Annual Report 2006
PO VALLE Y E NERGY LIM ITED
ABN 33 087 741 571
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3 Po Valley Energy Annual Report 2006
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Po Valley Energy Limited Annual Report 2006
Corporate Directory
Directors
Graham Bradley, Chairman
Michael Masterman, Managing Director
David McEvoy, Non-Executive Director
Byron Pirola, Non-Executive Director
Dietmar Greil, Executive Director - Technical
Company Secretary
Dom Del Borrello
Registered Office
Level 28, 140 St George’s Tce Perth WA 6000
Tel: (08) 9278 2533
Rome Office
Via Boncompagni, 47 Rome, Italy 00187
Tel: +39 06 4201 4968
Share Registry
Link Market Services Limited
Level 12, 680 George St Sydney NSW 2000
Tel: (02) 8280 7424
Contents
Corporate Directory
Chairman’s Letter to Shareholders
Managing Director’s Report
Corporate Governance Statement
Director’s Report
Lead Auditor’s Independence Declaration
Income Statements
Solicitors
Statements of Recognised Income and Expense
Steinepreis Paganin
Level 4, Next Building 16 Milligan St Perth WA 6000
Chiomenti Studio Legal
Via XXIV Maggio, 43 Rome Italy 00187
Balance Sheets
Cash Flow Statement
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Audit Report
Shareholder Information
Auditor
KPMG
Central Park, 152-158 St George’s Tce
Perth WA 6000
Banks
Anglo Irish Bank Coporation
10 Old Jewry, London EC2R 8DN, UK
ANZ Banking Corporation
Level 7, 77 St George’s Tce Perth WA 6000
Stock Exchange Listing
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.
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Po Valley Energy Annual Report 2006 1
Highlights
• Continued progress towards Sillaro, Castello
and Sant’ Alberto production
• Reservoir engineering completed
• Production concession applications submitted
• Connections to gas pipelines agreed with grid
operator
• Surface plant engineering complete and
procurement underway
• Development and drilling programs defi ned
for next phase of appraisal drilling
• Bezzecca 1 to appraise 45bcf structure
• Fantuzza 1 to test deeper (Sillaro) Miocene
reserves in Crocetta Licence
• Sillaro 2 targeting expanded production rates
in Sillaro (Pliocene) gas fi eld
• Five New licences (preliminary award) to Po
Valley Energy containing:
• Eight attractive gas prospects
• Two large oil/condensate targets in the Ossola
licence north of Milan
• Continued strong Italian gas prices
2 Po Valley Energy Annual Report 2006
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Chairman’s Letter to Shareholders
Dear Shareholders
On behalf of the Board of Directors, I am pleased to
present the Annual report of the company for 2006.
The year has been one of continued progress towards
our first commercial gas production following our
successful drilling and testing program in late 2005 and
early 2006.
Our priority for the past year was to complete the
steps necessary to bring our three successfully drilled
gas fields – Sillaro, Castello and Sant’ Alberto – into
commercial production. Significant progress has
been made on this front. Essential engineering
studies have been completed. Applications for
production concessions have been submitted to the
Italian authorities. Agreement on the critical pipeline
infrastructure connections has been reached with SNAM
(the national gas pipeline grid operator). Environmental
Impact assessments for Sillaro and Castello are currently
underway. In parallel, we are in the process of procuring
surface plant equipment to avoid delays to production
new licence areas. In addition, the new Ossola licence
contains two significant oil/condensate targets which
provide further potential exploration upside for the
company in future years. All ten of these exploration
targets are currently being evaluated.
In line with expectations, the company incurred an
operating loss of $ 2.8 million in 2006. Also during
the year, the company raised $5.85 million by way of
a private placement of 3,000,000 shares at a price
of $1.95 per share to institutional investors. As at 31
December 2006 the company had available cash of $5.1
million.
The continued commitment of our core team of
employees and consultants based in Italy has been
critical to the progress achieved during the past year. On
behalf of the Board, I thank them for their hard work
and perseverance. Again this year each of my fellow
directors spent time on the ground in Italy providing
technical and strategic input and I thank them for their
contribution.
once all necessary approvals are granted.
I look forward to reporting our future progress during
In 2006 we also progressed planning for the next phase
of our exploration drilling program. Plans are now
well advanced for our Bezzecca project and also for
exploiting the deeper Miocene structure in the Sillaro
field through the drilling of a new development well
– Fantuzza 1.
The company has also been awarded (100% PVE) five
new exploration licences in the Po River Valley region,
now underpinning the existing reserve base with a
longer term growth platform. Initial seismic reviews and
investigations have identified eight gas prospects in our
2007 and early 2008 when we hope to report initial
gas production and sales and further steps towards
expanding our portfolio of gas assets.
Graham Bradley
Chairman
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Po Valley Energy Annual Report 2006 3
Managing Director’s Report
Overview
The focus of the company over the last year has been
on production and growth. Driving off our exploration
we have expanded our sphere of operations to include
new gas exploration plays and large oil exploration
opportunities.
successes in late 2005 and early 2006 we have been
The company (through its 100% owned subsidiaries
pursuing a steady program to put our three gasfield
North Sun Italia and Po Valley Operations) has expanded
discoveries into production. In parallel we have created
its portfolio from four licences at the time of its IPO to
very significant growth options for the company
ten licences or licence applications.
through our success in new licence applications with
a preliminary award of a portfolio of five new licences
containing eight gas prospects and two oil/condensate
exploration prospects added to the portfolio.
Po Valley Energy’s Development Projects
and Licences
Po Valley Energy currently operates exclusively in
Northern Italy exploiting the large hydrocarbon system
The production, development and exploration projects
identified to date in these licences are shown in the
table below.
Sillaro, Castello, and Sant’ Alberto have been
successfully drilled and are being prepared for
production.
Licence and Gasfield Ownership Summary
that was previously the exclusive territory of ENI - the
Exploration Licences
successful Italian Oil and Gas Company founded in the
1950’s by Enrico Mattei.
Crocetta
Cascina San Pietro
San Vincenzo
Production Concession Applications
Sillaro
Sant’ Alberto
Castello
Exploration Permit Applications
(preliminary award subject to
environmental clearances)
Terra del Sole
La Risorta
La Prospera
Opera
Podere Gallina
Ossola
Exploration Permit Applications
(awaiting preliminary award)
Mazzalasino
The initial focus of the company was to develop
proven but underdeveloped gas reserves in former ENI
discovery/production fields. Over the last twelve months
4 Po Valley Energy Annual Report 2006
PVE
Share%
100%
100%
50%
100%
50%
100%
PVE
Share %
100%
100%
100%
100%
100%
100%
100%
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Managing Director’s Report continued
Po Valley Energy is the 100% owner and operator of all
Final environmental approval documentation has been
licences, with the exception of the San Vincenzo licence,
prepared and submitted and Po Valley Energy expects
which is 50% owned and operated by the EDF Group’s,
the formal grant of the Production Concession in the
subsidiary Edison.
second half of calendar year 2007.
Sillaro – Crocetta licence (100% PVE)
Following the grant of the production concession, the
Sillaro in the Crocetta licence area is the company’s
largest natural gasfield discovered to date. The field was
explored under the former ownership of ENI between
1955 and 1982 with seven wells drilled. The field
contains gas bearing zones in the Pliocene at around
2,100m and the Miocene at around 2,500m.
Po Valley Energy successfully drilled and tested Sillaro 1d
between November 2005 and January 2006, identifying
three gas bearing levels over a 100m gross interval in the
Pliocene sequence. Each of the levels were successfully
tested and this test work, the associated reservoir
simulations and development analysis confirmed a
commercial gas field development. Flow rate testing of
the three productive layers produced at up to 5.4, 4.0
and 3.0 million cubic feet per day respectively.
The company has moved forward to put the field into
commercial production. The required application to
the Italian Ministry for a production concession was
submitted in May 2006 and has been considered at
the 12th April Hydrocarbon Commission meeting. An
agreement has been reached with SNAM Rete Gas, the
national pipeline grid operator, to connect the Sillaro
development to the pipeline grid. The connection point
is 300 metres from the Sillaro well location and SNAM
will construct the connection line at its own cost.
company plans to drill a second Pliocene production
well – Sillaro 2. This well has been designed to produce
from multiple levels increasing overall production
rates, optimising total well reservoir field recovery,
and targeting increased reserves. Sillaro 2 will be
drilled from the existing Sillaro 1d drill site and prior to
commencing production from this field.
Plans are also well advanced to exploit the deeper
Miocene structure. 50 km of seismic data has been
acquired and reviewed to confirm the size and structure
of the Miocene target and to identify the best location
for drilling. Fantuzza 1 will be the first Po Valley Energy
well targeted to test this deeper structure, which was
previously successfully drilled and tested by ENI. The
Fantuzza 1 drilling program and environmental approval
documentation has been submitted to the regulatory
authorities and the necessary casing, tubing and
wellhead have been ordered. The well is expected to be
drilled in the first half of 2008 to a depth of 2,600m.
The surface plant and pipeline connection at Sillaro has
been sized to take advantage of success at Fantuzza 1
which is about 2km from the Sillaro field production site.
Castello – Cascina San Pietro Licence
(100% PVE)
On current scheduled planning, Castello should be the
company’s first gas field in commercial production.
The field was drilled in 2005 on an updip from the
former ENI, Agnadello 1 well which produced 13bcf of
gas over a period of five years in the 1980s.
The Castello gas field, formerly known as Vitalba,
was successfully tested at two gas bearing levels in
early 2006. Flow rate testing of San A1 and San A2
produced higher than expected flows of 2.8 million
cubic feet per day on a ¼” choke.
Field development will be based on a one well
development connected to the grid some 500 metres
away. Reservoir and surface plant engineering has been
completed and on the basis of this work, a production
concession application was submitted in September 2006.
Po Valley Energy Annual Report 2006 5
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Managing Director’s Report continued
Managing Director’s Report continued
The Hydrocarbon Commission has considered the
second production well in Sant’ Alberto/San Vincenzo in
application at its meeting on 12 April 2007. Agreement
late 2008.
has been reached with SNAM Rete Gas to connect to
the pipeline grid and the grid connection cost will be
borne by SNAM. The Castello environmental approval
documentation has been submitted and full grant of the
production concession is expected in the second half of
calendar year 2007.
Immediately following grant of the licence and
associated development approvals, surface plant will be
installed and the field put in production. All engineering
work has been completed and tenders have been
issued for the key surface plant components. SNAM,
the national pipeline grid operator, has commenced its
permitting and pipeline construction process.
Sant’ Alberto – San Vincenzo Licence
(50% PVE)
Sant’ Alberto is the third field in the portfolio to
process towards commercial gas production. Edison,
the operator submitted the production concession
application in July 2006. The concession is expected to
be put to the Hydrocarbon Commission in mid 2007.
Environmental documentation is complete and ready for
submission and arrangements are in place for pipeline
grid connection.
In late 2006 Edison undertook to purchase from ENI
additional 2D seismic lines on the Sant’ Alberto gas
field structure and process these. The seismic will
be analysed to identify new well and overall field
development plans. Po Valley Energy expects to drill a
6 Po Valley Energy Annual Report 2006
6 Po Valley Energy Annual Report 2006
Bezzecca – Cascina San Pietro Licence
(100% PVE)
Bezzecca is the company’s fourth development field.
The field, formerly called Pandino, was drilled in the
1950’s by ENI and produced 5bcf.
In 2006 some 50 km of seismic data was acquired and a
review of the size and structure of Bezzecca completed.
The review confirmed the size of the structure
– estimated at 45bcf – and confirmed the drill target
location for the planned Bezzecca 1 well.
Preparatory work is well advanced for the drilling of
Bezzecca 1. The drilling program and environmental
approval documentation has been submitted and
approvals are expected in the second half of 2007.
