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NorthWesternSACGASCO LIMITED
ABN 83 114 061 433
ANNUAL REPORT
For the year ended 31 December 2019
SACGASCO LIMITED
CONTENTS
CONTENTS
Page
Chairman’s Report ...................................................................................................................................... 1
Review of Operations .................................................................................................................................. 2
Directors’ Report ......................................................................................................................................... 8
Remuneration Report - Audited ................................................................................................................ 13
Auditor’s Independence Declaration ......................................................................................................... 21
Consolidated Statement of Profit or Loss .................................................................................................. 22
Consolidated Statement of Other Comprehensive Income ....................................................................... 23
Consolidated Statement of Financial Position ........................................................................................... 24
Consolidated Statement of Changes in Equity .......................................................................................... 25
Consolidated Statement of Cash Flows .................................................................................................... 27
Notes to the Consolidated Financial Statements ...................................................................................... 28
Directors’ Declaration ................................................................................................................................ 59
Independent Auditor’s Report ................................................................................................................... 60
Corporate Governance Statement ............................................................................................................ 63
Stock Exchange Information ..................................................................................................................... 72
Corporate Directory ................................................................................................................................... 75
SACGASCO LIMITED
CHAIRMAN’S REPORT
CHAIRMAN’S REPORT
Dear Shareholder,
Sacgasco continues to pursue its growth strategy by using existing facilities to realise value from its exploration of
the underexplored and overlooked older sediments in the Sacramento Basin. Sacgasco looks to 2020 to unlock the
value of its asset base, with a planned appraisal well at Borba 1-7, and to build on its success in conventional Natural
Gas flow, exploration and appraisal activities.
The Borba 1-7 well is a very exciting opportunity for the Company. Receipt of the drilling permit has allowed the
Company to construct a road to access the well site and planning is in place for the next stage in the development
of the Borba properties. Based on a return to more normal worldwide business conditions, this is expected later in
2020.
“Natural Gas is the enabler of renewable Energy, not its Enemy.
Natural Gas supply alternatives and operational flexibility allows it to fit easily into government energy policies
that are ultimately driven by the public expectation that the lights will stay on and living conditions will be
comfortable!
Natural gas is a fundamental mineral for the modern world and will be required in our future energy matrix as
much as any other energy source or energy storage mineral. Natural Gas also has important roles in fabrication
of modern clothing and accessories, and building products, formulation of medicines, and for transportation.
Natural Gas is the hydrocarbon of choice for realistic public and private energy policies.”
Our strategy to transition to become a significant producer in the short-term remains unchanged and unlike many
other companies, this is all the much easier for Sacgasco as we have immediate access to critical JV-owned
infrastructure that cannot be easily replicated. As well, we have the ability to supply directly into a high-demand and
premium-priced local market.
Positive Outlook for Natural Gas Markets
We believe there is a positive market outlook for natural gas, due to its diverse role in energy supply and we expect
that global energy demand, particularly natural gas, will grow significantly over the next two decades. Natural Gas
prices have remained firm in the face of recent falls in global oil prices.
Natural gas is an important component of California’s energy system, supplying about one-third of the state’s primary
energy demand. Even as California seeks to move away from fossil fuels to meet its climate goals, natural gas-fired
electricity will play an important role in integrating increasing amounts of renewables into the electricity grid.
California receives about 90 percent of its natural gas from supply basins outside the state, through the integrated
North American natural gas market. A local source of natural gas has many benefits, and this construct underpins
Sacgasco’s strategy in California.
California natural gas prices are almost always higher than US benchmark Henry Hub prices. Gas prices in California
remain at a premium of some 40% to the US benchmark and combined with Sacgasco’s low operating costs, the
potential for enhanced returns from increasing gas flows is attractive.
Yours faithfully,
Andrew Childs
Chairman
1
SACGASCO LIMITED
REVIEW OF OPERATIONS
REVIEW OF OPERATIONS
OVERVIEW
Sacgasco Limited is listed on the Australian Securities Exchange (ASX: SGC).
Sacgasco’s strategy is to find and drill, oil and gas flow opportunities in recently overlooked, but prospective
sedimentary basins close to under supplied oil and gas markets.
As an explorer Sacgasco uses its assets to facilitate exploration activities to grow the company.
Sacgasco’s focus is on activity that provides attractive options for investors.
OPERATIONS HIGHLIGHTS
o
o
o
o
o
o
County approval and drilling permit received for the Borba 1-7 Natural Gas Prospect;
Acquired additional interests in and simplified the JV structure in Sacgasco Operated Projects in Sacramento
Basin;
Sacgasco portfolio of wells and gas infrastructure, particularly natural gas pipelines and Gas Sales Meter
Stations provides platform to scale up production in near term;
Leases over mapped high potential prospects continue to be held for drilling, gas flow rework, appraisal and
exploration;
Opportunities that are consistent with the Company’s strategy are reviewed for drilling opportunities; and
Natural gas prices continue to be at a premium to the USA Henry Hub benchmark.
SGC has established a portfolio of large conventional natural gas prospects in the Sacramento Basin, close to under-
filled Natural Gas trunklines connecting to the attractive Californian gas market.
Conventional Natural Gas Growth Outlook for Sacgasco in 2020:
Clearly recognised new Natural Gas Play Fundamentals:
3D seismic based model for Conventional Sandstone reservoirs in robust
hydrocarbon traps
Source of Pipeline Quality Gas Proved
High Reservoir Energy to support High Gas Flows
Operated assets with low overheads
Access to existing JV-owned critical pipeline infrastructure
California Natural Gas prices at a premium
SGC’s growth strategy, based on funding drilling through a combination of capital raising and farmout processes,
represents an opportunity to achieve increased near-term gas supply to a domestic market with a major energy
supply deficit. California’s average gas demand is approximately 7 billion cubic feet per day or 2.5 trillion cubic feet
of gas per year, with Californian sourced gas production only amounting to less than 10% and declining.
SGC’s management team is committed to progressing corporate and operational objectives in order to expand the
Company’s business in California and elsewhere as opportunities present.
2
SACGASCO LIMITED
REVIEW OF OPERATIONS
SACRAMENTO BASIN - Onshore Northern California
Exploration, appraisal and new ventures
Opportunities have been identified in the Sacgasco portfolio of wells for multiples of current production levels.
Sacgasco has identified workover and equipment relocation and refurbishment activities in its portfolio that provide
opportunities for increases in production in the near future. While scaling up production from the Company’s portfolio
of 31 wells is a business fundamental, Sacgasco recognises that shareholder rewards are driven by bringing larger
potential projects into production across its gas fields and exploration acreage
Production facilities provide ready access points for future exploration success from Sacgasco’s appraisal and
exploration activities.
Borba 1-7 Field (SGC 50% WI)
During the year Sacgasco received approval from the Glenn County Planning and Community Development Services
Agency and subsequently received the Drilling Permit from California Division of Oil, Gas and Geothermal Resources
for the Borba 1-7 well. The Company interprets the Borba prospect to be an optimal location to test multiple stacked
amplitude anomalies and potential channel fill sand reservoirs, in a vertical well.
Notably, in granting the drilling permit Glenn County staff provided the following commentary in the approval
document:
The Borba well is located within a 3D seismic data volume. The first undrilled amplitude anomaly occurs at around
700 metres drilling depth. Multiple seismic anomalies below this depth are interpreted to represent individual gas
traps.
The interception of good reservoirs at this location will calibrate more extensive seismic anomalies and multi-TCF
natural gas resource potential in a new play fairway in this area.
3
SACGASCO LIMITED
REVIEW OF OPERATIONS
Rio Vista Gas Fields (SGC 100% WI)
As annouced in December 2018, Sacgasco acquired 100% of a strategic portfolio of natural gas assets in the Rio
Vista Gas Field in the Sacramento Basin, California. The Rio Vista field has produced over 3.8 Tcf of natural gas and
is the largest natural gas field in the Sacramento Basin.
The acquired wells are located within a 467-acre oil and gas lease, with flowing gas from depths between 5,000 and
7,000 feet. The property includes two gas flowing wells. The property, including an oil and gas lease, wells and
associated gas flow facilities was acquired for no initial cost.
Location of Sacgasco Rio Vista Field Wells (Inset Red Box)
GAS FLOW UPDATE
Sacgasco’s well portfolio of Operated wells, provides opportunities to bring additional wells back into gas flowing
conditions.
The Company has working interests in 8 gas fields in the Northern Sacramento Basin and is the operator of wells in
7 of these fields. The fields are Rancho-Capay, Rice Creek East, Malton, Dutch Slough, Denverton Creek, Los
Medanos, Rio Vista and Willows.
Gas Flows
Full Year 2019
Full Year 2018
Gross mcf * (100%)
SGC WI mcf
*mcf – Thousand Cubic feet gas
231,489
130,451
316,663
115,818
NEW VENTURES AND ACQUISITIONS
Sacgasco reviews opportunities that fit with the strategy to find and explore oil and gas opportunities in recently
overlooked, but prospective sedimentary basins close to under supplied oil and gas markets. A number of these
opportunities are under review.
4
SACGASCO LIMITED
REVIEW OF OPERATIONS
SAGASCO WELLS – WORKING INTEREST AND STATUS
Field and Well Name
Rancho Capay Gas Field: (Operated)
Rancho Unit 1
Rancho Unit 2
Rio Grande
Big Jake
Stoney Creek 3
Stoney Creek 2
Dempsey 1‐15
Rice Creek East Gas Field: (Operated)
OPI Bettencourt Unit
Bettencourt Unit B
Nareco Slade #1B
Malton Gas Field: (Operated)
Canfield 2
MU #1
Santa Clara #1
Unit #7
VBC #1
VBC #2
VBC #3
Dutch Slough Gas Field: (Operated)
SCOPESI #3
Reedy #1
Reedy #2
Reedy #3
Reedy #4
Denverton Creek Gas Field: (Operated)
Lambie Felenco 3‐4
Los Medanos Gas Field: (Operated)
Neely 1
Neely 2
Willows Gas Field: (Non‐Operated)
MJ Line
Rio Vista Gas Field (Operated)
Rec Board #5
Rec Board #7
Rec Board #8
Example Key Plugged Wells (available for re‐entry)
Alvares
Reedy #5
Working Interest (WI)*
(Approx.)
41%
57%
60%
60%
60%
60%
60%
60%
60%
60%
61%
44%
41%
35%
47%
47%
47%
69%
69%
69%
69%
69%
70%
90%
90%
10%
100%
100%
100%
49%
69%
Note: WI* – Approximate numbers represent post farmout working interests
5
Well Status
Active
Active
Active
Idle
Active
Idle
Intermittent
Idle
Idle
Idle
Idle
Idle
Idle
Idle
Active
Active
Active
Idle
Idle
Idle
Idle
Idle
Intermittent
Idle
Active
Active
Idle
Active
Active
Plugged
Plugged
SACGASCO LIMITED
REVIEW OF OPERATIONS
PROJECT SUMMARY
SGC’s current focus is unlocking the underlying value from its natural gas prospects in the Sacramento Basin.
LEASES; RELATED GAS
FIELD (HBP LEASES);
OR KEY WELL
PROJECT
TYPE
TOTAL
WELLS
WORKING
INTEREST
(WI)*
PROJECT NAMES
All located in the
Sacramento Basin
Onshore northern
California
Dempsey Project
Alvares Project
Rancho Capay, Rice
Creek, East Gas Fields -
HBP Leases;
Oil and Gas Mineral
Leases
Oil and Gas Mineral
Leases;
Alvares 1 well (P&A Re-
entry)
Dempsey Trend
Projects incl Borba
Oil and Gas Mineral
Leases
Los Medanos Project
Malton Project
Dutch Slough Gas
Project
Los Medanos Gas Field
HBP Leases
Malton Gas Field HBP
Leases
and Oil and Gas Mineral
Leases
Dutch Slough Gas Field
HBP Leases
Denverton Creek Gas
Project
Denverton Creek Gas Field
HBP Leases
Rio Vista Gas Project Rio Vista Field Wells
HBP Leases
Willows Gas Field
(Non-operated)
Willows Gas Fields
HBP Leases
Exploration,
Appraisal &
Rework
Exploration &
Appraisal
Exploration
Appraisal &
Rework
Exploration,
Appraisal &
Rework
Exploration,
Appraisal &
Rework
Gas flow &
Rework
Gas flow,
appraisal &
Rework
Gas flow &
Rework
10
41-60%
1
-
2
7
6
1
3
1
49%
46 - 50%
90%
35-61%
69%
70%
100%
10%
Note: WI* – Approximate numbers represent post farmout working interests
Changes in Tenement / Project List Reporting Period:
Significant Working Interest changes have been reported above.
Projects are continuously reviewed for their strategic fit and are expected to be modified over time to reflect local and
industry conditions:
Working interest may vary across individual projects and leases and WI above reflects the WI in the relevant well
bores or majority of leased lands.
6
SACGASCO LIMITED
REVIEW OF OPERATIONS
Leases
US exploration is conducted on leases grant by Mineral Right owners, in SGC’s case primarily private individuals or
groups. Leases can vary in size from very small parcels (part of an acre) to large landholdings (covering a few square
miles). Leases generally are for 5 years and rentals are paid annually. There are no firm work commitments
associated with the leases. Some leases are ‘Held By Production’ and royalties are paid to mineral right owners in
lieu of rentals. SGC has not listed all it leases as it is impractical and not meaningful for potential project value
assessment in a conventional natural gas play. A detailed listing of leases may also lead to a loss of competitive
advantage and consequent reduced value to SGC shareholders.
Competent Persons Statement
This document contains forward looking statements that are subject to risk factors associated with the oil and gas
industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected
by many variables which could cause actual results or trends to differ materially. The technical information provided
has been reviewed by Mr Gary Jeffery, Managing Director of Sacgasco Limited. He is a qualified geophysicist with
over 47 years technical, commercial and management experience in exploration for, appraisal and development, and
transportation of oil and gas. Mr Jeffery consents to the inclusion of the information in the form and context in which
it appears.
