IPM Petroleum Ltd and controlled entities ABN

Transcription

1 IPM Petroleum Ltd and controlled entities Consolidated Financial report For the year ended 30 June 2012

2 TABLE OF CONTENTS Directors' report Auditor's independence declaration... 6 Financial report Statement of comprehensive income... 7 Statement of financial position... 8 Statement of changes in equity... 9 Statement of cash flows Notes to financial statements Directors' declaration Independent auditor's report Additional information

3 DIRECTORS' REPORT The directors of IPM Petroleum Ltd present their report together with the financial report of IPM Petroleum Ltd, being IPM Petroleum Ltd and its controlled entities, for the year ended 30 June 2012 and auditors report thereon. This financial report has been prepared in accordance with Australian Accounting Standards. Directors names The names of the directors of IPM Petroleum Ltd in office at any time during or since the end of the year are: Brendan Brown Philip Smith Shane Tanner Terry White (appointed 15 August 2012) Craig Mathieson (appointed 15 August 2012) The directors of IPM Petroleum Ltd have been in office since the start of the year to the date of this report unless otherwise stated. Results The loss of IPM Petroleum Ltd for the year after providing for income tax amounted to $2,005,724 (2011 loss of $406,169) Review of operations IPM Petroleum Ltd continued to engage in its principal activity, the results of which are disclosed in the attached financial statements. Significant changes in state of affairs There were no significant changes in IPM Petroleum Ltd's state of affairs that occurred during the financial year, other than those referred to elsewhere in this report. Principal activities The principal activity of IPM Petroleum Ltd during the year was to explore for oil & gas within the WA-424- P and WA-471-P permits on and close to the existing oil discovery at Gwydion. No significant change in the nature of these activities occurred during the year. After balance date events No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of IPM Petroleum Ltd, the results of those operations, or the state of affairs of IPM Petroleum Ltd in future financial years

4 DIRECTORS' REPORT Likely developments IPM Petroleum Ltd expects to maintain the present status and level of operations for the following 12 months, after which time (depending on exploration & evaluation) further exploration with a view to develop and exploit the area(s) of interest will occur. Environmental / Government regulation IPM Petroleum Ltd's operations are regulated by the Offshore Petroleum & Greenhouse Gas Storage Act 2006 (CLTH). Petroleum rights are owned by State and Commonwealth Governments which grant licenses to companies to exploit them. Dividends paid, recommended and declared No dividends were paid or declared since the start of the year. No recommendation for payment of dividends has been made. Information on directors and company secretary Brendan Brown Qualifications Experience Managing Director & Company Secretary BSc, BE(Hons), MBA(Melb), G.Dip App Fin & Inv. F Fin, MAICD Brendan has over 20 years' experience in the Oil, Gas & Finance industries. Having commenced his career as an engineer with BHP Petroleum he has been involved in various projects and operations including the Jabiru, Challis, Skua and Griffin oil field developments. He later moved to the Financial Services industry as an analyst and corporate advisor at ANZ Securities in the Energy and Resources sectors. He founded his own successful fully licensed corporate advisory firm in 2000 providing advisory and capital raising services to small and mid capital listed and unlisted companies. He assisted Nexus Energy with equity raisings of over $40 million and successfully advised the company on a $200 million hostile takeover defence in Whilst employed at Nexus in as head of finance and business development he was responsible for raising capital in the order of $400 million in project finance, debt, hybrid and new equity issues and successfully negotiated the $1 billion Longtom gas off take agreement with Santos

