Final Results

Note

Consolidated

2012

$

2011

$

Revenue

1,063,086

-

Cost of sales

(898,654)

-

Gross profit

164,432

-

Other income

131,418

-

Gain / (loss) on derivative financial instrument

761,813

(59,455)

General and administrative costs

4

(4,659,544)

(4,894,945)

Operating loss

(3,601,881)

(4,954,400)

Finance income

24,475

64,729

Finance costs

(717,696)

-

Loss before tax

(4,295,102)

(4,889,671)

Income tax expense

5

-

-

Loss after income tax

(4,295,102)

(4,889,671)

Other comprehensive income net of tax

Foreign currency translation

1,337,981

(4,943,666)

Total comprehensive loss for the period

Earnings per share for loss attributable to the ordinary equity holders of the Company:

Basic loss per share (cents)

24

(3.70)

(5.25)

Diluted loss per share (cents)

24

(3.70)

(5.25)

Note

Consolidated

2012

2011

$

$

ASSETS

Current Assets

Cash and cash equivalents

6

395,445

13,968,248

Trade and other receivables

7

527,566

1,410,979

Other current assets

8

460,496

521,174

Inventories

9

53,320

-

Total Current Assets

1,436,827

15,900,401

Non Current Assets

Trade and other receivables

7

2,401,889

-

Oil and gas properties

10

14,225,282

-

Plant and equipment

11

926,336

398,851

Exploration and evaluation expenditure

12

25,014,521

25,319,806

Other financial assets

13

292,752

128,404

Total Non Current Assets

42,860,780

25,847,061

Total Assets

44,297,607

41,747,462

Current Liabilities

Payables

14

1,124,623

534,616

Deferred revenue

15

1,192,039

-

Provisions

16

90,957

61,918

Total Current Liabilities

2,407,619

596,534

Non-current Liabilities

Provisions

16

356,594

230,552

Other financial liabilities

17

2,789,897

-

Derivative liability

17

274,880

-

Total Non-Current Liabilities

3,421,371

230,552

Total Liabilities

5,828,990

827,086

Net Assets

38,468,617

40,920,376

Equity

Contributed equity

18

71,236,136

71,280,610

Share based payment reserve

19

4,472,289

3,922,453

Foreign currency translation reserve

19

(4,746,987)

(6,084,968)

Accumulated losses

(32,492,821)

(28,197,719)

Total Equity

38,468,617

40,920,376

Note

Consolidated

2012

2011

$

$

Cash flow from operating activities

Receipts from customers

3,244,141

1,578,406

Payments to suppliers and employees

(5,996,508)

(6,092,821)

Interest received

24,476

64,729

Net cash flows (used in) operating activities

26

(2,727,891)

(4,449,686)

Cash flows from investing activities

Payment for oil field extension

-

(766,964)

Payments for exploration and development expenditure

(13,255,794)

(8,298,650)

Payments for plant and equipment

(752,218)

(348,876)

Net Cash flows (used in) investing activities

(14,008,012)

(9,414,490)

Cash flows from financing activities

Proceeds from issues of shares

-

27,770,973

Proceeds from convertible notes

3,487,987

Transactions cost from issue of shares

(44,473)

(1,181,608)

Interest paid

(379,093)

Proceeds from option issue

-

10,000

Net cash flows from financing activities

3,064,421

26,599,365

Net increase / (decrease) in cash held

(13,671,482)

12,735,189

Effects of exchange rate changes

98,679

(94,747)

Cash at beginning of the year

13,968,248

1,327,806

Cash at end of the year

6

395,445

13,968,248

Issued capital

Share Based Payment

Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total

$

$

$

$

$

CONSOLIDATED

At 1 July 2010

44,681,247

3,164,908

(1,141,302)

(23,308,048)

23,396,805

Loss for the period

-

-

-

(4,889,671)

(4,889,671)

Other comprehensive income

-

-

(4,943,666)

-

(4,943,666)

Total comprehensive income

-

-

(4,943,666)

(4,889,671)

(9,833,337)

