Cue Biopharma, Inc. Annual Report 2013

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FY2013 Annual Report · Cue Biopharma, Inc.

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ABN 45 066 383 971
Level 21, 114 William Street Melbourne Victoria 3000 Australia
T: +61 3 9670 8668 F: +61 3 9670 8661 W: www.cuenrg.com.au E: mail@cuenrg.com.au

Photo courtesy of OMV

Exciting times
ahead

Annual Report 2012/13

About Cue Energy

Cue Energy Resources Limited is an oil and gas exploration and
production company with a focus on SE Asia and Australasia.

Cue Energy Resources has petroleum assets in
New Zealand, Papua New Guinea, Indonesia,
and Australia. The company has continuously
grown over recent years through a mix of
acquisitions and discoveries.

It is Cue Energy’s objective to develop a robust
and substantial E & P company with a focus on
the SE Asia and Australasia region through:

• maximising value of existing assets

• building organisational capability

• aggressively pursuing new E & P assets

• developing a balanced portfolio of

exploration, development and production
opportunities

•

increasing stakes in assets to 20-40%
and take up operatorship as required

• actively pursuing value accretive

acquisitions

Company snapshot

Ordinary Shares

12 Month Trading Range

12 Month Average Daily Volume

698,119,720

10.5¢ – 15.5¢

~400,000

Cash at 30 June 2013

A$58.83 million

Debt

Nil

Avg FY13 Production

~2600 boe/day

Contents

Highlights and Results 2012/13

Corporate Directory

Joint Venture Interests

Chairman’s Overview

Chief Executive Officer’s Review

Corporate Governance Statement

Directors’ Report

Auditor’s Independence Declaration

Directors’ Declaration

Consolidated Statement of Profit or Loss and Other
Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Independent Auditor’s Report

Shareholder Information

Cue was engaged during the year in planning for a
number of wells to be drilled in the 2013/14 year. In the
Maari-Manaia field, the Kan Tan IV semi-submersible
drilling unit is drilling the Manaia-2 appraisal well and
the Ensco 107 jack-up rig will be on location in early
2014 for Maari field development activities.

Photo courtesy of OMV

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The 2012/13 year was another good year for Cue. The Company experienced
strong production cashflows with reported production revenue of $49.8 million,
up $8.6 million from the 2011/12 year, and reported net profit after tax of
$6.4 million up from $5.7 million last year. Cue’s cash balance increased during the
year to $58.8 million from $33.7 million in 2011/12. Cue currently has no debt
and no hedging and continues to fully enjoy the current robust oil prices.

Gross profit
- Production

$30.7
million

Highlights and Results 2012/13Production Revenue $49.8millionCue’s DebtZeroCash at Year End $58.8million3

Photo courtesy of OMV

Cue Energy Resources Limited Annual Report 2012/13Highlights and Results 2012/13Corporate Results• Production revenue of $49.8 million• Production of 0.93 million boe• Gross profit of $30.7 million • Profit after income tax expense of $6.4 million• Cash at year end of $58.8 million• Group is debt freePapua New Guinea • SE Gobe gas sale negotiations near completionIndonesia• First full year of gas production from Wortel field asset, reliably delivering contract gas quantity to Indonesia Power • Appraisal drilling planned to commence in Mahakam Hilir PSC, onshore Kalimantan, Indonesia • Infill well drilled in Oyong field increasing production by over 40%New Zealand• Free carried exploration well scheduled on Whio Prospect in New Zealand PEP 51313• Pipeline 3D seismic survey acquired over PEP 51313. Potential further exploration well in Q2 calendar 2014• Development and appraisal drilling planned at Maari offshore Taranaki, New Zealand• PEP 51313 renewal application made with well commitment Q2 calendar 2014 plannedAustralia• Carnarvon Basin block Inversion study in WA-359-P to define potential oil prospect • Carnarvon Basin block WA-389-P renewed with increased equity at 40%Eight wells minimum and potentially 11 wells expected over next 12 months in Indonesia and New ZealandOperating Cash Flow $ MillionsProduction Calendar year mmboe0102030405060Sales Receipts Production CostsExploration CostsOther PaymentsNet operating Cash Flow201120122013f2014f2015f2016fSampang PSCMaariSE Gobe0.00.20.40.60.811.2Corporate Directory

Directors
Geoffrey J. King BA, LL.B (Chairman)
Paul D. Moore BSc, MBA
Timothy E. Dibb BSc, PhD
Andrew A. Young BE, MBA (Hons)

Chief Executive Officer
D.A.J. Biggs LL.B

Chief Financial Officer/
Company Secretary
A.M. Knox B.Com

Co-Company Secretary
P.M. Moffatt B.Com

Registered Office
Level 21, 114 William Street
Melbourne Victoria 3000 Australia
Telephone: + 61 3 9670 8668
Facsimile: + 61 3 9670 8661
Website: www.cuenrg.com.au
Email: mail@cuenrg.com.au
ABN 45 066 383 971

Stock Exchange Listings
AUSTRALIA
Australian Securities Exchange Ltd
525 Collins Street
Melbourne, Victoria 3000 Australia

NEW ZEALAND
New Zealand Exchange Limited
Level 1, NZX Centre, 11 Cable Street
PO Box 2959
Wellington, New Zealand

PAPUA NEW GUINEA
Port Moresby Stock Exchange
Level 4, Defence Haus
Port Moresby, Papua New Guinea

UNITED STATES OF AMERICA
OTCQX
OTC Markets
304 Hudson Street, 3rd Floor
New York, NY 10013 USA

Auditor
BDO East Coast Partnership
Level 14, 140 William Street
Melbourne Victoria 3000 Australia

Bankers
ANZ Banking Group Limited
91 William Street
Melbourne Victoria 3000 Australia

Investec Bank (Australia) Limited
Level 23, The Chifley Tower
2 Chifley Square, Philip Street
Sydney NSW 2000 Australia

ASB Bank Limited
PO Box 35, Shortland Street
Auckland 1140 New Zealand

National Australia Bank Limited
Level 4, 330 Collins Street
Melbourne Victoria 3000 Australia

Share Registry
AUSTRALIA
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street
Abbotsford, Victoria 3067 Australia
GPO Box 2975
Melbourne, Victoria 3000 Australia
Telephone: 1300 850 505
(within Australia)
or +61 3 9415 4000 (outside Australia)
Email: web.queries@computershare.com.au
Website: www.computershare.com.au

PAPUA NEW GUINEA
Computershare Investor Services
Pty Limited
C/- Kina Securities
Level 2, Deloitte Tower
Douglas Street
(PO Box 1141)
Port Moresby, National Capital District
Papua New Guinea
Telephone: +67 5 308 3888
Facsimile: +67 5 308 3899

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Joint Ventures

INDONESIA

Sampang PSC

Santos#
SPC
Cue(i)

Mahakam Hilir PSC

SPC#
Cue(i)

45%
40%
15%

60%
40%

(i) 8.181878% in the Jeruk field

(ii) 5% in the Whio prospect on

commercial success

Operator

^^ Title held by North West Shelf

Exploration Pty Ltd

*** Title held by Barracuda Ltd

AUSTRALIA

NEW ZEALAND

PAPUA NEW GUINEA

Carnarvon Basin Permits

WA-389-P
BHP Billiton#
Cue
WA-359-P
Cue#
WA-360-P
MEO#^^
Cue
WA-361-P
MEO#^^
Mineralogy
Cue
WA-409-P
Apache#
Cue
Rankin Trend

60%
40%

100%

62.5%
37.5%

50%
35%
15%

40%
30%
30%

Maari Oil Field
PMP 38160
OMV#
Todd
Horizon
Cue
PEP 51149
Todd#
Cue
PEP 51313
OMV#
Todd
Horizon
Cue(ii)
PEP 54865
Todd#
Cue

69%
16%
10%
5%

80%
20%

30%
35%
21%
14%

80%
20%

PDL 3

Santos#***
SHP
Oil Search
Cue
PRG
(SE Gobe Unit
3.286%)

PRL14

Oil Search#
Murray
Cue
PRL9

Santos***
Oil Search#
Cue

15.9%
40.1%
36.4%
5.6%
2.0%

62.5%
26.5%
11%

40%
45.1%
14.9%

The development of a business plan and model for the systematic growth of the company was discussed in detail at a company strategic planning forum in January 2013, when the creation of the plan was initiated and work commenced under the direction of the acting CEO, Andrew Young who was appointed from the Board to fill temporarily the vacancy resulting from the resignation of the former CEO. Andrew oversaw the development of the Cue business plan and model over the ensuing following months, which work was completed under the supervision of David Biggs when he was appointed as CEO in April this year. The business plan and model to which all members of the company have contributed, now forms one of the most important management resources of the company, providing a robust system for evaluating investment opportunities. I am confident that the plan lays a foundation for real growth in the value of Cue’s assets.Turning to the performance of the company during 2012/13, it is fair to say that it was another excellent year for Cue. The Company experienced strong production cashflows with reported production revenue of $49.8 million, up $8.6 million from the 2011/12 year, and reported profit after tax of $6.4 million up from $5.7 million last year. Gas production and related revenues during the year were significantly higher at 4.0 bcf (2.0 bcf in 2011/12) as a result of the first full year of production at Wortel. This was partially offset by a higher amortisation charge due to a move to a more gas based production profile. Total oil production volumes were steady at 0.28 million barrels. Cue’s cash balance increased during the year to $58.8 million from $33.7 million in 2011/12. Cue currently has no debt and no hedging and continues to enjoy the current robust oil prices. The Board will, of course, consider raising debt if required to fund profitable ventures or acquisitions.The company was engaged during the year in planning for a number of wells to be drilled in the 2013/14 year. In the Maari-Manaia field, the Kan Tan IV semi-submersible drilling unit is currently drilling the Manaia-2 appraisal well and the Ensco 107 jack-up rig will be on location in early 2014 for Maari field development activities.In the past year, several key executives left the company, and at Board level we experienced considerable change when Leon Musca and the former Chairman, Richard Tweedie, retired from the Board. I thank Leon and Richard on behalf of the Board and shareholders for their solid contributions to the advancement and growth of the company during their directorships of many years, and I am delighted that Richard and Leon continue to retain significant shareholdings in Cue.Sadly, we also lost from the Board Steven Koroknay who died suddenly during June 2013. Steve’s death at a relatively young age deprives us of his friendship and wise counsel on the Board. Steve was a well-known and respected figure in the oil and gas industry with over thirty-five years of experience over that time as an executive in very large international oil and gas companies, and in significant Australian focused energy companies. With Steve’s passing, the Cue Board now comprises four members and the Board has resolved to stay with a Board of four which we believe meets the current needs of Cue and our growth strategy.The company has moved to fill key vacancies and David Biggs has been welcomed as CEO to lead the company and implement the new focus and strategy adopted by the Board which addresses fundamental issues for any company in our industry – reserves replacement and growth – and the increase of the value of our shareholders’ investments in the company.David comes to the Company with more than 30 years’ experience in the international oil and gas industry with a strong background in oil and gas business development, marketing, joint ventures, and business strategy. He has worked for the past 19 years at senior levels with BHP Billiton Petroleum Ltd in both Melbourne and Houston and prior to that with Petroleum Corporation of New Zealand and Natural Gas Corporation of New Zealand. During the 2012 AGM when it was announced that I would become interim Chairman when Richard Tweedie stepped down as Chairman, I made a very brief comment that while Chairman my goal would be to persuade the Board to adopt an enhanced systematic and planned approach to directing the business of the company, with particular emphasis on reserves replacement which is the life blood of any oil and gas company, and the implementation of strategies to increase Cue’s oil and gas reserves.Chairman’s OverviewI am very pleased to provide my first report to shareholders as Chairman of the Board. It is a fortunate Chairman who is able to report the very positive results for our company for the twelve months to June 2013 and I must acknowledge the hard work, judgement and commitment of the Board as it was constituted up to the end of 2012, and to the management and staff for their efforts in the past year.7

Photo courtesy of OMV

Cue Energy Resources Limited Annual Report 2012/13Chairman’s OverviewPlanning is in progress for drilling the Whio-1 well in PEP 51313 with the Kan Tan IV with the well expected to spud by the end of the first quarter 2014. In Indonesia, the Naga Utara-2 well is expected to spud in late September on the Mahakam Hilir block onshore Kalimantan. If Naga Utara-2 is successful, the drill rig will move to Naga Utara-3. In all, we expect that at least three, and up to six exploration and appraisal wells, will be drilled over the next 12 months in Indonesia and New Zealand. In addition five wells will be drilled to support Maari development activities.In the Carnarvon Basin, Western Australia, Cue increased its interest in WA-389-P to 40%. Cue sees significant remaining hydrocarbon potential in the permit which is already substantially covered by 3D seismic that will underpin continuing exploration of the block. BHP Billiton Petroleum, the operator, holds the other 60%.In the WA-359-P Carnarvon Basin permit, Cue is conducting a programme of geological and geophysical studies to firm-up a drilling location for a likely well in 2015. Cue plans to farmdown its 100% interest in the permit, commencing later this year, to bring in partners capable of operating the drilling phase of the work programme.In WA-409-P the joint venture varied the work programme for the final year of the current permit term and drilling will now be deferred until the renewal of the permit in 2014. Cue will be carried through the work programme and any well the Operator elects to drill.In Papua New Guinea the construction of facilities to process the associated gas and gas cap from SE Gobe continues. The gas will be exported to the PNG LNG gas pipeline and LNG processing plant from June 2014.As part of the overall emphasis on business planning, the Company reviewed its exploration strategy during the year. The Board is very aware that Cue needs to replenish its exploration acreage holdings over the next two years and the company is currently putting in place the resources required to significantly lift the company’s screening of exploration opportunities and to capture new acreage. The Board concluded that the company should seek to add at least 5 million barrels of reserves by the end of calendar year 2018, by exploration and acquisition, which amounts to a reserves replacement ratio of 142%. The exploration component of this target will require Cue to drill at least 3 – 5 wells a year with a focus on fiscally attractive opportunities that can be quickly commercialised in onshore Australia, New Zealand and Asia. The Company’s balance sheet again remains strong. At the end of the financial year the Company had cash reserves of $58.8 million and no debt. Our strong existing production and cashflow forecast indicates that the Company has sufficient financial resources to deliver the Company’s growth strategy.Geoffrey J. KingChairman26th September 20138

A large part of the year was spent preparing for a very active 2013/14 year with wells to be drilled in Indonesia and New Zealand. Apart from the significant activity comprising the Maari growth project which continues the appraisal and development of the Maari field in New Zealand, significant wells in PEP 51313 (Whio) and the Mahakam Hilir PSC in Indonesia (Naga Utara-2) will be drilled. These wells will have implications for the further exploration of PEP 51313 in New Zealand and the Mahakam Hilir PSC block in Indonesia, respectively. In PMP 38160, the Manaia-2 well will appraise reservoirs in the Moki and Farewell formations which were oil-bearing in the Manaia field discovery. A successful Manaia appraisal well could add significant contingent resources to the Maari project with implications for its future development. Our producing fields in Indonesia (Oyong and Wortel) performed well during the year. Production from the fields in the Sampang PSC averaged 15,719 boes per day (2,045 boes Cue share). The Maari field produced 8,794 barrels per day (440 barrels per day Cue share).The Maari field continued to have operational issues. Whilst a series of workovers to replace the troublesome electrical submersible pumps were successfully executed resulting in improved pump reliability, post year end the facility encountered problems with the integrity of the mooring system on the FPSO Raroa and then subsequently the failure of the swivel on the vessel. The swivel was scheduled to be replaced in 2014, so the opportunity has been taken to bring forward the swivel replacement and at the same time, to reinstate the mooring system. These issues are dealt with in more detail later in this report, but at the time of writing, the root cause of the failure of the swivel has yet to be ascertained and the joint venture is reviewing whether design inadequacies in the mooring system were responsible for its failure.Achievements in 2012/13Cue’s share of production for the year from our New Zealand, Indonesian and Papua New Guinea fields was 0.93 mmboe. This is a good outcome given ongoing operational issues at Maari. Our production benefitted from the first full year of gas production from the Wortel field and increased production from the Oyong field after a successful infield well.Global oil prices remained steady during the year, contributing to total revenue of $49.8 million. Reported profit after tax of $6.4 million was higher than 2011/12 primarily due to increased production revenue, lower tax and foreign exchange gains.We continue to generate strong cash flows which are used to fund our exploration activities. The company’s financial position is healthy with $58.8 million in cash reserves as at 30 June 2013 and no debt.During the year the company undertook a strategic review of its activities and focus. The review entailed an assessment of our current exploration acreage, static resources and future exploration direction.Arising from that review a number of conclusions and actions were agreed:• continue to explore in Australia, New Zealand and Asia• refocus exploration away from expensive deep water opportunities to onshore where discoveries can be more quickly commercialised and brought into production• seek participating interests in the range of 20-40%• continue to build our exploration team• focus on creating value from our static resources by seeking to monetise them either by maturing them to the point that they can be booked as reserves or otherwise• aim to drill 3-5 exploration wells per year, consistent with the company’s ability to fund• add 5 million boes to current booked reserves by the end of calendar year 2018 (equates to replacing production in the period to end 2018 and increasing current booked reserves by 30%)Chief Executive Officer’s ReviewThe 2012/13 year was a year of solid progress on our core exploration and production activities. With several wells to be drilled in New Zealand and Indonesia over the next 12 months, 2013/14 promises to be a key year for the Company.9

Photo courtesy of OMV

Cue Energy Resources Limited Annual Report 2012/13Chief Executive Officer’s ReviewThe Year AheadThe company will participate in a number of key wells in 2013/14 – including Naga Utara-2, Manaia-2, Whio-1 and possibly Te Whatu-3. The outcome of two of these wells will impact significantly on Cue’s view of the prospectivity of two of our exploration permits – PEP 51313 in New Zealand and the Mahakam Hilir PSC in Indonesia. If the results of these two wells are positive, the technical view of further targets in each block will be enhanced and will probably lead to further exploration activity on the blocks. If however, the wells are not successful, Cue will have to reappraise its continuing interest in these properties.The Company can look forward to strong production numbers for calendar years 2014 and 2015. However, post 2015, forecast production, assuming no near term exploration or appraisal success, begins to decline rapidly. Cue’s Board and management are acutely aware of the challenge this presents and are focused on taking steps to secure Cue’s ongoing reserves position and production post 2015.In the meantime, the Company is in the fortunate position of being able to fund its exploration commitments and activities from cash flow. Consistent with the Company’s new exploration strategy and reserves booking target, Cue will focus on increasing its presence onshore Australia, in New Zealand and in Asia as it seeks to restock its exploration acreage portfolio by securing material positions in prospective acreage, and executing exploration activities to secure reserves replacement and growth.Australia

Cue has developed a new potential oil
play modelled on the Victoria syncline.
Permit equities have been increased.

