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Petroleum NL
ABN 60 002 688 851
A n n u a l R e p o r t 2 0 0 1
Contents
Corporate Directory
Chairman’s Report
Review of Operations
Directors’ Report
Statement of Financial Performance
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Corporate Governance
ASX Additional Information
1
3
4
8
13
14
15
16
34
35
36
38
Corporate Directory
Directors
Share Registry - Australia
Computershare Investor Services Pty Limited
Level 2, Reserve Bank Building
45 St. George’s Terrace
Perth Western Australia 6000
Telephone: +61 8 9323 2000
+61 8 9323 2033
Facsimile:
Share Registry – New Zealand
Computershare Registry Services Limited
Private Bag 92119
Auckland 1020
Telephone: +64 9 522 0022
+64 9 522 0058
Facsimile:
Stock Exchange Listing
Carnarvon Petroleum NL is listed on both the
Australian and New Zealand Stock Exchanges.
ASX Code: CVN
NZSE Code: CVN
GHC White (Non-Executive Chairman)
KC Tregonning (Managing Director)
DJ Orth (Executive Director)
NC Fearis (Non-Executive Director)
Company Secretary
L Troncone
Auditors
Ernst & Young
Solicitors
Freehills
Bankers
Australia and New Zealand Banking
Group Limited
Registered Office
Ground Floor, Durack Centre
263 Adelaide Terrace
Perth Western Australia 6000
Telephone: +61 8 9325 6344
+61 8 9325 6355
Facsimile:
http://www.carnarvon.com.au
Internet:
admin@carnarvon.com.au
Email:
Cover photograph shows drilling rig at WB-N2,
SWIA Concession, Central Thailand.
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
1
Buddhist shrine near WB-1 well, SWIA Concession,
Buddhist shrine near WB-1 well, SWIA Concession,
Central Thailand.
Central Thailand.
Chairman’s Report
The biggest change that Carnarvon has experienced this
past year is the acquisition of the producing Wichian Buri
Oil Field in Thailand and the surrounding acreage.We
participated in the drilling of two successful wells,WB-N1
and WB-N2, during the course of the year that effectively
doubled our net production and added reserves in the
order of 10 million barrels of oil.We have embarked on an
aggressive development program which, if successful, will
result in a five-fold increase in production by the middle
of calendar year 2002 and we anticipate that the project
will become self funding by early 2002.
On 31 August 2001, the Company announced plans for a
capital raising via a placement of 40,000,000 shares at 7
cents each with attaching free options.The $2.8 million
raised (before costs) will be utilised to fund the Company’s
share of the development plans for the SW1A Concession
as well as provide working capital for the Company to
pursue other similar opportunities.Your directors intend
to participate in this capital raising and we hope to see as
many of our fellow Shareholders as possible participating
as well.
I thank all Shareholders for their continued interest and
renewed support during the year and I look forward to
another successful year ahead.
George White
Chairman
Carnarvon’s year has been characterised by change. At
our last Annual General Meeting the Shareholders were
informed about the acquisition of Block SW1A in Thailand
in a move to take Carnarvon from being an exploration
company into a producing oil and gas company, not a small
feat for a junior Australian explorer.With our initial
success in Thailand we have been encouraged to seek out
and secure similar projects throughout the region in an
effort to grow the Company on the basis of production
and cash flow.
There have been a number of Board changes with the
addition of two new directors, Dr. Ken Tregonning and
David Orth, and the retirement of Stuart Hohnen in
November. In July 2001, Derek Cowlan and Warren
Beckwith also retired. I would like to take this opportunity
to both welcome Ken and David to the Company and to
express our thanks for the contributions made by Stuart,
Derek and Warren.
Consistent with Carnarvon’s overall goal to invest in
producing and developing projects, we have embarked on a
policy of divestiture of those assets in our portfolio that
no longer satisfy our criteria. During the year we have sold
our equity in EP 325 and we are progressing the sale of
our interests in WA 254-P, EP 395 and EP 342&TP/9, all in
the Carnarvon Basin.We have farmed out half of our
holding in EP 110 in return for a carried interest in an
upcoming seismic acquisition program while retaining a
significant equity as it lies next to the Tubridgi Gas Field.
We still hold an 11% interest in AusAm as well as a 2.5%
royalty in that company’s Perth Basin assets.
In Papua New Guinea we have relinquished PPL 204 but
have retained our interest in the ex PPL 157 retention
licenses, PRLs 4&5.The reserves in the PRLs total nearly a
trillion cubic feet of gas and about 50 million barrels of
condensate. If these reserves are not commercialized in
the near term, Carnarvon will consider selling to fund our
other Asian activities and further stimulate our expansion.
3
Review of Operations
Summary
Carnarvon Petroleum NL embarked on a new strategy during
the year, one of acquisition of producing and developing
properties whereby Carnarvon could add value through
technical excellence and take advantage of previously
unrecognised or unrealised growth potential. So far the
Company has acquired only the SW1A Concession in
Thailand but active negotiations and due diligence evaluations
are under way that could lead to the addition of one or more
new assets to its portfolio during the next year.
Block SW1A gave to Carnarvon an immediate cash flow
resulting from the purchase of the Wichian Buri Oil Field.
The initial drilling campaign has increased reserve estimates
to some four million barrels of oil net to the Company.This
estimate does not include the significant potential of the
production license nor does it reflect the value of the
application area, L44/43, which covers the remainder of the
Phetchabun Basin in Central Thailand.
Exploration activities over the past twelve months have been
restricted to Block SW1A and have resulted in two new
discoveries at WB-N1 and WB-N2.The Company is actively
involved in the divestiture of those assets that do not
complement the new strategy.This means that Carnarvon
has been, and will be, selling off those properties that are no
longer regarded as essential to its portfolio, including the
majority of permits in the Carnarvon Basin and perhaps the
acreage in Papua New Guinea.
Wells Drilled During 2000/2001
Carnarvon participated in the drilling of two wells during
the year both of which resulted in discoveries.WB-N1 is
currently shut in pending the award of an expanded
production license but it did prove up the geological
concept under which the acquisition was made by
expanding the confines of the producing Wichian Buri Oil
Field to the north.WB-N2 further delineated the field and
was put on stream immediately.
Well Name
Permit
Basin
Interest
Spud Date
WB-N1
WB-N2
SW1A
SW1A
Thailand
Thailand
40%
40%
21 Feb 01
26 May 01
Metres
1007
1020
Comment
Discovery
Discovery
Upcoming Wells
The Company has agreed to an aggressive field
development campaign over the course of the next year
to actively bring on stream a number of wells in an effort
to bolster cash flow. With each successful well producing
oil directly to the refiner it is imperative that the joint
venture enters into an accelerated development program
designed to maximise the financial returns to the
participants.There are also a number of low risk prospects
adjacent to the existing production fields that have been
included in the expanded production license that will be
investigated.
Well Name
Permit
Basin
Interest
Spud Date
Metres
Comment
WB-N3
WB-N4
WB-N5
WB-N6
WB-3N
Huai Phai
SW1A
SW1A
SW1A
SW1A
SW1A
SW1A
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
40%
40%
40%
40%
40%
40%
3Q 2001
3Q 2001
4Q 2001
4Q 2001
1Q 2002
1Q 2002
Development
Development
Development
Development
Exploration
Exploration
4
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
Thailand
There are over 30 significant Tertiary basins that have been
identified in Thailand. Hydrocarbons are found throughout
the trend from the Fang basin in the north to the Songkhla
basin in the south.The Phetchabun basin is located within
the Sukhothai-Loei fold belt, immediately north of the Mae
Ping fault zone. Exploration in the South Phetchabun Basin
commenced with the SW1 Concession in the mid 1980s.
Six wildcat wells have been drilled with hydrocarbons
produced from four new field discoveries (including the
economically marginal Bo Rang gas field).
The basin comprises a series of five half and full grabens
located in a narrow, elongate (30 km by 120km)
intermontaine rift. Individual grabens range in depth from
2500 meters in the Wichian Buri graben in the south to
1100 meters or less in the North Phetchabun sub-basin.
Block SW1A, in which Carnarvon holds a 40% equity,
covers the northern portion of the South Phetchabun
Basin and contains the producing Wichian Buri and Si Thep
oil fields as well as the Bo Rang gas discovery.