Transactions by owners recorded directly in equity:

Share based payments

-

757,545

-

-

757,545

Shares issued

- Ordinary shares

27,780,971

-

-

-

27,780,971

- Costs of issue

(1,181,608)

-

-

-

(1,181,608)

At 30 June 2011

71,280,610

3,922,453

(6,084,968)

(28,197,719)

40,920,376

As at 1 July 2011

71,280,610

3,922,453

(6,084,968)

(28,197,719)

40,920,376

Loss for the period

-

-

-

(4,295,102)

(4,295,102)

Other comprehensive income

-

-

1,337,981

-

1,337,981

Total comprehensive income

-

-

1,337,981

(4,295,102)

(2,957,121)

Transactions by owners recorded directly in equity:

Share based payments

-

549,836

-

-

549,836

Shares issued

- Costs of issue

(44,474)

-

-

-

(44,474)

At 30 June 2012

71,236,136

4,472,289

(4,746,987)

(32,492,821)

38,468,617

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

1

CORPORATE INFORMATION

The financial report of Jupiter Energy Limited for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the directors on 25 September 2012.

Jupiter Energy Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange and on London's Alternative Investment Market (as CDI's). Jupiter Energy Limited is a for profit entity.

The nature of the operations and principal activities of the Group are described in the Directors Report on pages 5 to 10 of this report.

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Basis of Preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis except for certain financial instruments measured at fair value. The financial report is presented in Australian dollars.

Going Concern

The consolidated financial statements have been prepared on a going concern basis with the Directors of the opinion that the Group can meet its obligations as and when they fall due.

Subsequent to 30 June 2012, the Company raised $11,613,016 (before costs) from an entitlement offer to fund ongoing development of Block 31 and working capital. The Directors recognise that the Company will need to secure Trial Production Licenses for the J-51 and J-53 wells to allow for oil production from these wells. The Company is also reliant on planned production forecasts to fund ongoing exploration, drilling and development activities for Block 31. The Directors are confident that these matters will be achieved.

(b)

Statement of compliance

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

From 1 July 2011, the Group has adopted the following Standards and Interpretations, mandatory for annual periods beginning on 1 July 2011. Adoption of these standards and interpretations did not have any significant effect on the financial position or performance of the Group

·; AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139]

·;

·; AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-settled Share-based Payment Transactions [AASB 2]

·; AASB 2009-10 Amendments to Australian Accounting Standards - Classification of Rights Issues [AASB 132]

·;

·; AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139]

·;

·; Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments

2010-8

Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets

[AASB 112]

These amendments address the determination of deferred tax on investment property measured at fair value and introduce a rebuttable presumption that deferred tax on investment property measured at fair value should be determined on the basis that the carrying amount will be recoverable through sale. The amendments also incorporate SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable Assets into AASB 112.

1 Jan 2012

The group has not yet determined the financial impact of the change.

1 July 2012

AASB 2011-9

Amendments to Australian Accounting Standards - Presentation of Other Comprehensive Income

[AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]

This Standard requires entities to group items presented in other comprehensive income on the basis of whether they might be reclassified subsequently to profit or loss and those that will not.

1 July 2012

The group has not yet determined the financial impact of the change.

1 July 2012

AASB 10

Consolidated Financial Statements

AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and UIG-112 Consolidation - Special Purpose Entities.

The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control.

Consequential amendments were also made to other standards via AASB 2011-7.

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 11

Joint Arrangements

AASB 11 replaces AASB 131 Interests in Joint Ventures and UIG-113 Jointly- controlled Entities - Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition it removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method.

Consequential amendments were also made to other standards via AASB 2011-7 and amendments to AASB 128.

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 12

Disclosure of Interests in Other Entities

AASB 12 includes all disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgments made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 13

Fair Value Measurement

AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets.

AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.

Consequential amendments were also made to other standards via AASB 2011-8.

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 119

Employee Benefits

The main change introduced by this standard is to revise the accounting for defined benefit plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognized in full with actuarial gains and losses being recognized in other comprehensive income. It also revised the method of calculating the return on plan assets.

