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ABN 60 002 688 851
Annual Report 2002
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
AG Shelton (Non-Executive Chairman)
KC Tregonning (Managing Director & CEO)
DJ Orth (Executive Director)
NC Fearis (Non-Executive Director)
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
Company Secretary
L Troncone
Auditors
Ernst & Young
Solicitors
Freehills
Legal Counsel
Agricola,Wunderlich & Associates
Bankers
Australia and New Zealand Banking
Group Limited
Registered Office
Suite 3, Level 18, Central Park
152-158 St. George’s Terrace
Perth Western Australia 6000
Telephone: +61 8 9288 4522
+61 8 9288 4447
Facsimile:
http://www.carnarvon.com.au
Internet:
admin@carnarvonpetroleum.com
Email:
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
1
Chairman’s Report
Carnarvon maintains an interest in EP 110 lying
onshore/offshore in the Carnarvon Basin primarily because
of its proximity to the Tubridgi Gas Field. The
interpretation of the license area continues by the
operator, Gulliver Productions.The 8% interest in AusAm
Resources Limited, as well as a 2.5% royalty in that
company’s Perth Basin assets, has been maintained. In
Papua New Guinea, Carnarvon holds 15% equity in the
Petroleum Retention Licenses 4 & 5. The reserves in the
blocks total nearly a trillion cubic feet of gas and about 50
million barrels of condensate but are unlikely to be
commercialised in the near term. As a consequence,
Carnarvon has sought expressions of interest to purchase
the PNG assets and plans to utilise the proceeds for
additional opportunities in the region.
In September 2002, the Company successfully completed a
capital raising. Its purpose was to underpin the financial
base of the Company for the forthcoming Phase 2
development as well as to provide funding for the
evaluation of new opportunities. The capital raising
initiatives were approved by shareholders at a general
meeting on 5 September 2002. Further details on the
capital raising are contained in the section tilted Significant
Events After Balance date in the Directors’ Report.
Finally, I was appointed the Company’s new Chairman on 1
April 2002 upon the retirement of George White who
served as a director and Chairman for many years. My
fellow Board members and I take the opportunity of
thanking George for his many years of service.
I look
forward to being of service to Carnarvon and its
shareholders for years to come in what no doubt will be
challenging times ahead but with genuine potential to
deliver improvements in shareholders’ wealth.
Andrew Shelton
Chairman
This past financial year has been another watershed year
for Carnarvon, with a strong focus on the further
evaluation and development of the Wichian Buri Oil Field,
including the completion of the Phase 1 program and
extensive planning for the Phase 2 development program.
Phase 1 was completed during the course of this past year
when Carnarvon participated in the drilling of an out-step
well.That well,WB-N3, was drilled in Production License 1
in our 40% owned SW1A Concession in Central Thailand.
The results of the well confirmed the positive results
posted by the successful farmin wells,WB-N1 and WB-N2,
and enabled the Company to report a boost in its P50
(Proven plus Probable) reserves estimates from 10 MMBO
to 23 MMBO. These latest reserves estimates have been
independently verified by an internationally respected
petroleum engineering consultancy firm.
These encouraging results have led the Company to
commit to the Phase 2 Field Development Program at
SW1A beginning in the third quarter of this calendar year.
At the time of writing this report, the Joint Venture
partners are well on the way to drilling three directional
production wells from a central site in Production
Licence 1 which, if successful, will augment production
significantly by the end of calendar 2002 when they all
will come on stream.
WB-N3 did not produce at the expected rate despite
confirming the presence of oil in an expanded area. Also,
production from WB-N2 experienced an unanticipated
decline. Remedial action was undertaken on WB-N2 but
operational problems prevented the procedure from
having the desired effect. At the time of writing this
report, the hydraulic fracturing of WB-N2 and WB-N3 has
been operationally successful and the results are being
evaluated.
it will become an option for all future well completions.
If the results of the technology are encouraging,
The Company has also entered into an agreement with
Gemini Oil & Gas Limited, a London based investment
firm, to assist with the funding for the Phase 2
development at SW1A. Gemini will provide US$2 million
to the Joint Venture in exchange for future royalty
payments from oil production derived from the F
Sandstone in Production Licences 1 and 2.
The Phase 2 development is part of a larger process in
which the Company works towards establishing a balanced
portfolio of high quality production and exploration assets
which began with the acquisition of Block SW1A in
Thailand and the disposal of the majority of the Carnarvon
Basin permits.The Company is actively assessing new
development opportunities throughout Asia and Australasia
to complete the transition from being an exploration
oriented entity to one whose growth will be funded
primarily by production and cash flow generating assets.
3
Review of Operations
Summary
Operational activities during the course of the year have concentrated on Block SW1A in Thailand where the successful
WB-N3 well was drilled during January 2002.The drilling of WB-N3, which successfully competed the Phase 1 development,
proved up the existence of an extensive accumulation that allowed Carnarvon to increase its P50 reserves estimates from
10 MMBO to 23 MMBO. Independently verified reserves estimates covering the Concession area are as follows:
SW1A
Concession
Mapped
Area
P90 Reserves
(Proven)
P50 Reserves
(Proven plus Probable)
Approx 37km2
Approx 2 km2
11 MMBO
23 MMBO
P10 Reserves
(Possible)
45 MMBO
In order to optimally evaluate and exploit these reserves, the SW1A JV partners agreed in August 2002 to the Phase 2 Field
Development Program.The program falls in two parts both of which focus on maximising extraction of the oil from the area of
Proved reserves.
