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BARAKA ENERGY & RESOURCES LTD A.B.N. 80 112 893 491 AND CONTROLLED ENTITIES
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Corporate Directory
Board of Directors Corporate Advisors
Collin Vost Jackson Greeve
Executive Chairman Suite 2 286 Fitzgerald Street
Justin Vost Perth WA 6000
Non-Executive Director
Ray Chang Solicitors
Non-Executive Director Steinepreis Paganin GPO Box 2799
Perth WA 6001
Company Secretary Auditors
Patrick J O'Neill Rothsay Chartered Accountants
Level 1 Lincoln House 4 Ventnor Avenue West Perth WA 6005
Registered Office Share Registry
Shop 12 'South Shore Piazza' Advanced Share Registry
85 South Perth Esplanade 150 Stirling Highway
South Perth WA 6151 Nedlands WA 6009
Contact Details Stock Exchange Listings
Baraka Energy & Resources Ltd Home Exchange: Perth, Western Australia
PO Box 255 Australian Securities Exchange
South Perth WA 6951 ASX Code: Ordinary Shares - BKP Tel: +61 8 6436 2350
Fax: +61 8 9367 2450 Bankers
National Australia Bank Ltd
Email: [email protected] Capital Office
100 St Georges Terrace
Website: www.barakaenergy.com.au Perth WA 6000
INDEX
Contents Page
Corporate Governance Statement 2
Directors' Report 6
Remuneration Report 11
Shareholder Information 14
Interest in Exploration Tenements 16
Statement of Profit or Loss and Other Comprehensive Income 17
Statement of Financial Position 18
Statement of Changes in Equity 19
Statement of Cash Flows 20
Notes to the Financial Statements 21
Directors' Declaration 44
Auditor's Independence Declaration 45
Independent Auditor's Report to the Members 46
Page 1
Introduction
The Board is responsible for the corporate governance of the Company. The major processes by which the Board fulfils those responsibilities are described in this statement.
The Board considers that except to the extent expressly indicated in this statement, those corporate governance practices comply with the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations with 3rd Edition 2014 Amendments. Also, except to the extent expressly indicated in this statement, those practices were followed throughout the year.
A copy of the Corporate Governance Statement, the Audit and Risk Management Committee Charter and the Company's Code of Conduct are available in the corporate governance section of the Company's website at www.barakaenergy.com.au together with other information which the ASX Corporate Governance Council's recommends be made publicly available.
Corporate Governance Council Recommendation 1 Lay Solid Foundations for Management and Oversight
Role of the Board of Directors
The Board has responsibility for protecting the rights and interests of Shareholders and is responsible for the overall direction, monitoring and governance of the Group. Responsibility for managing the business on a day- to-day basis has been delegated to the Managing Director and the management team.
The Board is responsible for the overall corporate governance of the Group and its subsidiaries. Responsibilities and Functions of the Board are set out under the Board Charter and include:
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setting the strategic direction of the Group, establishing goals to ensure that the strategic objectives are met and monitoring the performance of management against these goals and objectives;
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ensuring that there are adequate resources available to meet the Group's objectives;
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appointing the Managing Director, evaluating the performance and determining the remuneration of senior executives, and ensuring that appropriate policies and procedures are in place for recruitment, training, remuneration and succession planning;
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evaluating the performance of the Board and its Directors on an annual basis;
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determining remuneration levels of Directors;
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approving and monitoring financial reporting and capital management;
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approving and monitoring the progress of business objectives;
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ensuring that any necessary statutory licences are held and compliance measures are maintained to ensure compliance with the law and licence(s);
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ensuring that adequate risk management procedures exist and are being used;
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ensuring that the Group has appropriate corporate governance structures in place, including standards of ethical behaviors and a culture of corporate and social responsibility;
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ensuring that the Board is and remains appropriately skilled to meet the changing needs of the Group;
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ensuring procedures are in place for ensuring the Group's compliance with the law; and financial and audit responsibilities, including the appointment of an external auditor and reviewing the financial statements, accounting policies and management processes.
In complying with Recommendation 1.1 of the Corporate Governance Council, the Company has adopted a Board Charter which clarifies the respective roles of the Board and senior management and assists in decision making processes.
Diversity Policy
The Board has adopted a diversity policy that considers the benefits of diversity, ways to promote a culture of diversity, factors to be taken into account in the selection process of candidates for Board and senior management positions in the Company, education programs to develop skills and experience in preparation for Board and senior management positions, processes to include review measurable diversity performance objectives for the Board, Managing Director and senior management.