The revised standard changes the definition of short-term employee benefits. The distinction between short-term and other long-term employee benefits is now based on whether the benefits are expected to be settled wholly within 12 months after the reporting date.

Consequential amendments were also made to other standards via AASB 2011-10.

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 2012-5

Annual Improvements to 2009-2011 Cycle

This standard sets out amendments to International Financial Reporting

Standards (IFRSs) and the related bases for conclusions and guidance made during the International Accounting Standards Board's Annual Improvements process. These amendments have not yet been adopted by the AASB.

The following items are addressed by this standard:

AASB 1 First-time Adoption of International Financial Reporting Standards

• Repeated application of IFRS 1

• Borrowing costs

AASB 1 Presentation of Financial Statements

• Clarification of the requirements for comparative information

AASB 16 Property, Plant and Equipment

• Classification of servicing equipment

AASB 32 Financial Instruments: Presentation

• Tax effect of distribution to holders of equity instruments

AASB 34 Interim Financial Reporting

• Interim financial reporting and segment information for total assets and liabilities

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 2011-4

Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements[AASB 124]

This Amendment deletes from AASB 124 individual key management personnel disclosure requirements for disclosing entities that are not companies.

1 July 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 1053

Application of Tiers of Australian Accounting Standards

This Standard establishes a differential financial reporting framework consisting of two Tiers of reporting requirements for preparing general purpose financial statements:

(a) Tier 1: Australian Accounting Standards

(b) Tier 2: Australian Accounting Standards - Reduced Disclosure Requirements

Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1 and substantially reduced disclosures corresponding to those requirements.

The following entities apply Tier 1 requirements in preparing general purpose financial statements:

(a) For-profit entities in the private sector that have public accountability (as defined in this Standard)

(b) The Australian Government and State, Territory and Local Governments

The following entities apply either Tier 2 or Tier 1 requirements in preparing general purpose financial statements:

(a) For-profit private sector entities that do not have public accountability

(b) All not-for-profit private sector entities

(c) Public sector entities other than the Australian Government and State, Territory and Local Governments.

Consequential amendments to other standards to implement the regime were introduced by AASB 2010-2, 2011-2, 2011-6, 2011-11 and 2012-1.

1 July 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 2012-2

Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities

AASB 2012-2 principally amends AASB 7 Financial Instruments: Disclosures to require disclosure of information that will enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's financial position.

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 2012-5

Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle; and

AASB 2012-5 makes amendments resulting from the 2009-2011 Annual Improvements Cycle. The Standard addresses a range of improvements, including the following:• repeat application of AASB 1 is permitted (AASB 1); and• clarification of the comparative information requirements when an entity provides a third balance sheet (AASB 101 Presentation of Financial Statements).

1 January 2013

The group has not yet determined the financial impact of the change.

1 July 2013

AASB 2012-3

Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities;

AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement.

1 January 2014

The group has not yet determined the financial impact of the change.

1 July 2015

AASB 9

Financial Instruments

AASB 9 includes requirements for the classification and measurement of financial assets. It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities.

These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are described below.

(a) Financial assets that are debt instruments will be classified based on (1) the objective of the entity's business model for managing the financial assets; (2) the characteristics of the contractual cash flows.

(b) Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

(c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

(d) Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows:

► The change attributable to changes in credit risk are presented in other comprehensive income (OCI)

► The remaining change is presented in profit or loss

If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.

Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 2009-11 and superseded by AASB 2010-7 and 2010-10.

1 January 2015

The group has not yet determined the financial impact of the change.

1 July 2015

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(c)

Basis of consolidation

The consolidated financial statements comprise the financial statements of Jupiter Energy Limited and its subsidiaries as at 30 June each year ('the Group').

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

Subsidiaries and special purpose entities are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which Jupiter Energy Limited has control.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquisition. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values.

(d)

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black and Scholes model, trinomial and Monte Carlo using the assumptions detailed in note 21.

