2018 ANNUAL REPORT
Carnarvon Petroleum Limited
ABN 60 002 688 851
CONTENTS
Corporate Directory
Chairman’s Review
Operating and Financial Review
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
Consolidated Income Statement
Consolidated Statement of Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Shareholder Information
1
2-3
4-16
17-31
32
33
34
35
36
37
38
39-77
78
79-82
83-84
2018 Annual Report
CORPORATE DIRECTORY
Directors
PJ Leonhardt (Chairman)
AC Cook (Managing Director)
WA Foster (Non-Executive Director)
P Moore (Non-Executive Director)
G Ryan (Non-Executive Director)
Company Secretary
T Naude
Auditors
Ernst & Young
Bankers
Australia and New Zealand Banking Group Limited
Commonwealth Bank of Australia
National Australia Bank Limited
HSBC
Registered Office
2nd Floor
76 Kings Park Road
West Perth WA 6005
Telephone:
Facsimile:
Email:
Website:
Corporate Governance Statement: carnarvon.com.au/about-us/corporate-governance/
+61 8 9321 2665
+61 8 9321 8867
admin@cvn.com.au
carnarvon.com.au
Share Registry
Link Market Services Limited
Level 12
250 St Georges Terrace
Perth, WA 6000 Australia
Investor Enquiries:
Investor Enquiries:
Facsimile:
1300 554 474 (within Australia)
+61 2 8280 7111 (outside Australia)
+61 2 9287 0303
Stock Exchange Listing
Carnarvon Petroleum Limited’s shares are quoted on the Australian Securities Exchange.
ASX Code: CVN - ordinary shares
1
Carnarvon Petroleum Limited CHAIRMAN'S REVIEW
Carnarvon Petroleum Limited (“Carnarvon”) has remained committed to its strategy
of pursuing high value exploration opportunities on the North West Shelf (“NWS”) of
Australia. Despite challenging industry conditions in recent years, Carnarvon continued
to build its regional NWS database, technical team and participated in high impact
exploration drilling programs. With a recovery in the price of oil and a growing sense of
optimism in the industry, Carnarvon has built a significant position within the Australian
oil and gas industry to take advantage of an improving market. Carnarvon’s current
suite of projects has already begun to deliver considerable value to its shareholders,
with the potential for additional value to come.
Carnarvon and its Joint Venture partner Quadrant
Energy (“Quadrant”), commenced drilling the Dorado-1
and Phoenix South-3 wells towards the end of the
financial year. In July 2018, Carnarvon was pleased to
announce the significant discovery of oil, condensate
and gas in the Dorado-1 well. The Dorado discovery is
the third largest oil field ever found on the greater NWS
and with nearby follow up targets already identified of
similar characteristics to that of Dorado, there is the
potential to considerably add to the resources which
have already been discovered.
In addition, the Phoenix South-3 well reached its target
depth in August 2018 with the well also encountering
hydrocarbons. Over the coming months, technical
work will be performed to evaluate the reservoir and
determine if the Caley Member in the Phoenix South
area is capable of flowing at commercial rates.
During the year, Carnarvon completed its technical
work on the Labyrinth project which shares a border
to the north of the Phoenix and Dorado area. In light
of the Dorado and Phoenix South discoveries, I am
looking forward to Carnarvon attracting a partner and
testing the significant structures within the permit.
Carnarvon has also made significant progress in its
plans to redevelop the Buffalo oil field. Carnarvon’s
technical work has provided compelling evidence
of the existence of economically recoverable oil
remaining in the previously producing field. On
this basis, Carnarvon commenced work to acquire
approvals and commence the necessary work to drill a
Buffalo well and subsequently redevelop the oil field.
Following the signing of the Maritime Boundary
Treaty (“Treaty”) by the Australian and Timor-Leste
Governments, the redevelopment of the Buffalo oil field
will now occur under Timor-Leste jurisdiction. The Treaty
will preserve Carnarvon’s legal title and ensure that the
redevelopment will occur with equivalent outcomes to
those already in place under Australian domestic law.
Continuing discussions with the Timor-Leste government
have also made it clear to Carnarvon that all parties are
aligned in wanting to achieve first oil production as soon
as practical. We look forward to working closely with the
people of Timor-Leste.
I would like to take this opportunity to thank our
shareholders for their continued support of Carnarvon, in
particular, those who participated in the Capital Raising in
May 2018.
In August 2018 we were pleased to announce that Mr
Gavin Ryan had accepted an appointment to join the
Board. We warmly welcome Gavin who is a lawyer with
extensive legal and commercial skills gained through
an international career with organisations such as BHP
Petroleum, BP, PTTEP and Shell. As we focus on the
important period of growth before us we are confident
his experience, particularly in oil field developments will
add significantly to our discussions and I look forward to
working with him.
Building and maintaining a team with the skill and
passion to deliver Carnarvon’s strategy has always
been of primary importance to the Board. The Board
acknowledges that Carnarvon achieved a number of key
milestones in this regard during the year. As such, the
Board granted both a cash bonus and employee shares
(with attaching loans) as part of Carnarvon’s short and
long-term incentive plans.
2
2018 Annual Report CHAIRMAN'S REVIEW
Carnarvon has built a
significant position within the
Australian oil and gas industry
to take advantage of an
improving market
In regards to the latter, I would like to highlight that the
Board has updated its long-term incentive plan in terms
of the requirements for granting employee shares. The
potential share issues provided during each year are tied
to reaching strategic objectives and Carnarvon’s share
price growth in relation to a group of its peers during
each year. The Board feels this both motivates staff to
achieve strategic goals and also aligns staff rewards with
growth in shareholder value. Further details can be found
in the Remuneration Report section of the Annual Report.
Adrian Cook and the Carnarvon team continue to bring
their skills to bear with great energy and enthusiasm
and I thank them for the outstanding results that they
have delivered after a long period of hard work. Their
efforts have guided the Company through immensely
challenging times in the industry.
In closing, I believe my fellow directors bring an excellent
balance of experience and skills to our deliberations and I
thank them for their counsel and support during a period
of intense activity. We look forward to the year ahead
with great enthusiasm about the opportunities to build
upon the successes achieved so far.
Peter Leonhardt
Chairman
3
Carnarvon Petroleum Limited OPERATING AND FINANCIAL REVIEW
OVERVIEW OF OPERATIONS
The highlights for the Company during the 2018 financial year were:
> Commenced drilling the Dorado-1 and Phoenix South-3 wells.
> Advancing technical work for the Buffalo Project including booking
of 31 million barrels 2C resource.
> Carnarvon began developing plans to drill a Buffalo well and to redevelop
the Buffalo oil field.
> Awarded new permits AC/P62 and AC/P63 in the Bonaparte basin named the
Condor and Eagle projects.
> Completed technical work on the Labyrinth project and began farm-out preparations.
Figure 1: Carnarvon Interests as at 30 June 2018 in Australia.
Phoenix Project Background
Carnarvon and its partners acquired the Phoenix project
acreage in 2009, which included the four exploration
permits of WA-435-P, WA-436-P, WA-437-P and WA-
438-P. The permits cover an area of approximately
22,000km2 in the Bedout sub-basin, approximately 150
kilometres offshore of Port Hedland in Western Australia.
4
Carnarvon was initially drawn to the area after realising
the significance of the Phoenix-1 and 2 gas discoveries in
the early 1980’s. Following the award of the exploration
permits, Carnarvon, along with its Joint Venture partner,
acquired approximately 1,100km2 of modern 3D seismic
data and 407 km of additional 2D seismic data to better
understand the sub-surface opportunity. Interpretation
of this data, together with extensive geological studies,
confirmed two significant prospects in Roc and
Phoenix South.
2018 Annual Report The Phoenix South-1 well was drilled in 2014 which
encountered light oil. This discovery was followed by the
Roc-1 and Roc-2 wells which discovered condensate
rich gas. Additionally, the Roc-2 well was able to perform
a successful flow test, confirming the quality of the
reservoir, in particular within the Caley interval.
On the basis of these discoveries the Joint Venture
significantly expanded the seismic data coverage with
the acquisition of an additional 10,000km2 of high quality
3D data and 10,000km of new 2D data. A number of new
leads and prospects emerged after the interpretation,
with the Dorado prospect being the standout target
following the successes in the Roc wells.
Phoenix South Oil, Gas and Condensate (WA-435-P)
(Carnarvon 20%, Quadrant Energy is the Operator)
The Phoenix South-3 well commenced drilling in April
2018. The well was drilled using the GSF Development
Driller-1, a sixth-generation semi-submersible drilling rig
from Transocean Limited.
The primary objective of the Phoenix South-3 well was to
evaluate the gas and condensate potential of the Caley
Member within a large, faulted anti-clinal closure that was
partially penetrated with the Phoenix South-2 well.
The increased pressure encountered in the Phoenix
South-2 well led to an earlier than planned termination of
drilling. The successful control of the increased pressure
encountered in the Phoenix South-2 well led Carnarvon
to submit a successful cost recovery claim under its
insurance policy. The claim will cover a majority of the
costs of the Phoenix South-3 well.
Phoenix South-3 is located around 560 metres North-
North East of the Phoenix South-2 well. The well targeted
a closure that was estimated by Carnarvon to contain a
gross mean recoverable resource of 489 Bscf of gas and
57 million barrels of associated condensate (being 143
million barrels of oil equivalent, gross, Pmean as per the
table on page 14).
Subsequent to the year end, the well encountered
hydrocarbons within the Caley interval. The net reservoir
from the wireline logging is around 16 meters with an
average porosity of 8%. With permeabilities in the lower
end of the expected range, an analysis of the core is
required to determine if the reservoir is capable of flowing
at commercial rates.
Figure 2: Seismic map of Carnarvon’s well locations and discoveries in the Bedout Sub-basin.
5
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW Dorado and Roc (WA-437-P)
(Carnarvon 20%, Quadrant Energy is the Operator)
The gas and condensate discoveries within the Caley
Member in the Roc-1 and Roc-2 wells confirm the
hydrocarbon bearing nature of this interval. Furthermore,
the successful flow test in the Roc-2 well in October 2016
proved that the reservoir in the Caley interval is of high
quality.
The flow test achieved a peak flow rate of 55 million
scf/day and 3,000 barrels of condensate per day,
which is equal to approximately 11,500 barrels of oil
equivalent per day. These rates were achieved through
an approximate 1 ½” choke and were equipment
constrained flow rates; meaning the well flowed at the
maximum rate possible with the equipment being used.
These results supported the drilling of the Dorado-1 well,
which the Joint Venture commenced drilling in June 2018.
The primary objective of the Dorado-1 well was to assess
additional hydrocarbons within the Caley Member with
the well located less than 20km from and updip of the
Roc-1 and Roc-2 wells. The significant size of the Dorado
structure made it a natural follow up target to the Roc wells.
Following the end of the financial year, the Company
announced that there were multiple discoveries in the
Dorado-1 well.
As a result of the Dorado-1 oil and gas discoveries, the
Joint venture is currently reassessing the greater area and
have already identified follow-up prospects with similar
characteristics to Dorado.
Figure 3: Image of the Ocean Monarch flow testing at the Roc-2 well.
Exploration – Greater Phoenix Area (WA-435-P,
WA-436-P, WA-437-P and WA-438-P)
(Carnarvon 20%, Quadrant Energy is the Operator)
Following a string of discoveries at Phoenix South,
Roc and Dorado, the Joint Venture has proved that
there is an excellent petroleum system in the region.
Given Carnarvon and operator Quadrant Energy hold
a significant acreage in the area of approximately
22,000km2, there is considerable exploration upside
within the permits.
In particular, the discovery of light oil in the Dorado-1 well
has enhanced the potential for additional oil discoveries
in the region. With additional structures of similar
properties to Dorado, there is significant opportunity for
6
greater volumes of hydrocarbons. The Joint Venture will
now focus on assessing the follow up prospects and
leads, particularly in the Caley, Barret and Milne intervals.
The prospects and leads surrounding the Dorado, Roc
and Phoenix South areas are listed in the Prospective
Resource table on page 14. The additional leads which
have been identified across the rest of the acreage are
currently under technical review. The joint venture will
continue to analyse the discoveries it has made to date
and will update its prospect and lead inventories in the
coming months.
2018 Annual ReportOPERATING AND FINANCIAL REVIEW Buffalo Project – WA-523-P
(Carnarvon 100% and operator)
Figure 4: Structure map of the top of the reservoir showing the undrilled attic in the Buffalo field.
Carnarvon was awarded the WA-523-P permit in May 2016
which included the previously developed Buffalo oil field.
The initial technical work was focused on reprocessing
the 3D seismic data using state of the art Full Waveform
Inversion (FWI) technology. The FWI reprocessing
considerably improved the data quality, allowing clearer
analysis of key intervals in and around the Buffalo oil
field. The subsequent technical work supported the
interpretation of a significant attic oil accumulation
remaining after the original development, based on sub-
optimal positioning of early wells using poorly processed
seismic data.
Independently audited volumetric estimates of contingent
resources in the Buffalo oil field are 31.1 million barrels
(2C) with a low case estimate of 15.3 million barrels (1C)
and a high case estimate of 47.8 million barrels (3C) (refer
to page 14 for more information).
The Buffalo permit is in a proven petroleum system
with the Buffalo oil field achieving production rates up
to approximately 50,000stb/d of highly-unsaturated,
light oil (53°API). On this basis, Carnarvon commenced
preparations to redevelop the Buffalo oil field and initiate
plans to drill a Buffalo well.
Carnarvon commissioned an independent cost analysis
of the field redevelopment with the report showing capital
expenditure of approximately US$150M (inclusive of
the three production wells). At current Brent oil prices
of around US$73 per barrel, the field is expected to
generate significant revenue based on the 2C contingent
resource of 31 million barrels (page 14).
On 7 March 2018, the Australian and Timor-Leste
Governments signed a new Maritime Boundary Treaty.
