Pancontinental Energy NL
Annual Report 2017

Plain-text annual report

PANCONTINENTAL OIL & GA S N L – A P A N C O N T I N E N T A L O I L & G A S N L - A N N U A L R E P O R T 2 0 1 7 N N U A L R E P O R T 2 0 1 7 Level One, 10 Ord Street West Perth WA 6005 Telephone: +61 8 6363 7090 Facsimile: +61 8 6363 7099 Corporate Information Corporate Information Corporate Information ABN 95 003 029 543 ABN 95 003 029 543 Corporate Information Directors Directors Henry David Kennedy Henry David Kennedy Roy Barry Rushworth John Douglas Begg Ernest Anthony Myers Ernest Anthony Myers Anthony Robert Frederick Maslin Roy Barry Rushworth Marie Michele Malaxos Company Secretary Vesna Petrovic Company Secretary Vesna Petrovic Registered Office Level One, 10 Ord Street Registered Office West Perth WA 6005 Level One, 10 Ord Street Telephone: +61 8 6363 7090 West Perth WA 6005 +61 8 6363 7099 Fax: Telephone: +61 8 6363 7090 Fax: +61 8 6363 7099 Share Register Advanced Share Registry Services PO Box 1156 Nedlands WA 6909 Telephone: +61 8 9389 8033 Share Registry Advanced Share Registry Services PO Box 1156 Nedlands WA 6909 Telephone: +61 8 9389 8033 Auditors Rothsay Chartered Accountants Auditors Level 1, Lincoln House Rothsay Chartered Accountants 4 Ventnor Avenue Level 1, Lincoln House West Perth WA 6005 4 Ventnor Avenue West Perth WA 6005 Internet Address & Contact www.pancon.com.au info@pancon.com.au Internet Address & Contact www.pancon.com.au info@pancon.com.au ASX Code PCL ASX Code PCL (Non-Executive Chairman) Non-Executive Chairman (Executive Director & Chief Executive Officer) Executive Director & Chief Executive Officer (Executive Finance Director) Non-Executive Director (Non-Executive Director) Non-Executive Director Non-Executive Director Who we are 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.  Pancontinental Oil & Gas NL is an Australian based oil and gas exploration company with interests in Africa and newly acquired interests in the United States of America and Australia. Australia.  The Company’s headquarters are in West Perth, Western  The Company is listed on the Australian Securities Exchange under code PCL.  Pancontinental is managed by a team of experienced individuals from corporate, technical and financial backgrounds. Contents Chairman’s Review Chairman’s Review Contents Directors' Report Chairman’s Review 3 4 Directors' Report Directors' Report Corporate Governance Statement Corporate Governance Statement Permit Schedule Corporate Governance Statement Review of Operations Review of Operations Review of Operations Statement of Comprehensive Income Directors’ Report Statement of Financial Position Auditor’s Independence Declaration Statement of Changes in Equity Statement of Comprehensive Income Statement of Comprehensive Income Corporate Governance Statement Statement of Cash Flows Statement of Financial Position Statement of Financial Position Statement of Comprehensive Income 47 Notes to the Financial Statements Statement of Changes in Equity Statement of Financial Position Statement of Changes in Equity Directors' Declaration Statement of Changes in Equity Statement of Cash Flows Statement of Cash Flows 48 20 33 34 49 7 Notes to the Financial Statements Notes to the Financial Statements Statement of Cash Flows Independent Audit Report Notes to the Financial Statements Directors' Declaration Directors' Declaration Directors’ Declaration Independent Audit Report Independent Audit Report Independent Audit Report ASX Additional Information ASX Additional Information 50 51 68 69 72 XX XX XX XX XX XX XX XX XX XX XX 1 3 14 25 39 40 41 42 43 60 61 63             Corporate Information Corporate Information Non-Executive Chairman Executive Director & Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director Who we are  Pancontinental Oil & Gas NL is an Australian based oil and gas exploration company with interests in Africa and newly acquired interests in the United States of America and Australia.  The Company’s headquarters are in West Perth, Western Australia.  The Company is listed on the Australian Securities Exchange under code PCL.  Pancontinental is managed by a team of experienced financial from corporate, technical and individuals backgrounds. Corporate Information ABN 95 003 029 543 Directors Henry David Kennedy John Douglas Begg Ernest Anthony Myers Roy Barry Rushworth Marie Michele Malaxos Company Secretary Vesna Petrovic Registered Office Level One, 10 Ord Street West Perth WA 6005 Telephone: +61 8 6363 7090 Fax: +61 8 6363 7099 Share Registry 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 Directors' Report Corporate Governance Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Audit Report 1       Corporate Information Corporate Information Strategy & Business Model Identify oil & gas basins with overlooked potential & seek funding for PCL's original ideas Create value for Shareholders Secure acreage at low entry cost and complete initial work programmes Attract highly reputable companies to partner in projects 2   Corporate Information Chairman’s Review Chairman’s Review Strategy & Business Model Identify oil & gas basins with overlooked potential & seek funding for PCL's original ideas Attract highly reputable companies to partner in projects Create value for Shareholders Secure acreage at low entry cost and complete initial work programmes Pancontinental is now positioned with the potential to deliver early value from assets acquired through the recent Bombora transaction, while ensuring shareholders continue to benefit from exposure to our significant African position. Dear Shareholder, The Board of Directors of Pancontinental Oil & Gas NL is pleased to present to you the Company’s 2017 Annual Report. During the financial year, uncertainty continued across global markets with companies basing their exploration budgets and forward operational planning on a low oil price environment and reduced industry activity. Notwithstanding the challenges faced in the oil and gas industry, Pancontinental persisted and has now entered the new financial year well-funded and with a diverse asset portfolio. The Company’s Namibian asset is now partially owned by Africa Energy Corp. a well-respected company with a focus on the acquisition and exploration of African oil and gas assets. The transaction, which closed in September 2017 has given the Company a very healthy immediate capital injection of US $2.2 million, with more to follow once drilling commences. Additionally, Africa Energy will provide valuable technical expertise to complement our in-house experts. During the year, PEL 37 joint venture Operator Tullow Kudu Limited farmed out to India’s ONGC Videsh Limited. The farmout is a welcome development and we expect this to be a positive step toward testing the large oil potential of PEL 37 next year. In July 2017, Pancontinental joined forces with Bombora Natural Energy Pty Ltd, which has reinforced the Company’s oil and gas asset portfolio with a number of exciting new, near-term projects, including appraisal drilling of existing gas discoveries. Bombora adds considerable shorter-term activity with interests in gassy opportunities in the Sacramento Gas Basin and the onshore Perth Basin, as well as the potential for a series of additional new projects. The reformed management team now lead by John Begg is well suited to efficiently manage the exciting new USA and Australian assets and to continue to run the existing high-potential African projects. Pancontinental raised AU $1.8 million during the financial year which demonstrates market support in the Company, its assets, management and strategy. We thank all participants in placements as well as the Share Purchase Plan. Subsequent to year end a further AU $2.0 million was raised as part of the Bombora transaction. I acknowledge with appreciation, the hard work and dedication of the entire Pancontinental team during the financial year. To you, our loyal Shareholders, as always I extend a particular thanks for your patience and support. Rest assured that my fellow directors and I remain totally focused on delivering value to you. We look to a new, very positive future for Pancontinental, with an expanded portfolio that we believe to be very attractive to new and existing shareholders. HD Kennedy Chairman 3     Permit Schedule Permit Schedule Pancontinental is a junior oil and gas exploration company with a portfolio of high quality exploration and appraisal assets in prospective hydrocarbon provinces AFRICA AUSTRALIA Namibia PEL 37 Kenya L6 Australia Perth Basin Walyering Gas Field LOCATION: LOCATION: LOCATION: Walvis Basin, Offshore Namibia Lamu Basin, Onshore /Offshore Kenya Northern Perth Basin on trend from the analogue producing, Gingin/Red Gully gas & condensate field. PROJECT SIZE: PROJECT SIZE: PROJECT SIZE: 17,295 square kilometres 5,010 square kilometres 120 square kilometres (Area to be excised from a larger exploration licence, just focused on the Walyering Gas Field) JOINT VENTURE PARTNERS: JOINT VENTURE PARTNERS: JOINT VENTURE PARTNERS: Tullow Kudu Limited (Operator) 65.00%* Pancontinental Oil & Gas Group 30.00%** Paragon Oil & Gas (Pty) Ltd 5.00% *Post year-end ONGC Videsh Limited farmed in for a 30% interest. **Post year-end Africa Energy Corp. invested in Pancontinental Namibia Pty Ltd and acquired a deemed interest with Pancontinental retaining 20%. 10% Offshore FAR Limited (Operator) 60.00% Pancontinental Oil & Gas Group 40.00% Onshore Milio International Group (Operator) 60.00%* after earn in. Pancontinental Oil & Gas Group 16.00% FAR Limited 24.00% UIL Energy (Operator) 30.00% Pancontinental Oil & Gas 70.00%** **Assumes option exercised to earn the interest by funding a 3D seismic survey in 2018, covering the Walyering Gas Field. GEOLOGY: GEOLOGY: GEOLOGY: An "Oil Mature Fairway" has been interpreted which extends through PEL 37. Pancontinental believes that PEL 37 is one of the prime areas in Namibia 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 closely associated with, and within the Inner Graben of PEL 37 have been identified and mapped. "leads" large A deep central graben in this area is considered to be an oil and gas “source kitchen” and potential hydrocarbon trapping prospects have been identified adjacent to the 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 trap, with interpreted sandstone reservoirs at a number of levels. 4 put briefly The Walyering Gas Field was discovered in 1971 and a small compartment on production, producing about 0.25 Bcf gas. It is still crossed by the Parmelia gas trunk line that has available capacity. The field is located in a large, faulted anticline on the west side of the Dandaragan Trough which hosts the source kitchens for most of the gas discovered in the Basin. provided reservoir system A thick interbedded fluvio-deltaic is sandstone present with top and lateral seals mostly intra- formational shales and siltstones. The target reservoirs are between 3,000m and 4,000m but when drilled correctly have good natural gas flow potential. by   Permit Schedule Permit Schedule NORTH AMERICA USA California Sacramento Gas Basin Dempsey Gas Project USA California Sacramento Gas Basin Tulainyo Gas Discovery USA California Sacramento Gas Basin Alvares Gas Discovery LOCATION: LOCATION: LOCATION: Central-Northern, Sacramento Gas Basin, California West flank of Northern Sacramento Gas Basin Northern Perth Basin on trend from the analogue producing, Gingin/Red Gully gas and condensate field. PROJECT SIZE: PROJECT SIZE: PROJECT SIZE: Over 4,500 net acres (18 square kilometres) Over 40,000 net acres (152 square kilometres) Approx 6,000 acres (24 square kilometres) JOINT VENTURE PARTNERS: JOINT VENTURE PARTNERS: JOINT VENTURE PARTNERS: Sacgasco Limited (Operator) 50.00% Empyrean Energy PLC 30.00% Xstate Resources Limited 10.00% Pancontinental Oil and Gas NL 10.00%* � Via 100% subsidiary Bombora Natural Gas LLC California Resources Production Corporation (Operator) 41.67% Cirque Resources LP 25.00% Gas Fields LLC 33.33% � Equity interests are assumed post full earning via a staged farmin requiring funding of three wells. � Gas Fields is managed by and owned 40% by Pancontinental. Sacgasco Limited (Operator) 39.00% Empyrean Energy PLC 25.00% Xstate Resources Limited 21.00% Pancontinental Oil & Gas NL 15.00% � Via subsidiary Bombora Natural Gas LLC GEOLOGY: GEOLOGY: GEOLOGY: The Dempsey structure is a large 3-way dip, fault- bound structure continuing from shallow levels to economic basement down rocks and defined by 3D seismic. is located It in the central Northern Sacramento Gas Basin gas within producing area. a multi-field, an seismic It has lesser volume reservoir targets within existing producing field area, mapped on 3D overlying multiple, much larger, stacked targets within interpreted sandstones of Early Cretaceous age. and The Early Cretaceous reservoirs have not often been drilled in the Basin (just 16 partial well penetrations) and most of these were very old wells that were not drilled on structure. trapped There is strong evidence that the the shallow, in gas traditional producing zones such Forbes as the Kione and A large anticline structure with up to 100km² of closure located in the frontal folds of the Coastal the western Ranges boundary of the Sacramento Gas Basin. forming by Early Cretaceous rocks normally at greater depths beneath the traditional gas producing layers of the Basin, are brought near to compressional surface structuring that is continuing present day. This structuring, similar to that seen in the fold belt of PNG, creates high stress in the rocks and high formation pressures. early 2014 The Tulainyo-1 drilling program in late 2015 – encountered high pressure gas in a number of reservoirs but could not be tested due to mechanical difficulties. Good quality E-log data was however matched to extensive adjacent outcrop within the Coastal Ranges indicating that section thickens and will continue at reservoir the A large (over 16km²) faulted anticline structure in a frontal fold setting on the west flank of the Sacramento Gas Basin. On geological trend and north of the Tulainyo Gas Discovery. As at Tulainyo, the highly tectonised geological environment makes effective drilling challenging, often requiring very high mud weights to maintain the borehole when drilling and to hold back gas under apparent, high pressure. silt The Alvares-1 drilled in 1982 had extensive high gas shows in the Early Cretaceous Stoney Creek Formation. A thick sequence of sandstones, and conglomerates were penetrated in the well below 8,300 feet (2,530 metres) with gas shows extending over some 1,500m that were either not tested or improperly tested in the original discovery well. are gas The interpreted from E-log, core, cuttings and test data to have fair reservoirs 5   Permit Schedule Permit Schedule Formations, has been generated the rocks within by source underlying Early Cretaceous section. Primary reservoir targets are in the Ladoga and Boxer Formation sandstones. A circa 3,000m well would be required to test all target levels in the structure. depth within the structure. There is potential for all the reservoirs within some 10,000` (+3,000 metres) of vertical mapped closure to be gas filled, creating a gas potentially resource. giant-scale in reservoirs Over 11 TCF of dry gas has historically been produced from Late Cretaceous and younger the sandstone Sacramento Gas Basin. In the Northern part of the Basin, Pancontinental believes the gas is older sourced Cretaceous section that beneath the Tulainyo structure. The region is characterised by extensive production gas infrastructure. from like the to moderate reservoir quality and the Early than older are Cretaceous reservoirs encountered in the Tulainyo-1 well