PANCONTINENTAL OIL & GA
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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
Directors
Directors
Henry David Kennedy
Henry David Kennedy
Roy Barry Rushworth
Ernest Anthony Myers
Ernest Anthony Myers
Vesna Petrovic
Anthony Robert Frederick Maslin
John Douglas Begg
Roy Barry Rushworth
Marie Michele Malaxos
Company Secretary
Vesna Petrovic
+61 8 6363 7090
+61 8 6363 7099
Registered Office
Company Secretary
Level One, 10 Ord Street
Vesna Petrovic
West Perth WA 6005
Telephone: +61 8 6363 7090
Registered Office
+61 8 6363 7099
Fax:
Level One, 10 Ord Street
West Perth WA 6005
Share Register
Telephone:
Advanced Share Registry Services
Fax:
PO Box 1156
Nedlands WA 6909
Share Registry
Telephone: +61 8 9389 8033
Advanced Share Registry Services
PO Box 1156
Auditors
Nedlands WA 6909
Rothsay Chartered Accountants
Telephone: +61 8 9389 8033
Level 1, Lincoln House
4 Ventnor Avenue
Auditors
West Perth WA 6005
Rothsay Chartered Accountants
Level 1, Lincoln House
Internet Address & Contact
4 Ventnor Avenue
www.pancon.com.au
West Perth WA 6005
info@pancon.com.au
ASX Code
PCL
Internet Address & Contact
www.pancon.com.au
info@pancon.com.au
(Non-Executive Chairman)
Non-Executive Chairman
(Executive Director & Chief Executive Officer)
Executive Director
(Executive Finance Director)
Executive Director
(Non-Executive Director)
Non-Executive Director
Non-Executive Director
Non-Executive Director
PANCONTINENTAL LOGO
The Pancontinental logo is in keeping
with the Pancontinental name and
technical ethic. The logo represents a
mapped view of the globe seen from
above the polar region. The green
sectors represent the continents and the
blue sectors represent the oceans.
Corporate Information
Who we are
Pancontinental Oil & Gas NL is an Australian based
international oil and gas exploration company with interests
in Africa, Australia and United States of America.
The Company’s headquarters are in West Perth, Western
Australia.
under code PCL.
backgrounds.
The Company is listed on the Australian Securities Exchange
Pancontinental is managed by a team of experienced
individuals
from corporate,
technical and
financial
ASX Code
PCL
Contents
Chairman’s Review
Chairman’s Review
Directors' Report
Directors' Report
Statement of Financial Position
Statement of Financial Position
Statement of Comprehensive Income
Statement of Comprehensive Income
Contents
Review of Operations
Review of Operations
3
Chairman’s Review
Directors' Report
4
Permit Schedule
Corporate Governance Statement
Review of Operations
6
Corporate Governance Statement
Corporate Governance Statement
Statement of Comprehensive Income
Directors’ Report
19
Statement of Financial Position
34
Auditor’s Independence Declaration
Corporate Governance Statement
35
Statement of Changes in Equity
Statement of Changes in Equity
Statement of Changes in Equity
Statement of Comprehensive Income 49
Statement of Cash Flows
Statement of Financial Position
50
Notes to the Financial Statements
51
Statement of Changes in Equity
Notes to the Financial Statements
Notes to the Financial Statements
Directors' Declaration
Statement of Cash Flows
52
Independent Audit Report
53
Notes to the Financial Statements
72
Directors’ Declaration
ASX Additional Information
73
Independent Audit Report
76
ASX Additional Information
Independent Audit Report
Independent Audit Report
Statement of Cash Flows
Statement of Cash Flows
Directors' Declaration
Directors' Declaration
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Corporate Information
Corporate Information
Who we are
Pancontinental Oil & Gas NL is an Australian based
international oil and gas exploration company with interests
in Africa, Australia and United States of America.
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.
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
Chairman’s Review
Chairman’s Review
Dear Shareholder,
The Board of Directors of Pancontinental Oil & Gas NL is pleased to present to you
the Company’s 2018 Annual Report.
The highlights of the 2018 financial year for Pancontinental include:
participating in three high impact wells;
receiving circa AU $10 million for a partial sale of one of Pancontinental’s
Namibian assets;
successfully securing additional acreage in Namibia as operator amid
international competition; and
making significant advances toward securing the permits for the 3D seismic survey planned over
the Walyering Conventional Gas Field project.
Pancontinental commenced the financial year with the Company’s shareholders approving the
acquisition of gas explorer Bombora Natural Energy Pty Ltd which holds interests in the Sacramento
Basin, California. Through this acquisition, the Company participated in two wells; Dempsey 1-15 and
Tulainyo 2-7. Although the wells encountered some technical success, ultimately they were not able
to deliver the commercial production anticipated.
During the financial year, the Company negotiated a deal with Africa Energy Corp. for their investment
in the subsidiary that owns an interest in Namibia Petroleum Exploration Licence 37. This transaction
provided the Company with an immediate US $2.2 million cash injection and US $5.5 million upon the
spud of the Cormorant-1 well in September 2018. That is approximately AU $10 million brought to
the Company in one year, for part of one project.
Strengthening our Namibian portfolio, the Company was awarded Petroleum Exploration Licence 87
over a large, offshore exploration are in the Orange Basin, and on trend to industry giants Shell, GALP
(Portugal) and Total.
PEL 87 has the potential to host giant-scale oil traps. So far we have mapped a very large turbidite
complex, now called the “Saturn Superfan”. Covering about 2,400 sq km it has the potential, at least
in area, to easily surpass the size of any other oil trap of recent years. Saturn lies immediately on top
of oil-mature source rocks, as identified in regional wells. While containing a number of discrete
depositional bodies, it may itself form a single vast single oil trap. As always, only drilling will yield
Saturn’s true potential. We are very excited by this new project.
The long-awaited Cormorant-1 well offshore Namibia commenced drilling in September 2018.
Pancontinental was carried for the drilling costs under a 2013 agreement with Tullow Namibia Limited
(a subsidiary of Tullow Oil). The well reached total depth as designed but unfortunately no significant
hydrocarbons were found. Cormorant-1 is the first modern well in PEL 37 and the Joint Venture is in
the early stages of analysing the results. The well data has provided valuable information for the other
prospects and may assist in unlocking the prospectivity of the region.
Our team is also making good progress on the West Australian, Walyering Conventional Gas Field
Project, with the Company currently processing an application to conduct 3D seismic activities in the
area.
Pancontinental raised AU $2.0 million by way of Placement and AU $1.6 million via Convertible Notes
during the financial year and we thank all participants for their support.
The past twelve months have been particularly demanding with complex issues to navigate. I am
confident that the Board; Mr John Begg and Mrs Marie Malaxos having joined the Company during the
year through the Bombora transaction, along with long time existing Directors Mr Ernie Myers and Mr
Barry Rushworth as well as newly re-appointed Mrs Vesna Petrovic have the right assets and capability,
and your Company is well placed to continue delivering shareholder value.
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.
HD Kennedy - Chairman
3
Permit Schedule
Permit Schedule
Pancontinental is a junior oil and gas exploration company
with a portfolio of high quality assets in prospective
AFRICA
hydrocarbon provinces
Namibia PEL 37
Namibia PEL 87
Kenya L6
LOCATION:
LOCATION:
LOCATION:
Walvis Basin, Offshore Namibia
Orange Basin, Offshore Namibia
Lamu Basin, Onshore /Offshore
Kenya
PROJECT SIZE:
PROJECT SIZE:
PROJECT SIZE:
17,295 square kilometres
10,947 square kilometres
5,010 square kilometres
JOINT VENTURE PARTNERS:
JOINT VENTURE PARTNERS:
JOINT VENTURE PARTNERS:
Tullow Namibia Limited (Operator)
35.00%
Pancontinental Orange Pty Ltd
75.00%
Pancontinental Namibia Pty Ltd
30.00%*
Custos Investments (Pty) Ltd
15.00%
ONGC Videsh Limited
30.00%
National Petroleum Corporation of
Namibia (NAMCOR) 10.00%
Paragon Oil & Gas (Pty) Ltd
5.00%
*Africa Energy Corp. invested in
Pancontinental Namibia Pty Ltd
during the year and acquired a
10% interest with Pancontinental
retaining 20%.
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%
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
Pancontinental believes that PEL 87
is highly prospective for oil, with
high quality mature oil source rocks
and the potential for very large oil
traps.
Water depths are between 500m
and 3,200 m and the area is on
trend with the actively explored
Total /
Impact Oil and Gas
deepwater block, the subject of a
farmin by Total in October 2017.
Pancontinental has a large interest
in this area. Preliminary mapping
already shows evidence of traps in
large turbidite fan plays.
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
Permit Schedule
Permit Schedule
NORTH AMERICA
AUSTRALIA
USA California
Sacramento Gas Basin
Dempsey Gas Project
USA California
Sacramento Gas Basin
Alvares Gas Discovery
Australia
Perth Basin Walyering
Gas Field
LOCATION:
LOCATION:
LOCATION:
Central-Northern, Sacramento Gas
Basin, California
Western flank of Northern
Sacramento Gas Basin
Northern Perth Basin on trend from
the analogue producing, Gingin/Red
Gully gas & condensate field.
PROJECT SIZE:
Over 4,500 net acres
(18 square kilometres)
PROJECT SIZE:
PROJECT SIZE:
Approx 6,000 acres
(24 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:
Sacgasco Limited (Operator)
50.00%
Sacgasco Limited (Operator)
39.00%
UIL Energy (Operator)
30.00%
Empyrean Energy PLC
30.00%
Xstate Resources Limited
10.00%
Empyrean Energy PLC
25.00%
Xstate Resources Limited
21.00%
Pancontinental Oil and Gas NL
10.00%*
Pancontinental Oil & Gas NL
15.00%
� Via 100% subsidiary Bombora
Natural Gas LLC
� Via subsidiary Bombora
Natural Gas LLC
Pancontinental Oil & Gas
70.00%*earning
*Earning interest by funding a 3D
seismic survey covering the
Walyering Gas Field
GEOLOGY:
GEOLOGY:
GEOLOGY:
The Dempsey structure is a large 3-
way dip, fault- bound structure
continuing
levels
down to economic basement rocks
and defined by 3D seismic.
from shallow
It is located in the central Northern
Sacramento Gas Basin within a
multi-field, gas producing area.
an
within
It has lesser volume reservoir
targets
existing
producing field area, mapped on
3D seismic and overlying multiple,
targets
much
interpreted within sandstones of
Early Cretaceous age.
stacked
larger,
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.
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.
A thick interbedded fluvio-deltaic
sandstone reservoir system is
present with top and lateral seals
mostly provided by intra-
formational shales and siltstones.
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. The
highly
geological
environment makes effective
often
challenging,
drilling
requiring very high mud weights
to maintain the borehole when
drilling and to hold back gas
under apparent, high pressure.
tectonised
A
Formation.
The Alvares-1 well drilled in 1982
had extensive high gas shows in
the Early Cretaceous Stoney
Creek
thick
sequence of sandstones, silt and
conglomerates were penetrated
in the well below 8,300 feet
(2,530 metres) with gas shows
extending over some 1,500m that
tested or
were either not
improperly tested in the original
discovery well.