The Financial Year
Rights Issue
In August 2019 the Company completed a Non-Renounceable Rights Issue. The offer was based on 1 new option
for every 2 shares held at the record date, with the offer price of 0.3 cents per option. The options are exercisable
at 4 cents each on or before 31 December 2021. The rights issue was completed, with 133,429,948 new listed
options issued to shareholders raising $400,290.
Corporate Activity
Public Presentations:
SGC Non-Executive Director Greg Channon presented to shareholders and investors at the annual Good Oil
Conference held in Perth, Western Australia (Refer ASX release dated 11 September 2019).
7
SACGASCO LIMITED
DIRECTORS’ REPORT
For the year ended 31 December 2019
DIRECTORS’ REPORT
Your Directors present their report together with the financial statements of the Group consisting of Sacgasco Limited
and the entities it controlled for the financial year ended 31 December 2019 and the auditor’s report thereon.
DIRECTORS
The Directors of the Company at any time during or since the end of the financial year are:
Name and independence
status
Experience, qualifications, special responsibilities and other
directorships
Andrew Childs
Non-Executive Chairman
Appointed: 25 November 2008
Interests:
Shares: 6,798,094
Options: 9,224,769
Mr Childs graduated from the University of Otago, New Zealand in 1980 with
a Bachelor of Science in Geology and Zoology. Having started his
professional career as an Exploration Geologist in the Eastern Goldfields of
Western Australia, Mr Childs moved to petroleum geology and geophysics with
Perth-based Ranger Oil Australia (later renamed Petroz NL). He gained
technical experience with Petroz as a Geoscientist and later commercial
experience as the Commercial Assistant to the Managing Director.
Mr Childs is also Principal of Resource Recruitment and Non-Executive
Director of ADX Energy.
Andrew is Chair of the Remuneration and Nomination Committee and is a
member of the Audit and Risk Management Committee.
Past directorships
None
Gary Jeffery
Managing Director
Appointed: 24 October 2013
Mr Jeffery has over 47 years of project development, operations and
exploration experience in the oil, gas and mining and energy utilities
industries, having worked for both large and small organisations in over thirty
countries worldwide.
He is an experienced director of public companies in Australia, Uganda and
Canada, and has broad international experience in resources, and provides
consulting services on energy and resource related matters.
Interests:
Shares: 17,389,757
Options: 17,823,485
Mr Jeffery graduated with a BSc in Geology and Geophysics from the
University of New England. He is a WA Energy Research Alliance (WAERA)
Industry Advisory Group participant.
Past directorships:
None
8
SACGASCO LIMITED
DIRECTORS’ REPORT
For the year ended 31 December 2019
DIRECTORS (continued)
Name and independence
status
Experience, qualifications, special responsibilities and other
directorships
Greg Channon
Non-Executive Director
Appointed: 3 December 2018
Mr Channon is a geologist with over 35 years of international experience in
the oil and gas industry. He commenced his career in 1984 as a Wellsite and
Operations Geologist at Delhi Petroleum before joining Santos as an
Explorationist in 1987.
Interests:
Shares: 2,051,977
Options: 3,977,239
Mr Channon was a co-founder of RL Energy and has held numerous
management positions on oil and gas exploration entities. He has sat on the
Board of Directors of several companies listed on the ASX, TSX and HKSE in
previous years. He is currently a Non-Executive Director of Samson Oil and
Gas Ltd (ASX: SSN).
Greg is Chair of the Audit and Risk Management Committee and is a member
of the Remuneration and Nomination Committee.
Past directorships
None
COMPANY SECRETARIES
David McArthur is a Chartered Accountant and was appointed to the position of Company Secretary on
24 October 2013. Mr D. McArthur has over 30 years’ experience in the corporate management of publicly listed
companies and has substantial experience in capital raisings, company re-organisations and restructuring, mergers
and takeovers, and asset acquisitions by public companies.
Jordan McArthur is a Chartered Accountant and was appointed to the position of joint Company Secretary on
28 February 2020. Mr J. McArthur has nine years corporate and financial experience in Australia and the United
Kingdom.
DIRECTORS’ MEETINGS
The number of meetings of the Group’s Board of Directors and of each Board Committee held during the year ended
31 December 2019, and the number of meetings attended by each director were:
Full meetings of Directors
Meetings of Audit and Risk
Management Committee
Meetings of Remuneration and
Nomination Committee
Number of
meetings
attended
Number of
meetings
held whilst
a Director
Number of
meetings
attended
Number of
meetings
held whilst
a Director
Number of
meetings
attended
Number of
meetings
held whilst
a Director
Andrew Childs
Gary Jeffery
Greg Channon
4
4
4
4
4
4
2
2
2
2
2
2
-
n/a
-
-
n/a
-
9
SACGASCO LIMITED
DIRECTORS’ REPORT
For the year ended 31 December 2019
DIRECTORS’ MEETINGS (continued)
The small size of the Board means that Members of the Board meet informally on a regular basis to discuss company
operations, risks and strategies, and as required, formalise key actions through circular resolutions.
The audit and risk management, finance and environmental functions are handled by the full board of the Company.
PRINCIPAL ACTIVITIES
The principal activity of the Group during the financial year was oil and gas exploration with associated natural gas
flows as a by-product.
OPERATING RESULTS
The loss for the financial year ended 31 December 2019 attributable to members of Sacgasco Limited after income
tax was $1,316,441 (2018: $1,974,367).
The Group has a working capital deficit of $237,633 (2018: surplus of $458,256) and had net cash outflows of
$665,947 (2018: net cash outflows of $929,479).
The Company remains acutely aware of the current economic climate and continues to implement cost reduction
measures across the business.
OPERATIONS REVIEW
Information on the operations and financial position of the Group and its strategies and prospects is set out in the
Review of Operations at the beginning of this Annual Report.
Significant changes in the state of affairs
In the opinion of the Directors there were no matters that significantly affected the affairs of the Group during the
financial year, other than those matters referred to in the overview above.
DIVIDENDS
The Directors recommend that no dividend be provided for the year ended 31 December 2019 (2018: Nil).
LIKELY DEVELOPMENTS
The Group will continue to pursue its strategy to further develop its exploration portfolio and to increase gas flows
associated with its wells in California.
10
SACGASCO LIMITED
DIRECTORS’ REPORT
For the year ended 31 December 2019
ENVIRONMENTAL REGULATION
The Group is subject to significant environmental regulation in relation to its exploration activities. It aims to ensure
that the highest standard of environmental care is achieved, and that it complies with all relevant environmental
legislation. The Directors are not aware of any breaches during the period covered by this report.
INDEMNIFICATION AND INSURANCE OF DIRECTORS
The Company has agreed to indemnify all Directors and Company Secretary against any liability arising from a claim
brought by a third party against the Company. The Company has paid premiums to insure each Director and
Company Secretary against liabilities for costs and expenses incurred by them in defending any legal proceedings
arising out of their conduct whilst acting in the capacity of Director of the Company, other than conduct involving wilful
breach of duty in relation to the Company. The current premium is $52,410 (2018: $50,634) to insure the Directors
and Company Secretaries of the Company.
NON-AUDIT SERVICES
No non-audit services were provided during the year from the auditor of the Company, HLB Mann Judd.
EVENTS SUBSEQUENT TO REPORTING DATE
Other than as disclosed in note 6.8 of the notes to the consolidated financial statements, there have been no matters
or circumstances that have arisen since the end of the financial year that have significantly affected, or may
significantly affect, the operations of the Group, the results of these operations, or the state of affairs of the Group in
future financial years.
PROCEEEDINGS 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.
SHARES ISSUED DURING OR SINCE THE END OF THE YEAR AS A RESULT OF THE EXERCISE
OF OPTIONS
During the financial year, no ordinary shares (2018: 500,000 ordinary shares) were issued by the Company as a
result of the exercise of options.
There are no unpaid amounts on the shares issued.
11
SACGASCO LIMITED
DIRECTORS’ REPORT
For the year ended 31 December 2019
UNISSUED SHARES UNDER OPTION
At the date of this report unissued ordinary shares of the Group under option are:
Grant date
31-May-2019
15-Oct-2019
Number of shares
under option
19,000,000
133,429,948
152,429,948
Exercise price
of option
cents
4
4
Expiry date
of option
31-Dec-2021
31-Dec-2021
All unissued shares are ordinary shares of the Company.
During the reporting period 43,000,000 options expired (2018: no options expired).
REMUNERATION REPORT
The Remuneration Report, which forms part of the Directors’ Report, outlines the remuneration arrangements in
place for the key management personnel of Sacgasco Limited for the financial year ended 31 December 2019 and
is included on page 13.
AUDITOR INDEPENDENCE
Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the
Company with an Independence Declaration in relation to the audit of the financial report. The Independence
Declaration is set out on page 21 and forms part of this Directors’ report for the year ended 31 December 2019.
Signed in accordance with a resolution of the Directors.
GARY JEFFERY
Managing Director
Dated at Perth, Western Australia this 30th day of March 2020.
12
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
REMUNERATION REPORT - AUDITED
This report, which forms part of the Directors’ report, outlines the remuneration arrangements in place for the
Directors of Sacgasco Limited for the year ended 31 December 2019. There were no other key management
personnel during the year. The information provided in this remuneration report has been audited as required by
Section 308(3C) of the Corporations Act 2001.
The Remuneration Report details the remuneration arrangements for the Directors who are defined as those persons
having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or
indirectly, whether executive or otherwise.
Remuneration philosophy
The performance of the Company depends upon the quality of the Key Management Personnel. The philosophy of
the Company in determining remuneration levels is to:
Set competitive remuneration packages to attract and retain high-calibre employees;
Link executive rewards to shareholder value creation; and
Establish appropriate, demanding performance hurdles for variable executive remuneration.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee is responsible for determining and reviewing compensation
arrangements for the Key Management Personnel.
The Remuneration and Nomination Committee assesses the appropriateness of the nature and amount of
remuneration of Key Management Personnel on a periodic basis by reference to relevant employment market
conditions with an overall objective of ensuring maximum stakeholder benefit from the retention of a high-quality
Board and executive team. The Remuneration and Nomination Committee met once during the year.
Remuneration structure
In accordance with best practice corporate governance, the structure of Executive Director and Non-executive
directors’ remuneration is separate and distinct.
Executive Director remuneration
Remuneration consists of fixed remuneration and variable remuneration (compromising short-term and long-term
incentive schemes).
Fixed remuneration
Fixed remuneration is reviewed annually by the Board. The process consists of a review of relevant comparative
remuneration in the market and internally and, where appropriate, external advice on policies and practices. The
Board has access to external, independent advice where necessary.
Variable remuneration - Short-term incentive scheme
Short term incentives (STI) reward employees for their individual achievements and contributions to business
success and organisation outcomes during the financial year. STI’s are a variable reward and are not guaranteed.
13
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
Remuneration structure (continued)
Variable remuneration - Short-term incentive scheme (continued)
Each year, the Board considers the appropriate targets and Key Performance Indicators (KPI’s) to link the STI and
the level of payout if targets are met. This includes capping the maximum payout under the STI scheme and
determining the minimum levels of performance to trigger payment of the STI’s. Depending upon the level of
management, KPI’s include the following:
satisfactory completion of development programs, on time and on budget;
securing funding to support planned work programs;
consideration of safety performance, corporate governance, external relations and general management.
investor relations; and
At this stage, the Company does not award any STIs.
Variable remuneration - Long-term incentive scheme
The Group also makes long-term incentive payments such as share options and / or performance rights to reward
Executive Directors and other key management in a manner that aligns this element of remuneration with the creation
of shareholder wealth.
The Company has adopted an Employee Incentive Option Plan (Plan). Under the Plan, the Company may grant
options to Company eligible employees and consultants to attract, motivate and retain key employees over a period
of three years up to a maximum of 10% of the Company’s total issued ordinary shares at the date of the grant.
Director options are granted at the discretion of the Board and approved by shareholders. Performance hurdles are
not attached to vesting periods however, the Board determines appropriate vesting periods to provide rewards over
time.
Performance on shareholder wealth
The remuneration of the Group’s key management personnel, including any component of remuneration that consists
of securities in the Company, is not formally linked to the prior performance of the Group. The rationale for this
approach is that the Group is in the exploration phase, and it is currently not appropriate to link remuneration to
factors such as profitability or share price.
The table below sets out summary information about the Group’s earnings and movements in shareholders’ wealth
for the five years to 31 December 2019:
2019
2018
2017
2016
2015
Other income
782,243
1,250,989
404,632
183,646
365,605
Loss before income tax ($)
(1,314,164)
(1,972,174)
(6,714,764)
(1,134,923)
(2,336,013)
Net loss attributable to equity holders ($)
(1,316,441)
(1,974,367)
(6,720,095)
(1,137,120)
(2,337,230)
Share price at year end (cents)
4.50
2.50
7.80
6.50
3.90
Number of listed ordinary shares
268,513,742
261,780,949
243,989,884
130,110,984
107,095,783
Weighted average number of shares
266,085,375
204,386,845
204,386,845
115,477,089
100,008,631
Basic loss per share EPS (cents)
Listed options
Unlisted options
(0.49)
133,429,948
(0.78)
-
(3.29)
-
(0.98)
-
(2.34)
-
19,000,000
43,000,000
37,500,000
19,698,773
11,500,000
Market capitalisation ($)
12,083,118
7,591,648
19,024,191
8,457,214
1,821,292
Net tangible assets / (liabilities) (NTA) ($)
(133,437)
561,307
1,517,627
(,007,577)
(471,472)
NTA Backing (cents)
(0.05)
0.21
0.62
(0.77)
(0.44)
During the financial years noted above, there were no dividends paid or other returns of capital made by the Company
to shareholders.
14
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
Employment contracts
Remuneration and other terms of employment of the Managing Director is formalised in an employment contract.
