Whitebark Energy
Annual Report 2017

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WHITEBARK ENERGY LIMITED (ASX:WBE) (formerly Transerv Energy Limited) Annual Report 30 June 2017 ABN 68 079 432 796 WHITEBARK ENERGY LTD - Annual Financial Report 30 June 2017 Table of Contents Corporate Directory Chairman’s Letter Review of Operations Reserves and Resource Statement Directors’ Report Auditors Independence Declaration Independent Audit Report Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Shareholder Information Permits 3 4 5 10 12 21 22 27 28 29 30 31 62 63 65 2017 ANNUAL REPORT Page | 2 WHITEBARK ENERGY LTD Corporate Directory Directors Charles Morgan (Non-executive Chairman) David Messina (Managing Director) Stephen Keenihan (Executive Director) Company Secretary Kevin Hart Principal registered office in Australia Auditors Solicitors to the Company Share Registry Banker Stock exchange Level 2 6 Thelma Street West Perth WA 6005 Tel: +61 8 6555 6000 Fax: +61 8 6555 6099 Grant Thornton Audit Pty Ltd Level 1, 10 Kings Park Road West Perth WA 6005 Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street, Perth WA 6000 Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 Tel: +61 3 9415 5000 ANZ Whitebark Energy Limited shares are listed on the Australian Securities Exchange (ASX: WBE) Company website www.whitebarkenergy.com 2017 ANNUAL REPORT Page | 3 WHITEBARK ENERGY LTD Chairman’s Letter Dear Shareholders, The 2016/2017 financial year was one of transformation for the Company in its operations and business focus, changes which encouraged renaming the Company Whitebark Energy to recognise the new direction. Activities at the Warro Project, which has been the main focus of the Company for a number of years, have been reduced due to the fact that although the Warro wells produced sustained gas flows with substantial amounts of water, the wells will not be economic with the current combination of gas rates, water rates and well costs. This is further exasperated by the recently declared moratorium on fracking in WA pending the outcome of a “scientific enquiry”. There have been ongoing studies to try and determine how best to access the immense quantities of gas that are contained in the very tight sands. It is possible that in the future, pump assisted production and/or horizontal wells drilled into better zones of porosity may prove to be commercial. However, there is no possibility of any further field work with the current moratorium on fracking in WA. Subsequently, the Board determined that it would be in the Company’s best interest to seek assets that gave the company a balance between production with growth prospects and some higher risk exploration activity. On 11th July 2016, the Company announced that it had formed a strategic alliance with Norwest Energy Ltd (NWE) to facilitate the farmout and drilling of the Xanadu Prospect in TP-15 in the Perth Basin. Whitebark also acquired 100m shares at $0.002 at this time. The balance of Xanadu was subsequently farmed out and the well was spud on the 4th September 2017. On the 25th September it was announced that Xanadu was an Oil Discovery and we look forward to working with our Joint Venture partners to maximise shareholder value from this excellent result. On January 11th Whitebark received $9.3 million by successfully qualifying its portion of the Warro Project under the Australian Government Research and Development Tax Incentive Programme. In November and December the Company appointed a new Managing Director, Mr David Messina and a new Company Secretary, Kevin Hart. I have worked with both these gentlemen for many years and I commend them to you. The Board would like to thank Stephen Keenihan, who stays on as a director, for the excellent job he did as Managing Director of what was Transerv Energy at the time, and in particular his work in progressing Warro and working with Alcoa. On April 11, the Company announced that it had signed a binding Term Sheet to invest CAD$5 million for a 20% working interest in Point Loma Resources Ltd’s (“Point Loma”) operations in Alberta, Canada comprising land, production, underutilised facilities, shut in production, development and exploration. There are also many possibilities for the acquisition of further production in the area. Importantly these assets are positioned in a very active and rich oil and gas province and governed by a regulatory regime that is conducive to maintaining an active and vibrant exploration and production industry In the course of the year, the Company has completely changed its focus, has already participated in the Xanadu-1 Oil Discovery in Western Australia and is currently participating in a number of workovers and new wells in Canada. I would like to thank the Board and all in the office for a remarkable effort this year! Yours sincerely, Charles W Morgan Chairman 2017 ANNUAL REPORT Page | 4 WHITEBARK ENERGY LTD Review of Operations 1 Review of Operations 1.1 Overview The 2016/17 year was a period of heightened activity for the Company with the implementation of a new strategy focussed on growing a production base to provide an ongoing revenue stream while still ensuring the Company was exposed to upside by participating in high impact exploration wells. After reviewing many opportunities the Company decided to join forces with Point Loma Resources (PLX) in Alberta Canada, which had been acquiring producing assets with material stranded production and an extensive network of facilities. The transaction involved acquiring a 20% direct interest in all of the assets of PLX. While the production at the time was modest (900 boe/d) the business is poised for growth and required capital to unlock previously producing wells that were currently stranded. An active work program began in August which involved the reactivation of old wells, re-entry and workovers and a two well drilling campaign for the remainder of 2017. During the period the Company consummated a transaction with Norwest Energy Ltd to farm into TP15 which holds the Xanadu Prospect. The Company is paying 20% of the costs of the well to earn a 15% working interest. The well was spud on the 4th September 2017 and deemed a discovery on the 25th September 2017. The Western Australian government changed in March 2017 and as a result a fracking moratorium was imposed in the State. The terms of reference for the inquiry were finally announced on the 5th September 2017 and it is expected the inquiry will take twelve months. During this period it is unlikely any material activity will be undertaken on the Warro tight gas field which has been the focus of the Company’s activities over the last ten years. 2 Canadian Operations On 23 May, 2017, Whitebark (as Transerv Energy) announced that it had executed the final documentation to acquire a 20% working interest in Point Loma Resources’ (TSXV:PLX) in Alberta and paid the final instalment of AUD$2.69million (CAD$2.67 million). Point Loma has captured a significant land position of over 210,000 net acres in a highly productive and prospective portion of West Central Alberta which has multiple oil and gas zones ranging in age from the Cretaceous Mannville to Mississippian Banff. The acquisition includes land, property, equipment and production facilities including: • • • 210,000 net acres– 42,000 acres net to WBE. PLX’s production of 900 boe/d (25% liquids) up from 135 boe/d in July 2016 - 180 boe/d net to WBE (at the Effective Date 1 April 2017). 65 producing wells and approximately 70MMcf/d in gas plant capacity (50MMcf/d spare capacity), compressors, tank farms, production facilities, pipelines and associated infrastructure. • Work done by Point Loma has identified over 300 drilling and completion opportunities on the existing lands. Figure 1 - Canada Location Map • WBE’s investment is expected to double production over the next 12 months. Modest drilling depths throughout, and technological advancements associated with horizontal drilling, lead to strong economic returns due to low-cost wells (AFE $1.5m to drill and frac typical well in the region) and close proximity to production facilities and easy access to market. WBE’s investment (total C$5 million – $4m acquisition, $170,000 prepayment for planned expenditure for capital and/or development projects and $830,000 WI contribution) will be spent “in-the ground” and applied to fund joint venture activities. Point Loma has also identified numerous production acquisition opportunities which will complement its existing holdings and result in not only increased production and reserves but also drive down operating costs due to additional throughput and operating synergies. 2017 ANNUAL REPORT Page | 5 WHITEBARK ENERGY LTD Review of Operations Whitebark and Point Loma have agreed the work program for the second half of 2017. and includes: This program has commenced • Drilling of two back to back wells, the first of which spud on the 8th September 2017. • The re-entry and recompletion of two wells. • Acquisition of stranded production in the Paddle River Project which is being re-activated. • Optimisation of Paddle River production. • The building of pipeline interconnectors to bring on proven stranded production. In parallel to developing the existing assets additional opportunities are being reviewed with the objective of capitalising on assets priced in a low oil price environment. Through all these activities, Whitebark and Point Loma have a joint objective of doubling production over the next 12 months. 3 Xanadu Discovery 3.1 Highlights • Logs run over a 330m section of the Xanadu well confirm reservoir quality sand intervals throughout the Irwin River Coal Measures (IRCM) with porosities ranging 15% to 16%. • Oil was obtained via a testing tool from 4.6m of net pay in the top ‘A’ sand, one of three discrete sand intervals (A, B, C) at top of IRCM. • Analysis of oil samples obtained from Xanadu-1 expected to substantiate Cliff Head analogue with oil assay results expected by end of week. • Norwest Energy to lodge Discovery Notice with Minister of Mines, Industry Regulation and Safety. • The Joint Venture will now plan for a lateral well through the oil column. 3.2 Results The reservoir of interest is the top section of the Irwin River Coal Measures (IRCM). The Dongara Sandstone was not encountered at this well location, with the IRCM found directly below the base of the Kockatea Shale at 854mTVDSS. Reservoir quality sand intervals were encountered throughout the IRCM with porosities generally ranging from 15% to 16%. Three discrete sand intervals (“A”, “B” and “C”) at the top of the IRCM have log-derived hydrocarbon saturations in excess of 40%. Fluorescence in rock cuttings observed while drilling and log-derived hydrocarbon saturations persist for 120m in sands below these upper zones but the lower intervals are water-bearing. MDT pressure sampling has established a high confidence water gradient and water was flowed and sampled via a wireline tool from the “B” sand despite the high oil saturation. Reservoir Unit Oil was pumped from the “A” sand utilising the Schlumberger Saturn pressure and fluid sampling tool and three downhole samples collected. Based on the log data, pressure points and recovered fluid samples, a lowest known oil depth of 871.8mTVDSS and a highest known water depth of 880.2mTVDSS have been established for the Xanadu Field. Net Sand True Vertical Thickness (m) 4.6 2.8 2.7 Gross True Vertical Thickness (m) 7.7 6.0 4.3 Net Pay (m) 4.6 N/A N/A Oil Saturation 15% 16% 17% 66% 46% 41% “A” “B” “C” Porosity Seismic data indicate that it is possible to drill an up-dip location which could allow the higher quality sand units deeper in the section to be penetrated above the inferred oil-water contact. Erosion of the upper, poorer quality sands on a structural high similar to that observed at the Cliff Head Oil Field would further increase the chance of intersecting the oil column in better quality reservoir. Results at Xanadu-1 indicate that the assumption of the producing Cliff Head Oil Field being the primary analogue are correct. Analysis of the oil samples obtained from Xanadu-1 is expected to substantiate this with oil assay results expected by the end of the week. 2017 ANNUAL REPORT Page | 6 WHITEBARK ENERGY LTD Review of Operations 3.3 Background WBE announced in July 2016 that it would commit to funding 20% of the costs of Xanadu-1 to earn a 15% interest in the Xanadu prospect and TP15, conditional on the balance of the well costs being funded and the execution of a farm-in agreement and JOA. Norwest completed funding on 10 February 2017. In addition to the farm-in, WBE acquired 100,000,000 shares in Norwest @ $0.002. The TP15 Joint Venture interests and contributions to the well costs will be made up as per Table 1: Table 1 - Xanadu Joint Venture Interests and Contributions Company Norwest WBE Triangle 3C Group TP-15 Equity Post Well 25% 15% 30% 30% Contribution to Xanadu-1 Costs 0 20% 40% 40% WBE’s 20% share of the drilling costs will be approximately $1.6m to earn its 15% WI. The TP/15 Joint Venture was formalised following execution of the Farmin Agreement and Joint Venture Operating Agreement in May 2017. 3C Group IC Limited and Triangle Energy (Global) Limited will each contribute 40% of the costs to each earn a 30% working interest, while Operator, Norwest Energy, will be free carried for a 25% interest. The carry is limited to 110% of the approved well AFE. TP/15 is located near Dongara in the offshore northern Perth Basin, Western Australia. The Xanadu prospect is located at the southern end of TP/15 (see map). Xanadu-1 will be drilled using Enerdrill Rig 3. Xanadu-1 drilling operations will follow immediately afterwards and are expected to commence, subject to normal regulatory approvals, during September 2017. The Xanadu prospect is an offshore target that will be drilled from an adjoining onshore permit (EP413) also operated by Norwest, making access straight-forward. The surface location for the well is also situated on Crown Land with extinguished Native Title, and is outside the boundaries of any nature reserves. Figure 2- Xanadu-1 Location Map Xanadu-1 will target Permian sands from a depth of approximately 800 metres. Near-shore sands of the Dongara Sandstone represent the primary target, with secondary targets in the fluvio-deltaic Irwin River Coal Measures and the regressive marine sands of the High Cliff Sandstone. 3.4 Forward Plan The Cliff Head Oil Field discovery well Cliff Head-1 identified a gross 4.8m oil column at the top of the IRCM below the Kockatea Shale – the same stratigraphy encountered at Xanadu-1. Cliff Head-1 was immediately side-tracked to a more favourable up-dip location where a 36m gross oil column was intersected. Xanadu-1 was not initially designed to be completed as a producing well and now, with a better understanding of the stratigraphy, a side-track well similar to Cliff Head-1 is considered an excellent option, with the top section down to 971mMDRT already cased and cemented in place (approximately 250m vertically above the zone of interest). Based on the current understanding of the structure, there is an excellent chance of finding a significantly thicker column in an up-dip location which can be reached from the current drilling pad. The Operator is in the process of lodging a Discovery Notice with the Minister for Mines, Industry Regulation and Safety. 2017 ANNUAL REPORT Page | 7 WHITEBARK ENERGY LTD Review of Operations 3.5 Well Details Permit Well Name Well Location Type of Well NWE Working Interest Geology TP/15 Xanadu-1 GDA 94: 29°33ˈ29.117”S114°58ˈ42.074”E Deviated 25% Interbedded sequence of shale and sand 4 Warro Gas Project The suspension of Warro-4, 5 and 6 was completed during the first quarter. All the wells delivered sustained gas flows with substantial amounts of water. However, the wells will not be economic with the current combination of gas rates, water rates and well costs. The Joint Venture continued to assess all the well and production data acquired during this, and previous campaigns, to identify ways to increase gas production, by targeting sweet spots, while keeping water production to manageable levels. A work programme and budget for this analysis during 2017 was approved by Alcoa of Australia as part of the farmin project. Data gathered from the 2015/16 drilling and testing campaign have been analysed to gain greater understanding of the complex nature of the Warro reservoir and identify ways to increase gas production while keeping water production to manageable levels. This process will assist the Joint Venture to determine the next steps required to demonstrate the potential commercial viability of the Warro Project. The review of the Warro drilling and testing results was completed during the half year. The work concluded that; • A substantial in place gas resource is present; • Water production, which inhibited well deliverability, was declining and • showing signs of depletion; Extended testing with the aid of artificial lift to “dewater” the gas bearing intervals should be carried out; Figure 3 - Warro Location Map • Only once “dewatering” had been achieved would the true gas production potential of the field be ascertained; • A Statewide moratorium on fracture stimulation operations has been declared by the WA Government pending the • findings of a scientific review; Further testing operations at Warro may take place in 2018 but will depend on the timing and findings of the Government scientific inquiry. Environmental Monitoring and Community Consultation continued throughout the quarter as per the commitments of the Environmental Plans approved by the DMP. The final items regarding the rehabilitation of the Warro 3D seismic lines in the Watheroo National Park and Big Soak were completed during the first half of FY17 and the JV security bond of $119,000 held under Ministerial Statement 849 was released. The JV is progressing a planting scheme in the Watheroo National Park alongside the Badgingarra Primary School. The propagation of seeds collected in the area continues successfully under the guidance of Muchea Tree Farm. Educational presentations will be made to the students prior to the planting activity. At the end of 2016, Alcoa Corporation announced via their Form 8-K lodged in the USA, that it would impair its after tax and non-controlling interest in the Warro Project. Whitebark has reviewed its carrying value for these assets in the normal course of preparing the Company’s half year results. 2017 ANNUAL REPORT Page | 8 WHITEBARK ENERGY LTD Review of Operations 4.1 Environmental Monitoring Water and soil sampling is ongoing as per regulator requirements as part of the agreement to participate in a water, soil/atmospheric gas and seismic monitoring project with CSIRO and UWA and other Perth Basin Operators. This work has not detected any anomalous gas readings around the Warro area and also did not detect any seismic activity during or after the fracture stimulation work. 4.1.1 Warro Project Background The Warro field lies 200km north of Perth in the Perth Basin and is one of the largest undeveloped onshore gas fields in Australia. The Warro reservoir section is about 3,750m below surface and has a thickness of approximately 500m. The gas is held within low porosity and low permeability Jurassic sandstones. The field is located 31km east of both the Dampier-to-Bunbury Natural Gas Pipeline and the Dongara-to-Perth Parmelia Pipeline. Warro field is located in RL-7 and RL-6 and covers an area of approximately 7,000ha. These Retention Leases were granted over the Warro Field location during FY15. The remainder of EP321 was renewed on 5 December 2014 after the relinquishment of four graticular blocks in line with State Government requirements. The remainder of EP407, outside the RL7, was surrendered completely. The interest holders in the permits are currently Whitebark Energy (57%) and Alcoa Australia (43%). Under the farm-in agreement, Alcoa may earn a 65% interest in the permits by spending $100 million on a staged programme comprising exploration and development activities. To date, the Warro Joint Venture (WJV) has drilled four wells (Warro-3, 4, 5 and 6) and acquired the Warro 3D seismic survey. 5 Origin Asset Sale While Whitebark (as Transerv) and its funding partners presented in good faith a competitive, fully funded bid for the Origin Energy Limited’s (‘Origin’) Perth Basin Assets as required by the sales process, on December 6th Origin announced without warning that all the assets had been withdrawn and the sale cancelled. Whitebark was able to attract strong financial support during the course of the Origin process and is well placed to leverage this into new opportunities in 2017 and beyond. 