The first part of the Phase 2 program is designed to address the production problems encountered at the WB-N2 and WB-N3
wells where oil production has declined rapidly. After a review of possible causes of the problems and of means to redress
them, it was decided to use hydraulic fracturing (‘frac’) technology on the wells. Initially, an attempt was made in June 2002 to
conduct a frac operation on the WB-N2 well but was unsuccessful due to mechanical difficulties encountered with the
contractor’s equipment. Using a larger and more powerful set of pumps and with the benefit of the earlier experience, a
detailed computer-designed frac program was performed in September 2002 on both the WB-N2 and WB-N3 wells.The
program was operationally successful and production results are presently awaited.
The second part of Phase 2 comprises drilling of three new development wells in Production Licence 1 scheduled during
September and October 2002.
More generally, over the past 18 months the Company has been pursuing its strategy of creating a balanced portfolio of
production and exploration assets.This involves in part the Company divesting itself of its previous exploration portfolio and
building a new portfolio of assets capable of being brought into production in the short term and with upside potential
through the introduction of technological enhancements.The corporate objective is for a well balanced spread of assets in
terms of the nature of the projects, the number of countries in which they reside, and the magnitude of their upside potential
both for the hydrocarbon potential and the access to additional projects. At least three new projects have been assessed and
found to fit within Carnarvon’s acquisition guidelines. Discussions have been initiated and have led to broad agreement with
respect to the terms and conditions under which they could be accessed.The projects all share the ability to add immediate
production and revenue to Carnarvon and, if accessed, will provide diversification to the Company’s oil and gas assets
It is hoped that the first project could be accessed within the latter part of 2002 or early 2003.
portfolio.
Wells Drilled During 2001/2002
Carnarvon participated in the drilling of one well during the year and that well resulted in a discovery. WB-N3 is currently
producing at about 30 BOPD but that is expected to increase once the well is stimulated via hydraulic fracturing.
Well Name
WB-N3
Permit
Basin
Interest
Spud Date
SW1A
Thailand
40%
17 Jan 02
Metres
1,037
Comment
Discovery
Upcoming Wells
On the assumption that the Phase 2 development at SW1A is successful, the Company is planning an aggressive field
development campaign over the course of the next financial year to actively bring on stream a number of wells in an effort to
bolster oil production and resultant cash flow. With each successful well producing oil directly to the refiner it is imperative
that the SW1A 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
Depth in Metres
Comment
WB-N4
WB-N5
WB-N6
Huai Phai
PL1
PL1
PL1
PL2
Thailand
Thailand
Thailand
Thailand
40%
40%
40%
40%
Oct 2002
Oct 2002
Oct 2002
2Q 2003
1,000
1,000
1,000
1,000
Development
Development
Development
Exploration
4
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
Thailand
PL1, PL2 (award pending), & L44/43
(under application) (Carnarvon 40%)
The Phetchabun Basin is located some 120 kilometres
north of Bangkok in central Thailand. Carnarvon
originally farmed into Block SW1A within which there
are designated Production Licenses 1 & 2, the latter
of which is still pending. An application has
subsequently been made for block L44/43 to cover
the remaining portion of the Phetchabun Basin not
currently held by the Joint Venture. L44/43 covers
an area of some 8,000 square km. A total of seven
wildcat wells were drilled within the permit area
with hydrocarbons produced from four new field
discoveries (including the economically marginal
Bo Rang gas field).
Maps of Thailand permits held and under application
5
Review of Operations (cont.)
Papua New Guinea
PRLs 4 & 5 (Carnarvon 15%)
Petroleum Retention Licenses (PRLs) 4 & 5 have been
retained by the Joint Venture partners in Papua New
Guinea. These PRLs have been excised from the original
PPL 157 area which was relinquished.These PRLs are
located in the foreland of the Papuan Basin in Papua New
Guinea near the port town of Kiunga on the Fly River.
The Operator has calculated reserves of nearly a trillion
cubic feet of gas and about 50 million barrels of
condensate within the combined licenses. Numerous leads
and prospects have also been identified in PRLs 4 & 5.
With negotiations continuing between the governments
of PNG and Australia, as well as the participants in the
proposed PNG-Queensland gas pipeline, the timing of
commercialisation of the permits would still appear to be
some time away. Carnarvon’s current intention is to sell
the assets and reinvest the proceeds in projects that have
the ability to provide returns in the shorter term.
Papua New Guinea
PRLs 4 & 5 Permit Details
6
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
Carnarvon Basin
EP 110 (Carnarvon 25.8585%)
This permit is located onshore/offshore near Onslow,
Western Australia, and is adjacent to the Tubridgi Gas
Field. The farm out of EP 110 by Carnarvon to Gulliver
Productions was completed during the year and a
prospects and leads review is being conducted to
determine the attractiveness of the acreage.The minimum
work requirements of the renewal require one well to be
drilled in the third permit year of 2003 and one offshore
well to be drilled in the fifth permit year.
Perth Basin
Carnarvon owns 8% of AusAm Resources Limited and
retains a royalty of 2.5% by virtue of a sales agreement
completed in 2000 over a number of Perth Basin blocks.
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 2002.