The major provisions of the agreement related to remuneration are set out below.
Name
Terms of
agreement
Employee
notice period
Employer
notice period
Base salary **
Gary Jeffery *
Ongoing from
1 November 2013
Three months
Six months
$200,000
Termination
Benefit ***
Six months’ base
salary
*
**
On 6 November 2013, a Deed of Executive Services Agreement was entered into with Dungay Resources Pty
Ltd, a company associated with Gary Jeffery (effective 1 November 2013);
Base salary is inclusive of the superannuation guarantee charge rate applicable at the time (currently 9.50%)
and comprises $100,000 cash and $100,000 in shares for 50% of Mr Jeffery’s time. Shares are issued on a
calendar quarterly basis with shareholder approval. The issue price of the shares is the mathematical average
of the VWAP for the first and the last five trading days in the calendar quarter;
***
Termination benefits are payable upon early termination by the Company, other than for gross misconduct.
They are equal to base salary for the notice period.
At a general meeting on 31 May 2019, a share plan was approved by shareholders to satisfy 50% of the Executive
Director fees payable to Mr Jeffery through the issue of shares on a quarterly basis. These shares were issued as
follows:
Quarter
ended
31-Dec-18
31-Mar-19
30-Jun-19
30-Sep-19
31-Dec-19
Contractual
value of
services
rendered
Market value of
shares on
grant date
No. of Plan
Shares
issued
$
-
25,000
25,000
25,000
75,000
25,000
$
-
23,750
32,895
24,038
80,683
19,530
100,000
100,213
625,000
625,000
1,315,789
961,538
3,527,327
781,250
3,683,577
Date of
issue
10-Jan-19
04-Apr-19
05-Jul-19
15-Oct-19
22-Jan-20
Share price
on grant date
cents
3.80
3.80
2.50
2.50
2.50
Non-Executive Director remuneration
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and
retain Non-Executive Directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
The ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be determined from
time to time by a general meeting. The latest determination was in 2005 and an aggregate remuneration of $150,000
per annum was set. Any future changes would be approved by shareholders at an Annual General Meeting.
The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is
apportioned amongst Non-Executive Directors is reviewed annually. The Remuneration and Nomination Committee
considers advice from external shareholders as well as the fees paid to Non-Executive Directors of comparable
companies when undertaking the annual review process.
Each Non-Executive Director receives a fee for being a Director of the Company which is inclusive of statutory
superannuation and membership of sub-committees.
15
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
Non-Executive Director remuneration (continued)
The Non-Executive Director’s base fee payable to Mr Channon is $30,000 per annum, including superannuation.
The Non-Executive Chairman’s base fee is $40,000 per annum, including superannuation. Pursuant to the share-
plan approved by shareholders at a general meeting on 31 May 2019, 50% of Mr Childs fee is paid through the issue
of shares on a quarterly basis. These shares were issued as follows:
Quarter
ended
31-Dec-18
31-Mar-19
30-Jun-19
30-Sep-19
31-Dec-19
Contractual
value of
services
rendered
Market value of
shares on
grant date
No. of Plan
Shares
issued
$
-
5,000
5,000
5,000
15,000
5,000
20,000
$
-
4,750
6,579
4,808
16,137
3,906
20,043
125,000
125,000
263,158
192,308
705,466
156,250
736,716
Date of
issue
11-Jan-19
04-Apr-19
05-Jul-19
15-Oct-19
Share price
on grant date
cents
3.80
3.80
2.50
2.50
22-Jan-20
2.50
In addition to their base fees, non-executive directors may also receive payment for consultancy services at the lesser
of $200 per hour or $1,500 per day plus any reimbursable expenses.
Use of remuneration consultants
No remuneration consultants provided services during the year.
16
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
Remuneration of Directors
Short-term employee benefits
Share-based payments
Name
Executive Directors
Gary Jeffery
Non-Executive Directors
Andrew Childs
Greg Channon
Sub-total Non-Executive
Directors’ remuneration
Total Current Directors’
remuneration
Cash salary
and fees
$
D&O Insurance
Premiums
$
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
100,000
100,000
20,000
20,000
30,000
2,500
50,000
22,500
150,000
122,500
17,470
16,877
17,470
16,878
17,470
1,295
34,940
18,173
52,410
35,050
Shares
$
100,213
92,083
20,043
18,417
-
-
20,043
18,417
120,256
110,500
Options
(A)
$
58,000
-
34,800
-
17,400
-
52,200
-
110,20
-
(A)
The fair value of options granted was determined using the Black-Scholes option pricing model.
No proportion of Directors’ remuneration was linked to performance for the year ended 31 December 2019 (2018: nil)
Total
$
275,683
208,960
92,313
55,295
64,870
3,795
157,183
59,090
432,866
268,050
17
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
14. REMUNERATION REPORT - AUDITED (continued)
(f)
Key management personnel remuneration
Short-term employee benefits
Post
employment
benefits
Share-based payments
Name
Former Directors
Graeme Clatworthy (1)
Philip Haydn-Slater (2)
Sub-total former Directors’
remuneration
Total Directors’ remuneration
2019
2018
2019
2018
2019
2018
2019
2018
Cash salary
and fees
$
-
9,132
-
-
-
9,132
150,000
131,632
D&O Insurance
Premiums
$
Superannuation
$
-
5,688
-
9,896
-
15,584
52,410
50,634
-
868
-
-
-
868
-
868
Shares
$
-
-
-
15,750
-
15,750
120,256
126,250
Options
(A)
$
-
-
-
-
-
-
110,200
-
Total
$
-
15,688
-
25,646
-
41,334
432,866
309,384
(1)
(2)
(A)
Appointed 2 August 2018. Resigned 3 December 2018;
Appointed 1 February 2017. Resigned 2 August 2018;
The fair value of options granted was determined using the Black-Scholes option pricing model
No proportion of Directors’ remuneration was linked to performance for the year ended 31 December 2019 (2018: nil)
18
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
Options
Granted as compensation
At the date of this report, share options granted to the Directors of the Company as part of their remuneration are:
Number of
options
granted
Grant
date
Gary Jeffery
Andrew Childs
Greg Channon
10,000,000
6,000,000
3,000,000
31-May-19
31-May-19
31-May-19
Value per
option at
grant date
cents
0.58
0.58
0.58
Value of
options at
grant date
$
58,000
34,800
17,400
Vesting
and first
exercise
date
Last
Exercised
date
Exercise
price
per option
cents
Expiry date
13-Jun-19
13-Jun-19
13-Jun-19
31-Dec-21
31-Dec-21
31-Dec-21
4
4
4
31-Dec-21
31-Dec-21
31-Dec-21
The options tabled above were provided at no cost to the recipients.
No options granted as compensation in the current or prior years were exercised (2018: 500,000 options exercised). 16,000,000 options granted as compensation in a prior year were forfeited,
lapsed or cancelled (2018: no options were forfeited, lapsed or cancelled).
Other information
Options held by Directors
Held at
31 December
2018
Granted
As
Remuneration
Acquired
Exercised
Expired
Held at
31 December
2019
Vested and
Exercisable
At
31 December 2019
Gary Jeffery
Andrew Childs
Greg Channon
8,000,000
8,000,000
-
10,000,000
6,000,000
3,000,000
7,823,485
3,224,769
977,239
-
-
-
(8,000,000)
(8,000,000)
-
17,823,485
9,224,769
3,977,239
17,823,485
9,224,769
3,977,239
19
SACGASCO LIMITED
REMUNERATION REPORT
For the year ended 31 December 2019
Other information (continued)
Ordinary shares held by Directors
Gary Jeffery
Andrew Childs
Greg Channon
Held at
31 December
2018
Number
13,081,180
5,936,378
2,051,977
Purchases
Number
-
-
-
In lieu
of fees
Number
3,527,327
705,466
-
Held at
31 December
2019
Number
16,608,507
6,641,844
2,051,977
During the reporting period, no shares were issued on the exercise of options previously granted as compensation.
Cash bonuses included in remuneration
No cash bonuses were granted during 2019.
Share-based remuneration granted as compensation
For details of share-based payments granted during the year, refer note 6.1.
Other transactions with Key Management Personnel
Details of other transactions with key management personnel not involving direct remuneration are disclosed in
note 6.4.
2019 Annual General Meeting
The Company received 85.52% of “yes” votes on its remuneration report for the 31 December 2018 financial year.
THIS IS THE END OF THE REMUNERATION REPORT – AUDITED.
20
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Sacgasco Limited for the year
ended 31 December 2019, 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
30 March 2020
N G Neill
Partner
21
SACGASCO LIMITED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2019
Other operating income
Other operating expenses
Net operating expenses
Gain on disposal of subsidiaries
Foreign exchange gain
Site restoration reduction
Note
2.2
2019
$
782,243
(949,468)
(167,225)
3,722
6,210
-
2018
$
1,250,989
(1,253,564)
(2,575)
26,873
38,055
27,666
Exploration expenditure expensed through profit or loss
(156,392)
(1,161,373)
Marketing and business development
Personnel expenses
General and administration
Professional fees
Depreciation
Amortisation
Impairment of other receivables
Results from operating activities
Finance costs
Loss before income tax
Income tax expense
Loss for the year
2.4
(7,002)
(505,003)
(167,775)
(296,372)
(3,885)
(251)
-
(6,309)
(360,549)
(134,028)
(377,875)
(5,894)
-
(1,273)
(1,293,973)
(1,957,282)
2.3
(20,191)
(14,892)
(1,314,164)
(1,972,174)
2.5
(2,277)
(2,193)
(1,316,441)
(1,974,367)
Loss per share (cents per share)
Basic and diluted
2.7
(0.49)
(0.78)
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
22
SACGASCO LIMITED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Loss for the year
Other comprehensive income
Items that may be classified subsequently to profit or loss
2019
$
2018
$
(1,316,441)
(1,974,367)
Foreign currency translation difference of foreign operations
(2,233)
106,689
Total items that may be classified subsequently to
profit or loss
(2,233)
106,689
Total comprehensive loss for the year
(1,318,674)
(1,867,678)
The above consolidated statement of other comprehensive income should be read in conjunction with the
accompanying notes.
23
SACGASCO LIMITED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total current assets
Other financial assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Employee entitlements
Loans and borrowings
Total current liabilities
Site restoration
Total non-current liabilities
Total liabilities
Net (liabilities) / assets
Equity
Issued capital
Reserves
Accumulated losses
Total (deficiency) / equity attributable to equity
holders of the Company
Note
4.1
4.2
4.3
4.4
2.4
5.2
3.1
2019
$
282,454
536,599
61,933
880,986
290,138
7,952
289
298,379
1,179,365
(888,000)
(17,350)
(213,269)
2018
$
956,365
661,147
69,587
1,687,099
283,478
12,338
-
295,816
1,982,915
(943,649)
(7,344)
(277,850)
(1,118,619)
(1,228,843)
(193,894)
(193,894)
(192,765)
(192,765)
(1,312,513)
(1,421,608)
(133,148)
561,307
5.1
21,304,674
20,785,593
294,164
1,774,704
(21,731,986)
(21,998,990)
(133,148)
561,307
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
24
SACGASCO LIMITED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
Translation
reserve
Options
reserve
$
$
$
Share-based
Payments
reserve
$
Accumulated
losses
Total
$
$
Balance at 1 January 2019
20,785,593
162,759
1,583,445
28,500
(21,998,990)
561,307
Total comprehensive income for the year
Loss for the year
Other comprehensive income for the year
Foreign exchange translation difference on
foreign operations
Total other comprehensive expense for the year
Total comprehensive loss for the year
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners
Issue of ordinary shares
Issue of options
Transfer to accumulated losses on expiry of options
Share-based payment transactions
Capital raising costs
Total contributions by and distributions to owners
Total transactions with owners
Balance at 31 December 2019
-
-
-
-
-
(2,233)
(2,233)
(2,233)
188,320
400,290
-
-
(69,529)
519,081
519,081
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,583,445)
-
-
-
-
-
-
-
110,200
(5,062)
-
-
(1,316,441)
(1,316,441)
-
-
(2,233)
(2,233)
(1,316,441)
(1,318,674)
-
-
1,583,445
-
-
188,320
400,290
-
105,138
(69,529)
(1,473,245)
(5,062)
1,583,445
624,219
(1,473,245)
(5,062)
1,583,445
624,219
21,304,674
160,526
110,200
23,438
(21,731,986)
(133,148)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
25
SACGASCO LIMITED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Balance at 1 January 2018
19,899,304
56,070
1,573,150
42,326
(20,053,223)
1,517,627
Share
capital
Translation
reserve
Options
reserve
$
$
$
Share-based
Payments
reserve
$
Accumulated
losses
Total
$
$
Total comprehensive income for the year
Loss for the year
Other comprehensive income for the year
Foreign exchange translation difference on
foreign operations
Total other comprehensive income for the year
Total comprehensive loss for the year
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners
Issue of ordinary shares
Issue of ordinary shares on conversion of options
Share-based payment transactions
Capital raising costs
Total contributions by and distributions to owners
Total transactions with owners
Balance at 31 December 2018
-
-
-
-
-
106,689
106,689
106,689
830,909
75,000
-
(19,620)
886,289
886,289
-
-
-
-
-
-
-
-
-
-
-
(28,600)
-
-
-
-
-
-
38,895
(13,826)
-
-
(1,974,367)
(1,974,367)
-
-
106,689
106,689
(1,974,367)
(1,867,678)
-
830,909
28,600
-
-
75,000
25,069
(19,620)
10,295
(13,826)
28,600
911,358
20,785,593
162,759
1,583,445
28,500
(21,998,990)
10,295
(13,826)
28,600
911,358
561,307
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
26
SACGASCO LIMITED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Note
Cash flows from operating activities
Cash paid to suppliers and employees
Payments for exploration and evaluation
Interest paid
Income taxes paid
Net cash used in operating activities
4.1b
Cash flows from investing activities
Proceeds from investment in oil and gas lease
Payments for property, plant and equipment
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of shares and options
Proceeds from related party loans
Payment of capital raising costs
Payment of transaction costs related to loans
Repayment of related party loans
Repayment of premium funding facility
Net cash from financing activities
5.1
5.2
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 31 December
4.1a
2019
$
(551,584)
(309,675)
(26,290)
(2,277)
(889,826)
-
-
-
400,290
50,000
(69,529)
-
(100,000)
(56,882)
223,879
(665,947)
956,365
(7,964)
282,454
2018
$
(530,969)
(1,207,128)
(6,398)
(2,193)
(1,746,688)
136,383
(7,945)
128,438
500,000
220,000
(19,620)
(165)
-
(11,444)
688,771
(929,479)
2,006,364
(120,520)
956,365
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
27
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
SECTION 1 BASIS OF PREPARATION
Sacgasco Limited presents its financial statements in a format and style that is relevant and clear to shareholders
and other users. In preparing the 2019 financial statements, we have grouped notes into sections under six key
categories:
1. Basis of preparation
2. Results for the year
3. Assets and liabilities supporting exploration and evaluation
4. Working capital disclosures
5. Equity and funding
6. Other disclosures
Significant accounting policies specific to one note are included within that note and where possible, wording has
been simplified to provide clearer commentary on the financial report of the Group. Accounting policies determined
non-significant are not included in the financial statements. There have been no changes to the Group’s accounting
policies that are no longer disclosed in the financial statements.
