26 April 2016
Dear Shareholder,
Please find attached a copy of the 2015 Po Valley Energy Annual Report, prepared as at 31 March
2016
2015 was clearly a very difficult year for Po Valley Energy and for the gas and oil sector in particular.
Natural declines in production and declining global energy prices affected our revenues and
profitability, while adverse finance market conditions for small resource companies and the
challenging Italian regulatory environment slowed our timing in bringing new fields such as Bezzecca
and Sant Alberto into production.
In this challenging climate the management and the Board have taken decisive steps to:
Reduce the debt owed to Nedbank from EUR3m to less than EUR500,000, and to refinance
this debt into a more flexible and unsecured facility
Sell the smaller non-core Gradizza gas field for EUR1.85m
Recapitalise the Company through the recently completed rights issue which raised $1.75m
Significantly reduce administration and operating costs including a reduction in the size of
the Board related costs
Work over the Sillaro gas field with the plan to increase production and revenue
Notwithstanding these steps, further actions over the coming months are aimed at continuing to
further strengthen the Company and streamline costs. In particular, the Board has resolved to
pursue a delisting of the Company from ASX and will seek shareholder approval to delist the
Company at its Annual General Meeting on 31 May 2016. The detailed reasons for this decision are
set out in the explanatory memorandum which forms part of the Notice of AGM being sent to
shareholders on 29 April 2016.
The initiatives taken together with those planned are fundamentally improving the financial position
of the Company and creating the preconditions to earn strong returns from the low cost, high return
development and exploration assets in our gas portfolio.
I wanted to acknowledge the enormous efforts of Sara Edmonson the CEO, and the management
team in a difficult market and managerial environment.
Graham Bradley has been our Chairman for the last 12 years since listing and I wanted to thank him
for his great service as Chairman. I would also like to thank Kevin Eley and Greg Short who have
also announced their resignations from the Board since Christmas; the Company is indebted to each
of them for their tireless service as Directors. On 22 April 2016 we welcomed Kevin Bailey to the
Board. A shareholder since 2008, Mr Bailey will bring significant business acumen and experience
to the Board. Further details of his experience are set out in the Notice of AGM.
The Directors and financial report as at 31 March 2016 follows in the attached Annual Report. More
extensive details on the Company and its progress can be found on our website www.povalley.com.
Yours sincerely
Michael Masterman
Chairman
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Contents
Corporate Directory
Year in Summary
Directors’ Report
Lead Auditor’s Independence Declaration
Statement of Financial Position
Statement of Profit or Loss and
Other Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Director’s Declaration
Independent Auditor’s Report
Shareholder Information 2015-2016
Technical Summary
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3
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25
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A n n u a l R e p o r t 2 0 1 5 | 1
Corporate Directory
Directors
Graham Bradley - Non-Executive Chairman
Michael Masterman - Deputy Chairman
Byron Pirola - Non-Executive Director
Kevin Eley - Non-Executive Director
Gregory Short – Non- Executive Director
Chief Executive Officer Sara Edmonson
Company Secretary
Lisa Jones
Registered Office
Suite 8, 7 The Esplanade , Mt Pleasant WA 6153
Tel: + 61 8 9316 9100
Rome Office
Via Ludovisi 16, 00143 Rome, Italy
Tel: +39 0642014968
Share registry
Link Market Services Limited
Level 4, 152 St Georges Terrace, Perth WA 6000
Solicitors
Steinepreis Paganin
Level 4, The Read Buildings 16 Milligan Street , Perth WA 6000
Auditor
Ernst & Young
11 Mounts Bay Road, Perth WA 6000
Banks
Bankwest
108 St George’s tce Perth, Wa Australia 6000
Nedbank Limited
Old Mutual Place, 2 Lambeth Hill London, UK, EC4V 4GG
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.
,
2 | A n n u a l R e p o r t 2 0 1 5
Year in Summary
• Gas production 0.35 bcf (9.99 million standard cubic metres)
• € 2.49 million (AUD 3.79 million) revenue
• Continued reduction in G&A expenses by € 0.25 million (AUD 0.38 million),
or circa 10% compared to 2014
• Negative €0.79 million (AUD 1.2 million) EBITDA due to significant contraction
in revenue
• Completed sale of interests in La Prospera (Gradizza) and Zanza to JV Partner
Aleanna Resources in late December for €1.85 million (AUD 2.77 million)
• Filed the production concession application for the off-shore development
Teodorico (formerly Carola-Irma) with the Ministry of Economic Development
• Sillaro rigless campaign commenced in December, completion of initial rework
expected in 2016
A n n u a l R e p o r t 2 0 1 5 | 3
Directors’ Report
The directors present their report together with the financial report of Po Valley Energy Limited (‘the
Company” or “PVE”) and of the Group, being the Company and its controlled entities, for the year
ended 31 December 2015.
1. Directors
The directors of the Company at any time during or since the end of the financial year are:
Directors
M Masterman
B Pirola
G Bradley
G Short
K Eley
Date of Appointment
22 June 1999 (Managing Director)
11 October 2010 (Non-Executive Director)
10 May 2002
30 September 2004
5 July 2010 -- Resigned 25 January 2016
19 June 2012
Information on Directors
The Board is composed of Non-Executive Directors, including the Chairman. The Chairman of the
Board is elected by the Board and is an independent director.
Graham Bradley — Chairman BA, LLB (Hons), LLM, FAICD, Age 67
Graham joined PVE as a director and Chairman in September 2004 and is based in Sydney. He is an
experienced Chief Executive Officer and listed public company director. Graham previously served as
Chief Executive Officer of one of Australia’s major listed funds management and financial services
groups, Perpetual Limited. He was formerly Managing Partner of a national law firm, Blake Dawson
Waldron and was a senior Partner of McKinsey & Company. Graham is currently Chairman of
Stockland Corporation Limited, HSBC Bank Australia Limited, Energy Australia Holdings Limited and
Infrastructure NSW and a director of GI Dynamics Inc. Graham is Chairman of the Remuneration and
Nomination Committee and was a member of the Audit and Risk Committee until December 2010.
Michael Masterman — Non-Executive Director, BEcHons, Age 53
Michael is a co-founder of PVE. Michael took up the position of Executive Chairman and CEO of PVE
and Northsun Italia S.p.A. in 2002 and resigned in October 2010 to take up an executive position at
Fortescue Metal Group where he is currently CEO of FMG Iron Bridge iron ore company and recently
completed the US$1.15bn sale of a 31% interest in the project to Formosa Plastics Group. Prior to
joining PVE, Michael was CFO and Executive Director of Anaconda Nickel (now Minara Resources),
and he spent 8 years at McKinsey & Company serving major international resource companies
principally in the area of strategy and development. He is also Chairman of W Resources Plc, an AIM
listed company with tungsten and gold assets in Spain and Portugal. Michael became a member of
the Remuneration & Nomination Committee from 1 January 2011.
Byron Pirola — Non-Executive Director, BSc, PhD, Age 55
Byron is a co-founder of PVE and is based in Sydney. He is currently a Director of Port Jackson
Partners Limited, a Sydney based strategic management consulting firm. Prior to joining Port Jackson
Partners in 1992, Byron spent six years with McKinsey & Company working out of the Sydney, New
York and London Offices and across the Asian Region. He has extensive experience in advising
CEOs and boards of both large public and small developing companies across a wide range of
4 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
industries and geographies. Byron is a member of the Audit and Risk Committee and member of the
Remuneration and Nomination Committee.
Gregory Short — Non-Executive Director, BSc, Age 65
Resigned 25 January 2016
Greg Short was appointed Non-Executive Director in July 2010. Greg is a geologist who worked with
Exxon in exploration, development and production geosciences and management for 33 years in
Australia, Malaysia, USA, Europe and Angola. During his time in Europe, Greg was actively involved
in Exxon's activities in the Netherlands and Germany. Greg was Geoscience Director of Exxon's
successful development of its Angola offshore operations. Greg retired from Exxon in 2006 and is a
Non-Executive director of ASX listed MEO Australia, Metgasco Limited and Pryme Oil and Gas
Limited. Greg became a member of the Audit and Risk Committee from 1 January 2011. Gregory
Short resigned 25th January 2016.
Kevin Eley — Non-Executive Director, CA, F FIN, Age 66
Kevin Eley was appointed Non-Executive Director in June 2012. Kevin is based in Sydney and was
the Chief Executive of HGL Limited for 25 years until his retirement in 2011. He has management and
investment experience in a broad range of industries including, manufacturing, mining, retail and
financial services with experience in the direction of early stage companies and public company
governance. Kevin joined the PVE Audit & Risk Committee as Chairman and is currently a Non-
Executive director of HGL Ltd, Milton Corporation Limited, Hunter Hall international Limited and Equity
Trustees Limited.
2. Company Secretary
Lisa Jones – Company Secretary, LLB
Lisa was appointed to the position of Company Secretary in October 2009. She is a corporate lawyer
with over 17 years experience in commercial law and corporate affairs, working with large public
companies and emerging companies in Australia and in Europe. She was a senior associate in the
corporate & commercial practice of Allen Allen & Hemsley and spent several years working in Italy,
including as international legal counsel at Pirelli Cavi and as an associate in the Rome office of a
national Italian firm.
A n n u a l R e p o r t 2 0 1 5 | 5
Directors’ Report (Continued)
3. Directors Meetings
The number of formal meetings of the Board of Directors held during the financial year and the
number of meetings attended by each director is provided below:
G Bradley
M Masterman
B Pirola
G Short
K Eley
No. of board
meetings held
No. of board
meetings
attended
No. of Audit &
Risk Committee
meetings held
No. of Audit &
Risk Committee
meetings
attended
No. of
Remuneration &
Nomination
Committee
meetings held
No. of
Remuneration &
Nomination
Committee
meetings
attended
13
12
2
2
1
1
13
12
2
1
1
1
13
11
2
1
1
1
13
13
2
2
1
0
13
13
2
2
1
0
* attended meeting as an observer
4. Principal Activities
The principal continuing activities of the Group in the course of the year were:
• The exploration for gas and oil in the Po Valley region in Italy.
• Appraisal and development of gas and oil fields.
• Production and sale of gas from the Group’s production wells.
5. Earnings per share
The basic and diluted loss per share for the Company was 5.02 € cents (2014: loss 1.03 € cents).
6 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
6. Operating and financial review
The Italian gas market is dominated by gas imports. According to the 2015 Annual Report prepared by
the Italian Ministry of Economic Development, the domestic exploration and production industry
represents approximately 8% of total gas consumption in Italy the majority of which is produced by
industry majors including Eni Spa and Edison Spa in the northern Adriatic Sea. Consequently, the
Company has few comparable peers to contrast its operations.
Strategy
PVE’s strategy is to create value for shareholders and stakeholders using its existing and growing
Italian oil and gas resource base. PVE’s strategy focuses on optimising near term production to
maximise profitability and expanding the Company’s resources through exploration and development
activities.
The Company’s core portfolio includes 10 onshore assets and the first offshore asset – a game
changer in the Company’s resource potential. The Company’s operations are located in Italy and are
run by a local management team which PVE believe represents a significant competitive advantage
not enjoyed by newer entrants seeking to find success in the Italian market.
The 2015 faced a strong decline in gas prices in Italy, with the market seeing a reduction in order of
25% over the last 12 months. The decline was even more evident in the last part of the year, with spot
prices ranging between Euro 16.5 and 20 cents per cubic metre.
The Company has not been immune to the increasing pressure on the oil and gas industry
experienced worldwide. Funding from both debt and equity sources has been extremely challenging
for junior companies like Po Valley Energy. As previously reported, the Company’s priorities have
been to increase production and revenue from its Sillaro gas field, to seek funding to bring its near
term development assets into production and to progress the Company’s highly prospective licence
areas. Directors are currently reviewing several options to supplement the Company’s cash at bank
and revenue in order to fund the Company’s operations in short and medium term. A pro rata
renounceable rights issue to raise approximately Euro 1.2 million (AUD 1.75m) was launched on 18
March of this year. As outlined in the ASX Market Update of 18 March 2016, the Directors have
developed a pathway to restructure and recapitalise the Company in order to preserve maximum
value for shareholders. We refer to the Offer Document for more details.
Operations
During the year, the Company produced from both its Castello and Sillaro fields with total combined
production of 9.84 million cubic metres of gas (0.34 billion cubic feet).
Combined average production for 2015 was 27,000 scm/day. Production started out in the year at a
lower rate while the Company was in the process of conducting a reservoir review on Sillaro and
increased in the second and third quarter to 28,000 and 37,000 respectively following the conclusion
and the application of that study. In 4Q production began to curtail in preparation of the rigless
campaign. At the day of this report this re-work is ongoing.
As previously announced, generally speaking the production reduction at Sillaro over the past 18
months was caused by depletion of several reservoirs and water arrival and associated sand
production from some completions. Throughout 2015 the Company’s technical team together with
specialist advisors reviewed the residual potential in the Pliocene sequences on both completed and
non-completed levels and the opportunity to drill a sidetrack well to access a lower Miocene reservoir
directly below the field. In October, the Company’s technical team finalised a relatively low cost rig less
rework on both wells in order to access remaining gas from the Pliocene. Given the current funding
constraints the sidetrack on Sillaro-1 to access the Miocene has been postponed. The rigless
campaign was initiated in December 2015 and will be completed in 2016. Once the results are clear a
revised reserve estimate and production forecast for the field will be released to the market.
A n n u a l R e p o r t 2 0 1 5 | 7
Directors’ Report (Continued)
Thanks to careful production management Castello field increased its daily production during the year
from 2,500 scm/day up to a rate of 5,000 scm/day, until November 2015. After a slight decrease in 3Q
2015, the production stopped in late November, due to gas specifications issues following an increase
in the humidity content (dew point) at the entry point to the national grid. Some investments on the gas
treatment plant would be required to allow the plant to effectively treat the gas and deliver according to
SNAM specifications. It is unlikely that this investment would be carried out until development of
Bezzecca commences.
Exploration and Development
During the year the Company made significant progress on the offshore project Teodorico and in
August the Company filed a production concession application with the Ministry of Economic
Development. The filing of this application represents a milestone event for the Company following a
material investment in geoscience including the purchase and reprocessing of 3D seismic data and
the detailed preliminary front-end engineering and design (PRE-feed) study completed earlier in the
year.
Five months following the filing of the concession application, the Italian Parliament passed the 2016
Budget Law which includes further restrictions on offshore oil and gas activity including the re-
introduction of a general ban on Exploration and Production activity within 12 nautical miles of the
coast of Italy. Approximately half of the exploration license AR94PY and a small unutilised section of
the production concession area lie within the 12 nautical mile. As a result, in February 2016 the
Company was informed by the Ministry that the perimeter of the production concession area needed
to be reshaped in order to be eligible for production concession status. The new perimeter was
communicated a few weeks later showing that the application should be largely unaffected as all
envisaged development activity is within the permitted area. The Company is now waiting to receive a
formal response from the Ministry to its production concession application. If positive, this would result
in a preliminary production concession subject to environmental review by the Ministry of Environment.
As regards the broader exploration licence (AR94PY) the Company has been informed by the Italian
Ministry of Economic Development that this acreage will not be reduced or reshaped in any way;
however the area will be limited to exploration activity only and a production concession for any
discovered resources will not be awarded under the current legislation. The Company does not
currently have any pending applications regarding exploration activity in the license AR94PY.
In October, the Company announced the sale of its 75% interest in the fully awarded exploration
license La Prospera. The license also includes a preliminary production concession for the Gradizza
gas discovery located within the licence. AleAnna also acquired the Company’s share of the
preliminarily awarded adjacent exploration license Zanza for Euro 1,850,000. The sale was finalised in
December following formal approval by the Italian Ministry of Economic Development.
In respect of the production concession Cascina Castello which includes Bezzecca, the Company was
unable to secure a second farm-out partner necessary to fund this project in 2015 primarily due to the
challenging state of the oil and gas industry which has forced many companies to stall investment in
new projects. The Company continues to seek a partner or sell the project to increase the Company’s
cash reserves. The project remains attractive and fully authorised, ready for development.
In relation to Sant’Alberto and Selva, some progress was made during the year to complete the
environmental assessment for the development of the gas treatment plant and the drilling
authorisation respectively. At the date of this Directors’ Report both assessments are believed to be
effectively complete and the Company expects the final EIA Decree any day. Selva continues to be a
major prospective development and exploration license for the Company and a strategic priority.
8 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
Financial performance
Total revenue from the full year of gas production was €2,496,267, a year on year decline of €2,537,566
or 50.4%. This decrease in revenue is attributable to lower production volumes from the Sillaro field.
Earnings before interest, tax, impairment, depreciation and amortisation (EBITDA) for the year was a loss
of €795,406 and decreased €2,334,918, compared to the previous year. This decrease is mainly driven
by the decrease in revenue of €2,537,566 which was partially offset by savings in employee expenses
and corporate overheads of €276,666. As previously communicated to shareholders, the Company
continues to be committed to reviewing its cost structure and organisation on an ongoing basis with the
aim to reduce fixed costs. In summer 2015, the Company extended its off-take agreement with a global
oil and gas major until September 2017.
