Annual Report
For the year ended 31 December 2023
PO VALLEY ENERGY LIMITED
ABN 33 087 741 571
CORPORATE DIRECTORY
Kevin Bailey AM
Sara Edmonson
Joseph Constable
Katrina O’Leary
Kevin Hart
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Level 5, 191 St Georges Terrace, Perth WA 6000
Via Isonzo 34, Rome 00198 Italy
Tel: +39 06 42014968
Link Market Services Limited
Level 12, 250 St Georges Terrace, Perth WA 6000
Tel: +61 8 9211 6670
HLB Mann Judd (WA Partnership)
Level 4, 130 Stirling Street, Perth WA 6000
Steinepreis Paganin
Level 4, The Read Buildings, 16 Milligan Street, Perth WA 6000
Directors
Company Secretary
Registered Office
Rome Office
Share Register
Auditor
Solicitors
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
PO VALLEY ENERGY LIMITED
ABN 33 087 741 571
CONTENTS
CHAIRMAN’S LETTER TO SHAREHOLDERS ................................................................................................................... 1
DIRECTORS’ REPORT .................................................................................................................................................... 3
REMUNERATION REPORT .......................................................................................................................................... 11
AUDITOR’S INDEPENDENCE DECLARATION ............................................................................................................... 18
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............................................................... 19
STATEMENT OF FINANCIAL POSITION ....................................................................................................................... 20
STATEMENT OF CHANGES IN EQUITY ........................................................................................................................ 21
STATEMENT OF CASH FLOWS .................................................................................................................................... 22
NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................... 23
DIRECTORS’ DECLARATION ........................................................................................................................................ 63
INDEPENDENT AUDITOR’S REPORT ........................................................................................................................... 64
TECHNICAL SUMMARY – RESERVES AND RESOUCES STATEMENT ............................................................................ 69
ASX ADDITIONAL INFORMATION ............................................................................................................................... 75
PO VALLEY ENERGY LIMITED
ABN 33 087 741 571
CHAIRMAN’S LETTER
Dear Shareholder,
On behalf of the Board of Directors, we are pleased to present the Company’s Annual Report.
2023 was a pivotal year for the Company. Maiden produc�on from the Podere Maiar-1 (PM-1) field
commenced in early July reaching a cumula�ve 9.8 million standard cubic metres (6.2 million standard
cubic metres net) within year-end genera�ng revenue of €2.3 million for the Group. This produc�on
coupled with our con�nued focus on opera�onal discipline resulted in the first profit a�er tax in many
years.
The well has con�nued to show strong results during the first few months of 2024. Post commissioning,
the average daily produc�on rate is in the order of 80,000 scm per day and gas prices are rising on the
back of increased conflict in the Middle East.
At a macro level, Europe has boldly addressed its reliance on cheap Russian gas and consump�on levels
are at a record low. The Italian government, like many EU member states, has taken steps to strengthen
its own energy security by maintaining high natural gas storage levels and, more recently, passing
legisla�on to enable and accelerate domes�c gas development. Gas con�nues to play an important
role in Italy and Europe as a cri�cal transi�on energy source with the poten�al to reduce the carbon
footprint of key industries such as steel manufacturing by more than 50%.
2024 will mark the Company’s 20th year on the Australian Stock Exchange and we are delighted that
this milestone is met with an exci�ng new development phase including a 3D seismic campaign across
the Selva Malvezzi produc�on concession and a mul�ple well drilling program.
From a financial standpoint, the Company stands strong with no debt and a cash reserve at bank of
€2.1 million ($3.5 million AUD) for the first quarter of 2024. This con�nues to increase daily with free
cash flow from the PM-1 well. Net of all costs and royal�es at current prices we are adding on average
of €220 thousand ($365,000 AUD) every month to our cash balance. These revenues will be used to
help fund our upcoming work program.
The focus of the Board and Management has been to posi�on the company for op�mal value in the
medium term. The broader strategy is to increase produc�on in the Selva Malvezzi concession with
addi�onal wells. This will substan�ally increase cash flow and support Italy as it strengthens its energy
security and protects domes�c industry. There are four other gas prospects in the Selva Malvezzi
produc�on concession, and we intend to apply to the Ministry for drilling approval this year. Due
considera�on is being given to how we will fund these addi�onal wells. Op�ons are being assessed
with the aim to be least dilu�ve to exis�ng shareholders.
We are also advancing the opportunity to realize value from our offshore Adria�c asset at Teodorico
through either the sale of the asset to one of the major offshore operators or the farm in of a joint
venture partner. Recent developments have been encouraging as the Italian Government explores
ways to boost domes�c produc�on in this gas-rich basin. We hope to realise value from some of our
smaller sites including Cadelbosco and Gratasasso and our condensate explora�on license at Torro del
Moro.
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PO VALLEY ENERGY LIMITED
ABN 33 087 741 571
CHAIRMAN’S LETTER
Separately, we intend to begin evalua�ng both storage opportuni�es from exis�ng assets and new
geothermal opportuni�es with the aim to leverage the extensive exper�se of our technical team while
broadening our por�olio.
We share your disappointment in the current share price performance which has dri�ed down over
the last twelve months as some shareholders have sold their posi�ons. It has been said that in the
short term, the share market is a vo�ng machine but in the long term it is a weighing machine. This is
par�cularly true in the junior resource space. The Board is confident however that the Company has
the key ingredients to create significant mid-term value and is ideally posi�oned to deliver results.
A�er many years of hard work and building rela�onships in the Italian market, Po Valley Energy is at
the right place at the right �me. We look to the future with op�mism and a commitment to delivering
for the benefit of all shareholders.
Kevin Bailey AM
Chairman
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
The Directors of Po Valley Energy Limited (“the Company” or “PVE”) present their report together with the
financial report for the year ended 31 December 2023 of the Group, being the Company and its controlled
entities (“the Group” or “Po Valley”).
1. Directors
The Directors of the Company at any time during or since the end of the financial year are:
Kevin Bailey AM — Director since 22 April 2016
Non-Executive Chairman
DipFP, Age 63
Kevin was appointed as a director on 22 April 2016 and as Chairman on 2 May 2022. He has been a shareholder
of PVE since April 2008 and brings significant business acumen and experience to the Board. Kevin 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. Kevin 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. In the past three years, Kevin has not been a
director of any other listed company.
Sara Edmonson — Director since 23 December 2019
Non-Executive Director
BSBA, MBA, Age 44
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. Sara is a former 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 and a Masters in
Sustainability Sciences from Harvard University. Sara led PVE as CEO from July 2010 to 2017 and served on the
board of Coro Energy Plc from November 2017 to October 2018 and as executive until March 2019. Sara has
spent the last several years focused on the energy transition leading large commercial-scale development of
green hydrogen projects in Europe. She has been deeply involved in the policy shaping around decarbonisation
and climate targets at EU and Member State level. In the past three years, Sara has not been a director of any
other listed company.
Joseph Constable — Director since 30 November 2021
Non-Executive Director
BA(Hons) MPhil, Age 32
Joseph was appointed as a director on 30 November 2021. Joseph is an Executive Director of Hancock & Gore
Limited (ASX: HNG), and portfolio manager at H&G Investment Management Limited and has been a long-time
shareholder of PVE personally as well as professionally via H&G High Conviction Limited (ASX: HCF), of which
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
he is an Executive Director. Joseph has a detailed understanding of the Company and its assets and brings his
significant financial skills to the benefit of PVE and the board of directors. In the past three years, Joseph has
not been a director of any other listed company.
Katrina O’Leary — Director since 2 May 2022
Non-Executive Director
BA LLB, LLM, Age 60
Katrina was appointed as a director on 2 May 2022. Katrina is an Intellectual Property (IP) and Information
Technology lawyer with decades of experience in IP management, commercial and litigious matters. Katrina
also advises on ESG compliance especially in the area of ethical sourcing. Her practice is international, and she
has worked in Italy, the USA and Australia representing government and international organisations and major
public companies. Katrina brings to the board her strength in legal compliance, governance, and risk
management. In the past three years, Katrina has not been a director of any other listed company.
2. Company Secretary
Kevin Hart – Company Secretary, B.Comm, FCA
Kevin Hart is a Chartered Accountant and was appointed to the position of Company Secretary on 17 April
2018. He has over 30 years’ experience in accounting , management and administration of public listed entities
in the mining, mining services and exploration industry. Kevin is a Principal in the Company Secretarial and
CFO divisions of the Automic Group which provides Company Secretarial, CFO support and corporate
compliance advice to a number of ASX listed entities.
3. Directors’ Meetings
The number of meetings of the Board of Directors held during the financial year and the number of meetings
attended by each director are provided below:
Director
Kevin Bailey AM
Sara Edmonson
Joseph Constable
Katrina O’Leary
Attended
Held
11
9
10
11
11
11
11
11
Held: represents the number of meetings held during the time director held office.
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:
• Production of gas at Podere-Maiar 1 in the Selva Malvezzi concession
• The exploration for gas and oil in the Po Valley region in Italy.
• Appraisal and development of gas and oil fields.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
5. Operating and financial review
Financial results for the year
This Group’s focus for the 2023 year was the completion of the development of the Podere Maiar-1 well which
commenced gas production in early July 2023. Production from commencement to 31 December 2023 was
9,838 Mcm of gas (gross, net to the Group of 63% or 6,198 Mcm) generating revenue of €2.34 million for the
Group.
The profit after tax for the year from continuing operations was €586,657 (2022: Loss €983,714).
The Group’s cash reserves as at 31 December 2023 were €1,252,717 (31 December 2022: €1,536,041).
A review of the operations and the results of those operations of the Group during the year is as follows:
Summary of results table:
Production volume (net)
Gas Sales
EBITDA1
Depreciation and amortisation – production
Depreciation
Unwind of discount of restoration provision
EBIT1
Finance costs other than restoration provision
discounting
Taxation
Net profit / (loss) after tax attributable to shareholders
2023
Mcm
6,198
€’000
2,337
1,157
(189)
(27)
(108)
833
(32)
(215)
586
2022
Mcm
-
€’000
-
(734)
-
(9)
-
(743)
(253)
12
(984)
1EBITDA (earnings before interest, tax, depreciation and depletion, exploration expensed and impairment losses) and EBIT (earnings before
interest and tax) are non-IFRS measures that are presented to provide an understanding of the Group’s operations. The non-IFRS measures
are unaudited, however, the numbers have been extracted from the financial statements that have been subject to audit by the Company’s
auditor.
Share issues
The Company issued 5,000,000 shares on the exercise of options during the year at an exercise price of
AU$0.05 (~€0.031) per share raising €155,711 (before costs).
3,000,000 shares were issued on exercise of performance rights during the year. The performance rights had
a Nil exercise price.
Earnings per share
The basic and diluted earnings per share for the Group from continuing operations was 0.05 € cents (2022:
loss of (0.09) € cents)
Operations
Selva Gas Field (63% PVO) - Selva Malvezzi Production concession
Selva is an onshore natural gas field located in the eastern part of the Po Plain, among the Ferrara and Bologna
provinces, in the Emilia Romagna Region. The Selva Malvezzi Production Concession awarded in July 2022
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
measures 80.68km2 and includes the
Podere Maiar Gas field (PM-1) (in production) and the gas prospects
known as East Selva, Selva North and South, Riccardina and Fondo Perino. Previously these areas fell within
the Podere Gallina Exploration Permit which the Company relinquished in September 2022 having secured the
Production Concession over the prospective areas.