program. Despite at least 3 gas columns being present in the original mechanical conditions prevented valid flow testing although a partially successful test did flow good quality dry gas at 0.4 MMcfd to surface. well, A more reservoir recent engineering review of the well results indicates that natural flow of between 4.0 and 10.0MMcfd could be achievable from these and reservoirs completed using modern technology. if optimally, drilled Namibia USA California 6   Review of Operations Review of Operations Namibia The PEL 37 joint venture is focused on the interpretation of seismic data acquired in recent years, with a number of prospects under review. The post year-end entry of India’s ONGC Videsh into the joint venture signals a positive step toward testing the large oil potential of this offshore acreage. Namibia became an independent nation in March 1990. Since then, the country has achieved political stability with a democratically elected government and an improved economy which has attracted foreign investment. Namibia now ranks alongside Australia, the United States of America, China, the United Kingdom and Canada in its travel security grading. These factors have contributed to Pancontinental successfully conducting business activities in country over the past decade. Located on the west coast of Africa, Namibia has an offshore area of 240,000 sq km. A vast area. Bordering Namibia immediately to the North, is Angola, the second largest oil producer in Africa and a member of OPEC. The hydrocarbon potential of Namibia is virtually unexplored but the exploration findings to date indicate there is great potential. Pancontinental’s investment in Namibia is based on the theory that the offshore area is favourable for hydrocarbon generation due to the deposit and build-up of nutrients and sediments. The Koigab Fan (shown in the image to the right) is a depositional feature onshore Namibia. Within the feature is the Koigab River which transports bed loads and sediments into the Atlantic Ocean, where, over time the sediments have been deposited in features such as turbidites, which, together with further deposition of source rocks have been buried deeply enough to generate and trap hydrocarbons. The Company holds licence PEL 37 which covers three blocks in the Walvis Basin, offshore Namibia. In recent years, the Wingat-1 well drilled by HRT Participações em Petróleo S.A. (now PetroRio) in the block immediately to the south of PEL 37 verified for the first time that an active oil system was present in the Basin. The well struck oil and found two well- developed oil source rocks as well as several turbidite reservoirs saturated with oil. The recent entry of major companies ONGC Videsh Limited and Total into offshore Namibia reinforces the view that Namibia is emerging as one of the few remaining countries in the world where truly giant fields could be found. 7 PEL 37   Koigab River and Fan onshore Namibia     Review of Operations Review of Operations Namibia Offshore PEL 37 Location: Walvis Basin Project Size: 17,295 square kilometres JV Partners: Tullow Kudu Limited (Operator) Pancontinental Paragon Oil & Gas (Pty) Ltd 65.00%* 30.00%** 5.00% * Post year end, Tullow signed an agreement with ONGC Videsh Limited for the farmout of 30% of its interest subject to customary conditions precedent. ** Also post year end, Pancontinental entered into an agreement with Africa Energy Corp. (“AEC”) whereby the AEC was issued new shares in Pancontinental Namibia Pty Ltd, giving it a 33.33% interest in the subsidiary in return for a payment to Pancontinental of US $7.7 million. Pancontinental has been a leader in industry efforts to open up the exploration potential in Namibia. In 2011, under the Namibia’s Open Bidding System, the Company along with its local partner Paragon Oil & Gas (Pty) Ltd (“Paragon”) negotiated the terms for Petroleum Exploration Licence 37 (“PEL 37”) over three blocks; 2012B, 2112A and 2113B in the Walvis Basin. 100 km Pancontinental’s licence PEL 37 offshore Namibia Map of Africa showing Namibia’s location The blocks are situated in what is believed to be a prime area. PetroRio’s Wingat-1 well was drilled in the licence directly to the south and it is here that it was proven for the first time that an active oil system was present in Namibia. In fact, PetroRio published the image to the right after conducting Oil Seep Density Analysis over regional offshore Namibia, with Pancontinental’s PEL 37 holding the oily “Bullseye”. The key elements of a petroleum system include source, seal, trap and reservoir. Regional exploration has confirmed that all of these elements are present in the geological structures offshore Namibia. Pancontinental’s exploration team is confident that such a petroleum system exists within PEL 37 and this may well be proven by the planned drilling of the licence in 2018. 8 PetroRio’s Oil Seep Density Analysis   Review of Operations Review of Operations Licence Timeline Initial Exploration Period of 4 years - March 2011 to March 2015 Work Programme Commitment to the Ministry of Mines and Energy: Purchase seismic data; and acquire 3,000km2 3D seismic; Actual Work Programme completed by the PEL 37 Joint Venture: The PEL 37 joint venture completed the above work programme within the required timeframe by purchasing seismic data and acquiring 3,000km2 of 3D seismic; During the Initial Exploration Period: In 2011, with the initial award of the licence, Pancontinental held an 85% interest in the project, with Paragon holding the remaining 15%. The Company quickly recognised the potential of PEL 37 and as such sought an additional 10% from its local partner. In 2013, Pancontinental then farmed out a 65% interest to Tullow Kudu Limited, a subsidiary of Tullow Oil for an exploration work programme originally estimated to be in excess of US $100 million. Subsequent to that transaction Pancontinental has been carried through the cost of all activity other than eligible administration costs, for the project. 3D seismic analysis defined four Main Oil Prospects with significant Prospective Resources. First Renewal Period of 2+1 years - March 2015 to March 2018 Work Programme Commitment to the Ministry of Mines and Energy: Drill one well to 3,500m or acquire 1,000km of 2D seismic; Actual Work Programme completed by the PEL 37 Joint Venture: The PEL 37 joint venture has completed the above work programme within the required timeframe by acquiring 1,000km of 2D seismic; During the First Renewal Period: The farmout agreement with Tullow stated that Tullow would be required to notify the Joint Venture of their intention to either withdraw or continue into the drilling phase of the farmout agreement. Tullow chose to enter the drilling phase of the agreement, which required the drilling of one exploration well by March 2017 provided that a suitably matured drillable prospect was identified. As operator, Tullow is conducting further work with a focus on determining if there are mitigating factors to the current view of risk and confirming a drillable prospect in the licence. Post year end - Tullow farmout to ONGC Videsh Limited In July 2017, Pancontinental was advised by PEL 37 operator that it had negotiated and signed an agreement with India’s state-owned oil producer ONGC Videsh Limited (“ONGC”) for a 30% interest in the offshore licence. While ONGC will hold a considerable stake, operatorship will remain with Tullow. Pancontinental is optimistic that this latest development with ONGC will see the joint venture enter into a firm drilling programme in 2018. The news was received extremely well within the industry due to the strong credentials of ONGC and the impact their partnership will provide to the drilling of the highly prospective Namibia acreage. 9   Review of Operations Review of Operations Post year end – Africa Energy Corp. becomes a shareholder of Pancontinental’s Namibian subsidiary in exchange for a staged payment of US$7.7 million In September 2017, Pancontinental finalised a transaction with Africa Energy Corp. (“Africa Energy”), whereby Africa Energy subscribed for new shares in Pancontinental Namibia Pty Ltd. The first payment of US$2.2 million was received by Pancontinental at closing and a second payment of US$5.5 million will be due at spud of the planned well to be drilled in PEL 37. Pancontinental now own 66.67% of the subsidiary and Africa Energy 33.33%, resulting in deemed interests of 20% and 10% in the PEL 37 project for Pancontinental and Africa Energy respectively. Africa Energy is backed by one of the most successful and respected players in oil exploration – the Lundin Group, and Pancontinental welcomes their entry into the subsidiary. The deal with Africa Energy provides further, third party validation of Pancontinental’s long held theories and African asset selection. Large international companies are continuing to secure positions offshore Namibia, per the recent ONGC Videsh farmin to PEL 37 and news that oil major Total has also recently farmed into a deeper water block in Namibia. Prospects The PEL 37 Joint Venture has completed the agreed components of the work commitments to date including 3D and 2D seismic, processing, interpretation and mapping. The exploration programme going forward will look at determining which prospects will be high graded for the planned drilling campaign. 50 km  PEL 37 - seismic outline with location of Prospects and Leads PEL 37 - showing the location of 3D and 2D seismic acquisitions. The key Prospects within PEL 37 include Cormorant, Albatross, Seagull and Gannet North and South. The Prospects are positioned in the northern blocks of the licence and are on trend to the first oil discovery offshore Namibia. The four main Prospects have been mapped on 3D seismic, with potential for combined Prospective Resources of 915 Million Barrels of oil (recoverable). This potential does not include additional potential which may be present in the three leads which have also been mapped and extensive areas not yet covered by 3D seismic (see Cautionary Statement below). 10   Review of Operations Review of Operations Cormorant is a Cretaceous base-of-slope Cormorant turbidite fan prospect, located in water depths of about 400m. The prospect is located within the central part of a “fairway” which was predicted by Pancontinental during the formation of its exploration theories on Namibia. Albatross is a Cretaceous slope and base-of- slope turbidite fan prospect also located in a water depth of 400m and covering the largest area of all the potential traps mapped to date. Mature Aptian Oil Source Interval 5 km  Cormorant Prospect Cormorant is positioned on the northern flank of the fairway and is interpreted to have access to some of the thickest and most mature area of the Aptian oil source rock fairway. Albatross has estimated Pancontinental the Prospective Resource potential of the Prospects mapped to date using factors including estimates of the area of the Prospects, to what level the Prospects may be oil filled, the thickness, geometry, porosity and net to gross factors of the potential reservoirs, oil saturations and commercial recovery factors. The estimates have been made on a deterministic basis and no probabilistic estimates or chances of drilling success have therefore been made in this case. Details of the Prospects and Leads mapped to date are as follows: (see Cautionary Statement below and Disclaimers on the last pages of the Review of Operations) Mature Aptian Oil Source Interval Albatross Prospect PROSPECT / LEAD Albatross Seagull & Gannet S Seagull & Gannet N Cormorant Upper Fan 2 Lower Fan 3 Lower Fan 4 STATUS AREA (Sq Km) PROSPECTIVE RESOURCE 100% (MmBbls)* NET TO NET JOINT VENTURE (MmBbls) PANCONTINENTAL SHARE (MmBbls) Prospect Prospect Prospect Prospect Lead Lead Lead 293 273 90 120 85 352 170 349 338 104 124 331.6 321.1 98.8 117.8 66.3 64.2 19.8 23.6 TOTAL (Prospects Only) 915* 869.3 173.9 Cautionary Statement - The resources referred to above were announced 28 September 2015. The company confirms that it is not aware of any new information or data that, in its opinion, materially affects the information included in the relevant market announcement and that all the material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. * Prospective Resources – Best Estimate, 100% Basis – See Disclaimers for further information 11   Review of Operations Review of Operations Kenya Pancontinental has been present in Kenya for over a decade, during this time the Company has shared in two of Kenya’s historic offshore discoveries. The Company is now reviewing its interest in Block L6 which covers both an offshore and onshore area. As with Namibia, Pancontinental’s exploration division has led industry thinking on the exploration potential of offshore Kenya. The company developed theories with regard to oil generation and based on these theories, internationally recognised companies farmed into the projects and tested the concepts. This method of generating activity shelters the Company and its shareholders from the high cost that can be incurred in offshore exploration. For example, in 2012 with Kenya L8 (operated by Apache Corporation) and in 2014 with Kenya L10A (operated by BG Group), the company shared the success of Kenya’s first oil and gas discoveries with its joint venture partners. The discovery in Block L10A was particularly significant as it reversed a previously long held industry misconception that East Africa only had potential for gas. Pancontinental was a partner in both joint ventures since the award of the blocks and the discoveries were validation of Pancontinental’s views. The Company now holds an onshore and offshore stake in Block L6. Pancontinental’s past and current blocks Pancontinental has developed a model of how it believes the Lamu Basin came to be so prospective. The model is centred on a concept that the Tana River carried nutrients and sediments into the Indian Ocean. The nutrients and sediments then flowed along two offshore troughs; Tembo and Maridadi. Both troughs flow south through L6 and it is along this path that the Company believes is the prime location for oil generation. The Tana River Delta, offshore Kenya 12   Review of Operations Review of Operations Kenya Onshore/Offshore Block L6 Location: Lamu Basin Project Size: 5,010 square kilometres JV Partners Offshore: FAR Limited (Operator) Pancontinental JV Partners Onshore: Milio International (Operator) Pancontinental FAR Limited 60.00% 40.00% 60.00% 16.00% 24.00% The L6 permit was initially awarded in 2002, with Pancontinental as the original licence applicant. Currently, ASX listed FAR Limited are operators of the offshore portion of the block and Dubai-based Milio International who are experienced Kenyan operators are in control of the work programme for the onshore portion of the block. Due to uncertainties over the security of field operations in this area, activity has been suspended. 