Casing, tubing and well head equipment has been
procured and a contract signed for drilling the well. Drill
rig availability is expected in early 2008 when the well
should be drilled.
New Gas prospects
A priority of the company in 2006 has been to rapidly
grow the portfolio of new gas prospects. Through
a highly targeted program Po Valley Energy applied
for eight new licence areas in Northern Italy and was
successfully granted preliminary award of five of these
new licence applications during the year.
The new licences cover Ossola and Opera around Milan
and La Prospera, La Risorta, and Podere Gallina near
Bologna. The company also progressed the Terra del
Sole application near Bologna. Environmental clearance
documentation has been prepared and submitted for
Ossola, Opera, La Prospera, Podere Gallina and Terra del
nces
Sole and the company expects full grant of these licences
rant
in mid 2007. Clearance documentation and licence grant
procedures are also underway for La Risorta.
One of the eight new licence applications, Mazzalasino,
has been considered at the last Hydrocarbon Committee
y
meeting and the company is awaiting the preliminary
award of this licence.
Initial seismic and geological reviews have been
completed on the new licences and the following priority
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Managing Director’s Report continued
New Oil Plays
The Ossola licence north of Milan contains two
significant oil/condensate and gas exploration targets.
While the Po river valley region is traditionally know for
its gas, there have been a number of successful large
oil finds and developments including ENI’s nearby Villa
Fortuna (50km southwest) discovery with cumulative
production to date of 188 million barrels and Malossa oil
field (20km south) which produced in 20 years 176bcf
of gas and 20 million barrels of condensate.
The company was granted preliminary award of the
Ossola licence in October 2006 and has quickly moved to
complete environmental clearance procedures. Full grant
of the licence is expected in the third quarter of 2007.
In parallel with the licence grant procedures, the
company has commenced the early stage geological
and geophysical work to evaluate the licence. Initial
reviews of seismic data have highlighted two large oil/
condensate structures – Rovagnate at 3,500 metres and
Negrino at 6,000 metres.
Edison, an unsuccessful applicant for the Ossola licence
ola
Os
area, has sought to legally challenge the preliminary
min
pre
award by the Ministry of the Ossola application to Po
Valley Energy. Po Valley Energy and the Italian Ministry
have lodged strong defences, and based on its legal
advice Po Valley Energy is confident that the Edison claim
will be rejected.
list of 8 gas field prospects with resources ranging in size
from 10 to 80 bcf have been identified
(cid:129) Casa Rossa – Podere Gallina Licence
(cid:129) Cembalina – Podere Gallina Licence
(cid:129) F. Perino – Podere Gallina Licence
(cid:129) Occhia - Opera Licence
(cid:129) Ariano – La Risorta Licence
(cid:129) Corcreva – La Risorta Licence
(cid:129) Dosso Anime – La Risorta licence
(cid:129) Pioppette – La Prospera Licence
These gas prospects are in Northern Italy and like Sillaro,
Castello, and Bezzecca are expected to benefit from high
quality gas, close proximity to the pipeline grid, and high
Italian gas prices. Detailed geological and geophysical
studies are underway and are expected to be completed
during the 2007 calendar year. Target well locations will
be identified through these studies with a view to drilling
the first of the projects in late 2008.
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Po Valley Energy Annual Report 2006 7
Po Valley Energy Annual Report 2006 7
Managing Director’s Report continued
Remaining Recoverable Reserves (bcf)
Field Names
Exploration Permit
1. Sant’ Alberto
San Vincenzo
2. Sillaro
3. Castello
4. Bezzecca
Total Development
Crocetta
Cascina san Pietro
Cascina san Pietro
PVE
Interest
50%
100%
100%
100%
Proven
Probable
Possible
6.4
10.4
4.6
15.2
36.6
7.1
30.0
1.7
29.2
68.0
8.6
16.3
0.0
0.9
25.8
130.4
PVE
Total
22.1
56.7
6.3
45.3
Gas Reserves and Resources
Finance
The company’s reserves were unchanged during 2006
During the year the company raised $5.85 million in a
with Proven and Probable reserves of 105bcf.
placement to major institutional shareholders. The funds
Based on preliminary seismic reviews and structure
definition, gas and oil resources have been estimated
for the companies new licence application areas. As
have been used to progress Sillaro and Castello towards
commercial gas production and to accelerate assessment
and development of the highly attractive new projects.
these licences are still at the stage of preliminary award,
During the year the expenditure of $918,529 was
the company will await formal award of the licences
written off following the companies decision to
expected in the second half of 2007 prior to formalising
relinquish the Casone della Sacca licence.
resource estimates.
Italian Market
Gas prices in Italy continued to strengthen through
2006. The price and market conditions remain
structurally very strong and disruption continues with
The company maintains a solid cash position and is
well positioned to capitalise on the significant growth
and development opportunities in its portfolio. Very
substantial growth has been achieved in the companies
asset base with limited use of shareholder’s funds.
gas and oil supplies from Russia.
During 2007 the company expects to put in place
funding facilities for the development of Sillaro, Castello,
Italian Reference Gas Prices
EUR/cubic metre
AUD/'000 cubic feet
0.31
14.54
0.14
7.12
Jun
04
Sep
04
Dec
04
Mar
05
Jun
05
Sep
05
Dec
05
Mar
06
Jun
06
Sep
06
Dec
06
Jun
04
Sep
04
Dec
04
Mar
05
Jun
05
Sep
05
Dec
05
Mar
06
Jun
06
Sep
06
Dec
06
Source: ENI gas price release and GeEo Newsletter pricing data.
European Central Bank average monthly exchange rates.
8 Po Valley Energy Annual Report 2006
8 Po Valley Energy Annual Report 2006
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Managing Director’s Report continued
Sant’ Alberto and Bezzecca 1. Extensive discussions
current strong oil market conditions there are very few
have been held with a number of banks that specialise in
markets where we could have achieved the successful
Reservoir funding facilities.
growth with a minimal call on shareholders funds.
Management
Progress towards production and growth has continued
to be achieved with a small highly skilled management
team. The progress and growth options that we have
created are a credit to their dedication and perseverance.
As the company expands on the operations and
development front, we expect to expand and develop
the team over the coming twelve months.
We do a lot with a small core team, and I wish to join
the board in thanking the team for their enormous
contribution in 2006.
Conclusion
Northern Italy is a very lucrative market to hold gas and
oil reserves. The gas (and oil) is usually of very high
quality, transportation costs are very low and market
The company continues to make steady progress
towards bringing it’s gas fields into production. While
the regulatory environment in Italy poses a development
timetable significantly longer than some other non EU
environments, the company has successfully navigated
every stage of this process to date. The company’s
10 year operating experience in Italy and strong track
record represents significant ‘intellectual property’ and
provides the basis for a material competitive advantage
compared to new entrants seeking to replicate what we
have achieved to date.
We look forward, with patience, to growing the
company further in 2007 and achieving commercial
production and revenues in early 2008.
prices are exceptionally strong and stable. Furthermore,
Michael Masterman
we have found that we have been able to very
Chief Executive Officer
significantly grow our portfolio of assets at a very low
18 April 2007
cost creating major value for our shareholders. In the
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Po Valley Energy Annual Report 2006 9
Po Valley Energy Annual Report 2006 9
Corporate Governance Statement
The Directors are committed to the principles
All Directors, managers and employees are expected to act
underpinning the best practice in corporate governance.
with the utmost integrity and objectivity, striving at all times
The Directors have noted carefully the guidance on the
to enhance the reputation and performance of the Company.
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. One-third of the board is
subject to re-election at each annual general meeting.
The board comprises five directors; three non-executive
directors and two executive directors. 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
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:129) 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:129) 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.
which will not be unreasonably withheld.
(cid:129) External Audit:
The board accepts that it has the responsibility for
The Committee discusses with the external auditors the
internal control procedures within the Company.
overall scope and plans for their audit activities, including
Compliance with these procedures covering financial
staffing, contractual arrangements and fees. It reviews
reporting, quality and integrity of personnel and
all audit reports provided by the external auditor. The
operation control is to be regularly monitored. A number
Committee also specifically reviews any proposed activity
of areas are to be subject to regular reporting to the
or service by the providers of the external audit unrelated
board such as finance, trade practices, industrial relations,
to external audit assurance activities. The external auditor
environmental compliance, workplace health and safety
will be requested to attend annual general meetings, and
and insurance matters.
be available to answer questions from the shareholders.
10 Po Valley Energy Annual Report 2006
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Corporate Governance Statement continued
(cid:129) Appointment of External Auditor:
Remuneration Committee
The board appoints the external auditor. The Committee
The Remuneration Committee must have a majority
reviews the performance of the external auditor annually,
of non-executive directors. The main role of the
and can recommend to the board any changes to
Remuneration Committee is to:
selection it deems appropriate.
(cid:129) Internal Control:
The Committee examines the adequacy of the nature,
(cid:129) review the performance and remuneration of the
Chief Executive Offi cer, and in conjunction
with the Chief Executive Offi cer, review the
extent and effectiveness of the internal control processes of
engagement, performance and remuneration of
the Company.
(cid:129) Risk Management:
The Committee oversees the risk management framework
of the Company, and reviews risk management reports.
Processes
(cid:129) Communications:
senior executives of the Company; and
(cid:129) 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
The Committee maintains free and open communications
considerable weight to the contribution of the employee
with the external auditors and management.
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.
(cid:129) Reporting:
The issues discussed at each Committee meeting are
reported at the next board meeting
(cid:129) 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
fi nancial reporting and practices.
(cid:129) 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.
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Po Valley Energy Annual Report 2006 11
Corporate Governance Statement continued
Nominations Committee
The role of the Nominations Committee is to provide
recommendations to the board on matters including:
permitted to trade in securities, provided that the person
is not in possession of price sensitive information and the
trading is not for short term or speculative gain.
(cid:129) composition of the board and competencies of board
Related party matters
members;
Directors and senior management will be required to
(cid:129) appointment and evaluation of the Chief Executive
advise the Chairman of any related party contract or
Officer;
(cid:129) succession planning for board members and senior
management; and
(cid:129) 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
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
standards of honesty, integrity, objectivity and ethics in
all dealings with each other, the Company, customers,
through:
suppliers and the community. The codes of conduct
(cid:129) the Annual Report;
will be regularly reviewed and updated as necessary to
(cid:129) half yearly reports;
ensure they reflect the highest standards of behaviour
(cid:129) the Annual General Meeting and other meetings
called to obtain approval for board action as
appropriate; and
(cid:129) the Company’s web site.
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.
Share Trading
Directors, management and other employees as
nominated are not permitted to trade in securities during
“black-out” periods which are the six week period
prior to the announcement to ASX of the half yearly
and annual results. Any trading within the “black-out”
periods can only be conducted with the prior written
approval of the Chairman. Outside of the “black-out”
period directors, management and other employees are
12 Po Valley Energy Annual Report 2006
POV final.indd Sec1:12
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Director’s Report
The directors present their report together with the
financial report of Po Valley Energy Limited (‘the
Company” or “PVE”) and of the consolidated entity,
being the Company and its controlled entities, for the
year ended 31 December 2006.
1. Directors
The directors of the Company at any time during or since
the end of the financial year are:
Directors
Date of Appointment
M Masterman
22 June 1999
B Pirola
G Bradley
D McEvoy
D Greil
10 May 2002
30 September 2004
30 September 2004
5 August 2005
Information on Directors
Michael Masterman
Managing Director and CEO, BEcHons, Age 44
Michael is a co-founder of PVE and is based in Europe.
d
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 issue – 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 60
The board is composed of a majority of non-executive
David joined PVE as a Director in September 2004 and is
Directors, including the Chairman. The Chairman of the board is
based in Sydney. He has over 37 years experience in the
elected by the board and is an independent director.