2017 ANNUAL REPORT Page | 9 WHITEBARK ENERGY LTD Reserves & Resources Statement 6 Reserves & Resources Statement The following summarises Whitebark Energy Limited’s (WBE) proved Reserves (1P), Proved plus Probable Reserves (2P) and contingent and prospective resources as of the evaluation date of 30 June 2017. Unless otherwise stated, all estimates are quoted as net WBE share. Reserves at 30 June 2017 Alberta, Canada Proved Light and Medium Oil (1P) Mbbl Proved and Probable Light and Medium Oil (2P) Mbbl 40.8 34.9 75.7 51.8 46.5 98.3 Proved Heavy Oil (1P) Mbbl Proved and Probable Heavy Oil (2P) Mbbl 5.0 0.0 5.0 6.1 0.0 6.1 Proved Natural Gas (1P) MMcf Proved and Probable Natural Gas (2P) MMcf 3041.0 76.7 3117.7 3801.2 102.3 3903.5 Proved Natural Gas Liquids (1P) Mbbl Proved and Probable Natural Gas Liquids (2P) Mbbl 59.2 1.1 60.3 74.4 1.4 75.8 Developed Undeveloped Total Developed Undeveloped Total Developed Undeveloped Total Developed Undeveloped Total Contingent and Prospective Resources at 30 June 2017 – Gas Initially In Place (TCF) Warro Field, Western Australia Contingent (status unclarified and on hold) Prospective 1C 2.4 Low 2.0 4.4 2C 3.2 Medium 4.1 7.3 3C 4.5 High 7.3 11.6 Both deterministic and probabilistic methods at the field level have been used to estimate contingent resources. 2017 ANNUAL REPORT Page | 10 WHITEBARK ENERGY LTD Reserves & Resources Statement Xanadu, Western Australia At the time of writing, Xanadu-1 had been declared an oil discovery however, technical work in progress needs to be completed before a statement on Reserves and Resources can be made. Reserves and Contingent Resource Estimates – Governance The Company’s reserves and contingent resources estimates are prepared in accordance with the SPE Petroleum Resources Management Guidelines. Qualified Petroleum Reserves and Resources Evaluator Statement The reserve and contingent resource estimate in this annual report (Reserves & Resources Statement) is based on, and fairly represents, information and supporting documentation prepared by a qualified petroleum reserves and resources evaluator. The Reserves & Resources Statement as a whole has been approved by Mr Stephen Keenihan. Mr Keenihan is a holder of shares and options in and is Executive Director of the Company. Mr Keenihan has sufficient experience that is relevant to the style and nature of hydrocarbon resources and to the activities discussed in this report, and is a member of the following professional organisations; Society of Petroleum Engineers, Petroleum Exploration Society of Australia, American Association of Petroleum Geologists. Mr Keenihan has consented to the inclusion of information in this report in the form and context in which it appears. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of oil and gas reserves that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Reserves & Resources Statement is based on, and fairly represents, information and supporting documentation prepared by the respective Competent Persons below. Alberta, Canada The information in this report that relates to the oil and gas reserves of Salt Bush Energy Limited (subsidiary of Whitebark Energy Limited) was compiled by technical employees of McDaniel and Associates Ltd a leading independent Canadian Petroleum Consulting Firm, and subsequently reviewed by Mr Stephen Keenihan BSc (Hons) Geology/Geophysics, whom have consented to the inclusion of such information in this report in the form and context in which it appears. Mr Keenihan is consulting to the Company and has more than 40 years relevant experience in the petroleum industry and is a member of The Society of Petroleum Engineers (SPE). The reserves included in this report have been prepared using definitions and guidelines consistent with the 2007 Society of Petroleum Engineers (SPE)/World Petroleum Council (WPC)/American Association of Petroleum Geologists (AAPG)/Society of Petroleum Evaluation Engineers (SPEE) Petroleum Resources Management System (PRMS). Their sources information included in this report are based on, and fairly represent, information and supporting documentation reviewed by Mr Keenihan. Mr Keenihan is qualified in accordance with the requirements of ASX Listing Rule 5.41 and consents to the inclusion of the information in this report of the matter based on this information in the form and context in which it appears. Warro Field, Western Australia The information in this Announcement is based on and fairly represents the information and supporting documentation prepared by Mr Stephen Keenihan, a Director of Whitebark Energy Ltd, who has consented to its inclusion in the form and context as it is presented. It has been produced for the Company, at its request, for adoption by the Directors. Mr Keenihan has sufficient experience that is relevant to the style and nature of hydrocarbon resources and to the activities discussed in this document, and is a member of the following professional organisations; Society of Petroleum Engineers, Petroleum Exploration Society of Australia, American Association of Petroleum Geologists and Australian Institute of Company Directors. His qualifications, experience and industry membership meet the requirements for a qualified petroleum reserves and resources evaluator as defined in Chapters 19 of the ASX Listing Rules. Terminology and standards adopted by the Society of Petroleum Engineers “Petroleum Resources Management System” have been applied in producing this document. 2017 ANNUAL REPORT Page | 11 WHITEBARK ENERGY LTD Directors Report 7 Directors’ Report 7.1 Directors’ Meetings Board meetings held during the year and the number of meetings attended by each Director was as follows: Director Charles Morgan David Messina Stephen Keenihan Board of Directors Present 3 5 5 Held 5 5 5 Board and Management Committees In view of the current composition of the Board (which comprises a non-executive chairman and two executive directors) and the nature and scale of the Company’s activities, the Board has considered that establishing formally constituted committees for audit, board nominations, remuneration and general management functions would contribute little to its effective management. 7.2 Corporate Governance In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Whitebark Energy Limited support and have adhered to the principles of sound corporate governance. The Board recognises the recommendations of the Australian Securities Exchange Corporate Governance Council, and considers that the Company is in compliance with those guidelines which are of importance to the commercial operation of a junior listed resource Company. During the financial year, shareholders continued to receive the benefit of an efficient and cost- effective corporate governance policy for the Company. 7.3 Directors’ Information Charles Morgan| Non-executive Chairman Appointed 9 October 2015 Experience and expertise: Mr Morgan has extensive experience in equity capital markets and has been involved with numerous projects over a 25 year period. The bulk of these were in the resources/oil & gas industries and in the technology sector. Mr Morgan is an Executive Chairman of Grand Gulf Energy Limited, chairman of Hutton Energy Plc, Non-executive director of Gateway Capital Pty Ltd. David Messina | Managing Director Appointed 20 April 2016 Experience and expertise: Experienced international executive with proven entrepreneurial skills and solid track record in developing and managing a diverse range of businesses, raising finance, stakeholder engagement and delivering results to shareholders. Mr Messina has over twenty years’ multi-sector experience in the Energy and Agricultural industries, holding senior positions at the board and executive management level. Having lived and worked in numerous countries he has acquired global management experience with both start-up and mature businesses. 2017 ANNUAL REPORT Page | 12 WHITEBARK ENERGY LTD Directors Report Stephen Keenihan BSc (Hons)| Executive Director Appointed 23 March 2011 as Managing Director; Appointed 20 August 2013 as Executive Director; Appointed 9 October 2015 as Managing Director; Appointed 20 April 2016 as Executive Director Experience and expertise: Mr Keenihan has more than 39 years’ experience in the energy industry, within and outside Australia. He has primarily been involved with oil and gas activities but also a broad range of experience in other energy and electricity projects including coal, gas, wind, biofuels and geothermal. He has previously held management roles with Apache Energy, Griffin Energy, Novus Petroleum, WMC Petroleum and LASMO. He has extensive expertise in oil and gas exploration activities and experience covering a broad range of disciplines including development, operations, commercial and marketing activities both operated and non-operated. Prior to March 2011, Mr Keenihan led a small team of oil and gas professionals who acquired the Warro Gas Field in Western Australia. The Warro operator, Latent Petroleum, merged in 2011 with Whitebark Energy, with Mr Keenihan leading the Company and extending its interests internationally in oil and gas in Canada since that date until 20 August 2013. Mr Keenihan is also a Non-Executive Director of Grand Gulf Energy Limited, which is an active oil and gas explorer and producer in the USA. Kevin Ronald Hart FCA, BComm|Company Secretary Appointed 30 November 2016 Experience and expertise: Mr Hart was appointed to the position of Company Secretary on 30 November 2016. He is a Chartered Accountant and holds a Bachelor of Commerce degree from the University of Western Australia. He has over 30 years’ experience in accounting and the management and administration of public listed entities in the mining and exploration industry. Mr Hart is currently a partner in an advisory firm, Endeavour Corporate, which specialises in the provision of Company secretarial and accounting services to ASX listed entities. Jo-Ann Long FCA, BComm, GAICD Chief Financial Officer - Appointed 23 March 2011; Resigned 30 November 2016 Company Secretary - Appointed 12 February 2014; Resigned 30 November 2016 Experience and expertise: Ms Long has more than 25 years’ experience as a finance professional with 18 years in the oil and gas industry. In 2008 Ms Long joined the Whitebark Group and has worked on the Warro Joint Venture in both financial and operational capacity as well as the Company’s expansion into Alberta and British Columbia in Canada. 8 Remuneration Report (Audited) This Remuneration Report outlines the remuneration arrangements which were in place during the period, and remain in place as at the date of this report, for the key management personnel of Whitebark Energy Limited. For the purposes of this report, “key management personnel” is defined as persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company. 8.1 Remuneration Policy Key management personnel remuneration is based on commercial rates and the existing level of activities in the Group at this point of time. Should the extent of those activities change, the remuneration of key management personnel would be amended to reflect that change. 8.2 Principles of compensation Remuneration is referred to as compensation throughout this report. Under overall authority of the Board, key management personnel and other executives have authority and responsibility for planning, directing and controlling the activities of the Company and the consolidated entity. Key management personnel include the most highly remunerated executives for the Company and the consolidated entity. Compensation levels for key management personnel of the Company and relevant key management personnel of the consolidated entity are competitively set to attract and retain appropriately qualified and experienced key management 2017 ANNUAL REPORT Page | 13 WHITEBARK ENERGY LTD Directors Report personnel. The Company from time to time obtains independent advice on the appropriateness of compensation packages of both the Company and consolidated entity given trends in comparative companies both locally and internationally and the objectives of the Company’s compensation strategy. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: • • • The capability and experience of the key management personnel; The key management personnel’s ability to control the relevant assets’ performance; The amount of incentives within each key management person’s compensation. Compensation packages may include a mix of fixed and variable compensation and short and long-term performance- based incentives. In addition to their salaries, the consolidated entity also provides non-cash benefits to its key management personnel. 8.2.1.1 Fixed compensation Fixed compensation consists of base compensation, which is calculated on a total cost basis and includes any Fringe Benefit Tax charges related to employee benefits. 8.2.1.2 Performance-linked compensation The Company currently has no performance based remuneration built into key management personnel remuneration packages. 8.2.1.3 Long-term incentive Incentive options have been issued in the past to key management personnel and other employees of the Company. The ability to exercise the options is conditional upon the key management personnel and other employees achieving certain vesting conditions. These vesting conditions are set for each key management personnel and employee and are based primarily on the length of time spent providing their services to the Company. 8.2.1.4 Service contracts On appointment to the Board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the terms, including compensation, relevant to the office of the director. Remuneration and other terms of employment for the executive directors and other non-director key management personnel are also formalised in service agreements. Each of these agreements provide for the provision of bonuses, other benefits including health and superannuation, and participation in the issuance of options. Other major provisions of the agreement relating to remuneration are set out below. 2017 ANNUAL REPORT Page | 14 Directors and Key Personnel Term of agreement WHITEBARK ENERGY LTD Directors Report Base fee or salary including superannuation Termination benefit Directors Stephen Keenihan Executive Director Charles Morgan Non-Executive Chairman David Messina Managing Director Key Management Personnel Jo-Ann Long Chief Financial Officer Company Secretary Non-Executive Directors On-going commencing 1 January 2017 $2,000 per day On-going commencing 9 October 2015 $75,000pa On-going commencing 20 April 2016 and terminating on 30 June 2017 Commencing 1 July 2017 $1,500 per day $400,000pa Commencing 1 February 2015 and terminating 31 December 2016 $300,000pa Nil Nil Nil Nil Nil Total compensation for all non-executive Directors is to be approved by the Company in general meeting as detailed in the Company’s Constitution. 9 Directors and executive officers’ remuneration (Consolidated entity) The following table sets out remuneration paid to Directors and key executive personnel of the Company and the consolidated entity during the reporting period: Remuneration 2017 Executive directors Stephen Keenihan David Messina Non-Executive Directors Charles Morgan Executive officers Jo-Ann Long* Total Salary and Fees AUD Cash Bonus AUD Superannuation AUD Share based payments AUD Total AUD Value of options as a proportion of remuneration 288,620 - 373,025 - - - - - 288,620 373,025 75,000 - - - 75,000 280,816 - 1,017,461 - 15,000 - 15,000 - 295,816 1,032,461 0% 0% 0% *Resigned 30 November 2016 2017 ANNUAL REPORT Page | 15 WHITEBARK ENERGY LTD Directors Report Remuneration 2016 Executive directors Craig Burton* Stephen Keenihan Ian Cockerill* David Messina** Non-Executive Directors Charles Morgan*** Brett Lawrence**** Executive officers Jo-Ann Long Total Salary and Fees AUD Cash Bonus AUD Superannuation AUD Share based payments AUD Total AUD Value of options as a proportion of remuneration 60,000 - 394,226 - 188,387 - 97,800 - - - - - 16,749 - - - 60,000 394,226 205,136 97,800 54,605 - 18,000 - - - - - 54,605 18,000 297,473 7,500 1,110,491 7,500 26,363 - 43,112 - 331,336 1,161,103 0% 0% 0% 0% 0% 0% *Resigned 9 October 2015 **Appointed 20 April 2016 ***Appointed 9 October 2015 ****Appointed 9 October 2015; Resigned 20 April 2016 10 Equity instruments 10.1 Options granted as compensation There were no options granted as compensation to Key Management Personnel during the year. 10.2 Option Holdings of Key Management Personnel (Consolidated Entity) As at financial year ended 30 June 2017, there were no options issued to directors and key management personnel. 10.3 Other transactions of Key Management Personnel Details of equity instruments (other than options and rights) held directly, indirectly or beneficially by key management personnel and their related parties are as follows: Shares held in Whitebark Energy Ltd 30-Jun-17 Balance at beginning of year 1-Jul-16 Granted as Remuneration On Exercise of Options Net Other Changes Balance at end of year 30-Jun-17 Directors Stephen Keenihan Charles Morgan David Messina Key Management Personnel Jo-Ann Long* *Resigned 30 November 2016 72,947,334 62,100,294 362,000 6,050,880 141,460,508 - - - - - - - - - - - - 72,947,334 62,100,294 10,362,000 10,000,000 6,050,880 10,000,000 151,460,508 - No other key management personnel held shares during the financial year ended 30 June 2017. 2017 ANNUAL REPORT Page | 16 WHITEBARK ENERGY LTD Directors Report The aggregate amounts recognised during the year relating to directors and their related parties were as follows: TB & S Consulting Pty Ltd (i) Mtani Pty Ltd (ii) Transactions value year end Balance outstanding as at 30-Jun-17 30-Jun-16 30-Jun-17 30-Jun-16 288,620 373,025 661,645 394,226 97,800 492,026 125,867 66,187 192,054 104,268 25,200 129,468 i. TB & S Consulting Pty Ltd is a Company associated with Mr Stephen Keenihan. The charges from TB & S Consulting were for consultancy fees and reimbursement for travel costs incurred in the ordinary course of business. ii. Mtani Pty Ltd is a Company associated with Mr David Messina. The charges from Mtani Pty Ltd are for director’s fees and consulting fees. The terms and conditions of the transactions were no more favourable than those available, or which might be reasonably available, on similar transactions to non-director related entities on an arms-length basis. 11 Company performance, shareholder wealth and director and executive remuneration The remuneration policy has been tailored to increase goal congruence between the shareholders, key management personnel, and other employees. However, the Company continues to investigate alternative means for achieving this goal to the benefit of all stakeholders. There is no direct relationship between the remuneration policy and Company performance. 12 Voting and comments made at the Company’s 2016 Annual General Meeting Whitebark Energy Ltd received 83% of “yes” votes on its remuneration report for the 2016 financial year. The Company did not receive any specific feedback at the AGM on its remuneration report. 13 Use of remuneration consultants During the financial year ended 30 June 2017, the Company did not engage remuneration consultants to review its existing remuneration policies and provide recommendations on how to improve both the short-term incentives (‘STI’) program and long-term incentives (‘LTI’) program. End of Audited Remuneration Report 14 Principal Activities The principal activity of the consolidated entity during the course of the financial period was the evaluation of oil and gas exploration projects in Western Australia and production of oil and gas in Alberta, Canada. 15 Results and Dividends The consolidated entity’s loss after tax attributable to members of the Company for the financial year ending 30 June 2017 was $40,074,224 (30 June 2016 profit: $3,332,981). No dividends have been paid or declared by the Company during the period ended 30 June 2017. In determining our impairment position and the appropriateness of continuing to carry forward costs in relation to the Warro Project consideration has been given to current market conditions for junior mining exploration companies, the Company’s market capitalisation along with the announcement made by the Company’s JV partner, Alcoa Corporation in early January 2017 that it had recorded an impairment charge against the carrying value of the Warro project recorded in Alcoa’s accounts. As a result of this review of the Warro project, it is considered prudent that the Company make an impairment charge of $48,670,684 in the current period. 16 Financial Position The net assets of the consolidated entity at 30 June 2017 were $7,119,635 (30 June 2016: $50,960,471) of which $4,856,883 (30 June 2016: $3,321,814) represents cash and cash equivalents. The Directors believe that the consolidated entity is in a stable financial position with sufficient cash to fund its current operations and commitments expected to occur in the next financial year. 2017 ANNUAL REPORT Page | 17 WHITEBARK ENERGY LTD Directors Report 17 Earnings/ (Loss) Per Share The basic earnings/(loss) per share for continuing operations of the consolidated entity for the financial year ending 30 June 2017 was (4.7966) cents per share (30 June 2016: 0.3095 cents earnings per share). 18 Events subsequent to reporting date Whitebark Energy Limited (WBE) changed its name from Transerv Energy Limited (TSV) on the 3rd July 2017 following approval by its shareholders at a General Meeting held on that date. 100,000,000 Related Party Options were issued after obtaining shareholder approval at the General meeting. The options are exercisable by payment of 1.5 cents each on or before 31 May 2021. On the 5th September the Western Australian Government announced a moratorium on all hydraulic fracturing until an independent scientific inquiry is held. WBE is confident the scientific inquiry will come to the same conclusion as numerous enquiries completed to date but is concerned that this inquiry will delay important energy projects in the State and result in unnecessary delays and added costs for the industry. 