P O V A L L E Y E N E R G Y L I M I T E D
ABN 33 087 741 571
A N N U A L R E P O R T 2 0 0 4
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Po Valley Energy is listed on the Australian Stock Exchange
under the symbol PVE.
The Company focuses on developing existing but undeveloped shallow,
onshore gas fi elds in the Po Valley area in Northern Italy; a prolifi c
hydrocarbon province which has produced over 25 tcf of gas since
discovery in the late 1940s. For 50 years the Po Valley hydrocarbon
province was a monopoly of the then State Oil Company ENI, now one
of the 10 largest global oil and gas producers. Following the break-up of
ENI’s monopoly and the liberalisation of the Italian gas market, Po Valley
Energy entered the province in 1998 through its 100% owned subsidiary,
North Sun Italia.
Produced by:
0410 435 659
C O R P O R AT E D I R E C T O R Y
DIRECTORS
Graham Bradley, Chairman
Michael Masterman, Executive Director
AUDITOR
KPMG
Central Park
David McEvoy, Non-Executive Director
152-158 St. Georges Terrace
Byron Pirola, Non-Executive Director
Perth WA 6000
COMPANY SECRETARY
Dom Del Borrello
REGISTERED OFFICE
Level 28, 140 St. Georges Terrace
BANK
ANZ Banking Corporation
Level 7, 77 St George's Terrace
Perth WA 6000
Perth WA 6000
STOCK EXCHANGE LISTING
Telephone: (08) 9278 2533
Po Valley Energy Limited shares are listed
on the Australian Stock Exchange under
the code PVE.
The Company is limited by shares, incorporated
and domiciled in Australia.
SHARE REGISTRY
ASX Perpetual Registrars Limited
Level 8, 580 George Street
Sydney NSW 2000
Telephone: (02) 8280 7424
SOLICITOR
Steinepreis Paganin
Level 4, Next Building
16 Milligan Street
Perth WA 6000
I N D E X
1. CHAIRMAN'S LETTER TO SHAREHOLDERS
2. MANAGING DIRECTOR'S REPORT
3. CORPORATE GOVERNANCE STATEMENT
4. DIRECTORS’ REPORT
3
4
9
13
5.
STATEMENTS OF FINANCIAL PERFORMANCE
17
6.
STATEMENTS OF FINANCIAL POSITION
7.
STATEMENTS OF CASHFLOW
8. NOTES TO THE FINANCIAL STATEMENTS
9. DIRECTORS’ DECLARATION
10. INDEPENDENT AUDIT REPORT
11. SHAREHOLDER INFORMATION
18
19
20
40
41
44
C H A I R M A N ' S L E T T E R T O S H A R E H O L D E R S
Dear Shareholder
On behalf of the Board of Directors of Po Valley Energy I am pleased to present
the fi rst Annual report of the Company since listing on the Australian Stock
Exchange on 14 December 2004.
Since that time the Company has made solid progress against the initiatives set
out in the prospectus. As this report goes to press we have commenced drilling
activities at the fi rst of the new gasfi eld developments in the Po Valley and 2005
promises to be a very active year for the Company.
During 2004 the major milestones achieved were the successful drilling of our
Santa Maddalena fi eld north of Bologna and the raising of $20m in the Initial
Public offering of Po Valley Energy.
2005 should see the drilling of three new wells, the advancement of Santa
Maddalena towards production and commercial sales, and we expect to make
progress in evaluating the Company's exploration areas to assess their potential,
Graham Bradley
identify drilling targets and secure necessary approvals to begin further drilling
in 2006.
I would like to thank our executive team for their hard work in preparing the
Company for public listing, and for laying the groundwork for our 2005 drilling
program. I would also like to thank my fellow directors for their contribution to the
Company's achievements over the past year.
Yours faithfully
Graham Bradley
Chairman
13th April 2005
H I G H L I G H T S
(cid:127) Successfully drilled Santa Maddalena with Joint Venture partner Edison Gas
(cid:127) Raised $22.7m in capital
(cid:127) Listed on the Australian Stock Exchange
(cid:127) Primed the Sillaro and Vitalba gas fi elds for development in 2005
(cid:127) Assumed operator ship and 100% ownership of the
Casone della Sacca Licence area
(cid:127) Upgraded the Pandino and Clodo projects to development status
(cid:127) Increased 2P reserves by 71% to 105.6 bcf
M A N A G I N G D I R E C T O R ' S R E P O R T
Italian Gas Market
The Po Valley in Northern Italy has historically been a prolific
hydrocarbon province. Over 23tcf of gas has been produced from the
province since it was brought into production in the early 1950s – this is
over three times the production of Australia’s Northwest Shelf. Current
production levels in the province are some 476bcf per annum, which is
similar to the levels of the Northwest Shelf.
The gas province sits immediately below one of the largest and highest
priced gas consumption regions in Europe. Total gas consumption in Italy
in 2004 was 2.7tcf – four times the size of Australia – and has been
growing at a rapid rate of 5% per annum. Imports accounts for over 80%
of supply. The combination of comparatively rapid demand growth and
declining domestic production has significantly tightened import capacity.
Prices are high by world standards (approximately A$8.00/’000cf) and
have been steadily increasing over the last three years.
Michael Masterman
PO VALLEY GAS PROVINCE IN PERSPECTIVE
Cumulative Production
Billions of cubic ft
25,000
20,000
15,000
10,000
5,000
0
1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
Annual Production
Billions of cubic ft
800
700
600
500
400
300
200
100
0
Po Valley
22,809 Bcf
North West
Shelf
7,386 Bcf
North West
Shelf
635 Bcf
Po Valley
476 Bcf
1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
4
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
M A N A G I N G D I R E C T O R ' S R E P O R T
M A N A G I N G D I R E C T O R S R E P O R T
Po Valley Licences
PVE has 4 licences and one licence application in the Po Valley region. Following the acquisition of the 45%
interest in Casone della Sacca held by ENI, the Company owns 100% of Cascina San Pietro, Casone della
Sacca, Crocetta and Terra del Sol and, in joint venture with Edison Gas 50% of San Vincenzo licence areas.
Vitalba
Pandino
Santa
Maddalena
Sillaro
PO VALLEY ENERGY LTD
ITALY
PERMIT LOCATION
Santa Maddalena – San Vincenzo Licence (50% PVE)
Santa Maddalena #1 was successfully drilled in June 2004 at a depth of 1005 metres. The well was
cased to a depth of 1,005 metres and was completed with a single production string and gravel packing
covering 16.5 metres in July 2004. A 6 day production test was carried out in July 2004 that indicated an
initial daily production rate of 4mcf for each of the two levels tested with no liquids and high permeability
(~900md).
Under Italian law the current exploration licence has to be upgraded to a production licence and an
application has been prepared for submission. Grant of the production concession application is expected in
the second half of 2005.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
5
M A N A G I N G D I R E C T O R ' S R E P O R T
Vitalba – Cascina san Pietro Licence
(100% PVE)
Vitalba, 23 kms to the east of Milan will be the first of
the Company’s projects to be drilled since listing. The
Vitalba gas field has 3P reserves of 8.6bcf of gas.
Civil works are complete and drilling will commence in
April 2005.
Sillaro – Crocetta Licence (100% PVE)
Sillaro is PVE’s largest gas field and it is located 23
km east of Bologna. The field contains estimated 3P
reserves of 53.4bcf in two reservoirs at 2000m and
2500m . The field will be drilled following the drilling
of Vitalba in the 2nd quarter of 2005 with a second
well expected to be drilled later in the year.
Drilling at Santa Maddalena
SILLARO WELL CORRELATION AND GAS BEARING LAYERS
6
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
M A N A G I N G D I R E C T O R ' S R E P O R T
PANDINO ANTICLINE STRUCTURE
Pandino – Cascina san Pietro
Licence (100% PVE)
Pandino in the Cascina san Pietro Licence
is a major new addition to the Company’s
development portfolio. Following an
exhaustive review of the historic data,
geological and reservoir modelling, Pandino
has been upgraded to development status
and is expected to be drilled in 2006.
The field was first developed by ENI in
1955. Estimated 3P reserves are 45.3bcf.
Two well locations have been selected for
drilling and PVE has initiated the process of
applying for the necessary environmental
approvals for the planned drilling program.
Clodo and Marleba – Casone
della Sacca Licence (100% PVE)
The Casone della Sacca Licence is located
30km to the west of Bologna and holds the Clodo (formerly Bando) gasfield and the Marlerba prospect.
PVE reached an agreement with ENI to take over ownership and ENI’s 45% interest in the Licence area.
PVE has selected drill targets in Clodo and Marlerba and expects to drill one of these prospects in 2006.
Terre del Sole (100% PVE)
The company is undertaking prepatory environmental study work in order to be granted environmental
approvals.
