Source - RNS
RNS Number : 7223J
Tlou Energy Ltd
13 September 2016
 

Tlou Energy Limited / EPIC: TLOU / Sector: Oil & Gas

13 September 2016

Tlou Energy Limited ('Tlou' or 'the Company')

Final Results

 

Tlou Energy Limited, the AIM and ASX listed company focused on delivering power in Botswana and Southern Africa through the development of coal bed methane ('CBM') projects, is pleased to announce its final results for the year ended 30 June 2016.  To view a full version of the Annual Report and Accounts please click on the following link: http://tlouenergy.com/wp-content/uploads/2016/09/Tlou-Energy-Annual-Report-2016-Final.pdf

 

Highlights

·    Government of Botswana proposed the delivery of 100MW of CBM power to be incorporated into its future generation supply plans

o Post period end proposal in place for Tlou to tender for and develop a 50MW CBM project at Lesedi

·    Significant operational progress:

o Completion of dewatering and the commencement of gas testing at the Selemo production wells

o Sustained gas flow rate achieved

o Aiming to book initial independently certified reserves later this year

·    Dual listed on the London Stock Exchange's AIM Market raising £1.2 million

·    Submitted full development Environmental Impact Statement ('EIS') - a precursor to the award of a mining licence for Lesedi

 

Tlou Executive Director Gabaake Gabaake said, "This has been a highly active year for Tlou and I am delighted with the progress we have made at Lesedi resulting in our recent confirmation from the Botswana Government that we have been selected to tender for and develop a 50MW CBM project, which is five times larger than initially expected.  Our team has made significant efforts on the ground with sustained gas flow rates achieved at Selemo.  Subject to ongoing testing we are looking at booking our initial independently certified reserves by the end of the 2016 calendar year.  Separately, I am delighted to say that Tony Gilby has returned to a much more active role with the company following his recent illness. Both Tony and I look forward to providing further updates during this exciting time for Tlou."

 

**ENDS**

 

For further information, please visit www.tlouenergy.com or contact:

 

Tlou Energy Limited

+61 7 3012 9793

Gabaake Gabaake, Executive Director


Solomon Rowland, Company Secretary




Grant Thornton (Nominated Adviser)

+44 (0)20 7383 5100

Jen Clarke, Colin Aaronson, Harrison Clarke




Brandon Hill Capital (Financial Adviser and Joint broker)

+44 (0)20 3463 5016

Jonathan Evans, Alex Walker




Optiva Securities Limited (Joint broker)

+44 (0)20 3137 1904

Jeremy King, Christian Dennis




St Brides Partners Limited (Public relations)


Elisabeth Cowell, Lottie Brocklehurst

+44 (0) 20 7236 1177

 

Chairman Statement

 

The year under review has been transformational for Tlou and has seen us make significant progress in the development of our Lesedi Coal Bed Methane ('CBM') Project in Botswana, the most advanced gas project in the country.  This is of particular importance due to the chronic power shortages being experienced in the southern African region, where demand in Botswana alone is forecast to increase 37% to 1,017MW by 2025.

 

With this in mind, the Government of Botswana proposed the delivery of 100MW of CBM power to be incorporated into its future generation supply plans in June 2016.  This news came out whilst we were waiting for the results of our tender for an initial 10MW pilot project and we are delighted that Tlou has started the new financial year with this commitment in place for the development of a 50MW CBM project.  This is five times larger than anticipated and demonstrates the strength of the government's support for the development of domestic sources of power.  It was always our intention to upscale from 10MW, however this expected approval from the government will fast-track the roll-out of our strategy and we are incredibly excited to have been given this opportunity.

 

Excellent progress on the ground at the Lesedi Project ('Lesedi') has been made during the year under review.  This has included the completion of dewatering and the commencement of gas testing at the Selemo production wells.  To date flow rates have been in line with our expectations and we remain hopeful that these will continue to grow.  We are particularly encouraged by the Selemo 4 well which could potentially be a second key gas producer alongside Selemo 1.  In April 2016 a sustained gas flow rate was reported at Selemo 1 which represents a major milestone towards achieving an economic flow rate.  Together with the larger 50MW plant, this has been beneficial in our discussions with strategic partners.  Indeed, we have had considerable interest from a number of larger third-parties to partner with us for the proposed plant in addition to future projects.  Importantly, we are aiming to book independently certified reserves at Lesedi by the end of 2016, marking Tlou as the first in-country to do so. 

 

In November 2015 Tlou dual listed on the London Stock Exchange's AIM Market and on listing, thanks to the UK market's strong appetite for African energy projects, we raised £1.2 million (A$2.6 million).  We submitted our full development Environmental Impact Statement ('EIS') in December 2015, which is a precursor to the award of a mining licence for Lesedi. The EIS is currently with Botswana's Government Department of Environmental Affairs ('DEA') for final review which is expected in Q4 2016.  This will be the first of its kind in Botswana for a gas project and we eagerly await the final confirmation which will enable us to progress to the next step.

 

On a corporate level we have been very active over the last year, starting with the appointment of Solomon Rowland as Company Secretary to replace Stephen Rodgers who had been with us since 2009.  In conjunction with our dual listing on AIM we appointed Grant Thornton UK LLP as our nominated adviser and Brandon Hill Capital as financial adviser and broker, and in early 2016 added Optiva Securities as a Joint Broker.  Having previously been a non-executive director of Tlou since 2010, I was delighted and honoured to be appointed as Chairman to replace Nathan Mitchell in February.  This came at the same time as the addition of Colm Cloonan to our Board as Finance Director.  I am also pleased to announce that our Managing Director Tony Gilby's health is improving and as a result he has been participating with valuable input in Board discussions due to his significant experience in CBM projects.  I would like to thank Gabaake Gabaake for stepping in as acting Managing Director in Tony's place.   With a bolstered team and access to the London markets we are in a strong position to continue our development of our Botswanan projects towards commercial production.

