2021
ANNUAL
REPORT
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Carnarvon Petroleum Limited
ABN 60 002 688 851
CORPORATE
DIRECTORY
DIRECTORS
WA Foster (Chairman) (Appointed Chairman on 11 November 2020)
PJ Leonhardt (Chairman) (Retired on 11 November 2020)
AC Cook (Managing Director)
P Moore (Non-Executive Director)
SG Ryan (Non-Executive Director)
D Bakker (Non-Executive Director) (Appointed on 5 October 2020)
COMPANY SECRETARY
T Naude
A Doering
AUDITORS
Ernst & Young
BANKERS
Australia and New Zealand Banking Group Limited
Commonwealth Bank of Australia
National Australia Bank Limited
REGISTERED OFFICE
2nd Floor
76 Kings Park Road
West Perth WA 6005
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Carnarvon Petroleum Limited’s shares are quoted on the Australian Securities Exchange.
ASX Code: CVN - ordinary shares
CONTENTS
Chairman’s Review
Managing Director’s Review
Operating and Financial Review
Directors’ Report
Auditor's Independence Declaration
Corporate Governance Statement
Consolidated Income Statement and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Additional Shareholder Information
2-3
4-5
6-25
27-47
48
49
50
51
52
53
54-96
97
98-103
104-105
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 1
CHAIRMAN’S
REVIEW
The challenges of COVID-19
and the economic effects
of this have continued
throughout the past year.
Both human and operational
activity has required careful
management to ensure the
safety and well-being of
staff and the achievement
of operations despite
logistic and supply chain
disruptions. On behalf of
the Board, I wish to express
our appreciation to our staff
in working through this in
a safe and efficient manner
and to thank Adrian Cook for
the leadership he has shown
as Managing Director.
2 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
Various agencies such as the International Energy
Agency have identified that a rapid increase in
renewable energy sources is necessary if the
world is to achieve a net zero emissions position
by 2050. These agencies also recognise that oil
and gas will be required through this period to
meet energy needs. Carnarvon’s position remains
strong due to its focus on low cost assets and
the expected strengthening in the oil price due
to significant under-investment in recent years
in new supply sources. I am firmly of the view
Carnarvon has an ongoing future for many years
that shareholders will be able to realise value
through in the projects now being developed.
The Annual General Meeting of Carnarvon held
last November saw the appointment of Ms Debra
Bakker to the board, the retirement of Mr Peter
Leonhardt as Chairman and my appointment to
that position. The skillset of the board has been
considerably enhanced with Debra’s appointment
through her financing background, this now being
a key aspect of Carnarvon’s project achievement.
I wish to thank Peter for the excellent stewardship
he provided to Carnarvon over his 15-year term
as Chairman and I look forward to continuing this.
Carnarvon’s strategy was refined this year to a
focus on realising shareholder value from the
major discoveries in the high-grade exploration
areas it now holds. Four main areas of focus
were progressed around the Buffalo Field
Redevelopment; the Dorado Field Development;
the selection of drilling prospects adjacent to the
Dorado field and a deep assessment of the potential
within Carnarvon’s existing exploration portfolio.
The coming year is both exciting and transformational for
Carnarvon. The level of activity will be at an all-time high. With
three wells to be drilled and with Dorado Field Development
progressing shareholders have much to look forward to.
The Buffalo Field Redevelopment target is to drill
the Buffalo-10 well into the remapped structural
crest of this former field before the end of 2021,
where between 15 and 48 million barrels of oil are
prognosed as being recoverable. This target is on
track to be achieved with spud of the well planned
for late October 2021. Carnarvon’s 50% partner
in the Timor-Leste Production Sharing Contract
(“PSC”), Advance Energy PLC (“Advance”), is funding
US$20 million of the costs of this well. With drilling
success, the newly formed joint venture will acquire
development funding from third party lenders and any
additional funding requirements (above that provided
by third party lenders) will be provided by Advance
as an interest free loan. Carnarvon also remains
as operator for the PSC. We wish to acknowledge
the cooperation of the Timor-Leste authorities in
maintaining the schedule in what has been very
difficult times for them due to COVID-19.
In relation to the Dorado Field Development, Front End
Engineering and Design (“FEED”) for this project was
announced by Santos, the operating partner of the
licence area, at the end of this financial year. The original
milestone was delayed by some six months to better
plan for potential development from nearby prospects
that could utilise the Dorado field’s infrastructure. The
high productivity of the Dorado reservoirs means
that oil recovery is very rapid and capacity to process
other fields’ production will quickly become available.
This incremental production has an extremely high
net revenue margin as minimal new infrastructure
is required. The Final Investment Decision (“FID”)
for the Dorado Field Development is now expected
around the middle of calendar 2022, with production
commencement targeted for late 2025.
During the year, a commitment was made to the
drilling of two large prospects adjacent to the Dorado
field with commencement of the first well expected in
early 2022 and the other to immediately follow. These
are the Pavo-1 well and the Apus-1 well and the
Managing Directors’ report will outline further details
of these. Success in either of these prospects will be
transformational in value for shareholders.
Carnarvon’s exploration portfolio has some 10
offshore permits and licences stretching from the
Carnarvon Basin to the Timor Sea. High grading
of these was undertaken this year to ensure that
future expenditure was consistent with realising the
maximum value potential of an area. It would be no
surprise that the outstanding potential lay in the four
licence areas that were a part of the Bedout Basin.
This is where most of Carnarvon’s exploration funds
will be spent in the future.
Against the background of this significant activity
has been an overriding emphasis on Carnarvon’s
social licence and the subsequent ESG activities it
has undertaken. Commitment to a net zero emission
position by 2050 has been made, whilst current
emissions are being totally offset. Moving into a
production phase, emissions will rise substantially,
and plans are being developed to minimise and offset
these. A step in these plans is the joint venture that
Carnarvon has established with Frontier Impact Group
(“FIG”) to build a biorefinery business in Western
Australia based on waste lignocellulosic biomass as
a feedstock. This business is very complementary to
the significant increase in tree plantings that are now
taking place across Western Australia as a carbon
offset measure by many companies.
The coming year is both exciting and transformational
for Carnarvon. The level of activity will be at an
all-time high. With three wells to be drilled and with
Dorado Field Development progressing shareholders
have much to look forward to.
William (Bill) Foster
Chairman.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 3
MANAGING
DIRECTOR’S
REVIEW
In the past year we
have continued to make
substantial progress in
advancing our core projects
whilst also positioning
the Company for new
opportunities that will
enable it generate value
and be part of the energy
transition.
As outlined in our Net Zero by 2050 statement
in July 2021, we believe that Carnarvon has an
important role to play in the supply of energy in
a responsible and sustainable manner. To this
end, we hold the view that oil and gas, as well
as other current and emerging energy supply
sources and technologies will have an important
place for decades to come.
We have also been observing for some time a
reduction in oil project investments by energy
companies that has the very real potential to
cause supply to fall short of demand, resulting
in oil prices increasing in the future. We aim
to position the Company to benefit from this
outcome by maintaining an appropriate balance
of the portfolio in oil related assets.
4 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
As a result, Carnarvon will continue to focus on the
delivery of its core projects in the near term. These
include the Buffalo Field Redevelopment, the Dorado
Field Development and significant exploration
potential in the Bedout basin that hosts the Dorado
field.
For the Buffalo Field Redevelopment, our objective
has always been to secure a partner to share the
cost, risk and rewards, drill the first well to confirm
the resource and then bring the field into production
in a timely manner.
In December 2020 we announced that Advance
would join Carnarvon as a partner and capital provider,
providing funding for the Buffalo-10 well, where
Carnarvon is free carried to a gross cost of US$20
million. The subsequent cost of development will be
funded by the third party lenders through the joint
venture, with any additional funding requirements
(above that provided by third party lenders) provided
by Advance.
The Carnarvon team (as operator of the Buffalo
Project) are in the process of preparing to drill the
Buffalo-10 well in late October this year. At the
time of writing, a drilling rig has been secured and
important long lead items have been procured.
Whilst there is still a significant amount of work to
do to be ready for drilling operations, the activities
are on schedule, even with the challenges posed by
COVID-19 in Australia and Timor-Leste.
Behind the scenes, the Carnarvon team are also
working on field development activities to allow the
Buffalo field to be brought back into production as
soon as practical after the Buffalo-10 well is drilled.
These include consideration of a number of options
to accelerate the development timeline, including the
utilisation of facilities that are currently based in Asia.
An important facet in delivering the Buffalo Project is
securing the necessary approvals of the Timor-Leste
regulators. On behalf of the Carnarvon team, I would
like to express our gratitude for the efforts of the
regulators, particularly given the challenges of severe
flooding and COVID-19 outbreaks. Carnarvon once
again supported the Timor-Leste people, via UNICEF,
with the funds this year being directed to assisting with
local flood recovery efforts.
During the year we continued our work with Santos
on refining the subsurface resource and production
models and top surface facility design for the Dorado
Field Development. In June 2021 we announced the
commencement of FEED. This phase formalised the
project scope of work and allowed for contracts to be
prepared with the major engineering contractors. This
next phase will deliver the final facility designs and
costs which are expected by mid-calendar 2022. This
represents an important milestone for the project and
will allow the joint venture to take FID leading to the
commencement of the construction phase.
Prior to making a FID, the joint venture plans to drill two
high impact wells near the Dorado field. The first is the
Pavo-1 exploration well with a resource range between
11 and 223 million barrels of oil equivalent. The second
is the Apus-1 exploration well with a resource range
between 31 and 706 million barrels of oil equivalent.
Conceptually, volumes toward the lower to middle end
of the range would be tied back to the Dorado field
facilities. Outcomes at the higher end of the range could
become standalone developments, recognising that they
would be larger than the Dorado field.
Irrespective of whether a success case involves a tie
back to the Dorado Field Development or a standalone
development, the outcome will be transformational value
wise for Carnarvon.
A drilling rig for the Pavo-1 and Apus-1 exploration
wells has been contracted. The chosen rig, namely the
Noble Tom Prosser, was used to drill the successful
Dorado-2 and 3 appraisal wells. The rig is expected to
drill the Pavo-1 well, as the first of the two wells, after it
completes its other operations in late 2021. The Apus-1
well is scheduled to follow immediately after the Pavo-1
well is complete.
In terms of Carnarvon’s other exploration initiatives,
they will continue to be weighted towards the highly
prospective Bedout basin, in which Dorado resides, with
significant time being dedicated by the joint venture to
this area.
During the year, two new 3D seismic programs
commenced in the Bedout basin. The first 3D survey
acquired data around the Dorado field and, from an
exploration perspective, aims to enhance the joint
venture’s understanding of the prospect opportunities
capable of being tied back to Dorado. The second 3D
survey covered around 2,600 km² in WA-436-P and WA-
437-P that was previously only covered by 2D data.
This area has exciting prospectivity and exploration
potential based on the joint venture’s current
understanding of the basin.
For some time the Company has been considering its
position on its future greenhouse gas emissions, how
these might be mitigated or offset and the opportunity to
participate in the energy transition.
In 2020 the Company released its first Sustainability
Report. Internally, Carnarvon enhanced its financial
modelling to include carbon pricing in its business
decisions, reset its risk management processes for
climate change and established a Risk, Governance and
Sustainability Committee to ensure a targeted focus on
ESG . In July 2021 the Company also announced a new
partnership with FIG to build a renewable diesel and
biochar production business using internationally proven
processing technology.
In the future, the company envisages participating in
nature based sequestration programs, notably tree
planting, to contribute to delivering on its Net Zero
by 2050 commitment. Many of these programs are
expected to allow harvesting a portion of the plants for
feedstock for the production of the renewable diesel
and biochar.
The circular nature of this arrangement is one of the
pathways to reduce Carnarvon’s carbon intensity and
deliver valuable products to consumers as they in
turn seek to lower their carbon emissions, such as in
mining, transport and agriculture. This arrangement
provides a means of balancing lower carbon
emissions while generating appropriate returns on our
shareholder’s capital.
Looking forward, our focus is on delivering our key
projects, namely the Buffalo Field Redevelopment and
Dorado Field Development, and progressing further our
broader Bedout basin exploration. In these alone the
Carnarvon team expects to be very active in the coming
years. However, we also plan to pursue additional growth
opportunities, such as maturing the renewable diesel and
biochar business, and securing new opportunities where
they make strong business sense and offer compelling
value and earnings for shareholders.
Adrian Cook
Managing Director and Chief Executive Officer.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 5
OPERATING AND
FINANCIAL REVIEW
OVERVIEW OF OPERATIONS
THE HIGHLIGHTS FOR THE COMPANY DURING THE
2021 FINANCIAL YEAR WERE:
Successful farm-out of the Buffalo project to fund Buffalo-10 well costs
up to US$20M on a free carry basis.
Carnarvon retains 50% interest in the Buffalo project and operatorship.
Buffalo-10 well preparations significantly advanced with drilling
expected to commence in late October 2021.
Dorado phase-1 liquids development commenced Front End
Engineering and Design (‘’FEED’’).
Dorado Final Investment Decision (“FID’’) on schedule for mid-2022.
Rig secured to drill highly prospective Pavo-1 and Apus-1 exploration
wells in Bedout basin.
Additional 3D seismic acquired over the Bedout Basin to unlock
considerable prospectivity over the acreage.
Carnarvon commits to net-zero emissions by 2050, if not earlier.
Carnarvon formed a joint venture to produce renewable diesel and
other sustainable products.
6 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
6 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
Timor-Leste
Buffalo Project
TL-SO-T19-14 50%
Taurus Project
WA-523-P 100%
Condor Project
AC/P62 100%
Dorado, Apus & Pavo
WA-435-P 20%
WA-436-P 30%
WA-437-P 20%
WA-438-P 30%
Eagle Project
AC/P63 100%
Darwin
Truscott
Wyndham
Kununurra
Katherine
Labyrinth Project
WA-521-P 100%
Derby
Broome
Outtrim Project
WA-155-P 100%
Port Hedland
Karratha
Onslow
FIGURE 1: CARNARVON
INTERESTS AS AT 30 JUNE
2021 IN AUSTRALIA AND
TIMOR-LESTE.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 7
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 7
OPERATING AND FINANCIAL REVIEW DORADO PROJECT BACKGROUND
Carnarvon secured its interests in the Bedout Sub-
Basin permits (WA-435-P, WA-436-P, WA-437-P and
WA-438-P) in 2009. The offshore permits cover
an expansive area of 21,652km2 which is located
approximately 110km from the coast, offshore of Port
Hedland in Western Australia.
The 3D seismic acquisition confirmed two significant
prospects in Phoenix South within WA-435-P and Roc
in WA-437-P. As a result, interest in the permits grew
and the Joint Venture farmed out equity in the project
to new partners who funded the exploration drilling
costs to test the Phoenix South and Roc targets.
Historically, the Bedout Sub-Basin was significantly
underexplored in comparison to the prolific Carnarvon
Basin to the south-west and the Bonaparte Basin to
the north-east. Exploration drilling within the area was
limited to a string of four wells in the 1970’s, which
were followed by the Phoenix-1 and Phoenix-2 wells
drilled in the early 1980’s. At the time, these Phoenix
wells were considered gas discoveries and were not
pursued further. The unexplored potential across this
vast area and the presence of hydrocarbons within
the region, led to Carnarvon’s initial interest in the
basin.
Carnarvon’s initial work on the permits involved an
extensive geological study and the acquisition of
modern 3D seismic data which was a marked upgrade
to the existing legacy 2D seismic.
The Phoenix South-1 well was drilled in 2014,
discovering light oil within a high-quality reservoir.
Success at Phoenix South was followed by the
discovery and appraisal of a condensate rich gas in
the Roc field. These results proved to be the catalyst
for this region which warranted further exploration.
In 2018, the Dorado-1 exploration well discovered a
significant light oil column and condensate rich gas
in a number of additional reservoirs. The subsequent
appraisal of the Dorado discovery was successfully
completed with the well and flow test results
exceeding pre-test expectations and confirming the
high quality of the reservoirs in Dorado. Dorado is a
world class discovery which has ignited interest in the
Bedout Basin and has proven to be transformational
for the Company.
Figure 2: Image of Nobel’s Tom Prosser rig on site during the Dorado Appraisal campaign.
8 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW DORADO DEVELOPMENT (WA-437-P)
(CARNARVON 20%, SANTOS IS THE OPERATOR)
The scale and quality of the Dorado Project enabled
the joint venture to move quickly to the development
planning phase. Key milestones towards the Dorado
Field Development were achieved during the year, as
the project evolved through the pre-FEED workflows
before formally entering FEED prior to the end of
the period.
Dorado production is planned to be conducted
in a multi-phased development with the initial
development involving the extraction of the liquids
(oil and condensate). The field’s gas and LPG’s will
be re-injected before being assessed for subsequent
production in a second stage development. The
reinjection of gases is expected to considerably
enhance the recovery of the liquids from the field. As
a result, the initial target gross oil production rate is
expected to be between 75,000 to 100,000 barrels
per day.
Plans for the phase 1 liquids will consist of a single
Wellhead Platform (“WHP”) in 90 meters of water
depth, connected to a nearby Floating Production
Storage and Offloading (“FPSO”) vessel via sub-sea
flowlines and control lines.