The WB-N1 well is located 1.7 kilometers northeast of
Wichian Buri-1 and represents an exploratory step-out
from the Wichian Buri Oil Field into an independently
closed structure.The well successfully tested the
productive F-Sandstone package in a four-way, dip-closed
anticline in a structurally up dip position from the Wichian
Buri Oil Field.
Thailand Block SWIA, Permit Details
5
Review of Operations (cont.)
Papua New Guinea
Petroleum Retention Licenses (PRLs) 4 & 5 (Carnarvon
15%) have been excised from the original PPL 157.These
permits are located in the foreland of the Papuan Basin in
Papua New Guinea near the port town of Kiunga on the
Fly River.
Stanley-1, located within PRL 4 was a gas/condensate
discovery that identified 12 to 13 meters of gross gas pay
of which 9 to 10 meters is considered to be net pay of
good reservoir quality and potential deliverability.The
Operator estimates there is a potential recoverable
volume associated with this gas pay of approximately 110
BCF of gas and 4 million barrels of condensate.
The Elevala-1 discovery, situated in PRL 5, was made in
1990, and flowed gas at 11.3 MMCFD with an associated
condensate flow of 634 barrels of condensate per day.The
Elevala feature is estimated to contain some 550 BCF of
gas as well as 30 million barrels of condensate. Also within
the confines of PRL 5 is the Ketu discovery with an
additional 250 BCF and 13 million barrel of condensate.
Papua New Guinea
PRLs 4 & 5 Permit Details
6
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
Carnarvon Basin
EP 110 (Carnarvon 25.8585%)
This permit is located onshore/offshore at Onslow,
Western Australia, and is adjacent to the Tubridgi Gas
Field. Carnarvon has recently reduced its equity and
relinquished the operatorship in the permit by virtue of a
farm-out to Gulliver Productions in return for a two year
carry through the acquisition of a seismic program. In the
event that the interpretation of the seismic defines an
exploration target, the proximity to Tubridgi will make the
economics very attractive and reduce the time required to
bring on stream a new discovery. A well is required to be
drilled during the third permit year placing it sometime
during 2002.
EP 395 (Carnarvon 11.61%)
WA 254-P Parts 1, 3 and 4 (Carnarvon 7.82%)
WA 254-P Part 2 (Carnarvon 10.31%)
EP 342/TP9 (Carnarvon 9.70873%)
Carnarvon is well advanced in the negotiation for the sale
of these permits in the Carnarvon Basin.The decision was
made for the divestiture of the blocks as they did not fit in
with the new strategy being undertaken by the Company
which is focused on the acquisition of undervalued
producing properties with an upside to be developed by
a combination of technical expertise and state-or-the-art
technology. Cash generated from the sale of these assets
will be used in the implementation of that new strategy
throughout the region in projects similar in nature to that
in Thailand.
EP 325 (Carnarvon 1.8%)
Carnarvon has sold its equity in this permit to the
Operator,Victoria Petroleum.
Perth Basin
Carnarvon owns 11% of AusAm Resources NL and retains
a royalty of 2.5% by virtue of a sales agreement completed
in 2000 over a number of Perth Basin blocks. AusAm
Resources NL is preparing for a drilling campaign to begin
during the third quarter of 2001.Their interests are shown
below:
Interest
EP 413
EP 407
EP 23
EP 321
EP 414
%
9.44%
42.50%
14.38%
38.25%
18.89%
Carnarvon Basin
Infrastructure and Location Map
7
Directors’ Report
Your directors submit their report for the year ended
30 June 2001.
Interests in the Shares and Options of the
Company and Related Bodies Corporate
Directors
The names of the directors of the Company in office
during the financial year and until the date of this report
are:
George White - Appointed director 3 November 1992,
and Chairman on 28 November 1996
Ken Tregonning - Appointed director 14 December 2000
Neil Fearis - Appointed director 30 November 1999
David Orth - Appointed director 14 December 2000
Warren Beckwith - Appointed director 17 August 1998,
resigned 12 July 2001
Derek Cowlan - Appointed director 9 December 1998,
resigned 12 July 2001
Stuart Hohnen - Appointed director 21 June 1993,
resigned 30 November 2000
The details of the directors of the Company are:
George White
Non-Executive Chairman
Age 57. Bachelor of Science (Hons)
Fellow of the Australian Institute of Company Directors
Member of the Executive Council of the Chamber of
Minerals & Energy of Western Australia
Director of Doral Mineral Industries Limited and
Australian Fused Materials Pty Ltd
Ken Tregonning
Managing Director
Age 49. Bachelor of Science (Hons), Ph.D.
Member of the Society of Petroleum Engineers (SPE)
Past Chairman SPE (NSW/ACT Chapter) and member of
the Executive Committee SPE (Kuala Lumpur Chapter)
Neil Fearis
Non-Executive Director
Age 50. Bachelor of Law (Hons)
Director of Kresta Holdings Limited and Director
(and WA Chairman) of the Australian-British
Chamber of Commerce
Member of the Australian Institute of Company Directors
David Orth
Executive Director
Age 52. Bachelor of Science
Diploma of GeoSci
Member of American Association of Petroleum Geologists
(AAPG)
Relevant interest in the shares and options of the
Company as at the date of this report:
Director
Ordinary
Shares
25 cents
Options
31/7/2002
GHC White
2,713,482
1,131,741
KC Tregonning
4,000,000
100,610
DJ Orth
NC Fearis
2,000,000
800,000
–
–
20 cents
Options
31/12/2003
–
5,000,000
5,000,000
–
Corporate Information
Corporate structure
Carnarvon Petroleum NL is a no liability company
incorporated and domiciled in Australia. Carnarvon
Petroleum NL has prepared a consolidated financial report
incorporating the following entities:
Entity Name
% Ownership
Carnarvon Petroleum NL
S.R.L. Exploration Pty Ltd
Lassoc Pty Ltd
Strategic Exploration (Asia) Limited
Principal activities
100
100
100
100
The principal activity during the year was exploration,
development and production of oil and gas.There was
no significant change in the nature of this activity during
the year.
Employees
The consolidated entity employed 2 employees as at 30
June 2001 (2000: 2 employees).
Earnings Per Share
Earnings Per Share
Basic earnings per share
Diluted earnings per share
Dividends
Cents
(1.2)
(1.2)
The directors have recommended that no dividend be paid
in respect of the financial year ending 30 June 2001. No
dividends were declared or paid during the financial year.
8
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
Night crew during drilling of WB-N1well, SWIA Concession, Central Thailand.
Review of Operations
A review of the operations during the financial year of the
Carnarvon Petroleum Consolidated Entity is contained in
pages 4 to 7 of this Annual Report and the directors adopt
and endorse that review which is to be regarded as
incorporated herein.
Operating Results
The loss of the consolidated entity after providing for income tax was
This included exploration costs written off amounting to
The loss of the parent entity after providing for income tax was
This included exploration costs written off amounting to
$ (947,697)
$ (379,806)
$ (1,271,238)
$ (379,806)
Significant Changes in the State of Affairs
Significant Events After Balance Date
The directors of the parent entity evaluated a number
of opportunities to acquire oil and gas production and
renewable energy projects. In December 2000 the
acquisition of a 40% interest in the producing Wichian
Buri-1 & 1A (proved reserve area only) and Si Thep-1
oilfields (forming part of the SW1A Exploration Block)
in Thailand were finalised.This acquisition was satisfied by
the payment of US$800,000 plus the funding of 80% of
the cost of two exploration wells capped to a maximum
of US$400,000 per well.This acquisition represents the
first step in the consolidated entity’s change in strategy
from being a purely wildcat oil and gas exploration entity
into a oil and gas producing entity generating cash flows
from operations.
On 2 August 2001, the parent entity announced a
placement of 6,000,000 fully paid ordinary shares at 7
cents each together with 6,000,000 free options
exercisable at 25 cents each expiring on 31 July 2002.
The total sum raised was $420,000 and the cost of the
placement was $21,000.The funds were raised for working
capital purposes.
On 31 August 2001 the Company lodged a prospectus for
the open placement of 40,000,000 fully paid ordinary
shares at 7 cents each with free attaching options
exercisable at 25 cents each expiring on 31 December
2001.The placement is subject to shareholder approval.
