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CNX Resources2008 annual report
Corporate dIreCtorY
Directors
PJ Leonhardt (Chairman)
EP Jacobson (Chief Executive Officer)
NC Fearis (Non-Executive Director)
KP Judge (Non-Executive Director)
Company SeCretary
RA Anderson
auDitorS
WHK Horwath Perth Audit Partnership
ii
Carnarvon petroleum ltd
BankerS
Australia and New Zealand Banking Group Limited
HSBC (Thailand)
regiStereD offiCe
Ground Floor
1322 Hay Street
West Perth WA 6005
Telephone:
Facsimile:
Email:
Website:
+61 8 9321 2665
+61 8 9321 8867
admin@carnarvonpetroleum.com
www.carnarvonpetroleum.com
Share regiStry
Computershare Investor Services Pty Limited
Level 2
45 St Georges Terrace
Perth, WA 6000 Australia
Investor Enquiries: 1300 557 010 (within Australia)
Investor Enquiries: +61 3 9415 4000 (outside Australia)
Facsimile:
+61 8 9323 2033
StoCk exChange LiSting
Securities of Carnarvon Petroleum Limited are listed on
ASX Limited.
ASX Code:
CVN - ordinary shares
aBn: 60 002 688 851
ContentS
Chairman’S review
Chief exeCutive’S review
operating anD finanCiaL review
DireCtorS’ report
inCome StatementS
BaLanCe SheetS
StatementS of ChangeS in equity
StatementS of CaSh fLowS
noteS to the finanCiaL StatementS
DireCtorS’ DeCLaration
inDepenDent auDit report
Corporate governanCe Statement
aDDitionaL SharehoLDer information
2
3
4-16
17-29
30
31
32-33
34
35-69
70
71-72
73-75
76-77
2008 annual report
1
ChaIrman’S revIew
I am pleased to report that the 2008 financial year has been another exciting period of growth for Carnarvon. The ground work undertaken
over the previous two years to establish a strong platform for growth has been translated into very significant operating achievements
both in the field and financially. Sales revenue jumped from $3.7 million to $63 million and, together with our first profit after tax of $16.7
million, these results illustrate the scale of the transformation taking place.
Carnarvon is now well established in the mid-cap rankings of the Australian stock market as a well capitalised oil producer with growing
production, reserves and cash flow. Growth has been underpinned by the strong performance of our joint venture interest in the Phetchabun
Basin field in central Thailand.
We have continued the excellent working relationship with our partner and operator, Pan Orient Energy Corp. The development programme
and results achieved over a relatively short time frame have been impressive particularly in such a competitive environment for skilled
people and physical resources in the oil industry.
While our primary Thai interests provide significant further growth potential Carnarvon has added to its small but highly skilled technical
team and augmented our physical presence and representation in Bangkok. This has enabled us to accelerate our new venture activities.
In Thailand we have successfully developed our regional knowledge, added to our exploration acreage and built relationships with highly
regarded regional operators. Elsewhere, in South East Asia particularly, we have actively continued to review opportunities.
Over the last twelve months the oil and gas industry has experienced extremely buoyant conditions with record high oil prices. At the same
time there has been a significant shortage of experienced people and intense competition for access to oil and gas properties in many
cases resulting in commercially unrealistic prices.
More recently we have entered a period of uncertain and highly volatile financial markets and commodity prices. Our share price has been
adversely affected along with many of our peer companies. While we are mindful of the challenges in effectively deploying valuable cash
resources in this climate, Carnarvon is well positioned to take advantage of the opportunities that we are now starting to see emerge.
Carnarvon’s success is largely dependent on the efforts of the people involved. We are fortunate to have an experienced and dedicated
team. I thank my fellow directors, Chief Executive Officer Ted Jacobson and all of the staff for their outstanding contribution. I am confident
that with the Company’s strong position and their enthusiasm and efforts we can look forward to another rewarding year.
peter Leonhardt
Chairman
2
Carnarvon petroleum ltd
ChIef exeCutIve’S revIew
Carnarvon has grown significantly in the past twelve months to become a well respected mid-tier Australian oil exploration and producing
company. In recognition of the success we have achieved in our onshore Thailand assets, the company was awarded “Explorer of the Year”
by the recent Good Oil Conference in Perth.
Carnarvon’s oil production now comes from four fields within the Phetchabun Basin in which it has a 40% interest: at Wichian Buri, Na
Sanun East, Na Sanun and Si Thep. At the close of the 2007/2008 financial year, on the back of drilling over 20 wells in Thailand the
company has significantly increased its net average monthly production to approximately 2,600 bopd, booked reserves of 11.38 mmbls of
oil, discovered valuable contingent resources of 31 mmbbls of oil, and realised tangible results with a consolidated cash balance of $31.4
million, including deposits lodged to secure exploration commitments, at year end.
Full scale development of the Na Sanun East Oil Field has commenced following the grant of a production licence and environmental
approvals. Carnarvon is planning for anticipated 2008 calendar year end net production of around 6,000 bopd. Appraisal and development
drilling will continue throughout the remainder of this year and into next year with the next exploration wells planned to commence in
early 2009.
Significant exploration and appraisal oil upside has also been identified throughout the permits. Further appraisal and development of
the Wichian Buri Oil Field has commenced and appraisal of the Si Thep Oil Field, Bo Rang gas discovery and L44-R oil discovery will be
undertaken in 2009.
The Carnarvon team has considerable knowledge of onshore Thailand geology, and has successfully applied for and been granted
operatorship and 50% equity in exploration concession L20/50. This permit lies immediately south of the large Sirikit Oil Field within the
Phitsanulok Basin. Carnarvon is committed to acquiring 2D seismic in 2009 and the drilling of at least one well by 2010. An aeromagnetic
survey will commence soon, once approvals are finalised.
Carnarvon has also applied for two other concessions onshore Thailand as part of an equal partnership with Pearl Oil (Petroleum) Ltd.
The company will continue to progress new business opportunities, with a current focus in and around Thailand, concentrating on
opportunities that could provide further near-term cash flow.
Carnarvon is also actively looking for further opportunities to add to its existing acreage in Australia, where the Company has three permits
in the offshore Carnarvon Basin and a 2.5% ORRI interest in the Perth Basin tight gas field at Warro. If successfully developed, Warro would
lead to a positive cash flow to Carnarvon from 2009 or 2010.
As your Chief Executive Officer, on behalf of all shareholders, I would like to thank the Board of Directors, management and staff of Carnarvon
in helping to achieve this transformation of the company, laying the foundation for continued growth in the years to come. Carnarvon’s
technical team, with international experience and proven oil finding capabilities, provides the base from which we will continue to grow.
On behalf of Carnarvon I would like to express my gratitude to our joint venture partners, in particular the very active and committed Pan
Orient Energy Corp., for their hard work in helping Carnarvon achieve these excellent results.
As a shareholder of the company I am pleased at our past progress. I believe we have the fundamentals in place to continue this growth
and eagerly look forward to the next twelve months of activity.
ted Jacobson
Chief Executive Officer
2008 annual report
3
operatInG and fInanCIal revIew
Company performanCe
key performance indicators
Carnarvon tracks several key performance indicators to provide a relative measure of the company’s growth, as shown below.
wells Drilled
Period:
Measure:
Period Change:
1 July 2007 – 30 June 2008
23 Wells
+ 92%
25
20
15
10
5
0
s
l
l
e
W
2003 - 2004
2004 - 2005
2005 - 2006
2006 - 2007
2007 - 2008
Financial Year
annual net Sales
Period:
Measure:
Period Change:
1 July 2007 – 30 June 2008
702,084 bbls
+ 1000%
)
S
L
B
B
0
0
0
’
(
n
o
i
t
c
u
d
o
r
P
l
i
O
t
e
N
800
700
600
500
400
300
200
100
0
2003 - 2004
2004 - 2005
2005 - 2006
2006 - 2007
2007 - 2008
Financial Year
4
Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
Consolidated profit after tax
Period:
Measure:
Period Change:
1 July 2007 – 30 June 2008
$16.2 million
N/A
x
a
T
r
e
t
f
a
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l
i
f
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r
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t
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d
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n
o
i
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l
i
m
$
A
(
18
16
14
12
10
8
6
4
2
0
-2
-4
2003 - 2004
2004 - 2005
2005 - 2006
2006 - 2007
2007 - 2008
Financial Year
Share price
Period:
Measure:
Period Change:
As at 30 June 2008
A$0.53
+ 121%
0.6
0.5
0.4
0.3
0.2
0.1
0
)
e
r
a
h
s
/
$
A
(
e
c
i
r
P
2004
2005
2006
Date
2007
2008
market Capitalisation
Period:
Measure:
Period Change:
As at 30 June 2008
A$361 million
+ 129%
400
350
300
250
200
150
100
50
0
)
n
o
i
l
l
i
m
/
$
A
(
p
a
C
t
e
k
r
a
M
2004
2005
2006
Date
2007
2008
2008 annual report
5
operatInG and fInanCIal revIew (Continued)
operationS review
“ Over the course of the financial year Carnarvon Petroleum has increased net production from 500 bopd to 3,000 bopd, converted 9
mmbbls of contingent resources to 2P reserves, and significantly increased overall resources through a constant drilling and testing
campaign.”
(1) THAILAND
Carnarvon’s cornerstone assets
are the producing fields in the
L44/43 and SW1A licences in
the Phetchabun Basin onshore
Thailand in which the Company
has a 40% interest.
permit map of thailand
6
Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
L44/43, Sw1a & L33/43 thailand phetchabun Basin
(Carnarvon petroleum 40%, pan orient energy Corp. 60% and operator)
Exploration
Successful exploration and appraisal drilling has led to the delineation of the central and northern compartments of the Na Sanun East
(“NSE”) oil field, as well as the discovery of a new separate oil pool at L44-R.
An exploration well, WB-1 (Deep), which was drilled into the volcanics beneath the producing Wichian Buri sandstone reservoir, proved the
existence of reservoir quality volcanics but failed to recover commercial flows of oil. It is interpreted that structure may be present updip
of this location and further work is planned to evaluate this potential.
Exploration drilling in the northern exploration block L33/43 failed to intersect commercial volumes of hydrocarbons. Further exploration
is planned to be undertaken in the southern part of this permit closer to the proved petroleum system existing around the Wichian Buri
oil field.
Another 3 to 4 exploration wells are planned for 2009, with timing dependent primarily on rig availability and development well requirements.
These wells are planned to target volcanic reservoirs south of the Wichian Buri field and also sandstone reservoirs north of the Wichian
Buri field.
Appraisal
The successful appraisal of NSE in late 2007 led to independent certification of 2P reserves in that field of 20.6 million bbls (gross to joint
venture), the application for a production license over NSE, and implementation of a development plan that is detailed below.
Further appraisal drilling is anticipated for later in 2008 and 2009 to appraise the L44-R oil discovery, the volcanic reservoir potential at
the Si Thep and Wichian Buri structures, further delineation of the sandstone oil reservoir at Wichian Buri, and investigation of a potential
oil leg under the Bo Rang gas discovery.
2008 annual report
7
operatInG and fInanCIal revIew (Continued)
Development
A production license over the NSE oil field was granted early in 2008. Environmental approval to drill was delayed for a further six months,
in turn delaying the start of the development drilling.
The development plan for NSE incorporates 20 to 25 development wells being drilled from mid 2008 through to mid 2010. The first of
these wells, NSE-A1, was drilled and successfully completed in mid 2008 with positive results.
The wells will be drilled from a total of 5 or 6 well cluster locations, with each location being designed and built to accommodate a
maximum of four wells. Each location will have oil treatment, storage and offloading capacity. Five locations have been completed, with
the sixth location optional depending upon individual well performance.
The development plan is designed for plateau production of 15,000 bopd gross for 1 to 2 years before natural decline. There is sufficient
capacity in existing infrastructure to cater for delivery of the oil from the field to the refinery in Bangkok.
Successful appraisal of the Wichian Buri and other discoveries could lead to further development drilling in 2009, ultimately targeting
4,000 bopd gross from the SW1A concession incorporating Na Sanun, Wichian Buri and Si Thep, with peak production anticipated
in 2010.
Production
Exploration and appraisal wells within the onshore Thailand permits are extensively tested, with produced volumes being sold at commercial
rates. Consequently, due to the high success rate of exploration and production over the 2007/2008 financial year, production rates
have been substantially increased during that period. Average rates for June 2008 were over 2,600 bopd net to Carnarvon compared to
approximately 500 bopd in June 2007.
With the commencement of development drilling in June 2008, production rates are anticipated to increase to 6,000 bopd net by the
end of the year. Further development drilling in 2009 will ensure an extended plateau rate of around 6,000 bopd net and consistent
daily rates.
8
Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
L20/50 thailand phitsanulok Basin
(Carnarvon petroleum 50% and operator, Sun resources nL 50%)
The L20/50 concession is situated approximately 30 kms to the southeast and on trend with the largest onshore oil field in Thailand at
Sirikit. Previous drilling has demonstrated that oil has been generated within the L20/50 concession.
One previously drilled well in 1982 at Nong Bua-1 intersected significant oil shows which Carnarvon believes were not fully tested. Carnarvon
is continuing to investigate the possibility of twinning or re-drilling this well, however the earliest date to gain required environmental
approvals would delay the spudding until 2009.
Carnarvon has commenced reprocessing available seismic data within the permit, which, combined with a planned imminent high
resolution aeromagnetic survey, will provide a 3 dimensional view of the subsurface. This will enable the recording of new seismic in the
most prospective part of the concession during 2009 and the drilling of at least one exploration well within the first three year obligation
period.
L52/50 and L53/50 thailand Surat-khiensa Basin
(Carnarvon petroleum 50%, pearl oil (petroleum) Limited 50% and operator)
The Company has applied to the Department of Mineral Fuels (“DMF”) in Thailand for concession rights in petroleum exploration and
production for two areas described as Blocks L52/50 and L53/50 (“the Concessions”) onshore Thailand within the Surat-Khiensa Basin.
Pearl Oil (Petroleum) Ltd (“Pearl”), an independent oil and gas company with exploration and production (“E&P”) activities focused
exclusively in South East Asia, submitted the bid as operator on behalf of Pearl and Carnarvon, each company participating at a 50%
equity level.
