Audited 2020 Annual Report - Financial Report

note 5 - revenue and expenses

Loss from ordinary activities before tax has been determined after the following revenues and expenses:

	Note	2020	2019
		$	$
(a)   Revenue
Oil sales		-	115,673
Gas sales		-	72,547
		-	188,220
(b)   Other costs (30 June 2019: Cost of sales)
Care and maintenance costs (30 June 2019: Production costs)		(230,684)	(275,455)
Amortisation of development assets		(18)	(1,931)
Movement in oil stocks inventory		(9,389)	(66,186)
Write-down of inventory to net realisable values		(1,030,060)	(161,354)
		(1,270,151)	(504,926)
(c)   Other income
Government assistance arrangements (1)		98,000	-
		98,000	-
(d)   Exploration expense	4	(1,008,719)	(491,675)
(e)   Administration expenses
Employee benefits expense		(718,210)	(819,627)
Redundancy benefits		-	(31,928)
Administration expense		(1,297,267)	(1,106,295)
		(2,015,477)	(1,957,850)
(f)   Other Expenses
Depreciation expense	17	(26,867)	(32,763)
Termination penalty provision JPDA 06-103 PSC		(297,885)	-
Loss on disposal of plant and equipment		(12,169)	(8,227)
		(336,921)	(40,990)
(g)   Finance income
Interest income		1,659	4,403
(h)   Finance costs
Interest expense - borrowings		(70,977)	(97,162)
(i)   Foreign exchange (Loss)/Gain - net
Foreign exchange (loss)/gain- realised		10,912	5,582
Foreign exchange (loss)/gain - unrealised		(8,277)	(4,582)
		2,635	1,000

 

⁽¹⁾        Assistance packages provided by the Federal and State government to provide assistance to businesses and employers in response to the negative impacts of Covid-19 upon the Australian and Western Australia economies.

Accounting Policy - Revenue

The Group's Revenue policy is outlined in note 4.
 

NOTE 6 - INCOME TAX EXPENSE

Numerical reconciliation between tax expense and pre-tax accounting loss:

	2020	2019
	$	$
Loss before tax	(5,841,096)	(3,118,121)
Tax using the domestic corporation tax rate of 27.5% (2019: 27.5%)	(1,606,301)	(857,483)
Effect of tax rate in foreign jurisdictions	(265,604)	(497,254)
Non-deductible expenses
Share-based payments	-	30,507
Foreign expenditure non-deductible	1,939,864	1,609,412
Other non-deductible expenses	149,560	208,577
Non assessable income
Government assistance arrangements	(13,750)	-
	203,769	493,759
Unrecognised deferred tax assets generated during the year and not brought to account at reporting date as realisation is not regarded as probable	-	-
Tax expense	203,769	493,759
Tax losses utilised not previously brought to account	(203,769)	(493,759)
Impact of reduction in future tax rates	448,166	-
Unrecognised deferred tax assets not brought to account	(448,166)	-
Tax expense for the year	-	-

 

Tax Assets and Liabilities

During the year ended 30 June 2020, $203,769 of tax losses were recognised and were offset against the current tax liability resulting in nil tax assets and liabilities.

	2020	2019
	$	$
Unrecognised deferred tax assets not brought to account at reporting date as realisation is not regarded as probable - temporary differences
Other	28,520,335	27,482,151
Losses available for offset against future taxable income	16,819,556	17,018,120
Deferred tax asset not brought to account	45,339,891	44,500,271

 

The deductible temporary differences and tax losses do not expire under current tax legislation.

The deferred tax asset not brought to account for the 2020 financial year will only be realised if:

·    It is probable that future assessable income will be derived of a nature and of an amount sufficient to enable the benefit to be realised;

·    The conditions for deductibility imposed by the tax legislation continue to be complied with; and

·    The companies are able to meet the continuity of ownership and/or continuity of business tests.

The foreign component of the deferred tax asset not brought to account for the 2020 financial year will only be realised if the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit to be realised and the Group continues to comply with the deductibility conditions imposed by the Income Tax Act 1961 (India) and there is no change in income tax legislation adversely affecting the utilisation of the benefits.

Change in Corporate Tax Rate

There has been a legislated change in the corporate tax rate that will apply to future income tax years.  The impact of this reduction in the corporate tax rate has been reflected in the unrecognised tax positions and the prima facie income tax reconciliation above.
 

NOTE 6 - INCOME TAX EXPENSE (continued)

Tax Consolidation

In accordance with tax consolidation legislation the Company, as the head entity of the Australian tax-consolidated group, has assumed the deferred tax assets initially recognised by wholly owned members of the tax-consolidated group with effect from 1 July 2004. Total tax losses of the Australian tax-consolidated group, available for offset against future taxable income are $4,501,080 (2019: $5,480,637).

Accounting Policy

Income tax expense comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity, or in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Key Estimates and Assumptions

The application of the Group's accounting policy for recognition of tax losses requires management to make certain estimates and assumptions as to future events and circumstances, including the assessment of whether economic quantities of resources have been found, or alternatively, that the sale of the respective areas of interest will be achieved. Any such estimates and assumptions may change as new information becomes available. A deferred tax asset is only recognised for unused losses if it is probable that future taxable profits will be available to utilise those losses.

In determining the amount of current and deferred tax the Group considers the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact tax expense in the period that such a determination is made.

 

 

 

NOTE 7 - LOSS PER SHARE

(a)   Basic Loss Per Share

		2020 $	2019 $
Loss used in calculating earnings per share
Loss for the period attributable to ordinary shareholders		5,841,096	3,118,121
	Note	2020 Number	2019 Number
Weighted average number of ordinary shares
Issued ordinary shares at 1 July	18	2,587,318,001	2,001,968,379
Effect of shares issued		575,564,712	312,684,194
Effect of share options exercised		57,280,753	61,790,019
Weighted average number of ordinary shares at 30 June		3,220,163,466	2,376,442,592

(b)   Diluted Loss Per Share

The Company's potential ordinary shares, being its options granted, are not considered dilutive as the conversion of these instruments would result in a decrease in the net loss per share.

Accounting Policy

Basic earnings per share is calculated by dividing net profit or loss attributable to ordinary shareholders of the parent entity by the weighted average number of ordinary shares outstanding during the year, adjusted for any bonus element.

Diluted earnings per share is determined by adjusting the profit attributable to ordinary shareholders and weighted average number of shares outstanding for the dilutive effect of potential ordinary shares, which may comprise outstanding options, warrants and their equivalents.

 

 

 

This section provides information on the assets employed to develop value for shareholders and the liabilities incurred as a result.

NOTE 8 - EXPLORATION AND EVALUATION

	2020	2019
	$	$
Balance at 1 July	568,888	539,793
Acquisition of exploration licence interests	238,000	-
Reclassification to assets held for sale (Note 20)	(238,000)	-
Effect of movements in foreign exchange rates	12,434	29,095
Balance at 30 June	581,322	568,888

As at 30 June 2020, the balance of exploration and evaluation assets relates to the Cambay Field, which is currently at evaluation stage, and there was no impairment of this asset (2019: Nil).

The Cambay Field has minimal production that is sold to a third party.

Further development of the Cambay field is presently on hold pending the completion of the sale process being conducted by GSPC for its 55% PI in the Cambay PSC.  This sale process, however, has been subject to significant delays due to the impact of Covid-19 in India.

Accounting Policy

Accounting for exploration and evaluation expenditure is assessed separately for each area of interest. Exploration and evaluation expenditure in respect of each area of interest is accounted for under the successful efforts method.  An area of interest is an individual geological area which is considered to constitute a favourable environment for the presence of hydrocarbon resources or has been proven to contain such resources.

Expenditure incurred prior to securing legal rights to explore an area is expensed. Exploration licence acquisition costs relating to established oil and gas exploration areas are capitalised.

The costs of drilling exploration wells are initially capitalised pending the results of the well. Costs are expensed where the well does not result in a successful discovery.

All other exploration and evaluation expenditure, including general administration costs, geological and geophysical costs and new venture expenditure is expensed as incurred, except where:

·    The expenditure relates to an exploration discovery for which, at reporting date, an assessment of the existence or otherwise of economically recoverable reserves is not yet complete; or

·    The expenditure relates to an area of interest under which it is expected that the expenditure will be recouped through successful development and exploitation, or by sale.

When an oil or gas field has been approved for commercial development, the accumulated exploration and evaluation costs are first tested for impairment and then reclassified as development assets.

Impairment of Exploration and Evaluation Expenditure

The carrying value of exploration and evaluation assets are assessed at each reporting date if any of the following indicators of impairment exist:

·    The exploration licence term in the specific area of interest has expired during the reporting period or will expire in the near future and it is not anticipated that this will be renewed;

·    Expenditure on further exploration and evaluation of specific areas is not budgeted or planned;

·    Exploration for and evaluation of oil and gas assets in the specific area has not lead to the discovery of potentially commercial reserves; or

·    Sufficient data exists to indicate that the carrying amount of the asset is unlikely to be recovered in full, either by development or sale.