The Buffalo project is affected by the boundary change
and the Buffalo oil field redevelopment will now be
undertaken within Timor-Leste’s jurisdiction. A portion of
WA-523-P will remain within Australia’s jurisdiction, which
contains untapped exploration prospects.
The treaty provides that security of title and legal rights
currently held by Carnarvon will be preserved through
conditions equivalent to those already in place under
Australian domestic law. Special legislation will also be
enacted by Timor-Leste to confirm these arrangements.
The Government meetings to date have demonstrated
that all parties are aligned in wanting to achieve first oil as
soon as practicable.
Carnarvon has already established an office in Dili,
appointing a specialist Timor-Leste advisor and initiating
a series of meetings with the Timor-Leste government
agency Autoridade Nacional do Petróleo e Minerais
(ANPM).
Once the Treaty is ratified by Australia and Timor-Leste,
Carnarvon will enter a Production Sharing Contract (PSC)
with the Timor-Leste government. This will allow the
Company to begin entering contracts with suppliers to
progress towards drilling a Buffalo well and redeveloping
the oil field.
7
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW Labyrinth Project – WA-521-P
(Carnarvon 100% and operator)
The WA-521-P permit is located in the Roebuck Basin
in the North West Shelf of Western Australia and shares
a border to the north of the Phoenix permit, where the
Company has made a number of recent hydrocarbon
discoveries. Carnarvon holds 100% of the equity in the
WA-521-P permit, comprising of an area of approximately
5,000km2.
The permit was acquired in March 2016 by committing to
reprocessing existing 2D seismic over the area in addition
to completing various geological and geophysical studies.
The seismic reprocessing was completed during the
financial year with the Company identifying a number
of significant prospects. The technical work was
supplemented by the information gained from the oil, gas
and condensate discoveries directly to the south of the
Labyrinth project in the Phoenix, Roc and Dorado wells.
Following the completion of the technical interpretation,
a petrophysical analysis has identified 1.5 billion barrels
of unrisked recoverable prospective resource within
eight prospects in the permit (see page 14 for further
information). A number of additional leads have also been
recognised.
The standout target is the Ivory prospect, estimated to
contain 420 million barrels of mean recoverable oil over
two levels. Ivory is located in 350 metres water depth
with dual target reservoirs which can be drilled with one
well. The primary reservoir of the mid-Jurassic Depuch
sandstone is relatively shallow in at approximately 2,700
meters below sea level. This reservoir is typically of
excellent quality, with porosities averaging around 30%
and consisting of hundreds of meters of thick deltaic
sandstones.
The secondary target is the Upper Bedout formation at
approximately 3,400 meters below sea level. At the Ivory
location, these sandstones are overlain by approximately
200m-300m with seismically mapped shaly facies which
should promote an effective seal.
With the technical work now complete, Carnarvon has
commenced a farm-out process to identify an appropriate
partner to join the project. The forward program following
farm-out will involve acquiring 3D seismic in order to
refine potential drilling locations and enhance the chance
of success of the plays within the area.
Figure 5: Prospect and lead inventory for the Labyrinth project.
8
2018 Annual ReportOPERATING AND FINANCIAL REVIEW Maracas Project – WA-524-P
(Carnarvon 100% and operator)
Carnarvon was awarded the WA-524-P permit in
September 2016.
WA-524-P is situated on the flanks of the Dampier
sub-basin, an important part of the highly prospective
Greater Carnarvon Basin, on Western Australia’s North
West Shelf. This large 1,210km² permit is located on the
Enderby Terrace, which contains a number of untested
yet attractive play types in a proven basin which includes
the Stag, Wandoo and Legendre oil fields, plus the
Reindeer gas field.
The reprocessing of the existing 3D seismic data over the
permit was completed during the year. The reprocessing
included the application of Full Waveform Inversion (FWI)
which has demonstrated clear improvements in both the
Phoenix and Buffalo projects.
The FWI application has greatly assisted the mapping of
the existing leads within the permit. It has also enabled
the identification of new prospects and is allowing
Carnarvon to identify the potential for hydrocarbon
bearing sands within the permit.
The interpretation of the data has had a particular focus
on the Permian interval. Carnarvon was attracted to the
Permo-Triassic stratigraphy within the permit in part
due to the well documented success of drilling the Early
Triassic play types in the Roebuck Basin. Carnarvon has
also identified, through its regional technical work, the
potential for a similar pre-Jurassic play on the flanks of
the Dampier sub-basin.
Carnarvon’s technical team will further investigate the
potential of a secondary play system in the shallower
Cretaceous stratigraphy, which has seen great success in
the nearby Stag and Wandoo oil accumulations.
The technical work is expected to be completed in the
coming financial year. Once finalised, the Company will
begin working towards a farm-out to progress the project
towards drilling the prospects.
Figure 6: 3D interpretation highlighting the top Permian reservoir sand depth map pinching out on Basement stratigraphy.
9
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW Condor Project – AC/P62
(Carnarvon 100% and operator)
Carnarvon was awarded the AC/P62 permit in November
2017 over an area of 1,512km2 within the Vulcan sub-
basin in the Bonaparte basin.
The permit is on trend with and in the vicinity of
numerous oil and gas fields including the Montara, Jabiru,
Skua and Challis oil fields.
Carnarvon’s technical work has been focused around
interpreting the recent Cygnus 3D seismic survey
acquired by Polarcus over 682km2 of the permit. The
interpretation is being greatly assisted by the high-
quality data as interpretation in the Vulcan sub-basin
has historically been hampered by poor quality vintage
seismic data.
The Company has already identified various leads over
multiple Jurassic and Triassic reservoir levels with similar
properties to the nearby Challis oil field and Crux gas
field. In addition, there is the potential for secondary plays
in the shallower, Late Cretaceous stratigraphy. These
reservoirs could be targeted with the same well.
Carnarvon is also performing a fault seal study in order
to de-risk the fault seal integrity of the leads within
the Permit. Carnarvon will prepare the Condor project
for farm-out later in the year, once the studies and
interpretation have been completed.
Figure 7: Outline of the AC/P62 and AC/P63 permits in relation to existing fields.
Eagle Project – AC/P63
(Carnarvon 100% and operator)
Carnarvon was awarded the AC/P63 permit in February
2018, within the same Vulcan sub-basin as the Condor
project on Western Australia’s North-West Shelf.
The Eagle project is located in shallow water and
contains multiple Jurassic and Cretaceous leads over
multiple reservoir levels of the 542km2 permit area.
10
Carnarvon will utilise the Cygnus 3D seismic survey
acquired by Polarcus which has provided high quality
data for the Condor project. The seismic is currently
being processed and will be available for interpretation in
the coming financial year.
Carnarvon will work towards maturing the identified
leads into prospects within the permit and will utilise its
geoscience work-flows to add to its portfolio.
2018 Annual ReportOPERATING AND FINANCIAL REVIEW Outtrim Project - WA-155-P
(Carnarvon 28.5%, Quadrant Energy is the Operator)
Cerberus Project - EP-490, EP-491, EP-475
and TP/27
(Carnarvon 100% and operator)
Having acquired the Cerberus permits in May 2014,
Carnarvon’s interpretation identified several significant
prospects within the permit areas.
Due to suppressed industry conditions in the years
following the award of the permit, associated with the
collapse in the price of oil, Carnarvon was unable to
secure a partner to progress towards the drilling of a well.
As a result, Carnarvon made the prudent decision not
to progress with 100% of the equity in the permits and
avoid the well commitments.
As such, in July 2018 Carnarvon divested the permits for
nominal consideration.
Santa Cruz Project - EP-497
(Carnarvon 100% and operator)
Carnarvon was awarded EP-497 in November 2017,
which lies inboard of the Carnarvon basin on the North-
West Shelf of Western Australia.
The permit contains the previously drilled Santa Cruz-1
well, drilled in 1994 which discovered a gas cap above a
possible oil discovery.
In July 2018, Carnarvon divested the Santa Cruz
permit along with the Cerberus permits for nominal
consideration.
The Outtrim project is in the Barrow sub-basin, within
the Northern Carnarvon Basin of the North West Shelf.
Carnarvon entered the project in January 2016.
Following on from Carnarvon’s 2016 Outtrim East oil
discovery, the Company has identified another significant
prospect.
The Belgravia prospect is an upper Triassic tilted fault
block that is covered by 3D seismic data. The Belgravia
structure has a 45km2 closure in water depths of less
than 180 metres. The reservoir is expected to be Upper
Triassic in age, as part of the greater Upper Triassic play
system within the Northern Carnarvon Basin.
Belgravia lies within the north westerly graticular block of
the Outtrim permit and contains an estimated prospective
resource of 440 billion cubic feet of gas (Bcf) and 18
million barrels (Mmbbls) of condensate (gross Pmean) as
listed in the Prospective Resource table on page 14.
The Upper Triassic play system is the most successful
petroleum play within the North West Shelf creating a
heartland of LNG scale gas and condensate discoveries.
Upper Triassic reservoirs have underpinned fields such
as Gorgon, Rankin and Wheatstone. The petroleum traps
within this play tend to be simple fault block structures.
Reservoir quality is excellent and dependant on facies
and depth of burial. Results from the Zola and Gorgon
gas fields (North East of the area of interest) have proven
that the Upper Triassic stratigraphy can preserve good
reservoir quality and can flow hydrocarbons from depths
of over 4,000 metres.
In June 2018, the Joint Venture renewed the WA-
155-P exploration permit for a period of 5 years. The
renewal was acquired with minimal commitments, with
only geotechnical studies in the first three years being
compulsory. Following this the Joint Venture has the
option to commit to an exploration well in the final 2
years.
11
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW RESERVE ASSESSMENT
Petroleum Resource Classification, Categorisation and Definitions
Carnarvon calculates reserves and resources according to the Society of Petroleum Engineers’ Petroleum Resource
Management System (“SPE-PRMS”) definition of petroleum resources. Carnarvon reports reserves and resources in
line with ASX Listing Rules.
Production
Reserves
Proved
Proved
& Probable
Proved, Probable
& Possible
Contingent Resources
Commercial
Discovered; no field
development plan approved
or not yet economic
Prospective Resources
Exploration prospectivity
Reserves
Contingent Resources
Reserves represent that part of resources which are
commercially recoverable and have been justified for
development, while contingent and prospective resources
are less certain because some significant commercial or
technical hurdle must be overcome prior to there being
confidence in the eventual production of the volumes.
Carnarvon does not yet have any reported reserves.
Contingent resources are less certain than reserves.
These are resources that are potentially recoverable
but not yet considered mature enough for commercial
development due to technological or business hurdles.
For contingent resources to move into the reserves
category, the key conditions, or contingencies, that
prevented commercial development must be clarified
Figure 8: Cross section as indicated in Figure 2
12
2018 Annual ReportOPERATING AND FINANCIAL REVIEW and removed. As an example, all required internal and
external approvals should be in place or determined to be
forthcoming, including environmental and governmental
approvals. There also must be evidence of firm
intention by a company’s management to proceed with
development within a reasonable time frame (typically 5
years, though it could be longer).
Based on the results of drilling and testing to date, the
following Contingent Resource estimates are provided.
Gross Contingent Resources
Gross at
30 June 2017
Light Oil
Natural Gas
Condensate
Barrels of Oil Equivalent
MMSTB MMSTB MMSTB
BSCF
BSCF
BSCF MMSTB MMSTB MMSTB MMBOE MMBOE MMBOE
Permit
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
Buffalo
WA-523-P
Total
1C
-
6.8
2.0
-
8.8
2C
-
16.7
7.0
-
23.7
3C
-
29.6
16.0
-
45.6
1C
204.5
-
-
-
204.5
2C
331.8
-
-
-
331.8
3C
580.3
-
-
-
580.3
1C
11.9
-
-
-
11.9
2C
19.6
-
-
-
19.6
3C
34.8
-
-
-
34.8
1C
47.8
6.8
2.0
-
56.6
2C
77.8
16.7
7.0
-
101.5
3C
136.6
29.6
16.0
-
182.2
Technical
Revision
Permit
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
WA-523-P
Buffalo
Total
Gross at
30 June 2018
Light Oil
Natural Gas
Condensate
Barrels of Oil Equivalent
MMSTB MMSTB MMSTB
BSCF
BSCF
BSCF MMSTB MMSTB MMSTB MMBOE MMBOE MMBOE
1C
-
-
-
15.3
15.3
2C
-
-
-
31.1
31.1
3C
-
-
-
47.8
47.8
1C
2C
3C
1C
2C
3C
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1C
-
-
-
15.3
15.3
2C
-
-
-
31.1
31.1
3C
-
-
-
47.8
47.8
Light Oil
Natural Gas
Condensate
Barrels of Oil Equivalent
MMSTB MMSTB MMSTB
BSCF
BSCF
BSCF MMSTB MMSTB MMSTB MMBOE MMBOE MMBOE
Permit
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
Buffalo
WA-523-P
Total
1C
-
6.8
2.0
15.3
8.8
2C
-
16.7
7.0
31.1
23.7
3C
-
29.6
16.0
47.8
45.6
1C
204.5
-
-
2C
331.8
-
-
3C
580.3
-
-
1C
11.9
-
-
2C
19.6
-
-
3C
34.8
-
-
204.5
331.8
580.3
11.9
19.6
34.8
1C
47.8
6.8
2.0
15.3
56.6
2C
77.8
16.7
7.0
31.1
101.5
3C
136.6
29.6
16.0
47.8
182.2
(i) Buffalo volumes added as per ASX announcement 28 August 2017.
