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central petroleum
LIMITED
ABN 72 083 254 308
Suite 3, Level 4 South Shore Centre
85 South Perth Esplanade, South Perth
Western Australia 6151
Phone: +61(0)8 9474 1444
Facsimile: + 61(0)8 9474 1555
www.centralpetroleum.com.au
Annual Report 2011
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CONTENTS
Corporate Directory..........................................................................................................................................2
Chairman’s Letter.............................................................................................................................................3
Directors’ Report ..............................................................................................................................................5
Auditor’s Declaration of Independence...........................................................................................................31
Corporate Governance Statement .................................................................................................................32
Financial Report .............................................................................................................................................39
Directors’ Declaration .....................................................................................................................................76
Independent Auditor’s Report.........................................................................................................................77
ASX Additional Information ............................................................................................................................79
Interests in Petroleum Permits and Mineral Licenses.....................................................................................81
1
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE DIRECTORY
DIRECTORS
Henry J Askin BSc (Hons) PhD MPESA MSEG MEAGE, Non-executive Chairman
John P Heugh BSc (Hons) MAAPG MPESA, Managing Director
Richard W Faull BCom CPA, Non-executive Director
William J Dunmore BSc MSc, Non-executive Director
CHIEF FINANCIAL OFFICER AND JOINT COMPANY SECRETARY
Bruce Elsholz BCom CA
GROUP GENERAL COUNSEL AND JOINT COMPANY SECRETARY
Daniel CM White LLB BCom LLM
REGISTERED OFFICE
Suite 3, Level 4 South Shore Centre
85 South Perth Esplanade
South Perth
Western Australia 6151
Telephone; +61(0)8 9474 1444
Fax: +61(0)8 9474 1555
www.centralpetroleum.com.au
AUDITORS
PricewaterhouseCoopers
QV1
250 St Georges Terrace
Perth
Western Australia 6005
BANKERS
Westpac Banking Corporation
South Shore Centre
Mends Street
South Perth
Western Australia 6151
SHARE REGISTRAR
Computershare Investor Services Pty Limited
Level 2, 45 St Georges Terrace
Perth
Western Australia 6000
Telephone: +61(0)8 9323 2000
Fax: +61(0)8 9323 2033
www.computershare.com.au
STOCK EXCHANGE LISTING
Central Petroleum Limited shares and options are listed on the Australian Securities Exchange Limited under the
codes ‘CTP’ (shares) and ‘CTPO’ (options).
2
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CHAIRMAN’S LETTER
Fellow shareholders,
Early in the New Year, I issued a quite detailed and comprehensive review of your Company’s activities for the
half year to December 2010, together with an indication of the planning for the current year. This was mailed out
to then current shareholders and posted on the ASX announcements list as of 20 January 2011 where it may be
accessed by those more recent. For the present I will address the various subsequent developments
Let me start with the main highlight, which is of course the forthcoming drilling campaign and for which an Letter
Of Intent has been concluded with Australian Drilling Services. This program as announced 5 August 2011 is
planned to commence with the re-entry and completion of Surprise-1, followed by the drilling of Madigan-1 (a
major oil prospect in the Pedirka Basin), and Mt. Kitty-1 (a sub-salt gas/condensate/helium prospect). Although
this program may be subject to variation as a result of continuing prospect evaluations, logistics and weather, the
re-entry and flow testing of Surprise-1 remains the first priority.
Surprise-1 is a highly significant well and worthy of special mention, having exhibited strong oil shows while
drilling the Stairway sandstone, in which a 9 m core was successfully cut and retrieved. The base of this core was
still in sandstone with almost 100% hydrocarbon fluorescence and to visual inspection contained abundant oil.
Laboratory measurements determined a peak permeability of between 400 and 500 mD. If sufficient oil saturation
is present, and this remains to be confirmed, independent calculations suggest a production capability in the
vicinity of 1,000 barrels per day. It was during an attempt to establish a free oil flow from this interval when the rig
incident occurred and the well was suspended. The underlying Horn Valley siltstone (source rock and possible
unconventional reservoir) and the Pacoota sandstone (the primary objective), remain to be tested.
Except for the completion of some coal tests, there have been no field operations since January other than
relatively recent preparatory works for the drilling campaign, but the on going interpretation of new data including
recent seismic survey has delivered a number of very significant and encouraging outcomes including the
recognition of underlying Devonian carbonate plays at the Madigan and Simpson East prospects, the interpreted
Devonian reef plays along the Pellinor Trend and the recent most prospective interpretation of the Lander Trough
area where your Company has a major interest. These studies are available in detail for download on the
Company web site.
We continue to regard the coal discoveries as a major asset, and independent studies conclude that conversion
of the coal to liquid transport fuels is not only feasible but economically highly attractive. However it is
acknowledged that this is an area requiring additional skills and experience and consequently your Company has
entered into an agreement with Allied Resource Partners Pty Ltd, whereby they assume the responsibility for
commercialization of these deposits. Progress milestones have been agreed and are being monitored.
Independent assessments of the undiscovered potential oil and gas resources in the Company’s holdings, both
conventional and unconventional, have been commissioned and delivered and are available as downloads from
the Company website as well as being referenced later in this Report. Even though the key inputs were estimated
on a most conservative basis, the results are outstanding as are the valuations that follow from these, and
indicate that a major re-ranking of the Company’s shares would be justified.
Your Company has a wealth of exploration plays, not least the emerging unconventional plays where long reach
horizontal drilling and multistage fracturing enables commercial production from otherwise tight non-reservoir
quality formations. These techniques have revolutionized gas markets in North America and are now being tested
world wide. There appears to be good reason to expect that similar success is possible in Australia and moreover
in your Company’s holdings in the Amadeus and particularly the Georgina Basins. To this end, recent senior
management recruiting has been directed towards candidates with relevant direct experience.
Nevertheless it remains the case that until exploration success delivers a cash flow, the conduct of the operations
is reliant upon funding from either farmout or continuing support from investors. The former is dilutive in terms of
company equity holdings, the latter potentially in terms of shareholder ownership in the company, and whereas
farmout does deliver a spreading of the risk it also results in a commensurate reduction in the success case
reward. Your Company continues to engage with potential farminees, but to enable immediate operations must
also have recourse to the market, in which context I would remark that the rolling bond facility which had been
unused for some time has now been terminated by the Company.
Instead, and as has been announced, the Company is pursuing a listing on the Toronto Stock Exchange (the
TSXV) and has committed to the services of Canaccord Genuity Corporation and Comark Securities Inc. to act as
financial advisers in this regard. International consultants Ryder Scott (Canada) have been engaged to provide
the necessary independent reporting. When concluded this will allow the Company to access a vastly larger
investor base to the anticipated benefit of all shareholders.
3
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CHAIRMAN’S LETTER
Usually in conclusion I speculate on the oil price, but not this time, other than to note that Brent and Tapis are
around the US$120 per barrel mark, WTI at $87 as I write. What I will do is review some drilling histories.
In the Cooper Basin the first commercial discovery was Gidgealpa-2, the ninth well to be drilled, although the third
well in the basin (Dulingari-1) was initially classified as dry but subsequently found to have oil in the Cretaceous
and gas in the Permian and later developed.
In the Amadeus Basin, the third well (Mereenie-1 1964) and the fifth (Palm Valley-1 1965) were both commercial
discoveries. Interestingly Surprise-1 is your Company’s third well in the Amadeus, while Madigan-1 or an
alternative will be our third in the Pedirka.
All of our wells have had results confirming the presence of active petroleum systems, and we await the
outcomes of Surprise-1 and our further wells with what I believe is well placed optimism.
Dr. Henry J. Askin
Chairman.
Melbourne, 30 September, 2011
4
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Your directors present their report on the consolidated entity, consisting of Central Petroleum Limited (“Company”
or “CTP”) and the entities it controlled (collectively “the Group” or “the Consolidated Entity”) at the end of, or
during the year ended 30 June 2011.
Directors
The names of the directors of the parent company in office at any time during or since the end of the financial
year are:
Henry J Askin
John P Heugh
Richard W Faull
William J Dunmore
All directors have held office since the start of the financial year to the date of this report.
Principal activities
The principal activity of the Consolidated Entity during the financial year was the exploration for hydrocarbons,
helium and coal/coal seam gas.
There was no significant change in the nature of the Consolidated Entity’s activities during the year.
Operating result
The Consolidated Entity had an operating loss after income tax for the year ended 30 June 2011 of $36,643,523
(2010: $11,809,727).
At 30 June 2011 consolidated cash reserves available totalled $9,463,949 (2010: $37,529,579).
Dividends
No dividends were paid or declared during the financial year (2010:Nil). No recommendation for payment of
dividends has been made.
Corporate objectives
These can be summarised as:
1. Crude oil/condensate discovery and sales for early cash flow.
2. Gas/helium/condensate discovery for intermediate term cash flow from cryogenic helium export and
local “mini” LNG (liquefied natural gas) production for the transport and local mining industry.
3. Longer term value adding to gas via GTL (gas to liquids) and/or LNG for domestic and export markets.
4. Long term monetisation of coal via mining, beneficiation and export, UCG (underground coal
gasification) and value adding via GTL or other processes and possible mining and conversion to GTL
products via CTL (coal to liquids).
It is planned to explore and develop the Group’s coal assets in a joint venture structure with incoming joint
venture partners managing and funding 100% of exploration and bankable feasibility studies to earn an interest
and then for the Group to fund its participating interest at project funding stage. This approach if successful will
allow the Group to focus on its core interests of oil, gas, condensate and helium discovery and monetisation. This
would be assisted by farmouts and subsequent joint ventures from exploration all the way down the value adding
chain to point of sale as appropriate.
The Group’s main goal is to discover and produce hydrocarbons and helium, thereby maximising shareholder
returns by enhanced share value and potentially by dividend payments. It aims to operate a central Australian oil
and gas hub connected to appropriate infrastructure to allow the export to domestic and overseas markets of both
primary energy resources and value added hydrocarbon and helium products.
The Group’s immediate focus is crude oil and condensate discovery and monetisation for potential early cash
flow with future value adding for any gas discoveries via conversion to liquid transport fuels and/or LNG. Within
the constraints of land access, sequence of grant and the inherent constraints of joint ventures the Group’s focus
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CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
has not changed. Early cash flow from any oil discoveries may initially be possible simply via trucking to port
facilities at either of Port Darwin or Port Bonython with later development potential lying in additional pipeline
facilities and/or bulk liquids haulage on the rail system connecting central Australia with port facilities.
Early cash flow may also be possible from helium and “mini” LNG production and sales and this is regarded as an
intrinsic part of the Group’s overall strategy for relatively short term cash flow. In the longer term the Group is
seeking to build gas resources to a threshold point where value-adding processes via the conversion of gas into
liquid transport fuels (GTL) and/or LNG can be brought into play.
Apart from conventional oil and gas reservoir potential, the Group has significant areas prospective in
unconventionally reservoired oil and gas potential in the Group’s acreage in the Amadeus Basin and the Southern
Georgina Basin. 16 billion barrels of oil equivalent at “mean” prospective recoverable resource level have been
independently estimated.
Central Australia Basins
Several areas in central Australia with unconventional potential have recently received significant investor
attention due to the involvement of companies such as the North American groups Hess, PetroFrontier, Rodinia
and TME. Independent (Ryder Scott) estimates of prospective recoverable resources of up to 27 billion barrels of
oil at P50 level have been made in permits adjoining the Company’s acreage.
Recent developments in the worldwide coal sector and coal discoveries by the Group in its vast Pedirka Basin
mineral leases have led to interest from various groups in the Group’s potential coal resources with monetisation
pathways being evaluated including coal mining and beneficiation for export, coal to liquids (CTL) and
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CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
underground coal gasification (UCG) with gas to liquids value adding to any gas produced such as gas to liquids
(GTL) processing.
The Group holds a 100% working interest in all of its permits and application areas other than the Simpson,
Pellinor, Bejah and Dune prospect blocks within EP 97 where the Company has a farm-in agreement with
Rawson Resources Limited, and the Mt Kitty and Magee prospect blocks within EP 125 and EP 82 respectively
which are the subject of a farm-out to Oil and Gas Exploration Limited (previously known as He Nuclear Limited).
The Group continues to seek potential joint venture participants with the financial capacity and the will to explore
the vast prospective acreage at its disposal and is focussing its efforts on large companies and majors. This is a
shift away from previous joint ventures involving smaller partners who in the past have had difficulty in funding
their share of the various joint ventures that the Group had entered into. Interest in the Group’s acreage which is
believed to contain commercial quantities for conventionally and unconventionally reservoired hydrocarbons,
helium and coal continues. Prospective exploration acreage values in the energy industry, particularly in the
overlooked central Australian basin areas are escalating rapidly so the Group is determined to extract maximum
value for its shareholders in any deal being contemplated.
In order to deliver the best possible results from its recent round of seismic acquisition and this next round of
drilling, the Group has recruited strongly during the year with considerable focus placed on well credentialed and
experienced technical staff, including in particular, North American unconventional exploitation experience.
The Group entered into a business arrangement with Allied Resource Partners Pty Ltd (“ARP”) designed to
facilitate the further exploration of its coal resources. The Company and ARP have entered into a Deed of Co-
operation to oversee the sourcing of funding and technology for a series of underground coal gasification (“UCG”)
and or gas to liquids (“GTL”) projects. Further details of this arrangement are provided below under the heading
“Forward Exploration and Development Plans”.
Recent valuations
Recent valuations of the Group’s exploration potential underscore how undervalued the Company’s securities
are. Bakers Group have presented a lowside valuation of the Pedirka Basin coal UCG potential of $2 billion, a
short term share target price based on the Group’s short term drilling plans of $0.48 per Share and Mulcon Pty
Ltd have valued the Group’s unconventional potential at $412 million for the upstream component and $5 billion
for the downstream component based solely on unconventional resource potential in a report announced on 1
September 2011. An additional Bakers Group valuation has quoted a medium to long term diluted share trading
price of $1.75 to $2.16 per share.
Capital Raising
The Company completed a share placement on 15 September 2011. A total of 91 million shares were placed at
5.5 cents per share raising additional capital of approximately $5 million. The Company concurrently announced a
Share Purchase Plan, also at 5.5 cents share, to provide existing shareholders the opportunity to invest at the
same price as the placees. The Share Purchase Plan is underwritten by Patersons Securities Limited for $5.5
million and has a closing date of 20 October 2011.
TSXV Listing
On 22 August 2011 the Company committed to the services of Canadian investment banks Cormark and
CanaccordGenuity to act as co-lead managers, joint bookrunners and agents for the Company’s planned listing
and associated capital raising on the Toronto Stock Exchange Venture Exchange (TSXV) in the final quarter of
calendar year 2011 or early 2012.
Considerable upside exists for shareholders from current share price levels by leveraging the Company into a
broader North American peer group, thereby increasing its access to capital and broadening the base of potential
investors. A TSX listing could put the Company in a better position to secure a major JV partner with
unconventional experience as well as securing a cornerstone investor or investors.
The Toronto Stock Exchange (TSX) is the largest market in the world for mining and resource stocks in terms of
dollars invested and number of companies.
Review of operations and activities
The logistics of petroleum and coal exploration in central Australia proved difficult throughout most of 2010, due
to unseasonal rainfall resulting in widespread flooding and difficult ground conditions preventing access and
severely restricting ground vehicle movements over widespread areas of central Australia.
Despite these sometimes difficult conditions the Group did complete its three well drilling programme in the
Amadeus Basin exploring for conventional hydrocarbon targets. The Group continued with its 2009 / 2010
seismic programme until it was interrupted by seasonal and monsoonal rain. Following the completion of these
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CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
drilling and seismic programmes the focus turned to completing various studies and evaluation reports and on
planning for its forward exploration campaigns in conventional and unconventional oil and gas horizons.
Petroleum and Mineral Granted Licence and Application Interests of Central Petroleum Limited
Oil and Gas operations
Future Drilling and Seismic Plans
The Company has planned up to a three well drilling programme for the year commencing with the re-entry of
Surprise-1 Sidetrack-1. It is planned to re-drill certain sections to gain fresh samples, pressure gradients, electric
logging and hopefully flow testing. It is planned to drill at least as deep as the primary target, the Pacoota
Sandstone before electric logging and full well flow evaluation. It is anticipated that the well will be re-entered in
October 2011 subject to a rig contract
The prospects slated for drilling in 2011 subject to various contingencies are the Surprise-ST1 prospect, thought
to have oil potential (“best” or P50 UOIIP 10 MMbbls) in both conventional and unconventional horizons; the Mt
Kitty-1 prospect, a sub-salt 2 TCFG UGIIP (“best” or P50) gas/condensate/helium prospect and Madigan-1 or
Simpson East, two large Pedirka Basin oil prospects based on preliminary mapping of new seismic acquired in
2010.
Seismic acquisition and future drilling plans over a number of play types are also being evaluated inclusive of the
Surprise-Johnstone area in EP 115 for conventional and unconventional oil exploration or development, the
Madigan and Pellinor Devonian reefal carbonate plays in the Pedirka and, subject to grant, unconventional and
conventional oil and gas potential within the Company’s Southern Georgina Basin Arthur Creek Shale and
Thorntonia Limestone plays. The Company’s Queensland ATPs 909, 911 and 912 immediately adjacent to
PetroFrontier’s Southern Georgina Basin, are anticipated to be granted during the second half of 2011 and may
receive early attention from the Company. EPA 132 in the Northern Territory also has considerable
unconventional potential but its granting date is difficult to forecast.
8
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
The Company’s Lander Trough permits, EPAs 92, 129 and 160 cover 11 million acres of ground entirely within
the early oil to very early gas window of maturation and have demonstrated chronostratigraphic equivalent
formations to the Southern Georgina Arthur Creek Shale and Thorntonia Limestone unconventional plays.
Activities in the Year ended 30 June 2011
Drilling
Ooraminna-2 (EP 82)
The 2010 Phase Two Programme commenced in June 2010 with the spudding and drilling of Ooraminna-2, a
large gas prospect close to Alice Springs which had flowed gas to surface already in a previous well drilled in
1963. Ooraminna-2 was designed to have a deviated hole section through the main Pioneer Sandstone target in
an attempt to intersect an anticipated vertical fracture system. Although structural analysis remains to be
completed based on drilling information and image logs acquired from this well, it appears that no significant
fractures were intersected in this well. The structural analysis will assist in determining optimal locations for the
intersection of fracture systems in other well sections yet to be drilled.
The Ooraminna-2 well reached a true vertical depth (TVD) of 1,622.2m and the MB Century Rig 7 was released
on 7 August 2010 to be deployed at the Johnstone West-1 drilling location in EP 115. The drilling of Ooraminna-2
was a “technical success” with a stabilised gas flow to surface of 152,000 standard cubic feet of gas per day from
a tight reservoir zone. The total area of the prospect structure may be over 1,000km2 extending in to the
contiguous permit application EPA 147 and the Group believes it may have potential for additional exploration
and development, possibly employing horizontal drilling and/or fraccing techniques. It is possible that there is
potential for free flowing gas without well stimulation from other parts of the prospect remaining virtually
unexplored to date. The granting of EPA 147 has been initially refused by the Central Land Council but the Group
is hopeful of re-commencing negotiations within the moratorium period.
