Pancontinental Oil & Gas

Introduction

Pancontinental Oil & Gas NL ("Company") has adopted comprehensive systems of control and accountability as the basis for the administration of Corporate Governance. These policies and procedures are summarised below. The Board of the Company is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of Corporate Governance commensurate with the Company’s needs and the scope of its operations.

The Board and management are committed to Corporate Governance and, to the extent they are applicable to the Company, have adopted the Ten Essential Corporate Governance Principles and each of the Best Practice Recommendations as published by ASX Corporate Governance Council ("ASX Principles and Recommendations"). To read the ASX Principles and Recommendations click here.

Notwithstanding its commitment to best practice in corporate governance, the Board of the Company emphasises that good corporate governance is only one factor contributing to the success of the Company's operations. With its key activities focussed on oil and gas exploration, the Company operates in an inherently high risk industry. While sound corporate governance practices provide a foundation for internal processes that aim to service the best interests of the stakeholders, it is the results at an exploration level that will determine the Company's future success.

The following information is set out in this website (in the order corresponding with the ASX Principles and Recommendations):

Statement of Board and Management Functions;
Nomination Committee Charter;
policy and procedure for selection and appointment of new directors;
summary of Code of Conduct for directors and key executives;
summary of policy on securities trading;
Audit Committee Charter;
policy and procedure for selection of external auditor and rotation of audit engagement partners;
summary of policy and procedure for compliance with continuous disclosure requirements;
summary of arrangements regarding communication with and participation of shareholders;
summary of Company's risk management policy and internal compliance and control system;
process for performance evaluation of the Board, Board committees, individual directors and key executives;
Remuneration Committee Charter; and
Corporate Code of Conduct.

STATEMENT OF BOARD AND MANAGEMENT FUNCTIONS

Role of the Board

The Board’s key objectives are to:

increase shareholder value within an appropriate framework which safeguards the rights and interests of the Company’s shareholders; and
to ensure the Company is properly managed.

Responsibility of the Board

The Board is collectively responsible for promoting the success of the Company by:

supervising the Company’s framework of control and accountability systems to enable risk to be assessed and managed, which includes but is not limited to (a) to (i);
ensuring the Company is properly managed for example by:

appointing and, where appropriate, removing the chief executive officer of the Company;
ratifying the appointment and, where appropriate, the removal of the chief financial officer and the Company secretary;
input into and final approval of management's development of corporate strategy and performance objectives;
reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct, and legal compliance;
monitoring senior management's performance and implementation of strategy, and ensuring appropriate resources are available;

approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
approval of the annual budget;
monitoring the financial performance of the Company;
approving and monitoring financial and other reporting;
overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company;
liaising with the Company’s external auditors and Audit Committee; and
monitoring and ensuring compliance with all of the Company's legal obligations, in particular those obligations relating to the environment, native title, cultural heritage and occupational health and safety.

The Board must convene regular meetings with such frequency as is sufficient to appropriately discharge its responsibilities (approximately once every 2 months or more frequently as required).

The Board may from time to time, delegate some of its responsibilities listed above to its senior management team (except for paragraphs [(a), (b), (f) and (g)] and where any matter exceeds the Materiality Threshold as defined below).

Materiality Threshold

The Board has agreed on the following guidelines for assessing the materiality of matters:

Materiality – Quantitative
Balance sheet items

Balance sheet items are material if they have a value of more than 10% of pro-forma net asset.

Profit and loss items

Profit and loss items are material if they will have an impact on the current year operating result of 10% or more.

Materiality – Qualitative

Items are also material if:

they impact on the reputation of the Company;
they involve a breach of legislation;
they are outside the ordinary course of business;
they could affect the Company’s rights to its assets;
if accumulated they would trigger the quantitative tests;
they involve a contingent liability that would have a probable effect of 10% or more on balance sheet or profit and loss items; or
they will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more that 10%.