A notice of extraordinary general meeting is due to be
mailed to shareholders on 10 September 2001 and the
9
Directors’ Report (cont.)
meeting to approve the issue of shares and options is due
to be held on 11 October 2001.The funds raised by the
share placement will be used to fund the consolidated
entity’s portion of the development program on the
SW1A Concession and provide working capital for the
Company to pursue other oil and gas production
opportunities.
Likely Developments and Expected Results
The Review of Operations outlines likely developments in
the operations of the consolidated entity.The directors are
not presently in a position to predict the results of those
developments.
The directors are of the opinion that further information
as to the likely developments in the operations of the
consolidated entity would prejudice the interests of the
Company and the consolidated entity and it has
accordingly not been included.
Environmental Regulations and Performance
The consolidated entity’s oil and gas exploration and
development activities are concentrated in Western
Australia,Thailand and Papua New Guinea. Environmental
obligations are regulated under both State and Federal Law
in Western Australia, under Department of Mineral
Resources regulations in Thailand, and under the Oil and
Gas Act in Papua New Guinea. No significant
environmental breaches have been notified by any
government agency during the year ended 30 June 2001.
Share Options
Unissued shares
As at the date of this report, there were 53,953,645
unissued ordinary shares under options as follows:
(cid:2) 43,953,645 options to take up one ordinary share in
Carnarvon Petroleum NL at an issue price of 25 cents.
The options expire on 31 July 2002; and
(cid:2) 10,000,000 options to take up one ordinary share in
Carnarvon Petroleum NL at an issue price of 20 cents.
The options expire on 31 December 2003.
The option holders are entitled to participate in any new
pro-rata issue of securities of the Company on the prior
exercise of the options.
Shares issued as a result of exercise of options
There have been no options exercised during or since the
end of the financial year.
Expiry of options
On 28 July 2001, 7,373,680 options exercisable at $4.00
each expired and were cancelled.
Production facility adjacent to WB-1well, SWIA Concession, Central Thailand.
10
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
Indemnification and Insurance of Directors
and Officers
The Company has arranged Directors and Officers
insurance to cover losses or liabilities incurred by that
person as an officer of the Company or of a related body
corporate as permitted by law. Full details of the cover and
premium are not disclosed as the insurance policy
prohibits the disclosure.The amount of the premium
however is included as part of directors’ remuneration in
note 19 to the financial statements.
Directors’ Benefits
Disclosure of benefits provided to directors during the
financial year is made in notes 19 and 22 to the financial
statements.
Directors’ and other Officers’ Emoluments
The Board of directors is responsible for determining and
reviewing compensation arrangements for the directors,
officers and executive employees.The Board assesses the
appropriateness of the nature and amount of emoluments
on a periodic basis by reference to relevant employment
market conditions.
Officers and executives are given the opportunity to
receive their emoluments in a variety of forms including
cash and fringe benefits such as motor vehicles. It is
intended that the manner of payment chosen will be
optimal for the recipient without creating undue cost for
the Company.
Total directors’ fees are approved by shareholders and the
Board is responsible for the allocation amongst the
individual members of the Board.
The overall objective is to ensure maximum shareholder
benefit from the retention of a quality Board and executive
team.
Details of the nature and amount of each element of the
emolument of each director and each of the executive
officers of the Company are as follows:
Emoluments of directors of Carnarvon Petroleum NL
Emoluments Paid
Long Term Emoluments
Non-Executive Directors
GHC White
NC Fearis
DT Cowlan
SA Hohnen
Executive Directors
KC Tregonning
DJ Orth
WT Beckwith
Base Fee
$
20,000
17,083
17,083
6,250
113,333
87,500
54,458
Other
$
Termination &
similar payments
$
–
–
–
–
–
–
–
–
–
–
–
–
–
49,997
Superannuation
$
800
1,367
1,367
500
–
–
1,000
There are no performance bonus plans offered to directors of the Company.
Emoluments of executive officers of Carnarvon Petroleum NL
Emoluments Paid
Long Term Emoluments
Base Salary
$
66,461
Other
$
–
Termination &
similar payments
$
–
Superannuation
$
7,500
L Troncone
The terms ‘director’ and ‘officer’ have been treated as mutually exclusive for the purposes of this disclosure.
The elements of emoluments have been determined on the basis of cost to the Company and consolidated entity.The
category ‘Other’ includes the value of any non-cash benefits provided. Executive officers are those directly accountable and
responsible for the operational management and strategic direction of the Company and the consolidated entity.
11
Directors’ Report (cont.)
Options granted to directors and executive officers
The following options were granted to executive directors
during or since the end of the financial year:
Executive Directors
Number of Options
KC Tregonning
DJ Orth
5,000,000
5,000,000
Directors’ Meetings
During the year, 13 directors’ meetings were held.The
number of meetings attended by each director is as
follows:-
Exercise Price of
Options ($)
$0.20
$0.20
Expiry Date of
Options
31 December 2003
31 December 2003
Director
GHC White
KC Tregonning
NC Fearis
DJ Orth
WT Beckwith
DT Cowlan
SA Hohnen
Number of Board Meetings
Held While in Office
Number of Board Meetings
Attended
13
9
13
9
13
13
4
13
9
12
9
13
11
4
The Company does not have an audit committee as the
directors believe that the small size of the Company
enables the Board to monitor and control the operations
of the Company.
Corporate Governance
In recognising the need for the highest standards of
corporate behaviour and accountability, the directors of
Carnarvon Petroleum NL support and have adhered to
the principles of corporate governance.The Company’s
corporate governance statement is contained in pages 36
and 37 of this Annual Report.
Signed in accordance with a resolution of the directors.
GHC White
Director
Perth 31 August 2001
12
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
Statement of Financial Performance
for the Year ended 30 June 2001
Notes
2(a)
2(b)
2(c)
2(d)
2(e)
2(d)
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
533,490
(407,786)
172,129
–
–
–
–
–
–
757,315
161,292
757,315
(379,806)
(541,575)
(379,806)
(538,182)
190,224
–
–
–
(1,055,948)
(654,467)
(1,052,724)
(657,860)
REVENUES FROM ORDINARY
ACTIVITIES
Cost of sales
Other revenues from ordinary activities
Exploration expenses
Unrealised foreign exchange gain
Other expenses from ordinary activities
LOSS FROM ORDINARY ACTIVITIES
BEFORE INCOME TAX EXPENSE
(947,697)
(438,727)
(1,271,238)
(438,727)
INCOME TAX EXPENSE RELATING TO
ORDINARY ACTIVITIES
3
–
–
–
–
LOSS FROM ORDINARY ACTIVITIES
AFTER INCOME TAX EXPENSE
ATTRIBUTABLE TO MEMBERS OF
CARNARVON PETROLEUM NL
(947,697)
(438,727)
(1,271,238)
(438,727)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
25(a)
25(b)
(1.2)
(1.2)
(0.6)
(0.6)
13
Statement of Financial Position
As at 30 June 2001
CURRENT ASSETS
Cash
Receivables
Prepayments and other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Other financial assets
Plant and equipment
Deferred exploration evaluation and
development costs
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
Notes
2001
$
2000
$
2001
$
2000
$
788,519
220,599
32,680
4,373,791
263,406
8,165
463,199
4,373,791
70,269
6,902
263,406
8,165
1,041,798
4,645,362
540,370
4,645,362
249,815
282,876
31,933
139,290
281,757
14,514
1,855,267
1,765,838
19,321
139,290
281,787
14,514
3,144,389
–
–
–
4
5
4
6
8
9
TOTAL NON-CURRENT ASSETS
3,709,013
435,561
3,640,426
435,591
TOTAL ASSETS
4,750,811
5,080,923
4,180,796
5,080,953
CURRENT LIABILITIES
Payables
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Accumulated losses
TOTAL EQUITY
10
11
11
12
13
606,566
10,536
617,102
–
–
72,606
4,437
77,043
8,474
8,474
360,062
10,536
370,598
–
–
72,606
4,437
77,043
8,474
8,474
617,102
85,517
370,598
85,517
4,133,709
4,995,406
3,810,198
4,995,436
38,111,125
38,025,125
38,111,125
38,025,125
(33,977,416)
(33,029,719)
(34,300,927)
(33,029,689)
4,133,709
4,995,406
3,810,198
4,995,436
14
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
Statement of Cash Flows
For the Year ended 30 June 2001
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
Notes
2001
$
2000
$
2001
$
2000
$
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers
397,845
–
–
–
Payments to suppliers and employees
(933,589)
(560,371)
(736,080)
(560,371)
Interest received
Exploration costs
Goods and services tax paid
Rothschild contribution
185,138
(379,806)
(73,746)
212,303
(541,575)
–
174,299
(379,806)
(73,746)
212,303
(538,182)
–
–
225,000
–
225,000