LEGEND

Cue Permit
Oil Field
Gas Field
Prospect
Lead

Scale: 25km

Caterina

The Point

WA-389-P

Flower Drum

Intimo

WA-389-P

Attica

Brigadier Updip

WA-389-P

WA-409-P

Moriarty

Sherlock

WA-359-P
Watson

Andromeda
East

Python
(North/
South)

Maxwell

Hepphaestus
WA-361-P

Heracles

WA-360-P

WA-361-P

WA-360-P

WA-409-P

Cue Interest: 30%

Operator: Apache Northwest Pty Ltd

The Joint Venture received approval in April 2013 to vary the
work programme for the final year of the current permit term
(Year 6), which commenced on 30th April 2013. The revised
work programme includes reprocessing of 566 km² of existing
multi-client 3D seismic data, seismic attribute studies and
other technical studies to assess the petroleum potential of
the permit and select a drilling location. Drilling will now be
deferred until the renewal of the permit in 2014. Under the
terms of the farmout agreement with Apache, Cue is carried
through the work programme and any well Apache elect
to drill.

WA-360-P

WA-361-P

Cue Interest: 37.5%

Cue Interest: 15%

Operator: MEO Australia Ltd

Cue has decided to reduce its interest in both permits and MEO
and Cue have agreed to market jointly their respective interests
to potential new entrants.

Exploration
WA-359-P

Cue Interest: 100%

Operator: Cue Exploration Pty Ltd

The permit was renewed for a five year term on a reduced
area in October 2012 after Cue has identified encouraging
potential for both oil and gas in the permit. Structural traps
with Triassic-aged reservoirs which are prospective for gas have
been mapped on the existing 3D seismic data, however the
emergence of a new potential oil play based on the Victoria
Syncline is attracting most interest. The play fairway extends
across several adjacent permits including WA-359-P and WA-
409-P and Cue is well positioned with a number of possible
drilling candidates in both permits.

A programme of geological and geophysical studies is being
conducted to firm-up a drilling location for a likely well in 2015.
Reprocessing of the existing multi-client 3D seismic data over
the permit commenced in early July and is expected to be
complete in November 2013.

Cue plans to farmdown its interest in the permit, commencing
later this year after essential preliminary technical work is
complete, to bring in a partner capable of operating the drilling
phase of the work programme.

WA-389-P

Cue Interest: 40%

Operator: BHP Billiton Petroleum (Australia) Pty Ltd

Cue and BHP Billiton agreed to increase their respective
interests in the permit following Woodside’s decision to
withdraw (and resign as Operator). Cue now holds a 40%
interest in the permit which we consider to hold significant
remaining petroleum potential, particularly Triassic gas. BHP
Billiton Petroleum has been appointed Operator and the Joint
Venture has submitted an application to renew the permit on a
reduced area for a further five year exploration term.

Cue Energy Resources Limited Annual Report 2012/13Chief Executive Officer’s ReviewNew Zealand

Appraisal drilling has commenced at
Manaia. Maari / Manaia development
drilling due to commence Q1
calendar 2014.

Photo courtesy of OMV

PEP 54865

Hochstetter-1

Kiwa-1
Hector-1

Aiha

Pukeko-1

Paikea

Manaia

Te Whatu

Taranaki Peninsula

PMP 51149

PMP 38160

Maari

LEGEND

PEP 51313
North Tasman-1

Cue Permit
Oil Field
Gas Field
Prospect
Lead
Dry hole

Tasman-1

Gas wells with
oil shows

Exploration
PEP 51149

Cue Interest: 20%

Operator: Todd Exploration Limited

Geological and geophysical studies in the onshore permit
are progressing. The permit reached the end of Year 5 in
September 2013 and the Joint Venture has applied to the New
Zealand government for renewal of the permit. It is planned to
drill a well on the Te Kiri prospect which has prospectivity for oil
in relatively shallow Miocene age reservoirs and gas in deeper
Eocene objectives during the latter half of 2014. A commercial
gas discovery in this permit could be brought into production
relatively quickly, given the proximity of the permit to existing
infrastructure and markets for gas.

PEP 54865

Cue Interest: 20%

Operator: Todd Exploration Limited

The permit carries a minimum work programme of 285 km² of
3D seismic to be acquired, processed and interpreted prior to
June 2015, at which point the Joint Venture may elect to drill
a well before December 2016 to test Early Tertiary and Late
Cretaceous reservoir objectives, or surrender the permit.

PEP 54865 complements Cue’s existing acreage holdings in the
Taranaki Basin, particularly PEP 51313. The work programme
is structured to allow the Joint Venture to quickly develop
potential drilling opportunities, but defer the decision to
enter the drilling phase of the permit until after the results of
exploration activities in adjacent blocks become available.

PEP 51313

Cue Interest: 14% interest

Operator: OMV New Zealand Ltd

In November 2012, the PEP 51313 Joint Venture agreed to
farm-out a 30% interest in the permit to OMV New Zealand Ltd.
OMV will earn its interest by funding all of the drilling, testing
and completion of the first well on the Whio prospect which
is located approximately 4 km south of the Maari production
facilities. OMV assumed the operatorship of the permit (from
Todd Exploration) at the beginning of April 2013. Cue retains a
14% interest in the permit.

Planning is in progress for drilling the Whio well in the fifth
slot of the Kan Tan IV, a semi-submersible drilling unit, drilling
programme. The expected commencement of drilling is by the
end of the first quarter calendar 2014. In the event that Whio
is a commercial discovery (or additional activity is required to
determine commerciality), OMV will increase its interest to
69% within a predefined area of the permit that covers the
Whio prospect.

Cue will, in this event, retain a 5% interest in a Whio
development and any oil discovered will flow through the
Maari facilities at minimal cost.

A successful well at Whio will open up additional drilling
opportunities along the Tasman Ridge which extends southward
from the Maari field.

A 450 km² 3D seismic survey was acquired in March 2013 and
the processed data was received in August. The Joint Venture
has committed to further processing to obtain depth migration
which will be completed in January 2014.

The new data will be used to further evaluate the Pukeko
North-East and Te Whatu Deep prospects and to select a drilling
location for a well that is required to be drilled before July
2014 to fulfill the permit work programme obligations. Subject
to joint venture approval, it is expected that this well will be
drilled from the Kan Tan IV in the first half of 2014.

Cue continues to view both PEP 51313 and PEP 54865 as
important components of its exploration portfolio with potential
to deliver both material new discoveries in the emerging
Paleocene and Late Cretaceous plays in the relatively under-
explored south western Taranaki Basin and add incremental
reserves to the Maari development with relatively low-risk,
near-field prospects such as Whio.

Production
PMP 38160

Cue Interest: 5%

Operator: OMV New Zealand Ltd

Maari and Manaia Fields

Cue’s net share of oil sales receipts for the year from the
Maari and Manaia fields was 178,889 barrels which generated
$19.6 million in revenue. Oil from Maari and Manaia is being
commingled and produced jointly.

The production facilities have been shut in since 21 July
2013 as a precaution to effect interim repair works on the
mooring system. However, in the interim, a problem was
encountered with the swivel on the field FPSO, the Raroa
and the decision has been taken to replace the swivel. The
swivel was scheduled for replacement in 2014 and this work
has been brought forward and the vessel relocated to port
in New Zealand for the work to be effected. At the same
time, the opportunity will be taken to fully remediate the
mooring system and carry out planned enhancements to the
offshore production system. The facility is expected to resume
production in late December 2013, resulting in estimated
deferred production (Cue’s share) of 50,000 barrels.

Planning for the Maari growth project is continuing with a final
investment decision taken by the Joint Venture in July 2013. The
Kan Tan IV commenced work in the Maari-Manaia field with
the spudding of the Manaia-2 appraisal well and the Ensco 107
jack-up rig will be used for field redevelopment activities from
the existing wellhead platform, commencing in early 2014.

Taranaki Peninsula

PMP 51149

PEP 54865

Hochstetter-1

Kiwa-1

Hector-1

Aiha

Pukeko-1

Paikea

Manaia

Te Whatu

PEP 51313

North Tasman-1

PMP 38160

Maari

LEGEND

Cue Permit

Oil Field

Gas Field

Prospect

Lead

Dry hole

Tasman-1

Gas wells with

oil shows

Cue Energy Resources Limited Annual Report 2012/13Chief Executive Officer’s ReviewIndonesia

The Naga Utara-2 appraisal drilling
is expected to commence Q4
calendar 2013.

LEGEND

Cue Permit
Oil Field
Gas Field
Prospect
Well
Gas well

Scale: 5km

Pelarang Samarinda Oil Field

Sambutan
Gas/OilField

Naga Utara-1

Mahakam Hilir
PSC

South
Pelarang-1

Sei Nangka Oil Field

Pamaguan Gas Field

Naga
Selatan-1

Sanga Sanga Oil Field
500mmbbls recoverable

Exploration
Mahakam Hilir PSC - Kutei Basin

Cue Interest: 40%

Operator: SPC Mahakam Hilir Pte Ltd

Naga Utara

Production
Sampang PSC - Madura Strait

Cue interest: 15%

Operator: Santos (Sampang) Pty Ltd

Oyong Field

Planning for the 2013 drilling campaign is underway. The first
well in the programme will be Naga Utara-2 which is expected
to spud in the third quarter 2013. The well will evaluate the
Naga Utara-1 gas discovery (drilled in the first quarter 2012)
and will have the key objectives of acquiring information on
potential flow rates, pay thickness and gas quality to fully
characterise the resource. Following the gathering of additional
data from the gas-bearing reservoirs seen in Naga Utara-1,
the well will be deepened to intersect potential gas-bearing
intervals below the known pay. If successful it is intended
to complete the well as a future producer and drill a further
appraisal well, Naga Utara-3.

Sampang PSC – Madura Strait

Cue interest: 15%

Operator: Santos (Sampang) Pty Ltd

The Sampang PSC Joint Venture continues to investigate
the potential for development of the Jeruk oilfield which
is technically challenging due to high formation pressures,
fractured reservoirs and impurities in the hydrocarbons.
The main technical issues to be resolved are the range of
uncertainty in the size of the accumulation and the connectivity
of the fracture network which will control the quantity of oil
which may be recovered by each well and the flow rates that
can be achieved. Work is currently being carried out by the
Operator on possible development scenarios that can maximize
the amount of reservoir information obtained from early
production.

During the year, Cue’s share of oil sales receipts from the
Oyong field was 85,430 barrels which generated $9.88 million
in revenue; condensate sales receipts were 714 barrels, which
generated $0.048 million in revenue and gas sales receipts of
1.816 Bcf which generated $4.85 million in revenue received
during the year. The contract for the current in-field crude
oil storage facility ends in October 2013 and the vessel will
be replaced by a newer, Indonesian-flagged double-hulled
tanker the Surya Putra Jaya. The new vessel is undergoing
conversion work in Batam. The replacement of the storage
vessel will result in approximately 23 days shutdown of Oyong
production during October 2013. The new vessel will conform
to Indonesian regulations requiring double-hull construction and
local vessel registration. The change of vessel will also result in
a significant reduction in operating expenditures.

Oil production from the Oyong field is in natural decline and
the current forecast is that oil production will end in the fourth
quarter of calendar 2014.

Wortel Field

Cue’s receipts from gas sales during the year was 2.152 Bcf,
which generated $13.07 million in revenue. Condensate sales
receipts were 1063 barrels which generated $0.073 million in
revenue.

Wortel-3 and Wortel-4 are both flowing gas at a combined
rate of 46.25 MMscfd. The combined rate of Oyong and Wortel
gas production is 83.24 MMscfd (89.1 BBTU/d) (Billion British
thermal units per day) which is equal to the contract quantity to
be sold to PT Indonesia Power.

Cue Energy Resources Limited Annual Report 2012/13Chief Executive Officer’s ReviewPapua New Guinea

Gas production from the SE Gobe gas
field planned to commence Q2
calendar 2014.

APPL 387

W Gobe-1

Makas-1

Gobe Gap-1

Gobe-4

PDL 4

Wasuma 1/5T2

Gobe-2

PPL 338

Cobra-1/1A/5T3

Beaver-1

PPL 318

k
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b
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G

Gobe-7

PDL 3

NW Iehi-1

Gobe-1

Gobe-3

SE Gobe-12
Saunders-1

PDL 1

Bilip-1

otu
b

u to K

ul pip

elin

PPL 317

PRL 14

Iehi-1

PRL 9

PPL 315

Barikewa-2

Barikewa-1

PPL 338

PRL 13

LEGEND

Cue Permit
Oil Field
Gas Field
Gas Discovery
Leads
Dry hole

Gas

Gas well with oil shows

Oil

SEG unitisation

Scale: 10km

PPL 387

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Exploration
PRL14

Cue Interest: 10.947%

Operator: Oil Search (PNG) Limited

PRL9

Cue Interest: 14.894%

Operator: Oil Search (PNG) Limited

The joint venture is still awaiting PNG government advice of
the renewal of PRL9. The renewal application was lodged on
the 8th June 2012. The PRL9 permit contains the Barikewa
gas discovery currently estimated to contain 300 bcf and the
Operator is continuing to work economic development options
for the gas. The PNG government has agreed to defer the
drilling of the commitment well in the permit, which was
scheduled to be drilled in the fourth quarter of 2012, into the
next permit term. Appraisal drilling will be completed once
there is more certainty regarding a commercialisation path for
these licenses.

Production
PDL 3 SE Gobe Field, PNG

Cue Interest: 5.568892%

SE Gobe Unit, PNG

Cue Interest: 3.285646%

Operator: Oil Search (PNG) Limited

Cue’s share of oil sales receipts in the financial year was
21,014 barrels of oil from the SE Gobe field, which generated
$2.28 million in revenue received.

The construction of facilities to process the associated gas and
gas cap from SE Gobe continues. The gas will be exported
to the PNG LNG gas pipeline and LNG processing plant from
June 2014.

The gas export rate from the SE Gobe field is expected to be
approximately 35 MMscfd for ten years from June 2014.

0.836

1.299

2.309

0.841

5.284

1.244

7.422

5.638

4.561

0.657

19.522

24.806

2012 Reserves and Resources Summary

Reserves and Resources as at 31 December 2012

Net to Cue Energy Resources Limited

PROVED (1P)

PROVED & PROBABLE (2P)

CUE
INTEREST

LIQUIDS
MMBBL

GAS
BSCF

OIL EQUIVALENT(4)
MMBOE

LIQUIDS
MMBBL

GAS
BSCF

OIL EQUIVALENT(4)
MMBOE

FIELD (LICENCE)

Reserves

INDONESIA

Oyong(1)(2) (Sampang PSC)

Wortel(1) (Sampang PSC)

15%

0.039

0.008

2.259

6.240

0.415

1.048

0.082

0.011

4.523

7.730

NEW ZEALAND

Maari (PMP 38160)

PAPUA NEW GUINEA

SE Gobe(3) (PDL 3)

Total Reserves

Contingent Resources

INDONESIA

Jeruk (Sampang PSC)

PAPUA NEW GUINEA

Barikewa (PRL 9)

Cobra(5) (PRL 14)

Iehi(5) (PRL 14)

Bilip(5) (PRL 14)

Total Contingent Resources

1.099

2.309

3.286%

0.054

1.199

3.760

12.259

0.680

3.242

0.077

2.478

4.584

16.837

High Estimate 1C

Mid to Low Estimate 2C

8.182%

14.894%

10.947%

1.244

44.533

33.826

27.368

3.941

1.244

3.722

109.668

126.504

Total Reserves and Resources

1.199

12.259

3.242

(1)

(2)

(3)

(4)

(5)

Cue reserves are net of Indonesian government share of production.

Estimates of in-place and recoverable gas volumes include both free gas and solution gas.

SE Gobe 1P Gas reserves are pending the expected conclusion of an agreement to commercialise the gas.

Oil equivalent conversion factor: 6MSCF per BBL.

PRL 14 Contingent Resource estimates were based on 2009 volumetric studies. Some uncertainties still needed to be addressed.

Competent Persons Statement

The information contained in these statements has been compiled by Aung Moe, Senior Petroleum Engineer, who is a full time employee of the Company,
is qualified in accordance with ASX listing rule 5.11 and has consented to the publication of this report.

Summary of Movements in Reserves

LIQUIDS
MMBBL

2.280

(0.762)

0.319

1.199

PROVED (1P)

PROVED & PROBABLE (2P)

GAS
BSCF

OIL EQUIVALENT
MMBOE

LIQUIDS
MMBBL

GAS
BSCF

OIL EQUIVALENT
MMBOE

17.030

(1.025)

3.746

12.259

5.118

(0.933)

0.943

3.242

2.694

0.103

0.319

2.478

25.254

(4.671)

3.746

16.837

6.903

(0.676)

0.943

5.284

Total 2011

Plus/(less) adjustments

Less production

Total 2012

David Biggs

Chief Executive Officer

26th September 2013

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Photo courtesy of OMV

The Directors of Cue Energy Resources Limited recognise the
need for high standards of corporate governance and are
focused on fulfilling their responsibilities individually and as
a Board to all of the Company’s stakeholders.

The Company endorses the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations (with
2010 amendments) (“ASX Principles”).

Unless otherwise disclosed, the Company has in place corporate
governance practices which comply with the ASX Principles.

The following statement outlines the practices adopted by the
Company.

Principle 1: Laying Solid Foundations for Management
and Oversight

Recommendation 1.1: Companies should establish the
functions reserved to the board and those delegated
to senior executives and disclose those functions.

The role of the Board is to lead and oversee the management
and direction of the Company.

After appropriate consultation with Executive Management,
the Board:

•

Defines and sets the Company’s business objectives and
subsequently monitors performance and achievement of
those objectives;

Oversees the reporting on matters of compliance with
corporate policies and laws, takes responsibility for risk
management processes, review of Executive management
remuneration practices and insurance needs of the
Company;

• Monitors financial performance and approves budgets; and

•

Reports to shareholders.

The Board has delegated authority for the running of the day to
day business to the CEO.

Recommendation 1.2: Companies should disclose
the process for evaluating the performance of senior
executives.

The performance of senior executives is reviewed annually as part
of the duties performed by the Remuneration and Nomination
Committee. Performance measures and targets for the Company
and individual personnel are established annually. Company and
individual performance in achieving these targets is assessed by
the Board and line management.

Principle 2: Structure the Board to add value

Recommendation 2.1: A majority of the board should
be independent directors.

