FIN RESOURCES LIMITED - Annual Report 2014

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and Controlled Entities (ABN 25 009 121 644)

Annual Report For the Year Ended 30 June 2014

Corporate Directory	2
Directors’ Report	3
Auditors’ Independence Declaration	19
Independent Audit Report to the Members of Orca Energy Limited	20
Directors’ Declaration	22
Consolidated Statement of Profit or Loss and Other Comprehensive Income	23
Consolidated Statement of Financial Position	24
Consolidated Statement of Changes in Equity	25
Consolidated Statement of Cash Flows	26
Notes to the Financial Statements	27
Corporate Governance	60
ASX Additional Information	64

Orca Energy Limited

CORPORATE DIRECTORY

DIRECTORS

Gregory Bandy (Executive Director) Jeremy King (Non‐Executive Director) Jason Bontempo (Non‐Executive Director)

COMPANY SECRETARY

Aaron Bertolatti

REGISTERED OFFICE

35 Richardson Street West Perth WA 6005

PRINCIPAL OFFICE

35 Richardson Street West Perth WA 6005

SHARE REGISTRY

Advanced Share Registry Services Limited 150 Stirling Highway Nedlands WA 6008 Telephone: +61 8 9389 8033

AUDITORS

Stantons International Level 2 1 Walker Avenue West Perth WA 6005

AUSTRALIAN SECURITIES EXCHANGE

Orca Energy Limited shares (OGY) are listed on the Australian Securities Exchange.

Orca Energy Limited

DIRECTORS’ REPORT

Your Directors present their report on Orca Energy Limited (“Company”) and its controlled entities (“Group”) for the financial year ended 30 June 2014.

DIRECTORS

The names of Directors in office at any time during or since the end of the financial year are:

Gregory Bandy Jeremy King Jason Bontempo Denis Patten (resigned 25[th] October 2013) Arthur Pitts (Alternate Director) (resigned 25[th] October 2013)

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

PRINCIPAL ACTIVITIES

The principal activity of the Group during the financial year was oil and gas exploration and production.

RESULTS

The profit of the Group attributable to members amounted to $298,960 (2013: loss $566,756).

The Group’s basic profit per share for the financial year ended 30 June 2014 was 0.06 cents per share (2013: 0.01 cents loss).

FINANCIAL POSITION

The Group’s working capital, being current assets less current liabilities, was $2,876,571 as at 30 June 2014 (2013: $3,089,701).

DIVIDENDS

The Directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report.

Orca Energy Limited

DIRECTORS’ REPORT

REVIEW OF OPERATIONS

COOPER BASIN, SOUTH AUSTRLIA

PEL 115 (OGY 20%)

During the year, Orca completed the sale of its 20% participating interest in PEL 115 to Senex Energy Limited (ASX: SXY, “Senex”) in exchange for a consideration of cash and benefits worth approximately $7 million that included a free carry for oil exploration and development in the southern Cooper Basin. Under the terms of the agreement with Senex, Orca retained a 20% interest in two key assets within PEL 115, at the time named the “Fury Joint Venture”. These two blocks (refer Figure 1.) are now covered by both a production license, PPL 251 (current Burruna production area) and a retention license, PRL 117 (external Burruna production area and Fury Block).

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Figure 1 ‐ Burruna & Fury Blocks (Source Senex Energy)

PPL 251

Burruna‐2 (OGY 20%)

In August, Orca announced that a significant oil discovery had been made at the Burruna‐2 exploration well. Wireline logs confirmed a net pay interval in the mid Namur Formation of 5.3 metres and a subsequent drill stem test resulted in oil free‐flowing to surface at a rate of over 750 barrels per day with no associated water. The well was drilled to a total depth of 1,916 metres by Joint Venture partner and Operator, Senex Energy, and as per the Sale Agreement announced on the 13th June 2013, Orca was free carried for all costs associated with drilling, casing and completing the well.

Orca Energy Limited

DIRECTORS’ REPORT

REVIEW OF OPERATIONS (cont)

After the successful installation of an Electric Submersible Pump (ESP) at Burruna‐2 in March, some piping changes were made to more efficiently flow the well. These changes, specifically lowering the “pump barrel”, has allowed increased flow rates from Burruna, however water handling remains the biggest constraint with respect to production from Burruna‐2, which may require the need for further facility upgrades in the future.

Burruna‐3 (OGY 20%)

In November, the Burruna‐3 oil well successfully appraised the Namur Formation intersected by the Burruna‐2 discovery. Further, the well also encountered an additional oil accumulation in the previously untapped lower Birkhead Formation.

The well confirmed the structural mapping of the Burruna oil field and intersected the Namur Formation that delivered flow rates of up to 3,600 barrels of oil per day at the Burruna‐2 well. In addition, the appraisal well encountered approximately 3 metres of interpreted net pay in the lower Birkhead Formation. Wireline logging confirmed this discovery with the appraisal well also encountering good quality oil and gas shows in the Murta Formation, which is productive in the adjacent Fury and Mirage Fields.

During the June quarter, Burruna‐3 came online for production. While initial production rates for both Burruna‐2 and Burruna‐3 were in excess of 1,000 barrels of oil per day (200 barrels per day net to Orca), daily flow rates are still stabilising as the Burruna‐3 pump speed is being optimised. Burruna‐3 production is from the Birkhead Formation while production from Burruna‐2 remains from the Namur Formation.

Production for the year was 28,670 barrels of oil, net to Orca, with the number of barrels sold, net to Orca, being 28,221. The Burruna Oil Field in May 2014 produced its 100,000th barrel of oil, with Orca on average receiving in excess A$120/barrel due to the premium quality of the oil.

Reserves Estimate

During the year the Operator, Senex Energy, had a basin wide annual independent reserves estimate prepared by DeGolyer and MacNaughton for their licenses in the Cooper Basin. This study included the Burruna Field in Permit PPL 251 in which Orca has a 20% working interest.

The gross and net reserves for PPL 251 (Burruna Field) as of 30 June 2014 were estimated to be:

	1P	2P	3P
Gross (100%)	252,000	745,000	2,271,000
Net to OGY 20%	50,600	149,000	279,000*

*NOTE: A portion of the 3P gross reserves occurs outside the JV area.

Orca Energy has reviewed these estimates and considers the estimates reasonable. As new data becomes available the estimates may need to be adjusted (up or down).

These reserve numbers are in addition to the reserves in Block PRL 117 (Fury Field) as of 30 June 2014.

	1P	2P	3P
Gross (100%)	90,000	242,500	1,037,500
Net to OGY (20%)	18,000	48,500	207,500

Orca Energy Limited

DIRECTORS’ REPORT

REVIEW OF OPERATIONS (cont)

PRL 117 (OGY 20%) & Murta Formation

In July 2013 the Joint Venture announced the Fury‐1 oil exploration well successfully tested an 18‐metre gross oil column within the Murta Formation with initial flow rates of up to 75 barrels of oil per day. As well as completing this well re‐entry, which Orca was free carried for, Senex Energy quantified a significant contingent oil resource within the Murta Formation of the Fury JV (now PPL 251 and PRL 117). The potential for Murta Formation oil production has been identified and tested from conventional wells, and has been shown to be potentially viable. As a result the following contingent resources have been estimated within the Murta Formation across the Fury JV:

	1C1	2C	3C
Contingent Resource2 (recoverable oil, MMbbls)	0.25	0.52	1.05
Orca Working Interest (MMbbls)	0.05	0.104	0.21
Average recovery factor applied3	8%	13%	20%
Oil in place4(MMbbls)	2.37	4.08	7.04

1 The resource classes in the summation were not adjusted for risk

2 The contingent resource estimates are not reserves and do not include reserves within the Murta Formation that are associated with commercially viable production

3 Average recovery factor applied to this contingent resource booking relates to vertical wells without production enhancement

4 Stock tank oil initially in place (STOIIP)

5 The estimates represent arithmetic summation by category. Note that this may cause the 1C resource estimate to be very conservative and the 3C resource estimate to be overly optimistic

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ABOUT THE MURTA FORMATION RESERVOIR

The Murta Formation is a regionally extensive package of thinly interbedded sandstone and shale that lies above the primary production reservoirs of the Cooper‐Eromanga Basin, as shown below. The formation is commonly found to be highly oil saturated with net pay intervals of 4 metres to 16 metres in thickness.

Oil has been produced from the Murta Formation at Senex‐operated fields with initial flow rates ranging from 20 to 200 barrels of oil per day. Production from Senex‐operated fields such as Mirage and Padulla demonstrates that while initial production rates are typically modest, the long term stabilised rates are likely to decline at only 3‐4% per annum, providing consistent production.

A technical review of the formation in PEL‐115 in the southern Cooper‐Eromanga Basin revealed large volumes of oil in place. The Burruna‐2 cores were highly saturated with oil that conventional wireline logging could not identify. Data from the Burruna‐2 core also shows that the formation can be classified as an unconventional resource, where the use of modern production enhancement techniques, such as those used in North America, may increase Murta Formation recovery factors, production rates and overall field economics.

Petrophysical analysis indicates Murta Formation porosity is better developed at Burruna‐3 than Burruna‐2 at the same depth where oil saturation was identified in core.

Oil fluorescence in Murta core under ultra‐violet light

Orca Energy Limited

DIRECTORS’ REPORT

REVIEW OF OPERATIONS (cont)

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Figure 2 ‐ Murta Formation stratigraphy in the southern Cooper‐Eromanga Basin (source: Senex Energy Ltd)

PEL 110

The PEL 110 block is a 1,453km[2] exploration license in the Cooper Basin located north of the Keleary and Telopea oil and gas fields and west of the James oil field.

During the year, a 1,037km2 seismic program over 10 exploration blocks (including PEL 110) was carried out by JV partner and Operator, Senex Energy. As per the terms of the PEL 115 Sale Agreement, Orca was free carried for this comprehensive work program, with the processing and interpretation interpretive components effectively completed. This work has identified multiple first pass leads on PEL 110, all with potentially stacked horizons. Of these leads, at least two (2) are expected to be to be prioritized for drilling in the second half of 2014 with a work program and budget recently approved by the JV for the drilling of two wells.

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Figure 3 ‐ Dundina 3D seismic area (Source Senex Energy)

Orca Energy Limited

DIRECTORS’ REPORT

REVIEW OF OPERATIONS (cont)

It is important to note that all of the initial first pass leads identified from the 3D seismic program on PEL 110 exhibit 4‐way structural closure. An initial review of the seismic data indicates there is additional potential for stratigraphic prospects in block PEL 110 that will be properly delineated once the detailed interpretation of the 3D is complete. The 3D seismic covers a large area, but one that is sparsely explored. Of the 26 wells drilled within the Dundinna 3D seismic area, those interpreted to have been drilled within a valid structural closure have produced oil on 67% of occasions.


	# of Wells	Wells with production	Wells with fluorescence
All	26	7	19

Wells with closure	9	6 (67%)


Wells barely closed	8	1 (12%)	7 (88%)

Wells with no closure	9	0 (0%)	9 (100%)

– SEABISCUIT (MATAGORDA) PROJECT TEXAS (OGY 20%)

Acquired by Orca in 2011 the Seabiscuit Project is a large structural closure with an area of approximately 1,750 acres. It is located in an ideal geological setting on trend with recently drilled wells flowing at sustained rates of 20 million cubic feet of natural gas and 200 barrels of oil per day, without any fracture stimulation. The JV initially intended to drill a 17,500ft well to test the Seabiscuit trap that was estimated by the operator, Dan A. Hughes Company (Hughes), to contain prospective, commercial resources.