 

Our long-term vision is to become a mid-tier energy provider in southern Africa and the year under review has seen us make great strides towards this future goal.  We have ticked off a number of significant milestones and are well placed to book our first reserves by the end of the year.  We are now in discussions with the relevant government department to agree the terms of an off‐take agreement following our selection to tender for and develop an initial 50MW plant and I look forward to providing further updates on this in due course.  We are fortunate to benefit from a premium power price, a low cost operating environment, nearby power infrastructure and multiple market opportunities and I look forward to the year ahead with great enthusiasm as we continue to unlock the value in this exciting project.  I would like to thank the Tlou Board, management team, advisers and shareholders for their continued support.

 

Martin McIver

Chairman 

 

Managing Director's Report

 

Our Lesedi CBM project has been significantly de-risked during the period under review as a result of sustained gas flows and the company is closer to our aim of booking our first reserves by the end of the year.  This has involved a considerable amount of work on the ground and I am delighted with the progress we have made.

 

The original Selemo lateral production pod (Selemo 1) was expanded with drilling and installation of two new flanking lateral pods either side (Selemo 2 and 4) to assist with the dewatering, enhance gas deliverability and ultimately achieve reserve certification in advance of field development.  We decided to expand the testing to Selemo 2 and 4 due to the excellent communication observed between all three wells whilst flowing gas from Selemo 1.  This lateral well programme was completed in Q3 2015 and following the successful dewatering process a sustained gas flow was achieved in February 2016 from the main producing well, Selemo 1, with the shielding wells Selemo 2 and 4 successfully shielding water from the formation. 

 

We have been delighted with the flow rates recorded from Selemo 1 which have been in line with our expectations and excitingly, Selemo 4 has performed much better than expected and could potentially be a second gas producer alongside Selemo 1.  These gas flows will not only provide the key data in order to book initial independently certified reserves but will also provide further confidence to strategic off-takers with whom we are currently in advanced discussions with regard to gas supplies.  Another factor that will bolster our position is the receipt of our Environmental Impact Statement.  We submitted our full development EIS in December 2015 comprising production pods and a central processing facility for Lesedi, which is now with the Department of Environmental Affairs for the final review process.

 

As a validation of our strategy, in June 2016 the Government of Botswana proposed that the delivery of 100MW of CBM power be incorporated into its future generation supply plans in order to combat the severe power shortage in the country.  As the 100% owner of the most advanced CBM project in Botswana, this was clearly a breakthrough for Tlou.  This was followed, post period end, by our selection to tender for and develop a 50MW CBM power plant which is five times larger than we were anticipating however it complements and fast-tracks our strategy to upscale Lesedi and provides more development options.  This bodes well for our on-going discussions such as our expression of interest to supply gas to the nearby 90MW power plant at the Orapa diamond mine (the largest diamond mine in the world) which is currently run on high cost imported diesel.

 

Whilst no operations have been conducted at our adjacent Mamba project which consists of five CBM permits, the project provides us with considerable upside, optionality and flexibility.  We are also in on-going discussions with a number of relevant stakeholders with a view to securing additional prospective CBM acreage to further enhance this upside, although our current focus is on completing our production testing with a view to booking initial reserves in the near-term at Lesedi.

 

I look forward to providing further updates at this exciting time for Tlou and would like to thank our team on the ground for all their incredibly hard work over the period.

 

Anthony (Tony) Gilby

Managing Director 

 

 

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2016

 

 





Consolidated

Note

June 2016

June 2015


$

$




Other income

3

27,857




Expenses



Employee benefits expense

4

(613,809)

Depreciation and amortisation expense


(260,564)

Foreign exchange loss


(247,007)

Share issue costs


(779,310)

Professional fees


(185,566)

Corporate expenses


(57)

Occupancy costs

4

(64,601)

Other expenses

4

(942,526)

LOSS BEFORE INCOME TAX 


(3,065,583)

Income tax

5

-  

LOSS FOR THE PERIOD


(3,065,583)




OTHER COMPREHENSIVE INCOME/(LOSS)



Items that may be reclassified to profit or loss



Exchange differences on translation of foreign operations


(2,395,125)

Tax effect


-  

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)


(2,395,125)

TOTAL COMPREHENSIVE INCOME/(LOSS)


(5,460,708)





Earnings per share






Basic loss per share

6

Diluted loss per share

6

 

 

Consolidated Statement of Financial Position

as at 30 June 2016

 

 





Consolidated

Note

June 2016

June 2015


$

$

CURRENT ASSETS


Cash and cash equivalents

7

1,224,404

Trade and other receivables

8

290,431

Other current assets

9

43,969

TOTAL CURRENT ASSETS


1,558,804



NON-CURRENT ASSETS



Exploration and evaluation assets

11

46,183,722

Other non-current assets

12

946,675

Property, plant and equipment

10

444,358

TOTAL NON-CURRENT ASSETS


47,574,755

TOTAL  ASSETS


49,133,559





CURRENT LIABILITIES



Trade and other payables

13

306,956

Provisions

14

160,874

TOTAL CURRENT LIABILITIES


467,830




NON-CURRENT LIABILITIES



Deferred tax liabilities

15

369,353

Provisions

14

94,000

TOTAL NON-CURRENT LIABILITIES


463,353

TOTAL LIABILITIES


931,183



NET ASSETS


48,202,376





EQUITY



Contributed equity

16

73,931,569

Reserves

17

(4,741,113)