Net Contingent Resources
Light Oil
Natural Gas
Condensate
Barrels of Oil Equivalent
MMSTB MMSTB MMSTB
BSCF
BSCF
BSCF MMSTB MMSTB MMSTB MMBOE MMBOE MMBOE
Permit
Net at
30 June 2018
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
Buffalo
WA-523-P
Total
1C
2C
3C
1C
2C
3C
-
1.4
0.4
15.3
17.1
-
3.3
1.4
31.1
35.8
-
5.9
3.2
47.8
56.9
40.9
-
-
-
40.9
66.4
-
-
-
66.4
116.1
-
-
-
116.1
1C
2.4
-
-
-
2.4
2C
3.9
-
-
-
3.9
3C
7.0
-
-
-
7.0
1C
2C
3C
9.6
1.4
0.4
15.3
26.6
15.6
3.3
1.4
31.1
51.4
27.3
5.9
3.2
47.8
84.2
Prospective Resource Estimates
Prospective resources are estimated volumes associated
with undiscovered accumulations. These represent
quantities of petroleum which are estimated, as of a
given date, to be potentially recoverable from oil and gas
deposits identified on the basis of indirect evidence but
which have not yet been drilled. This class represents a
higher risk than contingent resources since the risk of
discovery is also added. For prospective resources to
become classified as contingent resources, hydrocarbons
must be discovered, the accumulations must be further
evaluated and an estimate of quantities that would be
recoverable under appropriate development projects
prepared.
2 Society of Petroleum Engineers (“SPE”); World Petroleum Council (“WPC”); American Association of Petroleum Geologist (“AAPG”)
13
& Society of Petroleum Evaluation Engineers (“SPEE”)
OPERATING AND FINANCIAL REVIEW
OPERATING AND FINANCIAL REVIEW
Net Prospective Resources
Phoenix South Caley
Roc-2 C/D
Dorado Caley
Roc Satellites
Bewdy
Bottler
Peng
Phoenix South Hove (ii)
Dorado Milne A
Dorado Milne B
Dorado Milne C
Dorado Milne D
Apus Caley (iii)
Mensa Caley (iii)
Pavo Caley (iii)
Mensa Barret (Phoenix) (iii)
Lupus (ii)
Indus (iii)
Ara (iii)
Bandy Rankin (iii)
Belgravia
Honeybadger
Kes
Belfon
Rudder
Bunji
Sparrow
Westy
Mighty
Gallant
Ivory (iv)
Ivory deep (iv)
Mouse (iv)
Mouse deep (iv)
Zebra (iv)
Hammock deep (iv)
Mahogany (iv)
Weaver (iv)
Total
Permit
WA-435-P
WA-437-P
WA-437-P
WA-437-P
WA-437-P
WA-437-P
WA-437-P
WA-435-P
WA-437-P
WA-437-P
WA-437-P
WA-437-P
WA-437/8-P
WA-435-P
WA-438-P
WA-435-P
WA-435-P
WA-435-P
WA-435/6-P
WA-435/6-P
WA-155-P
EP-491
EP-475
EP-491
EP-491
EP-491
EP-491
EP-491
EP-491
EP-490
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
Light Oil
MMBBL
P90
MMBBL
P50
MMBBL
Pmean
MMBBL
P10
BSCF
P90
128.0
52.5
Natural Gas
BSCF
BSCF
Pmean
P50
489.0
401.0
120.0
110.0
Condensate
Barrels Of Oil Equivalent
BSCF
P10
963.0
199.0
MMBBL
P90
10.5
3.1
MMBBL
P50
39.4
6.5
MMBBL
Pmean
56.8
7.2
MMBBL
P10
122.0
12.1
MMBOE
P90
33.0
12.3
MMBOE
P50
109.8
25.8
MMBOE
Pmean
142.6
28.2
MMBOE
P10
290.9
47.0
Probability
Geological
Success
71%
71%
1.9
12.7
31.2
74.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6.0
68.0
163.0
418.0
5.0
4.0
-
12.0
3.0
4.0
4.0
3.0
4.0
7.0
10.0
3.0
20.0
6.0
40.0
3.0
20.0
8.4
21.5
3.4
189.2
77.0
63.0
-
86.0
21.0
25.0
26.0
10.0
15.0
52.0
50.0
79.0
170.0
48.0
202.0
33.0
179.0
112.0
94.0
24.5
1447.2
172.0
142.0
-
144.0
50.0
40.0
36.0
18.0
22.0
114.0
94.0
200.0
322.0
99.0
278.0
62.0
382.0
249.0
148.0
44.0
2810.2
457.0
372.0
-
340.0
126.0
92.0
80.0
39.0
46.0
281.0
226.0
544.0
828.0
243.0
618.0
152.0
924.0
630.0
332.0
106.0
6928.1
58.7
28.7
0.2
-
4.9
338.0
112.9
8.6
-
18.2
545.0
143.3
27.6
-
22.6
1,260.0
300.3
84.7
-
46.4
45.7
36.5
82.3
51.5
97.0
75.0
31.0
266.0
295.0
416.0
409.0
332.0
305.0
193.0
429.0
438.0
565.0
555.0
481.0
446.0
234.0
1,016.0
1,025.0
1,248.0
1,251.0
1,087.0
1,000.0
500.0
2.5
1.7
1.1
16.6
6.7
9.8
31.6
8.6
26.7
74.9
18.0
64.2
0.3
4.1
9.7
23.6
To be determined
13.1
2.0
14.3
1.6
20.1
3.5
19.4
2.3
14.0
4.0
30.0
6.0
10.0
2.0
24.9
25.4
32.8
32.2
24.0
52.0
12.0
59.7
60.8
75.4
75.5
51.0
121.0
27.0
4.0
10.0
80.0
187.0
347.0
346.0
443.0
892.0
1.0
1.0
2.0
5.0
8.0
17.0
20.0
42.0
4.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
710.6
50.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3522.4
125.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
314.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,313.9 11630.3
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42.7
1.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
212.4
5.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
374.0
12.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
860.0
12.8
6.7
1.1
1.9
1.2
10.0
8.0
18.0
11.3
21.0
19.2
7.4
6.0
1.7
2.8
5.0
4.0
0.9
12.0
3.0
4.0
4.0
3.0
4.0
7.0
10.0
3.0
20.0
6.0
40.0
3.0
20.0
8.4
21.5
3.4
356.6
75.9
26.5
11.3
12.7
7.3
127.2
33.7
31.5
31.2
13.7
296.0
70.7
79.1
74.1
31.7
59.8
66.1
93.1
91.2
72.2
83.5
43.9
68.0
16.0
37.8
77.0
63.0
10.3
86.0
21.0
25.0
26.0
10.0
15.0
52.0
50.0
79.0
170.0
48.0
202.0
33.0
179.0
112.0
94.0
24.5
2277.6
100.2
102.2
131.9
129.6
108.4
130.2
53.1
163.0
68.9
77.7
172.0
142.0
27.1
144.0
50.0
40.0
36.0
18.0
22.0
114.0
94.0
200.0
322.0
99.0
278.0
62.0
382.0
249.0
148.0
44.0
4116.4
237.9
240.6
294.3
295.0
241.7
296.4
114.7
418.0
97.7
198.5
457.0
372.0
68.1
340.0
126.0
92.0
80.0
39.0
46.0
281.0
226.0
544.0
828.0
243.0
618.0
152.0
924.0
630.0
332.0
106.0
9828.5
36%
59%
32%
59%
32%
23%
23%
23%
23%
12%
17%
22%
54%
71%
32%
32%
59%
29%
15%
18%
17%
25%
25%
25%
17%
11%
12%
18%
13%
18%
13%
13%
13%
13%
13%
Risked
MMBOE
Pmean
101.2
20.0
45.8
19.9
10.1
18.4
4.4
23.0
23.5
30.3
29.8
13.0
22.1
11.7
88.0
48.9
24.9
55.0
83.8
7.9
21.6
9.0
6.8
9.0
4.5
5.5
19.4
10.3
24.0
58.0
12.9
50.0
8.1
49.7
32.4
19.2
5.7
1027.9
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%
20/30%
20%
30%
20%
20%
20%
20/30%
20/30%
28.50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(ii) Hydrocarbon shows were encountered in the Hove Member while drilling the Phoenix South-2 well however resource estimates are not able to be calculated for this package until further data is available as per ASX
announcement 28 March 2017.
(iii) Additional prospective resources included within the Phoenix project based on the results of the Phoenix South 1, Roc-1, Roc-2 and Phoenix South-2 well results as per ASX announcement 23 April 2018.
(iv) Updated prospective resources for the Labyrinth project based on the completion of a petrophysical analysis and per ASX announcement 7 February 2018.
14
Carnarvon Petroleum Limited
The estimates of petroleum resources are based
on and fairly represent information and supporting
documentation prepared by qualified petroleum reserves
and resources evaluators. The estimates have been
approved by the Company’s Chief Operating Officer,
Mr Philip Huizenga, who is a full-time employee of
Carnarvon. Mr Huizenga has over 25 years’ experience
in petroleum exploration and engineering. Mr Huizenga
holds a Bachelor Degree in Engineering and a Master’s
Degree in Petroleum Engineering and is a member of the
Society of Petroleum Engineers. Mr Huizenga is qualified
in accordance with ASX Listing Rules and has consented
to the form and context in which this statement appears.
There are numerous uncertainties inherent in
estimating reserves and resources, and in projecting
future production, development expenditures,
operating expenses and cash flows. Oil and gas
reserve engineering and resource assessment must
be recognised as a subjective process of estimating
subsurface accumulations of oil and gas that cannot be
measured in an exact way.
Notes on Petroleum Resource Estimates
Unless otherwise stated, all petroleum resource estimates
are quoted as at 30 June 2018 at standard oilfield
conditions of 14.696 psi (101.325 kPa) and 60 degrees
Fahrenheit (15.56 deg Celsius).
Carnarvon is not aware of any new information or data
that materially affects the information included in the
Reserves Statement. All the material assumptions and
technical parameters underpinning the estimates in
the Reserves Statement continue to apply and have
not materially changed. One exception to this is the
prospective resources for Dorado. Subsequent to the
year end, Carnarvon announced Dorado contingent
resource following discoveries in the Dorado-1 well on 20
August 2018.
Carnarvon uses both deterministic and probabilistic
methods for estimation of petroleum resources at the
field and project levels. Unless otherwise stated, all
petroleum estimates reported at the company level are
aggregated by arithmetic summation by category.
MMBOE means millions of barrels of oil equivalent.
Dry gas volumes, defined as ‘C4 minus’ hydrocarbon
components and non-hydrocarbon volumes that are
present in sales product, are converted to oil equivalent
volumes via a constant conversion factor, which for
Carnarvon is 5.7 Bcf of dry gas per 1 MMboe. Volumes
of oil and condensate, defined as ‘C5 plus’ petroleum
components, are converted from MMbbl to MMboe on a
1:1 ratio.
15
Carnarvon Petroleum LimitedOPERATING AND FINANCIAL REVIEW FINANCIAL REVIEW
The Group reports an after-tax profit $1,425,000 for
the financial year ending 30 June 2018 (2017: Loss:
$36,977,000).
a value of the shares of A$2,297,000 which is classified
as an Available for sale financial asset on the Balance
Sheet as at 30 June 2018.
Carnarvon’s balance sheet remained strong with cash
and cash equivalents of $63,606,000 (2017: $53,050,000),
no debt and minimal commitments going forward.
During the financial year, Carnarvon successfully
completed a capital raising through a placement to
sophisticated and institutional investors followed by a
share purchase plan to existing shareholders. Carnarvon
raised $19,107,000 after fees (2017: $0).
Carnarvon entered into an agreement with CWX Global
Limited (formerly Loyz Energy Limited) (“CWX”) to settle
the outstanding deferred consideration payable to
Carnarvon for a sum of US$4.0m with $0.05m paid on
the agreement date in the previous financial year and the
balance settled on 14 November 2017 in shares of CWX.
As the deferred consideration was written down to nil in
the prior financial year, the settlement resulted in a gain
of A$3,514,000 under other income in the Consolidated
Income Statement. Conversely, the subsequent
decline in the value of the shares since settlement has
created a change in fair value of ($1,217,000) in Other
Comprehensive Income. The resulting balance represents
Permit Interests
Permit
Basin
Equity
Carnarvon spent $2,204,000 (2017: $2,894,000) in new
venture and advisory costs as the Company continues to
build its database and portfolio of potentially high impact
assets to add to the Company’s string of successful
discoveries.
The Company also invested a further $6,505,000 on its
exploration assets. Most significantly in relation to the
Phoenix South-3 and Dorado-1 wells, and preparatory
work on redeveloping the Buffalo oil field.
During the financial year there was an unrealized gain on
foreign exchange of $1,751,000 (2017: Loss: $1,461,000)
due to the effect of a depreciation of AUD against the
Carnarvon’s USD cash and financial assets.
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.
Carnarvon manages its cash positions in US Dollars and
Australian Dollars to naturally hedge its foreign exchange
rate exposures having regard for likely future expenditure.
Joint Venture
Partner(s)
Partner
Interest
Indicative Forward
Program
Australia
AC-P62
AC-P63
EP-475
EP-490
EP-491
EP-497
TP/27
WA-521-P
WA-523-P
WA-524-P
WA-435-P
WA-436-P
WA-437-P
WA-438-P
WA-155-P
EP321
EP407
Bonaparte
Bonaparte
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Roebuck
Bonaparte
Dampier
Roebuck
Roebuck
Roebuck
Roebuck
Barrow
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
20%
30%
20%
-
-
-
-
-
-
-
-
-
-
Quadrant Energy (i)
Quadrant Energy (i)
Quadrant Energy (i)
-
-
-
-
-
-
-
-
-
-
80%
70%
80%
30%
28.5%
Quadrant Energy (i)
Quadrant Energy (i)
70%
71.5%
Perth
Perth
2.50% of 38.25% (ii)
2.50% of 42.5% (ii)
-
-
-
-
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies,
Appraisal
G & G Studies
G & G Studies,
Appraisal
G & G Studies
G & G Studies,
Exploration well
Appraisal
Appraisal
Note:
(i) Denotes operator where Carnarvon is non-operator partner
(ii) Carnarvon has an overriding royalty interest in these assets
16
2018 Annual ReportOPERATING AND FINANCIAL REVIEW DIRECTORS’ REPORT
Statutory Information
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 2018, 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, former Senior Partner of PricewaterhouseCoopers and National Board
member 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
was previously a foundation Chairman of Voyager Energy Limited until its agreed acquisition by ARC Energy Limited.