Key Estimates and Assumptions

The application of the Group's accounting policy for exploration and evaluation expenditure necessarily requires management to make certain estimates and assumptions as to future events and circumstances, particularly the assessment of whether economic quantities of resources have been found, or alternatively, that the sale of the respective areas of interest will be achieved. Critical to this assessment are estimates and assumptions as to contingent and prospective resources, the timing of expected cash flows, exchange rates, commodity prices and future capital requirements. These estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under this policy, it is determined that the expenditure is unlikely to be recovered by future exploitation or sale, then the relevant capitalised amount will be written off to the consolidated statement of profit or loss and other comprehensive income.

NOTE 9 - DEVELOPMENT ASSETS

	2020 $	2019 $
Cost  - Cambay Development Assets
Balance at 1 July	17,066,528	16,235,257
Effect of movements in foreign exchange rates	355,248	831,271
Balance at 30 June	17,421,776	17,066,528

 

Amortisation and Impairment Losses - Cambay Development Assets
Balance at 1 July	10,570,938	10,070,002
Impairment of development assets	1,348,458	-
Amortisation charge for the year	17	1,931
Effect of movements in foreign exchange rates	183,999	499,005
Balance at 30 June	12,103,412	10,570,938
Carrying Amount - Cambay Development Assets	5,318,364	6,495,436

 

Cost - Cambay Restoration Asset
Balance at 1 July	3,374,181	3,374,181
Additions during the period	1,131,420	-
Effect of movements in foreign exchange rates	-	-
Balance at 30 June	4,505,601	3,374,181

 

Amortisation and Impairment Losses - Cambay Restoration Asset
Balance at 30 June	-	-
Carrying Amount - Cambay Restoration Asset	4,505,601	3,374,181

 

Carrying Amounts - Total
At 1 July	9,869,770	9,539,435
At 30 June	9,823,965	9,869,770

 

Cambay Field Development Assets

Development assets are reviewed at each reporting date to determine whether there is any indication of impairment or reversal of impairment. Indicators of impairment can include changes in: market conditions, future oil and gas prices and future costs, extension of the Cambay Production Sharing Contract and the status of the dispute resolution with GSPC.  An indicator of impairment identified in the 2020 financial year is Covid-19, which has seen reduced global demand for energy products and caused delays to the implementation of the dispute resolution with GSPC. (2019: No indicators were identified)

An impairment charge of $1,348,458 has been applied to the Cambay Field development assets for the financial year ended 30 June 2020 (2019: Nil).

Accounting Policy

Development expenditure includes past exploration and evaluation costs, pre-production development costs, development drilling, development studies and other subsurface expenditure pertaining to that area of interest. Costs related to surface plant and equipment and any associated land and buildings are accounted for as property, plant and equipment.

The definition of an area of interest for development expenditure is narrowed from the exploration permit for exploration and evaluation expenditure to the individual geological area where the presence of an oil or natural gas field exists, and in most cases will comprise an individual oil or gas field.

Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. When production commences, carried forward development costs are amortised on a units of production basis over the life of economically recoverable reserves.

Restoration costs expected to be incurred are provided for as part of development mine assets that give rise to the need for restoration.

 

 

 

NOTE 9 - DEVELOPMENT ASSETS (CONTINUED)

Impairment of Development Assets

The carrying value of development assets are assessed on a cash generating unit (CGU) basis at each reporting date to determine whether there is any indication of impairment or reversal of impairment. Indicators of impairment can include changes in market conditions, future oil and gas prices and future costs. Where an indicator of impairment exists, the assets recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. A CGU is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. The CGU is the Cambay Field, India. Impairment losses are recognised in profit or loss.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell (FVLCS). As a market price is not available, FVLCS is determined by using a discounted cash flow approach. In assessing FVLCS, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Valuation principals that apply when determining FVLCS are that future events that would affect expected cash flows are included in the calculation of FVLCS.

Impairment losses are reversed when there is an indication that the loss has decreased or no longer exists and there has been a change in the estimate used to determine the recoverable amount. Such estimates include beneficial changes in reserves and future costs, or material increases in selling prices. 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 amortisation, if no impairment loss had been recognised.

 

Key Estimates and Assumptions

Significant judgements and assumptions are required by management in estimating the present value of future cash flows particularly in the assessment of long life development assets. It should be noted that discounted cash flow calculations are subject to variability in key assumptions including, but not limited to, the expected life of the relevant area of interest, long-term oil and gas prices, currency exchange rates, pre-tax discount rates, number of future wells, production profiles and operating costs.

An adverse change in one or more of the assumptions used to estimate FVLCS could result in an adjustment to the development asset's recoverable amount.

Development costs are amortised on a units of production basis over the life of economically recoverable reserves, so as to write off costs in proportion to the depletion of the estimated reserves. The estimation of reserves requires interpretation of geological and geophysical data. The geological and economic factors which form the basis of reserve estimates may change over reporting periods. There are a number of uncertainties in estimating resources and reserves, and these estimates and assumptions may change as new information becomes available.

NOTE 10 - INVENTORIES

	2020	2019
	$	$
Oil on hand - net realisable value	21,857	31,632
Drilling inventory - net realisable value	124,227	1,109,677
	146,084	1,141,309

 

Inventories have been reduced by $995,225 (2019: $161,354) as a result of write-down to net realisable value, which includes a $166,916 write-down to Bhandut JV inventories which have been reclassified to Assets held for sale (note 20).

Accounting Policy

Inventories comprising materials and consumables and petroleum products are measured at the lower of cost and net realisable value, on a 'weighted average' basis.  Costs comprises direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate portion of variable and fixed overhead expenditure based on normal operating capacity.  Given that oil activities have not achieved commercial levels of production, oil on hand is recognised at net realisable value.  Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

 

 

 

NOTE 11 - PROVISIONS

	2020	2019
	$	$
Site Restoration, Well Abandonment and Other Provisions
Balance at 1 July	4,589,391	4,354,675
Provision adjustments during the year - Termination (refer note 28)	297,885	-
Provision adjustments during the year- Restoration	1,131,420	-
Reclassification to liabilities directly associated with the assets held for sale (Note 20)	(441,264)	-
Effect of movements in exchange rates	93,840	234,716
Balance at 30 June	5,671,272	4,589,391
Current - Termination (refer note 28)	1,165,671	855,554
Non-current - Restoration	4,505,601	3,733,837
	5,671,272	4,589,391
Current - Employee benefits	143,110	148,731

 

Accounting Policy

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and when a reliable estimate can be made of the amount of the obligation.

Provisions are made for site rehabilitation of an oil and gas field on an incremental basis during the life of the field (which includes the field plant closure phase). Provisions include reclamation, plant closure, waste site closure and monitoring activities. These costs have been determined on the basis of current costs, current legal requirements and current technology. At each reporting date the rehabilitation provision is re-measured to reflect any changes in the timing or amounts of the costs to be incurred. Any such changes are dealt with on a prospective basis.

Short-term employee benefits for wages, salaries and fringe benefits are measured on an undiscounted basis and expensed as the related service is provided. A liability is recognised based on remuneration wage and salary rates that the Group expects to pay as at the reporting date as a result of past service provided by the employee, if the obligation can be measured reliably.

The Group's net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service up to the reporting date. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates; and is discounted using the high quality corporate bond rate at reporting date which have maturity dates approximating to the terms of the Group's obligations.

Key Estimates and Assumptions

In relation to rehabilitation provisions the Group estimates the future removal costs of onshore oil and gas production facilities, wells and pipeline at the time of installation of the assets. In most instances, removal of assets occurs many years into the future. This requires judgemental assumptions regarding removal date, future environmental legislation, the extent of reclamation activities required, the engineering methodology for estimating cost, future removal technologies in determining the removal cost, and discount rates to determine the present value of these cash flows. 

 

 

NOTE 12 - CASH AND CASH EQUIVALENTS

 

	2020	2019
	$	$
Cash at bank and on hand	173,816	357,970

The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 23.