During the June quarter, and after advising that they had made a final decision on the route to be used to access the Seabiscuit well site location, Hughes made a decision to relinquish its interest in the prospect and assign all leases back to Highland Minerals Inc. and New Oil and Gas, LLC (the prospect generators). Hughes cited land access issues, geological risk and gas prices as reasons for its decision. This was obviously in contrast to Hughes’ recently advised position regarding the project and its drilling intentions.

Orca has since been in contact with the prospect generators who are now in the process of identifying a new JV partner and operator. Orca remains committed to the project and is of the view that all issues cited by Hughes are manageable. The Company looks forward to updating the market when a new operator, who can deliver a well in a timely and cost effective manner, is identified.

Competent Persons Statement.

The reserves estimates have been prepared by DeGolyer and MacNaughton for Senex Energy Ltd on behalf of the PPL‐251 Joint Venture participants and have been reviewed by Alexander Parks.

All of the technical information, including information in relation to reserves and resources that is contained in this document has been reviewed internally by the Company's technical consultant, Mr Alexander Parks.

Mr Parks is a Petroleum Engineer who is a suitably qualified person with over 15 years’ experience in assessing hydrocarbon reserves and has reviewed the release and consents to the inclusion of the technical information in the form it is presented.

CORPORATE ACTIVITIES

On 7th August 2013 Orca Energy Limited held a General Meeting seeking approval of the sale of the 20% participating interest in PEL115 to Senex Energy Limited. This resolution was passed on a show of hands.

In December 2013 the Company announced a buy‐back of unmarketable parcels of 8,650,899 fully paid ordinary shares based on a Buy‐Back price of $0.02 per share. During April 2014 the Company completed the buy‐back.

Orca Energy Limited

DIRECTORS’ REPORT

CHANGES IN STATE OF AFFAIRS

During the year ended 30 June 2014 there was no significant change in the Group’s state of affairs other than that referred to in the financial statements or notes thereto.

FUTURE DEVELOPMENTS

Further information as to likely developments in the operations of the Group and expected results of those operations, would, in the opinion of the Directors, be speculative and prejudicial to the interests of the Group and its shareholders.

ENVIRONMENTAL ISSUES

The Group is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work. The Group is not aware of any environmental breaches during the current year.

INFORMATION ON DIRECTORS

Gregory Bandy Executive Director Experience Mr. Greg Bandy has over 12 years’ experience in retail, corporate and capital markets, both in Australia and overseas. Mr Bandy is also currently a Director of Red Emperor Resources NL (ASX|AIM: RMP) and a former director of Smart Parking Limited (ASX: SPZ) (formerly Car Parking Technologies Limited, formerly Empire Beer Group Limited (ASX: CPZ, EEE)).

Interest in Shares and Options 10,000,000 Unlisted Options exercisable at $0.03 on or before 31 December 2015

Directorships Red Emperor Resources NL (01/08/2010‐ present) Smart Parking Limited (formerly Car Parking Technologies Limited, formerly Empire Beer Group Limited) (18/06/2009‐ 16/02/2011)

Jeremy King Non‐Executive Director Experience Mr. Jeremy King is a corporate lawyer with over 12 years’ experience in domestic and international legal, financial and corporate matters. He has extensive corporate experience, particularly in relation to cross‐border private equity, leveraged buy‐out acquisitions and acting for banks, financial institutions and corporate issuers in respect of various debt and equity capital raisings. Mr King is currently also a director of, Smart Parking Limited (ASX: SPZ) (formerly Car Parking Technologies Limited) and Continuation Investments Limited (ASX: COT) and a former director of Glory Resources Ltd (ASX: GLY).

Interest in Shares and Options 50,000 fully paid ordinary shares and 2,500,000 Unlisted Options exercisable at $0.03 on or before 31 December 2015

Directorships Smart Parking Limited (formerly Car Parking Technologies Limited, formerly Empire Beer Group Limited) (01/08/2012 ‐ present)

Continuation Investments Limited (08/03/2012 – present) Glory Resources Limited (30/03/2010‐ 1/01/2012)

Orca Energy Limited

DIRECTORS’ REPORT

Jason Bontempo Non‐Executive Director Experience Mr Bontempo has worked in investment banking and corporate advisory since qualifying as a Chartered Accountant with Ernst & Young in 1997. Mr Bontempo has worked for investment banks in Australia and the UK and has been closely involved with the advising and financing of companies in the resources industry specialising in asset sales and AIM / ASX listings. Mr Bontempo is also currently a director of Glory Resources Limited. Interest in Shares and Options 5,000,000 Unlisted Options exercisable at $0.03 on or before 31 December 2015 Directorships Glory Resources Limited (24/05/2010 ‐ present) Red Emperor Resources NL (24/01/2011 ‐ present) Caeneus Minerals Ltd (formerly Matrix Metals Limited) (22/12/2010 – 25/02/2014) African Iron Limited (16/02/2007 ‐ 10/01/2011) Kupang Resources NL (formerly Chameleon Mining Limited) (13/09/2010‐ 1/03/2012) International Goldfields Limited (formerly Corvette Resources Limited) (17/04/2008 – 1/01/2012)

COMPANY SECRETARY

Mr Aaron Bertolatti

Mr Bertolatti is a qualified Chartered Accountant and Company Secretary with over 8 years’ experience in the mining industry and accounting profession.

Orca Energy Limited

DIRECTORS’ REPORT

REMUNERATION REPORT

Key Management Personnel Details (audited)

The following persons had authority and responsibility for planning, directing and controlling the activities of the Group during the current and prior financial years. The key management personnel of the Group are also that of the company.

Gregory Bandy Executive Director Jeremy King Non‐Executive Director Jason Bontempo Non‐Executive Director Denis Patten Non‐Executive Director (resigned 25[th] October 2013) Arthur Pitts Alternate Director (resigned 25[th] October 2013)

a) Remuneration Policy

The Board of Directors is responsible for determining and reviewing compensation arrangements for the executive team. The Board will assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. The Board reviewed the remuneration policy in August 2011.

Except as detailed, no Director has received or become entitled to receive, during or since the financial year, a benefit because of a contract made by the Company or a related body corporate with a Director, a firm of which a Director is a member or an entity in which a Director has a substantial financial interest.

This excludes a benefit included in the aggregate amount of emoluments received or due and receivable by Directors or the fixed salary of a full time employee of the Company.

The Group is an exploration and production entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented Executives, Directors and Senior Executives are paid market rates associated with individuals in similar positions, within the same industry. Options are issued to Directors and executives as performance incentives and to align Director, executive and shareholder goals.

The maximum aggregate amount of fees that can be paid to Non‐Executive Directors is subject to approval by shareholders at the Annual General Meeting. Fees for Non‐Executive Directors are not linked to the performance of the Company.

Orca Energy Limited

DIRECTORS’ REPORT

b) Director and Executive Remuneration (audited)

The Directors of the Group received the following amounts of compensation for the current year as set out below. There was no compensation of any type, to the Directors, other than as reported below for the provision of management services.

		Short‐	Post
		Term	Employment
Director/Key	Year	Salary &	Superannuation	Share	Other	Total	Performance	Value of
Management		Fees		Based	Benefits		Related	Options
Personnel				Payments				Remuneration
		$	$	$	$	$	%	%
Gregory Bandy	2014	197,500	17,775	82,504	5,563	303,342	‐	27.19
Jeremy King	2014	41,430	‐	20,626	5,563	67,619	‐	30.50
Jason Bontempo	2014	67,700	‐	41,252	5,563	114,515	‐	36.00
Denis Patten1	2014	6,000	810	‐	1,393	8,203	‐	‐
Arthur Pitts1	2013	‐	‐	‐	‐	‐	‐	‐
		312,630	18,585	144,382	18,082	493,679	‐
1.Resigned	25 October 2013.
		Short‐	Post
		Term	Employment
Director/Key	Year	Salary &	Superannuation	Share	Other	Total	Performance	Value of
Management		Fees		Based	Benefits		Related	Options
Personnel				Payments				Remuneration
		$	$	$	$	$	%	%
Gregory Bandy	2013	123,333	10,800	‐	4,705	138,838	‐	‐
Jeremy King	2013	36,000	‐	‐	4,705	40,705	‐	‐
Jason Bontempo	2013	42,000	3,780	‐	4,705	50,485	‐	‐
Denis Patten	2013	36,580	3,832	‐	4,705	45,117	‐	‐
Arthur Pitts	2013	‐	‐	‐	‐	‐	‐	‐
		237,913	18,412		18,820	275,145

Notes:

The fees paid to Director related entities were for the provision of management services of the particular Director, to the Group as follows:

a) Bushwood Nominees Pty Ltd, an entity associated with Jeremy King.
b) BR Corporation Pty Ltd, an entity associated with Jason Bontempo.

Orca Energy Limited

DIRECTORS’ REPORT

c) Value of Options Issued to Directors and Executives (audited)

There were 17,500,000 options issued for the Directors during the year (2013‐ Nil).

2014
		Options	Options	Options	Total	Value of	Percentage of
		Granted	Exercised	Lapsed	Value of	Options	Total
Director/Key	Year	Fair	Value at	Value at	Options	Included in	Remuneration
Management		Value at	Exercise	Lapse	Granted,	Remuneration	for the Year
Personnel		Grant	Date	Date	Exercised	for the Year	that Consists
		Date (i)			and		of Options
					Lapsed
		$	$	$	$	$	%
Gregory Bandy	2014	82,504	‐	‐	82,504	82,504	27.19
Jeremy King	2014	20,626	‐	‐	20,626	20,626	30.50
Jason Bontempo	2014	41,252	‐	‐	41,252	41,252	36.00
Denis Patten	2014	‐	‐	‐	‐	‐	‐
Arthur Pitts	2014	‐	‐	‐	‐	‐	‐
2013
		Options	Options	Options	Total	Value of	Percentage of
		Granted	Exercised	Lapsed	Value of	Options	Total
Director/Key	Year	Fair	Value at	Value at	Options	Included in	Remuneration
Management		Value at	Exercise	Lapse	Granted,	Remuneration	for the Year
Personnel		Grant	Date	Date	Exercised	for the Year	that Consists
		Date (i)			and		of Options
					Lapsed
		$	$	$	$	$	%
Gregory Bandy	2013	‐	‐	‐	‐	‐	‐
Jeremy King	2013	‐	‐	‐	‐	‐	‐
Jason Bontempo	2013	‐	‐	‐	‐	‐	‐
Denis Patten	2013	‐	‐	‐	‐	‐	‐
Arthur Pitts	2013	‐	‐	‐	‐	‐	‐

Orca Energy Limited

DIRECTORS’ REPORT

d) Options and Rights Over Equity Instruments Granted as Compensation (audited)

Details of options over ordinary shares in the Company that were granted as compensation to each key management person during the past two years and details of options that were vested during the past two years are as follows:

Director/Key	Number	Grant Date	Fair Value	Exercise	Expiry Date	Number
Management	Options		per Option	Price per		Options
Personnel	Granted		at Grant	Option		Vested
	During 2014		Date			During 2014
			$	$
Gregory Bandy	10,000,000	28/11/2013	0.008	0.03	31 Dec 2015	10,000,000
Jeremy King	2,500,000	28/11/2013	0.008	0.03	31 Dec 2015	2,500,000
Jason Bontempo	5,000,000	28/11/2013	0.008	0.03	31 Dec 2015	5,000,000
Denis Patten	‐	‐	‐	‐	‐	‐
Arthur Pitts	‐	‐	‐	‐	‐	‐
Director/Key	Number	Grant Date	Fair Value	Exercise	Expiry Date	Number
Management	Options		per Option	Price per		Options
Personnel	Granted		at Grant	Option		Vested
	During 2013		Date			During 2013
			$	$
Gregory Bandy	‐	‐	‐	‐	‐	‐
Jeremy King	‐	‐	‐	‐	‐	‐
Jason Bontempo	‐	‐	‐	‐	‐	‐
Denis Patten	‐	‐	‐	‐	‐	‐
Arthur Pitts	‐	‐	‐	‐	‐	‐

e) Service Agreements (audited)

The Company has entered into an Executive Service Agreement with Executive Director, Mr Greg Bandy, on the terms set out below:

Remuneration: $180,000
Termination: with reason, 3 months
Termination: without reason, 12 months
No fixed term (however 6 months notice required)

The Non‐Executive directors have letters of employment which provides an annual fee of $36,000 per annum for their services (subject to review). There is no termination notice period or termination benefit specified in the letter.

