PANCONTINENTAL OIL & GA
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Corporate Information
Corporate Information
ABN 95 003 029 543
Directors
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Company Secretary
Vesna Petrovic
Registered Office
288 Stirling Street
Perth WA 6000
Telephone:
Fax:
+61 8 9227 3220
+61 8 9227 3211
Share Register
Advanced Share Registry Services
PO Box 1156
Nedlands WA 6909
Telephone: +61 8 9389 8033
Auditors
Rothsay Chartered Accountants
Level 1, Lincoln House
4 Ventnor Avenue
West Perth WA 6005
Internet Address & Contact
www.pancon.com.au
info@pancon.com.au
ASX Code
PCL
Contents
Chairman’s Review
Chairman’s Review
Permit Schedule
Review of Operations
Review of Operations
Directors' Report
Directors’ Report
Corporate Governance Statement
Corporate Governance Statement
Statement of Comprehensive Income
Statement of Comprehensive Income
Statement of Financial Position
Statement of Financial Position
Statement of Changes in Equity
Statement of Changes in Equity
Statement of Cash Flows
Statement of Cash Flows
Notes to the Financial Statements
Notes to the Financial Statements
Directors' Declaration
Directors’ Declaration
Independent Audit Report
Independent Audit Report
ASX Additional Information
(Non-Executive Chairman)
(Executive Director & Chief Executive Officer)
(Executive Finance Director)
(Non-Executive Director)
PANCONTINENTAL LOGO
The Pancontinental logo is in keeping
with
the Pancontinental name and
technical ethic. The logo represents a
mapped view of the globe seen from
above the polar region. The green
sectors represent the continents and
the blue sectors represent the oceans
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Chairman’s Review
Chairman’s Review
Pancontinental Oil & Gas NL has had an exciting and eventful 2014 financial year.
Commencing in September 2013, the company announced the successful farmout of the EL 0037 licence in the
Walvis Basin offshore northern Namibia to Tullow Kudu Limited (“Tullow”) and in March 2014 the company
made the historic Sunbird-1 oil discovery, the first ever oil found offshore Kenya. We also farmed out the
onshore portion of Kenyan licence L6 during the year and here we expect to be free-carried for seismic and one
well.
Namibia
In Namibian licence EL 0037, Pancontinental originally held a strong 95% interest prior to farmout. Once the
farmout terms were negotiated and all approvals met, Tullow was assigned a 65% operated interest with
Pancontinental retaining a 30% free carried interest. Pancontinental has estimated that Tullow’s farmin
programme expenditure could be in the vicinity of US $130 million on a 100% basis.
Terms of the Tullow farmin are as follows:
Operatorship
Tullow to lead the forward programme as operator;
Work Programme
3D seismic survey of not less than 3,000 km2 prior to December 2014 – Pancontinental carried 100%;
2D seismic survey of not less than 1,000 km2 coincident or later than 3D – Pancontinental carried 100%;
Exploration well subject to the identification of a suitable drilling prospect – Pancontinental carried 100%;
Additional costs such as purchasing, interpreting and mapping seismic – Pancontinental carried 100%;
Note – there are no “caps” in place for any of the above expenditure which means that Pancontinental will
have no financial exposure for the exploration work under farmout.
Past Costs
Past costs incurred by Pancontinental in licence EL 0037 – Tullow to reimburse Pancontinental for 65%.
Tullow has now identified a number of geological leads and conducted the extensive 3D and 2D seismic
acquisitions which were completed prior to the end of the financial year. The seismic acquisitions covered a
number of strong leads and were carried out to prove-up these leads to prospect status for possible drilling.
In July 2014, Pancontinental announced that the 3D and 2D seismic surveys carried out earlier in 2014 were
beginning to yield very encouraging results. Initial mapping confirmed at least four main prospects in the 3D
area. The prospects appear to be large and robust and are in favourable geological settings. Additional
prospects and leads are expected to be mapped within and outside the 3D area in due course.
One of the main prospects is the Albatross Prospect, with potential to contain 422 Million Barrels of Oil (gross
unrisked mean) or 1.093 Billion Barrels of Oil (P10). Further prospects and leads have gross mean risked
potential resources exceeding 150 Million Barrels of Oil.* It is expected that a number of additional large
prospects will be identified and mapped in the course of seismic interpretation.
Current activity includes the ongoing processing of the 3D and 2D seismic data. It is anticipated that results of
the complete mapping from the fully processed seismic data will be made available before the end of the 2014
calendar year.
Pancontinental is extremely pleased with the farmout and exploration activities achieved in Namibia over the
past year. The company will continue to eagerly await results from each stage of Tullow’s aggressive exploration
campaign and will look forward to informing our shareholders and stakeholders of the progress.
*Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the
application of a future development project(s) relate to undiscovered accumulations. These estimates have both
an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is
required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
1
Chairman’s Review
Chairman’s Review
Kenya
Moving to the Eastern side of Africa in Kenya, the company’s projects have seen continued activity throughout
the reporting year, including a farmout and the drilling of the highly significant Sunbird-1 oil discovery.
The company holds interests in the L10A and L10B exploration permits. In the June 2014 quarter, the company
announced the historic Sunbird-1 first-ever oil discovery well offshore Kenya in area L10A. This is the first oil
column ever penetrated offshore Kenya and the first ever oil column discovered offshore East Africa.
The Sunbird Prospect is one of more than 20 buried Miocene Reef and reef-like features in Pancontinental’s
offshore Kenyan permits. The top of the Sunbird Reef contains an oil and gas bearing limestone reservoir and
drilling intersected a gross 29.6m gas column overlying a gross 14m oil column.
The age and type of the oil source rocks, as well as other crucial data was uncovered by detailed oil and gas
geochemical data. These data are confidential to Pancontinental and its L10A joint venture partners and may
hold the key to unlocking important commercial oil reserves offshore Kenya.
Pancontinental believes the exciting results of the Sunbird-1 well are highly significant as they are the first proof
of the presence of a prospective oil system in the Lamu Basin offshore Kenya. The company was pleased with
the analyses received with regard to porosity, permeability and seal for the reservoir. In addition to finding
significant oil, the presence of a thick and effective seal over the top of the Sunbird Reef is also a particularly
good outcome for future exploration in the area.
The Sunbird-1 discovery is considered to be a “play opener”, bringing a major opportunity for exploration of
larger volumes of oil, as well as gas, over Pancontinental’s extensive portfolio of prospects and leads offshore
Kenya. This exciting new future work, in the light of the Sunbird oil discovery, is being pursued in all licence
areas.
In the June 2014 quarter, the company reported that the Kenyan Government granted the extension of the L10B
permit for a further 12 months to the current term. This will provide the joint venture with additional time to
further assess the prospectivity and assess the impact of the Sunbird-1 oil discovery in the adjacent L10A area.
Further, the company increased its interest in the L10B licence to 25%. This increased percentage places the
company in a favourable position for the farmout of a portion of its interest in the permit and funding of future
exploration work programmes.
In addition during the financial year, Pancontinental and its joint venture partner FAR Limited (“FAR”) signed a
farmin agreement for the entry of Milio E&P Limited (“Milio”) and Milio International to the onshore portion of
permit L6 in Kenya. Prior to the farmin Pancontinental held a 40% interest in both the onshore and the offshore
areas of permit L6. After Milio has earned its interest, Pancontinental will hold a 16% interest onshore and will
continue with a 40% interest available offshore. The offshore interest is also available for farmin.
Terms of the Milio farmin are as follows:
Operatorship
Milio to lead the forward programme as operator of the onshore portion of the block; and
FAR to remain operator of the offshore portion of L6.
Work Programme
2D seismic survey of not less than 1,000 km2, possibly late 2014 – Pancontinental carried 100%;
Drilling and testing of an onshore exploration well post the 2D seismic – Pancontinental carried 100%;
Additional costs such as processing and interpreting of the 2D seismic – Pancontinental carried 100%;
Note – as with the EL 0037 Namibian farmout, there are no “caps” in place for any of the above expenditure
which means that Pancontinental will have no financial exposure for the exploration work under farmout in
Kenya permit L6.
Milio’s farmin to the L6 joint venture will bring future exploration to the onshore portion of the block while
concurrent attention will be paid to farming out the offshore portion for upcoming exploration programmes.
2
Chairman’s Review
Chairman’s Review
The company’s long-held exploration permit Kenya L8 expired in January 2014. Pancontinental has had initial
discussions with the Kenyan Ministry of Energy and Petroleum with regard to the grant of a new PSC
(Production Sharing Contract) in respect of Block L8 under a new joint venture.
While there is no guarantee that a new L8 PSC will be agreed, Pancontinental is encouraged by the initial work
and discussions carried out thus far.
In summary, the 2014 financial year has been a successful year of key achievements for the company.
Pancontinental continues to deliver, and as such continues to enhance its worldwide industry recognition as an
experienced and well managed junior explorer in Africa.
The company’s is focused on creating shareholder value and has achieved these key milestones during the
year:
Effectively maintained the company’s financial stability;
Strategically farmed out interests in permits in exchange for exploration programmes with no “caps”. This
is a crucial and notable achievement by the company as it leaves no financial exposure should the
licence activities experience cost overruns;
Involvement in extensive 3D and 2D programmes; and
Participated in the first- ever oil discovery offshore Kenya, with major ramifications for future commercial
oil exploration in the company’s extensive Kenyan acreage portfolio.
Pancontinental has strong in-house expertise in both technical and financial departments; this together with a
long history in Africa and working with local authorities has given the company the foundation to be able to work
alongside some of the world’s largest and most successful petroleum companies.
The Pancontinental team is very enthusiastic in progressing the company projects further and the team is
committed to providing the very best possible results.
HD Kennedy
Chairman
Pancontinental Oil & Gas NL
3
Permit Schedule
Permit Schedule
Namibia EL 0037
Kenya L6
Kenya L10A & L10B
LOCATION:
LOCATION:
LOCATION:
Walvis Basin, Offshore Namibia
Lamu Basin, Onshore /Offshore Kenya
Lamu Basin, Offshore Kenya
PROJECT SIZE:
17,295 square kilometres
PROJECT SIZE:
5,010 square kilometres
PROJECT SIZE:
4,962 & 5,585 square kilometres
JOINT VENTURE PARTNERS:
JOINT VENTURE PARTNERS:
JOINT VENTURE PARTNERS:
Tullow Kudu Limited (Operator) 65.00%
Offshore
L10A
Pancontinental Oil & Gas Group 30.00%
FAR Limited (Operator) 60.00%
BG Group (Operator) 50.00%
Paragon Oil & Gas (Pty) Ltd 5.00%
Pancontinental Oil & Gas Group 40.00%
Pancontinental Oil & Gas NL 18.75%
Onshore
PTTEP 31.25%
Milio International Group (Operator)* 60.00%
L10B
Pancontinental Oil & Gas Group 16.00%
BG Group (Operator) 75.00%
FAR Limited 24.00%
Pancontinental Oil & Gas NL 25.00%
GEOLOGY:
*after earn in
GEOLOGY:
GEOLOGY:
through
extends
An “Oil Mature Fairway” has been interpreted
which
0037.
Pancontinental believes that EL 0037 is one of
the few areas covering an oil generating
“sweet spot” where oil prone source rocks are
sufficiently buried to generate oil.
EL
A number of ponded turbidite, slope turbidite,
basin floor turbidite fans and channels forming
major very large “leads” closely associated
with, and within the Inner Graben of EL 0037
have been identified and mapped.
in
A deep central graben
is
considered to be an oil and gas “source
kitchen” and potential hydrocarbon trapping
prospects have been identified adjacent to the
area.
this area
The Kifaru Prospect and Kifaru West Prospect
are interpreted to be large stacked Miocene
reefs, with interpreted good lateral and top
seals and close proximity to mature Eocene
source rocks.
The Tembo Prospect is a large tilted fault
block
sandstone
reservoirs at a number of levels.
trap, with
interpreted
from
interpreted
Oil
two source kitchen
“troughs” Tembo and Maridadi. The offshore
trough
received sediments and nutrients
carried from the Tana River Delta.
The Sunbird Prospect is a large Miocene reef
build up. Mature Eocene rocks have been
interpreted.
The Crombec Prospect
large
Cretaceous anticline of 550 square kilometres
in the western sector of the areas.
is a very
Australia L 15
Australia EP 104 /R1
Australia EP 110 & EP 424
LOCATION:
LOCATION:
LOCATION:
Canning Basin, Western Australia
Canning Basin, Western Australia
Carnarvon Basin, Western Australia
PROJECT SIZE:
736 square kilometres
PROJECT SIZE:
736 square kilometres
PROJECT SIZE:
750 & 79 square kilometres
JOINT VENTURE PARTNERS:
JOINT VENTURE PARTNERS:
JOINT VENTURE PARTNERS:
Gulliver Productions (Operator) 61.40%
EP 104
EP 110
Pancontinental Oil & Gas NL 12.00%
Gulliver Productions (Operator) 65.23%
Strike Oil Limited (Operator) 61.54%
FAR Limited 12.00%
Pancontinental Oil & Gas NL 11.11%
Pancontinental Oil & Gas Group 38.46%
Indigo Oil Pty Ltd 14.60%
FAR Limited 8.89%
EP 424
Indigo Oil Pty Ltd 14.77%
Strike Oil Limited (Operator) 61.54%
R1
Pancontinental Oil & Gas Group 38.46%
Gulliver Productions (Operator) 65.23%
Pancontinental Oil & Gas NL 11.11%
FAR Limited 8.89%
Indigo Oil Pty Ltd 14.77%
GEOLOGY:
GEOLOGY:
GEOLOGY:
West Kora-1 was drilled in 1984 and produced
some 20,000 barrels of oil during an extended
production test, commencing at the rate of 350
BOPD.