Net loss before impairment expense is reconciled to comprehensive loss for the period as follows:
Comprehensive profit reconciliation table ( in Euro )
2015
2014
Net loss before impairment expense (unaudited)
(3,014,927)
(1,242,182)
Impairment on resource property costs for the Sillaro field
(2,558,276)
Impairment on resource property costs for the Castello field
Loss on sale of project
Exploration costs expensed
(233,566)
(822,203)
-
-
-
(28,854)
(20,180)
Comprehensive profit / (loss) for the year
(6,657,826)
(1,262,362)
Earnings before interest, tax, impairment, depreciation and amortisation (EBITDA) amounted to a loss of
€795,406 for the year.
EBITDA (unaudited) is reconciled to statutory results from operating activities as follows:
EBITDA reconciliation table ( in Euro )
EBITDA
Depreciation and amortisation expense
Depreciation expense
Impairment losses
Loss on disposal of project
Other miscellaneous income
Results from operating activities
2015
2014
(795,406)
1,539,512
(1,640,555)
(2,264,401)
(14,020)
(13,791)
(2,820,696)
(20,180)
(822,203)
112,137
251,380
(5,980,743)
(507,480)
A n n u a l R e p o r t 2 0 1 5 | 9
Directors’ Report (Continued)
Financial position
The Company completed a restructure of its borrowing arrangements under a reserve based lending
facility with its primary lender Nedbank Limited. The details of this restructure were announced to ASX on
21 January 2016 and included repayments totalling €2.2 million in January 2016 reducing the outstanding
amount to €576,000. A repayment plan has been agreed which would see the facility extinguished by 30
September 2016.
The Company successfully raised €872,906 (AU$1,242,000) through a private placement at AU$0.07 per
share to new and existing non-director shareholders in May 2015. The funds were used for general
working capital purposes and to further develop the Company’s asset portfolio. Cash and cash
equivalents at year end 2015 amounted to €2,446,005 before the above mentioned repayment to
Nedbank.
Health and safety
Paramount to PVE’s ability to pursue its strategic priorities is a safe workplace and a culture of safety first.
The Company regards Environmental awareness and Sustainability as key strengths in planning and
carrying out business activities. PVE’s daily operations are conducted in a way that adheres to these
principles and management are committed to their continuous improvement. Whilst growing from
exploration roots, the Company has strived to continually improve underlying safety performance. The
Company has adopted an HSE Management System which provides for a series of procedures and
routine checks (including periodical audits) to ensure compliance with all legal and regulatory
requirements and best practices in this area. In 2015, PVE maintained its outstanding occupational health
safety and environmental track record with no incidents or near misses to report during the 42,681 man-
hours worked at the well sites and in the administrative offices.
In addition to health and safety, Management and the Board use a number of operating and financial
indicators to measure performance overtime against our overall strategy. Refer to note 11 of the Directors
report for details of selected performance indicators.
Principle risks and uncertainties
Oil and gas exploration and appraisal involves significant risk. The future profitability of the Company and
the value of its shares are directly related to the results of exploration and appraisal activities. There are
inherent risks in these activities. No assurances can be given that funds spent on exploration and
appraisal will result in discoveries that will be commercially viable. Future exploration and appraisal
activities, including drilling and seismic acquisition may result in changes to current perceptions of
individual prospects, leads and permits.
The Company identifies and assesses the potential consequences of strategic, safety, environmental,
operational, legal, reputational and financial risks in accordance with the Company’s risk management
policy. PVE management continually monitors the effectiveness of the Company’s risk management,
internal compliance and control systems which includes insurance coverage over major operational
activities, and reports to the Audit and Risk Committee on areas where there is scope for improvement.
The Charter for the Audit and Risk Committee is available on the Company’s website. The principal risks
and uncertainties that could materially affect PVE future performance are described below.
10 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
External risks
Exposure to gas
pricing
Changes to law,
regulations or
Government
policy
Uncertainty of
timing of
regulatory
approvals
Operating risks
Exploration and
development
Volatile oil and gas prices make it difficult to predict future price movements with
any certainty. Decline in oil or gas prices could have an adverse effect on PVE. The
Company does not currently hedge its exposures to gas price movements long
term. The profitability of the Company’s prospective gas assets will be determined
by the future market for domestic gas. Gas prices can vary significantly depending
on other European gas markets, oil and refined oil product prices, worldwide supply
and the terms under which long term take or pay arrangements are agreed.
Changes in law and regulations or government policy may adversely affect PVE’s
business. Examples include changes to land access or the introduction of legislation
that restricts or inhibits exploration and production.
Similarly changes to direct or indirect tax legislation may have an adverse impact on
the Company’s profitability, net assets and cash flow.
Delays in the regulatory process could hinder the Company’s ability to pursue
operational activities
including drilling exploration and
development wells, to install infrastructure, and to produce oil or gas. In particular,
oil and gas operations in Italy are subject to both Regional and Federal approvals.
timely manner
in a
The future value of PVE will depend on its ability to find, develop, and produce oil
and gas that is economically recoverable. The ultimate success or otherwise of such
ventures requires successful exploration, establishment of commercial reserves,
establishment and successful effective production and processing facilities, transport
and marketing of the end product. Through this process, the business is exposed to
a wide variety of risks, including failure to locate hydrocarbons, changes to reserve
estimates or production volumes, variable quality of hydrocarbons, weather impacts,
facility malfunctions, lack of access to appropriate skills or equipment and cost
overruns.
Estimation of
reserves
The estimation of oil and natural gas reserves involves subjective judgments and
determinations based on geological,
technical, contractual and economic
information. It is not an exact calculation. The estimate may change because of new
information from production or drilling activities.
Tenure security
Health, safety and
environmental
matters
Exploration licences held by PVE are subject to the granting and approval by
relevant government bodies. Government regulatory authorities generally require the
holder of the licences to undertake certain proposed exploration commitments and
failure to meet these obligations could result in forfeiture. Exploration licences are
also subject to partial or full relinquishments after the stipulated period of tenure if no
alternative licence application (e.g. production concession application) is made,
resulting in a potential reduction in the Company’s overall tenure position. In order
for production to commence in relation to any successful oil or gas well, it is
necessary for a production concession to be granted
Exploration, development and production of oil and gas involve risks which may
impact the health and safety of personnel, the community and the environment.
Industry operating risks include fire, explosions, blow outs, pipe failures, abnormally
pressured formations and environmental hazards such as accidental spills or
leakage of petroleum liquids, gas leaks, ruptures, or discharge of toxic gases.
Failure to manage these risks could result in injury or loss of life, damage or
destruction of property and damage to the environment. Losses or liabilities arising
from such incidents could significantly impact the Company’s financial results.
A n n u a l R e p o r t 2 0 1 5 | 11
Directors’ Report (Continued)
In addition to the external and operating risks described above, the Company’s ability to successfully
develop future projects including their infrastructure is contingent on the Company’s ability to fund those
projects through operating cash flows and affordable debt and equity raisings.
7. Dividends
No dividends have been paid or declared by the Company during the year ended 31 December 2015.
8. Significant events after the balance date
On 20 January 2016, the Company announced the restructure of its borrowing arrangements with
Nedbank Limited, its primary lender. In accordance with the agreed terms, the Company repaid €2.2
million on 19 January 2016 reducing the outstanding amount to €576,000. Under the revised agreement,
the Loan Facility will be changed from a reserve based loan to a standard loan with an agreed repayment
plan in the form of monthly instalments in order to extinguish the facility by 30 September 2016. The
Company’s shares were temporarily halted from 14 January to 20 January 2016 whilst the new terms of
the arrangement were under negotiation.
On 24 January 2016, one of the Company’s Non Executive Directors Greg Short retired due to some
pressing family issues which did not allow Mr. Short to devote the necessary time and effort to carry out
his Board duties effectively.
On 18 March 2016 the Board updated the market on its strategy to recapitalise and restructure the
Company with the aim to preserve maximum value for shareholders. This strategy includes an
unmarketable parcel sale facility that was announced and initiated on 10 March 2016 and will close on 27
April 2016. Another key step to restructure the Company was a pro rata renounceable rights issue to
raise approximately $1.75 million (Euro 1.1 million) which was also announced on 18 March 2016.
On 18 March 2016 the Company entered into a short term unsecured bridging loan facility pending
completion of the Sillaro rework which, as at the date of this report, is currently ongoing. The Facility was
provided by Beronia Investments Pty Ltd, an entity associated with Director Dr. Byron Pirola. Under the
facility the Company may draw down up to €300,000.
Other than matters already disclosed in this report, there were no other 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 Group, the results of those operations, or the state of affairs of the Group.
9. Likely Developments
The Company plans to seek a suitable farm-out partner for selected assets. The Company also plans to
continue to invest in its current exploration portfolio through geological and geophysical studies and,
subject to available finances, in its planned drilling program for high potential gas prospects.
10. Environmental Regulation
The Company’s operations are subject to environmental regulations under both national 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 - audited
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.
12 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
Remuneration Policy
The Remuneration & Nomination Committee (Committee) is responsible for reviewing and recommending
compensation arrangements for the Directors, the Chief Executive Officer and the senior executive team.
The Committee assesses the appropriateness of the size and structure of remuneration of those officers
on a periodic basis, with reference to relevant employment market conditions, with the overall objective of
ensuring maximum stakeholder benefit from the retention of a high quality board and executive team.
The Company aims to ensure that the level and composition of remuneration of its directors and
executives is sufficient and reasonable in the context of the internationally competitive industry in which
the Company operates.
All senior executives except the company secretary are based in Rome and when setting their
remuneration the Board must have regard to remuneration levels and benefit arrangements that prevail in
the European oil and gas industry which remains highly competitive.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholders wealth the Board has regard to the
following indices in respect of the current financial year and the previous financial periods.
Indices
2015
2014
2013
2012
2011
2010
Production (scm’000)
9,991
18,560 23,983 24,673 28,995 26,793
Average realised gas price (€ cents per cubic metre)
25
27
28
33
31
27
EBITDA (unaudited (€'000s)
(795)
1,540
1,755
4,473
4,411
2,219
Profit / (loss) attributable to owners of the Company
(€'000s)
(6,658)
(1,262)
(5,796)
2,373
(5,071)
(2,324)
Earnings / (loss) per share (€ cents per share)
(5.02)
(1.03)
(4.76)
2.12
(4.57)
(2.11)
Share Price at year end - AU$
0.026
0.10
0.12
0.12
0.16
0.21
In establishing performance measures and benchmarks to ensure incentive plans are appropriately
structured to align corporate behavior with the long term creation of shareholder wealth, the Board has
regard for the stage of development of the Company’s business and gives consideration to each of the
indices outlined above and other operational and business development achievements of future benefit to
the Company which are not reflected in the aforementioned financial measures.
A n n u a l R e p o r t 2 0 1 5 | 13
Directors’ Report (Continued)
Senior Executives and Executive Directors
The remuneration of PVE Senior Executives is based on a combination of fixed salary, a short term
incentive bonus which is based on performance and in some cases a long term incentive payable in cash
or shares. Other benefits include employment insurances, accommodation and other benefits, and
superannuation contributions. In relation to the payment of annual bonuses, the Board assesses the
performance and contribution of executives against a series of objectives defined at the beginning of the
year. These objectives are a combination of strategic and operational company targets which are
considered critical to shareholder value creation and objectives which are specific to the individual
executive. More specifically, objectives mainly refer to operating performance from both a financial and
technical standpoint and growth and development of the Company’s asset base. The Board exercises its
discretion when determining awards and exercises discretion having regard to the overall performance
and achievements of the Company and of the relevant executive during the year. No remuneration
consultants were used during the current or previous year.
The table below represents the target remuneration mix for key management personnel in the current
year. The short-term incentive is provided at target levels.
Fixed remuneration
Short-term incentive
Long-term incentive
At risk
Chief
Officer
Executive
82%
18%
Non-Executive Directors
The remuneration of PVE Non-Executive Directors comprises cash fees. There is no current scheme to
provide performance based bonuses or retirement benefits to Non-Executive Directors. The Board of
Directors and shareholders approved the maximum agreed remuneration pool for Non-Executive
Directors at the annual general meeting in May 2011 at €250,000 per annum.
The total fees paid in 2015 to Non-Executive Directors was €220,000 (2014: €220,000). The total fees
paid in cash during the year was €55,000, the Board of Directors agreed that the remaining €165,000
may be paid in shares, subject to Shareholder’s approval. No increase in board fees was made in 2015
and there is a proposed reduction in 2016.
With effect from 1 January 2016, directors of the Company agreed to reduce their fees by 30% so that the
annual fees payable from 1 January 2016 are €42,000 for the Chairman and €28,000 for other
directors. Directors also agreed to accept 50% of those fees through the issue of Shares subject to
Shareholder approval at the relevant time.
Service contracts
The major provisions of the service contracts held with the specified directors and executives, in addition
to any performance related bonuses and/or options are as follows:
14 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
Directors:
Graham Bradley, Chairman
• Commencement Date: 30 September 2004 (re-elected 28 May 2014)
• Fixed remuneration for the year ended 31 December 2015: €60,000
• No termination benefits
Byron Pirola, Non-Executive Director
• Commencement Date: 10 May 2002 (re-elected 24 May 2013)
• Fixed remuneration for the year ended 31 December 2015: €40,000
• No termination benefits
Gregory Short, Non-Executive Director
• Commencement Date: 5 July 2010; Resigned: 25 January 2016
• Fixed remuneration for the year ended 31 December 2015: €40,000
• No termination benefits
Michael Masterman, Non-Executive Director
• Commencement Date: 22 June 1999 (re-elected 28 May 2014)
• Fixed remuneration for the year ended 31 December 2015: €40,000
• No termination benefits
Kevin Eley, Non-Executive Director
• Commencement Date: 19 June 2012 (re-elected 24 May 2013)
• Fixed remuneration for the year ended 31 December 2015: €40,000
• No termination benefits
The Non-Executive Directors are not appointed for any fixed term but rather are required to retire and
stand for re-election in accordance with the Company’s constitution and the ASX Listing Rules.
Executives:
Sara Edmonson, Chief Executive Officer
• Commencement Date: 26 July 2010 as Chief Financial Officer and 13 August 2013 as Chief
Executive
• Term of Agreement: Indefinite but terminable by either party on three months’ notice
• Fixed salary of €120,000 per annum
• Annual performance based fee of up to 40% of her contracted salary subject to the achievement
of performance criteria agreed with the Board
• Payment of termination benefit on termination by the Company (other than for gross misconduct)
equal to one year salary in accordance with the Italian National Collective Labour Agreement for
executives
A n n u a l R e p o r t 2 0 1 5 | 15
Directors’ Report (Continued)
Key Management Personnel remuneration outcomes (including link to performance)
The remuneration details of each Director and other key management personnel (KMP) during the year is
presented in the table below.
Salary &
fees
Accommodation Car Other
Termination
payments
Total
€
€
€
€
€
€
Directors
G Bradley Chairman
Non-Executive
B Pirola
Non-Executive
G Short,
(Resigned 25 Jan 16)
Non-Executive
M Masterman
Non-Executive
K Eley
Non-Executive
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
60,000
60,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
60,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40, 000
220,000
220,000
Total for Directors
2015
220,000
2014
220,000
-
-
-
-
The total fees paid in cash during the year was €55,000, the Board of Directors agreed that the remaining
€165,000 may be paid in shares, pending the Shareholders’ approval.
16 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
Key Management Personnel remuneration - Consolidated (Continued)
A n n u a l R e p o r t 2 0 1 5 | 17
Directors’ Report (Continued)
Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive bonus awarded as remuneration are detailed
below. Bonuses paid by issue of shares are included in share based payments to each Director and
Executive.
2015
2014
Directors and
specified executives
S Edmonson
Cash Bonus
% vested in year
Cash Bonus
% vested in year
€
30,000
€
100%
€
34,500
€
100%
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 operational
performance criteria. No amounts vest in future financial years in respect of the bonus.
The cash bonus awarded to Ms. Edmonson was based on performances, and specifically for having
reached the agreed operational strategic objectives. These performance objectives are linked to
financial performance and Company value indirectly.
Options over equity instruments granted as compensation
No options were granted as compensation to Directors or key management personnel during the
reporting period (2014: Nil). No options vested during 2015. (2014: Nil)
Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including options and rights granted as
compensation to a key management person) have been altered or modified by the issuing entity
during the reporting period or the prior period.
Exercise and lapse of options granted as compensation
No options granted as compensation were exercised during 2015.
There were no options outstanding during 2015.
No options were exercised by directors or key management personnel.
No options over ordinary shares in the Company were held by any key management personnel during
2015.