Subsequent to drilling the well, gas analyses of samples taken during the drilling of Ooraminna-2 (EP 82) showed
a helium content of 0.22% and a nitrogen content of 10.5%. Such an analysis result may point the way to
commercial helium production. If this helium were to be extracted with the nitrogen from the total gas composition
then the resultant extracted gas would have a nitrogen content of 97.9% and a helium concentration of around
2.1%. Helium extracted at the BOC-Linde Group helium plant at Port Darwin has a reported average helium
concentration of c.3% after commercial quantities of natural gas are extracted.
Johnstone West -1 (EP 115)
The Johnstone West-1 well was spudded on 19 August 2010 with a planned total depth (TD) of 1,367m in the
Goyder Formation. The well reached a TD of 1,666.0m in the lower Pacoota Sandstone and following flow testing
the MB Century Rig 7 was released on 5 October 2010. There were multiple oil targets as well as shale oil/gas
targets. The well penetrated continuous intersections of 128m based on show descriptions. Prior to flow testing,
electric log analysis and drilled cuttings analysis on site showed an approximate net “pay” zone of 15m from
1,470m to 1,485m which was thought likely to flow to surface. Excellent oil shows with evidence of good porosity,
live visible oil in samples, oil slicks mixed with drilling mud and very high oil saturation in fluoroscopic and visual
examination in natural light over this interval were recorded and there were other shows of lesser significance
within the hydrocarbon column.The results of flow testing however were profoundly disappointing and not
anticipated. The formation fluids did not flow to surface but 18 barrels of saline formation fluid without significant
hydrocarbons were recovered from the production tubing. The conclusion reached thus far is that the well had
been drilled at the edge of potential closure and the oil shows tested represented an oil-water transition zone.
The most significant result of the well is that it confirmed the presence of “live” oil in an area previously undrilled.
Johnstone West-1 was the first exploration well to be drilled west of the Central Ridge which is a major basement
feature in the Amadeus Basin. The well confirmed the Johnstone Trough as a productive source kitchen area and
a conservative estimate of the incremental Horn Valley Siltstone kitchen area is 1400 km2, west of the Central
Ridge. The oil shows at JW-1 are possibly the most geologically significant oil shows encountered in the
Amadeus Basin since the original oil discovery well at the Mereenie Field, West Mereenie-1 drilled in 1963.
It is planned to remap the Johnstone structure to examine potential for oil in other parts of the feature including on
the northerly side of the main east-west trending thrust fault and inclusive of the Johnstone East structure.
Surprise-1 (EP 115)
The processing of new seismic acquired in early 2010 allowed the Group to develop a second oil target and
mature it to drilling readiness, Surprise-1, a test of the same objectives in Johnstone West-1 in a deeper portion
of the trough and oil kitchen some 8 km to the southwest of Johnstone West-1.
Although the prospect was considerably smaller than the Johnstone West-1 prospect in anticipated areal closure,
with an estimated “high” UOIIP of 50 MMbbls and an estimated mean fully risked UOIIP of 6 MMbbls, it is located
9
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
in what was thought to be in a geologically more favourable location with much shorter postulated migration
distances.
In December 2010 the Group attained a milestone in its corporate objectives with the discovery of significant oil
shows in this well in the north western Amadeus Basin.
Surprise -1 rig on location in EP 115 Northern Territory
The well spudded on 11 October 2010 with a planned TD of 3,016m (extendable subject to drilling results). A core
that was successfully retrieved from 2546.2 – 2554.4 mRT (depth below rotary table) was analysed to determine
the relevant properties particularly porosity and permeability. Major fractures were observed in the zones 2547 –
2550 m and 2551 – 2554 m RT, the uppermost zone showing an abundance of light brown free oil with a sample
from the trip tank of darker oil with a API gravity of 26 although this sample was contaminated considerably with
insect remains from the open topped tank. Significantly, the core ending in sandstone exhibited close to 100%
fluorescence attributed to the presence of oil, with the base of the Lower Stairway Sandstone yet to be reached.
The well was prematurely suspended for re-entry at a future time due to problems with the drilling rig. The rig and
associated equipment together with service companies were successfully demobilised from site.
On 31 March 2011, the Company announced it had initiated legal proceedings against Century Energy Services
Pty Ltd (“Century”) to protect its interests. The proceedings follow an unplanned incident which occurred during
the drilling of Surprise-1 in EP 115 whereby the monkey board and 129 stands of racked drill pipe twisted around
the rig mast by thirty degrees whilst the wireline sheaves were being repositioned. This incident resulted in the
Company having to necessarily terminate the drilling contract with Century for performance related issues.
An interim application in respect to the dispute was heard in the Supreme Court of Western Australia on 5 July
2011 in respect to an application made by the Company for an injunction restraining Century from demanding or
obtaining payment under a Banker's Undertaking. Central had provided the Banker's Undertaking as security for
payment for drilling services provided by Century between May and December 2010.
Century had initially claimed that it was entitled to be paid an amount of $795,649.36 in addition to the amounts
already paid for services provided up to the point of termination of the contract. While the Court decided against
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CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
granting an injunction on 28 September 2011, Century has through the process reduced its claim to between
$312,282.66 and $358,832.66.
In respect to Century’s claim for payment, Central says that it has a claim arising from the breakdown and
termination which is for a far greater sum. It has made a claim against Century and MB Century Drilling Pty Ltd
(“MBC”) for costs incurred as a result of the breakdown and termination, and for the likely costs associated with
the logistics and the re-entry and drilling of Surprise 1 to the depth reached at the time of termination of the
contract with Century in December 2010. Central has commenced arbitration proceedings in connection with this
claim. Century and MBC have disputed Central's claim.
The Company announced on 29 September 2011 that the Company and Century were engaged in amicable
discussions in an attempt to resolve these issues without the need for continuing arbitration proceedings. If these
discussions do not lead to an agreed resolution, these issues will be resolved by arbitration, which would likely
occur in April 2012.
Subsequent independent tests on the core by RPS Energy concluded that the cored zone had potential to flow at
up to 1,000 barrels per day although electric logging, pressure gradient, flow testing and other work needs to be
done to confirm this.
Current planning entails the re-entry of the well, coring of the Horn Valley Siltstone (a potential shale gas/shale oil
target of wide spread distribution in the Amadeus Basin) and deepening through the main Pacoota Sandstone
objective to at least the top of the Neoproterozoic section. Additional cores will be acquired for detailed analysis in
order to evaluate the prospect’s unconventional potential. Subject to flow testing and other results, if successful,
the well will be completed as an oil producer with the aim of developing initial cash flow by simple field based
separation and treatment followed by truck transport to export facilities at Port Darwin. Subject to successful flow
parameters, it is thought that cash flow could be developed within 6-12 months of such successful flow testing.
Core taken at Surprise-1, December 2010, Depth 2051-2052m RKB
Seismic
During the year, a major 2D seismic regional and prospect oriented acquisition programme of over 1,300 km was
interrupted by the unseasonal weather. It was completed except for part of the uphole (weathered surface layers)
survey in the Pedirka Basin and seismic acquisition within EPs 105 and 106 which will remain a work in progress
until a crew and equipment are available once the area dries out sufficiently. Results have been very successful
with many new leads being developed for oil, gas, condensate and helium and some spectacular potential salt
related structures being revealed. A number of established leads, particularly for oil, are anticipated to be matured
into drillable prospects as soon as all the data has been processed, interpreted and mapped.
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CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Studies and Reports
The Company released various reports throughout the year. There were two separate independent reports on
the unconventional reservoir resource assessments of the Group’s permit areas – one for the Amadeus Basin
and the other the Georgina Basin.
Schematic of unconventionally reservoired hydrocarbon models
Lower Larapinta Group - Amadeus Basin
DSWPET Pty Ltd, an independent consulting group has concluded that the Group has “mean” prospective
recoverable resources of 26 Trillion Cubic Feet of Gas (TCFG) and 1 billion barrels of oil in the Lower Larapinta
Group sediments in permits and applications operated by the Company within the Amadeus Basin.
The Arthur Creek Formation – Georgina Basin
This study, also from DSWPET Pty Ltd, concluded that in the Group’s Southern Georgina Basin permit
applications, there is a total “mean” prospective recoverable resource of 5 billion barrels of oil and 33 trillion cubic
feet of gas over the Group’s net acreage position of 6 million acres, subject to the granting of the permits
concerned.
Overall, the independently derived resource estimates for unconventionally reservoired hydrocarbons in the
Group’s acreage translates to some 16 billion barrels of oil equivalent at “mean” estimate, with the Group
enjoying a 100% net acreage position less certain production royalties in the mix of granted permits and
applications it operates.
According to DSWPET, although the resource estimates for these unconventional plays will require significant
amounts of seismic, drilling and testing to potentially confirm or re-define, the Group’s recoverable resources at
“mean” level in the Group’s permits and applications in the Amadeus and Southern Georgina Basins rival the well
established Bakken and Barnett Shale plays in North America which are rapidly assuming a dominant position in
onshore North American oil and gas production. The North American companies have been successfully
exploiting unconventional resources for over a decade and the Company believes that access to capital, technical
know-how and ultimately appropriate equipment and crews will flow to Australia to aid in exploration of ground
held by various companies including Central Petroleum Limited.
12
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
The Group’s interests in the Southern Georgina Basin
Devonian Reef/Platform Carbonate Oil Plays
The Company has interpreted carbonate complexes underlying the Permian sediments of the Pedirka Basin. The
play types largely lie within the EP 97 Simpson and Pellinor Prospect Blocks where the Group holds an 80%
interest with co-venturer Rawson Resources Limited holding the balance.
Current mapping of the Madigan Prospect (likely to be drilled in the Group’s next drilling campaign) and the
Simpson East Prospect infers that both have underlying Devonian sediments. The P50 or “best” estimates of
UOIIP potential in the Madigan Prospect is 4 billion barrels and in the Simpson East Prospect is 350 million
barrels.
Lander Trough Oil Play
The Company’s Technical Report on the Lander Trough Oil Play concluded that results of maturation studies are
encouraging for the search for both conventional and unconventionally reservoired oil in the Group’s Lander
Trough acreage where the Group holds up to 11 million acres.
Studies have confirmed that stratigraphic equivalents of Middle Cambrian source rocks from the Georgina Basin
(the Arthur Creek Shale and the Middle Thorntonia Limestone) occur in the Lander Trough of the Wiso Basin.
In the Lander Trough, the dominant oil generation rate occurred in the Ordovician as is the case for analogous
source rocks to the east in the Georgina Basin. A second pulse of oil generation occurred during the early Alice
Springs Orogeny (Siluro/Devonian).
Fractured Basement Plays
The Company recently released a paper on Fractured Basement Hydrocarbon Plays and “Buried Hill” Plays in
central Australia. In this paper, basement is regarded as any metamorphic or igneous rock which is
unconformably overlain by a sedimentary sequence.
13
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
These fractured crystalline basement terranes occur in various parts of the world but are completely unexplored
in central Australia despite favourable geological criteria in several basins. The Group’s holdings in the Amadeus,
Georgina and Pedirka basins include specific areas where structurally deformed crystalline basement terranes
have potential to reservoir hydrocarbons.
The fractured basement play type may produce some exciting targets in subsequent exploration campaigns.
Helium Targets
The Group is involved in a joint venture in the Mt Kitty and Magee prospect blocks in the southern portion of EP
125 and EP 82 respectively and has reason to believe that the area has potential to host volumes of gas,
condensate and helium with a concentration of 5% or more. The Magee 1 well, drilled by Pacific Oil and Gas in
1992 flowed such a gas mixture to surface with a helium concentration of 6.2%, unusually high, from the subsalt
Heavitree Formation. The Group and its joint venture participant, Oil & Gas Exploration Limited (previously He
Nuclear Limited) have completed additional seismic over the Magee prospect and other prospects in the area as
part of the Phase One 2009/10 exploration programme and, the Group is planning on drilling the Mt Kitty prospect
in the next round of drilling.
An evaluation of the helium potential at Ooraminna has been given above in this report where the results of
Ooraminna 2 are presented.
Coal Operations
Pedirka Basin Coal
The Group drilled a three stratigraphic coal exploration wells in its mineral tenements in the Pedirka Basin during
the year. Further shallow coal holes are contemplated and the programme is contingent upon results gained from
time to time.
Coal hole SHEL27109-2 was completed and intersected approximately 42m of net coal seams greater than 1m in
thickness. Coal hole SHEL27109-1 was completed and intersected approximately 70m of coal greater than 1m in
thickness. Coal hole SHEL28095-1, a step out to relatively unexplored parts of a frontier coal basin, was
completed but failed to intersect a coal seam.
The results of the previous drilling campaign for coal seam gas (CSG) were examined by internationally
respected independents Netherland, Sewell & Associates Incorporated who reported that although there
remained some potential for biogenic CSG, they saw little chance of there being any thermally derived CSG in the
Pedirka Basin.
The intersections of coal however throughout both the 2008 and the 2009/10 drilling campaigns were singularly
impressive with individual seams up to 35m in thickness over widespread areas of the basin being apparent.
The coal, where tested to date, has preliminary indicative qualities as follows:
•
•
Specific Energy 5 - 6,000 kcals/kg, or 20 - 25 Mj/kg
> 300 Billion tonnes 1-1,000m – UCG, underground and open cut mining potential and also CTP
potential which is the process of mining coal, gasifying on the surface and running the gas through a
Fischer Tropsch GTL process to produce, inter alia, value added transport fuels
•
Ash 8-19% (average 11%)
• Moisture (air dried) 8-19% (av. 14%)
•
Single seams up to 35m in thickness
Shallower coals with average Specific Energy of some 20-21 Mj/kg have been tested and shown to have potential
via washing and floatation to increase the Specific Energy to some 24-25 Mj/kg and this, prima facie, means that
one of the coal products contemplated (briquetted or pelletised) may be comparable in part to many other
“steaming” or thermal coals being exported from Queensland and New South Wales.
14
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Drilled intersections of Coal in the Pedirka Basin
Known Coal Intersections Pedirka Basin
Well
CBM93-001
CBM93-002
CBM93-003
CBM93-004
Blamore-1
SHEL27109-1
SHEL27109-2
Simpson-1
CBM107-001
CBM107-002
Mt Hammersley
Dalmatia-1
Etingimbra-1
Colson-1
Top Coal
(m)
Base Coal
(m)
Net Coal
>2m
Thickest Seam
(m)
699
514
720
544
1534
739
822
1721
745
297
617
593
616
2133
1203
902
835
880
2037
1036
1170
1699
1227
471
845
641
626
2205
139.4
101.7
1.2
153.0
111.3
70.3
29.0
6.0
128.3
63.5
48.2
1.8
2.5
16.2
34.6
14.2
1.2
17.7
16.9
17.8
6.1
6.0
32.3
21.4
6.6
1.8
2.5
6.7
Drilled intersections of Coal in the Pedirka Basin. These figures are based on seams
over 2m thickness. Figures published in the 2010 Annual Report were based on
seams over 1m thickness.
15
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Geothermal Operations
Geothermal Exploration Permits
During the year the Northern Territory Government awarded Central Geothermal Pty Ltd, a wholly owned
subsidiary, three Geothermal Exploration Permits, GEP 27833, GEP 27834, and GEP 27835, for a term of five
years. These three permits cover an area of some 11,000 sq km.
Farm-ins /Farm-outs
Red Sky Energy (NT) Pty Ltd
On 30 July 2010 the Group and joint venture participant Red Sky Energy Limited (“Red Sky”) agreed to terminate
their farmin/farmout agreement covering all exploration permits and application areas where Red Sky had
previously agreed to earn a 10% equity interest by paying certain costs on a 2:1 promote basis. The promote was
capped at various levels for seismic and drilling operations. As a result the Group’s beneficial interest in each of
the permit and application areas increased by the 10%.
Rawson Resource Limited Farmin Agreement
Since October 2007, the Company’s wholly owned subsidiary Merlin Energy Pty Ltd, has been farming in to
Rawson Resources Limited’s (Rawson) EP 97 Simpson, Bejah and Dune Prospect Blocks to earn an 80%
interest in each of the blocks thought to be prospective for oil. Simpson-1 drilled by the Company in 2008
encountered interesting oil shows and limited coal intersections. As a result of the study of these results and both
recent and older vintage seismic, the Company identified a prospective new trend, the Pellinor trend and on 6
August 2010 announced a new farmin agreement with Rawson to allow it to acquire an 80% interest in the
Pellinor Prospect Block. The Group has completed the seismic requirements of the farmin concerned and now is
to drill a well to earn an 80% interest in the prospect block concerned.
Trident Energy Limited Farmin Agreement
As a result of Trident Energy Limited’s (TRI) inability to pay certain cash calls to cover its commitments within EP
115 and EPA 111, the Group reached an agreement with TRI such that TRI withdrew from the EPA 111 Joint
Venture and had until 6 December 2010 to pay outstanding cash calls amounting to $1.72 million. TRI was
unable to make the payment and has withdrawn from the EP 115 Joint Venture.
Great Southern Gas Limited Farmin Agreement EPA 130
In line with the Group’s policy of furthering farmouts to big companies and majors, a settlement was reached with
Great Southern Gas Limited for them to withdraw from the joint venture over EPA 130.
General Disclaimer and explanation of terms
Potential volumetrics of gas or oil may be categorised as Undiscovered Gas or Oil Initially In Place (UGIIP or
UOIIP) or Prospective Recoverable Oil or Gas in accordance with AAPG/SPE guidelines. Since oil via Gas to
Liquids Processes (GTL) volumetrics may be derived from gas estimates the corresponding categorisation
applies. Unless otherwise annotated any potential oil, gas or helium UGIIP or UOIIP figures are at “high” estimate
in accordance with the guidelines of the Society of Petroleum Engineers (SPE) as preferred by the ASX Limited
but the ASX Limited takes no responsibility for such quoted figures.
As new information comes to hand from data processing and new drilling and seismic information, preliminary
results may be modified. Resources estimates, assessments of exploration results and other opinions expressed
by the Company in this announcement or report have not been reviewed by relevant joint venture partners.
Therefore those resource estimates, assessments of exploration results and opinions represent the views of the
Company only. Exploration programmes which may be referred to in this announcement or report have not been
necessarily been approved by relevant joint venture partners and accordingly constitute a proposal only unless
and until approved. All exploration is subject to contingent factors including but not limited to weather, availability
of crews and equipment. funding, access rights and joint venture relationships.
16
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Competent Persons Statement
Al Maynard & Associates
Information in this report or announcement or notification which may relate to exploration results of coal tonnages
in the Pedirka Basin is based on information compiled by Mr Allen Maynard, who is a member of the Australian
Institute of Geosciences (“AIG”) and a corporate member of the Australasian Institute of Mining & Metallurgy
(“AusIMM”) and an independent consultant to the Company. Mr Maynard is the principal of Al Maynard &
Associates Pty Ltd and has over 30 years of exploration and mining experience in a variety of mineral deposit
styles. Mr Maynard has sufficient experience which is relevant to the styles of mineralisation and types of deposit
under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the
2004 Edition of the “Australasian Code for reporting of Exploration Results, Mineral Resources and Ore
Reserves”. Mr Maynard consents to inclusion in this report or announcement of the matters based on his
information in the form and context in which it appears.