Recommendation 2.2: The Chair should be an
independent director

Recommendation 2.3: The role of the Chairman
and the CEO should not be exercised by the same
individual.

The current board is made up of 4 non-executive directors,
including 3 independent directors. The chairman is non-executive
and independent:

•

Geoffrey J. King (Chairman)

Timothy E. Dibb

Paul D. Moore

Andrew A. Young

The board comprises a broad base of industry, business, technical,
administrative, corporate skills and experience considered
necessary to represent the shareholders and fulfil the business
objectives of the Company. The details of background, experience
and professional skills of each Director are set out in the Company
website and on pages 26 to 27 of this report.

Each of the directors is entitled to seek independent advice
at Company’s expense to assist them to carrying out their
responsibilities.

Corporate Governance Statement21

The Board reviews at least annually, the composition of the
board to determine if additional core strengths are required to
be added in light of the nature of the Company businesses and
its objectives.

One third of the Directors retires annually and is free to seek
re-election by shareholders.

Further details on the company’s directors can be found in the
Directors’ Report on pages 24 to 36.

Recommendation 2.4: The board should establish a
nomination committee.

The board has established a Remuneration and Nomination
Committee charter. The charter outlines the responsibilities of
the committee, and is available on the Company website.

The committee is comprised of:

•

Paul D. Moore (Chairman)

Andrew A. Young

Geoffrey J. King was also a member of this committee until 15
November 2012 when he stepped down to become Chairman
of the full board.

Steven J. Koroknay was also a member of this committee whilst
a director of the company.

Recommendation 2.5: Companies should disclose the
process for evaluating the performance of the board,
its committees and individual directors.

The Remuneration and Nomination Committee have delegated
responsibility to the Chairman of the Board to undertake annual
performance evaluations. The performance evaluations are
designed to review the board’s performance and effectiveness
of achieving its set objectives and targets. The Chairman also
discusses with each Director their requirements, performance
and aspects of involvement in the Company. The Remuneration
and Nomination Committee is also responsible for the
performance evaluations of the senior executives, individually
and together. This is reviewed against the discussed and agreed
objectives of the Company and the effectiveness in carrying out
those objectives.

Principle 3: Promote Ethical and Responsible
Decision Making

Recommendation 3.1: Companies should establish
a code of conduct and disclose the code or a
summary of the code as to the practices necessary
to maintain confidence in the Company’s integrity,
the practices necessary to take into account their
legal obligations and the reasonable expectations
of their stakeholders and the responsibility and
accountability of the individuals for reporting and
investigating reports of unethical practices.

The Company has established a code of conduct which
recognises the Company’s commitment to business
and corporate ethics and recognition of the interests of
shareholders. Directors, senior management, employees and
where relevant and to the extent possible, contractors of the
Company are required to comply with the code of conduct.

Directors are required to disclose to the Board actual or
potential conflicts of interest that may or might reasonably be
thought to exist between the interests of the Director or the
interests of any other party in so far as it affects the activities
of the Company and to act in accordance with the Corporations
Act if conflict cannot be removed or persists. That involves
taking no part in the decision making process or discussions
where that conflict does arise.

Directors are required to make disclosure of any share
trading. The Company policy in relation to share trading is
that officers, employees and contractors are prohibited from
trading whilst in possession of unpublished price sensitive
information concerning the Company. That is information which
a reasonable person would expect to have a material effect on
the value of the Company’s shares. An officer must discuss the
proposal to acquire or sell shares with the Chairman prior to
doing so to ensure that there is no price sensitive information
of which that officer might not be aware. The undertaking of
any trading in shares must also be notified to the Company
Secretary who makes disclosure to the ASX.

Cue Energy Resources Limited Annual Report 2012/13Corporate Governance StatementRecommendation 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 measureable
objectives for achieving gender diversity for the board
to assess annually both the objectives in achieving
them.

The Company established a formal policy on diversity in June
2012. This policy supports the existing equal opportunity policy
and non discrimination policy as well as states a commitment
to improving gender diversity within the Company. The
Remuneration and Nomination Committee has adopted the policy
and set annual objectives for achieving gender diversity.

Recommendation 3.3: Companies should disclose
in each annual report the measureable objectives
for achieving gender diversity set by the Board in
accordance with the diversity policy and progress
towards achieving them.

The measurable objectives set by the Board for achieving gender
diversity include:

•

Adopting a Company wide Diversity policy

Disclosing the policy in the corporate governance section on
the website

Tracking and reporting on the percentages of women
employed by the Company as a whole, in senior
management positions and on the board.

Recommendation 3.4: Companies should disclose
in each annual report the proportion of women
employees in the whole organisation, women in
senior management and women on the board.

As at 30 June 2013 the proportion of women in the whole
organisation is 3 out of 11 (27%), the proportion of women
in senior executive positions is 0 of 3 (0%) and proportion of
women on the Board is 0 of 4 (0%).

Principle 4: Safeguarding Integrity in Financial
Reporting

Recommendation 4.1: The board should establish an
audit committee.

Recommendation 4.3: The audit committee should
have a formal charter.

An Audit and Risk Committee and charter have been established.
The charter is available on the Company website.

The Committee consists of:

•

Timothy E. Dibb (Chairman)

Geoffrey J. King

Up until his date of resignation, Leon Musca was also a member
of this committee, along with Steven J. Koroknay who was a
member of this committee during his time as a director.

The primary role of the Audit and Risk Committee is to assist the
Board to fulfil its corporate governance responsibilities relating to
financial accounting practises, external financial reporting, financial
risk management and internal control, the internal and external
audit function, compliance with laws and regulations relating to
these areas of responsibility and identification and development
of strategies and actions to manage business risk.

All members of the Audit and Risk Committee are non-executive
directors. It is chaired by an independent chair who is not the
chairman of the board.

Principle 5: Make timely and balanced disclosure

Recommendation 5.1: Companies should establish
written policies designed to ensure compliance with
the ASX listing rules disclosure requirements and
to ensure accountability at a senior executive level
for that compliance and disclose those policies or a
summary of those policies.

The Company has in place an ASX Compliance procedure which
outlines the requirements to comply with the ASX listing rules
disclosure requirements and to ensure accountability at senior
executive level for that compliance.

The Public Officer, Company Secretary and Chief Financial Officer,
A.M Knox, has been nominated as the person responsible for
communications with the ASX. This role includes responsibility for
ensuring compliance with the ASX listing rules and overseeing
and co-ordinating information disclosure to the ASX, analysts,
brokers, shareholders, secondary exchanges, the media and the
public.

Principle 6: Respect the rights of shareholders

Recommendation 4.2: The audit committee should
be structured so that it consists only of non-executive
directors, a majority of independent directors, is
chaired by an independent chair who is not the chair
of the board, and has at least two members.

Recommendation 6.1: Companies should design
a communications policy for promoting effective
communication with shareholders and encouraging
their participation at general meetings and disclose
their policy or a summary of that policy.

The Company has established a Communications Policy for
promoting effective communication with shareholders and
encouraging their participation at general meetings.

The Company maintains a website which is kept up to date with
all relevant announcements to the market and related information
after release to the ASX. The web address is www.cuenrg.com.au.

A copy of the communications policy is available on the
Company website.

Principle 7: Recognise and Manage Risk

Recommendation 7.1 Companies should establish
policies for the oversight and management of
material business risks and disclose a summary of
those policies.

Risk recognition and management are viewed by the Company
as integral to the Company’s objectives of creating and
maintaining shareholder value, and to the successful execution
of the Company’s strategies. The board is responsible for the
overall risk management framework and has delegated to the
Audit and Risk Committee the responsibility for:

•

reviewing the adequacy and effectiveness of CUE’s risk
management framework;

Assisting the Board with regards to oversight of CUE’s
risk management by gaining assurance that all major
identified risks are being adequately managed and that
mitigation practices are appropriate.

Recommendation 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 to the
effectiveness of the Company’s management of its
material business risks.

Management is responsible for designing, implementing and
reporting on the adequacy of the Company’s risk management
and internal control system and has to report to the Audit and
Risk Committee on:

•

The risk management and internal control system during
the year; and

The Company’s management of its material business risks.

Management of the Company annually perform an assessment
of Company risks and identify measures to reduce the risk
levels to as low as possible. A risk register for the Company is
maintained to document the risks identified. The risk register
is reviewed as part of the Board meetings. A risk assessment
procedure is used to assess all risks when the Company is
contemplating a new business venture. Should the risk profile
of the Company change, the risk register will be updated to
reflect this accordingly and any further controls required will be
implemented.

Recommendation 7.3: The Board should disclose
whether it has received assurance from the chief
executive officer and the chief financial officer that
the declaration provided in accordance with section
295A of the Corporations Act is founded on a sound
system of risk management and internal control and
that the system is operating effectively in all material
respects in relation to financial reporting risks.

The CEO and CFO state in writing to the board every financial
year that the statements made by them regarding the integrity
of the financial statements are founded on a sound system of
risk management, internal compliance and control, which in
all material respects implements the policy as adopted by the
Board and that the risk management and internal compliance
control to the extent that they relate to financial reporting are
operating effectively and efficiently in all material respects.

Principle 8: Remunerate Fairly and Responsibly

Recommendation 8.1: The board should establish a
remuneration committee.

Recommendation 8.2: The remuneration committee
should be structured so that it consists of a
majority of independent directors, is chaired by an
independent chair and has at least two members.

The board has established a Remuneration and Nomination
Committee. It consists of two non-executive members. The
chair is not the chairman of the overall board.

The committee consists of:

•

Paul D. Moore (Chairman)

Andrew A. Young

Geoffrey J. King was also a member of this committee until 15
November 2012 when he stepped down to become Chairman
of the full board.

The Remuneration and Nomination Committee makes
recommendations to the full Board on remuneration packages
and other terms and conditions of employment and reviews
the composition of the Board having regard to the Company’s
present and future needs.

Remuneration and other terms and conditions of employment
are reviewed annually by the committee having regard to
the performance and relevant comparative data. As well as a
base salary, remuneration packages include superannuation,
termination entitlements, fringe benefits, annual cash bonuses
linked to short term performance and shares and options linked
to long term Company performance.

Remuneration packages are set at levels that are intended to
attract and retain high calibre staff and align the interest of the
executives with those of the Company shareholders.

Recommendation 8.3: Companies should clearly
distinguish the structure of non-executive director’s
remuneration from that of executive directors and
senior executives.

Remuneration of non-executive directors is determined by
the Board within the maximum amount approved by the
shareholders from time to time.

Further information on Directors and Executives remuneration
is set out in the Directors’ Report and Remuneration Report on
pages 24 to 36.

The Remuneration and Nomination committee charter is
available on the company’s website.

Cue Energy Resources Limited Annual Report 2012/13Corporate Governance StatementDirectors’ Report

Your Directors present their report on the Company and its
controlled entities (“the Group” or “consolidated entity”)
for the financial year ended 30 June 2013.

Directors

The names of Directors of the Company in office during the year
and up to the date of this report were:

Geoffrey J. King (Chairman)

Paul D. Moore

Timothy E. Dibb

Andrew A. Young

Leon Musca (retired 15 November 2012)

Richard G. Tweedie (retired 25 February 2013)

Steven J. Koroknay (deceased 6 June 2013)

Chief Executive Officer

David A.J. Biggs (commenced 22 April 2013)

Chief Financial Officer/Company Secretary

Andrew M. Knox

Co-Company Secretary

Pauline M. Moffatt

Principal Activities
The principal activities of the group are petroleum exploration,
development and production.

Cue Energy Resources Limited (‘Cue’) is listed on the Australian
Securities Exchange, the New Zealand Stock Exchange and the
Port Moresby Stock Exchange. The Company has an American
Depositary Receipt (ADR) program sponsored by the Bank of New
York and these are traded via the OTCQX Market in the US.

Principal Place of Business

Level 21

114 William Street

Melbourne 3000

Australia

Registered Office

Level 21

114 William Street

Melbourne 3000

Australia

Dividends

No dividends were paid during the financial year or have been
approved subsequent to balance date (2012: nil).

Review of Operations
Production income for the year ended 30 June 2013 was
$49.8 million (2012: $41.2 million).

Production and amortisation expenses totalled $36.7 million for
the year (2012: $24.3 million).

Profit before income tax expense for the year was $8.4 million
(2012: $13.6 million). Tax expense for the year was $2.0
million (2012: $8.0 million), resulting in profit after income tax
expense of $6.4 million for the year (2012: $5.7 million).

Further information on the operations and financial position of
the group and its business strategies and prospects is set out in
the Chairman’s Overview and Chief Executive Officer’s Review
sections of this annual report.

Significant changes in the state of affairs

During the financial year, there was no significant change in the
state of affairs of the consolidated entity.

Equity and Capital Structure

Total Equity as at 30 June 2013 was $131.6 million (2012:
$125.2 million). At the reporting date Cue had issued share
capital of $152.4 million (2012: $152.4 million). No further
shares have been issued subsequent to the reporting date.

The total number of shares on issue at 30 June 2013 was
698,119,720 (2012: 698,119,720).

Share options and Performance Rights

As at 30 June 2013 Cue had 1,600,000 performance rights on
issue that had yet to be exercised (2012: 3,200,000).

Environmental Regulation

Within the last year there have been zero incidents, zero lost
time injuries and zero significant spills within Cue Energy
Resources. Among the joint venture operations there have

been a number of incidents that have been reported and
investigated by all the relevant parties. The increased reporting
is showing a growth in the reporting culture and an openness
to share learnings in order to reduce risk not only within Cue
Energy Resources but within the industry. Cue Energy Resources
continues to monitor the progress and close out of these incidents
and work with the JV partners and operators to improve overall
health and safety and minimise any impact on the environment.

There have been a number of steps taken in order to improve
Health, Safety and Environment (HSE) and to implement an HSE
Management system that is suitable for all countries and all
levels of operations that the business may wish to be involved
with. The overall aim of the system is to not only meet legislative
requirements but to show a true commitment to HSE for the sake
of Cue Energy Resources personnel, contractors, assets and the
environment.

Throughout this year, internally the HSE Management system is
in effect and beginning to grow a proactive safety culture with
the business in line with industry best practice. While Cue is still
a relatively small business, it has in place a Management System
that is fit for purpose regardless of the size of the company. The
System will now be able to grow with the business.

Through ongoing commitment by both Senior Management
and staff alike, this system will move Cue Energy Resources
forward and will continually improve overall Health, Safety and
Environmental risk to the company. This will demonstrate that
Cue Energy Resources is a leader in all its current and projected
fields of expertise and will give Cue Energy Resources the ability
to remain competitive, whilst managing its risks to as low as
reasonably practicable.

Likely developments and expected results of operations

The particular information required by Section 299(1) (e) of
the Corporations Act 2001 has been omitted from the report
because the Directors believe that it would result in unreasonable
prejudice to the economic entity.

Directors Meetings, Qualifications and Experience

The following table sets out the number of meetings of the Board of Directors held during the year and the number of meetings
attended by each Director.

Board

Audit and Risk Committee

Remuneration and
Nomination Committee

Held

Attended

Held

Attended

Held

Attended

Geoffrey J. King

Timothy E. Dibb

Paul D. Moore

Andrew A. Young

Leon Musca(i)

Richard G. Tweedie(ii)

Steven J. Koroknay(iii)

(i)

(ii)

(iii)

Leon Musca (retired 15 November 2012)

Richard G. Tweedie (retired 25 February 2013)

Steven J. Korokany (deceased 6 June 2013)

Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.

Cue Energy Resources Limited Annual Report 2012/13Directors’ ReportParticulars of Directors’
Interests in shares of Cue
Energy Resources Limited at
the date of this report

Direct

20,000

Indirect

2,500

Nil

150,000

Information on directors and executives, including qualifications and experience is as follows:

Directors

Qualifications and Experience

Special Responsibilities

Non-Executive Chairman Board
of Directors
Member of Audit and Risk
Committee
Member of Remuneration and
Nomination Committee
(until 15 November 2012)

Non-Executive Director
Chairman of Remuneration
and Nomination Committee

Non-Executive Director
Chairman of the Audit and Risk
Committee

Non-Executive Director
Member of Remuneration and
Nomination Committee
Acting CEO/Executive Director
14 November 2012 to
21 April 2013

G.J. King

BA, LL.B
Non-Executive Chairman – Phoenix Oil and Gas Limited (ii)

-Appointed 17 December 2008

Non-Executive Chairman of Cue Energy Resources Limited(i)

-Appointed 24 November 2011

P.D. Moore(iii) BSc-Civil Eng, MBA

Director of Otto Energy Limited(i)
-Appointed 1 July 2009
-Resigned 1 July 2011

Non-Executive Director of Cue Energy Resources Limited(i)

-Appointed 24 November 2011

T.E. Dibb

BSc, PhD, Dip M’gmt
Non-Executive Director of Cue Energy Resources Limited(i)

A.A. Young

-Appointed 24 November 2011

BE (Chemical Engineering), MBA (Hons)
Non-Executive Director of National Safety Council
of Australia Limited(ii)

-Appointed March 2009

Non-Executive Director of Cliq Energy Berhad(ii)

-Appointed May 2012
-Resigned 31 March 2013
-Re-appointed June 2013

Non-Executive Chairman of Real Energy Corporation Limited(ii)

-Appointed 1 July 2012
-Resigned 31 March 2013

Non-Executive Director of New Guinea Energy Limited(i)

-Appointed 20 October 2010

Non-Executive Director of Cue Energy Resources Limited(i)

-Appointed 13 December 2011

Non-Executive Chairman of Galilee Energy Limited

-Appointed 19 August 2013(i)

L. Musca

LL.B
Barrister and Solicitor
Non-Executive Director of Cue Energy Resources Limited(i)

-Appointed 17 November 1999
-Retired 15 November 2012

Non-Executive Director
Member of Audit and
Risk Committee (until
15 November 2012)

1,628,572(iv)

11,142,655(iv)

R.G. Tweedie LL.B

Non-Executive Director

568,784(iv)

3,363,477(iv)

Director of Todd Petroleum Mining
Company Limited(ii)

-Appointed 4 September 1987
-Retired 31 December 2010

Non-Executive Director of Cue Energy Resources Limited

-Appointed 16 July 2001
-Retired 26 February 2013

Information on directors and executives, including qualifications and experience is as follows:

Directors

Qualifications and Experience

Special Responsibilities

Non-Executive Director
Member of Audit and Risk
Committee (until 6 June 2013)

S.J. Koroknay BE(Hons)-Civil Eng (Sydney), FAICD, FIEA

Non-Executive Director Innamincka Petroleum Limited(i)

-Appointed 15 May 2008
-Resigned 24 June 2011

Non-Executive Chairman Galilee Energy Limited(i)

-Appointed 20 January 2009
-Deceased 6 June 2013

Non-Executive Director Metgasco Limited(i)

-Appointed 20 January 2010
-Deceased 6 June 2013

Non-Executive Director Cue Energy Resources Limited(i)

-Appointed 9 October 2009
-Deceased 6 June 2013

Particulars of Directors’
Interests in shares of Cue
Energy Resources Limited at
the date of this report

Direct

Indirect

50,000(iv)

200,000(iv)

Executives

Qualifications and Experience

D.A.J. Biggs

LL.B

A.M. Knox

B.Com, CA, CPA, FAICD
Director of Rimfire Pacific Mining NL(i)

Special Responsibilities

Chief Executive Officer
-Appointed 22 April 2013

Chief Financial Officer
Company Secretary

Direct

8,045

Indirect

2,321,007

2,137,245

-Appointed 8 July 2005(i)
-Resigned 31 March 2011

Director of Axis Mining NL(ii)
-Appointed 8 July 2005
-Resigned 31 March 2011

D.B. Whittam BSc, MSc

M.J Paton

B.SC (Hons), MIChemE

Exploration Manager
-Appointed 18 June 2012

Chief Executive Officer
Appointed 8 February 2011
Resigned 14 November 2012

Nil

Nil(iv)

1,492,881(iv)

(i)

(ii)

(iii)

(iv)

Refers to ASX listed directorships held over the past three years.