The WHP is designed to be a normally unmanned
installation with minimal processing facilities. It will be
remotely operated from the FPSO using the sub-sea
control lines. The pre-FEED work during the year included
a tendering process and Concept Select Definition for the
construction and installation of the WHP.
The WHP will have the capacity to accommodate up
to 16 individual wells from a single drill centre. For
the initial Dorado production, the WHP is expected to
host 8 to 10 wells, meaning it will have the capacity
to accommodate production from possible future tie
backs following future exploration successes within
the area.
The FPSO is planned to be located around two
kilometres from the WHP and will be connected to the
seabed by a disconnectable turret mooring system.
The FPSO includes the processing facilities for the
oil and gas being delivered from the reservoir via the
wells and the WHP and allows for storage of oil and
condensate as well as offloading to a separate offtake
tanker.
Figure 3: Proposed Dorado Field Development Layout.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 9
OPERATING AND FINANCIAL REVIEW During the year, the pre-FEED work for the FPSO
included a design competition between three leading
FPSO vessel contractors who worked independently
to advance their FPSO designs and mature their
vessel construction plans and supply terms. This
competitive process ensures that the Joint Venture
is able to consider the optimal technical design, cost
and schedule for the provision of the FPSO.
At the end of the financial year, the pre-FEED work
was completed enabling the project to formally
commence FEED workflows. As a result, in August
2021, an FPSO FEED contract was awarded to Altera
Infrastructure Production AS (“Altera”). In addition, the
Dorado well head platform contract was awarded to
Sapura Energy.
Entry through the FEED gate means that the project
is on schedule for a Final Investment Decision around
mid-2022.
EXPLORATION – GREATER BEDOUT AREA
(WA-435-P, WA-436-P, WA-437-P AND WA-438-P)
(CARNARVON 20%-30%, SANTOS IS THE
OPERATOR)
Carnarvon’s discoveries within the Bedout basin
to date have high graded the numerous prospects
across the vast acreage Carnarvon holds in the basin.
Progress continued towards drilling the Pavo-1 and
Apus-1 wells as Carnarvon and the Bedout Joint
Venture are accelerating this potential.
On this basis, the Noble Tom Prosser rig has been
secured to drill these wells, with the Pavo-1 well
expected to spud early 2022. The Apus-1 well will
commence immediately following the completion of
the Pavo well.
Both wells are targeting prospects with similar
interpreted trap, source, seal and reservoir
characteristics to Dorado.
Figure 4: Map of top Caley/TR15 with well locations and significant prospects in the Bedout Sub-basin.
10 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW The Pavo-1 well is planned to be drilled in western
WA-438-P, and targets mean recoverable volumes of
82 million barrels of liquid hydrocarbons and 108 Bcf
of gas in the Caley Fm. The probability of geological
success (Pg) is 34% (Refer to page 19).
Apus-1 is planned to be drilled in eastern WA-437-P.
Apus-1 has two targets, with mean recoverable
volumes of 235 million barrels and 408 Bcf (combined
Caley and Milne Member sands) and a Pg of 23%
(Refer to page 19).
Due to their proximity to the Dorado development,
both prospects have tie-back potential to Dorado.
Resources capable of being tied-back to existing
infrastructure provide significantly enhanced
economic outcomes, minimize additional capital
investment requirements and shorten time periods to
first production from the tie-back fields.
These prospects were progressed for drilling utilising
the Keraudren 3D Seismic survey which was acquired
in 2019. The Joint Venture also made significant
progress in planning for exploration beyond the
Apus and Pavo wells by investing in further data
acquisitions during the year. Namely, the Archer and
Keraudren Extension 3D Seismic acquisitions.
The Archer 3D was primarily acquired over the
Dorado field with an alternative azimuth to the
existing data sets. This will complement the existing
data sets to support the Dorado development and
ensure the optimal placement of wells. The Archer 3D
also encompassed an area to the south-west of the
Dorado field which will allow for a thorough review of
the attractive exploration potential in the area.
Given the proximity of this region to the planned
Dorado Field development area, any discoveries in
this area could be tied back to the Dorado facilities.
There is, however, potential for larger discoveries to
result in a standalone development.
A fast-track processed volume of the Archer 3D will
be available for interpretation later in 2021.
The Keraudren Extension 3D seismic (“KE-3D”) survey
commenced following the completion of the Archer
3D acquisition, utilising the same vessel.
The KE-3D survey will cover an approximate 3,200km
area (within the WA-436-P and WA-438-P permits) to
the northwest of the Dorado development. This area
has over 30 prospects and leads already identified
using the existing 2D data which will be illuminated by
the KE-3D data.
The Archer and KE-3D surveys are important
elements towards further unlocking Carnarvon’s
commanding acreage in the emerging Bedout basin.
There are currently over 200 identified prospects and
leads across the Bedout permits, most of which are
covered by 2D data. The Archer and KE-3D data sets
are expected to enhance some of these prospects for
further near-term exploration.
BUFFALO PROJECT BACKGROUND
(CARNARVON 50% 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.
Carnarvon initially focused its technical work on
reprocessing the existing 3D seismic data set
using state of the art Full Waveform Inversion (FWI)
technology. This work supported the interpretation
of a significant attic oil accumulation remaining after
the original development because of potentially sub-
optimal positioning of the previous development wells
due to the seismic processing capability of that time.
Reservoir modelling has been conducted using
the latest structural interpretation and available
data, including an extensive history-matching effort
to calibrate model well performance to historical
production rates and water-cut development
(governed by strong aquifer drive) observed during
the original production period.
Based on this work, independently audited volumetric
estimates of contingent resources in the Buffalo oil
field are 31.1 million barrels (2C) with low estimates
of 15.3 million barrels (1C) and high estimates of 47.8
million barrels (3C) (refer to page 18).
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 11
OPERATING AND FINANCIAL REVIEW A jack-up drilling rig has been selected and the
Buffalo Joint Venture has signed a Letter of Intent
(“LOI”) with the relevant rig contractor. A formal
contract, consistent with the terms of the LOI, is now
being finalised.
In addition, procurement of Long Lead Items (“LLIs”)
has been completed, and significant progress has
been made on procuring the remainder of the items
and services for the well campaign. Considerable
progress has also been made to secure the necessary
Timor-Leste Government approvals for drilling the
well.
Signing the rig LOI is a significant milestone for the
Buffalo project. The LOI, along with the procurement
of LLIs, has been essential in ensuring that the
schedule is maintained.
The work to date has been significantly enhanced
by the appointment of Petrofac to provide drilling
management services for the Buffalo-10 well. A
Petrofac team has been embedded into Carnarvon’s
operational team and has complemented Carnarvon’s
operational capabilities.
The catalyst for this increased operational activity was
provided through securing funding for the Buffalo-10
well. During the year, Carnarvon completed a 50%
farm-out of the Buffalo project to Advance Energy PLC
(“Advance”).
Following the farm-out, Advance will fund the
Bufaflo-10 well up to US$20 million on a free carry
basis. This means there will be no cost to Carnarvon
unless the well costs exceed US$20 million.
Carnarvon has also retained operatorship of the
project.
Following a successful result in the Buffalo-10
well, the newly formed joint venture will acquire
development funding from third party lenders and any
additional funding requirements (above that provided
by third party lenders) will be provided by Advance as
an interest free loan.
The transaction is an important element of
Carnarvon’s strategic objectives as the Company
prudently manages its balance sheet in order to
both drill the Buffalo-10 well and progress the
development of the Dorado project.
Figure 5: PSC signing Ceremony in Dili, Timor-Leste.
In August 2019, a treaty was ratified between the
Governments of Australia and Timor-Leste which
meant the Buffalo oil field redevelopment will occur
under Timor-Leste juridication. One of the key
conditions of the treaty was that the affected parties,
such as Carnarvon, would be granted security of
title with conditions equivalent to those previously
in place under Australian domestic law. Importantly,
Carnarvon’s PSC achieves a similar net back after
government taxes and duties to Carnarvon, when
compared to Australia’s offshore PRRT regime.
BUFFALO PROJECT (TL-SO-T 19-14 PSC)
(CARNARVON 50% AND OPERATOR)
Plans to redevelop the Buffalo oil filed were materially
progressed during the year. Preparations for drilling
the Buffalo-10 well are well progressed with the well
planned to commence drilling in October 2021. The
well is being designed to target the attic oil remaining
from the field’s original development.
12 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW Figure 6: View of the beach near Fatucama Cristo Rei, Dilie, Timor-Leste.
TAURUS PROJECT (WA-523-P)
(CARNARVON 100% AND OPERATOR)
A significant portion of the WA-523-P exploration
permit remained in Australian waters following the
maritime boundary change between Australia and
Timor-Leste in 2019.
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.
The standout prospect is Angus, which is a dual
stacked Jurassic and Triassic structure. The Triassic
structure is almost 70 square kilometres in area
and with the overlying Jurassic, it could be a very
significant oil discovery in the region. Within WA-
523-P there are several follow-up drilling targets at
Jurassic and Triassic levels. WA-523-P is an excellent
exploration block as it is within the known Jurassic
petroleum system, likely to be oil bearing rather than
gas, with excellent reservoir rocks. The upside in the
permit is the unproven and undrilled Upper Triassic
interval, well known onshore Timor-Leste to be the
source for many of the known oil seeps. A discovery
within the Triassic interval would open up a new
petroleum province in the region and could have a
significant effect on Carnarvon’s exploration portfolio
in this region.
CONDOR AND EAGLE PROJECTS
(AC/P62 AND AC/P63)
(CARNARVON 100% AND OPERATOR)
Carnarvon was awarded the AC/P62 (Condor) permit
in November 2017 and the AC/P63 (Eagle) permit in
February 2018, both located 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 and gas fields. The acquisition of brand
new MC3D Cygnus PSDM seismic data has been
instrumental 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
across the Condor and Eagle projects. Within the
Condor project, four substantially sized Late Permian
carbonate reef prospects have been identified, a
new play type for the North-West Shelf of Australia.
Of the four prospects, Moa is the preferred target at
132 square kilometres and 350m relief with access
to two source kitchens and hosts seismic evidence
for porosity enhancement. The additional Permian
prospects, Pterosaur, Kelenken and Titanis are also
substantially sized and provide significant running room
with all three prospects sitting in jack-up water depths.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 13
OPERATING AND FINANCIAL REVIEW Figure 7: Outline of the AC/P62 and AC/P63 permits including identified prospects and leads.
In 2020, Carnarvon was granted a suspension and
extension approval from the regulator for the AC/
P62 permit. The grant and approval for AC/P62
has allowed Carnarvon additional time to assess
the Cygnus Phase 3 South dataset, which became
available at the start of this year. This Cygnus Phase
3 South dataset covers an additional 317 square
kilometre region of the permit, which has historically
only been covered by 2D seismic.
The technical work undertaken on the Cygnus Phase
3 South has helped de-risk the key play elements
of the Permian prospects as well as revealing the
Grouse lead. The Grouse lead is a Middle Jurassic,
fault bounded structure with 12 square kilometre
areal closure, 140m relief and sits within jack-up water
depths. The Grouse prospect directly drapes over the
Permian Pterosaur prospect with close access to the
proven and prolific Swan Graben source kitchen.
Carnarvon was also granted a suspension and
extension approval for the Eagle permit, AC/P63.
The approval was to accommodate for the delays
which have been experienced due to the COVID-19
restrictions.
The technical work to date has successfully de-
risked the reservoir, presence of oil and the quality
of hydrocarbons in the Eagle project. 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 AC/P63
is the Toucan prospect. Toucan is a large, Middle
Jurassic, fault bounded structure with seven square
kilometre areal extent and 140 metre 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 (Malita, Plover and Lower Vulcan) oil-
prone source rocks.
14 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW The nearby discoveries of Skua, Talbot, Cassini and
Challis oil fields confirm effective migration from the
Skua Trough and other surrounding kitchens which
gives considerable optimism for the Toucan prospect.
Carnarvon is currently seeking farm-in interest for the
Condor and Eagle projects in order to progress the
exciting prospects they contain.
OUTTRIM PROJECT (WA-155-P)
(CARNARVON 100% AND OPERATOR)
The Outtrim project, WA-155-P, is in the Barrow Sub-
Basin, within the Carnarvon Basin of the North-West
Shelf of Australia.
During the year, Carnarvon and its former joint
venture partner in the permit, Skye Exploration
(“Sky”), completed an agreement whereby Carnarvon
acquired 100% interest in the permit. Both parties
will now apply for a retention license over the area of
the Outtrim-East discovery and once granted, Skye
will acquire a 100% equity interest in the retention
license.
The Outtrim permit contains 3 graticular blocks, one
of which contains the Outtrim discovery. Following
the grant of the retention lease, Carnarvon will retain
100% interest in the remaining WA-155-P exploration
permit which will comprise the remaining 2 graticular
blocks.
As the marginal Outtrim discovery was not material
to the Company’s portfolio, this outcome allows
Carnarvon to advance the Palmerston prospect and
other exploration targets at 100% equity. Carnarvon
can also work towards a more desirable farm-out
outcome for the project at this equity level.
The Palmerston prospect, which is located in the
north-east graticular block of the permit, is a fault
bounded late Triassic structure which sits on the
eastern side of the Alpha Arch.
This late Triassic play has been successful in the
Gorgon field, and there have been several discoveries
on the Alpha Arch which have proved a working
petroleum system in the region.
Carnarvon believes there could be significant gas
potential in this area of the Southern Carnarvon Basin,
and is actively looking for a potential farm-in partner.
LABYRINTH PROJECT (WA-521-P)
(CARNARVON 100% AND OPERATOR)
WA-521-P (“Labyrinth Project”) 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 de-risked following
the Bedout discoveries. Carnarvon holds 100%
equity in the WA-521-P permit, comprising an area of
approximately 5,057 square kilometres.
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.
During the year, Carnarvon received a suspension and
extension approval from the regulator for the WA-
521-P permit.
The 12-month extension is to accommodate for the
delays which have been experienced due to the
COVID-19 restrictions which have impacted the
Company’s work.
The additional time will allow Carnarvon to continue
its review of the interpretive well reports and samples
for the nearby Anhalt-1 and Hannover South-1 wells.
This well data recently became open file and available
to the Company.
Anhalt-1 and Hannover South-1 were the first wells
to test the stratigraphy nearby the Labyrinth permit.
Their results will be incorporated into Carnarvon’s
knowledge of the greater Triassic plays.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 15
OPERATING AND FINANCIAL REVIEW The analysis from the well reports could also
potentially upgrade and de-risk the presence of
source rock for the Labyrinth targets. The analysis will
also refine the location of the proposed 2D cubed
seismic project which has been deferred to allow for
this analysis.
The focus of the Labyrinth Project is the Ivory
prospect which could target dual reservoirs with one
well. The first target is the Mid-Jurassic Lower Depuch
Formation which is proven to be an excellent quality
reservoir. The secondary target is in the early Jurassic
Upper Bedout Formation which also has the potential
to have excellent reservoir quality as encountered in
the sands in the Roc-2 well at this depth.
RENEWABLE FUELS
(CARNARVON 50%)
In July 2021, Carnarvon formed an incorporated joint
venture with Frontier Impact Group (“FIG”) under the
name FutureEnergy Australia Pty Ltd (“FEA”). FEA is
actively developing a commercial and sustainable
biorefining business that produces “drop-in”
renewable diesel (not biodiesel), high-quality biochar
and wood vinegar in Western Australia.
The biorefinery business is intended to be carbon-
negative and will likely attract Australian Carbon
Credit Units (“ACCUs”) once FEA is operating at scale.
The ACCUs generated by the biorefinery business are
proposed to be acquired by Carnarvon to help offset
the forecasted emissions profile from Carnarvon’s
oil projects, and support Carnarvon’s commitment to
carbon neutrality by 2050.
FEA’s first biorefinery is expected to enter FEED in
the September 2021 quarter, and the expected FID
date is late Q1 2022. Other aspects of the project,
including securing feedstock supply, product offtake
contracts and regulatory approvals, are on track to
meet the FID date. FEA is targeting first production
from the biorefinery in Q4 2022 or early Q1 2023.
FEA has undertaken extensive engagement with
State and local governments, who have shown
considerable support for the project. The project will
support economic development in the South-West of
Western Australia, bringing approximately 126 direct
and indirect jobs to the region.