Accounting Policy

Cash and cash equivalents comprise bank balances, call deposits, cash in transit and short-term deposits with an original maturity of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

Reconciliation of Cash Flows from Operating Activities

	2020	2019
	$	$
Net loss	(5,841,096)	(3,118,121)
Amortisation of development assets	18	1,931
Depreciation	26,867	32,763
Interest expense	43,439	72,695
Provision for doubtful debts expense	(107,313)	108,206
Impairment of development assets	1,348,458	-
Loss on disposal of assets	12,169	8,227
Equity settled share-based payments	-	110,935
Unrealised foreign exchange (gain)/loss	(6,083)	(46,688)
Operating Loss Before Changes in Working Capital and Provisions	(4,523,541)	(2,830,052)
Movement in trade and other payables	384,409	(82,065)
Movement in prepayments	132,253	(41,193)
Movement in trade and other receivables	(114,927)	(45,269)
Movement in provisions	277,744	-
Movement in inventories	991,935	161,936
Movement in employee benefits	14,520	(125,920)
Net Cash Used in Operating Activities	(2,837,661)	(2,962,563)

 

 

 

NOTE 13 - TRADE AND OTHER RECEIVABLES

	2020	2019
	$	$
Current
Allocation of receivables
Joint venture receivables	458,829	353,492
Other receivables	96,066	144,482
Shares to be issued	90,449	-
	645,344	497,974
Joint venture receivables
Joint venture receivables	6,394,990	6,272,808
Provision for doubtful debts	(5,936,161)	(5,919,316)
	458,829	353,492
Other receivables
Corporate receivables	240,793	288,040
Provision for doubtful debts	(144,727)	(143,558)
	96,066	144,482

 

Joint venture receivables include the Group's share of outstanding cash calls and recharges owing from the joint venture partners, as well as other minor receivables.

The Group considers that there is evidence of impairment if any of the following indicators are present; financial difficulties of the debtor, probability that the debtor will dispute amounts owing and default or delinquency in payment (more than one year old). Whilst the Group has been in ongoing discussions with its joint venture partner Gujarat State Petroleum Corporation (GSPC), for repayment of disputed and other amounts owing, in line with identified impairment indicators, an assessment has been made of the recoverable balance as at 30 June 2020. Each receivable has been assessed individually for recovery, and those deemed to have a low chance of recovery have been fully provided for in the current year. Accordingly, the Indian cash calls receivable have been fully provided for.

The Group is in continuing discussions with GSPC in order to resolve the outstanding issues and recover the outstanding amounts.

The carrying value of trade and other receivables approximates its fair value due to the assessment of recoverability.

Details of the Group's credit risk are disclosed in note 23(b).

 

	2020	2019
	$	$
Movement in provision for doubtful debts
Balance at 1 July	(6,062,874)	(5,497,703)
Provisions (made)/reversed during the year	107,313	(108,206)
Provision adjustment, as at 1 July 2018, on adoption of AASB 9	-	(177,874)
Effect of movements in exchange rates	(125,327)	(279,091)
Balance at 30 June	(6,080,888)	(6,062,874)
Allocation of impairment loss
Joint venture receivables	(5,936,161)	(5,919,316)
Other receivables	(144,727)	(143,558)
	(6,080,888)	(6,062,874)

 

 

 

NOTE 13 - TRADE AND OTHER RECEIVABLES (CONTINUED)

Trade and other receivables, which includes receivables, loans and deposits, are initially recognised when they are originated.  All other financial assets are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

All trade and other receivables do not include a significant financing component and are therefore initially measured at the transaction price. 

On initial recognition, trade and other receivables are classified as measured as at amortised cost.  Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

-       It is held within a business model whose objective is to hold assets to collect contractual cash flows; and

-       Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

For the purpose of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition.  'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular amount of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs).

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire , or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Impairment of Receivables

The Group recognises loss allowances for 'expected credit loss' (ECL's) on financial assets measured at amortised cost.  Loss allowances for trade and other receivables are always measured at an amount equal to lifetime ECL's.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL's, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort.  This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment and including forward-looking information.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 90 days due past.

Lifetime ECL's are the ECL's that result from all possible default events over the expected life of a financial instrument.

Measurement of ECL's

ECL's are a probability-weighted estimate of credit losses.  Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive.  ECL's are discounted at the effective interest rate of the financial asset.

Expected credit loss assessment

The Group uses its allowance schedule to measure the ECLs of trade and other receivables.  The allowance schedule is based on actual credit loss experience over the past years.  The ECL computed is purely derived from historical data which management is of the view that the historical conditions are representative of the conditions prevailing at the reporting date.

Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.

 

 

NOTE 14 - TRADE AND OTHER PAYABLES

	2020	2019
	$	$
Trade creditors	507,204	302,338
Accruals	564,140	394,846
	1,071,344	697,184

 

The Company's assessment in note 13, of the recoverability of outstanding cash call amounts owing from its joint venture partner (GSPC) has resulted in an additional impairment and consequently the Company is of the opinion that the Cambay Joint Venture will be unable to meet its third party liabilities, without financial support from the Company as Operator, due to non-payment of outstanding cash calls by the Joint Venture partner. As a result, the Group has accrued an additional $156,946 at 30 June 2020 (2019: $76,116) to cover Cambay and Bhandut Joint Venture third party liabilities.

The carrying value of trade and other payables is considered to approximate its fair value due to the short nature of these financial liabilities.

Accounting Policy

Trade and other payables are recorded at the value of the invoices received and subsequently measured at amortised cost and are non-interest bearing. The liabilities are for goods and services provided before year end, that are unpaid and arise when the Group has an obligation to make future payments in respect of these goods and services. The amounts are unsecured. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

 

 

NOTE 15 - BORROWINGS

	2020	2019
	$	$
Unsecured Loans	769,555	563,955
	769,555	563,955

 

Terms and repayment schedule

At 30 June 2020, the terms and conditions of outstanding loans are as follows:

				2020 $		2019 $
	Currency	Nominal interest rate	Year of maturity	Face value	Carrying amount	Face value	Carrying amount
Unsecured loans - from shareholders and financiers
Series A loan - AUD $330,000 (fully repaid)	AUD	5.0%	-	-	-	330,000	325,205
Series B loan - AUD $250,000 (fully drawn)	AUD	5.0%	2020	250,000	247,357	250,000	238,750
Series C loan - GBP £125,000 (fully drawn)	GBP	5.0%	2020	223,774	221,409	-	-
Series D loan - GBP £225,000 (drawn £185,000))	GBP	5.0%	2021	331,185	300,789	-	-
				804,959	769,555	580,000	563,955

 

At balance date, options had been issued to the lenders in connection to the above loans, as follows:

a)     Series B: 115,723,273 share options @ £0.0011 exercisable on or before the loan maturity date of 31 July 2020;

b)     Series C: 59,523,810 share options @ £0.0021 exercisable on or before the loan maturity date of 1 August 2020; and

c)     Series D: 107,142,857 share options @ £0.0021 exercisable on or before 1 August 2020, and 204,545,455 share options @£0.0011 exercisable on or before the loan maturity date of 30 June 2021.

In determining the fair value of the liability component of these borrowing arrangements, it has been estimated that the effective interest rate of similar borrowings without a share option component is 18%.  The fair value of the share options equity component of these borrowing arrangements has been recognised in the Loans Options Reserve as the loans have been treated as a convertible note.  That is, the borrowing arrangement falls within the definition of a compound financial instrument and as such as been classified as both a financial liability and equity.

The 115,723,273 share options @ £0.0011 exercisable on or before 31 July 2020, attached to the above-mentioned Series B loans, were not exercised and have lapsed.

The 59,523,810 share options @ £0.0021 exercisable on or before 1 August 2020, attached to the above-mentioned Series C loans, were not exercised and have lapsed.

The 107,142,857 share options @ £0.0021 exercisable on or before 1 August 2020, attached to the above-mentioned Series D loans, were not exercised and have lapsed.

On 23 July 2019, the Company entered into an amendment agreement to vary the terms of its Series C loan funding facility of £125,000 entered into on 3 February 2020.  Pursuant to the amendment, the loan repayment date has been extended from 1 August 2020 to 31 October 2020.  In addition, the Company will issue 113,636,364 new options to the lenders at an exercise price of £0.0011 and expiry date of 29 January 2021, which is subject to shareholder approval on or before 30 November 2020.  All other loan terms and conditions remain the same; and are extended to 31 October 2020.

On 24 August 2020, the Series B A$250,000 loan was fully repaid, together with interest payable.

Pursuant to an amendment agreement to the Series C loan of GBP£125,000 loan announced on 30 October 2020, the loan repayment date has been extended from 31 October 2020 to 31 December 2020.  All other terms remain the same and are extended to 31 December 2020.

The loans are subject to the following key undertakings without prior approval by the lenders:

·      Not to dispose of assets having an aggregate value of more than $1 million;

·      Not to incur any financial indebtedness more than $50,000; and

·      Not to incur any aggregate payment or outgoing exceeding $1m (except for employee benefit expenses).

 

 

NOTE 15 - BORROWINGS (CONTINUED)

Accounting Policy

General

All borrowings are initially recognised when the Group becomes a party to the contractual provisions of the lending instrument.  All borrowings are initially recognised at fair value less transaction costs.  Borrowings are subsequently carried at amortised cost.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

Series A, B, C and D Loans

The liability component of loans is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the loan as a whole and the fair value of the liability component. Subsequent to initial recognition, the liability component of the loan is measured at amortised cost using the effective interest method. The equity component of a loan is not remeasured. Interest related to the financial liability is recognised in profit or loss.