Graham Bradley
Chairman BA, LLB (Hons), LLM, FAICD, Age 58
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,
Graham joined PVE as a director and Chairman in
Exploration and Development Vice President for Esso
September 2004 and is based in Sydney. He is an
Resources Canada and Regional Vice President of Exxon
experienced Chief Executive Officer and listed public
Exploration Company responsible for Exxon’s exploration
company director. Graham previously served as Chief
activities in the Far East, USA, Canada and South America.
Executive Officer of one of Australia’s major listed funds
He was recently the Business Development Vice President
management and financial services groups, Perpetual
and member of the Management Committee of Exxon
Trustees Australia. He was Managing Partner and
(subsequently ExxonMobil) Exploration Company,
Chief Executive Officer of a national law firm, Blake
responsible for new exploration and development
Dawson Waldron and was a senior Partner of McKinsey
opportunities worldwide. He is currently a Non-Executive
& Company. Mr Bradley is currently a director of MBF
Director of Woodside Petroleum Limited, Australian
Australia and Singapore Telecommunications. He is
Worldwide Exploration and Innamincka Petroleum Limited.
Chairman of HSBC Bank Australia Limited, Stockland
David is a member of the Audit and Risk Committee.
Corporation, Film Finance Corporation Australia
Limited, Boart Longyear Limited and Proteome Systems
Byron Pirola
Non Executive Director, BSc, PhD, Age 46
Limited. Graham is Chairman of the Remuneration and
Byron is a co-founder of PVE and is based in Sydney.
Nomination Committee and member of the Audit and
He is currently a Director of Port Jackson Partners
Risk Committee.
Limited, a Sydney based strategy management consulting
firm. Prior to joining Port Jackson Partners in 1992, Byron
spent six years with McKinsey & Company working
Po Valley Energy Annual Report 2006 13
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Director’s Report continued
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. Byron is Chairman of the Audit and
Risk Committee and member of the Remuneration and
Nominations Committee.
Dietmar Greil
3. Directors Meetings
The number of formal meetings of the Board of Directors
Executive Director Technical, MEng Age 53
held during the financial year and the number of
Dietmar is a highly experienced petroleum engineer with
meetings attended by each director is provided below.
over 30 years experience in exploration and development
4. Principal Activities
in the oil and gas industry. He has extensive oil and
The principal continuing activities of the group in the
gas experience having worked for Statoil, Chevron
course of the year were;
and Pruesagg. Dietmar has been a member of the
management team since the Company’s listing in late
2004. Dietmar is also currently the Chief Operating
(cid:129)
the exploration for gas in the Po Valley region in Italy
(cid:129) appraisal and development of gas properties
Officer of Caspian Holdings Plc, an AIM listed company
5. Earnings per share
with oil interests in Kazakhstan.
2. Company Secretary &
Chief Financial Officer
Dom Del Borrello, BCom, Age 40
The basic loss per share for the Company was 3.41 cents
(2005: 3.19 cents).
6. Operating and financial review
The consolidated loss after income tax amounted to
Dom was appointed to the position of Company
$ 2,825,710 (2005: $2,267,469).
Secretary in September 2004 and in September 2006
joined the Company as the Chief Financial Officer. He
has significant corporate finance and capital markets
experience with a focus on resources companies gained
over the past 15 years. During this time he also spent a
number of years working for investment bank Goldman
Sachs in London. Prior to joining the Company he spent
3 years working with global titanium minerals and zircon
producer Iluka Resources , where he was the Group
Manager, Treasury and Risk.
During 2006 the Company prepared and submitted
production concession applications for Sillaro,
Castello (aka “Vitalba”) and Sant’ Alberto (aka “Santa
Maddalena”) fields. All of these applications are currently
sitting with the Italian ministry awaiting technical review
and approval.
Following the lodgement of the concession applications
with the Italian ministry the company awarded an
Engineering, Procurement, Construction and Installation
G Bradley
M Masterman
D McEvoy
B Pirola
D Greil
No. of board meetings held
No. of board meetings eligible to attend
No. of board meetings attended
No. of Audit Committee meetings held
No. of Audit Committee meetings attended
No. of Remuneration Committee meetings held
No. of Remuneration Committee meetings attended
8
8
8
2
2
2
2
8
8
8
n/a
n/a
n/a
n/a
8
8
8
2
2
n/a
n/a
8
8
8
2
2
2
2
8
8
6
n/a
n/a
n/a
n/a
14 Po Valley Energy Annual Report 2006
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Director’s Report continued
contract (“EPCI contract”) for Sillaro and Castello
The Company completed a private plac ement late in the
gasfields with Orion Energy International (“Orion”).
year issuing 3,000,000 shares to Harbinger Management
Under the contract, Orion will manage procurement
Corporation and Hunter Hall Investment Management at
and installation of surface plant equipment and pipeline
$1.95 per share, raising $5,850,000.
connections for the Sillaro and Castello surface plant.
7. Dividends
Commencing this work ahead of the production
approvals required from the Italian ministry will ensure
that the company can move quickly forward with
development once regulatory approvals are in place. A
key element of necessary infrastructure for production
was secured with the company announcing late in
the year that it had reached agreement on its maiden
No dividends have been paid or declared by the Company
during the year ended 31 December 2006.
8. Events subsequent to
reporting date
Since 31 December 2006, the consolidated entity
has undertaken the following signifi cant events:
pipeline connection with the national Italian gas pipeline
(cid:129) Edison, an unsuccessful applicant for the Ossola
operator SNAMRete Gas, for both the Sillaro and Castello
(aka “Vitalba”) fields, ahead of planned initial supply
deliveries.
Also during the year 8 new licence area applications were
submitted, of which the company was awarded with the
rights to proceed forward on an exclusive basis for five
gas and oil exploration licences applications in Italy.
The additional licences cover a total area of 1,610 square
kilometres and are all contained within the petroleum
provinces in northern Italy where the company has
focused it’s development options. Under the terms of the
licence award, the Italian Hydrocarbon Commission has
advised the company that it can proceed forward on an
exclusive basis with 5 major new licence applications in
northern Italy.
The five licence applications are “Ossola” and “Opera”
located near Milan and “La Prospera”, “Podere Gallina”
and “La Risorta” located near Bologna. Based on the
work initiated by Po Valley to date, the licence areas
contain 8 new gas prospects and 2 new oil exploration
targets.
The company has commenced environmental clearance
studies for the additional areas and then plans to seek
licence area, has sought to legally challenge the
preliminary award by the Ministry of the Ossola
application to Po Valley. Po Valley and the Italian
Ministry have lodged strong defences at the initial
hearing. The company will strongly defend the
preliminary award process. The administrative hearing
is scheduled for 18 April 2007 and based on legal
advice Po Valley is confident that the Edison claim will
be rejected.
Other than as set out above, there were no events
between the end of the financial year and the date of
this report that, in the opinion of the directors, affect
significantly the operations of the consolidated entity, the
results of those operations, or the state of affairs of the
consolidated entity.
9. Likely Developments
During 2007 the Company intends to continue to
progress engineering and procurement of necessary
equipment to bring Sillaro, Castello and the Sant’
Alberto gas fields into production in late 2007 once the
company receives ministerial approval for the production
concessions. Preparation will also commence to drill
Bezzacca 1 in the company’s Cascina san Pietro licence.
Ministerial approval for a grant of the full licences for
The Company now has an extensive portfolio of
these additional areas. In parallel with the environmental
exploration and development licences and licence
clearance process, the company will conduct geological
applications. It will focus on bringing the first 3 projects
and geophysical studies on each of the license areas to
of Castello, Sillaro and Sant’ Alberto into production,
better define and “prove up” the prospects. This will
undertake detailed geological evaluation of the new
include acquisition and evaluation of the seismic data
projects and preparation of drilling programs.
ed
co erin
covering selected target areas.
et are
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Po Valley Energy Annual Report 2006 15
Director’s Report continued
10. Environmental Regulation
Non-Executive Directors
The Company’s operations are subject to environmental
regulations under both Federal and local municipality
legislation in relation to its mining exploration and
development activities in Italy. Company management
monitor compliance with the relevant environmental
legislation. The Directors are not aware of any breaches
of legislation during the period covered by this report.
11. Remuneration Report
The Remuneration Report outlines the remuneration
arrangements which were in place during the year, and
remain in place as at the date of this report, for the
Directors and executives of the Company.
Remuneration Policy
The remuneration of PVE Non-Executive Directors
comprises cash fees and superannuation contributions.
There is no current scheme to provide performance
based bonuses or retirement benefits to Non-Executive
Directors other than superannuation contributions
Non-Executive Directors typically do not participate in equity
or options schemes of the Company. Given the size of PVE,
and its focussed nature of the business and shareholdings
structure, issues of share options to Non-Executive Directors
have previously been made, and may in the future be
subject to approval by shareholders, to enhance overall
shareholder wealth creation. The board of directors
and shareholders last approved the maximum agreed
remuneration for Non-Executive Directors at a meeting of
The Company aims to ensure that the level and
the Company in late 2004 at $200,000 per annum.
composition of remuneration of its directors and
executives is sufficient and reasonable for the
competitive industry in which the Company operates.
The total salary and fees paid in 2006 to non-executive
directors was $138,361 (2005:$135,549). The major
provisions of the service contracts held with the specified
The Remuneration Committee is responsible for
directors and executives, in addition to any performance
determining and reviewing compensation arrangements
related bonuses and/or options are as follows:
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
Specified directors
Graham Bradley, Chairman
(cid:129) Commencement Date: 19 May 2005
reference to relevant employment market conditions
(cid:129) Term of Appointment: 3 years
with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality
(cid:129) Fixed remuneration for the year ended
31 December, 2006: $60,000
board and executive team.
(cid:129) No termination benefits
Executive Directors and Senior Executives
David McEvoy, Non-executive director
The remuneration of PVE executive directors and
senior executives comprises some or all of the
following elements: fixed salary; short term incentive
bonus based on performance; long term incentive
shares and/or option scheme; and other benefits
(cid:129) Commencement Date: 19 May 2005
(cid:129) Term of Appointment: 3 years
(cid:129) Fixed remuneration for the year ended
31 December, 2006: $40,000
including employment insurances and superannuation
(cid:129) No termination benefits
contributions. In relation to the payment of bonuses,
Byron Pirola, Non-executive director
share option and other incentive amounts, discretion is
exercised by theRemuneration Committee having regard
to the overall performance of the Company and of the
relevant individual during the period.
(cid:129) Commencement Date: 30 May 2006
(cid:129) Term of Appointment: 3 years
(cid:129) Fixed remuneration for the year ended
31 December, 2006: $40,000
(cid:129) No termination benefits
16 Po Valley Energy Annual Report 2006
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Director’s Report continued
Michael Masterman, Chief Executive Offi cer
(cid:129) Payment of termination benefit on termination by
and Managing Director
the employer (other than for gross misconduct) equal
(cid:129) Commencement Date: 14 December 2004
(cid:129) Term of Agreement: 2 years with a further 1 year
extension at the option of the executive
(cid:129) Fixed remuneration inclusive of superannuation for
the year ended 31 December, 2006: $240,000
(cid:129) Payment of termination benefit on termination by
the employer (other than for gross misconduct)equal
to one years total fixed remuneration
Dietmar Greil, Technical Director
(cid:129) Commencement Date: 1 January 2005 (Executive
Agreement) and 30 May 2006 (Director Agreement)
(cid:129) Term of Agreement: 2 years with a further 1 year
extension at the option of the Executive
to one years total fixed remuneration
Specified Executive
Dom Del Borrello, Company Secretary and
Chief Financial Officer
(cid:129) Commencement Date: 1 September 2006
(cid:129) Term of Agreement: The services of Mr Del Borrello
are provided through a service contract with a
management company for 2 years with a further 1
year extension at the option of either the Company
or the service company.