1.1 GENERAL INFORMATION
The Company is a for-profit, listed public company domiciled in Australia. The Company’s registered office is located
at First Floor, 31 Cliff Street, Fremantle, WA, 6160.
The Group is primarily involved in the evaluation, acquisition, exploration and development of natural gas and
petroleum projects.
The consolidated financial statements of the Group as at and for the year ended 31 December 2019 comprise the
Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and were
authorised for issue by the Board of Directors on 30 March 2020. The financial statements are general purpose
financial statements which:
have been prepared in accordance with Australian Accounting Standards (“AASBs”) adopted by the
Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (IFRSs) as issued by the International
Accounting Standards Board (IASB);
have been prepared on a historical cost basis, except for share-based payments which are measured at fair
value. The basis of measurement is discussed further in the individual notes;
are presented in Australian Dollars, being the Company’s functional currency. The functional currency of
three of its subsidiaries is United States dollars;
adopt all new and revised Australian Accounting Standards and Interpretations issued by the AASB that are
relevant to the operations of the Group and effective for reporting periods beginning on or after 1 January
2019. Refer to note 6.9 for further details; and
do not early adopt any Australian Accounting Standards and Interpretations that have been issued or
amended but not yet effective. Refer to note 6.10 for further details.
28
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.2 BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiaries) made up to 31 December each year.
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. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They
are deconsolidated from the date that control ceases. All transactions and balances between Group companies are
eliminated on consolidation, including unrealised gains and losses on transactions between Group companies.
Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised
from the effective date of acquisition, or up to the effective date of disposal, as applicable.
1.3 GOING CONCERN
The consolidated financial statements have been prepared on a going concern basis which contemplates continuity
of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business.
The Directors are satisfied the Company is a going concern, notwithstanding it incurred a total comprehensive loss
of $1,318,674 for the year ended 31 December 2019 and has a net liability position of $133,148 at that date.
The Group is focused on securing further land leases in California and pursuing and assessing new venture
opportunities which are complementary with its existing assets. The Group’s cash flow forecast for the period to
31 March 2021, reflects the Group’s ability to meet its working capital requirements and its committed and planned
development expenditure relating to its exploration and evaluation assets. The directors are aware that the Group’s
ability to continue as a going concern, and thereby pay its debts as and when they fall due, is contingent on the Group
securing further working capital from one or more of the following alternatives:
a)
b)
c)
capital raising with existing shareholders or a placement to sophisticated investors;
short-term borrowings from related or third parties; and / or
farm-out of existing exploration areas with upfront consideration payable.
Given the financial position of the Group and its demonstrated ability to raise funds, the Directors have reviewed the
Groups’ financial position and forecast cash flows and reasonably expect that the Group will be able to raise additional
funds to meet future costs and satisfy its business plans for at least the next 12 months. If necessary, the Group will
delay discretionary expenditure including administration costs, exploration programs and development expenditure
that are not contractually committed. The timing of raising additional capital will depend on the investment markets,
current and future planned exploration and development activities. Directors have also declared that monies owing
to them will only be repaid should the Group be in a financial position to repay the amounts owing and remain solvent
for at least twelve months.
Accordingly, the Directors believe that the Group will be able to continue as a going concern and that it is appropriate
to adopt the going concern basis in the preparation of the financial report.
Should the Group be unsuccessful in raising sufficient funds, there is a material uncertainty that exists that may cast
significant doubt as to whether the Group will be able to continue as a going concern and, therefore, that it may be
unable to realise its assets and discharge its liabilities in the normal course of business.
The financial report does not include any adjustments relating to the amounts or classification of recorded assets and
liabilities that might be necessary if the Group does not continue as a going concern.
29
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.4 FUNCTIONAL AND PRESENTATION CURRENCY
The functional currency of each of the Group’s entities is measured using the currency of the primary economic
environment in which that entity operates. The consolidated financial statements are presented in Australian dollars
which is the parent entity’s functional and presentation currency.
Transactions in foreign currencies are initially recorded in Australian dollars at the exchange rate on that day. Foreign
currency monetary assets and liabilities are translated into Australian dollars at the year-end exchange rate. Where
there is a movement in the exchange rate between the date of the transaction and the year end, a foreign exchange
gain or loss may arise. Any such differences are recognised in the statement of profit or loss. Non-monetary assets
and liabilities measured at historical cost are translated into Australian dollars at the exchange rate on the date of the
transaction.
1.5 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The application of accounting policies requires the use of judgements, estimates and assumptions about carrying
values of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period
in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Information about judgements made in applying accounting policies that have the most significant effects on the
amounts recognised in the consolidated financial statements and information about assumptions and estimation
uncertainties that have a significant risk of resulting in material adjustment are included in the following notes:
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable
future tax profits will be available to utilise those temporary differences. Significant management judgement is
required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the
level of future taxable profits. Refer note 2.5.
Share-based payment transactions
The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at
the date at which they are granted. The fair value is determined using a Black-Scholes model, using the assumptions
detailed in note 6.1.
Fair value of financial instruments
Management uses valuation techniques to determine the fair value of financial instruments (where active market
quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent
with how market participants would price the instrument.
Management bases its assumption on observable data as far as possible, but this is not always available. In that
case, management uses the best information available. Estimated fair values may vary from the actual prices that
would be achieved in an arm’s length transaction at the reporting date. Refer note 6.2.
30
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.5 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
Fair value of assets
At each reporting date, the Group reviews the carrying amount of its non-financial assets, other than deferred tax
assets, to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. Value in use
is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment
losses are recognised in profit or loss.
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the
expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the
utility of certain software and IT equipment.
31
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SECTION 2 RESULTS FOR THE YEAR
This section focuses on the results and performance of the Group, with disclosures including segmental information,
components of the operating profit, taxation and earnings per share.
2.1 OPERATING SEGMENTS
Accounting Policy
Operating segments are reported in a manner consistent with the internal reporting provided by the Chief
Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Board of Directors of Sacgasco Limited.
AASB 8 Operating Segments requires operating segments to be identified based on internal reports about
components of the Group that are regularly reviewed by the Chief Operating Decision Maker in order to allocate
resources to the segment and to assess its performance.
The Group’s operating segments have been determined with reference to the monthly management accounts used
by the Chief Operating Decision Maker to make decisions regarding the Group’s operations and allocation of working
capital.
Based on the quantitative thresholds included in AASB 8, there is only one reportable segment, being oil and gas
exploration and appraisal.
The revenues and results of this segment are those of the Group as a whole and are set out in the consolidated
statement of profit or loss and other comprehensive income and the assets and liabilities of the Group as a whole
are set out in the consolidated statement of financial position.
There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss
since 31 December 2018.
2.2 NET OPERATING EXPENSES
Accounting Policy
Other income is recognised when the amount can be reliably measured and control of the right to receive the
income be passed to the Group.
Other operating income
Other operating expense
Net operating expense
Note
(i)
2019
2018
782,243
(949,468)
(167,225)
1,250,989
(1,253,564)
(2,575)
(i)
The gas flow from wells sold to customers, is a natural by-product of exploration activities and until such time
as well production becomes an economically viable direction for the Group, it is recognised as other operating
income.
32
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.3 FINANCE COSTS
Accounting Policy
Finance costs
Finance costs that are directly attributable to the acquisition, construction or production of qualifying assets are
capitalised where the finance cost is added to the cost of those assets until such time as the assets are
substantially ready for their intended use or sale.
All other finance costs are recognised in profit or loss in the period in which they are incurred.
Note
2019
$
2018
$
Interest expense on financial liabilities measured at
amortised cost
Interest expense on loans received from related parties
5.2
Interest expense on premium funding
Other finance charges
Finance costs
18,041
2,150
20,191
-
20,191
10,384
4,343
14,727
165
14,892
2.4 PERSONNEL EXPENSES AND EMPLOYEE BENEFITS
Accounting Policy
Employee leave benefits
Liabilities accruing to employees in respect of wages and salaries, annual leave, long service leave and sick
leave expected to be settled within 12 months of the balance date are recognised in other payables in respect
of employees’ services up to the balance date. They are measured at the amounts expected to be paid when
the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and
are measured at the rate paid or payable.
Liabilities accruing to employees in respect of wages and salaries, annual leave, long service leave and sick
leave not expected to be settled within 12 months of the balance date are recognised in non-current other
payables in respect of employees’ services up to the balance date. They are measured as the present value of
the estimated future outflows to be made by the Group.
Other long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of the future benefit that
employees have earned in return for their services in the current and prior periods. That benefit is discounted to
determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise.
33
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.4 PERSONNEL EXPENSES AND EMPLOYEE BENEFITS (continued)
The table below sets out personnel costs expensed during the year.
Directors’ remuneration
Other wages and salaries
Contributions to defined contribution plans
Other associated personnel expenses
Total Directors’ remuneration
Note
6.4
The table below sets out employee benefits payable at the reporting date.
Current
Salary accrual
Statutory superannuation contributions
2.5
INCOME TAX EXPENSE
Accounting Policy
2019
$
432,866
65,572
6,230
335
505,003
2019
$
17,146
204
17,350
2018
$
309,384
46,521
4,379
265
360,549
2018
$
5,475
1,869
7,344
Income tax expense or benefit comprises current and deferred tax. Current tax assets and liabilities are
measured at the amount expected to be recovered from, or paid to, the taxation authorities. Current tax is based
on tax rates enacted or substantively enacted at the balance date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax base used for calculating taxable
profits. Deferred tax balances are disclosed net to the extent that they relate to taxes levied by the same
authority and the Group has the right of set-off.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probably that taxable profits will be available against which deductible
temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance date and reduced to the extent that it is
no longer probable that taxable profits will be available to allow all or part of the assets to be recovered. Deferred
tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,
based on substantively enacted rates at the balance date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the consolidated
statement of profit or loss.
34
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.5
INCOME TAX EXPENSE (continued)
Accounting Policy (continued)
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
When the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part
of the expense item as applicable; and
Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payable in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
(a) Amounts recognised in profit or loss
Current tax expense / (benefit)
Adjustment for prior periods
Total income tax expense
(b) Reconciliation of effective tax rate
2019
$
2,277
2,277
2019
$
2018
$
2,193
2,193
2018
$
Loss for the period
Total income tax expense
Loss excluding income tax
(1,316,441)
(1,974,367)
2,277
2,193
(1,314,164)
(1,972,174)
Income tax using the Group’s domestic tax rate of 27.5%
(2018: 27.5%)
(361,395)
(542,348)
Non-deductible expense
Non-assessable income
Adjustment for prior periods
Timing differences not brought to account
Tax losses foregone on dissolution of group entities
Tax losses not brought to account
Income tax expense
All unused tax losses were incurred by Australian entities.
35
332,907
(59,188)
2,277
(11,282)
(1,759)
100,717
2,277
621,312
-
2,193
(18,971)
(445,959)
385,966
2,193
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.5
INCOME TAX EXPENSE (continued)
(b) Reconciliation of effective tax rate (continued)
Potential future income tax benefits of up to $1,436,995 (2018: $1,273,287) attributed to tax losses have not been
brought to account.
The benefit of these tax losses will only be obtained if:
i)
ii)
iii)
iv)
future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be
realised;
the conditions for deductibility imposed by tax legalisation continue to be complied with;
no changes in tax legislation adversely affect the Group in realising the benefit; and
satisfaction of either the continuity of ownership or the same business test.
(c) Unrecognised deferred tax assets and liabilities
Deferred tax assets and liabilities have not been recognised in respect of the following items:
Deferred tax assets
Capital raising costs – s40-880
Trade and other payables
Property, plant and equipment
Employee benefits
Carry forward tax losses
Deferred tax liabilities
Prepaid expenditure
2019
$
40,459
6,600
118
56
2018
$
43,055
5,500
-
514
1,404,560
1,224,218
1,451,793
1,273,287
(14,798)
(14,798)
-
-
Net unrecognised deferred tax assets
1,436,995
1,273,287
2.6 EXPLORATION AND EVALUATION EXPENDITURE
The exploration and evaluation accounting policy is to expense all exploration and evaluation expenditure as incurred.
Expenditure incurred on activities that precede exploration and evaluation of mineral resources, including all
expenditure prior to securing legal rights to explore an area, is expensed to profit or loss as incurred.
36
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.7 LOSS PER SHARE
Accounting Policy
Basic earnings per share is the amount of a company’s profit or loss for a reporting period that is available to the
shares of its common stock that are outstanding during the reporting period.