Refers to unlisted public company directorships held over the past three years.

P.D. Moore is an employee of the Todd Group of Companies which hold 189,023,314 shares in Cue Energy Resources Limited.

As at date of ceasing to be a director or executive.

Qualifications and Experience

P.M. Moffatt

B. Com, CSA(Cert)

Special Responsibilities

Co Company Secretary
-Appointed 31 May 2013

Direct

114,645

Indirect

Nil

No shares in subsidiary companies are held by the Directors and no remuneration or other benefits were paid or are due and
payable by subsidiary companies. No share options are held in the company by Directors or Executives. Performance Rights held by
Executives are detailed in the Remuneration Report.

Cue Energy Resources Limited Annual Report 2012/13Directors’ Report

Remuneration Report (Audited)
This Remuneration Report which has been audited, and which
forms part of the Directors’ Report, sets out information about the
remuneration of Cue Energy Resources Limited’s Directors and its
senior management for the financial year ended 30 June 2013, in
accordance with the Corporations Act 2001 and its regulations.

The prescribed details for each person covered by this report are
detailed below under the following headings:

(A) Director and Executive Details

(B) Remuneration Policy

(D) Equity Based Remuneration

(E) Relationship between Remuneration Policy and

Company Performance

(A)

Director and Executive Details

The following persons acted as Directors of the company during
or since the end of the financial year:

G.J. King (Non-Executive Chairman)

T.E. Dibb (Non-Executive Director)

P.D. Moore (Non-Executive Director)

A.A. Young (Non-Executive Director)

L. Musca (Non-Executive Director –
retired 15 November 2012)

R.G. Tweedie (Non-Executive Director –
retired 25 February 2013)

S.J. Koroknay (Non-Executive Director –
deceased 6 June 2013)

The term “Key Management Personnel” is used in this
Remuneration Report to refer to the following persons:

D.A.J. Biggs (Chief Executive Officer –
commenced 22 April 2013)

A.M. Knox (Chief Financial Officer/Company Secretary)

D.B. Whittam (Exploration Manager)

M.J. Paton (Chief Executive Officer –
resigned 14 November 2012)

A.B. Parks (Chief Commercial Officer –
resigned 30 August 2012)

Unless otherwise stated the persons named above held their
current position for the whole of the financial year and since the
end of the financial year.

(B)

Remuneration Policy

The Board’s policy for remuneration of Executives and Directors is
detailed below.

Remuneration packages are set at levels that are intended to
attract and retain high calibre directors and employees and align
the interest of the Directors and Executives with those of the
company’s shareholders. The Remuneration policy is established
and implemented solely by the Remuneration and Nomination
Committee which is comprised of Non-Executive Directors only.

Remuneration and other terms and conditions of employment
are reviewed annually by the Remuneration and Nomination
Committee having regard to performance and relevant employment
market information. As well as a base salary, remuneration
packages include superannuation, annual incentive plan cash
bonuses, termination entitlements, fringe benefits and share based
incentives in the form of share options or performance rights. From
1 July 2011, the company has implemented a Performance Rights
Plan as the primary share based incentive for services provided from
that date. The Performance Rights Plan is described under heading D
Equity Based Remuneration.

Performance measures and targets applicable to the award of
performance rights and annual cash bonuses will be established
by the board on an annual basis.

The Board is conscious of its responsibilities in relation to the
performance of the Company. Directors and Executives are
encouraged to hold shares in the Company to align their interests
with those of shareholders.

No remuneration or other benefits are paid to Directors or
Executives by any subsidiary companies.

(C)

Details of Remuneration

The structure of non-executive Director and Executive
remuneration is separate and distinct.

Non-Executive Directors

Remuneration of Non-Executive Directors is determined by
the Board within the maximum amount approved by the
shareholders from time to time. The amount currently approved
is $700,000, which was approved at the Annual General
Meeting held on 24 November 2011. The Company’s policy
is to remunerate Non-Executive Directors at a fixed fee based
on their time involvement, commitment and responsibilities.
Remuneration for Non-Executive Directors is not linked to
individual or company performance, however, to align Directors’
interests with shareholders’ interests, Non-Executive Directors
are encouraged to hold shares in the Company. The Board
retains the discretion to award options or performance rights
to Non-Executive Directors based on the recommendation of
the Remuneration and Nomination Committee, which is always
subject to shareholder approval.

Executives

Short term incentives

The Board, at its sole discretion, may elect to pay short term
incentives in the form of performance based cash bonuses to
executives based on the recommendation of the Remuneration
and Nomination Committee. Any payment of short term
incentives is dependent on the achievement of performance
targets as determined by the Board. These targets shall
include a combination of key strategic, financial and personal
performance measures which have major influence over
company performance in the short term. Short term incentive
payments may also be made at the discretion of the Board
to reward an executive’s participation in ad-hoc projects or
activities. Short term incentives, in the form of performance
based cash bonuses, were granted post year end for the 30
June 2013 financial year.

Long term incentives

The Board implemented a Performance Rights Plan effective
from 1 July 2011. The Remuneration and Nomination
Committee recommends the grant of performance rights
as incentives for its executives, to maintain their long term
commitment to the Company. The use of long term incentives
is considered a valuable means of aligning the interest of
shareholders and the individuals to whom such long term
incentives are provided. It also provides the Remuneration and
Nomination Committee with a range of incentives to attract
and retain key management, including executives. The number
of share options or performance rights granted and their terms
and conditions are determined by the Board and defined in the
Performance Rights Plan Rules and can be adjusted to reflect
specific performance hurdles (as discussed below) in order to
best match such awards with the actual circumstances of the
Company at a given point in time.

Executives receive a mixture of fixed and variable pay and
a blend of short and long term incentives as appropriate.
Remuneration packages contain the following key elements:

•

Fixed compensation component inclusive of base salary,
superannuation and non-monetary benefits.

Short term incentive programme incorporating
performance based cash bonuses.

Superannuation.

Long term incentives incorporating share based payments
including performance rights (from 1 July 2011) and share
options granted as long term performance incentives or in
lieu of services.

The award of long term incentives, such as share options
and performance rights ensures that the total compensation
package awarded to executives matches the stage of
development of the Company at a given point in time. The
grant of share options or performance rights is designed to
recognise and reward the efforts of executives as well as to
provide additional incentive. These grants may be subject to
the successful completion of performance hurdles. Executives
are prohibited from entering into transactions or arrangements
which limit the economic risk of participating in unvested
entitlements.

The Remuneration and Nomination Committee is responsible
for determining and reviewing remuneration arrangements.
The Remuneration and Nomination Committee assesses the
appropriateness of the nature and amount of remuneration
of executives on a periodic basis, by reference to relevant
employment market conditions, with the overall objective of
ensuring maximum stakeholder benefit from the retention of
a high quality, high performing Director and executive team.
The charter adopted by the Remuneration and Nomination
Committee aims to align rewards with achievement of strategic
objectives and creation of shareholder wealth.

Fixed compensation

Fixed compensation consists of base salary (which is calculated
on a total cost base and including any FBT charges related
to employee benefits including motor vehicles), as well as
employer contributions to superannuation funds.

The base salary is reflective of market rates for companies of
similar size and industry which is reviewed annually to ensure
market competitiveness. During 2013, the Remuneration and
Nomination Committee reviewed the salaries paid to peer
company executives in determining the salary of Cue’s Key
Management Personnel. This base salary is fixed remuneration
and is not subject to performance of the company. Base salary
is reviewed annually and adjusted as determined by the
Remuneration and Nomination Committee on 1 January each
year. There is no guaranteed base salary increase included in
any executive’s contracts.

Cue Energy Resources Limited Annual Report 2012/13Directors’ ReportDuring the year ended 30 June 2013, 3.2 million Performance Rights were granted to executives (for services provided from 1 July 2012):

Vesting Date

Vesting Target

D.B. Whittam

A. M. Knox

M.J. Paton(iii)

2013 Performance
Rights Issue

Expire 30 June 2014
if not vested

ASX
0.60 cents

800,000

1,600,000

The Performance Rights granted, during the year, and outstanding at year end, will vest as ordinary shares on 30 June 2014 if the
volume weighted average share price in Cue Energy Resources Limited quoted on ASX increases, for thirty consecutive days, to
60 cents per share from 1 July 2013 to 30 June 2014. If the price target is not met the Performance Rights lapse. Employees receiving
Performance Rights must also be employees on the vesting date or these rights will lapse.

During the year ended 30 June 2012, 4 million Performance Rights were granted to executives (for services provided from
1 July 2011):

Vesting Date

Vesting Target

M.J. Paton(iii)

A.M. Knox

A.B. Parks(i)

T. White(ii)

2011 Performance
Rights Issue

Expire 30 June 2013
if not vested

ASX
0.53 cents

1,600,000

800,000

(i)

(ii)

(iii)

A.B. Parks resigned 30 August 2012 and all performance rights outstanding lapsed.

T. White retired 17 May 2012 and all performance rights outstanding lapsed.

M. Paton resigned 14 November 2012 and all performance rights outstanding lapsed.

All 2011 Performance Rights issued have lapsed or expired.

Post employment benefits

The Company makes superannuation contributions for the Australian based employees and directors as required by law.

Employment contracts

Remuneration and other terms of employment for D.A.J. Biggs and D.B. Whittam is formalised in a service agreement. Details of the
agreement are as follows:

D.A.J. Biggs

Title:

Chief Executive Officer

Agreement commenced:

22 April 2013

Details:

Base salary of $450,000 plus statutory superannuation to be reviewed annually by the Remuneration and
Nomination Committee. 6 months termination notice by either party and eligible to receive a discretionary short
term incentive as per Remuneration and Nomination Committee approval and KPI achievement. Eligible for Long
Term Incentive Program. Non solicitation and non compete clauses included.

D.B. Whittam

Title:

Exploration Manager

Agreement commenced:

18 June 2012

Details:

Base salary of $420,000 including superannuation to be reviewed annually by the Remuneration and Nomination
Committee. 3 months termination notice by either party and eligible to receive a short term incentive up to 50% of
base salary as per Remuneration and Nomination Committee approval and KPI achievement. Eligible for Long Term
Incentive Program. Non solicitation and non compete clauses included.

No other Key Management Personnel at present has a service contract. Employment letters outline the components of compensation
paid to other Key Management Personnel but does not prescribe how compensation levels are modified year to year. Compensation
levels are reviewed each year to take into account cost of living changes, any change in the scope of the role performed and any
changes to meet the principles of the compensation policy.

Details of the nature and amount of each major element of remuneration of each Director of the Company and other Key Management
Personnel of the consolidated entity are:

Compensation of Key Management Personnel – 2013:

Cash
Salary and
Fees
$

Short-Term

Non
Monetary
Benefits (i)
$

Post Employment

Super-
annuation
$

Performance
Rights (ii)
$

2013

Name

Non-Executive Directors

G.J. King

T.E. Dibb

P.D. Moore

A.A. Young(ix)

L. Musca(iii)

R.G. Tweedie(iv)

S.J. Koroknay(v)

Total

Other Key Management Personnel

D.A.J. Biggs(vi)

A.M. Knox

D.B. Whittam

M.J. Paton(vii)

A.B. Parks(viii)

Total

Total remuneration of Executives
and Directors

104,800

98,000

100,000

386,500

37,500

65,862

85,695

878,357

83,159

324,679

403,336

616,919

284,402

1,712,495

2,590,852

25,060

25,000

7,712

32,712

6,249

25,000

16,664

6,865

2,746

57,524

90,236

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

Non performance based salary sacrifice benefits, including motor vehicle expenses.

See note 22 for more information.

L Musca retired 15 November 2012.

R.G. Tweedie retired 25 February 2013.

S.J. Koroknay deceased 6 June 2013.

D.A.J. Biggs commenced 22 April 2013.

M.J. Paton resigned 14 November 2012.

A.B. Parks resigned 30 August 2012.

A.A. Young was acting CEO/Executive Director 14 November 2012 to 21 April 2013.

Total
$

104,800

123,000

100,000

386,500

37,500

65,862

93,407

911,069

89,408

385,939

431,200

623,784

287,148

11,200

22,400

1,817,479

22,400

2,728,548

Cue Energy Resources Limited Annual Report 2012/13Directors’ ReportCompensation of Key Management Personnel – 2012:

Cash
Salary and
Fees
$

Short-Term

Non
Monetary
Benefits (i)
$

Super-
annuation
$

Share
Purchases (ii)
$

2012

Name

Non-Executive Directors

R.G. Tweedie

T.E. Dibb

G.J King

S.J. Koroknay

P.D. Moore

L. Musca

A.A. Young

Total

Other Key Management Personnel

M.J. Paton

A.M. Knox

A.B. Parks(iv)

T. White(v)

D.B. Whittam(vi)

Total

Total Remuneration of
Executives and Directors

60,326

68,807

60,326

100,000

55,163

404,948

368,121

281,940

409,224

200,970

15,547

42,918

Post Employment

Performance
Rights (iii)

22,400

11,200

Total
$

100,000

60,326

100,000

60,326

100,000

55,163

536,141

440,521

386,058

424,428

246,807

16,154

33,600

1,513,968

31,193

100,000

31,193

100,000

50,000

15,204

45,837

607

1,275,802

42,918

161,648

1,680,750

42,918

192,841

100,000

33,600

2,050,109

(i)

(ii)

(iii)

(iv)

(v)

(vi)

Non performance based salary sacrifice benefits, including motor vehicle expenses.

Shares purchased on market (refer Directors Saving Plan below).

Performance Share Rights granted see note 22.

A.B. Parks resigned 30 August 2012.

T White retired 17 May 2012.

D.B. Whittam commenced 18 June 2012.

All remuneration paid to D.A.J. Biggs, A.M. Knox and D.B. Whittam is incurred by the parent entity.

A.M. Knox is a Director of all the subsidiaries in the Group and an Executive of the parent company.

Name

Non-Executive Directors:

G.J. King

T.E. Dibb

P.D. Moore

A.A. Young

S.J. Koroknay

R.G. Tweedie

L. Musca

Other Key Management Personnel:

D.A.J. Biggs

A.M. Knox

D.B. Whittam

M.J. Paton

A.B. Parks

Fixed remuneration

At risk – STI

At risk - LTI

2013

2012

2013

2012

2013

2012

100%

98%

100%

97%

100%

95%

100%

(D)

Equity Based Remuneration

Overview of Share Options and Performance Rights

For services provided from 1 July 2012, the Company has granted 3.2 million Performance Rights to certain Key Management
Personnel as detailed above. These Performance Rights were granted under a Performance Rights Plan which was approved by
shareholders at the Company’s Annual General meeting on 24 November 2011. The Performance Rights Plan is a mechanism
for providing a share based performance incentive for Key Management Personnel and to achieve alignment between
Key Management Personnel and Shareholder objectives. Options were previously granted to the Executives as part of their
remuneration as approved by the Directors. Options granted were not related to a specific performance condition. Options were
granted to reward key management personnel for their contribution to achieving specific milestones.

Performance rights and share options are granted under the plan for no consideration, neither carry dividend or voting rights. No
share options were granted during the financial year to 30 June 2013 (2012: Nil), and performance rights were issued as in note 22.

Performance rights over shares in Cue Energy Resources Limited granted during the 30 June 2013 financial year were granted under
the Cue Energy Resources Ltd Performance Rights Plan (“Plan”) for services provided from 1 July 2012 as approved by the Board on
28 September 2012. The performance rights were granted under the Company’s Performance Rights Plan which was approved by
shareholders at the Annual General Meeting on 24 November 2011.

The Plan is designed to align the interests of executives with shareholders by providing direct participation in the benefits of
future Company performance over the medium to long term. It is contemplated that Performance rights will be granted to Key
Management Personnel on an annual basis. Non Executive Directors will not be eligible to participate in the 2013/14 Plan.

Long term performance targets of the Company will be established every year and the future award of performance rights may be
made at the Board’s sole discretion.

Performance Rights – 30 June 2013 Financial Year

Performance rights granted to Executives during the 30 June 2013 financial year, that have not lapsed, for services provided from
1 July 2012 were:

2012/2013
Performance Rights Issue

Grant Date

Expiry Date

Vesting Date

A.M. Knox

D.B. Whittam

28/09/2012

Expire
30 June 2014
if not vested

Target ASX
60 cents(i)

800,000

(i)

The performance rights granted vest as ordinary shares on 30 June 2014 if a 30 day volume weighted average share price in Cue Energy Resources
Ltd quoted on the ASX increases to 60 cents per share for the period 1 July 2013 to 30 June 2014. On 30 June 2013 the share price for Cue Energy
Resources Limited ordinary shares on the ASX was 11 cents per share. If the ASX Price Target is not met the Performance Rights lapse. Executives
receiving performance rights must also be employees on the vesting date or the rights will lapse.

Performance rights granted to Executives during the 30 June 2012 financial year for services provided from 1 July 2011 were:

Grant Date

Expiry Date

2011
Performance Rights Issue

24/11/2011

Expire
30 June 2013
if not vested

Vesting
Date

Target ASX

M.J. Paton

A.M. Knox

A.B. Parks

T. White

53 cents(i)

1,600,000

800,000

(i)

The performance rights granted vest as ordinary shares on 30 June 2013 if a 30 day volume weighted average share price in Cue Energy Resources
Ltd quoted on the ASX increases to 60 cents per share for the period 1 July 2012 to 30 June 2013. On 30 June 2012 the share price for Cue Energy
Resources Limited ordinary shares on the ASX was 18 cents per share. If the ASX Price Target is not met the Performance Rights lapse. Executives
receiving performance rights must also be employees on the vesting date or the rights will lapse. All Performance Rights granted during 2011 have
lapsed or expired.