NET CASH FLOWS FROM/(USED IN)
OPERATING ACTIVITIES
14(a)
(804,158)
(664,643)
(1,015,333)
(661,250)
CASH FLOWS FROM INVESTING
ACTIVITIES
Payment for purchase of interests in permits
(1,613,796)
Payments for exploration and development
expenditure
Proceeds from sale of permits
Purchase of plant & equipment
Proceeds from sale of plant & equipment
Purchase of shares in unlisted public company
Purchase of shares in subsidiary
Purchase of permit security deposits
NET CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING
ACTIVITIES
Advances to controlled entities
Proceeds from issue of shares & options
Capital raising costs
Proceeds from sale of employee shares
NET CASH FLOWS FROM/(USED IN)
FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN
CASH HELD
Add opening cash brought forward
Effects of foreign exchange rate changes
on cash
–
–
–
–
3,000
(21,757)
–
(1,490)
–
–
200,000
(13,218)
–
(1,119)
(1,475,470)
–
–
–
–
–
3,000
(21,757)
–
(1,490)
(1,359,469)
200,000
(25,830)
–
(1,119)
–
–
(2,800,214)
(20,247)
(1,289,807)
(20,247)
–
–
–
–
–
–
(1,605,452)
844,800
(42,720)
9,417
–
–
–
(3,393)
844,800
(42,720)
9,417
811,497
(1,605,452)
808,104
(3,604,372)
126,607
(3,910,592)
126,607
4,373,791
4,247,184
4,373,791
4,247,184
19,100
–
–
–
CLOSING CASH CARRIED FORWARD
14(b)
788,519
4,373,791
463,199
4,373,791
15
Notes to the Financial Statements
30 June 2001
1. Summary of Significant Accounting Policies
(a) Basis of accounting
The financial statements have been prepared in accordance with the historical cost convention.
The financial report is a general purpose financial report which has been prepared in accordance with the requirements
of the Corporations Act 2001 which includes applicable Accounting Standards. Other mandatory professional reporting
requirements (Urgent Issues Group Consensus Views) have also been complied with.
The accounting policies adopted are consistent with those of the previous year.
(b) Cash and cash equivalents
For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market
investments at call readily convertible to cash.
(c) Recoverable amount
Non-current assets are not carried at an amount above their recoverable amount, and where carrying values exceed this
recoverable amount, assets are written down. In assessing recoverable amounts the relevant cash flows have not been
discounted to their present value, except where specifically stated.
(d)
Investments
Non-current investments are carried at the lower of cost and recoverable amount.
(e) Plant and equipment
The Company owns plant and equipment, which is carried at cost. Assets are depreciated at rates based upon their
expected useful lives using the straight line method. Depreciation periods for all equipment are between 2 and 5 years
(2000: 2 and 5 years).
(f)
Joint ventures
Interest in the joint venture operation is brought to account by including in the respective classifications the share of
individual assets employed and share of liabilities and expenses incurred.
(g) Deferred exploration, evaluation and development costs
Deferred exploration, evaluation and development costs represent acquisition costs and direct exploration, evaluation
and development costs incurred.These costs are only carried forward in respect of each separate area of interest for
which rights of tenure are current and where such costs are expected to be recouped through successful development
and economic exploitation of the area of interest.
All costs relating to activities in areas of interest which have not yet reached a stage that permits an assessment of the
existence or otherwise of economically recoverable reserves are expensed as incurred.
Amortisation
Upon commencement of operations, expenditure is amortised on a units of production basis. Amortisation rates are
based on Proven plus Probable reserve estimates. No amortisation charge was applied in the current year as at current
disclosed reserve estimates the effect of amortisation is not considered to materially affect the results.
(h) Employee entitlements
Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the
reporting date.These benefits include wages and salaries, annual leave and long service leave. Sick leave is not accrued as
it is not of a material nature and any entitlement is not vested on termination of employment.
Liabilities arising in respect of wages and salaries, annual leave and any other employee entitlements expected to be
settled within twelve months of the reporting date are measured at their nominal amounts. All other employee
entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of
services provided by employees up to the reporting date. In determining the present value of future cash outflows, the
interest rates attaching to government guaranteed securities which have terms to maturity approximating the terms of
the related liability are used.
Employee entitlements expenses and revenues arising in respect of the following categories:
(i) wages and salaries, non-monetary benefits, annual leave, long service leave and other leave entitlements; and
(ii) other types of employee entitlements,
are charged against profits on a net basis in their respective categories.
16
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
(h) Employee entitlements (cont.)
The value of the employee share scheme described in note 16 is not being charged as an employee entitlement
expense.
In respect of the consolidated entity’s defined benefits superannuation plans, any contributions made to the
superannuation funds by entities within the consolidated entity are charged against profits when due.
(i) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the
revenue can be reliably measured.The following specific recognition criteria must also be met before revenue is
recognised:
Sale of goods
Control of the goods has passed to the buyer.
Interest
Control of a right to receive consideration for the provision of, or investment in, assets has been attained.
(j) Comparison
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current
financial year amounts and other disclosures.
(k) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the
agreement so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and
benefits of ownership of the leased item, are recognised as an expense on a straight line basis.
(l) Principles of consolidation
The consolidated financial statements are those of the economic entity, comprising Carnarvon Petroleum NL (the
parent entity) and all entities which Carnarvon Petroleum NL controlled from time to time during the year and at
balance date.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity using consistent
accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been
eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
(m) Foreign currency
Transactions
Foreign currency transactions are initially translated into Australian dollars at the rate of exchange applying on the date
of the transaction.The subsequent receipt of payment of funds relating to the transaction is translated at the rate
applicable on the date of receipt of payment.
Assets and liabilities at balance date are translated at the rate of exchange prevailing on balance date.
Exchange gains or losses, whether realised or unrealised, from the translation of assets and liabilities are included in the
determination of operating results.
Foreign operations
Strategic Exploration (Asia) Limited (SEAL), a wholly owned subsidiary, is accounted for in its functional currency. SEAL
is an integrated operation and its financial statements are translated using the temporal rate method.
Hedges
The economic entity has no hedging instruments in place.
17
Notes to the Financial Statements (cont.)
30 June 2001
(n)
Income tax
Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated
on the accounting profit after allowing for permanent differences.To the extent timing differences occur between the
time items are recognised in the financial statements and when items are taken into account in determining taxable
income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit
or a provision for deferred income tax.The net future income tax benefit relating to tax losses and timing differences is
not carried forward as an asset unless the benefit is virtually certain of being realised.
The income tax expense for the year is calculated using the 34% tax rate.
(o) Earnings per share
Basic earnings per share is determined by dividing the operating profit after tax and after preference dividends by the
weighted average number of ordinary shares outstanding during the financial year.
(p) Share capital
Ordinary share capital is recognised at the fair value of the consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
(q) Trade and other payables
Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the consolidated entity.
Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as
an expense on an accrual basis.
(r) Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectable debts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are
written-off as incurred.
Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income
on an accrual basis.