Equity holdings and transactions
The movement during the reporting period in the number of ordinary shares of the Company, held
directly and indirectly by key management personnel, including their personally-related entities is as
follows:
Directors
G Bradley
M Masterman (i)
B Pirola
G Short (resigned
25 Jan 2016)
K Eley
Executives
S. Edmonson
Held at
31 Dec 2014
Purchased
Share
based
payments
Options
Exercised
Sold /
Other
Held at
31 Dec 2015
1,403,880
33,626,222
7,112,782
200,000
800,000
43,142,884
28,064
28,064
75,000
30,000
-
-
-
105,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,478,880
33,656,222
7,112,782
200,000
800,000
43,247,884
28,064
28,064
(i)
Does not include shares held by family members which amount to 1,040,000 shares
18 | A n n u a l R e p o r t 2 0 1 5
Directors’ Report (Continued)
Directors
G Bradley
M Masterman (i)
B Pirola
G Short
K Eley
Executives
S. Edmonson
Held at
31 Dec 2013
Purchased
Share
based
payments
Options
Exercised Sold / Other
Held at
31 Dec 2014
1,373,880
33,177,327
7,112,782
200,000
800,000
42,663,989
28,064
28,064
30,000
448,895
-
-
-
478,895
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,403,880
33,626,222
7,112,782
200,000
800,000
43,142,884
28,064
28,064
(i)
Does not include shares held by related parties which amount to 1,040,000 shares
Other transactions and balances with KMP and their related parties
No key management personnel have entered into a material contract, other than disclosed above, with
the Group or the Company since the year end of the previous financial year end and there were no
material contracts involving key management personnel interests existing at year-end.
12. Directors’ interests
At the date of this report, the direct and indirect interests of the Directors in the shares and options of
the Company, as notified by the directors to the ASX in accordance with S205G (1) of the
Corporations Act 2001, at the date of this report is as follows:
G Bradley
M Masterman
B Pirola
G Short (resigned 25 Jan 2016)
K Eley
13. Share Options
Ordinary Shares
1,478,880
33,656,222
7,112,782
200,000
800,000
Options granted to directors and executives of the Company
The Company has not granted any options over unissued ordinary shares in the Company to any
directors or specified executive during or since the end of the financial year.
Unissued shares under option
At the date of this report there are no unissued ordinary shares of the Company under option.
Shares issued on exercise of options
The Company has not issued any shares as a result of the exercise of options during or since the end
of the financial year end.
A n n u a l R e p o r t 2 0 1 5 | 19
Directors’ Report (Continued)
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 and production company.
In accordance with ASX Listing Rule 4.10.3, the Company has elected to disclose its Corporate
Governance policies and its compliance with them on its website, rather than in the Annual Report.
Accordingly information about the Company’s Corporate Governance practices is set out on the
Company’s website at www.povalley.com
15. Indemnification and insurance of officers
The Company has agreed to indemnify current Directors against any liability or legal costs incurred by
a Director as an officer of the Company or entities within the Group or in connection with any legal
proceeding involving the Company or entities within the Group 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 Ernst & Young, the Group’s auditor, did not perform other services in addition to their
statutory duties. Refer to note 6 of the financial report for details of auditor’s remuneration.
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 financial year ended 31 December 2015.
This report has been made in accordance with a resolution of Directors.
Graham Bradley
Chairman
Sydney, NSW Australia
31 March 2016
20 | A n n u a l R e p o r t 2 0 1 5
A n n u a l R e p o r t 2 0 1 5 | 21
Statement of Financial Position
As at 31 December 2015
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Inventory
Other assets
Deferred tax assets
Property, plant & equipment
Resource property costs
Total Non-Current Assets
Total Assets
Liability and equity
Current Liabilities
Trade and other payables
Provisions
Interest bearing loans
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Equity
Issued capital
Reserve
Accumulated losses
Total Equity
Total Equity and liabilities
NOTES
10 (a)
12
11
15
13
14
16
17
18
17
19
19
CONSOLIDATED
2015
€
2014
€
2,446,005
649,441
3,095,446
1,579,585
1,086,118
2,665,703
732,801
30,378
2,017,059
2,615,193
15,167,548
20,562,979
783,669
30,378
2,316,267
3,033,821
19,781,635
25,945,770
23,658,425
28,611,473
2,382,918
217,212
2,767,408
1,698,845
179,714
2,968,858
5,067,538
4,847,417
4,779,855
4,779,855
4,168,104
4,168,104
9,847,393
9,015,521
46,692,830
1,192,269
(34,074,067)
45,819,924
1,192,269
(27,416,241)
13,811,032
19,595,952
23,658,425
28,611,473
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes to the financial statements.
22 | A n n u a l R e p o r t 2 0 1 5
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2015
CONSOLIDATED
NOTES
2015
€
2014
€
Continuing Operations
Revenue
Operating costs
Depreciation and amortisation expense
Gross Profit
Other income
Employee benefit expenses
Depreciation expense
Corporate overheads
Impairment losses
Loss on sale of project
Operating loss
Finance income
Finance expenses
Net finance expenses
Loss before tax
Income tax benefit / (expense)
Loss for the year
Other comprehensive income
Total comprehensive loss for the year, net of
tax
3
4
5
14
14
7
7
8
2,496,267
5,033,833
(1,077,739)
(1,028,427)
(1,640,555)
(2,264,401)
(222,027)
1,741,005
112,137
251,380
(1,105,494)
(14,020)
(1,108,440)
(2,820,696)
(822,203)
(5,980,743)
1,777
(447,426)
(1,285,895)
(13,791)
(1,179,999)
(20,180)
-
(507,540)
526
(612,403)
(445,649)
(611,877)
(1,119,356)
(5,863,750)
(231,434)
(143,006)
(6,657,826)
(1,262,362)
-
-
(6,657,826)
(1,262,362)
Basic and diluted loss per share
9
(5.02) cents
(1.03) cents
The above consolidated statement of comprehensive income / loss should be read in conjunction with the
accompanying notes to the financial statements.
A n n u a l R e p o r t 2 0 1 5 | 23
Statement of Changes in Equity
For the year ended 31 December 2015
Consolidated
Attributable to equity holders of the Company
Issued
Capital
€
Translation
Reserve
Accumulated
Losses
€
€
Total
€
Balance at 1 January 2014
45,819,924
1,192,269
(26,153,879)
20,858,314
Total comprehensive income:
Loss for the year
Other comprehensive income
Total comprehensive loss
Transactions with owners
recorded directly in equity:
Contributions by and
distributions to owners – Issue
of shares
-
-
-
-
-
-
-
-
(1,262,362)
(1,262,362)
-
-
(1,262,362)
(1,262,362)
-
-
Balance at 31 December 2014
45,819,924
1,192,269
(27,416,241)
19,595,952
Balance at 1 January 2015
45,819,924
1,192,269
(27,416,241)
19,595,952
Total comprehensive income:
Loss for the year
Other comprehensive income
Total comprehensive loss
Transactions with owners
recorded directly in equity:
Contributions by and
distributions to owners –
Issue of shares
-
-
-
872,906
-
-
-
-
(6,657,826)
(6,657,826)
-
-
(6,657,826)
(6,657,826)
-
872,906
Balance at 31 December 2015
46,692,830
1,192,269
(34,074,067)
13,811,032
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes to the financial statements
24 | A n n u a l R e p o r t 2 0 1 5
Statement of Cash Flows
For the year ended 31 December 2015
Operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
NOTES
CONSOLIDATED
2015
€
2014
€
2,680,923
6,495,675
(3,110,792)
(4,200,332)
1,777
526
(172,344)
(296,392)
-
(54,406)
Net cash flows from operating activities
10 (b)
(600,436)
1,945,071
Investing activities
Payments for non-current assets
Receipts for resource property costs from joint
operations partners
Payments for resource property costs
Proceeds from sale of resource property costs
(6,524)
(3,540)
64,572
200,569
(886,034)
(1,997,738)
1,850,000
-
Net cash flows used in investing activities
(1,022,014)
(1,800,709)
Financing activities
Proceeds from the issues of shares
872,906
-
Repayments of borrowings
Payment of borrowing costs
Net cash flows used in financing activities
Net increase in cash and cash equivalents
18
(428,064)
(93,410)
-
444,842
866,420
-
(93,410)
50,952
Cash and cash equivalents at 1 January
1,579,585
1,528,633
Cash and cash equivalents at 31 December
10 (a)
2,446,005
1,579,585
w
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to
the financial statements
A n n u a l R e p o r t 2 0 1 5 | 25
Notes to the Financial Statements
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1
REPORTING ENTITY
Po Valley Energy Limited (“the Company” or “PVE”) is a company domiciled in Australia. The address
of the Company’s registered office is Suite 8, 7 The Esplanade Mt Pleasant WA 6153.
The Consolidated Financial Statements of the Company for the year ended 31 December 2015
comprises the Company and its subsidiaries (together referred to as the “Group” and individually as
“Group entities”) and the Group’s interest in associates and jointly controlled entities and operations.
The financial statements were approved by the Board of Directors on 30 March 2016.
The Group primarily is involved in the exploration, appraisal, development and production of gas
properties in the Po Valley region in Italy and is a for profit entity.
1.2
(a)
BASIS OF PREPARATION
STATEMENT OF COMPLIANCE
The financial report is a general purpose financial report which has been prepared in accordance with
Australian Accounting Standards (AASB’s) (including Australian Interpretations) adopted by the
Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated
financial report of the Group also complies with International Financial Reporting Standards (IFRS)
and interpretations issued by the International Accounting Standards Board (IASB).
(b)
BASIS OF MEASUREMENT
These consolidated financial statements have been prepared on the basis of historical cost.
(c) GOING CONCERN
The financial report has been prepared on a going concern basis. In arriving at this position, the
Directors have had regard to the fact that the Group will have access to sufficient working capital to
fund administrative and other committed expenditure for a period of not less than 12 months from the
date of this report.
For the year ended 31 December 2015, the Group has recorded a loss of € 6,657,826, it has a cash
balance of €2,466,005 net current liabilities of €1,972,092 and had net cash outflows from operations
of €600,436.
The Group’s forecast cashflow requirements for the 15 months ending 31 March 2017 reflects
outflows from operating and investing activities in excess of its available cash resources at 31
December 2015. These requirements reflect a combination of committed and uncommitted but
current planned expenditure in relation to the fields of Sillaro, Sant’Alberto, Bezzecca and Selva.
Importantly, as announced on 20 January 2016, the Company successfully renegotiated its borrowing
arrangements with Nedbank Limited converting the existing facility from a reserved based
arrangement to a standard loan with a defined repayment plan through monthly instalments that will
extinguish the loan by September 2016.
As disclosed in the market update released on the ASX 18 March 2016, the Board is currently
progressing its strategy to recapitalise and restructure the Company with the aim to preserve
maximum value for shareholders. One key step to this strategy was a pro rata renounceable rights
issue which was launched on 18 March 2016 to raise approximately $1.75 million (€1.1 million).
Additionally a short term bridging facility was provided by Beronia Investments Pty Ltd, an entity
associated with Director Dr. Byron Pirola to provide up to €300,000 pending completion of the Sillaro
rework which, as at the date of this report, is currently ongoing.
26 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.2
BASIS OF PREPARATION (continued)
The Directors are confident of being able to raise the required capital, but note that the current cash
balance, rights issue and bridging financing will not be sufficient to address the Company’s committed
and uncommitted but current planned expenditure for the next 12 month period. The market update
released 18 March outlines the additional range of financing options that the Company is currently
considering or actively pursuing including the sale of operating or non-operating interests in assets,
other funding instruments and options or a combination of these. We refer to the ASX media release
for more details in this respect.
Should the Group not achieve the matters set out above, there is uncertainty whether the Group would
continue as a going concern and therefore whether it would realise its assets and extinguish its
liabilities in the normal course of business and at the amounts stated in the financial report. The
financial report does not include adjustments relating to the recoverability or classification of the
recorded assets amounts nor to the amounts or classification of liabilities that might be necessary
should the Group not be able to continue as a going concern.
(d)
FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in Euro, which is the Company’s and each of the
Group entity’s functional currency.
(e)
USE OF ESTIMATES AND JUDGEMENTS
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
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 and in any future periods
affected.
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 financial year are discussed below.
Impairment of non-current assets
The ultimate recoupment of the value of resource property costs and property plant and equipment is
dependent on successful development and commercial exploitation, or alternatively, sale, of the
underlying properties. The Group undertakes at least on an annual basis, a comprehensive review for
indicators of impairment of these assets. Should an impairment indicator exist, the area of interest is
tested for impairment. There is significant estimation involved in determining the inputs and
assumptions used in determining the recoverability amounts.
The key areas of estimation involved in determining recoverable amounts include:
• Recent drilling results and reserves and resources estimates
• Environmental issues that may impact the underlying licences
• The estimated market value of assets at the review date
• Fundamental economic factors such as the gas price and current and anticipated operating
costs in the industry
• Future production rates
The pre-tax discount rate used for impairment purposes is 12.7%.
A n n u a l R e p o r t 2 0 1 5 | 27
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.2
BASIS OF PREPARATION (continued)
Rehabilitation provisions
The value of these provisions represents the discounted value of the present obligations to restore,
dismantle and rehabilitate each well site. Significant estimation is required in determining the
provisions for rehabilitation and closure as there are many transactions and other factors that will
affect ultimate costs necessary to rehabilitate the sites. The discounted value reflects a combination of
management’s best estimate of the cost of performing the work required, the timing of the cash flows
and the discount rate.
A change in any, or a combination of, the key assumptions used to determine the provisions could
have a material impact on the carrying value of the provisions. The provision recognised for each site
is reviewed at each reporting date and updated based on the facts and circumstances available at that
time. Changes to the estimated future costs for operating sites are recognised in the balance sheet by
adjusting both the restoration and rehabilitation asset and provision.
Reserve estimates
Estimation of reported recoverable quantities of Proven and Probable reserves include estimates
regarding commodity prices, exchange rates, discount rates, and production and transportation costs
for future cash flows. It also requires interpretation of complex geological and geophysical models in
order to make an assessment of the size, shape, depth and quality of reservoirs, and their anticipated
recoveries. The economic, geological and technical factors used to estimate reserves may change
from period to period.
A change in any, or a combination of, the key assumptions used to determine the reserve estimates
could have a material impact on the carrying value of the project via depreciation rates or impairment
assessments. The reserve estimates are reviewed at each reporting date and any changes to the
estimated reserves are recognized prospectively to depreciation and amortisation. Any impact of the
change in the reserves is considered on asset carrying values and impairment losses, if any, are
immediately recognized in the profit or loss.
Recognition of deferred tax assets
The recoupment of deferred tax assets is dependent on the availability of profits in future years. The
Group undertakes a forecasting exercise at each reporting date to assess its expected utilisation of
these losses.
The key areas of estimation involved in determining the forecasts include:
• Future production rates
• Economic factors such as the gas price and current and anticipated operating costs in the
industry
• Capital expenditure expected to be incurred in the future
A change in any, or a combination of, the key assumptions used to determine the estimates could
have a material impact on the carrying value of the deferred tax asset. Changes to estimates are
recognised in the period in which they arise.
28 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES
Except for the changes noted below, the Group has consistently applied the accounting policies set
out in notes 1.3 (a) to 1.3 (q) to all periods presented in the consolidated financial statements.
Reference
Title
AASB 2013-9
AASB 2014-1
Part A -Annual
Improvements
2010–2012
Cycle
Amendments to Australian Accounting Standards – Conceptual Framework,
Materiality and Financial Instruments The Standard contains three main parts and
makes amendments to a number of Standards and Interpretations. Part A of AASB
2013-9 makes consequential amendments arising from the issuance of AASB CF
2013-1.
Part B makes amendments to particular Australian Accounting Standards to delete
references to AASB 1031 and also makes minor editorial amendments to various
other standards.
Part C makes amendments to a number of Australian Accounting Standards,
including incorporating Chapter 6 Hedge Accounting into AASB 9 Financial
Instruments.
These amendments do not have impact on the Group’s financial position and
performance.
AASB 2014-1 Part A: This standard sets out amendments to Australian
Accounting Standards arising from the issuance by the International Accounting
Standards Board (IASB) of International Financial Reporting Standards (IFRSs)
Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to
IFRSs 2011–2013 Cycle.
Annual Improvements to IFRSs 2010–2012 Cycle addresses the following items:
AASB 2 - Clarifies the definition of 'vesting conditions' and 'market
condition' and introduces the definition of 'performance condition' and
'service condition'.
AASB 3 - Clarifies the classification requirements for contingent
consideration in a business combination by removing all references to
AASB 137.
AASB 8 - Requires entities to disclose factors used to identify the entity's
reportable segments when operating segments have been aggregated. An
entity is also required to provide a reconciliation of total reportable segment
assets to the entity's total assets.
AASB 116 & AASB 138 - Clarifies that the determination of accumulated
depreciation does not depend on the selection of the valuation technique
and that it is calculated as the difference between the gross and net
carrying amounts.