5
Review of Operations
Review of Operations
Namibia
Offshore Namibia is one of the few frontier regions left in the world where
all the elements required for a material oil accumulation are assessed by
the international oil and gas industry to be present. It is also an area that
the industry considers, and Pancontinental’s own work indicates, has the
potential for billion-barrel discoveries. The country is situated in
favourable surrounds - south of Angola, which is the second largest oil
producer in Africa and a member of OPEC. The oil sector in Angola has
driven the country’s economic growth accounting for a significant
percentage of exports.
Namibia Offshore PEL 37
Location:
Walvis Basin
Project Size:
17,295 square kilometres
JV Partners:
Tullow Namibia Limited (Operator) 35.00%
Pancontinental Namibia Pty Ltd
ONGC Videsh Limited
Paragon Oil & Gas (Pty) Ltd
30.00%*
30.00%
5.00%
Pancontinental holds a 20% effective interest in PEL 37 and was the originator and initial Operator of
the project. PEL 37 covers blocks 2012B, 2112A and 2113B in the Walvis Basin, offshore Namibia.
Pancontinental has been present in Namibia for over a decade and commenced the PEL 37 journey in
2011 when it was awarded the licence alongside its local Namibian partner. In the seven years since
inception of the project, the
Company
successfully
farmed out to Tullow Namibia
Limited
subsidiary of
Tullow Oil) for the seismic – US
$34 million; and drilling – US
$30-40 million; and brought in
investment
Africa
Energy Corp.
for US $7.7
million.
partner
has
(a
small
That is, over US $70 million
brought into the project by
Pancontinental’s
and
effective team led by Barry
the Company’s
Rushworth,
currently
former CEO and
Director with oversight
for
Africa.
6
Review of Operations
Review of Operations
Prospects
Exploration findings to date uncovered four main Prospects:
•
•
•
•
Cormorant
Albatross
Seagull & Gannet North
Seagull & Gannet South
As well as three Leads (not pictured):
•
•
•
Upper Fan 2
Lower Fan 3
Lower Fan 4
The Prospects are positioned in the northern
blocks of the licence and are on trend to the first
oil discovery offshore Namibia. The Cormorant
Prospect was chosen by the Joint Venture as
having the lowest geological risk amongst the
identified prospects in the licence with attributes
similar to many successful, oil-charged turbidites
plays along the West African coast.
Prospects within PEL 37
Prospective Resources
The following table summarises the potential recoverable oil resources calculated pre drilling of
Cormorant-1 for the leading four submarine fan (turbidite) prospects mapped in PEL 37, including
Cormorant, now known to be dry. A number of other leads have yet to be quantified. The Prospective
Resources were estimated using a deterministic method and represent un-risked, Best Estimate
figures. Upside resource estimates are not shown.
PROSPECT / LEAD
Albatross
Seagull & Gannet S
Seagull & Gannet N
Cormorant
TOTAL (Prospects Only)
STATUS
Prospect
Prospect
Prospect
Prospect
AREA
(Sq Km)
PROSPECTIVE
RESOURCE 100%
(MMBbls)*
NET
PANCONTINENTAL
SHARE (MMBbls)
293
273
90
120
349
338
104
124
915*
64.6
62.5
19.2
22.9
169.20
Note - The 100% basis refers to the total resource while the Net to Pancontinental basis is adjusted for the Government Royalty of 5% under
Production Sharing Contracts and Pancontinental’s percentage entitlement under Joint Venture contracts.
* Cautionary Statement
The recoverable resources referred to above have been calculated deterministically and are unrisked
best estimate prospective resources. These were announced on 28 September, 2015.
The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an
associated risk of discovery and a risk of development. Further exploration appraisal and evaluation
is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
In the wake of the Cormorant-1 drill result (dry well), the oil resource estimates for the prospects may
be impacted but they have yet to be reviewed and quantified.
7
Review of Operations
Review of Operations
Investment of Africa Energy Corp. into Pancontinental Namibia
During the financial year, Pancontinental and Africa Energy Corp. (“AEC”) reached agreement over
the sale of an interest in the Pancontinental subsidiary which holds PEL 37. Consideration for the
transaction totalled US $7.7 million, with US $2.2 million received at the close of the transaction and
the remaining US $5.5 million received post financial year end at the spud of the Cormorant-1 well.
That is a cash injection into the Company of approximately AU $10 million.
AEC have a well-respected and highly qualified technical team whose input has considerably
strengthened Pancontinental Namibia Pty Ltd.
AEC subscribed for new shares in the subsidiary equivalent to 33.33% of the issued capital with
Pancontinental retaining 66.67%. AEC is a Canadian oil and gas exploration company listed on the
Toronto Venture Exchange under ticker symbol AFE. The Company is part of the Lundin Group of
Companies and is actively building an exploration portfolio across Africa.
AEC’s investment in the Pancontinental Group secured a relationship both parties have been jointly
pursuing for some time and is an important outcome for Pancontinental.
The Company’s historic strategy of acquiring frontier exploration areas and farming out to majors and
reputable companies once again delivered a high quality industry partnership, a considerable cash
injection and is an endorsement of the processes utilised by the Company in assessing and selecting
exploration assets.
Although the industry still faces challenging conditions, the Pancontinental management team was
able to conclude negotiations with AEC and provide a beneficial outcome for the Company.
Entry of ONGC Videsh Limited into the PEL 37 Joint Venture
In July 2017, the Operator of the PEL 37 joint venture Tullow Oil advised that it had entered into an
agreement with India’s state-owned oil producer ONGC Videsh Limited (“ONGC”) for a 30% interest
in the offshore licence, with Tullow retaining a 35% interest and operatorship.
Due to ONGC’s strong reputation and past credentials, both the joint venture and industry peers
welcomed the news. The deal is ONGC’s maiden entry into Namibia and is part of the Company’s
strategy to add high impact exploration and production assets to its portfolio.
Regional Activity
Galp Energia reported the farmin of Oil Major ExxonMobil into exploration permit PEL 82 for a 40%
interest. The licence covers an area of 11,444km² in water depths ranging from 200m to 2,000m. It
is located directly south of Pancontinental’s PEL 37, as shown in the diagram below.
The ExxonMobil farmin block, PEL 82, is operated by Galp in partnership with the National Petroleum
Corporation of Namibia (NAMCOR) and Custos Investments (Pty) Ltd, a local Namibian company.
These are the same Namibian partners that Pancontinental has in recently awarded PEL 87 (formerly
Block 2713) which covers 10,947 km² and is located further to the south. Pancontinental is the
operator of PEL 87 and holds a 75% interest.
Post financial year end, ExxonMobil also farmed-in to a second block (PEL 44) on trend to the south
of Pancontinental’s 20% owned PEL 37.
Pancontinental’s belief in the prospectivity and potential large size of oil resource targets offshore
Namibia has been validated by the positioning of industry-leading companies such as ExxonMobil,
Shell, Total and ONGC Videsh as well as Africa specialists like Tullow Oil and Africa Energy, either
within or around the Company’s licences.
8
Review of Operations
Review of Operations
Cormorant-1 Drilling
The Ocean Rig Poseidon – Drilled Cormorant-1 in September 2018
The Cormorant-1 exploration well in PEL 37 offshore Namibia reached a total measured depth of
3,855m and was plugged and abandoned as a dry hole. The well was efficiently drilled by operator
Tullow Oil, reaching total depth on 21 September 2018, materially quicker than prognosed.
The Early Cretaceous age Cormorant Submarine Fan target was encountered close to the predicted
depth but no accumulated hydrocarbons were found. The Fan contained approximately 50m thickness
of interbedded sands and claystones that were water-wet. Wet gas signatures, (that is, containing
heavier hydrocarbon components than dry gas which is methane) indicative of oil, were first
encountered in the overlying shale section and persisted throughout the target interval, indicating that
there has been significant hydrocarbon generation in the area.
Important geological data has been gained from this well, providing valuable insights into the
prospectivity of the Aptian-Cenomanian turbidite fans that are still valid exploration plays with very
large oil resource potential in Pancontinental’s acreage both in PEL 37 and, further south, in PEL 87
(Pancontinental 75%).
Cormorant-1 is the first modern well to penetrate this stratigraphic section in PEL 37, (which covers
some 17,000 km2), and the Joint Venture is in the early stages of analysing the results. The analysis
will assist the geological understanding, and the associated discovery probability, of other prospects
and leads in PEL 37, some of which have significantly larger resource potential than Cormorant. The
well data supports the presence of at least one active source rock system, with encouraging
implications for the range of play types mapped in the block, and in PEL 87.
Pancontinental Oil & Gas NL owns two thirds of Pancontinental Namibia Pty Ltd, which holds a 30%
participating interest in PEL 37, giving it a 20% effective interest in PEL 37.
9
Review of Operations
Review of Operations
Namibia Offshore PEL 87
Location:
Orange Basin
Project Size:
10,947 square kilometres
JV Partners:
Pancontinental
Custos Investments (Pty) Ltd
NAMCOR*
*National Petroleum Corporation of Namibia
75.00%
15.00%
10.00%
During the financial year, the Company successfully secured the award of a Petroleum Agreement
over PEL 87 (Block 2713) in the Orange Basin. This is a separate Basin further south offshore Namibia
to the Walvis Basin in which PEL 37 is located. The joint venture consists of local partners NAMCOR
and Custos Investments (Pty) Ltd holding 25% and Pancontinental a strategic, majority and operated
75% interest. The new area is in a region where high capacity oil prospects have previously been
identified.
Pancontinental’s technical evaluation of PEL 87 is advancing well based on interpretation of over 2,800
line km of mostly reprocessed 2D seismic data. A number of prospective trends have been identified
with current focus on a very large submarine fan complex of Aptian Age that the Company has named
the “Saturn” Superfan. It is an older feature than the submarine fan drilled in PEL 37 to the north.
The fan complex directly overlies interpreted, high quality oil source rocks correlated to the 2013
drilled Moosehead-1 well located in the south of the block. Independently assessed potential for giant
scale (over 500MMBbls* recoverable) oil resource is indicated with a range of large sub leads of this
play. These recoverable resource estimates were released to ASX post financial year end.
*Cautionary Statement
The potential recoverable oil resources, classified as Prospective Resources, have been estimated
probabilistically on an unrisked, Best Estimate basis.
These were announced on 11 September, 2018.
The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an
associated risk of discovery and a risk of development. Further exploration appraisal and evaluation
is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
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.
Seismic Section through the Saturn Superfan showing a large closed anticlinal-drape Lead
10
Review of Operations
Review of Operations
Pancontinental has completed the first major stage of
assessing the potential prospective oil resources in PEL 87.
Giant-scale prospective oil resource potential has now been
quantified by Independent Experts.
A vast Late Aptian Submarine Fan Complex directly on top of
Mature Oil Source is interpreted to contain a number of
individual Leads, while it is itself mapped to be enveloped in
sealing shale and with the potential to be one vast, single, oil
trap.
