3D Oil Limited Annual Report 2014

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FY2014 Annual Report · 3D Oil Limited

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ANNUAL
REPORT
2014

TURN ON THE GAS

3D Oil commences the

hunt for gas in the hydrocarbon

rich Otway Basin

TURN ON THE GAS

3D Oil commences the

hunt for gas in the hydrocarbon

rich Otway Basin

CONTENTS

Review of Operations

Directors’ report

Auditor’s independence declaration

Statement of profit or loss and other comprehensive income

Statement of financial position

Statement of changes in equity

Statement of cash flows

Notes to the financial statements

Directors’ declaration

Independent auditor’s report to the members of 3D Oil Limited

Shareholder information

Corporate directory

HIGHLIGHTS

SEA LION PROSPECT
TO BE DRILLED IN
EARLY 2015

SEA LION HIGHLY
PROSPECTIVE FOR OIL

The West Telesto jack up drilling rig to

A discovery at Sea Lion can be cheaply

be contracted in 4th quarter 2014

tied back to West Seahorse

HIGH QUALITY
PARTNER

SEISMIC VESSEL
SECURED

Beach Energy joins 3D Oil in the hunt

The JV has secured the Polarcus seismic

for gas in the Otway Basin

vessel to acquire data in T/49P in late 2014

MANAGING
DIRECTOR’S
REPORT

Last year I started my letter with ‘a lot can
happen in a year’ and this year is certainly
proving this to be true again. Since launching
3D Oil I feel the sale of West Seahorse is
the first time we have changed paths - and
for good reason. Importantly, this moment
in the company’s life provides an exciting
opportunity to reshape the company. And
one of these possibilities is to become a gas
producer into the strong Eastern Australian
gas market.

I feel both regret and relief at 3D Oil and West
Seahorse parting company. From the outset
3D Oil’s primary aim was to develop the field
to provide solid foundations in cash flow from
which the company could grow. However, within
this financial climate it was impossible for the
company to find a funding solution for the
development. This is a climate I do not believe
will dramatically change for resource companies
in the small cap sector in the short term.

For this reason selling the West Seahorse field
for an independently assessed fair market
value was the right decision for 3D Oil. Even in
the event that debt could have been sourced,
it would likely have included an expensive
mezzanine component, while the equity side
also remained problematical under these
market conditions.

The sale of West Sea Horse has provided the
Company with a strong cash balance and
avoided the need for a new capital raising
which would have considerably diluted the
value of existing shareholdings.

With this now behind us the coming months
see some exciting events for the company
including the acquisition of 3D seismic and
the drilling of an exploration well.

Early in 2015 3D Oil will be participating in
the drilling of the Sea Lion exploration well
within our Gippsland permit VIC/P57. With
our joint partner, Hibiscus, we are members
of a consortium which is mobilising the West
Telesto jack up rig due to arrive in Australia in
late December.

We at 3D Oil are very excited about drilling
the Sea Lion prospect as it is arguably the
last undrilled ‘top Latrobe closure’ within the
Gippsland Basin. Top Latrobe closures, at the
base regional seal, contain the vast majority

of trapped hydrocarbons in the Gippsland
Basin. The success rate for discoveries is
in the order of 70% in the basin. Certainly
the Sea Lion prospect has many positive
attributes including that it is on trend and
adjacent to West Seahorse and Seahorse, is
delineated by reprocessed 3D seismic, is a
simple structural inversion feature and that it
is interpreted to contain excellent shore face
reservoir sands. In my opinion it is one of the
best oil prospects currently in the offshore of
Australia, with an internal risking of just under
one in two.

As a consequence of the Hibiscus transaction,
3D Oil received US$7.5 million from Hibiscus
to be used to fund our interest in the drilling
of the Sea Lion well. It is probable therefore
that 3D Oil will require only minimal further
equity to fund this well if, as we envisage,
the company ends up with a 24.9% working
interest in VIC/P57.

In the event of a discovery at Sea Lion
the field would likely be tied-back through
Hibiscus’ West Seahorse development. This
would reduce the capital costs for 3D Oil
in comparison to a standalone Sea Lion
development.

Toward the end of 2014 we will be acquiring
the Flanagan 3D seismic survey in our permit
T/49P with our new partner Beach Energy.
The acquisition of this large permit and the
subsequent entry of Beach represent a coup
for 3D Oil which provides us with the potential
to explore for a number of large gas fields.
The aim of the Flanagan survey is to delineate
structures proximal and on trend with Origin’s
Thylacine gas field. The potential of T/49P
has recently been overlooked by the industry,
but our internal studies have indicated it
potentially has all the geological elements
necessary to create large gas fields. It is no
coincidence that the Thylacine gas field is the
largest in the Otway Basin (1.3 TCF) and also
the richest in terms of condensate content.
The assessment by our team can see no
technical reasons why this trend does not
continue southward beyond Thylacine.

It is difficult to know where else on the east
coast you could secure exploration rights to
structures of world class scale, in a known
gas province, in shallow water, and close to
infrastructure supplying an expanding secure

east coast gas market. The discovery of a
Thylacine-size field could have a Net Present
Value of well over a billion dollars; certainly a
company maker.

A number of factors are underpinning the
current increase in eastern Australia gas
prices. These include the unwinding of major
low-cost, long-term gas contracts, the
exposure to international pricing through
LNG exports and also increasing cost of
exploration and development for new gas
sources. The current market consensus view
is that gas prices will rise to $6 to $9 / GJ by
2016 in the eastern states market.

Our experience at West Seahorse has resulted
in the company re-evaluating its strategy
going forward. We now see that for junior
players in the industry – at least in the
current market - marginal offshore assets
can be a liability. However, this is not to say
the company will veer dramatically from its
long term strategy of becoming an eastern
Australia energy producer, only that such
factors as field size and offshore versus
onshore will be bigger considerations.

The acquisition of T/49P was a great
illustration of the company taking advantage
of our strengths in order to identify and
exploit niche positions. We will continue with
this strategy. Ultimately we will strive to
maximise value to shareholders by minimising
the potential for the issue of new equity. This
philosophy has also underpinned our support
of the Hibiscus transaction.

On behalf of the company, I thank the Board
and 3D Oil team for their endeavours and
commitment over the last year. They are
an integral part of realising our ambition of
becoming an Australian oil and gas producer.

Noel Newell
Managing Director

CHAIRMAN’S
LETTER

Dear Shareholders,

New beginnings
In 2014 your company underwent a significant
transformation which now provides a safe
foundation from which to conduct its
operations. The reasons to sell the interest
at in Petroleum Production Licence VIC/
L31to Hibiscus at fair market value have been
well documented and shareholders are to
be congratulated for adopting a commercial
approach in passing these resolutions at the
General Meeting held on 11 August, 2014. 3D
Oil is now in a position to do what it does best
which is finding and exploiting opportunities in
oil and gas.

The company got off to a flying start with
the acquisition of T/49P offshore exploration
permit and events have shown that the
decision to diversify the company’s business
was a very smart one indeed. It is fantastic
to have Beach Energy as a joint venture
partner in the Otway. Shareholders should
not under estimate the technical and
commercial scrutiny that Beach applied to
the permit before deciding to come on board
and there is every reason to look forward to
the shooting of the seismic later this year
with considerable optimism. 3D Oil’s timing
in this regard has been excellent, it being
generally conceded that Eastern States
gas prices are only headed in one direction.
Further, 3D Oil retains an interest in the
balance of exploration permit VIC/P57 and has
identified two exciting high impact exploration
prospects in Sea Lion and Felix. Bass Strait
has always been 3D Oil’s backyard and such
is the geology and prospectively of the area,
there is every reason to believe that this will
still be the case for some considerable period
of time to come.

As a result of the Hibiscus Transaction the
company has the liquidity to take advantage
of these opportunities. This is critical in the
current financial environment.

I was impressed with the job that Noel
Newell, Andrew Adams and Melanie Leydin
did this year in negotiating and completing
an exacting and difficult transaction with
Hibiscus. It has been good to have Ian
Tchacos involved in an ex officio capacity
as he has brought considerable commercial
and technical skill to the board’s operations.
The board and the executive team have all
worked extremely hard to place the company
in a sound financial position and this is of the
utmost importance for both the company and
its shareholders. The board supports Noel in
the carrying out of his plans to enhance the
company’s performance and deliver good
results for shareholders and we thank him for
his leadership and our staff for their effort
and contribution during the year.

We have a new addition to the board this
year, Mr Leo De Maria who has an extensive
accounting and commercial background and the
early signs are that he will make a significant
and valuable contribution to the company.

Finally, I would like to thank our shareholders
for their support during the year. I firmly
believe that the changes made this year put
the company in a great position to develop
and enhance its business.

Yours faithfully

Campbell Horsfall
Chairman

REVIEW OF
OPERATIONS

As at 30 June 3D Oil Limited had a 49.9%
interest in the offshore Gippsland Basin
exploration permit VIC/P57 and the Production
Licence VIC/L31 (non operator) and a
100% interest in the offshore Otway Basin
exploration permit T/49P (Figure 1).

During 2014 the two key events in relation
to 3D Oil’s equity in these areas were the
Hibiscus Transaction in relation to VIC/P57 and
VIC/L31P as announced on 13 May (detailed
below), and the sale of 20% of T/49P to Beach
Energy which was announced on 16 June and
completed on 15 August.

Upon the final completion of the Hibiscus
Transaction 3D Oil will most likely retain 24.9%
equity in VIC/P57. The key coming event in
this permit will be the drilling of the Sea Lion
prospect. Sea Lion is a highly prospective
feature with a robust closure at the top of the
Latrobe group and closures also at multiple
reservoir levels deeper in the structure. An
independent resource assessment (RISC
2012) estimated the combined probabilistic
estimate of the most likely (P50) Prospective
Resources for the three main target levels was
11.0 MMbbl of oil. As a result of the Hibiscus
Transaction 3D Oil’s financial commitment for
the drilling of Sea Lion is largely covered.

During November and December 2014 the
T/49P joint venture plans to acquire the
Flanagan 3D seismic survey. The purpose of
the survey is to high grade a number of leads
already identified adjacent to the Thylacine/
Geographe gas fields which are on production
for Origin Energy.

Figure 1: 3D Oil Limited current permits

VIC/P57, GIPPSLAND
BASIN, OFFSHORE
VICTORIA

HIBISCUS PETROLEUM
TRANSACTION
The Company began the 2014 year with a
strong focus on the West Seahorse project
and, together with our joint venture partners
at Hibiscus, made significant progress
towards development of the asset.

The JV was granted production licence VIC/
L31 in December 2013 and also achieved Field
Development Plan and EPBC (environmental)
approvals. FEED engineering and design
work for the production facilities was
completed with Worley Parsons. In January
2014 independent expert Gaffney, Cline &
Associates (GCA) reviewed and certified the
oil reserves at WSH.

In parallel with this work, from late 2013
the JV held discussions with Australian and
international banks in relation to project
finance for the West Seahorse project.
However, despite the progress noted above,
debt markets remained difficult and 3D Oil
also found similar challenges with potential
providers of equity finance and mezzanine
debt for the project.

Ultimately, it was not possible to achieve an
appropriate financing solution for the WSH
project by the joint venture.

This was the turning point in the Company’s
ability to participate in the development of
West Seahorse. Negotiations with Hibiscus
resulted in an agreement whereby 3D Oil sold
out of WSH at an independently assessed fair
market value while retaining an interest in the
VIC/P57 exploration permit.

This agreement involved a package of
measures relating to 3D Oil and the VIC/
P57 joint venture which was approved at the
General Meeting of 3D Oil shareholders on 11
August 2014. Assuming, as 3D Oil expects,
that HiRex exercises its VIC/P57 option, the
key points of the transaction are:

Ǵ 3D Oil is selling its interest in West Seahorse
(production licence VIC/L31) for a fair market
value of US$16 million and 3D Oil will have no
further interest in the project. US$1.95 million
has been used to pay off 3D Oil’s obligations
to the joint venture and the Company will
receive the balance, US$14.05 million, in cash.

Ǵ 3D Oil will retain a 25% interest in the VIC/P57
exploration permit – which includes the Sea
Lion and Felix prospects – and will be funded
for US$7.5 million of expenditure towards the
Sea Lion exploration well to be drilled in 2015.
These funds represent proceeds from the sale
of the Company’s share of the Britannia rig to
Hibiscus. If, as anticipated, the Sea Lion well
costs ~US$35 million, 3D Oil will have limited
further cash contribution to the drilling of this
commitment well.

Ǵ Of the US$7.5 million referred to above, US$2
million has been advanced to 3D Oil as a
working capital loan to meet cash calls and
other expenses.

This transaction involved no issue of new
3D Oil shares and therefore no shareholder
dilution, which would have been required
if 3D Oil had continued with the project. In
addition the cash buyout eliminated a number
of project related risks for 3D Oil and has
monetised the WSH asset at critical time
allowing the Company to efficiently fund its
ongoing exploration programme.

The 3D Oil board of directors unanimously
recommended that shareholders approve the
Hibiscus transaction.

VIC/P57 EXPLORATION
OPERATIONS
Exploration Permit VIC/P57 is located in the
north-west of the offshore Gippsland Basin.
It is the foundation asset for 3D Oil and
(prior to the grant of VIC/L31) contained the
undeveloped West Seahorse oil field.

A $27 million VIC/P57 farm-out to Hibiscus
Petroleum Berhad (‘Hibiscus’) was formally
completed in 2013 and 3D Oil currently holds a
49.9% working interest in VIC/P57 (with HiRex
having an option to acquire 20% of 3D Oils
interest) the remaining interest is held by
Hibiscus Petroleum Berhad. By arrangement,
3D Oil Limited continues to carry out the
subsurface technical work in VIC/P57 on
behalf of the Joint Venture.

Work in previous years by 3D Oil in VIC/P57
has identified a strong inventory of leads
and prospects (Figure 2). During the year
3D Oil has focused on the West Seahorse
development and preparation for an
exploration well in the Sea Lion prospect.

3D Oil has retained a significant role within
the VIC/P57 joint venture. 3D Oil is responsible
for exploration within the permit. This

arrangement makes effective use of the
complementary strengths of Hibiscus in field
development and project management and
the local knowledge and geoscience capability
of 3D Oil

The current work program for VIC/P57 requires
a well to be drilled in the current year of the
permit. On June 20, 2014, Canarvon Hibiscus,
on behalf of the VIC/P57 joint venture,
applied for a suspension and extension to the
work program commitment for the VIC/P57
exploration permit.

On July 23 2014 a suspension from compliance
with permit conditions and extension of
the term of petroleum permit VIC/P57 was
granted. This suspended the work program
conditions for a period of 12 months to 9
August 2015 and extended the permit term to
9 August 2017.

SEA LION PROSPECT
Sea Lion is robust closure at the top of the
Latrobe Group, with closures at multiple
reservoir levels deeper in the structure.
Similar to West Seahorse and most other top-
Latrobe discoveries, the Sea Lion structure is
the product of reverse movements on deep
seated faults. Sea Lion is also augmented by
the compaction of coals and shales around
prominent channel bodies that appear in the
seismic data.

The combination of prominent mapped depth
structure and the likely presence of thick
high quality reservoir sands overlain by the
regional Lakes Entrance Formation seal makes
Sea Lion uniquely prospective in VIC/P57.

The Sea Lion prospect was the subject of an
independent resource assessment as part of
the Hibiscus farm-in process. The combined
probabilistic estimate of the most likely (P50)
Prospective resource for the three main
target levels was 11.0MMbbl of oil.

Figure 2: Map of VIC/P57 with leads and prospects.

Figure 3:
Top Latrobe horizon with seismic line
through oil fields on the Rosedale fault trend.

Prospect

Reservoir

Sea Lion

Gurnard, N1u, N1, and N2.6

OIP

P90

14.3

Ultimate Recovery

P50

19.5

P10

26.0

P90

7.8

P50

11.0

P10

15.3

Table 1:
Unrisked Resource Estimates (RISC 2012)

Figure 4:
Sea Lion area schematic section.

The permit extension and suspension allows
the Sea Lion prospect to be drilled with the
West Telesto drilling rig in 2015 as part of a rig
sharing agreement with Origin Energy.

Currently the West Telesto is expected to be
mobilised during the summer of 2014/2015
initially to drill Origin’s Yolla gas field. The rig
will then be assigned to the VIC/P57 Joint
Venture for the drilling of Sea Lion-1.

Figure 5: A depth map showing the relationship between Sea Lion
and the West Seahorse and Seahorse fields at the interpreted Top Latrobe group horizon.

WEST SEAHORSE RESERVES CERTIFICATION
Following on from the reinterpretation and
depth conversion of reprocessed seismic data
in early 2013 certification of the reserves
in the West Seahorse Field and a Reservoir
Modelling Simulation was certified by Gaffney
Cline & Associates (GCA). This work was
completed in mid-January 2014.

A reserves estimation using a Reservoir Model
certified by GCA was made by Stochastic
Simulation Limited to further develop the
economic models and assist in obtaining
finance for the development.

Gross 100% Field

TDO share with VIC/L31

Reservoir

Main Reservoirs N1u/N1/N2-6

4.0

6.5

11.5

1.9

2.9

4.9

GCA Certified undeveloped Oil Reserves for West Seahorse.

WEST SEAHORSE DEVELOPMENT CONCEPT
The development concept proposes
production via a leased Mobile Offshore
Production Unit (MOPU) in to a leased tanker
serving as a Floating Storage and Offloading
(FSO) Vessel. This will enable crude oil sales
both locally and internationally. The field life
is anticipated to be 4 to 6 years, dependent
on a number of factors including operating
costs and oil price. Initial production rates
are expected to be as high as 12,000 barrels
of oil per day. The MOPU with FSO offshore
concept was chosen over previous concepts
for a number of economic and environmental
reasons, but primarily because it provides
the quickest route to production and
removes the environmental and regulatory
issues associated with a partially-onshore
production system.