AASB 124 - Defines a management entity providing KMP services as a
related party of the reporting entity. The amendments added an exemption
from the detailed disclosure requirements in paragraph 17 of AASB 124
Related Party Disclosures for KMP services provided by a management
entity. Payments made to a management entity in respect of KMP services
should be separately disclosed.
These amendments do not have impact on the Group’s financial position and
performance.
AASB 2014-1
Annual Improvements to IFRSs 2011–2013 Cycle addresses the following items:
A n n u a l R e p o r t 2 0 1 5 | 29
Notes to the Financial Statements (Continued)
Reference
Title
Part A -Annual
Improvements
Amendments to
AASB 1053 –
Transition to and
between Tiers,
and related Tier 2
Disclosure
Requirements
[AASB 1053]
AASB 13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13
applies to all contracts within the scope of AASB 139 or AASB 9, regardless of
whether they meet the definitions of financial assets or financial liabilities as
defined in AASB 132.
AASB 140 - Clarifies that judgment is needed to determine whether an
acquisition of investment property is solely the acquisition of an investment
property or whether it is the acquisition of a group of assets or a business
combination in the scope of AASB 3 that includes an investment property.
That judgment is based on guidance in AASB 3.
These amendments do not have impact on the Group’s financial position and
performance.
The Standard makes amendments to AASB 1053 Application of Tiers of
Australian Accounting Standards to:
• Clarify that AASB 1053 relates only to general purpose financial statements.
• Make AASB 1053 consistent with the availability of the AASB 108
Accounting Policies, Changes in Accounting Estimates and Errors option
in AASB 1 First-time Adoption of Australian Accounting Standards.
• Clarify certain circumstances in which an entity applying Tier 2 reporting
requirements can apply the AASB 108 option in AASB 1; permit an
entity applying Tier 2 reporting requirements for the first time to do so
directly using the requirements in AASB 108 (rather that applying AASB
1) when, and only when, the entity had not applied, or only selectively
applied, applicable recognition and measurement requirements in its
most recent previous annual special purpose financial statements.
• Specify certain disclosure requirements when an entity resumes the
application of Tier 2 reporting requirements.
These amendments do not have impact on the Group’s financial position and
performance.
(a)
PRINCIPLES OF CONSOLIDATION
(i)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. 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 accounting policies of subsidiaries have been changed when necessary to align them
with the policies adopted by the Group. Investments in subsidiaries are carried at cost less any
impairment losses.
In the Company’s separate financial statements, investments in subsidiaries are carried at cost less
any impairment losses.
(ii)
Joint arrangements
The Group classifies its interests in joint arrangements as either joint operations or joint ventures (see
below) depending on the Group’s rights to the assets and obligation for the liabilities of the
arrangements. When making this assessment, the Group considers the structure of the arrangements,
the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and
circumstances.
30 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Joint operation - when the Group has rights to the assets, and obligations for the liabilities, relating to
an arrangement, it accounts for each of its assets, liabilities and transactions, including its share of
those held or incurred jointly, in relation to the joint operation.
Joint venture – when the Group has rights only to the net assets of the arrangement, it accounts for its
interest using the equity method adopted for associates as noted in (a) (ii) above.
(iii)
Transactions eliminated on consolidation
Intra-group balances, and any unrealised income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial statements.
(b)
TAXATION
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit
or loss except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity or in comprehensive income. 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 taxable profit; and differences
relating to investments in subsidiaries to the extent that the Group is able to control the timing of the
reversal of the temporary difference and it is probable that they will 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. 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. Deferred tax assets are reduced to the extent
that it is no longer probable that the related tax benefit will be realised.
Judgement is required to determine which arrangements are considered to be a tax on income as
opposed to an operating cost. Judgement is also required to determine whether deferred tax assets
are recognised in the statement of financial position. Deferred tax assets, including those arising from
unutilised tax losses, require management to assess the likelihood that the Company will generate
sufficient taxable earnings in future periods, in order to utilise recognised deferred tax assets.
Assumptions about the generation of future taxable profits depend on management’s estimates of
future cash flows. These estimates of future taxable income are based on forecast cash flows from
operations (which are impacted by production and sales volumes, oil and natural gas prices, reserves,
operating costs, decommissioning costs, capital expenditure, dividends and other capital management
transactions) and judgement about the application of existing tax laws in each jurisdiction. To the
extent that future cash flows and taxable income differ significantly from estimates, the ability of the
Company to realise the net deferred tax assets recorded at the reporting date could be impacted.
In addition, future changes in tax laws in the jurisdictions in which the Company operates could limit
the ability of the Company to obtain tax deductions in future periods.
A n n u a l R e p o r t 2 0 1 5 | 31
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
(c)
IMPAIRMENT
(i)
Financial assets (including receivables)
A financial asset is assessed at each reporting date to determine whether there is any objective
evidence that it is impaired. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated future cash flows of that
asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount, and the present value of the estimated future cash flows
discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining
financial assets are assessed in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-
for-sale financial asset recognised previously in equity is transferred to profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognised. For financial assets measured at amortised cost and available-for-
sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-
for-sale financial assets that are equity securities, the reversal is recognised in equity.
(ii)
Non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset (or CGU)
may be impaired. Management has assessed its CGUs as being an individual field, which is the
lowest level for which cash inflows are largely independent of those of other assets. If any indication
exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s or
CGU’s recoverable amount. The recoverable amount is the higher of an asset’s or CGU’s fair value
less costs of disposal (FVLCD) and value in use (VIU). The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those
from other assets or groups of assets, in which case the asset is tested as part of a larger CGU to
which it belongs. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the
asset/CGU is considered impaired and is written down to its recoverable amount.
In calculating VIU, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate (11%) that reflects current market assessments of the time value of money and the
risks specific to the asset/CGU.
The Company bases its impairment calculation on detailed budgets and forecasts, which are prepared
separately for each of the Company’s CGUs to which the individual assets are allocated. These
budgets and forecasts generally cover the forecasted life of the CGUs. VIU does not reflect future
cash flows associated with improving or enhancing an asset’s performance.
Impairment losses of continuing operations, including impairment of inventories, are recognised in the
statement of profit or loss and other comprehensive income in those expense categories consistent
with the function of the impaired asset.
For assets/CGUs, an assessment is made at each reporting date to determine whether there is an
indication that previously recognised impairment losses may no longer exist or may have decreased. If
such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the assumptions used to
determine the asset’s/CGU’s recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset/CGU does not exceed either its recoverable
amount, or the carrying amount that
32 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
would have been determined, net of depreciation/amortisation, had no impairment loss been
recognised for the asset/CGU in prior years. Such a reversal is recognised in the statement of profit or
loss and other comprehensive income.
Please refer to Note 14 for further details on the impairment test results for the year ended December
31, 2015.
(d)
PROPERTY, PLANT AND EQUIPMENT
(i)
Recognition and measurement
Items of property, plant and equipment are recorded at cost less accumulated depreciation,
accumulated impairment losses and pre-commissioning revenue and expenses.
The cost of plant and equipment used in the process of gas extraction are accounted for separately
and are stated at cost less accumulated depreciation and impairment costs.
Cost includes expenditure that is directly attributable to acquisition of the asset.
Gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property, plant and equipment and
are recognised within “other income” in profit or loss.
(ii)
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits
associated with expenditure will flow to the Group.
(iii)
Depreciation
Gas producing assets
When the gas plant and equipment is installed ready for use, cost carried forward will be depreciated
on a unit-of -production basis over the life of the economically recoverable reserve.
The depreciation rate of gas plant and equipment incurred in the period for each project in production
phase is as follows:
Castello
Sillaro
2015
2014
13.96%
13.16%
14.37%
17.66%
Oil and gas properties are depreciated using the UOP method over total proved developed and
undeveloped hydrocarbon reserves. This results in a depreciation/amortisation charge proportional to
the depletion of the anticipated remaining production from the field.
The life of each item, which is assessed at least annually, has regard to both its physical life limitations
and present assessments of economically recoverable reserves of the field at which the asset is
located. These calculations require the use of estimates and assumptions, including the amount of
recoverable reserves and estimates of future capital expenditure. The calculation of the UOP rate of
depreciation/amortisation will be impacted to the extent that actual production in the future is different
from current forecast production based on total proved reserves, or future capital expenditure
estimates change.
A n n u a l R e p o r t 2 0 1 5 | 33
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Changes to proved reserves could arise due to changes in the factors or assumptions used in
estimating reserves, including:
• The effect on proved reserves of differences between actual commodity prices and commodity
price assumptions
• Unforeseen operational issues
Other property, plant and equipment
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment. The depreciation will commence when the
asset is installed ready for use.
The estimated useful lives of each class of asset fall within the following ranges:
Office furniture & equipment
3 – 5 years
3 – 5 years
2015
2014
The residual value, the useful life and the depreciation method applied to an asset are reviewed at
each reporting date.
(e)
FINANCIAL INSTRUMENTS
(i)
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and
other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially as fair value plus, for instruments not at
fair value through profit and loss, any directly attributable transaction costs. Subsequent to initial
recognition non-derivative financial instruments are measured as described below. A financial
instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial
assets expire or if the Group transfers the financial asset to another party without retaining control or
substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets
are accounted for at trade date, i.e. the date the Group commits itself to purchase or sell the asset.
Financial liabilities are derecognised if the Group’s obligation specified in the contract expire or are
discharged or cancelled. Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group’s cash management
are included as a component of cash and cash equivalents for the purpose of the statement of cash
flows.Accounting for finance income and expense is discussed in note (i).
Held-to-maturity investments
If the Group has the positive intent and ability to hold debt securities to maturity, then they are
classified as held-to-maturity. Held-to-maturity investments are measured at amortised cost using the
effective interest method, less any impairment losses.
Available-for-sale financial assets
The Group’s investments in equity securities and certain debt securities are classified as available-for-
sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes
therein, other than impairment losses, and foreign exchange gains and losses on available-for-sale
monetary items, are recognised directly in a separate component of equity. When an investment is
derecognised, the cumulative gain or loss in equity is transferred to profit or loss as finance income or
expense.
34 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets at fair value through profit and loss
An instrument is classified as at fair value through profit or loss if it is held for trading or is designated
as such upon initial recognition. Financial instruments are designated at fair value through profit or
loss if the Group manages such investments and makes purchase and sale decisions based on their
fair value in accordance with the Group’s documented risk management or investment strategy. Upon
initial recognition attributable transaction costs are recognised in profit or loss when incurred.
Financial instruments at fair value through profit or loss are measured at fair value, and changes
therein are recognised in profit and loss as finance income or expense.
Other
Other non-derivative financial instruments are measured at amortised cost using the effective interest
method, less any impairment losses.
(ii) Derivative financial instruments
Derivatives are initially recognised at fair value; attributable costs are recognised in profit or loss when
incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein
are accounted for in the profit and loss as finance income or expense.
(iii) Share capital
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
(f)
INVENTORIES
Inventories are measured at the lower of cost and net realisable value and includes expenditure
incurred in acquiring the inventories and other costs incurred in bringing them to their existing location
and condition. Net realisable value is the estimated selling price less selling expenses.
(g)
RESOURCE PROPERTIES
Resource property costs are accumulated in respect of each separate area of interest.
Exploration properties
Exploration properties are carried at balance sheet date at cost less accumulated impairment losses.
Exploration properties include the cost of acquiring resource properties, mineral rights and exploration,
evaluation expenditure incurred subsequent to acquisition of an area of interest.
Exploration properties 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 and
active and significant operations in, or in relation to, the area of interest are continuing.
A n n u a l R e p o r t 2 0 1 5 | 35
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine
technically feasibility and commercial viability or facts and circumstances suggest that the carrying
value amount exceeds the recoverable amount.
Exploration and evaluation assets are tested for impairment when any of the following facts and
circumstances exist
•
•
•
•
The term of the exploration license in the specific area of interest has expired during the
reporting period or will expire in the near future, and is not expected to be renewed;
Substantive expenditure on further exploration for an evaluation of mineral resources in the
specific area are not budgeted nor planned;
Exploration for and evaluation of mineral resources in the specific area have not led to the
discovery of commercially viable quantities of mineral resources and the decision was made
to discontinue such activities in the specific area; or
Sufficient data exists to indicate that, although a development in the specific area is likely to
proceed, the carrying amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale.
Areas of interest which no longer satisfy the above policy are considered to be impaired and are
measured at their recoverable amount, with any subsequent impairment loss recognised in the profit
and loss.
Development properties
Development properties are carried at balance sheet date at cost less accumulated impairment
losses. Development properties represent the accumulation of all exploration, evaluation and
acquisition costs in relation to areas where the technical feasibility and commercial viability of the
extraction of gas resources in the area of interest are demonstrable and all key project permits,
approvals and financing are in place. When there is low likelihood of the development property being
exploited, or the value of the exploitable development property has diminished below cost, the asset is
written down to its recoverable amount.
Production properties
Production properties are carried at balance sheet date at cost less accumulated amortisation and
accumulated impairment losses. Production properties represent the accumulation of all exploration,
evaluation and development and acquisition costs in relation to areas of interest in which production
licences have been granted and the related project has moved to the production phase.
Amortisation of costs is provided on the unit-of-production basis, separate calculations being
performed for each area of interest. The unit-of-production base results in an amortisation charge
proportional to the depletion of economically recoverable reserves. The amortisation rate incurred in
the period for each project in production phase is as follows:
Castello
2015
-
Sillaro
14.37%
2014
13.16%
17.66%
Amortisation of resource properties commences from the date when commercial production
commences. When the value of the exploitable production property has diminished below cost, the
asset is written down to its recoverable amount. The Group reviews the recoverable amount of
resource property costs at each reporting date to determine whether there is any indication of
impairment. If any such indication exists then the asset’s recoverable amount is estimated (refer Note
1.3 (c) (ii))
36 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
(h)
PROVISIONS
Rehabilitation costs
Long term environmental obligations are based on the Group’s environmental and rehabilitation plans,
in compliance with current environmental and regulatory requirements.
Full provision is made based on the net present value of the estimated cost of restoring the
environmental disturbances that have occurred up to the balance sheet date and abandonment of well
sites and production fields. Increases due to additional environmental disturbances, relating to the
development of an asset, are capitalised and recorded in resource property costs, and amortised over
the remaining useful lives of the areas of interest. The net present value is determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and risks specific to the liability.
Annual increases in the provision relating to the unwind of the discount rate are accounted for in the
income statement as finance expense.
The estimated costs of rehabilitation are reviewed annually and adjusted against the relevant
rehabilitation asset, as appropriate for changes in legislation, technology or other circumstances
including drilling activity and are accounted for on a prospective basis. Cost estimates are not reduced
by potential proceeds from the sale of assets.
(i)
FINANCE INCOME AND EXPENSES
Finance income comprises interest income on funds invested and foreign currency gains. Interest
income is recognised as it accrues in profit or loss, using the effective interest method.
Finance expenses comprise interest expense on borrowings or other payables and unwinding of the
discount of provisions and changes in the fair value of financial assets through profit and loss.
Borrowing costs that are not directly attributable to the acquisition, construction or production of
qualifying assets are recognised in profit or loss using the effective interest method.
Foreign currency gains and losses are reported as net amounts.
(j)
EMPLOYEE BENEFITS
(i)
Long-term service benefits
The Group’s net obligation in respect of long-term service benefits is the amount of future benefit 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 Government bonds at the balance
sheet date which have maturity dates approximating to the terms of the Group’s obligations.
A n n u a l R e p o r t 2 0 1 5 | 37
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
(ii)
Wages, salaries, annual leave, sick leave and non-monetary benefits
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 from
employees services provided to reporting date, are calculated at undiscounted amounts based on
remuneration wage and salary rates that the Group expects to pay as at reporting date including
related on-costs, such as workers compensation insurance and payroll tax.
(iii)
Superannuation
The Group contributes to defined contribution superannuation plans. Contributions are recognised as
an expense as they are due.
(k)
FOREIGN CURRENCY
(i)
Functional and presentation currency
Items included in the financial 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 financial statements are presented in Euro, which is PVE functional and presentation
currency (refer note 1.2 (d)).
(ii)
Foreign currency transactions
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 profit or loss as finance
income or expense.
Non-monetary assets and liabilities denominated in foreign currencies are translated at the date of
transaction or the date fair value was determined, if these assets and liabilities are measured at fair
value. Foreign currency differences arising on retranslation are recognised in profit and loss, except
for differences arising on the retranslation of available-for-sale equity instruments, a financial liability
designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges,
which are recognised directly in equity.
(iii)
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
consolidation are translated to Euro at foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations are translated to Euro 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.
Foreign exchange gains and losses arising from monetary items receivable from or payables to a
foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation and are recognised directly in equity
in the foreign currency translation reserve.
38 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
(l)
EARNINGS/LOSS PER SHARE
Basic earnings per share (“EPS”) is calculated by dividing the net profit attributable to members of the
parent entity for the reporting period, after excluding any costs of servicing equity (other than ordinary
shares and converting preference shares classified as ordinary shares for EPS calculation purposes),
by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.
