Annual
Report 2018
PO VALLEY ENERGY LIMITED
CONTENTS
CORPORATE DIRECTORY .............................................................................................................................................. 2
CHAIRMANS STATEMENT ............................................................................................................................................ 3
YEAR IN SUMMARY ...................................................................................................................................................... 5
DIRECTORS’ REPORT .................................................................................................................................................... 6
Remuneration Report ...................................................................................................................................... 11
AUDITOR’S INDEPENDENCE DECLARATION ............................................................................................................... 20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................................. 21
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .................................... 22
STATEMENT OF CHANGES IN EQUITY ........................................................................................................................ 23
CONSOLIDATED STATEMENT OF CASH FLOWS ......................................................................................................... 24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................................................................... 25
DIRECTORS’ DECLARATION ........................................................................................................................................ 59
INDEPENDENT AUDITOR’S REPORT ........................................................................................................................... 60
SHAREHOLDERS INFORMATION ................................................................................................................................. 64
TECHNICAL SUMMARY .............................................................................................................................................. 66
1
Directors
Company Secretary
Registered Office
Rome Office
Share Register
Auditor
Solicitors
Banks
PO VALLEY ENERGY LIMITED
CORPORATE DIRECTORY
Michael Masterman
Byron Pirola
Kevin Bailey
Chairman and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Kevin Hart
Suite 8, 7 The Esplanade, Mt. Pleasant WA 6153 Australia
Tel: +61 8 9316 9100
Via Francesco Crispi 90, 00143 Rome Italy
Tel: +39 06 42014968
Link Market Services Limited
Level 12, 250 St Georges Terrace, Perth WA 6000
Bentleys NSW Audit Pty Ltd
Level 14, 60 Margaret Street Sydney NSW 2000 Australia
Steinepreis Paganin
Level 4, The Read Buildings,16 Milligan Street, Perth WA 6000 Australia
Bankwest
108 St. Georges Terrace, Perth WA 6000, Australia
Stock Exchange Listing
Po Valley Energy Limited shares are listed on the Australian Securities
Exchange (ASX) under the code PVE
Website address
www.povalley.com
2
PO VALLEY ENERGY LIMITED
CHAIRMAN’S STATEMENT
Dear Shareholders,
Po Valley Energy has substantially advanced and upgraded its gas development and oil/gas condensate exploration
projects through 2018 and 2019. Advancing the Selva and Teodorico gas developments projects to production is
the priority and planning and approvals have advanced on both projects.
2018 kicked off with the successful production completion and testing of the Podere Maiar 1dir well in the former
Selva gas field. The well intersected two thick gas bearing levels and was tested successfully on both levels in
January 2018. Following completion, we finalized the detailed technical evaluation of the reservoir and production
development plan and submitted the Selva Malvezzi Production Concession application in May 2018. The
Production Concession was formally approved by the Italian Ministry Hydrocarbon Commission in January 2019 and
Environmental approval documentation was formally submitted to the Ministry in April 2019. The field is a
Joint Venture between Po Valley Energy (63%), United Oil and Gas Plc (20%) and Prospex Oil and Gas Plc (17%).
Our offshore Adriatic gas field, Teodorico, which was granted a preliminary Production Concession by the
Italian Ministry Hydrocarbon Commission in 2016, advanced substantially during the year. Maiden 2P reserves
of 37 bcf have been declared. Primary environmental approval was received and published by the Ministry in
February 2019 and additional approvals for water handling are underway. Once the main environmental
approvals are in place, we will move to full grant of the Production Concession and initiate design and
development and financing.
Advancing these two gas fields into production has a targeted incremental production increase of 111 and 28
million cubic meters per year respectively in their first year of production. Achieving this first gas for both these
fields remains the primary priority of the Company.
On the corporate front, in 2018 the Saffron Energy/Coro Energy spin off was completed. Coro Energy Plc
(formerly Saffron Energy Plc) agreed to purchase Sound Energy Italy for 187.9 million Saffron shares and
completed a GBP 14 million capital raising in March 2018. The company name was changed from Saffron
Energy to Coro Energy Plc (“Coro”). Following the completion of this transaction on 9 April 2018, Po Valley
Energy retained 100% of Po Valley Operations Pty Ltd which holds Teodorico (100%), Podere Gallina (Selva
Malvezzi) (63%), Torre del Moro (100%) and Ravizza/Bagnolo in Piano (100%) and held 100 million Coro shares
equal to 14% of the issued capital of Coro Energy Plc. Po Valley Energy distributed all of the 100 million shares it
held in Coro Energy to Po Valley shareholders on a pro-rata basis in May 2018.
Development and production from the Selva Malvezzi and Teodorico gas fields is the priority for Po Valley
Energy. Selva Malvezzi expects environmental approval this year and Teodorico full environmental review and
grant of the Production Concession. As we advance the approvals of each project, we will advance technical
design and financing work in parallel.
3
PO VALLEY ENERGY LIMITED
With the maiden Prospective Resources at Torre del Moro and Bagnolo SW at 106 million and 54.5 million barrels
recoverable best estimate respectively and the increase of the Contingent Resources in Ravizza and Bagnolo
in Piano to 45.6 million barrels (2C), we now have large onshore gas condensate and oil exploration assets to
advance over the next 18 months.
Our shareholders have been exceptionally well served by our dedicated and expert team in Italy lead by
Giorgio Bertuzzi, Daniele Marzorati, Gianluca De Rosa, and Pierpalo Poncia. Our team has been well supported by
the Company's dedicated Non Executive Directors Byron Pirola and Kevin Bailey. I want to thank them all for their
outstanding contribution to the Company during the last 18 months.
Michael Masterman
Chairman Po Valley Energy
4
PO VALLEY ENERGY LIMITED
YEAR IN SUMMARY
• Completion and testing of the Podere Maiar 1dir well in Selva field
• Upgrade of Reserves for Teodorico
•
Preliminary Production concession for Selva granted early 2019
• Upgrade of Reserves for Selva
• North Italian Oil Assets Cadelbosco di Sopra and Grattasasso retained
• Maiden Prospective Resources at Torre del Moro and Bagnolo SW
• Completion of the Coro Energy Plc (formerly Saffron Energy Plc) spin off with distribution of
shares to PVE shareholders
• Advanced regulatory approvals and planning to progress Selva and Teodorico to production
5
PO VALLEY ENERGY LIMITED
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 2018.
1. Directors
The Directors of the Company at any time during or since the end of the financial year are:
Michael Masterman — Chief Executive Officer and Chairman, BEcHons, Age 56
Director since 22 June 1999
Michael is a co-founder of PVE. Michael first took up the position of CEO of PVE in 2002 up to October 2010 when
he took up an executive position at Fortescue Metal Group until June 2014. 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
was appointed as Chairman of PVE on 22 April 2016 and took up the role of Chief Executive Officer on 1 November
2017.
Byron Pirola — Non-Executive Director, BSc, PhD, Age 58
Director since 10 May 2002
Byron is a co-founder of PVE and is based in Sydney. He is currently a Director and Managing 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 industries and geographies.
Kevin Bailey AM — Non-Executive Director, DipFP, Age 58
Director since 3 May 2016
Kevin was appointed as a director on 22 April 2016. He has been a shareholder of the Company since April 2008
and brings significant business acumen and experience to the Board. Mr. Bailey is a highly successful businessman
with a range of business interests, both local and overseas. He worked for 28 years as a Certified Financial Planner
and was a founding director of Shadforth Financial Group Limited. He was a member of the Prime Minister’s
Community Business Partnership and devotes considerable time to philanthropic interests. Mr. Bailey is currently
Chairman of Parousia Media Pty Ltd and has served as director of various entities including the Investment Advisory
Board of the Timor Leste Petroleum Fund, the $17bn Sovereign Wealth Fund of Timor Leste, Outward Looking
International Pty Ltd, Halftime Australia Pty Ltd, Alpha Australia, Empart Inc, and Dads4Kids Fatherhood
Foundation.
2. Company Secretary
Kevin Hart – Company Secretary, B.Comm, FCA
Appointed 17 April 2018
Kevin Hart is a Chartered Accountant and was appointed to the position of Company Secretary on 17 April 2018.
He has over 25 years’ experience in accounting and the management and administration of public listed entities in
the mining and exploration industry. He is currently a partner in an advisory firm, Endeavour Corporate, which
specialises in the provision of company secretarial and accounting services to ASX listed entities.
Zoe Levendel – Company Secretary, BInSt, JD and MIB
Resigned 17 April 2018
Zoe Levendel of Company Matters Pty Ltd was appointed to the position of Company Secretary on 3 July 2017 and
resigned on 17 April 2018. Zoe joined the Company Matters team from Suncorp Group Limited, where she spent
four years in the Legal and Secretariat team. Prior to Suncorp, Zoe was a Policy Advisory at AMA Queensland.
6
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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:
No. of board meetings held
No. of board meetings attended
Michael
Masterman
9
9
Byron Pirola
Kevin Bailey
9
8
9
9
The roles and responsibilities normally undertaken by the Audit and Risk Committee and the Remunerations and
Nominations Committee have been dealt with by the full board as part of its duly convened meetings rather than
through separate committees.
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.
5. Earnings per share
The basic and diluted loss per share for the Company from continuing operations was 0.33€ cents (2017: earnings
0.46€ cents).
