EXPLORATION
BY INNOVATION
2019 ANNUAL REPORT
Carnarvon Petroleum Limited
ABN 60 002 688 851
CORPORATE
DIRECTORY
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Directors
PJ Leonhardt
Chairman
AC Cook
Managing Director
WA Foster
Non-Executive Director & Lead Independent Director
P Moore
Non-Executive Director
G Ryan
Non-Executive Director
Company Secretary
T Naude
Auditors
Ernst & Young
Bankers
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: 1300 554 474
(within Australia)
Investor Enquiries: +61 2 8280 7111
Facsimile:
(outside Australia)
+61 2 9287 0303
Australia and New Zealand Banking Group Limited
Commonwealth Bank of Australia
National Australia Bank Limited
HSBC
Stock Exchange Listing
Carnarvon Petroleum Limited’s shares are quoted on
the Australian Securities Exchange.
ASX Code
CVN - ordinary shares
CONTENTS
Chairman’s Review ................................................................................................................................................2
Managing Director’s Review ................................................................................................................................4
Overview of Operations .........................................................................................................................................6
Operating and Financial Review .................................................................................................................... 8-21
Directors’ Report ........................................................................................................................................... 22-37
Auditor’s Independence Declaration .................................................................................................................38
Corporate Governance Statement .....................................................................................................................39
Consolidated Income Statement .......................................................................................................................40
Consolidated Statement of Other Comprehensive Income ............................................................................41
Consolidated Statement of Financial Position .................................................................................................42
Consolidated Statement of Changes in Equity ................................................................................................43
Consolidated Statement of Cash Flows ...........................................................................................................44
Notes to the Financial Statements .............................................................................................................. 45-82
Directors’ Declaration .........................................................................................................................................83
Independent Audit Report ............................................................................................................................. 84-87
Additional Shareholder Information............................................................................................................. 88-89
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The appeal for Carnarvon and
its shareholders is the strong
base that can be provided by
the generation of long-term
steady cash flows from both
liquids and gas production.
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ANNUAL REPORT 2019OPERATING AND FINANCIAL REVIEW
CHAIRMAN’S
REVIEW
During the reporting period Carnarvon Petroleum Limited (“Carnarvon” or
“Company”) consistently pursued its strategy of exploring for large deposits of oil
and gas on the North West Shelf (“NWS”) of Australia.
Not only has this strategy yielded a number of
exciting exploration projects for the Company, but
I’m also pleased to report that substantial progress
was achieved with the Dorado project during the
year. Dorado has been independently assessed
as containing a substantial quantity of both liquids
(oil and condensate) and gas (free and associated
with the oil). I eagerly anticipate the next 18 months
or so, where I look forward to seeing the Dorado
liquids resource firm into a development project
for Carnarvon and our partner, Santos. This would
be a crowning achievement for both organisations
and would importantly transition Carnarvon into a
production company. Uniquely, it may also generate
the opportunity for Carnarvon to reinvest a portion
of the cash flows from the liquids production into
the development of the Dorado and Roc gas fields.
The appeal for Carnarvon and its shareholders is the
strong base that can be provided by the generation
of long-term steady cash flows from both liquids and
gas production.
During the reporting period, Carnarvon also
advanced its 100% held Buffalo project. The
Company’s efforts are primarily focused on the
redevelopment of a former oil field in an area of
the permit that will shortly transition to Timor-
Leste jurisdiction. Our team have been working
constructively with the Timor-Leste authorities
since the intent to change the Maritime Boundary
Treaty was announced in March 2018. We are
looking forward to working with the community
and Government of Timor-Leste over the coming
years as we seek to generate tangible benefits for
Carnarvon shareholders and the people of
Timor-Leste.
In February and July 2019, we completed two
successful capital raisings at 33 and 39 cents per
share respectively. I’d like to take this opportunity
to welcome new shareholders to the Company and
to also thank our existing shareholders for their
ongoing support. As a result, Carnarvon’s balance
sheet has been significantly strengthened to provide
appropriate capacity for our planned work programs.
The capital from these raisings, together with our
existing cash, will be used most particularly to
advance the Dorado project. Work is underway to
advance the Buffalo project through the introduction
of a new partner to the project. As these projects
progress, we look forward to their value potential
becoming clearer and we expect materially accretive
to our current position.
I feel it’s important to recognize the value that has
been generated from Carnarvon’s relatively small
team of less than 20 people. In this regard I thank
Adrian Cook and the Carnarvon team for continuing
to bring their skills to bear with great energy and
enthusiasm and for delivering outstanding results
from what has been a long period of personal
investment into the execution of our strategy.
This year the Board recognised that the Carnarvon
team achieved a number of significant milestones.
As such, the Board granted both a cash bonus
and employee shares as part of Carnarvon’s short
and long-term incentive plans. Employee share
issues 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 employees to achieve strategic
goals and aligns staff rewards with growth in
shareholder value. Further details can be found in the
Remuneration Report section of the Annual Report.
As the Company’s business matures and in
particular, as it progresses towards production
operations, the Board will expand its corporate
practices to meet the changing circumstances.
The Board is cognizant of the need to achieve an
appropriate balance, over time, in relation to matters
such as diversity, the environment, social license and
corporate governance.
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
as we progress multiple projects through different
phases of maturity.
Peter Leonhardt
Chairman
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ANNUAL REPORT 2019 MANAGING DIRECTOR’S
REVIEW
Carnarvon’s business model seeks to identify oil and gas opportunities that are able
to deliver low cost production on a globally comparable basis. Such assets provide
value and insulation through-out the natural cycles in oil and gas prices over time.
Our business is currently focused on four key
projects that all aim to fall within this low-cost
measure as they mature into production assets.
The four projects comprise advancing the Dorado
liquids project, the Dorado and Roc gas project,
the Buffalo oil field project and maturing the best
exploration prospects within Carnarvon’s portfolio.
The Dorado project achieved a number of important
milestones this year, most notably in terms of the
results from the successful Dorado-2 appraisal well,
confirmation of substantial hydrocarbon volumes
by independent resource auditor ERC Equipoise
(“ERCE”), acquiring new development focused
3D seismic data over the Dorado and Roc areas
and advancing the scoping studies for the Dorado
liquids development.
At the time of writing, the Joint Venture was drilling
the Dorado-3 appraisal well. This well is expected to
provide another source of data on the reservoirs and
hydrocarbon flow rates for development purposes.
The information gathered to date on Dorado provides
strong support for the development of the project,
particularly the case where the liquids are produced
first, followed by a second phase of development
which will add gas production to the liquids. A
staged development and production concept should
enhance the overall return on investment given
the characteristics of the Dorado resource. This is
because it allows for the staging of capital investments
and the leveraging of early free cash flows to fund the
later stages of the development costs.
In the nearer term, our objective is to complete the
Front End Engineering and Design or FEED work for
the liquids project in calendar 2020. The FEED work is
expected to clarify the basis of design and the capital
and operating cost structures. We will work with our
partner, Santos to make a Final Investment Decision
or FID late in 2020 to then enable the liquids project
development work to commence.
Earlier this year the Joint Venture drilled the Roc
South-1 prospect with the view to incorporating any
discovered oil or gas into a Dorado production facility.
The exploration target did not contain a commercial
resource but the result does not detract from the
overall thematic of discovering new high margin near
field resources around Dorado or further afield where
the quantum could support a new low-cost stand-
alone development.
In addition to the work on and around the Dorado
and Roc discoveries, Carnarvon has also been
maturing the Buffalo oil field redevelopment.
Carnarvon secured the permit in 2016 and since
then has undertaken significant 3D seismic
reprocessing using the latest technologies
employed within the industry. This work has
resulted in an initial focus on the former Buffalo
oil field and the development of a plan to test for
untapped attic oil within the former oil field. In
progressing this work, Carnarvon recently received
environmental plan approvals to drill three wells into
the field.
As outlined by Peter Leonhardt, the Carnarvon
team has also been working with the Australian and
Timor-Leste Governments to effect the change in
the maritime boundary. This will result in part of
the Australian awarded permit falling under Timor-
Leste jurisdiction. A consequence of this change is
that Carnarvon and the Timor-Leste Government
will execute a Production Sharing Contract or PSC
to cover the terms of operation for Carnarvon. The
PSC is expected to be signed in calendar 2019 with
fiscal terms that are broadly equivalent to those
in Australia. The additional piece to advancing
the Buffalo oil field redevelopment is securing
funding to drill the first well and develop the field for
production. Carnarvon is currently in discussions
with a number of parties interested in becoming
Joint Venture partners to advance the project
by providing funding and production expertise.
The objective in seeking partner participation
for the project arises from Carnarvon’s capital
management plans that are primarily focused on
advancing the Dorado liquids project.
In a similar regard, Carnarvon intends to continue
to mature and seek expressions of interest from
parties to join it in its other exploration projects. The
Labyrinth, Eagle and Buffalo (Australian portion)
projects are all progressing technically and contain
attractive opportunities to present to prospective
partners in the coming year.
Adrian Cook
Managing Director and Chief Executive Officer
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ANNUAL REPORT 2019 Our business is currently
focused on four key
projects that all aim to
fall within this low-cost
measure as they mature
into production assets.
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OVERVIEW OF
OPERATIONS
The highlights for the Company
during the 2019 financial year were:
• Significant oil and gas discovery in the
Dorado-1 exploration well
• Dorado-2 appraisal well successful
confirms the major oil and gas
resource in Dorado
• The Joint venture now has confidence
to progress Dorado development plans
• New 3D seismic acquisition
commenced to further unlock Bedout
sub-basin potential
• Significant progress made towards
redeveloping the Buffalo oil field
• Progressed work to unlock the
potential of the suite of exploration
assets across the North West Shelf
Wyndham
Wyndham
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ANNUAL REPORT 2019 WyndhamWyndham
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ANNUAL REPORT 2019 OPERATING AND
FINANCIAL REVIEW
Phoenix Project Background
In 2009, Carnarvon secured an interest in the Bedout
Sub-basin acreage offshore of Western Australia
comprising four exploration permits (WA-435-P,
WA-436-P, WA-437-P and WA-438-P). The permits
lie approximately 110km from the coast, offshore of
Port Hedland in Western Australia in a region which
had been traditionally underexplored.
Carnarvon, along with its Joint Venture partner
undertook an extensive geological study, acquiring
modern 3D seismic which confirmed two significant
prospects in Phoenix South within WA-435-P and
Roc in WA-437-P. The venture was then expanded
with new partners being introduced to fund
exploratory drilling costs.
Encouraged by
the successful
discoveries, the
Joint Venture
acquired
additional high-
quality 3D seismic
data over the
permits and
surrounding areas.
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ANNUAL REPORT 2019 A
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The Phoenix South-1 well was drilled in the WA-
435-P permit in 2014 discovering light oil. Phoenix
South-1 was the first well drilled in the area since
the early 1980’s and was integral to re-exploring the
Bedout Sub-basin. The discovery encouraged the
Joint Venture to drill the Roc-1 well in WA-437-P in
late 2015 which discovered condensate rich gas.
The Roc-2 well was drilled in late 2016 to appraise
the Roc-1 discovery. This well was highlighted by
a historic flow test which exceeded Carnarvon’s
expectations. The flow test successfully confirmed
the ability of the hydrocarbons to flow from the
quality Caley reservoir at depths of over 4,000
metres. The Roc and Phoenix discoveries were
significant in breaking industry preconceptions
in Australia around the ability of hydrocarbons to
flow from these depths, in particular from Triassic
reservoirs.