Following exercise of a performance right, the Company must issue or transfer to the person exercising the performance right the
number of shares in respect of which the performance right has been exercised and credited as fully paid. All shares issued or
transferred to a participant under this Plan, will, from the date of issue or transfer, rank equally with all other issued shares. Once
rights have vested as shares in the company 50% of the shares may be sold on vesting but 50% must be held by the participant
for a period of 12 months.

Participants will not be required to make any payment for the grant of the performance rights or on the exercise of a vested
performance right.

Cue Energy Resources Limited Annual Report 2012/13Directors’ Report
The following performance rights granted to key management personnel of the Company lapsed during the year as a result of a failure
to meet a vesting condition (including employment conditions):

Participant

A.M. Knox

M.J. Paton(i)

T. White(iii)

A.B. Parks(ii)

Tranche

2011/2012 Plan

2012/2013 Plan

2011/2012 Plan

Number of Performance
Rights Lapsed

Value at lapse date*

800,000

1,600,000

800,000

88,000

224,000

184,000

128,000

(i)

(ii)

(iii)

M.J. Paton resigned 14 November 2012.

A.B. Parks resigned 30 August 2012.

T. White retired 17 May 2012

The value is determined at the date of lapsing using the closing share price on the date of lapse multiplied by the number of Performance Rights
assuming the condition was satisfied. The performance rights lapsed due to the resignation of an employee or vesting conditions not being met.

The performance hurdles for the grant of performance rights under the Plan to participants, as described above, are classified as
market-based hurdles. In determining the value of the performance rights granted to participants, a risk based statistical analysis was
used that took into account, as at the grant date, the following variables and assumptions:

•

Expected life of the instrument – the performance rights will expire on 30 June 2014 should they not be exercised.

Share price of the underlying share on grant date of 14 cents.

Expected volatility – the price volatility of the shares was approximately 45%.

Expected dividends – there was no dividends presently expected to be paid in respect of the underlying shares.

The risk free interest rate for the expected life of the instrument – the average risk free interest rate at grant date was 3%.

On the basis the implied value of the 2012/2013 performance rights was 0.28 cents per right. The implied value (share based payment
charge) of the performance rights that could vest in the future are:

2012/2013
Performance Rights Issue

Grant Date

28/09/2013

Expiry Date

Vesting Date

A.M. Knox

D.B. Whittam

Expire 30 June 2014
if not vested

Target ASX
60 cents

800,000

30 June 2013 financial year

30 June 2014 financial year

Total

$11,200

$22,400

$11,200

$22,400

Directors Savings Plan

Pursuant to the Directors Savings Plan, Directors can purchase through an appointed trustee, Cue Energy Resources Limited, shares on
market in lieu of being paid Directors fees in cash.

No ordinary shares were purchased for the Directors as part of the Plan during the current financial year (2012: $100,000).

(E)

Relationship Between Remuneration Policy and Company Performance

Company Performance Review

The tables below set out summary information about the company’s earnings and movements in shareholder wealth and key
management remuneration for the five years to 30 June 2013.

Profit Performance

Production Income

Profit/(loss) before income tax expense

Profit/(loss) after income tax expense

Total Key Management
Personnel Remuneration

30 June 2013
$000’s

30 June 2012
$000’s

30 June 2011
$000’s

30 June 2010
$000’s

30 June 2009
$000’s

49,798

8,409

6,369

41,222

13,621

5,663

52,506

25,761

19,107

54,700

39,351

27,510

30,445

(20,905)

(24,958)

2,729

2,050

2,237

963

970

Share Performance

30 June 2013

30 June 2012

30 June 2011

30 June 2010

30 June 2009

Share price at start of year (cents)

Share price at end of year (cents)

Dividends (cents)

Basic earnings/(loss) per share (cents)

Diluted earnings/(loss) per share (cents)

18.0

11.0

0.91

26.5

18.0

0.81

25.0

26.5

2.7

14.5

25.0

4.0

22.5

14.5

(4.0)

The company’s remuneration policy seeks to reward staff members for their contribution to adding shareholder value so there is a
direct link between a portion of remuneration and company share price or financial performance.

This concludes the Remuneration Report which has been audited.

Cue Energy Resources Limited Annual Report 2012/13Directors’ ReportAuditor
In accordance with the provisions of the Corporations Act 2001
the Company’s auditor, BDO East Coast Partnership, continues in
office.

Non-audit Services

The Company may decide to employ the auditor on assignments
additional to its statutory audit duties where the auditor’s
expertise and experience with the Company are important.

The Board of Directors has considered the position and 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 audit independence requirement, of the
Corporations Act 2001, based on advice received from the Audit
and Risk Committee, for the following reasons:

•

All non-audit services have been reviewed by the Board to
ensure they do not impact the impartiality and objectivity of
the auditor.

None of the services undermine the general principle
relating to auditor independence as set out in the Code of
Ethics for Professional Accountants, including reviewing or
auditing the auditor’s own work, acting in a management
or a decision making capacity for the Company, acting as
advocate for the Company or jointly sharing economic risk
and reward.

Audit Services

Directors’ Insurance and Indemnification of Directors
and Auditors

During the financial year, the company paid a premium in
respect of a contract insuring the directors of the company, the
company secretary, and all executive officers of the company
against a liability incurred as a director, company secretary or
executive officer to the extent permitted by the Corporations
Act 2001. In accordance with commercial practice, the insurance
policy prohibits disclosure of the terms of the policy, including
the nature of the liability insured against and the amount of the
premium.

The company has not otherwise, during or since the end of the
financial year indemnified or agreed to indemnify an officer or
auditor of the company or any related body corporate against a
liability incurred as an officer or auditor.

Matters subsequent to the end of the financial year

The Company wishes to advise that production from the Maari
field will be deferred until December 2013 to effect repairs to
the facilities. The costs of the repairs are yet to be finalised,
but it is expected that some of the costs will be covered by
insurance. Cue’s share of deferred production while the vessel
is out of service is estimated to be 50,000 boe, or 5.3% of Cue’s
production for the year to 30 June 2013.

Apart from the above, the Directors are not aware of any
matter or circumstance since the end of the financial year, not
otherwise dealt with in this report that has significantly or may
significantly affect the operations of Cue Energy Resources
Limited, the results of those operations or the state of affairs
of the Company or Group.

2013
$

2012
$

Proceedings on behalf of the company

Audit and review of financial reports

84,000

81,000

No person has applied to the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the
company is a party for the purpose of taking responsibility on
behalf of the company for all or part of those proceedings.

Non-Audit Services

Tax compliance services including review of
tax accounting, tax returns and tax advice
regarding tax losses

Total

36,950

39,250

120,950

120,250

On behalf of the Board

Independence Declaration

A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001, is set out on
page 37.

Rounding Off of Amounts

The Company is a company of the kind referred to in ASIC Class
Order 98/100, dated 10 July 1998, and in accordance with the
Class Order amounts in the directors’ report and the financial
report are rounded off to the nearest thousand dollars, unless
otherwise indicated.

Geoffrey J. King

Chairman

26th September 2013

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Cue Energy Resources Limited Annual Report 2012/13

Cue Energy Resources Limited
Directors’ Declaration

The directors of Cue Energy Resources Limited declare that:

(a)

in the Directors’ opinion the financial statements and notes and the Remuneration report in the Directors’ Report set out
on pages 28 to 35, are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance,

for the financial year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and

Corporations Regulations 2001.

(b)

(c)

the financial report also complies with International Financial Reporting Standards as disclosed in note 1; and

there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.

The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the Chief Executive
Officer and Chief Financial Officer for the financial year ended 30 June 2013.

Signed in accordance with a resolution of the Directors.

Dated in Melbourne 26th day of September 2013

Geoffrey J. King

Chairman

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Cue Energy Resources Limited
Financial Report 2012/13

for the financial year ended 30 June 2013

Photo courtesy of OMV

Consolidated Statement of Profit or Loss
and Other Comprehensive Income

for the financial year ended 30 June 2013

Production income

Production costs

Gross profit from production

Other income

Amortisation of production properties

Interest expense

Net realised gain on oil hedge derivatives

Net foreign currency exchange gain

Other expenses

Profit before income tax expense

Income tax expense

Profit after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Profit for the year is attributable to:

Owners of Cue Energy Resources Limited

Total comprehensive income for the year is attributable to:

Owners of Cue Energy Resources Limited

Note

2013
$000’s

2012
$000’s

49,798

(19,131)

41,222

(13,778)

30,667

27,444

160

274

(17,520)

(10,500)

(3)

3,702

(8,597)

(84)

158

2,616

(6,287)

8,409

13,621

(2,040)

(7,958)

6,369

5,663

6,369

5,663

6,369

5,663

6,369

5,663

Basic earnings per share (cents)

Diluted earnings per share (cents)

0.91

0.81

The accompanying notes form part of and are to be read in conjunction with these Financial Statements.

Consolidated Statement of
Financial Position

as at ended 30 June 2013

Current Assets

Cash and cash equivalents

Trade and other receivables

Inventories

Total Current Assets

Non-Current Assets

Property, plant and equipment

Deferred tax assets

Exploration and evaluation expenditure

Production properties

Total Non-Current Assets

Total Assets

Current Liabilities

Trade and other payables

Tax liabilities

Provisions

Total Current Liabilities

Non-Current Liabilities

Deferred tax liabilities

Provisions

Total Non-Current Liabilities

Total Liabilities

Net Assets

Equity

Issued capital

Reserves

Accumulated losses

Total Equity

Note

24(b)

2013
$000’s

2012
$000’s

58,828

5,096

1,157

65,081

214

36,944

73,935

111,156

176,237

11,977

3,973

475

16,425

22,106

6,137

28,243

44,668

33,733

11,746

1,500

46,979

322

31,765

84,886

117,057

164,036

8,631

1,293

381

10,305

23,098

5,455

28,553

38,858

131,569

125,178

7 (a)

7 (b)

152,416

(20,869)

131,569

152,416

425

(27,663)

125,178

The accompanying notes form part of and are to be read in conjunction with these Financial Statements.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13
Consolidated Statement of
Changes in Equity

for the financial year ended 30 June 2013

Issued Capital
$’000

Accumulated
Losses
$’000

Share-based
Payments
Reserve
$’000

Total
$’000

Balance at 1 July 2012

152,416

(27,663)

425

125,178

Profit after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Transactions with the owners in their capacity as owners:

Share based payments

6,369

425

(403)

Balance at 30 June 2013

152,416

(20,869)

131,569

Balance at 1 July 2011

Profit after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Transactions with the owners in their capacity as owners:

Share based payments

Contributions of equity, net of transaction costs

Issued Capital
$’000

Accumulated
Losses
$’000

Share-based
Payments
Reserve
$’000

Total
$’000

151,768

(33,326)

391

118,833

648

5,663

648

Balance at 30 June 2012

152,416

(27,663)

425

125,178

The accompanying notes form part of and are to be read in conjunction with these Financial Statements.

Consolidated Statement of
Cash Flows

for the financial year ended 30 June 2013

Note

2013
$000’s

2012
$000’s

Cash Flows From Operating Activities

Receipts from customers

Interest received

Payments to suppliers and employees

Income taxes paid

Royalties paid

Interest paid

Net Cash Provided by Operating Activities

24(a)

Cash Flows From Investing Activities

Payments for exploration and evaluation expenditure

Payments for production properties

Proceeds on sale of exploration tenements

Payments for property, plant and equipment

Net Cash Used In Investing Activities

Cash Flows From Financing Activities

Proceeds from issue of shares

Repayment of borrowings

Net Cash Used In Financing Activities

Net Increase/(Decrease) in Cash and Cash Equivalents

Cash and cash equivalents at the beginning of the year

Effect of exchange rate change on foreign currency balances held at the beginning of the year

58,127

149

41,548

266

(23,420)

(20,585)

(244)

(1,880)

(3)

32,729

(4,932)

(5,905)

(18)

(8,257)

(1,191)

(52)

11,729

(13,156)

(22,190)

7,407

(55)

(10,855)

(27,994)

21,874

33,733

3,221

648

(5,086)

(4,438)

(20,703)

52,811

1,625

Cash and Cash Equivalents at the End of the Year

24(b)

58,828

33,733

The accompanying notes form part of and are to be read in conjunction with these Financial Statements.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13
Notes to the Financial Statements

for the financial year ended 30 June 2013

1 Summary of Significant Accounting Policies
Cue Energy Resources Limited is a for-profit Public Company listed
on the Australian Securities Exchange incorporated and domiciled
in Australia. The financial report was authorised for issue by the
Directors on the date the Directors’ Declaration was signed.

(a)

Operations and Principal Activities

Operations comprise petroleum exploration, development
and production activities.

(b)

Statement of Compliance

The financial report is a general purpose financial report
presented in Australian dollars which has been prepared
in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting
Standards Board (“AASB”) and the Corporations Act 2001,
as appropriate for for-profit oriented entities. International
Financial Reporting Standards (“IFRSs”) form the basis of
Australian Accounting Standards adopted by the AASB.
The financial reports of the consolidated entity also
comply with IFRS and interpretations adopted by the
International Accounting Standards Board.

The accounting policies set out below have been applied
consistently to all periods presented in this report.

(c)

Basis of Preparation

The financial report has been prepared on a going
concern basis using the historical cost convention.

In accordance with the Corporations Act 2001, these
financial statements present the results of the
consolidated entity only. Supplementary information
about the parent entity is disclosed in note 25.

readily apparent from other sources. Actual results may
differ from these estimates. These accounting policies
have been consistently applied by each entity in the
consolidated entity, and the estimates and underlying
assumptions are reviewed on an ongoing basis.

The judgements, estimates and assumptions that have
a significant risk of causing a material adjustment to the
carrying values of assets and liabilities within the next
financial year are discussed below.

(i) Recovery of Deferred Tax Assets

Deferred tax assets resulting from unused tax losses have
been recognised on the basis that management considers
it is probable that future tax profits will be available to
utilise the unused tax losses.

(ii) Share-Based Payment Transactions

The Group measures the cost of equity settled
transactions with employees by reference to the fair
value of the equity instruments at the date at which they
are granted. The fair value is determined for options by
using the Black Scholes Option Valuation Model and for
Performance Rights a risked statistical analysis technique
is used. The accounting estimates and assumptions
relating to equity-settled share-based payments would
have no impact on the carrying amounts of assets and
liabilities within the next annual reporting period but may
impact expenses and equity. These assumptions include
expected volatility of Cue’s share price, expected dividend
yields and other variables necessary in option pricing
models.

(d)

Critical Accounting Estimates and Judgements

(iii) Impairment of Production Properties Assets

The preparation of a financial report in conformity with
Australian Accounting Standards requires management
to make judgements, estimates and assumptions that
affect the application of policies and reported amounts
of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on
historical experience and various other factors that are
believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not

Production properties impairment testing requires an
estimation of the value-in-use of the cash generating
units to which deferred costs have been allocated. The
value-in-use calculation requires the entity to estimate
the future cash flows expected to arise from the cash
generating unit and a suitable discount rate in order to
calculate present value. Other assumptions used in the
calculations which could have an impact on future years
includes USD rates, available reserves and oil and gas
prices.

1 Summary of Significant Accounting Policies (cont’)

(iv) Useful Life of Production Property Assets

(e)

As detailed at note 1 (k) production properties are
amortised on a unit of production basis, with separate
calculations being made for each resource. Estimates
of reserve quantities are a critical estimate impacting
amortisation of production property assets.

(v) Estimates of Reserve Quantities

The estimated quantities of Proven and Probable
hydrocarbon reserves reported by the Company
are integral to the calculation of the amortisation
expense relating to Production Property Assets, and
to the assessment of possible impairment of these
assets. Estimated reserve quantities are based upon
interpretations of geological and geophysical models
and assessments of the technical feasibility and
commercial viability of producing the reserves. These
assessments require assumptions to be made regarding
future development and production costs, commodity
prices, exchange rates and fiscal regimes. The estimates
of reserves may change from period to period as the
economic assumptions used to estimate the reserves
can change from period to period, and as additional
geological data is generated during the course of
operations. Reserves estimates are prepared in
accordance with the Company’s policies and procedures
for reserves estimation which conform to guidelines
prepared by the Society of Petroleum Engineers.

(vi) Restoration Provisions

Provisions for future environmental restoration are
recognised where there is a present obligation as
a result of exploration, development, production,
transportation or storage activities having been
undertaken, and it is probable that an outflow of
economic benefits will be required to settle the
obligation. The estimated future obligations include
the costs of removing facilities, abandoning wells and
restoring the affected areas.

(vii) Legal Claim

As a result of an economic project arrangement in the
Jeruk field within the Sampang PSC, Indonesia, Cue
may in certain circumstances have an obligation to
reimburse certain monies spent by the incoming party
from future profit oil within the Sampang PSC. There is
a dispute between Cue and the incoming party as to
the quantum of monies that they may be entitled to
claim by way of such reimbursement and when any
such reimbursement would be payable. The Company
is of the view that any amount which might eventually
become payable would not be likely to exceed the
amount of USD5.3 million which has been provided for
in the accounts. The Company awaits the outcome of
an arbitration hearing.

New, revised or amending Accounting
Standards and Interpretations adopted

The consolidated entity has adopted all of the new,
revised or amending Accounting Standards and
Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) that are mandatory for
the current reporting period. The adoption of these
accounting standards and interpretations has not have
any significant impact on the financial performance or
position of the consolidated entity.

(f)

Principles of Consolidation

The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of Cue Energy
Resources Limited (‘’company’’ or ‘’parent entity’’) as
at 30 June 2013 and the results of all subsidiaries for
the year then ended. Cue Energy Resources Limited and
its subsidiaries together are referred to in this financial
report as the Group or the consolidated entity.

Subsidiaries are all those 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 that control ceases.

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.

A change in ownership interest, without the loss of
control, is accounted for as an equity transaction, where
the difference between the consideration transferred
and the book value of the share of the non-controlling
interest is recognised directly in equity attributable to
the parent.

Investments in subsidiaries are accounted for at cost
in the individual financial statements of Cue Energy
Resources Limited.