The L15 joint venture aims to upgrade the
production facility and restore oil production
from West Kora-1.
The permit area is on the Lennard Shelf of the
Canning Basin, known for oil discoveries such
as Blina and Sundown.
Baniyas lies in an established oil producing
trend in the Carnarvon Basin adjacent to the
Roller, Saladin and Skate oil fields.
The basin has rich source rocks and good
quality reservoir rocks, however is largely
under-explored.
the Baniyas
The crest of
feature has
anomalous seismic amplitudes, consistent with
the presence of gas-over-oil or gas-over-
water, although it is possible that other factors
may be responsible for the anomaly.
4
Review of Operations
Review of Operations
Kenya L10A – Sunbird-1 Oil Discovery
Highlights
The historic Sunbird-1 first-ever oil discovery well was drilled offshore Kenya in area L10A in the first
months of 2014;
The top of the Sunbird Reef was drilled in an oil and gas bearing limestone reservoir and intersected a
gross 29.6m gas column overlying a gross 14m oil column;
The age and type of the oil source rocks, as well as other crucial data was uncovered by detailed oil
and gas geochemical analysis;
Results received from the Sunbird-1 well are highly significant as they are the first proof of the
presence of a prospective oil system in the Lamu Basin offshore Kenya;
The Sunbird-1 play-opening oil discovery brings a major opportunity for exploration of larger volumes of
oil, as well as gas, over Pancontinental’s extensive portfolio of prospects and leads offshore Kenya.
Namibia EL 0037 – Farmout to Tullow
Farmout to Tullow 65%, Pancontinental retains 30%;
Tullow to lead the forward programme as operator with a work programme of-
3D seismic survey of not less than 3,000 km2 prior to December 2014 – Pancontinental carried 100%;
2D seismic survey of not less than 1,000 km coincident or later than 3D – Pancontinental carried 100%;
Exploration well subject to identification of a suitable drilling prospect – Pancontinental carried 100%;
Additional costs such as purchasing, interpreting and mapping seismic – Pancontinental carried 100%;
Note – there are no caps in place for any of the above expenditure which means that Pancontinental
will have no financial exposure for the exploration work under farmout.
Past costs incurred by Pancontinental in licence EL 0037 – Tullow to reimburse Pancontinental 65%;
Pancontinental values the future work programme in the vicinity of US $130 million;
3D and 2D seismic survey data acquired early 2014 are currently yielding encouraging results.
Kenya L6 – Farmout to Milio
Farmout to Milio 24% onshore, Pancontinental retains 16% onshore, 40% offshore;
Milio to lead the forward programme as operator of the onshore portion of the block and FAR to remain
operator of the offshore portion of L6;
The farmin work programme consists of –
2D seismic survey of not less than 1,000 km, possibly late 2014 – Pancontinental carried 100%;
Drilling and testing of an onshore exploration well post the 2D seismic – Pancontinental carried 100%;
Additional costs such as processing and interpreting of the 2D seismic – Pancontinental carried 100%.
Note – there are no “caps” in place for any of the above expenditure which means that Pancontinental
will have no financial exposure for the exploration work under farmout in Kenya permit L6.
Current activity includes preparations for the onshore 2D seismic campaign;
Farmout efforts are under way for the offshore portion of the block.
5
Review of Operations
Review of Operations
Kenya
Pancontinental has enjoyed a long business relationship with the country of Kenya.
PSC (Production Sharing Contracts) and licences were granted to the company as early as 2002 and since
then, Pancontinental has been actively involved in the exploration, evaluation, seismic and drilling programmes.
High quality international joint venture partners have taken advantage of Pancontinental’s long association with
Kenya by joining the company’s joint ventures and leading exploration programmes in country.
Pancontinental’s strong acreage position as well as the stable business environment of Kenya combines for a
favourable association in the East African region. The region has become an industry favourite with a number of
world-class deepwater gas discoveries and further exploration programmes actively pursued by a number of the
world’s major petroleum companies, some of which are Pancontinental’s partners through farmin and in new
projects.
The company has been successful in Kenya; in the current year with the historic Sunbird-1 first-ever oil
discovery well, offshore Kenya in area L10A, and the L8 Mbawa gas discovery in September 2012. These
discoveries have, for the first time, established the existence of offshore oil and gas systems in the Kenyan
region.
The Sunbird-1 oil discovery in March 2014 has for the first time established an oil system offshore Kenya. This
has long been predicted by Pancontinental and amply justifies the company’s continuing presence in this new
oil province.
6
Review of Operations
Review of Operations
Pancontinental has identified a major oil and gas play offshore Kenya and has acquired interests in three licence
areas; L6, L10A and L10B as shown below:
Figure 1 – Pancontinental Licence Areas offshore Kenya
The company entered Kenyan offshore exploration after identifying the oil potential in the restricted depositional
environment in the Tana River Delta shown below:
Figure 2 – Tana River Delta, coastal Kenya
7
Review of Operations
Review of Operations
Kenya L6
Kenya L6
LOCATION:
Lamu Basin, Onshore /Offshore Kenya
PROJECT SIZE:
5,010 square kilometres
JOINT VENTURE PARTNERS:
Offshore
FAR Limited (Operator) 60.00%
Pancontinental Oil & Gas Group 40.00%
Onshore
Milio International Group (Operator)* 60.00%
Pancontinental Oil & Gas Group 16.00%
FAR Limited 24.00%
*after earn in
GEOLOGY:
in
A deep central graben
is
considered to be an oil and gas “source
kitchen” and potential hydrocarbon trapping
prospects have been identified adjacent to the
area.
this area
The Kifaru Prospect and Kifaru West Prospect
are interpreted to be large stacked Miocene
reefs, with interpreted good lateral and top
seals and close proximity to mature Eocene
source rocks.
The Tembo Prospect is a large tilted fault
block
sandstone
reservoirs at a number of levels.
trap, with
interpreted
8
Review of Operations
Review of Operations
Kenya L6
Prospectivity
Pancontinental’s theory with regard to the geology in L6 is that a deep central trough extends from the onshore
into the offshore area. This area is considered to be an oil and gas “source kitchen”, and potential hydrocarbon
trapping prospects have been identified immediately adjacent to this area.
The most prospective leads onshore Kenya L6 include:
Kudu;
Mamba (Updip Kipini); and
Boundary Anticline
Offshore prospects covered by 3D include:
Kifaru;
Kifaru West; and
Tembo.
The Kifaru and Kifaru West prospects are interpreted to be large stacked Miocene reefs, with interpreted good
lateral and top seals and close proximity to mature Eocene source rocks. The Tembo prospect is a large tilted
fault block, interpreted to contain a number of sandstone targets.
Figure 3 – Kenya L6 Offshore Prospects
The Kifaru and Kifaru West Miocene reef prospects covered by 3D seismic offshore L6 share similar
characteristics to the Sunbird-1 oil discovery made by Pancontinental and its joint venture partners in offshore
Kenya L10A.
Block L6 is well situated in relation to Kenyan coastal communities and infrastructure. An onshore oil or gas
development has the potential to contribute significantly to Kenya’s growing near-term energy needs. A gas
discovery could supply gas to a major power generation project that is currently under consideration by the
Kenyan Government.
The operator of the offshore portion of permit L6, FAR Limited conducted an assessment of prospective
resources and has advised that the L6 area has the potential to contain approximately 3.7 billion barrels of oil or
10.2 trillion cubic feet of gas prospective resource on a gross, un-risked, best estimate basis*. Further details
are shown below:
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Review of Operations
Review of Operations
Table 1 - L6 Unrisked Prospective Resource Estimates
*Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the
application of a future development project(s) relate to undiscovered accumulations. These estimates have both
an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is
required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
Kudu
Kudu
Boundary
Boundary
An7cline
Anticline
ONSHORE AREA
ONSHORE
AREA
Mamba
Mamba
L6
OFFSHORE
OFFSHORE AREA
AREA
Kifaru
Kifaru
Kifaru
West
Tembo
Tembo
3D seismic
3D
seismic
Figure 4 - L6 Prospects and Leads
10
Review of Operations
Review of Operations
Kenya L6 Onshore Farmout to Milio
During the reporting year, Milio E&P Limited (“Milio”) and Milio International joined Pancontinental and FAR
Limited in exploration permit Kenya L6 by signing a farmin agreement whereby Milio will explore the onshore
portion of L6. Pancontinental will retain a 16% interest onshore and be fully carried through a regional 2D
1,000km seismic survey and the testing of an onshore exploration well with an expected spud date early 2015.
As the company’s 40% interest in the offshore portion of the block remains unchanged, it is well positioned for
the negotiation of a farmout deal to cover the future exploration work programme.
Milio will earn a 60% interest in the onshore permit by funding the agreed work programme as well as becoming
operator for the onshore area. The operator of the offshore portion of the permit will continue to be FAR Limited.
Based in Dubai, Milio is recognised as a prominent international company specialising in petroleum logistics,
marketing, trading, exploration and production. East Africa has been a strategic focus for Milio, with the group
investing in a number of high-profile projects.
The entry of Milio into the L6 onshore joint venture is a welcome addition as it keeps the exploration momentum
on the permit going while allowing Pancontinental to concurrently focus its attention on securing another high
quality joint venture partner for the offshore.
Forward Programme
Having secured a farminee for the onshore area, the L6 joint venture believes that it is in a strong position to
secure a farminee for the offshore portion of the licence with the farmout also aiming to secure a reimbursement
of significant back costs.
The joint venture is working to secure a farminee for drilling in the offshore portion of the L6 area. The location,
timing, depth and stratigraphy of the well will be determined after discussions with any farminee.
Onshore, seismic and drilling are planned under farmout for 2015.
11
Review of Operations
Review of Operations
Kenya L10A & Kenya L10B
Kenya L10A & L10B
LOCATION:
Lamu Basin, Offshore Kenya
PROJECT SIZE:
4,962 & 5,585 square kilometres
JOINT VENTURE PARTNERS:
L10A
BG Group (Operator) 50.00%
Pancontinental Oil & Gas NL 18.75%
PTTEP 31.25%
L10B
BG Group (Operator) 75.00%
Pancontinental Oil & Gas NL 25.00%
GEOLOGY:
from
interpreted
Oil
two source kitchen
“troughs” Tembo and Maridadi. The offshore
trough
received sediments and nutrients
carried from the Tana River Delta.
The Sunbird Prospect is a large Miocene reef
build up. Mature Eocene rocks have been
interpreted.
The Crombec Prospect
large
Cretaceous anticline of 550 square kilometres
in the western sector of the areas.
is a very
12
Review of Operations
Review of Operations
Kenya L10A and L10B
Prospectivity
The presence of oil in the Lamu Basin has now been proven conclusively by the Sunbird-1 oil discovery earlier
in 2014. Sunbird was drilled by Pancontinental and its joint venture partners in a venture operated by BG Group.
It is now the aim of the joint venture partners to locate, drill and prove commercially larger volumes of oil.
The joint venture operator of both the L10A and the L10B joint ventures, BG Group plc (“BG”), has mapped
more than twenty leads and prospects in the licence areas. Multiple prospects mapped on 3D seismic are in
several groups. Of the main prospects mapped to date four are currently high-graded as possible drilling targets:
Crombec North
Weaver Stack
Longclaw Stack
Chatterer
A number of prospects are “stacked” prospects, such as the Weaver Stack and the Longclaw Stack, and have
drilling targets at a number of levels throughout the geological column.
The main prospects are associated with several play types - the inboard carbonate play (limestone reefs,
platforms etc), the large Crombec trend associated with channel sands and other clastic (sand and shale) play
types, and an outboard trend of structured channel sands and other clastic features.
The zones of prospects are separated by two large depositional troughs that are regarded as oil and gas
generating source-kitchen areas.
Figure 5 – L10A & L0B Prospects and Leads
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Review of Operations
Block L10A
Sunbird-1 Oil Discovery
The company experienced a truly historic event with the drilling of the Sunbird-1 well, in the early months of
2014.
After lengthy analysis, the Sunbird-1 oil column was verified in the discovery well – the first-ever such oil
discovered off the entire east African coast. A notable achievement for an exploration junior such as
Pancontinental to be involved in such a history making well.
Pancontinental believes that it is now in an excellent position to explore for larger, commercial volumes of oil
and gas over its extensive portfolio of prospects and leads offshore Kenya.
The Sunbird Prospect straddles the western sector boundary of the L10A / L10B areas and is one of more than
20 buried Miocene Reef and reef-like features in Pancontinental’s licence areas offshore Kenya.
The Sunbird oil discovery is considered to be a “play opener”. The discovery has major implications for regional
exploration – proprietary geochemical data puts Pancontinental and its L10A Joint Venture partners in a leading
position.
Sunbird is located about 50km from the port of Mombasa. The well was managed by Joint Venture operator BG
Group, using the drillship Deepsea Metro 1.