Ǵ The Britannia jack-up rig will be refurbished
and modified for duty as a Mobile Offshore
Production Unit (MOPU). It will be fixed to the
seabed at West Seahorse field location for
the life of the project. The MOPU will include
processing facilities to remove associated
gas and water, to stabilise and export the
crude.

Ǵ The West Seahorse Development wells will
be tied back to the MOPU when this facility
is installed on location using a temporary
package mounted on the MOPU.

Ǵ Produced gas will be processed and utilized
for fuel gas and enhanced recovery (gas
lift) with the remaining gas being flared.
Produced water will be treated to regulatory
requirement quality and disposed overboard.

Ǵ It is planned to drill and suspend the two

development wells using the West Telesto jack
up rig. These will be suspended in compliance
with all relevant regulations & in line with
good oilfield practice at the seabed. This is
similar to the West Seahorse-3 well which was
suspended in 2008.

Ǵ The stabilised oil will be produced via a 1.6km
4-inch flexible flowine to a fixed mooring and
flexible hose to a Floating Storage Offloading
(FSO) vessel. The FSO can the either load to
another vessel in tandem mooring or shuttle
the crude to a refinery.

Figure 6: Schematic illustration of the West Seahorse development

VIC/L31 (THE WEST
SEAHORSE DISCOVERY)

The West Seahorse discovery lies 14km
offshore from Ninety Mile Beach in 39 meters
of water, 18km SSE of the Gippsland town of
Loch Sport. The area hosts existing oil and gas
infrastructure, with West Seahorse located
38km east of the onshore Esso Longford
gas Plant and 11km from Esso’s offshore
Barracouta platform.

Application for a declared location ( a
precursor to applying for a Production
Licence) was made over the West Seahorse
Oil Field in 2012 which was granted in 2012.
A Production Licence was applied for in May
2013 and this was granted on December 5,
2014 and VIC/L31 was excised from the VIC/
P57 exploration permit.

3D Oil’s participating interest in the VIC/L31
permit is 49.9% with the remaining interest
held by Hibiscus Petroleum Berhad. By
arrangement, 3D Oil continues to carry out
the subsurface technical work in VIC/L31 on
behalf of the Joint Venture.

The West Seahorse oil reservoir is
approximately 1400m below sea level in some
of the same high-productivity sandstones
that have historically contributed to the
prolific oil fields of the Gippsland Basin. Initial
oil production rates are estimated to be as
high as 12000 barrels of oil per day.

Significant progress has been made on the
development of the West Seahorse Oil field.

Ǵ The West Seahorse Geophysical and

Geotechnical survey environmental plan was
accepted by NOPSEMA in August 2013.

Ǵ A key environmental milestone in the WSH

regulatory approval process was also achieved
when the Joint Venture received approval for
the project under the Environment Protection
and Biodiversity Conservation (EPBC) Act on
18 October 2013.

Ǵ The West Seahorse Field Development Plan
was accepted by NOPTA on November 13,
2013.

Ǵ In April 2013 Canarvon Hibiscus on behalf of
the West Seahorse Joint Venture submitted
an application for a Production Licence (PPL)
over the West Seahorse Field. On December
5th, 2013 the PPL (VIC/L31) was granted.

Ǵ Up to December 2013, the JV largely

completed the Front End Engineering and
Design (FEED) work for the West Seahorse
Project. This work was led by Melbourne-
based engineering firm WorleyParsons and
carried out in conjunction with Carnarvon
Hibiscus Pty Ltd and 3D Oil.

Ǵ In the first and second quarters of 2014 the
focus of the development team has been on
the well planning, site studies and stakeholder
consultations in preparation for drilling in
2015.

T/49P, OTWAY BASIN,
OFFSHORE TASMANIA

3D Oil Limited (3D Oil) was granted a new
exploration permit in the Tasmanian part of
the Otway Basin on the 22nd of May 2013.
The permit, T/49P, has a 6 year initial term
with a guaranteed work program consisting
of preliminary studies followed by a 755 km2
3D marine seismic acquisition program in
Year 2. Permit T/49P is situated 250 km SE of
Melbourne and immediately west of King Island
in water depths which are generally less than
200m. T/49P is an exceptionally attractive
permit as it covers an area of 4,960 km2
within a shallow water shelf environment.
The permit is adjacent to the Thylacine and
Geographe gas fields which have a combined
gas in place (“GIP”) of over 2 TCF. Thylacine is
the largest gas discovery in the Otway Basin.

During the past year 3D Oil continued to
review the geological and geophysical data
in the permit and has identified more than
10 leads from mapping of the existing 2D
seismic. The petroleum system that has been
proven in adjacent permits is interpreted to
be active within T/49P. A thick accumulation
of sediments to the west of T/49P suggests
the possibility of a second generative
source. The leads range from medium to large
structures by world standards (Figure 7). The
estimated undiscovered gas in place for these
leads is in the order of 20 TCF.

The perceived geological prospectivity is
underpinned by several key factors. A thick
‘Tertiary wedge’ is located approximately
coincident with the shelf-break edge in a
largely north-south orientation. This is a
common feature of successful plays further
to the north and west along the offshore
Otway. It is also analogous to productive
areas on the Northwest Shelf and many other
examples around the world. While seismic
coverage is sparse, this feature can clearly
be seen within the western sector of T/49P.
3D Oil considers that the rapid Tertiary burial
evidenced by this build-up of sediment
will have caused late stage hydrocarbon
generation from the Eumeralla Formation
and potentially other formations along this
margin. A 3D maturation modelling program
has demonstrated that source material in the
Eumeralla Formation is currently at optimal
temperature and depth for gas generation.
The present day maturity at the top of the
Eumeralla as derived from the 3D modelling
program is shown in Figure 8.

Figure 7: T/49P Location Map

Figure 10: Series of Troughs

Figure 8: Modelled Vitrinite reflectance at the Top
of the Eumeralla Formation at present day

Figure 9: Reprocessed 2D Seismic Data

Seismic facies interpretation indicates areas
of good seal based upon a low acoustic
signature correlated with the Belfast
Mudstone at Thylacine. This unit overlies
a complexly faulted sequence of higher
amplitude seismic events interpreted to be
the Waarre Formation and its equivalents. 3D
Oil interprets this as potentially analogous
to the reservoir and seal combinations that
are successful in the known Otway basin gas
fields to the north.

3D Oil entered into its second year of a 6 year
term on May 23, 2014. 3D Oil completed the
reprocessing of approximately 500 kilometres
of a selection of the older 2D seismic data
which is shown as dashed red highlighted lines
in Figure 9.

The perceived risk in T/49P is the extent of
the regional seal as illustrated by the Prawn-
A1 (1967) and Whelk-1(1970) wells which were
both dry holes located on the Prawn Shelf.
Modern seismic indicates Prawn-A1 was
drilled off structure and did not target the
formations currently of interest. A trace of
ethane and propane within the Waarre sands
in Prawn-A1 suggest a working source in this
area. A more recent development in 3D Oil’s
understanding of the geology in this part of
the Otway Basin has been the recognition of
underlying structures which appear to control
the overlying depositional environment. What
has generally been called the Prawn Platform
is in fact not a platform but is cut by a series
of en echelon troughs trending SW to NE and
parallel to the Shipwreck Trough (Figure 10 and
Figure 11).

3D Oil’s highest ranked lead, Flanagan, has the
potential to contain up to 6 TCF GIIP (Figure 12).

The commercial attractiveness of exploring
for gas in eastern Australia has been boosted
by an expected shortfall in gas supply for
south-eastern Australia as LNG projects
come on stream. 3D Oil notes that the timing
of any T/49P discovery and production
would likely coincide with spare capacity in
existing facilities such as Thylacine, Minerva
and Casino offering various opportunities
to commercialize any discoveries. 3D Oil’s
analysis did not include the value of associated
condensate. Based on known condensate/gas
ratios (CGR) in Thylacine and Geographe, 15
MMbbl of condensate could be produced from a
hypothetical gas field of 1 TCF.

T/49P represents an attractive exploration
opportunity and 3D Oil has held discussions
with a number of potential farmin partners
during the past year. On 16 June 2014 3D Oil
announced that Beach Energy Limited had
executed agreements to acquire a 20% working
interest in the T/49P exploration permit for a
price of $3 million. This transaction values the
full permit at $15 million. 3D Oil is pleased to
have attracted a significant partner such as
Beach Energy and believes that this validates
the Company’s technical and commercial
rationale for the permit.

The T/49P permit had been held at 100%
equity interest by 3D Oil since it was granted
via government gazettal in May 2013. The
completion of the transaction with Beach was
finalised on the 21 August 2014 with 3D Oil
retaining an 80% interest and operatorship of
the new T/49P joint venture. The Company is
continuing discussions with further potential
farminees to jointly explore T/49P.

Figure 11: Cross Section from La Bella 1 through T/49P

Figure 12: T/49P North Block Prospects

T/49P 3D SEISMIC
OPERATIONS 2014
3D Oil intends to conduct the Flanagan 3D
Marine Seismic Survey (MSS), in accordance
with the principles of Ecologically Sustainable
Development (ESD), to better define the
subsurface geology of the permit area and
more accurately define prospective petroleum
targets for exploration drilling in an economic,
commercial, environmental and technically
efficient manner. This is consistent with
the agreed work-plan for T/49P with the
Commonwealth Department of Industry (DOI).
3D Oil signed a Joint Acquisition Protocol
Agreement with Origin Energy on May 20th,
2014 for the purpose of sharing seismic
acquisition services with Origin Energy.

Preparations commenced for the planned
Flanagan 3D MSS program which is part
of 3D Oil’s year 2 T/49P commitments.
Prior to conducting a seismic program an
Environmental Plan (EP) must be prepared
and submitted to NOPSEMA for approval
in accordance with Regulation 9 of the
Offshore Petroleum and Greenhouse Storage
(Environment) Regulations 2009. The
preparation of the EP was initiated in February
of this year. The plan was submitted on June
5th, 2014 and formally accepted on July 30th,
2014. During the review period 3D Oil also
undertook consultations with fisherman in
several communities along the Great Ocean
Road: Apollo Bay, Port Campbell, Port Fairy,
Warrnambool and Portland (Figure 13).

Figure 13: Fishing Trawlers docked at Portland

The Flanagan MSS has been designed to
cover only the most prospective areas of
the northern third portion of T/49P (Figure
14). On the basis of this prospective area
selection, the vessel proposed is a multi-
streamer vessel which allows for the efficient
and rapid acquisition of data compared with
a single streamer vessel. The acoustic source
to be utilised in this MSS will be the smallest
source size which will achieve the survey data
acquisition objectives.

The Flanagan 3D MSS data acquisition area
covers an area of approximately 1100 km2
with and objective survey acquisition design
of 755km2 and is located entirely within
Commonwealth waters of the Otway Basin.
The MSS data acquisition area is shown as a
yellow polygon in Figure 8. The seismic vessel
will also execute turns up to 15km outside this
defined MSS area and will work within a ‘Vessel
Operational Area’ of approximately 2100km2
shown by the red polygon. It is expected the
vessel will operate in a NE-SW orientation
when acquiring seismic data and during
acquisition will maintain a minimum distance
of approximately 45km from each of the
Victorian and King Island coastlines.

The proposed Flanagan 3D MSS is scheduled
to be acquired between 1 November and
31 December 2014. The survey duration
will be approximately 30 days. The precise
commencement and completion dates will be
dependent on vessel availability/schedule and
weather conditions.

Polarcus DMCC has been selected as the
preferred contractor to acquire the he
Flanagan 3D MSS. The Polarcus Asima, an
ultra-modern 12 streamer 3D/4D seismic
vessel (built in 2010) will be used to acquire
the seismic data (Figure 15). Seismic
acquisition will be undertaken 24 hours per
day, seven days per week and is expected
to continue for a total of approximately 30
days, dependent on weather conditions and
operational efficiency.

Figure 14: Proposed 3D Flanagan MSS

3D Oil’s Petroleum Tenement Holdings
Note that TDO’s interests in each of VIC/P57,
VIC/L31 and T/49P are subject to transactions
pending completion as detailed above. As
at 30 June 2014, TDO petroleum tenement
holdings were:

Tenement and Location

VIC/P57 offshore
Gippsland Basin, Victoria

VIC/L31 offshore
Gippsland Basin, Victoria

T/49P offshore
Otway Basin, Tasmania

TDO beneficial
interest at 31Mar14

Beneficial interest
acquired / (disposed)

TDO beneficial
interest at 30Jun14

49.9%

100%

n/a

49.9%

100%

Figure 15: Polarcus Alima 3D Multistreamer Vessel

COMPETENT PERSON’S
STATEMENT
Any Petroleum Reserves, Contingent
Resources and Prospective Resources
information on the oil and gas in this
release are based on, and fairly represent,
information and supporting documents
prepared by, or under the supervision of, 3D
Oil’s Senior Geophysicist Dr. Chris Pike. He
is a Geophysicist [Ph.D. Geophysics] with
more than 25 years practising in Petroleum
Geophysics. Dr. Pike is a member of the
Petroleum Exploration Society of Australia, The
American Association of Petroleum Geologists
(AAPG – US), the Society of Exploration
Geophysicists (SEG – US), the Association
of Professional Engineers and Geoscientists
of Alberta (APEGA – Canada) and the
Professional Engineers and Geoscientists
of Newfoundland and Labrador (PEGNL –
Canada). Dr Pike has consented in writing to
the inclusion of the information in the form
and context in which it appears.

DIRECTORS’
REPORT

The directors present their report, together
with the financial statements, on the
consolidated entity (referred to hereafter
as the ‘consolidated entity’) consisting of
3D Oil Limited (referred to hereafter as the
‘company’ or ‘parent entity’) and the entities
it controlled at the end of, or during, the year
ended 30 June 2014.

DIRECTORS
The following persons were directors of 3D
Oil Limited during the whole of the financial
year and up to the date of this report, unless
otherwise stated:

Mr Campbell Horsfall
Mr Noel Newell
Ms Melanie Leydin
Ms Philippa Kelly (resigned 25 November 2013)
Dr Kenneth Pereira (resigned 3 July 2014)

PRINCIPAL ACTIVITIES
During the financial year the principal
continuing activities of the company
consisted of exploration and development of
upstream oil and gas assets.

DIVIDENDS
There were no dividends paid or declared
during the current or previous financial year.

The consolidated entity does not have
franking credits available for subsequent
financial years.

REVIEW OF OPERATIONS
The loss for the consolidated entity after
providing for income tax amounted to
$1,289,942 (30 June 2013: $2,033,105).

Refer to the detailed Review of Operations
preceding this Directors’ Report.

FINANCIAL POSITION
The net assets of the Group decreased
by $1,250,492 to $20,947,726 at 30
June 2014 (2013: $22,198,218), with the
material movements relating to exploration
expenditure and borrowings received by the
consolidated entity.

The consolidated entity’s working capital
position at 30 June 2014, being current
assets less current liabilities decreased by
$5,549,221 to a working capital deficiency of
$3,449,711 (2013: surplus $2,099,510).

SIGNIFICANT CHANGES IN THE
STATE OF AFFAIRS
On 10 November 2013 the consolidated entity
granted 300,000 unlisted employee options
exercisable at $0.1055 (10.55 cents) per
option expiring 30 November 2016.

On 16 June 2014 the consolidated entity
announced that it had executed agreements
with Beach Energy Limited (Beach) for Beach
to acquire a 20% working interest in the T/49P
exploration permit for consideration of $3
million.

There were no other significant changes in
the state of affairs of the consolidated entity
during the financial year.

MATTERS SUBSEQUENT TO THE
END OF THE FINANCIAL YEAR
On 7 July 2014 the consolidated entity
announced that it had executed binding
agreements with Carnarvon Hibiscus Pty Ltd
(CHPL), Althea Corporation Limited, and HiRex
Petroleum Sdn Bhd (HIREX) in relation to the
restructuring of the funding and ownership
of its interest in offshore Gippsland Basin
tenements VIC/P57 and VIC/L31.

Key points of the binding agreements are
as follows:

Ǵ CHPL to pay TDO US$7.5 million for the

Company’s interest in the Britannia Rig and a
5% interest in VIC/P57.

Ǵ The proceeds will be used to meet Year 3

funding commitments for VIC/P57.

Ǵ US$2 million will be paid in advance to TDO to

assist with short term funding.

Ǵ US$1.94 million of funding owing to the

Operator of the VIC/L31 JV will be offset
against a transfer to CHPL of a 6.07% interest
in VIC/L31.

Ǵ An option has been granted to CHPL to

purchase the remaining 43.83% interest in
VIC/L31 at fair market value, which has been
deemed to be $14.05 million.

Ǵ An option has been granted to HIREX to earn
a 20% interest in VIC/P57. Under the HiRex
Farmin Agreement, HIREX has been granted
the option to earn a 20% interest in VIC/P57
directly from the Company in return for the
provision of data analysis for VIC/P57 using
the HIREX virtual drilling technology. The
option to farm-in is exercisable within 1 month
following receipt of all conditions precedent to
the agreements.

Ǵ As CHPL is a substantial holder of the

consolidated entity for the purposes of
ASX Listing Rule 10.1, Shareholder approval

was required to be obtained to complete
the matters set out in the transaction
documents. The consolidated entity held
a general meeting of shareholders on 11
August 2014 and shareholders approved
the transaction. On 18 August 2014 the
consolidated entity announced that it
received notice from CHPL exercising its
option to acquire the VIC/L31 remaining
interest from the consolidated entity for
a consideration of US$14.05 million. On
21 August 2014 the consolidated entity
announced completion of the sale of a 20%
working interest in the T/49P exploration
permit to Beach Energy Limited and the
remaining $2.5 million of the $3 million
purchase price was received.