 

NOTE 16 - EXPENDITURE COMMITMENTS

Exploration Expenditure Commitments

In order to maintain rights of tenure to exploration permits, the Group is required to perform exploration work to meet the minimum expenditure requirements specified by various state and national governments. These obligations are subject to renegotiation when application for an exploration permit is made and at other times. These obligations are not provided for in the financial report. The expenditure commitments are currently estimated to be $nil (2019: $nil).

There are no minimum exploration work commitments in the Cambay and Bhandut Production Sharing Contracts.

There are no minimum exploration work commitments in the Cooper-Eromanga Basins as the two Petroleum Exploration Licences and the 27 Petroleum Retention Licences in the Basins are currently in suspension status with the Department for Energy and Mining, South Australia. 

When obligations expire, are re-negotiated or cease to be contractually or practically enforceable, they are no longer considered to be a commitment.

Further expenditure commitments for subsequent permit periods are contingent upon future exploration results. These cannot be estimated and are subject to renegotiation upon expiry of the existing exploration leases.

Capital Expenditure Commitments

The Group had no capital commitments as at 30 June 2020 (2019: Nil).
 

NOTE 17 - PROPERTY, PLANT AND EQUIPMENT

	Motor Vehicles $	Plant and Equipment $	Office Furniture $	Total $
Cost
Balance at 1 July 2018	9,781	888,121	144,376	1,042,278
Disposals	-	(681)	(13,841)	(14,522)
Currency translation differences	527	24,998	4,146	29,671
Balance at 30 June 2019	10,308	912,438	136,830	1,059,576
Additions	-	1,453	-	1,453
Disposals	-	(21,221)	(43,673)	(64,894)
Currency translation differences	225	10,684	1,772	12,681
Reclassification to assets held for sale (Note 19)	-	(36,354)	-	(36,354)
Balance at 30 June 2020	10,533	867,000	94,929	972,462
Depreciation and Impairment Losses
Balance at 1 July 2018	9,397	743,779	110,172	863,348
Depreciation charge for the year	108	28,682	3,973	32,763
Disposals	-	(655)	(5,068)	(5,723)
Currency translation differences	508	19,095	3,658	23,261
Balance at 30 June 2019	10,013	790,901	112,735	913,649
Depreciation charge for the year	94	23,275	3,498	26,867
Disposals	-	(17,728)	(35,049)	(52,777)
Currency translation differences	217	8,100	1,551	9,869
Reclassification to assets held for sale (Note 19)	-	(29,186)	-	(29,186)
Balance at 30 June 2020	10,324	775,362	82,736	868,422
Carrying amounts
At 1 July 2019	295	121,537	24,095	145,927
At 30 June 2020	209	91,638	12,193	104,040

Accounting Policy

Property, plant and equipment is measured at cost less accumulated depreciation and any accumulated impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located and an appropriate proportion of overheads.

Gains and losses on disposal are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net in the consolidated statement of profit or loss and other comprehensive income.

Depreciation is calculated using the reducing balance or straight line method over the estimated useful life of the assets, with the exception of software which is depreciated at prime cost. The estimated useful lives in the current and comparative periods are as follows:

·     Motor vehicles                   4 to 7 years

·     Plant and equipment         2 to 7 years

·     Office furniture                 2 to 10 years

Depreciation methods, useful lives and residual values are reviewed and adjusted if appropriate, at each financial year end.

 

Impairment of Property, Plant and Equipment

The carrying value of assets are assessed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated.

 

 

 

This section addresses the Group's capital structure, the Group structure and related party transactions, as well as including information on how the Group manages various financial risks.

 

NOTE 18 - ISSUED CAPITAL AND RESERVES

The reconciliation of the movement in capital, reserves and accumulated losses for the consolidated entity can be found in the consolidated statement of changes in equity.

(a)   Issued Capital

Ordinary Shares	2020 Number of Ordinary Shares	2020 $ Issued Capital	2019 Number of Ordinary Shares	2019 $ Issued Capital
On issue at 1 July - fully paid	2,587,318,001	176,502,200	2,001,968,379	174,046,036
Issue of share capital
Shares issued for cash (2) (4) (5) (7)	874,289,063	2,365,288	458,793,303	2,126,049
Shares issued for non-cash (1) (3)	62,873,896	194,999	26,365,320	110,936
Shares to be issued (7)	55,555,556	90,449
Exercise of unlisted options (6)	124,060,150	330,000	100,190,999	395,367
Capital raising costs	-	(228,122)	-	(176,188)
Balance at 30 June - fully paid	3,704,096,666	179,254,814	2,587,318,001	176,502,200

 

Refer notes following for additional information and Note 23 for details of unlisted options.

The issue of  shares in lieu of non-executive director income were approved by shareholders at the Annual General Meeting (AGM) held on 29 November 2018 for the period from 1 November 2018 to 31 October 2019; and the AGM held on 27 November 2019 for the period from 1 November 2019 to 1 October 2020.  The shares shall be issued at a price based upon the 10-Day VWAP up to the applicable quarter end for the period.

In accordance with the ASX waiver granted on 22 October 2019, the Company advises that the number of remuneration shares that were issued to directors totalled nil for the year ended 30 June 2020, which was equivalent to 0% of the Company's issued capital as at 30 June 2020.

The Non-Executive directors were entitled to the issue of 10,399,814 remuneration shares during the financial year ended 30 June 2020.  These remuneration shares will be issued in the next financial year.

Additional information of the issue of ordinary shares and unlisted options:

¹⁾         Pursuant to an announcement on 7 August 2019 relating to an agreement with Holloman Energy Corporation to acquire an interest in petroleum exploration licences (PEL's 112 & 114) in the Cooper-Eromanga Basins in South Australia, the Company issued, in accordance with the agreement:

-       24,250,150 new ordinary shares on 7 August 2019 at a deemed price of $0.003; and

-       16,166,767 new ordinary shares on 14 October 2019 at the above-mentioned deemed price.

²⁾         Pursuant to an equity raise announcement on 31 July 2019, relating to the placement of 257,329,999 new ordinary shares at an issue price of £0.0013 (A$0.002330), the Company issued the shares on 13 August 2019.

³⁾         Pursuant to an announcement on 14 August 2019 relating to an agreement with Perseville Investing Inc and Terra Nova Energy (Australia) Pty Ltd to acquire additional interests in petroleum exploration licenses (PEL's 112 & 114), the Company issued, in accordance with the agreement:

-       9,166,333 new ordinary shares on 14 August 2019 at a deemed price of $0.003; and

-       13,290,646 new ordinary shares on 14 October 2019 at the above-mentioned deemed price.

⁴⁾         Pursuant to an equity raise announcement on 30 September 2019, relating to the placement of 315,789,474 new ordinary shares at an issue price of £0.0019 (A$0.003480):

-       118,421,053 shares were issued on 14 October 2019; and

-       197,368,421 shares were issued on 21 October 2019.

 

⁵⁾         Pursuant to an equity raise announcement on 30 October 2019, relating to the placement of 78,947,368 new ordinary shares at a price of £0.0019 (A$0.00356), all 78,947,368 shares were issued on 5 November 2019.
 

NOTE 18 - ISSUED CAPITAL AND RESERVES (CONTINUED)

 

⁶⁾         Pursuant to the Company's announcement on 31 December 2019 relating to the exercise/underwriting of 124,060,150 options convertible at $0.00266 each, 124,060,150 shares were issued on 3 January 2020.

 

⁷⁾         Pursuant to equity raise announcements on 15 March 2020 and 23 April 2020, relating to the placement of 277,777,778 new ordinary shares at an issue price of £0.0009 (A$0.001792), the first tranche of 222,222,222 shares were issued on 15 May 2020.

Other receivables (refer Note 13) include an amount of $90,449 receivable in connection to the second tranche of 55,555,555 shares which have been recognised at balance date given that a contractual right to receive settlement exists.  This amount was received in July 2020.

 

The Company does not have authorised capital or par value in respect of its issued shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

Accounting Policy

Ordinary shares are classified as equity. Transaction costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Subsequent Event

On 17 July 2020, the Company announced that it had issued the second tranche of 55,555,555 shares at £0.0009 (A$0.001792) pursuant to the equity raise announcements on 15 March 2020 and 23 April 2020.

 

(b)   Reserves

	2020	2019
	$	$
Foreign Currency Translation Reserve	7,341,214	7,376,163
Option Reserve	69,202	36,485
Loans Option Reserve	35,404	88,740
	7,445,820	7,501,388

Foreign Currency Translation Reserve (FCTR)

The foreign currency translation reserve is comprised of all foreign currency differences arising from the translation of the financial statements of foreign operations from their functional currency to Australian dollars.