16 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW Production
Reserves
Proved
Proved &
Probable
Proved,
Probable &
Possible
Commercial
Contingent Resources
Discovered, no field development plan
approved or not yet economic
Prospective Resources
Exploration prospectivity
RESERVE ASSESSMENT
Petroleum Resource Classification, Categorisa-
tion 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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 17
OPERATING AND FINANCIAL REVIEW Gross Contingent Resources (100%)
Gross at 30 June 2020
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
1C
86
12
7
2
15
122
2C
162
20
17
7
31
236
3C
285
35
30
16
48
413
Free & Associated Gas
BSCF
BSCF
BSCF
Barrels of Oil Equivalent
MMBOE MMBOE MMBOE
1C
367
204
-
-
2C
748
332
-
-
3C
1,358
580
-
-
571
1,080
1,938
1C
176
48
7
2
15
248
2C
344
78
17
7
31
477
3C
614
137
30
16
48
844
Technical Revision
Permit
WA-437-P
Dorado
WA-437-P
Roc
Phoenix South WA-435-P
WA-435-P
Phoenix
WA-523-P
Buffalo
Total
Gross at 30 June 2021
Permit
WA-437-P
Dorado
Roc
WA-437-P
Phoenix South WA-435-P
WA-435-P
Phoenix
WA-523-P
Buffalo
Light Oil and Condensate
MMSTB MMSTB MMSTB
2C
3C
1C
Free & Associated Gas
BSCF
2C
BSCF
3C
BSCF
1C
Barrels of Oil Equivalent
MMBOE MMBOE MMBOE
2C
3C
1C
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1C
Light Oil and Condensate
MMSTB MMSTB MMSTB
2C
162
20
17
7
31
3C
285
35
30
16
48
86
12
7
2
15
Free & Associated Gas
BSCF
2C
748
332
-
-
BSCF
1C
367
204
-
-
BSCF
3C
1,358
580
-
-
Barrels of Oil Equivalent
MMBOE MMBOE MMBOE
2C
344
78
17
7
31
3C
614
137
30
16
48
1C
176
48
7
2
15
Total
122
236
413
571
1,080
1,938
248
477
844
Net Contingent Resources (Carnarvon’s Share)
Net at 30 June 2021
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
-
8
29
32
4
3
1
16
57
57
7
6
3
24
97
BSCF
1C
Free & Associated Gas
BSCF
2C
150
66
-
-
-
73
41
-
-
-
BSCF
3C
272
116
-
-
-
114
216
388
Barrels of Oil Equivalent
MMBOE MMBOE MMBOE
2C
1C
3C
123
27
6
3
24
69
16
3
1
16
105
183
35
10
1
-
8
54
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 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW d
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2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 19
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(
Notes on Petroleum Resource Estimates
Unless otherwise stated, all petroleum resource
estimates are quoted as at 30 June 2021 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.
20 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW Carnarvon spent $2,049,000 (2020: $1,393,000)
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
loss on foreign exchange of $1,244,000 (2020: gain:
$847,000) due to the effect of an appreciation 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.
RISK MANAGEMENT
Carnarvon recognises the importance of risk
management in order to deliver the Company’s
strategies and to provide sustainable value growth
to shareholders. Carnarvon manages its risks in
accordance with its risk management policy to
ensure the critical risks are identified, managed and
monitored.
The Company’s risk management framework is
overseen by the Risk, Governance and Sustainability
Committee. This oversight of the effectiveness of the
risk management processes and activities provides
assurance to the Board and shareholders and
supports the Company’s commitment to continuous
business improvement.
FINANCIAL REVIEW
The Group reports an after-tax profit of $17,136,000
for the financial year ending 30 June 2021 (2020:
loss: $4,137,000). The primary contributing factor to
the profit result was the farm out of the Buffalo project
to Advance Energy.
Carnarvon’s balance sheet remained strong with
cash and cash equivalents of $98,436,000 (2020:
$113,632,000), no debt and minimal commitments
going forward.
On 19 April 2021, Carnarvon successfully completed
a 50% farm-out of the subsidiary which held its
interest in the Buffalo project in Timor-Leste. As a
result, the Company recognised a gain on disposal of
subsidiary of $23,635,000 (2020: $0). Going forward,
the interest in the Buffalo project will be accounted for
as a Joint Venture as per AASB 11 under the equity
accounting methodology. On this basis, the Company
recorded a value of $26,199,000 (2020: $0) at
the end of the period for its investment in the Joint
Venture. This includes Carnarvon’s 50% share of the
loss incurred by the Joint Venture of $77,000 (2020:
$0) between the date of the farm-out and the end of
the period.
The Company invested a further $6,878,000 on its
exploration and evaluation assets. Most of these costs
were in relation to pre-Front End Engineering and
Design work for the Dorado development and the
acquisition of the Archer and Keraudren Extension
3D seismic acquisitions within the Company’s Bedout
permits.
The Company recorded A$1,339,000 (2020:
$1,037,000) in other financial assets as at 30 June
2021. This represents the current value of the shares
held by Carnarvon in CWX Global Limited (formerly
Loyz Energy Limited) (“CWX”). The value reflects the
increase in the value of the shares during the year
which has been recorded in the income statement
for the year ended 30 June 2021. 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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 21
OPERATING AND FINANCIAL REVIEW MATERIAL BUSINESS RISKS
Safety, Environment and Sustainability:
Health, Safety and Environment
Oil and gas exploration, development and production
involve a variety of risks which may impact the health
and safety of Carnarvon’s people, communities, and
the environment. There is a risk of injury or negative
health or wellbeing for Carnarvon’s employees. These
impacts could also lead to reputational damage or
fines to the Company.
Carnarvon’s projects are also subject to various
laws and regulations regarding the environment.
Carnarvon’s exploration, development and production
can be potentially environmentally hazardous
giving rise to substantial costs for environmental
rehabilitation, damage control, and losses.
Carnarvon ensures that it maintains very high
standards for health, safety, and environment (“HSE”)
management. Carnarvon also actively manages its
HSE risks which is embedded in its operations and
risk management framework. This includes ensuring
appropriate HSE systems are in place and insurances
are maintained.
Where Carnarvon does not directly manage its
exploration and development activities, as a non-
operating partner, Carnarvon ensures it partners
with companies that maintain very high standards for
health, safety, and environment HSE management.
Climate Change
Climate change and management of carbon
emissions may affect Carnarvon’s operations, the
markets for oil and gas and the funding and insuring
of projects. Potential risks arising from physical
changes caused by climate change include increased
severe weather events and rising sea levels which
may impact the Company’s operations. There are also
risks arising from policy changes by governments
which may result in increasing regulation and costs
which could have a material adverse impact on the
Company’s operations.
Carnarvon recognises climate-related risks and the
need for these to be managed effectively particularly
across the energy industry. As a result, the Company
actively monitors current and potential areas of
climate change risk. Carnarvon is also currently in the
process of developing a roadmap to a lower carbon
economy and expect that the direction we take will
evolve over time utilising a variety of technologies.
Importantly, Carnarvon has committed to net zero
carbon emissions from its operations by 2050, if not
earlier. Carnarvon has offset its current Scope 1 and
Scope 2 emissions, which at this time are derived
from our head office.
With respect to our future assets such as Buffalo
and Dorado, we are committed to working with our
partners to reduce emissions from the proposed
operations and will continue to develop our plans to
offset emissions from these projects as they mature.
Carnarvon has also commenced diversifying its
portfolio into lower carbon intensive assets which
provide appropriate returns to shareholders. This
includes a joint venture the Company has entered
into with FIG to produce renewable diesel and other
sustainable products.
Economic and Financial Risks:
Additional information on financial risks are contained
in Note 27.
Oil Price
The financial performance, future value and growth
of Carnarvon is dependent upon the prevailing price
of oil. The price of oil is subject to fluctuations and is
affected by numerous factors beyond the control of
Carnarvon.
A sustained period of low or declining oil prices could
adversely affect the carrying value of Carnarvon’s
assets and the commercial viability of future
developments.
Carnarvon monitors and analyses oil markets and
seeks to reduce the price risk where reasonable and
practical. Carnarvon will develop a hedging strategy
upon sanction of future projects. Due to the early
stage of Carnarvon’s projects, Carnarvon does not
have any active hedges against the price of oil. Once
Carnarvon’s projects develop further, the Company
may enter hedging contracts to mitigate against
fluctuations in the price of oil.
22 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW Foreign Currency Exchange
Carnarvon’s financial report is presented in Australian
dollars, however, Carnarvon holds funds in both AUD
and USD. The retention of US dollars influences
Carnarvon’s reported cash holdings due to AUD / USD
exchange rates at each reporting period year end
which may result in foreign exchange gains or losses
in each period. Carnarvon also incurs some costs in
foreign currencies, typically US dollars, which means
Carnarvon is subject to fluctuations in the rates of
currency exchanges.
To mitigate against these foreign currency exchange
fluctuations, Carnarvon holds a balance between
USD and AUD as a natural hedge to committed
future expenditures denominated in both USD and
AUD. Once Carnarvon’s projects develop further,
the Company may enter into hedging contracts to
mitigate against fluctuations in foreign currency
exchanges.
Funding Risk
The nature of Carnarvon’s business involves
significant capital expenditures on exploration,
appraisal, and potential development activities.
Carnarvon’s business and the development of large-
scale projects in which Carnarvon pursues, relies on
access to debt and equity funding.
Limitations on Carnarvon’s ability to access funding
could result in the postponement or reduction of
capital expenditures, the relinquishment of rights in
relation to assets, adversely affect Carnarvon’s ability
to take advantage of opportunities and restrict the
expansion of the business. These could result in a
material adverse effect on Carnarvon’s business,
financial condition, and operations.
Carnarvon establishes funding plans for its material
projects to ensure that the optimal funding is obtained
to maximise shareholder value. This includes an
economic and commercial analysis of projects and
funding and ensuring that potential funding complies
with Carnarvon’s risk management framework.
Carnarvon also prepares short and long-term budgets
and financial models which are monitored monthly in
order to identify and manage any potential risks.
Operational Risks:
Exploration
Exploration is a speculative endeavor with an
associated risk of discovery to find any oil and gas in
commercial quantities and a risk of development. The
future profitability of Carnarvon directly relates to the
results of exploration, development, and production
activities. If Carnarvon is unsuccessful in locating
and developing new reserves and resources that are
commercially viable, this may have a material adverse
effect on Carnarvon’s future business, operations, and
financial conditions.
Carnarvon utilises well-established prospect
evaluation and experienced personnel to identify and
evaluate prospects in order to manage exploration
risks. Carnarvon also has a process to ensure major
decisions are subject to assurance reviews which
include external experts and contractors where
appropriate.
Joint Venture Operations
Carnarvon participates in a number of joint ventures.
This is a common form of business arrangement
particularly in the oil and gas industry in order to share
the benefits, risks and costs associated with projects.
Subject to any sole risk development rights which
may exist in joint venture agreements, Carnarvon
may require the agreement of other joint venturers to
proceed with an exploration or development project.
Failure to agree on these matters may have a material
adverse effect on Carnarvon’s business.
To the extent that Carnarvon is a minority partner
in a joint venture, Carnarvon is dependant on
the efficient and effective management of those
operating companies as managers. The objectives
and strategies of these operating companies may
not always be consistent with the objectives and
strategies of Carnarvon. However, operators must
act in accordance with the directions of the relevant
voting majority or by the voting principles of the joint
venture.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 23
OPERATING AND FINANCIAL REVIEW Carnarvon must also pay its percentage interest
share of all costs and liabilities incurred by the joint
venture as required under the relevant joint venture
arrangements. If Carnarvon fails to meet these
obligations it may experience a dilution of its interests
in the joint venture or may not gain the benefit of the
activities, except at a significant cost penalty later in
time.
Regulatory
Carnarvon operates in highly regulated industries and
jurisdictions. Changes in regulations or enforcement
actions could have material adverse impacts on
Carnarvon. Changes in government, monetary,
taxation, operational and other laws in the countries
in which Carnarvon operates may also impact
Carnarvon’s operations.
Carnarvon manages joint venture risks through
careful joint venture partner selection, stakeholder
engagement and relationship management.
Commercial and legal agreements, including
appropriate joint venture arrangements, are in place
across all joint ventures to define the responsibilities
and obligations of the joint venture.
Carnarvon also holds interests in permits which are
governed by the granting of contracts, licenses,
permits, or leases by the appropriate government
authorities. Carnarvon may lose title to or its interest
in a permit if license conditions are not met or
insufficient funds are available to meet expenditure
commitments.
Resource Estimates
Oil and gas resource estimates are expressions of
judgement based on knowledge, experience, and
industry practice. Estimates which are valid when
originally calculated may alter significantly or become
uncertain when new information becomes available.
Material changes to resource estimates may result
in Carnarvon altering its plans which could have a
positive or negative effect on its operations.
Carnarvon prepares its reserves and contingent
resources estimates in accordance with the definitions
and guidelines in the Society of Petroleum Engineers
2007 Petroleum Resources Management Systems.
Carnarvon engages personnel with an appropriate
level of skill and experience to prepare and review its
resource estimates. The assessment of Reserves and
Contingent Resources may also undergo independent
audit and review.
Development
The development of Carnarvon’s projects is
subject to a range of risks and uncertainties. These
developments are exposed to the risk of low side
reserve outcomes, cost overruns, timing delays and
production decreases. A significant poor development
outcome could result in material adverse impacts to
reserve and production forecasts, future revenues,
and operating costs.
Carnarvon mitigates these risks through the
careful selection of joint venture partners, where
possible, ensuring the utilisation of high quality and
experienced contractors throughout the development
process and conducts a series of assurance and
analysis procedures prior to committing to a
development.
24 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
Carnarvon monitors changes in relevant regulations
and engages with stakeholders to ensure their
concerns are managed and that policy changes are
understood, to ensure the Company complies all
regulatory requirements.
Foreign Operations
Some countries within which Carnarvon operates are
developing countries that have political and regulatory
structures that are maturing and have potential for
future change. There is the risk that certain events
can have a material impact on the investment and
security environment within these countries which
could impact the assets held by Carnarvon.
Carnarvon closely monitors the political developments
and events in the countries in which it operates.
Carnarvon engages with stakeholders in these
countries and maintains local offices which are locally
staffed and provide close monitoring and feedback to
head office management.
Key Personnel
Skilled employees and consultants are essential
to the successful delivery of Carnarvon’s business
strategy. Carnarvon relies on the services of certain
key management personnel, including its executive
officers, other key employees, and consultants. The
loss of any of these key personnel could have a
material adverse effect on Carnarvon’s business.
Carnarvon ensures it maintains competitive
remuneration practices relative to its industry,
including long and short-term incentive schemes, to
ensure it maintains the services of its key personnel
and has the ability to attract additional personnel as
required.
OPERATING AND FINANCIAL REVIEW Carnarvon maintains clear and regular updates on strategy and business planning to provide clarity of the
Company’s ongoing plans. Guidance and opportunities are provided for staff to foster their careers and to
achieve personal and business goals aligned with the Company’s strategy. Succession plans for key personnel
are also prepared when required.
Permit Interests
Joint Venture
Partner(s)
Basin
Equity
Bonaparte
Bonaparte
Roebuck
Bonaparte
Roebuck
Roebuck
Roebuck
Roebuck
Barrow
Perth
Permit
Australia
AC-P62
AC-P63
WA-521-P
WA-523-P
WA-435-P
WA-436-P
WA-437-P
WA-438-P
WA-155-P
R 7
Timor-Leste
TL-SO-T 19-14 PSC
Note:
(i) Denotes operator where Carnarvon is non-operator partner.
(ii) Carnarvon has an overriding royalty interest in these assets
100%
100%
100%
100%
20%
30%
20%
30%
100%
2.50% of 42.5% (ii)
-
-
-
-
Santos Limited (i)
Santos Limited (i)
Santos Limited (i)
Santos Limited (i)
-
-
Bonaparte
50%
Advance Energy PL
Partner
Interest
Indicative Forward
Program
-
-
-
-
80%
70%
80%
70%
-
-
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
G & G Studies
FEED, Exploration Drilling
Exploration Drilling
G & G Studies
Appraisal
50%
Exploration Drilling
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 25
OPERATING AND FINANCIAL REVIEW
26 CARNARVON PETROLEUM LIMITED 2021 ANNUAL 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
2021, 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
Chair (retired on 11 November 2020)
FCA, FAICD (Life)
Appointed as a director on 17 March 2005 and
appointed Chair in April 2005. Retired as Chairman
and non-executive director on 11 November 2020.
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).
William (Bill) A Foster
Chair
BE (Chemical)
Appointed as a director on 17 August 2010 and
appointed as Chair on 11 November 2020.
Bill is an internationally experienced energy
executive who has worked with Chevron, a Middle
Eastern National Oil Corporation as well as US and
ASX listed independents. He spent 30 years with
Marubeni Corporation as Energy Advisor until his
recent retirement, assisting in the development of
their Oil, Gas and LNG business. During this time, a
global business was established with Tokyo, London,
Houston, Singapore and Perth offices. Mr Foster
was a director of Marubeni’s various exploration and
production subsidiaries and a former director of Tap
Oil Ltd.
Bill’s activities have covered a broad range of areas
relevant to the oil and gas industry and he has
extensive, commercial, financial and mergers and
acquisitions experience, as well as that from his
engineering background.
During the past three years Bill was a director of
Hawkley Oil and Gas Limited (retired 2019).
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 27
DIRECTORS' REPORT Adrian C Cook
Chief Executive Officer and Managing Director
B Bus, CA, MAppFin, FAICD
Appointed as a director on 1 July 2011
Peter Moore
Non-Executive Director
B.Sc (Hons Geology), MBA, PhD, GAICD.
Appointed as a director on 18 June 2015.
Mr Cook has over 30 years’ experience in commercial
and financial management, primarily in the energy
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.