No other matter or circumstance has arisen
since 30 June 2014 that has significantly
affected, or may significantly affect the
consolidated entity’s operations, the results of
those operations, or the consolidated entity’s
state of affairs in future financial years.

LIKELY DEVELOPMENTS
AND EXPECTED RESULTS OF
OPERATIONS
The consolidated entity will continue to
pursue its exploration interest in the West
Seahorse Oil Field (VIC/P57) in Joint Venture
partnership with Carnarvon Hibiscus Pty Ltd
following the sale of the consolidated entity’s
interest in VIC/L31 for a consideration of
US$14.05 million during the financial year.

3D Oil will continue to develop other permits
held and to this end has successfully
introduced new partners to its new
exploration permit (T/49P) in the offshore
Otway Basin of Tasmania during the financial
year. Over the course of the next 3 years the
Minimum Guaranteed Work Programme sets
out planned expenditures of $13.15 million. 3D
Oil intend to seek a farm-in partner to assist
in financing the work programme.

ENVIRONMENTAL REGULATION
The consolidated entity holds participating
interests in a number of oil and gas areas. The
various authorities granting such tenements
require the licence holder to comply with
the terms of the grant of the licence and
all directions given to it under those terms
of the licence. There have been no known
breaches of the tenement conditions, and
no such breaches have been notified by any
government agencies during the year ended
30 June 2014.

INFORMATION ON DIRECTORS

Mr Campbell Horsfall

Mr Noel Newell

Non-Executive Director and Chairman

Executive Director

Ms Melanie Leydin

Non-executive Director and
Company Secretary

Qualifications
B.Comm., LL.B (Melb)

Qualifications
B App Sc (App Geol)

Qualifications
B.Bus CA

Experience and expertise
Campbell Horsfall is a lawyer with extensive
experience in the petroleum industry and has
held positions as Company Solicitor for BP
Australia Ltd, BHP Petroleum, Japan Australia
LNG (MIMI) Pty Ltd and was General Counsel
of Vicpower Trading (formerly the State
Electricity Commission of Victoria). Campbell
holds Degrees in Law and Commerce from
the University of Melbourne and a Diploma
from the Securities Institute and practices
as a barrister in Melbourne. Campbell has
commercial expertise in fund raisings,
mergers and acquisitions as well as the
day to day running of an ASX listed public
company. He has been a director of two other
public companies and was a non-executive
director of Orchard Petroleum Limited. Orchard
Petroleum is an oil and gas exploration
company based in California, USA.

Other current directorships
None

Former directorships (last 3 years)
None

Special responsibilities
Member of Audit Committee and
Remuneration and Nomination Committee

Experience and expertise
Noel Newell holds a Bachelor of Applied
Science and has over 25 years experience
in the oil and gas industry, with 20 years of
this time with BHP Billiton and Petrofina. With
these companies he has been technically
involved in exploration of areas around the
globe, particularly South East Asia and all
major Australian offshore basins. Prior to
leaving BHP Billiton in 2002, Noel was Principal
Geologist working within the Southern
Margin Company and primarily responsible
for exploration within the Gippsland Basin.
Noel has a number of technical publications
and has co-authored Best Paper and runner
up Best Paper at the Australian Petroleum
Production & Exploration Association
conference and Best Paper at the Western
Australian Basins Symposium. Noel is the
founder of 3D Oil. Immediately prior to starting
3D Oil, Noel was a technical advisor to Nexus
Energy Limited and was directly involved in
their move to explore in the offshore of the
Gippsland Basin.

Other current directorships
None

Former directorships (last 3 years)
None

Interests in shares
84,625 ordinary fully paid shares

Special responsibilities
None

Interests in options
None

Interests in shares
38,444,150 ordinary fully paid shares.

Interests in options
None

Experience and expertise
Melanie Leydin is a Chartered Accountant
and is a Registered Company Auditor. She
Graduated from Swinburne University in 1997,
became a Chartered Accountant in 1999 and
since February 2000 has been the principal
of chartered accounting firm, Leydin Freyer.
In the course of her practice she audits listed
and unlisted public companies involved in
the resources industry. Her practice also
involves outsourced company secretarial
and accounting services to public companies
in the resources sector. This involves
preparation of statutory financial statements,
annual reports, half year reports, stock
exchange announcements and quarterly ASX
reporting and other statutory requirements.
Melanie has 23 years experience in the
accounting profession and is a director and
company secretary for a number of oil and
gas, junior mining and exploration entities
listed on the Australian Stock Exchange.

Other current directorships
Former directorships (last 3 years)
Celamin Holdings NL
(resigned: 9 October 2012)

Special responsibilities
Chairman of Audit Committee and Member of
Remuneration and Nomination Committee

Interests in shares
295,000 ordinary fully paid shares

Interests in options
None

Ms Philippa Kelly

Non-Executive Director
(resigned 25 November 2013)

Qualifications
LLB, FFin, GAICD

Experience and expertise
Philippa Kelly has over 25 years experience
in the corporate sector, with a background
in law and investment banking. She is Chief
Operating Officer of the Juilliard Group of
Companies, a private property group.

Other current directorships
Lifestyle Communities Limited

Dr Kenneth Pereira

Non-Executive Director
(resigned 3 July 2014)

Qualifications
BSc (Hons) Engineering, MBA, DBA.

Experience and expertise
Kenneth Pereira has 22 years’ experience in
the oil and gas industry (both services and
exploration and production). He has worked
for Schlumberger (9 years as a Field Engineer
in North Africa and Europe) and SapuraCrest
Petroleum Berhad (from founding of the
company as Sapura Energy in 1997 until
2008) as Chief Operating Officer. In 2009,
he became Managing Director of Interlink
Petroleum Ltd, an oil and gas exploration &
production company listed on the Mumbai
Stock Exchange (2009 to 2011).

‘Other current directorships’ quoted above are
current directorships for listed entities only
and excludes directorships in all other types of
entities, unless otherwise stated.

‘Former directorships (in the last 3 years)’
quoted above are directorships held in the last
3 years for listed entities only and excludes
directorships in all other types of entities,
unless otherwise stated.

MEETINGS OF DIRECTORS
The number of meetings of the company’s
Board of Directors (‘the Board’) and of each
Board committee held during the year ended
30 June 2014, and the number of meetings
attended by each director were:

Held: represents the number of meetings held
during the time the director held office or was
a member of the relevant committee.

Full Board

Audit and
Risk Committee

Remuneration and
Nomination Committee

Attended

Held

Attended

Held

Attended

Held

Mr C Horsfall

Mr N Newell

Ms M Leydin

Ms P Kelly

Mr K Pereira

REMUNERATION REPORT
(AUDITED)

The remuneration report, which has been
audited, outlines the director and executive
remuneration arrangements for the company,
in accordance with the requirements of the
Corporations Act 2001 and its Regulations.

The remuneration report is set out under the
following main headings:

Ǵ Principles used to determine the nature and

amount of remuneration

Ǵ Details of remuneration

Ǵ Service agreements

Ǵ Share-based compensation

Ǵ Additional information

Ǵ Additional disclosures relating to key

management personnel

PRINCIPLES USED
TO DETERMINE THE
NATURE AND AMOUNT OF
REMUNERATION
The objective of the consolidated entity’s
executive reward framework is to ensure
reward for performance is competitive and
appropriate for the results delivered. The
framework aligns executive reward with the
achievement of strategic objectives and
the creation of value for shareholders, and
conforms with the market best practice for
delivery of reward. The Board of Directors
(‘the Board’) ensures that executive reward
satisfies the following key criteria for good
reward governance practices:

Ǵ competitiveness and reasonableness

Ǵ acceptability to shareholders

Ǵ alignment of executive compensation

Ǵ transparency

The Nomination and Remuneration Committee
is responsible for determining and reviewing
remuneration arrangements for its directors
and executives. The performance of the
consolidated entity and company depends
on the quality of its directors and executives.
The remuneration philosophy is to attract,
motivate and retain high performance and
high quality personnel.

All remuneration paid to Directors and
Executives is valued at the cost to the
consolidated entity and expensed. Options are
valued using the Black-Scholes or Binomial
methodology.

The long-term incentives (‘LTI’) includes long
service leave and share-based payments.
Shares and or options are awarded to
executives on the discretion of the
remuneration and Nomination Committee
based on long-term incentive measures.

Consolidated entity performance and link
to remuneration
Remuneration packages do not include
performance-based components. An
individual member of staff’s performance is
assessed by reference to their contribution
to the Company’s overall achievements. The
intention of this program is to facilitate goal
congruence between Executives with that
of the business and shareholders. Generally,
the executive’s remuneration is tied to the
consolidated entity’s successful achievement
of certain key milestones as they relate to its
operating activities.

Voting and comments made at the
company’s 25 November 2013 Annual
General Meeting (‘AGM’)
The company received 99.50% of ‘for’ votes
in relation to its remuneration report for the
year ended 30 June 2013. The company did
not receive any specific feedback at the AGM
regarding its remuneration practices.

The Nomination and Remuneration Committee
has structured an executive remuneration
framework that is market competitive and
complementary to the reward strategy of the
consolidated entity.

Executive remuneration
The consolidated entity aims to reward
executives with a level and mix of
remuneration based on their position and
responsibility, which are both fixed.

Alignment to shareholders’ interests:

Ǵ focuses on sustained growth in shareholder
wealth, consisting of dividends and growth
in share price, and delivering constant
or increasing return on assets as well as
focusing the executive on key non-financial
drivers of value

Ǵ attracts and retains high calibre executives

Alignment to program participants’ interests:

Ǵ rewards capability and experience

Ǵ reflects competitive reward for contribution

to growth in shareholder wealth

Ǵ provides a clear structure for earning rewards

In accordance with best practice corporate
governance, the structure of non-executive
directors and executive remunerations
are separate.

Non-executive directors remuneration
Fees and payments to non-executive
directors reflect the demands which are made
on, and the responsibilities of, the directors.
Non-executive directors’ fees and payments
are reviewed annually by the Nomination and
Remuneration Committee. The chairman’s
fees are determined independently to the fees
of other non-executive directors based on
comparative roles in the external market. The
chairman is not present at any discussions
relating to determination of his own
remuneration. Non-executive directors do not
receive share options or other incentives.

ASX listing rules requires that the aggregate
non-executive directors remuneration shall be
determined periodically by a general meeting.
The most recent determination was at the
Annual General Meeting held on 21 November
2012, where the shareholders approved an
aggregate remuneration of $400,000.

The executive remuneration and reward
framework has three components:

Ǵ base pay and non-monetary benefits

Ǵ share-based payments

Ǵ other remuneration such as superannuation

and long service leave

The combination of these comprises the
executive’s total remuneration.

Fixed remuneration, consisting of base salary,
superannuation and non-monetary benefits,
are reviewed annually by the Nomination and
Remuneration Committee, based on individual
and business unit performance, the overall
performance of the company and comparable
market remunerations.

Executives can receive their fixed
remuneration in the form of cash or other
fringe benefits (for example motor vehicle
benefits) where it does not create any
additional costs to the company and adds
additional value to the executive.

All Executives are eligible to receive a base
salary (which is based on factors such
as experience and comparable industry
information) or consulting fee. The Board
reviews the Managing Director’s remuneration
package, and the Managing Director reviews
the senior Executives’ remuneration packages
annually by reference to the consolidated
entity’s performance, executive performance
and comparable information within the industry.

The performance of Executives is measured
against criteria agreed annually with each
executive and is based predominantly on
the overall success of the consolidated
entity in achieving its broader corporate
goals. Bonuses and incentives are linked to
predetermined performance criteria. The
Board may, however, exercise its discretion
in relation to approving incentives, bonuses,
and options, and can require changes to
the Managing Director’s recommendations.
This policy is designed to attract the highest
calibre of Executives and reward them for
performance that results in long-term growth
in shareholder wealth.

SERVICE
AGREEMENTS
Remuneration and other terms of employment
for key management personnel are formalised
in service agreements. Details of these
agreements are as follows:

Mr N Newell

Managing Director

Agreement commenced
1 November 2006

Details
(i) Mr Newell may resign from his position
and thus terminate this contract by
giving 6 months written notice.

(ii) The Company may terminate this

employment agreement by providing
6 months written notice.

(iii) The Company may terminate the

contract at any time without notice if
serious misconduct has occurred. Where
termination with cause occurs,
Mr Newell is only entitled to that portion
of remuneration which is fixed, and only
up to the date of termination.

(iv) On termination of the agreement,

Mr Newell will be entitled to be paid those
outstanding amount owing to him up until
the Termination date.

DETAILS OF REMUNERATION
Amounts of remuneration
Details of the remuneration of the key management personnel of the consolidated entity are set
out in the following tables.

Details of the remuneration of the directors and other key management personnel (defined as those
who have the authority and responsibility for planning, directing and controlling the major activities
of the company) of the company are set out in the following tables.

Short-term benefits

Post-
employment
benefits

Long-
term
benefits

Share-
based
payments

Cash salary
and fees

Non-
monetary

Super-
annuation

Bonus

Long
service
leave

Equity-
Settled
(options)

2014

Non-Executive Directors:

Mr C Horsfall

76,278

Ms M Leydin *

142,875

Ms P Kelly **

17,677

Dr K Pereira ***

45,000

Executive Directors:

Mr N Newell

384,063

Other Key Management Personnel:

Mr A Adams****

292,917

958,810

7,056

1,635

17,775

25,000

51,466

This includes fees paid to Leydin Freyer Corp Pty Ltd in respect of Directors fees,
Company Secretarial and Accounting services.

** Resigned on 25 November 2013
*** Resigned on 3 July 2014
**** Determined to be Key Management Personnel from 1 July 2013.

Total

83,334

142,875

19,312

45,000

401,838

20,700

338,617

20,700 1,030,976

Short-term benefits

Post-
employment
benefits

Long-
term
benefits

Share-
based
payments

Cash salary
and fees

Non-
monetary

Super-
annuation

Bonus

Long
service
leave

Equity-
settled

2013

Non-Executive Directors:

Mr C Horsfall

Ms M Leydin *

Ms P Kelly

Dr K Pereira **

73,395

141,341

41,284

37,500

Executive Directors:

Mr N Newell

336,859

630,379

6,605

3,716

42,307

12,222

52,628

12,222

* This includes fees paid to Leydin Freyer Corporate Pty Ltd in respect of Directors fees,
Company Secretarial and Accounting services.
** Appointed on 4 September 2012

Total

80,000

141,341

45,000

37,500

391,388

695,229

Mr C Horsfall

Chairman

Mr A Adams

Commercial and Exploration Manager

Agreement commenced
23 January 2009

Agreement commenced
10 October 2012

Details
(i) Mr Horsfall may resign from his position
and thus terminate this contract by
giving 6 months written notice.

Term of agreement
(i) Mr Adams may resign from his position
and thus terminate this contract by
giving 3 months written notice.

(ii) The Company may terminate this

employment agreement by providing
6 months written notice.

(iii) The Company may terminate the

contract at any time without notice if
serious misconduct has occurred. Where
termination with cause occurs,
Mr Horsfall is only entitled to that portion
of remuneration which is fixed, and only
up to the date of termination.

contract at any time without notice if
serious misconduct has occurred. Where
termination with cause occurs,
Mr Adams is only entitled to that portion
of remuneration which is fixed, and only
up the the date of termination.

(iv) On termination of the agreement,

Mr Horsfall will be entitled to be paid
those outstanding amounts owing to him
up until the Termination date.

Mr Adams will be entitled to be paid those
outstanding amounts owing to her up
until the Termination date.

SHARE-BASED
COMPENSATION
Issue of shares
There were no shares issued to directors and
other key management personnel as part of
compensation during the year ended 30 June
2014.

Options
There were no options over ordinary
shares issued to directors and other
key management personnel as part of
compensation that were outstanding as at
30 June 2014.

There were no options over ordinary shares
granted to or vested by directors and other
key management personnel as part of
compensation during the year ended
30 June 2014.

Key management personnel have no
entitlement to termination payments in the
event of removal for misconduct.

Ms M Leydin

Non-Executive Director

Agreement commenced
23 January 2009

Details
(i) Ms Leydin may resign from her position
and thus terminate this contract by
giving 6 months written notice.

(ii) The Company may terminate this

employment agreement by providing
6 months written notice.

(iii) The Company may terminate the

contract at any time without notice if
serious misconduct has occurred. Where
termination with cause occurs,
Ms Leydin is only entitled to that portion
of remuneration which is fixed, and only
up the the date of termination.

(iv) On termination of the agreement, Ms
Leydin will be entitled to be paid those
outstanding amounts owing to her up
until the Termination date.