The combined area of the two blocks is large, comprising approximately 6,950 km2. However, both are lightly explored, with only two deep
wells and limited seismic data available.
There has been minimal exploration over the area and little public knowledge is available about the Surat-Khiensa Basin. Work completed
to date and Carnarvon’s regional knowledge suggests this is an area with good potential for hydrocarbon exploration.
Carnarvon and Pearl were together the sole bidders for this block and anticipate the block being formally awarded in late 2008 or
early 2009.
2008 annual report
9
operatInG and fInanCIal revIew (Continued)
(2) auStraLia
ep 321, ep 407 australia onshore perth Basin
(Carnarvon petroleum 2.5% overriding royalty - orri)
The Warro Gas Field is located in the EP 321 and EP 407 permits, within the onshore part of the Perth Basin, Western Australia. Carnarvon
holds a 2.5% overriding royalty of net well head value from any production within the permits. Carnarvon is not required to commit to any
expenditure in development, production, appraisal and exploration operations. The operator of the permits, Latent Petroleum, is planning
to bring the Warro Gas field into production during 2009. The operator, who has estimated the field contains approximately 7 Tcf of gas in
place, has announced plans for the field to commence production at an initial rate of 20 mmcfgd, peaking at 100 mmcfgd.
onshore perth Basin – location map
10
Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
wa 399 p – australia offshore north west Shelf
(Carnarvon petroleum 50% and operator, rialto energy Limited 50%)
WA-399-P was awarded on 7 May 2007. The permit covers an area of 50km2 located between the Pyrenees and Macedon oil and gas
fields and the Leatherback oil accumulation. The minimum guaranteed work programme (Years 1 -3) comprises geotechnical studies and
315km2 new 2D seismic data.
Carnarvon has completed the reprocessing of all available seismic over the permit (550km2) and is incorporating the results into a
revised structural interpretation of the permit. Once finalized this is expected to determine the optimum location for the new 2D seismic
programme.
ep 424 / ep 110 - australia offshore northwest Shelf
(Carnarvon petroleum 35%, Strike oil Limited 40% and operator, pancontinental oil and gas Limited 25%)
A variation to the permit terms of EP 424 has been requested from the Department of Industry and Resources (“DOIR”) under which the
drilling of one well is now required by 13 April 2009. The outcome is awaited.
Further detailed seismic analysis of ‘amplitude versus offset’ was carried out by the operator over the Baniyas Prospect to refine the nature
of hydrocarbons expected. The Baniyas Prospect is situated on the downthrown side of the Flinders Fault, the eastern bounding fault of
the Carnarvon Basin. Bright seismic amplitudes on the crest of the structure are similar to the Cyrano and Nasutus discoveries elsewhere
along this fault trend which encountered a gas cap on oil leg. Baniyas is estimated to have potential for Pmean prospective resources of
26 million barrels oil and 56 Bcf gas (34 million Barrels of Oil Equivalent). These prospective resources are of a speculative nature until
the prospect has been evaluated by drilling. EP-110 is operated in conjunction with EP-424 and an application to renew the permit was
submitted to the DOIR in July 2006. The outcome is also awaited.
north west Shelf permits – location map
2008 annual report
11
operatInG and fInanCIal revIew (Continued)
reServe aSSeSment
Petroleum Resource Classification, Categorisation and Definitions
Carnarvon calculates reserves and resources according to the SPE/WPC/AAPG/SPEE 1 Petroleum Resource Management System (“SPE-
PRMS”) definition of petroleum resources. This definition was first published in 1997 by the SPE, and in an effort to standardise reserves
reporting has been further clarified by the SPE-PRMS in 2007.
PRODUCTION
RESERVES
Proved
Proved & Probable
Proved,
Probable &
Possible
Commercial
CONTINGENT RESOURCES
Discovered, but not currently commercial
PROSPECTIVE RESOURCES
Exploration prospectivity
Proved and Probable (2P) Reserves
Reserves are defined as those quantities of petroleum which are anticipated to be commercially recovered from known accumulations
from a given date forward. Estimation of reserves is inherently uncertain and to express an uncertainty range, reserves are subdivided
in Proved, Probable and Possible categories. Carnarvon reports its reserves as Proved plus Probable reserves, also abbreviated as 2P.
Carnarvon’s reserves are calculated using forward projections of production levels, work programmes and the associated capital investment
and operating cost levels. From these projections the last year of economic production is calculated, given an assumed oil price scenario.
The aggregate production until this economic cut-off point constitutes the reserves.
1
Society of Petroleum Engineers ( SPE ); World Petroleum Council ( WPC ); American Association of Petroleum Geologist ( AAPG ) & Society of Petroleum Evaluation Engineers ( SPEE )
12
Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
Carnarvon’s reserves base has been certified by an independent reserves auditor. Over the last few years Gaffney, Cline and Associates
(“GCA”) has performed this service in line with end of calendar year requirements for the Department of Mineral Fuels (“DMF”) in Thailand.
GCA is one of the largest independent reserves certifiers in the world and this year GCA certified 11.38 million barrels of oil of 2P oil
reserves net to Carnarvon as at 1 January 2008, which is an increase of over 300% compared to December 2006 reserves. In particular,
2P reserves increased as a result of successful appraisal drilling in the NSE oil field.
Net Carnarvon Reserves
Proved
1P
Proved + Probable
2P
Proved + Probable + Possible
3P
GCA 31 Dec 2007
2.59 (million bbls)
11.38 (million bbls)
45.69 (million bbls)
The information in this Reserves Statement has been compiled by Philip Huizenga, a full-time employee of the Company. Philip Huizenga is
qualified in accordance with ASX listing rule 5.11 and has consented to the form and context in which this statement appears.
Contingent Resources
In addition to its certified reserves, Carnarvon has a number of discovered oil and gas resources which do not currently classify as
reserves. According to the SPE-PRMS, these classify as contingent resources. Contingent resources are those quantities of petroleum
which are estimated, on a given date, to be potentially recoverable from known accumulations, but which are not currently considered
to be commercially recoverable. In addition, a viable development strategy has to be developed to allow contingent resources to be
categorised as reserves.
Carnarvon has an estimated 31 million barrels of contingent oil resources. These resources are not reserves because further work is
required to mature them, most notably appraisal drilling. During 2007 / 2008 around 9 million bbls of contingent resources were converted
into 2P reserves. Contingent resources have been replenished by the recent L44-R oil discovery and further analysis of volcanics in wells
at Bo Rang, Si Thep and NSE.
Carnarvon has an active work programme to convert further contingent resources into reserves. However, this would require drilling
additional appraisal wells and potentially acquiring further 3D seismic. Study work is underway to identify additional development targets.
Appraisal drilling in Wichian Buri and NSE is scheduled for late 2008 and 2009. The timing of these wells will dictate the amount of
resources that may be converted into reserves before the next GCA reserves audit scheduled for calendar year end 2008.
2008 annual report
13
operatInG and fInanCIal revIew (Continued)
Carnarvon estimates its contingent resources in a similar manner as its reserves, requiring forward projections of production levels and
work programmes and the associated capital investment and operating cost levels. There is a chance that identified resources will not
convert into reserves.
NSE
Bo Rang
Si Thep
L44-R
CVN 30 Jun 2008
Net Carnarvon Contingent Resource
Proved + Probable 2C
(million bbls)
14
7
7
3
31
For the remainder of 2008 Carnarvon is planning to drill a further 8 development / appraisal wells and 2 or 3 exploration wells. The
appraisal and exploration wells will be targeting 18 million bbls of unrisked contingent resources net. Carnarvon estimates that more
than 13 million bbls of unrisked contingent resources, plus 34 million bbls of possible reserves, will be targeted by appraisal drilling work
programmes in 2009 and beyond.
Prospective Resources
Carnarvon’s contingent resources are not the same as its prospective resources. Under the SPE-PRMS definitions prospective resources
can also be classified as exploration resources. Prospective resources are those quantities of petroleum which are estimated, on a given
date, to be potentially recoverable from undiscovered accumulations.
Carnarvon has a number of exploration licences. These exploration licences are evaluated using techniques like gravity and magnetic
surveys, geochemical surveys, seismic surveys and basin analysis. This analysis results in a long list of leads and drillable prospects. Only
drillable prospects which have been included on drilling schedules are categorised as prospective resources by Carnarvon. Leads are
identified as potential hydrocarbon accumulations that will require additional study before they are matured to prospects and appear in
drilling plans. Prospects and leads carry exploration risks which result in the possibility of not finding commercial hydrocarbons. These
risks are identified by Carnarvon and help management in ranking exploration activities.
Exploration wells scheduled for 2009 will target prospective resources which have yet to be calculated.
14
Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
new ventureS
Organic Growth
As an integrated exploration and production company, Carnarvon is continuously aiming to grow the business by identifying exploration
targets and maturing them into drillable prospects, thus increasing its prospective resource base. Successful exploration discoveries result
in prospective resources moving into contingent resources. Successful appraisal drilling, in combination with a development strategy and
demonstrating commerciality, result in contingent resources being moved into reserves.
Other
Carnarvon has continued to achieve significant growth from its successful exploration and development efforts in its Thailand assets,
L44/43 and SW1A. These areas continue to be a primary focus for the Company and they are now delivering significant sustained
oil production and revenues as predicted. Cash flow from these producing fields facilitates Carnarvon’s pursuit of other new venture
opportunities to grow the company.
Identifying and successfully negotiating these opportunities requires a concentrated effort. Carnarvon has recruited a New Ventures
Manager to lead this endeavour who is a geologist/geophysicist with significant industry experience in South East Asia, Australia and
globally. The new ventures team is currently implementing a strategy to acquire quality exploration acreage and appraisal projects with
preference for the following:
•
•
•
•
•
•
•
Near-term production and revenue
Producing fields with potential upside via infill drilling, near-field exploration or workovers
Low cost, non-operated interests with competent partner operators
On trend with commercial oil discoveries
Necessary infrastructure and markets in place
Leveraging Carnarvon’s knowledge and expertise to develop healthy, long-term relationships with larger operators
Organic growth as well as growth via mergers and acquisitions
Carnarvon is progressing at an advanced stage with several exploration and appraisal opportunities to deliver on this strategy. A new
exploration block in onshore Thailand, L20/50, was awarded to Carnarvon in the recent bid round. This block lies within the same proven
basin as the Sirikit and S1 oil fields. Bids have also been made for two further blocks onshore Thailand.
2008 annual report
15
operatInG and fInanCIal revIew (Continued)
finanCiaL Summary
The Group’s revenue from continuing operations for the year ended 30 June 2008, being its share of the Phetchabun Basin Joint Venture
(“Joint Venture”) in Thailand, was $63,033,000 (2007: $3,674,000).
The higher A$ oil revenue resulted from higher Joint Venture oil sales of 1,755,209 bbls (2007: 147,904 bbls) complemented by an
improvement in the achieved oil sale price to US$82.19 per bbl (2007: US$50.24), partly offset by an appreciation in the A$ from US$0.85
to US$0.96 over the reporting period. The increase in oil sales is explained earlier in this operating and financial review.
The Group’s profit after income tax for the year ended 30 June 2008 was $16,174,000 (2007: $1,542,000 loss), however its share of the
pre-tax (income and special remuneratory benefit) cash operating profit of the Phetchabun Basin Joint Venture in Thailand increased to
$52,734,000 (2007: $882,000) as a result of significantly improved production and the low variable operating, transportation, royalty and
selling cost per barrel of $13.87 (2007 $48.26).
Corporate and administration costs for the year were $2,129,000 excluding share-based payments (2007: $966,000). This increase
reflects a general increase in corporate costs as well as staff costs associated with expanding the Company’s technical capability.
16
Carnarvon petroleum ltd
dIreCtorS’ report
The directors present their report together with the financial report of Carnarvon Petroleum Limited (“Company”) and of the Group, being
the Company, its controlled entities, and the Group’s interest in jointly controlled assets, for the financial year ended 30 June 2008, and
the auditor’s report thereon.
Carnarvon Petroleum Limited is a listed public company incorporated and domiciled in Australia.
DireCtorS
The names and details of the Company’s directors in office at any time during or since the end of the financial year are as follows. Directors
were in office for this entire period unless otherwise stated.
peter J Leonhardt FCA, FAICD (Life)
Chairman
Age 61. Appointed as a director on 17 March 2005 and appointed Chairman in April 2005.
Mr Leonhardt is an independent company director and adviser with extensive business, financial and corporate experience. He is
a Chartered Accountant and a former Senior Partner with PricewaterhouseCoopers and Managing Partner of Coopers & Lybrand in
Western Australia.
During the past three years Mr Leonhardt has served as a director of the following listed companies: Centrepoint Alliance Limited
(from May 2002); CTI Logistics Limited (from August 1999); Voyager Energy Limited (from March 2001 to September 2005); Titan
Resources Limited (from June 2005 to June 2006). He is also a director of the Western Australian Institute for Medical Research.
Mr Leonhardt is Chairman of the Audit Committee.
Edward (Ted) P Jacobson B.Sc (Hons Geology)
Chief Executive Officer
Age 59. Appointed as a director on 5 December 2005.
Mr Jacobson is a petroleum geophysicist with 38 years’ experience in petroleum exploration principally in the European North
Sea, South East Asia, South America and Australia. Within Australia he has been responsible for initiating a number of petroleum
discoveries within the Cooper Basin, Barrow Sub Basin and Timor Sea. In 1986, Ted established the consulting company Exploration
Study Projects Pty Ltd which advised companies on new venture opportunities in Australia and South East Asia and assisted in
capital raisings and corporate activity. In 1991 Ted was co-founder of Discovery Petroleum NL and from 1996 co-founder and
technical director of Tap Oil Ltd which grew to a market capitalisation of over $400 million under his technical leadership. Ted retired
from Tap in September 2005.
During the past three years Mr Jacobson has served as director of the following listed companies: Rialto Energy Limited (from July
2006); Tap Oil Ltd (from September 1996 to September 2005). Mr Jacobson was also a director of Smart Rich Energy Finance
(Holdings) Ltd (from January 2007 to November 2007), listed on the Hong Kong Stock Exchange.