Orca Energy Limited

DIRECTORS’ REPORT

KMP Shareholdings

The number of ordinary shares in Orca Energy Limited held by each KMP of the Group during the financial year is as follows:

2014 Key management personnel Greg Bandy Jason Bontempo Jeremy King Denis Patten Arthur Pitts (Alternate director) 2013 Key management personnel Greg Bandy Jason Bontempo Jeremy King Denis Patten Arthur Pitts (Alternate director)*	Balance at beginning of year Granted as Remuneration Options exercised Other changes Balance at end of year ‐ ‐ 50,000 ‐ ‐ ‐ 50,000 ‐ ‐ ‐ ‐ ‐ 1,000,000 ‐ ‐ (1,000,000) ‐
	1,050,000 ‐ ‐ (1,000,000) 50,000
	Balance at beginning of year Granted as Remuneration Options exercised Other changes Balance at end of year ‐ ‐ 50,000 ‐ ‐ ‐ 50,000 ‐ ‐ ‐ ‐ ‐ 1,000,000 ‐ ‐ ‐ 1,000,000
	1,050,000 ‐ ‐ ‐ 1,050,000

*Shares held at time of share consolidation on 28/12/2012

** Shares purchased during the year on a post share consolidation basis.

Orca Energy Limited

DIRECTORS’ REPORT

KMP Option holdings

The number of options in Orca Energy Limited held by each KMP of the Group during the financial year is as follows:

OPTIONS

Share Options Granted to Directors and Executives

During the year and up to the date of this report, there were 17,500,000 share options issued to Directors and Executives of the Company as remuneration.

2014 Key management personnel Greg Bandy Jason Bontempo Jeremy King Denis Patten Arthur Pitts (Alternate director) 2013 Key management personnel Greg Bandy Jason Bontempo Jeremy King Denis Patten Arthur Pitts (Alternate director)*	Balance at beginning of year Granted as Remuneration Options exercised Other changes Balance at end of year ‐ 10,000,000 ‐ ‐ 10,000,000 ‐ 5,000,000 5,000,000 ‐ 2,500,000 ‐ ‐ 2,500,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
	‐ 17,500,000 ‐ ‐ 17,500,000
	Balance at beginning of year Granted as Remuneration Options exercised Other changes Balance at end of year ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
	‐ ‐ ‐ ‐ ‐

Other KMP Transactions

There have been no other transactions involving equity instruments other than those described above.

INDEMNIFYING OFFICERS

The Company currently has a policy in place for directors and officers insurance. During the financial year ended 30 June 2014, the Company paid an insurance premium of $18,082 (2013: $18,820) for directors and officers liability insurance.

Orca Energy Limited

DIRECTORS’ REPORT

MEETINGS OF DIRECTORS

The number of Directors' meetings (including committees) held during the financial year and the number of meetings attended by each Director are:

	Directors’	Meetings
Director	Number Eligible to Attend	Meetings Attended
Gregory Bandy	1	1
Jeremy King	1	1
Jason Bontempo	1	1
Denis Patten	1	1
Arthur Pitts	1	1

There were no audit committee meetings held during or since the end of the financial year, as the audit committee function is performed by the Board as a whole.

Un‐issued Shares Under Option

At the date of this report, the unissued ordinary shares of the Company under option to Directors and Executives of the Company are:

	Expiry	Date	Exercise Price	Number Shares
31	December	2015	$0.03	17,500,000

At the date of this report unissued ordinary shares of the Company under option to those other than Directors and Executives of the Company are:

	Expiry	Date	Exercise Price	Number Shares
11	December	2014	$0.16	500,000
31	December	2015	$0.03	10,500,000

The holders of these options do not have the right, by virtue of the option, to participate in any share issue or any other body corporate or registered scheme.

Shares Issued on Exercise of Options

There were no shares issued upon the exercise of options during the financial year ended 30 June 2014(2013‐ Nil).

During the financial year ended 30 June 2014 (30 June 2013: Nil) there were nil compensation options exercised into fully paid ordinary shares.

There has been no issue of ordinary shares as a result of the exercise of options since the end of the financial year.

Orca Energy Limited

DIRECTORS’ REPORT

AUDITORS INDEPENDENCE DECLARATION

The auditor’s independence declaration for the year ended 30 June 2014 has been received and can be found on page 19 of the financial report.

NON AUDIT SERVICES

Non‐audit services have been provided by the auditor of the company during the year for the preparation of an independent experts report $3,027 (2013‐ $7,500).

All non‐audit services were subject to the corporate governance procedures adopted by the Group and they do not impact the integrity and objectivity of the auditor.

SUBSEQUENT EVENTS

Apart from the above, there has not been any matter or circumstance that has arisen since 30 June 2014 that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in subsequent financial years.

Signed on behalf of the Board of Directors.

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________ Gregory Bandy Executive Director Perth, 30 September 2014

Orca Energy Limited

Stantons International Audit and Consulting Pty Ltd trading as

PO Box 1908 West Perth WA 6872 Australia

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Chartered Accountants and Consultants

Level 2, 1 Walker Avenue West Perth WA 6005 Australia

Tel: +61 8 9481 3188 Fax: +61 8 9321 1204

ABN: 84 144 581 519 www.stantons.com.au

30 September 2014

Board of Directors Orca Energy Limited 35 Richardson Street West Perth WA 6005

Dear Directors

RE: ORCA ENERGY LIMITED

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Orca Energy Limited.

As Audit Director for the audit of the financial statements of Orca Energy Limited for the year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.

Yours faithfully

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

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Martin Michalik Director

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Liability limited by a scheme approved under Professional Standards Legislation

Stantons International Audit and Consulting Pty Ltd trading as

PO Box 1908 West Perth WA 6872 Australia

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Chartered Accountants and Consultants

Level 2, 1 Walker Avenue West Perth WA 6005 Australia

Tel: +61 8 9481 3188 Fax: +61 8 9321 1204

ABN: 84 144 581 519 www.stantons.com.au

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ORCA ENERGY LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Orca Energy Limited, which comprises the consolidated statement of financial position as at 30 June 2014, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In note 4, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Liability limited by a scheme approved under Professional Standards Legislation

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Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Auditor’s opinion

In our opinion:

(a) the financial report of Orca Energy Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in note 4.

Report on the Remuneration Report

We have audited the remuneration report included in pages 11 to 16 of the directors’ report for the year ended 30 June 2014. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards

Auditor’s opinion

In our opinion the remuneration report of Orca Energy Limited for the year ended 30 June 2014 complies with section 300A of the Corporations Act 2001.

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD

(Trading as Stantons International) (An Authorised Audit Company)

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Martin Michalik Director

West Perth, Western Australia 30 September 2014

DIRECTORS’ DECLARATION

The directors of the company declare that:

the financial statements and notes, as set out on pages 23 to 58, are in accordance with the Corporations Act 2001 and:
a. comply with Accounting Standards;
b. are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in Note 4 to the financial statements; and
c. give a true and fair view of the financial position as at 30 June 2014 and of the performance for the year ended on that date of the consolidated group;

The Chief Executive Officer and Company Secretary have each declared that:

a. the financial records of the company for the financial year have been properly maintained in accordance with s 286 of the Corporations Act 2001 ;
b. the financial statements and notes for the financial year comply with the Accounting Standards; and
c. the financial statements and notes for the financial year give a true and fair view;

In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001 .

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Gregory Bandy Executive Director Perth, 30 September 2014

Orca Energy Limited

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014

Note Revenue 5 Cost of Sales 6 Gross Profit Other income 5 Profit on farm down 5 Consultancy fees Corporate compliance expenses Depreciation expense 13(b) Employee benefits expense 5 Exploration expenditure written off 14(a) Foreign exchange (loss)/gain Share based payments 5 General and administrative expense Occupancy expenses Travel expenses Other expenses Profit/(loss) before income tax expense Income tax expense 7 Net profit/( loss) attributable to members of Orca Energy Other comprehensive income Items that may be reclassified subsequently to profit and loss Income tax expense on items other comprehensive income 7 Total other comprehensive income Total comprehensive profit/(loss) for the year Profit/(loss) attributable to: Owners of the parent Non‐controlling interests Total comprehensive profit/(loss) attributable to: Owners of the parent Non‐controlling interests Basic and diluted earnings/(loss) per share (cents per share) 20	Consolidated Consolidated 2014 2013 $ $ 3,101,300 ‐ (1,278,377) ‐
	1,822,923 ‐ 55,604 100,867 1,840,000 ‐ (240,523) (48,000) (224,172) (282,697) (12,146) (13,012) (342,274) (231,653) (2,158,006) ‐ (38,159) 5,348 (214,134) ‐ (34,594) (21,257) (23,990) (12,127) (11,724) (17,433) (119,845) (46,792)
	298,960 (566,756) ‐ ‐
	298,960 (566,756)
	‐ ‐
	‐ ‐ 298,960 (566,756)
	298,960 (566,756) ‐ ‐
	298,960 (566,756)
	298,960 (566,756) ‐ ‐
	298,960 (566,756)
	0.06 (0.01)

The accompanying notes form part of these financial statements.