(cid:129) Fixed Service contract fee of EUR7,000 per calendar
month
(cid:129) Payment of termination benefit on termination by
the Company (other than for gross misconduct)
(cid:129) Fixed remuneration for the year ended 31 December,
equal to three month service fee
2006: EUR100,000
The remuneration details of each director and specified executives during the year is presented in the table below.
There are no executive officers of the consolidated entity other than those listed.
Specifi ed directors
G Bradley (Chairman)
D McEvoy
B Pirola
M Masterman (CEO)
D Greil (appointed
5 Aug 2005 as a director)
Specifi ed executives
D Del Borrello
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
Salary & fees
$
Bonus
$
Superannuation
benefi ts
$
Value of options
$
Total
$
Proportion of
remuneration
performance
related %
Value of options
as proportion of
remuneration %
58,345
57,163
40,008
39,198
40,008
39,198
240,046
255,877
166,699
149,714
74,701
33,058
-
-
-
-
-
-
83,350
-
33,340
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
96,636
280,986
57,982
168,592
58,345
57,163
40,008
39,198
40,008
39,198
420,032
536,863
258,021
318,306
12,464
28,099
87,165
61,157
-
-
-
-
-
-
19.8%
-
12.9%
-
-
-
-
-
-
-
-
-
23%
52%
22%
53%
14%
46%
Short term incentive bonuses awarded as remuneration to specified executives is related to performance hurdles
established by the Remuneration Committee. The performance hurdles are a combination of company targets and
objectives specific to the executive.
POV final.indd Sec1:17
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Po Valley Energy Annual Report 2006 17
Director’s Report continued
Analysis of bonuses included
in remuneration
Equity instruments
All options refer to options over ordinary shares of Po
Details of the vesting profile of the short-term incentive
Valley Energy Limited, which are exercisable on a one
cash bonus awarded as remuneration to each director and
for-one basis.
specified executives are detailed here.
Short term incentive bonus
Directors
Included in
Options over equity instruments
granted as compensation
Details on options over ordinary shares in the Company
remuneration % vested in year
that were granted as compensation to each key
M Masterman
D Greil
$ (a)
83,350
33,340
100%
100%
management personnel during the reporting period and
details on options that vested during that period are as
follows:
(a) Amounts included in remuneration for the financial year
represent the amount that vested in the financial year based
on achievement of personal goals and satisfaction of specified
performance criteria. No amounts vest in future financial years in
respect of the bonus schemes for the 2006 financial year.
No of options
Fair value per
Exercise price
No. of options
granted during 2006
Grant date
option at grant date ($)
per option ($)
Expiry date
vested during 2006
Directors
G Bradley
D McEvoy
B Pirola
M Masterman
D Greil
Executives
D Del Borello
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
500,000
200,000
750,000
450,000
150,000
30 Nov 2006
$0.70
$1.95
1 Dec 2010
75,000
No of options
granted during 2005
Grant date
Fair value per
option at grant date ($)
Exercise price
No. of options
per option ($)
Expiry date
vested during 2005
Directors
G Bradley
D McEvoy
B Pirola
M Masterman
D Greil
Executives
D Del Borello
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
750,000
450,000
75,000
No options have been granted since the end of the financial year. The options were provided at no cost to the recipients.
All options expire on the earlier of their expiry date or termination of the individual’s employment.
For options granted in the current year, the earliest exercise date is 1 December 2008.
18 Po Valley Energy Annual Report 2006
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Director’s Report continued
Exercise of options granted as
compensation
Analysis of options over equity
instruments granted as compensation
During the reporting period, no shares were issued
Details of vesting profiles of the options granted as
on the exercise of options previously granted as
remuneration to each director of the Company and key
compensation.
management personnel are detailed below:
Number
Date granted
% vested in year
in year
which grant vests
Value yet to vest
% forfeited
Financial year in
Non-executive directors
G Bradley
D McEvoy
B Pirola
1,000,000
15 Oct 2004
500,000
15 Oct 2004
200,000
15 Oct 2004
Executive directors
M Masterman
750,000
15 Oct 2004
750,000
15 Oct 2004
D Griel
450,000
15 Oct 2004
450,000
15 Oct 2004
100 %
100 %
100 %
-
100%
-
100%
-
-
-
-
-
-
-
31 Dec 2006
31 Dec 2006
31 Dec 2006
31 Dec 2005
31 Dec 2006
31 Dec 2005
31 Dec 2006
-
-
-
-
-
-
-
Number
Date granted
% vested in year
in year
which grant vests
Value yet to vest
% forfeited
Financial year in
Specifi ed executives
D Del Borello
75,000
75,000
15 Oct 2004
15 Oct 2004
75,000
30 Nov 2006
75,000
30 Nov 2006
-
100%
-
-
-
-
-
-
31 Dec 2005
31 Dec 2006
31 Dec 2008
31 Dec 2009
-
-
$52,828
$52,828
Further details of Director and Executive Remuneration are set out in Note 23 to the Financial Statements and form part of this
report.
POV final.indd Sec1:19
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Po Valley Energy Annual Report 2006 19
Director’s Report continued
Po Valley Energy Limited
Po Valley E
tements
Notes to the Consolidated Financial Statements
Not
or th
for the year ended 31 December 2006
r ended 31 December 2006
inanci
12. Directors’ interests
At the date of this report, the direct and indirect
15. Indemnification and insurance of
officers and auditors
interests of the Directors in the shares and options of the
The Company has agreed to indemnify current Directors
Company were:
against any liability or legal costs incurred by a Director
Options over Ordinary Shares
Ordinary
Shares
$1.00
expiring
31 Oct 08
G Bradley
323,981
1,000,000
$1.25
expiring
31 Oct 08
-
M Masterman 21,464,242
-
1,500,000
500,000
200,000
-
-
-
-
-
-
900,000
-
-
-
D McEvoy
B Pirola
D Greil
129,593
12,010,821
695,989
J Masterman1
I Masterman 1
G Masterman1
4,788,444
500,000
388,778
1. Related parties to M Masterman
13. Share Options
Details of share options over ordinary shares issued
during the year and on issue at 31 December 2006 are
set out in Note 15 to the Financial Statements and form
part of this report. No options have been exercised or
forfeited between the end of the financial year and the
date of this report.
14. Corporate Governance
In recognising the need for the highest standards of
corporate behaviour and accountability, the Directors
of PVE support and have adhered to the principles of
sound corporate governance. The Board recognises the
recommendations of the ASX Corporate Governance
Council, and considers that PVE is in compliance
with those guidelines which are of importance to the
commercial operation of a junior listed gas exploration
company.
as an officer of the Company or entities within the
consolidated entity or in connection with any legal
proceeding 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 premiums to insure
the Directors against certain liabilities arising out of the
conduct while acting on behalf of the Company. Under
the terms and conditions of the insurance contract, the
nature of liabilities insured against and the premium paid
cannot be disclosed.
16. Non audit services
During the year KPMG has not performed any other
services in addition to their statutory duties as auditors to
the Company.
17. Proceedings on behalf of the Company
No person has applied for leave of Court, pursuant to
section 237 of the Corporations Act 2001, to bring
proceedings on behalf of the Company or intervene in
any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the
Company for all or any part of those proceedings.
18. Lead Auditor’s independence
declaration
The lead auditor’s independence declaration is set out on
page 21 and forms part of the Directors’ report for the
fi nancial year ended 31 December 2006.
This report has been made in accordance with a resolution
of Directors.
The Company’s Corporate Governance Statement and
disclosures are contained elsewhere in the annual report.
Graham Bradley, Chairman
Sydney, NSW Australia
12 March 2007
20 Po Valley Energy Annual Report 2006
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Po Valley Energy Limited
Po Valley
Po Valley Energy Limited
Notes to the Consolidated Financial Statements
olidated Financ
Note
Lead Auditor’s Independence Declaration
under Section 307C of the Corporation Act 2001
006
for the year ended 31 December 2006
ateme
31 Decemb
Co
To: the directors of Po Valley Energy Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for
the fi nancial year ended 31 December 2006 there have been:
(i) no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to
the audit.
KPMG
B C FULLARTON, Partner
Perth
12 March 2007
KPMG, an Australian partnership, is part of the KPMG International
network. KPMG International is a Swiss cooperative.
POV final.indd Sec1:21
POV final.indd Sec1:21
24/4/07 4:04:42 PM
24/4/07 4:04:42 PM
Po Valley Energy Annual Report 2006 21
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Income Statements for the year ended 31 December 2006
Notes to the Consolidated Financial Statements
s
t
Not
Notes to the Consolidated Financial Statements
tementss
s
or th
for the year ended 31 December 2006
r ended 31 December 2006
n
inanci
CONSOLIDATED
COMPANY
Revenue
Other income
NOTES
2
3(a)
2006
214,756
33,455
2005
512,952
78,112
2006
200,173
548,635
2005
471,436
-
Employee benefi t expense
4
(1,088,279)
(1,176,455)
(196,073)
(561,972)
Depreciation and
amortisation expense
12
Overheads costs
Finance costs
Resource property costs
written off
Other expenses
3(b)
(Loss) / Profi t before
income tax expense
(11,698)
(1,060,267)
(1,620)
(905,111)
(6,946)
(12,095)
(804,474)
(29,700)
(745,403)
(90,406)
-
(460,406)
-
-
-
(412,864)
(27,825)
-
(6,071)
(331,366)
(2,825,710)
(2,267,469)
86,258
(862,591)
Income tax expense
6
-
-
-
-
(Loss) / Profi t for the period
(2,825,710)
(2,267,469)
86,258
(862,591)
Basic / Diluted loss per
share
7
(3.41)
(3.19)
The income statements are to be read in conjunction with the accompanying notes to the financial statements.
NOTES
2006
2005
2006
2005
CONSOLIDATED
COMPANY
Foreign exchange
translation differences
17
748,585
(787,954)
Net income and expense
recognised directly in equity
748,585
(748,954)
-
-
-
-
Profi t / (Loss) for the year
(2,825,710)
(2,267,469)
86,258
(862,591)
Total recognised income
and expense for the year
(2,077,125)
(3,055,423)
86,258
(862,591)
The statements of recognised income and expense are to be read in conjunction with the accompanying
notes to the fi nancial statements.
22 Po Valley Energy Annual Report 2006
POV final.indd Sec1:22
POV final.indd Sec1:22
24/4/07 4:04:43 PM
24/4/07 4:04:43 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Balance Sheets as at 31 December 2006
Notes to the Consolidated Financial Statements
olidated Financ
Note
006
for the year ended 31 December 2006
ateme
31 Decemb
Co
NOTES
2006
2005
2006
2005
CONSOLIDATED
COMPANY
Current Assets
Cash and cash equivalents
Trade and other receivables
8
9
5,082,323
10,437,245
5,008,195
8,667,320
2,241,481
1,035,392
49,194
27,109
Total Current Assets
7,323,804
11,472,637
5,057,389
8,694,429
Non-Current Assets
Investments
Receivables
Plant & Equipment
Resource Property Costs
10
11
12
13
18,713
2,100,375
838,595
1,939,540
494,542
29,254,350
27,032,818
-
10,922,204
10,749,314
27,735,881
18,580,545
-
-
-
-
Total Non-Current Assets
32,212,033
29,466,900
38,658,085
29,329,859
Total Assets
39,535,837
40,939,537
43,715,474
38,024,288
Current Liabilities
Payables
Provisions
14
16
645,658
83,167
5,980,010
36,454
205,188
561,324
-
-
Total Current Liabilities
728,825
6,016,464
205,188
561,324
Total Liabilities
Net Assets
Equity
Issued Capital
Reserves
728,825
6,016,464
205,188
561,324
38,807,012
34,923,073
43,510,286
37,462,964
44,354,162
38,589,171
44,354,162
38,589,171
221,899
(526,686)
-
-
Accumulated Losses
(5,749,049)
(3,139,412)
(843,876)
(1,126,207)
Total Equity
17
38,807,012
34,923,073
43,510,286
37,462,964
The balance sheets are to be read in conjunction with the accompanying notes to the fi nancial statements.