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:
Andrew Shelton – Appointed director and Chairman on
1 April 2002
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
George White – Appointed director 3 November 1992,
Chairman on 28 November 1996, retired on 1 April 2002
The details of the directors of the Company are:
Andrew Shelton
Non-Executive Chairman
Age 55. Bachelor of Arts (Economics and Politics),
Master of Arts (Cantab.)
Non-Executive Director of Capricorn Development
Fund Limited
Member of the Australian Institute of Company Directors
Past President & CEO of J P Morgan Canada
Ken Tregonning
Managing Director and CEO
Age 50. 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)
Member of the Australian Institute of Company Directors
Neil Fearis
Non-Executive Director
Age 51. Bachelor of Law (Hons)
Non-Executive Director of Kresta Holdings Limited
and Capital Growth Corp Limited
Member of the Australian Institute of Company Directors
David Orth
Executive Director
Age 53. Bachelor of Science
Diploma of GeoSci
Member of American Association of Petroleum Geologists
(AAPG)
Member of the Australian Institute of Company Directors
Relevant interest in the shares and options of the
Company as at the date of this report:
Director
Ordinary
Shares
20 cents
Options
31/12/2002
AG Shelton
4,067,421
833,334
KC Tregonning
6,188,067
1,366,667
DJ Orth
NC Fearis
2,858,067
1,571,400
666,667
400,000
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 2002 (2001: 2 employees).
Earnings Per Share
Earnings Per Share
Basic earnings per share
Diluted earnings per share
Dividends
Cents
(1.4)
(1.4)
The directors have recommended that no dividend be paid
in respect of the financial year ending 30 June 2002. No
dividends were declared or paid during the financial year.
8
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
Production storage tanks,WB-1,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
$ (1,463,901)
$ (111,686)
$ (1,600,917)
$ (111,686)
Significant Changes in the State of Affairs
–
There were no significant changes in the state of affairs of
the consolidated entity during the financial year.
The issue of up to 30,000,000 ordinary shares at 4.2
cents per share pursuant to a placement of shares.
The placement was fully subscribed and the Company
raised $1,260,000.
Significant Events After Balance Date
At a general meeting of shareholders held on 5 September
2002, the shareholders of the Company approved the
following capital raising initiatives:
–
The issue to shareholders of up to 18,750,000
ordinary shares at 4.2 cents per shares pursuant to a
share purchase plan.The Company received
acceptances for 17,073,200 shares and raised
$717,074; and
On 6 September 2002, the Company received US$800,000
from Gemini Oil & Gas Limited (“Gemini”) pursuant to an
investment agreement whereby Gemini agreed to fund the
drilling of up to 4 wells on the Company’s 40% owned
SW1A Concession in Central Thailand in exchange for
royalty payments from oil produced from the F Sandstone
formation in Production Licences 1 and 2 of the Wichian
Buri oil field.
9
Directors’ Report (cont.)
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 2002.
Share Options
Unissued shares
As at the date of this report, there were 47,485,577
unissued ordinary shares under options as follows:
37,485,577 options to take up one ordinary share in
Carnarvon Petroleum NL at an issue price of 20
cents.The options expire on 31 December 2002; and
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.
Option holders are entitled to participate in any new pro-
rata issue of securities of the Company only 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 31 July 2002, 43,953,645 options exercisable at 25
cents each expired.
Well head at WB-1,Thailand
10
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
(cid:2)
(cid:2)
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 20 to the financial statements.
Directors’ Benefits
Disclosure of benefits provided to directors during the
financial year is made in notes 20 and 23 to the financial
statements. Directors are eligible to participate in the
Company’s Employee Share Plan, details of which are
disclosed in note 17(a) to the financial statements.
Directors’ and Other Officers’ Emoluments
The Board of directors is responsible for determining and
reviewing compensation arrangements for executive
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 and, when appropriate,
independent expert advice.
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 non-executive 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
Base Fee
$
Superannuation
$
Non-Executive Directors
AG Shelton
NC Fearis
DT Cowlan
WT Beckwith
GHC White
Executive Directors
KC Tregonning
DJ Orth
5,883
21,400
1,667
1,667
16,246
199,804
137,500
550
1,900
133
133
–
14,246
14,179
There are no performance bonus plans offered to
directors of the Company.
Emoluments of executive officers of Carnarvon
Petroleum NL
Emoluments
Paid
Base Salary
$
193,280
Long Term
Emoluments
Superannuation
$
21,250
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.
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.)
Directors’ Meetings
During the year, 11 directors’ meetings were held.The
number of meetings attended by each director is as
follows:-
Director
AG Shelton
KC Tregonning
NC Fearis
DJ Orth
GHC White
Number of Board Meetings
Held While in Office
Number of Board Meetings
Attended
2
11
11
11
9
2
11
11
11
9
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.