Encouraged by the successful discoveries, the
Joint Venture acquired additional high-quality 3D
seismic data over the permits and surrounding
areas. Through utilising the new 3D seismic, further
geological studies confirmed additional prospects
including Dorado which had been significantly de-
risked by the Phoenix South and Roc wells.
The Roc and Phoenix discoveries were significant in
breaking industry preconceptions in Australia around
the ability of hydrocarbons to flow from these depths, in
particular from Triassic reservoirs.
FIGURE 1: SCHEMATIC IMAGE OF THE DORADO
STRUCTURE AND COMPLETED WELL LOCATIONS.
Dorado, Roc and Roc South (WA-437-P)
(Carnarvon 20%, Santos is the Operator)
The Dorado-1 exploration well was a landmark
outcome for the Bedout area and the Company,
discovering a significant light oil column along with
gas and condensate in a number of reservoirs.
Hydrocarbons were recovered from four reservoirs
in the well encompassing the Caley, Baxter, Crespin
and Milne Members with a total hydrocarbon net
pay of 132 metres. The quality of the reservoirs
encountered were also better than pre-drill
estimates.
Importantly, the well encountered high quality and
productive reservoirs in each target.
The significant nature of the Dorado discovery led
the Joint Venture to move quickly to appraise the
results. The Dorado-2 appraisal well was completed
in June 2019 encountering light oil and condensate
rich gas in pressure communication with the original
exploration well, confirming Dorado as a major oil
and gas resource. The Dorado-2 well was located
around 2km from the Dorado-1 well.
In the Caley reservoir, the Dorado-2 well intersected
an oil-water contact as planned which enabled the
refinement of the range of recoverable oil resource.
High quality oil was extracted from the reservoir and
the excellent reservoir properties encountered were
comparable to those discovered at Dorado-1.
Condensate rich gas was extracted from the Baxter
reservoir with wireline logging confirming that a
hydrocarbon column was encountered with no gas-
water contact, as expected. Pressure data indicates
that the column likely extends for several hundred
meters below the depth encountered in the well.
Samples from the Milne reservoir were recorded as
oil bearing on the rig. The very light nature of this oil
may result in this hydrocarbon being re-classified
as a highly condensate rich gas. Importantly the
reservoirs down to the Milne level were also of high
quality which will be important in development.
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Following the results of the Dorado appraisal,
Carnarvon prepared an update of the volumetric
estimates which can be found on page 18.
The Roc South-1 well commenced before the end of
the financial year and was completed in July 2019.
The purpose of the Roc South well was to add tie-in
resources to the nearby Dorado field. The target
reservoirs were drilled and interpreted on wireline
logs as not containing commercial quantities of
producible hydrocarbons.
The information gained from the Roc South-1 well
improves the regional understanding and provides
more data on the reservoir. The Roc South-1 result
does not impact the resource volumes estimated in
Dorado.
During the year, the Joint Venture commenced a new
3D seismic survey over the Dorado, Roc and near-
field exploration prospects. The survey is designed
to improve on the existing 3D, specifically over
the Caley to Milne intervals. The new data will also
support the Dorado oil and gas field development
and assist with refining numerous exploration targets
within Carnarvon’s Bedout Sub-basin permits.
Subsequent to the end of the financial year, the
Dorado-3 appraisal well commenced drilling. The
Dorado-3 well, which is located approximately 900
metres from the Dorado-1 well, will include drill stem
tests which will be critical to understand reservoir
performance and obtain the fluid samples required
for the design of the Dorado production facilities. The
results from the Dorado-3 well will be instrumental
in preparing for a Final Investment Decision which
the Joint Venture is targeting for late in the 2020
calendar year.
ANNUAL REPORT 2019OPERATING AND FINANCIAL REVIEW
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Exploration – Greater Phoenix Area (WA-
435-P, WA-436-P, WA-437-P and WA-438-P)
(Carnarvon 20%, Santos is the Operator)
The string of discoveries, most significantly the
Dorado discovery, has redefined the Bedout
Sub-basin as a proven hydrocarbon province.
Importantly, there is still significant exploration
prospectively within the approximate 22,000km2
of the greater Phoenix area which is still relatively
underexplored.
The standout hydrocarbon prospects identified to
date are Pavo and Apus, which have been de-risked
following the Dorado discovery. Pavo and Apus are
estimated by Carnarvon to contain 82 million barrels
and 612 million barrels respectively of oil recoverable
(Gross Pmean) (refer to page 19). The scale of these
prospects mean they will play an important part in
the future exploration of the greater Phoenix area.
The new 3D seismic survey over Dorado, Roc and
nearby prospects commenced during the year will
play a key role in the further exploration of the area.
The interpretation and analysis of this new data will
be instrumental in defining the follow up exploration
targets.
Some of the additional prospects and leads
surrounding the Dorado, Roc and Phoenix South
areas are listed in the Prospective Resource table
on page 19. The results achieved to date from the
2019 drilling campaign and the latest 3D seismic
survey will be analysed to gain further understanding
over the prospectively in the region and to update
the existing prospect and lead inventories over the
coming months.
FIGURE 2: MAP OF TOP CALEY/TR15 WITH WELL LOCATIONS AND SIGNIFICANT
PROSPECTS IN THE BEDOUT SUB-BASIN.
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Buffalo Project – WA-523-P
(Carnarvon 100% and operator)
Carnarvon was awarded the WA-523-P permit within
the Bonaparte Basin of Australia in May 2016 which
included the previously developed Buffalo oil field.
The initial technical work was focused on
reprocessing the 3D seismic data using a number of
new technologies, including 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.
In March 2018, the Australian and Timor-Leste
Governments signed a Maritime Boundary Treaty
which will redefine the maritime boundary between
the two countries. The Buffalo project will be 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, however,
will remain within Australia’s jurisdiction, which
contains undrilled exploration prospects.
Carnarvon has now completed its discussions
and agreed the terms of the Production Sharing
Contract (“PSC”) with the Timor-Leste government
agency Autoridade Nacional do Petróleo e Minerais
(“ANPM”). The Company now has a clearer timeline
for the official signing the PSC and the ratification
of the Maritime Boundary Treaty which is expected
to occur in Calendar 2019. Once the process is
finalised, Carnarvon will be in a position to progress
with its plans to drill the first Buffalo well to confirm
the presence of the attic oil and to progress the
Buffalo oil field redevelopment project.
During the year, Carnarvon made significant
progress towards its drilling preparations and project
planning for the Buffalo oil field redevelopment.
This included the acceptance by NOPSEMA of
the Company’s environmental plan for drilling up
to three Buffalo wells. The Government of Timor-
Leste has also agreed to endorse the environmental
report approved by the Australian regulator. The
bilateral co-operation has been important in enabling
Carnarvon to progress its planning whilst the
boundary change process completes.
Additionally, Carnarvon undertook a field
surveillance survey over the proposed Buffalo Field
Redevelopment Area in late 2018. The data from the
survey indicated that there are no impediments to
locating the Buffalo wells in the surface locations that
are most ideal for targeting the identified attic of oil.
A significant portion of the WA-523-P exploration
permit will still remain in Australian waters. Carnarvon
continued its technical analysis during the year to
identify additional exploration potential within the
permit. The work to date has been very promising
with mapping of the existing seismic identifying
numerous prospects and leads.
Carnarvon has also commenced a process to
introduce a partner to the Buffalo project. Acquiring a
suitable partner will assist with financing the project
which will be vital as Carnarvon works towards
bringing both the Dorado and Buffalo fields into
production.
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ANNUAL REPORT 2019OPERATING AND FINANCIAL REVIEW The work to date has been very promising
with mapping of the existing seismic
identifying numerous prospects and leads.
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FIGURE 3: SCHEMATIC PLAY CONCEPT
FOR THE LABYRINTH PROJECT.
Labyrinth Project – WA-521-P
(Carnarvon 100% and operator)
The Labyrinth project, within the WA-521-P permit, is
located in the Roebuck Basin in the North West Shelf
of Western Australia.
This frontier acreage, which lies directly to the north
of the Company’s Bedout permits, was acquired by
Carnarvon in 2016 and has been significantly
de-risked following the Bedout discoveries.
Carnarvon holds 100% equity in the WA-521-P
permit, comprising an area of approximately
5,057km2.
The Discovery of hydrocarbons in the Late Triassic
section of the Phoenix South-3 well, has enhanced
confidence in the hydrocarbon charge within
the adjoining WA-521-P Permit. Carnarvon is
encouraged by the Late Triassic oil prone source
rocks in the Labyrinth permit which are currently
within the oil window. This has led to comparison
with the proven Late Triassic petroleum systems of
the Birds Head area of West Papua, Indonesia and
Timor Island.
The nearby Nebo-1 well drilled in the early 1990’s
and flowing around 2,000 barrels of oil per day on
test, demonstrated that Triassic oil can migrate
vertically into Jurassic reservoirs. With the WA-521-P
permit containing several large Jurassic structures
across multiple reservoirs, there is considerable
potential contained within the Labyrinth project.
The standout target is the Ivory prospect, estimated
to contain 420 million barrels of mean recoverable
oil over two levels (refer to page 19). Ivory is located
in 350 metres water depth with these 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.
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ANNUAL REPORT 2019OPERATING AND FINANCIAL REVIEW With the industry’s increased focus on the
region following the Dorado discovery,
the nearby Labyrinth project represents a
compelling exploration opportunity.
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.
Success in the Ivory target would open a new play
fairway across 16 additional prospects and leads.
With the geological analysis to date identifying 1.5
billion barrels of recoverable prospective resources
within these prospects across the permit (refer to
page 19), there is significant follow up potential.
The prospects within the Labyrinth project could
be further strengthened by upgraded seismic data
which would in turn increase the confidence to drill.
As such, Carnarvon has begun planning to acquire
enhanced seismic over the Ivory prospect which is
expected to commence in 2020.
Carnarvon has also commenced a farm out process
to acquire a suitable partner to join the project
and evaluate the significant oil prospects. With the
industry’s increased focus on the region following
the Dorado discovery, the nearby Labyrinth project
represents a compelling exploration opportunity.
Condor and Eagle Projects
– AC/P62 and AC/P63
(Carnarvon 100% and operator)
Carnarvon was awarded the AC/P62 permit in
November 2017 and the AC/P63 permit in February
2018 within the Vulcan sub-basin. Carnarvon
identified the opportunity to secure these assets
whilst developing its extensive regional database
across the North West Shelf of Australia.
The Vulcan sub-basin is a proven and prolific region
within the greater Bonaparte basin, containing
numerous oil fields. The acquisition of brand new
MC3D Cygnus pSDM seismic data has been a game
changer for the basin which has historically been
hampered by poor quality vintage data.
With considerable assistance from the improved
data, Carnarvon has identified several exciting
prospects and leads across the Condor and Eagle
projects. The technical work to date has successfully
de-risked the reservoir, presence of oil and the
quality of hydrocarbons in the projects. The recent
Orchid discovery, nearby to the Eagle permit,
has also enhanced the potential of the identified
prospects.
The standout target identified to date within the
AC/P63 permit is the Toucan prospect. Toucan is
a large, Mid Jurassic, fault bounded structure with
6km2 areal extent and 220m structural closure. The
structure sits on the North-east flank of the Skua
Trough, with access to migration of hydrocarbons
generated by the proven Middle and Late Jurassic
(Lower Vulcan and Plover) oil-prone source rocks.
The nearby discoveries of Skua, Talbot, Cassini and
Challis oil fields confirm effective migration from the
Skua and other surrounding kitchens which gives
considerable optimism for the Toucan prospect.
In AC/P62, several opportunities have been identified,
including the Birdie and Chick prospects and the
Vulture lead. These prospects and lead represent
conventional structural closures at the Late Triassic,
Nome Formation level, with hydrocarbons sourced by
proven Lower Vulcan or Plover formations and sealed
by Late Jurassic marine shales.
