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2015
ottoenergy.com
BACK COVER
FRONT COVER
HIGH IMPACT PLAYS
TARGETED
OTTO ACQUIRES
ONSHORE ALASKAN
INTEREST
PHILIPPINES PROJECT +
SC55 OFFSHORE PALAWAN +
TANZANIA PROJECTS +
KILOSA – KILOMBERO +
PANGANI +
AUSTRALIA
HEAD OFFICE
INSIDE FRONT COVER
INSIDE BACK COVER
CONTENTS
02
04
08
10
1 1
14
18
2 1
22
23
24
25
42
43
44
45
46
47
8 1
82
84
Chairman’s Report
Managing Director’s Report
Company Highlights
Asset Overview
Philippines
Tanzania
Alaska
Reserves and Contingent Resources
Summary of Assets
Financial Report 2015
Corporate Directory
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Directors’ Declaration
Independent Audit Report to the Members of Otto Energy Limited
ASX Additional Information
OTTO ENERGY | ANNUAL REPORT 2015
1
CHAIRMAN’S
REPORT
2 OTTO ENERGY | ANNUAL REPORT 2015
DEAR SHAREHOLDERS
It is my pleasure to present the 11th Annual Report to shareholders at the close of a year
that has seen a significant transition in the Company.
The most significant outcome delivered this year was the sale of the 33% working interest
in the Galoc oil field for a headline number of US$108 million as of 1 July 2014, and the
subsequent distribution of 6.4 cents per share to shareholders. I am proud of this major
achievement by Otto Energy’s management, who have delivered on our strategy to create value
for shareholders. The sale of Galoc was a timely transaction given the subsequent decline in
oil price and the proceeds from the sale have positioned Otto Energy in an enviable position of
financial strength among our peers.
The completion by Otto to divest the 33% interest in the Galoc Oil field maximised and
monetised the inherent value of the Galoc Interest after the successful completion of the Galoc
Phase II expansion.
The transaction demonstrates Otto’s commitment to creating shareholder value, through
monetising a key asset and delivering a significant return to shareholders, whilst
simultaneously funding a highly prospective exploration program.
The Company has also maintained its commitment to longer term growth through exploration
and during the year our technical team remained focussed on this objective. Significant
achievements included executing the drilling of the Hawkeye-1 well offshore Philippines,
acquiring new seismic and preparing for drilling in Tanzania and obtaining entry into the
prospective North Slope in Alaska.
We look forward to the coming financial year, during which Otto Energy plans to maintain its
current high level of activity. Highlights for the coming period include:
• Preparation for the first ever onshore exploration wells to be drilled in Tanzania in 2016;
• Seismic acquisition and drilling in the prospective North Slope acreage in Alaska;
•
Completing assessment of Hawkeye-1 hydrocarbon discovery and seeking to secure
partners to drill follow-up prospects in SC55 offshore the Philippines; and
• Assessing further business development opportunities.
The ability to monetise the Galoc asset at such a fortuitous time augers well for Otto Energy’s
capacity to capture opportunities for FY2016 and beyond – the early identification of such
opportunities has already commenced in FY2016. The core goal of the Board and Management
continues to be the creation of sustainable, long term value for all shareholders.
I thank you, our shareholders, for your continued support through this past year and as we
move forward. I also thank my fellow Directors, Management team and staff in Perth and
overseas for their continued commitment.
Rick Crabb
Chairman
OTTO ENERGY | ANNUAL REPORT 2015 3
MANAGING
DIRECTOR’S
REPORT
4
OTTO ENERGY | ANNUAL REPORT 2015 DEAR SHAREHOLDERS
Welcome to Otto Energy’s Annual Report for FY2015.
This year has been one of significant transition for the Company following the sale of our
interest in the producing Galoc oil field, which along with preparation for the drilling of
the Hawkeye-1 exploration well, consumed a large proportion of our focus. The support of
Otto’s shareholders, staff and my fellow directors throughout this challenging and rewarding
transition period has been greatly appreciated.
Otto Energy’s primary objective is to grow shareholder value, through:
• Sound financial management;
•
•
The application of technical and commercial rigour in the building of a focussed pipeline
of exploration and appraisal projects selected for their prospectivity and favourable fiscal
regimes; and
Making considered commercial decisions via an understanding of the oil and gas asset life
cycle and external market influences.
The Company delivered several key achievements during FY2015 across each of these
elements.
Galoc Oil Field Divestment and Distribution of funds to Shareholders
In February 2015, Otto completed the divestment of its 33% interest in the Galoc oil field
located offshore Philippines, to Nido Petroleum Ltd for a headline value of US$108 million
with an effective date of 1 July 2014. Following completion of the sale, a distribution to
shareholders of A$0.064 per share was made in June 2015.
Consistent with our focus on delivering value to our shareholders, the divestment on such
favourable terms at the peak of the oil price cycle and the subsequent distribution to
shareholders was an excellent result.
Exploration
Exploration is critical to the growth of any oil & gas company, and Otto has continued to
progress opportunities in its Philippines and Tanzanian exploration assets. More recently, the
Company acquired an interest in acreage located on the highly prospective Alaska North Slope,
which has the potential for high impact exploration and appraisal success.
In Service Contract 55 in the Philippines, Otto Energy successfully executed a farm-out strategy
via the participation of Red Emperor Resources NL and Pryce Gases Inc in the drilling campaign
of Hawkeye-1. Hawkeye-1 was drilled in August 2015, safely and significantly under budget.
The successful farm-outs along with funding contributions from BHPB, saw Otto fully carried
on the well.
The hydrocarbons discovered at Hawkeye were at the low end of expectation and will be
uneconomic to develop. However, the drilling results proved up a new petroleum system and
will now be incorporated into our understanding of the remaining leads and prospects in
the permit.
In Tanzania, Otto and its joint venture partner, acquired a further 600km of 2D seismic to
better understand the geology of the basins and firm up structures ahead of drilling in 2016.
The Kilombero Basin ‘Kito’ prospect is drill ready with un-risked net prospective resource 60.4
MMbbl to Otto. With a large working interest Otto will consider farm-outs to reduce cost
exposure and risk during drilling.
OTTO HAS
CONTINUED
TO PROGRESS
OPPORTUNITIES
IN ITS PHILIPPINES
AND TANZANIA
EXPLORATION
ASSETS.
5
OTTO ENERGY | ANNUAL REPORT 2015 Throughout the year, Otto actively assessed a great many new venture and business
development opportunities. As a result of this process, in August 2015, Otto made an initial
entry into the prospective Alaskan North Slope to earn between 8 to 10.8% working interest in
a large (558,195 acre) position operated by Great Bear Petroleum. The acreage has extensive
3D seismic coverage, existing well control and is close to the all-weather Dalton Highway and
Trans-Alaska Pipeline System. The upcoming northern winter operating season will expose Otto
to 3D seismic acquisition and drilling.
The Alaskan North Slope is one of the world’s most prolific oil and gas exploration and
production areas. This acquisition positions Otto with significant exposure to this highly
prospective area, through the ability to participate in multiple appraisal and exploration
wells in the coming year.
Corporate
Otto’s balance sheet has remained strong with a closing cash position of US$41.2 million and
no debt at year end. Otto’s cash position and the free carry on Hawkeye-1 means Otto is well
placed to fund the high impact forward exploration programs.
Thank you once again for your ongoing support of Otto Energy and I look forward to reporting
upon a similarly very successful year in FY2016.
Matthew Allen
Managing Director &
Chief Executive Officer
6 OTTO ENERGY | ANNUAL REPORT 2015
OTTO ENERGY | ANNUAL REPORT 2015 7
COMPANY HIGHLIGHTS
2015
Successful sale of 33% working interest in Galoc oil field for a
headline value of US$108 million.
Return of funds of AUD 6.4 cents per share to Shareholders.
Further acquisition of seismic for Pangani and Kilosa-Kilombero
PSA’s in Tanzania ahead of drilling in 2016.
Preparation for Hawkeye-1 exploration well in SC55 offshore
Philippines (‘SC55’) and successful farm out campaign.
8 OTTO ENERGY | ANNUAL REPORT 2015
Post the sale of the Galoc oil field, Otto
Energy Ltd (‘Otto’ or the ‘Company’) has
focussed on the transition to becoming a
company with a balanced portfolio of high
quality exploration and appraisal type assets.
Post the period, Otto drilled the Hawkeye-1
exploration well in SC55. These operations
were completed safely and well below
budget expectations. In addition, the
Company acquired an interest in an
exploration/appraisal asset on the Alaskan
North Slope via the acquisition of Borealis
Petroleum Pty Ltd.
OTTO ENERGY | ANNUAL REPORT 2015 9
ASSET
OVERVIEW
10
OTTO ENERGY | ANNUAL REPORT 2015 PHILIPPINES
Service Contract 55
Ownership: Otto Energy 78.18%, and Operator
Status: Exploration
Location: Offshore - Palawan Basin, Philippines
Area: 9,880km2
• Otto free-carried on Hawkeye-1 exploration well through:
•
•
Farm out of 15% working interest Red Emperor Resources NL (‘Red Emperor’)
Farm in option executed with Pryce Gases Inc (‘Pryce Gases’) for 10%
working interest
•
Funding up to US$24.5m from BHPB to be paid to Otto for the Hawkeye well
• Hawkeye exploration well drilled in August 2015 with new petroleum system discovered
• Hawkeye well results to be incorporated into understanding of remaining prospects
in SC55.
Service Contract 55 (‘SC55’) is located in the southwest Palawan Basin and covers an area of
9,880km2 and was awarded to Otto Energy Investments Ltd (formerly NorAsian Energy Ltd)
in 2005. It is a deep-water block in the middle of a proven regional oil and gas fairway that
extends from the productive offshore Borneo region in the southwest to the offshore Philippine
production assets northwest of Palawan.
SC55 contains a number of distinct exploration play types including the material Cinco
carbonate gas/condensate prospect, as well as a number of follow-up leads. The permit
provides material opportunity and a series of possible drill targets which will be reviewed in
light of the results of the Hawkeye-1 well.
Hawkeye-1 Exploration Well
In August 2015, the Hawkeye well was drilled to 2,920 metres. Hydrocarbons were logged
between 2,710 and 2,737 metres in reservoir of variable quality. Cuttings returns provided
indications of fluorescence – usually an indicator of liquid hydrocarbons.
The Hawkeye well has proven a petroleum system exists in the south west Palawan area
and the existence of a source kitchen has reduced the geological risk of remaining
prospects, including Cinco. Whilst the volume of hydrocarbons discovered at Hawkeye
was sub-economic, other prospects on trend are likely to be hydrocarbon bearing and
require re-estimation of potential resources.
The well was drilled in 19.5 days. Final well cost is expected to be less than
US$25 million; as a result of funding contributions from BHPB, Red Emperor
and Pryce Gases, Otto was fully carried on the cost of drilling.
11
OTTO ENERGY | ANNUAL REPORT 2015
PHILIPPINES
Cinco Prospect
The Cinco gas/carbonate prospect was identified as part of a 1,800km2 3D seismic program
undertaken by BHPB in 2010 that focused on a trend of carbonate prospects and leads, with
Cinco being analogous to the Malampaya producing gas/condensate field in the Philippines.
Cinco contains a ‘Best Estimate’ GIIP of 2.4 Tcf with a ‘Best Estimate’ Net Prospective Resource
of 1.1 Tcf of gas and 38 MMbbls of associated condensate (Condensate Gas Ratio 35 bbls/
MMscf). The Net Prospective Resources reflect working interest for Otto of 78.18% and net of
Government Share of profit oil.
In addition to Cinco, several other large carbonate prospects have been identified on 3D
seismic and will be subject of further evaluation by Otto. Success at Cinco would high grade
many of these adjacent large analogue structures in SC55, which, in combination, would have
the potential to unlock a large new gas province.
12
OTTO ENERGY | ANNUAL REPORT 2015 PHILIPPINES
Name
Percentage
OEL (through 100% subsidiaries Otto Energy Investments Ltd and Otto
Energy Philippines Inc.)
78.18%*
(Operator)
Century Red Pte Ltd (subsidiary of Red Emperor Resources NL)
Palawan 55 Exploration and Production Corporation
(formerly Trans-Asia Oil & Energy Development Corporation)
15%
6.8%
* A farm in option was executed with Pryce Gases Inc in July 2015 for a 10% working interest.
Sub-Phase
Date
Commitment
4
5
Aug 11 – Dec 15
1 Deepwater Well
COMPLETED AUGUST 2015
Dec 15 – Dec 16
1 Deepwater Well
Extension Period
Further 1 year allowed
SC55 Prospective Resources:
The arithmetically aggregated gas/condensate prospect and lead inventory including Cinco,
contains a ‘Best Estimate’ GIIP of ~17 Tscf with a ‘Best Estimate’ Net Prospective Resource of
~8 Tscf of gas and 268 MMbbls of condensate.
SC55 Portfolio - Gas. Arithmetric Aggregation (Bscf)
GIIP
Gross Prospective Resource
Net Prospective Resource
P90
2,325
1,545
366
P50
P10
17,141
71,064
11,527
48,207
2,729
11,414
Significant Regional Projects:
• Malampaya gas and condensate project, operated by Shell, offshore Palawan, Philippines
• Offshore gas and condensate project commissioned in 2001, produces approximately
2,700 megawatts of power for the main island of the Philippines, Luzon
•
Kebabangan cluster of gas and condensate fields, operated by Kebabangan Petroleum
Operating Company (Petronas, Shell and ConocoPhillips), offshore Sabah, Malaysia
• Large gas aggregation offshore Sabah with export to the Bintulu LNG plant
13
OTTO ENERGY | ANNUAL REPORT 2015
TANZANIA
Key Highlights
Ownership: Otto Energy 50% of the Pangani and Kilosa-Kilombero
Production Sharing Agreements.
Status: Exploration
Location: Onshore, Tanzania
Area: ~34,000km2
•
Tata Petroleum has farmed in for a 25% interest in both licences, reducing Swala
Energy’s (ASX:SWE) equity interest to 25%
• Planning for the drilling of an exploration well in each licence in 2016 has
commenced – these will be the first wells drilled in each permit
Overview
The Production Sharing Agreements (PSA) were awarded by the Government of the United
Republic of Tanzania on 20 February 2012, with the overall Kilosa-Kilombero and Pangani
licence areas covering a gross area of almost 34,000km2.
Overview of Exploration Activities
Following the award of the licences in 2012, the joint venture partners conducted analysis
of legacy gravity and magnetic data as well as the acquisition of new airborne gravity and
magnetic data. Analysis of both data sets confirmed the presence of a significant sedimentary
basin at Kilosa-Kilombero and identified a possible significant sedimentary basin at Pangani.
Exploration success and Otto acreage
14
OTTO ENERGY | ANNUAL REPORT 2015
TANZANIA
In 2013, the joint venture undertook a 2D seismic program over both exploration licence areas,
which yielded positive results indicating Neogene aged basins in both Pangani and Kilosa-
Kilombero. The latter appeared analogous to large discovery areas in Kenya and Uganda. In
February 2014, the joint venture partners agreed to enter into Years 3 and 4 of the licences.
Additional seismic data was acquired to allow optimal well positioning for commitment wells in
each licence area.
In August 2015, a 1 year extension was received for the current exploration period which will
see one exploration well drilled in each licence area before February 2017.
KILOSA-KILOMBERO PSA
Ownership: Otto Energy 50%
Status: Exploration
Location: Onshore East Africa
Area: 17,675km2
Work undertaken by the joint venture has confirmed the presence of three basins, each of
about 2,000km² in area. The northern two basins at Kilosa and Kidatu are estimated to contain
6,000m to 7,000m of sediment. Some of the sediment is likely to be of Karoo age but there is
potential for some Neogene fill.
The southern Kilombero basin is believed to be predominantly Neogene in age. Neogene aged
rift basins similar to that observed in the license area have reservoired billions of barrels of oil
as evidenced in both Uganda and Kenya.
During the second year of the contract the joint venture acquired 110km 2D seismic over the
Kilosa-Kilombero basin, with results indicating large scale structures and sediments similar
to the oil basins of Lokichar (Kenya) and Lake Albert (Uganda) where Africa Oil and Tullow Oil
have had significant success.
The results of this seismic program identified the Kito prospect, which indicated a prospective
resource of between 19.2 MMbbls and 169.6 MMbbls net to Otto, with a best estimate of 60.4
MMbbls.
A 2014 program to acquire 430 km of additional 2D seismic data across the Kilombero basin
was undertaken during Q4 2014. The focus of the program was to:
1. Provide additional lines across the ‘Kito’ prospect, in order to assist its development into
a drillable target.
2. Cover other portions of the basin which according to the initial 2013 seismic data and
earlier remote sensing data have the potential to contain additional leads and prospects.
The new 2D data has been processed and detailed technical evaluation has been completed
during Q3 2015 ahead of drill planning to prepare for an exploration well in 2016.
15
OTTO ENERGY | ANNUAL REPORT 2015
TANZANIA
Kilombero 2014 Seismic Program
PANGANI PSA
Ownership: Otto Energy 50%
Status: Exploration
Location: Onshore East Africa
Area: 17,156km2
During 2013 a total of 200km of 2D seismic data was acquired over the Pangani licence,
specifically focused on the Mvungwe and Moshi basins originally recognised from regional
gravity and magnetics data.
The results from the seismic survey show that the Moshi basin, in the north of the licence area,
appears to be a deep basin with sedimentary fill of probable Neogene age. Additionally, the
data suggests the basin is fault-bounded, 25km wide and with basin fill between 2,000m and
3,000m depth.
16
OTTO ENERGY | ANNUAL REPORT 2015 TANZANIA
Results also indicate that the Mvungwe basin, located in the south of the licence area, is less
than 1,000m deep and contains sediments of probably Neogene age.
During Q3 2014, a further 200km of 2D seismic data were acquired across the Moshi basin
area. The focus of the survey was to better understand the geometry of the basin and firm up
structures for drilling. Processing of new data has been completed and technical analysis was
completed during Q2 2015. Several leads have been identified which required further review
before they can be elevated to prospect status.
