Jupiter Energy Regulatory News (JPRL)

ANNUAL REPORT

FOR THE YEAR ENDED 30 JUNE 2015

CORPORATE INFORMATION

Jupiter Energy Limited

ABN 65 084 918 481

Directors

Geoffrey Gander (Executive Chairman/Chief Executive Officer)

Alastair Beardsall (Non-Executive Director)

Baltabek Kuandykov (Non-Executive Director)

Scott Mison (Executive Director)

Company Secretary

Scott Mison

Registered Office & Principal Place of Business

Ground Floor, 10 Outram Street

West Perth WA 6005

PO Box 1282

Western Australia 6872

Telephone +61 8 9322 8222

Facsimile +61 8 9322 8244

Email info@jupiterenergy.com

Website www.jupiterenergy.com

Solicitors

Steinepreis Paganin

Level 4,

16 Milligan Street

Perth WA 6000

Auditors

Ernst & Young

11 Mounts Bay Road

Perth WA 6000

Bankers

National Australia Bank Ltd

UB13.03, 100 St Georges TerracePerth WA 6000

Nomad

finnCap Ltd

60 New Broad St

London, EC2M 1JJ

United Kingdom

Share Registry

Computershare Investor Services Pty Ltd

Level 2, 45 St George's Terrace

Perth WA 6000

Telephone 1300 557 010 (only within Australia)

+61 8 9323 2000

Facsimile +61 8 9323 2033

Website www.computershare.com 

Stock Exchange Listing

Jupiter Energy Limited shares are listed on the Australian Securities Exchange under the code JPR, on the AIM Market under the code JPRL and on the Kazakh Stock Exchange (KASE) under the code AU_JPRL.

Contents of Financial Report

Chairman's Letter................................................................................................................................................................ 1

Directors' Report ................................................................................................................................................................. 2

Remuneration Report ...................................................................................................................................................... 11

Corporate Governance Statement ................................................................................................................................ 22

Auditor Independence Declaration ............................................................................................................................... 28

Consolidated Jupiter Energy Limited Financial Statements

Consolidated Statement of Comprehensive Income............................................................................................. 30

Consolidated Statement of Financial Position........................................................................................................ 31

Consolidated Statement of Cash Flows................................................................................................................... 32

Consolidated Statement of Changes in Equity ....................................................................................................... 33

Notes to the Consolidated Financial Statements ...................................................................................................... 34

Directors' Declaration....................................................................................................................................................... 72

Independent Audit Report to the members of Jupiter Energy Limited.................................................................... 73

ASX Additional Information.............................................................................................................................................. 75

CHAIRMAN'S LETTER

Dear Shareholder,

I am pleased to present the 2015 Annual Report for Jupiter Energy Limited (Jupiter Energy or the Company).

The past year can be best described as one of two halves.

The first six months of the year showed slow but steady progress with the development of the Block 31 licence area supported by the ongoing trial production from the J-50, 51 and 52 wells and progress towards the granting of Trial Production Licences for the J-58 and J-59 wells located on the West Zhetybai field.

Funding constraints meant that drilling on the permit was limited to Well 19, the Company's eighth well that reached target depth in February 2015 but was not fully completed and tested due to a lack of funding. That said, the Company recovered three hydrocarbon samples from the well, with each container holding 300 litres. Independent analysis of the recovered liquids showed that it was oil with a water cut of ~0.03% with the density and salt content in line with oil produced from the J-51 and J-52 wells.

The second six months saw production halted in February 2015 when the falling world oil price meant that the sales price being achieved for domestic oil in Kazakhstan fell to levels that made oil production from Block 31 uneconomic.

The Company took the opportunity during this shut down period to restructure its operations and overall monthly operating costs have been reduced by ~40% providing an annual saving in running costs of over $US2 million. In addition, the Company has reviewed its overall approach to Trial Production. Based on a cost structure that uses purchased (vs rental) topside equipment, the Company believes that with the additional oil produced from the J-58 and J-59 wells (once Trial Production Licences for these wells have been approved) it should be possible to return to selling into the domestic market on a cashflow positive basis. Ultimately the price of Kazakh domestic oil will be the key determining factor in the timing of recommencing trial production.

The Company continues to be supported by its major shareholders with interim debt funding during the year via the renewal of Convertible Notes and the issue of a new Promissory Note. The continued use of unsecured debt to fund the Company is driven by the fact that the Company has been unable to secure the required permission from the Kazakh Ministry of Energy to raise equity through the issue of new shares. Once permission is granted it is the intention of the note holders to convert their unsecured debt to equity, subject to the necessary approvals being granted, and for the provision of additional funding to come through the issue of new shares.

Looking forward, the Company plans to return to domestic oil production as soon as possible and, assuming funding is in place, focus on both exploration and appraisal drilling as well as to start the building of the requisite infrastructure to allow the Akkar East oilfield to move into its Full Field Development phase - a key step in the Company achieving the first sale of export oil.

The Board remains confident in the prospectivity of the licence area and furthermore that the two oilfields that have already been discovered on our permit area can be commercially developed into significant producers. Subject to securing additional funding, the Company will also continue to progress applications for further land extensions of the permit area, which could provide further exploration upside.

Finally, I would like to take this opportunity to thank all our employees and shareholders for their continued support over the past twelve months.

Sincerely

Geoff Gander

Chairman/CEO

DIRECTORS' REPORT

Your Directors submit their report for the year ended 30 June 2015.