Mulready Consulting Services
The Mulready Consulting Services Report on UCG and CSG which may be referred to in this report or
announcement or notification was prepared by their Associate Mr Roger Meaney, who holds a BSc (Hons) from
Latrobe University and has over 30 years experience in the petroleum exploration and production industry with 8
years experience in the field of Coal Seam Gas.
Seismic acquisition in EP 115 Northern Territory
17
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Information on directors
Henry J Askin BSc (Hons) PhD MSEG MEAGE MPESA
Independent Non Executive Chairman
Dr Askin has over 40 years of experience in the oil exploration industry, of which some
25 years were with the Shell Group of Companies, most recently as a consultant. He is
based in Melbourne.
From 1990 until his retirement in December 1997, he was exploration manager with
Shell Development (Australia) Pty Ltd in Melbourne. Throughout this period he was
Shell’s representative on the APPEA Exploration Committee, and was a Director of the various Shell companies
established pursuant to operations in the Indonesia Australia Zone of Cooperation.
Dr Askin’s previous appointments with the Shell Group were in Australia, Oman, Norway, The Netherlands and
India. During this time he held various positions including seismic interpreter, chief geophysicist, seismic
processing manager, deputy head of new exploration ventures and, immediately prior to returning to Australia,
general manager of Shell India.
While his career has ranged from seismic interpretation and prospect generation to senior management, Dr.
Askin has contributed to the practice of geophysics in the wider sense, most notably in the co-authorship of a
paper read at the EAEG meeting in Belgrade (1987) which received the inaugural best paper award. He is a life
member of the Society of Exploration Geophysicists, an active member of the European Association of
Geoscientists and Engineers, and a member of the Petroleum Exploration Society of Australia.
Dr Askin is a non-executive director of Bass Strait Oil Company Ltd. Within the last three years, he has not been a
director of any other listed public company.
John Heugh BSc (Hons) MAAPG, MPESA
Managing Director
A practising Geologist, Mr Heugh has over 30 years experience in many aspects of
petroleum and mineral exploration, with 20 years experience in oil field exploration and
development, both onshore and offshore, in Australia and overseas, supplemented by
10 years metallics, environmental and general geology experience.
He has worked as a consultant to or with sub-contractors working for a number of
petroleum companies, including Esso, Wapet, Pancontinental Petroleum, Santos, Western Mining Corporation,
Bridge Oil, Ampol, Kuwaiti Foreign Petroleum Corporation, Arco and Chevron-Texaco. Mr Heugh also has
expertise in technical sales management, general management, exploration, joint venture and contract
negotiation and management, project generation, logistics, engineering technical support and remote area
operations.
He has undertaken specialist correspondence studies in oilfield drilling technology and development at the
University of Texas and advanced management courses with the Australian Institute of Management.
He holds an honours degree in Science, majoring in Geology from the University of New England in New South
Wales. Mr Heugh is Chairman of the Curtin University Centre of Excellence in Petroleum Geology and
Engineering Annual Symposia on Extreme Operations, Petroleum. He is a member of the Petroleum Exploration
Society of Australia and the American Association of Petroleum Geologists.
Within the last three years, Mr Heugh has not been a director of any other listed public companies.
Richard Faull BCom CPA
Independent Non Executive Director
Mr Faull has had over 30 years experience as a director, executive and company
secretary in mineral and petroleum exploration companies. He is currently a director
and company secretary of Barranco Resources NL.
Mr Faull has a degree in Commerce from the University of Western Australia and is a
member of CPA Australia.
Within the last three years, Mr Faull has not been a director of any other listed public company.
18
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
William J Dunmore BSc MSc
Independent Non Executive Director
Mr Dunmore is an experienced reservoir and production engineer with significant
transaction, analysis and
from consulting and
employment with a number of petroleum companies and financial institutions including
Barclays Bank, Unicredit, HVB, British Gas, HBOS/BankWest, SMBC, BHP Petroleum,
Schlumberger, Hardman, Mobil, Petrobras, Total, Nippon Oil and Powergen.
financial modelling knowledge
Mr Dunmore has over 35 years of direct relevant experience in Australia, Europe and
elsewhere. He actively consults to a number of clients. Recent and current projects have included several very
large gas and LNG developments in Asia and Australia as well as oil and gas projects located around the world.
He has also advised on asset finance such as drilling rig conversions and FPSO new build and construction.. He
is a member of the Society of Petroleum Engineers.
Within the last three years, Mr Dunmore has not been a director of any other listed public company.
Company secretaries
Bruce Elsholz BCom CA
Mr Elsholz has around 30 years experience in the upstream oil and gas sector. He has held senior financial roles
with a number of exploration and production companies in Australia and Canada. He also has approximately ten
years experience as Company Secretary with a number of ASX listed entities.
Daniel CM White LLB BCom LLM
Mr White has considerable experience in corporate finance transactions (including acquisitions and divestitures),
equity and debt capital raisings, joint venture and partnering agreements and litigation and international
commercial arbitration. He has held senior international based positions with Kuwait Energy Company and
Clough Limited.
Directors’ meetings
The number of directors’ meetings held and the number of meetings attended by each of the directors of the
Company during the financial year are:
Henry Askin
John Heugh
Richard Faull
William Dunmore
Number of meetings held
at which eligible to attend
7
7
7
7
Number of meetings
attended
7
7
6
7
Business of the directors was often effected by written resolutions signed by all of the directors who were eligible
to vote on the resolution.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Consolidated Entity during the financial year were as follows:
Cancellation of Bond Subscription Agreement
The Company determined that the bond subscription agreement which was entered into in November
2007 and which had been partly drawn down to raise funds for its exploration and development
programmes was no longer in the Company’s best interests and elected to exercise its rights to
terminate.
The Group continued its exploration activities in conjunction with its joint venture partners, including the
drilling of drilling the conventional gas prospect Ooraminna-2 (EP 82) as well as two oil prospects -
Johnstone West 1 and Surprise 1 (both in EP 115). In addition, three coal stratigraphic holes were
drilled on the Group’s mineral leases.
19
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Matters subsequent to the end of the financial year
No matters or circumstances, besides those disclosed at note 32 to the financial statements, have arisen since
the end of the financial year which significantly affected or may affect the operations of the Consolidated Entity,
the results of those operations or the state of affairs of the Consolidated Entity in future financial years.
Likely developments and expected results of operations
Oil and Gas Interests
The Group is scheduling to kick off its renewed liquids focused exploration and development programme in the
fourth (December) quarter of 2011 with the re-entry and testing of Surprise-1 in the Amadeus Basin for oil
potential in both conventional and unconventional horizons, followed by the drilling of the 4 Billion barrel Madigan
prospect (P50 UOIIP) in the Pedirka Basin and the 2 TCFG Mt Kitty prospect (P50 UGIIP).The Mt Kitty prospect
is anticipated to host condensate as well as helium, a valuable gas originally discovered in the sub-salt Magee
prospect in the Amadeus Basin in 1992 (Magee-1).
Seismic acquisition and further drilling of a number of play types are also being evaluated. Included amongst the
play types are the Surprise-Johnstone area in EP 115 for both conventional and unconventional oil
accumulations, reefal carbonate plays in the Pedirka Basin and the conventional and unconventional oil and gas
potential within the Group’s application areas in the Southern Georgina Basin.
The Southern Georgina Basin has recently been attracting a high level of interest. Canadian companies
PetroFrontier and Rodinia have commenced or are soon to commence well funded drilling programmes. As the
Group has various petroleum permit interests (under application) adjacent to the PetroFrontier acreage, drilling
success by either PetroFrontier or Rodinia would likely see escalated attention by the Group to its Arthur Creek
Shale and Thorntonia Limestone plays.
Mineral / Coal Interests
The Company has commenced a global search for Pedirka Basin UCG/GTL Commercialisation Partners.
The Company has partnered with Allied Resource Partners Pty Ltd (“ARP”) to commercialise part of the Group’s
permit and application areas in the Pedirka Basin covering coal deposits. ARP will instigate and oversee the
global search for funding and technology partners for this part of the Group’s coal assets located in the Northern
Territory and South Australia. This watershed agreement is aimed at creating significant and multi-generational
benefits to Australia including liquid fuels self-security, taxation and royalty revenues, employment and indigenous
empowerment.
ARP’s Chairman, Michael Doyle, is a specialist in investment banking, corporate finance, project and
infrastructure financing. ARP’s Managing Director, David Shearwood, has extensive experience in mining
engineering, funds management, as a resource analyst, in infrastructure and coal mining.
UCG projects are “clean coal” as they offer a major step towards reducing CO2 intensity of power generation and
transport fuels. UCG extraction does not employ the same technology methods as Coal Seam Methane or Coal
Seam Gas. UCG does not require the lowering of the water table to drain coal seams, the use of fraccing
techniques to rupture rock underground, or the use of carcinogenic chemicals. It is the directors’ view that the
market is grossly misinformed regarding these facts.
UCG technology based projects are increasingly becoming mainstream and it is expected many more will appear
across the globe in the next decade.
A rigourously prescriptive Request for Proposal (“RFP”) process will be used to bind commitments to the Project
from already identified carefully selected major domestic and global petroleum and mining companies, sovereign
funds, energy funds and investment funds. Compliant RFP respondents will be required to detail their plans to
explore for coal and potentially complete a Bankable Feasibility Study with Stage 1 output of a minimum of 60,000
barrels per day from the yet to be drilled minimum JORC compliant resource of 4 billion tonnes of accessible coal
and their plans to commence construction of Stage 1 of the Project within 5 year. The respondents will also be
required to detail their incremental expansion strategies to a potential 3 million barrels per day output.
The foregoing effort is predicated upon significant expenditure, exploration success, technical due diligence and
other attendant requirements such as State and Federal support and legislative clarification. While the tenements
are highly prospective with coal intersections up to 35m in thickness, they remain sparsely drilled at this time,
hence the exploration phase is critical to the long term success of the proposal.
20
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Dual Listing in Canada
The Company has evaluated the level of support that it could expect from potential Canadian and US investors
(shareholders) as well as from its existing shareholders domiciled in those locations for future equity fund
raisings. As expected, with the groundswell of interest in unconventional resources globally and given the
magnitude of the Group’s potential unconventional reserves and resources, the preliminary support has been
very encouraging such that the Company has elected to plan a listing on the TSX Venture Exchange (“TSXV”).
The Company has appointed Ryder Scott Company Canada to prepare an estimate of the potential hydrocarbon
resources attributable to the Group’s interest in the Amadeus Basin, the Pedirka Basin, the Wiso Basin and the
Southern Georgina Basin for the primary purpose of the Company listing on TSXV.
Further information about likely developments in the operations of the Group and the expected results of those
operations in future financial years has not been included in this report because, in the opinion of the directors,
disclosure of the information may prejudice the interests of the consolidated entity.
Environmental regulation
The Consolidated Entity is subject to significant environmental regulation with regard to its exploration activities.
The Consolidated Entity aims to ensure the appropriate standard of environmental care is achieved, and in doing
so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company and
the Consolidated Entity are not aware of any breach of environmental legislation for the year under review.
Insurance of directors and officers
During the financial year, the Group paid premiums to insure Directors and Officers of the Group. The contracts
include a prohibition on disclosure of the premium paid and nature of the liabilities covered under the policy.
Number of employees
The Company had nineteen (19) employees at 30 June 2011 (twenty (20) at 30 June 2010).
Proceedings on behalf of the Company
Except as referred below no person has applied for leave of Court to bring proceedings on behalf of the
Consolidated Entity or intervene in any proceedings to which the Consolidated Entity is a party for the purpose of
taking responsibility on behalf of the Consolidated Entity for all or any part of those proceedings. The
Consolidated Entity was a party to the following proceedings during the year.
Century Energy Services Pty Ltd
On 31 March 2011, the Company announced it had initiated legal proceedings against Century Energy Services
Pty Ltd (“Century”) to protect its interests. The proceedings follow an unplanned incident which occurred during
the drilling of Surprise-1 in EP 115 whereby the monkey board and 129 stands of racked drill pipe twisted around
the rig mast by thirty degrees whilst the wireline sheaves were being repositioned. This incident resulted in the
Company having to necessarily terminate the drilling contract with Century for performance related issues.
An interim application in respect to the dispute was heard in the Supreme Court of Western Australia on 5 July
2011 in respect to an application made by the Company for an injunction restraining Century from demanding or
obtaining payment under a Banker's Undertaking. Central had provided the Banker's Undertaking as security for
payment for drilling services provided by Century between May and December 2010.
Century had initially claimed that it was entitled to be paid an amount of $795,649.36 in addition to the amounts
already paid for services provided up to the point of termination of the contract. While the Court decided against
granting an injunction on 28 September 2011, Century has through the process reduced its claim to between
$312,282.66 and $358,832.66.
In respect to Century’s claim for payment, Central says that it has a claim arising from the breakdown and
termination which is for a far greater sum. It has made a claim against Century and MB Century Drilling Pty Ltd
(“MBC”) for costs incurred as a result of the breakdown and termination, and for the likely costs associated with
the logistics and the re-entry and drilling of Surprise 1 to the depth reached at the time of termination of the
contract with Century in December 2010. Central has commenced arbitration proceedings in connection with this
claim. Century and MBC have disputed Central's claim.
The Company announced on 29 September 2011 that the Company and Century were engaged in amicable
discussions in an attempt to resolve these issues without the need for continuing arbitration proceedings. If these
discussions do not lead to an agreed resolution, these issues will be resolved by arbitration, which would likely
occur in April 2012.
21
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Non-audit services
At the Annual General Meeting of the Company held on 25 November 2010, shareholders voted in favour of a
motion to change to Company’s auditor from Stantons International to PricewaterhouseCoopers (PwC).
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where
the auditor’s expertise and experience with the Company and/or the Consolidated Entity are important.
Details of amounts paid or payable to the auditor (PwC) for non-audit services provided during the year are set
out below.
The board of directors is satisfied that the provision of the non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the
provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence
requirements of the Corporations Act 2001 and did not compromise the general principles relating to auditor
independence in accordance with APES 110 Code of Ethics for Professional Accountants set by the Accounting
Professional and Ethical Standards Board.
PwC Australian firm:
Other assurance services
Review of governance processes, controls and systems
Taxation services
Tax compliance
International tax consulting and advice
Other services
Benchmarking services
Corporate and strategic advice
Total remuneration for non-audit services
Stantons International did not provide any non-audit services during either year.
Auditor’s Independence
CONSOLIDATED
2011
$
2010
$
45,500
300
47,319
5,950
25,500
124,569
-
-
-
-
-
-
The directors received an Independence Declaration from the auditor of Central Petroleum Limited as required
under section 307C of the Corporations Act 2001 and this is set out on page 31.
Remuneration report
This remuneration report, which has been audited, outlines the remuneration arrangements in place for non-
executive directors, executive directors, other key management personnel and the five highest remunerated
executives of the Consolidated Entity and the Company.
Key Management Personnel
The key management personnel of the Consolidated Entity during the year were:
Directors
Dr Henry Askin
Mr John Heugh
Mr Richard Faull
Mr William Dunmore
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Executives
Mr Tim Green
Drilling, Operations and Production Manager
Mr Stewart Bayford
Mr Bruce Elsholz
Mr Daniel White
Exploration Manager
Chief Financial Officer and Company Secretary
Group General Counsel and Company Secretary
(position made redundant 31 January
2011)
(resigned 31 July 2011)
22
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Remuneration Policy
The remuneration policy of the Company is to pay its directors and executives amounts in line with employment
market conditions relevant to the oil exploration industry.
The performance of the Company depends upon the quality of its directors and executives and the Company
strives to attract, motivate and retain highly qualified and skilled management.
The remuneration of directors and executives consists of the following key elements:
Short term incentives
(i)
(ii)
(iii)
Annual salary and non-monetary benefits (executives and Managing Director only);
Directors fees (directors only);
Participation in performance-based bonuses over and above salary arrangements where applicable
and in line with key performance indicators.
Long term incentives
(i)
(ii)
Participation in the Incentive Option Scheme;
Payment of superannuation benefits in line with Australian regulatory guidelines
Salaries and directors fees are reviewed at least annually to ensure they remain competitive with the market.
There are no guaranteed base pay increases included in any executive’s contract.
Performance-based bonus
Participation in bonus schemes is at the discretion of the board of directors. In determining the extent of any
performance based bonus, the Company takes into consideration the key performance indicators and objectives
of the employee and the Company, as the Company may set from time to time, and any other matter that it
deems appropriate. Before establishment of any bonus scheme the board of directors will consider the
appropriate targets and key performance indicators (KPI’s) to link the bonus scheme and the level of payout if
targets are met. This includes setting any maximum payout under the scheme, and minimum levels of
performance to trigger payment of the bonus. As of the date of this report no bonus scheme has been established
for any director or employee.
Incentive Option Scheme
Non executive directors do not receive performance-based pay, however they, along with executives, do
participate in the Incentive Option Scheme which is designed to provide incentive to deliver long-term shareholder
returns.
At the discretion of the Company, performance criteria may or may not be established in respect of options that
vest under the Incentive Option Scheme. Options are granted for no consideration. Options that have been
granted to date to employees, excluding directors, have contained service conditions in respect of their vesting.
Options have vested progressively from grant date to, in some cases, an employee’s third anniversary of
employment. As of the date of this report no options issued to any director or executive under the Incentive
Option Scheme have contained any performance criteria in respect of their vesting.
There are no rules imposing a restriction on removing the ‘at risk’ aspect of options granted to directors and
executives.
23
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Details of remuneration
Details of the remuneration of the directors and the key management personnel of Central Petroleum Ltd and the
Consolidated Entity are set out in the following tables.