5 DIRECTORS' REPORT Information on directors and company secretary (Continued) Philip Smith Qualifications Experience Technical Director BSc Physics(Hons), Msc Geophysics, Grad Dip App Fin & Inv Philip has over 30 years' experience working as an exploration geoscientist. Having worked in London for Phillips Petroleum and Kufpec before coming to Australia to join Woodside Petroleum and BHP Petroleum. At BHP Petroleum he worked for 15 years in senior technical and managerial roles in offshore basins around Australia and was involved in oil and gas discoveries at Elang, Laminaria, Maple and Argus. After leaving BHP Petroleum he joined Nexus Energy where he was responsible for building the exploration portfolio and was involved in the Longtom and Crux appraisal and development projects. Shane Tanner Qualifications Experience Non-Executive Chairman FCPA, ACIS Shane is Chairman of Funtastic Limited (FUN), Paragon Care Limited (PGC) and Vision Group Holdings Limited (VGH). He is the former CEO of Mayne Nickless Diagnostic Services (later renamed Symbion Health). He has a vast commercial and financial experience and has helped many start-up Companies develop through acquisition and organic means into sizable organisations whilst adhering to excellent Corporate Governance. Terry White Non-Executive Director (appointed 15 August 2012) Qualifications BSc (Hons) Experience Terry has over 31 years' experience in the oil and gas sector and has held technical, exploration management and executive roles in Esso Australia, BHP Billiton and Santos. He has extensive experience in Australia, the United States and South East Asia in exploration, new ventures, appraisal, development and production activities. Craig Mathieson Non-Executive Director (appointed 15 August 2012) Experience Craig is the CEO of The Mathieson Group. He was Managing Director of DMS Glass from 2001 to 2007 and also gained a banking and commercial background while working with the Business Banking division of ANZ Bank and the Property and Finance division of St George Bank. Meetings of directors Directors Directors' meetings Number eligible to attend Number attended Brendan Brown Philip Smith Shane Tanner

6 DIRECTORS' REPORT Options Options over unissued ordinary shares granted by IPM Petroleum Ltd during the financial year to the employees of IPM Petroleum Ltd were as follows: Employees Options granted Steven Tomlin 87,500 Victoria Fitzgerald 87,500 Indemnification of officers During or since the end of the year, the IPM Petroleum Ltd has given indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums in order to indemnify the directors of IPM Petroleum Ltd against any actual, threatened or reasonably apprehended action, proceeding, investigation, inquiry or hearing (whether criminal, civil, administrative or judicial) brought against, involving or likely to involve the Officer which relates or may relate to an actual or alleged act or omission of the Officer in their capacity as a director of the Company or Subsidiary. Further disclosure required under section 300(9) of the corporations law is prohibited under the terms of the contract. Indemnification of auditors No indemnities have been given or insurance premiums paid, during or since the end of the year, for any person who is or has been an auditor of IPM Petroleum Ltd. Auditor's independence declaration A copy of the auditor's declaration under section 307C of the Corporations Act 2001 in relation to the audit for the financial year is provided with this report

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9 STATEMENT OF COMPREHENSIVE INCOME Note $ $ Revenue Other revenue 3 64,657 70, ,657 70,282 Less: expenses Depreciation and amortisation expense (28,832) (1,580) Employee benefits expense (968,177) (166,202) Occupancy expense (74,209) (6,438) Foreign currency exchange gains and losses 2,322 (79,884) Consulting fees (525,156) (141,911) Travel expenses (92,959) (10,891) Other expenses (383,370) (69,545) (2,070,381) (476,451) Loss before income tax expense (2,005,724) (406,169) Total comprehensive income (2,005,724) (406,169) The accompanying notes form part of these financial statements

10 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012 Note $ $ Current assets Cash and cash equivalents 4 2,419,425 2,622,823 Receivables 5 373, ,100 Other assets 7 30,677 4,372 Total current assets 2,823,761 2,894,295 Non-current assets Property, plant and equipment 6 60,222 67,917 Other assets 7 3,714,127 3,626,527 Total non-current assets 3,774,349 3,694,444 Total assets 6,598,110 6,588,739 Current liabilities Payables 8 374, ,219 Provisions 9 63,854 14,057 Total current liabilities 438, ,276 Total liabilities 438, ,276 Net assets 6,160,088 5,711,463 Equity Share capital 11 8,571,981 6,117,632 Retained earnings 12 (2,411,893) (406,169) Total equity 6,160,088 5,711,463 The accompanying notes form part of these financial statements