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 Beach Energy Limited (since
2017).
Dr Moore is Chair of the Risk, Governance and
Sustainability Committee and a member of the Audit
Committee and the Remuneration and Nomination
Committee.
28 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT Gavin Ryan
Non-Executive Director
LLB (Hons), MAICD
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 relations, 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 Committee and the Risk, Governance and
Sustainability Committee.
Mr Thomson Naude
Mr Alex Doering
Debra Bakker
Non-Executive Director
(Appointed on 5 October 2020)
MAppFin., BBus. (FinAcc), Grad Dip FINSIA, GAICD
Debra is an experienced financier and deal maker
with more than 27 years’ experience in the resources
industry with significant international experience.
Debra has previously held senior positions with
Commonwealth Bank of Australia, Standard Bank
London Group and Barclays Capital. Debra is the also
an experienced non-executive director having held a
number of positions with ASX resource companies.
During the past three years, Ms Bakker has served as
a non-executive director for IGO Limited (since 2016),
Azumah Resources Ltd (ceased 2019) and Capricorn
Metals Ltd (ceased 2019).
Ms Bakker is Chair of the Audit Committee and
a member of the Remuneration and Nomination
Committee and the Risk, Governance and
Sustainability Committee.
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.
Mr Alex Doering was appointed as Joint company
secretary in August 2019. Mr Doering is a qualified
Chartered Accountant, an Associate of the
Governance Institute of Australia and the Financial
Controller at Carnarvon Petroleum.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 29
DIRECTORS' REPORT Directors’ meetings
The number of directors’ meetings held and attended by each of the directors during the reporting period was as follows:
(a)
(b)
PJ Leonhardt 1
WA Foster 2
AC Cook
P Moore
SG Ryan
D Bakker 3
(a) Number of meetings held and eligible to attend during period of office
(b) Number of meetings attended
1 Mr Leonhardt retired from the Board on 11 November 2020.
2 Mr Foster was appointed as Chairman on 11 November 2020.
3 Ms Bakker was appointed to Board as a Non-Executive Director on 5 October 2020.
9
15
15
15
15
10
9
15
15
15
15
10
Audit 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 Ms
Bakker (appointed Chair of the Audit Committee on 11 December 2020), Dr Moore and Mr Ryan. Qualifications
of Audit and Risk Committee members are provided in the Directors section of this directors’ report. Mr Foster
retired from the Committee on 11 December 2020.
Audit Committee meetings
The number of Audit and Risk Committee meetings held and attended by the members during the reporting
period was as follows:
(a)
(b)
WA Foster 1
D Bakker 2
P Moore
SG Ryan
(a) Number of meetings held during period of office
(b) Number of meetings attended
1 Mr Foster retired from the Committee on 11 December 2020.
2 Ms Bakker was appointed to Committee as Chair on 11 December 2020.
1
1
2
2
1
1
2
2
Risk, Governance and Sustainability Committee
Names and qualifications of Risk, Governance and Sustainability (“RGS”) Committee members
The RGS Committee, which was formed was formed on 11 December 2020, is to include at least 3 members.
Current members of the committee are Dr Moore (Chair of the RGS Committee), Mr Ryan and Ms Bakker.
Qualifications of RGS Committee members are provided in the Directors section of this directors’ report.
RGS Committee meetings
The number of RGS Committee meetings held and attended by the members during the reporting period was as follows:
P Moore
D Bakker
SG Ryan
(a) Number of meetings held during period of office
(b) Number of meetings attended
(a)
1
1
1
30 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
(b)
1
1
1
DIRECTORS' REPORT 2021 REMUNERATION IN BRIEF (UNAUDITED)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021 (“FY21”)
Remuneration of executive key management personnel (“KMP”) in FY21
In arriving at the overall remuneration outcomes for KMP in FY21, the Board have sought to balance and take
into account both the wider industry and economic conditions, and the outcomes achieved by management
during the year.
More specifically, the Board adopted the following key principles for KMP earnings:
•
•
•
•
Earnings were re-weighted, with a greater portion at risk income, and a greater focus on alignment with
shareholder interests. As an example, the Managing Director’s remuneration now comprises one third in
fixed remuneration and two thirds at risk remuneration (previously half was at risk);
KMP fixed remuneration was reduced by 10% from FY20 levels;
Short term incentives now have a performance gate that requires the share price to exceed the energy
index before targets can be considered, and (subject to performance) are awarded 50% as cash and 50%
as performance rights; and
Long term share-based incentives are now linked directly to absolute and relative share price performance
under the new Performance Rights plan which was approved by shareholders at the 2020 Annual General
Meeting.
The performance rights under the short-term and long-term incentives were determined and granted post year-
end on 1 July 2021.
A summary of the audited cost to the Company of executive key management personnel (KMP) remuneration is
provided on Page 43.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 31
DIRECTORS' REPORT REMUNERATION REPORT (UNAUDITED) (CONTINUED)
FY21 remuneration outcomes at a glance
KMP Fixed
Remuneration
Reduction in base
salaries.
Short Term
Incentive (STI)
Awarded to KMP
during the year.
Total fixed remuneration (TFR) was reduced by 10% for KMP with
effect from 1 January 2021 as part of a Board initiative to increase
KMP’s at-risk remuneration. At risk remuneration also now has a
greater link to share price performance and accordingly a greater
alignment with shareholder interests.
The Board determined the nature of the award on 1 July 2021 which
awarded 50% - 51% of the STI entitlement to KMP after the CVN
share price exceeded the ASX Energy Index (ASX:XEJ share price
performance gate) with key performance targets being achieved.
The award comprised a 50% cash component and a 50% equity
component. The cash component is included in FY21 remuneration
and the equity component comprised performance rights which will
only be recognised from the grant date of 1 July 2021.
Long Term
Incentive (LTI)
No performance rights
vested during the year
(namely no value was
realised by KMP).
No Performance rights were granted or vested during the year.
Performance rights granted and issued subsequent to the year end
are subject to the achievement of absolute and relative (to peer
group) share price performance conditions in three years’ time
before they vest.
Non-executive
directors
No change to fees.
Fees payable to non-executive directors remain unchanged from
FY20 levels. Non-executive directors did not receive any other form
of remuneration or incentives.
The statutory disclosures required by the Corporations Act are set out in the remuneration report on pages 33
to 44. These disclosures, particularly the inclusion of accounting values for LTI performance rights awarded
but not vested, can vary significantly from the cash value of remuneration realised by senior executives. This is
because the Accounting Standards require a value to be placed on a right at the time it is granted to a senior
executive and then reported as remuneration even if ultimately the senior executive does not receive any actual
value, for example because performance conditions are not met and the rights do not vest.
The following is an unaudited and non-IFRS summary of the cash value of remuneration actually realised by
executive KMP for FY21, which the company believes is useful to shareholders, The amounts include cash
salary and fees, STI cash awards and superannuation. No share-based payments vested to KMP during the year
and therefore no value is included in the table below.
Table 1: Cash value of remuneration realised for executive KMP (unaudited):
Name
A Cook
Managing Director and Chief Executive Officer
P Huizenga
Chief Operating Officer
T Naude
Chief Financial Officer
Total
Salary
$
Super
$
STI cash
$
Total cash
$
606,288
35,381
124,414
766,083
550,286
34,037
58,283
642,606
314,125
1,470,699
27,434
96,852
33,752
375,311
216,449
1,784,000
32 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT REMUNERATION REPORT (AUDITED)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
This report has been prepared in accordance with section 300A of the Corporations Act 2001 (Cth)
(Corporations Act) for the consolidated entity for the financial year ended 30 June 2021. It has been audited as
required by section 308(3C) of the Corporations Act and forms part of the Directors’ Report.
At the Company’s most recent Annual General Meeting at least 25% of the votes cast were against the adoption
of the 2020 remuneration report. In response the Board enacted the following actions:
•
•
•
•
Earnings were re-weighted, with a greater portion at risk income, and a greater focus on alignment with
shareholder interests. As an example, the Managing Director’s remuneration now comprises one third in
fixed remuneration and two thirds in at risk remuneration (previously half was at risk);
KMP fixed remuneration was reduced by 10% from FY20 levels;
Short term incentives now have a performance gate that requires the share price to exceed the energy
index before targets can be considered, and (subject to performance) are awarded 50% as cash and 50%
as performance rights (effective 1 July 2021); and
Long term share-based incentives are now (effective 1 July 2021) linked directly to absolute and relative
share price performance under the new Performance Rights plan which was approved by shareholders at
the 2020 Annual General Meeting.
Key Management Personnel (“KMP”)
The Company’s KMP are listed in Table 2. They are the Company’s non-executive directors (NED) and executive
KMP who have authority and responsibility for planning, directing and controlling the activities of the Company,
directly or indirectly.
Table 2: Key management personnel during FY21
Name
Executive KMP
A Cook
P Huizenga
T Naude
Non-executive Directors
W Foster
P Leonhardt
P Moore
G Ryan
D Bakker
Position
Period as KMP during the year
Managing Director & Chief Executive Officer (CEO)
Chief Operating Officer
Chief Financial Officer
All of FY21
All of FY21
All of FY21
Independent Chairman
Independent Chairman (Retired)
Non-executive Director
Non-executive Director
Non-executive Director (Appointed)
All of FY21
1 July 2020 to 11 November 2020
All of FY21
All of FY21
5 October 2020 to 30 June 2021
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 33
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
Summary of Carnarvon’s remuneration policy framework
Carnarvon’s vision is to become a major Australian energy provider with expertise and capability that
enables the generation of material returns for shareholders over any given medium-term time horizon and
outperformance against the ASX Energy Index (ASX:XEJ).
Carnarvon’s remuneration framework seeks to focus executives on delivering that purpose:
•
•
•
•
Fixed remuneration aligns to market practice and prevailing economic conditions. It seeks to attract,
motivate and retain executives focused on delivering Carnarvon’s purpose.
‘At risk’ performance-based incentives link to shorter-term and longer-term Company goals. The goals
contribute to the achievement of Carnarvon’s purpose.
Short term incentives are considered and awarded against an annual performance ‘gate’ whereby the
company’s share price performance must exceed the ASX Energy Index (ASX:XEJ) before performance
against any other criteria is considered. If that gate is passed, then incentives are awarded 50% in cash and
50% as performance rights with the total incentives related to the achievement of the STI measures in table
5. This ensures even short-term incentives are judged through the lens of shareholder interests.
Longer term ‘at risk’ incentives are also designed to directly align with shareholder objectives and interests.
Half of longer-term incentives are based on the Company’s share price performance against peers
considered to be alternative investments to Carnarvon. The other half is based on the Company’s absolute
share price appreciation. Both measures are assessed over a three-year period and are entirely share
based rewards to executives.
How Carnarvon makes decisions about remuneration
The Board determines Carnarvon’s KMP remuneration based on recommendations made to the Board by its
Remuneration and Nominations Committee. The Committee is to include at least 3 members who are all non-
executive directors.
Members of the Committee during the 30 June 2021 financial year were Mr Ryan (Chairman of Remuneration
and Nomination Committee), Mr Foster (retired from the Committee on 11 December 2020), Dr Moore and
Ms Bakker (appointed to Committee on 11 December 2020). Qualifications of Remuneration & Nomination
Committee members are provided in the Directors section of this directors’ report.
The Remuneration and Nomination Committee Charter is available at Carnarvon’s website: www.carnarvon.com.
au/corporate-governance/. Carnarvon’s Managing Director & CEO may attend Committee meetings by invitation
in an advisory capacity. Other executives may also attend by invitation. The Committee excludes executives from
any discussion about their own remuneration.
Remuneration & Nomination 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:
(a)
SG Ryan
PS Moore
WA Foster 1
D Bakker 2
(a) Number of meetings held during period of office.
(b) Number of meetings attended.
1 Mr Foster retired from the Committee on 11 December 2020.
2 Ms Bakker was appointed to Committee on 11 December 2020.
3
3
1
2
(b)
3
3
1
2
34 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
External advisers and remuneration advice
Where an adviser is engaged by the company in relation to remuneration matters, the adviser is engaged by
and reports to the Board or chair of the Remuneration and Nominations Committee. This protocol ensures any
recommendations are free from undue influence by management. The Board or Committee chair deals with the
adviser on all material matters. Management involvement is only to the extent necessary to coordinate the work.
No external advisors were engaged during FY21.
The Board and Committee seek recommendations from the Managing Director & CEO about executive
remuneration. The Managing Director & CEO does not make any recommendation about his own remuneration.
The Board and Committee have regard to industry benchmarking information.
How Carnarvon links performance to incentives
Carnarvon’s remuneration policy includes short term (STI) and long-term (LTI) incentive plans. The plans seek to
align management performance with shareholder interests.
The STI is an operationally focused target incentive plan which is only considered after the Company’s share
price achieves a specified performance gate. STI, if awarded, is 50% in cash and 50% in performance rights with
a vesting period of 12 months.
The LTI links to an increase in total shareholder return over an extended period and is a share-based incentive
through the Company’s performance rights plan.
SENIOR EXECUTIVE REMUNERATION STRUCTURE
This section details the remuneration structure for senior executives (Key Management Personnel, or KMP).
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 a full time 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 a full time 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 a full time employee. Termination by the Company is
with 3 months notice or payment in lieu thereof. Termination by Mr Naude is with 3 months’ notice.
Remuneration mix
Remuneration for KMP is a mix of a fixed cash salary component and an ‘at risk’ component. The ‘at risk’
component means that specific targets or conditions must be met before there is any entitlement to receive that
component.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 35
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
What is the balance between fixed and ‘at risk’ remuneration?
The remuneration structure and packages offered to KMP for the period were:
•
•
Fixed remuneration; and
‘At risk’ remuneration comprising:
-
Short term incentive (STI) – an annual cash and (from 1 July 2021) performance rights with a 12 month
vesting period, which may be offered at the discretion of the Board, linked to Company and individual
performance over a year.
Long term incentive (LTI) – from 1 July 2021, performance rights-based incentive, which may be
granted annually at the discretion of the Board, linked to the absolute and relative share price
performance conditions measured over three years.
-
The balance between fixed and ‘at risk’ remuneration depends on the senior executive’s role. The CEO has the
highest level of ‘at risk’ remuneration reflecting the greater level of responsibility of this role.
Table 3: Shareholder wealth indicators FY17 – FY21:
Share price at year-end
Basic earnings/(loss) per share
FY17
$0.079
$(3.62)
FY18
$0.15
$0.14
FY19
$0.60
$(0.64)
FY20
$0.195
$(0.26)
FY21
$0.25
$1.09
Table 4 sets out the relative proportions of the three elements of the executives KMP’s total remuneration
packages from 1 July 2021.
Table 4: Remuneration mix 1
Position
CEO
Other KMP
1
Performance Based Remuneration
Fixed Remuneration
%
34
50
STI
%
33
25
LTI
%
33
25
Total ‘at risk’
%
66
50
The remuneration mix assumes maximum ‘at risk’ awards. Percentages shown later in this report reflect the
actual incentives paid as a percentage of total fixed remuneration, movements in leave balances and other
benefits and share based payments calculated using the relevant accounting standards.
Fixed remuneration
What is fixed remuneration?
How is fixed remuneration reviewed?
Senior executives are entitled to a fixed cash remuneration
amount inclusive of the guaranteed superannuation contribution.
The amount is not based upon performance. Senior executives
may decide to salary sacrifice part of their fixed remuneration for
additional superannuation contributions and other benefits.
Fixed remuneration is determined by the Board based on external
review and advice that takes account of the role and responsibility
of each senior executive. It is reviewed annually against industry
benchmarking information.
36 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
Fixed remuneration for the year
Total fixed remuneration (TFR) of KMP is provided in Table 1 on Page 43. Page 43 reports on the remuneration
for KMP as required under the Corporations Act.
Short Term Incentive (STI)
What is the STI?
How does the STI link
What are the performance
conditions or KPIs?
The STI is part of ‘at risk’ remuneration offered to senior executives. It
measures individual and Company performance over a 12-month period.
The period coincides with Carnarvon’s financial year. It is paid as 50% in cash
and, from 1 July 2021, 50% in performance rights and is offered to senior
executives at the discretion of the Board based on company performance and
performance against objectives.
The STI is an at-risk opportunity for senior executives and is subject to the
achievement of the performance threshold (see below), it rewards senior
executives for meeting or exceeding key performance indicators. The key
performance indicators link to Carnarvon’s key purpose and goals set for
KMP during the reporting period. The STI aims to motivate senior executives
to meet Company expectations for success. Carnarvon can only achieve its
purpose if it attracts and retains high performing senior executives.
Carnarvon’s key performance indicators (KPIs) are set by the Board for
each 12-month period beginning at the start of a financial year. They reflect
Carnarvon’s financial and operational goals that are essential to it achieving
its purpose. Senior executives also have individual KPIs to reflect their
particular responsibilities. For the reporting period, the performance measures
comprised:
STI Measures
Company KPI’s
Buffalo project farm out
Buffalo drilling commitment
Dorado development progressed
Dorado development FPSO
Dorado development financing
Bedout exploration drilling
CVN exploration permit farm out
Other KPI’s, eg growth, strategy,
people, governance & environment
Individual KPI’s
Refer to Table 5 for more information.