2008 annual report
17
dIreCtorS’ report (Continued)
Neil C Fearis LL.B (Hons), MAICD, F Fin
Non-Executive Director
Age 57. Appointed as a director on 30 November 1999.
Mr Fearis has over 30 years’ experience as a commercial lawyer in the UK and Australia.
During the past three years Mr Fearis has served as a director of the following listed companies: Kresta Holdings Limited (from
1997); Perseus Mining Limited (from 2004); Liberty Resources Limited (from 25 June 2007). Mr Fearis is also a member of several
professional bodies associated with commerce and law.
Mr Fearis is a member of the Audit Committee.
Kenneth P Judge B.Com, B. Juris, LL.B
Non-Executive Director
Age 53. Appointed as a director on 1 April 2005.
Mr. Judge has extensive legal and business management experience having held a number of public company directorships and has
been engaged in the establishment or corporate restructure of technology, mining, and oil and gas companies in Australia, United
Kingdom, USA, Brazil, Argentina, Mexico and the Philippines.
Mr. Judge is a director and Chairman of Brazilian Diamonds Limited (from February 2001), which is listed on both the Toronto Stock
Exchange and the AIM market of the London Stock Exchange Plc. He is a director of Block Shield Corporation Plc (from February
2004), director and Chairman of Hidefield Gold Plc (from October 2003) and a director of Gulfsands Petroleum Plc. (from October
2006), all of which are listed on AIM.
He is also a director and Chairman of Alto Ventures Ltd (from April 2004), Columbus Gold Corporation (from September 2004),
Columbus Silver Corporation (from May 2007) and Empire Mining Ltd (from January 2005), all of which are listed on the TSX Venture
Exchange.
Company SeCretary
Mr Robert Anderson was appointed Company Secretary in November 2005. Mr Anderson is a Chartered Accountant who has previously
held company secretarial positions in both ASX-listed companies and private entities.
DireCtorS’ meetingS
The number of directors’ meetings and the number of meetings attended by each of the directors of the Company during the financial
year are as follows:
(a)
5
5
5
5
(b)
5
5
5
5
Peter Leonhardt
Ted Jacobson
Neil Fearis
Ken Judge
(a) Number of meetings held during period of office
(b) Number of meetings attended
18
Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
auDit Committee
Names and qualifications of Audit Committee members
The Committee is to include at least 2 members. Current members of the committee are Mr Peter Leonhardt and Mr Neil Fearis.
Qualifications of Audit Committee members are provided in the Directors section of this directors’ report.
Audit Committee meetings
The number of Audit Committee meetings and the number attended by each of the members during the reporting period were as
follows:
Peter Leonhardt
Neil Fearis
(a) Number of meetings held during period of office
(b) Number of meetings attended
remuneration Committee
(a)
3
3
(b)
3
3
In August 2008 the Board determined the Company was of a size to justify the existence of a Remuneration Committee that now comprises
Mr Leonhardt, Mr Judge and Mr Fearis. There were no Remuneration Committee meetings during the reporting period.
The Remuneration Committee is responsible for the remuneration arrangements for directors and executives of the Company.
The Remuneration Committee considers remuneration packages and policies applicable to the executive directors, senior executives, and
non-executive directors. It is also responsible for share option schemes, the Employee Share Plan, incentive performance packages, and
retirement and termination entitlements.
prinCipaL aCtivitieS
During the course of the 2008 financial year the Group’s principal activities continued to be directed towards oil and gas exploration,
development and production.
iDentifiCation of inDepenDent DireCtorS
The independent directors are identified in the Corporate Governance Statement section of this Annual Report as set out on pages 73 to
75.
2008 annual report
19
dIreCtorS’ report (Continued)
remuneration report
During the reporting period the Board determined remuneration policies and practices, evaluated the performance of senior management,
and considered remuneration for those senior managers.
The Remuneration Committee now assesses the appropriateness of the nature and amount of remuneration on an annual basis by
reference to industry and market conditions, and with regard to the Company’s financial and operational performance.
Total non-executive directors’ fees are approved by shareholders and the Board is responsible for the allocation of those fees amongst the
individual members of the Board.
The value of remuneration is determined on the basis of cost to the Company and the Group.
Principles of compensation
Remuneration of directors and executives is referred to as compensation throughout this report.
Compensation levels for key management personnel of the Company and the Group are competitively set to attract and retain appropriately
qualified and experienced directors and senior executives. The directors obtain, when required, independent advice on the appropriateness
of remuneration packages, given trends in comparative companies both locally and internationally.
Compensation arrangements include a mix of fixed and performance based compensation. A component of share-based compensation is
awarded at the discretion of the Board, subject to shareholder approval when required.
Compensation structures take into account the overall level of compensation for each director and executive, the capability and experience
of the directors and senior executives, the executive’s ability to control the financial performance of the relative business segment,
the Group’s performance (including earnings and the growth in share price), and the amount of any incentives within each executive’s
remuneration.
On 1 August 2008 the Board adopted a policy that prohibits those that are granted share-based payments as part of their remuneration
from entering into other arrangements that limit their exposure to losses that would result from share price decreases. The Company
requires all executives and directors to sign annual statements of compliance with this policy throughout the preceding year.
In considering the Group’s performance and benefits for shareholder wealth, the Board has had regard to the following indices in respect
of the current financial year and the previous four years. No dividends have been paid or declared during this period.
30 June 2004
30 June 2005
30 June 2006
30 June 2007 30 June 2008
Share price
Consolidated net profit / (loss) from
continuing operations ($000)
$0.015
$0.018
$0.052
$0.24
$0.53
($1,417)
($1,007)
($1,246)
($1,542)
$16,174
The directors believe the increase in share price since June 2004 reflects a number of factors, including the appointment of Ted Jacobson
as Chief Executive Officer in February 2006. The development of the Group’s oil and gas interests in Thailand since his appointment
has resulted in a substantial increase in production and operational revenues, as evidenced by the operating profit in the period under
review.
20
Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
remuneration report (continued)
Principles of compensation (continued)
Fixed compensation
Fixed compensation consists of base compensation as well as employer contributions to superannuation funds. Base compensation may
be supplemented by an element of share-based compensation.
There was no share-based compensation in the period under review, other than that set out in the Employee Share Plan section of this
remuneration report.
Non-executive directors
Total remuneration for all non-executive directors, last voted upon by shareholders at a General Meeting in November 2005, is not to
exceed $200,000 per annum.
A non-executive director’s base fee is currently $55,000 per annum. The Chairman receives $90,000 per annum. Non-executive directors
do not receive any performance-related remuneration. Directors’ fees cover all main Board activities and membership of Board committees.
The Company does not have any terms or schemes relating to retirement benefits for non-executive directors.
Service contracts
The contract duration, period of notice and termination conditions for key management personnel are as follows:
(i)
(ii)
Ted Jacobson, Chief Executive Officer, is engaged through a rolling 12 month Employment Agreement. Termination by the Company
is with 3 months’ notice (or payment in lieu thereof) and payment of 9 months remuneration. Termination by Mr Jacobson is with 3
months’ notice.
Robert Anderson, Company Secretary and Chief Financial Officer, is engaged through a rolling 12 month Consultancy Agreement.
Termination by the Company is with 6 months’ notice or payment in lieu thereof. Termination by the consultant is with 3 months’
notice.
(iii) Philip Huizenga, Chief Operating Officer, is engaged as an employee. Termination by the Company is with 4 weeks’ notice or
payment in lieu thereof. Termination by Mr Huizenga is with 4 weeks’ notice.
Employee Share Plan
Shares are issued under an Employee Share Plan (“ESP”), which has been approved by shareholders in Annual General Meeting (“AGM”).
The purpose of the ESP is to attract, retain and motivate those who have been invited to participate in the ESP and thereby align their
interests with those of other shareholders as a means of encouraging them to ensure that Company performance increases shareholder
wealth through long term growth. Shares are issued based upon the assessed performance of each person against their job specifications
and the recommendations of the Chief Executive Officer, and in the case of directors, with the approval of shareholders. The following ESP
shares were issued to directors and key management personnel:
2008 annual report
21
dIreCtorS’ report (Continued)
remuneration report (continued)
Employee Share Plan (continued)
2008
executive officers
RA Anderson
PP Huizenga
2007
Directors
EP Jacobson
PJ Leonhardt
number of
shares issued
100,000
100,000
issue date
07/01/2008
07/01/2008
number of
shares issued
6,000,000
3,000,000
issue date
30/04/2007
30/04/2007
issue price
per share
$0.701
$0.701
issue price
per share
$0.09
$0.09
Loan
$70,100
$70,100
Loan
$540,000
$270,000
These issues were not subject to a performance condition. The issue price was calculated based on the 5 day weighted average closing
price prior to the date of offer. The purchases were funded by interest-free loans with a limited recourse security over the plan shares and
subject to the detailed rules of the ESP.
Analysis of bonuses included in remuneration
All cash bonuses awarded during the period and included in remuneration, as set out on page 23, fully vested to each of the directors,
named Company executives, and key management personnel during the period.
Directors’ and executive officers’ remuneration (Company and consolidated)
Details of the nature and amount of each major element of the remuneration of each director of the Company and each of the named
Company and Group executives receiving the highest remuneration are set out on the following page.
The fair value of options, including ESP shares treated in principle as an option over the Company’s shares, is calculated at the date of
grant using the Black-Scholes Option Pricing Model. Shares issued under the ESP vest immediately and their fair value recognised as an
expense in the current period. The following factors and assumptions were used in determining the fair value of ESP shares at grant date,
being the date of shareholder approval, in the current and previous reporting period:
grant date
2008
07/01/2008
2007
30/04/2007
assumed
expiry date
fair value
per option
exercise
price
price of shares
at grant date
expected
volatility
risk free
interest rate
Dividend
yield
06/01/2011
$0.31
$0.701
$0.701
55%
7.5%
30/04/2010
$0.07
$0.09
$0.135
55%
5.5%
0%
0%
22
Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
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2008 annual report
23
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dIreCtorS’ report (Continued)
remuneration report (continued)
Equity instruments
(i)
Shares
There were no shares in the Company granted as compensation to key management personnel during the reporting period, other than the
ESP shares treated in principle as an option over the Company’s shares as described under (ii) below.
(ii) Options and ESP shares
There were no options over shares in the Company granted as compensation during the reporting period. No options have been granted
since the end of the financial year.
Share issues under the Company’s ESP are treated in principle as an option over the Company’s shares and are included in the option
tables below. These options are assumed to have a life of 3 years.
Details of options, including ESP shares treated in principle as options, granted and vested to directors and executives are as follows. All
options were issued for nil cash consideration, vest immediately, and have been recognised as an expense in the current period.
2008
executive officers
RA Anderson
PP Huizenga
2007
Directors
EP Jacobson
PJ Leonhardt
number of
eSp shares
issued
100,000
100,000
number of
eSp shares
issued
issue
date
07/01/2008
07/01/2008
issue
date
fair value per
option at issue
date
$0.31
$0.31
fair value per
option at issue
date
6,000,000
3,000,000
30/04/2007
30/04/2007
$0.074
$0.074
exercise
price per
option
$0.701
$0.701
exercise
price per
option
$0.09
$0.09
assumed
expiry date
06/01/2011
06/01/2011
assumed
expiry date
29/04/2010
29/04/2010
The following shares were issued on the exercise of options granted as compensation in prior periods:
2008
Directors
EP Jacobson
PJ Leonhardt
KP Judge
KP Judge
2007
Directors
NC Fearis
number of shares
4,000,000
3,000,000
2,000,000
1,000,000
amount paid per share
$0.07
$0.07
$0.07
$0.10
number of shares
2,000,000
amount paid per share
$0.07
There are no amounts unpaid on shares issued as a result of the exercise of options in the reporting period.
24
Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
remuneration report (continued)
Equity instruments (continued)
(ii) Options and ESP shares (continued)
During the reporting period there was no forfeiture or vesting of options granted in previous periods. At the end of the reporting period
there were no unvested options on issue.
All options expire on the expiry date but do not expire as a result of the termination of the holder’s engagement with the Company.
The movement during the reporting period, by value, of options over ordinary shares, including shares issued under the Company’s ESP,
for each company director and company executive and granted as part of remuneration is detailed below:
Directors
EP Jacobson
PJ Leonhardt
KP Judge
executive officers
PP Huizenga
RA Anderson
granted
in year ($)
exercised in
year ($)
forfeited in
year ($)
total
value in year ($)
value of options
-
-
-
1,720,000
1,290,000
1,540,000
-
-
-
1,720,000
1,290,000
1,540,000
granted
in year ($)
exercised in
year ($)
forfeited in
year ($)
total
value in year ($)
value of options
30,734
30,734
-
1,141,373
-
-
30,734
1,172,107
The value of options granted in the year is the fair value of the options at grant date using the Black-Scholes Option Pricing Model.
The value of options exercised during the year is calculated as the market price of shares of the Company on ASX Limited as at close of
trading on the date the options were exercised or the ESP loan repaid, after deducting the price paid to exercise the options or repay the
loan.
non-auDit ServiCeS
The auditors have not performed any non-audit services over and above their statutory duties during the current reporting period.
Details of the amounts paid or payable to the auditor of the Group for audit services provided during the year are set out below:
audit Services
Consolidated 2008 ($)
Auditors of the Company:
Audit and review of financial reports
78,428
2008 annual report
25
dIreCtorS’ report (Continued)
DireCtorS’ intereStS
At the date of this report, the relevant interests of the directors in securities of the Company are as follows:
name
PJ Leonhardt
EP Jacobson
NC Fearis
KP Judge
ordinary Shares
options over ordinary Shares
14,900,000
28,917,335
6,400,000
14,332,855
3,000,000
4,000,000
2,000,000
1,000,000
Shares issued under the Company’s ESP are included under the heading Ordinary Shares.
Share optionS
Options granted to directors and executives of the Company
There were no options over shares in the Company granted as compensation to directors or named executives during or since the end of
the financial year.
Share issues under the Company’s ESP are treated in principle as an option over the Company’s shares and are included in the table
below. These options are assumed to have a life of 3 years.