11 STATEMENT OF CHANGES IN EQUITY Note Contributed Retained equity Reserves earnings Total equity $ $ $ $ Consolidated Balance as at 1 July Profit/(loss) for the year - - (406,169) (406,169) Total comprehensive income for the year - - (406,169) (406,169) Transactions with owners in their capacity as owners: Contributions 6,116, ,116,932 Total transactions with owners in their capacity as owners 6,116, ,116,932 Balance as at 30 June ,117,632 - (406,169) 5,711,463 Balance as at 1 July ,117,632 - (406,169) 5,711,463 Profit/(loss) for the year - - (2,005,724) (2,005,724) Total comprehensive income for the year - - (2,005,724) (2,005,724) Transactions with owners in their capacity as owners: Contributions 2,403, ,403,426 Transactions during period 11 50, ,923 Total transactions with owners in their capacity as owners 2,454, ,454,349 Balance as at 30 June ,571,981 - (2,411,893) 6,160,088 The accompanying notes form part of these financial statements

12 STATEMENT OF CASH FLOWS Note $ $ Cash flow from operating activities Payments to suppliers and employees (2,268,769) 99,535 Interest received 64,662 70,282 Net cash provided by / (used in) operating activities (2,204,107) 169,817 Cash flow from investing activities Payment for property, plant and equipment (21,137) (69,497) Payment for other non-current assets (87,600) (3,594,434) Net cash provided by / (used in) investing activities (108,737) (3,663,931) Cash flow from financing activities Proceeds from share issue 2,109,446 6,116,932 Net cash provided by financing activities 2,109,446 6,116,932 Reconciliation of cash Cash at beginning of the financial year 2,622,823 5 Net increase / (decrease) in cash held (203,398) 2,622,818 Cash at end of financial year 10(a) 2,419,425 2,622,823 The accompanying notes form part of these financial statements

13 NOTES TO FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards - Reduced Disclosure Requirements, Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act The financial report was approved by the directors as at the date of the directors' report. The financial report is for IPM Petroleum Ltd and its consolidated entities. IPM Petroleum Ltd is a company limited by shares, incorporated and domiciled in Australia. IPM Petroleum Ltd is a for-profit entity for the purpose of preparing the financial statements. The following is a summary of the material accounting policies adopted by IPM Petroleum Ltd in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Basis of preparation of the financial report Historical Cost Convention The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. (b) Principles of consolidation The consolidated financial statements are those of the consolidated entity ("IPM Petroleum Ltd"), comprising the financial statements of the parent entity and all of the entities for which the parent has the power to control the financial and operating policies. The financial statements of both entities are prepared for the same reporting period, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist. All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is transferred to the company and are de-recognised from the date that control ceases. (c) Foreign currency translations and balances Functional and presentation currency The financial statements of each entity within the consolidated entity is measured using the currency of the primary economic environment in which that entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars which is the consolidated entity s functional and presentation currency. Transactions and Balances Transactions in foreign currencies of IPM Petroleum Ltd and its controlled entities are translated into functional currency at the rate of exchange ruling at the date of the transaction

14 NOTES TO FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Foreign currency translations and balances (Continued) Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or restatement are recognised as revenues and expenses for the financial year. Entities that have a functional currency different from the presentation currency are translated as follows: Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; Income and expenses are translated at actual exchange rates or average exchange rates for the period, where appropriate; and All resulting exchange differences are recognised as a separate component of equity. (d) Revenue Interest revenue is recognised when it becomes receivable on a proportional basis taking in to account the interest rates applicable to the financial assets. All revenue is stated net of the amount of goods and services tax (GST). (e) Income tax Current income tax expense or revenue is the tax payable on the current period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are expected to be recovered or liabilities are settled. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. 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. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (f) Property, plant and equipment Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and any accumulated impairment losses

