Annual
Report 2019
PO VALLEY ENERGY LIMITED
CONTENTS
CORPORATE DIRECTORY .............................................................................................................................................. 2
CHAIRMAN’S STATEMENT ........................................................................................................................................... 3
YEAR IN REVIEW ........................................................................................................................................................... 5
DIRECTORS’ REPORT .................................................................................................................................................... 6
Remuneration Report ...................................................................................................................................... 12
AUDITOR’S INDEPENDENCE DECLARATION ............................................................................................................... 21
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................................. 22
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .................................... 23
STATEMENT OF CHANGES IN EQUITY ........................................................................................................................ 24
CONSOLIDATED STATEMENT OF CASH FLOWS ......................................................................................................... 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................................................................... 26
DIRECTORS’ DECLARATION ........................................................................................................................................ 65
INDEPENDENT AUDITOR’S REPORT ........................................................................................................................... 66
ASX ADDITIONAL INFORMATION .............................................................................................................................. 70
TECHNICAL SUMMARY .............................................................................................................................................. 73
1
Directors
Company Secretary
Registered Office
Rome Office
Share Register
Auditor
Solicitors
Banks
PO VALLEY ENERGY LIMITED
CORPORATE DIRECTORY
Michael Masterman
Kevin Bailey
Sara Edmonson
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, 00187 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 fellow shareholders,
Po Valley Energy advanced and upgraded its north Italian gas development and oil/gas condensate exploration
projects through 2019 and 2020. Our Selva (onshore gas) and Teodorico (offshore gas) development projects have
been granted preliminary production concession by the Italian Government, and its Ministry of Environment has
confirmed completion of the environmental approval process.
The approval and development of Selva Malvezzi is Po Valley’s number one priority, offering low capital costs and
high returns even in the challenging global oil and gas environment evident in the opening months of calendar
2020. Primary environmental approval was received and published by the Ministry in January 2020. Initial works
including installation of GPS monitoring equipment are underway and your Board expects final production
concession approval in the second half of 2020. 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’s Hydrocarbon Commission in 2016, advanced substantially during the past 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 requested documentation for water handling/decommissioning was submitted to the Ministry
in July 2019. We expect full grant of the Production Concession in the second half of 2020 and at that point, will
initiate design, 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.
During 2019, Po Valley declared maiden Prospective Resources at Torre del Moro (oil/gas condensate) and Bagnolo
SW (oil) of 106 million and 54.5 million barrels recoverable best estimate respectively and an increase in Contingent
Resources in Ravizza (oil) and Bagnolo-in-Piano (oil) to 45.6 million barrels (2C). This has delivered your Company
large onshore gas condensate and oil exploration assets to advance over the next 18 months.
Italy has faced a very challenging environment in 2020 as a result of COVID-19 virus impacts and the resulting State
of Emergency and associated lockdowns. Energy is excluded from these restrictions and this has enabled Po Valley
to advance low cost preliminary work at Selva. All members of our Po Valley team in Italy have moved to Smart
Working from home and are taking all necessary safety measures in line with that country’s State of Emergency.
The Italian Government has also provided a range of tax deferrals and grants, which, together with our own
initiatives, has materially reduced the Company’s running costs. We are working to ensure that once the crisis is
over, that Po Valley can rapidly advance our Selva development.
3
PO VALLEY ENERGY LIMITED
CHAIRMAN’S STATEMENT
Po Valley shareholders have been exceptionally well served by the Company’s dedicated and expert team in Italy,
led by Giorgio Bertuzzi, Daniele Marzorati, Gianluca De Rosa and Pierpalo Poncia and supported by dedicated Non-
Executive Directors, Byron Pirola and Kevin Bailey. Byron retired from the PVE Board in March this year but remains
a committed shareholder. I thank Byron in particular, and the entire team, for their outstanding contribution to
the Company during the past 18 months.
Michael Masterman
Chairman Po Valley Energy
4
PO VALLEY ENERGY LIMITED
YEAR IN REVIEW
• Preliminary Production concession for Selva granted early 2019
• Upgrade of Reserves for Selva
• Maiden Prospective Resources at Torre del Moro and Bagnolo SW
• PVE retains North Italian oil assets, Cadelbosco di Sopra and Grattasasso
• 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 (“the Group” or “Po Valley”), for the
year ended 31 December 2019.
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 57
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 59
Director from 10 May 2002 to 3 March 2020
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 59
Director since 3 May 2016
Kevin was appointed as a director on 22 April 2016. He has been a shareholder of PVE 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.
Sara Edmonson — Non-Executive Director, BSBA, MBA Age 40
Director since 23 December 2019
Sara was appointed as a director on 23 December 2019. Sara has extensive experience in natural gas, the critical
transition fuel for a low carbon future, having led PVE from July 2010 to 2017. She is currently the President at
Associazione Energia Nazionale, an Italian association created to promote sustainable production, transportation
and use of domestic energy and is fluent in Italian, having previously worked both in Italy and internationally for
Ernst & Young Transaction Advisory Services. During her tenure at EY Sara advised numerous blue-chip corporate
clients on transactions in Russia, Romania, Turkey and the US including the US$5 billion acquisition of DRS
Technologies by Finmeccanica in 2008. She holds an MBA from St John’s University in New York City. Sara served
on the board of Coro Energy plc from November 2017 to October 2018 and as executive until March 2019.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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.
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
10
10
Byron Pirola
Kevin Bailey
10
10
10
10
Sara
Edmonson
-
-
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 earnings / (loss) per share for the Company from continuing operations was (0.24)€ cents
(2018: (0.31)€ cents and 0.78€ from discontinued operations).
6. Operating and financial review
The loss for the year from continuing operations was €1,504,741 (2018: €1,832,552).
Cash and cash equivalents for the Group at 31 December 2019 amounted to €42,165 (2018: €515,604).
The Company completed a private placement of A$1.4 million for the issue of 25,454,547 shares during the year in
two tranches. The first tranche of the placement was completed in August 2019 with receipt of A$800,000 from
sophisticated investors and the second tranche completed with director participation for A$600,000.
Selva Gas Field (63% PVO*)
Selva advanced during the year with addition of significant additional 2C and 2P resources to the existing reserves
in the production concession application area and importantly good progress with the environmental approval
process.
Po Valley was formally granted the Selva Malvezzi preliminary gas Production Concession (80.68km²) by the Italian
Ministry for the Economic Development. Following concession preliminary award, Reserves of 13.3bcf (2P) were
certified and new Contingent Resources in the Selva North and South Flank of 14.1bcf (2C) have been added.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
With the benefit of the successful Podere Maiar well, and access to well and seismic data, the East Selva field’s
chance of success has been increased to 40% and a new large prospective resource for the Riccardina structure
added, taking this concession’s total Prospective Resources (best) to 91.5bcf.
The Environmental Impact Assessment (‘EIA’) study for Selva was submitted during the year. With the Italian
Government confirming preliminary technical environmental approval for the Selva gas field development and
preliminary work has now commenced to prepare the field for gas production in 2020. Final EIA decree is expected
in the second quarter of 2020.
Under the first phase of the development plan, PVO 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 the well with the nearby
Italian National Gas Grid. Based on dynamic reservoir studies, the field development is designed to produce at a
rate of up to 150,000 cubic metres (5.3 mmscf/day) a day from successfully tested C1 and C2 production levels in
the Medium-Upper Pliocene sands of the Porto Garibaldi Formation.
*Po Valley Operations Pty Ltd (100% owned subsidiary of PVE, “PVO”) holds the quota for 100% of the Podere Gallina and Selva Licences. United and Prospex
have 20% and 17% economic interests and are awaiting Italian government approval for the 20% and 17% quotas to be transferred.
Teodorico Offshore Gas field development (100% PVO)
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 existing off-shore gas production facilities.