Pangani 2014 Seismic Program
Kilosa-Kilombero and Pangani Block Participants
Otto Energy (Tanzania) Pty Ltd (100% subsidiary of Otto)
50%
Swala Oil and Gas (Tanzania) Plc
Tata Petrodyne Limited
25% (Operator)
25%
17
OTTO ENERGY | ANNUAL REPORT 2015 ALASKA
Ownership: Otto Energy 8-10.8%
Status: Exploration
Location: Onshore North Slope Alaska
Area: 2,259km2
In August 2015, Otto acquired the right to earn an interest, through staged capital injections,
in a substantial acreage position on the highly prospective, oil prone, onshore Alaskan North
Slope held by Great Bear Petroleum Operating LLC (‘Great Bear’).
Through its agreements with Great Bear, Otto has the right to acquire an 8% and 10.8%
working interest (equivalent to 58,334 net acres) in two areas of Alaskan North Slope
exploration acreage held by Great Bear.
About the Alaskan North Slope
Alaska contains some of the largest conventional oil fields in North America and has produced
more than 17 billion barrels of oil and 13 trillion cubic feet of natural gas. The US Geological
Society (USGS) estimates that the Alaskan North Slope has the potential to hold 40 billion
barrels of conventional oil and over 200 trillion cubic feet of conventional gas. Whilst Otto
and its partners’ focus will be on conventional oil, the unconventional oil plays located in this
acreage also contain significant potential and Otto will have access to its proportionate share
of any resource through its deal with Great Bear.
The size and potential of the opportunities on the Alaskan North Slope see it as home to super
majors such as Conoco, Shell, ExxonMobil, Repsol, ENI, Statoil and BP. Recent exploration
drilling by Repsol in adjacent acreage has yielded a significant conventional oil discovery in the
Kuparuk play sands; similar opportunities at this play level have already been identified in the
Great Bear North Slope acreage. The Repsol well discovered several distinct oil accumulations
and encountered a 650 foot oil column and 150 feet of net pay and is likely a multi-hundred
million barrel oil discovery. This discovery was made after Repsol had farmed in to a 350,000
net acre position in 2011 in a deal valued at US$760 million.
Further, financial incentives provided by the Alaskan Government to attract investment in the
North Slope provides Alaska with the most attractive fiscal regime in North America and one
that ranks very highly on a global scale. These incentives include:
• 75% to 85% exploration and development cash rebates;
•
Flat rate production tax of 35% (previously taxes varied between 25-75% depending
on profitability criteria);
• 12.5% state royalty; and
• Various production tax exemptions for new oil production.
Oil production can be transported through the Trans Alaska Pipeline System (‘TAPS’), which
runs through the Great Bear acreage. TAPS provides regulated open access to domestic and
international markets and presently has around 1.0 mmbopd spare capacity.
Alaska is the only US state able to export oil under current regulations. Alaska’s
geographical location provides safe and effective shipping routes for crude exports into the
Asian markets, allowing Alaskan projects to provide a strategic long-term petroleum reserve
for the Asian region.
18
OTTO ENERGY | ANNUAL REPORT 2015 ALASKA
About the Great Bear Acreage
Great Bear is a private exploration company focused on exploring and developing conventional
and unconventional resources on the North Slope of Alaska. Great Bear is the largest
exploration leaseholder on the North Slope, having taken a position in a major play fairway
south of the Prudhoe Bay and Kuparuk fields.
Great Bear is the dominant exploration acreage holder in this highly prospective basin; holding
558,195 gross acres. Great Bear has undertaken significant exploration work on the acreage
since 2011 with a cumulative spend in excess of US$150 million. This work includes:
• Acquisition and processing of approximately 1800km2 of 3D seismic data.
•
Drilling of 2 unconventional stratigraphic test wells which cored 3 primary unconventional
targets. Results from these wells indicate that the majority of the Great Bear acreage is
expected to be liquids rich. These wells also encountered light oil in various conventional
formations.
•
Drilling of a conventional exploration well (Alkaid-1) which specifically targeted a 3D
defined Brookian reservoir. The Alkaid well results are under evaluation.
The extensive, modern 3D seismic coverage, existing well control and proximity to the all-
weather Dalton Highway and TAPS means that the Great Bear joint venture is well positioned
to test numerous prospects during the 2015-6 and 2016-7 northern winter drilling seasons.
19
OTTO ENERGY | ANNUAL REPORT 2015 ALASKA
The Great Bear acreage lies in the established conventional play fairways of the Ivishak,
Kuparuk and Brookian sand reservoir systems in a region demonstrating oil maturity.
•
•
•
The Brookian turbidite fans are productive at offset Tarn, Meltwater and Tabasco Fields
(field sizes of around 100mmbo to 300mmbo in place).
The Ivishak formation is the primary producing reservoir at the Prudhoe Bay Field
(25 billion barrels of oil in place).
The Kuparuk sand play is regionally productive with the Kuparuk Field holding 5.9 billion
barrels of oil in place and was also the target of the recent substantial oil discovery made
by Repsol.
The play types exhibited in the prospects so far identified by Great Bear have been the basis
for other significant conventional oil discoveries in and around the Alaskan North Slope with
discovered recoverable volumes being in the hundreds of millions of barrels. The size of these
other discoveries within these plays provides an indication of the potential of Great Bear
acreage in the success case.
In terms of unconventional potential, the North Slope is rated by the USGS as being potentially
one of the last remaining material oil shale plays in the US. The North Slope contains three
world class source rocks - Shublik, Kingak and Hue/HRZ shales. All three of these source rocks
are in existence within the Great Bear acreage. This substantial unconventional play will be
the subject of a longer term evaluation program with the immediate focus of the joint venture
being on the conventional oil potential.
Multinational oil and gas services company, Halliburton farmed into a portion of the Great
Bear acreage in 2011. Halliburton currently holds a 25% working interest in 126,186 gross
acres. Halliburton’s interest ensures the joint venture exposure to leading edge experience
and technology in developing unconventional plays and will ensure that this aspect of the
exploration potential continues to be progressed in conjunction with the planned 2015 and
2016 conventional exploration work program.
20
OTTO ENERGY | ANNUAL REPORT 2015 ALASKA
Map showing Great Bear acreage highlighted in red and proximity to other fields.
Great Bear Alaska North Slope Participants
Otto (through 100% owned subsidiary, Borealis Alaska LLC)
Great Bear Petroleum Operating LLC and affiliated companies
Halliburton Energy Services, Inc
8-10.8%
67-89.2%
(Operator)
0-25%
Reserves and Contingent Resources
Governance
The reserve and contingent resource information in this report is based on information
compiled by Mr Paul Senycia BSc (Hons) (Mining Engineering), MAppSc (Exploration
Geophysics), who has consented to the inclusion of such information in this report in the form
and context in which it appears. Mr Senycia is a full time employee of the Company, with more
than 30 years relevant experience in the petroleum industry and is a member of The Society of
Petroleum Engineers (SPE).
Reserves and contingent resources have been estimated using both probabilistic and
deterministic methods. Otto is not aware of any new information or data that materially
affects the assumptions and technical parameters underpinning the estimates of reserves and
contingent resources and the relevant market announcements referenced continue to apply
and have not materially changed.
The estimated quantities of petroleum that may potentially be recovered by the application
of future development projects relate to undiscovered accumulations. These estimates have
both an associated risk of discovery and a risk of development. Further exploration appraisal
and evaluation is required to determine the existence of a significant quantity of potentially
moveable hydrocarbons.
21
OTTO ENERGY | ANNUAL REPORT 2015 Summary of Assets
Asset
The Philippines
SC55
Exploration block, Southwest
Palawan Basin
OEL Working Internet
Joint Venture Partners
Notes
78.18%
(Operator)
Palawan 55 Exploration
and Production
6.82%
Otto carrying Filipino partner
through drilling of two wells.
Century Red Pte Ltd
15%
SC73
Offshore Mindoro-Cuyo Block
100%
(Operator)
-
-
There is 1% Gross Overriding
Royalty to RGA on Otto share.
Trans-Asia also has a right to
acquire an additional 5% equity
from Otto.
Farm in option executed with
Pryce Gases Inc in July 2015 for
a 10% working interest.
Otto gave notice of
relinquishment in July 2015.
Tanzania
Kilosa-Kilombero PSA
50%
Swala Oil and Gas
(Tanzania)
25%
Permit acquired in February 2012
Tata Petrodyne Limited
25%
Current exploration period
extended to February 2017
Pangani PSA
50%
Swala Oil and Gas
(Tanzania)
25%
Permit acquired in February 2012
Tata Petrodyne Limited
25%
Current exploration period
extended to February 2017
Alaska
Alaskan North Slope
8-10.8%
Great Bear Petroleum
Operating LLC
67%-
89.2%
154 leases covering 2,259km2
make up the Great Bear Alaskan
North Slope Acreage
Halliburton Energy
Services, Inc
0-25%
Otto entry made in August 2015
22 OTTO ENERGY | ANNUAL REPORT 2015
FINANCIAL REPORT 2015
Contents
Corporate Directory
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Director’s Declaration
Independent Audit Report to the Members of Otto Energy Limited
ASX Additional Information
24
25
42
43
44
45
46
47
81
82
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OTTO ENERGY | ANNUAL REPORT 2015 23
CORPORATE DIRECTORY
For The Year Ending 30 June 2015
CORPORATE DIRECTORY
For the year ending 30 June 2015
Directors
Company Secretary
Key Management Personnel
Principal registered office in Australia
Share Register
Auditors
Stock Exchange Listings
Banks
Website address
ABN
Mr Rick Crabb – Non-Executive Chairman
Mr Matthew Allen – Managing Director and Chief Executive Officer
Mr Rufino Bomasang – Non-Executive Director
Mr John Jetter – Non-Executive Director
Mr Ian Macliver – Non-Executive Director
Mr Ian Boserio – Non-Executive Director
Mr Neil Hackett (appointed 1 April 2015)
Mr Scott Blenkinsop (resigned 1 April 2015)
Mr Matthew Allen – Managing Director and Chief Executive Officer
Mr Paul Senycia – Vice President Exploration and New Ventures
Mr Craig Hasson – Chief Financial Officer
Mr Matthew Worner – Commercial Manager (appointed 9 March 2015)
32 Delhi Street
West Perth WA 6005
Tel: + 61 8 6467 8800
Fax: + 61 8 6467 8801
Link Market Services Limited
178 St Georges Terrace
Perth WA 6000
Tel: + 61 8 9211 6670
Fax: + 61 2 9287 0303
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Tel: + 61 8 6382 4600
Fax: + 61 8 6382 4601
Australian Securities Exchange
Level 8, Exchange Plaza
2 The Esplanade
Perth WA 6000
ASX Code: OEL
Westpac Banking Corporation
Level 17, 109 St Georges Terrace
Perth WA 6000
Tel: + 61 8 9426 2580
Fax: + 61 8 9426 2288
www.ottoenergy.com
56 107 555 046
24
OTTO ENERGY | ANNUAL REPORT 2015
27
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
DIRECTORS’ REPORT
For The Year Ending 30 June 2015
Your Directors present their report on the consolidated entity (referred to hereafter as the “consolidated entity” or the
“Group”) consisting of Otto Energy Limited and the entities it controlled at the end of, or during, the year ended 30 June
2015.
Directors
The Directors in office at any time during the financial year or since the end of the financial year are:
Mr Rick Crabb
Mr Matthew Allen (appointed 24 June 2015)
Mr Rufino Bomasang
Mr John Jetter
Mr Ian Macliver
Mr Ian Boserio
Directors have been in office from 1 July 2014 until the date of this report unless otherwise stated.
Company Secretary
Neil Hackett (appointed 1 April 2015)
Principal Activities
The principal activity of the consolidated entity continued to be investment in oil and gas exploration, development and
production in the Philippines and East Africa.
Dividends – Otto Energy Limited
During the financial year, Shareholders approved a capital return to shareholders of AUD$0.0564 per share, on 26 June
2015. The Board of Directors also resolved to pay an unfranked dividend of AUD$0.0076 per share, to be paid on 26 June
2015. The record date for entitlement to this dividend was 16 June 2015. The financial impact of this capital return and
dividend amounting to AUD$74.52m has been recognised in the Financial Statements for the year ended 30 June 2015. No
dividends were paid or declared by the Group during the previous financial year.
Review of Operations
A review of the operations of the consolidated entity during the financial year and the results of those operations are set
out in the review of operations, refer to pages 8 to 22.
Financial Summary
The consolidated entity recognised a loss after income tax for the year from continuing operations, of $6.79m (2014: loss of
$30.20m), as a result of the discontinuation and divestment of the Group’s remaining producing investment, Galoc
Production Company WLL (GPC) on 17 February 2015.
The net profit after discontinued operations for the financial year ending 30 June 2015 was $26.00m (2014: net loss of
$0.09m), which was due to the sale of GPC and profit from GPC operations totalling $32.79m.
Significant changes in state of affairs
Significant changes in the state of affairs of the consolidated entity during the financial year were as follows:
On 20 January 2015 shareholder approval was received for Otto to divest 100% of the shares in the GPC, the holder of
Otto's 33% interest in the Galoc oil field located in Service Contract 14C (Galoc Interest), to Nido Petroleum Ltd.
Completion of the transaction was achieved on 17 February 2015.
Otto entered into a farm‐in agreement with Red Emperor Resources NL for a 15% working interest in SC55.
Otto commenced preparation for Hawkeye‐1 exploration well.
25
OTTO ENERGY | ANNUAL REPORT 2015
25
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Matters subsequent to the end of the Financial Year
On 21 July 2015 the Company acquired 100% of the issued capital of Borealis Petroleum Pty Ltd, to earn an interest,
through staged capital injections, in a substantial acreage position in onshore Alaskan North Slope, held by Great Bear
Petroleum Operation LLC. Borealis Petroleum Pty Ltd was acquired through the issue of 17,518,250 shares in the Company.
On 27 July 2015 Red Emperor Resources received approval from the Department of Energy in Philippines for the farm‐in of
a 15% working interest into SC55.
On 30 July 2015 Pryce Gases Inc agreed to a farm‐in option for a 10% working interest in the drilling of the Hawkeye‐1
exploration well.
Hawkeye‐1 drilling was completed to a depth of 2,920 metres in August 2015 with uneconomical quantities of
hydrocarbons discovered. Hawkeye‐1 was plugged and abandoned, and is currently undergoing analysis to incorporate into
the Company’s understanding of its other SC55 prospects, including Cinco.
Likely developments and expected results of Operations
Likely developments in the operations of the consolidated entity constituted by Otto Energy Limited and the entities it
controls from time to time that were not finalised at the date of this report included:
Complete staged entry into Alaska and participate in upcoming 3D seismic and drilling program.
Commence drilling planning in Tanzania.
Incorporate Hawkeye‐1 drilling results into understanding of remaining SC55 leads and prospects.
Additional comments on expected results of certain operations of the group are included in the review of operations on
pages 8 to 22.
In accordance with its objectives, the consolidated entity intends to participate in a number of exploration and appraisal
wells and will consider growing its exploration effort by farm‐in, permit application and/or acquisition within its existing
operational focus areas and in other suitable countries or regions. Further information on likely developments in the
operations of the consolidated entity and the expected results of operations have not been included in this annual financial
report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.
Environmental Regulation
So far as the Directors are aware, there have been no breaches of environmental conditions of the Group’s exploration or
production licences. Procedures are adopted for each exploration program to ensure that environmental conditions of the
Group’s tenements are met.
26
OTTO ENERGY | ANNUAL REPORT 2015
26
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
Information on Directors and Key Management Personnel
Mr Rick Crabb BJuris (Hons), LLB, MBA, FAICD. Chairman (Independent Non‐Executive)
Date appointed
19 November 2004
Experience and expertise
Other current directorships
Mr Rick Crabb holds degrees in law and business administration from the University of Western
Australia. Mr Crabb practised as a solicitor from 1980 to 2004, specialising in resources,
corporate and commercial, with considerable offshore experience. Mr Crabb now focuses on
his public company directorships and investments.
Chairman, Non‐Executive Director of Golden Rim Resources Limited from 22 August 2001,
Platypus Minerals Limited (formerly Ashburton Minerals Limited) from 1 September 1999 and
Paladin Energy Limited from 8 February 1994.
Former directorships in last 3 years
None
Special responsibilities
Audit and Compliance
Remuneration and Nomination Committee
Interest in shares and options
17,795,052 ordinary shares of Otto Energy Limited.
Mr Matthew Allen BBus, FCA, F Fin, GAICD. Managing Director and Chief Executive Officer
Date appointed
24 June 2015
Experience and expertise
Interest in shares and options
Mr Matthew Allen was appointed Managing Director in June 2015 and Chief Executive Officer
in February 2014 after joining Otto in 2009 as Chief Financial Officer. Mr Allen has played an
integral role in implementing Otto’s strategy. Mr Allen’s experience lies in the operation and
management of oil and gas companies with particular focus on strategic, commercial and
financial aspects of the business. Mr Allen previously spent 8 years with Woodside Energy
working with many of Woodside’s assets and has had global upstream oil and gas industry
experience in Asia, Africa, Australia and the Middle East.
3,643,000 ordinary shares in Otto Energy Limited and performance rights of 4,700,000.
Mr John Jetter BLaw, BEcon, INSEAD. Director (Independent Non‐Executive)
Date appointed
10 December 2007
Experience and expertise
Mr John Jetter is the former Managing Director, CEO and head of investment banking of JP
Morgan in Germany and Austria, and a member of the European Advisory Council, JP Morgan
London. Mr Jetter has held senior positions with JP Morgan throughout Europe, focusing his
attention on major corporate clients advising on some of Europe’s largest corporate
transactions. Formerly Chairman of the Board of Rodenstock AG, Germany, Deputy Chairman of
the Board of European Business School and Chairman of the Finance Facility, Oestrich‐Winkel,
Germany.
Other current directorships
Non‐Executive Director of Venture Minerals Limited since 8 June 2010 and Non‐Executive
Director of Peak Resources Limited since 1 April 2015.
Former directorships in last 3 years
None
Special responsibilities
Remuneration and Nomination Committee
Interest in shares and options
16,089,175 ordinary shares of Otto Energy Limited.