Gas Reserves
The total 3P gas reserves of PVE have increased to 129.6bcf from 84.2bcf in the November 2004
prospectus following the extensive review and upgrade to development status of the Pandino project. The
reserves on a PVE equity basis are set out below:
Field
Permit
PVE Interest
Proven
Probable
Possible
Total
Santa Maddalena
San Vincenzo
Crocetta
50%
100%
Cascina san Pietro
100%
6.50
0.00
3.60
Cascina san Pietro
100%
15.20
7.10
38.90
5.10
29.20
8.60
14.50
0.00
0.90
22.20
53.40
8.60
45.30
Sillaro
Vitalba
Pandino
Total
25.30
80.30
24.00
129.60
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
7
M A N A G I N G D I R E C T O R ' S R E P O R T
Finance
During 2004 the Company raised a total of $22.7 million through seed issues and the $20 million IPO
in December. Funds have been used to drive forward development of the Company and it’s gasfields and
prospects. Details are set out in the attached statement of Financial Performance. Cash at bank at
31 December 2004 was $18.03m. The Company's pre-drilling preparation work is running according to
budget and broadly in line with prospectus estimates.
Management
The Company has put in place during 2004 a management team with the skills and experience necessary for the
Company at this stage of it’s development. The key executives provide the breadth of skills needed to achieve the
short and long-term objectives of the company. As PVE moves from development into production and operations,
the Company will review and expand the number and skill mix of management as required.
Conclusion
Following the ground work laid in 2004, PVE starts 2005 well capitalized with a solid and growing development
portfolio of gasfield assets located in a highly prospective and commercially attractive market.
Market conditions are exceptionally strong and the core objective of the Company will be to drive its projects
forward to gas production and sales.
Michael Masterman
Managing Director and
Chief Executive Officer
13th April 2005
8
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
The Directors are committed to the principles underpinning the best practice in corporate governance. The
Directors have noted carefully the recent guidance on the principles of corporate governance issued by the
ASX. The Directors support the intent of these principles, noting that some recognition is required in their
practical application given the limited size and scope of the Company at this time.
The Directors’ overriding objective is to increase shareholder value within an appropriate framework
that protects the rights and enhances the interests of Shareholders and ensures the Company is properly
managed.
A description of the Company’s main corporate governance practices is set out below.
The Board
The board ultimately takes responsibility for corporate governance and operates in accordance with the
Company’s Constitution. Directors are initially appointed by the board subject to election by Shareholders at
the next annual general meeting with one-third of the board being subject to re-election at each subsequent
annual general meeting.
The board comprises four directors; three non-executive directors and one executive director (the CEO). Two
directors, including the Chairman, are independent non-executive directors. The board believes that this
is an appropriate composition for a company at this stage of its development. Directors have the right, in
connection with their duties and responsibility as Directors, to seek independent professional advice at the
Company’s expense. Prior approval of the Chairman is required which will not be unreasonably withheld.
The board accepts that it has the responsibility for internal control procedures within the Company.
Compliance with these procedures covering financial reporting, quality and integrity of personnel and
operation control is to be regularly monitored. A number of areas are to be subject to regular reporting to the
board such as finance, trade practices, industrial relations, environmental compliance, workplace health and
safety and insurance matters.
All Directors, managers and employees are expected to act with the utmost integrity and objectivity, striving
at all times to enhance the reputation and performance of the Company.
Audit and Risk Committee
The Audit and Risk Committee provides advice and assistance to the board in fulfilling the board’s
responsibilities relating to the Company’s financial statements, financial and market reporting processes,
internal accounting and financial control systems, internal audit, external audit, risk management and such
other matters as the board may request from time to time.
Responsibilities
(cid:127)
Standards and Quality:
The Committee oversees the adequacy and effectiveness of the Company’s accounting and financial
policies and controls, and risk management systems, including periodic discussions with management and
external auditors, and seeks assurance of compliance with relevant regulatory and statutory requirements.
(cid:127)
Financial Reports:
The Committee oversees the Company’s financial reporting process and reports on the results of its
activities to the board. Specifically, the Committee reviews, with management and the external auditor,
the Company’s annual and interim financial statements and reports to Shareholders, seeking assurance
that the external auditor is satisfied with the disclosures and content of those financial statements.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
9
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
(cid:127) External Audit:
The Committee discusses with the external auditors the overall scope and plans for their audit activities,
including staffing, contractual arrangements and fees. It reviews all audit reports provided by the external
auditor. The Committee also specifically reviews any proposed activity or service by the providers of the
external audit unrelated to external audit assurance activities. The external auditor will be requested to
attend annual general meetings, and be available to answer questions from the shareholders.
(cid:127) Appointment of External Auditor:
The board appoints the external auditor. The Committee reviews the performance of the external auditor
annually, and can recommend to the board any changes to selection it deems appropriate.
(cid:127)
Internal Control:
The Committee examines the adequacy of the nature, extent and effectiveness of the internal control
processes of the Company.
(cid:127) Risk Management:
The Committee oversees the risk management framework of the Company, and reviews risk
management reports.
Processes
(cid:127) Communications:
The Committee maintains free and open communications with the external auditors and management.
(cid:127) Reporting:
The issues discussed at each Committee meeting are reported at the next board meeting.
(cid:127) Access:
In exercising its oversight role, the Committee may investigate any matter relevant to its charter or
relating to its role and scope, and for this purpose has full access to the Company’s financial reporting
and practices.
(cid:127) Charter:
The Committee reviews and reassesses this Charter at least annually, and recommends any changes
it considers appropriate to the board. The Committee may also undertake any other special duties as
requested by the board.
The current members of the committee are:
Byron Pirola (Chairman), Graham Bradley and David McEvoy.
10
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
Remuneration Committee
The Remuneration Committee must have a majority of non-executive directors. The main role of the Remuneration
Committee is to:
(cid:127) review the performance and remuneration of the Chief Executive Officer, and in conjunction with the Chief
Executive Officer, review the engagement, performance and remuneration of senior executives of the Company;
and
(cid:127) recommend to the board appropriate terms and conditions of engagement and remuneration of Directors within
the aggregate limits approved by Shareholders.
In assessing the performance of the Chief Executive Officer and senior executives, the Committee gives considerable
weight to the contribution of the employee towards the achievement of key performance indicators of the Company.
Where necessary the committee can obtain external advice in respect to the structure and level of remuneration
packages.
The current members of the committee are Graham Bradley (Chairman) and Byron Pirola.
Nominations Committee
The role of the Nominations Committee is to provide recommendations to the board on matters including:
(cid:127) composition of the board and competencies of board members;
(cid:127) appointment and evaluation of the Chief Executive Officer;
(cid:127) succession planning for board members and senior management; and
(cid:127) processes for the evaluation of the performance of the Chief Executive Officers and Directors.
The current members of the committee are Graham Bradley (Chairman) and Byron Pirola.
Standards and Codes of Conduct
All executives and employees are required to abide by laws and regulations, to respect confidentiality and the
proper handling of information and act with the highest standards of honesty, integrity, objectivity and ethics in
all dealings with each other, the Company, customers, suppliers and the community. The codes of conduct will
be regularly reviewed and updated as necessary to ensure they reflect the highest standards of behaviour and
professionalism.
Continuous disclosure
The Directors are committed to keeping the market fully informed of material developments to ensure compliance
with the Listing Rules and the Corporations Act. At each board meeting specific consideration is to be given as to
whether any matters should be disclosed under the Company’s continuous disclosure policy.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T 11
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
Share Trading
Directors, management and other employees as nominated will normally be permitted to trade in securities
during an eight week period commencing two business days after the announcement to ASX of the half yearly
and annual results and after the conclusion of the Company’s annual general meeting, provided that the
person is not in possession of price sensitive information and the trading is not for short term or speculative
gain. Any trading outside these periods can only be conducted with the prior written approval of the
Chairman.
Related party matters
Directors and senior management will be required to advise the Chairman of any related party contract or
potential contract. The Chairman will inform the board and the reporting party will be required to remove
himself/herself from all discussions and decisions involving the matter. The board may, when appropriate,
take further steps to avoid conflicts of interest in related party matters.
Shareholder relations
The Directors aim to ensure that the shareholders, on behalf of whom they act, are informed of all information
necessary to assess the performance of the Company. Information on all major developments affecting the
company is to be communicated to the shareholders through:
(cid:127) the Annual Report;
(cid:127) half yearly reports;
(cid:127) the Annual General Meeting and other meetings called to obtain approval for board action as
appropriate; and
(cid:127) the Company’s web site.
12
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
D I R E C T O R S ' R E P O R T
D I R E C T O R S ' R E P O R T
The directors present their general purpose financial report on the consolidated entity of Po Valley Energy
Limited (formerly Po Valley Energy Pty Limited) and the entities it controlled at the end of, or during, the year
ended 31 December 2004.
The following persons were directors of Po Valley Energy Limited (“PVE” or “the Company”) during the
financial year, and up to the date of this report:-
G Bradley
D McEvoy
D Del Borrello1
M Masterman
B Pirola
(1) Mr D Del Borrello resigned as a Director of the Company on 30/9/2004.
Principal Activities
The principal continuing activity of the group in the course of the year was the exploration for gas in the
Po Valley region in Italy.