DIRECTORS

The names and details of the Company's Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Names, qualifications experience and special responsibilities

Interests in the shares and options of the company and related bodies corporate

At the date of this report, the interest of the Directors in the shares of Jupiter Energy Limited were:

In compliance with Corporations Law, none of the Directors' shareholdings in the Company is subject to hedging. Each Director must disclose any changes via formal ASX, AIM and KASE announcement without delay. Any changes in Directors' shareholdings are also confirmed at each Board meeting.

DIRECTORS' REPORT (continued)

CORPORATE STRUCTURE

Jupiter Energy Limited is a company limited by shares that is incorporated and domiciled in Australia. Jupiter Energy Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year, which are outlined in note 28 of the financial statements.

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

· Exploration for oil and gas in Kazakhstan: and

· Appraisal, development and production of oil and gas properties in Kazakhstan.

The consolidated entity employed 21 employees as at 30 June 2015 (2014: 37 employees).

DIVIDENDS

No dividends in respect of the current or previous financial year have been paid, declared or recommended for payment.

FINANCIAL REVIEW

Operating Results

The consolidated loss for the year after income tax was $10,982,261 (2014: $2,547,271).

Review of Financial Condition

At the end of the 2015 financial year, cash resources were $1,613,560 (2014: $1,285,358). These accounts have been prepared on a going concern basis, predicated on the Company's ability to raise additional cash in order to finance its proposed work programme and general and administrative costs for the next 12 months. The Board is currently progressing a number of financing options including seeking the requisite waivers for an equity raising and/or the issue of debt finance.

Assets increased to $76,897,616 (2014: $59,218,198) and equity increased to $41,654,900 (2014: $39,830,138).

CAPITAL RAISING / CAPITAL STRUCTURE

The Company has on issue $US15.5m in Series B Convertible Notes made up of 12,400,000 Notes with a conversion price of $US1.25 per Note; interest on the Notes is accrued at 12% per annum and will become payable when the Notes are repaid or converted into shares. The Series B Convertible Notes were issued on 20 September 2013, have a three (3) year term and fall due for repayment (including accrued interest) on 20 September 2016 unless converted/repaid at an earlier date.

As announced on 17 November 2014, independent shareholders approved amendments to the terms of the Series B Convertible Notes at the 2014 AGM such that in the event of a capital raising at a price lower than $US1.25 per share, the Convertible Notes may be converted at this lower price.

On 7 October 2014 the Company announced it had received $US5m of funding from its largest shareholder, Waterford Petroleum Limited.

The funding was by way of a Promissory Note with the following key terms:

· Amount: $US5m.

· Repayable in full on 30 June 2015 or when the Company raises a minimum of $US20m (whichever is sooner). The raising may be via equity, debt or a combination of both.

DIRECTORS' REPORT (continued)

· Amount repayable may be set off against payment for future equity investment.

· Coupon Rate: 12% with any interest being accrued to maturity and able to be offset against payment for future equity investment.

On 30 April 2015 the Company signed a Framework Agreement with a substantial shareholder, Waterford Petroleum Limited (Waterford), which will provide the Company with up to $US5m in additional working capital via the issuance of promissory notes. The Company continues to seek a longer term funding package that will enable the commencement of the 2015/16 drilling program.

The Framework Agreement has certain terms and conditions, the key ones being:

· The issuance of new promissory notes repayable on 1 July 2016.

· The October 2014 $US5m Promissory Note (October 2014 Note) held by Waterford were rolled into a Series B Promissory Note along with the accrued interest outstanding on the October 2014 Note as at 30 April 2015 of $US346,849.

· The issuance of further Series B Promissory Notes will provide up to $US5m for working capital purposes which can be drawn down as required following agreement on the use of funds by Waterford.

· The Series B Promissory Note has a coupon rate of 15% per annum, and the interest will accrue and be payable at the time that the Series B Promissory Note is repaid.

· Waterford may elect to offset the value of the Series B Promissory Note and any accrued interest against participation in any future capital raising carried out by the Company prior to 30 June 2016.

· Waterford may elect to roll the value of the Series B Promissory Note and any accrued interest into any other debt funding facility that the Company may establish prior to 1 July 2016.

Summary of share options on issue

At the date of this report, there were no share options on issue.

OPERATING REVIEW

This section provides details on the operations of the past 12 months.

Ongoing trial production from the J-50, J-51 and J-52 wells took place for the first six months of the financial year. All other wells were either shut in awaiting remedial work (J-53 and J-55) or shut in awaiting approval of Trial Production Licences (J-58 and J-59). Details on all these wells are outlined below as are details of other work carried out over the course of the year.

Well Operations

J-50, J-51 and J-52 Trial Production

During the first seven months of the financial year the Company achieved revenues of ~$US3.66 million from the sale of approximately 108,500 barrels of oil at an average price of $US33.75 per barrel.

All oil sales were made into the Kazakhstan domestic market, as is required under Trial Production, and made predominantly through three local traders. All sales were made on a pre-paid basis, with oil collected by the traders from the well head.

The J-50, J-51 and J-52 wells all had Trial Production Licences (TPL) in place to 29 December 2014. Applications for the extension of the J-50, J-51 and J-52 TPL's for the period 1 January 2015 to 29 December 2016 were submitted during the first half of the financial year and TPL extensions to December 2016 for the J-51 and J-52 wells were received in December 2014.