Following the granting of the primary environmental approval in 2019, Teodorico continued during the year to
advance through the regulatory approval process. Key related EIA approval integrated documentation has now
been submitted and Po Valley expects to complete the regulatory approval process in 2020.
Teodorico has the largest gas-in-place of all of Po Valley’s gas fields and is at an advanced stage of assessment,
ready for development.
Torre del Moro Gas/Oil Condensate exploration (100% PVO)
Torre del Moro is a very large oil prospect at a maiden Prospective Resource of 106 million barrels best estimate
and has the potential to transform the size and scale of the company’s operations.
The current focus of activities for the Torre del Moro site, south of Forli, is to identify the best drilling location,
prepare a petroleum system study and the drilling plan for submission to the Government as soon as the exploration
activities ban will end in February 2021.
Ravizza, Bagnolo in Piano, and Bagnolo SW Exploration (100% PVO)
The significant upgrade in the estimated 2C resources in Bagnolo in Piano (Cadelbosco exploration licence) and
Ravizza (Grattasasso exploration licence) oil discoveries from 5.6 million and 4.4 million barrels respectively to 27.3
million and 16.1 million barrels (as independently assessed and validated by French consultancy CGG), flows from
fresh seismic revision and geological evaluation work. This enhanced structure volumes and recovery factors,
increases derived from the use of horizontal development wells (extensively drilled in these kind of reservoirs). In
addition, available data of similar oil fields such as Cavone and Villafortuna were utilised.
In addition to these Contingent Resources estimates, a maiden Prospective Resource of 54.5 million barrels (best
estimate) has been defined in the Bagnolo SW prospect (Torre del Moro exploration licence), being a
geological/structural south-western extension of the Bagnolo in Piano oil discovery (refer ASX announcement 26
April 2019).
Development design work for these two proven undeveloped oil fields between Bologna and Parma has advanced
with production profiles, development plan, design and verification work at an advanced stage.
Po Valley’s objective is to complete production planning and well design during 2020.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Strategy
Po Valley remains a northern Italy-focused energy development and exploration company with a streamlined focus
on five large assets:
• The onshore gas development at Selva Malvezzi;
• Offshore Adriatic gas development at Teodorico;
• The large-scale gas/oil condensate exploration licence at Torre del Moro, and
• The expanded Ravizza (Grattasasso Permit) and Bagnolo (Cadelbosco Permit) oil reservoirs and
extensions.
Po Valley’s priority is very focused on bringing the low cost Selva and Teodorico fields into gas production. The size
and scale of Torre del Moro and Ravizza / Bagnolo in Piano, warrant initiatives to de-risk and prioritise the projects
and design drilling programs.
While the current Italian regulatory environment remains challenging, the Italian Ministry has confirmed that recent
government amendments to energy policy will not affect the approval processes for Selva and Teodorico, both of
which continue to progress through the normal approval procedures. Gas remains a critical transition fuel in Italy’s
move to greater renewables and the development and employment generation from the Company’s two advanced
projects enjoy good local support.
The fields and prospects in granted exploration licences (Torre del Moro, Bagnolo in Piano, and Ravizza) are covered
under the Italian Government’s Plan of Areas Program. Under this program, which was recently reviewed in
Parliament, the timeframe for field activities such as drilling and related approvals is suspended until August 2021
(30 months from the date of Ministerial decree in February 2019) as the Ministry conducts an environmental
clearance program. This aligns with the Group’s technical advancement program on Torre del Moro, Bagnolo in
Piano, and Ravizza, allowing Po Valley to advance and prioritise low cost geological and geophysical evaluation, and
to advance drilling location selection and prepare drilling programs over a prudent timeframe. The Group’s drilling
programs have very small footprints and are designed to the highest environmental and safety standards. While Po
Valley is confident that the areas in which it operates should clear the environmental clearance process, there is
always a risk of delay or non-clearance.
During the month of March 2020, the Italian government imposed a nationwide lockdown as a preventative
measure to reduce the contagion of Covid-19. We are pleased to report that all Po Valley employees are healthy
and are working from home. Importantly, we have seen evidence that the Italian Ministries continue to be
operational therefore we do not expect significant delays in the ongoing environmental approvals for Selva Malvezzi
and Teodorico. Importantly, the oil and gas industry was declared an "essential service" by the Italian government
underpinning its strategic importance in the Italian economy.
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)
2019
2018
Net loss from continuing operations before impairment expense (unaudited)
(1,503,241)
(1,013,582)
Impairment of investment in associate
Exploration costs expensed
Net profit / (loss) from discontinued operations
-
(816,426)
(1,500)
(2,544)
-
4,406,460
Comprehensive income / (loss) for the year
(1,504,741)
2,573,908
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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 from discontinued
operations in 2018 is a result of the restructuring of the Group and the spin-off of Coro Energy Plc (formerly Saffron
Energy Plc).
Health and safety
Paramount to Po Valley’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. Po Valley’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 2019, the Group
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
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.
10
Operating risks
Exploration,
development and
production
Estimation of
reserves
Tenure security
Health, safety and
environmental
matters
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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
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 2019.
8. Significant events after the balance date
In February 2020, the Company entered into a Master Service Agreement for the provision of technical,
administrative and commercial services to an oil and gas company with assets within the Po Valley region. These
services will provide the Company with income of €25,000 per month for a minimum period of 3 months and until
the agreement is terminated by either party.
During the month of March 2020, the Italian government imposed a nationwide lockdown as a preventative
measure to reduce the contagion of Covid-19. Po Valley employees are working from home during this time.
Importantly, we have seen evidence that the Italian Ministries continue to be operational therefore we do not
expect significant delays in the ongoing environmental approvals for Selva Malvezzi and Teodorico. Importantly,
the oil and gas industry was declared an "essential service" by the Italian government underpinning its strategic
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
importance in the Italian economy. However, the timing, full extent of the impact and recovery from Covid-19 on
our employees and business operations continues to evolve as at the date of this report. As such, the Group is
unable to estimate the effects on the Group’s financial position, liquidity and operations in the 2020 financial year.
Other than the above, 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.
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)
Average realised gas price (€ cents per cubic metre)
2019
2018
2017
2016
2015
2014
-
-
2,799*
7,155
4,461
9,991 18,560
21*
19
21
25
27
Profit / (loss) attributable to owners of the Company (€'000s) (1,504) 2,780
(1,087) (8,699) (6,658) (1,262)
Earnings / (loss) per share (€ cents per share)
(0.24)
(0.31)
(0.19)
(2.06)
(5.02)
(1.03)
Share Price at year end - AU$
0.052
0.038
0.041
0.025
0.026
0.10
* 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.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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.
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: as Chief Executive Officer 1 November 2017
• Fixed remuneration for the year ended 31 December 2019: €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
• Resignation date: 3 March 2020
• Fixed remuneration for the year ended 31 December 2019: €15,007 (A$24,000)
• No termination benefits
Kevin Bailey, Non-Executive Director
• Commencement Date: 3 May 2016
• Fixed remuneration for the year ended 31 December 2019: €15,007 (A$24,000)
• No termination benefits
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Sara Edmonson, Non-Executive Director
• Commencement Date: 23 December 2019
• Fixed remuneration for the year ended 31 December 2019: €15,007 (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.
14
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S
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Analysis of bonuses included in remuneration
There was no short-term incentive bonus awarded in remuneration in the current year.
The short-term incentive bonus awarded to S Edmonson in 2018 was in her capacity as Chief Executive Officer
of Coro Energy Plc (formerly Saffron Energy Plc) (“Coro’’). The amount of €19,230 included in remuneration
related to the period up to the date the Company completed restructuring of the Group and spin off of Coro
and vested in that financial year based on achievement of personal goals and satisfaction of specified
operational performance criteria. The bonus award 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 (2018: Nil). No options vested during 2019. (2018: 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 2019.