The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and are presented within equity in the FCTR.

Option Reserve

The option reserve recognises the fair value of options issued but not exercised. Upon the exercise, lapsing or expiry of options, the balance of the option reserve relating to those options is transferred to accumulated losses.

 

 

NOTE 19 - CONSOLIDATED ENTITIES

	Country of  Incorporation	Ownership Interest %
		2020	2019
Parent Entity
Oilex Ltd	Australia
Subsidiaries
Independence Oil and Gas Limited	Australia	100	100
Admiral Oil and Gas Holdings Pty Ltd	Australia	100	100
Admiral Oil and Gas (106) Pty Ltd	Australia	100	100
Admiral Oil and Gas (107) Pty Ltd	Australia	100	100
Admiral Oil Pty Ltd	Australia	100	100
Oilex (JPDA 06-103) Ltd	Australia	100	100
Merlion Energy Resources Private Limited	India	100	100
Oilex N.L. Holdings (India) Limited	Cyprus	100	100
Oilex (West Kampar) Limited	Cyprus	100	100
CoEra Limited (incorporated 7 October 2019)	Australia	100	-
Holloman Petroleum Pty Ltd	Australia	100	-
Cordillo Energy Pty Ltd (incorporated 18 October 2019)	Australia	100	-
Oilex EIS Limited (incorporated 12 December 2019)	United Kingdom	100	-

 

Acquisition of Subsidiary

On 16 October 2019, the Group completed the acquisition of 100% of the shares in Holloman Petroleum Pty Ltd pursuant to the share purchase agreement entered into with Holloman Energy Corporation.

Consideration transferred

The following table summarises the acquisition-date fair value of each major class of consideration transferred.

Cash	72,750
Equity instruments (40,416,917 ordinary shares)	121,251
Total consideration transferred	194,001

 

The fair value of the ordinary shares issued was based on the listed share price of the Company at 7 August 2019 of $0.003 per share.

Acquisition related costs

The Group incurred acquisition-related costs of $17,000 relating to external legal fees.  These costs have been included in 'administration expense' in the condensed consolidated statement of profit or loss and OCI.

Identifiable assets acquired

The following table summarises the recognised amounts of assets acquired at the date of acquisition.  Nil liabilities were assumed.

Trade and other receivables	48,500
Exploration and evaluation	145,501
Total identifiable assets acquired	194,001

 

Trade and other receivables comprised Petroleum Exploration Licence bonds of $48,500, of which $nil was expected to be uncollectable at the date of acquisition.

Accounting Policy

The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. 

 

 

 

NOTE 20 - DISPOSAL GROUPS HELD FOR SALE

On 28 January 2020, the Company announced that it had accepted an offer from Kiri to acquire the Company's PI in Bhandut.  Pursuant to the Agreement entered with Kiri, the Company advised it will receive US$0.14 million in cash proceeds for the sale of its PI to Kiri.  The sale has since progressed substantially with all the necessary documentation submitted to the Government of India to affect the transfer of the PI to Kiri.   Delays with the process; however, have been experienced due to the impact of Covid-19 in India.

On 27 May 2020, the Company announced that it has signed a conditional binding Heads of Agreement with Armour Energy Limited, an ASX-listed company, for the proposed sale of all of its interests in the Cooper-Eromanga Basin to Armour.  On the 15 June 2020 the Company further announced it has entered into a conditional binding Share Purchase Agreement (SPA) with Armour. The transaction is subject to the satisfaction of various conditions precedent which are expected to be satisfied.

Accordingly, these operations are presented as a disposal group held for sale.

As at 30 June 2020, the disposal group comprised assets of $327,791 less liabilities of $451,469, detailed as follows:

 

	$
Trade and other receivables	79,333
Inventories	3,290
Exploration and evaluation	238,000
Property, plant and equipment	7,168
Trade and other payables	(10,205)
Provisions (non-current)	(441,264)
	(123,678)

 

Accounting Policy

Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable.

An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised.

Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities.

 

 

 

NOTE 21 - JOINT ARRANGEMENTS

The Group's interests in joint arrangements as at 30 June 2020 are detailed below.  Principal activities are oil and gas exploration, evaluation, development and production.

(a) Joint Operations Interest

Permit		2020 %	2019 %
OFFSHORE
JPDA 06-103 (1)	Timor Leste and Australia (JPDA)	10.0	10.0
ONSHORE
Cambay Field	India (Cambay Basin)	45.0	45.0
Bhandut Field	India (Cambay Basin)	40.0	40.0
Sabarmati Field (2)	India (Cambay Basin)	40.0	40.0
West Kampar Block (3)	Indonesia (Central Sumatra)	67.5	67.5

 

⁽¹⁾   The JPDA 06-103 Production Sharing Contract was terminated on 15 July 2015. The Joint Operating Agreement between the Joint Venture participants is still in effect.

⁽²⁾   The Sabarmati Production Sharing Contract was cancelled on 10 August 2016. The Joint Operating Agreement between the Joint Venture participants is still in effect.

⁽³⁾  Oilex (West Kampar) Limited is entitled to have assigned an additional 22.5% to its holding of 45% through exercise of its rights under a Power of Attorney granted by PT Sumatera Persada Energi (SPE), following the failure by SPE to repay funds due. The assignment request had been provided to BPMigas (now SKK Migas), the Indonesian Government regulator, and had not been approved or rejected. The West Kampar Contract Area Production Sharing Contract was terminated on 15 August 2018. 

On 27 July 2020, the Company announced that substantial progress has been made towards the Company's strategic objective to regain a participating interest in the West Kampar PSC in Indonesia, which is expected to lead, subject to financing, to recommencing production from the Pendalian Oilfield (refer Note 29 c) for further commentary. 

 

(b) Joint Operations

The aggregate of the Group's interests in all joint operations is as follows:

	2020 $	2019 $
Current assets
Cash and cash equivalents	33,360	81,872
Trade and other receivables (1)	2,109,359	1,907,808
Inventories	1,133,931	1,054,795
Prepayments	5,399	36,286
Total current assets	3,282,049	3,080,761
Non-current assets
Exploration and evaluation	581,321	568,887
Development assets	9,823,965	6,495,591
Property, plant and equipment	95,509	111,877
Total non-current assets	10,500,797	7,176,355
Total assets	13,782,846	10,257,116
Current liabilities
Trade and other payables	(283,038)	(137,094)
Total liabilities	(283,038)	(137,094)
Net assets	13,499,808	10,120,022

 

⁽¹⁾ Trade and other receivables of the joint operations is before any impairment and provisions.

 

 

 

NOTE 21 - JOINT ARRANGEMENTS (CONTINUED)

(c) Joint Operations Commitments

In order to maintain the rights of tenure to exploration permits, the Group is required to perform exploration work to meet the minimum expenditure requirements specified by various state and national governments. These obligations are subject to renegotiation when application for an exploration permit is made and at other times. These obligations are not provided for in the financial report.

The Group's has no exploration expenditure commitments attributable to joint operations during the year (2019: $nil).

There are no minimum exploration work commitments in the Cambay and Bhandut Production Sharing Contracts.

Accounting Policy

Joint arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual agreed sharing of control of the arrangements which exists only when decisions about the relevant activities required unanimous consent of the parties sharing control. Joint arrangements are classified as either a joint operation or joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the arrangement.

To the extent the joint arrangement provides the Group with rights to the individual assets and obligations arising from the joint arrangement, the arrangement is classified as a joint operation and as such, the Group recognises its:

·    Assets, including its share of any assets held jointly;

·    Liabilities, including its share of any liabilities incurred jointly;

·    Revenue from the sale of its share of the output arising from the joint operation;

·    Share of revenue from the sale of the output by the joint operation; and

·    Expenses, including its share of any expenses incurred jointly.

The Group's interest in unincorporated entities are classified as joint operations.

Joint Ventures provides the Group a right to the net assets of the venture and are accounted for using the equity method. The Group currently has no joint venture arrangements.

 

 

 

NOTE 22 - RELATED PARTIES

Identity of Related Parties

The Group has a related party relationship with its subsidiaries (refer note 19), joint operations (refer note 21) and with its key management personnel.

Key Management Personnel

The following were key management personnel of the Group at any time during the financial year and unless otherwise indicated were key management personnel for the entire period:

Non-Executive Directors	Position
Brad Lingo (resigned 5 May 2020)	Non-Executive Chairman
Paul Haywood	Non-Executive Director
Peter Schwarz (appointed 4 September 2019)	Non-Executive Director
Executive Directors	Position
Joe Salomon (1)	Chairman and Managing Director
Mark Bolton (2)	Executive Director and Company Secretary
Executive	Position
Ashish Khare	Head - India Assets

⁽¹⁾        Current Chairman from 5 May 2020 following Mr Lingo's resignation.