18.1 Canada On 9 August 2017 Whitebark Energy announced the acquisition of two further oil wells through its joint venture with Point Loma. The acquired section 4-56-7W5 is immediately adjacent to and enlarges the JV’s producing Paddle River Ostracod A Pool in central Alberta, Canada and is connected to existing facilities. 18.2 Xanadu The Xanadu-1 conventional oil exploration well commenced drilling operations on 4 September 2017. Xanadu-1 well was drilled to a planned maximum total depth of 1863 MDRT from onshore to offshore using a deviated well profile, with the target located below shallow water approximately 1300m from the coastline. Logs run over a 330m section of the Xanadu-1 well confirm reservoir quality sand intervals throughout the Irwin River Coal Measures (IRCM) with porosities ranging 15% to 16%. Oil was obtained via a testing tool from 4.6m of net pay in the top ‘A’ sand, one of three discrete sand intervals at top of the IRCM. Analysis of the oil samples is now taking place. Other than the above, no material matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the consolidated entity. 19 Likely Developments and Expected Results The consolidated entity will continue to pursue activities within its corporate objectives. Further information about likely developments in the operations of the Company and the expected results of those operations in the future financial years has not been included in this report because disclosure would be likely to result in unreasonable prejudice to the Company. 20 Environmental Regulations The consolidated entity’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation. However the Board believes there are adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply. 2017 ANNUAL REPORT Page | 18 21 Directors and executives interests As at the date of this report, the interests of the Directors and Executives at any time during the financial year in the shares and options of Whitebark Energy Limited (“the Company”) were: WHITEBARK ENERGY LTD Directors Report Directors Charles Morgan Stephen Keenihan* David Messina** Key Management Personnel Jo-Ann Long*** Shares Options 62,100,294 72,947,334 10,362,000 20,000,000 28,000,000 52,000,000 6,050,880 - * Held in the name of Stephen Leslie Keenihan & Sheridan Jay Keenihan . **10,362,000 held in the name of Mtani Pty Ltd . *** Held in the name of Long JPJ Pty Ltd . 22 Share options 22.1 Options granted to officers of the Company No options have been granted to officers of the Company during the financial year. Options granted to officers of the Company since the end of the financial year to the date of this Directors’ report are as follows: Grant date 24-Jul-17 Exercisable 24 July 2017 to 31 May 2021 Expiry date 31-May-21 Exercise price $0.015 Unissued shares under options As at the date of the report, there were 112,675,000 unlisted options on issue detailed as follows: Grant date 17-Nov-15 28-Apr-17 24-Jul-17 Exercisable 17 November 2015 28 April 2017 to 1 April 2021 24 July 2017 to 31 May 2021 Expiry date 10-Jul-18 01-Apr-21 31-May-21 Exercise price $0.060 $0.015 $0.015 Number of options 100,000,000 Number of options 1,675,000 11,000,000 100,000,000 All options expire on the earlier of their expiry date or termination of employment. Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company. 22.2 Shares issued on exercise of options During the financial year there were no ordinary shares issued as a result of the exercise of options. 23 Indemnification and Insurance of Officers and Auditors 23.1 Indemnification An indemnity agreement has been entered into with each of the Directors and Company Secretary of the Company named earlier in this report. Under the agreement, the Company has agreed to indemnify those officers against any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities to the extent permitted by law. There is no monetary limit to the extent of this indemnity. 2017 ANNUAL REPORT Page | 19 WHITEBARK ENERGY LTD Directors Report 23.2 Insurance premiums During the financial year the Company has paid insurance premiums in respect of Directors’ and officers’ liability and legal expenses’ insurance contracts, for current Directors and officers. The insurance premiums relate to costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome and other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage. The premiums were paid in respect of the following Directors and Officers: Stephen Keenihan, Jo-Ann Long, Charles Morgan, David Messina and Kevin Hart. There were no legal proceedings entered into on behalf of the Company or the consolidated entity by any of the Directors or executive officers of the Company. Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor. 24 Corporate Structure Whitebark Energy Limited is a Company limited by shares that is incorporated and domiciled in Australia. The Company is listed on the Australian Securities Exchange under code WBE. 25 Non-audit services During the year Grant Thornton, the Company’s auditor, performed certain other services in addition to their statutory duties. The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit services during the year is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: All non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Directors to ensure they do not impact upon the impartiality and objectivity of the auditor; and The non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. 26 Auditor’s independence declaration The auditor’s Independence Declaration is set out on page 21 and forms part of the Directors’ report for the financial year ended 30 June 2017. Signed in accordance with a resolution of the Directors. Perth, 29 September 2017 David Messina Managing Director 2017 ANNUAL REPORT Page | 20 WHITEBARK ENERGY LTD Auditors Independence Declaration 2017 ANNUAL REPORT Page | 21 WHITEBARK ENERGY LTD Independent Audit Report 2017 ANNUAL REPORT Page | 22 WHITEBARK ENERGY LTD Independent Audit Report 2017 ANNUAL REPORT Page | 23 WHITEBARK ENERGY LTD Independent Audit Report 2017 ANNUAL REPORT Page | 24 WHITEBARK ENERGY LTD Independent Audit Report 2017 ANNUAL REPORT Page | 25 WHITEBARK ENERGY LTD Independent Audit Report 2017 ANNUAL REPORT Page | 26 WHITEBARK ENERGY LTD Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2017 5 6 7 8 9 21 10 11 12 13 15 16 Revenue Cost of goods and services sold Gross Profit Other income Loss on disposal of available-for-sale financial assets Profit/(loss) on disposal of assets Gain on discount purchase Expenses Administrative expenses Finance costs Impairment expense Share based payment expense Other expenses Loss before income tax expense from continuing operations Income tax benefit Loss after income tax expense for the period Discontinued operations Profit/(loss) for the year from discontinued operations Profit/(loss) for the year Loss attributable to: Members of the parent entity Non-controlling interests Other comprehensive income, net of tax Items reclassified through profit and loss: Unrealised gain on marketable securities Foreign currency translation Total other comprehensive income for the period Total comprehensive income/(loss) for the period Total comprehensive income/(loss) for the year attributable to: Members of the parent entity Non-controlling interest Total comprehensive income/(loss) attributable to owners of the parent: Continuing operations Discontinued operations 30-Jun-17 AUD 101,436 (105,886) (4,450) 122,554 (13,242) (31,223) 1,289,406 30-Jun-16 AUD - - - 485,524 260,754 - - (1,758,750) (74,105) (52,123,882) (29,455) (675,968) (1,399,582) (79,565) (3,938,165) (67,367) (828,220) (53,299,115) (5,566,621) 9,348,766 (43,950,349) 1,135,659 (4,430,962) 3,876,125 (40,074,224) 7,763,943 3,332,981 (40,064,362) (9,862) (40,074,224) 2,551,079 781,902 3,332,981 200,000 (48,484) 151,516 (39,922,708) - 293,619 293,619 3,626,600 (39,912,846) (9,862) (39,922,708) 2,844,698 781,902 3,626,600 (43,798,833) (4,137,343) 7,763,943 3,876,125 3,626,600 (39,922,708) Earnings/(loss) per share Basic/diluted (cents per share) Continuing operations Discontinued operations 17 17 (4.7966) (0.0012) (4.7978) 0.3095 0.0948 0.4043 The accompanying notes form part of these financial statements. 2017 ANNUAL REPORT Page | 27 WHITEBARK ENERGY LTD Statement of Financial Position as at 30 June 2017 Assets Current Assets Cash and cash equivalents Trade and other receivables Other current assets Assets classified as available-for-sale Total current assets Non-current Assets Property, plant and equipment Exploration and evaluation assets Total non-current assets Total assets 18 19 20 24 22 23 25 26 Liabilities Current Liabilities Trade and other payables Provisions Total current liabilities Non-current liabilities Provisions Decommissioning liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Non-controlling interest Accumulated losses Total equity attributable to equity holders of the Consolidated Entity 29 30 31 26 27 30-Jun-17 AUD 30-Jun-16 AUD 4,856,883 280,574 240,886 400,000 5,778,343 3,321,814 143,562 88,329 - 3,553,705 5,225,806 2,077,749 7,303,555 13,081,898 100,004 48,012,854 48,112,858 51,666,563 651,783 65,480 717,263 554,036 112,112 666,148 37,132 5,207,868 5,245,000 5,962,263 7,119,635 39,944 - 39,944 706,092 50,960,471 52,646,771 1,629,955 - (47,157,091) 7,119,635 52,646,771 1,448,984 3,957,445 (7,092,729) 50,960,471 The accompanying notes form part of these financial statements. 2017 ANNUAL REPORT Page | 28 WHITEBARK ENERGY LTD Statement of Changes in Equity for the year ended 30 June 2017 Foreign currency translation reserve AUD 1,381,617 - - (48,484) (48,484) (48,484) AUD 52,646,771 - - - - - - - - - 52,646,771 - - - - 1,333,133 Share based payments reserve Available-for- sale reserve Accumulated Losses Non- controlling interest Total Equity AUD 67,367 AUD - AUD (7,092,729) AUD 3,957,445 AUD 50,960,471 (40,064,362) - - - (40,064,362) - - - (9,862) - - (9,862) (40,064,362) (9,862) (48,484) (48,484) (40,122,708) - - 200,000 200,000 200,000 - - - - (47,157,091) (3,947,583) - - (3,947,583) - (3,947,583) 29,455 200,000 (3,718,128) 7,119,635 - - - 29,455 - 29,455 96,822 Foreign currency translation reserve AUD 1,412,938 - - 293,619 293,619 293,619 AUD 66,952,804 - - - - - - - - - - - (14,522,033) 196,000 20,000 - - (14,306,033) 52,646,771 - - - - - (324,940) (324,941) 1,381,617 - - - - 67,367 - 67,367 67,367 Share based payments reserve Available-for- sale reserve Accumulated Losses Non- controlling interest AUD - AUD - AUD (9,968,749) AUD 2,706,585 Total Equity AUD 61,103,578 - 2,551,079 781,902 - - - - - - - - - - - - - 2,551,079 - - 781,902 - - 2,551,079 - - 781,902 293,619 293,619 3,626,600 - - - - - 324,940 324,940 (7,092,730) 468,958 - - - - - 468,958 3,957,445 468,958 (14,522,033) 196,000 20,000 67,367 - (13,769,708) 50,960,471 For the period ended 30 June 2017 Share Capital Balance at 1 July 2016 Total comprehensive income for the period Profit attributable to members of the parent entity Profit attributable to non-controlling interests Foreign currency translation differences Total other comprehensive income Total comprehensive income for period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Disposal of Non-controlling interest Share options vested Unrealised gain on marketable securities Total contributions by and distributions to owners Balance at 30 June 2017 For the year ended 30 June 2016 Share Capital Balance at 1 July 2015 Total comprehensive income for the period Profit attributable to members of the parent entity Loss attributable to non-controlling interests Other comprehensive income Foreign currency translation differences Total other comprehensive income Total comprehensive income for period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Accrued interest on shareholder loans Demerger of Woma Energy Ltd share capital Options exercised Options issued Share options vested Share options expired Total contributions by and distributions to owners Balance at 30 June 2016 The accompanying notes form part of these financial statements. 2017 ANNUAL REPORT Page | 29 WHITEBARK ENERGY LTD Statement of Cash Flows for the year ended 30 June 2017 Note 30-Jun-17 AUD 30-Jun-16 AUD Cash flows from operating activities Receipts from customers Interest received Receipt for Research and Development Rebate Payment to suppliers and employees Net cash used in operating activities Cash flows from investing activities Proceeds from sale of securities Payment for securities Cash disposed of on loss of control of subsidiary Acquisition of interest in joint operation Payment for exploration assets Net cash used in investing activities Cash flows from financing activities Proceeds from exercise of options Net cash from financing activities Net increase/ (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at 30 June 2017 32 5,351 57,347 9,348,766 (2,809,286) 6,602,178 - (200,000) (125,538) (4,024,287) (717,284) (5,067,109) - - 1,535,069 3,321,814 4,856,883 652,339 3,670 1,135,659 (2,350,889) (559,221) 2,042,693 - - - (613,293) 1,429,400 196,000 196,000 1,066,179 2,255,635 3,321,814 The accompanying notes form part of these financial statements. 2017 ANNUAL REPORT Page | 30 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 1 Reporting entity Whitebark Energy Limited (the ‘Company’) is domiciled and incorporated in Australia. The address of the Company’s registered office is Level 2, 6 Thelma Street, West Perth WA 6005. The consolidated financial report of the consolidated entity for the period ended 30 June 2017 comprises the Company and its subsidiaries. The consolidated entity is involved in oil and gas exploration and production in Western Australia and Alberta, Canada. The financial report was authorised for issue by the directors on 29 September 2017. 2 Basis of preparation (a) Statement of Compliance The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (‘AASBs’) (including Australian Accounting Interpretations), other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with the International Financial Reporting Standards (IFRS). Whitebark Energy Limited is a for-profit entity for the purpose of preparing the financial statements. (b) Going concern The accounts have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. The Consolidated Entity reported a loss after tax of $40,074,224 for the year ended 30 June 2017 (2016: profit of $3,332,981). Included within this loss was the exploration and development expenditure write off or impairment of $48,670,684 (2016 $3,938,165) and the property, plant and equipment write off or impairment of $3,453,197. The net working capital surplus of the Consolidated Entity at 30 June 2017 was $5,061,080 (2016: surplus of $2,887,557) and the net increase in cash held during the year was $1,535,069 (2016: increase of $1,066,179). The Directors believe it is appropriate to prepare these accounts on a going concern basis because: • • • The Company has $4,856,883 in cash reserves: and The Directors also have an appropriate plan to contain certain operating and exploration expenditure if suitable funding is unavailable. The Directors believe the company will be successful in capital raising initiatives given its new portfolio of assets. In the event that the consolidated entity is not able to continue as a going concern, it may be required to realise assets and extinguish liabilities other than in the normal course of business and at amounts different to those stated in its financial report. (c) Basis of measurement The financial report is prepared on an accruals basis and is based on the historical costs except that the following assets and liabilities are stated at their fair value: financial instruments held for trading and financial instruments classified as available-for-sale. (d) Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the functional currency of the Company. The functional currency of the Company’s United States of American subsidiary is USD and CAD for the Canadian subsidiary. 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. (e) Critical accounting estimates and judgements The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and 2017 ANNUAL REPORT Page | 31 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the consolidated group. The Company’s accounting policy for the recognition of rehabilitation provisions requires significant estimates including the magnitude of possible works for removal or treatment of waste materials and the extent of work required and the associated costs of rehabilitation work. These uncertainties may result in future actual expenditure, different from the amounts currently provided. The provision recognised for each production well is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimate future costs for operating sites are recognised in the balance sheet by adjusting the rehabilitation asset and provision. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: Note 22 and 23 – Impairment expense (see note 3(k)) Note 26 – Provisions (see note 3(r)) Note 34 – Share-based payment (see note 3(q)(iii)) (f) New and revised standards that are effective for these financial statements A number of new and revised standards are effective for annual periods beginning on or after 1 July 2016. Information on these new standards is presented below. • AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations (applicable for annual reporting periods commencing on or after 1 January 2016). • AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation (applicable for annual reporting periods commencing on or after 1 January 2016). • AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements (applicable for annual reporting periods commencing on or after 1 January 2016). • AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (applicable for annual reporting periods commencing on or after 1 January 2016). • AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle (applicable for annual reporting periods commencing on or after 1 January 2016). • AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 (applicable for annual reporting periods commencing on or after 1 January 2016). • AASB 2015-5 Amendments to Australian Accounting Standards – Investment Entities: Applying the Consolidation Exception (applicable for annual reporting periods commencing on or after 1 January 2016). • AASB 2015-9 Amendments to Australian Accounting Standards – Scope and Application Paragraphs (applicable for annual reporting periods commencing on or after 1 January 2016). When these Standards were first adopted for the year ending 30 June 2017, there was no material impact on the financial statements. 3 Summary of accounting policies (a) Basis of consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2017. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary 2017 ANNUAL REPORT Page | 32 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. 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. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. (b) Business Combination The Group applies the acquisition method in accounting for business combinations in accordance with AASB 3. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of (a) fair value of consideration transferred, (b) the recognised amount of any non-controlling interest in the acquiree, and (c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. (c) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit and loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined. (ii) Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in other comprehensive income in a separate component of equity. (d) Exploration and evaluation expenditure Exploration and evaluation costs, including the costs of acquiring licences and the costs of acquiring the rights to explore, are capitalised as exploration and evaluation assets on an area of interest basis. Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either: • the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or 2017 ANNUAL REPORT Page | 33 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 • activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see impairment accounting policy). For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest. Once the technical feasibility and commercial viability of the extraction of petroleum resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation expenditure to property plant and equipment assets. (e) Determination of Recoverability of Asset Carrying Values The recoverability of development and production asset carrying values are assessed at a cash-generating unit (“CGU”) level. Determination of what constitutes a CGU is subject to management judgements. The asset composition of a CGU can directly impact the recoverability of the assets included therein. The key estimates used in the determination of cash flows from oil and natural gas reserves include the following: • Reserves – Assumptions that are valid at the time of reserve estimation may change significantly when new information becomes available. Changes in forward price estimates, production costs or recovery rates may change the economic status of reserves and may ultimately result in reserves being restated. • Oil and natural gas prices – Forward price estimates are used in the cash flow model. Commodity prices can fluctuate for a variety of reasons including supply and demand fundamentals, inventory levels, exchange rates, weather, and economic and geopolitical factors. • Discount rate – The discount rate used to calculate the net present value of cash flows is based on estimates of an approximate industry peer group weighted average cost of capital. Changes in the general economic environment could result in significant changes to this estimate. (f) Reserve estimates Proved plus probable reserves are defined as the “best estimate” of quantities of oil, natural gas and related substances estimated to be commercially recoverable from known accumulations, from a given date forward based on drilling, geological, geophysical and engineering data, the use of established technology and specified economic conditions. It is equally likely that the actual remaining quantities recovered will be greater than or less than the sum of the estimated proved plus probable reserves. The estimates are made using all available geological and reservoir data as well as historical production data. Estimates are reviewed as appropriate. Revisions occur as a result of changes in prices, costs, fiscal regimes and reservoir performance or changes in the Company’s plans with respect to future development or operating practices. (g) Restoration, rehabilitation and environmental costs and decommissioning obligations Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are accrued at the time of those activities and treated as exploration and evaluation expenditure. Restoration, rehabilitation and environmental obligations recognised include the costs of reclamation and subsequent monitoring of the environment. Costs are estimated on the basis of current assessed costs, current legal requirements and current technology, which are discounted to their present value. The present value of the costs is included as part of the cost of the exploration and evaluation asset or the Property plant and equipment asset. Estimates are reassessed at least annually. Changes in estimates are dealt with prospectively, with any amounts that would have been written off or provided against under accounting policy for exploration and evaluation immediately written off. Amounts recorded for decommissioning obligations and the related accretion expense requires the use of estimates with respect to the amount and timing of decommissioning expenditures. Actual costs and cash outflows can differ from estimates because of changes in laws and regulations, public expectations, market conditions, discovery and analysis of site conditions and changes in technology. Other provisions are recognized in the period when it becomes probable that there will be future cash outflow. 2017 ANNUAL REPORT Page | 34 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 (h) Development Expenditure Development expenditure represents the accumulated exploration, evaluation, land and development expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of hydrocarbon resource has commenced. When further development expenditure is incurred in respect of an asset after commencement of production, such expenditure is carried forward as part of the asset only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production. Amortisation of costs is provided on the unit-of-production method with separate calculations being made for each hydrocarbon resource. The unit-of-production basis results in an amortisation charge proportional to the depletion of the estimated recoverable reserves. In some circumstances, where conversion of resources into reserves is expected, some elements of resources may be included. Development and land expenditure still to be incurred in relation to the current reserves are included in the amortisation calculation. Where the life of the assets are shorter than the reserves life their costs are amortised based on the useful life of the assets. The estimated recoverable reserves and life of the development and the remaining useful life of each class of asset are reassessed at least annually. Where there is a change in the reserves/resources amortisation rates are correspondingly adjusted. (i) Other receivables Other receivables are recorded at amounts due less any allowance for doubtful debts. (j) Cash and cash equivalents Cash and cash equivalents comprise cash balances, short term bills and call deposits. Cash equivalents include deposits and other 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. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flow. (k) Impairment of non-financial assets The carrying amounts of the consolidated entity’s non-financial assets, other than deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit and loss unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. Reversals of impairment Impairment losses, other than in respect of goodwill, are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (l) Share capital (i) Dividends Dividends are recognised as a liability in the period in which they are declared. (ii) Transaction costs Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit. 2017 ANNUAL REPORT Page | 35 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 (m) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by weighted average number of ordinary shares outstanding during the financial year, adjusted for the bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account 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. (n) Property, plant and equipment Buildings, IT equipment and other equipment (comprising fittings and furniture) are initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by the Group’s management. Buildings and IT equipment also include leasehold property held under a finance lease (see note 39). Buildings, IT equipment and other equipment are subsequently measured using the cost model, cost less subsequent depreciation and impairment losses. Developed and producing assets are measured at cost less accumulated depreciation and accumulated impairment losses. Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of property, plant and equipment are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific assets to which they relate. All other expenditures are recognised in earnings as incurred. Such capitalised oil and gas interests generally represent costs incurred in developing proven and/or probable reserves and bringing on or enhancing production from such reserves. The carrying amount of any replaced or sold component is derecognised. The costs of periodic servicing of property plant and equipment is recognised in earnings. (o) Depletion and depreciation The net carrying value of developed and producing assets are depleted using the unit of production method by reference to the ratio of production in the period to the related proven and probable reserves, taking into account estimated future development costs necessary to bring those reserves into production. Future development costs are estimated taking into account the level of development required to produce the reserves. These estimates are reviewed by independent reserve engineers on an annual basis. Proven and probable reserves are estimated using independent reserve engineer reports and represent the estimated quantities of oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. In determining reserves for use in the depletion and impairment calculations, a boe conversion ratio of six thousand cubic feet of natural gas (“mcf”) to one barrel of oil (“bbl”) is used as an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in the reserve reports are derived by converting natural gas to oil in the ratio of six mcf of gas to one barrel of oil. For other assets, depreciation is recognized on a straight-line basis to write down the cost less estimated residual value of buildings, IT equipment and other equipment. The following useful lives are applied: • Buildings: 40 years • IT equipment: 4 years • Other equipment: 4-5 years In the case of leasehold property, expected useful lives are determined by reference to comparable owned assets. Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit and loss. 2017 ANNUAL REPORT Page | 36 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 (p) Fair value measurement The estimated fair value of financial assets and liabilities, by their very nature, are subject to measurement uncertainty. The group measures financial and non-financial assets at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • • In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participants ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The group uses valuation techniques that are appropriate in the circumstances ad for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The following describes the grouping of financial instruments. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in the active market for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset or liability, either directly (ie. as prices) or indirectly (derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The carrying values of the Company’s cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximated their fair values due to the short term nature of the instruments. (q) Employee Benefits (i) Long Term Employee Benefits The Company’s liabilities for long service leave are included in both short term employee benefits and other long term benefits as they are not expected to be settled wholly within twelve (12) months after the end of the period in which the employees render the related services. They are measured at the present value of the expected future payments to be made to employees. The expected future payments incorporate anticipated future wage and salary levels, experience of employee departures and periods of service, and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds that have maturity dates that approximate the timing of the estimated future cash outflows. Any re-measurements arising from experience adjustments and changes in assumptions are recognised in profit or loss in the periods in which the changes occur. The Company presents employee benefit obligations as current liabilities in the statement of financial position if the Company does not have an unconditional right to defer settlement for at least twelve (12) months after the reporting period, irrespective of when the actual settlement is expected to take place. (ii) Short Term Employee Benefits Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled wholly within twelve (12) months after the end of the period in which the employees render the related service. Examples of such benefits include wages and salaries, non-monetary benefits and accumulating sick leave. Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the liabilities are settled. (iii) Share-based payment transactions The share option program allows the consolidated entity’s employees and consultants to acquire shares of the Company. The fair value of options granted is recognised as an employee benefit or consultant expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the 2017 ANNUAL REPORT Page | 37 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Binomial and Black Scholes option-pricing models, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting. (r) Provisions A provision is recognised in the statement of financial position when the consolidated entity has a present, legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. (s) Trade and other payables Trade and other payables are non-interest bearing liabilities stated at cost and settled within 30 days. (t) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. (i) Net financial income Net financial income comprises interest payable on borrowings calculated using the effective interest method, interest receivable on funds invested and dividend income. Interest income is recognised in the profit and loss as it accrues, using the effective interest method. Dividend income is recognised in the profit and loss on the date the entity’s right to receive payments is established which in the case of quoted securities is the ex-dividend date. (ii) Sales revenue Revenue from the sale of oil and natural gas will be recorded when the significant risks and rewards of ownership of the product is transferred to the byer, which is usually when legal title passes to the external party and when collection is reasonably assured. Royalty income is recognised in petroleum and natural gas revenues as it accrues in accordance with the terms of the overriding royalty agreements. (u) Income tax Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Included in the income tax benefit are research and development grants provided during the year. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. 2017 ANNUAL REPORT Page | 38 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Amounts receivable from the Australian Tax Office in respect of research and development tax concession claims are recognised as a tax benefit at the time the claim is lodged and received with the Australian Tax Office. (v) Segment reporting An operating segment is a component of the consolidated entity that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the consolidated entity’s other components. Based on the information used for internal reporting purposes by the chief operating decision maker, being the executive management that makes strategic decisions, at 30 June 2017 the group’s assets are in two reportable geographical segments being Australia and Canada. (w) Goods and Services Tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flow on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. (x) Financial instruments (i) Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. A financial instrument is recognised if the consolidated entity becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the consolidated entity’s contractual rights to the cash flows from the financial assets expire or if the consolidated entity transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. They arise when the consolidated entity provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non- current assets. Loans and receivables are included in receivables in the statement of financial position. (iii) Financial Liabilities 2017 ANNUAL REPORT Page | 39 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Non-derivative financial liabilities are subsequently measured at amortised cost. (iv) Available-for-sale (AFS) financial assets Available-for-sale (AFS) financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group’s AFS financial assets include listed securities. Available-for-sale (AFS) financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported within the AFS reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. Interest is calculated using the effective interest method and dividends are recognised in profit or loss within ‘finance income’. (v) Impairment The consolidated entity assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the profit and loss. Impairment losses recognised in the profit and loss on equity instruments classified as available-for-sale are not reversed through the profit and loss. If there is evidence of impairment for any of the consolidated entity’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the profit and loss. (vi) Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. (vii) De-recognition Financial assets are de-recognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are de-recognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Accounting for net finance income is discussed in note 3(t)(i). (y) Adoption of new and revised accounting standards Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. (i) New standards and interpretations not yet adopted The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2017, but have not been applied in preparing this financial report. • AASB 9 Financial Instruments and the relevant amending standards (December 2014) (applicable for annual reporting periods commencing on or after 1 January 2018). • AASB 15 Revenue from Contracts with Customers (applicable for annual reporting periods commencing on or after 1 January 2018). • AASB 16 Leases (applicable for annual reporting periods commencing on or after 1 January 2019). 2017 ANNUAL REPORT Page | 40 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 • AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15 (applicable for annual reporting periods commencing on or after 1 January 2018) • AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014). (applicable for annual reporting periods commencing on or after 1 January 2018) • AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor an its Associate or Joint Venture (applicable for annual reporting periods commencing on or after 1 January 2018) • AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15 (applicable for annual reporting periods commencing on or after 1 January 2017). • AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses (applicable for annual reporting periods commencing on or after 1 January 2017). • AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 (applicable for annual reporting periods commencing on or after 1 January 2017). • AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to AASB 15 (applicable for annual reporting periods commencing on or after 1 January 2018). • AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based Payment Transactions (applicable for annual reporting periods commencing on or after 1 January 2018). • AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvement 2014-2016 Cycle and Other Amendments (applicable for annual reporting periods commencing on or after 1 January 2018). • AASB 2017-2 Amendments to Australian Accounting Standards – Further Annual Improvement 2014-2016 Cycle (applicable for annual reporting periods commencing on or after 1 January 2018). • • Interpretation 22 Foreign Currency Transactions and Advance Consideration (applicable for annual reporting periods commencing on or after 1 January 2018). IFRIC 23 Uncertainty Over Income Tax Treatments (applicable for annual reporting periods commencing on or after 1 January 2019). The entity is yet to undertake a detailed assessment of the impact of these amendments. However, based on the entity’s preliminary assessment, the amendments are not expected to have a material impact on the transactions and balances recognised in the financial statements when they are first adopted. 2017 ANNUAL REPORT Page | 41 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 4 Segment reporting During the period the group operated in three business segments (three geographical areas) – exploration, development and production of oil and gas – Australia, Canada and USA. The chief operating decision maker considers the discontinued operations to be a separate reporting segment from the geographical segments. The group has identified its operating segment based on the internal report that is reviewed and used by the Board of directors (chief operating decision maker) in assessing performance and determining the allocation of resources. 