The diversity policy states that the Company will report, where appropriate, in each annual report, the measurable objectives for achieving gender diversity set by the Board.
The following table provides a break-up of the gender diversity in the organisation.
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Number
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%
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Number of women employees in the whole organisation
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0
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0%
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Number of women in senior executive positions
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0
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0%
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Number of women on the Board
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0
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0%
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Board Processes
An agenda for the meetings has been determined to ensure certain standing information is addressed and other items which are relevant to reporting deadlines and or regular review are scheduled when appropriate. The agenda is regularly reviewed by the Chairman and the Company Secretary.
Corporate Governance Council Recommendation 2 Structure the Board to Add Value
Board Composition
The relevant provisions in the Constitution and the Corporations Act determine the terms and conditions relating to the appointment and termination of Directors. All Directors, other than the Managing Director, are subject to re-election every three years.
The Board does not have a separate Nomination Committee comprising of a majority of Independent Directors and as such does not comply with Recommendation 2.4 of the Corporate Governance Council. The Board believes that given the size of the Consolidation Group and the stage of its development a separate nomination committee is not warranted at this time. Any changes to Directorships will, for the foreseeable future, be considered by the full Board subject to any applicable laws. Identification of potential Board candidates includes consideration of the skills, experience, personal attributes and capability to devote the necessary time and commitment to the role.
The Board consists of Mr Collin Vost, executive Chairman and Managing Director, Mr Justin Vost non-executive Director, and Mr Ray Chang, non-executive Director.
The Constitution requires a minimum number of three Directors. The maximum number of Directors is fixed by the Board but may not be more than 9, unless the members of the Company, in general meeting, resolve otherwise. The skills, experience and expertise of all Directors is set out in the Directors' section of the Company's website.
The Board considers, however, that given the size and scope of the Group's operations at present, it is appropriately structured to discharge its duties in a manner that is in the best interests of the Group and its Shareholders from both a long-term strategic and operational perspective.
Independent Chairman
The Chairman is not considered to be an independent director and as such Recommendation 2.2 of the Corporate Governance Council has not been complied with. However, the Board believes that Mr Collin Vost is an appropriate person for the position as Chairman because of his industry experience and proven track record as a public company director.
Roles of Chairman and Managing Director
The roles of Chairman and Managing Director is exercised by the same individual, and as such the Company does not comply with Recommendation 2.3 of the Corporate Governance Council. However, the Board believes that Mr Collin Vost is an appropriate person for the position of Managing Director because of his industry experience and proven track record as a public company director.
Evaluation of Board Performance
The Company does not have a formal process for the evaluation of the performance of the Board and as such does not comply with Recommendation 2.5 of the Corporate Governance Council. The Board is of the opinion that the competitive environment in which the Company operates will effectively provide a measure of the performance of the Directors. In addition the Chairman assesses the performance of the Board, individual directors and key executives on an informal basis.
Education
All Directors are encouraged to attend professional education courses relevant to their roles.
Independent Professional Advice and Access to Information
Each Director has the right to access all relevant information in respect of the Group and to make appropriate enquiries of senior management. Each Director has the right to seek independent professional advice at the Group's expense, subject to the prior approval of the Chairman, which shall not be unreasonably withheld.
Corporate Governance Council Recommendation 3 Promote Ethical and Responsible Decision Making
The Board actively promotes ethical and responsible decision making.
Code of Conduct
The Board has adopted a Code of Conduct that applies to all employees, executives and Directors of the Group, and as such complies with Recommendation 3.1 of the Corporate Governance Council. This Code addresses expectations for conduct in accordance with legal requirements and agreed ethical standards.
Security Trading Policy
The Board has committed to ensuring that the Group, its Directors and executives comply with their legal obligations as well as conducting their business in a transparent and ethical manner. The Board has adopted a policy and has procedures on dealing in the Company's securities by directors, officers and employees which prohibits dealing in the Company's securities when those persons possess information, and as such complies with Recommendation 3.2 of the Corporate Governance Council.
Corporate Governance Council Recommendation 4 Safeguarding Integrity in Financial Reporting
Audit Committee
The Board does not have a separate Audit Committee with a composition as suggested by Recommendations 4.1, 4.2 and 4.3 of the Corporate Governance Council. The full Board carries out the function of an audit committee. The Board believes that the Group is not of a sufficient size to warrant a separate committee and that the full Board is able to meet objectives of the best practice recommendations and discharge its duties in this area. The relevant experience of Board members is detailed in the Directors' section of the Directors' Report.