There were no options outstanding during 2019.
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 2019.
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 2018
Purchased
Share
based
payments
Options
Exercised
Held at
Sold / Other
31 Dec 2019
Directors
M Masterman
156,692,994
11,278,788
B Pirola
K Bailey
59,494,135
3,290,043
132,728,169
17,536,983
S. Edmonson
2,966,406(i)
-
351,881,704
32,105,814
(i)
(i)Holding at date of appointment
-
-
-
-
-
-
-
-
-
-
-
-
-
167,971,782
62,784,178
150,265,152
2,966,406
383,987,518
17
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Held at
31 Dec 2017
Purchased
Share
based
payments
Options
Exercised
Held at
Sold / Other
31 Dec 2018
(ii)
Directors
M Masterman
156,692,994
B Pirola
K Bailey
Executives
S. Edmonson
59,494,135
132,728,169
348,915,298
2,966,406(i)
2,966,406
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
156,692,994
59,494,135
132,728,169
-
348,915,298
-
-
2,966,406(ii)
2,966,406
(i) 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).
Other transactions and balances with KMP and their related parties
The Company 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 2019 are as follows:
Related Party
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Kevin Bailey
Fuiloro Pty Ltd
G. Bradley
K & G Bailey as trustee for The Bailey Family Trust
Loan Amount
A$663,179
A$156,055
A$528,396
A$264,172
A$190,800
A$126,736
A$106,055
Interest
% p.a
10%
10%
10%
10%
10%
10%
10%
Repayment
Term
19 months
19 months
19 months
19 months
19 months
19 months
19 months
No key management personnel have entered into a material contract, other than disclosed above, with the
Group or the Company.
18
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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
S Edmonson
13. Share Options
Ordinary Shares
Convertible Notes
167,971,782
62,784,178
150,635,225
2,966,406
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.
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 that the Annual 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.
19
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
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.
18. Proceedings on behalf of the Company
In 2019 a legal proceeding was initiated by Northsun Italia (a wholly owned subsidiary of Coro Energy Plc)
against Po Valley Energy’s operating subsidiary Po Valley Operations in respect of a few disputed invoices
related to intercompany services carried out in 2017 and early 2018 before the group restructuring was
completed. The legal proceeding commenced in 2019 and a final decision from the Italian courts is expected
in 2020. The full amount of the invoices in dispute has been provided for in the financial statements.
19. Lead Auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 21 and forms part of the Directors’ report for
the financial year ended 31 December 2019.
This report has been made in accordance with a resolution of Directors.
Michael Masterman
Chairman and Chief Executive Officer
31 March 2020
20
21
PO VALLEY ENERGY LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
CONSOLIDATED
NOTES
2019
€
2018
€
10
11
14
12
13
15
17
16
18
17
19
20
20
42,165
283,853
326,018
17,578
947,181
105,145
7,876,926
8,946,830
515,604
499,780
1,015,384
27,455
744,040
9,602
7,704,644
8,485,741
9,272,848
9,501,125
1,090,159
41,066
2,797
1,272,676
2,406,698
1,122,845
-
2,756
1,201,258
2,326,859
58,512
1,563,183
-
1,531,250
1,621,695
1,531,250
4,028,393
3,858,109
46,461,745
1,192,269
(42,589,559)
45,531,416
1,192,269
(41,080,669)
5,244,455
5,643,016
9,272,848
9,501,125
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
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
Lease liabilities
Provisions
Interest bearing loans
Total Current Liabilities
Non-Current Liabilities
Lease liabilities
Convertible notes
Total Non-Current Liabilities
Total Liabilities
Equity
Issued capital
Reserve
Accumulated losses
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.
22
PO VALLEY ENERGY LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
CONSOLIDATED
NOTES
2019
€
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
2018
€
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
35,144
(639,131)
(41,700)
(752,431)
-
(1,500)
(1,399,618)
134
(308,398)
(308,264)
(1,707,882)
203,141
(1,504,741)
(1,832,552)
-
-
-
4,406,460
2,573,908
-
Total comprehensive income / (loss) for the year
(1,504,741)
2,573,908
Profit / (loss) attributable to:
Members of the Company
Non-controlling interests
Profit / (loss) for the period
Total comprehensive income / (loss) attributable
to:
Members of the Company
Non-controlling interests
Total comprehensive income / (loss) for the period
Basic and diluted earnings / (loss) per share (€)
from continuing operations
Basic and diluted earnings / (loss) per share (€)
from discontinued operations
9
9
(1,504,741)
-
(1,504,741)
(1,504,741)
-
(1,504,741)
(0.24)
-
2,780,060
(206,152)
2,573,908
2,780,060
(206,152)
2,573,908
(0.31)
0.78
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
to the financial statements.
23
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F
PO VALLEY ENERGY LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
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
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
Payments of lease liabilities
Net financing cash flows provided by discontinued
operations
Net cash flows from financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at 1 January
19
18
NOTES
CONSOLIDATED
2019
€
2018
€
(1,065,464)
134
(61,961)
(1,281,537)
286
(13,470)
10
-
(1,127,291)
(164,730)
(1,459,451)
-
(271,225)
-
(271,225)
877,550
(8,066)
-
99,351
(43,758)
-
925,077
(473,439)
515,604
1,742,693
(2,748,836)
(927,652)
(1,933,795)
483,009
(3,015)
1,580,038
731,719
-
726,985
3,518,736
125,490
390,114
Cash and cash equivalents at 31 December
10
42,165
515,604
The above statement of cash flows should be read in conjunction with the accompanying notes to the financial statements.
25
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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 2019
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 31 March 2020.
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 2019, the Group has recorded a loss after tax from continuing
operations of €1,504,741; it has a cash balance of €42,165 net current liabilities of €2,080,680 and had
net cash outflows from continuing operations of €1,127,291. In addition, the Group may be impacted
by the subsequent event (COVID-19) as noted in note 27. These conditions indicate a material
uncertainty that may cast a significant doubt about the entity's ability to continue as a going concern
and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal
course of business.
The Directors believe that sufficient funds will be available to meet the Group’s immediate working
capital requirements. However, the Directors recognise that the ability of the Group to continue as a
going concern is dependent on the Group being able to secure additional funding through either the
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 as required to fund ongoing planned
activities and for working capital. The Directors are currently reviewing a range of financing options
and reviewed the Group’s cashflow requirements for the 15 months ended 31 March 2021 and are of
the opinion that sufficient funds will be available in order to meet its ongoing obligations.
26
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Should the Group not achieve the matters set out above, there is uncertainty whether the Group
would continue as a going concern and therefore whether it would realise its assets and extinguish its
liabilities in the normal course of business and at the amounts stated in the financial report. The
financial report does not include adjustments relating to the recoverability or classification of the
recorded assets amounts nor to the amounts or classification of liabilities that might be necessary
should the Group not be able to continue as a going concern.
(d)
FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in Euro, which is the Company’s and each of the
Group entity’s functional currency.
(e)
USE OF ESTIMATES AND JUDGEMENTS
The preparation of the financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods
affected.
The estimates and judgements that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of non-current assets
The ultimate recoupment of the value of resource property costs and property plant and equipment
is dependent on successful development and commercial exploitation, or alternatively, sale, of the
underlying properties. The Group undertakes at least on an annual basis, a comprehensive review for
indicators of impairment of these assets. Should an impairment indicator exist, the area of interest 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
Any provisions made for rehabilitation represents the discounted value of the present obligations to
restore, dismantle and rehabilitate a 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 when required. 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.
27
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
A provision, when recognised ,for each site is reviewed at each reporting date and updated based on
the facts and circumstances available at that time and any subsequent changes to the estimated future
costs for operating sites will be recognised in the balance sheet by adjusting both the restoration and
rehabilitation asset and provision.