DIRECTORS' REPORT (continued)

The application for an extension to the J-50 TPL was not approved. The underlying issue delaying the J-50 TPL renewal is the demand by the Kazakh Committee of Geology that Jupiter Energy reach agreement with its neighbour MangistauMunaiGas (MMG) over the division of reserves associated with each companies' share of the Akkar North accumulation. Jupiter Energy had been in dialogue with MMG on this issue for some time prior to the December 2014 expiry date but was not able to reach formal agreement with MMG with respect to the division of Akkar North reserves by 29 December 2014. The matter remains unresolved and as a result J-50 has been shut in since 29 December 2014. There has been no revenue from this well since that date.

Oil was produced from the J-51 and J-52 wells from 1 January 2015 to 10 February 2015 when the dramatic fall in world oil prices resulted in sales contracts being offered by local traders for domestic oil in the Kazakh market at levels that meant further production would be cashflow negative. A decision was made to shut in both wells and there has been no revenue from the J-51 and J-52 wells since February 2015.

The J-53 well requires further remedial work and the Company does not, at present, have the requisite funding for this work and as such the well has not been in production at any time during the financial period.

Overall, average daily production during the first half of the 2014/15 year when the J-50, 51 and 52 wells were all on production was ~550 barrels of oil per day (2013/14: ~680 bopd). The reduction was due to a combination of the downtime of the J-50 well during August (ESP maintenance) and the J-51 and J-52 wells in September (regulatory well testing).

West Zhetybai Field (J-55, J-58 and J-59 wells)

The Kazakh authorities require companies that believe they have discovered a new oilfield to submit a Preliminary Reserves Report for their review and approval. This report must be prepared under the approved Kazakh standards which have been developed from the Russian reserves system; the standards are based on the analysis of geological attributes.

Once Preliminary Reserves have been approved for a field, a company is then able to submit applications for various environmental and emission approvals to complete the Trial Production Licence (TPL) application process for the relevant wells on that field. Once these TPL's have been received the wells can be put on Trial Production and oil from those wells (and subsequent ones that are drilled on the same field) can be sold into the domestic market.

Jupiter Energy has drilled three wells on the West Zhetybai field (J-55, J-58 and J-59) and after being allowed to carry out a maximum of 90 days testing on each well, the wells were shut in awaiting the preparation, review and ultimate approval of the West Zhetybai Preliminary Reserves Report. The State Approval for the West Zhetybai Preliminary Reserves was received in July 2014.

In summary the West Zhetybai accumulation covers the area delineated by the J-55, J-58 and J-59 wells and reserves were evaluated for the T31, T32, T2A and T2B reservoir horizons. The State approved quantity of Oil in Place (OIP) for this area has been estimated at ~173.5 million barrels of oil (mmbbls) from all horizons with preliminary recoverable reserves (C1 + C2) estimated at ~27.0 mmbbls with the approved C1 reserves estimated at ~4.0 mmbbls and C2 reserves at ~23.0 mmbbls. The proportion of approved C1 to C1+C2 reserves indicates the need for (i) further testing of the J-55 and J-59 wells and (ii) drilling of additional appraisal wells on the field.

The approval of the Preliminary Reserves Report for West Zhetybai enabled the TPL application process to begin for the J-58 and J-59 wells and during the year this approval process continued. As at the date of this report, the Company has all the requisite approvals from the State Authorities to commence trial production from J-58 and J-59. Funding to install the topside infrastructure for these wells is now required before trial production can commence.

DIRECTORS' REPORT (continued)

The J-55 well requires remedial work before it is ready for trial production. Like the J-53 well, until funding for this work is in place, the well remains shut in.

Well 19

During the year the Company drilled one well. Well 19 is located on the Akkar East field and was drilled in an area of already proven C1 reserves between the J-51 and J-52 wells and as such was the Company's first 'production' well.

The well was drilled on time and on budget. The limited completion and testing of well 19 included perforating the well underbalanced with tubing conveyed perforating guns, monitoring fluid levels and running pressure gages. Testing of the well indicated severe skin damage which will require an acid treatment to stimulate the well and assist oil flow into the well bore. This is consistent with other wells in the area.

Further work, including an acid stimulation, will not take place until the requisite funding for the work is in place and the Company is ready to return to trial production operations.

Forward Plan for Drilling Activity

The Company is currently reviewing the funding plan for the coming twelve months. Assuming the funding is in place, it is expected that there will be a combination of exploration, appraisal and early development wells drilled.

In the North, the Company expects to drill at least two new wells; one well (J-57) on Akkar East will be drilled in an area of C2 reserves and should be the final well required before the State Authorities approve the Final Reserves Report for the Akkar East field. The obtaining of a Final Reserves Report is a critical step in moving the Akkar East field towards Full Field Development and export oil.

The second well in the North is expected to be the J-54 well. The J-54 prospect is a large structural closure mapped using 3D seismic to the north of the producing Akkar East field. The Company believes the prospect is a separate field and the prognosis is that it is structurally up dip of Akkar East.

The Company considers that the main risk associated with the J-54 well is the presence of an adequate top seal to trap oil. Assuming success, the Company believes that the reservoir quality and flow rates should be similar to that found in the Akkar East field.

In the South, the J-58 and J-59 wells are both currently suspended awaiting completion of the requisite infrastructure to begin trail production from these wells. When ready, J-58 will be put on production from the T2B horizon, and the J-59 well will be used to test the potential of the shallow Jurassic horizon before being completed for production from the T2B horizon.

Further remedial work will be carried out on J-55 to determine if commercial production can be established and this work may require separate approvals from the relevant bodies.

It is expected that, subject to the Company obtaining the requisite funding, two further appraisal wells will also be drilled on the West Zhetybai field during 2016/17.