The basic earning per share for the Company from discontinued operations was 0.78€ cents (2017: loss 0.64€
cents).
6. Operating and financial review
The net profit attributable to members of the Company of €2,573,908 is due to a net gain of €4,406,460 from
discontinued operations following the restructuring of the Group and the spin-off of Coro Energy Plc (formerly
Saffron Energy Plc). The loss for the year from continuing operations was €1,832,552 (2017: profit €2,692,544).
As approved by shareholders, the Company’s shareholding of 100m ordinary shares in Coro Energy Plc was
distributed to shareholders of the Company as a return of capital. Shareholders received 1 Coro share for every 5.9
shares held in PVE. The value of the total distribution was €4,410,847.
The Company completed a A$2.5 million convertible note issue in June 2018, and a private placement late in
December 2018 for A$1.2 million to fund ongoing Selva, Teodorico and Torre del Moro development. Tranche 1 of
the placement (18,476,191 ordinary shares raising A$776,000) was completed on 21 December 2018 and tranche
2 (10,095,237 ordinary shares) from related parties is subject to shareholder approval at the upcoming General
Meeting on 30 April 2019.
Selva Gas Field (63% PVE)
PVE was formerly granted the Selva Malvezzi preliminary production concession (80.68 km2) by the Italian Ministry,
for the development of the Selva Malvezzi gas field early in January 2019.
Selva is 63%-owned by Po Valley, with the remainder owned 20% by United Oil & Gas Plc and 17% by Prospex Oil &
Gas Plc. The field was a significant historic producer for Eni S.p.A, producing 2,380MMscm (84 Bcf) from 24 wells
between 1956 and 1984. The Selva field is less than one kilometer from the country’s national gas grid.
The Company is targeting final Selva production approvals by the first half of 2020 and to complete the well and
field connection pipework with first gas targeted by late in CY20.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Under the first phase of the development plan for Selva, PVE will install a fully automated gas plant at the existing
Selva/Podere Maiar-1dir well site and install a one-kilometre long pipeline to connect with the nearby Italian
national grid. Based on dynamic reservoir studies, the field development is designed to produce, in the first phase,
at a rate of up to 150,000 cubic metres (5.3mmscf/day) a day from successfully tested C1 and C2 production levels
in the Medium-Upper Pilocene sands of the Porto Garibaldi Formation.
In the second phase of the development (contingent on 3D seismic results), additional wells would be drilled: a
Selva gas field development well, the highly prospective Selva East, Selva South Flank, and Riccardina prospects, all
of which fall within the production concession application area.
In parallel, Po Valley has completed the environmental approval documentation.
Teodorico Offshore Gas field development (100% PVE)
The Teodorico gas field is located in shallow waters of the northern Adriatic Sea – the primary source of domestic
gas production for much of Italy – and in close proximity to exiting off-shore gas production facilities.
Teodorico has the largest gas in place of all of Po Valley’s gas fields, is at an advanced stage of assessment and is
ready for development. The Company received a preliminary award of the Teodorico Production Concession in
2018 and is advanced in securing environmental approval - the main step before full grant of the Production
Concession.
In the quarter to December 2018, Teodorico neared final approval, with key meetings with the Environmental
Approval officials completed. PVE’s target for environmental approval is for early 2019.
Torre del Moro Gas/Oil Condensate exploration (100% PVE)
Following the purchase of existing 2D seismic lines for Torre del Moro, geological and geophysical evaluations of
this large gas/oil condensate prospect have advanced. This work has advanced quantitative estimates of the size of
the prospective resource and target drilling location.
Cadelbosco di Sopra (85% PVE) and Grattasasso (100% PVE)
Po Valley retains the Grattasasso and Cadelbosco di Sopra licences in northern Italy following a major shareholder
of Delta Energy Limited blocking completion of the proposed Delta Energy acquisition transaction. Given the higher
oil price, upgraded potential of the two existing oil fields and the shallow gas development opportunities, Po Valley
will now focus its attention on realising significant value from these assets.
Strategy
PVE remains a northern Italy focused energy development and exploration company with a streamlined focus on
three large assets:
The onshore gas development at Selva
•
• Offshore Adriatic gas development at Teodorico; and
•
The large-scale gas/oil condensate exploration licence at Torre del Moro
The internal restructuring over 2017-2018 substantially streamlined the business and allowed the skilled technical
team to focus on these three large high-impact gas and oil assets. The focus and progress is continuing to yield
significant results.
8
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Financial performance
Net loss before impairment expense is reconciled to comprehensive loss (after impairment expense) for the period
as follows:
Comprehensive income reconciliation table (in Euro)
2018
2017
Net loss from continuing operations before impairment expense (unaudited)
(1,013,582)
(570,704)
Impairment of investment in associate
Exploration costs expensed
Net profit / (loss) from discontinued operations
(816,426)
(2,544)
-
(413)
4,406,460
(7,027,587)
Reversal of prior period impairment losses on resource property costs
-
3,263,661
Comprehensive income / (loss) for the year
2,573,908
(4,335,043)
Net loss from continuing operations before impairment expense, which is not reviewed or audited, is calculated to
show impact of impairment losses on the total comprehensive income for the year. The net profit / (loss) from
discontinued operations is a result of the restructuring of the Group and the spin-off of Coro Energy Plc (formerly
Saffron Energy Plc).
Financial position
The Company completed a A$2.5 million convertible note issue in June 2018, and a private placement late in
December 2018 for A$1.2 million to fund ongoing Selva, Teodorico and Torre del Moro development. Tranche 1 of
the private placement (18,476,191 ordinary shares raising A$776,000) was completed on 21 December 2018 and
tranche 2 (10,095,237 ordinary shares) from related parties is subject to shareholder approval at the upcoming
General Meeting on 30 April 2019.
Cash and cash equivalents for the Group at 31 December 2018 amounted to €515,604.
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 2018, PVE maintained its outstanding
occupational health safety and environmental track record with no incidents or near misses to report.
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
9
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Company’s website. The principal risks and uncertainties that could materially affect PVE future performance are
described below.
External risks
Exposure to gas
pricing
Changes to law,
regulations or
Government policy
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.
Uncertainty of timing
of regulatory
approvals
Delays in the regulatory process could hinder the Company’s ability to pursue
operational activities in a timely manner 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.
Operating risks
Exploration,
development and
production
Estimation of
reserves
Tenure security
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.
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.
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 involves 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
10
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Health, safety and
environmental
matters
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.
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 2018.
8. Significant events after the balance date
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.
Remuneration Policy
The Board is responsible for reviewing and recommending compensation arrangements for the Directors, the Chief
Executive Officer and the senior executive team. The Board 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.
11
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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
Production (scm’000)
2018
2017
2016
2015
2014
2013
2,799* 7,155
4,461
9,991 18,560 23,983
Average realised gas price (€ cents per cubic metre)
21*
19
21
25
27
28
Profit / (loss) attributable to owners of the Company (€'000s) 2,671
(1,087) (8,699)
(6,658) (1,262) (5,796)
Earnings / (loss) per share (€ cents per share)
0.47
(0.19)
(2.06)
(5.02)
(1.03)
(4.76)
Share Price at year end - AU$
0.038
0.041
0.025
0.026
0.10
0.12
* production and gas prices for 2018 relates to the period prior to restructuring of the Group and deconsolidation
of Coro Energy Plc (formally Saffron Energy Plc). PVE currently does not have any producing assets.
In establishing performance measures and benchmarks to ensure incentive plans are appropriately structured to
align corporate behaviour 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.
Senior Executives and Executive Directors
The remuneration of PVE senior executives is based on a combination of fixed salary, 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.
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.
12
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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:
Directors:
Michael Masterman, Chairman and Chief Executive Officer
• Commencement Date: 22 June 1999
• Fixed remuneration for the year ended 31 December 2018: €140,000 p.a.
• Benefit of €2,500 per month for accommodation
• No termination benefits
Byron Pirola, Non-Executive Director
• Commencement Date: 10 May 2002
• Fixed remuneration for the year ended 31 December 2018: €14,790 (A$24,000)
• No termination benefits
Kevin Bailey, Non-Executive Director
• Commencement Date: 3 May 2016
• Fixed remuneration for the year ended 31 December 2018: €14,790 (A$24,000)
• 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.
.
13
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive bonus awarded as remuneration are detailed below.
Directors and
executives
Cash
Bonus
€
2018
Share based
payment
Bonus
€
% vested
in year
Cash
Bonus
€
2017
Share
based
payment
Bonus
€
% vested
in year
S Edmonson(1)
19,230
-
-
-
57,090*
100%
(1)Sara Edmondson was Chief Executive officer of Po Valley Energy Ltd up to 31 October 2017 and then
appointed as Chief Executive Officer of Coro Energy Plc (formerly Saffron Energy Plc)(“Coro’’). The amounts in
the table above for 2018 represents remuneration up to the date that the Company completed the restructuring
of the Group and spin-off of Coro (refer note 7).
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 bonus awarded to Ms. Edmonson was
based on performance, 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 (2017: Nil). No options vested during 2018. (2017: 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 2018.
There were no options outstanding during 2018.
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 2018.