Reserve estimates
Estimation of reported recoverable quantities of Proven and Probable reserves include estimates
regarding commodity prices, exchange rates, discount rates, and production and transportation costs
for future cash flows. It also requires interpretation of complex geological and geophysical models in
order to make an assessment of the size, shape, depth and quality of reservoirs, and their anticipated
recoveries. The economic, geological and technical factors used to estimate reserves may change from
period to period.
A change in any, or a combination of, the key assumptions used to determine the reserve estimates
could have a material impact on the carrying value of the project via depreciation rates or impairment
assessments. The reserve estimates are reviewed at each reporting date and any changes to the
estimated reserves are 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, except for new accounting policies
adopted as detailed below.
New and amended standards adopted by the group
AASB16 ‘Leases’
AASB16 Leases became applicable to the current reporting period. AASB16 Leases replaced AASB117
Leases.
The new Standard has been applied using the modified retrospective approach, with the cumulative
effect of adopting AASB16 being recognised in equity as an adjustment to the opening balance of
retained earnings for the current period. Prior periods have not been restated.
At the date of initial application, the Company has elected to apply AASB16 to contracts that were
previously identified as leases under the definition of a lease from AASB117 and has not applied
AASB16 to arrangements that were previously not identified as leases under AASB117.
28
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
The Company has elected not to include initial direct costs in the measurement of the right-of-use
asset for operating leases in existence at the date of initial application of AASB16, being 1 January
2019. At this date, the Company has also elected to measure the right-of-use assets at an amount
equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date
of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial application,
the Company has relied on its historic assessment as to whether leases were onerous immediately
before the date of initial application of AASB16.
On transition, for leases previously accounted for as operating leases with a remaining lease term of
less than 12 months and for leases of low-value assets the Company has applied the optional
exemptions to not recognise right-of-use assets but to account for the lease expense on a straight-line
basis over the remaining lease term.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are
measured at the date of initial application at the same amounts as under AASB117 immediately before
the date of initial application.
On transition to AASB16 the weighted average incremental borrowing rate applied to lease liabilities
recognised under AASB16 was 1.83%. The Company has benefited from the use of hindsight for
determining lease term when considering options to extend and terminate leases.
Impact on transition
On transition to AASB16, the Company recognised right-of-use assets and lease liabilities, recognising
the difference in accumulated losses.
The impact on transition is summarised below.
Right-of-use assets – property, plant and equipment
Lease liabilities
Accumulated losses
1 January 2019
€
136,617
(140,766)
4,149
The following is a reconciliation of total operating lease commitments at 31 December 2018 to the lease
liabilities recognised at 1 January 2019:
Leases of low value assets / with remaining lease of less than 12 months
Total operating lease commitments at 31 December 2018
Recognition exemptions:
-
Operating lease liabilities before discounting
Discounting using incremental borrowing rate
Operating lease liabilities recognised under AASB16 at 1 January 2019
Refer Note 1.3 (p) and Note 17 for further details.
€
147,408
(833)
146,575
(5,809)
140,766
29
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(a)
PRINCIPLES OF CONSOLIDATION
(i)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control
ceases. The accounting policies of subsidiaries have been changed when necessary to align them with
the policies adopted by the Group. Investments in subsidiaries are carried at cost less any impairment
losses.
In the Company’s separate financial statements, investments in subsidiaries are carried at cost less
any impairment losses.
(ii)
Joint arrangements
The Group classifies its interests in joint arrangements as either joint operations or joint ventures (see
below) depending on the Group’s rights to the assets and obligation for the liabilities of the
arrangements. When making this assessment, the Group considers the structure of the arrangements,
the legal form of any separate vehicles, the contractual terms of the arrangements and other facts
and circumstances.
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
30
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
be available against which the asset can be utilised. Deferred tax assets are reduced to the extent
that it is no longer probable that the related tax benefit will be realised.
Judgement is required to determine which arrangements are considered to be a tax on income as
opposed to an operating cost. Judgement is also required to determine whether deferred tax assets
are recognised in the statement of financial position. Deferred tax assets, including those arising from
unutilised tax losses, require management to assess the likelihood that the Company will generate
sufficient taxable earnings in future periods, in order to utilise recognised deferred tax assets.
Assumptions about the generation of future taxable profits depend on management’s estimates of
future cash flows. These estimates of future taxable income are based on forecast cash flows from
operations (which are impacted by production and sales volumes, oil and natural gas prices, reserves,
operating costs, decommissioning costs, capital expenditure, dividends and other capital management
transactions) and judgement about the application of existing tax laws in each jurisdiction. To the
extent that future cash flows and taxable income differ significantly from estimates, the ability of the
Company to realise the net deferred tax assets recorded at the reporting date could be impacted.
In addition, future changes in tax laws in the jurisdictions in which the Company operates could limit
the ability of the Company to obtain tax deductions in future periods.
(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
31
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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.
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
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
Right-of-use assets: buildings
2019
3 – 5 years
4 – 6 years
2018
3 – 5 years
-
The residual value, the useful life and the depreciation method applied to an asset are reviewed at
each reporting date.
32
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(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.
33
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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.
34
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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.
35
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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)).
36
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(h)
PROVISIONS
Restoration and 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.
37
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(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’s 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.
38
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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.
39
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(p)
LEASES
Accounting Policy Applicable from 1 January 2019
The Company as a lessee
For any new contracts entered into on or after 1 January 2019, the Company considers whether a
contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the
right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply
this definition the Company assesses whether the contract meets three key evaluations which are
whether:
•
the contract contains an identified asset, which is either explicitly identified in the contract or
implicitly specified by being identified at the time the asset is made available to the Company
the Company has the right to obtain substantially all of the economic benefits from use of the
identified asset throughout the period of use, considering its rights within the defined scope of
the contract
the Company has the right to direct the use of the identified asset throughout the period of use.
•
•
The Company assess whether it has the right to direct ‘how and for what purpose’ the asset is used
throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the
balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement
of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments made in advance of
the lease commencement date (net of any incentives received).
The Company depreciates the right-of-use assets on a straight-line basis from the
lease
commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of
the lease term. The Company also assesses the right-of-use asset for impairment when such indicators
exist.
At the commencement date, the Company measures the lease liability at the present value of the
lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate
is readily available or the Company’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments
(including in substance fixed), variable payments based on an index or rate, amounts expected to be
payable under a residual value guarantee and payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for
interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-
substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use
asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases and leases of low-value assets using the
practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in
relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease
term.
40
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
On the statement of financial position, right-of-use assets have been included in property, plant and
equipment (except those meeting the definition of investment property) and lease liabilities have
been disclosed separately under current and non-current liabilities.
The Company as a lessee - Finance leases
Management applies judgment in considering the substance of a lease agreement and whether it
transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors
considered include the length of the lease term in relation to the economic life of the asset, the present
value of the minimum lease payments in relation to the asset’s fair value, and whether the Company
obtains ownership of the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component
based on the relative fair values of the respective lease interests. Each component is then evaluated
separately for possible treatment as a finance lease, taking into consideration the fact that land
normally has an indefinite economic life.
The Company depreciates assets held under finance leases on a straight-line basis over the useful lives
of the asset. The interest element of lease payments is charged to profit or loss, as finance costs over
the period of the lease.
Operating leases
All other leases are treated as operating leases. Where the Company is a lessee, payments on
operating lease agreements are recognised as an expense on a straight-line basis over the lease term.
Associated costs, such as maintenance and insurance, are expensed as incurred.
Accounting policy applicable to prior periods before 1 January 2019
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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
CHANGES IN ACCOUNTING POLICIES, DISCLOSURES, STANDARDS AND INTERPRETATIONS
Australian Accounting Standards and Interpretations that have recently been issued or amended but
are not yet effective and have not been adopted by the Group for the annual reporting period ending
31 December 2019.
(q)
(r)
41
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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. 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.