Exploration and evaluation

The Group's accounting policy for exploration and evaluation is set out in note 2(f). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances, in particular the assessment of whether economic quantities of reserves may be found. Any such, estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under the Group's policy, management concludes that the Group is unlikely to recover the expenditure by future exploitation or sale, then the relevant capitalised amount will be written off to the income statement.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Provision for restoration

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

Units of production depreciation of oil and gas properties

Oil and gas properties are depreciated using the units of production (UOP) method over total proved developed hydrocarbon reserves. This results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining production from the field.

Each items' life, which is assessed annually, has regard to both its physical life limitations and to present assessments of economically recoverable reserves of the field at which the asset is located. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves. The calculation of the UOP rate of depreciation could be impacted to the extent that actual production in the future is different from current forecast production based on total proved reserves. Changes to proved reserves could arise due to changes in the factors or assumptions used in estimating reserves, including:

·; The effect on proved reserves of differences between actual commodity prices and commodity price assumptions

Or

·; Unforeseen operational issues

Changes are accounted for prospectively.

Recoverability of oil and gas properties

The Group assesses each asset or cash generating unit (CGU) (excluding goodwill, which is assessed annually regardless of indicators) every reporting period to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term oil prices (considering current and historical prices, price trends and related factors), discount rates, operating costs, future capital requirements, decommissioning costs, exploration potential, reserves operating performance (which includes production and sales volumes). These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. Fair value for oil and gas assets is generally determined as the present value of estimated future cash flows arising from the continued use of the assets, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Management has assessed its CGUs as being an individual field, which is the lowest level for which cash inflows are largely independent of those of other assets.

(e)

Plant and equipment

Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the part is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:

Plant and equipment - over 3 to 10 years

The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.

Disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected to be derived from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(f)

Exploration and Evaluation Expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of evaluation, seismic and unsuccessful exploration in the area of interest are expensed as incurred even if activities in this area of interest are continuing. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

When a discovered oil or gas field enters the development phase the accumulated exploration and evaluation expenditure is transferred to oil and gas assets - assets in development.

(g)

Oil and Gas Properties

Oil and gas properties are usually single oil or gas fields being developed for future production or which are in the production phase. Where several individual oil fields are to be produced through common facilities, the individual oil field and the associated production facilities are managed and reported as a single oil and gas asset.

Assets in development

When the technical and commercial feasibility of an undeveloped oil or gas field has been demonstrated, the field enters its development phase. The costs of oil and gas assets in the development phase are separately accounted for as tangible assets and include past exploration and evaluation costs, development drilling and plant and equipment and any associated land and buildings. When commercial operation commences the accumulated costs are transferred to oil and gas assets - producing assets.

Producing assets

The costs of oil and gas assets in production are separately accounted for as tangible assets and include past exploration and evaluation costs, pre-production development costs and the ongoing costs of continuing to develop reserves for production and to expand or replace plant and equipment and any associated land and buildings. Producing assets are depreciated over proved reserves on a unit of production basis.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(h)

Impairment of assets

At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.

(i)

Trade and other receivables

Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

(j)

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(k)

Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less any estimated selling costs.

Cost includes those costs incurred in bringing each component of inventory to its present location and condition.

(l)

Trade and other payables

Trade payables and other payables are carried at amortised costs and due to their short-term nature are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(m)

Financial liabilities

Financial liabilities within the scope of AASB 139 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly

attributable transaction costs. The Group's financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments.

Derivative Financial Instruments

Derivatives are fair valued using appropriate valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation techniques.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(n)

Share-based payment transactions

Share-based compensation benefits are provided to directors and executives.

Options

The fair value of options granted to directors and executives is recognised as an employee benefit expense with a corresponding increase in contributed equity. The fair value is measured at grant date and recognised over the vesting period during which the directors and/or executives becomes entitled to the options.

The fair value at grant date is determined using an option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected divided yield and the risk-free interest rate for the term of the option.

