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Berry2009 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
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
ii
Carnarvon Petroleum ltd
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
5-17
18-28
29
30
31-32
33
34-68
69
70-71
72-74
75-76
2009 annual rePort
1
CHaIrman’S revIeW
The 2008/09 financial year was a period of severe turbulence in economic conditions and I am delighted to report that Carnarvon has
been successful in delivering further significant growth in operational and financial performance. Importantly, we have built a strong
foundation for future development and your Company is now very well positioned to pursue the emerging opportunities.
Financial and operating highlights include:
•
•
•
•
Sales revenue grew by 59% to $100.8 million. Due to lower oil prices this did not match the 93% growth in oil sales to 1.35
million bbls
Profit after tax increased by 133% to $36.4 million
Exploration and development expenditure more than doubled to $35.5 million which was funded from operating cash flows
Proved and probable reserves increased by 46% to 16.6 million bbls reflecting the successful exploration and development
work programme
• Market capitalisation increased by 54% to $556 million at year end and Carnarvon was included in the S&P/ASX 200 Index for
the first time
These excellent results have been achieved against a background of a collapse in the oil price from record levels, significant fluctuations
in the A$ exchange rate, and uncertain market conditions.
Over the last two years numerous investment opportunities have been considered by the Board and management team. We have been
mindful of the risk-reward balance, particularly during a period of enthusiastic valuations, and have taken a cautious approach to exploration
commitments. As a result we believe Carnarvon now has the capacity to pursue the opportunities available at an opportune time in the
business cycle.
Our existing Phetchabun Basin joint venture interests continue to provide extensive scope for future exploration and development. At the
same time, we have grown our regional knowledge and resources and added to our Thai interests. Outside of Thailand our new ventures
team is seeing many opportunities, and current work in progress should flow through to the announcement of a number of exciting new
interests.
At an operational level our Thai Joint Venture partner Pan Orient Energy Corp has again delivered excellent results in the field notwithstanding
the complexities and challenges of exploration and drilling in fractured volcanic reservoirs. The contributions of Pan Orient’s Chief
Executive Officer, Jeff Chisholm, and his team are greatly appreciated. Our strong working relationship with them is an important element
of our success.
To continue Carnarvon’s successful growth we are conscious of the need to work closely with all stakeholders including joint venture
partners, suppliers, our corporate advisers and shareholders. I would like to thank all those who have supported us during the year.
Carnarvon’s people have again made outstanding contributions and the high calibre of our relatively small team is a key to our future
growth. On behalf of the Carnarvon Board I congratulate our Chief Executive Officer Ted Jacobson and all of the staff. We all look forward
to another exciting year in 2010 and beyond.
peter Leonhardt
Chairman
2
Carnarvon Petroleum ltd
CHIef exeCutIve’S revIeW
The Company’s key performance indicators prepared in this report show that the 2008/2009 reporting period has been one of significant
growth at all levels.
This growth is the direct result of the discovery of oil within highly fractured volcanic reservoirs in the L44/43 licence within onshore
Thailand where Carnarvon has a 40% interest. When we look at the production graph it appears that this rapid growth has happened
over a period of only two years. But this doesn’t do justice to the extensive preparatory work carried out by the joint venture in Thailand,
commencing in late 2005, with the recording of 3D seismic and drilling of eight exploration wells prior to the discovery of commercial oil
in fractured volcanics in the POE-9 well.
We are fortunate to have a highly competent and experienced operator, Pan Orient Energy Corp, who led our joint venture to this success,
demonstrating the importance of performing good technical work and being open minded to new ideas and concepts.
Whilst we are grateful for this new discovery, these fractured reservoirs are unlike the homogeneous reservoirs more normally developed
for oil production elsewhere and present numerous difficulties. The fracture systems within these volcanic reservoirs are complex with
adjacent wells performing quite differently depending on the number, intensity, distribution and size of the fractures intersected. This
makes for difficulties in predicting flow rates and ultimate recoveries for wells drilled across the field. During the reporting period 25 wells
were drilled with a success of 17 wells resulting in commercial production or extensive testing. This is an excellent result considering the
uncertainties posed by these reservoirs.
Whilst drilling through these zones the wells often experience “lost circulation” with all drilling fluids being lost into the reservoir with no
returns arriving back to the surface. This makes for difficult drilling and at times results in wells taking longer to drill than expected.
The L44/43 licence has produced 5.5 mmbbls to date from fractured volcanic reservoirs. Net reserves to Carnarvon estimated by our
Reserves Auditor at 31 December 2008 are 16.6 mmbbls. The joint venture has two drilling rigs on long term contract drilling continuously.
Whilst it is important to drill many more development wells to grow production, new discoveries such as Bo Rang and L44-W have meant
that the drilling programme has had to be changed frequently at short notice to appraise these new discoveries to provide the information
required to apply for a development licence. Whilst we have found more commercial oil in these other structures, this has been at the
expense of not being able to drill as many production wells as we would have liked.
2009 annual rePort
3
CHIef exeCutIve’S revIeW (Continued)
It is becoming clear that the L44/43 licence covers that part of the Phetchabun Basin that is generating considerable quantities of
oil, trapped in numerous structures. Although the testing of oil flows at high rates in fractured volcanic reservoirs has led us to drilling
these reservoirs exclusively, many other types of prospects occur on the licence and need to be addressed in time, particularly within
sandstones deposited within these ancient lake systems such as at the Wichian Buri oil field in the north of the licence.
Carnarvon also has a 40% interest in the L33/43 licence immediately to the north. Although we have drilled several unsuccessful
exploration wells here, the discovery of a good oil flow rate in the L44-W well on a structure that straddles the border between L44/43
and L33/43 is encouraging that the oil potential may continue to the north into this licence. Several exploration wells will be required to
evaluate this trend.
The Company is keen to search for other such oily basins not only in onshore Thailand but elsewhere in SE Asia. In 2008, Carnarvon was
awarded a 50% interest in permit L20/50 to the west of L44/43. This licence is located within the Phitsanulok Basin south of the largest
oil field onshore Thailand at Sirikit. Here Carnarvon, as operator, has commenced the recording and processing of 550 kms of 2D seismic.
The preliminary results from this survey are encouraging and the Company plans to drill up to four wells here in early 2010.
Furthermore Carnarvon, together with Pearl Energy Ltd, has applications pending with the Thai Government for the granting of two permits
south of Bangkok at L52/50 and L53/50 and is evaluating other onshore opportunities in the SE Asian area.
Within Australia, Carnarvon has taken a 100% interest in a large permit offshore Western Australia, with a Heads of Agreement signed to
exchange 50% of this permit for 50% of three adjacent permits. These permits contain several large structures where two previous drilled
wells, Phoenix-1 and 2, intersected several hundred metres of gas within low porosity sandstone reservoirs. The company plans to record
3D seismic over the Phoenix structures late this year. The earliest that appraisal drilling can be undertaken is late in 2010 and Carnarvon
will attempt to get a well drilled as soon as possible.
This certainly has been a busy year. Aside from all the activity in Thailand, the Company has worked hard to build an asset portfolio
that will deliver near and medium term growth, diversified through several countries and in different geological provinces. The new and
interesting permit additions I have described are just the beginning. Over the coming months I hope to be able to announce several other
interesting opportunities we have been negotiating in other hydrocarbon rich areas, which will provide even more excitement to our
drilling programme. With success, all of these opportunities are capable of growing our company substantially. The oil production from
our Thailand operations will enable Carnarvon to explore and develop these new opportunities using funds generated from the Company’s
cashflow, maintaining our strong financial position without debt.
We have been careful in selecting those new opportunities where joint venture partners are like minded to Carnarvon. The Carnarvon
management considers good relationships an important ingredient for success. Thus we have been careful to select those opportunities
that are situated in areas with well demonstrated hydrocarbon generating systems and where the joint venture is active in carrying out
good technical work, encouraging the drilling of wells. Our success in the Pan Orient operated permits in Thailand is testament to this
philosophy.
None of this could happen without the small and highly loyal team we have at Carnarvon and I sincerely thank the staff and other Board
members for their support and hard work.
ted Jacobson
Chief Executive Officer
4
Carnarvon Petroleum ltd
oPeratInG and fInanCIal revIeW
company performance
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 2008 – 30 June 2009
25 wells
+ 9%
25
20
15
10
5
0
s
l
l
e
W
2004 - 2005
2005 - 2006
2006 - 2007
2007 - 2008
2008 - 2009
Net Sales
Period:
Measure:
Period Change:
1 July 2008 – 30 June 2009
1,353,421 bbls
+ 93%
Financial Year
)
s
l
b
b
0
0
0
’
(
s
e
l
a
S
l
i
O
t
e
N
1600
1400
1200
1000
800
600
400
200
0
2004 - 2005
2005 - 2006
2006 - 2007
2007 - 2008
2008 - 2009
Proved and Probable Reserves
Period:
Measure:
Period Change:
As at 31 December 2008
16.6 million bbls
+ 46%
Financial Year
18
16
14
12
10
8
6
4
2
0
)
s
l
b
b
M
M
(
s
e
v
r
e
s
e
R
P
2
2005
2006
2007
Date
2008
2009
2009 annual rePort
5
oPeratInG and fInanCIal revIeW (Continued)
Consolidated Profit After Tax
Period:
Measure:
Period Change:
1 July 2008 – 30 June 2009
A$36.4 million
+ 133%
t
l
i
f
o
r
P
d
e
t
a
d
i
l
o
s
n
o
C
)
n
o
i
l
l
i
m
$
A
(
45
40
35
30
25
20
15
10
5
0
-5
-10
2004 - 2005
2005 - 2006
2006 - 2007
2007 - 2008
2008 - 2009
Share Price
Period:
Measure:
Period Change:
As at 30 June 2009
A$0.815
+ 54%
Financial Year
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
)
e
r
a
h
s
/
$
A
(
e
c
i
r
P
Market Capitalisation
Period:
Measure:
Period Change:
As at 30 June 2009
A$556 million
+ 54%
600
500
400
300
200
100
0
)
n
o
i
l
l
i
m
/
$
A
(
p
a
C
t
e
k
r
a
M
6
Carnarvon Petroleum ltd
2005
2006
2007
Date
2008
2009
2005
2006
2007
Date
2008
2009
oPeratInG and fInanCIal revIeW (Continued)
operating review
Summary
Carnarvon participated in the drilling of 25 wells within the SW1A group of permits resulting in 17 commercial production / testing wells.
