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Solaris Oilfield InfrastructureSACGASCO LIMITED
ABN 83 114 061 433
FINANCIAL REPORT
For the year ended 31 December 2020
CONTENTS
Sacgasco Limited
Page
Chairman’s Report ...................................................................................................................................... 1
Directors’ Report ......................................................................................................................................... 2
Auditor’s Independence Declaration ......................................................................................................... 24
Consolidated Statement of Comprehensive Income ................................................................................. 25
Consolidated Statement of Financial Position ........................................................................................... 26
Consolidated Statement of Changes in Equity .......................................................................................... 27
Consolidated Statement of Cash Flows .................................................................................................... 28
Notes to the Consolidated Financial Report .............................................................................................. 29
Directors’ Declaration ................................................................................................................................ 64
Independent Auditor’s Report ................................................................................................................... 65
Securities Exchange Information............................................................................................................... 69
Corporate Directory ................................................................................................................................... 72
Chairman’s Report
For the year ended 31 December 2020
Sacgasco Limited
CHAIRMAN’S REPORT
Dear Shareholder,
The past twelve months has been a very active and productive period for Sacgasco Limited, and I am pleased to be
writing to you following the execution of a number of exciting operational developments. The COVID -19 pandemic
has caused a change in the way we manage our business; however, it has provided many attractive opportunities
as a result of its mid-year impact on oil prices.
First and foremost, the Board has remained steadfast in its approach towards consolidating the Company’s position
in one of the leading onshore natural gas development plays in the Sacramento Basin, whilst continuing to pursue
assets that will provide Sacgasco with a solid operating platform.
The Board and management team have demonstrated their commitment to progressing corporate and operational
objectives in order to expand the Company’s business in California and elsewhere as opportunities present.
Combined with Sacgasco’s low operating costs, the potential for enhanced returns from increasing oil and gas
production is compelling.
As an exploration company, the commencement of the drilling of Borba 1-7 Prospect well post year end has been
one of the most exciting developments in the history of the company. The drilling coincides with improvement of
natural gas prices on the USA West Coast which have averaged around A$5/MMBtu in recent months.
Oil and Natural gas are important components of the world’s energy system. In California natural gas supplies about
one-third of the state’s primary energy demand. Even as California covets a move away from fossil fuels to meet its
climate goals, natural gas-fired electricity is playing an important role in integrating increasing amounts of renewables
into the electricity grid. Natural Gas is the enabler of renewable energy, not its enemy!
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.
World oil consumption has reduced with the reduction in travel, but the world is still consuming over 90 million barrels
of oil per day. This will increase as vaccinations are rolled out worldwide. However, we as an industry are not
replacing that oil through exploration and development. Oil and Natural Gas are not going to be replaced as a
primary energy source overnight and I foresee improved prices in the future. As a company we are positioning
ourselves in California and Alberta, Canada to benefit from improved oil and gas prices and moreover to provide
shareholders with attractive investment returns.
Yours faithfully,
Andrew Childs
Chairman
Page | 1
Directors’ Report
For the year ended 31 December 2020
DIRECTORS’ REPORT
Sacgasco Limited
The directors present their report, together with the financial statements, on the consolidated entity (referred to
hereafter as the ‘group’) consisting of Sacgasco Limited (referred to hereafter as the Company’) and the entities it
controlled at the end of, or during, the year ended 31 December 2020.
DIRECTORS
The names of the Directors who held office during the whole of the financial year and up to the date of this report are
noted below. Directors were in office for the entire period unless otherwise stated.
Gary Jeffery
Managing Director
Andrew Childs
Non-executive Chairman
David McArthur
Non-executive Director
Appointed 17 August 2020
Greg Channon
Non-executive Director
Resigned 17 August 2020
PRINCIPAL ACTIVITIES
During the financial year the principal activity of the Group 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 2020 attributable to members of Sacgasco Limited after income
tax was $1,734,221 (2019: $1,316,441).
The Group has not reached a stage in its development where it is generating an operating profit. The Group has a
working capital surplus of $757,866 (2019: deficit of $237,633) and had net cash inflows of $1,458,928 (2019: net
cash outflows of $665,947).
DIVIDENDS
The Directors recommend that no dividend be provided for the year ended 31 December 2020 (2019: Nil).
REVIEW OF OPERATIONS
Overview
Sacgasco Limited is listed on the Australian Securities Exchange (ASX: SGC), classified as an oil and gas exploration
entity, and has approximately 477 million shares on issue at the date of this report.
Page | 2
Directors’ Report
For the year ended 31 December 2020
Strategy
Sacgasco Limited
Sacgasco’s strategy is to find and drill oil and gas exploration and production opportunities in recently overlooked,
but prospective sedimentary basins close to under supplied oil and gas markets.
As an explorer Sacgasco uses it assets to facilitate exploration activities to grow the company.
Sacgasco’s Focus is on activity that provides attractive returns for investors.
OPERATIONS HIGHLIGHTS
Preparations that led to the commencement of drilling of Borba 1-7 well in February 2021. Drilling is
progressing ahead with very encouraging results.
Fund raising efforts provided a solid base for expanding operations and exploratory drilling.
Sacgasco acquired 20% working interest in 500 BOEPD from the Alberta Plains Producing Oil Fields in
Southern Alberta, Canada.
Sacgasco acquired 30% working interest in 1,000 BOPD from Producing Oil Fields in Northern Alberta,
Canada.
California Natural Gas prices continue to be at a premium to the USA Henry Hub benchmark.
Leases and well bores over and in mapped high potential prospects continue to be held for drilling, gas
flow rework, appraisal and exploration.
Continuing to review new opportunities and prospects to add resilience and sustainability to the strong
Sacramento Basin portfolio of projects.
SACRAMENTO BASIN - Onshore Northern California
Exploration, appraisal and new ventures
SGC has established a portfolio of large conventional natural gas prospects in the Sacramento Basin, close to under-
filled Natural Gas pipelines connecting to the attractive Californian gas market.
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.
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.
Page | 3
Directors’ Report
For the year ended 31 December 2020
Borba 1-7 Prospect
Sacgasco Limited
Borba Natural Gas Prospect Drilling (Sacgasco 66.67% Working Interest (“WI”))
During 2020 the Company carried out operations to prepare for drilling the multi-target, Tcf-play-opening well at
Borba 1-7 in Glenn County, onshore Sacramento Basin during.
The company farmed out a 9.33% Working Interest in the Borba AMI in return for a funding contribution equal to
13.5% of the cost of drilling the Borba 1-7 well.
The Borba 1-7 well will be drilled to test multiple stacked 3D seismic anomalies in the interval from 3,200 feet (975
metres) to 9,500 feet (2,800 metres) depth and finish in Basement rocks. The prospective interval covers around
6,300 feet (1,920 metres).
The well will be drilled from an all-weather drilling and production pad, with a small directional component to optimise
the intersection of the multiple seismic anomalies on 3D seismic. The well is expected to take some 25-35 days to
drill. The well was spudded on 21 February 2021.
Fig.1: Borba rig assembly
At the time of publication the Borba 1-7 well was driling ahead in 8½” diameter hole below the 9⅝” casing shoe at
8,827 feet (2,690 metres).
The well has intersected 92 feet of log pay in the Kione with possible pay of 137 feet in total. This zone will be tested
after the lower formations in the well are evaluated. This zone is safely protected behind the 95/8” casing.
The well has also recorded high natural gas shows in 25 feet of sandstone 120 feet up-dip on the same structure
from a historical well with 9 feet of log pay in the upper Guinda Formation. The Lower Guinda Formation in the Borba
1-7 well recorded high gas shows including Methane and Ethane in a blocky sandstone. Numerous other zones of
apparent porosity totalling over 880 feet exhibited high levels of Natural Gas, including Methan eand Ethane. Ethane
adds heating value and hence sales value to the gas when sold.
The interval below the Casing shoe at 5493 feet will be petrophysically logged and evaluated further once drilling is
completed.
Page | 4
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
Fig. 2: Schematic of Borba 1-7 well along 3D Seismic Line
The Borba Prospect is located in ‘Big Gas Country’, just north of the Willows Gas Field (650 Bcf produced) on an
extensive prospective Sandstone trend for Natural Gas that produces from Princeton Canyon, Kione, Forbes,
Dobbins and Guinda sand reservoirs in the North Eastern Sacramento Basin. The potential traps mapped by
Sacgasco along this trend range from Channel Sands wrapping around structural highs to stratigraphic traps created
by isolated bodies and sandstones onlapping onto structural highs. The interpretation of the 3D seismic data reveals
traps that are significantly larger than the Borba Prospect with multi-Tcf-potential. Success at Borba 1-7 is expected
to open-up these plays for follow-up evaluation within the Borba Area of Mutual Interest (‘AMI’) and within JV AMI on
trend with Borba.