Operating Results
The consolidated loss of the consolidated entity after income tax amounted to $1,044,700.
During 2004, the Company successfully drilled the Santa Maddalena #1 well in conjunction with joint
venture partner Edison Gas S.p.A in the San Vincenzo licence.
Civil works and purchase of casing equipment commenced late in 2004 in preparation to drill the Sillaro
wells in the Crocetta Licence and the Vitalba well in the Cascina San Pietro Licence.
The Company successfully completed an Initial Public Offering (“IPO”) on 14 December 2004 raising
$20,000,000. Net cash received from the IPO was $18,879,082.
Dividends
The directors report that during the year ended 31 December 2004 no dividends were declared or paid.
Information on Directors
The board is composed of a majority of non-executive Directors, including the Chairman. The Chairman of
the board is elected by the board and is an independent director.
Graham Bradley — Chairman BA, LLB (Hons), LLM, FAICD, Age 56
Graham joined PVE as a director and Chairman in September 2004 and is based in Sydney. He is an
experienced chief executive and company director. Graham previously served as Chief Executive Officer
of one of Australia’s major listed funds management and financial services groups, Perpetual Trustees
Australia. He was formerly Managing Partner and Chief Executive Officer of national law firm Blake Dawson
Waldron and was a senior partner of McKinsey & Company. Mr Bradley is currently a director of Stockland
Corporation, Singapore Telecommunications, MBF Australia and Queensland Investment Corporation. He is
Chairman of HSBC Bank Australia, Proteome Systems and Film Finance Corporation Australia.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
13
D I R E C T O R S ' R E P O R T
Michael Masterman — Managing Director and CEO, BEcHons, Age 42
Michael is a co-founder of PVE and is based in Europe. Michael took up the position of Executive Chairman
and CEO of PVE and Northsun Italia S.p.A. in 2002. Prior to joining PVE he was CFO and Executive Director
of Anaconda Nickel (now Minara Resources). Michael oversaw the financing of the US$1 billion Murrin
Murrin Nickel and Cobalt project in Western Australia, involving the negotiation of a US$220m joint venture
agreement with Glencore International and the raising of US$420m in project finance from a US capital
markets issues – the first of its kind for a green fields mining project. Prior to joining Anaconda Nickel, he
spent 8 years at McKinsey & Company serving major international resources companies principally in the
area of strategy and development. He is also Executive Chairman of Caspian Holdings Plc, an AIM listed
company with oil interests in Kazakhstan.
David McEvoy — Non Executive Director, BSc, Grad Diploma (Appl. Geophysics), Age 58
David joined PVE as a Director in September 2004 and is based in Sydney. He has over 35 years
experience in the oil and gas industry since joining Esso Australia Limited in 1969. Key positions held
within Exxon affiliates included Esso Australia Limited’s Exploration General Manager, Exploration and
Development Vice President for Esso Resources Canada and Regional Vice President of Exxon Exploration
Company responsible for Exxon’s exploration activities in the Far East, USA, Canada and South America.
He was recently the Business Development Vice President and member of the Management Committee of
Exxon (subsequently ExxonMobil) Exploration Company, responsible for new exploration and development
opportunities worldwide. He is currently a Non-Executive Director of Innamincka Petroleum.
Byron Pirola — Non Executive Director, BSc, PhD, Age 44
Byron is a co-founder of PVE and is based in Sydney. He is currently a Director of Port Jackson Partners
Limited, a Sydney based strategy management consulting firm. Prior to joining Port Jackson Partners in 1992,
Byron spent six years with McKinsey & Company working out of the Sydney, New York and London Offices
and across the Asian Region. He has extensive experience in advising CEOs and boards of both large public
and small developing companies across a wide range of industries and geographies.
Meeting of Directors
The number of formal meetings of the Board of Directors held during the financial year and the number of
meetings attended by each director is provided below:
No. of board
meetings held meetings eligible meetings attended
No. of board
No. of board
No. of Audit
Committee
No. of Audit
Committee
meetings held meetings attended
6
12
6
12
1
1
1
1
1
1
1
-
1
1
-
G Bradley
M Masterman
D McEvoy
B Pirola
D Del Borrello
12
12
12
12
12
to attend
6
12
6
12
1
14
14
P O V A L L E Y E N E R G Y P R O S P E C T U S
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
D I R E C T O R S ' R E P O R T
Subsequent Events
Since 31 December 2004, the consolidated entity has undertaken the following significant events:
(cid:127) Commencement of civil works and acquisition of key well equipment for the Sillaro and Vitalba gas fields.
Likely Developments
During 2005 PVE intends to drill its Vitalba and Sillaro Gas fields and bring its Santa Maddalena gas field
into production. Vitalba and Sillaro will be drilled in the second quarter of 2005. PVE and its joint venture
partner Edison Gas S.p.A (“Edison”) are progressing development of Santa Maddalena.
The Company will continue the program of scoping it’s reserves and identifying drill sites for it’s exsiting
licence areas. In addition to the above exploration and development activities, the Company is pursuing
an active program to acquire by application new gas fields and exploration prospects in the Po Valley
Hydrocarbon region.
Environmental Regulation
The consolidated entity is required to carry out its activities in accordance with regulations determined by
both Italian National and regional entities in the areas in which it undertakes its exploration, development
and production activities. The consolidated entity is not aware of any matter which requires disclosure with
respect to any significant environmental regulation in respect of its operating activities.
Share Options
Details of share options over ordinary shares issued during the year and on issue at 31 December 2004 are
set out in Note 19 to the Financial Statements and form part of this report.
Directors’ Interests
At the date of this report, the direct and indirect interests of the Directors in the shares and options of the
Company were:
Options over Ordinary Shares
Ordinary Shares
G Bradley
323,981
M Masterman
21,339,242
D McEvoy
B Pirola
J Masterman1
I Masterman1
G Masterman1
129,593
12,010,821
4,788,444
500,000
388,778
(1) Related parties to M Masterman
Directors’ and Officers’ Remuneration
$1.00 expiring
31 October 08
1,000,000
–
500,000
200,000
–
–
–
$1.25 expiring
31 October 08
–
1,500,000
–
–
–
–
–
The Remuneration Committee is responsible for determining and reviewing compensation arrangements for
the Directors, the Chief Executive Officer and the executive team. The Remuneration Committee assesses the
appropriateness of the nature and amount of entitlements of such officers on a periodic basis by reference to
relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit
from the retention of a high quality board and executive team.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T 15
D I R E C T O R S ' R E P O R T
Executive directors and senior executives may receive bonuses based on the achievement of specific goals
related to the performance of the consolidated entity (including operational results and cash flow). Options
may also be issued although the ability to exercise the options is conditional on the Company achieving
certain performance hurdles.
Details of the nature and amount of each major element of the remuneration provided to each director and
officer of the Company and the consolidated entity during the financial year are as follows:
Salary
& Fees Bonus
$
$
Superannuation
benefits
$
Number
Value
of Options of Options
$
Total
$
Specified directors
G Bradley (Chairman)
2004
15,000
D McEvoy
B Pirola
2004
10,000
2004
10,000
M Masterman (CEO)
2004 152,000
Specified executives
D Greil
2004
57,804
D Del Borrello
2004
5,000
-
-
-
-
-
-
1,350
1,000,000
292,500 308,850
900
900
500,000
146,250 157,150
200,000
58,500
69,400
-
-
-
1,500,000
61,128 213,128
900,000
36,677
94,481
150,000
6,113
11,113
Further details of Director and Executive Remuneration are set out in Note 17 to the Financial Statements and
form part of this report.
Annual General Meeting
The Annual General Meeting of the Company will be held 10.30am on the 19th May, 2005 at Level 39,
Citigroup Centre, 2 Park Street, Sydney NSW.
Indemnities and Insurance
The Company has agreed to indemnify current Directors against any liability or legal costs incurred by a
Director as an officer of the Company or entities within the consolidated entity or in connection with any legal
proceedings involving the Company or entities within the consolidated entity which is brought against the
director as a result of his capacity as an officer.
During the financial year the Company paid insurance premiums ($58,150) in respect of Directors’ and
Officers’ Liability insurance contracts.
This report has been made in accordance with a resolution of Directors.