Successful drilling and testing also resulted in an increase in 2P reserves to 16.6 million bbls.
Annual production increased significantly, compensating for varying but decreasing oil prices, resulting in consolidated profit after tax
more than doubling from the prior year.
In Carnarvon’s operated L20/50 exploration concession, a 500 km 2D seismic acquisition program was initiated.
Subsequent to year end Carnarvon was awarded a new permit offshore West Australia in the Roebuck basin on the North West Shelf. A
Heads of Agreement has been signed with a third party to swap 50% of Carnarvon’s permit for 50% of three new adjacent permits, subject
to ratification by government authorities.
Permits
Permit
Basin
Equity
Joint Venture
Partner(s)
Partner
Interest
Indicative
Program
Notes
Thailand
SW1A
Phetchabun
40%
Pan Orient Energy *
60%
L33/43
Phetchabun
40%
Pan Orient Energy *
60%
L44/43
Phetchabun
40%
Pan Orient Energy *
60%
L20/50
Phitsanulok
50%
Sun Resources
50%
Australia
WA-435-P
Roebuck
100.00%
EP321
EP407
Perth
Perth
2.50% of 38.25% (i)
2.50% of 42.5% (i)
WA399P
Carnarvon
50%
Rialto Energy
50%
Production,
Appraisal
Appraisal,
Exploration
Production,
Appraisal,
Exploration
Seismic
Acquisition,
Exploration
Studies
Appraisal
Appraisal
Seismic
Acquisition,
Exploration
Up to two wells
planned.
Up to two wells
planned.
Up to 20 wells
planned.
500 Km 2D
seismic
acquisition;
One to four wells
in planning
Reprocessing
315 Km 2D
Seismic
acquisition.
EP110 /
EP424
Carnarvon
35%
Strike Oil *
Pancontinental
Oil and Gas
25%
30%
Exploration
Active farm out.
Note: (*) Denotes operator where Carnarvon is non-operator partner
(i) Carnarvon has an overriding royalty interest in these assets
2009 annual rePort
7
oPeratInG and fInanCIal revIeW (Continued)
Thailand
Carnarvon’s principal assets are the
producing fields in the L44/43 and
SW1A licences in the Phetchabun Basin
onshore Thailand.
L44/43, SW1A & L33/43 Thailand
Phetchabun Basin (“SW1A”)
(Carnarvon Petroleum 40%, Pan Orient
60% operator)
A total of 25 wells were drilled in the
SW1A permits resulting in 17 commercial
oil production / testing wells, delineation
of one new oil field, and several new
oil pools. The remaining eight wells
all contained promising oil shows and
several have sidetrack potential.
A production license and environmental
approval were granted over the Na
Sanun East (“NSE”) oil field allowing field
development drilling to commence.
volumes
commercial
in the northern
Exploration drilling
failed to
exploration block L33/43
intersect
of
hydrocarbons. However, the L44-W oil
discovery, in the north eastern corner of
L44/43, is interpreted to spill over into
the southern end of L33/43. Appraisal
drilling of the L44-W oil discovery is
anticipated in both concessions over the
next 12 months.
Permit map of Thailand
8
Carnarvon Petroleum ltd
oPeratInG and fInanCIal revIeW (Continued)
A total of sixteen development/appraisal wells have been drilled into the NSE structure, with several other oil pools discovered above
and below the main producing volcanic reservoir. It is evident from the varied drilling results that the development of oil reserves from
the fractured volcanic reservoirs at Na Sanun East and adjacent oil fields requires comprehensive understanding due to the severe
heterogeneity in this type of reservoir.
these
The geological setting of
volcanic oil reservoirs is very complex,
featuring rapid changes of lithofacies
and
thicknesses, distributions of
fractures and pores/vugs, and
different oil well productivities with
neighbouring wells.
likely exploitation plan
The most
for NSE
incorporates 20 to 25
development wells being drilled from
mid 2008 through to mid 2010.
The wells will be drilled from a total
of 7 to 10 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.
The production profile is designed for
plateau production of 15,000 bopd
for 1-2 years before natural decline.
There is sufficient capacity in the
existing trucking operation infrastructure to cater for delivery of the oil from the field to the refinery in Bangkok.
Location of oilfields and prospects within L44/43 & L33/43 Thailand Phetchabun Basin
While a significant number of wells have been drilled, and a comprehensive 3D geological model has been completed, a comprehensive
development plan is still in the course of development by the joint venture.
2009 annual rePort
9
oPeratInG and fInanCIal revIeW (Continued)
L20/50 Thailand Phitsanulok Basin
(Carnarvon Petroleum 50% Operator, Sun Resources 50%)
Carnarvon, and partner Sun Resources, were granted the L20/50 exploration concession in January of 2007. 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. The permit is around
60 km to the west of Carnarvon’s 40% owned Petchabun Basin producing assets. The concession covers around 4,000 km2 and is lightly
explored. Around 1,000 km of 1980’s vintage 2D seismic data is available in paper format and six wells have been drilled in the block (three
shallow at around 500m and three deeper).
One previously drilled well in 1982 at Nong Bua-1
intersected oil shows which Carnarvon believes were
not fully tested. Carnarvon is continuing to investigate
the possibility of twinning or re-drilling this well.
Carnarvon has also digitized and reprocessed the bulk
of the available 2D seismic data and the interpretation
of that dataset showed the potential for a large
number of structures of significant potential size.
500 km of new 2D seismic is being acquired and is
due for completion in September of 2009.
Reprocessed 1980’s vintage 2D seismic
line indicates potential structuring
The processing and interpretation of the new data, incorporating the
reprocessed data, will be fast tracked to allow for a decision on the location
and number of exploration wells to be drilled in 2010.
Geological analysis of seismic and previous drilling data has concluded that
a number of play types are apparent, including Sirikit style fans, Wichian Buri
style sandstones, and Na Sanun style volcanics.
10
Carnarvon Petroleum ltd
oPeratInG and fInanCIal revIeW (Continued)
L52/50 and L53/50 Thailand Surat-Khiensa Basin
(Carnarvon Petroleum 50%, Pearl Oil 50% 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, however 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 the Company
anticipates award in late 2009.
Australia
WA-435-P Australia Offshore Northwest Shelf
(Carnarvon Petroleum 100% Operator)
Basin locations within Application Permits L52/50 and L53/50
Subsequent to being awarded 100% of exploration permit WA-435-P, Carnarvon entered into a heads of agreement with private exploration
company Finder Exploration (“Finder”) to swap 50% of Carnarvon’s WA-435-P for 50% of the three new adjacent Finder permits WA-436-P,
WA-437-P and WA-438-P, subject to ratification by the government authorities. Finder will assume operatorship of all four permits.
The four permits are situated in the north-western part of the Bedout Sub-basin within the greater Roebuck Basin, offshore Western
Australia. The blocks lie in an under-explored area that has received little recent attention, between the prolific Carnarvon Basin hydrocarbon
province to the southwest and the Browse Basin to the northeast. The town of Port Hedland lies approximately 150 km to the south of the
permits and Broome lies 250 km to the northeast. Water depths range from 35 to 265 metres and the permits cover a very large area of
more than 21,000 km2 (268 graticular blocks).
2009 annual rePort
11
oPeratInG and fInanCIal revIeW (Continued)
Only six wells have been drilled in the permits to date. The two wells, Phoenix-1 and Phoenix-2, drilled
on the large Phoenix structure in WA-435-P both intersected extensive gas columns within lower-
porosity, mid-Triassic reservoirs. In particular, Phoenix-1 recorded 110 metres of net gas-bearing
section; however, further work is required to determine whether the gas discovery at Phoenix could
flow at commercial rates. A larger, untested structure in WA-435-P lies directly on trend with the
Phoenix structure, 5 to15 km to the southwest. Further to the southeast in WA-437-P lies yet another
large, untested structure. Regional geology suggests that reservoir quality improves southward
toward these prospects, but this model will need to be confirmed by drilling. These Triassic structures
have significant potential of the order of several Tcf’s of recoverable gas, if exploration and appraisal
drilling are successful.
Other viable plays are recognised in these blocks including possible oil exploration potential at the
shallower Cretaceous-aged levels. Carnarvon and Finder intend to carry out numerous studies to
evaluate this potential.
The Government approved work programme for these permits, for the initial firm three-year term,
comprises seismic reprocessing, the recording of an aeromagnetic survey and technical studies,
which will include a complete analysis of the gas intersections in the Phoenix-1 and Phoenix-2 wells.
