OILEX LTD

ABN 50 078 652 632

Financial report for year ended 30 june 2017

 

CONTENTS

Chairman's Review

Business Review

Permit Schedule

Directors' Report

Remuneration Report - Audited

Lead Auditor's Independence Declaration

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Directors' Declaration

Independent Audit Report

Shareholder Information

Definitions

Corporate Information

 

CHAIRMANS REVIEW

Dear Shareholder

 

The 2017 financial year has delivered important steps to reset your Company and regain momentum behind the Cambay Project, the Company's key asset.

 

The Company remains committed to unlocking the multi TCF in-place tight gas potential in the tight EP-IV siltstones at its onshore Cambay Project, Gujarat State in India. Energy demand in India continues to underpin a strong investment case for the Joint Venture partners at Cambay.

 

The Company appointed Schlumberger and Baker Hughes to advise on the optimal well and stimulation design required to achieve potential commercial flow rates in the EP-IV reservoir. Importantly, the results from their analysis has confirmed the potential for substantially increased flow rates with the application of the appropriate stimulation technology suite. The Company is now reviewing its existing vertical wells with a view to conducting an initial test of the stimulation recipe.

 

During the year, the Company actively engaged in resolving the legacy issues associated with Cambay. In the June quarter, our Indian joint venture received the equivalent of US$1.4 million in outstanding cash calls from its joint venture partner, with additional proceeds anticipated. Importantly, all outstanding work programmes were approved by the joint venture and government regulator, and our joint venture partner has resumed payment of Cambay cash calls relating to the 2017/18 work programme.

 

A key focus of the 2017 financial year has been the preparation of the application for an extension of the Cambay PSC. As required, the application was lodged in September 2017 ahead of PSC expiry date of September 2019. The Company anticipates receiving a response to the application from the Government of India in mid-2018.

 

Strategically, the Company continues to actively review new opportunities to create value by diversifying the Company's project portfolio.

 

On behalf of the Board, I wish to thank our staff, Joint Venture partners, contractors, local communities, shareholders and stakeholders for their ongoing support as the Company moves closer to unlocking substantial unconventional hydrocarbon resources within the Cambay Project.

 

Mr B Lingo

Chairman

12 September 2017

 

BUSINESS REVIEW

External Impact on the Petroleum Industry

Low global oil and gas prices during 2016/17 continue to negatively impact the oil and gas industry. Overall new capital expenditures have remained relatively low, with funding for greenfield exploration projects challenging. Many companies have responded by continuing where possible to reduce costs and defer projects. Oilex has responded similarly by reducing its headcount and non-core expenditure.

 

In contrast, the Indian economy has remained strong and is described as the fastest growing major economy in the World.  India's oil consumption grew by 8.3 per cent year-on-year in 2016, against the global growth of 1.5 per cent, making it the third-largest oil consuming nation in the world. The Indian government is actively supporting foreign investment, including in the oil and gas sector. 

Oilex Strategy

Oilex continued to focus on its core project in India during the year while also evaluating potentially value accretive new business opportunities ranging from discovered undeveloped resources with exploration upside to existing production. These evaluations are aimed at broadening the company's opportunity base and investment opportunities.

Figure 1: Oilex Staff

Introduction

The Cambay Project, Oilex's major project, is located onshore in the state of Gujarat in the heart of one of India's most prolific hydrocarbon and leading industrialised provinces. The project is ideally located near a major industrial corridor and approximately 20 km from the existing national gas pipeline grid. The project is well-positioned to commercialise production in the fast-growing, demand-driven domestic energy market. 

The area has a long history of hydrocarbon production from a number of vertically stacked reservoir sections. Oilex continues to focus on a tight siltstone Eocene aged reservoir which has potential for Multi-TCF gas resources within the license area of the Cambay Production Sharing Contract (PSC). A secondary conventional reservoir is present in the Oligocene section. Oilex and its Joint Venture partner, the Gujarat State Petroleum Corporation Limited (GSPC), have been working on a development plan for both zones. The plan was submitted together with an application for a ten-year extension of the PSC in September 2017.

Production of gas and condensate from Cambay continued throughout most of the year. Gas was also produced during the year from the smaller Bhandut field until water production curtailed the operations.

Cambay Field, Onshore Gujarat, India

(Oilex - 45%, Operator)

Oilex is the Operator of the Cambay Field and holds a 45% participating interest. The remaining 55% interest is held by Joint Venture partner, Gujarat State Petroleum Corporation Limited (GSPC).

Exploration and production in the region has occurred since the early 1960s.  Oilex's focus on the tight siltstone reservoir is a step away from the conventional exploration and production that has dominated the basin. It requires application of drilling and stimulation technologies to produce the reservoir at commercial rates. Core samples from a well drilled in 2008 have been analysed by Schlumberger for geomechanics properties and fluid and proppant matching. This core test analysis along with the data from previous vertical and horizontal wells has been the subject of an in-depth review by Baker Hughes aimed specifically to identify reasons for the limited success of past drilling and stimulation, and to outline optimal drilling and stimulation methodologies for future work programmes to establish commercial gas production.

Figure 2: Gujarat Gas Pipeline Network to the Nation

 

A detailed development plan for both the Eocene siltstones and the Oligocene sandstones has been prepared during the year and submitted to the Indian government regulator, the Director General of Hydrocarbons in September 2017. The plan is required to support the application for the PSC extension. The PSC's primary term expires in September 2019, requiring submission of the application documents two years in advance. The Joint Venture has applied for an extension of up to ten years.

The development plan encompasses a staged approach, initially focussing on workovers and drilling of a small number of new wells. It is anticipated that notification by the government regarding the PSC extension will occur during Q2 of 2018.  No major expenditure will be undertaken whilst the PSC extension is being considered.

A field programme involving the workover of two older wells C-70 and C-23z to test potential production flow rates from the OS-II reservoir was completed in June 2017. However, these wells did not return commercial volumes of oil and or gas.

During the year, a small volume of gas was produced into the local low pressure pipeline from the Eocene reservoir.  The C-77H well produced 8.6 mmscf, and C-73 produced 2.7 mmscf. A plan of cycling production alternately from C-77H and C-73 will continue into the next year.