(a) Basic and diluted loss per share
Earnings / (loss) per share (EPS) is the amount of post-tax profit or loss attributable to each share.
The calculation of basic loss per share at 31 December 2019 has been based on the loss attributable to ordinary
shareholders and weighted average number of ordinary shares outstanding.
Diluted EPS takes into account the dilutive effect of all potential ordinary shares, being share options on issue.
Loss per share attributable to ordinary shareholders
Net loss attributable to ordinary shareholders - $
(1,316,441)
(1,974,367)
Issued ordinary shares at 1 January - number
Effect of shares issued - number
261,780,949
243,899,884
4,307,426
9,887,875
Weighted average number of ordinary shares at 31 December
266,088,375
253,787,759
Basic and diluted loss per share (cents)
(0.49)
(0.78)
2019
2018
* At 31 December 2019, 152,429,948 options (31 December 2018: 43,000,000 options) were excluded from
diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.
37
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SECTION 3 ASSETS AND LIABILITIES SUPPORTING EXPLORATION AND EVALUATION
This section focuses on the assets and liabilities which form the core of the ongoing business, including those assets
and liabilities which support ongoing exploration and evaluation as well as capital and other commitments existing at
the year end.
Key estimates and assumptions in this section
Site restoration
Provisions for the costs of rehabilitation, decommissioning and restoration of the area disturbed during oil and gas
exploration and development activities depends on the legal requirements at the date of decommissioning, the costs
and timing of work and the discount rate to be applied.
3.1 PROVISIONS
Accounting Policy
Provisions
Provisions are determined by discounting the expected future cash flow at a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability. The unwinding of the
discount is recognised as finance costs.
Site restoration
In accordance with the Group’s published environment policy and applicable legal requirements, a provision for
site restoration in respect of contaminated and disturbed land, and the related expense, is recognised when the
land is contaminated or disturbed.
At each reporting date the site rehabilitation provision is re-measured to reflect any changes in discount rates
and timing or amounts of the costs to be incurred. Such changes in the estimated liability are accounted for
prospectively from the date of the change and re-added to, or deducted from, the related asset where it is
possible that future economic benefits will flow to the entity.
The non-current site restoration provision of $193,894 (2018: $192,765) is in respect of the Group's on-going
obligation for the environmental rehabilitation of the Sacramento Basin onshore California area of interest. The timing
of rehabilitation expenditure is dependent on the life of the gas field which may vary in the future. The nature of
restoration activities includes plugging gas wells, restoration, reclamation and revegetation of affected areas. The
Company continues to work within the regulations of the Californian authorities with regards to the planning and
timing of the rehabilitation, such rehabilitation subject to the Company’s share of the DoGGR bond of US$200,000
for up to fifty wells.
2019
$
2018
$
Site restoration provision
(193,894)
(192,765)
Movement in carrying amounts
Opening balance
Adjustment to provision recognised as per DoGGR bond
Effects of foreign exchange
Closing balance
(192,765)
-
(1,129)
(193,894)
(200,238)
27,666
(20,193)
(192,765)
38
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SECTION 4 WORKING CAPITAL DISCLOSURES
This section focuses on the cash funding available to the Group and working capital position at year end.
4.1 CASH AND CASH EQUIVALENTS
Accounting Policy
Cash comprises cash at bank and in hand.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
(a) Reconciliation of cash recorded in the Statement of Financial Position to the Statement of Cash Flows
2019
$
2018
$
Cash and cash equivalents in the statement of cash flows
282,454
956,365
(b) Reconciliation of cash flows from operating activities
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation
Amortisation
Equity-settled share-based payment transactions
Finance expense
Net (gain) / loss on foreign exchange translation
Capitalised exploration expenditure impaired
Proceeds from investment in oil and gas lease
(Profit) / loss on disposal of subsidiaries
Change in other receivables
Change in prepayments
Change in other financial assets
Change in trade and other payables
Change in interest bearing liabilities
Change in employee benefits
Change in site restoration provision
Change in deferred income
2019
$
2018
$
(1,316,441)
(1,974,367)
3,885
251
243,457
-
9,898
-
-
(2,296)
(131,931)
6,178
(5,000)
249,865
42,301
10,007
-
-
5,894
-
355,979
165
357,125
1,515,404
(136,383)
(25,242)
(2,253,970)
(20,487)
-
552,656
67,239
(63,035)
(27,666)
(100,000)
Net Cash used in operating activities
(889,826)
(1,746,688)
39
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 CASH AND CASH EQUIVALENTS (continued)
(c) Changes in liabilities arising from financing activities
Related party
loans
$
Other loans
$
Balance at 1 January 2018
Net cash from / (used in) financing activities
Interest on related party loans
Premium funding facility
Balance at 31 December 2018
Net cash from / (used in) financing activities
Interest on related party loans
Premium funding facility
Balance at 31 December 2019
4.2 TRADE AND OTHER RECEIVABLES
Accounting Policy
2,055
220,000
8,329
-
230,384
(50,000)
(6,099)
-
174,285
Total
$
2,055
208,556
8,329
58,910
277,850
-
(11,444)
-
58,910
47,466
(56,882)
(106,882)
-
48,400
38,984
(6,099)
48,400
213,269
Trade receivables are measured on initial recognition at fair value and subsequently measured at amortised cost
using the effective interest method, less any allowance for impairment. Trade receivables are generally due for
settlement within fourteen days.
Impairment of trade receivables is continually reviewed and those considered uncollectable are written off by
reducing the carrying amount directly. An allowance account is used when there is objective evidence that the
Group will be unable to collect all amounts due according to the original contractual terms. Factors considered
by the Group in making this determination include significant financial difficulties of the debtor, review of financial
information and significant delinquency in making contractual payments to the Group. The impairment allowance
is set equal to the difference between the carrying amount of the receivable and the present value of estimated
future cash flows, discounted at the original effective interest rate. Where receivables are short-term, discounting
is not applied in determining the allowance.
The amount of the impairment loss is recognised in the statement of profit or loss and other comprehensive
income within other expenses. When a trade receivable for which an impairment allowance had been recognised
becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against other expenses in the statement of profit or loss
and other comprehensive income.
Expected credit losses
The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade and
other receivables as these items do not have a significant financing component.
In measuring the expected credit losses, the trade and other receivables have been assessed on a collective
basis as they possess shared credit risk characteristics.
Trade and other receivables are written off when there is no reasonable expectation of recovery.
40
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.2 TRADE AND OTHER RECEIVABLES (continued)
Current
Trade debtors
Due from authorised government agencies
Other receivables
Other receivables are non-interest bearing.
2019
$
373,096
85,584
77,919
536,599
2018
$
445,896
132,997
82,254
661,147
Note 6.2 includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected
credit losses.
4.3 OTHER FINANCIAL ASSETS
Non-current
Deposits and bonds
2019
$
2018
$
(i)
290,138
283,478
(i)
includes $285,138 (US$200,000) DoGGR bond required to work within the regulations of the Californian
authorities with regards to the planning and timing of site rehabilitation.
4.4 TRADE AND OTHER PAYABLES
Accounting Policy
Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided
to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to
make future payments in respect of the purchase of these goods and services. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months.
Current
Trade payables
Non-trade payables and accrued expenses
Note
(i)
2019
$
(726,484)
(161,516)
(888,000)
2018
$
(821,696)
(121,953)
(943,649)
(i)
Trade payables are non-interest bearing and are normally settled on 30-day terms. All amounts are short-
term. The net carrying amount of trade payables is considered a reasonable approximation of fair value.
Information regarding the interest rate, foreign exchange and liquidity risk exposure is set out in Note 6.2.
41
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SECTION 5 EQUITY AND FUNDING
This section focuses on the debt and equity funding available to the Group at year end, most notably covering share
capital and loans and borrowings.
5.1 CAPITAL AND RESERVES
Accounting Policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity, net of any tax effects.
Share capital
Ordinary shares
Number of shares
Amount in $
2019
2018
2019
2018
On issue at 1 January
261,780,949
243,899,884
20,785,593
19,899,304
Shares issued and expensed during the period:
Issue of fully paid shares for cash
Issue of fully paid shares on conversion of
options
Issue of shares in lieu of directors’ fees
Issue of shares in satisfaction of service
provider fees
Issue of shares pursuant to an option to
acquire RL Energy Pty Ltd
Issue of shares to Raven Energy to acquire
BNG’s share of Sacramento Basin
Capital raising costs
-
-
10,000,000
500,000
-
-
500,000
75,000
4,232,793
2,423,702
125,320
113,659
500,000
2,957,363
13,000
161,250
-
2,000,000
-
56,000
2,000,000
-
-
-
50,000
-
(69,529)
(19,620)
On issue at 31 December
268,513,742
261,780,949
20,904,384
20,785,593
Options
Options issued for cash
Number of options
Amount in $
On issue at 1 January
Issue of listed options exercisable at 4 cents each,
expiring on 31-Dec-21
On issue at 31 December
Total capital
2019
-
133,429,948
133,429,948
2018
-
-
-
2019
-
400,290
400,290
2018
-
-
-
21,304,674
20,785,593
The holders of ordinary shares are entitled to receive dividends as declared from time and are entitled to one vote
per share at meetings of the Group. Option holders cannot participate in any new share issues by the Group without
exercising their options.
42
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.1 CAPITAL AND RESERVES (continued)
In the event of a winding up of the Company, ordinary shareholders rank after all other shareholders (if any) and
creditors and are fully entitled to any proceeds on liquidation.
All issued shares and listed options are fully paid.
The Company also has share options on issue (see note 6.1).
Nature and purpose of reserves
Share-based payments reserve
The share-based payments reserve represents the fair value of shares to be issued to directors, consultants and
employees. Refer to note 6.1 for further details of these plans.
Options reserve
The options reserve represents the fair value of options to be issued to directors, consultants and employees. This
reserve will be transferred to capital once the shares have been issued or reversed through accumulated losses if
the options expire or are cancelled.
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from
their functional currencies to the Group’s presentation currency (i.e. Australian dollars) are recognised directly in
other comprehensive income and accumulated in the foreign currency translation reserve. Exchange differences
previously accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal of
the foreign operations.
5.2 LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For
more information about the Group’s exposure to interest rate risk, see note 6.2.
Accounting Policy
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting
date, the loans or borrowings are classified as non-current.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred, including interest on short-term and long-term borrowings.
43
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.2 LOANS AND BORROWINGS (continued)
Book value
Fair value
Book value
Fair value
2019
$
2019
$
2018
$
2018
$
Current
Loans received from a director
(174,285)
(182,785)
(230,384)
(238,884)
Premium funding facility
(38,984)
(40,172)
(47,466)
(48,989)
On issue at 31 December
(213,269)
(222,957)
(277,850)
(287,873)
Balance at 1 January 2018
Loans & borrowings received
Financing of premium funding facility
Interest charged
Less repaid (1)
Balance at 31 December 2018
Loans & borrowings received
Financing of premium funding facility
Interest charged
Less repaid (1)
Balance at 31 December 2019
(1)
(2)
Amounts repaid include interest and loan establishment costs.
Refer to note 6.4 for further details.
Loans from
a director (2)
Premium
funding
(2,055)
(220,000)
-
(10,384)
2,055
(230,384)
(50,000)
-
(18,041)
124,140
(174,285)
-
-
(58,910)
(4,343)
15,787
(47,466)
-
(48,400)
(2,150)
59,032
(38,984)
44
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SECTION 6 OTHER DISCLOSURES
The disclosures in this section focus on share schemes in operation and financial risk management of the Group.
Other mandatory disclosures, such as details of related party transactions, can also be found here.
6.1 SHARE-BASED PAYMENT PLANS
Accounting Policy
The share option program allows Group employees to receive rights to acquire shares of the Company. The
grant date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees unconditionally become
entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market vesting conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of awards that do not meet the related service and
non-market performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there
is no true-up for differences between expected and actual outcomes.
Where the fair value of an employee share option has been recognised as a share-based payment and the option
lapses on expiry, the total amount of the share-based payment expense is transferred from the share-based
payment reserve to accumulated losses.
The share-based payment expense included within the consolidated financial statements can be broken down as
follows:
Expensed in personnel expenses (director remuneration)
Options issued to directors
Shares issued to directors
Shares to be issued to directors
Expensed in professional fees
Options issued to consultants of the company
Shares issued to consultants of the company
Share-based payment programme
2019
$
110,200
96,818
23,438
-
50,000
2018
$
-
97,750
28,500
38,895
56,000
The Company has adopted an Employee Share Options Scheme (ESOS) effective 25 July 2014. Under the ESOS,
the Company may grant options and rights to Company eligible employees to acquire securities to a maximum of
10% of the Company’s total issued ordinary shares at the date of the grant. The fair value of share options granted
is estimated using the Black-Scholes option pricing model.
The options and rights vest on a time scale as specified in the ESOS and is granted for no consideration. Options
and rights granted under the plan carry no dividend or voting rights. When exercisable, each option is converted into
one ordinary share. The maximum term of an option is 5 years from grant date and are settled in cash.
Options may not be transferred other than to an associate of the holder.
45
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.1 SHARE-BASED PAYMENT PLANS (continued)
Options
At 31 December 2019, a summary of the Group options issued and not exercised under the share-based payment programme are as follows. Options are settled by the
physical delivery of shares:
Granted
during
the year
-
Exercised
during
the year
-
Grant
date
26-Oct-15
Vesting
date
26-Oct-15
Expiry
date
30-Sep-19
11-Jan-17
27-Jan-17
31-Dec-19
19-Jan-17
27-Jan-17
31-Dec-19
07-Apr-17
13-Apr-17
31-Dec-19
31-May-17
14-Jun-17
31-Dec-19
21-Aug-18
21-Aug-18
30-Dec-19
31-May-19
13-Jun-19
31-Dec-21
Total
Exercise
Price
(cents)
10
15
15
15
15
5
4
Balance at
the start of
the year
10,000,000
17,500,000
4,000,000
500,000
5,000,000
6,000,000
-
19,000,000
43,000,000
19,000,000
-
-
-
-
-
Weighted average exercise price (cents)
12.44
4.00
Expired /
forfeited
during
the year
(10,000,000)
(17,500,000)
(4,000,000)
(500,000)
(5,000,000)
(6,000,000)
Balance at
the end of
the year
-
Vested and
exercisable
at the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
19,000,000
19,000,000
(43,000,000)
19,000,000
19,000,000
12.44
4.00
-
-
-
-
-
-
-
-
At the exercise date, the weighted average remaining contractual life of options outstanding at year end was 2 years.