The second three-year term is planned to consist of seismic acquisition and the drilling of at least one
well in each permit. The results of the initial technical studies will be used to modify/accelerate this
second period work programme as appropriate.
Carnarvon’s proposed new permits, offshore Western Australia.
12
Carnarvon Petroleum ltd
oPeratInG and fInanCIal revIeW (Continued)
WA-399 P – Australia Offshore Northwest Shelf
(Carnarvon Petroleum 50% Operator, Rialto Energy 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. Carnarvon has completed the reprocessing of all available seismic over the permit (550
km2). The current work programme requires acquisition of 315km of new 2D seismic and Carnarvon is reviewing vessel availability
and prices.
EP 424 / EP 110 - Australia Offshore Northwest Shelf
(Carnarvon Petroleum 35%, Strike Oil 40% operator, Pancontinental 25%)
A variation to the permit terms of EP 424 has been granted from the Department of Industry and Resources to alter the requirement
for the drilling of one well by 13 April 2011.
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 and bright seismic
amplitudes on the crest are similar to the Cyrano and Nasutus discoveries elsewhere along trend which encountered a gas cap on
an 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.
The joint venture is actively farming out the drilling of a well into this prospect.
North West Shelf permits – location map
2009 annual rePort
13
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. Carnarvon reports reserves in line with ASX Listing Rules.
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 Thailand
Carnarvon’s reserves base has been certified by an independent reserves auditor. Over the last few years Gaffney, Cline and Associates
(“GCA”), one of the largest independent reserves certifiers in the world, has performed this service in line with end of calendar year
requirements for the Department of Mineral Fuels (“DMF”) in Thailand. GCA certified 16.6 million barrels of oil of 2P oil reserves net to
Carnarvon as at 31 December 2008, which is an increase of 46% percent compared to 31 December 2007 reserves.
Net Carnarvon Reserves
Proved
1P
Proved + Probable
2P
Proved + Probable + Possible
3P
GCA 31 Dec 2008
3.72 (million bbls)
16.62 (million bbls)
36.85 (million bbls)
This report is based on information which has been compiled by the Company’s Chief Operating Officer, Mr Philip Huizenga, who is a
full-time employee of the Company. Mr Huizenga is qualified in accordance with ASX Listing Rule 5.11 and has consented to the form and
context in which this statement appears.
1
Society of Petroleum Engineers ( SPE ); World Petroleum Council ( WPC ); American Association of Petroleum Geologist ( AAPG ) & Society of Petroleum Evaluation
Engineers ( SPEE )
14
Carnarvon Petroleum ltd
oPeratInG and fInanCIal revIeW (Continued)
Contingent Resources Thailand
In addition to its certified reserves, Carnarvon has a number of discovered oil and gas resources which currently do not classify as
reserves.
Net Carnarvon Contingent Resource
2C (million bbls)
2.5
5.0
2.2
3.7
9.7
3.6
5.8
2.6
35.1
NSE - F1
NSE North A
NSE - I1
Bo Rang A
Bo Rang B
L44-W
Si Thep (Deep)
L44-R
Carnarvon 30 June 2009
Carnarvon has an estimated 35 million
barrels of contingent oil resources.
These resources are not reserves,
because further work is required to
mature them, most notably appraisal
drilling and well testing. During 2008
around 2.5 million bbls of contingent
resources were matured
into 2P
reserves. Contingent resources have
been replenished by the recent L44-W,
NSE-I1 and NSE-F1 oil discoveries.
Map showing location of contingent
resources
2009 annual rePort
15
oPeratInG and fInanCIal revIeW (Continued)
Prospective Resources
Under the SPE-PRMS definitions prospective resources can also be classified as exploration resources.
Carnarvon has a growing 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. It is important to realise that prospects and leads carry exploration risks, which result in a chance of not finding
commercial hydrocarbons. These risks are identified by Carnarvon and help management in ranking exploration activities.
At the time of writing this report, Carnarvon has a seriatim of leads in a number of exploration blocks, most notably L20/50, L33/43 and
L44/43 in Thailand, but is still in the process of undertaking additional work to progress those leads to drillable prospects. Notwithstanding,
a number of exploration wells are scheduled for the latter part of 2009 and for 2010.
growth anD new ventures
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. Cash flow from these producing fields facilitates Carnarvon’s pursuit of other new venture opportunities to grow
the company.
Through the year Carnarvon has added four new exploration permits offshore North West Shelf Australia and is actively pursuing several
other near term drilling opportunities.
The new ventures team has implemented a strategy to acquire quality exploration acreage and appraisal projects with preference for the
following:
•
•
•
•
•
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 at an advanced stage of progressing several additional exploration and appraisal opportunities to deliver on this strategy
over the next few months.
16
Carnarvon Petroleum ltd
oPeratInG and fInanCIal revIeW (Continued)
financiaL summary
The Group’s revenue from continuing operations for the year ended 30 June 2009, being its share of the Phetchabun Basin Joint Venture
(“Joint Venture”) in Thailand, was $100,758,000 (2008: $63,033,000).
The higher A$ oil revenue resulted from Carnarvon’s share of higher Joint Venture oil sales of 1,353,421 bbls (2008: 702,084 bbls),
however this was offset by a reduced oil sale price of US$56.92 per bbl (2008: US$82.19). The weakening in the A$/US$ exchange rate
from US$0.96 to US$0.80 over the reporting period also had a positive impact on A$ revenue.
The Group’s profit after income tax for the year ended 30 June 2009 was $36,423,000 (2008: $15,651,000 profit). Its share of the pre
tax (income and special remuneratory benefit) cash operating profit of the Joint Venture increased to $83,194,000 (2008: $52,734,000)
as a result of improved production and the low variable operating, transportation, royalty and selling cost of per barrel of $12.95 (2008:
$13.87). Depreciation cost per barrel increased to $7.43 (2008: $3.78); estimated future costs of maintaining existing production have
been included, effective 1 July 2008, in the depreciable cost base.
New venture costs of $963,000 (2008: $973,000) are indicative of the Company’s continued effort to diversify its project base.
Corporate and administration costs for the year of $2,909,000 (2008: $2,129,000), excluding share-based payments, reflect a general
increase in corporate costs, including larger office premises, together with staff costs devoted towards expanding the Company’s
technical capability.
2009 annual rePort
17
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 2009, 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
Chairman
FCA, FAICD (Life)
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: CTI Logistics Limited (from August
1999); Centrepoint Alliance Limited (from May 2002 to June 2009). He is also a director of the Western Australian Institute for Medical
Research.
Mr Leonhardt is a member of the Audit Committee and the Remuneration Committee.
Edward (Ted) P Jacobson
Chief Executive Officer
B.Sc (Hons Geology)
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).
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.
Neil C Fearis
Non-Executive Director
LL.B (Hons), MAICD, F Fin
Appointed as a director on 30 November 1999.
Mr Fearis has over 32 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 June 2007 to November 2008). Mr Fearis is also a member of several
professional bodies associated with commerce and law.
Mr Fearis is Chairman of the Audit Committee and Chairman of the Remuneration Committee.
18
Carnarvon Petroleum ltd
dIreCtorS’ rePort (Continued)
Directors (continueD)
Kenneth P Judge
Non-Executive Director
B.Com, B. Juris, LL.B
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 also Chairman of Hidefield Gold Plc (from October 2003) and a
director of Gulfsands Petroleum Plc. (from October 2006), both of which are listed on AIM. He is also a director and Chairman of Alto
Ventures Ltd (from April 2004) which is listed on the TSX Venture Exchange.
Mr Judge is a member of the Audit Committee and the Remuneration Committee.
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 held and attended by each of the directors during the reporting period was as follows:
Peter Leonhardt
Ted Jacobson
Neil Fearis
Ken Judge
(a) Number of meetings held during period of office
(b) Number of meetings attended
auDit committee
Names and qualifications of Audit Committee members
(a)
6
6
6
6
(b)
6
6
6
6
The Committee is to include at least 3 members from 1 July 2009. Current members of the committee are Neil Fearis (Chairman), Peter
Leonhardt, and Ken Judge. Mr Judge was appointed a member on 1 July 2009. Qualifications of Audit Committee members are provided in
the Directors section of this directors’ report.
Audit Committee meetings
The number of Audit Committee meetings held and attended by the members during the reporting period was as follows:
Peter Leonhardt
Neil Fearis
(a) Number of meetings held during period of office
(b) Number of meetings attended
(a)
3
3
(b)
3
3
2009 annual rePort
19
dIreCtorS’ rePort (Continued)
remuneration committee
In August 2008 the Board determined the Company was of a size to justify the existence of a Remuneration Committee that now comprises
Neil Fearis (Chairman), Peter Leonhardt, and Ken Judge.
Remuneration Committee meetings
The number of Remuneration Committee meetings and the number attended by each of the members during the reporting period were
as follows:
Peter Leonhardt
Neil Fearis
Ken Judge
(a) Number of meetings held during period of office
(b) Number of meetings attended
(a)
2
2
2
(b)
2
2
2
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.
remuneration report
Until August 2008 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 recognise the relatively small size of the staff and stage of development of the Company and include a mix of
fixed and performance based compensation. A component of share-based compensation may be 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 issued 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.