This “Saturn” Superfan lies immediately on top of oil-mature
and rich oil source shales that were drilled by Moosehead-1
and interpreted throughout PEL 87. The Superfan is a highly
prospective Play Type tested in analogue basins but not yet
drilled in Namibia.
Exploration in PEL 87 adds to Pancontinental’s activities in PEL
37 further to the north in the Walvis Basin, a project which it initiated in 2011. While both projects
share similar geological characteristics, different oil source kitchens are accessed in each area. The
“Saturn” Superfan is geologically older and located closer to the oil source sequence than the younger
submarine fan body targeted by the Cormorant-1 well in PEL 87.
Prospective Resources
The “Saturn” Superfan is made up of a number of discrete internal geological Play types but could
itself be a vast single oil trap on a global scale.
TABLE OF BEST ESTIMATE VOLUMES
GROSS BEST ESTIMATE
PROSPECTIVE
RESOURCES
POTENTIAL*
LEAD
PLAY TYPE
Aptian Depositional Wedge
1.3 Billion Bbls
Saturn Superfan**
Mounded Facies
Structural (4 way rollover)
Structural / Stratigraphic
152 Million Bbls
73 Million Bbls
345 Million Bbls
First Turbidite lobe/Sheet sand
349 Million Bbls
Structural/Mound (4 way rollover)
40 Million Bbls
A
C1
D
G
H
The oil volumes shown are gross volumes.
*A Giant field has at least 500 MMBOE recoverable potential
** The overall Saturn Superfan incorporates all of the other Leads, but with different risk inputs
*Cautionary Statement
The potential recoverable oil resources, classified as Prospective Resources, have been estimated
probabilistically on an unrisked, Best Estimate basis.
These were announced on 11 September, 2018.
The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an
associated risk of discovery and a risk of development. Further exploration appraisal and evaluation
is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
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.
11
Review of Operations
Review of Operations
Kenya
Kenya Onshore/Offshore Block L6
Location:
Project Size:
JV Partners
Offshore:
JV Partners
Onshore:
Lamu Basin
5,010 square kilometres
FAR Limited (Operator)
Pancontinental
60.00%
40.00%
Milio International (Operator) 60.00%
16.00%
Pancontinental
24.00%
FAR Limited
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.
USA California
Pancontinental added to its exploration portfolio in
July 2017 with the addition of projects in California
USA, via the acquisition of Bombora Natural Energy
Pty Ltd (“Bombora”).
Tulainyo
***
Alvares
Dempsey
*** As of June 2018, the Company no longer holds interests in the Tulainyo Project.
Sacramento Basin Assets
12
Review of Operations
Review of Operations
USA California – Dempsey Gas Project
Location:
Project Size:
JV Partners:
Sacramento Gas Basin
18 square kilometres
Sacgasco Limited (Operator) (ASX:SGC)
Pancontinental Oil & Gas NL (ASX:PCL)
(AIM:EME)
Empyrean Energy PLC
(ASX:XST)
Xstate Resources Limited
50.00%
10.00%
30.00%
10.00%
The Dempsey Prospect is located in an area of producing gas fields which are connected to the
California gas network in the central, Northern Sacramento Gas Basin.
Pancontinental’s work programme in the region during the year included the appraisal of two existing
gas discoveries, with the Dempsey-1 well, the first in line. The Dempsey-1 well had stacked exploration
reservoir targets below predicted undrained compartments in a shallow producing field area.
During the financial year, the Dempsey 1-15 gas well commenced and was completed with 5 ½ inch
casing for production testing. The well reached the planned total depth of 2,970m or 9,750 feet.
The shallower well section encountered potential gas pay as expected and deeper, primary targets
confirmed a number of gas saturated zones. Data extracted from the main target zones of Dempsey
1-15 cannot be tied to regional wells as previous drilling in the region had not reached that depth. As
such, to assist in interpretation, testing was essential to prove whether the rocks are capable of
commercial rates of flow.
Testing was carried out across a range of high pressure intervals in the lower part of the well bore
that both successfully flowed clean, dry gas to surface. The highest natural flow rate achieved however
was circa 0.2 MMCFD which was below expectations.
Commercial gas production commencing at approximately 1.0 MMCFD was initially achieved from one
of the shallow gas pay zones within the existing field area but due to associated water production was
subsequently shut in.
Although the Operator announced recommencement of gas production from the Dempsey 1-15 well
on 18 July 2018, some water accumulated in the well bore and reduced gas production. Production of
gas from the Dempsey well has been shut-in for pressure build-up as a means to clear water from the
well bore before recommencing gas production.
The well remains shut in as at the date of this report.
The results of the Dempsey-1 drill programme have downgraded gas resource estimates. Further
analysis is being conducted on the gas resource potential at Dempsey and in related gas prospects on
trend for which there has been joint venture leasing.
13
Review of Operations
Review of Operations
USA California – Alvares Gas Project
Location:
Project Size:
JV Partners:
Sacramento Gas Basin
24 square kilometres
(ASX:SGC)
Sacgasco Limited
(AIM:EME)
Empyrean Energy PLC
(ASX:XST)
Xstate Resources Limited
Pancontinental Oil & Gas NL (ASX:PCL)
39.00%
25.00%
21.00%
15.00%*
*earning
The Alvares Gas Project is also located in the Sacramento Gas Basin, California. Alvares-1 was drilled
by American Hunter Exploration Limited in 1982 to a total depth of 4380m (14,060 feet) targeting oil
in the Early Cretaceous age, Stoney Creek Formation. This formation is part of an early, marine basin
fill and is comprised of sandstones and conglomerates interspersed with clay rich rocks. Wireline log
data from the well indicates extensive zones that may have conventional gas reservoir potential.
Testing of the original well bore was typified by mechanical difficulties due to equipment limitations
and the deeper oil target failing. Despite these limitations minor gas flows to surface were recorded.
Bombora entered into a farmin agreement with Sacgasco Limited and Xstate Resources Limited
whereby Bombora has the right to earn a 10% working interest by funding 13.33% of the next well
on the 1982 Alvares gas discovery.
Bombora has also exercised an option to earn a further 5% in Alvares, by part funding re-entry of the
discovery well to assess it for mechanical integrity. If the well bore is sound other mechanical options
could be considered to test the zones of interest as cheaper alternatives to a new well drilled from the
surface. These include a sidetrack of the existing well.
The Alvares license does not have a commitment to drill a well, so timing can be matched to take
advantage of the other drilling results in the Basin.
USA Tulainyo Project [0% interest at 30 June 2018]
During the financial year, Pancontinental participated in the drilling of the Tulainyo 2-7 appraisal well
on the untested Tulainyo gas discovery on the west side of the Sacramento Gas Basin. Pancontinental’s
investment partner funded most of the drilling and in turn acquired a 60% interest in the subsidiary
holding the Tulainyo asset. The well, which was the second in the Company’s 2017 drilling programme,
reached a planned total depth of 1,737m or 5,700 feet encountering gas at all predicted levels. The
Tulainyo 2-7 well was flow tested in two stages over a range of zones. The gas that flowed into the
well was of good quality, although at low sub commercial rates. It is uncertain whether this outcome
was mainly a function of inferior reservoir quality or due to damage to the reservoir caused during
drilling and completion of the well.
In June 2018, a Share Sale and Purchase Agreement was executed with Raven Energy Limited for US
incorporated Gas Fields LLC which holds the Tulainyo Gas Project. Sale consideration for the
transaction was AU $300,000 and AU $1,000,000 worth of shares in Raven Energy Limited. In addition,
there is the potential for longer term milestone success payments based on booking of gas reserves
and attaining commercial production. Therefore, as at 30 June 2018 and the date of this report, the
Pancontinental group no longer hold any interest in the Tulainyo Project.
14
Review of Operations
Review of Operations
Western Australia
Western Australia – Perth Basin Walyering
Location:
Perth Basin
Project Size:
120 square kilometres
JV Partners:
UIL Energy Ltd (Operator) (ASX:UIL)
30.00%
Pancontinental Oil & Gas NL (ASX:PCL)
70.00%*earning
Under a
farmin with UIL Energy Ltd,
Pancontinental can earn a 70% operated
interest in the southern part of onshore
exploration licence EP 447, covering the 1971-
discovered Walyering Conventional Gas Field,
by acquiring a 3D seismic survey.
The Company
is currently processing an
application to conduct an approximately 90km²
3D seismic survey. This is a challenging process
requiring environmental, heritage and land
holder approvals before
regulatory
authority can issue a permit.
the
The 3D seismic survey will provide better
definition of the mapping at the gas reservoir
levels. The seismic will be
funded by
Pancontinental and is expected to cost less than
AU $2.0 million.
During the
financial year, the Company
released an independent resource estimate
which gives weight to the appraisal program
designed for the project.
Prospective Resources
Walyering Conventional Gas Field
Net to the Company, unrisked, recoverable Prospective Resources for Walyering, calculated on a
Probabilistic Basis range from a Low or P90 of 14 Bcf gas plus 0.14 MMbbl condensate (or light oil) to
a High or P10 of 158 Bcf gas and 4.4 MMbbl condensate as per below:
*Based on a standard industry ratio of 6Mcf/bbl
15
Review of Operations
Review of Operations
Field Area
Central
Hydrocarbon
Type
Gas (Bcf)
Condensate
(MMbbl)
East
Gas (Bcf)
TOTAL
Pancontinental
Net 70%
Gas (Bcf)
Condensate
(MMbbl)
Gas (Bcf)
Condensate
(MMbbl)
Oil Equivalent*
(MMBOE)
P90
P50
Mean
P10
17
0.2
3
20
0.2
14
54
1.2
9
63
88
2.5
12
100
1.2
2.5
202
6.3
24
226
6.3
44.1
70
158.2
0.14
0.84
1.8
4.4
2.5
8.2
13.5
30.8
*Cautionary Statement
The resources referred to above were announced on 16 May 2018.
The estimated quantities of petroleum that may potentially be recovered by the application of a future
development project(s) relate to undiscovered accumulations. These estimates have both an
associated risk of discovery and a risk of development. Further exploration appraisal and evaluation
is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
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.
Corporate
At a General Meeting held in July 2017, Pancontinental shareholders
approved the acquisition of private company Bombora Natural
Energy Pty Ltd (“Bombora”) as well as other related resolutions.
The acquisition of the subsidiary has provided Pancontinental with
exposure to assets in both Australia and in the USA.
The Company’s Board was reformed with a mix of former Pancontinental Board members and new
Bombora Directors. The Pancontinental Board is again led, as Chairman, by founding Director and
Shareholder David Kennedy. John Begg was appointed to the role of Director and CEO, replacing Barry
Rushworth as CEO, but will himself be stepping down as CEO on 15 November 2018. Mr Rushworth
remains a Non-Executive Director with responsibilities for the Company’s African projects. Ernie Myers
continued on the Board as Non-Executive Director providing guidance on corporate and finance
matters but has now moved back to an Executive Director position. Marie Malaxos was also appointed
Non-Executive Director at the time of acquiring Bombora.
16
Review of Operations
Review of Operations
In addition, Company Secretary and CFO Vesna Petrovic was appointed as Alternate Director for David
Kennedy in July 2017 and returned to the Board as an Executive Director in September 2018.