13   Review of Operations Review of Operations Post Year End Acquisition of Bombora Natural Energy Pty Ltd Pancontinental’s acquisition of Bombora has its asset portfolio by complemented providing near term drilling activity in California and opportunities in Australia. On 7 June 2017, Pancontinental executed a binding Heads of Agreement to acquire Bombora Natural Energy Pty Ltd (“Bombora”). The acquisition, which was approved and completed on 12 July 2017, will see Pancontinental obtain rights to interests in gas projects located in the Sacramento Gas Basin, California, USA and the Perth Basin, Western Australia. Bombora is mainly focussed on drilling for gas with most of the projects being existing gas discoveries requiring appraisal drilling to prove commerciality. Its interests in the USA are close to strong gas markets and existing infrastructure. The Company will participate in two high-potential wells during 2017; Dempsey-1 which has already spudded and reached TD (Total Depth), and Tulainyo-2 in November. If successful, the two wells have the potential for rapid development and early production. The acquisition of Bombora will provide Pancontinental shareholders with the opportunity to participate in near term, high impact drilling activity while preparations are ongoing for the drilling of the highly anticipated Namibia PEL 37 well. Pancontinental has strengthened its Board with the addition of key Bombora directors. John Begg is now the CEO and Executive Director, and Marie Malaxos a Non-Executive Director. Both incoming directors have considerable experience in the petroleum industry, a history of securing valuable opportunities and converting these to commercially productive projects. Sacramento Basin Projects Location Map Sacramento Gas Basin, California Bombora has concentrated on exploring overlooked petroleum systems that have the potential for near-term commercial gas production in prime locations that are easily accessible to existing infrastructure. The Company’s Sacramento Gas Basin projects include: The Dempsey Gas Project: This project is operated by ASX listed Sacgasco Limited (ASX:SGC). Under the farmin agreement, the Company has earned a 10% interest by funding 20% of the Dempsey-1 well. The well which reached TD in September 2017 will now be flow tested after encountering gas in each of the target zones drilled. Dempsey-1 is the first well to target the Early Cretaceous sand section on structures defined by 3D seismic and has proven Bombora’s theory that gas in the northern Sacramento Gas Basin originates from the older Cretaceous section. 14   Review of Operations Review of Operations The Tulainyo Gas Discovery: Resources California is Production Corporation this of the Operator project with discovery company Cirque private Resources LP a partner in venture. the Bombora’s 40% owned subsidiary Gas Fields LLC (“Gas Fields”) is earning up to a 33.33% interest in the project by funding up to three wells over an 18 month period. joint Schematic Cross Section of Sacramento Gas Basin Plays (image courtesy of Xstate Resources Limited) Alvares and Tulainyo Trend Gas recovered on test with >1,500m gas shows Dempsey and New Prospects Trend High relief anticlines and sub-thrust plays in first well The the programme, Tulainyo 2-7, is due to spud in November 2017 with the objective of appraising a potentially giant-scale, over pressured gas discovery in similar age rocks to those about to be tested in the Dempsey-1 well. In 2015, the area was drilled with the Tulainyo-1 well which recovered good quality gas although testing could not proceed due to mechanical difficulties. Historic drilling, including the most recent well, indicates that the entire anticline could be gas charged. A variety of lightly explored structural and stratigraphic plays beneath existing production Financing of the Tulainyo 2-7 well has been secured with Bombora’s funding partner Magnum Gas & Power Limited having already contributed all the necessary funds for the drilling of the well to the Operator. Tulainyo Recoverable Gas Resource Potential Net to PCL Assumes a net beneficial position at completion of farmin earning wells and unrisked resources per press release 23 June 2017. Cautionary statement: The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcement and that all the material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Alvares Gas Discovery: Under a farmin with Sacgasco Limited (ASX: SGC) and Xstate Resources, Bombora has the right to earn a 15% working interest by funding on a promoted basis appraisal drilling on the 1982 Alvares discovery. Although there is currently no commitment to drill at Alvares, the discovery is on trend to the Tulainyo Gas Discovery and may be revalued pending results of the Tulainyo 2-7 well operations. Bombora’s Sacramento Gas Basin projects have previously encountered gas, but the discoveries have not yet been proved commercial. Bombora believes it has the expertise required to plan for and re- drill these gas discoveries with the aim of rapidly commercialising the gas. 15   Review of Operations Review of Operations Walyering Project Location Perth Basin, Australia Walyering Gas Field: Under a farmin with UIL Energy Ltd (ASX: UIL), the Company can earn a 70% operated interest in the southern part of onshore exploration licence EP 447. The Company must carry out permitting for the project (remaining cost c. A$150,000) thereby earning the right to a 70% operated interest by acquiring a 3D seismic survey before August 2018 at a cost of approximately A$1.8 million. Bombora believes that 3D data will show the Walyering Gas Field to be substantial in size. Its position relative to important infrastructure means it is well placed for potential fast track development following appraisal drilling success. 16   Review of Operations Review of Operations Corporate Pancontinental’s corporate activities for the financial year included; changes to the Board, and Fundraising, Conferences General Meetings Board Changes As stated above in the ‘Post Year End Acquisition of Bombora Natural Energy Pty Ltd’ section, two of Bombora’s directors have joined the Pancontinental Board; John Begg as CEO and Executive Director and Marie Malaxos as Non-Executive Director. Pancontinental director (and former Chairman) Dave Kennedy has taken over the role of Chairman from John Leach, who has stepped down from the Board. The Board thanks John for his valuable contribution and leadership of the Company. Barry Rushworth and Ernie Myers will continue on the Board as Non-Executive Directors. For a detailed timeline of Board changes throughout the year please see ‘Board Changes throughout the Financial Year’ on the first page of the Directors’ Report. New Directors Marie Malaxos & John Begg Fundraising Pancontinental raised AU $1.8m during the financial year with a breakdown as follows: Placement to sophisticated and professional investors Placement to directors approved at general meeting Share Purchase Plan Total funds raised AU $1,170,000 AU $ 230,000 AU $ 398,500 AU $1,798,500 In addition, post year end, the company announced that it had raised AU $2.0 million by way of placement to professional and sophisticated investors as well as US $2.2 million from Africa Energy’ Corp.’s investment in Pancontinental Namibia Pty Ltd. 17   Review of Operations Review of Operations General Meeting On 15 March, the company held a general meeting of shareholders to vote on resolutions with regard to a share placement ratification and issue of shares to directors. All resolutions put to the meeting were passed via a poll. Conferences During the financial year, Director Ernie Myers had the pleasure of being invited to present at the Africa Oil, Gas and Energy Conference, an event connecting professionals from the Australian oil and gas sector with African local knowledge experts, government officials, potential projects and investment opportunities. Director Ernie Myers presenting to the Africa Oil, Gas and Energy Conference 18 Review of Operations Prospective Resource Estimates Cautionary Statement DISCLAIMERS & NOTES The estimated quantities of petroleum in this report 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. Prospective Resources All Prospective Resource estimates in this report with regard to Namibian operations are prepared as of 28 September 2015. The estimates for California date from 23 June 2017. The estimates have been prepared in accordance with the definitions and guidelines set forth in the Petroleum Resource Management System 2007 approved by the Society of Petroleum Engineers and have been prepared for the Namibian project using deterministic methods and for California using probabilistic methods. Unless otherwise stated the estimates provided in this report are Best Estimates. The estimates are unrisked and have not been adjusted for an associated risk of discovery and risk of development. The 100% basis refers to the total resource while the Net to Pancontinental basis is adjusted for Pancontinental’s percentage entitlement under Joint Venture contracts and adjusted for applicable royalties. Prospective Resources estimates in this report have been made by Pancontinental Oil & Gas NL and may be subject to revision if amendments to mapping or other factors necessitate such revision. Prospects and Leads The meanings of “Prospects” and “Leads” in this report are in accordance with the Petroleum Resource Management System 2007 approved by the Society of Petroleum Engineers. A Prospect is a project that is sufficiently well defined to represent a viable drilling target. A Lead is a project associated with a potential accumulation that is currently poorly defined and requires more data acquisition and / or evaluation to be classified as a Prospect. Competent Person Statement Information The hydrocarbon resource estimates in this report have been compiled by Mr John Begg the Chief Executive Officer and Executive Director of Pancontinental Oil & Gas NL. Mr Begg has more than 30 years’ experience in practising petroleum geology and exploration management. Mr Begg consents to the inclusion in this report of information relating to the hydrocarbon Prospective Resources in the form and context in which it appears. Forward Looking Statements This document may include forward looking statements. Forward looking statements include, are not necessarily limited to, statements concerning Pancontinental Oil & Gas NL’s planned operation programme and other statements that are not historic facts. When used in this document, the words such as “could”, “plan”, “estimate”, “expect”, “intend”, “may”, “potential”, “should” and similar expressions are forward looking statements. Although Pancontinental believes its expectations reflected in these are reasonable, such statements involve risks and uncertainties, and no assurance can be given that actual results will be consistent with these forward looking statements.     Review of Operations Review of Operations Prospective Resource Estimates Cautionary Statement DISCLAIMERS & NOTES The estimated quantities of petroleum in this report 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. Prospective Resources All Prospective Resource estimates in this report with regard to Namibian operations are prepared as of 28 September 2015. The estimates for California date from 23 June 2017. The estimates have been prepared in accordance with the definitions and guidelines set forth in the Petroleum Resource Management System 2007 approved by the Society of Petroleum Engineers and have been prepared for the Namibian project using deterministic methods and for California using probabilistic methods. Unless otherwise stated the estimates provided in this report are Best Estimates. The estimates are unrisked and have not been adjusted for an associated risk of discovery and risk of development. The 100% basis refers to the total resource while the Net to Pancontinental basis is adjusted for Pancontinental’s percentage entitlement under Joint Venture contracts and adjusted for applicable royalties. Prospective Resources estimates in this report have been made by Pancontinental Oil & Gas NL and may be subject to revision if amendments to mapping or other factors necessitate such revision. Prospects and Leads The meanings of “Prospects” and “Leads” in this report are in accordance with the Petroleum Resource Management System 2007 approved by the Society of Petroleum Engineers. A Prospect is a project that is sufficiently well defined to represent a viable drilling target. A Lead is a project associated with a potential accumulation that is currently poorly defined and requires more data acquisition and / or evaluation to be classified as a Prospect. Competent Person Statement Information The hydrocarbon resource estimates in this report have been compiled by Mr John Begg the Chief Executive Officer and Executive Director of Pancontinental Oil & Gas NL. Mr Begg has more than 30 years’ experience in practising petroleum geology and exploration management. Mr Begg consents to the inclusion in this report of information relating to the hydrocarbon Prospective Resources in the form and context in which it appears. Forward Looking Statements This document may include forward looking statements. Forward looking statements include, are not necessarily limited to, statements concerning Pancontinental Oil & Gas NL’s planned operation programme and other statements that are not historic facts. When used in this document, the words such as “could”, “plan”, “estimate”, “expect”, “intend”, “may”, “potential”, “should” and similar expressions are forward looking statements. Although Pancontinental believes its expectations reflected in these are reasonable, such statements involve risks and uncertainties, and no assurance can be given that actual results will be consistent with these forward looking statements. 19   Directors’ Report Your Directors submit their report for the year ended 30 June 2017. 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. BOARD CHANGES THROUGHOUT THE FINANCIAL YEAR Henry David Kennedy 1 July 2016 30 November 2016 10 July 2017 John Douglas Begg 10 July 2017 Non-Executive Chairman as at 29 September 2017 Mr Kennedy held the position of Non-Executive Chairman. Mr Kennedy retired as Non-Executive Chairman to become a Non-Executive Director. Post financial year end, but prior to the release of this report, Mr Kennedy was again appointed Non-Executive Chairman. Chief Executive Officer and Executive Director as at 29 September 2017 Mr Begg joined the Board as Executive Director and Chief Executive Officer in July 2017. Mr Begg did not hold office at any time during the 2017 financial year. Ernest Anthony Myers 1 July 2016 10 July 2017 Non-Executive Director as at 29 September 2017 Mr Myers held the position of Executive Finance Director. Post financial year end, but prior to the release of this report, Mr Myers was appointed as a Non-Executive Director. Roy Barry Rushworth 1 July 2016 10 July 2017 Non-Executive Director as at 29 September 2017 Mr Rushworth held the positions of Chief Executive Officer and Executive Director. Post financial year end, but prior to the release of this report, Mr Rushworth was appointed as a Non-Executive Director. Marie Michele Malaxos 10 July 2017 Non-Executive Director as at 29 September 2017 Mrs Malaxos joined the Board as Non-Executive Director in July 2017. Mrs Malaxos did not hold office at any time during the 2017 financial year. Vesna Petrovic 1 July 2016 9 December 2016 10 July 2017 31 July 2017 Company Secretary and Alternate Director as at 29 September 2017 Mrs Petrovic held the position of Company Secretary. Mrs Petrovic was appointed Executive Director. Post financial year end, but prior to the release of this report, Mrs Petrovic stepped down as Executive Director but remained Company Secretary. Mr Kennedy appointed Mrs Petrovic as his Alternate Director. John Edward Leach 1 July 2016 30 November 2016 10 July 2017 No longer a Board Member Mr Leach held the position of Independent Non-Executive Director. Mr Leach is appointed Independent Non-Executive Chairman. Post financial year end, but prior to the release of this report, Mr Leach stepped down as Independent Non-Executive Chairman. 