20
Carnarvon Petroleum ltd
dIreCtorS’ rePort (Continued)
remuneration report (continueD)
Principles of compensation (continued)
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 2005
30 June 2006
30 June 2007
30 June 2008
30 June 2009
Share price
$0.018
$0.052
$0.24
$0.53
$0.815
Consolidated net profit / (loss)
from continuing operations ($000)
($1,007)
($1,246)
($1,542)
$15,651
$36,423
The directors believe the increase in share price since June 2005 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 current and prior
reporting period.
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 current or prior reporting periods, 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 2008, is not to
exceed $300,000 per annum.
A non-executive director’s base fee is currently $60,500 per annum. The Chairman receives $103,500 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)
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.
(ii) 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.
2009 annual rePort
21
dIreCtorS’ rePort (Continued)
remuneration report (continueD)
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. There were no
ESP shares issued to directors and key management personnel during the reporting period.
2008
executive officers
RA Anderson
PP Huizenga
number of
shares issued
100,000
100,000
issue date
07/01/2008
07/01/2008
issue price
per share
$0.701
$0.701
Loan
$70,100
$70,100
These issues were not subject to a performance condition but were made having regard to market advice on the relevant base packages.
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 is 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
in the current and prior reporting period:
2008
grant date
assumed
expiry date
fair value
per option
exercise
price
price of shares
at grant date
expected
volatility
risk free
interest rate
Dividend
yield
07/01/2008
06/01/2011
$0.31
$0.701
$0.701
55%
7.5%
0%
22
Carnarvon Petroleum ltd
dIreCtorS’ rePort (Continued)
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2009 annual rePort
23
dIreCtorS’ rePort (Continued)
remuneration report (continueD)
Equity instruments
(i)
Shares
There were no shares in the Company issued 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 or ESP shares in the Company issued as compensation to key management personnel during the
reporting period. No options have been issued 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, issued 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
number of
esp shares
issued
issue
date
fair value per
option at issue
date
100,000
100,000
07/01/2008
07/01/2008
$0.31
$0.31
exercise
price per
option
$0.701
$0.701
assumed
expiry date
06/01/2011
06/01/2011
The following shares were issued on the exercise of options issued as compensation in prior periods. These options were issued
to Directors in 2006 at a time the Company had no full-time employees, very limited cash resources, and recognised the unusual
contribution of the Directors.
2009
Directors
EP Jacobson
PJ Leonhardt
NC Fearis
KP Judge
2008
Directors
EP Jacobson
PJ Leonhardt
KP Judge
KP Judge
number of shares
amount paid per share
4,000,000
3,000,000
2,000,000
1,000,000
$0.10
$0.10
$0.10
$0.10
number of shares
amount paid per share
4,000,000
3,000,000
2,000,000
1,000,000
$0.07
$0.07
$0.07
$0.10
There are no amounts unpaid on shares issued as a result of the exercise of options. During the reporting period there was no forfeiture
or vesting of options issued in previous periods. At the end of the reporting period there were no unvested options on issue. All options
expire on the expiry date but do not expire as a result of the termination of the holder’s engagement with the Company.
24
Carnarvon Petroleum ltd
dIreCtorS’ rePort (Continued)
remuneration report (continueD)
Equity instruments (continued)
(ii) Options and ESP shares (continued)
The movement during the reporting period, by value, of options over ordinary shares, including shares issued under the Company’s ESP, for
each company director and company executive and issued as part of remuneration is detailed below. These should be read in the context
of the comments above about the status of the Company in 2006 at the time the options were issued.
Directors
EP Jacobson
PJ Leonhardt
KP Judge
NC Fearis
executive officers
PP Huizenga
issued
in year ($)
exercised in
year ($)
forfeited in
year ($)
total
value in year ($)
value of options
-
-
-
-
1,160,000
870,000
290,000
580,000
-
-
-
-
1,160,000
870,000
290,000
580,000
value of options
issued
in year ($)
exercised in
year ($)
forfeited in
year ($)
total
value in year ($)
-
359,000
-
359,000
The value of options issued in the year is the fair value of the options at grant date using the Black-Scholes Option Pricing Model.
The value of options exercised during the year is calculated as the market price of shares of the Company on ASX Limited as at close of
trading on the date the options were exercised or the ESP loan repaid, after deducting the price paid to exercise the options or repay the
loan.
non-auDit services
The auditors have not performed any non-audit services over and above their statutory duties during the current reporting period.
Details of the amounts paid or payable to the auditor of the Group for audit services provided during the year are set out below:
audit services
Auditors of the Company:
Audit and review of financial reports
Directors’ interests
consolidated 2009 ($)
108,000
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
17,000,000
30,917,335
8,400,000
10,932,855
-
-
-
-
Shares issued under the Company’s ESP are included under the heading Ordinary Shares.
2009 annual rePort
25
dIreCtorS’ rePort (Continued)
share options
Options issued to directors and executives of the Company
There were no options over shares or ESP shares in the Company issued as compensation to directors or named executives during or
since the end of the financial year.
Shares under option
The following unissued ordinary shares of the Company were under option. These exclude share issues made under the Company’s ESP.
expiry Date
exercise
price
1 July 2008
issued
number
exercised
expired
30 June 2009
31/03/2009
$0.10
10,000,000
10,000,000
-
-
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 issued in previous periods. At the end of the reporting period there were no unvested options on issue.
LikeLy DeveLopments
The likely developments for the 2010 financial year are contained in the operating and financial review as set out on pages 5 to 17. 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 2009.
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 28 and forms part of the directors’
report for the financial year ended 30 June 2009.
principaL activities
During the course of the 2009 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 72
to 74.
26
Carnarvon Petroleum ltd
dIreCtorS’ rePort (Continued)
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 5 to 17.
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 2009 is set out on pages 5 to 17 and forms part of
this report.
inDemnity of Directors anD company secretary
Deeds of Access and Indemnity have been executed by the Company with each of the directors and Company Secretary. The deeds 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
On 28 July 2009 the Company announced that its application to the Australian Government to acquire 100% of a new offshore West
Australian permit covering application block WA-435-P had been successful.The application block is situated in the north-western part of
the Bedout Sub-basin within the greater Roebuck Basin. In the same bidding round Finder Exploration (“Finder”) was also successful in
being awarded 100% of three permits surrounding WA-435-P. Subject to ratification by the government authorities, Carnarvon and Finder
have entered into a heads of agreement to swap 50% of Carnarvon’s WA-435-P for 50% of the three new Finder permits WA-436-P, WA-
437-P and WA-438-P. Finder will assume operatorship of all four permits.
No other matter or circumstance has arisen since 30 June 2009 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, 28 August 2009
2009 annual rePort
27
audItor’S IndePendenCe deClaratIon
28
Carnarvon Petroleum ltd
InCome StatementS
for the year enDeD 30 June 2009
consoLiDateD
company
notes
2009
$000
2008
$000
(restated)
sales revenue from continuing operations
100,758
63,033
Other income
Cost of sales
4
5
896
318
(27,847)
(12,392)
Administrative expenses
Directors’ fees
Employee benefits expense
Travel related costs
Unrealised foreign exchange gain / (loss)
New ventures
Share-based payments
Finance costs
(1,445)
(212)
(829)
(424)
2,305
(963)
(122)
(1)
(1,032)
(183)
(637)
(311)
(656)
(973)
(119)
34
2009
$000
-
214
-
(1,445)
(212)
(829)
(424)
2,759
(963)
(122)
(1)
2008
$000
-
251
-
(1,032)
(183)
(637)
(311)
(1,851)
(973)
(119)
-
profit before income tax
72,116
47,082
(1,023)
(4,855)
Taxes
Income tax expense
Special remuneratory benefit
9
22,132
13,561
16,452
14,979
Total taxes
35,693
31,431
-
-
-
-
-
-
profit / (loss) from continuing operations
36,423
15,651
(1,023)
(4,855)
profit / (loss) attributable to members
of the company
Basic earnings per share from continuing
operations (cents per share)
Diluted earnings per share from continuing
operations (cents per share)
36,423
15,651
(1,023)
(4,855)
8
8
5.4
5.4
2.4
2.3
The above income statements should be read in conjunction with the accompanying notes to the financial statements.
2009 annual rePort
29
BalanCe SHeetS
as at 30 June 2009
consoLiDateD
company
2009
$000
3,380
2,730
-
415
6,525
10,273
115
438
-
1,483
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
notes
2009
$000
2008
$000
(restated)
21(b)
10
12
13
31,099
11,904
3,865
677
28,281
12,443
1,586
299
total current assets
47,545
42,609
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
Income tax provision
Provisions
10
11
14
15
16
17
24
18
-
353
1,219
49,701
-
-
172
379
22,078
-
51,273
22,629
12,309
98,818
65,238
18,834
6,901
49
3,521
3,122
3,368
13
9,304
14,848
1,017
49
-
-
total current liabilities
13,593
27,533
1,066
non-current liabilities
Deferred tax
19
8,964
total non-current liabilities
8,964
3,215
3,215
-
-
2008
$000
570
2,788
-
96
3,454
12,713
49
379
-
1,483
14,624
18,078
531
13
-
-
544
-
-
total liabilities
net assets
equity
Issued capital
Reserves
Retained profits / (accumulated losses)
22,557
30,748
1,066
544
76,261
34,490
17,768
17,534
68,090
(2,215)
10,386
66,738
(6,211)
(26,037)
68,090
1,131
(51,453)
66,738
1,226
(50,430)
total equity
76,261
34,490
17,768
17,534
The above balance sheets should be read in conjunction with the accompanying notes to the financial statements.