Key valuation assumptions made at valuation date under the Black & Scholes option pricing model are summarised below:
Number of
Options
Exercise
Price
Grant
date
Expiry
Date
Life of the
Options
Volatility
Risk free
Rate
(cents)
(years)
Fair value
at grant
date
(cents)
Share price
at grant
date
(cents)
Tranche 1
19,000,000
4
31-May-19
31-Dec-21
2.59
72.51%
1.23%
0.6
2.1
46
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.1 SHARE-BASED PAYMENT PLANS (continued)
Options (continued)
At 31 December 2018, a summary of the Group options issued and not exercised under the share-based payment programme are as follows. Options are settled by the
physical delivery of shares:
Grant
date
26-Oct-15
Vesting
date
26-Oct-15
Expiry
date
30-Sep-19
11-Jan-17
27-Jan-17
31-Dec-19
19-Jan-17
27-Jan-17
31-Dec-19
07-Apr-17
13-Apr-17
31-Dec-19
31-May-17
14-Jun-17
31-Dec-19
21-Aug-18
21-Aug-18
30-Dec-19
Exercise
Price
(cents)
10
15
15
15
15
5
Balance at
the start of
the year
10,000,000
18,000,000
4,000,000
500,000
5,000,000
Granted
during
the year
-
-
-
-
-
-
6,000000
Exercised
during
the year
-
(500,000)
-
-
-
-
Total
37,500,000
6,000,000
(500,000)
Weighted average exercise price (cents)
13.67
5.00
15.00
Expired /
forfeited
during
the year
-
-
-
-
-
-
-
-
Balance at
the end of
the year
10,000,000
Vested and
exercisable
at the end of
the year
10,000,000
17,500,000
17,500,000
4,000,000
4,000,000
500,000
500,000
5,000,000
5,000,000
6,000,000
6,000,000
43,000,000
43,000,000
12.44
At the exercise date, the weighted average remaining contractual life of options outstanding at year end was 0.94 years.
47
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.2 FINANCIAL INSTRUMENTS
Accounting Policy
Recognition and derecognition
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of
the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire,
or when the financial asset and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
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).
For the purpose of subsequent measurement, financial assets, other than those designated and effective as
hedging instruments, are classified into the following categories:
fair value through profit or loss (FVTPL);
amortised cost;
equity instruments at fair value through other comprehensive income (FVOCI);
debt instruments at fair value through other comprehensive income (FVOCI).
All income and expenses relating to financial assets that are recognised in profit or loss are presented within
finance costs, finance income or other financial items, except for impairment of trade receivables which is
presented within other expenses.
The classification is determined by both:
the entity’s business model for managing the financial asset; and
the contractual cash flow characteristics of the financial asset.
Subsequent remeasurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not
designated as FVTPL):
they are held within a business model whose objective is to hold the financial assets to collect its
contractual cash flows;
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised costs using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category of financial instruments as well as listed bonds that were
previously classified as held-to-maturity under AASB 139.
48
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.2 FINANCIAL INSTRUMENTS (continued)
Accounting Policy (continued)
Impairment of financial assets
AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses –
the ‘expected credit loss (ECL) model’. This replaced AASB 139’s ‘incurred loss model’.
Instruments within the scope of the new requirements included loans and other debt-type financial assets
measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under
AASB 15 and loan commitments that are not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the
Group considers a broader range of information when assessing credit risk and measuring expected credit
losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
financial instruments that have not deteriorated significantly in credit quality since initial recognition or
that have low credit risk (‘Level 1’); and
financial instruments that have deteriorated significantly in credit quality since initial recognition and
whose credit risk is not low (‘Level 2’).
‘Level 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
’12-month expected credit losses’ are recognised for the first category whilst ‘lifetime expected credit losses’ are
recognised for the second category. The Group does not have any material expected credit losses.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses
over the expected life of the financial instrument.
The Group makes use of a simplified approach in accounting for trade and other receivables and records the
loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows,
considering the potential for default at any point during the life of the financial instrument. In calculating, the
Group uses its historical experience, external indicators and forward-looking information to calculate the
expected credit losses using a provision matrix.
Classification and measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and where applicable, adjusted for transaction costs unless
the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are initially measured at amortised cost using the effective interest method
except for derivatives and financial liabilities designation at FVTPL, which are carried subsequently at fair value
with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or
loss are included within finance costs or finance income.
Derivative financial instruments
Derivative financial instruments are accounted for at fair value through profit and loss (FVTPL).
49
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.2 FINANCIAL INSTRUMENTS (continued)
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance.
The Group’s overall strategy remains unchanged from 2018.
The capital structure of the Group consists of cash and cash equivalents, borrowings and equity attributable to equity
holders of the parent, comprising issued capital, reserves and retained earnings.
None of the Group’s entities are subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as
tax and general administrative outgoings.
Financial risk management objectives
The Group is exposed to market risk (including foreign currency exchange rate risk and interest rate risk), credit risk
and liquidity risk.
The Group seeks to minimise the effect of these risks, by using derivative financial instruments to hedge these risk
exposures. The use of financial derivatives is governed by the Group’s Board of Directors who has overall
responsibility for the establishment and oversight of the Group’s risk management framework. The Board is
responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed on a continuous basis to reflect changes in market conditions and the Group’s activities. The
Group does not trade financial instruments, including derivative financial instruments, for speculative purposes.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures
the risk from the previous period.
Foreign currency exchange rate risk management
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other
than their functional currency. The Group’s policy is to allow group entities to settle liabilities denominated in their
functional currency with the cash generated from their own operations in that currency. Where group entities have
liabilities denominated in a currency other than their functional currency, cash already denominated in that currency
will, where possible, be transferred from elsewhere within the Group.
The Group is predominantly exposed to US Dollars (USD).
As at 31 December 2019, the Group’s net exposure to foreign exchange risk was as follows:
Assets
2019
$
2018
$
Liabilities
2019
$
2018
$
US Dollar
933,848
1,547,609
(177,818)
(377,469)
50
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.2 FINANCIAL INSTRUMENTS (continued)
Market risk (continued)
Foreign currency sensitivity analysis
The Group is mainly exposed to US dollars (USD). The following table details the Group’s sensitivity to a 1%
(2018: 10%) increase and decrease in the Australian dollar against the relevant foreign currencies and represents
management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 1%
(2018: 10%) change in foreign currency rates. A positive number indicates an increase in profit or loss where the
Australian dollar strengthens against the respective currency.
If AUD strengthens by 1% (2018: 10%)
USD
If AUD weakens by 1% (2018: 10%)
USD
Impact on profit or loss
2019
$
2018
$
(7,485)
(106,376)
7,637
130,016
Fluctuation in the US Dollar during the current financial year was minimal (1%) compared with the previous year
which was 10%.
There would be no impact on other equity of the Group.
Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest
rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate
borrowings.
The Group’s exposure to interest rate on financial assets and financial liabilities are detailed in the liquidity risk
management section of this note.
Interest rate risk sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative
instruments at the balance date.
At balance date, if interest rates had been 100 points higher or lower and all other variables were held constant, the
Group’s profit or loss would increase / (decrease) by $105.
The Group’s sensitivity to interest rates has decreased during the year mainly due to the reduction in variable rate
debt instruments.
51
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.2 FINANCIAL INSTRUMENTS (continued)
Credit risk management
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to credit
risk from financial assets including cash and cash equivalents held at banks and trade and other receivables.
The Group has adopted a policy of only dealing with creditworthy counterparties.
The Group only transacts with entities that are rated the equivalent of investment grade and above. This information
is supplied by independent rating agencies where available and, if not available, the Group uses publicly available
financial information and its own trading record to rate its customers.
The Group’s exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate
value of transactions concluded is spread amongst approved counterparties.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks or
government agencies with high credit ratings assigned by international credit rating agencies.
The carrying amount of financial assets recorded in the financial statements, represents the Group’s maximum
exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding and
liquidity management requirements.
The Group manages liquidity risk by maintaining adequate banking and borrowing facilities by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
Non-derivative financial liabilities
The following table details the Group’s expected contractual maturities for its non-derivative financial liabilities.
These have been drawn up based on undiscounted contractual maturities of the financial liabilities based on the
earliest date the Group can be required to repay.
The table include both interest and principal cash flows.
31 December 2019
Trade and other payables
Employee entitlements
Borrowings
31 December 2018
Trade and other payables
Employee entitlements
Borrowings
Less than
6 months
$
6 months
to 1 year
$
1 – 5 years
$
251,166
17,350
33,523
302,039
438,316
7,344
277,850
723,510
-
-
9,746
9,746
-
-
-
-
636,834
-
170,000
806,834
505,333
-
-
505,333
Weighted
average
interest
rate
%
n/a
n/a
10
n/a
n/a
10
52
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.2 FINANCIAL INSTRUMENTS (continued)
Fair value measurement
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 (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).
The Directors consider that the carrying amounts of current receivables, current payables, and current interest-
bearing borrowings, approximate their fair values.
6.3 COMMITMENTS AND CONTINGENCIES
Commitments
Office rent *
Not less than one year
Between one and five years
2019
$
15,600
-
15,600
2018
$
15,600
-
15,600
*
Office rents are short-term (less than 12 months) and continue to be recognised on a straight-line basis.
Contingent liabilities
Pursuant to the acquisition of Peregrine Limited, a cash bonus totalling in aggregate $3,000,000 may be payable out
of the net proceeds of sales of gas (after deducting operating costs) from any reservoir below the Forbes Zone and
attributable to the 17.5% working interest in the Dempsey 1-15 well.
At the reporting date the Group has not achieved the conditions which will crystalise this payment requirement.
53
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.4 RELATED PARTIES
Accounting Policy
Key management personnel compensation
Directors’ remuneration is expensed as the related service is provided. A liability is recognised for the amount
expected to be paid if the Group has a present legal or constructive obligation to pay this amount because of
past service provided by the employee and the obligation can be estimated reliably.
(a) Key management personnel compensation
Key management personnel compensation comprises the following:
Short term employee benefits
Post-employment benefits
Share-based payments – shares issued
Share-based payments – shares to be issued
Share-based payments – options
Note
6.1
6.1
6.1
2.4
2019
$
2018
$
202,410
182,266
-
96,818
23,438
110,200
432,866
868
97,750
28,500
-
309,384
(b) Other key management personnel transactions
Several key management personnel, or their related parties, hold positions in other companies that result in them
having control or significant influence over these companies.
A number of these companies transacted with the Group during the year. The terms and conditions of these
transactions were no more favourable than those available, or which might reasonably be expected to be available,
in similar transactions to non-key management personnel related companies on an arm’s length basis.
Andrew Childs
Resource Recruitment Pty Ltd, a company for which Mr Childs is a Director, received $31,200 (2018: $31,200) in
repayment for office rent and outgoings. The balance outstanding at 31 December 2019 was nil (2018: nil).
Greg Channon
Ruby Lloyd Pty Ltd, a company for which Mr Channon is a Director, received $13,000 (2018: nil) in repayment for
consultancy services. The balance outstanding at 31 December 2019 was nil (2018: nil).
(c)
Loans from key management personnel
The following is based on standard commercial terms and conditions.
Gary Jeffery
Dungay Resources Pty Ltd, a company for which Mr Jeffery is a Director and shareholder, provided cash loans to the
Company, accruing interest at 10% per annum, pro rata, repayable within six months if, and when, the company was
in a financial position to do so. Interest expense at 31 December 2019 was $18,041 (2018: $10,384) and the balance
outstanding was $174,285 (2018: $230,384).
54
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.5 SUBSIDIARIES
The consolidated financial statements include the financial statements of Sacgasco Limited (the parent entity) and the
subsidiaries listed in the following table:
Name of subsidiary
Place of incorporation
Equity Interest
Sacgasco CA Inc. (1)
PEOCO LLC
Peregrine Limited (2)
AOC Investments Pty Ltd (3)
United States of America
United States of America
Belize
Australia
(1)
(2)
(3)
Formerly known as Parker Company Inc.
Company deregistered on 1 July 2019.
On 16 January 2019, AOC Investments Pty Ltd was dissolved.
2019
%
100
100
-
-
2018
%
100
100
100
100
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation.
6.6 PARENT COMPANY DISCLOSURES
As at, and throughout the financial year ended 31 December 2019, the parent entity of the Group was
Sacgasco Limited.
2019
$
(1,865,812)
(1,865,812)
633,053
641,790
(940,801)
(940,801)
2018
$
39,752
39,752
995,435
1,002,489
(59,907)
(59,907)
21,304,674
133,638
(21,737,323)
20,785,593
1,611,945
(21,454,956)
(299,011)
942,582
Result of the parent entity
Profit / (loss) for the year
Total comprehensive income / (loss) for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Reserves
Accumulated losses
Total (deficiency) / equity
55
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.7 AUDITORS’ REMUNERATION
HLB Mann Judd
Audit and other assurance services
Audit and review of financial reports
TOTAL AUDITORS’ REMUNERATION
6.8 SUBSEQUENT EVENTS
2019
$
40,580
40,580
2018
$
32,500
32,500
On 20 January 2020, the Company issued 1,578,947 shares in lieu of directors’ fees, as approved by shareholders
on 31 May 2019.