In March 2014, Sunbird-1 drilled into an oil and gas-bearing limestone reservoir in the top of the Sunbird Reef.
The gross oil column is assessed to be 14m thick beneath a gross gas column of 29.6m in a reefal limestone
reservoir in the Sunbird Miocene Pinnacle Reef.
The corresponding net values are 9.2m for the oil zone and 28.3 m for the gas zone. The net values are
calculated for the reservoir using cut-offs of 10% porosity (Phi) and 50% shale volume (Vsh). Zones with
porosity lower than 10% are not included in the net pay assessment. Oil and gas samples were recovered and
analysed using sophisticated geochemical techniques.
The detailed oil and gas geochemical data, which are confidential to the L10A Joint Venture partners, give the
age and type of the oil source rocks, as well as other crucial data that Pancontinental believes places the L10A
Joint Venture in a leading position to find commercial oil offshore Kenya.
A thick and effective seal was encountered over the top of the Sunbird Reef, and the regional follow-on
implications of the presence of the seal are also very significant.
Porosity, permeability and seal for the Sunbird reservoir were all better than Pancontinental expected.
Pancontinental believes the results are highly significant because they are the first proof of the presence a
prospective oil system in the Lamu Basin offshore Kenya.
Sunbird-1 was “plugged and abandoned” in accordance with the planned drilling program, meaning that the well
has been made safe in such a way that it can be left permanently without further intervention. These measures
are designed to ensure that there is no danger of leakage of oil or gas within the well or to the sea floor.
14
Review of Operations
Review of Operations
Forward Programme - Block L10A
Pancontinental believes that the implications of the Sunbird-1 well results for regional oil exploration are truly
outstanding.
The Operator of the Block L10A Petroleum Sharing Contract, BG Group, is continuing to analyse the well data
and also re-examining the inventory of known Prospects and Leads using the Sunbird results.
The Sunbird discovery has yielded important details of the oil system in the Lamu Basin including the age and
depositional environment of the source rock and the timing of the generation of the oil phase.
The Sunbird Prospect is one of an inboard cluster of Miocene reefs. Outboard prospects include Tertiary and
Cretaceous channels, large anticlinal complexes and series of Cretaceous and Tertiary fault bounded prospects.
L10A covers a variety of play types, prospects and leads. The L10A and L10B Operator, BG Group, is
continuing to map Prospects using the 4,800km2 of high-quality 3D seismic data acquired over the last two
years in areas L10A and L10B.
In the western sector of L10A, the very large Crombec Lead continues to be mapped. Crombec is a large faulted
anticline covering 550km2, with vertical relief of about 400m.
The L10A consortium is now considering the location for one or more additional wells. A drilling decision will be
made after further technical and joint venture consideration. At the present time, Pancontinental considers that
two wells may be drilled commencing in 2015, one in each of L10A and L10B, and the company awaits the
drilling recommendations of operator BG Group before any firm joint venture drilling decisions will be made.
15
Review of Operations
Review of Operations
Block L10B
Exploration Activity
Mapping of the extensive 3D seismic data sets acquired over both L10A and L10B is continuing. A number of
Prospects are receiving close attention, including the Crombec Prospect that extends across the L10A and
L10B boundary. Crombec is a large faulted anticline with vertical relief of about 400m.
The L10B Operator, BG Group, is mapping Prospects and Leads using the 4,800km2 of high-quality 3D seismic
data acquired over the last two years.
Following the Sunbird-1 oil discovery, the Joint Venture is considering a second well on either another Miocene
Reef or a Clastic prospect in both L10A and L10B. The L10B joint venture will make a firm decision on drilling
once all of the revised data has been made in the light of the Sunbird-1 oil discovery.
At the present time, Pancontinental considers that two wells may be drilled commencing in 2015, one in each of
L10A and L10B. The company awaits the drilling recommendations of operator BG Group before any firm joint
venture decisions will be made regarding drilling.
Block L10B Extension and Increase in Interest
During the year Pancontinental was advised that the Government of Kenya had granted an extension of 12
months to the current term of the L10B licence. This will enable the L10B joint venture more time in which to
assess the impact of the Sunbird oil discovery in the adjacent L10A area, and how this will direct any drilling in
L10B in the next succeeding licence term.
During the year, Pancontinental increased its interest in licence L10B to 25%.
BG Group, the London-listed FTSE-100 company which operates the licence, also increased its interest, taking
it to 75%. The companies have increased their stakes in L10B by taking up a pro-rata share of the
interests held by Premier Oil and PTTEP.
Pancontinental believes that the very significant prospectivity of L10B, as well as the adjacent area L10A,
means it is well-placed to farm-out a portion of its interest in both licences on attractive terms. The company
would aim to achieve terms that included securing the reimbursement of significant back costs as well as
securing substantial funding for forward exploration programs.
Forward Programme - Block L10B
The Operator of the Block L10A and Block L10B Petroleum Sharing Contracts, BG Group, is continuing to
analyse the well data and also re-examining the inventory of known Prospects and Leads in both L10A and
L10B using the Sunbird results. It is anticipated that the operator may recommend one or more exploration wells
in L10B in 2015, however such a recommendation has not yet been received and Pancontinental, as joint
venture participant, will consider and report on such recommendation when it has been received.
16
Review of Operations
Review of Operations
Namibia
Namibia is seeing increasing activity both offshore and onshore, with the offshore entry of major international
companies such as Shell, Tullow, Repsol, OMV and Murphy.
Namibia provides a stable and favourable investment climate for oil exploration.
An oil recovery and verification of mature oil-prone source rocks in the Walvis Basin has given considerable
encouragement to oil explorers. 3D seismic surveys by various operators have identified large structural and
stratigraphic features as potential oil traps.
Pancontinental identified a potential oil-generating trend in the Walvis Basin offshore northern Namibia and
acquired licence EL 0037 in 2011. Since then, oil has been recovered immediately to the south in the Wingat-1
well and mature oil source rocks have also been drilled.
The prospectivity of EL 0037 attracted farminee Tullow Oil in 2013 and since undertaking its initial work, Tullow
has also farmed-in to the block immediately north, and on-trend to EL 0037.
17
Review of Operations
Review of Operations
Namibia EL 0037
Namibia EL 0037
LOCATION:
Walvis Basin, Offshore Namibia
PROJECT SIZE:
17,295 square kilometres
JOINT VENTURE PARTNERS:
Tullow Kudu Limited (Operator) 65.00%
Pancontinental Oil & Gas Group 30.00%
Paragon Oil & Gas (Pty) Ltd 5.00%
GEOLOGY:
An “Oil Mature Fairway” has been interpreted
which extends through EL 0037.
Pancontinental believes that EL 0037 is one of
the few areas covering an oil generating
“sweet spot” where oil prone source rocks are
sufficiently buried to generate oil.
A number of ponded turbidite, slope turbidite,
basin floor turbidite fans and channels forming
major very large “leads” closely associated
with, and within the Inner Graben of EL 0037
have been identified and mapped.
18
Review of Operations
Review of Operations
Namibia EL 0037
Prospectivity
Offshore Namibia is considered highly prospective for oil and gas, lying south of the prolific producing areas
offshore Angola, with which it shares some geological characteristics.
Offshore Namibia and Angola form the tectonic conjugate of offshore Brazil, which contains some highly oil-
productive basins.
Drilling results in the Walvis Basin have proved encouraging for the presence of mature source rocks, and
regional wells show good evidence of reservoir quality sands in the Cretaceous interval.
EL
0037
NEW
3D
AREA
-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐
0
Km
50
EL
0037
17,295
sq
km
Tullow
Oil
65%
PanconGnental
30%
Paragon
5%
NEW
2D
AREA
OIL
MATURE
FAIRWAY
Figure 6 - EL 0037 Location Map of Oil Mature Fairway
Wingat
1
Oil
Recovery
An oil recovery and reports of high-quality oil-mature source rocks in the Wingat-1 well, drilled in 2013, have
given considerable encouragement for exploration in the Walvis Basin.
Wingat-1 is directly on-trend in an “Oil Mature Fairway” interpreted by Pancontinental in EL 0037.
Pancontinental believes that a critical factor for oil exploration offshore Namibia is oil maturity- where source
rocks are sufficiently buried and heated to generate oil - within the “Oil Window”.
Pancontinental has interpreted an “Oil Mature Fairway” that extends through EL 0037.
HRT announced on 20 May 2013 that oil had been found in the Wingat-1 well, although not in commercial
volumes; 4 samples of oil of 450cc each were recovered. Two well-developed source rocks, rich in organic
carbon, were reported within the oil-generating window. Pancontinental regards Wingat-1 as within the Oil
Mature Fairway.
EL 0037 is immediately on-trend and is geologically continuous to the Wingat area.
The Prospects identified on 3D in EL 0037 are interpreted to be at approximately the same stratigraphic level as
the oil found in Wingat-1, as well as close vertically to the interpreted oil source rocks.
19
Review of Operations
Review of Operations
The Oil Mature Fairway and Inner Graben are asymmetric, with considerably larger “fetch” for oil generation and
migration on the Eastern side of the Graben, in EL 0037.
Crucially, the Oil Mature Fairway lies to the Eastern side of the axis of the Basin Floor and within the Eastern
part of the Basin Floor and the Eastern Slope area. Oil migration is therefore interpreted to be predominantly to
the East.
Pancontinental therefore believes that the Eastern Flank is the environment that is most likely to contain
volumes of trapped oil, and this is where EL 0037 is situated.
Tullow Farmin
Tullow Oil farmed-in to EL 0037 in September 2013 and identified a number of geological Leads for further work
including 3D and 2D seismic surveys (now completed).
Pancontinental retains a 30% free-carried interest through the surveys and one optional well to be drilled by
Tullow; Tullow must drill the well in order to retain its 65% interest. Pancontinental estimates that Tullow’s farm-
in expenditure may be up to US$130 million (100% basis) for the full work programme.
As part of Tullow Oil’s commitment under the late-2013 farmin agreement with Pancontinental, Tullow has
carried out the 3,000 sq km 3D seismic survey and a 1,000 line km 2D survey at its sole cost. Pancontinental
has retained a 30% free-carried interest through the surveys, at no cost to Pancontinental.
To maintain its 65% farmin interest, Tullow must fully free-carry Pancontinental’s 30% interest through one
exploration well (with no expenditure ‘cap’). Pancontinental estimates farmin expenditure up to US$130 million
(100% basis) for the full work programme.
Completion of Extensive 3D and 2D Seismic Data Acquisition
An extensive 3,000km2 3D seismic survey was completed in early April 2014 under the farmout agreement by
Pancontinental to Tullow Oil.
The survey covered a number of strong “leads” mapped on existing 2D seismic data and was designed to
prove-up these leads to “prospect” status for possible drilling.
A second, 2D, acquisition phase was also completed in the first part of April 2014. The 2D survey, to the south
of the 3D survey area, is designed to outline a number of additional leads.
The survey was managed by the EL 0037 Joint Venture operator Tullow Oil, using the seismic acquisition vessel
Polarcus Asima.
20
Review of Operations
Review of Operations
Early Seismic Mapping Yields Major Prospects
Initial mapping has confirmed at least four major turbidite fan prospects up to 300 sq km in area, and now
covered by 3D - the Albatross, Gannett, Petrel and Seagull Prospects;
The Prospects will be further confirmed using the new 3D and 2D data;
The Albatross Prospect is estimated by Tullow to have potential to contain 422 Million Barrels of Oil (gross
unrisked mean) or 1.093 Billion Barrels of Oil (P10), from initial mapping* (See Cautionary Statement
below);
Further prospects and leads in addition to Albatross have gross mean risked potential resources exceeding
150 Million Barrels of Oil * (See Cautionary Statement below);
The early-mapped Prospects are considered to be in the oil system “fairway” verified by Wingat-1, on-trend
to EL 0037;
Final 3D mapping in September-October 2014 is expected to present a number of potential drilling targets,
including Albatross;
Additional prospects and leads are expected to be mapped within and outside the 3D area in due course.
The Albatross Prospect
The Albatross Prospect, in the newly acquired 3D area, is currently mapped over an area of approximately 300
sq km and is assessed by Tullow to have the potential to contain 422 Million Barrels of oil (gross unrisked
mean), or 1.093 Billion Barrels of oil (P10 basis)* (See Cautionary Statement below).
Albatross is a large base-of-slope turbidite fan of mid to early Cretaceous age. The chance of success for the
Albatross Prospect is currently estimated by Tullow at 17%*(See Cautionary Statement below).
The Albatross Prospect is interpreted to be horizontally and vertically close to the “fairway” of mature oil source
rocks identified by Pancontinental and subsequently verified in the Wingat-1 well drilled in the adjacent
exploration licence area. Good oil-prone and oil-mature source rocks were seen, and live oil was recovered,
from Wingat-1 in 2013.
*Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the
application of a future development project(s) relate to undiscovered accumulations. These estimates have both
an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is
required to determine the existence of a significant quantity of potentially movable hydrocarbons.
21
Review of Operations
Review of Operations
Figure 7 – EL 0037 (North) Location Map of Main Prospects, New 3D and 2D Seismic Surveys
Potential of Additional Prospects
A number of other Prospects and Leads have been identified in addition to Albatross in the very large EL 0037
area of some 17,000 sq km.