Details of ESP shares issued to directors and named executives during the reporting period, and treated as options for valuation purposes,
are as follows. These shares were issued for nil cash consideration, vest immediately, and have been recognised as an expense in the
current period.
executive officers
RA Anderson
PP Huizenga
number of eSp
shares granted
exercise price
per share
100,000
100,000
$0.701
$0.701
assumed
expiry date
06/01/2011
06/01/2011
Shares under option
The following unissued ordinary shares of the Company are under option. These exclude share issues made under the Company’s ESP.
expiry Date
31/03/2008
31/03/2009
exercise
price
$0.07
$0.10
1 July 2007
issued
9,000,000
16,000,000
25,000,000
-
-
-
number
exercised
9,000,000
6,000,000
15,000,000
expired
30 June 2008
-
-
-
-
10,000,000
10,000,000
All options expire on the expiry date but do not expire as a result of the termination of the holder’s engagement with the Company. Option holders
do not have any right, by virtue of the option, to vote or to participate in any share issue of the Company or any related body corporate.
No shares have been issued as a result of the exercise of options since the end of the financial year. There are no amounts unpaid on the
shares issued as a result of the exercise of options in the reporting period.
During the reporting period there was no forfeiture or vesting of options granted in previous periods. At the end of the reporting period
there were no unvested options on issue.
26
Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
LikeLy DeveLopmentS
The likely developments for the 2009 financial year are contained in the operating and financial review as set out on pages 4 to 16.The
directors are of the opinion that further information as to the likely developments in the operations of the Group would prejudice the
interests of the Company and the Group and it has accordingly not been included.
environmentaL reguLation anD performanCe
The Group’s oil and gas exploration and development activities are concentrated in Thailand and Western Australia. Environmental
obligations are regulated under both State and Federal Law in Western Australia and under the Department of Mineral Fuels regulations in
Thailand. No significant environmental breaches have been notified by any government agency during the year ended 30 June 2008.
DiviDenDS
No dividends were paid during the year and the directors do not recommend payment of a dividend in respect of the current financial
year.
auDitor’S inDepenDenCe DeCLaration
The auditor’s Independence Declaration under Section 307C of the Corporations Act is set out on page 29 and forms part of the directors’
report for the financial year ended 30 June 2008.
SignifiCant ChangeS in State of affairS
In the opinion of the directors no significant changes in the state of affairs of the Group occurred during the current financial year other
than as outlined in the operating and financial review as set out on pages 4 to 16.
inDemnifiCation anD inSuranCe of DireCtorS anD offiCerS
During the period the Company paid a premium to insure the directors and officers of the Company and its controlled entities. The policy
prohibits the disclosure of the nature of the liabilities covered and the amount of the premium paid.
proCeeDingS on BehaLf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of the proceedings. The Company
was not a party to any such proceedings during the year.
operating anD finanCiaL review
An operating and financial review of the Group for the financial year ended 30 June 2008 is set out on pages 4 to 16 and forms part of
this report.
2008 annual report
27
dIreCtorS’ report (Continued)
inDemnity of DireCtorS anD Company SeCretary
It is intended that Deeds of Access and Indemnity will shortly be executed by the Company with each of the directors and Company
Secretary. The deeds will require the Company to indemnify each director and Company Secretary against any legal proceedings, to the
extent permitted by law, made against, suffered, paid or incurred by the directors or Company Secretary pursuant to, or arising from or in
any way connected with the director or Company Secretary being an officer of the Company.
eventS SuBSequent to reporting Date
No matter or circumstance has arisen since 30 June 2008 that in the opinion of the directors has significantly affected, or may significantly
affect in future financial years:
(i)
(ii)
(iii)
the Group’s operations, or
the results of those operations, or
the Group’s state of affairs
rounDing off
The Company is an entity to which ASIC Class Order 98/100 dated 10 July 1998 applies. In accordance with that Class Order amounts in
the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.
Signed in accordance with a resolution of the directors.
pJ Leonhardt
Director
Perth, 25 September 2008
28
Carnarvon petroleum ltd
IndependenCe deClaratIon
2008 annual report
29
InCome StatementS
for the year enDeD 30 June 2008
Sales revenue from continuing operations
Other income
Cost of sales
Administrative expenses
Directors’ fees
Employee benefits expense
Travel related costs
Unrealised foreign exchange (loss) / gain
Exploration expenditure written off
New ventures
Share-based payments
Finance costs
ConSoLiDateD
Company
notes
4
5
2008
$000
63,033
318
2007
$000
3,674
247
(11,346)
(3,162)
(1,032)
(183)
(637)
(311)
(656)
-
(973)
(119)
34
(628)
(135)
(145)
(38)
54
(75)
(380)
(934)
(20)
2008
$000
-
251
-
(1,032)
(183)
(637)
(311)
(1,851)
-
(973)
(119)
-
profit / (loss) before income tax
48,128
(1,542)
(4,855)
Taxes
Income tax expense
Special remuneratory benefit
9
Total taxes
16,975
14,979
31,954
-
-
-
-
-
-
2007
$000
-
240
-
(628)
(135)
(145)
(38)
(1,416)
(75)
(380)
(934)
(1)
(3,512)
-
-
-
profit / (loss) from continuing operations
16,174
(1,542)
(4,855)
(3,512)
profit / (loss) attributable to
members of the Company
Basic earnings / (loss) per share from
continuing operations (cents per share)
Diluted earnings / (loss) per share from
continuing operations (cents per share)
16,174
(1,542)
(4,855)
(3,512)
8
8
2.4
2.4
(0.3)
(0.3)
The above income statements should be read in conjunction with the accompanying notes to the financial statements.
30
Carnarvon petroleum ltd
BalanCe SheetS
aS at 30 June 2008
ConSoLiDateD
Company
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
notes
21(b)
10
12
13
2008
$000
28,281
12,443
1,586
299
2007
$000
8,927
1,684
1,111
639
total current assets
42,609
12,361
2008
$000
570
2,788
-
96
3,454
12,713
49
379
-
1,483
-
172
379
23,124
-
-
104
-
12,129
-
23,675
12,233
14,624
66,284
24,594
18,078
3,368
13
24,152
27,533
3,738
-
3,738
3,028
4
-
3,032
-
105
105
531
13
-
544
-
-
-
2007
$000
6,520
123
-
34
6,677
13,024
70
-
-
1,483
14,577
21,254
297
4
-
301
-
-
-
31,271
3,137
544
301
35,013
21,457
17,534
20,953
66,738
(6,211)
(25,514)
65,041
(1,896)
(41,688)
66,738
1,226
(50,430)
65,041
1,487
(45,575)
35,013
21,457
17,534
20,953
10
11
14
15
16
17
24
18
19
18
non-current assets
Trade and other receivables
Property, plant and equipment
Exploration and evaluation
Oil and gas assets
Other investments
total non-current assets
total assets
Current liabilities
Trade and other payables
Employee benefits
Provisions
total current liabilities
non-current liabilities
Deferred tax
Provisions
total non-current liabilities
total liabilities
net assets
equity
Issued capital
Reserves
Accumulated losses
total equity
The above balance sheets should be read in conjunction with the accompanying notes to the financial statements.
2008 annual report
31
StatementS of ChanGeS In eQuItY
for the year enDeD 30 June 2008
group
issued accumulated
losses
capital
$000
$000
translation
reserve
$000
Share-based
payments
reserve
$000
Balance at 1 July 2006
50,220
(40,146)
(1,646)
Shares issued, net of transaction costs
Exchange differences on translation
of foreign operations
Share based payments
Loss attributable to members of Company
14,778
-
-
-
43
-
-
-
(1,542)
(1,737)
-
-
Balance at 30 June 2007
65,041
(41,688)
(3,383)
Shares issued net of transaction costs
Exchange differences on
translation of foreign operations
Share based payments
Profit attributable to members of Company
1,226
-
-
-
471
-
-
-
16,174
(4,054)
-
-
278
-
-
1,209
-
1,487
-
-
(261)
-
total
$000
8,706
14,778
(1,737)
1,252
(1,542)
21,457
1,226
(4,054)
210
16,174
Balance at 30 June 2008
66,738
(25,514)
(7,437)
1,226
35,013
The above statements of changes in equity should be read in conjunction with the accompanying notes to the financial statements.
32
Carnarvon petroleum ltd
StatementS of ChanGeS In eQuItY
for the year enDeD 30 June 2008
Company
issued
capital
$000
accumulated
losses
$000
Share-based
payments
reserve
$000
Balance at 1 July 2006
50,220
(42,063)
Shares issued, net of transaction costs
Share based payments
Loss attributable to members of the Company
14,778
43
-
-
-
(3,512)
Balance at 30 June 2007
65,041
(45,575)
Shares issued, net of transaction costs
Share based payments
Loss attributable to members of the Company
1,226
471
-
-
-
(4,855)
278
-
1,209
-
1,487
-
(261)
-
total
$000
8,435
14,778
1,252
(3,512)
20,953
1,226
210
(4,855)
Balance at 30 June 2008
66,738
(50,430)
1,226
17,534
The above statements of changes in equity should be read in conjunction with the accompanying notes to the financial statements.
2008 annual report
33
StatementS of CaSh flowS
for the year enDeD 30 June 2008
Cash flows from operating activities
Receipts from customers and GST recovered
Payments to suppliers and employees
Income tax paid
Interest received
Interest paid
net cash flows generated from / (used in)
operating activities
Cash flows from investing activities
Exploration and development expenditure
Cash held as security
Acquisition of property, plant and equipment
Net (advances to) controlled entities
net cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Payment of share issue costs
Proceeds from repayment of
Employee Share Plan loans
net cash flows from financing activities
net increase in cash and cash equivalents
Cash and cash equivalents at the beginning
of the financial year
Effect of exchange rate fluctuations on
cash and cash equivalents
Cash and cash equivalents at the end
of the financial year
ConSoLiDateD
Company
notes
2008
$000
56,145
(13,616)
(3,666)
236
(8)
2007
$000
2,782
(3,794)
-
213
(1)
2008
$000
275
(3,153)
-
204
-
21(a)
39,091
(800)
(2,674)
(17,399)
(3,156)
(218)
-
(20,773)
1,230
(3)
90
1,317
(7,188)
-
(87)
-
(7,275)
15,960
(881)
77
15,156
(628)
(2,656)
(13)
(1,293)
(4,590)
1,230
(3)
90
1,317
19,635
7,081
(5,947)
8,927
1,898
6,520
(281)
(52)
21(b)
28,281
8,927
(3)
570
2007
$000
139
(1,345)
-
206
(1)
(1,001)
(334)
-
(26)
(8,830)
(9,190)
15,960
(881)
77
15,156
4,965
1,559
(4)
6,520
The above statements of cash flows should be read in conjunction with the accompanying notes to the financial statements.
34
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS
1.
reporting entity
The consolidated financial report of the Company for the financial year ended 30 June 2008 comprises the Company and its
controlled entities (the “Group”) and the Group’s interest in jointly controlled assets.
The financial report was authorised for issue by the directors on 25 September 2008.
2.
Basis of preparation of the financial report
Statement of compliance
The financial report is a general purpose financial report prepared in accordance with Australian Accounting Standards (“AASBs”),
including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board
(“AASB”), and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report
containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with
Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting
Standards (“IFRSs”). Material accounting policies adopted in the preparation of this financial report are presented below. They have
been consistently applied unless otherwise stated.
Basis of measurement
The financial report is prepared on a historical cost basis, except for available-for-sale financial assets and financial instruments at
fair value through profit and loss which are measured at fair value.
Functional and presentation currency
The consolidated financial statements are stated in Australian dollars, which is the Company’s functional and presentation
currency.
Use of estimates and judgements
The preparation of the financial report requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised and in any future periods affected.
Key estimate – impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to the impairment
of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations
performed in assessing recoverable amounts incorporate a number of key estimates.
There was not considered to be any impairment trigger over the carrying value of the Group’s interest in the Phetchabun Basin Joint
Venture at the date of this report.
Key estimate – income and capital gains taxes
Judgement is required in determining any provision for income and capital gains taxes. The Group recognizes liabilities of anticipated
tax based on estimates of taxes due. Where the final tax outcome of these matters is different from the amounts that were initially
recognised, such differences will impact the income tax and deferred tax expenses, assets or provisions in the year in which such
determination is made.
2008 annual report
35
noteS to the fInanCIal StatementS (Continued)
2.
Basis of preparation of the financial report (continued)
Use of estimates and judgements (continued)
Key estimate – special remuneratory benefit tax and income tax
The Group’s Phetchabun Basin Joint Venture is subject to Thai income tax at 50% and a special remuneratory benefit (“SRB”) tax on
profits, at sliding scale rates (0% - 75% by concession) in 2008 and beyond.
The SRB, which is tax deductible in the calculation of Thai income taxes, involves a highly detailed calculation done on a concession
by concession basis. The basis of the calculation is petroleum profits, adjusted for capital spent, being subjected to a sliding
scale SRB rate such that profits are not taxed until all capital has been recovered. The sliding scale rate is principally driven by
production and pricing but is subject to other adjustments such as changes in Thailand’s consumer price index, wholesale price
index, cumulative metres drilled on the concession, and, for certain concessions, changes in the exchange rate between the Thai
Baht and the USD.
The SRB calculation is performed and paid annually for each concession at the calculated annual rate at the end of each calendar
year. Judgement is required in determining provisions which are based on estimates of amounts due. Where the final outcome of
those matters is different from the amounts that were originally recognised, such difference may impact those provisions in the
period in which such a determination is made.
Key estimate – functional currency
The determination of the functional currency of the Company’s controlled entities requires consideration of a number of factors.
These factors include the currencies that primarily influence their sales and costs and the economic environment in which the
entities operate.
Key estimates – other
Other areas of judgement are in the determination of oil reserves, rehabilitation provisions, capitalisation of exploration and
evaluation costs, determination of areas of interest, and the units of production method of depreciation.
3.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial report.
The accounting policies have been applied consistently by all entities in the Group. Certain comparative amounts have been
reclassified to conform to the current year’s presentation.
(a) Basis of consolidation
Controlled entities
The consolidated financial report comprises the financial statements of the Company and its controlled entities. A controlled entity
is any entity controlled by the Company whereby the Company has the power to control the financial and operating policies of an
entity so as to obtain benefits from its activities. All inter-company balances and transactions between entities in the economic
entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of controlled entities
have been changed where necessary to ensure consistency with those applied by the Company.