Po Valley Energy Annual Report 2006 23
POV final.indd Sec1:23
POV final.indd Sec1:23
24/4/07 4:04:43 PM
24/4/07 4:04:43 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Cash Flow Statement
Notes to the Consolidated Financial Statements
s
t
Not
Notes to the Consolidated Financial Statements
tementss
s
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
n
inanci
NOTES
2006
2005
2006
2005
CONSOLIDATED
COMPANY
Cash fl ows from
operating activities
Payments to suppliers and
employees
Interest received
Interest paid
Net cash outfl ow from
(1,813,813)
(1,331,529)
214,757
(1,620)
512,952
(38,763)
(494,967)
200,173
-
(484,170)
471,435
(36,887)
operating activities
22
(1,600,676)
(857,340)
(294,794)
(49,622)
Cash fl ows from investing
activities
Payments for non-current assets
(343,521)
(487,628)
Advances for well equipment
(897,583)
-
Payments for exploration expenditure
(7,953,445)
(14,252,182)
Payments for investments
(18,713)
Payment for investment in controlled entity
Amounts advanced to controlled entities
-
-
-
-
-
-
-
-
-
(172,890)
-
-
-
-
-
(8,606,700)
(17,120,613)
Net cash outfl ow from
investing activities
Cash fl ows from fi nancing
activities
Proceeds from the issues of shares
Payments for share issue costs
Repayment of borrowings
Net cash outfl ow from
fi nancing activities
(9,213,262)
(14,739,810)
(8,779,590)
(17,120,613)
5,850,000
(434,759)
-
8,750,000
(161,195)
(504,098)
5,850,000
(434,759)
-
8,750,000
(161,195)
(504,098)
5,415,241
8,084,707
5,415,241
8,084,707
Net decrease in cash held
(5,398,697)
(7,512,443)
(3,659,143)
(9,085,528)
Cash and cash equivalents at
1 January
Effects of exchange rate
fl uctuations on cash held
Cash and cash equivalents
10,437,245
18,030,792
8,667,320
17,821,432
43,775
(81,104)
18
(68,584)
at 31 December
8
5,082,323
10,437,245
5,008,195
8,667,320
The statements of cash fl ows are to be read in conjunction with the accompanying notes to the fi nancial statements.
24 Po Valley Energy Annual Report 2006
POV final.indd Sec1:24
POV final.indd Sec1:24
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24/4/07 4:04:43 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING
POLICIES
The estimates and underlying assumptions are
reviewed 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
Po Valley Energy Limited (“the Company” or “PVE”)
period or in the period of the revision and future
is a company domiciled in Australia. The consolidated
periods if the revision affects both current and future
financial report of the Company for the year ended
periods.
31 December 2006 comprises the Company and its
subsidiaries (together referred to as the “Consolidated
Entity”).
The estimates and judgements that have a significant
risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next
The financial report was authorised for issuance on
financial year are discussed below.
12 March 2007.
(a) STATEMENT OF COMPLIANCE
The financial report is a general purpose financial
report which has been prepared in accordance
with Australian Accounting Standards and the
Corporations Act 2001. The consolidated financial
report of the consolidated entity also complies with
IFRSs and interpretations adopted by the International
Accounting Standards Board.
(b) BASIS OF PREPARATION
The financial report is presented in Australian dollars.
Resource Property Costs
The Group’s accounting policy for resource property
costs is set out below. The application of this policy
necessarily requires management to make certain
estimates and assumptions as to future events and
circumstances, in particular, the assessment of whether
economic quantities of resources and reserves have
been found. Any such estimates and assumptions
may change as new information becomes available.
If, after having capitalised expenditure under our
policy, we conclude that we are unlikely to recover the
expenditure by future exploitation or sale, then the
This financial report has been prepared on the basis of
relevant capitalised amount will be written off to the
historical cost, except for financial assets and liabilities
Income Statement.
recognised at fair value.
The accounting policies set out below have been
applied consistently to all periods presented in the
consolidated financial report.
The accounting policies have been applied consistently
by consolidated entities.
(c) 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.
(d) PRINCIPLES OF CONSOLIDATION
Subsidiaries
Subsidiaries are entities controlled by the Company.
Control exists when the Company has the power,
directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits
from its activities. In assessing control, potential voting
rights that presently are exercisable or convertible
are taken into account. The financial statements of
subsidiaries are included in the consolidated financial
statements from the date that control commences until
the date that control ceases.
The consolidated financial statements incorporate
the assets and liabilities of all entities controlled by
Po Valley Energy Limited (“parent entity”) as at 31
December 2006 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.
POV final.indd Sec1:25
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24/4/07 4:04:44 PM
Po Valley Energy Annual Report 2006 25
Po Valley Energy Limited
Po Valle
Po Valley Energy Limited
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
ements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2006
or the
r ended 31 December 2006
for the year ended 31 December 2006
nanci
i
NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES continued
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.
The effects of all transactions between entities in the
consolidated entity are eliminated in full.
When control of an entity is obtained during
the financial year, its results are included in the
consolidated income statement from the date on which
control commences.
Investments in subsidiaries are carried at their cost of
acquisition in the Company’s financial statement less
impairment losses.
(f) IMPAIRMENT OF ASSETS
The carrying amounts of the consolidated entity’s
assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount and is
recognised in the income statement. The recoverable
amount is the higher of an asset’s fair value less costs
to sell and value in use. For the purposes of assessing
Joint Controlled operations and assets
impairment, assets are grouped at the lowest levels for
The interest of the Company and of the consolidated
which there are separately identifiable cash flows (cash
entity in unincorporated joint ventures and jointly
generating units).
controlled assets are brought to account by recognising
in its financial statements the assets it controls, the
liabilities that it incurs, the expenses it incurs and its
share of income that it earns from the sale of goods or
services by the joint venture.
(e) TAXATION
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, using tax rates enacted or
substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous
years. Deferred tax is provided using the balance sheet
liability method, providing for temporary differences
between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts
used for taxation purposes. The following temporary
differences are not provided for: the initial recognition
of assets or liabilities that affect neither accounting nor
Financial assets
The recoverable amount of the consolidated entity’s
receivables carried at amortised is calculated as
the present value of estimated future cash flows,
discounted at the original effective interest rate (i.e. the
effective interest rate computed at initial recognition
of these financial assets). Receivables with a short
duration are not discounted.
Impairment of receivables is not recognised until
objective evidence is available that a loss event has
occurred. Significant receivables are individually
assessed for impairment. Impairment testing of
significant receivables that are not assessed as impaired
individually is performed by placing them into portfolios
of significant receivables with similar risk profiles and
undertaking a collective assessment of impairment.
Non-significant receivables are not individually
assessed. Instead, impairment testing is performed
by placing non-significant receivables in portfolios
of similar risk profiles, based on objective evidence
from historical experience adjusted for any effects of
conditions existing at each balance sheet date.
taxable profit; and differences relating to investments
(g) CASH AND CASH EQUIVALENTS
in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount
of assets and liabilities using tax rates enacted at the
balance sheet date.
For purposes of the cash fl ow statement, 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.
26 Po Valley Energy Annual Report 2006
POV final.indd Sec1:26
POV final.indd Sec1:26
24/4/07 4:04:45 PM
24/4/07 4:04:45 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES continued
Cumulative exploration and evaluation expenditure
which no longer satisfies the above policy is no longer
carried forward as an asset, but is charged against, and
(h) 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 fall within the following ranges:
2005
2004
Offi ce furniture
& equipment
3 – 5 years
3 – 5 years
The residual value, the useful life and the depreciation
method applied to an asset are reassessed annually.
Well equipment which is not ready for use is not
depreciated.
(i) TRADE AND OTHER PAYABLES
Trade payables and other payables are recognised when
the consolidated entity becomes obliged to make future
payments resulting from the purchase of goods and
services. These amounts are stated at their amortised cost.
(j) RESOURCE PROPERTIES
Resource property costs are intangible assets and
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.
shown as a deduction from profit.
(k) REVENUE RECOGNITION
Interest revenue
Interest revenue is recognised as it accrues, taking into
account the effective yield on the fi nancial asset.
(l) TRADE AND OTHER RECEIVABLES
Trade receivables and other receivables are recorded
stated at their cost less impairment losses.
(m) EMPLOYEE BENEFITS
Long-term service benefi ts
The consolidated entity’s net obligation in respect of
long-term service benefi ts is the amount of future
benefi t that employees have earned in return for their
service in the current and prior periods. The obligation is
calculated using expected future increases in wage and
salary rates including on-costs and expected settlement
dates, and is discounted using the rates attached to the
Commonwealth Government bonds at the balance sheet
date which have maturity dates approximating to the
terms of the consolidated entity’s obligations.
Wages, salaries, annual leave, sick lieave and
non-monetary benefi ts
Liabilities for employee benefits for wages, salaries,
annual leave and sick leave that are expected to
be settled within 12 months of the reporting date
represent present obligations resulting form employees
services provided to reporting date, are calculated at
undiscounted amounts based on remuneration wage
and salary rates that the consolidated entity expects
to pay as at reporting date including related on-costs,
such as workers compensation insurance and payroll
Resource properties include the cost of acquiring and
tax.
developing resource properties, mineral rights and
exploration, evaluation and development expenditure
relating to an area of interest.
Superannuation
The consolidated entity contributes to defi ned
contribution superannuation plans. Contributions are
Resource properties are amortised using the unit of
recognised as an expense as they are made.
production basis over the economically recoverable
reserves. Amortisation of resource properties
commences from the date when commercial
production commences. When there is low 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.
POV final.indd Sec1:27
POV final.indd Sec1:27
24/4/07 4:04:45 PM
24/4/07 4:04:45 PM
Po Valley Energy Annual Report 2006 27
Po Valley Energy Limited
Po Valley E
Po Valley Energy Limited
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2006
or th
r ended 31 December 2006
for the year ended 31 December 2006
inanci
NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES continued
Share-based payments
The executive and employee share option plan grants
translated to Australian dollars at rates approximating
the foreign exchange rates ruling at the dates of the
transactions. Foreign exchange differences arising
on retranslation are recognised directly in a separate
component of equity.
options to employees as part of their remuneration.
(o) EARNINGS PER SHARE
The fair value of options granted is recognised as an
employee expense with a corresponding increase in
retained earnings. The fair value is measured at grant date
and spread over the period during which the employees
become unconditionally entitled to the options. The fair
value of the options granted is measured, using an options
pricing model; taking into account the market related
vesting conditions upon which the options were granted.
The amount recognised as an expense is adjusted to
refl ect the actual number of share options that vest except
where forfeiture is only due to share prices not achieving
the threshold for vesting.
(n) FOREIGN CURRENCY
Functional and presentation currency
Items included in the fi nancial statements of each of
the Group’s entities are measured using the currency of
the primary economic environment in which the entity
operates (“the functional currency”). The consolidated
fi nancial statements are presented in Australian dollars,
which is Po Valley Energy Limited’s functional and
presentation currency.
Transactions and balance
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of
such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the
income statement.
Group companies
The assets and liabilities of foreign operations,
including goodwill and fair value adjustments arising
on consolidation are translated to Australian dollars at
foreign exchange rates ruling at the balance sheet date.
