ABn 60 002 688 851
www.carnarvon.com.au
2013
AnnuAl RepoRt
CONTENTS
Chairman’s Review ........................................................................ 1
Consolidated Statement of Changes in Equity .............29
Chief Executive’s Review........................................................... 2
Statement of Cash Flows ........................................................30
Operating and Financial Review ............................................. 3
Notes to the Financial Statements ....................................31
Directors’ Report .........................................................................15
Directors’ Declaration ...............................................................72
Auditor’s Independence Declaration .................................25
Independent Audit Report ......................................................73
Consolidated Income Statement .........................................26
Corporate Governance Statement ......................................75
Consolidated Statement of
Comprehensive Income ............................................................27
Consolidated Statement of Financial Position ..............28
Additional Shareholder Information ..................................78
Share Registry
Link Market Services Limited
Ground Floor
178 St Georges Terrace
Perth, WA 6000 Australia
Investor Enquiries: 1300 554 474 (within Australia)
Investor Enquiries: +61 2 8280 7111 (outside Australia)
+61 2 9287 0303
Facsimile:
Stock Exchange Listing
Carnarvon Petroleum Limited’s shares are quoted on the
Australian Securities Exchange.
ASX Code
CVN - ordinary shares
CORPORATE DIRECTORY
Directors
PJ Leonhardt (Chairman)
AC Cook (Chief Executive Officer)
EP Jacobson (Non-Executive Director)
NC Fearis (Non-Executive Director)
WA Foster (Non-Executive Director)
Company Secretary
T Naude (Appointed 22 November 2012)
G Smith (Resigned 22 November 2012)
Auditors
Crowe Horwath Perth
Bankers
Australia and New Zealand Banking Group Limited
National Australia Bank Limited
HSBC
Registered Office
Ground Floor
1322 Hay Street
West Perth WA 6005
Telephone:
Facsimile:
Email:
Website:
+61 8 9321 2665
+61 8 9321 8867
admin@cvn.com.au
www.carnarvonpetroleum.com.au
www.carnarvon.com.au
CHAIRMAN’S REVIEW
At the start of the 2013 financial year the company set out to firstly, work closely with its new operator
in Thailand focusing on enhancing production in the Wichian Buri area and to secondly, establish a new
region of growth in Western Australia focusing on two exploration blocks containing the Phoenix gas
discovery and associated geological structures. The Company also continues to look elsewhere in South
East Asia and Australia for opportunities that would provide a new growth horizon for the company.
Pleasingly, excellent progress has been achieved in the
Phoenix area exploration permits with drilling now being
planned around the end of the 2013 calendar year. In
Thailand, significant technical work has been undertaken,
albeit with field development activity being slower than
anticipated and results are therefore delayed. Management
has also been very active in assessing other opportunities
throughout South East Asia and Australia and I am hopeful
that their efforts will yield a result soon.
In Western Australia two key Phoenix area wells were farmed
out to highly regarded international partners, significantly
reducing the financial risk associated with these wells. We
are pleased to have Apache and JX Nippon join the WA-
435-P and WA-437-P joint venture that contains the Phoenix
gas discovery. Apache brings to the joint venture particular
experience and capability suited to these blocks and any
subsequent development. The first exploration well is
expected to commence later this year or early next year based
on current indications and will be an important milestone for
Carnarvon if it delivers on the identified targets.
The sandstone focus that I indicated last year would be a
priority for our Thailand reserve exploitation has resulted
in an effective increase in developed sandstone reserves.
Overall Carnarvon maintained similar proved plus probable
reserve levels to those assessed in the previous year with
the increase in sandstone reserves offsetting a reduction
attributable to the igneous reservoirs.
Notwithstanding the delayed Thailand production results,
from an operational perspective I am pleased to report that
the drilling programme conducted during the financial year
was completed on time, safely and on budget. The new
3D seismic data acquisition program was similarly acquired
without incident and a water-flooding program to enhance
recovery has recently been initiated.
The immediate objective remains to build sustainable
production in Thailand, through developing the identified
sandstone reservoirs and continuing to focus on means
by which the igneous reservoirs can be produced more
effectively. The challenge for the joint venture is to generate
value from those reserves by increasing development activity
to boost oil rates in a cost efficient manner.
In terms of financial results, for the year ended 30 June 2013,
Carnarvon recorded sales revenue of $18.3 million, a profit
before tax of $1.5 million and a loss after tax of $8.4 million
that mainly related to a deferred tax expense arising from
exchange rate adjustments. The earnings figures include
a $1.1 million exploration expenditure write-off for the
L20/50 Concession as the Company continues to maintain a
prudent policy of expensing exploration costs.
During the year the Board recognised the difficult trading
conditions in the market and consequently adopted prudent
remuneration practices, most notably in not granting
bonuses or annual employee share plan shares to senior
executives, as well as freezing director’s fees. The Board
also limited salary increases to a small number of staff and
these were only to compensate for CPI increases. The Board
continually monitors market conditions and prevailing
remuneration practices to ensure the Company’s position is
broadly in line with industry and market conditions.
Finally, I’d like to thank my fellow directors and the
management team and staff for their support and
contribution this year. We look forward to seeing value
from their efforts in the coming year.
Peter Leonhardt
Chairman
1
1
Carnarvon Petroleum Limited CHIEF EXECUTIVE’S REVIEW
It was back in 2008 that the Company secured five exploration permits in Western Australia that within
the coming financial year will be tested with at least one high impact well being drilled by Apache as the
operator. The Company secured these five large contiguous exploration permits with a clear vision of
building an exploration program from a base around the Phoenix-1 gas discovery. Carnarvon’s vision was
that this area of some 28,000km2 between the Carnarvon and Browse basins could contain significantly
greater hydrocarbon potential along the North West Shelf than just the Phoenix gas discovery.
In October 2012 Apache and JX Nippon farmed into two of
the five permits committing expertise and funding, to a cap,
for the drilling of one firm and one contingent well. The first
of these wells targeting significant hydrocarbon potential is
scheduled to spud between November 2013 and January 2014.
is expected to involve a level of refinement as it progresses.
Once the first fault block is performing to expectations the
operator will move to develop a number of adjoining fault
blocks containing similar sandstone reservoirs in a similar
manner.
Alongside the commercial work to farm out these blocks,
the Carnarvon team continued its technical work in this
region covering all five exploration blocks, including the two
farmed out in October 2012. The benefits of this technical
work include preparation for future farmout activity in the
remaining three permits and the identification of additional
potential hydrocarbon targets in a shallower oil zone and
a larger gas zone within WA-435-P. Carnarvon is of the
opinion that, at this time, both these additional potential
hydrocarbon zones could be tested with the first well,
namely the Phoenix South well.
From a commercialisation perspective, these permits are
well suited to a number of development options given they
are in reasonably shallow water depth and close to onshore
infrastructure.
In Thailand a key focus in the 2013 financial year was the
study and development of the first sandstone fault block
in the Wichian Buri extension area. Given the nature of
the sandstone reservoirs in this area, developments require
drilling water injection and production wells with the former
being necessary to create reservoir pressure and move the oil
to the production wells. This is a common industry practice
for enhancing oil recovery from sandstone reservoirs. The
operator completed the first sandstone development
program late in 2012 with promising oil flow rates from
the wells drilled. Whilst the water injection program has
been delayed, I am pleased that it was brought on line in
August 2013. It is expected to take some months before the
reservoir pressure builds sufficiently to lift production and
In addition to sandstone reservoirs, the more complex but
prolific igneous reservoirs remains a key focus of the joint
venture. The first new 3D seismic in six years was acquired
during the 2013 financial year. At this stage, drilling on this
new 3D seismic data is expected to commence late in 2013
and form a part of the longer term exploitation plan for
these igneous reservoirs.
It is also important to report that Carnarvon has stepped
up its new ventures initiatives and has been very active in
assessing opportunities in South East Asia and Australia. This
market remains highly competitive but we have identified
a small number of suitable projects where we are either
progressing discussions or monitoring the situation.
The Company is focused on a number of key initiatives
involving increasing production in Thailand, building a new
region of growth in Western Australia around the Phoenix
area and securing new opportunities in South East Asia and
Australia to either complement the Company’s existing
portfolio or form the platform for a new region of growth.
Adrian Cook
Chief Executive Office
2
Annual Report 30 June 2013 OPERATING AND FINANCIAL REVIEW
Permits
Permit
Basin
equity
Joint Venture
Partner(s)
Partner
interest
indicative Forward Program
thailand
SW1A
Phetchabun
40%
Eco Orient Energy
60%
L33/43
Phetchabun
40%
Eco Orient Resources
60%
L44/43
Phetchabun
40%
Eco Orient Resources
60%
L20/50
L52/50
L53/50
Australia
Phitsanulok
0%
Siam Moecoii
100%
Surat-Khiensa
100%
Surat-Khiensa
100%
-
-
WA-435-P
Roebuck
20%
Apache (i)
Finder Exploration
JX Nippon
WA-436-P
Roebuck
50%
Finder Exploration (i)
WA-437-P
Roebuck
WA-438-P
Roebuck
20%
50%
WA-443-P
Roebuck
100%
EP321
Perth
EP407
Perth
2.50% of
38.25% (ii)
2.50% of 42.5%
(ii)
WA399P
Carnarvon
13%
Apache (i)
Finder Exploration
JX Nippon
Finder Exploration (i)
-
-
-
Apache (i)
Rialto Energy
Jacka Resources
Note:
(i) Denotes operator where Carnarvon is non-operator partner
(ii) Carnarvon has an overriding royalty interest in these assets
-
-
40%
20%
20%
50%
40%
20%
20%
50%
-
-
-
60%
12%
15%
Production,
Appraisal
Production, Appraisal,
Exploration
Production, Appraisal,
Exploration
Post well G&G studies
Seismic planning
Seismic acquisition and Interpretation
Seismic acquisition and Interpretation
Interpretation,
Exploration well
G & G Studies,
Farmout
Interpretation,
Exploration well
G & G Studies
G & G Studies
Appraisal
Appraisal
Interpretation
3
3
Carnarvon Petroleum Limited
OPERATING AND FINANCIAL REVIEW
thAilAnd
L44/43, L33/43 and SW1A Phetchabun Basin (“SW1A”)
(Carnarvon Petroleum 40%, Eco Orient Energy 60% operator)
Background
Exploration
Carnarvon’s producing asset is contained within the L33/43,
L44/43 and SW1A Concessions. These Concessions are
situated onshore Thailand, within the Phetchabun Basin.
The Concessions cover the central, oil prone section of the
basin, with around 100 km2 under long term production
licenses and an additional 1,000 km2 area reserved for
exploration.
Carnarvon has been a co-concessionaire in these permits
since 2000, however oil has been flowing from the area since
1995.
Oil has been discovered in multiple oil bearing reservoirs in
two distinct reservoir type: sandstone (clastic) and fractured
igneous (volcanic).
Details on the reserves can be found later in this report.
2013 drilling
The joint venture performed 16 drilling operations in the
2013 financial year targeting a combination of volcanic and
sandstone reservoirs. A complete list of results can be found
in the Table 2.
Eight wells were drilled into the WBEXT sandstone
reservoirs, primarily targeting the “D” and “E” sands of the
WBEXT-1B fault block, and the results from these wells
supported the WBEXT-1B water flood project that is in the
process of being implemented.
Two wells were unsuccessful appraisals of the WBV2
igneous reservoir in the WBEXT area. The WBEXT-2C well,
drilled after the financial year end, was also drilled into this
reservoir and initial testing resulted in flow rates of 400
bopd at 60-70% water cut.
One well was an unsuccessful appraisal of the WBV3
igneous reservoir in the WBEXT area.
Four wells appraised the NSE igneous reservoir with sub-
commercial results.
One exploration well was drilled between Si Thep and
Wichian Buri and, while adding to the overall understanding
of the area, did not result in a commercial discovery.
4
Acquisition of 100 km2 of 3D seismic was completed in 2013
over the south-western portion of the L33/43 concession.
The seismic was acquired for approximately US$1.4 million
net to Carnarvon.