Mr Ian Macliver BCom, FCA, SF Fin, FAICD. Director (Independent Non‐Executive)
Date appointed
7 January 2004
Experience and expertise
Mr Ian Macliver is Managing Director of Grange Consulting Group Pty Ltd, which provides
specialist corporate advisory services to listed and unlisted companies. Mr Macliver has
held senior Executive and Director roles of both resource and industrial companies, specifically
responsible for capital raising and other corporate initiatives.
Other current directorships
Non‐Executive Chairman of Western Areas Limited since November 2013 (Non‐Executive
Director since October 2011).
Former directorships in last 3 years
Non‐Executive Director of Rent.com.au Limited (formerly Select Exploration Limited) from
September 2010 to June 2015. Non‐Executive Director of Range Resources Limited from June
to August 2014, Non‐Executive Director of JCurve Solutions Limited (formerly Stratatel Limited)
from July 2000 to October 2013.
Special responsibilities
Audit and Compliance
Remuneration and Nomination Committee
Interest in shares and options
4,549,721 ordinary shares of Otto Energy Limited.
27
OTTO ENERGY | ANNUAL REPORT 2015
27
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
DIRECTORS’ REPORT
For The Year Ending 30 June 2015
For the year ending 30 June 2015
Mr Ian Boserio BSc Hons First Class (Geophysics), BSc (Geology). Director (Independent Non‐Executive)
Date appointed
2 September 2010
Experience and expertise
Mr Ian Boserio brings to the Otto Board more than 33 years international experience in the
oil and gas business, focused predominantly on exploration and management. Mr Boserio
spent 26 years with Shell. In his last role leading Australia and NZ Exploration and New
Business, Mr Boserio and his team doubled Shell's LNG portfolio, enabling several LNG
projects and adding a total resource base of approximately 15 Tcf. Previous international
postings with Shell included Australia, North Sea, the Middle East, India and Indonesia, plus a
five year secondment into Woodside as the Australia Exploration Manager. He is currently co‐
owner and Technical Director of private oil and gas company Pathfinder Energy.
Other current directorships
Technical Director, Pathfinder Energy
Former directorships in last 3 years
Non‐Executive Director of Nexus Energy Limited November 2009 to October 2012
Special responsibilities
Audit and Compliance
Interest in shares and options
None
Mr Rufino Bomasang BSc (Min Eng), Master in Business Economics (Phil). Director (Independent Non‐Executive)
Date appointed
18 August 2006
Experience and expertise
Mr Rufino Bomasang, formerly a mining engineer, having worked in recent years as an
International Energy and Mining Consultant, focused on the development of untapped
indigenous energy resources in the Philippines. From 1996 to 2004 Mr Bomasang was President
and CEO of Philippine National Oil Company Exploration Corporation. Mr Bomasang previously
worked with the United States Agency for International Development as an Energy Consultant,
providing technical assistance to the Philippine Department of Energy.
Other current directorships
Non‐Executive Chairman of Otto Energy Investments Limited and Otto Energy Philippines Inc.,
subsidiaries of Otto Energy Limited.
Former directorships in last 3 years
Special responsibilities
Interest in shares and options
None
None
None
Mr Paul Senycia BSc (Hons) MAppSc (Geophysics) Vice President Exploration and New Ventures
Date appointed
12 April 2010
Experience and expertise
Mr Paul Senycia has more than 30 years of international oil and gas business experience in
Australia, North and West Africa, North America, Europe and Asia. Mr Senycia also has
significant experience in all facets of the upstream oil and gas exploration business including:
executing seismic and drilling programs; capturing new venture opportunities; joint venture
relationship; and farm in/out management. Mr Senycia has spent the majority of his career with
Woodside Energy and Shell International with roles in Australia, Europe and the Middle East. He
was Head of Evaluation at Woodside and subsequently Exploration Manager at Oilex before
joining Otto Energy in April 2010.
Interest in shares and options
3,000,000 ordinary shares in Otto Energy Limited and performance rights of 4,700,000.
Mr Craig Hasson BCom, CA, AGIA. Chief Financial Officer
Date appointed
26 February 2014
Experience and expertise
Mr Craig Hasson joined Otto as Group Financial Controller in November 2012 and was appointed
Chief Financial Officer in February 2014. Mr Hasson is a Chartered Accountant with over 13 years
of resource related financial experience in Australia, Europe, Africa and Asia.
Interest in shares and options
112,500 ordinary shares in Otto Energy Limited and performance rights of 2,900,000.
Mr Matthew Worner LLB. B.Bus. Commercial Manager
Date appointed
9 March 2015
Experience and expertise
Mr Matthew Worner joined Otto as Commercial Manager in March 2015. Mr Worner is a former
corporate lawyer with specialist experience in IPO’s and capital raisings and having advised
listed companies on these matters in both Australia and overseas. Over the last 10 years Mr
Worner’s focus has been on the oil and gas sector, having worked in various in‐house legal,
company secretarial, commercial and business development roles throughout Australia,
Europe, Africa and Asia.
Interest in shares and options
1,400,000 performance rights.
28
OTTO ENERGY | ANNUAL REPORT 2015
28
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Mr Neil Hackett BEc F Fin, GAICD. Company Secretary
Date appointed
1 April 2015
Experience and expertise
Mr Hackett has over 20 years director, company secretarial, compliance and corporate
governance experience including 7 years ASX200 listed company secretary experience with
diversified industrial and financial services entities. Mr Hackett holds a Bachelor of Economics
and is a Fellow of Finsia, GAICD (Merit) and Affiliate of Corporate Governance Institute.
Interest in shares and options
None
Meetings of Directors
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30
June 2015, and the numbers of meetings attended by each Director were:
Director
Mr R Crabb
Mr M Allen
Mr R Bomasang
Mr J Jetter
Mr I Macliver
Mr I Boserio
Full meetings of Directors
Meetings of Audit
Committee
Remuneration and
Nomination Committee
Number
eligible to
attend
Number
attended
Number eligible
to attend
Number
attended
Number
eligible to
attend
Number
attended
14
-
14
14
14
14
14
-
12
14
14
14
2
-
-
-
2
-
2
-
-
-
2
-
1
-
-
1
1
-
1
-
-
1
1
-
Remuneration Report (Audited)
The Directors of the Company have prepared this remuneration report to outline the overall remuneration strategy, policies
and practices, which were adopted by the consolidated entity in 2015 and which utilises the share rights and option plans
approved by the shareholders in 2013. The report has been prepared in accordance with Section 300A of the Corporations
Act 2001 and its regulations.
Otto Energy’s remuneration policy is designed to ensure that the level and form of compensation achieves certain objectives,
including:
a) attraction and retention of employees and management to pursue the consolidated entity’s strategy and goals;
b) delivery of value-adding outcomes for the consolidated entity;
c)
fair and reasonable reward for past individual and consolidated entity performance; and
d)
incentive to deliver future individual and consolidated entity performance.
Remuneration consists of base salary, superannuation, short term incentives (STI) and long term incentives (LTI).
Remuneration is determined by reference to market conditions and performance. Performance is evaluated at an individual
level as well as the performance of the consolidated entity as a whole.
The remuneration policies and structure in 2015 were generally the same as for 2014.
OTTO ENERGY | ANNUAL REPORT 2015
32
29
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
DIRECTORS’ REPORT
For The Year Ending 30 June 2015
For the year ending 30 June 2015
Directors and Key Management Personnel disclosed in this report:
Directors
Mr Rick Crabb
Mr Matthew Allen
Mr Rufino Bomasang
Mr John Jetter
Mr Ian Macliver
Mr Ian Boserio
Non-Executive Chairman
Managing Director and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Key Management Personnel
Mr Paul Senycia
Mr Craig Hasson
Mr Matthew Worner
Mr Scott Blenkinsop
Vice President Exploration and New Ventures
Chief Financial Officer
Commercial Manager (appointed 9 March 2015)
Chief Legal Counsel (resigned 6 March 2015) and Company Secretary (resigned 1 April 2015)
Remuneration Governance
Role of the Remuneration and Nomination Committee
The Remuneration and Nomination Committee’s role is to review and recommend remuneration for Key Management
Personnel, review remuneration policies and practices, Company incentive schemes and superannuation arrangements.
The Committee considers independent advice where circumstances require, on the appropriateness of remuneration to
ensure the consolidated entity attracts, motivates and retains high quality people.
The ASX Listing Rules require that the maximum aggregate amount of remuneration to be allocated among the Non-Executive
Directors be approved by shareholders in a general meeting. In proposing the maximum amount for consideration by
shareholders and in determining the allocation, the Remuneration and Nomination Committee takes account of the time
demands made on Directors and such factors as fees paid to Non-Executive Directors in comparable Australian companies.
The Remuneration and Nomination Committee comprises of three Non-Executive Directors.
Remuneration arrangements for Directors and Executives are reviewed by the Remuneration and Nomination Committee
and recommended to the Board for approval. The Remuneration and Nomination Committee considers external data and
information, where appropriate, and may engage independent advisors where appropriate to establish market benchmarks.
Remuneration arrangements are determined in conjunction with the annual review of the performance of Directors,
Executives and employees of the consolidated entity. Performance of the Directors and the CEO of the consolidated entity is
evaluated by the Board, assisted by the Remuneration and Nomination Committee. The CEO reviews the performance of
Executives with the Remuneration and Nomination Committee. These evaluations take into account criteria such as the
achievement toward the consolidated entity’s performance benchmarks and the achievement of individual performance
objectives.
Non-Executive Director Remuneration Policy
Non-Executive Directors of the consolidated entity are remunerated by way of fees, statutory superannuation, and LTI’s
where applicable. Fees are set to reflect current market levels based on the time, responsibilities and commitments
associated with the proper discharge of their duties as members of the Board.
The current base fees were last reviewed in June 2015. Non-Executive Directors’ fees are determined within an aggregate
Non-Executive Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum
currently stands at A$500,000 per annum and was approved by shareholders at the Annual General Meeting in January
2008.
30
OTTO ENERGY | ANNUAL REPORT 2015 33
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Directors’ Fees
The following fees have applied:
Base fees
Chair
Other Non-Executive Directors
Other Non-Executive Directors (Philippines based)
Additional fees
Audit Committee
Director of Otto Energy Investments Limited
Director of Otto Energy Philippines Inc.
Retirement allowances for Non-Executive Directors
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
From 1 July 2014 to 30 June 2015
From 1 July 2013 to 30 June 2014
A$ 125,000
A$ 75,000-90,000
US$ 72,000
A$ 10,000
US $24,000
US $24,000
A$ 125,000
A$ 75,000-90,000
US$ 72,000
A$ 10,000
US $24,000
US $24,000
In line with ASX Corporate Governance Council Non-Executive Directors’ remuneration does not include retirement
allowances. Superannuation contributions required under the Australian superannuation guarantee legislation continue to
be made and are deducted from the Directors’ overall fee entitlements.
Appointment
The term of appointment is determined in accordance with the Company’s Constitution and is subject to the provisions of
the Constitution dealing with retirement, re-election and removal of Directors of the Company. The Constitution provides
that all Directors of the Company, other than the Managing Director, are subject to re-election by shareholders by rotation
every three years during the term of their appointment.
Directors and Executive Remuneration Policy and Framework
The remuneration arrangement for Directors and Executives of the consolidated entity for the year ended 30 June 2015 is
summarised below.
The remuneration structure in place for 2014/2015 applies to all employees including Key Management Personnel and staff
members of the consolidated entity. The consolidated entity’s remuneration structure has three elements:
a) Fixed annual remuneration or base salary (FAR) (including superannuation);
b) Short term incentive (STI) award which provides a reward for performance in the past year; and
c)
Long term incentive (LTI) award which provides an incentive to deliver future Company performance.
Executive Remuneration Mix
In accordance with the consolidated entity’s objective to ensure that Executive remuneration is aligned to consolidated
entity’s performance, a significant portion of the Executives’ target pay is “at risk”.
a)
Fixed Annual Remuneration (FAR) or base salary (including superannuation)
To attract and retain talented, qualified and effective employees, the consolidated entity pays competitive base
salaries which have been benchmarked to the market in which the consolidated entity operates. The consolidated
entity compiles competitive salary information on companies of comparable size in the oil and gas industry from
several sources. Where appropriate, information is obtained from surveys conducted by independent consultants
and national and international publications. In the past the Board had engaged independent advisors to review the
remuneration levels paid to the consolidated entity’s Key Management Personnel. An advisor was not retained for
the 2015 review.
FAR will be paid in cash and is not at risk other than by termination. Individual FAR is set each year based on job
description, competitive salary information sourced by the consolidated entity and overall competence in fulfilling
the requirements of the particular role.
There is no guaranteed base pay increases included in any Executives’ contracts.
Retirement benefits are delivered under the employees’ superannuation fund.
OTTO ENERGY | ANNUAL REPORT 2015
34
31
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
b)
Short-term incentives
Executives have the opportunity to earn an annual short-term incentive (STI) if predefined targets are achieved. The
CEO has a target STI opportunity of 20% of FAR and other members of the Executive team have an STI opportunity of
approximately 20% of FAR. The targets are reviewed annually.
STI awards for the Executive team in the 2015 financial year were based on the scorecard measures and weightings
as disclosed below. These targets were set by the Board and the Remuneration and Nomination Committee and are
aligned to the Company’s strategic and business objectives.
Performance category
Health, safety & environment
Total shareholder return
Asset specific
New business development
Leadership
Weighting
10%
25%
30%
25%
10%
The Board and Remuneration and Nomination Committee are responsible for assessing whether the KPIs are met. To
assist in this assessment, the Committee receives detailed reports on performance from management. The
Committee has the discretion to adjust short-term incentives downwards in light of unexpected or unintended
circumstances.
c)
Long-term incentives
The consolidated entity believes that encouraging its employees to become shareholders is the best way of aligning
their interests with those of its shareholders. Long-term incentives are provided to certain employees via the Otto
Energy Limited Employee Performance Rights and Option Plan which was approved by shareholders at the 2013
Annual General Meeting.
The Otto Energy Limited Employee Performance Rights and Option Plan is designed to provide long-term incentives
for employees to deliver long-term shareholder returns. Under the plan, participants are granted performance rights
or options which only vest if certain performance conditions are met and the employees are still employed by the
consolidated entity at the end of the vesting period. Participation in the plan is at the Board’s discretion and no
individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
Vesting of the performance rights are either time based or subject to Otto Energy Limited’s total shareholder return
(TSR), including share price growth, dividends and capital returns, over a three-year period.
Once vested, the performance rights are automatically converted into shares. Performance rights are granted under
the plan for no consideration.
Four maximum LTI organisational benchmarks have been established as a percentage of individual FARs. These four
levels reflect the increased involvements of each level in pursuing and achieving the Company’s goals. These
benchmarks are set out in the following table.
Organisational Level
CEO
Management
Professional,
Technical &
Support
Support Staff
LTI Organisational Benchmarks
50%
40%
30%
10%
The total number of performance rights granted is subject to being reduced proportionately so that the total number
for performance rights is within:
i)
The Board’s determined cap on the total number of performance rights which are issued as LTI awards in a given
year; and
ii) Any discretionary cap on the total number of rights on issue at any given time.
The Board has established an initial guideline that the total number of performance rights to be issued in a single year will be
capped at 1.7% of the fully paid issued capital of the Company as at the end of the prior year. In the event that the potential
total number of performance rights exceeds the cap then all awardees receive a pro-rated reduced number of performance
rights. This cap is at the discretion of the Board and may be altered depending on the prevailing context.
32
OTTO ENERGY | ANNUAL REPORT 2015 35
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Share Trading Policy
The trading of shares issued to participants under any of the Company’s employee equity plans is subject to, and conditional
upon, compliance with the Company’s employee share trading policy. Executives are prohibited from entering into any
hedging arrangements over unvested rights or options under the Company’s employee option plan. The Company would
consider a breach of this policy as gross misconduct which may lead to disciplinary action and potentially dismissal.
Voting and comments made at the consolidated entity’s 2014 Annual General Meeting
Otto Energy Limited received more than 81% of “yes” votes on its remuneration report for the 2014 financial year. The
Company did not receive any specific feedback at the Annual General Meeting or throughout the year on its remuneration
practices.
Performance of Otto Energy Limited
The graph below illustrate two of the key links between Key Management Personnel remuneration and Otto Energy Limited’s
performance.
The graph illustrates the link between Otto Energy Limited’s profit before tax and payments made under the STI plan.
Profit
before
tax
$m
25,000
20,000
15,000
10,000
5,000
-
(5,000)
(10,000)
(15,000)
(20,000)
STI as
% of
target
Profit/(loss) before tax * AUD
STI as % of target **
65%
60%
55%
50%
45%
40%
35%
30%
2011
2012
2013
2014
2015
* Profit/(loss) before tax is profit from continuing operations before income tax expense.
** STI % of target reflects the percentage of the target STI pool that was paid out to Executives.
OTTO ENERGY | ANNUAL REPORT 2015
36
33
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Details of Remuneration
The following tables show details of the remuneration received by the Directors and the Key Management Personnel of the
consolidated entity for the current and previous financial year.
Remuneration and other terms of employment for the Managing Director & Chief Executive Officer and Key Management
Personnel are formalised in service agreements. Each of these agreements provides for performance related conditions and
agreements relating to remuneration are set out below.
2015
Short‐term Employee
Benefits
Post
Employment
Share‐Based Payments
Total
Salary &
Fees
A$
Cash Bonus
A$
Superannuation
A$
Termination
Benefits
A$
Options
A$
Performance
Rights(i)
A$
A$
Directors of Otto Energy Limited
Mr R Crabb
Mr M Allen
Mr I Macliver
Mr I Boserio
Mr J Jetter
Mr R Bomasang
114,155
445,000
77,626
68,493
90,000
138,517
933,791
‐
100,000
‐
‐
‐
‐
10,845
30,000
7,374
6,507
‐
‐
100,000
54,726
Key Management Personnel
Mr P Senycia
Mr C Hasson
Mr M Worner(ii)
Mr S Blenkinsop(iii)
441,249
271,597
100,513
242,756
‐
53,000
‐
80,662
35,000
30,000
9,549
38,781
1,056,115
133,662
113,330
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
102,395
102,395
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
79,157
‐
‐
‐
‐
125,000
654,157
85,000
75,000
90,000
138,517
79,157
1,167,674
79,157
37,216
‐
‐
555,406
391,813
110,062
464,594
116,373
1,521,875
1,989,906
2,689,549
(i) Performance rights have been valued using a hybrid Monte Carlo and Hull‐White model. Further details of the share rights plan is
contained in the Remuneration Report pages 36 to 38 and Note 23.