2017 Revenue Sales to external customers Total Sales Revenue Financial income Other income Total Revenue Segment result Depreciation and amortisation Impairment of assets Profit before income tax expense Income tax Profit after income tax expense Assets Total current assets Total non-current assets Total assets Liabilities Total current liabilities Total non-current liabilities Total liabilities 2016 Revenue Sales to external customers Total Sales Revenue Financial income Other income Total Revenue Segment result Loss on disposal of available for sale financial assets Depreciation and amortisation Impairment of assets Profit before income tax expense Income tax Profit after income tax expense Assets Total current assets Total non-current assets Total assets Liabilities Total current liabilities Total non-current liabilities Total liabilities Australia 30-Jun-17 Canada 30-Jun-17 Discontinued 30-Jun-17 Total Segment 30-Jun-17 USA 30-Jun-17 Consolidated 30-Jun-17 - - 103,312 16,836 120,148 1,089,877 (24,917) (52,123,882) (51,058,922) 5,582,943 (2,125,048) 3,457,895 (448,185) (42,445) (490,630) 101,436 101,436 - - 101,436 (2,235,670) - - (2,235,670) 195,400 9,428,603 9,624,003 (269,078) (5,202,555) (5,471,633) - - 2,406 - 2,406 101,436 101,436 105,718 16,836 223,990 3,876,125 - - 3,876,125 2,730,332 (24,917) (52,123,882) (49,418,467) - - - - - - 5,778,343 7,303,555 13,081,898 (717,263) (5,245,000) (5,962,263) - - - - - (4,523) - - (4,523) - - - - - - 101,436 101,436 105,718 16,836 223,990 2,725,809 (24,917) (52,123,882) (49,422,990) 9,348,766 (40,074,224) 5,778,343 7,303,555 13,081,898 (717,263) (5,245,000) (5,962,263) Australia 30-Jun-16 Canada 30-Jun-16 Discontinued 30-Jun-16 Total Segment 30-Jun-16 USA 30-Jun-16 Consolidated 30-Jun-16 - - 3,641 481,881 485,522 (1,620,940) - (21,473) (3,938,165) (5,580,578) 3,382,863 48,112,858 51,495,721 663,887 39,944 703,831 - - - - - - - - - - - - - - - - 34,790 34,790 29 - 34,819 8,314,554 (546,389) (4,087) (135) 7,763,943 170,842 - 170,842 2,261 - 2,261 34,790 34,790 3,670 481,881 520,341 6,693,614 (546,389) (25,560) (3,938,300) 2,183,365 3,553,705 48,112,858 51,666,563 666,148 39,944 706,092 - - - - - 13,957 - - - 13,957 - - - - - - 34,790 34,790 3,670 481,881 520,341 6,707,571 (546,389) (25,560) (3,938,300) 2,197,322 1,135,659 3,332,981 3,553,705 48,112,858 51,666,563 666,148 39,944 706,092 5 Revenue from continuing operations Sales revenue Product sales 6 Cost of goods and services sold Production expenditure 30-Jun-17 AUD 30-Jun-16 AUD 101,436 101,436 30-Jun-17 AUD 30-Jun-16 AUD (105,886) (105,886) - - - - 2017 ANNUAL REPORT Page | 42 7 Other income Interest income Indirect overhead WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 30-Jun-17 AUD 30-Jun-16 AUD 105,718 16,836 122,554 3,643 481,881 485,524 8 Loss on disposal of available-for-sale financial assets Gain on disposal of financial assets - Leucrotta Exploration Inc Loss on disposal of financial assets - Carnaby Energy Limited 9 Profit/ (loss) on disposal of assets Loss on write off of depreciable assets - Latent Petroleum Pty Ltd 10 Administration expenses Audit and review of financial reports Directors' fees Executive fees Administration and finance support Corporate costs Insurance Office costs General and administration 11 Finance costs Interest expense Establishment fee - facility Foreign currency loss 12 Impairment expenses Impairment - Warro Joint Venture Impairment - Canadian assets Impairment - other 30-Jun-17 AUD 30-Jun-16 AUD - (13,242) (13,242) 260,754 - 260,754 30-Jun-17 AUD 30-Jun-16 AUD (31,223) (31,223) - - 30-Jun-17 AUD 30-Jun-16 AUD (72,773) (148,184) (734,650) (415,942) (69,544) (15,538) (92,989) (209,130) (1,758,750) (96,446) (144,605) (498,652) (202,548) (43,474) (14,396) (86,839) (312,622) (1,399,582) 30-Jun-17 AUD 30-Jun-16 AUD (403) (74,063) 361 (74,105) (212) (148,125) 68,772 (79,565) 30-Jun-17 AUD 30-Jun-16 AUD (48,670,684) (3,453,198) - (52,123,882) - - (3,938,165) (3,938,165) In determining our impairment position and the appropriateness of continuing to carry forward costs in relation to the Warro Project consideration has been given to the above, current market conditions for junior mining exploration companies, the Company’s market capitalisation along with the announcement made by the Company’s JV partner, Alcoa Corporation in early January 2017 that it had recorded an impairment charge against the carrying value of the Warro project recorded in Alcoa’s accounts. 2017 ANNUAL REPORT Page | 43 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 As a result of this review of the Warro project, it is considered prudent that the Company make an impairment charge of $48,670,684 in the current period In determining our impairment position of the Canadian assets the Company evaluated its developed and producing CGU for indicators of impairment. The developed and producing CGU consists of production facilities, wells, land and associated reserves. The recoverable amount of the CGU’s has been established by reference to an independently prepared Reserve Report. An impairment amount of $3,475,336 has been charged in relation to the developed and producing assets. 13 Other expenses Depreciation and amortisation Project costs Legal fees Commissions expense Bad debt expense Tax advisory services Accountancy services Consultancy fees 14 Auditor remuneration Audit and review of financial statements - auditors of Whitebark Energy Limited - Grant Thornton Australia remuneration for audit and review of financial statements Other services - auditors of Whitebark Energy Limited - Grant Thornton Australia Taxation compliance Taxation advice Due diligence services Total other services remuneration Total auditors remuneration 30-Jun-17 AUD 30-Jun-16 AUD (24,917) (340,430) (26,504) - (23,943) (254,050) 68,450 (74,574) (675,968) (21,473) (202,651) (54,051) (5,038) (67,048) (119,065) (32,050) (326,844) (828,220) 30-Jun-17 AUD 30-Jun-16 AUD (72,773) (9,550) (1,950) (2,000) (13,500) (86,273) - (96,446) (5,815) - - (5,815) (102,261) 2017 ANNUAL REPORT Page | 44 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 15 Income tax benefit Current income tax expense/(benefit) Income tax benefit - discontinued operations Deferred tax - origination and reversal of temporary differences Under/overprovision for tax - prior year Aggregate income tax expense/(benefit) Deferred tax included in income tax expense comprises: Increase in deferred tax liabilities Increase in deferred tax assets Deferred tax - origination and reversal of temporary differences Numerical reconciliation of income tax expense and tax at the statutory rate Loss before income tax from continuing operations Tax at the statutory rate of 30% Adjustment for tax rate difference (Canada 25%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Share-based payments Debt forgiveness Gain on deconsolidation Impairment Sundry items Deferred tax asset on losses/(recouped) not recognised - Australia Deferred tax asset on losses not recognised - Canada Deferred tax asset on temporary differences not recognised - Australia Deferred tax asset on temporary differences not recognised - Canada Deferred tax liability on temporary differences not previously recognised Recoupment of losses not previously recognised Research and development tax offset Under/overprovision for tax - prior year 30-Jun-17 AUD (9,348,766) - - - (9,348,766) 30-Jun-16 AUD (1,135,659) (572,549) - - (1,708,208) - - - - - - (49,422,991) (13,591,322) 56,623 (13,534,699) 1,624,769 487,431 42,141 529,572 8,100 - (1,075,721) 12,754,570 67,831 20,210 842,167 (2,427,962) - 142,563 (1,779,919) (893,450) 809,302 176,585 361,247 432,785 - - (9,348,766) - (619,816) 62,397 1,244,078 206,791 - (572,549) (1,135,659) - Income tax benefit (9,348,766) (1,708,208) A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. It is in the opinion of management of the Company that there will be no taxable profits generated in the near future and the deferred tax asset is not to be recognised. Closing balance of unrecognised Deferred Tax Assets on tax losses carried forward and temporary differences: Australian Operations Deferred tax assets - temporary differences Deferred tax assets - tax losses Deferred tax liabilities - temporary differences Net deferred tax asset 120,892 6,643,676 (70,958) 6,693,610 Overseas Operations Deferred tax assets - temporary differences Deferred tax assets - tax losses Deferred tax assets - capital losses Deferred tax liabilities - temporary differences Net deferred tax asset 1,301,967 167,688 - (868,998) 600,657 151,190 11,967,810 (490,804) 11,628,196 - 39,152 19,012 - 58,164 2017 ANNUAL REPORT Page | 45 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 16 Discontinued operations Whitebark Energy disposed of its shareholding in Carnaby Energy Limited (13,750,000 ordinary shares) on the 26th June 2017 for nil consideration. The results of the discontinued operations included in the statement of profit and loss and other comprehensive income are set out below. The 2016 balances include the results from the demerger of Woma Energy Limited. Results of the discontinued operations for the period: Revenue Expenses Profit before tax Attributable income tax benefit Gain on sale of discontinued operations Gain on sale of discontinued operations Cash flows from discontinued operations Net cash flows from operating activities Net cash flows from investing activities Net cash flows Effects on disposal on the financial position of the group Current assets Cash and cash equivalents Trade and other receivables Current Liabilities Trade and other payables Net assets and liabilities disposed of Consideration received Gain on sale of discontinued operation 30-Jun-17 AUD 30-Jun-16 AUD 8,728 (38,224) (29,496) - (29,496) 3,905,621 3,876,125 274,133 (1,175,944) (901,811) 572,549 (329,262) 8,093,205 7,763,943 68,599 - 68,599 (456,338) (625,023) (456,338) 30-Jun-16 (125,851) (292) 90,561 (35,582) 3,941,203 3,905,621 2017 ANNUAL REPORT Page | 46 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 17 Earnings/(loss) per share The calculation of basic loss per share at 30 June 2017 of 4.7978 cents per share (30 June 2016 basic gain: 0.4043 cents per share) was based on the loss attributable to the ordinary shareholders of $40,074,224 (30 June 2016 gain: $3,332,981) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2017 of 835,264,337 (30 June 2016: 824,377,274 shares) being calculated as follows: Earnings per share Loss attributable to the ordinary shareholders Profit/(loss) for the period Attributed to: Members of the parent entity Non-controlling interests Weighted average number of ordinary shares Opening balance Movement during the year Earnings/(loss) - cents per share Continuing operations Discontinued operations 30-Jun-17 AUD 30-Jun-16 AUD (40,074,224) (40,064,362) (9,862) 835,264,337 - 835,264,337 (4.7978) (4.7966) (0.0012) (4.7978) 3,332,981 2,551,079 781,902 806,819,893 17,557,381 824,377,274 0.4043 0.3095 0.0948 0.4043 12,675,000 options (refer Note 34) are not included in calculating diluted EPS because the effect is anti-dilutive. 18 Cash and cash equivalents Cash at bank Term deposits 30-Jun-17 AUD 30-Jun-16 AUD 816,883 4,040,000 4,856,883 3,301,194 20,620 3,321,814 Effective interest rates were 2.5% - 2.75% and average maturity was 45 days. 19 Trade and other receivables Trade receivables 30-Jun-17 AUD 30-Jun-16 AUD 280,574 280,574 143,562 143,562 All amounts are short term. The net carrying value of trade receivables is considered a reasonable approximation of fair value. 20 Other current assets Prepayments 30-Jun-17 AUD 30-Jun-16 AUD 240,886 240,886 88,329 88,329 2017 ANNUAL REPORT Page | 47 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 21 Business Combination On 23rd May 2017 Whitebark Energy Ltd completed the acquisition of 20% working interest in the assets of Point Loma Resources Ltd in Alberta, Canada. The property plant and equipment fair value is based on the discounted proved plus probable reserves acquired as determined by an independent reserves evaluation. The exploration and evaluation assets, comprising undeveloped land, is based on internal estimates with reference to recent Crown sales. The decommissioning obligations assumed are based on the Alberta Energy Regulator’s estimated abandonment liability amount discounted by the credit adjusted interest rate of 10%. Any costs associated with the acquisition of the 20% working interest have been included in the Statement of Profit or Loss. The estimated fair values of the assets and liabilities acquired is as follows: Property, plant and equipment including land, production facilities and producing wells Exploration and evaluation Decommissioning obligations assumed 22 23 27 Cash paid to Vendor by Whitebark Energy Limited Gain on discount acquisition 30-Jun-17 AUD 5,638,548 1,900,117 (2,224,972) 5,313,693 4,024,287 (1,289,406) Other costs amounting to $63,836 are included as part of the fair value of assets acquired. The gain on bargain purchase has arisen primarily due to the variation in the accounting treatment of decommissioning liabilities being measured at their acquisition date fair value in accordance with IFRS 13 for business combinations and then subsequent to initial measurement (ie. Day 2), these provisions are to be measured using the principles in IAS 37. The acquired net assets contributed petroleum and natural gas revenues of $101,436 and operating loss of $4,450 since 23 May 2017. Had the acquisition closed on 1 July 2016 Whitebark’s estimated petroleum revenue would have been approximately $1,370,000 and operating income would have increased by approximately $305,000. 2017 ANNUAL REPORT Page | 48 22 Property, plant and equipment Plant and equipment at cost Less: accumulated depreciation Impairment Property, plant and equipment Reconciliation of carrying amounts Developed and Producing Opening balance Acquisition through business combination Asset retirement obligation asset Additions Foreign exchange Impairment Depletion Land and buildings Opening balance Disposal Depreciation expense Furniture and Fixtures Opening balance Disposal Depreciation expense Office equipment Opening balance Additions Disposal Depreciation expense Software Assets Opening balance Depreciation expense Motor vehicles Opening balance Depreciation expense WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 30-Jun-17 AUD 30-Jun-16 AUD 8,765,220 (64,078) (3,475,336) 5,225,806 - 153,989 (53,985) 100,004 - 21 - 5,638,548 2,982,896 35,542 (767) (3,475,336) (3,576) 5,177,307 21,283 (21,237) (46) - 5,892 (5,516) (75) 301 13,759 4,377 (3,738) (4,282) 10,116 37,048 (14,436) 22,612 22,022 (6,552) 15,470 5,225,806 - - - - - - - - 21,830 - (547) 21,283 6,778 - (886) 5,892 42,125 - (18,409) (9,957) 13,759 51,484 (14,436) 37,048 28,574 (6,552) 22,022 100,004 Impairment test of property, plant and equipment The recoverable amount of property, plant and equipment is determined as the fair value less costs of disposal using a discounted cash flow method and is assessed at the CGU level. Key input estimates used in the determination of cash flows from oil and gas reserves include estimates regarding recoverable reserves, forward price estimates of crude oil and natural gas prices, royalties forward price estimates of production costs and required capital expenditures and discount rate. The company used a discount rate of 10%. The following table outlines the forecast benchmark 2017 ANNUAL REPORT Page | 49 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 commodity prices used in the impairment calculation of property, plant and equipment at 30 June 2017. Forecast benchmark commodity price assumptions tend to be stable because short-term increases or decreases in prices are not considered indicative of long-term price levels, but are nonetheless subject to change. WTI Crude Oil ($US/bbl) Brent Crude Oil ($US/bbl) Edmonton Iight Crude Oil ($C/bbl) Alberta Bow river Hardisty Crude Oil ($C/bbl) Western Canadian Select Crude Oil ($C/bbl) Alberta Heavy Crude Oil ($C/bbl) Sask Cromer Medium Crude Oil ($C/bbl) Edmonton Cond & Natural Gasolines ($/bbl) Edmonton Ethane ($/bbl) Edmonton Propane ($/bbl) Edmonton Butanes ($/bbl) 2017 (6 mths) 50.00 52.00 61.80 48.20 47.60 41.20 57.50 64.80 10.60 19.10 40.70 2018 56.10 57.10 68.30 55.30 54.60 47.50 63.50 71.40 10.60 20.70 45.00 2019 59.80 60.80 70.60 58.60 57.90 50.50 65.70 73.70 11.40 24.40 46.50 2020 63.70 64.80 75.40 62.60 61.80 53.90 70.10 78.60 12.20 26.10 52.50 2021 70.40 71.50 81.00 67.20 66.40 57.90 75.30 84.20 13.60 28.20 59.30 2022 74.50 75.60 85.90 71.30 70.40 61.40 79.90 89.20 14.80 30.10 62.90 2023 78.80 79.90 88.20 73.20 72.30 63.10 82.00 91.60 15.00 30.80 64.60 2024 80.40 81.50 90.00 74.70 73.80 64.40 83.70 93.40 15.20 31.40 65.90 2025 82.00 83.20 91.80 76.20 75.30 65.60 85.40 95.30 15.60 32.10 67.30 2026 83.70 84.90 93.70 77.80 76.80 67.00 87.10 97.30 16.00 32.80 68.60 2027 85.30 86.50 95.50 79.30 78.30 68.30 88.80 99.20 16.20 33.40 70.00 2028 87.00 88.20 97.40 80.80 79.90 69.60 90.60 101.10 16.60 34.10 71.40 The impairment test of property, plant and equipment at 30 June 2017 concluded that the estimated recoverable amount was lower than the carrying amount of the CGUs. As such, property, plant and equipment impairment existed. Carrying Value at 30 June 2017 (AUD equiv) Less: Impairment (AUD equiv) Recoverable amount at 30 June 2017 (AUD equiv) Mannville 6,468,716 (2,680,740) 3,787,976 Thornbury/Portage 2,183,927 (794,597) 1,389,330 The fair value less costs of disposal values used to determine the recoverable amounts of the impaired property, plant and equipment assets are categorized as Level 3 on the fair value hierarchy as the key assumptions are not based on observable market data. The impairment tests completed during the year ended 30 June 2017 are sensitive to changes in any of the key judgements such as a revision in reserves, a change in forecast benchmark commodity prices, changes in expected royalties, change in operating costs, which could increase or decrease the recoverable amount of the assets and result in additional impairment expense or recovery of the impairment expense. 23 Exploration and evaluation expenditure Exploration and evaluation assets Movement in exploration and evaluation expenditure Opening Balance Acquisition through business combination Additions - Warro Joint Venture Demerger of Woma Energy Ltd Expenditure incurred during the period Depreciation/amortisation for exploration assets Impairment for exploration and evaluation assets Foreign currency movement 21 30-Jun-17 AUD 30-Jun-16 AUD 2,077,749 48,012,854 48,012,854 1,900,117 665,660 - 177,632 (7,830) (48,670,684) - 2,077,749 57,269,040 - - (6,044,880) 753,324 (15,660) (3,938,165) (10,805) 48,012,854 The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective areas of interest. Where activities in the area of interest have, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves the exploration and evaluation assets are assessed for impairment. Impairment will occur if sufficient data exists to determine technical feasibility and commercial viability and the facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Warro Joint Venture During the year ended 30 June 2017 the 2017 Work Programme and Budget has been approved by Alcoa of Australia as part of the farmin project. Suspension of Warro 4, 5 and 6 brings the current drilling and testing activities to a close. The coming 12 months will see the data gathered from the 2015/16 drilling and testing campaign undergo futher analysis to gain greater understanding of the complex nature of the Warro reservoir and to identify ways to increase gas production while keeping water production to manageable levels. As part of this program sand(s) that are likely to produce commercial flow rates from alternative drilling techniques will be identified. If the technical review supports the drilling of new wells, the JV will move forward to determine the most appropriate way to execute the program. 2017 ANNUAL REPORT Page | 50 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Based on presently available information the Warro wells as currently drilled are not commercially feasible and additional investment will be required to move to the next phase. It is noted that subsequent to the end of the financial year the WA Government has announced a moratorium on hydraulic fracturing until an independent scientific inquiry is held. In determining our impairment position and the appropriateness of continuing to carry forward costs in relation to the Warro Project consideration has been given to the above, current market conditions for junior mining exploration companies, the Company’s market capitalisation along with the announcement made by the Company’s JV partner, Alcoa Corporation in early January 2017 that it had recorded an impairment charge against the carrying value of the Warro project recorded in Alcoa’s accounts. As a result of this review of the Warro project, it is considered prudent that the Company make an impairment charge of $48,670,684 in the current period. 24 Assets classified as available-for-sale Available-for-sale financial assets: Listed equity securities 30-Jun-17 AUD 30-Jun-16 AUD 400,000 400,000 - - The the listed equity securities are denominated in $AUD. The listed equity securities consist of 100,000,000 Norwest Energy Limited shares and are publicly traded in Australia. 25 Trade and other payables Current: Trade creditors Other payables Total trade and other payables 30-Jun-17 AUD 30-Jun-16 AUD 93,136 558,647 651,783 126,827 427,209 554,036 All amounts are short-term. The carrying value of trade payables and other payables are considered to be a reasonable approximation of fair value. 26 Provisions Current Provisions: Annual leave Long service leave Non-Current Provisions: Annual leave Long service leave 30-Jun-17 AUD 30-Jun-16 AUD 44,856 20,624 65,480 24,114 13,018 37,132 102,612 49,730 62,382 112,112 31,010 8,934 39,944 152,056 2017 ANNUAL REPORT Page | 51 27 Decommissioning liabilities Balance at the beginning of the year Liabilities acquired Change in discount rate of liabilities acquired Balance at th end of the year WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 30-Jun-17 AUD 30-Jun-16 AUD - 2,224,972 2,982,896 5,207,868 - - - - The Company’s decommissioning obligations result from its ownership interest in oil and natural gas well sites and facilities. The total decommissioning obligation is estimated based on the estimated costs to reclaim and abandon these wells and facilities and the estimated timing of costs to be incurred in future years. The Company has estimated the net present value of the decommissioning obligations to be $5,207,868 as at 30 June 2017 based on an undiscounted total future liability of $6,628,717. Subsequent to the initial measurement, the obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The increase in the provision due to the passage of time is recognized as a finance cost whereas increases/decreases due to changes in the estimated future cash flows are capitalized. Actual costs incurred upon settlement of the decommissioning liabilities are charged against the provision to the extent the provision had been established. The weighted average time in which these payments are expected to be made is approximately 10 years. The discount factor, being the risk free interest rate of 2.0% and the inflation rate is 2.0% per annum. The discount factor, for the liabilities acquired at 23 May 2017, was the credit adjusted interest rate of 10.0%. 