The seismic was designed to cover the areas surrounding
the 2010 discoveries in L33-1 and L33-2 that flowed at rates
of 1,200 and 2,400 bopd (gross) respectively, as well as the
extension of the WBEXT sandstone and igneous reservoirs
from the L44/43 concession into the L33/43 concession, as
depicted below. The data is in the final stages of processing
and is expected to be available for interpretation in the
September 2013 quarter with drilling tentatively scheduled
for late in the December 2013 quarter.
l33/43
l44/43
Figure 1: Carnarvon’s Production Licenses within the
Phetchabun Basin
Annual Report 30 June 2013 Only six wells have previously been drilled in the 450 km2
L33/43 block. While the processing of this seismic is still
ongoing, initial analysis suggests that the successful wells
in the L33/43 Production License (“PL”) are producing from
two shallow igneous horizons. The main WBEXT WBV1
and WBV2 igneous reservoirs, where significant volumes of
oil have been produced from around 5km to the south, are
interpreted to be deeper horizons. It is interpreted that no
wells in the L33/43 permit have penetrated these deeper
horizons, which will be a target for the late 2013 drilling.
dEvElopmEnt – SandStonE rESErvoirS
Eight wells drilled in the 2013 financial year in the WBEXT-
1B fault block were designed to develop the reserves in the
“D” and “E” sandstone reservoirs in the WBEXT area. The
nature of the geological formations in this area require water
flooding of the reservoir to improve the overall recovery and
manage reservoir pressure to increase flow rates.
After a successful implementation of the water flood project
in this fault block, further water flood programs will be
initiated in the surrounding areas, including the original
Wichian Buri sandstones that have been producing since
1996.
The water injection program is planned to commence in in
the September 2013 quarter, however pressure rebuild could
take several months to deliver meaningful results.
Figure 2: Carnarvon’s Proposed Seismic Program within the
Phetchabun Basin
Figure 3: Water flood injection equipment on-site at WBEXT-1 well site
5
5
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW
agricultural land rEform officE
Shut in wEllS
Ten wells in the Bo Rang North area, which is covered by
CVN’s petroleum licence, were shut in on 2 May 2012 while
clarification was sought from the Agricultural Land Reform
Office (ALRO), regarding development approvals for these
wells.
Four wells were brought back online on 26 December 2012.
The remaining six wells, producing around 200 bopd in
aggregate (gross) at the time of the shut-in and remain off-
line whilst discussions continue with ALRO on the matter.
dEvElopmEnt – ignEouS rESErvoirS
The igneous development wells in the 2013 financial year
targeted the NSE and WBEXT igneous reservoirs with
varying results.
New technical work is being applied to the results from
these wells, and previous wells, to determine future
development locations.
Previously, wells were drilled primarily based solely
on geophysical interpretations of reservoir highs. The
new technical work has applied different geological,
petrophysical and reservoir engineering expertise along
with ongoing geophysical interpretation to determine
development locations.
The first of these locations was drilled after the 2013
financial year with the WBEXT-2C well, initially flowing oil
at an encouraging 400 bopd from one of a number of zones
to be tested.
For the 2014 financial year, the Joint Venture is planning on
two drilling campaigns of 6-8 wells each targeting a mix of
locations within the WBEXT and NSE reserves areas and
L33, Nong Bua and Si Thep exploration areas.
6
Annual Report 30 June 2013 Exploration/Appraisal well to test the northern extension of the Wichian Buri Oil Field.
The well was targeting igneous reservoirs and experienced well bore collapse and was
terminated.
Spud Date
6-Jul-12
Appraisal well to test the “E” sandstone reservoir. The well encountered oil bearing
reservoir sands and was completed as an oil producer. The well tested at up to 120 bopd.
25-Jul-12
Development/Appraisal well designed to test the “E” sandstone as defined by WBEXT-
5C. The well identified gas with associated oil flows of up to 30 bopd.
6-Aug-12
Appraisal well of the WBEXT-5C “E” sand which intersected poorly developed sandstone
reservoir. Well tested up to 40 bopd.
15-Aug-12
Exploration well to evaluate the Wichian Buri sands north of the Si Thep field.
Encountered tight igneous reservoir with oil shows.
24-Aug-12
Igneous appraisal well of the NSE-F1 reservoir. Encountered tight igneous reservoir and
sub-commercial oil flow rates.
6-Sep-12
Appraisal well in the sandstone reservoirs with a view to developing a waterflood
development plan. Successfully encountered several sandstone packages. Tested at rates
up to 70 bopd.
17-Sep-12
Igneous Appraisal well. Significant drilling fluid losses over the interval indicated
excellent fracturing however oil flow rates were sub-commercial.
26-Sep-12
Well
Q1
WBEXT-4A ST2
WBEXT-5C
WBEXT-6A
WBEXT-5B
L44K-D
NSE-F9 ST1
WBEXT-1D ST3
WBEXT-7B
Q2
WBEXT-7B ST1
WBEXT-1G
Igneous Appraisal well. Significant drilling fluid losses over the interval indicated
excellent fracturing however oil flow rates were sub-commercial.
Targeting the WBEXT sandstone reservoirs. Central well to be converted into water
injection well.
WBEXT-6D
Targeting the WBEXT sandstone reservoirs. Tested at rates up to 20 bopd.
WBEXT-1A ST2 (5F)
Targeting the WBEXT sandstone reservoirs. Tested at rates up to 30 bopd.
Targeting the WBEXT sandstone reservoirs. Tested at rates up to 250 bopd.
Appraisal well for the NSE central igneous reservoir. Testing resulted in sub-commercial
oil flows.
Appraised the Na Sanun East igneous interval. The well flowed significant gas from an
interpreted oil-bearing zone. A workover was completed in late February and the well
tested only minimal amounts of oil with significant water cut.
Appraised the Na Sanun East igneous interval. The well contained significant fracturing
and logging tools indicated oil present. Initial testing resulted in no oil flows and the
wells failure to flow is believed to be caused by plugging of the fractures by well cuttings.
A workover was completed in mid to late January 2013 and the well initially tested up to
50 bopd.
WBEXT-1H
NSE-B2 ST1
NSE-H4
NSE-H5
Q3
No drilling
Q4
No drilling
Table 1: Wells drilled in 2013 financial year
3-Oct-12
16-Oct-12
26-Oct-12
6-Nov-12
14-Nov-12
20-Nov-12
13-Dec-12
24-Dec-12
7
7
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW
L52/50 and L53/50
Surat-Khiensa Basin
(Carnarvon Petroleum 100% Operator)
The exploration Concessions L52/50 and L53/50 onshore
Thailand were awarded to Carnarvon and Mubudala in
March 2010. The L52/50 Concession covers an area of
3,085km² and the L53/50 Concession covers an area
of 3,872km². Carnarvon acquired 100% equity and
Operatorship of both blocks in November 2012.
Acquisition of 314km of 2D seismic data was completed
in November 2011 with the processing and interpretation
being completed in April 2013. Several leads and three
prospects have been identified with the target formation
being the Permian Limestone, similar to those producing in
the Chumphon basin.
These blocks are situated in the Khian Sa Basin in the
isthmus of southern Thailand adjacent to the NNE-oriented
Ranong and Khlong Marui Fault Zones. The basin is of
particular interest as it is on trend with the similar sized
Chumphon Basin in the Gulf of Thailand to the immediate
north. The Chumphon Basin has a proven oil kitchen and 4.3
MM bbls of oil was recovered from the Nang Nuan B well
from 1994-1997 at rates up to 10,000 bopd. Numerous wells
in the Chumphon Basin encountered oil shows.
Three oil and gas exploration wells have been drilled in the
L52/50 Concession in addition to two very shallow coalbed
methane wells. One well has been drilled in
the L53/50 Concession.
Carnarvon is currently seeking a partner for the
advancement of exploration in these permits. Carnarvon’s
forward plan includes acquiring an EIA (Environmental
Impact Assessment) and planning the drilling of two wells in
L52/50.
L20/50 Concession – Thailand
(Siam Moeco Limited 100% - subject to Government approval
of recent 100% interest transfer)
Carnarvon and joint venture partner, Sun Resources,
previously assigned 100% of the L20/50 concession to Siam
Moeco Limited.
The assignment to Siam Moeco Limited means Carnarvon
has no financial exposure to exploration or development
costs in this block. However, should commercial production
eventuate, Siam Moeco Limited will pay Carnarvon and
Sun Resources a total US$4.7 million and a 2.0% overriding
royalty capped at a total US$5.5 million.
Siam Moeco have now completed 3D seismic data and are
planning for exploration drilling in the concession
in 2014.
new 2d
seismic survey
completed
2012
Figure 4: Basin location within the L52/50 and
L53/50 Concessions
Figure 5: Seismic line through Khian Sa Basin
8
Annual Report 30 June 2013OPERATING AND FINANCIAL REVIEW AustrAliA
WA-435-P and WA-437-P permits – Western Australia (NW Shelf)
(Carnarvon 20%, Finder Exploration 20%, JX Nippon 20%, Apache 40% and Operator)
These two permits, along with WA-436, WA-438 and WA-
443, are situated in the north-western part of the Bedout
Sub-basin within the greater Roebuck Basin, offshore
Western Australia. The blocks lie 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.
Apache, as the operator of the WA-435-P permit in Western
Australia, has advised Carnarvon that the Phoenix South
well is expected to spud between November 2013 and
January 2014, using the Apache-contracted Atwood Eagle
semisubmersible drilling rig.
The Phoenix South and Roc wells both have primary gas
targets in lower Triassic reservoirs.
The WA-435-P permit contains the Phoenix-1 and Phoenix-2
wells, with the former, drilled by BP as previous licensee,
being declared a gas discovery. The Joint Venture embarked
on an extensive geological study, acquiring 1,100 km2 of
multi-client 3D seismic and another 407 km of 2D seismic
data through to mid 2012.
A study of the newly acquired 3D data confirmed two
significant gas prospects, Phoenix South within WA-435-P;
and Roc in WA-437-P.
The Phoenix South prospect is assessed by Carnarvon as
a multi-TCF prospect that will be drilled on modern 3D
seismic data and in proximity to proven gas in lower Triassic
reservoirs in the Phoenix-1 well.
Carnarvon recently completed additional technical work within
the WA-435-P permit, uncovering a potential new oil prospect
and a new stratigraphic gas prospect. Both prospects have the
potential to be tested by the Phoenix South well, and this is
undergoing a technical review by the operator.
To fund the drilling of these prospects, Carnarvon executed
agreements with both Apache and JX Nippon in October
2012 that covers the cost, to an agreed cap of $50 million
per well, for drilling of the Phoenix South prospect (firm) in
WA-435-P and the Roc prospect (contingent) in WA-437-P.
If successful, the Phoenix South well has the potential
to open up the prospectivity in the region for oil and
gas. Importantly Carnarvon holds a significant interest in
approximately 28,000 km2 of contiguous acreage providing a
great deal of scope for further exploration.
Figure 6: Offshore North West Shelf permit map
9
9
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW Figure 7: North West Shelf leads and prospects
Figure 8: North West Shelf seismic 3D seismic locations over key leads and prospects
10
Annual Report 30 June 2013OPERATING AND FINANCIAL REVIEW WA-436-P and WA-438-P – Western Australia (NW Shelf)
(Carnarvon Petroleum 50%, Finder Exploration 50% and
operator)
The WA-436-P and WA-438-P permits are adjacent to the
Phoenix blocks (i.e. WA-435-P and WA-437-P) that were
farmed out to Apache and JX Nippon in October 2012.
On 26 June 2013 the 3,854 km² new Zeester 3D seismic
survey was completed covering the Northern part of WA-
436-P (as well as a portion of WA-435-P and WA-443-P).
The survey covers several key leads of interest and has the
potential to add significant value to the Phoenix blocks
and WA-443-P. Carnarvon has yet to license the data and
processing has been delayed until late 2013.
The joint venture will continue with its technical work on
these permits, including consideration of the Zeester 3D
data once it is available.
Carnarvon’s technical work has to date identified an
additional play type in these blocks being, a stratigraphic
play along the margins of the basin, which has the potential
to contain significant volumes of hydrocarbons. This type of
play has been very successful in the North Sea. Further work
will be carried out to assess and develop this play type.
WA-443-P Australia Offshore Northwest Shelf
(Carnarvon Petroleum 100% Operator)
This exploration permit is situated adjacent to Carnarvon’s
four existing permits WA-435-P, WA-436-P, WA-437-P and
WA-438-P within the Bedout Sub-Basin.
No previous drilling has taken place in the WA-443-P
block. Carnarvon has secured this new permit with a firm
programme over three years to reprocess and interpret 1,400
km of 2D seismic. Geological and geophysical studies will
also be carried out in conjunction with similar work in the
Phoenix permits.
The multi-client Zeester 3D seismic survey being undertaken
across the WA-435-P and WA-437-P permits also extends
into a portion of WA-443-P permit. The seismic acquisition
covered the Salamander lead, identified in a regional
technical review, in the north-western section of this block.