The revenues and expenses of foreign operations are
Basic earnings per share (“EPS”) is calculated by dividing
the net profi t 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 classifi ed 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 fi nancing
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.
(p) OTHER TAXES
Revenue, expenses and assets are recognised net of the
amount of goods and services tax (GST) and value added
tax (VAT) except where the amount of GST or VAT
incurred is not recoverable from the taxation authority.
In these circumstances, the GST or VAT is recognised as
part of the cost of acquisition of the asset or as part of
the expense.
Receivables and payables are stated with the amount
of GST or VAT included. The net amount of GST or VAT
recoverable from, or payable to, the relevant taxation
authority is included as a current asset or liability in the
balance sheet.
Cash fl ows are included in the statement of cash fl ows
on a gross basis. The GST and VAT components of cash
fl ows arising from investing and fi nancing activities
which are recoverable from, or payable to, the relevant
taxation authority are classifi ed as operating cash fl ows.
28 Po Valley Energy Annual Report 2006
POV final.indd Sec1:28
POV final.indd Sec1:28
24/4/07 4:04:46 PM
24/4/07 4:04:46 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 2: REVENUE
CONSOLIDATED
COMPANY
2006
2005
2006
2005
Interest income
214,756
512,952
200,173
471,436
NOTE 3: OTHER INCOME AND OTHER EXPENSES
(a) Other Income:
Provisions written back
Foreign exchange gains - unrealised
Other
(b) Other Expenses:
Foreign exchange losses
Realised
Unrealised
-
-
33,455
33,455
72,052
-
6,060
78,112
-
548,635
-
548,635
-
-
-
-
6,946
-
81,104
9,302
6,071
68,584
-
262,782
6,946
90,406
6,071
331,366
NOTE 4: EMPLOYEE BENEFIT EXPENSES
Wages and salaries
Equity based compensation
892,206
196,073
614,483
561,972
-
-
196,073
561,972
1,088,279
1,176,455
196,073
561,972
NOTE 5: AUDITORS’ REMUNERATION
Remuneration for audit or review of the fi nancial reports
of the parent entity or any entity in the consolidated entity:
Auditors of the Company – KPMG Australia
54,000
46,566
54,000
26,704
POV final.indd Sec1:29
POV final.indd Sec1:29
24/4/07 4:04:47 PM
24/4/07 4:04:47 PM
Po Valley Energy Annual Report 2006 29
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
inanci
NOTE 6: INCOME TAX EXPENSE
CONSOLIDATED
COMPANY
2006
2005
2006
2005
The income tax expense on pre tax accounting reconciles
to the income tax expense in the fi nancial statements as follows:
(Loss) / Profi t from ordinary activities before
income tax expense
(2,825,710)
(2,267,469)
86,258
(862,591)
Prima facie income tax calculated at 30%
(847,713)
(680,240)
25,877
(258,777)
Tax effect of permanent differences
Foreign tax losses not brought to account
Tax losses and temporary differences not
58,822
708,983
168,592
465,634
58,822
168,592
-
-
brought to account as income tax benefi t
79,908
46,014
(84,699)
90,185
Income tax attributable to loss
-
-
-
-
The directors estimate that the potential future income tax benefi t in Australia at 31 December 2006
in respect of tax losses and temporary differences not brought to
account is
698,266
411,776
694,939
408,467
This benefi t for tax losses will only be obtained if:
(i) the relevant company derives future assessable income of a nature and of an amount suffi cient to
enable the benefi t 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 benefi t from the
deductions for the losses
NOTE 7: LOSS PER SHARE
Basic loss per share(cents)
(3.41)
(3.19)
The calculation of basic loss per share was based on the loss attributable to shareholders of $2,825,710
(2005: $2,267,469) and a weighted average number of ordinary shares outstanding during the year of
82,976,712 (2005: 71,165,753).
Diluted loss per share is the same as basic loss per share.
NOTE 8: CASH AND CASH EQUIVALENTS
Cash at bank and on hand
5,082,323
10,437,245
5,008,195
8,667,320
30 Po Valley Energy Annual Report 2006
POV final.indd Sec1:30
POV final.indd Sec1:30
24/4/07 4:04:47 PM
24/4/07 4:04:47 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 9: TRADE AND
OTHER RECEIVABLES
Sundry debtors
Vendor advances for well equipment
Indirect taxes receivable (a)
CONSOLIDATED
COMPANY
2006
2005
2006
2005
97,668
897,583
132,712
-
1,246,230
902,680
2,241,481
1,035,392
43,351
17,500
-
5,843
49,194
-
9,609
27,109
(a) Included in receivables are Italian indirect taxes
recoverable as follows:
Current1
Non-current
237,387
893,072
2,100,375
1,939,540
-
-
-
-
The indirect taxes relate to Italian Value Added Tax (“VAT”), which is typically 20% of invoiced amounts (with certain
exceptions). The extent of VAT that has not been recovered from the Italian authorities is recognised on the balance sheet as
a receivable. Po Valley expects to recover this receivable through reducing VAT remitted on sales, reducing the consolidated
entity’s obligation to pay employee taxes to the authorities and/or applying for an annual refund (capped at the lowest
amount of VAT credits generated in any of the past 3 years). The current portion receivable is estimated to be recoverable in
the next twelve months.
NOTE 10: INVESTMENTS
Shares in unlisted entities, at fair value
Shares in controlled entities, at cost
18,713
-
18,713
-
-
-
-
-
10,922,204
10,749,314
10,922,204
10,749,314
The investments held in controlled entities are included in the fi nancial statements at cost at 31 December 2006 are as
follows:-
Name:
Country of
Incorporation
Class of
Shares
2006
Investment
2005
Investment
Holding
%
Northsun Italia S.p.A (“NSI”)
Italy
Ordinary
10,206,314
10,033,424
Po Valley Operations Pty Ltd (“PVO”)
Australia
Ordinary
715,890
715,890
100
100
10,922,204
10,749,314
POV final.indd Sec1:31
POV final.indd Sec1:31
24/4/07 4:04:48 PM
24/4/07 4:04:48 PM
Po Valley Energy Annual Report 2006 31
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
nanci
i
NOTE 11: NON- CURRENT
ASSETS - RECEIVABLES
CONSOLIDATED
COMPANY
2006
2005
2006
2005
Indirect taxes receivable (refer Note 9(a))
2,100,375
1,939,540
-
-
Loans – Controlled Entities (i)
-
-
27,735,881
18,580,545
2,100,375
1,939,540
27,735,881 18,580,545
(i) These loans are unsecured, interest free and repayable on demand in Euro.
NOTE 12: PROPERTY PLANT & EQUIPMENT
Offi ce Furniture & Equipment:
At cost
Accumulated depreciation
Well Equipment:
At cost
Reconciliations:
Reconciliation of the carrying amounts for each
class of Plant & equipment are set out below:
Offi ce Furniture & Equipment:
Carrying amount at beginning of year
Additions
Depreciation expense
Foreign exchange difference
Carrying amount at end of year
Well Equipment:
Carrying amount at beginning of year
Additions
Transfer to resource property costs
Foreign exchange difference
Carrying amount at end of year
130,884
(94,506)
36,378
109,571
(80,810)
28,761
802,217
465,781
838,595
494,542
28,761
18,603
20,220
20,636
(11,698)
(12,095)
712
-
36,378
28,761
465,781
324,917
829,647
465,781
-
(829,647)
11,519
-
802,217
465,781
838,595
494,542
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32 Po Valley Energy Annual Report 2006
POV final.indd Sec1:32
POV final.indd Sec1:32
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24/4/07 4:04:48 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 13: RESOURCE
PROPERTY COSTS
CONSOLIDATED
COMPANY
2006
2005
2006
2005
Resource Property costs
Exploration Phase
29,254,350
27,032,818
Reconciliation of carrying amount of
resource properties
Exploration Phase
Carrying amount at beginning of year
27,032,818
12,157,809
Foreign exchange difference
656,474
(688,806)
Transfer from property plant & equipment
-
829,647
Exploration expenditure
Exploration expenditure written off
2,470,169
15,479,571
(905,111)
(745,403)
Carrying amount at end of year
29,254,350
27,032,818
NOTE 14: TRADE AND OTHER PAYABLES
-
-
-
-
-
-
-
-
-
-
-
-
Trade payables and accruals
633,682
5,951,015
205,188
561,324
Taxes payable
11,976
28,995
-
-
645,658
5,980,010
205,188
561,324
POV final.indd Sec1:33
POV final.indd Sec1:33
24/4/07 4:04:49 PM
24/4/07 4:04:49 PM
Po Valley Energy Annual Report 2006 33
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
nanci
i
NOTE 15: 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 23.
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.
2006
2005
Number of Weighted average
exercise price $
options
Number of Weighted average
exercise price $
options
Balance at beginning of year
3,000,000
Granted
Exercised
(a)
150,000
-
Balance at end of year
(b) 3,150,000
Exercisable at end of year
3,150,000
$1.25
$1.95
-
3,000,000
-
-
3,000,000
3,000,000
$1.25
-
-
(a) Details of options granted during the reporting period pursuant to EIOS.
Number granted
Granted date
Vesting date
Expiry date
Exercise price
2006
150,000
30 November 2006
50% 1 December 2008
50% 1 December 2009
1 December 2010
$1.95
2005
-
-
-
-
-
-
(b) Options held at the end of the reporting period pursuant to EIOS.
Number of Options Grant date
Vesting date
Expiry date
Exercise price $
1,500,000
1,500,000
150,000
15 Oct 2004
15 Oct 2004
15 Dec 2005
15 Dec 2006
30 Nov 2006
50% 1 Dec 2008
31 Oct 2008
31 Oct 2008
1 Dec 2010
$1.25
$1.25
$1.95
50% 1 Dec 2009
34 Po Valley Energy Annual Report 2006
POV final.indd Sec1:34
POV final.indd Sec1:34
24/4/07 4:04:49 PM
24/4/07 4:04:49 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 16: PROVISIONS
CONSOLIDATED
COMPANY
2006
2005
2006
2005
The aggregate employee benefi t liability recognised
and included in the fi nancial statement is as follows:
Provision for employee benefi ts:
Current
Other provisions:
Provision for legal claim
NOTE 17: CAPITAL AND RESERVES
-
36,454
83,167
-
-
-
-
-
Reconciliation of movement in capital and reserves Attributable to equity holders of the parent
Consolidated – 2006
Issued
Capital
Translation
Reserve
Accumulated
losses
Balance at 1 January 2006
38,589,171
(526,686)
(3,139,412)
Total recognised income and expense
Equity-settled transactions
Shares issued
Share issue costs
-
-
5,850,000
(85,009)
748,585
(2,825,710)
-
-
-
196,073
-
-
Total
34,923,073
(2,077,125)
196,073
5,850,000
(85,009)
Balance at 31 December 2006
44,354,162
221,899
(5,769,049)
38,807,012
Consolidated – 2005
Issued
Capital
Translation
Reserve
Accumulated
losses
Balance at 1 January 2005
30,276,671
261,268
(1,433,915)
Total recognised income and expense
Equity-settled transactions
Shares issued
Share issue costs
-
-
8,750,000
(437,500)
(787,954)
(2,267,469)
-
-
-
561,972
-
-
Total
29,104,024
(3,055,423)
561,972
8,750,000
(437,500)
Balance at 31 December 2005
38,589,171
(526,686)
(3,139,412)
34,923,073
POV final.indd Sec1:35
POV final.indd Sec1:35
24/4/07 4:04:50 PM
24/4/07 4:04:50 PM
Po Valley Energy Annual Report 2006 35
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
i
inanci
NOTE 17: CAPITAL AND RESERVES continued
Reconciliation of movement in capital and reserves
Company
Issued Accumulated
losses
Capital
2006
Total
Issued Accumulated
losses
Capital
2005
Total
Balance at 1 January
38,589,171
(1,126,207)
37,462,964
30,276,671
(825,588)
29,451,083
Total recognised
income and expense
-
86,258
86,258
Equity-settled transactions
196,073
196,073
-
-
(862,591)
(862,591)
561,972
561,972
Shares issued
Share issue costs
5,850,000
(85,009)
-
-
5,850,000
8,750,000
(85,009)
(437,500)
-
-
8,750,000
(437,500)
Balance at 31 December 44,354,162
(843,876)
43,510,286
38,589,171
(1,126,207)
37,462,964
Share Capital - Company
Opening balance - 1 January
Shares issued during the year:
Share issue at 70c each on 22.11.2005
Share issue at 70c each on 23.12.2005
2006
Number
82,500,000
-
-
Share issue at $1.95 each on 3.11.2006
3,000,000
2005
Number
70,000,000
10,500,000
2,000,000
-
Closing balance – 31 December
85,500,000
82,500,000
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.
