Microsoft Word - PCL Full Year Statutory Accounts 2015
FULL YEAR STATUTORY ACCOUNTS 2015
ABN 95 003 029 543
Directors
Henry David Kennedy (Non-Executive Chairman)
Roy Barry Rushworth (Executive Director & Chief Executive Officer)
Ernest Anthony Myers (Executive Finance Director) Anthony Robert Frederick Maslin (Non-Executive Director)
Company Secretary
Vesna Petrovic
Registered Office Level One, 10 Ord Street West Perth WA 6005
Telephone: +61 8 6363 7090
Fax: +61 8 6363 7099
Share Register
Advanced Share Registry Services PO Box 1156
Nedlands WA 6909
Telephone: +61 8 9389 8033
Auditors
Rothsay Chartered Accountants Level 1, Lincoln House
4 Ventnor Avenue West Perth WA 6005
ASX Code
PCL
Contents
Directors' Report 2
Corporate Governance Statement 13
Statement of Comprehensive Income 27
Statement of Financial Position 28
Statement of Changes in Equity 29
Statement of Cash Flows 30
Notes to the Financial Statements 31
Directors' Declaration 48
Independent Audit Report 49
Your Directors submit their report for the year ended 30 June 2015.
DIRECTORS
The names and details of the company's Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Henry David Kennedy MA (Geology), SEG (Non-Executive Chairman)
Mr Kennedy is a Geologist with an extensive history in the Australian and New Zealand oil and gas industries. As Technical Director, Mr Kennedy led the establishment and development of a number of successful companies who were involved in numerous discoveries in Western Australia and New Zealand. Mr Kennedy has been a Director of Pancontinental since August 1999, with the Company benefiting from Mr Kennedy's broad knowledge base through ongoing support in achieving the Company's strategic goals.
Mr Kennedy is currently a Non-Executive Director of Norwest Energy NL (since April 1997) and was an East Africa Resources Limited Non-Executive Director (since March 2013) but resigned from the position in April 2015.
Roy Barry Rushworth, BSc (Executive Director, Chief Executive Officer)
Mr Rushworth is a Geologist with vast experience in petroleum exploration. Commencing with positions in exploration operations, Mr Rushworth then accepted the role as Chief Geologist and Exploration Manager for an Australian listed company. The Company discovered a number of oil and gas finds during Mr Rushworth's leadership.
More recently for Pancontinental, Mr Rushworth has been responsible for identifying, negotiating and acquiring international new venture opportunities in Kenya, Namibia and elsewhere in Europe and Africa. In addition, he has a track record of working closely with international government bodies and attracting blue chip joint venture partners to Pancontinental's projects. Mr Rushworth has been a Director of Pancontinental since August 2005 and Chief Executive Officer since November 2008.
Ernest Anthony Myers CPA (Executive Finance Director)
Mr Myers, an Accountant by profession, experienced many years in ASX listed companies from positions in senior management and executive capacities to board participation roles. During his career he has been instrumental in the capital raisings and financial management of these companies. With skills and knowledge gained from vast experiences in corporate, exploration and operational areas, Mr Myers has played a key role in maintaining the Company's financial stability. Mr Myers joined Pancontinental in March 2004 as Company Secretary and was appointed Finance Director in January 2009.
Mr Myers has been an alternate Director of East Africa Resources Limited since June 2010, although he resigned from the position during the financial year (April 2015).
Anthony Robert Frederick Maslin BBus (Independent Non-Executive Director)
Mr Maslin is an ex-Stockbroker with a broad knowledge base of financial markets. Prior experience has included capital raising and the promotion of several development companies as well as consulting to a number of ASX listed companies on corporate matters. Mr Maslin has had the responsibility of managing people as well as projects which has provided him with an understanding of the exploration industry in addition to his corporate background. Mr Maslin has been a Director of Pancontinental since December 2010.
Mr Maslin is also a Non-Executive Director of Buxton Resources Ltd (Executive and Non-Executive roles since November 2010).