Po Valley Operations (100% subsidiary of the Company, “PVO”) is the operator under a Joint Operating
Agreement (“JOA”) and holds a 63% interest in the Selva gas field with Prospex Oil and Gas Plc (“Prospex”)
holding 37% (includes 20% held by Prospex subsidiary UOG Italia S.r.l).
Figure 1: Selva Malvezzi Production Concession
Podere Maiar-1 (“PM-1”) gas facility and production:
The PM-1 gas facility construction and grid connection to the Italian national pipeline grid operated by SNAM
(Società Nazionale Metanodotti / National Pipeline Company) was completed in May 2023 on schedule and
within 3% of budget. The performance bond of €757,000 (63% to PVO €476,910) initially deposited with SNAM
at the commencement of the PM-1 gas facility development was returned to the Group following the
successful completion of the pipeline tie-in and having satisfied the condition of a Gas Sale Agreement being
in place.
Production at PM-1 commenced on 4 July 2023 with a four-week ramp up and commissioning programme.
Gas is sold under the gas sales agreement (GSA) with BP Gas Marketing Limited (BPGM). The contract with
BPGM is an 18-month contract by which PVO will supply an estimated 37,000,000 standard cubic meters of
gas at the gas supply price in the contract which is linked to Italy’s “Heren PSV day ahead mid” price. The
option to renew contract is open 30 days prior to the end of the contract term (30 September 2024) (refer to
ASX Announcement dated 14 February 2023).
PVO carried out several slick line operations over the production period to 31 December 2023 the first
immediately after ramp-up concluded followed by programmes at end of August, September, November and
in mid-December. The slick line work programs were based around delivering well certainty for the long term,
monitoring bottom hole pressure and temperature and for any debris accumulation. Preliminary concerns
around debris accumulation identified post ramp-up during August slick line operations were rectified and
resolved as part of the September slick line work programme. Ongoing monitoring throughout the period
ensured no accumulation issues were evident. Bottom hole pressure and temperature readings in static
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
conditions were in line with expectations. PVO completed two further slick line operations in January 2024
with results confirming no debris accumulation and with the well performance in line with expectations. Choke
levels have been set to produce at ~78,000 to 80,000 standard cubic meters (‘scm’) / day.
PM-1 production for the year is shown in the table below:
PM-1 Gas Production for the year to 31 December 2023
July to September 2023 October to December 2023
Total
PM-1 Production
PM-1 – 100%
PM-1 – 63% (PVE share)
Revenue
PM-1- 100%
PM-1 – 63% (PVE share)
(scm)
5,658,117
3,564,613
€ (‘000)
1,937
1,220
(scm)
4,180,015
2,633,409
€ (‘000)
1,773
1,117
(scm)
9,838,132
6,198,022
€ (‘000)
3,710
2,337
Selva Malvezzi Prospects: Selva North and South, Selva East and Riccardina
The Selva Malvezzi Production Concession is the key area of focus for the Company with the next stages of
development including development of drilling programmes at Selva North, South, East and Riccardina, a
seismic survey over East Selva and Riccardina and planned Environmental Impact Studies for all four wells.
Works have already commenced, and once environmental approval is received, detailed planning for drilling
will follow. Approvals of these programs are expected in the second half of 2024. Initial discussions with
landholders near the North / South and East drilling prospects have commenced and been very positive.
Teodorico Offshore Gas field development (100% PVO)
The Teodorico gas field is located in shallow waters (approximately 30m deep) off the east coast in the
northern Adriatic Sea; the primary source of domestic gas production for much of Italy; and in close proximity
to existing east coast offshore gas production facilities.
Teodorico has the largest gas-in-place of all of Po Valley Energy’s gas fields and is at an advanced stage of
assessment, ready for development. The Group holds a preliminary production concession for this area and
the Environmental Impact Assessment (“EIA”) decree for Teodorico was granted in March 2021.
In December 2023, the Italian government published a New Energy Decree in response to Italy’s energy
security needs which include measures to strengthen the production and security of domestic natural gas
supply. An accelerate permitting regime is envisaged as an integral part of this decree. The decree was
converted into law in February 2024. This law must now be operationalised, and the Italian Government has
assigned this mandate to Gestiore Servizi Energetici “GSE”, an existing regulated body for energy in Italy. Po
Valley is currently investigating the implications of this new law in consultation with its legal advisers and the
relevant Ministry, MASE, to determine the full impact on Teodorico. Ultimately the law is promoting domestic
production citing the Northern Adriatic as a key source of natural gas for the country therefore the impact on
Teodorico is positive, however the details are still being worked through from an operational perspective.
The Company continues to assess how best to realise value from its 100%-owned Teodorico off-shore asset,
either via a joint venture or sale.
Torre del Moro, Cadelbosco di Sopra and Grattasasso exploration licences (100% PVO)
The Company is reviewing optimal development paths for these residual assets including introduction of third-
party investors/partners who have interest in participating in their development.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Cadelbosco di Sopra and Grattasasso are shallow gas opportunities which fit neatly with the Company’s proven
exploration and development capabilities whilst Torre del Moro is a large deep gas prospect.
Strategy
Po Valley remains a northern Italy-focused energy production, development and exploration company with a
streamlined focus on the following assets:
-
The onshore gas production and further development at Selva Malvezzi;
- Offshore Adriatic gas development at Teodorico;
-
The large-scale gas prospect at Torre del Moro; and
- Canolo and Zini gas prospects in the Cadelbosco di Sopra exploration licence.
Po Valley’s primary focus is gas production at the Podere Maiar-1 well in the Selva Malvezzi Production
Concession and to advance development of the surrounding prospects at North, South and East Selva, with
the goal of drilling these prospects in the next twelve to twenty-four months.
Teodorico is very leveraged to the current market conditions in Italy and Po Valley continues to explore options
to introduce joint venture partners or divest this large offshore gas field.
Health, safety and environment
Paramount to Po Valley’s ability to pursue its strategic priorities is a safe workplace and a culture of safety first.
The Group 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 is committed to their continuous improvement. Whilst growing from exploration roots, the
Group has strived to continually improve underlying safety performance. The Group 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 2023, the
Group maintained its outstanding occupational health safety and environmental track record with no incidents
or near misses to report.
Principal risks and uncertainties
Oil and gas exploration and appraisal involves significant risk. The future profitability of the Group and the
value of the Company’s 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 Group identifies and assesses the potential consequences of strategic, safety, environmental, operational,
legal, reputational and financial risks in accordance with the Group’s risk management policy. Po Valley
management continually monitors the effectiveness of the Group’s risk management, internal compliance and
control systems which includes insurance coverage over major operational activities, and reports to the Board
on areas where there is scope for improvement. The Board as a whole is responsible for oversight of the
Group’s risk management and control system. The principal risks and uncertainties that could materially affect
PVE’s future performance are described below.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
External risks
Exposure to gas
pricing
Changes to law,
regulations or
Government policy
Volatile gas prices make it difficult to predict future price movements with any
certainty. Decline in gas prices could have an adverse effect on PVE. The Group does
not currently hedge its exposures to gas price movements long term. The
profitability of the Group’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, worldwide supply and the terms under which long term take
or pay arrangements are agreed.
Changes in laws 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 Group’s profitability, net assets and cash flow.
Uncertainty of timing
of regulatory
approvals
Delays in the regulatory process could hinder the Group’s ability to pursue
operational activities in a timely manner including drilling exploration and
development wells, installing infrastructure, and to producing gas. In particular, oil
and gas operations in Italy are subject to both Regional and Federal approvals.
Operating risks
Exploration,
development and
production
Estimation of
reserves
Tenure security
The future value of PVE will depend on its ability to find, develop, and produce gas
that is economically recoverable. The ultimate success or otherwise of such
ventures requires successful exploration, establishment of commercial reserves,
establishment of and successful effective production from processing facilities, and
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 Group’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.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Health, safety and
environmental
matters
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 Group’s financial results.
Climate Change
PVE recognises climate-related risks and the need for these to be managed
effectively particularly across the energy industry.
Key climate-related risks and opportunities relevant to PVE’s operations include:
• The transition to a
low carbon economy through technological
improvements and innovations that support a lower carbon energy
efficient system with decreased demand and changing community
sentiment for fossil fuels. In addition, there may be increased uncertainty,
time and cost associated with regulatory bodies granting approvals or
licences on fossil fuel intensive projects. Transition to a lower carbon
economy may also give rise to opportunity for PVE’s potential gas
production assets. Natural gas is viewed as a key element to supporting a
sustainable energy transition. Possibility to produce Blue H2 (with
CCS/CCUS) and/or LNG from PVO gas fields (utilising access and support via
EU or Italian research development funds).
• Physical changes caused by climate change include increased severe
weather events and chronic changes to weather patterns which may
impact demand for energy and PVE’s development and production assets
and production capability. These events could have a financial impact on
the Group through increased operating costs, maintenance costs, revenue
generation and sustainability of production assets.
• Policy changes by governments which may result in increasing regulation
and costs which could have a material impact on PVE’s operations.
PVE is committed to continually improve climate change related disclosures as
processes and understanding of climate change related matters improve alongside
its activities and operations.
In addition to the external and operating risks described above, the Group’s ability to successfully develop
future projects including their infrastructure is contingent on the Group’s ability to fund those projects through
operating cash flows and affordable debt and equity raisings.
6. Dividends
No dividends have been paid or declared by the Company during the year ended 31 December 2023.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
7. Significant events after balance date
There were no events between the end of the financial year and the date of this report that, in the opinion of
the Directors, will affect significantly the operations of the Group, the results of those operations, or the state
of affairs of the Group in future financial years.
8. Likely Developments
With strong production ongoing at the Podere Maiar-1 well, the Company will continue to invest in its current
exploration portfolio through geological and geophysical studies and, subject to available finance, in its
planned drilling program for high potential gas prospects. The Group may seek a suitable farm-out partner for
selected assets.
9. Environmental Regulation
The Group’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. Group management
monitors compliance with the relevant environmental legislation. The Directors are not aware of any breaches
of legislation during the period covered by this report.
10. 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 other Key Management Personnel of the
Group.
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 Group 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 Group
operates.
For senior executives based in Rome, the Board the Board will have regard to remuneration levels and benefit
arrangements that prevail in the European oil and gas industry when setting remuneration which remains
highly competitive.
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PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholders’ wealth the Board has regard to the
following indices in respect of the current and previous financial years.