Mr Leonhardt is also a director of the Cancer Research Trust and retired as a director of The Harry Perkins Institute of
Medical Research in April 2016 following 17 years’ service.
Mr Leonhardt is a member of the Audit and Risk Committee and the Remuneration and Nomination Committee.
Adrian C Cook
Chief Executive Officer and Managing Director
B Bus, CA, MAppFin, FAICD
Appointed as a director on 1 July 2011
Mr Cook has over 30 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. Mr. Cook is
a fellow of the Australian Institute of Company Directors.
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.
17
Carnarvon Petroleum Limited DIRECTORS’ REPORT
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 plus year period. He has been an advisor to a major Japanese trading company for the last 25 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 has significant M&A experience and has assisted companies
in their commercial activities including financing and marketing.
During the past three years Mr Foster served as a director of Hawkley Oil & Gas Limited and was a former independent
director of Tap Oil Ltd and of the E&P companies that were formed through his advisory services to the Japanese
trading company.
Mr Foster is Chairman of the Remuneration and Nomination Committee and the Audit and Risk Committee.
Peter Moore
Non-Executive Director
B.Sc (Hons Geology), MBA, PhD, GAICD.
Appointed as a director on 18 June 2015.
Dr Moore has extensive experience in exploration and production in Australia and internationally gained through senior
roles with a number of globally recognised companies. Dr Moore led Woodside’s worldwide exploration efforts as the
Executive Vice President Exploration reporting to the CEO and was the Head of the Geoscience function (Exploration,
Development, Production, M&A).
During the past three years Dr Moore served as a non-executive Director of Central Petroleum Ltd and Beach Energy
Limited.
Dr Moore is a member of the Audit and Risk Committee and the Remuneration and Nomination Committee.
Gavin Ryan
Non-Executive Director
LLB (Hons), GAICD
Appointed as a director on 30 July 2018.
Mr Ryan is a lawyer who has extensive legal and commercial skills in oil and gas gained through an extensive
international career with organisations such as BHP Petroleum, BP, PTTEP and Shell. Mr Ryan has experience in
government dealing, production sharing contracts and petroleum project construction contracts.
During the past three years, Mr Ryan has not served as a Director on any other listed Company.
Company Secretary
Mr Thomson Naude was appointed Company Secretary in November 2013. Mr Naude is a qualified Chartered
Accountant, a member of Chartered Secretaries Australia and the Chief Financial Officer at Carnarvon Petroleum.
18
2018 Annual Report Directors’ meetings
The number of directors’ meetings held and attended by each of the directors during the reporting period was as
follows:
DIRECTORS’ REPORT
PJ Leonhardt
WA Foster
AC Cook
P Moore
(a)
(b)
8
8
8
8
8
8
8
7
(a) Number of meetings held and eligible to attend during period of office
(b) Number of meetings attended
Audit and Risk Committee
Names and qualifications of Audit and Risk Committee members
The Committee is to include at least 3 members from 1 July 2009. Current members of the committee are Mr Foster
(Chairman of the Audit and Risk Committee), Mr Leonhardt and Dr Moore. Qualifications of Audit and Risk Committee
members are provided in the Directors section of this directors’ report.
Audit and Risk Committee meetings
The number of Audit and Risk Committee meetings held and attended by the members during the reporting period was
as follows:
PJ Leonhardt
WA Foster
P Moore
(a)
(b)
2
2
2
2
2
1
(a) Number of meetings held during period of office
(b) Number of meetings attended
19
Carnarvon Petroleum Limited DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
Principles of remuneration
The Board is responsible for the Company’s remuneration policy and practices. To assist the Board with this, it has
established the Remuneration & Nomination Committee (Committee). The Committee’s role is to review and make
recommendations to the Board on remuneration policies and practices and to ensure that the remuneration policies
and practices are consistent with the strategic goal of the Board to build and deliver value to shareholders over the
long term.
The 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 Committee obtains, when required,
independent advice on the appropriateness of remuneration packages, given trends in comparative companies both
locally and internationally.
The Committee determines its compensation practices in terms of their effectiveness to:
• Provide a strategic and value based reward for employees and executives who make a contribution to the success
of the Company;
• Align executives and employees interests with the interests of shareholders;
• Promote the retention of executives and employees; and
• Promote the long term success of the Company;
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 executives’ 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 executives’ remuneration.
The Remuneration & Nomination 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 the most effective structure to meet its objectives and attract, retain and motivate appropriately qualified and
experienced executives.
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.
30 June
2014
30 June
2015
30 June
2016
30 June
2017
30 June
2018
Share price as at 30 June each year
$0.075
$0.115
$0.100
$0.079
$0.15
Year on year change in the share price
83%
53%
(13%)
(21%)
90%
20
2018 Annual Report DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
The Board sets objectives and targets for its executives and employees for each financial year. The quantum of short-
term incentive payments and long term incentive payments to be made to executives are determined by the extent
to which they meet achieve strategic objectives set by the board. Given many of these objectives are closely linked
to strategy, it is not possible for the Company to publicly disclose the objectives until they are fully achieved. These
objectives are summarised, to the extent possible in the following pages.
Non-executive directors
Shareholders approve total non-executive directors’ fees and the Committee is responsible for the allocation of those
fees amongst the individual members of the Board.
Total remuneration for all non-executive directors, last voted upon by shareholders at a General Meeting in November
2015, is not to exceed $400,000 per annum.
A non-executive director’s base fee is $75,000 per annum, the Chairman of the board receives $115,000 per annum,
the Chairman of the Audit Committee receives an additional $2,500 and the Chairman of the Remuneration Committee
receives an additional $2,500. These fees were last increased with effect from 1 January 2014. Non-executive directors
do not receive any performance-related remuneration. The Company does not have any terms or schemes relating to
incentives or retirement benefits for non-executive directors.
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 & Nomination Committee based on three components:
1. The performance of the business as a whole;
2. The extent to which the executive team achieves strategic objectives set by the board; and
3. The individual performances of each employee.
The value of any short-term incentive paid in cash is restricted to a maximum 50% of an individual’s Fixed
Compensation.
The Remuneration & Nomination 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.
All short-term incentives awarded during the period are included in remuneration, as set out on page 27, and fully
vested to each named executive and key management personnel during the period.
The strategic objectives that were met during the 30 June 2018 financial year were as follows:
Identifying 2C contingent resource of 31 mmbbls in the Buffalo project;
•
• Materially advancing the Buffalo redevelopment project;
• Award of AC/P62 (Condor Project);
• Award of AC/P63 (Eagle Project);
• Materially advanced the North-West Shelf database;
• Completion of the Maracas project reprocessing and initial prospect mapping;
• Commencement of the Labyrinth project farm out;
• Conversion of deferred consideration to shares in CWX global;
21
Carnarvon Petroleum Limited DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
Given many of objectives are closely linked to strategy, it is not possible for the Company to publicly disclose all of the
objectives until they are fully achieved.
Long- term incentive scheme - Employee Share Plan
The Carnarvon Employee Share Plan (“ESP”) was originally implemented following shareholder approval at the 1997
Annual General Meeting (“AGM”) and was last updated and ratified by shareholders at the AGM on 13 November 2015.
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 Plan is considered to be the most appropriate long-term incentive scheme for the size and nature of the Company.
The plan only rewards long term share price growth, rather than relative performance. Unlike performance rights, the
Plan shares are only of value to the holder of the shares to the extent to which the share price increases to exceed at
least 120% of the share price when the offer is made to the employee. Furthermore, the Plan does not give rise to a tax
liability on issue (unlike some options) thus encouraging long-term holdings.
The Company Employee Share Plan is considered to be an effective way to align the objectives of management with
the interests of shareholders.
Each year the maximum numbers of Plan shares that can be awarded is 1.5% of the Company’s total issued capital
which is broken down into two components.
The award of Plan shares is based on two components:
1. Relative total shareholder return (maximum of 0.75% of total issued capital); and
2. The extent to which the executive team achieves strategic objectives set by the board (maximum of 0.75% of total
issued capital).
The relative total shareholder return component as awarded on the following basis:
CVN TSR compared to peers
% of EPS award
Less than 50%
50%
50% to 90%
90% and above
Nil
25%
Pro rata
Full amount
For the purposes of the TSR evaluation, Carnarvon’s peer group is Buru Energy Ltd, Cooper Energy Ltd, Cue Energy
Resources Ltd, Elk Petroleum Ltd, FAR Ltd, Horizon Oil Ltd, Karoon Gas Australia Ltd, Otto Energy Ltd, Senex Energy
Ltd, Sino Gas & Energy Ltd, 88E Ltd and Tap Oil Ltd.
In the 30 June 2018 financial year, the relative TSR outcome was 58% on the pro rata basis outlined above. Therefore,
the pool of plan shares on the relative TSR basis was 5,147,524 shares.
The board has set a number of long term measurable objectives for the executive team. Given the sensitive, strategic
and ongoing nature of these objectives the Company is not in a position to fully disclose these at this point in time. The
long term objectives do however relate to:
• Progress under the company’s traditional model of acquiring permits, applying technical expertise with a view to
attract a farm in partner to advance the project;
• Progress in the Phoenix project (multiple objectives);
• Progress in the Buffalo project (multiple objectives); and
• Numerous corporate objectives which remain confidential.
22
2018 Annual Report DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
During the 30 June 2018 year, the pool of plan shares on the meeting of measurable objectives was 2,640,000 shares.
Therefore, the total pool of Plan shares to be awarded was 7,787,524 shares. Given the team like nature of the
Carnarvon organization, the Plan shares were allocated pro rata each executives salary.
The principal provisions of the Plan include:
• The Plan is available to all executive Directors, employees or consultants of the Company or any of its subsidiaries
(“Eligible Person”);
• Non-Executive Directors are not eligible to participate in the Plan;
• The Company may at any time, in its absolute discretion, make an offer to an Eligible Person;
• The number of Plan Shares issued to any Eligible Person and the issue price is to be determined by the directors of
the Company;
• The issue price is to be determined by the Board, provided that the issue price is at least 120% of the market price
of the Company’s Shares, being the weighted average sale price of Shares sold through the ASX on the 5 trading
days prior to the proposed date of an offer under the Plan.;
• The offer may be accepted by an Eligible Person or an associate of that Eligible Person, within the given
acceptance period;
• The person accepting the offer (“Participant”) will be taken to have agreed to borrow from the Company on the
terms of the loan agreement referred to below an amount to fund the purchase of the Plan Shares;
• The Plan Shares will rank pari passu with all issued fully paid ordinary shares in respect of voting rights, dividends
and entitlement to participate in any bonus or rights issues;
• Plan participants may not dispose of any ESP Shares within two years of the issue date but, subject to repayment of
any associated loan (equal to the issue price), participants may dispose of up to 25% of their ESP Shares after two
years, 50% after three years, 75% after four years and 100% after five 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.
23
Carnarvon Petroleum Limited DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
There has been some misunderstanding with respect to the Company’s ESP scheme. Unlike performance rights where
executives enjoy the entire value of the share upon vesting,the Company’s ESP scheme only rewards the holder of the
share to the extent the share price exceeds the issue price of the share.
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 & Nomination Committee based upon the assessed performance of
each person against their job specifications and the recommendations of the Chief Executive Officer, and in the case of
executive Directors, with the approval of shareholders.
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 page 27.
Service contracts
The contract duration, period of notice and termination conditions for key management personnel are as follows:
(i) 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.
(ii) 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.
(iii) Thomson Naude, Chief Financial Officer, is engaged as an employee. Termination by the Company is with 3 months’
notice or payment in lieu thereof. Termination by Mr Naude is with 3 months’ notice.
Equity instruments
(i) Shares
There were no shares in the Company issued as compensation to key management personnel during the reporting
period, other than the Plan Shares issued as described on page 22.
(ii) Plan Shares
During the current financial year, the following Plan Shares, which are in-substance options, were granted to Executive
Officers of the Company based on the outperformance on the strategic based targets detailed above:
Executive Officers
Number of plan
shares issued
AC Cook*
PP Huizenga
TO Naude
1,500,000*
1,176,201
548,880
Grant date
17/11/2017*
29/06/2018
29/06/2018
Exercise price
per plan share
Fair value at
grant date
$0.100*
$0.165
$0.165
$0.041*
$0.082
$0.082
* Approved by shareholders at the AGM on 25 November 2017.
24
2018 Annual Report
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
The exercise price for each issue above was calculated based on at least a 20% premium on the 5-day weighted
average closing price prior to the date of offer. The purchases were funded by interest-free loans with a limited recourse
security over the Plan Shares and subject to the detailed rules of the ESP. The shares remain subject to the disposal
restrictions contained in the Plan Rules summarized above.
The following factors and assumptions were used in determining the fair value of Plan Shares at grant date in the
current reporting period:
2018
Grant date
Assumed
expiry date
Fair value
per option
Exercise
price
ASX quoted
price of shares
at grant date
Expected
volatility
Risk free
interest rate
Dividend
yield
27/11/2017
29/06/2022
29/06/2018
28/06/2022
$0.041
$0.082
$0.100
$0.165
$0.079
$0.150
68%
68%
1.50%
1.50%
0%
0%
(iii) Options
There were no options over shares in the Company issued as compensation to key management personnel during the
reporting period. No options have been issued since the end of the financial year.
The movement during the reporting period, by value, of options over ordinary shares, including shares issued under the
Company’s ESP, for each company director and company executive and granted as part of remuneration is detailed
below:
Granted
in year ($)
Expense recognised
in year ($)
Exercised
in year ($)
Forfeited
in the year ($)
Total option value
in year ($)
Directors
WA Foster
P Moore
-
-
7,446*
7,446*
-
-
-
-
39,637
39,637
* Options approved by shareholders at the AGM and granted on 13 November 2015.