Figure 3: Cambay Field - recorded hydrocarbon flowrates from EP-IV (Y Zone) reservoir

The Company is in discussion with potential partner companies who have undertaken data room reviews of the EP-IV tight gas potential. Should any change in the structure of the existing Cambay joint venture eventuate, a restructure of the Company's ongoing funding commitment to the Cambay Project may ensue.

Figure 4: Cambay-73 Production Facility

Joint Venture Management

Oilex's has been working with its Joint Venture partner, GSPC, to resolve a number of unpaid cash calls going back several years. During the year Oilex received US$1.708 million gross from GSPC attributable to the Cambay Field. At 30 June 2017, gross unpaid cash calls issued to GSPC totalled approximately US$5.492 million. Oilex continues to engage positively with its Joint Venture partner to resolve these unpaid amounts. During the year Oilex continued to bear the ongoing costs of the Joint Venture and managed payment of the Cambay Joint Venture creditors. It is anticipated that GSPC will commence regular contributions to ongoing operating cash calls going forward.

Oilex has worked closely with GSPC exploring various options for the PSC and on the future development plan. There are no outstanding work commitments remaining on the PSC before the term expires. 

In December 2016, Oilex participated in a formal tender process initiated by GSPC, by submitting a conditional offer for a possible additional 55% interest in the Cambay PSC.  The outcome of this process has yet to be determined.

Cambay Contingent Resources

Resource volumes for the Eocene are unchanged since June 2016 and are summarised in the following table which shows Oilex net working interest. The development plan submitted as part of the application for extension of the PSC term addresses a sub-set of these resources in a staged approach.

 

Unrisked Cambay Field Contingent Resource Estimates at June 2017
			Net Gas Volume			Net Condensate Volume
			Bcf			million bbl
			1C	2C	3C	1C	2C	3C
X & Y Zones
			215	417	728	12	27.4	54.6

Bhandut Field, Onshore Gujarat, India

(Oilex - 40%, Operator)

Oilex N.L. Holdings (India) Limited is the Operator of the Bhandut Field Production Sharing Contract (PSC) in the Cambay Basin onshore Gujarat, India and holds a 40% participating interest. The remaining 60% interest is held by Joint Venture partner Gujarat State Petroleum Corporation Limited (GSPC).

The Bhandut Field was initially discovered and developed by ONGC in 1976.

Production from the Bhandut-3 well continued until June 2017 when it was shut-in due to increasing water production. A total of 28.5 mmscf was produced during the year.

The field has ongoing production and exploration potential, coupled with existing production facilities. The Company is currently in discussion with several parties, regarding a possible sale of its participating interest in the PSC. A development plan in support of the application for an extension of the PSC was submitted in September 2017.

During the financial year, the Joint Venture received US$0.283 million gross from GSPC against outstanding cash calls for Bhandut. Total unpaid cash calls by GSPC were reduced to US$62,983 (gross) at 30 June 2017.

Figure 5: Bhandut Production Facility

Sabarmati Field, Onshore Gujarat, India

(Oilex - 40%, Operator)

The Sabarmati Field Petroleum Mining Permit was relinquished in August 2016. During the financial year, the Joint Venture received US$84,644 gross from GSPC against outstanding cash calls and the total unpaid cash calls by GSPC had been reduced as at June 2017 to US$769 (gross).

JPDA 06-103, Timor Sea

(Oilex - 10%, Operator)

The Joint Venture submitted a request to the Autoridade Nacional do Petroleo e Minerais (ANPM) to terminate the PSC by mutual agreement in accordance with its terms and without penalty or claim on 12 July 2013 (Request to Terminate).

The Request to Terminate followed Joint Venture concerns over the security of PSC tenure as a result of developments within the JPDA, including JPDA 06-103, which are outside the control and influence of the Joint Venture Participants, including:

·      existence of separate unilateral rights to terminate the Certain Maritime Arrangements in the Timor Sea (CMATS) arising in 2013 in favour of both the Government of Timor Leste and the Government of Australia; and

·      formal arbitration proceedings being initiated by the Timor Leste Government against the Government of Australia to have CMATS declared void ab initio.

On 15 January 2014, the ANPM suspended the PSC for 3 months to provide sufficient time for a response to the Request to Terminate be determined. The ANPM subsequently granted successive 3 month extensions to the PSC.

In May 2015, the ANPM responded to the Joint Venture and advised that the Request to Terminate had been rejected. Shortly thereafter, the Joint Venture received a Notice of Intent to Terminate the PSC (Notice) from the ANPM effective 15 July 2015.

The Notice asserts a monetary claim against the Joint Venture for payment of the estimated cost of exploration activities not carried out in 2013 and certain local content obligations set out in the PSC. The total amount sought to be recovered by the ANPM in the Notice is approximately US$17 million. The obligations and liabilities of the Joint Venture participants under the PSC are joint and several.   

The Joint Venture had previously requested credit for excess expenditure on the approved work programme in the amount of circa US$56 million and this issue remains unresolved. The Notice does not include any reference to, nor allowance for, credit for excess monies which have been spent by the Joint Venture during the PSC term.  Oilex considers such excess expenditure should be included as part of any financial assessment incorporated in the termination process.

The Joint Venture continues to discuss any financial liabilities which may arise from the termination of the PSC with the ANPM.

Notwithstanding the Group's belief that no penalty is applicable, both parties have made a number of offers to settle the matter, none of which have been mutually acceptable. In view of ongoing discussions to resolve this matter, the Group has elected to make a provision of US$600,000 as at 31 December 2016, being the Group's share of a proposed settlement of the JPDA matter. The provision, timing and or settlement, if any, is subject to variation dependent upon ongoing negotiations with the ANPM.

The Joint Venture continues its discussions with the ANPM and remains hopeful an amicable settlement will be reached. If the parties are unable to reach an amicable settlement, any party may refer the matter to arbitration. If this occurs, the obligations and liabilities of the Joint Venture participants under the PSC are joint and several, with parent company guarantees provided by all Joint Venture participants. Oilex has a 10% participating interest in the Joint Venture and is the Operator

The equity interest of the Joint Venture participants are:

Oilex (JPDA 06-103) Ltd (Operator)	10%
Pan Pacific Petroleum (JPDA 06-103) Pty Ltd	15%
Japan Energy E&P JPDA Pty Ltd	15%
GSPC (JPDA) Limited	20%
Videocon JPDA 06-103 Limited	20%
Bharat PetroResources JPDA Ltd	20%
Total	100%

The Joint Venture is presently being conducted in accordance with a care and maintenance budget.