Graham Bradley
Chairman
Sydney, NSW Australia
21 March 2005
16
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
S T A T E M E N T S O F F I N A N C I A L P E R F O R M A N C E
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
Revenue from ordinary activities
Borrowing costs
General and administration
Exploration expenditure written off
Other expenses
Loss from ordinary activities
before income tax expense
Income tax expense
Loss from ordinary activities after
income tax expense
Net loss attributable to members of
Po Valley Energy Limited
Total changes in equity other than those
resulting from Transactions with
Owners as Owners
NOTES
CONSOLIDATED
COMPANY
2
3
3
4
2004
$
195,057
(40,042)
2004
$
18,970
(38,687)
(1,132,856)
(724,799)
(30,451)
(36,408)
-
(2,208)
(1,044,700)
(746,724)
-
-
(1,044,700)
(746,724)
15
(1,044,700)
(746,724)
(1,044,700)
(746,724)
Earnings per share (cents)
Diluted earnings per share (cents)
24
24
(7.59)
(7.59)
The above statements of financial performance should be read in conjunction with the accompanying notes.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
17
17
S T A T E M E N T S O F F I N A N C I A L P O S I T I O N
A S A T 3 1 D E C E M B E R 2 0 0 4
NOTES
CONSOLIDATED
COMPANY
2004
$
2004
$
Current Assets
Cash
Receivables
Other Assets
Total Current Assets
Non-Current Assets
Investments
Receivables
Plant & Equipment
Resource Property Costs
Total Non-Current Assets
Total Assets
Current Liabilities
Provisions
Payables
Interest Bearing Liabilities
Total Current Liabilities
Non-Current Liabilities
Interest Bearing Liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Equity
Accumulated Losses
Parent Entity Interest
Total Equity
Commitments for Expenditure
Contingent Liabilities
18,030,792
523,428
16,561
17,821,432
46,726
–
18,570,781
17,868,158
–
–
826,213
11,869,449
10,749,314
1,740,215
–
–
12,695,662
12,489,529
31,266,443
30,357,687
21,692
1,939,581
513,160
2,474,433
–
–
–
393,444
513,160
906,604
–
–
2,474,433
906,604
28,792,010
29,451,083
30,276,671
(1,484,661)
30,276,671
(825,588)
28,792,010
29,451,083
28,792,010
29,451,083
5
6
7
8
9
10
11
12
13
13
14
15
25
27
The above statements of financial position should be read in conjunction with the accompanying notes.
18
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
S T A T E M E N T S O F C A S H F L O W
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
NOTES
CONSOLIDATED
COMPANY
2004
$
44,986
(574,373)
18,991
(3,142)
2004
$
–
(419,936)
18,970
–
Net cash outflow from operating activities
23
(513,538)
(400,966)
Cash flows from investing activities
Payments for non-current assets
Payments for exploration expenditure
Payments for investments
Amounts advanced to related parties
(809,692)
(2,088,805)
–
(3,376)
(1,531,571)
(1,754,821)
Net cash outflow from investing activities
(2,901,873)
(3,286,392)
Cash flows from financing activities
Proceeds from the issues of shares
Payments for share issue costs
Loans received from related parties
Repayment of borrowings
22,678,500
(1,120,918)
–
(66,411)
22,678,500
(1,120,918)
–
(66,411)
Net cash inflow from financing activities
21,491,171
21,491,171
Net increase in cash held
18,075,760
17,803,813
Cash at the beginning of the financial year
Effects of exchange rate changes on cash
69,589
(114,557)
42,518
(24,899)
Cash at the end of the financial year
5
18,030,792
17,821,432
The above statements of cash flows should be read in conjunction with the accompanying notes
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
19
19
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1 FINANCIAL REPORTING FRAMEWORK
The financial report is a general purpose financial report which has been prepared in accordance with
the Corporations Act 2001, Accounting Standards and Urgent Issues Group Consensus Views, and other
authoritative pronouncements of the Australian Accounting Standards Board.
The financial report has been prepared on the basis of historical cost and except where stated, does not take
into account changing money values or current valuations of non-current assets. Cost is based on the fair
values of the consideration given in exchange for assets.
1.2 SIGNIFICANT ACCOUNTING POLICIES
Accounting policies are selected and applied in a manner which ensures that the resulting financial
information satisfies the concepts of relevance and reliability, thereby, ensuring that the substance of the
underlying transactions and other events is reported.
The following significant accounting policies have been adopted in the preparation and presentation of the
financial report:
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by
Po Valley Energy Limited (“parent entity”) as at 31 December 2004 and the results of all controlled entities
for the year then ended. Po Valley Energy Limited and its controlled entities together are referred to in this
financial report as the consolidated entity. A list of controlled entities appears in Note 7.
The effects of all transactions between entities in the consolidated entity are eliminated in full. Outside equity
interests in the results and equity of controlled entities are shown separately in the consolidated statement of
financial performance and statement of financial position respectively.
When control of an entity is obtained during the financial year, its results are included in the consolidated
statement of financial performance from the date on which control commences.
Joint Ventures
A joint venture is either an entity or operation that is jointly controlled by the consolidated entity.
Joint Venture Operations
The consolidated entity’s interests in unincorporated joint ventures are brought to account by including its
proportionate share of joint venture operations’ assets, liabilities and expenses and the consolidated entity’s
revenue from the sale of its share of output on a line-by-line basis, from the date joint control commences to
the date joint control ceases.
20
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) TAXATION
The liability method of tax effect accounting procedures are followed whereby the income tax expense is
matched with the accounting profit after allowing for permanent differences.
The Company has not entered the tax consolidation regime. Each entity will be taxed on a stand alone basis.
Tax losses may not be transferred between group companies and remain with the entity that incurred the loss.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond
reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their
realisation is virtually certain. The tax effects of capital losses are not recorded unless realisation is
virtually certain.
(c) CASH
For purposes of the statement of cash flows, cash includes short term deposits less bank overdrafts which are
readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis.
(d) RECOVERABLE AMOUNT OF NON-CURRENT ASSETS
Non current assets other than exploration and evaluation expenditure are written down to recoverable
amount where the carrying value of any non current asset exceeds recoverable amount. In determining the
recoverable amount of non current assets, the expected net cash flows have not been discounted to their
present value.
(e) PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are recorded at cost and depreciated over their estimated useful lives
using the straight line method. The useful lives of each class of asset falls within the following ranges:
Office furniture & equipment
2004
3 – 5 years
(f)
INVESTMENTS
Investments in controlled entities are valued in the parent entity’s financial statements at cost less amounts
written off for permanent diminution in the value of investments.
(g) PAYABLES
Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to
make future payments resulting from the purchase of goods and services.
(h) RESOURCE PROPERTIES
Resource property costs are accumulated in respect of each separate area of interest. Resource property
costs are carried forward where right of tenure of the area of interest is current and they are expected to
be recouped through sale or successful development and exploitation of the area of interest, or, where
exploration and evaluation activities in the area of interest have not yet reached a stage that permits
reasonable assessment of the existence of economically recoverable reserves.
Resource properties include the cost of acquiring and developing resource properties, mineral rights and
exploration, evaluation and development expenditure relating to production and exploration areas.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
21
21
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Resource properties are amortised using the unit of production basis over the economically recoverable
reserves. Amortisation of resource properties commences from the date when commercial production
commences. When there is little likelihood of a mineral right being exploited, or the value of the exploitable
mineral right has diminished below cost, the asset is written down to its recoverable amount.
Cumulative exploration, evaluation and development expenditure which no longer satisfies the above policy is
no longer carried forward as an asset, but is charged against, and shown as a deduction from operating profit.
(i) REVENUE RECOGNITION
Revenue from the sale of goods (gas) and disposal of other assets is recognised when the consolidated entity
has passes control of the goods or other assets to the buyer.
Interest revenue
Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.
(j) RECEIVABLES
Trade receivables and other receivables are recorded at amounts due less any allowance for doubtful debts.
The collectibility of debts is assessed at the reporting date and specific provision is made for any doubtful
accounts. Bad debts are written off in the period they are identified.
(k) EMPLOYEE BENEFITS
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long
service leave, and sick leave when it is probable that settlement will be required and they are capable of
being measured reliably.
Provisions made in respect of wages and salaries, annual leave, sick leave, and other employee benefits
expected to be settled within 12 months, are measured at their nominal values using the remuneration rate
expected to apply at the time of settlement.
Provisions made in respect of other employee benefits which are not expected to be settled within 12 months
are measured as the present value of the estimated future cash outflows to be made by the consolidated entity
in respect of services provided by employees up to reporting date.
Superannuation
The consolidated entity contributes to superannuation plans. Contributions are recognised as an expense as
they are made.
(l) COMPARATIVES
The Company was not a disclosing entity in the previous year and therefore comparative information has not
been disclosed.
22
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) FOREIGN CURRENCY
Foreign Currency Transactions
All foreign currency transactions during the financial year are brought to account using the monthly
average exchange rate. Foreign currency monetary items at reporting date are translated at the
exchange rate existing at that date.
Exchange differences are recognised in net profit or loss in the period in which they arise except
exchange differences on transactions entered into in order to hedge the purchase or sale of specific
goods and services are deferred and included in the measurement of the purchase or sale.
The assets and liabilities of foreign operations, including controlled entities, associates and joint
ventures, that are integrated are translated using the temporal method. Monetary assets and liabilities
are translated into Australian currency at rates of exchange current at reporting date, while
non-monetary items and revenue and expense items are translated at exchange rates current when
the transactions occurred. Exchange differences arising on translation are brought to account in the
statement of financial performance.
In the prior year, Northsun Italia S.p.A., being a controlled entity, was treated as a self-sustaining
foreign operation.