Diluted EPS is calculated by dividing the net profit attributable to members of the parent entity,
adjusted by the after tax effect of financing costs associated with dilutive potential ordinary shares and
the effect on revenues and expenses of conversion to ordinary shares associated with dilutive
potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential
ordinary shares adjusted for any bonus issue.
(m)
OTHER INDIRECT 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 flows are included in the statement of cash flows on a net basis. The GST and VAT components
of cash flows arising from investing and financing activities which are recoverable from, or payable to,
the relevant taxation authority are classified as operating cash flows.
(n)
SEGMENT REPORTING
Determination and presentation of operating statements
The Group determines and presents operating segments based on the information that internally is
provided to the CEO, who is the Group’s chief operating decision maker.
An operating segment is a component of the Group that engages in business activities from which it
may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the Group’s other components. An operating segment’s operating results are reviewed
regularly by the CEO to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available.
Segment results that are reported to the CEO include items directly attributable to a segment as well
as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate
assets and income tax assets and liabilities. Segment capital expenditure is the total cost incurred
during the period to acquire property, plant and equipment and resource property costs.
(o)
REVENUE
Revenues is measured at fair value of the consideration received or receivable, net of the amount of
value added tax (“VAT”) payable to the taxation authority. Revenue is recognised when the significant
risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is
probable, the
A n n u a l R e p o r t 2 0 1 5 | 39
Notes to the Financial Statements (Continued)
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.3
SIGNIFICANT ACCOUNTING POLICIES (continued)
associated costs can be estimated reliably, there is no continuing management involved with the
goods, and the amount of revenue can be measured reliably.
Sale of gas
Gas sales revenue is recognised when control of the gas passes at the delivery point. Proceeds
received in advance of control passing are recognised as unearned revenue.
(p)
LEASED ASSETS
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are
classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal
to the lower of its fair value and the present value of the minimum lease payments. Subsequent to
initial recognition, the asset is accounted for in accordance with the property, plant and equipment
accounting policy.
Other leases are operating leases and the leased assets are not recognised on the Group’s balance
sheet. Payments made under operating leases are recognized in profit or loss on a straight line basis
over the term of the lease.
40 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
(q)
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Application
date of
standard*
Impact on
Group
financial
report
1 January
2018
The entity has
not yet
assessed the
full impact of
these
amendments.
Application
date for
Group*
1 January
2018
Reference Title
Summary
AASB 9
Financial
Instruments
AASB 9 (December 2014) is a
new Principal standard which
replaces AASB 139. This new
Principal version supersedes
AASB 9 issued in December
2009 (as amended) and
AASB 9 (issued in December
2010) and includes a model
for classification and
measurement, a single,
forward-looking ‘expected
loss’ impairment model and a
substantially-reformed
approach to hedge
accounting.
AASB 9 is effective for annual
periods beginning on or after
1 January 2018. However, the
Standard is available for early
application. The own credit
changes can be early applied
in isolation without otherwise
changing the accounting for
financial instruments.
Classification and
measurement
AASB 9 includes
requirements for a simpler
approach for classification
and measurement of financial
assets compared with the
requirements of AASB 139.
The main changes are
described below.
a. Financial assets that are
debt instruments will be
classified based on (1)
the objective of the
entity's business model
for managing the financial
assets; (2) the
characteristics of the
contractual cash flows.
A n n u a l R e p o r t 2 0 1 5 | 41
Notes to the Financial Statements (Continued)
Reference Title
Summary
Application
date of
standard*
Impact on
Group
financial
report
Application
date for
Group*
AASB 9
Financial
Instruments
(continued)
b. Allows an irrevocable
election on initial
recognition to present
gains and losses on
investments in equity
instruments that are not
held for trading in other
comprehensive income.
Dividends in respect of
these investments that
are a return on
investment can be
recognised in profit or
loss and there is no
impairment or recycling
on disposal of the
instrument.
c. Financial assets can be
designated and measured
at fair value through profit
or loss at initial
recognition if doing so
eliminates or significantly
reduces a measurement
or recognition
inconsistency that would
arise from measuring
assets or liabilities, or
recognising the gains and
losses on them, on
different bases.
Financial liabilities
Changes introduced by AASB
9 in respect of financial
liabilities are limited to the
measurement of liabilities
designated at fair value
through profit or loss (FVPL)
using the fair value option
Where the fair value option
is used for financial
liabilities, the change in fair
value is to be accounted for
as follows:
-
The change
attributable to
changes credit risk
are presented in
other comprehensive
income (OCI)
The remaining
change is presented
in profit or loss
-
42 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
Reference Title
Summary
Application
date of
standard*
Impact on
Group
financial
report
Application
date for
Group*
AASB 9
Financial
Instruments
(continued)
AASB 9 also removes the
volatility in profit or loss that
was caused by changes in the
credit risk of liabilities elected to
be measured at fair value. This
change in accounting means
that gains or losses attributable
to changes in the entity’s own
credit risk would be recognised
in OCI. These amounts
recognised in OCI are not
recycled to profit or loss if the
liability is ever repurchased at a
discount.
Impairment
The final version of AASB 9
introduces a new expected-loss
impairment model that will
require more timely recognition
of expected credit losses.
Specifically, the new Standard
requires entities to account for
expected credit losses from
when financial instruments are
first recognised and to
recognise full lifetime expected
losses on a more timely basis.
Hedge accounting
Amendments to AASB 9
(December 2009 & 2010
editions and AASB 2013-9)
issued in December 2013
included the new hedge
accounting requirements,
including changes to hedge
effectiveness testing, treatment
of hedging costs, risk
components that can be
hedged and disclosures.
Consequential amendments
were also made to other
standards as a result of AASB
9, introduced by AASB 2009-11
and superseded by AASB
2010-7, AASB 2010-10 and
AASB 2014-1 – Part E. AASB
2014-7 incorporates the
consequential amendments
arising from the issuance of
AASB 9 in Dec 2014.
AASB 2014-8 limits the
application of the existing
versions of AASB 9 (AASB 9
(December 2009) and AASB 9
(December 2010)) from 1
February 2015 and applies to
annual reporting periods
beginning on after 1 January
2015.
A n n u a l R e p o r t 2 0 1 5 | 43
Application
date of
standard*
Impact on
Group
financial
report
1 January
2016
The entity has
not yet
assessed the
full impact of
these
amendments.
Application
date for
Group*
1 January
2016
1 January
2016
1 January
2016
The entity has
not yet
assessed the
full impact of
these
amendments.
Notes to the Financial Statements (Continued)
Reference Title
Summary
AASB
2014-3
Amendments
to Australian
Accounting
Standards –
Accounting
for
Acquisitions
of Interests in
Joint
Operations
[AASB 1 &
AASB 11]
AASB
2014-9
Amendments
to Australian
Accounting
Standards –
Equity
Method in
Separate
Financial
Statements
AASB 2014-3 amends AASB
11 to provide guidance on the
accounting for acquisitions of
interests in joint operations in
which the activity constitutes a
business. The amendments
require:
(a) the acquirer of an interest
in a joint operation in which
the activity constitutes a
business, as defined in AASB
3 Business Combinations, to
apply all of the principles on
business combinations
accounting in AASB 3 and
other Australian Accounting
Standards except for those
principles that conflict with the
guidance in AASB 11; and
(b) the acquirer to disclose the
information required by AASB
3 and other Australian
Accounting Standards for
business combinations.
This Standard also makes an
editorial correction to AASB
11
AASB 2014-9 amends AASB
127 Separate Financial
Statements, and
consequentially amends
AASB 1 First-time Adoption of
Australian Accounting
Standards and AASB 128
Investments in Associates
and Joint Ventures, to allow
entities to use the equity
method of accounting for
investments in subsidiaries,
joint ventures and associates
in their separate financial
statements.
AASB 2014-9 also makes
editorial corrections to AASB
127.
AASB 2014-9 applies to
annual reporting periods
beginning on or after 1
January 2016. Early adoption
permitted.
44 | A n n u a l R e p o r t 2 0 1 5
Application
date of
standard*
Impact on
Group
financial
report
1 January
2016
The entity has
not yet
assessed the
full impact of
these
amendments.
Application
date for
Group*
1 January
2016
Notes to the Financial Statements (Continued)
Reference Title
Summary
AASB
2014-4
Clarification of
Acceptable
Methods of
Depreciation
and
Amortisation
(Amendments
to
AASB 116
and AASB
138)
AASB 116 Property Plant and
Equipment and AASB 138
Intangible Assets both
establish the principle for the
basis of depreciation and
amortisation as being the
expected pattern of
consumption of the future
economic benefits of an
asset.
The IASB has clarified that
the use of revenue-based
methods to calculate the
depreciation of an asset is not
appropriate because revenue
generated by an activity that
includes the use of an asset
generally reflects factors other
than the consumption of the
economic benefits embodied
in the asset.
The amendment also clarified
that revenue is generally
presumed to be an
inappropriate basis for
measuring the consumption of
the economic benefits
embodied in an intangible
asset. This presumption,
however, can be rebutted in
certain limited circumstances.
A n n u a l R e p o r t 2 0 1 5 | 45
Application
date of
standard*
Impact on
Group
financial
report
1 January
2018
The entity has
not yet
assessed the
full impact of
this standard.
Application
date for
Group*
1 January
2018
Notes to the Financial Statements (Continued)
Reference Title
Summary
AASB 15
Revenue from
Contracts with
Customers
AASB 15 Revenue from
Contracts with Customers
replaces the existing revenue
recognition standards AASB
111 Construction Contracts,
AASB 118 Revenue and
related Interpretations
(Interpretation 13 Customer
Loyalty Programmes,
Interpretation 15 Agreements
for the Construction of Real
Estate, Interpretation 18
Transfers of Assets from
Customers, Interpretation 131
Revenue—Barter
Transactions Involving
Advertising Services and
Interpretation 1042 Subscriber
Acquisition Costs in the
Telecommunications
Industry).
AASB 15 incorporates the
requirements of IFRS 15
Revenue from Contracts with
Customers issued by the
International Accounting
Standards Board (IASB) and
developed jointly with the US
Financial Accounting
Standards Board (FASB).
46 | A n n u a l R e p o r t 2 0 1 5
Application
date of
standard*
Impact on
Group
financial
report
1 January
2018
The entity has
not yet
assessed the
full impact of
this standard.
Application
date for
Group*
1 January
2018
Notes to the Financial Statements (Continued)
Reference Title
Summary
AASB 15
Revenue from
Contracts with
Customers
(continued)
AASB 15 specifies the
accounting treatment for
revenue arising from
contracts with customers
(except for contracts within
the scope of other accounting
standards such as leases or
financial instruments).The
core principle of AASB 15 is
that an entity recognises
revenue to depict the transfer
of promised goods or services
to customers in an amount
that reflects the consideration
to which the entity expects to
be entitled in exchange for
those goods or services. An
entity recognises revenue in
accordance with that core
principle by applying the
following steps:
Step 1: Identify the contract(s)
with a customer
Step 2: Identify the
performance obligations in the
contract
Step 3: Determine the
transaction price
Step 4: Allocate the
transaction price to the
performance obligations in the
contract
Step 5: Recognise revenue
when (or as) the entity
satisfies a performance
obligation
AASB 2015-8 amended the
AASB 15 effective date so it
is now effective for annual
reporting periods
commencing on or after 1
January 2018. Early
application is permitted.
AASB 2014-5 incorporates
the consequential
amendments to a number
Australian Accounting
Standards (including
Interpretations) arising from
the issuance of AASB 15.
A n n u a l R e p o r t 2 0 1 5 | 47
Application
date of
standard*
Impact on
Group
financial
report
1 January
2016
The entity has
not yet
assessed the
full impact of
this standard.
Application
date for
Group*
1 January
2016
1 January
2018
1 January
2018
The entity has
not yet
assessed the
full impact of
these
amendments.
Notes to the Financial Statements (Continued)
Reference Title
Summary
AASB
1057
Application of
Australian
Accounting
Standards
AASB
2014-10
AASB
2015-10*
Amendments
to Australian
Accounting
Standards –
Sale or
Contribution
of Assets
between an
Investor and
its Associate
or Joint
Venture
This Standard lists the
application paragraphs for
each other Standard (and
Interpretation), grouped where
they are the same.
Accordingly, paragraphs 5
and 22 respectively specify
the application paragraphs for
Standards and Interpretations
in general. Differing
application paragraphs are
set out for individual
Standards and Interpretations
or grouped where possible.
The application paragraphs
do not affect requirements in
other Standards that specify
that certain paragraphs apply
only to certain types of
entities.
AASB 2014-10 amends AASB
10 Consolidated Financial
Statements and AASB 128 to
address an inconsistency
between the requirements in
AASB 10 and those in AASB
128 (August 2011), in dealing
with the sale or contribution of
assets between an investor
and its associate or joint
venture. The amendments
require:
(a) a full gain or loss to be
recognised when a
transaction involves a
business (whether it is housed
in a subsidiary or not); and
(b) a partial gain or loss to be
recognised when a
transaction involves assets
that do not constitute a
business, even if these assets
are housed in a subsidiary.
48 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
Reference Title
Summary
Application
date of
standard*
Impact on
Group
financial
report
Application
date for
Group*
AASB
2014-10
AASB
2015-10*
AASB
2015-1
Amendments
to Australian
Accounting
Standards –
Sale or
Contribution
of Assets
between an
Investor and
its Associate
or Joint
Venture
(continued)
Amendments
to Australian
Accounting
Standards –
Annual
Improvements
to Australian
Accounting
Standards
2012– 2014
Cycle
AASB 2014-10 also makes an
editorial correction to AASB
10.
AASB 2015-10 was issued
subsequently and deferred
the application date of AASB
2014-10 to annual reporting
periods beginning on or after
1 January 2018.
*The amendments issued
by the IASB has been
deferred indefinitely.
The subjects of the principal
amendments to the Standards
are set out below:
1 January
2016
for
Sale
AASB 5 Non-current Assets
Held
and
Discontinued Operations:
Changes
in methods of
disposal – where an entity
reclassifies an asset
(or
disposal group) directly from
being held for distribution to
being held for sale (or visa
versa), an entity shall not
follow
in
paragraphs 27–29 to account
for this change.
guidance
the
1 January
2016
The entity has
not yet
assessed the
full impact of
these
amendments.
Financial
AASB
7
Instruments: Disclosures:
Servicing contracts - clarifies
how an entity should apply
the guidance
in paragraph
42C of AASB 7 to a servicing
contract to decide whether a
is
servicing
‘continuing
for
the purposes of applying the
in
disclosure
of
paragraphs
AASB 7.
requirements
42E–42H
contract
involvement’
A n n u a l R e p o r t 2 0 1 5 | 49
Notes to the Financial Statements (Continued)
Reference Title
Summary
Application
date of
standard*
Impact on
Group
financial
report
Application
date for
Group*
AASB
2015-1
Amendments
to Australian
Accounting
Standards –
Annual
Improvements
to Australian
Accounting
Standards
2012– 2014
Cycle
(continued)
of
Assets
Applicability
the
amendments to AASB 7 to
condensed interim financial
statements - clarify that the
disclosure
additional
by
required
the
to AASB 7
amendments
Disclosure–Offsetting
Financial
and
Financial Liabilities is not
specifically required for all
interim periods. However,
the additional disclosure is
required
in
condensed interim financial
are
statements
prepared in accordance with
AASB 134 Interim Financial
Reporting when its inclusion
would be required by the
requirements of AASB 134.
to be given
that
AASB 119 Employee Benefits:
Discount rate: regional market
issue - clarifies that the high
quality corporate bonds used
to estimate the discount rate
for post-employment benefit
obligations
be
the same
denominated
currency as
liability.
Further it clarifies that the
depth of the market for high
quality
bonds
corporate
should be assessed at the
currency level.
should
in
the
the
to clarify
of
in
report’
AASB 134 Interim Financial
Reporting:
information
Disclosure
interim
‘elsewhere
- amends
financial
AASB 134
the
meaning of disclosure of
information ‘elsewhere in the
interim financial report’ and to
inclusion of a
require
the
from
cross-reference
interim financial statements to
the
this
information.
location
the
of
50 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
Reference Title
Summary
Application
date of
standard*
Impact on
Group
financial
report
1 January
2016
The entity will
consider
these
amendments
going forward.