Canning Basin, Western Australia

Oilex currently holds exploration permit application STP-EPA-0131, and has "preferred applicant" status for two adjacent exploration areas, STP-EPA-0106 and STP-EPA-0107 in the onshore Canning Basin, Western Australia. The combined total area is ~3 million acres. The exploration areas cover the prospective Wallal Graben.

The acreage is adjacent to many world class mining projects in the Pilbara region. The Great Northern Highway runs through the northern area and the Telfer Gas Pipeline traverses STP-EPA-0131.

Final award of each permit requires signing of Heritage Agreements with the Nyangumarta and Njamal People and is linked to a request to the Department of Mines and Petroleum (DMP) that all three permits be awarded simultaneously. Oilex can review its position in pursuing these applications at any time.

West Kampar PSC, Central Sumatra

(Oilex - 45% + further 22.5% secured, Non operator)

Oilex continues to pursue a commercial resolution to the Joint Venture dispute with the Operator in the West Kampar PSC, in parallel with considering options to enforce its Arbitration Award in Jakarta. The Pendalian Field which lies within the PSC has been managed outside of the terms of the JOA and funded by the Operator with no accounting of any production revenues to Oilex.

Following application by a creditor, the Commercial Court in Jakarta appointed an Administrator and implemented a scheme of arrangement to repay creditors over a ten-year period. As this scheme excluded Oilex's claim, Oilex has commenced legal action to recover the balance of the arbitration award and to ensure its interests are protected.  

At the end of 2016 the Indonesian Operator applied to the Indonesian courts for a debt payment obligation suspension. This was denied and the operating company, PT Sumatera Persada Energi (SPE) was declared bankrupt. A number of creditors meetings were held during the year. Oilex has instructed its Indonesian based lawyers to pursue its claim in the courts covering refund of monies provided by Oilex to the Operator, accrued interest, arbitration and legal costs and loss of profits. 

Oilex recently has received confirmation from the Indonesian Government regulator, SKKMigas that Oilex continues to retain a 45% participating interest in the PSC. In the absence of a commercial settlement, the Company intends to preserve its rights including the Arbitration Award. 

The carrying value of this investment had been fully provided for in 2012 pending resolution of this matter.

Financial

Treasury policy

The funding requirements of the Group are reviewed on a regular basis by the Group's Chief Financial Officer and reported to the Board to ensure the Group is able to meet its financial obligations as and when they fall due. Internal cash flow models are used to review and to test investment decisions. Until sufficient operating cash flows are generated from its operations, the Group remains reliant on equity or debt funding, as well as assets divestiture or farmouts to fund its expenditure commitments.

Formal control over the Group's activities is maintained through a budget and cash flow monitoring process with annual budgets considered in detail, and monitored monthly by the Board and forming the basis of the Company's financial management strategy.

Cash flows are tested under various scenarios to ensure that expenditure commitments are able to be met under all reasonably likely scenarios.  Expenditures are also carefully monitored against budget.

The Company continues to actively develop funding options in order that it can meet its expenditure commitments and its' planned future discretionary expenditure.

As at 30 June 2017 the Group had no loan borrowings.

Corporate

The Company has dual listing on the ASX and on the Alternative Investment Market (AIM) of the London Stock Exchange with approximately 64% of the Company's shares held on the Company's UK register. At the 23 November 2016, Annual General Meeting, shareholders approved the adoption of an updated Constitution.

During the year, the Company continued to undertake material cost reduction initiatives in both its Perth and Indian offices. The cost reductions undertaken in both Perth and India, included a 30% overall reduction in the number of personnel; and a 14% average reduction in salaries and wages for existing personnel.  

A capital raising (Placement) to secure funding of approximately £1.1 million (A$1.78 million) to support its 2017 work programme and working capital requirements was undertaken in the first half of 2017. Cornhill Capital Limited (Cornhill) was appointed as broker pursuant to the AIM Rules for Companies and arranged £1 million from new investors in the United Kingdom. The Company also received direct subscriptions of £0.1 million from existing professional shareholders. The Placement, part of which was subject to shareholder approval, secured approximately £1.1 million before expenses through the issue of 488,888,888 new fully paid ordinary shares at an average price of 0.225 pence (A$0.0036) per share and 190,353,386 options in the issued capital of the Company. 

The first tranche of 298,353,502 shares issued for £0.67 million (approximately A$1.07 million) completed during the March 2017 quarter. Shareholder approval was gained at a subsequent General Meeting held on 3 May 2017, for a second tranche of 190,353,386 shares at 0.225 pence each for a gross raising of £0.43 million (approximately A$0.69 million). Each share of this second tranche was issued with an attached unlisted option exercisable at 0.35 pence (A$0.0056) at any time within six months from the date of issue.  The General Meeting also approved the granting to Cornhill of 88,888,888 unlisted options exercisable at 0.225 pence per share exercisable within 3 years of grant.

As at 30 June 2017 the Company had:

·      Available cash resources of $3.22 million;

·      No loans or borrowings;

·      Issued capital of 1,684,302,899 fully paid ordinary shares and unlisted options of 286,974,272.

On 4 September 2017, the Company issued 13,809,266 new ordinary shares following the exercise of 11,722,222 broker options at 0.225 pence and the sum of 2,087,044 shares in lieu of consulting fees.

Figure 6: Oilex Tree Planting

Executive and Board Changes

In early 2017, a number of changes were made at Board level.

In February, Mr Max Cozijn stepped down as Non-Executive Chairman of the Company and Mr Bradley Lingo agreed to act as Non-Executive Chairman in an interim capacity during the transition period. The Company has initiated a formal search process to identify a potential new Chairman.

On 17 March 2017, Mr Jonathan Salomon's contract as Managing Director, was extended by one year.

In May, Mr Paul Haywood was appointed as a Non-Executive Director, providing the Company with United Kingdom financial markets expertise.

The Board continues to review the Board composition with a view to conforming with best corporate governance requirements while being cognisant of the need to conserve the cash resources of the group during this constrained economic environment for the hydrocarbon industry globally.