Orca Energy Limited

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014

Note ASSETS Current Assets Cash and cash equivalents 9 Trade and other receivables 10 Other assets 11 Other financial assets 12 Oil inventory Assets held for sale 31 Total Current Assets Non‐Current Assets Plant and equipment 13 Exploration and evaluation expenditure 14(a) Oil and gas properties 14(b) Total Non‐Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 15 Provisions 16(a) Total Current Liabilities Non‐Current Liabilities Provisions 16(b) Total Non‐Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 17 Reserves 19 Accumulated losses 18 TOTAL EQUITY	Consolidated Consolidated 2014 2013 $ $ 2,768,502 1,615,645 635,422 8,193 19,776 13,763 400 2,600 88,348 ‐ ‐ 2,460,251
	3,512,448 4,100,452
	‐ 12,146 2,473,570 6,045,863 2,404,118 ‐
	4,877,688 6,058,009
	8,390,136 10,158,461
	608,194 994,126 27,683 16,625
	635,877 1,010,751
	132,000 ‐
	132,000 ‐
	767,877 1,010,751
	7,622,259 9,147,710
	28,630,786 30,669,331 2,255,331 2,041,197 (23,263,858) (23,562,818)
	7,622,259 9,147,710

The accompanying notes form part of these financial statements.

Orca Energy Limited

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014

Consolidated Balance at 30 June 2012 Total comprehensive loss for the year Loss for the year Other comprehensive income Foreign currency translation differences Total comprehensive loss for the year Transactions with owners recorded directly in equity Securities issued during the year (net of transaction costs) Total Contributions by and distributions to owners Balance at 30 June 2013 Total comprehensive loss for the year Profit for the year Other comprehensive income Foreign currency translation differences Total comprehensive income for the year Transactions with owners recorded directly in equity Securities reduced due to share buy‐ back during the year (including transaction costs) Options issued during the year (net of transaction costs) Total Contributions by and distributions to owners Balance at 30 June 2014	Issued Capital Accumulated Losses Option Reserve Total Equity $ $ $ $ 30,669,331 (22,996,062) 2,041,197 9,714,466
	‐ (566,756) ‐ (566,756) ‐ ‐ ‐ ‐
	‐ (566,756) ‐ (566,756)
	‐ ‐ ‐ ‐
	‐ ‐ ‐ ‐
	30,669,331 (23,562,818) 2,041,197 9,147,710
	‐ 298,960 ‐ 298,960 ‐ ‐ ‐ ‐
	‐ 298,960 ‐ 298,960
	(2,038,545) ‐ ‐ (2,038,545) ‐ 214,134 214,134
	‐ ‐ ‐ ‐
	28,630,786 (23,263,858) 2,255,331 7,622,259

The accompanying notes form part of these financial statements.

Orca Energy Limited

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2014

Note Cash flows from operating activities Receipts from sales and related debtors Payments to suppliers and employees Interest received Other revenue Interest paid Net cash provided by (used in) operating activities 27(a) Cash flows provided by investing activities Exploration and evaluation expenditure Payment for development of oil and gas properties Refund of exploration expenditure Net cash provided by (used in) investing activities Cash flows from financing activities Proceeds from issue of securities Unmarketable parcel buy‐back Share issue costs Net cash (used in) financing activities Net increase/(decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of the financial year Net foreign exchange differences Cash and cash equivalents at end of financial year 9	Consolidated Consolidated 2014 2013 $ $ 2,340,361 ‐ (1,487,197) (638,203) 51,108 100,867 4,496 ‐ ‐ ‐
	908,768 (537,336)
	(13,282) (1,795,485) (1,160,597) ‐ 1,654,673 ‐
	480,794 (1,795,485)
	‐ ‐ (173,018) ‐ (25,527) ‐
	(198,545) ‐
	1,191,017 (2,332,821) 1,615,645 3,948,466 (38,160) ‐
	2,768,502 1,615,645

The accompanying notes form part of these financial statements.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

1 General information

Orca Energy Limited (the Company) is a listed public company, incorporated in Australia and operating in Australia and the USA.

Separate financial statements for Orca Energy Limited as an individual entity are no longer presented as the consequence of a change to the Corporations Act 2001 , however, required financial information for Orca Energy Limited as an individual entity is included in Note 25.

2 New accounting standards for application in future periods

The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group At the date of the authorization of the financial statements, the standards and Interpretations listed below were in issue but not yet effective.

AASB 9 Financial Instruments and associated Amending Standards (applicable for annual reporting period commencing 1 January 2017)

AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under AASB 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. The 2010 revisions introduce additional changes relating to financial liabilities.

The Standard will be applicable retrospectively (subject to the comment on hedge accounting below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting.

Key changes made to this standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non‐financial items. Should the entity elect to change hedge policies in line with the new hedge accounting requirements of AASB 9, the application of such accounting would be largely prospective.

Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments, including hedging activity, it is impractical at this stage to provide a reasonable estimate of such impact.

Other standards not yet applicable

These standards are not expected to have a material impact on the entity in the current or future reporting periods.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

New Accounting Standards for Application in Future Periods (continued)

	Effective for	Expected to be
	annual reporting	initially applied
	periods	in the financial
	beginning on or	year ending
Standard/Interpretation	after
AASB 1031 ‘Materiality’ (2013)	1 January 2014	30 June 2015
AASB 2012‐3 ‘Amendments to Australian	1 January 2014	30 June 2015
Accounting Standards – Offsetting Financial Assets and Financial
Liabilities’
AASB 2013‐3 ‘Amendments to AASB 136 – Recoverable Amount	1 January 2014	30 June 2015
Disclosures for Non‐Financial Assets’
AASB 2013‐4 ‘Amendments to Australian Accounting Standards –	1 January 2014	30 June 2015
Novation of Derivatives and Continuation of Hedge Accounting
AASB 2013‐5 ‘Amendments to Australian Accounting Standards –	1 January 2014	30 June 2015
Investment Entities
AASB 2013‐9 ‘Amendments to Australian Accounting Standards –	1 January 2014	30 June 2015
Conceptual Framework, Materiality and Financial Instruments’
AASB 1031 ‘Materiality’ (2013)	1 January 2014	30 June 2015
AASB 2012‐3 ‘Amendments to Australian	1 January 2014	30 June 2015
Accounting Standards – Offsetting Financial Assets and Financial
Liabilities’
AASB 2013‐3 ‘Amendments to AASB 136 – Recoverable Amount	1 January 2014	30 June 2015
Disclosures for Non‐Financial Assets’

3 New accounting standards for application in current period

New standards and interpretations Adopted

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2013.

AASB 10: Consolidated Financial Statements;

AASB 11: Joint Arrangements; AASB 12: Disclosure of Interests in Other Entities; AASB 13: Fair Value Measurement; AASB 119: Employee Benefits; and AASB 127: Separate Financial Statements

Account Standard and Interpretation

AASB 10 ‘Consolidated Financial Statements’ and AASB 2011‐7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements standards’

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

New Accounting Standards for Application in Current Period

AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated financial statements and provides a revised definition of “control” such that an investor controls an investee when:

a) it has power over an investee;

b) it is exposed, or has rights, to variable returns from its involvement with the investee; and

c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. This may result in an entity having to consolidate an investee that was not previously consolidated and/or deconsolidate an investee that was consolidated under the previous accounting pronouncements.

There have been no changes to the treatment of investees compared to prior year.

AASB 11 ‘Joint Arrangements’ and AASB 2011‐7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements standards’

AASB 11 replaces AASB 131 ‘Interests in Joint Ventures. AASB 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under AASB 11, there are only two types of joint arrangements – joint operations and joint ventures. The classification of joint arrangements under AASB 11 is determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances.

Application of this standard has not impacted on the financial statements of the Group.

AASB 12 ‘Disclosure of Interests in Other Entities’ and AASB 2011‐7 ‘Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’

AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of AASB 12 has resulted in more extensive disclosures in the consolidated financial statements.

AASB 13 ‘Fair Value Measurement’ and AASB 2011‐8 ‘Amendments to Australian Accounting Standards arising from AASB 13’

The Group has applied AASB 13 for the first time in the current year. AASB 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of AASB 13 is broad; the fair value measurement requirements of AASB 13 apply to both financial instrument items and non‐ financial instrument items for which other AASBs require or permit fair value measurements and disclosures about fair value measurements, except for share based payment transactions that are within the scope of AASB 2 ‘Share‐based Payment’, leasing transactions that are within the scope of AASB 117 ‘Leases’, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

AASB 119 ‘Employee Benefits’ (2011) and AASB 2011‐10 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

New Accounting Standards for Application in Current Period (Continued)

AASB 119 (as revised in 2011) changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of AASB 119 and accelerate the recognition of past service costs.

All actual gains and losses are recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus.

Application of AASB 119 Employee Benefits has not impacted on the financial statements for the year ended 30 June 2014.

4 Significant accounting policies

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001 , Accounting Standards and Interpretations, and complies with other requirements of the law.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A‐IFRS’). Compliance with the A‐IFRS ensures that the consolidated financial statements and notes of the Group comply with International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by the Directors on 30 September 2014.

Basis of preparation

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non‐ current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars unless otherwise stated.

Going concern

This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

The Group has incurred a net profit after tax for the year ended 30 June 2014 of $298,960 (2013: $566,756 loss) and experienced net cash inflows from operating activities of $908,768 (2013: outflow of $537,336). As at 30 June 2014, the Group had working capital of $2,876,571 (2013: $3,089,701).

The Directors believe that there are sufficient funds to meet the Group’s working capital requirements. .

The Directors have reviewed the business outlook and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Group will achieve the matters set out above. As such, the Directors believe that they will continue to be successful in securing additional funds through debt or equity issues as and when the need to raise working capital arises.

Should the Group be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial report.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the Group be unable to continue as a going concern.

(a) Basis of consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Orca Energy Limited) and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 24.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non controlling interests". The Group initially recognises non‐controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary's net assets on liquidation at either fair value or at the non‐controlling interests' proportionate share of the subsidiary's net assets. Subsequent to initial recognition, non‐controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non‐controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income.

(b) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except for non‐current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non‐current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. The non‐controlling interest of shareholders in the acquiree is initially measured at the non‐controlling interest’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

(c) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short‐term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

(d) Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

(e) Fair Value of Assets and Liabilities

The Group measures some of its assets and liabilities at fair value on either a recurring or non‐recurring basis, depending on the requirements of the applicable Accounting Standard.

Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date.

As fair value is a market‐based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.

To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs).

For non‐financial assets, the fair value measurement also takes into account a market participant's ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use.

The fair value of liabilities and the entity's own equity instruments (excluding those related to share‐based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. Valuation techniques

In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches:

‐ Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities.

‐ Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value.

‐ Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity.

Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable.

Fair value hierarchy

AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows:

Level 1

Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2

Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3

Measurements based on unobservable inputs for the asset or liability.

The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3.

The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or

(ii) if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa.

When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred.

(f) Financial assets

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company financial statements.

Other financial assets are classified into the following specified categories: ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of available‐for‐sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(g) Foreign currency

Foreign currency transactions

All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. Non‐monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

Exchange differences are recognised in profit or loss in the period in which they arise except that:

(h) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

ii) for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

(i) Impairment of assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash‐generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash‐generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash‐generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash‐generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash‐generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately.

(j) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the statement of profit or loss and other comprehensive income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

(k) Payables

Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services.

(l) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised;

Sale of oil and gas

Revenue is recognised when the significant risks and rewards of ownership of the product have passed to the buyer and the amount of revenue can be measured reliably. Risks and rewards are considered to have passed to the buyer at the time of delivery of the product to the customer. For oil sales this is generally when crude is delivered by truck or pipeline.