Page | 5
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
Fig.3: Borba 1-7 Located in ‘Big Gas Country’
GAS FLOW UPDATE
Gas flows were impacted by somewhat restricted operating conditions during the COVID 19 pandemic.
Production
Full Year 2020
Full Year 2019
Gross mcf * (100%)
SGC WI mcf
*mcf – Thousand Cubic feet gas
166,937
92,205
231,489
130,451
Sacgasco’s portfolio of operated wells, provides opportunities to bring additional wells back into gas flowing
conditions.
Page | 6
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
SACGASCO WELLS – WORKİNG 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.)
Well Status
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%
Active
Active
Active
Idle
Active
Idle
Active ‐Intermittent
Idle
Idle
Idle
Idle
Idle
Idle
Idle
Active
Active
Active
Idle
Idle
Idle
Idle
Idle
Active‐Intermittent
Idle
Active
Active
Idle
Active
Active
Plugged
Plugged
Note: WI* – Approximate numbers represent post farmout working interests
Page | 7
Directors’ Report
For the year ended 31 December 2020
PROJECT SUMMARY
Sacgasco Limited
Sacgasco’s current focus in California is on unlocking the underlying value from its natural gas prospects in the
Sacramento Basin.
The Company has working interests in eight gas fields in the Northern Sacramento Basin and is the operator of wells
in seven of these fields. The fields are Rancho-Capay, Rice Creek East, Malton, Dutch Slough, Denverton Creek,
Los Medanos, Rio Vista and Willows.
PROJECT NAMES
All located in the
Sacramento Basin
Onshore northern
California
Dempsey Area Project
LEASES; RELATED GAS
FIELD (HBP LEASES); OR
KEY WELL
PROJECT
TYPE
TOTAL
GAS
WELLS
WORKING
INTEREST
(WI)*
Rancho Capay, Rice Creek,
East Gas Fields - HBP
Leases
Oil and Gas Mineral Leases
Exploration, Appraisal
and Rework
10
40-60%
Borba Project
Oil and Gas Mineral Leases Exploration
Los Medanos Project
Malton Project
Los Medanos Gas Field
HBP Leases
Malton Gas Field HBP
Leases
and Oil and Gas Mineral
Leases
Appraisal and Rework
Exploration, Appraisal
and Rework
Dutch Slough Gas
Project
Dutch Slough Gas Field
HBP Leases
Exploration, Appraisal
and Rework
Denverton Creek Gas
Project
Denverton Creek Gas Field
HBP Leases
Gas flow and Rework
Rio Vista Gas Project
Rio Vista Field Wells
HBP Leases
Gas flow, development
and Rework
Willows Gas Field
(Non-operated)
Willows Gas Fields
HBP Leases
Alvares Project
Oil and Gas Mineral Leases
Alvares 1 well (P&A Re-
entry)
Gas flow and
Rework
Exploration and
Appraisal
Note: WI* – Approximate numbers represent post farmout working interests
1
2
7
5
1
3
1
1
66.67%
90%
45-70%
70%
70%
100%
10%
50%
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.
Page | 8
Directors’ Report
For the year ended 31 December 2020
Leases:
Sacgasco Limited
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.
NEW VENTURES AND ACQUISITIONS
ONSHORE CANADA
Sacgasco announced on 20 November 2020 that it was acquiring a 30% Working interest (WI) in an oil producing
asset in Northern Alberta, Canada. The Red Earth asset consists of 6 oilfields and associated infrastructure, located
450 km north of Edmonton is currently producing over 1000 Barrels of Sweet Light (39oAPI) oil per day (~300 BOPD
net to SGC WI). The vendor is Blue Sky Resources Limited which has recently acquired the Red Earth assets. This
asset purchase closed on 25 March 2021 with the same effective date.
The Red Earth Asset Joint Venture parties are:
Sacgasco Limited (ASX: SGC) 30%
Blue Sky Resources Ltd (Private) 55% Operator
Xstate Resources Limited (ASX:XST) 15%
Fig.4: Red Earth and Alberta Plains Locations
Page | 9
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
Cumulative oil production over 30 years to date has been around 63 million barrels with a low 10% base decline rate.
Approximately 160 producing wells are included in the assets. Current gross production is around 1,000 BOPD.
Opportunities exist to return currently idled wells to production with the potential for an additional 300 BOPD in the
short term.
At Alberta Plains (assets acquired in January 2021) production is being restored, initially to some 500+ BOEPD and
then two more tranches of 300 BOEPD as production restoration activities are implemented. Current Production is
459 BOEPD
Fig.5: Oil well Pump Jack at a Red Earth oilfield
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. Mr Jeffery is a qualified geophysicist
and member of the American Association of Petroleum Geologists with over 48 years of oil and gas Industry
experience. He has worldwide 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.
Corporate
On 6 May 2020, the Company signed agreements with shareholders who are sophisticated investors (Section 708)
for the subscription and issue of unsecured convertible notes (“Notes”) to raise $400,500. These notes and accrued
interest were converted to fully paid shares on 2 February 2021.
On 1 December 2020, the Company successfully raised $2,335,951 to fund its acquisition of the Red Earth assets.
Sacgasco held its Annual General Meeting of shareholders on 21 July 2020 where all resolutions were passed.
Public Presentations
Managing Director Gary Jeffery updated shareholders through three InvestorStream webinars between June 2020
and November 2020, and by interview with the Market Herald in November 2020. Further interviews were conducted
in 2021.
Page | 10
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as reported above in the Review of Operations, there were no significant changes in the state of affairs
of the Group during the reporting period.
LIKELY DEVELOPMENTS
The Group is focussed on exploration and oil production within its current portfolio as disclosed in the Review of
Operations and will also continue to assess other opportunities which may offer value enhancing opportunities for
shareholders.
As disclosed in note 6.8 of the notes to the consolidated financial statements and in the Review of Operations, the
Group has signed agreements with a Canadian operator to earn a working interest in its oil and gas assets.
ENVIRONMENTAL REGULATIONS
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 Group is not aware of any significant breaches of these laws and regulations during the period covered by this
report.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Other than as disclosed in note 6.8 of the notes to the consolidated financial statements, there have been no other
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.
Page | 11
Directors’ Report
For the year ended 31 December 2020
INFORMATION ON DIRECTORS
Sacgasco Limited
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
Andrew Childs
Non-Executive Chairman
BSc.
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 Range Oil Australia (later named 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.
Other current public directorships:
Non-executive Director of ADX Energy Limited
Former directorships (past 3 years):
None
Special responsibilities:
Chair of the Remuneration and Nomination Committee
Member of the Audit and Risk Management Committee
Interests in shares:
Interests in options:
7,478,598
15,224,769
Name:
Title:
Qualifications:
Experience and expertise:
Gary Jeffery
Managing Director
BSc.
Mr Jeffery has over 48 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 experience 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.
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.
Other current public directorships:
None
Former directorships (past 3 years):
None
Special responsibilities:
None
Interests in shares:
Interests in options:
20,792,275
27,823,485
Page | 12
Directors’ Report
For the year ended 31 December 2020
INFORMATION ON DIRECTORS (continued)
Sacgasco Limited
Name
Experience, qualifications and other directorships
Name:
Title:
Qualifications:
Experience and expertise:
Other current public directorships:
David McArthur
Non-Executive Director
CA, BCom.
Mr McArthur has a Bachelor of Commerce Degree from the University of
Western Australia. Mr McArthur is a Chartered Accountant, having spent four
years with a major international accounting firm, and has over 30 years’
experience in the accounting profession. Mr McArthur has been actively
involved in the financial and corporate management of numerous public listed
companies over the past 30 years.
Mr McArthur has substantial experience in capital raisings, company re-
takeovers, and asset
organisations and restructuring, mergers and
acquisitions by public companies.
Interim Managing Director of Xstate Resources Limited
Appointed: 3 September 2013
Resigned: 15 July 2019
Reappointed: 26 November 2019
Non-Executive Director of Lodestar Minerals Limited
Appointed: 3 September 2018
Executive Director from 13 August 2007 to 3 September 2018
Former directorships (past 3 years):
Non-Executive Director of Harvest Technology Limited (formerly Smart
Marine Systems Limited) from 29 January 2016 until 3 September 2019.
Special responsibilities:
Chair of the Audit and Risk Management Committee
Member of the Remuneration and Nomination Committee
Interests in shares:
Interests in options:
2,000,000
2,000,000
On 18 August 2020, David McArthur joined the Board as a Non-Executive Director when Greg Channon resigned
his position due to other work commitments.
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships
of all other types of entities, unless otherwise stated.
‘Former directorships’ quoted above are directorships held in the last three years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Page | 13
Directors’ Report
For the year ended 31 December 2020
COMPANY SECRETARIES
Sacgasco Limited
David McArthur is a Chartered Accountant and was appointed to the position of Company Secretary on
24 October 2013. Mr 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 McArthur has 10 years’ corporate and financial experience in Australia and the United
Kingdom.