Other prospects and leads are currently assessed by Tullow to have potential to hold gross mean risked
resources exceeding 150 Million Barrels of Oil* (See Cautionary Statement below).
Pancontinental emphasises that the early prospective resource estimates above are made using existing data,
and will be subject to change when fully processed 3D and 2D data become available and these have been
interpreted and mapped.
Further, it is expected that a number of additional large prospects will be identified and mapped as possible
drilling targets in the course of seismic data interpretation.
*Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the
application of a future development project(s) relate to undiscovered accumulations. These estimates have both
an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is
required to determine the existence of a significant quantity of potentially movable hydrocarbons.
3D and 2D Seismic Mapping Schedule
Processing is ongoing on the 2D and 3D seismic survey data acquired early in 2014.
Figure 1: L10A Location Map
It is anticipated that fully processed data will be available late October 2014. The results of complete mapping
from the fully processed data are expected in November-December 2014.
22
Review of Operations
Review of Operations
Forward Exploration Programme
The 3D and 2D data are now being processed, with final results expected around end-October 2014.
Fast-track processed 3D data are expected earlier in October, and mapping of the Prospects has already
commenced using existing data versions. Following full mapping, Albatross and other Prospects will be
examined for drilling potential. The EL 0037 joint venture will then be in a position to determine drilling sites and
dates.
Depending on the outcome of the seismic programmes, one exploration well will be drilled by Tullow to retain its
65% interest in EL 0037. Pancontinental will retain a 30% free-carried interest in the well.
Pancontinental considers that drilling may be possible in 2015, although no joint venture recommendation to
that effect has yet been made and the company awaits the operator’s recommendations.
23
Review of Operations
Review of Operations
Australia
EP-104 / R1 Onshore Canning Basin
The R1 area has been excised from the EP-104 exploration area to allow retention of the Point Torment
gas discovery and the Stokes Bay 1 area. RL1 was renewed by the Minister of Mines and Petroleum of
Western Australia for a period of five years from 8 November 2010.
No activity has been undertaken for some time and Pancontinental is now reviewing its position in the
licences.
L15 Onshore Canning Basin
Pancontinental and its co-venturers have been granted petroleum production licence L15 over the West
Kora-1 oil discovery well in the Canning Basin of Western Australia. The licence is for 21 years
commencing 1 April 2010.
The company is examining the future potential and value of this project.
EP 424 Offshore Carnarvon Basin
EP-110 is operated in conjunction with EP-424. The parties in EP-110 have identical equities to those in
permit EP-424.
Following a technical review of the Baniyas potential and due to the absence of success in extending joint
venture access over all of the Baniyas prospect, it was decided to consider selling or farming out the
licences.
EP 110 Onshore Carnarvon Basin
This permit is operated in conjunction with EP-424. The parties in EP-110 have identical equities to those in
permit EP-424.
The joint venture is continuing to consider a further review aimed at outlining possible onshore leads and
prospects in EP- 110.
24
Directors’ Report
Directors’ Report
Your directors submit their report for the year ended 30 June 2014.
DIRECTORS
The names and details of the company's directors in office during the financial year and until the date of this report are as
follows. Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Henry David Kennedy MA (Geology), SEG (Non-Executive Chairman)
Mr Kennedy is a Geologist with a long history in Australian and New Zealand oil and gas companies. During his time as a
technical director he was instrumental in the formation and development of a number of successful listed companies. These
companies were involved in numerous discoveries in Western Australia and New Zealand. Mr Kennedy has been a director of
Pancontinental since August 1999. At Pancontinental, Mr Kennedy has used his wide knowledge base to assist with the
strategic direction of the company.
Mr Kennedy is currently a non-executive director of Norwest Energy NL (since April 1997) and East Africa Resources Limited
(since March 2013).
Roy Barry Rushworth, BSc (Executive Director, Chief Executive Officer)
Mr Rushworth is a Geologist who brings extensive experience in petroleum exploration to the Company. Commencing with
positions in exploration operations, his career then extended to the role of Chief Geologist and Exploration Manager for an
Australian listed company. A number of oil and gas discoveries were made by the company during that time.
More recently for Pancontinental, Mr Rushworth has been responsible for identifying, negotiating and acquiring international
new venture opportunities in Kenya, Namibia and elsewhere. In addition, he has a track record of working closely with
international government bodies and attracting blue chip joint venture partners to Pancontinental’s projects. Mr Rushworth has
been a director of Pancontinental since August 2005 and Chief Executive Officer since November 2008.
Ernest Anthony Myers CPA (Executive Finance Director)
Mr Myers, an Accountant by profession, has held senior management and executive roles within a number of ASX listed
companies. During his career he has been instrumental in the capital raisings and financial management of these companies.
With skills and knowledge gained from vast experiences in corporate, exploration and operational areas, Mr Myers has played a
key role in maintaining the company’s financial stability. Mr Myers joined Pancontinental in March 2004 as Company Secretary
and was appointed Finance Director in January 2009.
Mr Myers has been an alternate director of East Africa Resources Limited since June 2010.
Anthony Robert Frederick Maslin BBus (Independent Non-Executive Director)
Mr Maslin is an ex-Stockbroker with a broad understanding of financial markets. His past experience includes capital raising and
promotion of several development companies as well as consulting to a number of ASX listed companies on corporate matters.
The responsibility of managing people as well as projects has provided Mr Maslin with an understanding of the exploration
industry in addition to his corporate background. Mr Maslin has been a director of Pancontinental since December 2010.
Mr Maslin is also a director of Buxton Resources Ltd (since November 2010).
COMPANY SECRETARY
Vesna Petrovic, BComm, CPA
Mrs Petrovic is an Accountant who holds a Bachelor of Commerce, Major in Accounting and Business Law and has completed
the Graduate Diploma in Applied Corporate Governance from the Governance Institute of Australia. Roles in accounting and
finance of numerous publicly listed entities, particularly those involved in Africa have provided Mrs Petrovic a base from which to
contribute to the international and domestic projects of Pancontinental. Mrs Petrovic was appointed Company Secretary in April
2010.
25
Directors’ Report
Directors' Report continued
30 June 2014
DIRECTORS' INTERESTS
The relevant interest of each director in the shares and options of the company as at 30 June 2014 is as follows:
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
DIRECTORS' MEETINGS
Ordinary Shares
Options over
Ordinary Shares
141,351,602
36,835,610
400,715
14,583
1,250,000
2,500,000
750,000
500,000
The numbers of meetings of directors (including meetings of committees of directors) held during the year and the number of
meetings attended by each director were as follows:
Number of meetings held:
Number of meetings attended:
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Directors'
Meetings
5
5
5
5
3
Notes
The directors are of the opinion that it is often more efficient to deal with matters by circular resolutions than by board
meetings, and 16 matters were dealt with in such a manner during the year.
CORPORATE INFORMATION
Corporate structure
Pancontinental Oil & Gas NL is a no liability company incorporated and domiciled in Australia.
Nature of operations and principal activities
The principal activity during the year of entities within the consolidated entity was exploration for oil and gas.
There have been no significant changes in the nature of those activities during the year.
Objectives
Objectives of the group include:
Continued exploration on the company’s current permits;
Seek new ventures suitable for inclusion in the group’s assets;
Manage risks involved in the exploration industry; and
Maintain liquidity.
The group’s targets and strategies for meeting the above objectives include:
Approve work programmes best suited for exploration success;
Consider strategic alliances through joint ventures to minimise risks to the group;
Review appropriate fundraising proposals.
Focus on cost cutting in all non-essential areas; and
Earnings (loss) per share
Basic earnings (loss) per share
Diluted earnings (loss) per share
Cents
(1.66)
(1.66)
The main contributing factor to the Earnings per Share result this financial year was the write off of exploration licence Kenya L8
due to the expiration of the licence in early 2014. The company is in continued discussions with the Kenyan Ministry for the
issue of a new licence.
Employees
The consolidated entity had no employees as at 30 June 2014, (2013: no employees). The consolidated entity employs the
services of specialised consultants where and when needed.
2
26
Directors’ Report
Directors' Report continued
30 June 2014
OPERATING AND FINANCIAL REVIEW
Review of Operations
Kenya L6 [40% offshore, 16% onshore]
During the year, a farmout with Milio International for the onshore portion of L6 was secured. Pancontinental will be free carried
for the drilling of an onshore exploration well. The offshore portion of L6 remains open for drilling under farmin.
Kenya L10A [18.75%]
The Sunbird-1 well was drilled during the year and encountered a historic first-ever oil column offshore East Africa. A significant
opportunity now opens for Pancontinental to find commercial oil in its areas offshore Kenya using commercially confidential
Sunbird-1 oil data.
Kenya L10B [25%]
Pancontinental increased its stake in this highly prospective licence to 25% during the 2014 financial year. The Kenyan Ministry
granted a 12 month extension of the licence to enable further exploration work and assessment of the adjacent Sunbird results.
Namibia EL 0037 [30%]
The joint venture secured Tullow Oil as a farminee and new operator of the permit. Pancontinental estimates the full farmin
expenditure to be up to US$130 million. The first phase of Tullow’s farmin programme commenced with extensive 3D and 2D
acquisitions completed at no cost to Pancontinental. Large prospects from early mapping will be confirmed by the 3D and 2D
seismic.
Kenya L8
The L8 licence expired during the year; however Pancontinental continued discussions with the Kenyan Ministry with regard to a
new licence for L8 offshore Kenya.
Group Overview
Pancontinental Oil and Gas NL was incorporated in 1985 and listed on the Australian Securities Exchange in 1986.
Dynamics of the Business
The company continues to look for new opportunities, particularly in Africa. Whilst the company is committed to further
developing existing projects, emerging opportunities are reviewed on a timely basis.
Performance Indicators
The board closely monitors the group’s operating plans, financial budget and overall performance as well as the company’s
share price.
The underlying drivers which contribute to the company’s performance and can be managed internally include a disciplined
approach to reducing the group’s non-essential costs and allocating funds to those areas which will add shareholder value. The
company’s share price is often influenced by factors outside the control of management and the board, such as market
conditions; however through effective communication between the company and all of its stakeholders the company can provide
assurance that there are regular reviews in place to determine actions which should be implemented to increase performance.
Operating Results for the Year
Summarised operating results are as follows:
2014
Non-segment and unallocated revenues and results
Consolidated entity revenues and results from ordinary activities before income tax
expense
The main contributing factor to the current year results is the write off of Kenya L8 exploration licence which expired earlier in
2014. The company continues to discuss the possibility of a new licence with the Kenyan Ministry.
(19,068,997)
1,090,608
Revenues
$
1,090,608
Results
$
(19,068,997)
Shareholder Returns
The group is in the exploration phase and so returns to shareholders are primarily measured through capital growth.
Basic earnings per share (cents)
2014
(1.66)
2013
(0.06)
2012
(0.23)
2011
(0.16)
2010
(0.32)
2009
(1.26)
3
27
Directors’ Report
Directors' Report continued
30 June 2014
Risk Management
Risk management is the process by which an organisation identifies, analyses, responds, gathers information about and
monitors strategic risks that could actually or potentially impact the organisation’s ability to achieve its mission and objectives.
The board and management assess risk as part of the ordinary course of business activities such as strategic planning,
promotion, budgets, mergers and acquisitions, strategic partnerships, legislative changes and conducting business abroad.
The board is responsible for ensuring that risks and opportunities are identified on a timely basis and that the group's
objectives and activities are aligned with the risks and opportunities identified by the board.
The group believes that it is crucial for all board members to be a part of this process and as such the board has not
established a separate risk management committee. The board has a number of mechanisms in place to ensure that its
objectives and activities are aligned with the risks identified. These include the following:
Implementation of operating plans and cash flow budgets by management and board monitoring of progress against
these budgets.
On going analysis of business risks specific to the exploration industry.
The group has advised each director, manager and consultant that they must comply with a set of ethical standards
maintaining appropriate core company values and objectives. Such standards ensure shareholder value is delivered and
maintained. Standards cover legal compliance, conflict resolution, privileged information and fair dealing.
The board provides shareholders with information using a comprehensive Continuous Disclosure Policy which includes
identifying matters which have a material effect on the underlying security price. ASX announcements, the web page of
the company and other media resources are used to convey such information. The board encourages full participation by
shareholders at the AGM and shareholders are requested to vote on board and executive remuneration aggregates as
well as Employee Incentive Schemes.
The risk assessment process takes into account the following steps:
Condition – What is the particular problem that has been identified?;
Criteria – What is the standard that was not met? This may be an internal benchmark or industry standard;
Cause – Why did the problem occur?;
Consequence – What is the risk, negative outcome or opportunity foregone due to the finding?; and
Corrective action – What should management and the board do to correct the finding and implement procedures for the
continued monitoring of the risk?.
The continued monitoring of risk within the group is directed at evaluating:
The effectiveness and efficiency of operations;
The reliability of financial and management internal processes and reporting; and
Compliance with laws and regulations
to enable that the group to safeguard its assets.
Review of Financial Condition
Capital Structure
The group has a sound capital structure from which to continue its development programmes. During the year, the company
maintained sufficient cash reserves and as such there was no requirement for any fundraising activities.