Details on the Exploration and Production Licences

The current Exploration Licence takes the exploration period through to December 2016. An application for a further minimum 2 year extension to the Exploration Licence will be submitted to the relevant Kazakh authorities later this calendar year. The further extension of the Exploration Licence is an integral part of the plan for the successful completion of the exploration phase of the project and will provide the Company with the necessary time to make a smooth transition into the 25 year Production Licence phase of the Block 31 contract.

DIRECTORS' REPORT (continued)

Prospectivity

As outlined in the Forward Plan for Drilling Activity section of this report, the drilling of J-54 offers the potential, assuming success, for an a further upgrade of Block 31 reserves. The Company's understanding of the prospectivity of Jupiter Energy's Block 31 continues to improve and the Board is confident that further additions to the reserves are achievable.

The Company is also progressing land extension applications in the North East and South East and if these are successful there could be further exploration targets identified for drilling in 2016/2017.

Future Production

The J-51 and J-52 wells already have their respective TPL's approved until December 2016 and it is expected that wells J-58 and J-59 will be ready to go into Trial Production as soon as the requisite topside infrastructure is in place.

Well 19 needs further work, including an acid stimulation, and this work will not take place until the requisite funding is in place and the Company is ready to return to trial production operations.

Board and Staffing

An integrated operating team that has proven in-country experience as well as the capacity to operate major assets is a critical component to success in Kazakhstan. The building of such a team over the past few years has been a majority priority. Unfortunately a number of staff were made redundant as a result of the shutdown of field operations in February 2015 and others were offered part time roles at that time. Once the Company is ready to resume trial production, these positions will again be filled with past employees given priority to apply for roles.

The Board is confident that the Company will be well prepared for continued growth over the coming years.

SIGNIFICANT EVENTS POST PERIOD END

Except as otherwise set out in this report, the Directors are unaware of any significant changes in the state of affairs or principal activities of the consolidated entity that occurred during the period under review.

DIRECTORS' REPORT (continued)

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Except as otherwise set out in this report, the Directors are unaware of any significant changes in the state of affairs or principal activities of the consolidated entity that occurred during the period under review.

The Directors will continue to pursue oil and gas exploration and production opportunities in the Republic of Kazakhstan.

As Jupiter Energy Limited is listed on the Australian Stock Exchange, London's AIM Market (AIM) and the Kazakh Stock Exchange (KASE), it is subject to the continuous disclosure requirements of the ASX Listing Rules, the AIM Rules and the KASE Rules for Companies which require immediate disclosure to the market of information that is likely to have a material effect on the price or value of Jupiter Energy Limited's securities.

The consolidated entity is committed to achieving the highest standards of environmental performance. Standards set by the Government of Kazakhstan are comprehensive and highly regulated. The consolidated entity strives to comply not only with all Kazakh government regulations, but also maintain worldwide industry standards.

To maintain these high standards the Company is committed to a locally developed environmental monitoring programme. This monitoring programme will continue to expand as and when new regulations are implemented and adopted in Kazakhstan.

HEALTH & SAFETY

The Company has developed a comprehensive Health and Safety policy for its operations in Kazakhstan and has the appropriate personnel in place to monitor the performance of the Company with compliance under this policy. The Company outsources many of its key drilling functions and as part of any contract entered into with third parties, a commitment to Health & Safety and a demonstrated track record of success in this area is a key performance indicator in terms of deciding on which companies will be contracted.

DIRECTORS' REPORT (continued)

MEETINGS OF DIRECTORS

The number of meetings of the Directors held during the year and the number of meetings attended by each Director was as follows:

Due to the small number and geographical spread of the Directors, it was determined that the Board would undertake all of the duties of properly constituted Audit & Compliance and Remuneration Committees.

Competent Persons Statements

General

Keith Martens, BSc Geology and Geophysics, with over 35 years' oil & gas industry experience, is the qualified person who has reviewed and approved the technical information contained in this report. Keith Martens has no material interest in the Company.

Kazakh State Approved Reserves

The information in this report which relates to the C1 and C2 Block 31 reserve estimations is based on information compiled by Reservoir Evaluation Services LLP ("RES"), a Kazakh based oil & gas consulting company that specialises in oil & gas reserve estimations. RES has used the Kazakh Reserve classification system in determining their estimations. RES has sufficient experience which is relevant to oil & gas reserve estimation and to the specific permit in Kazakhstan to qualify as competent to verify the information pertaining to the C1 and C2 reserve estimations. RES has given and not withdrawn its written consent to the inclusion of the C1 and C2 reserve estimations in the form and context in which they appear in this report. RES has no financial interest in the Company.

This remuneration report outlines the Director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the parent company, and includes the three executives in the Company and the Group.

For the purposes of this report, the term 'executive' encompasses the chief executive, senior executives, general managers and secretaries of the Company and the Group.

Details of key management personnel (including the three highest executives of the Company and the Group)

(i) Directors

There were no other changes after reporting date and before the date the financial report was authorised for issue.

Remuneration Philosophy

The remuneration policy of the Group has been designed to align Directors and executives interests with the shareholder and business objectives by providing a fixed remuneration component and offering long term incentives based on a key performance area - with a focus to the material improvement in share price performance. The Board of the Group believes the remuneration policy to be appropriate to attract and retain the best executives and Directors to run and manage the Company, as well as create goal congruence between Directors, executives and shareholders.