With the technical work moving closer to completion,
Carnarvon intends to begin seeking farm-in interest
for the Condor and Eagle projects in late 2019.
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ANNUAL REPORT 2019 Outtrim Project - WA-155-P
(Carnarvon 28.5%, Santos is the Operator)
Maracas Project – WA-524-P
(Carnarvon 100% and operator)
The Maracas Project, located in WA-524-P, is
situated on the flanks of the Dampier sub-basin,
an important part of the 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 play types in a
proven basin which includes the Stag, Wandoo and
Legendre oil fields, plus the Reindeer gas field.
The technical team has completed their
interpretation of the newly reprocessed 3D seismic
data and have identified three late Permian aged
prospects. To test the validity of these prospects
the team commenced a Permian focused reservoir
quality study, which aims to analyse the condition of
the potential reservoir, and is completing a regional
source rock study to determine the effectiveness of
the petroleum source rocks in the region.
Specialist consultants were also used to perform
a fault seal analysis for each of the identified
prospects, with the purpose to further understand
the trapping nature of the tilted fault block
configuration. Fluid inclusion screening was
performed on a key well within the permit, to
assess the origin of the residual oil in that well and
to subsequently determine if the oil was related to
the same play system as the Permian prospects.
Carnarvon is close to completing all of its work
commitments by the end of permit year 3 in
September.
The Outtrim project is in the Barrow sub-basin,
within the Northern Carnarvon Basin of the North
West Shelf.
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 19.
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
with minimal commitments in the first three years.
Following this the Joint Venture has the option to
commit to an exploration well in the final 2 years.
16
ANNUAL REPORT 2019OPERATING AND FINANCIAL REVIEW Production
Reserves
Commercial
Prospective Resources
Exploration prospectivity
Proved
Proved &
Probable
Proved, Probable
& Possible
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.
Reserves
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 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
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 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.
17
ANNUAL REPORT 2019 Gross Contingent Resources
Gross at 30 June 2018
Permit
WA-437-P
Dorado
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
Buffalo
WA-523-P
Total
Technical Revision
Permit
Dorado (i)
WA-437-P
WA-437-P
Roc
Phoenix South WA-435-P
WA-435-P
Phoenix
Buffalo
WA-523-P
Total
Gross at 30 June 2019
Permit
WA-437-P
Dorado
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
Buffalo
WA-523-P
Total
Barrels of Oil Equivalent
BSCF MMBOE MMBOE MMBOE
Light Oil and Condensate
MMSTB MMSTB MMSTB
2C
-
20
17
7
31
74
1C
-
12
7
2
15
36
3C
-
35
30
16
48
128
Light Oil and Condensate
MMSTB MMSTB MMSTB
2C
162
3C
285
86
1C
Free & Associated Gas
BSCF
2C
-
332
BSCF
1C
-
204
3C
-
580
-
-
-
-
-
-
204
332
580
Free & Associated Gas
BSCF
2C
748
BSCF
1C
367
3C
1,358
1C
-
48
7
2
15
72
2C
-
78
17
7
31
133
3C
137
30
16
48
230
Barrels of Oil Equivalent
1C
176
2C
344
3C
614
BSCF MMBOE MMBOE MMBOE
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
86
162
285
367
748
1,358
176
344
614
Barrels of Oil Equivalent
BSCF MMBOE MMBOE MMBOE
1C
Light Oil and Condensate
MMSTB MMSTB MMSTB
2C
162
20
17
7
31
236
86
12
7
2
15
122
3C
285
35
30
16
48
413
Free & Associated Gas
BSCF
2C
748
332
BSCF
1C
367
204
3C
1,358
580
-
-
-
-
-
-
571
1,080
1,938
Net Contingent Resources
Net at 30 June 2019
Permit
WA-437-P
Dorado
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
WA-523-P
Buffalo
Total
Light Oil and Condensate
MMSTB MMSTB MMSTB
2C
1C
3C
17
2
1
0
15
37
32
4
3
1
31
72
57
7
6
3
48
121
BSCF
1C
Free & Associated Gas
BSCF
2C
150
66
73
41
3C
272
116
-
-
-
-
-
-
-
-
-
114
216
388
1C
176
48
7
2
15
233
2C
344
78
17
7
31
446
3C
614
137
30
16
48
796
Barrels of Oil Equivalent
1C
35
10
1
0
15
62
2C
69
16
3
1
31
120
3C
123
27
6
3
48
207
BSCF MMBOE MMBOE MMBOE
(i) Dorado volumes added as at 30 June 2019 as per ASX announcement 15 July 2019.
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.
18
ANNUAL REPORT 2019OPERATING AND FINANCIAL REVIEW
Net Prospective Resources
Pavo Caley
Apus Caley (i)
Permit
WA-438-P
30%
WA-437/8-P
20/30%
Apus Baxter (i)
WA-437/8-P
20/30%
Apus Crespin (i)
WA-437/8-P
20/30%
WA-437/8-P
20/30%
WA-437-P
WA-437-P
WA-437-P
WA-437-P
WA-437-P
WA-435-P
WA-435-P
WA-435-P
20%
20%
20%
20%
20%
20%
20%
20%
20%
Mensa Barret (Phoenix) WA-435-P
Bandy Rankin (ii)
WA-435/6-P
20/30%
WA-435/6-P
20/30%
3
2
1
2
8
1
-
-
-
-
1
1
-
-
1
1
Apus Milne (i)
Roc-2 C/D
Roc Satellites
Bewdy
Bottler
Peng
Mensa Caley
Lupus
Indus
Ara (ii)
Belgravia
Ivory
Ivory deep
Mouse
Mouse deep
Zebra
Hammock deep
Mahogany
Weaver
Total
WA-155-P
28.50%
-
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
WA-521-P
100%
100%
100%
100%
100%
100%
100%
100%
20
6
40
3
20
8
22
3
Light Oil and Condensate
Free & Associated Gas
Barrels of Oil Equivalent
MMBBL MMBBL MMBBL MMBBL BSCF
P90
Pmean
P10
P50
P90
BSCF MMBOE MMBOE MMBOE MMBOE
P50
P10
Pmean
P90
P10
Probability
Geological
Success
Risked
MMBOE
Pmean
19
18
12
25
41
1
1
2
3
1
6
14
-
1
19
16
1
170
48
202
33
179
112
94
25
25
25
24
39
55
1
2
6
6
2
10
33
2
3
43
36
5
322
99
278
62
382
249
148
44
54
56
63
96
121
2
4
14
15
5
24
84
4
8
114
93
13
828
243
618
152
924
630
332
106
1
1
-
1
2
11
6
-
-
1
15
-
1
2
-
-
5
-
-
-
-
-
-
-
-
BSCF
P50
BSCF
Pmean
9
9
6
12
21
22
23
2
32
33
31
52
73
24
29
6
-
-
4
61
5
89
-
-
16
37
-
-
69
69
-
-
75
75
68
116
164
40
60
17
-
9
200
33
89
178
-
-
51
125
315
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
2
1
2
8
2
1
-
-
-
4
1
-
1
1
1
1
20
6
40
3
20
8
22
3
20
20
13
27
44
5
5
2
3
2
17
14
3
8
19
16
10
170
48
202
33
179
112
94
25
30
31
29
49
68
6
7
7
6
3
26
33
14
16
43
36
27
322
99
278
62
382
249
148
44
67
69
74
116
149
9
14
17
15
7
59
89
20
40
114
93
68
828
243
618
152
924
630
332
106
34%
21%
21%
21%
21%
66%
45%
32%
32%
40%
17%
38%
14%
14%
10%
14%
29%
18%
13%
18%
13%
13%
13%
13%
13%
10.3
6.5
6.0
10.0
13.9
3.7
3.0
2.1
2.0
1.2
4.4
12.4
1.9
2.2
4.3
5.0
7.9
58.0
12.9
50.0
8.1
49.7
32.4
19.2
5.7
146
1,043
1,901
4,602
44
271
637
1,437
154
1,091
2,012
4,854
332.7
(i) Note Apus prospect lies across WA-437-P and WA-438-P in which Carnarvon has 20% and 30% equity respectively
(ii) Note Ara and Bandy prospects lies across WA-435-P and WA-436-P in which Carnarvon has 20% and 30% equity respectively
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
19
Notes on Petroleum Resource Estimates
Unless otherwise stated, all petroleum resource estimates are quoted as at 30 June 2019 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.
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.
Conversion from gas to barrels of oil equivalent is based on Gross Heating Value. The conversion is based on composition of gas in
each reservoir and is 4.07 Bscf/MMboe, 3.85 Bscf/MMboe, 4.16 Bscf/MMboe, 4.45 Bscf/MMboe, and 3.87 Bscf/MMboe for the Upper
Caley, Caley associated gas, Crespin, Baxter and Milne reservoirs, respectively, that make up the Dorado Contingent Resource. For all
other gas resources the Company uses a constant conversion factor of 5.7 Bscf/MMboe. Volumes of oil and condensate, defined as
‘C5 plus’ petroleum components, are converted from MMbbl to MMboe on a 1:1 ratio.
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.
FINANCIAL REVIEW
The Group reports an after-tax loss $8,021,000 for
the financial year ending 30 June 2019 (2018: profit:
$1,425,000).
Carnarvon’s balance sheet remained strong with
cash and cash equivalents of $73,900,000 (2018:
$63,606,000), 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. Carnarvon
raised $47,467,000 after fees. The Placement
provided additional funds for Carnarvon’s appraisal
and exploration activities, engineering and design
work for Dorado and a new 3D seismic acquisition
over the Dorado and Roc fields and over prospective
exploration prospects within the Bedout sub-basin.
The Company invested a further $38,129, 000 on
its exploration assets. Most of these costs were
in relation to the drilling costs for the Dorado-1,
Dorado-2, Phoenix South-3 and Roc South-1 wells
within the Company’s Phoenix project. In addition,
the Company continued its preparatory work
for the Buffalo oil field redevelopment and other
exploration projects.
The Company received $2,703,000 during the year
in relation to an insurance recovery claim. The
claim reimbursed a significant portion of the costs
incurred to drill the Phoenix South-3 well which
was designed as a re-drill of the Phoenix South-2
well. The Phoenix South-2 well was successfully
controlled following higher than expected
pressures, which enabled the Claim.
The Company recorded A$629,000 in other financial
assets (2018:2,297,000) as at 30 June 2019. This
represents the current value of the shares held by
Carnarvon in CWX Global Limited (formerly Loyz
Energy Limited) (“CWX”). The movement reflects
the decline in the value of the shares during the
year which has been recorded on the income
statement for the year ended 30 June 2019. The
shares were received as settlement of the deferred
consideration asset relating to the 2014 sale of half
of Carnarvon’s former interests in its producing
concessions in Thailand.
Carnarvon spent $1,666,000 (2018: $2,204,000) in
new venture and advisory costs as the Company
continues to develop its significant regional
geological database. This has been integral in
identifying highly prospective opportunities within
the North-West shelf of Australia to add to the
Company’s string of successful discoveries.
During the financial year there was an unrealized
gain on foreign exchange of $2,478,000 (2018:
$1,751,000) due to the effect of a depreciation of
AUD against the Carnarvon’s USD cash and financial
assets.
The Company does not currently use derivative
financial instruments to hedge financial risk
exposures and therefore it is exposed to daily
movements in the international oil prices, exchange
rates, and interest rates. The Company manages its
cash position in US Dollars and Australian Dollars to
naturally hedge its foreign exchange rate exposures
having regard for likely future expenditure.