Weighting
80%
20%
10%
10%
10%
10%
10%
5%
5%
20%
Different performance levels for KMPs
Individual KPIs link to Carnarvon’s strategy and strategic plan. Individual KPIs relate to areas where senior
executives are able to influence or control outcomes. KPIs may include: development of project specific plans
to align with Carnarvon’s strategy; specific commercial or corporate milestones; funding capacity; improvements
in systems to achieve efficiencies; people measures; or specific safety and environmental and sustainability
targets.
The Board sets KPI measures for KMPs. A participant must achieve the threshold level to entitle them to any
payment for an individual KPI.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 37
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
The value of the STI awards to individual KMPs
Incentive payments are based on a percentage of a senior executive’s fixed remuneration. The CEO can earn up
to a maximum of 100% of his fixed remuneration. The value of the award that can be earned by other KMP is up
to a maximum of 50% of their fixed remuneration.
Assessment of performance conditions
The Board assesses the extent to which KPIs were met for the period after the close of the relevant financial
year. The Board assesses the achievement of the KPIs for the CEO. The Board assesses the performance of
other KMPs on the CEOs recommendation.
Assessment of threshold level of performance before an STI is paid
To align with shareholder interests, at the end of Carnarvon’s financial year there is a calculation of the share
price performance against the ASX Energy Index (ASX:AEJ). Carnarvon’s share price performance must exceed
the ASX Energy Index in order for the Board to then consider the outcomes for the CEO and other KMP against
each of the KPI measures.
What happens if an STI is awarded
On achievement of the relevant KPIs Carnarvon will pay STI awards as to 50% in cash and 50% in performance
rights with a vesting period of 12 months. Carnarvon includes the cash and nominal value of any performance
rights STI awards in its financial statements for the relevant financial year.
STI PERFORMANCE FOR THE YEAR
At the completion of the financial year, the board tested each senior executive’s performance against the STI
performance conditions set for the year after exercising its discretion in relation to the hurdle measures.
The first test is a ‘gate’ in relation to the Company’s share price performance compared with the return of the
ASX Energy Index. If Carnarvon’s share price does not exceed the performance of the Index within the period,
no STI will be awarded, regardless of whether other targets have been met.
The change in Carnarvon’s share price over the financial year exceeded the change in the ASX Energy Index,
and accordingly the board tested each senior executive’s performance against the STI performance conditions
set for the year.
Carnarvon share price (ASX:CVN) at 1 July 2020
Carnarvon share price (ASX:CVN) at 30 June 2021
Change in share price over the period
ASX Energy Index (ASX:XEJ) at 1 July 2020
ASX Energy Index (ASX:XEJ) at 30 June 2021
Change in ASX Energy Index over the period
19.5 cents per share
25 cents per share
28.2%
7,528
8,051
6.9%
The percentage of the maximum STI that will be awarded or forfeited for the period for each executive KMP,
determined on 1 July 2021, was as follows (awarded/ forfeited):
KMP
Adrian Cook
Mr Huizenga
Mr Naude
STI Awarded
STI Forfeited
50%
51%
50.5%
50%
49%
49.5%
38 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
The STI awards made reflect Carnarvon’s performance for FY21, with outcomes of the Company related
performance conditions that make up a fixed percentage of the STI KPIs provided in Table 5.
Table 5: Outcome of FY21 STI Company KPIs:
STI Measure
STI KPI
STI Performance and score
Buffalo project farm
out
Secure funding support for >50% of
the Buffalo-10 well by 30 June 2021
Buffalo drilling
commitment
a). Secure drilling rig for Buffalo-10
well with well cost estimate US$20m.
Score: KPI not achieved
Drilling rig for Buffalo-10 secured by
30 June 2021.
Score: KPI achieved
Score: KPI not achieved
Dorado development
FPSO
Lease contract principles agreed by
30 September, 2020
Score: KPI not achieved
Dorado development
financing
Secure strategic portion of non-debt
financing by 30 June 2021
Score: KPI not achieved
Bedout exploration
drilling
Secure drilling rig by 31 March, 2021
for drilling Pavo or Apus
CVN exploration
permit farm out
Farm out permit interest(s) by 30
June, 2021 to cover CVN share of
exploration costs >$10 million
Drilling rig secured.
Score: KPI achieved
Score: KPI not achieved
Other KPI’s, eg
growth, strategy,
people, governance &
environment
Build ESG policies by 30 June, 2021
that enable CVN to operate Buffalo
and other drilling and production
facilities.
Policies delivered and appropriate
frameworks constructed and implemented
for the drilling operations in Buffalo.
Score: KPI achieved
STI performance rights issued in FY21
There were no STI performance rights awarded or in operation during the year. KMP were granted a total of
403,110 STI performance rights on 1 July 2021 on the basis outlined in the tables above.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 39
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
LONG TERM INCENTIVE (LTI)
What is the LTI?
How does the LTI link to
Carnarvon’s key purpose?
How are the number of
rights issued to senior
executives calculated?
The LTI is an equity based ‘at risk’ incentive plan which operates through a
performance rights scheme approved by Carnarvon shareholders. The LTI aims
to reward results that promote long term growth in shareholder value or total
shareholder return (TSR).
Carnarvon offers LTIs to senior executives at the discretion of the Board and
offers to KMP as outlined in table 4.
The LTI links to Carnarvon’s key purpose by aligning the longer term ‘at risk’
incentive rewards with outcomes that match shareholder objectives and
interests by:
•
•
benchmarking shareholder returns against a group of companies
considered alternative investments to Carnarvon and against absolute
target returns
giving share based rather than cash-based rewards to executives. This links
their own rewards to shareholder expectations of company performance,
especially share price growth.
The award of performance rights is at the absolute discretion of the Board.
The number of performance rights granted to the executives under the LTI is
calculated as fixed remuneration at 30 June of the Financial Year multiplied by
the relevant percentage (2021: CEO: 100%, other KMP: 50%) divided by the
market value. The Market Value is the market value of a fully paid ordinary share
in the Company, calculated using a five day VWAP, up to and including the date
the performance rights are granted.
What equity based grants
are given and are there
plan limits?
Carnarvon grants performance rights using the formula set out above. If the
performance conditions are met, senior executives have the opportunity to
acquire one Carnarvon share for every vested performance right. There are no
plan limits as a whole for the LTI due to the style of the plan.
What are the performance
conditions?
The two performance conditions used by Carnarvon are based on Total
Shareholder Return (TSR) (1) in absolute terms and (2) relative to the returns of a
group of companies considered alternative investments to Carnarvon.
The vesting schedule of 50% of the performance rights granted in July 2021
will be subject to relative TSR testing is as follows:
Relative TSR Performance
Less than 50th percentile
Between 50th and 75th percentile
75th percentile or better
Level of vesting
Zero
Pro rata between 50% and 100%
100%
Peer Group: 88 Energy, Buru Energy, Central Petroleum, Cooper Energy, Elixir
Energy, Empire Energy, Galilee Energy, Helios Energy, Horizon Oil, Karoon
Energy, Senex Energy, Strike Energy, Warrego Energy.
The vesting schedule of 50% of the performance rights granted in July 2021
will be subject to absolute TSR testing is as follows:
Absolute TSR Performance
10% per annum return
Between 10% and 20% per annum
Above 20% per annum
% of performance rights that will vest
33%
Pro rata between 33% and 100%
100%
40 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
Why choose these
Performance conditions?
Relative TSR is an appropriate performance hurdle because it ensures a
proportion of each participants remuneration in linked to the return received by
shareholders from holding shares in a company in the peer group for the same
period.
Absolute TSR is an appropriate performance hurdle because it ensures KMP
performance is rewarded when a year-on-year improvement in shareholder
value is achieved.
What happens to LTI
performance rights on a
change of control?
The Board reserves the discretion for early vesting in the event of a change of
control of the Company. Adjustments to a participant’s entitlements may also
occur in the event of a company reconstruction and certain share issues.
LTI equity awards issued or in operation during the year.
There were no LTI performance rights awarded or in operation during the year. KMP were granted 1,586,560
performance rights on 1 July 2021 on the basis outlined in the tables above.
REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS:
The fees paid to non-executive directors are determined using the following principles. Fees are:
•
•
•
•
not incentive or performance based, but are fixed amounts;
determined by reference to the nature of the role, responsibility and time commitment required for the
performance of the role including membership of board committees;
are benchmarked against industry peers on an annual basis; and
driven by a need to attract and retain a diverse and well-balanced group of individuals with relevant
experience and knowledge
Following a benchmarking analysis against Carnarvon’s peers, the board made no change to its fee structure or
quantum in the current year. The benchmarking analysis was conducted by comparing Carnarvon non-executive
director fees to those of a peer group comprising
ASX-listed companies of similar size in both the resources and oil and gas sectors. Following the review, the
Chair’s fee remains at $150,000 per annum and the base board fee $100,000 per annum to ensure Carnarvon
will be able to attract and retain quality board candidates.
The board added a Risk, Governance and Sustainability (“RGS”) Committee to the board structure to reflect
the changing nature of the company’s operations and the increased need to focus on environmental, social,
governance and stakeholder expectations. This brings the total of board committees to three, each chaired
by a non-executive director. Committee chairs are paid an additional fee of $5,000 to reflect the workload
required of them in fulfilling those roles. No additional fees are payable to any director for membership of board
committees.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 41
DIRECTORS' REPORT REMUNERATION REPORT (CONTINUED)
Directors are not paid superannuation contributions by the Company.
Non-executive directors are entitled to be reimbursed at cost for their reasonable expenses incurred in the
performance of their directors’ duties.
At $472,812, the aggregate remuneration of Carnarvon non-executive directors remains well below the annual
limit of $600,000 approved by shareholders at the 2018 Annual General Meeting.
Details of the fees payable to non-executive directors for Board and committee membership for FY21 are set
out in Table 6.
Table 6: FY21 non-executive directors’ fees and board committee fees per annum:
Board
Chair
$
Member
$
150,000 100,000
Chair Audit
$
5,000
Board Committees
Chair
Remuneration
and Nomination
$
5,000
Member
Remuneration
and Nomination
$
-
Member
Audit
$
-
Chair
RGS
$
5,000
Member
RGS
$
-
REMUNERATION INITIAIVES DURING THE YEAR
Review of Senior Executive Remuneration
The directors reviewed the remuneration of KMP in late 2020 taking into consideration Carnarvon’s positioning
against its industry peers, the wider effects of the COVID-19 situation in the broader community, the position
of resources companies in the broader market, realignment of staff priorities arising from changes in the
company’s strategy and operations, and the introduction of the new performance rights scheme mandated by
shareholders at the 2020 Annual General Meeting.
As a result, KMP remuneration was adjusted to reduce the amount of the fixed component by ten percent and
more closely align the variable elements to company and performance and positive shareholder outcomes. The
board will continue to monitor and adjust alignment of KMP to strategic and operational objectives as required
through 2022 and beyond.
Staff structure and remuneration
Changes were made to the staffing of Carnarvon’s operations during 2021 to reflect the changes in the
strategic and operational focus of the business as we progress the Buffalo project, focus on unlocking value
from the company’s position in Dorado and progress the renewable diesel project. The board is supporting
management through the process to ensure that the company’s remuneration levels and structures remain fit
for purpose and aligned with the current market.
42 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT d
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2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 43
REMUNERATION REPORT (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:
Held at
1 July 2020
Net acquired/
(sold) on market
Award under
Employee Share Plan
Received on
exercise of options
Held at
30 June 2021
17,750,000
925,938
15,938,797
464,232
267,701
-
-
-
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37,520
304,774
12,076,196
4,074,357
-
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500,000
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17,750,000 1
1,425,938
15,938,797
964,232
305,221
304,774
-
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12,076,196
4,074,357
2021
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
D Bakker
Executives
PP Huizenga
TO Naude
1
This balance reflects the shares held by PJ Leonhardt on the date he retired as Director of 11 November 2020.
Plan shares held by key management personnel
Included in the above table are plan shares held by key management personnel held under the previous ESP
loan scheme which are accounted for as in substance options. 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:
2021
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
Executives
PP Huizenga
TO Naude
Held at
1 July 2020
Granted as
compensation
Employee Share
Plan cancellations
3,000,000
-
12,945,592
-
-
11,976,196
3,992,512
-
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Exercised
3,000,000
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Held at
30 June 2021
-
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12,945,592
-
-
-
-
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:
Held at
1 July 2020
Granted as
compensation
2021
Directors
WA Foster
P Moore
1 The options were exercised at the exercise price of $0.15 each.
500,000
500,000
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500,000 1
Held at
30 June 2021
-
-
End of Remuneration Report
44 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' REPORT Non-audit services
The auditors have not performed any non-audit services over and above their statutory duties during the current
reporting period.
Directors’ interests
At the date of this report, the relevant interests of the directors in securities of the Company are as follows:
Name
WA Foster
AC Cook
P Moore
SG Ryan
D Bakker
Ordinary Shares
1,425,938
15,938,797
964,232
305,221
304,774
Options over ordinary Shares
-
-
-
-
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 ended 30 June 2021, women made up 20% of the Board and 29% of the Company’s general work
force.
The Board has set the following measurable diversity objectives for the 2021 financial year:
2021 Measurable objectives
Progress
Aim to have not less than 30% of the
directors of each gender.
Female Board representation in 2021 was 20% (2020: 0%).
Dedicated mentoring program for the
female employees of the Company
The Company provided ongoing training, mentoring and
professional support in the development of all employees’ careers.
Maintain flexible work practices
The Company continued to maintain its flexible work practices which
includes a parental leave policy and provides employees the ability
to maintain flexible hours and to work from home where required.
Likely developments
The likely developments for the 2021 financial year are contained in the operating and financial review as set
out on pages 6 to 25.
Environmental regulation and performance
The Group’s oil and gas exploration and development activities are concentrated in offshore Western Australia.
Environmental obligations are regulated under both State and Commonwealth law in Western Australia,
depending on whether a permit sits in State or Commonwealth waters. The Group is not aware of any significant
environmental breaches during the year ended 30 June 2021.
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 (2020: Nil).
Auditor’s independence declaration
The auditor’s Independence Declaration under Section 307C of the Corporations Act is set out on page 48 and
forms part of the directors’ report for the financial year ended 30 June 2021.
Principal activities
During the course of the 2021 financial year the Group’s principal activities continued to be directed towards oil
and gas exploration, development and production.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 45
DIRECTORS' 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 6 to 25.
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 2021 is set out on pages 6
to 25 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
1). On 1 July 2021, the Company granted 3,119,670 performance rights to executives and other employees
under the company’s performance rights plan.
2). On 6 July 2021, the company formed a joint venture with Frontier Impact Group to produce renewable
diesel and other sustainable products.
3). On 14 July 2021, the Company was granted Petroleum Exploration Permits EP 509 & TP/29 in the North
West Shelf, offshore Western Australia.
4). On 23 August 2021, the Front End Engineering and Design contract for the Floating Platform, Storage and
Offloading facility for the Dorado project in WA-437-P was awarded to Altera Infrastructure Production AS.
5). On 26 August, the contract for the design, construction and installation of the Well Head Platform, for the
Dorado project in WA-437-P, was awarded to Sapura Energy.
Other than above, there is no other matters or circumstance has arisen since 30 June 2021 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
46 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
DIRECTORS' 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.
William A Foster
Chairman
Perth, 30 August 2021
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 47
DIRECTORS' 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
Auditor’s independence declaration to the directors of Carnarvon
Petroleum Limited
As lead auditor for the audit of the financial report of Carnarvon Petroleum Limited for the financial
year ended 30 June 2021, 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
relation to the audit; and
b.
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Carnarvon Petroleum Limited and the entities it controlled during the
financial year.
Ernst & Young
T S Hammond
Partner
30 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TH:AJ:CVN:007
48 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
CORPORATE GOVERNANCE
STATEMENT
The Board is committed to achieving and demonstrating the highest standards of corporate governance. As
such, Carnarvon Petroleum Limited and its Controlled Entities (‘the Group’) have adopted the fourth edition
of the Corporate Governance Principles and Recommendations which was released by the ASX Corporate
Governance Council in February 2019 and became effective for financial years commencing on or after 1
January 2020.
The Group’s Corporate Governance Statement for the financial year ending 30 June 2021 is dated as at 30
June 2021 and was approved by the Board on 30 August 2021. The Corporate Governance Statement is
available on Carnarvon Petroleum’s website at carnarvon.com.au/about-us/corporate-governance/.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 49
CONSOLIDATED INCOME STATEMENT AND
OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2021
Interest income
Movement in fair value of financial assets
Gain on loss of control of subsidiary
Administrative expenses
Directors’ fees
Employee benefits expense
New venture and advisory costs
Foreign exchange (loss) / gain
Exploration expenditure written off
Share of loss of Joint venture
Consolidated
Notes
2
9
3
21(a)
13
2021
$000
492
302
23,635
(2,429)
(473)
(1,021)
(2,049)
(1,244)
-
(77)
2020
$000
1,545
408
-
(2,611)
(419)
(1,340)
(1,393)
847
(1,174)
-
Gain/ (loss) before income tax
17,136
(4,137)
Taxes
Current income tax expense
Gain/ (loss) for the year
7(a)
-
-
17,136
(4,137)
Other comprehensive income
Other Comprehensive income to be reclassified to profit or loss
in subsequent periods (net of tax):
Exchange differences arising on translation of foreign operations
126
-
Total comprehensive income for the year
17,262
(4,137)
Total comprehensive income for the period attributable to
members of the entity
17,262
(4,137)
Earnings per share:
Basic earnings / (loss) per share (cents per share)
Diluted earnings / (loss) per share (cents per share)
6
6
1.09
1.09
(0.26)
(0.26)
The above consolidated income statement and other comprehensive income should be read in conjunction
with the accompanying notes to the financial statements.