ADDITIONAL
INFORMATION
The earnings of the consolidated entity
for the five years to 30 June 2014 are
summarised below:

2010

2011

2012

2013

2014

Revenue

414,898

336,290

140,072

101,500

47,652

Net profit/(loss)
before tax

Net profit/(loss)
after tax

(857,435)

(1,003,568)

(7,672,697)

(2,033,105)

(1,289,142)

(857,435)

(1,003,568)

(6,976,803)

(2,033,105)

(1,289,142)

The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:

2010

2011

2012

2013

2014

Share price at
financial year end
($)

Basic earnings per
share (cents per
share)

Diluted earnings
per share (cents
per share)

0.11

0.20

0.14

0.07

0.09

0.20

0.14

0.07

0.09

0.07

(0.42)

(0.49)

(3.38)

(0.92)

(0.54)

ADDITIONAL
DISCLOSURES RELATING
TO KEY MANAGEMENT
PERSONNEL

Shareholding
The number of shares in the company held
during the financial year by each director and
other members of key management personnel
of the consolidated entity, including their
personally related parties, is set out below:

Balance at
the start of
the year

Received
as part of
remuneration

Additions

Disposals/
other

Balance at
the end of
the year

Ordinary shares

Mr C Horsfall

Mr N Newell

Ms M Leydin

Ms P Kelly *

Mr K Pereira

38,000

38,147,650

150,000

145,000

30,963,000

69,443,650

* Resigned on 25 November 2013

Option holding

46,625

196,500

84,625

38,344,150

150,000

(145,000)

30,963,000

243,125

(145,000)

69,541,775

The number of options over ordinary shares in the company held during the financial year by each
director and other members of key management personnel of the consolidated entity, including
their personally related parties, is set out below:

Balance at the
start of
the year

Granted

Exercised

Expired/
forfeited/
other

Balance at
the end of
the year

Options over ordinary shares

Mr A Adams

300,000

Options over ordinary shares

Andrew Adams

Vested and
exercisable

Vested and
unexercisable

600,000

Balance at
the end of
the year

600,000

This concludes the remuneration report, which has been audited.

Shares under option
Unissued ordinary shares of 3D Oil Limited
under option at the date of this report are as follows:

Grant date

2 June 2010

30 November 2014

24 January 2011

31 January 2015

7 October 2011

7 October 2015

15 December 2012

30 November 2015

2 September 2013

30 November 2016

6 December 2013

29 November 2016

25 July 2014

30 November 2017

Expiry date

Exercise price

Number under option

$0.40

$0.18

$0.16

$0.11

$0.12

$0.08

150,000

200,000

78,000

495,000

300,000

250,000

400,000

1,873,000

No person entitled to exercise the options
had or has any right by virtue of the option to
participate in any share issue of the company
or of any other body corporate.

Shares issued on the exercise of options
There were no ordinary shares of 3D Oil
Limited issued on the exercise of options
during the year ended 30 June 2014 and up to
the date of this report.

Indemnity and insurance of officers
The consolidated entity has indemnified the
directors of the company for costs incurred,
in their capacity as a director, for which they
may be held personally liable, except where
there is a lack of good faith.

During the financial year, the company paid a
premium in respect of a contract to insure the
directors of the company against a liability to
the extent permitted by the Corporations Act
2001 (Cth) (Act). The contract of insurance
prohibits disclosure of the nature of liability
and the amount of the premium.

Indemnity and insurance of auditor
The company has not otherwise, during or
since the financial year, indemnified or agreed
to indemnify the auditor of the company or
any related entity against a liability incurred
by the auditor.

Officers of the company who are former
audit partners of Grant Thornton Audit Pty
Ltd
There are no officers of the company who are
former audit partners of Grant Thornton Audit
Pty Ltd.

During the financial year, the company has
not paid a premium in respect of a contract
to insure the auditor of the company or any
related entity.

Proceedings on behalf of the company
No person has applied to the Court under
section 237 of the Corporations Act 2001 for
leave to bring proceedings on behalf of the
company, or to intervene in any proceedings
to which the company is a party for the
purpose of taking responsibility on behalf
of the company for all or part of those
proceedings.

Non-audit services
There were no non-audit services provided
during the financial year by the auditor.

Auditor’s independence declaration
A copy of the auditor’s independence
declaration as required under section 307C of
the Corporations Act 2001 is set out on the
following page.

Auditor
Grant Thornton Audit Pty Ltd continues in
office in accordance with section 327 of the
Corporations Act 2001.

This report is made in accordance with a
resolution of directors, pursuant to section
298(2)(a) of the Corporations Act 2001.

On behalf of the directors

Noel Newell
Managing Director

30 September 2014
Melbourne

The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000

Correspondence to:
GPO Box 4736
Melbourne Victoria 3001

T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au

Auditor’s Independence Declaration
To the Directors of 3D Oil Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead
auditor for the audit of 3D Oil Limited for the year ended 30 June 2014, I declare that, to
the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the
audit.

GRANT THORNTON AUDIT PTY LTD
Chartered Accountants

B.A. Mackenzie
Partner - Audit & Assurance

Melbourne, 30 September 2014

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the
context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm
is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and
are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its
Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.

FINANCIAL
REPORTS

STATEMENT OF PROFIT
OR LOSS AND OTHER
COMPREHENSIVE INCOME

For the year ended 30 June 2014

Revenue

Expenses

Corporate expenses

Administrative expenses

Employment expenses

Occupancy expenses

Depreciation and amortisation expense

Exploration costs written off

Loss on sale of assets

Exchange gains/loss

Share based payments

Loss before income tax expense

Income tax expense

Consolidated

2013

101,500

2014

47,652

(366,358)

(85,058)

(707,727)

(77,343)

(674,264)

(1,131,330)

(86,815)

(33,703)

(81,216)

23,556

5,714

(39,450)

(94,979)

(50,055)

(43,444)

(1,403)

(28,324)

(1,289,942)

(2,033,105)

Note

Loss after income tax expense for the year attributable to the owners of 3D Oil Limited

(1,289,942)

(2,033,105)

Other comprehensive income for the year, net of tax

Total comprehensive income for the year attributable to the owners of 3D Oil Limited

(1,289,942)

(2,033,105)

Basic earnings per share

Diluted earnings per share

Cents

(0.54)

Cents

(0.92)

STATEMENT OF
FINANCIAL POSITION

As at 30 June 2014

Assets

Current assets

Cash and cash equivalents

Trade and other receivables

Other

Total current assets

Non-current assets

Property, plant and equipment

Intangibles

Exploration and evaluation

Total non-current assets

Total assets

Liabilities

Current liabilities

Trade and other payables

Borrowings

Employee benefits

Provisions

Other

Total current liabilities

Non-current liabilities

Employee benefits

Provisions

Total non-current liabilities

Total liabilities

Net assets

Equity

Issued capital

Reserves

Accumulated losses

Total equity

Note

Consolidated

2014

2013

827,864

337,545

57,994

2,125,708

515,825

60,424

1,223,403

2,701,957

25,162

26,565

14,561

24,902,640

20,632,631

24,927,802

20,673,757

26,151,205

23,375,714

3,422,971

533,785

639,591

101,012

9,540

500,000

4,673,114

24,637

505,728

530,365

62,879

5,783

602,447

59,781

515,268

575,049

5,203,479

1,177,496

20,947,726

22,198,218

52,657,366

98,562

66,395

(31,808,202)

(30,525,543)

20,947,726

22,198,218

STATEMENT OF
CHANGES IN EQUITY

For the year ended 30 June 2014

Consolidated

Balance at 1 July 2012

Loss after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Share-based payments

Expiry of Options

Balance at 30 June 2013

Consolidated

Balance at 1 July 2013

Loss after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Transactions with owners in their capacity as owners:

Share-based payments (note 35)

Expiry of Options

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs (note 21)

2,036,499

Contributed
equity

Accumulated
losses

Reserves

Total equity

50,620,867

(28,533,012)

78,645

22,166,500

(2,033,105)

2,036,499

28,324

40,574

(40,574)

52,657,366

(30,525,543)

66,395

22,198,218

52,657,366

(30,525,543)

66,395

22,198,218

(1,289,942)

7,283

39,450

(7,283)

39,450

Balance at 30 June 2014

52,657,366

(31,808,202)

98,562

20,947,726

STATEMENT OF
CASH FLOWS

For the year ended 30 June 2014

Cash flows from operating activities

Receipts from customers (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Tax receipt

Interest received

Note

Consolidated

2014

2013

15,945

19,771

(455,598)

(1,847,747)

695,894

32,834

81,446

Net cash used in operating activities

(406,819)

(1,050,636)

Cash flows from investing activities

Payments for property, plant and equipment

Payments for intangibles

Payments for exploration and evaluation

Reimbursement from Joint Venture

Proceeds from foreign exchange investment

Deposits received

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue of shares

Share issue transaction costs

Loans received from joint venture

Net cash from financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

(17,739)

(22,735)

(2,070)

(3,079,063)

(1,609,374)

1,071,900

1,090,535

(5,714)

500,000

(1,403)

(1,530,616)

(545,047)

2,043,558

(7,059)

639,591

2,036,499

(1,297,844)

440,816

2,125,708

1,684,892

Cash and cash equivalents at the end of the financial year

827,864

2,125,708

NOTES TO THE
FINANCIAL
STATEMENTS

30 June 2014

NOTE 1.
GENERAL INFORMATION

The financial statements cover 3D Oil Limited
as a consolidated entity consisting of 3D Oil
Limited and its subsidiaries. The financial
statements are presented in Australian
dollars, which is 3D Oil Limited’s functional and
presentation currency.

3D Oil Limited is a listed public company
limited by shares, incorporated and domiciled
in Australia. Its registered office and principal
place of business is:

Level 5, 164 Flinders Lane
Melbourne Victoria 3000

A description of the nature of the
consolidated entity’s operations and its
principal activities are included in the
directors’ report, which is not part of the
financial statements.

The financial statements were authorised
for issue, in accordance with a resolution
of directors, on 29 September 2014. The
directors have the power to amend and
reissue the financial statements.

NOTE 2.
SIGNIFICANT
ACCOUNTING POLICIES

The principal accounting policies adopted in
the preparation of the financial statements
are set out below. These policies have
been consistently applied to all the years
presented, unless otherwise stated.

New, revised or amending Accounting
Standards and Interpretations adopted
The consolidated entity has adopted all of
the new, revised or amending Accounting
Standards and Interpretations issued by
the Australian Accounting Standards Board
(‘AASB’) that are mandatory for the current
reporting period.

Any new, revised or amending Accounting
Standards or Interpretations that are not yet
mandatory have not been early adopted.

Any significant impact on the accounting
policies of the consolidated entity from the
adoption of these Accounting Standards
and Interpretations are disclosed below. The
adoption of these Accounting Standards and
Interpretations did not have any significant
impact on the financial performance or
position of the consolidated entity.

The following Accounting Standards and
Interpretations are most relevant to the
consolidated entity:

AASB 10 Consolidated Financial Statements
The consolidated entity has applied AASB 10
from 1 July 2013, which has a new definition
of ‘control’. Control exists when the reporting
entity is exposed, or has the rights, to
variable returns from its involvement with
another entity and has the ability to affect
those returns through its ‘power’ over
that other entity. A reporting entity has
power when it has rights that give it the
current ability to direct the activities that
significantly affect the investee’s returns. The
consolidated entity not only has to consider
its holdings and rights but also the holdings
and rights of other shareholders in order
to determine whether it has the necessary
power for consolidation purposes.

AASB 11 Joint Arrangements
The consolidated entity has applied AASB
11 from 1 July 2013. The standard defines
which entities qualify as joint arrangements
and removes the option to account for joint
ventures using proportional consolidation.
Joint ventures, where the parties to the
agreement have the rights to the net assets
are accounted for using the equity method.
Joint operations, where the parties to the
agreements have the rights to the assets
and obligations for the liabilities, will account
for its share of the assets, liabilities,
revenues and expenses separately under the
appropriate classifications.

AASB 12 Disclosure of Interests in Other
Entities
The consolidated entity has applied AASB
12 from 1 January 2013. The standard
contains the entire disclosure requirement
associated with other entities, being
subsidiaries, associates, joint arrangements
(joint operations and joint ventures)
and unconsolidated structured entities.
The disclosure requirements have been
significantly enhanced when compared to
the disclosures previously located in AASB
127 ‘Consolidated and Separate Financial
Statements’, AASB 128 ‘Investments in

Associates’, AASB 131 ‘Interests in Joint
Ventures’ and Interpretation 112 ‘Consolidation
– Special Purpose Entities’.

AASB 13 Fair Value Measurement and
AASB 2011-8 Amendments to Australian
Accounting Standards arising from AASB 13
The consolidated entity has applied AASB 13
and its consequential amendments from 1
January 2013. The standard provides a single
robust measurement framework, with clear
measurement objectives, for measuring
fair value using the ‘exit price’ and provides
guidance on measuring fair value when a
market becomes less active. The ‘highest and
best use’ approach is used to measure non-
financial assets whereas liabilities are based
on transfer value. The standard requires
increased disclosures where fair value is used.

AASB 119 Employee Benefits (September
2011) and AASB 2011-10 Amendments to
Australian Accounting Standards arising
from AASB 119 (September 2011)
The consolidated entity has applied AASB 119
and its consequential amendments from 1
January 2013. The standard eliminates the
corridor approach for the deferral of gains
and losses; streamlines the presentation of
changes in assets and liabilities arising from
defined benefit plans, including requiring
remeasurements to be presented in other
comprehensive income; and enhances the
disclosure requirements for defined benefit
plans. The standard also changed the
definition of short-term employee benefits,
from ‘due to’ to ‘expected to’ be settled within
12 months. Annual leave that is not expected
to be wholly settled within 12 months is now
discounted allowing for expected salary
levels in the future period when the leave is
expected to be taken.

AASB 2011-4 Amendments to Australian
Accounting Standards to Remove Individual
Key Management Personnel Disclosure
Requirement
The consolidated entity has applied 2011-4
from 1 July 2013, which amends AASB 124
‘Related Party Disclosures’ by removing the
disclosure requirements for individual key
management personnel (‘KMP’). Corporations
and Related Legislation Amendment
Regulations 2013 and Corporations and
Australian Securities and Investments
Commission Amendment Regulation 2013
(No.1) now specify the KMP disclosure
requirements to be included within the
directors’ report.

Basis of preparation
These general purpose financial statements
have been prepared in accordance with
Australian Accounting Standards and
Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for
for-profit oriented entities. These financial
statements also comply with International
Financial Reporting Standards as issued
by the International Accounting Standards
Board (‘IASB’).

Historical cost convention
The financial statements have been prepared
under the historical cost convention, except
for, where applicable, the revaluation of
available-for-sale financial assets, financial
assets and liabilities at fair value through
profit or loss, investment properties, certain
classes of property, plant and equipment and
derivative financial instruments.

Critical accounting estimates
The preparation of the financial statements
requires the use of certain critical
accounting estimates. It also requires
management to exercise its judgement in the
process of applying the consolidated entity’s
accounting policies. The areas involving a
higher degree of judgement or complexity, or
areas where assumptions and estimates are
significant to the financial statements, are
disclosed in note 3.

Going Concern
The financial report has been prepared on
the going concern basis, which contemplates
continuity of normal business activities
and realisation of assets and settlement of
liabilities in the ordinary course of business.
At 30 June 2014 the Company has cash
and cash equivalents of $0.82 million and
a net decrease of cash during the financial
year of $1.29 million. This cash decrease
was predominately due the exploration and
development expenditure which took place
during the year through the Company’s new
joint venture partner on the VIC/P57 and
VIC/L31 permits, Hibiscus Petroleum. The
Company also has exploration commitments
as detailed in Note 24 of $70.55 million over
the next 5 years. On 7 July 2014, the Company
announced that it had entered into binding
agreements with Carnarvon Hibiscus Pty
Ltd (“CHPL”), Althea Corporation Limited
(“Athlea”) and HiRex Petroleum Sdn Hbd
(“HIREX”) in relation to the restructuring of
the funding and ownership interest in offshore
Gippsland Basin tenements VIC/P57 and VIC/
L31 permits. The key points of the agreement
were as follows:

The key points under the binding agreements
are:

Ǵ CHPL to pay TDO US$7.5 million for the

Company’s interest in the Britannia Rig and a
5% interest in VIC/P57.

Ǵ The proceeds will be used to meet Year 3

funding commitments for VIC/P57.

Ǵ US$2 million will be paid in advance to TDO to

assist with short term funding.

Ǵ US$1.94 million of funding owing to the

Operator of the VIC/L31 JV will be offset
against a transfer to CHPL of a 6.07% interest
in VIC/L31.

Ǵ An option has been granted to CHPL to

purchase the remaining interest in VIC/L31 at
fair market value.

Ǵ An option has been granted to HIREX to earn a

20% interest in VIC/P57.

Ǵ As CHPL is a substantial holder for the
purposes of ASX Listing Rule 10.1, the
Company wasrequired to obtain Shareholder
approval to complete the matters set out in
the transaction documents. The Company
sought shareholder approval for these
transactions and a meeting of shareholders
was held on 11 August 2014.

On 18 August 2014 the consolidated entity
announced that CHPL has exercised its
VIC/L31 option to acquire the VIC/L31
remaining interest from 3D Oil Limited for a
consideration of USD $14.05 million. On 16
June 2014 the consolidated entity announced
that Beach Energy Limited (“Beach”) has
purchased a 20% working interest in the
consolidated entity’s T/49P permit for a
consideration amount of $3 million and
$500,000 deposit was paid. The remaining
$2.5 million was paid on 21 August 2014
following completion of the transaction.

In addition to the commitments outlined
above and in Note 24, the Company will need
to secure funding by means of a capital
raising, debt financing, sale of assets, farm
out or a combination of these in order to
manage its own working capital requirements.
The Directors continue to monitor the ongoing
funding requirements of the Company. The
Directors are of the opinion that the financial
report has been appropriately prepared on a
going concern basis.

Parent entity information
In accordance with the Corporations Act
2001, these financial statements present
the results of the consolidated entity only.
Supplementary information about the parent
entity is disclosed in note 30.

Principles of consolidation
The consolidated financial statements
incorporate the assets and liabilities of all
subsidiaries of 3D Oil Limited (‘company’ or
‘parent entity’) as at 30 June 2014 and the
results of all subsidiaries for the year then
ended. 3D Oil Limited and its subsidiaries
together are referred to in these financial
statements as the ‘consolidated entity’.