Where controlled entities enter or leave the economic entity during the year, their operating results are included or excluded
from the date control was obtained or until the date control ceased. Investments in controlled entities are carried at cost in the
Company’s financial statements.
Jointly controlled assets
The Group's share of the assets, liabilities, revenue and expenses of joint venture assets are included in the financial statements
under the appropriate headings.
36
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(b) income tax and special remuneratory benefit
Income tax
The charge for current income tax expense is based on the result for the year adjusted for any non-assessable or disallowed items.
It is calculated using tax rates that have been enacted or are substantively enacted by balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised
from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or
taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.
Deferred tax is recognised in the income statement except where it relates to items recognised directly in equity, in which case it is
recognised in equity. Deferred income tax assets are recognised for deductible temporary differences and unused tax losses only if
it is probable that future taxable amounts will be available to utilise those temporary differences and tax losses. Deferred tax assets
and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company / group intends
to settle its current tax assets and liabilities on a net basis.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable
income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. The carrying amount
of deferred tax assets is reviewed at each balance date and only recognised to the extent that sufficient future assessable income
is expected to be obtained.
Special remuneratory benefit
The Group’s Phetchabun Basin Joint Venture is subject to a special remuneratory benefit (“SRB”) tax on profits, at sliding scale rates
(0% - 75% by concession) in 2008 and beyond.
The SRB, which is tax deductible in the calculation of Thai income taxes, involves a highly detailed calculation done on a concession
by concession basis. The basis of the calculation is petroleum profits, adjusted for capital spent, being subjected to a sliding
scale SRB rate such that profits are not taxed until all capital has been recovered. The sliding scale rate is principally driven by
production and pricing but is subject to other adjustments such as changes in Thailand’s consumer price index, wholesale price
index, cumulative metres drilled on the concession, and, for certain concessions, changes in the exchange rate between the Thai
Baht and the USD. The SRB calculation is performed and paid annually for each concession at the calculated annual rate at the end
of each calendar year.
The SRB is considered, for accounting purposes, to be a tax on income.
Tax consolidation
Carnarvon Petroleum Limited and its wholly-owned Australian resident controlled entities formed a tax-consolidated group with
effect from 1 July 2003 and are therefore taxed as a single entity from that date. Carnarvon Petroleum Limited is the head entity of
the tax-consolidated group. In future periods the members of the group will, if required, enter into a tax sharing agreement whereby
each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of
the tax consolidated group.
2008 annual report
37
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(c) property, plant and equipment
Recognition and measurement
All property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. The cost of an item also
includes the initial estimate of the costs of dismantling and removing an item and restoring the site on which it is located.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are
incurred.
Impairment
The carrying amount of property, plant and equipment is reviewed at each balance date to determine whether there are any
objective indicators of impairment that may indicate the carrying values may not be recoverable in whole or in part. Impairment
testing is carried out in accordance with Note 3(f).
Where an asset does not generate cash flows that are largely independent it is assigned to a cash generating unit and the recoverable
amount test applied to the cash generating unit as a whole.
If the carrying value of the asset is determined to be in excess of its recoverable amount, the asset or cash generating unit is written
down to its recoverable amount.
Depreciation
Depreciation on plant and equipment is calculated on a straight-line basis over expected useful life to the economic entity
commencing from the time the asset is held ready for use. The major depreciation rates used for each class of depreciable assets
are:
Plant and equipment:
20% to 33%
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at least annually.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are
included in the income statement.
(d) oil and gas assets
Oil and gas assets include costs transferred from exploration and evaluation once technical feasibility and commercial viability of
an area of interest are demonstrable, together with subsequent costs to develop the asset to the production phase.
Where the directors decide that specific costs will not be recovered from future development, those costs are charged to the income
statement during the financial period in which the decision is made.
Depreciation of oil and gas assets is calculated on a unit of production basis so as to write off the costs in proportion to the
depletion of the estimated recoverable reserves.
38
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(e) exploration and evaluation
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only
carried forward to the extent that the Group’s rights of tenure to the area are current and that the costs are expected to be recouped
through the successful development of the area, or where activities in the area have not yet reached a stage that permits reasonable
assessment of the existence of economically recoverable reserves.
Each area of interest is assessed for impairment to determine the appropriateness of continuing to carry forward costs in relation
to that area of interest. Impairment testing is carried out in accordance with Note 3(f).
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon
the area is made.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable,
exploration and evaluation costs attributable to that area of interest are first tested for impairment and then reclassified from
exploration and evaluation to oil and gas assets.
(f) recoverable amount of assets and impairment testing
Assets that have an indefinite useful life are not subject to depreciation and are tested annually for impairment by estimating their
recoverable amount.
Assets that are subject to depreciation are reviewed annually to determine whether there is any indication of impairment. Where
such an indicator exists, a formal assessment of recoverable amount is then made. Where this is in excess of carrying amount, the
asset is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is the present value of the future cash
flows expected to be derived from the asset or cash generating unit. In estimating value in use, a pre-tax discount rate is used which
reflects the current market assessments of the time value of money and the risks specific to the asset. Any resulting impairment
loss is recognised immediately in the income statement.
For the purposes of impairment testing assets are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or groups of assets.
(g) trade receivables
Trade receivables are stated at fair value and subsequently measured at amortised cost, less impairment losses. Impairment testing
is carried out in accordance with Note 3(f).
(h) provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable
that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are determined by discounting
the expected future cash flows at a pre-tax discount rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
Restoration costs
The amount of the provision for future restoration and rehabilitation costs is capitalised and depreciated in accordance with the
policy set out in Note 3(c). The unwinding of the effect of discounting on the provision is recognised as a finance cost.
2008 annual report
39
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(i) investments and other financial instruments
The Group determines the classification of its financial instruments at initial recognition and re-evaluates this designation at each
reporting date.
Fair value is the measurement basis, with the exception of held-to-maturity investments and loans and receivables which are
measured at amortised cost. Fair value is inclusive of transaction costs. Changes in fair value are either taken to the income
statement or to an equity reserve (refer below).
Fair value is determined based on current bid prices for all quoted investments. If there is not an active market for a financial asset
fair value is measured using established valuation techniques.
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets
are impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a
security below its cost is considered in determining whether the security is impaired. If any such evidence exists the cumulative loss
is removed from equity and recognised in the income statement.
(i) Financial assets at fair value through profit and loss
A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated
by management. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the
income statement in the period in which they arise.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and are stated at amortised cost using the effective interest rate method, less any impairment losses.
(iii) Held-to-maturity investments
These investments have fixed maturities, and it is the group’s intention to hold these investments to maturity. Held-to-maturity
investments are stated at amortised cost using the effective interest rate method.
(iv) Available-for-sale financial assets
Available for sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated
in this category or not included in any of the above categories. Available-for-sale financial assets are reflected at fair value. Unrealised
gains and losses arising from changes in fair value are taken directly to equity in an available-for-sale investments revaluation
reserve. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included
in the income statement as gains and losses from investment securities.
(j) Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different to those of other business segments.
A geographical segment is engaged in providing products or services within a particular economic environment and is subject to
risks and returns that are different from those of segments that are operating in other economic environments.
40
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(k) foreign currency
Functional and presentation currency
The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in
which that entity operates (the “functional” currency). The consolidated financial statements are presented in Australian dollars
which is the Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate at balance sheet date. Non-
monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction.
Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred
in equity as a qualifying cash flow or net investment hedge.
Translation differences arising on non-monetary items, such as equities held at fair value through profit and loss, are reported as
part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale
financial assets, are included in the fair value reserve in equity.
Foreign operations
The financial performance and position of foreign operations whose functional currency is different from the Group’s presentation
currency are translated as follows:
• assets and liabilities are translated at exchange rates prevailing at balance sheet date
•
income and expenses are translated at average exchange rates for the period
Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation
reserve as a separate component of equity. These differences are recognised in the income statement upon disposal of the foreign
operation.
(l) 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
A lease where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments in relation to operating leases are charged to the income statement on a straight-line basis over the period of the lease.
(m) Share capital
Incremental costs directly attributable to an equity transaction are shown as a deduction from equity, net of any recognised income
tax benefit.
(n) inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business less any estimated selling costs.
Cost includes those costs incurred in bringing each component of inventory to its present location and condition.
2008 annual report
41
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(o) employee benefits
Wages and salaries, annual leave
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date.
Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when
the liability is settled, plus related on-costs.
Share based payments – shares and share options
The fair value of shares and share options granted is recognised as an expense with a corresponding increase in equity. Fair value
is measured at grant date and recognised over the period during which the grantees become unconditionally entitled to the shares
or share options.
The fair value of share grants at grant date is determined by the share price at that time.
The fair value of share options at grant date is determined using a Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, any vesting and performance criteria, the share price at grant date, the expected price
volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the option.
Share based payments – Employee Share Plan
Share based compensation has been provided to eligible persons via the Carnarvon Employee Share Plan (“ESP”), financed by
means of interest free limited recourse loans. Under AASB 2 “Share-based Payments”, the ESP shares are deemed to be equity
settled, share based remuneration and treated as an in-substance grant of options.
For limited recourse loans issued to eligible persons on or after 1 January 2005, the Group is required to recognise within the
income statement a remuneration expense measured at the fair value of the “share option” inherent in the issue to the eligible
person, with a corresponding increase to a share-based payments reserve in equity. The fair value is measured at grant date and
recognised when the eligible person become unconditionally entitled to the shares, effectively on grant. A loan receivable is not
recognised.
The fair value at grant date is determined using a pricing model that factors in the share price at grant date, the expected price
volatility of the underlying share, the expected dividend yield, and the risk free rate for the assumed term of the “option”. Upon the
exercise of the “option”, the balance of the share-based payments reserve relating to the “option” is transferred to issued capital.
(p) earnings per share
The Group presents basic and diluted earnings per share (“EPS”) for its ordinary shares.
Basic EPS is calculated by dividing the profit attributable to equity holders of the Company by the weighted number of shares
outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding for the effects of all potential ordinary shares, which comprise share options granted.
42
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(q) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquid
investments.
(r) revenue
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable.
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the
consideration is probable, and the amount of revenue can be measured reliably. For the sale of oil the transfer of risks and rewards
occurs on delivery of oil to the refinery.
(s) goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the amount of
GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
(t) trade and other payables
Trade and other payables are stated at amortised cost. The amounts are unsecured and usually paid within 60 days of recognition.
(u) finance income and expenses
Interest revenue on funds invested is recognised as it accrues, using the effective interest rate method.
Finance expenses comprise interest expense on borrowings and the unwinding of the discount on provisions.
(v) royalties
Royalties are treated as taxation arrangements when they have the characteristics of a tax. This is considered to be the case when
they are imposed under government authority and the amount payable is calculated by reference to revenue derived (net of any
allowable deductions) after adjustment for items comprising temporary differences. For such arrangements, current and deferred
tax is provided on the same basis as described above for other forms of taxation.
Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current provisions and included in
expenses.
(w) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the
current financial year.
2008 annual report
43
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(x) new standards and interpretations not yet adopted
The AASB has issued a number of AASBs and amendments to AASBs which are available for early adoption.
The Company and Group have not early adopted any of these accounting standards or amendments as they are not expected to
have a material impact on the financial results of the Company or Group. They may have an effect on the disclosures of the Company
and Group, however a detailed assessment of the potential impact has not been undertaken at the date of this report.
The following Australian Accounting Standards have been issued or amended and are applicable to the parent and consolidated
group but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.
application
Date for group
1.7.2009
aaSB amendment
Standards affected
outline of amendment application
Date of
Standard
1.1.2009
The disclosure
requirements of AASB
114: Segment Reporting
have been replaced by
the issue of AASB 8:
Segment Reporting in
February 2007. These
amendments will involve
changes to segment
reporting disclosures
within the financial
report. However, it is
anticipated that there
will be no direct impact
on recognition and
measurement criteria
amounts included in the
financial report.
AASB 2007-3
Amendments
to Australian
Accounting
Standards
AASB 5
AASB 6
Non Current Assets
held for Sale and
Discontinued Operations
Exploration for and
Evaluation of Mineral
Resources
AASB 102
Inventories
AASB 107 Cash Flow Statements
AASB 119
Employee Benefits
AASB 127 Consolidated and
Separate Financial
Statements
AASB 134
Interim Financial
Reporting
AASB 136
Impairment of Assets
AASB 1023 General Insurance
Contracts
AASB 1038 Life Insurance Contracts
AASB 8
Operating Segments
AASB 114
Segment reporting
As above
1.1.2009
1.7.2009
44
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3.
Significant accounting policies (continued)
(x) new standards and interpretations not yet adopted (continued)
aaSB amendment
Standards affected
outline of amendment application
AASB 2007-6
Amendments
to Australian
Accounting
Standards
AASB 1
First Time adoption of
AIFRS
AASB 101
Presentation of Financial
Statements
AASB 107 Cash Flow Statements
AASB 111
Construction Contracts
AASB 116
Property, Plant and
Equipment
AASB 138
Intangible Assets
Date of
Standard
1.1.2009
The revised AASB
123: Borrowing Costs
issued in June 2007
has removed the
option to expense all
borrowing costs. This
amendment will require
the capitalisation of all
borrowing costs directly
attributable to the
acquisition, construction
or production of a
qualifying asset.
However, there will be
no direct impact to the
amounts included in
the financial group as
there are currently no
borrowing costs.
application
Date for group
1.7.2009
AASB 123 Borrowing
Costs
AASB 2007-8
Amendments
to Australian
Accounting
Standards
AASB 123 Borrowing Costs
As above
1.1.2009
1.7.2009
AASB 101
Presentation of Financial
Statements
1.1.2009
1.7.2009
The revised AASB
101: Presentation of
Financial Statements
issued in September
2007 requires
the presentation
of a statement of
comprehensive income
and makes changes
to the statement of
changes in equity.