16 |
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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:
Held at
31 Dec 2017
Purchased
Share
based
payments
Options
Exercised
Held at
Sold / Other
31 Dec 2018
Directors
M Masterman (i)
156,692,994
B Pirola
K Bailey
Executives
S. Edmonson
59,494,135
132,728,169
348,915,298
2,966,406(ii)
2,966,406
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
156,692,994
59,494,135
132,728,169
-
348,915,298
-
-
2,966,406(ii)
2,966,406
(i)
(ii)
(i) Does not include shares held by family members which amount to 1,040,000 shares
(ii) Sara Edmondson was Chief Executive officer of Po Valley Energy Ltd up to 31 October 2017 and then appointed as Chief
Executive Officer of Coro Energy Plc (formerly Saffron Energy Plc)(“Coro’’). Shares in the table above were held at the time
of restructuring of the Group (refer note 7).
Held at
31 Dec 2016
Purchased
Share
based
payments
Options
Exercised
Held at
Sold / Other
31 Dec 2017
Directors
M Masterman (i)
147,602,085
9,090,909
B Pirola
K Bailey
Executives
S. Edmonson
56,818,518
2,675,617
117,230,533
15,497,636
321,651,136
27,264,162
1,148,224
1,818,182
1,148,224
1,818,182
-
-
-
-
-
-
-
-
-
-
-
-
-
156,692,994
59,494,135
132,728,169
-
348,915,298
-
-
2,966,406
2,966,406
Other transactions and balances with KMP and their related parties
During 2016 the Company restructured its financing facility by repaying the facility with Nedbank Limited and
obtained financing through a streamlined facility provided by existing and former Directors of the Company.
Refer to Note 24 for further details.
The amounts outstanding at 31 December 2018 are as follows:
17
Related Party
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Kevin Bailey
Fuiloro Pty Ltd
Fuiloro Pty Ltd
G. Bradley
Symmall Pty Ltd
Beronia Investments Pty Ltd
K & G Bailey as trustee for The
Bailey Family Trust
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Loan Amount
2018
A$236,181
A$459,696
A$395,000
A$237,305
A$6,191
A$240,000
A$94,927
A$90,000
A$100,000
A$100,000
Loan Amount
2017
A$236,181
A$227,238
-
A$237,305
A$6,191
-
A$94,927
-
-
-
Interest
Repayment Term
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
12 months
6 months
6 months
6 months
12 months
6 months
12 Months
6 months
6 months
6 months
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:
M Masterman
B Pirola
K Bailey
13. Share Options
Ordinary Shares
Convertible Notes
156,692,994
54,494,135
132,728,169
300,000
-
700,000
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.
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.
18
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
The Company has elected to publish its Statement of Corporate Governance Practices on its website
www.povalley.com. In addition, each year the Key to Disclosures - Corporate Governance Council Principles
and Recommendations will be available to shareholders at the same time this report is released.
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. Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Bentleys NSW Audit Pty
Ltd, as part of the terms of its audit engagement agreement against claims by third parties arising from the
audit (for an unspecified amount). No payment has been made to indemnify Bentleys NSW Audit Pty Ltd
during or since the financial year.
17. Non audit services
During the year Bentleys NSW Audit Pty Ltd, the Group’s auditor, did not provide non-audit services. Refer to
note 5 of the financial report for details of auditor’s remuneration.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor, is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
18. 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.
20. Lead Auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 20 and forms part of the Directors’ report for
the financial year ended 31 December 2018.
This report has been made in accordance with a resolution of Directors.
Michael Masterman
Chairman
Sydney, NSW Australia
29 March 2019
19
Po Valley Energy Limited
ABN: 33 087 741 571
Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 to the
Directors of Po Valley Energy Limited
As lead auditor for the audit of Po Valley Energy Limited for the year ended 31 December 2018, I declare that,
to the best of my knowledge and belief, there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001
in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
BENTLEYS NSW AUDIT PTY LTD
ROBERT EVETT
Director
Sydney
29 March 2019
20
Bentleys NSW Audit Pty LtdLevel 14, 60 Margaret StSydney NSW 2000AustraliaABN 49 141 611 896T +61 2 9220 0700F +61 2 9220 0777bentleys.com.au Auditors Advisors Accountants A member of Bentleys, a network of independent advisory and accounting firms located throughout Australia, New Zealandand China that trade as Bentleys. All members of the Bentleys Network are affiliated only, are separate legal entities and not inpartnership. Liability limited by a scheme approved under Professional Standards Legislation. A member of Allinial Global - anassociation of independent accounting and consulting firms.
PO VALLEY ENERGY LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
CONSOLIDATED
NOTES
2018
€
2017
€
10
11
14
12
13
15
16
17
16
18
19
19
515,604
499,780
1,015,384
-
27,455
744,040
9,602
7,704,644
8,485,741
390,114
2,292,724
2,682,838
252,034
100,031
2,598,509
2,158,869
9,341,801
14,451,244
9,501,125
17,134,082
1,122,845
2,756
1,201,258
2,326,859
4,739,681
58,270
526,892
5,324,843
-
1,531,250
4,802,873
-
1,531,250
4,802,873
3,858,109
10,127,716
45,531,416
1,192,269
(41,080,669)
-
49,462,268
1,192,269
(43,860,729)
212,558
5,643,016
7,006,366
9,501,125
17,134,082
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
Convertible notes
Total Non-Current Liabilities
Total Liabilities
Equity
Issued capital
Reserve
Accumulated losses
Minority interests
Total Equity
Total Equity and liabilities
The above statement of financial position should be read in conjunction with the accompanying notes to the financial statements.
21
PO VALLEY ENERGY LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
CONSOLIDATED
NOTES
2018
€
2017
€
Continuing Operations
Other income
Employee benefit expenses
Depreciation expense
Corporate overheads
Impairment losses
Exploration costs expensed
Profit / (loss) from operating activities
Finance income
Finance expenses
Net finance expenses
Loss before tax
Income tax (expense) / benefit
Loss for the year
Discontinued Operations
Profit / (loss) for the period from discontinued
operations
Profit / (loss) for the period
Other comprehensive income
3
4
6
6
8
7
161,563
(577,570)
(1,067)
(651,169)
(816,426)
(2,544)
(1,887,213)
286
(85,797)
(85,511)
(1,972,724)
140,172
(1,832,552)
330,471
(310,831)
(1,996)
(339,543)
3,263,661
(413)
2,941,349
97
(163,051)
(162,954)
2,778,395
(85,851)
2,692,544
4,406,460
(7,027,587)
2,573,908
(4,335,043)
-
-
Total comprehensive income / (loss) for the year
2,573,908
(4,335,043)
Profit / (loss) attributable to:
Members of the Company
Non-controlling interests
Profit / (loss) for the period
Total comprehensive loss attributable to:
Members of the Company
Non-controlling interests
2,780,060
(1,087,609)
(206,152)
(3,247,434)
2,573,908
(4,335,043)
2,780,060
(1,087,609)
(206,152)
(3,247,434)
Total comprehensive income / (loss) for the period
2,573,908
(4,335,043)
Basic and diluted earnings / (loss) per share (€)
from continuing operations
Basic and diluted earnings / (loss) per share (€)
from discontinued operations
9
9
(0.31)
0.78
0.46
(0.64)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
to the financial statements.
22
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PO VALLEY ENERGY LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Operating activities
Payments to suppliers and employees
Interest received
Interest paid
Net operating cash flows used in discontinued
operations
Net cash used in operating activities
Investing activities
Payments for non-current assets
Receipts for resource property costs from joint
operations partners
Payments for resource property costs
Net investing cash flows used in discontinued
operations
Net cash flows used in investing activities
Financing activities
Proceeds from the issues of shares
Payment of share issue costs
Proceeds from convertible notes
Proceeds from borrowings
Net financing cash flows provided by discontinued
operations
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
18
17
NOTES
CONSOLIDATED
2018
€
2017
€
(1,281,537)
286
(13,470)
(494,187)
97
(28,055)
10
(164,730)
(1,459,451)
(1,885,848)
(2,407,993)
-
1,742,693
(2,748,836)
1,135,225
(1,431,397)
(927,652)
(1,933,795)
(612,521)
(908,693)
483,009
(3,015)
1,580,038
731,719
726,985
3,518,736
125,490
390,114
444,377
(2,534)
-
341,939
2,756,559
3,540,341
223,655
166,459
Cash and cash equivalents at 31 December
10
515,604
390,114
The above statement of cash flows should be read in conjunction with the accompanying notes to the financial statements.
24
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 2018
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 29 March 2019.
The Group primarily is involved in the exploration, appraisal and development of gas properties in the
Po Valley region in Italy and is a for profit entity.
1.2
BASIS OF PREPARATION
(a)
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 the going concern basis, which contemplates the continuity
of normal business activity and the realisation of assets and the settlement of liabilities in the normal
course of business.
For the year ended 31 December 2018, the Group has recorded a loss after tax from continuing
operations of €1,832,552; it has a cash balance of €515,604 net current liabilities of €1,311,475 and
had net cash outflows from continuing operations of €1,294,722.
The Directors are currently reviewing a range of financing options which may include the further issue
of new equity, convertible debt, sale of operating or non-operating interests in assets or a combination
of these and other funding instruments and options. The Directors have reviewed the Group’s
cashflow requirements for the 15 months ended 31 March 2020 and are of the opinion that sufficient
funds will be available in order to meet its ongoing obligations.