AG Shelton
Director
Perth 23 September 2002
12
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
Statement of Financial Performance
for the Year ended 30 June 2002
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
2002
$
2001
$
2002
$
2001
$
986,763
533,490
(847,450)
(407,786)
233,231
(111,686)
(154,088)
172,129
(379,806)
190,224
–
–
233,231
(111,686)
(152,737)
–
–
161,292
(379,806)
–
(1,570,671)
(1,055,948)
(1,569,725)
(1,052,724)
(1,463,901)
(947,697)
(1,600,917)
(1,271,238)
REVENUES FROM ORDINARY
ACTIVITIES
Cost of sales
Other revenues from ordinary activities
Exploration expenses
Unrealised foreign exchange gain/(loss)
Other expenses from ordinary activities
LOSS FROM ORDINARY ACTIVITIES
BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE RELATING TO
ORDINARY ACTIVITIES
3
–
–
–
–
LOSS FROM ORDINARY ACTIVITIES
AFTER INCOME TAX EXPENSE
ATTRIBUTABLE TO MEMBERS OF
CARNARVON PETROLEUM NL
(1,463,901)
(947,697)
(1,600,917)
(1,271,238)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
26(a)
26(b)
(1.4)
(1.4)
(1.2)
(1.2)
13
Statement of Financial Position
As at 30 June 2002
CURRENT ASSETS
Cash assets
Receivables
Inventories
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
2002
$
2001
$
2002
$
2001
$
466,928
107,963
65,558
55,495
788,519
220,599
–
32,680
498,593
32,226
–
14,931
463,199
70,269
–
6,902
695,944
1,041,798
545,750
540,370
222,565
282,876
90,007
249,815
282,876
31,933
2,232,725
1,765,838
13,096
1,855,267
1,765,838
19,321
4
5
6
4
7
9
10
3,964,997
3,144,389
–
–
TOTAL NON-CURRENT ASSETS
4,560,445
3,709,013
4,011,659
3,640,426
TOTAL ASSETS
5,256,389
4,750,811
4,557,409
4,180,796
CURRENT LIABILITIES
Payables
Provisions
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Accumulated losses
TOTAL EQUITY
11
12
13
14
399,099
5,014
606,566
10,536
160,646
5,014
360,062
10,536
404,113
617,102
165,660
370,598
404,113
617,102
165,660
370,598
4,852,276
4,133,709
4,391,749
3,810,198
40,293,593
38,111,125
40,293,593
38,111,125
(35,441,317)
(33,977,416)
(35,901,844)
(34,300,927)
4,852,276
4,133,709
4,391,749
3,810, 198
14
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
Statement of Cash Flows
For the Year ended 30 June 2002
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
2002
$
2001
$
2002
$
2001
$
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers
1,019,602
397,845
–
–
Payments to suppliers and employees
(2,578,279)
(933,589)
(1,572,647)
(736,080)
Interest received
Exploration costs
Goods and services tax paid
28,413
(111,686)
(112,644)
185,138
(379,806)
(73,746)
27,377
(111,686)
(112,644)
174,299
(379,806)
(73,746)
NET CASH FLOWS FROM/(USED IN)
OPERATING ACTIVITIES
15(a)
(1,754,594)
(804,158)
(1,769,600)
(1,015,333)
CASH FLOWS FROM INVESTING
ACTIVITIES
Payment for purchase of interests in permits
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
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
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
–
(1,613,796)
(854,921)
(1,359,469)
204,828
(93,250)
7,094
–
–
200,000
(25,830)
–
(1,119)
–
–
–
204,828
(8,951)
7,094
–
–
–
–
200,000
(13,218)
–
(1,119)
(1,475,470)
(736,249)
(2,800,214)
202,971
(1,289,807)
–
2,294,278
(134,810)
2,159,468
–
–
–
–
(557,445)
(1,605,452)
2,294,278
(134,810)
–
–
1,602,023
(1,605,452)
(331,375)
(3,604,372)
788,519
4,373,791
35,394
463,199
(3,910,592)
4,373,791
9,784
19,100
–
–
CLOSING CASH CARRIED FORWARD
15(b)
466,928
788,519
498,593
463,199
15
Notes to the Financial Statements
30 June 2002
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 except for the accounting policy with
respect to earnings per share.
The consolidated entity has adopted the revised Accounting Standard AASB 1027 “Earnings Per Share” and has for the
first time, determined basic and diluted earnings per share in accordance with the revised Standard. Basic earnings per
share (EPS) was previously calculated by dividing the profit or loss from ordinary activities after tax by the weighted
average number of ordinary shares outstanding during the financial year. In accordance with the revised AASB 1027, basic
EPS is now calculated as net profit or loss attributable to members, adjusted to exclude costs of servicing equity (other
than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS was previously determined by dividing the profit or loss from ordinary activities after tax adjusted for the
effect of earnings on potential ordinary shares, by the weighted average number of ordinary shares (both issued and
potentially dilutive) outstanding during the financial year. In accordance with AASB 1027, diluted EPS is now calculated as
net profit or loss attributable to members, adjusted for:
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
other non-discretionary changes in revenue or expenses during the period that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element.
The revised policy has had no effect on the derivation of basic and dilutive EPS for the 2002 financial 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
(2001: 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.
16
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
(cid:2)
(cid:2)
(cid:2)
(g) Deferred exploration, evaluation and development costs
Deferred exploration, evaluation and development costs represent acquisition costs and direct and 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.
(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.
The value of the employee share scheme described in note 17 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.
17
Notes to the Financial Statements (cont.)
30 June 2002
(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 being
US$. 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.
(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 30% tax rate.
(o) Earnings per share
Basic EPS is calculated as net profit or loss attributable to members, adjusted to exclude costs of servicing equity (other
than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit or loss attributable to members, adjusted for:
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
other non-discretionary changes in revenue or expenses during the period that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element.