Application
date for
Group*
1 January
2016
Standard
determining
to
companies
The
makes
amendments to AASB 101
Presentation of Financial
Statements arising from the
IASB’s Disclosure Initiative
project. The amendments
further
are designed
encourage
to
apply professional judgment
in
what
information to disclose in the
statements. For
financial
example,
the amendments
make clear that materiality
applies
the whole of
financial statements and that
the inclusion of immaterial
information can inhibit the
usefulness
financial
disclosures. The amendments
that companies
also clarify
professional
should
determining
judgment
where and
in what order
information is presented in the
financial disclosures.
use
in
to
of
AASB
2015-2
Amendments
to Australian
Accounting
Standards –
Disclosure
Initiative:
Amendments
to AASB 101
AASB
2015-3
AASB
2015-4
Amendments
to Australian
Accounting
Standards
arising from
the
Withdrawal of
AASB 1031
Materiality
Amendments
to Australian
Accounting
Standards –
Financial
Reporting
Requirements
for Australian
Groups with a
Foreign
Parent
The Standard completes the
remove
AASB’s project
on
Australian
materiality
from Australian
Accounting Standards.
to
guidance
1 July 2015 There is no
impact on the
entity.
1 January
2016
The amendment aligns the
relief available in AASB 10
Consolidated
Financial
Statements and AASB 128
in Associates
Investments
in
and
financial
respect of
reporting
for
Australian groups with a
foreign parent.
Joint Ventures
the
requirements
1 July 2015 There is no
impact on the
entity.
1 January
2016
A n n u a l R e p o r t 2 0 1 5 | 51
Application
date of
standard*
Impact on
Group
financial
report
1 January
2016
The entity has
not yet
assessed the
full impact of
these
amendments.
Application
date for
Group*
1 January
2016
1 January
2019
1 January
2019
The entity has
not yet
assessed the
full impact of
IFRS16.
Notes to the Financial Statements (Continued)
Reference Title
Summary
AASB
2015-9
Amendments
to Australian
Accounting
Standards –
Scope and
Application
Paragraphs
[AASB 8,
AASB 133 &
AASB 1057]
AASB 16
Leases
This Standard inserts scope
paragraphs into AASB 8 and
in place of
AASB 133
application paragraph text in
AASB 1057. This is to correct
inadvertent removal of these
paragraphs during editorial
changes made
in August
2015. There is no change to
the
the
requirements or
applicability of AASB 8 and
AASB 133.
The key features of AASB 16
are as follows:
Lessee accounting
Lessees are required to
recognise assets and liabilities
for all leases with a term of
more than 12 months, unless
the underlying asset is of low
value.
A lessee measures right-of-
use assets similarly to other
non-financial assets and
lease liabilities similarly to
other financial liabilities.
Assets and liabilities arising
from a lease are initially
measured on a present value
basis. The measurement
includes non-cancellable
lease payments (including
inflation-linked payments),
and also includes payments
to be made in optional
periods if the lessee is
reasonably certain to exercise
an option to extend the lease,
or not to exercise an option to
terminate the lease.
AASB 16 contains disclosure
requirements for lessees.
52 | A n n u a l R e p o r t 2 0 1 5
Application
date of
standard*
Impact on
Group
financial
report
1 January
2019
The entity has
not yet
assessed the
full impact of
AASB 16.
Application
date for
Group*
1 January
2019
Notes to the Financial Statements (Continued)
Reference Title
Summary
AASB 16
Leases
Lessor accounting
AASB 16 substantially carries
forward the lessor accounting
requirements in AASB 117.
Accordingly, a lessor
continues to classify its leases
as operating leases or finance
leases, and to account for
those two types of leases
differently.
AASB 116 also requires
enhanced disclosures to be
provided by lessors that will
improve information
disclosed about a lessor’s
risk exposure, particularly to
residual value risk.
AASB 16 supersedes:
AASB 117 Leases;
Interpretation 4 Determining
whether an Arrangement
contains a Lease;
Interpretation 115 Operating
Leases—Incentives; and
Interpretation 127 Evaluating
the Substance of
Transactions Involving the
Legal Form of a Lease.
The new standard will be
effective for annual periods
beginning on or after 1
January
2019. Early application is
permitted, provided the new
revenue standard, AASB 15
Revenue from Contracts with
Customers, has been applied,
or is applied at the same date
as AASB 16.
A n n u a l R e p o r t 2 0 1 5 | 53
Notes to the Financial Statements (Continued)
NOTE 2:
FINANCIAL RISK MANAGEMENT
Exposure to credit, market and liquidity risks arise in the normal course of the Group’s business.
This note presents information about the Group’s exposure to each of the above risks, their objectives,
policies and processes for measuring and managing risk, and the management of capital. Further
quantitative disclosures are included throughout this financial report.
Risk recognition and management are viewed as integral to the Group's objectives of creating and
maintaining shareholder value, and the successful execution of the Group's strategies in gas
exploration and development. The Board as a whole is responsible for oversight of the processes by
which risk is considered for both ongoing operations and prospective actions. In specific areas, it is
assisted by the Audit and Risk Committee. Management is responsible for establishing procedures
which provide assurance that major business risks are identified, consistently assessed and
appropriately addressed.
(i)
Credit Risk
The Group invests in short term deposits and trades with recognised, creditworthy third parties. There
is a concentration of credit risk in relation to receivables due to indirect tax from the Italian tax
authorities (see note 12).
Cash and short term deposits are made with institutions that have a credit rating of at least A1 from
Standard & Poors and A from Moody's.
Management has a credit policy in place whereby credit evaluations are performed on all customers
and parties the Company and its subsidiaries deal with. The exposure to credit risk is monitored on an
ongoing basis.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset.
(ii)
Market Risk
Interest rate risk
The Group is primarily exposed to interest rate risk arising from its cash and cash equivalents and
borrowings. The Group does not hedge its exposure to movements in market interest rates. The
Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash
equivalents in bank accounts earning interest.
Currency risk
The Group is exposed to foreign currency risk on purchases that are denominated in a currency other
than the respective functional currencies of consolidated entities. The currency giving rise to this risk is
primarily Australian dollars.
In respect to monetary assets held in currencies other than Euro, the Group ensures that the net
exposure is kept to an acceptable level by minimising their holdings in the foreign currency where
possible by buying or selling foreign currencies at spot rates where necessary to address short term
imbalances.
(iii)
Capital Management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Capital consists of issued share capital
plus accumulated losses/earnings. The Board monitors accumulated losses/earnings.
The Board seeks to encourage all employees of the Group to hold ordinary shares.
The Board seeks to maintain a balance between the higher returns that might be possible with higher
levels of borrowings and the advantages and security afforded by a sound capital position from
shareholders. The Group does not have a defined share buy-back plan and there were no changes
in the Group’s approach to capital management during the year.
There are no externally imposed restrictions on capital management.
54 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 2:
FINANCIAL RISK MANAGEMENT (continued)
(iv)
Liquidity Risk
The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due. Management prepares monthly cash flow forecasts
taking into consideration debt facility obligations. Capital expenditures are planned around cash flow
availability.
NOTE 3:
REVENUE
Gas sales
CONSOLIDATED
2015
€
2,496,267
2014
€
5,033,833
NOTE 4:
EMPLOYEE BENEFIT EXPENSES
Wages and salaries
Contributions to defined contribution plans
NOTE 5:
CORPORATE OVERHEADS
Company administration and compliance
Professional fees
Office costs
Travel and entertainment
Other expenses
NOTE 6:
AUDITORS’ REMUNERATION
912,740
192,754
1,071,316
214,579
1,105,494
1,285,895
194,675
344,754
249,374
111,143
208,494
193,344
395,017
243,100
95,620
252,918
1,108,440
1,179,999
CONSOLIDATED
2015
€
2014
€
Auditors of the Company
Audit and review of the Group financial statements
48,530
47,780
A n n u a l R e p o r t 2 0 1 5 | 55
Notes to the Financial Statements (Continued)
NOTE 7:
FINANCE INCOME AND EXPENSE
Recognised in profit and loss:
Interest income
Finance income
Amortisation of borrowing costs
Interest expense
Unwind of discount on site restoration provision
Foreign exchange losses (net)
Finance expense
Net finance expense
NOTE 8:
INCOME TAX BENEFIT/(EXPENSE)
Current tax
Current year
Deferred tax
Origination and reversal of temporary differences
Deferred tax benefit
Total income tax (benefit) / expense
CONSOLIDATED
2015
€
1,777
1,777
2014
€
526
526
129,092
129,092
172,344
296,392
113,623
179,280
32,367
7,639
447,426
612,403
(445,649)
(611,877)
-
89,134
231,434
231,434
53,872
53,872
231,434
143,006
Numerical reconciliation between tax expense and pre-tax accounting profit / (loss)
Loss for the year before tax
(6,426,392)
(1,119,356)
Income tax (benefit) / expense using the Company’s domestic tax
rate of 30 per cent (2014: 30%)
(1,927,918)
(335,807)
Non-deductible expenses:
Borrowing costs
IFRS adjustments
Other
Effect of tax rates in foreign jurisdictions
Current year losses and temporary differences for which no deferred
tax asset was recognised
Changes in temporary differences
Utilisation of tax losses
Tax effect of regional taxes in Italy – current
Income tax (benefit) / expense
19,157
786,424
211,087
3,027
238,037
43,133
148,144
(13,284)
775,697
216,571
208,857
56,029
2,272
(146,119)
-
89,134
231,434
143,006
56 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 9:
EARNINGS PER SHARE
Basic loss per share (€ cents)
CONSOLIDATED
2015
€
2014
€
(5.02)
(1.03)
The calculation of earnings per share was based on the loss attributable to shareholders of
€6,657,826 (2014: €1,262,362) and a weighted average number of ordinary shares outstanding during
the year of 132,670,893 (2014: 122,414,063).
Diluted earnings / (loss) per share is the same as basic earnings / (loss) per share.
The number of weighted average shares is
calculated as follows:
No. of days
2015
Weighted
average no.
2014
Weighted
average no.
Number of shares on issue at beginning of the year
154
(365 for
2014)
122,414,063 122,414,063
17,742,857 shares issued on 4 June 2015
211
10,256,830
-
132,670,893 122,414,063
NOTE 10:
CASH AND CASH EQUIVALENTS
(a) Cash and cash equivalents
(b) Reconciliation of cash flows from operating activities
Loss
Adjustment for non-cash items:
Depreciation and amortisation
Resource property costs impairments
Unwind of discount on site restoration provision
Amortisation of borrowing costs
Loss on sale of project
Change in operating assets and liabilities:
Decrease in receivables
Decrease in trade and other payables
Increase in provisions
Increase in deferred tax assets
2,446,005
1,579,585
(6,657,826)
(1,262,362)
1,654,575
2,820,696
113,623
129,092
822,203
2,257,850
20,180
179,280
129,092
-
310,191
(61,922)
37,498
231,434
1,589,646
(1,063,809)
41,322
53,872
Net cash inflow from operating activities
(600,436)
1,945,071
A n n u a l R e p o r t 2 0 1 5 | 57
Notes to the Financial Statements (Continued)
NOTE 11:
INVENTORY
Non – Current
Well equipment – at cost
CONSOLIDATED
2015
€
2014
€
732,801
783,669
Well equipment represents inventory expected to be utilised in future development of known wells with
specific characteristics.
NOTE 12:
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Accrued gas sales revenue
Sundry debtors
Deposit
Indirect taxes receivable (a)
235,820
443,211
124,268
-
147,513
131,423
7
202,485
141,833
308,999
649,441
1,086,118
The Group’s exposure to credit and currency risks and impairment losses related to trade and other
receivables are disclosed in Note 21.
(a) Included in receivables are Italian indirect taxes recoverable in the prior period as follows:
Current
-
169,718
58 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 13:
PROPERTY PLANT & EQUIPMENT
Office Furniture & Equipment:
At cost
Accumulated depreciation
Gas producing plant and equipment
At cost
Accumulated depreciation
Reconciliations:
Reconciliation of the carrying amounts for each class of Plant &
equipment are set out below:
Office Furniture & Equipment:
Carrying amount at beginning of year
Additions
Depreciation expense
Carrying amount at end of year
Gas Producing plant and equipment:
Carrying amount at beginning of period
Additions / Reclassification
Depreciation expense
Carrying amount at end of period
CONSOLIDATED
2015
€
2014
€
207,196
(184,845)
200,672
(170,825)
22,351
29,847
8,503,197
(5,910,355)
8,483,197
(5,479,223)
2,592,842
3,003,974
2,615,193
3,033,821
29,847
6,524
(14,020)
43,098
540
(13,791)
22,351
29,847
3,003,974
20,000
(431,132)
3,529,067
80,446
(605,539)
2,592,842
3,003,974
2,615,193
3,003,821
A n n u a l R e p o r t 2 0 1 5 | 59
Notes to the Financial Statements (Continued)
NOTE 14:
RESOURCE PROPERTY COSTS
Resource Property costs
Exploration Phase
Development Phase
Production Phase
CONSOLIDATED
2015
€
2014
€
9,646,269
11,624,796
-
-
5,521,279
8,156,839
15,167,548
19,781,635
Reconciliation of carrying amount of resource properties
Exploration Phase
Carrying amount at beginning of period
11,624,796
10,060,661
Exploration expenditure
Change in estimate of rehabilitation assets
Disposal of project
Impairment losses
Carrying amount at end of period
669,988
1,584,315
(67,671)
(2,551,990)
-
-
(28,854)
(20,180)
9,646,269
11,624,796
On December 23, 2015 the Group sold its 75% interest in the La Prospera exploration licence. The
carrying amount of the disposed projects at the deal closing date was €2,621,334. As part of the deal
also inventory items for €50,869 were also sold. The consideration received was €1,850,000
generating a loss of €822,203. The sale contract also included a bonus payment of €200,000 subject
to the obtainment of the final production concession status for Gradizza (part of the assets sold) by
August 31, 2016.
Resource property costs in the exploration and evaluation phase have not yet reached a stage which
permits a reasonable assessment of the existence of or otherwise of economically recoverable
reserves. The ultimate recoupment of resource property costs in the exploration phase is dependent
upon the successful development and exploitation, or alternatively sale, of the respective areas of
interest at an amount greater than or equal to the carrying value.
60 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 14:
RESOURCE PROPERTY COSTS (continued)
Production Phase
Carrying amount at beginning of period
Additions / Reclass to property plant & equipment
Change in estimate of rehabilitation assets
Amortisation of producing assets
Impairment loss
Carrying amount at end of period
CONSOLIDATED
2015
€
2014
€
8,156,839
9,811,589
799,908
565.797
4,112
-
(1,209,423)
(1,658,862)
(2,791,842)
-
5,521,279
8,156,839
The Company reviewed the carrying value of its assets and cash generating units due to the following
material events that took place during the year ended December 31, 2015:
1. Reserves and resources: Reservoir depletion and performance has resulted in production
reduction at Sillaro over the last 18 months. Throughout 2015 the technical team reviewed the
residual potential of the field. A rework was initiated in December 2015 and will be completed
after the date of this report. Once results are clear a revised reserve estimate and production
forecast will be available.
2. Gas and oil price trend: during 2015 the global decreasing trend in oil & gas prices continued.
Prices in the month of December 2015 when compared to December 2014 decreased on
average by 27% (daily spot price recorded in PSV market);
Increase in cost of capital: the pressure described in the point above on market prices for
oil&gas resulted in an increase in cost of capital for natural resources companies, and
particularly for junior companies.
3.
Considering the above events/information, and any new information available, an impairment of
€2,558,276 has been recognised in the Financial Statements for field Sillaro.
Impairment losses are reconciled as follows:
Impairment expense
Sillaro gas field
Castello gas field
Exploration costs
Total impairment loss
(2,558,276)
(233,566)
(28,854)
(2,820,696)
-
-
(20,180)
(20,180)
The Group assessed each asset or cash generating unit (CGU) for the year ended 31 December 2015
to determine whether any indication of impairment exists. When an indication of impairment exists, a
formal estimate of the recoverable amount was made, which is considered to be higher of the fair
value less cost to sell and Value in Use (VIU). The Group has used VIU method for all the CGUs
identified.
A n n u a l R e p o r t 2 0 1 5 | 61
Notes to the Financial Statements (Continued)
NOTE 14:
RESOURCE PROPERTY COSTS (continued)
Value in Use of Sillaro CGU was calculated using a pre-tax Discounted Cash Flow model based on
the following main assumptions:
1. Gas price of €21,1/Mwh for the years 2016-2019;
2. A pre-tax discount rate of 12.7%;
3. Variable operating expenses of €0.02/scm produced;
4. Production from Sillaro will increase from a current average of approximately 10,000
scm/day to 30,000 scm/day in 2016 once the rigless rework is completed;
5. Rehabilitation costs of €500k per well;
These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility
that changes in circumstances will impact the projections, which may impact the recoverable amounts
of assets and/or CGUs.
It is estimated that changes in key assumptions, in isolation, would impact the recoverable amount of
Sillaro at December 31, 2015 as follows:
Gas price -5%
Gas price +5%
Discount rate +1%
Discount rate -1%
Opex +5%
Opex -5%
Capex +5%
Capex -5%
Yearly production +10%
Yearly production -10%
(717,477)
717,477
(197,597)
204,275
(127,293)
127,293
(339,865)
339,865
1,275,165
(1,275,165)
NOTE 15:
DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets
Deferred tax assets have been recognised in respect of the following items:
Tax losses
Accrued expenses and liabilities
Recognised deferred tax assets
CONSOLIDATED
2015
€
1,691,137
325,922
2,017,059
2014
€
1,884,192
432,075
2,316,267
The tax losses in both Italy and Australia do not expire. The deductible temporary differences do not
expire under current tax legislation. Deferred tax assets have been recognised in respect of these
items because it is probable that future taxable profit will be available against which the Group can
utilise the benefits therefrom.