The value of options expensed in the year is the fair value of the options at grant date using the Black-Scholes Option
Pricing Model.
The value of options exercised during the year is calculated as the market price of shares of the Company on the
Australian Securities Exchange as at the close of trading on the date the options were exercised, after deducting the
price paid to exercise the options.
25
Carnarvon Petroleum Limited DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
Remuneration & Nomination Committee
The Committee is to include at least 3 members. Members of the committee during the 30 June 2018 financial year
were Mr Foster (Chairman of the Remuneration & Nomination Committee), Mr Leonhardt and Dr Moore. Qualifications
of Remuneration & Nomination Committee members are provided in the Directors section of this directors’ report.
Remuneration Committee meetings
The number of Remuneration & Nominations Committee meetings and the number attended by each of the members
during the reporting period were as follows:
WA Foster
PJ Leonhardt
P Moore
(a)
2
2
2
(b)
2
2
1
(a) Number of meetings held during period of office
(b) Number of meetings attended
The Remuneration & Nomination Committee is responsible for the compensation arrangements for directors and
executives of the Company. The Remuneration & Nomination 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.
26
2018 Annual Report REMUNERATION REPORT (AUDITED) (CONTINUED)
Short Term
Name
Salary and
fees ($)
Short term
cash bonus ($)
NOTES TO THE FINANCIAL STATEMENTS
Long Term
Shares/
Options ($)
Total ($)
Proportion of
remuneration
performance
related %
Value of shares/
options as a % of
remuneration
Post-
Employment
Superannuation
contributions ($)
82,400
80,000
118,450
115,000
Directors
Non-Executive
Mr PJ Leonhardt (Chairman)
2018
2017
Mr WA Foster
2018
2017
Dr P Moore
2018
2017
Executive
Mr AC Cook (Chief Executive Officer)
2018
2017
Executives
Mr PP Huizenga (Chief Operating Officer)
2018
2017
Mr TO Naude (Chief Financial Officer)
2018
2017
Total compensation: key management personnel (Company and consolidated)
2018
2017
1,646,733
1,604,685
241,097
235,205
578,865
543,896
548,671
513,974
77,250
75,000
-
-
-
-
-
-
73,124
-
69,468
-
32,417
-
-
-
-
-
-
-
7,4461,2
19,9831,2
7,4461,2
19,9831,2
28,375
37,060
61,2261,3
54,3701,4
23,661
37,933
96,7471
45,9191
24,103
24,225
45,1471
30,6131
-
-
118,450
115,000
89,846
99,983
84,696
94,983
741,590
635,326
738,547
597,826
342,764
290,043
175,009
-
76,139
99,218
218,012
170,8681
2,115,893
1,874,771
-
-
-
-
-
18.1%
8.6%
22.5%
7.7%
22.6%
10.6%
18.6%
9.3%
Directors’ fees are paid or payable to the director or a director-related entity.
¹ Accounting cost as determined using the Black-Scholes Option Pricing Model
2 2017 and 2018 options issued to Mr Foster and Dr Moore relate to 2015 financial year remuneration approved at AGM on 13 November 2015, issued 20 November 2015.
3 2018 share-based payments to Mr Cook relate to 2018 financial year remuneration approved at the AGM on 17 November 2017 and issued 27 November 2017.
4 2017 share-based payments to Mr Cook relate to 2017 financial year remuneration approved at the AGM on 25 November 2016 and issued 23 December 2016.
Carnarvon Petroleum Limited
-
-
8.3%
20.0%
8.8%
21.0%
8.3%
8.6%
13.1%
7.7%
13.2%
10.6%
10.3%
9.3%
27
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
Ordinary shares held by key management personnel
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:
2018
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
Held at
1 July 2017
Net acquired/
(sold)
Award under
Employee
Share Plan
Received on
exercise
of options
Held at
30 June 2018
17,750,000
684,455
10,999,917
-
9,492,421
2,692,509
-
52,847
-
270,232
-
-
1,500,000
-
-
-
1,176,201
548,880
-
-
-
-
-
-
17,750,000
737,302
12,499,917
270,232
10,668,622
3,241,389
Plan shares held by key management personnel
Included in the above are plan shares held by key management personnel. The balance and movement during the
reporting period in the number of plan shares directly, indirectly or beneficially, by each key management person,
including their related parties, is as follows:
2018
Directors
Held at
1 July 2017
Granted as
compensation
Employee
Share Plan
cancellations
Exercised
Held at
30 June 2018
PJ Leonhardt
3,000,000
WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
-
-
-
8,234,917
1,500,000
-
-
8,992,421
2,478,436
1,176,201
548,880
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
9,734,917
-
10,168,622
3,027,316
Options over equity instruments held by key management personnel
The movement during the reporting period in the number of options over ordinary shares in Carnarvon Petroleum Limited
held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
2018
Directors
WA Foster
P Moore
Held at
1 July 2017
Granted as
compensation
Acquired/
(sold)
Exercised
Held at
30 June 2018
500,000
500,000
-
-
-
-
-
-
500,000
500,000
End of Remuneration Report
28
2018 Annual Report 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 2018 ($)
Auditors of the Company:
Ernst & Young
Directors’ interests
99,575
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
WA Foster
P Moore
17,750,000
12,499,917
737,302
270,232
-
-
500,000
500,000
Shares issued under the Company’s ESP are included under the heading Ordinary Shares. Options over ordinary shares
issued to directors are included under the heading Share options.
Diversity
For the year ending 30 June 2018, women made up 25% of the Company’s general work force. Currently, there are no
women on the board or in senior executive positions.
The Board has set the diversity objective of providing mentoring and support to female employees for the 2018
financial year.
All employees receive ongoing training and professional support in the development of their career and no diversity
distinction exists for these activities.
Likely developments
The likely developments for the 2018 financial year are contained in the operating and financial review as set out on
pages 4 to 16.
Environmental regulation and performance
The Group’s oil and gas exploration and development activities are concentrated in Western Australia. Environmental
obligations are regulated under both State and Federal Law in Western Australia. No significant environmental
breaches have been notified by any government agency during the year ended 30 June 2018.
29
Carnarvon Petroleum Limited DIRECTORS’ REPORT
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 (2017: Nil).
Auditor’s independence declaration
The auditor’s Independence Declaration under Section 307C of the Corporations Act is set out on page 32 and forms
part of the directors’ report for the financial year ended 30 June 2018.
Principal activities
During the course of the 2018 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 Company’s Corporate Governance Statement. The Corporate
Governance Statement is available on Carnarvon Petroleum’s website at:
carnarvon.com.au/about-us/corporate-governance/.
Significant changes in state of affairs
In the opinion of the directors no significant changes in the state of affairs of the Group occurred during the current
financial year other than as outlined in the operating and financial review as set out on pages 4 to 16.
Indemnification and insurance of directors and officers
During the period the Company paid a premium to insure the directors and officers of the Company and its controlled
entities. The policy prohibits the disclosure of the nature of the liabilities covered and the amount of the premium paid.
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.
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 2018 is set out on pages 4 to 16
and forms part of this report.
Indemnity of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of
the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
30
2018 Annual Report Events subsequent to reporting date
No matters or circumstance has arisen since 30 June 2018 that in the opinion of the directors has significantly affected,
or may significantly affect in future financial years:
DIRECTORS’ REPORT
(i) The Group’s operations; or
(ii) The results of those operations; or
(iii) The Group’s state of affairs.
Rounding off
The Company is an entity of the kind referred to in the Australian Securities and Investments Commission Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. As a result, amounts in the
financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.
Signed in accordance with a resolution of the directors.
PJ Leonhardt
Director
Perth, 28 August 2018
31
Carnarvon Petroleum Limited AUDITOR’S INDEPENDENCE DECLARATION
32
2018 Annual Report CORPORATE GOVERNANCE STATEMENT
The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such,
Carnarvon Petroleum Limited and its Controlled Entities (‘the Group’) have adopted the third edition of the Corporate
Governance Principles and Recommendations which was released by the ASX Corporate Governance Council on 27
March 2015 and became effective for financial years beginning on or after 1 July 2015.
The Group’s Corporate Governance Statement for the financial year ending 30 June 2018 is dated as at 30 June 2018
and was approved by the Board on 28 August 2018. The Corporate Governance Statement is available on Carnarvon
Petroleum’s website at carnarvon.com.au/about-us/corporate-governance/.
33
Carnarvon Petroleum Limited CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2018
Consolidated
Notes
2018
$000
2017
$000
Other income
2
5,653
3,690
Administrative expenses
Directors’ fees
Employee benefits expense
Unrealised foreign exchange gain/(loss)
New venture and advisory costs
Exploration expenditure written off
Remeasurement of deferred consideration asset
(1,409)
(278)
(2,088)
1,751
(2,204)
-
-
(1,587)
(312)
(2,155)
(1,462)
(2,894)
(10,104)
(22,153)
12
9
Profit (loss) before income tax
1,425
(36,977)
Taxes
Current income tax expense
Profit (loss) for the year
Profit (loss) attributable to members of the Company
Profit (loss) per share:
Basic profit (loss) for the period attributable to members of the
entity (cents per share)
Diluted profit (loss) for the period attributable to members of
the entity (cents per share)
6(a)
-
-
1,425
(36,977)
1,425
(36,977)
5
5
0.14
(3.62)
0.14
(3.62)
The above consolidated income statement should be read in conjunction with the accompanying notes to the financial
statements.
34
2018 Annual Report CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2018
Consolidated
Notes
2018
$000
2017
$000
Profit (loss) for the year
1,425
(36,977)
Other comprehensive income
Items that may be reclassified to profit or loss
Change in fair value of available for sale financial asset
8
(1,217)
Exchange differences arising on translation of foreign operations,
net of income tax
-
-
(2)
Total comprehensive profit (loss) for the year
208
(36,979)
Total comprehensive profit (loss) attributable to members
of the company
208
(36,979)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes to the financial statements.
35
Carnarvon Petroleum Limited CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2018
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Available for sale financial asset
Exploration and evaluation expenditure
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Total current liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Notes
16(b)
7
11
10
8
12
14
19
19
15
15
Consolidated
2018
$000
2017
$000
63,606
53,050
324
555
400
459
64,485
53,909
35
2,297
53,443
80
-
46,938
55,775
47,018
120,260
100,927
902
386
1,341
379
1,288
1,720
196
196
279
279
1,484
1,999
118,776
98,928
115,508
(1,595)
4,863
95,865
(375)
3,438
118,776
98,928
The above consolidated statement of financial position should be read in conjunction with the accompanying notes to
the financial statements.
36
2018 Annual Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
Issued
capital
$000
Reserve
shares
$000
Retained
earnings
$000
Translation
reserve
$000
Fair value
reserve
$000
Balance at 1 July 2016
95,401
(3,190)
40,415
28
Comprehensive loss
Loss for the year
Other comprehensive loss
Total comprehensive loss
for the year
Transactions with owners and
other transfers
Share based payments
Issue of ESP shares
Total transactions with owners
and other transfers
-
-
-
-
-
-
-
-
464
(464)
464
(464)
(36,977)
-
(36,977)
-
-
-
Balance at 30 June 2017
95,865
(3,654)
3,438
Balance at 1 July 2017
95,865
(3,654)
3,438
Comprehensive loss
Profit for the year
Other comprehensive loss
Total comprehensive loss
for the year
Transactions with owners and
other transfers
Share based payments
-
-
-
-
Proceeds from capital raise
19,021
-
-
-
-
-
Issue of ESP shares
622
(622)
Total transactions with owners
and other transfers
19,643
(622)
1,425
-
1,425
-
-
-
-
-
(2)
(2)
-
-
-
26
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,217)
(1,217)
-
-
-
-
Share based
payments
reserve
$000
Total
$000
2,854
135,508
-
-
-
(36,977)
(2)
(36,979)
399
-
399
399
-
399
3,253
98,928
3,253
98,928
-
-
-
1,425
(1,217)
208
619
-
-
619
19,021
-
619
19,640
Balance at 30 June 2018
115,508
(4,276)
4,863
26
(1,217)
3,872
118,776
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes to
the financial statements.
37
Carnarvon Petroleum Limited
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2018
Cash flows from operating activities
Payments to suppliers and employees
Interest received
Research and development tax credit received
Consolidated
Notes
2018
$000
2017
$000
(5,855)
630
1,523
(7,345)
480
1,822
Net cash used in operating activities
16(a)
(3,702)
(5,043)
Cash flows from investing activities
Exploration and development expenditure
Acquisition of property, plant and equipment
Proceeds from deferred consideration asset
Net cash used in investing activities
Cash flows from financing activities
Proceeds from capital raise
Net cash provided by 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
10
(6,505)
(27,760)
(6)
-
(17)
93
(6,511)
(27,684)
19,021
19,021
8,808
53,050
1,748
-
-
(32,727)
87,847
(2,070)
Cash and cash equivalents at the end of the financial year
16(b)
63,606
53,050
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the
financial statements.
38
2018 Annual Report NOTES TO THE FINANCIAL STATEMENTS
1.
REPORTING ENTITY
The consolidated financial report of Carnarvon Petroleum Limited (‘Company’) for the financial year ended 30
June 2018 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.
Carnarvon Petroleum Limited is a for profit company limited by shares incorporated in Australia whose shares
are publicly traded on the Australian Stock Exchange.
The financial report was authorised for issue by the directors on 28 August 2018.
The basis for the preparation of the following notes can be found in note 29 and the significant accounting
policies used in the preparation can be found in note 30.
39
Carnarvon Petroleum Limited NOTES TO THE FINANCIAL STATEMENTS
2.
OTHER INCOME
Finance income on bank deposits
Research and development tax credit received
Gain on settlement of deferred consideration asset (Note 8)
Other income
Unwinding of interest on deferred consideration asset (note 9)
Net loss on foreign currency transactions
3.