During the financial year the Company raised AU $2.0 million by way of Placement and AU $1.6 million
via the issue of Convertible Notes. A further approximate A$10 million was raised from the partial
(10%) sale of Pancontinental’s interests in PEL 37 in Namibia.
17
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
Prospective Resource estimates in this report have been prepared as at the date disclosed under the
prospective resource numbers. 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 using deterministic methods and probabilistic methods
depending on the project and this is disclosed under the prospective resource numbers. 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.
18
Directors’ Report
Your Directors submit their report for the year ended 30 June 2018.
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 2017
10 July 2017
Non-Executive Chairman as at 28 September 2018
Mr Kennedy held the position of Non-Executive Director.
Mr Kennedy was once again appointed Non-Executive Chairman.
John Douglas Begg
10 July 2017
Chief Executive Officer and Executive Director as at 28 September 2018
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 2017
10 July 2017
Non-Executive Director as at 28 September 2018
Mr Myers held the position of Executive Finance Director.
Mr Myers was appointed as a Non-Executive Director.
Roy Barry Rushworth
1 July 2017
10 July 2017
Non-Executive Director as at 28 September 2018
Mr Rushworth held the positions of Chief Executive Officer and Executive Director.
Mr Rushworth was appointed as a Non-Executive Director.
Marie Michele Malaxos
10 July 2017
Non-Executive Director as at 28 September 2018
Ms Malaxos joined the Board as Non-Executive Director in July 2017. Ms Malaxos
did not hold office at any time during the 2017 financial year.
Vesna Petrovic
1 July 2017
10 July 2017
31 July 2017
5 September 2018
Executive Director and Company Secretary as at 28 September 2018
Mrs Petrovic held the position of Executive Director and Company Secretary.
Mrs Petrovic stepped down as Executive Director but remained Company
Secretary.
Mr Kennedy appointed Mrs Petrovic as his Alternate Director.
Mrs Petrovic was once again appointed Executive Director.
John Edward Leach
1 July 2017
10 July 2017
No longer a Board Member
Mr Leach held the position of Independent Non-Executive Chairman.
Mr Leach stepped down as Independent Non-Executive Chairman.
19
Directors’ Report
Review of Operations
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).
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.
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.
20
Directors’ Report
Review of Operations
Marie Michele Malaxos BE, Dip Bus, GAICD (Non-Executive Director)
Ms 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, Ms Malaxos was appointed to the Board of Pancontinental Oil & Gas NL as
a Non-Executive Director.
Vesna Petrovic, BComm, CPA (Executive Director & Company Secretary)
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, Alternate for Mr Kennedy
in July 2017 and Executive Director in September 2018.
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 Independent Non-Executive Chairman. On 10 July 2017, after shareholder approval
of the Bombora Natural Energy Pty Ltd acquisition Mr Leach stepped down from the Board.
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
2018.
DURING THE FINANCIAL YEAR, 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.
21
Directors’ Report
Directors’ Report
DIRECTORS' INTERESTS
The relevant interest of each Director in the shares and options of the Company as at 30 June 2018 is as follows:
Henry David Kennedy
John Douglas Begg
Roy Barry Rushworth
Ernest Anthony Myers
Marie Michele Malaxos
Vesna Petrovic
John Edward Leach (resigned July 2017)
DIRECTORS' MEETINGS
Ordinary Shares
Options over
Ordinary Shares
411,768,269
187,200,026
134,335,610
2,900,715
39,000,000
-
-
-
157,853,660
20,000,000
20,000,000
78,926,829
20,000,000
-
The numbers of meetings of Directors (including meetings of committees of Directors) held during the year and
the number of meetings attended by each Director were as follows:
Number of meetings held:
Number of meetings attended:
Henry David Kennedy
John Douglas Begg
Roy Barry Rushworth
Ernest Anthony Myers
Marie Michele Malaxos
Vesna Petrovic
John Edward Leach (resigned July 2017)
Directors'
Meetings
6
6
6
6
6
6
6
0
Notes
The Directors discussed and agreed various matters throughout the financial year which were resolved by circular
resolution; 35 matters were dealt with in such a manner during the year.
In addition to formal Board Meetings and Circular Resolutions, the Board has instigated a policy of attending a
fortnightly update call to keep abreast of current issues.
22
Directors’ Report
Review of Operations
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 and receivables.
(0.12)
(0.12)
Cents
Employees
The consolidated entity had two (2) employees as at 30 June 2018, (2017: four (4)). The consolidated entity
employs the services of specialised consultants where and when needed.
OPERATING AND FINANCIAL REVIEW
Namibia PEL 37 – Offshore [20% interest]
Pancontinental now holds a 20% interest in the PEL 37 project through an interest (66.67%) in subsidiary
Pancontinental Namibia Pty Ltd. During the year, Africa Energy Corp. committed to an investment of US $7.7
million in Pancontinental Namibia Pty Ltd for a 33.33% shareholding, equating to 10% of PEL 37. US $2.2 million
was received at the close of the transaction with the balance of US $5.5 million received at the spud of the
Cormorant-1 well in September 2018. The total investment of US $7.7 million equates to AU $10.6 million.
During the financial, year giant Indian corporation ONGC Videsh Limited farmed into the PEL 37 joint venture in
Namibia, for a 30% non-operated interest.
Pancontinental announced the spud of the Cormorant-1 well in PEL 37, Offshore Namibia on 4 September 2018.
Cormorant-1 was drilled by the Ocean Rig Poseidon, a 6th Generation drillship, in 545 meters of water. The well
tested the oil potential of a mid-Cretaceous marine turbidite “fan” sandstone system. On 24 September 2018,
Pancontinental advised that the Cormorant-1 exploration well reached a total measured depth of 3,855m and is
to be plugged and abandoned as a dry hole. The Company was not financially exposed to the drilling costs of the
well as per the previously negotiated farmout agreement with operator Tullow Namibia Pty Ltd (a subsidiary of
Tullow Oil plc).
Namibia PEL 87 – Offshore [75% interest]
Also in Namibia, Pancontinental signed a Petroleum Agreement over a large, offshore exploration area in the
Orange Basin. A new Petroleum Exploration Licence (PEL 87) was issued for the area. Pancontinental is the project
Operator, with a 75% interest. PEL 87 covers 10,947 km² in an area that is on trend to where industry giants
Shell, GALP (Portugal) and Total (in 2017) have acquired interests.
23
Directors’ Report
Review of Operations
The new Pancontinental project area is in a region where high-capacity oil prospects, such as large turbidites
sand bodies, have been identified. Initial exploration studies have commenced in Pancontinental’s second large
Namibian licence. Pancontinental has mapped extensive high-potential and oil-prone turbidite fan “fairways” in
the newly awarded PEL 87. Oil generating source rocks are also evident from well control studies in PEL 87.
Pancontinental has completed the first major stage of assessing the potential prospective oil resources in PEL 87.
Giant-scale prospective oil resource potential has now been quantified by Independent Experts. A vast Cretaceous
Superfan directly on top of Mature Oil Source is interpreted to contain a number of individual Leads, while it is
itself mapped to be enveloped in sealing shale and with the potential to be one vast, single, oil trap.
USA Dempsey Project [10% interest]
Pancontinental part funded the drilling of Dempsey 1-15 well during the year and as such earned a 10% interest
in the project. Dempsey 1-15 was drilled with the well reaching the planned total depth of 2,970m or 9,750 feet.
The well encountered gas in all targeted intervals and natural flow testing commenced during the year. Testing
was carried out within two high pressure intervals in the lower part of the well bore. These both successfully
flowed clean, dry gas of pipeline quality naturally to surface at moderate rates. Following the previously
announced recommencement of gas production from the Dempsey 1-15 well on 18 July 2018, some water
accumulated in the well bore and reduced gas production. Dempsey is currently shut-in pending a workover and
change to surface facilities to manage the produced water.
USA Tulainyo Project [0% interest at 30 June 2018]
During the financial year, Pancontinental participated in the drilling of the Tulainyo 2-7 appraisal well on the
untested Tulainyo gas discovery. Pancontinental’s investment partner funded most of the drilling and in turn
acquired a 60% interest in the subsidiary holding the Tulainyo asset. The well, which was the second in the
Company’s 2017 drilling programme, reached a planned total depth of 1,737m or 5,700 feet encountering gas at
all predicted levels. The Tulainyo 2-7 well was flow tested in two stages over a range of zones. The gas that
flowed into the well was of good quality, although at low rates which could have been be due to damage to the
reservoir caused during drilling of the well.
In June 2018, a Share Sale and Purchase Agreement was executed with Raven Energy Limited for US incorporated
Gas Fields LLC which holds the Tulainyo Gas Project. Sale consideration for the transaction was AU $300,000 and
AU $1,000,000 worth of shares in Raven Energy Limited. In addition, there is the potential for longer term
milestone success payments based on booking of gas reserves and attaining commercial production. Therefore,
as at 30 June 2018 and the date of this report, the Pancontinental group no longer hold any interest in the
Tulainyo Project.
Western Australia Walyering Project [earning 70%]
Under a farmin with UIL Energy Ltd, Pancontinental can earn a 70% operated interest in the southern part of
onshore exploration licence EP 447, covering the 1971-discovered Walyering Gas Field, by acquiring a 3D seismic
survey. The Company is currently processing an application to conduct an approximately 90km² 3D seismic
survey. This is a challenging process requiring environmental, heritage and land holder approvals before the
regulatory authority can issue a permit. The 3D seismic survey will provide better definition of the mapping at
the gas reservoir levels. The seismic will be funded by Pancontinental and is expected to cost less than AU $2.0
million. During the financial year, the Company released an independent resource estimate which gives weight
to the appraisal program designed for the project.
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.
Corporate
At a General Meeting held in July 2017, Pancontinental shareholders approved the acquisition of private company
Bombora Natural Energy Pty Ltd (“Bombora”) as well as other related resolutions. The acquisition of the subsidiary
has provided Pancontinental with exposure to assets in both Australia and in the USA.
The Company’s Board was reformed with a mix of former Pancontinental Board members and new Bombora
Directors. The Pancontinental Board is again led by founding Director and Shareholder David Kennedy. John Begg
was appointed to the role of Executive Director and CEO, replacing Barry Rushworth who remains a Non-Executive
24
Directors’ Report
Review of Operations
Director with responsibilities for the Company’s African projects. Ernie Myers continued on the Board as Non-
Executive Director providing guidance on corporate and finance matters. Marie Malaxos was also appointed Non-
Executive Director at the time of acquiring Bombora.
In addition, Company Secretary and CFO Vesna Petrovic was appointed as Alternate Director for David Kennedy
in July 2017 and Executive Director in September 2018.
During the financial year the Company raised AU $2.0 million by way of Placement and AU $1.6 million via the
issue of Convertible Notes. Also during the year, and up until the date of this report, Pancontinental received AU
$10.6 million from the investment of Africa Energy Corp. into Pancontinental’s subsidiary Pancontinental Namibia
Pty Ltd.
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. One of the
subsidiary companies also holds its own subsidiary.
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 that the Company’s assets are being
well managed.