(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 uncollectible 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 • 2002 ANNUAL REPORT
(cid:2)
(cid:2)
(cid:2)
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
2002
$
2001
$
2002
$
2001
$
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
986,763
533,490
Total revenues from oil and gas operations
986,763
533,490
(b) Cost of sales
Production
Royalty and excise
Transportation
Depreciation of production assets
Amortisation
(355,055)
(146,785)
(49,106)
(80,321)
(20,000)
(24,529)
(27,100)
(45,148)
–
–
Selling, general and administration
(318,439)
(188,753)
Total cost of sales
(847,450)
(407,786)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(c) Other revenues from ordinary activities
Interest – other persons/corporations
Proceeds from sale of exploration permits
Other
27,375
205,828
28
172,129
–
–
27,375
205,828
28
161,292
–
–
Total other revenues from ordinary activities
233,231
172,129
233,231
161,292
(d) Other expenses from ordinary activities
Exploration costs incurred and expensed
in current year
Corporate administration costs
Administration
Depreciation – plant & equipment
Rental premises – operating lease
Provision for non-recovery of:
Employee share loans
(111,686)
(379,806)
(111,686)
(379,806)
(1,363,846)
(977,689)
(1,362,900)
(974,455)
(8,032)
(8,411)
(8,032)
(8,411)
(139,243)
(115,503)
(139,243)
(115,503)
(59,550)
45,655
(59,550)
45,655
Total corporate administration costs
(1,570,671)
(1,055,948)
(1,569,725)
(1,052,724)
Total other expenses from ordinary activities
(1,682,357)
(1,435,754)
(1,681,411)
(1,432,530)
(e) Gains/(Losses)
Unrealised foreign exchange gain/(loss) on:
Translation of integrated subsidiary
Loan to subsidiary
Total gains/(losses)
(154,088)
190,224
–
–
–
(152,737)
(154,088)
190,224
(152,737)
–
–
–
Loss from ordinary activities before income tax
(1,463,901)
(947,697)
(1,600,917)
(1,271,238)
19
Notes to the Financial Statements (cont.)
30 June 2002
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
Note
2002
$
2001
$
2002
$
2001
$
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
439,170
322,217
480,275
432,221
Tax effect of permanent differences
Foreign sourced income
Foreign sourced exploration expenditure
Expenditure of a capital nature
41,510
(16,382)
(39,384)
45,328
(50,561)
–
–
(16,382)
(39,384)
–
(50,561)
–
Current year tax benefit not brought to account
(424,914)
(316,984)
(424,509)
(381,660)
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:
1,345,018
1,042,785
1,344,613
1,042,785
(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
Other debtors
4(a)
4(a)
64,374
28,399
110,667
85,442
92,773
196,109
–
17,036
17,036
–
45,779
45,779
Employee share loans
Provision for non-recovery
17(a)
17(a)
177,800
(162,610)
177,800
(153,310)
177,800
(162,610)
177,800
(153,310)
15,190
24,490
107,963
220,599
15,190
32,226
24,490
70,269
20
CARNARVON PETROLEUM NL • 2002 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
2002
$
2001
$
2002
$
2001
$
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
–
–
–
–
–
–
2,703,509
(693,349)
2,298,801
(693,349)
2,010,160
1,605,452
Employee share loans
Provision for non-recovery
17(a)
17(a)
343,600
(152,525)
320,600
(102,275)
343,600
(152,525)
320,600
(102,275)
191,075
218,325
191,075
218,325
222,565
249,815
2,232,725
1,855,267
(a) Terms and Conditions
Terms and conditions relating to the above
financial instruments
(i) Trade debtors are generally settled in
the month after invoicing.
(ii) Details of the terms and conditions of
related party receivables are set out in
note 23.
5.
Inventories
CURRENT
Production materials – at cost
65,558
–
–
–
6. Prepayments and Other Current Assets
Prepayments and other current assets
55,495
32,680
14,931
6,902
7. Other Financial Assets
NON-CURRENT
Shares in controlled entities – at cost
Shares in AusAm Resources Limited – at cost
25
(i)
–
–
1,482,962
1,482,962
282,876
282,876
282,876
282,876
(i) AusAm Resources Limited is an unlisted public company. Its main activity is the exploration and development of oil and
gas. Carnarvon Petroleum NL holds a 7.7% (2001: 10.7%) ownership interest in AusAm Resources Limited.
282,876
282,876
1,765,838
1,765,838
21
Notes to the Financial Statements (cont.)
30 June 2002
8.
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)
EP110
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
40%
Exploration for hydrocarbons
25.8585%
Exploration for hydrocarbons
15%
–
–
–
Assets and liabilities in the Joint Venture are included in the financial statements as follows:
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
2002
$
2001
$
2002
$
2001
$
CURRENT ASSETS
Cash assets
Receivables
Inventories
Prepayments and other
919
75,737
65,558
40,565
253,734
110,667
–
65,441
TOTAL CURRENT ASSETS
182,779
429,842
NON-CURRENT ASSETS
Property, plant and equipment
Exploration, evaluation and development costs
96,911
1,555,868
12,612
952,955
TOTAL NON-CURRENT ASSETS
1,652,779
965,567
TOTAL ASSETS
CURRENT LIABILITIES
Payables
TOTAL LIABILITIES
NET ASSETS
1,835,558
1,395,409
111,811
148,943
111,811
148,943
1,723,747
1,246,466
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Capital expenditure commitments and contingent liabilities in respect of the joint venture are disclosed in Notes 16 and 18
respectively.