The Board's policy for determining the nature and amount of remuneration for Board members and senior executives of the Company is as follows:

* The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the Board after a review of similar listed and unlisted companies with activities in overseas jurisdictions and taking into account the experience and skill set required to successfully develop operations in these jurisdictions from early stage development. The Company does not have a remuneration committee. The Board is of the opinion that due to the size of the Company, the functions performed by a Remuneration Committee can be adequately handled by the full Board.

* All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and performance incentives.

* The Board reviews executive packages annually by reference to the Company's performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

Executives are eligible to participate in the Company's long term Performance Rights plan.

The executive Directors receive a superannuation guarantee contribution as required by the government which is currently 9.5%, and do not receive any other retirement benefits.

The remuneration paid to Directors and executives is valued at the cost to the Company and expensed. Shares given to Directors and executives are valued as the difference between the market price of those shares and the amount paid by the Director or executive. Options are valued using the Black & Scholes methodology. Performance Rights are valued using a hybrid employee share option model. The hybrid model incorporates a trinomial option valuation and a Monte Carlo simulation.

Remuneration Structure

Non-Executive Director Remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. 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. Total remuneration for all non-executive Directors, is not to exceed $350,000 per annum as approved by shareholders at the Annual General Meeting held on 15 November 2010. Fees for non-executive Directors are not linked to performance of the Company. However, to align Directors' interests with shareholder interests, the non-executive Directors have been issued Performance Rights which have vesting conditions that are specifically linked to share price performance. Non-executive Directors are also encouraged to hold shares in the company.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers the fees paid to non-executive directors of comparable companies and the potential value provided via the allocation of Performance Rights when undertaking the annual review process.

Each Director receives a fee for being a Director of the Company. Directors who are called upon to perform extra services beyond the director's ordinary duties may be paid additional fees for those services.

Executive Remuneration

Objective

The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group so as to:

- reward executives for Company, business unit and individual performance;

- align the interests of executives with those of shareholders;

- link reward with the strategic goals and performance of the Company; and

- ensure total remuneration is competitive by market standards.

Structure

In determining the level and make-up of executive remuneration, the Board reviews remuneration packages provided by similar listed and unlisted companies with activities in overseas jurisdictions and taking into account the experience and skill set required to successfully develop operations in these jurisdictions from early stage development as well as the salary levels of local workers in that jurisdiction. It is the Board's policy that employment contracts are entered into with the Chief Executive Officer and all key management personnel.

Fixed Remuneration

The fixed remuneration of executives is comprised of a base salary and superannuation. The fixed remuneration of executives is reviewed annually.

Variable remuneration - Short Term Incentives (STI)

The Group operates a STI program for its Kazakh based employees, which is based on a cash bonus subject to the attainment of clearly defined Branch and individual measures.

Actual STI payments awarded to each employee depends on the extent to which specific targets are met. The targets consist of a number of key performance indicators (KPIs) covering financial and non-financial Branch and individual measures of performance.

Directors are not eligible for participation in the STI program.

Variable Remuneration - Long Term Incentives (LTI)

Objective

The objectives of long term incentives are to:

- align executives remuneration with the creation of shareholder wealth;

- recognise the ability and efforts of the Directors, employees and consultants of the Company who have contributed to the success of the Company and to provide them with rewards where deemed appropriate;

- provide an incentive to the Directors, employees and consultants to achieve the long term objectives of the Company and improve the performance of the Company; and

- attract persons of experience and ability to employment with the Company and foster and promote loyalty between the Company and its Directors, employees and consultants.

Structure

Long term incentives granted to Directors and senior executives are delivered in the form of Performance Rights, issued under the Performance Rights Plan.

Company Performance

Due to the current embryonic stage of the Company's growth it is not appropriate at this time to evaluate the Company's financial performance using generally accepted measures such as EBITDA and profitability; this assessment will be developed over the next few years.

The following information provides a summary of the Company's financial performance for the last five years:

\* The earnings per share and last share price have been adjusted for all periods to reflect the 15:1 share consolidation approved on 12 August 2011.

Table 1: Remuneration for the year ended 30 June 2015

*Directors fees from February 2015 have been deferred until such time that at least $US5m in new equity is raised or alternatively the Company sells the Block 31 licence and receives the funds associated with that sale.

(a): Other relates to living expenses covering cost of apartment/office in London as per service agreement.

(b): Fees relate to CFO / Company Secretary ($90,000) and Director Fees ($40,000).

(c): The cash bonus to Mr Mison was for the period 1 July 2014 to 30 June 2015. Under his service agreement, he is entitled a cash bonus every six months to a maximum of $15,000 per six months. The performance criteria were to ensure full compliance with ASX, AIM and KASE and sign off of debt funding package. The % of bonus granted was 56%, with 44% being forfeited. This is determined at the board's discretion.

(d): During the year, consulting fees of $144,096 (2014: $144,584) were accrued and paid under normal terms and conditions to Meridian Petroleum LLP, of which Mr. Kuandykov is a director, for the provision of geological services at normal commercial rates.

Table 2: Remuneration for the year ended 30 June 2014

(a): Other relates to living expenses covering cost of apartment/office in London as per service agreement.

(b): Fees relate to CFO / Company Secretary ($90,000) and Director Fees ($40,000).

(c): The cash bonus to Mr Mison was for the period 1 January 2014 to 30 June 2014. Under his service agreement, he is entitled a cash bonus every six months to a maximum of $15,000 per six months. The performance criteria were to ensure full compliance with ASX, AIM and KASE and sign off of debt funding package. The % of bonus granted was 75%, with 25% being forfeited.