Risk Management

The full Board undertakes the function of the Audit and Risk Committee and is responsible for the Group's internal financial control system and the Company's risk management framework. Management of business risk, particularly exploration, development and operational risk is essential for success in the oil & gas business. The Group manages risk through a formal risk identification and risk management system.

Health, Safety, Security and Environment

Policy

Oilex is committed to protecting the health and safety of everybody who plays a part in our operations or lives in the communities where we operate. Wherever we operate, we will conduct our business with respect and care for both the local and global, natural and social environment and systematically manage risks to drive sustainable business growth. We will strive to eliminate all injuries, occupational illness, unsafe practise and incidents of environmental harm from our activities. The safety and health of our workforce and our environment stewardship are just as important to our success as operational and financial performance and the reputation of the Company.

Oilex respects the diversity of cultures and customs that it encounters and endeavours to incorporate business practices that accommodate such diversity and that have a beneficial impact through our working involvement with local communities. We strive to make our facilities safer and better places in which to work and our attention to detail and focus on safety, environmental, health and security issues will help to ensure high standards of performance. We are committed to a process of continuous improvement in all we do and to the adoption of international industry standards and codes wherever practicable. Through implementation of these principles, Oilex seeks to earn the public's trust and to be recognised as a responsible corporate citizen.

 

 

Qualified Petroleum Reserves and Resources Evaluator Statement

Pursuant to the requirements of Chapter 5 of the ASX Listing Rules, the information in this report relating to petroleum reserves and resources is based on and fairly represents information and supporting documentation prepared by or under the supervision of Mr Joe Salomon, Managing Director employed by Oilex Ltd. Mr Salomon has over 31 years' experience in petroleum geology and is a member of the American Association of Petroleum Geologists, Petroleum Exploration Society of Australia and South East Asian Petroleum Exploration Society. Mr Salomon meets the requirements of a qualified petroleum reserve and resource evaluator under Chapter 5 of the ASX Listing Rules and consents to the inclusion of this information in this report in the form and context in which it appears. Mr Salomon also meets the requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies and consents to the inclusion of this information in this report in the form and context in which it appears.

 

PERMIT SCHEDULE

 

PERMIT SCHEDULE AS AT 30 JUNE 2017
ASSET	LOCATION	ENTITY	EQUITY %	OPERATOR
Cambay Field PSC	Gujarat, India	Oilex Ltd	30.0	Oilex Ltd
		Oilex N.L. Holdings (India) Limited	15.0
Bhandut Field PSC	Gujarat, India	Oilex N.L. Holdings (India) Limited	40.0	Oilex N.L. Holdings (India) Limited
West Kampar PSC	Sumatra, Indonesia	Oilex (West Kampar) Limited	67.5 (1)	PT Sumatera Persada Energi
JPDA 06-103 PSC	Joint Petroleum Development Area Timor Leste and Australia	Oilex (JPDA 06-103) Ltd	10.0	Oilex (JPDA 06-103) Ltd
STP-EPA-0131	Western Australia	Admiral Oil Pty Ltd (3)	100.0	Admiral Oil Pty Ltd (2)
STP-EPA-0106	Western Australia	Admiral Oil and Gas (106) Pty Ltd (3)	100.0 (3)	Admiral Oil and Gas (106) Pty Ltd (2)
STP-EPA-0107	Western Australia	Admiral Oil and Gas (107) Pty Ltd (3)	100.0 (3)	Admiral Oil and Gas (107) Pty Ltd (2)

 

 ⁽¹⁾ Oilex (West Kampar) Limited is entitled to have assigned an additional 22.5% to its holding through the exercise of its rights under a Power of Attorney granted by PT Sumatera Persada Energi (SPE) following the failure of SPE to repay funds due.  The assignment request has been provided to BPMigas (now SKKMigas) but has not yet been approved or rejected. If Oilex is paid the funds due it will not be entitled to also pursue this assignment.

⁽²⁾ Ultimate parent entity is Oilex Ltd.

⁽³⁾ Current status is a Preferred Applicant.

DIRECTORS REPORT

FOR THE YEAR ENDED 30 JUNE 2017

 

2017 FINANCIAL REPORT

CONTENTS

Directors' Report

Remuneration Report - Audited

Lead Auditor's Independence Declaration

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Directors' Declaration

Independent Audit Report

Shareholder Information

 

For the year ended 30 June 2017

The directors of Oilex present their report (including the Remuneration Report) together with the consolidated financial statements of the Group comprising of Oilex Ltd (the Company) and its subsidiaries for the financial year ended 30 June 2017 and the auditors' report thereon.

DIRECTORS

The directors of Oilex Ltd (the Company) in office at any time during or since the end of the financial year are:

Mr Bradley Lingo

(Non-Executive Chairman)

Bachelor of Arts with Honours, Juris Doctorate, MAICD

Mr Lingo was appointed as a Non-Executive Director in February 2016 and Non-Executive Chairman in February 2017. Mr Lingo has more than 31 years of experience in a diverse range of oil and gas leadership roles, including business development, new ventures, mergers and acquisitions and corporate finance. Mr Lingo has worked with Tenneco Energy and El Paso Corporation in the US and Australia, the Commonwealth Bank of Australia and Drillsearch Energy Limited. He is currently the Managing Director and CEO of Elk Petroleum Limited.

During the last three years Mr Lingo has been a director of the following ASX listed companies:

·    Elk Petroleum Limited (from August 2015 to current)

·    Drillsearch Energy Limited (from May 2009 to July 2015)

·    Acer Energy Limited (from November 2012 to July 2015)

·    Ambassador Oil and Gas Limited (from August 2014 to July 2015)

Mr Max Cozijn

(Non-Executive Director)

BCom CPA MAICD

Mr Cozijn was initially appointed Chairman when the Company listed on the Australian Securities Exchange (ASX) in 2003, having been the founding director of Oilex Ltd. He stepped down as Chairman in February 2017 and is currently a Non-Executive Director of the Company. Mr Cozijn has a Bachelor of Commerce degree from the University of Western Australia, is a member of CPA Australia and is a member of the Australian Institute of Company Directors. Mr Cozijn has over 35 years of experience in the administration of listed mining and industrial companies and is the Non-Executive Chairman of Jacka Resources Limited and is a director of various private companies. Mr Cozijn was appointed a Non-Executive Board Member of Indigo Junction Inc, a not-for-profit organisation providing emergency accommodation and support services in July 2017. 