15 NOTES TO FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Property, plant and equipment (Continued) Plant and equipment Plant and equipment is measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts. Depreciation The depreciable amount of all fixed assets are depreciated over their estimated useful lives commencing from the time the asset is held ready for use. Class of fixed asset Depreciation rates Depreciation basis Office equipment at cost 20% Straight line Furniture, fixtures and fittings at cost 20% Straight line Computer equipment at cost 33% Straight line

16 NOTES TO FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Exploration expenditure Exploration for and evaluation of hydrocarbon resources is the search for hydrocarbon resources after the entities have obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the hydrocarbon resource. Accordingly, exploration and evaluation expenditures are those expenditures incurred by the entities in connection with the exploration for and evaluation of hydrocarbon resources before the technical feasibility and commercial viability of extracting hydrocarbon resources are demonstrable. Accounting for exploration and evaluation expenditures is assessed separately for each area of interest. An area of interest is an individual geological area which is considered to constitute a favourable environment for the presence of a hydrocarbon deposit or has been proved to contain such a deposit. Expenditure incurred on activities that precede exploration and evaluation of hydrocarbon resources, including all expenditure incurred prior to securing legal rights to explore an area, is expensed as incurred. For each area of interest the expenditure is recognised as an exploration and evaluation asset where the following conditions are satisfied: a) The rights to tenure of the area of interest are current; and b) At least one of the following conditions is also met: (i) the expenditure is expected to be recouped through successful development and commercial exploitation of an area of interest, or alternatively by its sale; or (ii) exploration and evaluation activities in the area of interest have 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 in relation to, the area of interest are continuing. Economically recoverable reserves are the estimated quantity of product in an area of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable conditions. Exploration and evaluation assets include: Acquisition of rights to explore; Topographical, geological, geochemical and geophysical activities and studies; Exploratory drilling, trenching, and sampling; and Activities and studies in relation to evaluating the technical feasibility and commercial viability of extracting the hydrocarbon resource. General and administrative costs are allocated to, and included in, the cost of exploration and evaluation assets only to the extent that those costs can be related directly to the operational activities in the area of interest to which the exploration and evaluation assets relate. In all other instances, these costs are expensed as incurred. When the technical feasibility and commercial viability of the extraction of a hydrocarbon resource has been demonstrated then any capitalised exploration and evaluation expenditure is reclassified as capitalised mining and project development expenditure. Prior to reclassification, capitalised exploration and evaluation

17 NOTES TO FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Exploration expenditure (Continued) expenditure is assessed for impairment. In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of no value, accumulated costs carried forward are written off in the year in which that assessment is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Impairment testing of exploration and evaluation assets Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Exploration and evaluation assets are tested for impairment when any of the following facts and circumstances exist: The term of exploration license in the specific area of interest has expired during the reporting period or will expire in the near future, and is not expected to be renewed; Substantive expenditure on further exploration for and evaluation of hydrocarbon resources in the specific area are not budgeted nor planned; Exploration for and evaluation of hydrocarbon resources in the specific area have not led to the discovery of commercially viable quantities of hydrocarbon resources and the decision was made to discontinue such activities in the specified area; or Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. Where a potential impairment is indicated, an assessment is performed for each cash-generating-unit which is no larger than the area of interest. (h) Impairment Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance with AASB 136. Assets subject to annual depreciation or amortisation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and value in use. It is noted in accordance with AASB 6, paragraph 19, for the purposes of exploration and evaluation assets only, paragraph 20 of AASB 6 shall be applied (as outlined above) rather than paragraphs 8-17 of AASB 136, except as limited by cash generating unit / operating segment limitations

18 NOTES TO FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as an expense on a straight-line basis over the term of the lease. Lease incentives received under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. (j) Borrowing costs Borrowing costs can include interest, amortisation of discounts or premiums relating to borrowings, ancillary costs incurred in connection with arrangement of borrowings, foreign exchange losses net of hedged amounts on borrowings. Borrowing costs are expensed as incurred. (k) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. (l) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are based on past performance and management's expectation for the future

