Condensed Notes to the Financial Statements

For the Half-Year Ended 31 December 2018

All amounts are Australian Dollars

1. Summary of Significant Accounting Policies

   Statement of Compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 'Interim Financial Reporting'. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS34 'Interim Financial Reporting'. The half-year report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the most recent annual financial report.

Basis of preparation

The condensed consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Group's 2018 annual financial report for the financial year ended 30 June 2018, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

Going Concern
 

The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and the discharge of liabilities in the normal course of business.

As disclosed in the half-year interim financial report, the Group incurred a net loss for the period of $730,767 and had net cash outflows from operating activities of $459,096 for the half year ended 31 December 2018.  As at that date the Group had net current assets of $357,075.

The Directors believe that there are reasonable grounds to believe that the Group will be able to continue as a going concern, after consideration of the following factors:
 

·      The Company has $337,202 in current trade receivables which the directors believe will be sufficient to fund short term working capital needs;

·      The inventory balance as at 31 December 2018 was $56,196; 

·      The Directors are of the opinion that existing shareholders and financiers will continue to fund the company in the short term, and if required additional share capital or debt funding can be sourced to develop the projects further.

However, should the Group activities not eventuate as planned or be unable to obtain sufficient funding as advised above, there is a significant uncertainty which may cast doubt as to whether or not the Group will be able to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.

Accordingly, the Directors believe that the Group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report.

Condensed Notes to the Financial Statements

For the Half-Year Ended 31 December 2018

All amounts are Australian Dollars

1.   Summary of Significant Accounting Policies (Continued)

New and revised accounting requirements applicable to the current half- year reporting period

The following Accounting Standards and Interpretations are most relevant to the consolidated entity:

AASB 9 Financial Instruments

The consolidated entity has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest.

A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value.

All other financial assets are classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income ('OCI').

Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch).

New impairment requirements use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. The Group has not recognised an ECL in the current period as the group has not recognised a bad debts expense since operations began. This can be attributed to the Group's customer profile and credit policies in place.

AASB 9 was adopted using the modified retrospective approach and as such comparatives were not restated.

AASB 15 Revenue from Contracts with Customers

The consolidated entity has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with customers are presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract period.

Condensed Notes to the Financial Statements

For the Half-Year Ended 31 December 2018

All amounts are Australian Dollars

1.   Summary of Significant Accounting Policies (Continued)

The consolidated entity's main source of income is royalties, where the adoption of AASB 15 has been determined to not have a significant impact on the consolidated entity's accounting policies or the amounts recognised in the financial statements. There is therefore no impact on opening retained profits as at 1 July 2018.

Exploration and Evaluation Costs

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are carried forward in respect of an area for which the rights to tenure are current and that has not at reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or relating to, the area of interest are continuing.

Impairment of Exploration and Evaluation Assets

The ultimate recoupment of the value of exploration and evaluation assets, is dependent on the successful development and commercial exploitation, or alternatively, sale, of the exploration and evaluation assets.

Impairment tests are carried out when there are indicators of impairment in order to identify whether the asset carrying values exceed their recoverable amounts. There is significant estimation and judgement in determining the inputs and assumptions used in determining the recoverable amounts.

The key areas of judgement and estimation include:

·      Recent exploration and evaluation results and resource estimates;

·      Environmental issues that may impact on the underlying tenements;

·      Fundamental economic factors that have an impact on the operations and carrying values of assets and liabilities.

Revenue Reporting

Revenue for the Company is reported in a number of sections of the financial report. The revenue reported in the Statement of Profit or Loss and Other Comprehensive Income is statutory revenue which includes adjustments for inventory balances at period ends, intercompany management fee eliminations and other accounting adjustments required by the AASB. Revenue for the Producing Assets note (Note 14) is taken as being the Revenue for that specific oil and gas assets, which excludes, among others, the intercompany management fee adjustment. The Net Sales attributable to Mosman figure released to the market via the Regulatory News Service (RNS) on 6 February 2019 is the Net Revenue attributable to the Company prior to adjustments for inventory balances at period ends, and other adjustments required by the AASB.

Oil and Gas assets

The cost of oil and gas producing assets and capitalised expenditure on oil and gas assets under development are accounted for separately and are stated at cost less accumulated amortisation and impairment losses. Costs include expenditure that is directly attributable to the acquisition or construction of the item as well as past exploration and evaluation costs.

When an oil and gas asset commences production, costs carried forward are amortised on a units of production basis over the life of the economically recoverable reserves. Changes in factors such as estimates of economically recoverable reserves that affect amortisation calculations do not give rise to prior financial period adjustments and are dealt with on a prospective basis.

Condensed Notes to the Financial Statements

For the Half-Year Ended 31 December 2018

All amounts are Australian Dollars

1.   Summary of Significant Accounting Policies (Continued)

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance.

13        Segment Information

The Group has identified its operating segments based on the internal reports that are reviewed and used by the board to make decisions about resources to be allocated to the segments and assess their performance.

Operating segments are identified by the board based on the Oil and Gas projects in Australia the United States and New Zealand. Discrete financial information about each project is reported to the board on a regular basis.

The reportable segments are based on aggregated operating segments determined by the similarity of the economic characteristics, the nature of the activities and the regulatory environment in which those segments operate.

Condensed Notes to the Financial Statements

For the Half-Year Ended 31 December 2018

All amounts are Australian Dollars

13        Segment Information (continued)

The Group has three reportable segments based on the geographical areas of the mineral resource and exploration activities in Australia, the United States and New Zealand. Unallocated results, assets and liabilities represent corporate amounts that are not core to the reportable segments.

Condensed Notes to the Financial Statements

For the Half-Year Ended 31 December 2018

All amounts are Australian Dollars

13     Segment Information (continued)