22
CARNARVON PETROLEUM NL • 2002 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
Note
2002
$
2001
$
2002
$
2001
$
130,679
(40,672)
165,109
(133,176)
33,768
(20,672)
152,497
(133,176)
9(a)
90,007
31,933
13,096
19,321
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
2002
$
2001
$
31,933
93,250
(7,144)
(28,032)
90,007
19,321
8,951
(7,144)
(8,032)
13,096
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
Note
2002
$
2001
$
2002
$
2001
$
9. Plant and Equipment
Plant and equipment at cost
Accumulated depreciation
(a) Reconciliation
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
10. Deferred Exploration, Evaluation
and Development Expenditure
Exploration, evaluation and development costs
carried forward in respect of the SW1A
Concession:
Pre-production
Exploration & development phases
3,964,997
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.
11. 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
11(a)
11(a)
22,575
376,524
138,767
467,799
–
–
160,646
360,062
399,099
606,566
160,646
360,062
23
Notes to the Financial Statements (cont.)
30 June 2002
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
2002
$
2001
$
2002
$
2001
$
12. Provisions
CURRENT
Employee leave entitlements
17
5,014
10,536
5,014
10,536
13. Contributed Equity
(a)
Issued and paid up capital
Ordinary shares fully paid
(b) Movements in shares on issue
40,293,593
38,111,125
40,293,593
38,111,125
2002
———————————————
$
Number of
Shares
2001
———————————————
$
Number of
Shares
Beginning of the financial year
80,532,846
38,111,125
78,532,846
38,025,125
Issued during the year
– employee share scheme
– public equity raising
less transaction costs
500,000
43,485,577
23,000
2,294,278
(134,810)
2,000,000
–
86,000
–
–
End of the financial year
124,518,423
40,293,593
80,532,846
38,111,125
(c) Share options
The following options over ordinary shares were issued during the financial year:
Date Issued
Number of Options
Exercise Price
Expiry Date
2 August 2001
26 October 2001
29 November 2001
17 December 2001
10 January 2002
6,000,000
6,480,000
8,975,223
15,399,747
6,630,607
The options were issued for no consideration.
Unissued ordinary shares of the Company under option:
$
0.25
0.20
0.20
0.20
0.20
31 July 2002
31 December 2002
31 December 2002
31 December 2002
31 December 2002
Expiry date
Exercise Price
Number of Options
28 July 2001 (since expired)
31 July 2002 (since expired)
31 December 2002
31 December 2003
$
4.00
0.25
0.20
0.20
(d) Terms and conditions of contributed equity
Ordinary Shares
2002
–
43,953,645
37,485,577
10,000,000
2001
7,373,680
37,953,645
–
10,000,000
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 • 2002 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
2002
$
2001
$
2002
$
2001
$
14. Accumulated Losses
Balance at the beginning of the year
(33,977,416)
(33,029,719)
(34,300,927)
(33,029,689)
Operating loss attributable to members of
Carnarvon Petroleum NL
(1,463,901)
(947,697)
(1,600,917)
(1,271,238)
Balance at the end of the year
(35,441,317)
(33,977,416)
(35,901,844)
(34,300,927)
15. 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
Amortisation of deferred exploration
evaluation and development costs
Depreciation – plant & equipment
Unrealised foreign exchange (gain)/loss
Profit on sale of exploration permits
Changes in assets and liabilities:
Receivables
Inventories
Prepayments
Accounts payable
Employee entitlements
(1,463,901)
(947,697)
(1,600,917)
(1,271,238)
59,550
(45,655)
59,550
(45,655)
24,529
28,032
–
(204,778)
103,336
(65,558)
(22,815)
(207,467)
(5,522)
–
8,411
(190,224)
–
(136,063)
–
(24,515)
533,960
(2,375)
–
8,032
152,737
(204,778)
28,743
–
(8,029)
(199,416)
(5,522)
–
8,411
–
–
14,267
–
1,263
279,994
(2,375)
Net cash flows used in operating activities
(1,754,594)
(804,158)
(1,769,600)
(1,015,333)
(b) Reconciliation of cash
Cash balance comprises:
Cash at bank and at call
466,928
788,519
498,593
463,199
Closing cash balance
466,928
788,519
498,593
463,199
(c) Financing facilities available
At balance date the Company was not
utilising any financing facilities.
(d) Non-cash financing and investment
activities
Issue of shares under the employee share scheme
23,000
86,000
23,000
86,000
25
Notes to the Financial Statements (cont.)
30 June 2002
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
2002
$
2001
$
2002
$
2001
$
16. 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
(b) Lease expenditure commitments
Operating leases (non cancellable)
Not later than one year
Aggregate lease expenditure contracted
for at balance date
Aggregate expenditure commitments comprise:
Amounts not provided for at balance date
Rental commitments
89,205
208,848
–
–
69,272
34,750
69,272
34,750
69,272
34,750
69,272
34,750
69,272
34,750
69,272
34,750
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 2002/03 to be approximately $30,000 (actual 2001/02: $18,833).