Accumulated losses


(20,988,080)



TOTAL EQUITY


48,202,376

 

Consolidated Statement of Changes in Equity

for the year ended 30 June 2016

 

 


Contributed Equity

Share Based Payments Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total


$

$

$

$

$

Balance at 1 July 2014

Profit for the period

Other comprehensive income for the period

Total comprehensive income for the period

Transactions with owners in their capacity as owners

Transfers

Shares issued, net of costs

Balance at 30 June 2015

Balance at 1 July 2015

71,606,519

2,062,745

(2,442,989)

(19,985,242)

51,241,033

Loss for the period

-  

-  

-  

(3,065,583)

(3,065,583)

Other comprehensive income

-  

-  

(2,395,125)

-  

(2,395,125)

Total comprehensive income

-  

-  

(2,395,125)

(3,065,583)

(5,460,708)






Transactions with owners in their capacity as owners




Share based payments

-  

97,001

-  

-  

97,001

Transfers

-  

(2,062,745)

-  

2,062,745

-  

Shares issued, net of costs

2,325,050

-  

-  

-  

2,325,050

2,325,050

(1,965,744)

-  

2,062,745

2,422,051

Balance at 30 June 2016

73,931,569

97,001

(4,838,114)

(20,988,080)

48,202,376

 

 

Consolidated Statement of Cash Flows

for the year ended 30 June 2016

 

 





Consolidated

Note

June 2016

June 2015


$

$


CASH FLOWS FROM OPERATING ACTIVITIES


Payments to suppliers and employees (inclusive of GST)


(2,896,862)

Interest received


27,857

GST and VAT received

565,759

NET CASH USED IN OPERATING ACTIVITIES

27

(2,303,246)



CASH FLOWS FROM INVESTING ACTIVITIES



Payments for exploration and evaluation assets


(5,783,800)

Payment for property, plant and equipment


(24,102)

NET CASH USED IN INVESTING ACTIVITIES


(5,807,902)




CASH FLOWS FROM FINANCING ACTIVITIES



Proceeds from issue of shares


2,292,540

Share issue costs


(227,676)

NET CASH PROVIDED BY FINANCING ACTIVITIES


2,064,864





Net decrease in cash held


(6,046,284)

Cash at the beginning of the period


7,197,813

Effects of exchange rate changes on cash


72,875



CASH AT THE END OF THE PERIOD

7

1,224,404

 

 

Notes to the financial statements

 

Note 1.                 Significant accounting policies

 

Introduction

This financial report includes the consolidated financial statements of Tlou Energy Limited (the "Company") and its controlled entities (together referred to as the "consolidated entity" or the "group").

Tlou Energy Limited is a public company, incorporated and domiciled in Australia.  Its registered office and principal place of business is:

 

210 Alice Street

BRISBANE QLD 4000

 

The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial report.  The accounting policies have been consistently applied, unless otherwise stated.

 

Operations and principal activities

The principal activity of the consolidated entity is the exploration and evaluation of assets in southern Africa to identify and develop CBM resources. No revenue from this activity has been earned to date, as the consolidated entity is still in the exploration and evaluation stage.

 

Currency

The financial report is presented in Australian dollars, rounded to the nearest dollar, which is the functional currency of the parent entity.

 

Authorisation of financial report

The financial report was authorised for issue on 13 September 2016.

 

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Tlou Energy Limited is a for-profit entity for the purposes of preparing the financial statements.

 

Compliance with IFRS

The consolidated financial statements of Tlou Energy Limited also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Historical cost convention

The consolidated financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2.

Early adoption of standards

The group has not elected to apply any pronouncements before their operative date in preparation of these financial statements.

 

Going Concern

The consolidated financial statements have been prepared on a going concern basis which contemplates that the group will continue to meet its commitments and can therefore continue normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

Because of the nature of the operations, exploration companies, such as Tlou Energy Limited, find it necessary on a regular basis to raise additional cash funds for future exploration activity and meet other necessary corporate expenditure. The company has recently completed a capital raising which is expected to fund ongoing operations and working capital requirements for the next 12 months. Subject to the results of these operations the group may need to raise additional capital to expand and develop the project further. Accordingly, the group is in the process of investigating various options for the raising of additional funds which may include but is not limited to an issue of shares or the sale of exploration assets where increased value has been created through previous exploration activity.

At the date of this financial report, none of the above fund raising options have been concluded and no guarantee can be given that a successful outcome will eventuate. The directors have concluded that as a result of the current circumstances there exists a material uncertainty that may cast significant doubt regarding the group's and the company's ability to continue as a going concern and therefore the group and company may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after taking into account the current status of the various funding options currently being investigated and making other enquiries regarding other sources of funding, the directors have a reasonable expectation that the group and the company will have adequate resources to fund its future operational requirements and for these reasons they continue to adopt the going concern basis in preparing the financial report.

The financial report does not include adjustments relating to the recoverability or classification of recorded assets amounts or to the amounts or classification of liabilities that might be necessary should the group not be able to continue as a going concern.

 

Parent entity information

In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in Note 30.

 

Accounting Polices

 

(a)          Principles of consolidation

Subsidiaries are all entities (including structured entities) over which the Consolidated Entity has control. The Consolidated Entity controls an entity when the Consolidated Entity 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Consolidated Entity.

Intercompany transactions, balances and unrealised gains on transactions between Consolidated Entity companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Consolidated Entity.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of financial position respectively.

 

(b)          Foreign currency translation

The financial report is presented in Australian dollars rounded to the nearest dollar, which is Tlou Energy Limited's functional and presentation currency.