62 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 15:
DEFERRED TAX ASSETS AND LIABILITIES (continued)
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Tax losses
Deductible temporary differences
Unrecognised deferred tax assets
Deferred tax benefit will only be obtained if:
2,462,399
2,308,116
1,735,629
2,016,301
4,198,028
4,324,417
(i)
(ii)
(iii)
the relevant company derives future assessable income of a nature and of an amount
sufficient to enable the benefit from the deductions for the losses to be realised;
the relevant company continues to comply with the conditions for deductibility imposed by tax
legislation; and
No changes in tax legislation adversely affect the relevant company in realising the benefit
from the deductions for the losses.
Movement in recognised temporary differences during the year
Balance 1
Jan 2014
Profit and
loss
Equity
Balance 31
December
2014
Profit and
loss
Equity
Consolidated
Tax losses
Accrued
expenses and
liabilities
Total
recognised
deferred tax
asset
2,030,650
(146,458)
339,489
92,586
2,370,139
(53,872)
-
-
-
1,884,992
(193,005)
432,075
(106,203)
2,316,267
(299,208)
-
-
-
Balance
31 Dec
2015
1,691,137
325,922
2,017,059
NOTE 16:
TRADE AND OTHER PAYABLES
Trade payables and accruals
Other payables
CONSOLIDATED
2015
€
1,947,197
435,271
2,382,918
2014
€
1,391,960
306,885
1,698,845
The Group’s exposure to currency and liquidity risks related to trade and other payables are disclosed
in note 21.
A n n u a l R e p o r t 2 0 1 5 | 63
Notes to the Financial Statements (Continued)
NOTE 17:
PROVISIONS
Current:
Employee leave entitlements
Other provisions
Non Current:
Restoration provision
Reconciliation of restoration provision:
Opening balance
Increase in provision due to revised estimates
Increase in provision from unwind of discount rate
Closing balance
91,867
125,345
217,212
119,714
60,000
179,714
4,779,855
4,168,104
4,168,104
498,128
113,623
4,779,855
3,988,825
-
179,279
4,168,104
Provision has been made based on the net present value of the estimated cost of restoring the
environmental disturbances that have occurred up to the balance sheet date and abandonment of the
well site and production fields.
NOTE 18:
INTEREST BEARING LOANS
This note provides information about the contractual terms of the Group’s interest-bearing loans and
borrowings, which are measured at amortised cost. For more information about the Group’s exposure
to interest rate, foreign currency and liquidity risk, see note 21.
Current liabilities
Finance facility
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
CONSOLIDATED
2015
€
2014
€
2,467,408
2,968,858
Currency Nominal
Interest
rate
Year of
Maturity
31 December 2015
Carrying
Face
Amount
Value
$
$
31 December 2014
Carrying
Face
Amount
Value
$
$
Euro
Euribor +
3.75%
2016
2,776,048 2,467,408 3,406,590 2,968,858
Current
liabilities
Secured bank
loan
64 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 18:
INTEREST BEARING LOANS (continued)
Subsequent to the year end the Company, following the sale of its interest in La Prospera, repaid
€2,200,000 on the loan facility with Nedbank Group Ltd. After the repayment, the facility has changed
from a reserve based loan to a standard loan with an agreed repayment plan in the form of monthly
instalments in order to extinguish the facility by 30 September 2016.
At December 31, 2015 PVE was compliant with all the covenants related to the Nedbank’s facility.
Interest is currently payable at Euribor plus 375 basis points. Principal repayments of €630,542 (of
which €202,478 were accounted for in the Debt Service Reserve Account) have been made during
the year to December 2015 in regards to the Nedbank facility.
NOTE 19:
CAPITAL AND RESERVES
Share Capital
Opening balance - 1 January
Shares issued during the year:
Issued on 4 June 2015
Closing balance – 31 December
Ordinary Shares
2015
Number
2014
Number
122,414,063
122,414,063
17,742,857
-
140,156,920
122,414,063
All ordinary shares are fully paid and carry one vote per share and the right to dividends. In the event
of winding up the Company, ordinary shareholders rank after creditors. Ordinary shares have no par
value.
No shares were issued to employees pursuant to the employees share purchase plan (2014: Nil)
Translation Reserve
The translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations. The historical balance comprises of translation differences
prior to change in functional currency of a foreign operation.
Dividends
No dividends were paid or declared during the current year (2014: Nil).
A n n u a l R e p o r t 2 0 1 5 | 65
Notes to the Financial Statements (Continued)
NOTE 20:
FINANCIAL REPORTING BY SEGMENTS
The Group reportable segments as described below are the Group’s strategic business units. The
strategic business units are classified according to field licence areas which are managed separately.
All strategic business units are in Italy. For each strategic business unit, the CEO reviews internal
management reports on a monthly basis. Exploration, Development and Production gas and oil are
the operating segments identified for the Group. The individual exploration, development and
production operation sites have been aggregated.
.
In euro
External
revenues
Segment (loss) /
profit before tax
Depreciation and
amortisation
Impairment on
resource property
costs
Loss on sale of
project
Reportable
segment assets:
Resource
property costs
Plant &
Equipment
Receivables
Inventory
Capital
expenditure
Movement in
rehabilitation
assets
Reportable
segment liabilities
Exploration
Development and
Production
Total
2015
€
2014
€
2015
€
2014
€
2015
€
2014
€
-
-
2,496,267
5,033,833
2,496,267
5,033,833
(851,057)
(20,180)
(3,013,869)
1,741,005
(3,864,926)
1,720,825
-
-
(1,640,555)
(2,264,401)
(1,640,555)
(2,264,401)
(28,854)
(20,180)
(2,791,842)
(822,203)
-
-
-
-
(2,820,696)
(20,180)
(822,203)
-
9,646,269 11,624,796
5,521,279
8,156,839 15,167,548
19,781,635
-
-
-
-
-
-
2,592,842
3,003,974
2,592,842
3,003,974
360,088
443,211
360,088
732,081
783,669
732,081
443,221
783,669
669,988
1,568,715
799,908
84,589
1,469,896
1,653,304
(67,691)
-
620,149
-
552,478
-
(1,967,787)
(2,510,250)
(4,390,251)
(2,807,091)
(6,358,038)
(5,317,341)
66 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 20:
FINANCIAL REPORTING BY SEGMENTS (continued)
Reconciliation of reportable segment profit or loss, assets and
liabilities
Profit or loss:
Total profit / (loss) for reportable segments
Unallocated amounts:
Net finance expense
Other corporate expenses
Consolidated loss before income tax
Assets:
Total assets for reportable segments
Other assets
Consolidated total assets
Liabilities:
Total liabilities for reportable segments
Other liabilities
Consolidated total liabilities
Other Segment Information
2015
€
(3,864,926)
2014
€
1,720,825
(445,649)
(2,115,817)
(6,426,392)
(611,876)
(2,228,305)
(1,119,356)
18,853,279
4,805,146
23,658,425
23,986,577
4,624,896
28,611,473
(6,358,038)
(3,489,355)
(9,847,393)
(5,317,341)
(3,698,180)
(9,015,521)
All of the Group’s revenue is currently attributed to gas sales in Italy through an off-take agreement
with Shell Italia. For the current year, the Group’s only customer contributed the entire revenue.
NOTE 21:
FINANCIAL INSTRUMENTS
(a)
Interest Rate Risk Exposures
Profile:
At the reporting date the interest rate profile of the Group’s interest-bearing financial
instruments was:
Variable rate instruments
Financial assets
Financial liabilities
CONSOLIDATED
2015
€
2014
€
2,446,005
(2,467,408)
(21,403)
1,579,585
(2,968,858)
(1,389,273)
A n n u a l R e p o r t 2 0 1 5 | 67
Notes to the Financial Statements (Continued)
NOTE 21:
FINANCIAL INSTRUMENTS (continued)
Cash flow sensitivity analysis for variable rate instruments:
A strengthening of 50 basis points in interest rates at the reporting date would have increased
/ (decreased) equity and profit and loss by the amounts shown below. This analysis assumes
that all other variables, in particular foreign currency rates, remain constant. The analysis is
performed on the same basis for 2014.
Effect in €’s
31 December
Profit or loss
Equity
2015
2014
2015
2014
Variable rate instruments
(13,765)
(17,500)
-
-
(b) Credit Risk
Exposure to credit risk
The Group is not exposed to significant credit risk. Credit risk with respect to cash is held with
recognised financial intermediaries with acceptable credit ratings.
The Group has limited its credit risk in relation to its gas sales in that all sales transactions fall
under an offtake agreement with Shell Italia which expires in October 2017. Shell currently has
an option to extend the contract a second Gas Year from October 2017 to September 2018.
The Group has a concentration of credit risk exposure to its one customer (Shell Italia). Payment
terms are 35 days and the customer has an investment grade credit rating.
The carrying amount of the Group’s financial assets represents the maximum credit exposure and
is shown in the table below. No receivables are considered past due nor were any impairment
losses recognised during the period.
The carrying amount of the Group’s financial assets represents the maximum credit exposure and
is shown in the table below. No receivables are considered past due nor were any impairment
losses recognised during the period.
Cash and cash equivalents
Receivables – Current
Other assets
Note
10
12
CONSOLIDATED
Carrying Amount
2015
€
2,446,005
649,441
30,378
2014
€
1,579,585
1,086,118
30,378
3,125,824
2,696,081
68 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 21:
FINANCIAL INSTRUMENTS (continued)
(c)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest
payments:
Consolidated
31 December 2015
In €
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
1 – 2
Years
2 – 5
Years
Trade and other
payables
Secured bank
loan
(2,382,918)
(2,382,918)
(2,382,918)
-
(2,467,408)
(4,850,326)
(2,792,805)
(5,175,723)
(2,211,172)
(4,594,090)
(581,633)
(581,633)
-
-
-
-
-
-
Consolidated
31 December 2014
In €
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
1 – 2
Years
2 – 5
Years
Trade and other
payables
Secured bank
loan
(1,698,845)
(1,698,845)
(1,698,845)
-
-
(2,968,858)
(4,667,703)
(3,841,384)
(5,540,229)
(355,000)
(2,053,845)
(3,486,384)
(3,486,384)
(135,766)
(135,766)
-
-
-
(d)
Net Fair Values of financial assets and liabilities
The carrying amounts of financial assets and liabilities (excluding borrowing costs) as
disclosed in the balance sheet equate to their estimated net fair value.
(e)
Foreign Currency Risk
The Group is exposed to foreign currency risk on purchases and borrowings that are
denominated in a currency other than Euro. The currency giving rise to this risk is primarily
Australian Dollars.
Amounts receivable/(payable) in foreign currency other than
functional currency:
Cash
Current – Payables
Net Exposure
CONSOLIDATED
2015
€
12,977
(60,884)
(47,908)
2014
€
17,652
(39,479)
(21,827)
The following significant exchange rates applied during the year:
Australian Dollar ($)
Average rate
2015
0.6741
2014
0.6792
Reporting date spot
rate
2015
0.6691
2014
0.6710
A n n u a l R e p o r t 2 0 1 5 | 69
Notes to the Financial Statements (Continued)
NOTE 21: FINANCIAL INSTRUMENTS (continued)
Sensitivity Analysis
A 10 percent strengthening of the Australian dollar against the Euro (€) at 31 December would have
increased (decreased) equity and profit and loss by the amounts shown below. This analysis
assumes that all other variables, in particular interest rates, remain constant. The analysis is
performed on the same basis for 2014.
31 December 2015
Australian Dollar to Euro (€)
31 December 2014
Australian Dollar to Euro (€)
CONSOLIDATED
Profit or loss
€
3,707
Equity
€
-
1,373
-
A 10 percent weakening of the Australian dollar against the Euro (€) at 31 December would have the
equal but opposite effect on the above currencies to the amounts shown above, on the basis that all
other variables remain constant.
NOTE 22:
COMMITMENTS AND CONTINGENCIES
Contractual Commitments and contingencies
There are no material commitments or contingent liabilities not provided for in the financial statements
of the Company or the Group as at 31 December 2015.
NOTE 23:
RELATED PARTIES
KEY MANAGEMENT PERSONNEL COMPENSATION
The key management personnel compensation included in employee benefit expenses (see note 4) is
as follows:
Consolidated
2015
€
376,124
2014
€
376,000
-
-
-
-
9,761
9,742
-
-
385,885
385,742
Short-term employee benefits
Termination benefits
Other long term benefits
Post-employment benefits
Share-based payments
70 | A n n u a l R e p o r t 2 0 1 5
Notes to the Financial Statements (Continued)
NOTE 24:
PARENT ENTITY DISCLOSURES
Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Accumulated losses
Total equity
Financial Performance
Loss
Other comprehensive loss
Total Comprehensive loss
2015
€
201
€
935,382
1,232,577
15,592,225
21,504,730
16,527,607
22,737,307
2,716,575
3,141,355
-
-
2,716,575
3,141,355
13,811,032
19,595,952
46,692,830
45,819,924
(32,881,798)
(26,223,972)
13,811,032
19,595,952
(6,657,826)
(11,170,626)
-
-
(6,657,826)
(11,170,626)
NOTE 25:
INTERESTS IN OTHER ENTITIES
Subsidiaries
The parent and ultimate controlling party of the Group is Po Valley Energy Limited. The investments held in
controlled entities are included in the financial statements of the parent at cost less any impairment loss. Set out
below is a list of the significant subsidiaries of the Group:
Name:
Country of
Incorporation
Class of
Shares
2015
Investment
€
2014
Investment
€
Northsun Italia S.p.A (“NSI”)
Po Valley Operations Pty
Limited (“PVO”)
Italy
Ordinary
14,961,169
21,083,268
Australia
Ordinary
631,056
15,592,225
631,056
21,714,324
Holding
%
100
100
A n n u a l R e p o r t 2 0 1 5 | 71
Notes to the Financial Statements (Continued)
NOTE 26:
SUBSEQUENT EVENT
On 20 January 2016, the Company announced the restructure of its borrowing arrangements with
Nedbank Limited, its primary lender. In accordance with the agreed terms, the Company repaid €2.2
million on 19 January 2016 reducing the outstanding amount to €576,000. Under the revised
agreement, the Loan Facility will be changed from a reserve based loan to a standard loan with an
agreed repayment plan in the form of monthly instalments in order to extinguish the facility by 30
September 2016. The Company’s shares were temporarily halted from 14 January to 20 January 2016
whilst the new terms of the arrangement were under negotiation.
On 18 March 2016 the Board updated the market on its strategy to recapitalise and restructure the
Company with the aim to preserve maximum value for shareholders. This strategy includes an
unmarketable parcel sale facility that was announced and initiated on 10 March 2016 and will close on
27 April 2016. Another key step to restructure the Company was a pro rata renounceable rights issue
to raise approximately $1.75 million (Euro 1.1 million) which was also announced on 18 March 2016.
On 18 March 2016 the Company entered into a short term unsecured bridging loan facility pending
completion of the Sillaro rework which, as at the date of this report, is currently ongoing. The Facility
was provided by Beronia Investments Pty Ltd, an entity associated with Director Dr. Byron Pirola.
Under the facility the Company may draw down up to €300,000.
Other than matters already disclosed in this report, there were no other 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 Group, the results of those operations, or the state of affairs of the Group
72 | A n n u a l R e p o r t 2 0 1 5
DIRECTOR’S DECLARATION
1. In the opinion of the directors of PVE (“the Company”):
i)
the financial statements and notes, as set out on pages 22 to 72, and the remuneration
disclosures that are contained in the Remuneration report in the Directors’ report, are in
accordance with the Corporations Act 2001, including:
a.
b.
giving a true and fair view of the Group’s financial position as at 31 December 2015
and of its performance, for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
ii)
subject to the matters disclosed in Note 1.2(c), 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 required by 295A of the Corporations Act 2001 by
the acting chief executive officer and chief financial officer for the financial year ended 31
December 2054.
3. The Directors draw attention to Note 1.2 to the Financial Statements which include a statement of
compliance with International Financial Reporting Standards.
Dated at Sydney this 31 March 2016.
Signed in accordance with a resolution of the Directors:
Graham Bradley
Chairman
Kevin Eley
Non-Executive Director
A n n u a l R e p o r t 2 0 1 5 | 73
74 | A n n u a l R e p o r t 2 0 1 5
A n n u a l R e p o r t 2 0 1 5 | 75
Shareholders Information 2015-2016
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 the share
registry information processed up to 31 March 2016.