The survey has been completed and processing of this data is
expected to commence in Q4 2013.
The stratigraphic play concept identified in the adjacent
block also has the potential to extend into WA-443-P, and
geological and geophysical studies are currently being carried
out on this block in conjunction with similar work in the
adjacent permits.
11
11
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW
Figure 9: WA-399-P permit map
WA-399-P – Australia Offshore Northwest Shelf
(Carnarvon Petroleum 13%, Apache Energy 60% and Operator,Jacka Resources 15% and Rialto Energy 12%)
The Operator has undertaken technical work including the
interpretation and analysis of the “Gazelle” 3D seismic data.
The work supports several prospects and leads in the permit
that requires further review. The joint venture approved
making an application to the Government to defer the
drilling commitment by 12 months to allow further technical
and commercial work to be undertaken. This will include
an assessment of the potential to coordinate activities and
resources with other permits in the region operated by
Apache.
WA-399-P was awarded on 7 May 2007. The exploration
permit covers an area of 50km² and is situated offshore
Western Australia within the Exmouth Sub-basin. The block
is adjacent to the Pyrenees Oil development, a Joint Venture
between BHP Billiton and Apache, which commenced
oil production in March 2010. Nearby, there are several
producing oil fields including Enfield and Vincent/Van Gogh,
as well as Macedon gas field and a number of other oil field
discoveries as set out below.
Apache Energy, as operator, acquired the “Gazelle” 3D
seismic data over the whole permit in late 2010 and into
early 2012.
reserVe Assesment
pEtrolEum rESourcE claSSification,
catEgoriSation and dEfinitionS
Carnarvon calculates reserves and resources according to the
SPE/WPC/AAPG/SPEE 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.
12
Annual Report 30 June 2013OPERATING AND FINANCIAL REVIEW carnarvon rESErvES
All Carnarvon’s reserves are within the L33/43, L44/43
and SW1 Concessions in which Carnarvon has a 40%
equity interest. Eco Orient Energy (“Eco”) as Operator of
these Concessions has commissioned Chapman Petroleum
Engineering Ltd (“Chapman”) to undertake a third party
independent appraisal of these Concessions for planning
purposes. Chapman completed a Reserve and Economic
Evaluation of these Concessions. Chapman has performed
this service in line with end of calendar year requirements
for the Department of Mineral Fuels (“DMF”) in Thailand.
Chapman certified 12.2 million barrels of 2P oil reserves
net to Carnarvon as at 31 December 2012.
net carnarvon reserves
proved +
probable
proved +
probable +
possible
2p
3p
proved
1p
(million bbls)
(million bbls)
(million bbls)
Chapman 31
Dec 2012
3.4
12.2
33.5
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.
provEd and proBaBlE (2p)
rESErvES thailand
A breakdown of the major reservoirs net to Carnarvon is given below.
SW1
Reservoir
Type
WB I
WB II
Sandstones
Sandstones
Na Sanun
Sandstones
Si Thep
Sandstones
NSE
NSE
Igneous
Sandstones
L44/43
Bo Rang Nth
Igneous
Bo Rang Nth
Sandstones
WBEXT
WBEXT
Igneous
Sandstones
L33/43
L33
Igneous
Igneous
Sandstones
net Carnarvon (at 31 dec 2012)
Proved (1P)
(million bbls)
Proved +
Probable (2P)
(million bbls)
Proved +
Probable +
Possible (3P)
(million bbls)
These reservoirs are
schematically reproduced
below.
0.1
0.1
0.1
0.1
1.5
-
0.8
-
-
0.4
0.2
2.5
0.9
3.4
0.4
0.3
0.2
0.4
5.4
1.5
2.5
-
0.4
0.7
0.5
8.8
3.4
12.2
0.7
0.6
0.2
1.1
12.8
7.5
5.3
-
1.0
0.7
3.4
22.6
10.9
33.5
l33/43
l44/43
13
13
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW
FinAnCiAl reVieW
The Group reports an after-tax loss of $8,385,000 for the
financial year ending 30 June 2013.
The Company spent $13,196,000 on exploration and
development drilling and associated activities during the period.
2013
2012
change
Production (bbls)
200,147
321,968 t 38%
Sales ($’000)
18,304
30,411
t 40%
Cost of sales
13,007
15,828
t
18%
The decline in production is the main driver of the decrease
in revenue in the 30 June 2013 financial year. A large portion
of cost of sales is fixed and as a result, cost of sales did not
decrease in line with sales.
During the year Carnarvon raised $20,000,000 by way of
a placement and share purchase plan which has enabled
the Company to participate in the L33/43 3D seismic
acquisition, development drilling in the L44/43 concession
and the proposed drilling program in the 2014 financial year
in Thailand as well as other exploration activities.
The exploration expenditure written off during the 2013
financial year consists of $1,105,000 in relation to the
exploration expenses incurred in the L20/50 Concession.
With the increase in development costs carried forward and
exchange rate adjustments, there has been an increase in
deferred tax liabilities recognised in the financial statements.
These liabilities are due to temporary differences between
income tax deductions and amortization with respect to the
Company’s oil and gas assets in Thailand. The deferred tax
component of the income tax expense does not incur any cash
obligation to the Thai tax authorities in the current period.
The Group does not currently use derivative financial
instruments to hedge financial risk exposures and therefore
it is exposed to daily movements in the international oil
prices, exchange rates, and interest rates. The Company
manages its cash positions in Thai Baht, US Dollars and
Australian Dollars to naturally hedge its foreign exchange
rate exposures.
Revenues under the Group’s contractual arrangements with
its customer are denominated in US$, 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.
14
Annual Report 30 June 2013OPERATING AND FINANCIAL REVIEW Directors’ report
the directors present their report together with the financial report 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 2013, 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 of pricewaterhousecoopers and Managing partner of coopers & Lybrand in
Western Australia.
During the past three years Mr Leonhardt has served as a director of cti Logistics Limited (from August 1999). He is also a
director of the Western Australian institute for Medical research and the cancer research trust.
Mr Leonhardt is a member of the Audit committee and the remuneration committee.
Adrian C Cook
Chief Executive Officer and Managing Director
B Bus, cA, MAppFin
Appointed as a director on 1 July 2011
Mr cook has 25 years experience in commercial and financial management, primarily in the petroleum industry. immediately prior
to joining carnarvon, he was the Managing Director of Buru energy Limited, an AsX listed oil and gas exploration and production
company with interests in the canning Basin in Western Australia. Mr cook has also held senior executive positions within
clough Limited’s oil and gas construction business and was on the executive committee at Arc energy Limited, an AsX listed
mid cap oil and gas exploration and production company.
During the past three years Mr cook has not served as a Director of any other listed company. Mr cook joined carnarvon on 2
November 2009 and was appointed to the Board on 1 July 2011.
Edward (Ted) P Jacobson
Non-Executive Director
B.sc (Hons Geology)
Appointed as a director on 5 December 2005.
Mr Jacobson is a petroleum geophysicist with 39 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 Mr Jacobson 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. Mr Jacobson retired from tap in september 2005.
During the past three years Mr Jacobson has not served as director of any other listed company.
Mr Jacobson retired as chief executive officer of carnarvon on 30 June 2011.
15
15
Carnarvon Petroleum Limited
Directors’ report
Neil C Fearis
Non-executive Director
LL.B (Hons), FAicD, F Fin
Appointed as a director on 30 November 1999.
Mr Fearis has over 35 years’ experience as a commercial lawyer in the UK and Australia.
During the past three years Mr Fearis served as a director of the following listed companies: perseus Mining Limited (from 2004);
Magma Metals Limited (from october 2009 to June 2012); and tiger resources Limited (from May 2011). Mr Fearis is also a
member of several professional bodies associated with commerce and law.
Mr Fearis is chairman of the Audit committee and a member of the remuneration committee.
William (Bill) A Foster
Non Executive Director
Be (chemical)
Appointed as a director on 17 August 2010.
Mr Foster is an engineer with extensive technical, commercial and managerial experience in the energy industry over a 40 year
period. He has been an advisor to a major Japanese trading company for the last 20 years in the development of their global e&p
and LNG activities and has spent time prior to this working internationally in the development of a number of energy companies.
Mr Foster was chairman red river resources Limited (resigned 2011) and was a former director of the e&p companies that were
formed through his advisory services to the Japanese trading company.
Mr Foster is chairman of the remuneration committee a member of the Audit committee.
company secretary
Mr thomson Naude was appointed company secretary in November 2012. Mr Naude is a qualified chartered Accountant, a
member of chartered secretaries Australia and the Financial controller at carnarvon petroleum.
Mr Naude was appointed following the resignation of Mr Graeme smith in November 2012.
16
Annual Report 30 June 2013
Directors’ meetings
the number of directors’ meetings held and attended by each of the directors during the reporting period was as follows:
Directors’ report
peter Leonhardt
ted Jacobson
Neil Fearis
Bill Foster
Adrian cook
(a)
10
10
10
10
10
(b)
10
9
10
10
10
(a) Number of meetings held during period of office
(b) Number of meetings attended
Audit committee
Names and qualifications of Audit Committee members
the committee is to include at least 3 members from 1 July 2009. current members of the committee are Neil Fearis (chairman
of the Audit committee), peter Leonhardt, and Bill Foster. 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
Bill Foster
(a)
(b)
2
2
2
2
2
2
(a) Number of meetings held during period of office
(b) Number of meetings attended
17
17
Carnarvon Petroleum Limited Directors’ report
remuneration report (Audited)
remuneration committee
the remuneration committee currently comprises Neil Fearis, peter Leonhardt, and Bill Foster. Mr Foster replaced Mr Fearis as
chairman of the committee on 3 July 2012.
Qualifications of remuneration committee members are provided in the directors section of this directors’ report.
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:
Neil Fearis
peter Leonhardt
Bill Foster
(a)
2
2
2
(b)
2
2
2
(a) Number of meetings held during period of office
(b) Number of meetings attended
the remuneration committee is responsible for the compensation arrangements for directors and executives of the company.
the remuneration committee considers compensation packages and policies applicable to the executive directors, senior
executives and non-executive directors’ fees. in certain circumstances these include incentive arrangements including employee
share plans, incentive performance packages, and retirement and termination entitlements.
Principles of compensation
total non-executive directors’ fees are approved by shareholders and the remuneration committee is responsible for the
allocation of those fees amongst the individual members of the Board.
the remuneration committee assesses the appropriateness of the nature and amount of compensation on an annual basis
by reference to industry and market conditions, and with regard to individual performance and the company’s financial
and operational results. such assessments are also made after referring to the recommendations of specialist consultancy
firms, industry groups, government and shareholder bodies. the Board obtains, when required, independent advice on the
appropriateness of remuneration packages, given trends in comparative companies both locally and internationally.
the remuneration committee ultimately determines its compensation practices in terms of their effectiveness to attract, retain
and incentivise appropriately qualified and experienced directors and senior executives.
remuneration arrangements are made having regard to the number and composition of staff in the business and the stage
of development of the company. remuneration arrangements include a mix of fixed and performance based remuneration.
performance based remuneration comprises short term and long term incentive schemes. short term incentive arrangements are
designed to incentivise superior individual achievement over a period of twelve months and typically comprise cash payments
or share issues, as the remuneration committee considers appropriate. Long term incentive arrangements are share-based and
designed to be simple, clear and strongly aligned between shareholder and executive interests over the medium to longer term.
remuneration 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 share price), and the amount of any incentives within each
executive’s remuneration.
18
Annual Report 30 June 2013 Directors’ report
remuneration report (Audited) (continued)
Principles of compensation (continued)
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.
in considering the Group’s performance and impact on shareholder wealth, the Board has had regard to the following in respect
of the current financial year and the previous four years. No dividends have been paid or declared during this period.
30 June
2009
30 June
2010
30 June
2011
30 June
2012
30 June
2013
share price as at 30 June each year
$0.815
$0.345
$0.175
$0.105
$0.041
Year on year change in the share price
54%
(58%)
(49%)
(40%)
(61%)
consolidated net profit / (loss) from
continuing operations ($000)
$28,736
$14,423
$2,159
($2,498)
($8,385)
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 $62,500 per annum and the chairman receives $105,000 per annum. these fees were
last increased with effect from 1 January 2010. 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 incentives or retirement benefits for non-executive directors.
Additional consulting fees of $149,987 (2012:$83,447) were paid to a related entity of ted Jacobson in relation to exploration
advisory services during the year.