(ii) Mr M Worner was appointed as Commercial Manager on 9 March 2015.
(iii) Mr S Blenkinsop resigned as Company Secretary on 1 April 2015.
233,662
102,395
168,056
195,530
‐
34
OTTO ENERGY | ANNUAL REPORT 2015
34
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
2014
Short‐term Employee
Benefits
Post
Employment
Share‐Based Payments
Total
Salary &
Fees
A$
Cash Bonus
A$
Superannuation
A$
Termination
Benefits
A$
Options(i)
A$
Performance
Rights(ii)
A$
A$
Directors of Otto Energy Limited
Mr R Crabb
Mr I Macliver
Mr I Boserio
Mr J Jetter
Mr R Bomasang
114,416
77,803
68,650
90,000
131,207
482,076
‐
‐
‐
‐
‐
‐
Key Management Personnel
Mr M Allen
Mr P Senycia
Mr C Hasson(iii)
Mr S Blenkinsop(iv)
Mr G McNab(v)
413,585
444,691
81,090
172,757
352,425
1,464,548
91,514
82,844
‐
‐
107,803
282,161
10,584
7,197
6,350
‐
‐
24,131
25,000
25,000
7,501
15,980
25,000
98,481
‐
‐
‐
‐
‐
‐
‐
‐
‐
587,822
587,822
‐
‐
123,000
123,000
82,000
328,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
59,590
59,590
‐
‐
(163,483)
125,000
85,000
198,000
213,000
213,207
834,207
589,689
612,125
88,591
188,737
909,567
(44,303)
2,388,709
122,612
282,161
1,946,624
(i) The options have been valued using the Black‐Scholes model.
(ii) Performance rights have been valued using a hybrid Monte Carlo and Hull‐White model. Further details of the share rights plan is
contained in the Remuneration Report pages 36 to 38 and Note 23.
(iii) Mr C Hasson was appointed as CFO on 26 February 2014.
(iv) Mr S Blenkinsop was appointed Chief Legal Counsel on 6 January 2014 and in addition was appointed as Company Secretary on 26
February 2014.
(v) Mr G McNab resigned as CEO on 24 February 2014.
3,222,916
(44,303)
587,822
328,000
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Directors of Otto Energy Limited
Mr R Crabb
Mr M Allen
Mr I Macliver
Mr I Boserio
Mr J Jetter
Mr R Bomasang
Key Management Personnel of the consolidated entity
Mr P Senycia
Mr C Hasson
Mr M Worner
86%
77%
100%
Fixed remuneration
At risk – STI
%
At risk – LTI (i)
%
2015
2014
2015
2014
2015
2014
100%
73%
100%
100%
100%
100%
100%
74%
100%
38%
42%
62%
77%
100%
‐
‐
15%
‐
‐
‐
‐
‐
14%
‐
‐
16%
‐
‐
‐
‐
14%
‐
‐
‐
12%
‐
‐
‐
‐
14%
9%
‐
‐
10%
‐
62%
58%
38%
9%
‐
‐
Mr S Blenkinsop (ii) (iii)
‐
(i) Since long‐term incentives are provided exclusively by way of performance rights or options, the percentages disclosed also reflect the
value of remuneration consisting of performance rights and options, based on the value of performance rights or options expensed during
the year.
(ii) Mr S Blenkinsop resigned as Company Secretary on 1 April 2015.
(iii) Total remuneration includes termination expenses for the relevant period.
100%
61%
17%
‐
‐
Service Agreements
On appointment to the Board, all Non‐Executive Directors enter into a service agreement with the Company in the form of
a letter of appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the office
of Director.
35
OTTO ENERGY | ANNUAL REPORT 2015
35
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Remuneration and other terms of employment for the Managing Director and Chief Executive Officer, Chief Financial Officer
and the Key Management Personnel are also formalised in service agreements. Each of these agreements provide for the
provision of performance related cash bonuses, and participation, when eligible, in the Otto Energy Limited Employee
Performance Rights or Option Plan. Other major provisions of the agreements relating to remuneration are set out below.
All contracts with Executives may be terminated early by either party with notice, per individual agreement, subject to
termination payments as detailed below.
Name
Mr Matthew Allen
Managing Director and Chief
Executive Officer
Mr Paul Senycia
Vice President Exploration Manager
and New Ventures
Mr Craig Hasson
Chief Financial Officer
Mr Matthew Worner
Commercial Manager
Commencement of
Contract
Base salary including
superannuation (i)
$A
Termination benefit(ii)
24 June 2015
$475,000
6 months base salary
12 April 2010
$476,250
3 months base salary
26 February 2014
$290,175
3 months base salary
9 March 2015
$350,400
1 months base salary
(i) Base salaries quoted are for the year ended 30 June 2015; they are reviewed annually by the Board and the Remuneration and Nomination
Committee.
(ii) Termination benefits are payable on early termination by the Company, other than for gross misconduct.
Share-Based Compensation
Otto Energy Limited has two forms of share based compensation for Key Management Personnel. They are performance
rights and options.
Performance Rights over Equity Instruments Granted
Performance rights granted to the Key Management Personnel were granted as remuneration unless otherwise noted. The
rights granted have no exercise price and are exercisable from the date of vesting and details of vesting periods are set out
at Note 23. All rights expire on the earlier of their expiry date or termination of individual’s employment. Performance rights
granted carry no dividend or voting rights.
The value of rights included in remuneration for the year is calculated in accordance with Australian Accounting Standards.
The assessed fair value at grant date of the performance rights is allocated equally over the period from grant date to vesting
date and the amount is included in the remuneration tables. Where rights vest fully in the year, the full value of the rights is
recognised in remuneration for that year.
The value of performance rights at the grant date is calculated as the fair value of the rights at grant date, using a hybrid
Monte Carlo and Hull-White model, multiplied by the number of rights granted.
No adjustment is made to the value included in remuneration or the financial results where the right ultimately has a lesser
or greater value than as at the date of grant. The inputs into the fair value calculation of the rights granted and outstanding
as of 30 June 2015 are set out in the following table.
36
OTTO ENERGY | ANNUAL REPORT 2015 39
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Year ended 30 June 2015 – TSR based performance rights:
Measurement date
1 February
2017
1 February
2018
1 February
2019
1 February
2016
1 February
2017
1 February
2018
Grant date
23 April 2015
23 April 2015
23 April 2015
3 October
2014
3 October
2014
3 October
2014
Expiry date
31 December
2019
31 December
2019
31 December
2019
31 December
2018
31 December
2018
31 December
2018
Number of rights
2,000,001
2,000,001
1,999,998
2,600,000
2,600,000
2,600,000
Share price at grant date – A$
Expected volatility
Expected dividend yield
Risk free rate
Fair value ‐ $A
0.11
47.7%
Nil
1.95%
0.06
0.11
51.2%
Nil
1.90%
0.07
0.11
51.2%
Nil
1.90%
0.07
0.09
51.3%
Nil
2.60%
0.05
0.09
52.4%
Nil
2.60%
0.05
0.09
53.2%
Nil
2.60%
0.06
Year ended 30 June 2014 – TSR based performance rights
Grant date
Expiry date
Share price at grant date – A$
Expected volatility
Expected dividend yield
Risk free rate
Fair value ‐ $A
3 October
2011
31 December
2014
0.08
50.0%
Nil
3.66%
0.02
1 February
2013
1 April 2016
0.10
52.6%
Nil
2.75%
0.01
The expected price volatility is based upon the historic volatility (based on the remaining life of the options), adjusted for any
expected changes to future volatility due to publicly available information.
No cash benefit is received by Key Management Personnel of the consolidated entity, until the sale of the resultant shares,
which cannot be done unless and until the rights have vested and the shares issued.
The number of performance rights over ordinary shares held, granted to, vested and/or lapsed/expired by Directors of Otto
Energy Limited and Key Management Personnel as part of compensation during the year ended 30 June 2015 is set out
below.
Balance at
Start of Year
Granted as
Compensation
Vested
and
Exercisable
Lapsed/
Expired
Balance at
End of Year
2015
Directors of Otto Energy Limited
Mr R Crabb
Mr M Allen
Mr I Macliver
Mr I Boserio
Mr J Jetter
Mr R Bomasang
‐
‐
‐
5,500,000
4,700,000
(5,500,000)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
5,500,000
4,700,000
(5,500,000)
Key Management Personnel of the consolidated entity
Mr P Senycia
Mr C Hasson
Mr M Worner(i)
Mr S Blenkinsop(ii)
5,500,000
‐
‐
‐
4,700,000
2,900,000
‐
1,500,000
(5,500,000)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(1,500,000)
‐
4,700,000
‐
‐
‐
‐
4,700,000
4,700,000
2,900,000
‐
‐
9,100,000
(i) Mr M Worner was appointed as Commercial Manager on 9 March 2015.
(ii) Mr S Blenkinsop resigned as Company Secretary on 1 April 2015.
5,500,000
(5,500,000)
(1,500,000)
7,600,000
37
OTTO ENERGY | ANNUAL REPORT 2015
37
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
The value of performance rights over ordinary shares vested and/or lapsed/expired by Directors of Otto Energy Limited and
Key Management Personnel as part of compensation during the year ended 30 June 2015 is set out in the following table.
2015
Mr M Allen
Mr P Senycia
Mr S Blenkinsop
Number of
performance
rights vested
Value of
performance
rights vested
during the year
(A$)
5,500,000
5,500,000
-
140,950
140,950
-
11,000,000
281,900
Number of rights
lapsed/cancelled
during the year
Number of
ordinary shares
issued as a result
of vesting
-
-
(1,500,000)
(1,500,000)
5,500,000
5,500,000
-
11,000,000
Options over Equity Instruments Granted
Options granted to the Directors and Key Management Personnel were granted as remuneration unless otherwise noted.
Options are issued under the Option Plan. The following table summarises the number and value of options, related to
Directors and Key Management Personnel that have been granted, vested or lapsed during the financial year.
No cash benefit is received by the Directors or Key Management Personnel of the Company until the sale of the options or
the sale of the resultant share which cannot be done unless and until the options have been exercised and the shares issued.
Options granted carry no dividend or voting rights.
2015
Balance at Start
of Year
Granted as
Compensation
Directors of Otto Energy Limited
Mr R Crabb
Mr M Allen
Mr I Macliver
Mr I Boserio
Mr J Jetter
Mr R Bomasang
-
-
-
3,000,000
3,000,000
2,000,000
8,000,000
Key Management Personnel of the consolidated entity
Mr P Senycia
Mr C Hasson
Mr M Worner(i)
Mr S Blenkinsop(ii)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Value of
options
granted
A$
Other
changes(iii)
Balance at
End of Year
Vested and
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,000,000)
(3,000,000)
(2,000,000)
(8,000,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Mr M Worner was appointed as Commercial Manager on 9 March 2015.
(ii) Mr S Blenkinsop resigned as Company Secretary on 1 April 2015.
(iii) Options were sold to 3rd parties during the year ended 30 June 2015.
38
OTTO ENERGY | ANNUAL REPORT 2015 41
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
Additional Disclosure relating to Key Management Personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
2015
Balance at Start
of Year
Granted During
the year
Directors of Otto Energy Limited
Mr R Crabb
Mr M Allen
Mr J Jetter
Mr I Macliver
Mr I Boserio
Mr R Bomasang
17,495,052
4,000,000
19,089,175
4,549,721
330,000
‐
45,463,948
Key Management Personnel of the consolidated entity
Mr P Senycia
Mr C Hasson
Mr M Worner(i)
Mr S Blenkinsop(ii)
3,100,000
37,500
‐
650,000
3,787,500
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Received
through
conversion of
performance
rights during the
Year
Other Changes
During Year
Balance at End
of Year
‐
5,500,000
‐
‐
‐
‐
300,000
(6,000,000)
(3,000,000)
‐
(330,000)
‐
17,795,052
3,500,000
16,089,175
4,549,721
‐
‐
5,500,000
(9,030,000)
41,933,948
5,500,000
(5,600,000)
‐
‐
‐
75,000
‐
(650,000)
3,000,000
112,500
‐
‐
5,500,000
(6,175,000)
3,112,500
(i) Mr M Worner was appointed as Commercial Manager on 9 March 2015.
(ii) Mr S Blenkinsop resigned as Company Secretary on 1 April 2015.
Outstanding Balances arising from Sales/Purchases of Goods and Services
There are no balances outstanding at the end of the reporting period in relation to transactions with key management
personnel and their related parties (2014: nil).
End of Audited Remuneration Report
Diversity
Proportion of women employees in Otto Energy Limited
Whole organisation
Senior Executive positions
Board
Number
6/14
0/4
0/6
Proportion
43%
0%
0%
39
OTTO ENERGY | ANNUAL REPORT 2015
39
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Shares under Option
Unissued ordinary shares of Otto Energy Limited under option and performance rights at the date of this report are as
follows:
Date of Granted
Date of Expiry
Exercise price of performance
rights or options
A$
Number
Options
2‐Dec‐13
Performance Rights
3‐Oct‐14
3‐Oct‐14
3‐Oct‐14
23‐Apr‐15
23‐Apr‐15
23‐Apr‐15
2‐Dec‐16
31‐Dec‐18
31‐Dec‐18
31‐Dec‐18
31‐Dec‐19
31‐Dec‐19
31‐Dec‐19
0.0549
‐
‐
‐
‐
‐
‐
8,000,000
8,000,000
2,433,340
2,433,330
2,433,330
2,158,336
2,158,334
2,158,330
13,775,000
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
Included in these performance rights or options were performance rights or options granted as remuneration to the
Directors and Key Management Personnel during the year. Details of performance rights and options granted to Key
Management Personnel are disclosed on pages 36 to 38.
Insurance of Officers and Indemnity of Auditors
During the financial year, the Company paid a premium of US$58,603 to insure the Directors and officers of the Company
and its Australian‐based controlled entities, and the managers of each of the divisions of the consolidated entity.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from
liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from
conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of
information to gain advantage for them or someone else or to cause detriment to the Company. It is not possible to
apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
Proceedings on Behalf of Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of
the Corporations Act 2001.
40
OTTO ENERGY | ANNUAL REPORT 2015
40
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ REPORT (continued)
For The Year Ending 30 June 2015
DIRECTORS’ REPORT
For the year ending 30 June 2015
Non‐Audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the consolidated entity are important. Details of the amounts paid or
payable to the auditor (BDO Australia) for non‐audit services provided during the year are set out below.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is
satisfied that the provision of the non‐audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non‐audit services by the auditor, as
set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following
reasons:
all non‐audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants.
During the year the following fees were paid or payable for non‐audit services provided by the auditor of the parent entity,
its related practices and non‐related audit firms:
BDO Australian firm:
Other assurance services
Total remuneration for other assurance services
Tax compliance services
Tax advice services
Total remuneration for taxation services
Total remuneration for non‐audit services
Auditor’s Independence Declaration
2015
US$
2014
US$
‐
‐
29,431
105,332
134,763
134,763
7,432
7,432
52,802
67,412
120,214
127,646
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 42.
Auditor
BDO continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Mr I Macliver
DIRECTOR
24 September 2015
41
OTTO ENERGY | ANNUAL REPORT 2015
41
OTTO ENERGY | ANNUAL REPORT 2015
AUDITOR’S INDEPENDENCE DECLARATION
For The Year Ending 30 June 2015
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF OTTO ENERGY LIMITED
As lead auditor of Otto Energy Limited for the year ended 30 June 2015, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Otto Energy Limited and the entities it controlled during the period.