Share Capital
Beginning of the financial year
Issued during the year:
End of the financial year
There were no movements in the options of the company during the year:
Option Reserve
Balance at beginning of year
exercised
issued
Balance at end of year
Number of shares
1,150,994,096
-
1,150,994,096
$
99,411,998
-
99,411,998
Number
of
options
5,000,000
-
-
5,000,000
Weighted
average exercise
price
0.12
-
-
0.12
4
28
Directors’ Report
Directors' Report continued
30 June 2014
Treasury policy
The board has not considered it necessary to establish a separate treasury function because of the size and scope of the
group's activities.
Liquidity and Funding
The group has sufficient liquidity and funding to continue operations into the foreseeable future.
All operating plans and budgets are approved and progress is reviewed continuously.
Statement of Compliance
The above report is based on the guidelines in The Group of 100 Incorporated publication Guide to the Review of Operations
and Financial Condition.
SHARE OPTIONS
Unissued shares
At the date of this report there were 5,000,000 unissued ordinary shares under options. Refer to the notes for further details on
the options outstanding.
During the year, there were no option movements.
Shares issued as a result of the exercise of Options
There were no shares issued as a result of the exercise of options during the financial year.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
No significant changes in the state of affairs of the company occurred during the financial year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Significant events after balance date include:
Namibia EL 0037
In July 2014, Pancontinental announced that the 3D and 2D seismic surveys carried out earlier in 2014 were beginning to
yield very encouraging results. Initial mapping confirmed at least four main prospects in the 3D area. The prospects appear to
be large and robust and are in favourable geological settings. Additional prospects and leads are expected to be mapped
within and outside the 3D area in due course.
The Albatross Prospect has potential to contain 422 Million Barrels of Oil (gross unrisked mean) or 1.093 Billion Barrels of Oil
(P10). Further prospects and leads have gross mean risked potential resources exceeding 150 Million Barrels of Oil.
Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and
a risk of development. Further exploration, appraisal and evaluation is required to determine the existence of a significant
quantity of potentially moveable hydrocarbons.
Apart from the above, no matters or circumstances have arisen since the end of the financial year which significantly affected
or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company
in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The economic entity expects to maintain the present status and level of operations and hence there are no likely
developments in the entity's operations.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Pancontinental is committed to complying with any requirement for environmental management in any jurisdiction and country
that it operates.
5
29
Directors’ Report
Directors' Report continued
30 June 2014
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Since the end of the previous financial year the company has paid insurance premiums in respect of directors' and officers'
liability and legal expenses insurance contracts. The directors have not included details of the nature of the liabilities covered
or the amount of the premium paid in respect of the directors and officers and legal expenses insurance contracts as such
disclosure is prohibited under the terms of the contract. The premiums were paid in respect of the following officers of the
company and its controlled entities:
HD Kennedy, RB Rushworth, EA Myers, ARF Maslin and V Petrovic.
6
30
Directors’ Report
Directors' Report continued
30 June 2014
REMUNERATION REPORT (Audited)
This report outlines the remuneration arrangements in place for directors and executives of Pancontinental Oil & Gas NL (“the
company”).
Remuneration philosophy
A description of the remuneration structures in place is as follows: The non-executive directors received a fixed fee for their
services. They do not receive performance based remuneration. The chief executive officer received a fixed fee for his
respective executive services (with no bonus or other performance-based remuneration). Directors do not receive any
termination or retirement benefits.
Remuneration committee
The full board carries out the role of the remuneration committee.
Remuneration structure
In accordance with best practice corporate governance, the structure of non-executive and executive remuneration is separate
and distinct.
Non-executive director remuneration
Objective
The board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain
directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be
determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between
the directors as agreed. The latest determination was at the Annual General Meeting held on 29 November 2007 when
shareholders approved an aggregate remuneration of $400,000 per year. The amount of aggregate remuneration sought to be
approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The board
considers advice from external sources as well as the fees paid to non-executive directors of comparable companies when
undertaking reviews. The non-executive directors of the company can participate in Employee Option Incentive Schemes with
shareholder approval. The remuneration of executive and non-executive directors for the period ending 30 June 2014 is
detailed in Table 1 of this report.
Senior management and executive director remuneration
Objective
The board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain
executives of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
Structure
In determining the level and make up of executive remuneration, the board takes independent advice from external sources
when necessary. It is the board's policy that employment contracts are only entered into with the chief executive officer and
with key executives. Details of the CEO’s contract are as follows:
Basic Sum:
Capacity:
Commencement Date:
Termination Period:
$750,000
Chief Executive Officer
1 July 2012
6-12 months
The board regularly reviews compensation levels to take into account market-related factors such as cost of living changes,
any change to the scope of the role performed and any other relevant factors of influence.
Fixed remuneration
Objective
The level of fixed directors’ fees is set so as to provide a base level which is both appropriate to the position and is competitive
in the market.
Structure
Fixed primary remuneration is paid on a cash basis and there are no fringe benefits or other costs incurred by the company.
7
31
Directors’ Report
Directors' Report continued
30 June 2014
Table 1: Director remuneration for the year ended 30 June 2014
Primary benefits
Post Employment
Salary & Fees Cash STI Superannuation
Equity
Options
(Issued)
Value of options
as proportion of
Revenue
Total
Henry David Kennedy
(Non-Executive Chairman)
2014
2013
Roy Barry Rushworth
(Executive Director,
Chief Executive Officer)
2014
2013
Ernest Anthony Myers1
(Executive Finance Director)
2014
2013
Anthony Robert Frederick Maslin
(Non-Executive Director)
2014
2013
Total Current Year
Remuneration
50,000
50,000
750,000
650,000
48,000
48,000
48,000
48,000
896,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28,000
50,000
78,000
0.0%
2.2%
-
56,000
750,000
706,000
0.0%
4.3%
-
42,000
48,000
90,000
0.0%
3.2%
-
28,000
48,000
76,000
0.0%
2.2%
-
896,000
-
Note 1.
Mr Myers has a 50% interest in a consulting company which provides staff, accounting and administrative services to listed
companies, including Pancontinental. Mr Myers is paid a salary from that company. The same company also pays the staff who
provide company secretarial, accounting and administrative services to Pancontinental. The total fees paid for these services
and functions was $338,496 (2013: $305,400).
Table 2: Options granted as part of remuneration for the year ended 30 June 2014
(as approved by Shareholders)
There were no options granted as part of remuneration for the year ended 30 June 2014
Options issued during the financial year ended 30 June 2013 are shown below:
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Total Options Issued
Issued
500,000
1,000,000
750,000
500,000
2,750,000
Options granted as part of director and management remuneration have been valued using an appropriate option pricing
model, in which the option exercise price, the current level and volatility of the underlying share price, the risk-free interest
rate, expected dividends on the underlying shares, the current market price of the underlying shares and the expected life of
the options are taken into account. See following table for further details. 2,750,000 options were granted to directors during
the 2013 financial year and none in the 2014 financial year.
8
32
Directors’ Report
Directors' Report continued
30 June 2014
Fair values of options:
The fair value of each option is estimated on the date of grant using an appropriate option pricing model.
Expected volatility
Risk-free interest rate
Expected life of option
Total number of options:
Number of options
2014
2013
-
-
-
110%
2.74%
4 years
2012
120%
3.57%
3 years
2011
2010
2009
-
-
-
-
-
-
-
-
-
Grant date
Vesting date
2,250,000
2,750,000
29 Nov 11
30 Nov 12
28 May 12
30 Nov 12
Weighted average fair
value
0.08
0.06
Company Performance
Company performance can be reflected in the movement of the company's share price over time. As the company is in an
exploration phase, returns to shareholders will primarily come through share price appreciation. The board’s strategy in
achieving this aim is to acquire early stage projects which can attract quality joint venture partners.
The company has developed skills in the acquisition of quality projects and has also built strategic alliances with other
companies to further develop its project portfolio.
Consequences of Performance on Shareholder Wealth
Return on Equity
Share price at 30 June
Average equity
Net Profit
Return on Equity in %
2014
$0.023
65,037,139
(19,068,997)
(29.32)%
2013
$0.050
72,686,103
(662,822)
(0.91)%
2012
$0.175
43,124,939
(1,805,773)
(4.19)%
2011
$0.110
13,566,697
(967,031)
(7.13)%
2010
$0.042
11,041,234
(1,786,654)
(16.18)%
END OF REMUNERATION REPORT
ROUNDING
The amounts contained in this report and in the financial report have been rounded to the nearest $1 (where rounding is
applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which
the Class Order applies.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor independence declaration is set out on the following page and reviews part of the Directors’ Report for the year
ended 30 June 2014.
NON-AUDIT SERVICES
Rothsay did not receive any payment for non-audit services during the year.
Signed in accordance with a resolution of the Directors.
Ernest Anthony Myers
Director
Perth 30 September 2014
9
33
Directors’ Report
Directors' Report continued
30 June 2014
AUDITOR INDEPENDENCE
The directors received the following declaration from the auditor of Pancontinental Oil & Gas NL:
Auditor's Independence Declaration to the Directors of Pancontinental Oil & Gas NL
In accordance with Section 307C of the Corporations Act 2001 (the “Act”) I hereby declare that to the best of my knowledge
and belief there have been:
i)
ii)
no contraventions of the auditor independence requirements of the Act in relation to the audit of the 30 June
2014 annual financial statements; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Mr Graham Swan
Lead Auditor
30 September 2014
10
34
Corporate Governance Statement
Corporate Governance Statement
30 June 2014
In accordance with the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations ("ASX
Principles and Recommendations")1, Pancontinental Oil & Gas NL ("the company") has made it a priority to adopt systems of
control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures
are summarised in this statement. Commensurate with the spirit of the ASX Principles and Recommendations, the company
has followed each recommendation where the board has considered the recommendation to be an appropriate benchmark for
corporate governance practices, taking into account factors such as the size of the company and the board, resources
available and activities of the company. Where, after due consideration, the company's corporate governance practices depart
from the ASX Principles and Recommendations, the board has offered full disclosure of the nature of and reason for the
adoption of its own practice.
Further information about the company's corporate governance practices is set out on the company's website at
www.pancon.com.au. In accordance with the ASX Principles and Recommendations, information published on the company's
website includes charters (for the board and its committees), the company's code of conduct and other policies and
procedures relating to the board and its responsibilities.
EXPLANATIONS FOR DEPARTURES FROM BEST PRACTICE RECOMMENDATIONS
During the company's 2013/2014 financial year ("reporting period") the company has followed each of the ASX Principles and
Recommendations, other than in relation to the matters specified below.
Principle 2
Recommendation 2.1: A majority of the board should be independent directors
Notification of Departure:
Currently only one of the four directors is considered to be independent – Mr Maslin.
Messrs Rushworth and Myers are executives and Mr Kennedy, a substantial shareholder.
Explanation for Departure:
Given the size and scope of the company's operations the board considers that it is appropriately structured to discharge its
duties in a manner that is in the best interests of the company. The board believes its current composition is in line with the
long term interests of shareholders. Furthermore, mechanisms are in place so that if a director considers it necessary, they
may obtain independent professional advice. The board considers independence, amongst other things, when recommending
new directors to the board.
Principle 2
Recommendation 2.2: The chair should be an independent director
Notification of Departure
The chair is not considered to be independent.
Explanation for Departure
Mr Kennedy is not independent by virtue of his substantial shareholding in the company. However, the board considers that Mr
Kennedy's interests are aligned with the long term interests of shareholders. Given Mr Kennedy's extensive experience and
qualifications, the board believes Mr Kennedy is the most appropriate director to carry out the role of chair.
1 A copy of the ASX Principles and Recommendations is set out on the company’s website under the Section entitled "Corporate
Governance".
11
35
Corporate Governance Statement
Corporate Governance Statement
30 June 2014
Principle 2
Recommendation 2.4: The board should establish a nomination committee
Notification of Departure:
The full board fulfils the role of a nomination committee.
Explanation for Departure:
The full board considers those matters that would usually be the responsibility of a nomination committee. The board
considers that no efficiencies or other benefits would be gained by establishing a separate nomination committee. The board
has adopted a nomination committee charter, which it applies when convening as the nomination committee.
Principle 4
Recommendation 4.1: The board should establish an audit committee
Recommendation 4.2: Structure of the audit committee
Notification of Departure:
The full board fulfils the role of an audit committee.
Explanation for Departure:
The composition of the board is not suitable for the formation of a separate audit committee in accordance with the
recommendation. Further, the independent director does not possess the requisite financial expertise recommended in an
audit committee. The board has adopted an audit committee charter to assist with its function as an audit committee. The audit
committee charter provides that independent directors may meet with the external auditor.
Principle 7
Recommendation 7.2: Implement, manage and report on risk management system
Notification of Departure:
The board has not received a formal documented report from management on the effectiveness of their management of the
company’s material business risks other than verbal updates.
Explanation for Departure:
Although a formal risk management system has not been implemented, the board has continued focus on risk management
during the year. The board and management assess risk as part of the ordinary course of business activities such as
strategic planning, promotion, budgets, mergers and acquisitions, strategic partnerships, legislative changes and conducting
business abroad. The company is as always committed to further developing and strengthening the company’s risk
management policies.
Principle 8
Recommendation 8.1: The board should establish a remuneration committee
Recommendation 8.2: Structure of the remuneration committee
Notification of Departure:
The board fulfils the function of a remuneration committee.
Explanation for Departure:
Given the size and composition of the board, it is not practicable that a separate committee be formed. To assist it to carry out
its function in relation to remuneration matters, the board has adopted a remuneration committee charter.