50 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 30 June 2021
Current assets
Cash and cash equivalents
Other receivables
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Other financial assets
Exploration and evaluation expenditure
Right-of-use assets
Investment in Joint Venture
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Lease liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated profit / (losses)
Total equity
Notes
18(b)
8
11
10
9
13
12
15
16
21(b)
12
21(b)
12
Consolidated
2021
$000
98,436
351
728
2020
$000
113,632
281
814
99,515
114,727
128
1,339
129,500
593
26,199
62
1,037
122,622
796
-
157,759
124,517
257,274
239,244
1,310
604
203
947
649
186
2,117
1,782
202
441
643
160
644
804
2,760
2,586
254,514
236,658
17
17
246,268
(378)
8,624
245,856
(686)
(8,512)
254,514
236,658
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes to the financial statements.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 51
Issued
capital
$000
Reserve
shares
$000
166,081 (6,780)
Accumulated
profit /
(losses)
$000
(4,375)
Translation
reserve
$000
26
Fair
value
reserve
$000
-
Share based
payments
reserve
$000
6,820
Total
$000
161,772
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 30 June 2021
Balance at 1 July 2019
Comprehensive loss
Loss for the year
Other comprehensive income
Total comprehensive loss for
the year
Transactions with owners
and other transfers
Share based payments
Proceeds from capital raise
Exercise of ESP shares
Issue of ESP shares
Total transactions with
owners and other transfers
-
-
-
-
-
-
(4,137)
-
(4,137)
-
78,671
31
-
-
33
1,073 (1,073)
79,775 (1,040)
-
-
-
-
-
Balance at 30 June 2020
245,856 (7,820)
(8,512)
Balance at 1 July 2020
245,856 (7,820)
(8,512)
Comprehensive Income
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Transactions with owners
and other transfers
Exercise of options
Exercise of ESP shares
Total transactions with
owners and other transfers
-
-
-
-
-
-
17,136
-
17,136
150
262
-
182
412
182
-
-
-
-
-
-
-
-
-
-
-
26
26
-
126
126
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,137)
-
(4,137)
288
-
-
-
288
78,671
64
-
288
79,023
7,108
236,658
7,108
236,658
-
-
-
-
-
-
17,136
126
17,262
150
444
594
7,108
254,514
Balance at 30 June 2021
246,268 (7,638)
8,624
152
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes to the financial statements.
52 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year ended 30 June 2021
Cash flows from operating activities
Payments to suppliers and employees
Interest received
Notes
Consolidated
2021
$000
(5,349)
492
2020
$000
(6,212)
1,545
Net cash used in operating activities
18(a)
(4,857)
(4,667)
Cash flows from investing activities
Exploration and development expenditure
Research and development refundable tax offset
Insurance refund received
Acquisition of property, plant and equipment
Additional investment in joint venture
Cash derecognised on loss of control of subsidiary
Net cash used in investing activities
Cash flows from financing activities
Proceeds from capital raise
Proceeds from exercise of Employee Share Plan
Proceeds from exercise of options
Payment of principal portion of lease
Net cash provided by financing activities
10
12
(9,413)
286
-
(120)
(196)
(30)
(37,197)
1,089
1,180
(47)
-
-
(9,473)
(34,975)
-
445
150
(217)
78,671
64
-
(209)
378
78,526
Net increase in cash and cash equivalents held
(13,952)
38,884
Cash and cash equivalents at the beginning of the financial year
Effect of exchange rate fluctuations on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
18(b)
113,632
(1,244)
98,436
73,900
848
113,632
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to
the financial statements.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 53
1.
REPORTING ENTITY
The consolidated financial report of Carnarvon Petroleum Limited (‘Company’) for the financial year
ended 30 June 2021 comprises the Company and its controlled entities (the “Group”).
Carnarvon Petroleum Limited is a for profit oil and gas exploration and production company limited by
shares incorporated in Australia at the registered office of Level 2, 76 Kings Park Road, West Perth,
Western Australia, whose shares are publicly traded on the Australian Stock Exchange.
The financial report was authorised for issue by the directors on 30 August 2021.
The basis for the preparation of the following notes can be found in note 31 and the significant
accounting policies used in the preparation can be found in note 32.
2.
INTEREST INCOME
Consolidated
Interest revenue
2021
$000
492
492
2020
$000
1,545
1,545
3.
GAIN ON LOSS OF CONTROL OF SUBSIDIARY
In the prior year, the Group held a 100% interest in Carnarvon Petroleum Timor Unip Lda (CPT) and the
Group had historically consolidated CPT into financial statements as a fully owned subsidiary. On 19
April 2021, the Group has divested 50% interest in CPT which resulted in a loss of control of subsidiary
due to the infusion into CPT of US$20 million by a third party. The Group has accounted for the
remaining 50% interest as a joint venture due to the existence of joint control at the date of disposal.
This transaction has resulted in the recognition of a gain on loss of control of subsidiary, calculated as
follows:
Loan to joint venture
Retained Interest in joint venture
Derecognition of net assets of CPT
Gain on loss of control of subsidiary
Derecognition of net assets of CPT
Assets:
Cash at bank
Exploration and evaluation assets
Property, plant and equipment
Liabilities:
Other payables
Derecognition of net assets
54 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
2021
$000
-
25,798
(2,163)
23,635
2021
$000
(30)
(2,172)
(1)
(2,203)
40
(2,163)
NOTES TO THE FINANCIAL STATEMENTS 3.
GAIN OR LOSS OF CONTROL OF SUBSIDIARY (CONTINUED)
The loan to the joint venture amounting to $3,221,000 was determined to have a fair value of nil as it
is only repayable out of the after-tax profits of CPT noting that the Buffalo project is at an early stage of
exploration and evaluation.
The fair value of the retained investment in joint venture as of 19 April 2021 was determined using the
adjusted net asset approach (level 3 in fair value hierarchy) wherein the assets of Carnarvon Petroleum
Timor Unipessoal LDA were mainly cash and the exploration and evaluation expenditure assets and
measured at fair value.
4.
OTHER EXPENSES
Consolidated
The following expenses are included in administrative and
employee benefit expenses in the consolidated income statement:
Depreciation – property, plant and equipment
Depreciation – leases
Defined contribution – superannuation expense
2021
$000
(53)
(203)
(318)
2020
$000
(29)
(203)
(223)
5.
AUDITORS’ REMUNERATION
As a result of work in relation to and required for the 30 June 2021 period, the auditor of the Group,
Ernst & Young, has charged the following fees:
Fees to Ernst & Young Australia:
Fees for auditing statutory financial report of the parent
covering the group and auditing the statutory financial report
of any controlled entities
2021
$
2020
$
(67,600)
(67,451)
6.
EARNINGS/(LOSS) PER SHARE
The calculation of basic and diluted earnings per share was based on a weighted average number of
shares calculated as follows:
2021
2020
Number of shares
Issued ordinary shares at 1 July
Shares issued during the period
Weighted average number of ordinary shares 30 June (basic)
Weighted average number of ordinary shares 30 June (diluted)
1,564,379,917 1,350,824,248
212,130,000
1,000,000
1,565,127,862 1,562,954,248
1,565,127,862 1,562,954,248
Earnings/(Loss) used in calculating basic and diluted loss per share
2021
$
17,136,000
2020
$
(4,317,000)
As at 30 June 2021, the Group has 52,504,005 reserve shares on issue under the employee share
plan (refer Note 17). Based on the weighted average exercise price of these reserve shares, they are
considered to be anti-dilutive and therefore have not impacted the calculation of diluted earnings per
share.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 55
NOTES TO THE FINANCIAL STATEMENTS 7.
TAXES
(a) Income tax expense
Current Income tax expense
Current Income tax (benefit) / expense
Adjustment for prior period
Deferred tax (income)
Origination and Reversal of temporary differences – current
Adjustment for prior period
Consolidated
2021
$000
2020
$000
-
236
236
-
445
445
(236)
(236)
(445)
(445)
Total income tax (benefit) / expense
-
-
Numerical reconciliation between pre-tax profit and income tax expense:
Profit/(Loss) for the period
17,136
(4,137)
Income tax using the statutory rate of 30% (2020: 27.5%)
5,141
(1,138)
Non-deductible expenditure
Non-assessable gain on loss of control
Share based payment expense
Entertainment
Effect of foreign tax jurisdiction
Revaluation of investments on capital account
Current year tax benefit not brought to account
Under(over) provision in prior years
Income tax (benefit) / expense
-
(7,090)
-
3
-
(91)
2,037
-
-
-
275
79
3
(13)
(112)
906
-
-
-
56 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 7.
TAXES (CONTINUED)
(b) Current tax liability
Consolidated
2021
$000
-
2020
$000
-
The current tax liability of nil (2020: nil) represents the amount of income tax payable in respect of
current and prior financial periods.
Tax Consolidation
Effective 1 July 2003, for the purposes of Australian income taxation, Carnarvon and its
100%-owned Australian controlled entities formed a tax consolidated group. The head entity of the
tax consolidated group is Carnarvon.
The impact of consolidating for tax purposes is that Carnarvon’s Australian controlled entities are
treated as divisions of Carnarvon rather than as separate entities for tax purposes. The members
of the group will, if required, enter into a tax sharing arrangement in order to allocate group tax
related liabilities to contributing members on a reasonable basis. The agreement will provide for the
allocation of income tax liabilities between entities should the head entity default on its tax payment
obligations.
(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
Unrealised foreign exchange loss
Property, plant and equipment
Share issue costs
Provisions
Accruals
Lease liability and right-of-use-assets
Gross deferred tax assets
2021
$000
2020
$000
38,850
-
38,850
33,350
196
33,546
2021
$000
2020
$000
49,068
374
94
160
242
27
15
45,950
-
130
238
222
23
9
49,980
46,572
Set-off of deferred tax liabilities pursuant to set-off provisions
Unrecognised deferred tax asset
(38,850)
(11,130)
(33,546)
(13,026)
Net deferred tax assets
-
-
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 57
NOTES TO THE FINANCIAL STATEMENTS 7.
TAXES (CONTINUED)
(d) Partially unrecognised tax losses and PRRT credits (not tax effected)
Total Australian tax losses
Unaugmented PRRT losses
2021
$000
163,560
151,242
2020
$000
167,091
135,884
The Company has disclosed deferred tax disclosures for the 2021 year at the Australian income tax
rate of 30% (PY 27.5%), as it does not qualify for the base rate entity company tax rate of 27.5%.
8.
OTHER RECEIVABLES
Consolidated
Current
Other receivables
Cash held as security
The Group’s exposure to credit and currency risks is disclosed in Note 27.
9.
OTHER FINANCIAL ASSETS
Financial assets at FVTPL
Reconciliation
Reconciliation of the fair values at the beginning and end of the
current financial year are set out below:
2021
$000
133
218
351
2021
$000
1,339
2020
$000
63
218
281
2020
$000
1,037
Carrying value at the beginning of period
Fair value movements
1,037
302
629
408
Carrying value at the end of period
1,339
1,037
On 6 September 2017, CWX Global Limited (formerly Loyz Energy Limited) (“CWX”) issued
331,653,000 shares to Carnarvon. The shares were received as settlement for a deferred
consideration asset relating to the sale of Carnarvon’s share in oil producing Concessions in Thailand
to CWX in 2014. As part of the settlement, Carnarvon is also entitled to 12% of any sale proceeds over
US$45m, should CWX sell the Concessions.
The shares in CWX held by Carnarvon at 30 June 2021 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 using the share price of CWX as at 30 June 2021.
58 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 10.
PROPERTY, PLANT AND EQUIPMENT
Consolidated
2021
$000
2020
$000
Fixtures and fittings
Cost:
Balance at beginning of financial year
Additions
Disposals
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
11.
OTHER ASSETS
Current
Deposits and prepayments
610
119
-
729
548
-
-
53
601
62
128
563
47
-
610
519
-
-
29
548
44
62
Consolidated
2021
$000
2020
$000
728
814
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 59
NOTES TO THE FINANCIAL STATEMENTS 12.
RIGHTS-OF-USE ASSETS AND LEASE LIABILITIES
The Group has leases which predominantly relate to office premise and office car bays. Amounts
recognised in the statement of financial position and the carrying amounts of the Group’s right-of-use
assets and lease liabilities and the movement during the period are as follows:
Rights-of- use asset
Consolidated
Balance at beginning of financial year
Additions
Depreciation expense
Balance at end of financial year
Lease liabilities
Balance at beginning of financial year
Additions
Interest expense
Lease payments
Balance at end of financial year
Current lease
Non-current lease
Balance at end of financial year
2021
$000
796
-
(203)
593
2020
$000
999
-
(203)
796
Consolidated
2021
$000
2020
$000
830
-
31
(217)
644
203
441
644
999
-
40
(209)
830
186
644
830
The following are the amounts recognised in profit or loss:
Consolidated
Depreciation – leases
Interest expense - leases
2021
$000
(203)
(31)
2020
$000
(203)
(40)
60 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 13.
EXPLORATION AND EVALUATION EXPENDITURE
Consolidated
Cost:
Balance at beginning of financial year
Additions
Derecognition on loss of control of subsidiary (Note 15)
Well control insurance refund
R&D refundable tax offset
Exploration expenditure written off
Balance at end of financial year
2021
$000
122,622
9,335
(2,171)
-
(286)
-
129,500
2020
$000
88,869
37,196
-
(1,180)
(1,089)
(1,174)
122,622
The recoverability of the carrying amount of the exploration and evaluation assets is dependent on
successful development and commercial exploitation, or alternatively, sale of the respective areas of
interest.
The Company performed an assessment during the period on whether the changes in business
conditions due to COVID-19 has impacted the carrying value of Exploration and Evaluation Expenditure
assets. The Company has assessed that there has been no impact to the carrying value of these assets.
14.
JOINT OPERATIONS
The Group has the following interests in joint operations:
Joint operation
Principal activities
Ownership interest %
Western Australia
WA-435-P, WA437-P, Roebuck Basin
WA-436-P, WA 438-P, Roebuck Basin
WA-155-P, Barrow sub Basin
Exploration for hydrocarbons
Exploration for hydrocarbons
Exploration for hydrocarbons
2021
20%
30%
100%
2020
20%
30%
70%
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.
With respect to the WA-155-P permit, Carnarvon completed an agreement with Skye Exploration Pty
Ltd in April 2020 which increased Carnarvon’s interest in the permit and secured operatorship of the
permit for Carnarvon.
Carnarvon has accounted for its interest in the above Concessions as Joint Operations as the company
has joint control. Joint control is derived from the voting rights assigned by the Joint Operating
Agreements for each permit.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 61
NOTES TO THE FINANCIAL STATEMENTS 15.
INTEREST IN JOINT VENTURE
On 19 April 2021, Carnarvon divested 50% of its interest in Carnarvon Petroleum Timor Unipessoal
LDA (CPT) an entity domiciled in Dili, Timor-Leste which holds the interest in the Buffalo project (TL-
SO-T 19-14 PSC).
Following the divestment, CPT is jointly controlled and the Group holds a 50% interest in CPT. Based
on the contractual arrangements of the newly formed incorporated joint arrangement, the Group
reassessed its accounting treatment of its interest in CPT. It was determined that the Group’s interest in
CPT is to be accounted for as a joint venture as per AASB 11: Joint Arrangements as the Company has
rights to the net assets of CPT.
From the date of the divestment, the Group’s interest in CPT is accounted for using the equity method
in the consolidated financial statements. On this basis, the net assets of CPT, which were previously
consolidated by the Group were derecognised. In addition, the Group’s retained investment in the joint
venture was measured at fair value as at the date of the transaction (19 April 2021). See details in Note 3.
Summarised financial information of the joint venture, based on its AASB financial statements, and
reconciliation with the carrying amount of the investment in the consolidated financial statements are
set out below:
Investment in joint venture
Additional investment in joint venture
Loss
Investment in joint venture
Summarised statement of financial position of CPT at 30 June 2021:
Current assets
Cash and cash equivalents
Non current assets
Property, plant and equipment
Exploration and evaluation
Current liabilities
Trade and other payables
Non current liabilities
Deferred tax liability
Equity
Group’s share in equity (50%)
Group’s carrying amount of the investment
62 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
2021
$000
25,798
478
(77)
26,199
2021
$000
25,579
1
37,299
352
10,129
52,398
26,199
26,199
NOTES TO THE FINANCIAL STATEMENTS 15.