Jarrad Prue
Director
BDO Audit (WA) Pty Ltd
Perth, 24 September 2015
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN
77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK
company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under
Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
42
OTTO ENERGY | ANNUAL REPORT 2015 CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
For The Year Ending 30 June 2015
For the year ending 30 June 2015
Revenue and other income
(Loss)/profit on disposal of property, plant and equipment
Other expenses from ordinary activities
Employee benefit expense
Depreciation & amortisation
Finance expenses
Impairment of exploration and evaluation assets
Other expenses
Foreign currency losses
Loss before income tax
Income tax benefit
Net loss after income tax for the year from continuing operations
Profit after tax for the year from discontinued operations
Net profit/(loss) for the year
Other comprehensive income
Other comprehensive income for the year net of tax
Total comprehensive profit/(loss) for the year attributable to ordinary equity
holders of Otto Energy Limited
Loss per share for loss from continuing operations attributable to the ordinary
equity holders of the Company:
Basic loss per share
Diluted loss per share
Earnings/(loss) per share for profit/(loss) attributable to the ordinary equity holders
of the Company:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Note
2015
2014
(Restated)
US$’000
US$’000
4
13
5
5
5
14
5
6
7
1,357
(112)
(4,008)
(235)
-
(685)
(2,209)
(901)
(6,793)
-
8,197
1
(8,452)
(498)
(1,487)
(23,792)
(4,078)
(87)
(30,196)
1
(6,793)
(30,195)
32,793
26,000
30,102
(93)
-
-
-
-
26,000
(93)
Note
2015
2014
(Restated)
US cents
US cents
19
19
19
19
(0.59)
(0.59)
(2.63)
(2.63)
2.24
2.23
(0.01)
(0.01)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
OTTO ENERGY | ANNUAL REPORT 2015
46
43
OTTO ENERGY | ANNUAL REPORT 2015
CONSOLIDATED STATEMENT OF FINANCIAL
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
POSITION
For The Year Ending 30 June 2015
Current Assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Inventories
Total Current Assets
Non‐Current Assets
Other assets
Property, plant and equipment
Exploration and evaluation assets
Oil and gas properties
Total Non‐Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Provision for income tax payable
Total Current Liabilities
Non‐Current Liabilities
Deferred tax liabilities
Provisions
Total Non‐Current Liabilities
Total Liabilities
NET ASSETS
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
Note
2015
2014
US$’000
US$’000
9
10
11
12
11
13
14
14
15
16
6
16
17
18
41,206
‐
701
2,422
44,329
6
151
18,645
‐
18,802
63,131
2,800
98
‐
2,898
‐
68
68
2,966
60,165
7,735
18
1,758
2,941
12,452
7,955
496
9,049
91,460
108,960
121,412
4,755
196
2,442
7,393
13,935
8,910
22,845
30,238
91,174
81,104
13,410
(34,349)
60,165
131,577
13,145
(53,548)
91,174
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
OTTO ENERGY | ANNUAL REPORT 2015
44
44
OTTO ENERGY | ANNUAL REPORT 2015
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For The Year Ending 30 June 2015
Balance as at 1 July 2013
Total comprehensive loss for the year
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Issued options during the year
Balance as at 30 June 2014
Total comprehensive loss for the year
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Issued performance rights during the year
Share capital return (Note 17)
Cash dividends (Note 8)
Balance as at 30 June 2015
Attributable to owners of Otto Energy Limited
Contributed
Equity
US$’000
Accumulated
Losses
US$’000
Other
Reserves
US$’000
Total Equity
US$’000
131,577
(53,455)
12,873
90,995
‐
‐
‐
(93)
(93)
‐
131,577
(53,548)
‐
‐
(93)
(93)
272
13,145
272
91,174
‐
‐
‐
(50,473)
‐
81,104
26,000
26,000
‐
‐
26,000
26,000
‐
‐
(6,801)
(34,349)
265
‐
‐
13,410
265
(50,473)
(6,801)
60,165
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
OTTO ENERGY | ANNUAL REPORT 2015
45
45
OTTO ENERGY | ANNUAL REPORT 2015
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Year Ending 30 June 2015
For the year ending 30 June 2015
Note
2015
2014
US$’000
US$’000
Cash flows from operating activities
Receipts from customers
Payment to suppliers and employees
Interest received
Interest and financing costs paid
Income taxes paid
Net cash inflow from operating activities
25
45,217
(19,352)
503
-
(6,354)
20,014
(13)
10
(9,590)
-
165
-
80,400
70,972
73,693
(25,093)
22
(5,699)
(770)
42,153
(102)
3
(10,404)
(39,138)
(165)
425
-
(49,381)
-
-
19,084
(35,923)
(6,832)
(50,703)
(57,535)
33,451
7,735
20
41,206
-
-
(16,839)
(24,067)
31,854
(52)
7,735
8
17
9
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for exploration and evaluation
Payment for oil and gas properties
Loan to other entities
Proceeds from other investments
Net proceeds from sale of controlled entities (net of cash disposed)
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from loan drawdown
Repayment of borrowings
Dividends paid
Return of capital
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash
Cash and cash equivalents at end of year
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
46
OTTO ENERGY | ANNUAL REPORT 2015 49
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
1.
Statement of Significant Accounting Policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements
are for the consolidated entity consisting of Otto Energy Limited and its subsidiaries.
a)
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
interpretations issued by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001, as appropriate
for for‐profit‐oriented entities. Otto Energy Limited is a for‐profit entity for the purpose of preparing the financial statements.
The Consolidated financial statements were approved for issue by the Board of Directors on 24 September 2015.
i)
Compliance with IFRS
The consolidated financial statements of the Otto Energy Limited Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
ii)
New, revised or amended Accounting Standards and Interpretations adopted by the consolidated entity
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new, revised and amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards
and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any
significant impact on the financial performance or position of the consolidated entity.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
Amendments to Australian Accounting Standards ‐ Offsetting Financial Assets and Financial Liabilities
AASB 2012‐3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified
in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of "currently has a legally enforceable
right of set‐off" and that some gross settlement systems may be considered equivalent to net settlement. This change in
accounting policy had no material impact on the Group.
Amendments to AASB 136 – Recoverable Amount Disclosures for Non‐Financial Assets
AASB 2013‐3 amends the disclosure requirements in AASB 136 Impairment of Assets. The amendments include the
requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired
assets is based on fair value less costs of disposal.
The application of AASB 136 did not impact the Group’s accounting for its impairment of non‐financial assets.
Interpretation 21 Levies
This Interpretation confirms that a liability to pay a levy is only recognised when the activity that triggers the payment occurs.
Applying the going concern assumption does not create a constructive obligation.
For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be
anticipated before the specified minimum threshold is reached. The adoption of Interpretation 21 had no material impact on
the Group.
iii)
Standards issued but not yet effective
The Accounting Standards and Interpretations that are issued but not yet effective up to the date of issuance of the Group’s
financial statements are disclosed below. The Group intends to adopt these standards and interpretations, if applicable, when
they become effective.
OTTO ENERGY | ANNUAL REPORT 2015
47
47
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
Application date
of standard
Annual reporting
periods commencing
on or after 1 January
2018
Impact on
Otto Energy Ltd
financial statements
When this standard is
first adopted from 1 July
2018, there will be no
impact on transactions
and balances recognised
in the financial
statements.
Reference and
Title
AASB 9 - Financial
Instruments
Summary
AASB 9 (December 2014) is a new Principal standard which replaces AASB 139. This
new Principal version supersedes AASB 9 issued in December 2009 (as amended) and
AASB 9 (issued in December 2010) and includes a model for classification and
measurement, a single, forward-looking ‘expected loss’ impairment model and a
substantially-reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning on or after 1 January 2018. However,
the Standard is available for early application. The own credit changes can be early
applied in isolation without otherwise changing the accounting for financial
instruments. The final version of AASB 9 introduces a new expected-loss impairment
model that will require more timely recognition of expected credit losses.
Specifically, the new Standard requires entities to account for expected credit losses
from when financial instruments are first recognised and to recognise full lifetime
expected losses on a more timely basis.
Amendments to AASB 9 (December 2009 & 2010 editions) (AASB 2013-9) issued in
December 2013 included the new hedge accounting requirements, including changes
to hedge effectiveness testing, treatment of hedging costs, risk components that can
be hedged and disclosures.
AASB 9 includes requirements for a simpler approach for classification and
measurement of financial assets compared with the requirements of AASB 139.
The main changes are described below.
a)
b)
c)
d)
Financial assets that are debt instruments will be classified based on (1) the
objective of the entity's business model for managing the financial assets; (2)
the characteristics of the contractual cash flows.
Allows an irrevocable election on initial recognition to present gains and
losses on investments in equity instruments that are not held for trading in
other comprehensive income. Dividends in respect of these investments that
are a return on investment can be recognised in profit or loss and there is no
impairment or recycling on disposal of the instrument.
Financial assets can be designated and measured at fair value through profit
or loss at initial recognition if doing so eliminates or significantly reduces a
measurement or recognition inconsistency that would arise from measuring
assets or liabilities, or recognising the gains and losses on them, on different
bases.
Where the fair value option is used for financial liabilities the change in fair
value is to be accounted for as follows:
The change attributable to changes in credit risk are presented in other
comprehensive income (OCI)
The remaining change is presented in profit or loss
AASB 9 also removes the volatility in profit or loss that was caused by changes in the
credit risk of liabilities elected to be measured at fair value. This change in accounting
means that gains caused by the deterioration of an entity’s own credit risk on such
liabilities are no longer recognised in profit or loss.
Consequential amendments were also made to other standards as a result of AASB
9, introduced by AASB 2009-11 and superseded by AASB 2010-7, AASB 2010-10 and
AASB 2014-1 – Part E.
AASB 2014-7 incorporates the consequential amendments arising from the issuance
of AASB 9 in Dec 2014.
AASB 2014-8 limits the application of the existing versions of AASB 9 (AASB 9
(December 2009) and AASB 9 (December 2010)) from 1 February 2015 and applies
to annual reporting periods beginning on after 1 January 2015.
AASB 15 – Revenue
from Contracts with
Customers
An entity will recognise revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. This means that revenue will
be recognised when control of goods or services is transferred, rather than on
transfer of risks and rewards as is currently the case under IAS 18 Revenue.
Annual
reporting
periods beginning on
or after 1 January
2017
Due to the recent release
of
this standard,
the
entity has not yet made a
detailed assessment of
the
this
standard
impact
of
48
OTTO ENERGY | ANNUAL REPORT 2015 51
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
AASB 2015-1
Amendments to
Australian
Accounting
Standards – Annual
Improvements to
Australian
Accounting
Standards 2012-
2014 Cycle
AASB 2015-2
Amendments to
Australian
Accounting
Standards –
Disclosure Initiative:
Amendments to
AASB 101
The subjects of the principal amendments to the Standards are set out below:
AASB 119 Employee Benefits
Discount rate: regional market issue – clarifies that the high quality corporate bonds
used to estimate the discount rate for post-employment benefit obligations should
be denominated in the same currency as the liability. Further it clarifies that the
depth of the market for high quality corporate bonds should be assessed at the
currency level.
Annual reporting
periods commencing
on or after 1 January
2016
the
There will be no impact
on
financial
statements when these
first
amendments are
they
adopted because
to
apply prospectively
payment
share-based
transactions
for which
the grant date is on or
after 1 January 2016.
The Standard makes amendments to AASB 101 Presentation of Financial Statements
arising from the IASB’s Disclosure Initiative project. The amendments are designed
to further encourage companies to apply professional judgement in determining
what information to disclose in the financial statements. For example, the
amendments make clear that materiality applies to the whole of financial statements
and that the inclusion of immaterial information can inhibit the usefulness of
financial disclosures. The amendments also clarify that companies should use
professional judgement in determining where and in what order information is
present in the financial disclosures.
Annual reporting
periods commencing
on or after 1 January
2016
There will be no impact
on the financial
statements when these
amendments are first
adopted because this is a
disclosure standard only.
iv)
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are
disclosed in Note 2.
b)
Principles of consolidation
i)
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Otto Energy Limited
(‘Company’ or ‘parent entity’) as at 30 June 2015 and the results of all subsidiaries for the year then ended. Otto Energy
Limited and its subsidiaries together are referred to in this financial report as the consolidated entity.
Subsidiaries are all entities (including special purpose entities) over which the consolidated entity has the power to govern
the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The
existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the consolidated entity controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-
consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between consolidated entity companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
The acquisition method of accounting is used to account for business combinations by the consolidated entity (refer to Note
1(h)). A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the
difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is
recognised directly in equity attributable to the parent.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit
or loss and other comprehensive income, statement of changes in equity and statement of financial position respectively.
OTTO ENERGY | ANNUAL REPORT 2015
52
49
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
ii)
Joint arrangements
Jointly controlled assets
The consolidated entity’s share of the assets, liabilities, revenues and expenses of joint arrangement operations have been
incorporated into the financial statements in the appropriate items of the consolidated statement of profit or loss and other
comprehensive income and consolidated statement of financial position. Details of joint arrangements are set out in Note
21.
iii)
Changes in ownership interests
The consolidated entity treats transactions with non-controlling interests that do not result in a loss of control as transactions
with equity owners of the consolidated entity. A change in ownership interest results in an adjustment between the carrying
amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference
between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in
a separate reserve within equity attributable to owners of Otto Energy Limited.
When the consolidated entity ceases to have control, joint control or significant influence, any retained interest in the entity
is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled
entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that
entity are accounted for as if the consolidated entity had directly disposed of the related assets or liabilities. This may mean
that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is
retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified
to profit or loss where appropriate.
c)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Board. Management has determined that based on the report reviewed by
the Board and used to make strategic decisions, that the consolidated entity has four reportable segments.
d)
Foreign currency translation
i)
Functional and presentation currency
Items included in the financial statements of each of the consolidated entity’s entities are measured using the currency of
the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial
statements are presented in United States dollars, which is Otto Energy Limited’s functional and presentation currency.
ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss.
iii)
Consolidated entity companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
assets and liabilities for each statement of financial position account presented are translated at the closing rate at the
date of that statement of financial position
income and expenses for each statement of profit or loss and other comprehensive income account are translated at
average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
50
OTTO ENERGY | ANNUAL REPORT 2015 53
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid,
the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable to the extent that it is probable that
economic benefits will flow to the consolidated entity and the revenue can be reliably measured.
i)
Sale of oil
Revenue from the sale of oil is recognised when the consolidated entity has transferred to the buyer the significant risks and
rewards of ownership of the goods.
ii)
Interest revenue
Interest income is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.
iii) Dividends
Dividends are recognised as revenue when the right to receive payment is established.
f)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are
not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments in foreign operations where the Company is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly
in equity, respectively.
g)
Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the consolidated entity as
lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the
lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
OTTO ENERGY | ANNUAL REPORT 2015
54
51
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
h) Business combinations
The purchase method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are
acquired. Cost is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed
at the date of exchange. Where equity instruments are issued in an acquisition, the fair value of the instruments is their
published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published
price at the date of exchange is an unreliable indicator of fair value. Any directly attributable costs of acquisition are expensed.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of
acquisition over the fair value of the consolidated entity’s share of the identifiable net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the consolidated entity's share of the fair value of the identifiable net assets of the
subsidiary acquired, the difference is recognised directly in the statement of profit or loss, but only after a reassessment of
the identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
i)
Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets
other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
j)
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
k)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are
presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability
of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing
the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is
objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of
the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation,
and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is
impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term
receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which
an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or
loss.
52
OTTO ENERGY | ANNUAL REPORT 2015 55
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
l)
Inventories
Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and
variable overhead expenses, are assigned to inventory on hand by the method most appropriate to each particular class of
inventory, with the majority being valued on weighted average. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
m) Discontinued operations
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose
of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the profit or loss.
n) Other financial assets
Other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement,
except for financial assets at fair value through profit or loss. They are subsequently measured at either amortised cost or
fair value depending on their classification. Classification is determined based on the purpose of the acquisition and
subsequent reclassification to other categories is restricted. The fair values of quoted investments are based on current bid
prices. For unlisted investments, the consolidated entity establishes fair value by using valuation techniques. These include
the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash
flow analysis, and option pricing models.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a financial
asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor;
a breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to
economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter
bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable data
indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for financial assets carried at cost is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the current market rate of return for similar
financial assets.
o)
Property, plant and equipment
Property, plant and equipment other than Oil and Gas Properties are stated at historical cost less depreciation. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated using the straight-line method to allocate their cost over their estimated useful lives to estimate
residual value. The following estimated useful lives are used in the calculation of depreciation:
Plant and equipment
Furniture and equipment
5 years
3 - 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or
loss. When revalued assets are sold, it is consolidated entity policy to transfer any amounts included in other reserves in
respect of those assets to retained earnings.
OTTO ENERGY | ANNUAL REPORT 2015
56
53
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
p) Oil and gas properties
i)
Exploration and evaluation expenditure
Expenditure on exploration and evaluation is accounted for in accordance with the area of interest method. This approach is
strongly linked to the Company’s oil and gas reserves determination and reporting process and is considered to most fairly
reflect the results of the Company’s exploration and evaluation activity because only assets with demonstrable value are
carried on the statement of financial position.
Upon the production of commercial quantities of oil and gas, capitalised exploration and evaluation costs are transferred to
Oil and Gas Properties – Producing Projects and amortisation commences. This method allows the costs associated with the
acquisition, exploration and evaluation of a prospect to be aggregated on the Consolidated Statement of Financial Position
and matched against the benefits derived from commercial production once this commences.
ii)
Costs
Exploration lease acquisition costs relating to oil and gas exploration provinces are expensed as incurred while the costs
incurred in relation to established or recognised oil and gas provinces are initially capitalised and then amortised over the
shorter term of the lease or the expected life of the project. All other exploration and evaluation costs, including general
permit activity, geological and geophysical costs and new venture activity costs are charged as expenses as incurred except
where:
the expenditure relates to an exploration discovery that, at the reporting date, had not been recognised as an area of
interest as the assessment of the existence or otherwise of economically recoverable reserves has not yet been
completed; or
where there exists an economically recoverable reserve, and it is expected that the capitalised expenditure will be
recouped through exploitation of the area of interest, or alternatively, by its sale.
Areas of interest are recognised at field level. Subsequent to the recognition of an area of interest, all further costs relating
to the area of interest are initially capitalised. Each area of interest is reviewed at least bi-annually to determine whether
economic quantities of reserves exist or whether further exploration and evaluation work is required to support the
continued carry forward of capitalised costs. To the extent it is considered that the relevant expenditure will not be recovered,
it is written off.
The costs of drilling exploration and evaluation wells are initially capitalised pending the results of the well. Costs are
expensed where the well does not result in the discovery of economically recoverable hydrocarbons. To the extent that it is
considered that the relevant expenditure will not be recovered, it is immediately expensed.
In the statement of cash flows, those cash flows associated with the capitalised exploration and evaluation expenditure are
classified as cash flows used in investing activities. Exploration and evaluation expenditure expensed is classified as cash flows
used in operating activities.
iii)
Prepaid drilling and completion costs
Where the Company has a non-operator interest in an oil or gas property, it may periodically be required to make a cash
contribution for its share of the Operator’s estimated drilling and/or completion costs, in advance of these operations taking
place.
Where these contributions relate to a prepayment for exploratory or early stage drilling activity, prior to a decision on the
commerciality of a well having been made, the costs are capitalised as prepaid drilling costs within Exploration and Evaluation
and/or Development Projects.
Where these contributions relate to a prepayment for well completion, these costs are capitalised as prepaid completion
costs within Exploration and Evaluation.
As the Operator notifies the Company as to how funds have been expended, the costs are reclassified from prepaid costs to
the appropriate expenditure category.
Where the Company has Operator interest in an oil or gas property, it will periodically call for the contribution of the non-
operator’s share of the estimated drilling and/or completion costs, in advance of these operations taking place.