OTHER EXPENSES
The following expenses are included in administrative and employee benefit
expenses in the income statement:
Depreciation – property, plant and equipment
Rental premises – operating leases
Defined contribution – superannuation expense
4.
AUDITORS’ REMUNERATION
Audit and review services:
Ernst & Young
Tax services:
Ernst & Young
5.
PROFIT (LOSS) PER SHARE
Consolidated
2018
$000
2017
$000
630
1,523
3,514
-
-
(14)
5,653
480
1,822
-
93
1,403
(108)
3,690
(52)
(242)
(288)
(102)
(275)
(293)
(67)
(56)
(33)
-
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
2018
2017
Number of shares
1,027,969,809
1,019,941,717
24,552,749
1,275,448
Weighted average number of ordinary shares 30 June (basic)
1,052,522,558
1,021,217,165
Effect of share options on issue (1)
1,000,000
-
Weighted average number of ordinary shares 30 June (diluted)
1,053,522,558
1,021,217,165
Profit (loss) used in calculating basic and diluted loss per share
1,425,000
(36,977,000)
(1) As the consolidated entity incurred a loss for the year ended 30 June 2017, the effect of options on issue is
considered to be antidilutive and thus not factored in determining the diluted earnings per share.
2018
$
2017
$
40
2018 Annual Report 6.
TAXES
(a) Income tax expense
Consolidated
2018
$000
2017
$000
Numerical reconciliation between pre-tax profit and income tax expense:
Prima facie income tax benefit on pre-tax profit (loss) at 27.5%
392
(10,169)
Tax effect of:
Effect of foreign exchange
Non-deductible expenditure
R&D grant not assessable
Settlement of deferred consideration
Current year tax benefit not brought to account
Income tax benefit
Current income tax
Deferred tax
(b) Current tax liability
Tax Consolidation
-
190
(419)
(966)
803
-
-
-
-
-
402
5,896
(501)
-
4,372
-
-
-
-
-
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.
(c) Unrecognised deferred tax assets and liabilities
Deferred tax asset on Australian tax losses
Deferred tax liability on capitalised exploration and evaluation expenditure
Deferred tax liability on capitalised exploration and evaluation expenditure
Net deferred tax asset not recognised
21,006
(2,335)
(14,697)
3,974
20,773
(1,912)
(12,908)
5,953
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.
41
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
7.
TRADE AND OTHER RECEIVABLES
Consolidated
Current
Trade and other receivables
Cash held as security
The Group’s exposure to credit and currency risks is disclosed in Note 26.
8. AVAILABLE FOR SALE FINANCIAL ASSET
Available for sale financial asset
Reconciliation
Reconciliation of the fair values at the beginning and end of the current financial
year are set out below:
Carrying value at the beginning of period
Receipt of shares in CWX Global Limited on settlement of deferred
consideration asset
Fair value movements
Carrying value at the end of period
2018
$000
96
228
324
2018
$000
2,297
-
3,514
(1,217)
2,297
2017
$000
175
225
400
2017
$000
-
-
-
-
-
On 2 May 2017, Carnarvon entered into an agreement with CWX Global Limited (formerly Loyz Energy Limited)
(“CWX”) to settle the outstanding deferred consideration payable to Carnarvon for a sum of US$4.0m with
$0.05m paid on the agreement date and the balance payable on 30 June 2017 in cash or shares in CWX; and
in addition, Carnarvon would be entitled to 12% of any sale proceeds over US$45m, should CWX sell the
concession. In June 2017, Carnarvon gave CWX an extension until 31 October 2017 to complete the settlement
of the deferred consideration, subject to certain conditions being met.
The deferred consideration asset element of the sale was for US$32,000,000 of future payments based on 12%
of the acquirer’s share of revenue in the Concessions. This was in addition to US$30,000,000 received in cash.
CWX made the US$3.95m in settlement for the deferred consideration asset by issue of shares as it was unable
to make a cash settlement. On 6 September 2017, the issue of 331,653,000 shares in CWX (equating to a
fair value of US$3.95m) to Carnarvon (in settlement of the deferred consideration asset) was approved by the
shareholders of CWX. Settlement occurred on 14 November 2017. The settlement of the deferred consideration
asset resulted in a gain of $3,514,000 which has been reflected in other income in the income statement (note 2).
The shares in CWX held by Carnarvon at 30 June 2018 has been accounted for as an available for sale financial
asset under Australian Accounting Standards and classified as a “level 1” financial asset under the fair value
hierarchy.
42
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS
9. DEFERRED CONSIDERATION ASSET
Current portion of deferred consideration asset
Non-current portion of deferred consideration asset
Reconciliation
Reconciliation of the fair values at the beginning and end of the current financial
year are set out below:
Opening fair value
Effective interest
Repayments
Fair value movement
Effects of exchange rate fluctuations
Closing fair value
Consolidated
2018
$000
2017
$000
-
-
-
-
-
-
-
-
-
-
-
-
20,051
1,403
-
(22,153)
699
-
Carnarvon completed the sale of half of its 40% interest in its producing Concessions in Thailand
during the 2014 financial year to Loyz Energy Limited (“Loyz Energy”) which included a US$32,000,000
deferred consideration based on 12% of the acquirer’s share of revenue in the Concessions.
In the 2017 financial year, Carnarvon impaired the carrying value of the deferred consideration asset due to
a number of factors including the performance of the underlying Thai assets, a sustained decline in oil prices
since the divestment and the financial position of Loyz. More specifically, Loyz was unable to make the deferred
consideration payment that was due in December 2016 and an agreement was reached to settle the deferred
consideration for US$4.0m by 30 June 2017, which was extended to 31 October 2017 (note 8).
10. PROPERTY, PLANT AND EQUIPMENT
Consolidated
2018
$000
2017
$000
Fixtures and fittings
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
Additions
Disposals
Depreciation charge for year
Balance at end of financial year
Carrying amount opening
Carrying amount closing
558
6
-
-
564
478
-
-
51
529
80
35
541
17
-
-
558
376
-
-
102
478
165
80
43
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
11. OTHER ASSETS
Current
Deposits and prepayments
12. EXPLORATION AND EVALUATION EXPENDITURE
Cost:
Balance at beginning of financial year
Additions
Exploration expenditure written off
Balance at end of financial year
13. JOINT OPERATIONS
The Group has the following interests in joint operations:
555
459
46,938
6,505
-
53,443
29,282
27,760
(10,104)
46,938
Joint operation
Principal activities
Ownership interest %
Western Australia
2018
2017
WA-435-P, WA437-P, Roebuck Basin
Exploration for hydrocarbons
20%
WA-436-P, WA 438-P, Roebuck Basin
Exploration for hydrocarbons
30%
20%
30%
WA-155-P, Barrow sub Basin
Exploration for hydrocarbons
28.5%
28.5%
With respect to oil and gas in the Phoenix South resource, within WA-435-P, Carnarvon has an arrangement
with the operator whereby Carnarvon funds 5% of the Phoenix South-2 and Phoenix South-3 well costs (net
of insurance proceeds) and Carnarvon will contribute the balance of its 20% interest into any future work at
Phoenix South plus a small promote to be offset against future production.
Carnarvon has accounted for its interest in the above Concessions as Joint Operations as the company has joint
control.
14. TRADE AND OTHER PAYABLES
Current
Trade payables
Non-trade payables and accrued expenses
Consolidated
2018
$000
2017
$000
533
369
902
1,263
78
1,341
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.
44
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 15. CAPITAL AND RESERVES
Contributed equity
Balance at beginning of financial year
Issued for cash
Employee Share Plan issues
Balance at end of financial year
Issued capital
Balance at beginning of financial year
Reserve employee shares
Proceeds from capital raise
Balance at end of financial year
Company
2018
2017
Number of shares
1,027,969,809
1,019,941,717
153,769,034
-
8,149,416
8,028,092
1,189,888,259
1,027,969,809
Company
2018
$000
95,865
622
19,021
115,508
2017
$000
95,401
464
-
95,865
Ordinary shares have the right to one vote per share at meetings of Carnarvon, to receive dividends as declared
and, in the event of a winding-up of Carnarvon, 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.
Reserve shares (plan shares)
Balance at beginning of financial year
Employee Share Plan issues
Balance at end of financial year
Reserve shares (plan shares)
Balance at beginning of financial year
Employee Share Plan issues
Balance at end of financial year
Translation reserve
Company
2018
2017
Number of shares
45,455,192
37,427,100
8,149,416
8,028,092
53,602,608
45,455,192
Company
2018
$000
3,654
622
4,276
2017
$000
3,190
464
3,654
Movements in the translation reserve are set out in the Statement of Changes in Equity on page 37.
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 37.
This reserve represents the fair value of shares issued under the Carnarvon’s ESP.
45
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS 16.
RECONCILIATION OF CASH FLOWS FROM
OPERATING ACTIVITIES
(a) Cash flows from operating activities
Profit (loss) for the year
Adjustments for:
Equity settled share based payment expense
Settlement of deferred consideration asset
Impairment of deferred consideration asset
Depreciation
Foreign exchange (loss) profit
Exploration expenditure written off
Operating loss before changes in working capital and provisions:
Changes in assets and liabilities:
Decrease / (increase) in trade and other receivables
(Increase) / decrease in other assets
Decrease in trade and other payables
(Decrease) / increase in provisions and employee benefits
Consolidated
2018
$000
2017
$000
1,425
(36,977)
618
(3,514)
-
51
(1,748)
-
(3,168)
76
(96)
(439)
(75)
399
-
22,153
102
1,362
10,104
(2,857)
(1,594)
8
(789)
189
Net cash flows used in operating activities
(3,702)
(5,043)
(b) Reconciliation of cash and cash equivalents
Cash at bank and at call
Cash on deposit
3,726
59,880
63,606
13,938
39,112
53,050
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed
in Note 26.
Restricted cash of $228,000 consolidated is included under trade and other receivables (2017:$ 225,000
consolidated), see Note 7.
46
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS
17. CAPITAL AND OTHER COMMITMENTS
(a) 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. Failure to meet Joint Operation cash
requirements may result in a reduction in equity in that particular Joint Operation.
Exploration expenditure commitments forecast but not provided for in the financial statements are as follows:
Less than one year
Between one and five years
(b) Capital expenditure commitments
Consolidated
2018
$000
1,153
1,474
2,627
2017
$000
2,707
3,297
6,004
Data licence commitments
437
493
18. CONTINGENCIES
In accordance with normal petroleum industry practice, the Group has entered into joint operations and farmin
agreements with other parties for the purpose of exploring and developing its petroleum permit interests. If a
party to a joint operation defaults and does not contribute its share of joint operation obligations, then the other
joint operators 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 operators.
19. EMPLOYEE BENEFITS
Consolidated
Current:
Liability for annual leave and long service leave
Non-Current:
Provision for long service leave
Total Employee benefits
2018
$000
386
196
582
2017
$000
379
279
658
47
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
19. EMPLOYEE BENEFITS (CONTINUED)
Employee Share Plan
Under the terms of the Carnarvon Employee Share Plan (“ESP”), as approved by shareholders, Carnarvon may,
in its absolute discretion, make an offer of ordinary fully paid shares in Carnarvon 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 Carnarvon’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 following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in
plan shares during the year:
Outstanding at 1 July
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 June
Exercisable at 30 June
Number
2018
WAEP
2018
Number
2017
WAEP
2017
45,453,192
8,149,416
-
-
-
53,602,608
53,602,608
0.15
0.15
-
-
-
0.15
0.15
37,427,100
8,026,092
-
-
-
45,453,192
45,453,192
0.16
0.10
-
-
-
0.15
0.15
Shares granted under the ESP are accounted for as “in-substance” options due to the limited recourse nature
of the loan between the employees and Carnarvon to finance the purchase of ordinary shares. The fair value
at grant date for the various tranches of shares issued under the ESP is determined using a Black Scholes
methodology using the following model inputs:
Fair value of ESP shares and
related assumptions
Fair value at measurement date (cents)
Share price at date of issue (cents)
Exercise price (cents)
Expected volatility
Expected life of ESP share
Expected dividends
Risk-free interest rate
Key
management
personnel
2018
Key
management
personnel
2017
Other
employees
2018
Other
employees
2017
6.3
11
13
68%
5 years
Nil
1.50%
6.7
11
13
89%
4 years
Nil
1.75%
$80,289
8.1
15
17
68%
5 years
Nil
1.5%
4.1
8
10
68%
5 years
Nil
1.5%
$400,975
$279,051
Share-based expense recognised
$203,120
Further details of shares granted under the ESP to directors are set out in Note 23, and in the Remuneration
Report set out on pages 20 to 28.
48
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 19. EMPLOYEE BENEFITS (CONTINUED)
Options over equity instruments
The movement during the reporting period in the number of options over ordinary shares in Carnarvon Petroleum
Limited held, directly, indirectly or beneficially, by each key management person, including their related parties,
is as follows:
2018
Directors
W Foster
P Moore
Held at
1 July 2017
Granted as
compensation
Acquired/
(sold)
Exercised
Held at
30 June 2018
500,000
500,000
-
-
-
-
-
-
500,000
500,000
Options granted as compensation vest immediately. During the financial year there was no forfeiture or vesting
of options granted in previous periods. There were no options on issue that were still to vest at the end of the
reporting period.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in,
share options during the year:
Outstanding at 1 July
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 June
Exercisable at 30 June
Number
2018
1,000,000
-
-
-
-
1,000,000
1,000,000
WAEP
2018
0.15
-
-
-
-
0.15
0.15
Number
2017
1,000,000
-
-
-
-
1,000,000
1,000,000
WAEP
2017
0.15
-
-
-
-
0.15
0.15
The weighted average remaining contractual life for the share options outstanding as at 30 June 2018 was 1
years (2017: 2 years).