Operating Results for the Year
Summarised operating results are as follows:
2018
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 and the write off of receivables.
(6,311,330)
(6,311,330)
9,906
9,906
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
2018
2017
2016
2015
2014
(6,263,751) (4,981,475)
(5,472,381) (41,878,638) (19,068,997)
(0.12)
(0.26)
(0.40)
(3.64)
(1.66)
$0.004
$0.002
$0.003
$0.006
$0.023
25
Directors’ Report
Review of Operations
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
Consulting with employees and independent contractors 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
Review of Operations
Review of Financial Condition
Capital Structure
During the year, the Company added to its cash reserves through placements, convertible notes and divestment
of a 33.33% interest in subsidiary Pancontinental Namibia Pty Ltd.
Share Capital
Beginning of the financial year
Issued during the year:
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
$
2,450,077,442 103,369,164
2,811,711,226
6,434,486
5,261,788,668 109,803,650
Number
of
options
100,000,000
-
467,134,149
567,134,149
Weighted
average
exercise price
0.005
-
0.005
0.005
Since the end of the financial year and up until the date of this report 66,000,000 options were exercised by Mr
Begg, providing the Company with a cash injection of $264,000. Mr Begg also sold 61,000,000 ordinary shares.
As a consequence of these transactions Mr Begg increased his net shareholding.
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, convertible notes and
divestment of a 33.33% interest in subsidiary Pancontinental Namibia Pty Ltd.
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 2018 there were 567,134,149 ordinary shares under options. Refer to the notes for further details
on the options outstanding.
During the year 467,134,149 options were issued and none 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.
27
Directors’ Report
Review of Operations
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
24 September 2018 - Cormorant-1 Well in PEL 37, Offshore Namibia
Pancontinental announced the spud of the Cormorant-1 well in PEL 37, Offshore Namibia on 4 September 2018.
Cormorant-1 was drilled by the Ocean Rig Poseidon, a 6th Generation drillship, in 545 meters of water. The well tested
the oil potential of a mid-Cretaceous marine turbidite “fan” sandstone system. On 24 September 2018, Pancontinental
advised that the Cormorant-1 exploration well reached a total measured depth of 3,855m and is to be plugged
and abandoned as a dry hole.
11 September 2018 – Billion Barrel Oil Potential Assessed in PEL 87, Offshore Namibia
Pancontinental completed the first major stage of assessing the potential prospective oil resources in its 75% owned
PEL 87 project in the Orange Basin, offshore Namibia.
6 September 2018 - Pancontinental receives cash injection of US$5.5 million (~AU$7.6 million) to complete
Africa Energy Corp’s investment in Pancontinental Namibia
Pancontinental Namibia Pty Ltd (“PNPL”) holds a 30% interest in the highly prospective licence PEL 37, offshore Namibia.
Pancontinental Oil and Gas NL (“Pancontinental”) owns 66.67% of PNPL with a wholly owned subsidiary of Africa Energy
Corp. (“Africa Energy”) now holding a 33.33% interest in the Company. The consideration for the issue of shares was a
total of US$7.7 million (approximately AU$10 million) payable by Africa Energy in two stages. The first payment of
US$2.2 million (approximately AU$3 million) was received by Pancontinental at closing. The second payment of US$5.5
million (approximately AU$7.6 million) was received 6 September 2018 after the spud of the Cormorant-1 well.
5 September 2018 – Appointment of Executive Director Vesna Petrovic
Mrs Vesna Petrovic was appointed back to the Board as Executive Director. Mrs Petrovic is also Alternate Director for
Pancontinental Chairman Mr Kennedy.
3 September 2018 - Gas Fields LLC, Tulainyo Project Overruns
On 29 June 2018, Pancontinental Oil & Gas NL (“Pancon”) announced that it had divested its forty percent (40%) interest
in US subsidiary Gas Fields LLC (“Gas Fields”) to Raven Energy Limited (“Raven”). Gas Fields, a wholly owned subsidiary
of Raven, has been earning an interest in the Tulainyo Gas Project in California.
At the time of the divestment, the Operator of the Tulainyo project claimed that Gas Fields (via Raven) owed it
US$321,353.
The Operator is now claiming that:
1) Gas Fields has failed to provide the required completion funds for costs allegedly incurred by the Operator in the
drilling of Tulainyo #2;
2) that the sum allegedly owed by Gas Fields has now increased to US$1,738,273; and
3) as Bombora Natural Energy Pty Ltd had guaranteed the obligations of Gas Fields in the original Farmin Agreement
between Gas Fields, Bombora and Cirque of 21 March 2017, the Operator would look to Bombora to make that payment
in the event that Gas Fields failed to pay it.
Pancontinental, itself, has no liability in relation to this matter.
30 August 2018 –Dempsey Update
Following the previously announced recommencement of gas production from the Dempsey 1-15 well on 18 July 2018,
some water accumulated in the well bore and reduced gas production. Production of gas from the Dempsey well has
been shut-in for pressure build-up as a means to clear water from the well bore before recommencing gas production.
The well remains shut in as at the date of this report.
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.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Pancontinental is committed to complying with any requirement for environmental management in any
jurisdiction and country that it operates.
During the year, the Company submitted to the Regulator, an Environmental Plan as part of the application for a
3D seismic survey over its Walyering Project, onshore Perth Basin. The complicated State and Federal
environmental hurdles were negotiated and approval of the plan is nearing completion with minimum impact to
the survey.
28
Directors’ Report
Review of Operations
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Since the end of the previous financial year the company has paid insurance premiums in respect of Directors'
and officers' liability and legal expenses insurance contracts. The Directors have not included details of the
nature of the liabilities covered or the amount of the premium paid in respect of the Directors and Officers and
legal expenses insurance contracts as such disclosure is prohibited under the terms of the contract. The
premiums were paid in respect of the following officers of the company and its controlled entities:
HD Kennedy, JD Begg, EA Myers, RB Rushworth, MM Malaxos, V Petrovic and JL Leach (resigned July 2017).
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 fees 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 2018 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: 3-9 months
$265,000 (+ GST)
Chief Executive Officer & Executive Director
10 July 2017
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.
29
Directors’ Report
Review of Operations
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.
Table 1: Director remuneration for the year ended 30 June 2018
Primary benefits
Equity
Other
Total
Salary &
Fees
Consult-
ing
Options
(Issued)
Value of
options as
proportion
of Revenue
Henry David Kennedy
(Non-Executive Chairman)
2018
2017
John Douglas Begg **
(Executive Director & CEO)
2018
2017
Ernest Anthony Myers
(Non-Executive Director)
50,000
50,000
241,290
-
-
-
-
-
-
-
-
-
2018
2017
38,925
187,500
76,651
-
60,000
-
Roy Barry Rushworth
(Non-Executive Director)
2018
2017
38,925
237,500
230,981
-
60,000
-
Marie Michele Malaxos
(Non-Executive Director)
2018
2017
Vesna Petrovic
(Executive Director & Company Secretary)
38,885
-
43,000
-
-
-
2018
2017
John Edward Leach
(resigned July 2017)
2018
2017
Total Current Year
Remuneration
140,625
140,625
-
48,000
-
-
-
-
60,000
-
-
-
-
-
-
-
-
-
175,000*
-
-
-
-
-
-
-
50,000
50,000
0.0%
0.0%
241,290
-
0.0%
0.0%
175,576
187,500
0.0%
0.0%
504,906
237,500
0.0%
0.0%
81,885
-
0.0%
0.0%
200,625
140,625
0.0%
0.0%
-
48,000
0.0%
0.0%
548,650
350,632 180,000 175,000
663,625 1,254,282
* $175,000 paid to Mr Rushworth relates to a settlement payout in lieu of fees. In addition, Mr Rushworth was
issued 87,500,000 ordinary shares with a value of $175,000 as approved by Shareholders at a General Meeting
held on 10 July 2018.
** Mr Begg was issued 187,200,026 ordinary shares with a value of $374,400 and 157,853,660 options with a
value of $276,244 as part of Pancontinental’s transactions with Bombora Natural Energy Pty Ltd.
*** Ms Malaxos was issued 39,000,000 ordinary shares with a value of $78,000 and 78,926,829 options with a
value of $138,121 as part of Pancontinental’s transactions with Bombora Natural Energy Pty Ltd.
30
Directors’ Report
Review of Operations
Table 2: Options granted as part of Director remuneration for the year ended 30 June 2018
(as approved by Shareholders)
Granted
Number
Grant
Date
Terms & Conditions for
Each Grant
Value per
option at
grant
date ($)
Exercise
Price
per
share ($)
First
Exercise
Date
Last
Exercise
Date
Specified Directors
Roy Barry Rushworth
Ernest Anthony Myers
Vesna Petrovic
Total
20,000,000 12 Dec 17
20,000,000 12 Dec 17
20,000,000 12 Dec 17
0.003
0.003
0.003
0.006
0.006
0.006
12 Dec 17
12 Dec 17
12 Dec 17
11 Dec 21
11 Dec 21
11 Dec 21
60,000,000
There were no options granted as part of Director remuneration for the year ended 30 June 2017.
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.
2018
2017
2016
2015
2014
125%
2.03%
4 years
120%
1.79%
3 years
-
-
-
-
-
-
-
-
-
Expected volatility
Risk-free interest rate
Expected life of option
Total number of options:
Number of options
Grant
Date
Vesting
Date
Expiry
Date
Exercise
Price
100,000,000
Class A 118,390,244
Class B 78,926,830
Class C 78,926,830*
Class D 118,390,244**
Director 60,000,000
Employee 12,500,000
21 Apr 17
Jul-Aug 17
Jul-Aug 17
Jul-Aug 17
Jul-Aug 17
12 Dec 17
12 Dec 17
21 Apr 17
Jul-Aug 17
Jul-Aug 17
18 Jul 17
-
12 Dec 17
12 Dec 17
21 Apr 20
24 Jul 20
24 Jul 20
24 Jul 22
24 Jul 22
11 Dec 21
11 Dec 21
$0.005
$0.004
$0.004
$0.006
$0.006
$0.006
$0.006
Weighted
Average Fair
Value
$0.001
$0.002
$0.002
$0.002
$0.002
$0.002
$0.002
* Class C options vested when the Company completed the capital raising contemplated by the terms of the
agreement under which the Company agreed to acquire the shares in Bombora Natural Energy Pty Ltd.
** Class D options vest when the Company is notified of the discovery of gas or oil testing to surface at
potential commercial rates at any of the projects in which Bombora Natural Energy Pty Ltd (or any of its
subsidiaries) holds an interest.
31
Directors’ Report
Review of Operations
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 %
2018
$0.004
6,998,599
(6,263,751)
(89.50)%
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)%
END OF REMUNERATION REPORT
32
Directors’ Report
Review of Operations
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 2018.
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.
Vesna Petrovic
Director
Perth 28 September 2018
33
Directors’ Report
Directors’ Report Corporate Governance Statement
Corporate Governance Statement
The Company’s 2018 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 2018.
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 2018 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
for
at
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.
35
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, engineering,
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
2018
33%
100%
43%
2017
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 12.8% of women.
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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.
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.