30
Carnarvon Petroleum ltd
StatementS of CHanGeS In eQuItY
for the year enDeD 30 June 2009
group
issued
capital
$000
retained
profits /
(accumulated
losses)
$000
(restated)
translation
reserve
$000
share-based
payments
reserve
$000
total
$000
Balance at 1 July 2007
65,041
(41,688)
(3,383)
1,487
21,457
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
-
-
-
-
(4,054)
-
-
15,651
-
-
-
(261)
-
Balance at 30 June 2008
66,738
(26,037)
(7,437)
1,226
Shares issued net of transaction costs
Exchange differences on translation of
foreign operations
Exchange differences on change in
functional currency
Share based payments
Profit attributable to members
of Company
996
-
-
356
-
-
-
-
-
36,423
-
2,839
1,252
-
-
-
-
-
(95)
-
Balance at 30 June 2009
68,090
10,386
(3,346)
1,131
1,226
(4,054)
210
15,651
34,490
996
2,839
1,252
261
36,423
76,261
The above statements of changes in equity should be read in conjunction with the accompanying notes to the financial statements.
2009 annual rePort
31
StatementS of CHanGeS In eQuItY
for the year enDeD 30 June 2009
company
issued
capital
$000
accumulated
losses
$000
share-based
payments
reserve
$000
total
$000
Balance at 1 July 2007
65,041
(45,575)
1,487
20,953
Shares issued net of transaction costs
Share based payments
Loss attributable to members of the Company
1,226
471
-
-
-
(4,855)
-
(261)
-
1,226
210
(4,855)
Balance at 30 June 2008
66,738
(50,430)
1,226
17,534
Shares issued net of transaction costs
Share based payments
Loss attributable to members of the Company
996
356
-
-
-
(1,023)
-
(95)
-
Balance at 30 June 2009
68,090
(51,453)
1,131
996
261
(1,023)
17,768
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 CaSH floWS
for the year enDeD 30 June 2009
consoLiDateD
company
notes
2009
$000
2008
$000
2009
$000
cash flows from operating activities
Receipts from customers and GST recovered
Payments to suppliers and employees
Income tax and special remuneratory benefit paid
Interest received
Interest paid
net cash flows generated from / (used in)
operating activities
21(a)
cash flows from investing activities
Exploration and development expenditure
Joint venture cash assigned to subsidiary
Cash held as security
Acquisition of property, plant and equipment
Net repayments from / (advances to)
controlled entities
net cash flows (used in) / from 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
2008
$000
275
(3,153)
-
204
-
114,038
(34,238)
(48,177)
973
-
56,145
(13,616)
(3,666)
236
(8)
221
(3,832)
-
291
-
32,596
39,091
(3,320)
(2,674)
(35,550)
-
(429)
(300)
(17,399)
-
(3,156)
(218)
-
-
(36,279)
(20,773)
1,000
(4)
140
1,136
1,230
(3)
90
1,317
(346)
(341)
(581)
(139)
6,366
4,959
1,000
(4)
140
1,136
(628)
-
(2,656)
(13)
(1,293)
(4,590)
1,230
(3)
90
1,317
net (decrease) / 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
21(b)
(2,547)
19,635
2,775
(5,947)
28,281
8,927
5,365
(281)
570
35
31,099
28,281
3,380
6,520
(3)
570
The above statements of cash flows should be read in conjunction with the accompanying notes to the financial statements.
2009 annual rePort
33
noteS to tHe fInanCIal StatementS
1.
reporting entity
The consolidated financial report of the Company for the financial year ended 30 June 2009 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 28 August 2009.
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 presented 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 exploration and evaluation
or oil and gas assets 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.
34
Carnarvon Petroleum ltd
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).
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.
2009 annual rePort
35
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).
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.
36
Carnarvon Petroleum ltd
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 property 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 all classes of depreciable assets
are:
Property, plant and equipment:
10% 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 costs, including an element of future
costs, in proportion to the depletion of the estimated recoverable reserves. Refer to Note (y) for further details on changes in
accounting policy.
2009 annual rePort
37
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 less than 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
Any 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.
38
Carnarvon Petroleum ltd
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). Amortised cost is the amount measured at initial recognition, less principal repayments, adjusted for
the difference, if any, between initial measurement and the maturity amount calculated using the effective interest method, less any
reduction for impairment. The effective interest method is the rate that discounts future expected cash flows through the expected
life of the financial instrument to its net carrying amount. Revisions to expected cash flows will require an adjustment to the carrying
value with a consequential recognition of an income or expense in profit and loss.
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.
2009 annual rePort
39
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.
40
Carnarvon Petroleum ltd
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 issued 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 becomes 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 issued.
2009 annual rePort
41
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.
42
Carnarvon Petroleum ltd
noteS to tHe fInanCIal StatementS (Continued)
3.
significant accounting policies (continued)
(x) new standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting
periods. The consolidated entity’s and the parent entity’s assessment of the impact of these new standards and interpretations is
set out below.
(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards
arising from AASB 8 (effective from 1 January 2009).
AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to
reporting on financial performance. The information being reported will be based on what the key decision makers use internally for
evaluating segment performance and deciding how to allocate resources to operating segments. The consolidated entity will adopt
AASB 8 from 1 July 2009. It may result in an increase in the number of reportable segments presented. In addition, the segments will
be reported in a manner that is more consistent with the internal reporting provided to the chief operating decision-maker.
(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting
Standards arising from AASB 123 (effective from 1 January 2009)
The revised AASB 123 has removed the option to expense all borrowing costs and, when adopted, will require the capitalisation of
all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact
on the financial report of the consolidated entity.
(iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to
Australian Accounting Standards arising from AASB 101 (effective from 1 January 2009)
The September 2007 revised AASB 101 requires the presentation of a statement of comprehensive income and makes changes to
the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has
made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet
(statement of financial position), this one being as at the beginning of the comparative period. The consolidated entity will apply the
revised standard from 1 July 2009.
(iv) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting
Conditions and Cancellations (effective from 1 January 2009)
AASB 2008-1 clarifies that vesting conditions are service conditions and performance conditions only and that other features of a
share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties,
should receive the same accounting treatment. The consolidated entity will apply the revised standard from 1 July 2009, but it is not
expected to affect the accounting for the consolidated entity’s share-based payments.
(v) Revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial
Statements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 (effective 1 July
2009)
The revised AASB 3 continues to apply the acquisition method to business combinations, but with some significant changes. For
example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments
classified as debt subsequently remeasured through the income statement. There is a choice on an acquisition-by-acquisition basis
to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of
the acquiree’s net assets. All acquisition-related costs must be expensed.
The revised AASB 127 requires the effects of all transactions with non-controlling interests to be recorded in equity if there is
no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the
accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in
profit or loss. The consolidated entity will apply the revised standards prospectively to all business combinations and transactions
with non-controlling interests from 1 July 2009.
2009 annual rePort
43
noteS to tHe fInanCIal StatementS (Continued)
3.
significant accounting policies (continued)
(x) new standards and interpretations not yet adopted (continued)
(vi) AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual
Improvements Project (effective 1 July 2009)
The amendments to AASB 5 Discontinued Operations and AASB 1 First-Time Adoption of Australian-Equivalents to International
Financial Reporting Standards are part of the IASB’s annual improvements project published in May 2008. They clarify that all of
a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant
disclosures should be made for this subsidiary if the definition of a discontinued operation is met. The consolidated entity will apply
the amendments prospectively to all partial disposals of subsidiaries from 1 July 2009.
(vii) AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or
Associate (effective 1 July 2009)
In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards and
AASB 127 Consolidated and Separate Financial Statements. The consolidated entity will apply the revised rules prospectively from
1 July 2009. After that date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be
recognised as revenue, even if they are paid out of pre-acquisition profits, but the investments may need to be tested for impairment
as a result of the dividend payment. Furthermore, when a new intermediate parent entity is created in internal reorganisations it will
measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary rather than the subsidiary’s fair
value.
(viii) AASB 2008-8 Amendment to IAS 39 Financial Instruments: Recognition and Measurement (effective 1 July 2009)
AASB 2008-8 amends AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively in
accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendment makes two significant
changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in
the one-sided hedged risk when designating options as hedges. The consolidated entity will apply the amended standard from 1 July
2009. It is not expected to have an impact on the consolidated entity’s financial statements.
44
Carnarvon Petroleum ltd
noteS to tHe fInanCIal StatementS (Continued)
3.
significant accounting policies (continued)
(y) change in accounting policy
The consolidated entity changed its accounting policy relating to the depreciation of oil and gas assets for the financial year ending
30 June 2009.
Depreciation is now calculated using a unit of production method which amortises capitalised costs carried forward plus the
estimated future field development costs for proved and probable (“2P”) reserves over the life of the 2P reserves. Previously only
capitalised costs were included in the depreciation calculation. This change has been implemented as the directors are of the opinion
that a cost base that reflects the future costs of maintaining current production provides more relevant information and a more
accurate carrying value of oil and gas assets at balance date.
Total costs subject to depletion included $62.5 million of estimated future development costs to deplete the proved and probable
reserves. Since an approved development plan has not yet been sanctioned by the joint venture, future costs have been estimated
by Carnarvon management based on historical depletion rates of around 500,000 bbls per well and estimated costs for drilling and
completion of US$1.5 million per well. It is anticipated that an approved development plan will supersede these estimates.