 

Foreign currency transactions

Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

 

Foreign operations

The assets and liabilities of foreign operations are translated into functional currency using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into functional currency using the average exchange rates, which approximate the rate at the date of the transaction, for the period. All resulting foreign exchange differences are recognised in the foreign currency translation reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.

 

(c)          Revenue recognition

Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.

 

Interest

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

 

Other revenue

Other revenue is recognised when it is received or when the right to receive payment is established.

 

(d)          Income tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses and under and over provision in prior periods, where applicable.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

·      When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

·      When the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

 

(e)          Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the consolidated statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the consolidated statement of financial position.

 

(f)           Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade and other receivables are generally due for settlement within 30 days.

Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

 

(g)          Investments and other financial assets

Investments and other financial assets are measured at either amortised cost or fair value depending on their classification.  Classification is determined based on the purpose of the acquisition and subsequent reclassification to other categories is restricted. The fair values of quoted investments are based on current bid prices. For unlisted investments, the consolidated entity establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.

 

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are either: (i) held for trading, where they are acquired for the purpose of selling in the short- term with an intention of making a profit; or (ii) designated as such upon initial recognition, where they are managed on a fair value basis or to eliminate or significantly reduce an accounting mismatch. Except for effective hedging instruments, derivatives are also categorised as fair value through profit or loss. Fair value movements are recognised in profit or loss.

 

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets, principally equity securities that are either designated as available-for-sale or not classified as any other category. After initial recognition, fair value movements are recognised in the available-for-sale reserve in equity. Cumulative gain or loss previously reported in the available-for-sale reserve is recognised in profit or loss when the asset is derecognised or impaired.

 

Impairment of financial assets

The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable data indicating that there is a measurable decrease in estimated future cash flows.

The amount of the impairment allowance for financial assets carried at cost is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for similar financial assets.

Available-for-sale financial assets are considered impaired when there has been a significant or prolonged decline in value below initial cost. Subsequent increments in value are recognised in the available-for-sale reserve.

 

(h)          Property, plant and equipment

Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows:

Plant and equipment          3-7 years

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.

 

(i)           Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits.

Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.

Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the end of the lease term.

Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease.

 

(j)           Impairment of non-financial assets

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs.

Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

 

(k)          Exploration and evaluation assets

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest.  Such expenditures comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration expenditure not having a specific nexus with a particular area of interest.  These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active or significant operations in relation to the area are continuing.

Accumulated costs in relation to an area no longer considered viable are written off in full in the year the decision is made. Regular reviews are undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

 

(l)           Trade and other payables

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

 

(m)        Provisions

Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.

 

Restoration and rehabilitation

Both for close down and restoration and for environmental clean-up costs, a provision is made in the accounting period when the related disturbance occurs, based on the net present value of estimated future costs.  The amortisation or 'unwinding' of the discount applied in establishing the net present value of provision is charged as a finance cost to the consolidated statement of comprehensive income in each accounting period.

For close down and restoration costs, which include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas, movements in provision other than the amortisation of the discount, such as those resulting from changes in the cost estimates, lives of operations or discount rates, are capitalised into the carrying amount of development and amortised against future production.

 

(n)          Employee benefits

Wages and salaries and annual leave

Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

 

Long service leave

The liability for long service leave is recognised in current and non-current liabilities, depending on the unconditional right to defer settlement of the liability for at least 12 months after the reporting date. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

 

Severance pay

As per the Botswana Labour a provision is calculated for each Botswana based employee of one day per month of service, which can be paid out after 60 months or when employment ends. The benefit rises to two days per month after the first 60 months.

 

Share-based payments

Equity-settled and cash-settled share-based compensation benefits are provided to employees.

Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price.

The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.

The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

 

(n) Employee benefits (continued)

 

Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met provided all other conditions are satisfied.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

 

(o)          Contributed equity

Issued and paid up capital is recognised at the fair value of the consideration received by the consolidated entity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

(p)          Dividends

Dividends are recognised when declared during the financial year and no longer at the discretion of the company.

 

(q)          Earnings per share

Basic and diluted earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of Tlou Energy Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

 

(r)           Goods and Services Tax ('GST') and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the consolidated statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.

 

(s)          Comparative figures

When required by accounting standards comparative figures have been adjusted to conform to changes in presentation for the current financial year.

 

(t)           New Accounting Standards and Interpretations

The Consolidated Entity has adopted all new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2015. The Consolidated Entity did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.

 

(u)          New Standards and Interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2016 reporting periods. The Consolidated Entity has decided against early adoption of these standards.  The Consolidated Entity's assessment of the impact of these new standards and interpretations is set out below:

 

AASB 9 Financial Instruments

This standard and its consequential amendments are currently applicable to annual reporting periods beginning on or after 1 January 2018. This standard introduces new classification and measurement models for financial assets, using a single approach to determine whether a financial asset is measured at amortised cost or fair value. To be classified and measured at amortised cost, assets must satisfy the business model test for managing the financial assets and have certain contractual cash flow characteristics. All other financial instrument assets are to be classified and measured at fair value. This standard allows an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income, with dividends as a return on these investments being recognised in profit or loss. In addition, those equity instruments measured at fair value through other comprehensive income would no longer have to apply any impairment requirements nor would there be any 'recycling' of gains or losses through profit or loss on disposal. The accounting for financial liabilities continues to be classified and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity's own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. The Consolidated Entity does not expect any material impacts when the standard is adopted.

 

AASB 16: Leases

This standard is applicable to annual reporting periods beginning on or after 1 January 2019. When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases.

The main changes introduced by the new Standard include:

§ recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets);

§ depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the liability in principal and interest components;

§ variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability using the index or rate at the commencement date;

§ by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead account for all components as a lease; and

§ additional disclosure requirements.