NOTE 18: FINANCIAL REPORTING BY SEGMENTS
The Company operates primarily as a gas explorer and in one geographical location, being Italy.
36 Po Valley Energy Annual Report 2006
POV final.indd Sec1:36
POV final.indd Sec1:36
24/4/07 4:04:50 PM
24/4/07 4:04:50 PM
Po Valley Energy Limited
Po Valley
Po Valley Energy Limited
Notes to the Consolidated Financial Statements
Note
Notes to the Consolidated Financial Statements
for the year ended 31 December 2006
006
for the year ended 31 December 2006
olidated Financ
ateme
31 Decemb
Co
NOTE 19 : 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
fi nancial assets and fi nancial liabilities is set out below:
2006
Weighted
Average
Interest Rate
Floating
Interest Rate
Fixed interest
Maturing in
1 year or<
Non-
Interest
bearing
Total
Financial Assets
Cash assets
3.68%
221,702
4,860,621
-
5,082,323
Receivables
- Current
- Non current
Financial Liabilities
Payables
Provisions
-
-
-
-
Net fi nancial assets/(liabilities)
5,082,323
-
-
-
-
2,241,481
2,100,375
2,241,481
2,100,375
(645,658)
(645,658)
(83,617)
(83,617)
3,613,031
8,695,354
2005
Weighted
Average
Interest Rate
Floating
Interest Rate
Fixed interest
Maturing in
1 year or<
Non-
Interest-
bearing
Total
Financial Assets
Cash assets
3.61%
8,853,410
1,583,835
-
10,437,245
Receivables
- Current
- Non current
Financial Liabilities
Payables
Provisions
-
-
-
-
-
-
-
1,035,392
1,939,540
1,035,392
1,939,540
(5,980,010)
(5,980,010)
(36,454)
(36,454)
Net fi nancial assets/(liabilities)
8,853,410
1,583,835
(3,041,532)
7,395,713
(b) Credit Risk Exposures
The consolidated entity is not exposed to signifi cant credit risk. Credit risk with respect to cash is held with recognised fi nancial
intermediaries with acceptable credit ratings.
(c) Net Fair Values of Financial Assets and Liabilities
The carrying amounts of fi nancial assets and liabilities as disclosed in the balance sheet equate to their estimated net fair value.
(d) Foreign Currency Risk
The consolidated entity is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a
currency other than Australian Dollars. The currency giving rise to this risk is primarily Euro.
POV final.indd Sec1:37
POV final.indd Sec1:37
24/4/07 4:04:51 PM
24/4/07 4:04:51 PM
Po Valley Energy Annual Report 2006 37
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
nanci
i
NOTE 19 : FINANCIAL INSTRUMENTS continued
Amounts receivable/(payable) in foreign currency which are not effectively hedged:
Cash
Current – Receivables
Non-current – Receivables
Current – Payables
CONSOLIDATED
COMPANY
2006
2005
2006
2005
74,128
1,747,322
104
745
2,192,288
1,025,783
2,100,375
1,939,540
-
-
385,996
5,418,686
5,801
-
-
-
NOTE 20: COMMITMENTS AND CONTINGENCIES
(i) Exploration Commitments
Under its exploration licence for Casone della Sacca, the Company was required to drill one well by March 2006. The
company relinquished this exploration area during 2006. As a result of the application for extensions to the licence areas of
San Vincenzo, Crocetta and Cascino san Pietro the company is required to drill one well in each of these licences by January
2010.
The estimated cost of drilling one dry well is in the range of €1,800,000 to €2,000,000.
(ii) Contingencies
There are no material contingencies that have not been provided for in the fi nancial report.
(iii) Other commitments
The company has entered into a contract that provides engineering design, procurement and supervision of the
construction and installation of both the Sillaro and Castello production surface plants. The contract is for a lump sum
amount of €336,000 which consist separable portions.
38 Po Valley Energy Annual Report 2006
POV final.indd Sec1:38
POV final.indd Sec1:38
24/4/07 4:04:51 PM
24/4/07 4:04:51 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 21: JOINT VENTURES
As at the 31 December, 2006 the consolidated entity held interests in the following Joint Ventures and permits in Italy:
Titles of Permits granted
San Vincenzo
Participation percentages
NSI 32.5%
Other registered holders
and relevant percentages
Edison 50%
PVO 17.5%
Assets and liabilities of the Joint Venture at 31.12.2006 were as follows:
Resource Property Costs
1,791,757
Receivables
Payables
Net Assets
-
-
1,791,757
As at the 31 December, 2005 the consolidated entity held interests in the following Joint Ventures and permits
in Italy:
Titles of Permits granted
San Vincenzo
Participation percentages
NSI 32.5%
Other registered holders
and relevant percentages
Edison 50%
PVO 17.5%
Assets and liabilities of the Joint Ventures at 31.12.2005 were as follows:
Resource Property Costs
Receivables
Payables
Net Assets
1,560,176
75,537
(26,491)
1,609,222
POV final.indd Sec1:39
POV final.indd Sec1:39
24/4/07 4:04:52 PM
24/4/07 4:04:52 PM
Po Valley Energy Annual Report 2006 39
Po Valley Energy Limited
Po Valley E
Po Valley Energy Limited
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2006
or th
r ended 31 December 2006
for the year ended 31 December 2006
nanci
i
NOTE 22: RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) / Profi t for the period
Adjustment for non-cash items:
Foreign exchange loss
Foreign exchange gains
Share-based payments
Depreciation – offi ce furniture & equipment
Exploration expenditure written off
Change in operating assets and liabilities:
CONSOLIDATED
COMPANY
2006
2005
2006
2005
(2,825,710)
(2,267,469)
86,258
(862,591)
6,071
6,946
90,406
(548,635)
331,366
-
196,073
11,698
905,111
-
561,972
12,095
745,403
-
196,073
561,972
-
-
-
-
(Increase) decrease in receivables
33,980
(122,088)
(25,850)
(Increase in shareholder loans for interest
Increase (decrease) in trade and other creditors
Increase in provisions and accruals
-
(33,870)
50,622
(9,062)
116,641
14,762
37,118
(9,062)
-
(12,620)
(108,425)
3,909
-
Net cash outfl ow from operating activities
(1,600,676)
(857,340)
(294,794)
(49,622)
NOTE 23: KEY MANAGEMENT PERSONNEL DISCLOSURE
a) Remuneration
Remuneration Policy
The Company aims to ensure that the level and composition of remuneration of its directors and executives is suffi cient and
reasonable for the competitive industry in which the Company operates.
The Remuneration Committee is responsible for determining and reviewing compensation arrangements for the Directors, the
Chief Executive Offi cer and the executive team. The Remuneration Committee assesses the appropriateness of the nature and
amount of entitlements of such offi cers on a periodic basis by reference to relevant employment market conditions with the
overall objective of ensuring maximum stakeholder benefi t from the retention of a high quality board and executive team.
Executive Directors and Senior Executives
The remuneration of PVE executive directors and senior executives comprises some or all of the following elements: fi xed
salary; short term incentive bonus based on performance; long term incentive shares and/or option scheme; and other benefi ts
including employment insurances and superannuation contributions. In relation to the payment of bonuses, share option and
other incentive amounts, discretion is exercised by the Remuneration Committee having regard to the overall performance of
the Company and of the relevant individual during the period.
40 Po Valley Energy Annual Report 2006
POV final.indd Sec1:40
POV final.indd Sec1:40
24/4/07 4:04:52 PM
24/4/07 4:04:52 PM
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 23: KEY MANAGEMENT PERSONNEL DISCLOSURE continued
Non-Executive Directors
The remuneration of PVE Non-Executive Directors comprises cash fees and superannuation contributions. There is no current
scheme to provide performance based bonuses or retirement benefi ts to Non-Executive Directors other than superannuation
contributions. Non-Executive Directors typically do not participate in equity or options schemes of the Company. Given the size
of PVE, and its focussed nature of the business and shareholdings structure, issues of share options to Non-Executive Directors
have previously been made, and may in the future be subject to approval by shareholders, to enhance overall shareholder
wealth creation. The board of directors and shareholders last approved the maximum agreed remuneration
for Non-Executive Directors at a meeting of the Company in late 2004 at $200,000 per annum.
The following were key management personnel of the consolidated entity at any time during the reporting period and unless
otherwise indicated were key management personnel for the entire period. The major provisions of the service contracts held
with the specifi ed directors and executives, in addition to any performance related bonuses and/or options are as follows:
Specifi ed directors
Graham Bradley, Chairman
(cid:129) Commencement Date:
19 May 2005
(cid:129) Term of Appointment:
3 years
(cid:129) Fixed remuneration for the year ended 31 December, 2006: $60,000
(cid:129) No termination benefi ts
David McEvoy, Non-executive director
(cid:129) Commencement Date:
19 May 2005
(cid:129) Term of Appointment:
3 years
(cid:129) Fixed remuneration for the year ended 31 December, 2006: $40,000
(cid:129) No termination benefi ts
Byron Pirola, Non-executive director
(cid:129) Commencement Date:
30 May 2006
(cid:129) Term of Appointment:
3 years
(cid:129) Fixed remuneration for the year ended 31 December, 2006: $40,000
(cid:129) No termination benefi ts
Michael Masterman, Chief Executive Offi cer and Managing director
(cid:129) Commencement Date:
14 December 2004
(cid:129) Term of Agreement:
2 years with a further 1 year extension at the option of the executive
(cid:129) Fixed remuneration inclusive of superannuation for the year ended 31 December, 2006: $240,000
(cid:129) Payment of termination benefi t on termination by the employer (other than for gross misconduct) equal to one
years total fi xed remuneration
Dietmar Greil, Technical director
(cid:129) Commencement Date:
1 January 2005 (Executive) and 30 May 2006 (Director)
(cid:129) Term of Agreement:
2 years with a further 1 year extension at the option of the Executive
(cid:129) Fixed remuneration for the year ended 31 December, 2006: EUR100,000
(cid:129) Payment of termination benefi t on termination by the employer (other than for gross misconduct) equal to one years
total fi xed remuneration
POV final.indd Sec1:41
POV final.indd Sec1:41
24/4/07 4:04:53 PM
24/4/07 4:04:53 PM
Po Valley Energy Annual Report 2006 41
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
inanci
NOTE 23: KEY MANAGEMENT PERSONNEL DISCLOSURE continued
Specifi ed Executive
Dom Del Borrello, Company Secretary and Chief Financial Offi cer
(cid:129) Commencement Date:
1 September 2006
(cid:129) Term of Agreement:
The services of Mr Del Borrello are provided through a service
contract with a management company for 2 years with a further 1year extension at the option of either the Company
or the Service company.