42
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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 regular 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 comprise:
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
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
2019
€
2018
€
564,039
75,092
639,131
502,368
75,202
577,570
115,528
494,997
60,007
70,953
10,946
752,431
101,522
357,611
105,588
66,697
19,751
651,169
24,090
26,581
10,540
-
-
10,540
8,000
15,600
16,800
40,400
43
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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
2019
€
2018
€
134
134
286
286
260,191
48,207
308,398
(308,264)
169,200
(83,403)
85,797
(85,511)
During the prior 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:
2019
€
2018
€
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
(3,100,666)
(37,510)
(4,827,080)
1,056,466
44
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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:
2019
€
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
2018
€
584,676
(207,589)
(55,784)
321,303
3,927
(664,230)
(73,303)
-
(412,303)
4,818,763
4,406,460
-
4,406,460
4,612,612
(206,152)
4,406,460
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
€
2018
€
-
-
-
-
-
(164,730)
(431,063)
(496,589)
726,985
(365,397)
In the prior year, 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 for 2018.
45
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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
2019
€
2018
€
-
-
(203,141)
(140,172)
(203,141)
(140,172)
(203,141)
(140,172)
Numerical reconciliation between tax expense and pre-tax accounting profit / (loss)
Profit / (loss) for the year before tax from continuing operations
(1,707,882)
(1,972,724)
Income tax (benefit) / expense using the Company’s domestic tax rate of
27.5 per cent (2018: 27.5%)
(469,667)
(542,500)
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
-
115,744
29,826
108,600
12,356
224,517
14,928
24,015
115,382
23,486
Income tax (benefit) / expense
(203,141)
(140,172)
NOTE 9:
EARNINGS PER SHARE
Basic and diluted earnings / (loss) per share (€ cents) from continuing
operations
Basic and diluted earnings / (loss) per share (€ cents) from discontinued
operations
(0.24)
(0.31)
-
0.78
The calculation of basic and diluted loss per share from continuing operations was based on the loss
attributable to shareholders of €1,504,741 (2018: €1,832,552) and a weighted average number of ordinary
shares outstanding during the year of 631,578,465 (2018: 593,766,325).
The calculation of basic and diluted earnings per share from discontinued operations in 2018 was based on
the profit attributable to members of €4,612,612 and a weighted average number of ordinary shares
outstanding during the half year of 593,766,325.
Diluted earnings / (loss) per share is the same as basic earnings / (loss) per share.
46
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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
10,095,237 shares issued 27 May 2019
14,545,456 shares issued on 8 August 2019
10,909,091 shares issue on 6 November 2019
18,476,190 shares issued on 21 December 2018
No. of days
365
218
145
55
10
CONSOLIDATED
2019
Weighted
average no.
611,736,318
6,029,485
9,674,730
4,109,590
-
631,578,465
2018
Weighted
average no.
593,260,128
-
-
-
506,197
593,766,325
CONSOLIDATED
2019
€
2018
€
NOTE 10: CASH AND CASH EQUIVALENTS
(a) Cash and cash equivalents
42,165
515,604
Reconciliation of cash flows from operating activities
(b)
Profit / (loss) for the year
Adjustment for non-cash items:
Depreciation and amortisation
Unrealised foreign exchange losses related to financing activities
Interest capitalised to loans / borrowings
Interest on lease liabilities
Impairments
Profit from discontinued operations
Change in operating assets and liabilities:
Decrease/(increase) in receivables
Increase/(decrease) in trade and other payables
(Decrease)/Increase in provisions
(Increase)/Decrease in deferred tax assets
(1,504,741)
2,573,908
41,700
38,611
195,660
2,570
-
-
215,927
86,082
41
(203,141)
1,067
-
-
-
816,426
(4,406,460)
(100,758)
(20,728)
(18,004)
(140,172)
Cash flows used in discontinued operations
-
(164,730)
Net cash inflow from operating activities
(1,127,291)
(1,459,451)
(c) Non-cash financing activities
Repayment of related party loans (refer Note 24)
240,845
-
47
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
TRADE AND OTHER RECEIVABLES
NOTE 11:
Current
Trade receivables
Sundry debtors
Indirect taxes receivable
CONSOLIDATED
2019
€
2018
€
151,866
85,351
46,636
205,605
4,443
289,732
283,853
499,780
The Group’s exposure to credit and currency risks and impairment losses related to trade and other
receivables are disclosed in Note 22.
NOTE 12:
PROPERTY PLANT & EQUIPMENT
Office Furniture & Equipment:
At cost
Accumulated depreciation
Right-of-use asset: Building
At Cost
Accumulated depreciation
Total property plant & equipment
Reconciliations:
Reconciliation of the carrying amounts for each class of
Plant & equipment are set out below:
Carrying amount at beginning of year
Additions
Adjustment of right-of-use assets on transition to AASB16
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 year
21,503
(12,989)
8,514
136,616
(39,985)
96,631
105,145
9,602
626
136,616
(41,700)
-
-
105,145
-
-
-
-
-
-
105,145
24,576
(14,974)
9,602
-
-
-
9,602
18,258
-
-
(1,067)
(1,057)
(6,532)
9,602
2,140,611
-
(49,628)
-
(2,090,983)
-
9,602
48
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 13:
RESOURCE PROPERTY COSTS
Resource Property costs
Exploration and Evaluation
Reconciliation of carrying amount of resource properties
Exploration and Evaluation Phase
Carrying amount at beginning of period
Exploration expenditure
Impairment losses
Assets relating to discontinued operations (refer note 7)
CONSOLIDATED
2019
€
2018
€
7,876,926
7, 704,644
7,704,644
9,182,411
172,282
636,128
-
-
-
(2,113,895)
Carrying amount at end of period
7,876,926
7,704,644
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 (“CGG”).
The recoverable amount determined by the CGG report of Selva and Teodorico was €18.2 million and €17.8
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 €4.1 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.
49
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 13:
RESOURCE PROPERTY COSTS (continued)
Production Phase
Carrying amount at beginning of period
Additions
Amortisation of producing assets in discontinued operations
Assets relating to discontinued operations (refer note 7)
Carrying amount at end of period
The Group currently does not have any production assets
CONSOLIDATED
2019
€
2018
€
-
-
-
-
-
159,390
137,400
(6,157)
(290,633)
-
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
848,694
658,474
98,487
85,566
947,181
744,040
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
759,112
1,100,264
1,848,250
1,840,089
2,607,362
2,940,353
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)
50
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 14:
DEFERRED TAX ASSETS AND LIABILITIES (continued)
Movement in recognised temporary differences during the year
Discontinu
ed
operations
(refer note 7)
€
Balance 1
January
2018
€
Profit and
loss
€
Equity
€
Consolidated
Balance 31
December
2018
€
Profit and
loss
€
Equity
€
Balance 31
December
2019
€
Tax losses
Accrued expenses
and liabilities
Total recognised
deferred tax asset
1,970,177
(1,446,919)
135,216
628,332
(547,994)
5,228
2,598,509
(1,994,913)
140,444
-
-
-
658,474
190,220
85,566
12,921
744,040
203,141
-
-
-
848,694
98,487
947,181
NOTE 15:
TRADE AND OTHER PAYABLES
Trade payables and accruals
Other payables
CONSOLIDATED
2019
€
2018
€
1,051,524
1,112,384
38,635
10,461
1,090,159
1,122,845
Accrued interest on interest bearing loans of €76,484 (2018: €155,380) is included in trade payable
and accruals (refer note 24)
The Group’s exposure to currency and liquidity risks related to trade and other payables are
disclosed in note 22.