The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. The Consolidated Entity does not expect any material impacts when the standard is adopted.

 

 

Note 2.                                 Critical accounting judgements, estimates and assumptions

 

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Exploration & evaluation assets

The consolidated entity performs regular reviews on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.  These reviews are based on detailed surveys and analysis of drilling results performed to reporting date.

 

Deferred Tax assets

The group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The group estimates its tax liabilities based on the group's understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

In addition, the group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same subsidiary against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity, which is not part of the tax consolidated group, to satisfy certain tests at the time the losses are recouped. Due to the parent entity acquiring the entity that holds the losses it is expected that the entity will fail to satisfy the continuity of ownership test and therefore has to rely on the same business test. As at 30 June 2016 the group has received advice that the losses are available, however should this change in the future the group may be required to derecognise these losses.

 

Note 3.                                 Other Income

 








Consolidated


June 2016

June 2015

$

$

Interest

27,857

27,857

114,133

 

 

Note 4.                                 Expenses

 

Loss before income tax includes the following specific expenses:









Employee benefits expense



Defined contribution superannuation expense

46,535

Other employee benefits expense


567,274



613,809








Occupancy costs



Rental expense relating to operating leases minimum lease rentals

64,601

Other occupancy costs


-  


64,601



Other expenses include the following specific items:


Travel and accommodation costs


140,462

Consultants


365,460

Stock exchange and secretarial fees

198,707

Insurance


70,705







775,334

 

Note 5.                                 Income Tax

 








Consolidated







June 2016

June 2015


$

$

Loss before income tax


(3,065,583)







Tax at the domestic tax rates applicable to profits in the country concerned

(919,675)

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:

Other non-deductible items

244,706

Difference in overseas tax rates

329,015

Previously unrecognised tax losses used to reduce deferred tax expense

-  

Deferred tax asset not recognised

345,954

Income tax benefit



-  







Recognised deferred tax assets



Unused tax losses




5,937,794







5,937,794

Recognised deferred tax liabilities



Assessable temporary differences


6,307,147







6,307,147







Net deferred tax liability recognised


369,353







Unrecognised temporary differences and tax losses


Unused tax losses and temporary differences for which no deferred tax asset has been recognised

25,426,397

 

The deductible temporary differences and tax losses do not expire under current tax legislation.  Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the group can utilise these benefits.

 

 

Note 6.                                 Earnings per share

 








Consolidated








June 2016

June 2015


$

$

(a)

Reconciliation of earnings used in calculating basic and diluted loss per share:








Loss for the year attributable to owners of Tlou Energy Limited

(3,065,583)

Loss used in the calculation of the basic and dilutive loss per share

(3,065,583)








(b)

Weighted average number of ordinary shares used as the denominator







Number

Number


Number used in calculating basic and diluted loss per share

 

Options are considered to be "potential ordinary shares" but were anti-dilutive in nature and therefore the diluted loss per share is the same as the basic loss per share.

 

Note 7.                                 Cash and Cash Equivalents

 

Consolidated

June 2016

June 2015





$

$




Cash at bank



1,224,404

Cash on deposit



-  






1,224,404

 

 

Note 8.                                 Trade and Other Receivables

 

Current




Other receivables


244,369

GST/VAT receivable


46,062

290,431

The carrying values of Trade and Other Receivables approximate fair values due to short-term nature of the amounts. These are non-interest bearing.

 

 

Note 9.                                 Other Current Assets

 

Prepayments



43,969






43,969

 

 

Note 10.               Property, Plant and Equipment

 







Consolidated



June 2016

June 2015

$

$

Plant and equipment at cost

1,782,697

Accumulated depreciation


(1,338,339)






444,358







Movements in Carrying Amounts

Movement in the carrying amount of plant and equipment between the beginning and the end of the current financial year:








Balance at the beginning of year

724,334

Additions


24,140

Disposals


(1,069)

Depreciation


(260,564)

Foreign exchange movements

(42,483)

Carrying amount at the end of year

444,358

 

 

Note 11.               Exploration and Evaluation Assets

 





Consolidated





June 2016

June 2015

$

$



Exploration and evaluation assets

46,183,722






46,183,722

Movements in exploration and evaluation assets


Balance at the beginning of period

43,559,315

Exploration and evaluation expenditure during the year

4,572,815

Impairment expense

-  

Foreign currency translation


(1,948,408)

Balance at the end of period

46,183,722

 

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

 

 

Note 12.               Other non-current assets

 







Consolidated







June 2016

June 2015



$

$

Inventory and well consumables

946,675






946,675

 

Inventory and well consumables has been reclassified as a non-current asset. In the prior year it was reported under current assets.

 

 

Note 13.               Trade and Other Payables

 








Consolidated








June 2016

June 2015



$

$



Current




Trade payables



151,133

Accruals



145,793

Other payables



10,030

306,956

The carrying values of Trade and Other Payables approximate fair values due to short-term nature of the amounts. These are non-interest bearing.

 

Note 14.               Provisions

 



Consolidated




June 2016

June 2015

Current



$

$

Employee benefits


49,136

Employee benefits - Botswana severance

111,738






160,874







Non-current




Rehabilitation



94,000






94,000












Movements in rehabilitation provision during the year

Balance at the beginning of the year

90,000

Rehabilitation required on wells drilled during the year

4,000

Completed during the year

-  

Carrying amount at the end of the year

94,000

 

Rehabilitation

The provision represents the estimated costs to rehabilitate wells in licences held by the consolidated entity. This provision has been calculated based on the number of wells which require rehabilitation and the expected costs to rehabilitate each well, taking into consideration the type of well and its location.