28 Deferred tax liabilities Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit and loss: Capitalised exploration Deferred tax liability Movements: Opening balance Credited to income statement Foreign currency movement Closing balance 30-Jun-17 AUD 30-Jun-16 AUD - - - - - - - - - - 220,806 (220,806) - - 2017 ANNUAL REPORT Page | 52 29 Issued capital Ordinary Shares WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 30-Jun-17 AUD 52,646,771 30-Jun-16 AUD 52,646,771 The Company does not have authorised capital or par value in respect of its issued shares. The holders of ordinary shares are entitled to one vote per share at meetings of the Company. Reconciliation of movement in issued capital For the year ended 30 June 2017 Ordinary shares Opening balance Closing balance Less share issue costs: Opening balance Share issue costs at the end of the year For the year ended 30 June 2016 Ordinary shares Opening balance New share issue Exercise of options Demerger of Woma Energy Ltd Closing balance Less share issue costs: Opening balance Share issue costs at the end of the year 30 Reserves Share based payments reserve Available for sale reserve Foreign currency translation reserve Balance at 1 July 2016 Exchange differences on translating foreign operations Revaluation of marketable securities Share options vested Balance at 30 June 2016 Share based payments reserve Number of shares Issue price 835,264,337 835,264,337 Issue price Number of shares 806,819,893 444,444 28,000,000 835,264,337 AUD 53,757,488 53,757,488 (1,110,717) (1,110,717) 52,646,771 AUD 68,063,521 20,000 196,000 (14,522,033) 53,757,488 (1,110,717) (1,110,717) 52,646,771 30-Jun-17 AUD 30-Jun-16 AUD 96,822 200,000 1,333,133 1,629,955 67,367 - 1,381,617 1,448,984 Foreign currency translation reserve AUD Share based payments reserve AUD Available for sale reserve AUD 1,381,617 (48,484) - 1,333,133 67,367 - 29,455 96,822 - - 200,000 - 200,000 The reserve represents the value of options issued under the compensation arrangement that the consolidated entity is required to include in the consolidated financial statements. This reserve will be reversed against share capital when the underlying options are exercised by the employee or consultant or expire. No gain or loss is recognised in the profit or loss on the purchase, sale, issue or cancellation of the consolidated entity’s own equity instruments. 2017 ANNUAL REPORT Page | 53 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Foreign currency translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity. 31 Non-Controlling Interest Contributed Equity Opening share of loss attributed to non-controlling interest Recognition of change in non-controlling interest of Carnaby Energy Ltd Accrued interest on shareholder loans Current share of profit attributed to non-controlling interest 30-Jun-17 AUD 30-Jun-16 AUD 5,509,972 (1,552,527) 3,957,445 (3,947,583) - (9,862) - 5,509,972 (2,803,387) 2,706,585 - 468,958 781,902 3,957,445 The non-controlling interest had a 33.7% (2016: 33.7%) equity holding in Carnaby Energy Ltd. The shares held by Whitebark Energy Limited in Carnaby Energy Ltd were disposed of on the 26th June 2017. No dividends were paid to the NCI during the years 2017 and 2016. Summarised financial information for Carnaby Energy Ltd, before intragroup eliminations, is set out below: 30-Jun-17 AUD 30-Jun-16 AUD Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Equity attributable to owners of the Parent Non-controlling interest Revenue Profit for the year attributable to owners of the Parent Profit for the year attributable to NCI Profit for the year Other comprehensive income for the year (all attributable to owners of the parent) Total comprehensive income for the year attributable to owners of the Parent Total comprehensive income for the year attributable to NCI Total comprehensive income for the year The summarised cash flow amounts for Carnaby Energy Limited are as follows: Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net cash flows - - - - - - - - - - - - - - - - - - - - 170,841 - 170,841 (89,024) (2,351,577) (2,440,601) 1,504,851 764,909 34,790 1,538,283 781,902 2,320,185 - 1,538,283 781,902 2,320,185 (81,799) - - (81,799) 2017 ANNUAL REPORT Page | 54 32 Reconciliation of cash flow from operating activities WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Cash flows used in operating activities Profit/(loss) for the period Adjustments for: Depreciation, depletion and amortisation expense Loss on disposal of available for sale financial assets Loss on disposal of assets Gain on discount purchase Profit from discontinued operations (refer note 31) Impairment expense Bad debt expense Cash disposed of on loss of control of subsidiary Foreign exchange gain Equity settled share-based payment expenses Operating profit before changes in working capital and provisions Decrease in other receivables and prepayments Decrease in trade and other payables Net cash provided/(used in) operating activities 33 Related Party Transactions 30-Jun-17 AUD 30-Jun-16 AUD (40,074,224) 3,332,981 24,917 13,242 31,223 (1,289,406) (3,947,585) 52,146,021 23,943 (125,538) (38,047) 29,455 6,794,001 (289,569) 97,746 6,602,178 31,521 546,389 20,019 - (8,730,301) 3,938,165 67,048 - (94,345) 67,367 (821,156) 756,716 (494,781) (559,221) Detailed disclosures relating to Directors and Key Management Personnel are set out in the Directors’ Report under the section entitled Remuneration Report. The totals of remunerations paid to Key Management Personnel of the Company and the consolidated entity during the year are as follows: Short-term employee benefits Post-employment benefits 30-Jun-17 AUD (1,017,461) (15,000) (1,032,461) 30-Jun-16 AUD (1,117,991) (43,112) (1,161,103) The aggregate amounts recognised during the year relating to directors and their related parties were as follows: TB & S Consulting Pty Ltd (i) Mtani Pty Ltd (ii) Transactions value year end 30-Jun-16 30-Jun-17 Balance outstanding as at 30-Jun-17 30-Jun-16 288,620 373,025 661,645 394,226 97,800 492,026 125,867 66,187 192,054 104,268 25,200 129,468 i. TB & S Consulting Pty Ltd is a Company associated with Mr Stephen Keenihan. The charges from TB & S Consulting were for consultancy fees and reimbursement for travel costs incurred in the ordinary course of business. ii. Mtani Pty Ltd is a Company associated with Mr David Messina. The charges from Mtani Pty Ltd were for directors’ fees and consultancy fees. The terms and conditions of the transactions were no more favourable than those available, or which might be reasonably available, on similar transactions to non-director related entities on an arms-length basis. 2017 ANNUAL REPORT Page | 55 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 34 Share –based payments Options are granted and approved by the directors and shareholders. Options are granted to directors, employees, consultants and others. Entitlements to the options are exercisable as soon as they have vested and performance conditions have been met. There are no cash settlement alternatives. Options granted carry no dividend or voting rights. The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of any movements in share options issued during the year: Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Consolidation (5:1) during the year Expired during the year No. 2017 WAEP 2017 No. 2016 WAEP 2016 1,675,000 11,000,000 - - - - 0.06 0.015 28,000,000 1,675,000 - - 28,000,000 - - 0.005 12,675,000 0.021 1,675,000 0.005 The number of options vested and exercisable as at 30 June 2017 was 5,341,668 (2016: 1,675,000). The outstanding balance of options over ordinary shares as at 30 June 2017 represented by: Grant Date 17-Nov-15 28-Apr-17 Exercisable Expiry date Exercise price Number of options Value of share based payments 17 November 2015 28 April 2017 to 1 April 2021 10-Jul-18 1-Apr-21 $0.060 1,675,000 67,367 70,191 $0.015 11,000,000 The outstanding balance of options over ordinary shares as at 30 June 2016 represented by: Grant date 17-Nov-15 Exercisable 17 November 2015 Expiry date 10-Jul-18 Exercise price $0.060 Number of options Value of share based payments 1,675,000 67,367 The weighted average remaining contractual life for the share options outstanding as at 30 June 2017 is two years. The exercise price for options outstanding at the end of the year is 1,675,000 at A$0.060 (2016: A$0.06) and 11,000,000 at A$0.015. Fair value of options granted Options granted during the year ended 30 June 2017; the fair value of options granted during the financial year was $0.006 with a weighted average of $0.006. The fair value at grant date is determined using the binomial method of valuing options that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The following table lists the inputs to the model used for valuation of options: Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of option (year) Option exercise price ($) Weighted average share price at grant date ($) 1.5c Options Nil 119% 2.00% 3.93 $0.015 $0.009 The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. The expense recognised in profit or loss in relation to share-based payments is $29,455. 2017 ANNUAL REPORT Page | 56 35 Parent Company disclosures Current Assets Non-Current Assets Total Assets Current Liabilities Non-Current Liabilities Total Liabilities Net Assets Contributed Equity Share based payments reserve Available for sale reserve Foreign translation reserve Accumulated losses Total Equity WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 30-Jun-17 AUD 30-Jun-16 AUD 4,563,918 425,000 4,988,918 335,063 - 335,063 4,653,855 9,539,175 96,822 200,000 1,885,725 (7,067,867) 4,653,855 1,031,135 1,892 1,033,027 416,968 - 416,968 616,059 9,539,175 67,367 - 1,885,725 (10,876,208) 616,059 The Company has no contingent liabilities or commitments and no guarantees due to subsidiaries at 30 June 2017. 36 Financial instruments Financial Risk Management Overview The consolidated entity has exposure to the following risks from its use of financial instruments: credit risk; liquidity risk; and • • • market risk. The consolidated entity’s management of financial risk is aimed at ensuring net cash flows are sufficient to: • Meet all its financial commitments; and • Maintain the capacity to fund the consolidated entity’s operating activities. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the consolidated entity through regular reviews of the risks. Market, liquidity and credit risk (including foreign exchange, commodity price and interest rate risk) arise in the normal course of business. These risks are managed under Board approved directives which underpin treasury practices and processes. This note presents information about the Company’s and consolidated entity’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Credit risk Credit risk is the risk of financial loss to the consolidated entity if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the consolidated entity’s receivables from customers. Trade and other receivables The consolidated entity operates in the mining exploration and production sector. As at 30 June 2017 there were no significant concentrations of credit risk on the statement of financial position. 2017 ANNUAL REPORT Page | 57 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Impairment losses None of the Company’s other receivables are past due (2016: nil). As at 30 June 2017 there is no allowance for impairment in respect to other receivables for the consolidated entity (2016: nil). Exposure to credit risk The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The consolidated entity’s maximum exposure to credit risk at the reporting date was: Financial Instruments Other receivables Cash and cash equivalents 30-Jun-2017 Financial assets measured at fair value Assets held for sale Financial assets not measured at fair value Trade and other receivables Cash and cash equivalents 30-Jun-2016 Financial assets measured at fair value Financial assets not measured at fair value Trade and other receivables Cash and cash equivalents Liquidity risk 30-Jun-17 AUD 30-Jun-16 AUD 280,574 4,856,883 5,137,457 Carrying Amount 143,562 3,321,814 3,465,376 Non-current assets Trade and other receivables 0 Other investments including derivatives 0 - - - - - - - - Current assets Total Level 1 Trade and other receivables 0 Other investments including derivatives 0 Cash and cash equivalents 0 - 400,000 280,574 - 280,574 - - 400,000 - - 4,856,883 4,856,883 0 - 280,574 4,856,883 5,137,457 0 400,000 - - 400,000 Non-current assets Trade and other receivables Other investments including derivatives Carrying Amount Current assets Total Level 1 Trade and other receivables Other investments including derivatives Cash and cash equivalents - - - - - - 143,562 - 143,562 - - - - 3,321,814 3,321,814 143,562 3,321,814 3,465,376 - - - Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the consolidated entity’s reputation. The consolidated entity manages liquidity risks by maintaining adequate reserves by continuously monitoring forecast and actual cash flows. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: 30-Jun-2017 Financial liabilities measured at fair value Financial liabilities not measured at fair value Trade and other payables 30-Jun-2016 Financial assets measured at fair value Financial assets not measured at fair value Finance lease liabilities Trade and other payables Non-current liabilities Trade and other payables Loans and borrowings Carrying Amount Bank overdraft Current liabilities Trade and other payables Loans and borrowings 5,245,000 5,245,000 Non-current liabilities Trade and other payables Loans and borrowings 12,188 39,944 52,132 - - - - - - - 717,263 717,263 Carrying Amount Bank overdraft Current liabilities Trade and other payables Loans and borrowings - - - 6,359 666,148 672,507 Total Level 1 5,962,263 5,962,263 Total Level 1 18,547 706,092 724,639 - - - - - - - - 2017 ANNUAL REPORT Page | 58 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the consolidated entity’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Commodity price risk The consolidated entity is exposed to commodity price risk through its revenue from the sale of hydrocarbons – gas, crude oil, condensate and LPG. – which are priced against world benchmark commodity prices. Currency risk The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Interest rate risk At the reporting date the interest rate profile of the Company’s and the consolidated entity’s interest-bearing financial instruments was: Variable rate instruments Financial assets 2017 2016 4,856,883 4,856,883 3,321,814 3,321,814 Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2016. 30 June 2017 Variable rate instruments Cash flow sensitivity 30 June 2016 Variable rate instruments Fair values 100bp increase AUD 100bp decrease AUD 100bp increase AUD 100bp decrease AUD 48,569 48,569 33,218 33,218 (48,569) (48,569) (33,218) (33,218) 48,569 48,569 33,218 33,218 (48,569) (48,569) (33,218) (33,218) There is little or no difference between carrying amounts and fair values of financial assets and liabilities. Capital Management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the consolidated entity defines as net operating income divided by total shareholders’ equity. Equity attributable to shareholders of the Company Equity Total assets Equity ratio Average equity Net Profit Return on Equity in % 2017 2016 52,646,771 52,646,771 13,081,898 25% 29,040,053 (40,074,224) -138.00% 52,646,771 52,646,771 51,666,563 98% 56,032,025 3,332,981 5.95% There were no changes in the consolidated entity’s approach to capital management during the year. As at 30 June 2017, neither the Company nor its subsidiaries are subject to externally imposed capital requirements. 2017 ANNUAL REPORT Page | 59 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 37 Consolidated entities (a) Parent entity The parent entity of the group is Whitebark Energy Limited, incorporated in Australia. Registered office: Level 2, 6 Thelma Street West Perth WA 6005 (b) Subsidiaries The consolidated financial statements incorporate assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described under 1(a). Name of Entity Subsidiaries of Whitebark Energy Ltd Tejon Energy Pty Ltd Tejon Energy Inc (100% subsidiary of Tejon Energy Pt Latent Petroleum Pty Ltd Carnaby Energy Ltd Calor Energy Pty Ltd Kubla Oil Pty Ltd Salt Bush Energy Ltd Country of incorporation 2017 Equity holding % 2016 Equity holding % Australia USA Australia Canada Australia Australia Canada 100 100 100 0 100 100 100 100 100 100 66.3 0 0 0 No dividends were paid to the NCI during the years 2016 and 2017. 38 Contingent Liabilities There are no contingent liabilities at 30 June 2017. 39 Commitments The Group leases a photocopier/printer under operating leases and is sub-lessee to the premises situated at Level 2, 6 Thelma Street West Perth. The future minimum lease payments are as follows; Within 1 year 1 to 5 years After 5 years Total 30-Jun-17 30-Jun-16 59,583 6,359 5,829 12,188 - - 65,412 18,547 Minimum Lease Payments Due Lease expense during the period amounted to $98,450 (2016: $253,200) representing the minimum lease payments. The rental agreement for the photocopier/printer is for a term of 36 months and will expire in June 2019. The Group has a commitment to an additional spend of approximately $1,200,000 to complete the Xanadu-1 farm-in and $800,000 for agreed capital and/or development projects in Alberta, Canada. 40 Subsequent events Whitebark Energy Limited (WBE) changed its name from Transerv Energy Limited (TSV) on the 3rd July 2017 following approval by its shareholders at a General Meeting held on that date. 100,000,000 Related Party Options were issued after obtaining shareholder approval at the General meeting. The options are exercisable by payment of 1.5 cents each on or before 31 May 2021. On the 5th of September the Western Australian Government announced a moratorium on all hydraulic fracturing until an independent scientific inquiry is held. WBE is confident the scientific inquiry will come to the same conclusion as numerous enquiries completed to date but is concerned that this inquiry will delay important energy projects in the State and result in unnecessary delays and added costs for the industry. Canada On 9 August 2017 Whitebark Energy announced the acquisition of two further oil wells through its joint venture with Point Loma. The acquired section 4-56-7W5 is immediately adjacent to and enlarges the JV’s producing Paddle River Ostracod A Pool in central Alberta, Canada and is connected to existing facilities. 2017 ANNUAL REPORT Page | 60 WHITEBARK ENERGY LTD Notes to the Financial Statements for the year ended 30 June 2017 Xanadu The Xanadu-1 conventional oil exploration well commenced drilling operations on 4 September 2017. Xanadu-1 well was drilled to a planned maximum total depth of 1863 MDRT from onshore to offshore using a deviated well profile, with the target located below shallow water approximately 1300m from the coastline. Logs run over a 330m section of the Xanadu-1 well confirm reservoir quality sand intervals throughout the Irwin River Coal Measures (IRCM) with porosities ranging 15% to 16%. Oil was obtained via a testing tool from 4.6m of net pay in the top ‘A’ sand, one of three discrete sand intervals at top of the IRCM. Analysis of the oil samples is now taking place. 2017 ANNUAL REPORT Page | 61 WHITEBARK ENERGY LTD Directors’ Declaration for the year ended 30 June 2017 1. In the opinion of the Directors of Whitebark Energy Ltd (“the Company”): a. The financial statements and notes set out on pages 27 to 61, are in accordance with the Corporations Act 2001, including: iii. Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and iv. Complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; b. c. the financial report also complies with International Financial Reporting standards as disclosed in note 2(a); there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the chief executive officer and chief financial officer for the financial year ended 30 June 2017. Dated at Perth this 29th day of September 2017. Signed in accordance with a resolution of the Directors. On behalf of the Directors David Messina Managing Director 2017 ANNUAL REPORT Page | 62 EXCHANGE LISTING Whitebark Energy Ltd shares are listed on the Australian Securities Exchange. The Company’s ASX code is WBE. WHITEBARK ENERGY LTD Shareholder Information SUBSTANTIAL SHAREHOLDERS (HOLDING NOT LESS THAN 5%) As at 25 September 2017 Rank 1. 2. 3. 