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors (“the Board”) and of each Board committee held during
the year ended 31 December 2020, and the number of meetings attended by each director was:
Full Board
Audit and Risk
Management Committee
Attended
Held
Attended
Held
Andrew Childs
Gary Jeffery
David McArthur
Greg Channon
2
2
1
1
2
2
1
1
2
2
1
1
2
2
1
1
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
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.
In addition to the meetings held above, a number of decisions of the Board are undertaken via circular resolution (10).
INDEMNITY AND INSURANCE OF OFFICERS
The Company has agreed to indemnify all Directors and Company Secretaries 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 $41,670 (2019: $52,410) to insure the
Directors and Company Secretaries of the Company.
Page | 14
Directors’ Report
For the year ended 31 December 2020
SHARES UNDER OPTION
Sacgasco Limited
Unissued ordinary shares of Sacgasco Limited under option at the date of this report are as follows:
Grant date
Expiry date
31-May-2019
15-Oct-2019
22-Jan-2021
31-Dec-2021
31-Dec-2021
30-Dec-2022
Exercise price
cents
Number
under option
4
4
6
16,000,000
131,915,719
18,000,000
165,915,719
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue
of the Company or of any other body corporate.
SHARES ISSUED ON THE EXERCISE OF OPTIONS
The following ordinary shares of Sacgasco Limited were issued during the year ended 31 December 2020, and up
to the date of this report, on the exercise of options granted:
Date options granted
15-Oct-2019
31-May-2019
22-Jan-21
Exercise price
cents
Number of
shares issued
4
4
6
1,514,219
3,000,000
2,000,000
PROCEEDINGS ON BEHALF OF THE COMPANY
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.
NON-AUDIT SERVICES
No non-audit services were provided during the year from the auditor of the Company, HLB Mann Judd.
AUDITOR INDEPENDENCE
A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is
set out on page 24.
Page | 15
Directors’ Report
For the year ended 31 December 2020
AUDITOR
Sacgasco Limited
HLB Mann Judd (WA Partnership) continues in office in accordance with section 327 of the Corporations Act 2001.
AUDITED REMUNERATION REPORT
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 2020. 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 and its Regulations.
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 objective of the Group’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results achieved. The framework aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for
the delivery of reward. The Board of Directors (“the Board”) ensures that executive reward satisfies the following
key criteria for good reward governance practices:
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration
arrangements for its directors. The performance of the Group depends on the quality of its key management
personnel. The remuneration philosophy is to attract, motivate and retain high performance and high-quality
personnel.
The reward framework is designed to align executive reward to shareholders’ interest. The Board has considered
that it should seek to enhance shareholders’ interests by:
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
Page | 16
Directors’ Report
For the year ended 31 December 2020
Remuneration structure
Sacgasco Limited
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate and distinct.
Non-Executive Directors’ Remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors’ fees and payment are reviewed annually by the Nomination and Remuneration Committee. The
Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration
consultants to ensure non-executive directors’ fees and payments are appropriate and in line with the market. The
Chairman’s fees are determined independently to the fees of other non-executive directors based on comparative
roles in the external market. The Chairman is not present at any discussions relating to the determination of his own
remuneration.
ASX Listing Rules require the aggregate non-executive directors’ remuneration be determined periodically by a
general meeting. The most recent determination was at the Annual General Meeting held in 2005, where the
shareholders approved a maximum annual aggregate remuneration of $150,000.
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:
Non-Executive Directors
$30,000 p.a. inclusive of statutory superannuation
Chairman
$40,000 p.a. inclusive of statutory superannuation
Pursuant to the share-plan approved by shareholders at a general meeting on 31 May 2020, 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-19
31-Mar-20
30-Jun-20
30-Sep-20
31-Dec-20
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
$
-
4,032
7,353
3,472
14,857
2,155
17,012
156,250
161,290
294,118
138,889
750,547
86,207
836,754
Date of
issue
22-Jan-20
02-Apr-20
22-Jul-20
01-Oct-20
Share price
on grant date
cents
2.50
2.50
2.50
2.50
15-Jan-21
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.
David McArthur does not receive a directors’ fee.
Page | 17
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
Executive Directors’ Remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration
which has both fixed and variable components.
There are four components to the executive remuneration and reward framework:
base pay and non-monetary benefits,
other remuneration such as superannuation and long-service leave.
share-based payments,
The combination of these comprises the executive’s total remuneration.
Fixed remuneration
Fixed remuneration, consisting of base salary, superannuation, and non-monetary benefits, are reviewed annually
by the Nomination and Remuneration Committee. 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
Nomination and Remuneration Committee has access to external, independent advice where necessary.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits where it does not create
any additional costs to the Group and provides additional value to the executive.
Short-term incentive scheme
The short-term incentives (“STI”) program is designed to align the targets of the business units with the performance
hurdles of key management. STI payments are granted to executives based on specific annual targets and key
performance indicators (“KPIs”) being achieved. At this stage, the Group does not award any STIs.
Long-term incentive scheme
The long-term incentives (“LTIs”) include long-service leave and share-based payments. Share options are awarded
to executives 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.
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
Value per
option at
grant date
Value of
options at
grant date
Vesting
and first
exercise
date
Gary Jeffery
10,000,000
22-Jan-21
Andrew Childs
6,000,000
22-Jan-21
David McArthur
4,000,000
22-Jan-21
cents
5.21
5.21
5.21
$
521,000
29-Jan-21
312,600
29-Jan-21
208,400
29-Jan-21
Exercise
Price
Per option
cents
Expiry
date
6.0
6.0
6.0
31-Dec-22
31-Dec-22
31-Dec-22
The options tabled above were provided at no cost to the recipients.
The cost of these options will form part of the 31 December 2021 remuneration report.
Page | 18
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
Options granted as compensation (continued)
No options granted as compensation in the current or prior years were exercised, forfeited, lapsed, or cancelled
(2019: nil).
Group performance and link to remuneration
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.
2020
2019
2018
2017
2016
Other operating income
437,155
782,243
1,250,989
404,632
183,646
Loss before income tax ($)
(1,730,534)
(1,314,164)
(1,972,174)
(6,714,764)
(1,134,923)
Net loss attributable to equity holders ($)
(1,734,221)
(1,316,441)
(1,974,367)
(6,720,095)
(1,137,120)
Share price at year end (cents)
6.30
4.50
2.50
7.80
6.50
Number of listed ordinary shares
341,258,491
268,513,742
261,780,949
243,989,884
130,110,984
Weighted average number of shares
277,329,705
266,085,375
204,386,845
204,386,845
115,477,089
Basic loss per share EPS (cents)
(0.63)
(0.49)
(0.78)
(3.29)
(0.98)
Listed options
Unlisted options
133,429,938
133,429,948
-
-
-
19,000,000
19,000,000
43,000,000
37,500,000
19,698,773
Market capitalisation ($)
21,499,285
12,083,118
7,591,648
19,024,191
8,457,214
Net tangible assets / (liabilities) (NTA) ($)
844,695
(133,437)
561,307
1,517,627
(,007,577)
NTA Backing (cents)
0.25
(0.05)
0.21
0.62
(0.77)
During the financial years noted above, there were no dividends paid or other returns of capital made by the Company
to shareholders.
Use of remuneration consultants
No remuneration consultants provided services during the year.
Voting and comments made at the Company’s 2020 Annual General Meeting (“AGM”)
At the 2020 AGM, 100% of the votes received, supported the adoption of the remuneration report for the year ended
31 December 2019. The Company did not receive any specific feedback at the AGM regarding its remuneration
practices.
Page | 19
Directors’ Report
For the year ended 31 December 2020
Employment contracts
Sacgasco Limited
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 21 July 2020, 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-19
31-Mar-20
30-Jun-20
30-Sep-20
31-Dec-20
Contractual
value of
services
rendered
$
-
25,000
25,000
25,000
75,000
25,000
100,000
Market value of
shares on
grant date
No. of Plan
Shares
issued
$
-
20,161
36,765
17,361
74,287
10,776
85,063
781,250
806,452
1,470,588
694,444
3,752,734
431,034
4,183,768
Date of
issue
22-Jan-20
02-Apr-20
22-Jul-20
01-Oct-20
15-Jan-21
Share price
on grant date
cents
2.50
2.50
2.50
2.50
2.50
Page | 20
Directors’ Report
For the year ended 31 December 2020
Details of remuneration
Sacgasco Limited
Details of the remuneration of key management personnel of the Group are set out in the following tables.