Financial Reporting
The Board relies on senior executives to monitor the internal controls within the Group. Financial performance is monitored on a regular basis by the Managing Director who reports to the Board at the scheduled Board meetings.
Corporate Governance Council Recommendation 5 Make Timely and Balanced Disclosure
The Board reviews the performance of the external auditors on an annual basis and meets with them during the year to review findings and assist with Board recommendations.
In the absence of a formal audit committee the Directors of the Group are available for correspondence with the auditors of the Group.
Continuous Disclosure
The Board places a high priority on communication with Shareholders and is aware of the obligations it has, under the Corporations Act and ASX Listing Rules, to keep the market fully informed of information which is not generally available and which may have a material effect on the price or value of the Company's securities.
The Company has adopted policies which establish procedures to ensure that Directors and management are aware of and fulfill their obligations in relation to the timely disclosure of material price sensitive information.
Continuous disclosure is discussed at all regular Board meetings and on an ongoing basis the Board ensures that all activities are reviewed with a view to the necessity for disclosure to security holders.
Corporate Governance Council Recommendation 6 Respect the Rights of Shareholders
Communications
The Board fully supports security holder participation at general meetings as well as ensuring that communications with security holders are effective and clear. This has been incorporated into a formal shareholder communication strategy, in accordance with Recommendation 6.1 of the Corporate Governance Council.
In addition to electronic communication via the ASX website, the Company publishes all significant announcements together with all quarterly reports. These documents are available in both hardcopy on request and on the Company website at www.barakaenergy.com.au
Shareholders are able to pose questions on the audit process and the financial statements directly to the independent auditor who attends the Company's Annual General Meeting for that purpose.
Corporate Governance Council Recommendation 7 Recognise and Manage Risk
Risk Management Policy
The Board has adopted a risk management policy that sets out a framework for a system of risk management and internal compliance and control, whereby the Board delegates day-to-day management of risk to the Managing Director, therefore complying with Recommendation 7.1 of the Corporate Governance Council. The Board is responsible for supervising management's framework of control and accountability systems to enable risk to be assessed and managed.
The Group's risk management strategy is evolving and will be an ongoing process and it is recognised that the level and extent of the strategy will develop with the growth and change in the Group's activities.
Risk Reporting
As the Board has responsibility for the monitoring of risk management it has not required a formal report regarding the material risks and whether those risks are managed effectively therefore not complying with Recommendation 7.2 of the Corporate Governance Council. The Board believes that the Group is currently effectively communicating its significant and material risks to the Board and its affairs are not of sufficient complexity to justify the implementation of a more formal system for identifying, assessing, monitoring and managing risk in the Company.
Managing Director and Company Secretary Written Statement
The Board requires that the Managing Director and the Company Secretary provide a written statement that the financial statements of the Group present a true and fair view, in all material aspects, of the financial position and operational results and have been prepared in accordance with Australian Accounting Standards and the Corporations Act. The Board also requires that the Managing Director and Company Secretary provide sufficient assurance that the declaration is founded on a sound system of risk management and internal control, and that the system is working effectively.
The declarations have been received by the Board, in accordance with Recommendation 7.3 of the Corporate Governance Council.
Corporate Governance Council Recommendation 8 Remunerate Fairly and Responsibly
Remuneration Committee
The Board has not created a separate Remuneration Committee and as such does not comply with Recommendation 8.1 of the Corporate Governance Council. The Board considers that the Group is not currently of a size, nor are its affairs of such complexity to justify a separate Remuneration Committee.
Executive Directors, non-executive Director receive fees agreed on an annual basis by the Board and may include performance based components designed to reward and motivate.
The full Board determines all compensation arrangements for Directors. It is also responsible for setting performance criteria, performance monitors, share option schemes, incentive performance schemes, superannuation entitlements, retirement and termination entitlements and professional indemnity and liability insurance cover.
The Board ensures that all matters of remuneration will continue to be in accordance with the Corporations Act requirements.
Your Directors present their report, together with the financial statements of the Group, being the Company and its controlled entity, for the year ended 30 June 2015.
Principal Activities and Significant Change in Nature of Activities
The principal activities of the Group during the financial year was operating in the oil and gas exploration sector in Australia.