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.
25
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
(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 or
CGU 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 post-tax discount rate used for impairment purposes is 10%.
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.
26
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 recognised 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 recognised 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.
1.3
SIGNIFICANT ACCOUNTING POLICIES
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.
New and amended standards adopted by the group
AASB9 Financial Instruments and AASB15 Revenue from Contracts with Customers became applicable
to the current reporting period. The adoption of these standards did not require any restatement of
prior year comparatives as the application of these standards did not have a material impact on the
financial report.
(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.
27
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
(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.
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.
(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,
28
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
(c)
IMPAIRMENT
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 (12.7%) 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 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.
(d)
PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement
(i)
Items of property, plant and equipment are recorded at cost less accumulated depreciation,
accumulated impairment losses and pre-commissioning revenue and expenses.
29
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
Subsequent expenditure
(ii)
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.
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.
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
2018
3 – 5 years
2017
3 – 5 years
The residual value, the useful life and the depreciation method applied to an asset are reviewed at
each reporting date.
30
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
(e)
FINANCIAL INSTRUMENTS
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Group becomes a party to the
contractual provisions to the instrument. For financial assets, this is the date that the Group commits
itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).
Except for those trade receivables that do not contain a significant financing component and are
measured at the transaction price in accordance with AASB 15, all financial assets are initially
measured at fair value adjusted for transaction costs (where applicable), except where the instrument
is classified "at fair value through profit or loss", in which case transaction costs are expensed to profit
or loss immediately. Where available, quoted prices in an active market are used to determine fair
value. In other circumstances, valuation techniques are adopted. Trade receivables are initially
measured at the transaction price if the trade receivables do not contain a significant financing
component or if the practical expedient was applied as specified in AASB 15.63.
Classification and subsequent measurement of financial assets
Financial assets are subsequently measured at:
• amortised cost;
•
•
fair value through other comprehensive income; or
fair value through profit or loss.
Measurement is on the basis of two primary criteria:
•
•
the contractual cash flow characteristics of the financial asset; and
the business model for managing the financial assets.
A financial asset that meets the following conditions is subsequently measured at amortised cost:
•
•
the financial asset is managed solely to collect contractual cash flows; and
the contractual terms within the financial asset give rise to cash flows that are solely payments
of principal and interest on the principal amount outstanding on specified dates.
A financial asset that meets the following conditions is subsequently measured at fair value through
other comprehensive income:
•
•
the contractual terms within the financial asset give rise to cash flows that are solely payments
of principal and interest on the principal amount outstanding on specified dates;
the business model for managing the financial assets comprises both contractual cash flows
collection and the selling of the financial asset.
By default, all other financial assets that do not meet the measurement conditions of amortised cost
and fair value through other comprehensive income are subsequently measured at fair value through
profit or loss.
Classification and subsequent measurement of financial liabilities
Financial liabilities are subsequently measured at:
• amortised cost; or
•
fair value through profit or loss.
A financial liability is measured at fair value through profit and loss if the financial liability is:
• a contingent consideration of an acquirer in a business combination to which AASB 3:
Business Combinations applies;
• held for trading; or
•
initially designated as at fair value through profit or loss.
31
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
All other financial liabilities are subsequently measured at amortised cost using the effective interest
method.
The effective interest method is a method of calculating the amortised cost of a debt instrument and
of allocating interest expense in profit or loss over the relevant period. The effective interest rate is
the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts
the estimated future cash flows through the expected life of the instrument to the net carrying amount
at initial recognition.
Derecognition
Derecognition refers to the removal of a previously recognised financial asset or financial liability from
the statement of financial position.
Derecognition of financial liabilities
A liability is derecognised when it is extinguished (i.e. when the obligation in the contract is discharged,
cancelled or expires). An exchange of an existing financial liability for a new one with substantially
modified terms, or a substantial modification to the terms of a financial liability is treated as an
extinguishment of the existing liability and recognition of a new financial liability.
The difference between the carrying amount of the financial liability derecognised and the
consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss.
Derecognition of financial assets
A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the
asset is transferred in such a way that all the risks and rewards of ownership are substantially
transferred.
Compound financial instruments
Compound instruments (convertible notes) issued by the Group are classified as either financial
liabilities or equity in accordance with the substance of the arrangements. An option that is
convertible and that will be settled by the exchange of a fixed amount of cash or another financial
asset for a fixed number of the Group’s own equity instruments will be classified as equity.
The fair value of the liability component is estimated on date of issue. This is done by using the
prevailing market interest rate of the same kind of instrument. This amount is recognised using the
effective interest method as a liability at amortised cost until conversion or the end of life of the
instrument. The equity portion is calculated by deducting the liability amount from the fair value of
the instrument as a whole. The equity portion is not remeasured after initial recognition. Equity will
remain as such until the option is exercised. When the option is exercised a corresponding amount
will be transferred to share capital. If the option lapses without the option being exercised the balance
in equity will be recognised in profit or loss.
Costs of the transaction of the issue of convertible instruments are proportionally allocated to the
equity and liability. Transaction costs in regards to the liability are included in the carrying amount of
the liability and are amortised over its life using the effective interest method. Transaction cost in
equity is directly recognised in equity.
32
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Impairment
The Group recognises a loss allowance for expected credit losses on financial assets that are measured
at amortised cost or fair value through other comprehensive income.
Expected credit losses are the probability-weighted estimate of credit losses over the expected life of
a financial instrument. A credit loss is the difference between all contractual cash flows that are due
and all cash flows expected to be received, all discounted at the original effective interest rate of the
financial instrument.
The Group uses the following approaches to impairment, as applicable under AASB 9: Financial
Instruments:
• the general approach
• the simplified approach
• the purchased or originated credit impaired approach; and
•
low credit risk operational simplification.
Recognition of expected credit losses in financial statements
At each reporting date, the Group recognises the movement in the loss allowance as an impairment
gain or loss in the statement of profit or loss and other comprehensive income.
The carrying amount of financial assets measured at amortised cost includes the loss allowance
relating to that asset.
Assets measured at fair value through other comprehensive income are recognised at fair value, with
changes in fair value recognised in other comprehensive income. Amounts in relation to change in
credit risk are transferred from other comprehensive income to profit or loss at every reporting
period.
For financial assets that are unrecognised (e.g. loan commitments yet to be drawn, financial
guarantees), a provision for loss allowance is created in the statement of financial position to
recognise the loss allowance.
(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 related to drilling 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.
33
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
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)).
(h)
PROVISIONS
34
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 unwinding of the discount rate are accounted for in
the statement of profit or loss 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.
(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.
35
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
(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.
(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.
36
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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
Revenue is measured at the 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 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.
37
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
(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 recognised in profit or loss on a straight line basis
over the term of the lease.
38
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PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
Cash and short-term deposits are made with institutions that have a credit rating of at least A1 from Standard
& Poor’s 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.
40
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
(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:
EMPLOYEE BENEFIT EXPENSES
Wages and salaries
Contributions to defined contribution plans
NOTE 4:
CORPORATE OVERHEADS
Corporate overheads comprises:
Company administration and compliance
Professional fees
Office costs
Travel and entertainment
Other expenses
NOTE 5:
AUDITORS’ REMUNERATION
Auditors of the Company: Bentleys NSW Audit Pty Ltd
Audit and review of the Group financial statements
For corporate tax services
Auditors of the Subsidiary entity: EY S.p.A
Audit and review of the subsidiary financial statements
For corporate tax services
For other services
CONSOLIDATED
2018
€
2017
€
502,368
75,202
577,570
257,650
53,181
310,831
101,522
357,611
105,588
66,697
19,751
651,169
54,078
207,677
15,929
49,240
12,619
339,543
26,581
-
26,581
8,000
15,600
16,800
40,400
22,638
10,718
33,356
3,150
-
-
3,150
41
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 6:
FINANCE INCOME AND EXPENSE
Recognised in profit and loss:
Interest income
Finance income
Interest expense
Foreign exchange (gains) / losses (net)
Finance expense
Net finance expense
NOTE 7: DISCONTINUED OPERATIONS
CONSOLIDATED
2018
€
2017
€
286
286
97
97
169,200
(83,403)
85,797
115,105
47,946
163,051
(85,511)
(162,954)
During the period, PVE completed the restructuring and spin-off of its subsidiary Saffron Energy Plc, now Coro
Energy Plc (“Coro”). On 9 April 2018, Coro acquired Sound Energy Italy and completed a GBP14 million capital
raise, thereby diluting the Company’s 100m shareholding in Coro to 13.92%, and with no members on the
Board of Coro, this has resulted in deconsolidation of Coro from the Group results. An effective date for
accounting purposes of 31 March 2018 has been used for the deconsolidation given the level of operating
transactions between this date and 9 April 2018 were immaterial.