Short-term benefits
Share-based payments
Total
Cash salary
and fees
D&O insurance
premiums
2020
$
$
Shares
$
Equity-settled
options
(A)
$
Non-executive Directors
Andrew Childs
David McArthur
Executive Directors
20,000
-
13,890
5,161
17,012
-
Gary Jeffery
100,000
13,890
85,063
18,952
138,952
8,729
-
41,670
102,075
$
50,902
5,161
198,953
27,681
282,697
-
-
-
-
-
20,000
30,000
17,470
17,470
20,043
-
34,800
17,400
92,313
64,870
100,000
150,000
17,470
52,410
100,213
58,000
275,683
120,256
110,200
432,866
(A) The fair value of options granted was determined using the Black-Scholes option pricing model,
(B) Greg Channon was appointed on 3 December 2018 and resigned on 17 August 2020.
No proportion of Directors’ remuneration was linked to performance for the year ended 31 December 2020 (2019: nil).
No cash bonuses were granted during the year (2019: Nil).
Page | 21
Former Directors
Greg Channon (B)
2019
Non-executive Directors
Andrew Childs
Greg Channon
Executive Directors
Gary Jeffery
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
Additional disclosures relating to key management personnel
Shareholdings
The number of shares in the company held during the financial year by each director, including their personally
related parties, is set out below:
Held on
31 December
2019
Andrew Childs
6,641,844
David McArthur
-
Greg Channon
2,051,977
In lieu
of fees
750,547
-
-
Held on
resignation
Held on
31 December
2020
Held on
31 December
2020
Held at
31 December
2020
-
-
(2,051,977)
7,392,391
-
-
Gary Jeffery
16,608,507
3,752,734
-
20,361,241
25,302,328
4,503,281
(2,051,977)
27,753,632
Option holdings
The number of options over ordinary shares in the company held during the financial year by each director, including
their personally related parties, is set out below:
Held on
31 December
2019
Held on
appointment /
resignation
Held on
31 December
2020
Vested and
exercisable
on
31 December
2020
Vested and
exercisable
on
31 December
2020
Andrew Childs
9,224,769
David McArthur
-
-
-
Greg Channon
3,977,239
(3,977,239)
9,224,769
9,224,769
-
-
-
-
Gary Jeffery
17,823,485
-
17,823,485
17,823,485
31,025,493
(3,977,239)
27,048,254
27,048,254
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.
END OF AUDITED REMUNERATION REPORT
Page | 22
Directors’ Report
For the year ended 31 December 2020
Sacgasco Limited
This report is made in accordance with a resolution of the directors, pursuant to section 298(2)(a) of the Corporations
Act 2001.
GARY JEFFERY
Managing Director
31 March 2021
Perth, WA
Page | 23
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Sacgasco Limited for the year
ended 31 December 2020, 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
31 March 2021
N G Neill
Partner
Page | 24
Financial Report
For the year ended 31 December 2020
Sacgasco Limited
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2020
Other operating income
Government grants - PAYG cash flow boost
Other gains
Other operating expenses
Exploration expenditure
Site restoration expense
Personnel expenses
General and administrative expenses
Professional fees
Marketing and business development expense
Depreciation and amortisation
Foreign exchange (losses) / gains
Provision for lifetime expected credit losses
Results from operating activities
Finance income
Finance expenses
Note
2.2
2.6
2.2
2.4
2.6
2.6
2.3
2.3
2020
$
437,155
20,000
8,383
(731,769)
(311,313)
(6,794)
(309,593)
(123,078)
(309,938)
(85,660)
(3,214)
(14,959)
(273,420)
2019
$
782,243
-
3,722
(949,468)
(156,392)
-
(505,003)
(167,775)
(296,372)
(7,002)
(4,136)
6,210
-
(1,704,200)
(1,293,973)
1,134
(27,468)
(26,334)
-
(20,191)
(20,191)
Loss before income tax
(1,730,534)
(1,314,164)
Income tax expense
Loss for the year
2.5
(3,687)
(2,277)
(1,734,221)
(1,316,441)
Other comprehensive income
Items that may be classified subsequently to profit or loss
Foreign currency translation difference of foreign operations
Total items that may be classified as subsequently to profit or loss
31,030
31,030
(2,233)
(2,233)
Total comprehensive loss for the period
(1,703,191)
(1,318,674)
Loss per share (cents per share)
Basic and diluted
2.8
(0.63)
(0.49)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Page | 25
Financial Report
For the year ended 31 December 2020
Sacgasco Limited
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of 31 December 2020
Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Interest bearing assets
Other financial assets
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
Borrowings
Total current liabilities
Site restoration provision
Total non-current liabilities
Total liabilities
Net assets / (liabilities)
Equity
Issued capital
Reserves
Accumulated losses
Note
4.1
4.2
4.3
4.4
4.4
4.5
2.4
5.2
3.1
2020
$
1,735,573
260,964
18,150
66,709
142,952
2019
$
282,454
536,599
61,933
-
-
2,224,348
880,986
264,509
4,857
106
269,472
2,493,820
(1,140,746)
(6,313)
(319,423)
290,138
7,952
289
298,379
1,179,365
(888,000)
(17,350)
(213,269)
(1,466,482)
(1,118,619)
(182,537)
(182,537)
(193,894)
(193,894)
(1,649,019)
(1,312,513)
844,801
(133,148)
5.1
23,635,092
21,304,674
675,916
294,164
(23,466,207)
(21,731,986)
Total equity / (deficiency) attributable to equity
holders of the Company
844,801
(133,148)
The above statement of financial position should be read in conjunction with the accompanying notes.
Page | 26
Financial Report
For the year ended 31 December 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Balance on 1 January 2019
Loss for the period
Foreign exchange translation difference on
foreign operations
Total comprehensive loss for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Transfer to accumulated losses on expiry of options
Share-based payment transactions
Balance on 31 December 2019
Loss for the period
Foreign exchange translation difference on
foreign operations
Total comprehensive loss for the period
Issued
capital
$
20,785,593
-
-
-
519,081
-
-
21,304,674
-
-
-
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
2,330,418
Equity
component of
convertible
note
$
-
-
-
-
-
-
-
-
-
-
-
-
Issue of convertible notes
Share-based payment transactions
-
-
361,229
-
Sacgasco Limited
Translation
reserve
Options
reserve
Share-based
payments
reserve
Accumulated
losses
Total
equity
$
$
$
$
$
162,759
1,583,445
28,500
(21,998,990)
561,307
-
(2,233)
(2,233)
-
-
-
160,526
-
31,030
31,030
-
-
-
-
-
-
-
(1,583,445)
110,200
110,200
-
-
-
-
-
-
-
-
-
-
-
(5,062)
23,438
-
-
-
-
-
(10,507)
(1,316,441)
(1,316,441
-
(2,233)
(1,316,441)
(1,318,674)
-
519,081
1,583,445
-
-
105,138
(21,731,986)
(133,148)
(1,734,221)
(1,734,221)
-
31,030
(1,734,221)
(1,703,191)
-
-
-
2,330,418
361,229
(10,507)
844,801
Balance on 31 December 2020
23,635,092
361,229
191,556
110,200
12,931
(23,466,207)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Page | 27
Financial Report
For the year ended 31 December 2020
Sacgasco Limited
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2020
Cash flows from operating activities
Receipts from customers
Government grants
Cash paid to suppliers and employees
Payments for exploration and evaluation
Interest paid
Interest received
Income taxes paid
Note
2020
$
3,025
20,000
(692,363)
(409,967)
(21,601)
48
(3,687)
Net cash used in operating activities
4.1(b)
(1,104,545)
Cash flows from investing activities
Payments for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares and options
Proceeds from issue of convertible notes
Repayment of premium funding facility
Loan to joint venture partner
Proceeds from related party loans
Repayment of related party loans
Payment of capital raising costs
Net cash from financing activities
(198)
(198)
2,335,951
400,500
(38,984)
(65,681)
270,000
(170,000)
(168,115)
2,563,671
2019
$
-
-
(551,584)
(309,675)
(26,290)
-
(2,277)
(889,826)
-
-
400,290
-
(56,882)
-
50,000
(100,000)
(69,529)
223,879
Net increase / (decrease) in cash and cash equivalents
1,458,928
(665,947)
Cash and cash equivalents on 1 January
Effect of exchange rate fluctuations on cash held
282,454
(5,809)
Cash and cash equivalents on 31 December
4.1(a)
1,735,573
956,365
(7,964)
282,454
The above statement of cash flows should be read in conjunction with the accompanying notes.
Page | 28
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
For the year ended 31 December 2020
SECTION 1 ABOUT THESE FINANCIAL STATEMENTS
The financial statements of Sacgasco Limited (the Company) and its controlled entities (collectively known as “the
Group”) for the year ended 31 December 2020 were authorised for issue on 31 March 2021 in accordance with a
resolution of the Directors. The directors have the power to amend and reissue the financial statements.