12
36
Corporate Governance Statement
Corporate Governance Statement
30 June 2014
COMMITTEE MEETINGS
Due to the size of the current board, the functions of the Nomination, Audit and Remuneration Committees were carried out by
the full board during the financial year. As such, no separate meetings were held for the Nomination and Remuneration
Committees. The board agenda may incorporate these items and appropriate discussions held at the board meetings.
Details of each of the director's qualifications are set out in the Directors’ Report. All of the directors have substantial industry
experience and consider themselves to be financially literate. Mr Myers is a Certified Practising Accountant and therefore
meets the tests of financial expertise.
OTHER
Skills, Experience, Expertise and term of office of each Director
A profile of each director containing the skills, experience, expertise and term of office of each director is set out in the
Directors' Report.
Identification of Independent Directors
In considering the independence of directors, the board refers to the criteria for independence as set out in Box 2.1 of the ASX
Principles and Recommendations ("Independence Criteria"). To the extent that it is necessary for the board to consider issues
of materiality, the board refers to the thresholds for qualitative and quantitative materiality as adopted by the board and
contained in the board charter, which is disclosed in full on the company’s website.
Applying the Independence Criteria, the independent director of the company for the current financial year was Mr Maslin.
Corporate Reporting
ASX Principle 7.3 requires the board to disclose whether it has received assurance from the Chief Executive Officer (or
equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the
Corporations Act is founded on a sound system of risk management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks. The board confirms that such assurance has been
received.
Statement concerning availability of Independent Professional Advice
If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her
office as a director, then, provided the director first obtains approval for incurring such expense from the chair, the company
will pay the reasonable expenses associated with obtaining such advice.
Confirmation of whether performance Evaluation of the Board and its members has taken place and how it was
conducted
During the reporting period a formal evaluation of the board and its members was not carried out as it was not considered to
be a beneficial procedure given the size and composition of the board and the nature of the company's operations. However,
the composition of the board and its suitability to carry out the company's objectives is discussed on an as-required basis.
Existence and Terms of any Schemes for Retirement Benefits for Executive and Non-Executive Directors
There are no termination or retirement benefits for non-executive directors.
Directors’ Terms in Office
Name
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Term in office
15 years
9 years
5 years
3 years
For additional details regarding board appointments, please refer to the Pancontinental website.
37
Corporate Governance Statement
Corporate Governance Statement
30 June 2014
Diversity – Board Composition
The mix of skills and diversity for which the company is looking to achieve in membership of the board is one that is as diverse
as practicable given the size and scope of the company’s operations. The company has adopted a Diversity Policy which is
available on the company’s website under the Corporate Governance section.
Diversity – Measurable Objectives
The company’s primary objectives with regard to diversity are as follows:
the company’s composition of board, executive, management and employees to be as diverse as practicable; and
to provide equal opportunities for all positions within the company and continue the company’s commitment to
employment based on merit.
Primary objectives set by the company with regard to diversity have been met, as described below:
blend of skills – wide range of backgrounds; geology, petroleum exploration, finance and corporate experience;
cultural backgrounds – Australian, European and American;
gender – both male and female members; and
age – the age range spans over 40 years.
The above points relate to the composition of the board, as the company does not have any employees.
Diversity – Annual Reporting
The company’s annual reporting on the percentage of females in the organisation is as follows:
Employees
N/A [no employees]
N/A [no employees]
Executives & Board Members
20%
20%
% Female
2014
2013
38
Statement of Comprehensive Income
Statement of Comprehensive Income
YEAR ENDED 30 JUNE 2014
Notes
OPERATING ACTIVITIES
Depreciation and amortisation expenses
Salaries, fees and benefits
Audit fees
Generative exploration expenditure and write off
Annual report costs
ASX fees
Administration, accounting and secretarial fees
Insurance
Legal fees
Share registry costs
Rent and outgoings
Travel
Other revenues and expenses
TOTAL OPERATING ACTIVITIES
FINANCING ACTIVITIES
Financing income
Financing expense
TOTAL FINANCING ACTIVITIES
PROFIT/(LOSS) BEFORE INCOME TAX
Income tax expense
PROFIT/(LOSS) FOR THE PERIOD
OTHER COMPREHENSIVE INCOME/(LOSS)
Other comprehensive income
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE
PERIOD
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2, 6
2
3
10
15
CONSOLIDATED
2013
2014
$
$
(1,416)
(385,872)
(23,582)
(17,846,392)
(7,770)
(43,751)
(340,928)
(40,885)
(49,073)
(29,067)
(119,661)
(91,182)
(267,367)
(19,246,946)
(1,587)
(559,094)
(31,500)
(82,210)
(16,591)
(58,242)
(307,686)
(20,842)
(18,142)
(66,319)
(85,675)
(100,555)
(340,980)
(1,689,423)
1,090,608
(912,659)
177,949
1,295,429
(268,828)
1,026,601
(19,068,997)
-
(19,068,997)
(662,822)
-
(662,822)
-
-
-
-
(19,068,997)
(662,822)
(1.66)
(1.66)
(0.06)
(0.06)
The Statement of Comprehensive Income is to be read in conjunction with the Notes to the Financial Statements.
15
39
Statement of Financial Position
Statement of Financial Position
AT 30 JUNE 2014
Notes
CURRENT ASSETS
Cash assets
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Deferred exploration, evaluation and development costs
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Parent entity interest
Contributed equity
Reserves
Accumulated losses
Total parent entity interest in equity
TOTAL EQUITY
4
6
7
8
9a
10
10
CONSOLIDATED
2014
$
2013
$
9,665,484
45,055
9,710,539
33,821,848
1,930,056
35,751,904
1,388
45,950,928
45,952,316
2,804
38,938,195
38,940,999
55,662,855
74,692,903
160,215
160,215
121,266
121,266
160,215
121,266
55,502,640
74,571,637
99,411,998
345,179
(44,254,537)
55,502,640
99,411,998
345,179
(25,185,540)
74,571,637
55,502,640
74,571,637
The Statement of Financial Position is to be read in conjunction with the Notes to the Financial Statements.
16
40
Statement of Changes in Equity
Statement of Changes in Equity
AT 30 JUNE 2014
Consolidated
Share Capital
Balance at 1 July 2013
Profit or loss
Other comprehensive income/(loss)
Shares issued (net of costs)
Share options
Balance at 30 June 2014
Balance at 1 July 2012
Profit or loss
Other comprehensive income/(loss)
Shares issued (net of costs)
Share options
Balance at 30 June 2013
$
99,411,998
-
-
-
-
99,411,998
95,132,106
-
-
4,279,892
99,411,998
Retained
Earnings
$
(25,185,540)
(19,068,997)
-
-
-
(44,254,537)
(24,630,494)
(662,822)
-
-
107,776
(25,185,540)
Option
Reserve
$
345,179
-
-
-
-
345,179
298,956
-
-
-
46,223
345,179
Total
Equity
$
74,571,637
(19,068,997)
-
-
-
55,502,640
70,800,568
(662,822)
-
4,279,892
153,999
74,571,637
The above Statement of Changes in Equity is to be read in conjunction with the Notes to the Financial Statements.
17
41
Statement of Cash Flows
Statement of Cash Flows
YEAR ENDED 30 JUNE 2014
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Recharges & refunds of exploration expenditure
Expenditure on exploration interests
NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
11(a)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Interest received
Proceeds from issues of ordinary shares
Share issue costs
NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH HELD
Add opening cash brought forward
Effects of exchange rate changes
CLOSING CASH CARRIED FORWARD
11(b)
CONSOLIDATED
2013
2014
$
$
(1,583,303)
2,266,032
(25,090,575)
(24,407,846)
(1,874,229)
2,268,613
(19,859,452)
(19,465,068)
-
-
(794)
(794)
1,089,388
-
-
1,089,388
1,295,429
4,560,250
(292,906)
5,562,773
(23,318,458)
33,821,848
(837,906)
9,665,484
(13,903,089)
47,722,233
2,704
33,821,848
The above Statement of Cash Flows is to be read in conjunction with the Notes to the Financial Statements.
18
42
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This financial report was authorised for issue by the directors on 30 September 2014.
Statement of Compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting
Standards (“AASBs”), including Australian interpretations adopted by the Australian Accounting Standards Board (‘AASB’)
and the Corporations Act 2001. The consolidated financial report of the consolidated entity and company also complies with
IFRSs and interpretations adopted by the International Accounting Standards Board.
Basis of preparation
The report has been prepared on the basis of historical costs and except where stated does not take into account changing
money values or current valuation of non-current assets. The accounting policies adopted are consistent with those of the
previous year. The following specific accounting policies have been consistently applied, unless otherwise stated.
(a) Income Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, and any adjustment to tax payable in respect of
prior years.
Deferred tax is provided using the balance sheet liability method, providing for temporary difference between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax
asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised.
(b) Exploration Expenses
Exploration, evaluation and development costs are accumulated in respect of each separate area of interest. Such costs are
carried forward where they are expected to be recouped through successful development and exploitation of the area of
interest or alternatively, by its sale, or where activities in the area of interest have not yet reached a stage to allow a
reasonable assessment regarding the existence of economically recoverable reserves.
(c) Principles of consolidation
The consolidated financial statements are those of the consolidated entity, comprising Pancontinental Oil & Gas NL (the
parent entity) and all entities which Pancontinental Oil & Gas NL controlled from time to time during the year and at balance
date.
Information from the financial statements of subsidiaries is included from the date the parent company obtains control until
such time as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the
results for the part of the reporting period during which the parent company has control.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been
eliminated in full.
(d) Foreign currencies
Translation of foreign currency transactions
Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of
exchange ruling at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign
currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate
at the end of the financial year.
A monetary item arising under a foreign currency contract outstanding at the reporting date where the exchange rate for the
monetary item is fixed in the contract is translated at the exchange rate fixed in the contract.
All resulting exchange differences arising on settlement or re-statement are recognised as revenues and expenses for the
financial year. Any gains or costs on entering a hedge are deferred and amortised over the life of the contract.
19
43
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
(e) Cash and cash equivalents
For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments
readily convertible to cash within two working days, net of outstanding bank overdrafts.
Interest expense is charged as an expense as it accrues.
(f) Receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as
incurred.
Receivables from related parties are recognised and carried at the nominal amount due. Bills of exchange and promissory
notes are measured at the lower of cost and net realisable value.
(g) Investments
Investments in controlled entities are carried in the company’s financial statements at the lower of cost and recoverable
amount.
(h) Recoverable Amount
The carrying amounts of non-current assets valued on the cost basis, other than exploration and evaluation expenditure
carried forward are reviewed to determine whether they are in excess of their recoverable amount at reporting date. If the
carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount. The
write down is expensed in the reporting period in which it occurs.
(i) Property, plant and equipment
Cost and valuation
Property, plant and equipment is measured at cost.
Depreciation
Depreciation is provided on a diminishing value basis on all property, plant and equipment.
Major depreciation rates are:
Plant and equipment:
2014
30%
2013
30%
(j) Joint ventures
Interests in the joint venture operations are brought to account by including in the respective classifications, the share of
individual assets employed and share of liabilities and expenses incurred.
In the company’s financial statements, investments in joint venture operations were carried at the lower of cost and
recoverable amount.
(k) Going concern
The directors consider that the going concern basis for the consolidated entity is appropriate and recognise that additional
funding is required to ensure the consolidated entity can continue its operations for the twelve month period from the date of
this financial report and to fund the continued development of the consolidated entity’s exploration assets. This basis has
been determined after consideration of the following factors:
The ability to issue additional share capital under the Corporations Act 2001, if required, by a share purchase plan, share
placement or rights issue;
The option of farming out all or part of the consolidated entity’s exploration projects; and
The ability, if required to dispose of interests in exploration and development assets.
Accordingly, the directors believe that the consolidated entity will obtain sufficient cash inflows to enable it to continue as a
going concern and that it is appropriate to adopt that basis of accounting in the preparation of the financial statements.
(l) Payables
Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in
the future for goods and services received, whether or not billed to the consolidated entity.
Payables to related parties are carried at the principal amount.
Deferred cash settlements are recognised at the present value of the outstanding consideration payable on the acquisition of
an asset discounted at prevailing commercial borrowing rates.
20
44
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
(m) Provisions
Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future
sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future
sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.
(n) Contributed equity
Issued and paid up capital is recognised at the fair value of the consideration received by the company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
(o) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can
be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Rendering of Services
Where the contract outcome can be reliably measured, control of the right to be compensated for the services and the stage
of completion can be reliably measured. Stage of completion is measured by reference to the labour hours incurred to date
as a percentage of total estimated labour hours for each contract.
Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent that costs have been
incurred.
Interest Revenue
Control of the right to receive the interest payment. Interest revenue is recognised as it accrues, taking into account the
effective yield on the financial asset.
(p) Taxes
Tax-effect accounting is applied using the income statement liability method whereby income tax is regarded as an expense
and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur
between the time items are recognised in the financial statements and when items are taken into account in determining
taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax
benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences
is not carried forward as an asset unless the benefit is virtually certain of being realised.
Where assets are revalued no provision for potential capital gains tax has been made.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;
and
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis and the
GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority, are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
(q) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date.