(g)

Revenue Recognition

Revenue is recognised in profit or loss when the
significant risks and rewards of ownership have been
transferred to the buyer. Revenue is recognised and
measured at the fair value of the consideration or
contributions received, net of goods and service tax
(“GST”), to the extent it is probable that the economic
benefits will flow to the Group and the revenue can be
reliably measured.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13

1 Summary of Significant Accounting Policies (cont’)
Sales Revenue

Impairment

(i)

Sales revenue is recognised on the basis of the Group’s
interest in a producing field (“entitlements” method),
when the physical product and associated risks and
rewards of ownership pass to the purchaser, which is
generally at the time of ship or truck loading, or in certain
instances the product entering the pipeline.

Revenue earned under a production sharing contract
(“PSC”) is recognised on a net entitlements basis
according to the terms of the PSC.

Interest Income

Interest revenue is recognised as interest accrues using
the effective interest method. This is a method calculating
the amortised cost of a financial asset and allocating
the interest income over the relevant period using the
effective interest rate, which is the rate that exactly
discounts estimated future cash receipts through the
expected life of the financial assets to the net carrying
amount of the financial asset.

Other Income

Other income is recognised in the profit or loss at the fair
value of the consideration received or receivable, net of
GST, when the significant risks and rewards of ownership
have been transferred to the buyer or when the service
has been performed.

The gain or loss arising on disposal of a non-current asset
is included as other income at the date control of the
asset passes to the buyer. The gain or loss on disposal is
calculated as the difference between the carrying amount
of the asset at the time of disposal and the net proceeds
on disposal.

(h)

Exploration and Evaluation Project Expenditure

Costs incurred during the exploration, evaluation and
development stages of specific areas of interest are
accumulated. Such expenditure comprises net direct costs,
but does not include general overheads or administrative
expenditure not having a specific nexus with a particular
area of interest.

Expenditure is only carried forward as an asset where it
is expected to be fully recouped through the successful
development of the area, or where activities to date have
not yet reached a stage to allow adequate assessment
regarding existence of economically recoverable reserves,
and active and significant operations in relation to the area
are continuing. Ultimate recoupment of costs is dependent
on successful development and commercial exploitation, or
alternatively, sale of respective areas.

Costs are written off as soon as an area has been
abandoned or considered to be non-commercial.

No amortisation is provided in respect of projects in the
exploration, evaluation and development stages until they
are reclassified as production properties.

Restoration costs recognised in respect of areas of interest
in the exploration and evaluation stage are carried forward
as exploration, evaluation and development expenditure.

The carrying amounts of the consolidated entity’s assets,
are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If any
such indications exists, the asset’s recoverable amount is
estimated.

An impairment loss is recognised whenever the carrying
amount of an asset or its cash generating unit exceeds the
recoverable amount. Impairment losses are recognised in
profit or loss, unless an asset has previously been revalued,
in which case the impairment loss is recognised as a
reversal to the extent of that previous revaluation with any
excess recognised through profit or loss.

Impairment losses recognised in respect of cash-generating
units are allocated to reduce the carrying amount of the
assets in the unit (group of units) on a pro rata basis.

(j)

Calculation of Recoverable Amount

For oil and gas assets the estimated future cash flows
are based on value-in-use calculations using estimates
of hydrocarbon reserves, future production profiles,
commodity prices, operating costs and any future
development costs necessary to produce the reserves.
Estimates of future commodity prices are based on
contracted prices where applicable or based on forward
market prices where available. The recoverable amount
of other assets is the greater of their net selling price and
value in use.

In assessing value-in-use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to
the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the
asset belongs.

(k)

Production Properties

Production properties are carried at the reporting date
at cost less accumulated amortisation and accumulated
impairment losses. Production properties represent the
accumulation of all exploration, evaluation, development
and acquisition costs in relation to areas of interest in
which production licences have been granted.

Amortisation of costs is provided on the unit-of-production
basis, separate calculations being made for each resource.
The unit-of-production basis results in an amortisation
charge proportional to the depletion of economically
recoverable reserves (comprising both proven and
probable reserves), and is shown as a separate line item
in profit or loss.

Amounts (including subsidies) received during the
exploration, evaluation, development or construction
phases which are in the nature of reimbursement or
recoupment of previously incurred costs are offset against
such capitalised costs.

1 Summary of Significant Accounting Policies (cont’)
(l)

Property, Plant and Equipment

Restoration

The provision of future restoration costs is the best
estimate of the present value of the future expenditure
required to settle the restoration obligation at the
reporting date, based on current legal requirements.
Future restoration costs are reviewed annually and any
changes in the estimate are reflected in the present
value of the restoration provision at the reporting
date, with a corresponding change in the cost of the
associated asset.

The amount of the provision for future restoration costs
relating to exploration, development and production
facilities is capitalised and depleted as a component of
the cost of those activities.

(r)

Employee Benefits

The following liabilities arising in respect of employee
benefits are measured at their nominal amounts:

• wages and salaries and annual leave expected to
be settled within twelve months of the reporting
date; and

•

other employee benefits expected to be settled
within twelve months of the reporting date.

All other employee benefit liabilities expected to be
settled more than 12 months after the reporting date
are measured at the present value of the estimated
future cash outflows in respect of services provided up
to the reporting date. Liabilities are determined after
taking into consideration estimated future increase in
wages and salaries and past experience regarding staff
departures. Related on-costs are included.

(s)

Joint Ventures

When a member of the group participates in a
joint venture arrangement, the member recognises
its proportionate interest in the individual assets,
liabilities, revenue and expenses of the joint venture.
The liabilities recognised include its share of those for
which it is jointly liable.

Details of major joint venture interests are set out
in note 17.

Class of Fixed Asset

Plant and equipment

Depreciation Rate

5-33%

Property, plant and equipment is carried at historical
cost less accumulated depreciation and accumulated
impairment losses. Depreciation is calculated on a
diminishing value basis so as to allocate the cost of
each item of equipment over its expected economic
life. The economic life of equipment has due regard
to physical life limitations and to present assessments
of economic recovery. Estimates of remaining useful
lives are made on a regular basis for all assets, with
annual reassessment for major items. Gains and losses
on disposal of property, plant and equipment are taken
into account in determining the operating results for
the year.

(m)

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash
includes deposits at call which are readily convertible
to cash on hand and which are used in the cash
management function on a day-to-day basis, net of
outstanding bank overdrafts.

(n)

Trade and Other Receivables

Trade receivables amounts due from related parties
and other receivables represent the principal amounts
due at the reporting date plus accrued interest and less,
where applicable, any unearned income and allowance
for doubtful accounts. Trade receivables are generally
due for settlement within 30 days.

(o)

Inventories

Inventories consist of hydrocarbon stock. Inventories
are valued at the lower of cost and net realisable value.
Cost is determined on a weighted average basis and
includes direct costs and an appropriate portion of fixed
production overheads where applicable.

(p)

Trade and Other Payables

These amounts represent the principal amounts
outstanding at the reporting date plus, where applicable,
any accrued interest. Trade payables are normally paid
within 30 days, and due to their short term nature are
generally unsecured and not discounted.

(q)

Provisions

A provision is recognised in the statement of financial
position when the Group has a present legal or
constructive obligation as a result of a past event, it
is probable that an outflow of resources embodying
economic benefits will be required to settle the
obligation and a reliable estimate can be made of the
amount of the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the
time value of money and, where appropriate, the risk
specific to the liability.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/131 Summary of Significant Accounting Policies (cont’)
(t)

Foreign Currency

Income Tax

(u)

The income tax expense for the year is the tax payable
on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.

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. However,
deferred income tax is 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 reporting date and are expected to apply
when the related deferred income tax asset is realised or
the deferred income tax liability is settled.

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 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.

Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly
in equity.

Cue Energy Resources Limited (the ‘head entity’) and
its wholly-owned Australian controlled entities have
formed an income tax consolidated group under the tax
consolidation regime effective 1 July 2010. The head
entity and the controlled entities in the tax consolidated
group continue to account for their own current and
deferred tax amounts. The tax consolidated group has
applied the group allocation approach in determining the
appropriate amount of taxes to allocate to members of
the tax consolidated group.

In addition to its own current and deferred tax amounts,
the head entity also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from
unused tax losses and unused tax credits assumed from
controlled entitles in the tax consolidated group.

Assets or liabilities arising under tax funding agreement
with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in
the tax consolidated group. The tax funding arrangement
ensures that the intercompany charge equals the current
tax liability or benefit of each tax consolidated group
member, resulting in neither a contribution by the
head entity to the subsidiaries nor a distribution by the
subsidiaries to the head entity.

Functional and presentation currency

The financial statements of each group entity are
measured using its functional currency, which is the
currency of the primary economic environment in
which that entity operates. The consolidated financial
statements are presented in Australian dollars, as this is
the parent entity’s functional and presentation currency.

Transactions and balances

Transactions in foreign currencies of entities within
the consolidated entity are translated into functional
currency at the rate of exchange ruling at the date of
the transaction.

Foreign currency monetary items that are outstanding
at the reporting date (other than monetary items arising
under foreign currency contracts where the exchange
rate for that monetary item is fixed in the contract) are
translated using the spot rate at the end of financial year.

Resulting exchange differences arising on settlement or
re-statement are recognised as in profit or loss for the
financial year.

(v)

Share-Based Payment Transactions

Equity settled transactions

The Group provides benefits in the form of share-based
payments to executives, senior management and general
staff. These personnel render services in exchange for
shares or rights over shares (equity-settled transactions).
The cost of these equity-settled transactions with
employees is measured by reference to the fair value
of the equity instruments at the date at which they are
granted. The fair value for the options over ordinary
shares are determined using the Black-Scholes Option
Valuation Model and for Performance Rights a risked
statistical analysis pricing technique is used.

In valuing equity-settled transactions, no account
is taken of any performance conditions, other than
conditions linked to the price of the shares of the
Company (market conditions) if applicable. The cost of
equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled,
ending on the date on which the relevant employees
become fully entitled to the award (the vesting date).

The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date
reflects (i) the extent to which the vesting date has
expired and (ii) the Group’s best estimate of the
number of equity instruments that will ultimately vest.
No adjustment is made for the likelihood of market
performance conditions being met as the effect of these
conditions is included in the determination of fair value
at grant date. The profit or loss charge or credit for a
period represents the movement in cumulative expense
recognised as at the beginning and end of that period.

1 Summary of Significant Accounting Policies (cont’)

No expense is recognised for awards that do not
ultimately vest, except for awards where vesting is only
conditional upon a market condition.

If the terms of an equity-settled award are modified,
as a minimum an expense is recognised as if the terms
had not been modified. In addition, an expense is
recognised for any modification that increases the total
fair value of the share-based payment arrangement, or
is otherwise beneficial to the employee, as measured
at the date of modification.

If an equity-settled award is cancelled, it is treated as
if it had not vested on the date of cancellation, and
any expense not yet recognised for the award is not
recognised. However, if a new award is substituted for
the cancelled award and designated as a replacement
award on the date that it is granted, the cancelled and
new award are treated as if they were a modification
of the original award, as described in the previous
paragraph.

The dilutive effect, if any, of outstanding options and
Performance Rights is reflected as additional share
dilution in the computation of earnings per share (see
note 20).

(w)

Leases

Lease payments for operating leases where substantial
risks and benefits remain with the lessor are charged as
expenses in the periods in which they are incurred.

(x)

Contributed Equity

Ordinary share capital is recognised at the fair value
of the consideration received by the company. Any
transaction costs arising on the issue of ordinary shares
are recognised directly in equity as a reduction of the
share proceeds received. Ordinary share capital bears
no special terms or conditions affecting income or
capital entitlements of the shareholders.

(y)

Rounding

The amounts contained in this financial report have
been rounded to the nearest $1,000 (where rounding is
applicable) under the option available to the company
under ASIC Class Order 98/100. The Company is an
entity to which the Class Order applies.

(z)

New Accounting Standards and Interpretations
not yet mandatory or early adopted

Australian Accounting Standards and Interpretations
that have recently been issued or amended but are
not yet mandatory, have not been early adopted
by the consolidated entity for the annual reporting
period ended 30 June 2013. The consolidated entity’s
assessment of the impact of these new or amended
Accounting Standards and Interpretations, most relevant
to the consolidated entity, are set out below.

AASB 9 Financial Instruments, 2009-11
Amendments to Australian Accounting
Standards arising from AASB 9, 2010-7
Amendments to Australian Accounting
Standards arising from AASB 9 and 2012-
6 Amendments to Australian Accounting
Standards arising from AASB 9

This standard and its consequential amendments are
applicable to annual reporting periods beginning on
or after 1 January 2015 and completes phase I of the
lASB’s project to replace lAS 39 (being the international
equivalent to AASB 139 ‘Financial Instruments:
Recognition and Measurement’). This standard
introduces new classification and measurement
models for financial assets, using a single approach to
determine whether a financial asset is measured at
amortised cost or fair value. The accounting for financial
liabilities continues to be classified and measured in
accordance with AASB 139, with one exception, being
that the portion of a change of fair value relating
to the entity’s own credit risk is to be presented in
other comprehensive income unless it would create
an accounting mismatch. The consolidated entity will
adopt this standard from 1 July 2015 but the impact of
its adoption is yet to be assessed by the consolidated
entity.

AASB 10 Consolidated Financial Statements

This standard is applicable to annual reporting periods
beginning on or after 1 January 2013. The standard
has a new definition of ‘control’. Control exists when
the reporting entity is exposed, or has the rights, to
variable returns (e.g. dividends, remuneration, returns
that are not available to other interest holders including
losses) from its involvement with another entity
and has the ability to affect those returns through its
‘power’ over that other entity. A reporting entity has
power when it has rights (e.g. voting rights, potential
voting rights, rights to appoint key management,
decision making rights, kick out rights) that give it the
current ability to direct the activities that significantly
affect the investee’s returns (e.g. operating policies,
capital decisions, appointment of key management).
The consolidated entity will not only have to consider
its holdings and rights but also the holdings and rights
of other shareholders in order to determine whether
it has the necessary power for consolidation purposes.
The adoption of this standard from 1 July 2013 may
have an impact where the consolidated entity has a
holding of less than 50% in an entity, has de facto
control, and is not currently consolidating that entity.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/131 Summary of Significant Accounting Policies (cont’)

AASB 11 Joint Arrangements

This standard is applicable to annual reporting periods
beginning on or after 1 January 2013. The standard
defines which entities qualify as joint ventures and
removes the option to account for joint ventures using
proportional consolidation. Joint ventures, where the
parties to the agreement have the rights to the net
assets will use equity accounting. Joint operations, where
the parties to the agreements have the rights to the
assets and obligations for the liabilities will account for
the assets, liabilities, revenues and expenses separately,
using proportionate consolidation. Management are yet
to determine if the adoption of this standard from 1 July
2013 will have a material impact on the consolidated
entity.

AASB 12 Disclosure of Interests in Other Entities

This standard is applicable to annual reporting periods
beginning on or after 1 January 2013. It contains the
entire disclosure requirement associated with other
entities, being subsidiaries, associates and joint ventures.
The disclosure requirements have been significantly
enhanced when compared to the disclosures previously
located in AASB 127 ‘Consolidated and Separate Financial
Statements’, AASB 128 ‘Investments in Associates’, AASB
131 ‘Interests in Joint Ventures’ and Interpretation 112
‘Consolidation - Special Purpose Entities’. The adoption of
this standard from 1 July 2013 will significantly increase
the amount of disclosures required to be given by the
consolidated entity such as significant judgements and
assumptions made in determining whether it has a
controlling or non-controlling interest in another entity
and the type of non-controlling interest and the nature
and risks involved.

AASB 13 Fair Value Measurement and AASB
2011-8 Amendments to Australian Accounting
Standards arising from AASB 13

This standard and its consequential amendments
are applicable to annual reporting periods beginning
on or after 1 January 2013. The standard provides a
single robust measurement framework, with clear
measurement objectives, for measuring fair value using
the ‘exit price’ and it provides guidance on measuring fair
value when a market becomes less active. The ‘highest
and best use’ approach would be used to measure assets
whereas liabilities would be based on transfer value. As
the standard does not introduce any new requirements
for the use of fair value, its impact on adoption by the
consolidated entity from 1 July 2013 should be minimal,
although there will be increased disclosures where fair
value is used.

AASB 127 Separate Financial Statements
(Revised)

AASB 128 Investments in Associates and Joint
Ventures (Reissued)

These standards are applicable to annual reporting
periods beginning on or after 1 January 2013. They
have been modified to remove specific guidance that is
now contained in AASB 10, AASB 11 and AASB 12. The
adoption of these revised standards from 1 July 2013 will
not have a material impact on the consolidated entity.

AASB 119 Employee Benefits (September 2011)
and AASB 2011-10 Amendments to Australian
Accounting Standards arising from AASB 119
(September 2011)

This revised standard and its consequential amendments
are applicable to annual reporting periods beginning on
or after 1 January 2013. The amendments eliminate the
corridor approach for the deferral of gains and losses;
streamlines the presentation of changes in assets and
liabilities arising from defined benefit plans, including
requiring remeasurements to be presented in other
comprehensive income; and enhances the disclosure
requirements for defined benefit plans. The amendments
also changed the definition of short-term employee
benefits, from ‘due to’ to ‘expected to’ be settled within
12 months.

This will require annual leave that is not expected to
be wholly settled within 12 months to be discounted
allowing for expected salary levels in the future period
when the leave is expected to be taken. The adoption of
the revised standard from 1 July 2013 is not expected to
have a significant impact on the consolidated entity.

AASB 2011-4 Amendments to Australian
Accounting Standards to Remove Individual Key
Management Personnel Disclosure Requirement

These amendments are applicable to annual reporting
periods beginning on or after 1 July 2013, with early
adoption not permitted. They amend AASB 124
‘Related Party Disclosures’ by removing the disclosure
requirements for individual key management personnel
(‘KMP’). The adoption of these amendments from 1
July 2014 will remove the duplication of information
relating to individual KMP in the notes to the financial
statements and the directors’ report. As the aggregate
disclosures are still required by AASB 124 and during the
transitional period the requirements may be included in
the Corporations Act or other legislation, it is expected
that the amendments will not have a material impact on
the consolidated entity.

1 Summary of Significant Accounting Policies (cont’)

AASB 2011-7 Amendments to Australian
Accounting Standards arising from the
Consolidation and Joint Arrangements Standards

The amendments are applicable to annual reporting
periods beginning on or after 1 January 2013. The
amendments make numerous consequential changes
to a range of Australian Accounting Standards and
Interpretations, following the issuance of AASB 10,
AASB 11, AASB 12 and revised AASB 127 and AASB
128. The adoption of these amendments from 1
July 2013 will not have a material impact on the
consolidated entity.