Foreign Operations
The assets and liabilities of foreign operations, including controlled entities, associates and joint
ventures, that are integrated are translated using the temporal method. Monetary assets and liabilities
are translated into Australian currency at rates of exchange current at reporting date, while
non-monetary items and revenue and expense items are translated at exchange rates current when
the transactions occurred. Exchange differences arising on translation are brought to account in the
statement of financial performance.
In the prior year, Northsun Italia S.p.A., being a controlled entity, was treated as a self-sustaining
foreign operation.
(n)
INTEREST-BEARING LIABILITIES
Bank loans and other loans are recorded at an amount equal to the net proceeds received. Interest
expense is recognised on an accrual basis.
(o) ACQUISITION OF ASSETS
Assets acquired are recorded at the cost of acquisition, being the purchase consideration determined as
at the date of acquisition plus costs incidental to the acquisition. When equity instruments are issued as
consideration, their market price at date of acquisition is used as fair value.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
23
23
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) PROVISION FOR RESTORATION AND ABANDONMENT
A provision for restoration and abandonment costs is accumulated by charging to the statements of financial
performance the expected expenditure to be incurred on cessation of each area of interest. The provision
is calculated so that at the end of operations the provision will be adequate to meet net restoration and
abandonment costs, including the removal of facilities, abandonment of wells and restoration of affected
areas. This method recognises the estimated future abandonment restoration and obligations incrementally
over the life of the proved and probable reserves on a unit of production basis. Estimates of the future
restoration obligation are based on current legal requirements and technology and are determined in current
dollars on an undiscounted basis. The adequacy of the provision for restoration and abandonment is
reassessed regularly. Changes in cost estimates are dealt with on a prospective basis.
(q) EARNINGS PER SHARE
Basic earnings per share (“EPS”) is calculated by dividing the net profit attributable to members of the parent
entity for the reporting period, after excluding any costs of servicing equity (other than ordinary shares and
converting preference shares classified as ordinary shares for EPS calculation purposes), by the weighted
average number of ordinary shares of the Company, adjusted for any bonus issue.
Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of financing
costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion
to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of
ordinary shares and dilutive potential ordinary shares adjusted for any bonus issue.
(r) USE AND REVISION OF ACCOUNTING ESTIMATES
The preparation of the financial report requires the making of estimations and assumptions that affect the
recognised amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities.
The estimates and associated assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are viewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
(s) INTERNATIONAL FINANCIAL REPORTING STANDARDS
For reporting periods beginning on or after 1 January 2005, the consolidated entity must comply with International
Financial Reporting Standards (“IFRS”) as issued by the Australian Accounting Standards Board (“AASB”).
This financial report has been prepared in accordance with Australian accounting standards and other financial
reporting requirements (Australian GAAP). The differences between Australian GAAP and IFRS identified to
date as potentially having a significant effect on the consolidated entity’s financial performance and financial
position are summarised below. The summary should not be taken as an exhaustive list of all the differences
between Australia GAAP and IFRS. No attempt has been made to identify all disclosure, presentation or
classification differences that would affect the manner in which transactions or events are presented.
The consolidated entity has not quantified the effects of the differences discussed below. Accordingly, there
can be no assurances that the consolidated financial performance and financial position as disclosed in this
financial report would not be significantly different if determined in accordance with IFRS.
24
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The key potential implications of the conversion to IFRS on the consolidated entity are as follows:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
financial instruments must be recognised in the statement of financial position and all derivatives and most
financial assets must be carried at fair value;
income tax will be calculated based on the “balance sheet” approach, which will result in more deferred
tax assets and liabilities and, as tax effects follow the underlying transaction, some tax effects will be
recognised in equity;
impairments of assets will be determined on a discounted basis, with strict tests for determining whether
goodwill and cash-generating operations have been impaired;
equity-based compensation in the form of shares and options will be recognised as expenses in the
periods during which the employee provides related services;
provisions for future restoration and abandonment costs will be recognised as an asset and liability up
front; and
the AASB has recently released AASB 6 “Exploration for and Evaluation of Mineral Resources” which
is not expected to cause significant changes to the Consolidated Entity’s accounting for capitalised
exploration and evaluation expenditure. AASB 6 continues to allow an area of interest approach to
impairment and the standard effectively permits the grandfathering of existing accounting treatments of
exploration and evaluation expenditure. Impairment tests of exploration and evaluation assets will be
required once technical feasibility and commercial viability is determinable.
The Board has established a formal project, monitored by the Audit and Risk Committee, to achieve transition
to IFRS reporting, beginning with the half-year ended 30 June, 2005. The Company’s implementation project
consists of three phases as described below.
Assessment and planning phase
The assessment and planning phase aims to produce a high level overview of the impacts of conversion to
IFRS reporting on existing accounting and reporting policies and procedures, systems and processes, business
structures and staff.
This phase includes:
(cid:127)
(cid:127)
high level identification of the key differences in accounting policies and disclosures that are expected to
arise from adopting IFRS;
assessment of new information requirements affecting management information systems, as well as the
impact on the business and its key processes;
(cid:127)
evaluation of the implications for staff, for example training requirements; and
(cid:127)
preparation of a conversion plan for expected changes to accounting policies, reporting structures,
systems, accounting and business processes and staff training.
The Company expects to complete the assessment and planning phase by June 2005.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
25
25
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Design phase
The design phase aims to formulate the changes required to existing accounting policies and procedures and
systems and processes in order to transition to IFRS. The design phase will incorporate:
(cid:127)
formulating revised accounting policies and procedures for compliance with IFRS requirements;
(cid:127)
identifying potential financial impacts as at the transition date and for subsequent reporting periods prior
to adoption of IFRS;
(cid:127) developing revised IFRS disclosures;
(cid:127) designing accounting and business processes to support IFRS reporting obligations;
(cid:127)
identifying and planning required changes to financial reporting and business source systems; and
(cid:127) developing training programs for staff.
The design phase is expected to be completed by 30 June 2005.
Implementation phase
The implementation phase will include implementation of identified changes to accounting and business
procedures, processes and systems and operational training for staff. It will enable the Company to generate
the required disclosures of AASB 1 as it progresses through its transition to IFRS.
The Company expects this phase to be complete by 30 June 2005.
26
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 2: REVENUE FROM ORDINARY ACTIVITIES
Revenue from non-operating activities
Provisions written back
Interest received – non related corporations
Other
Total revenue
NOTE 3: LOSS FROM ORDINARY ACTIVITIES
Loss from ordinary activities before income tax expense
includes the following specific expenses:
CONSOLIDATED
2004
$
COMPANY
2004
$
135,704
18,991
40,362
195,057
–
18,970
–
18,970
Borrowing costs - interest
Depreciation – office furniture & equipment
Exploration expenditure written off
40,042
12,197
30,451
38,687
–
–
NOTE 4:
INCOME TAX
The income tax expense on pre tax accounting reconciles to
the income tax expense in the financial statements as follows:
Loss from ordinary activities before income tax expense
Income tax calculated at 30%
Tax effect of permanent differences
Tax effect of timing differences
Timing differences and tax losses not brought to
account as future income tax benefit
(1,044,700)
(746,724)
(313,410)
–
–
(224,017)
–
–
313,410
224,017
Income tax attributable to operating loss
–
–
The directors estimate that the potential future income tax benefit
at 31 December 2004 in respect of tax losses not brought to account is
358,884
311,404
This benefit for tax losses will only be obtained if:
(i) the relevant company derives future assessable income of a nature and of an amount sufficient to enable
the benefit from the deductions for the losses to be realised;
(ii) the relevant company continues to comply with the conditions for deductibility imposed by tax legislation;
and
(iii) no changes in tax legislation adversely affect the relevant company in realising the benefit from the
deductions for the losses.
NOTE 5: CURRENT ASSETS – CASH
Cash at bank and on hand
18,030,792
17,821,432
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
27
27
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 6: CURRENT ASSETS – RECEIVABLES
Sundry debtors
Indirect taxes receivable
CONSOLIDATED
2004
$
COMPANY
2004
$
73,244
450,184
523,428
–
46,726
46,726
NOTE 7: NON-CURRENT ASSETS – INVESTMENTS
Shares in controlled entities, at cost
–
10,749,314
The investments held in controlled entities are included in the financial statements at cost at 31 December
2004 are as follows:-
Name:
Country of
Incorporation
Class of Shares
Northsun Italia S.p.A
Italy
Ordinary
2004
Investment
$
10,033,424
Holding
%
100
Po Valley Operations Pty Limited
(formerly Petroz (Italy) Pty Limited)
Australia
Ordinary
715,890
100
NOTE 8: NON-CURRENT ASSETS – RECEIVABLES
Loans – Controlled Entities
10,749,314
–
–
1,740,215
1,740,215
NOTE 9: NON-CURRENT ASSETS – PLANT AND EQUIPMENT
Office Furniture & Equipment:
At cost
Accumulated depreciation
Casing:
At cost
Reconciliations:
Reconciliation of the carrying amounts for each class of
Plant & equipment are set out below:
Office Furniture & Equipment:
Carrying amount at beginning of year
Additions
Depreciation
Carrying amount at end of year
Casing:
Carrying amount at beginning of year
Additions
Carrying amount at end of year
28
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
92,587
(72,906)
19,681
806,532
826,213
21,191
10,687
(12,197)
19,681
–
806,532
806,532
826,213
–
–
–
–
–
–
–
–
–
–
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 10: NON-CURRENT ASSETS – RESOURCE COSTS
CONSOLIDATED
2004
$
COMPANY
2004
$
Resource Property Costs - exploration phase:
Reconciliation of the carrying amount of resource properties
Resource Property Costs – exploration phase:
Carrying amount at beginning of year
Exploration expenditure
Exploration expenditure written off
Carrying amount at end of year
11,869,449
11,869,449
7,929,640
3,970,260
(30,451)
11,869,449
–
–
–
–
–
–
The ultimate recoupment of costs carried forward for areas in exploration or evaluation phases is dependant on
the successful development and commercial exploitation of the area or commercial sale of the respective areas.