The Company is:
a company limited by shares.
incorporated and domiciled in Australia.
publicly traded on the Australian Securities Exchange (ASX code: SGC).
a for-profit entity for the purpose of preparing the financial statements.
A description of the nature of the Group’s operations and its principal activities are included in the Directors’ Report,
which is not part of the financial statements.
Its registered office is located at Level 1, 31 Cliff Street, Fremantle, WA, 6160.
The financial report is a general-purpose financial report, which:
has been prepared in accordance, and complies, with the requirements of the Corporations Act 2001,
Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting
Standards Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
has been prepared on a historical cost basis, except for, where applicable, the revaluation of financial
assets and liabilities at fair value through profit or loss, financial assets at fair value through other
comprehensive income, investment properties, certain classes of property, plant and equipment and
derivative financial instruments.
is presented in Australian dollars ($).
presents reclassified comparative information if required for consistency with the current year’s
presentation.
adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are
relevant to the Group and effective from reporting periods beginning on or before 1 January 2020. Refer
to note 6.9 for further details.
does not early adopt Accounting Standards and Interpretations that have been issued or amended but are
not yet effective.
Page | 29
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
1.1 PRINCIPLES OF CONSOLIDATION
Sacgasco Limited
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.
1.2 PARENT ENTITY INFORMATION
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 6.6.
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. On 31 December 2020, the Group had net assets of $844,801, a working capital surplus of $757,866 and
cash at bank of $1,735,573.
The Directors are aware that the Group’s ability to continue as a going concern is contingent on securing further
working capital to continue funding its operational and exploration activities. Prior to, and since the year-end, the
Group has acquired working interests in several production assets in Alberta, Canada which are anticipated to
recommence operations mid-2021.
On 11 February 2021, the Company announced that it had placed 76,973,072 shares to sophisticated investors at
6.5 cents each to raise $5,003,250 before costs to be utilised for drilling activities at the Borba well, and for further
investment activities.
The Directors are of the opinion that given the capital raised post year end, the Group is in a position to carry on
operations for the foreseeable future and that it will be able to realise its assets and discharge its liabilities in the
normal course of business.
1.4 FOREIGN CURRENCIES
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.
Page | 30
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
1.5 CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and
estimates will seldom equal the related actual results. Judgements estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes)
within the next financial year are discussed below.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or
may have, on the Group based on known information. This consideration extends to nature of exploration activities
and geographic regions in which the Group operates. Other than as addressed in specific notes, there does not
currently appear to be either any significant impact upon the financial statements or any significant uncertainties with
respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently
resulting from the Coronavirus (COVID-19) pandemic.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees 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.
Fair value of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use
is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to
the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are
grouped together to form a cash-generating unit.
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.
Page | 31
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
1.5 CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses. Refer
note 2.5.
1.6 CURRENT AND NON-CURRENT CLASSIFICATION
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when it is either expected to be realised or intended to be sold or consumed in the
Group’s normal operating cycle, it is held primarily for the purpose of trading, it is expected to be realised within 12
months after the reporting date, or the asset is cash or cash equivalent unless restricted from being exchanged or
used to settle a liability for at least 12 months after the reporting date. All other assets are classified as non-current.
A liability is classified as current when it is either expected to be settled in the Group’s normal operating cycle, it is
held primarily for the purpose of trading, it is due to be settle within 12 months after the reporting date, or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting date. All other
liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Page | 32
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
SECTION 2 RESULTS FOR THE YEAR
Sacgasco Limited
This section focuses on the results and performance of the Group, with disclosures including segmental information,
components of the operating loss, tax and loss per share.
2.1 OPERATING SEGMENTS
Accounting Policy
Operating segments are presented using the ‘management approach’, where the information presented is on the
same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM, who
is responsible for allocating resources and assessing performance of the operating segments, has been identified
as the Board of Directors of Sacgasco Limited.
The Group is organised into one operating segment, being oil and gas exploration and appraisal. This operating
segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as
the CODM) in assessing performance and determining the allocation of resources.
The CODM reviews EBITDA (earnings before interest, tax, depreciation, and amortisation). The accounting policies
adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The
information reported to the CODM is on a quarterly basis.
There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss
since 31 December 2019.
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.
Government grants relating to costs are deferred and recognised in the profit or loss over the period necessary to
match them with the costs that they are intended to compensate.
Other operating income
Other operating expenses
Net operating expenses
Note
(i)
2020
$
2019
$
437,155
(731,769)
782,243
(949,468)
(294,614)
(167,225)
(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.
Page | 33
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
2.3 NET FINANCE COSTS
Accounting Policy
Interest
Interest income is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using
the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to the net carrying amount of the financial asset.
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.
Interest income on deposits
Interest income on loans to joint venture partner
Total finance income
Interest expense on financial liabilities measured at
amortised cost
Interest expense on loans received from related parties
Interest expense on premium funding
Interest on convertible notes
Total finance costs
Net finance costs
Note
5.2
5.2
5.2
2020
$
(104)
(1,030)
(1,134)
22,915
1,188
3,365
27,468
26,334
2019
$
-
-
-
18,041
2,150
-
20,191
20,191
Page | 34
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
2.4 PERSONNEL EXPENSES AND EMPLOYEE BENEFITS
Accounting Policy
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the
liabilities are settled.
Other long-term employee benefits
The liability for annual and long service leave, not expected to settle within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by
employees up to the reporting date using the projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and
currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
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
Note
6.4
The table below sets out employee benefits payable at the reporting date.
Current
Salary accrual
Statutory superannuation contributions
2020
$
282,697
24,182
2,241
473
2019
$
432,866
65,572
6,230
335
309,593
505,003
2020
$
5,900
413
6,313
2019
$
17,146
204
17,350
Page | 35
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
2.5
INCOME TAX EXPENSE
Accounting Policy
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied
when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively
enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits, or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled, and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
Deferred tax liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities, and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of, unless the GST incurred is not recoverable
from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from or payable to the tax authority, are presented as operating cash flows.
Commitments and commitments and contingencies are disclosed net of the amount of GST recoverable from, or
payable to, the taxation authority.
Page | 36
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
2.5
INCOME TAX EXPENSE (continued)
(a) Amounts recognised in profit or loss
Current tax expense
Deferred tax expense
Income tax expense
Sacgasco Limited
2020
$
3,687
-
3,687
2019
$
2,277
-
2,277
Numerical reconciliation of income tax expense to prima facie tax
payable
Loss from continuing operations before income tax
(1,730,534)
(1,314,164)
Tax at the Australian tax rate of 27.5% (2019: 27.5%)
(475,897)
(361,395)
Non-deductible expenses
Non-assessable income
Non-assessable non-exempt overseas subsidiaries expense
Overseas minimum income tax
Adjustment for prior years
Timing differences
Tax losses foregone on dissolution of group entities
Tax losses not brought to account
Income tax expense
53,498
(237,919)
519,266
3,687
1,900
(4,692)
-
143,844
3,687
161,786
(59,188)
171,121
2,277
-
(11,282)
(1,759)
100,717
2,277
Tax losses
Potential future income tax benefits attributed to tax losses,
not brought to account
1,541,328
1,404,560
All unused tax losses were incurred by Australian entities.
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.
Page | 37
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
2.5
INCOME TAX EXPENSE (continued)
(b) Unrecognised deferred tax assets and liabilities
Deferred tax liabilities have not been recognised in respect of the following items:
Deferred tax liabilities
Prepaid expenditure
Deferred tax assets
Capital raising costs – s40-880
Borrowing costs – s25-25
Property, plant and equipment
Trade and other payables
Employee benefits
Carry forward tax losses
Net unrecognised deferred tax assets
2.6 OTHER GAINS OR LOSSES
2020
$
2019
$
(2,294)
(14,798)
23,229
2,017
84
6,600
114
40,459
-
118
6,600
56
1,541,328
1,404,560
1,573,372
1,451,793
1,571,078
1,436,995
Other income
(Loss) / gain on foreign exchange transactions
Gain on disposal of subsidiaries
Note
2020
$
8,383
(14,959)
-
Provision for lifetime expected credit losses
4.2
(273,420)
(279,996)
2019
$
-
6,210
3,722
-
9,932
Page | 38
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
2.7 EXPLORATION AND EVALUATION EXPENDITURE
The exploration and evaluation accounting policy expenses 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.
2.8 LOSS PER SHARE
Accounting Policy
Basic earnings per share
Basic earnings per share is calculated by dividing the profit / (loss) attributable to the owners of Sacgasco Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to accounting
for the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares
and the weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares.