18
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
2. Revenues from Ordinary Activities
Loss from ordinary activities before income tax is
arrived at after taking into account:
(a) Revenues from oil and gas operations
Sales revenue
Oil-SW1A Concession
Total revenues from oil and gas operations
(b) Cost of sales
Production
Royalty and excise
Transportation
Selling, general and administration
Total cost of sales
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
533,490
533,490
(146,785)
(27,100)
(45,148)
(188,753)
(407,786)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(c) Other revenues from ordinary activities
Interest – other persons/corporations
172,129
220,951
161,292
220,951
Profit from sale of non-current assets
and investments
Profit from sale of employee shares
Profit from sale of exploration permits
Other
–
–
–
–
3,000
9,417
460,000
63,947
–
–
–
–
3,000
9,417
460,000
63,947
Total other revenues from ordinary activities
172,129
757,315
161,292
757,315
(d) Other expenses from ordinary activities
Exploration costs incurred and expensed
in current year
Corporate administration costs
Administration
Depreciation – plant & equipment
Loss on disposal of plant and equipment
Rental premises – operating lease
Provision for non-recovery of:
Controlled entity advances
Employee share loans
(379,806)
(541,575)
(379,806)
(538,182)
(977,689)
(8,411)
–
(115,503)
–
45,655
(516,386)
(12,197)
(3,794)
(69,175)
–
(52,915)
(974,465)
(8,411)
–
(115,503)
–
45,655
(516,386)
(12,197)
(3,794)
(69,175)
(3,393)
(52,915)
Total corporate administration costs
(1,055,948)
(654,467)
(1,052,724)
(657,860)
Total other expenses from ordinary activities
(1,435,754)
(1,196,042)
(1,432,530)
(1,196,042)
(e) Gains/(Losses)
Unrealised foreign exchange gain on
translation of integrated subsidiary
Loss from ordinary activities before
income tax
190,224
–
–
–
(947,697)
(438,727)
(1,271,238)
(438,727)
19
Notes to the Financial Statements (cont.)
30 June 2001
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
Notes
2001
$
2000
$
2001
$
2000
$
3.
Income Tax
The prima facie income tax on operating loss differs
from the income tax provided in the financial
statements as follows:
Prima facie income tax benefit on operating loss
322,217
157,942
432,221
157,942
Tax effect of permanent differences
Exploration costs written off
Provision for doubtful debts
Employee share loan written off
Foreign sourced income
Expenditure of a capital nature
Other
Current year tax benefit not brought to account
–
–
–
45,328
(50,561)
–
(316,984)
(137,412)
–
(19,049)
–
–
(89)
(1,392)
–
–
–
–
(50,561)
–
(381,660)
(137,412)
(1,221)
(19,049)
–
–
(89)
(171)
Income tax benefit attributable to operating loss
–
–
–
–
Income tax losses
Future income tax benefit arising from tax losses
of a controlled entity not brought to account at
balance date as realisation of the benefit is not
regarded as virtually certain
This future income tax benefit will only be obtained if:
5,007,641
4,565,838
3,014,669
2,523,507
(a)
(b)
(c)
future assessable income is derived of a nature and an amount sufficient to enable the benefit to be realised;
the conditions for deductibility imposed by tax legislation continue to be complied with; and
no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
4. Receivables
CURRENT
Trade debtors
Interest receivable
Other debtors
4(a)
4(a)
4(a)
110,667
–
85,442
–
13,007
247,039
–
–
45,779
–
13,007
247,039
196,109
260,046
45,779
260,046
Employee share loans
Provision for non-recovery
16(a)
16(a)
177,800
(153,310)
7,800
(4,440)
177,800
(153,310)
7,800
(4,440)
24,490
3,360
24,490
3,360
220,599
263,406
70,269
263,406
20
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
Notes
2001
$
2000
$
2001
$
2000
$
4. Receivables (cont.)
NON-CURRENT
Permit security deposits
Amounts receivable from controlled entities
Provision for non-recovery
4(a)
4(a)
31,490
31,490
31,490
31,490
–
–
–
–
–
–
2,298,801
(693,349)
693,349
(693,349)
1,605,452
–
Employee share loans
Provision for non-recovery
16(a)
16(a)
320,600
(102,275)
404,600
(296,800)
320,600
(102,275)
404,600
(296,800)
218,325
107,800
218,325
107,800
249,815
139,290
1,855,267
139,290
(a) Terms and Conditions
Terms and conditions relating to the above financial instrument
(i) Trade debtors are generally settled in the month after invoicing.
(ii)
Interest receivable on bank accepted bills is recognised on an accrual basis.
(iii) Details of the terms and conditions of related party receivables are set out in note 22.
5. Prepayments and Other Current Assets
Prepayments and other current assets
32,680
8,165
6,902
8,165
6. Other Financial Assets
NON-CURRENT
Shares in controlled entities
Shares in AusAm Resources NL
24
–
–
282,876
281,757
1,482,962
282,876
30
281,757
282,876
281,757
1,765,838
281,787
21
Notes to the Financial Statements (cont.)
30 June 2001
7.
Joint Ventures
The economic entity has the following interests in joint venture operations:
Joint Venture
Principal Activities
Ownership Interest
%
Related Party
%
Thailand
SW1A Concession
Western Australia (Carnarvon Basin)
EP395
WA254-P, Parts 1,3 and 4 including the
proposed Argos-1 Well
WA254-P, Part 2 including the Sage-1 Well
EP110
EP342/TP9
Papua New Guinea (Papuan Basin)
PRLs 4 & 5 (ex PPL157) including the
Stanley, Elevala and Ketu discoveries
Exploration, development,
production and marketing
of crude oil
Exploration for hydrocarbons
40%
11.61%
7.82%
10.31%
46.55%
9.71%
Exploration for hydrocarbons
15%
–
–
–
–
–
–
Assets and liabilities in the joint ventures are
included in the financial statements as follows:
CURRENT ASSETS
Cash
Receivables
Prepayments and other
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Exploration, evaluation and development costs
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
TOTAL LIABILITIES
NET ASSETS
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
253,734
110,667
65,441
429,842
12,612
952,955
965,567
1,395,409
1,269,704
1,269,704
125,705
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Capital expenditure commitments and contingent liabilities in respect of the joint venture are disclosed in Notes 15 and 17
respectively.
22
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
165,109
139,279
152,497
139,279
(133,176)
(124,765)
(133,176)
(124,765)
31,933
14,514
19,321
14,514
CO N S O L I D AT I O N
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
14,514
25,830
–
(8,411)
31,933
14,514
13,218
–
(8,411)
19,321
8. Plant and Equipment
Plant and equipment at cost
Accumulated depreciation
(a) Reconciliations
Reconciliation of the carrying amount of plant
and equipment at the beginning and end of the
current financial year
Plant and equipment
Carrying amount at beginning
Additions
Disposals
Depreciation expense
9. Deferred Exploration, Evaluation and
Development Expenditure
Exploration, evaluation and development costs
carried forward in respect of the SW1A Concession:
Pre-production
Exploration & development phases
3,144,389
–
–
–
The ultimate recoupment of costs carried
forward for exploration and evaluation
phases is dependent on the successful further
development and commercial exploitation
or sale of the SW1A Concession.
10. Payables
CURRENT
Trade creditors
Other creditors
(a) Terms and Conditions
Terms and conditions relating to the
above financial instruments:
(i) Trade and other creditors are
non-interest bearing and are normally
settled on 30 day terms
10(a)
10(a)
138,767
467,799
606,566
20,841
51,765
72,606
–
360,062
360,062
20,841
51,765
72,606
23
Notes to the Financial Statements (cont.)
30 June 2001
11. Provisions
CURRENT
Employee leave entitlements
NON CURRENT
Employee leave entitlements
12. Contributed Equity
(a)
Issued and paid up capital
Ordinary shares fully paid
(b) Movements in shares on issue
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
Notes
2001
$
2000
$
2001
$
2000
$
16
16
10,536
4,437
10,536
4,437
–
8,474
–
8,474
38,111,125
38,025,125
38,111,125
38,025,125
2001
———————————————
Number of
$
Shares
2000
———————————————
$
Number of
Shares
Beginning of the financial year
78,532,846
38,025,125
68,212,846
37,093,845
Issued during the year
– employee share scheme
– public equity raising
less transaction costs
2,000,000
–
–
86,000
–
–
1,520,000
8,800,000
–
129,200
844,800
(42,720)
End of the financial year
80,532,846
38,111,125
78,532,846
38,025,125
(c) Share options
Options over ordinary shares:
In April 2001, 10,000,000 options were issued over ordinary shares exercisable at 20 cents each expiring on 31
December 2003.The options were issued to two executive directors pursuant to their respective service agreements
with the Company. Shareholder approval to issue these options was obtained at a general meeting held on 15 March 2001.