During the last three years Mr Cozijn has been a director of the following ASX listed companies:

·    Jacka Resources Limited (from May 2014 to current)

·    Energia Minerals Limited (from May 1997 to June 2016)

·    Carbon Energy Limited (from September 1992 to April 2015)

Mr Paul Haywood

(Non-Executive Director - appointed 29 May 2017)

Mr Haywood was appointed as a Non-Executive Director in May 2017. Mr Haywood has over 14 years of international experience in delivering value for his investment network through a blended skill-set of corporate and operational experience, including six years in the Middle East, building early stage and growth projects. More recently, Mr Haywood has held senior management positions with UK and Australian public companies in the natural resource and energy sectors including O&G exploration and development in UK, EU and Central Asia. Mr Haywood's expertise stretch across a broad UK and Australian public market, with a cross-functional skill set with diverse experience and capability encompassing research, strategy, implementation, capital and transactional management. Mr Haywood is currently Executive Director of Block Energy Plc and resource focussed UK advisory firm, Plutus Strategies Ltd.

During the last three years Mr Haywood has not been a director of any other ASX listed companies.

Mr Jonathan Salomon

(Managing Director)

B App Sc (Geology), GAICD

Mr Salomon was appointed as a Non-Executive Director in November 2015 and Managing Director on 18 March 2016. Mr Salomon has over 31 years of experience working for upstream energy companies. Further details of Mr Salomon's qualifications and experience can be found in the Executive Management section of the Directors' Report.

During the last three years Mr Salomon has not been a director of any other ASX listed companies.

COMPANY SECRETARY

The Chief Financial Officer, Mr Mark Bolton (B Bus) was appointed Company Secretary in June 2016.

CORPORATE GOVERNANCE STATEMENT

The Corporate Governance Statement, which reports on Oilex's key governance principles and practices is available on the Oilex website. 

In establishing its corporate governance framework, the Company has referred to the recommendations set out in the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 3^rd edition.  The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices.  Where the Company's corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation.  In compliance with the "if not, why not" reporting regime, where, after due consideration, the Company's corporate governance practices do not follow a recommendation, the Board has explained its reasons for not following the recommendation and disclosed what, if any, alternative practices the Company has adopted instead of those in the recommendation.

The Corporate Governance Statement provides detailed information on the Board and committee structure, diversity and risk management.

DIRECTORS' MEETINGS

Directors in office and directors' attendance at meetings during the 2016/17 financial year are as follows:

	Board Meetings (1)
	Held (2)	Attended
Non-Executive Directors
B Lingo (3)	14	14
M D J Cozijn (4)	14	14
P Haywood (5)	1	1
Executive Director
J Salomon	14	14

(a)    Following the changes to the Board at the Annual General Meeting on 25 November 2015, the Board resolved that the full Board would perform the role of the Audit and Risk Committee and the Remuneration and Nomination Committee. The Company is considering the appointment of additional independent non-executive directors in order to achieve best practice corporate governance and may reconstitute the Committees at that time.

(b)    Held indicates the number of meetings available for attendance by the director during the tenure of each director.

(c)    Current Chairman effective 23 February 2017.

(d)    Prior Chairman to 23 February 2017.

(e)    Appointed as Non-Executive Director 29 May 2017.

EXECUTIVE MANAGEMENT

Mr Jonathan Salomon

(Managing Director)

B App Sc (Geology), GAICD

Mr Salomon was appointed as a Non-Executive Director in November 2015 and Managing Director on 18 March 2016. Mr Salomon has a Bachelor degree in Applied Science and is a member of the American Association of Petroleum Geologists, Petroleum Exploration Society of Australia, South East Asian Petroleum Exploration Society and has over 31 years of experience working for upstream energy companies. Mr Salomon has worked for a number of oil and gas companies in various senior positions including General Manager Exploration and New Ventures at Murphy Oil Corporation and Global Head of Geoscience at RISC PL, in addition to a number of executive director roles including Strategic Energy Resources, Norwest Energy and Nido Petroleum. At several times in his career, Mr Salomon has acted as an independent consultant for various oil and gas companies, including New Standard Energy and Pacrim Energy. Mr Salomon first worked on Indian projects in 1994 while at Ampolex and since that time has maintained connection with the Indian industry, at various times bidding in India's exploration and field development rounds and working with Indian companies as joint venture partners, both in India and internationally.

Mr Mark Bolton

(Chief Financial Officer and Company Secretary)

B Business

Mr Bolton was appointed Chief Financial Officer and Company Secretary in June 2016. He has significant experience in the resource sector in Australia, having worked as Chief Financial Officer and Company Secretary for a number of resource companies since 2003. Prior to this, Mr Bolton worked with Ernst & Young as an Executive Director in Corporate Finance. Mr Bolton has experience in the areas of commercial management and the financing of resource projects internationally. He also has extensive experience in capital and equity markets in a number of jurisdictions including ASX and AIM. 

Mr Ashish Khare

(Head - India Assets - appointed 8 November 2016)
Bachelor of Engineering (BE in Chemical Engineering, including petroleum management)

Mr Khare was appointed Acting Head - India Assets on 8 November 2016 and is based in Gandhinagar India and has over 16 years of experience in the petroleum industry. Mr Khare's area of expertise include upstream oil and gas, as well as midstream and downstream project implementation and operation management. Mr Khare originally worked for Oilex as GM Operations & Business Development, and has experience working for various Indian companies including Cairn India Ltd and Reliance Petroleum.

Mr Peter Bekkers 

(Chief Geoscientist- until 30 September 2016)

BSC (Hons) Geology and Geophysics

Mr Bekkers joined Oilex in 2007, appointed as Chief Geoscientist in April 2010 until he ceased working for Oilex in September 2016.  Mr Bekkers held various roles with Woodside Energy Ltd, Santos Ltd and Boral Energy and had over 20 years of experience in the oil and gas industry.

Mr Jayant Sethi

(Head - India Assets - until 11 November 2016)

Geology (Masters)

Mr Sethi joined Oilex in February 2015 as Head - India Assets and ceased working for Oilex in November 2016. Mr Sethi previously held senior management positions with Cairn Energy Ltd and the Oil & Natural Gas Corporation and had over 30 years of experience in the oil and gas industry.