INTEREST IN JOINT VENTURE (CONTINUED)
Summarised statement of profit or loss of CPT for the period from 19 April 2021 to 30 June 2021:
Administrative expenses
Employee benefits
Foreign exchange loss
Loss for the period
Group’s share of loss for the period (50%)
2021
$000
(112)
(41)
(2)
(155)
(77)
Exploration Commitments
The joint venture is required under the minimum exploration work requirements of the TL-SO-T-19-14
production sharing contract to perform well planning and long lead studies.
16.
TRADE AND OTHER PAYABLES
Current
Trade payables
Director’s fee payable
Non-trade payables and accrued expenses
Consolidated
2021
$000
2020
$000
995
116
199
1,310
782
116
49
947
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in
Note 27.
17.
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
Exercise of options
Proceeds from capital raise
Balance at end of financial year
Consolidated
2021
2020
Number of shares
1,564,379,917 1,350,824,248
211,583,102
1,972,567
1,565,379,917 1,564,379,917
1,000,000
-
2021
$000
2020
$000
245,856
(182)
444
150
-
246,268
166,081
1,040
64
-
78,671
245,856
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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 63
NOTES TO THE FINANCIAL STATEMENTS
17.
CAPITAL AND RESERVES (CONTINUED)
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
2021
2020
Number of shares
57,392,934
-
(4,888,929)
52,504,005
56,145,486
1,972,567
(725,119)
57,392,934
2021
$000
2020
$000
7,820
(182)
7,638
6,780
1,040
7,820
Translation reserve
Movements in the translation reserve are set out in the Statement of Changes in Equity on page 52.
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 52. This reserve represents the fair value of shares issued under the Carnarvon’s ESP.
64 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 18.
RECONCILIATION OF CASH FLOWS FROM
OPERATING ACTIVITIES
(a) Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Fair Value Movement of financial asset
Foreign exchange movement
Exploration expenditure write-off
Gain on disposal of subsidiary
Share of loss on Joint Venture
Consolidated
2021
$000
2020
$000
17,136
(4,137)
53
302
1,030
-
(23,635)
(78)
29
408
928
(1,174)
-
-
Operating loss before changes in working capital and provisions:
(5,192)
(3,659)
Changes in assets and liabilities:
(Increase)/Decrease in other receivables
Decrease/(Increase) in other assets
Increase/ (Decrease) in trade and other payables
Decrease/(Increase) in provisions and employee benefits
Derecognition of other payables from subsidiary disposal
Net cash flows used in operating activities
(b) Reconciliation of cash and cash equivalents
Cash at bank and at call
Cash on deposit
(71)
85
363
(2)
(40)
(4,857)
27
(354)
(829)
148
-
(4,667)
31,443
66,993
98,436
36,541
77,091
113,632
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is
disclosed in Note 27.
Restricted cash of $218,000 consolidated relating to security deposits for corporate credit cards
and rental of the Company’s head office is included under other receivables (2020: $218,000
consolidated), see Note 8.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 65
NOTES TO THE FINANCIAL STATEMENTS
19.
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
Consolidated
2021
$000
250
-
250
2020
$000
650
500
1,150
Joint Venture exploration commitments
The Group, through its interest in the Carnarvon Petroleum Timor Unipessoal LDA joint venture, is
required under the minimum exploration work requirements of the TL-SO-T-19-14 production sharing
contract to perform well planning and long lead studies.
(b) Capital expenditure commitments
Data licence commitments
560
580
(c) leases
Lease information for the current reporting period is outlined in Note 12.
20.
CONTINGENCIES
In accordance with normal petroleum industry practice, the Group has entered into joint operations and
farm-in 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.
66 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 21.
EMPLOYEE BENEFITS
Consolidated
(a) Employee benefits charged to P&L
Salary and wages (including super)
Staff costs allocated to projects
Short term cash bonus
2021
$000
4,464
(3,745)
302
2020
$000
4,667
(3,614)
-
Share based payment expense
-
287
Total Employee benefits
(b) Employee benefits liabilities
Current:
Liability for annual leave and long service leave
Non-Current:
Provision for long service leave
Total Employee benefits
1,021
1,340
Consolidated
2020
$000
2020
$000
604
649
202
806
160
809
Employee Share Plan
Under the terms of the Carnarvon’s previous 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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 67
NOTES TO THE FINANCIAL STATEMENTS 21.
EMPLOYEE BENEFITS (CONTINUED)
The following table illustrates the number and weighted average exercise prices (WAEP) of, and
movements in plan shares during the year:
Number
2021
WAEP
2021
Number
2020
WAEP
2020
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
57,392,934
-
-
4,888,929
-
-
52,504,005
0.25
-
-
0.09
-
-
0.27
56,145,486
1,972,567
-
725,119
-
57,392,934
57,392,934
0.24
0.69
-
0.09
-
0.25
0.25
Shares previously granted under the ESP are accounted for as “in-substance” options due to the
limited recourse nature of the loan between the employees and Carnarvon to finance the purchase of
ordinary shares. The fair value at grant date for the various tranches of shares issued under the ESP is
determined using a Black Scholes methodology using the following model inputs:
Fair value of ESP shares
and related assumptions
Fair value at measurement date (cents)
Share price at date of issue (cents)
Exercise price (cents)
Expected volatility
Expected life of ESP share
Expected dividends
Risk-free interest rate
Share-based expense recognised
Key
management
personnel
2021
Key
management
personnel
2020
Other
employees
2021
Other
employees
2020
-
-
-
-
-
-
-
-
14.6
36
69
68%
5 years
Nil
1.5%
287,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
68 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 21.
EMPLOYEE BENEFITS (CONTINUED)
Options over equity instruments
The movement during the reporting period in the number of options over ordinary shares in Carnarvon
Petroleum Limited held, directly, indirectly or beneficially, by each key management person, including
their related parties, is as follows:
2021
Directors
W Foster
P Moore
Held at
1 July 2020
Granted as
compensation
Acquired/(sold)
Exercised
Held at
30 June 2021
500,000
500,000
-
-
-
-
500,000
500,000
-
-
Options granted as compensation have a two-year vesting condition. 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:
Number 2021
WAEP 2021
Number 2020
WAEP 2020
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
1,000,000
-
-
1,000,000
-
-
-
0.15
-
-
0.15
-
-
-
1,000,000
-
-
-
-
1,000,000
1,000,000
0.15
-
-
-
-
0.15
0.15
The weighted average remaining contractual life for the share options outstanding as at 30 June 2021
was zero. (2020: 5 months).
The fair value of share options issued is measured by reference to their fair value using the Black-
Scholes model, as set out below:
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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 69
NOTES TO THE FINANCIAL STATEMENTS 22.
RELATED PARTY DISCLOSURES
Carnarvon Petroleum Limited hold 50% interest in Carnarvon Petroleum Timor Unipessoal LDA. During
the reporting period there have been transactions between Carnarvon and its controlled entities and
joint arrangements. Carnarvon provided technical, accounting and administrative services to Carnarvon
Petroleum Timor Unipessoal Lda for which it charged fees of $876,000 (2020: $847,000). The
Company provided accounting and administrative services to its other controlled entities for which it
did not charge a management fee.
The Group provides a guarantee share of performance and obligations under the TL-SO-T-19-14
Production Sharing Contract to the regulator in Timor-Leste (Autoridade Nacional Do Petroleo E
Minerais.
Carnarvon Petroleum has loaned CPT an amount of $3,221,000 as at 30 June 2021 (2020:
$1,886,000). This amount is unsecured, interest-free and is only repayable out of the after-tax profits
and has been recorded at a fair value of nil in the Group’s statement of financial position as it is only
repayable out of the after-tax profits of CPT noting that the Buffalo project is at an early stage of
exploration and evaluation.
Other related party balances and transactions
At 30 June 2021, an amount of $ 116,250 (2020: $116,250) is included in Carnarvon and
consolidated trade and other payables for outstanding director fees and expenses.
23.
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 capitalised exploration and evaluation expenditure reflected on the statement of financial position
is in respect of exploration projects in 2021: Australia, 2020: Australia and Timor-Leste.
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.
Exploration and evaluation assets by geographical region
Australia
Timor-Leste
2021
$000
129,500
-
129,500
2020
$000
121,273
1,349
122,622
70 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 24.
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 benefits
Post employment benefits
Share based payments
Long term benefits
Consolidated
2021
$000
2,145
97
-
(19)
2,223
2020
$000
2,008
40
287
47
2,382
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 33 to 44.
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 fees and expenses are as follows:
Current
Director’s fee payable
Consolidated
2021
$000
2020
$000
116
116
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 71
NOTES TO THE FINANCIAL STATEMENTS 24.
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:
2021
Directors
PJ Leonhardt 1
WA Foster
AC Cook
P Moore
SG Ryan
D Bakker
Held at
1 July 2020
Net
acquired/
(sold)
Award under
Employee
Share Plan
Received
on exercise
of options
Held at
30 June 2021
17,750,000
925,938
15,938,797
464,232
267,701
-
-
-
-
37,520
304,774
-
-
-
-
-
-
-
500,000
-
500,000
-
-
17,750,000 1
1,425,938
15,938,797
964,232
305,221
304,774
Executives
-
PP Huizenga
TO Naude
-
1 This balance reflects the shares held by PJ Leonhardt on the date he retired as Director of
11 November 2020.
12,076,196
4,074,357
-
-
-
-
12,076,196
4,074,357
2020
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
D Bakker
Executives
PP Huizenga
TO Naude
Held at
1 July 2019
Net
acquired/
(sold)
Award under
Employee
Share Plan
Received
on exercise
of options
Held at
30 June 2020
17,750,000
850,938
13,738,025
420,232
229,240
-
-
75,000
228,205
44,000
38,461
-
-
-
1,972,567
-
-
-
11,976,196
4,019,357
100,000
55,000
-
-
-
-
-
-
-
-
-
-
17,750,000
925,938
15,938,797
464,232
267,701
-
12,076,196
4,074,357
72 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 24.
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:
2021
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
D Bakker
Executives
PP Huizenga
TO Naude
2020
Directors
PJ Leonhardt
WA Foster
AC Cook
P Moore
SG Ryan
D Bakker
Executives
PP Huizenga
TO Naude
Held at
1 July 2020
Granted as
compensation
Employee Share
Plan cancellations
Exercised
Held at
30 June 2021
3,000,000
-
12,945,592
-
-
-
11,976,196
3,992,512
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
-
-
-
-
-
-
12,945,592
-
-
-
-
-
11,976,196
3,992,512
Held at
1 July 2019
Granted as
compensation
Employee Share
Plan cancellations
Exercised
Held at
30 June 2020
3,000,000
-
10,973,025
-
-
-
-
-
1,972,567
-
-
-
11,976,196
3,992,512
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
12,945,592
-
-
-
11,976,196
3,992,512
(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:
2021
Directors
WA Foster
P Moore
Held at
1 July 2020
Granted as
compensation
Acquired/(sold)
Exercised
Held at
30 June 2021
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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 73
NOTES TO THE FINANCIAL STATEMENTS 25.
CONSOLIDATED ENTITIES AND JOINT VENTURE
Name
Country of Incorporation
2021
2020
Ownership interest
Company
Carnarvon Petroleum Ltd
Controlled entities
Carnarvon Thailand Ltd
Lassoc Pty Ltd
SRL Exploration Pty Ltd
Timor-Leste Petroleum Pty Ltd
Dorado Petroleum Pty Ltd
Carnarvon Bedout 1 Pty Ltd
Carnarvon Petroleum Timor Unip LDA
1
British Virgin Islands
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Timor-Leste
50%
100%
1 Entity no longer consolidated following 50% divestment of entity.
26.
SUBSEQUENT EVENTS
1). On 1 July 2021, the Company has granted 3,119,670 performance rights to executives and other
employees under the company’s performance rights plan.
2). On 6 July 2021, the company formed a joint venture with Frontier Impact Group to produce
renewable diesel and other sustainable products.
3). On 14 July 2021, the Company was granted Petroleum Exploration Permits EP 509 & TP/29 in the
North West Shelf, offshore Western Australia.
4). On 23 August 2021, the Front End Engineering and Design contract for the Floating Platform,
Storage and Offloading facility for the Dorado project in WA-437-P was awarded to Altera
Infrastructure Production AS.
5). On 26 August, the contract for the design, construction and installation of the Well Head Platform,
for the Dorado project in WA-437-P, was awarded to Sapura Energy.
Other than above, there is no other matters or circumstance which have arisen since 30 June 2021
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
74 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 27.
FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to market risk (including currency risk and interest rate risk), credit
risk and liquidity risk. This note presents qualitative and quantitative information about the Group’s
exposure to each of the above risks, their objectives, policies and procedures for managing risk, and
the management of capital. The Board of Directors has overall responsibility for the establishment and
oversight of the risk management framework.
The Group’s overall risk management approach focuses on the unpredictability of financial markets and
seeks to minimize the potential adverse effects on the financial performance of the Group. The Group
does not currently use derivative financial instruments to hedge financial risk exposures and therefore
it is exposed to daily movements in the international oil prices, exchange rates, and interest rates.
The Group uses various methods to measure different types of risk to which it is exposed. These
methods include sensitivity analysis in the case of interest rate, foreign exchange, and commodity price
risk and ageing analysis for credit risk.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and
market confidence and to sustain future development of the business. Given the stage of the
Group’s development there are no formal targets set for return on capital. There were no changes
to the Group’s approach to capital management during the year. Neither the Company nor any of its
controlled entities are subject to externally imposed capital requirements.
(a) Interest rate risk
The significance and management of the risks to the Group is dependent on a number of factors
including:
Interest rates (current and forward) and the currencies that are held;
Level of cash and liquid investments and their term;
•
•
• Maturity dates of investments;
•
Proportion of investments that are fixed rate or floating rate.
The Group manages the risk by maintaining an appropriate mix between fixed and floating rate
investments.
At the reporting date, the effective interest rates of variable rate interest bearing financial instruments
of the Group were as follows.
Carrying amount (A$000)
Financial assets – cash and cash equivalents
Weighted average interest rate (%)
Financial assets – cash and cash equivalents
All other financial assets and liabilities are non-interest bearing.
Consolidated
2021
2020
98,436
113,632
0.21%
0.66%
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 75
NOTES TO THE FINANCIAL STATEMENTS
27.
FINANCIAL RISK MANAGEMENT (CONTINUED)
Sensitivity analysis
An increase in 25 basis points from the weighted average year-end interest rates at 30 June would
have increased equity and profit and loss by the amounts shown below. This analysis assumes that all
other variables remain constant. The analysis is performed on the same basis for 2020:
30 June 2021
30 June 2020
Consolidated
Equity
$000
Profit and loss
$000
246
281
246
280
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 2020:
30 June 2021
30 June 2020
Consolidated
Equity
$000
Profit and loss
$000
(246)
(281)
(246)
(280)
(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 2021 or 30 June 2020 that were past due.
Cash transactions are limited to financial institutions considered to have a suitable credit rating.
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
Other receivables
Consolidated
2021
$000
98,436
351
98,787
2020
$000
113,632
281
113,913
All cash held by the Group is deposited with investment grade banks and any expected credit loss is
immaterial.
76 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 27.
FINANCIAL RISK MANAGEMENT (CONTINUED)
The aging of the Group’s other receivables at reporting date was:
Gross
2021
$000
351
351
Impairment
2021
$000
-
-
Gross
2020
$000
281
281
Impairment
2020
$000
-
-
Not past due
The Group trades only with recognised creditworthy third parties and the exposure to credit risk as
at balance date is not significant. The Group believes that no impairment allowance is necessary in
respect of other receivables.
(c) Currency risk
Currency risk arises from assets and liabilities that are denominated in a currency other than the
functional currencies of the entities within the Group, being the A$ 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 2021
Cash and cash equivalents
Trade payables and accruals
Gross balance sheet exposure
30 June 2020
Cash and cash equivalents
Trade payables and accruals
Gross balance sheet exposure
USD
A$000
9,956
-
9,956
10,385
-
10,385
The following significant exchange rates applied during the year:
AUD to:
1 USD
Average rate
2021
1.337
2020
1.489
Reporting date spot rate
2020
2021
1.332
1.454
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 77
NOTES TO THE FINANCIAL STATEMENTS
27.
FINANCIAL RISK MANAGEMENT (CONTINUED)
Sensitivity analysis
A 5% strengthening of the AUD against the USD for the 12 months to 30 June 2021 and 30 June 2020
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 2021
USD
30 June 2020
USD
Consolidated
Equity
$000
Profit and loss
$000
(631)
(719)
(631)
(719)
A 5% weakening of the AUD against the USD for the 12 months to 30 June 2020 and 30 June 2019
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 2021
USD
30 June 2020
USD
Consolidated
Equity
$000
Profit and loss
$000
698
795
698
795
(f) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when
they fall due. The Group’s approach to managing this risk is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when due under a range of financial conditions. The
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
30 June 2021
Non-derivative financial liabilities
Trade and other payables
30 June 2020
Non-derivative financial liabilities
Trade and other payables
1,111
1,111
1,111
898
898
898
-
-
78 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 28.