The aggregate effect of the change in accounting policy on the annual financial statements is as follows:
Consolidated
Income statement
Cost of sales
Profit before income tax
Profit after income tax
Balance sheet
Oil and gas assets
Deferred tax liability
Opening retained earnings
2009
previously
stated
$000
2009
adjusted
2009
restated
$000
$000
2008
previously
stated
$000
2008
adjusted
2008
restated
$000
$000
23,080
76,883
38,807
4,767
(4,767)
(2,384)
27,847
72,116
36,423
11,346
48,128
16,174
1,046
(1,046)
(523)
12,392
47,082
15,651
55,514
11,871
(25,514)
(5,813)
(2,907)
(523)
49,701
8,964
(26,037)
23,124
3,738
(41,688)
(1,046)
(523)
-
22,078
3,215
(41,688)
cents
cents
cents
cents
cents
cents
Basic earnings per share
Diluted earnings per share
5.7
5.7
(0.3)
(0.3)
5.4
5.4
2.4
2.4
-
(0.1)
2.4
2.3
There were no adjustments to the Company income statement or balance sheet figures in 2008 or 2009.
2009 annual rePort
45
noteS to tHe fInanCIal StatementS (Continued)
consoLiDateD
company
2009
$000
896
-
896
(3,892)
(7,331)
(3,827)
(10,057)
(2,740)
(27,847)
2008
$000
2009
$000
283
35
318
(1,800)
(4,374)
(1,920)
(2,651)
(1,647)
(12,392)
214
-
214
-
-
-
-
-
-
2008
$000
251
-
251
-
-
-
-
-
-
4. other income
Finance income on bank deposits
Other income
5. cost of sales
Production expenses
Royalty and excise
Transportation
Depreciation - development costs and
producing assets
Selling, general and administration
6. other expenses
Depreciation – property, plant and equipment
Rental premises – operating leases
(162)
(234)
(73)
(131)
(57)
(184)
(34)
(66)
7.
auditors’ remuneration
Audit services:
Auditors of the Company
8.
earnings per share
108
78
108
78
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)
2009
2008
number of shares
672,924,634
583,699
2,493,151
676,001,484
-
676,001,484
657,537,134
186,849
6,979,452
664,703,435
19,163,014
683,866,449
Profit used in calculating basic and diluted earnings per share from
continuing operations
$36,423,000
$15,651,000
46
Carnarvon Petroleum ltd
noteS to tHe fInanCIal StatementS (Continued)
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$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% (2008: 30%)
21,634
14,124
(307)
(1,457)
Tax effect of:
Special remuneratory benefit
Effect of higher overseas tax rate
Foreign exchange (gains) / losses
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
Current income tax
Deferred tax
Tax Consolidation
(6,781)
12,988
(3,220)
350
(198)
(3,434)
793
22,132
16,383
5,749
22,132
(7,552)
10,229
-
322
(3,064)
1,814
579
16,452
13,237
3,215
16,452
-
-
(836)
350
-
-
793
-
-
-
-
-
-
554
277
-
-
626
-
-
-
-
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
Non-current
Amounts receivable from controlled entities
Provision for non-recovery
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$000
8,318
3,586
11,904
-
-
-
9,287
3,156
12,443
-
-
-
90
2,640
2,730
10,966
(693)
10,273
132
2,656
2,788
13,406
(693)
12,713
The Group’s exposure to credit and currency risks is disclosed in Note 32.
2009 annual rePort
47
noteS to tHe fInanCIal StatementS (Continued)
11. property, plant and equipment
Plant and equipment
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
Disposals
Transfers
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
Disposals
Effects of movements in foreign exchange
Balance at end of financial year
Depreciation and impairment losses:
Balance at beginning of financial year
Disposals
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
Effects of movements in foreign exchange
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
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$000
74
-
(43)
-
11
42
67
-
(43)
8
32
7
10
319
271
43
(58)
51
626
191
(41)
43
141
334
128
292
38
21
6
65
1
13
14
37
51
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
-
-
-
-
-
-
-
-
-
-
-
-
-
121
139
-
(58)
-
202
72
(42)
-
57
87
49
115
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
108
13
-
-
-
121
38
-
-
34
72
70
49
-
-
-
-
-
-
-
-
-
noteS to tHe fInanCIal StatementS (Continued)
11. property, plant and equipment (continued)
Total
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
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
Assignment of joint venture to subsidiary
Balance at end of financial year
15. oil and gas assets
Cost:
Balance at beginning of financial year
Additions
Effects of movements in foreign exchange
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
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$000
431
292
(58)
68
733
259
(41)
162
380
172
353
293
215
(63)
(14)
431
189
(3)
73
259
104
172
121
139
(58)
-
202
72
(42)
57
87
49
115
3,865
1,586
-
108
13
-
-
121
38
-
34
72
70
49
-
677
299
415
96
379
915
(75)
1,219
25,340
31,233
6,341
62,914
3,262
9,951
13,213
22,078
49,701
-
379
-
379
12,773
14,475
(1,908)
25,340
644
2,618
3,262
12,129
22,078
379
134
(75)
438
-
-
-
-
-
-
-
-
-
-
379
-
379
-
-
-
-
-
-
-
-
-
For details of the change in oil and gas assets depreciation policy refer to Note 3(y).
2009 annual rePort
49
noteS to tHe fInanCIal StatementS (Continued)
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$000
16. other investments
Non-current
Investments in controlled entities – at cost
The Group has the following interests in joint venture assets:
-
-
1,483
1,483
Principal activities
Ownership interest %
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
Exploration, development and
production of hydrocarbons
Exploration for hydrocarbons
40%
50%
35%
50%
EP 110 & 424, Carnarvon Basin
WA-399-P, Carnarvon Basin
Exploration for hydrocarbons
Exploration for hydrocarbons
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
Total non-current liabilities
Total liabilities
Net assets
Income
Expenses
Net profit after tax
2009
$000
27,758
9,176
3,865
384
41,183
238
1,189
50,401
51,828
93,011
5,889
6,643
12,532
8,964
8,964
21,496
71,515
100,758
(63,313)
37,445
2008
$000
28,130
9,124
1,586
738
39,578
123
363
22,991
23,477
63,055
2,863
24,152
27,015
3,215
3,215
30,230
32,825
63,033
(44,380)
18,653
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
2009
$000
2008
$000
2009
$000
2008
$000
2,686
4,163
52
6,901
2,352
948
68
3,368
368
597
52
1,017
308
155
68
531
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 32.
18. provisions
Current
Special Remuneratory Benefit - Thailand
Non-current
Site restoration:
Balance at beginning of financial year
Provision (reversed) during the year
Balance at end of financial year
3,122
3,122
14,848
14,848
-
-
-
105
(105)
-
There are no restoration provisions required in respect of the Group’s activities.
19. Deferred tax
Recognised deferred tax assets and liabilities
The net deferred tax liability is attributable to the following:
Oil and gas assets
Tax value of losses carry forward
Net tax liability
11,232
(2,268)
8,964
5,395
(2,180)
3,215
The movement in the deferred tax liability during the reporting period has all been recognised in income.
Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognised in respect of the following items:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deductible temporary differences
Tax losses
159
2,571
2,730
212
1,631
1,843
459
2,571
3,030
1,518
1,631
3,149
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.
2009 annual rePort
51
noteS to tHe fInanCIal StatementS (Continued)
20. capital and reserves
Issued capital
consoLiDateD & company
2009
2008
number of shares
Balance at beginning of financial year
Employee Share Plan issues
Shares issued on exercise of share options
Balance at end of financial year
672,924,634
750,000
10,000,000
683,674,634
657,537,134
387,500
15,000,000
672,924,634
Issued capital
Balance at beginning of financial year
Employee Share Plan related movements
Employee Share Plan loans repaid
Shares issued on exercise of share options
Share issue transaction costs
Balance at end of financial year
consoLiDateD & company
2009
$000
2008
$000
66,738
216
140
1,000
(4)
68,090
65,041
380
90
1,230
(3)
66,738
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.
Translation reserve
Movements in the translation reserve are set out in the Statement in Changes in Equity on page 31.
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 31 and 32.
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)
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
Depreciation
Finance costs for rehabilitation provisions
Loss on disposal of property, plant and equipment
Foreign exchange (gains) / losses
Operating profit before changes in working
capital and provisions:
Changes in assets and liabilities:
Decrease / (increase) in trade and other receivables
(Increase) in inventories
(Increase) / decrease in other assets
Increase in trade and other payables
(Decrease) / increase in provisions and
employee benefits
Net cash flows generated from / (used in)
operating activities
(b) Reconciliation of cash and cash equivalents
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$000
36,423
15,651
122
5,749
10,114
-
16
(2,305)
50,119
2,682
(1,972)
(185)
150
(18,198)
32,596
119
3,215
2,688
(39)
-
656
22,290
(7,789)
(604)
273
760
24,161
39,091
(1,023)
122
-
57
-
16
(2,787)
(3,615)
74
-
(319)
504
36
(4,855)
119
-
34
-
-
1,851
(2,851)
(9)
-
(62)
239
9
(3,320)
(2,674)
Cash at bank and at call
31,099
28,281
3,380
570
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed in Note 32.
Restricted cash of $2,640,000 Company and $3,586,000 consolidated is included under trade and other receivables (2008:
$2,656,000 Company and $3,156,000 consolidated), see Notes 10 and 23.