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the financial year included:

·    exploration for oil and gas;

·    appraisal and development of oil and gas prospects; and

·    production and sale of oil and gas.

There were no significant changes in the nature of the activities during the year.

OPERATING RESULTS

The loss after income tax of the consolidated entity for the year ended 30 June 2017 amounted to $3,665,192 (2016: loss of $36,154,111).

Revenue for the period decreased due to Bhandut-3 being shut in from 6 October 2016, Cambay-73 only being on production test from 2 July to 24 July 2016, and Cambay-77 being shut in after June 2016 until May 2017.

Other income includes the recovery of $285,558 relating to joint venture receivables reclassified to development assets in prior years, but subsequently received in the current financial year.

The prior year results included the impairment of development assets of $10,023,940, with no impairment recorded in the current year. Exploration and evaluation assets were impaired by $373,780 (2016: $11,572,740). Exploration expenses of $936,721 were offset by the reversal of $1,287,170 prior year expenses, including the reversal of cash calls and the decrease in the joint venture partners' share of creditors initially taken up by the Group in its capacity as operator, resulting in a net write back of $350,449 (2016: expense $3,972,848).

Administration expenses of $2,982,826 (2016: $5,648,298) includes the recovery of $693,400 arising from the insurance claim relating to the Zeta Resources Limited (Zeta) litigation, whilst the prior year included $1,484,993 for legal and settlement costs associated with Zeta. Other expenses include a provision of $795,229 (2016: Nil) being the Group's 10% share of a proposed settlement of the JPDA 06-103 termination penalty.

The impairment of receivables owing from Gujarat State Petroleum Corporation (GSPC) has been partially reversed with $473,112 written back in the current period (2016: expense of $3,941,988).

Cash and cash equivalents held by the Group as at 30 June 2017 was $3,215,565 (30 June 2016: cash and cash equivalents $5,158,361).

FINANCIAL POSITION

The net assets of the consolidated entity totalled $7,273,611 as at 30 June 2017 (2016: $9,328,974).

DIVIDENDS

No dividend was paid or declared during the year and the directors do not recommend the payment of a dividend.

REVIEW OF OPERATIONS

A review of the operations of the Group during the financial year and the results of those operations are set out in the Review of Operations on pages 3 to 11 of this report.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

The Review of Operations details those changes that have had a significant effect on the Group. 

Other than those matters, there have been no other significant changes in the state of affairs of the Group that occurred during the financial year.

SIGNIFICANT EVENTS AFTER BALANCE DATE

Subsequent to year end, on 4 September 2017, the Company issued 11,722,222 ordinary shares upon the exercise of £0.00225 ($0.004) unlisted options and 2,087,044 ordinary shares as consideration for consulting services.

There were no other significant subsequent events occurring after year end.

LIKELY DEVELOPMENTS

Additional comments on expected results on operations of the Group are included in the Review of Operations on pages 3 to 11.

Further disclosure as to likely developments in the operations of the Group and expected results of those operations have not been included in this report as, in the opinion of the Board, these would be speculative and as such, disclosure would not be in the best interests of the Group.

ENVIRONMENTAL ISSUES

The Group's oil and gas exploration and production activities are subject to environmental regulation under the legislation of the respective states and countries in which they operate. The majority of the Group's activities involve low level disturbance associated with its drilling programmes and production from existing wells. The Board actively monitors compliance with these regulations and as at the date of this report is not aware of any material breaches in respect of these regulations.

FINANCIAL POSITION

Capital Structure and Treasury Policy

Details of transactions involving ordinary shares during the financial year are as follows:

	Number of Shares	Number of Shares Under Option	Gross Amount Raised $
November 2016 - Managing Director Award Shares	12,987,013		-
March 2017 - Managing Director Retention Rights	2,000,000		-
March 2017 - Tranche One Placement	298,353,502		1,074,073
May 2017 - Tranche Two Placement including options	190,535,385	190,535,385	762,142
May 2017 - Broker options		88,888,888	-
Total	503,875,900	279,424,273	1,836,214

 

At the date of this report, the Company had a total issued capital of 1,698,112,165 ordinary shares and 274,977,051 unlisted options exercisable at Australian Dollar equivalent prices of between $0.004 and $0.35 per share. 

As at 30 June 2017 the Group had no loan borrowings.

Material Uncertainty Related to Going Concern

The audit opinion for the year ended 30 June 2017 identifies a material uncertainty regarding continuation as a going concern. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realisation of assets and settlement of liabilities in the normal course of business.  The Group will require funding in order to continue its exploration activities and progress the Cambay Project.

The funding requirements of the Group are reviewed on a regular basis by the Group's Chief Financial Officer and Managing Director and are reported to the Board at each board meeting to ensure the Group is able to meet its financial obligations as and when they fall due. Until sufficient operating cash flows are generated from its operations, the Group remains reliant on joint venture contributions, equity raisings or debt funding, as well as asset divestitures or farmouts to fund its expenditure commitments.

The Company continues to actively develop funding options in order that it can meet its expenditure commitments and its planned future discretionary expenditure, as well as any contingent liabilities that may arise.

DIRECTORS' INTERESTS

The relevant interest of each director in shares and unlisted options issued by the Company, as notified by the directors to the ASX in accordance with Section 205G (1) of the Corporations Act 2001, at the date of this report is as follows:

	Number of Ordinary Shares		Number of Options Over Ordinary Shares
	Direct	Indirect	Direct	Indirect
B Lingo	-	-	-	-
M D J Cozijn	-	1,848,218	-	-
P Haywood	-	-	-	-
J Salomon	14,987,013	-	-	-

 

SHARE OPTIONS

Unissued shares under options

At the date of this report unissued ordinary shares of the Company under option (with an exercise price) are:

 

Expiry Date	Number of Shares	Exercise Price
Unlisted Options
11 November 2017	2,000,000	$0.25
22 December 2017	5,000,000	$0.10
5 August 2018	275,000	$0.35
22 November 2017	190,535,385	£0.0036 ($0.006)
22 May 2020	77,166,666	£0.00225 ($0.004)
Total	274,977,051

 

These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.