20 Directors’ Report   Directors’ Report 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. At Pancontinental, Mr Kennedy has used his wide knowledge base to assist with the strategic direction of the company. Mr Kennedy has been a director of Pancontinental since August 1999. Mr Kennedy is currently a Non-Executive Director of Norwest Energy NL (since April 1997) and was an East Africa Resources Limited Non-Executive Director (since March 2013) but resigned from the position in April 2015. John Douglas Begg BSc (Geology) (Chief Executive Officer and Executive Director) Mr Begg is an expert upstream oil and gas project generator and deal closer. Experienced in equity capital raisings, mergers and acquisitions, and negotiations with industry joint ventures, regulators and governments. An industry-leading geoscientist who has lived and worked with consistently high business impact in Australia, Developing South East Asian countries, the UK, Middle East and the USA. Mr Begg has been instrumental in the discovery and development of commercial oil and gas fields on three continents so far. Mr Begg joined the Board as Executive Director and Chief Executive Officer in July 2017. Ernest Anthony Myers CPA (Non-Executive 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. He has played a key role in managing the Group’s African portfolio. Mr Myers joined Pancontinental in March 2004 and has served in a number of executive and non-executive roles. Mr Myers was an alternate Director of East Africa Resources Limited from June 2010 until April 2015. Roy Barry Rushworth, BSc (Non-Executive Director) 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, Mr Rushworth has been responsible for identifying, negotiating and acquiring international new venture opportunities in Malta, Kenya, Morocco and Namibia. 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. 21 Directors’ Report   Directors’ Report Marie Michele Malaxos BE, Dip Bus, GAICD (Non-Executive Director) Mrs Malaxos has been a professional executive in the resources sector for over 25 years, with involvement in all aspects of the development and operation of oil and gas fields including commercial and budget control, technical management and approval, stakeholder liaison, environmental management, health and safety management and assessment of assets for sale and purchase. In July 2017, Mrs Malaxos was appointed to the Board of Pancontinental Oil & Gas NL as a Non-Executive Director. FORMER DIRECTOR John Edward Leach BArts (Economics) CA, MBA (Independent Non-Executive Chairman) Mr Leach was a Director of Pancontinental since February 2016, having held both the positions of Independent Non-Executive Director and more recently Independent Non-Executive Chairman. Post financial year end on 10 July 2017, after shareholder approval of the Bombora Natural Energy Pty Ltd acquisition Mr Leach stepped down from the Board. The Board would like to express their sincere thanks to Mr Leach for his contribution to the company during his tenure. COMPANY SECRETARY & ALTERNATE DIRECTOR 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 accounting and governance functions at Pancontinental. Mrs Petrovic was appointed Company Secretary in April 2010 and Alternate Director in July 2017. IMPORTANT NOTE THE DISCLOSURES IN THE DIRECTORS’ REPORT AND FINANCIAL STATEMENTS WHICH FOLLOW RELATE TO THE DIRECTORS WHO WERE IN OFFICE DURING THE FINANCIAL YEAR ENDED 30 JUNE 2017. POST FINANCIAL YEAR END, PANCONTINENTAL ACQUIRED BOMBORA NATURAL ENERGY PTY LTD (“BOMBORA”) AND AS SUCH TWO EXISTING PANCONTINENTAL BOARD MEMBERS RESIGNED FROM THEIR POSITIONS TO MAKE WAY FOR TWO DIRECTORS FROM BOMBORA. FOR FURTHER DETAILS, PLEASE SEE THE “BOARD CHANGES THROUGHOUT THE FINANCIAL YEAR” SECTION AT THE BEGINNING OF THE DIRECTORS’ REPORT. 22 Directors’ Report   Directors’ Report DIRECTORS' INTERESTS The relevant interest of each Director in the shares and options of the Company as at 30 June 2017 is as follows: John Edward Leach Henry David Kennedy Roy Barry Rushworth Ernest Anthony Myers Vesna Petrovic DIRECTORS' MEETINGS Ordinary Shares Options over Ordinary Shares - 336,768,269 46,835,610 2,900,715 - - - - - - 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: John Edward Leach Henry David Kennedy Roy Barry Rushworth Ernest Anthony Myers Vesna Petrovic Directors' Meetings 7 6 7 6 7 7 Notes The Directors discussed and agreed various matters throughout the financial year which were resolved by circular resolution; 11 matters were dealt with in such a manner during the year. 23 Directors’ Report   Directors’ Report CORPORATE INFORMATION Corporate structure Pancontinental Oil & Gas NL is a no liability company incorporated and domiciled in Australia. The Company’s ACN is 003 029 543. 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 portfolio of permits;  Extraction of value from the Company’s asset base;  Seek new ventures suitable for inclusion in the group’s asset structure;  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 which are within the Company’s financial capacity;  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 The main contributing factor to the Earnings per Share result this financial year was the write off of exploration carrying balances. (0.26) (0.26) Employees The consolidated entity had four (4) employees as at 30 June 2017, (2016: four (4)). The consolidated entity employs the services of specialised consultants where and when needed. Cents OPERATING AND FINANCIAL REVIEW Review of Operations Namibia PEL 37 [30% at 30 June 2017, 20% interest at 29 September 2017] Pancontinental holds an interest in acreage over an offshore area in the Walvis Basin, Namibia, which it acquired as one of the original bidders in 2011. After the completion of initial exploration studies Pancontinental and its local partner sought to bring in a strong joint venture partner to take the lead. In 2013, the Company farmed out to Tullow Namibia Limited, a subsidiary of Tullow Oil plc (“Tullow”), a multinational oil and gas company. In exchange for a 65% operated interest, Tullow would free carry Pancontinental in an exploration programme worth in excess of US $100 million. To date, the joint venture has acquired 3D and 2D seismic data which it has processed, mapped and interpreted. The total spend to date is circa US $34 million, with all of the exploration costs free carried for Pancontinental. Post the end of the financial year, in July 2017, operator Tullow entered into a farmout agreement with ONGC Videsh Limited of India for a 30% participating interest. Tullow is to remain as operator of the PEL 37 joint venture. Pancontinental believes this transaction to be a positive step toward testing the oil potential of PEL 37. Also post year end, Africa Energy Corp, a Canadian oil and gas exploration company listed on the TSX Venture Exchange (Ticker Symbol AFE) invested in Pancontinental’s subsidiary Pancontinental Namibia Pty Ltd. Africa Energy subscribed for new shares in the subsidiary, acquiring a 33.33% shareholding in exchange for US $7.7 million; US $2.2 million payable immediately and the balance payable upon spud of the PEL 37 well in Namibia. Africa Energy has a highly regarded team focused on large African oil plays that will add technical capability 24 Directors’ Report   Directors’ Report towards furthering the growth potential of this asset. Kenya L6 [40% offshore, 16% onshore] Pancontinental holds an interest in the L6 block onshore/offshore Kenya. The company has been a participant in the block since its award and has completed various work programmes in joint venture over the area. Due to uncertainties over the security of field operations in this area, activity has been suspended. In conjunction with joint venture partner and operator of the offshore area, FAR Limited, future activities for Block L6 are in review. Group Overview Pancontinental Oil and Gas NL was incorporated in 1985 and listed on the Australian Securities Exchange in 1986. The Pancontinental group is comprised of the parent company along with four subsidiary companies. Dynamics of the Business The company continues to look for new opportunities, in Africa and elsewhere compatible with its strengths. Whilst the company is committed to further developing existing projects, emerging opportunities are reviewed on a timely basis. Performance Indicators The Board closely monitors and discusses 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 of regular reviews to determine actions to mitigate risk and increase performance. Operating Results for the Year Summarised operating results are as follows: 2017 Revenues $ Results $ 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 Earnings per Share result this financial year was the write off of exploration expenditure. (4,981,475) (4,981,475) 3,207 3,207 Shareholder Returns The group is in the exploration phase and so returns to Shareholders are primarily measured through capital growth. Profit attributable to owners of the company Basic earnings per share (cents) Share price 2017 2016 2015 2014 2013 (4,981,475) (5,472,381) (41,878,638) (19,068,997) (662,822) (0.26) (0.40) (3.64) (1.66) (0.06) $0.002 $0.003 $0.006 $0.023 $0.050 25 Directors’ Report   Directors’ Report 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. Ongoing analysis of business risks specific to the upstream oil and gas 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 Company’s prevents the occurrence of risks by undertaking regular reviews of the Group’s business practices to identify potential risks. Techniques used for identifying risks include:  Evaluating each function of the business and identifying anything that could have a negative impact on the Group’s operations;  Reviewing records to identify previous issues that could have a current impact;  Considering any external risks that could affect the Group; and  Brainstorming with employees to identify risks and in turn implementing risk prevention measures. Once potential risks have been identified, managing risks involves developing cost effective options on how to best to deal with the risks. Risks can be:  Avoided – by changing business processes or equipment to achieve a similar outcome with less risk;  Reduced - if a risk can’t be avoided the Group can reduce its likelihood and consequence. This could include staff training, documenting procedures and policies, complying with legislation, maintaining equipment, practicing emergency procedures, keeping records safely secured and contingency planning. Transferred - transfer some or all of the risk to another party through contracting, insurance, partnerships or joint ventures.   Accepted – this may be the only option. 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 the group to safeguard its assets. 26 Directors’ Report   Directors’ Report Review of Financial Condition Capital Structure During the year, the Company added to its cash reserves through placements and a share purchase plan. Share Capital Beginning of the financial year Issued during the year: Shares awaiting shareholder approval End of the financial year Option movements during the financial year were as follows: Option Reserve Balance at beginning of year  expired  issued Balance at end of year Number of shares $ 1,717,494,096 101,545,967 1,673,197 732,583,346 150,000 - 2,450,077,442 103,369,164 Number of options 2,750,000 (2,750,000) 100,000,000 Weighted average exercise price 0.12 0.12 0.005 100,000,000 0.005 Since the end of the financial year and up until the date of this report 394,634,149 options were issued. 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 During the current financial year, the company raised funds by way of placements and a share purchase plan. 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 As at 30 June 2017 there were 100,000,000 ordinary shares under options. Refer to the notes for further details on the options outstanding. During the year 2,750,000 options expired. 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 4 July 2017 Namibia PEL 37 operator Tullow entered into a farmout agreement with ONGC Videsh Limited of India for a 30% participating interest. Tullow is to remain as operator of the PEL 37 joint venture. Pancontinental believes this transaction to be a positive step toward testing the oil potential of PEL 37. 10 July 2017 General Meeting of shareholders held to seek approval for the acquisition of private company Bombora Natural Energy Pty Ltd and related resolutions. Bombora is a gas-focused company with interests onshore in the 27 Directors’ Report   Directors’ Report Sacramento Gas Basin, USA and onshore Perth Basin. All resolutions put to the meeting were passed on a poll. 17 July 2017 Placement funds received for Pancontinental’s $2 million fundraising. 3 August 2017 Dempsey-1 onshore well in the Sacramento Gas Basin, California commences drilling. 14 August 2017 Magnum Gas and Power Limited (“Magnum”) contributed funds in accordance with a Letter of Intent announced on 5 June 2017 to provide the remaining funding on its and Pancontinental’s behalf required for the drilling of Tulainyo-2 in the Sacramento Gas Basin, USA to the operator of the Tulainyo project. Following transfer of the funds, Gas Fields LLC, a subsidiary of Pancontinental holding the Tulainyo asset, will be owned 40% Pancontinental and 60% Magnum Gas and Power Limited. The drilling of the Tulainyo-2 well is scheduled to commence late October 2017. 11 September 2017 Africa Energy Corp, a Canadian oil and gas exploration company listed on the TSX Venture Exchange (Ticker Symbol AFE) invested in Pancontinental’s subsidiary Pancontinental Namibia Pty Ltd. Africa Energy subscribed for new shares in the subsidiary, acquiring a 33.33% shareholding in exchange for US $7.7 million; US $2.2 million payable immediately and the balance payable upon spud of the PEL 37 well in Namibia. Africa Energy has a highly regarded team focused on large African oil plays that will add technical capability towards furthering the growth potential of this asset There were no other significant events after balance date. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The economic entity expects to maintain the present status and level of operations and hence currently there are no likely developments in the entity's operations. Post year end the Company acquired a subsidiary Bombora Natural Energy Pty Ltd which holds interests in the United States of America as well as Western Australia. Exploration and appraisal drilling activity on the newly acquired projects may lead to expansion in the entity’s operations, however this is not known as at the date of this report. ENVIRONMENTAL REGULATION AND PERFORMANCE Pancontinental is committed to complying with any requirement for environmental management in any jurisdiction and country that it operates. 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: JL Leach, HD Kennedy, RB Rushworth, EA Myers and V Petrovic. 28 Directors’ Report   Directors’ Report 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 receive a fixed fee for their services. If they perform additional duties they are remunerated at market rates. The Chief Executive Officer receives a fixed fee for his respective executive services. Executive Directors are paid a salary. 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 2017 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 may take independent advice from external sources when necessary. Details of the CEO’s contract are as follows: Basic Sum: Capacity: Commencement Termination Period: 6-12 months $375,000 (actual payments reduced to $237,500) Chief Executive Officer 23 December 2014 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. As such, Executive Director remuneration was further reduced during the financial year by $128,125, this is in addition to the $345,000 reduction in the last financial year. 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. 