(cid:129) Fixed Service contract fee of EUR7,000 per calendar month
(cid:129) Payment of termination benefi t on termination by the Company (other than for gross misconduct) equal to three
month service fee
The remuneration details of each director and specifi ed executives during the year is presented in the table below.
Salary &
Fees
Bonus
Super-
annuation
Benefi ts
Value of
Options(1)
Specifi ed directors
G Bradley (Chairman)
2006
D McEnvoy
B Pirola
2005
2006
2005
2006
2005
58,345
57,163
40,008
39,198
40,008
39,198
-
-
-
-
-
-
M Masterman (CEO)
2006
240,046
83,350
D Greil
Specifi ed directors
D Del Borrello
2005
2006
2005
2006
2005
2006
2005
255,877
166,699
149,714
74,701
33,058
619,807
574,208
-
33,340
-
-
-
116,690
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
58,345
57,163
40,008
39,198
40,008
39,198
420,032
536,863
258,021
318,306
-
-
-
-
-
-
96,636
280,986
57,982
168,592
12,464
28,099
87,165
61,157
167,082
903,579
477,677
1,051,885
(1) The fair value of options was calculated at the date of issue using a Black-Scholes Option Pricing Model, taking
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.
Options granted in 2004 expire 31 October 2008, options granted in 2006 expire 1 December 2010. Each option entitles
the holder to purchase one share.
42 Po Valley Energy Annual Report 2006
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Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 23: KEY MANAGEMENT PERSONNEL DISCLOSURE continued
The directors and executives were appointed on the following dates
M Masterman
22 June 1999
B Pirola
G Bradley
D McEvoy
D Greil
10 May 2002
30 September 2004
30 September 2004
5 August 2005
D Del Borrello
30 September 2004
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, 150,000 options over ordinary shares were issued and no options were exercised or forfeited.
(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 specifi ed director and specifi ed executive, including their personally-related entities, is as follows:
Specifi ed directors
G Bradley
M Masterman
D McEvoy
B Pirola
D Greil
Specifi ed executives
D Del Borrello
Held at
31 Dec 2005
Issued
Held at
31 Dec 2006
1,000,000
1,500,000
500,000
200,000
900,000
-
-
-
-
-
1,000,000
1,500,000
500,000
200,000
900,000
150,000
150,000
300,000
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Po Valley Energy Annual Report 2006 43
Po Valley Energy Limited
Po Valley Energy Limited
Po Valley E
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
for the year ended 31 December 2006
for the year ended 31 December 2006
or th
r ended 31 December 2006
nanci
i
NOTE 23: KEY MANAGEMENT PERSONNEL DISCLOSURE continued
The details of the options held at 31 December 2006 are as follows:
$1.00
exercise price
expiring 31 Oct 08
$1.25
exercise price
expiring 31 Oct 08
$1.95
exercise price
expiring 31 Dec 10
Specifi ed directors
G Bradley
M Masterman
D McEvoy
B Pirola
D Greil
Specifi ed executives
D Del Borrello
1,000,000
-
500,000
200,000
-
-
-
1,500,000
-
-
900,000
-
-
-
-
-
Total
1,000,000
1,500,000
500,000
200,000
900,000
150,000
150,000
300,000
1,700,000
2,550,000
150,000
4,400,000
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 specifi ed director and specifi ed executive, including their personally-related entities is as follows:
Specifi ed directors
G Bradley
M Masterman (i)
D McEvoy
B Pirola (i)
D Greil
Specifi ed executives
D Del Borrello
Held at
31 Dec 2005
323,981
21,339,242
129,593
12,010,821
695,989
90,715
i) Included above are shares held by related parties
Purchased
Sold
Held at
31 Dec 2006
323,981
21,464,242
129,593
12,010,821
695,989
-
-
-
-
-
25,919
64,796
-
125,000
-
-
-
-
44 Po Valley Energy Annual Report 2006
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Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note
for the year ended 31 December 2006
for the year ended 31 December 2006
006
olidated Financ
ateme
31 Decemb
Co
NOTE 23: KEY MANAGEMENT PERSONNEL DISCLOSURE continued
Held at
Related Entities
J Masterman 1
I Masterman 1
G Masterman 1
31 Dec 2005
Purchased
4,788,444
500,000
388,778
-
-
-
Held at
Sold
-
-
-
31 Dec 2006
4,788,444
500,000
388,778
1. Related parties to M Masterman
(e) Other transactions with the Company
A total amount of $21,859 (2005: $35,858) 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.
POV final.indd Sec1:45
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Po Valley Energy Annual Report 2006 45
Po Valley Energy Limited
Po Valley E
Po Valley Energy Limited
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
Directors’ Declaration
or th
for the year ended 31 December 2006
r ended 31 December 2006
nanci
i
1.
In the opinion of the directors of Po Valley Energy Ltd (“the Company”):
i) the fi nancial statements and notes, as set out on pages 22 to 45, are in accordance with the Corporations Act 2001,
including:
a. giving a true and fair view of the fi nancial position of the Company and the consolidated entity as at 31 December
2006 and of their performance, as represented by the results of their operations and their cash fl ows, for the
fi nancial year ended on that date.
b. complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
ii) 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.
The directors have been given the declarations by the Chief Executive Offi cer and Chief Financial Offi cer for the
fi nancial year ended 31 December 2006 pursuant to Section 295A if the Corporations Act 2001.
Dated at Sydney this 12 day of March 2007.
Signed in accordance with a resolution of the directors:
Graham Bradley, Chairman
Byron Pirola, Non-Executive Director
46 Po Valley Energy Annual Report 2006
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Po Valley Energy Limited
Po Valley Energy Limited
Po Valley
Independent Audit Report
Notes to the Consolidated Financial Statements
Note
006
for the year ended 31 December 2006
olidated Financ
ateme
31 Decemb
Co
Independent audit report to members of Po Valley Energy Limited
Scope
The fi nancial report and directors’ responsibility
The fi nancial report comprises the income statements, statements of recognised income and expense, balance sheets,
statement of cash fl ows, accompanying notes to the fi nancial statements, and the directors’ declaration for both Po Valley
Energy Limited (the “Company”) and Po Valley Energy Limited and its subsidiaries (the “group”), for the year ended 31
December 2006. The group comprises both the Company and the subsidiaries it controlled
during that year.
The directors of the Company are responsible for the preparation and true and fair presentation of the fi nancial 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 fi nancial 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 fi nancial report is free of material misstatement. The nature of an audit is infl uenced 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 fi nancial report presents fairly, in accordance with
the Corporations Act 2001, Australian Accounting Standards and other mandatory fi nancial reporting requirements in
Australia, a view which is consistent with our understanding of the Company’s and the group’s fi nancial position, and of
their performance as represented by the results of their operations and cash fl ows.
We formed our audit opinion on the basis of these procedures, which included:
(cid:129) examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the fi nancial report,
and
(cid:129) assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of signifi cant
accounting estimates made by the directors.
While we considered the effectiveness of management’s internal controls over fi nancial reporting when determining the
nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.
KPMG, an Australian partnership, is part of the KPMG International
network. KPMG International is a Swiss cooperative.
POV final.indd Sec1:47
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Po Valley Energy Annual Report 2006 47
Po Valley Energy Limited
Independent Audit Report
Audit opinion
In our opinion, the fi nancial 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 the group’s fi nancial position as at 31 December 2006 and
of their performance for the fi nancial year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b)
other mandatory fi nancial reporting requirements in Australia.
KPMG
B C FULLARTON, Partner
Perth
12 March 2007
KPMG, an Australian partnership, is part of the KPMG International
network. KPMG International is a Swiss cooperative.
48 Po Valley Energy Annual Report 2006
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Po Valley Energy Limited
Shareholder Information
for the year ended 31 December 2006
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 28 February, 2007.
SHAREHOLDINGS
Substantial Shareholders
Name
Michael Masterman
Harbinger Capital Management
Hunter Hall Investment Management Pty Ltd
Beronia Investments Pty Ltd1
Joan Masterman
1Interests associated with Non-Executive Director, Byron Pirola
Distribution of Share and Option Holdings
Number of
ordinary shares held
Percentage of
capital held %
21,464,242
15,708,244
13,479,300
12,010,821
4,788,444
25.10%
18.37%
15.76%
14.04%
5.60%
Size of Holdings
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - over
Ordinary Shares
Options
Number of
holders
37
140
98
138
37
450
Number of
shares
23,876
454,450
838,202
3,964,603
80,218,869
85,500,000
Number of
holders
Number of
options
0
0
0
4
7
11
0
0
0
150,000
4,700,000
4,850,000
Number of ordinary shareholders with less than a marketable parcel
Nil
Voting Rights of Shares and Options
Refer to Note 15 and Note 17.
On-Market Buy-Back
There is no current on-market buy-back.
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Po Valley Energy Annual Report 2006 49
Po Valley Energy Limited
Po Valley E
Po Valley Energy Limited
Notes to the Consolidated Financial Statements
t
Not
Notes to the Consolidated Financial Statements
tements
Shareholder Information
for the year ended 31 December 2006
or th
r ended 31 December 2006
for the year ended 31 December 2006
nanci
i
Number of ordinary shares held
Percentage of capital held %
Twenty Largest Shareholders
1
Citicorp Nominees Pty Limited
2 Michael Masterman
3
4
5
6
7
8
9
Beronia Investments Pty Ltd
Joan Masterman
Equity Trustees Limited
HSBC Custody Nominees – GSI ECSA
Ken Ambrecht
Holly Gibson
Lauri Macri
10 Dietmar Greil
11 Beronia FS Pty Ltd
11 Beronia FS Pty Ltd
11 Nicola Forrest
12 HSBC Custody Nominees
13 McDonald Petroleum Pty Ltd
14 George Gurney Masterman
15 Mellior Pty Ltd
16 Beronia Investments Pty Ltd
17 Chris & Betsy Carr
18 Graham Bradley
18 NorthSun Energy Limited
19 Lisa White
20 Tucabia Investments Pty Ltd
Option holders – Unquoted
1 Michael Masterman
2
3
4
5
6
Graham Bradley
Dietmar Greil
Options issued under the PVE Employee Incentive
Option Scheme 1
David McEvoy
Byron Pirola
27,857,948
21,464,242
10,389,821
4,788,444
3,185,376
1,500,000
1,224,649
910,000
840,000
695,989
500,000
500,000
500,000
406,909
400,000
388,778
380,742
371,000
370,000
323,981
323,981
304,323
285,000
32.58%
25.10%
12.15%
5.60%
3.73%
1.75%
1.43%
1.06%
0.98%
0.81%
0.58%
0.58%
0.58%
0.48%
0.47%
0.45%
0.45%
0.43%
0.43%
0.38%
0.38%
0.36%
0.33%
77,911,183
91.12%
Number of ordinary options held Percentage of Options held %
1,500,000
1,000,000
900,000
750,000
500,000
200,000
4,850,000
30.93%
20.62%
18.55%
15.47%
10.31%
4.12%
100%
1 No person holds 20% or more of these securities, other than as disclosed above. The total number of option
holders is 11.
Restricted Securities
Class
Executive – unlisted Options
Executive – unlisted Options
50 Po Valley Energy Annual Report 2006
Number of restricted Securities
75,000
75,000
Date of Release
1 December 2008
1 December 2009
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Po Valley
Po Valley Energy Limited
Note
Notes to the Consolidated Financial Statements
006
for the year ended 31 December 2006
olidated Financ
ateme
31 Decem
Co
Notes:
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Po Valley Energy Annual Report 2006 51
Notes:
52 Po Valley Energy Annual Report 2006
POV final.indd Sec1:52
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PO VALLEY ENERGY LIMITED
A.B.N. 33 087 741 571
Registered Offi ce
Level 28, 140 St. Georges Terrace
Perth WA 6000
Tel: (08) 9278 2533
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