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)
2,797
2,756
-
-
-
-
-
-
4,802,873
24,207
(4,827,080)
Closing balance
The Group has considered its obligations for restoration and rehabilitation of the well development planned
for the Selva field. The Company estimates that the cost of restoration of the well development will be
€2,065,119 to be incurred once production ceases at the end of estimated production life estimated to be 15
years. A provision for these restoration costs will be recognised once the final production concession is
granted and development has commenced as anticipated in 2020.
-
-
51
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 17: LEASES
Leases as lessee
The Company leases office facilities in Rome, the lease runs for a period of six years from start of the lease in
June 2016. Previously this lease was classified as an operating lease under AASB117. The Company leases
office equipment under short term contracts for low-value items and as such the Company has elected not
to recognise right-of use assets and lease liabilities for these leases. Payments made under such leases are
expensed on a straight-line basis.
Information about leases for which the Company is a lessee is presented below.
Right-of-use assets
Right-of-use assets related to leased properties that do not meet the definition of investment property and
are presented as property, plant and equipment (see Note 12)
Buildings
Balance at 1 January (on adoption of AASB16)
Additions to right-of-use assets
Depreciation
Balance at 31 December 2019
Amounts recognised in profit or loss
2019 - Leases under AASB16
Interest on lease liabilities
Expenses relating to leases of low-value assets
2018 - Leases under AASB117
Lease expense
Amounts recognised in statement of cash flows
Total cash outflow for leases
€
136,616
-
(39,985)
96,631
€
2,570
1,233
35,220
31 December 2019
€
43,758
Lease liabilities
Lease liabilities are presented in the statement of financial position separately within liabilities as follows:
31 December 2019
€
31 December 2018
€
Lease liabilities (current)
Lease liabilities (non-current)
The Group has a lease for the main operation office in Rome Italy. Future minimum lease payments at
31 December were as follows:
41,066
58,512
-
-
Within one year
One to five
years
After five
years
Lease payments
Finance charges
Net present values
42,900
(1,834)
41,066
59,916
(1,404)
58,512
-
-
-
Total
102,816
(3,238)
99,578
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for short term leases (leases with an expected
term of 12 months or less) or for leases of low value assets.
52
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 18:
INTEREST BEARING LOANS
This note provides information about the contractual terms of the Group’s interest-bearing loans and
borrowings, which are measured at amortised cost. For more information about the Group’s exposure to
interest rate, foreign currency and liquidity risk, see note 22.
Current liabilities
Loans
CONSOLIDATED
2019
€
2018
€
1,272,676
1,201,258
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
31 December 2019
31 December 2018
Currency
Nominal
Interest
rate
Year of
Maturity
Face Value
€
Carrying
Amount
€
Face Value
€
Carrying
Amount
€
Current liabilities
10%
AUD
2020
Unsecured loans
1,201,258
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 19 months and an interest
rate of 10%. (refer note 24 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 22.
1,201,258
1,272,676
1,272,676
NOTE 19: CONVERTIBLE NOTES
The Company issued convertible notes equivalent to A$2,500,000 in 2018. The Euro value of these convertible
notes at 31 December 2019 is €1,563,183 (2018: €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.
53
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 20:
CAPITAL AND RESERVES
Share Capital
Opening balance - 1 January
Shares issued during the year:
Placement issue tranche 2 – 27 May 2019
Placement issue - 8 August 2019
Placement issue tranche 2 - 6 November 2019
Placement issue of 21 December 2018
Return of capital
Ordinary Shares
2019
Number
2018
Number
2019
€
2018
€
611,736,318
593,260,128
45,531,416
49,462,268
10,095,237
14,545,456
10,909,091
-
-
-
-
-
18,476,190
-
262,337
484,062
371,996
-
-
-
-
-
483,009
(4,410,847)
Share issue costs
-
-
(8,066)
(3,014)
Closing balance – 31 December
647,286,102
611,736,318
46,641,745
45,531,416
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.
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 (2018: Nil).
54
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l
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 21:
FINANCIAL REPORTING BY SEGMENTS (continued)
Reconciliation of reportable segment profit or loss, assets and
liabilities
Profit or loss:
CONSOLIDATED
2019
€
2018
€
Total profit / (loss) for reportable segments
(432,308)
3,741,613
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 22:
FINANCIAL INSTRUMENTS
(308,264)
(85,511)
(967,310)
(1,222,366)
(1,707,882)
2,433,736
8,028,792
7,856,510
1,244,056
1,644,615
9,272,848
9,501,125
(352,159)
(527,663)
(3,676,234)
(3,330,446)
(4,028,393)
(3,858,109)
(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
42,165
-
42,165
515,604
-
515,604
Fixed rate instruments
Financial assets
Financial liabilities
-
(2,835,859)
(2,835,859)
-
(2,732,508)
(2,732,508)
56
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 22:
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 2018.
Effect in €’s
31 December
Variable rate instruments
Profit or loss
Equity
2019
2018
2019
2018
211
2,578
-
-
(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
2019
€
42,165
283,853
17,578
343,596
2018
€
515,604
499,780
27,455
1,042,389
57
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 22:
FINANCIAL INSTRUMENTS (continued)
(c)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest
payments:
-
-
-
-
-
Consolidated
31 December 2019
In €
Trade and other
payables
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
1 – 2 Years
2 – 5 Years
(1,090,159)
(1,090,159)
(1,090,159)
-
-
Lease liabilities
(99,578)
(103,675)
(21,450)
(21,450)
(60,775)
Interest bearing
loans
(1,272,676)
(1,476,427)
-
(1,476,427)
-
Convertible notes
(1,563,183)
(1,816,444)
(128,207)
(62,527)
(1,625,710)
(4,025,596)
(4,486,705)
(1,239,816)
(1,560,404)
(1,686,485)
Consolidated
31 December 2018
In €
Trade and other
payables
Interest bearing
loans
Convertible notes
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)
(1,531,250)
(1,356,638)
(1,882,770)
-
(106,520)
(1,356,638)
(61,250)
-
(1,715,000)
(3,772,548)
(4,279,448)
(1,146,560)
(1,417,888)
(1,715,000)
-
-
-
-
(d)
Net Fair Values of financial assets and liabilities
The carrying amounts of financial assets and liabilities as disclosed in the balance sheet equate
to their estimated net fair value.
Financial assets and financial liabilities measured at fair value in the statement of financial
position are grouped into three levels of a fair value hierarchy.
The three levels are defined based on the observability of significant inputs to the
measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (derived from
prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
58
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 22:
FINANCIAL INSTRUMENTS (continued)
Current receivables, current payables and cash & cash equivalents are not measured at fair
value. Due to their short- term nature, the carrying amount of current receivables, current
payables and cash and cash equivalents is assumed to approximate their fair value.
The table below summarises financial assets and liabilities at fair value at each level of
measurement:
At 31 December 2019
Lease Liabilities
Convertible Notes (refer note)
Level 1
$
Level 2
$
Level 3
$
Total
$
-
-
-
-
99,578
99,578
1,563,183
-
1,563,183
1,563,183
99,578
1,662,761
(e)
Foreign Currency Risk
The Group is exposed to foreign currency risk on purchases and borrowings that are
denominated in a currency other than Euro. The 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
CONSOLIDATED
2019
€
29,685
(127,238)
(1,272,676)
(1,563,183)
(2,933,412)
2018
€
413,682
(68,022)
(1,201,258)
(1,531,250)
(2,386,848)
The following significant exchange rates applied during the year:
Australian Dollar ($)
Pound Sterling (£)
Average rate
Reporting date spot rate
2019
0.620
1.141
2018
0.632
1.130
2019
0.625
1.175
2018
0.616
1.113
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 2018 was
prepared using the same basis.