29 Directors’ Report   Directors’ Report Table 1: Director remuneration for the year ended 30 June 2017 Primary benefits Post Employment Equity Total Salary & Fees Cash STI Super- annuation Options (Issued) Value of options as proportion of Revenue John Edward Leach (Non-Executive Chairman) 2017 2016 Henry David Kennedy (Non-Executive Director) 2017 2016 48,000 16,000 50,000 50,000 Roy Barry Rushworth (Executive Director, Chief Executive Officer) 2017 2016 Ernest Anthony Myers (Executive Finance Director) 2017 2016 Vesna Petrovic (Executive Director) 2017 2016 237,500 343,750 187,500 200,000 140,625 150,000 Anthony Robert Frederick Maslin (Non-Executive Director_to Jan 16) 2017 2016 Total Current Year Remuneration - 26,000 663,625 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 48,000 16,000 0.0% 0.0% 50,000 50,000 0.0% 0.0% 237,500 343,750 0.0% 0.0% 187,500 200,000 0.0% 0.0% 140,625 150,000 0.0% 0.0% - 26,000 0.0% 0.0% 663,625 - Table 2: Options granted as part of remuneration for the year ended 30 June 2017 (as approved by Shareholders) There were no options granted as part of remuneration for the year ended 30 June 2017 (30 June 2016: Nil). Over the past five years 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. 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 2017 2016 2015 2014 2013 120% 1.79% 3 years - - - - - - - - - 110% 2.74% 4 years 30 Directors’ Report   Directors’ Report Total number of options: Number of options Grant date Vesting date Weighted average fair value 100,000,000 21 Apr 17 21 Apr 20 0.001 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 /(Loss) Return on Equity in % 2017 $0.002 8,756,452 (4,981,475) (56.89)% 2016 $0.003 11,954,797 (5,472,381) (45.78)% 2015 $0.006 34,563,322 (41,878,638) (121.16)% 2014 $0.023 65,037,139 (19,068,997) (29.32)% 2013 $0.050 72,686,103 (662,822) (0.91)% END OF REMUNERATION REPORT 31 Directors’ Report   Directors’ 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 2016/191. 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 2017. 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 29 September 2017 32 Directors’ Report   33 Directors’ ReportCorporate Governance Statement Corporate Governance Statement The Company’s 2017 Corporate Governance Statement is presented below and can also be accessed at http://pancon.com.au/about-us/corporate-governance/. The Statement has been approved by the Board of Pancontinental Oil & Gas NL and is current as at 30 June 2017. Pancontinental’s Corporate Governance Statement outlines the Company’s governance practices throughout the financial year and the extent of the Company’s compliance, as at 30 June 2017 with the ASX Corporate Governance Council’s third edition of Corporate Governance Principles and Recommendations. The Company will regularly review its current practices to ensure they evolve with good practice methods recommended by regulatory bodies while taking into account factors such as the size, nature and activities of the Company. Corporate Governance Council Recommendation followed by Pancontinental Oil & Gas NL Corporate Governance Comments PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT 1.1 A listed entity should disclose: (a) the respective roles and responsibilities of its board and management; and (b) those matters expressly reserved to the board and those delegated to management. Adopted - Pancontinental has adopted a Board Charter which can be found on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ The Charter outlines the roles and responsibilities of Board and Management including the responsibilities for not only the Board as a whole but also the Chairman, Chief Executive Officer and Non-Executive / Independent Directors. The Charter contains a list of responsibilities for the Board which cannot be directly delegated to Senior Management, however day-to-day activities required to fulfil those responsibilities may be assigned to Senior Management. 1.2 A listed entity should: (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and (b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. Adopted – The Company’s Nomination Committee Charter which has been disclosed on the Pancontinental website http://pancon.com.au/about-us/corporate-governance/ outlines the role of the Nomination Committee including the oversight of the Company’s selection and appointment practices for Directors. and Selection As part of its Corporate Governance Manual the Company has also adopted a Policy and Procedure at for http://pancon.com.au/about-us/corporate-governance/ The Policy and Procedure outlines the process for the evaluation and appointment of new Board members, as well as listing information that is required to be provided to Shareholders so that they may make an informed decision regarding the election of a proposed candidate. of Directors which (Re)Appointment found can be The Nomination Committee Charter empowers the Directors to engage external consultants such as Employment Screening Australia who are a CrimTrac accredited information agent that adheres to the Australian Standard AS 4811-2006 Employment Screening. 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. Adopted – Each Director is in possession of a written agreement setting out the terms of their appointment including their right to independent professional advice if required to fulfil their capacity as Director. Material terms of any employment, service or consultancy agreement are disclosed. 1.4 The Company Secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. Adopted – The Company Secretary is accountable to the Board through the Chairman on matters relating to the proper functioning of the Board. 34   Corporate Governance Statement Corporate Governance Statement The Company Secretary completes and circulates board papers, records minutes of the business discussed at Board Meetings and communicates with the Board on: governance matters, application of the Company’s Constitution, the ASX Listing Rules and other relevant laws. They are a point of reference between the Board and Management. 1.5 A listed entity should: (a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; (b) disclose that policy or a summary of it; and (c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them and either: 1. the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or 2. if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under that Act. Adopted – Pancontinental has formally adopted a Diversity Policy which can be found at http://pancon.com.au/about-us/corporate-governance/ 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 practical given the size and scope of the Company’s operations. In considering new member appointments, the Board evaluates the candidate’s ability to actively participate in Board matters by exercising sensible business judgement and committing the time required to fulfil the role effectively so that the Company can move towards achieving its strategic goals. Diversity – Measurable Objectives The main objectives with regard to diversity include:    The Company’s composition of Board, Executive, Management and Employees to be as diverse as practicable; To provide equal opportunities for all positions within the Group and continue the Group’s commitment to employment based on merit; Periodic review of the Group’s workforce structure and assessment of where and how improvements can be implemented incorporating greater diversity. The above 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 and European;  Gender – both male and female; and  Age – the age range spans over 40 years. Diversity – Annual Reporting Board & Company Secretary Employees Total Workforce 2017 20% 100% 43% 2016 20% 100% 43% The Australian Government’s Workplace Gender Equality Agency periodically releases statistics with regard to the gender composition of the Australian workforce by industry. With reference to its latest data, Pancontinental far exceeds the industry average of 12.6% of women. 35   Corporate Governance Statement Corporate Governance Statement 1.6 A listed entity should: a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Adopted – The Company’s website includes a policy with regard to the Process for Performance Evaluation which can be found at http://pancon.com.au/about-us/corporate-governance/ During the reporting period a formal evaluation of the Board and its members was not carried out however the composition of the Board, its suitability to carry out the Company’s objectives and remuneration levels are reviewed on an as required basis. For example, in recent years market conditions have dictated the oil and gas environment prompting companies to review expenditures in order to preserve cash balances. As such, Pancontinental reduced Executive Director salaries by $345,000 per annum in the 2016 financial year to adapt to market circumstances. In addition, this 2017 financial year Executive Director salaries were further reduced by $128,125. Although the instability in the oil and gas industry is not attributable to the Directors it does show the willingness of the Board to put requisite measures in place when industry settings change. 1.7 A listed entity should: a) have and disclose a process for periodically evaluating the performance of its senior executives; and b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Adopted – The Company’s website includes a policy with regard to the process for performance evaluation which can be found at http://pancon.com.au/about-us/corporate-governance/ With regard to the current financial reporting period, a formal evaluation of the performance of Senior Executives was not carried out as the suitability and size of the Company’s workforce is reviewed by the Board on an as required basis. 36   Corporate Governance Statement Corporate Governance Statement PRINCIPLE 2 - STRUCTURE THE BOARD TO ADD VALUE 2.1 The board of a listed entity should: (a) have a nomination committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. Not Adopted – The full Board fulfils the role of the Nomination Committee. The Board considers those matters that would ordinarily be the responsibility of a Nomination Committee and no separate meetings were held as the Nomination Committee during the year. The Board has adopted a Nomination Committee Charter which is disclosed on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ The Charter as well as the Company’s Policy and Procedure for Selection and (Re) Appointment of Directors http://pancon.com.au/about-us/corporate-governance/ and Succession Plan Policy are applied when convening to discuss Nomination Committee matters. In assessing the Company’s diversity objectives, the composition of the Board is considered with regard to blend of skills, experience, independence and diversity. The Directors consider that the current Board has the appropriate balance to successfully carry out the duties required of them as Officers of the Company. 2.2 A listed entity should have and disclose a Board Skills Matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. Adopted – The Board is seeking Directors who collectively have the skills, knowledge and experience to govern and direct the Company effectively. The below table shows the key skills and experience the Board as a whole possess. Board Expertise Board Experience Commercial Compliance Corporate Ethics Exploration Finance Geology Governance Risk Strategy ● ● ● ● ● ● ● ● ● ● Capital Raisings Company Promotion Financial Management Former Board Experience International Business Listed Company Management Mergers & Acquisitions Mineral Exploration Mineral Production Oil & Gas Exploration ● ● ● ● ● ● ● ● ● ● 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 Leach, Mr Myers and Mrs Petrovic are qualified accountants and therefore meets the tests of financial expertise. 37   Corporate Governance Statement Corporate Governance Statement Pancontinental acknowledges that the skills, knowledge and experience required on the Board will change as the Organisation evolves however under the current circumstances, the mix of expertise and experience identified above is beneficial in meeting the current challenges faced by the Group. 2.3 A listed entity should disclose: (a) the names of the directors considered by the board to be independent directors; (b) if a director has an interest, position, association or relationship of the type described in Box 2.3 but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and (c) the length of service of each director. Adopted – see table below. Director Position Tenure Independent JE Leach Independent Non-Executive Chairman 1 year Yes RB Rushworth Executive Director, Chief Executive 12 years No - Executive Director Officer HD Kennedy Non-Executive Director 18 years No - Substantial Shareholder EA Myers Executive Finance Director 8 years No - Executive Director V Petrovic Company Secretary and Executive Director < 1 year No - Executive Director In considering the independence of Directors, the Board refers to the criteria for independence as set out in Box 2.3 of the ASX Corporate Governance Council’s third edition of Corporate Governance Principles and Recommendations. 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 on the Company’s website. Box 2.3’s independence criteria has been applied in the above table and although the only Director considered to be independent is Mr Leach, the Board believes its current composition is in line with the long term interests of Shareholders. The Board also acknowledges the need for independent judgement on all Board decisions, irrespective of each individual Director’s independence and as such has implemented a Policy on Independent Professional Advice. 2.4 A majority of the board of a listed entity should be independent directors. Not Adopted – Currently the only Director considered independent is Mr Leach. The Board acknowledges Recommendation 2.4 in that the majority of the Board of a listed entity should be independent Directors, however the Board is of the belief that each area of expertise required for a Company of Pancontinental’s size is well represented and that there are long term benefits to be gained from the current combination of Directors’ skills, experience and expertise. Although the Board of Directors are able to exercise objective business judgement, a Policy on Independent Professional Advice has been implemented to assist if required. If a Director considers it necessary to obtain professional advice to properly discharge the responsibility for their office as a Director, then the Company will pay reasonable expenses associated with obtaining such advice. 2.5 The Chair of the Board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. Adopted – As recommended, the Chairman is an independent director. Also as recommended, the Chairman and the CEO are not the same person. 2.6 A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively. 