19 NOTES TO FINANCIAL STATEMENTS $ $ NOTE 3: REVENUE $ $ Other revenue Interest income 64,657 70,282 Total revenue 64,657 70,282 NOTE 4: CASH AND CASH EQUIVALENTS Cash on hand Cash at bank 2,419,281 1,222,818 Cash on deposit - 1,400,000 2,419,425 2,622,823 NOTE 5: RECEIVABLES CURRENT GST receivable 28, ,100 Amounts receivable from: - individual shareholders 344, , ,100 NOTE 6: PROPERTY, PLANT AND EQUIPMENT Office equipment at cost 18,725 - Accumulated depreciation (3,017) - 15,708 - Furniture, fixtures and fittings at cost 10,068 10,068 Accumulated depreciation (2,231) (272) 7,837 9,796 Computer equipment at cost 61,841 59,429 Accumulated depreciation (25,164) (1,308) 36,677 58,121 Total plant and equipment 60,222 67,917 Total property, plant and equipment 60,222 67,

20 NOTES TO FINANCIAL STATEMENTS NOTE 6: PROPERTY, PLANT AND EQUIPMENT (CONTINUED) (a) Details for measurement of revalued amounts No revaluations of assets held under AASB 116 have occurred during the 2011/12 financial period. (b) Reconciliations Reconciliation of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year Office equipment Opening carrying amount - - Additions 18,725 - Depreciation expense (3,017) - Closing carrying amount 15,708 - Furniture, fixtures and fittings Opening carrying amount 9,796 - Additions - 10,068 Depreciation expense (1,959) (272) Closing carrying amount 7,837 9,796 Computer equipment Opening carrying amount 58,121 - Additions 2,412 59,429 Depreciation expense (23,856) (1,308) Closing carrying amount 36,677 58,121 NOTE 7: OTHER ASSETS CURRENT Prepayments 27,000 - Other current assets 3,677 4,372 30,677 4,372 NON CURRENT Costs carried forward in respect of areas of interest in: Exploration expenditure Exploration and evaluation phases 3,682,034 3,594,434 Less accumulated amortisation & impairment - - 3,682,034 3,594,434 Other non-current assets 32,093 32,093 3,714,127 3,626,

21 NOTES TO FINANCIAL STATEMENTS $ $ NOTE 8: PAYABLES CURRENT Unsecured liabilities Trade creditors - 825,227 Sundry creditors and accruals 374,168 37, , ,219 Trade creditors at 30 June 2011 related to outstanding payables to PGS Australia in relation to the Gwydion Multi-Client 3D Survey. This amount, along with associated foreign exchange gains/losses was paid in full by 30 June NOTE 9: PROVISIONS CURRENT Employee benefits (a) 63,854 14,057 (a) Aggregate employee benefits liability 63,854 14,057 NOTE 10: CASH FLOW INFORMATION (a) Reconciliation of cash Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position is as follows: Cash on hand Cash at bank 2,419,281 1,222,818 At call deposits with financial institutions - 1,400,000 2,419,425 2,622,

22 NOTES TO FINANCIAL STATEMENTS $ $ NOTE 11: SHARE CAPITAL Issued and paid-up capital 18,600,000 (2011: 1,750,000) Ordinary shares 8,571,981 6,117, Number $ Number $ (a) Ordinary Shares Opening balance 1,750,000 6,117, Shares issued: 3 September September , September ,000 1,400 6 October , November ,803 6,329,997 6 March ,750, June ,100,000 2,531, Transaction costs relating to shares issues - (127,807) - (215,187) 16,850,000 2,403,426 1,749,300 6,116,932 Amounts eliminated against equity on consolidation 30 June (5,427) - - Contribution on option issuance to employees - 56, , At reporting date 18,600,000 8,571,981 1,750,000 6,117,632 A subdivision of Ordinary shares was conducted on the 6th of March 2012 resulting in a 10:1 offer to existing shareholders at that date. The effect was an issuance of an additional 15,750,000 shares for nil contribution. During June 2012 a capital raising was conducted resulting in issuance of 1,100,000 shares for a contribution of $2,531,233 (less associated costs of $127,807). Rights of each type of share Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders meetings each ordinary share is entitle to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands