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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 Myers and Mrs Petrovic are qualified accountants and therefore meets the tests of financial
expertise.
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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
HD Kennedy
Non-Executive Chairman
19 years
No - Substantial
Shareholder
JD Begg
Executive Director and Chief
Executive Officer
< 1 year
No – Executive Director
EA Myers
Non-Executive Director
9 years
RB Rushworth Non-Executive Director
13 years
MM Malaxos
Non-Executive Director
< 1 year
No – Provides Executive
Services
No – Provides Executive
Services
No – Provides Executive
Services
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 no Directors are
considered to be independent, 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 – No Directors are considered to be independent.
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.
Not Adopted – As recommended, the Chairman and the CEO are not the same person, however
the Chairman of the Board is Mr Kennedy, who is not independent by virtue of this substantial
shareholding in the Company.
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Corporate Governance Statement
Corporate Governance Statement
Leadership of the Board rests with the Chairman who oversees its operation ensuring that it is run
effectively. The Board believes Mr Kennedy’s interests are aligned with the long term interests of
Shareholders and given his extensive experience and qualifications, believes Mr Kennedy is the
most appropriate Director to carry out the role of the Chairman.
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.
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.
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Corporate Governance Statement
Corporate Governance Statement
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.
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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 – Mr Myers, Ms Malaxos and Mrs Petrovic are members of the Audit Committee.
Although the Company has an Audit Committee, not all of the members are Non-Executive
Directors and there is no Independent Director on the Committee.
One meeting was held as the Audit Committee during the year and recommendations were
presented to the Board. 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 Procedure for the Selection, Appointment and Rotation of External Auditor
http://pancon.com.au/about-us/corporate-governance/ is applied when convening to discuss
Audit Committee matters.
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:
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Corporate Governance Statement
Corporate Governance Statement
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;
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/
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Corporate Governance Statement
Corporate Governance Statement
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.
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.
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Corporate Governance Statement
Corporate Governance Statement
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.
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.
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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 is affected by 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 exploration budgets and 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.
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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.
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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.
48
Statement of Comprehensive Income
Statement of Comprehensive Income
YEAR ENDED 30 JUNE 2018
Notes
2, 6
2
2
OPERATING ACTIVITIES
Depreciation expenses
Salaries, fees and benefits
Audit fees
Generative exploration expenditure and write off
Write off of receivables
Annual report costs
ASX fees
Insurance
Legal fees
Share registry costs
Rent and outgoings
Office expenses
Travel
Corporate advisory
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
3
OTHER COMPREHENSIVE INCOME/(LOSS)
Other comprehensive income
TOTAL OTHER COMPREHENSIVE
INCOME/(LOSS)
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIOD
10
Comprehensive income / (loss) attributable to:
Owners of the Company
Non-controlling interest
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
15
CONSOLIDATED
2018
$
2017
$
(26,266)
(821,539)
(54,749)
(1,407,705)
(2,274,785)
(8,836)
(24,153)
(55,263)
(9,825)
(29,141)
(105,253)
(112,834)
(126,374)
(120,154)
(198,004)
(5,374,881)
(16,869)
(781,136)
(35,975)
(3,473,130)
-
(8,531)
(23,941)
(43,513)
(112,842)
(23,750)
(101,706)
(53,594)
(44,336)
(90,000)
(74,631)
(4,883,954)
9,906
(946,355)
(936,449)
3,207
(100,728)
(97,521)
(6,311,330)
-
(6,311,330)
(4,981,475)
-
(4,981,475)
-
-
-
-
(6,311,330)
(4,981,475)
(6,263,751)
(47,579)
(6,311,330)
(4,981,475)
-
(4,981,475)
(0.12)
(0.12)
(0.26)
(0.26)
The Statement of Comprehensive Income is to be read in conjunction with the Notes to the Financial Statements.
49
Statement of Financial Position
Statement of Financial Position
AT 30 JUNE 2018
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
Financial liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provision for employee entitlements
Other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
4
6
7
8(a)
8(b)
9(a)
10
10
CONSOLIDATED
2018
2017
$
$
755,661
113,322
868,983
740,160
77,571
817,731
90,043
8,799,541
8,889,584
45,423
6,874,976
6,920,399
9,758,567
7,738,130
353,236
1,600,000
1,953,236
499,946
-
499,946
17,935
159,688
177,623
10,871
-
10,871
2,130,859
510,817
7,627,708
7,227,313
992,324
109,803,650 103,369,164
100,000
(103,168,266) (96,241,851)
7,227,313
7,627,708
Capital and reserves attributable to owners of PCL
Non-controlling interest
6,769,885
857,823
7,627,708
7,227,313
-
7,227,313
The Statement of Financial Position is to be read in conjunction with the Notes to the Financial Statements.
50
Statement of Changes in Equity
Statement of Changes in Equity
AT 30 JUNE 2018
Consolidated
Share
Capital
$
Retained
Earnings
$
Option
Reserve
$
Total
Equity
$
Balance at 1 July 2017
Profit or loss
Other comprehensive income/(loss)
Shares issued (net of costs)
Share option & reserve movements
103,369,164
(96,241,851)
-
-
3,437,729
-
(6,311,330)
-
-
-
Acq /disp of subsidiaries (net of costs)
2,996,747
(615,085)
100,000
-
7,227,313
(6,311,330)
-
-
-
3,437,729
892,324
892,324
-
-
2,381,662
10
Non-Controlling interest
Balance at 30 June 2018
Balance at 1 July 2016
Profit or loss
Other comprehensive income/(loss)
Shares issued (net of costs)
Shares awaiting shareholder approval
Share option & reserve movements
Acquisition /disposal of subsidiaries
Non-Controlling interest
Balance at 30 June 2017
10
-
109,803,650 (103,168,266)
992,324
7,627,708
101,545,967
(91,414,376)
154,000
10,285,591
-
-
1,673,197
150,000
-
-
-
(4,881,475)
-
-
-
-
-
-
-
(4,881,475)
-
1,673,197
150,000
54,000
(54,000)
-
-
-
-
-
-
-
103,369,164
(96,241,851)
100,000
7,227,313
The above Statement of Changes in Equity is to be read in conjunction with the Notes to the Financial Statements.
51
Statement of Cashflows
Statement of Cashflows
Notes to the Financial Statements
11(a)
(5,410,460)
(2,248,315)
YEAR ENDED 30 JUNE 2018
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Expenditure on exploration interests
NET CASH FLOWS FROM/(USED IN) OPERATING
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Payments relating to creditors of acquired subsidiary
Proceeds from sale of part interest in subsidiary
NET CASH FLOWS FROM/(USED IN) INVESTING
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Interest received
Proceeds from issues of ordinary shares
Share issue costs
NET CASH FLOWS FROM/(USED IN) FINANCING
ACTIVITIES
NET INCREASE/(DECREASE) IN CASH HELD
Add opening cash brought forward
Effects of exchange rate changes
CLOSING CASH CARRIED FORWARD
11(b)
CONSOLIDATED
2018
2017
$
$
(1,884,084)
(3,526,376)
(1,315,144)
(933,171)
(21,061)
(516,755)
2,739,240
2,201,424
-
-
-
-
3,661
3,600,000
(458,044)
3,207
1,948,500
(118,272)
3,145,617
1,833,435
(63,419)
740,160
78,920
755,661
(414,880)
1,157,927
(2,887)
740,160
The above Statement of Cash Flows is to be read in conjunction with the Notes to the Financial Statements.
52
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This financial report was authorised for issue by the Directors on 28 September 2018.
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
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.
As at the end of the financial year, 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 28 September 2018.
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.
As at the end of the financial year, 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.
53
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:
2018
30%
2017
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
54
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;
The ability, if required to dispose of interests in exploration and development assets; and
US $5.5 million was received by the Company post year end in September at the commencement of drilling
the Cormorant-1 well offshore Namibia.
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:
55
Notes to the Financial Statements
Notes to the Financial Statements
where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on
a gross basis and the GST component of cash flows arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority, are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
(q) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee benefits
expected to be settled within twelve months of the reporting date are measured at their nominal amounts
based on remuneration rates which are expected to be paid when the liability is settled.
Employee benefit expenses and revenues arising in respect of the following categories:
wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave
benefits; and
other types of employee benefits
are charged against profits on a net basis in their respective categories.
(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.
56
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 and evaluation costs
Write off of Debtor
Loan and debtor write off relating to the
sale of US subsidiary Gas Fields LLC
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 30% in respect of:
CONSOLIDATED
2018
2017
$
$
26,266
16,869
1,407,705
3,473,130
2,274,785
-
CONSOLIDATED
2018
$
2017
$
(1,893,399)
(1,369,906)
8,915
-
1,884,484
1,369,906
-
-
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
8,011,130
* 8,011,130
6,750,443
6,750,443
-
-
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 30% by the
Group’s carry forward losses at 30 June 2018 of $26,703,767.
4. RECEIVABLES (CURRENT)
Trade receivables & prepayments
Total
CONSOLIDATED
2018
$
113,322
113,322
2017
$
77,571
77,571
57
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
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 Pty Ltd
Pancontinental Orange Pty Ltd**
Provision for diminution in value of
investment
Loan to Pancontinental Orange Pty Ltd
Provision for loss on loan to
Pancontinental Orange Pty Ltd
Afrex Ltd *
Provision for diminution in value of
investment
Loan to Afrex Ltd
Provision for loss on loan to Afrex Ltd
Bombora Natural Energy Pty Ltd #
Provision for diminution in value of
investment
Loan to Bombora Natural Energy Pty Ltd
Provision for loss on loan to Bombora
Natural Energy Pty Ltd
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
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
2018
%
2017
%
2018
$
2017
$
Australia
66.67
100
20
1
(1)
3,309,323
(1)
5,677,968
(83,271)
(83,271)
Australia
100
0
20
-
415,593
-
-
-
-
-
Saint Lucia
100
100
10,584,107
10,584,107
(10,584,107) (10,584,107)
6,770,414
(6,299,703)
6,794,101
(6,329,746)
Australia
100
0
2,014,341
Australia
0
100
British Virgin
Islands
0
100
(2,014,341)
3,439,067
(1,028,794)
-
-
-
-
-
-
-
-
-
-
-
2
(2)
(149,935)
-
380,000
(380,000)
89,147
-
6,516,312
-
6,004,620
*Indicates companies not audited by Rothsay Chartered Accountants.
**Australian entities audited by Rothsay, branch operation by Ernst & Young Namibia.
^ Subsidiaries disposed of during the financial year.
# Bombora Natural Energy Pty Ltd (“Bombora”) was acquired during the financial year. At acquisition, the company held
interests in two US subsidiaries – Gas Fields LLC and Bombora Natural Gas, LLC. In June 2018, Bombora sold its interest
in Gas Fields LLC and as such now only holds Bombora Natural Gas LLC.