Indices
Production (Mcm) (net)
Average realised gas price (€ cents per cubic metre)
Profit / (Loss) attributable to owners of the Company
(€'000s)
2023
2022
2021
2020
2019
6,198
38
-
-
-
-
-
-
-
-
586
(984)
(596)
(1,036)
(1,504)
Earnings / (loss) per share (€ cents per share)
0.05
(0.09)
(0.07)
(0.16)
(0.24)
Share price at year end - AU$
0.046
0.062
0.025
0.030
0.052
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 Management, Executives and Executive Directors
The remuneration of Po Valley’s senior management and executives is based on a combination of fixed salary,
short term incentive bonuses which are based on performance, and in some cases a long term incentive which
may be payable in cash or shares. Other benefits may include employment insurances, accommodation and
other benefits, and superannuation contributions. In determining bonus payments, 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 Group’s asset base. The Board exercises its discretion when determining awards and
exercises discretion having regard to the overall performance and achievements of the Group 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 Po Valley’s 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 €250,000
per annum.
12
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Service contracts
The major provisions of the service contracts held with the directors, in addition to any performance related
bonuses and/or options are as follows:
Kevin Bailey AM, Chairman
• Commencement Date: 3 May 2016
• Remuneration for the year ended 31 December 2023: €35,299 (A$57,500)
• Annual remuneration at date of this report is A$75,000 (Fees were increased at 1 April 2023 from
A$30,000 to A$50,000 for all non-executive directors, with an additional increase to A$75,000 for the
Chairman effective 1 July 2023)
• No termination benefits
Sara Edmonson, Non-Executive Director
• Commencement Date: 23 December 2019
• Fixed remuneration for the year ended 31 December 2023: €27,515 (A$45,000)
• Annual remuneration at date of this report is A$50,000 (Fees were increased at 1 April 2023 from
A$30,000 to A$50,000 for all non-executive directors)
• No termination benefits
Joseph Constable, Non-Executive Director
• Commencement Date: 30 November 2021
• Fixed remuneration for the year ended 31 December 2023: €27,533 (A$45,000 p.a.)
• Annual remuneration at date of this report is A$50,000 (Fees were increased at 1 April 2023 from
A$30,000 to A$50,000 for all non-executive directors)
• No termination benefits
Katrina O’Leary, Non-Executive Director
• Commencement Date: 2 May 2022
• Fixed remuneration for the year ended 31 December 2023: €27,553 (A$45,000 p.a.)
• Annual remuneration at date of this report is A$50,000 (Fees were increased at 1 April 2023 from
A$30,000 to A$50,000 for all non-executive directors)
• No termination benefits
The Non-Executive Directors are not appointed for any fixed term but rather are required to retire and stand
for re-election in accordance with the Company’s constitution and the ASX Listing Rules.
13
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Key Management Personnel remuneration outcomes
The remuneration details of each Key Management Personnel (KMP) (being the Directors) during the year is
presented in the table below:
Salary & fees
€
Other
€
Termination
payments
€
Total
€
K Bailey AM
Non-Executive
S Edmonson
Non-Executive
J Constable
Non-Executive
K O’Leary
Non-Executive
Michael Masterman
Resigned 2 May 2022
Total for Directors
2023
2022
2023
2022
2023
2022
2023
2022
2022
35,299
14,968
27,515
19,980
27,533
20,023
27,553
13,327
-
2023
117,900
2022
68,298
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,299
14,968
27,515
19,980
27,533
20,023
27,553
13,327
5,171*
5,171*
-
117,900
5,171
73,469
*part of settlement deed on resignation in 2022
Analysis of bonuses included in remuneration
There was no short-term incentive bonuses awarded to KMP in the current year.
Options over equity instruments granted as compensation
No options were granted as compensation to KMP during the reporting period (2022: Nil). There are no options
granted to KMP that vested during 2023. (2022: 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 KMP) have been altered or modified during the reporting period or the prior period.
Exercise and lapse of options granted as compensation
No options over ordinary shares in the Company were held by any KMP during 2023 and no options were
exercised or lapsed during 2023.
14
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
Equity holdings and transactions
The movement during the reporting period in the number of ordinary shares of the Company, held directly
and indirectly by KMP, including their personally related entities is as follows:
Held at
Held at
31 Dec 2022
Acquired
31 Dec 2023
Acquired post
31 Dec 2023
Held at date of
this report
Directors
K Bailey AM
274,378,670
1,332,299
275,710,969
1,167,701
276,878,670
S. Edmonson
3,708,007
J Constable
K O’Leary
402,575
-
-
-
-
3,708,007
402,575
-
-
3,708,007
250,000
652,575
-
-
278,489,252
1,332,299
279,821,551
1,417,701
281,239,252
Held at
31 Dec 2021
Acquired
Disposals
Issued on
conversion of
Convertible
notes
Held at
31 Dec 2022
Directors
K Bailey AM
242,105,942
7,272,728
S. Edmonson
3,708,007
J Constable
K O’Leary (i)
45,433
- (i)
M Masterman (ii)
218,014,515
-
463,873,897
7,272,728
(i) (i)Holding at date of appointment 2 May 2022
(ii) (ii)Holding at date of resignation 2 May 2022
(iii)
Other transactions and balances with KMP and their related parties
Other balances owing to directors are as follows:
-
-
-
-
-
-
25,000,000
274,378,670
3,708,007
357,142
402,575
-
-
10,714,286
228,728,801(ii)
36,071,428
507,218,053
KMP (or their related parties)
Kevin Bailey AM
Sara Edmonson
Joseph Constable
Katrina O’Leary
Total
Directors’
remuneration
outstanding at
31 Dec 2022
€
62,034
-
6,655
-
Fees for the
year
€
35,299
27,515
27,533
27,553
Amount paid
€
(97,333)
(27,515)
(34,188)
(27,553)
68,689
117,900
(186,589)
Directors’
remuneration
outstanding at
31 Dec 2023
€
-
-
-
-
-
15
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
11. Directors’ interests
At the date of this report, the direct and indirect interests of the current Directors in the shares of the
Company, as notified by the Directors to the ASX in accordance with S205G (1) of the Corporations Act 2001,
are as follows:
K Bailey AM
S Edmonson
J Constable
K O’Leary
12. Equity securities on issue
Ordinary Shares
276,878,670
3,708,007
652,575
-
31 December 2023
31 December 2022
Ordinary fully paid shares
1,158,961,620
1,150,961,620
Options over unissued shares
7,500,000
Performance rights
-
12,500,000
3,000,000
Unissued shares under option and performance rights
No options or performance rights were granted during the year. (2022: 7,500,000 unlisted options and
3,000,000 performance rights)
At the date of this report the unissued ordinary shares of the Company under option or performance rights
are as follows:
Options
Date Granted
Expiry Date
Exercise Price
Number of
options at 31
December 2023
Number of
options at date of
report
15 Aug 2022
30 June 2024
A$0.10
7,500,000
7,500,000
Performance rights
There are no unissued ordinary shares of the Company under performance rights.
No options or performance rights were cancelled during or subsequent to the financial year.
Shares issued on exercise of options and performance rights
5,000,000 Unlisted options were exercised in the year by the option holders by payment of at AU$0.05 per
option for 5,000,000 ordinary shares.
3,000,000 Performance rights were converted into 3,000,000 ordinary shares in January 2023 upon
achievement of the performance milestone.
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.
16
PO VALLEY ENERGY LIMITED
DIRECTORS’ REPORT
13. Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of
Po Valley 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 Po Valley is in compliance
with those guidelines which are of importance to the commercial operation of a junior listed resource
company.
The Group 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.
14. Indemnification and insurance of officers
The Group 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 Group paid premiums to insure the Directors against certain liabilities arising out
of the conduct while acting on behalf of the Group. Under the terms and conditions of the insurance contract,
the nature of liabilities insured against and the premium paid cannot be disclosed.
15. Indemnification of auditors
The Group has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor
of the Company or any related entity against a liability incurred by the auditor. The Group has not provided
any insurance for an auditor of the Company.
16. Non audit services
During the year HLB Mann Judd, the Group’s auditor, did not provide non-audit services. Refer to note 8 of
the financial report for details of the auditor’s remuneration.
17. Proceedings on behalf of the Group
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the
purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under
section 237 of the Corporations Act 2001.
18. Lead Auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 18 and forms part of the Directors’ report for
the financial year ended 31 December 2023.
This report has been made in accordance with a resolution of Directors.
Kevin Bailey AM
Chairman
28 March 2024
17
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Po Valley Energy Limited for the
year ended 31 December 2023, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b)
any applicable code of professional conduct in relation to the audit.
Perth, Western Australia
28 March 2024
L Di Giallonardo
Partner
18
PO VALLEY ENERGY LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
CONSOLIDATED
Continuing Operations
Revenue from contracts with customers
Cost of sales
Depreciation and amortisation expense -
production
Gross profit
Other income
Employee benefit expenses
Depreciation expense
Corporate overheads
Share based payment expense
Profit / (loss) from operating activities
Finance income
Finance expense
Net finance expense
Profit / (loss) before tax
Income tax (expense) / benefit
Profit / (loss) for the year
NOTES
4
5
5
6
7
21
9
10
2023
€
2,337,315
(308,905)
(189,969)
1,838,441
267,900
(565,441)
(27,348)
(572,154)
-
941,398
8,221
(148,428)
(140,207)
801,191
(214,534)
586,657
2022
€
-
-
-
-
219,502
(388,623)
(8,559)
(503,520)
(61,225)
(742,425)
2,705
(256,131)
(253,426)
(995,851)
12,137
(983,714)
Other comprehensive income
-
-
Total comprehensive income / (loss) for the year
568,657
(983,714)
Basic and diluted earnings / (loss) per share (€)
from continuing operations
11
0.05
(0.09)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
to the financial statements.
19
PO VALLEY ENERGY LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
NOTES
CONSOLIDATED
2023
€
2022
€
12
13
16
14
15
17
19
18
18
19
20
20
1,252,717
691,719
-
1,944,436
11,325
4,678
937,831
2,067,623
9,975,367
12,996,824
1,536,041
434,480
476,910
2,447,431
-
13,178
1,120,413
155,946
11,398,598
12,688,135
14,941,260
15,135,566
296,251
24,851
4,557
325,659
974,991
100,086
1,075,077
741,384
22,112
4,387
767,883
1,450,828
117,412
1,568,240
1,400,736
2,336,123
13,540,524
12,799,443
56,847,751
1,299,983
(44,607,210)
56,632,102
1,371,895
(45,204,554)
13,540,524
12,799,443
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
Non-Current Assets
Inventory – non-current
Other assets
Deferred tax assets
Property, plant & equipment
Resource property costs
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Lease liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total Equity
The above statement of financial position should be read in conjunction with the accompanying notes to the financial statements.
20
PO VALLEY ENERGY LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Consolidated
Issued capital
€
Attributable to equity holders of the Company
Share Based
Payment
Reserve
€
Accumulated
Losses
€
Translation
Reserve
€
Total
€
Balance at 1 January 2022
52,719,884
1,192,269
10,687
(44,220,840)
9,702,000
Loss for the year
Other comprehensive income
Total comprehensive loss
-
-
-
Issue of securities (net of costs)
3,912,218
Share based payments
-
-
-
-
-
-
-
-
-
168,939
(983,714)
(983,714)
-
-
(983,714)
(983,714)
-
-
3,912,218
168,939
Balance at 31 December 2022
Balance at 1 January 2023
56,632,102
56,632,102
1,192,269
1,192,269
179,626
(45,204,554)
12,799,443
179,626
(45,204,554)
12,799,443
Profit for the year
Other comprehensive income
Total comprehensive income
Issue of securities (net of costs)
Transfers within equity
-
-
-
154,424
61,225
-
-
-
-
-
-
-
-
-
586,657
-
(71,912)
10,687
-
586,657
154,424
-
586,657
586,657
Balance at 31 December 2023
56,847,751
1,192,269
107,714
(44,607,210)
13,540,524
The above statement of changes in equity should be read in conjunction with the accompanying notes to the financial statements.