17. Employee Entitlements
Aggregate employee entitlements,
including on-costs
The aggregate employee entitlement liability
is comprised of:
Provisions (Current)
12
5,014
10,536
5,014
10,536
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)
(iii)
(iv)
(v)
(vi)
(vii)
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;
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;
transfer of shares is limited within the first two years;
eligible employees receive an interest free advance to acquire the shares;
the maximum liability of the advance is the market value of the shares from time to time;
the carrying value of advances made to eligible employees is the lower of the equivalent market value of the shares from
time to time or the price of the shares at the time the shares were issue to eligible employees;
(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
(ix) Australian Stock Exchange Listing Rules require the Company to obtain shareholder approval for the issue of shares to
directors.
26
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
17. Employee Entitlements (cont.)
At balance date there were 9 (2001: 8) eligible participant employees.
During the financial year, 500,000 (2001: 2,000,000) shares were issued at an issue price of 4.6 cents (2001: 4.3 cents) each for a
value of $23,000 (2001: $86,000) which was funded under the loan arrangement scheme with the Company.The market value of
the 500,000 (2001: 2,000,000) shares at the date of issue was $23,000 (2001: $86,000). At balance date the market value of the
shares was $24,500 (2001: $158,000).
In respect to the eligible employees who ceased employment during the year, Nil (2001: Nil) shares were disposed of by the
Company Secretary as agent. During last year, Nil (2001: $9,417) was used to repay the advances under the loan arrangement
scheme. During the year there was also a further 310,000 (2001: 310,000) shares being held by the Company Secretary as agent
for employees who have ceased employment with a market value of $15,190 (2001: $24,490).
At balance date, there were 4,485,000 (2001: 3,985,000) shares on issue in respect to eligible employees with a market value of
$219,765 (2001: $314,815).
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
2002
$
2001
$
2002
$
2001
$
Share capital
23,000
86,000
23,000
86,000
(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
55,510
28,240
55,510
28,240
18. 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
(2001: $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.
27
Notes to the Financial Statements (cont.)
30 June 2002
19. Segment Information
Geographical Segments
Revenue
Australia
Thailand
Papua New Guinea
Consolidated
2002
$
2001
$
2002
$
2001
$
2002
$
2001
$
2002
$
2001
$
Sales to customers outside the consolidated entity
–
–
986,763
533,490
Other revenue from customers outside the
consolidated entity
233,231
172,129
–
–
Total segment revenue
233,231
172,129
986,763
533,490
–
–
–
–
–
–
986,763
533,490
233,231
172,129
1,219,994
705,619
Results
Segment result
Assets
(1,583,229) (1,075,020)
138,367
178,253
(19,039)
(50,930) (1,463,901)
(947,697)
Exploration and development costs
–
–
3,964,997
3,144,389
–
–
3,964,997 3,144,389
Other
1,032,797
1,084,195
227,105
490,737
31,490
31,490
1,291,392 1,606,422
Total segment assets
1,032,797
1,084,195
4,192,102
3,635,126
31,490
31,490
5,256,389 4,750,811
Liabilities
Total segment liabilities
165,660
370,598
238,453
246,504
Other segment information:
Acquisition of property, plant and equipment
and other non-current assets
Depreciation
Amortisation
Other non-cash expenses
8,951
8,032
–
59,550
14,337
939,220
2,985,877
8,411
20,000
–
–
24,529
–
–
–
–
–
–
–
–
–
–
404,113
617,102
–
–
–
–
948,171 3,000,214
28,032
24,529
59,550
8,411
–
–
The consolidated entity operated predominantly in the exploration for oil and gas in Australia,Thailand and Papua New Guinea.
28
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
20. 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:
$
2002
2001
0 – 9,999
10,000 – 19,999
20,000 – 29,999
80,000 – 89,999
100,000 – 109,999
110,000 – 119,999
150,000 – 159,999
210,000 – 219,999
3
1
1
–
–
–
1
1
1
2
1
1
1
1
—
—
21. 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.
The number of executive officers of Carnarvon Petroleum NL
whose income (including superannuation contributions)
falls within the following bands is:
$
210,000 – 219,999
2002
1
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
2002
$
2001
$
2002
$
2001
$
434,346
370,738
434,346
370,738
214,530
–
214,530
–
29
Notes to the Financial Statements (cont.)
30 June 2002
22. 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
2002
$
2001
$
2002
$
2001
$
52,874
20,055
52,874
20,055
17,750
49,511
17,750
49,511
9,000
79,624
15,000
84,566
–
–
70,624
69,566
23. Related Party Disclosures
(a) The directors of Carnarvon Petroleum NL during the financial year were:
AG Shelton
KC Tregonning
DJ Orth
NC Fearis
WT Beckwith
DT Cowlan
GHC White
(b) Carnarvon Petroleum NL is the ultimate parent entity.