23 NOTES TO FINANCIAL STATEMENTS NOTE 11: SHARE CAPITAL (CONTINUED) Share options Options over ordinary shares: Employee share scheme IPM Petroleum Ltd continued to offer employee participation in short-term and long-term incentive schemes as part of the remuneration packages for the employees of the companies. Since the end of the 2010/11 financial year, 175,000 options have been granted under this scheme (inclusive of 10:1 share subdivision in March 2012). The share options available to employees are exercisable not before 1 July 2012 and not after 31 July The options issued on 2 August 2011 were immediately vesting and convertible at 1 share per 1 option. The company's valuation has been conducted using the Black-Scholes model and the following equivalent post 10 for 1 subdivision input values; - Share price $ Execution price $ Valuation date 2 August Risk free rate (continuously compounded) 4.18% - Future volatility 75% over life of option - Life of option 1.9 years (assumed held up to 1 month before expiry) - Valuation is $0.322 per option for a total contribution of $56, $ $ NOTE 12: RETAINED EARNINGS Retained earnings at beginning of year (406,169) - Net loss attributable to period (2,005,724) (406,169) (2,411,893) (406,169) NOTE 13: CONTROLLED ENTITIES Country of incorporation Ownership % % Subsidiaries of IPM Petroleum Ltd: IPM WA 424P Pty Ltd Australia IPM Browse Pty Ltd Australia IPM West Pty Ltd Australia IPM Exploration Pty Ltd Australia

24 NOTES TO FINANCIAL STATEMENTS NOTE 13: CONTROLLED ENTITIES (CONTINUED) (a) Controlled entities acquired IPM Browse Pty Ltd, IPM West Pty Ltd & IPM Exploration Pty Ltd have been incorporated since 3 October NOTE 14: RELATED PARTY TRANSACTIONS (a) Wholly owned group transactions IPM WA 424P Pty Ltd maintains the costs carried forward in conjunction the exploration and evaluation of the area of interest which has been consolidated and disclosed in full in note 6 to these accounts. An intercompany payable to the same value of the exploration and evaluation asset ($3,682,034.39) is also held by IPM WA 424P Pty ltd which has been eliminated in full on consolidation against the receivable held in the accounts of the parent entity, IPM Petroleum Ltd. The operations of IPM Browse Pty Ltd, IPM West Pty ltd & IPM Exploration Pty Ltd are deemed to be immaterial in the consideration of 4 column financial statements for financial reporting purposes. The equity and/or investment held in these subsidiaries by IPM Petroleum Ltd have been eliminated against equity in full on consolidation. (b) Transactions with key management personnel of the entity or its parent and their personally related entities Services provided by Cape Leveque Securities Pty Ltd (related party by common director - Brendan Brown) Nature of services provided: Accounting / bookkeeping Value of services provided during the period 1 July 2011 to 30 June 2012: $9, NOTE 15: KEY MANAGEMENT PERSONNEL COMPENSATION Compensation received by directors of IPM Petroleum Ltd - Salaries and wages 450, , , ,000 Compensation received by senior employees of IPM Petroleum Ltd - Salaries and wages 328,000 30, ,000 30, , ,