 

Employee benefits

A provision has been recognised for employee benefits relating to severance pay payable in Botswana. The measurement and recognition criteria relating to employee benefits have been included in note 1 to this report.

 

 

Note 15.               Deferred Tax Liabilities

 





Consolidated








June 2016

June 2015







$

$









Deferred tax liabilities




369,353

 

 

Note 16.               Contributed equity

 







Consolidated

June 2016

June 2015

June 2016

June 2015


Shares

Shares

$

$

Opening balance




Issue of ordinary shares during the year*

Share issue costs



Ordinary shares fully paid


205,619,292

73,931,569

*15,973,306 shares were issued on 30 November 2015 and 2,489,667 shares were issued on 3 December 2015. All shares issued during the year were at $0.14 per share.

 

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of, and amounts paid on, the shares held. The fully paid ordinary shares have no par value.  On a show of hands every member present at a meeting, in person or by proxy, shall have one vote and upon a poll, each share shall have one vote. The company does not have authorised capital or par value in respect of its issued shares.

 

Options

At 30 June 2016, the following options for ordinary shares in Tlou Energy Limited were on issue:

Number


Exercise

Expiry

2016

2015

Price

Date

$0.625

30/04/2016

$0.14

29/11/2017

$0.14

14/01/2018




 

Capital risk management

The capital structure of the consolidated entity consists of equity attributable to equity holders of the parent entity, comprising issued capital and reserves as disclosed in the Consolidated Statement of Changes in Equity.

 

When managing capital, management's objective is to ensure the parent entity continues as a going concern and to maintain a structure that ensures the lowest cost of capital available and to ensure adequate capital is available for exploration and evaluation of tenements.  In order to maintain or adjust the capital structure, the group may seek to issue new shares.  Consistent with other exploration companies, the group and the parent entity monitor capital on the basis of forecast exploration and development expenditure required to reach a stage which permits a reasonable assessment of the existence or otherwise of an economically recoverable reserve.

There were no changes in the group's approach to capital management during the year.

The group is not subject to externally imposed capital requirements.

 

 

Note 17.               Reserves

 

Foreign Currency Translation Reserve

The foreign currency translation reserve records exchange differences arising on translation of foreign controlled entities.

 

Share Based Payments Reserve

The share based payments reserve is used to record the share based payment associated with options granted to employees and others under equity-settled share based payment arrangements.

 

Note 18.               Share-based payments

 

Employee Share Options

Options may be granted to certain personnel of the company on terms determined by the directors or otherwise approved by the company at a general meeting.  The options are granted for no consideration. Options and entitlements to the options are vested on a time basis and/or on specific performance based criteria such as share price increases or reserves certification. Options granted as described above carry no dividend or voting rights.  When exercisable, each option is convertible to one ordinary share.

The expense recognised in the consolidated statement of comprehensive income in relation to share based payments amounts to $16,900 (2015: nil). The amount assessed as fair value at the grant date of the options is allocated equally over the period from grant date to vesting date. The fair value of options at grant date is determined using generally accepted valuation techniques that take into account exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option/performance right and an appropriate probability weighting to factor the likelihood of the satisfaction of non-vesting conditions.

Inputs used to calculate the value of options granted during the year are as follows:

 

The following table shows the number, movements and weighted average exercise price of employee share options outstanding for the 2016 year:

Grant Date

Expiry date

Exercise price

Opening Balance

July 2015

Exercised During the Year

Granted During the Year

Expired During the year

Closing Balance

June 2016

Vested & Exercisable

01/07/12

30/04/16

$0.625

01/04/14

30/04/16

$0.625

30/11/15

29/11/17

$0.14

14/01/16

14/01/18

$0.14

Total




Weighted average exercise price








The weighted average remaining contractual life of share options outstanding at the end of the year was 1.4 years.

 

The following table shows the number, movements and weighted average exercise price of employee share options outstanding for the 2015 year:

Grant Date

Expiry date

Exercise price

Opening Balance

July 2014

Exercised During the Year

Granted During the Year

Expired During the year

Closing Balance

June 2015

Vested & Exercisable

01/07/12

30/04/16

$0.625

01/04/14

30/04/16

$0.625

Total



Weighted average exercise price





The weighted average remaining contractual life of share options outstanding at the end of the year was 0.8 years.

 

 

Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transaction recognised during the year were as follows:

 








Consolidated







June 2016

June 2015







$

$









Options expensed




16,900

Options capitalised


80,101






97,001

 

 

Note 19.               Commitments

 

Operating lease commitments

Commitments for minimum lease payments for non-cancellable operating leases for offices and equipment contracted for but not recognised in the financial statements.








Consolidated








June 2016

June 2015

Payable - minimum lease payments

$

$

not later than 12 months

5,250

between 12 months and 5 years

-  


5,250

 

Exploration expenditure:

In order to maintain an interest in the exploration tenements in which it is involved, the group is required to meet certain conditions imposed by the various statutory authorities granting the exploration tenements or that are imposed by the joint venture agreements entered into by the group.  These conditions include minimum expenditure commitments.  The timing and amount of minimum exploration expenditure obligations of the group may vary significantly from the forecast based on the results of the work performed, which will determine the prospectivity of the relevant area of interest.  The group's minimum expenditure obligations, which are not provided for in the financial statements are as follows:

 







Consolidated





June 2016

June 2015

Minimum expenditure requirements 

$

$

not later than 12 months

25,668,594

between 12 months and 5 years

-  





25,668,594

 

 

Note 20.               Dividends and franking credits

 

There were no dividends paid or recommended during the financial year and there are no franking credits available to shareholders of the company.