Table 1: Remuneration of Directors and Highest Paid Executives
Short-term
Post-employment
Long-term
benefits
Share-
based
payments
Salary/
fees
$
Non-
monetary
benefits7
$
Superannuation
contributions
$
Termination
Benefits
$
Long service
leave
$
Options
$
Total
$
Value of
options as
proportion
of
remuneration
%
Directors
Henry Askin
John Heugh
Richard Faull
William Dunmore
Sub-total
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
80,500
70,000
423,555
369,538
57,500
50,000
57,500
63,603
619,055
553,141
Other key management personnel
Tim Green1
Stewart Bayford6
Julian Tambyrajah2
Bruce Elsholz3
Daniel White4
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
173,945
245,541
276,749
270,445
-
37,268
207,231
151,438
340,630
176,070
998,555
880,762
Sub-total
2010
Other Company executives
Greg Ambrose5
Sub-total
Total
Remuneration
2011
2010
2011
2010
2011
257,195
242,284
257,195
242,284
1,874,805
3,186
2,094
3,186
2,094
3,186
2,094
3,186
2,093
12,744
8,375
1,877
2,093
3,186
2,094
-
-
3,186
2,094
3,186
2,094
11,434
8,375
-
-
-
-
24,178
7,245
6,300
36,414
32,538
5,175
4,500
-
-
48,834
43,338
21,065
22,500
24,167
22,500
-
3,323
18,360
12,835
20,625
14,533
84,217
75,691
22,736
21,248
22,736
21,248
155,787
-
-
-
-
-
-
-
-
-
-
64,856
-
-
-
-
-
-
-
-
-
64,856
-
-
-
-
-
64,856
-
-
-
11,151
-
-
-
-
-
11,151
-
-
-
6,005
-
-
-
3,994
-
5,248
-
15,247
-
-
-
-
-
-
-
-
-
-
90,931
78,394
474,306
404,170
65,861
56,594
60,686
65,696
691,784
604,854
19,621
63,591
11,127
63,109
-
-
9,345
33,892
21,763
47,936
61,856
281,364
333,725
321,234
358,148
-
40,591
242,116
200,259
391,452
240,633
1,236,165
-
208,528
1,173,356
16,946
-
16,946
-
43,344
(20,898)
32,596
275,979
296,128
(20,898)
275,979
32,596
40,958
296,128
2,203,928
241,124
2,074,338
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
7%
19%
3%
18%
N/A
0%
4%
17%
6%
20%
5%
18%
0%
11%
0%
11%
2%
12%
2010
1,676,187
16,750
140,277
¹Drilling Manager Position made redundant 31 January 2011
² Resigned 10 July 2009
³ Appointed 31 August 2009.
7 Represents insurance premiums
4 Appointed 30 November 2009.
5 One of the 5 highest paid executives of the Company
6 Resigned 31 July 2011
24
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Details of remuneration (continued)
No options were granted to key management personnel during 2011.
The fair values of options granted during 2010 were calculated at the dates of grant using a Black-Scholes
valuation model. The values are allocated to each reporting period evenly over the period from grant date to
vesting date.
The values disclosed for 2011 are the portions of the fair values applicable to and recognised in this reporting
period.
The following factors and assumptions were used in determining the fair value of options on grant date:
Grant
date
Expiry
date
Fair value
per option
Exercise
price
Price of
shares on
grant date
Estimated
volatility
Risk free
interest
rate
Dividend
yield
1 Jun 10
31 May 15
$0.026
$0.122
$0.07
49.3%
4.5%
0%
Table 2: Share based compensation – Options granted and vested during the year
Number of
options
granted
Grant
date
Average
fair value
at grant
date
Average
exercise
price per
option
Number of
options
vested
Proportion
of options
vested
%
Expiry
date
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Tim Green1
Stewart Bayford6
Julian Tambyrajah2
Bruce Elsholz3
Daniel White4
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
-
-
-
-
-
-
-
1 Jun 10
-
-
-
-
-
-
-
-
$0.026
-
2,000,000
-
3,000,000 1 June 10
$0.026
-
-
-
-
-
-
-
$0.122
-
$0.122
-
-
-
-
-
-
-
31 May 15
-
31 May 15
800,000
1,600,000
800,000
1,600,000
-
-
666,666
666,666
1,000,000
1,000,000
34%
66%
34%
66%
-
-
33%
33%
33%
33%
Other Company executives
Greg Ambrose5
2011
2010
Total compensation
options
2011
2010
-
-
-
5,000,000
¹ Position made redundant 31 January 2011
² Resigned 10 July 2009
³ Appointed 31 August 2009.
-
-
-
-
-
-
-
-
-
250,000
-
25%
3,266,666
4,866,666
4 Appointed 30 November 2009.
5 One of the five highest paid executives of the Company
6 Resigned 31 July 2011
25
Directors
Henry Askin
John Heugh
Richard Faull
William Dunmore
Year
2011
2010
2011
2010
2011
2010
2011
2010
Other key management personnel
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Details of remuneration (continued)
Table 3: Options granted as part of remuneration
2011
Directors
Henry Askin
John Heugh
Richard Faull
William Dunmore
Other key management personnel
Tim Green
Stewart Bayford
Bruce Elsholz
Daniel White
Other Company executives
Greg Ambrose
Value of options
granted during
the year
($)
Value of options
lapsed during
the year ($)
Remuneration
consisting of options
for the year
(%)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Table 3: Options granted as part of remuneration
2010
Directors
Henry Askin
John Heugh
Richard Faull
William Dunmore
Other key management personnel
Tim Green
Stewart Bayford
Bruce Elsholz
Daniel White
Julian Tambyrajah
Other Company executives
Greg Ambrose
Value of options
granted during
the year
($)
Value of options
lapsed during
the year* ($)
Remuneration
consisting of options
for the year
(%)
-
-
-
-
-
-
45,285
76,852
-
-
-
-
-
-
-
-
-
(111,900)
-
-
-
-
-
-
-
-
17%
20%
-
-
No options were exercised during either year, and no shares were issued on exercise of compensation options.
* Lapsed because a vesting condition was not satisfied. The value is determined at the time of lapsing but
assuming the condition was satisfied.
26
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Details of remuneration (continued)
Table 4: Shareholdings of key management personnel
Held at
beginning
of year
Held at
date of
appointment
Renounceable
rights issue
purchase
Received on
exercise of
options
Net
change
other
Held at
date of
departure
Held at
end of
year
Directors
Henry Askin
2011
2010
John Heugh
2011
2010
Richard Faull
2011
2010
William Dunmore
2011
2010
3,600,000
2,400,000
5,703,693
5,683,803
2,386,100
2,311,100
766,666
766,666
Other key management personnel
Tim Green
2011
2010
Stewart Bayford
2011
2010
Julian Tambyrajah
2011
2010
Bruce Elsholz
2011
2010
Daniel White
2011
2010
90,000
-
-
-
N/A
-
-
N/A
1,440,000
N/A
Other Company executives
Greg Ambrose
2011
2010
-
-
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
-
-
-
-
N/A
N/A
-
1,200,000
-
19,890
-
75,000
-
-
-
22,500
-
-
-
-
-
-
-
480,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,736
-
-
-
-
-
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3,600,000
3,600,000
5,741,429
5,703,693
2,386,100
2,386,100
776,666
776,666
-
67,500
90,000
N/A
N/A
90,000
-
-
-
-
-
-
-
960,000
-
-
N/A
N/A
N/A
-
N/A
N/A
N/A
N/A
N/A
N/A
-
-
N/A
N/A
-
-
1,440,000
1,440,000
-
-
27
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Details of remuneration (continued)
Table 5: Option holdings of key management personnel
Held at
beginning
of year
Options
exercised
Granted as
remuneration
Net
change
other
Held at
end of
year *
Directors
-
(560,000)
-
-
-
-
5,340,000
5,900,000
7,503,978
12,050,000
Henry Askin
2011
2010
John Heugh
2011
2010
Richard Faull
2011
2010
William Dunmore
2011
2010
* All of the options had vested and were exercisable at the end of the year.
3,580,550
5,065,550
3,400,000
4,000,000
-
-
-
-
-
-
-
-
-
-
-
-
300,000
(4,546,022)
-
(1,485,000)
-
(600,000)
5,340,000
5,340,000
7,803,978
7,503,978
3,580,550
3,580,550
3,400,000
3,400,000
Held at
beginning
of year
Held at
date of
appointment
Options
exercised
Granted as
remuneration
Net change
other
Held at
date of
departure
Held at
end of
year
Other key management personnel
Tim Green
2011
2010
Stewart Bayford
2011
2010
Julian Tambyrajah
2011
2010
Bruce Elsholz
2011
2010
Daniel White
2011
2010
2,404,500
2,400,000
2,400,000
2,400,000
N/A
4,000,000
2,000,000
N/A
3,096,000
N/A
Other Company executives
Greg Ambrose
2011
2010
2,000,000
2,000,000
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,500
2,404,500
N/A
N/A
2,404,500
-
-
N/A
N/A
2,400,000
2,400,000
-
(2,666,668)
N/A
1,333,332
N/A
N/A
-
2,000,000
-
3,000,000
-
-
-
96,000
N/A
N/A
N/A
N/A
2,000,000
2,000,000
3,096,000
3,096,000
-
-
(1,000,000)
-
N/A
N/A
1,000,000
2,000,000
28
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Details of remuneration (continued)
The vesting profile for options held at the end of the year was as follows:
Executive
Holding at
end of year
Key management personnel
2011
Vested
during the
year
Exercisable
at end of
year
Holding at
end of year
2010
Vested
during the
year
Exercisable
at end of
year
Tim Green
Stewart Bayford
Bruce Elsholz
Daniel White
N/A
2,400,000
2,000,000
3,096,000
800,000
800,000
666,666
1,000,000
N/A
2,400,000
1,333,332
2,096,000
2,404,500
2,400,000
2,000,000
3,096,000
800,000
800,000
666,666
1,000,000
1,604,500
1,600,000
666,666
1,096,000
Other Company executives
Greg Ambrose
1,000,000
-
1,000,000
2,000,000
250,000
2,000,000
For each grant of options included in the tables 1 to 5 above, the percentage of the grant that was vested in the
financial year and the percentage that was forfeited because the person did not meet the performance or service
criteria is set out below. The options vest over a range of time frames provided the vesting conditions are met.
No options will vest if the conditions are not satisfied (refer page 23), hence the minimum value of the option yet
to vest is nil. The maximum value of the options yet to vest has been determined as the amount of the grant date
fair value of the options that is yet to be expensed.
Share based compensation benefits (options)
Financial years
in which
options may
vest
-
-
-
-
-
-
-
-
Forfeited
%
-
-
-
-
-
-
-
-
Vested
%
100
100
100
100
100
100
100
100
100
100
33
67
67
100
100
-
-
67
-
-
-
-
-
-
-
30/6/2012
30/6/2012
-
-
Maximum
value of grant
yet to vest
$
-
-
-
-
-
-
-
-
-
-
-
2,048
7,152
-
-
Year
Granted
2009
2008
2009
2008
2009
2008
2009
2008
2009
2009
2009
2010
2010
2009
2008
Name
Henry Askin
John Heugh
Richard Faull
William Dunmore
Tim Green
Stewart Bayford
Julian Tambyrajah
Bruce Elsholz
Daniel White
Greg Ambrose
Service agreements
The details of service agreements of the key management personnel of Central Petroleum Limited and the
Consolidated Entity are as follows:
John Heugh, Managing Director:
The term of the agreement, which was entered into in April 2005 and extended in December 2008, is for the
period through until 7 March 2015;
Mr Heugh’s base salary is presently $337,500 per annum. In addition, superannuation at the statutory 9%
rate is applicable, and Mr Heugh receives a director’s fee of $60,000 per annum;
29
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
DIRECTORS’ REPORT
30 JUNE 2011
Service agreements (continued)
The agreement provides for the provision of 3 months’ notice for termination in specified circumstances or
the payment of 3 months’ salary in lieu of notice. In certain circumstances, the termination provisions require
payment of the equivalent of seven times the annual average of the base salary for the period of three years
prior to the termination of the contract. There is no entitlement to a termination payment in the event of a
conviction for any major criminal offence which brings the Company or any of its Related Bodies Corporate into lasting
disrepute.
The terms of employment also require the Company to maintain an appropriate level of Directors and
Officers’ Liability Insurance and provide rights relating to indemnity, insurance, and access to documents.
Tim Green, Drilling, Operations and Production Manager
Mr Green’s position was made redundant effective from 31 January 2011.
The term of the agreement was 4 years, commencing 11 May 2009;
Mr Green’s base salary at the date of redundancy was $266,250 per annum. In addition, superannuation at
the statutory 9% rate was applicable.
Stewart Bayford, Exploration Manager
Mr Bayford resigned effective from 31 July 2011;
The term of the agreement was 4 years, commencing 1 June 2009;
Mr Bayford’s base salary was $262,500 per annum. In addition, superannuation at the statutory 9% rate was
applicable. The salary was reviewed annually.
Bruce Elsholz, Chief Financial Officer and Company Secretary
The term of the agreement is 4 years, commencing 31 August 2009;
Mr Elsholz’s base salary is presently $217,800 per annum. In addition, superannuation at the statutory 9%
rate is applicable. The salary is reviewed annually.
In order to terminate employment, increasing periods of notice are required by either, depending on the
length of service, up to a maximum of 3 months’ notice or payment in lieu.
Daniel White , Group General Counsel and Company Secretary
The term of the agreement is 4 years, commencing 30 November 2009;
Mr White’s base salary is presently $332,750 per annum. In addition, superannuation at the statutory 9%
rate is applicable. The salary is reviewed annually.
In order to terminate employment, increasing periods of notice are required by either, depending on the
length of service, up to a maximum of 3 months’ notice or payment in lieu.
Greg Ambrose , Manager Geology
The term of the agreement is 4 years, commencing 16th June 2011;
Mr Ambrose’s base salary is presently $259,329 per annum. In addition, superannuation at the statutory 9%
rate is applicable. The salary is reviewed annually.
The Company may terminate the employment at any time by either giving 3 month's written notice or
payment in lieu thereof.
Non executive directors
The Company has engaged Dr Henry Askin, Mr Richard Faull and Mr William Dunmore whereby they are
appointed as non-executive directors of the Company. The terms of appointment are subject to the Company’s
Constitution. The Company maintains an appropriate level of Directors and Officers’ Liability Insurance and
provide rights relating to indemnity, insurance, and access to documents. Dr Askin receives a non-executive
director’s fee of $84,000 per annum, plus superannuation benefits. Messrs Faull and Dunmore receive non-
executive directors’ fees of $60,000 per annum. Mr Faull also receives superannuation benefits. However, Mr
Dunmore, who resides outside of Australia, does not receive superannuation benefits.
Signed in accordance with a resolution of the Directors:
John Heugh – Director, Perth 30 September, 2011
30
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT – 30 JUNE 2011
31
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT
Introduction
The Company and the board are committed to achieving and demonstrating high standards of corporate
governance. The board continues to review the framework and practices to ensure they meet the interests of
shareholders. The Group seeks to follow the best practice recommendations for listed companies to the extent
that it is practicable.
The Company is required to disclose the extent to which they have complied with the ASX Corporate Governance
Principles and Recommendations. Set out below are the principal corporate governance practices of the
Company along with the reasons for non-compliance with the recommendations (including 2010 Amendments)
where applicable.
Principle 1: Lay solid foundations for management and oversight
Role of the board of Directors
The board of directors guides and monitors the business and affairs of the Company on behalf of its
shareholders, by whom the directors are elected and to whom they are accountable.
The board’s primary role is the protection and enhancement of long-term shareholder value. The board is
responsible for the overall corporate governance of the Company, including engaging with management in the
development of strategic and business plans, preparation of annual budgets and establishment of goals for
management and monitoring the achievement of those goals on a regular basis. Management will report to the
board and execute the directives of the board.
The board is also responsible for:
reviewing the performance of the managing director and senior management;
planning the development, retention and succession of the management team;
reviewing and ratifying systems of risk management and internal compliance, including approving and
monitoring the policies and procedures relating to occupational health and safety and the environment;
approving and monitoring financial and other reporting, including the progress of major capital
expenditure and capital management;
approving and monitoring acquisitions and divestitures; and
preparing, implementing and monitoring policies to ensure that all major developments affecting the
financial position and state of affairs of the Company and any subsidiaries are announced to the ASX in
strict accordance with the Listing Rules.
The board has also established a framework for the management of the Company, including a system of internal
control and business risk management and the establishment of appropriate ethical standards. The board
conducts annual reviews of its processes to ensure that it is able to carry out its functions effectively and in an
efficient manner.
Principle 1 recommendations not complied with:
Recommendation
Explanation/ Reference
formalised
The Company has not
the
functions reserved to the board and those
delegated to management. However, the
responsibilities of the board are set out
above.
(KPI)
The Company has a ten key performance
process
indicator
administered by the Managing Director for
evaluating
the performance of senior
executives.
evaluation
Rec 1.1 Companies should establish
functions
reserved to the board and those delegated to
senior executives and disclose the functions.
the
Rec 1.2 Companies should disclose the process for
evaluating the performance of senior executives.
32
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT
Principle 2: Structure the board to add value
Structure and composition of the board
The board consists of four directors - the managing director and three non–executive directors. The directors
bring a broad range of relevant expertise, both nationally and internationally, to the board. Details of their skills,
experience and expertise and the period of office held by each director have been included in the directors’
report. The number of board meetings and the attendance of the directors are set out in the directors’ report.
The Chairman, Dr Askin, is an independent director. The roles of chairman and the managing director are not
exercised by the same individual as there is a clear division of responsibility between them.
Independence of non-executive directors and the chairman of the board
The Company utilises the Corporations Act threshold of 5% shareholding for determining independence. The
Board monitors the independence of each board member on a regular ongoing basis.
The board has assessed the independence of the non-executive directors and the Chairman.
Although Messrs Askin, Faull and Dunmore hold 3,600,000, 2,386,100 and 776,666 fully paid ordinary shares
respectively, the board considers these holdings to be immaterial, being significantly below the holdings threshold
to be considered as substantial shareholders as defined by the Corporations Act.
The non-executive directors have no business or other relationship which is likely to compromise their
independence. Individual directors are required to keep the board advised of any interests that could potentially
create conflict with those of the Company.
Conflict of Interest
Directors and senior management are required to advise the Chairman of any existing or potential conflict of
interest. When necessary, the Chairman will refer the matter to the board for determination.
Term of office
Under the constitution of the Company, the directors, other than the Managing Director, are obliged to present
one third of their company for retirement and potential re-election at each annual general meeting of the
Company.
Independent professional advice
In the proper performance of their duties, each director has the right to seek a reasonable level of independent
professional advice on matters concerning the Company at the Company’s expense, after obtaining the
Chairman’s approval, which will not be unreasonably withheld. Each director has the right of access to all relevant
Company information and to the Company’s executives.
Principle 2 recommendations not complied with:
Recommendation
Explanation/ Reference
Rec 2.4 The board should establish a nomination
committee.
Rec 2.5 Companies should disclose the process for
evaluating the performance of the board, its
committees and individual directors
The Company currently does not have a nomination
committee. Because of the Company’s size, the
board believes that such a formal committee would
its effective management.
contribute
Nomination matters are reviewed and approved by
the board as a whole.
little
to
the performance of
The Company has not disclosed the process for
its
evaluating
committees and individual directors. The full board is
responsible for this function. However, because of
the size and structure of
formal
performance evaluation process is not conducted.
the board a
the board,
33
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT
Principle 3: Promote ethical and responsible decision making
Ethical standards and code of conduct
The directors acknowledge the need for, and continued maintenance of, the highest standards of ethical conduct
by all directors and employees of the Company. All directors, executives and employees are required to abide by
laws and regulations, to respect confidentiality and the proper handling of information and act with their highest
standards of honesty, integrity, objectivity and ethics in all dealings with each other, the Company, customers,
suppliers and the community.
The board has developed a code of conduct reflecting its high standards and expectations. The code of conduct
will be regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and
professionalism.
The code of conduct is available on the Central Petroleum Limited website.
Share trading
The Company has adopted a Share Dealing Code for the directors and employees, which is appropriate for a
Company whose shares are admitted to trading on the ASX, and the Company will take all reasonable steps to
ensure compliance by its directors and any relevant employees. The Share Dealing Code is summarised as
follows:
Consistent with the legal prohibitions on insider trading contained in the Corporations Act, all employees,
officers and directors are prohibited from trading in the Company’s securities while in possession of
unpublished price sensitive information.