Fixed compensation
Fixed compensation consists of base compensation as well as employer contributions to superannuation funds.
Short term incentive scheme
short term incentives are assessed by the remuneration committee based on two components:
1.
2.
the performance of the business as a whole; and
the individual performances of each employee.
the value of any short term incentive paid in cash is restricted to a maximum 20% of an individual’s Fixed compensation.
the remuneration committee is not obliged to make incentive payments where there are material adverse changes in the
circumstances of the company.
Non-executive directors are not entitled to participate in the short term incentive scheme.
there were no short term incentives awarded during the period as set out on page 22, to each of the directors, named company
executives, and key management personnel during the period.
19
19
Carnarvon Petroleum Limited Directors’ report
remuneration report (Audited) (continued)
Long term incentive scheme - Employee Share Plan
the carnarvon employee share plan (“esp”) was implemented following shareholder approval at the 1997 Annual General
Meeting (“AGM”) and was last updated and ratified by shareholders at the AGM on 16 November 2012.
the purpose of the esp is to attract, retain and motivate those who have been invited by the Board to participate in the esp and
align their interests with all other shareholders by encouraging performance that increases shareholder wealth through long term
growth.
the principal provisions of the plan include:
• A participant may not dispose of any plan shares within one year of the issue Date but, subject to repayment of any
associated loan, may dispose of up to 33.3% of plan shares after one year, 66.6% after two years, and
100% after three years;
• until the loan to the participant is fully repaid, the company has control over the disposal of the plan shares. once the
loan is repaid in full, the participant may deal with the plan shares as he wishes;
•
the aggregate number of plan shares and other shares and options issued in the previous 5 years under any other
employee incentive scheme of the company must not exceed 5% of the issued capital of the company; and
•
applications will be made as soon as practicable after the allotment of the plan shares for listing for quotation on AsX.
• the principal provisions of the loan agreement include:
•
•
•
•
•
the amount lent will be an advance equal to the issue price of the plan shares multiplied by the number
of plan shares issued;
the loan can be repaid at any time but the participant must pay any amount outstanding to the company within 30 days
of termination of the eligible person’s employment. All dividends declared and paid on the plan shares will be applied
towards the repayment of the advance and there is no interest on the advance;
the maximum liability in respect of the loan will be the value of the plan shares from time to time; and
a holding lock will be placed on the plan shares until the loan is fully repaid.
loans made under the esp involve no cash outlay by the company.
A complete copy of the rules of the esp (which incorporates the terms of the loan agreement) is available for inspection by
shareholders (free of charge) at the company’s registered office or, upon request, from the company secretary.
plan shares are approved by the remuneration committee based upon the assessed performance of each person against his job
specifications and the recommendations of the chief executive officer, and in the case of executive directors, with the approval
of shareholders.
the remuneration committee, having regard to recent changes in the taxation of certain long term incentive schemes and
current trends in structuring long term incentive plans, is of the view that the company’s esp is effectively structured to meet its
objectives in attracting, retaining and motivating appropriately qualified and experienced directors and senior executives.
there were no plan shares were issued to executive officers of the company During the current financial year:
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.
in order to determine the cost of plan shares issued in a period, the company uses the Black-scholes option pricing Model,
calculated at the date of issue of the plan shares, assuming a 3 year life and nil cash consideration. For this purpose, plan shares
are treated as having vested immediately and the cost calculated under the Black-scholes option pricing Model is recognised as
an expense entirely in the current period, notwithstanding restrictions on their disposal and the period over which the benefits
arise.
20
Annual Report 30 June 2013
Directors’ report
remuneration report (Audited) (continued)
Service contracts
the contract duration, period of notice and termination conditions for key management personnel are as follows:
(i) philip Huizenga, chief operating officer, is engaged as an employee. termination by the company is with 3 months’
notice or payment in lieu thereof and an additional payment of 3 months’ remuneration. termination by Mr Huizenga is
with 3 months’ notice.
(ii) Adrian cook, chief executive officer, is engaged as an employee. termination by the company is with 12 months’
notice or payment in lieu thereof. termination by Mr cook is with 6 months’ notice.
Equity instruments
(i) shares
there were no shares in the company issued as compensation to key management personnel during the reporting period.
(ii) options
there were no options over 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. esp shares issued as compensation to key management
personnel during the year are disclosed on page 22.
there were no shares issued in either 2013 or 2012 on the exercise of options.
there are no amounts unpaid on shares issued as a result of the exercise of options. During the reporting period there was no
forfeiture, lapsing or vesting of options issued in previous periods.
At the end of the reporting period, other than plan shares (treated in principle as options), there were no unvested options on issue.
21
21
Carnarvon Petroleum Limited
Directors’ report
remuneration report (Audited) (continued)
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Annual Report 30 June 2013
Directors’ report
Non-audit services
the auditors have not performed any non-audit services over and above their statutory duties during the current reporting
period.
Details of the amounts paid or payable to the auditor of the Group for audit services provided during the year are set out below:
Audit Services
Consolidated 2013 ($)
Auditors of the Company:
Audit and review of financial reports
138,000
Directors’ interests
At the date of this report, the relevant interests of the directors in securities of the company are as follows:
Name
Ordinary Shares
Options over ordinary Shares
pJ Leonhardt
Ac cook
ep Jacobson
Nc Fearis
WA Foster
17,750,000
5,900,000
31,297,635
9,287,768
121,955
-
-
-
-
-
shares issued under the company’s esp are included under the heading ordinary shares.
share options
Options issued to directors and executives of the Company
there were no options over shares issued as compensation to directors or named executives during or since the end of the
financial year.
Diversity
For the year ending 30 June 2013, women make up 37.5% of the company’s general work force. currently, there are no women
on the board or in senior executive positions.
Likely developments
the likely developments for the 2013 financial year are contained in the operating and financial review as set out on pages 3 to
14. 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 2013.
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 (2012: Nil).
Auditor’s independence declaration
the auditor’s independence Declaration under section 307c of the corporations Act is set out on page 25 and forms part of the
directors’ report for the financial year ended 30 June 2013.
23
23
Carnarvon Petroleum Limited Directors’ report
principal activities
During the course of the 2013 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 75 to 77.
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 3 to 14.
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 2013 is set out on pages 3 to 14 and forms
part of this report.
indemnity of directors, company secretary and auditors
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.
the company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified
or agreed to indemnify the auditor of the company against a liability incurred by the auditor.
events subsequent to reporting date
No matters or circumstance has arisen since 30 June 2013 that in the opinion of the directors has significantly affected, or may
significantly affect in future financial years:
(i) the Group’s operations; or
(ii) the results of those operations; or
(ii) 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, 30 August 2013
24
Annual Report 30 June 2013
AUDitor’s iNDepeNDeNce DecLArAtioN
25
25
Carnarvon Petroleum Limited coNsoLiDAteD iNcoMe stAteMeNt
For tHe YeAr eNDeD 30 JUNe 2013
Notes
4
5
Oil sales
other income
cost of sales
Administrative expenses
Directors’ fees
employee benefits expense
travel related costs
Unrealised foreign exchange gain
New venture and advisory costs
exploration expenditure written off
14
share-based payments
Profit before income tax
taxes
current income tax (benefit) / expense
Deferred income tax expense
special remuneratory benefit
total taxes
(Loss) for the year
(Loss) attributable to members of the Company
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
9 (a)
9 (b)
8
8
Consolidated
2013
$000
2012
$000
18,304
30,411
787
61
(13,007)
(15,828)
(1,192)
(293)
(885)
(271)
1,498
(2,334)
(1,105)
(14)
1,488
(261)
10,134
9,873
-
9,873
(1,100)
(293)
(1,165)
(126)
235
(1,504)
(3,361)
(445)
6,885
5,074
4,309
9,383
-
9,383
(8,385)
(2,498)
(8,385)
(2,498)
(1.0)
(1.0)
(0.4)
(0.4)
The above consolidated income statement should be read in conjunction with the accompanying notes to the financial statements.
26
Annual Report 30 June 2013 coNsoLiDAteD stAteMeNt oF coMpreHeNsive iNcoMe
For tHe YeAr eNDeD 30 JUNe 2013
Consolidated
2013
$000
2012
$000
(Loss) for the year
(8,385)
(2,498)
Other comprehensive income
Items that may be reclassified to profit or loss
exchange differences arising in translation of foreign
operations, net of income tax
18,102
3,070
Total comprehensive income for the year
9,717
572
Total comprehensive income attributable to members
of the company
9,717
572
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes to the financial
statements.
27
27
Carnarvon Petroleum Limited coNsoLiDAteD stAteMeNt oF FiNANciAL positioN
As At 30 JUNe 2013
Consolidated
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 expenditure
oil and gas assets
Total non-current assets
Total assets
Current liabilities
trade and other payables
employee benefits
current tax liability
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
issued capital
reserves
retained earnings
Total equity
Notes
21(b)
10
12
13
11
14
15
17
24
19
20
20
2013
$000
19,525
5,082
6,963
251
31,821
765
3,404
108,374
112,543
144,364
3,166
279
846
4,291
43,245
43,245
47,536
96,828
87,573
857
8,398
96,828
2012
$000
7,106
2,926
4,332
427
14,791
469
7,776
82,905
91,150
105,941
1,945
222
2,347
4,514
33,111
33,111
37,625
68,316
68,536
(17,003)
16,783
68,316
the above consolidated statement of financial position should be read in conjunction with the accompanying
notes to the financial statements.
28
Annual Report 30 June 2013 coNsoLiDAteD stAteMeNt oF cHANGes iN eQUitY
For tHe YeAr eNDeD 30 JUNe 2013
Issued
capital
$000
Retained
earnings
$000
Translation
reserve
$000
Share based
payments
reserve
$000
Total
$000
Balance at 1 July 2011
68,240
19,281
(22,267)
2,045
67,299
comprehensive income
(Loss) for the year
other comprehensive income
Total comprehensive income for the year
Transactions with owners and
other transfers
share based payments
Total transactions with owners
and other transfers
-
-
-
296
296
(2,498)
-
(2,498)
-
-
-
3,070
3,070
-
-
-
-
-
149
149
(2,498)
3,070
572
445
445
Balance at 30 June 2012
68,536
16,783
(19,197)
2,194
68,316
Balance at 1 July 2012
68,536
16,783
(19,197)
2,194
68,316
Comprehensive income
(Loss) for the year
other comprehensive income
Total comprehensive income
for the year
Transactions with owners and other transfers
share based payments
proceeds from capital raise
Total transactions with owners and other
transfers
-
-
-
256
18,781
19,037
(8,385)
-
(8,385)
-
-
-
-
18,102
18,102
-
-
-
-
-
-
(242)
-
(242)
(8,385)
18,102
9,717
14
18,781
18,795
Balance at 30 June 2013
87,573
8,398
(1,095)
1,952
96,828
the above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes to the financial statements.
29
29
Carnarvon Petroleum Limited stAteMeNt oF cAsH FLoWs
For tHe YeAr eNDeD 30 JUNe 2013
Notes
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
Net cash inflow generated from operating activities
21(a)
Cash flows from investing activities
exploration and development expenditure
cash held as security
Acquisition of property, plant and equipment
proceeds from farm-out activities
Net cash outflow investing activities
Cash flows from financing activities
sale from property, plant and equipment
proceeds from issue of shares
Net cash inflow from financing activities
Net increase / (decrease) in cash
and cash equivalents held
cash and cash equivalents at the beginning of
the financial year
effect of exchange rate fluctuations on cash and cash
equivalents
Cash and cash equivalents at the end of
the financial year
Consolidated
2013
$000
18,352
(15,766)
(1,479)
180
1,287
(12,448)
(745)
(453)
4,480
(9,166)
19
18,781
18,800
10,921
7,106
1,498
2012
$000
33,818
(18,908)
(3,733)
61
11,238
(19,271)
359
(253)
-
(19,165)
-
-
-
(7,927)
14,798
235
7,106
21(b)
19,525
the above consolidated statement of cash flows should be read in conjunction with the accompanying notes to
the financial statements.
30
Annual Report 30 June 2013
Notes to tHe FiNANciAL stAteMeNts
1. reporting entity
the consolidated financial report of carnarvon petroleum Limited (‘company’) for the financial year ended 30 June 2013
comprises the company and its controlled entities (the “Group”) and the Group’s interest in jointly controlled assets.
the separate financial statements of the parent entity, carnarvon petroleum Limited, have not been presented within this
financial report as permitted by the Corporations Act 2001.
the group is a for profit entity for financial reporting purposes under Australian Accounting standards.
the financial report was authorised for issue by the directors on 30 August 2013.