58
Notes to the Financial Statements
Notes to the Financial Statements
6. PROPERTY, PLANT AND EQUIPMENT
Office equipment
At cost
Less: Accumulated depreciation
Written down amount
Vehicles *
At cost
Less: Accumulated depreciation
Written down amount
Total written down value of Office equipment & Vehicles
*Motor vehicle acquired through purchase of Bombora Natural Energy Pty Ltd
Reconciliations
Reconciliations of the carrying amounts of property, plant, equipment and vehicles
Office equipment & Vehicles
Carrying amount opening balance
Additions
Write offs
Depreciation expense
Total written down amount
7. DEFERRED EXPLORATION, EVALUATION AND
DEVELOPMENT COSTS
CONSOLIDATED
2017
2018
$
$
141,949
(74,567)
67,382
93,964
(48,541)
45,423
32,739
(10,078)
22,661
90,043
-
-
-
-
45,423
80,723
-
(36,103)
90,043
62,292
-
-
(16,869)
45,423
CONSOLIDATED
2018
$
2017
$
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
Acquisition of exploration properties via transaction with Bombora*
Sale of Bombora’s US subsidiary Gas Fields LLC
Carrying amount at 30 June
*Bombora Natural Energy Pty Ltd
6,874,976
3,464,095
(1,407,705)
1,787,367
(1,919,192)
8,799,541
9,293,818
1,054,288
(3,473,130)
-
-
6,874,976
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.
8a. TRADE and OTHER PAYABLES (CURRENT)
Trade creditors, accruals and provisions
Total
CONSOLIDATED
2017
2018
$
$
499,946
353,236
499,946
353,236
8b. FINANCIAL LIABILTIES (CURRENT)
CONSOLIDATED
Convertible Notes
Total
During the quarter, the Company raised $1.6 million through the issue of Convertible Notes. The issue has a conversion
price of A$0.008 per share which represents a 33% premium to the 30-day VWAP (volume weighted average price) of
A$0.006, an interest rate of 10% and a maturity date 12 months from the date of issue, ie 27 March 2019.
-
-
2018
$
1,600,000
1,600,000
2017
$
59
Notes to the Financial Statements
Notes to the Financial Statements
9. CONTRIBUTED EQUITY
(a) Issued and paid up capital
Ordinary shares fully paid
Total
(b) Movements in shares on issue
CONSOLIDATED
2018
$
2017
$
109,803,650 103,369,164
109,803,650 103,369,164
2018
2017
Number of
shares
$
Number of
shares
$
Beginning of the financial year
Issued during the year:
Placements & SPP (2017) (net of costs) 1,162,500,000
Acq /disp of subsidiaries (net of costs)
1,649,211,226
Shares awaiting shareholder approval
-
End of the financial year
1,673,197
3,437,729
2,996,757
-
150,000
-
5,261,788,668 109,803,650 2,450,077,442 103,369,164
732,583,346
-
-
2,450,077,442 103,369,164 1,717,494,096 101,545,967
10. RESERVES AND ACCUMULATED LOSSES
Reserves
Beginning of the financial year
Options expired
Options issued
End of the financial year
Accumulated losses
Beginning of the financial year
Net loss
Share options expired
Acq /disposal of subsidiaries
Total available for appropriation
End of the financial year
CONSOLIDATED
2018
$
2017
$
100,000
-
892,324
992,324
154,000
(154,000)
100,000
100,000
(96,241,851)
(6,311,330)
-
(615,085)
(103,168,266)
(103,168,266)
(91,414,376)
(4,981,475)
154,000
-
(96,241,851)
(96,241,851)
60
Notes to the Financial Statements
Notes to the Financial Statements
11. STATEMENT OF CASH FLOWS
CONSOLIDATED
2018
$
(a) Reconciliation of the net loss after tax to the net cash flows from operations
2017
$
Net loss
Non-Cash Items, Non-Operating Items
Depreciation of non-current assets
Financing expense
Financing income
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in property, plant & equipment
(Increase)/decrease in exploration, evaluation & development
(Increase)/decrease in interests in subsidiaries
(Decrease)/increase in trade and other payables
(Decrease)/increase in financial liabilities
(Decrease)/increase in non-current liabilities
Other non-cash
Net cash flow from operating activities
(b) Reconciliation of cash
Cash balance comprises:
cash assets
Closing cash balance
12. EXPENDITURE COMMITMENTS
(6,311,330)
(4,981,475)
26,266
946,355
(9,906)
16,869
100,728
(3,207)
(35,751)
(44,620)
(1,924,565)
-
(146,710)
1,600,000
166,752
323,049
(5,410,460)
(14,458)
16,869
2,418,842
-
219,258
-
-
(21,741)
(2,248,315)
755,661
755,661
740,160
740,160
CONSOLIDATED
2018
$
2017
$
Capital expenditure commitments
Estimated capital expenditure contracted for at reporting date, but not provided for, payable:
950,000
not later than one year
4,500,000
later than one year and not later than five years
later than five years
-
Total
5,450,000
$5 million of the above commitment total relates to PEL 87, offshore Namibia. It is anticipated that this new
project will follow the Company’s normal practice of costs being met by an industry third party after farmout of
its current 75% interest.
-
-
-
-
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
issued
expired
Balance at end of year
2018
2017
Number of
options
-
72,500,000
-
72,500,000
Weighted
average
exercise
price
-
0.006
-
-
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 an additional 494,634,149 options held by the Company as at 30 June 2018, these options were not
issued under the Employee Share Scheme.
61
Notes to the Financial Statements
Notes to the Financial Statements
14. SUBSEQUENT EVENTS
24 September 2018 - Cormorant-1 Well in PEL 37, Offshore Namibia
Pancontinental announced the spud of the Cormorant-1 well in PEL 37, Offshore Namibia on 4 September 2018.
Cormorant-1 was drilled by the Ocean Rig Poseidon, a 6th Generation drillship, in 545 meters of water. The well
tested the oil potential of a mid-Cretaceous marine turbidite “fan” sandstone system. On 24 September 2018,
Pancontinental advised that the Cormorant-1 exploration well reached a total measured depth of 3,855m and
is to be plugged and abandoned as a dry hole.
11 September 2018 – Billion Barrel Oil Potential Assessed in PEL 87, Offshore Namibia
Pancontinental completed the first major stage of assessing the potential prospective oil resources in its 75% owned
PEL 87 project in the Orange Basin, offshore Namibia.
6 September 2018 - Pancontinental receives cash injection of US$5.5 million (~AU$7.6 million) to
complete Africa Energy Corp’s investment in Pancontinental Namibia
Pancontinental Namibia Pty Ltd (“PNPL”) holds a 30% interest in the highly prospective licence PEL 37, offshore
Namibia. Pancontinental Oil and Gas NL (“Pancontinental”) owns 66.67% of PNPL with a wholly owned subsidiary of
Africa Energy Corp. (“Africa Energy”) now holding a 33.33% interest in the Company. The consideration for the
issue of shares was a total of US$7.7 million (approximately AU$10 million) payable by Africa Energy in two stages.
The first payment of US$2.2 million (approximately AU$3 million) was received by Pancontinental at closing. The
second payment of US$5.5 million (approximately AU$7.6 million) was received 6 September 2018 after the spud
of the Cormorant-1 well.
5 September 2018 – Appointment of Executive Director Vesna Petrovic
Mrs Vesna Petrovic was appointed back to the Board as Executive Director. Mrs Petrovic is also Alternate Director
for Pancontinental Chairman David Kennedy.
3 September 2018 - Gas Fields LLC, Tulainyo Project Overruns
On 29 June 2018, Pancontinental Oil & Gas NL (“Pancon”) announced that it had divested its forty percent (40%)
interest in US subsidiary Gas Fields LLC (“Gas Fields”) to Raven Energy Limited (“Raven”). Gas Fields, a wholly
owned subsidiary of Raven, has been earning an interest in the Tulainyo Gas Project in California.
At the time of the divestment, the Operator of the Tulainyo project claimed that Gas Fields (via Raven) owed it
US$321,353.
The Operator is now claiming that:
1) Gas Fields has failed to provide the required completion funds for costs allegedly incurred by the Operator in the
drilling of Tulainyo #2;
2) that the sum allegedly owed by Gas Fields has now increased to US$1,738,273; and
3) as Bombora Natural Energy Pty Ltd had guaranteed the obligations of Gas Fields in the original Farmin Agreement
between Gas Fields, Bombora and Cirque of 21 March 2017, the Operator would look to Bombora to make that
payment in the event that Gas Fields failed to pay it.
Pancontinental, itself, has no liability in relation to this matter.
30 August 2018 –Dempsey Update
Following the previously announced recommencement of gas production from the Dempsey 1-15 well on 18 July
2018, some water accumulated in the well bore and reduced gas production. Production of gas from the Dempsey
well has been shut-in for pressure build-up as a means to clear water from the well bore before recommencing gas
production. The well remains shut in as at the date of this report.
62
Notes to the Financial Statements
Notes to the Financial Statements
15. EARNINGS PER SHARE
CONSOLIDATED
2018
$
2017
$
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
(6,311,330)
(6,311,330)
(4,981,475)
(4,981,475)
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
5,123,168,736
1,942,921,042
-
-
5,320,485,810
1,942,921,042
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
2018
2017
$
$
39,000
26,000
-
-
15,749
-
54,749
9,975
-
35,975
63
Notes to the Financial Statements
Notes to the Financial Statements
17. DIRECTOR AND EXECUTIVE DISCLOSURES
(a) Details of Specified Directors and Specified Executives as at 30 June 2018
(i) Specified Directors for the current financial year
Henry David Kennedy
John Douglas Begg
Ernest Anthony Myers
Roy Barry Rushworth
Marie Michele Malaxos
Vesna Petrovic
John Edward Leach
(ii) Specified Executives for the current financial year
N/A
Non-Executive Chairman
Executive Director, CEO
Non-Executive Director
Non-Executive Director
Non-Executive Director
Alternate Director & Company Secretary
Non-Executive Chairman (resigned July 2017)
Fees paid for 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 Directors did throughout the year provide services in addition to their Non-Executive Director
roles and as such invoiced the Company for those services.
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
Consult-
ing
Post
Employment
Retire-
ment
benefits
Super-
annuati
on
Non
Monetary
benefits
Equity
Options
Other
Total
Specified Directors/Officers
Henry David Kennedy
2018
2017
50,000
50,000
John Douglas Begg **
2018
2017
241,290
-
Ernest Anthony Myers
-
-
-
-
-
-
-
-
2018
2017
38,925
187,500
76,651
-
-
-
Roy Barry Rushworth
2018
2017
38,925 230,981
-
237,500
-
-
Marie Michele Malaxos ***
38,885
-
43,000
-
-
-
140,625
140,625
-
-
John Edward Leach (resigned July 2017)
-
-
-
48,000
2018
2017
-
-
-
-
2018
2017
Vesna Petrovic
2018
2017
Total Remuneration: Specified Directors /Officers
2018
2017
548,650 350,632
-
663,625
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
50,000
-
-
241,290
-
-
60,000
-
-
-
175,576
187,500
-
-
60,000 175,000*
-
-
504,906
237,500
-
-
-
-
-
-
-
-
-
-
81,885
-
60,000
-
-
-
200,625
140,625
-
-
-
-
-
48,000
180,000
-
175,000 1,254,282
663,625
-
* $175,000 paid to Mr Rushworth relates to a settlement payout in lieu of fees. In addition, Mr Rushworth
was issued 87,500,000 ordinary shares with a value of $175,000 as approved by Shareholders at a General
64
Notes to the Financial Statements
Notes to the Financial Statements
Meeting held on 10 July 2018.