Basic and diluted loss per share
Loss after income tax attributable to owners of Sacgasco Limited
(1,734,221)
(1,316,441)
2020
$
2019
$
Basic loss per share
Diluted loss per share
Weighted average number of ordinary shares
Issued ordinary shares on 1 January
Effect of shares issued
Cents
Cents
(0.63)
(0.63)
(0.49)
(0.49)
Number
Number
268,513,742
261,780,949
8,815,963
4,307,426
Weighted average number of ordinary shares on 31 December
277,329,705
266,088,375
Page | 39
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
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 $182,537 (2019: $193,894) 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.
2020
$
2019
$
Site restoration provision
(182,537)
(193,894)
Movement in carrying amounts
Opening balance
Additional provisions recognised
Effects of foreign exchange
Closing balance
Page | 40
(193,894)
(192,765)
(6,794)
18,151
-
(1,129)
(182,537)
(193,894)
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
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 and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows
presentation purposes, cash and cash equivalent also includes, bank overdrafts, which are shown within
borrowings in current liabilities on the statement of financial position.
(a) Reconciliation of cash recorded in Statement of Financial Position to Statement of Cash Flows
2020
$
2019
$
Cash and cash equivalents in the statement of cash flows
1,735,573
282,454
(b) Reconciliation of cash flows from operating activities
Cash flows from operating activities
Loss for the period
Adjustments for:
Equity-settled share-based payment transactions
Depreciation
Amortisation
Profit on disposal of subsidiaries
Provision for expected credit losses
Net loss on foreign exchange translations
Net finance income
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
2020
$
2019
$
(1,734,221)
(1,316,441)
152,075
3,031
183
-
273,420
17,414
(259)
(12,117)
42,771
(142,971)
295,274
5,098
(11,037)
6,794
243,457
3,885
251
(2,296)
9,898
-
(131,931)
6,178
(5,000)
249,865
42,301
10,007
-
Net cash used in operating activities
(1,104,545)
(889,826)
Page | 41
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
4.1 CASH AND CASH EQUIVALENTS (continued)
(c) Changes in liabilities arising from financing activities
Related
party loans
Convertible
notes
Premium
funding
Total
Balance on 1 January 2019
Net cash used in financing activities
Premium funding facility
Interest on related party loans
Balance on 31 December 2019
Net cash from / (used in) financing activities
Interest on convertible notes
Interest on related party loans
$
230,384
(50,000)
-
(6,099)
174,285
100,000
-
2,502
$
-
-
-
-
-
-
42,636
-
Balance on 31 December 2020
276,787
42,636
$
$
47,466
277,850
(56,882)
(106,882)
48,400
-
38,984
(38,984)
-
-
-
48,400
(6,099)
213,269
61,016
42,636
2,502
319,423
4.2 TRADE AND OTHER RECEIVABLES
Accounting Policy
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for
settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on
days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
2020
$
365,974
(273,420)
28,536
2019
$
373,096
-
-
121,090
373,096
Current
Trade debtors
Less: Provision for expected credit losses
Effects of foreign exchange
Page | 42
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
4.2 TRADE AND OTHER RECEIVABLES (continued)
Current
Trade debtors
Due from authorised government agencies
Other receivables
2020
$
121,090
91,265
48,609
260,964
2019
$
373,096
85,584
77,919
536,599
The Group has provided $273,420 of expected credit losses (ECL) for the period ended 31 December 2020. The
ECL includes an amount of $213,229 due from subsidiaries of California Resources Corporation (CRC). CRC filed
for Chapter 11 bankruptcy reorganisation in July 2020. The Group will continue to seek payment of these amounts.
The remaining balance is due from other working interest parties. The Group has assessed the recoverability of
these amounts due for well expenses on exploratory wells, accounting for factors such as oil and gas prices and
historical recovery and determined that an ECL of $60,191 for the year ended 31 December 2020 is appropriate.
Should the exploratory wells for which costs are due move from exploration to production in the future, the Group
intends to recover the amounts owing prior to releasing net revenues to the working interest parties.
Other receivables are non-interest bearing.
Note 6.2 includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected
credit losses.
4.3
INTEREST BEARING ASSETS
Current
Opening balance
Cash calls paid on behalf of joint venture partner
Interest charged at 10%
2020
$
-
65,681
1,028
66,709
2019
$
-
-
-
-
During the year, joint venture partners mutually agreed to fund reciprocal cash calls. At year end these amounts had
not been repaid and are recorded as unsecured loans accruing interest at 10% per annum. The unsecured loans
including interest were settled in two tranches on 15 January 2021 and 29 January 2021.
Page | 43
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
4.4 OTHER FINANCIAL ASSETS
Accounting Policy
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part
of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are
subsequently measured at either amortised cost or fair value depending on their classification. Classification is
determined based on both the business model within which such assets are held and the contractual cash flow
characteristics of the financial asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part, or all, of a financial asset, the carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified
as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for
trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or
a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are
recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the Group
intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial
recognition.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either measured
at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance
depends upon the Group’s assessment at the end of each reporting period as to whether the financial instrument’s
credit risk has increase significantly since initial recognition, based on reasonable and supportable information that
is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses
that is attributable to a default event that is possible within the next 12 months. Where a financial asset has
become credit impaired, or where it is determined that credit risk has increased significantly, the loss allowance is
based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measure
on the probable weighted present value of anticipated cash shortfalls over the life of the instrument discounted at
the original effective interest rate.
For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance
is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other
cases, the loss allowance reduces the asset’s carrying value with a corresponding expense through profit or loss.
Current: Deposit for Canadian oil and gas investment
Non-current: Deposits and bonds
Page | 44
2020
$
142,952
264,509
407,461
2019
$
-
290,138
290,138
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
4.4 OTHER FINANCIAL ASSETS (continued)
Sacgasco Limited
Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below:
Balance on 1 January 2019
Effects of foreign exchange
Balance on 31 December 2019
Deposit for Canadian oil and gas asset investment
Interest income re-invested
Effects of foreign exchange
Deposit (1)
$
DoGGR
Bond (2)
$
ANZ
Term Deposit
$
-
-
142,952
-
-
283,477
1,661
285,138
-
-
(25,649)
5,000
-
5,000
-
20
-
Balance on 31 December 2020
142,952
259,489
5,020
1. On 12 November 2020, the Company signed a term sheet to acquire a 30% working interest in oil and gas properties in
Red Earth, Alberta Canada for:
1.1.
$645,000 (C$600,000) cash, of which $142,952 (C$133,000) was paid on execution of the agreement, and
1.2.
the issue of Sacgasco shares equivalent to $354,000 (C$333,333), at a deemed price equal to the five-trading
day VWAP closing price of SGC on the Australian Securities Exchange.
2.
includes $259,489 (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.
Refer to note 6.2 for further information on fair value measurement.
4.5 TRADE AND OTHER PAYABLES
Accounting Policy
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
financial year and which are unpaid. Due to their short-term nature, they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
2020
$
842,184
298,562
1,140,746
2019
$
726,484
161,516
888,000
Current
Trade payables
Accrued expenses
Refer to Note 6.2 for further information on financial instruments.
Page | 45
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
SECTION 5 EQUITY AND FUNDING
Sacgasco Limited
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, as are payments made for options.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Issued Capital
Ordinary shares
Number of shares
Amount in $
2020
2019
2020
2019
Balance on 1 January
268,513,742
261,780,949
20,904,384
20,785,593
Issue of fully paid shares for cash
Issue of fully paid shares on exercise of options
66,741,458
10
-
-
2,335,951
-
-
-
Issue of shares in lieu of directors’ fees
4,503,281
4,232,793
112,582
125,320
Issue of shares in satisfaction of service
provider fees
Issue of shares to Raven Energy to acquire
BNG’s share of Sacramento Basin
Capital raising costs
1,500,000
500,000
50,000
13,000
-
-
2,000,000
-
-
(168,115)
50,000
(69,529)
Balance on 31 December
341,258,491
268,513,742
23,234,802
20,904,384
Options
Options issued for cash
Number of options
Amount in $
Balance on 1 January
133,429,948
-
400,290
2020
2019
2020
2019
-
Issue of listed options exercisable at 4 cents each,
Expiring on 31 December 2021
Exercise of options
-
133,429,948
(10)
-
-
-
400,290
-
Balance on 31 December
133,429,938
133,429,948
400,290
400,290
Total capital
23,635,092
21,304,674
Page | 46
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
5.2 LOANS AND BORROWINGS
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.
The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the
statement of financial position, net of transaction costs.
On the issue of the convertible notes the fair value of the liability component is determined using a market rate
for an equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost
basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is
recognised as a finance cost. The remainder of the proceeds are allocated to the conversion option that is
recognised and included in shareholders equity as convertible note reserve, net of transaction costs. The
carrying amount of the conversion option is not remeasured in the subsequent years. The corresponding interest
on convertible notes is expensed to profit or loss.