COMPANY SECRETARY
Vesna Petrovic, BComm, CPA
Mrs Petrovic is an Accountant who holds a Bachelor of Commerce, Major in Accounting and Business Law and has completed the Graduate Diploma in Applied Corporate Governance from the Governance Institute of Australia. Public listed company involvement, particularly those involved in the African continent, have provided Mrs Petrovic a base from which to contribute to the accounting and governance functions at Pancontinental. Mrs Petrovic was appointed Company Secretary in April 2010.
DIRECTORS' INTERESTS
The relevant interest of each Director in the shares and options of the Company as at 30 June 2015 is as follows:
Options over
|
Ordinary Shares
|
Ordinary Shares
|
|
Henry David Kennedy
|
141,351,602
|
500,000
|
|
Roy Barry Rushworth
|
36,835,610
|
1,000,000
|
|
Ernest Anthony Myers
|
400,715
|
750,000
|
|
Anthony Robert Frederick Maslin
|
14,583
|
500,000
|
DIRECTORS' MEETINGS
The numbers of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows:
Directors'
Meetings
|
Number of meetings held:
Number of meetings attended:
|
4
|
|
Henry David Kennedy
|
4
|
|
Roy Barry Rushworth
|
4
|
|
Ernest Anthony Myers
|
4
|
|
Anthony Robert Frederick Maslin
|
0
|
Notes
The Directors discussed and agreed various matters throughout the financial year which were resolved by circular resolution; 7 matters were dealt with in such a manner during the year.
CORPORATE INFORMATION
Corporate structure
Pancontinental Oil & Gas NL is a no liability company incorporated and domiciled in Australia. The Company's CAN is 003 029 543.
Nature of operations and principal activities
The principal activity during the year of entities within the consolidated entity was exploration for oil and gas. There have been no significant changes in the nature of those activities during the year.
Objectives
Objectives of the group include:
-
Continued exploration on the company's current portfolio of permits;
-
Seek new ventures suitable for inclusion in the group's asset structure;
-
Manage risks involved in the exploration industry; and
-
Maintain liquidity.
The group's targets and strategies for meeting the above objectives include:
-
Approve work programmes best suited for exploration success which are within the Company's financial capacity;
-
Consider strategic alliances through joint ventures to minimise risks to the group;
-
Focus on cost cutting in all non-essential areas; and
-
Review appropriate fundraising proposals.
Cents Earnings (loss) per share
Basic earnings (loss) per share (3.64)
Diluted earnings (loss) per share (3.64)
The main contributing factor to the Earnings per Share result this financial year was the write off of exploration licences Kenya L10A, Kenya L10B and the Company's former non-core Australian assets.
Employees
The consolidated entity had five employees as at 30 June 2015, (2014: no employees). Pancontinental previously employed the services of a management company for its administration and accounting services whereas during the 2015 financial year, individuals were employed in place of the management services company. In addition, the consolidated entity employs the services of specialised consultants where and when needed.
OPERATING AND FINANCIAL REVIEW
Review of Operations
Kenya L6 [40% offshore, 16% onshore]
Under the farmout secured with Milio International in recent years, Pancontinental is to be fully carried with no cap for; 2D seismic, interpretation, mapping and an onshore well. The work programme would satisfy the work commitments on the permit. Although a number of delays have been experienced, Operator Milio International is continuing with planning for the seismic acquisition proposed as part of the farmout agreement.
Kenya L10A [18.75%] & Kenya L10B [25%]
Due to current market conditions, the Company conducted internal evaluation of its exploration portfolio and as a result withdrew from the L10A and L10B blocks during the year. The Company is still of the belief that the area is prospective and is looking forward to the planned exploration programme in its Kenya L6 area.
Namibia EL 0037 [30%]
Pancontinental was successful in securing Tullow Oil as a joint venture partner in its EL 0037 licence, Namibia, with a planned exploration programme worth in excess of US$100 million. Seismic operations to date worth over US $30 million have been carried out with no cost to Pancontinental. The initial exploration programme has revealed four main prospects which will be further analysed before a drilling site can be chosen. The forward exploration programme is also free carried, with the Company encouraged by the results received from the Operator so far.
Group Overview
Pancontinental Oil and Gas NL was incorporated in 1985 and listed on the Australian Securities Exchange in 1986.