AASB 2012-2 Amendments to Australian
Accounting Standards-Disclosures-Offsetting
Financial Assets and Financial Liabilities

The amendments are applicable to annual reporting
periods beginning on or after 1 January 2013.
The disclosure requirements of AASB 7 ‘Financial
Instruments: Disclosures’ (and consequential
amendments to AASB 132 ‘Financial Instruments:
Presentation’) have been enhanced to provide users
of financial statements with information about netting
arrangements, including rights of set-off related to
an entity’s financial instruments and the effects of
such rights on its statement of financial position. The
adoption of the amendments from 1 July 2013 will
increase the disclosures by the consolidated entity.

AASB 2012-3 Amendments to Australian
Accounting Standards-Offsetting Financial
Assets and Financial Liabilities

The amendments are applicable to annual reporting
periods beginning on or after 1 January 2014.
The amendments add application guidance to
address inconsistencies in the application of the
offsetting criteria in AASB 132 ‘Financial Instruments:
Presentation’, by clarifying the meaning of “currently
has a legally enforceable right of set-off”; and clarifies
that some gross settlement systems may be considered
to be equivalent to net settlement. The adoption of the
amendments from 1 July 2014 will not have a material
impact on the consolidated entity.

AASB 2012-5 Amendments to Australian
Accounting Standards arising from Annual
Improvements 2009-2011 Cycle

The amendments are applicable to annual reporting
periods beginning on or after 1 January 2013. The
amendments affect five Australian Accounting
Standards as follows: Confirmation that repeat
application of AASB 1 (IFRS 1) ‘First time Adoption
of Australian Accounting Standards’ is permitted;
Clarification of borrowing cost exemption in AASB
1; Clarification of the comparative information
requirements when an entity provides an optional
third column or is required to present a third statement
of financial position in accordance with AASB 101

‘Presentation of Financial Statements’; Clarification
that servicing of equipment is covered by AASB 116
‘Property, Plant and Equipment’, if such equipment
is used for more than one period; clarification that
the tax effect of distributions to holders of equity
instruments and equity transaction costs in AASB
132 ‘Financial Instruments: Presentation’ should be
accounted for in accordance with AASB 112 ‘Income
Taxes’; and clarification of the financial reporting
requirements in AASB 134 ‘Interim Financial Reporting’
and the disclosure requirements of segment assets
and liabilities. The adoption of the amendments from
1 July 2013 will not have a material impact on the
consolidated entity.

AASB 2012-9 Amendment to AASB 1048
arising from the Withdrawal of Australian
Interpretation 1039

This amendment is applicable to annual reporting
periods beginning on or after 1 January 2013. The
amendment removes reference in AASB 1048 following
the withdrawal of Interpretation 1039. The adoption of
this amendment will not have a material impact on the
consolidated entity.

AASB 2012-10 Amendments to Australian
Accounting Standards-Transition Guidance and
Other Amendments

These amendments are applicable to annual reporting
periods beginning on or after 1 January 2013. They
amend AASB 10 and related standards for the transition
guidance relevant to the initial application of those
standards. The amendments clarify the circumstances
in which adjustments to an entity’s previous accounting
for its involvement with other entities are required and
the timing of such adjustments. The adoption of these
amendments will not have a material impact on the
consolidated entity.

(aa) Goods and Services tax (‘GST’) and Other

Similar Taxes

Revenues, expense and assets are recognised net of
the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority.In this case it is
recognised as part of the cost of the 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 tax authority
is included in other receivables or other payables in the
statement of financial position.

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 tax authority, are presented as operating
cash flows.

Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
tax authority.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/132 Financial Instruments

The Group’s principal financial instruments comprise receivables, payables, cash and short term deposits.

The Group manages its exposure to key financial risks, including interest rate and currency risk through management’s
regular assessment of financial risks. The objective of the assessment is to support the delivery of the Group’s financial
targets whilst protecting future financial security.

The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, commodity price
risk, credit risk and liquidity risk. The Group uses different methods to measure and manage different types of risk to which
it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of
market forecasts for interest rate, foreign exchange and commodity prices. These risks are summarised below.

Primary responsibility for identification and control of financial risks rests with the Chief Financial Officer under the authority
of the Board. The Board reviews and agrees management’s assessment for managing each of the risks identified below.

The carrying amounts and net fair values of the economic entity’s financial assets and liabilities at the reporting date are:

Consolidated

Financial assets

Cash and cash equivalents

Trade and other receivables

Non-traded financial assets

Financial liabilities

Trade and other payables

Tax liabilities - current

Non-traded financial liabilities

Risk Exposures and Responses

(a)

Fair Value Risk

Carrying Amount

Net Fair Value

2013
$’000

2012
$’000

2013
$’000

2012
$’000

58,828

5,096

63,924

11,977

3,973

15,950

33,733

11,746

45,479

8,631

1,293

9,924

58,828

5,096

63,924

11,977

3,973

15,950

33,733

11,746

45,479

8,631

1,293

9,924

The financial assets and liabilities of the Group are recognised in the statement of financial position at their fair value in
accordance with the accounting policies set out in note 1. In all instances the fair value of financial amounts and liabilities
approximates to their carrying value.

Basis for determining fair values

The following summarises the significant methods and assumptions used in estimating the fair values of financial
instruments:

Trade and other receivables

The carrying value less impairment provision of trade receivables is a reasonable approximation of their fair values due
to the short-term nature of trade and other receivables.

Financial liabilities

Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market
rate of interest at the reporting date. Where these cash flows are in a foreign currency the present value is converted
into Australian dollars at the foreign exchange spot rate prevailing at reporting date.

Trade and other payables

The carrying value of trade payables is a reasonable approximation of their fair values due to the short term nature of
trade payables.

2 Financial Instruments (cont’)
(b)

Interest Rate Risk

The Group’s exposure to market interest rates is related primarily to the Group’s cash deposits (see note 24 (b)).

At the reporting date, the Group had the following mix of financial assets and liabilities exposed to Australian and overseas
variable interest rate risk that are not designated in cash flow hedges:

Cash and cash equivalents

Consolidated

2012
$’000

33,733

2013
$’000

58,828

The Group constantly analyses its interest rate opportunity and exposure. Within this analysis consideration is given to
existing positions and alternative arrangement on fixed or variable deposits.

The following sensitivity analysis is based on the interest rate opportunity/risk in existence at the reporting date.

Based upon the average balance of net exposure during the year, if interest rates changed by +/-1%, with all other
variables held constant, the estimated impact on post-tax profit and equity would have been:

Impact on post-tax profit

Interest rates +1%

Interest rates –1%

Impact on equity

Interest rates +1%

Interest rates –1%

Consolidated

2013
$’000

2012
$’000

463

(463)

463

(463)

510

(510)

510

(510)

A movement of + and – 1% is selected because this historically is within a range of rate movements and available
economic data suggests this range is reasonable.

(c)

Foreign Exchange Risk

The Group is subject to foreign exchange risk on its international exploration and appraisal activities where costs are
incurred in foreign currencies, in particular United States dollars.

The Board approved the policy of holding certain funds in United States dollars to manage foreign exchange risk.

The Group’s exposure to foreign exchange risk at the reporting date was as follows (holdings are shown in AUD equivalent):

Consolidated

Financial assets:

Cash and cash equivalents

Receivables

Financial liabilities:

Current payables

USD

$’000

57,908

4,473

30 June 2013

NZD

PNG KINA

$’000

102

614

USD

$’000

32,385

9,268

30 June 2012

NZD

PNG KINA

$’000

1,152

171

3,543

1,966

1,621

731

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13

2 Financial Instruments (cont’)

At the reporting date, if the currencies set out in the table above, strengthened or weakened against the Australian dollar by
the percentage shown, with all other variables held constant, net profit for the year would increase/(decrease) and net assets
would increase / (decrease) by:

Impact on post-tax profit

+10%

-10%

Impact on equity

+10%

-10%

Impact on post-tax profit

+10%

-10%

Impact on equity

+10%

-10%

USD
$’000

NZD
$’000

(5,884)

5,884

(5,884)

5,884

125

(125)

125

(125)

USD
$’000

NZD
$’000

(4,003)

4,003

(4,003)

4,003

(59)

Consolidated

2013
Total
$’000

(5,760)

5,760

(5,760)

5,760

Consolidated

2012
Total
$’000

(4,063)

4,063

(4,063)

4,063

PNG
KINA
$’000

(1)

PNG
KINA
$’000

(1)

Management believes the risk exposures as at the reporting date are representative of the risk exposure inherent in the
financial instruments. A movement of +/– 10% is selected because a review of recent exchange rate movements and
economic data suggests this range is reasonable.

(d)

Commodity Price Risk

The Group is involved in oil and gas exploration and appraisal, and since April 1998 has received revenue from the sale of
hydrocarbons. Exposure to commodity price risk is therefore limited to this production and from successful exploration and
appraisal activities the quantum of which at this stage cannot be measured.

The Group is exposed to commodity price fluctuations through the sale of petroleum products denominated in US dollars. The
Group may enter into commodity crude oil price swap and option contracts to manage its commodity price risk.

At 30 June 2013 the Group had no open oil price swap contracts (2012: nil).

If the US dollar oil price changed by +/-20% from the average oil price during the year, with all other variables held constant,
the estimated impact on post-tax profit and equity would have been:

Impact on post-tax profit

US dollar oil price +20%

US dollar oil price –20%

Impact on equity

US dollar oil price +20%

US dollar oil price –20%

Consolidated

2013
$’000

2012
$’000

6,375

(6,375)

6,375

(6,375)

3,683

(3,683)

3,683

(3,683)

Management believes the risk exposures as at the reporting date are representative of the risk exposure inherent in the
financial instruments. A movement of + and – 20% is selected because a review of historical oil price movements and
economic data suggests this range is reasonable.

2 Financial Instruments (cont’)
(e)

Liquidity Risk

Liquidity Risk is the risk that the group, although balance sheet solvent, cannot meet or generate sufficient cash resources
to meet its payment obligations in full as they fall due, or can only do so at materially disadvantageous terms.

Ultimate responsibility for liquidity risk management rests with the board of directors, who have established an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding and
liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities
and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.

The Group is consequently more than sufficiently solvent to meet its payment obligations in full as they fall due.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions. The Group aims to
maintain flexibility in funding to meet ongoing operational requirements, exploration and development expenditure, and
small-to-medium-sized opportunistic projects and investments, by keeping committed credit facilities available.

The following table analyses the contractual maturities of the Group’s financial liabilities into relevant groupings based on
the remaining period at the reporting date to the contractual undiscounted cash flows comprising principal and interest
repayments. Estimated variable interest expense is based upon appropriate yield curves existing as at 30 June 2013.

Consolidated 2013

Non-derivative financial liabilities

Trade and other payables(i)

Tax liabilities - current

Consolidated 2012

Non-derivative financial liabilities

Trade and other payables(i)

Tax liabilities - current

12 months
or less
$000’s

1 to 2
years
$000’s

2 to 5
years
$000’s

More than
5 years
$000’s

11,977

3,973

15,950

8,631

1,293

9,924

(i) Repayment within 3 months, except for the Jeruk liability of $5.7 million which is expected to be repaid in 12 months.

(f)

Credit Risk

Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents and trade and other
receivables. The Group’s exposure to credit risk arises from potential default by the counter-party, with maximum exposure
equal to the carrying amount of these instruments. Exposure at the reporting date is addressed in each applicable note.

The Group does not hold any credit derivatives to offset its credit exposure.

The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the
Group’s policy to securitize its trade and other receivables.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures
including an assessment of their independent credit rating, financial position, past experience and industry reputation. The
risks are regularly monitored.

At the reporting date there are no significant concentrations of credit risk within the Group.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/133 Revenue and Other Income

Revenue from continuing operations:

Production income

Other income:

Interest from cash and cash equivalents

Net realised gain on oil hedge derivative

Net foreign currency exchange gain

4 Expenses

Operating Expenses

Production costs

Amortisation of production properties

Interest expense

Other Expenses

Depreciation of property, plant and equipment

Employee expense

Superannuation contribution expense

Administrative expenses

Operating lease expenses

Business development expenses

Consolidated

2013
$000’s

2012
$000’s

49,798

41,222

160

3,702

274

158

2,616

19,131

17,520

4,485

205

887

208

2,773

13,778

10,500

3,141

182

693

203

2,024

Other expenses

8,597

6,287

5 Auditors Remuneration

Amounts paid or due and payable to the auditor – BDO East Coast Partnership for:

Audit or review of the financial statements

84,000

81,000

Other Services:

Tax compliance services

36,950

120,950

39,250

120,250

No other services were provided by the auditor during the year, other than those set out above.

6 Taxation

Income tax expense

Current tax

Adjustment recognised for prior periods

Deferred tax

Consolidated Entity

2013
$000’s

3,073

(149)

(884)

2012
$000’s

1,967

(1,670)

7,661

Aggregate income tax expense

2,040

7,958

Income tax expense is attributable to:

Profit from continuing operations

Deferred tax included in income tax comprises:

Decrease in deferred tax assets

(Decrease)/increase in deferred tax liabilities

2,040

7,958

2,040

(2,924)

(884)

1,782

5,879

7,661

Numerical reconciliation of income tax expense and tax at the statutory rate

Profit from continuing operations before income tax expense

8,409

13,621

Tax expense at Australian tax rate of 30% (2012: 30%)

2,523

4,086

Unrealised timing differences

Difference in overseas tax rates

Non-Allowable/(Allowable) mining deductions

Tax losses carried forward

Adjustments to current tax from prior periods

Disallowable intercompany interest

First tranche petroleum tax

Movements in deferred tax

Unrealised foreign exchange movements

Previously unrecognised tax losses now recognise to reduce tax expense

Income tax expense

Tax losses

Unused tax losses for which no deferred tax asset has been recognised

Potential tax benefit at relevant local tax rates

Current tax liabilities

Non-current assets – deferred tax assets

Movements - Consolidated

Opening balance

Debit to the income statement

Closing balance

(387)

456

(2,914)

2,766

(149)

(175)

1,912

(884)

(1,108)

2,040

4,688

1,701

(629)

(1,670)

(218)

7,958

30,831

9,181

19,988

5,996

3,973

1,293

10,840

(2,040)

8,800

12,622

(1,782)

10,840

(i)

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/136 Taxation (cont’)

Non-current liabilities – deferred tax liabilities

Movements - Consolidated

Opening balance

(Debit)/credit to the income statement

Net

(i) Presentation in the consolidated statement of financial position as follows:

Deferred tax asset

Deferred tax liability

Net

7 Capital and Reserves

(a)

Issued Capital

Consolidated Entity

2013
$000’s

2012
$000’s

(33,616)

2,924

(27,737)

(5,879)

(30,692)

(33,616)

(21,892)

(22,776)

(i)

214

(22,106)

(21,892)

322

(23,098)

(22,776)

Issued and paid up ordinary fully paid shares

Balance at 1 July

3,300,002 options exercised

Closing balance at 30 June

Consolidated

2013
$000’s

2012
$000’s

2013

2012

152,416

151,768

698,119,720

694,819,718

648

3,300,002

152,416

698,119,720

Ordinary shares entitle the holder to the right to receive dividends as declared and, in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid on the shares
held. Ordinary shares entitle holders to one vote, either in person or by proxy at a meeting of the Company. The Company has
an unlimited authorised capital and the shares have no par value.

(b)

Share Based Payment Reserve

Balance at 1 July

Performance Share Rights payment expense

Performance Share Rights payment transferred

Closing balance at 30 June

Consolidated

2013
$000’s

2012
$000’s

425

(425)

391

425

7 Capital and Reserves (cont’)

Nature and purpose of reserve

This reserve is used to record the value of equity benefits provided as part of agreements entered into by the company
during the year. Refer to note 22 and the Remuneration Report within the Directors’ Report for details.

The following reconciles the outstanding options and Performance Share Rights granted as remuneration in the current and
prior financial years at the beginning and end of the year.

2013

2012

Number of
Performance
Share Rights

Number of
Options

Number of
Performance
Share Rights

Number of
Options

3,200,000

(4,000,000)

(800,000)

1,600,000

4,300,000

4,000,000

(800,000)

3,200,000

(3,300,002)

(999,998)

Balance at beginning of the year

Granted during the year

Forfeited during the year

Exercised during the year

Lapsed during the year

Balance at end of the year

(c)

Capital Management

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as
maintaining optimal return for shareholders and benefits for other stakeholders. Management also aims to maintain a
capital structure that ensures the lowest cost of capital available to the entity.

Management are constantly adjusting the capital structure of the entity to take advantage of favourable costs of capital or
high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

During 2013 management did not pay any dividends.

There has been no change during the year to the strategy adopted by management to control the capital of the entity.

The gearing ratios for the year ended 30 June 2013 and 30 June 2012 are as follows:

Trade and other payables

Tax liabilities

Total

Less cash and cash equivalents

Surplus cash

Total equity

Total capital

Gearing ratio

Consolidated Group

2013
$000’s

(11,977)

(3,973)

(15,950)

58,828

42,878

131,569

174,447

2012
$000’s

(8,631)

(1,293)

(9,924)

33,733

23,809

125,178

148,987

nil%

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/138 Trade and Other Receivables

Current receivables

Trade receivables

Other receivables and prepayments

The ageing of trade receivables at the reporting date was as follows:

Less than one month

Consolidated Group

2013
$000’s

2012
$000’s

4,469

627

5,096

4,469

11,180

566

11,746

11,180

Trade receivables are non-interest-bearing and settlement terms are generally within 30 days.

Trade receivables are neither past due nor impaired and relate to a number of independent customers for whom there is no
recent history of default.

Impaired receivables

At 30 June 2013 there were no current trade receivables that were impaired (2012: nil).

The balance of the allowance for impairment in respect of trade receivables at 30 June 2013 was nil (2012: nil). There has been
no movement in the allowance during the year.

The Directors consider that the carrying value of receivables reflects their fair values.