21
PO VALLEY ENERGY LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTES
CONSOLIDATED
2023
€
2022
€
Operating activities
Receipts from customers
Receipts from joint operation partners (operations)
Payments to suppliers and employees
Interest received
Interest paid
Net cash from / (used in) operating activities
12
Investing activities
Payments for property plant and equipment
Payments for resource property costs (net of joint
operation partner recoveries)
Refund of guarantee deposit for pipeline tie-in
Receipt from joint operation partner’s share of
guarantee deposit for pipeline tie-in
Payments for other assets
1,985,315
283,831
(1,537,220)
8,221
(741)
739,406
(36,194)
(1,556,500)
476,910
-
-
-
209,544
(1,050,881)
2,705
(37,931)
(876,563)
-
(1,800,590)
-
280,090
(16,601)
Net cash used in investing activities
(1,115,784)
(1,537,101)
Financing activities
Proceeds from the issues of shares
Payment of share issue costs
Payments of lease liabilities
Net cash from financing activities
Net (decrease) / increase in cash and cash
equivalents
Cash and cash equivalents at 1 January
Exchange difference on cash and cash equivalents
Cash and cash equivalents at 31 December
12
155,710
(1,286)
(27,868)
126,556
(249,822)
1,536,041
(33,502)
1,252,717
3,071,153
(231,675)
(6,900)
2,832,578
418,914
1,262,151
(145,024)
1,536,041
The above statement of cash flows should be read in conjunction with the accompanying notes to the financial statements.
22
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1
1.2
(a)
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 Level 5, 191 St Georges Terrace, Perth WA 6000.
The Consolidated Financial Statements for the year ended 31 December 2023 comprise 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 28 March 2024.
The Group primarily is involved in the exploration, appraisal and development of and production from
gas properties in the Po Valley region in Italy and is a for profit entity.
BASIS OF PREPARATION
STATEMENT OF COMPLIANCE
The financial report is a general-purpose financial report which has been prepared in accordance with
Australian Accounting Standards (AASB’s) (including Australian Interpretations) adopted by the
Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated
financial report of the Group also complies with International Financial Reporting Standards (IFRS) and
interpretations issued by the International Accounting Standards Board (IASB).
(b)
BASIS OF MEASUREMENT
These consolidated financial statements have been prepared on the basis of historical cost.
(c)
GOING CONCERN
The financial report has been prepared on 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.
(d)
FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in Euro, which is the Company’s and each of the
Group entities’ functional currency.
23
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(e)
USE OF ESTIMATES AND JUDGEMENTS
The preparation of the financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods
affected.
The estimates and judgements that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of non-current assets
The ultimate recoupment of the value of resource property costs and property plant and equipment
is dependent on successful development and commercial exploitation, or alternatively, sale, of the
underlying properties. The Group undertakes at least on an annual basis, a comprehensive review for
indicators of impairment of these assets. Should an impairment indicator exist, the area of interest or
CGU is tested for impairment. There is significant estimation involved in determining the inputs and
assumptions used in determining the recoverability amounts.
The key areas of estimation involved in determining recoverable amounts include:
• Recent drilling results and reserves and resources estimates
• Environmental issues that may impact the underlying licences
• The estimated market value of assets at the review date
• Fundamental economic factors such as the gas price and current and anticipated operating
costs in the industry
• Future production rates
The post-tax discount rate used for impairment purposes is 10%.
Rehabilitation provisions
The value of these provisions represents the discounted value of the present obligations to restore,
dismantle and rehabilitate each well site under development or in production.
Significant estimation is required in determining the provisions for rehabilitation and closure as there
are many transactions and other factors that will affect ultimate costs necessary to rehabilitate the
sites. The discounted value reflects a combination of management’s best estimate of the cost of
performing the work required, the timing of the cash flows and the discount rate.
A change in any, or a combination of, the key assumptions used to determine the provisions could
have a material impact on the carrying value of the provisions.
The provision recognised for each site is reviewed at each reporting date and updated based on the
facts and circumstances available at that time. Changes to the estimated future costs for operating
24
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
sites are recognised in the statement of financial position by adjusting both the restoration and
rehabilitation asset and provisions.
The Group reviewed the provision at reporting date for works completed during development and
revised costs estimates for current prices and conditions to ensure provision is appropriate at the
reporting date. This review resulted in a reduction of the cost base of $544,679.
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.
25
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1.3 SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the accounting policies set out in notes 1.3 (a) to 1.3 (r) to all
periods presented in the consolidated financial statements.
(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.
Transactions eliminated on consolidation
(iii)
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 date, and any adjustment to tax payable in respect of previous
years.
26
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Deferred tax is provided using the liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. The following temporary differences are not provided for: the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit; and differences relating to
investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of
the temporary difference and it is probable that they will not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities using tax rates enacted at the balance 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 Group 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
Group to realise the net deferred tax assets recorded at the reporting date could be impacted.
(c)
In addition, future changes in tax laws in the jurisdictions in which the Group operates could limit the
ability of the Group to obtain tax deductions in future periods.
IMPAIRMENT
Non-financial assets
The Group 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.
27
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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 asset/CGU.
The Group bases its impairment calculation on detailed budgets and forecasts, which are prepared
separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets
and forecasts generally cover the forecasted life of the CGUs. VIU does not reflect future cash flows
associated with improving or enhancing an asset’s performance.
Impairment losses of continuing operations, including impairment of inventories, are recognised in
the statement of profit or loss and other comprehensive income in those expense categories
consistent with the function of the impaired asset.
For assets/CGUs, an assessment is made at each reporting date to determine whether there is an
indication that previously recognised impairment losses may no longer exist or may have decreased.
If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the assumptions used to
determine the asset’s/CGU’s recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset/CGU does not exceed either its
recoverable amount, or the carrying amount that would have been determined, net of
depreciation/amortisation, had no impairment loss been recognised for the asset/CGU in prior years.
Such a reversal is recognised in the statement of profit or loss and other comprehensive income.
(d)
PROPERTY, PLANT AND EQUIPMENT
(i)
Recognition and measurement
Items of property, plant and equipment are recorded at cost less accumulated depreciation,
accumulated impairment losses and pre-commissioning revenue and expenses.
The cost of plant and equipment used in the process of gas extraction are accounted for separately
and are stated at cost less accumulated depreciation and impairment costs.
Cost includes expenditure that is directly attributable to acquisition of the asset.
Gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property, plant and equipment
and are recognised within “other income” in profit or loss.
(ii)
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits
associated with expenditure will flow to the Group.
28
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(iii)
Depreciation
Gas producing assets
When the gas plant and equipment in installed ready for use, costs carried forward will be
depreciated using the units-of-production method (“UOP”) over the life of the economically
recoverable reserve (Proved plus Probable (2P)) from date of commencement of production.
The depreciation rate of gas plant and equipment used in the period of each project in production
is as follows:
Podere Maiar -1
2023
2.6%
2022
-
The life of each item, is assessed at least annually, has regard to both its physical life limitations and
present assessments of economically recoverable reserves of the field at which the asset is located.
These calculations require the use of estimates and assumptions, including the amount of
recoverable reserves and estimates of future capital expenditure. The calculation of the UOP rate
of depreciation / amortisation will be impacted to the extent that actual production in the future is
different from current forecast production based on total proved reserves , or future capital
expenditure estimate changes.
Other property, plant and equipment
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment, unless a units of production method
represents a more reasonable allocation of the assets depreciable value over its economic useful
life. 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
2023
3 – 5 years
6 years
2022
3 – 5 years
6 years
The residual value, the useful life and the depreciation method applied to an asset are reviewed at
each reporting date.
(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).
29
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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 profit or loss.
fair value through other comprehensive income; or
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.
30
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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.
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
31
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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.
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 considers 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.
32
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(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
Exploration properties
Exploration properties are carried at cost less accumulated impairment losses. Exploration properties
include the cost of acquiring resource properties, mineral rights and exploration and 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.
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.
33
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Where a decision is made to proceed with development in respect of a particular area of interest,
the relevant exploration and evaluation asset is tested for impairment and the balance is then
reclassified to development.
Development properties
Development properties are carried at balance 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 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.
Depletion charges are calculated to amortise the depreciable value of carried forward exploration,
evaluation and subsurface development expenditure of production properties over the life of the
Proved plus Probable (2P) reserves for a hydrocarbon reserve, together with future subsurface
costs necessary to develop the respective hydrocarbon reserve.
Amortisation of costs is provided on the unit-of-production basis (UOP), separate calculations being
performed for each area of interest. The UOP base results in an amortisation charge proportional to
the depletion of economically recoverable reserves. The amortisation rate used in the period for
each project in the production phase is as follows:
Podere Maiar -1
2023
2.6%
2022
-
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.
34
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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)).
(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 date of the statement of financial position
in respect of the eventual abandonment of well sites in development or in production 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 and other comprehensive income 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.
35
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(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 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.
(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 Po Valley’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.
36
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(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 date of the statement
of financial position. 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/loss per share (“EPS”) is calculated by dividing the net profit/loss attributable to
members of the parent entity for the reporting period, after excluding any costs of servicing equity
(other than ordinary shares and converting preference shares classified as ordinary shares for EPS
calculation purposes), by the weighted average number of ordinary shares of the Company, adjusted
for any bonus issue.
Diluted EPS is calculated by dividing the net profit attributable to members of the parent entity,
adjusted by the after tax effect of financing costs associated with dilutive potential ordinary shares
and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive
potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential
ordinary shares adjusted for any bonus issue.
(m)
OTHER INDIRECT TAXES
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST) and
value added tax (VAT) except where the amount of GST or VAT incurred is not recoverable from the
taxation authority. In these circumstances, the GST or VAT is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST or VAT included. The net amount of
GST or VAT recoverable from, or payable to, the relevant taxation authority is included as a current
asset or liability in the statement of financial position.
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.
37
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(n)
SEGMENT REPORTING
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 or similar taxes. 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.
Revenue from contracts with customers – gas sales
Gas sales revenue is recognised based on volume sold under contract with customers at the point in
time where performance obligations are considered met. Generally, for the sale of gas, the
performance obligation will be met when control of the gas passes at the delivery point. Gas sales
are based on market prices under contractual arrangement, at the time of the delivery, there is only
minimal risk of change in transaction price to be allocated to the product sold. Accordingly, at the
point of sale there is no significant risk of revenue reversal relative to the cumulative revenue
recognised, there is no constraining of variable consideration.
During the year, 100% of the gas sales revenue were from one customer (2022:NIL).
Proceeds received in advance of control passing are recognised as contract liability for deferred
revenue. Deferred revenue liabilities unwind as revenue from contracts with customers, upon
satisfaction of the performance obligation.