Interest revenue

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

(m) Exploration and evaluation expenditure

Exploration and evaluation activities in the area of interest have not at the 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.

Capitalised exploration costs are reviewed each reporting date to whether an indication of impairment exists. If any such indication exists, the recoverable amount of the capitalised exploration costs is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

Where a decision is made to proceed with development, accumulated expenditure is tested for impairment and transferred to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced. Exploration and evaluation expenditure incurred by the Group subsequent to the acquisition of the rights to explore is expensed as incurred.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

(n) Interests in joint ventures

Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about relevant activities are required.

Separate joint venture entities providing joint ventures with an interest to net assets are classified as a "joint venture" and accounted for using the equity method.

Joint venture operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to each liability of the arrangement. The Group's interests in the assets, liabilities, revenue and expenses of joint operations are included in the respective line items of the consolidated financial statements.

Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties' interests. When the Group makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those goods/assets to a third party.

(o) Plant and equipment

Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.

(p) Share based payments

Equity‐settled share‐based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a Black Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non‐transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity‐settled share‐based transactions has been determined can be found in Note 31.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

4 Significant accounting policies (Continued)

The fair value determined at the grant date of the equity‐settled share‐based payments is expensed on a straight‐line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. No amount has been recognised in the financial statements in respect of the other equity‐settled shared‐ based payments.

Equity‐settled share‐based payment transactions with other parties are measured at the fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

(q) Oil inventories

Oil inventories represent the value at balance date of hydrocarbons in storage tanks or pipelines. Oil inventories are stated at the lower of cost and net realisable value. Net realisable value is calculated based on the estimated costs of production.

(r) Provisions for Rehabilitation Costs

The Group records the present value of the estimated cost of legal and constructive obligations to restore operating locations in the period which the obligation arises. The nature of rehabilitation activities includes the removal of facilities, abandonment of wells and restoration of affected areas.

Typically, the obligation arises when the asset is installed at the production location. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of the related asset. Over time, the liability is increased for the change in the present value based on a risk adjusted pre‐tax discount rate appropriate to the risks inherent in the liability. The unwinding of the discount is recorded as an accretion charge within finance costs. The carrying amount is capitalised and amortised over the useful life of the related asset.

Costs incurred which relate to an existing condition caused by past operations, and which do not have a future economic benefit, are expensed. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances.

(s) Oil and gas properties

Oil and gas properties are carried at cost and include capitalised project expenditure, development expenditure and costs associated with lease and well equipment.

The Group uses the units of production method to amortise costs carried forward in relation to its oil and gas properties. For this approach the calculations are based on Proved and Probable (2P) reserves as determined by the Group’s reserves determination.

Impairment of the carrying value of oil and gas properties is assessed based on Proved and Probable (2P) reserves on a cash‐generating unit basis.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

(t) Critical accounting judgements and key sources of estimation uncertainty

For cash‐settled share‐based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

In the application of the Group’s accounting policies, which are described in Note 4, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key Sources of estimation uncertainty

The following the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Recoverability of exploration and evaluation expenditure

The recoverability of the exploration and evaluation expenditure recognised as a non‐current asset is dependent upon the successful development, or alternatively sale, of the respective tenements which comprise the assets.

Recoverability of oil and gas properties

In determining the recoverable amount of assets, in the absence of quoted market prices, estimations are made regarding the present value of future cashflows using asset specific discount rates. For oil and gas properties, expected future cashlow estimation is based on reserves, future production profiles, commodity prices, foreign exchange rates, operating costs and any future development costs necessary to produce reserves. Estimates of future commodity prices are based on market consensus prices where available .A recoverable amount is then determined by discounting the expected net cash flows to their present values.

Rehabilitation obligations

The Group records the present value of the estimated cost of legal and constructive obligations to restore operating locations in the period in which the obligation arises. The nature of rehabilitation activities includes the removal of facilities, abandonment of wells and restoration of affected areas.

Typically, the obligation arises when the asset is installed at the production location. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of the related asset. Over time, the liability is increased for the change in the present value based on a risk adjusted pre‐tax discount rate appropriate to the risks inherent in the liability. The unwinding of the discount is recorded as an accretion charge within finance costs. The carrying amount capitalised is amortised over the useful life of the related asset.

Deferred tax assets

The Group recognises deferred tax assets when it becomes probable that sufficient taxable income will be derived in future periods against which to offset these assets .At each reporting date, the Group assesses the level of expected future cash flows from the business and the probability associated with realising these cash flows, and makes an assessment of whether the deferred tax assets of the Group should be recognised.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014
	Consolidated	Consolidated
	2014	2013
	$	$
5 Profit (loss) from continuing operations
Revenue
Oil sales revenue	3,101,300	‐
Other income
Other revenue	55,604	100,867
Profit on farm down	1,840,000	‐‐
	4,996,904	100,867
Employee benefits expense
Salaries	312,630	213,688
Superannuation	18,585	14,632
Other	11,059	3,333
	342,274	231,653
Share based payments	214,134	‐
6 Cost of sales
Operating costs	715,606	‐
Amortisation of oil and gas properties	562,771	‐
	1,278,377	‐
7 Income taxes
(a) The components of tax expense comprise:
Current tax	‐	‐
Deferred tax expense	‐	‐
Income tax expense reported in statement of profit or loss and other	‐	‐
comprehensive income
(b) The prima facie tax benefit on profit/(loss) from ordinary activities before income tax is reconciled to
the income tax as follows:
Prima facie tax benefit on profit/(loss) from ordinary activities before
income tax at 30% (2013: 30%)	89,688	(170,027)
Add tax effect of:
Revenue losses and other deferred tax balances not recognised	258,014	169,672
Other non‐allowable items	658,518	355
	1,006,220	170,027
Less tax effect of:
Other non‐assessable items	(552,000)	‐
Allowable items	(454,220)	‐
Income tax expense reported in statement of profit or loss and other	‐	‐
comprehensive income

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

(c) Deferred tax not recognised at 30 June relates to the following:

Deferred tax liabilities: Exploration expenditure Development and production assets Deferred tax assets: Carry forward revenue losses (d) Unrecognised deferred tax assets: Carry forward revenue losses Carry forward capital losses Capital raising costs Financial assets Other	Consolidated Consolidated 2014 2013 $ $ (374,584) (1,208,560) (29,274) ‐ 403,858 1,208,560
	‐ ‐
	2,172,637 2,747,502 1,356,430 1,356,430 71,615 127,816 3,031 2,370 21,957 20,067
	3,625,670 4,254,185

The tax benefits of the above deferred tax assets will only be obtained if:

i) the company derives future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised;
ii) the company continues to comply with the conditions for deductibility imposed by law; and
iii) no changes in income tax legislation adversely affect the company in utilising the benefits.

(e) Tax consolidation:

Orca Energy Limited and its wholly owned Australian resident subsidiaries have formed a tax consolidated group with effect from 1 July 2009. Orca Energy Limited is the head entity of the tax consolidated group.

(f) Tax losses

The Group has $8,588,316 gross tax losses arising in Australia that are available to offset against future profit of the Company in which the losses arose. Utilisation of these tax losses is subject to satisfaction of either the continuity of ownership or same business test in accordance with Australian Tax requirements. Deferred tax assets have not been recognised in respect of these losses.

8 Remuneration of auditors Auditor of the company Audit or review of the financial report 9 Cash and cash equivalents Cash on hand and at bank	43,156 25,096
	43,156 25,096
	2,768,502 1,615,645
	2,768,502 1,615,645

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014
10 Trade and other receivables Trade debtors GST recoverable	Consolidated Consolidated 2014 2013 $ $ 623,658 ‐ 11,764 8,193
	635,422 8,193

As at 30 June 2014 and 2013, current trade and other receivables do not contain impaired assets and are not past due. It is expected that these amounts will be received when due.

11 Other assets Prepayments 12 Other financial assets Investments carried at fair market value Current Investment in listed entity Total other financial assets As at 30 June 2014 the Company held 100,000 shares in Peak Oil & Gas Limited (formerly Raisama Energy Limited) (2013: 100,000 shares) At the date of signing this report, the value of the shares held was $600. 13 Plant and equipment (a) At cost Accumulated depreciation (b) Reconciliation Reconciliations of the carrying amounts of plant and equipment at the previous financial years: Carrying amount at the beginning of the year Additions NBV of Disposals Depreciation expense Carrying amount at the end of the year	19,776 13,763
	400 2,600
	400 2,600
	94,049 94,049 (94,049) (81,903)
	‐ 12,146
	beginning and end of the current and 12,146 25,158 ‐ ‐ ‐ ‐ (12,146) (13,012)
	‐ 12,146

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

14 Exploration and evaluation expenditure a) Carrying amount at the beginning of the year Expenditure capitalised during the year Expenditure written off during the year Assets transferred to oil and gas properties Assets transferred to held for sale (Note 31) Carrying amount at the end of the year Comprising of: Interest in PEL115 Interest in PPL117 Interest in PEL110 Interests in USA Assets	Consolidated Consolidated 2014 2013 $ $ 6,045,863 6,034,361 53,327 2,471,753 (2,158,006) ‐ (1,467,614) ‐ ‐ (2,460,251)
	2,473,570 6,045,863
	‐ 1,804,164 336,645 ‐ 136,925 136,925 2,000,000 4,104,774
	2,473,570 6,045,863

The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the discovery of commercial viable oil and gas reserves or other natural mineral deposits and the successful development and commercial exploitation or sale of the respective exploration and evaluation areas of interest.

Summarised financial statement information for the Group’s share of jointly controlled assets and operations is disclosed below:

Komodo Energy Pty Ltd (a 100% subsidiary of Orca Energy Limited), jointly with other participants, hold certain exploration assets. Komodo Energy Pty Ltd’s share held 20% of PEL115 prior to farm down completed in July 2013. The company now holds a 20% interest in licences PPL117 and PRL251 (refer below).

(i) Farm in for PEL115 Interests in jointly controlled assets

The company also contributed $2,019,498 during the year to PEL115. This amount is classified as held for sale and will be reimbursed as part of the farmdown of the asset (refer Note 32).

Exploration and evaluation expenditure

‐ 1,804,164

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

14 Exploration and evaluation expenditure (Continued)

(ii) PPL117	Consolidated	Consolidated
Interests in jointly controlled assets	2014	2013
	$	$
Exploration and evaluation expenditure	336,645		‐

Orca Energy Limited holds an 20% interest in PPL117 Licence via its 100% subsidiary Komodo Energy Limited

(iii) Farm‐in for PEL110

Interests in jointly controlled assets

On 18 November 2009, Orca Energy Limited entered into a farm‐in agreement with Cooper Energy Limited to earn a potential 20% participatory interest of the PEL110 petroleum exploration licence. An amount of $136,925 is included in exploration and evaluation expenditure.

(iv) USA Assets

Interests in jointly controlled assets

On 12 July 2011, the Company executed a binding Term Sheet to acquire a 20% interest in the Matagorda Project located in Matagorda County, Texas (“Matagorda Project”), an oil and gas project located within the prolific lower Frio trend of the Texas Gulf Coast. An amount of $2,000,000 is included in exploration and evaluation expenditure.