NOTE 11: CURRENT LIABILITIES - PROVISIONS
The aggregate employee benefit liability recognised
and included in the financial statement is as follows:
Provision for employee benefits:
Current
The Company had 3 employees during 2004.
NOTE 12: CURRENT LIABILITIES - PAYABLES
Trade payables
NOTE 13: INTEREST BEARING LIABILITIES
CURRENT LIABILITIES
Unsecured loans from:
Other parties
Directors and director-related entities
NON-CURRENT LIABILITIES
Other parties
21,692
21,692
–
–
1,939,581
1,939,581
393,444
393,444
4,098
509,062
513,160
4,098
509,062
513,160
–
–
–
–
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
29
29
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 14: CONTRIBUTED EQUITY
Share Capital
At the beginning of the reporting period
Shares issued during the year:
– Debt to equity swap at $5.00 each on 01.01.2004
– Cash issues at $5.00 each on 08.03.2004
– Options exercised at $1.00 each on 15.08.2004
– Options exercised at $1.30 each on 15.08.2004
– Seed issues at $9.00 each on 08.10.2004
– Debt to equity swap at $9.00 each on 08.10.2004
– Share issue at $9.00 each on 08.10.2004
Total shares after share reconstruction of 12.9593 for
each share on issue on 15.10.04
COMPANY
No.
$
2,564,254
6,409,352
10,000
200,000
525,000
195,000
100,000
30,500
233,493
50,000
1,000,000
525,000
253,000
900,000
274,500
2,101,437
50,000,000
11,513,789
– Initial public offer at $1.00 each on 14.12.2004
20,000,000
20,000,000
Transaction costs relating to share issues
–
(1,237,118)
Ordinary shares
70,000,000
30,276,671
Fully paid ordinary shares carry one vote per share and carry the right to dividends. In the event of winding
up the Company, ordinary shareholders rank after creditors.
Founder shareholders had options over 720,000 shares issued in February 2002 which were exercised in
August 2004.
NOTE 15: ACCUMULATED LOSSES
CONSOLIDATED
2004
$
COMPANY
2004
$
Accumulated losses at the beginning of the financial year
(439,961)
(78,864)
Net loss attributable to members Po Valley Energy Limited
(1,044,700)
(746,724)
Accumulated losses at the end of the financial year
(1,484,661)
(825,588)
NOTE 16: REMUNERATION OF AUDITORS
Remuneration for audit or review of the financial reports of the
parent entity or any entity in the consolidated entity:
Auditors of parent entity – KPMG
- Auditing the financial statements
32,000
32,000
30
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 17: DIRECTOR AND EXECUTIVE DISCLOSURES
(a) Remuneration of specified directors and specified executives by the consolidated entity
Total remuneration for all non-executive directors, last voted upon by the shareholders at the
15 October 2004 Extraordinary General Meeting, is not to exceed $200,000 per annum.
Non-executive directors’ base fees are presently $140,000 per annum. Directors’ fees cover all main
board activities.
Remuneration levels are competitively set to attract and retain appropriately qualified and experienced
directors and senior executives. The performance of all specified directors and specified executives are
reviewed annually according to performance targets agreed at the beginning of each annual assessment
period. These performance contracts are keyed to both group goals set annually in the Company Business
Plan and individual performance objectives.
Executive directors and senior executives may receive bonuses and/or options based on the achievement
of specific performance hurdles. All options awarded to specified directors and specified executives have
award thresholds set at prices equal to or higher than the Po Valley Energy share price at the time of
issue. All remuneration levels are set after independent comparison with peer companies in the upstream
oil and gas industry. The Chairman of the Remuneration Committee reviews the remuneration package of
the Chief Executive Officer in this context.
The major provisions of the service contracts held with the specified directors and executives, in addition
to performance related bonuses and/or options, are as follows:
Term of Contract
Notice Period
Remuneration
Review Period
Specified directors
G Bradley
M Masterman
D McEvoy
B Pirola
Specified executives
D Greil
D Del Borrello3
From 30 Sep 2004 until AGM
2 years from 14 Dec 20041
From 30 Sep 2004 until AGM
From 30 Sep 2004 until AGM
12 months from 1 Jan 2005
From 6 Sep 2004
N/A
3 months2
N/A
N/A
3 months2
N/A
Annually
Annually
Annually
Annually
Annually
Annually
(1) Option to extend for another year at election of executive
(2) If termination is made without reason the termination payment will be the equivalent of 12 months salary
(3) Mr D Del Borrello is contracted on an hourly basis to provide company secretarial and financial services.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
31
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
The following table provides the details of all directors of the Company (“specified directors”) and the
executives of the consolidated entity with the greatest authority (“specified executives”) and the nature and
amount of the elements of their remuneration for the year ended 31 December 2004.
Primary
Post-employment
Equity Compensation
Salary Bonus Superannuation Number of
& fees
$
options
#
benefits
$
$
Value of
options(1)
$
Total
$
Specified directors
Non-executive
G Bradley
D McEvoy
B Pirola
Executive
M Masterman
Total, all specified
Directors
Specified executives
D Greil,
Technical Director
D Del Borrello,
Company Secretary
Total, all
specified Executives
2004
2004
2004
15,000
10,000
10,000
2004 152,000
2004 187,000
–
–
–
–
–
2004
57,804
–
2004
5,000
62,804
–
–
1,350
900
900
1,000,000
500,000
200,000
292,500
146,250
58,500
308,850
157,150
69,400
–
1,500,000
61,128
213,128
3,150
3,200,000
558,378
748,528
–
–
900,000
36,677
94,481
150,000
6,113
11,113
–
1,050,000
42,790
105,594
(1)
The exercise of Non-Executive Director options in 2004 was conditional upon the weighted average
closing price of the Company’s Shares on the ASX for a period of 60 consecutive trading days being
equal to or greater than $1.25. The exercise price of the Non-Executive Director options is $1.00 and
the expiry is on 31 October 2008. These options are subject to mandatory ASX escrow and are unable
to be exercised until 14 December, 2006.
The issue of Executive Director and Executive options in 2004 was conditional upon 50% vesting 12
months after the listing of the Company and 50% vesting 24 months after the listing of the Company. The
exercise price of the Executive Director and Executive options is $1.25. The Executive Director options
issued to Michael Masterman are subject to mandatory ASX escrow and are unable to be exercised
earlier than 14 December, 2006.
The fair value of options was calculated at the date of issue using a Black-Scholes Option Pricing Model,
adjusted for a discount rate (25%) to take into account such factors as the option exercise price, the
current level and volatility of the underlying share price, the performance hurdles, the non-tradeable and
non-transferable nature of the options, and the vesting and escrow periods before the options are able
to be exercised.
The options expire 31 October 2008 and each option entitles the holder to purchase one share.
32
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
(b) Options and rights over equity instruments granted as remuneration or exercised
All options refer to options over ordinary shares of Po Valley Energy Limited, which are exercisable on a
one-for-one basis.
During the reporting period, no options over ordinary shares were exercised.
(c) Option holdings
The movement during the reporting period in the number of options over ordinary shares in the Company
held directly or indirectly by each specified director and specified executive, including their personally
related entities, is as follows:
Specified directors
G Bradley
M Masterman
D McEvoy
B Pirola
Specified executives
D Greil
D Del Borrello
Held at
31 Dec 2003
-
525,000
-
75,000
-
-
Issued
1,000,000
1,500,000
500,000
200,000
900,000
150,000
(1) All options are yet to vest and expire on 31 October, 2008.