Unissued shares under option that expired during the year 

During the financial year, the following unlisted employee and advisor options expired or were cancelled upon cessation of employment:

Date Lapsed	Number	Exercise Price
25 August 2016	1,500,000	$0.25
25 August 2016	1,500,000	$0.35
4 November 2016	2,000,000	$0.15
11 November 2016	2,000,000	$0.15
5 December 2016	3,000,000	$0.15
4 January 2017	1,000,000	$0.25
4 January 2017	500,000	$0.35
13 February 2017	500,000	$0.25
13 February 2017	500,000	$0.35
1 March 2017	100,000	$0.25
1 March 2017	100,000	$0.35
Total	12,700,000

Shares issued on exercise of unlisted options

During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of unlisted options as follows (there were no amounts unpaid on the shares issued):

	Number of Shares	Amount Paid on Each Share
During the financial year	-	-
Since the end of the financial year	11,722,222	£0.00225 ($0.004)

 

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Group paid a premium in respect of insurance cover for the directors and officers of the Group. The Group has not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors' liability and legal expense insurance contracts, as such disclosure is prohibited under the terms of the insurance contract.

PROCEEDINGS ON BEHALF OF THE COMPANY

No proceedings have been brought on behalf of the Company, nor has any application been made in respect of the Company under Section 237 of the Corporations Act 2001.

NON-AUDIT SERVICES

The Company may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditor's expertise and experience with the Group is important.

The Board has considered the non-audit services provided during the year and is satisfied that the provision of the non-audit services is compatible with, and did not compromise, the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

·     all non-audit services were subject to the corporate governance procedures adopted by the Group and these have been reviewed by the Board to ensure they do not impact the impartiality and objectivity of the auditor; and

·     the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor's own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.

Refer note 23 of the Consolidated Financial Statements for details of the amounts paid to the auditor of the Group, KPMG Australia, and its network firms for audit and non-audit services provided during the year.

rounding of Amounts

The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest dollar, unless otherwise stated.

LEAD AUDITOR'S INDEPENDENCE DECLARATION

The Lead Auditor's Independence Declaration for the year ended 30 June 2017 has been received and can be found on page 33.

DIRECTORS' REPORT - REMUNERATION REPORT

FOR THE YEAR ENDED 30 JUNE 2017

REMUNERATION REPORT - AUDITED

The Board has performed the function of the Nomination and Remuneration Committee since June 2016 when the Board considered that, given the size and composition of the existing Board, that there are no efficiencies to be gained by having a separate committee. The Board has adopted a Nomination and Remuneration Committee Charter, which describes the role, composition, functions and responsibilities of the committee. The Nomination and Remuneration Committee is responsible for the review and recommendation to the Board, of the Company's Remuneration Policy, senior executives' remuneration and incentives, the remuneration framework for directors, superannuation arrangements, incentive plans and remuneration reporting. 

1.     PRINCIPLES OF COMPENSATION

Remuneration is referred to as compensation throughout this report. The Remuneration Report explains the remuneration arrangements for directors and senior executives of Oilex Ltd who have authority and responsibility for planning, directing and controlling the activities of the Group (key management personnel). 

The compensation structures explained below are designed to attract, retain and motivate suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account:

·     the capability and experience of the key management personnel;

·     the ability of key management personnel to control the performance of the relevant segments;

·     the current downturn of the resources industry;

·     the Company's performance including:

·    the Group's earnings; and

·    the growth in share price and delivering constant returns on shareholder wealth;

·     exploration success; and

·     development of projects.

Compensation packages include a mix of fixed compensation and long-term performance-based incentives. In specific circumstances the Group may also provide short-term cash incentives based upon the achievement of Company performance hurdles or in recognition of specific achievements.

1.1   Fixed Compensation

Fixed compensation consists of base compensation and employer contributions to superannuation funds.  Compensation levels are reviewed annually through a process that considers individual, sector and overall performance of the Group.  In addition, reviews of available data on oil and gas industry companies provide comparison figures to ensure the directors' and senior executives' compensation is competitive in the market. 

In September 2016 following another review of cost reduction initiatives, the Board resolved to reduce the remuneration of Non-Executive Directors by 10%, the Managing Director by 22.3% and the CFO by 5% effective from 1 October 2016.

Compensation for senior executives is separately reviewed at the time of promotion or initial appointment.

1.2   Performance Linked Compensation

Performance linked compensation includes both short-term and long-term incentives designed to reward key management personnel for growth in shareholder wealth. The short-term incentive (STI) is an "at risk" bonus provided in the form of cash or shares, while the long-term incentive plan (LTI) is used to reward performance by granting options over ordinary shares of the Company.

Short-term incentive bonus

The Group does not utilise short-term incentives on an annual or regular basis, as these are not considered part of the standard compensation package for key management personnel.

In certain circumstances the Board may, for reasons of retention, motivation or recognition, consider the use of short-term incentives.

Short-term incentives, if granted, are at the discretion of the Board having regard to the business plans set before the commencement of the financial year as well as the achievement of performance targets as determined by the Board.  These targets include a combination of key strategic, financial and personal performance measures which may have a major influence over company performance in the short-term.

The prior year short-term incentive, granted to Mr Salomon as Managing Director, of $100,000 in Oilex shares upon the resolution of the Zeta Resources Limited litigation, was conditional upon shareholder approval.

Shareholder approval was obtained in the current financial year at the AGM held 23 November 2016. The 2016 financial year fully vested short-term incentive was awarded on 24 November 2016, with 12,987,013 shares issued to Mr Salomon. The pricing of the Oilex shares was based on the 20 day VWAP for OEX on the ASX in the 20 trading days preceding the AGM.

During the reporting period, a short-term incentive cash bonus was paid to Mr Sethi, Head of India Assets of $5,328. This discretionary bonus was in recognition of Mr Sethi's contribution to the strengthening of the Groups' relationship with its Indian joint venture partner, GSPC.

Long-term incentive bonus

Long-term incentives include shares, rights and options and are issued at the discretion of the Board.  

The issue of options is designed to allow the Group to attract and retain talented employees. The issue of options aims to closely align the interests of senior executives and employees with those of shareholders and create a link between increasing shareholder value and employee reward.  Any options issued to senior executives are issued under the Australian Securities Exchange Rule 7.1. 