Subsidiaries are all those entities over
which the consolidated entity has control.
The consolidated entity controls an entity
when the consolidated entity is exposed to,
or has rights to, variable returns from its
involvement with the entity and has the ability
to affect those returns through its power to
direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which
control is transferred to the consolidated
entity. They are de-consolidated from the
date that control ceases.

Intercompany transactions, balances
and unrealised gains on transactions
between entities in the consolidated
entity are eliminated. Unrealised losses
are also eliminated unless the transaction
provides evidence of the impairment of
the asset transferred. Accounting policies
of subsidiaries have been changed where
necessary to ensure consistency with the
policies adopted by the consolidated entity.

The acquisition of subsidiaries is accounted
for using the acquisition method of
accounting. A change in ownership interest,
without the loss of control, is accounted for
as an equity transaction, where the difference
between the consideration transferred and
the book value of the share of the non-
controlling interest acquired is recognised
directly in equity attributable to the parent.

Where the consolidated entity loses control
over a subsidiary, it derecognises the assets
including goodwill, liabilities and non-
controlling interest in the subsidiary together
with any cumulative translation differences
recognised in equity. The consolidated entity
recognises the fair value of the consideration
received and the fair value of any investment
retained together with any gain or loss in
profit or loss.

Operating segments
Operating segments are presented using
the ‘management approach’, where the
information presented is on the same basis
as the internal reports provided to the
Chief Operating Decision Makers (‘CODM’).
The CODM is responsible for the allocation
of resources to operating segments and
assessing their performance.

Revenue recognition
Revenue is recognised when it is probable
that the economic benefit will flow to the
consolidated entity and the revenue can be
reliably measured. Revenue is measured at
the fair value of the consideration received
or receivable.

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

Other revenue
Other revenue is recognised when it is
received or when the right to receive payment
is established.

Income tax
The income tax expense or benefit for the
period is the tax payable on that period’s
taxable income based on the applicable
income tax rate for each jurisdiction,
adjusted by changes in deferred tax assets

and liabilities attributable to temporary
differences, unused tax losses and the
adjustment recognised for prior periods,
where applicable.

Deferred tax assets and liabilities are
recognised for temporary differences at
the tax rates expected to apply when the
assets are recovered or liabilities are settled,
based on those tax rates that are enacted or
substantively enacted, except for:

Ǵ When the deferred income tax asset or

liability arises from the initial recognition of
goodwill or an asset or liability in a transaction
that is not a business combination and that,
at the time of the transaction, affects neither
the accounting nor taxable profits; or

Ǵ When the taxable temporary difference is
associated with interests in subsidiaries,
associates or joint ventures, and the timing
of the reversal can be controlled and it is
probable that the temporary difference will
not reverse in the foreseeable future.

Deferred tax assets are recognised for
deductible temporary differences and unused
tax losses only if it is probable that future
taxable amounts will be available to utilise
those temporary differences and losses.

The carrying amount of recognised and
unrecognised deferred tax assets are
reviewed each reporting date. Deferred
tax assets recognised are reduced to the
extent that it is no longer probable that
future taxable profits will be available for the
carrying amount to be recovered. Previously
unrecognised deferred tax assets are
recognised to the extent that it is probable
that there are future taxable profits available
to recover the asset.

Deferred tax assets and liabilities are offset
only where there is a legally enforceable right
to offset current tax assets against current
tax liabilities and deferred tax assets against
deferred tax liabilities; and they relate to the
same taxable authority on either the same
taxable entity or different taxable entities
which intend to settle simultaneously.

3D Oil Limited (the ‘head entity’) and its
wholly-owned Australian subsidiaries have
formed an income tax consolidated group
under the tax consolidation regime. The
head entity and each subsidiary in the tax
consolidated group continue to account for
their own current and deferred tax amounts.
The tax consolidated group has applied the
‘separate taxpayer within group’ approach
in determining the appropriate amount of
taxes to allocate to members of the tax
consolidated group.

Current and non-current classification
Assets and liabilities are presented in the
statement of financial position based on
current and non-current classification.

An asset is current when: it is expected to be
realised or intended to be sold or consumed
in normal operating cycle; it is held primarily
for the purpose of trading; it is expected to be
realised within 12 months after the reporting
period; or the asset is cash or cash equivalent
unless restricted from being exchanged or
used to settle a liability for at least 12 months
after the reporting period. All other assets are
classified as non-current.

A liability is current when: it is expected to
be settled in normal operating cycle; it is
held primarily for the purpose of trading; it is
due to be settled within 12 months after the
reporting period; or there is no unconditional
right to defer the settlement of the liability
for at least 12 months after the reporting
period. All other liabilities are classified as
non-current.

Deferred tax assets and liabilities are always
classified as non-current.

Cash and cash equivalents
Cash and cash equivalents includes cash
on hand, deposits held at call with financial
institutions, other short-term, highly liquid
investments with original maturities of three
months or less that are readily convertible to
known amounts of cash and which are subject
to an insignificant risk of changes in value.

Trade and other receivables
Trade receivables are initially recognised at
fair value and subsequently measured at
amortised cost using the effective interest
method, less any provision for impairment.
Trade receivables are generally due for
settlement within 30 days.

Other receivables are recognised at amortised
cost, less any provision for impairment.

Investments and other financial assets
Investments and other financial assets are
initially measured at fair value. Transaction
costs are included as part of the initial
measurement, except for financial assets
at fair value through profit or loss. They are
subsequently measured at either amortised
cost or fair value depending on their
classification. Classification is determined
based on the purpose of the acquisition
and subsequent reclassification to other
categories is restricted.

Financial assets are derecognised when the
rights to receive cash flows from the financial
assets have expired or have been transferred
and the consolidated entity has transferred
substantially all the risks and rewards of
ownership.

Loans and receivables
Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. They are carried at amortised cost
using the effective interest rate method.
Gains and losses are recognised in profit
or loss when the asset is derecognised or
impaired.

Impairment of financial assets
The consolidated entity assesses at the
end of each reporting period whether there
is any objective evidence that a financial
asset or group of financial assets is impaired.
Objective evidence includes significant
financial difficulty of the issuer or obligor;
a breach of contract such as default or
delinquency in payments; the lender granting
to a borrower concessions due to economic
or legal reasons that the lender would not
otherwise do; it becomes probable that
the borrower will enter bankruptcy or other
financial reorganisation; the disappearance
of an active market for the financial asset;
or observable data indicating that there is
a measurable decrease in estimated future
cash flows.

The amount of the impairment allowance for
loans and receivables carried at amortised
cost is the difference between the asset’s
carrying amount and the present value of
estimated future cash flows, discounted at
the original effective interest rate. If there is
a reversal of impairment, the reversal cannot
exceed the amortised cost that would have
been recognised had the impairment not been
made and is reversed to profit or loss.

Property, plant and equipment
Plant and equipment is stated at historical
cost less accumulated depreciation and
impairment. Historical cost includes
expenditure that is directly attributable to the
acquisition of the items.

Depreciation is calculated on a straight-line
basis to write off the net cost of each item of
property, plant and equipment (excluding land)
over their expected useful lives as follows:

Plant and equipment

3-7 years

The residual values, useful lives and
depreciation methods are reviewed, and
adjusted if appropriate, at each reporting date.

An item of property, plant and equipment is
derecognised upon disposal or when there is
no future economic benefit to the company.
Gains and losses between the carrying
amount and the disposal proceeds are taken
to profit or loss. Any revaluation surplus
reserve relating to the item disposed of is
transferred directly to retained profits.

Farm-outs
The Group does not record any expenditure
made by the farmee on its account. It
also does not recognise any gain or loss
on its exploration and evaluation farm out
arrangements but redesignates any costs
previously capitalised in relation to the whole
interest as relating to the partial interest
retained and any consideration received
directly from the farmee is credited against
costs previously capitalised.

Intangible assets
Intangible assets acquired as part of a
business combination, other than goodwill,
are initially measured at their fair value at

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 production
commences, the accumulated costs for the
relevant area of interest are amortised over
the life of the area according to the rate of
depletion of the economically recoverable
reserves. A regular review is undertaken
of each area of interest to determine the
appropriateness of continuing to carry
forward cost in relation to that area of
interest.

Costs of site restoration are provided over
the life of the facility from when exploration
commences and are included in the cost of
that stage. Site restoration costs include
the dismantling and removal of mining
plant, equipment and building structures,
waste removal, and rehabilitation of the site
in accordance with clauses of the mining
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.

Impairment of non-financial assets
Goodwill and other intangible assets that
have an indefinite useful life are not subject
to amortisation and are tested annually for
impairment, or more frequently if events or
changes in circumstances indicate that they
might be impaired. Other non-financial assets
are reviewed for impairment whenever events
or changes in circumstances indicate that the
carrying amount may not be recoverable. An
impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds
its recoverable amount.

Recoverable amount is the higher of an asset’s
fair value less costs of disposal and value-in-
use. The value-in-use is the present value of
the estimated future cash flows relating to the
asset using a pre-tax discount rate specific
to the asset or cash-generating unit to which
the asset belongs. Assets that do not have
independent cash flows are grouped together
to form a cash-generating unit.

Trade and other payables
These amounts represent liabilities for goods
and services provided to the consolidated
entity prior to the end of the financial year
and which are unpaid. Due to their short-term
nature they are measured at amortised cost
and are not discounted. The amounts are
unsecured and are usually paid within 30 days
of recognition.

Finance costs
Finance costs attributable to qualifying
assets are capitalised as part of the asset.
All other finance costs are expensed in the
period in which they are incurred, including:

Ǵ interest on short-term and long-term

borrowings

Provisions
Provisions are recognised when the
consolidated entity has a present (legal or
constructive) obligation as a result of a past
event, it is probable the consolidated entity
will be required to settle the obligation, and a
reliable estimate can be made of the amount
of the obligation. The amount recognised
as a provision is the best estimate of the
consideration required to settle the present
obligation at the reporting date, taking
into account the risks and uncertainties
surrounding the obligation. If the time value of
money is material, provisions are discounted
using a current pre-tax rate specific to the
liability. The increase in the provision resulting
from the passage of time is recognised as a
finance cost.

Employee benefits

Short-term employee benefits
Liabilities for wages and salaries, including
non-monetary benefits, annual leave and long
service leave expected to be settled within 12
months of the reporting date are recognised
in current liabilities in respect of employees’
services up to the reporting date and are
measured at the amounts expected to be paid
when the liabilities are settled.

Other long-term employee benefits
The liability for annual leave and long service
leave not expected to be settled within 12
months of the reporting date are recognised
in non-current liabilities, provided there is
an unconditional right to defer settlement of
the liability. The liability is measured as the
present value of expected future payments
to be made in respect of services provided by
employees up to the reporting date using the
projected unit credit method. Consideration
is given to expected future wage and salary
levels, experience of employee departures and
periods of service. Expected future payments
are discounted using market yields at the
reporting date on national government bonds
with terms to maturity and currency that
match, as closely as possible, the estimated
future cash outflows.

Share-based payments
Equity-settled and cash-settled share-based
compensation benefits are provided to
employees.

Equity-settled transactions are awards of
shares, or options over shares, that are
provided to employees in exchange for
the rendering of services. Cash-settled
transactions are awards of cash for the
exchange of services, where the amount
of cash is determined by reference to the
share price.

the date of the acquisition. Intangible assets
acquired separately are initially recognised at
cost. Indefinite life intangible assets are not
amortised and are subsequently measured at
cost less any impairment. Finite life intangible
assets are subsequently measured at cost
less amortisation and any impairment. The
gains or losses recognised in profit or loss
arising from the derecognition of intangible
assets are measured as the difference
between net disposal proceeds and the
carrying amount of the intangible asset. The
method and useful lives of finite life intangible
assets are reviewed annually. Changes in the
expected pattern of consumption or useful life
are accounted for prospectively by changing
the amortisation method or period.

Software
Significant costs associated with software
are deferred and amortised on a straight-
line basis over the period of their expected
benefit, being their finite life of 5 years.

Exploration and evaluation assets
Exploration and evaluation expenditure in
relation to separate areas of interest for
which rights of tenure are current is carried
forward as an asset in the statement of
financial position where it is expected that
the expenditure will be recovered through
the successful development and exploitation
of an area of interest, or by its sale; or
exploration activities are continuing in an
area and activities have not reached a stage
which permits a reasonable estimate of
the existence or otherwise of economically
recoverable reserves. Where a project or an
area of interest has been abandoned, the
expenditure incurred thereon is written off in
the year in which the decision is made.

Petroleum and Exploration Development
Expenditure
Petroleum and exploration development
expenditure incurred is accumulated in
respect of each identifiable area of interest.
These costs are only carried forward in
relation to each area of interest to the extent
the following conditions are satisfied:

(a) the rights to tenure of the area of

interest are current; and

(b) at least one of the following conditions is

also met:

(i) the exploration and evaluation
expenditures are expected to
be recouped through successful
development and exploitation of the
area of interest, or alternatively, by
its sale; and

(ii) exploration and evaluation activities
in the area of interest have not
at the reporting date reached a
stage which permits a reasonable
assessment of the existence
or otherwise of economically
recoverable reserves, and active
and significant operations in, or in
relation to, the area of interest are
continuing.

The cost of equity-settled transactions are
measured at fair value on grant date. Fair
value is independently determined using either
the Binomial or Black-Scholes option pricing
model that takes into account the exercise
price, the term of the option, the impact of
dilution, the share price at grant date and
expected price volatility of the underlying
share, the expected dividend yield and the risk
free interest rate for the term of the option,
together with non-vesting conditions that
do not determine whether the consolidated
entity receives the services that entitle the
employees to receive payment. No account is
taken of any other vesting conditions.

The cost of equity-settled transactions
are recognised as an expense with a
corresponding increase in equity over the
vesting period. The cumulative charge to profit
or loss is calculated based on the grant date
fair value of the award, the best estimate of
the number of awards that are likely to vest
and the expired portion of the vesting period.
The amount recognised in profit or loss for the
period is the cumulative amount calculated
at each reporting date less amounts already
recognised in previous periods.

The cost of cash-settled transactions is
initially, and at each reporting date until
vested, determined by applying either the
Binomial or Black-Scholes option pricing
model, taking into consideration the terms
and conditions on which the award was
granted. The cumulative charge to profit
or loss until settlement of the liability is
calculated as follows:

Ǵ during the vesting period, the liability at each
reporting date is the fair value of the award at
that date multiplied by the expired portion of
the vesting period.

Ǵ from the end of the vesting period until

settlement of the award, the liability is the full
fair value of the liability at the reporting date.

All changes in the liability are recognised in
profit or loss. The ultimate cost of cash-
settled transactions is the cash paid to settle
the liability.

Market conditions are taken into consideration
in determining fair value. Therefore any awards
subject to market conditions are considered
to vest irrespective of whether or not that
market condition has been met, provided all
other conditions are satisfied.

If equity-settled awards are modified, as a
minimum an expense is recognised as if the
modification has not been made. An additional
expense is recognised, over the remaining
vesting period, for any modification that
increases the total fair value of the share-
based compensation benefit as at the date of
modification.

If the non-vesting condition is within
the control of the consolidated entity or
employee, the failure to satisfy the condition
is treated as a cancellation. If the condition
is not within the control of the consolidated
entity or employee and is not satisfied during

the vesting period, any remaining expense for
the award is recognised over the remaining
vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is
treated as if it has vested on the date of
cancellation, and any remaining expense is
recognised immediately. If a new replacement
award is substituted for the cancelled award,
the cancelled and new award is treated as if
they were a modification.

Fair value measurement
When an asset or liability, financial or
non-financial, is measured at fair value for
recognition or disclosure purposes, the fair
value is based on the price that would be
received to sell an asset or paid to transfer
a liability in an orderly transaction between
market participants at the measurement
date; and assumes that the transaction will
take place either: in the principal market; or in
the absence of a principal market, in the most
advantageous market.

Fair value is measured using the assumptions
that market participants would use when
pricing the asset or liability, assuming they
act in their economic best interest. For non-
financial assets, the fair value measurement
is based on its highest and best use.
Valuation techniques that are appropriate in
the circumstances and for which sufficient
data are available to measure fair value,
are used, maximising the use of relevant
observable inputs and minimising the use of
unobservable inputs.

Issued capital
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.

Dividends
Dividends are recognised when declared
during the financial year and no longer at the
discretion of the company.

Business combinations
The acquisition method of accounting is
used to account for business combinations
regardless of whether equity instruments or
other assets are acquired.

The consideration transferred is the sum
of the acquisition-date fair values of the
assets transferred, equity instruments
issued or liabilities incurred by the acquirer
to former owners of the acquiree and the
amount of any non-controlling interest in the
acquiree. For each business combination,
the non-controlling interest in the acquiree
is measured at either fair value or at the
proportionate share of the acquiree’s
identifiable net assets. All acquisition costs
are expensed as incurred to profit or loss.

On the acquisition of a business, the
consolidated entity assesses the financial
assets acquired and liabilities assumed for
appropriate classification and designation

in accordance with the contractual terms,
economic conditions, the consolidated
entity’s operating or accounting policies and
other pertinent conditions in existence at the
acquisition-date.

Where the business combination is achieved
in stages, the consolidated entity remeasures
its previously held equity interest in the
acquiree at the acquisition-date fair value
and the difference between the fair value and
the previous carrying amount is recognised in
profit or loss.

Contingent consideration to be transferred by
the acquirer is recognised at the acquisition-
date fair value. Subsequent changes in
the fair value of contingent consideration
classified as an asset or liability is recognised
in profit or loss. Contingent consideration
classified as equity is not remeasured and
its subsequent settlement is accounted for
within equity.