There were no other significant changes in the nature of the Group's principal activities during the financial year.
Operating Results and Review of Operations for the Year Operating Results
The loss of the Group for the financial year after providing for income tax amounted to:
Year ended Year ended
30 June 2015 30 June 2014
$ $
555,329 1,781,106
The consolidated profit of the Group amounted to $555,329 after providing for income tax. Further discussion on the Group's operation now follows.
Review of Operations
In mid November 2014, Statoil Australia Theta B.V (Statoil), operator and joint venture partner, informed Baraka that it had concluded the drilling and testing campaign on the permits, EP127 and EP128, in the Georgina Basin, Northern Territory, Australia, and based on the disappointing results, Statoil had decided to withdraw from any further activity on these permits. This disappointment arose specifically from the fraccing not providing sufficient hydrocarbons from the limited drilling and fraccing operations. Statoil was specifically seeking liquid oil from very large unconventional shale operations, similar to the Bakken in Canada/USA and other large oil shale operations in the USA.
Whilst this was disappointing news from Statoil, Baraka was approached by a Canadian group interested in pursuing exploration on the 'conventional targets' within EP127. Baraka shareholders may recall that Baraka's Board pressed for these conventional targets to be considered in the 2014 work program, but were unsuccessful at that time in convincing the Operators.
Importantly, all Northern Territory Government minimum work requirements have been met on EP127 and EP128 permits for the 2015 year.
In early March 2015, after extensive discussions with Petrofrontier and Statoil, Baraka applied for the renewal of Exploration Permit EP128, being the most northerly of the two permits Baraka has an interest in.
Directors of Baraka travelled to Darwin and met with the Department of Mines and Energy, to discuss Baraka pursuing renewal of EP128 in its own right, and were provided a very courteous and supportive audience.
As a result, Baraka appointed an experienced law firm and a tenement administrator in Darwin, to assist in the application to renew the permit in the name of Baraka as the 100% holder. This application was lodged with supporting documentation.
Subject to the success of the renewal application with Department of Mines and Energy, the Company will make further announcements regarding its intentions on this permit going forward.
Baraka has, in September 2015, lodged an application to renew EP127 as a 100% permit holder with the documented support of Statoil and Petrofrontier. EP127 does not expire until 13 December 2015 and once
again, all commitments have been met to that date. The Company will also keep the market fully informed on the progress of this renewal submission.
Whilst the world's energy and resource companies are suffering low oil, iron ore, coal and other commodity prices, history shows that these are only temporary dips in the world's growth, and will result in the same recovery of prices and demand as every other recession and or commodity cycle in the past 40 years, especially considering the growth of China, India and other Asian countries.
The board of Baraka would like to once again thank Petrofrontier and Statoil for their courage in committing substantial funds to pursue the basins unconventional prospects, regardless of results during their programs.
Baraka has, in addition to pursuing the renewal of these permits and seeking farm in partners, continued to assess a number of other projects and ventures for the benefit of its shareholders, including its current assets, and seeks to create cash generating opportunities as soon as realistically possible.
Iron Sands (Titaniferous Magnetite) 'Loan Profit Sharing Agreement'
Baraka entered into a Commercial Secured Loan Agreement in September 2012, including a 7.5% interest payments, and a 75% amended profit sharing arrangement with an unlisted public company, with an iron sands venture in the Philippines. Details of which have been previously announced. The project was introduced to Baraka by Cervantes Corporation Ltd (ASX:CVS) who will as a result be entitled to certain fees, profits and or the right to back in to the investment at a later date subject to particular goals and conditions being achieved.
As a result of Baraka's assistance, the permits controlled by the unlisted public company were renewed and further exploration of the areas are being pursued, in an attempt to add value to the underlying assets of the loan agreement.
Baraka continues discussions in regards to farming down or disposing of all or part of this investment to third parties, subject to the resolution of continued drawn out legal disputes.
This opportunity was considered by Baraka as a distressed situation at the time, in line with the guidelines previously outlined by the board, to secure such opportunities and add value for Baraka shareholders where possible. The board of Baraka may need to reconsider the current loan arrangements as a result of the extended and drawn out legal actions and the extra funding required.
Baraka continues to have minimal debt and with cash and current assets of approximately $5.4m and continue to assess other opportunities which the board believes will add value for its shareholders, in a market where cash and a clean balance sheet is a valuable commodity.
Subject to the successful outcome of additional R&D applications, the cash position of Baraka could be substantially enhanced prior to the end of this calendar year.