Unpublished price sensitive information is information, which a reasonable person would expect to have
a material affect on the price or value of the Company’s securities. Examples may include:
o
o
o
o
the financial results of the Company and any of its subsidiaries;
projections of future earnings or losses;
changes in senior management; and
results of drilling and or production testing.
It should be noted that either positive or negative information may be material.
An employee, officer or director, whilst in possession of unpublished price sensitive information, is subject to
three restrictions:
they must not deal in securities affected by information;
they must not cause or procure anyone else to deal in those securities; and
they must not communicate the information to any person if they know or ought to know that the other
person will use the information, directly in directly, for dealings in securities.
Employees, officers, and directors are required to advise the Company Secretary of their intentions prior to
undertaking any transaction in the Company’s securities. If an employee, officer or director is considered to
possess unpublished price sensitive information, they will be precluded from making a security transaction until
one trading day after the time of public release of that information.
Related party matters
Directors and senior management are required to advise the Chairman of any related party contract or potential
contract. The Chairman will inform the board and the reporting party will be required to remove himself/herself
from all discussions and decisions involving the matter. Prior board approval will be required for all proposed
contracts.
Diversity
The Company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its
goals. The Company employs people from a range of ethnic and cultural backgrounds.
At the end of the current reporting period there were 4 women in the whole organisation representing 21% of total
employees. There were no women in senior executive or board positions.
34
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT
Principle 3 recommendations not complied with:
Recommendation
Explanation/ Reference
Whilst recognising the benefits of diversity, due to the
size and nature of its operations, the Company has
not developed a formal diversity policy.
No formal diversity policy has been established.
Refer recommendation 3.2 above.
Rec 3.2 Companies should establish a policy
concerning diversity and disclose the policy
or a summary of that policy. The policy
should include requirements for the board to
establish measurable objectives for achieving
greater diversity for the board to assess
annually both the objectives and progress
towards achieving them.
Rec 3.3 Companies should disclose in each annual
report
for
achieving gender diversity set by the board
in accordance with the diversity policy and
progress towards achieving them.
the measurable objectives
Principle 4: Safeguard integrity in financial reporting
Reporting and assurance
When considering the financial reports, the board receives a written statement declaration in accordance with
section 295A of the Corporations Act, signed by the Managing Director and Chief Financial Officer that the
Company’s financial reports give a true and fair view, in all material respects, of the Company’s financial position
and comply in all material respects with relevant accounting standards. This statement also confirms that the
Company’s financial reports are founded on a sound system of risk management and internal control and that the
system is operating effectively in relation to financial reporting risks.
Similarly, in a separate written statement the Managing Director and Chief Financial Officer also confirm to the
board that the Company’s risk management and internal control systems are operating effectively in relation to
material business risks for the period, and that nothing has occurred since period-end that would materially
change the position.
Financial reporting
Monthly results are circulated to the board of directors and Chief Financial Officer for review. Rolling cash flow
forecasts are prepared on a regular basis. Exploration expenditure is measured against approved programme
budgets.
Audit committee
The board has established an audit committee which consists of the following non-executive directors:
Richard Faull (Chair)
Henry Askin
William Dunmore
Details of these directors’ qualifications are set out in the directors’ report.
The audit committee operates in accordance with a charter which is available on the Company’s website. The
main responsibilities of the committee are to:
To review the terms of engagement of the external auditors, including their compensation, and to
evaluate their performance
To oversee the receipt from external auditors of a formal written statement delineating all relationships
between the auditor and the Company or its affiliates, and to engage in a dialogue with the auditor with
respect to any disclosed relationships or services that may impact the objectivity and independence of
the external auditor
To review annually the external audit scope, audit plans and relevant processes, the results of the
external audit and whether recommendations made have been implemented by Company management
To discuss with the external auditors the results of their audits, any unusual items or disclosures
contained in the audits and the matters required by Australian Auditing Standards
To review with external auditors and the financial and accounting personnel of the Company whether the
accounting policies and financial controls of the Company are appropriate, adequate and effective
35
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT
To meet with management and the external auditors to review the financial statements and to
understand significant transactions, significant business risk, or other unusual items or disclosures in the
annual report;
To review the external financial statements and annual report to consider whether they conform to
accepted accounting principles and the standards set by the Company
To review with management and the external auditors their qualitative judgments about the
appropriateness, not just acceptability, of accounting principles, estimates and financial disclosure
practices used in the preparation of the Company's financial statements and other public reports
To review major issues regarding the status of the Company's compliance with laws and regulations, as
well as major legislative and regulatory developments that may have a significant impact on the
Company
To review the processes and procedures for management's monitoring of compliance with local laws
To review and obtain reasonable assurance that the financial risk management, internal control and
information systems are operating effectively to produce accurate, appropriate and timely management
and financial information
To review compliance by management of the Company with those Company policies designated by the
Board from time to time, including the Share Trading Policy. To this end, the Committee will review
periodic reports submitted by those persons the Committee has designated as responsible for
implementation of and compliance with such policies and give guidance on how said policies are to be
administered
To review such other matters in relation to the Company's accounting, auditing, financial reporting and
compliance with law as the Committee may, in its own discretion, deem desirable in connection with the
review functions described above.
External Auditors
The Company and audit committee policy is to appoint external auditors who clearly demonstrate quality and
independence. The performance of the external auditor is reviewed regularly. PwC was appointed auditor for the
first time for the financial year ended 30 June 2011. It is PwC’s policy to rotate audit engagement partners on
listed companies at least every five years.
An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is
provided in the directors’ report and in note 5 to the financial statements. It is the policy of the external auditors to
provide an annual declaration of their independence to the audit committee.
The external auditor will attend the annual general meeting and be available to answer shareholder questions
about the conduct of the audit and the preparation and content of the audit report.
Principle 5: Make timely and balanced disclosure
Continuous disclosure
The directors are committed to keeping the market fully informed of material developments to ensure compliance
with the listing rules and the Corporations Act. At each board meeting, specific consideration is given as to
whether any matters should be disclosed under the Company’s continuous disclosure policy.
The practice of senior management is to review and authorise any Company announcement to ensure that the
information is factual, timely, clearly expressed and contains all material information so that investors can make
appropriate assessments of the information for investment decisions.
Principle 5 recommendations not complied with:
Recommendation
Explanation/ Reference
Rec 5.1 Companies should establish written policies
designed to ensure compliance with ASX
Listing Rule disclosure requirements and to
ensure accountability at a senior level for
that compliance and disclose those policies
or a summary of those policies.
The Company has established a practice of evaluating
continuous disclosure issues as a part of each formal
board meeting. The board is acutely aware of the
continuous disclosure regime and believes there are
strong informal systems in place to ensure compliance.
Disclosure of the Company’s approach to continuous
disclosure is set out above.
36
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT
Principle 6: Respect the rights of shareholders
Shareholder relations
The directors aim to ensure that the shareholders, on behalf of whom they act, are informed of all information
necessary to assess the performance of the Company.
Information on all major developments affecting the Company is available to shareholders through:
the Company’s annual report;
quarterly and half yearly reports;
the annual general meeting of the Company and other meetings called to obtain approval for board
actions as appropriate. All shareholders who are unable to attend these meetings will be encouraged to
communicate issues or ask questions by writing or emailing to the Company; and
mandatory ASX announcements on the Company website.
The Company will take advantage of technology, such as the Company website, to provide greater opportunities
for effective communication with shareholders and to encourage participation at meetings.
Information disclosed to the Australian Stock Exchange (“ASX”) is available to shareholders via the ASX website.
In addition various reports and announcements are made available on the Company’s website where there is also
an option for shareholders to register their email address for updates made by the Company from time to time.
All shareholders are entitled to receive a copy of the Company’s annual and half-yearly reports and these reports
are also made available on the Company’s website.
Principle 7: Recognise and manage risk
The board is responsible for satisfying itself annually, or more frequently as required, that management has
developed and implemented a sound system of risk management and internal control. Detailed work on this task
is delegated to the audit committee for review by the full board.
The audit committee is responsible for ensuring there are adequate policies in relation to risk management,
compliance and internal control systems. In providing this oversight they review and obtain reasonable
assurance that the financial risk management, internal control and information systems are operating effectively
to produce accurate, appropriate and timely management and financial information
Business risk management
The board acknowledges that it is responsible for the overall internal control and risk management framework.
Accordingly, the board has implemented the following control framework:
Special functional reporting:
The board has identified a number of key areas which are subject to regular reporting to the board such as safety,
environmental, insurance and legal matters.
Investment appraisal:
The Company has set clearly defined guidelines for capital expenditure. These include annual budgets, detailed
appraisal and review procedures, levels of authority and due diligence requirements. Capital expenditure and
revenue commitments above a certain size require prior board approval. Procedures exist to ensure that business
transactions are properly authorised and executed.
Principle 7 recommendations not complied with:
Recommendation
Rec 7.1 Companies should establish policies
the
oversight and management of material business
risks and disclose a summary of those policies.
for
Rec 7.2 The Board should require management to design
and implement the risk management and internal
control system to manage the Company’s material
business risks and report to it on whether those
risks are being managed effectively. The board
should disclose that management has reported to it
as
the Company’s
the effectiveness of
management of its material business risks.
to
37
Explanation/ Reference
The Company has not established a formal,
written risk management policy. Disclosure of
the Company’s approach to risk management
is set out above.
The Company has not established a formal,
written risk management and internal control
the Company’s
system.
approach to risk management and internal
control is set out above.
Disclosure of
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
CORPORATE GOVERNANCE STATEMENT
Principle 8: Remunerate fairly and responsibly
On matters of remuneration, the board has policies that were established to review the remuneration policies and
practices of the Company to ensure that it remunerates fairly and responsibly.
The remuneration policy of the board is designed to ensure that the level and composition of remuneration is
competitive, reasonable and appropriate for the results delivered and to attract and maintain talented and
motivated directors and employees. The policy is designed for:
decisions in relation to executive and non-executive remuneration policy;
decisions in relation to remuneration packages for executive directors and senior management;
decisions in relation to merit recognition arrangements and termination arrangements; and
ensuring that any equity-based executive remuneration is made in accordance with the thresholds set in
plans approved by shareholders.
Non-executive directors’ remuneration policy
The structure of non-executive directors’ remuneration is distinguished from that of executives. Remuneration for
non-executive directors is fixed. Total remuneration for all non-executive directors, as approved by shareholders,
is not to exceed $500,000 per annum. Neither the non-executive directors nor the executives of the Company
receive any retirement benefits, other than superannuation.
Executive directors’ remuneration policy
Executive directors are employed pursuant to employment agreements. A summary of the Managing Director’s
employment agreement is set out in the remuneration report.
Principle 8 recommendations not complied with:
Recommendation
Rec 8.1 The
board
should
remuneration committee.
establish
a
Explanation/ Reference
The Company currently does not have a remuneration
committee. Because of the Company’s size, the board
believes that a remuneration committee would contribute
little to its effective management. Remuneration matters
are reviewed and approved by the board as a whole.
Disclosure of the Company’s remuneration policy is set
out above.
38
CENTRAL PETROLEUM LIMITED
ABN 72 083 254 308
ANNUAL FINANCIAL REPORT – 30 JUNE 2011
Contents Page
Financial statements
Consolidated statement of comprehensive income.............................................................................40
Consolidated balance sheet................................................................................................................41
Consolidated statement of changes in equity......................................................................................42
Consolidated statement of cash flows.................................................................................................43
Notes to the consolidated financial Statements ..................................................................................44
Directors’ declaration .....................................................................................................................................76
Independent auditor’s report to the members.................................................................................................77
These financial statements are the consolidated financial statements of the consolidated entity consisting of
Central Petroleum Limited and its subsidiaries. The financial statements are presented in Australian currency.
Central Petroleum Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Suite 3, Level 4 South Shore Centre
85 South Perth Esplanade
South Perth
Western Australia 6151.
A description of the nature of the consolidated entity’s operations and its principal activities is included in the
review of operations and activities on pages 7 to 17 and in the directors’ report on page 5, both of which are not
part of these financial statements.
The financial statements were authorised for issue by the directors on 30 September 2011. The directors have
the power to amend and reissue the financial statements.
Through the use of the internet we have ensured that our corporate reporting is timely and complete. Press
releases,
links on our website:
financial
www.centralpetroleum.com.au
information are available via
reports and other
the
39
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
C O N S O L I D AT E D S T AT E M E N T O F C O M P R E H E N S I V E I N C O M E
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
Note
2011
$
Continuing Operations
Other income
Share based employment benefits
General and administrative expenses
Depreciation & amortisation
Employee benefits and associated costs
Exploration expenditure
Finance costs
Loss before income tax
Income tax expense
Loss for the year from continuing operations
Other comprehensive loss:
2
28
3
3
3
3
4
1,357,644
(129,668)
(3,357,254)
(264,894)
(2,903,215)
(31,342,975)
(3,161)
2010
$
1,191,578
(327,027)
(2,540,269)
(242,279)
(1,665,058)
(8,168,009)
(58,663)
(36,643,523)
(11,809,727)
-
(36,643,523)
-
(11,809,727)
-
-
Total comprehensive loss for the year
(36,643,523)
(11,809,727)
Total comprehensive loss attributable to
members of the parent entity
18
(36,643,523)
(11,809,727)
Basic and diluted loss per share (cents)
19
(3.80)
(3.49)
The accompanying notes form part of these financial statements.
40
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
C O N S O L I D AT E D B AL AN C E S H E E T
AS AT 3 0 J U N E 2 0 1 1
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Exploration assets
Intangible assets
Other financial assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Note
2011
$
2010
$
6
7
8
9
10
11
12
13
14
15
9,463,949
3,468,537
853,995
37,529,579
13,019,383
968,376
13,786,481
51,517,338
828,358
10,488,500
72,406
2,412,746
445,112
10,237,492
148,120
3,428,923
13,802,010
14,259,647
27,588,491
65,776,985
1,257,329
386,128
9,038,307
225,729
1,643,457
9,264,036
49,862
49,862
-
-
1,693,319
9,264,036
25,895,172
56,512,949
16
17
18
99,105,548
6,893,100
(80,103,476)
93,209,470
6,763,432
(43,459,953)
25,895,172
56,512,949
The accompanying notes form part of these financial statements.
41
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
C O N S O L I D AT E D S T AT E M E N T O F C H AN G E S I N E Q U I T Y
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
Contributed
equity
$
Reserves
$
Accumulated
Losses
$
Total
$
Total equity at 1 July 2009
68,685,229
6,436,405
(31,650,226)
43,471,408
Total loss for the year
Transactions with owners in their
capacity as owners
Share based payments
Share and option issues
Conversion of convertible bonds
Share issue costs
-
-
(11,809,727)
(11,809,727)
-
22,661,370
4,000,000
(2,137,129)
327,027
-
-
-
-
-
-
-
327,027
22,661,370
4,000,000
(2,137,129)
Balance at 30 June 2010
93,209,470
6,763,432
(43,459,953)
56,512,949
Total loss for the year
Transactions with owners in their
capacity as owners
Share based payments
Share and option issues
Share issue costs
-
-
(36,643,523)
(36,643,523)
-
6,451,281
(555,203)
129,668
-
-
-
-
-
129,668
6,451,281
(555,203)
Balance at 30 June 2011
99,105,548
6,893,100
(80,103,476)
25,895,172
The accompanying notes form part of these financial statements.
42
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
C O N S O L I D AT E D S T AT E M E N T O F C AS H F L O W S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
Note
2011
$
2010
$
Cash flows from operating activities
Interest received
GST refunds received
Other income
Interest paid
Payments to suppliers and employees (inclusive of GST)
940,776
2,674,149
358,829
(3,161)
(38,131,130)
1,010,953
-
-
-
(20,614,584)
Net cash outflow from operating activities
24
(34,160,537)
(19,603,631)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Payments for exploration assets
Redemption/(lodgement) of security deposits and bonds
(578,079)
(5,565)
(319,718)
1,016,177
(407,423)
(36,855)
-
(2,877,403)
Net cash inflow/(outflow) from investing activities
112,815
(3,321,681)
Cash flows from financing activities
Proceeds from the issue of shares, bonds and options
Payments for share issue and listing costs
6,451,281
(469,189)
26,661,370
(2,137,129)
Net cash inflow from financing activities
5,982,092
24,524,241
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at the beginning of the
financial year
(28,065,630)
1,598,929
37,529,579
35,930,650
Cash and cash equivalents at the end of the financial
year
6
9,463,949
37,529,579
The accompanying notes form part of these financial statements.
43
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all the year presented, unless otherwise stated. The
financial statements are for the consolidated entity consisting of Central Petroleum Limited (“the Company”) and
its subsidiaries (collectively “the Group” or “Consolidated Entity”).
(a)
Basis of Preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues
Group Interpretations and the Corporations Act 2001.
(i)
Going concern
The consolidated financial statements of the Group have been prepared on a going concern basis, which
contemplates continuity of business activities and realisation of assets and the settlement of liabilities in the
ordinary course of business. For the year ended 30 June 2011 the Group incurred a loss before tax of
$36,643,523 and a cash outflow from operating activities of $34,160,537.
As at 30 June 2011 the Group had cash assets amounting to $9,463,949. Minimum cash requirements for the
next year, based on the current level of staffing and overheads, are expected to be in the vicinity of $5.5 million.
Accordingly the financial statements have been prepared on a going concern basis.
The continuing viability of the Group and its ability to continue as a going concern and meet its debts and
commitments as they fall due has been enhanced by the capital raising activities undertaken since the end of the
financial year. The Company completed a share placement in September 2011 raising approximately $5 million
and also announced an underwritten Share Purchase Plan which will raise a further $5.5 million before costs.
Whilst the Group has exploration plans and commitments in excess of cash reserves, in the petroleum industry it
is common practice for entities to farm-out, transfer or sell a portion of their rights to third parties or relinquish
them altogether and, as a result, obligations may be significantly reduced or extinguished. In addition to
continued funding from existing investors, the Company’s proposed listing on the Toronto Stock Exchange
Venture Exchange is expected to provide an additional source of funds for future exploration activities.
The directors, therefore, are of the opinion that no asset is likely to be realised for an amount less than the
amount it is recorded in the financial report at 30 June 2011. Accordingly no adjustments have been made to the
financial report relating to the recoverability and classification of the asset carrying amounts and classification of
liabilities that might be necessary should the Company and the Group not continue as a going concern.
(ii) Compliance with IFRS
The consolidated financial statements of the Central Petroleum Limited Group also comply with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(iii)
New and amended standards adopted by the Group
The following new and amendments to standards are mandatory for the first time for the financial year beginning
on 1 July 2010:
AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual
Improvements Project
AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based
Payment Transactions
AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues
AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments and AASB 2009-13
Amendments to Australian Accounting Standards arising from Interpretation 19, and
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements
Project
AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual
Improvements Project
AASB 2010-5 Amendments to Australian Accounting Standards
The adoption of these standards did not have any impact on the current period or any prior period and is not likely
to affect future periods.