31 December 2019
Australian Dollar to Euro (€)
Pound Sterling (£)
31 December 2018
Australian Dollar to Euro (€)
Pound Sterling (£)
CONSOLIDATED
Profit or loss
€
(142,970)
(3,700)
Equity
€
-
-
(128,673)
(308)
-
-
59
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 22:
FINANCIAL INSTRUMENTS (continued)
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 23:
COMMITMENTS AND CONTINGENCIES
Contractual Commitments and contingencies
The Company has considered its obligations for restoration and rehabilitation of the well
development planned for the Selva field. The Company estimates that the cost of restoration of the
well development will be €2,065,119 to be incurred once production ceases at the end of estimated
production life estimated to be 15 years.
A provision for these restoration costs will be recognised once the final production concession is
granted and development has commenced as anticipated in 2020.
Other than the above, 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 2019.
NOTE 24:
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
Consolidated
2019
€
200,303
-
-
-
2018
€
267,883
-
-
9,847
200,303
277,730
INTEREST BEARING LOANS
The Company obtained financing through a streamlined facility provided by existing and former
Directors of the Company. The facility agreements have been reached with entities associated with
Kevin Bailey (current director), Byron Pirola (director up to 3 March 2020) and Graham Bradly (former
director and current shareholder). The loan balances and their repayment terms are summarised
below:
60
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 24:
RELATED PARTIES (continued)
31 December 2019
Related Party
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Beronia Investments Pty Ltd
Kevin Bailey
Fuiloro Pty Ltd
G. Bradley
K & G Bailey as trustee for The Bailey
Family Trust
Loan Amount
A$663,179
A$156,055
A$528,396
A$264,172
A$190,800
A$126,736
Interest
% p.a
10%
10%
10%
10%
10%
10%
Repayment
Term
19 months
19 months
19 months
19 months
19 months
19 months
Accrued
Interest
€
24,312
5,721
19,371
12,408
6,138
4,646
A$106,055
10%
19 months
3,888
76,484
Related party loans were extended by mutual agreement to 31 December 2020 with the lenders agreeing to
capitalise interest accrued on the outstanding loans up to 1 June 2019.
31 December 2018
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
12 months
6 months
6 months
6 months
12 months
6 months
12 Months
6 months
6 months
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
45,752
30,694
19,607
16,963
730
20,525
17,409
1,302
1,199
10%
10%
10%
10%
10%
10%
10%
10%
10%
A$100,000
6 months
1,199
10%
Movement on related party loans is summarised below:
Balance at beginning of year
Loans received
Loans repaid
Interest capitalised on loans
Effect of foreign exchange
155,380
CONSOLIDATED
2019
€
1,201,258
99,351
(240,845)
206,234
6,678
2018
€
526,892
731,719
-
-
(57,353)
Balance at end of year
1,201,258
Related party loans repaid during the year were settled with issue of 8,722,944 ordinary shares as part of
the Directors participation in the private placements.
1,272,676
61
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 24:
RELATED PARTIES (continued)
Accrued interest on loans
Balance at beginning of year
Accrued interest for year
Interest capitalised to loans during year
155,380
127,338
(206,234)
54,888
100,492
-
Balance of accrued interest at end of year
76,484
155,380
CONVERTIBLE NOTES
The table below summarises the Convertible notes held by related parties at 31 December 2019. The
convertible notes are held by entities associated with Kevin Bailey and Michael Masterman (current
directors) Refer note 19 for details on the terms of the convertible notes.
Symmall Pty Ltd
K & G Bailey as trustee for The Bailey Family Trust
Interest accrued on convertible notes included in trade payables and
accruals
Symmall Pty Ltd
K & G Bailey as trustee for The Bailey Family Trust
NOTE 25:
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
A$300,000
A$700,000
A$300,000
A$700,000
A$1,000,000
A$1,000,000
€
23,599
55,065
78,664
€
17,666
7,572
25,238
2019
€
2018
€
43,971
7,429,667
7,473,638
440,283
6,643,667
7,083,951
1,299,666
1,563,183
2,862,849
1,196,513
1,531,250
2,727,763
4,610,789
4,356,187
46,641,745
(42,030,956)
4,610,789
45,531,416
(41,175,229)
4,356,187
62
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 25:
PARENT ENTITY DISCLOSURES (continued)
Financial Performance
Loss
Other comprehensive loss
Total Comprehensive loss
(855,727)
-
(855,727)
(1,285,086)
-
(1,285,086)
NOTE 26:
INTERESTS IN OTHER ENTITIES AND JOINT OPERATIONS
The Company’s interest in joint arrangements at 31 December 2019 are as follows:
Joint Operation
Manager
Company’s Interest
Principal Activity
(Exploration)
Selva Malvezzi Field
Po Valley Operations
63%*
Gas
The Company has a farm-out agreement and Joint Operations Agreement (“JOA”) with United Oil and
Gas Plc (“United”) (20% economic interest) and Prospex Oil and Gas Plc (“Prospex”) (17% economic
interest). In exchange for their respective interests United and Prospex cover 74% of the completed
Podere Maiar-1 well cost. The Company received preliminary award of the Selva Production
concession in January 2019. Development of the production well and field connection pipework will
be undertaken under the terms of the JOA with United and Prospex.
*The Company holds the quota for 100% of the Podere Gallina and Selva Licences. United and Prospex have 20% and 17% ecomonic
interests and are awaiting Italian government approval for the 20% and 17% quotas to be transferred.
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
2019
Investment
€
2018
Investment
€
Holding
%
Po Valley Operations Pty Limited
(“PVO”)
NOTE 27:
SUBSEQUENT EVENTS
Australia
Ordinary
2,544,225
2,544,225
100
In February 2020, the Company entered into a Master Service Agreement for the provision of
technical, administrative and commercial services to an oil and gas company with assets within the Po
Valley region. These services will provide the Company with income of €25,000 per month for a
minimum period of 3 months and until the agreement is terminated by either party.
During the month of March 2020, the Italian government imposed a nationwide lockdown as a
preventative measure to reduce the contagion of Covid-19. Po Valley employees are working from
home during this time. Importantly, we have seen evidence that the Italian Ministries continue to be
operational therefore we do not expect significant delays in the ongoing environmental approvals for
63
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
NOTE 27:
SUBSEQUENT EVENTS (continued)
Selva Malvezzi and Teodorico. Importantly, the oil and gas industry was declared an "essential service"
by the Italian government underpinning its strategic importance in the Italian economy. However, the
timing, full extent of the impact and recovery from Covid-19 on our employees and business
operations continues to evolve as at the date of this report. As such, the Group is unable to estimate
the effects on the Group’s financial position, liquidity and operations in the 2020 financial year.
Other than the above, 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.
64
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 22 to 64, 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 2019
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 chief executive officer for the financial year ended 31 December 2019.
3. The Directors draw attention to Note 1.2 to the Financial Statements which include a statement of
compliance with International Financial Reporting Standards.
This declaration is made in accordance with a resolution of directors.
Michael Masterman
Chairman and Chief Executive Officer
31 March 2020
Kevin Bailey
Non-Executive Director
31 March 2020
65
66
67
68
69
PO VALLEY ENERGY LIMITED
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Securities Exchange Limited Listing Requirements
and not disclosed elsewhere in this report is set out below.
Information regarding share holdings is current as at 15 April 2020.