AASB 101
AASB 101
Presentation of Financial
Statements
As above
1.1.2009
1.7.2009
2008 annual report
45
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD
Company
2008
$000
283
-
35
318
(1,800)
(4,374)
(1,920)
(1,605)
(1,647)
(11,346)
2007
$000
2008
$000
240
7
-
247
(1,386)
(410)
(168)
(307)
(891)
(3,162)
251
-
-
251
-
-
-
-
-
-
2007
$000
233
7
-
240
-
-
-
-
-
-
4. other income
Finance income on bank deposits
Reversal of provision for non-recovery of
Employee Share Plan loans
Other
5. Cost of sales
Production
Royalty and excise
Transportation
Depreciation - development costs and producing assets
Selling, general and administration
6. other expenses
Depreciation – other plant and equipment
Rental premises – operating leases
(37)
(131)
(28)
(60)
(34)
(66)
(28)
(60)
7. auditors’ remuneration
Audit services:
Auditors of the Company
8. earnings per share
78
48
78
48
The calculation of basic and diluted earnings per share was based on a weighted average number of shares calculated as follows:
Issued ordinary shares at 1 July
Effect of shares issued
Effect of share options exercised
Weighted average number of ordinary shares 30 June (basic)
Effect of share options on issue
Weighted average number of ordinary shares 30 June (diluted)
number of shares
657,537,134
186,849
6,979,452
664,703,435
19,163,014
683,866,449
411,787,134
95,027,860
98,630
506,913,624
22,750,685
529,664,309
Profit / (loss) used in calculating basic and diluted earnings /
(loss) per share from continuing operations
$16,174,000
($1,542,000)
46
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
9. income tax expense
Numerical reconciliation between pre-tax profit / (loss) and income tax expense / (benefit):
Prima facie income tax expense / (benefit) on pre-tax profit /
(loss) at 30% (2007: 30%)
14,438
(463)
(1,457)
(1,054)
Tax effect of:
Foreign sourced income
Special remuneratory benefit
Effect of higher overseas tax rate
Unrealized foreign exchange gains / (losses)
Non-assessable income
Non-deductible expenditure
Prior year losses recognised
Prior year temporary differences recognised
Current year tax benefit not brought to account
Income tax expense on pre tax profit / (loss)
Current income tax
Deferred tax
Tax Consolidation
-
(7,552)
10,438
-
-
322
(3,064)
1,814
579
16,975
13,237
3,738
16,975
(167)
-
-
(16)
(2)
295
-
-
353
-
-
-
-
-
-
-
554
-
277
-
-
626
-
-
-
-
-
-
-
425
(2)
295
-
-
336
-
-
-
-
Effective 1 July 2003, for the purposes of Australian income taxation, Carnarvon and its 100%-owned controlled entities formed a tax
consolidated group. The head entity of the tax consolidated group is Carnarvon.
The impact of consolidating for tax purposes is that Carnarvon’s Australian controlled entities are treated as divisions of Carnarvon rather
than as separate entities for tax purposes. The members of the group will, if required, enter into a tax sharing arrangement in order to
allocate group tax related liabilities to contributing members on a reasonable basis. The agreement will provide for the allocation of income
tax liabilities between entities should the head entity default on its tax payment obligations.
10. trade and other receivables
Current
Trade and other receivables
Cash held as security
Owing by Phetchabun Basin Joint Venture partner
Non-current
Amounts receivable from controlled entities
Provision for non-recovery
ConSoLiDateD
Company
2008
$000
8,995
3,156
292
12,443
-
-
-
2007
$000
1,534
-
150
1,684
-
-
-
2008
$000
2007
$000
132
2,656
-
2,788
13,406
(693)
12,713
123
-
-
123
13,717
(693)
13,024
The Group’s exposure to credit and currency risks is disclosed in Note 32.
2008 annual report
47
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
89
56
(63)
(8)
74
56
(3)
14
67
33
7
204
121
-
(6)
319
133
-
58
191
71
128
-
38
38
-
1
1
-
37
65
27
-
(3)
89
29
-
27
56
36
33
262
79
(111)
(26)
204
119
(22)
36
133
143
71
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
108
13
-
-
121
38
-
34
72
70
49
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
80
28
-
-
108
10
-
28
38
70
70
-
-
-
-
-
-
-
-
11. property, plant and equipment
Plant and equipment
Cost:
Balance at beginning of financial year
Additions
Disposals
Effects of movements in foreign exchange
Balance at end of financial year
Depreciation and impairment losses:
Balance at beginning of financial year
Disposals
Depreciation charge for year
Balance at end of financial year
Carrying amount opening
Carrying amount closing
Fixtures and fittings
Cost:
Balance at beginning of financial year
Additions
Transfers
Effects of movements in foreign exchange
Balance at end of financial year
Depreciation and impairment losses:
Balance at beginning of financial year
Transfers
Depreciation charge for year
Balance at end of financial year
Carrying amount opening
Carrying amount closing
Land and buildings
Cost:
Balance at beginning of financial year
Additions
Balance at end of financial year
Depreciation and impairment losses:
Balance at beginning of financial year
Depreciation charge for year
Balance at end of financial year
Carrying amount opening
Carrying amount closing
48
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
11. property, plant and equipment (continued)
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
Total
Cost:
Balance at beginning of financial year
Additions
Transfers
Disposals
Effects of movements in foreign exchange
Balance at end of financial year
Depreciation and impairment losses:
Balance at beginning of financial year
Transfers
Disposals
Depreciation charge for year
Balance at end of financial year
Carrying amount opening
Carrying amount closing
12. inventories
Current
Raw materials and consumables
13. other assets
Current
Deposits and prepayments
14. exploration and evaluation
Cost:
Balance at beginning of financial year
Additions
Balance at end of financial year
15. oil and gas assets
Cost:
Balance at beginning of financial year
Additions
Transfers
Effects of movements in foreign exchange
Balance at end of financial year
Depreciation and impairment losses:
Balance at beginning of financial year
Transfers
Depreciation charge for year
Balance at end of financial year
Carrying amount opening
Carrying amount closing
293
215
-
(63)
(14)
431
189
-
(3)
73
259
104
172
327
106
(111)
-
(29)
293
148
(22)
-
63
189
179
104
1,586
1,111
299
639
-
379
379
12,773
14,475
-
(1,908)
25,340
644
-
1,572
2,216
12,129
23,124
-
-
-
7,167
6,676
111
(1,181)
12,773
350
22
272
644
6,817
12,129
108
13
-
-
-
121
38
-
-
34
72
70
49
-
96
-
379
379
-
-
-
-
-
-
-
-
-
-
-
80
28
-
-
-
108
10
-
-
28
38
70
70
-
34
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2008 annual report
49
noteS to the fInanCIal StatementS (Continued)
16. other investments
Non-current
Investments in controlled entities – at cost
The Group has the following interests in joint venture assets:
Joint venture
Thailand
Phetchabun Basin Concession,
Exploration Blocks L44/43 and L33/43
3/2546/60 and 5/2546/62 Concessions
Exploration Block L20/50
7/2551/98 Concession
Western Australia
EP 110 & 424, Carnarvon Basin
WA-399-P, Carnarvon Basin
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
-
-
1,483
1,483
Principal activities
Ownership interest %
Exploration, development and
production of hydrocarbons
Exploration for hydrocarbons
Exploration for hydrocarbons
Exploration for hydrocarbons
40%
50%
35%
50%
Summary financial information for joint venture assets, as included in the consolidated balance sheet and income statement, is shown below:
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Exploration and evaluation
Oil and gas assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Deferred tax
Provisions
Total non-current liabilities
Total liabilities
Net assets
Income
Expenses
Net profit after tax
2008
$000
28,130
9,124
1,586
738
39,578
123
363
24,037
24,523
64,101
2,863
24,152
27,015
3,738
-
3,738
30,753
33,348
63,033
(43,857)
19,176
2007
$000
2,407
1,594
1,111
572
5,684
34
-
12,129
12,163
17,847
2,730
-
2,730
-
105
105
2,836
15,011
3,681
(3,125)
556
Capital commitments and contingent liabilities for the joint ventures are disclosed in Notes 22 and 23 respectively.
50
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
17. trade and other payables
Current
Trade payables
Non-trade payables and accrued expenses
Owing to related parties
ConSoLiDateD
Company
2008
$000
2,352
948
68
3,368
2007
$000
2008
$000
955
2,073
-
3,028
308
155
68
531
2007
$000
206
91
-
297
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 32.
Company trade payables denominated in currencies other than its functional currency comprise A$10,000 denominated in US$ (2007:
A$84,000) and A$36,000 denominated in GBP (2007: A$Nil).
18. provisions
Current
Income tax
Special Remuneratory Benefit - Thailand
Non-current
Site restoration:
Balance at beginning of financial year
Provision (reversed) / made during the year
Balance at end of financial year
9,304
14,848
24,152
105
(105)
-
-
-
-
68
37
105
-
-
-
-
-
-
-
-
-
-
-
-
There are no restoration provisions required in respect of the Group’s activities. The unused provision of $105,000 at the previous year
end has been reversed in full during the current period.
19. Deferred tax
Recognised deferred tax assets and liabilities
The net deferred tax liability is attributable to the following:
Oil and gas assets (liability)
Tax value of loss carry forwards recognised (asset)
Net tax liability
5,918
(2,180)
3,738
-
-
-
-
-
-
-
-
-
The movement in the deferred tax liability during the reporting period has all been recognized in income.
Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognized in respect of the following items:
Deductible temporary differences
Tax loses
212
1,631
1,843
288
1,070
1,358
1,518
1,631
3,149
1,037
1,054
2,091
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can
utilise the benefits.
2008 annual report
51
noteS to the fInanCIal StatementS (Continued)
20. Capital and reserves
Issued capital
Company and consolidated
2007
2008
number of shares
Balance at beginning of financial year
Shares issued for cash
Employee Share Plan issues
Shares issued on exercise of share options
Balance at end of financial year
657,537,134
-
387,500
15,000,000
672,924,634
411,787,134
230,000,000
13,750,000
2,000,000
657,537,134
Issued capital
Balance at beginning of financial year
Shares issued for cash
Transaction costs
Employee Share Plan related movements
Employee Share Plan loans repaid
Shares issued on exercise of share options
Balance at end of financial year
Company and consolidated
2007
$000
2008
$000
65,041
-
(3)
380
90
1,230
66,738
50,220
15,820
(1,182)
43
-
140
65,041
Ordinary shares have the right to one vote per share at meetings of the Company, to receive dividends as declared and, in the event
of a winding-up of 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.
The Company does not have authorised capital or par value in respect of its issued shares.
Translation reserve
Movements in the translation reserve are set out in the Statement in Changes in Equity on page 32.
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations where their functional currency is different to the presentation currency of the reporting entity.
Share based payments reserve
Movements in the share based payments reserve are set out in the Statements of Changes in Equity on pages 32 and 33.
This reserve represents the fair value at grant of share options issued, including the value of shares issued under the Company’s ESP.
This reserve is reversed against issued capital when shares are issued on exercise of the options, or, in the case of the shares issued
under the ESP, the loan is repaid.
52
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
16,174
(1,542)
(4,855)
(3,512)
119
3,738
-
1,642
(39)
-
656
934
-
(7)
335
19
75
(54)
119
-
-
34
-
-
1,851
934
-
(7)
28
-
75
1,416
22,290
(240)
(2,851)
(1,066)
(7,789)
(604)
273
760
24,161
(1,292)
(908)
(683)
2,319
4
(9)
-
(62)
239
9
(76)
-
(15)
152
4
39,091
(800)
(2,674)
(1,001)
21. reconciliation of cash flows from operating activities
(a) Cash flows from operating activities
After tax profit / (loss) for the period
Adjustments for:
Equity settled share based payment expense
Deferred tax expense
Reversal of provision for impairment losses
Depreciation
Finance costs associated with rehabilitation provisions
Exploration expenditure written off
Foreign exchange losses / (gains)
Operating profit / (loss) before changes in working
capital and provisions:
Changes in assets and liabilities:
(Increase) in trade and other receivables
(Increase) in inventories
Decrease / (increase) in other assets
Increase in trade and other payables
Increase in provisions and employee benefits
Net cash flows generated from / (used in)
operating activities
(b) Reconciliation of cash and cash equivalents
Cash at bank and at call
28,281
8,927
570
6,520
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 32.
Restricted cash of $2,656,000 Company and $3,156,000 consolidated is included under trade and other receivables (2007: $Nil
Company and consolidated), see Notes 10 and 23.
2008 annual report
53
noteS to the fInanCIal StatementS (Continued)
22. Capital and other commitments
(a) Joint venture commitments
Share of capital commitments of joint venture assets:
Within one year
Capital commitments of the Group to joint venture assets:
Within one year
(b) Exploration expenditure commitments
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
1,721
187
204
1,950
-
187
-
1,950
Due to the nature of the Group'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, or by farming out portions of the entity's equity.
Exploration expenditure commitments forecast but not provided for in the financial statements are as follows:
ConSoLiDateD
Company
2008
$000
500
3,000
3,500
2007
$000
568
213
781
2008
$000
500
3,000
3,500
2007
$000
132
213
345
Less than one year
Between one and five years
(c) Capital expenditure commitments
Data licence commitments
96
107
96
107
54
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
23. Contingencies
The directors are of the opinion that provisions are not required in respect of these matters as it is not probable that a future sacrifice of
economic benefits will be required or the amount is not capable of reliable measurement.
Contingent liabilities not considered remote
Under the terms of an Investment Agreement the Group is required to pay a percentage of sales proceeds from specified zones within
the Wichian Buri Production Licences I and II in Thailand to Gemini Oil and Gas Limited, an independent oil and natural gas investment
fund. The percentage is 12.5% to a maximum cumulative payment of US$800,000, after which the percentage falls to 7.5%.
The Group has expensed US$371,000 in the current period (2007: US$184,000). Cumulative amounts paid and payable at balance date
under the terms of this agreement are US$820,000.
Contingent liabilities considered remote
a) The Phetchabun Basin Joint Venture operation, in which the Group has a 40% interest, has issued bank guarantees for an amount of
40.5 million Thai Baht as security in lieu of bonds. The Group’s “trade and other receivables” include A$500,000 of restricted cash held
by the bank as security for these guarantees.
b) The Company has provided a cash bond of US$2,125,000 to the Department of Mineral Fuels in Thailand in respect of its obligations
for its 50% interest in the L20/50 concession in Thailand. The bond is secured by a cash deposit of A$2,656,000 held with Company’s
Australian bank. The Company and its joint venture partner, who has provided a similar guarantee to the Department of Mineral Fuels,
are negotiating a Cross Deed of Indemnity in respect of their respective rights and interests.
c) In accordance with normal petroleum industry practice, the Group 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.