Net assets of discontinued operation at the date of loss of
control
The carrying amount of assets and liabilities as at the date of deconsolidation were:
2018
€
2017
€
Cash and cash equivalents
Trade and other receivables
Inventory
Other non-current assets
Deferred tax assets
Property plant and equipment
Resource property costs
Trade and other payables
Provisions – current
Provisions – non-current
Net assets of discontinued operation
496,589
1,696,458
252,034
79,685
1,994,913
2,097,515
2,404,528
365,397
663,560
252,034
72,453
1,994,913
2,148,200
2,271,285
(3,100,666)
(2,100,238)
(37,510)
(37,510)
(4,827,080)
(4,802,874)
1,056,466
827,220
42
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 7: DISCONTINUED OPERATIONS (continued)
CONSOLIDATED
Financial performance from discontinued operation
The financial performance presented for the 3 months ended 31 March 2018 was as
follows:
2018
€
2017
€
Revenue
Operating expenses
Depreciation and amortisation expense
Gross profit
Other income
Administrative and corporate expenses
Net finance costs
Impairment losses
Loss from discontinued operations
Gain on deconsolidation of discontinued operations
Profit / (loss) from discontinued operations before tax
Income tax expense
Profit / (loss) from discontinued operations
Profit / (loss) attributable to members of the Company
Profit / (loss) attributable to Non-controlling interests
Net profit from discontinued operations
Cash flows from discontinued operation
The net cash flows from discontinued operations were as
follows:
Net cash used in operations
Net cash used in investing activities
Net cash and cash equivalents disposed of
Net cash provided by financing activities
584,676
1,389,196
(207,589)
(1,116,958)
(55,784)
321,303
3,927
(256,470)
15,768
35,999
(664,230)
(1,982,638)
(73,303)
(253,049)
-
(4,843,667)
(412,303)
4,818,763
(7,027,587)
-
4,406,460
(7,027,587)
-
-
4,406,460
(7,027,587)
4,612,612
(3,780,153)
(206,152)
(3,247,434)
4,406,460
(7,027,587)
2018
€
2017
€
(164,730)
(431,063)
(496,589)
726,985
(1,885,848)
(612,521)
-
2,756,559
(365,397)
258,190
The Company obtained shareholder approval to distribute the 100m shares it held in Coro to shareholders as
a return of capital. Shareholders received 1 Coro share for every 5.9 shares held in PVE. The fair value of the
distribution was determined as the closing market price of the Coro shares on the record date for distribution.
The Coro share price on that date was €0.0441 (GBP0.03875) per share. The total value of the distribution to
shareholders was €4,410,847. The decrease in value of shares held at the record date for distribution has been
recognised as an impairment of €816,426 in the statement of profit and loss and other comprehensive income.
43
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
INCOME TAX (BENEFIT) / EXPENSE
NOTE 8:
Current tax
Current year
Deferred tax
Origination and reversal of temporary differences
Deferred tax (benefit) / expense
Total income tax (benefit) / expense
CONSOLIDATED
2018
€
2017
€
-
-
(140,172)
(140,172)
(140,172)
85,851
85,851
85,851
Numerical reconciliation between tax expense and pre-tax accounting profit / (loss)
Profit / (loss) for the year before tax from continuing operations
(1,972,724)
2,778,395
Income tax (benefit) / expense using the Company’s domestic tax rate of
27.5 per cent (2017: 27.5%)
(542,500)
764,059
Non-deductible expenses:
Fair value 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
Income tax (benefit) / expense
NOTE 9:
EARNINGS PER SHARE
-
14,928
24,015
(1,151,684)
(34,231)
7,034
339,899
23,486
362,611
3,983
(140,172)
85,851
Basic and diluted earnings / (loss) per share (€ cents) from continuing
operations
Basic and diluted earnings / (loss) per share (€ cents) from discontinued
operations
(0.31)
0.78
0.46
(0.64)
The calculation of basic and diluted loss per share from continuing operations was based on the loss
attributable to shareholders of €1,832,552 (2017: Profit €2,692,544 and a weighted average number of
ordinary shares outstanding during the year of 593,766,325 (2017: 587,519,266).
The calculation of basic and diluted earnings per share from discontinued operations was based on the profit
attributable to members of €4,612,612(2017: Loss €3,780,153) and a weighted average number of ordinary
shares outstanding during the half year of 593,766,325 (2017: 587,519,266).
Diluted earnings / (loss) per share is the same as basic earnings / (loss) per share.
44
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 9:
EARNINGS PER SHARE (continued)
The number of weighted average shares is calculated
as follows:
Number of shares on issue at beginning of the year
18,476,190 shares issued on 21 December 2018
No. of days
365
10
CONSOLIDATED
2018
Weighted
average no.
593,260,128
506,197
2017
Weighted
average no.
550,378,091
14,526,966 shares issued on 5 April 2017
28,355,071 shares issued on 7 June 2017
271
208
-
-
593,766,325
11,998,448
25,142,727
587,519,266
2018
€
2017
€
NOTE 10: CASH AND CASH EQUIVALENTS
(a) Cash and cash equivalents
515,604
390,114
Reconciliation of cash flows from operating activities
(b)
Profit / (loss) for the year
Adjustment for non-cash items:
Depreciation and amortisation
Impairments
Profit from discontinued operations
Change in operating assets and liabilities:
Decrease in receivables
Decrease in trade and other payables
(Decrease)/Increase in provisions
(Increase)/Decrease in deferred tax assets
Cash flows used in discontinued operations
Net cash inflow from operating activities
TRADE AND OTHER RECEIVABLES
NOTE 11:
Current
Trade receivables
Accrued gas sales revenue
Sundry debtors
Deposit
Indirect taxes receivable
2,573,908
(4,355,043)
1,067
816,426
(4,406,460)
1,996
(3,263,661)
7,027,587
(100,758)
(20,728)
(18,004)
(140,172)
(115,191)
179,727
2,440
(164,730)
(1,459,451)
(1,885,848)
(2,407,993)
205,605
-
4,443
-
289,732
1,243,696
158,507
70,697
7
819,817
499,780
2,292,724
The Group’s exposure to credit and currency risks and impairment losses related to trade and other
receivables are disclosed in Note 21.
45
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 12:
PROPERTY PLANT & EQUIPMENT
Office Furniture & Equipment:
At cost
Accumulated depreciation
Gas producing plant and equipment
At cost
Accumulated depreciation and impairment losses
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
Depreciation expense of assets in discontinued operations (refer note 7)
Assets relating to discontinued operations (refer note 7)
Carrying amount at end of year
Gas Producing plant and equipment:
Carrying amount at beginning of period
Additions / Reclassification
Depreciation expense discontinued operations
Impairment losses
Assets relating to discontinued operations (refer note 7)
Carrying amount at end of period
NOTE 13:
RESOURCE PROPERTY COSTS
Resource Property costs
Exploration Phase
Production Phase
CONSOLIDATED
2018
€
2017
€
24,576
(14,974)
9,602
221,843
(203,585)
18,258
-
-
-
8,509,086
(6,368,475)
2,140,611
9,602
2,158,869
18,258
-
(1,067)
(1,057)
(6,532)
9,602
21,941
4,325
(1,996)
(6,012)
-
18,258
2,140,611
-
(49,628)
-
(2,090,983)
2,325,663
5,889
(119,998)
(70,943)
-
-
2,140,611
9,602
2,158,869
7, 704,644
9,182,411
-
159,390
7,704,644
9,341,801
46
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 13:
RESOURCE PROPERTY COSTS (continued)
CONSOLIDATED
Reconciliation of carrying amount of resource properties
Exploration Phase
Carrying amount at beginning of period
Exploration expenditure
Change in estimate of rehabilitation assets
Transfer to production phase
Adjustment resulting from reorganisation
Impairment losses
Reversal of prior impairment losses
2018
€
2017
€
9,182,411
8,383,017
636,128
1,466,203
-
-
-
-
-
(131,699)
(2,524,310)
(506,547)
(767,914)
3,263,661
Assets relating to discontinued operations (refer note 7)
(2,113,895)
-
Carrying amount at end of period
7,704,644
9,182,411
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. Where exploration permits have expired or not renewed, the costs
previously capitalised are expensed to the statement of profit and loss.
The Group reviewed the carrying value of its assets and cash generating units using a Value in Use CGU
valuation, in particular a valuation on Selva and Teodorico projects was calculated to determine the
recoverable amount of each of these fields.
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). In calculating VIU, the estimated future cash flows are discounted to their present value using
an after-tax discount rate (10%) that reflects current market assessments of the time value of money and the
risks specific to the assets.
The Company bases its 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. Furthermore, independent valuations were performed for the purposes
of estimating the reserves of these projects by CGG Services (UK) Limited.
The recoverable amount determined by the CGG report of Selva and Teodorico was €17.3 million and €17.9
million respectively. The recoverable amount determined by the Groups internal valuation was higher than
these amounts.
The carrying value of these assets is significantly lower at €3.9 million and €2.9 million respectively. As a result
of this assessment, with the recoverable amount exceeding the carrying value of these assets, no impairment
has been required.
47
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 13:
RESOURCE PROPERTY COSTS (continued)
Production Phase
Carrying amount at beginning of period
Additions
Transfer from exploration phase
Change in estimate of rehabilitation assets
CONSOLIDATED
2018
€
2017
€
159,390
599,173
137,400
782,529
-
-
2,524,310
(86,106)
Amortisation of producing assets in discontinued operations
(6,157)
(136,472)
Impairment losses
-
(3,524,044)
Assets relating to discontinued operations (refer note 7)
(290,633)
Carrying amount at end of period
-
159,390
The Group currently does not have any production assets
NOTE 14:
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
658,474
1,970,177
85,566
628,332
744,040
2,598,509
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.