After the reporting date, we have seen macro-economic uncertainty with regards to prices and demand for oil, gas and
products as a result of the COVID-19 (coronavirus) outbreak and a rapid escalation in oil production by Saudi Arabia.
Furthermore, recent global developments and uncertainty in oil supply in March have caused further abnormally large
volatility in commodity markets. The scale and duration of these developments remain uncertain but may impact our
cash flow and financial condition.
No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or
may significantly affect, the operations of the Group, the results of these operations, or the state of affairs of the Group
in future financial years.
6.9 ADOPTION OF NEW AND REVISED STANDARDS
In the year ended 31 December 2019, the Directors have reviewed all the new and revised Standards and
Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting
period.
AASB 16 Leases
AASB 16 replaces AASB 117 Leases. AASB 16 eliminates the operating and finance lease classifications for
lessees.
AASB 16 is applicable to annual reporting periods beginning on or after 1 January 2019.
Impact on operating leases
AASB 16 will change how the Group accounts for leases previously classified as operating leases under AASB 117,
which were off-balance sheet. On initial application of AASB 16, for all leases (except as noted below), the Group
will:
Recognise right-of-use assets and lease liabilities in the consolidated statement of financial position, initially
measured at the present value of the future lease payments.
Recognise depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement
of comprehensive income.
Separate the total amount of cash paid into a principal portion (presented within financing activities) and
interest (presented in operating activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free period) will be recognised as part of the measurement of the right-of-use assets and
lease liabilities whereas under AASB 117 they resulted in the recognition of a lease liability incentive, amortised as
a reduction of rental expenses on a straight-line basis.
56
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.9 ADOPTION OF NEW AND REVISED STANDARDS
AASB 16 Leases (continued)
Under AASB 16, right-of-use assets will be tested for impairment in accordance with AASB 136 Impairment of Assets.
This will replace the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers
and office furniture), the Group will opt to recognise a lease expense on a straight-line basis as permitted by AASB 16.
The Company has signed a 12-month lease with Resource Recruitment for a share of its office space.
Per paragraph 5(a) of AASB 16, it is noted that:
“A lessee may elect not to apply the requirements in paragraphs 22-49 to short-term leases.”
Based on the above, it is considered that the Group is outside the scope of the new Standard and no material change
is necessary to the Group accounting policies.
Impact on finance leases
The main differences between AASB 16 and AASB 117 with respect to assets formerly held under a finance lease is
the measurement of the residual guarantees provided by the lessee or lessor.
AASB 16 requires that the Group recognises as part of its lease liability only the amount expected to be payable
under a residual value guarantee, rather than the maximum amount guaranteed as required by AASB 117.
On initial application, the Group will present equipment previously included in property, plant and equipment within
the line item for right-of-use assets and the lease liability, previously presented with borrowing, will be presented in
a separate line for lease liabilities.
The Company is ASX listed and classified as an oil and gas exploration entity and as such, has entered into leasing
arrangements for various oil and gas fields to explore these areas in an effort to discover and assess economically
viable gas deposits. The leasing agreements for the exploration sites are with families who have divided the
ownership down through generations, meaning that one field could potentially have in excess of thirty to forty lessors.
Per paragraph 3(a) of AASB 16, it is noted that:
“An entity shall apply this Standard to all leases, including lease of right-of-use assets in a sublease, except for leases
to explore for or use minerals, oil, natural gas and similar non-regenerative resources.”
Based on an analysis of the Group’s finance leases as at 31 December 2019 on the basis of the facts and
circumstances that exist at that date, the directors of the Company have assessed that the impact of this change will
not have a material impact on the amounts recognised in the Group’s consolidated financial statements.
Interpretation 23 Uncertainty over Income Tax Treatments
This interpretation clarifies how to apply the recognition and measurement requirements in AASB 112 when there is
uncertainty over income tax treatments. In such a circumstance, an entity shall recognise and measure its current
or deferred tax asset or liability applying the requirements in AASB 112 based on taxable profit (tax loss), unused tax
losses, unused tax credits and tax rates determined applying this interpretation.
Interpretation 23 is effective from annual reporting periods beginning on or after 1 January 2019.
Other than the above, the Directors have determined that there is no material impact of the Standards and
Interpretations in issue not yet adopted on the Company and, therefore, no change is necessary to Group accounting
policies.
57
SACGASCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.10 NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
At the date of authorisation of these consolidated financial statements, the Group has not applied the following new
and revised accounting standards and interpretations that have been issued but are not yet effective:
AASB 10 and AASB 128
Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
Amendments to AASB 3
Definition of a business
Amendments to AASB 101 and AASB 108
Definition of material
Amendments to references to the Conceptual Framework in Accounting Standards
The directors do not expect that the adoption of the Standards listed above will have a material impact on the
consolidated financial statements.
58
SACGASCO LIMITED
DIRECTORS’ DECLARATION
DIRECTORS’ DECLARATION
1.
In the opinion of the Directors of Sacgasco Limited (the “Company”):
(a)
the accompanying financial statements and notes are in accordance with the Corporations Act 2001
including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 31 December 2019 and of its
performance for the financial year ended on that date; and
complying with Australian Accounting Standards, the Corporations Regulations 2001,
professional reporting requirements and other mandatory requirements.
(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with Section 295A of the Corporations Act 2001 for the financial year ended 31 December 2019.
This declaration is signed in accordance with a resolution of the Board of Directors.
GARY JEFFERY
Managing Director
Dated this 30th day of March 2020.
59
INDEPENDENT AUDITOR’S REPORT
To the members of Sacgasco Limited.
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Sacgasco Limited (“the Company”) and its controlled entities
(“the Group”), which comprises the consolidated statement of financial position as at 31 December
2019, the consolidated statement of profit or loss, the consolidated statement of other
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies, and the directors’ declaration.
In our opinion, 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 2019 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 (“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.
Material uncertainty related to going concern
We draw attention to Note 1.3 in the financial report, which indicates that a material uncertainty
exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
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. Other than the matter described in the Material
Uncertainty Related to Going Concern paragraph above, we have not identified any other key audit
matters to be communicated in our report.
60
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 2019, 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.
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.
-
61
-
-
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,
related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
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 2019.
In our opinion, the Remuneration Report of Sacgasco Limited for the year ended 31 December
2019 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
30 March 2020
N G Neill
Partner
62
SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
The 2019 Corporate Governance Statement is dated as at 31 December 2019 and reflects the corporate governance
practices in place throughout the 2019 financial year.
Sacgasco Limited (the Company) and the Board are committed to achieving and demonstrating the highest
standards of Corporate Governance. The Board continues to review the framework and practices to ensure that
they meet the interests of shareholders. The Company and its controlled entity together are referred to as the Group
in this statement.
A description of the Group’s main corporate governance practices is set out below. All these practices, unless
otherwise stated, were in place for the entire year. Additionally, they comply with the 3rd edition of the ASX Corporate
Governance Principles and Recommendations. A copy of the Corporate Governance policies is contained on the
Company’s web site (www.sacgasco.com).
Board of Directors
Role of the Board
The matters expressly reserved to the Board of Directors are set out in a written policy and include:
Establishment of long-term goals of the Group and strategic plans to achieve these goals
Monitoring the achievement of these goals
Review of the management accounts and reports to monitor the progress of the Group
Review and adoption of budgets for the financial performance of the Group and monitoring the results on a
regular basis to assess performance
Review and approval of the annual and interim financial reports
Nominating and monitoring the external auditor
Approving all significant business transactions
Appointing and monitoring senior management
All remuneration, development and succession issues
Ensuring the Group has implemented adequate systems of risk management and internal control together with
appropriate monitoring of compliance activities
Overseeing the process for making timely and balanced disclosure of all material information that a reasonable
person would expect to have a material effect on the price or value of the Company’s securities
Ensuring that the Company has a suitably qualified Company Secretary who shall be accountable directly to
the Board, through the chair, on all matters to do with the proper functioning of the Board
Ensuring that the Company reports on its measurable objectives in relation to gender diversity and assesses
annually both the objectives and progress in achieving gender diversity
The Board delegates day to day operational matters to the Managing Director of the Company.
The Board evaluates this policy on an ongoing basis.
Board Composition
The Directors' Report contains details of the Directors' skills, experience and education. The Board seeks to establish
a Board that consists of Directors with an appropriate range of experience, skill, knowledge and vision to enable it to
operate the Group's business with excellence. To maintain this, the Group's policy is that Executive Directors should
serve at least three years. At the completion of the first three years, the position of the Director is reviewed to
ascertain if circumstances warrant a further term.
63
SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Board Composition (continued)
The specific skills that the Board collectively bring to the Company include:
Industry experience/ technical qualification;
Commercial experience;
Public company experience;
Analytical expertise;
Financial expertise;
Risk Management experience;
Strategic planning experience;
Strategic leadership experience;
Corporate Governance expertise;
Communications experience; and
Interpersonal experience.
The Board comprises one Executive Director, one Non-Executive Director and a Non-Executive Chairman. A written
agreement is entered with each Director and Senior Executive of the Company setting out the terms of their
employment.
The chair of any sub-committees formed by the Board has specific skills in the area for which they are responsible.
The Board does not have a Director with legal experience, as any legal work is outsourced to external legal advisers.
Directors’ details are set out in the Directors' Report.
The Board, through the Remuneration and Nomination Committee, is primarily responsible for identifying potential
new Directors and has the option to use an external consulting firm to identify and approach possible new candidates
for Directorship. When a vacancy exists, or where it is considered that the Board would benefit from the services of
a new Director with particular skills, candidates with the appropriate experience, expertise and diversity are
considered. Each incumbent Director is given the opportunity to meet with each candidate on a one to one basis.
The full Board then appoints the most suitable candidate.
The Board undertakes appropriate checks before appointing a person as a Director or putting forward to shareholders
a candidate for election as a Director.
The Board ensures that shareholders are provided with all material information in the Board’s possession relevant
to a decision on whether, or not, to elect or re-elect a Director.
The appointment of the Directors must be approved by the majority of the Shareholders at the first Annual General
Meeting after the appointment.
Retirement and re-election of Directors
The Constitution of the Company requires one third of Directors (or the number nearest one third, rounded up), other
than the Managing Director, to retire from office at each Annual General Meeting. No Director (other than the
Managing Director) shall hold office for a period in excess of three years without seeking re-election.
Directors who have been appointed by the Board are required to retire from office at the Annual General Meeting
following their appointment and are not considered in determining the number of Directors to retire at that Annual
General Meeting. Retiring Directors are eligible for re-election by Shareholders.
64
SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Independence of Directors
The Board has reviewed the position and association of each of the Directors in office at the date of this report and
considers that Mr Childs and Mr Channon can be deemed independent as they have no material business or
contractual relationship with the Company.
In considering whether a Director is independent, the Board has regard to the independence criteria in ASX Corporate
Governance Principles and Recommendations Principle 2 and other facts, information and circumstances that the
Board considers relevant. The Board assesses the independence of new Directors upon appointment and reviews
their independence, and the independence of the other Directors, as appropriate.
Director education
All new Directors complete an induction process. The Non-Executive Directors are given every opportunity to gain
a better understanding of the business, the industry, and the environment within which the Group operates, and are
given access to continuing education opportunities to update and enhance their skills and knowledge. The Board
are specifically provided the opportunity to enhance their financial, regulatory and compliance skills in relation to
public companies through external courses.
Independent professional advice
With prior approval of the Board, each Director has the right to seek independent legal and other professional advice
at the Group's expense concerning any aspect of the Group's operations or undertakings to fulfil their duties and
responsibilities as Directors.
Board performance review
The performance of all Directors is assessed through review by the whole Board of a Director's attendance at and
involvement in Board meetings, their performance and other matters identified by the Board or other Directors.
Significant issues are actioned by the Board. Due to the Board's assessment of the effectiveness of these processes,
the Board has not otherwise formalised measures of a Director's performance.
The Directors conducted an internal performance evaluation of the Members of the Board during the reporting period.
External advisers were not used.
Director remuneration
Details of the Group's remuneration policies are included in the "Remuneration Report" section of the Directors
Report.
Non-Executive Directors will be remunerated by cash payments (including statutory superannuation) and may
receive equity performance incentives, but they will not be provided with any benefits for ceasing to be a Director.
Executive Directors are remunerated by both fixed remuneration and equity performance-based remuneration,
subject to obtaining all regulatory approvals from shareholders. A reasonable period of notice of termination is
required and is detailed in the Executive's employment contract.
Managing Business Risk
The Group maintains policies and practices designed to identify and manage significant risks including:
Regular budgeting and financial reporting;
Procedures and controls to manage financial exposures and operational risks;
The Group's business plan;
Corporate strategy guidelines and procedures to review and approve the Group's strategic plans;
65
SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Managing Business Risk (continued)
Establish and continuously assess a Group Risk Profile which identifies all significant risk to the Group and
controls that are in place to minimise or mitigate the risk.
insurance and risk management programs which are reviewed by the Board
The Board reviews these systems and the effectiveness of their implementation annually and considers the
management of risk at its meetings. The Board may consult with their Group’s external auditors on external risk
matters, or other appropriately qualified external consultants on risk generally, as required. The entity’s risk
management framework was reviewed by the Board during the financial year.
The Board’s review of business risk is also based on reports from the Audit and Risk Management Committee.
The Board receives regular reports about the financial condition and operating results of the consolidated Group.
The Managing Director and Chief Financial Officer annually provide a formal statement to the Board that in all
material respects and to the best of their knowledge and belief:
the Group's financial reports present a true and fair view of the Group's financial condition and operational
results and are in accordance with relevant accounting standards; and
the Group's risk management and internal control systems are sound, appropriate and operating efficiently
and effectively.
The Company assesses its exposure to economic, environmental and social sustainability risks. The Board
assesses the likely impact of changes and implements strategies to minimise exposure to these specific risks. Due
to risk procedures adopted by the Company, it is not believed the Company has a material exposure to these risks.