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
HSBC Custody Nominees (Australia) Limited
Fuiloro Pty Ltd
P & N Dairies Pty Ltd
Beronia Investments Pty Ltd
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 Citicorp Nominees Pty Limited
13 Mr Paul Kenneth Lambert & Mrs Nadine Alison Lambert
14 Beronia Investments Pty Ltd
15 Donus Australia Foundation Limited
16 Mr Laurence Mark Macri & Mrs Christine Simone Macri
17 Mr Chris Carr & Mrs Betsy Carr
18 Mr Graham John Bradley
19 Mr Kevin Christopher Bailey
20 Henderson International Pty Limited
Total
2. SUBSTANTIAL SHAREHOLDERS
Number
86,234,079
79,002,181
78,446,050
42,054,444
30,799,806
25,105,188
25,061,679
23,942,460
20,718,217
20,310,674
19,868,413
11,573,968
10,815,921
9,716,708
9,460,000
9,175,900
9,000,000
8,857,965
8,000,000
6,415,500
534,559,153
%
13.32
12.21
12.12
6.50
4.76
3.88
3.87
3.70
3.20
3.14
3.07
1.79
1.67
1.50
1.46
1.42
1.39
1.37
1.24
0.99
82.60
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
Byron Pirola
Supervised Investments Australia Limited
Mr Paul Kenneth Lambert
Number
167,971,782
150,635,225
62,784,178
50,082,268
34,813,665
%
25.95
23.27
9.70
8.19
5.47
3. NUMBER OF SECURITY HOLDERS AND SECURITIES ON ISSUE
Total number of fully paid ordinary shares on issue is 647,286,103 held by 394 shareholders.
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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
18
18
152
123
394
Fully paid Ordinary Shares %
7,659
43,954
136,295
6,809,924
640,288,271
647,286,103
0.00
0.01
0.02
1.05
98.92
100.00
6. UNMARKETABLE PARCEL OF SHARES
The number of shareholders holding less than a marketable parcel of ordinary shares is 122
based on the Po Valley Energy Limited closing share price of $0.044 on 15 April 2020.
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.
71
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
The following information is provided in order to comply with Chapter 5 of the ASX Listing Rules and
include general requirements applicable to the public reporting of petroleum resources and specific
information to be included in the oil and gas exploration:
1)
TENEMENTS
Po Valley Energy Limited (the “Company”, “Po Valley Energy” or “PVE”) holds 100% of Po Valley
Operations Pty Ltd (“PVO”). PVO holds the titles to all exploration permits and production concessions
and its operations are located entirely in the north of Italy.
As at 31 December 2019, the Company’s core portfolio includes a total of 4 onshore Exploration
Permits and 1 offshore Exploration Permit and two preliminary awarded Production Concessions.
Total acreage position of the Company at 31 December 2019 is 1,690 km2.
For an illustration of each asset’s location please refer to the map in Figure 1 and Table 1.
Figure 1: Licences map at 31 December 2019
72
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
Tenement
Location
Interest held
N
O
I
T
C
U
D
O
R
P
S
N
O
I
S
S
E
C
N
O
C
PREL.
AWARDED
PREL.
AWARDED
Teodorico (d.40.AC-PY)
Italy, Adriatic Offshore
100% Po Valley
Selva Malvezzi (1)
Italy, Emilia Romagna
100% Po Valley
S
T
I
M
R
E
P
N
O
I
T
A
R
O
L
P
X
E
AR94PY
Italy, Adriatic Offshore
Cadelbosco di Sopra (gas) (2)
Italy, Emilia Romagna
GRANTED
Cadelbosco di Sopra (oil) (2)
Italy, Emilia Romagna
Grattasasso
Italy, Emilia Romagna
100% Po Valley
85% Po Valley
(op.)
100% Po Valley
100% Po Valley
(op.)
Podere Gallina(1)
Italy, Emilia Romagna
100% Po Valley
Torre del Moro
Italy, Emilia Romagna
100% Po Valley
Table 1: Tenements at 31 December 2019
Notes:
1. PVO holds the quota for 100% of the Podere Gallina and Selva Malvezzi licences. United Oil and Gas and Prospex have 20%
and 17% economic interests; the Italian government has preliminarily approved the 20% and 17% licences quotas to be
transferred to them in Podere Gallina Permit; transfer approval for Selva Malvezzi has to be formally requested.
2. Cadelbosco di Sopra 85% is related only to the “gas play” - After Petrorep Italiana request, Italian government on 25
February 2020 approved the 15% licence quota to be transferred from Petrorep Italiana to Po Valley Operations.
As at 31 December 2019 all tenements are 100% owned with exception of the Cadelbosco gas play at
85%. The Company holds 100% of the quota for the Podere Gallina Licence but a 63% economic
interest on the basis of the 2017 Farm-in Agreement with United Oil & Gas (20%) and Prospex Oil &
Gas (17%) in the Podere Gallina licence (promotion on the Podere Maiar 1 well). United and Prospex
received from the Italian government on 13 March 2020 a preliminary approval for the 20% and 17%
quotas transfer in Podere Gallina permit; request for quotas transfer approval for Selva Malvezzi will
follow after formal request.
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 in 2019 lodged the application to transfer its
15% licence quotas to Po Valley Operations and on 25 February 2020 the Italian government granted
this quotas transfer.
2) RESERVES AND RESOURCES STATEMENT
The following tables summarise the status of the Company’s Reserves & Resources as at 31 December
2019.
Company Reserves
Reserves as at
Reserves as at
31 December 2019
31 December 2018
Gas, Italy (bcf)
Developed
Undeveloped
Teodorico
Selva Malvezzi (Podere Maiar) [net]
Total Reserves
Table 2: Total Company Reserves
1P
-
26.70
2.60
29.30
2P
-
36.50
8.40
44.90
1P
-
26.70
2.60
29.30
2P
-
36.50
8.40
44.90
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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.
Company Contingent Resources
Contingent Resources as at
Contingent Resources as at
Gas (bcf)
Oil (MMbbls)
Table 3: Total Company Contingent Resources
31 December 2019
1C
2C
31 December 2018
1C
2C
12.8
9.4
25.8
43.4
12.8
9.4
25.8
43.4
The table on the following page of the Technical Summary shows the detailed estimate for each field.
There have been no material changes to Reserves and Resource estimates since the prior year.
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. The last
review took place in April 2019.
The reserves and resource estimates of the gas fields Teodorico and Selva were independently
evaluated by the geological and petroleum reservoir consultancy firm CGG (UK) Services Ltd in 2018
and 2019. The two oil discoveries (Bagnolo in Piano and Ravizza) were initially evaluated by CGG (UK)
Services Ltd in 2013 and reviewed in 2019.
All figures have been determined using a deterministic method except Teodorico which was estimated
using a probabilistic method.
Estimates of the 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 together with a Competent Persons Report issued by CGG(UK) Services Ltd covering all Po Valley
assets dated 24 April 2019.
All estimates are based on independent evaluations in accordance with SPE/WPC/AAPG/SPEE
Petroleum Resource Management System (2007/2011).
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PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
Table 4: Gas Reserves and Resources by Field at 31 December 2019 and 31 December 2018 (As Per CPR Dated 24 April 2019)
Table 5: Oil Reserves and Resources by Field at 31 December 2019 and 31 December 2018 (As Per CPR Dated 24 April 2019)
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.
The Company confirms that it is not aware of any new information or data that materially affects the
information included in the original market announcement and, in the case of estimates of oil and gas
reserves that all material assumptions and technical parameters underpinning the estimates in the
relevant market announcement continue to apply and have not materially changed.
75
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
The Reserves and Resources Statement is based on, and fairly represents, information and supporting
documentation prepared by or under the supervision of Andrew Webb, Manager of Petroleum
Reservoir and Economics of CGG Services (UK) Limited (“CGG”) Reference no. 8P512. CGG compiled
these estimates to confirm with the definitions or the Petroleum Resources Management Systems
(2007 and 2011) as published by the Society of Petroleum Engineers (SPE). These estimates were
prepared as part of a CPR dated 24 April 2019 which was lodged with the ASX on 26 April 2019. Mr
Webb is qualified in accordance with the requirements of ASX Listing Rule 5.41 and consents to the
inclusion of the information in this report of the matters in the form and context in which it appears.
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.
76