Material Contracts

Contracts will be considered material if:

they are outside the ordinary course of business;
they contain exceptionally onerous provisions in the opinion of the Board;
they impact on income or distribution in excess of the quantitative tests;
there is a likelihood that either party will default, and the default may trigger any of the quantitative tests;
they are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in cost of such a quantum, triggering any of the quantitative tests;
they contain or trigger change of control provisions;
they are between or for the benefit of related parties; or
they otherwise trigger the quantitative tests.

Any matter which falls within the above guidelines is a matter which triggers the materiality threshold ("Materiality Threshold"

The Chairperson

The chairperson is responsible for leadership of the Board, for the efficient organisation and conduct of the Board's function and for the briefing of all directors in relation to issues arising at Board meetings. The chairperson is also responsible for shareholder communication and arranging Board performance evaluation.

The Chief Executive Officer

The chief executive officer is responsible for running the affairs of the Company under delegated authority from the Board and to implement the policies and strategy set by the Board. In carrying out his/her responsibilities the chief executive officer must report to the Board in a timely manner and ensure all reports to the Board present a true and fair view of the Company’s financial condition and operational results.

Role and Responsibility of Management

The role of management is to support the chief executive officer and implement the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board.

Management is responsible for reporting all matters which fall within the Materiality Threshold at first instance to the chief executive officer or, if the matter concerns the chief executive officer, then directly to the chairperson.

NOMINATION COMMITTEE CHARTER

Composition

The Nomination Committee comprises the full Board.

Role

The role of the Nomination Committee is to determine the state of director nominees for election to the Board, to identify and recommend candidates to fill casual vacancies.

Operations

The full Board convenes as the committee at least once a year and otherwise as required. Minutes of all meetings of the committee are to be kept. Committee meetings will be governed by the same rules as set out in the Company’s constitution, as they apply to meetings of the Board.

Responsibilities

The responsibilities of the Nomination Committee are:

to implement processes to assess the necessary and desirable competencies of Board members including, experience, expertise, skills and performance of the Board and its committees;
to provide new directors with an induction to the Company;
to provide all directors with access to ongoing education relevant to their position in the Company;
advise the Board on new appointments and assist with selection of new Board members;
provide a succession plan for directors and chief executive officer;
evaluate and advise the Board on the performance of the managing director (when applicable);
review time required for non-executive directors to perform their duties;
evaluate and report to the Board on the performance and effectiveness of the Board to facilitate the directors fulfilling their responsibilities in a manner that serves the interests of shareholders;
produce a list of individuals recommended for nomination for election to the Board at the annual meeting of shareholders;
before recommending an incumbent, replacement or additional director, review his or her qualifications, including capability, availability to serve, conflicts of interest, and other relevant factors;
assist in identifying, interviewing and recruiting candidates for the Board;
review the composition of each committee and present recommendations for committee memberships to the Board as needed;
periodically review the compensation paid to non-employee directors for annual retainers (including Board and committee chairs) and meeting fees, if any, and recommend any adjustments. No member of the Committee will act to fix his or her own compensation except for uniform compensation to directors for their services as such.

POLICY AND PROCEDURE FOR SELECTION AND APPOINTMENT OF NEW DIRECTORS

Directors are selected by reference to their background and experience which is relevant to the business needs of the Company. New directors are invited to joint the Board by the chairperson, who makes the invitation based on recommendations made by the Board in its capacity as the Nomination Committee.

CODE OF CONDUCT FOR DIRECTORS AND KEY EXECUTIVES

A Code of Conduct has been adopted by all directors and employees. It requires all business affairs to be conducted legally, ethically and with integrity. The Code provides for reporting of breach of the Code by others.

POLICY ON SECURITIES TRADING

The Board has adopted a policy and procedure on dealing in the Company’s securities by directors, officer and employees which prohibits dealing in the Company’s securities when those persons possess inside information. It also requires the chairperson of the Company to be notified when trading of securities in the Company occurs.