20
ANNUAL REPORT 2019OPERATING AND FINANCIAL REVIEW FIGURE 4: CARNARVON INTERESTS AS AT 30 JUNE 2019 IN AUSTRALIA.
Permit Interests
Basin
Equity
Joint Venture
Partner(s)
Partner
Interest
Indicative Forward
Program
Permit
Australia
AC-P62
AC-P63
Bonaparte
Bonaparte
WA-521-P
Roebuck
WA-523-P
Bonaparte
WA-524-P
Dampier
WA-435-P
Roebuck
WA-436-P
Roebuck
WA-437-P
Roebuck
WA-438-P
Roebuck
100%
100%
100%
100%
100%
20%
30%
20%
30%
-
-
-
-
-
-
-
-
-
-
Santos Limited (i)
Santos Limited (i)
Santos Limited (i)
Santos Limited (i)
80%
70%
80%
70%
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
WA-155-P
Barrow
28.5%
Santos Limited (i)
71.5%
G & G Studies
EP407
Perth
2.50% of 42.5% (ii)
-
-
Appraisal
Note:
(i) Denotes operator where Carnarvon is non-operator partner
(ii) Carnarvon has an overriding royalty interest in these assets
21
ANNUAL REPORT 2019
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
2019, 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 retired as a member of the Audit
and Risk Committee and the Remuneration and
Nomination Committee on 12 April 2019.
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.
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
22
DIRECTORS’ REPORT
William (Bill) A Foster
Non-Executive Director
BE (Chemical)
Peter Moore
Non-Executive Director
B.Sc (Hons Geology), MBA, PhD, GAICD
Appointed as a director on 17 August 2010.
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.
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 the Company’s Lead Independent
Director, Chairman of the Audit and Risk Committee
and a member of the Remuneration and Nomination
Committee. Mr Foster Retired as the Chairman of
the Remuneration and Nomination Committee on 12
April 2019.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
9
23
DIRECTORS’ REPORT
Company Secretary
Mr Thomson Naude was appointed Company
Secretary in November 2013. Mr Naude is a qualified
Chartered Accountant, a member of Governance
Institute of Australia and the Chief Financial Officer at
Carnarvon Petroleum.
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.
Mr Ryan is Chairman of the Remuneration and
Nomination Committee and a member of the Audit
and Risk Committee.
24
ANNUAL REPORT 2019 Directors’ meetings
The number of directors’ meetings held and attended by each of the directors during the reporting period was
as follows:
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
(a)
8
8
8
8
8
(b)
8
8
8
8
8
(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 1
WA Foster
P Moore
SG Ryan 2
(a)
2
2
2
-
(b)
2
2
2
-
(a) Number of meetings held during period of office
(b) Number of meetings attended
1 Mr Leonhardt retired from the Audit and Risk Committee on 12 April 2019.
2 Mr Ryan was appointed to the Audit and Risk Committee on 12 April 2019.
25
ANNUAL REPORT 2019DIRECTORS’ REPORT DIRECTORS’ REPORT
Remuneration Report (Audited)
Overview
This section provides an overview of Carnarvon’s remuneration principles and practices and should be read in
conjunction with the more comprehensive detail that is contained within this Remuneration Report.
Carnarvon’s business is such that a relatively small number of individuals can generate significant returns for
shareholders. This was achieved in the 2019 financial year wherein the share price increased 300% year on year.
Carnarvon’s remuneration policies, as determined by the Board, are designed to deliver short and long-term
benefits for the Company and its shareholders. These include attracting, retaining and incentivising quality staff
while ensuring remuneration practices operate within appropriate frameworks.
During the year the Board determined that the Company’s executives and staff outperformed their set
goals across a number of key metrics. Notwithstanding these achievements, a number of fixed and Board
discretionary limits were triggered. For example, the short-term incentive plan contains a limit of 50% of an
individual’s base salary. In addition. given the share price and business performance during the year, the
Board exercised its discretion to reduce Executive and staff entitlements under the long-term incentive plan as
outlined below.
Short term incentive plan (“STIP”):
The STIP is assessed for all Executives and staff and in the current year was awarded on individual and team
contributions toward the achievement of the following strategic objectives and hurdles:
• Dorado-1 exploration success;
• Dorado-2 appraisal success;
• Share price increase in absolute terms and relative terms to peer group from 30 June 2018 level;
• Buffalo PSC signing materially progressed;
• Key Buffalo governmental drilling approvals obtained;
• Preparedness to operate Buffalo materially advanced;
• Business Management System, risk management and processes advanced for enhanced
business operations.
Long term incentive plan (“LTIP”):
The Company’s LTIP contains two hurdle components. The first is share price performance relative to a peer
group. The second is based on specific measurable objectives that are linked to the Company’s long-term
strategic objectives. All Executives and staff participate in the Company’s LTIP which is an Employee Share
Plan (“ESP”) scheme.
• Share price growth during the financial year was 300% and materially exceeded all of the Company’s peer
group’s performance;
• Accordingly, the Board approved the maximum entitlement to Executives and staff based on an
assessment of their contribution to achieving the objectives. The ESP aggregate limit under this component
is 0.75% of total issued capital in any given year. There is also a total ESP aggregate limit of 5% for all
years provided for under the shareholder approved ESP scheme;
• Important strategic measurable objectives were also achieved during the year which ordinarily would have
entitled Executives and staff to receive an LTIP award, also to the maximum of 0.75% of total issued capital;
• However, the Board exercised its judgement and resolved not to award any shares under the measurable
objectives component on the grounds that overall remuneration was considered reasonable;
• Under the Company’s shareholder approved ESP scheme:
• The Company does not outlay any cash under the scheme
• There are limits on when ESP shares can be disposed of by Executives and staff, namely:
-
-
-
-
25% only after two years,
50% after three years,
75% after four years, and
100% after five years
• The ESP shares are issued at a 20% premium to the share price on the date they are granted. The
participant owes the Company, by way of a loan, for the equivalent value of the shares. This loan must
be repaid prior to any ESP share disposal.
• Repayment of the loan provides additional funds to the Company
• Therefore, in repaying the loan, the participant only benefits to the extent the long-term share price is
over 20% from the date the shares were granted
• Carnarvon’s ESP is unlike performance rights in which a participant’s benefit comprises the full value of
the shares that vest.
26
ANNUAL REPORT 2019 Remuneration Report (Audited) (continued)
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.
Share price as at 30 June each year
Year on year change in the share price
30 June
2015
$0.115
53%
30 June
2016
$0.100
(13%)
30 June
2017
$0.079
(21%)
30 June
2018
$0.15
90%
30 June
2019
$0.60
300%
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.
27
ANNUAL REPORT 2019DIRECTORS’ REPORT Remuneration Report (Audited) (continued)
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 2018, is not to exceed $600,000 per annum.
A non-executive director’s base fee is $80,340 per annum, the Chairman of the board receives $123,188
per annum, the Chairman of the Audit Committee receives an additional $2,678 and the Chairman of the
Remuneration Committee receives an additional $2,678. These fees were last increased with effect from 1
January 2019. 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, and fully vested to each
named executive and key management personnel during the period.
The strategic objectives that were met during the 30 June 2019 financial year were as follows:
• Dorado-1 success below the Caley formation
• Dorado-2 appraisal success
• Share price increase in absolute terms and relative terms to peer group from 30 June 2018 level
• Buffalo PSC signing progressed
• Main Buffalo government drilling approvals obtained
• Preparedness to operate Buffalo materially advanced
• Business Management System, risk management and processes advanced for enhanced
business operations
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.
28
ANNUAL REPORT 2019DIRECTORS’ REPORT Remuneration Report (Audited) (continued)
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 9
November 2018.
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
Less than 50%
50%
50% to 90%
90% and above
% of EPS award
Nil
25%
Pro rata
Full amount
For the purposes of the TSR evaluation, Carnarvon’s peer group is Australis Oil and Gas Ltd, Buru Energy Ltd,
Central Petroleum Ltd, Cooper Energy Ltd, Cue Energy Resources Ltd, FAR Ltd, Horizon Oil Ltd, Karoon Gas
Australia Ltd, Otto Energy Ltd, Senex Energy Ltd, 88E Ltd, Strike Energy Ltd and Tap Oil Ltd.
29
ANNUAL REPORT 2019DIRECTORS’ REPORT Remuneration Report (Audited) (continued)
In the 30 June 2019 financial year, the Company achieved the highest TSR in relation to its peers with a share
price increase of 300%. As such, the relative TSR outcome was 100% on the pro rata basis outlined above.
Therefore, the pool of plan shares on the relative TSR basis was 10,070,448 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 Dorado project (multiple objectives);
• Progress in the Buffalo project (multiple objectives); and
• Numerous corporate objectives which remain confidential.
While the executive team achieved many of the strategic objectives during the 30 June 2019 financial year, the
Board applied a reasonableness judgment over the “measurable objectives” component and resolved not to
award any additional ESP shares under this section.
Therefore, the total pool of Plan shares to be awarded was 10,070,448 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 number of Plan Shares issued to any Eligible Person and the issue price is to be determined by the
The Company may at any time, in its absolute discretion, make an offer to an Eligible Person;
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 they wish;
• 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;
• A holding lock will be placed on the Plan Shares until the loan is fully repaid.
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.
30
ANNUAL REPORT 2019DIRECTORS’ REPORT
Remuneration Report (Audited) (continued)
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 34.
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 pages 29 to 30.
(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
1,238,108*
1,807,574
965,196
Grant date
9/11/2018*
28/06/2019
28/06/2019
* Approved by shareholders at the AGM on 9 November 2018.
Exercise price
per plan share
Fair value at
grant date
$0.165*
$0.690
$0.690
$0.28*
$0.32
$0.32
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.
31
ANNUAL REPORT 2019DIRECTORS’ REPORT Remuneration Report (Audited) (continued)
The following factors and assumptions were used in determining the fair value of Plan Shares at grant date in
the current reporting period:
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
9/11/2018
28/06/2019
28/06/2023
28/06/2024
$0.28
$0.32
$0.165
$0.690
$0.38
$0.60
68%
68%
1.50%
1.25%
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.
Remuneration & Nomination Committee
The Committee is to include at least 3 members. Members of the committee during the 30 June 2019 financial
year were Mr Foster (retired as Chairman of the Remuneration & Nomination Committee on 12 April 2019), Mr
Ryan (joined and appoint as Chairman of the Remuneration & Nomination Committee on 12 April 2019), Mr
Leonhardt (retired from Remuneration & Nomination Committee on 12 April 2019) 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:
SG Ryan 1
WA Foster 2
PJ Leonhardt 3
P Moore
(a)
1
2
1
2
(b)
1
2
1
2
(a) Number of meetings held during period of office
(b) Number of meetings attended
1 Mr Ryan joined and was appointed as Chairman of the Remuneration & Nomination Committee on
12 April 2019.
2 Mr Foster retired as Chairman of the Remuneration & Nomination Committee on 12 April 2019.
3 Mr Leonhardt retired from the Remuneration & Nomination Committee on 12 April 2019.
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.