Unissued ordinary shares of the Company under option:
Expiry date
Exercise Price
$
28 July 2001 (since expired and cancelled) 4.00
31 July 2002
31 December 2003
0.25
0.20
Number of Options
2001
7,373,680
37,953,645
10,000,000
2000
7,373,680
37,953,645
–
An additional 6,000,000 options exercisable at 25 cents each expiring on 31 July 2002 were issued on 2 August 2001
pursuant to a placement of shares.
(d) Terms and conditions of contributed equity
Ordinary Shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of, and amounts paid up on,
shares held.
24
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
13. Accumulated Losses
Balance at the beginning of the year
(33,029,719)
(32,590,992)
(33,029,689)
(32,590,962)
Operating loss attributable to members of
Carnarvon Petroleum NL
(947,697)
(438,727)
(1,271,238)
(438,727)
Balance at the end of the year
(33,977,416)
(33,029,719)
(34,300,927)
(33,029,689)
14. Statement of Cash Flows
(a) Reconciliation of the operating loss
after tax to the net cash flows used in
operations
Loss from ordinary activities after tax
Provision for diminution – employee share loans
Provision for non-recovery of controlled
entity advances
Depreciation – plant & equipment
Gain on sale of plant and equipment
Gain on sale of employee shares
Unrealised foreign exchange gain
Profit on sale of exploration permits
Changes in assets and liabilities:
Receivables
Prepayments
Accounts payable
Employee entitlements
(947,697)
(45,655)
–
8,411
–
–
(190,224)
–
(136,063)
(24,515)
533,960
(2,375)
(438,727)
52,915
–
12,197
3,794
(792)
–
(460,000)
192,174
7,966
(33,295)
(875)
(1,271,238)
(45,655)
–
8,411
–
–
–
–
14,267
1,263
279,994
(2,375)
(438,727)
52,915
3,393
12,197
3,794
(792)
–
(460,000)
192,174
7,966
(33,295)
(875)
Net cash flows used in operating activities
(804,158)
(664,643)
(1,015,333)
(661,250)
(b) Reconciliation of cash
Cash balance comprises:
Cash at bank and at call
Term deposit
Bank accepted bill
Closing cash balance
(c) Financing facilities available
At balance date the Company was not utilising
any financing facilities.
(d) Non-cash financing and investment
activities
788,519
–
–
39,908
1,000,000
3,333,883
463,199
–
–
39,908
1,000,000
3,333,883
788,519
4,373,791
463,199
4,373,791
Issue of shares under the employee share scheme
86,000
129,200
86,000
129,200
25
Notes to the Financial Statements (cont.)
30 June 2001
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
208,848
–
–
–
208,848
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15. Expenditure Commitments
(a) Capital expenditure commitments
Estimated capital expenditure contracted for at
balance date, but not provided for, payable:
Not later than one year
Joint venture
Other
Later than one year and not later than 5 years
Joint venture
Other
(b) Lease expenditure commitments
Operating leases (non cancellable)
Not later than one year
Later than one year and not later than 5 years
34,750
–
16,462
–
34,750
–
16,462
–
Aggregate lease expenditure contracted
for at balance date
Aggregate expenditure commitments comprise:
Amounts not provided for at balance date
Rental commitments
34,750
16,462
34,750
16,462
34,750
16,462
34,750
16,462
Due to the nature of consolidated entity’s operations in exploring and evaluating areas of interest, it is difficult to accurately
forecast the nature or amount of future expenditure, although it will be necessary to incur expenditure in order to retain the
entity’s present permit interests. Expenditure commitments on exploration permits can be reduced by selective relinquishment
of exploration tenure, by the renegotiation of expenditure commitments and by farming out portions of the entity’s equity.The
Company forecasts its exploration commitments for 2001/02 to be approximately $0.2 million (actual 2000/01: $0.4 million).
16. Employee Entitlements
Aggregate employee entitlements,
including on-costs
The aggregate employee entitlement liability
is comprised of:
Accrued wages, salaries and on costs
Provisions (Current)
Provisions (Non-Current)
11
11
–
10,536
–
10,536
–
4,437
8,474
12,911
–
10,536
–
10,536
–
4,437
8,474
12,911
26
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
16. Employee Entitlements (cont.)
(a) Employee share plan
At the Annual General Meeting held on 16 October 1997 the shareholders approved the Carnarvon Employee Share
Plan and a loan arrangement scheme to assist in funding the acquisition of Plan Shares.
Under the terms of the Plan:
(i)
(ii)
the Company may, in its absolute discretion, make an offer of ordinary fully paid shares in Carnarvon Petroleum NL
to any eligible employee;
an eligible employee is any person who is a director or employee of Carnarvon Petroleum NL or any of its
subsidiaries;
(iii)
the issue price is determined by the directors and is not to be less than the weighted average market price of the
Company’s shares on the five trading days prior to the proposed date of offer;
(iv)
transfer of shares is limited within the first two years;
(v) eligible employees receive an interest free advance to acquire the shares;
(vi)
the maximum liability of the advance is the market value of the shares from time to time;
(viii) the eligible employee is the legal owner of the shares subject to the provisions of the loan agreement between the
Company and the eligible employee; and
(viii) Australian Stock Exchange Listing Rules require the Company to obtain shareholder approval for the issue of shares
to directors.
At balance date there were 8 (2000: 7) eligible employees, all of whom have received and accepted an offer.
During the financial year, 2,000,000 (2000:1,520,000) shares were issued at an issue price of 4.3 cents (2000: 8.5 cents)
each for a value of $86,000 (2000: $129,200) which was funded under the loan arrangement scheme with the Company.
The market value of the 2,000,000 (2000: 1,520,000) shares at the date of issue was $86,000 (2000: $129,200). At
balance date the market value of the shares was $158,000 (2000: $85,120).
In respect to the eligible employees who ceased employment during the year, Nil (2000: 115,000) shares were disposed
of by the Company Secretary as agent. During last year, $9,417 was used to repay the advances under the loan
arrangement scheme. During the year there was also a further 310,000 (2000: 60,000) shares being held by the Company
Secretary as agent for employees who have ceased employment with a market value of $24,490 (2000: $3,360).
At balance date, there were 3,985,000 (2000: 1,925,000) shares on issue in respect to eligible employees with a market
value of $314,815 (2000: $107,800).
The advances in respect to the shares on issue or being held have been written down to market value as at balance date.
The following amounts were recognised in the financial statements in relation to shares issued during the financial year
under the Carnarvon Employee Share Plan:
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
Share capital
86,000
129,200
86,000
129,200
(b) Superannuation Commitments
Employees make contributions to employee
superannuation plans based on various percentages
of their salary and wage.The consolidated entity
has a legal obligation to contribute to the plans
to the extent of the superannuation guarantee
legislation and the specific terms of individual
employment contracts.
Employer contributions to the plans
28,240
24,884
28,240
24,884
27
Notes to the Financial Statements (cont.)
30 June 2001
17. Contingent Liabilities
Controlled Entities
(a) Carnarvon Petroleum NL has agreed not to recall the loans owing by its controlled entities where it would result in the
controlled entity not being able to meet its debts and commitments as they fall due.
(b)
(c)
(d)
In accordance with normal petroleum industry practice, the consolidated entity has entered into joint ventures and farmin
agreements with other parties for the purpose of exploring and developing its petroleum permit interests. If a party to a
joint venture defaults and does not contribute its share of joint venture obligations, then the other joint venturers are
liable to meet those obligations. In this event, the interest in the permit held by the defaulting party may be redistributed
to the remaining joint venturers.
Securities have been placed in favour of the Independent State of Papua New Guinea in respect of the compliance with the
conditions of Petroleum Prospecting Licences (PPL’s) granted to the Company and its joint venturers, totalling $31,490
(2000: $31,490).
If a discovery is made within an exploration permit in which a Native Title claim has been made and a production licence is
sought in respect of that exploration permit, the issue of the production licence may be subject to the right to negotiate
procedures set out in the Native Title Act. If no agreement is reached with the claimants, the National Native Title Tribunal
will conduct a hearing to determine whether the licence can be granted, and if so on what conditions. A condition of the
grant may be the payment of compensation.