Dynamics of the Business
The company continues to look for new opportunities, particularly in Africa. Whilst the company is committed to further developing existing projects, emerging opportunities are reviewed on a timely basis.
Performance Indicators
The Board closely monitors and discusses the group's operating plans, financial budget and overall performance as well as the company's share price.
The underlying drivers which contribute to the company's performance and can be managed internally include a disciplined approach to reducing the group's non-essential costs and allocating funds to those areas which will add shareholder value. The company's share price is often influenced by factors outside the control of Management and the Board, such as market conditions; however through effective communication between the company and all of its Stakeholders the company can provide assurance that there are regular reviews in place to determine actions which should be implemented to mitigate risk and increase performance.
Operating Results for the Year
Summarised operating results are as follows:
Revenues
$
2015
Results
$
Non-segment and unallocated revenues and results 328,058 (41,878,638)
Consolidated entity revenues and results from
ordinary activities before income tax expense 328,058 (41,878,638) The main contributing factor to the Earnings per Share result this financial year was the write off of exploration licences Kenya L10A, Kenya L10B and the Company's former non-core Australian assets.
Shareholder Returns
The group is in the exploration phase and so returns to Shareholders are primarily measured through capital growth.
|
2015
|
2014
|
2013
|
2012
|
2011
|
2010
|
|
Basic earnings per share (cents)
|
(3.64)
|
(1.66)
|
(0.06)
|
(0.23)
|
(0.16)
|
(0.32)
|
Risk Management
Risk management is the process by which an organisation identifies, analyses, responds, gathers information about and monitors strategic risks that could actually or potentially impact the organisation's ability to achieve its mission and objectives. The Board and Management assess risk as part of the ordinary course of business activities such as strategic planning, promotion, budgets, mergers and acquisitions, strategic partnerships, legislative changes and conducting business abroad.
The Board is responsible for ensuring that risks and opportunities are identified on a timely basis and that the group's objectives and activities are aligned with the risks and opportunities identified by the Board.
The group believes that it is crucial for all Board members to be a part of this process and as such the Board has not established a separate risk management committee. The Board has a number of mechanisms in place to ensure that its objectives and activities are aligned with the risks identified. These include the following:
-
Implementation of operating plans and cash flow budgets by Management and Board monitoring of progress against these budgets.
-
Ongoing analysis of business risks specific to the exploration industry.
-
The group has advised each Director, Manager and Consultant that they must comply with a set of ethical standards maintaining appropriate core company values and objectives. Such standards ensure shareholder value is delivered and maintained. Standards cover legal compliance, conflict resolution, privileged information and fair dealing.
-
The Board provides Shareholders with information using a comprehensive Continuous Disclosure Policy which includes identifying matters which have a material effect on the underlying security price. ASX announcements, the web page of the company and other media resources are used to convey such information. The Board encourages full participation by Shareholders at the AGM and Shareholders are requested to vote on Board and Executive remuneration aggregates as well as Employee Incentive Schemes.
The risk assessment process takes into account the following steps:
-
Condition - What is the particular problem that has been identified?;
-
Criteria - What is the standard that was not met? This may be an internal benchmark or industry standard;
-
Cause - Why did the problem occur?;
-
Consequence - What is the risk, negative outcome or opportunity foregone due to the finding?; and
-
Corrective action - What should Management and the Board do to correct the finding and implement procedures for the continued monitoring of the risk?.
The continued monitoring of risk within the group is directed at evaluating:
-
The effectiveness and efficiency of operations;
-
The reliability of financial and management internal processes and reporting; and
-
Compliance with laws and regulations
to enable that the group to safeguard its assets.
Review of Financial Condition
Capital Structure
The group has a sound capital structure from which to continue its development programmes. During the year, the company maintained sufficient cash reserves and as such there was no requirement for any fundraising activities.
Share Capital
Number of
shares $
|
Beginning of the financial year Issued during the year:
|
1,150,994,096
-
|
99,411,998
-
|
|
End of the financial year
|
1,150,994,096
|
99,411,998
|
All options currently on issue were granted in previous financial years. No options have been granted since the end of the previous financial year.