These benefits include wages and salaries, annual leave, sick leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee benefits expected to be
settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates
which are expected to be paid when the liability is settled.
Employee benefit expenses and revenues arising in respect of the following categories:
wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave benefits; and
other types of employee benefits
are charged against profits on a net basis in their respective categories.
21
45
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
(r) Earnings per share
Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than
dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any
bonus element.
Diluted EPS is calculated as net profit attributable to members, adjusted for:
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised
as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element.
(s) Comparatives
Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.
(t) Financial Instruments
See financial instruments note for compliance notes with AASB 7, financial instruments: disclosures.
(u) New accounting standards and interpretations
The financial report is presented in Australian dollars which is the company’s functional currency. A number of new
standards, amendments to standards and interpretations are effective for the current annual report period; however, none
have been applied in preparing these consolidated financial statements. The standards are not expected to have a material
impact on the accounting policies or consolidated financial statements of the group.
22
46
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
2. DEPRECIATION AND WRITE OFF
Notes
Expenses
Depreciation of non-current assets:
Office furniture and equipment
Generative exploration and write off:
Exploration, evaluation and development costs
3.
INCOME TAX
(a) Income Tax (Benefit)/Expense
The prima facie tax, using tax rates applicable in
the country of operation, on profit and extraordinary
items differs from the income tax provided in the
financial statements as follows:
Prima facie tax on profit from ordinary activities
Tax effect of permanent differences:
Other items (net)
Amount not brought to account as a carried forward
future income tax benefit
Income tax expense attributable to ordinary
activities
CONSOLIDATED
2013
2014
$
$
1,416
1,587
17,846,392
82,210
CONSOLIDATED
2013
2014
$
$
(5,721,273)
(198,104)
-
46,200
5,721,273
151,904
-
-
(b) Future Income Tax Benefit not taken into account
The potential future income tax benefit calculated at 30% in respect of :
Adjustments to carry forward tax losses
Tax Losses not brought to account
Total
-
6,245,263
6,245,263
-
6,122,404
6,122,404
This future income tax benefit will only be obtained if:
future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
(a)
the conditions for deductibility imposed by tax legislation continue to be complied with; and
(b)
(c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
The recognition and utilisation of losses is subject to the loss recoupment rules being satisfied.
4. RECEIVABLES (CURRENT)
Sundry receivables
Total
CONSOLIDATED
2013
2014
$
$
1,930,056
45,055
1,930,056
45,055
(a) Terms and conditions
(i)
(ii) Sundry debtors and other receivables are non-interest bearing and have repayment terms between 30 and 90 days.
Trade debtors are non-interest bearing and generally on 30 day terms.
23
47
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
INTERESTS IN SUBSIDIARIES
5.
Name
Country of
incorporation
Percentage of equity
interest
held by the
consolidated entity
Investment
2014
%
2013
%
2014
$
2013
$
Euro Pacific Energy Pty Ltd
Provision for diminution in value of investment
Loan to Euro Pacific Energy Pty Ltd
Provision for loss on loan to Euro Pacific Energy Pty Ltd
Pancontinental Namibia Pty Ltd
Provision for diminution in value of investment
Loan to Pancontinental Namibia Pty Ltd
Provision for loss on loan to Pancontinental Namibia P/L
Afrex Ltd *
Provision for diminution in value of investment
Loan to Afrex Ltd
Provision for loss on loan to Afrex Ltd
Starstrike Resources Ltd *
Provision for diminution in value of investment
Loan to Starstrike Resources Ltd
Provision for loss on loan to Starstrike Resources Ltd
Total
Australia
100
100
Australia
100
100
Saint Lucia
100
100
British Virgin
Islands
100
100
*Indicates companies not audited by Rothsay Chartered Accountants.
6. PROPERTY, PLANT AND EQUIPMENT
Office equipment
At cost
Less: Accumulated depreciation
Total written down amount
Reconciliations
Reconciliations of the carrying amounts of property, plant and equipment
Office equipment
Carrying amount opening balance
Additions
Depreciation expense
Total written down amount
2
(2)
(161,423)
-
1
(1)
5,009,288
(12,479)
2
(2)
(162,659)
-
1
(1)
4,839,699
(4,328)
10,584,107 10,584,107
(4,541,703)
(10,584,107)
7,561,202
7,263,753
-
(2,927,448)
380,000
(380,000)
66,535
-
9,238,226
380,000
(380,000)
60,315
-
18,336,633
CONSOLIDATED
2013
2014
$
$
29,559
(28,171)
1,388
54,375
(51,571)
2,804
2,804
-
(1,416)
1,388
3,598
793
(1,587)
2,804
24
48
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
7. DEFERRED EXPLORATION, EVALUATION AND
DEVELOPMENT COSTS
Exploration, evaluation and development costs carried
forward
Pre-production:
exploration and evaluation phases:
Carrying amount at 1 July
Expenditure & acquisitions during the year
Exploration expenditure written off
Recovery and refunds of exploration expenditure *
Carrying amount at 30 June
CONSOLIDATED
2014
$
2013
$
38,938,195
25,080,520
(17,752,562)
(315,225)
45,950,928
23,211,960
19,723,183
(18,250)
(3,978,698)
38,938,195
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful
development and commercial exploitation or sale of the respective mining areas.
* For the year ended 30 June 2013 the recoveries relate to refunds of exploration expenditure previously cash called, for the
year ended 30 June 2014, the recovery relates to refunds of past expenditure.
8. TRADE and OTHER PAYABLES (CURRENT)
Trade creditors
Total
9. CONTRIBUTED EQUITY
(a) Issued and paid up capital
Ordinary shares fully paid
Total
(b) Movements in shares on issue
CONSOLIDATED
2013
2014
$
$
121,266
121,266
160,215
160,215
CONSOLIDATED
2013
2014
$
$
99,411,998
99,411,998
99,411,998
99,411,998
Beginning of the financial year
Issued during the year:
Placement (net of costs)
Shortfall from Share Purchase Plan (net of costs)
Exercise of Options (net of costs)
End of the financial year
2014
2013
Number of
shares
1,150,994,096
$
Number of
shares
$
99,411,998
1,123,444,094 95,132,106
-
-
-
1,150,994,096
-
-
-
99,411,998
-
25,300,002
2,250,000
-
4,148,781
131,111
1,150,994,096 99,411,998
25
49
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
10. RESERVES AND ACCUMULATED LOSSES
Reserves
Beginning of the financial year
Directors and employee options issued
Options exercised
End of the financial year
Accumulated losses
Beginning of the financial year
Net loss attributable to members of Pancontinental Oil & Gas NL
Share options exercised
Total available for appropriation
End of the financial year
11. STATEMENT OF CASH FLOWS
(a) Reconciliation of the net loss after tax to the net cash flows from operations
Net loss
Non-Cash Items, Non-Operating Items
Depreciation of non-current assets
Financing expense
Financing income
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in property, plant & equipment
(Increase)/decrease in exploration, evaluation & development
(Increase)/decrease in interests in subsidiaries
(Decrease)/increase in trade and other payables
(Decrease)/increase in employee entitlements
Other non-cash
Net cash flow from operating activities
(b) Reconciliation of cash
Cash balance comprises:
cash assets
Closing cash balance
CONSOLIDATED
2014
$
2013
$
345,179
-
-
345,179
298,956
153,999
(107,776)
345,179
(25,185,540)
(19,068,997)
-
(44,254,537)
(44,254,537)
(24,630,494)
(662,822)
107,776
(25,185,540)
(25,185,540)
CONSOLIDATED
2014
$
2013
$
(19,068,997)
(662,822)
1,416
912,659
(1,090,608)
1,587
153,999
(1,295,429)
1,885,001
1,416
(7,012,733)
-
38,949
-
(74,949)
(24,407,846)
(1,831,474)
794
(15,726,235)
-
(114,539)
-
9,051
(19,465,068)
9,665,484
9,665,484
33,821,848
33,821,848
26
50
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
12. EXPENDITURE COMMITMENTS
Capital expenditure commitments
Estimated capital expenditure contracted for at reporting date, but not provided for, payable:
not later than one year
other
later than one year and not later than five years
other
later than five years
Total
13. EMPLOYEE BENEFITS
CONSOLIDATED
2014
$
2013
$
342,718
21,607,950
14,892,810
31,584,412
15,235,528
53,192,362
Employee Share Scheme
Information with respect to the number of options under the employee share incentive scheme is as follows:
Balance at beginning of year
expired
exercised
issued
Balance at end of year
2014
2013
Number of
options
5,000,000
-
-
-
5,000,000
Weighted
average
exercise
price
0.12
-
-
-
0.12
Weighted
average
exercise
price
0.09
-
0.59
0.12
0.12
Number of
options
4,500,000
-
(2,250,000)
2,750,000
5,000,000
Options held at the end of the reporting period
The following table summarises information about options held by directors and employees as at 30 June 2014:
Number of options
2,250,000
2,750,000
Grant date
29 Nov 11
30 Nov 12
Expiry date
28 Nov 14
29 Nov 16
Weighted average exercise
price
0.1275
0.1230
14. SUBSEQUENT EVENTS
Significant events after balance date include:
In July 2014, Pancontinental announced that the 3D and 2D seismic surveys carried out earlier in 2014 were beginning to
yield very encouraging results. Initial mapping confirmed at least four main prospects in the 3D area. The prospects appear to
be large and robust and are in favourable geological settings. Additional prospects and leads are expected to be mapped
within and outside the 3D area in due course.
The Albatross Prospect has potential to contain 422 Million Barrels of Oil (gross unrisked mean) or 1.093 Billion Barrels of Oil
(P10). Further prospects and leads have gross mean risked potential resources exceeding 150 Million Barrels of Oil.
Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and
a risk of development. Further exploration, appraisal and evaluation is required to determine the existence of a significant
quantity of potentially moveable hydrocarbons.
27
51
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
15. EARNINGS PER SHARE
CONSOLIDATED
2014
$
2013
$
The following reflects the income and share data used in the calculations of basic and diluted earnings per share:
Net profit
(662,822)
Adjustments:
Earnings used in calculating basic and diluted earnings per
share
(19,068,997)
(662,822)
(19,068,997)
Weighted average number of ordinary shares used in
calculating basic earnings per share
Effect of dilutive securities:
Share options
Adjusted weighted average number of ordinary shares used
in calculating diluted earnings per share
Number of shares
Number of shares
1,150,994,096
1,147,339,986
-
-
1,150,994,096
1,147,339,986
16. AUDITORS' REMUNERATION
Amounts received or due and receivable by Rothsay for:
an audit or review of the financial report of the entity
and any other entity in the consolidated entity
other services in relation to the entity and any other
entity in the consolidated entity
CONSOLIDATED
2013
2014
$
$
23,582
31,500
-
23,582
-
31,500
52
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
17. DIRECTOR AND EXECUTIVE DISCLOSURES
(a) Details of Specified Directors and Specified Executives
(i) Specified Directors
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin Non-Executive Director
(ii) Specified Executives
Vesna Petrovic
Company Secretary
Non-Executive Chairman
Executive Director, Chief Executive Officer
Executive Finance Director
Total remuneration for all non-executive directors, last voted upon by shareholders at the 2007 AGM, is not to exceed
$400,000 per annum and is set with reference to fees paid to other non-executive directors of comparable companies.
Non-executive and executive directors do not receive performance related remuneration but they are eligible to participate in
Employee Option Schemes approved by shareholders.
Directors do not receive any termination or retirement benefits.
(b) Remuneration of Specified Directors /Officers
Salary
& Fees
Primary
Cash
Bonus
Non
Monetary
benefits
Post Employment
Super-
annuation
Retirement
benefits
Equity
Options Bonuses
Other
Total
Specified
Directors/Officers
Henry David Kennedy
2014
2013
Roy Barry Rushworth
2014
2013
Ernest Anthony Myers
2014
2013
50,000
50,000
750,000
650,000
48,000
48,000
Anthony Robert Frederick Maslin
2014
2013
Vesna Petrovic
2014
2013
48,000
48,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Remuneration: Specified Directors /Officers
2014
2013
896,000
796,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28,000
-
-
50,000
78,000
-
-
-
56,000
-
-
750,000
706,000
-
-
- -
42,000 -
48,000
90,000
-
-
- -
28,000 -
48,000
76,000
-
-
- -
-
-
-
-
-
-
- 154,000
-
-
896,000
950,000
Mr Myers has a 50% interest in a consulting company which provides staff, accounting and administrative services to listed
companies, including Pancontinental. Mr Myers is paid a salary from that company. The same company also pays the staff
who provide company secretarial, accounting and administrative services to Pancontinental. The total fees paid for these
services and functions was $338,496 (2013: $305,400).
Mrs Petrovic received no direct remuneration from the company for her services as company secretary however during the
year the company paid fees to Resource Services International (Aust) Pty Limited totalling $338,496 (2013: $305,400) for
the provision of corporate, accounting and administration services. Mrs Petrovic is employed by Resource Services
International (Aust) Pty Limited. See Note 20 for further information.
29
53
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
(c) Remuneration options: Granted and vested during the year
There were no grants of remuneration options during the year.