Due to its size and activities, the Company does not have an internal audit function. The Board has determined that
the established internal controls for the Company, combined with the work of the audit and risk management
committee, at this stage satisfactorily address the function that would otherwise be dealt with by an internal audit
function.
Internal Controls
Procedures have been established at the Board and Executive management levels that are designed to safeguard
the assets and interests of the Group, and to ensure the integrity of reporting. These include accounting, financial
reporting and internal control policies and procedures. To ensure these established procedures are being followed,
the Directors:
ensure appropriate follow-up of significant audit findings and risk areas identified;
review the scope of the external audit to align it with Board requirements; and
conduct a detailed review of published accounts.
Board Committees
Audit and Risk Management Committee
The role of the Audit and Risk Management Committee is documented in a Charter which is approved by the Board
of Directors. In accordance with this Charter, all members of the Committee must be Non-Executive Directors.
The primary role of the Audit function of the Committee is to:
Assist the Board in fulfilling its overview of the audit process
Assist the Board in overviewing financial reporting
Assist the Board in fulfilling its overview of the systems of internal control which the Board and management
have established
66
SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Audit and Risk Management Committee (continued)
Monitor, review and recommend the adoption of the financial statements of the Company
Regularly review the adequacy of accounting, internal controls, reporting and other financial management
systems and practices of the Company
Review the financial report and other financial information distributed externally
Review any new accounting policies to ensure compliance with Australian Accounting Standards and generally
accepted accounting principles
Review audit reports to ensure that if major deficiencies or breakdowns in controls or procedures are identified,
appropriate and prompt remedial action is taken by management
Review the nomination and performance of the auditor
Liaise with external auditors and ensure that the annual and half-year statutory audits are conducted in an
effective manner
Monitor the establishment of appropriate ethical standards
Monitor the procedures in place to ensure compliance with the Corporations Act 2001, Australian Accounting
Standards, ASX Listing Rules and all other regulatory requirements
Address any matters outstanding with the auditors, the Australian Taxation Office, the Australian Securities
and Investments Commission, the ASX and financial institutions; and
Improve the quality of the accounting function
The primary role of the risk function of the committee is to assist the Board in its oversight of the Company’s
management of key risks, including strategic and operational risks, as well as the guidelines, policies and processes
for monitoring and mitigating such risks.
Risk assessment and risk management are the responsibility of the Company’s management. The Committee has
an oversight role and in fulfilling that role, it relies on the reviews and reports received from management.
The Committee shall have the following authority and responsibilities:
Review and discuss with management the Company’s risk governance structure, risk assessment and risk
management practices and the guidelines, policies and processes in place for risk management
Review and discuss with management the Board’s risk appetite and strategy relating to key risks, including
credit risk, liquidity and funding risk, market risk, product risk and reputational risk, as well as the guidelines,
policies and processes for monitoring and mitigating such risks
Discuss with the Company’s executive team the Company’s risk assessment and risk management guidelines,
policies and processes, as the case may be. The Risk Committee meets separately at least twice a year with
the executive team
Review disclosure regarding risk contained in the Company’s Annual Report
Review and assess the nature and level of insurance coverage
Initiate and monitor special investigations into areas of corporate risk or breakdowns in internal controls
Discharge any other duties or responsibilities delegated to the Committee by the Board
Delegate any of its responsibilities to subcommittees as the Committee may deem appropriate
Retain such outside counsel, experts and other advisors as the committee may deem appropriate in its sole
discretion and approve related fees
Report its actions and any recommendations to the Board
Review at least annually the adequacy of this Charter and recommend any proposed changes to the board for
approval.
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SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Audit and Risk Management Committee (continued)
The Committee consists of the following Non-Executive Directors:
Mr Greg Channon (Committee Chair)
Mr Andrew Childs (Committee member)
The auditors and the Managing Director are invited to attend Audit and Risk Management Committee meetings at
the discretion of the Committee.
The Audit and Risk Management Committee met twice during the year.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee operates in accordance with its Charter. The main responsibilities of
the Committee are:
Determine remuneration policies and remuneration of Directors
Determine remuneration and incentive policies of Key Executives
Determine the Group recruitment, retention and termination policies and procedures for senior management
Determine and review incentive schemes
Ensure all Directors and senior executives have a written agreement setting out the terms of their appointment.
Evaluate senior executive performance on an annual basis; this occurred during the 2019 financial year
Determine and review superannuation arrangements of the Group
Determine and review professional indemnity and liability insurance for Directors and senior management
Review the Board composition to ensure the Board has the correct balance of skills and expertise
Appointment of the Managing Director and the Company Secretary
Approve the recommendation for the appointment of key management personnel presented to the Committee
by the Managing Director
Performance appraise the Board members and the Managing Director
Succession planning for Board members and the Managing Director
Approve the recommended succession planning for key management personnel presented to the Committee
by the Managing Director
Identify, evaluate and recommend candidates for the Board, the position of Managing Director and the position
of Company Secretary.
The Remuneration and Nomination Committee can seek independent external advice from consultants with specific
industry experience relevant to Sacgasco’s remuneration assessment. External advice was not obtained during the
2019 financial year.
Specific policies and procedures regarding remuneration determination is contained within the Directors Report.
The Committee consists of the following Non-Executive Directors:
Mr Andrew Childs (Committee Chair)
Mr Greg Channon (Committee member)
The Committee did not have a specific need to meet during the year.
68
SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Ethical Standards
Code of Conduct
In pursuit of the highest level of ethical standards, the Group has adopted a Code of Conduct which establishes the
standards of behaviour required of Directors and employees in the conduct of the Group's affairs. This code is
provided to all Directors and employees. The code stipulates that any unethical behaviour is to be reported to the
Group's Managing Director as soon as possible.
The Code of Conduct is based on respect for the law and the rights of individuals, and acting accordingly, dealing
with conflicts of interest appropriately, using the consolidated entity's assets responsibly and in the best interests of
the Company, acting with integrity, being fair and honest in dealings, treating other people with dignity and being
responsible for actions and accountable for the consequences.
Trading in the Company's Securities by Directors and Employees
The Board has adopted a policy in relation to dealings in the securities of the Group which applies to all Directors
and employees. Under the policy, Directors are prohibited from short-term or "active" trading in the Group's securities
and Directors and employees are prohibited from dealing in the Group's securities whilst in the possession of price
sensitive information. The Company's Managing Director must be notified of any proposed transactions in the
Company’s shares.
Any Director or employee receiving shares pursuant to the Company’s equity-based remuneration scheme (refer to
the remuneration report) is not permitted to enter into transactions which limit the economic risk of participating in
the scheme.
This policy is provided to all Directors and employees. Compliance with it is reviewed on an on-going basis in
accordance with the Company's risk management systems.
Continuous Disclosure
The Group has in place a continuous disclosure policy, a copy of which is provided to all Group officers and
employees who may from time to time be in possession of undisclosed information that may be material to the price
or value of the Group's securities.
The continuous disclosure policy aims to ensure timely compliance with the Company’s continuous disclosure
obligations under the Corporations Act 2001 and ASX Listing Rules and to ensure officers and employees of the
Group understand these obligations.
The procedure adopted by the Group is essentially that any information which may need to be disclosed must be
brought to the attention of the Board (where practicable) and any other appropriate personnel (including external
advisors if deemed appropriate) will consider the information and whether disclosure is required. If disclosure is
deemed necessary, an appropriate announcement will be prepared for release to the market as soon as possible.
At least once every 12 months’ period, the Board will review the company's compliance with this continuous
disclosure policy and update it from time to time, if necessary.
Communication with Shareholders
The Board aims to ensure that Shareholders are kept fully informed of all major developments affecting the Group.
Information is communicated to Shareholders as follows:
As the Company is a disclosing entity, regular announcements are made to the ASX in accordance with the
Group's disclosure policy, including the half-year review, the year-end audited accounts and an Annual Report
The Board ensures the Annual Report includes relevant information about the operations of the Group during
the year, changes in the affairs and details of future developments
69
SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Communication with Shareholders (continued)
Shareholders are advised in writing of key issues affecting the Group by effective use of the Group's share
registry or electronically via the website
Shareholders are provided the opportunity to receive communications electronically through the Company’s
share registry
Any proposed major changes in the Group's affairs are submitted to a vote of Shareholders, as required by
the Corporations Act 2001 and the ASX Listing Rules
The Board encourages full participation of Shareholders at the Annual General Meeting to ensure a high level
of accountability and identification of the Group's strategies and goals. All Shareholders who are unable to
attend these meetings are encouraged to communicate or ask questions by writing to the Group
The external auditor is requested to attend the Annual General Meetings to answer any questions concerning
the audit and the content of the auditor's report
The Board seek feedback from proxy advisers to assess the appropriateness and adequacy of its reporting to
shareholders
The Board reviews this policy and compliance with it on an ongoing basis.
Diversity Policy
The Group is committed to workplace diversity at all levels and recognises the benefits arising from employee and
Board diversity. The benefits include a broader pool of high-quality employees, improved employee retention,
accessing different perspectives and ideas, and benefitting from all available talent.
The Group recognises that diversity includes matters of age, disability, ethnicity, marital and family status, religion
and culture, sexual orientation and gender identity.
The Group strives to:
Recruit and manage on the basis of an individual's competence, qualification and skills and performance;
Create a workplace culture characterised by inclusive practices and behaviours for the benefit of all staff;
Appreciate and respect the unique aspects that an individual brings to the workplace;
Where possible and practicable, increase participation and employment opportunities for indigenous people;
Create a work environment that values and utilises the contributions of employees with diverse backgrounds,
experiences and perspectives through improved awareness of the benefits of workplace diversity and
successful management of diversity, and at all times recognising that employees may have restrictions placed
on them by domestic responsibilities outside the workplace;
Take action to prevent discrimination, harassment, vilification or victimisation;
Create awareness in all staff of their rights and responsibilities with regards to fairness, equity and respect for
all aspects of diversity; and
Identify and implement programs that will assist in the development of a broader and more diverse pool of
skilled and experienced employees, and to offer employees opportunities to reach management levels with
the Group.
The Board is committed to workplace diversity and has an objective of providing a balanced representation of
employees from a diversity stance across the Group. The Board has also implemented strategies to support the
framework and objectives of the Diversity Policy and is responsible for monitoring the progress of the measurable
objectives through various monitoring, evaluation and reporting mechanism. For the 2019 financial year, the Boards’
objectives were met by the Group. The Board assesses annually the progress and achievement of the objectives.
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SACGASCO LIMITED
CORPORATE GOVERNANCE STATEMENT
Diversity Policy (continued)
Pursuant to ASX Corporate Governance Recommendation 1.5, the Company discloses the following information as
at the date of this report:
Percentage details
Women and Men employed within the Group
Women and Men at senior management level
Women and Men employed at Board level
Women and Men employed by corporate services provider
Women
25%
-
-
60%
Men
75%
100%
100%
40%
ASX Corporate Governance principals and recommendations not followed - "if not, why not" approach
Pursuant to the ASX Listing Rules, the Company advises that it does not comply with the following Corporate
Governance Principles and Recommendations, issued by the ASX Corporate Governance Council. Reasons for the
Company’s non-compliance are detailed below.
Recommendations 2.1 / 8.1
The Remuneration and Nomination committee should be structured so that it:
consists of a majority of Independent Directors
is chaired by an Independent Chair
has at least three members
Recommendation 2.5
The chair of the board of a listed entity should be an Independent Director.
Recommendations 4.1 / 7.1
The Audit and Risk Management committee should be structured so that it:
consists only of Non-Executive Directors
consists of a majority of Independent Directors
is chaired by an Independent Chair, who is not chair of the Board
has at least three members
While the ASX Principles recommend an ideal structure for the Audit and Risk Management and Remuneration and
Nomination committees, they recognise that for smaller Boards it may not be possible to implement such a structure.
Two of the three directors are considered independent. In view of the size of the Company and the nature of its
activities, the Board considers that the current Board structure is a cost effective and practical means of directing
and managing the Company.
Given the size, scale and nature of the Company’s business, the Board does not consider the non-compliance with
these ASX Principles to be materially detrimental to the Company. This statement is current as at 31 December 2019
and has been approved by the Board.
71
SACGASCO LIMITED
STOCK EXCHANGE INFORMATION
STOCK EXCHANGE INFORMATION
The shareholder information set out below was applicable as at 29 February 2020:
1.
Distribution of ordinary shares
Range
Total holders
Ordinary shares
% of issued capital
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
82
60
130
440
278
990
8,329
243,947
1,116,054
19,919,940
248,162,982
269,451,252
-
0.09
0.42
7.39
92.10
100.00
There were 348 holders of less than a marketable parcel of ordinary shares.
2.
Distribution of listed options
Range
1 - 1,000
1,001 - 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
3.
Substantial shareholders
The substantial shareholders are set out below:
Shareholders
BNP Parabis Nominees Pty Limited
Mr Gary J Jeffery
Total holders
Listed options over
ordinary shares
% of issued capital
2,039
86,416
121,460
3,800,082
129,419,941
133,429,938
-
0.07
0.09
2.85
96.99
100.00
Number of Shares
23,029,304
17,389,757
19
27
14
81
124
265
72
SACGASCO LIMITED
STOCK EXCHANGE INFORMATION
4.
Voting rights
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll, every member present or by proxy shall have one vote for every share held.
Options and rights
No voting rights.
5.
Unlisted options
Grant date
31-May-19
Number
Number
of holders
Expiry date
Exercise price
(cents)
19,000,000
3
31-Dec-21
4
6.
Twenty largest shareholders as at 29 February 2020
Shareholders
BNP Parabis Nominees Pty Ltd
Mr Gary J Jeffery
Citicorp Nominees Pty Ltd
Mr Benjamin William Jarvis
Talex Investments Pty Ltd
Mr Andrew R Childs
Rebo Nominees Pty Ltd
Mr Alan George Brooks & Mrs Philippa Clair Brooks
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