18. Segment Information
Geographical Segments
Australia
Thailand
Papua New Guinea
Consolidated
2001
$
2000
$
2001
$
2000
$
2001
$
2000
$
2001
$
2000
$
Segment revenue
Exploration costs
expensed
Other
Segment Result
Exploration and
development costs
Other
Segment Assets
–
–
533,490
(183,588)
(359,315)
(145,288)
–
–
–
–
533,490
–
(50,930)
(182,260)
(379,806)
(541,575)
(891,432)
--------------------------------------------
(1,075,020)
--------------------------------------------
--------------------------------------------
102,848
--------------------------------------------
(256,467)
--------------------------------------------
--------------------------------------------
(209,949)
--------------------------------------------
178,253
--------------------------------------------
--------------------------------------------
–
--------------------------------------------
–
--------------------------------------------
--------------------------------------------
–
--------------------------------------------
(50,930)
--------------------------------------------
--------------------------------------------
– (1,101,381)
--------------------------------------------
(947,697)
--------------------------------------------
--------------------------------------------
--------------------------------------------
(182,260)
--------------------------------------------
--------------------------------------------
102,848
--------------------------------------------
(438,727)
--------------------------------------------
--------------------------------------------
–
–
3,144,389
–
–
–
3,144,389
–
1,084,195
--------------------------------------------
1,084,195
--------------------------------------------
--------------------------------------------
5,049,433
--------------------------------------------
5,049,433
--------------------------------------------
--------------------------------------------
490,737
--------------------------------------------
3,635,126
--------------------------------------------
--------------------------------------------
–
--------------------------------------------
–
--------------------------------------------
--------------------------------------------
31,490
--------------------------------------------
31,490
--------------------------------------------
--------------------------------------------
31,490
--------------------------------------------
31,490
--------------------------------------------
--------------------------------------------
1,606,422
--------------------------------------------
4,750,811
--------------------------------------------
--------------------------------------------
5,080,923
--------------------------------------------
5,080,923
--------------------------------------------
--------------------------------------------
The consolidated entity operated predominantly in the exploration for oil and gas in Australia,Thailand and Papua New Guinea.
28
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
19. Remuneration of Directors
Income paid or payable, or otherwise made available,
in respect of the financial year, to all directors of each
entity in the consolidated entity, directly or indirectly,
by the entities of which they are directors or any
related party.
Income paid or payable, or otherwise made available,
in respect of the financial year, to all directors of
Carnarvon Petroleum NL, directly or indirectly,
from the entity or any related party.
The number of directors of Carnarvon Petroleum NL
whose income (including superannuation contributions)
falls within the following bands is:
$
2001
2000
0 – 9,999
10,000 – 19,999
20,000 – 29,999
80,000 – 89,999
100,000 – 109,999
110,000 – 119,999
1
2
1
1
1
1
1
3
2
—
—
—
20. Remuneration of Executives
Remuneration received or due and receivable by
executive officers of the consolidated entity whose
remuneration is $100,000 or more, from entities
in the consolidated entity or a related party, in
connection with the management of the affairs of
the entities in the consolidated entity whether as
an executive officer or otherwise.
Remuneration received or due and receivable by
executive officers of the Company whose remuneration
is $100,000 or more, from the Company or any
related party, in connection with the management
of the affairs of the Company or any related party
whether as an executive officer or otherwise.
21. Remuneration of Auditors
Amounts received or due and receivable by the
auditors of Carnarvon Petroleum NL and the
consolidated entity for an audit and review of
the financial report of the Company and any
other entity in the consolidated entity.
Other services in relation to the entity and any
other entity in the consolidated entity.
Audit of overseas operations by an overseas branch
of the auditors of Carnarvon Petroleum NL.
CO N S O L I D AT E D
C A R N A RVO N PE T RO L E U M N L
2001
$
2000
$
2001
$
2000
$
370,738
112,323
370,738
112,323
–
–
–
–
20,055
15,000
20,055
15,000
49,511
6,000
49,511
6,000
15,000
84,566
–
–
–
21,000
69,566
21,000
29
Notes to the Financial Statements (cont.)
30 June 2001
22. Related Party Disclosures
(a) The directors of Carnarvon Petroleum NL during the financial year were:
GHC White
KC Tregonning
DJ Orth
NC Fearis
WT Beckwith
DT Cowlan
SA Hohnen
(b) Carnarvon Petroleum NL is the ultimate parent entity.
(c) Equity instruments of directors
Interests in the equity instruments of entities in the consolidated entity held by directors of the reporting entity and
their director-related entities at balance date are as follows:
Notes
1 July 2000
Ordinary shares
GHC White
KC Tregonning
NC Fearis
DJ Orth
WT Beckwith
DT Cowlan
SA Hohnen
TOTAL
(i)
(i)
(ii)
(iii)
31 July 2002 Options
GHC White
KC Tregonning
WT Beckwith
(i)
(ii)
TOTAL
28 July 2001 Options
SA Hohnen
TOTAL
31 December 2003 Options
KC Tregonning
DJ Orth
(i)
(i)
TOTAL
2,713,482
—
800,000
—
14,271,055
1,200,000
244,000
19,228,537
1,238,841
—
13,145,043
14,383,884
3,000
3,000
—
—
—
Acquired/
(Sold, Cancelled,
Disassociated)
—
2,000,000
—
—
(10,147,335)
—
(244,000)
(8,391,335)
(107,100)
100,610
(9,136,708)
(9,143,198)
(3,000)
(3,000)
—
—
—
Employee
Share Plan
30 June 2001
—
2,000,000
—
2,000,000
—
—
—
4,000,000
—
—
—
—
—
—
2,713,482
4,000,000
800,000
2,000,000
4,123,720
1,200,000
—
14,837,202
1,131,741
100,610
4,008,335
5,240,686
—
—
5,000,000
5,000,000
5,000,000
5,000,000
10,000,000
10,000,000
30
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
22. Related Party Disclosures (cont.)
Notes:
(i)
In April 2001, the following shares were issued under the Carnarvon Employee Share Plan to directors at an issue
price of 4.3 cents per share.
KC Tregonning
DJ Orth
1,000,000
1,000,000
The shares were issued to a related entity of both directors.
Under the Carnarvon Employee Share Plan, the Company provides an interest-free loan to employees to acquire
shares.The total value of the shares issued during the year was $86,000 (2000: $129,200).
(ii)
In May 2001, Mr WT Beckwith advised the Company of a change in his interests in the Company’s equity
instruments due to disassociation rather than sale.
(iii) On 30 November 2000 Mr Hohnen resigned as a director of the Company and ceased to be a related party.
The above holdings are calculated according to the provisions of the Corporations Law. Under that law, a shareholder
may have a relevant interest in, or an entitlement to, certain shares without having any beneficial interest in those shares.
(d) Wholly owned group
The following related party transactions occurred during the financial year within the wholly owned group.
During the reporting period there have been transactions between the Company and its controlled entities.The
Company provided accounting and administrative services to its controlled entities for which it did not charge a
management fee.
The Company also provided interest free funding for exploration and acquisition expenditure, accounting and
administrative services to its controlled entities during the year amounting to $1,605,452 (2000 $3,393).The outstanding
balance of loans made by Carnarvon Petroleum NL to its controlled entities at 30 June 2001 was $2,298,801 (2000
$693,349) of which $693,349 (2000: $693,349) has been provided for.These loans are unsecured and have no fixed
terms of repayment.
(e) Other transactions
Dr KC Tregonning and Mr DJ Orth are directors and shareholders in Resource Management Associates Pty Ltd.That
company provided consulting services to the consolidated entity in relation to the acquisition of the SW1A Concession
in Thailand.The total value of consulting fees paid was US$110,000 prior to Dr Tregonning and Mr Orth becoming
directors of the Company.
Mr WT Beckwith is a director and shareholder in Gondwana Resources NL. During the year, Gondwana Resources NL
provided accounting and administration services to the consolidated entity.The value of the transactions during the year
was $45,715 (2000 $14,818). Carnarvon provided office space to Gondwana Resources NL to the value of $41,174
(2000: $25,643).
The terms and conditions of the above transactions were no more favourable than those available, or which might
reasonably be expected to be available, on similar transactions to non-director related entities on an arms length basis.