The difference between the acquisition-
date fair value of assets acquired, liabilities
assumed and any non-controlling interest
in the acquiree and the fair value of the
consideration transferred and the fair value of
any pre-existing investment in the acquiree
is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is
less than the fair value of the identifiable net
assets acquired, being a bargain purchase
to the acquirer, the difference is recognised
as a gain directly in profit or loss by the
acquirer on the acquisition-date, but only
after a reassessment of the identification and
measurement of the net assets acquired, the
non-controlling interest in the acquiree, if any,
the consideration transferred and the acquirer’s
previously held equity interest in the acquirer.

Business combinations are initially
accounted for on a provisional basis.
The acquirer retrospectively adjusts the
provisional amounts recognised and also
recognises additional assets or liabilities
during the measurement period, based on
new information obtained about the facts
and circumstances that existed at the
acquisition-date. The measurement period
ends on either the earlier of (i) 12 months
from the date of the acquisition or (ii) when
the acquirer receives all the information
possible to determine fair value.

Earnings per share

Basic earnings per share
Basic earnings per share is calculated by
dividing the profit attributable to the owners
of 3D Oil Limited, excluding any costs of
servicing equity other than ordinary shares,
by the weighted average number of ordinary
shares outstanding during the financial year,
adjusted for bonus elements in ordinary
shares issued during the financial year.

Diluted earnings per share
Diluted earnings per share adjusts the
figures used in the determination of basic
earnings per share to take into account the
after income tax effect of interest and other

financing costs associated with dilutive
potential ordinary shares and the weighted
average number of shares assumed to have
been issued for no consideration in relation to
dilutive potential ordinary shares.

Leases
The determination of whether an arrangement
is or contains a lease is based on the
substance of the arrangement and requires
an assessment of whether the fulfilment of
the arrangement is dependent on the use of a
specific asset or assets and the arrangement
conveys a right to use the asset. A distinction
is made between finance leases, which
effectively transfer from the lessor to the
lessee substantially all the risks and benefits
incidental to ownership of leased assets,
and operating leases, under which the lessor
effectively retains substantially all such risks
and benefits.

Finance leases are capitalised. A lease asset
and liability are established at the fair value
of the leased assets, or if lower, the present
value of minimum lease payments. Lease
payments are allocated between the principal
component of the lease liability and the
finance costs, so as to achieve a constant
rate of interest on the remaining balance of
the liability.

Leased assets acquired under a finance lease
are depreciated over the asset’s useful life
or over the shorter of the asset’s useful life
and the lease term if there is no reasonable
certainty that the company will obtain
ownership at the end of the lease term.

Operating lease payments, net of any
incentives received from the lessor, are
charged to profit or loss on a straight-line
basis over the term of the lease.

Goods and Services Tax (‘GST’) and other
similar taxes
Revenues, expenses and assets are recognised
net of the amount of associated GST, unless
the GST incurred is not recoverable from the
tax authority. In this case it is recognised as
part of the cost of the acquisition of the asset
or as part of the expense.

Receivables and payables are stated inclusive
of the amount of GST receivable or payable.
The net amount of GST recoverable from, or
payable to, the tax authority is included in
other receivables or other payables in the
statement of financial position.

Cash flows are presented on a gross basis.
The GST components of cash flows arising
from investing or financing activities which
are recoverable from, or payable to the
tax authority, are presented as operating
cash flows.

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

Foreign Currency translation
Both the functional and presentation currency
of 3D Oil Limited is Australian dollars (A$).
Transactions in foreign currencies are initially
recorded in the functional currency at 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.

New Accounting Standards and
Interpretations not yet mandatory or early
adopted
Australian Accounting Standards and
Interpretations that have recently been
issued or amended but are not yet mandatory,
have not been early adopted by the
consolidated entity for the annual reporting
period ended 30 June 2014. The consolidated
entity’s assessment of the impact of these
new or amended Accounting Standards
and Interpretations, most relevant to the
consolidated entity, are set out below.

AASB 9 Financial Instruments and its
consequential amendments
This standard and its consequential
amendments are applicable to annual
reporting periods beginning on or after 1
January 2018 and completes phases I and III
of the IASB’s project to replace IAS 39 (AASB
139) ‘Financial Instruments: Recognition and
Measurement’. This standard introduces new
classification and measurement models for
financial assets, using a single approach
to determine whether a financial asset is
measured at amortised cost or fair value. The
accounting for financial liabilities continues
to be classified and measured in accordance
with AASB 139, with one exception, being
that the portion of a change of fair value
relating to the entity’s own credit risk is
to be presented in other comprehensive
income unless it would create an accounting
mismatch. Chapter 6 ‘Hedge Accounting’
supersedes the general hedge accounting
requirements in AASB 139 and provides a new
simpler approach to hedge accounting that
is intended to more closely align with risk
management activities undertaken by entities
when hedging financial and non-financial
risks. The consolidated entity will adopt this
standard and the amendments from 1 January
2018 but the impact of its adoption is yet to
be assessed by the consolidated entity.

NOTE 3.
CRITICAL ACCOUNTING
JUDGEMENTS,
ESTIMATES AND
ASSUMPTIONS

The preparation of the financial statements
requires management to make judgements,
estimates and assumptions that affect the
reported amounts in the financial statements.
Management continually evaluates its
judgements and estimates in relation to

assets, liabilities, contingent liabilities,
revenue and expenses. Management bases
its judgements, estimates and assumptions
on historical experience and on other
various factors, including expectations of
future events, management believes to
be reasonable under the circumstances.
The resulting accounting judgements and
estimates will seldom equal the related actual
results. The judgements, estimates and
assumptions that have a significant risk of
causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the
respective notes) within the next financial
year are discussed below.

Share-based payment transactions
The consolidated entity 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 by using
either the Binomial or Black-Scholes model
taking into account the terms and conditions
upon which the instruments were granted.
The accounting estimates and assumptions
relating to equity-settled share-based
payments would have no impact on the
carrying amounts of assets and liabilities
within the next annual reporting period but
may impact profit or loss and equity.

Estimation of useful lives of assets
The consolidated entity determines
the estimated useful lives and related
depreciation and amortisation charges
for its property, plant and equipment and
finite life intangible assets. The useful lives
could change significantly as a result of
technical innovations or some other event.
The depreciation and amortisation charge
will increase where the useful lives are less
than previously estimated lives, or technically
obsolete or non-strategic assets that have
been abandoned or sold will be written off or
written down.

Provision for well abandonment
A provision has been made for the present value
of anticipated costs for future remediation
work that will be required to comply with
environmental and legal obligations. The
provision is estimated based on currently
available facts, technology expected to be
available at the time of the clean up, laws and
regulations presently or virtually certain to be
enacted and prior experience in remediation of
contaminated sites.

Exploration and evaluation costs
Exploration and evaluation costs have been
capitalised on the basis that the consolidated
entity will commence commercial production
in the future, from which time the costs will
be amortised in proportion to the depletion
of the mineral resources. Key judgements are
applied in considering costs to be capitalised
which includes determining expenditures
directly related to these activities and
allocating overheads between those that
are expensed and capitalised. In addition,
costs are only capitalised that are expected
to be recovered either through successful

development or sale of the relevant mining
interest. Factors that could impact the future
commercial production at the mine include
the level of reserves and resources, future
technology changes, which could impact
the cost of mining, future legal changes and
changes in commodity prices. To the extent
that capitalised costs are determined not
to be recoverable in the future, they will
be written off in the period in which this
determination is made.

NOTE 4.
OPERATING SEGMENTS

NOTE 5.
REVENUE

AASB 8 requires operating segments to be
identified on the basis of internal reports
about the components of the consolidated
entity that are regularly reviewed by the
chief decision maker in order to allocate
resources to the segment and to assess
its performance. 3D Oil Limited operates
in the development of oil and gas within
Australia. The consolidated entity’s activities
are therefore classified as one operating
segment. The chief decision makers,
being the Board of Directors, assess the
performance of the consolidated entity as a
whole and as such through one segment.

Consolidated

2013

81,729

19,771

2014

31,707

15,945

Interest

Rent

Revenue

47,652

101,500

NOTE 6.
EXPENSES

Loss before income tax includes the following specific expenses:

Depreciation

Plant and equipment

Amortisation

Software

Consolidated

2014

2013

(19,142)

(9,811)

(14,561)

(40,244)

Total depreciation and amortisation

(33,703)

(50,055)

Post employment benefit plans – Superannuation contributions

Equity settled share based payments

Operating lease payments

Office lease

NOTE 7.
INCOME TAX EXPENSE

(86,749)

(39,450)

(126,199)

(99,220)

(28,324)

(127,544)

(64,221)

(69,066)

Consolidated

2014

2013

Numerical reconciliation of income tax expense and tax at the statutory rate

Loss before income tax expense

(1,289,942)

(2,033,105)

Tax at the statutory tax rate of 30%

(386,983)

(609,932)

Tax effect amounts which are not deductible/(taxable) in calculating taxable income:

Entertainment expenses

Share-based payments

Donation

Share of Joint venture losses

Gain on Disposal of 50.1% of Permit VIC/P57

952

11,385

2,366

8,497

(810,935)

(783,508)

4,041,900

Previously unrecognised DTA now brought to account

1,185,581

(2,659,398)

Income tax expense

Petroleum Resource Rent Tax
Petroleum Resource Rent Tax (PRRT) applies
to petroleum projects in Australian onshore
and offshore areas under the Petroleum
Resource Rent Tax Assessment Act 1987. PRRT
is assessed on a project basis or production
licence area and is levied on the taxable
profits of a petroleum project at a rate of
40%. Production license VIC/L31 has been
registered at a project for PRRT purposes.
Eligible expenditure incurred in relation to the
production license VIC/L31 and permits VIC/
P57 and T49P, attach to the permit and can be
carried forward. Certain specified undeducted
expenditure is eligible for annual compounding

at set rates. The compound amount can be
deducted against assessable receipts in
future years.

The consolidated entity has undeducted
expenditure across its license/permits of
$59M at 30 June 2014 (2013: $46M). As
compounding occurs annually on 1 July,
the compounded amount at 1 July 2014 is
estimated at $61M (1 July 2013: $54M).

The Company has not recognised a deferred
tax asset with respect to the carried forward
undeducted expenditure.

Consolidated

2014

2013

Deferred tax assets not recognised

Deferred tax assets not recognised comprises temporary
differences attributable to:

Tax Losses

2,582,792

5,800,878

Total deferred tax assets not recognised

2,582,792

5,800,878

The above potential tax benefit, which
excludes tax losses, for deductible temporary
differences has not been recognised in
the statement of financial position as the
recovery of this benefit is uncertain.

The taxation benefits of tax losses and
temporary difference not brought to account
will only be obtained if:

(i) the consolidated entity derives future

assessable income of a nature and of an
amount sufficient to enable the benefit
from the deductions for the losses to be
realised;

(ii) the consolidated entity continues
to comply with the conditions for
deductibility imposed by law; and

(iii) no change in tax legislation adversely
affects the company in realising the
benefits from deducting the losses.

NOTE 8.
CURRENT ASSETS
– CASH AND CASH
EQUIVALENTS

NOTE 9.
CURRENT ASSETS –
TRADE AND OTHER
RECEIVABLES

Consolidated

2014

2013

Consolidated

2014

2013

Cash at bank

669,344

537,416

Trade receivables

319,556

511,103

Cash on deposit

158,520

1,588,292

Rent Receivable

1,594

NOTE 10.
CURRENT ASSETS –
OTHER

Consolidated

2014

2013

Prepayments

57,994

60,424

827,864

2,125,708

Interest
receivable

GST receivable

2,000

15,989

3,128

337,545

515,825

Trade receivables represent reimbursement
of labour costs and third party invoices by
Carnarvon Hibiscus Pty Ltd. The average
credit period on trade and other receivables
is 30 days. No interest is charged on the
receivables. The consolidated entity has
financial risk management policies in place to
ensure that all receivables are received within
the credit timeframe. Due to the short term
nature of these receivables, their carrying
value is assumed to be approximate to their
fair value.

NOTE 11.
NON-CURRENT ASSETS –
PROPERTY, PLANT AND EQUIPMENT

Plant and equipment – at cost

Less: Accumulated depreciation

Reconciliations

Reconciliations of the written down values at the beginning and
end of the current and previous financial year are set out below:

Consolidated

Balance at 1 July 2012

Additions

Depreciation expense

Balance at 30 June 2013

Additions

Depreciation expense

Consolidated

2013

105,429

(78,864)

2014

123,169

(98,007)

25,162

26,565

Plant &
Equipment

13,640

22,736

(9,811)

26,565

17,739

(19,142)

Total

13,640

22,736

(9,811)

26,565

17,739

(19,142)

Balance at 30 June 2014

25,162

NOTE 12.
NON-CURRENT ASSETS – INTANGIBLES

Software – at cost

Less: Accumulated amortisation

Reconciliations

Reconciliations of the written down values at the beginning and
end of the current and previous financial year are set out below:

Consolidated

Balance at 1 July 2012

Additions

Amortisation expense

Balance at 30 June 2013

Amortisation expense

Balance at 30 June 2014

Consolidated

2014

2013

153,586

(153,586)

(139,025)

14,561

Software

52,736

2,069

Total

52,736

2,069

(40,244)

14,561

(14,561)

14,561

(14,561)

The recoverability of the carrying amount
of the exploration and evaluation assets is
dependent on successful development and
commercial exploitation, or alternatively, sale
of the respective areas of interest.

Farm-outs — in the exploration and evaluation
phase The consolidated entity does not record
any expenditure made by the farmee on its
account. It also does not recognise any gain or
loss on its exploration and evaluation farm-out
arrangements, but redesignates any costs
previously capitalised in relation to the whole
interest as relating to the partial interest
retained. Any cash consideration received
directly from the farmee is credited against
costs previously capitalised in relation to the
whole interest with any excess accounted for
by the farmor as a gain on disposal.

NOTE 13.
NON-CURRENT ASSETS –
EXPLORATION AND EVALUATION

Consolidated

2014

2013

Exploration and evaluation expenditure

24,902,640

20,632,631

Reconciliations

Reconciliations of the written down values at the beginning and
end of the current and previous financial year are set out below:

Consolidated

Balance at 1 July 2012

Expenditure during the year

Write off of assets

Reimbursement from Joint Venture

Balance at 30 June 2013

Expenditure during the year

Write off of assets

Reimbursement from Joint Venture

Exploration &
Development
Expenditure

Total

20,569,130

1,693,796

(43,444)

(1,586,851)

20,632,631

5,849,870

(81,216)

(1,498,645)

Balance at 30 June 2014

24,902,640

NOTE 15.
CURRENT LIABILITIES –
BORROWINGS

NOTE 16.
CURRENT LIABILITIES –
EMPLOYEE BENEFITS

Consolidated

2014

2013

Loan –
Carnarvon
Hibiscus

639,591

Annual leave

Long service
leave

Consolidated

2014

2013

49,118

62,879

51,894

101,012

62,879

7,878

Refer to note 24 for further information on
financial instruments.

On 13 May 2014 the consolidated entity
announced that it had entered into a non-
binding heads of agreement with Carnarvon
Hibiscus Pty Ltd (CHPL), Athlea Corporation
Limited and HiRex Petroleum Sdn Bhd (HIREX).
Within one day of executing the heads of
agreement, CHPL was required to transfer
USD $600,000 to the consolidated entity
for working capital purposes. These funds
are repayable to the joint venture without
interest within 8 months of signing the final
agreements.

NOTE 14.
CURRENT LIABILITIES
– TRADE AND OTHER
PAYABLES

Consolidated

2014

2013

Trade payables

3,089,592

346,697

GST Payable

Sundry payables
and accrued
expenses

333,379

179,210

3,422,971

533,785

Refer to note 24 for further information on
financial instruments.

The increase in trade payables as at 30 June
2014 from the previous corresponding year
was a result of the increased development
costs and cash calls from the joint venture
received as at 30 June 2014.

NOTE 17.
CURRENT LIABILITIES –
PROVISIONS

NOTE 18.
CURRENT LIABILITIES –
OTHER

Consolidated

2014

2013

2014

Consolidated

2013

Deferred lease
incentives

9,540

5,783

Deposits
received

500,000

Deferred lease incentives
The provision represents operating lease
incentives received. The incentives are
allocated to profit or loss in such a manner
that the rent expense is recognised on a
straight-line basis over the lease term.

On 16 June 2014 the consolidated entity
announced that it had entered into an
agreement with Beach Energy Limited for
the purchase of a 20% working interest of
the consolidated entity’s T/49P permit for
a consideration of $3 million and a deposit
of $500,000 was received during the
financial year.

NOTE 19.
NON-CURRENT
LIABILITIES – EMPLOYEE
BENEFITS

Consolidated

2014

2013

Long service
leave

24,637

59,781

NOTE 20.
NON-CURRENT
LIABILITIES –
PROVISIONS

Deferred lease
incentives

Provision for well
abandonment

Consolidated

2014

2013

5,728

15,268

500,000

505,728

515,268

Provision for Well Abandonment
The provision for well abandonment
represents the present value of director’s
best estimate for the costs to abandon the
Wardie-1 Well. There is no current estimate
of when any abandonment may take place
in light of the recently agreed farm-in
arrangement with Hibiscus Petroleum Berhad.

NOTE 21.
EQUITY – ISSUED CAPITAL

2014

2013

Consolidated

2014

2013

Ordinary shares – fully paid

237,523,000

52,657,366

Movements in ordinary share capital

Date

Issue price

1 July 2012

206,560,000

Ordinary shares issued

8 January 2013

30,963,000

Capital raising costs

$0.07

$0.00

50,620,867

2,043,558

(7,059)

52,657,366

30 June 2013

237,523,000

30 June 2014

237,523,000

52,657,366

Details

Balance

Ordinary shares
Ordinary shares entitle the holder to
participate in dividends and the proceeds on
the winding up of the company in proportion
to the number of and amounts paid on the
shares held. The fully paid ordinary shares
have no par value and the company does not
have a limited amount of authorised capital.