(p)
LEASES
The Group as a lessee
For any new contracts, the Group 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
38
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
asset) for a period of time in exchange for consideration’. To apply this definition the Group 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 Group
the Group 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 Group has the right to direct the use of the identified asset throughout the period of use.
The Group 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 Group recognises a right-of-use asset and a lease liability on the
statement of financial position. 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 Group, 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 Group 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 Group also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group 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 Group’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 Group 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
39
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease
term.
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.
(q)
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.
(r)
CHANGES IN ACCOUNTING POLICIES, DISCLOSURES, STANDARDS AND INTERPRETATIONS
(i) New and revised Standards and Interpretations on issue not yet adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended
but are not yet effective have not been early adopted by the Group for the annual reporting period
ended 31 December 2023. The Directors do not believe that these new and revised Standards
and Interpretations will have a material effect on the Group.
(ii) New Standards and Interpretations applicable for the annual reporting period ended 31 December
2023
The Directors have reviewed all the new and revised Standards and Interpretations issued by the
AASB that are relevant to the Group and effective for the current reporting period. As a result of
this review, the Directors have determined that there is no material impact of the new and revised
Standards and Interpretations on the Group and, therefore, no material change is necessary to
the Group accounting policies.
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
40
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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 Group and its subsidiaries deal with. The group monitors receivable balances on an
ongoing basis and as a result believes its exposure to bad debts is not significant.
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. The Group’s exposure to interest rate risk and sensitivity analysis is disclosed
in note 22.
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. The Group’s exposure to currency risk and sensitivity analysis is disclosed in note 22.
(iii)
Capital Management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Capital consists of issued share capital
plus accumulated losses/earnings. The Board monitors accumulated losses/earnings.
The Board seeks to encourage all employees of the Group to hold ordinary shares.
The Board seeks to maintain a balance between the higher returns that might be possible with higher
levels of borrowings and the advantages and security afforded by a sound capital position from
shareholders.
41
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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. The Group’s contractual maturities of financial liabilities, including estimated interest
payments are disclosed in Note 22.
(v)
Climate change risk
Key climate-related risks and opportunities relevant to the Group’s operations include:
• The transition to a low carbon economy through technological improvements and innovations
that support a lower carbon energy efficient system with decreased demand and changing
community sentiment for fossil fuels, increased uncertainty time and cost associated with
regulatory bodies granting approvals or licences on fossil fuel intensive projects. Transition to
lower carbon economy also gives rise to opportunity for the Group’s gas production assets.
Natural gas is viewed as a key element to supporting a sustainable energy transition.
• Physical changes caused by climate change include increased severe weather events and chronic
changes to weather patterns which may impact demand for energy and the Group’s production
assets and production capability. These events could have a financial impact on the Group
through increased operating costs, maintenance costs, revenue generation and sustainability of
its production assets.
• Policy changes by governments which may result in increasing regulation and costs which could
have a material impact on the Group’s operations.
Due to the nature of the uncertainties relating to the above risks, the financial impact has not been
quantified for the financial year.
The Group is committed to continually improve climate change related disclosures as processes and
understanding of climate change related matters improve alongside the Group's activities and
operations.
42
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 3:
FINANCIAL REPORTING BY SEGMENTS
The Group’s reportable segments as described below are the Group’s strategic business units. The strategic business units are classified according to field
licence areas which are managed separately. All strategic business units are in Italy. For each strategic business unit, the Board reviews internal management
reports on a monthly basis.
Exploration and evaluation
Development
Production
Total
External revenues
Segment profit / (loss) before tax
Depreciation and amortisation
Unwind of discount on site
restoration provision
Reportable segment assets:
2023
€
2023
€
2022
€
115,628
70,545
-
-
-
-
-
-
Resource property costs
4,733,654
4,661,672
Property, plant and equipment
Receivables
Other assets
-
-
11,325
-
-
-
4,744,979
4,661,672
-
-
-
-
-
-
-
-
-
Capital expenditure
71,984
430,021
1,191,140
2022
€
2022
€
103,874
71,432
-
-
6,736,926
-
211,437
484,470
7,432,833
1,371,203
2023
€
2,605,215
1,831,030
(189,969)
(108,302)
5,241,713
1,938,726
421,461
-
7,601,900
37,805
Reportable segment liabilities:
Rehabilitation and restoration
provision
Other liabilities
-
-
-
-
-
-
-
-
-
(1,450,828)
(452,896)
(974,991)
(90,466)
(1,903,724)
(1,065,457)
-
-
-
-
-
-
-
-
-
-
-
-
-
2023
€
2,605,215
1,831,030
(189,969)
(108,302)
2022
€
219,502
141,977
-
-
9,975,367
11,398,598
1,938,726
421,461
11,325
-
211,437
484,470
12,346,879
12,094,505
1,300,929
1,801,224
(974,991)
(1,450,828)
(90,466)
(452,896)
(1,065,457)
(1,903,724)
43
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 3:
FINANCIAL REPORTING BY SEGMENTS (continued)
Reconciliation of reportable segment profit or loss, assets and
liabilities
Profit or loss:
CONSOLIDATED
2023
€
2022
€
Total profit / (loss) for reportable segments
1,831,030
141,977
Unallocated amounts:
Net finance expense not allocated to reportable segments
Other 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 4:
REVENUE
(31,905)
(997,934)
801,191
(256,131)
(881,697)
(995,851)
12,346,879
12,094,505
2,594,381
3,041,061
14,941,260
15,135,566
(1,065,457)
(1,903,724)
(335,279)
(432,399)
(1,400,736)
(2,336,123)
Gas sales contract with customers
2,337,315
All gas sales are recorded as revenue at a point in time.
NOTE 5:
COST OF SALES
Production operating costs
Capacity and transportation costs
Cash costs of production
Depreciation of plant and equipment
Depletion of resource property costs
Depreciation and amortisation expense
280,783
28,122
308,905
50,278
139,691
189,969
-
-
-
-
-
-
-
44
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 6:
EMPLOYEE BENEFIT EXPENSES
Wages, salaries and fees
Contributions to defined contribution plans
Less: allocation to projects
NOTE 7:
CORPORATE OVERHEADS
Corporate overheads comprise:
Company administration and compliance
Professional fees
Office costs
Travel and entertainment
Other expenses
AUDITOR’S REMUNERATION
NOTE 8:
Audit and review of the Group financial statements
Auditor of the Company: HLB Mann Judd
NOTE 9:
FINANCE INCOME AND EXPENSE
Recognised in profit and loss:
Interest income
Finance income
Interest expense
Unwind of discount on site restoration provision
Foreign exchange (gains) / losses (net)
Finance expense
Net finance expense
CONSOLIDATED
2023
€
2022
€
563,963
113,016
(111,538)
565,441
454,384
83,963
(149,724)
388,623
122,492
357,478
31,982
31,748
28,454
572,154
140,349
233,151
55,443
26,054
48,523
503,520
74,271
38,807
8,221
8,221
6,227
108,302
33,899
148,428
2,705
2,705
43,472
-
212,659
256,131
(140,207)
(253,426)
45
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
INCOME TAX EXPENSE / (BENEFIT)
NOTE 10:
Current tax
Current year
Deferred tax
Deferred tax expense / (benefit)
Total income tax expense / (benefit)
CONSOLIDATED
2023
€
2022
€
31,952
-
182,582
214,534
(12,137)
(12,137)
Numerical reconciliation between tax expense and pre-tax accounting profit / (loss)
Profit / (loss) for the year before tax from continuing operations
801,191
(995,851)
Income tax benefit expense using the Company’s domestic tax rate of
30% (2022: 26%)
Permanent differences
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
Foreign regional taxes payable
Income tax expense / (benefit)
NOTE 11:
EARNINGS PER SHARE
240,358
(196,961)
(81,851)
287,114
(66,078)
31,952
214,534
(258,921)
39,088
5,863
185,194
16,639
-
(12,137)
Basic and diluted earnings / (loss) per share (€ cents)
0.05
(0.09)
The calculation of basic and diluted earnings per share from continuing operations was based on the profit
after tax for the year of €586,657 (2022: loss €983,714) and a weighted average number of ordinary shares
outstanding during the year of 1,157,419,155 (2022: 1,076,661,499).
Diluted earnings per share is the same as basic earnings per share.
The number of weighted average shares is calculated as
follows:
Number of shares on issue at beginning of the year
Performance rights exercised
Conversion of unlisted options – tranche 1
Conversion of unlisted options – tranche 2
Conversion of unlisted options – tranche 3
Conversion of unlisted options – tranche 4
Conversion of unlisted options – tranche 4
Conversion of convertible notes
Placement – tranche 1
Placement – tranche 2
Placement – tranche 3
No.
of
days
365
347
314
299
263
256
184
243
139
58
25
Weighted
average no
2023
1,150,961,620
2,852,055
860,274
819,178
720,548
701,370
504,110
-
-
-
-
Weighted
average no
2022
1,006,643,439
-
-
-
-
-
-
41,609,590
27,003,736
1,155,667
249,067
Weighted average number of shares on issue at end of the year
1,157,419,155
1,076,661,499
46
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 12: CASH AND CASH EQUIVALENTS
(a) Cash and cash equivalents
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
Employee benefit costs capitalised
Share based payments
Interest on lease liabilities
Unwind of discount on site restoration provision
Plant and equipment written off
Change in operating assets and liabilities:
Increase in receivables
Increase in trade and other payables
Increase in provisions
Increase in regional tax payable
Decrease / (increase) in deferred tax assets
CONSOLIDATED
2023
€
2022
€
1,252,717
1,536,041
586,657
(983,714)
217,317
33,502
(111,538)
-
5,487
108,302
7,495
(355,212)
32,692
170
31,952
182,582
8,559
205,308
(149,724)
61,225
5,541
-
-
(164,898)
152,609
668
-
(12,137)
Net cash inflow / (outflow) from operating activities
739,406
(876,563)
NOTE 13:
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Sundry debtors
Indirect taxes receivable
Accrued revenue
69,461
18,915
251,343
352,000
691,719
211,793
37,634
185,053
-
434,480
The Group’s exposure to credit and currency risks and impairment losses related to trade and other
receivables are disclosed in Note 22.