2008 annual report
55
noteS to the fInanCIal StatementS (Continued)
24. employee benefits
Current:
Liability for annual leave
Share options
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
13
4
13
4
The number and weighted average exercise price of employee share options is as follows:
Outstanding 1 July
Exercised during the period
Outstanding 30 June
Exercisable at 30 June
weighted
average
exercise
price
2008
$0.09
$0.07
$0.10
$0.10
number
of options
2008
20,000,000
10,000,000
10,000,000
10,000,000
weighted
average
exercise
price
2007
$0.09
$0.07
$0.09
$0.09
number
of options
2007
22,000,000
2,000,000
20,000000
20,000000
All options on issue at 30 June 2008 have an exercise price of $0.10, expire on 31 March 2009, and are issued to directors or their
related parties.
The weighted average share price at the date of exercise for employee share options exercised during the period was $0.53 (2007:
$0.22)
Share based payments - Employee Share Plan
Under the terms of the Carnarvon Employee Share Plan (“ESP”), as approved by shareholders, the Company may, in its absolute
discretion, make an offer of ordinary fully paid shares in the Company to any eligible person, to be funded by a limited recourse loan
granted by the Company.
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 date of offer. Eligible persons receive an interest free advance to acquire the shares.
The movements in the ESP during the financial year, including those held by Key Management Personnel, were as follows:
1 July 2007
issued
repaid
30 June 2008
Number of shares
Loan
Average issue price per share
16,250,000
$1,573,992
$0.10
387,500
$271,638
$0.70
1,785,000
$90,277
$0.05
14,852,500
$1,755,353
$0.12
In accordance with AASB 2 the issue of shares under the ESP are accounted for as an in principle option.
56
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
24. employee benefits (continued)
The fair value of services received in return for options for both the Company and Group, including shares issued under the ESP and
valued as options, is measured by reference to the fair value of share options granted using the Black-Scholes model, as set out below.
fair value of share options
and related assumptions
Fair value at measurement date (cents)
Share price at date of issue (cents)
Exercise price (cents)
Expected volatility
Actual / assumed option life
Expected dividends
Risk-free interest rate
Share-based expense recognised
key
management
personnel
2008
key
management
personnel
2007
other
employees
2008
30.7
70.1
70.1
55%
3 years
Nil
7.5%
$61,468
7.4
13.5
9.0
55%
3 years
Nil
5.5%
$666,790
30.7
70.1
70.1
55%
3 years
Nil
7.5%
$57,627
other
employees
2007
5.1 to 6.0
12.2 to 14.3
12.2 to 14.3
55%
3 years
Nil
5.5%
$267,029
The current year volatility approximates the Company’s historic volatility over a 90 day period ending 30 June 2008 and is intended to
reflect the movement of the Company’s share price volatility towards its peers as its oil and gas interests mature.
Further details of shares and options issued to directors are set out in Note 27, and in the Remuneration Report set out on pages 20 to
25.
2008 annual report
57
noteS to the fInanCIal StatementS (Continued)
25. related party disclosures
Ultimate parent
Carnarvon Petroleum Limited is the ultimate parent company.
Wholly-owned group transactions
During the reporting period there have been transactions between the Company and its controlled entities and joint ventures. The
Company provided accounting and administrative services to its controlled entities and joint ventures for which it did not charge a
management fee.
During the financial year ended 30 June 2008 net loans to controlled entities totalled $1,293,000 (2007: $9,088,000).
The carrying value of loans to controlled entities at 30 June 2008 was $12,713,000 (2007: $13,024,000) after provisions of $693,000
(2007: $693,000). These loans are unsecured, non-interest bearing, and have no fixed terms of repayment.
Other related party balances
At 30 June 2008 an amount of $68,548 (2007: $Nil) is included in Company and consolidated trade and other payables for outstanding
director fees and expenses.
26. operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
ConSoLiDateD
Company
2008
$000
170
12
182
2007
$000
232
149
381
2008
$000
71
-
71
2007
$000
119
64
183
During the reporting period $344,000 was recognised as an expense in the consolidated income statement in respect of operating
leases (2007: $240,000).
27. Segment information
Segment information is presented in respect of the Group’s primary format, geographical segments, which is based on the Group’s
management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. In presenting information on the basis of geographical segments, segment revenue is based on the geographical
location of customers, and segment assets are based on the geographical location of the assets.
The Group operated one business segment during the reporting period, being oil and gas exploration, development and production.
58
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
27. Segment information (continued)
Geographical Segments
australia
2008
$000
2007
$000
-
251
251
-
240
240
2008
$000
63,033
67
63,100
(3,001)
(3,001)
(2,098)
(2,098)
19,195
19,175
Revenue
Sales
Other
Total revenue
Segment result
Result from continuing
operations
Total segment result
Assets
Oil and gas assets
Property, plant and
equipment
Other
Total segment assets
-
49
3,454
3,503
-
70
6,677
6,747
23,124
123
39,534
62,781
thailand
Consolidated
2007
$000
3,674
7
3,681
556
556
12,129
34
5,684
17,847
2008
$000
63,033
318
63,351
2007
$000
3,674
247
3,921
16,174
16,174
(1,542)
(1,542)
23,124
172
42,988
66,284
12,129
104
12,361
24,594
Liabilities
Total segment liabilities
Other segment information:
544
301
30,727
2,836
31,271
3,137
Capital expenditure
Depreciation
13
34
285
28
14,614
1,608
6,915
307
14,627
1,642
7,200
335
2008 annual report
59
noteS to the fInanCIal StatementS (Continued)
28. key management personnel disclosures
(a) Key management personnel compensation
Key management personnel compensation included in employee benefits expense, directors emoluments, share based payments and
administration expenses is as follows:
Short term employee benefits
Post-employment benefits
Share-based payments
ConSoLiDateD
Company
2008
$000
936,281
21,981
61,468
1,019,730
2007
$000
534,936
-
666,790
1,201,726
2008
$000
936,281
21,981
61,468
1,019,730
2007
$000
534,936
-
666,790
1,201,726
Information regarding individual directors and executives’ compensation and some equity instruments disclosures, as permitted by
Corporations Regulation 2M.3.03, are provided in the Remuneration Report section of the directors’ report as set out on pages
20 to 25.
Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the Group since the
end of the previous financial year and there were no material contracts involving directors’ interests existing at year end.
(b) Options and rights over equity instruments
The movement during the reporting period in the number of options over ordinary shares in the Company held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
Directors
PJ Leonhardt
EP Jacobson
NC Fearis
KP Judge
Directors
PJ Leonhardt
EP Jacobson
NC Fearis
KP Judge
held at
1 July 2007
6,000,000
8,000,000
2,000,000
4,000,000
held at
1 July 2006
6,000,000
8,000,000
4,000,000
4,000,000
exercised
(3,000,000)
(4,000,000)
-
(3,000,000)
exercised
-
-
(2,000,000)
-
held at
30 June 2008
3,000,000
4,000,000
2,000,000
1,000,000
held at
30 June 2007
6,000,000
8,000,000
2,000,000
4,000,000
Options granted as compensation vest immediately. During the financial year there was no forfeiture or vesting of options granted in
previous periods. There were no options on issue that were still to vest at the end of the reporting period.
60
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
28. key management personnel disclosures (continued)
(c) Loans to key management personnel and their related parties
Details of loans to key management personnel and their related parties, which are all interest free loans with limited recourse security
over the plan shares provided in accordance with the Company’s Employee Share Plan (“ESP”), are as follows:
Directors
PJ Leonhardt
EP Jacobson
Executives
PP Huizenga
RA Anderson
Directors
PJ Leonhardt
EP Jacobson
NC Fearis
Executive
RA Anderson
Balance
1 July 2007 ($)
Balance highest balance
in period ($)
30 June 2008 ($)
Loaned
in period ($)
repaid
in period ($)
270,000
540,000
244,000
101,242
270,000
540,000
314,100
81,065
270,000
540,000
314,100
101,242
-
-
-
-
70,100
70,100
-
90,277
Balance
1 July 2006 ($)
Balance highest balance
in period ($)
30 June 2007 ($)
Loaned
in period ($)
repaid
in period ($)
-
-
17,000
270,000
540,000
-
270,000
540,000
17,000
270,000
540,000
-
-
-
17,000
101,242
101,242
101,242
-
-
Details regarding the aggregate of loans, all of which are interest free, made by the Group to key management personnel and their
related parties, and the number of individual in each group, are as follows:
2008
2007
opening
balance ($)
Closing
balance ($)
number in
group at 30 June
911,242
1,205,162
118,242
911,242
4
4
Mr Huizenga was only classified as a key management person effective 1 January 2008, and his loans are therefore not included in the 1
July 2007 opening balance.
(d) Other key management personnel transactions
Amounts payable to key management personnel or their related parties at reporting date in respect of outstanding director and
consulting fees and expenses are as follows:
ConSoLiDateD
Company
2008
$000
2007
$000
2008
$000
2007
$000
Current
Trade and other payables
68
-
68
-
2008 annual report
61
noteS to the fInanCIal StatementS (Continued)
28. key management personnel disclosures (continued)
(e) Movements in shares
The movement during the reporting period in the number of ordinary shares in Carnarvon Petroleum Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
Directors
PJ Leonhardt
EP Jacobson
NC Fearis
KP Judge
Executives
PP Huizenga
RA Anderson
held at
1 July 2007
net
acquired/(sold)
award under
employee Share
plan
received on
exercise of
options
held at
30 June 2008
11,900,000
24,313,793
6,316,186
15,068,596
-
300,000
-
(2,500,000)
-
-
-
-
3,000,000
4,000,000
-
3,000,000
14,900,000
28,613,793
6,316,186
15,568,596
2,000,000
4,443,490
-
(1,439,049)
100,000
100,000
-
-
2,100,000
3,104,441
Mr Huizenga became a key management person effective 1 January 2008.
Directors
PJ Leonhardt
EP Jacobson
NC Fearis
KP Judge
Executive
RA Anderson
held at
1 July 2006
net
acquired/(sold)
award under
employee Share
plan
received on
exercise of
options
held at
30 June 2007
7,510,504
13,189,307
5,871,400
14,168,596
1,389,496
5,124,486
(1,555,214)
900,000
3,000,000
6,000,000
-
-
-
-
2,000,000
-
11,900,000
24,313,793
6,316,186
15,068,596
3,464,998
978,492
-
-
4,443,490
Shares allotted under the ESP were funded by interest-free loans with a limited recourse security over the plan shares and subject to the
detailed rules of the ESP.
In accordance with AASB 2 the issue of shares under the ESP is accounted for as an in principle option. The fair value of share options,
including ESP shares issued and valued as options, and their valuation assumptions are set out in Note 24.
Information regarding individual directors’ and executives’ compensation, including company loans used to finance the purchase of the
ESP shares, is provided in the Remuneration Report section of the directors’ report as set out on pages 18 to 23.
62
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
29. non-key management personnel disclosures
Identity of related parties
The Group has a related party relationship with its controlled entities (see Note 30), joint venture assets (see Note 16), and with its key
management personnel (see Note 28).
30. Consolidated entities
name
Company
Carnarvon Petroleum Ltd
Controlled entities
Carnarvon Thailand Ltd
Lassoc Pty Ltd
SRL Exploration Pty Ltd
Country of incorporation
2008
2007
ownership
interest
British Virgin Islands
Australia
Australia
100%
100%
100%
100%
100%
100%
Investments in controlled entities are measured at cost in the financial statements of the Company.
31. Subsequent events
No matter or circumstance has arisen since 30 June 2008 that in the opinion of the directors has significantly affected, or may
significantly affect in future financial years:
(i)
(ii)
(iii)
the Group’s operations; or
the results of those operations; or
the Group’s state of affairs
2008 annual report
63
noteS to the fInanCIal StatementS (Continued)
32. financial risk management
The Group’s activities expose it to market risk (including currency risk, commodity price risk and interest rate risk), credit risk and liquidity
risk.
This note presents qualitative and quantitative information about the Company’s and Group’s exposure to each of the above risks, their
objectives, policies and procedures for managing risk, and the management of capital. The Board of Directors has overall responsibility for
the establishment and oversight of the risk management framework.
The Group’s overall risk management approach focuses on the unpredictability of financial markets and seeks to minimize the potential
adverse effects on the financial performance of the Group. The Group does not currently use derivative financial instruments to hedge
financial risk exposures and therefore it is exposed to daily movements in the international oil prices, exchange rates, and interest rates.
The Group uses various methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in
the case of interest rate, foreign exchange, and commodity price risk and ageing analysis for credit risk.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence and to sustain future
development of the business. Given the stage of the Group’s development there are no formal targets set for return on capital. There were
no changes to the Group’s approach to capital management during the year. Neither the Company nor any of its controlled entities are
subject to externally imposed capital requirements.
(a) Commodity price risk
Commodity price risk is the risk of financial loss resulting from movements in the price of the Group’s commodity output, being crude
oil.
Revenues under the Group’s contractual arrangements with its customer are denominated in US$, linked to the US$ prices of a basket of
oil products, and paid in Thai Baht at the average monthly exchange rate. The Group does not currently use derivative financial instruments
to hedge commodity price risk and therefore is exposed to daily movements in the prices of these oil products. The Company is not
exposed to commodity price risk.