The fair value of share options issued is measured by reference to their fair value using the Black-Scholes model,
as set out below:
Fair value of share option and related assumptions
Fair value at measurement date (cents)
Share price at date of issue (cents)
Exercise price (cents)
Expected volatility
Expected life of options
Expected dividends
Risk-free interest rate
Share-based expense recognised
2018
7.9
12
15
89%
5 years
Nil
2.0%
$14,891
2017
7.9
12
15
89%
5 years
Nil
2.0%
$39,966
The expected life of the share options is based on historical data and current expectations and is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical
volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be
the actual outcome
49
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS 20. 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 Carnarvon and its controlled entities and joint
arrangements. Carnarvon provided accounting and administrative services to its controlled entities for which it
did not charge a management fee.
Other related party balances and transactions
At 30 June 2018 an amount of $78,006 (2017: $130,978) is included in Carnarvon and consolidated trade and
other payables for outstanding director fees and expenses.
21. OPERATING LEASES
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
Consolidated
2018
$000
203
-
203
2017
$000
196
203
399
During the reporting period $196,000 was recognised as an expense in the consolidated income statement in
respect of operating leases (2017: $188,000).
The property lease is a non-cancellable lease with the five-year term, with rent payable in advance. Contingent
rental provisions within the lease agreement require that minimum lease payment shall be increased by 4% per
annum.
50
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 22. 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 the chief operating decision maker.
The capitalised exploration and evaluation expenditure reflected on the statement of financial position is in
respect of exploration projects in Australia.
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.
23. 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
2018
$000
1,822
76
218
2,116
2017
$000
1,605
99
171
1,875
Information regarding individual directors and executives’ compensation and some equity instruments
disclosures, as permitted by Corporations Regulation 2M.3.03, are provided in the Remuneration Report section
of the directors’ report as set out on pages 20 to 28.
Apart from the details disclosed in this note, no director has entered into a material contract with the Company
or the Group since the end of the previous financial year and there were no material contracts involving directors’
interests existing at year end.
(b) 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
2018
$000
78
2017
$000
131
51
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
2017
Directors
23. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(c) Ordinary shares held by key management personnel
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:
2018
Directors
Held at
1 July 2017
Net
acquired/
(sold)
Award under
Employee
Share Plan
Received on
exercise
of options
Held at
30 June 2018
PJ Leonhardt
17,750,000
684,455
10,999,917
-
52,847
-
-
-
1,500,000
-
270,232
-
9,492,421
2,692,509
-
-
1,176,201
548,880
-
-
-
-
-
-
17,750,000
737,302
12,499,917
270,232
10,668,622
3,241,389
Held at
1 July 2016
Net
acquired/
(sold)
Award under
Employee
Share Plan
Received on
exercise
of options
Held at
30 June 2017
PJ Leonhardt
17,750,000
WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
684,455
9,799,917
-
8,367,421
1,942,509
-
-
-
-
-
-
-
-
1,200,000
-
1,125,000
750,000
-
-
-
-
-
-
17,750,000
684,455
10,999,917
-
9,492,421
2,692,509
52
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 23. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(d) Plan shares held by key management personnel
Included in the above are plan shares held by key management personnel. The balance and movement during
the reporting period in the number of plan shares directly, indirectly or beneficially, by each key management
person, including their related parties, is as follows:
2018
Directors
Held at
1 July 2017
Granted as
compensation
Employee
Share Plan
cancellations
Exercised
Held at
30 June 2018
PJ Leonhardt
3,000,000
WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
2017
Directors
WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
-
-
-
-
-
-
8,234,917
1,500,000
-
-
8,992,421
2,478,436
1,176,201
548,880
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
9,734,917
-
10,168,622
3,027,316
Held at
1 July 2016
Granted as
compensation
Employee
Share Plan
cancellations
Exercised
Held at
30 June 2017
7,034,917
1,200,000
-
-
7,867,421
1,728,436
1,125,000
750,000
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
8,234,917
-
8,992,421
2,478,436
PJ Leonhardt
3,000,000
(e) Options over equity instruments held by key management personnel
The movement during the reporting period in the number of options over ordinary shares in Carnarvon Petroleum
Limited held, directly, indirectly or beneficially, by each key management person, including their related parties,
is as follows:
2018
Directors
WA Foster
P Moore
Held at
1 July 2017
Granted as
compensation
Acquired/
(sold)
Exercised
Held at
30 June 2018
500,000
500,000
-
-
-
-
-
-
500,000
500,000
Options granted as compensation vest immediately. During the financial year there was no forfeiture or vesting
of options granted in previous periods. There were no options on issue that were still to vest at the end of the
reporting period.
53
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS 24. CONSOLIDATED ENTITIES
Name
Company
Carnarvon Petroleum Ltd
Controlled entities
Carnarvon Thailand Ltd
Lassoc Pty Ltd
SRL Exploration Pty Ltd
Timor-Leste Petroleum Pty Ltd
25. SUBSEQUENT EVENTS
Country of Incorporation
2018
2017
Ownership interest
British Virgin Islands
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
-
No other matters or circumstance has arisen since 30 June 2018 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
54
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to market risk (including currency 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)
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.
Carrying amount (A$000)
Financial assets – cash and cash equivalents
63,606
53,050
Weighted average interest rate (%)
Financial assets – cash and cash equivalents
1.78%
1.07%
Consolidated
2018
2017
All other financial assets and liabilities are non-interest bearing.
55
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT (CONTINUED)
Sensitivity analysis
An increase in 25 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 2017:
30 June 2018
30 June 2017
Consolidated
Equity
$000
Profit and loss
$000
159
132
159
132
A decrease in 25 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 2017:
30 June 2018
30 June 2017
Consolidated
Equity
$000
Profit and loss
$000
(159)
(132)
(159)
(132)
56
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) 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 are deposits and amounts due from the Australian Taxation office. There were no
receivables at 30 June 2018 or 30 June 2017 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 17.
Exposure to credit risk 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:
Carrying amount:
Cash and cash equivalents
Trade and other receivables
The aging of the Group’s trade receivables at reporting date was:
Consolidated
2018
$000
2017
$000
63,606
324
63,930
53,050
400
53,450
Gross
2018
$000
Impairment
2018
$000
Gross
2017
$000
Impairment
2017
$000
Not past due
324
324
-
-
400
400
-
-
Based on historical default rates, the Group believes that no impairment allowance is necessary in respect of
trade receivables.
57
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Currency risk
Currency risk arises from assets and liabilities that are denominated in a currency other than the functional
currencies of the entities within the Group, being the A$ and US$.
The Group 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 USD cash
balances to meet its USD obligations.
The Group’s exposure to foreign currency risk at balance date was as follows, based on carrying amounts.
Consolidated 2018
Cash and cash equivalents
Trade payables and accruals
Gross balance sheet exposure
Consolidated 2017
Cash and cash equivalents
Trade payables and accruals
Gross balance sheet exposure
USD
A$000
46,930
-
46,930
49,827
379
50,206
The following significant exchange rates applied during the year:
AUD to:
1 USD
Average rate
Reporting date spot rate
2018
1.290
2017
1.325
2018
1.349
2017
1.301
58
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Currency risk (continued)
Sensitivity analysis
A 5% strengthening of the AUD against the USD for the 12 months to 30 June 2018 and 30 June 2017 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, remain constant:
30 June 2018
USD
30 June 2017
USD
Consolidated
Equity
$000
Profit and loss
$000
(2,235)
(2,235)
(2,372)
(2,372)
A 5% weakening of the AUD against the USD for the 12 months to 30 June 2018 and 30 June 2017 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, remain constant:
30 June 2018
USD
30 June 2017
USD
(f) Liquidity risk
Consolidated
Equity
$000
Profit and loss
$000
2,470
2,622
2,470
2,622
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 Group’s significant balance of
cash and cash equivalents are considered to be 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:
Carrying
amount
$000
Contractual
cash flows
$000
6 months
or less
$000
6 to 12
months
$000
Consolidated 2018
Non-derivative financial liabilities
Trade and other payables
Consolidated 2017
Non-derivative financial liabilities
533
533
533
Trade and other payables
1,263
1,263
1,263
-
-
59
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
27. FAIR VALUE MEASUREMENT
Fair value hierarchy
The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a
three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
Consolidated - 2018
Assets
Available for sale financial asset
Total assets
Consolidated - 2017
Assets
Available for sale financial asset
Total assets
Level 1
$’000
Level 2
$’000
Level 3
$’000
2,297
2,297
-
-
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
Total
$’000
2,297
2,297
Total
$’000
-
-
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate
their fair values due to their short-term nature.
28. 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 Profits
Reserves
Total equity
Statement of comprehensive income
Total loss
Total comprehensive loss
60
2018
$000
64,485
55,775
120,260
1,288
196
1,484
115,508
3,672
(404)
118,776
1,425
1,425
2017
$000
53,909
47,018
100,927
1,720
279
1,999
95,865
3,438
(375)
98,928
(36,977)
(36,977)
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 28. PARENT INFORMATION (CONTINUED)
Parent Contingencies
In accordance with normal petroleum industry practice, Carnarvon has entered into joint arrangements and
farmin agreements with other parties for the purpose of exploring and developing its petroleum permit interests.
If a party to a joint operation defaults and does not contribute its share of joint operation’s obligations, then the
other joint operators 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 operators.
Parent
2018
$000
2017
$000
Parent capital and other commitments
(a) Exploration expenditure commitments
Due to the nature of Carnarvon’s operations in exploring and evaluating areas of interest it is necessary to incur
expenditure in order to retain Carnarvon’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 Carnarvon’s equity. Failure to meet Joint Operation cash
requirements may result in a reduction in equity in that particular Joint Operation.
Exploration expenditure commitments forecast but not provided for in the financial statements are as follows:
Less than one year
Between one and five years
(b) Capital expenditure commitments
1,153
1,474
2,627
2,707
3,297
6,004
Data licence commitments
437
493
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
203
-
203
196
203
399
61
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
29. BASIS OF PREPARATION OF THE FINANCIAL REPORT
(a) 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 2017 affected any of the amounts recognised in the current period or any prior period and
are not likely to affect future periods.
(b) 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.
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 – 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.
62
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 29. 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:
• Depreciation charged in the income statement (note 3) may change as such charges are determined by the
units of production basis; and
• The carrying value of deferred tax assets (note 6) may change due to changes in the estimates of the likely
recovery 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.
Classification of deferred consideration
The deferred consideration asset has been classified as an available for sale financial asset as the Company
may not recover substantially all of its initial investment for the reasons other than credit deterioration. Nor has
the deferred consideration asset been recognised as held-to-maturity as it does not have fixed or determinable
payments.
The deferred consideration asset is measured at fair value but the interest is calculated at an effective interest
rate that takes into account the cash flows expected at origination. Subsequent changes in expected cash flows
are recognised in profit and loss.
Key judgements – other
Other areas of judgement are in the determination of oil reserves, rehabilitation provisions, and capitalisation
of exploration and evaluation costs, determination of areas of interest, and the units of production method of
depreciation.
63
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
30. 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 statements comprise the financial statements of the Group and its subsidiaries as at
30 June 2018. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has:
• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of
the investee)
Exposure, or rights, to variable returns from its involvement with the investee
•
• The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption
and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all
relevant facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement(s) with the other vote holders of the investee
•
Rights arising from other contractual arrangements
•
• The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to
the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities,
non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or
loss. Any investment retained is recognised at fair value.
Joint Operations
The Group’s shares of the assets, liabilities, revenue and expenses of joint operations have been included in the
appropriate line items of the consolidated financial statements. Details of the Group’s interests are provided in
Note 13.
64
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS
30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Income tax and special remuneratory benefit
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date in the countries where the Group operates and generates taxable
income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement
of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations
in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities
are recognised for all taxable temporary differences, except:
• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss
In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the foreseeable future
•
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised, except:
• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss
In respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised
•
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax
items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
65
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition
at that date, are recognised subsequently if new information about facts and circumstances change. The
adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred
during the measurement period or recognised in profit or loss.
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.
(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 30(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.
66
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. The carrying amount
of Oil and gas assets 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 30(f).
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.
67
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
30. 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 29(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.
68
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 30. 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 or at amortised cost using the effective interest rate
method. 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 include investments in the equity of other entities and debt instruments where there is
neither a fixed maturity nor fixed or determinable payments.
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.
69
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
30. 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.
(k) Discontinued operations
A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as
held for sale and that represents a separate major line of business or geographical area of operations, is part of
a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired
exclusively with a view to resale. The results of discontinued operations are presented separately on the face of
the statement of profit or loss and other comprehensive income.
70
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of
the agreement so as to reflect the risks and benefits incidental to ownership.
Operating leases
A lease where a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases. Payments in relation to operating leases are charged to the income statement on a straight-
line basis over the period of the lease.
(m) Share capital
Incremental costs directly attributable to an equity transaction are shown as a deduction from equity, net of any
recognised income tax benefit.
(n) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business less any estimated selling costs.
Cost includes those costs incurred in bringing each component of inventory to its present location and condition.
(o) Employee benefits
Wages and salaries, annual leave
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees
to balance date. Employee benefits that are expected to be settled within one year have been measured at the
amounts expected to be paid when the liability is settled, plus related on-costs.
Share based payments
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 and share options issued to eligible persons, 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 in respect of plan shares issued.
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. With respect to plan share, upon repayment of the ESP loans, the balance of the
share-based payments reserve relating to the loan repaid is transferred to issued capital.
71
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) for its ordinary shares.
Basic EPS is calculated by dividing the profit attributable to equity holders of the Company by the weighted
number of shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of all potential ordinary shares, which comprise
share options issued.
(q) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly
liquid investments.
(r) Revenue
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable.
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, and the amount of revenue can be measured reliably. For the sale of
oil the transfer of risks and rewards occurs on delivery of oil to the refinery.
(s) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except
where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances
the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and
payables in the 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.
(t) 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.
(u) 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.
72
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and
all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as
income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are
expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected
useful life of the related asset.
When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal
amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of
consumption of the benefits of the underlying asset by equal annual instalments.