On a show of hands every member present
at a meeting in person or by proxy shall have
one vote and upon a poll each share shall have
one vote.

Capital risk management
The company’s objectives when managing
capital are to safeguard its ability to continue
as a going concern, so that it can provide
returns for shareholders and benefits for
other stakeholders and to maintain an
optimum capital structure to reduce the cost
of capital.

In order to maintain or adjust the capital
structure, the company may adjust the
amount of dividends paid to shareholders,
return capital to shareholders, issue new
shares or sell assets to reduce debt.

The consolidated entity would look to raise
capital when an opportunity to invest in a
business or company was seen as value
adding relative to the current parent entity’s
share price at the time of the investment. The
company is not actively pursuing additional
investments in the short term as it continues
to integrate and grow its existing businesses
in order to maximise synergies.

The capital risk management policy remains
unchanged from the 30 June 2013 Annual
Report.

Options
For further information in relation to unissued
ordinary shares of 3D Oil Limited under option,
refer to the Directors’ report and Note 30.

NOTE 22.
EQUITY – RESERVES

Consolidated

2014

2013

NOTE 23.
EQUITY – DIVIDENDS

There were no dividends paid or declared
during the current or previous financial year.

The consolidated entity does not have
franking credits available for subsequent
financial years.

Share-based payments reserve

98,562

66,395

Movements in reserves

Movements in each class of reserve during the current
and previous financial year are set out below:

Consolidated

Balance at 1 July 2012

Share based payments

Expiry of options

Balance at 30 June 2013

Share based payments

Expiry of options

Options Reserve

78,645

28,324

Total

78,645

28,324

(40,574)

66,395

39,450

(7,283)

66,395

39,450

(7,283)

Balance at 30 June 2014

98,562

NOTE 24.
FINANCIAL INSTRUMENTS

Financial risk management objectives
The consolidated entity’s activities expose
it to a variety of financial risks: market
risk (including foreign currency risk, price
risk and interest rate risk), credit risk and
liquidity risk. The consolidated entity’s
overall risk management program focuses
on the unpredictability of financial markets
and seeks to minimise potential adverse
effects on the financial performance of the
consolidated entity. The consolidated entity
uses derivative financial instruments such
as forward foreign exchange contracts to
hedge certain risk exposures. Derivatives are
exclusively used for hedging purposes, i.e. not
as trading or other speculative instruments.
The consolidated entity uses different
methods to measure different types of risk to
which it is exposed. These methods include
sensitivity analysis in the case of interest
rate, foreign exchange and other price risks,
ageing analysis for credit risk and beta
analysis in respect of investment portfolios to
determine market risk.

Risk management is carried out by senior
finance executives (‘finance’) under policies
approved by the Board of Directors (‘the
Board’). These policies include identification
and analysis of the risk exposure of the
consolidated entity and appropriate
procedures, controls and risk limits. Finance
identifies, evaluates and hedges financial
risks within the consolidated entity’s
operating units. Finance reports to the Board
on a monthly basis.

Market risk

Foreign currency risk
The consolidated entity undertakes certain
transactions denominated in foreign currency
and is exposed to foreign currency risk
through foreign exchange rate fluctuations.

Foreign exchange risk arises from future
commercial transactions and recognised
financial assets and financial liabilities
denominated in a currency that is not the
entity’s functional currency. The risk is
measured using sensitivity analysis and cash
flow forecasting.

Price risk
The consolidated entity is not exposed to any
significant price risk.

Interest rate risk
The consolidated entity’s only exposure to
interest rate risk is in relation to deposits
held. Deposits are held with reputable banking
financial institutions.

The tables below illustrate the impact on
profit before tax based upon expected
volatility of interest rates using market data
and analysis forecasts.

Basis points increase

Basis points decrease

Basis
points
change

Effect on
profit
before tax

Effect
on equity

Basis
points
change

Effect on
profit
before tax

Effect
on equity

Consolidated – 2014

Cash at bank

4,139

(4,139)

Consolidated – 2013

Cash at bank

10,629

(10,629)

Credit risk
Credit risk refers to the risk that a
counterparty will default on its contractual
obligations resulting in financial loss to the
consolidated entity. The consolidated entity
has a strict code of credit, including obtaining
agency credit information, confirming
references and setting appropriate credit
limits. The consolidated entity obtains
guarantees where appropriate to mitigate
credit risk. The maximum exposure to credit
risk at the reporting date to recognised
financial assets is the carrying amount, net
of any provisions for impairment of those
assets, as disclosed in the statement of
financial position and notes to the financial
statements. The consolidated entity does not
hold any collateral.

Liquidity risk
Vigilant liquidity risk management requires
the consolidated entity to maintain
sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities
to be able to pay debts as and when they
become due and payable.

The consolidated entity manages liquidity risk
by maintaining adequate cash reserves and
available borrowing facilities by continuously
monitoring actual and forecast cash flows
and matching the maturity profiles of financial
assets and liabilities.

Remaining contractual maturities
The following tables detail the consolidated
entity’s remaining contractual maturity for its
financial instrument liabilities. The tables have
been drawn up based on the undiscounted
cash flows of financial liabilities based on
the earliest date on which the financial
liabilities are required to be paid. The tables
include both interest and principal cash flows
disclosed as remaining contractual maturities
and therefore these totals may differ from
their carrying amount in the statement of
financial position.

Consolidated – 2014

Non-derivatives

Non-interest bearing

Trade payables

Other loans

Total non-derivatives

Consolidated – 2013

Non-derivatives

Non-interest bearing

Trade payables

Total non-derivatives

Weighted average
interest rate

1 year or less

3,422,971

639,591

4,062,562

1 year or less

533,785

Between
1 and 2 years

Between
2 and 5 years

Over 5 years

Between
1 and 2 years

Between
2 and 5 years

Over 5 years

The cash flows in the maturity analysis above
are not expected to occur significantly earlier
than contractually disclosed above.

Fair value of financial instruments
Unless otherwise stated, the carrying
amounts of financial instruments reflect their
fair value. The carrying amounts of trade
receivables and trade payables are assumed
to approximate their fair values due to their
short-term nature. The fair value of financial
liabilities is estimated by discounting the
remaining contractual maturities at the
current market interest rate that is available
for similar financial instruments.

Remaining
contractual
maturities

3,422,971

639,591

4,062,562

Remaining
contractual
maturities

533,785

NOTE 25.
KEY MANAGEMENT
PERSONNEL
DISCLOSURES

Directors
The following persons were directors of 3D Oil
Limited during the financial year:

Mr Campbell Horsfall
Non-executive Chairman

Mr Noel Newell
Managing Director

Ms Melanie Leydin
Non-executive Director and
Company Secretary

Ms Philippa Kelly
Non-executive Director
(resigned 25 November 2013)

Mr Kenneth Pereira
Non-executive Director
(resigned 3 July 2014)

Other key management personnel
The following person also had the authority
and responsibility for planning, directing
and controlling the major activities of the
consolidated entity, directly or indirectly,
during the financial year:

Mr Andrew Adams
Commercial and Exploration Manager

Compensation
The aggregate compensation made to
directors and other members of key
management personnel of the consolidated
entity is set out below:

Short-term
employee
benefits

Post-employment
benefits

Long-term
benefits

Consolidated

2014

2013

958,810

630,379

51,466

52,628

20,700

12,222

1,030,976

695,229

NOTE 26.
REMUNERATION OF
AUDITORS

NOTE 27.
CONTINGENT
LIABILITIES

In the financial year end period 30 June 2012
the consolidated entity received a tax refund
in relation to R&D Tax Incentive of $695,894.
The claim is currently undergoing the
AusIndustry audit process. Any adjustment
arising to claim the refund as a result of
the audit may impact future cash flows.
There were no other contingent liabilities in
existence at 30 June 2014.

During the financial year the following fees
were paid or payable for services provided by
Grant Thornton Audit Pty Ltd, the auditor of
the company:

Consolidated

2014

2013

47,400

43,000

Audit services –
Grant Thornton
Audit Pty Ltd

Audit or review
of the financial
statements

NOTE 28.
COMMITMENTS

Operating Lease Commitments

Committed at the reporting date but not recognised as liabilities, payable:

Within one year

One to four years

Exploration Licenses – Commitments for Expenditure

Committed at the reporting date but not recognised as liabilities, payable:

Consolidated

2014

2013

88,146

44,073

88,146

132,219

220,365

12,000,000

18,400,000

750,000

52,150,000

20,000,000

12,750,000

90,550,000

Within one year

One to five years

More than five years

In order to maintain current rights of tenure
to exploration tenements, the consolidated
entity is required to outlay rentals and to
meet the minimum expenditure requirements
of the Mineral Resources Authority. Minimum
expenditure commitments may be subject
to renegotiation and with approval may
otherwise be avoided by sale, farm out or
relinquishment. These obligations are not
provided in the accounts and are payable.

NOTE 29.
RELATED PARTY
TRANSACTIONS

Parent entity
3D Oil Limited is the parent entity.

Subsidiaries
Interests in subsidiaries are set out in note 31.

Key management personnel
Disclosures relating to key management
personnel are set out in note 25 and the
remuneration report in the directors’ report.

Transactions with related parties
There were no transactions with related
parties during the current and previous
financial year.

Receivable from and payable to related
parties
There were no trade receivables from or trade
payables to related parties at the current and
previous reporting date.

Loans to/from related parties
There were no loans to or from related parties
at the current and previous reporting date.

NOTE 30.
PARENT ENTITY
INFORMATION

Set out below is the supplementary
information about the parent entity.

Statement of profit or loss and other comprehensive income

Loss after income tax

Total comprehensive income

Statement of financial position

Total current assets

Total assets

Total current liabilities

Total liabilities

Equity

Issued capital

Share-based payments reserve

Accumulated losses

Total equity

Parent

2014

2013

(1,271,574)

(2,033,098)

(1,271,574)

(2,033,098)

1,223,391

2,701,945

25,669,573

23,312,210

4,121,220

602,447

4,703,479

1,113,992

52,657,366

98,562

66,395

(31,789,834)

(30,525,543)

20,966,094

22,198,218

Guarantees entered into by the parent
entity in relation to the debts of its
subsidiaries
The parent entity had no guarantees in
relation to the debts of its subsidiaries as at
30 June 2013 and 30 June 2014.

Contingent liabilities
In the financial year end period 30 June
2012 the consolidated entity received a tax
refund in relation to R&D Tax Incentive of
$695,894. The claim is currently undergoing
the AusIndustry audit process. Any adjustment
arising to claim the refund as a result of
the audit may impact future cash flows.
The parent entity had no other contingent
liabilities as at 30 June 2013 and 30 June 2014.

Capital commitments – Property, plant and
equipment
The parent entity had no capital commitments
for property, plant and equipment at as 30
June 2013 and 30 June 2014.

Significant accounting policies
The accounting policies of the parent entity
are consistent with those of the consolidated
entity, as disclosed in note 2, except for the
following:

Ǵ Investments in subsidiaries are accounted for
at cost, less any impairment, in the parent
entity.

Ǵ Investments in associates are accounted for
at cost, less any impairment, in the parent
entity.

Ǵ Dividends received from subsidiaries are

recognised as other income by the parent
entity and its receipt may be an indicator of
an impairment of the investment.

NOTE 31.
INTERESTS IN
SUBSIDIARIES

The consolidated financial statements
incorporate the assets, liabilities and results
of the following subsidiary in accordance with
the accounting policy described in note 2:

Principal place of business /
Country of incorporation

Ownership interest

2014

2013

100.00%

Name

3D Oil T49P Pty Ltd *

Australia

*Incorporated 27 May 2013

NOTE 32.
EVENTS AFTER THE
REPORTING PERIOD

On 7 July 2014 the consolidated entity
announced that it had executed binding
agreements with Carnarvon Hibiscus Pty Ltd
(CHPL), Althea Corporation Limited, and HiRex
Petroleum Sdn Bhd (HIREX) in relation to the
restructuring of the funding and ownership
of its interest in offshore Gippsland Basin
tenements VIC/P57 and VIC/L31.

On 18 August 2014 the consolidated entity
announced that it received notice from CHPL
exercising its option to acquire the VIC/L31
remaining interest from the consolidated
entity for a consideration of US$14.05 million.
On 21 August 2014 the consolidated entity
announced completion of the sale of a 20%
working interest in the T/49P exploration
permit to Beach Energy Limited and the
remaining $2.5 million of the $3 million
purchase price was received.

Key points of the binding agreements are
as follows:

Ǵ CHPL to pay TDO US$7.5 million for the

Company’s interest in the Britannia Rig and a
5% interest in VIC/P57.

Ǵ The proceeds will be used to meet Year 3

funding commitments for VIC/P57.

Ǵ US$2 million will be paid in advance to TDO to

assist with short term funding.

Ǵ US$1.94 million of funding owing to the

Operator of the VIC/L31 JV will be offset
against a transfer to CHPL of a 6.07% interest
in VIC/L31.

Ǵ An option has been granted to CHPL to

purchase the remaining 43.83% interest in
VIC/L31 at fair market value, which has been
deemed to be $14.05 million.

Ǵ As CHPL is a substantial holder of the

consolidated entity for the purposes of
ASX Listing Rule 10.1, Shareholder approval
was required to be obtained to complete
the matters set out in the transaction
documents. The consolidated entity held
a general meeting of shareholders on 11
August 2014 and shareholders approved the
transaction.

NOTE 33.
RECONCILIATION OF LOSS
AFTER INCOME TAX TO
NET CASH USED IN
OPERATING ACTIVITIES

Loss after income tax expense for the year

(1,289,942)

(2,033,105)

Consolidated

2014

2013

Adjustments for:

Depreciation and amortisation

Share-based payments

Foreign exchange differences

Exploration costs written off

Change in operating assets and liabilities:

Decrease in trade and other receivables

Decrease/(increase) in prepayments

Increase in trade and other payables

Increase/(decrease) in other provisions

33,703

39,450

5,714

81,216

156,370

(4,320)

647,841

(76,851)

50,055

28,324

1,403

43,444

730,708

3,294

75,694

49,547

Net cash used in operating activities

(406,819)

(1,050,636)

Consolidated

2014

2013

(1,289,942)

(2,033,105)

Number

237,523,000

221,235,614

237,523,000

221,235,614

Cents

(0.54)

Cents

(0.92)

NOTE 34.
EARNINGS PER SHARE

Loss after income tax attributable to the owners of
3D Oil Limited

Weighted average number of ordinary shares
used in calculating basic earnings per share

Weighted average number of ordinary shares
used in calculating diluted earnings per share

Basic earnings per share

Diluted earnings per share

The rights to options held by option holders
have not been included in the weighted
average number of ordinary shares for the
purposes of calculating diluted earnings per
share as they do not meet the requirements
for inclusion in AASB 133 “Earnings per Share”.
The rights to options are non-dilutive as the
consolidated entity has generated a loss for
the financial year. The total number of options
not included in the calculation of dilutive
earnings per share were 1,873,000 options.

NOTE 35.
SHARE-BASED PAYMENTS

Set out below are summaries of options granted under the plan:

2014

Grant date

27/08/2009

02/06/2010

24/01/2011

07/10/2011

15/12/2012

02/09/2013

06/12/2013

Expiry date

30/06/2014

30/11/2014

31/01/2015

07/10/2015

30/11/2015

30/11/2016

29/11/2016

Exercise
price

$0.25

$0.40

$0.18

$0.16

$0.11

$0.12

Granted

Exercised

Balance at
the start
of the year

64,000

150,000

200,000

78,000

595,000

300,000

250,000

1,087,000

550,000

Shares are awarded to executives from time to time based on long-term incentive
measures. These include the increase in shareholders value relative to the entire
market and the increase compared to the consolidated entity’s direct competitors.

2013

Grant date

27/08/2009

02/06/2010

24/01/2011

07/10/2011

15/12/2012

Expiry date

30/06/2014

30/11/2014

31/01/2015

07/10/2015

30/11/2015

Exercise
price

Balance at
the start
of the year

Granted

Exercised

$0.25

$0.40

$0.18

$0.16

64,000

265,000

150,000

200,000

554,700

595,000

2,028,700

For the options on issue during the previous and current financial year, the valuation
model inputs used to determine the fair value at the grant date, are as follows:

Expired/
forfeited/
other

(64,000)

(100,000)

Balance at
the end
of the year

150,000

200,000

78,000

495,000

300,000

250,000

(164,000)

1,473,000

Expired/
forfeited/
other

Balance at
the end
of the year

64,000

(265,000)

150,000

(200,000)

(476,700)

200,000

78,000

595,000

(941,700)

1,087,000

Expiry date

30/06/2014

30/11/2014

31/01/2015

07/10/2015

30/11/2015

30/11/2016

29/11/2016

Share price at
grant date

Exercise
price

Expected
volatility

Dividend
yield

Risk-free
interest rate

Fair value at
grant date

$0.19

$0.25

$0.14

$0.09

$0.25

$0.40

$0.18

$0.16

$0.11

$0.12

0.80%

1.00%

0.05%

0.04%

0.40%

$0.049

$0.440

$0.083

$0.076

$0.083

$0.931

$0.090

$0.045

$0.069

$0.075

Grant date

27/08/2009

02/06/2010

24/01/2011

07/10/2011

15/12/2012

02/09/2013

06/12/2013

DIRECTORS’
DECLARATION

In the directors’ opinion:

Ǵ the attached financial statements and

notes thereto comply with the Corporations
Act 2001, the Accounting Standards,
the Corporations Regulations 2001 and
other mandatory professional reporting
requirements;

Ǵ the attached financial statements and
notes thereto comply with International
Financial Reporting Standards as issued
by the International Accounting Standards
Board as described in note 2 to the financial
statements;

Ǵ the attached financial statements and

notes thereto give a true and fair view of the
consolidated entity’s financial position as at
30 June 2014 and of its performance for the
financial year ended on that date; and

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

The directors have been given the
declarations required by section 295A of the
Corporations Act 2001.