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.
Adoption of new and revised Accounting standards
None of the new standards and amendments to standards that are mandatory for the first time for the financial year
beginning 1 July 2012 affected any of the amounts recognised in the current period or any prior period and are not likely
to affect future periods. However, amendments made to AAsB 101 Presentation of Financial Statements effective 1 July
2012 now require the statement of comprehensive income to show the items of comprehensive income grouped into
those that are not permitted to be classified to profit or loss in a future period and those that may have to be reclassified
if certain conditions are met.
Basis of measurement
the financial report is prepared on a historical cost basis, except for available-for-sale financial assets which are measured
at fair value.
31
31
Carnarvon Petroleum Limited
Notes to tHe FiNANciAL stAteMeNts
2. Basis of preparation of the financial report (continued)
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 recognised
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 as detailed in Note 15(a).
Key estimate – income and capital gains taxes
estimates are made 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.
Exploration and evaluation expenditures
the application of the company’s accounting policy for exploration and evaluation expenditure requires judgement to
determine whether it is likely that future economic benefits are likely, from future either exploitation or sale, or whether
activities have not reached a stage which permits a reasonable assessment of the existence of reserves. the determination
of reserves and resources is itself an estimation process that requires varying degrees of uncertainty depending on how
the resources are classified. these estimates directly impact when the company defers exploration and evaluation
expenditure. the deferral policy requires management to make certain estimates and assumptions as to future events and
circumstances, in particular, whether an economically viable extraction operation can be established. Any such estimates
and assumptions may change as new information becomes available. if, after expenditure is capitalised, information
becomes available suggesting that the recovery of the expenditure is unlikely, the relevant capitalised amount is written
off in profit or loss in the period when the new information becomes available.
Key estimate – special remuneratory benefit 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% per 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.
32
Annual Report 30 June 2013
Notes to tHe FiNANciAL stAteMeNts
2. Basis of preparation of the financial report (continued)
Key estimate – reserve quantities
reserves are estimates of the amount of product that can be economically and legally extracted from the consolidated
entity’s properties. in order to estimate economically recoverable reserves, assumptions are required about a range of
geological, technical, legal and economic factors, including quantities, production techniques, reversion rights, recovery
rates, production costs, transport costs, commodity demand, commodity prices and exchange rates.
estimating the quantity of reserves requires the size, shape and depth of fields to be determined by analysing geological
drilling and production data. this process may require complex and difficult judgements to interpret the data. Because
the economic assumptions used to estimate economically recoverable reserves change from period to period, and because
additional data is generated during the course of operations, estimates of reserves may change from period to period.
changes in reported reserves may affect the consolidated entity’s financial results and financial position in a number of
ways, including the following:
•
•
•
asset carrying values (note 15) may be affected due to changes in estimated future cash flows;
depreciation charged in the income statement (note 5) may change as such charges are determined by the
units of production basis; and
the carrying value of deferred tax assets (note 19) may change due to changes in the estimates of the likely
ecovery of the tax benefits.
Key judgement – 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 judgements – 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 group, 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 group 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
Joint Ventures
the Group’s shares of the assets, liabilities, revenue and expenses of joint ventures have been included in the appropriate
line items of the consolidated financial statements. Details of the Group’s interests are provided in Note 16.
33
33
Carnarvon Petroleum Limited
3. significant accounting policies (continued)
(b) income tax and special remuneratory benefit
Income tax (current tax & deferred 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 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 against which the benefits of the deferred
tax assets can be utilized.
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% per concession).
the srB, which is tax deductible in the calculation of thai income taxes, involves a 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 quarterly for each
concession at the calculated annual rate at the end of each quarter.
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.
34
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
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. such amounts are determined based on current costs.
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.
Amortisation 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 which are expected to be recovered
by the expiry of the production licenses.
35
35
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
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.
the company does not record any expenditure made by the farmee on its account. it also does not recognise any gain or
loss on its exploration and evaluation farm-out arrangements but redesignates any costs previously capitalised in relation
to the whole interest as relating to the partial interest retained. Any cash consideration received directly from the farmee is
credited against costs previously capitalised in relation to the whole interest with any excess accounted for by the farmor as
a gain on disposal.
(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) 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
there are no restoration provisions required in respect of the Group’s activities under current thai Legislation.
36
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
3. significant accounting policies (continued)
(h) Financial instruments
recognition and initial measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to
the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase
or sale of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at
fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.
classification and subsequent measurement
Finance instruments are subsequently measured at fair value, amortised cost using the effective interest rate method, or
cost. Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition less
principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference
between that initial amount and the maturity amount calculated using the effective interest method.
the effective interest method is used to allocate interest income or interest expense over the relevant period and is
equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and
other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term)
of the financial instrument to the net carrying amount of the financial asset or financial liability. revisions to expected
future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income
or expense item in profit or loss.
Fair value is determined based on current bid prices for all quoted investments. valuation techniques are applied to
determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar
instruments and option pricing models.
the Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the
requirements of Accounting standards specifically applicable to financial instruments.
(i)
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 subsequently measured at amortised cost.
Loans and receivables are included in current assets, where they are expected to mature within 12 months after
the end of the reporting period.
(ii)
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified
into other categories of financial assets due to their nature, or they are designated as such by management.
they comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or
determinable payments.
they are subsequently measured at fair value with changes in such fair value (ie gains or losses) recognised in
other comprehensive income (except for impairment losses and foreign exchange gains and losses). When the
financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other
comprehensive income is reclassified into profit or loss. Available-for-sale financial assets are included in non-
current assets where they are expected to be sold within 12 months after the end of the reporting period. All
other financial assets are classified as current assets.
(iii)
Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.
37
37
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
3. significant accounting policies (continued)
(i) segment reporting
the Group reports one segment, oil and gas exploration, development and production, to the chief operating decision maker,
being the board of carnarvon petroleum Limited, in assessing performance and determining the allocation of resources. the
financial information presented in the statement of cash flows is the same basis as that presented to chief operating decision
maker.
Unless otherwise stated, all amounts reported to the chief operating decision maker are determined in accordance with
accounting policies that are consistent to those adopted in the annual financial statements of the Group.
(j) 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 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.
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 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.
38
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
3. significant accounting policies (continued)
(k) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the
agreement so as to reflect the risks and benefits incidental to ownership.
Operating leases
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.
(l) share capital
incremental costs directly attributable to an equity transaction are shown as a deduction from equity, net of any
recognised income tax benefit.
(m) 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.
(n) 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 – 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.
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 shares inherent in the issue to the eligible
person, with a corresponding increase to a share-based payments reserve in equity. the fair value is measured at grant
date and recognised when the eligible person become unconditionally entitled to the shares, effectively on grant. A loan
receivable is not recognised.
the fair value at grant date is determined using a pricing model that factors in the share price at grant date, the expected
price volatility of the underlying share, the expected dividend yield, and the risk free rate for the assumed term of the
plan. Upon repayment of the esp loans, the balance of the share-based payments reserve relating to the loan repaid is
transferred to issued capital.
39
39
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
3. significant accounting policies (continued)
(o) 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.
(p) 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.
(q) 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.
(r) 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 statement of
financial position are shown inclusive of Gst.
cash flows are presented in the statement of cash flows on a gross basis, except for the Gst component of investing and
financing activities, which are disclosed as operating cash flows.
(s) 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.
(t) 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.
(u) comparative figures
When required by Accounting standards, comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
40
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
3. significant accounting policies (continued)
(v) New Accounting standards for Application in Future periods
the AAsB has issued a number of new and amended Accounting standards and interpretations that have mandatory
application dates for future reporting periods, some of which are relevant to the Group. the Group has decided not
to early adopt any of the new and amended pronouncements. the Group’s assessment of the new and amended
pronouncements that are relevant to the Group but applicable in future reporting periods are set out below:
–
AAsB 9: Financial Instruments (December 2010) and AAsB 2010–7: Amendments to Australian Accounting Standards
arising from AAsB 9 (December 2010).
these standards are applicable retrospectively and include revised requirements for the classification and
measurement of financial instruments, as well as recognition and derecognition requirements for financial
instruments.
the key changes made to accounting requirements include:
-
-
-
-
-
-
-
simplifying the classifications of financial assets into those carried at amortised cost and those carried at
fair value;
simplifying the requirements for embedded derivatives;
removing the tainting rules associated with held-to-maturity assets;
removing the requirements to separate and fair value embedded derivatives for financial assets carried at
amortised cost;
allowing an irrevocable election on initial recognition to present gains and losses on investments in equity
instruments that are not held for trading in other comprehensive income. Dividends in respect of these
investments that are a return on investment can be recognised in profit or loss and there is no impairment
or recycling on disposal of the instrument;
requiring financial assets to be reclassified where there is a change in an entity’s business model as they
are initially classified based on: (a) the objective of the entity’s business model for managing the financial
assets; and (b) the characteristics of the contractual cash flows; and
requiring an entity that chooses to measure a financial liability at fair value to present the portion of the
change in its fair value due to changes in the entity’s own credit risk in other comprehensive income,
except when that would create an accounting mismatch. if such a mismatch would be created or enlarged,
the entity is required to present all changes in fair value (including the effects of changes in the credit risk
of the liability) in profit or loss.
these standards were mandatorily applicable for annual reporting periods commencing on or after 1 January 2013.
However, AAsB 2012–6: Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and
transition Disclosures (issued september 2012) defers the mandatory application date of AAsB 9 from 1 January
2013 to 1 January 2015. in light of the change to the mandatory effective date, the Group is expected to adopt
AAsB 9 and AAsB 2010–7 for the annual reporting period ending 31 December 2015. Although the directors
anticipate that the adoption of AAsB 9 and AAsB 2010–7 may have a significant impact on the Group’s financial
instruments, it is impracticable at this stage to provide a reasonable estimate of such impact.
–
AAsB 10: consolidated Financial statements, AAsB 11: Joint Arrangements, AAsB 12: Disclosure of interests in
other entities, AAsB 127: separate Financial statements (August 2011) and AAsB 128: investments in Associates
and Joint ventures (August 2011) (as amended by AAsB 2012–10: Amendments to Australian Accounting
standards – transition Guidance and other Amendments), and AAsB 2011–7: Amendments to Australian
Accounting standards arising from the consolidation and Joint Arrangements standards (applicable for annual
reporting periods commencing on or after 1 January 2013).
41
41
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
3. significant accounting policies (continued)
(v) New Accounting standards for Application in Future periods (continued)
AAsB 10 replaces parts of AAsB 127: Consolidated and Separate Financial Statements (March 2008, as amended)
and interpretation 112: Consolidation – Special Purpose Entities. AAsB 10 provides a revised definition of “control”
and additional application guidance so that a single control model will apply to all investees. this standard is not
expected to significantly impact the Group’s financial statements.
AAsB 11 replaces AAsB 131: Interests in Joint Ventures (July 2004, as amended). AAsB 11 requires joint arrangements
to be classified as either “joint operations” (where the parties that have joint control of the arrangement have
rights to the assets and obligations for the liabilities) or “joint ventures” (where the parties that have joint control
of the arrangement have rights to the net assets of the arrangement).
At this point in time this standard is not expected to significantly impact the Group’s financial statements.
AAsB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint
venture, joint operation or associate. AAsB 12 also introduces the concept of a “structured entity”, replacing the
“special purpose entity” concept currently used in interpretation 112, and requires specific disclosures in respect
of any investments in unconsolidated structured entities. this standard will affect disclosures only and is not
expected to significantly impact the Group’s financial statements.
to facilitate the application of AAsBs 10, 11 and 12, revised versions of AAsB 127 and AAsB 128 have also been
issued. the revisions made to AAsB 127 and AAsB 128 are not expected to significantly impact the Group’s
financial statements.
–
AAsB 13: Fair Value Measurement and AAsB 2011–8: Amendments to Australian Accounting Standards arising from
AASB 13 (applicable for annual reporting periods commencing on or after 1 January 2013).
AAsB 13 defines fair value, sets out in a single standard a framework for measuring fair value, and requires
disclosures about fair value measurement.
AAsB 13 requires:
-
-
inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy; and
enhanced disclosures regarding all assets and liabilities (including, but not limited to, financial assets and
financial liabilities) to be measured at fair value.
these standards are expected to result in more detailed fair value disclosures, but are not expected to significantly
impact the amounts recognised in the Group’s financial statements.