⁽²⁾        Mr Bolton, previously Chief Financial Office and Company Secretary, was appointed to the board on 26 March 2020^.

 

 

Key Management Personnel Compensation

Key management personnel compensation comprised the following:

	2020 $	2019 $
Short-term employee benefits	757,848	615,475
Other long-term benefits	34,546	40,542
Non-monetary benefits	5,777	21,252
Post-employment benefits	67,372	59,668
Equity compensation benefits - shares issued in lieu of salary	33,103	55,454
	898,646	792,391

 

Individual Directors' and Executives' Compensation Disclosures

Information regarding individual Directors' and Executives' compensation is provided in the Remuneration Report section of the Directors' Report. Apart from the details disclosed in this note, or in the Remuneration Report, no Director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving Directors' interests existing at year end.

Key Management Personnel Transactions with the Company or its Controlled Entities

There were no transactions in the current year between the Group and entities controlled by key management personnel.

 

 

 

 

NOTE 23 - FINANCIAL INSTRUMENTS

(a)   Financial Risk Management

The Group has exposure to the following risks arising from financial instruments.

i)    Credit Risk

ii)    Liquidity Risk

iii)   Market Risk

This note presents qualitative and quantitative information in relation to the Group's exposure to each of the above risks and the management of capital.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework and the development and monitoring of risk management policies. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

(b)   Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations; and arises principally from the Group's receivables from customers and joint ventures.

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group's customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset. The maximum exposure to credit risk at the reporting date was:

	2020 $	2019 $
Cash and cash equivalents	173,816	357,970
Trade and other receivables - current	564,397	497,974
	738,213	855,944

 

The Group's cash and cash equivalents are held with major banks and financial institutions.

The Group's gross share of outstanding cash calls and recharges owing from joint venture partners and joint operations is $6,294,032 (2019: $6,129,333).

The Group's most significant customers are Enertech Fuel Solutions Pvt Limited (Enertech) with gas sales representing nil% of the Group's total revenues (2019: 39%) and Indian Oil Corporation Limited, in its capacity as nominee of the Government of India, with oil sales representing nil% of the Group's total revenues (2019: 61%). Enertech accounts for $nil of trade receivables as at June 2020 (2019: $nil), whilst the Indian Oil Corporation Limited accounts for $nil of trade receivables (2019: $nil).

Impairment Losses

The aging of the trade and other receivables at the reporting date was:

	2020	2019
	$	$
Consolidated Gross
Not past due	226,557	189,941
Past due 0-30 days	177,421	111,566
Past due 31-120 days	141,146	202,591
Past due 121 days to one year	738,319	524,518
More than one year	5,442,789	5,532,232
	6,726,232	6,560,848
Provision for doubtful debts	(6,080,888)	(6,062,874)
Trade and other receivables net of provision	645,344	497,974

 

 

 

NOTE 23 - FINANCIAL INSTRUMENTS (CONTINUED)

(b)   Credit Risk (continued)

Receivable balances are monitored on an ongoing basis. The Group may at times have a high credit risk exposure to its joint venture partners arising from outstanding cash calls. 

The Group considers an allowance for expected credit losses (ECL's) for all debt instruments.  The Group applies a simplified approach in calculating ECL's.  The Group bases its ECL assessment on its historical credit loss experience, adjusted for factors specific to the debtors and the economic environment including, but not limited to, financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and delinquency in payments.

The Group has been in discussions with its joint venture partner for repayment of disputed and other amounts owing. The Group is continuing discussions in order to resolve the outstanding issues and recover payment of the outstanding amounts, however due to the age of the receivables amounts, is uncertain of the timing or of full recovery.

(c)   Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.  The Group'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 without incurring unacceptable losses or risking damage to the Group's reputation.

The Group manages liquidity by monitoring present cash flows and ensuring that adequate cash reserves, financing facilities and equity raisings are undertaken to ensure that the Group can meet its obligations.

The table below analyses the Group's financial liabilities by relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

			Contractual Cash Flows
	Carrying Amount   $	Face Value     $	Total     $	2 months or less   $	2 - 12 months   $	Greater than 1 year $
2020
Trade and other payables	1,071,341	1,071,341	1,071,341	1,071,341	-	-
Borrowings	769,555	804,959	804,959	250,000	554,959	-
Total financial liabilities	1,840,896	1,876,300	1,876,300	1,321,341	554,959	-
2019
Trade and other payables	697,184	697,184	697,184	697,184	-	-
Borrowings	563,955	580,000	580,000	-	580,000
Total financial liabilities	1,261,139	1,277,184	1,277,184	697,184	580,000	-

 

Subsequent Events

 

On 31 July 2020, the Company announced that it has entered into an amendment agreement to vary the repayment obligations for its Series C (GBP£125,000) loan.  Pursuant to the amendment agreement, the loan repayment date has been extended from 1 August 2020 to 31 October 2020.  All other terms remain the same and are extended to 31 October 2020, except for the issue of 113,636,364 new options exercisable at £0.0011 on or before 29 January 2021.

The options, which if exercised in their entirety, will result in a cash inflow to the Company of £125,000 (A$224,901).  The proceeds from such conversion of options will be applied to the outstanding Series C Loan balance, which is fully drawn down.

Pursuant to an amendment agreement to the Series C loan of GBP£125,000 loan announced on 30 October 2020, the loan repayment date has been extended from 31 October 2020 to 31 December 2020.  All other terms remain the same and are extended to 31 December 2020.

 

 

 

 

 

 

 

  NOTE 23 - FINANCIAL INSTRUMENTS (CONTINUED)

(d)   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 Group'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.

i)      Currency risk

An entity is exposed to currency risk on sales and purchases that are denominated in a currency other than the functional currency of the entity.  The currencies giving rise to this risk are the United States dollar (USD), Indian rupee (INR) and British pound (GBP).

The amounts in the table below represent the Australian dollar equivalent of balances in the Oilex Group Entities that are held in a currency other than the functional currency in which they are measured in that Group Entity.  The exposure to currency risk at balance date was as follows:

 

 

In equivalents of Australian dollar	2020				2019
	USD	INR	GBP	USD		INR	GBP
	$	$	$	$		$	$
Cash and cash equivalents	1,591	67,746	20,346	20,095		139,811	24,467
Trade and other receivables (1)	267,162	3,136,248	-	229,196		3,219,109	-
Trade and other payables	(29,971)	(403,585)	(128,669)	(3,978)		(312,161)	(4,665)
Loans	-	-	(522,198)	-		-	-
Net balance sheet exposure	238,782	2,800,409	(630,521)	245,313		3,046,759	19,802

(1)   Trade and other receivables of the joint operation is before any impairment and provisions.

 

The following significant exchange rates applied during the year:

	Average Rate		Reporting Date Spot Rate
AUD	2020	2019	2020	2019
USD	0.6714	0.7156	0.6863	0.7013
INR	48.5957	50.5060	51.8000	48.4100
GBP	0.5329	0.5527	0.5586	0.5535

Foreign Currency Sensitivity

A 10% strengthening/weakening of the Australian dollar against the following currencies at 30 June would have (increased)/ decreased the loss by the amounts shown below.  This analysis assumes that all other variables, in particular interest rates, remain constant.  The analysis is performed on the same basis for 2019.

	2020 $	2019 $
10% Strengthening
United States dollars (USD)	23,274	24,351
Indian rupees (INR)	290,819	304,676
British pounds (GBP)	63,052	1,980
10% Weakening
United States dollars (USD)	(23,274)	(24,351)
Indian rupees (INR)	(290,819)	(304,676)
British pounds (GBP)	(63,052)	(1,980)

 

 

 

NOTE 23 - FINANCIAL INSTRUMENTS (CONTINUED)

(d)   Market Risk (continued)

ii)       Interest rate risk

At the reporting date the interest rate profile of the Group's interest-bearing financial instruments was:

	Carrying Amount
	2020 $	2019 $
Fixed Rate Instruments
Financial assets (short-term deposits included in trade receivables)	50,000	100,000
Financial liabilities (borrowings)	(769,555)	(563,955)
Variable Rate Instruments
Financial assets (cash and cash equivalents)	173,816	357,970

Cash Flow Sensitivity Analysis for Variable Rate Instruments

An increase of 100 basis points in interest rates at the reporting date would have decreased the loss by the amounts shown below.  A decrease of 100 basis points in interest rates at the reporting date would have had the opposite impact by the same amount.  This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2019.

	2020	2019
	$	$
Impact on profit or loss	1,738	3,580

 

iii)      Other market price risks

At 30 June 2020, the Group had no financial instruments with exposure to other price risks (2019: $nil).

Equity Price Sensitivity

At 30 June 2020, the Group had no exposure to equity price sensitivity (2019: $nil).