Options granted for the financial year ended 30 June 2013 are shown below:
Granted
Number
Grant
Date
Specified Directors
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Total
500,000 30 Nov 12
1,000,000 30 Nov 12
750,000 30 Nov 12
500,000 30 Nov 12
2,750,000
Terms & Conditions for Each
Grant
Value per
option at
grant
date ($)
0.06
0.06
0.06
0.06
Exercise Price
per share ($)
First Exercise
Date
Last Exercise
Date
0.123
0.123
0.123
0.123
30 Nov 12
30 Nov 12
30 Nov 12
30 Nov 12
29 Nov 16
29 Nov 16
29 Nov 16
29 Nov 16
(d) Option holdings of specified directors and specified executives
2014
Specified Directors
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Total
2013
Specified Directors
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Total
Balance at
beginning of
period
1 July 2013
1,250,000
2,500,000
750,000
500,000
5,000,000
Balance at
beginning of
period
1 July 2012
1,500,000
3,000,000
-
-
4,500,000
Granted as
Remuneration
Options Exercised/
(Expired)
Net Change
Other
Balance at end
of period
-
-
-
-
-
-
-
-
-
-
30 June 2013
1,250,000
2,500,000
750,000
500,000
5,000,000
-
-
-
-
-
Granted as
Remuneration
Options Exercised/
(Expired)
Net Change
Other
Balance at end
of period
500,000
1,000,000
750,000
500,000
2,750,000
(750,000)
(1,500,000)
-
-
(2,250,000)
-
-
-
-
-
30 June 2013
1,250,000
2,500,000
750,000
500,000
5,000,000
(e) Shareholdings of Specified Directors and Specified Executives
2014
Ordinary Shares held in
Pancontinental Oil & Gas NL
Specified Directors
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Total
Acquisitions
(Disposals)
Balance
30 June 2014
7,300,000
-
-
-
7,300,000
141,351,602
36,835,610
400,715
14,583
178,602,510
Balance
1 July 2013
134,051,602
36,835,610
400,715
14,583
171,302,510
30
54
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
2013
Ordinary Shares held in
Pancontinental Oil & Gas NL
Specified Directors
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Anthony Robert Frederick Maslin
Total
18. SEGMENT INFORMATION
Balance
1 July 2012
133,301,602
35,335,610
285,715
14,583
168,937,510
Acquisitions
(Disposals)
Balance
30 June 2013
750,000
1,500,000
115,000
-
2,365,000
134,051,602
36,835,610
400,715
14,583
171,302,510
Segment accounting policies
The group has adopted AASB 8 Operating Segments which requires operating segments to be identified on the basis of
internal reports about components of the group that are reviewed by the chief operating decision-maker in order to allocate
resources to the segment and to assess its performance.
The board of Pancontinental reviews internal reports prepared as consolidated financial statements and strategic decisions of
the group are determined upon analysis of these internal reports. During the period the group operated predominately in one
business segment, being the oil and gas sector. Accordingly, under the management approach outlined only one operating
sector has been identified and no further disclosures are required in the notes to the consolidated financial statements.
19. FINANCIAL INSTRUMENTS
Financial risk management
Overview:
The company and group have exposure to the following risks from their use of financial instruments:
(a) credit risk
(b) liquidity risk
(c) market risk
This note presents information about the company’s and group’s exposure to each of the above risks, their objectives,
policies and processes for measuring and managing risk, and the management of capital.
The board of directors has overall responsibility for the establishment and oversight of the risk management framework.
Management monitors and manages the financial risks relating to the operations of the group through regular reviews of the
risks.
(a) Credit risk:
Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. In this industry, it arises principally from the receivables of joint venture re-charges and
recuperations of cost. For the group, it arises from receivables due from subsidiaries and re-charges to joint venture
partners.
(i) Trade and other receivables:
The group operates predominantly in the oil and gas exploration sector; it does not ordinarily have material trade
receivables and is therefore not ordinarily exposed to credit risk in relation to trade receivables.
31
55
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
The company’s and group’s exposure to credit risk is influenced directly and indirectly by the individual characteristics of
each joint venture. The balance of any outstanding amounts is monitored and payments are received promptly from joint
venture partners.
(ii) Loans to subsidiaries:
The company has provided funding to its subsidiaries by way of loans. Based on management’s review of the subsidiaries
net tangible asset position and cash flow projections, the current carrying value of the loans have been assessed to be fully
recoverable. Repayment of these loans will occur through future business activities of each respective entity.
Exposure to credit risk
The carrying amount of the company’s and group’s financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
Consolidated
Trade and other receivables
Cash and cash equivalents
Total
Note
4
Carrying amount
2014
$
45,055
9,665,484
2013
$
1,930,056
33,821,848
9,710,539
35,751,904
*Note, the above trade receivable for 2013 mostly relates to the expected refund of joint venture contributions.
Impairment losses:
None of the company’s or group’s receivables are past due at 30 June 2014, (2013: nil).
An impairment write down in respect of inter-group loans and shares was recognised during the current year from an analysis
of the subsidiaries respective financial positions. The total impairment write down recognised through impairment of loans to
subsidiaries and shares held in subsidiaries during the current period was $8,978,003 (2013: $29,904).
Whilst the loans were not payable at 30 June 2014 a provision for impairment based on the subsidiaries financial position was
carried forward from previous periods. The balance of this provision may vary due to performance of a subsidiary in a given
year.
(b) Liquidity risk:
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.
The group manages liquidity risk by maintaining adequate cash reserves through continuously monitoring forecast and actual
cash flows.
(c) Market risk:
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
the group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return.
(i) Currency risk:
The group is from time to time exposed to currency risk on investments, and foreign currency denominated purchases in a
currency other than the respective functional currencies of group entities, primarily the Australian dollar (AUD). The other
material currency that these transactions are denominated in is the (USD).
32
56
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
The group has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts
or payments that are denominated in a foreign currency.
Exposure to currency risk:
The group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
30 June 2014
AUD
AUD
USD
Total
AUD
Cash & cash equivalents
Trade & other receivables
Trade and other payables
7,036,895
45,055
(160,215)
2,628,589
-
-
9,665,484
45,055
(160,215)
31,766,074
69,180
(121,266)
30 June 2013
USD
2,055,774
1,860,876
-
Total
33,821,848
1,930,056
(121,266)
Net balance sheet
exposure
6,921,735
2,628,589
9,550,324
31,713,988
3,916,650
35,630,638
The following significant exchange rates applied during the year:
AUD : USD
Sensitivity analysis:
Average rate
Reporting date spot rate
2014
0.918
2013
1.027
2014
0.942
2013
0.913
A 10 percent strengthening of the Australian dollar against the USD at 30 June would have increased (decreased) equity and
profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain
constant. The analysis is performed on the same basis for 2013.
Effect in AUD
30 June 2014
10% strengthening
30 June 2013
10% strengthening
Consolidated
Equity
Profit or loss
64,610
64,610
206,764
206,764
A 10 percent weakening of the Australian dollar against the USD at 30 June would have had the equal but opposite effect on
the above currencies to the amounts shown above, on the basis that all other variables remain constant.
The sensitivity analysis only had an effect on the equity or profit and loss of the company in relation to the USD bank account
as the other bank transactions in foreign currencies are predominately guarantees for exploration expenditure and would not
have an effect on the financial position of the company until their maturity date and only then, if the guarantee is to be
extended and that extension is at a different AUD to USD rate.
Interest rate risk:
At balance date the group had exposure to interest rate risk, through its cash and equivalents held within financial institution.
Variable rate instruments
Cash and cash equivalents
Fair value sensitivity analysis for fixed rate instruments:
Consolidated Carrying Amount
30 June 2013
30 June 2014
9,665,484
33,821,848
The company and group do not account for any fixed rate financial assets at fair value through profit or loss. Therefore, a
change in interest rates at reporting date would not affect profit or loss or equity.
33
57
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
Fair values:
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Consolidated
30 June 2014
30 June 2013
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Carrying amount
Fair value
45,055
9,665,484
(160,215)
9,550,324
45,055
9,665,484
(160,215)
9,550,324
Carrying
amount
1,930,056
33,821,848
(121,266)
Fair value
1,930,056
33,821,848
(121,266)
35,630,638
35,630,638
The basis for determining fair values is disclosed in note [1].
Capital Management:
The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. The board of directors monitors the return on capital, which the group defines as net
operating income divided by total shareholders’ equity, excluding non-redeemable preference shares and minority interests.
Equity attributable to shareholders of the Company
Minorities
Equity
Total assets
Equity ratio in %
Average equity
Net Profit
Return on Equity in %
2014
2013
-
55,502,640
55,662,855
99.71%
65,037,139
(19,068,997)
(29.32)%
-
74,571,637
74,692,903
99.84%
72,686,103
(662,822)
(0.91)%
There were no changes in the group’s approach to capital management during the year.
Neither the company nor any of its subsidiaries are subject to externally imposed capital requirements.
20.
RELATED PARTY
(a) During the year the company paid fees to Resource Services International Limited, a company in which Mr Kennedy has a
financial interest, for consulting services. The amount paid to was $50,000 (2013: $50,000). Refer note 17.
(b) During the year the company paid fees to Resource Services International (Aust) Pty Limited, a company of which Mr
Myers is a director, to cover the provision of corporate, accounting and administration services. The amount paid to
Resource Services International (Aust) Pty Limited was $338,496 (2013: $305,400). Amounts were billed based on normal
market rates for such services and were due and payable under normal payment terms.
(c) The company has effected Directors and Officers Liability Insurance.
34
58
Notes to the Financial Statements
Notes to the Financial Statements
30 June 2014
21. PARENT INFORMATION
The Group has applied amendments to the Corporations Act (2001) which remove the requirement for the Group to lodge
parent entity financial statements. Parent entity financial statements have been replaced by the specific parent entity
disclosures below.
AT 30 JUNE 2014
STATEMENT OF COMPREHENSIVE INCOME
Profit/(Loss) for the period
TOTAL COMPREHENSIVE INCOME/(LOSS)
STATEMENT OF FINANCIAL POSITION
Assets
Current assets
TOTAL ASSETS
Liabilities
Current liabilities
TOTAL LIABILITIES
Equity
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
2014
$
2013
$
(19,062,522)
(19,062,522)
(653,500)
(653,500)
2014
$
2013
$
8,884,363
34,315,253
55,567,964
74,590,496
158,330
158,330
118,341
118,341
99,411,998
345,179
(44,347,543)
55,409,634
99,411,998
345,179
(25,285,022)
74,472,155
35
59
Directors’ Declaration
Directors' Declaration
In accordance with a resolution of the directors of Pancontinental Oil & Gas NL, I state that:
(1)
In the opinion of the directors:
(a)
the financial statements and notes of the company and of the consolidated entity are in accordance with the
Corporations Act 2001, including:
(i)
giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2014
and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with
section 295A of the Corporations Act 2001 for the financial period ending 30 June 2014.
On behalf of the Board
Ernest Anthony Myers
Director
Perth 30 September 2014
36
60
61
62
ASX Additional Information
ASX Additional Information
Additional information required by the ASX Ltd and not shown elsewhere in this report is as follows.
The information is current as at 30 September 2014.
(a) Distribution of equity securities
The number of shareholders, by size of holding, in each class of share are:
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001
and over
The number of shareholders holding less than a marketable parcel of shares are:
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SUNDOWNER INTERNATIONAL LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
CM SKYE TRUSTEES LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
ROY BARRY RUSHWORTH
FLOTECK CONSULTANTS LIMITED
CRESCENT NOMINEES LIMITED
MR ROBERT ALBERT BOAS
NATIONS NATURAL GAS PTY LTD
CS FOURTH NOMINEES PTY LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
BRISPOT NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
TATTERSFIELD SECURITIES LIMITED
QUICKSILVER ASSET PTY LTD
MR MALCOLM CLARK ANDERSON
M & M FAMILY PTY LTD
Ordinary shares
Number of holders
Number of shares
421
324
441
1,860
1,040
90,656
1,131,773
3,745,236
82,216,463
1,063,809,968
4,086
1,150,994,096
1,342
6,836,573
Listed ordinary shares
Number of shares
158,119,100
132,256,827
82,793,017
73,541,608
26,277,940
13,682,924
9,704,127
9,057,670
8,162,925
8,000,000
7,525,000
7,500,000
7,150,000
7,135,886
6,837,851
6,333,222
6,268,388
6,107,523
6,075,000
6,000,000
Percentage of
ordinary shares
13.74
11.49
7.19
6.39
2.28
1.19
0.84
0.79
0.71
0.7
0.65
0.65
0.62
0.62
0.59
0.55
0.54
0.53
0.53
0.52
588,529,008
51.13
63
ASX Additional Information
(c) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
(d) Substantial Shareholders
The details of substantial shareholders as disclosed in substantial shareholder notices received by the
Company are set out below:
Sundowner International Limited and HSBC Custody Nominees
Roy Barry Rushworth and CM Skye Trustees Limited as trustee for the Mulberry Trust
Number of Shares
118,499,351
34,764,181
Interest
12 %
11.11 %
38.462%
38.462%
40% offshore, 16% onshore
18.75%
25%
30%
(e) Permit Schedule
Permits and Licence Interests
Permit reference
Petroleum prospects
Western Australia
Kenya
Namibia
L15
EP 104 (R1)
EP 110
EP 424
L6
L10A
L10B
EL 0037
64
288 Stirling Street
Perth WA 6000
Telephone: +61 8 9227 3220
Fax: +61 8 9227 3211
66