44
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
Summary of significant accounting policies (continued)
(iv)
Early adoption of standards
The Group has not applied any pronouncements to the annual reporting period beginning on 1 July 2010 where
such application would result in them being applied prior to them becoming mandatory.
(v)
Historical cost convention
These financial statements have been prepared under the historical cost convention.
(vi)
Critical accounting judgements and key sources of estimate uncertainty
In the application of the Group’s accounting policies, management is required to make judgements, estimates and
assumptions regarding carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and assumptions are based on historical experience and various other factors that are believed to
be reasonable under the circumstance, the results of which form the basis of making the judgements. Actual
results may differ from these estimates.
Key judgements in applying the entity’s accounting policies are required in the following areas:
Rehabilitation
The Group recognises any obligations for removal and restoration that are incurred during a particular
period as a consequence of having undertaken exploration and evaluation activity. The Group makes
provision for future restoration expenditure relating to work previously undertaken based on
management’s estimation of the work required.
Share-based payments
The Group is required to use assumptions in respect of their fair value models, and the variable
elements in these models, used in determining share based payments. The directors have used a
model to value options, which requires estimates and judgements to quantify the inputs used by the
model.
Impairment of capitalised exploration and evaluation expenditure
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number
of factors, including whether the Group decides to exploit the lease itself or, if not, whether it successfully
recovers the related exploration and evaluation expenditure through sale. Factors that impact
recoverability may include, but are not limited to, the level of resources and reserves, the cost of
production, legal changes and commodity price changes.
Acquisition expenditure is capitalised if activities in the area of interest have not yet reached a stage that
permits a reasonable assessment of the existence or otherwise of economically recoverable reserves.
To the extent that the capitalised acquisition expenditure is determined not to be recoverable in future,
profits and net assets will be reduced in the period in which this determination is made.
(vii)
Comparatives
In some cases the classification, format and presentation of disclosures has changed from that presented in the
prior year’s financial report. Where reclassifications have been made the comparative numbers have also been
reclassified.
(b)
Principles of consolidation
(i)
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Central Petroleum
Limited (‘Company’ or ‘Parent Entity’) as at 30 June and the results of all subsidiaries for the year then ended.
Central Petroleum Limited and its subsidiaries together are referred to in this financial report as the Group or the
Consolidated Entity.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of more than one-half of the voting
rights. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are de-consolidated from the date control ceases.
45
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
Summary of significant accounting policies (continued)
The acquisition method is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non controlling interests (if applicable) in the results and equity of subsidiaries are shown separately in the
statement of comprehensive income, statement of changes in equity and balance sheet respectively.
(ii)
Joint Ventures
The proportionate interests in the assets, liabilities, revenue and expenses of a joint venture activity have been
incorporated in the financial statements under the appropriate headings.
(c)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Board of Directors.
(d)
Foreign currency translation
Functional and presentation currency
(i)
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the functional currency”). The consolidated financial
statements are presented in Australian dollars, which is Central Petroleum Limited’s functional and presentation
currency.
Transactions and balances
(ii)
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash
flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign
operation.
(e)
(i)
Revenue recognition
Interest Income
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the
financial assets.
(ii)
Government grants
Grants from the government, including research and development concessions, are recognised at their fair value
where there is a reasonable assurance that the grant or refund will be received and the Group has or will comply
with any conditions attaching to the grant or refund.
(f)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the
end of the reporting period in the countries where entities in the Group generate taxable income.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred
tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
46
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
Summary of significant accounting policies (continued)
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of
the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability simultaneously.
Central Petroleum Limited and its wholly-owned Australian controlled entities have implemented the tax
consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax
assets and liabilities of these entities are set off in the consolidated financial statements.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
(i)
Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards
of ownership, are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair
value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding
rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease
payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. The property, plant and equipment acquired under finance leases is depreciated over the asset's
useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that
the Group will obtain ownership at the end of the lease term. Capitalised leased assets are depreciated over the
shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the
Consolidated Entity will obtain ownership by the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as
lessee are classified as operating leases (note 27). Payments made under operating leases (net of any incentives
received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
(h)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment or more frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value
less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(i)
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value, and bank overdrafts. Bank overdrafts (if applicable) are shown within
borrowings in current liabilities in the balance sheet.
47
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
(j)
Summary of significant accounting policies (continued)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. Trade receivables are generally due for settlement within
30 days. They are presented as current assets unless collection is not expected for more than 12 months after
the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade
receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30
days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment
allowance is the difference between the asset's carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not
discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable
for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is
written off against the allowance account. Subsequent recoveries of amounts previously written off are credited
against other expenses in profit or loss.
(k)
Inventories
Inventories comprise drilling materials and spare parts and are valued at the lower of cost and net realisable
value. Costs are assigned to individual items of inventory on a first in first out cost basis. Cost of inventory
includes the purchase price after deducting any rebates and discounts, as well as any associated freight charges.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs
necessary to make the sale.
(l)
Other financial assets
Classification
The Group’s financial assets consist of loans and receivables. These are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They are included in current assets,
except for those with maturities greater than 12 months after the reporting period which are classified as non-
current assets. Loans and receivables are included in trade and other receivables (note 7) and other financial
assets (note 12) in the balance sheet. Amounts paid as performance bonds or amounts held as security for bank
guarantees in satisfaction of performance bonds are classified as other financial assets.
Measurement
At initial recognition, the Group 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 that are directly attributable to the acquisition of the
financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in
profit or loss. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost
using the effective interest method.
(m)
Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity
of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and
equipment.
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. The carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
48
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
Summary of significant accounting policies (continued)
Land is not depreciated. Depreciation of plant and equipment is calculated on a reducing balance basis so as to
write off the net costs of each asset over the expected useful life. The assets' residual values and useful lives are
reviewed, and adjusted if appropriate, at each balance sheet date.
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 are
included in the profit or loss.
The expected useful life for each class of depreciable assets is:
Class of Fixed Asset
Expected useful life
Buildings
40 years
Leasehold Improvements
2 – 6 years
Plant and Equipment
2 – 10 years
(n)
Exploration expenditure
Exploration and evaluation costs are expensed as incurred. Acquisition costs of rights to explore are accumulated
in respect of each separate area of interest. Acquisition costs are carried forward where right of tenure of the area
of interest is current and they are expected to be recouped through sale or successful development and
exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not
yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in
respect of that area are written off in the financial period the decision is made. Each area of interest is also
reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be
recoverable in the future. Amortisation is not charged on costs carried forward in respect of areas of interest in
the development phase until production commences.
(o)
(i)
Intangible assets
Software
Costs incurred in acquiring software and licenses that will contribute to future period financial benefits through
revenue generation and/or cost reduction are capitalised to software. Amortisation is calculated on a straight-line
basis over periods generally ranging from 3 to 5 years.
(ii)
Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating
to the design and testing of new or improved products) are recognised as intangible assets when it is probable
that the project will, after considering its commercial and technical feasibility, be completed and generate future
economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly
attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset
is ready for use on a straight-line basis over its useful life, which varies from 3 to 5 years.
(p)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and
other payables are presented as current liabilities unless payment is not due within 12 months from the reporting
date. They are recognised initially at their fair value and subsequently measured at amortised cost using the
effective interest method.
49
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
(q)
Summary of significant accounting policies (continued)
Provisions
Provisions for legal claims, restoration, and make good obligations are recognised when the Group has a present
legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be
required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for
future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of
an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the end of the reporting period. The discount rate used to determine the present
value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
(r)
Employee benefits
(i)
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected
to be settled within 12 months after the end of the period in which the employees render the related service are
recognised in respect of employees' services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled. The liability for annual leave and long service leave
is recognised in the provision for employee benefits. All other short-term employee benefit obligations are
presented as payables.
(ii)
Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the
end of the period in which the employees render the related service is recognised in the provision for employee
benefits and measured as the present value of expected future payments to be made in respect of services
provided by employees up to the end of the reporting period. Consideration is given to expected future wage and
salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the end of the reporting period on national government bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii)
Share-based payments
Share-based compensation benefits are provided to employees (including directors) by Central Petroleum
Limited.
The fair value of options granted is recognised as an employee benefits expense with a corresponding increase in
equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which
includes any market performance conditions and the impact of any non-vesting conditions but excludes the
impact of any service and non-market performance vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that are expected to
vest. The total expense is recognised over the vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of
options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the
revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
(iv)
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal or to providing termination benefits as a result of an offer
made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting
period are discounted to present value.
50
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
(s)
Summary of significant accounting policies (continued)
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
(t)
Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting
period.
(u)
Earnings per share
(i)
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company, excluding any
costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares
outstanding during the financial year.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of additional ordinary shares that would have been outstanding
assuming the exercise of all dilutive potential ordinary shares.
(v)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset
or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
(w)
Parent entity financial information
The financial information for the parent entity, Central Petroleum Limited, disclosed in note 21, has been prepared
on the same basis as the consolidated financial statements except as set out below.
Central Petroleum Limited and its wholly-owned Australian controlled entities have implemented the tax
consolidation legislation. The head entity, Central Petroleum Limited, and the controlled entities in the tax
consolidated Group account for their own current and deferred tax amounts where recognition of such is
permitted under accounting standards. These tax amounts are measured as if each entity in the tax consolidated
Group continues to be a stand alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Central Petroleum Limited also recognises the current tax
liabilities or assets and the deferred tax assets arising from unused tax losses from controlled entities, where
permitted to recognise such assets under accounting standards.
(x)
New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2011 reporting periods. The Group's assessment is that these standards are not expected to have a material
impact on the consolidated entity in the current or future reporting periods and on foreseeable future transactions,
other than as set out below.
51
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
1.
Summary of significant accounting policies (continued)
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements (effective 1 July 2013).
In July 2011 the AASB decided to remove the key management personnel (KMP) disclosure requirements from
AASB 124 Related Party Disclosures to achieve consistency with the international equivalent standard and to
remove a duplication of the requirements of the Corporations Act 2001. While this will reduce the disclosures that
are currently required in the notes to the financial statements, it will not affect any of the amounts recognised in
the financial statements. The amendments will apply from 1 July 2013 and cannot be adopted early. The
Corporations Act 2001 requirements in relation to remuneration reports will remain unchanged for now, but these
requirements are currently subject to review and may also be revised in the near future.
Certain international standards and interpretations have also been published that have not yet been endorsed by
the AASB as set out below.
IFRS 10 Consolidated Financial Statements
IFRS 10 introduces a single definition of control that applies to all entities. It focuses on the need to have both
power and rights or exposure to variable returns before control is present. Power is the current ability to direct
the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There
is also new guidance on participating and protective rights and on agent/principal relationships. The Group does
not expect the new standard to have an impact on its composition as it currently stands.
IFRS 11 Joint Arrangements
IFRS 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on
the legal structure of joint arrangements, but rather how rights and obligations are shared by the parties to the
joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as
either a joint operation or joint venture. Joint ventures are accounted for using the equity method, and the choice
to proportionately consolidate will no longer be permitted. Parties to a joint operation will account for their share
of revenues, expenses, assets and liabilities in much the same way as under the previous standard. IFRS 11
also provides guidance for parties that participate in joint arrangements but do not share joint control. The Group
is yet to evaluate its joint arrangements in light of the new guidance.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 sets out the required disclosures for entities reporting under the two new standards mentioned above,
IFRS 10 and IFRS 11, and replaces the disclosure requirements currently found in IAS 28. Application of this
standard by the Group will not affect any of the amounts recognised in the financial statements, but may impact
the type of information disclosed in relation to the Group’s investments.
52
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
2.
Other income
Interest
Research and development refunds
Foreign exchange gains
Other
Total other income
3.
Expenses
Loss before income tax includes the following specific
expenses:
Depreciation
Buildings
Plant and equipment
Leasehold improvements
Total depreciation
Amortisation
Software
Write off of property, plant and equipment
Write off of intangible assets
Rental expense relating to operating leases –
Minimum lease payments
2011
$
2010
$
962,376
345,228
36,439
13,601
1,010,953
-
-
180,625
1,357,644
1,191,578
4,786
186,185
1,553
192,524
-
173,656
2,750
176,406
72,370
65,873
5,058
6,159
-
-
433,265
360,555
Interest paid to suppliers and joint venture partners
3,161
58,663
Net foreign exchange losses included in general and
administrative expenses for the year
-
18,205
53
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
4.
Income tax
The Consolidated Entity is in a tax loss position and is not yet in a situation whereby it can
satisfy AASB112 for the recognition of its tax losses. Accordingly, no current or deferred
income tax benefits have yet been brought to account.
2011
$
2010
$
(a) Income tax expense
Current tax
Deferred tax
(b) Numerical reconciliation of income tax expense and
prima facie tax benefit
Loss before income tax expense
Prima facie tax benefit at 30% (2010: 30%)
Tax effect of amounts which are not deductible in calculating
taxable income:
Depreciation on buildings
Non-deductible expenses
Share based payments
Movement in Items of deferred tax not recognised
Provisions and accruals
Blackhole expenditure
Accrued income
Capitalised exploration expenditure
Adjustment to current tax of prior periods relating to additional
exploration deductions available upon entry into tax
consolidation
Adjustment to deferred tax of prior periods relating to
provisions and accruals
Deferred tax assets not recognised
Income tax expense
-
-
-
-
-
-
(36,643,523)
(11,809,727)
10,993,057
3,542,918
(1,436)
(4,213)
(38,900)
-
(2,760)
(98,108)
737,276
(714,675)
(41,066)
(167,270)
6,480
75,302
-
(365,126)
11,726,500
2,194,979
2,936,635
(67,719)
-
-
(14,595,416)
(2,194,979)
-
-
54
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
4.
Income tax (continued)
(c) Amounts recognised directly in equity
Aggregate deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income
but directly debited or credited to equity:
Net deferred tax – debited (credited) directly to equity
Deferred tax assets not recognised
Net amounts recognised directly in equity
2011
$
2010
$
181,281
(238,860)
(181,281)
238,860
-
-
(d) Tax losses
Unused tax losses for which no deferred tax asset has been
recognised
85,314,089
35,277,501
Potential tax benefit @ 30%
25,594,227
10,583,250
(e) Deferred tax assets and liabilities
Deferred tax assets
Provisions
Capital raising costs
Undeducted losses
Total deferred tax assets before set-offs
153,482
958,477
1,025,998
1,166,213
25,594,227
10,583,250
26,773,707
12,707,940
Set-off of deferred tax liabilities pursuant to set-off provisions
(3,153,030)
(3,071,248)
Net deferred tax assets not recognised
23,620,677
9,636,692
Deferred tax liabilities
Accrued income
Capitalised exploration expenditure
Total deferred tax liabilities before set-offs
6,480
-
3,146,550
3,071,248
3,153,030
3,071,248
Set-off of deferred tax liabilities pursuant to set-off provisions
(3,153,030)
(3,071,248)
Net deferred tax liabilities
-
-
55
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
5.
Remuneration of auditors
Following a motion carried at the Company’s Annual General Meeting on
25 November 2010, the Company changed auditors from Stantons
International to PwC. The following fees were paid or payable for services
provided by the auditor of the Company, its related practices and non-
related audit firms:
(a) PwC Australia
(i) Audit and other assurance services
Audit and review of financial statements
Other assurance services
Review of governance processes, controls and systems
(ii) Taxation services
Tax compliance
International tax consulting and advice
(iii) Other services
Benchmarking services
Corporate and strategic advice
Total remuneration of PwC
(b) Stantons International
(i) Audit and other assurance services
Audit and review of financial statements – current year
Audit and review of financial statements – prior year
(over)/under provision
Other assurance services
Joint Venture audits – prior year under provision
2011
$
2010
$
80,000
45,500
125,500
300
47,319
47,619
5,950
25,500
31,450
204,569
-
-
-
-
-
-
-
-
-
-
-
100,546
(20,000)
40,095
2,000
(18,000)
53,500
194,141
Total remuneration of Stantons International
(18,000)
194,141
Total auditors’ remuneration
186,569
194,141
56
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
6.
Cash and cash equivalents
Cash at bank and in hand
Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 29. The
maximum exposure to credit risk at the end of the reporting period is the
carrying amount of cash and cash equivalents.
7.
Trade and other receivables
Current
Other receivables
GST receivables
Prepayments
Receivables due from joint ventures
2011
$
2010
$
9,463,949
37,529,579
37,446
13,408
3,250,856
2,409,870
180,235
76,426
-
10,519,679
3,468,537
13,019,383
The Group’s exposure to credit and currency risks and impairment losses
related to trade and other receivables is disclosed in Note 29.
8.
Inventories
Drilling materials and supplies at cost
853,995
968,376
9.
Property, plant and equipment
Freehold
Land
$
Freehold
Buildings
$
Plant and
equipment
$
Leasehold
Improvements
$
Total
$
At 1 July 2009
Cost
Accumulated depreciation
Net book amount
-
-
-
485,029
93,194
578,223
(151,741)
(86,540)
(238,281)
333,288
6,654
339,942
-
-
-
57
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
9.
Property, plant and equipment (continued)
Freehold
Land
$
Freehold
Buildings
$
Plant and
equipment
$
Leasehold
Improvements
$
Total
$
Year ended 30 June 2010
Opening net book amount
Additions and transfers
Depreciation charge
Closing net book amount
At 30 June 2010
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2011
Opening net book amount
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,288
280,938
6,654
339,942
638
281,576
(173,656)
(2,750)
(176,406)
440,570
4,542
445,112
723,291
12,671
735,962
(282,721)
(8,129)
(290,850)
440,570
4,542
445,112
-
440,570
4,542
445,112
-
-
578,079
(2,309)
Additions
230,000
191,452
156,627
Disposals, write offs and adjustments
Depreciation charge
-
-
-
(2,309)
(4,786)
(186,185)
(1,553)
(192,524)
Closing net book amount
230,000
186,666
408,703
2,989
828,358
At 30 June 2011
Cost
230,000
191,452
877,332
12,670
1,311,454
Accumulated depreciation
-
(4,786)
(468,629)
(9,681)
(483,096)
Net book amount
230,000
186,666
408,703
2,989
828,358
58
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
10. Exploration assets
Acquisition costs of rights to explore
10,488,500
10,237,492
2011
$
2010
$
Movements for the year:
Balance at the beginning of the year
Expenditure incurred during the year
Expenditure written off during the year
Balance at the end of the year
11.
Intangible assets
Software
At the beginning of the year
Cost
Accumulated amortisation
Net book value
Movements for the year:
Opening net book amount
Additions
Disposals, write offs and other adjustments
Amortisation
Closing net book amount
At the end of the year
Cost
Accumulated amortisation
Net book value
10,237,492
10,168,783
319,718
(68,710)
68,709
-
10,488,500
10,237,492
269,174
(121,054)
148,120
148,120
5,565
(8,909)
(72,370)
72,406
63,158
(13,520)
49,638
49,638
164,355
-
(65,873)
148,120
264,456
269,174
(192,050)
(121,054)
72,406
148,120
12. Other financial assets
Security bonds on exploration permits
2,412,746
3,428,923
Security bonds are provided to State or Territory governments in respect of
certain performance obligations arising from awarded petroleum and
mineral tenements. The bonds are typically provided as cash or as bank
guarantees in favour of the State or Territory government secured by term
deposits with the financial institution providing the bank guarantee.