 

Note 21.               Financial instruments

 

Overview

The group's principal financial instruments comprise receivables, payables, cash and term deposits. The main risks arising from the group's financial assets are interest rate risk, foreign currency risk, credit risk and liquidity risk.

This note presents information about the group's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk. Other than as disclosed, there have been no significant changes since the previous financial year to the exposure or management of these risks.

The group holds the following financial instruments:

 






Consolidated

June 2016

June 2015

Financial Assets

$

$

Cash and cash equivalents


1,224,404

Trade and other receivables

290,431

1,514,835

Financial Liabilities

Trade and other payables


306,956

306,956

 

Financial risk management objectives

The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk.

Key risks are monitored and reviewed as circumstances change (e.g. acquisition of new entity or project) and policies are created or revised as required. The overall objective of the group's financial risk management policy is to support the delivery of the group's financial targets whilst protecting future financial security.

Given the nature and size of the business and uncertainty as to the timing and amount of cash inflows and outflows, the group does not enter into derivative transactions to mitigate the financial risks. In addition, the group's policy is that no trading in financial instruments shall be undertaken for the purpose of making speculative gains. As the group's operations change, the Directors will review this policy periodically going forward.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board reviews and agrees policies for managing the group's financial risks as summarised below. These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits.

Risk management is carried out by senior finance executives (finance) under policies approved by the Board of Directors. Finance identifies, evaluates and hedges financial risks within the consolidated entity's operating units where appropriate.

 

(a)   Interest rate risk

Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The group is also exposed to earnings volatility on floating rate instruments.

A forward business cash requirement estimate is made, identifying cash requirements for the following period (generally up to one year) and interest rate term deposit information is obtained from a variety of banks over a variety of periods (usually one month up to six month term deposits) accordingly. The funds to invest are then scheduled in an optimised fashion to maximise interest returns.

 

Interest rate sensitivity

A sensitivity of 1% interest rate has been selected as this is considered reasonable given the current market conditions. A 1% movement in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

Profit or loss

Equity


1% increase

1% decrease

1% increase

1% decrease


$

$

$

$

Consolidated - 30 June 2016

Cash and cash equivalents

Consolidated - 30 June 2015

Cash and cash equivalents

Interest rate risk on other financial instruments is immaterial.

 

(b)   Liquidity risk

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The Board's approach to managing liquidity is to ensure, as far as possible, that the group will always have sufficient liquidity to meet its obligations when due.

Ultimate responsibility for liquidity risk management rests with the Board of Directors. The group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.  This is based on the undiscounted cash flows of the financial liabilities based on the earliest date on which they are required to be paid. At the end of the reporting period the group held cash of $1,224,404 (2015: $7,197,813).

The following table details the remaining contractual maturity for non-derivative financial liabilities.


Within

Between

Total Contractual

Carrying


1 Year

1 & 2 years

Cash Flows

Amount

Consolidated - 30 June 2016

$

$

$

$

Trade and other payables

Consolidated - 30 June 2015





Trade and other payables

 

(c)    Foreign exchange risk

As a result of activities overseas, the group's consolidated statement of financial position can be affected by movements in exchange rates. The group also has transactional currency exposures. Such exposures arise from transactions denominated in currencies other than the functional currency of the relevant entity.

The group's exposure to foreign currency risk primarily arises from the group's operations overseas.  Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.

The group currently does not engage in any hedging or derivative transactions to manage foreign currency risk. The group's policy is to generally convert its local currency to Pula, Rand or US dollars at the time of transaction.  The group, has on rare occasions, taken the opportunity to move Australian dollars into foreign currency (ahead of a planned requirement for those foreign funds) when exchange rate movements have moved significantly in favour of the Australian dollar, and management considers that the currency movement is extremely likely to move back in subsequent weeks or months.  Therefore, the opportunity has been taken to lock in currency at a favourable rate to the group.  This practice is expected to be the exception, rather than the normal practice.

The group's exposure to foreign currency risk at the reporting date, expressed in Australian dollars, was as follows:


2016

2016

2016

2015

2015

2015


USD

Pula

SA Rand

USD

Pula

SA Rand


$

$

$

$

$

$

Financial Assets

Cash and cash equivalents

Trade and other receivables



Financial Liabilities

Trade and other payables

Net Financial Instruments

21,279

(24,840)

8,976

176,331

(745,515)

27,051

 

Foreign currency rate sensitivity

Based on financial instruments held at 30 June 2016, had the Australian dollar strengthened/weakened by 10% the group's profit or loss and equity would be impacted as follows:


Profit or loss

Equity



10%

10%

10%

10%


Increase

Decrease

Increase

Decrease

2016

$

$

$

$

US dollar

Bw Pula

South African Rand

2015



US dollar

Bw Pula

South African Rand

 

(d)   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. This arises principally from cash and cash equivalents and trade and other receivables. The group exposure and the credit ratings of its counterparties are continuously monitored by the Board of Directors.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in the table above.

 

Credit Risk Exposures

Trade and other receivables

Trade and other receivables comprise primarily of VAT and GST refunds due and a balance payable to the group by Brandon Hill Capital. Where possible the group trades with recognised, creditworthy third parties. The receivable balances are monitored on an ongoing basis. The group's exposure to bad debts is not significant. At 30 June 2016 $nil (2015: $nil) of the group's receivables were past due.

 

Cash and cash equivalents

The group has a significant concentration of credit risk with respect to cash deposits with Westpac Banking Corporation, First National Bank Botswana and First National Bank South Africa.  However, significant cash deposits are invested across three to four banks to mitigate credit risk exposure to a particular bank. AAA rated banks are mostly used and non AAA banks are utilised where commercially attractive returns are available.