47
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 14:
PROPERTY PLANT & EQUIPMENT
Land – gas producing well site
Gas producing plant and equipment
At Cost
Accumulated depreciation
Office Furniture & Equipment:
At cost
Accumulated depreciation
Right-of-use asset: Building (Note 19)
At Cost
Accumulated depreciation
Total property plant & equipment
CONSOLIDATED
2023
€
2022
€
52,100
1,936,904
(50,278)
1,886,626
29,666
(20,097)
9,569
148,678
(29,350)
119,328
2,067,623
-
-
-
-
39,707
(18,775)
20,932
140,884
(5,870)
135,014
155,946
Reconciliations:
Reconciliation of the carrying amounts of each class property, plant & equipment are set out below:
Land – production well site
Carrying amount at beginning of period
Additions – reclassified from resource property costs
-
52,100
Gas production plant and equipment
Carrying amount at beginning of period
Additions – reclassified from resource property costs
Additions
Depreciation expense
Office furniture & equipment
Carrying amount at beginning of year
Additions office furniture & equipment
Written off
Depreciation expense
Carrying amount at end of year
Right-of-use assets
Carrying amount at beginning of year
Additions right-of-use assets
Remeasurement of lease arrangements
Depreciation expense
Carrying amount at end of year
52,100
-
1,900,710
36,194
(50,278)
1,886,626
20,932
-
(7,495)
(3,868)
9,569
135,014
-
7,794
(23,480)
119,328
2,067,623
-
-
-
-
-
-
-
-
7,021
16,600
-
(2,689)
20,932
-
140,884
(5,870)
135,014
155,946
48
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 15:
RESOURCE PROPERTY COSTS
Resource Property costs
Exploration and evaluation phase
Development phase
Production phase
Reconciliation of carrying amount of resource properties
Exploration and Evaluation Phase
Carrying amount at beginning of year
Exploration expenditure
Transfer to development phase
Carrying amount at end of year
Development Phase
Carrying amount at beginning of year
Transfer from exploration and evaluation phase
Development expenditure
Transfer to production phase
Restoration and rehabilitation asset
Carrying amount at end of year
Production Phase
Carrying amount at beginning of period
Transfer from development phase
Additions
Reclassified to property, plant & equipment (Gas producing
assets and well site land)
Reclassified as inventory
Impact of changes to rehabilitation and restoration provision
Amortisation
CONSOLIDATED
2023
€
2022
€
4,733,654
4,661,672
-
6,736,926
5,241,713
-
9,975,367
11,398,598
4,661,672
8,146,546
71,982
430,021
-
(3,914,895)
4,733,654
4,661,672
6,736,926
-
-
3,914,895
1,191,140
1,371,203
(7,928,066)
-
-
-
-
7,928,066
1,612
(1,952,810)
(11,325)
(584,139)
(139,691)
5,241,713
1,450,828
6,736,926
-
-
-
-
-
-
-
-
49
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 15:
RESOURCE PROPERTY COSTS (continued)
Resource property costs in the exploration phase comprise the carrying value of its exploration and pre-
development projects. The ultimate recoupment of resource property costs 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 activities in the area of interest have, at the
reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves, the exploration and evaluation assets are assessed for impairment.
Impairment will occur if sufficient data exists to determine technical feasibility and commercial viability and
the facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
Resource property costs in the development phase comprise the carrying value of the development costs
for areas that have reached the stage of reasonable assessment of economically recoverable reserves and
have attained required permits and approvals to develop into a producing field.
Resource property costs in the production phase comprise the carrying value of the Group’s production
projects that have reached the completion of development and are ready for or have commenced
production of gas having attained the required permits and approvals.
The Group assessed each asset or cash generating unit (CGU) for any indication of impairment, reviewing
the carrying value of these assets and in relation to significant projects in conjunction with reviewing the
recoverable amount using a Value in Use CGU valuation.
The Group bases its calculation on detailed budgets and forecasts, which are prepared separately for each
of the Group’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.
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.
As a result of this assessment, with the recoverable amount exceeding the carrying value of these assets, no
impairment was required on the carrying value of these material projects.
50
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 16:
DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets
Deferred tax assets have been recognised in respect of the following items:
Tax losses (Italy)
Accrued expenses and liabilities
Recognised deferred tax assets
CONSOLIDATED
2023
€
2022
€
910,822
1,093,161
27,009
27,252
937,831
1,120,413
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 (Australia)
Tax losses (Italy)
Deductible temporary differences
Unrecognised deferred tax assets
3,826,380
3,035,105
152,436
76,423
152,436
93,572
4,055,239
3,281,113
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;
(ii)
(iii)
The relevant company continues to comply with the conditions for deductibility imposed by tax
legislation; and
No changes in tax legislation adversely affect the relevant company in realising the benefit from the
deductions for the losses.
Movement in recognised temporary differences during the year
Balance 1
January
2022
€
Profit and
loss
€
Equity
€
Balance
31
December
2022
€
Profit and
loss
€
Equity
€
1,041,718
51,443
66,558
(39,306)
1,108,276
12,137
-
-
-
1,093,161
(182,339)
27,252
(243)
1,120,413
(182,582)
Consolidated
Tax losses
Accrued expenses
and liabilities
Total recognised
deferred tax asset
Balance 31
December
2023
€
910,822
27,009
937,831
-
-
-
51
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 17:
TRADE AND OTHER PAYABLES
Trade payables and accruals
CONSOLIDATED
2023
€
296,251
296,251
2022
€
741,384
741,384
The Group’s exposure to currency and liquidity risks related to trade and other payables are disclosed in
Note 22.
PROVISIONS
NOTE 18:
Current:
Employee leave entitlements
Non-current:
Rehabilitation and restoration provision
Reconciliation of rehabilitation and restoration provision:
Opening balance
Provision for rehabilitation and restoration costs
Impact of changes to cost estimates
Impact of changes to assumptions
Unwind of discount
Closing balance
4,557
4,387
974,991
1,450,828
1,450,828
-
(544,679)
(39,460)
108,302
-
1,450,828
-
-
-
974,991
1,450,828
Provision has been made for the future removal and environmental restoration costs at the Podere Maiar-
1 well site in the Selva Malvezzi production concession. The estimated future obligation includes the costs
of removing facilities, abandoning well site, restoring the affected area and is the best estimate of the
present value of the future expenditure required to settle the restoration obligation at the reporting date.
The provision will be adjusted at the end of each reporting period to reflect the passage of time and changes
in the estimated future cash flows underlying the obligation. Increases in the provision due to the passage
of time will be recognised as a finance cost whereas increases/decreases due to changes in estimated future
cash flows are capitalised where there is a future economic benefit associated with the asset. Actual costs
incurred upon settlement of the rehabilitation and restoration obligation are charged against the provision
to the extent the provision has been established.
The Group reviewed the provision at reporting date for works completed during development and revised
costs estimates for current prices and conditions to ensure provision is appropriate at the reporting date.
This review resulted in a reduction of the cost base of $544,679.
The estimated net present value at 31 December 2023 is €974,991 (net 63% to the Group) (31 December
2022 €1,450,828) based on an undiscounted total future liability of €1,122,572 (net) (2022: €1,701,000
(net)) using a discount factor, being the risk-free interest rate, of 4.04% p.a. and inflation rate of 2.79% p.a.
Payments of these costs are expected at the end of the life of the field in approximately 14 years.
52
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 19: LEASES
Leases as lessee
The Group leases office facilities in Rome under a new lease agreement. The lease runs for a period of six
years from the start of the lease in October 2022.
Information about leases for which the Group 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 & equipment (see Note 14).
Buildings
Balance at 1 January
Additions to right-of-use assets (new leases)
Remeasurement of lease arrangements
Depreciation
Total
Amounts recognised in profit and loss:
Interest on lease liabilities
Amounts recognised in statement of cash flows:
Payment of lease liabilities
CONSOLIDATED
2023
€
2022
€
135,014
-
7,794
(23,480)
119,328
-
140,884
(5,870)
135,014
5,488
5,541
27,870
6,900
Lease liabilities:
Lease liabilities are presented in the statement of financial position separately withing liabilities as follows:
Lease liabilities – current
Lease liabilities – non-current
24,851
100,086
124,937
22,112
117,412
139,524
Lease liabilities are for the main operation office in Rome Italy. Future minimum lease payments at 31
December were as follows:
Lease payments
Finance charges
Net Present values
Within one
year
One to five
years
28,680
(3,829)
24,851
107,550
(7,464)
100,086
After 5 years
-
-
-
Total
136,230
(11,293)
124,937
53
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
20:
CAPITAL AND RESERVES
Share Capital
Opening balance - 1 January
Ordinary Shares
CONSOLIDATED
Issue
price
2023
Number
2022
Number
2023
€
2022
€
1,150,961,620
1,006,643,438
56,632,102
52,719,884
Shares issued during the reporting period:
Exercise of performance rights
Conversion of options
Conversion of convertible notes
Placement
-
A$0.05
A$0.028
A$0.055
3,000,000
5,000,000
-
-
-
-
62,500,000
81,818,182
61,225
155,711
-
-
-
-
1,180,454
3,071,153
Share issue costs
-
-
(1,287)
(339,389)
Closing balance – 31 December
1,158,961,620
1,150,961,620
56,847,751
56,632,102
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.
Reserves
Translation Reserve
Share based payment Reserve
CONSOLIDATED
2022
€
2023
€
1,192,269
1,192,269
107,714
179,626
1,299,983
1,371,895
Translation Reserve
The translation reserve of €1,192,269 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.
Share based payment Reserve
The share based payment reserve of €107,714 comprises the fair value of vested options and performance
rights issued as consideration.
Share based payment reserve reconciliation for the period:
Opening balance
Options exercised during the period
Performance rights exercised during the period
Issue of options during the period (refer Note 21)
Vesting of performance rights during the period (refer Note 21)
179,626
(10,687)
(61,225)
-
-
10,687
-
-
107,714
61,225
Closing balance
107,714
179,626
Dividends
No dividends were paid or declared during the current year (2022: Nil).
54
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 21:
SHARE BASED PAYMENTS
Performance rights:
There were no performance rights granted as consideration for services in this period (2022: 3,000,000).
On 18 January 2023, 3,000,000 performance rights were exercised and converted to 3,000,000 ordinary
shares. The performance rights had a Nil exercise price and vested on 31 December 2022.
The table below summarises the movement in performance rights for the period:
Performance rights at the start of the year
Granted in the year
Exercised in the year
31 December 2023
31 December 2022
No.
3,000,000
-
(3,000,000)
No.
-
3,000,000
-
Performance rights at the end of the year
-
3,000,000
There were no performance rights outstanding over unissued ordinary shares at 31 December 2023 and there
have been no rights granted subsequent to the year end.
Options:
No options were granted during the year (31 December 2022: 7,500,000).
During the year, 5,000,000 ordinary shares were issued on the exercise of options at an exercise price of
AU$0.05 prior to their expiry date of 21 July 2023.
No options were cancelled, lapsed or expired in the period to 31 December 2023 (2022: Nil), and no options
were issued or cancelled subsequent to the year end.
The table below summarises the movement in options for the year:
31 December 2023
31 December 2022
Options outstanding at the start of the year
Granted in the year
Exercised in the year
No.
12,500,000
-
(5,000,000)
Performance rights at the end of the year
7,500,000
WAEP (€
cents)
0.053
-
0.031
0.068
(AU$0.10)
No.
5,000,000
7,500,000
-
12,500,000
WAEP (€
cents)
0.031
0.068
-
0.053
(AU$0.08)
The weighted average contractual life for un-exercised options is 6 months.