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
1,324,781
3,830,154
1,840,089
1,840,721
3,164,870
5,670,875
Deferred tax benefit will only be obtained if:
(i)
the relevant company derives future assessable income of a nature and of an amount sufficient to
enable the benefit from the deductions for the losses to be realised;
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.
(ii)
(iii)
48
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 14:
DEFERRED TAX ASSETS AND LIABILITIES (continued)
Movement in recognised temporary differences during the year
Balance 1
January
2017
€
Profit and
loss
€
Equity
€
Balance 31
December
2017
€
Discontinued
operations
(refer note 7)
€
Profit and
loss
€
Equity
€
1,888,687
81,490
795,679
(167,341)
2,684,366
(85,851)
-
-
-
1,970,177
(1,446,919)
135,216
628,332
(547,994)
5,228
2,598,509
(1,994,913)
140,444
-
-
-
Balance 31
December
2018
€
658,474
85,566
744,040
Consolidated
Tax losses
Accrued expenses
and liabilities
Total recognised
deferred tax asset
NOTE 15:
TRADE AND OTHER PAYABLES
Trade payables and accruals
Other payables
CONSOLIDATED
2018
€
2017
€
1,112,384
4,555,543
10,461
184,138
1,122,845
4,739,681
The Group’s exposure to currency and liquidity risks related to trade and other payables are
disclosed in note 21.
PROVISIONS
NOTE 16:
Current:
Employee leave entitlements
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 in discontinued
operations
Provisions relating to discontinued operations (refer note 7)
Closing balance
2,756
58,270
-
4,802,873
4,802,873
4,961,907
(217,805)
24,207
(4,827,080)
58,771
-
-
4,802,873
49
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 17:
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
Loans
CONSOLIDATED
2018
€
2017
€
1,201,258
1,201,258
526,892
526,892
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
31 December 2018
31 December 2017
Currency
Nominal
Interest
rate
Year of
Maturity
Face Value
€
Carrying
Amount
€
Face Value
€
Carrying
Amount
€
Current liabilities
10%
AUD
Unsecured loans
2019
526,892
The Group obtained financing through a streamlined facility provided by existing and former Directors of the
Company and longstanding shareholders. The facility arrangement has a term of 12 months and an interest
rate of 10%. (refer note 23 for details of related party balances)
The Group’s exposure to currency, interest and liquidity risk related to interest bearing loans are disclosed in
note 21.
1,201,258
1,201,258
526,892
NOTE 18: CONVERTIBLE NOTES
During the period, the Company issued convertible notes equivalent to A$2,500,000 (€1,531,250).
The convertible notes are convertible into fully paid ordinary shares of the Company at a conversion price of
A$0.042 per share. The notes are to be converted or otherwise redeemed within three years of issue
(repayment date) and interest shall be payable in cash on the principal amount at a rate of 8% per annum,
calculated monthly and payable 6 monthly in arrears. Subject to shareholder approval, if required, the
noteholder may before the maturity date convert the convertible note into shares by providing the Company
with written notice of the conversion.
The Company has the right to elect to redeem any unconverted convertible notes by giving 30-day notice to
the noteholder.
Redemption of the notes occurs on:
a) The repayment date;
b) Within 10 business days on the occurrence of an event of default which has not been remedied within
the prescribed period; or
c) On a change in control of the Company (including a takeover) or the sale of the Company’s main
undertaking unless the noteholder elects to convert the Convertible Notes into shares.
The redemption amount is the outstanding facility amount with respect to each note plus any unpaid interest.
50
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 19:
CAPITAL AND RESERVES
Share Capital
Opening balance - 1 January
Shares issued during the year:
Placement issue of 21 December 2018
Return of capital
Placement issue on 5 April 2017
Settlement of short terms loans by issue of
shares on 5 April 2017
Placement issue on 7 June 2017
Settlement of short-term loans by issue of
shares on 7 June 2017
Share issue costs
Ordinary Shares
2018
Number
2017
Number
2018
€
2017
€
593,260,128
550,378,091
49,462,268
48,659,337
18,476,190
-
-
-
-
9,818,182
483,009
(4,410,847)
-
-
-
192,471
90,528
251,906
270,560
4,708,784
13,818,181
14,536,890
-
-
-
-
-
-
-
-
(3,014)
(2,534)
Closing balance – 31 December
611,736,318
593,260,128
45,531,416
49,462,268
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.
Following shareholder approval, the Company distributed 100m shares held in Coro Energy Plc to its
shareholders as a final completion of the restructuring and spin off of Coro Energy Plc.
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 (2017: Nil).
51
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C
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 20:
FINANCIAL REPORTING BY SEGMENTS (continued)
Reconciliation of reportable segment profit or loss, assets and
liabilities
Profit or loss:
2018
€
2017
€
Total profit / (loss) for reportable segments
3,741,613
(1,568,432)
Unallocated amounts:
Net finance expense
Other corporate expenses
Consolidated profit / (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
NOTE 21:
FINANCIAL INSTRUMENTS
(85,511)
(416,003)
(1,222,366)
(2,264,757)
2,433,736
(4,249,192)
7,856,510
13,116,976
1,644,615
4,017,106
9,501,125
17,134,082
(527,663)
(8,458,439)
(3,330,446)
(1,669,277)
(3,858,109)
(10,127,716)
(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
Fixed rate instruments
Financial assets
Financial liabilities
CONSOLIDATED
2018
€
515,604
-
515,604
-
(2,732,508)
(2,732,508)
2017
€
390,114
-
390,114
-
(526,892)
(526,892)
53
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 2017.
Effect in €’s
31 December
Variable rate instruments
Profit or loss
Equity
2018
2017
2018
2017
2,578
1,951
-
-
(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 receivables. Receivables from joint
operations partners fall under the Joint Operations Agreement for the development of the Selva
project. Other receivables from Government agencies have limited credit risk as these are either
offset against other indirect taxes or payroll taxes payable first with any remainder receivable
within a 12-month 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
11
CONSOLIDATED
Carrying Amount
2018
€
515,604
499,780
27,455
1,042,389
2017
€
390,114
2,292,724
100,031
2,782,869
54
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 21:
FINANCIAL INSTRUMENTS (continued)
(c)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest
payments:
-
-
-
-
Consolidated
31 December 2018
In €
Trade and other
payables
Interest bearing
loans
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
1 – 2 Years
2 – 5 Years
(1,040,040)
(1,040,040)
(1,040,040)
-
(1,201,258)
(1,356,638)
-
(1,356,638)
-
-
Convertible notes
(1,531,250)
(1,882,770)
(106,520)
(61,250)
(1,715,000)
(3,772,548)
(4,279,448)
(1,146,560)
(1,417,888)
(1,715,000)
Consolidated
31 December 2017
In €
Trade and other
payables
Interest bearing
loans
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
1 – 2 Years
2 – 5 Years
(4,739,681)
(4,739,681)
(4,739,681)
(526,892)
(5,132,643)
(602,083)
(5,341,764)
(602,083)
(5,341,764)
-
-
-
-
-
-
-
-
-
(d)
(e)
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.
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 currencies giving rise to this risk is primarily
Australian Dollars and Pound Sterling.
Amounts receivable/(payable) in foreign currency other than
functional currency:
Cash
Current – Payables
Current – Interest bearing loans
Non-current – Convertible notes
Net Exposure
2018
€
413,682
(68,022)
(1,201,258)
(1,531,250)
(2,386,848)
2017
€
266,382
(188,370)
(526,892)
-
(448,880)
CONSOLIDATED
55
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 21:
FINANCIAL INSTRUMENTS (continued)
The following significant exchange rates applied during the year:
Australian Dollar ($)
Pound Sterling (£)
Average rate
Reporting date spot rate
2018
0.632
1.130
2017
0.679
1.142
2018
0.616
1.113
2017
0.651
1.126
Sensitivity Analysis
A 5 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 for 2017 was
prepared using the same basis.
31 December 2018
Australian Dollar to Euro (€)
Pound Sterling (£)
31 December 2017
Australian Dollar to Euro (€)
Pound Sterling (£)
CONSOLIDATED
Profit or loss
€
(128,673)
(308)
Equity
€
-
-
(52,526)
6,012
-
-
A 5 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 other material commitments or contingent liabilities not provided for in the financial
statements of the Company or the Group as at 31 December 2018.
NOTE 23:
RELATED PARTIES
KEY MANAGEMENT PERSONNEL COMPENSATION
The key management personnel compensation included in employee benefit expenses (see note 3) is
as follows:
Short-term employee benefits
Termination benefits
Other long term benefits
Post-employment benefits
Share-based payments
Consolidated
2018
€
267,883
-
-
9,847
-
277,730
2017
€
309,143
-
-
21,989
57,090
388,222
56
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTE 23:
RELATED PARTIES (continued)
INTEREST BEARING LOANS
During 2016 the Company restructured its financing facility by repaying the facility with Nedbank
Limited and obtained financing through a streamlined facility provided by existing and former
Directors of the Company. The new facility agreement has been reached with entities associated with
Byron Pirola and Kevin Bailey (current directors) and Graham Bradly (former director).