54
OTTO ENERGY | ANNUAL REPORT 2015 57
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
iv)
Transfer of capitalised exploration and evaluation expenditure to producing projects (oil and gas properties)
When a well demonstrates commercial feasibility or comes into commercial production, accumulated exploration and
evaluation expenditure for the relevant area of interest is transferred to producing projects and amortised on a units of
production basis.
v)
Development assets
When the technical and commercial feasibility of an undeveloped oil or gas field has been demonstrated the field enters its
development phase. The costs of oil and gas assets are transferred from exploration and evaluation expenditure and
reclassified into oil and gas properties and include past exploration and evaluation costs.
vi)
Producing assets
Producing projects are stated at cost less accumulated amortisation and impairment charges. Producing projects include
construction, installation or completion of production and infrastructure facilities such as pipelines, transferred exploration
and evaluation assets, development wells and the provision for restoration.
vii) Amortisation and depreciation of producing projects
The consolidated entity uses the “units of production” (“UOP”) approach when amortising and depreciating field-specific
assets. Using this method of amortisation and depreciation requires the consolidated entity to compare the actual volume of
production to the reserves and then to apply this determined rate of depletion to the carrying value of the depreciable asset.
Capitalised producing projects costs relating to commercially producing wells are depreciated/amortised using the UOP basis
once commercial quantities are being produced within an area of interest. The reserves used in these calculations are the
Proved plus Probable reserves and are reviewed at least annually.
viii)
Future restoration costs
The consolidated entity’s aim is to avoid or minimise environmental impact resulting from its operations.
Provision is made in the statement of financial position for the estimated cost of legal and constructive obligations to restore
operating locations in the period in which the obligation arises. The estimated costs are capitalised as part of the cost of the
related project where recognition occurs upon acquisition of an interest in the operating locations. The carrying amount
capitalised is amortised on a unit of production basis during the production phase of the project.
Work scope and cost estimates for restoration are reviewed annually and adjusted to reflect the expected cost of restoration.
Restoration costs are based on the latest estimated future costs, determined on a discounted basis, which are re-assessed
regularly and exclude any allowance for potential changes in technology or material changes in legislative requirements.
Provisions for future restoration are made where there is a present obligation as a result of development or production
activity, and is capitalised as a component of the cost of those activities.
The consolidated entity accounts for changes in cost estimates on a prospective basis.
q)
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other
payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are
recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
OTTO ENERGY | ANNUAL REPORT 2015
58
55
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
r)
Provisions
Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably
estimated.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability.
s)
i)
Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months after the end of the period in which the employees render the related service are recognised in
respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled.
The liability for annual leave and accumulating sick leave is recognised in the provision for employee benefits. All other short-
term employee benefit obligations are presented as payables.
ii)
Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the
period in which the employees render the related service is recognised in the provision for employee benefits and measured
as the present value of expected future payments to be made in respect of services provided by employees up to the end of
the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service.
iii) Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
t)
Share based payments
The consolidated entity has provided benefits to its employees and Key Management Personnel in the form of share-based
payments, whereby services were rendered partly or wholly in exchange for shares or rights over shares. The Board has also
approved the grant of options or performance rights as incentives to attract employees and to maintain their long term
commitment to the Company. These benefits were awarded at the discretion of the Board, or following approval by
shareholders (equity-settled transactions).
The costs of these equity-settled transactions are measured by reference to the fair value of the equity instruments at the
date on which they are granted. The fair value of performance rights granted is determined using a hybrid Monte Carlo and
Hull-White model, further details of which are disclosed in Note 23. The fair value of options granted is determined by using
a Black-Scholes option pricing technique.
The costs of these equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and / or service conditions are fulfilled (the vesting period), ending on the date on which the
relevant employees become fully entitled to the equity instrument (vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the Consolidated Statement of Profit or Loss and
Other Comprehensive Income is the product of (i) the fair value at grant date of the award; (ii) the current best estimate of
the number of equity instruments that will vest, taking into account such factors as the likelihood of employee turnover
during the vesting period and the likelihood of non-market performance conditions being met and (iii) the expired portion of
the vesting period.
The charge to the Statement of Profit or Loss for the period is the cumulative amount as calculated above less the amounts
already charged in previous periods. There is a corresponding credit to equity.
56
OTTO ENERGY | ANNUAL REPORT 2015 59
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
Until an equity instrument has vested, any amounts recorded are contingent and will be adjusted if more or fewer equity
instruments vest than were originally anticipated to do so. Any equity instrument subject to a market condition is considered
to vest irrespective of whether or not that market condition is fulfilled, provided that all other conditions are satisfied.
If the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share based
payment arrangement, or is otherwise beneficial to the recipient of the award, as measured at the date of modification.
If an equity-settled transaction is cancelled (other than a grant cancelled by forfeiture when the vesting conditions are not
satisfied), it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. However, if a new equity instrument is substituted for the cancelled award and designated as a
replacement award on the date that it is granted, the cancelled and new equity instrument are treated as if they were a
modification of the original award, as described in the preceding paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share (see Note 19).
u)
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Where any Group company purchases the Company’s equity instruments, for example as the result of a share buy-back or a
share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes)
is deducted from equity attributable to the owners of Otto Energy Limited as treasury shares until the shares are cancelled
or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, and is included in equity attributable to the
owners of Otto Energy Limited.
v)
Earnings per share
i)
Basic earnings per share
Basic earnings per share are calculated by dividing:
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements
in ordinary shares issued during the year and excluding treasury shares (Note 19).
ii)
Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account:
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion
of all dilutive potential ordinary shares.
w) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
OTTO ENERGY | ANNUAL REPORT 2015
60
57
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
x)
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded
off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
2. Critical Accounting Estimates
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Critical accounting estimates and assumptions
Share based payments
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using either a hybrid Monte Carlo
and Hull-White model or the Black-Scholes model taking into account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no
impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss
and equity.
Income taxes
The consolidated entity is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining the worldwide provision for income taxes. There are certain transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The
consolidated entity estimates its tax liabilities based on the consolidated entity’s understanding of the tax law. Where the
final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
current and deferred income tax assets and liabilities in the period in which such determination is made.
In addition, the consolidated entity has recognised deferred tax assets relating to carried forward tax losses to the extent
there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation jurisdiction and the
same subsidiary against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on
the ability of the entity to satisfy certain tests at the time the losses are recouped.
3.
Segment Information
a) Description of segments
Management has determined the operating segments based on reports reviewed by the executive management committee
for making strategic decision. The executive leadership team comprises the Chief Executive Officer, Chief Financial Officer
and divisional managers. Management monitors the business based on geographic factors and has identified four reportable
segments.
58
OTTO ENERGY | ANNUAL REPORT 2015 61
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
b)
Segment information provided to the Board
The segment information provided to the Board for the reportable segments for the year ended 30 June 2015 is as follows:
2015
Other revenue
(Loss)/profit on disposal of property, plant and
equipment
Employee benefit expense
Depreciation and amortisation
Impairment of assets
Other expenses
Foreign currency losses
Net (loss)/profit before income tax and discontinued
operations
Income tax expense
Net loss for the year from continuing operations
Profit after tax for the year from discontinued
operations
Profit/(loss) for the year
Total Segment Assets
Total Segment Liabilities
Australia
Philippines
Tanzania
Other
Consolidated
US$’000
US$’000
US$’000
US$’000
US$’000
1,184
10
(3,845)
(211)
‐
(2,068)
(899)
(5,829)
‐
(5,829)
173
(122)
(163)
(24)
(685)
(96)
(2)
(919)
‐
(919)
‐
32,793
‐
‐
‐
‐
‐
(15)
‐
(15)
‐
(15)
‐
(5,829)
44,081
283
31,874
5,476
2,814
(15)
13,573
(132)
‐
‐
‐
‐
‐
(30)
‐
(30)
‐
(30)
‐
(30)
1
1
1,357
(112)
(4,008)
(235)
(685)
(2,209)
(901)
(6,793)
‐
(6,793)
32,793
26,000
63,131
2,966
The segment information provided to the Board for the reportable segments for the year ended 30 June 2014 is as follows:
2014
Australia
Philippines
Tanzania
Other
Consolidated
US$’000
US$’000
US$’000
US$’000
US$’000
Other revenue
Profit on disposal of asset
Employee benefit expense
Depreciation and amortisation
Finance expenses
Loss on derivative through profit or loss
Impairment of assets
Other expenses
Foreign currency losses
Net loss before income tax and discontinued
operations
4,174
1
(7,196)
(454)
(1,487)
‐
4,023
‐
(1,256)
(44)
‐
‐
(589)
(23,203)
(3,661)
(84)
(369)
(3)
(9,296)
(20,852)
Income tax expense
‐
1
Net loss for the year from continuing operations
(9,296)
(20,851)
Profit after tax for the year from discontinued
operations
Profit/(loss) for the year
Total Segment Assets
Total Segment Liabilities
‐
30,102
(9,296)
7,331
777
9,251
107,008
29,457
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
7,072
‐
‐
‐
‐
‐
‐
‐
‐
(48)
‐
(48)
‐
(48)
‐
(48)
1
4
8,197
1
(8,452)
(498)
(1,487)
‐
(23,792)
(4,078)
(87)
(30,196)
1
(30,195)
30,102
(93)
121,412
30,238
OTTO ENERGY | ANNUAL REPORT 2015
59
59
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
4. Revenue and Other Income
Interest revenue
Other income
Revenue from continuing operations
5.
Expenses
Employee benefits expenses
Defined contribution superannuation expense
Share based payment expense
Other employee benefits expenses
Total employee benefits expenses
Depreciation & Amortisation
Property, plant and equipment
Total depreciation & amortisation
Finance expenses
Finance charges paid/payable
Total finance costs
Other expenses
Business development
Corporate and other costs
Total other expenses
2015
US$’000
2014
US$’000
503
854
1,357
15
8,182
8,197
2015
US$’000
2014
US$’000
218
265
3,525
4,008
235
235
‐
‐
486
1,723
2,209
398
272
7,782
8,452
498
498
1,487
1,487
52
4,026
4,078
60
OTTO ENERGY | ANNUAL REPORT 2015
60
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
6.
Income Tax Expense
1) The components of tax expense comprise:
– Current tax
– Deferred tax – origination and reversal of temporary differences
2) Reconciliation of income tax expense to prima facie tax payable:
– Loss before income tax
– Prima facie income tax at 30%
– Tax effect of amounts not deductible in calculating taxable income
– Benefit of deferred tax assets not brought to account
– Income tax expense
3) Deferred tax assets
– Unrealised foreign exchange
– Share issue costs through equity
– Other temporary differences
– Temporary differences ‐ foreign
– Tax losses ‐ revenue
– Tax losses ‐ foreign
– Offset against deferred tax liabilities recognised
– Deferred tax assets not brought to account
– Deferred tax assets brought to account
4) Deferred tax liabilities
– Unrealised foreign exchange
– Accrued income
– Temporary differences ‐ foreign
– Temporary differences ‐ development asset
– Offset by deferred tax assets recognised
– Deferred tax liabilities brought to account
2015
US$’000
2014
US$’000
(Restated)
‐
‐
‐
(6,793)
(2,038)
1,012
1,026
‐
27
‐
74
‐
101
5,387
12,491
17,979
‐
‐
1
1
(30,196)
(9,059)
(2,492)
11,552
1
32
‐
125
‐
157
6,937
22,963
30,057
(50)
(17,979)
(30,007)
‐
‐
‐
‐
‐
‐
‐
‐
‐
2
13,983
‐
(50)
13,935
OTTO ENERGY | ANNUAL REPORT 2015
61
61
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
7. Discontinued Operations
On 22 September 2014, Otto announced it had executed a sale and purchase agreement (SPA) to divest 100% of the shares
in Galoc Production Company W.L.L (GPC), a wholly owned subsidiary of the Otto Group, to Risco Energy Investments Pte
Ltd (“Risco”) for US$101.4 million as at 1 July 2014. The operations of GPC were classified as a discontinued operation held
for sale asset from September 2014.
On 12 December 2014, Otto announced it had executed a superior sale and purchase agreement with Nido Petroleum
Limited to divest GPC for US$108 million on the same terms and conditions as the Risco SPA. Nido assumed all production
rights and liabilities associated with GPC Interest with effect from 1 July 2014.
Shareholder approval for the sale of Galoc Production Company was received on 20 January 2015. On 17 February 2015,
the sale of Galoc Production Company W.L.L to Nido Petroleum Ltd was completed. The sale consideration was US$108
million, based on the effective date of 1 July 2014 and before leakages up until closing date.
The results of Galoc Production Company W.L.L. for the period until sale are presented below:
Revenue
Cost of Sale
Gross Profit
Other Expenses
Profit before Tax from a Discontinued Operation
Income Tax (Expense)/Benefit
Net Profit after Income Tax from a Discontinued Operations
Gain on sale of the subsidiary after income tax
Profit from discontinued operation
17‐Feb‐2015
US$’000
2014
US$’000
45,217
(14,826)
30,391
(2,107)
28,284
(5,830)
22,454
10,339
32,793
73,693
(29,701)
43,992
(13,968)
30,024
78
30,102
‐
30,102
The major classes of assets and liabilities of Galoc Production Company W.L.L. which were divested are as follows:
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventories
Oil and gas properties
Liabilities
Trade and other payables
Provision for income tax payable
Deferred tax liabilities
Provisions
Net assets
62
OTTO ENERGY | ANNUAL REPORT 2015
62
17‐Feb‐2015
US$’000
6,206
1,126
11,537
3,100
87,668
109,637
8,630
1,760
13,962
9,018
33,370
76,267
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
The net cash flows incurred by Galoc Production Company W.L.L. are as follows:
Operating
Investing
Financing
Net cash inflow/(outflow)
Details of the sale of the subsidiary:
Consideration received or receivable:
Final price received on settlement
Less transactions costs
Net disposal consideration
Carrying amount of net assets sold
Gain on sale after income tax
8. Dividends Paid
17-Feb-2015
US$’000
26,595
165
-
26,760
17-Feb-2015
US$’000
87,423
(817)
86,606
(76,267)
10,339
Dividends paid during the financial year:
Current year unfranked special dividend AUD$0.0076, paid 26 June 2015 (2014: nil)
9. Cash and Cash Equivalents
Cash at bank and in hand
Risk exposure
2015
US$’000
2014
US$’000
6,801
6,801
-
-
2015
US$’000
2014
US$’000
41,206
41,206
7,735
7,735
The consolidated entity’s exposure to interest rate risk is discussed in Note 22. The maximum exposure to credit risk at the
end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.
OTTO ENERGY | ANNUAL REPORT 2015
66
63
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
10. Trade and Other Receivables
Current
Other receivables
2015
US$’000
2014
US$’000
-
-
18
18
No consolidated entity trade receivables are past due or impaired at 30 June 2015 (30 June 2014: nil) and there is no
indication that amounts recognised as trade and other receivables will not be recovered in the normal course of business.
Refer credit risk, Note 22(a).
11. Other Assets
Current
Prepayments
Other assets
Non-Current
Other assets
Decommissioning fund
12. Inventories
Raw materials
Oil (held in storage)
Fuel
Drilling and other inventory
2015
US$’000
2014
US$’000
169
532
701
6
-
6
196
1,562
1,758
1,355
6,600
7,955
2015
US$’000
2014
US$’000
-
-
2,422
2,422
2,150
141
650
2,941
64
OTTO ENERGY | ANNUAL REPORT 2015 67
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
13. Property Plant and Equipment
Plant &
Equipment
US$’000
Furniture &
Fixtures
US$’000
Total
US$’000
Year ended 30 June 2014
Balance at the beginning of year
Additions
Disposals
Depreciation expense
Closing net book amount
At 30 June 2014
Cost or fair value
Accumulated depreciation
Net book value
Year ended 30 June 2015
Balance at the beginning of year
Additions
Disposals
Depreciation expense
Closing net book amount
At 30 June 2015
Cost or fair value
Accumulated depreciation
Net book value
696
93
(2)
(449)
338
2,015
(1,677)
338
338
7
(24)
(200)
121
1,723
(1,602)
121
198
9
‐
(49)
158
293
(135)
158
158
10
(103)
(35)
30
106
(76)
30
894
102
(2)
(498)
496
2,308
(1,812)
496
496
17
(127)
(235)
151
1,829
(1,678)
151
As part of the sale of GPC, Otto Energy Philippines, Inc.’s associated property, plant and equipment was disposed of,
recognising a loss on disposal of $0.12m for the year ended 30 June 2015. Otto Energy Ltd disposed of minor plant and
equipment, realising a $0.01m gain on disposal for the year ended 30 June 2015.
14. Exploration and Evaluation Assets and Oil and Gas Properties
Exploration and Evaluation Assets
At Cost
As at 1 July
Additions
Impairment
Net carrying value
2015
US$’000
2014
US$’000
9,049
10,281
(685)
18,645
22,437
10,404
(23,792)
9,049
On 13 July 2015, the consolidated entity decided to relinquish its 100% stage in Service Contract 73. The decision to exit
comes after reprocessing of existing seismic data was completed. A total of US$0.69m was impaired as a result of the
withdrawal.
OTTO ENERGY | ANNUAL REPORT 2015
65
65
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
All capitalised exploration and evaluation costs and inventory as at 30 June 2015 relating to Service Contract 55, including
$5.03m in capitalised exploration and evaluation and $2.42m in inventory costs, are fully recovered through the farm-in of
Red Emperor Resources NL (“Red Emperor”) and through BHPB’s reimbursement. Red Emperor will reimburse 15% of costs
following approval by the Philippines Department of Energy, and BHPB will refund up to $24.5m of the costs incurred in
drilling Hawkeye-1 upon completion of the drilling campaign.
The impairment expense recognised in the prior year relates to the withdrawal from Service Contract 51 and Service Contract
69, which had previously capitalised $17.4m and $6.4m respectively.
The consolidated entity has interests in the following wholly-owned and non-wholly owned oil and gas explorations assets:
Asset
Country
Principal Activity
Service Contract 55
Service Contract 73
Philippines
Philippines
Offshore Palawan
Offshore Mindoro-Cuyo
2015
93.18%(i)
100%
Kilosa-Kilombero
Tanzania
Pangani
Tanzania
Tanzania
Kilosa-Kilombero
50%
Tanzania
Pangani
50%
2014
93.18%
100%
50%
50%
Percentage Interest
(i)On 28 February 2015 Red Emperor signed a farmout agreement for a 15% working interest in Service Contract 55, and as at 30 June 2015
was awaiting approval from the Philippines Department of Energy.