Whilst the Company moved certain assets to development in previous financial years, these have been impaired and the Company does not generate profits or net operating cash inflows and as such does not pay any dividends, and consequently remuneration packages are not linked to profit performance. It is the performance of the overall exploration and appraisal programme and ultimately the share price that largely determines Oilex's performance. The Board therefore considered that fixed compensation combined with short-term and long-term incentive components is the best remuneration structure for achieving the Company's objectives to the benefit of shareholders. The table below sets out the closing share price at the end of the current and four previous financial years.

	2017	2016	2015	2014	2013
Share Price (cents)	0.3	1.0	6.1	11.5	5.0

 

The remuneration of directors, may consist of a cash component as well as an equity component, and is designed to retain directors of a high calibre, whilst rewarding them for their ongoing commitment and contribution to the Company on a cost effective basis. The issue of shares, rights or options to directors, subject to shareholder approval, is judged by the Company, to further align the directors' interests with that of shareholders, whilst maintaining the cash position of the Company. The Board does not consider that there are any significant opportunity costs to the Company or benefits foregone by the Company in issuing shares, rights or options to directors.

The Company did not issue any options to senior executives or staff during the year.

In the previous financial year, the Board granted the incoming Managing Director, Mr Salomon a retention award of 2 million rights to fully paid ordinary shares in the Company, if Mr Salomon's employment with the Company was extended beyond the initial one-year term, expiring on 18 March 2017, with the issue of these rights being subject to shareholder approval. Shareholder approval was obtained at the AGM held 23 November 2016, during the current year and 2 million retention rights to shares were issued at no cost on 16 December 2016 and converted to ordinary shares on 17 March 2017.

No non-executive directors have been granted any shares, rights or unlisted options in this financial year. During the financial year, no long-term incentives were granted to any employee.

1.3   Non-Executive Directors

Total compensation for all Non-Executive Directors is based on comparison with external data with reference to fees paid to Non-Executive Directors of comparable companies. Directors' fees cover all main Board activities and membership of committees.

The Board resolved to reduce the remuneration of Non-Executive Directors by 10% effective from 1 October 2016.

The Chairman's annual fee including superannuation reduced to $78,840 per annum the previous year, was again reduced by 10% to $70,956 per annum effective from 1 October 2016.

The Australian based Non-Executive Directors fees including superannuation of $54,750 per annum was reduced by 10% to $49,275 per annum effective 1 October 2016.

The annual fee for Mr Haywood, the Company's United Kingdom based Non-Executive Director was set at £30,000 per annum on commencement in May 2017.

The aggregate maximum fixed annual amount of remuneration available for Non-Executive Directors of $500,000 per annum was approved by Shareholders on 9 November 2011.

In addition to the fixed component, the Company can remunerate any director called upon to perform extra services or undertake any work for the Company beyond their general duties. This remuneration may either be in addition to, or in substitution for, the director's share of remuneration approved by Shareholders.

1.4   Clawback Policy

The Board has adopted the following Clawback Policy applicable from August 2015.

In relation to circumstances where an employee acts fraudulently or dishonestly, or wilfully breaches his or her duties to the Company or any of its subsidiaries, the Board has adopted a clawback policy in relation to any cash performance bonuses (including deferred share awards) or LTIs. The Board reserves the right to take action to reduce, recoup or otherwise adjust an employee's performance based remuneration in circumstances where in the opinion of the Board, an employee has acted fraudulently or dishonestly or wilfully breached his or her duties to the Company or any of its subsidiaries. The Board may:

·     deem any bonus payable, but not yet paid, to be forfeited;

·     require the repayment by the employee of all or part of any cash bonus received;

·     determine that any unvested and/or unexercised LTIs will lapse;

·     require the repayment of all or part of the cash amount received by the employee following vesting and subsequent sale of a LTI;

·     reduce future discretionary remuneration to the extent considered necessary or appropriate to take account of the event that has triggered the clawback;

·     initiate legal action against the employee; and/or

·     take any other action the Board considers appropriate.

1.5   Managing Director Sign On and Retention Awards

The table below sets out the special funding and retention awards granted to Mr Salomon as part of his employment contract. The retention award was issued free of charge and enables the holder to subscribe for one fully paid ordinary share in the Company per retention right.

Terms and Conditions of Each Grant
2017	Number of Shares Granted	Number of Shares Vesting in the Year (1)		Percentage of Cumulative Shares Vested (%)		Service Commencement Date / Grant Date		Value at Grant Date	Exercise Price
J Salomon (1)	12,987,013	12,987,013		100%		23 November 2016		-	Nil
J Salomon (2)	2,000,000	2,000,000		100%		23 November 2016		$14,000	Nil
Total	14,987,013	14,987,013
2016
J Salomon (1)	-		-		-		18 March 2016	$100,000	Nil
Total	-		-

(1)     The granting of $100,000 in Oilex shares upon the resolution of the Zeta Resources Limited litigation, subject to shareholder approval was treated as vested for the year ended 30 June 2016. The Zeta litigation settlement was announced by the Company on 8 June 2016, with $100,000 expensed to 30 June 2016. For accounting purposes under AASB 2 Share-based Payment where the grant date occurs after year end (upon shareholder approval), the fair value of the grant is estimated at the end of the reporting period 30 June 2016. Shareholder approval was granted in the current year at the AGM held on 23 November 2016 and 12,987,013 shares were awarded on 24 November 2016.

(2)     The granting of 2 million retention rights to ordinary shares on 18 March 2016, should Oilex elect to extend and Mr Salomon elects to enter a subsequent term of employment, subject to shareholder approval, was treated as vested for the year ended 30 June 2017. The Company issued 2 million retention rights on 19 December 2016 and these retention rights converted into 2 million ordinary shares on 17 March 2017, upon Mr Salomon's employment being extended beyond 18 March 2017.

1.6   Remuneration Consultants

There were no remuneration recommendations made in relation to key management personnel by remuneration consultants in the financial year ended 30 June 2017.

1.7   Adoption of year ended 30 June 2016 Remuneration Report

At the Annual General Meeting held 23 November 2016 shareholders adopted the 30 June 2016 Remuneration Report with a clear majority of 248,754,044 votes in favour, being 96.5% of the votes cast.