Baraka now has some $12m of Net Assets, and considering the company was rescued from receivership by the current board in June of 2009, and has some $42m of accumulated losses from activities still to be utilised, prior to the current management involvement, we believe the shareholders should have a considerable amount of confidence in the company's future.
Financial Position
The net assets of the Group have increased by $555,329 from $11,513,201 at 30 June 2014 to $12,068,530 at 30 June 2015.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the Company during the financial year.
Dividends Paid or Recommended
No dividends were declared or paid since the start of the financial year. No recommendation for payment of dividends has been made.
Events after the Reporting Date
On 14 September 2015, Baraka announced that, with the support of Statoil and Petrofrontier, the company had lodged an application for the renewal of exploration permit EP127 in the Georgina Basin, Northern Territory, with the Department of Mines and Energy in the Northern Territory
No other matters or circumstances have arisen since the end of the financial year which significantly affect or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.
Future Developments, Prospects and Business Strategies
Likely developments in the operations of the Group and the expected results of those operations in future financial years have not been included in this report, as the inclusion of such information is likely to result in unreasonable prejudice to the Group.
Environmental Issues
The Group is not aware of any matter which requires disclosure with respect to any significant environmental regulation in respect of its operating activities.
Information on Directors
Collin Vost EXECUTIVE CHAIRMAN (Executive) (appointed 13 March 2012) MANAGING DIRECTOR (Executive)
Qualifications Diploma of Financial Services, Licenced Securities Dealer.
Experience Mr Vost has been involved in public companies for the past 30 years and has served on the Board of several, mostly junior resource companies as well as being involved in the securities dealing business since 2001. Mr Vost was appointed to the Board on 18 May 2009.
Interest in shares and options 47,000,000 ordinary shares.
Special responsibilities Mr Vost is a member of the audit committee
Directorships held in other Cervantes Corporation Ltd (appointed 9 October 2007) listed entities during the three JV Global Ltd (appointed 29 May 2009).
years prior to the current year
Justin Vost DIRECTOR (Non-executive)
Qualifications Diploma of Financial Markets.
Experience Mr Vost was appointed to the Board on 15 March 2011. Mr Vost has experience in mining, manufacturing and capital markets.
Interest in shares 13,500,000 ordinary shares.
Special responsibilities Mr Vost is a member of the audit committee Directorships held in other JV Global Ltd (appointed 19 April 2011)
Listed entities during the three Cervantes Corporation Ltd (appointed 23 November 2011) years prior to the current year
Ray Chang DIRECTOR (Non-executive) (appointed 23 November 2011)
Qualifications Bachelor of Science, Pd D and Diplomas in Metallurgy and Gemmology
Experience Mr Chang was appointed to the Board on 23 November 2011. Ray Chang has over 39 years experience including the Atomic Energy Commission in Taiwan, University of Calgary in Canada, University of WA and Curtin University of Technology in Australia and Zhejiang University and Yantat Electronics (Shendzhen) Ltd Co in China.
Interest in shares None
Special responsibilities Mr Chang is a member of the audit committee Directorships held in other None.
Listed entities during the three years prior to the current year
COMPANY SECRETARY
The following person held the position of company secretary at the end of the financial year:
Patrick O'Neill - Bachelor of Business, Chartered Accountant. Mr O'Neill is a partner in the accounting firm Jackson Greeve. He has acted as Company Secretary for several public companies. Mr O'Neill was appointed Company Secretary on 12 October 2010.
Meetings of Directors
During the financial year, five meetings of directors were held. Attendances by each director during the year were as follows:
Directors' Meetings
Number eligible to attend
Number attended
Collin Vost 5 5
Justin Vost 5 5
Ray Chang 5 3
There were of 11 circular resolutions.
Indemnifying Officers
In accordance with the constitution, except as may be prohibited by the Corporation Act 2001, every Officer of the Company shall be indemnified out of the property of the Company against any liability incurred by them in their capacity as an Officer of the Company or a related corporation in respect of any act or omission whatsoever and howsoever occurring or in defending any proceedings, whether civil or criminal.
During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company (as named above), the company secretary, and all executive officers of the Company and of any related body corporate against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.
Proceedings on Behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year.
Non-Audit Services
Rothsay did not provide non-audit services to the Group during 2015.
Auditor's Independence Declaration
The auditor's independence declaration for the year ended 30 June 2015 has been received and can be found on page 45 of the financial report.