38   Corporate Governance Statement Corporate Governance Statement Adopted – The Company has devised an Induction Programme for new Directors, Executives and Employees. The goal of the Induction Programme is to assist new Directors in participating fully and actively in Board decision making at the earliest opportunity by providing them with the necessary Company knowledge as well as information pertaining to the industry within which it operates. A Directors’ Pack is made available which includes key information on Board Members, Board Charters, Duties Imposed on Directors of Public Companies, Directors’ Disclosure Obligations, Declaration of Interest Forms and Overall Responsibility amongst other Policies and Procedures implemented by the Company. New Directors are given the opportunity to review the Company’s operations and meet with key Executives in the Exploration, Geology, Finance and Corporate areas. Professional development opportunities arise when there are new corporate, legal, tax, accounting or geological developments within Australia or in overseas countries where the Company operates. The Board is briefed by Management on any new standards or matters of interest that are relevant in the Company continuing its business effectively. In addition, a number of professional bodies with which the Company is associated run regular seminars or conferences at which attendance is encouraged. PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY 3.1 A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it. Adopted – A summary of http://pancon.com.au/about-us/corporate-governance/ the Company’s Code of Conduct can be found at The Company’s Code of Conduct sets out the principles and standards which the Board, Management and employees of the Company are encouraged to strive towards when dealing with each other, Shareholders, Stakeholders and the broader community. The Code of Conduct covers the Company’s core values and beliefs including the following:  Integrity and Honesty  Responsibility to Shareholders  Respect for the Law  Conflicts of Interest  Protection of Assets  Confidential Information  Employment Practices  Responsibility to the Community  Responsibility to the Individual  Obligations Relative to Fair Trading and Dealing  Financial and other Inducements  Compliance with the Code of Conduct In addition, a Whistleblower Policy forms part of the Company’s Corporate Governance Manual. The Policy covers the following:  Reporting and Investigating Officers  Reporting Responsibility  No Retaliation  Reporting Violations  Accounting and Auditing Matters  Acting in Good Faith  Confidentiality  Handling of Reported Violations The Policy was adopted so that any concerns regarding contraventions of the Code of Conduct could be addressed in a safe and formal manner without fear of reprisal. 39   Corporate Governance Statement Corporate Governance Statement PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING 4.1 The board of a listed entity should: (a) have an Audit Committee which: (1) has at least three members, all of whom are Non-Executive Directors and a majority of whom are Independent Directors; and (2) is chaired by an Independent Director, who is not the chair of the board, and disclose: (3) the charter of the committee; (4) the relevant qualifications and experience of the members of the committee; and (5) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. Not Adopted – The full Board fulfils the role of the Audit Committee. The Board considers those matters that would ordinarily be the responsibility of an Audit Committee and no separate meetings were held as the Audit Committee during the year. The Board has adopted an Audit Committee Charter which is disclosed on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ The Charter as well as the Company’s External Auditor Procedure http://pancon.com.au/about-us/corporate-governance/ is applied when convening to discuss Audit Committee matters. the Selection, Appointment and Rotation for of An External Auditor is appointed to independently verify and safeguard the integrity of the Company’ corporate reporting, in addition when discussing Audit Committee matters, the Board reviews annual action points such as:  Review of financial statements  Assess Management’s selection of accounting policies and principles  Consider the external audit report and whether it is consistent with the Board’s information and knowledge  Consider the Company’s internal controls  Assess if the external audit report is adequate for Shareholder needs  Discuss any significant findings with the External Auditor  Confirm the independence of the External Auditor  Ensure that the External Auditor is requested to attend the Annual General Meeting The Board in conjunction Management’s input, review the suitability of existing audit arrangements and the scope of the audit on a periodic basis. The Board is responsible for the appointment of a new external auditor should a vacancy arise, however the appointment must be ratified by Shareholders at the next Annual General Meeting. The Board of Directors also review the current circumstances in light of Section 324D (1) and (2) of the Corporations Act 2001 which stipulates that an individual may not play a significant role in the audit of a listed entity for more than five out of seven successive financial years. 4.2 The Board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Adopted – A Directors’ Declaration under Subsection 295(4) of the Corporations Act 2001 is only made after each person who performs: a) A Chief Executive Officer function; or b) A Chief Financial Officer function in relation to the Company, has given the Directors a declaration whether, in their opinion: a) The financial records of the Company for the financial year have been properly maintained in accordance with Section 286 of the Corporations Act 2001; 40   Corporate Governance Statement Corporate Governance Statement b) The financial statements and notes for the financial year comply with the accounting standards; c) The financial statements and notes for the financial year give a true and fair view; d) Any other matters that are prescribed by the regulations in relation to the financial statements and notes for the financial year are satisfied. In addition, that the opinion has been formed on the basis of a sound system of risk management and internal controls which is operating effectively. The declaration is made: a) In writing; b) Specifying the date the declaration is made; c) Specifying the capacity in which the person is making the declaration; and d) Signed by the person making the declaration. 4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Adopted – During Annual General Meeting planning, the External Auditors are consulted to ensure that they are available to attend the meeting and answer questions from Shareholders with regard to the conduct of the audit and the Auditor’s Report. PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE 5.1 A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it. Adopted – A summary of the Company’s Policy on ASX Listing Rule Compliance can be found at http://pancon.com.au/about-us/corporate-governance/ As a Company listed on the Australian Securities Exchange, Pancontinental is obliged to disclose certain information under a continuous disclosure regime to keep the market informed of events and developments as they occur. The Company promotes timely and balanced disclosure of all material matters concerning the Company. All Investors should have equal and timely access to material information. The Company has adopted certain procedures to ensure that it complies with its continuous disclosure obligations and has appointed a Responsible Officer for ensuring the procedures are complied with. The Policy sets out details with regards to: The Responsible Officer The concept of timely announcements Types of information that needs to be disclosed     Board Notification – informing the Board and ongoing monitoring  Avoiding a false market  Safeguarding confidentiality of corporate information to avoid premature disclosure  Media contact and comment  External communications such as analyst briefings and responses to Shareholder questions  Reporting  Required actions in the case of non-compliance  Updating compliance procedures  Guide to drafting company announcements PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS 6.1 A listed entity should provide information about itself and its governance to investors via its website. Adopted – The Company’s website includes a Corporate Governance landing page which can be found at http://pancon.com.au/about-us/corporate-governance/ The Corporate Governance page shows an introduction to the Corporate Governance of the Company by referring to the Corporate Governance Manual adopted, in addition, Investors can find Board Charters as well as an extract of Policies and Procedures included in the manual. 41   Corporate Governance Statement Corporate Governance Statement Links to the Investor Centre can also be opened from the Corporate Governance page where ASX releases, the Company’s share price, financial reports, broker reports, media coverage and company presentations can be accessed. Subscriptions to the Company’s mailing list can also be submitted from this page. Furthermore, general and detailed project information is available for the Investor’s perusal from the Corporate Governance page. 6.2 A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors. Adopted – The Company has adopted a Shareholder Communication Policy which can be found on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ The Policy aims to ensure that Shareholders are informed of all major developments affecting the Company and that there are means available to facilitate two-way communication. If Investors have a greater understanding of the business they are able to make informed investment decisions. Information is communicated to Investors by:  Company announcements  Information briefings to media and analysts  Notices of Meeting and explanatory material   Website updates  Board and Management addresses and presentations at meetings Investors can express their views or present queries to the Company by: Financial information including annual reports  Utilising the Contact Us section of the website http://pancon.com.au/contact-us to send   direct communications to the Company The Contact Us section http://pancon.com.au/contact-us as well as any ASX or media updates include the contact details of the Company such as address and telephone number. These details can be used to initiate written or verbal contact with the Company The Company provides Shareholders with a Notice of Meeting detailing matters such as the agenda, location and time of the meeting so that Shareholders can make arrangements to attend and speak to Company representatives. Notices of Meeting are available on the ASX platform under the code PCL or the Company website so that Investors who are not currently Shareholders can also attend the meeting 6.3 A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. Adopted – The Company has adopted a Shareholder Communication Policy which can be found on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ The Policy covers the Company’s belief that general meetings are an effective means of communicating with Shareholders. The Company provides information in the Notice of Meeting that is presented in a clear, concise and effective manner. Meetings are held during business hours, at a central location convenient for the largest number of Investors to attend. Shareholders are encouraged to attend and take note of the Chairman’s address as well as vote on the resolutions presented to the meeting. Upon completion of formal matters, the Chief Executive Officer provides attendees with an update of activities via a company presentation. This provides Investors with an opportunity to ask questions, express their views or just meet the Company representatives. 6.4 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. Adopted – Security holders have the option of receiving communications from the Company and its Share Registry electronically. The Contact Us section of the Company’s website http://pancon.com.au/contact-us provides an opportunity for security holders to send communications to the Company electronically. The website has been specifically designed so that it is user friendly on all devices from laptops to phones. Electronic communication is not only cost effective, it provides Investors with real time updates on the activities of the Company. The Company’s website provides a tab where Stakeholders can join the Company’s mailing list which will enable them to receive electronic communication each time the Company lodges an announcement on the ASX or provides a media update. 42   Corporate Governance Statement Corporate Governance Statement Advanced Share Registry and the Company review and monitor opportunities to increase the use of electronic communication with its Shareholders. PRINCIPLE 7 – RECOGNISE AND MANAGE RISK 7.1 The Board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework. Not Adopted - The full Board fulfils the role of the Risk Committee. The Board considers those matters that would ordinarily be the responsibility of a Risk Committee and no separate meetings were held as the Risk Committee during the year. The Company’s Risk Management Policy (a summary of which can be found at http://pancon.com.au/about- us/corporate-governance/) is applied when reviewing and discussing risk management matters. In managing risk, it is the Company’s practice to take advantage of potential opportunities while managing potential adverse effects. The Company’s Risk Management Policy sets out the Company’s risk management system and processes as well as the Company’s Risk Profile. The Policy covers the following risk related points and is used as a means to assess the Company’s risk management structure:  The role of the Board and delegated responsibility – ultimate responsibility rests with the Board, however day to day management of risk is the responsibility of the CEO with the assistance of Senior Management The role of the CEO and accountabilities   Authority of the CEO  Risk Profile  Audit Committee Charter  Regular budgeting and financial reporting  Clear limits and authorities for expenditure levels   Procedures for compliance with continuous disclosure obligations under the Listing Rules Procedures to assist with establishing and administering corporate governance systems and disclosure requirements  Responsibility to Stakeholders  Continuous improvement 7.2 The Board or a committee of the Board should: (a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and (b) disclose, in relation to each reporting period, whether such a review has taken place. Adopted – 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. Each Board Meeting is used as a platform for the review and assessment of the Company’s risk profile. 7.3 A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. 43   Corporate Governance Statement Corporate Governance Statement Adopted – The Company discloses that it does not have an internal audit function. The Company’s risk management system is overseen by Management who ensure that the identification, monitoring and response of business risks. The Board reviews Management’s assessment of the efficiency of the system and according to the Risk Management Policy is required to satisfy itself that Management has developed and implemented a sound system of risk management and internal control. 7.4 A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. Adopted – The Company values economic, environmental and social sustainability in areas within which it operates. The Company has adopted a Corporate Governance Manual which sets outs the policies and procedures in place which apply to the Board, Management, Employees and the entire business. The policies and procedures are designed to assist in identifying relevant risks and having processes in place to mitigate if not eliminate the risk.  Economic sustainability refers to the ability of a listed entity to continue operating at a particular level of economic production over the long term.  Environmental sustainability refers to the ability of a listed entity to continue operating in a manner that does not compromise the health of the ecosystems in which it operates over the long term.  