Performance Rights

The cost of performance rights are measured by reference to the fair value at the date at which they are granted. The fair value is determined using a Monte Carlo methodology, which considers the incorporation of market based hurdles. Non market conditions are not factored into the fair value of the performance rights at grant. Probability factors are assigned to the vesting expense as to whether non market conditions will be met.

(o)

Revenue recognition

Sales revenue

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Incidental revenue generated during the development stage of an asset, is offset against the carrying value of the asset, rather than recognised in the statement of comprehensive income.

Interest

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

(p)

Convertible Note

The Convertible Note is split into two components: a debt component and a component representing the embedded derivatives in the Convertible Note. The debt component represents the Group's liability for future interest coupon payments and the redemption amount. The embedded derivatives represent the value of the option that note holders have to convert into ordinary shares in the Company.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(q)

Income tax

The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit adjusted for any non-assessable or disallowed items.

Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

(r)

Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

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

(s)

Contributed equity

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

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(t)

Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

• costs of servicing equity (other than dividends) and preference share dividends;

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have beenrecognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(u)

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Employee leave benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in provisions in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

Restoration

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(v)

Foreign Currency Transactions and Balances

(i) Functional and presentation currency

Both the functional and presentation currency of Jupiter Energy Limited and its Australian subsidiaries are Australian dollars ($). The Singapore subsidiaries' functional currency is United States Dollars which is translated to the presentation currency. The functional currency of the Branch of the Singapore subsidiary is Tenge. (see below for consolidated reporting).

(ii) Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(iii) Translation of Group Companies' functional currency to presentation currency

The results of the Singapore subsidiaries are translated into Australian Dollars (presentation currency) as at the date of each transaction. Assets and liabilities are translated at exchange rates prevailing at reporting date.

Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity

On consolidation, exchange differences arising from the translation of the net investment in the Singapore subsidiaries and it's Branch are taken to the foreign currency translation reserve. If a Singapore subsidiary was sold, the proportionate share of exchange differences would be transferred out of equity and recognised in the statement of comprehensive income.

(w)

Segments

An operating segment is a component of an entity that engages in business activities from which it may earn revenue and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the Board of Directors (the chief operating decision makers) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the executive management team.

Operating segments are identified based on the information provided to the chief operating decision makers, being the Board of Directors. Currently the Group has only one operating segment, being the Group.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(x)

Borrowing costs

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred. Where surplus funds are available for a short term out of money borrowed specifically to finance a project, the income generated from the temporary investment of amounts is also capitalised and deducted from the total capitalised borrowing cost. Where the funds used to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during the period.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Even though exploration and evaluation assets can be qualifying assets, they generally do not meet the ―probable economic benefits test and also are rarely debt funded. Any related borrowing costs are therefore generally recognised in profit or loss in the period they are incurred.

Consolidated

2012

2011

$

$

Financial Assets

Cash and cash equivalents

395,445

13,968,248

Net exposure

395,445

13,968,248

Consolidated

Post - tax gain / (loss)

2012

2011

$

$

+ 1%

3,954

139,682

-1%

(3,954)

(139,682)

Consolidated

2012

2011

$

$

Financial Assets

Cash and cash equivalents

- USD

341,630

11,948,540

- KZT

-

-

- SGD

-

-

- GBP

4,200

8,511

Liquidation Fund

244,151

128,404

Trade and other receivables

-

7,426

Other debtors

-

-

589,981

12,092,881

Financial Liabilities

Trade and other payables

-

-

Other financial liabilities

(2,789,897)

-

Derivative

(274,880)

-

(3,064,777)

-

Net exposure

(2,474,796)

12,092,881

Consolidated

Post - tax gain / (loss)

2012

2011

$

$

+5%

(123,740)

604,644

-5%

123,740

(604,644)

Credit risk

Credit risk represents the loss that would be recognised if counterparties fail to perform as contracted.

Part of the Group's receivables balances are represented by GST input tax credits, which are received on a quarterly basis, and deposits held in trust in respect of leases for office premises.

With respect to credit risk arising from the financial assets of the Group, which comprise cash and cash equivalents and trade receivables, the Group's exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.