Details of remuneration (Audited)

Remuneration of Directors and Executives (continued)

Compensation Options: Granted and vested during the year ended 30 June 2015

During the 2015 and 2014 year, there were no options granted. No options, listed or unlisted, were exercised during the year.

Share issued on Exercise of Compensation Options

There were no shares issued on the exercise of compensation options during the financial years ended 30 June 2015 or 30 June 2014.

Performance Rights

During the year, 8,075,000 performance rights expired unvested.

The conditions during the year were as follows:

The Performance Rights for each holder shall vest in proportion to the % increase in the Share price of the Company above $0.735 subject to a minimum increase of 25%, i.e. Performance Rights will start vesting at $0.919. For 100% of the Performance Rights to vest, the share price of the Company needs to reach $1.47 (Vesting Conditions). In respect of the Vesting Conditions, the % increase in the Share price of the Company will be calculated by reference to the volume weighted average price of Shares in the 20 consecutive trading days immediately prior to the Vesting Date.

Details of remuneration (Audited)

Remuneration of Directors and Executives (continued)

Table 3: Compensation Performance Rights: Granted and vested during the year ended 30 June 2015

During the year ended 30 June 2015, no performance rights vested and no additional performance rights were granted.

Table 4: Compensation Performance Rights: Granted and vested during the year ended 30 June 2014

\* The only modification was the expiry vesting date was extended from 7 November 2013 to 31 December 2014. All other terms and conditions remained the same.

(i) Represents the incremental fair value, between the original and modified awards at modification date.

Details of remuneration (Audited)

Remuneration of Directors and Executives (continued)

Shareholdings

The number of shares in the Company held by each Key Management Personnel of Jupiter Energy Limited during the financial year, including their personally-related entities, is set out below:

Performance Rights Holdings

The number of Performance Rights in the Company held by each Director of Jupiter Energy Limited and each of the specified Executives of the consolidated entity during the financial year, including their personally-related entities, is set out below:

Details of remuneration (Audited)

Remuneration of Directors and Executives (continued)

Option Holdings

There were no options held by, granted to or exercised by Key Management Personnel during the financial years ended 30 June 2015 or 30 June 2014.

Details of remuneration (Audited)

Remuneration of Directors and Executives (continued)

Service agreements

Remuneration and other terms of employment for the Executive Chairman/CEO, Company Sec/CFO, and all other key management positions held in Kazakhstan have been formalised in service agreements. The main provisions of the agreements in relation to Directors holding management roles are set out below.

Geoff Gander, Executive Chairman (Effective - 1 July 2015)

Base Terms

· This agreement was effective from 1 July 2015 and is for a term of 12 months (to 30 June 2016).

· Base Salary of GBP200,000 ($417,000) including Director Fees and the current Superannuation Levy of 9.5%.

· Living expenses of GBP 80,000 ($174,000) per year, covering the cost of an apartment/office in London.

· Potential GBP 100,000 ($208,000) incentive bonus in the event a change of control occurs.

· Director fees of $4,000 per month (included in Base Salary figure above) is deferred until such time that at least $US5m in new equity is raised or alternatively the Company sells the Block 31 licence and receives the funds associated with that sale.

The termination provisions are as follows:

Scott Mison, CFO / Company Secretary / Executive Director (Effective - 1 June 2015)

Base Terms

· This agreement is effective from 1 June 2015. The term is on a rolling month basis.

· CFO / Company Secretary Fees of $6,500 per month.

· Director fees of $2,500 per month which is deferred until such time that at least $US5m in new equity is raised or alternatively the Company sells the Block 31 licence and receives the funds associated with that sale.

The termination provisions are as follows:

End of Remuneration Report (Audited)

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into Deeds of Indemnity with the Directors, indemnifying them against certain liabilities and costs to the extent permitted by law.

The Company has also agreed to pay a premium in respect of a contract insuring the Directors and Officers of the Company against certain liabilities and costs to the extent permitted by law. Full details of the cover and premium are not disclosed as the insurance policy prohibits the disclosure.

INDEMNIFICATION OF AUDITORS

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Jupiter Energy Limited adhere to strict principles of corporate governance. The Company's corporate governance statement is included on page 22 of this annual report.

The Directors received the declaration included on page 28 of this annual report from the auditor of Jupiter Energy Limited.

NON-AUDIT SERVICES

There were no non-audit services provided by the entity's auditors, Ernst & Young during the year.

This report has been made in accordance with a resolution of the Directors.

G A Gander

Director

Perth, Western Australia

30 September 2015

CORPORATE GOVERNANCE STATEMENT

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Jupiter Energy adhere to strict principles of corporate governance.

The Board of Directors of Jupiter Energy Limited is responsible for the overall corporate governance of the consolidated entity, guiding and monitoring the business and affairs of Jupiter Energy on behalf of the shareholders by whom they are elected and to whom they are accountable.

The Company's corporate governance principles and policies are structured with reference to the Corporate Governance Councils best practice recommendations, which are as follows:

Principle 1. Lay solid foundations for management and oversight

Principle 2. Structure the Board to add value

Principle 3. Act ethically and responsibly

Principle 4. Safeguard integrity in corporate reporting

Principle 5. Make timely and balanced disclosure

Principle 6. Respect the rights of shareholders

Principle 7. Recognise and manage risk

Principle 8. Remunerate fairly and responsibly

The Board's Corporate Governance Charter includes procedures for compliance with the ASX Listing Rules continuous disclosure requirements, trading in the Company's securities, the management of risk, and a Code of Conduct. Jupiter Energy'scorporate governance practices were in place throughout the year ended 30 June 2015.