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 2021
Assets
Other financial assets
Total assets
30 June 2020
Assets
Other financial assets
Total assets
Level 1
$’000
1,339
1,339
Level 1
$’000
1,037
1,037
Level 2
$’000
Level 3
$’000
-
-
-
-
Level 2
$’000
Level 3
$’000
-
-
-
-
Total
$’000
1,339
1,339
Total
$’000
1,037
1,037
There were no transfers between levels during the financial year.
The carrying amounts of cash and cash equivalents, other receivables and trade and other payables
approximate their fair values due to their short-term nature.
On 19 April 2021, the Group divested 50% of its interest Carnarvon Petroleum Timor Unipessoal LDA.
The Group has accounted for the remaining 50% interest at fair value at the date of disposal.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 79
NOTES TO THE FINANCIAL STATEMENTS 29.
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 gain/ loss
Reserves
Total equity
2021
$000
2020
$000
99,515
159,657
259,172
1,914
846
2,760
246,268
10,674
(530)
256,412
114,693
124,022
238,715
1,584
990
2,574
245,856
(9,003)
(712)
236,141
Statement of comprehensive income
Total gain/loss
19,677
(3,616)
Total comprehensive gain/loss
19,677
(3,616)
Parent Contingencies
In accordance with normal petroleum industry practice, Carnarvon has entered into joint arrangements
and farmin agreements with other parties for the purpose of exploring and developing its petroleum
permit interests. If a party to a joint operation defaults and does not contribute its share of joint
operation’s obligations, then the other joint operators may be liable to meet those obligations. In this
event, the interest in the permit held by the defaulting party may be redistributed to the remaining joint
operators.
Parent 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.
80 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 29.
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
Parent
2021
$000
250
-
250
2020
$000
650
500
1,150
560
580
30.
CONTINGENT ASSETS AND LIABILITIES
There were no contingent assets and liabilities as at 30 June 2021 (2020: $0).
31.
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.
The consolidated entity has adopted all the new, revised or amended 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.
(c) Basis of measurement
The financial report is prepared on a historical cost basis, except for financial assets which are
measured at fair value.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 81
NOTES TO THE FINANCIAL STATEMENTS 31.
BASIS OF PREPARATION OF THE FINANCIAL REPORT (CONTINUED)
(d) Functional 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.
(e) 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.
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. This 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 judgement – joint control
The determination of whether the Company has joint control, in relation to a joint arrangement, requires
consideration of contractual arrangements. The Company must determine if there is a contractually
agreed sharing of control, which only exists when decisions about the relevant activities require the
unanimous consent of the parties sharing control.
Key judgements – other
Other areas of judgement are in the determination of oil reserves, and capitalisation of exploration and
evaluation costs, determination and definitions of areas of interest.
(f) 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.
82 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 32.
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.
(a) Basis of consolidation
Controlled entities
The consolidated financial statements comprise the financial statements of the Group and its
subsidiaries as at 30 June 2021. 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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 83
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 14.
Joint Ventures
The Group’s investments in joint ventures are accounted for using the equity method. Details of the
Group’s interests in joint ventures are provided in Note 15.
(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.
84 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 85
NOTES TO THE FINANCIAL STATEMENTS 32.
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 30(e).
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 non-financial assets and impairment testing
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.
86 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 32.
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. 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.
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.
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
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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 87
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
88 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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).
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.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 89
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
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.
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) Share capital
Incremental costs directly attributable to an equity transaction are shown as a deduction from equity,
net of any recognised income tax benefit.
90 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Employee benefits
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.
Employee benefits payable later than one year have been measured at the present value of the
estimated future cash outflows to be made for those benefits.
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.
(l) 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.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and deposits held at call with banks.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 91
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) 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.
(o) 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.
(p) Investment in joint ventures
A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those
necessary to determine control over subsidiaries. The Group’s investment in its joint venture is
accounted for using the equity method.
Under the equity method, the investment in a joint venture is initially recognised at cost.
The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net
assets of the joint venture since the acquisition date.
(q) 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 2021. 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:
92 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS Impact
on the
Company
Application
date of
standard
Application
date for
Group
1 January
2022
1 July
2022
The
Company
is still
assessing
the
impact.
1 January
2022
1 July
2022
The
Company
is still
assessing
the
impact.
32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reference
Title
Summary
Amendments
to AASB 3,
Reference
to the
Conceptual
Framework
AASB 2020-3
Amendments
to AASs
– Annual
Improvements
2018–2020
and Other
Amendments
AASB 2020-3
Amendments
to AASs
– Annual
Improvements
2018–2020
and Other
Amendments
Amendment
to AASB
9, Fees in
the ‘10 per
cent’ Test for
Derecognition
of Financial
Liabilities
The IASB’s assessment of applying
the revised definitions of assets and
liabilities in the Conceptual Framework
to business combinations showed that
the problem of day 2 gains or losses
would be significant only for liabilities
that an acquirer accounts for after
the acquisition date by applying IAS
37 Provisions, Contingent Liabilities
and Contingent Assets or IFRIC 21
Levies. The Board updated IFRS 3 in
May 2020 for the revised definitions
of an asset and a liability and excluded
the application of the Conceptual
Framework to liabilities and contingent
liabilities within the scope of IAS 37 or
IFRIC 21.
Under AASB 9, an existing financial
liability that has been modified or
exchanged is considered extinguished
when the contractual terms of the
new liability are substantially different,
measured by the “10 per cent” test.
That is, when the present value of
the cash flows under the new terms,
including any fees paid or received, is
at least 10 per cent different from the
present value of the remaining cash
flows of the original financial liability.
The amendment to AASB 9 clarifies
that fees included in the 10 per cent
test are limited to fees paid or received
between the borrower and the lender,
including amounts paid or received
by them on the other’s behalf. When
assessing the significance of any
difference between the new and old
contractual terms, only the changes
in contractual cash flows between
the lender and borrower are relevant.
Consequently, fees incurred on the
modification or exchange of a financial
liability paid to third parties are
excluded from the 10 per cent test.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 93
NOTES TO THE FINANCIAL STATEMENTS 32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reference
Title
Summary
Impact
on the
Company
Application
date of
standard
Application
date for
Group
AASB 2014-
10
Amendments
to AASs
– Sale or
Contribution
of Assets
between an
Investor and
its Associate
or Joint
Venture
AASB 2020-1
Amendments
to AASs
Classification
of Liabilities
as Current or
Non-current
1 January
2022
1 July
2022
1 January
2023
1 July
2023
The
Company
is still
assessing
the
impact.
The
Company
is still
assessing
the
impact.
The amendments to AASB 10
Consolidated Financial Statements and
AASB 128 Investments in Associates
and Joint Ventures clarify that a full gain
or loss is recognised when a transfer to
an associate or joint venture involves
a business as defined in AASB 3. Any
gain or loss resulting from the sale
or contribution of assets that does
not constitute a business, however,
is recognised only to the extent of
unrelated investors’ interests in the
associate or joint venture.
A liability is classified as current if the
entity has no right at the end of the
reporting period to defer settlement for
at least 12 months after the reporting
period. The AASB recently issued
amendments to AASB 101 Presentation
of Financial Statements to clarify the
requirements for classifying liabilities as
current or non-current. Specifically:
•
The amendments specify that the
conditions which exist at the end
of the reporting period are those
which will be used to determine
if a right to defer settlement of a
liability exists.
• Management intention or
•
expectation does not affect
classification of liabilities.
In cases where an instrument with
a conversion option is classified
as a liability, the transfer of equity
instruments would constitute
settlement of the liability for the
purpose of classifying it as current
or non-current.
94 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS Impact
on the
Company
Application
date of
standard
Application
date for
Group
1 January
2023
1 July
2023
The
Company
is still
assessing
the
impact.
32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reference
Title
Summary
Amendments
to AASB 7,
AASB 101,
AASB 134
and AASB
Practice
Statement 2
AASB 2021-2
Amendments
to AASs –
Disclosure of
Accounting
Policies and
Definition of
Accounting
Estimates
The amendments to AASB 101 require
disclosure of material accounting
policy information, instead of significant
accounting policies. Unlike ‘material10’,
‘significant’ was not defined in
Australian Accounting Standards.
Leveraging the existing definition of
material with additional guidance is
expected to help preparers make more
effective accounting policy disclosures.
The guidance illustrates circumstances
where an entity is likely to consider
accounting policy information to be
material. Entity-specific accounting
policy information is emphasised
as being more useful than generic
information or summaries of the
requirements of Australian Accounting
Standards.11
The amendments to AASB
Practice Statement 2 supplement
the amendments to AASB 101
by illustrating how the four-step
materiality process can identify material
accounting policy information.
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 95
NOTES TO THE FINANCIAL STATEMENTS Impact
on the
Company
Application
date of
standard
Application
date for
Group
1 January
2023
1 July
2023
The
Company
is still
assessing
the
impact.
32.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reference
Title
Summary
Amendments
to AASB 108
AASB 2021-2
Amendments
to AASs –
Disclosure of
Accounting
Policies and
Definition of
Accounting
Estimates
An accounting policy may require
items in the financial statements to
be measured using information that is
either directly observable, or estimated.
Accounting estimates use inputs and
measurement techniques that require
judgements and assumptions based on
the latest available, reliable information.
The amendments to AASB 108 clarify
the definition of an accounting estimate,
making it easier to differentiate
it from an accounting policy. The
distinction is necessary as their
treatment and disclosure requirements
are different. Critically, a change in
an accounting estimate is applied
prospectively whereas a change in an
accounting policy is generally applied
retrospectively17.
The new definition provides that
‘Accounting estimates are monetary
amounts in financial statements that are
subject to measurement uncertainty.’
The amendments explain that a change
in an input or a measurement technique
used to develop an accounting
estimate is considered a change in
an accounting estimate unless it is
correcting a prior period error.
The amendments did not change the
existing treatment for a situation where
it is difficult to distinguish a change in
an accounting policy from a change
in an accounting estimate. In such a
case, the change is accounted for as a
change in an accounting estimate.
96 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION
(1)
In the opinion of the directors of Carnarvon Petroleum Limited:
(a)
the financial statements and notes of the Group set out on pages 50 to 96 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 2021 and of its
performance for the year ended on that date; and
(ii) Complying with Accounting Standards and the Corporations Regulations 2001; and
(b) The financial statements and notes comply with International Financial Reporting Standards as set out
in Note 32; and
(c) 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 2021.
Signed in accordance with a resolution of the directors.
William A Foster
Chairman
Perth, 30 August 2021
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 97
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 2021, the consolidated income statement and 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
2021 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 (including Independence Standards) (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.
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98 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
INDEPENDENT
AUDIT REPORT
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.
1. Carrying value of capitalised exploration and evaluation
Why significant
How our audit addressed the key audit matter
As disclosed in Note 13 to the financial report, the
Group held capitalised exploration and evaluation
expenditure of $129,500,000 as at 30 June 2021.
Under AASB 6 Exploration for and Evaluation of
Mineral Resources, the recoverability of exploration
and evaluation assets is subject to the Group’s ability
and intention to continue to explore and evaluate such
assets. 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:
► We considered the Group’s right to explore in the
relevant exploration area which included
obtaining and assessing supporting
documentation such as license agreements.
► We 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 enquiries of management and the
Board of Directors as to the intentions and
strategy of the Group.
► We assessed management’s assertion 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 company
announcements and review of minutes of
directors’ meetings.
► We assessed the directors’ review of the carrying
value of exploration and expenditure, ensuring
that there was consideration of the effect of
potential indicators of impairment.
► We assessed the adequacy of the financial report
disclosures contained in Note 13 of the financial
report.
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2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 99
INDEPENDENT
AUDIT REPORT
2. Accounting for the Group’s interest in Carnarvon Petroleum Timor Unipessoal LDA
(“CPT”)
Why significant
How our audit addressed the key audit matter
As disclosed in Notes 3 and 15 to the financial report,
as at 30 June 2020 the Group held a 100% interest in
CPT and consolidated CPT. During the year ended 30
June 2021 the Group divested 50% of its interest in
CPT to a third party. As CPT is no longer a controlled
entity, the Group is required to recognise its remaining
interest in CPT at fair value, after which it is accounted
for using the equity method. As a result of this
transaction the Group recorded a gain on loss of
control of a subsidiary of $23,635,500 (refer to Note
3 to the financial report) and holds an interest in a
joint venture of $26,199,000 as at 30 June 2021
(refer to Note 15 to the financial report).
There is judgement involved in the assessment of
whether the Group has lost control of CPT following
the sale of a 50% interest and in the determination of
the nature of the investment and appropriate
accounting treatment for the interest retained. The
determination of the fair value of the retained
investment also involves significant judgement.
Our audit procedures included the following:
► We reviewed the agreements to understand the
contractual terms and conditions, ensuring that
management’s accounting treatment of the
transaction is supported and reasonable.
► We agreed the cash consideration received by CPT to
the bank statement.
► We reviewed management’s determination of the date
when control is lost.
► We involved our valuation specialists to assess the
reasonableness of the fair value of the exploration
and evaluation assets within CPT
► We assessed the appropriateness of the accounting
entries recorded to account for the transaction.
► We considered whether there was any objective
evidence to suggest that the Group’s investment in
CPT is impaired at the balance sheet date.
► We assessed the adequacy of the financial report
disclosures contained in Notes 3 and 15 to 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 2021 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.
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100 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
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.
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2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 101
INDEPENDENT
AUDIT REPORT
►
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.
►
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, actions
taken to eliminate threats or safeguards applied.
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 pages 32 to 44 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the Remuneration Report of Carnarvon Petroleum Limited for the year ended 30 June
2021, complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
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102 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
INDEPENDENT
AUDIT REPORT
\
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
T S Hammond
Partner
Perth
30 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 103
ADDITIONAL SHAREHOLDER
INFORMATION
Additional information required by the ASX Limited (“ASX”) Listing Rules and not disclosed elsewhere in this
report is set out below.
a)
Shareholdings as at 27 August 2021
Substantial shareholders
Name of Shareholder
McCusker Holdings Pty Ltd (ACN 009 466 586),
Martindale Pty Ltd (ACN 008 690 604)
Number of Shares
81,000,000
Date of Notice
23 July 2021
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 Pty Limited
HSBC Custody Nominees (Australia) Limited
McCusker Holdings Pty Ltd
Citicorp Nominees Pty Limited
Nero Resource Fund Pty Ltd
BNP Paribas Nominees Pty Ltd
Marford Group Pty Ltd
Havannah Investments Pty Ltd
BNP Paribas Noms Pty Ltd
Prettejohn Projects Pty Ltd
Mr Philip Paul Huizenga
Brixia Investments Ltd
Mr Adrian Caldwell Cook Ms Belinda Michelle Honey
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
National Nominees Limited
Mr Edward Patrick Jacobson
Martindale Pty Ltd
Bretworth Pty Ltd
Geolyn Pty Ltd
Jacobson Geophysical Services Pty Ltd
Kinabalu Australia Pty Ltd
Number of Shares
% held
80,516,478
75,882,484
72,000,000
58,109,219
32,355,008
24,205,606
21,225,155
16,710,037
12,926,048
12,100,000
11,876,196
11,743,000
11,520,592
10,119,945
9,651,642
9,522,482
9,000,000
9,000,000
8,800,000
8,754,068
8,500,000
5.14
4.85
4.60
3.71
2.07
1.55
1.36
1.07
0.83
0.77
0.76
0.75
0.74
0.65
0.62
0.61
0.57
0.57
0.56
0.56
0.54
514,517,960
32.86
104 CARNARVON PETROLEUM LIMITED 2021 ANNUAL REPORT
ADDITIONAL SHAREHOLDER
INFORMATION
Distribution of equity security holders
Size of Holding
1
1,001
5,001
10,001
100,001
to
to
to
to
and over
1,000
5,000
10,000
100,000
b) Option holdings as at 27 August 2021
There are no current option holdings.
c) On-market buyback
There is no current on-market buyback.
d)
Schedule of permits
Number of
shareholders
632
2,466
1,856
5,154
1,793
11,901
Number of
fully paid shares
242,036
7,408,143
15,330,660
205,028,170
1,337,370,908
1,565,379,917
PERMIT
BASIN/COUNTRY
JOINT VENTURE PARTNERS
EQUITY %
OPERATOR
WA-435-P,
WA-437-P
WA-436-P,
WA-438-P
TL-SO-T
19-14 PSC
Roebuck / Australia
Roebuck / Australia
Bonaparte /
Timor-Leste
WA-155-P
Barrow / Australia
WA-521-P
Roebuck / Australia
WA-523-P
Bonaparte / Australia
WA-524-P
Dampier / Australia
AC-P62
Bonaparte / Australia
AC-P63
Bonaparte / Australia
R7
Perth / Australia
Carnarvon
Santos Limited
Carnarvon
Santos Limited
Advance Energy PL
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
20%
80%
30%
70%
50%
100%
100%
100%
100%
100%
100%
Santos Limited
Santos Limited
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
Carnarvon
2.5% of 42.5% Latent Petroleum
2021 ANNUAL REPORT CARNARVON PETROLEUM LIMITED 105
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www.carnarvon.com.au