Related Party
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Kevin Bailey
Fuiloro Pty Ltd
Fuiloro Pty Ltd
G. Bradley
Symmall Pty Ltd
Beronia Investments Pty Ltd
K & G Bailey as trustee for The
Bailey Family Trust
Loan Amount
2018
A$236,181
A$459,696
A$395,000
A$237,305
A$6,191
A$240,000
A$94,927
A$90,000
A$100,000
Loan Amount
2017
A$236,181
A$227,238
-
A$237,305
A$6,191
-
A$94,927
-
-
Interest
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
10% p.a.
Repayment Term
12 months
6 months
6 months
6 months
12 months
6 months
12 Months
6 months
6 months
A$100,000
-
10% p.a.
6 months
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
2018
€
2017
€
440,283
6,643,667
7,083,951
17,304
10,021,070
10,038,374
1,196,513
1,531,250
2,727,763
466,249
-
466,249
4,356,187
9,572,125
45,531,416
(41,175,229)
4,356,187
49,462,268
(39,890,143)
9,572,125
(1,285,086)
-
(1,285,086)
(5,981,321)
-
(5,981,321)
57
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 losses. Set out below is a list of the significant subsidiaries of the Group.
Name:
Country of
Incorporation
Class of
Shares
2018
Investment
€
2017
Investment
€
Holdin
g
%
Po Valley Operations Pty Limited
(“PVO”)
Coro Energy Plc (formerly Saffron
Energy Plc) (refer note 7)
NOTE 26:
SUBSEQUENT EVENT
Australia
Ordinary
2,544,225
2,544,225
100
UK
Ordinary
-
-
5,227,273
7,771,498
-
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.
58
PO VALLEY ENERGY LIMITED
DIRECTORS’ DECLARATION
1. In the opinion of the directors of PVE (“the Company”):
i)
the financial statements and notes, as set out on pages 25 to 58, 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 2018
and of its performance, for the financial year ended on that date; and
complying with Australian Accounting Standards
Accounting Interpretations) and the Corporations Regulations 2001;
(including the Australian
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 2018.
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 29 March 2019
Signed in accordance with a resolution of the directors:
Michael Masterman
Chief Executive Officer
Kevin Bailey
Non-Executive Director
59
Po Valley Energy Limited
ABN: 33 087 741 571
Independent Audit Report to the Members of Po Valley Energy Limited and its
Controlled Entities
Report on the Audit of the Financial Report
We have audited the financial report of Po Valley Energy Limited (“the Company”) and its Controlled Entities (“the
Group”), which comprises the consolidated statement of financial position as at 31 December 2018, and the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes
in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the Directors’ Declaration.
In our opinion:
a)
the financial report of the Group is in accordance with the Corporations Act 2001 including:
i.
giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its
performance for the year then ended; and
ii.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis of Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
60
Bentleys NSW Audit Pty LtdLevel 14, 60 Margaret StSydney NSW 2000AustraliaABN 49 141 611 896T +61 2 9220 0700F +61 2 9220 0777bentleys.com.au Auditors Advisors Accountants A member of Bentleys, a network of independent advisory and accounting firms located throughout Australia, New Zealand and China that trade as Bentleys. All members of the Bentleys Network are affiliated only, are separate legal entities and not in partnership. Liability limited by a scheme approved under Professional Standards Legislation. A member of Allinial Global - an association of independent accounting and consulting firms. Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial statements of the current year. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Key audit matter
How our audit addressed the key audit matter
Carrying value of Resource Property Costs
Our procedures included, amongst others:
The Group has an exploration asset of €7.7m at 31
December 2018. The carrying value of exploration and
evaluation assets can be subjective based on the
Group’s ability, and intention, to continue to explore the
asset.
•
Evaluating the Group’s assessment of the
carrying value of exploration and
evaluation assets.
• We have considered the Group’s right to
explore in the relevant exploration area.
Going Concern
Our procedures included, amongst others:
The Group has incurred a loss of €1.8m from continuing
operations and had net operating cash outflows of
€1.46m for the year ended 31 December 2018.
• We have obtained the current cash flow
forecasts and budgets and discussed the
assumptions with management.
• We have reviewed the disclosure in Note
1.2(c) for consistency with management’s
forecasts and assertions.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group’s annual report for the year ended 31 December 2018, but does not include the financial report and
our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly, we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as directors determine is necessary to enable the preparation of the financial report that gives a true and
fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
61
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, amongst other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in
the audit of the financial report of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
62
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 15 of the Directors’ Report for the year ended
31 December 2018.
In our opinion the Remuneration Report of Po Valley Energy Limited for the year ended 31 December 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
BENTLEYS NSW AUDIT PTY LTD
ROBERT EVETT
Director
Sydney, 29 March 2019
63
PO VALLEY ENERGY LIMITED
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Listing Rules and not disclosed
elsewhere in this report is set out below.
Information regarding share holdings is current as at 15 April 2019.
ORDINARY SHAREHOLDERS
1. TOP TWENTY SHAREHOLDERS
Details of the 20 largest shareholders of quoted fully paid ordinary shares by registered shareholding
are:
Name
Symmall Pty Ltd
J P Morgan Nominees Australia Pty Limited
Berne No 132 Nominees Pty Ltd
Fuiloro Pty Ltd
P & N Dairies Pty Ltd
HSBC Custody Nominees (Australia) Limited
1 Michael Masterman
2 Mr Kevin Bailey & Mrs Grace Bailey
3
4
5 Quo Vadis Pty Ltd
6
7
8
9
10 Mr Laurie Mark Macri
11 Beronia Investments Pty Ltd
12 Beronia Investments Pty Ltd
13 Beronia Investments Pty Ltd
14 Mr Laurence Mark Macri & Mrs Christine Simone Macri
15 Mr Chris Carr & Mrs Betsy Carr
16 Mr Graham John Bradley
17 Donus Australia Foundation Limited
18 Henderson International Pty Limited
19 Beronia FS Pty Ltd
20 Beronia FS Pty Ltd
Total
2. SUBSTANTIAL SHAREHOLDERS
Number
86,234,079
73,547,636
67,167,262
42,267,677
30,799,806
23,904,865
22,680,727
22,517,691
21,897,657
20,917,857
19,809,126
17,487,461
9,716,708
9,175,900
9,000,000
8,857,965
7,800,000
6,415,500
5,880,000
5,600,840
511,678,757
%
14.10
12.02
10.98
6.91
5.03
3.91
3.71
3.68
3.58
3.42
3.24
2.86
1.59
1.50
1.47
1.45
1.28
1.05
0.96
0.92
83.64
The following table shows holdings of 5% or more of voting rights as disclosed in substantial holding
notices given to the Company or, in the case of directors, information available to the Company and
disclosed to ASX in Directors Interest Notices:
Fully paid Ordinary Shares
Name
Michael Masterman
Kevin Bailey
Beronia Investments Pty Ltd
Supervised Investments Australia Limited
Number
156,692,994
132,728,169
59,494,135
50,082,268
%
25.61
21.69
9.73
8.19
3. NUMBER OF SECURITY HOLDERS AND SECURITIES ON ISSUE
Total number of fully paid ordinary shares on issue is 611,736,319 held by 428 shareholders.
64
PO VALLEY ENERGY LIMITED
ASX ADDITIONAL INFORMATION
4. VOTING RIGHTS
The voting rights attached to ordinary shares are that on a show of hand, every member present, in
person or proxy, has one vote and upon a poll, each share shall have one vote.
5. DISTRIBUTION OS SECURITY HOLDERS
Quoted Securities
Category
1 to 1,000
1001 to 5000
5001 to 10000
10,001 to 100,000
100,000 and over
Total
Holders
83
20
26
168
131
428
Fully paid Ordinary Shares %
8,158
48,194
210,325
7,490,910
603,978,732
611,736,319
0.01
0.01
0.03
1.22
98.73
100
6. UNMARKETABLE PARCEL OF SHARES
The number of shareholders holding less than a marketable parcel of ordinary shares is 147
based on the Po Valley Energy Limited closing share price of $0.04 on 15 April 2019.
7. ON MARKET BUY-BACK
There is no current on market buy-back.
UNQUOTED SECURITIES
Po Valley Energy Limited has the following unquoted securities on issue:
Category
Convertible Notes
Number
2,500,000
Number of holders
6
Convertible notes on issue have a maturity of 3 years from date of issue and interest payable of 8%
p.a. Convertible notes are convertible into 59,523,809 ordinary fully paid shares based on the
conversion price of $0.042 per fully paid ordinary share.
65
PO VALLEY ENERGY LIMITED
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. Before the Saffron Energy/Coro Energy
spin off, as at 9 April 2018, the Company’s core portfolio included a total of 10 onshore assets and 1 offshore
license. Following the completion of this transaction on 9 April 2018, Po Valley Energy holds 100% of Po Valley
Operations Pty Ltd, and as at 31 December 2018, the Company’s core portfolio includes a total of 4 onshore
Exploration Permits and 1 offshore Exploration permit and two preliminary awarded Production Concessions.
Further to geological and geophysical studies, the Tozzona exploration licence has been voluntary
relinquished, and Ministry accepted relinquishment on 7 December 2018. Total acreage position of the
Company at 31 12 2018 is circa 1,400 km2. For an illustration of each asset’s location please refer to the map
in figure 1 and table 1.