55
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 21:
SHARE BASED PAYMENTS (continued)
The number of options issued and outstanding over unissued ordinary shares at 31 December 2023 is as
follows:
Grant date
Exercise price
Expiry date
Balance at 31
December
2023
Vested and
Exercisable at 30
June 2023
Balance at 31
December
2022
15 Aug 2022
21 Jul 2021
AU$0.10
(€0.068)
AU$0.05
(€0.031)
30 Jun 2024
7,500,000
7,500,000
7,500,000
21 Jul 2023
-
-
5,000,000
NOTE 22:
FINANCIAL INSTRUMENTS
(a) Interest Rate Risk Exposures
Profile
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Variable rate instruments
Financial assets
Financial liabilities
Fixed rate instruments
Financial assets
Financial liabilities
CONSOLIDATED
2023
€
2022
€
1,252,717
-
1,252,717
-
(124,937)
(124,937)
1,536,041
-
1,536,041
-
(139,524)
(139,524)
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 2022.
Effect in €’s
31 December
Variable rate instruments
(b) Credit Risk
Profit or loss
Equity
2023
2022
2023
2022
6,264
7,680
-
-
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.
56
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 22:
FINANCIAL INSTRUMENTS (continued)
The Group is not exposed to significant credit risk. Credit risk with respect to cash is held with recognised
financial institutions with acceptable credit ratings. The Group has limited its credit risk in relation to its
gas sales in that all transactions fall within an offtake agreement with BP Gas Marketing Limited the initial
term to 30 September 2024 with an option to extend.
The Group has a concentration of credit risk exposure to its one customer (BP Gas Marketing Limited).
Settlement and payment terms are 20 days after month end, and the customer has an investment grade
credit rating.
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
12
13
CONSOLIDATED
Carrying Amount
2023
€
1,252,717
691,719
4,678
1,949,114
2022
€
1,536,041
434,480
490,088
2,460,609
(c)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest
payments:
Consolidated
31 December 2023
€
Trade and other
payables
Lease liabilities
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
1 – 2 Years
2 – 5 Years
(296,251)
(296,251)
(296,251)
-
-
-
(124,937)
(136,230)
(14,340)
(14,340)
(57,360)
(50,190)
(421,188)
(432,481)
(310,591)
(14,340)
(57,360)
(50,190)
57
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 22:
FINANCIAL INSTRUMENTS (continued)
31 December 2022
€
Trade and other
payables
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
1 – 2 Years
2 – 5 Years
(741,384)
(741,384)
(741,384)
-
-
-
Lease liabilities
(139,524)
(158,700)
(13,800)
(13,800)
(27,600)
(103,500)
(880,908)
(900,084)
(755,184)
(13,800)
(27,600)
(103,500)
(d)
Net Fair Values of financial assets and liabilities
The carrying amounts of financial assets and liabilities as disclosed in the statement of financial
position equate to their estimated net fair value.
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).
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 are not other financial assets and liabilities at fair value.
(e)
Foreign Currency Risk
The Group is exposed to foreign currency risk on purchases and borrowings that are denominated in
a currency other than Euro. The currencies giving rise to this risk is primarily Australian Dollars.
Amounts receivable/(payable) in foreign currency other than
functional currency:
Cash
Current – payables
Net exposure
CONSOLIDATED
2023
€
21,794
(50,941)
(29,147)
2022
€
1,473,921
(17,484)
1,456,437
58
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 22:
FINANCIAL INSTRUMENTS (continued)
The following significant exchange rates applied during the year:
Australian Dollar ($)
USA Dollar (US$)
Sensitivity Analysis
Average rate
Reporting date spot rate
2023
0.619
0.912
2022
0.659
-
2023
0.614
0.924
2022
0.636
-
A 5% strengthening of these currencies 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 2022 was prepared using the same
basis.
31 December 2023
Australian Dollar to Euro (€)
USA Dollar to Euro (€)
31 December 2022
Australian Dollar to Euro (€)
CONSOLIDATED
Profit or loss
€
(1,008)
(449)
72,822
Equity
€
-
-
-
A 5% weakening of these currencies 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 table below summarises material commitments for the Group
Leases (refer Note 19)
Within one year
28,680
28,680
One to five
years
107,550
107,550
After 5 years
-
-
Other than the above, there are no other material commitments or contingent liabilities not provided for in
the financial statements of the Group as at 31 December 2023.
59
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 24:
RELATED PARTIES
KEY MANAGEMENT PERSONNEL COMPENSATION
The key management personnel compensation included in employee benefit expenses (see Note 6) is as
follows:
Short-term employee benefits
Termination benefits
Other long term benefits
Post-employment benefits
Other balances owing to directors are as follows:
CONSOLIDATED
2023
€
117,900
-
-
-
2022
€
68,298
5,171
-
-
117,900
73,469
Related Party
Kevin Bailey AM
Sara Edmonson
Joseph Constable
Katrina O’Leary
Total
Directors’
remuneration
outstanding at
31 Dec 2022
€
62,034
-
6,655
-
Fees for the
year
€
35,299
27,515
27,533
27,553
Amount paid
€
(97,333)
(27,515)
(34,188)
(27,553)
68,689
117,900
(186,589)
Directors’
remuneration
outstanding at
31 Dec 2023
€
-
-
-
-
-
60
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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
Reserves
Accumulated losses
Total equity
Financial Performance
Loss
Other comprehensive loss
Total comprehensive loss
COMPANY
2023
€
2022
€
180,173
12,688,233
12,868,406
1,559,240
11,443,468
13,002,708
(83,990)
-
(83,990)
(203,265)
-
(203,265)
12,784,416
12,799,443
56,847,752
107,714
(44,171,050)
56,632,102
179,626
(44,012,285)
12,784,416
12,799,443
(169,457)
-
(1,097,516)
-
(169,457)
(1,097,516)
NOTE 26:
INTERESTS IN OTHER ENTITIES AND JOINT OPERATIONS
The Group’s interest in joint arrangements at 31 December 2023 is as follows:
Joint Operation
Manager
Company’s
Interest
Principal Activity
(Exploration)
Selva Malvezzi Field
Po Valley Operations
63%
Gas
The Group received the Selva Malvezzi Production concession in July 2022 and holds a 63% interest in the
field together with Prospex Oil and Gas Plc (“Prospex”) holding 37% (includes 20% held by Prospex subsidiary
UOG Italia S.r.l). Po Valley Operations (100% subsidiary of the Company) is operator under a Joint Operations
Agreement (“JOA”).
61
PO VALLEY ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
NOTE 26:
INTERESTS IN OTHER ENTITIES AND JOINT OPERATIONS (continued)
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.
Details of the subsidiary is tabled below:
Name:
Country of
Incorporation
Class of
Shares
2023
Investment
€
2022
Investment
€
Holding
%
Po Valley Operations Pty
Limited (“PVO”)
Australia
Ordinary
4,043,419
4,043,419
100
NOTE 27:
SUBSEQUENT EVENTS
There were no events between the end of the financial year and the date of this report that, in the opinion of
the Directors, will affect significantly the operations of the Group, the results of those operations, or the state
of affairs of the Group in future financial years.
62
PO VALLEY ENERGY LIMITED
DIRECTORS’ DECLARATION
1. In the opinion of the directors of Po Valley Energy Limited (“the Company”):
i)
the financial statements and notes, as set out on pages 19 to 62, 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 2023 and of
its performance, for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
ii)
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 for the
financial year ended 31 December 2023.
3. The Directors draw attention to Note 1.2(a) to the Financial Statements which includes a statement of
compliance with International Financial Reporting Standards.
This declaration is made in accordance with a resolution of directors.
Kevin Bailey AM
Chairman
28 March 2024
63
INDEPENDENT AUDITOR’S REPORT
To the Members of Po Valley Energy Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Po Valley Energy Limited (“the Company”) and its controlled entities
(“the Group”), which comprises the consolidated statement of financial position as at 31 December 2023,
the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes to the financial
statements, including material accounting policy information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(a) giving a true and fair view of the Group’s financial position as at 31 December 2023 and of its financial
performance for the year then ended; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements
of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our
report.
64
Key Audit Matter
Revenue recognition
Note 4 to the financial report
How our audit addressed the key audit matter
The Group generates revenue from gas sales. The
Group recognised sales revenue of €2,337,315 for
the year (2022: €nil).
Revenue recognition is considered to be a key audit
matter given the significance of revenue to the
Group’s results as well as the fraud risk around
revenue recognition including:
-
-
revenues
An overstatement of
through
premature revenue recognition or recording of
fictitious revenues; or.
Revenue not being recognised when control is
transferred to the customer, resulting in it not
being recognised in the correct accounting
period.
Revenue is recognised when control is transferred
to the buyer and the amount of revenue can be
reliably determined. This occurs for the Group when
the control of gas passes at the delivery point.
Our audit procedures included but were not limited
to the following:
- Obtaining an understanding of the Group’s
processes for revenue recognition and controls
in place around gas sales;
- Performing substantive tests of detail of all gas
sales transactions during the year to supporting
documentation and receipt of cash;
- Assessing the Group’s policies for recognition of
the
revenue against
the
accounting standards and ensuring these are
applied correctly and adequately disclosed in
the financial statements; and
requirements of
- Performing sales cut-off procedures focusing on
sales around balance date, testing a sample of
transactions to underlying documentation and
assessing the period
in which they were
recognised.
Recoverability of exploration and evaluation phase assets
Note 15 to the financial report
In accordance with AASB 6 Exploration for and
Evaluation of Mineral Resources, the Group’s
accounting policy is to capitalise exploration and
evaluation expenditure. As at 31 December 2023
the Group had €4,733,654 of capitalised
exploration and evaluation costs.
Our audit focused on the Group’s assessment of
the carrying amount of the capitalised exploration
and evaluation costs, as this is one of the most
significant assets of the Group. We planned our
work to address the audit risk that the capitalised
expenditure may no longer meet the recognition
criteria of the standard. In addition, we considered
it necessary
facts and
circumstances existed to suggest that the carrying
amount of the exploration and evaluation costs may
exceed their recoverable amounts.
to assess whether
Our procedures included but were not limited to the
following:
- Obtaining an understanding of
the key
processes associated with management’s
review of the carrying values of each area of
interest;
- Verifying a sample of amounts capitalised;
- Considering management’s assessment of
potential indicators of impairment;
- Obtaining evidence that the Group has current
rights to tenure of its areas of interest;
- Examining the exploration budget for the year
ending 31 December 2024 and discussing with
management the nature of planned activities;
- Enquiring with management, reviewing ASX
announcements and reviewing minutes of
Directors’ meetings to ensure that the Group
had not resolved to discontinue exploration and
evaluation at any of its areas of interest; and
- Examining the disclosures made in the financial
report.
65
Recoverability of gas producing plant and equipment and production phase assets
Notes 14 and 15 to the financial report
As at 31 December 2023 the Group had gas
producing plant and equipment with a carrying
value of €1,886,626 and production phase assets
of €5,241,713.
Assessing the recoverability and carrying value of
these balances was considered to be a key audit
matter due to the judgements and estimations
involved.
These estimations and judgements relate to two
main areas, being
indicators and
depreciation and amortisation associated with
these assets.
impairment
Impairment indicators involve assessing future
forecasts and judgement around recoverability of
the assets.
Depreciation and amortisation involves using
estimated reserves and resources in a units of
production methodology.