4. Name MR STEPHEN LESLIE KEENIHAN + MRS SHERIDAN JAY KEENIHAN MR CHARLES WAITE MORGAN MR RUSSELL STEPHENSON + MRS PAMELA STEPHENSON VILLEMARETTE NOMINEES PTY LTD Units 72,947,334 % of Units 8.73 62,100,294 50,161,231 7.43 6.01 46,856,085 5.61 CLASS OF SHARES AND VOTING RIGHTS At 25 September 2017 there were 1,859 holders of 835,264,337 ordinary fully paid shares of the Company. The voting rights attaching to the ordinary shares are in accordance with the Company’s Constitution being that: a. each Shareholder entitled to vote may vote in person or by proxy, attorney or Representative; b. on a show of hands, every person present who is a Shareholder or a proxy, attorney or Representative of a shareholder has one vote; and c. on a poll, every person present who is a shareholder or a proxy, attorney or Representative of a shareholder shall, in respect of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney or Representative, have one vote for the Share, but in respect of partly paid Shares, shall, have such number of votes as bears the proportion which the paid amount (not credited) is of the total amounts paid and payable (excluding amounts credited). DISTRIBUTION OF SHAREHOLDERS Spread of Holdings Ordinary Shares 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - 9,999,999,999 Total 9,477 146,495 635,091 45,578,991 788,894,283 835,264,337 The number of shareholders holding less than a marketable parcel is 600. 2017 ANNUAL REPORT Page | 63 WHITEBARK ENERGY LTD Shareholder Information UNLISTED OPTIONS Securities Options exercisable at 6 cents on or before 10 July 2018 Options exercisable at 1.5 cents on or before 1 April 2021 Options exercisable at 1.5 cents on or before 31 May 2021 Number of Securities on issue 1,675,000 Number Holders 2 of 11,000,000 100,000,000 4 3 ESCROWED SECURITIES The Company does not have any securities on issue that are subject to escrow restrictions. LISTING OF 20 LARGEST SHAREHOLDERS AS AT 25 SEPTEMBER 2017 Rank Name 1. MR STEPHEN LESLIE KEENIHAN + MRS SHERIDAN JAY KEENIHAN Units 72,947,334 % of Units 8.73 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. MR CHARLES WAITE MORGAN 62,100,294 7.43 RUSSELL STEPHENSON + PAMELA STEPHENSON VILLEMARETTE NOMINEES PTY LTD 50,161,231 46,856,085 ARGONAUT INVESTMENTS PTY LTD 18,932,000 ORABANT PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED INVESTMENT FUNDS LIMITED ONE MANAGED INVESTING ABSOLUT R> MTANI PTY LTD COSMOS NOMINEES PTY LTD LEEJAMES NOMINEES PTY LTD 15,000,000 14,901,425 13,910,001 11,529,713 10,362,000 10,000,000 10,000,000 BT PORTFOLIO SERVICES LIMITED 10,000,000 ONE MANAGED INVESTMENT FUNDS LIMITED 8,900,000 MORITZ INVESTMENTS PTY LTD DAVKAZ INVESTMENTS PTY LIMITED LONG JPJ PTY LTD MR DONATO IACOVANTUONO HABIBIE PTY LTD MR DAVID JOHN GRRECH 7,500,000 6,100,000 6,050,880 5,238,373 5,200,000 4,798,766 6.01 5.61 2.27 1.80 1.78 1.67 1.38 1.24 1.20 1.20 1.20 1.07 0.90 0.73 0.72 0.63 0.62 0.57 2017 ANNUAL REPORT Page | 64 WHITEBARK ENERGY LTD Permits PERMITS AUSTRALIAN LAND INTERESTS Lease or Project Legal Description Interest Location Rights Warro JV Warro JV Warro JV Xanadu JV EP321 RL6 RL7 TP15 57% 57% 57% 15% Western Australia 100% Western Australia 100% Western Australia 100% Western Australia 100% CANADIAN LICENSES CANADIAN LICENSES Crown # Rights Held Active WI AOI Crown # Rights Held Active WI AOI Other 0485100560 Other 0485100560 Other 0486010407 Other 0486010407 Other 3932 Other 29953 Other 0417020121 Other 0417020122 Other 0514080070 Other 0516050022 Wildwood 21631 Wildwood 0596050319 Wildwood 0512100181 Wildwood 5414070308 Leaman 0597100807 Leaman 0597070666 top base top base top base top base from to from to from to from to PNG SURFACE MANNVILLE top from PNG OSTRACOD ZONE to base OSTRACOD ZONE top from PNG SURFACE base to MANNVILLE PNG SURFACE MANNVILLE PNG from top VIKING to base MANNVILLE Excluding WELLBORE PNG from top VIKING to base MANNVILLE Excluding WELLBORE PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE NORDEGG PNG SURFACE MANNVILLE Excluding PNG from top NOTIKEN to base NOTIKEN PNG from base BELLY RIVER base to BASEMENT PNG SURFACE BASEMENT PNG base from EDMONTON GRP to base VIKING FM PNG SURFACE PEKISKO from to from to from to from to from to from to top base top base top base top base top base top base 1.31 3 0.75 0.75 20 20 20 20 20 20 20 12 20 20 5 10 Leaman 0594120281 Leaman 0594120282 Leaman 38482 Leaman 38482 Leaman 38482 Leaman 38001 Leaman 38001 Leaman 1184 Leaman 1184 Leaman 1184 Leaman 0589050108 Leaman 5497020047 Leaman 38479 Leaman 38479 Leaman 0590040492 Leaman 18323 from top base top base from to from to from to top to base PNG WELLBORE WELLBORE top from PNG JURASSIC SYSTEM to base JURASSIC SYSTEM top from CBM SURFACE base to BASEMENT PNG SURFACE PEKISKO FM top PNG base SURFACE PEKISKO FM Excluding CBM from top SURFACE to base BASEMENT NG fr top PEKISKO FM to base PEKISKO FM PNG SURFACE NORDEGG PNG fr top SURFACE to base NORDEGG MBR NG from top JURASSIC SYSTEM base JURASSIC SYSTEM NG from top JURASSIC base SYSTEM JURASSIC SYSTEM NG from top JURASSIC SYSTEM base JURASSIC SYSTEM PNG SURFACE MANNVILLE CBM SURFACE MANNVILLE CBM SURFACE PEKISKO NG NORDEGG MBR base NORDEGG MBR PNG SURFACE PEKISKO FM PNG fr top SURFACE to base NORDEGG MBR PNG fr top SURFACE to base NORDEGG MBR top base FM top to from to from to from to from to top base top base top base from to to to 4 4 10 4 1.2 10 10 4 10 10 1.2 10 10 4 10 10 2017 ANNUAL REPORT Page | 65 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Leaman 11916 Leaman 38480 Leaman 38507 Leaman 38507 Leaman 1183 Leaman 1183 Leaman 1183 Leaman 1183 Leaman 1183 Leaman 1183 Leaman 0578090138 Leaman 0578090138 Leaman 36939 Leaman 111575 Leaman 38481 to to base from from top base top base from to from to PNG SURFACE PEKISKO FM base from PNG MANNVILLE to base PEKISKO FMExcluding top NG from to NORDEGG MBR NORDEGG base MBRExcluding CBM from top SURFACE to base BASEMENT PNG SURFACE PEKISKO FM PNG EDMONTON SANDSTONE to base NORDEGG MBR NG from top JURASSIC SYSTEM base JURASSIC SYSTEM NG from top JURASSIC to base JURASSIC NG from top JURASSIC SYSTEM base JURASSIC SYSTEM NG from top PEKISKO FM to base PEKISKO FMNG top JURASSIC SYSTEM to base JURASSIC SYSTEM NG from top JURASSIC base SYSTEM JURASSIC SYSTEMNG from top PEKISKO FM PEKISKO to FMExcluding CBM from top SURFACE to base BASEMENTExcluding NG from NORDEGG MBR base NORDEGG MBR NG from top JURASSIC SYSTEM base JURASSIC SYSTEM PNG SURFACE NORDEGG MBRExcluding PNG from top MANNVILLE to base MANNVILLE PNG SURFACE NORDEGG MBRExcluding PNG from top MANNVILLE to base MANNVILLE from PNG SURFACE to NORDEGG MBR PNG SURFACE PEKISKO FM from PNG SURFACE to NORDEGG MBR from to from to from to top base top base top base top base top base top to base to to 10 4. 10 10 10 10 4 5 4 10 10 10 10 10 10 Leaman 27886 Leaman 0597090712 Leaman 111574 Leaman 111573 Leaman 111573 Leaman 111573 Other 0416050054 Other 0486030221 Other 040912A258 Other 0497050619 Other 0510060146 Other 5411110211 Wildwood 22289A Other 5414070312 Thornbury 0590100432 Thornbury 29993 base top base top base top base top base top base top base top base from to from to from to from to from to from to from PNG SURFACE to NORDEGG MBR PNG SURFACE MANNVILLE PNG SURFACE PEKISKO EXCL. CBM PNG SURFACE NORDEGG MBRExcluding PNG from top MANNVILLE to base MANNVILLE from PNG SURFACE to NORDEGG MBR PNG SURFACE PEKISKO FM PNG SURFACE BASEMENT NG from top VIKING to base VIKINGNG from top BASAL COLORADO to BASAL from COLORADONG top BASAL BLAIRMORE to BASAL base BLAIRMORE PNG SURFACE MANNVILLE top PNG SURFACE base BANFFExcluding NG BASAL top from COLORADO to base BASAL COLORADOExcluding NG from top BASAL BLAIRMORE to base BASAL BLAIRMOREExcluding NG from top VIKING to base VIKING top from PNG BLUESKY-BULLHEAD to base BLUESKY- BULLHEAD PNG SURFACE BANFF PNG SURFACE EDMONTON GRP 8-W5M 61-RGE 24,N25,SE25PNG from top SURFACE to base BASEMENT PNG SURFACE MANNVILLE PNG SURFACE MANNVILLEExcluding from to from to from to from to from to top base top base top base top base top base 10 6 4 10 10 10 10 9.07500000 00 8.78715600 00 8.78715600 00 20 AFTER- EARN18 1.774 20 10 20 2017 ANNUAL REPORT Page | 66 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Thornbury 23015A Thornbury 0595010782 Thornbury 0593030391 Thornbury 0593030387 Thornbury 0593030387 Thornbury 0593050487 Thornbury 0593070520 Thornbury 0593070520 Thornbury 0593050473 Thornbury 0594050514 Thornbury 0595070450 Thornbury 5495100048 Thornbury 5495100049 Thornbury 0506070714 Other 0588100423 Thorsby 0411110070 Thorsby 0412100056 Thorsby 0412100057 Thorsby 0412100058 Thorsby 0412100059 Thorsby 0412100060 from from top to top to top base top base top base top base top base top base top base top base top base from to from to from to from to from to from to from to PNG MCMURRAY FM base MCMURRAY FM from PNG SURFACE to MANNVILLE PNG MCMURRAY FM base MCMURRAY FM from PNG SURFACE to MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLEExcluding CBM PNG SURFACE MANNVILLEExcluding CBM PNG SURFACE MANNVILLE PNG SURFACE CARDIUM PNG top from MANNVILLE to base MANNVILLE PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT from to from to from to from to from to from to from to from to from to from to top base top base top base top base top base top base top base top base top base top base Thorsby 0412100061 3.334 Thorsby 0412100070 20 20 20 20 20 20 20 20 20 20 20 20 20 16 20 20 20 20 20 20 Thorsby 0412100071 Thorsby 0412100072 Thorsby 0412100073 Thorsby 0412100074 Thorsby 0412100094 Thorsby 0412100095 Thorsby 0412100096 Thorsby 0412100097 Thorsby 0412100102 Thorsby 0412100103 Thorsby 0412100104 Thorsby 0494100828 Whitecourt 0578100052 Whitecourt 0582010223 Whitecourt 0582010223 Whitecourt 0585100503 Whitecourt 0596080466 Whitecourt 12670 Whitecourt POINT LOMA FEE LANDS top base top base top base top base top base top base top base top base top base top base top base from to from to from to from to from to from to from to from to from to from to from to PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT 50-RGE 3-W5M 17(LSD top 5-8)PNG SURFACE base BELLY RIVER PNG SURFACE NORDEGG PNG SURFACE NORDEGG PNG from surface to base NORDEGGExcluding WELLBORE ONLY PNG NORDEGG NORDEGG 58-RGE 9-W5M NE2258-RGE 9-W5M top NW22NG SURFACE base MANNVILLE PNG from surface to base NORDEGGExcluding WELLBORE ONLY NG from surface to base NORDEGG top to base from to from to from to from to from to from to top base top base top base top base from 20 20 20 20 20 20 20 20 20 20 20 20 20 20 3.50 20 3.50 10 POOLED 4.8 3.50 POOLED 4.8 2017 ANNUAL REPORT Page | 67 CANADIAN LICENSES CANADIAN LICENSES Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits AOI Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River 0589060122 0589060123 058407A286 058407A286 35970 0579080256 0598080338 0587090394 26248 0589110368 0581020085 0581020085 018203A006 CONOCO CANADA EN 0580060165 0182030006 Thornbury 5495100161 Thornbury 5495100161 Thornbury 5495100161 Thornbury 5495080117 top base top base top base top base top base top base top base top base from to from to from to top base FMExcluding top from base to from PNG SURFACE to NORDEGG MBR PNG SURFACE BANFF CBM SURFACE BASEMENT from PNG SURFACE to NORDEGG MBR PNG from to SURFACE NORDEGG MBR from PNG SURFACE to NORDEGG MBR PNG SURFACE NORDEGG MBRExcluding CBM PNG from to SURFACE NORDEGG MBR PNG SURFACE NORDEGG CBM MBRExcluding from top SURFACE to base BASEMENT from PNG SURFACE to NORDEGG MBR from PNG SURFACE to NORDEGG MBR PNG from to SURFACE NORDEGG MBR from PNG SURFACE to NORDEGG MBR PNG SURFACE BANFF FM from PNG SURFACE to NORDEGG MBR PNG SURFACE BANFF FM PNG SURFACE BANFF FM PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE from to from to from to from to from to from to from to top base top base top base top base top base top base top base top base top base top base top base 20 20 20 Thornbury 5495080116 Thornbury 5495090144 Thornbury 5495090144 Thornbury 5495090144 POOLED 15 Thornbury 5495110058 15 20 20 20 20 20 20 20 20 Thornbury 0595010787 Thornbury 0595010787 Thornbury 39586 Thornbury 39586 Other 0500110822 Other 5408090493 Other 5408090493 Other 0506010361 Other 0591040348 Other 0514110057 POOLED 15 Other 0484090377 20 Other LEHET ET AL 11.227504 Other SORENSEN, R 20 20 20 20 Other Other Other BOGGOTT ET AL HISER ET AL HISER ET AL Other 0481100014 top base top base top base top base top base top base top base top base top base from to from to from to from to from to from to from to PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE 80-RGE 16-W4M 3681- RGE 15-W4M 6PNG from top SURFACE to base MANNVILLE PNG SURFACE MANNVILLE PNG from to SURFACE GROSMONT FM from PNG SURFACE to GROSMONT FM PNG SURFACE VIKING PNG base from BLUESKY BULLHEAD to base TRIASSIC SYSTEM PNG base from BLUESKY BULLHEAD to top DOIG PNG base from BLUESKY BULLHEAD to top DOIG from PNG SURFACE to CHARLIE LAKE from PNG SURFACE to BLUESKY-BULLHEAD PNG SURFACE CARDIUM PET CARDIUM CARDIUM PET CARDIUM CARDIUM PET CARDIUM CARDIUM NG from top SURFACE to base BASEMENT PET CARDIUM CARDIUMExcluding WELLBORE PROD PET from top BASAL QUARTZ to base BASAL QUARTZPET from top top to base top to base top to base top to base from to top base top base top base from from from from 20 20 20 20 20 20 20 1.6 1.6 10 20 10 10 20 20 20 POOLED 5 POOLED 5 POOLED 5 19.5 POOLED 5 7.91 2017 ANNUAL REPORT Page | 68 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Leaman 5417030207 Leaman 0585090110 Leaman 0585080381 Leaman 0585080381 Leaman 0585090107 Leaman 0578120076 Leaman 0578120076 Leaman 31640 Leaman 31640 Leaman 31640 Leaman 31640 Leaman 31640 Leaman 31640 Leaman 31640 Leaman 31640A Leaman 0578080076 Leaman 37585 Leaman 0578080078 Leaman 0578080077 Leaman CRESTAR from from from from from to base from to from to top to base top to base top to base top to base top to base 10-W5M top base OSTRACOD OSTRACOD PNG top base SURFACE BASEMENTTract 2 57- RGE 9-W5M NW16PNG from base NORDEGG to base BASEMENT PNG NORDEGG NORDEGG PNG from surface to base NORDEGG PNG from NORDEGG NORDEGGExcluding CBM NORDEGG NORDEGG PNG NORDEGG NORDEGG NG from surface to top NORDEGG NG NORDEGG NORDEGG 57-RGE 26PNG SURFACE NORDEGG PNG NORDEGG NORDEGG 57-RGE SW23PNG NORDEGG NORDEGG PNG SURFACE NORDEGG PNG NORDEGG NORDEGG 57-RGE N24PNG SURFACE NORDEGG PNG SURFACE NORDEGG PNG SURFACE NORDEGG PNG from surface to base NORDEGG PNG from surface to base NORDEGG PNG from surface to base NORDEGG PNG from NORDEGG NORDEGG PNG from surface to top NORDEGGExcluding 10-W5M from top to base 10-W5M top base top to base top to base top to base from to from to from to from to top base top base top base from 20 Leaman 0578120074 Leaman 057812A073 Leaman 31639 Leaman 0578120073 Leaman 37586 Leaman 37586 Leaman 0579120177 Leaman 0580020159 Leaman 5497040081 Leaman 0585090109 Leaman 0591050578 Leaman 0579120178 Leaman 0591050577 POOLED 16.68205 8 20 20 2.22462 POOLED 2.22462 7.41536 5.9641 Leaman 0590020438 3.76138 9.08204 Leaman 0590020438 Leaman 0594030701 Thornbury 0585050411 5.9641 Thornbury 39567 3.76138 Leaman 0512090287 7.41536 7.41536 7.41536 PREPOOL 7.41538 PREPOOL 7.41538 7.41538 2.82154 Thornbury 0179040029 Thornbury 0179040029 Thornbury 0179040029 Thornbury 0179040029 Other Other 22178 Other 22178 NG from surface to base EDMONTON PNG from surface to base NORDEGG PNG to base NORDEGG PNG from surface to base NORDEGG 9-W5M 57-RGE NE7PNG from surface to base NORDEGG PNG from surface to base NORDEGG PNG from surface to base NORDEGG WELLBORE ONLY top base from to PNG from surface to base MANNVILLE PNG base from MANNVILLE to base NORDEGG PNG SURFACE NORDEGGExcluding WELLBORE PNG SURFACE NORDEGG PNG from surface to base NORDEGG PNG to base NORDEGG from to top base top base from to from to 9-W4M top base PNG from surface to base NORDEGG PNG from surface to base NORDEGG PNG from surface to base NRDG 76-RGE S20PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE BASEMENT PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE from to from to from to from to from to top base top base top base top base top base 2.59538 7.41538 3.3334 7.41538 4.6352 4.6352 10 20 20 POOLED 17.736844 4 BPEN4.635 2 7.50 10 20 20 1.250 1.0666 20 10 10 10 10 from to PNG SURFACE MANNVILLE PNG SURFACE from to 10 0.625 top base top base 018012A014 WELLBORE PROD 5.83332 2017 ANNUAL REPORT Page | 69 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Other 22178 Other 14445 Other 13533 Other 22178A Other 34937 Other 29397 Wildwood 0512090286 Leaman 5497010208 Leaman 5497010208 Leaman Leaman CONOCOPHIL LIPS 0504030331 Leaman 5497020042 Leaman CONOCOPHIL LIPS Leaman 5497040009 Leaman 0597040239 Paddle River Paddle River 1042 112437 top top top top top base top base top base from to from to from to from to from to MANNVILLEExcluding WELLBORE PNG from top GRAND RAPIDS FM to base BLUESKY BULLHEAD PNG SURFACE GILWOOD PNG MBRExcluding from top SURFACE to base MANNVILLE PNG SURFACE MANNVILLEExcluding WELLBORE PNG SURFACE GILWOOD PNG MBRExcluding from top SURFACE to base MANNVILLE PNG SURFACE MANNVILLEExcluding WELLBORE PNG from top GRAND RAPIDS FM to base BLUESKY BULLHEAD PNG from surface to basement PNG SURFACE MANNVILLEExcluding WELLBORE PNG from surface to base NOTIKEN PNG from base VIKING to base NOTIKEN PNG from base VIKING to base NOTIKEN PNG SURFACE NOTIKEN PNG SURFACE MANNVILLEExcluding CBM SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG top from SURFACE to base ROCK CREEKExcluding CBM 56-RGE NE36NG PEKISKO BANFF base PEKISKO BANFF top PNG SURFACE base PEKISKO FMExcluding NG from top PEKISKO FM to base PEKISKO FMExcluding NG from top VIKING FM to base VIKING FMExcluding NG from top DETRITAL 9-W5M top to from to from to from to from to from to top base top base top base top base from POOLED 2.50 10 0.625 10 0.625 POOLED 2.50 20 14 20 20 20 7 20 20 20 14.6728 13.333334 Paddle River 112438 Paddle River 112439 Paddle River 126681 Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River 362 0599050113 876 877 878 0577070164 815 815 POOLED 18.33334 13.333334 13.333334 13.333334 20 20 20 20 14.67280 13.333334 13.333334 base from to SANDSTONE to base DETRITAL SANDSTONE from PNG top base to SURFACE PEKISKO FMExcluding NG from top PEKISKO FM to base PEKISKO FMExcluding NG from top DETRITALSANDSTONE to base DETRITAL SANDSTONEExcluding NG from top VIKING FM to base VIKING FM top from PNG SURFACE base to PEKISKO FMExcluding NG from top VIKING FM to base VIKING FMExcluding NG from top DETRITAL SANDSTONE to base DETRITAL SANDSTONEExcluding NG from top PEKISKO FM to base PEKISKO FM top CBM base SURFACE PEKISKOPNG from base BELLY RIVER GRP to PEKISKO FMExcluding NG from top PEKISKO FM to base PEKISKO FMExcluding NG from JURASSIC top DETRITAL base to JURASSIC DETRITAL NG from top DETRITAL SANDSTONE to base DETRITAL SANDSTONE top from CBM base to SURFACE EDMONTON GRP NG from top PEKISKO to base PEKISKO NG from top PEKISKO FM to base PEKISKO FM NG from top PEKISKO FM to base PEKISKO FM NG from top PEKISKO BANFF base to PEKISKO BANFF NG from top JURASSIC DETRITAL base JURASSIC DETRITALNG from top PEKISKO FM to base PEKISKO FM 57-RGE W7,W18,N19,SW19N G from top PEKISKO FM to base PEKISKO FMNG top JURASSIC DETRITAL to 8-W5M from to 2017 ANNUAL REPORT Page | 70 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Paddle River 815 Paddle River Paddle River Paddle River Paddle River 815 816 814 0577070162 Paddle River 0577070163 Paddle River Paddle River 5495090111 29151 Paddle River 23820 Paddle River Paddle River 23820 111671 Paddle River 111672 to to from from from JURASSIC top base base DETRITAL NG from top PEKISKO FM to base PEKISKO FMNG top JURASSIC DETRITAL to base JURASSIC DETRITAL NG from top JURASSIC DETRITAL base JURASSIC DETRITAL NG from top JURASSIC DETRITAL base JURASSIC DETRITAL NG from top PEKISKO FM to base PEKISKO FM NG from top PEKISKO FM to base PEKISKO FMNG top JURASSIC DETRITAL to base JURASSIC DETRITAL NG from top PEKISKO FM to base PEKISKO FMNG top JURASSIC DETRITAL to base JURASSIC DETRITAL from PNG SURFACE to NORDEGG MBR NG from top JURASSIC base DETRITAL JURASSIC DETRITALNG from top PEKISKO FM to base PEKISKO FM NG from top JURASSIC base DETRITAL JURASSIC DETRITALNG from top PEKISKO FM to PEKISKO BANFF NG from top JURASSIC DETRITAL base JURASSIC DETRITAL top PNG SURFACE base PEKISKOExcluding NG JURASSIC from DETRITAL base to JURASSIC DETRITALExcluding NG from top PEKISKO to base PEKISKOExcluding NG from top NORDEGG to base NORDEGG top from CBM SURFACE base to PEKISKO FMPNG from top SURFACE to base PEKISKO FMExcluding NG from top JURASSIC DETRITAL base JURASSIC DETRITALExcluding NG from top PEKISKO to from to base top to to to to 13.333334 13.333334 13.333334 13.333334 13.333334 13.333334 20 20 20 20 6.6660 6.6660 Paddle River 111672 Paddle River 111673 Paddle River 111674 Paddle River Paddle River 1043 340 Paddle River 340 Paddle River Paddle River Paddle River 38010 38010 38010 to to base PEKISKOExcluding NG from top NORDEGG to base NORDEGG top from PNG SURFACE base to PEKISKO FMExcluding NG from top JURASSIC base DETRITAL JURASSIC DETRITALExcluding NG from top PEKISKO to base PEKISKOExcluding NG from top NORDEGG to base NORDEGG top from PNG SURFACE base to PEKISKO FMExcluding NG from top JURASSIC DETRITAL base JURASSIC DETRITALExcluding NG from top PEKISKO to base PEKISKOExcluding NG from top NORDEGG to base NORDEGG top from PNG SURFACE base to PEKISKO FMExcluding NG from top PEKISKO FM to base PEKISKO FMExcluding NG from JURASSIC top DETRITAL base to JURASSIC DETRITALExcluding NG from top NORDEGG to base NORDEGG NG from top JURASSIC DETRITAL base JURASSIC SYSTEM 9-W5M 56-RGE E25,E36NG from top JURASSIC DETRITAL to base JURASSIC DETRITAL 56-RGE N15,NE16,SW16,S17, W19,E21,W27,E28,W3 0,N32,N33,SE33NG from top DETRITAL JURASSIC DETRITAL PNG base from MANNVILLE to base PEKISKO base from PNG MANNVILLE to base NORDEGG top CBM SURFACE base PEKISKO FMNG from top PEKISKO to base PEKISKONG from top JURASSIC DETRITAL to JURASSIC base to from to 8-W5M to 6.6660 6.6660 6.6660 