Book value
2020
$
Fair value
2020
$
Book value
2019
$
Fair value
2019
$
Current
Loans received from a related party
276,787
276,787
174,285
174,285
Convertible notes
Premium funding
Balance
42,636
42,636
-
-
-
-
38,984
38,984
319,423
319,423
213,269
213,269
Convertible
notes
$
Loans from
a director (2)
$
Premium
funding
$
-
-
-
-
-
400,500
(361,229)
230,384
50,000
-
18,041
47,466
-
48,400
2,150
(124,140)
(59,032)
174,285
270,000
-
38,984
-
-
3,365
22,915
1,188
-
(190,413)
(40,172)
42,636
276,787
-
Balance on 1 January 2019
Loans and borrowings received
Financing of premium funding facility
Interest charged
Less: repaid
Balance on 31 December 2019
Loans and borrowings received
Equity component of convertible notes
Interest charged
Less repaid (1)
Balance on 31 December 2020
(1)
(2)
amounts repaid include interest and loan establishment costs
refer to note 6.4 for further details.
Page | 47
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
Sacgasco Limited
5.2 LOANS AND BORROWINGS (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Related party loans
Used at the reporting date
Related party loans
Unused at the reporting date
Related party loans
2020
$
2019
$
270,000
170,000
270,000
170,000
-
-
Page | 48
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
SECTION 6 OTHER DISCLOSURES
Sacgasco Limited
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 PAYMENTS
Accounting Policy
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services,
where the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently
determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of
the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share,
the expected dividend yield and the risk-free interest rate for the term of the option, together with non-vesting
conditions that do not determine whether the Group receives the services that entitle the employees to receive
payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase inequity over
the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the
award, the best estimate of the number of awards that are likely to vet and the expired portion of the vesting period.
The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date
less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying
the Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award
was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
during the vesting period, the liability at each reporting date is the fair value of the award at that date
multiplied by the expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the
liability at the reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the
cash paid to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether that market condition has been met or not, provided all
other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been
made. An additional expense is recognised, over the remaining vesting period, for any modification that increases
the total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the Group or employee, and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period,
unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the
cancelled and new award is treated as if they were a modification.
Page | 49
Notes to the Consolidated Financial Report
For the year ended 31 December 2020
6.1 SHARE-BASED PAYMENTS (continued)
Sacgasco Limited
The share-based payment expense included within the consolidated financial statements can be broken down as
follows:
Expensed in personnel expenses (director remuneration)
Shares issued to directors
Shares to be issued to directors
Options issued to directors
Capital raising costs within equity
Shares issued to a consultant
2020
$
89,144
12,931
-
-
2019
$
96,818
23,438
110,200
50,000
Share-based payment programme
The Company has adopted an Employee Share Option Scheme (“ESOS”). 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 measured using the
Black Scholes option pricing model.
The options and rights vest on a time scale as specified in the ESOS and are 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 five years from grant date and the exercise price is settled in
cash.
Options will not be transferable and will not be listed on the ASX unless the offer provides otherwise or the Board in
its absolute discretion approves.
Page | 50
Notes to the Financial Report
For the year ended 31 December 2020
6.1 SHARE-BASED PAYMENT PLANS (continued)
Sacgasco Limited
Options
On 31 December 2020, 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
31-May-19
Vesting
date
13-Jun-19
Expiry
date
31-Dec-21
Exercise
Price
(cents)
4
Balance at
the start of
the year
19,000,000
Granted
during
the year
-
Exercised
during
the year
-
Expired /
forfeited
during
the year
-
Balance at
the end of
the year
19,000,000
Vested and
exercisable
at the end of
the year
19,000,000
Total
Weighted average exercise price (cents)
19,000,000
4.00
-
-
-
-
-
-
19,000,000
19,000,000
4.00
At the exercise date, the weighted average remaining contractual life of options outstanding at year end was one year.
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
Tranche 1
19,000,000
(cents)
4
31-May-19
31-Dec-21
(years)
2.59
72.51%
1.23%
Fair value
at grant
date
(cents)
0.6
Share price
at grant
date
(cents)
2.1
Page | 51
Notes to the Financial Report
For the year ended 31 December 2020
6.1 SHARE-BASED PAYMENT PLANS (continued)
Sacgasco Limited
Options (continued)
On 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
Weighted average exercise price (cents)
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
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 two years.
Page | 52
Notes to the Financial Report
For the year ended 31 December 2020
6.2 FINANCIAL INSTRUMENTS
Accounting Policy
Sacgasco Limited
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 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.
Page | 53
Notes to the Financial Report
For the year ended 31 December 2020
6.2 FINANCIAL INSTRUMENTS (continued)
Accounting Policy (continued)
Sacgasco Limited
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.
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).
Page | 54
Notes to the Financial Report
For the year ended 31 December 2020
6.2 FINANCIAL INSTRUMENTS (continued)
Capital risk management
Sacgasco Limited
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 2019.
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 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 of 31 December 2020, the Group’s net exposure to foreign exchange risk was as follows:
US Dollar
392,242
933,848
(265,528)
(177,818)
Assets
2020
$
2019
$
Liabilities
2020
$
2019
$
Page | 55
Notes to the Financial Report
For the year ended 31 December 2020
6.2 FINANCIAL INSTRUMENTS (continued)
Market risk (continued)
Sacgasco Limited
Foreign currency sensitivity analysis
The Group is mainly exposed to US dollars (USD). The following table details the Group’s sensitivity to a 10%
(2019: 1%) 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 10%
(2019: 1%) 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 10% (2019: 10%)
USD
If AUD weakens by 10% (2019: 10%)
USD
Impact on profit or loss
2020
$
2019
$
(12,671)
(107,787)
12,671
107,787
Fluctuation in the US Dollar during the current financial year strengthened by 9.91% compared with the previous
year where it weakened by 0.60%.
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 10 points higher or lower and all other variables were held constant, the
Group’s profit or loss would increase / (decrease) by $1,648 / (Nil).
The Group’s sensitivity to interest rates has decreased during the year mainly due to the reduction in variable rate
debt instruments.
Page | 56
Notes to the Financial Report
For the year ended 31 December 2020
6.2 FINANCIAL INSTRUMENTS (continued)
Credit risk management
Sacgasco Limited
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.
Weighted
average
interest
rate
%
n/a
10
n/a
10
Less than
6 months
6 months
to 1 year
1 – 5 years
$
1,147,059
276,787
1,423,846
268,516
33,523
302,039
$
-
-
-
-
9,746
9,746
$
-
-
-
636,834
170,000
806,834
31 December 2020
Trade and other payables
Borrowings
31 December 2019
Trade and other payables
Borrowings
Page | 57
Notes to the Financial Report
For the year ended 31 December 2020
6.2 FINANCIAL INSTRUMENTS (continued)
Fair value measurement
Sacgasco Limited
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).
Transfers
There have been no transfers between the levels of the fair value hierarchy during the year ended
31 December 2020.
Not measured at fair value
The Group has various financial instruments which are not measured at fair value in the statement of financial
position.
The Directors consider that the carrying amounts of current receivables, current payables and current borrowings
are a reasonable approximation to their fair values.
The methods and valuation techniques used for the purposes of measuring fair values are unchanged compared to
the previous reporting period.
6.3 CAPITAL AND OTHER COMMITMENTS
Office rent
Less than one year (1)
2020
$
2019
$
15,600
15,600
(1)
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.
Page | 58
Notes to the Financial Report
For the year ended 31 December 2020
6.4 RELATED PARTIES
Accounting Policy
Sacgasco Limited
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
Share-based payments – shares issued
Share-based payments – shares to be issued
Share-based payments – options
2020
$
180,622
89,144
12,931
-
282,697
2019
$
202,410
96,818
23,438
110,200
432,866
6.1
6.1
6.1
2.4
(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 (2019: $31,200) in
repayment for office rent and outgoings. The balance outstanding on 31 December 2020 was nil (2019: nil).
Greg Channon
Ruby Lloyd Pty Ltd, a company for which Mr Channon was a Director, received nil (2019: $13,000) in repayment for
consultancy services. The balance outstanding on 31 December 2020 was nil (2019: nil).
David McArthur
Broadway Management (WA) Pty Ltd, a company for which Mr McArthur is a Director, received $36,387 (2019: $nil)
in repayment for commercial, arms-length consulting services. The balance outstanding on 31 December 2020 was
$nil (2019: nil).
DAS (Australia) Pty Ltd, a company for which Mr McArthur is a Director, received $4,548 (2019: nil) in repayment for
company secretarial services. The balance outstanding on 31 December 2020 was nil (2019: nil).
Page | 59
Notes to the Financial Report
For the year ended 31 December 2020
Sacgasco Limited
6.4 RELATED PARTIES (continued)
(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 to 31 December 2020 was $7,000 (2019: $18,041) and the
balance outstanding was $71,760 (2019: $174,185).