Oil and Gas Properties
Movements in oil and gas properties for the year included:
At Cost
Oil and Gas properties - at cost
Net book value
As at 1 July
Additions
Amortisation
Disposals
Net carrying value
15. Trade and Other Payables
Current Liabilities(i)
Trade payables
Other payables
2015
US$’000
2014
US$’000
-
-
91,460
-
(3,792)
(87,668)
-
91,460
91,460
69,405
38,071
(16,016)
91,460
2015
US$’000
2014
US$’000
2,800
-
1,247
3,508
4,755
(i)Trade and other payables are expected to be settled with 12 months. Refer to Note 22 for further information on financial instruments.
2,800
66
OTTO ENERGY | ANNUAL REPORT 2015 69
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
16. Provisions
Current Liability
Provisions – employee benefits
Non-Current Provision (i)
Provisions – employee benefits
Decommissioning Fund(ii)
2015
US$’000
2014
US$’000
98
98
68
-
68
196
196
132
8,778
8,910
(i) Amounts not expected to be settled within the next 12 months:
The non-current provision for employee benefits also includes all entitlements where employees have completed the
required period of service that are not expected to be settled within 12 months.
(ii) Decommissioning fund was derecognised as part of the divestment of Galoc Production Company W.L.L. on 17 February
2015.
17. Contributed Equity
a)
Share Capital
2015
No.
2014
No.
2015
US$’000
2014
US$’000
At the beginning of year
1,151,790,071
1,140,290,071
131,577
131,577
Return of capital during the year at AUD$0.0564
-
-
(50,473)
Shares issued during year on exercise of performance rights
12,500,000
11,500,000
-
-
-
1,164,290,071
1,151,790,071
81,104
131,577
Following the sale of Galoc Production Company W.L.L., Otto paid $0.0564 per share return of capital to shareholders on 26
June 2015.
b) Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion
to the number and amount paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting
in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. The ordinary shares have no
par value and the Company does not have a limited amount of authorised capital.
c) Options
Information relating to the Otto Energy Employee Option Plan, including details of options issued, exercised and lapsed during
the financial year and options outstanding at the end of the reporting period, is set out in Note 23.
d)
Performance Rights
Information relating to the Otto Energy Employee Performance Rights Plan, including details of performance rights issued,
exercised and lapsed during the financial year and performance rights outstanding at the end of the reporting period, is set
out in Note 23.
OTTO ENERGY | ANNUAL REPORT 2015
70
67
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
18. Other Reserves
Reserves
Foreign currency translation reserve
Share based payment reserve
Foreign Currency Translation Reserve(i)
Balance at beginning of year
As at end of year
Share Based Payment Reserve(ii)
Balance at beginning of year
Share based payment expense
As at end of year
2015
US$’000
2014
US$’000
4,188
9,222
13,410
4,188
4,188
8,957
265
9,222
4,188
8,957
13,145
4,188
4,188
8,685
272
8,957
(i) Foreign Currency Translation Reserve
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as
described in Note 1(d) and accumulated in a separate reserve within equity.
(ii) Share Based Payment Reserve
The share-based payments reserve is used to recognise the value of share-based payments provided to employees
(including key management personnel) as part of their remuneration; and share options and performance rights issued as
part of consideration for acquisitions. Refer to Note 23 for further details of these plans.
19. Earnings per Share
a)
Earnings per share attributable to the ordinary equity holders of the Company
Basic loss per share from continuing operations
Basic earnings per share from discontinued operations
Total basic earnings/(loss) per share attributable to the ordinary equity holders of the
Company
Diluted loss per share from continuing operations
Diluted earnings per share from discontinued operations
Total diluted earnings/(loss) per share attributable to the ordinary equity holders of
the Company
b)
Earnings used in calculation of basic / diluted earnings per share
Net loss after tax from continuing operations
Net profit after tax from discontinued operations
2015
US cents
2014
(Restated)
US cents
(0.59)
2.83
2.24
(0.59)
2.82
2.23
(2.63)
2.62
(0.01)
(2.63)
2.62
(0.01)
2015
US$’000
2014
(Restated)
US$’000
(6,793)
32,793
(30,195)
30,102
68
OTTO ENERGY | ANNUAL REPORT 2015 71
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
c) Weighted average number of ordinary shares used as a denominator in calculating
Basic earnings per share
Diluted earnings per share
Options and share rights
2015
2014
Number of Shares Number of Shares
1,156,832,537
1,146,503,770
1,164,132,537
1,146,503,770
The options and share rights have not been considered in the determination of basic EPS. Details relating to options and share
rights are set out in Note 23.
Performance share rights are only included in determining diluted EPS to the extent that they are dilutive.
The exercise prices of all options are included in Note 23. In determining diluted EPS, options with an exercise price greater
than the average Otto Energy Limited’s share price over the year have not been included, as these are not considered dilutive.
20. Subsidiaries
Significant investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in
accordance with the accounting policy described in Note 1(b):
Subsidiaries of Otto Energy Limited
Country of Incorporation
Class of shares
Otto Energy (Tanzania) Pty Limited
Otto Energy Investments Limited
Otto Energy Philippines Inc
Colag (BVI) Limited
Otto Energy (Galoc Investment 1) Aps
Otto Energy (Galoc Investment 2) Aps
GPC Investments SA
Galoc Production Company W.L.L
Australia
Bermuda
Philippines
British Virgin Islands
Denmark
Denmark
Switzerland
Bahrain
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
(i) The proportion of ownership interest is equal to the proportion of voting power held.
Equity holding (i)
2015
(%)
2014
(%)
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
21. Interest in Joint Operations
a)
Joint operations
The consolidated entity’s interest in joint arrangement assets as at 30 June 2015 is detailed below. Exploration is the
principal activity performed across these assets.
Service Contract 55 Philippines
Kilosa-Kilombero Tanzania
Pangani Tanzania
Group Interest
(%)
Group Interest
(%)
2015
2014
93.18
50
50
93.18
50
50
OTTO ENERGY | ANNUAL REPORT 2015
72
69
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
b)
Commitments through joint operations
The aggregate of the consolidated entity’s commitments through jointly controlled assets is as follows:
2015
US$’000
2014
US$’000
Exploration and other capital expenditure commitments
9,000
9,500
22. Financial Risk Management
The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and
interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is
exposed.
Otto’s Board of Directors (“Board”) is responsible for approving Otto’s policies on risk oversight and management and
ensuring management has developed and implemented effective risk management and internal control. Risk management
is carried out by the senior finance executives under these policies which have been approved by the Board. Finance
identifies, evaluates and, if necessary, hedges financial risks within the consolidated entity’s operating units. The Board
then receives reports as required from the Chief Financial Officer in which they review the effectiveness of the processes
implemented and appropriateness of policies it sets. Currently, the Group does not apply any form of hedge accounting.
These disclosures are not, nor are they intended to be, an exhaustive list of risks to which Otto is exposed.
a) Market Risk
Market risk arises from Otto’s exposure to the use of interest bearing and foreign currency financial instruments. It is a risk
that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates
(currency risk) and interest rates (interest rate risk).
Foreign Exchange Risk
i)
The consolidated entity’s source currency for the majority of revenue and costs is in US dollars. Given the location of the
group offices there is a small exposure to foreign exchange risk arising from the fluctuations in the US dollar and Australian
dollar, and US dollar and Philippine peso on cash balances.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a
currency that is not the entity’s functional currency. The exposure to risk is measured using sensitivity analysis and cash
flow forecasting.
The Board has formed the view that it would not be beneficial for the consolidated entity to purchase forward contracts or
other derivative financial instruments to hedge this foreign exchange risk. Factors which the Board considered in arriving at
this position included the expense of purchasing such instruments and the inherent difficulties associated with forecasting
the timing and quantum of cash inflows and outflows compared to the relatively low volume and value of commercial
transactions and recognised assets and liabilities denominated in a currency which is not US dollars.
30 June 2015
US$
US$'000
A$
US$'000
PHP
US$'000
Total
US$'000
40,630
40,630
2,546
2,546
516
516
141
141
60
60
113
113
41,206
41,206
2,800
2,800
Financial Assets
Cash and Cash equivalents
Total Financial Assets
Financial Liabilities
Trade and Other payables
Total Financial Liabilities
70
OTTO ENERGY | ANNUAL REPORT 2015
70
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
Financial Assets
Cash and Cash equivalents
Trade and other receivables
Total Financial Assets
Financial Liabilities
Trade and Other payables
Total Financial Liabilities
30 June 2014
US$
US$'000
A$
US$'000
PHP
US$'000
Total
US$'000
7,467
8
7,475
4,186
4,186
70
1
71
476
476
198
9
207
93
93
7,735
18
7,753
4,755
4,755
A hypothetical change of 10% in the Australian dollar and Philippine Peso exchange rate was used to calculate the
consolidated entity's sensitivity to foreign exchange rates movements as this is management’s estimate of possible rate
movements over the coming year taking into account current market conditions and past volatility (30 June 2014: 10%). At
30 June 2015, management has assessed that the entity’s exposure to foreign exchange movements is found to be
immaterial (2014: Immaterial exposure) therefore no further analysis provided.
ii)
Interest Rate Risk
The consolidated entity is exposed to interest rate risk through liquid funds on deposit. The consolidated entity’s policy is to
maximise the return on cash held through the use of high interest deposit accounts and term deposits where possible.
Currently, the Group does not have any interest-bearing liabilities.
Financial assets
Cash assets
Floating rate(i)
41,206
7,735
(i)Weighted average effective interest rate of funds on deposit is Nil (2014: Nil)
2015
US$’000
2014
US$’000
Sensitivity analysis – change in interest rates
A 25 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the possible change in interest rate.
At reporting date, if interest rates had been 25 basis points higher or lower and all other variables were held constant, the
consolidated entity’s profit or loss and equity for the year is found to be immaterial (2014: immaterial) therefore no further
analysis provided.
iii)
Credit Risk
Credit risk arises from cash and cash equivalents and long term deposits with financial institutions.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised
below, none of which are impaired or past due.
Cash and cash equivalents
Long-term deposits and other assets
2015
US$’000
2014
US$’000
41,206
-
41,206
7,735
7,404
15,139
To manage credit risk from cash and cash equivalents financial assets, it is the consolidated entity’s policy to only deposit
with banks maintaining a minimum independent rating of ‘AA’. Due to the operating environments in the Philippines, it is not
currently possible for all the deposit cash with financial institutions that have an ‘AA’ rating.
OTTO ENERGY | ANNUAL REPORT 2015
74
71
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
AA Rated
BBB Rated
Unrated
Cash at bank and short term deposits
Other Assets
2015
US $‘000
2014
US$‘000
2015
US $‘000
2014
US$‘000
41,151
55
-
41,206
7,529
203
3
7,735
-
-
-
-
804
6,600
-
7,404
The consolidated entity trades only with recognised, trustworthy third parties. It is the consolidated entity’s policy to perform
credit verification procedures in relation to any customers wishing to trade on credit terms with the consolidated entity.
These include taking into account the customers’ financial position and any past experience to set individual risk limits as
determined by the Board.
b)
Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, availability of funding and access
to capital markets. It is the policy of the Board to ensure that the consolidated entity is able to meet its financial obligations
and maintain the flexibility to pursue attractive investment opportunities through ensuring the consolidated entity has
sufficient working capital and preserving the 15% share issue limit available to the Company under the ASX Listing Rules. The
consolidated entity manages liquidity risk by continuously monitoring forecast and actual cash flows. As at reporting date the
consolidated entity had sufficient cash reserves to meet its current requirements.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted
payments:
Contractual maturities financial
liabilities
Less than 1
year
US$’000
Between 1-2
years
US$’000
Between 2-5
years
US$’000
Total
contractual
cash flows
US$’000
Carrying
amount
(assets) /
liabilities
US$’000
Trade payables and other payables
-
-
2015
2014
c)
Capital Risk Management
2,800
4,755
-
-
-
-
2,800
4,755
2,800
4,755
The consolidated entity manages its capital to ensure that entities in the consolidated entity will be able to continue as a
going concern while maximising the potential return to shareholders through the optimisation of debt and equity balance.
The capital structure of the consolidated entity is entirely equity (2014: 100% equity).
In determining the funding mix of debt and equity (total borrowings/total equity), consideration is given to the relative impact
of gearing ratio on the ability of the consolidated entity to service loan interest and repayment schedules, credit facility
covenants and also to generate adequate free cash available for corporate and oil and gas exploration, development and
production activities. The debt to equity rate is 0% as at 30 June 2015 (2014: 0%).
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value
adding relative to the current company's share price at the time of the investment.
23. Share-Based Payments
a)
Employee Share Option Plan
The establishment of the Employee Share Option Plan was approved by shareholders at the 2013 Annual General
Meeting. The Employee Option Plan is designed to provide long term incentives for senior managers and employees to deliver
long term shareholder returns. Under the plan, participants are granted options at the Board’s discretion and no individual
has a contractual right to participate in the plan or to receive any guaranteed benefits.
72
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OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
Options granted under the plan carry no dividend or voting rights.
The exercise price of options is based on the weighted average price at which the Company’s shares are traded on the
Australian Securities Exchange (ASX) during the week up to and including the date of the grant.
Set out below are summaries of share options granted under the Employee Share Option Plan:
2015
Exercise
Price
Balance at
start of
the year
Granted
during the
year
Exercised
during the
year
Expired /
Forfeited
during the
year
Balance at
end of the
year
Vested and
exercisable
at end of
the year
Grant Date
Expiry Date
A$
Number
Number
Number
Number
Number
Number
13 Oct 2011
13 Oct 2014
5 Jan 2012
5 Jan 2015
0.12
0.12
750,000
500,000
2 Dec 2013
2 Dec 2016
0.0549
8,000,000
Total
Weighted average exercise price – A$
9,250,000
0.12
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(750,000)
(500,000)
‐
‐
‐
‐
‐
8,000,000
8,000,000
(1,250,000)
8,000,000
8,000,000
0.12
0.05
0.05
2014
Exercise
Price
Balance at
start of
the year
Granted
during the
year
Exercised
during the
year
Expired /
Forfeited
during the
year
Balance at
end of the
year
Vested and
exercisable
at end of
the year
Grant Date
Expiry Date
A$
Number
Number
Number
Number
Number
Number
11 Aug 2010
11 Aug 2013
26 Nov 2010
26 Nov 2013
30 Nov 2010
30 Nov 2013
13 Oct 2011
13 Oct 2014
5 Jan 2012
5 Jan 2015
0.12
0.12
0.13
0.12
0.12
3,000,000
9,000,000
6,000,000
1,250,000
2,500,000
‐
‐
‐
‐
‐
2 Dec 2013
2 Dec 2016
0.1113
‐
8,000,000
Total
21,750,000
8,000,000
Weighted average exercise price – A$
0.12
0.11
‐
‐
‐
‐
‐
‐
‐
‐
(3,000,000)
(9,000,000)
(6,000,000)
‐
‐
‐
‐
‐
‐
(500,000)
750,000
(2,000,000)
500,000
750,000
500,000
‐
8,000,000
8,000,000
(20,500,000)
9,250,000
9,250,000
0.12
0.12
0.12
An option may only be exercised after that option has vested and any other conditions imposed by the Board on exercise
are satisfied. Options are granted under the plan for no consideration. Options granted under the plan carry no dividend or
voting rights.
When exercisable, shares allotted pursuant to the exercise of options will be allotted following receipt of all the relevant
documents and payments and will rank equally with all other shares. The exercise price of options is based on the weighted
average price at which the Company’s shares are traded on the Australian Securities Exchange during the five trading days
immediately before the options are granted.
There were 1,250,000 options that expired during the year ended 30 June 2015. The weighted average remaining
contractual life of share options outstanding at the end of the year is 1.43 years (2014: 0.74 years).
The above amounts representing options granted as part of remuneration are calculated in accordance with AASB 2 Share
Based Payments. AASB 2 requires that the expense associated with a share based payment is calculated at grant date and
then subsequently amortised over the option vesting period.
During the year ended 30 June 2015 the consolidated entity issued no options under the Employee Share Plan (2014:
8,000,000 options).
OTTO ENERGY | ANNUAL REPORT 2015
73
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OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
The assessed fair values at grant date of options granted to employees are detailed below:
Grant date
Exercise price – A$
Expiry date
Share price at grant date – A$
Expected volatility
Expected dividend yield
Risk free rate
Fair value – A$
5 December 2013
0.1113
2 December 2016
0.08
90%
Nil
3.02%
0.04
The expected price volatility is based upon the historic volatility (based on the remaining life of the options), adjusted for
any expected changes to future volatility due to publicly available information.
As a result of the AUD$0.0564 per share return of capital which occurred on 26 June 2015, the exercise price of the
remaining options was adjusted down by the capital return amount per share to A$0.0549.
b)
Performance Rights Plan
The Performance Rights Plan was approved by shareholders at the 2013 Annual General Meeting. The Performance Rights
Plan is designed to provide long term incentives for senior managers and employees to deliver long term shareholder
returns. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the
plan or to receive any guaranteed benefits.
The amount of performance rights that will vest depends on vesting period and/or Otto Energy Limited’s TSR, including
share price growth, dividends, and capital returns. Once vested, the performance rights are automatically converted to
shares. Performance rights are granted under the plan for no consideration.
Rights granted under the plan carry no dividend or voting rights.