BOARD OF DIRECTORS

Role of the Board

In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company.

Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following:

· To set the strategic direction for the Company and monitor progress of those strategies;

· Establish policies appropriate for the Company;

· Monitor the performance of the Company, the Board and management;

· Approve the business plan and work programmes and budgets;

· Authorise and monitor investment and strategic commitments;

· Review and ratify systems for health, safety and environmental management; risk and internal control; codes of conduct and regulatory compliance;

· Report to shareholders, including but not limited to, the Financial Statements of the Company; and

· Take responsibility for corporate governance.

CORPORATE GOVERNANCE STATEMENT (continued)

Composition of the Board

To add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations.

The names of Directors of the Company in office at the date of this statement are set out in the Directors' Report. Information regarding Directors' experience and responsibilities are included in the Directors' Report section of this Annual Report.

The number of Directors is specified in the Constitution of the Company as a minimum of three up to a maximum of ten.

The preferred skills and experiences for a Director of the Company include:

· Exploration for oil and gas accumulations;

· Development and production operations of hydrocarbon accumulations;

· Financing of operations

· Business Development; and

· Public Company financial reporting and administration.

Chairman of the Board

The Chairman of the Board should be a Non-Executive Director and the Chairman will be elected by the Directors. Mr. Geoff Gander, however is an Executive Chairman and is not independent. Given his skills, experience and knowledge of the Company, the Board considers that it is appropriate for him to be Chairman.

Independent Directors

The Board considers that a Director is independent if that Director complies with the following criteria:

· Apart from Director's fees and shareholding, independent Directors should not have any business dealings which could materially affect their independent judgment;

· Must not have been in an Executive capacity in the Company in the last 3 years;

· Must not have been in an advisory capacity to the Company in the last 3 years;

· Must not be a significant customer or supplier for the Company;

· Must not be appointed through a special relationship with a Board member;

· Must not owe allegiance to a particular group of shareholders which gives rise to a potential conflict of interest;

· Must not hold conflicting cross Directorships; and

· Must not be a substantial shareholder or a nominee of a substantial shareholder (as defined under section 9 of the Corporations Act).

Using the ASX Best Practice Recommendations on the assessment of the independence of Directors. The Board considers that of a total of four Directors, only one is considered independent.

Mr. Geoff Gander is an Executive Chairman of the Company and is not considered to be independent. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board.

Mr. Baltabek Kuandykov is an independent Non-Executive Director of the Company. His oil industry experience, especially within Kazakhstan, makes his contribution to the Board important and significant.

Mr. Alastair Beardsall is a Non-Executive Director of the Company and is not considered to be independent as he was a nominee Director by The Waterford Group, a substantial shareholder. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board.

CORPORATE GOVERNANCE STATEMENT (continued)

Mr. Scott Mison is an executive director / CFO / Company Secretary of the Company and is not considered to be independent. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board.

Retirement and Rotation of Directors

Retirement and rotation of Directors are governed by the Corporations Act 2001 and the Constitution of the Company. Each year one third Directors must retire and offer themselves for re-election. Any casual vacancy filled will be subject to shareholder vote at the next Annual General Meeting of the Company.

Independent Professional Advice

Each Director has the right to seek independent professional advice at the Company's expense after consultation with the Chairman. Once received the advice is to be made immediately available to all Board members.

Access to Employees

Directors have the right of access to any employee. Any employee shall report any breach of corporate governance principles or Company policies to a Director and/or Company Secretary/CFO who shall remedy the breach. If the breach is not rectified to the satisfaction of the employee, they shall have the right to report any breach to an independent Director without further reference to senior managers of the Company.

Insurance

The Directors review the requirements for insurance cover for the associated risks for its field operations, including drilling, production and storage of hydrocarbons and other activities and procures insurance cover at levels and costs they feel are appropriate.

Directors and officers insurance for Directors will be arranged by the Company at Company expense.

Share Ownership

Directors are encouraged to own Company shares.

Board Meetings

The following points identify the frequency of Board Meetings and the extent of reporting from management at the meetings:

· A minimum of four meetings are to be held per year;

· Other meetings will be held as required, meetings can be held by telephone link; and

· Information provided to the Board includes all material information on: operations, budgets, cash flows, funding requirements, shareholder movements, broker activity in the Company's securities, assets and liabilities, disposals, financial accounts, external audits, internal controls, risk assessment, new venture proposals, and health, safety and environmental (HSE) reports.

The number of Directors' meetings and the number of meetings attended by each of the Directors of the Company during the financial year are set out in the Directors' Report.

Board Performance Review

There was no evaluation conducted during the financial year.

CORPORATE GOVERNANCE STATEMENT (continued)

Other Areas for Board Review

· Reporting to shareholders and the market to ensure trade in the Company's securities takes place in an efficient, competitive and informed market; and

· Insurance, both corporate and joint venture related insurances.

Board Committees

Audit Committee

The Company does not have an audit committee. The Board is of the opinion that due to the size of the Company, the functions performed by an audit committee can be adequately handled by the full Board.

The CEO and the CFO declare in writing to the Board that the Company's financial statements for the year ended 30 June 2015 present a true and fair view, in all material aspects, of the Company's financial condition and operational results and are in accordance with relevant accounting standards. This representation is made by the CEO and the CFO prior to the Director's approval of the release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by, appropriate levels of management.