(e)   Capital Risk 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 capital structure of the Group consists of equity attributable to equity holders of the Company, comprising issued capital, reserves and accumulated losses as disclosed in the consolidated statement of changes in equity.

(f)    Fair Values of Financial Assets and Liabilities

The net fair values of financial assets and liabilities of the Group approximate their carrying values.  The Group has no off-balance sheet financial instruments, and no amounts are offset.

 

 

This section provides information on items which are required to be disclosed to comply with Australian Accounting Standards, other regulatory pronouncements and the Corporations Act 2001.

NOTE 24 - SHARE-BASED PAYMENTS

Share-based Payments Expense Shares

The following equity settled share-based payment transactions have been recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income:

	2020	2019
	$	$
Shares and rights - equity settled
Non-Executive Directors - remuneration shares (1)	-	55,422
Technical and administrative contractors	-	55,513
Total share-based payments expense	-	110,935

 

⁽¹⁾        At the Annual General Meeting held on 29 November 2018, the shareholders of the Company approved the issue of shares in lieu of cash for part of the remuneration for the Non-Executive Directors.  The Directors have also agreed to receive part of their Directors fees in the form of the Company's shares in lieu of cash payments for the period from 1 November 2018 to 31 October 2019, in order to conserve the cash reserves of the Company.  Similar shareholder approval was also received at the Annual General Meeting held on 27 November 2019 for the period from 1 November 2019 to 31 October 2020.

In accordance with the ASX waiver granted 22 October 2019, the Company advised that the number of remuneration shares that were issued to directors for the year ended 30 June 2020 totalled nil (2019 11,437,407) and the percentage of the Company's issued capital represented by these remuneration shares was nil% (2018 0.44%).

The Non-Executive directors were entitled to the issue of 10,399,814 remuneration shares during the financial year ended 30 June 2020.  These remuneration shares shall be issued in the next financial year.

As at 30 June 2020, the accrued non-executive director fees, being remuneration shares not yet issued totalled $34,908 (2019: $12,607).

Unlisted Options

At 30 June 2020, the terms and conditions of unlisted options granted by the Company to directors, employees, financiers and advisors are as follows, whereby all options are settled by physical delivery of shares:

Grant Date	Number of Instruments	Vesting Conditions	Contractual Life of Options
Key Management Personnel
Nil
Other Employees
Nil
Financiers and Advisors
19 December 2018	6,666,667	Upon granting	2 years
30 September 2019	11,842,105	Upon granting	2 years
30 October 2019	2,960,526	Upon granting	2 years
3 February 2020	166,666,667	Upon granting	6 months
19 May 2020	115,727,273	Upon granting	10 weeks
19 May 2020	204,545,455	Upon granting	13 months
Total Options	508,408,693

Subsequent to reporting date, no options have been exercised; however, the 166,666,667 and 115,727,273 options have lapsed.

Accounting Policy

Options allow directors, employees and advisors to acquire shares of the Company. The fair value of options granted to employees is recognised as an employee 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 Black-Scholes Model, 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.

 

 

NOTE 24 - SHARE-BASED PAYMENTS (CONTINUED)

Options may also be provided as part of consideration for services by brokers and underwriters. Any unlisted options issued to the Company's AIM broker are treated as a capital raising cost.

When the Group grants options over its shares to employees of subsidiaries, the fair value at grant date is recognised as an increase in the investments in subsidiaries, with a corresponding increase in equity over the vesting period of the grant.

The number and weighted average exercise prices (WAEP) of unlisted share options are as follows:

	WAEP	Number	WAEP	Number
	2020	2020	2019	2019
Outstanding at 1 July	161,220,442	$0.004	$0.005	77,441,666
Lapsed during the year	(215,218,662)	$0.004	$0.35	(275,000)
Exercised during the year	(124,060,150)	$0.003	$0.004	(100,190,999)
Granted during the year
-       Granted to Brokers and Financial Advisers (1)	14,802,631	$0.004	$0.005	16,140,351
-       Series A Loan Options (2)(3)	124,060,150	$0.003	$0.004	91,666,666
-       Series B Loan Options (3)	176,392,160	$0.003	$0.004	76,437,758
-       Series C Loan Options (3)	59,523,810	$0.004	-	-
-       Series D Loan Options (3)	311,688,312	$0.003	-	-
Outstanding at 30 June	508,408,693	$0.003	$0.004	161,220,442
Exercisable at 30 June	508,408,693	$0.003	$0.004	161,220,442

 

The unlisted options outstanding at 30 June 2020 have an exercise price in the range of $0.002 to $0.004 (2019: $0.004 to $0.006) and a weighted average remaining contractual life of 0.5 years (2019: 0.2 years).

The fair value of unlisted options is calculated at the date of grant using the Black-Scholes Model. Expected volatility is estimated by considering historical volatility of the Company's share price over the period commensurate with the expected term.

 

⁽¹⁾        The following factors and assumptions were used to determine the fair value of 14,802,631 options issued to brokers and financial advisors during the year.

 

2020 Grant Date	Vesting Date	Expiry Date	Fair Value Per Option	Exercise Price	Price of Shares on Grant Date	Expected Volatility	Risk Free Interest Rate	Dividend Yield
30 Sept 2019	21 Oct 2019	21 Oct 2019	$0.004	$0.004	$0.005	133.61%	0.75%	-
30 Oct 2019	5 Nov 2019	21 Oct 2019	$0.004	$0.004	$0.004	133.61%	0.75%	-

 

⁽²⁾        124,060,150 Series A loan options were exercised during the period.

⁽³⁾        The fair value equity component of the 124,060,150 Series A, 176,392,160 Series B, 59,523,840 Series C, and 311,688,312 Loan Options  has been determined using an implied effective interest rate of 18% pa (effective interest rate on a similar borrowing without an equity component.. At loan drawdown, this amount is recognised in the Loan Option Reserve as the loans have been recognised as convertible notes.

    For further information refer to Note 15: Borrowings.

 

 

 

NOTE 25 - PARENT ENTITY DISCLOSURE

As at, and throughout, the financial year ended 30 June 2020 the parent entity of the Group was Oilex Ltd.

		2020 $	2019 $
Result of the parent entity
Loss for the year		(3,812,707)	(3,382,300)
Other comprehensive income/(loss)		(275,240)	143,085
Total comprehensive loss for the year		(4,087,947)	(3,239,215)
Financial position of the parent entity at year end
Current assets		224,271	1,164,081
Total assets		5,325,470	5,995,034
Current liabilities		1,613,752	1,160,603
Total liabilities		3,863,201	3,361,943
Net assets		1,462,269	2,633,091
Total equity of the parent entity comprising of:
Issued capital		179,254,814	176,502,200
Option reserve		35,404	36,485
Loans Options Reserve		69,202	88,740
Foreign currency translation reserve		4,776,928	5,052,168
Accumulated losses		(182,674,079)	(179,046,502)
Total equity		1,462,269	2,633,091

Parent Entity Contingencies

The Directors are of the opinion that provisions are not required in respect of the following matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

Oilex Ltd has issued a guarantee in relation to corporate credit cards. The bank guarantee amounts to $50,000. An equal amount is held in cash and cash equivalents as security by the bank. (2019: $100,000).

Parent entity capital commitments for acquisition of property plant and equipment

Oilex Ltd had no capital commitments as at 30 June 2020 (2019: Nil).

Parent entity guarantee (in respect of debts of its subsidiaries)

On 7 November 2006, Oilex Ltd issued a Deed of Parent Company Performance Guarantee in relation to the Production Sharing Contract entered into with the Timor Sea Designated Authority dated 15 November 2006.

Oilex Ltd has issued no other guarantees in respect of debts of its subsidiaries. 

 

 

 

NOTE 26 - AUDITORS' REMUNERATION

	2020 $	2019 $
Audit and review services
Auditors of the Company - PKF Perth (2019:KPMG)
Audit and review of financial reports	50,000	81,400
Audit of Joint Operations operated by Oilex Ltd    Operator proportion only (KPMG Australia)	414	414
Audit and review of financial reports (KPMG related practices)	22,687	20,656
	73,101	102,470
Other Auditors
Audit and review of financial reports (India Statutory)	5,821	5,972
	78,922	108,442
Other services
Auditors of the Company - PKF Perth (2019: KPMG)
Taxation compliance services	8,389	13,213
Taxation compliance services (KPMG related practices)	-	6,987
	8,389	20,200
Other Auditors
Taxation compliance services (India Statutory)	7,451	5,255
	15,840	25,455

 

PKF Perth were appointed as auditors of Oilex Ltd by its shareholders at a General Meeting convened on 30 June 2020.