 

Note 22.               Key Management Personnel

 

Key management personnel comprise directors and other persons having authority and responsibility for planning, directing and controlling the activities of the Consolidated Entity.

Detailed remuneration disclosures are provided in the remuneration report on pages 10 to 16.

 

Key management personnel compensation

The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below:

 









Consolidated









June 2016

June 2015









$

$

Short-term employee benefits


885,565

Post-employment benefits



55,012

Other long-term benefits



28,063



968,640



Share based payments


-  


968,640

 

 

Note 23.               Auditors' Remuneration

 

During the year the following fees were paid or payable for services provided by the auditor of the group:

Consolidated








June 2016

June 2015

$

$

Audit services


Auditing or reviewing the financial statements - BDO Australia

48,500

Auditing or reviewing the financial statements - BDO Botswana

25,088





73,588

Non-audit services - BDO Australia

Tax consulting and compliance services

16,132

AIM listing



36,983





53,115

17,176

Total

126,703

 

Note 24.               Contingent Liabilities

 

The Directors are not aware of any contingent liabilities (2015: $nil).

 

Note 25.               Related Party Transactions

 

Parent entity

The legal parent entity is Tlou Energy Limited.

Subsidiaries

Interests in subsidiaries are set out in note 28.

Transactions with related parties

The following transactions occurred with related parties:

Consolidated

2016

2015








$

$

Payment for goods and services:

Payment to The Gilby McKay Alice Street Partnership

46,500

Office rent paid to The Gilby McKay Alice Street Partnership, a director-related entity of Anthony Gilby.

Payment to Fleur Gilby

-  

Salary paid to Fleur Gilby, related entity of Anthony Gilby.









Receivable from and payable to related parties




The following balances are outstanding at the reporting date in relation to transactions with related parties:








Current payables:




Trade payables to The Gilby McKay Alice Street Partnership

1,925

Office rent payable to The Gilby McKay Alice Street Partnership, a director-related entity of Anthony Gilby.








Loans to/from related parties




There were no loans to or from related parties at the reporting date or during the year.








Terms and conditions







Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

 

Note 26.               Segment Reporting

 

Reportable Segments

Operating segments are identified on the basis of internal reports that are regularly reviewed by the executive team in order to allocate resources to the segment and assess its performance.

The Company currently operates in one segment, being the exploration, evaluation and development of Coalbed Methane resources in southern Africa.

Segment revenue

As at 30 June 2016 no revenue has been derived from its operations (2015: $nil).

 

Segment assets

Segment non-current assets are allocated to countries based on where the assets are located as outlined below.

 









June 2016

June 2015








$

$

Botswana






47,574,122

Australia






633

 

 

Note 27.               Cash Flow Information

 








Consolidated








June 2016

June 2015



$

$

Reconciliation of cash flow from operations

Loss for the period

(3,065,583)

Depreciation

260,564

Share-based payments

97,001

Salaries and fees paid in equity


(97,000)

Net exchange differences

247,007









Changes in operating assets and liabilities, net of the effects of purchase and disposal of subsidiaries:

Decrease/(increase) in trade and other receivables

(68,487)

Decrease/(increase) in other assets

431,342

Increase/(decrease) in trade payables and accruals

(165,192)

Decrease/(increase) in employee benefits

170,322

Increase/(decrease) in provisions

(113,220)





(2,303,246)

 

 

Note 28.               Subsidiaries

 

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1.

 

Name of entity



Country of incorporation

Class of shares

Equity holding %





June 2016

June 2015

Tlou Energy Botswana (Proprietary) Ltd

Botswana

Ordinary

100

100






Technoleads International Inc

Barbados

Ordinary

100

100

Tlou Energy Exploration (Proprietary) Limited

Botswana

Ordinary

100

100






Sable Energy Holdings (Barbados) Inc

Barbados

Ordinary

100

100

Tlou Energy Resources (Proprietary) Limited

Botswana

Ordinary

100

100






Copia Resources Inc


Barbados

Ordinary

100

100

Tlou Energy Corp Services Botswana (Proprietary) Limited

Botswana

Ordinary

100

100






Madra Holdings (Barbados) Inc

Barbados

Ordinary

100

100

Tlou Energy Solutions (Proprietary) Limited

Botswana

Ordinary

100

100






Aguia Energy Limitada


Mozambique

Ordinary

100

100

Mica Investments (Barbados) Inc

Barbados

Ordinary

100

100

SK Holdings (Barbados) Inc


Barbados

Ordinary

100

100

Tlou South Karoo (Proprietary) Limited

Botswana

Ordinary

100

100

Apex Resources No. 2 Inc


Barbados

Ordinary

100

100

Apex Resources Holdings No. 2 Corp

British Virgin Islands

Ordinary

100

100

Tembo Holdings Inc


British Virgin Islands

Ordinary

100

100

 

 

Note 29.               Subsequent Events

 

In September 2016, the company completed a placement to sophisticated and professional investors raising ~$3 million with the proceeds to be used to further the operations in Botswana and provide additional working capital.

No other matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

 

Note 30.               Parent entity disclosures

 








Parent









June 2016

June 2015







$

$









Current assets





1,411,310

Non-current assets




30,214,384

Total assets





31,625,694









Current liabilities





173,688

Total liabilities





173,688

Net assets





31,452,006









Contributed equity




73,931,569

Share based payment




2,159,745

Accumulated losses




(44,639,308)

Total equity





31,452,006









Loss for the period




2,598,498

Total comprehensive income



2,598,498

 

Commitments, Contingencies and Guarantees of the Parent Entity

The Parent Entity has no commitments for the acquisition of property, plant and equipment, no contingent assets, contingent liabilities or guarantees at balance date.


This information is provided by RNS
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