** Mr Begg was issued 187,200,026 ordinary shares with a value of $374,400 and 157,853,660 options with
a value of $276,244 as part of Pancontinental’s transactions with Bombora Natural Energy Pty Ltd.
*** Ms Malaxos was issued 39,000,000 ordinary shares with a value of $78,000 and 78,926,829 options
with a value of $138,121 as part of Pancontinental’s transactions with Bombora Natural Energy Pty Ltd.
(c) Directors’ remuneration options: Granted and vested during the year
Granted
Number
Grant
Date
Terms & Conditions for
Each Grant
Value per
option at
grant
date ($)
Exercise
Price
per
share ($)
First
Exercise
Date
Last
Exercise
Date
Specified Directors
Roy Barry Rushworth
Ernest Anthony Myers
Vesna Petrovic
Total
20,000,000 12 Dec 17
20,000,000 12 Dec 17
20,000,000 12 Dec 17
0.003
0.003
0.003
0.006
0.006
0.006
12 Dec 17
12 Dec 17
12 Dec 17
11 Dec 21
11 Dec 21
11 Dec 21
60,000,000
(d) Option holdings of specified Directors and specified Executives
2018
Specified Directors
Henry David Kennedy
John Douglas Begg
Ernest Anthony Myers
Roy Barry Rushworth
Marie Michele Malaxos
Vesna Petrovic
John Edward Leach
(resigned July 2017)
Total
2017
Balance at
beginning of
period
1 July 2017
Granted as
Remuneration
Options
Exercised/
(Expired)
-
-
-
-
-
-
-
-
-
-
20,000,000
20,000,000
-
20,000,000
-
60,000,000
-
-
-
-
-
-
-
-
Net Change
Other
Balance at
end of period
30 June 2018
-
-
-
-
157,853,660* 157,853,660
20,000,000
20,000,000
78,926,829** 78,926,829
20,000,000
-
-
-
236,780,489 296,780,489
Balance at
beginning of
period
1 July 2016
Granted as
Remuneration
Options
Exercised/
(Expired)
Net Change
Other
Balance at
end of period
30 June 2017
Specified Directors
Henry David Kennedy
John Douglas Begg
Ernest Anthony Myers
Roy Barry Rushworth
Marie Michele Malaxos
Vesna Petrovic
John Edward Leach
(resigned July 2017)
Total
500,000
-
750,000
1,000,000
-
-
-
2,250,000
-
-
-
-
-
-
-
-
(500,000)
-
(750,000)
(1,000,000)
-
-
-
(2,250,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Mr Begg was issued 187,200,026 ordinary shares with a value of $374,400 and 157,853,660 options with
a value of $276,244 as part of Pancontinental’s transactions with Bombora Natural Energy Pty Ltd.
** Ms Malaxos was issued 39,000,000 ordinary shares with a value of $78,000 and 78,926,829 options with
a value of $138,121 as part of Pancontinental’s transactions with Bombora Natural Energy Pty Ltd.
65
Notes to the Financial Statements
Notes to the Financial Statements
(e) Shareholdings of Specified Directors and Specified Executives
2018
Ordinary Shares held in
Pancontinental Oil & Gas NL
Specified Directors
Henry David Kennedy
John Douglas Begg
Ernest Anthony Myers
Roy Barry Rushworth
Marie Michele Malaxos
Vesna Petrovic
John Edward Leach (resigned July 2017)
Total
2017
Ordinary Shares held in
Pancontinental Oil & Gas NL
Specified Directors
Henry David Kennedy
John Douglas Begg
Ernest Anthony Myers
Roy Barry Rushworth
Marie Michele Malaxos
Vesna Petrovic
John Edward Leach (resigned July 2017)
Total
18. SEGMENT INFORMATION
Balance
1 July 2017
Acquisitions
(Disposals)
Balance
30 June 2018
336,768,269
-
2,900,715
46,835,610
-
-
-
386,504,594
75,000,000
187,200,026
87,500,000
39,000,000
-
-
388,700,026
411,768,269
187,200,026
2,900,715
134,335,610
39,000,000
-
-
775,204,620
Balance
1 July 2016
Acquisitions
(Disposals)
Balance
30 June 2017
270,101,602
-
1,650,715
36,835,610
-
-
-
308,587,927
66,666,667
-
1,250,000
10,000,000
-
-
-
77,916,667
336,768,269
-
2,900,715
46,835,610
-
-
-
386,504,594
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.
66
Notes to the Financial Statements
Notes to the 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 trade
debtors, 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.
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
2018
$
113,322
755,661
868,983
2017
$
77,571
740,160
817,731
None of the Company’s or Group’s receivables are past due at 30 June 2018, (2017: 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
67
Notes to the Financial Statements
Notes to the Financial Statements
through impairment of loans to subsidiaries and shares held in subsidiaries during the current period was
$3,013,880 (2017: $1,456,301).
Whilst the loans were not payable at 30 June 2018 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.
Pancontinental’s subsidiary Bombora Natural Energy Pty Ltd (“Bombora”), wrote off $2,045,885 relating to an
intercompany loan with Gas Fields LLC, its US incorporated subsidiary which was sold during June 2018.
Bombora also wrote off $461,370 relating to debtors receivable from Raven Energy Limited (“Raven”), its
investment partner in Gas Fields LLC. The basis for the write off is that Raven is currently suspended from the
Australian Securities Exchange and has limited cash reserves.
(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
< 1 year
Contractual cashflows
1-5 years
Trade and other payables - Current
Financial liabilities - Current
Provisions - Non Current
Other payables – Non Current
$
(353,236)
(1,600,000)
-
-
$
-
-
-
(159,688)
> 5 years
$
-
-
(17,935)
-
Total
(1,953,236)
(159,688)
(17,935)
The Company received US$5.5 million (approximately AU$7.6 million) from Africa Energy Corp. as the second
instalment of its investment in subsidiary Pancontinental Namibia Pty Ltd which holds the PEL 37 project. The funds
were received 6 September 2018 after the spud of the Cormorant-1 well.
(c) Market risk:
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect the group’s income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return.
(i) Currency risk:
The Group is from time to time exposed to currency risk on investments, and foreign currency denominated
purchases in a currency other than the respective functional currencies of group entities, primarily the
Australian dollar (AUD). The other material currency that these transactions are denominated in is the (USD).
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.
68
Notes to the Financial Statements
Notes to the Financial Statements
Exposure to currency risk:
The group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
30 June 2018
30 June 2017
AUD
USD
Total
AUD
USD
Total
620,231 135,430
755,661
185,119
555,041
740,160
113,322
(2,130,859)
-
-
113,322
77,571
(2,130,859)
(510,817)
-
-
77,571
(510,817)
(1,397,306) 135,430 (1,261,876)
(248,127)
555,041
306,914
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
2018
0.775
2017
0.754
2018
0.740
2017
0.769
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
2017.
Effect in AUD
30 June 2018
10% strengthening
30 June 2017
10% strengthening
Consolidated
Equity
Profit or
loss
15,048
15,048
61,671
61,671
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
2018
30 June
2017
755,661
740,160
69
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 2018
30 June 2017
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Carrying
amount
113,322
755,661
(2,130,859)
Fair value
113,322
755,661
(2,130,859)
Carrying
amount
77,571
740,160
(510,817)
(1,261,876)
(1,261,876)
306,914
Fair value
77,571
740,160
(510,817)
306,914
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 %
2018
2017
857,823
6,769,885
9,758,567
69.37%
6,998,599
(6,263,751)
(89.50)%
-
7,227,313
7,738,130
93.40%
8,756,452
(4,981,475)
(56.89)%
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.
Notes to the Financial Statements
Notes to the Financial Statements
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 his role as Non-Executive Chairman. The amount paid was
$50,000 (2017: $50,000). Refer note 17.
(b) During the year the company paid fees to Rock Doc Pty Ltd, a company in which Mr Begg has a financial
interest, for CEO and Executive Director fees. The amount paid was $241,290 (2017: Nil). Refer note 17.
(c) During the year the company paid fees to GM Woodmont Pty Ltd, a company in which Ms Malaxos has a
financial interest, for Non-Executive Director fees and consulting. The amount paid was $81,885 (2017:
Nil). Refer note 17.
(d) The Company has effected Directors and Officers Liability Insurance.
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 2018
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
2018
$
2017
$
(6,077,645)
(4,964,349)
(6,077,645)
(4,964,349)
2018
$
2017
$
822,906
7,681,814
814,409
7,637,155
1,890,441
1,908,376
447,340
458,211
107,148,979
992,324
(102,367,865)
5,773,438
103,369,164
100,000
(96,290,220)
7,178,944
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 2018 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 2018.
On behalf of the Board
Vesna Petrovic
Director
Perth, Western Australia
28 September 2018
72
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 2018.
(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
434
278
332
1,538
2,157
4,739
3,210
94,546
932,134
2,800,134
74,812,733
5,328,075,951
5,406,715,498
182,361,356
Listed ordinary shares
Number of
shares
Percentage of
ordinary
shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SUNDOWNER INTERNATIONAL LTD
PERTH SELECT SEAFOODS PTY LTD
CRESCENT NOMINEES LIMITED
ROCK DOC GROUP
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JEMAYA PTY LTD
CITICORP NOMINEES PTY LIMITED
BT PORTFOLIO SERVICES LIMITED
ROY BARRY RUSHWORTH
ZENIX NOMINEES PTY LTD
RAVINA QLD PTY LTD
MR MICHAEL LYNCH + MRS SUSAN LYNCH
MR GEOFFREY DONALD COULTAS
TARNEY HOLDINGS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
GERARD C TOSCAN MANAGEMENT PTY LIMITED
BOTSIS HOLDINGS PTY LTD
VINCELLE PTY LTD
INVESCO NOMINEE PTY LTD
402,673,494
330,000,000
215,835,000
192,200,026
189,669,972
170,000,000
108,263,748
99,553,913
87,500,000
78,926,830
75,000,000
73,000,000
67,000,000
60,000,000
53,305,624
45,037,478
42,000,000
40,000,000
39,000,000
37,991,380
7.45
6.10
3.99
3.55
3.51
3.14
2.00
1.84
1.62
1.46
1.39
1.35
1.24
1.11
0.99
0.83
0.78
0.74
0.72
0.70
2,406,957,465
44.51
76
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
Perth Select Seafood
Tattersfield Group
(e) Permit Schedule
Number of
Shares
411,768,269
319,000,000
92,157,865
Permits
Interests
and
Licence
Permit reference
Interest
Petroleum prospects
Namibia
Namibia
Kenya
USA California
USA California
Australia
PEL 37
PEL 87
L6
Dempsey
Alvares
Walyering
20%
75%
40% offshore, 16% onshore
10%
earning 15%
earning 70%
77
PANCONTINENTAL OIL & GA
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Level One, 10 Ord Street
West Perth WA 6005
Telephone: +61 8 6363 7090
Facsimile: +61 8 6363 7099