SHAREHOLDING
SUBSTANTIAL SHAREHOLDERS
The following table shows holdings of 5% or more of voting rights as disclosed in substantial holding
notices given to the Company
Name
Michael Masterman
Kevin Bailey
Hunter Hall Management Ltd and its
associates
Byron Pirola
DISTRIBUTION OF SHARES
Number of
Percentage of
Ordinary Shares Held
Capital Held %
33,656,222
26,296,077
15,603,136
7,112,782
24.01
18.76
11.13
5.07
Size of Holdings
Number of Holders
Number of Shares Percentage of Capital Held %
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - over
Unmarketable Parcels
176
170
94
236
94
770
449
48,517
503,537
755,861
7,717,111
131,131,894
140,156,920
1,402,776
0.03
0.36
0.54
5.51
93.56
100
1.00
On the 10th of March 2016 the Company implemented an unmarketable parcel sale facility for holders
of unmarketable parcels of the Company’s shares. The first notice of this facility was mailed on 10
March 2016. Retention notices are due on 27 April 2016 and unmarketable parcels that are not
retained will be sold on or around 6 May 2016.
VOTING RIGHTS OF SHARES AND OPTION
Refer to Note 19
ON-MARKET BUY-BACK
There is no current on-market buy back
76 | A n n u a l R e p o r t 2 0 1 5
Shareholders Information 2015-2016
TWENTY LARGEST SHAREHOLDERS
Name
1 Michael Masterman
2
J P Morgan Nominees Australia Limited
3 Mr Kevin Bailey And Mrs Grace Bailey
4
< Bailey Family A/C>
Kevin Bailey Corporation Pty Ltd
5 Mr Michael George Masterman
6
Joan Masterman
7 Mr Laurie Mark Macri
8 Greenvale Asia Limited
9
Symmall Pty Ltd
10 Beronia Investments Pty Ltd
11
P & N Dairies Pty Ltd
12 Beronia Fs Pty Ltd
13 Beronia Fs Pty Ltd
15
14 Mr John Fyfe & Mrs Evelyn Fyfe
Tucabia Holdings Pty Ltd
Tangar Boring & Excavations Pty Ltd
17 Mr Kevin Bailey & Mr Wayne Dowd
< Kevin Bailey Charity A/C>
18 Beronia Investments Pty Ltd
16
19 Mr Chris Carr & Mrs Betsy Carr
19 Mr Cary Wesley Christian
20 McIndoe Superannuation Fund Pty Ltd
Number of Ordinary
Share Held
Percentage of
Capital Held %
24,163,632
21,712,504
16,585,714
8,510,363
6,654,758
4,788,444
4,000,000
2,938,977
2,837,832
2,776,202
1,738,217
1,680,000
1,600,240
1,400,000
1,378,870
1,288,653
1,200,000
1,171,721
1,000,000
1,000,000
978,592
17.24
15.49
11.83
6.07
4.75
3.42
2.85
2.10
2.02
1.98
1.24
1.20
1.14
1.00
0.98
0.92
0.86
0.84
0.71
0.71
0.70
Please note that as the Company launched a pro-rata rights issue on 18 March 2016 which is due to
close on 20 April 2016 the issued share capital of the Company is expected to increase to
490,549,220 at that time.
109,404,719
78,06
A n n u a l R e p o r t 2 0 1 5 | 77
Technical Summary
In December 2013 the ASX introduced new reporting requirements for oil and gas activities through
amendments to Chapter 5 of the Listing Rules. The new reporting requirements include general
requirements applicable to the public reporting of petroleum resources and also require specific
information to be included in the oil and gas exploration entity’s Annual Report. The following
information is provided in order to comply with Chapter 5 of the Listing Rules:
1) TENEMENTS
The Company’s operations are located entirely in the north of Italy, in the Lombardy and Emilia
Romagna regions. As at 31 December 2015 the Company’s core portfolio includes a total of 12
onshore assets and 1 offshore license. Total acreage position of the Company is circa 2,000 km2. For
an illustration of each asset’s location please refer to the map and table below. As at 31 December
2015 all tenements are 100% owned with exception of the production concession Cascina Castello
which includes Bezzecca (90%) and, Cadelbosco (85%).
In October 2015 the Company announced the sale of its 75% interest in the fully awarded exploration
license La Prospera to its Joint Venture partner AleAnna Resources LLC (“AleAnna”). The license also
includes a preliminary production concession for the Gradizza gas discovery located within the
licence. AleAnna also acquired the Company’s share of the preliminarily awarded adjacent exploration
license Zanza. Consideration was Euro 1,850,000 with a further amount of Euro 200,000 to be paid if
the final production concession for Gradizza is received by August 2016. The sale was finalised in
December following formal approval by the Italian Ministry of Economic Development.
The Farmin Agreement for Cadelbosco was completed in June 2012 with Petrorep Italiana Spa for its
15% interest; Petrorep committed to a promoted share of future drilling expenditures and
reimbursement on past costs. In 2014, the Company successfully concluded another farm-in with
Petrorep Italiana Spa for a 10% interest in the Cascina Castello Bezzecca production concession.
Petrorep committed to a promoted share of future development expenditures.
78 | A n n u a l R e p o r t 2 0 1 5
Technical Summary
Tenement
Location
Interest held
for 2015*
I
N
O
S
S
E
C
N
O
C
.
D
O
R
P
Sillaro
(derived from Crocetta Expl. Licence)
Italy, Emilia Romagna,
Bologna
GRANTED
Cascina Castello
(derived from C.S. Pietro Expl. Licence)
Italy, Lombardia
Cremona
Cascina Castello extension
(derived from C.S. Pietro Expl. Licence)
Italy, Lombardia
Lodi
PREL.
AWARDED
Sant'Alberto
(derived from San Vincenzo Expl. Licence)
Italy, Emilia Romagna,
Bologna
I
S
T
M
R
E
P
N
O
T
A
R
O
L
P
X
E
I
GRANTED
PREL.
AWARDED
AR94PY
Cadelbosco di Sopra
Grattasasso
Podere Gallina
Opera
Crocetta
Tozzona
Italy, Adriatic Offshore
Italy, Emilia Romagna
Italy, Emilia Romagna
Italy, Emilia Romagna
Italy, Lombardia
Italy, Emilia Romagna
Italy, Emilia Romagna
La Risorta
Italy, Emilia Romagna &
Veneto
Torre del Moro
Italy, Emilia Romagna.
100%
100%
90%
100%
100%
85%
100%
100%
100%
100%
100%
100%
100%
*as at 31 December 2015
2) RESERVES & RESOURCES
The following table summarises the status of the Company’s Reserves & Resources as at 31
December 2015.
With the exception of Sillaro and Vitalba, these figures were independently evaluated by the geological
and petroleum reservoir consultancy UK firm Robertson CGG during 2013 and as regards Bezzecca
in 2014 and are based upon independent evaluations in accordance with SPE/WPC/AAPG/SPEE
Petroleum Resource Management System.
In regards to the Sillaro gas field, together with specialist advisors and the Company’s Technical
Director Greg Short, a comprehensive re-evaluation of the residual potential of this field was
completed in January 2015. The review was conducted in accordance with SPE
PRMS standards.
The results of this re-evaluation, including estimates of recoverable volumes as at 31 December 2014,
were provided in the ASX media release entitled “Sillaro Field Reserves Revision and Production
Forecast” dated 9 January 2015. Figures shown in the table on the next page are the revised reserve
estimates less production for the year.
‐
A n n u a l R e p o r t 2 0 1 5 | 79
Technical Summary
Licence
Project
Reserves
Contingent
Resources
Prospective
Resources
2P
3P
1C
Gas Bcf
2C
3C
Low
Best
High
4.4
5.2
0.5
1.5
1P
1.9
0.5
Sillaro
Vitalba
West Vitalba
Quaternary
West Vitalba
Pliocene
Sillaro
Cascina
Castello
Cascina
Castello ext
Bezzecca [Net]
2.7
3.8
5.2
1.4
1.6
2.2
3.1
2.4
3.2
7.9
15.9
25.0
1.2
2.1
10.2
29.1
5.3
4.1
3.3
4.7
14.6
20.5
34.8
40.6
9.5
7.0
15.6
10.8
10.6
16.6
24.7
7.0
8.8
11.3
13.8
18.3
24.4
3.3
5.0
7.3
29.0
47.0
73.0
UNDER REVIEW
UNDER REVIEW
Sant’Alberto
Santa Maddalena
1.8
2.1
2.8
AR94PY
Teodorico
PL3-C
Crocetta
Fantuzza
Zini (Qu-B) [Net]
Canolo (Qu-A)
Cadelbosco
[Net]
di Sopra
Canolo (Plioc)
[Net]
Zini(Qu-A) [Net]
34.6
47.3
62.2
0.4
0.9
4.3
2.3
6.9
3.9
0.6
0.9
1.4
0.3
3.1
8.9
Selva Strat. (Podere Maiar-1)
11.4
17.0
23.0
Podere
Gallina
La Prospera
Cembalina
Fondo Perino
East Selva
Pioppette [Net]
Capitello [Net]
Ariano
La Risorta
Corcrevà
D. delle Anime
Barona Lead
Opera Lead
Opera
T. del Moro
Tozzona
Licence
Project
Cadelbosco
Bagnolo in Piano
Grattasasso Ravizza
80 | A n n u a l R e p o r t 2 0 1 5
Contingent Resources
Oil, MMbbls
1C
3.7
2.2
2C
4.3
3C
5.1
5.7
10.7
Technical Summary
Qualified Petroleum Reserves and Resources Evaluator:
Statements in this Annual Report regarding estimates of petroleum Reserves and Contingent and
Prospective Resources and the Reserves statement for 2015 are based on and fairly represent
information and supporting documentation prepared under the supervision of Mr Gregory Short, a non-
executive director of Po Valley Energy Limited throughout 2015. Mr Short is a geologist with over 40
years of oil and gas industry experience and a member of AAPG. Mr Short has approved the
Reserves statement as a whole and has consented to: (a) the inclusion of the estimated petroleum
Reserves and Contingent and Prospective Resources and supporting information in this Annual
Report in the form and context in which they are presented; and (b) the inclusion of the Reserves
statement in this Annual Report in the form and context in which it appears. Mr Short resigned from
the Board in January 2016
RESERVES are those quantities of hydrocarbon anticipated to be commercially recoverable by
application of development projects to known accumulations from a given date forward under defined
conditions.
Proved Reserves are those quantities of hydrocarbon, which, by analysis of geoscience and
engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a
given date forward, from known reservoirs and under defined economic conditions, operating
methods, and government regulations (1P).
Probable Reserves are those additional reserves which analysis of geoscience and engineering data
indicate are less likely to be recovered than proved reserves but more certain to be recovered than
possible reserves. It is equally likely that actual remaining quantities recovered will be greater than or
less than the sum of the estimated Proved plus Probable Reserves (2P).
Possible Reserves are those additional reserves which analysis of geoscience and engineering data
suggest are less likely to be recoverable than probable reserves. The total quantities ultimately
recovered from the project have a low probability to exceed the sum of proved plus probable plus
possible (3P) Reserves, which is equivalent to the high estimate scenario.
CONTINGENT RESOURCES are those quantities of hydrocarbon estimated, as of a given date, to be
potentially recoverable from known accumulations, but the applied project(s) are not yet considered
mature enough for commercial development due to one or more contingencies.
PROSPECTIVE RESOURCES are those quantities of hydrocarbon that may potentially be recovered
by the application of a future development project(s) relate to undiscovered accumulations. These
estimates have both an associated risk of discovery and a risk of development. Further exploration
appraisal and evaluation is required to determine the existence of a significant quantity of potentially
moveable hydrocarbons.
For Contingent Resources, the general cumulative terms low/best/high estimates are denoted as
1C/2C/3C respectively. For Prospective Resources, the general cumulative terms low/best/high
estimates still apply. No specific terms are defined for incremental quantities within contingent and
Prospective Resources.
A n n u a l R e p o r t 2 0 1 5 | 81
Technical Summary
Company Reserves
Gas, Italy (bcf)
Developed
(Sillaro Pliocene + Vitalba)
Undeveloped
(Sillaro Miocene + Bezzecca [net]+
Sant’Alberto)
Total Reserves
Reserves as at
31 December 2015
Reserves as at
31 December 2014
1P
2.4
4.5
6.9
2P
3.5
7.4
1P
2.7
5.7
2P
3.8
10.0
10.9
8.4
13.8
The variation in developed Reserves (1P and 2P) reflects production from the fields (Sillaro 0.32 bcf
and Vitalba 0.03 bcf) achieved during 2015.
As announced to the market throughout 2015 and early 2016, the Company is in the process of a
relatively low cost rigless rework of its Sillaro field in order to access remaining gas from completed
and non-completed Pliocene levels. This rework is in its final stages and is expected to be complete
around the time this Annual Report will be published. Immediately thereafter, the Company intends to
incorporate the results of the various rigless interventions in a revised reservoir study which will
ultimately review the estimated recoverable volumes of this field. The results and any changes to
estimated volumes will be released to the market in due course. The timing for the sidetrack well on
Sillaro-1 to access the lower Miocene reservoir will depend to a large degree on the performance of
the field after the ongoing re-work is complete.
As regards Vitalba, the field increased its daily production during the year from 2,500 scm/day up to a
rate of 5,000 scm/day, until November 2015. After a slight decrease in 3Q 2015, the production
stopped in late November, due to gas specifications issues following an increase in the humidity
content (dew point) at the entry point to the national grid. Some investments on the gas treatment
plant would be required to allow the plant to effectively treat the gas and deliver according to SNAM
specifications. It is unlikely that this investment would be carried out until development of Bezzecca
commences.
The variation in the Company’s 1P and 2P undeveloped Reserves chiefly reflects the disposal of the
Company’s 75% interest in the exploration license La Prospera which included the gas discovery
Gradizza.
In regards to the future development of the undeveloped Reserves the Company states that Sillaro
Miocene, Bezzecca, and Sant’Alberto Reserves have been classified undeveloped under the SPE-
PRMS definition as they are expected to be recovered through future investments. The Company is
currently in the process of securing the funding to commence the installation of the infrastructure to
bring the Bezzecca gas field into production, including a 7km pipeline. As previously stated, 1P and 2P
Reserves for Bezzecca represented in the table are net of the 10% equity interest that was farmed out
to Petrorep Italiana Spa in 4Q 2014.
As regards the Sant’Alberto gas field, the Company has been informed that the Environmental Impact
Assessment (“EIA”) procedure is complete and the Company expects the EIA Decree, which is
essentially a final sign off from the Minister of Environment, to be issued in the near future. Once the
Ministry of Economic Development receives a copy of the EIA Decree then, upon verification that all
documentation has been filed, it is able to award the final Production Concession. The Company
intends to develop this field using a small modular gas treatment plant which will be installed at the
existing well site.
The reference point for gas flow from Vitalba & Sillaro is measured through a turbine, located on the
wells site, using non standard cubic metres. The figure is standardised using a Fiorentini Fiomec
Calculator (FFC) which is a conversion consisting of gas temperature and pressure with gas quality
82 | A n n u a l R e p o r t 2 0 1 5
Technical Summary
parameters. The outcome of this conversion is the actual gas volume in standard cubic meters
injected in the SNAM gridline. (SNAM is an Italian natural gas infrastructure company and manages
the national gas transportation network). The SNAM entry points for Sillaro & Vitalba are located 200
metres and 50 metres respectively from site perimeters. The FFC prints a production report which is
authenticated by the Ministry of Economic Development and this official data is then accepted by
SNAM, our customers and the Taxation Authority.
The Company does not have unconventional petroleum Resources in its portfolio. The Company does
not have any material concentration of undeveloped Reserves in Oil & Gas projects that remained
undeveloped for more than 5 years from the date they were initially reported.
In reference to the Reserves & Resources estimation process, the Company commits to a regular
independent audit in order to obtain a certified update of its Reserves & Resources portfolio. The
latest review took place in December 2014 for Bezzecca and a similar review is planned for Sillaro
once the rigless re-work is complete. For the remaining projects, the last review was carried out in
April 2013. As there were no material changes or developments in 2014, 2015 or to the date of this
report which could impact the Reserve and Resource estimates, an independent audit refresh was not
deemed necessary.
Company Contingent Resources
Contingent Resources as at
Contingent Resources as at
31 December 2015
31 December 2014
1C
48.2
5.9
2C
74.9
10.0
1C
48.2
5.9
2C
74.9
10.0
Gas (bcf)
Oil (MMbbls)
There was no variation in Contingent Gas Resources, both 1C and 2C, in 2015.
All figures have been determined using a probabilistic method except Sillaro, Vitalba, Bezzecca, Santa
Maddalena and Fantuzza, which were determined using a deterministic method.
A n n u a l R e p o r t 2 0 1 5 | 83
Po Valley Ener gy Limited
ABN 33 087 741 571
Registered Office
Suite 8, 7 The Esplanade
Mt Pleasant WA 6153
Australia
Tel: (08) 9278 2533