25 NOTES TO FINANCIAL STATEMENTS $ $ NOTE 16: EQUITY HELD BY DIRECTORS Paid up value of ordinary shares held by directors Brendan Brown 287,992 37,982 Shane Tanner 156, ,019 Phillip Smith 164,482 37, , ,983 NOTE 17: CAPITAL AND LEASING COMMITMENTS (a) Operating lease commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements: Payable - not later than one year 52,000 50,000 - later than one year and not later than five years 54, , , ,080 Operating lease of head office - 23 Small Street, Hampton. The lease is for a 3 year period expiring 1 May 2014 at which point IPM Petroleum Ltd have the option to renew for another 3 years. (b) Capital expenditure commitments contracted for: - Exploration and evaluation of mineral resources (WA-424-P) - between one year and five years 14,000,000-14,000,000 - The commitments pertaining to area of interest WA-424-P relate to the contract entered into with AGR Petroleum Services effective 7 September 2011 for provision of drilling services (contract no. PGAP.PWM.AUS.84.A). The payments outlined above are subject to Section 9(1) of the contract and any future farm out agreements reached between IPM Petroleum Ltd and prospective third parties

26 NOTES TO FINANCIAL STATEMENTS NOTE 17: CAPITAL AND LEASING COMMITMENTS (CONTINUED) $ $ (c) Capital expenditure commitments for: - Exploration and evaluation of mineral resources (WA-471-P) 24,000,000 - Estimated expenditure - not later than one year 500, later than one year and not later than five years 23,500,000-24,000,000 - The exploration and evaluation of hydrocarbon resources commitments relate to the permit for exploration and evaluation of area of interest WA-471-P and the commitments made by IPM Petroleum Ltd in conjunction with its successful tender. The geotechnical studies for the initial year of permit will be carried out in 2012/13 and the remainder of the expenditure (seismic exploration well drilling and further geotechnical studies) will be assessed for on an annual basis dependent on findings (including Government permit renewal on a year to year basis). This is included as a capital commitment in the interest of full disclosure over the life of the project based on initial assessments by IPM Petroleum Ltd. NOTE 18: EVENTS SUBSEQUENT TO REPORTING DATE There has been no matter or circumstance, which has arisen since 30 June 2012 that has significantly affected or may significantly affect: (a) (b) (c) the operations, in financial years subsequent to 30 June 2012, of IPM Petroleum Ltd, or the results of those operations, or the state of affairs, in financial years subsequent to 30 June 2012, of IPM Petroleum Ltd

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30 ADDITIONAL INFORMATION PRIVATE INFORMATION FOR THE DIRECTORS ON THE 2012 FINANCIAL STATEMENTS $ $ Other operating income Interest income 64,657 70,282 Total other operating income 64,657 70,282 Contribution margin 64,657 70,282 Less expenses Administration costs 195,263 1,360 Advertising Cleaning Computer expenses 30,940 1,516 Consultancy fees 525, ,911 Depreciation 28,832 1,580 Directors' emoluments 46,320 30,959 Electricity 1,541 - Employees' amenities 56,066 - Entertainment expenses 2,159 1,085 Exploration expenditure (non-capital) 4,125 - Fees and permits - 1,840 Foreign currency translation losses (2,322) 79,884 Insurance 5,042 1,231 Legal costs 39,954 10,970 Licensing fees - 4,125 Office supplies 2,996 1,504 Operating expenses 1,828 - Payroll tax 16,274 1,563 Postage 1, Printing and stationery 8,368 4,684 Professional fees 12,750 - Rates and taxes 21,997 - Rent 52,212 6,438 Repairs and maintenance 7,277 5,768 Salaries and wages 796, ,467 Security costs Staff training and welfare 79,075 16,173 Subscriptions 6,174 3,168 Superannuation 20,684 - Telephone 8, Travelling expenses 98,723 11,525 Travelling and entertainment 1,

31 ADDITIONAL INFORMATION PRIVATE INFORMATION FOR THE DIRECTORS ON THE 2012 FINANCIAL STATEMENTS $ $ Total expenses 2,070, ,451 Operating loss from continuing activities before tax (2,005,724) (406,169) Income tax (expense) / benefit - - Operating loss from continuing activities after tax (2,005,724) (406,169)