–
AAsB 2011–4: Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel
Disclosure Requirements (applicable for annual reporting periods beginning on or after 1 July 2013).
this standard makes amendments to AAsB 124: Related Party Disclosures to remove the individual key management
personnel disclosure requirements (including paras Aus29.1 to Aus29.9.3). these amendments serve a number
of purposes, including furthering trans-tasman convergence, removing differences from iFrss, and avoiding any
potential confusion with the equivalent Corporations Act 2001 disclosure requirements.
this standard is not expected to significantly impact the Group’s financial report as a whole because:
-
-
some of the disclosures removed from AAsB 124 will continue to be required under s 300A of the
corporations Act, which is applicable to the Group; and
AAsB 2011–4 does not affect the related party disclosure requirements in AAsB 124 applicable to all
reporting entities, and some of these requirements require similar disclosures to those removed by AAsB
2011–4.
42
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
3. significant accounting policies (continued)
(v) New Accounting standards for Application in Future periods (continued)
–
–
–
–
AAsB 119: Employee Benefits (september 2011) and AAsB 2011–10: Amendments to Australian Accounting Standards
arising from AAsB 119 (september 2011) (applicable for annual reporting periods commencing on or after
1 January 2013).
this standard is not expected to significantly impact the Group’s financial statements.
AAsB 2012–2: Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial
Liabilities (applicable for annual reporting periods commencing on or after 1 January 2013).
AAsB 2012–2 principally amends AAsB 7: Financial Instruments: Disclosures to require entities to include
information that will enable users of their financial statements to evaluate the effect or potential effect of netting
arrangements, including rights of set-off associated with the entity’s recognised financial assets and recognised
financial liabilities, on the entity’s financial position. this standard is not expected to significantly impact the
Group’s financial statements.
AAsB 2012–3: Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities
(applicable for annual reporting periods commencing on or after 1 January 2014).
this standard adds application guidance to AAsB 132: Financial Instruments: presentation to address potential
inconsistencies identified in applying some of the offsetting criteria of AAsB 132, including clarifying the meaning
of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered
equivalent to net settlement.
this standard is not expected to significantly impact the Group’s financial statements.
AAsB 2012–5: Amendments to Australian Accounting standards arising from Annual improvements 2009–2011
(applicable for annual reporting periods commencing on or after 1 January 2013).
this standard amends a number of Australian Accounting standards as a consequence of the issuance of Annual
improvements to iFrss 2009–2011 cycle by the international Accounting standards Board, including:
AAsB 1: First-time Adoption of Australian Accounting standards to clarify the requirements in respect of the
application of AAsB 1 when an entity discontinues and then resumes applying Australian Accounting standards;
AAsB 101: presentation of Financial statements and AAsB 134: interim Financial reporting to clarify the
requirements for presenting comparative information;
AAsB 116: property, plant and equipment to clarify the accounting treatment of spare parts, stand-by equipment
and servicing equipment;
AAsB 132 and interpretation 2: Members’ shares in co-operative entities and similar instruments to clarify the
accounting treatment of any tax effect of a distribution to holders of equity instruments; and
AAsB 134 to facilitate consistency between the measures of total assets and liabilities an entity reports for its
segments in its interim and annual financial statements.
this standard is not expected to significantly impact the Group’s financial statements.
43
43
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
4. other income
Finance income on bank deposits
Net gain on asset transactions
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
Defined contribution – superannuation expense
7. Auditors’ remuneration
Consolidated
2013
$000
188
599
787
(4,426)
(1,050)
(486)
(5,140)
(1,905)
2012
$000
61
-
61
(5,894)
(1,664)
(764)
(5,171)
(2,335)
(13,007)
(15,828)
(310)
(163)
(143)
(236)
(181)
(147)
Auditors of the company
(138)
(132)
8. earnings per share
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
Weighted average number of ordinary shares 30 June (basic)
effect of share options on issue
2013 2012
Number of shares
693,370,634
687,820,634
168,989,083
2,727,397
862,359,717
690,548,031
-
-
Weighted average number of ordinary shares 30 June (diluted)
862,359,717
690,548,031
(Loss) / profit used in calculating basic and diluted earnings per share from
continuing operations
2013
$
2012
$
(8,385,000)
(2,498,000)
44
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
Consolidated
2013
$000
2012
$000
9. taxes
(a) Income tax expense
Numerical reconciliation between pre-tax profit and income tax expense:
prima facie income tax expense on pre-tax profit at 30% (2012: 30%)
446
2,065
tax effect of:
special remuneratory benefit
effect of higher overseas tax rate
effect of foreign exchange
Non-deductible expenditure
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
-
1,039
6,200
635
(356)
1,909
9,873
(261)
10,134
9,873
-
2,929
729
1,160
878
1,622
9,383
5,074
4,309
9,383
Tax Consolidation
effective 1 July 2003, for the purposes of Australian income taxation, carnarvon and its 100%-owned Australian
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.
income tax expense has not been accrued on the profits generated by the thailand joint venture as under Australian tax
law, such profits attributable to the branch are taxed in thailand and are non-assessable in Australia.
45
45
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
9. taxes (continued)
(b) Special remuneratory benefit expense
special remuneratory benefit
Consolidated
2013
$000
-
-
2012
$000
-
-
the Group’s phetchabun Basin Joint venture is subject to a special remuneratory benefit (“srB”) tax on profits, at sliding
scale rates (0% - 75% per concession).
the srB, which is tax deductible in the calculation of thai income taxes (see Note 9 (a)), involves a 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 quarterly for each
concession at the calculated annual rate at the end of each quarter.
the srB rate was 0% for the 2013 financial year (2012:0%).
the srB is considered, for accounting purposes, to be a tax on income.
10. trade and other receivables
Current
trade and other receivables
cash held as security
trade and other receivables include May 2013 oil sales of $1,399,000 (2012:$0).
the Group’s exposure to credit and currency risks is disclosed in Note 32.
Consolidated
2013
$000
5,028
54
5,082
2012
$000
2,035
891
2,926
46
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
11. property, plant and equipment
Consolidated
2013
$000
2012
$000
Plant and equipment :
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
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
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
Land and buildings
Cost:
Balance at beginning of financial year
Additions
effects of movements in foreign exchange
Balance at end of financial year
Depreciation:
Balance at beginning of financial year
Depreciation charge for year
Balance at end of financial year
carrying amount opening
carrying amount closing
552
206
(8)
142
892
279
136
415
273
477
823
222
77
1,122
695
204
899
181
223
139
-
20
159
71
23
94
68
65
495
42
-
15
552
192
87
279
303
273
732
138
6
823
621
74
695
111
181
105
32
2
139
49
22
71
56
68
47
47
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
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
Depreciation charge for year
Balance at end of financial year
carrying amount opening
carrying amount closing
12. inventories
Current
consumables
13. other assets
Current
Deposits and prepayments
14. exploration and evaluation expenditure
cost:
Balance at beginning of financial year
Additions
exploration back costs recovered
exploration expenditure written off
Balance at end of financial year
Consolidated
2013
$000
2012
$000
1,567
428
(8)
239
2,226
1,098
363
1,461
469
765
1,332
212
-
23
1,567
862
236
1,098
470
469
6,963
4,332
251
427
7,776
1,213
(4,480)
(1,105)
3,404
5,955
5,182
-
(3,361)
7,776
the exploration expenditure written off during the financial year ended 30 June 2013 of $1,105,000 was in relation to the exploration
expenses incurred in the L20/50 block in thailand following the assignment of the concession to siam Moeco Limited.
48
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
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
(a) Impairment
Consolidated
2013
$000
2012
$000
113,730
13,196
17,138
144,064
30,825
4,865
35,690
82,905
108,374
97,549
14,583
1,598
113,730
25,867
4,958
30,825
71,682
82,905
the company identified impairment indicators at 30 June 2013 relating to its L44/43, L33/43 and sW1A concessions in
thailand and as such performed an impairment test on the assets relating to those concessions.
the company’s production assets are held in a single joint venture which includes the L44/43, L33/43 and sW1A
concessions. therefore, the company’s producing assets in thailand as a whole were determined to be a cash generating
unit (cGU) for impairment purposes. the recoverable amount of the cGU was determined based on fair value less cost to
sell (FvLcs). FvLcs was determined as the present value of the estimated real future cash flows expected to arise from
the continued use of the asset using assumptions that an independent market participant may consider. these cash flows
were discounted using a nominal after-tax discount rate that is derived from the company’s post-tax weighted average
cost of capital (WAcc), with appropriate adjustments made to reflect the risks specific to the cGU.
the calculation of fair value less costs to sell was most sensitive to the following assumptions:
•
production volumes – estimated production volumes are based on the production profiles of proven and
probable reserves for the fields and take into account development plans for the fields agreed by management
as part of the long-term planning process, which have been independently verified;
• crude oil price – forecast crude oil prices are based on independent data;
• operating and capital cost – these costs were based on independent data; and
• Discount rate – a post–tax nominal discount rate of 12%.
Based on the proven and probable production profile from the L44/43, L33/43 and sW1A concessions, the company
believes that no reasonable foreseeable changes in the above assumptions would cause the carrying amount of oil and gas
assets to exceed their recoverable amount.
49
49
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
16. Joint ventures
the Group has the following interests in joint venture assets:
Joint venture
Thailand
Principal activities
Ownership interest %
2013
2012
phetchabun Basin concession, exploration Blocks
L44/43 and L33/43
3/2546/60 and 5/2546/62 concessions
exploration, development and
production of hydrocarbons
40%
40%
exploration Block L20/50
7/2551/98 concession
exploration for hydrocarbons
0%
55%
exploration Blocks L52/50 and L53/50 3/2553/105
concession
exploration for hydrocarbons
100%
50%
Western Australia
WA-435-p, WA-437-p, roebuck Basin
exploration for hydrocarbons
20%
50%
WA-436-p, WA 438-p, roebuck Basin
exploration for hydrocarbons
50%
50%
WA-443-p, roebuck Basin
exploration for hydrocarbons
100%
100%
WA-399-p, carnarvon Basin
exploration for hydrocarbons
13%
13%
50
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts 16. Joint ventures (continued)
summary financial information for joint venture assets, as included in the consolidated statement of financial position 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
current tax
provisions
total current liabilities
Non-current liabilities
Deferred tax
total non-current liabilities
total liabilities
Net assets
income
expenses
Net profit after tax
2013
$000
5,087
4,972
6,963
174
2012
$000
5,465
2,838
4,332
390
17,196
13,025
707
3,132
108,374
112,213
129,409
2,568
846
-
3,414
43,245
43,245
46,659
82,750
18,351
(23,026)
(4,675)
435
6,085
82,905
89,425
102,450
1,658
2,347
-
4,005
33,111
33,111
37,116
65,334
30,411
(28,572)
1,839
capital commitments and contingent liabilities for the joint ventures are disclosed in Notes 22 and 23 respectively.
17. trade and other payables
current
trade payables
Non-trade payables and accrued expenses
owing to related parties
2013
$000
533
2,633
-
3,166
2012
$000
105
1,760
80
1,945
51
51
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
18. provisions
Provision for restoration costs
there are no restoration provisions required in respect of the Group’s activities under current thai Legislation.
2013
$000
2012
$000
19. Deferred tax liabilities
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 - thailand
Net deferred tax liability
44,359
(1,114)
43,245
34,334
(1,223)
33,111
the movement in the deferred tax liability during the reporting period has all been recognised in the income statement.
Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognised in respect of the following items:
Australian tax losses
6,362
5,407
3,691
the 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. As explained in note 9(a), income tax is not payable in Australia on the profits generated by the thailand joint
venture as under Australian tax law, such profits attributable to the branch are taxed in thailand and are non-assessable in
Australia.
52
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
20. capital and reserves
Issued capital
Balance at beginning of financial year
issued for cash
employee share plan issues
employee share plan cancellations
Balance at end of financial year
Issued capital
Balance at beginning of financial year
transfer from share based payment reserve*
Net proceeds from capital raising activities
Balance at end of financial year
Company
2013
2012
Number of shares
693,370,634
687,820,634
243,887,066
-
600,000
6,824,000
(3,748,199)
(1,274,000)
934,109,501
693,370,634
Company
2013
$000
2012
$000
68,536
256
18,781
87,573
68,240
296
-
68,536
* this represents the fair value of employee share plan shares transferred from the share based payment reserve to issued
capital upon cancellation.
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 of changes in equity on page 29.
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 page 29.
this reserve represents the fair value of shares issued under the company’s esp. this reserve is reversed against issued
capital when shares are issued on exercise of options issued under the previous employee option plan and the loan is
repaid or cancelled under the current esp.