2,250,000 options of the company expired during the year:
Option Reserve
Number of options
Weighted average exercise price
Balance at beginning of year 5,000,000 0.12
expired (2,250,000) 0.13
Balance at end of year 2,750,000 0.12
Treasury policy
The Board has not considered it necessary to establish a separate treasury function because of the size and scope of the group's activities.
Liquidity and Funding
The Company conducted its last significant fundraising in 2012. Since then, the Group has maintained adequate cash reserves to fund ongoing operations including paying its own way through a drilling programme. Going forward the Board recognises that there will be a need for the Company to review fundraising options in order to progress operations into the future.
Statement of Compliance
The above report is based on the guidelines in The Group of 100 Incorporated publication Guide to the Review of Operations and Financial Condition.
SHARE OPTIONS
Unissued shares
At the date of this report there were 2,750,000 unissued ordinary shares under options. Refer to the notes for further details on the options outstanding.
During the year, 2,250,000 options expired.
Shares issued as a result of the exercise of Options
There were no shares issued as a result of the exercise of options during the financial year.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
No significant changes in the state of affairs of the company occurred during the financial year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
There were no significant events after balance date.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The economic entity expects to maintain the present status and level of operations and hence there are no likely developments in the entity's operations.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Pancontinental is committed to complying with any requirement for environmental management in any jurisdiction and country that it operates.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Since the end of the previous financial year the company has paid insurance premiums in respect of Directors' and officers' liability and legal expenses insurance contracts. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors and officers and legal expenses insurance contracts as such disclosure is prohibited under the terms of the contract. The premiums were paid in respect of the following officers of the company and its controlled entities:
HD Kennedy, RB Rushworth, EA Myers, ARF Maslin and V Petrovic.
REMUNERATION REPORT (Audited)
This report outlines the remuneration arrangements in place for Directors and Executives of Pancontinental Oil
& Gas NL ('the company').
Remuneration philosophy
A description of the remuneration structures in place is as follows: The Non-Executive Directors received a fixed fee for their services, they do not receive performance based remuneration. The Chief Executive Officer received a fixed fee for his respective executive services (with no bonus or other performance-based remuneration). Directors do not receive any termination or retirement benefits.
Remuneration committee
The full Board carries out the role of the remuneration committee.
Remuneration structure
In accordance with best practice corporate governance, the structure of Non-Executive and Executive remuneration is separate and distinct.
Non-Executive Director remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to Shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the Directors as agreed. The latest determination was at the Annual General Meeting held on 29 November 2007 when Shareholders approved an aggregate remuneration of $400,000 per year. The amount of aggregate remuneration sought to be approved by Shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers advice from external sources as well as the fees paid to Non-Executive Directors of comparable companies when undertaking reviews. The Non-Executive Directors of the Company can participate in Employee Option Incentive Schemes with Shareholder approval. The remuneration of Executive and Non-Executive Directors for the period ending 30 June 2015 is detailed in Table 1 of this report.
Senior Management and Executive Director remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain Executives of the highest calibre, whilst incurring a cost which is acceptable to Shareholders.
Structure
In determining the level and make up of Executive remuneration, the Board may take independent advice from external sources when necessary. Details of the CEO's contract are as follows:
Basic Sum: $750,000 (actual payments reduced to $375,000) Capacity: Chief Executive Officer Commencement 1 July 2012
Termination Period: 6-12 months
The Board regularly reviews compensation levels to take into account market-related factors such as cost of living changes, any change to the scope of the role performed and any other relevant factors of influence. As such Executive Director remuneration was reduced by $435,000pa during the year.
Fixed remuneration
Objective
The level of fixed Directors' fees is set so as to provide a base level which is both appropriate to the position and is competitive in the market.
Structure
Fixed primary remuneration is paid on a cash basis and there are no fringe benefits or other costs incurred by the company.