32
ANNUAL REPORT 2019DIRECTORS’ REPORT Remuneration report (Audited) (continued)
Directors’ and executive officers’ remuneration, Company and consolidated (continued)
Name
Directors
Non-Executive
Mr PJ Leonhardt (Chairman)
2019
2018
Mr WA Foster 1
2019
2018
Mr SG Ryan 2
2019
2018
Dr P Moore
2019
2018
Executive
Mr AC Cook (Chief Executive Officer)
2019
2018
Executives
Mr PP Huizenga (Chief Operating Officer)
2019
2018
Mr TO Naude (Chief Financial Officer)
2019
2018
Total compensation: key management personnel
2019
2018
Short Term
Post-Employment
Long Term
Salary
and fees
Short term
cash bonus
Superannuation
contributions
Shares/
Options
Total
Proportion of
remuneration
performance
related
Value of shares/
options
as a % of
remuneration
$120,819
$118,450
$83,474
$82,400
$72,861
-
$78,795
$77,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$7,446 3,4
-
-
-
$7,446 3,4
$120,819
$118,450
$83,474
$89,846
$72,861
-
$78,795
$84,696
$621,438
$578,865
$296,705
$73,124
$33,903
$28,375
$346,912 3,5
$61,226 3,6
$1,298,958
$741,590
$572,154
$548,671
$269,945
$241,097
$1,819,486
$1,646,733
$271,888
$69,468
$145,181
$32,417
$713,774
$175,009
$39,249
$23,661
$36,799
$24,103
$580,834 3
$96,747 3
$1,464,125
$738,547
$310,150 3
$45,147 3
$762,075
$342,764
$109,951
$76,139
$1,237,896
$218,012
$3,881,107
$2,115,893
-
-
-
-
-
-
-
49.5%
18.1%
58.2%
22.5%
59.7%
22.6%
51.5%
18.6%
-
-
-
8.3%
-
-
8.8%
26.7%
8.3%
39.7%
13.1%
40.7%
13.2%
32.7%
10.3%
Directors’ fees are paid or payable to the director or a director-related entity.
1 Mr Foster resigned as Chairman of the Remuneration and Nomination Committee on 12 April 2019.
2 Mr Ryan appointed as a non-executive director on 30 July 2018 and appointed as Chairman of the Remuneration and Nomination Committee on 12 April 2019.
3 Accounting cost as determined using the Black-Scholes Option Pricing Model.
4 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.
5 2019 share-based payments to Mr Cook relate to 2018 financial year remuneration approved at the AGM on 9 November 2018 and issued 16 November 2018.
6 2018 share-based payments to Mr Cook relate to 2017 financial year remuneration approved at the AGM on 17 November 2017 and issued 27 November 2017.
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
33
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:
2019
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
Executives
PP Huizenga
TO Naude
Held at
1 July 2018
Net
acquired/ (sold)
Award under
Employee
Share Plan
Received on
exercise
of options
Held at
30 June 2019
17,750,000
737,302
12,499,917
270,232
-
-
113,636
-
150,000
229,240
-
-
1,238,108
-
-
10,668,622
3,241,389
(500,000)
(187,228)
1,807,574
965,196
-
-
-
-
-
-
-
17,750,000
850,938
13,738,025
420,232
229,240
11,976,196
4,019,357
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:
2019
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
Executives
PP Huizenga
TO Naude
Held at
1 July 2018
Granted as
compensation
Employee
Share Plan
cancellations
Exercised
Held at
30 June 2019
3,000,000
-
9,734,917
-
-
-
-
1,238,108
-
-
10,168,622
3,027,316
1,807,574
965,196
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
10,973,025
-
-
11,976,196
3,992,512
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:
2019
Directors
WA Foster
P Moore
Held at
1 July 2018
Granted as
compensation
Acquired/
(sold)
Exercised
Held at
30 June 2019
500,000
500,000
-
-
-
-
-
-
500,000
500,000
End of Remuneration Report
34
ANNUAL REPORT 2019DIRECTORS’ 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 2019 ($)
Auditors of the Company:
Ernst & Young
Directors’ interests
71,502
At the date of this report, the relevant interests of the directors in securities of the Company are as follows:
Name
PJ Leonhardt
AC Cook
WA Foster
P Moore
SG Ryan
Ordinary
Shares
Options over
Ordinary Shares
17,750,000
13,738,025
850,938
420,232
229,240
-
-
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 2019, women made up 31% 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 2019
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 2019 financial year are contained in the operating and financial review as set
out on pages 8 to 21.
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 2019.
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 (2018: Nil).
Auditor’s independence declaration
The auditor’s Independence Declaration under Section 307C of the Corporations Act is set out on page 39 and
forms part of the directors’ report for the financial year ended 30 June 2019.
Principal activities
During the course of the 2019 financial year the Group’s principal activities continued to be directed towards oil
and gas exploration, development and production.
35
ANNUAL REPORT 2019DIRECTORS’ REPORT 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 8 to 21.
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 2019 is set out on pages 8
to 21 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.
Events subsequent to reporting date
On 25 July 2019, the Company announced a successful Placement of 202,623,637 shares which raised $79
million (before costs). In addition to the Placement, the Company completed a Share Purchase Plan on 16
August 2019 which issued 8,959,465 shares and raised $3.5 million (before costs).
Other than that there is no other matters or circumstance has arisen since 30 June 2019 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
36
ANNUAL REPORT 2019DIRECTORS’ REPORT 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, 27 August 2019
37
ANNUAL REPORT 2019DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
Auditor’s Independence Declaration to the Directors of Carnarvon
GPO Box M939 Perth WA 6843
Petroleum Limited
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
As lead auditor for the audit of the financial report of Carnarvon Petroleum Limited for the financial year
ended 30 June 2019, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
Auditor’s Independence Declaration to the Directors of Carnarvon
Petroleum Limited
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
As lead auditor for the audit of the financial report of Carnarvon Petroleum Limited for the financial year
ended 30 June 2019, I declare to the best of my knowledge and belief, there have been:
This declaration is in respect of Carnarvon Petroleum Limited and the entities it controlled during the
financial year.
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
Ernst & Young
This declaration is in respect of Carnarvon Petroleum Limited and the entities it controlled during the
financial year.
R J Curtin
Partner
Ernst & Young
27 August 2019
R J Curtin
Partner
27 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:CARNARVON:031
38
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:CARNARVON:031
ANNUAL REPORT 2019
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 2019 is dated as at 30
June 2019 and was approved by the Board on 27 August 2019. The Corporate Governance Statement is
available on Carnarvon Petroleum’s website at carnarvon.com.au/about-us/corporate-governance/.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
9
39
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2019
Other income
Administrative expenses
Directors’ fees
Employee benefits expense
Foreign exchange gain
New venture and advisory costs
Movement in fair value of financial assets
Notes
2
18(a)
Consolidated
2019
$000
1,401
(2,214)
(356)
(5,755)
2,237
(1,666)
(1,668)
2018
$000
5,667
(1,409)
(278)
(2,088)
1,737
(2,204)
-
(Loss)/Profit before income tax
(8,021)
1,425
Taxes
Current income tax expense
6(a)
-
-
(Loss)/Profit for the year
(8,021)
1,425
(Loss)/Profit attributable to members of the Company
(8,021)
1,425
(Loss)/Profit per share:
Basic (loss)/profit for the period attributable to members of the
entity (cents per share)
Diluted (loss)/ profit for the period attributable to members of
the entity (cents per share)
5
5
(0.64)
0.14
(0.64)
0.14
The above consolidated income statement should be read in conjunction with the accompanying notes to the
financial statements.
40
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Consolidated
Notes
2019
$000
2018
$000
(Loss)/Profit for the year
(8,021)
1,425
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)
Total comprehensive (loss)/profit for the year
(8,021)
208
Total comprehensive (loss)/profit attributable to members of
the company
(8,021)
208
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes to the financial statements.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
9
41
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Other financial assets
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
(Accumulated deficit)/Retained earnings
Total equity
Notes
15(b)
7
10
9
8
11
Consolidated
2019
$000
2018
$000
73,900
308
459
63,606
324
555
74,667
64,485
44
629
88,869
35
2,297
53,443
89,542
55,775
164,209
120,260
13
18(b)
1,776
378
902
386
18(b)
2,154
1,288
283
283
196
196
2,437
1,484
161,772
118,776
14
14
166,081
66
(4,375)
115,508
(1,595)
4,863
161,772
118,776
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes to the financial statements.
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
42
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Issued
capital
$000
Reserve
shares
$000
(Accumulated
deficit) /
Retained
earnings
$000
Translation
reserve
$000
Fair value
reserve
$000
Share based
payments
reserve
$000
Total
$000
Balance at 1 July 2017
95,865
(3,654)
3,438
26
-
3,253
98,928
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
9
Comprehensive loss
Profit for the year
Other comprehensive loss
Total comprehensive
loss for the year
-
-
-
-
-
-
1,425
-
1,425
Transactions with owners
and other transfers
Share based payments
-
Proceeds from capital raise 19,021
Issue of ESP shares
622
Total transactions
with owners and other
19,643
transfers
Balance at 30 June 2018 115,508
-
-
(622)
-
-
-
(622)
(4,276)
-
4,863
115,508
(4,276)
4,863
-
-
(1,217)
Balance at 1 July 2018
Comprehensive loss
AASB 9 adjustment to
opening balances
Restated balance
1 July 2018
Loss for the year
Other comprehensive loss
Total comprehensive
loss for the year
Transactions with owners
and other transfers
Share based payments
115,508
-
-
(4,276)
-
-
-
-
-
-
Proceeds from capital raise 47,468
262
Exercise of ESP shares
Issue of ESP shares
2,843
Total transactions
with owners and other
transfers
50,573
-
339
(2,843)
(2,504)
3,646
(8,021)
-
(8,021)
-
-
-
-
-
-
-
-
-
-
-
-
26
26
-
26
-
-
-
-
-
-
-
-
-
(1,217)
(1,217)
-
-
-
-
(1,217)
-
-
-
1,425
(1,217)
208
619
-
-
619
19,021
-
619
3,872
19,640
118,776
(1,217)
3,872
118,776
1,217
-
-
-
-
-
-
-
-
-
-
-
-
3,872
-
-
118,776
(8,021)
-
-
(8,021)
2,948
2,948
-
-
-
47,468
601
-
2,948
51,017
6,820
161,772
Balance at 30 June 2019 166,081
(6,780)
(4,375)
26
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes to the financial statements.
43
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Payments to suppliers and employees
Interest received
Research and development tax credit received
Net cash used in operating activities
Cash flows from investing activities
Exploration and development expenditure
Insurance Refund Received
Acquisition of property, plant and equipment
Consolidated
Notes
2019
$000
2018
$000
(5,944)
1,401
-
(5,855)
630
1,523
15(a)
(4,543)
(3,702)
(38,129)
2,703
(44)
(6,505)
-
(6)
9
Net cash used in investing activities
(35,470)
(6,511)
Cash flows from financing activities
Proceeds from capital raise
Proceeds from exercise of Employee Share Plan
47,468
601
19,021
-
Net cash provided by financing activities
48,069
19,021
Net increase 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
8,056
63,606
2,238
8,808
53,050
1,748
Cash and cash equivalents at the end of the financial year
15(b)
73,900
63,606
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to
the financial statements.
44
NOTES TO THE FINANCIAL STATEMENTS
1. Reporting entity
The consolidated financial report of Carnarvon Petroleum Limited (‘Company’) for the financial year
ended 30 June 2019 comprises the Company and its controlled entities (the “Group”) and the Group’s
interest in joint operations.
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 27 August 2019.
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.
45
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 2. Other income
Consolidated
Interest revenue
Research and development tax credit received
Gain on settlement of deferred consideration asset (Note 8)
3. Other expenses
The following expenses are included in administrative and employee
benefit expenses in the consolidated 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. (Loss)/Profit per share
2019
$000
1,401
-
-
1,401
(34)
(287)
(368)
(67)
-
2018
$000
630
1,523
3,514
5,667
(52)
(242)
(288)
(67)
(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
Weighted average number of ordinary shares 30 June (basic)
Effect of share options on issue(1)
Weighted average number of ordinary shares 30 June (diluted)
(Loss)/Profit used in calculating basic and diluted loss per share
2019
2018
Number of shares
1,189,888,259
63,787,832
1,253,676,091
-
1,254,676,091
1,027,969,809
24,552,749
1,052,522,558
1,000,000
1,053,522,558
2019
$
(8,021,000)
2018
$
1,425,000
(1) As the consolidated entity incurred a loss for the year ended 30 June 2019, the effect of options on
issue is considered to be antidilutive and thus not factored in determining the diluted earnings per
share.