Social sustainability is the ability of a listed entity to continue operating in a manner that meets accepted social norms and needs over the long term. Risks identified that may have a material effect on the Company include:  Oil price volatility as well as currency fluctuations in the Australian and United States dollars. The state of the oil and gas industry has been affected by the uncertainty in the oil price. Although the Company is not in production and there is not a material business risk in that regard, the Company’s operations are affected due to reduced exploration budgets and reduced overall activity in the exploration sector;  Currently all of Pancontinental’s assets are managed by Joint Venture Operators who are responsible for the day to day operations of the permits. As such, regular review of the Joint Venture activities is crucial in safeguarding the assets of the Company. Technical and financial Executives review the work programmes and budgets in place to ensure compliance with approved documents. Updates on operational activities are provided by the Joint Venture partners on a regular basis and will include any environmental operational issues if applicable;  Conducting business in foreign jurisdictions carries with it a risk of change in business, legal, tax, accounting, political, environmental and technical practices for example, which may have a material effect on the Company. Pancontinental monitors joint venture partners working in those jurisdictions as well as local news developments to ensure that if a risk presents itself the Company is well equipped with sufficient time to decide on a course of action; The Company is committed to providing all Employees, Executives and Directors with a safe and productive work environment. There are environmental and location risks that the Company may face, however the Corporate Governance Manual and the procedures and policies within it should assist in assessing the best course of action to mitigate or eliminate the risk; For expenditure that the Company has control of, it will endeavour to use sustainable and ethically sourced products that have little or no impact on the environment.   44   Corporate Governance Statement Corporate Governance Statement PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY 8.1 The Board of a listed entity should: (a) have a remuneration committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. Not Adopted – The full Board fulfils the role of the Remuneration Committee. The Board considers those matters that would ordinarily be the responsibility of a Remuneration Committee and no separate meetings were held as the Remuneration Committee during the year. The Board has adopted a Remuneration Committee Charter which is disclosed on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ The Charter as well as the Company’s Remuneration Policy is applied when convening to discuss Remuneration Committee matters. Emoluments of Directors and Senior Executives are set by reference to payments made by other companies of a similar size and industry, and by reference to the skills and experience of the Directors and Executives. Details of the nature and amount of emoluments of each Director of the Company are disclosed annually in the Company’s annual report. Should circumstances arise where the Board needs assistance on a remuneration matter, the Board after requisite approval may engage a remuneration consultant to ensure the level of remuneration in the Company is appropriate for its size, level of activity and industry. 8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. Adopted - The Company has adopted a Remuneration Committee Charter which can be found on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ The Charter separately discloses the processes regarding the remuneration of Non-Executive Directors and the remuneration of Executive Directors and other Senior Executives. Executive Remuneration In considering the level of remuneration for Executives, the matters that are taken into account include:  Remuneration which motivates Executives to pursue the long term growth and success of the Company within an appropriate control framework;  A clear correlation between performance and remuneration;  Align the interests of key leadership with the long term interests of the Company’s  Shareholder; and Prohibit Executives from entering into transactions which limit the economic risk of participating in unvested entitlement. Non-Executive Remuneration Matters of consideration include:  Fees paid to Non-Executive Directors are within the aggregate amount approved by Shareholders;  Non-Executive Directors to be remunerated by way of fees;  Non-Executive Directors are not provided with retirement benefits other than statutory superannuation; and  Non-Executive Directors are not entitled to participate in equity-based remuneration schemes designed for Executives without due consideration and appropriate disclosure to the Company Shareholders. 45   Corporate Governance Statement Corporate Governance Statement 8.3 A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it. Adopted - The Company has adopted a Policy for Trading in Company Securities which can be found on the Company’s website at http://pancon.com.au/about-us/corporate-governance/ Directors, Officers and Employees who wish to trade in Company securities must first have regard to the statutory provisions of the Corporations Act 2001 dealing with insider trading, in conjunction with the Company’s Policy for Trading in Company Securities. The policy has been developed so that all Company employees and representatives are clear as to their obligations with regard to trading while in possession of insider information. 46   Statement of Comprehensive Income Statement of Comprehensive Income YEAR ENDED 30 JUNE 2017 Notes OPERATING ACTIVITIES Depreciation 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 Office expenses Travel Other 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 2017 $ 2016 $ (16,869) (781,136) (35,975) (3,473,130) (8,531) (23,941) (3,717) (43,513) (112,842) (23,750) (101,706) (52,361) (44,336) (162,147) (4,883,954) (23,565) (888,438) (43,924) (4,044,840) (13,249) (30,231) (3,304) (46,589) (15,812) (23,750) (101,082) (42,204) (25,718) (183,399) (5,486,105) 3,207 (100,728) (97,521) 16,893 (3,169) 13,724 (4,981,475) - (4,981,475) (5,472,381) - (5,472,381) - - - - (4,981,475) (5,472,381) (0.26) (0.26) (0.40) (0.40) The Statement of Comprehensive Income is to be read in conjunction with the Notes to the Financial Statements. 47   Statement of Financial Position Statement of Financial Position AT 30 JUNE 2017 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 NON-CURRENT LIABILITIES Provision for employee entitlements TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Parent entity interest Contributed equity Reserves Accumulated losses Total parent entity interest in equity 4 6 7 8 9a 10 10 CONSOLIDATED 2017 2016 $ $ 740,160 77,571 817,731 1,157,927 63,113 1,221,040 45,423 6,874,976 6,920,399 62,292 9,293,818 9,356,110 7,738,130 10,577,150 499,946 499,946 274,658 274,658 10,871 10,871 16,901 16,901 510,817 291,559 7,227,313 10,285,591 100,000 103,369,164 101,545,967 154,000 (96,241,851) (91,414,376) 10,285,591 7,227,313 TOTAL EQUITY 7,227,313 10,285,591 The Statement of Financial Position is to be read in conjunction with the Notes to the Financial Statements. 48   Statement of Changes in Equity Statement of Changes in Equity AT 30 JUNE 2017 Consolidated Share Capital Retained Earnings $ $ Option Reserve $ Total Equity $ Balance at 1 July 2016 101,545,967 (91,414,376) 154,000 10,285,591 Profit or loss - (4,881,475) Other comprehensive income/(loss) Shares issued (net of costs) Shares awaiting shareholder approval - 1,673,197 150,000 - - - - - - - (4,881,475) - 1,673,197 150,000 Share options - 54,000 (54,000) - Balance at 30 June 2017 103,369,164 (96,241,851) 100,000 7,227,313 Balance at 1 July 2015 Profit or loss Other comprehensive income/(loss) Shares issued (net of costs) 2,133,969 Shares awaiting shareholder approval Share options - - 99,411,998 (85,941,995) 154,000 13,624,003 - - (5,472,381) - - - - - - - - - (5,472,381) - 2,133,969 - - Balance at 30 June 2016 101,545,967 (91,414,376) 154,000 10,285,591 The above Statement of Changes in Equity is to be read in conjunction with the Notes to the Financial Statements. 49   Statement of Cashflows Statement of Cashflows Notes to the Financial Statements  CONSOLIDATED 2017 2016 $ $ (1,315,144) - (933,171) (1,457,727) - (885,452) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This financial report was authorised for issue by the Directors on 29 September 2017. 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 11(a) (2,248,315) (2,343,179) Standards Board. YEAR ENDED 30 JUNE 2017 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 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) - - (2,600) (2,600) 3,207 1,948,500 (118,272) 17,093 2,224,000 (82,289) 1,833,435 2,158,804 (414,880) 1,157,927 (2,887) 740,160 (186,975) 1,345,837 (935) 1,157,927 The above Statement of Cash Flows is to be read in conjunction with the Notes to the Financial Statements. 50 Basis of preparation applied, unless otherwise stated. (a) Income Tax it is recognised in equity. in respect of prior years. 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 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 Current tax is the expected tax payable on the taxable income for the year, and any adjustment to tax payable 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 and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that the costs are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against operating results in the year in which the decision to abandon the area is made. When production commences the accumulated costs for the relevant area of interest are classified as development costs and amortised over the life of the project area according to the rate of depletion of the economically recoverable reserves. Where independent valuations of areas of interest have been obtained, the valuations are brought to account. Subsequent expenditure on re-valued areas of interest is accounted for in accordance with the above principles. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. At 30 June 2017 the Directors considered that the carrying value of the oil and gas exploration interests of the consolidated entity was as shown in the Statement of Financial Position and no further impairments arises other than that already recognised. (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. have been eliminated in full. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions,     Notes to the Financial Statements  Notes to the Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This financial report was authorised for issue by the Directors on 29 September 2017. 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 and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that the costs are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against operating results in the year in which the decision to abandon the area is made. When production commences the accumulated costs for the relevant area of interest are classified as development costs and amortised over the life of the project area according to the rate of depletion of the economically recoverable reserves. Where independent valuations of areas of interest have been obtained, the valuations are brought to account. Subsequent expenditure on re-valued areas of interest is accounted for in accordance with the above principles. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. At 30 June 2017 the Directors considered that the carrying value of the oil and gas exploration interests of the consolidated entity was as shown in the Statement of Financial Position and no further impairments arises other than that already recognised. (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. 51   Notes to the Financial Statements  Notes to the Financial Statements Notes to the Financial Statements  (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. (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: 2017 30% 2016 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 52 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. (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 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 the amount of the obligation. (n) Contributed equity of the share proceeds received. (o) Revenue recognition revenue is recognised: Rendering of Services have been incurred. Interest Revenue (p) Taxes 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 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 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. 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     Notes to the Financial Statements  Notes to the Financial Statements 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. (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 53   Notes to the Financial Statements  Notes to the Financial Statements  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. (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. 54   Notes to the Financial Statements Notes to the Financial Statements 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 (b) Future Income Tax Benefit not taken into account The potential future income tax benefit calculated at 27.5% in respect of: CONSOLIDATED 2016 2017 $ $ 16,869 23,565 3,473,130 4,044,840 CONSOLIDATED 2017 $ 2016 $ (1,369,906) (1,559,629) - - 1,369,906 1,559,629 - - Adjustments to carry forward tax losses Tax Losses not brought to account Total This future income tax benefit will only be obtained if: (a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be 6,750,443 * 6,750,443 6,920,304 6,920,304 - - realised; (b) the conditions for deductibility imposed by tax legislation continue to be complied with; and (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. *The potential future income tax benefit was calculated by multiplying the current tax rate of 27.5% by the Group’s carry forward losses at 30 June 2017 of $24,547,065. 4. RECEIVABLES (CURRENT) Sundry receivables Total CONSOLIDATED 2017 $ 77,571 77,571 2016 $ 63,113 63,113 55   Notes to the Financial Statements  Notes to the Financial Statements (a) Terms and conditions (i) Trade debtors are non-interest bearing and generally on 30 day terms. (ii) Sundry debtors and other receivables are non-interest bearing and have repayment terms between 30 and 90 days. 5. INTERESTS IN SUBSIDIARIES Name 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 Country of incorporation Percentage of equity interest held by the consolidated entity Investment 2017 % 2016 % 2017 $ 2016 $ Australia 100 100 2 2 Australia 100 100 (2) (149,935) (2) (150,184) - 1 - 1 (1) 5,677,968 (1) 4,786,523 (83,271) (65,161) Saint Lucia 100 100 10,584,107 10,584,107 British Virgin Islands (10,584,107) (10,584,107) 6,741,096 (4,861,512) 6,770,414 (6,299,703) 100 100 380,000 380,000 (380,000) 89,147 (380,000) 81,580 - 6,004,620 - 6,532,342 *Indicates companies not audited by Rothsay Chartered Accountants. **Australian entity audited by Rothsay, branch operation by Ernst & Young Namibia. Note, the Group is in the process of evaluating its subsidiary companies to assess how the Group’s operations can be streamlined. 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 CONSOLIDATED 2016 2017 $ $ 93,964 (48,541) 45,423 93,964 (31,672) 62,292 56   Notes to the Financial Statements  Notes to the Financial Statements Carrying amount opening balance Additions Write offs Depreciation expense Total written down amount 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 Exploration expenditure written off – direct to P&L Recovery and refunds of exploration expenditure * Carrying amount at 30 June 62,292 - - (16,869) 45,423 83,257 2,600 - (23,565) 62,292 CONSOLIDATED 2017 $ 2016 $ 9,293,818 918,135 (3,473,130) 136,153 - 6,874,976 13,399,620 327,704 (4,044,840) 588,847 (977,513) 9,293,818 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 petroleum areas. * For the year ended 30 June 2016, the $977,513 relates to cash call credits. 