AUDIT REVIEW GUIDELINES

Conduct of Audit Review

The audit review process is to be conducted by the independent directors of the Company.

Functions of the Audit Review

To monitor the integrity of the financial statements of the Company, reviewing significant financial reporting judgments.
To make recommendations to the Board in relation to the appointment of the external auditor and to approve the remuneration and terms of engagement of the external auditor.
To monitor and review the external auditor’s independence, objectivity and effectiveness, taking into consideration relevant professional and regulatory requirements.
To develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm.

Operations

Meetings with the external auditor are to occur at least twice a year, with further meetings on an as required basis.
Minutes of all meetings are to be kept and a report given at a subsequent meeting of the full Board.

Resources

The Company is to provide the independent directors with sufficient resources to undertake their duties, including provision of educational information on accounting policies and other financial topics relevant to the Company and such other relevant materials requested by the independent directors.

Reporting to the Shareholders

The directors’ report to contain a separate section that describes the role of the independent directors and what action they have taken.

Responsibilities

Responsibilities of the independent directors are as set out in the Audit Review Responsibilities List attached as Appendix A.

Appendix A

Audit Review Responsibilities List

Responsibility

1.	The independent directors will meet with the external auditor bi-annually.
2.	Provide an open avenue of communication between the independent auditor and finance management. Report independent director actions to the Board with such recommendations as the independent directors may deem appropriate.
3.	Provide oversight of the independent auditor and resolve any disagreements between management and the independent auditor about financial reporting.
4.	Confirm annually the independence of the independent auditor, and review the firm’s non-audit services and related fees.
51.	Inquire of management and the independent auditor about significant risks or exposures and assess the steps management has taken to minimize such risk to the Company.
6.	Review with the independent auditor and finance management the audit scope and plan, and coordination of audit efforts to assure completeness of coverage, reduction of redundant efforts, the effective use of audit resources, and the use of independent accountants other than the appointed auditors of the Company.
7.	Consider and review with finance management and the independent auditor:
	(a) The Company’s annual assessment of the effectiveness of its internal controls and the independent auditor’s attestation and report about the Company’s assessment. (Effective beginning fiscal year 2004).
	(b) The adequacy of the Company's internal controls including computerized information system controls and security.
	(c) Any related significant findings and recommendations of the independent accountants with management's responses thereto.
8.	Review with finance management any significant changes to financial policies or standards.
9.	Review with management and the independent auditor at the completion of the annual audit:
	(a) The Company's annual financial statements and related footnotes.
	(b) The independent auditor’s audit of the financial statements and its report thereon.
	(c) Any significant changes required in the independent auditor’s audit plan.
	(d) Any serious difficulties or disputes with management encountered during the course of the audit.
	(e) Other matters related to the conduct of the audit which are to be communicated to the independent directors under generally accepted auditing standards.
10.	Review with finance management and the independent auditor at least annually the Company’s critical accounting policies.
11.	Review policies and procedures with respect to transactions between the Company and officers and directors, or affiliates of officers or directors, or transactions that are not a normal part of the Company’s business.
12.	Consider and review with management and the independent auditor:
	(a) Significant findings during the year and management’s responses thereto.
	(b) Any difficulties encountered in the course of their audits, including any restrictions on the scope of their work or access to required information.
	(c) Any changes required in planned scope of their audit plan.
13.	The independent directors will participate in a meeting with finance management and the independent auditor prior to earnings release.

POLICY AND PROCEDURE FOR SELECTION OF EXTERNAL AUDITOR AND ROTATION OF AUDIT ENGAGEMENT PARTNERS

1. Responsibility

The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises. Any appointment made by the Board must be ratified by shareholders at the next annual general meeting of the Company.

2. Selection Criteria

Mandatory criteria

Candidates for the position of external auditor of the Company must be able to demonstrate complete independence from the Company and an ability to maintain independence through the engagement period. Further the successful candidate must have arrangements in place for the rotation of the audit engagement partner on a regular basis.