2009 annual rePort
53
noteS to tHe fInanCIal StatementS (Continued)
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$000
22. capital and other commitments
(a) Joint venture commitments
Share of capital commitments of joint venture assets:
Within one year
1,189
1,721
-
Capital commitments of the Group to
joint venture assets:
Within one year
(b) Exploration expenditure commitments
2,264
187
2,264
-
187
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
2009
$000
4,100
1,700
5,800
2008
$000
500
3,000
3,500
2009
$000
4,100
1,700
5,800
2008
$000
500
3,000
3,500
Less than one year
Between one and five years
(c) Capital expenditure commitments
Data licence commitments
126
96
126
96
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
a) 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 current percentage is 7.5%.
The Group has expensed US$85,000 in the current period (2008: US$371,000). Cumulative amounts paid and payable at balance
date under the terms of this agreement are US$905,000.
54
Carnarvon Petroleum ltd
noteS to tHe fInanCIal StatementS (Continued)
23. contingencies (continued)
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 million Thai Baht as security in lieu of bonds.
The L20/50 Joint venture, in which the Group has a 50% interest, has issued bank guarantees for an amount of 20 million Thai Baht
as security in lieu of bonds.
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 US$2,125,000 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, have signed a Cross Deed of Indemnity in respect of their respective rights and interests.
The restricted cash held by the banks as security for these guarantees totaling $3,586,000 (2008: $3,156,000) is classified under
“trade and other receivables”.
b) 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.
24. employee benefits
Current:
Liability for annual leave
Share options
consoLiDateD
company
2009
$000
2008
$000
2009
$000
2008
$000
49
13
49
13
The number and weighted average exercise price of employee share options is as follows:
weighted
average
exercise
price
2009
$0.10
$0.10
-
-
number of
options
2009
10,000,000
10,000,000
-
-
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
Outstanding 1 July
Exercised during the period
Outstanding 30 June
Exercisable at 30 June
All options on issue at 30 June 2008 had an exercise price of $0.10, expired on 31 March 2009, and were 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 $0.36 (2008:
$0.53)
2009 annual rePort
55
noteS to tHe fInanCIal StatementS (Continued)
24. employee benefits (continued)
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 2008
issued
repaid
30 June 2009
Number of shares
Loan
Average loan per share
14,852,500
$1,755,353
$0.12
750,000
$285,750
$0.38
895,000
$139,895
$0.16
14,707,500
$1,901,208
$0.13
In accordance with AASB 2 the issue of shares under the ESP are accounted for as an in principle option.
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 issued 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
2009
key
management
personnel
2008
-
-
-
-
-
-
-
-
30.7
70.1
70.1
55%
3 years
Nil
7.5%
$61,468
other
employees
2009
11.2 to 20.8
26.1 to 48.5
26.1 to 48.5
60%
3 years
Nil
3.5%
$122,208
other
employees
2008
30.7
70.1
70.1
55%
3 years
Nil
7.5%
$57,627
The current year volatility 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 28, and in the Remuneration Report set out on pages
20 to 25.
56
Carnarvon Petroleum ltd
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 for which it did not charge a management fee.
During the financial year ended 30 June 2009 net repayments from controlled entities totalled $6,366,000 (2008: net loans to
controlled entities $1,293,000).
The carrying value of loans to controlled entities at 30 June 2009 was $10,273,000 (2008: $12,713,000) after provisions of $693,000
(2008: $693,000). These loans are unsecured, non-interest bearing, and have no fixed terms of repayment.
Other related party balances
At 30 June 2009 an amount of $52,070 (2008: $68,548) 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
2009
$000
231
271
502
2008
$000
170
12
182
2009
$000
163
-
163
2008
$000
71
-
71
During the reporting period $371,000 was recognised as an expense in the consolidated income statement in respect of operating
leases (2008: $344,000).
2009 annual rePort
57
noteS to tHe fInanCIal StatementS (Continued)
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.
Geographical Segments (A$000)
australia
thailand
consolidated
2009
$000
2008
$000
2009
$000
2008
$000
2009
$000
2008
$000
Revenue
Sales
Other
Total revenue
Segment result
Result from continuing
operations
Total segment result
Assets
Oil and gas assets
Property, plant and
equipment
Other
Total segment assets
Liabilities
-
214
214
-
251
251
100,758
682
101,440
63,033
67
63,100
100,758
896
101,654
63,033
318
63,351
(1,023)
(1,023)
(3,001)
(3,001)
37,446
37,446
18,652
18,652
36,423
36,423
15,651
15,651
-
115
6,963
7,078
-
49,701
22,078
49,701
22,078
49
3,833
3,882
238
41,801
91,740
123
39,155
61,356
353
48,764
98,818
172
42,988
65,238
Total segment liabilities
1,066
544
21,491
30,204
22,557
30,478
Other segment information:
Capital expenditure
Depreciation
139
57
13
34
31,400
10,057
14,614
2,657
31,539
10,114
14,627
2,691
58
Carnarvon Petroleum ltd
noteS to tHe fInanCIal StatementS (Continued)
28. key management personnel disclosures
(a) Key management personnel compensation
Key management personnel compensation included in employee benefits expense, directors emoluments, share based payments
and administration expenses is as follows:
Short term employee benefits
Post-employment benefits
Share-based payments
consoLiDateD
company
2009 ($)
2008 ($)
2009 ($)
2008 ($)
1,157,213
68,997
-
1,226,210
936,281
21,981
61,468
1,019,730
1,157,213
68,997
-
1,226,210
936,281
21,981
61,468
1,019,730
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 2008
3,000,000
4,000,000
2,000,000
1,000,000
held at
1 July 2007
6,000,000
8,000,000
2,000,000
4,000,000
exercised
(3,000,000)
(4,000,000)
(2,000,000)
(1,000,000)
held at
30 June 2009
-
-
-
-
exercised
(3,000,000)
(4,000,000)
-
(3,000,000)
held at
30 June 2008
3,000,000
4,000,000
2,000,000
1,000,000
Options issued as compensation vest immediately. During the financial year there was no forfeiture or vesting of options issued in
previous periods. There were no options on issue that were still to vest at the end of the reporting period.
2009 annual rePort
59
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 set out below. The loans
to directors were made in 2006 in lieu of normal remuneration at a time the Company had no full time employees and limited cash
resources.
Balance
1 July 2008 ($)
Balance highest balance
in period ($)
30 June 2009 ($)
Loaned
in period ($)
repaid
in period ($)
Directors
PJ Leonhardt
EP Jacobson
Executives
PP Huizenga
RA Anderson
Directors
PJ Leonhardt
EP Jacobson
Executives
PP Huizenga
RA Anderson
270,000
540,000
314,100
81,065
270,000
540,000
253,100
81,065
270,000
540,000
314,100
81,065
-
-
-
-
-
-
61,000
-
Balance
1 July 2007 ($)
Balance highest balance
in period ($)
30 June 2008 ($)
Loaned
in period ($)
repaid
in period ($)
270,000
540,000
244,000
101,242
270,000
540,000
314,100
81,065
270,000
540,000
314,100
101,242
-
-
-
-
70,100
70,100
-
90,277
Details regarding the aggregate of loans, all of which are interest free, made by the Group to key management personnel and their
related parties, and the number of individuals in each group, are as follows:
2009
2008
opening
balance ($)
closing
balance ($)
number in
group at 30 June
1,205,165
911,242
1,144,165
1,205,165
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
2009
$000
2008
$000
2009
$000
Current
Trade and other payables
212
68
212
2008
$000
68
60
Carnarvon Petroleum ltd
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:
held at
1 July 2008
net
acquired/(sold)
award under
employee share
plan
received on
exercise of
options
held at
30 June 2009
14,900,000
28,613,793
6,316,186
15,568,596
(900,000)
(1,696,458)
83,814
(5,635,741)
2,100,000
3,104,441
(500,000)
(1,619,441)
-
-
-
-
-
-
3,000,000
4,000,000
2,000,000
1,000,000
17,000,000
30,917,335
8,400,000
10,932,855
-
-
1,600,000
1,485,000
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
Directors
PJ Leonhardt
EP Jacobson
NC Fearis
KP Judge
Executives
PP Huizenga
RA Anderson
Directors
PJ Leonhardt
EP Jacobson
NC Fearis
KP Judge
Executives
PP Huizenga
RA Anderson
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 20 to 25.
2009 annual rePort
61
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
country of incorporation
2009
2008
ownership
interest
Company
Carnarvon Petroleum Ltd
Controlled entities
Carnarvon Thailand Ltd
Lassoc Pty Ltd
SRL Exploration Pty Ltd
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
On 28 July 2009 the Company announced that its application to the Australian Government to acquire 100% of a new offshore West
Australian permit covering application block WA-435-P had been successful. The application block is situated in the north-western
part of the Bedout Sub-basin within the greater Roebuck Basin. In the same bidding round Finder Exploration (“Finder”) was also
successful in being awarded 100% of three permits surrounding WA-435-P. Subject to ratification by the government authorities,
Carnarvon and Finder have entered into a heads of agreement to swap 50% of Carnarvon’s WA-435-P for 50% of the three new Finder
permits WA-436-P, WA-437-P and WA-438-P. Finder will assume operatorship of all four permits.