59
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
2011
$
2010
$
806,588
450,741
8,399,750
638,557
1,257,329
9,038,307
326,128
60,000
386,128
225,729
-
225,729
-
150,000
60,000
60,000
(150,000)
-
13.
Trade and other payables
Trade payables
Other payables
Trade payables are usually non-interest bearing provided payment is
made within the terms of credit. The consolidated entity’s exposure to
liquidity and currency risks related to trade and other payables is disclosed
in Note 29.
14. Current liabilities - Provisions
Employee entitlements
Restoration and rehabilitation
(a) Movements in restoration and rehabilitation provision
Carrying amount at start of year
Charged/(credited) to profit or loss
Carrying amount at end of year
(b) Amounts not expected to be settled within the next 12 months
The current provision for employee entitlements includes accrued annual
leave and long service leave. For long service leave it covers all
unconditional entitlements where employees have completed the required
period of service. The amount is presented as current, since the
consolidated entity does not have an unconditional right to defer
settlement for these obligations. However, based on past experience the
consolidated entity does not expect all employees to take the full amount
of accrued leave or require payment within the next 12 months. The
following amounts reflect leave that is not expected to be taken within the
next 12 months.
Leave obligations expected to be settled after 12 months
102,131
15. Non-current liabilities - Provisions
Employee entitlements – long service leave
49,862
-
-
60
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
16. Contributed equity
(a) Share Capital
982,298,842 (2010: 907,289,333) fully paid ordinary shares
99,105,548
93,209,470
2011
$
2010
$
(b) Movements in ordinary share capital
Balance at start of year
Exercise of listed options at 16 cents
per share
Conversion of bonds
Rights issue May 2010 at 7.5 cents
per share
Placement of shares to sophisticated
investors on 30 September 2010 at
8.6 cents per share
Capital raising costs
Number of shares
2011
2010
$
2011
$
2010
907,289,333
564,244,921
93,209,470
68,685,229
9,509
-
-
154,956
41,068,172
301,821,284
1,281
-
-
24,793
4,000,000
22,636,577
75,000,000
-
-
-
6,450,000
-
(555,203)
(2,137,129)
982,298,842
907,289,333
99,105,548
93,209,470
(c) Options granted during the year
The following options over unissued ordinary shares were granted by the Company during the year:
Class
Date of
Issue
9 Nov 2010
Unlisted Employee Options
12 May 2011 Unlisted Employee Options
Expiry Date
Exercise Price
31 Oct 2015
12 May 2016
$0.11
$0.12
(d) Options exercised during the year
The following options over unissued ordinary shares were exercised during the year:
Class
Expiry Date
Exercise Price
Listed options (CTPO)
31 Mar 2014
$0.16
(e) Options lapsed during the year
The following options over unissued ordinary lapsed during the year:
Class
Expiry Date
Exercise Price
Unlisted Employee Options
Unlisted Vendor Options
Unlisted Employee Options
30 Nov 2010
20 Feb 2011
31 Mar 2011
$0.30
$0.20
$0.30
Number of
Options
800,000
300,000
Number of
Options
9,509
Number of
Options
1,800,000
7,000,000
1,450,000
61
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
16. Contributed equity (continued)
(f) Unissued shares under option
At year end, options over unissued ordinary shares of the Company are as follows:
Class
Expiry Date
Exercise Price
Listed options (CTPO)
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Employee Options
Unlisted Director Options
Unlisted Director Options
31 Mar 2014
31 Jul 2011
31 Aug 2011
17 Nov 2011
19 Jan 2012
16 Feb 2012
23 Feb 2012
31 Mar 2014
31 May 2015
31 Oct 2015
12 May 2016
3 Jan 2012
31 Mar 2014
$0.16
$0.33
$0.30
$0.25
$0.25
$0.25
$0.25
$0.20
$0.122
$0.11
$0.12
various
various
Number of
Options
274,310,525
200,000
500,000
666,666
1,000,000
250,000
200,000
8,366,666
6,340,000
800,000
300,000
11,000,000
7,500,000
None of the options entitle holders to participate in any share issue of the Company or any other entity.
(g) Capital risk management
The Group’s objective when managing capital is to safeguard the ability to continue as a going concern to
ultimately add value for shareholders through the exploitation of hydrocarbon resources. This is monitored
through the use of cash flow forecasts.
In order to maintain the capital structure, the Group may issue new shares or other equity instruments. Given
the Group is still in the exploration phase, equity is the sole source of funding. Debt is not a viable option and
therefore gearing ratios are not currently applicable.
2011
$
2010
$
17. Reserves
Share options reserve
6,893,100
6,763,432
Movements:
Balance at start of year
Share based payments expense
Balance at end of year
6,763,432
6,436,405
129,668
327,027
6,893,100
6,763,432
The reserve is used to record the value of share based payments provided to employees and
directors as part of their remuneration. Refer to note 28 for further details of share based
payments.
62
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
18. Accumulated losses
Movements in accumulated losses were as follows:
Balance at the start of the year
Net loss for the year
Balance at the end of the year
2011
$
2010
$
(43,459,953)
(31,650,226)
(36,643,523)
(11,809,727)
(80,103,476)
(43,459,953)
19.
Loss per share
(a) Basic loss per share (cents)
(3.80)
(3.49)
(b) Diluted loss per share (cents)
(3.80)
(3.49)
(c) Loss used in loss per share calculation
Loss attributable to ordinary equity holders of the Company
(36,643,523)
(11,809,727)
(d) Weighted average number of ordinary shares
Weighted average number of shares used as the denominator
in calculating basic and diluted earnings per share
963,598,282
338,476,501
Options on issue are considered to be potential ordinary shares and have not been included in
the calculation of basic earnings per share. Additionally, any exercise of the options would be
antidilutive as their exercise to ordinary shares would decrease the loss per share. In
accordance with AASB 133 they are also excluded from the diluted loss per share calculation.
Refer to Note 16 for details of options on issue.
20.
Segment reporting
Management has considered the operating segments based on the reports reviewed by the
chief operating decision maker, being the board of directors, that are used to make strategic
decisions. As the consolidated entity is in the exploration phase of operations, the board
considers the business as a whole, and makes decisions on the allocation of resources based
on its strategic objectives.
The operations of the consolidated entity involve a single industry segment being that of
exploration for hyrdrocarbons, helium, and coal/coal seam gas. The consolidated entity’s
operations are wholly in one geographical location being Australia.
63
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
21.
Parent entity information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
PARENT ENTITY
2011
$
2010
$
Balance Sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Issued capital
Reserves
Accumulated losses
Total equity
Loss for the year
5,582,000
24,515,465
12,994,160
13,788,010
18,576,160
38,303,475
(1,238,240)
(7,454,137)
(49,862)
-
(1,288,102)
(7,454,137)
17,288,058
30,849,338
99,105,548
93,209,470
6,893,100
6,763,432
(88,710,590)
(69,123,564)
17,288,058
30,849,338
(19,587,026)
(38,797,122)
Total comprehensive loss
(19,587,026)
(38,797,122)
(b) Guarantees entered into by the parent entity
No guarantees have been provided by the parent entity (2010: Nil).
(c) Contingent liabilities of the parent entity
A contingent asset exists in relation to proceedings brought against a supplier. Details are set
out in Note 26 (b). There are no contingent liabilities (2010: Nil).
(d) Commitments of the parent entity
Operating lease commitments of the parent entity are set out in note 27 (b).
64
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
22. Related party transactions
(a) Parent entity
The parent entity is Central Petroleum Limited.
(b) Subsidiaries
The consolidated financial statements include the financial statements of Central Petroleum Limited and the
subsidiaries listed in the following table.
Name of entity
Place of
Incorporation
Merlin Energy Pty Ltd
Merlin West Pty Ltd
Western Australia
Western Australia
Helium Australia Pty Ltd
Victoria
Ordiv Petroleum Pty Ltd
Western Australia
Frontier Oil & Gas Pty Ltd
Western Australia
Central Green Pty Ltd
Western Australia
Central Geothermal Pty Ltd
Western Australia
Merlin Coal Pty Ltd
Western Australia
Central Petroleum Services Pty Ltd
Western Australia
Class of
Shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 23.
(d) Transactions with other related parties
Superannuation contributions
Equity holding
2011
2010
%
100
100
100
100
100
100
100
100
100
%
100
100
100
100
100
100
100
100
100
2011
$
2010
$
Contributions to superannuation funds on behalf of employees
242,169
197,803
23. Key management personnel
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Non-monetary benefits
Termination benefits
Share based payments
1,617,610
1,433,903
133,051
24,178
64,856
61,856
119,029
16,750
-
208,528
1,901,551
1,778,210
Detailed remuneration disclosures are provided in the remuneration report on pages 22 to 30.
65
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
23. Key management personnel (continued)
(b) Equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with the
terms and conditions of the options, can be found in the remuneration report on pages 25 and 26.
(ii) Option holdings
The number of options over ordinary shares in the Company held during the financial year by each director of
Central Petroleum Limited and other key management personnel of the consolidated entity, including their
personally related parties, are set out below.
Balance at
start of year
Granted as
compensation Exercised Other changes
Balance at
end of
year
Vested and
exercisable
Unvested
Directors
Henry Askin
2011
2010
John Heugh
2011
2010
Richard Faull
2011
2010
William Dunmore
2011
2010
5,340,000
5,900,000
7,503,978
12,050,000
3,580,550
5,065,550
3,400,000
4,000,000
Other key management personnel
Tim Green (to
31/01/11)
2011
2010
Stewart Bayford
2011
2010
Julian Tambyrajah
(to 10/07/09)
2010
Bruce Elsholz
(from 31/08/09)
2,404,500
2,400,000
2,400,000
2,400,000
4,000,000
2011
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2010
Daniel White
(from 30/11/09)
2011
2010
N/A
2,000,000
3,096,000
-
N/A
3,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66
-
-
5,340,000
5,340,000
5,340,000
5,340,000
300,000
7,803,978
7,803,978
7,503,978
7,503,978
3,580,550
3,580,550
3,580,550
3,580,550
3,400,000
3,400,000
3,400,000
3,400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
N/A
N/A
N/A
4,500
2,404,5000
1,604,500
800,000
-
-
2,400,000
2,400,000
-
2,400,000
1,600,000
800,000
(2,666,668)
N/A
N/A
N/A
-
-
-
2,000,000
1,333,332
666,668
2,000,000
666,666
1,333,334
3,096,000
2,096,000
1,000,000
96,000
3,096,000
1,096,000
2,000,000
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
23. Key management personnel (continued)
(iii) Share holdings
The number of shares in the Company held during the financial year by each director of Central Petroleum
Limited and other key management personnel of the consolidated entity, including their personally related parties,
are set out below. There were no shares granted as compensation during the year.
Balance at start
of year
Held at
date of
appointment
Renounceable
rights issue
purchase
On exercise
of options
Net change
other
Held at
date of
departure
Balance at
end of
year
Directors
Henry Askin
2011
2010
John Heugh
2011
2010
Richard Faull
2011
2010
William Dunmore
2011
2010
3,600,000
2,400,000
5,703,693
5,683,803
2,386,100
2,311,100
776,666
776,666
Other key management personnel
Tim Green (to
31/01/11)
2011
2010
Stewart Bayford
2011
2010
Julian Tambyrajah
(to 10/07/09)
2010
Bruce Elsholz (from
31/08/09)
2011
2010
Daniel White (from
30/11/09)
2011
2010
90,000
-
-
-
-
-
N/A
1,440,000
N/A
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,200,000
-
19,890
-
75,000
-
-
-
22,500
-
-
N/A
-
-
-
480,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,736
-
-
-
-
-
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3,600,000
3,600,000
5,741,429
5,703,693
2,386,100
2,386,100
776,666
776,666
-
90,000
N/A
67,500
N/A
90,000
-
-
-
-
-
-
960,000
N/A
N/A
-
-
-
N/A
N/A
N/A
-
-
N/A
N/A
1,440,000
1,440,000
(c) Other transactions with key management personnel
During the year ended 30 June 2011 the consolidated entity paid $59,423 (2010: $13,603) to Dunmore
Consulting, a business in which Mr Dunmore is the principal, for the provision of corporate advisory services. This
transaction was on normal commercial terms and conditions no more favourable than those available to other
parties.
67
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N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
24. Reconciliation of loss after income tax to net cash outflow from operating activities
2011
$
2010
$
Loss after income tax
Adjustments for:
Depreciation and amortisation
Share-based payments
Write off of property, plant and equipment
Write off of intangible assets
Foreign exchange (gain)/loss
(36,643,523)
(11,809,727)
264,894
129,668
5,058
6,159
-
242,279
327,027
-
-
18,206
Changes in assets and liabilities relating to operating activities:
Decrease/ (increase) in receivables and prepayments
9,464,834
(10,876,428)
Decrease/(increase) in inventories
Decrease/(increase) in exploration assets
(Decrease)/Increase in creditors
Increase/(decrease) in provisions
Net cash outflow from operating activities
114,381
68,709
(403,208)
(68,709)
(7,780,978)
3,043,144
210,261
(76,215)
(34,160,537)
(19,603,631)
25. Non-cash investing and financing activities
There were no non-cash investing and financing activities (2010: Nil).
26. Contingencies
(a) Contingent liabilities
The consolidated entity had contingent liabilities at 30 June 2011 in respect of certain joint venture payments.
As partial consideration under the terms of the purchase agreement for EPs 105, 106 and 107, there is a
requirement to pay the vendor the sum of $1,000,000 (2010: $1,000,000) within twelve months following the
commencement of any future commercial production from the permits.
(b) Contingent assets
On 31 March 2011, the Company announced it had initiated legal proceedings against Century Energy Services
Pty Ltd to protect its interests.
The proceedings follow an unplanned incident which occurred during the drilling of Surprise-1 in EP 115 whereby
the monkey board and 129 stands of racked drill pipe twisted around the rig mast by thirty degrees whilst the
wireline sheaves were being repositioned. This incident resulted in the Company having to necessarily terminate
the drilling contract with Century Energy Services Pty Ltd for performance related issues.
The directors believe a favourable outcome is probable. However, the contingent asset has not been recognised
as a receivable at 30 June 2011 as receipt of the amount is dependent on the outcome of the proceedings.
There were no contingent assets at 30 June 2010.
68
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N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
27. Commitments
(a) Capital commitments
The consolidated entity has exploration expenditure commitments on the following permits:
Petroleum EP’s 82,93,97,105,106,107,112,115,118, and 125.
Mineral EL’s - 27094, 27100, 27101, 27102, 27103, 27104, 27105, 27107, 27108, 27109, 27110, 27114, 28095,
28096, 28097.
Geothermal permits GEP 27833, 27834, 27835.
Within one year
Later than one year but not later than five years
Later than five years
2011
$
2010
$
11,634,000
9,160,263
57,041,000
44,540,000
-
1,300,000
68,675,000
55,000,263
In the petroleum industry it is common practice for entities to farm-out, transfer or sell a portion of their rights to
third parties or relinquish them altogether and, as a result, obligations may be reduced or extinguished.
(b) Operating lease commitments
The consolidated entity, through its parent entity Central Petroleum
Limited, has non-cancellable operating leases for office premises in Perth
and Alice Springs. The leases have varying terms, escalation clauses and
renewal rights.
Commitments for minimum lease payments in relation to non-
cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
2011
$
384,494
185,364
569,858
2010
$
420,112
522,447
942,559
69
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N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
28.
Share based payments
(a) Employee options
An Incentive Option Scheme operates to provide incentives for employees. Participation in the plan is at the
board’s discretion; however the plan is open to all employees and directors of the Company.
At the discretion of the Company, performance criteria may or may not be established in respect of options that
vest under the Incentive Option Scheme. Options are granted for no consideration. Options that have been
granted to date to employees, excluding directors, have contained service conditions in respect of their vesting.
Options have vested progressively from grant date to, in some cases, an employee’s third anniversary. As of
the date of this report no options issued under the Incentive Option Scheme have contained any performance
criteria in respect of their vesting.
There are no rules imposing a restriction on removing the ‘at risk’ aspect of options granted to employees or
directors. One ordinary share is issued upon exercise of one option.
Set out below are summaries of options that have been granted to directors and employees.
Expiry Date
Exercise
price
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Expired
during the
year1
Number
Balance at
end of the
year
Number
Vested and
exercisable at
the end of the
year
2011
30 November 2010
20 February 2011
31 March 2011
31 July 2011
31 August 2011
17 November 2011
3 January 2012
3 January 2012
3 January 2012
3 January 2012
3 January 2012
19 January 2012
16 February 2012
23 February 2012
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 May 2015
31 October 2015
12 May 2016
Totals
$0.30
$0.20
$0.30
$0.33
$0.30
$0.25
$0.28
$0.33
$0.37
$0.43
$0.50
$0.25
$0.25
$0.25
$0.22
$0.25
$0.28
$0.32
$0.37
$0.20
$0.122
$0.11
$0.12
1,800,000
7,000,000
1,450,000
200,000
500,000
666,666
2,200,000
2,200,000
2,200,000
2,200,000
2,200,000
1,000,000
250,000
200,000
1,500,000
1,500,000
1,500,000
1,500,000
1,500,000
8,366,666
6,340,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
800,000
300,000
46,273,332
1,100,000
Weighted average exercise price
$0.258
$0.113
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,800,000)
(7,000,000)
(1,450,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
500,000
666,666
2,200,000
2,200,000
2,200,000
2,200,000
2,200,000
1,000,000
250,000
200,000
1,500,000
1,500,000
1,500,000
1,500,000
1,500,000
8,366,666
6,340,000
800,000
300,000
-
-
-
200,000
500,000
666,666
2,200,000
2,200,000
2,200,000
2,200,000
2,200,000
1,000,000
250,000
150,000
1,500,000
1,500,000
1,500,000
1,500,000
1,500,000
8,316,666
4,369,999
266,667
200,000
(10,250,000)
37,123,332
34,419,998
$0.232
$0.261
$0.271
Weighted average remaining contractual life (years) at the end of the year
2.33
1 No options were forfeited during the year
70
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N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
Balance at
end of the
year
Number
Vested and
exercisable at
the end of the
year
28.