46
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS
6. Taxes
(a) Income tax expense
Current Income tax expense
Current Income tax expense
Adjustment for prior period
Deferred tax (income)
Origination and Reversal of temporary differences-Current
Adjustment for prior period
Total income tax expense
Consolidated
2019
$000
2018
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Numerical reconciliation between pre-tax profit and income tax
expense:
(Loss)/profit for the period
Total income tax expense
(Loss)/profit excluding income tax
(8,022)
-
(8,022)
1,425
-
1,425
Income tax using the statutory rate of 27.5%
(2,206)
392
Non-deductible expenditure
R&D grant not assessable
Settlement of deferred consideration
Share based payment expense
Entertainment
Current year tax benefit not brought to account
Under(over) provision in prior years
Income tax expense
(b) Current tax liability
Tax Consolidation
-
-
-
811
4
1,391
-
-
-
-
190
(419)
(966)
-
-
803
-
-
-
-
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.
47
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 6. Taxes (continued)
(c) Deferred tax assets and liabilities
Deferred tax liabilities
Capitalised exploration deducted immediately
Unrealised foreign exchange gains
Gross deferred tax liabilities
Deferred tax assets
Carry forward revenue tax losses
Carry forward capital tax losses
Property, plant and equipment
Share issue costs
Provisions
Accruals
Consolidated
2019
$000
2018
$000
22,953
681
13,211
481
23,634
13,692
2019
$000
36,747
2,319
149
680
182
24
2018
$000
26,337
2,319
161
215
160
34
Gross deferred tax assets
40,100
29,226
Set-off of deferred tax liabilities pursuant to set-off provisions
Unrecognised deferred tax asset
(23,634)
(16,466)
(13,692)
(15,534)
Net deferred tax assets
-
-
(d) Unrecognised tax losses and PRRT credits
Australian tax losses
The Group has not recognised a deferred tax asset for its Australian
tax losses.
2019
$000
2018
$000
116,058
78,203
Unaugmented PRRT losses
103,144
67,719
The Group has not recognised a deferred tax asset for its PRRT losses.
7. Trade and other receivables
Consolidated
Current
Other receivables
Cash held as security
The Group’s exposure to credit and currency risks is disclosed in Note 25.
2019
$000
90
218
308
2018
$000
96
228
324
48
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 8. Other financial assets
Financial assets at FVTPL
2019
$000
2018
$000
629
2,297
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
2,297
-
-
3,514
(1,668)
(1,217)
Carrying value at the end of period
629
2,297
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; 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 2019 has been accounted for as a fair value through
profit or loss financial asset under Australian Accounting Standards and classified as a “level 1” financial
asset under the fair value hierarchy.
49
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 9. Property, plant and equipment
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
10. Other assets
Current
Deposits and prepayments
11. Exploration and evaluation expenditure
Cost:
Balance at beginning of financial year
Additions
Well control insurance refund
Balance at end of financial year
Consolidated
2019
$000
2018
$000
564
44
(45)
-
563
529
-
(45)
35
519
35
44
558
6
-
-
564
478
-
-
51
529
80
35
Consolidated
2019
$000
2018
$000
459
555
53,443
38,129
(2,703)
88,869
46,938
6,505
-
53,443
50
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 12. Joint operations
The Group has the following interests in joint operations:
Principal activities
Ownership interest %
Joint operation
Western Australia
WA-435-P, WA437-P, Roebuck Basin
Exploration for hydrocarbons
WA-436-P, WA 438-P, Roebuck Basin
Exploration for hydrocarbons
2019
20%
30%
2018
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.
13. Trade and other payables
Consolidated
Current
Trade payables
Non-trade payables and accrued expenses
2019
$000
1,697
79
1,776
2018
$000
533
369
902
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in
Note 25.
51
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019
14. 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
Exercise of employee shares
Proceeds from capital raise
Balance at end of financial year
Company
2019
2018
Number of shares
1,189,888,259
151,600,000
9,335,989
1,350,824,248
1,027,969,809
153,769,034
8,149,416
1,189,888,259
Company
2019
$000
115,508
2,504
601
47,468
166,081
2018
$000
95,865
622
-
19,021
115,508
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
Employee Share Plan repaid
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
2019
2018
Number of shares
53,602,608
9,335,989
(6,793,111)
56,145,486
45,455,192
8,149,416
-
53,602,608
Company
2019
$000
4,276
2,504
6,780
2018
$000
3,654
622
4,276
Movements in the translation reserve are set out in the Statement of Changes in Equity on page 43.
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 43. This reserve represents the fair value of shares issued under the Carnarvon’s ESP.
52
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 15. Reconciliation of cash flows from operating activities
Consolidated
(a) Cash flows from operating activities
(Loss)/Profit for the year
Adjustments for:
Equity settled share based payment expense
Settlement of deferred consideration asset
Depreciation
Movement of financial asset
Foreign exchange profit/(loss)
Operating loss before changes in working capital and provisions:
Changes in assets and liabilities:
Decrease in trade and other receivables
Decrease/(Increase) in other assets
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in provisions and employee benefits
Net cash flows used in operating activities
(b) Reconciliation of cash and cash equivalents
Cash at bank and at call
Cash on deposit
2019
$000
2018
$000
(8,021)
1,425
2,949
-
34
(2,885)
2,315
618
(3,514)
51
-
(1,748)
(5,608)
(3,168)
16
96
874
79
(4,543)
76
(96)
(439)
(75)
(3,702)
25,329
48,571
73,900
3,726
59,880
63,606
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is
disclosed in Note 25.
Restricted cash of $218,000 consolidated is included under trade and other receivables (2018:$228,000
consolidated), see Note 7.
53
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019
16. 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
Data licence commitments
17. Contingencies
Consolidated
2019
$000
793
493
1,286
2018
$000
1,153
1,474
2,627
483
437
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.
54
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 18. Employee benefits
(a) Employee benefits
Short term:
Salary and wages (including super)
Allocated staff costs to projects
Short term cash bonus
Long term:
Share based payment expense
Total Employee benefits
(b) Employee benefits
Current:
Liability for annual leave and long service leave
Non-Current:
Provision for long service leave
Total Employee benefits
Employee Share Plan
Consolidated
2019
$000
4,359
(3,068)
1,515
2018
$000
3,826
(2,817)
460
2,949
619
5,755
2,088
Consolidated
2019
$000
2018
$000
378
386
283
661
196
582
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:
Number
2019
WAEP
2019
Number
2018
WAEP
2018
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
53,602,608
9,335,989
-
6,793,111
-
56,145,486
56,145,486
0.15
0.62
-
0.09
-
0.24
0.24
45,453,192
8,149,416
-
-
-
53,602,608
53,602,608
0.15
0.15
-
-
-
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:
55
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 18. Employee benefits (continued)
Fair value of ESP shares and related
assumptions
Key
management
personnel
2019
Key
management
personnel
2018
Other
employees
2019
Other
employees
2018
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
Share-based expense recognised
30.9
54
54
68%
5 years
Nil
1.33%
1,237,895
6.3
11
13
68%
5 years
Nil
1.50%
$203,120
32.1
60
69
68%
5 years
Nil
1.25%
1,711,136
8.1
15
17
68%
5 years
Nil
1.5%
$400,975
Further details of shares granted under the ESP to directors are set out in Note 22, and in the
Remuneration Report set out on pages 26 to 34.
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:
2019
Held at
1 July 2018
Granted as
compensation
Acquired/
(sold)
Exercised
Held at
30 June 2019
Directors
W Foster
P Moore
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
2019
1,000,000
-
-
-
-
1,000,000
1,000,000
WAEP
2019
0.15
-
-
-
-
0.15
0.15
Number
2018
1,000,000
-
-
-
-
1,000,000
1,000,000
WAEP
2018
0.15
-
-
-
-
0.15
0.15
The weighted average remaining contractual life for the share options outstanding as at 30 June 2019
was 1 years (2018: 1 year).
The fair value of share options issued is measured by reference to their fair value using the Black-Scholes
model, as set out below:
56
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 18. Employee benefits (continued)
Fair value of share option and related assumptions
2019
2018
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
7.9
12
15
89%
5 years
Nil
2.0%
-
7.9
12
15
89%
5 years
Nil
2.0%
$14,891
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
19. 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 2019 an amount of $67,855 (2018: $78,006) is included in Carnarvon and consolidated trade
and other payables for outstanding director fees and expenses.
20. Operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
Consolidated
2019
$000
196
845
1,041
2018
$000
203
-
203
During the reporting period $289,000 was recognised as an expense in the consolidated income
statement in respect of operating leases (2018: $196,000).
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.
57
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 21. 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.
22. 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
2019
$000
2,533
110
1,238
3,881
2018
$000
1,822
76
218
2,116
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 26 to 34.
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
2019
$000
68
2018
$000
78
58
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 22. 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:
2019
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
Executives
PP Huizenga
TO Naude
2018
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
Held at
1 July 2018
Net
acquired/ (sold)
Award under
Employee
Share Plan
Received on
exercise
of options
Held at
30 June 2019
17,750,000
737,302
12,499,917
270,232
-
-
113,636
-
150,000
229,240
-
-
1,238,108
-
-
10,668,622
3,241,389
(500,000)
(187,228)
1,807,574
965,196
-
-
-
-
-
-
-
17,750,000
850,938
13,738,025
420,232
229,240
11,976,196
4,019,357
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
59
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 22. 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:
2019
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
Executives
PP Huizenga
TO Naude
2018
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
Executives
PP Huizenga
TO Naude
Held at
1 July 2018
Granted as
compensation
Employee
Share Plan
cancellations
Exercised
Held at
30 June 2019
3,000,000
-
9,734,917
-
-
-
-
1,238,108
-
-
10,168,622
3,027,316
1,807,574
965,196
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
10,973,025
-
-
11,976,196
3,992,512
Held at
1 July 2017
Granted as
compensation
Employee
Share Plan
cancellations
Exercised
Held at
30 June 2018
3,000,000
-
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
(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:
2019
Directors
WA Foster
P Moore
Held at
1 July 2018
Granted as
compensation
Acquired/
(sold)
Exercised
Held at
30 June 2019
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.
60
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 23. Consolidated entities
Name
Country of Incorporation
Ownership interest
2018
2019
Company
Carnarvon Petroleum Ltd
Controlled entities
Carnarvon Thailand Ltd
Lassoc Pty Ltd
SRL Exploration Pty Ltd
Timor-Leste Petroleum Pty Ltd
24. Subsequent events
British Virgin Islands
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
On 25 July 2019, the Company announced a successful Placement of 202,623,637 shares which raised
$79 million (before costs). In addition to the Placement, the Company completed a Share Purchase Plan
on 16 August 2019 which issued 8,959,465 shares and raised $3.5 million (before costs).
Other than that there is no other matters or circumstance has arisen since 30 June 2019 that in the
opinion of the directors has significantly affected, or may significantly affect in future financial years:
(iv) The Group’s operations; or
(v) The results of those operations; or
(vi) The Group’s state of affairs
25. 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.
61
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 25. Financial risk management (continued)
(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
Weighted average interest rate (%)
Financial assets – cash and cash equivalents
All other financial assets and liabilities are non-interest bearing.