Sensitivity analysis
An increase of 10% in the achieved monthly oil sale price would have increased equity and pre tax profit and loss by the amounts shown
below. This analysis assumes that all other variables other than royalties, which are directly related to oil revenues, remain constant. The
analysis is performed on the same basis for 2007:
30 June 2008
30 June 2007
ConSoLiDateD
Company
equity
profit and loss
equity
profit and loss
$000
5,867
336
$000
$000
$000
5,867
336
-
-
-
-
A decrease of 10% in the achieved monthly oil sale price would have decreased equity and pre tax profit and loss by the amounts shown
below. This analysis assumes that all other variables other than royalties, which are directly related to oil revenues, remain constant. The
analysis is performed on the same basis for 2007:
ConSoLiDateD
Company
equity
profit and loss
equity
profit and loss
$000
$000
$000
$000
30 June 2008
30 June 2007
(5,867)
(336)
(5,867)
336)
-
-
-
-
64
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(b) Interest rate risk
The significance and management of the risks to the Group and the Company is dependent on a number of factors including:
Interest rates (current and forward) and the currencies that are held;
Level of cash and liquid investments and their term;
Maturity dates of investments;
Proportion of investments that are fixed rate or floating rate.
The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate investments.
At the reporting date the effective interest rates of variable rate interest bearing financial instruments of the Company and the Group were
as follows. There were no interest-bearing financial liabilities:
Carrying amount (A$000)
Financial assets
Weighted average interest rate (%)
Financial assets
Sensitivity analysis
ConSoLiDateD
Company
2008
2007
2008
28,281
8,927
570
2007
6,520
0.25%
5.16%
6.14%
6.23%
An increase in 50 basis points from the weighted average year-end interest rates at 30 June would have increased equity and profit and
loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same
basis for 2007:
ConSoLiDateD
Company
equity
profit and loss
equity
profit and loss
$000
$000
$000
$000
30 June 2008
30 June 2007
141
45
141
45
3
33
3
33
A decrease in 50 basis points from the weighted average year-end interest rates at 30 June would have decreased equity and profit and
loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same
basis for 2007:
30 June 2008
30 June 2007
ConSoLiDateD
Company
equity
profit and loss
equity
profit and loss
$000
$000
$000
(141)
(45)
(141)
(45)
(3)
(33)
$000
(3)
(33)
2008 annual report
65
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(c) Credit risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in a financial loss to the Company or
Group, and arises principally from the Group’s receivables from customers and cash deposits. The Company has no trade receivables at
June 2008 or June 2007 and has no significant concentration of credit risk.
The Group’s trade receivables at both June 2008 and June 2007 are all due from an entity located in Thailand and controlled by its
government. This entity has an appropriate credit history with the Group.
Cash transactions are limited to financial institutions considered to have a suitable credit rating.
Credit risk further arises in relation to financial guarantees given to certain parties, refer to Note 23.
Exposure to credit risk is considered minimal but is monitored on an ongoing basis. The maximum exposure to credit risk is represented
by the carrying amount of each financial asset in the balance sheet.
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit
risk at the reporting date was:
ConSoLiDateD
Company
Carrying amount:
Cash and cash equivalents
Trade and other receivables
2008
$000
28,281
12,443
40,724
2007
$000
8,927
1,684
10,611
The aging of the Group’s trade receivables at reporting date was:
Not past due
gross
impairment
2008
$000
9,255
9,255
2008
$000
-
-
2008
$000
570
15,501
16,071
gross
2007
$000
1,001
1,001
2007
$000
6,520
13,147
19,667
impairment
2007
$000
-
-
Based on historic default rates, the Group believes that no impairment allowance is necessary in respect of trade receivables.
66
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(d) Currency risk
Currency risk arises from sales, purchases, assets and liabilities that are denominated in a currency other than the functional currencies
of the entities within the Group, being the A$ and US$.
The Group operates predominantly in Thailand and is exposed to currency risk arising from various foreign currency exposures, primarily
with respect to the US$ and Thai Baht (“THB”). The functional currency of its Thai operations is considered to be the US$, however the
cash receipts from those operations, which comprise 100% of the revenues of the Group, are received in Thai Baht. The majority of the
Group’s payments, including Thai SRB and income tax, are also payable in THB which effectively creates a natural hedge. The Company’s
foreign exchange risk predominantly resides in its US$ loan to one of its controlled entities.
The Group does not currently use derivative financial instruments to hedge foreign currency risk and therefore is exposed to daily
movements in exchange rates. However, the Group intends to maintain sufficient THB cash balances to meet its THB obligations, in
particular its SRB and income tax liabilities.
The Company and Group’s exposure to foreign currency risk at balance date was as follows, based on carrying amounts.
thai Baht
a$000
uSD
a$000
gBp
a$000
Consolidated 2008
Cash and cash equivalents
Trade receivables
Trade payables
SRB and income tax provisions
Gross balance sheet exposure
Company 2008
Trade receivables
Trade payables
Gross balance sheet exposure
Consolidated 2007
Cash and cash equivalents
Trade receivables
Trade payables
Gross balance sheet exposure
Company 2007
Trade payables
Gross balance sheet exposure
27,634
9,255
(1,561)
(24,152)
11,176
-
-
-
2,181
1,101
(669)
2,613
-
-
114
-
(493)
-
(379)
-
(10)
(10)
234
-
(165)
69
(83)
(83)
-
-
(36)
-
(36)
-
(36)
(36)
-
-
-
-
-
-
The following significant exchange rates applied during the year:
auD to:
1 Thai baht
1 USD
average rate
2008
0.036
1.12
2007
0.036
1.27
reporting date spot rate
2007
2008
0.031
1.04
0.037
1.18
2008 annual report
67
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(d) Currency risk (continued)
Sensitivity analysis
A 10% strengthening of the AUD against the following currencies at 30 June would have decreased equity and pre tax profit and loss by the
amounts shown below. This analysis assumes that all other variables, in particular interest rates and the exchange rate between the Thai
Baht and USD, remain constant. The analysis is performed on the same basis for 2007:
30 June 2008
USD
30 June 2007
USD
ConSoLiDateD
Company
equity
profit and loss
equity
profit and loss
$000
$000
$000
$000
(3,439)
(2,137)
(1,237)
(1,237)
(1,553)
(89)
(1,289)
(1,289)
A 10% weakening of the AUD against the following currencies at 30 June would have increased equity and pre tax profit and loss by the
amounts shown below. This analysis assumes that all other variables, in particular interest rates and the exchange rate between the Thai
Baht and USD, remain constant. The analysis is performed on the same basis for 2007:
30 June 2008
USD
30 June 2007
USD
(e) Fair values
ConSoLiDateD
Company
equity
profit and loss
equity
profit and loss
$000
4,203
$000
2,612
$000
1,515
1,895
108
1,573
$000
1,515
1,573
The fair values of financial assets and financial liabilities, together with their carrying amounts shown in the balance sheet, are as
follows:
Carrying
amount
2008
$000
12,443
28,281
(3,368)
37,356
15,501
1,483
570
(486)
17,068
fair value
2008
$000
12,443
28,281
(3,368)
37,356
15,501
1,483
570
(486)
17,068
Carrying
amount
2007
$000
1,684
8,927
(3,028)
7,583
13,147
1,483
6,520
(297)
20,853
fair value
2007
$000
1,684
8,927
(3,028)
7,583
13,147
1,483
6,520
(297)
20,853
Consolidated
Loans and receivables
Cash and cash equivalents
Trade and other payables
Company
Loans and receivables
Investment in controlled entities
Cash and cash equivalents
Trade and other payables
The basis for determining fair values is disclosed in Note 3(i).
68
Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(f) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group’s approach to
managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due under a range
of financial conditions. The net cashflows arising from its Thai assets are considered to generate sufficient working capital to adequately
address this risk.
Neither the Company nor the Group currently has any available lines of credit.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of any
netting agreements:
Carrying
amount
$000
Contractual
cashflows
$000
6 months
or less
$000
6 to 12
months
$000
Consolidated 2008
Non-derivative financial liabilities
Trade and other payables
SRB and income tax provisions
Company 2008
Non-derivative financial liabilities
Trade and other payables
Consolidated 2007
Non-derivative financial liabilities
Trade and other payables
Company 2007
Non-derivative financial liabilities
Trade and other payables
3,368
24,152
27,520
3,368
24,152
27,520
3,368
9,304
12,672
-
14,848
14,848
531
531
531
531
531
531
3,028
3,028
3,028
3,028
3,028
3,028
297
297
297
297
297
297
-
-
-
-
-
-
2008 annual report
69
dIreCtorS’ deClaratIon
(1)
In the opinion of the directors of Carnarvon Petroleum Limited:
(a)
the financial statements and notes of the Company and of the Group set out on pages 30 to 69 are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Company’s and Group’s financial position as at 30 June 2008 and of their performance,
as represented by the results of their operations and their cash flows, for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
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.
(2)
This declaration has been made after receiving the declarations required to be made to the directors in accordance with section
295A of the Corporations Act 2001 for the financial period ending 30 June 2008.
Signed in accordance with a resolution of the directors.
pJ Leonhardt
Director
Perth, 25 September 2008
70
Carnarvon petroleum ltd
audIt report
2008 annual report
71
audIt report (Continued)
72
Carnarvon petroleum ltd
Corporate GovernanCe Statement
introduction
Carnarvon Petroleum Limited (“Carnarvon”) has addressed the Essential Corporate Governance Principles as published by the ASX
Corporate Governance Council and has adopted the Best Practice Recommendations which the Board considers to be relevant and
essential for the efficient management of the Company and its business whilst safeguarding shareholder assets.
The following additional information about the Company's corporate governance practices is set out on the Company's website at
www.carnarvonpetroleum.com:
•
•
•
•
•
•
•
•
•
•
•
Corporate governance disclosures and explanations;
Statement of Board and management functions;
Composition of the Board and new appointments;
Committees of the Board;
Summary of code of conduct for directors;
Summary of policy on securities trading;
Audit Committee Charter;
Summary of policy and procedures for compliance with ASX Listing Rule disclosure requirements;
Summary of arrangements regarding communication with and participation of shareholders;
Summary of Company's risk management policy and internal compliance and control system; and
Corporate code of conduct.
Skills, experience, expertise and term of office of each director
A profile of each director containing the applicable information is set out in the directors' report.
Statement concerning availability of independent professional advice
If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office
as a director then, provided the director first obtains approval for incurring such expense from the chairman, the Company will pay the
reasonable expenses associated with obtaining such advice.
number of audit Committee meetings and names of attendees
The number of Audit Committee meetings and names of attendees is set out in the directors' report.
names and qualifications of audit Committee members
The names and qualifications of Audit Committee members are set out in the directors’ report.
2008 annual report
73
Corporate GovernanCe Statement (Continued)
explanations for departures from best practice recommendations
From 1 July 2007 to 30 June 2008 (the “Reporting Period”) the Company complied with each of the Essential Corporate Governance
Principles (Note 1 below) and the corresponding Best Practice Recommendations (Note 2 below) as published by the ASX Corporate
Governance Council ("ASX Principles and Recommendations"), other than in relation to the matters specified below:
Principle
Reference
Recommendation
Reference
Notification of Departure
Explanation for Departure
2
2
2
4
9
2.1
The Board did not comprise a majority of
independent directors. The Board currently
consists of two independent and two non-
independent directors.
Mr Peter Leonhardt, the Chairman, is currently
acting in a part time executive capacity as
a non-independent director to support the
Chief Executive Officer. Mr Leonhardt’s
fulfilment of this role going forward will be
monitored relative to the Company’s stage of
development.
2.2
The Chairman is not an independent director. Mr Peter Leonhardt, the Chairman, is currently
2.4
4.3
9.2
A separate Nomination Committee has not
been formed.
Since February 2006 the Audit Committee
has comprised two directors, one of whom
is non-independent, operates in a part time
executive capacity, and is the Chairman of
the Board. This does not meet the criteria in
Best Practice Recommendation 4.3.
A separate Remuneration Committee has not
been formed.
acting in a part time executive capacity as
a non-independent director to support the
Chief Executive Officer. Mr Leonhardt’s
fulfilment of this role going forward will be
monitored relative to the Company’s stage of
development.
The Board considers that the Company is not
currently of a size to justify the formation of a
Nomination Committee. The Board as a whole
undertakes the process of reviewing the skills
base and experience of existing directors to
enable identification or attributes required in
new directors. Where appropriate independent
consultants are engaged to identify possible
new candidates for the Board.
In accordance with Listing Rule 12.7, the
Company is not required to comply with
Recommendation 4.3.
The Board considered that the Company
was not of a size during the reporting period
to justify the formation of a Remuneration
Committee. The Board as a whole undertook
the role of this committee. Since the end of
the reporting period the Board has determined
that the Company is now of a size to justify the
formation of a Remuneration Committee and
one was formed on 1 August 2008.
Notes
(1) A copy of the Ten Essential Corporate Governance Principles is set out on the Company’s website under the section entitled "Corporate
Governance". (2) A copy of the Best Practice Recommendations is set out on the Company’s website under the section entitled "Corporate
Governance".
74
Carnarvon petroleum ltd
Corporate GovernanCe Statement (Continued)
existence and terms of any schemes for retirement benefits for non-executive directors
The Company does not have any terms or schemes relating to retirement benefits for non-executive directors.
Company’s remuneration policies
The Company’s remuneration policies are set out in the Remuneration Report on pages 20 to 25.
The Company has separate remuneration policies for executive and non-executive directors. Non-executive directors receive a fixed fee
and, when appropriate, share options or participation in the Employee Share Scheme.
Executive directors receive a salary or fee and, when appropriate, shares, share options, or participation in the Employee Share Scheme.
identification of independent directors
The Company’s two independent directors are considered to be Mr Neil Fearis and Mr Ken Judge.
Neither of these directors was considered to have a material relationship with the Company or another group member during the Reporting
Period as professional advisor, consultant, supplier, customer, or through any other contractual relationship, nor did they have any business
or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best
interests of the Company.
The Board considers material in this context to be where any director-related business relationship represents the lesser of at least 5% of
the Company’s or the director-related business’s revenue.
2008 annual report
75
addItIonal Shareholder InformatIon
Additional information required by the ASX Limited ( ASX ) Listing Rules and not disclosed elsewhere in this report is set out below.
a)
Shareholdings as at 18 September 2008
Substantial shareholders
There are no substantial shareholder notices lodged with the Company.
Voting Rights
The voting rights attaching to Ordinary Shares are governed by the Constitution. On a show of hands every person present who is a
member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by attorney
or duly authorised representative shall have one vote for each share held. No options have any voting rights.
Twenty Largest Shareholders
Name of Shareholder
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Mr Edward Patrick Jacobson
ANZ Nominees Limited
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