30
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
23. Related Party Disclosures (cont.)
(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 2001
Acquired/
(Sold, Cancelled,
Disassociated)
Employee
Share Plan
30 June 2002
Ordinary shares
AG Shelton
KC Tregonning
NC Fearis
DJ Orth
WT Beckwith
DT Cowlan
GHC White
TOTAL
(i)
(i)
(i)
(i)
(ii)
(ii)
(ii)
31 July 2002 Options (since expired)
GHC White
KC Tregonning
WT Beckwith
(ii)
(ii)
–
4,000,000
800,000
2,000,000
4,123,720
1,200,000
2,713,482
2,796,021
1,516,667
400,000
666,667
(4,123,720)
(1,200,000)
(2,713,482)
14,837,202
(2,657,847)
1,131,741
100,610
4,008,335
(1,131,741)
–
(4,008,335)
TOTAL
5,240,686
(5,140,076)
31 December 2002 Options
AG Shelton
KC Tregonning
NC Fearis
DJ Orth
TOTAL
31 December 2003 Options
KC Tregonning
DJ Orth
TOTAL
Note:
–
–
–
–
–
5,000,000
5,000,000
10,000,000
833,334
1,366,667
400,000
666,667
3,266,668
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,796,021
5,516,667
1,200,000
2,666,667
–
–
–
12,179,355
–
100,610
–
100,610
833,334
1,366,667
400,000
666,667
3,266,668
5,000,000
5,000,000
10,000,000
(i) The following directors subscribed for ordinary shares in the Company as part of the capital raising initiatives
completed after balance date (refer to note 27):
Name of Director
AG Shelton
KC Tregonning
NC Fearis
DJ Orth
No. of Ordinary Shares
1,271,400
671,400
371,400
191,400
(ii) On 12 July 2001, Messrs Beckwith and Cowlan resigned as directors of the Company and ceased to be related
parties. On 1 April 2002, Mr White retired as Chairman and 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.
31
Notes to the Financial Statements (cont.)
30 June 2002
23. Related Party Disclosures (cont.)
(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 development expenditure to its controlled entities
during the year amounting to $557,445 (2001: $1,605,452).The outstanding balance of loans made by Carnarvon
Petroleum NL to its controlled entities at 30 June 2002 was $2,703,509 (2001: $2,298,801) of which $693,349 (2001:
$693,349) has been provided for.These loans are unsecured and have no fixed terms of repayment.
(e) Other transactions
Mr AG Shelton is a director of Andrew Shelton & Co Pty Ltd.That company provided financial consulting services to the
consolidated entity in relation to the SW1A Concession in Thailand.The total value of consulting fees paid or payable
was $45,000 (2001: Nil).
Mr NC Fearis is a director of Pendomer Investments Pty Ltd.That company provided services to the consolidated entity
in relation to general corporate matters.The total value of fees paid was $16,362 (2001: Nil).
Mr KC Tregonning is a director of Winlen Pty Ltd.That company provided a Melbourne based fully serviced office to the
consolidated entity.The total value of licence fees paid was $82,787 ($47,305).
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.
24. 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 assets
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.
32
CARNARVON PETROLEUM NL • 2002 ANNUAL REPORT
25. 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
2002
%
2001
%
2002
$
2001
$
2002
$
2001
$
(1,602,268)
(1,271,238)
100
100
100
100
100
100
20
10
20
10
—
—
–
–
1,482,932
1,482,932
138,367
323,541
1,482,962
1,482,962
(1,463,901)
(947,697)
26. 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
(d) Earnings used in calculating basic and
diluted earnings per share
2002
2001
(1.4)
(1.4)
(1.2)
(1.2)
107,429,976
78,861,613
$(1,463,901)
$(947,697)
Details of share issues made subsequent to the end of the financial year are contained in note 27 to the financial statements.
27. Subsequent Events After Balance Date
At a general meeting of shareholders held on 5 September 2002, the shareholders of the Company approved the following
capital raising initiatives:
– The issue to shareholders of up to 18,750,000 ordinary shares at 4.2 cents per shares pursuant to a share purchase plan.
The Company received acceptances for 17,073,200 shares and raised $717,074; and
– The issue of up to 30,000,000 ordinary shares at 4.2 cents per share pursuant to a placement of shares.The placement
was fully subscribed and the Company raised $1,260,000.
On 6 September 2002, the Company received US$800,000 from Gemini Oil & Gas Limited (“Gemini”) pursuant to an
investment agreement whereby Gemini agreed to fund the drilling of up to 4 wells on the Company’s 40% owned SW1A
Concession in Central Thailand in exchange for royalty payments from oil produced from the F Sandstone formation in
Production Licences 1 and 2 of the Wichian Buri oil field.
33
Directors’ Declaration
In accordance with a resolution of the directors of Carnarvon Petroleum NL, we state that:
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 2002 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.
AG Shelton
Director
Perth 23 September 2002
34
CARNARVON PETROLEUM NL • 2002 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 2002 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 2002 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
P Fry
Partner
Perth
Date: 23 September 2002
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
AG Shelton
KC Tregonning
DJ Orth
NC Fearis
Position
Non-Executive Director (Chairman)
Managing Director and CEO
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 are 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; 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 • 2002 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 in consultation with independent expert
advice at the Company’s expense where appropriate.
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 16 September 2002.
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 holders
Number of
Shareholders
Number of Option
Holders (31 December 2002)
Number of Option
Holders (31 December 2003)
1,902
1,450
463
847
275
4,937
352
158
42
74
53
679
—
—
—
—
2
2
2.
3.
The number of shareholders holding less than a marketable parcel was 3,621.
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
Number of Shares
Hamilton Capital Partners Limited
Danari Holdings Pty Ltd
Oasis International General Trading LLC
Arne Investments Pty Ltd
Jeffrey Frank Fradd
Kenneth Tregonning & Brenda Leung Tregonning
Alakor Corporation Inc.
Miss Ching-Yu Chen
9,687,942
5,000,000
4,820,513
4,067,421
3,600,000
3,000,000
2,487,703
2,100,000
Snowy River Trading Store Pty Ltd
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