14 Oil and gas properties

b)Carrying amount at the beginning of the year Assets transferred to oil and gas properties Additions Amortisation Carrying amount at the end of the year (i) PRL251 Oil and gas properties	‐ ‐ 1,467,614 ‐ 1,497,074 ‐ (560,570) ‐
	2,404,118 ‐
	2,404,118 ‐

Orca Energy Limited holds an 20% interest in PRL251 Licence via its 100% subsidiary Komodo Energy Limited

15 Trade and other payables

Trade payables Other payables and accruals 16 Provisions Current 16a) Provisions Employee benefits Non‐current 16b) Rehabilitation Provisions Rehabilitation provision	290,374 46,500 317,820 947,626
	608,194 994,126
	27,683 16,625
	132,000 ‐

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

Consolidated Consolidated 2014 2013 17 Issued capital $ $ a) Fully paid ordinary shares 451,382,876 (2013: 575,033,775) 28,629,986 30,668,531 b) Converting preference shares 100 (2013: 100) 800 800 28,630,786 30,669,331 2014 2014 2013 2013 No. $ No. $ (a) Fully paid ordinary shares Balance at beginning of the year 575,033,775 30,668,531 575,033,775 30,668,531 Share buy‐back Senex Energy (115,000,000) (1,840,000) ‐ ‐ Unmarketable parcel buy‐back (8,650,899) (173,018) ‐ ‐ Transaction costs relating to buy‐back ‐ (25,527) ‐ ‐ Balance at the end of the year 451,382,876 28,629,986 575,033,775 30,668,531	Consolidated Consolidated 2014 2013 17 Issued capital $ $ a) Fully paid ordinary shares 451,382,876 (2013: 575,033,775) 28,629,986 30,668,531 b) Converting preference shares 100 (2013: 100) 800 800 28,630,786 30,669,331 2014 2014 2013 2013 No. $ No. $ (a) Fully paid ordinary shares Balance at beginning of the year 575,033,775 30,668,531 575,033,775 30,668,531 Share buy‐back Senex Energy (115,000,000) (1,840,000) ‐ ‐ Unmarketable parcel buy‐back (8,650,899) (173,018) ‐ ‐ Transaction costs relating to buy‐back ‐ (25,527) ‐ ‐ Balance at the end of the year 451,382,876 28,629,986 575,033,775 30,668,531	Consolidated Consolidated 2014 2013 $ $ 28,629,986 30,668,531 800 800	Consolidated Consolidated 2014 2013 $ $ 28,629,986 30,668,531 800 800
			28,630,786 30,669,331
			2013 2013 No. $ 575,033,775 30,668,531 ‐ ‐ ‐ ‐ ‐ ‐
	451,382,876 28,629,986		575,033,775 30,668,531

Fully paid ordinary shares carry one vote per share and carry the rights to dividends.

(b) Converting preference shares Balance at beginning of the year Balance at the end of the year	2,006 800 2,006 800
	2,006 800 2,006 800

The converting preference shares do not have any voting rights but are entitled to the payment of a dividend. The conversion terms for these shares have now expired.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

18 Accumulated losses Balance at beginning of the year Net profit (loss) attributable to the members of the company Balance at the end of the year 19 Reserves Option, share based payments and option premium reserves Balance at beginning of the year Movement Balance at the end of the year	Consolidated Consolidated 2014 2013 $ $ (23,562,818) (22,996,062) 298,960 (566,756)
	(23,263,858) (23,562,818)
	2,255,331 2,041,197
	2,255,331 2,041,197
	2,041,197 2,041,197 214,134 ‐
	2,255,331 2,041,197

Share based payment reserve

The share based payments reserve arises on the grant of share options to Directors, Executives and senior employees as part of their remuneration and to consultants for services provided. Further information about share‐based payments to employees is made in the remuneration report. This reserve also includes options issued at a premium on equity raising. Refer to Note 31 for Share Based Payments during the year.

Share Options and Option Premium Reserves

There were 28,000,000 unlisted options issued during the year. A total of 28,500,000 shares under option are on issue at 30 June 2014 (2013: 500,000).

Options carry no rights to dividends and have no voting rights. During the financial year nil (2013: nil) options were exercised, the details of which are set out below.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

19 Reserves (Continued)

19 Reserves (Continued)
Unquoted options on issue Balance at beginning of financial year Lapse of Options Issue of Options Balance at end of the year 20 Profit (loss) per share Basic/diluted profit (loss) per share	2014 2014 No. $ 500,000 865,931 ‐ ‐ 28,000,000 214,133	2013 2013 No. $ 4,375,000 865,931 (3,875,000) ‐ ‐ ‐
	28,500,000 1,080,064	500,000 865,931
	2014 2013 Cents per Share Cents per Share 0.06 (0.1)

(a) Basic/diluted loss per share

The profit/(loss) and weighted average number of ordinary shares used in this calculation of basic / diluted profit/(loss) per share are as follows:

Profit (loss) Weighted average number of ordinary shares for the purposes of basic / diluted earnings/(loss) per share	Consolidated Consolidated 2014 2013 $ $ 298,960 (566,756)
	2014 2013 No. No. 461,775,748 575,033,775

As all options outstanding at 30 June 2014 have exercise prices which are below the weighted market price of Orca shares during the year they are not considered dilutive, therefore at 30 June 2014 basic and diluted earnings are the same.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

21 Commitments for expenditure

(a) SEABISCUIT (MATAGORDA) PROJECT – TEXAS

(b) PEL 110

During the year, a 1,037km[2] seismic program over 10 exploration blocks (including PEL 110) was carried out by JV partner and Operator, Senex Energy, with processing and interpretation effectively completed. This work has identified multiple first pass leads on PEL 110, all with potentially stacked horizons. Of these leads, two (2) are expected to be to be prioritized for drilling in the second half of 2014 with a work program and budget recently approved by the JV for the drilling of two wells. Orca’s share of the budgeted costs are anticipated to be approx. $1.2m

(c) PPL 251 – COOPER BASIN, SOUTH AUSTRLIA (20% INTEREST)

There are currently no commitments for the project except for standard operating costs.

(d) PRL 117 – COOPER BASIN, SOUTH AUSTRLIA (20% INTEREST)

There are currently no commitments for the project except for standard operating costs.

22 Contingent liabilities and assets

The Directors are not aware of any material contingent liabilities or assets at reporting date (2013: Nil).

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

23 Interests in exploration licences

At the date of this financial report, the Group had interests in the following exploration licences:

	2014	2013
	%	%
Licence details
PEL 115^	‐	20
PPL251^	20
PRL117^	20
PEL 110 (subject to farm‐in)*	20	‐
USA	20	20

Has the right to earn 20% subject to farm‐in conditions refer to Note 31
^ The company now holds a 20% interest in PPL251 and PRL117 as part of the farm down of the 20% holding in PEL115.

24 Subsidiaries

24 Subsidiaries
		Ownership	interest
Name of entity	Country of incorporation	2014	2013
		%	%
Company
Orca Energy Limited	Australia
Subsidiaries and Associates
Komodo Energy Pty Ltd	Australia	100	100
Sugarbay Investments Pty Ltd	Australia	100	100

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2014

25 Parent entity disclosures (a) Financial position ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other assets Assets held for sale Total Current Assets Non‐Current Assets Other financial assets Plant and equipment Exploration and evaluation expenditure Total Non‐Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Provisions Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY	Company Company 2014 2013 $ $ 2,755,112 1,602,255 87,571 21,956 400 2,600 ‐ 440,753
	2,843,083 2,067,564
	1,844,702 3,069,619 ‐ 12,146 136,924 136,924
	1,981,626 3,218,689
	4,824,709 5,286,253
	105,807 512,036 27,684 16,625
	133,491 528,661
	133,491 528,661
	4,691,218 4,757,592
	28,630,786 30,669,332 2,255,331 2,041,197 (26,194,899) (27,952,937)
	4,691,218 4,757,592

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014
25 Parent entity disclosures‐ Financial Position (Continued) (b) Financial performance Net profit/(loss) attributable to members of Orca Energy Other comprehensive income Total other comprehensive income Total comprehensive profit/(loss) for the year	Consolidated Consolidated 2014 2013 $ $ 1,758,038 (3,268,244) ‐ ‐ ‐
	1,758,038 (3,268,244)

The parent company has not provided any guarantees.

The parent company does not have any contingent liabilities.

The commitments of the parent company are the same as those disclosed in 21(b) for PEL110.

26 Segment information

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group’s primary segment is one business, being exploration and evaluation of oil and gas.

During the year ended 30 June 2014 the Group operated in the following Geographic Segments: Australia and USA. (2013: Australia and USA).

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Inter‐segment loans payable and receivable are initially recognised at the consideration received net of transaction costs. If inter‐segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates.

Segment assets

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location.

Unless indicated otherwise in the segment assets note, investments in financial assets, deferred tax assets and intangible assets have not been allocated to operating segments.

Segment liabilities

Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014 26 Segment information (Cont)

Unallocated item s

The following items of revenue, expense, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment:

impairment of assets and other non‐recurring items of revenue or expense

(a) Revenue by geographical region

Revenue attributable to external customers is disclosed below, based on the location of the external customer:

Australia USA Unallocated items Total revenue (b) Profit/(loss) by geographical	Consolidated Consolidated 2014 2013 $ $ 4,996,904 ‐ ‐ ‐ ‐ 100,867
	4,996,904 100,867

region

The location of the segment profit/(loss) is disclosed below by geographical location:

		Consolidated	Consolidated
		2014	2013
		$	$
Australia		2,456,966	(562,454)
USA		(2,158,006)	(4,302)
Unallocated items		‐	‐
Total profit/(loss)		298,960	(566,756)
(c)	Assets by geographical region
The location of the segment assets is disclosed below by geographical location of the assets:
Australia		6,390,126	6,053,687
USA		2,000,010	4,104,774
Unallocated items		‐	‐
Total assets		8,390,136	10,158,461
(d)	Liabilities by geographical region

The location of the segment liabilities is disclosed below by geographical location of the liabilities:

Australia USA Unallocated items Total liabilities	757,446 1,002,870 10,431 7,881 ‐ ‐
	767,877 1,010,751

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014
	Consolidated	Consolidated
	2014	2013
	$	$
27 Notes to the cash flow statement
(a) Reconciliation of loss for the year to net cash flows from	operating activities
Profit (loss) for the year	298,960	(566,756)
Non‐cash flows in operating loss:
Depreciation	12,146	13,012
Amortisation	562,771	‐
Share based payments expense	214,134	‐
Foreign exchange differences	38,159	(5,348)
Movement in financial assets	2,200	‐
Profit on farm down of asset	(1,840,000)	‐
Write‐off exploration expenditure	2,158,006	‐
Changes in operating net assets and liabilities, net of effects from
acquisition of businesses:
(Increase)/decrease in assets:
Trade and other receivables	(488,831)	72,116
Inventory	(88,348)	‐
Prepayments	(6,013)	(408)
Increase/(decrease) in liabilities:
Trade and other payables	34,525	(53,285)
Provisions	11,059	3,333
Net cash outflow from operating activities	908,768	(537,336)

(b) Non‐cash financing and investing activities

During the financial year ended 30 June 2014, nil shares were issued (2013: Nil).

28 Financial instruments

(a) Financial risk management objectives

The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of financial derivatives. The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group has not entered into any derivative financial instruments.