Table 1: Director remuneration for the year ended 30 June 2015
Post
Value of
Primary benefits
Employment Equity Total
options as
Henry David Kennedy (Non-Executive Chairman)
Salary &
Fees
Cash STI Super-
annuation
Options
(Issued)
proportion of Revenue
|
2015
|
50,000
|
- - - 50,000
|
0.0%
|
|
2014
|
50,000
|
- - - 50,000
|
0.0%
|
Roy Barry Rushworth (Executive Director, Chief Executive Officer)
|
2015
|
643,750
|
- - - 643,750
|
0.0%
|
|
2014
|
750,000
|
- - - 750,000
|
0.0%
|
Ernest Anthony Myers1 (Executive Finance Director)
|
2015
|
245,000
|
- - - 245,000
|
0.0%
|
|
2014
|
48,000
|
- - - 48,000
|
0.0%
|
Anthony Robert Frederick Maslin (Non-Executive Director)
|
2015
|
48,000
|
- - - 48,000
|
0.0%
|
|
2014
|
48,000
|
- - - 48,000
|
0.0%
|
|
Total Current Year Remuneration
|
986,750
|
- - - 986,750
|
-
|
Note 1 - During the 2014 financial year, Mr Myers held a 50% interest in a consulting company which provided staff, accounting and administrative services to listed companies, including Pancontinental. Mr Myers was paid a salary from that company. The same company also paid the staff who provided company secretarial, accounting and administrative services to Pancontinental. In the 2015 financial year, the contract for services came to an end and Pancontinental sought the employment of individuals to fulfil the roles previously carried out by the consulting company.
Table 2: Options granted as part of remuneration for the year ended 30 June 2015 (as approved by Shareholders)
There were no options granted as part of remuneration for the year ended 30 June 2015 (30 June 2014: Nil).
Over the past five years options granted as part of Director and Management remuneration have been valued using an appropriate option pricing model, in which the option exercise price, the current level and volatility of the underlying share price, the risk-free interest rate, expected dividends on the underlying shares, the current market price of the underlying shares and the expected life of the options are taken into account. See following table for further details.
Fair values of options:
The fair value of each option is estimated on the date of grant using an appropriate option pricing model.
|
2015
|
2014
|
2013
|
2012
|
2011
|
2010
|
|
Expected volatility
|
-
|
-
|
110%
|
120%
|
-
|
-
|
|
Risk-free interest rate
|
-
|
-
|
2.74%
|
3.57%
|
-
|
-
|
|
Expected life of option
|
-
|
-
|
4 years
|
3 years
|
-
|
-
|
|
Total number of options:
|
Number of options Grant date Vesting date Weighted average fair
value
2,750,000 30 Nov 12 30 Nov 12 0.06
Company Performance
Company performance can be reflected in the movement of the company's share price over time. As the company is in an exploration phase, returns to Shareholders will primarily come through share price appreciation. The Board's strategy in achieving this aim is to acquire early stage projects which can attract quality joint venture partners.
The company has developed skills in the acquisition of quality projects and has also built strategic alliances with other companies to further develop its project portfolio.
Consequences of Performance on Shareholder Wealth
|
Return on Equity
|
2015
|
2014
|
2013
|
2012
|
2011
|
|
Share price at 30 June
|
$0.006
|
$0.023
|
$0.050
|
$0.175
|
$0.110
|
|
Average equity
|
34,563,322
|
65,037,139
|
72,686,103
|
43,124,939
|
13,566,697
|
|
Net Profit /(Loss)
|
(41,878,638)
|
(19,068,997)
|
(662,822)
|
(1,805,773)
|
(967,031)
|
|
Return on Equity in %
|
(121.16)%
|
(29.32)%
|
(0.91)%
|
(4.19)%
|
(7.13)%
|
END OF REMUNERATION REPORT
ROUNDING
The amounts contained in this report and in the financial report have been rounded to the nearest $1 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which the Class Order applies.
AUDITOR'S INDEPENDENCE DECLARATION
The auditor independence declaration is set out on the following page and reviews part of the Directors' Report for the year ended 30 June 2015.
NON-AUDIT SERVICES
Rothsay did not receive any payment for non-audit services during the year. Signed in accordance with a resolution of the Directors.
Ernest Anthony Myers Director
Perth 30 September 2015