NOTE 27 - LEASES

Short-term leases and lease of low value assets

	2020	2019
	$	$
Within one year	5,126	27,211
One year or later and no later than five years	-	-
	5,126	27,211

Lease rentals are payable as follows:

 

During the 2020 financial year, the Group leased its head office premises at Level 2, 11 Lucknow Place, West Perth, Australia. The lease commenced on 1 June 2019 for a six-month period; with expiry on 30 November 2019.  Thereafter, the Group had  the option of a month by month lease extension subject to lessor approval.

From 1 July 2020, the Group relocated its head office premises to Level 1, 11 Lucknow Place, West Perth, Australia. The lease commenced on 1 July 2020 on a monthly rolling basis, subject to 30 days notice to terminate.

	2020	2019
	$	$
Expenses related to short-term leases	76,104	-
Operating lease rentals expensed during the financial year	-	102,788

The Group leases office premises in Gandhinagar (India). The current lease had a three year term, commencing 16 October 2016; continuing thereafter on a monthly rolling basis.  On 1 July 2020, the lease was renegotiated and extended for a 12 month period to 30 June 2021.

 

Accounting Policy

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment.  The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
 

NOTE 28 - PROVISIONS and CONTINGENT LIABILITIES

Contingent Liabilities at Reporting Date

The Directors are of the opinion that provisions (except as noted below) are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

Guarantees

Oilex Ltd has issued guarantees in relation to the corporate credit cards. The bank guarantees amount to $50,000 (2019: $100,000).

Termination Penalty

Subsequent to year end the termination penalty has been settled and this is detailed in note 29 to the financial report.  The history of this contingent liability is as follows:

In October 2018, the Company announced the Autoridade Nacional Do Petroleo E Minerais (ANPM) had commenced arbitration proceedings against Oilex and its joint venture partners, in regard to the JPDA Production Sharing Contract (PSC).

On 16 August 2019, the Company announced that the JPDA joint venture had lodged a counterclaim against the ANPM for the amount US$23.3 million (plus interest) as damages arising from the wrongful termination of the PSC.

During the March 2020 quarter, the arbitration panel dismissed ANPM's application to increase their claim against the joint venture from A$17.0 million to US$22.6 million (plus interest). The arbitration hearing, which was scheduled to commence on 10 February 2020, was subsequently suspended while the parties continue their commercial settlement negotiations.

During the period, the Group has increased the provision by USD$200,000 to USD$800,000 in relation to this matter

(30 June 2019: USD$600,000).

 

NOTE 29 - SUBSEQUENT EVENTS

a)     The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has been financially negative for the consolidated entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian and Indian Governments and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

 

b)     On 17 July 2020, the Company announced it has issued the second and final tranche of 55,555,556 ordinary shares pursuant to the placement first announced on 16 March 2020; and amended as announced on 27 April 2020. The share issue was pursuant to an equity capital raising to secure further funding of £0.25 million (A$0.5 million) through the subscription of 277,777,778 new shares at £0.009 per share (0.1792 AUD cents) per share. 

The Company also announced:

·      the issue of 103,033,333 shares to advisors and consultants in lieu of cash fees payable; and

·      further to the approval by shareholders at the annual general meeting held on 30 June 2020 and the Company announcement on 15 May 2020, the Company issued the following unlisted options:

-       Series B Loan Options     115,727,273 exercisable at £0.0011 on or before 31 July 2020

-       Series D Loan Options    204,545,455 exercisable at £0.0011 on or before 30 June 2021.

c)     On 27 July 2020, the Company announced that substantial progress has been made towards the Company's strategic objective to regain a participating interest in the West Kampar PSC in Indonesia, which is expected to lead, subject to financing, to recommencing production from the Pendalian Oilfield.

Following various meetings and correspondence with the Government of Indonesia (GoI) and with the support of the Company's local Indonesian partner, the GoI has advised that our Proposed Direct Bid, through the Joint Study of the West Kampar Region, is declared administratively complete and have recorded it as a proposal for a Direct Offer through a Joint Study as stipulated in ESDM Regulation No. 35 of 2008. 

This confirmation from the GoI, which is exclusive to Oilex, provides a pathway to conduct the Joint Study on the proposed development of West Kampar which will then provide certain preferential rights in the ultimate award of the West Kampar PSC by the GoI.  Oilex's interest in the study and ultimate potential award of the PSC will be on a 50-50 joint basis with its local Indonesian partner, PT Ephindo.

d)     On 31 July 2020, the Company announced that it has taken further steps to strengthen its balance sheet as the Company continues to navigate the impact of Covid-19 on its business and global equity markets.  In particular, the Company entered into an amendment agreement to vary the repayment obligations for its Series C (GBP£125,000) loan.  Furthermore, the Company secured additional equity investment of £0.25 million to increase its working capital flexibility and reduce its financial debt obligations.

 

 

NOTE 29 - SUBSEQUENT EVENTS (CONTINUED)

Amendment to Series C Loan Funding Agreement (GBP £125,000)

Pursuant to the amendment agreement, the loan repayment date has been extended from 1 August 2020 to 31 October 2020.  All other terms remain the same and are extended to 31 October 2020, except for the issue of 113,636,364 new options exercisable at £0.0011 on or before 29 January 2021.

The options, which if exercised in their entirety, will result in a cash inflow to the Company of £125,000 (A$224,901).  The proceeds from such conversion of options will be applied to the outstanding Series C Loan balance, which is fully drawn down.

The issue of the new options is subject to shareholder approval under ASX Listing Rule 7.1 on or before 30 November 2020. Failure to secure shareholder approval will require immediate repayment of the loan principal and accrued interest.

Equity Capital Raising

The Company has arranged an equity capital raising, through Novum Securities Limited and to existing institutional shareholders, to secure further funding of £0.25 million (A$0.5 million) through the subscription of 312,500,000 new shares at GBP 0.08 pence (0.144 AUD cents) per share.

Funds raised from the subscription are intended to be applied towards increasing the Company's working capital base and debt reduction  The additional funding will support the Company's initiative to implement the settlement with GSPC, which has been delayed by the impact from Covid-19. 

On 10 August 2020, the Company announced that it has issued the 312,500,000 shares.  Pursuant to advisory agreements with Novum, the Company also issued 15,000,000 unlisted options exercisable at GBP 0.08 pence on or before 12 August 2022 upon the completion of the capital raise.

e)     On 7 August 2020, the Company, in its capacity as Operator, on behalf of the Joint Venture Participants in Joint Petroleum Development Area ("JPDA") 06-103 Production Sharing Contract ("PSC") in East Timor announced it had executed a Deed of Settlement and Release (Deed) with the Autoridade Nacional Do Petroleo E Minerais ("ANPM") to terminate the ongoing arbitration proceedings arising from the termination of the PSC by the ANPM in 2015 and settle all claims and counterclaims between the parties.

The execution of the Deed sees an amicable conclusion to the arbitration proceedings, as announced in October 2018, where Oilex and its joint venture partners in the PSC were subject to a penalty claim of US$17 million (plus interest) on a joint and several basis.  Oilex is the Operator of the PSC on behalf of the joint venture.

Under the terms of the Deed, Oilex has committed to a settlement of US$800,000 payable in the 2021 and 2022 financial years, which has been fully provided for at 30 June 2020.  In addition, the Company has entered into an unsecured loan facility agreement for US$800,000 with two of its joint venture partners to fund the settlement.  The Deed further provides the Company with the option, at its sole discretion, to extend the settlement payments into the 2023-24 financial year. 

f)      On 14 September 2020, the Company announced that it has agreed to amend the Share Purchase Agreement (SPA) with Armour Energy Limited (Armour), as announced on 15 June 2020, for the proposed sale of all of its interests in the Cooper-Eromanga Basin (Proposed Transaction). Pursuant to the SPA, Armour will acquire 100% of the issued capital of CoEra Limited (CoEra), a wholly owned Company subsidiary which holds all of Oilex's interests in the Cooper-Eromanga Basin. The amendments:

·      extend the completion date from 15 September 2020 until 15 October 2020 to enable Armour to seek its shareholder approval pursuant to ASX Listing Rule 7, with such shareholder meeting scheduled for September 18 2020, and allow additional time to satisfy the Conditions Precedent;

·      amend the date upon which Armour pays to Oilex the past costs of $125,000 to within 5 Business Days after receipt of Armour's above shareholder approval; and

·      reduce the timeframe for the Tranche 2 share adjustment from 90 days to 60 days from completion.

On 15 October 2020, the Company announced the completion of the sale of all its interests in the Cooper-Eromanga Basins to Armour Energy Limited.

g)     Pursuant to an amendment agreement to the Series C loan of GBP£125,000 loan announced on 30 October 2020, the loan repayment date has been extended from 31 October 2020 to 31 December 2020.  All other terms remain the same and are extended to 31 December 2020.

Other than the above disclosure, there has not arisen in the interval between the end of the financial year and the date of this report an item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.