Other criteria

Other than the mandatory criteria mentioned above, the Board may select an external auditor based on criteria relevant to the business of the Company such as experience in the industry in which the Company operates, references, cost and any other matters deemed relevant by the Board.

3. Review

The Board will review the performance of the external auditor on an annual basis.

POLICY AND PROCEDURES FOR COMPLIANCE WITH CONTINUOUS DISCLOSURE REQUIREMENTS

Detailed compliance procedures for ASX Listing Rule disclosure requirements have been adopted by the Company. It appoints an officer of the Company to be responsible for compliance. It is detailed in its application covering the following areas:

appointment of the responsible officer and description of his/her duties;
identifies areas of risk for the Company;
provides guidelines for:
- identifying disclosure material; and
- monitoring share price movements;
guide for use of trading halts;
guide for decision making process;
details on record keeping;
education of Board and management;
confidentiality;
release of disclosure material; and
updating of compliance procedures.

ARRANGEMENTS REGARDING COMMUNICATION WITH AND PARTICIPATION OF SHAREHOLDERS

The Company maintains a website at www.pancon.com.au, on which it makes the following information available on a regular and up to date basis:

company announcements (for last 3 years);
media and brokers reports (for last 3 years);
notices of meetings and explanatory materials; and
annual, half-yearly and quarterly reports (for last 3 years).

Shareholders and potential investors can also obtain information by emailing info@pancon.com.au.

COMPANY’S RISK MANAGEMENT POLICY AND INTERNAL COMPLIANCE AND CONTROL SYSTEM

The Company has developed a framework for risk management and internal compliance and control systems which cover organisational, financial and operational aspects of the Company's affairs. It appoints the Chief Executive Officer as being responsible for ensuring the systems are maintained and complied with.

PROCESS FOR PERFORMANCE EVALUATION OF THE BOARD, BOARD COMMITTEES, INDIVIDUAL DIRECTORS AND KEY EXECUTIVES

The chairperson is responsible for conducting an annual review of Board performance.

REMUNERATION COMMITTEE CHARTER

Composition

The Remuneration Committee comprises the full Board.

Role

The Remuneration Committee’s role is to discharge the Board's responsibilities in relation to remuneration of the Company’s executives including share and benefit plans.

Operations

The Committee meets annually and otherwise as required. Minutes of all meetings of the Committee are to be kept. Committee meetings will be governed by the same rules as set out in the Company’s Constitution, as they apply to meetings of the Board.

Responsibilities

The responsibilities and functions of the Remuneration Committee are as follows:

review the competitiveness of the Company’s executive compensation programs to ensure:
(a)     the attraction and retention of corporate officers;
(b)     the motivation of corporate officers to achieve the Company’s business objectives; and
(c)     the alignment of the interests of key leadership with the long-term interests of the Company’s shareholders;

review trends in management compensation, oversee the development of new compensation plans and, when necessary, approve the revision of existing plans;
review the performance of executive management;
review and approve chairperson and (when applicable) managing director goals and objectives, evaluate chairperson's and managing director's performance in light of these corporate objectives, and set chairperson's and managing director's compensation levels consistent with Company philosophy;
approve the salaries, bonus and other compensation for all senior executives;
review and approve compensation packages for new corporate officers and termination packages for corporate officers as requested by management;
review and approve the awards made under any executive officer bonus plan, and provide an appropriate report to the Board;
review and make recommendations concerning long-term incentive compensation plans, including the use of share options and other equity-based plans. Except as otherwise delegated by the Board, the Committee will act on behalf of the Board as the “Committee” established to administer equity-based and employee benefit plans, and as such will discharge any responsibilities imposed on the Committee under those plans, including making and authorising grants, in accordance with the terms of those plans; and
review periodic reports from management on matters relating to the Company’s personnel appointments and practices.