Sensitivity analysis
Consolidated
2019
2018
73,900
63,606
1.63%
1.78%
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 2018:
30 June 2019
30 June 2018
Consolidated
Equity
$000
Profit and loss
$000
183
159
183
159
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 2018:
30 June 2019
30 June 2018
Consolidated
Equity
$000
Profit and loss
$000
(183)
(159)
(183)
(159)
62
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 25. 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 2019 or 30 June 2018 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 25.
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
Consolidated
2019
$000
2018
$000
73,900
308
74,208
63,606
324
63,930
All cash held by the Group is deposited with investment grade banks and any expected credit loss is
immaterial.
The aging of the Group’s trade receivables at reporting date was:
Not past due
Gross
2019
$000
308
308
Impairment
2019
$000
-
-
Gross
2018
$000
324
324
Impairment
2018
$000
-
-
The Group trades only with recognised creditworthy third parties and the exposure to credit risk as at
balance date is not significant. The Group believes that no impairment allowance is necessary in respect
of other receivables.
63
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 25. Financial risk management (continued)
(c) Currency risk
Currency risk arises from assets and liabilities that are denominated in a currency other than the
functional currencies of the entities within the Group, being the A$ 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.
30 June 2019
Cash and cash equivalents
Trade payables and accruals
Gross balance sheet exposure
30 June 2018
Cash and cash equivalents
Trade payables and accruals
Gross balance sheet exposure
USD
A$000
32,543
4
32,547
46,930
-
46,930
The following significant exchange rates applied during the year:
AUD to:
1 USD
Sensitivity analysis
Average rate
2019
1.424
2018
1.290
Reporting date spot rate
2018
2019
1.349
1.423
A 5% strengthening of the AUD against the USD for the 12 months to 30 June 2019 and 30 June 2018
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 2019
USD
30 June 2018
USD
Consolidated
Equity
$000
Profit and loss
$000
(1,549)
(1,549)
(2,235)
(2,235)
A 5% weakening of the AUD against the USD for the 12 months to 30 June 2019 and 30 June 2018
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 2019
USD
30 June 2018
USD
64
Consolidated
Equity
$000
Profit and loss
$000
1,712
2,470
1,712
2,470
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 25. Financial risk management (continued)
(d) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they
fall due. The Group’s approach to managing this risk is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due under a range of financial conditions. The 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
1,697
1,697
1,697
533
533
533
-
-
30 June 2019
Non-derivative financial liabilities
Trade and other payables
30 June 2018
Non-derivative financial liabilities
Trade and other payables
26. 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
30 June 2019
Assets
Other financial assets
Total assets
30 June 2018
Assets
Other financial assets
Total assets
Level 1
$’000
Level 2
$’000
Level 3
$’000
629
629
-
-
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
2,297
2,297
-
-
-
-
Total
$’000
629
629
Total
$’000
2,297
2,297
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.
65
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019
27. 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)/profit
Total comprehensive (Loss)/Profit
Parent Contingencies
2019
$000
2018
$000
74,667
88,913
163,580
2,154
283
2,437
64,485
55,775
120,260
1,288
196
1,484
166,080
(4,349)
41
161,772
115,508
3,672
(404)
118,776
(6,354)
1,425
(6,354)
1,425
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 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.
66
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 27. Parent Information (continued)
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
Data licence commitments
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
28. Contingent assets and liabilities
Parent
2019
$000
793
493
1,286
2018
$000
1,153
1,474
2,627
482
437
196
845
1,041
203
-
203
The Company has a contingent asset which relates to the future receipt of an insurance refund. As at 30
June 2019, the Company had received $2.7m of the refund which is no longer recognised as a contingent
asset. The final settlement amount is still being determined with the insurance Underwriters.
The successful insurance claim related to the completion of well control activities for the Phoenix South-2
well in January 2017 due to the well encountering higher than expected pressures. The Phoenix South-3
well was designed as a re-drill with a significant portion of the costs of the Phoenix South-3 well to be
reimbursed by the insurance claim.
There were no contingent liabilities as at 30 June 2019.
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.
(b) Adoption of new and amended Accounting Standards
The accounting policies adopted are consistent with those of the previous financial year and
corresponding interim reporting period, except for the policies stated below.
The consolidated entity has adopted all the new, revised or amending Accounting Standards and
Interpretations issued by the AASB that are mandatory for the current reporting period. Any new, revised
or amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
The nature and the effect of the adoption of new Accounting Standards and Interpretations that are most
relevant to the consolidated entity are described below:
67
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 29. Basis of preparation of the financial report (continued)
(b) Adoption of new and amended Accounting Standards (continued)
(i) AASB 15 Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers (AASB 15) supersedes AASB 111 Construction
Contracts, AASB 18 Revenue and related Interpretations and it applies, with limited exceptions, to all
revenue arising from contracts with its customers. AASB 15 establishes a five-step model to account for
revenue arising from contracts with customers and requires that revenue be recognised at an amount
that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods
or services to a customer.
AASB 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and
circumstances when applying each step of the model to contracts with their customers. The standard
also specifies the accounting for the incremental costs of obtaining a contract and the costs directly
related to fulfilling a contract. In addition, the standard requires extensive disclosures.
The Group adopted AASB 15 using the full retrospective method of adoption. The adoption of AASB 15
had no impact on the Group and as such no transition adjustments to the comparative year.
(ii) AASB 9 Financial Instruments
AASB 9 Financial Instruments (AASB 9) replaces AASB 139 Financial Instruments: Recognition and
Measurement (AASB 139), bringing together all three aspects of the accounting for financial instruments:
classification and measurement; impairment; and hedge accounting. The Group has applied AASB 9,
with the initial application date of 1 July 2018. The consolidated statement of financial position as at
30 June 2018 and the consolidated income statement and consolidated statement of comprehensive
income for the year then ended were not restated.
Classification and measurement
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and
some contracts to buy or sell non-financial items. AASB 9 largely retains the existing requirements
of AASB 139 for the classification and measurement of financial liabilities, however, it eliminates the
previous AASB 139 categories for financial assets held to maturity, receivables and available for sale.
Under AASB 9, on initial recognition a financial asset is classified as measured at:
• Amortised cost;
• Fair Value through Other Comprehensive Income (FVOCI) – debt investment;
• FVOCI – equity investment; or
• Fair Value through Profit or Loss (FVTPL)
The classification is based on two criteria: the Group’s business model for managing the assets; and
whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on
the principal amount outstanding.
At the date of initial application, existing financial assets and liabilities of the Group were assessed in
terms of the requirements of AASB 9. The assessment was conducted on instruments that had not been
derecognised as at 1 July 2018. In this regard, the Group has determined that the adoption of AASB 9
has impacted the classification of financial instruments at 1 July 2018 as follows:
Class of financial instrument
Original measurement
presented in the statement
category under AASB 139
of financial position
Cash and cash equivalents
Loans and receivables
Trade and other receivables Loans and receivables
Other financial assets
Trade and other payables
New measurement
category under AASB 9
Financial assets at amortised cost
Financial assets at amortised cost
Fair value through profit and loss
Available-for-sale
Financial Liabilities at amortised cost Financial liabilities at amortised cost
As a result of the change in classification of the Group’s other financial assets, the fair value reserve of
$1.2m related to the listed equity investments that were previously presented under accumulated OCI,
was reclassified to Retained earnings as at 1 July 2018.
68
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 29. Basis of preparation of the financial report (continued)
Impairment of financial assets
In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit loss
model to be applied as opposed to an incurred credit loss model under AASB 139. The expected credit
loss model requires the Group to account for expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial
asset. In particular, AASB 9 requires the Group to measure the loss allowance at an amount equal to
lifetime expected credit loss (“ECL”) if the credit risk on the instrument has increased significantly since
initial recognition. On the other hand, if the credit risk on the financial instrument has not increased
significantly since initial recognition, the Group is required to measure the loss allowance for that financial
instrument at an amount equal to the ECL within the next 12 months.
As at 1 July 2018, the Group reviewed and assessed the existing financial assets for impairment using
reasonable and supportable information, and determined that the impact is not material.
Hedge accounting
The Group has not applied applied hedge accounting.
(c) Basis of measurement
The financial report is prepared on a historical cost basis, except for financial assets which are measured
at fair value.
(d) 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.
Key judgement – functional currency
The determination of the functional currency of the Company’s controlled entities requires consideration
of a number of factors. These factors include the currencies that primarily influence their sales and costs
and the economic environment in which the entities operate.
Key judgements – other
Other areas of judgement are in the determination of oil reserves, rehabilitation provisions, and
capitalisation of exploration and evaluation costs, determination of areas of interest, and the units of
production method of depreciation.
69
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 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 2019. 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 12.
70
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 30. Significant accounting policies (continued)
(b) Income tax
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.
71
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 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.
Where an asset does not generate cash flows that are largely independent it is assigned to a cash
generating unit and the recoverable amount test applied to the cash generating unit as a whole.
If the carrying value of the asset is determined to be in excess of its recoverable amount, the asset or
cash generating unit is written down to its recoverable amount.
Depreciation
Depreciation on property, plant and equipment is calculated on a straight-line basis over expected
useful life to the economic entity commencing from the time the asset is held ready for use. The major
depreciation rates used for all classes of depreciable assets are:
Property, plant and equipment:
10% to 33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at least annually.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains and losses are included in the income statement.
72
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 30. Significant accounting policies (continued)
(d) 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(b).
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.
(e) 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.
(f) 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.
73
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 30. Significant accounting policies (continued)
(g) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
(i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair
value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of
trade receivables that do not contain a significant financing component or for which the Group has
applied the practical expedient, the Group 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. Trade receivables
that do not contain a significant financing component or for which the Group has applied the practical
expedient are measured at the transaction price determined under AASB 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it
needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal
amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument
level.
The Group’s business model for managing financial assets refers to how it manages its financial assets
in order to generate cash flows. The business model determines whether cash flows will result from
collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e.,
the date that the Group commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt
instruments)
• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses
upon derecognition (equity instruments)
• Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if
both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets in order
to collect contractual cash flows and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding
74
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 30. Significant accounting policies (continued)
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method
and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes other receivables.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial
assets designated upon initial recognition at fair value through profit or loss, or financial assets
mandatorily required to be measured at fair value. Financial assets are classified as held for trading
if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including
separated embedded derivatives, are also classified as held for trading unless they are designated as
effective hedging instruments. Financial assets with cash flows that are not solely payments of principal
and interest are classified and measured at fair value through profit or loss, irrespective of the business
model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value
through OCI, as described above, debt instruments may be designated at fair value through profit or loss
on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair
value with net changes in fair value recognised in the statement of profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial
position) when:
• The rights to receive cash flows from the asset have expired or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a ‘pass-through’
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the
asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset
When the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of
ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the
asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to
the extent of its continuing involvement. In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on a basis that reflects the rights and
obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the maximum amount of consideration that the
Group could be required to repay.
Impairment of financial assets
Expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss will be
recognised through an allowance. ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the Group expects to receive, discounted
at an approximation of the original effective interest rate. The expected cash flows will include cash flows
from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default
events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for
which there has been a significant increase in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life of the exposure, irrespective of the timing of
the default (a lifetime ECL).
75
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 30. Significant accounting policies (continued)
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date.
For any debt instruments at fair value through OCI, the Group will apply the low credit risk simplification.
At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit
risk using all reasonable and supportable information that is available without undue cost or effort. In
making that evaluation, the Group reassesses the internal credit rating of the debt instrument. In addition,
the Group considers that there has been a significant increase in credit risk when contractual payments
are more than 30 days past due.
The Group considers a financial asset in default when contractual payments are 90 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when internal or
external information indicates that the Group is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held by the Group. A financial asset is written off
when there is no reasonable expectation of recovering the contractual cash flows.
(ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate.
The Group’s financial liabilities include trade and other payables.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in the statement of profit or loss.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statement of financial position if there is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities
simultaneously.
(h) 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.
(i) 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.
76
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 30. Significant accounting policies (continued)
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.
(j) 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.
(k) Leases
Leases are classified at their inception as either operating or finance leases based on the economic
substance of the agreement so as to reflect the risks and benefits incidental to ownership.
Operating leases
A lease where a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments in relation to operating leases are charged to the income
statement on a straight-line basis over the period of the lease.
(l) Share capital
Incremental costs directly attributable to an equity transaction are shown as a deduction from equity, net
of any recognised income tax benefit.
(m) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated
selling price in the ordinary course of business less any estimated selling costs.
Cost includes those costs incurred in bringing each component of inventory to its present location and
condition.
(n) Employee benefits
Wages and salaries, annual leave
Provision is made for the Group’s liability for employee benefits arising from services rendered by
employees to balance date. Employee benefits that are expected to be settled within one year have been
measured at the amounts expected to be paid when the liability is settled, plus related on-costs.
77
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 30. Significant accounting policies (continued)
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.
(o) Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) for its ordinary shares.
Basic EPS is calculated by dividing the profit attributable to equity holders of the Company by the
weighted number of shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shares outstanding for the effects of all potential ordinary shares,
which comprise share options issued.
(p) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and deposits held at call with banks
(q) Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are
transferred to the customer at an amount that reflects the consideration to which the Group expects to
be entitled in exchange for those goods or services.
(r) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”),
except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these
circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the
expense. Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component
of investing and financing activities, which are disclosed as operating cash flows.
(s) Finance income and expenses
Interest revenue on funds invested is recognised as it accrues, using the effective interest rate method.
Finance expenses comprise interest expense on borrowings and the unwinding of the discount on
provisions.
(t) Royalties
Royalties are treated as taxation arrangements when they have the characteristics of a tax. This is
considered to be the case when they are imposed under government authority and the amount payable
is calculated by reference to revenue derived (net of any allowable deductions) after adjustment for items
comprising temporary differences. For such arrangements, current and deferred tax is provided on the
same basis as described above for other forms of taxation.
Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current
provisions and included in expenses.
78
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS 30. Significant accounting policies (continued)
(u) 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 2019. 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:
Application
date of
standard
1 January
2019
Application
date for
Group
1 July 2019
Impact
on the
Company
The
Company
is still
assessing
whether
there will be
any material
impact.
Reference Title
AASB 16
Leases
Summary
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
79
NOTES TO THE FINANCIAL STATEMENTSANNUAL REPORT 2019 Application
date of
standard
1 January
2019
Application
date for
Group
1 July 2019
Impact
on the
Company
There will be
no material
impact
on the
Company.
1 January
2019
1 January
2019
There will be
no material
impact
on the
Company.
Reference Title
IFRIC 23
Uncertainty
over
Income Tax
Treatments
AASB
2017-6
Amendments
to Australian
Accounting
Standards –
Prepayment
Features with
Negative
Compensation
Summary
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:
• 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.
This Standard amends AASB 9
Financial Instruments to permit entities
to measure at amortised cost or fair
value through other comprehensive
income particular financial assets that
would otherwise have contractual
cash flows that are solely payments of
principal and interest but do not meet
that condition only as a result of a
prepayment feature. This is subject to
meeting other conditions, such as the
nature of the business model relevant
to the financial asset. Otherwise, the
financial assets would be measured at
fair value through profit or loss.
The Standard also clarifies in the
Basis for Conclusion that, under
AASB 9, gains and losses arising on
modifications of financial liabilities that
do not result in derecognition should be
recognised in profit or loss.
80
ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS
Reference Title
Conceptual
Framework
AASB
2019-1
Conceptual
Framework
for Financial
Reporting
Amendments
to Australian
Accounting
Standards
– Reference
to the
Conceptual
Framework
Application
date of
standard
1 January
2020
Application
date for
Group
1 January
2020
Impact
on the
Company
The
Company
is still
assessing
whether
there will be
any material
impact.
Summary
The revised Conceptual Framework
includes some new concepts, provides
updated definitions and recognition
criteria for assets and liabilities and
clarifies some important concepts. It is
arranged in eight chapters, as follows:
• Chapter 1 – The objective of financial
reporting
• Chapter 2 – Qualitative
characteristics of useful financial
information
• Chapter 3 – Financial statements and
the reporting entity
• Chapter 4 – The elements of financial
statements
• Chapter 5 – Recognition and derecognition
• Chapter 6 – Measurement
• Chapter 7 – Presentation and disclosure
• Chapter 8 – Concepts of capital and
capital maintenance
AASB 2019-1 has also been issued,
which sets out the amendments to
Australian Accounting Standards,
Interpretations and other
pronouncements in order to update
references to the revised Conceptual
Framework. The changes to the
Conceptual Framework may affect the
application of accounting standards in
situations where no standard applies
to a particular transaction or event.
In addition, relief has been provided
in applying AASB 3 and developing
accounting policies for regulatory
account balances using AASB 108,
such that entities must continue to
apply the definitions of an asset and
a liability (and supporting concepts) in
the Framework for the Preparation and
Presentation of Financial Statements
(July 2004), and not the definitions in
the revised Conceptual Framework.
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 2021.
81
ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS
Reference Title
AASB
2018-7
Amendments
to Australian
Accounting
Standards –
Definition of
Material
Summary
This Standard amends AASB 101
Presentation of Financial Statements
and AAS 108 Accounting Policies,
Changes in Accounting Estimates and
Errors to align the definition of ‘material’
across the standards and to clarify
certain aspects of the definition. The
amendments clarify that materiality will
depend on the nature or magnitude
of information. An entity will need to
assess whether the information, either
individually or in combination with
other information, is material in the
context of the financial statements. A
misstatement of information is material
if it could reasonably be expected
to influence decisions made by the
primary users.
Application
date of
standard
1 January
2020
Application
date for
Group
1 January
2020
Impact
on the
Company
The
Company
is still
assessing
whether
there will be
any material
impact.
82
ANNUAL REPORT 2019 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 40 to 82 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 2019 and of its
performance for the year ended on that date; and
(ii) Complying with Accounting Standards and the Corporations Regulations 2001; and
(b)
(c)
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 2019.
Signed in accordance with a resolution of the directors.
PJ Leonhardt
Director
Perth, 27 August 2019
83
ANNUAL REPORT 2019 INDEPENDENT AUDIT REPORT
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor's report to the members of Carnarvon Petroleum
Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Carnarvon Petroleum Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2019, the consolidated income statement, statement of other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended, notes
to the financial statements, including a summary of significant accounting policies, and the directors'
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019
and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
84
RC:KW:CARNARVON:030
ANNUAL REPORT 2019 INDEPENDENT AUDIT REPORT
1. Carrying value of capitalised exploration and evaluation
Why significant
How our audit addressed the key audit matter
As disclosed in Note 11, the Group held
capitalised exploration and evaluation
expenditure of $88,869,000 as at 30 June
2019.
The carrying value of exploration and evaluation
assets is subjective as it is based on the Group’s
ability and intention to continue to explore the
asset. The carrying value may also be impacted
by the results of exploration and evaluation work
indicating that the reserves may not be
commercially viable for extraction. This creates a
risk that the amounts stated in the financial
report may not be recoverable.
Our audit procedures included the following:
•
•
•
•
•
considered the Group’s right to explore in the
relevant exploration area which included
obtaining and assessing supporting
documentation such as license agreements.
considered the Group’s intention to carry out
significant exploration and evaluation activity in
the relevant exploration area which included an
assessment of the Group's future cash flow
forecasts and enquired of management and the
Board of Directors as to the intentions and
strategy of the Group.
assessed management’s decision that activities
have not yet progressed to a point that a
determination of the existence of economically
recoverable reserves can be made, through
discussion with management, review of ASX
announcements and review of minutes of
directors’ meetings.
assessed the directors’ review of the carrying
value of E&E, ensuring that there was
consideration of effect of potential indicators of
impairment.
assessed the adequacy of the financial report
disclosures contained in Note 11 of the financial
report.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2019 Annual Report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:CARNARVON:030
85
ANNUAL REPORT 2019 INDEPENDENT AUDIT REPORT
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
►
►
►
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:CARNARVON:030
86
ANNUAL REPORT 2019 INDEPENDENT AUDIT REPORT
►
►
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of Carnarvon Petroleum Limited for the year ended 30 June
2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
R J Curtin
Partner
Perth
27 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RC:KW:CARNARVON:030
87
ANNUAL REPORT 2019 ADDITIONAL SHAREHOLDER INFORMATION
Additional information required by the ASX Limited (“ASX”) Listing Rules and not disclosed elsewhere in this
report is set out below.
(a)
Shareholdings as at 26 August 2019
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
UBS Nominees Pty Ltd
Marford Group Pty Ltd
BNP Paribas Nominees Pty Ltd
CS Fourth Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Brispot Nominees Pty Ltd
Mr Philip Paul Huizenga
Jacobson Geophysical Services Pty Ltd
Zero Nominees Pty Ltd
Prettejohn Projects Pty Ltd
Mr Adrian Caldwell Cook Ms Belinda Michelle Honey
Brentworth Pty Ltd
Arne Investments Pty Ltd
Mr Peter James Leonhardt
Brixia Investments Ltd
Kemast Investments Pty Ltd
Distribution of equity security holders
Number of Shares
150,304,719
87,230,233
70,384,762
25,154,835
24,872,963
20,239,873
13,413,628
12,799,443
12,449,338
12,438,411
11,876,196
11,334,068
10,438,461
10,111,961
9,548,025
9,000,000
8,353,950
7,700,000
7,614,000
7,000,000
522,264,866
% held
9.62
5.58
4.50
1.61
1.59
1.30
0.86
0.82
0.80
0.80
0.76
0.73
0.67
0.65
0.61
0.58
0.53
0.49
0.49
0.45
33.43
Size of Holding
1
1,001
5,001
10,001
100,001
1,000
5,000
10,000
100,000
to
to
to
to
and over
Number of
shareholders
626
2,600
1,986
5,485
1,772
12,469
Number of
fully paid shares
283,388
7,772,778
16,552,270
215,537,861
1,322,261,053
1,562,407,350
88
ANNUAL REPORT 2019 ADDITIONAL SHAREHOLDER INFORMATION
(b) Option holdings as at 26 August 2019
Options over ordinary shares issued
1,000,000
2
Number
on issue
Number
of holders
(c) On-market buyback
There is no current on-market buyback.
(d)
Schedule of permits
PERMIT
BASIN/COUNTRY
JOINT VENTURE PARTNERS EQUITY %
OPERATOR
WA-435-P,
WA-437-P
WA-436-P,
WA-438-P
Roebuck / Australia
Roebuck / Australia
WA-155-P
Barrow / Australia
Carnarvon
Santos Limited
Carnarvon
Santos Limited
Carnarvon
Santos Limited
WA-521-P
Roebuck / Australia
Carnarvon
WA-523-P
Bonaparte / Australia
Carnarvon
WA-524-P
Dampier / Australia
Carnarvon
AC-P62
AC-P63
R7
Bonaparte / Australia
Carnarvon
Bonaparte / Australia
Carnarvon
Perth / Australia
Carnarvon
20%
80%
30%
70%
28.5%
71.5%
100%
100%
100%
100%
100%
Santos Limited
Santos Limited
Santos Limited
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
2.5% of 42.5% Latent Petroleum
89
ANNUAL REPORT 2019 carnarvon.com.au