Set out below are summaries of rights granted under the Performance Rights Plan:
Date of Issue
Balance at
Start of Year
Rights
Issued
During the
Year
Fair Value on
Date of Issue
A$
1 Oct 2011
1 Feb 2013
3 Oct 2014
3 Oct 2014
3 Oct 2014
3 Oct 2014
3 Oct 2014
3 Oct 2014
23 Apr 2015
23 Apr 2015
23 Apr 2015
23 Apr 2015
23 Apr 2015
23 Apr 2015
4,000,000
8,500,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
2,766,670
2,766,665
2,766,665
166,670
166,665
166,665
2,079,170
2,079,167
2,079,163
79,166
79,167
79,167
0.02
0.02
0.05
0.05
0.06
0.07
0.06
0.05
0.06
0.07
0.07
0.09
0.08
0.07
Exercised
Lapsed/
Expired
Balance at
End of Year
Expiry Date
(4,000,000)
(8,500,000)
‐
‐
‐
‐
31 Dec 2014
1 Apr 2016
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(500,000)
2,266,670
31 Dec 2018
(500,000)
2,266,665
31 Dec 2018
(500,000)
2,266,665
31 Dec 2018
‐
‐
‐
‐
‐
‐
‐
‐
‐
166,670
31 Dec 2018
166,665
31 Dec 2018
166,665
31 Dec 2018
2,079,170
31 Dec 2019
2,079,167
31 Dec 2019
2,079,163
31 Dec 2019
79,166
31 Dec 2019
79,167
31 Dec 2019
79,167
31 Dec 2019
Total
12,500,000
15,275,000
0.04
(12,500,000)
(1,500,000)
13,775,000
WAEP – A$
0.02
0.06
0.02
0.05
0.06
74
OTTO ENERGY | ANNUAL REPORT 2015
74
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
Date of Issue
Balance at
Start of Year
1 Oct 2011
10,000,000
1 Nov 2011
1 Nov 2011
1 Nov 2011
1 Feb 2013
Total
5,000,000
5,000,000
5,000,000
15,700,000
40,700,000
Rights
Issued
During the
Year
Fair Value on
Date of Issue
US$
Exercised
Lapsed/
Expired
Balance at
End of Year
Expiry Date
‐
‐
‐
‐
‐
‐
0.02
0.02
0.02
0.02
0.02
(6,000,000)
‐
4,000,000
31 Dec 2014
(500,000)
(4,500,000)
(5,000,000)
(5,000,000)
‐
‐
‐
1 Apr 2014
1 Nov 2014
1 Apr 2015
(7,200,000)
8,500,000
1 Apr 2016
(11,500,000)
(16,700,000)
12,500,000
On 3 October 2014, the Group issued 8,800,000 Performance Rights to employees. On 23 April 2015, the Group issued a
further 6,475,000 Performance Rights to employees. The assessed fair values at grant date of rights granted to employees,
including key management personnel, are detailed below:
Total Return on Shareholders (“TSR”) based performance rights:
Measurement date
1 February
2017
1 February
2018
1 February
2019
1 February
2016
1 February
2017
1 February
2018
Grant date
23 April 2015
23 April 2015
23 April 2015
3 October
2014
3 October
2014
3 October
2014
Expiry date
31 December
2019
31 December
2019
31 December
2019
31 December
2018
31 December
2018
31 December
2018
Number of rights
2,079,170
2,079,167
2,079,163
2,766,670
2,766,665
2,766,665
Share price at grant date – A$
Expected volatility
Expected dividend yield
Risk free rate
Fair value ‐ $A
0.11
47.7%
Nil
1.95%
0.06
Time based performance rights:
0.11
51.2%
Nil
1.90%
0.07
0.11
51.2%
Nil
1.90%
0.07
0.09
51.3%
Nil
2.60%
0.05
0.09
52.4%
Nil
2.60%
0.05
0.09
53.2%
Nil
2.60%
0.06
Measurement date
1 February
2017
1 February
2018
1 February
2019
1 February
2016
1 February
2017
1 February
2018
Grant date
23 April 2015
23 April 2015
23 April 2015
3 October
2014
3 October
2014
3 October
2014
Expiry date
No. of rights
31 December
2019
31 December
2019
31 December
2019
31 December
2018
31 December
2018
31 December
2018
79,166
79,167
79,167
166,670
166,665
166,665
Share price at grant date – A$
Fair value ‐ $A
0.11
0.09
0.11
0.08
0.11
0.07
0.09
0.07
0.09
0.06
0.09
0.05
The expected price volatility is based upon the historic volatility (based on the remaining life of the rights), adjusted for any
expected changes to future volatility due to publically available information.
For the year ended 30 June 2015, the Group has recognised $265,000 of share‐based payment transactions expense in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income (30 June 2014: $272,000).
c)
Expenses arising from share based payment transactions
Options
Performance rights
Share‐based payments expensed
2015
US$’000
2014
US$’000
‐
265
265
293
(21)
272
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
24. Related Party Transactions
a)
Key Management Personnel Compensation
Short ‐term employee benefits
Post‐employment benefits
Termination Benefits
Share‐based payments
2015
US$’000
2014
US$’000
1,864
141
86
161
2,252
2,045
113
540
252
2,950
Detailed remuneration disclosures are provided in the remuneration report on pages 29 to 39.
25. Reconciliation of (loss)/profit after income tax to net cash inflow from operating
activities
Cash flows from operating activities
Loss before tax from continuing operations
Profit before tax from discontinued operations
Non‐cash items
Depreciation and amortisation
Impairment of exploration assets
Non‐cash employee benefits expense – share‐based payments
Unwinding of borrowing costs
Loss on derivative through profit or loss
Profit from discontinued operations
Other non‐cash expenses
Change in operating assets and liabilities, net of effects from
Decrease/(Increase) in trade other receivables
Decrease/(Increase) in other operating assets
Decrease/(Increase) in inventories
Decrease/(Increase) in deferred tax assets
(Decrease)/Increase in trade and other payables
(Decrease)/Increase in provision for income taxes payable
(Decrease)/Increase in provisions
(Decrease)/Increase in deferred tax liabilities
Net cash inflow from operating activities
Note
2015
2014
US$’000
US$’000
(6,793)
32,793
(30,195)
30,102
4,028
685
265
‐
‐
(10,339)
378
27
30
(2,422)
‐
1,515
13
(166)
‐
20,014
16,514
23,792
272
2,705
1,916
‐
801
2,729
(816)
(808)
1
(4,011)
1,791
(116)
(2,524)
42,153
76
OTTO ENERGY | ANNUAL REPORT 2015
76
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
26. Auditors’ Remuneration
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non‐related audit firms:
2015
US$
2014
US$
1) BDO Australia
a) Audit and Other Assurance services:
i) Audit and review of financial statements
ii) Other assurance services
Total remuneration for audit and other assurance services
b) Taxation services:
i) Tax compliance services
ii) Tax consulting and tax advice
Total remuneration for taxation services
Total remuneration of BDO Australia
2) Network firms of BDO Australia
a) Audit and Other Assurance services:
i) Audit and review of financial statements
ii) Other assurance services
Total remuneration for audit and other assurance services
b) Taxation services:
i) Tax compliance services
ii) International tax consulting
Total remuneration for taxation services
107,971
‐
107,971
29,431
105,332
134,763
242,734
11,852
‐
11,852
‐
346
346
113,803
7,432
121,235
52,802
67,412
120,214
241,449
24,894
‐
24,894
‐
‐
‐
Total remuneration of network firms of BDO Australia
12,198
24,894
3) Non‐BDO
a) Audit and Other Assurance services:
i) Audit and review of financial statements
ii) Other assurance services
Total remuneration for audit and other assurance services
b) Taxation services:
i) Tax compliance services
ii) International tax consulting and tax advice
Total remuneration for taxation services
Total remuneration of non‐BDO audit firms
Total auditors’ remuneration
‐
‐
‐
‐
21,637
21,637
21,637
276,569
62,117
1,149
63,266
1,986
23,394
25,380
88,646
354,898
It is the consolidated entity’s policy to employ BDO on assignments additional to their statutory audit duties where BDO’s
expertise and experience with the consolidated entity are important. These assignments are principally tax advice and due
diligence reporting on acquisitions, or where BDO is awarded assignments on a competitive basis. It is the consolidated
entity’s policy to seek competitive tenders for all major consulting projects.
OTTO ENERGY | ANNUAL REPORT 2015
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OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
27. Contingent Liabilities and Contingent Assets
Contingent Consideration Payable (Middle East Petroleum Services)
In 2008 the Company’s shareholders approved an arrangement to buy back a 5% gross overriding royalty over the
production revenues generated from its petroleum interests in SC55 in the Philippines from Middle East Petroleum Services
(“MEPS”). MEPS are a privately‐held company that originally negotiated the farm in deal for Otto Energy in the Philippines
acreage in 2005. As part of the farm‐in agreement MEPS retained a 5% gross overriding royalty over Otto Energy
Investment’s share of the assets.
Under the buyback agreement referred to above, there is a contingent consideration component whereby Otto will also
pay MEPS a production bonus of US$1.5m, should the block produce 1.5m barrels of oil equivalent during the term of
Otto’s license.
Contingent Asset (Red Emperor)
On 28 February 2015 Red Emperor signed a farm‐in agreement with Otto Energy Philippines Inc. for a 15% working interest
in Service Contract 55. The application was awaiting approval by the DOE as at 30 June 2015. Red Emperor will reimburse
the Group for 15% of the Hawkeye‐1 well costs incurred to 30 June 2015 following final approval by the DOE.
28. Commitments
a)
Capital Commitments
Capital and exploration expenditure contracted for at the reporting date but not recognised as liabilities are as follows:
Committed capital and exploration expenditure commitments.
No longer than 1 year
Longer than 1 year and no longer than 5 years
More than 5 years
2015
US$’000
2014
US$’000
9,000
‐
‐
9,000
7,016
6,066
116
13,198
b)
Lease Commitments: Group as Lessee
The consolidated entity leases corporate offices under non‐cancellable operating leases. The leases have varying terms,
escalation terms and renewal rights. On renewal, the terms of the leases may be renegotiated.
Non‐cancellable operating leases
Commitments for minimum lease payments in relation to non‑cancellable operating leases are payable as follows:
No longer than 1 year
Longer than 1 year and no longer than 5 years
2015
US$’000
2014
US$’000
325
551
876
495
1,333
1,828
78
OTTO ENERGY | ANNUAL REPORT 2015
78
OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ending 30 June 2015
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ending 30 June 2015
29. Events Occurring after the Reporting Period
On 21 July 2015 the Company acquired 100% of the issued capital of Borealis Petroleum Pty Ltd, to earn an interest,
through staged capital injections, in a substantial acreage position in onshore Alaskan North Slope, held by Great Bear
Petroleum Operation LLC. Borealis Petroleum Pty Ltd was acquired through the issue of 17,518,250 shares in the Company.
On 27 July 2015 Red Emperor Resources received approval from the Department of Energy in Philippines for the farm‐in of
a 15% working interest into SC55.
On 30 July 2015 Pryce Gases Inc agreed to a farm‐in option for a 10% working interest in the drilling of the Hawkeye‐1
exploration well.
Hawkeye‐1 drilling was completed to a depth of 2,920 metres in August 2015 with uneconomical quantities of
hydrocarbons discovered. Hawkeye‐1 was plugged and abandoned, and is currently undergoing analysis to incorporate into
the Company’s understanding of its other SC55 prospects, including Cinco.
30. Parent Entity Disclosures
As at, and throughout the financial year ended 30 June 2015, the
parent Company of the consolidated entity was Otto Energy Limited.
Summarised Statement Of Profit or Loss and Other Comprehensive Income
Parent Entity
2015
US$’000
2014
US$’000
Profit/(loss) for the year after tax
Total comprehensive profit/(loss) for the year
Summarised Statement of Financial Position
Current Assets
Non Current Assets
Total Assets
Current Liabilities
Non Current Liabilities
Total Liabilities
Net Assets
Total equity of the parent entity comprising:
Share Capital
Share based payments reserves
Foreign currency translation reserve
Accumulated Losses
Total Equity
73,463
73,463
44,068
1,926
45,994
219
10,071
10,290
35,706
81,104
9,221
118
(54,737)
35,706
(25,579)
(25,579)
8,870
12,164
21,034
1,724
58
1,782
19,252
131,577
8,956
118
(121,399)
19,252
Guarantees entered into by the parent in relation to the debts of its subsidiaries
The parent entity had no guarantees as at 30 June 2015. As at 30 June 2014, the parent entity had guaranteed financial
payment obligations of its subsidiary, Galoc Production Company W.L.L., with its supplier, Rubicon Offshore International
Pte Ltd, for up to US$862,500.
Contingent Liabilities
The parent entity had no contingent liabilities as at 30 June 2015 and 30 June 2014.
OTTO ENERGY | ANNUAL REPORT 2015
79
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OTTO ENERGY | ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
For The Year Ending 30 June 2015
STATEMENTS
For the year ending 30 June 2015
Commitments
The parent entity had no capital commitments for property plant and equipment as at 30 June 2015 and 30 June 2014. The
parent entity has a non-cancellable operating lease payable as follows:
No longer than 1 year
Longer than 1 year and no longer than 5 years
Significant Accounting Policies
2015
US$’000
2014
US$’000
325
551
876
376
1,333
1,709
The accounting policies of the parent entity are consistent with those of the consolidated entity as disclosed in Note 1 and
Note 2, except for the following; investments in subsidiaries are accounted for at cost, less any impairment in the parent
entity.
80
OTTO ENERGY | ANNUAL REPORT 2015 83
OTTO ENERGY | ANNUAL REPORT 2015
DIRECTORS’ DECLARATION
DIRECTOR’S DECLARATION
For The Year Ending 30 June 2015
For the year ending 30 June 2015
In the Directors’ opinion:
a) The financial statements and accompanying notes are in accordance with the Corporations Act 2001, including:
i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements
ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance
for the year ended on that date
b) The financial statements and notes comply with International Financial Reporting Standards as disclosed in note 1.
c) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
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:
Mr I Macliver
Director
24 September 2015
OTTO ENERGY | ANNUAL REPORT 2015
81
81
OTTO ENERGY | ANNUAL REPORT 2015
INDEPENDENT AUDIT REPORT TO THE MEMBERS
OF OTTO ENERGY LIMITED
For The Year Ending 30 June 2015
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
To the members of Otto Energy Limited
Report on the Financial Report
We have audited the accompanying financial report of Otto Energy Limited, which comprises the
consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or
loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN
77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK
company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under
Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
82
OTTO ENERGY | ANNUAL REPORT 2015 INDEPENDENT AUDIT REPORT TO THE MEMBERS
OF OTTO ENERGY LIMITED
For The Year Ending 30 June 2015
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of Otto Energy Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a)
the financial report of Otto Energy Limited is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2015. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Otto Energy Limited for the year ended 30 June 2015
complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Jarrad Prue
Director
Perth, 24 September 2015
83
OTTO ENERGY | ANNUAL REPORT 2015 ASX ADDITIONAL INFORMATION
ASX ADDITIONAL INFORMATION
For The Year Ending 30 June 2015
For the year ending 30 June 2015
The shareholder information set out below was applicable as at 31 August 2015 unless otherwise stated
a) Distribution of Equity Securities
The issued capital of the Company at 31 August 2015 is 1,181,808,321 ordinary fully paid shares. All ordinary shares carry
one vote per share. There are no listed options.
Ordinary Shares
100,001 and over
10,001 – 100,000
5,001 – 10,000
1,001 – 5,000
1 – 1,000
Number holding less than a marketable parcel size of 16,667 shares at A$0.03 per share
Shareholders by Location
Australian holders
Overseas holders
b)
Equity Security Holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
No. of Holders
No. of Shares
683
2,073
712
315
120
3,903
1,539
108,9852,190
85,010,386
5,860,432
1,061,947
23,366
1,181,808,321
12,065,804
No. of Holders
No. of Shares
3,649
254
3,903
868,897,084
312,911,237
1,181,808,321
Name
SANTO HOLDING AG
MOLTON HOLDINGS LIMITED
ACORN CAPITAL LIMITED
CITICORP NOMINEES PTY LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
RICK CRABB (CONSOLIDATED RELEVANT INTEREST)
JOHN JETTER (CONSOLIDATED RELEVANT INTEREST)
DBS VICKERS SECURITIES (SINGAPORE) PTE LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
FORSYTH BARR CUSTODIANS LTD
SPHINX HOLDINGS LTD
PAN PACIFIC PETROLEUM NL
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
IAN MACLIVER (CONSOLIDATED RELEVANT INTEREST)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 MR TIMOTHY FRANCIS CLIVE MCDONNELL & MRS MILA MCDONNELL
20 WENDY MARY CHAN
Ordinary Shares
Number Held
% of issued
shares
241,910,757
241,910,757
69,559,640
50,048,571
32,454,257
26,782,875
17,795,052
16,089,175
14,020,833
11,214,626
8,150,000
7,930,357
7,373,659
7,295,071
6,639,085
6,080,340
5,534,424
4,549,721
4,514,100
4,267,541
20.47%
20.47%
5.89%
4.23%
2.75%
2.27%
1.51%
1.36%
1.19%
0.95%
0.69%
0.67%
0.62%
0.62%
0.56%
0.51%
0.47%
0.38%
0.38%
0.36%
784,120,841
66.35%
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OTTO ENERGY | ANNUAL REPORT 2015
ASX ADDITIONAL INFORMATION
ASX ADDITIONAL INFORMATION
For The Year Ending 30 June 2015
For the year ending 30 June 2015
c)
Substantial Shareholders
1
2
3
Santo Holding AG
Molton Holdings Limited
Acorn Capital Limited
d) Unquoted Securities
No. of Shares
Held
% Held
241,910,757
241,910,757
69,559,640
20.47%
20.47%
5.89%
The unlisted securities of the Company as at 18 September 2015 are 14,775,000 performance rights and 8,000,000 options.
The performance rights and options do not carry a right to vote at a general meeting of shareholders.
Unlisted Options
Vesting Date
Expiry Date
Exercise Price
No. of Options
No. of Holders
2 December 2013
2 December 2016
A$0.0549
Unlisted Performance Rights*
Issue Date
Expiry Date
Exercise Price
3 October 2014
23 April 2015
14 August 2015
31 December 2018
31 December 2019
31 December 2019
A$0.00
A$0.00
A$0.00
* Subject to meeting certain share price and service hurdles
e) Voting Rights
8,000,000
8,000,000
No. Of
Performance
Rights
6,900,000
6,475,000
1,400,000
14,775,000
No. of Holders
3
8
8
1
In accordance with the Company’s Constitution, on a show of hands every shareholder present in person or by proxy,
attorney or representative of a shareholder has one vote and on a poll every shareholder present in person or by proxy,
attorney or representative of a shareholder has in respect of fully paid shares, one vote for every share held. No class of
option holder has a right to vote, however the shares issued upon exercise of options will rank pari passu with the then
existing issued fully paid ordinary shares.
31.
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