Share based payments (continued)
Expiry Date
Exercise
price
Balance at
start of the
year
Number
Granted
during
the year
Number
Exercised
during the
year
Number
2010
31 January 2010
31 May 2010
30 November 2010
20 February 2011
31 March 2011
31 July 2011
31 August 2011
17 November 2011
3 January 2012
3 January 2012
3 January 2012
3 January 2012
3 January 2012
19 January 2012
16 February 2012
23 February 2012
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
$0.25
$0.20
$0.30
$0.20
$0.30
$0.33
$0.30
$0.25
$0.28
$0.33
$0.37
$0.43
$0.50
$0.25
$0.25
$0.25
$0.22
$0.25
$0.28
$0.32
$0.37
$0.20
300,000
21,250,000
1,800,000
7,000,000
1,450,000
200,000
500,000
2,000,000
2,200,000
2,200,000
2,200,000
2,200,000
2,200,000
1,000,000
250,000
200,000
1,500,000
1,500,000
1,500,000
1,500,000
1,500,000
9,700,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31 May 2015
$0.122
-
6,340,000
Totals
64,150,000
6,340,000
Weighted average exercise price
$0.251
$0.122
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Expired or
forfeited
during the
year
Number
(300,000)
(21,250,000)
-
-
-
-
-
(1,333,334)1
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,333,334)1
-
-
1,800,000
7,000,000
1,450,000
200,000
500,000
666,666
2,200,000
2,200,000
2,200,000
2,200,000
2,200,000
1,000,000
250,000
200,000
1,500,000
1,500,000
1,500,000
1,500,000
1,500,000
8,366,666
-
-
1,800,000
7,000,000
1,450,000
150,000
500,000
666,666
2,200,000
2,200,000
2,200,000
2,200,000
2,200,000
666,666
200,000
150,000
1,500,000
1,500,000
1,500,000
1,500,000
1,500,000
6,333,332
2,230,000
-
6,340,000
(24,216,668)
46,273,332
39,646,664
$0.203
$0.258
$0.275
Weighted average remaining contractual life (years) at the end of the year
2.55
1 Options forfeited during the year
(b) Employee options granted during the year
Options granted during the year ended 30 June 2011 were valued using a binomial option pricing model. The Black
Scholes options pricing model was used to value options for the year ended 30 June 2010. The model inputs for option
issued during the year included:
Grant date
Expiry date
Number
of options
2011
Average
fair
value
per
option
Exercise
price
Price of
shares on
grant date
Estimated
volatility*
Risk free
interest
rate
Dividend
yield
9 Nov 2010
31 Oct 2015
800,000
$0.031
12 May 2011
12 May 2016
300,000
$0.029
$0.110
$0.120
$0.07
$0.07
85.56%
85.40%
5.10%
5.05%
2010
1 Jun 2010
31 May 2015
6,340,000
$0.026
$0.122
$0.07
49.30%
4.50%
* The estimated price volatility is based on the historical price volatility for the 12 months prior to the date of
granting of the options, adjusted for any expected changes to future volatility due to publicly available information.
0.0%
0.0%
0.0%
71
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F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
28.
Share based payments (continued)
(c) Expenses arising from share-based payment transactions
Total expenses arising from share based transactions recognised during the year were:
Options issued to directors and employees
29.
Financial risk management
2011
$
2010
$
129,668
327,027
The consolidated entity’s principal financial instruments are cash and short-term deposits. The consolidated entity also
has other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its
operations. The consolidated entity’s risk management objective with regard to financial instruments and other financial
assets include gaining interest income and the policy is to do so with a minimum of risk.
(a) Credit Risk
The credit risk on financial assets of the consolidated entity which have been recognised in the balance sheet is
generally the carrying amount, net of any provision for doubtful debts. The consolidated entity trades only with
recognised banks and it is considered that the credit risk is minimal. There are no significant concentrations of
credit risk within the consolidated entity.
The aging of the consolidated entity’s receivables at reporting date was:
Trade and other receivables
Gross
Past due: 0 – 30 days
Past due: 31 – 150 days
Past due: 151 – 365 days
Past due: More than 1 year
2011
$
117,131
538,458
1,575,927
1,056,786
2010
$
9,958,738
1,548,237
231,186
3,288,302
11,738,161
Impairment
2011
$
2010
$
-
-
-
-
-
-
-
-
-
-
Based on historic default rates, the consolidated entity believes that no impairment allowance is necessary in
respect of receivables past due by up to 150 days.
The receivables at 30 June 2011 relate predominantly to GST refunds due from the Australian Taxation Office
(ATO). The Company is the operator of a number of exploration joint ventures and lodges returns to claim back
GST on creditable acquisitions. The ATO had been undertaking a review of the claims. The review was
substantially completed in late June 2011 and the consolidated entity expects to realise all amounts shown as
receivables at year end.
(b) Liquidity Risk
The following are the contractual maturities of financial assets and liabilities:
2011
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial Liabilities
Trade and other payables
≤ 6 months
$
6 - 12
months
$
1 - 5 years
$
≥ 5 years
$
Total
$
9,463,949
3,288,302
-
12,752,251
(1,257,329)
(1,257,329)
-
-
-
-
-
-
-
-
2,412,746
2,412,746
-
-
-
-
-
-
-
-
9,463,949
3,288,302
2,412,746
15,164,997
(1,257,329)
(1,257,329)
72
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
29.
Financial risk management (continued)
≤ 6 months
$
6 - 12
months
$
1 - 5 years
$
≥ 5 years
$
Total
$
37,529,579
11,738,161
1,329,200
50,596,940
(7,833,511)
(7,833,511)
-
-
-
-
-
-
-
-
2,099,723
2,099,723
-
-
-
-
-
-
-
-
37,529,579
11,738,161
3,428,923
52,696,663
(7,833,511)
(7,833,511)
2010
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial Liabilities
Trade and other payables
(c)
Interest Rate Risk
The consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value
will fluctuate as a result of changes in market interest rates and the effective weighted average interest
rates on classes of financial assets and financial liabilities, is as follows:
Consolidated
Weighted
Average
Effective
Interest Rate
Floating interest rate
Fixed interest
Non-interest
bearing
Total
2011
%
2010
%
2011
$
2010
$
2011
$
2010
$
2011
$
2010
$
2011
$
2010
$
Financial Assets:
Cash and
cash equivalents
Trade and other
receivables
Other financial
assets
2.7
4.0
9,463,949
37,529,579
-
-
5.7
5.5
-
-
-
-
-
-
-
-
-
-
9,463,949
37,529,579
3,288,302
11,738,161
3,288,302
11,738,161
2,271,438
3,388,923
141,308
40,000
2,412,746
3,428,923
Financial Liabilities:
Trade and other
payables
-
-
Net Financial
Assets/(Liabilities)
9,463,949
37,529,579
2,271,438
3,388,923
3,429,610
11,778,161
15,164,997
52,696,663
-
-
-
-
-
-
-
-
1,257,329
7,833,151
1,257,329
7,833,151
1,257,329
7,833,151
1,257,329
7,833,151
9,463,949
37,529,579
2,271,438
3,388,923
2,172,281
3,945,010
13,907,668
44,863,512
Interest Rate Sensitivity
A sensitivity of 10 per cent has been selected as this is considered reasonable given the current level of
both short term and long term interest rates. A 10% movement in interest rates at the reporting date would
have increased (decreased) equity and profit and loss by the amounts shown below based on the average
amount of interest bearing financial instruments held. This analysis assumes that all other variables, in
particular foreign currency rates, remain constant. The analysis is performed only on those financial assets
and liabilities with floating interest rates and is prepared on the same basis as for 2010.
2011
Profit or Loss
Equity
10% Increase 10% Decrease 10% Increase 10% Decrease
Cash and cash equivalents
25,309
(25,309)
2010
Cash and cash equivalents
150,118
(150,118)
-
-
-
-
73
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N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
29.
Financial risk management (continued)
(d)
Currency Risk
The consolidated entity’s exposure to currency risk is limited due to its ongoing operations being in Australia
and all associated contracts completed in Australian dollars. A small foreign exchange risk arises from
liabilities denominated in a currency other than Australian dollars. The Group generally does not undertake
any hedging or forward contract transactions as the exposure is considered immaterial, however individual
transactions are reviewed for any potential currency risk exposure.
(e)
Fair Values
The carrying amounts of cash, cash equivalents, financial assets and financial liabilities, approximate their
fair values.
30.
Interests in joint ventures
Details of joint ventures in which the consolidated entity has an interest are as follows:
Principal activities
Oil & gas exploration
Oil & gas exploration
Oil & gas exploration
Oil & gas exploration
Oil & gas exploration
Oil & gas exploration
2011
%
80.00
100.00
100.00
100.00
86.12
76.54
2010
%
80.00
90.00
90.00
55.00
75.00
75.00
EP 97 Joint Venture (Rawson)
EP 115 Joint Venture (Trident)
EPA 111 Joint Venture (Trident)
EPA 130 (Great Southern Gas)
EP 82 Magee Joint Venture (OGE)
EP 125 Mt Kitty Joint Venture (OGE)
Rawson = Rawson Resources Limited
TRI = Trident Energy Limited
OGE = Oil and Gas Exploration Limited (formerly He Nuclear Limited)
The interests in the assets and liabilities of the joint ventures are included in the consolidated entity’s balance
sheets in accordance with the accounting policy described in note 1(b) under the following classifications:
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
Current liabilities
Trade and other payables
Net assets
Joint venture contribution to loss before tax
Revenue
Expenses
Loss before income tax
74
2011
$
2010
$
228,707
371,323
600,030
14,964,864
7,264,265
22,229,129
87,919
4,033,016
512,111
18,196,113
110,021
139,571
(18,794,907)
(8,904,024)
(18,684,886)
(8,764,453)
C E N T R AL P E T R O L E U M L I M I T E D
AB N 7 2 0 8 3 2 5 4 3 0 8
N O T E S T O T H E C O N S O L I D AT E D F I N AN C I AL S T AT E M E N T S
F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 1
31. Convertible notes
As announced on 3 June 2011, the Company exercised its right to terminate a Bond Subscription Agreement.
In November 2007, Central Petroleum Limited entered into an $80,000,000 Bond Subscription Agreement
with D.B. Zwirn Mauritius Trading No. 3 Limited (“DBZ”). DBZ novated the Bond Subscription Agreement to
Asia Convertible Bond Opportunities LLC on 9 September 2008.
During the year ended 30 June 2010 the Company issued four tranches of 100 convertible bonds at an issue
price of $10,000 each to Asia Convertible Bond Opportunities, LLC for a total subscription amount of
$4,000,000. The bonds were subsequently converted to shares at various prices per share, resulting in the
issue of 41,068,172 shares. A total of $10,000,000 in convertible bonds had been issued and subsequently
converted to equity at the date of termination of the agreement.
32. Events occurring after the reporting period
Subsequent to 30 June 2011 the following events have occurred:
(i) Option issues
The Company issued further options to employees as set out below:
Grant Date
20 July 2011
19 August 2011
30 August 2011
Number of options issued Exercise price
7,646,665
2,000,000
4,000,000
11 cents
11.5 cents
11.5 cents
Expiry Date
20 July 2016
19 August 2016
30 August 2016
(ii) Capital Raising
The Company completed a share placement on 21 September 2011. A total of 91 million shares were
placed at 5.5 cents per share raising additional capital of approximately $5 million before costs. The
Company concurrently announced a Share Purchase Plan, also at 5.5 cents share, to provide existing
shareholders the opportunity to invest at the same price as the placees. The Share Purchase Plan is
underwritten by Patersons Securities Limited for $5.5 million and has a closing date of 20 October 2011.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial
year and the date of this report any item, transaction or event of a material or unusual nature likely, in the
opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those
operations, or the state of affairs of the Group, in future financial years.
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DIRECTORS’ DECLARATION
In the directors opinion :
a)
the financial statements and notes set out on pages 40 to 75 are in accordance with the Corporations
Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and
of its performance for the financial year ended on that date; and
b)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
Note 1(a) confirms that the financial statements also comply with the International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer
required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors:
JP Heugh
Director
Perth, 30 September 2011
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INDEPENDENT AUDITOR’S REPORT
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INDEPENDENT AUDITOR’S REPORT
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AS X AD D I T I O N AL I N F O R M AT I O N AT 2 2 S E P T E M B E R 2 0 1 1
Details of shares and options as at 22 September 2011:
Top holders
The 20 largest registered holders of each class of quoted equity security as at 22 September 2011 were:
Ordinary fully paid shares
Name
No. of Shares
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
National Nominees Limited
Brighten International Pty Ltd
Citicorp Nominees Pty Limited
ABN Amro Clearing Sydney Nominees Pty Ltd
Renlyn Bell Investments Pty Ltd
RBJ Nominees Pty Ltd
Franze Holdings Pty Ltd
Mr Mark Philip Shawcross
AMG International Pty Ltd
Salavente Pty Ltd
JP Morgan Nominees Australia Limited
Merrill Lynch (Australia) Nominees Pty Limited
Colbern Fiduciary Nominees Pty Ltd
Advent Energy Ltd
Mr John Phillip Heugh
Forsyth Barr Custodians Ltd
Agens Pty Limited
HSBC Custody Nominees Australia Limited
My Anthony Norman Buist
Marford Group Pty Ltd
49,549,830
22,841,551
20,944,992
11,342,086
10,416,670
9,375,000
9,360,000
9,000,000
8,915,000
8,625,000
7,708,557
7,294,555
7,181,818
6,250,000
5,741,429
5,549,563
5,324,176
5,216,189
5,066,000
5,000,000
%
4.62
2.13
1.95
1.06
0.97
0.87
0.87
0.84
0.83
0.80
0.72
0.68
0.67
0.58
0.53
0.52
0.50
0.49
0.47
0.46
220,702,416
20.56
Options exercisable at $0.16 each on or before 31 March 2014
Name
No. of
Options
%
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Franze Holdings Pty Ltd
CIMB Securities (Singapore) Pte Ltd
Avatar Equities Pty Ltd
Madeiros Pty Ltd
Mr Terry Visser + Mrs Hafidah Visser
Renlyn Bell Investments Pty Ltd
Citicorp Nominees Pty Limited
Dr Kelvin Lo + Mrs Yoke Lo
National Nominees Limited
Merrill Lynch (Australia) Nominees Pty Limited
Mr Robert William Dean + Mrs Waraporn Chanadoungdee
Advent Energy Ltd
Mr Terence McCarthy
ICM Australia Pty Ltd
Victor M Lewis Pty Ltd
Mrs Yoke Shaw Lo + Dr Kelvin Lo
Leet Investments Pty Ltd
Mr James David Harry Boddam-Whetham
Jannarn Pty Ltd
Ms Mooi Fah Lee
9,730,000
9,000,000
5,662,526
5,300,000
4,600,000
4,350,000
4,347,268
4,000,000
3,289,750
3,255,563
3,150,000
3,125,000
3,050,000
3,000,000
2,950,588
2,700,000
2,500,000
2,491,648
2,450,000
2,353,838
3.55
3.28
2.06
1.93
1.68
1.59
1.58
1.46
1.20
1.19
1.15
1.14
1.11
1.09
1.08
0.98
0.91
0.91
0.89
0.86
81,306,181
29.64
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AS X AD D I T I O N AL I N F O R M AT I O N AT 2 2 S E P T E M B E R 2 0 1 1
Distribution schedules
A distribution schedule of each class of equity security as at 22 September 2011:
Ordinary fully paid shares
Range
Holders
Units
%
1
1,001
5,001
10,001
100,001
- 1,000
- 5,000
- 10,000
- 100,000
- Over
192
636
1,179
4,285
1,575
32,563
2,356,444
9,634,192
180,249,316
881,032,327
0.00
0.22
0.90
16.79
82.09
Total
7,867
1,073,304,842
100.00
Listed options exercisable at $0.16 each on or before 31 March 2014
Range
Holders
Units
%
1
1,001
5,001
10,001
100,001
- 1,000
- 5,000
- 10,000
- 100,000
- Over
618
826
390
851
380
388,690
2,308,770
3,047,055
33,724,272
234,835,738
0.14
0.84
1.11
12.29
85.62
Total
3,065
274,304,525
100.00
Substantial shareholders
As at 22 September 2011, there are no substantial shareholders in the Company.
Restricted Securities
As at 22 September 2011, the Company had no restricted securities.
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 9,616 shares as at 22 September 2011):
Holders
Units
1,587
7,828,787
Holdings less than a marketable parcel of listed options exercisable at $0.16 each on or before 31 March 2014 (being 22,728
options as at 22 September 2011):
Holders
Units
2,154
10,809,226
Voting Rights
Subject to any rights or restrictions for the time being attached to any class or classes of shares, at meetings of shareholders
or classes of shareholders:
each shareholder entitled to vote may vote in person or by proxy, attorney or representative of a
shareholder;
on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a
shareholder has one vote; and
on a poll, every person present who is a shareholder shall, in respect of each fully paid share held by him,
or in respect of which he is appointed a proxy, attorney or representative, have one vote for their share, but
in respect of partly paid shares, shall have such number of votes being equivalent to the proportion which
the amount paid (not credited) is of the total amounts paid and payable in respect of those shares
(excluding amounts credited)..
On-Market Buy Back
There is no current on-market buy-back.
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INTERESTS IN PETROLEUM PERMITS, MINERAL LICENSES AND GEOTHERMAL PERMITS
AT 22 SEPTEMBER 2011
Permits and Licenses Granted
Location
Tenement
Operator
EP 82 (1)
EP 93
EP 97 (2)
EP 105
EP 106
EP 107
EP 112
EP 115
EP 118
EP 125 (1)
EL-27094
EL-27100
EL-27101
EL-27102
EL-27103
EL-27104
EL-27105
EL-27106
EL-27107
EL-27108
EL-27109
EL-27110
EL-27114
EL-28095
EL-28096
EL-28097
EL-28472
GEP27833
GEP27834
GEP27835
Amadeus Basin NT
Pedirka Basin NT
Pedirka Basin NT
Amadeus/Pedirka Basin NT
Amadeus Basin NT
Amadeus/Pedirka Basin NT
Amadeus Basin NT
Amadeus Basin NT
Amadeus Basin NT
Amadeus Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Georgina Basin NT
Pedirka/Eromanga Basin NT
Pedirka/Eromanga Basin NT
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Permits and Licenses Under Application
Tenement
Location
Operator
EPA 92
EPA 111
EPA 120
EPA 124
EPA 129
EPA 130
EPA 131
EPA 132
EPA 133
EPA 137
EPA 147
EPA 149
EPA 152
EPA 160
ATP 909
ATP 911
ATP 912
PELA 77
16/08-9
17/08-9
18/08-9
EL 27095
EL 27096
EL 27097
EL 27098
EL 27099
Lander Trough NT
Amadeus Basin NT
Amadeus Basin NT
Amadeus Basin NT
Lander Trough NT
Pedirka Basin NT
Pedirka Basin NT
Georgina Basin NT
Amadeus Basin NT
Amadeus Basin NT
Amadeus Basin NT
Amadeus Basin NT
Amadeus Basin NT
Lander Trough NT
Georgina Basin QLD
Georgina Basin QLD
Georgina Basin QLD
Pedirka Basin SA
Amadeus Basin WA
Amadeus Basin WA
Amadeus Basin WA
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Pedirka Basin NT
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
CTP Consolidated Entity
Registered
Interest (%)
Other JV Participants
Participant Name
Beneficial
Interest (%)
Rawson Resources Ltd
20%
Beneficial
Interest (%)
100
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
CTP Consolidated Entity
Projected
Projected
Registered
Beneficial
Interest (%)
Interest (%)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(1) For the Magee prospect Block within EP 82 and the Mt Kitty prospect Block within EP 125 the beneficial interest is 86.12%
and 76.54% respectively. The remaining beneficial interest is held by Oil & Gas Exploration Limited (formerly known as
HeNuclear Limited).
(2) For the Simpson, Bejah, Dune and Pelinor Sub- Blocks within EP 97.
81