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

On behalf of the directors

Noel Newell
Managing Director

30 September 2014
Melbourne

Independent Auditor’s Report
To the Members of 3D Oil Limited

The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000

Correspondence to:
GPO Box 4736
Melbourne Victoria 3001

T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au

Report on the financial report
We have audited the accompanying financial report of 3D Oil Limited (the “Company”),
which comprises the consolidated statement of financial position as at 30 June 2014, the
consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then
ended, notes comprising a summary of significant accounting policies and other explanatory
information and the directors’ declaration of the consolidated entity comprising the
Company and the entities it controlled at the year’s end or from time to time during the
financial year.

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

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

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
report, whether due to fraud or error.

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.

In making those risk assessments, the auditor considers internal control relevant to the
Company’s preparation of the financial report that gives a true and fair view in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Directors, as well as evaluating the
overall presentation of the financial report.

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

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

Auditor’s opinion
In our opinion:

the financial report of 3D Oil Limited is in accordance with the Corporations Act
2001, including:

giving a true and fair view of the consolidated entity’s financial position as at
30 June 2014 and of its performance for the year ended on that date; and

complying with Australian Accounting Standards and the Corporations
Regulations 2001; and

the financial report also complies with International Financial Reporting Standards as
disclosed in the notes to the financial statements.

Report on the remuneration report
We have audited the remuneration report included in pages 21 to 26 of the directors’ report
for the year ended 30 June 2014. The Directors of the Company are responsible for the
preparation and presentation of the remuneration report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration
report, based on our audit conducted in accordance with Australian Auditing Standards.

20 to 25

Auditor’s opinion on the remuneration report
In our opinion, the remuneration report of 3D Oil Limited for the year ended 30 June 2014,
complies with section 300A of the Corporations Act 2001.

GRANT THORNTON AUDIT PTY LTD
Chartered Accountants

B.A. Mackenzie
Partner - Audit & Assurance

Melbourne, 30 September 2014

SHAREHOLDER
INFORMATION

30 June 2014

The shareholder information set out below was applicable as at 24 September 2014.

Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:

1 to 1,000

1,001 to 5,000

5,001 to 10,000

10,001 to 100,000

100,001 and over

Holding less than a marketable parcel

Equity security holders

Twenty largest quoted equity security holders

The names of the twenty largest security holders of quoted equity securities are listed below:

Noel Newell (Newell Family A/C)

Oceania Hibiscus SDN BHD

Nefco Nominees Pty Ltd

H Louey Pang & Co Pty Ltd (Demaria Family A/C)

National Nominees Limited

Fugro Multi Client Services Pty Ltd

Bill Hopper

Pand JR Pty Ltd (John Demaria Family A/C)

Citicorp Nominees Pty Limited

DMG & Partners Securities Pte Ltd (Superannuation Fund A/C)

Pengold Pty Ltd (Pengold Super Fund A/C)

J K Demaria Pty Ltd

Andrew Paterson

Vobe Resources Pty Ltd (Superannuation A/C)

Noel Mainwaring

Mr Giovanni Monteleone + Mrs Frances Monteleone

Vin Naidu + Wendy Naidu

Mr Joseph Hannah

Mr Russell Barwick

Eilie Sunshine Pty Ltd (Eilie Sunshine Superfund A/C)

Number of holders of
ordinary shares

135

146

439

168

922

186

Ordinary shares

% of total shares
issued

15.43

13.04

6.74

4.86

4.73

2.73

2.05

1.98

1.82

1.56

1.50

1.36

1.34

1.28

1.26

1.19

1.11

1.05

Number held

36,661,450

30,963,000

16,007,851

11,550,000

11,234,549

6,475,000

4,865,201

4,709,283

4,320,178

3,695,000

3,556,576

3,237,500

3,194,099

3,050,000

3,000,000

2,837,500

2,643,200

2,500,000

163,475,387

68.81

Number on issue

Number of holders

1,873,000

Ordinary shares

% of total shares
issued

15.43

13.04

6.74

Number held

36,661,450

30,963,000

16,007,851

Unquoted equity securities

Options over ordinary shares issued

Substantial holders

Substantial holders in the company are set out below:

Noel Newell (Newell Family A/C)

Oceania Hibiscus SDN BHD

Nefco Nominees Pty Ltd

Voting rights
The voting rights attached to ordinary shares
are set out below:

Ordinary shares
On a show of hands every member present
at a meeting in person or by proxy shall have
one vote and upon a poll each share shall have
one vote.

There are no other classes of equity
securities.

CORPORATE
GOVERNANCE
STATEMENT

The Board of Directors (‘the Board’) of 3D Oil
Limited (the ‘company’) is responsible for the
corporate governance of the consolidated
entity. The Board guides and monitors the
business and affairs of the company on behalf
of the shareholders by whom they are elected
and to whom they are accountable.

The table below summarises the company’s
compliance with the ASX Corporate
Governance Council’s Revised Principles and
Recommendations.

Principles and Recommendations

Compliance

Comply

Principle 1 – Lay solid foundations for management and oversight

1.1

Establish the functions reserved
to the Board and those delegated
to manage and disclose those
functions.

The Board is responsible for the overall corporate governance of the
company.

Complies.

The Board has adopted a Board charter that formalises its roles and
responsibilities and defines the matters that are reserved for the Board
and specific matters that are delegated to management.

The Board has adopted a Delegations of Authority that sets limits of
authority for senior executives.

On appointment of a director, the company issues a letter of
appointment setting out the terms and conditions of appointment to the
Board.

1.2

1.3

Disclose the process for
evaluating the performance of
senior executives.

The Board meets annually to review the performance of executives. The
senior executives’ performance is assessed against performance of the
Company as a whole.

Complies.

Provide the information indicated
in Guide to reporting on Principle
1.

A Board charter has been disclosed on the company’s website and is
summarised in this Corporate Governance Statement.

Complies.

A performance evaluation process is included in the Board Charter, which
has been disclosed on the company’s website and is summarised in this
Corporate Governance Statement.

Complies.

The Board conducted a performance evaluation for senior executives at
June 2012 in accordance with the process above.

Complies.

Principle 2 – Structure the Board to add value

2.1

A majority of the Board should be
independent directors.

The majority of the Board’s directors are not independent directors of
the company.

Mr Campbell Horsfall is an independent Non-Executive Director and
Chairman.

Ms Melanie Leydin is a Non-Executive Director.

Mr Noel Newell is an Executive Director.

Does not comply. Whilst the
Board recognises that it is
desirable for the majority of
the Board to be Independent
Directors, the Board believes
that the current Board is
reflective of the structure of
the business at the present
time. The Board will review
the appointment of further
Independent Directors should
the Company’s size, growth and
structure warrant this.

The chair should be an
independent director.

Mr Campbell Horsfall is the Chairman and is an independent Non-
Executive Director.

The roles of chair and chief
executive officer should not be
exercised by the same individual.

Mr Campbell Horsfall is the Chairman and Mr Noel Newell the Executive
Director.

Complies.

2.2

2.3

Principles and Recommendations

Compliance

2.4

The Board should establish a
nomination committee.

The company has established a Nomination and Remuneration
Committee.

Comply

Complies

The Board has undertaken a review of the mix of skills and experience on
the Board in light of the company’s principal activities and direction, and
has considered diversity in succession planning. The Board considers
the current mix of skills and experience of members of the Board and
its senior management is sufficient to meet the requirements of the
company.

The Board supports the nomination and re-election of the directors at
the company’s forthcoming Annual General Meeting.

The company conducts the process for evaluating the performance of
the Board, its committees and individual directors as outlined in the
Board Charter which is available on the company’s website.

Complies.

The Board’s induction program provides incoming directors with
information that will enable them to carry out their duties in the best
interests of the company. This includes supporting ongoing education of
directors for the benefit of the company.

2.5

Disclose the process for
evaluating the performance of
the Board, its committees and
individual directors.

2.6

Provide the information indicated
in the Guide to reporting on
Principle 2.

This information has been disclosed (where applicable) in the directors’
report attached to this Corporate Governance Statement.

Complies.

Mr Campbell Horsfall is an independent directors of the company. A
director is considered independent when he substantially satisfies the
test for independence as set out in the ASX Corporate Governance
Recommendations.

Complies

Members of the Board are able to take independent professional advice
at the expense of the company.

Mr Campbell Horsfall, Non-Executive Chairman, was appointed to the
Board in January 2009.

Mr Noel Newell, Executive Director and Chief Executive Officer, was
appointed to the Board at incorporation of the Company.

Ms Melanie Leydin, Non-Executive Director, was appointed to the Board
in January 2009.

In accordance with the information suggested in Guide to Reporting on
Principle 2, the company has disclosed full details of its directors in the
director’s report attached to this Corporate Governance Statement.
Other disclosure material on the Structure of the Board has been made
available on the company’s website.

Principle 3 – Promote ethical and responsible decision making

3.1

Establish a code of conduct and
disclose the code or a summary
of the code.

The Board has adopted a code of conduct. The code establishes a clear
set of values that emphasise a culture encompassing strong corporate
governance, sound business practices and good ethical conduct.

Complies.

The code is available on the company’s website.

Principles and Recommendations

Compliance

3.2

3.3

3.4

Companies should establish a
policy concerning diversity and
disclose the policy or a summary
of that policy. The policy should
include requirements for the
Board to establish measurable
objectives for achieving gender
diversity and for the Board
to assess annually both the
objectives and progress in
achieving them.

Companies should disclose
in each annual report the
measurable objectives for
achieving gender diversity set
by the board in accordance with
the diversity policy and progress
towards achieving them.

Companies should disclose in
each annual report the proportion
of women employees in the whole
organisation, women in senior
executive positions and women
on the board.

3.5

Provide the information indicated
in Guide to reporting on Principle
3.

Comply

Complies.

The Board has undertaken a review of the mix of skills and experience on
the Board in light of the company’s principal activities and direction.

The Board has prepared a Diversity Policy that considers the benefits
of diversity, ways to promote a culture of diversity, factors to be taken
into account in the selection process of candidates for Board and senior
management positions in the company, education programs to develop
skills and experience in preparation for Board and senior management
positions, processes to include review and appointment of directors, and
identify key measurable diversity performance objectives for the Board,
CEO and senior management.

The company will report in each annual report the measurable objectives
for achieving gender diversity set by the Board.

Complies.

The company will report, where appropriate, the proportion of women
employees and their positions held within the company.

Complies

The current composition of the board is 3 Directors of which 1 is female.

The proportion of females in the company is 20% being 2 out of a total of
10 employees.

This information is available on the Company’s website.

Complies

Principle 4 – Safeguard integrity in financial reporting

4.1

The Board should establish an
audit committee.

The Board has established an audit and risk committee which operates
under an audit and risk committee charter to focus on issues relevant to
the integrity of the company’s financial reporting.

Members of the audit and risk committee are Ms Melanie Leydin (Chair)
and Mr Campbell Horsfall. Ms Melanie Leydin is a Non-Executive Director
and is not chair of the Board. The committee consists of two non-
executive directors.

Complies.

Complies

The audit committee should be
structured so that it consists
of only non-executive directors,
a majority of independent
directors, is chaired by an
independent chair who is not
chair of the Board and have at
least 3 members.

The audit committee should have
a formal charter.

The Board has adopted an audit and risk charter.

This charter is available on the company’s website.

Complies.

Provide the information indicated
in Guide to reporting on Principle
4.

In accordance with the information suggested in Guide to Reporting on
Principle 2, this has been disclosed in the directors’ report attached
to this Corporate Governance Statement and is summarised in this
Corporate Governance Statement.

The members of the audit and risk committee are appointed by the Board
and recommendations from the committee are presented to the Board
for further discussion and resolution.

The audit and risk committee held two meetings during the period to the
date of the directors’ report and will meet at least twice per annum.

The audit and risk charter, and information on procedures for the
selection and appointment of the external auditor, and for the rotation
of external audit engagement partners (which is determined by the audit
committee), is available on the company’s website.

4.2

4.3

4.4

Principles and Recommendations

Compliance

Comply

Principle 5 – Make timely and balanced disclosure

5.1

Establish written policies
designed to ensure compliance
with ASX Listing Rules
disclosure requirements and
to ensure accountability at a
senior executive level for that
compliance and disclose those
policies or a summary of those
policies.

5.2

Provide the information indicated
in the Guide to reporting on
Principle 5.

The company has adopted a continuous disclosure policy, to ensure that
it complies with the continuous disclosure regime under the ASX Listing
Rules and the Corporations Act 2001.

Complies.

This policy is available on the company’s website.

The company’s continuous disclosure policy is available on the company’s
website.

Complies.

Principle 6 – Respect the rights of shareholders

6.1

Design a communications
policy for promoting effective
communication with shareholders
and encouraging their
participation at general meetings
and disclose that policy or a
summary of that policy.

6.2

Provide the information indicated
in the Guide to reporting on
Principle 6.

Principle 7 – Recognise and manage risk

7.1

7.2

Establish policies for the
oversight and management
of material business risks and
disclose a summary of these
policies.

The Board should require
management to design and
implement the risk management
and internal control system to
manage the company’s material
business risks and report to it
on whether those risks are being
managed effectively. The Board
should disclose that management
has reported to it as to the
effectiveness of the company’s
management of its material
business risks.

The company has adopted a shareholder communications policy. The
company uses its website (www.3doil.com.au), annual report, market
announcements, media disclosures and webcasting to communicate
with its shareholders, as well as encourages participation at general
meetings.

Complies.

This policy is available on the company’s website.

The company’s shareholder communications policy is available on the
company’s website.

Complies.

The company has adopted a risk management statement within the audit
and risk committee charter. The audit and risk committee is responsible
for managing risk; however, ultimate responsibility for risk oversight and
risk management rests with the Board.

Complies.

The audit and risk charter is available on the company’s website and is
summarised in this Corporate Governance Statement.

The Board believes the risk management and internal control systems
designed and implemented by the Directors and the Financial Officer
are adequate given the size and nature of the Company’s activities. The
Board informally reviews and requests management internal control.

Management has not formally
reported to the Board as to the
effectiveness of the Company’s
management of its material
business risks. Given the
nature and size of the Company
and the Board’s ultimate
responsibility to manage the
risks of the Company this is
not considered critical. The
Company intends to develop the
risk reporting framework into a
detailed policy as its operations
continue to grow.

Principles and Recommendations

Compliance

The Board has received a statement from the chief executive officer
and company secretary that the declaration provided in accordance
with section 295A of the Corporations Act 2001 is founded on a sound
system of risk management and internal control and that the system is
operating efficiently and effectively in all material respects in relation to
the financial reporting risks.

Comply

Complies.

7.3

The Board should disclose
whether it has received
assurance from the chief
executive officer and chief
financial officer that the
declaration provided in
accordance with section 295A of
the Corporations Act is founded
on a sound system of risk
management and internal control
and that the system is operating
efficiently and effectively in all
material respects in relation to
the financial reporting risks.

7.4

Provide the information indicated
in Guide to reporting on Principle
7.

The Board has adopted an audit and risk charter which includes a
statement of the company’s risk policies.

Complies.

This charter is available on the company’s website and is summarised in
this Corporate Governance Statement.

The company has identified key risks within the business and has
received a statement of assurance from the chief executive officer and
chief financial officer.

Principle 8 – Remunerate fairly and responsibly

8.1

The Board should establish a
remuneration committee.

The Board has established a Nomination and Remuneration Committee
and has adopted a remuneration charter.

The remuneration committee:

Ǵ consists of a majority of independent directors Mr Campbell Horsfall

and Ms Melanie Leydin;

Ǵ is chaired by Ms Melanie Leydin,

Ǵ has two members

Does not comply. The size of
the Company’s board does
not allow the recommended
number of 3 members for this
committee.

8.2

Clearly distinguish the structure
of non-executive directors’
remuneration from that of
executive directors and senior
executives.

8.3 Provide the information indicated
in the Guide to reporting on
Principle 8.

The company complies with the guidelines for executive remuneration
packages and non-executive director remuneration.

Complies.

No senior executive is involved directly in deciding their own
remuneration.

The Board has adopted a Nomination and Remuneration Committee
charter.

Complies.

The company does not have any schemes for retirement benefits other
than superannuation for non-executive directors.

3D Oil Limited’s corporate governance
practices were in place for the financial year
ended 30 June 2014 and to the date of signing
the directors’ report.

Various corporate governance practices
are discussed within this statement. For
further information on corporate governance
policies adopted by 3D Oil Limited, refer to our
website: www.3doil.com.au

CORPORATE
DIRECTORY

Directors
Campbell Horsfall
(Non-Executive Chairman)

Noel Newell
(Managing Director)

Melanie Leydin
(Non-Executive Director)

Company secretary
Melanie Leydin

Registered office
Level 5, 164 Flinders Lane
Melbourne, VIC 3000
Telephone: (03) 9650 9866

Share register
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford Victoria 3067
Telephone: (03) 9415 5000

Auditor
Grant Thornton Audit Pty Ltd
Chartered Accountants
The Rialto, Level 30
525 Collins Street
Melbourne Victoria 3000

Solicitors
Baker & McKenzie
Level 19
181 William Street
Melbourne
Victoria 3000

Stock exchange listing
3D Oil Limited shares are listed on the
Australian Securities Exchange (ASX code:
TDO)

Website
3doil.com.au