(b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 4 to the financial statements.

(c) Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

28 Financial instruments (Continued)

(d) Interest rate risk management

The Group is exposed to interest rate risk as it invests funds at both fixed and floating interest rates.

(e) Maturity profile of financial instruments

The following table details the Group’s exposure to interest rate risk as at 30 June:

Average interest rate % 2014 Financial assets Cash and cash equivalents 2.35% Trade and other receivables N/A Other financial assets N/A Financial liabilities Trade and other payables N/A Net financial assets Average interest rate % 2013 Financial assets Cash and cash equivalents 3.5% Trade and other receivables N/A Other financial assets N/A Financial liabilities Trade and other payables N/A Net financial assets/(liabilities)	Fixed interest rate maturing in: Floating interest rate <1 year 1 – 5 years Non‐ interest bearing Total $ $ $ $ $ 919,322 ‐ ‐ 1,849,180 2,768,502 ‐ ‐ ‐ 635,422 635,422 ‐ ‐ ‐ 400 400
	919,322 ‐ ‐ 2,485,002 3,404,324
	‐ ‐ ‐ 608,194 608,194
	‐ ‐ ‐ 608,194 608,194

	919,322 ‐ ‐ 1,876,808 2,796,130
	Fixed interest rate maturing in: Floating interest rate <1 year 1 – 5 years Non‐ interest bearing Total $ $ $ $ $ 1,615,645 ‐ ‐ ‐ 1,615,645 ‐ ‐ ‐ 8,193 8,193 ‐ ‐ ‐ 2,600 2,600
	1,615,645 ‐ ‐ 10,793 1,626,438
	‐ ‐ ‐ 994,126 994,126
	‐ ‐ ‐ 994,126 994,126

	1,615,645 ‐ ‐ (983,333) 632,312

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

28 Financial instruments (Continued)

(f) Credit risk management

An analysis of the credit quality of trade and other receivables that are due are as follows;

Customers with external credit rating Other customers	2014 2013 $ $ 423,834 ‐ 199,824 ‐
	623,658

(g) Liquidity risk management

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

(h) Capital risk management

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. In order to maintain or adjust the capital structure, the entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, enter into joint ventures or sell assets.

No dividends were paid in 2013 and no dividends are expected to be paid in 2014. There is no current intention to incur debt funding on behalf of the Company as on‐going exploration expenditure will be funded via cash reserves, equity or joint ventures with other companies. The Company is not subject to any externally imposed capital requirements.

(i) Fair value of financial instruments

The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair value.

The Group has performed sensitivity analysis relating to its exposure to interest rate risk and foreign currency risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

Interest rate sensitivity analysis

At 30 June 2014, the effect on profit/(loss) and equity as a result of a 1% increase in the interest rate, with all other variables remaining constant would be a decrease in profit by $9,193 (2013: $32,313 loss) and an increase in equity by $9,193 (2013: $32,313).

Foreign currency risk sensitivity analysis

The Group undertakes certain transactions denominated in foreign currencies, hence it has exposure to exchange rate fluctuations. Exchange rate exposures are managed by holding all funds in Australian dollars and only remitting funds to foreign operations as needed to reduce the foreign currency exposure.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

29 Financial instruments (Continued)

Commodity price risk

The Group’s exposure to commodity price risk relates to the market price of oil. Currently, the Group’s exposure to this risk is not hedged. The board will continue to monitor this risk and seek to mitigate it, if considered necessary.

The sensitivity analysis is based on the commodity risk exposures in existence at the reporting date.

	Change in year‐	Effect on profit	Effect on equity
	end price	before tax
	$’000	$’000	$’000
2014	+10%	310,213	310,213
Oil Revenue	‐10%	(281,436)	281,436

A 10 percent movement of the Australian dollar against the following currency at 30 June 2014 would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2013.

2013.
	Consolidated
	Equity	Profit
	$	$
30 June 2014
USD – 10% Increase	466,378	466,378
USD – 10% Decrease	(423,980)	(423,980)
30 June 2013
USD	1,224	(1,112)

Price risk sensitivity analysis

As the Company derives revenue from sale of products, the effect on profit and equity as a result of changes in the price risk is considered material. The fair value of the mineral projects will be impacted by commodity price changes (predominantly oil and gas) and could impact future revenues. However, management monitor current and projected commodity prices (refer to commodity price risk above).

Financial risk management objectives

The Group’s corporate treasury function provides services to the business, co‐ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

28 Financial instruments (Continued)

Financial risk management 2014 Financial assets Shares in ASX listed entity 2013 Financial assets Shares in ASX listed entity	Level 1 Level 2 Level 3 Total $ $ $ $ 400 ‐ ‐ 400
	400 ‐ ‐ 400
	2,600 ‐ ‐ 2,600
	2,600 ‐ ‐ 2,600

Included within Level 1 of the hierarchy are listed investments. The fair values of these financial assets and liabilities have been based on the closing quoted prices at reporting date, excluding transaction costs. In valuing unlisted investments, included in Level 2 of the hierarchy, valuation techniques such as those using comparisons to similar investments for which market observable prices are available have been adopted to determine the fair values of these investments. Derivative instruments are included in Level 2 of the hierarchy with the fair values being determined using valuation techniques incorporating observable market data relevant to the hedged position.

29 Related party transactions

(a) Company

Loans provided by the Company to subsidiary companies for the year ended 30 June 2014 amounted to $2,024,194 (2013: $6,118,831).

(b) Subsidiaries

Refer to Note 24.

(c) Interests of Key management personnel

Refer to the remuneration report contained in the directors’ report for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2014.

The totals of remuneration paid to KMP of the Company and Group during the year are as follows:

Short‐term employee benefits Post‐employment benefits Share based payments Other benefits	Consolidated Consolidated 2014 2013 $ $ 312,630 237,913 18,585 18,412 144,382 ‐ 18,082 18,820
	493,679 275,145

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

29 Related party transactions (continued)

(d) Transactions with related parties

During the year, the Group paid Glory Resources Limited for the reimbursement of occupancy costs of which Mr Jason Bontempo is a director.

Mr Jason Bontempo is a director.
	Consolidated	Consolidated
	2014	2013
	$	$
Invoiced during the year	2,642	‐
At year end unpaid amount	‐	‐

During the year, the Group paid Red Emperor Resources NL for the reimbursement of occupancy costs of which Mr Greg Bandy is a director.

	Consolidated	Consolidated
	2014	2013
	$	$
Invoiced during the year	50,266	‐
At year end unpaid amount	19,881	‐

There were no other transactions with related parties during the year that were not in the ordinary course of business.

30 Share based payments

There were 17,500,000 granted as share based payments to key management personnel outstanding at 30 June 2014 (2013: Nil) valued at $144,382.

There were 10,500,000 (30 June 2013 –nil) options granted as share based payment to consultants for services provided.

Options granted as share based payments outstanding at 30 June 2014:

Option Series 1	Number granted Number Vested Grant date Fair value at grant date Exercise price First exercise date Expiry date 28,000,000 28,000,000 28/11/2013 $0.008 $0.03 28/11/2013 31/12/2015 28,000,000 28,000,000

Orca Energy Limited

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2014

30 Share based payments (continued)

Balance at beginning of year Option issue Expired during the year Balance at end of the year Exercisable at end of the year	2014 Number options WAEP 500,000 $0.16 28,000,000 $0.03 ‐ ‐	2013 Number options WAEP 4,375,000 $0.24 ‐ ‐ (3,875,000) ($0.26)
	28,500,000 $0.03	500,000 $0.16
	28,500,000	500,000

i) The options outstanding at 30 June 2014 had a weighted average exercise price of $0.03 (2013: $0.16) and remaining lives of 1.5 years and 0.5 years (2013: 0.5 years).
ii) Included in the statement of profit or loss and other comprehensive income is $214,134 (2013: nil) related to equity‐settled share based payment transactions.

31 Assets held for sale

30 June 2013

On the 14th June 2013 the group entered into an agreement with Senex Energy Limited regarding the sale of its 20% participating interest in PEL115. The transaction required shareholder approval which was subsequently received on the 7th August 2013. At 30 June 2013 the below assets were classified as held for sale as they were costs which would be reimbursed or accrued payables which were subsequently free‐ carried.

PEL 110 PEL 115	Consolidated Consolidated 2014 2013 $ $ ‐ 440,753 ‐ 2,019,498
	‐ 2,460,251

32 Subsequent events

Subsequent to year end Orca has been in contact with the Seabiscuit Project prospect generators who are now in the process of identifying a new JV partner and operator. Orca remains committed to the project and is of the view that all issues cited by Hughes are manageable. The Company looks forward to updating the market when a new operator, who can deliver a well in a timely and cost effective manner, is identified.

Orca Energy Limited

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Corporate Governance

The Board of Directors are responsible for the overall strategy, governance and performance of Orca Energy Limited and its controlled entities. The Group is an exploration Group whose strategy is to add substantial shareholder value through the acquisition, exploration, development and commercialisation of its projects. The Board has adopted a corporate governance framework which it considers to be suitable given the size, history and strategy of the Group.

Principles of Best Practice Recommendations

The board has adopted corporate governance policies and practices consistent with the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (ASX Principles and Recommendations 2[nd] Edition) where considered appropriate for the Group of Orca Energy Limited size and nature. In accordance with ASX Listing Rule 4.10, Orca Energy Limited is required to disclose the extent to which it has followed the Principles of Best Practice Recommendations during the financial year. Where Orca Energy Limited has not followed a recommendation, this has been identified and an explanation for the departure has been given. Further details can be found on the Group’s website.

	BEST PRACTICE RECOMMENDATION	COMMENT
1.	*Lay solid foundations for management and* *oversight*
1.1	Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.	Satisfied. Refer the Corporate Governance section on the Group website.
1.2	Companies should disclose the process for evaluation the performance of senior executives.	Satisfied.
1.3	Provide the information indicated in_Guide to_ Reporting on Principle 1.	Satisfied. Refer to Director’s report and the Corporate Governance section on the Groupwebsite.
2.	*Structure the board to add value*
2.1	A majority of the board should be independent directors.	Satisfied. The Board consists of one executive director and two non‐executive directors.
2.2	The chairperson should be an independent director.	Satisfied.
2.3	The roles of chairperson and chief executive officer should not be exercised by the same individual.	The full Board consider all operational matters for the Company.
2.4	The board should establish a nomination committee.	Not satisfied. The Board considers that given the current size of the board, this function is efficiently achieved with full Board participation. Accordingly, the Board has resolved not to establish a nomination committee at this stage.
2.5	Disclose the process for performance evaluation of the board, its committees and individual directors, and key executives.	Not satisfied. The Group has not yet established formal performance review measures for key executives nor has it established a nomination committee given the size and stage of the Group’s operations.