53
53
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
Consolidated
2013
$000
2012
$000
21. reconciliation of cash flows from operating activities
(a) Cash flows from operating activities
(Loss) for the year
(8,385)
(2,498)
equity settled share based payment expense
Deferred tax expense
Depreciation
Foreign exchange gains
exploration expenditure written off
operating profit before changes in working capital and provisions:
changes in assets and liabilities:
(increase) / decrease in trade and other receivables
(increase) / decrease in inventories
(increase) / decrease in other assets
increase / (decrease) in trade and other payables
increase / (decrease) in provisions and employee benefits
Net cash flows generated from operating activities
(b) Reconciliation of cash and cash equivalents
14
10,134
5,139
(1,498)
1,105
6,509
(2,544)
(2,631)
176
1,221
(1,444)
1,287
445
4,309
5,194
(235)
3,361
10,576
2,695
(894)
(136)
(3,006)
1,533
11,238
cash at bank and at call
19,525
7,106
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 $1,443,100 consolidated is included under trade and other receivables (2012:$ 891,000 consolidated),
see Notes 10 and 23.
54
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
22. capital and other commitments
(a) Joint venture commitments
share of capital commitments of joint venture assets:
Within one year
capital commitments of the Group to joint venture assets:
Within one year
Consolidated
2013
$000
2012
$000
542
1,987
983
413
(b) Exploration expenditure commitments
Due to the nature of the Group’s operations in exploring and evaluating areas of interest it is necessary to incur
expenditure in order to retain the Group’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 Group’s equity.
exploration expenditure commitments forecast but not provided for in the financial statements are as follows:
Less than one year
Between one and five years
(c) Capital expenditure commitments
Consolidated
2013
$000
3,120
3,650
6,770
2012
$000
2,350
5,300
7,650
Data licence commitments
229
156
55
55
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
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 considered remote
a) the company has provided a cash bond of tHB 39,309,600 (AUD$1,388,639) to the Department of Mineral Fuels in
thailand in respect of its obligations for its 40% interest in the L44/43 and L33/43 concessions in thailand. the bond is
secured by a cash deposit of tHB 39,309,600 (AUD$1,388,639) held with the joint venture partner’s thai bank. the joint
venture partner has also provided their 60% share of similar guarantee’s to the Department of Mineral Fuels.
the restricted cash held by the banks as security for these bonds and other guarantees total $1,443,100 (2012: $891,000) 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
2013
$000
2012
$000
279
222
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 interest free 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 use the above-mentioned loan to
acquire plan shares.
the movements in the esp during the financial year, including those held by Key Management personnel,
were as follows:
1 July 2012
Issued
Cancelled
30 June 2013
Number of shares
Loan
Average loan per share
23,239,199
4,718,316
$0.20
600,000
54,000
$0.09
2,474,199
598,422
$0.24
21,365,000
4,173,894
$0.19
1 July 2011
Issued
Cancelled
30 June 2012
Number of shares
Loan
Average loan per share
17,689,199
3,916,097
$0.22
6,824,000
1,463,600
$0.21
1,274,000
661,381
$0.52
23,239,199
4,718,316
$0.20
56
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
24. employee benefits (continued)
shares issued under the esp are accounted for in accordance with the AAsB 2.
the fair value of shares issued under the esp is measured by reference to their fair value 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
Key
management
personnel
2013
2012
Other
employees
2013
Other
employees
2012
-
-
-
-
-
-
-
-
7.6
16.5
23
70%
3 years
Nil
4.61%
2.3
7.4
9
70%
3 years
Nil
3%
$380,974
$13,723
4.8
11.5
15
70%
3 years
Nil
4.25%
$64,188
the current year volatility is intended to reflect the movement of the company’s share price during the financial year.
Further details of shares and options issued to directors are set out in Note 28, and in the remuneration report set out
on pages 18 to 22.
57
57
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
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 2013 net receipts from controlled entities totalled $0 (2012: net receipts from
controlled entities $2,957,000).
the carrying value of loans to controlled entities at 30 June 2013 was $8,131,000 (2012: $2,798,000) after
provisions of $833,000 (2012: $693,000). these loans are unsecured, non-interest bearing, and have no fixed
terms of repayment.
Other related party balances and transactions
At 30 June 2013 an amount of $84,175 (2012: $80,437) is included in company and consolidated trade and other
payables for outstanding director fees and expenses.
Additional consulting fees of $149,987 (2012:$83,447) were paid to a related entity of ted Jacobson in relation to
exploration advisory services during the year.
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
2013
$000
298
114
412
2012
$000
238
304
542
During the reporting period $238,000 was recognised as an expense in the consolidated income statement in respect of
operating leases (2012: $243,000).
the property lease is a non-cancellable lease with the three-year term, with rent payable in advance. contingent rental
provisions within the lease agreement require that minimum lease payment shall be increased by the change in the
consumer price index (cpi).
58
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
27. segment information
the Group reports one segment, oil and gas exploration, development and production, to the chief operating decision maker,
being the board of carnarvon petroleum Limited, in assessing performance and determining the allocation of resources. the
financial information presented in the statement of cash flows is the same basis as that presented to chief operating decision
maker.
Basis of accounting for purposes of reporting by operating segments
Unless otherwise stated, all amounts reported to the chief operating decision maker are determined in accordance with
accounting policies that are consistent to those adopted in the annual financial statements of the Group.
Revenue by geographical region
revenue, including interest income, is disclosed below based on the location of the external customer:
thailand
Australia
2013
$000
18,350
741
19,091
2012
$000
30,454
18
30,472
the Group derives 100% of its sales revenue from one customer in the oil and gas exploration, development and
production segment.
Assets by geographical region
the location of segment assets is disclosed below by geographical location of the assets:
thailand
Australia
2013
$000
128,692
15,672
144,364
2012
$000
100,544
5,397
105,941
59
59
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
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 are as follows:
short term employee benefits
post-employment benefits
share-based payments
Consolidated
2013
$000
1,305
50
-
1,355
2012
$000
1,305
49
381
1,735
information regarding individual directors and executives’ compensation and some equity instruments disclosures, as
permitted by corporations regulation 2M.3.03, are provided in the remuneration report section of the directors’ report
as set out on pages 18 to 22.
Apart from the details disclosed in this note, no director has entered into a material contract with the company or the
Group since the end of the previous financial year and there were no material contracts involving directors’ interests existing
at year end.
60
Annual Report 30 June 2013Notes to tHe FiNANciAL stAteMeNts
28. Key management personnel disclosures (continued)
(b) Loans to key management personnel and their related parties
Details of loans to key management personnel and their related parties, which are all interest free loans with limited
recourse security over the plan shares provided in accordance with the company’s employee share plan (“esp”), are set
out below.
2013
Balance
1 July 2012 ($)
Balance
30 June 2013 ($)
Highest balance
in period ($)
Loaned
in period ($)
Repaid
in period ($)
Directors
pJ Leonhardt*
ep Jacobson*
Executives
pp Huizenga
Ac cook
2012
Directors
pJ Leonhardt*
ep Jacobson*
Executives
pp Huizenga
Ac cook
270,000
540,000
270,000
540,000
270,000
540,000
1,021,300
1,528,800
1,021,300
1,528,800
1,021,300
1,528,800
-
-
-
-
-
-
-
-
Balance
1 July 2011 ($)
Balance
30 June 2012 ($)
Highest balance
in period ($)
Loaned
in period ($)
Repaid
in period ($)
270,000
540,000
446,300
838,800
270,000
540,000
270,000
540,000
-
-
1,021,300
1,528,800
1,021,300
1,528,800
575,000
690,000
-
-
-
-
* the loans to directors were made in 2006 in lieu of normal remuneration at a time the company had no full time
employees and limited cash resources.
Details regarding the aggregate of loans, all of which are interest-free, made by the Group to key management personnel
and their related parties, and the number of individuals in each group, are as follows:
Opening balance ($)
Closing balance ($)
Number in
group at 30 June
2013
2012
2,550,100
1,285,100
2,550,100
2,550,100
2
2
(c) 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:
Current
trade and other payables
Consolidated
2013
$000
84
2012
$000
80
61
61
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
Notes to tHe FiNANciAL stAteMeNts
28. Key management personnel disclosures (continued)
(d) 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:
2013
Directors
pJ Leonhardt
ep Jacobson
Nc Fearis
W Foster
Ac cook
Executives
pp Huizenga
2012
Directors
pJ Leonhardt
ep Jacobson
Nc Fearis
W Foster
Ac cook
Executives
pp Huizenga
Held at
1 July 2012
Net
acquired/ (sold)
Award under
Employee
Share Plan
Received on
exercise
of options
Held at
30 June 2013
17,000,000
31,297,635
9,000,000
-
5,000,000
750,000
-
287,768
121,955
900,000
4,600,000
150,000
-
-
-
-
-
-
Held at
1 July 2011
Net
acquired/ (sold)
Award under
Employee
Share Plan
Received on
exercise
of options
17,000,000
31,037,335
8,600,000
-
-
260,300
400,000
-
-
-
-
-
1,794,839
205,161
3,000,000
2,100,000
-
2,500,000
-
-
-
-
-
-
-
-
-
-
-
-
17,750,000
31,297,635
9,287,768
121,955
5,900,000
4,750,000
Held at
30 June 2012
17,000,000
31,297,635
9,000,000
-
5,000,000
4,600,000
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 using the Black-scholes model, and their
valuation assumptions are set out in Note 24.
information regarding individual directors’ and executives’ compensation, including company loans used to finance the
purchase of the esp shares, is provided in the remuneration report section of the directors’ report as set out on pages 18
to 22.
62
Annual Report 30 June 2013
29. Non-key management personnel disclosures
Identity of related parties
the Group has a related party relationship with its controlled entities (see Note 30), joint venture assets (see Note 16),
and with its key management personnel (see Note 28).
30. consolidated entities
Name
Company
carnarvon petroleum Ltd
Controlled entities
carnarvon thailand Ltd
Lassoc pty Ltd
srL exploration pty Ltd
carnarvon petroleum (indonesia) pty Ltd
carnarvon (NZ) pty Ltd
carnarvon Khian sa pte Ltd
Country of Incorporation
2013
2012
Ownership interest
British virgin islands
Australia
Australia
Australia
New Zealand
singapore
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
investments in controlled entities are measured at cost in the financial statements of the company.
31. subsequent events
No matters or circumstance has arisen since 30 June 2013 that in the opinion of the directors has significantly affected, or
may significantly affect in future financial years:
(i) the Group’s operations; or
(ii) the results of those operations; or
(iii) the Group’s state of affairs
63
63
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
Notes to tHe FiNANciAL stAteMeNts
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 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.
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 2012:
30 June 2013
30 June 2012
Consolidated
Equity
$000
1,739
2,888
Profit and loss
$000
1,739
2,888
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 2012:
30 June 2013
30 June 2012
64
Consolidated
Equity
$000
(1,739)
(2,888)
Profit and loss
$000
(1,739)
(2,888)
Annual Report 30 June 2013
32. Financial risk management (continued)
(b) Interest rate risk
the significance and management of the risks to the Group 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 Group were
as follows. there were no interest-bearing financial liabilities.
Carrying amount (A$000)
Financial assets – cash and cash equivalents
Weighted average interest rate (%)
Financial assets – cash and cash equivalents
Sensitivity analysis
All other financial assets are non interest bearing.
Consolidated
2013
2012
19,525
7,106
1.12%
0.44%
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 2012:
30 June 2013
30 June 2012
Consolidated
Equity
$000
Profit and loss
$000
96
34
96
34
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 2012:
30 June 2013
30 June 2012
Consolidated
Equity
$000
(110)
(28)
Profit and loss
$000
(110)
(28)
65
65
Carnarvon Petroleum LimitedNotes to tHe FiNANciAL stAteMeNts
Notes to tHe FiNANciAL stAteMeNts
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 Group, and arises principally from the Group’s receivables from customers and cash deposits.
the Group’s trade receivables at both June 2013 and June 2012 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 2013 or 30 June 2012 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 statement of financial position.
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:
cash and cash equivalents
trade and other receivables
the aging of the Group’s trade receivables at reporting date was:
Not past due
Gross
2013
$000
3,153
3,153
Impairment
2013
$000
-
-
Consolidated
2013
$000
19,525
5,082
24,607
Gross
2012
$000
1,800
1,800
2012
$000
7,106
2,926
10,032
Impairment
2012
$000
-
-
Based on historical default rates, the Group believes that no impairment allowance is necessary in respect of
trade receivables.