14.6728 20 20 13.333334 13.333334 13.333334 2017 ANNUAL REPORT Page | 71 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Paddle River Paddle River Paddle River Paddle River 38010 38018 38011 38527 Paddle River 38527 Paddle River 38527 Paddle River Paddle River 38527 38013 Paddle River 38013 Paddle River Paddle River Paddle River Paddle River 38013 38012 38012 38000 from from from 9-W5M top to JURASSIC top base top base top base top base from to from to from to from to top DETRITAL PNG SURFACE PEKISKO PNG SURFACE NORDEGG PNG SURFACE PEKISKO PNG SURFACE MANNVILLEExcluding NG from top VIKING FM to base VIKING FM NG from top PEKISKO FM to base PEKISKO top FMNG JURASSIC DETRITAL to base JURASSIC DETRITAL NG from top PEKISKO FM to base PEKISKO FMNG top JURASSIC DETRITAL to base JURASSIC DETRITAL NG NORDEGG MBR base NORDEGG MBR 56-RGE NW25,35,W36PNG from top SURFACE to base PEKISKO FMExcluding NG from JURASSIC top DETRITAL base to JURASSIC DETRITALExcluding NG from top PEKISKO FM to base PEKISKO FM PNG from base BELLY RIVER GRP to base PEKISKO FMCBM from top SURFACE to base BASEMENTExcluding NG from top PEKISKO FM to base PEKISKO FMExcluding NG from JURASSIC top DETRITAL base to JURASSIC DETRITAL 56-RGE N26PNG SURFACE PEKISKO FM NG from top JURASSIC base DETRITAL JURASSIC DETRITALNG from top PEKISKO FM to base PEKISKO FM NG from top JURASSIC base DETRITAL JURASSIC DETRITAL NG from top JURASSIC DETRITAL base JURASSIC DETRITAL 9-W5M top base from to to to to 13.333334 13.333334 13.333334 2.334 13.333334 13.333334 13.333334 13.333334 13.333334 13.333334 20 20 20 Paddle River Paddle River 38000 37999 Paddle River 37999 Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River 360 360 0595030612 1304B 1304B 21810 21811 0588020179 0581090214 0597120230 0586020328 0595110324 0594030698 5404040707 CONOCOPHIL LIPS CANADA ENERGY PARTNERSHIP 5409100375 to from 8-W5M 8-W5M top to NG from top PEKISKO FM to base PEKISKO FM NG NORDEGG MBR base NORDEGG MBR 56-RGE NE18,W21,W28,S32,S W3356-RGE N17,E20,29,SE3156- RGE 8-W5M SW2056- RGE 8-W5M NE19,NW20,SE30NG JURASSIC top from DETRITAL base to JURASSIC DETRITALNG from top PEKISKO FM to base PEKISKO FM NG from top JURASSIC DETRITAL base JURASSIC DETRITALNG from top PEKISKO FM to base PEKISKO FM NG from top VIKING FM to base VIKING FM 8-W5M 57-RGE S2,S3,4NG from top DETRITAL SANDSTONE base DETRITAL to SANDSTONE PNG from surface to base NORDEGG NG from top SURFACE to base NORDEGG top NG NORDEGG to base NORDEGGNG from top PEKISKO base PEKISKO PNG from surface to base NORDEGG PNG from surface to base NORDEGG PNG from surface to base NORDEGG from PNG SURFACE to NORDEGG PNG from surface to base NORDEGG PNG from surface to base NORDEGG PNG from surface to base NORDEGG PNG from surface to base NORDEGG from PNG SURFACE to NORDEGG PNG SURFACE NORDEGGExcluding CBM PNG SURFACE MANNVILLEExcluding WELLBORE PROD from to from to top base top base top base top top from to 20 13.333334 13.333334 6.666 13.333334 20 20 20 20 20 20 5.102 8 8 20 20 13.334 13.334 20 2017 ANNUAL REPORT Page | 72 CANADIAN LICENSES CANADIAN LICENSES Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits AOI Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River 0509010131 0511030676 CONOCOPHIL LIPS CONOCOPHIL LIPS 0595080624 0581100188 0511050342 5497100192 0597040236 0506070654 0513020072 5414020096 5414100229 Thorsby 0512100118 Thorsby 0412100075 Thorsby 0412100078 Thorsby 0412100079 Thorsby 0412100080 Thorsby 0412100081 top base top base top base top base top base from to from to from to from to from to PNG top from MANNVILLE to base MANNVILLEExcluding WELLBORE PROD PNG top from MANNVILLE to base MANNVILLE PNG SURFACE OSTRACOD PNG SURFACE OSTRACOD PNG SURFACE NORDEGGExcluding WELLBORE PNG SURFACE NORDEGG PNG top from MANNVILLE to base MANNVILLE PNG from surface to base MANNVILLEExcluding CBM PNG top from GLAUCONITIC to base GLAUCONITICExcludin g CBM PNG SURFACE NORDEGG PNG from surface to basement PNG from surface to basement top PNG SURFACE base BASEMENTTract 2 55- RGE 7-W5M NE30PNG from top SURFACE to base BASEMENTExcluding PNG top from MANNVILLE to base MANNVILLETract 3 55- 7-W5M RGE NW29PNG from base MANNVILLE to base BASEMENT PNG CARDIUM BASEMENT PNG CARDIUM MANNVILLE PNG CARDIUM PNG CARDIUM BASEMENT PNG CARDIUM PNG CARDIUM base to base base to base base to base from to from from from from from from base base base 20 20 20 20 13 13 20 4 4 13 20 20 20 20 20 20 20 20 20 Thorsby 0412100082 Thorsby 0412100083 Thorsby 0412100084 Thorsby 0412100085 Thorsby 0412100086 Thorsby 0412100087 Thorsby 0412100088 Thorsby 0412100089 Thorsby 0412100090 Thorsby 0412100091 Thorsby 0412100092 Thorsby 0412100093 Thorsby 0412120147 Thorsby 0508080372 Thornbury 0593040701 Thornbury 0593040701 Thornbury 0507010387 Thornbury 0507010388 Thornbury 5495100055 Other Other Paddle River Paddle River Paddle River 0413040016 0502030291 0577030155 0182030004 0182030004 20 20 20 20 20 20 20 20 20 20 20 20 20 10 20 20 20 20 20 20 7 1.875 0.83334 APO 0.83334 base base base base base base from from from from from from from from from from from from from base to base base to base base to base base to base base to base base to base base to base PNG CARDIUM PNG CARDIUM PNG CARDIUM PNG CARDIUM BASEMENT PNG CARDIUM BASEMENT PNG CARDIUM PNG CARDIUM BASEMENT PNG CARDIUM BASEMENT PNG CARDIUM BASEMENT PNG CARDIUM PNG CARDIUM BASEMENT PNG CARDIUM BASEMENT PNG CARDIUM PNG from base BELLY RIVER base to CARDIUM PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLEExcluding CBM PNG from base VIKING to base MANNVILLE PNG SURFACE BLUESKY BULLHEAD NG NORDEGG MBR base NORDEGG MBR PNG NORDEGG MBR base NORDEGG MBR top PNG base SURFACE BELLY RIVER GRPExcluding NG from top BELLY RIVER GRP from to from to from to from to from to from to from to top base top base top base top base top base top base top to top to from from 2017 ANNUAL REPORT Page | 73 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Paddle River 0182030004 Paddle River 0182030004 Other 38222 Other 5405120248 Paddle River 0401080193 Paddle River Paddle River 5411110203 5411110203 Paddle River Paddle River Thornbury 5411110210 5411110210 0595110488 Thornbury 5498010077 Thornbury 5495100160 Thornbury 0591050535 Thornbury 0591050534 Thornbury 0595110408 Thornbury 5495090143 Thornbury 5495090143 Thornbury 0595090673 Thornbury 0595090673 from top to top base top base from to from to from to from to to base BELLY RIVER GRP top PNG base SURFACE BELLY RIVER GRPExcluding NG from top BELLY RIVER GRP to base BELLY RIVER GRP NG NORDEGG MBR base NORDEGG MBR PNG SURFACE BLUESKY BULLHEAD top PNG SURFACE base PEACE RIVERExcluding WELLBORE PNG SURFACE MANNVILLEExcluding PNG top from NOTIKEN MBR to base NOTIKEN MBR PNG from surface to base MANNVILLE PNG from base BELLY base to RIVER MANNVILLE PNG from surface to base BANFF PNG from base BELLY RIVER to base BANFF PNG SURFACE MANNVILLE PNG from top GRAND RAPIDS FM to base GRAND RAPIDS FM PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE 79-RGE 3,4PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE 79-RGE 15-W4M 14,23,24,26PNG from top SURFACE to base MANNVILLE 79-RGE 25PNG SURFACE MANNVILLE 15-W4M top base 14-W4M top base from to from to from to from to from to from to from to from to top base top base top base top base top base top base Thornbury 0595110411 APO 0.83334 Thornbury 0591050533 Thornbury 0586030343 Thornbury 0587070166 Thornbury 0586030344 Thornbury 0586030344 Thornbury 0585050215 Thornbury 0594060666 Thornbury 0593060378 Thornbury 0593060380 Thornbury 0593060381 Thornbury 0594110276 Thornbury 0590010409 Thornbury 0593060383 Thornbury 0593090784 Thornbury 0593090784 Thornbury 0590060342 Thornbury 0590060343 Thornbury 0589050395 Thornbury 0586010365 Thornbury 0586010365 Thornbury 058905A395 1.875 8.75 5 4 20 20 20 20 20 20 20 20 20 20 20 20 20 20 from to from to from to from to from to from to from to PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE BASEMENT PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE from to from to from to from to from to from to from to from to from to from to from to from to from to from to from to 20 20 17 20 17 14.75 4 4 4 4 4 4 4 4 4 4 4 4 4 2 2 4 top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base top base 2017 ANNUAL REPORT Page | 74 CANADIAN LICENSES AOI Crown # Rights Held Active WI Thornbury 058905A395 Thornbury 0585050217 Thornbury 0590010419 Thornbury 0586030342 Thornbury 5495100050 Thornbury 5495100054 Thornbury 5494100161 Thornbury 5494100161 Thornbury 5494100161 Thornbury 5495100052 Thornbury 0505060901 Thornbury 0505080596 Thornbury 0505080599 Thornbury 0500110212 Thornbury 0596060259 Thornbury 0595060345 Thornbury 0596010191 Thornbury 0178050155 Thornbury 0514120033 Other 0582080144 Other 058208A144 top base top base top base top base top base top base top base top base top base from to from to from to from to from to from to from to from to from to from to PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLEExcluding WELLBORE PNG SURFACE MANNVILLEExcluding CBM PNG SURFACE MCMURRAY FMExcluding CBM top PNG SURFACE base MCMURRAYExcluding CBM PNG SURFACE MCMURRAY FMExcluding CBM PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MCMURRAY PNG SURFACE MCMURRAY PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG base from MANNVILLE to base BASEMENT PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE from to from to from to from to from to from to from to from to from to from to top base top base top base top base top base top base top base top base top base top base 4 4 6.75 4.5 20 20 20 20 20 20 20 20 20 16 16 16 16 BPO 20 20 1.541664 4.874994 WHITEBARK ENERGY LTD Permits CANADIAN LICENSES Crown # Rights Held Active WI AOI Other 38215 Other 13198 Other Other 0276080004 5414110077 Other 0178100008 Other Other 0178100001 0595040193 Other 0593110766 Other Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River Paddle River M107265 058109A212 058109A212 0500080482 0581090185 0581100188 0581100188 5411110204 Whitecourt 0507010723 Whitecourt 0501060447 Whitecourt 0501080238 Whitecourt 0597040244 Whitecourt 0577020072 top base top base from to from to PNG SURFACE VIKING FM PNG from base UPPER MANNVILLE FM to base BANFF FM NG from top BANFF FM to base BANFF FM base from PNG GILWOOD to base BASEMENT PNG SURFACE VIKING FM Tract 100 62-RGE 4- W5M 3 PNG SURFACE BLUESKY- BULLHEADExcluding CBM top from MANNVILLE to base MANNVILLE PNG SURFACE BLUESKY-BULLHEAD WELLBORE from to from to top base top base top base top base top base top base from to from to from to from to PNG SURFACE NORDEGG PNG SURFACE NORDEGGExcluding WELLBORE PNG SURFACE BELLY RIVER PNG from base BELLY base RIVER to NORDEGGCBM from top SURFACE to base NORDEGG PNG SURFACE NORDEGG PNG from base BELLY RIVER base to NORDEGGExcluding CBM PNG base from MANNVILLE to base NORDEGG PNG from base BELLY RIVER GRP to base MANNVILLE PNG SURFACE BELLY RIVER GRP PNG NORDEGG MBR base PEKISKO FM PNG SURFACE PEKISKO FM top PNG SURFACE base PEKISKO FMExcluding from to from to from to base to top base top base from 6.668 5 5 20 2.5 5 20 10 20 5.102 5.102 4 5.3 11.775 11.775 20 POOLED 1.25 5 10 2 2.454 2017 ANNUAL REPORT Page | 75 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Whitecourt 0577020073 Whitecourt 2985 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38510 Whitecourt 38509 Whitecourt 38509 Whitecourt 38509 Whitecourt 38509 Whitecourt 38509 to to from top base from to CBM SURFACE BASEMENT top NG NORDEGG to base NORDEGGNG from top PEKISKO base PEKISKOCBM from top base SURFACE PEKISKO PNG from top PEKISKO FM to base PEKISKO FM PNG from base BELLY RIVER GRP to base MANNVILLE PNG SURFACE PEKISKO FM WELLBORE PROD from to top base to from to from to from to PNG from top BASAL QUARTZ base PEKISKOExcluding CBM top PNG SURFACE base PEKISKOTract 2 60- RGE 11-W5M S35PNG from top SURFACE to base NORDEGG PNG from top PEKISKO FM to base PEKISKO FM top PNG SURFACE base PEKISKO FMExcluding PNG from top BELLY RIVER to base BELLY RIVER top PNG SURFACE base PEKISKO FMExcluding PNG from top BELLY RIVER to base BELLY RIVER PNG SURFACE PEKISKO FM top CBM SURFACE base PEKISKONG from top NORDEGG to base NORDEGGNG from top base PEKISKO PEKISKO from PNG SURFACE to NORDEGG MBR PNG NORDEGG MBR base NORDEGG MBR NG from NORDEGG NORDEGG WELLBORE PROD top to base from to from to top base top base top to from to CBM NORDEGG MBR from base to 4.2 Whitecourt 38509 POOLED 5 POOLED 1.25 10 2.454 2.78333 10 Whitecourt 120107 Whitecourt 21453 Whitecourt 21453 Whitecourt 16143 Whitecourt 16143 POOLED 5 Whitecourt 38508 Whitecourt 38508 Whitecourt 38508 Whitecourt 120106 Whitecourt 120108 Whitecourt 120105 Whitecourt 934A Whitecourt 934A Whitecourt 38504 10 10 10 4.2 10 POOLED 4.2 POOLED 9.125993 POOLED 4 10 from from top base top base top base top base from to from to from to from to from to base PEKISKO FMPNG from base NORDEGG MBR to base PEKISKO FM top NG to base NORDEGG NORDEGGCBM from top SURFACE to base NORDEGG top NG to base NORDEGG NORDEGGCBM from top PEKISKO to base PEKISKOExcluding WELLBORE top CBM SURFACE base NORDEGG MBRPNG from base NORDEGG MBR to base PEKISKO FM CBM SURFACE PEKISKO FM PNG SURFACE PEKISKO FM PNG SURFACE PEKISKO FM PNG SURFACE PEKISKO FM PNG SURFACE PEKISKO FM PNG SURFACE PEKISKO FM PNG NORDEGG MBR base NORDEGG MBR PNG top from SURFACE to top BASAL QUARTZExcluding CBM top NG to base NORDEGG from NORDEGGCBM top SURFACE to base NORDEGG 59-RGE SW30NG NORDEGG MBR base NORDEGG MBR NG from top BELLY RIVER GRP to base BELLY RIVER GRPNG LOWER from MANNVILLE to base LOWER MANNVILLE NG from top BELLY RIVER GRP to base BELLY RIVER GRPNG from LOWER MANNVILLE to base LOWER MANNVILLE 11-W5M top to from to from to top base top base top to from from from top top 4.2 POOLED 4 POOLED 2.25 2.25 10 6 6 10 10 POOLED 4.2 7.42222 4.2 8.3125 POOLED 8.545542 POOLED 8.545542 2017 ANNUAL REPORT Page | 76 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Whitecourt 38504 Whitecourt 38477 Whitecourt 38477 Whitecourt 38477 Whitecourt 38477 Whitecourt 0578080151 Whitecourt 0596010415 Whitecourt 124127 Whitecourt 127754 Whitecourt 127754 Whitecourt 127754 Whitecourt 931 Whitecourt 931 Whitecourt 931 top top base top base from to 59-RGE 12-W5M 36NG from LOWER MANNVILLE to base LOWER MANNVILLENG from top PEKISKO FM to base PEKISKO FMNG from top NORDEGG base to MBR NORDEGG MBR PNG SURFACE LOWER MANNVILLE NG from top SURFACE to base SURFACE PET from top SURFACE to base NORDEGG MBR PNG from base LOWER MANNVILLE to base NORDEGG MBRExcluding NG from top NORDEGG base to MBR NORDEGG MBR from PNG SURFACE to NORDEGG MBR top from CBM SURFACE base to NORDEGG MBRPNG from base NORDEGG MBR to base PEKISKO FM NG NORDEGG MBR base NORDEGG MBR top PNG base SURFACE PEKISKO FMExcluding NG from top PEKISKO FM to base PEKISKO FMExcluding NG from top NORDEGG MBR to base NORDEGG MBR 11-W5M 59-RGE E31NG top PEKISKO FM to base PEKISKO FMNG from top NORDEGG MBR to base NORDEGG MBR NG from top PEKISKO FM to base PEKISKO FM NG from top PEKISKO FM to base PEKISKO FM top NG to NORDEGG MBR NORDEGG base MBRNG top from PEKISKO FM to base PEKISKO FM NG from top PEKISKO FM to base PEKISKO top FMNG to NORDEGG MBR NORDEGG base from to top to from from from from 10 5 10 10 10 10 Whitecourt 931 Whitecourt 127739 Whitecourt 38768 Whitecourt 38768 POOLED 2.25 Whitecourt 38766 5 8.3125 8.3125 8.3125 8.3125 8.3125 Whitecourt 38766 Whitecourt 38767 Whitecourt 38511 Whitecourt 0500060518 8.3125 Whitecourt 932 Whitecourt 1262 to from from from top to top to base MBRNG top LOWER MANNVILLE to base LOWER MANNVILLE NG from top PEKISKO FM to base PEKISKO FM 60-RGE 12-W5M 2PNG from top SURFACE to base NORDEGGExcluding NG NORDEGG NORDEGGExcluding NG from top LOWER MANNVILLE to base LOWER MANNVILLETract 2 60- RGE 12-W5M E3PNG from top SURFACE to base NORDEGG NG NORDEGG MBR base NORDEGG MBR PNG from top UPPER to MANNVILLE FM base UPPER MANNVILLE FMExcluding CBM 59-RGE 11-W5M 7,18,S19PNG from top SURFACE base NORDEGGExcluding CBM SURFACE NORDEGGExcluding NG NORDEGG NORDEGG PNG SURFACE NORDEGGExcluding NG NORDEGG NORDEGGExcluding PNG from top UPPER MANNVILLE to base UPPER MANNVILLEExcluding CBM SURFACE NORDEGG NG from top PEKISKO FM to base PEKISKO FM PNG base from MANNVILLE to base PEKISKO FM NG from top PEKISKO FM to base PEKISKO FMNG top JURASSIC SYSTEM to base JURASSIC SYSTEM top NG from to NORDEGG MBR base NORDEGG MBR 59-RGE 11-W5M S28,NW28NG from top top to base top to base from to from to from to top base top base top base from from from 8.3125 4.4446 8.57143000 00 POOLED 9.508925 7.5 7.5 10 1.28 7.5 8.3125 8.48829 2017 ANNUAL REPORT Page | 77 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Whitecourt 933 Whitecourt 935 Whitecourt 21400 Whitecourt 21400 Whitecourt 21400 Whitecourt 21400 Whitecourt 38505 Whitecourt 38505 Whitecourt 1263 Whitecourt 21401 Whitecourt 16143A Whitecourt 5496080102 Whitecourt 5496080102 Whitecourt 5496080102 Whitecourt 37822 from from from from to LOWER MANNVILLE to LOWER base MANNVILLENG from top NORDEGG MBR to NORDEGG base MBRNG top from PEKISKO FM to base PEKISKO FM top NG to NORDEGG MBR NORDEGG base MBRNG top from PEKISKO FM to base PEKISKO FM 11-W5M 60-RGE W4,5NG top PEKISKO FM to base PEKISKO FM top PNG SURFACE base UPPER MANNVILLE FM top from PNG SURFACE base to UPPER MANNVILLE FM top NG from NORDEGG MBR to base NORDEGG MBR PNG from top UPPER to MANNVILLE FM base UPPER MANNVILLE FMExcluding CBM top NG to NORDEGG MBR NORDEGG base MBRNG top from LOWER MANNVILLE to LOWER base from MANNVILLENG top PEKISKO FM to base PEKISKO FM top PNG SURFACE base UPPER MANNVILLE FM top NG from NORDEGG MBR to base NORDEGG MBR NG from NORDEGG MBR base NORDEGG MBR from PNG SURFACE to NORDEGG MBR PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE PNG SURFACE MANNVILLE top PNG base SURFACE PEKISKO FMExcluding NG from top JURASSIC SYSTEM base JURASSIC SYSTEM from to from to from to from to from to top base top base top base top base top to to Whitecourt 120106B Whitecourt 120106B Whitecourt 0597030792 Whitecourt BP/CANPAR Whitecourt 0501030376 Whitecourt 5413110079 Whitecourt 5496120022 Wildwood 0512110145 Wildwood 0512110314 Wildwood 0512110315 Wildwood 0512110316 Wildwood 0512110317 Wildwood 0512110319 Wildwood 0512110320 Wildwood 0597100806 Wildwood 0593100169 Wildwood 0504030792 8.3125 8.3125 BPO3.75 5 10 POOLED 9.508925 10 5 7.125 10 10 3.333 1.6 1.6 10 to to to from from from top base from to top NG to base NORDEGG NORDEGGCBM from top SURFACE to base NORDEGG top NG NORDEGG to base NORDEGGNG from top base PEKISKO PEKISKOCBM from top SURFACE base PEKISKO NG from top PEKISKO FM to base PEKISKO FMNG top JURASSIC SYSTEM to base JURASSIC SYSTEM NG from top LOWER MANNVILLE to base LOWER MANNVILLENG from top NORDEGG MBR to NORDEGG base top from MBRNG PEKISKO FM to base PEKISKO FM PNG SURFACE PEKISKO FM 61-RGE 11-W5M N2,SE2PNG from top SURFACE base BASEMENTTract 2 61- RGE 11-W5M SW2PNG from base VIKING to base BASEMENT PNG WELLBORE WELLBORE PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG SURFACE BASEMENT PNG to MANNVILLE PNG SURFACE VIKING FM PNG from base VIKING FM to base PEKISKO FMExcluding CBM PNG from surface to base NORDEGG top to base from to from to from to from to from to from to from to top base top base top base top base top base top base top base from base 4.2 4.2 7.5 10 10 20 1.6 20 20 20 20 20 20 20 20 BPO 10.0008 6.668 2017 ANNUAL REPORT Page | 78 CANADIAN LICENSES CANADIAN LICENSES AOI Crown # Rights Held Active WI AOI Crown # Rights Held Active WI WHITEBARK ENERGY LTD Permits Wildwood 0504040482 Wildwood 26266 Wildwood 0594110221 Wildwood 0597030415 Wildwood 0597030415 Wildwood 0597100906 Wildwood 0597100906 Wildwood 0506070655 Wildwood 0504100171 Wildwood 0502110177 Wildwood 0512110318 Wildwood 0513040053 Wildwood 0513080054 Wildwood 5417030079 13.334 19.2985 10 20 20 20 20 20 20 20 20 20 20 20 Wildwood 5413070101 Wildwood 5413070101 Wildwood 5413070102 Wildwood 5413080085 Wildwood 5413080086 Wildwood 5413080086 Leaman 0581090178 Leaman 0580120177 Wildwood 0512070371 Wildwood 0512080346 Wildwood 5413070105 top base top base from to from to PNG SURFACE NORDEGG PNG from surface to base MANNVILLEExcluding PNG from top VIKING to base VIKING from PNG SURFACE to MANNVILLEExcluding CBM PNG from surface to base EDMONTON PNG from surface to base EDM GROUP PNG from surface to base MANNVILLE top CBM base SURFACE MANNVILLETract 2 WELLBORE ONLYTract 3 WELLBORE ONLY base from PNG MANNVILLE to base NORDEGG PNG from base VIKING to base NORDEGG PNG from surface to base NORDEGG PNG from surface to basement PNG base from MANNVILLE to base NORDEGG PNG SURFACE NORDEGG top PNG SURFACE base BASEMENTTract 2 53- RGE 9-W5M 28PNG EDM base from from to from to top base to top base top base top base top base from to from to from to from to 10-W5M top base GROUP base BASEMENTTract 3 53- RGE 9-W5M W26PNG from top SURFACE to base PEKISKO from PNG SURFACE to BASEMENT PNG SURFACE MANNVILLE PNG SURFACE BASEMENT 52-RGE 13,24PNG SURFACE BASEMENT PNG SURFACE BASEMENT top PNG SURFACE base MANNVILLEPNG from base NORDEGG to base BASEMENT from PNG SURFACE to NORDEGG MBR PNG SURFACE NORDEGG PNG SURFACE BASEMENT PNG base from MANNVILLE to base BASEMENTExcluding WELLBORE PNG SURFACE BASEMENT from to from to from to from to top base top base top base top top 20 20 20 20 20 20 4.5 6.70072 20 20 - 20 2017 ANNUAL REPORT Page | 79

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