Orca Energy Limited

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

	BEST PRACTICE RECOMMENDATION	COMMENT
2.6	Provide the information indicated in_Guide to_ Reporting on Principle 2.	Satisfied. Refer to Director’s report and the Corporate Governance section on the Group website. In addition, the Board or individual Directors may seek independent external professional advice as considered necessary at the expense of the Group, subject to prior consultation with the Chairman. A copy of any such advice received is made available to all members of the Board.
3.	*Promote ethical and responsible decision‐* *making*
3.1	Companies should establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to: (a) the practices necessary to maintain confidence in the group’s integrity; and (b) the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders (c) the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.	Satisfied. Refer the Corporate Governance section on the Group website.
3.2	Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measureable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them.	Not Satisfied. The Group recognises that a talented and diverse workforce is a key competitive advantage and that an important contributor to the Group’s success is the quality, diversity and skills of its people. Under the Group's Code of Conduct, employees must not harass, discriminate or support others who harass and discriminate against colleagues or members of the public on the grounds of sex, pregnancy, marital status, age, race (including their colour, nationality, descent, ethnic or religious background), physical or intellectual impairment, homosexuality or transgender. Such harassment or discrimination may constitute an offence under legislation. Due to the small scale of the Group's operations and the limited number of employees, the Group has not yet established a Diversity Policy. However, as the Group develops the Board will consider adopting such a policy.
3.3	Companies should disclose in each annual report the measureable objectives for achieving gender diversity set by the board in accordance with the diversity policyand	Not Satisfied. Given the size of the Group, the Group has not yet set measurable objectives for achieving gender diversity. In addition, the Board will review progress against anyobjectives identified on an annual

Orca Energy Limited

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

	BEST PRACTICE RECOMMENDATION	COMMENT
	progress in achievingthem.	basis.
3.4	Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.	Not Satisfied. Given the size of the Board and the Group, the Board considers that this function is efficiently achieved with the current Board. In addition. The Group does not currently have any employees.
3.5	Provide the information indicated in_Guide to_ Reporting on Principle 3.	Satisfied. Refer the Corporate Governance section on the Groupwebsite.
4.	*Safeguard integrity infinancial reporting*
4.1	The board should establish an audit committee.	Not Satisfied. The Directors believe that it would not increase efficiency or effectiveness to have a separate audit committee, and that audit matters are of such significance that they should be considered by the full Board. The Board may seek independent external professional advice as considered necessary if it requires assistance in this area.
4.2	Structure the audit committee so that it consists of: (a) only non‐executive directors; (b) a majority of independent directors; (c) an independent chairperson, who is not chairperson of the board; and (d) at least three members.	Not satisfied. Refer 4.1.
4.3	The audit committee should have a formal charter.	Not satisfied. Refer 4.1.
4.4	Provide the information indicated in_Guide to_ Reporting on Principle 4.	Satisfied. Refer to Director’s report.
5.	*Make timely and balanced disclosure*
5.1	Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summaryof thosepolicies.	Satisfied. Continuous disclosure policy is available in the Corporate Governance section on the Group website.
5.2	Provide the information indicated in_Guide to_ Reporting on Principle 5.	Satisfied. Refer 5.1
6.	*Respect the rights of shareholders*
6.1	Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose the policy or a summary of that policy.	Satisfied. Communications with Shareholders policy is available in the Corporate Governance section on the Group website.
6.2	Provide the information indicated in_Guide to_ Reporting on Principle 6.	Satisfied. Refer to the Group website.
7.	*Recognise and manage risk*
7.1	The Group should establish policies for the oversight and management of material business risks and disclose a summary of thosepolicies.	Satisfied. Risk management policy is available in the Corporate Governance section on the Group website.

Orca Energy Limited

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

	BEST PRACTICE RECOMMENDATION	COMMENT
7.2	The Board should design and implement the risk management and internal control system to manage the group’s material business risks and report on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Group’s management of its material business risks.	Satisfied. Refer 7.1 & 7.3
7.3	The board should disclose whether it has received assurances from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reportingrisks.	Satisfied.
7.4	Provide the information indicated in_Guide to_ Reporting on Principle 7.	Satisfied. Refer 7.1
8.	*Remuneratefairly and responsibly*
8.1	The board should establish a remuneration committee.	Not satisfied. The Board considered this recommendation and formed the view that it would not increase efficiency or effectiveness to have a separate committee, and that remuneration matters are of such significance that they should be considered by the full Board. The Board may seek independent external professional advice as considered necessary if it requires assistance in this area.
8.2	Clearly distinguish the structure of non‐ executive directors’ remuneration from that of executives.	Details of remuneration are outlined in the Directors’ report.
8.3	Provide the information indicated in_Guide to_ Reporting on Principle 8.	Satisfied.

Orca Energy Limited

ASX ADDITIONAL INFORMATION (CONTINUED)

Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report. This additional information was applicable as at 29 September 2014.

1. DISTRIBUTION OF SECURITY HOLDERS

Analysis of numbers of listed equity security holders by size of holding:

Category 1 ‐ 1,000 1,001 ‐ 5,000 5,001 ‐ 10,000 10,001 ‐ 100,000 100,001 and over	Number of Shareholders Number of Shares 34 4,040 64 250,168 62 522,269 782 37,958,588 403 412,647,811
	1,345 451,382,876

Number of shareholders holding less than a marketable parcel of ordinary shares: 486 shareholders amounting to 9,062,465 shares.

2. STATEMENT OF RESTRICTED SECURITIES

There are no restricted securities.

3. SUBSTANTIAL SHAREHOLDERS

3.	SUBSTANTIAL SHAREHOLDERS
Rank	Name	Number of	% of Issued
		Shares	Capital
1	J & J Bandy Nominees Pty Ltd	47,750,000	10.58
2	Seventy Three Pty Ltd	45,201,459	10.01
3	Percy Holdings Limited	35,000,000	7.75

4. UNQUOTED SECURITIES

The Company has the following unquoted securities:

Number	Class
500,000 28,000,000	Unlisted Options ($0.16; 03/12/2014) Unlisted Options ($0.03; 31/12/2015)

Orca Energy Limited

ASX ADDITIONAL INFORMATION (CONTINUED)

5. VOTING RIGHTS

The voting rights attaching to the ordinary shares, set out in the Company’s Constitution, are: At meetings of members, each member is entitled to vote in person or by proxy, attorney or representative; and

On a show of hands, every person present who is a member has one vote, and on a poll every member present has a vote for each fully paid share.

6. ON‐MARKET BUY‐BACK

There is no current on‐market buy‐back.

7. STATEMENT OF TOP 20 HOLDERS OF LISTED EQUITY SECURITIES AS AT 29 SEPTEMBER 2014

Fully paid ordinary shares

Rank
Name
1
J & J Bandy Nominees Pty Ltd
2
Seventy Three Pty Ltd
3
Percy Holdings Limited
4
HSBC Custody Nominees
5
James Anthony Gleeson
6
Fletcher Developments Pty Ltd
7
Ms Merle Smith & Ms Kathryn Smith
8
Seefeld Investments Pty Ltd
9
Sonic Holdings Pty Ltd
10
Morgrae Pty Ltd
11
Seivad Investments Pty Ltd
12
Sonic Holdings Pty Ltd
13
Rombola Family Pty Ltd
14
Mr Ian Morton & Mrs Deborah Morton
15
Mr Simon William Tritton
16
Carrickalinga Investments Pty Ltd
17
Bushwood Nominees Pty Ltd
18
Hardmail Pty Ltd
19
The Fence Masters Pty Ltd
20
Berpaid Pty Ltd

Number of
Shares
% of Issued
Capital
47,750,000
10.58
45,201,459
10.01
35,000,000
7.75
16,956,051
3.76
16,640,625
3.69
9,500,000
2.10
9,000,000
1.99
6,100,000
1.35
5,000,001
1.11
5,000,000
1.11
5,000,000
1.11
5,000,000
1.11
4,670,000
1.04
3,890,252
0.86
3,100,000
0.69
3,000,000
0.66
2,953,125
0.65
2,875,000
0.64
2,500,001
0.55
2,500,000
0.55

231,636,514
51.31

TAX STATUS

The Company is treated as a public company for taxation purposes.

FRANKING CREDITS

The Company has nil franking credits.

Orca Energy Limited

ASX ADDITIONAL INFORMATION (CONTINUED)

TENEMENT SCHEDULE

TENEMENT SCHEDULE
	Tenement Reference	Location	Working Interest at End of the Period
Oil & Gas Beneficial percentage interests held in farm‐in or farm‐ out agreement
	PPL251 (Was previously Fury JV of PEL 115)	Cooper Basin, South Australia	20%
	PRL117 (Was previously Fury JV block of PEL 115)	Cooper Basin, South Australia	20%
	PEL 110	Cooper Basin, South Australia	20%
	Seabiscuit (Matagorda) Project	Texas	20%

Orca Energy Limited

AI assistant

FIN RESOURCES LIMITED — Annual Report 2014

64920_rns_2014-09-29_fe7a64f5-dad5-4592-a57b-8dab6aa9c228.pdf

CONTENTS

DIRECTORS

COMPANY SECRETARY

REGISTERED OFFICE

PRINCIPAL OFFICE

SHARE REGISTRY

AUDITORS

AUSTRALIAN SECURITIES EXCHANGE

DIRECTORS

PRINCIPAL ACTIVITIES

RESULTS

FINANCIAL POSITION

DIVIDENDS

REVIEW OF OPERATIONS

COOPER BASIN, SOUTH AUSTRLIA

PEL 115 (OGY 20%)

PPL 251

Burruna‐2 (OGY 20%)

REVIEW OF OPERATIONS (cont)

Burruna‐3 (OGY 20%)

Reserves Estimate

REVIEW OF OPERATIONS (cont)

PRL 117 (OGY 20%) & Murta Formation

ABOUT THE MURTA FORMATION RESERVOIR

PEL 110

REVIEW OF OPERATIONS (cont)

– SEABISCUIT (MATAGORDA) PROJECT TEXAS (OGY 20%)

Competent Persons Statement.

CORPORATE ACTIVITIES

CHANGES IN STATE OF AFFAIRS

FUTURE DEVELOPMENTS

ENVIRONMENTAL ISSUES

INFORMATION ON DIRECTORS

COMPANY SECRETARY

Mr Aaron Bertolatti

REMUNERATION REPORT

Key Management Personnel Details (audited)

a) Remuneration Policy

b) Director and Executive Remuneration (audited)

Notes:

c) Value of Options Issued to Directors and Executives (audited)

d) Options and Rights Over Equity Instruments Granted as Compensation (audited)

e) Service Agreements (audited)

KMP Shareholdings

KMP Option holdings

OPTIONS

Share Options Granted to Directors and Executives

Other KMP Transactions

INDEMNIFYING OFFICERS

MEETINGS OF DIRECTORS

Un‐issued Shares Under Option

Shares Issued on Exercise of Options

AUDITORS INDEPENDENCE DECLARATION

NON AUDIT SERVICES

SUBSEQUENT EVENTS

RE: ORCA ENERGY LIMITED

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ORCA ENERGY LIMITED

Report on the Financial Report

Directors’ responsibility for the Financial Report

Auditor’s responsibility

Independence

Auditor’s opinion

Report on the Remuneration Report

Auditor’s opinion

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014

1 General information

2 New accounting standards for application in future periods

New Accounting Standards for Application in Future Periods (continued)

3 New accounting standards for application in current period

New standards and interpretations Adopted

Account Standard and Interpretation

New Accounting Standards for Application in Current Period

New Accounting Standards for Application in Current Period (Continued)

4 Significant accounting policies

FIN RESOURCES LIMITED Annual Report 2014