As at 31 December 2018 all tenements are 100% owned with exception of the Cadelbosco (gas play 85%) and
Podere Gallina (63%) Exploration Permits.
The Farm-in Agreement for Cadelbosco (correlated only to the gas play) 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 2017 the Company farmed out the whole
Cadelbosco/Grattasasso permits (oil play) to Delta Energy, but the sale was not finalized because Delta Energy
did not proceed with the transaction. In 2017 the Company successfully concluded the farm-in with United
Oil & Gas (20%) and Prospex Oil & Gas (17%) in the Podere Gallina licence (promotion on the Podere Maiar 1
well).
Figure 1: Licences map at 31 December 2018
66
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
Tenement
Location
Interest held
Teodorico (d.40.AC-PY)
Italy, Adriatic Offshore
100% Po Valley
Selva Malvezzi
Italy, Emilia Romagna
63% Po Valley
PREL.
AWARDED
PREL.
AWARDED
AR94PY
Italy, Adriatic Offshore
100% Po Valley
Cadelbosco di Sopra
Italy, Emilia Romagna
85% Po Valley
GRANTED
Grattasasso
Italy, Emilia Romagna
100% Po Valley
Podere Gallina
Italy, Emilia Romagna
63% Po Valley
Torre del Moro
Italy, Emilia Romagna
100% Po Valley
S
N
O
I
S
S
E
C
N
O
C
.
D
O
R
P
S
T
I
M
R
E
P
.
L
P
X
E
Table 1: Tenements at 31 December 2018
*Cadelbosco di Sopra 85% related only to the “gas play”
2) RESERVES & RESOURCES
The following table summarises the status of the Company’s Reserves & Resources as at 31 December 2018.
The reserves and resource estimates of the gas field Teodorico was independently evaluated by the geological
and petroleum reservoir consultancy firm CGG (UK) Services Ltd in 2013, 2018 and 2019; the other gas field
Selva; after the successful Podere Maiar 1dir well drill and test, was reviewed by the same firm in 2018 and
early 2019.The two oil discoveries (Bagnolo in Piano and Ravizza) were reviewed by CGG (UK) Services Ltd in
2013 and 2019.
Estimates of the revised recoverable volumes for each field and a detailed explanation of how this review
was carried out as required under the Chapter 5 ASX Listing Rules are provided in the ASX media releases
entitled “Po Valley Upgrades Selva Resources” and “Po Valley Oil Resource Update” dated 26 April 2019. All
estimates are based on independent evaluations in accordance with SPE/WPC/AAPG/SPEE Petroleum
Resource Management System (2007/2011).
Figures shown in the table on the next page are the revised reserve and resource estimates.
Following successful tests in January 2018 of the Podere Maiar 1 well (drilled from November and December
2017) and the preliminary Production Concession granted by the Italian Ministry (after CIRM positive opinion in
December 2018), Selva resources were upgraded to reserves.
67
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
TABLE 2: RESERVES AND RESOURCES AT 31 DECEMBER 2018 (as per CPR dated 24 April 2019)
Licence
Project
Reserves
1P
2P
3P
26.7 36.5 47.5
2.6
8.4
18.8
AR94PY
Podere Gallina
[Net]
Cadelbosco
di Sopra [Net]
Teodorico outside 12miles
Teodorico Inside 12 miles
PL3-C
Selva (Podere Maiar1)
Selva level A South
Selva level B North
Selva level B South
Cembalina
Fondo Perino
East Selva [Net]
Riccardina
Zini (Qu-B)
Canolo (Qu-A)
Canolo (Plioc)
Zini (Qu-A)
Licence
Project
Reserves
Contingent
Resources
Gas Bcf
2C
3C
1C
Prospective
Resources
Low Best High
7.4
10.6 14.0
7.9
15.9 25.0
0.7
2.2
0.6
1.1
5.6
2.2
2.3
11.2
5.9
0.9
0.6
0.3
2.3
0.9
3.1
3.9
1.4
8.9
Contingent
Resources
Oil MMbbl
2.9
2.1
1.3
6.4
12.9
9.2
18.3 21.9 25.6
24.4 81.2
8.2
0.5
1.2
2.0
Prospective
Resources
Torre del Moro
Cadelbosco
Grattasasso
Torre del Moro
Bagnolo in Piano
Bagnolo SW
Ravizza
1P
2P
3P
1C
2C
3C Low Best High
65.0 106.0 240.0
6.6
27.3 80.6
2.8
16.1 41.6
22.1 54.5 112.0
In 2018 the Company carried out thorough geological geophysical work reviewing the gas resources of the
Podere Gallina/Selva Malvezzi asset and oil resources of Cadelbosco (Bagnolo in Piano), Grattasasso (Ravizza)
and Torre del Moro licences. This work has undergone the process of independent review by CGG (UK)
Services Ltd. The new CPR covering all Po Valley assets was released on 24 April 2019.
68
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
Previous 2017 reserves, resources figures (as per 2017 Annual Report) in following table:
Licence
Project
Reserves
1P
2P
3P 1C
Contingent
Resources
Gas Bcf
2C
3C
Prospective
Resources
Low Best High
Sillaro
Sillaro
0.0
2.2
2.6
0.6
1.1
1.5
Cascina Castello
Vitalba
West Vitalba Quaternary
West Vitalba Pliocene [Net]
Cascina Castello ext Bezzecca [Net]
Sant’Alberto
AR94PY
Cadelbosco
di Sopra [Net]
Santa Maddalena
Teodorico outside 12miles
Teodorico Inside 12 miles
PL3-C
Zini (Qu-B)
Canolo (Qu-A)
Canolo (Plioc)
Zini (Qu-A)
Selva Strat. (Podere Maiar1)
Cembalina
Podere Gallina [Net] Fondo Perino
East Selva [Net]
Ariano
Corcrevà
D. delle Anime
La Risorta
Torre del Moro
Tozzona
Licence
Project
Cadelbosco
Grattasasso
Bagnolo in Piano
Ravizza
Table 3: 2017 Reserves and Resources
/
/
/
3.3
2.3
1.2
1.6
2.8
2.1
26.7 36.5 47.5
1.3
1.4
2.0
2.2
2.8
2.9
7.9 15.9 25.0
1.2
1.8
2.5
3.2
7.4
10.6 13.9
0.9
0.6
0.3
2.3
0.9
3.1
3.9
1.4
8.9
7.2
10.7 14.5
1.32 2.08 2.96
6.42 9.20 12.92
18.33 21.93 25.58
10.6 16.6 24.7
7.0
8.8 11.3
13.8 18.3 24.4
UNDER REVIEW
UNDER REVIEW
Contingent
Resources
Oil, MMbbls
1C
3.7
2.2
2C
4.3
5.7
3C
5.1
10.7
Qualified Petroleum Reserves and Resources Evaluator:
Statements in this Annual Report regarding estimates of petroleum Reserves and Contingent and Prospective
Resources are based on the technical work carried out by Po Valley Technical Team validated/certified by the
geological and petroleum reservoir consultancy firm CGG (UK) Services Ltd.
CGG (UK) Services Ltd 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.
69
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
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.
Company Reserves
Gas, Italy (bcf)
Developed
(Sillaro + Bezzecca [net])
Undeveloped
(Sillaro Miocene + Sant’Alberto)
Teodorico
Selva (Podere Maiar) [net]
Total Reserves
Reserves as at
31 December 2018
2P
1P
-
-
26.70
2.60
29.30
-
-
36.50
8.40
44.90
Reserves as at
31 December 2017
2P
1P
0.02
0.055
3.12
26.70
-
10.30
36.50
-
29.85
46.85
The variation in Undeveloped Reserves (1P and 2P) primarily reflects the preliminary award of the onshore
Selva Malvezzi Production Concession (December 2018) resulting in classification for the Selva from
Contingent Resources to Reserves. In addition, following the completion of the Saffron/Coro Energy spin off
in April 2018 the Sillaro, Bezzecca and Sant'Alberto are not included in the Company Reserves at 31 December
2018.
70
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
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 and Resources estimation process, the Company commits to a regular independent
audit in order to obtain a certified update of its Reserves & Resources portfolio.
Company Contingent Resources
Gas (bcf)
Oil (MMbbls)
Contingent Resources as at Contingent Resources as at
31 December 2018
2C
1C
12.8
25.8
31 December 2017
2C
1C
73.1
49.3
9.4
43.4
5.9
10.0
The table on page 68 of the Technical Summary shows the detailed estimate for each field.
The variation in Contingent Resources is as result of the Company’s review of gas resources of the Podere
Gallina/Selva Malvezzi asset and oil resources of Cadelbosco (Bagnolo in Piano), Grattasasso (Ravizza) and
Torre del Moro licences. Furthermore, contingent resources for 2017 relating to assets included in the
Saffron/Coro Energy spin off are no longer included in the Company’s Contingent Resources.
All figures have been determined using a deterministic method except Teodorico which was estimated
using a probabilistic method.
71
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Po Valley Energy Limited
ABN 33 087 741 571
Registered Office
Suite 8, 7 The Esplanade
Mt Pleasant WA 6153
Australia
Tel: + 61 8 9316 9100