A non-executive Director meets with the Auditors without Executives present to go through the financial statements prior to sign off on the accounts.

Jupiter Energy Limited has requested the external auditors to attend the annual general meeting to be available to answer shareholders questions regarding the audit.

Nomination Committee

The Board of Directors of the Company does not have a nomination committee. The Board is of the opinion that due to the size of the Company, the functions performed by a nomination committee can be adequately handled by the full Board.

Remuneration Committee

The Company does not have a remuneration committee. The Board is of the opinion that due to the size of the Company, the functions performed by a remuneration committee can be adequately handled by the full Board.

Remuneration levels for Directors, Secretaries, Senior Executives of the Company, and relevant group Executives of the consolidated entity ("the Directors and Senior Executives") are competitively set to attract and retain appropriately qualified and experienced Directors and Senior Executives.

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

· the capability and experience of the Directors and Senior Executives

· the Directors and Senior Executives ability to control the relevant segment/s' performance

· the consolidated entity's performance including:

o the consolidated entity's earnings

o the growth in share price and returns on shareholder wealth

· the amount of incentives within each Directors and Senior Executives remuneration

For details of remuneration paid to Directors and officers for the financial year please refer to the Directors' Report on page 15.

CORPORATE GOVERNANCE STATEMENT (continued)

Risk Management

The risks involved in oil and gas exploration Company and the specific uncertainties for the Company continue to be regularly monitored and the full Board of the Company meets on an annual basis to formally review such risks. All proposals reviewed by the Board include a consideration of the issues and risks of the proposal.

The potential exposures, including financial, reputation, and HSE, with running the Company have been managed by the Board and senior management in Kazakhstan who together have significant broad-ranging industry experience.

Additionally, it is the responsibility of the Board to assess the adequacy of the Company's internal control systems and that its financial affairs comply with applicable laws and regulations and professional practices. The CEO and the CFO declare in writing to the Board that the financial reporting risk management and associated compliance controls have been assessed and found to be operating efficiently and effectively. This representation is made by the CEO and CFO prior to the Director's approval of the release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by, appropriate levels of management.

PROMOTION OF ETHICAL AND RESPONSIBLE DECISION-MAKING

Code of Conduct

The goal of establishing the Company as a significant Australian-based petroleum exploration and production Company is underpinned by its core values of honesty, integrity, common sense and respect for people. The Company desires to remain a good corporate citizen and appropriately balance, protect and preserve all stakeholders' interests.

The Board has adopted a Code of Conduct for Directors and employees of the Company. The Company's goal of achieving above average wealth creation for our shareholders should be enhanced by complying with this Code of Conduct which provides principles to which Directors and employees should be familiar and to which they are expected to adhere and advocate.

It is the responsibility of the Board to ensure the Company performs under this Code and for its regular review.

Diversity

The Board has not adopted a separate diversity policy, however is committed to workplace diversity and recognizes the benefits arising from recruitment, development and retention of talented, diverse and motivated workforce. The Company is not of a sufficient size to justify measurable objectives at this stage. As at 30 June 2015, there were twelve women in the Groups workforce, two of which held key executive positions.

Trading in Company Securities by Directors, officers and employees

Trading of shares is covered by, amongst other things, the Corporations Act, the ASX Listing Rules, the AIM Listing Rules and the KASE Listing Rules. The Board has established a Securities Trading Policy that establishes strict guidelines as to when a Director, officer or an employee can deal in Company shares. The policy prohibits trading in the Company's securities whilst the Directors, officer or employee is in the possession of price sensitive information.

For details of shares held by Directors and Officers please refer to the Directors' Report on page 3.

CORPORATE GOVERNANCE STATEMENT (continued)

SHAREHOLDER COMMUNICATION

The Board aims to ensure that shareholders and the general investing community have equal access to the Company's information.

The Company has policies and procedures that are designed to ensure compliance with ASX, AIM and KASE Listing Rules disclosure requirements and to ensure accountability at a senior management level for that compliance. This disclosure policy includes processes for the identification of matters that may have material effect on the price of the Company's securities, notifying them to the ASX and posting them on the Company's website.

The Company also has a strategy to promote effective communication with shareholders and encourage effective participation at general meetings through a policy of open disclosure to shareholders, regulatory authorities and the broader community of all material information with respect to the Company's affairs including, but not limited to:

· Company's activities

· Conflicts of interest and related party transactions;

· Executive remuneration;

· The grant of options and details of Share Option and Performance Rights Plans;

· The process for performance evaluation of the Board, its committees, individual Directors and key managers;

· The link between remuneration paid to Directors and Executives and corporate performance; and

· The use of clear and concise text in all communications.

The following information is communicated to shareholders and available on the Company web site (www.jupiterenergy.com):

· The Annual Report and notices of meetings of shareholders;

· Quarterly reports reviewing the operations, activities and financial position of the Company;

· All documents that are released to the ASX, AIM and KASE are made available on the Company's website; and

· All other information on the Company's website is updated on an ongoing basis.

AUDITORS INDEPENDENCE DECLARATION

Financial StatementsFOR THE YEAR ENDED 30 JUNE 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2015

The consolidated statement of comprehensive income is to be read in conjunction with the notes of the financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2015

The consolidated statement of financial position is to be read in conjunction with the notes of the financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2015

The statement of cash flows is to be read in conjunction with the notes of the financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2015

The statements of changes in equity are to be read in conjunction with the notes of the financial statements.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2015

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 June 2015. These are outlined in the following table.