No other matter or circumstance has arisen since 30 June 2009 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
62
Carnarvon Petroleum ltd
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 2008:
consoLiDateD
equity
$000
profit and loss
$000
company
equity
$000
profit and loss
$000
30 June 2009
30 June 2008
9,344
5,867
9,344
5,867
-
-
-
-
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 2008:
consoLiDateD
equity
$000
profit and loss
$000
company
equity
$000
profit and loss
$000
30 June 2009
30 June 2008
(9,344)
(5,867)
(9,344)
(5,867)
-
-
-
-
2009 annual rePort
63
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 Group manages the risk 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
2009
2008
2009
2008
31,099
28,281
3,380
570
0.4%
0.25%
2.95%
6.14%
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 2008:
consoLiDateD
equity
$000
profit and loss
$000
company
equity
$000
profit and loss
$000
30 June 2009
30 June 2008
140
141
140
141
17
3
17
3
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 2008:
consoLiDateD
equity
$000
profit and loss
$000
company
equity
$000
profit and loss
$000
30 June 2009
30 June 2008
(47)
(141)
(47)
(141)
(17)
(3)
(17)
(3)
64
Carnarvon Petroleum ltd
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 2009 or June 2008 and has no significant concentration of credit risk.
The Group’s trade receivables at both June 2009 and June 2008 are all due from an entity located in Thailand and controlled by its
government. This entity has an appropriate credit history with the Group. There were no receivables at 30 June 2009 or 30 June
2008 that were past due.
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
2009
$000
31,099
11,904
43,003
2008
$000
28,281
12,443
40,724
The aging of the Group’s trade receivables at reporting date was:
Not past due
gross
2009
$000
7,218
7,218
impairment
2009
$000
-
-
2009
$000
3,380
13,003
16,383
gross
2008
$000
9,255
9,255
2008
$000
570
15,501
16,071
impairment
2008
$000
-
-
Based on historic default rates, the Group believes that no impairment allowance is necessary in respect of trade receivables.
2009 annual rePort
65
noteS to tHe fInanCIal StatementS (Continued)
32. financial risk management (continued)
(d) Currency risk
Currency risk arises from sales, purchases, assets and liabilities that are denominated in a currency other than the functional
currencies of the entities within the Group, being the A$, THB and US$.
The Group operates predominantly in Thailand and is exposed to currency risk arising from various foreign currency exposures,
mainly with respect to the US$ and Thai Baht ( THB ). The functional currency of its Thai operations changed from US$ to THB from
1 January 2009, primarily because the trend in the source currency of the majority of its costs from US$ to THB was not considered
temporary. The effect of this change was to increase Property, Plant and Equipment and the Translation Reserve by $1,252,000.
Cash receipts from the Thai operations, which comprise 100% of the Group revenues, are received in Thai Baht. The majority of
the Group’s payments, including Thai SRB and income tax, are also payable in THB which effectively creates a natural hedge. The
Company’s foreign exchange risk predominantly resides in its US$ 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.
Consolidated 2009
Cash and cash equivalents
Trade and other receivables
Trade payables and accruals
SRB and income tax provisions
Gross balance sheet exposure
Company 2009
Cash and cash equivalents
Trade and other receivables
Trade payables and accruals
Gross balance sheet exposure
Consolidated 2008
Cash and cash equivalents
Trade and other receivables
Trade payables and accruals
SRB and income tax provisions
Gross balance sheet exposure
Company 2008
Trade and other receivables
Trade payables and accruals
Gross balance sheet exposure
thB
a$000
27,405
8,208
(5,304)
(6,643)
23,666
-
-
-
-
27,634
9,255
(1,561)
(24,152)
11,176
-
-
-
usD
a$000
gBp
a$000
48
-
(754)
-
(706)
14
10,760
(11)
10,763
114
-
(493)
-
(379)
13,625
(10)
13,615
-
-
-
-
-
-
-
-
-
-
-
(36)
-
(36)
-
(36)
(36)
The following significant exchange rates applied during the year:
auD to:
1 Thai baht
1 USD
66
Carnarvon Petroleum ltd
average rate
2009
0.040
1.36
2008
0.036
1.12
reporting date spot rate
2008
2009
0.037
1.24
0.031
1.04
noteS to tHe fInanCIal StatementS (Continued)
32. financial risk management (continued)
(d) Currency risk (continued)
Sensitivity analysis
A 10% strengthening of the AUD against the US$ for the 6 months to 31 December 2008 and against the THB for the 6 months to 30
June 2009, reflecting the change in functional currency of the Phetchabun Basin Joint Venture from 1 January 2009, and against the
THB as at 30 June 2009, 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:
30 June 2009
THB and US$
30 June 2008
USD
consoLiDateD
equity
$000
profit and loss
$000
company
equity
$000
profit and loss
$000
(7,752)
(3,439)
(5,077)
(2,137)
(1,232)
(1,237)
(1,232)
(1,237)
A 10% weakening of the AUD against the US$ for the 6 months to 31 December 2008 and against the THB for the 6 months to 30
June 2009, reflecting the change in functional currency of the Phetchabun Basin Joint Venture from 1 January 2009, and against the
THB as at 30 June 2009, 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:
30 June 2009
THB and USD
30 June 2008
USD
(e) Fair values
consoLiDateD
equity
$000
profit and loss
$000
company
equity
$000
profit and loss
$000
9,412
4,203
6,206
2,612
1,232
1,515
1,232
1,515
The fair values of financial assets and financial liabilities, together with their carrying amounts shown in the balance sheet, are as
follows:
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
carrying
amount
2009
$000
11,904
31,099
(6,901)
36,102
13,003
1,483
3,380
(1,017)
16,849
fair value
2009
$000
11,904
31,099
(6,901)
36,102
13,003
1,483
3,380
(1,017)
16,849
carrying
amount
2008
$000
12,443
28,281
(3,368)
37,356
15,501
1,483
570
(531)
17,023
fair value
2008
$000
12,443
28,281
(3,368)
37,356
15,501
1,483
570
(531)
17,023
The basis for determining fair values is disclosed in Note 3(i).
2009 annual rePort
67
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:
Consolidated 2009
Non-derivative financial liabilities
Trade and other payables
SRB and income tax provisions
Company 2009
Non-derivative financial liabilities
Trade and other payables
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
carrying
amount
$000
contractual
cashflows
$000
6 months
or less
$000
6 to 12
months
$000
6,901
6,643
13,544
6,901
6,643
13,544
6,901
3,521
10,422
1,017
1,017
1,017
1,017
1,017
1,017
-
3,122
3,122
-
-
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
-
-
68
Carnarvon Petroleum ltd
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 29 to 68 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 2009 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 2009.
Signed in accordance with a resolution of the directors.
pJ Leonhardt
Director
Perth, 28 August 2009
2009 annual rePort
69
audIt rePort
70
Carnarvon Petroleum ltd
audIt rePort (Continued)
2009 annual rePort
71
CorPorate GovernanCe Statement
introDuction
The Company’s directors are fully cognisant of the Corporate Governance Principles and Best Practice Recommendations published by
the ASX Corporate Governance Council (“CGC”) and have adopted those recommendations where they are appropriate to the Company’s
circumstances.
However, a number of those principles and recommendations are directed towards listed companies considerably larger than Carnarvon,
whose circumstances and requirements accordingly differ markedly from the Company’s. For example, the nature of the Company’s
operations and its low direct employee count mean that a number of the board committees and other governance structures recommended
by the CGC are not only unnecessary in Carnarvon’s case, but the effort and expense required to establish and maintain them would, in
the directors’ view, be an unjustified diversion of shareholders’ funds.
Carnarvon’s directors are aware that according to one school of thought listed companies will be rated by the investment community
according to their compliance with the CGC’s Best Practice Recommendations. However, in the directors’ view that approach is not soundly
based, particularly where unquestioning compliance with the recommendations would produce marginal or no benefit to shareholders.
In discharging its functions Carnarvon’s board of directors receives competent legal and other professional advice. Based on that advice
the board is satisfied that, notwithstanding non-compliance with the Best Practice Recommendations (to the extent noted below), the
Company’s governance structures are appropriate for its circumstances and the board acts at all times in the best interests of the
Company and its shareholders.
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
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.
72
Carnarvon Petroleum ltd
CorPorate GovernanCe Statement (Continued)
explanations for departures from best practice recommendations
From 1 July 2008 to 30 June 2009 (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
4
8
2.4
4.2
8.1
A separate Nomination Committee
has not been formed.
The Audit Committee comprised two
independent directors. An additional
independent director was appointed
on 1 July 2009.
A Remuneration Committee was
appointed on 1 August 2008.
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
was not required to comply with Recommendation
4.2 prior to admission to the ASX top 300.
Prior to its formation the Board considered that
the Company was not of a size to justify the
formation of a Remuneration Committee. The
Board as a whole undertook the role of this
committee prior to its formation.
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”.
2009 annual rePort
73
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.
material business risks
Management has reported to the Board as to the effectiveness of the Company’s management of its material business risks.
performance evaluation of the Board, its committees and senior executives
The Board reviews and evaluates the performance of the Board and its committees, which involves consideration of all the Board‘s key
areas of responsibility.
A performance evaluation of senior executives was undertaken during the year, in the case of the Chief Executive by the Board, and in all
other cases by the Chief Executive Officer and the Chairman.
identification of independent directors
The Company’s independent directors are considered to be Peter Leonhardt, Neil Fearis, and Ken Judge.
None 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.
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.
74
Carnarvon Petroleum ltd
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 26 august 2009
Substantial shareholders
The following substantial shareholder notices are lodged with the Company:
Name of Shareholder
Number of Shares
Barclays Global Investors Australia Limited
36,107,227
% held
5.28
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
number of shares
% held
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
ANZ Nominees Limited
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