The terms of the options held at 31 December 2004 are as follows:
$1.00 exercise price,
expiring 31 Oct 08
$1.25 exercise price,
expiring 31 Oct 08
Specified directors
G Bradley
M Masterman
D McEvoy
B Pirola
Specified executives
D Greil
D Del Borrello
1,000,000
–
500,000
200,000
–
–
–
1,500,000
–
–
900,000
150,000
Held at
31 Dec 2004(1)
1,000,000
1,500,000
500,000
200,000
900,000
150,000
Total
1,000,000
1,500,000
500,000
200,000
900,000
150,000
1,700,000
2,550,000
4,250,000
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
33
33
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
d) Equity holdings and transactions
The movement during the reporting period in the number of ordinary shares of the Company, held
directly indirectly by each specified director and specified executive, including their personally-related
entities is as follows:
Held at
31 Dec 2003
Purchased
Held at
31 Dec 20031
Specified directors
G Bradley
M Masterman
D McEvoy
B Pirola
Specified executives
D Greil
D Del Borrello
–
14,031,683
–
8,169,371
695,989
64,796
323,981
7,307,559
129,593
3,841,450
–
25,919
(1) The equity holdings and transactions shown in the above table are on a post reconstruction basis.
Related Entities
J Masterman1
I Masterman1
G Masterman1
Held at
31 Dec 2003
3,142,619
–
259,185
Purchased
1,645,825
500,000
129,593
323,981
21,339,242
129,593
12,010,821
695,989
90,715
Held at
31 Dec 20031
4,788,444
500,000
388,778
(1) The related parties to M. Masterman
(e) Other transactions with the Company
A total amount of $18,531 was received or receivable from Caspian Holdings Plc , a company which is
related to Michael Masterman and Dietmar Greil, for recharge of the use of courier and telephone services.
Recharges were based on the cost from third party service invoice.
The Company purchased the 11 shares and 5 options in NSI held by Michael Masterman, representing 6.1%
of the issued capital in NSI, for the issue of 233,493 ordinary shares in the Company at $9.00 each.
Masterman Investments Pty Limited, a company controlled by Michael Masterman has a loan to the Company
totalling $509,062 as at 31 December, 2004. During the year interest of $27,812 was accrued on the loan
and the amount of $35,611 was repaid to Masterman Investments Pty Limited. The loan is repayable before
30 December 2005, attracts interest at the Bank Bill Rate and is unsecured.
Beronia Investments Pty Ltd, a company which is controlled by Byron Pirola, converted a loan to ordinary
shares for $25,000 (5,000 shares at $5.00 each) on 1 January 2004 and for $126,000 (14,000 shares at
$9.00 each) on 8 October 2004. The loan accrued interest of $4,598 during 2004.
Joan Masterman, a related party of Michael Masterman, converted a loan into ordinary shares for $25,000
(5,000 shares at $5.00 each) on 1 January 2004 and for $108,000 (12,000 shares at $9.00 each) on
8 October 2004. The loan accrued interest of $3,838 during 2004.
34
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 18: RESERVES
Foreign Currency Translation Reserve
Balance at beginning of financial year
Translation of foreign operations
Balance at end of financial year
CONSOLIDATED
2004
$
COMPANY
2004
$
19,023
–
19,023
–
–
–
The foreign currency translation reserve is a reserve and records the foreign currency differences arising from
the translation of self-sustaining foreign operations. Refer Note 1(m).
NOTE 19: EMPLOYEE BENEFITS
The Company has issued options to Directors, Executives and nominated employees.
Details of Employee Options are summarised below. Details of the options issued to Directors and Executives
are in Note 17.
Employee Incentive Option Scheme
The issue of Employee Incentive Option Scheme (“EIOS”) was approved by the Board of the Company on
15 October 2004.
The opportunity for a number of employees to acquire options over ordinary shares in the Company was
offered to employees and consultants who were instrumental to the initial public offering of the Company.
Each option is convertible to one ordinary share. The exercise price of the options, determined in
accordance with the rules of the plan, must not be less than the market price on the date the options are
granted. The terms and conditions with respect to expiry, exercise and vesting provisions are at the discretion
of the Board of the Company.
There are no voting or dividend rights attached to the options. Voting and dividend rights will only be
attached once an option is exercised into ordinary shares.
The total number of shares which are the subject of options issued under the EIOS immediately following an
issue of options under the EIOS must not exceed 5% of the then issued share capital of the Company on a
diluted basis.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
35
35
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
Number of options
Weighted average
2004
exercise price
$
$1.25
–
$1.25
Balance at beginning of year
Granted
Exercised
(a)
–
3,000,000
–
Balance at end of year
(b)
3,000,000
Exercisable at end of year
3,000,000
(a) Options granted during the reporting period
Number granted
Grant date
Vesting date
Expiry date
Exercise price
2004
3,000,000
15 Oct 2004
14 Dec 20051
14 Dec 20061
31 Oct 2008
$1.25
Of the options granted, the total number granted to M Masterman, D Greil and D Del Borrello has also been
disclosed at Note 17(c) .
There were no options exercised by employees during the year ended 31 December 2004. Fair value of
shares issued during the reporting period is estimated to be the market price of shares of the Company on the
Australian Stock Exchange as at close of trading on their respective issue dates.
(1) 50% vest 12 months after listing and 50% vest 24 months after listing date.
(b) Options held at the end of the reporting period
Number of Options
Grant date
Vesting date
Expiry date
Exercise price
1,500,000
1,500,000
15 Oct 2004
15 Oct 2004
15 Dec 2005
15 Dec 2006
31 Oct 2008
31 Oct 2008
$1.25
$1.25
NOTE 20: SUBSEQUENT EVENTS
Since 31 December 2004, the consolidated entity has undertaken the following significant events:
(cid:127) Commencement of civil works and acquisition of key well equipment for the Sillaro and Vitalba gas fields.
36
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 21: NON-DIRECTOR RELATED PARTY DISCLOSURES
(a) Loans to Controlled Entities
Loans to controlled entities comprise
Northsun Italia S.p.A.
Po Valley Operations Pty Limited
CONSOLIDATED
2004
$
–
–
–
COMPANY
2004
$
1,381,215
359,000
1,740,215
The loans are denominated in EUR and are non-interest bearing as at 31 December 2004.
(b) Remuneration
Information on remuneration of directors is provided in Note 17.
The Company, in an intercompany transaction purchased 100% of Po Valley Operations Pty Ltd (“PVO”) from
a subsidiary Northsun Italia S.p.A. (“NSI”) in May 2004. Consideration for the acquisition was $715,760
and resulted in no profit or loss to the consolidated entity.
NOTE 22: FINANCIAL REPORTING BY SEGMENTS
The Company operates primarily as a gas explorer and in one geographical location, being Italy.
NOTE 23: RECONCILIATION OF OPERATING LOSS AFTER INCOME TAX TO NET
CASH OUTFLOW FROM OPERATING ACTIVITIES
Operating loss after income tax
Foreign exchange loss
Adjustment for non-cash items:
Provision written back
Depreciation – office furniture & equipment
Exploration expenditure written off
Other – provisions
Creditors written back
Change in operating assets and liabilities:
(Increase) decrease in other receivable
(Increase) decrease in sundry debtors
Increase in shareholder loans for interest
Increase (decrease) in trade and other creditors
(1,044,700)
47,202
(746,724)
93,624
(135,704)
12,197
30,451
10,665
(8,365)
(4,920)
(157)
40,760
539,033
–
–
–
–
–
(43,425)
–
38,687
256,872
Net cash outflow from operating activities
(513,538)
(400,966)
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
37
37
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 24: EARNINGS PER SHARE
CONSOLIDATED
2004
$
(7.59)
13,759,050
Basic earnings per share (cents)
Weighted average number of ordinary
shares outstanding during the year used
in the calculation of basic earnings per share
Diluted earnings per share is the same as basic earnings per share.
NOTE 25: COMMITMENTS FOR EXPENDITURE
(i) Exploration Commitments
Under its exploration licence for Crocetta and for Cascina San Pietro, PVE is required to drill one well in
2005. This will be satisfied by the drilling of Sillaro #1 (Crocetta) and Vitalba #1 (Cascina San Pietro)
expected to cost $ 8,200,000.
Under it’s exploration licence for Casone della Sacca, PVE is required to drill one well by March 2006
expected to cost $ 2,034,000.
NOTE 26: JOINT VENTURES
As at the 31 December, 2004 the consolidated entity held interests in the following Joint Ventures and permits
in Italy:
Titles of Permits granted
San Vincenzo
Crocetta Cascina San Pietro Casone della Sacca
Participation percentages
NSI 32.5%
PVO 17.5%
NSI 65%
PVO 35%
NSI 100%
NSI 36.1%
PVO 19.45%
Other registered holders
and relevant percentages
Edison 50%
–
–
ENI 44.45%
All assets relating to the above joint ventures are capitalised resources property costs.
NOTE 27: CONTINGENT LIABILITIES
As at the 31 December 2004, the consolidated entity had no contingent liabilities.
(b) Credit Risk Exposures
The consolidated entity is not exposed to significant credit risk. Credit risk with respect to cash is held
with recognised financial intermediaries with acceptable credit ratings.
(c) Net Fair Values of Financial Assets and Liabilities
The carrying amounts of financial assets and liabilities as disclosed in the statement of financial
position equate to their estimated net fair value.