Gary Jeffery 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 to 31 December 2020
was $15,915 (2019: $18,041) and the balance outstanding was $205,027 (2019: $174,185).
On 12 February 2021, all loans and accrued interest were repaid in full.
6.5 SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities, and results of the following wholly owned
subsidiary in accordance with the accounting policy described in note 1.1:
Name of subsidiary
Place of incorporation
Equity Interest
Sacgasco CA Inc
PEOCO LLC
United States of America
United States of America
2020
%
100
100
2019
%
100
100
As disclosed in note 6.8, Sacgasco AB Ltd. was incorporated in Alberta, Canada on 4 February 2021.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company,
have been eliminated on consolidation.
Page | 60
Notes to the Financial Report
For the year ended 31 December 2020
6.6 PARENT COMPANY DISCLOSURES
Accounting Policy
Sacgasco Limited
The accounting policies of the parent entity, which has been applied in determining the financial information shown
below, are the same as those applied in the consolidated financial statements.
As at, and throughout the financial year ended 31 December 2020, the parent entity of the Group was
Sacgasco Limited.
Result of the parent entity
Loss for the year
Total comprehensive 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
Equity-settled benefits reserve
Accumulated losses
Total equity / (deficiency)
6.7 AUDITORS’ REMUNERATION
HLB Mann Judd
Audit and other assurance services
Audit and review of financial reports
Total Auditor’s Remuneration
Page | 61
2020
$
2019
$
(1,413,573)
(1,865,812)
(1,413,573)
(1,865,812)
2,083,416
2,090,530
633,053
641,790
(1,121,973)
(1,121,973)
(940,801)
(940,801)
23,656,342
21,304,674
484,360
133,637
(23,150,895)
(21,737,322)
968,557
(299,011)
2020
$
2019
$
37,669
37,669
40,580
40,580
Notes to the Financial Report
For the year ended 31 December 2020
Sacgasco Limited
6.8 MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
On 15 January 2021, the Company issued 517,241 shares in lieu of directors’ fees, as approved by shareholders on
21 July 2020.
On 28 January 2021, the Company announced that it had signed a Binding Term Sheet to acquire a 20% working
interest in oil and gas producing assets in Southern Alberta, Canada, (known as “Alberta Plains” Assets).
Consideration for this purchase is $510,000 (C$500,000) cash plus the issue of 1,917,808 Sacgasco shares at $0.073
per share, based on the five-day VWAP price prior to the date of signing on 22 January 2021. This acquisition was
completed on 9 February 2021.
On 29 January 2021, the Company issued 1,514,219 fully paid shares on conversion of 4 cent options issued on
30 September 2019 to raise $60,569.
On 29 January 2021, 20,000,000 options were issued to the Directors of the Company as approved by shareholders
at a general meeting held on 22 January 2021. The options are exercisable at 6 cents each, on or before
31 December 2022.
On 2 February 2021, the Company issued 42,979,685 shares in full satisfaction of 801 convertible notes including
interest at 10% p.a. which were issued on 11 May 2020.
On 2 February 2021, the Company issued 8,850,000 shares at 4 cents each as part consideration for a 30% working
interest in the Red Earth oil and gas assets located in Alberta, Canada. A Binding Term Sheet was signed on 20
November 2020 to acquire a 30% working interest in producing oil fields in Alberta Canada. This acquisition was
completed on 22 March 2021.
On 4 February 2021, Sacgasco AB Ltd. was incorporated in Alberta, Canada to manage the groups working interests
in the Alberta, Canada production acquisitions.
On 11 February 2021, the Company placed 76,973,072 fully paid shares at 6.5 cents each to raise $5,003,250 (before
costs) through the issue of 125,000,000 fully paid shares for the Borba drilling program and production growth.
On 11 February 2021, the Company issued 3,000,000 fully paid shares on conversion of 4 cent options issued on
31 May 2019 and 2,000,000 fully paid shares on conversion of 6 cent options issued on 22 January 2021 to raise
$240,000.
Page | 62
Notes to the Financial Report
For the year ended 31 December 2020
Sacgasco Limited
6.9 NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED
The Group has adopted all new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (“AASB”) that are relevant to its operations and effective for an accounting period on
or after 1 January 2020. New and revised Standards and amendments thereof and Interpretations effective for the
current year that are relevant to the Group include:
AASB 2018-6
AASB 2018-7
AASB 2019-1
AASB 2019-5
Amendments to Australian Accounting Standards –
Definition of a Business
Amendments to Australian Accounting Standards –
Definition of Material
Amendments to Australian Accounting Standards –
References to the Conceptual Framework
Amendments to Australian Accounting Standards –
Disclosure of the Effect of New IFRS Standards not
yet issued in Australia
The Directors have determined that there is no material impact of the new and revised Standards and Interpretations
on the Group and, therefore, no material change is necessary to the Group accounting policies.
6.10 ACCOUNTING STANDARDS AND INTERPRETATIONS IN ISSUE NOT YET ADOPTED
At the date of authorisation of these consolidated financial statements, the Group has not applied the new and
revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet
effective. Based on a preliminary review of the standards and amendments, the Directors do not anticipate a material
change to the Group’s accounting policies, however, further analysis will be performed when the relevant standards
are effective.
Page | 63
Directors’ Declaration
For the year ended 31 December 2020
DIRECTORS’ DECLARATION
Sacgasco Limited
In accordance with a resolution of the Directors of Sacgasco Limited, we state that:
In the directors’ opinion:
1.
2.
3.
4.
The financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001, and other mandatory professional reporting requirements.
The attached financial statements and notes comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board as disclosed in Section 1 - ‘About these financial
statements’.
The financial statements and notes give a true and fair view of the Group’s financial position as of
31 December 2020 and of its performance for the financial year ended on that date; and
There are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
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 year ended 31 December 2020.
On behalf of the Board
GARY JEFFERY
Managing Director
31 March 2021
Perth, Western Australia
Page | 64
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
2020, the consolidated statement of 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 2020 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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report of the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. We have determined the matters described below to
be the key audit matters to be communicated in our report.
Page | 65
Key Audit Matter
How our audit addressed the key audit matter
Accounting for convertible notes
Refer to Note 5.2
Accounting for the convertible notes was
considered a key audit matter due to:
We performed the following audit procedures
amongst others:
• The complexity involved in assessing
whether to account for the notes as
equity, a liability or a combination of both;
• Obtaining an understanding of and
assessing the terms and conditions of
the convertible loan note agreements;
• Measurement at initial recognition of the
individual components of the liability
based on the terms and conditions of the
agreement and the significant
judgements in determining the fair value
of the liability component; and
• Measurement subsequent to initial
recognition including the fair value
measurement at balance date.
• Considered the appropriateness of the
valuation methodology against the
requirements of the relevant Australian
Accounting Standards;
• Considered the reasonableness of the
inputs into the valuation and amounts
recognised; and
• Assessed the adequacy of the
disclosures in accordance with the
applicable accounting standards.
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 2020 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.
Page | 66
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
-
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
-
-
- Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
-
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
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.
Page | 67
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 2020.
In our opinion, the Remuneration Report of Sacgasco Limited for the year ended 31 December
2020 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
31 March 2021
N G Neill
Partner
Page | 68
Securities Exchange Information
Sacgasco Limited
SECURITIES EXCHANGE INFORMATION
The shareholder information set out below was applicable on 11 March 2021:
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
93
100
359
1,008
506
2,066
10,839
437,772
2,808,171
40,138,263
433,697,662
477,092,707
-
0.59
0.59
8.41
90.91
100.00
There were 227 holders of less than a marketable parcel of ordinary shares.
2.
Distribution of listed options
Range
Total holders
Ordinary shares
% of issued capital
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 1,00,000
100,001 and over
Total
3.
Voting rights
19
28
13
83
118
262
2,039
90,332
110,460
3,927,008
127,785,880
131,915,719
-
0.07
0.08
2.98
96.87
100.00
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.
4.
Corporate Governance Statement
In accordance with Listing Rule 4.10.3, the Company’s Corporate Governance Statement can be found on the
Company’s website.
Refer to http://www.sacgasco.com/company/corporate-governance/
Page | 69
Securities Exchange Information
Sacgasco Limited
5.
Listed options
Grant date
Number
Number of
holders
Expiry date
Exercise price
(cents)
15-Oct-19
131,915,719
262
31-Dec-21
4
6.
Unlisted options
Grant date
31-May-19
29-Jan-21
Number
16,000,000
18,000,000
Number of
holders
2
3
Expiry date
31-Dec-21
31-Dec-22
Exercise price
(cents)
4
6
7.
Twenty largest shareholders on 11 March 2021
Shareholders
Gary John Jeffery related parties
BNP Parabis Nominees Pty Ltd
Kenneth James Baker
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Pty Ltd
Justine Davina Michel
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