66
Annual Report 30 June 2013
Notes to tHe FiNANciAL stAteMeNts
32. Financial risk management (continued)
(d) Currency risk
currency risk arises from sales, purchases, assets and liabilities that are denominated in a currency other than the
functional currencies of the entities within the Group, being the A$, 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”).
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$ loans to 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 Group’s exposure to foreign currency risk at balance date was as follows, based on carrying amounts.
Consolidated 2013
cash and cash equivalents
trade and other receivables
trade payables and accruals
srB and income tax provisions
Gross balance sheet exposure
Consolidated 2012
cash and cash equivalents
trade and other receivables
trade payables and accruals
srB and income tax provisions
Gross balance sheet exposure
THB
A$000
4,348
4,957
(2,112)
(846)
6,347
5,004
2,688
(1,445)
(2,347)
3,900
USD
A$000
7,773
191
(455)
-
7,509
2,047
558
(213)
-
2,392
the following significant exchange rates applied during the year:
AUD to:
1 thai baht
1 UsD
Average rate
Reporting date spot rate
2013
0.032
0.97
2012
0.031
0.97
2013
0.035
1.093
2012
0.031
0.98
67
67
Carnarvon Petroleum Limited
Notes to tHe FiNANciAL stAteMeNts
32. Financial risk management (continued)
(d) Currency risk (continued)
Sensitivity analysis
A 10% strengthening of the AUD against the tHB for the 12 months to 30 June 2013 and 30 June 2012 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 2013
tHB
30 June 2012
tHB
Consolidated
Equity
$000
Profit and loss
$000
(16,761)
(945)
(13,333)
(1,797)
A 10% weakening of the AUD against the tHB for the 12 months to 30 June 2013 and 30 June 2012 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 2013
tHB
30 June 2012
tHB
(e) Fair values
Consolidated
Equity
$000
Profit and loss
$000
20,486
16,295
1,155
2,197
the fair values of financial assets and financial liabilities, together with their carrying amounts shown in the statement of
financial position, are as follows:
Consolidated
Loans and receivables
cash and cash equivalents
trade and other payables
Carrying amount
Fair Value
Carrying amount
Fair Value
2013
$000
5,082
19,525
(3,167)
21,440
2013
$000
5,082
19,525
(3,167)
21,440
2012
$000
2,926
7,106
(1,945)
8,087
2012
$000
2,926
7,106
(1,945)
8,087
the basis for determining fair values is disclosed in Note 3(h).
68
Annual Report 30 June 2013
Notes to tHe FiNANciAL stAteMeNts
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.
the Group currently does not have 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 2013
Non-derivative financial liabilities
trade and other payables
srB and income tax provisions
Consolidated 2012
Non-derivative financial liabilities
trade and other payables
srB and income tax provisions
Carrying
amount
$000
Contractual
cashflows
$000
6 months
or less
$000
6 to 12
months
$000
3,167
846
4,013
1,945
2,347
4,292
3,167
846
4,013
1,945
2,347
4,292
3,167
846
4,013
1,945
2,347
4,292
-
-
-
-
-
-
69
69
Carnarvon Petroleum Limited
Notes to tHe FiNANciAL stAteMeNts
33. parent information
the following information has been extracted from the books and records of the parent and has been prepared in
accordance with the accounting standards:
Statement of financial position
current Assets
Non-current assets
total assets
current liabilities
Non-current liabilities
total liabilities
equity
issued capital
Accumulated losses
reserves
total equity
Statement of comprehensive income
total (loss)
total comprehensive income
2013
$000
14,625
12,917
27,542
821
-
821
87,573
(62,804)
1,952
26,721
2012
$000
1,787
10,367
12,154
500
-
500
68,536
(59,077)
2,195
11,654
(3,709)
(3,709)
(4,772)
(4,772)
parent contingencies
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 may be 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.
70
Annual Report 30 June 2013
Notes to tHe FiNANciAL stAteMeNts
33. parent information (continued)
Parent capital and other commitments
(a) Joint venture commitments
Parent
2013
$000
2012
$000
capital commitments of the Group to joint venture assets:
Within one year
1,987
413
(b) Exploration expenditure commitments
Due to the nature of the company’s operations in exploring and evaluating areas of interest it is necessary to incur
expenditure in order to retain the company’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 company’s equity.
exploration expenditure commitments forecast but not provided for in the financial statements are as follows:
Less than one year
Between one and five years
(c) Capital expenditure commitments
3,120
3,650
6,770
2,350
5,300
7,650
Data licence commitments
229
156
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
155
13
168
150
168
318
71
71
Carnarvon Petroleum Limited
Directors’ DecLArAtioN
(1) in the opinion of the directors of carnarvon petroleum Limited:
(a) the financial statements and notes of the Group set out on pages 26 to 71 are in accordance
with the corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2013 and of its
performance, as represented by the results of its operations and its cash flows, for the financial year ended
on that date; and
(ii) complying with Australian Accounting standards (including the Australian Accounting interpretations) and
the corporations regulations 2001; and
(b) the financial statements comply with international Financial reporting standards as set out in Note 2; and
(c) the remuneration disclosures that are contained in the remuneration report in the Directors report comply with
the corporations Act 2001 and the corporations regulations 2001; and
(d) 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 2013.
signed in accordance with a resolution of the directors.
PJ Leonhardt
Director
perth, 30 August 2013
72
Annual Report 30 June 2013
iNDepeNDeNt AUDit report
73
73
Carnarvon Petroleum Limited iNDepeNDeNt AUDit report
74
Annual Report 30 June 2013 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.carnarvon.com.au:
• 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;
•
•
•
•
remuneration 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.
75
75
Carnarvon Petroleum Limited corporAte GoverNANce stAteMeNt
explanations for departures from best practice recommendations
From 1 July 2012 to 30 June 2013 (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
3
3
2.4
A separate Nomination committee
has not been formed.
3.2
A diversity policy has not
been established.
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.
Due to the size of the company’s workforce,
the company has not adopted a formal
diversity policy or any gender diversity
objectives. the Board believes that there is no
detriment to the company in not adopting
a formal diversity policy or in not setting
gender diversity objectives as the company
is committed to providing all employees
with fair and equal access to employment
opportunities.
3.3
Measurable objectives for achieving
gender diversity set in accordance
with the diversify policy have not
been established.
see above.
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”
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 18 to 22.
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.
76
Annual Report 30 June 2013 corporAte GoverNANce stAteMeNt
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, ted Jacobson, Neil Fearis, and Bill Foster.
Neither of these directors was considered to have a material relationship with the company or another group member during
the reporting period as professional advisor, consultant, supplier, customer, or through any other contractual relationship, nor
did they have any business or other relationship which could, or could reasonably be perceived to, materially interfere with the
director’s ability to act in the best interests of the company.
the Board considers “material” in this context to be where any director-related business relationship represents the lesser of at
least 5% of the company’s or the director-related business’s revenue.
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.
77
77
Carnarvon Petroleum Limited 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 30 August 2013
Substantial shareholders
there are no substantial shareholder notices lodged with the company.
Voting Rights
the voting rights attaching to ordinary shares are governed by the constitution. on a show of hands every person present who
is a member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by
attorney or duly authorised representative shall have one vote for each share held. No options have any voting rights.
Twenty Largest Shareholders
Name of Shareholder
HsBc custody Nominees (Australia) Limited
J p Morgan Nominees Australia Limited
citicorp Nominees pty Limited
Mr edward patrick Jacobson
sun Loong corporation pty Ltd
sunshine Group investments pty Ltd
Jacobson Geophysical services pty Ltd
pendomer investments pty Ltd
Mr James Mark Dack
Jp Morgan Nominees Australia (cash income A/c)
Mr peter James Leonhardt
Log creek pty Ltd
Arne investments pty Ltd
National Nominees Limited
Arne investments pty Ltd
ABN Amro clearing sydney Nominees pty Ltd
Mr edward patrick Jacobson
Geolyn pty Ltd
Mr Hsin Wei Wi & Ms Lydia Wen-Lin Hsieh
Mr thomas Fritz ensmann
Number of Shares
% held
76,878,404
46,672,367
20,743,780
12,917,903
12,359,768
10,000,000
9,728,390
9,287,768
8,999,999
8,891,859
7,700,000
7,117,596
7,078,209
6,748,046
6,710,493
6,578,910
6,000,000
6,000,000
5,930,568
4,450,000
8.22
4.99
2.22
1.38
1.32
1.07
1.04
0.99
0.96
0.95
0.82
0.76
0.76
0.72
0.72
0.70
0.64
0.64
0.63
0.48
280,794,060
30.02
Distribution of equity security holders
the number of shareholders holding less than a marketable parcel of ordinary shares is 2,964.
Size of Holding
1
1,001
5,001
10,001
100,001
to
to
to
to
and over
1,000
5,000
10,000
100,000
1,273
Number of
shareholders
Number of
fully paid shares
526
1,724
1,505
4,059
757,279,238
9,087
262,151
5,416,695
12,738,544
159,686,873
935,383,501
the number of shareholders holding less than a marketable parcel of ordinary shares is 2,964.
78
Annual Report 30 June 2013 ADDitioNAL sHAreHoLDer iNForMAtioN
b) option holdings as at 31 August 2013
there were no share options on issue.
c) on-market buyback
there is no current on-market buyback.
d) schedule of permits
PERMIT
BASIN/COUNTRY
sW1A
L33/43
L44/43
L20/50
L52/50,
& L53/50
ep321
ep407
WA-399-p
phetchabun /
thailand
phetchabun /
thailand
phetchabun /
thailand
phitsanulok /
thailand
surat-Khiensa /
thailand
perth /
Australia
perth /
Australia
carnarvon /
Australia
WA-435-p,
WA-437-p
roebuck /
Australia
WA-436-p,
WA-438-p
WA-443-p
roebuck /
Australia
roebuck /
Australia
JOINT VENTURE
PARTNERS
EQUITY
%
OPERATOR
carnarvon
eco orient energy
carnarvon
eco orient resources
carnarvon
eco orient resources
carnarvon
siam Moeco
carnarvon
carnarvon
carnarvon
carnarvon
Apache
rialto energy
Jacka
carnarvon
Apache
Finder exploration
JX Nippon
carnarvon
40%
60%
40%
60%
40%
60%
0%
100%
100%
2.5% of
38.25%
2.5% of
42.5%
13%
60%
12%
15%
20%
40%
20%
20%
50%
eco orient energy
eco orient resources
eco orient resources
carnarvon
carnarvon
Latent petroleum
Latent petroleum
Apache
Apache
Finder exploration
carnarvon
50%
100%
Finder exploration
carnarvon
79
79
Carnarvon Petroleum Limited CONTENTS
Chairman’s Review ........................................................................ 1
Consolidated Statement of Changes in equity .............29
Chief executive’s Review........................................................... 2
Statement of Cash Flows ........................................................30
operating and Financial Review ............................................. 3
notes to the Financial Statements ....................................31
Directors’ Report .........................................................................25
Directors’ Declaration ...............................................................72
Auditor’s Independence Declaration .................................25
Independent Audit Report ......................................................73
Consolidated Income Statement .........................................26
Corporate Governance Statement ......................................75
Consolidated Statement of
Comprehensive Income ............................................................27
Consolidated Statement of Financial position ..............28
Additional Shareholder Information ..................................78
Share Registry
link Market Services limited
Ground Floor
178 St Georges terrace
perth, WA 6000 Australia
Investor enquiries: 1300 554 474 (within Australia)
Investor enquiries: +61 2 8280 7111 (outside Australia)
+61 2 9287 0303
Facsimile:
Stock Exchange Listing
Carnarvon petroleum limited’s shares are quoted on the
Australian Securities exchange.
ASX Code
CVn - ordinary shares
CORPORATE DIRECTORY
Directors
pJ leonhardt (Chairman)
AC Cook (Chief executive officer)
ep Jacobson (non-executive Director)
nC Fearis (non-executive Director)
WA Foster (non-executive Director)
Company Secretary
t naude (Appointed 22 november 2012)
G Smith (Resigned 22 november 2012)
Auditors
Crowe Horwath perth
Bankers
Australia and new Zealand Banking Group limited
national Australia Bank limited
HSBC
Registered Office
Ground Floor
1322 Hay Street
West perth WA 6005
telephone:
Facsimile:
email:
Website:
+61 8 9321 2665
+61 8 9321 8867
admin@cvn.com.au
www.carnarvonpetroleum.com.au
www.carnarvon.com.au