38
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 4
NOTE 28: FINANCIAL INSTRUMENTS
(a)
Interest Rate Risk Exposures
The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for
classes of financial assets and financial liabilities is set out below:
2004
Note
Weighted
Average Interest Rate
Floating
Fixed interest
Maturing in
1 year or < 1 to 5 years
Non-Interest
bearing
%
$
2.10 18,030,792
Financial Assets
Cash assets
Receivables
$
5
6
Financial Liabilities
Payables
12
–
–
Interest bearing
liabilities – current
13
5.48
Interest bearing
liabilities – non-current 13
–
–
–
–
–
Total
$
18,030,792
$
–
523,428
523,428
$
–
–
–
(1,939,581)
(1,939,581)
$
–
–
–
(513,160)
–
–
–
–
–
(513,160)
–
Net financial assets
18,030,792
(513,160)
–
(1,416,153)
16,101,479
(b) Credit Risk Exposures
The consolidated entity is not exposed to significant credit risk. Credit risk with respect to cash is held
with recognised financial intermediaries with acceptable credit ratings.
(c) Net Fair Values of Financial Assets and Liabilities
The carrying amounts of financial assets and liabilities as disclosed in the statement of financial
position equate to their estimated net fair value.
NOTE 29: AMOUNTS RECEIVABLE/PAYABLE IN FOREIGN CURRENCIES
Amounts receivable/(payable) in foreign currency
which are not effectively hedged:
Cash
Current – Receivables
Current – Payables
CONSOLIDATED
2004
$
COMPANY
2004
$
1,344,651
493,263
1,672,658
1,146,056
-
-
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
39
39
D I R E C T O R S ' D E C L A R A T I O N
In the opinion of the directors of the Company :
1.
the financial statements and notes, as set out on pages 10 to 32, are in accordance with the
Corporations Act 2001 and:
(a) comply with the Accounting Standards and the corporations Regulations 2001; and
(b) give a true and fair view of the Company’s and the consolidated entity’s financial position as at
31 December 2004 and of their performance, as represented by the results of their operations and their
cash flows, for the financial year ended on that date.
2.
There are reasonable grounds to believe that the Company will be able to pay it’s debts as and when
they become due and payable.
This declaration is made in accordance with a resolution of the directors.
Graham Bradley
Chairman
Byron Pirola
Non-Executive Director
Sydney, NSW Australia
21 March, 2005
40
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
I N D E P E N D E N T A U D I T R E P O R T T O M E M B E R S
O F P O V A L L E Y E N E R G Y L I M I T E D
Scope
The financial report and directors’ responsibility
The financial report comprises the statements of financial position, statements of financial performance, statements of
cash flows, accompanying notes to the financial statements, and the directors’ declaration for both Po Valley Energy
Limited (the “Company”) and the “Consolidated Entity, for the year ended 31 December 2004. The Consolidated
Entity comprises both the Company and the entities it controlled during that year.
The directors of the Company are responsible for the preparation and true and fair presentation of the financial
report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate
accounting records and internal controls that are designed to prevent and detect fraud and error, and for the
accounting policies and accounting estimates inherent in the financial report.
Audit approach
We conducted an independent audit in order to express an opinion to the members of the Company. Our audit
was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to
whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as
the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability
of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements
have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly, in
accordance with the Corporations Act 2001, Australian Accounting Standards and other mandatory financial
reporting requirements in Australia, a view which is consistent with our understanding of the Company’s and the
Consolidated Entity’s financial position, and of their performance as represented by the results of their operations
and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
(cid:127)
(cid:127)
examining, on a test basis, information to provide evidence supporting the amounts and disclosures in
the financial report, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of
significant accounting estimates made by the directors.
While we considered the effectiveness of management’s internal controls over financial reporting when determining the
nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional ethical
pronouncements and the Corporations Act 2001.
Audit opinion
In our opinion, the financial report of Po Valley Energy Limited is in accordance with:
a)
the Corporations Act 2001, including:
i.
giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at
31 December 2004 and of their performance for the financial year ended on that date; and;
ii. complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
b) other mandatory financial reporting requirements in Australia.
KPMG
Perth, Australia
21 March 2005
B C FULLARTON
Partner
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
41
41
S H A R E H O L D E R I N F O R M A T I O N
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed
elsewhere in this report is set out below. The information was prepared based on share registry information
processed up to 28th February, 2005.
SHAREHOLDINGS
Substantial Shareholders
Name
Michael Masterman
Beronia Investments Pty Ltd1
Joan Masterman
Hunter Hall Investment Management Pty Ltd
(1) Interests associated with Non-Executive Director, Byron Pirola
Distribution of Share and Option Holdings
Number of ordinary
shares held
Percentage of
capital held %
21,339,242
12,010,821
4,788,444
3,602,000
30.48%
17.16%
6.84%
5.15%
Ordinary Shares
Options
Number
of shares
9,575
379,363
1,118,981
8,168,743
60,323,338
Number
of holders
Number
of options
0
0
0
4
7
0
0
0
150,000
4,550,000
70,000,000
11
4,700,000
Size of Holdings
Number
of holders
1
– 1,000
1,001
– 5,000
5,001
– 10,000
10,001 – 100,000
100,001 – over
16
90
119
235
46
506
Number of ordinary
shareholders with less
than a marketable parcel
Nil
Voting Rights of Shares and Options
Refer to Note 14.
On-Market Buy-Back
There is no current on-market buy-back.
42
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
S H A R E H O L D E R I N F O R M A T I O N
Twenty Largest Shareholders
Beronia Investments Pty Ltd
Joan Masterman
1 Michael Masterman
2
3
4 Citicorp Nominees Pty Ltd
5
Equity Trustees Limited
6 Westpac Custodian Nominees
7
Ken Ambrecht
8 Claire Energy Pty Ltd
9
James Zadko
10 Holly Gibson
11
12 Dietmar Greil
13 Arton No 001 Pty Limited
14 Christie (Qld) Pty Ltd
15 Equitas Nominees Pty Limited
16 Nicola Forrest
17 McDonald Petroleum Pty Ltd
18 Mellior Pty Ltd
19 National Australia Trustees Ltd
20 George Masterman
John Kahlbetzer
Number of
ordinary
shares held
21,339,242
12,010,821
4,788,444
4,123,398
2,200,000
1,443,600
1,224,649
1,150,510
1,049,375
1,000,000
795,925
695,989
575,000
575,000
500,000
500,000
468,723
455,142
448,000
388,778
55,732,596
Percentage of
capital held
%
30.48%
17.16%
6.84%
5.89%
3.14%
2.06%
1.75%
1.64%
1.45%
1.43%
1.14%
0.99%
0.82%
0.82%
0.71%
0.71%
0.67%
0.65%
0.64%
0.56%
79.62%
Option holders – Unquoted
1 Michael Masterman
2 Options issued under the PVE Employee Incentive
Option Scheme1
3 Graham Bradley
4 David McEvoy
5
Byron Pirola
Number of ordinary
options held
Percentage of
Options held %
1,500,000
1,500,000
1,000,000
500,000
200,000
4,700,000
31.91%
31.91%
21.28%
10.64%
4.26%
100%
(1) No person holds 20% or more of these securities, other than as disclosed above. The total number of option holders is 11.
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
43
43
S H A R E H O L D E R I N F O R M A T I O N
Restricted Securities
Class
Director & Executives – fully paid ordinary shares
Director & Executives – fully paid ordinary shares
Other – Fully paid ordinary shares
Other – Fully paid ordinary shares
Other – Fully paid ordinary shares
Other – Fully paid ordinary shares
Director & Executives – unlisted Options
Other – unlisted
Number of restricted
Securities
Date
of Release
3,323,171
31,259,252
795,925
8,929,172
167,258
4,970,223
3,200,000
1,500,000
16 September 20051
16 December 2006
15 March 2005
16 September 20051
15 October 2005
16 December 2006
16 December 2006
15 October 2005
(1) Release date is the earlier of the 16th September, 2005 or 10 days after the release of the ASX announcements regarding the complete
results of the proposed 2 well Sillaro gas field drilling and testing program (or as that program is otherwise modified by the board).
44
P O V A L L E Y E N E R G Y A N N U A L R E P O R T
Po Valley Energy is listed on the Australian Stock Exchange
under the symbol PVE.
The Company focuses on developing existing but undeveloped shallow,
onshore gas fi elds in the Po Valley area in Northern Italy; a prolifi c
hydrocarbon province which has produced over 25 tcf of gas since
discovery in the late 1940s. For 50 years the Po Valley hydrocarbon
province was a monopoly of the then State Oil Company ENI, now one
of the 10 largest global oil and gas producers. Following the break-up of
ENI’s monopoly and the liberalisation of the Italian gas market, Po Valley
Energy entered the province in 1998 through its 100% owned subsidiary,
North Sun Italia.
Produced by:
0410 435 659
P O V A L L E Y E N E R G Y L I M I T E D
ABN 33 087 741 571
A N N U A L R E P O R T 2 0 0 4
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