(w) New Accounting Standards for Application in Future Periods
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30
June 2018. The consolidated entity’s assessment of the impact of these new or amended Accounting Standards
and Interpretations, most relevant to the consolidated entity, are set out below:
Reference
Title
Summary
AASB
2017-2
AASB
2018-2
Amendments
to Australian
Accounting
Standards –
Disclosure
Initiative:
Amendments
to AASB 107
The amendments to AASB 107 Statement of
Cash Flows are part of the IASB’s Disclosure
Initiative and help users of financial
statements better understand changes in
an entity’s debt. The amendments require
entities to provide disclosures about changes
in their liabilities arising from financing
activities, including both changes arising from
cash flows and non-cash changes (such as
foreign exchange gains or losses).
Amendments
to Australian
Accounting
Standards –
Further Annual
Improvements
2014-2017
Cycle
This Standard clarifies the scope of AASB
12 Disclosure of Interests in Other Entities by
specifying that the disclosure requirements
apply to an entity’s interests in other
entities that are classified as held for sale or
discontinued operations in accordance with
AASB 5 Non-current Assets Held for Sale and
Discontinued Operations.
Impact
on the
Company
There will be no
material impact on
the Company.
Application
date of
standard
Application
date for
Group
1 January
2018
1 July
2018
There will be no
material impact on
the Company.
1 January
2018
1 July
2018
73
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Application
date of
standard
Application
date for
Group
1 January
2018
1 July
2018
Impact
on the
Company
AASB 9 Financial
Instruments
brings together
all three aspects
of the accounting
for financial
instruments:
classification and
measurement,
impairment and
hedge accounting.
This standard does
not apply before 1
January 2018 and
the application date
for the Company is
1 July 2018.
The Company holds
equity instruments
that are not held
for trading. The
Company has
elected to carry
their investment at
fair value with the
fair value changes
recognised in profit
and loss. On the
adoption of AASB
9, the fair value
movement currently
in fair value reserves
of $1.217m will be
transferred to the
opening retained
earnings on 1 July
2018.
Reference
Title
Summary
AASB 9,
and relevant
amending
standards
Financial
Instruments
AASB 9 replaces AASB 139 Financial
Instruments: Recognition and Measurement.
Except for certain trade receivables, an entity
initially measures a financial asset at its fair
value plus, in the case of a financial asset not
at fair value through profit or loss, transaction
costs.
Debt instruments are subsequently measured
at fair value through profit or loss (FVTPL),
amortised cost, or fair value through other
comprehensive income (FVOCI), on the
basis of their contractual cash flows and
the business model under which the debt
instruments are held.
There is a fair value option (FVO) that allows
financial assets on initial recognition to
be designated as FVTPL if that eliminates
or significantly reduces an accounting
mismatch.
Equity instruments are generally measured at
FVTPL. However, entities have an irrevocable
option on an instrument-by-instrument basis
to present changes in the fair value of non-
trading instruments in other comprehensive
income (OCI) without subsequent
reclassification to profit or loss.
For financial liabilities designated as FVTPL
using the FVO, the amount of change in the
fair value of such financial liabilities that is
attributable to changes in credit risk must
be presented in OCI. The remainder of the
change in fair value is presented in profit or
loss, unless presentation in OCI of the fair
value change in respect of the liability’s credit
risk would create or enlarge an accounting
mismatch in profit or loss.
All other AASB 139 classification and
measurement requirements for financial
liabilities have been carried forward into
AASB 9, including the embedded derivative
separation rules and the criteria for using the
FVO.
The incurred credit loss model in AASB 139
has been replaced with an expected credit
loss model in AASB 9.
The requirements for hedge accounting have
been amended to more closely align hedge
accounting with risk management, establish
a more principle-based approach to hedge
accounting and address inconsistencies in
the hedge accounting model in AASB 139.
Based on an initial impact assessment, the
new standard is not expected to significantly
impact the recognition and measurement of
financial instruments.
74
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Application
date of
standard
Application
date for
Group
1 January
2018
1 July
2018
Impact
on the
Company
This standard does
not apply before 1
January 2018 and
the application date
for the Company
is 1 July 2018.
The Company has
performed an initial
impact assessment
and concluded
that there will be
no material impact
on the adoption of
AASB 15.
Reference
Title
Summary
AASB
15, and relevant
amending
standards
Revenue from
Contracts with
Customers
AASB 15 replaces all existing revenue
requirements in Australian Accounting
Standards (AASB 111 Construction
Contracts, AASB 118 Revenue, AASB
Interpretation 13 Customer Loyalty
Programmes, AASB Interpretation 15
Agreements for the Construction of Real
Estate, AASB Interpretation 18 Transfers
of Assets from Customers and AASB
Interpretation 131 Revenue – Barter
Transactions Involving Advertising Services)
and applies to all revenue arising from
contracts with customers, unless the
contracts are in the scope of other standards,
such as AASB 117 (or AASB 16 Leases, once
applied).
The core principle of AASB 15 is that an entity
recognises revenue to depict the transfer of
promised goods or services to customers
in an amount that reflects the consideration
to which an entity expects to be entitled in
exchange for those goods or services. An
entity recognises revenue in accordance with
the core principle by applying the following
steps:
•
•
•
•
•
Step 1: Identify the contract(s) with a
customer
Step 2: Identify the performance
obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
to the performance obligations in the
contract
Step 5: Recognise revenue when (or
as) the entity satisfies a performance
obligation.
As the company does not generate any
revenue at the moment, AASB 15 is not
expected to have a significant impact on the
financial performance of the company.
75
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS Impact
on the
Company
There will be no
material impact on
the Company.
Application
date of
standard
Application
date for
Group
1 January
2018
1 July
2018
There will be no
material impact on
the Company.
1 January
2018
1 July
2018
There will be no
material impact on
the Company.
1 January
2018
1 July
2018
30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reference
Title
Summary
Amendments
to Australian
Accounting
Standards
– Sale or
Contribution of
Assets between
an Investor and
its Associate or
Joint Venture
The amendments clarify that a full gain or loss
is recognised when a transfer to an associate
or joint venture involves a business as defined
in AASB 3 Business Combinations. Any gain
or loss resulting from the sale or contribution
of assets that does not constitute a business,
however, is recognised only to the extent of
unrelated investors’ interests in the associate
or joint venture.
AASB
2014-10
AASB
2017-5
Amendments
to Australian
Accounting
Standards –
Classification
and
Measurement
of Share-based
Payment
Transactions
•
AASB 2015-10 defers the mandatory
effective date (application date) of
AASB 2014-10 so that the amendments
are required to be applied for annual
reporting periods beginning on or after 1
January 2018 instead of 1 January 2017.
This Standard amends AASB 2 Share-based
Payment, clarifying how to account for certain
types of share-based payment transactions.
The amendments provide requirements on
the accounting for:
•
•
•
The effects of vesting and non-vesting
conditions on the measurement of cash-
settled share-based payments
Share-based payment transactions with a
net settlement feature for withholding tax
obligations
A modification to the terms and
conditions of a share-based payment
that changes the classification of the
transaction from cash-settled to equity-
settled.
The Interpretation clarifies that in determining
the spot exchange rate to use on initial
recognition of the related asset, expense or
income (or part of it) on the derecognition of a
non-monetary asset or non-monetary liability
relating to advance consideration, the date
of the transaction is the date on which an
entity initially recognises the non-monetary
asset or non-monetary liability arising from
the advance consideration. If there are
multiple payments or receipts in advance,
then the entity must determine a date of the
transactions for each payment or receipt of
advance consideration.
AASB
Interpretation 22
Foreign
Currency
Transactions
and Advance
Consideration
76
2018 Annual ReportNOTES TO THE FINANCIAL STATEMENTS 30. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reference
Title
Summary
AASB 16
Leases
IFRIC 23
Uncertainty
over Income
Tax Treatments
AASB 16 requires lessees to account for all
leases under a single on-balance sheet model
in a similar way to finance leases under
AASB 117 Leases. The standard includes
two recognition exemptions for lessees –
leases of ’low-value’ assets (e.g., personal
computers) and short-term leases (i.e., leases
with a lease term of 12 months or less).
At the commencement date of a lease, a
lessee will recognise a liability to make lease
payments (i.e., the lease liability) and an asset
representing the right to use the underlying
asset during the lease term (i.e., the right-of-
use asset).
Lessees will be required to separately
recognise the interest expense on the lease
liability and the depreciation expense on the
right-of-use asset.
Lessees will be required to remeasure the
lease liability upon the occurrence of certain
events (e.g., a change in the lease term, a
change in future lease payments resulting
from a change in an index or rate used to
determine those payments). The lessee
will generally recognise the amount of the
remeasurement of the lease liability as an
adjustment to the right-of-use asset.
Lessor accounting is substantially unchanged
from today’s accounting under AASB 117.
Lessors will continue to classify all leases
using the same classification principle as in
AASB 117 and distinguish between two types
of leases: operating and finance leases.
The Group has yet to fully assess the impact
on the Group’s financial results when it is first
adopted for the year ended 30 June 2020
The Interpretation clarifies the application
of the recognition and measurement criteria
in IAS 12 Income Taxes when there is
uncertainty over income tax treatments. The
Interpretation specifically addresses the
following:
Impact
on the
Company
The Company is still
assessing whether
there will be any
material impact.
Application
date of
standard
Application
date for
Group
1 January
2019
1 July
2019
The Company is still
assessing whether
there will be any
material impact.
1 January
2019
1 July
2019
•
•
Whether an entity considers uncertain tax
treatments separately
The assumptions an entity makes about
the examination of tax treatments by
taxation authorities
How an entity determines taxable profit
(tax loss), tax bases, unused tax losses,
unused tax credits and tax rates
• How an entity considers changes in
•
facts and circumstances.
77
Carnarvon Petroleum LimitedNOTES TO THE FINANCIAL STATEMENTS
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 34 to 77 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 2018 and of its performance for
the year ended on that date; and
(ii)
Complying with Accounting Standards and the Corporations Regulations 2001; and
(b)
(d)
The financial statements and notes comply with International Financial Reporting Standards as set out in
Note 29; and
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 by the chief
executive officer and chief financial officer in accordance with section 295A of the Corporations Act 2001 for the
financial year ended 30 June 2018.
Signed in accordance with a resolution of the directors.
PJ Leonhardt
Director
Perth, 28 August 2018
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2018 Annual Report INDEPENDENT AUDITOR’S REPORT
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Carnarvon Petroleum Limited INDEPENDENT AUDITOR’S REPORT
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2018 Annual Report INDEPENDENT AUDITOR’S REPORT
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Carnarvon Petroleum Limited INDEPENDENT AUDITOR’S REPORT
82
2018 Annual Report 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 27 August 2018
Substantial shareholders
There are no substantial shareholder notices lodged with the Company.
Voting Rights
The voting rights attaching to Ordinary Shares are governed by the Constitution. On a show of hands every person
present who is a member or representative of a member shall have one vote and on a poll, every member present in
person or by proxy or by attorney or duly authorised representative shall have one vote for each share held. No options
have any voting rights.
Twenty Largest Shareholders
Name of Shareholder
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Nero Resource Fund Pty Ltd
Jacobson Geophysical Services Pty Ltd
BNP Paribas Noms Pty Ltd
Mr Philip Paul Huizenga
Brentworth Pty Ltd
National Nominees Limited
Elgar Park Pty Ltd
Prettejohn Projects Pty Ltd
Arne Investments Pty Ltd
Mr Adrian Caldwell Cook Ms Belinda Michelle Honey
Mr Peter James Leonhardt
Kemast Investments Pty Ltd
Kemast Investments Pty Ltd
Log Creek Pty Ltd
Mr Edward Patrick Jacobson
Geolyn Pty Ltd
47 Eton Pty Ltd
Mr Edward Patrick Jacobson
Distribution of equity security holders
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
Number of Shares
50,364,139
36,167,527
29,350,701
18,538,462
11,934,068
10,480,994
10,068,622
9,000,000
8,489,858
8,470,425
8,400,000
8,353,950
8,309,917
7,700,000
7,000,000
6,502,944
6,440,851
6,000,000
6,000,000
5,500,000
5,315,982
268,388,440
% held
4.23
3.04
2.47
1.56
1.00
0.88
0.85
0.76
0.71
0.71
0.71
0.70
0.70
0.65
0.59
0.55
0.54
0.50
0.50
0.46
0.45
22.56
Number of
shareholders
Number of
fully paid shares
609
2,544
1,930
5,151
1,603
284,659
7,690,691
16,103,961
198,289,077
967,519,871
11,837
1,189,888,259
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Carnarvon Petroleum Limited ADDITIONAL SHAREHOLDER INFORMATION
(b) Option holdings as at 27 August 2018
Options over ordinary shares issued
(c) On-market buyback
There is no current on-market buyback.
(d) Schedule of permits
Number
on issue
1,000,000
Number
of holders
2
Permit
Basin/Country
Joint Venture
Partners
WA-435-P, WA-437-P
Roebuck / Australia
Carnarvon
WA-436-P, WA-438-P
Roebuck / Australia
Carnarvon
Quadrant Energy
WA-155-P
Barrow / Australia
Quadrant Energy
Carnarvon
Quadrant Energy
EP-490, EP-491,
EP-475, EP497, TP/27
Carnarvon / Australia
Carnarvon
WA-521-P
WA-523-P
WA-524-P
AC-P62
AC-P63
EP321
EP407
Roebuck / Australia
Bonaparte / Australia
Dampier / Australia
Bonaparte / Australia
Bonaparte / Australia
Perth / Australia
Perth / Australia
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Equity
%
20%
80%
30%
70%
28.5%
71.5%
100%
100%
100%
100%
100%
100%
Operator
Quadrant Energy
Quadrant Energy
Quadrant Energy
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
2.5% of 38.25%
Transerv Energy
2.5% of 42.5%
Transerv Energy
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2018 Annual Report carnarvon.com.au