There are no significant concentrations of credit risk within the Group.

Liquidity Risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through use of bank overdrafts, bank loans, finance leases and hire purchase contracts.

The contractual maturities of the Group's financial liabilities are shown in the table below. Undiscounted cash flows for the respective years are presented.

Consolidated

2012

2011

$

$

Financial Assets

Within one year

527,566

-

After one year but not more than five years

2,401,889

-

More than five years

292,752

128,404

3,222,207

128,404

Financial Liabilities

Within one year

(2,316,661)

(534,616)

After one year to two years

(3,064,777)

-

More than two years

-

-

(5,381,438)

(534,616)

Net Exposure

(2,159,231)

(406,212)

Management and the Board monitor the Group's liquidity on the basis of expected cash flow. The information that is prepared by senior management and reviewed by the Board includes monthly and annual cash flow budgets.

Consolidated

2012

2011

$

$

Administration and compliance expenses

2,846,275

2,183,445

Consulting fees

252,673

481,258

Depreciation and amortisation expenses

241,723

43,156

Directors fees

321,147

564,911

Legal fees

112,022

133,512

Occupancy expenses

335,868

262,092

Share based payments

549,836

343,266

Foreign currency loss

-

883,305

Total expenses

4,659,544

4,894,945

During the year, employee benefits were $1,052,621. This is included in administration and compliance expenses.

Consolidated

2012

2011

$

$

Prima facie income tax benefit on operating (loss) at the Australian tax rate of 30% (2011: 30%)

(1,288,531)

(1,466,901)

Non deductible expenditure:

- Effect of tax rates in foreign jurisdictions

 523,042

165,642

- Share Based payments

164,951

94,880

- Administration expenses

6,619

57,812

Temporary differences and tax losses not

bought to account as a deferred tax asset

593,919

1,148,567

Income tax expense

-

-

Deferred Income Tax

Deferred income tax at 30 June relates to the following:

Consolidated

Deferred tax liabilities

-

-

Deferred tax assets

Unrealised FX (gain) / loss

32,989

264,991

Unrealised derivative gain

228,544

-

Share issue costs

52,136

27,164

Revenue tax losses - Australia

6,572,464

5,438,370

Deferred tax assets not recognised

(6,886,133)

(5,730,525)

Deferred tax (income)/expense

-

-

Net deferred tax recognised in Balance Sheet

-

-

Consolidated

2012

2011

$

$

NOTE 6. CASH ASSETS

Cash at bank and in hand

395,445

13,968,248

395,445

13,968,248

The bank accounts are at call and pay interest at a weighted average interest rate of 0.30% at 30 June 2012 (2011: 0.84%)

NOTE 7. RECEIVABLES

Current

Trade receivables

23,911

7,426

Other debtors

503,655

1,403,553

527,566

1,410,979

Non current

Other debtors

2,401,889

-

The Group's exposure to credit and currency risks is disclosed in Note 3. The majority of the non-current other debtor balance is VAT receivable which will be offset against future taxes payable on oil revenue.

At 30 June, the aging analysis of receivables is as follows:

Total

0 - 30

Days

31 - 60 days

61 - 90

days

90+

 days

2012

2,929,455

23,911

150,926

11,336

2,743,282

2011

1,410,979

55,425

16,919

34,702

1,303,933

There are no receivables as at 30 June 2012 that are impaired.

NOTE 8. OTHER CURRENT ASSETS

Prepayment

336,995

460,969

Other

123,501

60,205

460,496

521,174

NOTE 9. INVENTORIES

Raw Material

58,113

-

Crude oil

11,265

-

Provision of obsolete items

(16,058)

-

53,320

-

Consolidated

$

NOTE 10. OIL AND GAS PROPERTIES

Cost as at 1 July 2011

Additions

-

Transferred from exploration and evaluation assets

14,241,140

Disposals

-

Net exchange differences

82,137

Cost as at 30 June 2012

14,323,277

Depletion and impairment as at 1 July 2011