31
Notes to the Financial Statements (cont.)
30 June 2001
23. Financial Instruments
(a)
Interest rate risk
The Company’s exposure to interest rate risk is considered minimal.The only financial asset or financial liability subject
to fluctuations in interest rates is the cash balance which is at a floating rate.
(b) Net fair values
The aggregate net fair value of financial assets and financial liabilities, at balance date, is the same as or approximates the
carrying amount disclosed in the statement of financial position.
(c) Credit risk exposures
The Company’s maximum exposures to credit risk at balance date in relation to each class of recognised financial asset
is the carrying amount of those assets as indicated in the statement of financial position.
Concentrations of credit risk
The Company considers its exposure to credit risk as minimal. Amounts receivable by the Company relate to either:
(i)
(ii)
costs charged to related entities for which the Company awaits reimbursement; or
amounts advanced to employees which are repayable under the terms of the Carnarvon Employee Share Plan which
requires repayment on sale of the shares.
24. Controlled Entities and Contribution to Consolidated Entity Profit/(Loss)
Name
% held by parent
entity
Book value of
shares held
Contribution to
consolidated entity
profit/(loss)
Carnarvon Petroleum NL
Controlled entities of
Carnarvon Petroleum NL:
Lassoc Pty Ltd
SRL Exploration Pty Ltd
Strategic Exploration (Asia) Ltd
2001
%
2000
%
2001
$
2000
$
2001
$
2000
$
(1,271,238)
(435,335)
100
100
100
100
100
—
20
10
1,482,932
1,482,962
20
10
—
30
—
—
323,541
(1,696)
(1,696)
—
(947,697)
(438,727)
32
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
25. Earnings Per Share
(a) Basic earnings per share
(cents per share)
(b) Diluted earnings per share
(cents per share)
(c) Weighted average number of ordinary
shares on issue used in the calculation
of earnings per share
26. Subsequent Events After Balance Date
2001
2000
(1.2)
(1.2)
(0.6)
(0.6)
78,861,613
72,187,641
On 2 August 2001 the Company raised $420,000 in capital via the issue of 6,000,000 fully paid ordinary shares at 7 cents per
share plus 6,000,000 free attaching options exercisable at 25 cents each expiring on 31 July 2002.The cost of the capital
raising was $21,000.The funds were raised for working capital purposes.
On 31 August 2001 the Company lodged a prospectus for the open placement of 40,000,000 fully paid ordinary shares at
7 cents each with free attaching options exercisable at 25 cents each expiring on 31 December 2002.The placement is
subject to shareholder approval. A notice of extraordinary general meeting is due to be mailed to shareholders on 10
September 2001 and the meeting to approve the issue of shares and options is due to be held on 11 October 2001.
The funds raised by the share placement will be used to fund the consolidated entity’s portion of the development program
on the SW1A Concession and provide working capital for the Company to pursue other oil and gas production
opportunities.
33
Directors’ Declaration
In accordance with a resolution of the directors of Carnarvon Petroleum NL, we state that:
1. In the opinion of the directors:
(a)
the financial statements and notes of the Company and of the consolidated entity are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2001 and
of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
Signed in accordance with a resolution of the directors.
GHC White
Director
Perth 31 August 2001
34
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
Independent Audit Report
To the members of Carnarvon Petroleum NL
Scope
We have audited the financial report of Carnarvon Petroleum NL for the financial year ended 30 June 2001 as set out on
pages 13 to 34, including the Directors’ Declaration.The financial report includes the financial statements of Carnarvon
Petroleum NL and the consolidated financial statements of the consolidated entity comprising the Company and the entities
it controlled at year’s end or from time to time during the financial year.The Company’s directors are responsible for the
financial report.We have conducted an independent audit of the financial report in order to express an opinion on it to the
members of the Company.
Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the
financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting
the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting
estimates.These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is
presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements and statutory
requirements in Australia, so as to present a view which is consistent with our understanding of the Company’s and the
consolidated entity’s financial position and performance as represented by the results of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In our opinion, the financial report of Carnarvon Petroleum NL is in accordance with:
(a)
the Corporations Act 2001 including:
(i)
giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2001
and of their performance for the year ended on that date; and
(ii)
complying with Accounting Standards and the Corporations Regulations; and
(b) other mandatory professional reporting requirements.
ERNST & YOUNG
J P Dowling
Partner
Perth
Date: 31 August 2001
35
Corporate Governance
The Board of directors of Carnarvon Petroleum NL is responsible for the corporate governance of the economic entity.The
Board guides and monitors the business and affairs of Carnarvon Petroleum on behalf of the shareholders by whom they are
elected and to whom they are accountable.
To ensure the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and
selection of directors and for the operation of the Board.
Composition of the Board
The Composition of the Board is determined in accordance with the following principles and guidelines:
the Board should comprise at least four directors and should maintain a majority of non-executive directors;
the chairperson should be a non-executive director;
the Board should comprise of directors with an appropriate range of qualifications and expertise; and
the Board shall meet at least bi-monthly and follow meeting guidelines set down to ensure all directors are made aware
of, and have available all necessary information, to participate in an informed discussion of all agenda items.
The directors in office at the date of this statement are:
Name
GHC White
KC Tregonning
DJ Orth
NC Fearis
Position
Non-Executive Director (Chairman)
Managing Director
Executive Director
Non-Executive Director
Board responsibilities
As the Board acts on behalf of, and is accountable to the shareholders, the Board seeks to identify the expectations of the
shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for
identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks.The
Board seeks to discharge these responsibilities in a number of ways.
The Board is responsible for corporate development matters and ensuring the Company’s objectives and activities re aligned
with the expectations and risks identified by the Board.The Board has a number of mechanisms in place to ensure this is
achieved and include the following mechanisms:
implementation of operating plans and budgets and Board monitoring of progress against budget - this includes the
identification of significant variances;
(cid:2) membership and liaison with APPEA to ensure that environmental issues are correctly canvassed; and
procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the
Company’s expense.
The responsibility for the administration function of the consolidated entity is delegated by the Board to the Company
Secretary.The Board ensures that the Company Secretary is appropriately qualified and experienced to discharge his
responsibilities.
36
CARNARVON PETROLEUM NL • 2001 ANNUAL REPORT
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
The Board of directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information
necessary to assess the performance of the directors. Information is communicated to the shareholders through:
the annual report which is distributed to all shareholders;
the half-yearly report which is available;
the annual general meeting and other meetings so called to obtain approval for Board action as appropriate; and
establishment of a world-wide web page on all aspects of the Company which is updated on a regular basis.
Remuneration
The Board is responsible for determining compensation arrangements for employees.
Share trading by directors and officers
The directors and officers of Carnarvon Petroleum NL are not permitted to engage in short-term trading of the Company’s
shares and must notify the Board in advance of any proposed transactions involving the Company’s shares. In addition directors
and officers are prohibited from buying or selling the Company’s shares during the drilling of a well in which Carnarvon has an
interest and from one week prior to the commencement of drilling and up to one week after the drilling of any well is
completed.
37
(cid:2)
(cid:2)
(cid:2)
(cid:2)
ASX Additional Information
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as
follows.The information is made up to 27 August 2001.
1. Analysis of shareholdings
Size of Holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 – and over
Total number of shareholders
Number of
Shareholders
Number of Option
Holders (31 July 2002)
Number of Option
Holders (31 December 2003)
2,008
1,585
502
700
83
4,878
311
299
66
148
55
879
—
—
—
—
2
2
2.
3.
The number of shareholders holding less than a marketable parcel was 3,698.
Voting Rights - no restrictions apply. On a show of hands every member present or by proxy shall have one vote and upon a
poll each share shall have one vote.
4.
The names of the twenty largest holders of securities.
Shareholders
Hamilton Capital Partners Limited
B C Capital Limited
Pearl Resources Pty Ltd
Danari Holdings Pty Ltd
Geoffrey Desmond Hartnett
CNW (Explorations) Pty Ltd
Resource Management Associates Pty Ltd
Kenneth Tregonning & Brenda Leung Tregonning
Alakor Corporation Inc.
National Nominees Limited
Exchange Nominees Pty Ltd
Civic Transport Services Pty Ltd
Lawrence Crowe Consulting Pty Ltd
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