Our audit procedures included but were not limited
to the following:
- Obtaining an understanding of the processes
and controls in place around management’s
assessment of the recoverability of the assets;
- Testing for impairment indicators to determine
whether any such indicators exist at balance
date;
- Reviewing future plans for the cash-generating
units and ensuring that such plans support the
recoverability of the related assets;
- Ensuring items capitalised during the year were
appropriate to capitalise;
in
- Assessing the application of reserves and
the depreciation/amortisation
latest
resources
models by comparing
published statement and underlying records;
- Testing the mathematical accuracy of the
them
the
to
depreciation/amortisation models; and
- Assessing
the adequacy of
disclosures within the financial statements.
the Group’s
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 31 December 2023, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report, or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
66
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
−
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
− Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
−
− Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
−
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
67
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included within the directors’ report for the year ended 31
December 2023.
In our opinion, the Remuneration Report of Po Valley Energy Limited for the year ended 31 December 2023
complies with Section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
HLB Mann Judd
Chartered Accountants
Perth, Western Australia
28 March 2024
L Di Giallonardo
Partner
68
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”) together the Group. PVO holds the titles to all exploration permits
fully awarded and / or preliminary awarded production concessions.
Its operations are located entirely in the north of Italy.
As at 31 December 2023, the Group’s core portfolio includes 1 awarded production concession
(Selva Malvezzi), 1 preliminary awarded production concession with environmental approval
granted (Teodorico), 3 onshore Exploration Permits and 1 offshore Exploration Permit as detailed
in Table 1.
Total acreage position of the Group at 31 December 2023 is 733,73 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 2023
69
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
Table 1 below summarises the ownership % held by the Group of each tenement as at 31 December
2023:
PRODUCTION
CONCESSIONS
AWARDED
PREL.
AWARDED
EXPLORATION
PERMITS
GRANTED
Tenement
Location
Interest held
Selva Malvezzi (1)
Italy, Emilia Romagna
63% Po Valley(1)
Teodorico (d.40.AC-PY)
Italy, Adriatic Offshore
100% Po Valley
AR94PY
Italy, Adriatic Offshore
100% Po Valley
Cadelbosco di Sopra
Italy, Emilia Romagna
100% Po Valley
Grattasasso
Italy, Emilia Romagna
100% Po Valley
Torre del Moro
Italy, Emilia Romagna
100% Po Valley
Table 1: Tenements at 31 December 2023
(1) Net to PVE is 63%, JV partners’ 37% held by Prospex Group (Prospex Oil & Gas Plc 17% and UOG Italia S.r.l. 20%, UOG Italia S.r.l is a wholly
owned subsidiary of Prospex Oil & Gas Plc. Notices of the quota transfers were submitted to Italian ministry in November 2022 and formally
approved by MASE on 6th March 2024.)
2)
RESERVES AND RESOURCES STATEMENT
The following tables summarise the status of the Group’s Reserves & Resources as at 31 December
2023.
Group Reserves
Reserves as at
Reserves as at
Gas, Italy (bcf)
Developed
31 December 2023
31 December 2022
1P
2P
1P
2P
Selva Malvezzi (Podere Maiar) [net]1
2.38
8.18
2.60
8.40
Undeveloped
Teodorico
Total Reserves
27
37
27
29.38
45.18
29.60
37
45.4
Table 2: Total Group Reserves ( per CPR dated 25 July 2022 ASX announcement 26 July 2022 less depletion from production)
Reserves Reconciliation
Reserves as at
Reserves as at
Gas, Italy (bcf)
Reserves at 31 December 2022
Production at Selva Malvezzi [net]
Total Reserves
Table 3: Reconciliation of Reserves
1P
29.60
0.22
29.38
2P
45.40
0.22
45.18
70
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
The movement in reserves for the year is a result of the production of gas at the Podere Maiar-1 well
in the Selva Malvezzi concession summarised in the table below:
Production well
Podere Maiar-1
Table 4: Production summary
Gross 100%
Net to PVE 63%
9,838,132 scm (0.35bcf)
6,198,022 scm (0.22 bcf)
The Group does not have unconventional petroleum resources in its portfolio.
Undeveloped reserves held for longer than 5 years since first reported:
Teodorico (37 bcf 2P Reserve) has been held for longer than 5 years since first reported. The Group
received Environmental Impact assessment Decree in March 2021. During 2022, the impact of the
Italy’s Plan of Sustainable Energy Transition of Suitable Areas (“Pitesai”) was being assessed which
inhibit progression for development. A recent court ruling struck down the Pitesai which restricted
domestic exploration activity. In December 2023, the Italian government published a New Energy
Decree in response to Italy’s energy security needs which include measures to strengthen the
production and security of domestic natural gas supply. An accelerate permitting regime is envisaged
as an integral part of this decree. The decree was converted into law in February 2024 and must be
operationalised. The Italian Government has assigned this mandate to Gestore Servizi Energetici
“GSE”, an existing regulated body for energy in Italy. Po Valley is currently investigating the
implications of this new law in consultation with its legal advisers and the relevant Ministry, MASE, to
determine the full impact on Teodorico. Ultimately the law is promoting domestic production citing
the Northern Adriatic as a key source of natural gas for the country therefore the impact on Teodorico
is positive, however the details are still being worked through from an operational perspective.
The Company continues to assess how best to realise value from its 100%-owned Teodorico off-shore
asset, either via a joint venture for development or sale.
Group Contingent Resources
Contingent Resources as at Contingent Resources as at
Gas (bcf)
31 December 2023
31 December 2022
1C
13.1
2C
26.9
1C
13.1
2C
26.9
Table 5: Total Group Contingent Resources (as per CPR dated 25 July 2022 ASX announcement 26 July 2022)
There have been no changes in contingent resources since the prior year.
Where reported, aggregated reserves and contingent resources are aggregated by arithmetic
summation by category.
71
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
Current estimates of contingent and prospective resources by licence are shown in Table 6 below.
Licence
Project
Reserves
Contingent
Resources
Gas Bcf
Prospective
Resources
1P
2P
3P
1C
2C
3C
Low
Best
High
Selva (Podere Maiar1)
Selva level A South
2.38
8.18
18.58
0.7
2.2
0.6
1.1
5.6
2.2
2.3
11.2
5.9
Selva Malvezzi Selva level B North
[Net]
Selva level B South
Fondo Perino
East Selva
Riccardina
Teodorico
Teodorico
PL3-C
AR94PY
Zini (Qu-B)
Cadelbosco
Canolo (Qu-A)
di Sopra
Canolo (Plioc)
Zini (Qu-A)
Torre del Moro Torre del Moro
27
37
48
7.4
10.6
14.0
1.1
0.7
0.4
2.7
1.1
3.6
4.6
1.7
10.5
6.4
18.3
8.2
9.2
21.9
24.4
12.9
25.6
81.2
7.9
15.9
25.0
0.6
420.7
1.4
502
2.4
596.1
Table 6: Gas Reserves and Resources by Field at 31 December 2023 (as per CPR dated 25 July 2022 ASX announcement 26
July 2022) less depletion from production for the year 2023.
Prospective Resources are the estimated quantities of petroleum 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
In reference to the reserve and resources estimation process, the Group commits to a regular
independent audit in order to obtain a certified update of its Reserves and Resources portfolio. The
last review took place in July 2022 (refer Competent Persons Report dated 25 July 2022 ASX
announcement 26 July 2022). The reserves and resources 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 and reviewed in July 2022 (ASX announcement 26 July 2022).
The currently is no new information or data that materially affects the information included in the
July 2022 review of reserve and resource estimates and all material assumptions and technical
parameters underpinning the estimates in that review continue to apply and have not materially
changed. Where applicable, reserve estimates reported are updated for depletion form production
during the year as summarised in Tables 3 and 4.
All figures have been determined using a deterministic method except Teodorico which was estimated
using a probabilistic method.
72
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
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 announcement
26 July 2022 “Revised and updated Competent Persons report on PVE assets” together with a
Competent Persons Report issued by CGG(UK) Services Ltd dated 25 July 2022. All estimates are based
on independent evaluations in accordance with the Petroleum Resource Management System PRMS
(2007/2011) as published by the Society of Petroleum Engineers (SPE).
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 Group 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.
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 25 July 2022 which was lodged with the ASX on 26 July 2022. 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).
73
PO VALLEY ENERGY LIMITED
TECHNICAL SUMMARY
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.
74
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 2024.
ORDINARY SHAREHOLDERS
1. TOP TWENTY SHAREHOLDERS
Details of the 20 largest shareholders of quoted fully paid ordinary shares by registered
shareholding are:
Name
Bond Street Custodians Limited
Lambert Blue Chip Investments Pty Ltd
Fuiloro Pty Ltd
1 Mr Kevin Bailey & Mr Christopher Bailey
2
Symmall Pty Ltd
3 Michael Masterman
4
5
6
7 H&G High Conviction Limited
8 Quo Vadis Pty Ltd
9
10 HSBC Custody Nominees (Australia) Limited
11 P&N Platinum Investments Pty Ltd
12 Mr Kevin Christopher Bailey
13
14 Mr Laurie Mark Macri & Mrs Chirstine Simone Macri
J P Morgan Nominees Australia Pty Limited
Super Fund>
15 Dr Ida Constable
16 Citicorp Nominees Pty Limited
17 Donus Australia Foundation Limited
19 Mr Laurie Mark Macri
19 Beronia Investments Pty Ltd
20 LDU Pty Ltd
Total
2. SUBSTANTIAL SHAREHOLDERS
Number
135,879,916
127,633,636
87,525,732
85,694,960
56,523,436
55,281,743
48,815,048
30,799,806
25,000,000
24,664,317
24,136,805
19,645,646
16,978,535
%
11.72
11.01
7.55
7.39
4.88
4.77
4.21
2.66
2.16
2.13
2.08
1.70
1.46
15,674,624
1.35
14,071,429
12,529,435
12,400,000
12,000,000
11,121,549
10,404,362
826,780 979
1.21
1.00
1.07
1.04
0.96
0.90
71.33
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
Kevin Bailey AM
Michael Masterman
Beronia Investments Pty Ltd
Paul Kenneth Lambert
Number
284,648,345
215,159,368
119,490,777
79,149,367
%
24.56
18.56
10.31
6.84
75
PO VALLEY ENERGY LIMITED
ASX ADDITIONAL INFORMATION
3. NUMBER OF SECURITY HOLDERS AND SECURITIES ON ISSUE
Total number of fully paid ordinary shares on issue is 1,158,961,620 held by 766 shareholders.
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
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,000 and over
Total
Holders
91
21
47
310
298
%
11.88
2.87
6.14
40.86
38.25
Fully paid Ordinary Shares %
8,695
60,045
377,162
13,654,550
1,144,861,168
0.00
0.01
0.03
1.18
98.78
767
100.00
1,158,961,620
100.00
6. UNMARKETABLE PARCEL OF SHARES
The number of shareholders holding less than a marketable parcel of ordinary shares is 189
shareholders with 799,597 ordinary shares, based on the Po Valley Energy Limited closing
share price of AU$0.037 on 15 April 2023.
7. ON MARKET BUY-BACK
There is no current on market buy-back.
8. UNQUOTED SECURITIES
Po Valley Energy Limited has the following unquoted securities on issue:
Category
Number
Number of holders
Unlisted Options exercise price
AU$0.10 expiry 30 Jun 2024
7,500,000
1
76