8. TRADE and OTHER PAYABLES (CURRENT) Trade creditors, accruals and provisions Total 9. CONTRIBUTED EQUITY (a) Issued and paid up capital Ordinary shares fully paid Total CONSOLIDATED 2016 2017 $ $ 274,658 499,946 274,658 499,946 CONSOLIDATED 2017 $ 2016 $ 103,369,164 101,545,967 103,369,164 101,545,967 (b) Movements in shares on issue 2017 2016 Beginning of the financial year Issued during the year:  Placements & SPP (net of costs)  Exercise of Options (net of costs)  Shares awaiting shareholder approval End of the financial year Number of shares $ 1,717,494,096 101,545,967 1,673,197 732,583,346 - - 150,000 - 2,450,077,442 103,369,164 Number of shares 1,150,994,096 $ 99,411,998 2,133,969 566,500,000 - - - - 1,717,494,096 101,545,967 57   Notes to the Financial Statements  Notes to the Financial Statements 10. RESERVES AND ACCUMULATED LOSSES Reserves Beginning of the financial year Options expired Options issued End of the financial year CONSOLIDATED 2017 $ 2016 $ 154,000 (154,000) 100,000 100,000 154,000 - - 154,000 Accumulated losses Beginning of the financial year Net loss attributable to members of Pancontinental Oil & Gas NL Share options expired Total available for appropriation End of the financial year (91,414,376) (4,981,475) 154,000 (96,241,851) (96,241,851) (85,941,995) (5,472,381) - (91,414,376) (91,414,376) 11. STATEMENT OF CASH FLOWS CONSOLIDATED 2017 $ (a) Reconciliation of the net loss after tax to the net cash flows from operations 2016 $ 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 Other non-cash Net cash flow from operating activities (b) Reconciliation of cash Cash balance comprises:  cash assets Closing cash balance (4,981,475) (5,472,381) 16,869 100,728 (3,207) 23,565 3,169 (16,893) (14,458) 16,869 2,418,842 - 219,258 (21,741) (2,248,315) (11,274) 20,965 4,105,802 - (964,991) (31,141) (2,343,179) 740,160 740,160 1,157,927 1,157,927 58   Notes to the Financial Statements  Notes to the Financial Statements 12. EXPENDITURE COMMITMENTS CONSOLIDATED 2017 $ 2016 $ Capital expenditure commitments Estimated capital expenditure contracted for at reporting date, but not provided for, payable: not later than one year later than one year and not later than five years later than five years Total - - - - - - - - 13. EMPLOYEE BENEFITS 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 Balance at end of year 2017 2016 Number of options 2,750,000 (2,750,000) - Weighted average exercise price 0.12 0.12 - Number of options 2,750,000 - 2,750,000 Weighted average exercise price 0.12 - 0.12 Options held at the end of the reporting period There were 100,000,000 options held by the Company as at 30 June 2017, these options were not issued under the Employee Share Scheme 14. SUBSEQUENT EVENTS 4 July 2017 Namibia PEL 37 operator Tullow entered into a farmout agreement with ONGC Videsh Limited of India for a 30% participating interest. Tullow is to remain as operator of the PEL 37 joint venture. Pancontinental believes this transaction to be a positive step toward testing the oil potential of PEL 37. 10 July 2017 General Meeting of shareholders held to seek shareholder approval for the acquisition of private company Bombora Natural Energy Pty Ltd and related resolutions. Bombora is a gas-focused company with interests onshore in the Sacramento Gas Basin, USA and onshore Perth Basin. All resolutions put to the meeting were passed on a poll. 17 July 2017 Placement funds received for Pancontinental’s $2 million fundraising. 3 August 2017 Dempsey-1 onshore well in the Sacramento Gas Basin, California commences drilling. 14 August 2017 Magnum Gas and Power Limited (“Magnum”) contributed funds in accordance with a Letter of Intent announced on 5 June 2017 to provide the remaining funding on its and Pancontinental’s behalf required for the drilling of Tulainyo-2 in the Sacramento Gas Basin, USA to the operator of the Tulainyo project. Following transfer of the funds, Gas Fields LLC, a subsidiary of Pancontinental holding the Tulainyo asset, will be owned 40% Pancontinental and 60% Magnum Gas and Power Limited. The drilling of the Tulainyo-2 well is scheduled to commence late October 2017. 11 September 2017 Africa Energy Corp, a Canadian oil and gas exploration company listed on the TSX Venture Exchange (Ticker Symbol AFE) invested in Pancontinental’s subsidiary Pancontinental Namibia Pty Ltd. Africa Energy subscribed 59   Notes to the Financial Statements  Notes to the Financial Statements for new shares in the subsidiary, acquiring a 33.33% shareholding in exchange for US $7.7 million; US $2.2 million payable immediately and the balance payable upon spud of the PEL 37 well in Namibia. Africa Energy has a highly regarded team focused on large African oil plays that will add technical capability towards furthering the growth potential of this asset. 15. EARNINGS PER SHARE CONSOLIDATED 2017 $ 2016 $ The following reflects the income and share data used in the calculations of basic and diluted earnings per share: Net profit Adjustments: Earnings used in calculating basic and diluted earnings per share (4,981,475) (4,981,475) (5,472,381) (5,472,381) 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 1,942,921,042 1,372,776,288 - - 1,942,921,042 1,372,776,288 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 Amounts received or due and receivable by Ernst and Young Namibia for:  an audit or review of the Pancontinental Namibia Pty Ltd  other services in relation to the entity financial report of CONSOLIDATED 2017 2016 $ $ 26,000 35,000 - - 9,975 - 35,975 8,924 - 43,924 60   Notes to the Financial Statements  Notes to the Financial Statements 17. DIRECTOR AND EXECUTIVE DISCLOSURES (a) Details of Specified Directors and Specified Executives (i) Specified Directors for the current financial year John Edward Leach Henry David Kennedy Roy Barry Rushworth Ernest Anthony Myers Vesna Petrovic (ii) Specified Executives for the current financial year N/A Non-Executive Chairman Non-Executive Director Executive Director, Chief Executive Officer Executive Finance Director Executive Director & Company Secretary 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 Other Options Bonus Total Specified Directors/Officers John Edward Leach 2017 2016 Henry David Kennedy 2017 2016 Roy Barry Rushworth 2017 2016 Ernest Anthony Myers 48,000 16,000 50,000 50,000 237,500 343,750 187,500 200,000 2016 2016 Vesna Petrovic 2017 2016 140,625 150,000 Anthony Robert Frederick Maslin - 26,000 2017 2016 - - - - - - - - - - - - - - - - - - - - Total Remuneration: Specified Directors /Officers 663,625 785,750 - - 2017 2016 - - - - - - - - - - - - - - 48,000 16,000 - - - - - - - - 50,000 50,000 - - - - - - - - 237,500 343,750 - - - - - - - - 187,500 200,000 - - - - - - - - 140,625 150,000 - - - - - - - - - 26,000 - - - - - - - - 663,625 785,750 (c) Remuneration options: Granted and vested during the year There were no grants of remuneration options during the year. 61   Notes to the Financial Statements  Notes to the Financial Statements (d) Option holdings of specified Directors and specified Executives 2017 Specified Directors John Edward Leach Henry David Kennedy Roy Barry Rushworth Ernest Anthony Myers Vesna Petrovic Total 2016 Specified Directors John Edward Leach Henry David Kennedy Roy Barry Rushworth Ernest Anthony Myers Anthony Robert Frederick Maslin (to 15/1/16) Total Balance at beginning of period 1 July 2016 - 500,000 1,000,000 750,000 - 2,250,000 Balance at beginning of period 1 July 2015 - 500,000 1,000,000 750,000 500,000 2,750,000 Granted as Remuneration Options Exercised/ (Expired) Net Change Other Balance at end of period 30 June 2017 - - - - - - - (500,000) (1,000,000) (750,000) - (2,250,000) - - - - - - - - - - - - Granted as Remuneration Options Exercised/ (Expired) Net Change Other Balance at end of period - - - - - - - - - - - - 30 June 2016 - - - - - - - 500,000 1,000,000 750,000 500,000 2,750,000 (e) Shareholdings of Specified Directors and Specified Executives 2017 Ordinary Shares held in Pancontinental Oil & Gas NL Specified Directors John Edward Leach Henry David Kennedy Roy Barry Rushworth Ernest Anthony Myers Vesna Petrovic Total 2016 Ordinary Shares held in Pancontinental Oil & Gas NL Specified Directors John Edward Leach Henry David Kennedy Roy Barry Rushworth Ernest Anthony Myers Anthony Robert Frederick Maslin (to 15/1/16) Balance 1 July 2016 Acquisitions (Disposals) Balance 30 June 2017 - 270,101,602 36,835,610 1,650,715 - - 66,666,667 10,000,000 1,250,000 - - 336,768,269 46,835,610 2,900,715 - 308,587,927 77,916,667 386,504,594 Balance 1 July 2015 Acquisitions (Disposals) Balance 30 June 2016 - 141,351,602 36,835,610 400,715 14,583 - 128,750,000 - 1,250,000 - - 270,101,602 36,835,610 1,650,715 14,583 Total 178,602,510 130,000,000 308,602,510 62   Notes to the Financial Statements  Notes to the Financial Statements 18. SEGMENT INFORMATION 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 in this financial year, it arises primarily from receivables due from subsidiaries, GST and VAT refunds, prepayments and bonds. (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. The Company’s and Group’s exposure to credit risk is influenced directly and indirectly by the individual characteristics of each joint venture. (ii) Loans to subsidiaries: The Company has provided funding to its subsidiaries by way of loans. Repayment of these loans will occur through future business activities of each respective entity. 63   Notes to the Financial Statements  Notes to the Financial Statements 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 Impairment losses: Note 4 Carrying amount 2017 $ 77,571 740,160 2016 $ 63,113 1,157,927 817,731 1,221,040 None of the Company’s or Group’s receivables are past due at 30 June 2017, (2016: 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 $1,456,301 (2016: $1,924,379). Whilst the loans were not payable at 30 June 2017 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. Consolidated Trade and other payables - Current Trade and other payables - Non Current < 1 year $ (499,946) - Total (499,946) (c) Market risk: Contractual cashflows 1-5 years > 5 years $ - (10,871) (10,871) $ - - - 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). 64   Notes to the Financial Statements  Notes to the Financial Statements 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 2017 30 June 2016 AUD USD Total AUD USD Total 185,119 555,041 740,160 750,247 407,680 1,157,927 77,571 (510,817) - - 77,571 63,113 (510,817) (291,559) - - 63,113 (291,559) (248,127) 555,041 306,914 521,801 407,680 929,481 AUD Cash & cash equivalents Trade & other receivables Trade and other payables Net balance sheet exposure The following significant exchange rates applied during the year: AUD : USD Average rate Reporting date spot rate 2017 0.754 2016 0.728 2017 0.769 2016 0.744 Sensitivity analysis: 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 2016. Effect in AUD 30 June 2017 10% strengthening 30 June 2016 10% strengthening Consolidated Equity Profit or loss 61,671 61,671 45,298 45,298 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. 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 Consolidated Carrying Amount 30 June 2017 30 June 2016 740,160 1,157,927 65   Notes to the Financial Statements  Notes to the Financial Statements Fair value sensitivity analysis for fixed rate instruments: 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. 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 2017 30 June 2016 Trade and other receivables Cash and cash equivalents Trade and other payables Carrying amount 77,571 740,160 (510,817) Fair value 77,571 740,160 (510,817) Carrying amount 63,113 1,157,927 (291,559) Fair value 63,113 1,157,927 (291,559) 306,914 306,914 929,481 929,481 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 % 2017 2016 - 7,227,313 7,738,130 93.40% 8,756,452 (4,981,475) (56.89)% - 10,285,591 10,577,150 97.24% 11,954,797 (5,472,381) (45.78)% 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 was $50,000 (2016: $50,000). Refer note 17. (b) The Company has effected Directors and Officers Liability Insurance. 66   Notes to the Financial Statements  Notes to the Financial Statements 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 2017 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 2017 $ 2016 $ (4,964,349) (3,533,398) (4,964,349) (3,533,398) 2017 $ 2016 $ 814,409 7,637,155 1,221,040 10,577,150 447,340 458,211 274,658 291,559 103,369,164 100,000 (96,290,220) 7,178,944 101,545,967 154,000 (91,414,376) 10,285,591 67   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 2017 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards including International Financial Reporting 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 2017. On behalf of the Board Ernest Anthony Myers Director Perth 29 September 2017 68   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 2017 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards including International Financial Reporting 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 2017. On behalf of the Board Ernest Anthony Myers Director Perth 29 September 2017 69 Directors’ Report   70 Directors’ Report71 Directors’ Report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 2017. (a) Distribution of equity securities The number of shareholders, by size of holding, in each class of share are: 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 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: Ordinary shares Number of holders Number of shares 428 287 358 1,397 1,303 3,773 2,319 94,353 977,376 3,029,671 59,621,075 5,198,066,193 5,261,788,668 48,622,475 Listed ordinary shares Number of shares Percentage of ordinary shares 1 2 3 4 5 6 7 8 9 10 11 12 13 SUNDOWNER INTERNATIONAL LTD PERTH SELECT SEAFOODS PTY LTD BT PORTFOLIO SERVICES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ROCK DOC PTY LTD JEMAYA PTY LTD CRESCENT NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED CEN PTY LTD BNP PASIBAS NOMINEES PTY LTD ZENIX NOMINEES PTY LTD ROY BARRY RUSHWORTH BNP PARIBAS NOMINEES PTY LTD 14 MR GEOFFREY DONALD COULTAS 15 16 17 18 J P MORGAN NOMINEES AUSTRALIA LIMITED INVESCO NOMINEE PTY LTD TARNEY HOLDINGS PTY LTD NEJA PTY LTD 19 MILVERTON PTY LTD 20 OIL & GAS SOLUTIONS PTY LTD 402,673,494 319,000,000 224,000,000 200,089,233 187,200,026 163,000,000 160,835,000 133,179,185 104,000,000 91,711,670 88,400,000 87,500,000 86,009,798 67,589,500 66,526,828 63,878,175 63,000,000 60,000,000 55,000,000 52,000,000 7.65 6.06 4.26 3.80 3.56 3.10 3.06 2.53 1.98 1.74 1.68 1.66 1.63 1.28 1.26 1.21 1.20 1.14 1.05 0.99 2,675,592,909 50.84 72   ASX Additional Information  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 are set out below:  Sundowner International Limited 26 July 2017  Tattersfield Group (e) Permit Schedule Number of Shares 411,768,268 92,157,865 Permits Interests and Licence Permit reference Interest Petroleum prospects Namibia Kenya USA California USA California USA California Australia PEL 37 L6 Dempsey Tulainyo Alvares Walyering 20% 40% offshore, 16% onshore 10% earning 13.33% 15% earning 70% 73   PANCONTINENTAL OIL & GA S N L – A N N U A L R E P O R T 2 0 1 7 P A N C O N T I N E N T A L O I L & G A S N L - A N N U A L R E P O R T 2 0 1 7 Level One, 10 Ord Street West Perth WA 6005 Telephone: +61 8 6363 7090 Facsimile: +61 8 6363 7099 

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