CORPORATE CODE OF CONDUCT

Introduction

This Code of Conduct sets out the standard which the Board, management and employees of the Company are encouraged to comply with when dealing with each other, shareholders and the broader community.

Commitment of the Board and Management to Corporate Code of Conduct

The Board and management approve and endorse this Code of Conduct and support it and all it strives to achieve.

The Board and management encourage all staff to consider the principles of this Code of Conduct and use them as a guide to determining how to respond when acting on behalf of the Company.

Responsibilities to Shareholders and the Financial Community Generally

The Company aims:

(a) to increase shareholder value within an appropriate framework which safeguards the rights and interests of the Company’s shareholders and the financial community; and
(b) comply with systems of control and accountability which the Company has in place as part of its corporate governance with openness and integrity.

Responsibilities to Clients, Customers and Consumers

The Company is to comply with all legislative and common law requirements which affect its business, in particular those in respect of occupational health and safety, the environment, native title and cultural heritage. Any transgression from the applicable legal rules is to be reported to the chief executive officer as soon as a person becomes aware of such a transgression.

Employment Practices

The Company will employ the best available staff with skills required to carry out vacant positions.
The Company will ensure a safe work place and maintain proper occupational health and safety practices commensurate with the nature of the Company’s business and activities.

Responsibility to the Community

The Company will recognise, consider and respect environmental issues which arise in relation to the Company’s activities and comply with all applicable legal requirements.

Responsibility to the Individual

The Company recognises and respects the rights of individuals and to the best of its ability will comply with the applicable legal rules regarding privacy, privileges, private and confidential information.

Obligations Relative to Fair Trading and Dealing

The Company will deal with others in a way that is fair and will not engage in deceptive practices.

Conflicts of Interest

The Board, management and employees must not involve themselves in situations where there is a real or apparent conflict of interest between them as individuals and the interest of the Company. Where a real or apparent conflict of interest arises, the matter should be brought to the attention of the chairperson in the case of a Board member or the chief executive officer, the chief executive officer in the case of a member of management and a supervisor in the case of an employee, so that it may be considered and dealt with in an appropriate manner for all concerned.

Compliance with the Code of Conduct

Any breach of compliance with this Code of Conduct is to be reported directly to the chief executive officer or chairperson, as appropriate.

Periodic Review of Code

The Company will monitor compliance with this Code of Conduct periodically by liaising with the Board, management and staff especially in relation to any areas of difficulty which arise from this Code of Conduct and any other ideas or suggestions for improvement of it. Suggestions for improvements or amendments to this Code of Conduct can be made at any time by providing a written note to the chief executive officer.

Incorporation of Code of Conduct for Company Executives

The Code of Conduct for Company Executives forms part of this Corporate Code of Conduct. It provides as follows:

All Executives will:

Actively promote the highest standards of ethics and integrity in carrying out their duties for the Company.
Disclose any actual or perceived conflicts of interest of a direct or indirect nature of which they become aware and which they believe could compromise in any way the reputation or performance of the Company.
Respect confidentiality of all information of a confidential nature which is acquired in the course of the Company’s business and not disclose or make improper use of such confidential information to any person unless specific authorisation is given for disclosure or disclosure is legally mandated.
Deal with the Company’s customers, suppliers, competitors and each other with the highest level of honesty, fairness and integrity and to observe the rule and spirit of the legal and regulatory environment in which the Company operates.
Protect the assets of the Company to ensure availability for legitimate business purposes and ensure all corporate opportunities are enjoyed by the Company and that no property, information or position belonging to the Company or opportunity arising from these are used for personal gain or to compete with the Company.
Report any breach of this Code of Conduct to the chairperson, who will treat reports made in good faith of such violations with respect and in confidence.

This Code of Conduct for Company Executives is in addition to the Corporate Code of Conduct which has been adopted by the Board of the Company.