9 Property, Plant and Equipment

Office and computer equipment

Cost

Accumulated depreciation

Consolidated

2013
$000’s

2012
$000’s

356

(293)

338

(254)

Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current
financial year are set out below:

Balance at beginning of year

Additions

Depreciation expense

Balance at end of year

Inventories

Current Assets

Inventory

Consolidated

2013
$000’s

2012
$000’s

(39)

(43)

Consolidated

2013
$000’s

2012
$000’s

1,157

1,500

11 Shares in Subsidiaries at Balance Date

Shares held by the parent entity at balance date:

PARENT

Subsidiary Companies

Cue PNG Oil Company Pty Ltd

Cue Energy Holdings Ltd(i)

Cue Mahakam Hilir Pty Ltd

Cue (Ashmore Cartier) Pty Ltd

Cue Sampang Pty Ltd

Cue Taranaki Pty Ltd

Toro Oil Pty Ltd(i)

Cue Energy Malaysia Sdn Bhd(i)

Galveston Mining Corporation Pty Ltd(i)

Less accumulated impairment losses

2013

2012

1,286,678

(1,286,678)

Interest
Held

Country of
Incorporation

100%

Australia

Malaysia

Australia

Principal Activity

Petroleum production and
exploration

Administration

Petroleum production and
exploration

Petroleum exploration

Petroleum production

Petroleum exploration

Cue Exploration Pty Ltd

1,929,077

100%

Australia

Petroleum exploration

Less accumulated impairment losses

(1,343,808)

Total

585,269

585,275

585,269

585,279

All companies in the Group have a 30 June balance date.
(i) Companies deregistered at year end.

12 Exploration and Evaluation Expenditure

Costs carried forward in respect of areas of interest in exploration and evaluation phase

Expenditure incurred during the year

Closing balance at 30 June

Accumulated costs incurred on current areas of interest net of amounts written off -

- Sampang PSC

- Mahakam Hilir PSC

- PNG PRL 9

- PNG PRL14

- PNG PDL 3 (non unitised)

- WA-359-P

- WA-360-P

- WA-361-P

- WA-389-P

- WA-409-P

- PEP 51313

- PEP 51149

Consolidated

2012
$000’s

13,166

18,599

31,765

8,709

9,572

2,080

326

209

133

1,894

382

2,667

148

4,233

1,412

2013
$000’s

31,765

5,179

36,944

8,969

11,831

2,196

407

209

269

1,947

539

2,694

187

6,163

1,533

Net accumulated exploration and evaluation expenditure

36,944

31,765

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13

13 Production Properties

Balance at beginning of year

Expenditure incurred during the year

Amortisation expense

Balance at end of year

Net accumulated costs incurred on areas of interest:

- PNG PDL 3 (unitized)

- Oyong and Wortel – Sampang PSC

- Maari – PMP 38160

Total

Consolidated

2013
$000’s

2012
$000’s

84,886

6,569

(17,520)

73,935

601

22,415

50,919

73,935

68,786

26,600

(10,500)

84,886

500

34,978

49,408

84,886

Impairment of Production Property Assets
At 30 June 2013 the Group reassessed the carrying amount of its oil and gas assets, Production Properties (refer note 13 and
note 1(j)), for indicators of impairment such as changes in future prices, future costs and reserves. As a result, the recoverable
amounts of cash-generating units were formally reassessed. No impairment loss was recognised during the year (2012: nil).

Estimates of recoverable amounts are based on the assets’ value in use, determined by discounting each asset’s estimated
future cash flows at asset specific discount rates. The pre-tax discount rates applied were 14.3% (2012: 14.3%) equivalent
to post-tax discount rates of 10% (2012: 10%) depending on the nature of the risks specific to each asset. Where an asset
does not generate cash flows that are largely independent from other assets or groups of assets, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.

15 Trade and Other Payables

Current

Trade payables and accruals

Amounts due to directors and director related entities

11,652

325

11,977

8,606

8,631

The Directors consider the carrying amount of payables reflect their fair values. Trade creditors are generally settled within
30 days. The Group does not have any significant concentration of credit risks.

Included within trade payable and accruals is an amount of $5.711 million relating to liabilities associated with a dispute in
relation to the Jeruk field within the Sampang PSC. Refer to note 25 for more information.

16 Provisions

Current

Employee benefits

Non-Current

Employee benefits

Restoration

Consolidated

2013
$000’s

2012
$000’s

475

381

6,099

6,137

5,411

5,455

Movements in each class of provision during the financial year, other than provisions relating to employee benefits
are set out below:

Consolidated

Balance at 1 July 2012

Provisions made during the year

Provisions used during the year

Balance at 30 June 2013

Restoration

Employee
Benefits

Restoration

$000’s

425

206

(118)

513

5,411

688

6,099

Provisions for future removal and restoration costs are recognised where there is a present obligation as a result of
exploration, development, production, transportation or storage activities having been undertaken, and it is probable that
an outflow of economic benefits will be required to settle the obligation. The estimated future obligations include costs of
removing facilities, abandoning wells and restoring the affected areas. Expected timing of outflow of restoration liabilities is
not within the next 12 months from the reporting date.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/1317

Interests in Joint Ventures

Property

Operator

Petroleum Exploration Properties

Carnarvon Basin – Western Australia

WA-359-P

WA-360-P

WA-361-P

WA-389-P(i)

WA-409-P

New Zealand

PEP51313

PEP51149

PEP54865

Indonesia

Cue Exploration Pty Ltd

MEO Australia Limited

BHP Billiton (Australia) Pty Ltd

Apache Northwest Pty Ltd

OMV New Zealand Limited

Todd Exploration Limited

Mahakam Hilir PSC

Singapore Petroleum

Papua New Guinea

PRL 9(ii)

PRL 14

Oil Search Ltd

Petroleum Production Properties

New Zealand

Cue Interest
(%)

Gross Area
(Km2)

Net Area
(Km2)

Permit Expiry
Date

100

37.50

645

643

644

3,796

565

645

25/10/2017

241.1

96.6

05/03/2017

30/01/2016

1,518.4

29/07/2013

169.5

29/04/2014

2,595

437.7

2,474.97

363.3

29/07/2014

87.5

495

22/09/2013

10/12/2017

222.14

88.9

12/11/2014

14.894

10.947

598

427

46.7

17/12/2012

21/11/2015

PMP 38160

OMV New Zealand Limited

80.18

01/12/2027

Madura - Indonesia

Sampang PSC

Santos (Sampang) Pty Ltd

15
(8.181818
Jeruk field)

534.5

80.2

04/12/2027

Papua New Guinea

PDL 3

Barracuda Pty Ltd

5.568892

4.7

23/12/2021

(i) Subject to government approval.

(ii) Renewal under consideration by the PNG government.

Interests in Joint Ventures (cont’)

Consolidated

2013
$000’s

2012
$000’s

The share of assets and liabilities of the joint ventures and other financial liabilities
attributed to Joint Ventures have been included under the relevant headings:

Current Assets:

Receivables

Inventory

Non-Current Assets:

Exploration and Evaluation Expenditure (note 12)

Deferred Tax Assets

Production Properties (note 13)

Total Assets

Current Liabilities:

Payables

Current Tax Liabilities

Non-Current Liabilities:

Restoration

Deferred Tax Liabilities

Total Liabilities

Net Assets

Income and expenses of the consolidated entity attributable to joint ventures:

Income

Expenses

4,469

1,157

11,180

1,500

36,944

214

73,935

116,719

31,765

322

84,886

129,653

11,159

3,973

6,099

22,106

43,337

73,382

49,798

19,131

8,347

1,293

5,411

23,098

38,149

91,504

41,222

13,778

Refer to note 25 in relation to contingent liabilities of the Group. Commitments for expenditure are disclosed in note 18.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/1318 Commitments for Expenditure

Exploration Tenements

In order to maintain current rights of tenure to petroleum exploration tenements, the Group has discretionary exploration
expenditure requirements up until expiry of the primary term of the tenements. These requirements, which are subject to
renegotiation and are not provided for in the financial statements, are payable as follows:

Not later than 1 year

Later than 1 year but not later than 2 years

Later than 2 years but not later than 5 years

Later than 5 years

Consolidated

2013
$000’s

2012
$000’s

12,700

4,000

20,000

36,700

4,891

494

5,385

If the economic entity decides to relinquish certain tenements and/or does not meet these obligations, assets recognised
in the Statement of Financial Position may require review in order to determine the appropriateness of carrying values. The
sale, transfer or farm-out of exploration rights to third parties could potentially reduce or extinguish these obligations, which
comprise primarily drilling commitments entered into during the 2013 financial year.

All commitments relate to Joint Venture projects.

Production Development Expenditure

In order to maintain and improve existing production properties the Group has committed to expend funds as follows:

Not later than 1 year

Later than 1 year but not later than 2 years

Later than 2 years but not later than 5 years

Later than 5 years

All development expenditure commitments relates to the development of oil and gas fields.

Operating Lease Commitments

Non-cancellable operating lease relating to rental of premises are payable as follows:

Not later than 1 year

Later than 1 year but not later than 2 years

Later than 2 years but not later than 5 years

Later than 5 years

Consolidated

2013
$000’s

2012
$000’s

18,988

10,906

1,161

31,055

412

Consolidated

2013
$000’s

2012
$000’s

123

185

19 Events Subsequent to Balance Date

The Company wishes to advise that production from the Maari field will be deferred until December 2013 to effect repairs
to the facilities. The costs of the repairs are yet to be finalised, but it is expected that some of the costs will be covered by
insurance. Cue’s share of deferred production while the vessel is out of service is estimated to be 50,000 boe, or 5.3% of
Cue’s production for the year to 30 June 2013.

Apart from the above, the Directors are not aware of any matter or circumstance since the end of the financial year, not
otherwise dealt with in this report that has significantly or may significantly affect the operations of Cue Energy Resources
Limited, the results of those operations or the state of affairs of the Company or Group.

20 Earnings Per Share

Basic earnings per share (cents)

Diluted earnings per share (cents)

Consolidated

2012

0.81

2013

0.91

0.81

Basic earnings per share is calculated by dividing profit after income tax expense for the year attributable to ordinary equity
holders of the Parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the profit after income tax expense for the year attributable to ordinary
equity of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into
ordinary shares.

Earnings used in the calculation of basic and diluted earnings per share:

Profit for the year attributable to ordinary equity holders of the Parent
from continuing operations ($’000)

Weighted average number of shares used for the purposes of calculating
basic earnings per share

Weighted average adjustments for calculation of diluted earnings per share:

Performance Rights on issue

Share options on issue

Weighted average number of shares used for the purpose of calculating diluted
earnings per share

Consolidated

2013

2012

6,369

5,663

698,119,720

695,672,087

3,719,452

1,914,754

2,739,680

701,839,172

700,326,521

During the year nil (2012: 3.3 million) share options and nil (2012: nil) performance rights were converted into ordinary
shares. The diluted earnings per share calculation includes that portion of these share options and performance rights
assumed to be issued for nil consideration weighted with reference to the date of conversion.

Information Concerning the Classification of Securities

All outstanding share options and performance rights are considered to be potential dilutive ordinary shares and have been
included in the determination of diluted earnings per share.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13

21 Financial Reporting by Segments

Segment Information

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are
regularly reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (“CODM”)) in
assessing performance and in determining the allocation of resources.

The CODM assesses the performance of the operating segments based upon a measure of earnings before interest expense,
tax, depreciation and amortisation. The accounting policies adopted for internal reporting to the CODM are consistent with those
adopted in the financial statements.

The principal business of the group is the production and exploration for hydrocarbons in Australia, New Zealand, Indonesia
and PNG. The board considers the business from both a product and geographic perspective and has identified four reportable
segments. Information regarding the Group’s reportable segments is presented below:

2013

Production Revenue

Production Expenses

Gross Profit

Other revenue

Foreign exchange movement

Earnings/(loss) before interest expense, tax,
depreciation and amortisation

Profit/(loss) after income tax expense

2012

Production Revenue

Production Expenses

Gross Profit

Other revenue

Foreign exchange movement

Earnings/(loss) before interest expense, tax,
depreciation and amortisation

Profit/(loss) after income tax expense

Total segment assets

30 June 2013

30 June 2012

Total segment liabilities

30 June 2013

30 June 2012

Depreciation and Amortisation

30 June 2013

30 June 2012

Additions to Non-Current Assets

30 June 2013

30 June 2012

Australia

$’000

160

4,443

(3,955)

(3,993)

Australia

$’000

432

2,616

(3,195)

(3,238)

63,905

38,216

1,340

1,116

(39)

(44)

429

2,732

Indonesia

$’000

19,590

(8,450)

11,140

(237)

10,903

5,426

$’000

27,926

(9,201)

18,725

(504)

18,221

4,501

Indonesia

$’000

21,874

(6,085)

15,789

10,941

61,394

60,554

13,949

11,851

$’000

16,106

(6,769)

9,337

(3,611)

46,912

61,336

27,651

24,322

(4,048)

(3,982)

(13,378)

(6,320)

8,250

7,251

3,334

36,229

PNG

$’000

2,282

Total

$’000

49,798

(1,480)

(19,131)

802

435

PNG

$’000

3,242

(924)

2,318

1,571

4,026

3,930

1,728

1,569

(94)

(198)

402

432

30,667

160

3,702

25,971

6,369

Total

$’000

41,222

(13,778)

27,444

432

2,616

24,249

5,663

176,237

164,036

44,668

38,858

(17,559)

(10,544)

12,415

46,644

21 Financial Reporting by Segments (cont’)

Reconciliation of earnings before interest expense, tax, depreciation and amortisation (EBITDA) to Profit before Income Tax:

EBITDA

Interest expense

Depreciation

Amortisation

Profit before income tax expense

22 Share Based Payments

Directors and Employee Benefits – Share Based Payment Plans

2013
$’000

25,971

(3)

(39)

(17,520)

8,409

2012
$’000

24,249

(84)

(44)

(10,500)

13,621

Performance rights over shares in Cue Energy Resources Limited were granted under the Cue Energy Resources Limited
Performance Rights Plan (the ‘Plan’) which was approved by shareholders at the general meeting held on 24 November
2011. The Plan is designed to align the interests of executives with shareholders by providing direct participation in the
benefits of future Company performance over the medium to long term.

Ownership based compensation payments for employees and executives of the group are made at the discretion of the
Board. At year end the current participants in the Plan are A.M. Knox and D.B. Whittam.

Under the Plan, participants were granted performance rights which only vest if certain performance standards (as disclosed
in the Remuneration Report) are met and the executive remains employed by the Company until the end of the vesting
period. The selection of suitable performance benchmarks was considered critical to securing the objectives of the Plan,
and benchmark price levels for vesting were set at significantly higher levels than those prevailing at the time of
structuring the Plan.

Performance rights are not listed and carry no dividend or voting rights. Upon exercise, each option or performance right is
convertible into one ordinary share to rank pari passu in all respects with the Company’s existing fully paid ordinary shares.

In addition, the company historically had share options on issue to certain employees and other executives. As at 30 June
2012, all these options had either been exercised or had expired.

Share-Based Payments

The following reconciles the outstanding share options and performance rights granted as remuneration in the current and
prior financial years at the beginning and end of the year.

Balance at beginning of the year

Granted during the year

Forfeited during the year

Exercised during the year

Lapsed during the year

Balance at end of the year

2013

Number of
Share Rights

3,200,000

(4,000,000)

(800,000)

1,600,000

2013

Number of
Options

2012

Number of
Share Rights

4,000,000

(800,000)

3,200,000

2012

Number of
Options

4,300,000

(3,300,002)

(999,998)

During the year 4,000,000 performance rights were forfeited following resignation of M.J. Paton and A.B. Parks.

None of the performance rights outstanding as at 30 June 2013 had vested.

The fair value of performance rights granted was calculated using a risked statistical analysis. This expense has been
apportioned pro-rata to reporting periods where vesting periods apply.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/1322 Share Based Payments (cont’)

Key inputs to the model used to calculate the fair value of performance rights issued during the year are as follows:

Grant date:

Expected price volatility (i)

Exercise price

Expiry date

Share price at grant date

Risk free interest rate (ii)

28 September 2012

45%

nil

30 June 2014

A$0.14

3.0%

(i) Expected price volatility was 45% (based on the historical volatility adjusted for any expected changes to future volatility due to publicly available

information).

(ii) Risk free rates of securities with comparable terms to maturity.

For the full entitlement of these performance rights to vest, the top range of the Performance Hurdle would need to be met of
a volume weighted average price of 60 cents for thirty consecutive days between 1 July 2013 and 30 June 2014.

On this basis the weighted average fair value of each of the performance rights at the date of grant was A$0.028.

Performance rights can only be exercised if they have vested and can be exercised at any time until their expiry. The exercise of
any vested performance right may only be effected in such form and manner as the Board prescribed.

Participants will not be required to make any payment for the grant of the performance rights on the exercise of a vested
performance right. At 30 June 2013 the maximum number of performance rights that could vest in future periods and hence be
exercised by the Participants are as follows:

A.M. Knox

D.B. Whittam

800,000

Grant date

Expiry date

24 November 2011

30 June 2013

Balance at
start of
the year

Number

3,200,000

Granted
during
the year

Lapsed
during
the year

Forfeited
during
the year

Balance at
end of
the year

Vested and
exercisable
at end of
the year

Number

(800,000)

(2,400,000)

28 September 2012

30 June 2014

3,200,000

(1,600,000)

1,600,000

Weighted average remaining contractual life of performance rights is one year (2012: one year). The weighted average exercise
price for performance rights at 30 June 2013 was nil (2012: nil). Also, the weighted average share price during the year ended
30 June 2013 was A$0.14 (2012: A$0.25).

23 Key Management Personnel and Related Party Disclosures

The following were Directors of Cue Energy Resources Limited during the financial year:

Chairman

G.J. King (Non-Executive)

Non-Executive Directors

T.E. Dibb

P.D. Moore

A.A. Young

L. Musca (retired 15 November 2012)

R.G. Tweedie (retired 25 February 2013)

S.J. Koroknay (deceased 6 June 2013)

Key Management Personnel

The following executives, in addition to those directors identified above comprise Key Management Personnel:

Name

D.A.J. Biggs (commenced 22 April 2013)

A.M. Knox

D.B. Whittam

M.J. Paton (resigned 14 November 2012)

A.B. Parks (resigned 30 August 2012)

Remuneration

Management Personnel

Position

Chief Executive Officer

Company Secretary and Chief Financial Officer

Exploration Manager

Chief Executive Officer

Chief Commercial Officer

Total remuneration payments and equity issued to Directors and Key Management personnel are summarised below.
Elements of Directors and executives remuneration includes:

•

Short term employments benefits, including non monetary benefits

Post employment benefits – superannuation

Share based payments

Share purchases through Directors’ Saving Plan

Short term employment benefits (including non-monetary benefits)

Post employment benefits

Share purchases

Share based payments

Consolidated Entity

2013
$

2012
$

2,615,912

1,723,668

90,236

22,400

192,841

100,000

33,600

2,728,548

2,050,109

Refer to the Remuneration Report in the Directors’ Report for detailed compensation disclosures on
key management personnel.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/1323 Key Management Personnel and Related Party Disclosures (cont’)

Share Options Holdings

The number of options in ordinary shares in the Company held during the financial year by each Director of Cue Energy Resources
Limited and each of the Executives, noted above, including their personally related entities are set out below:

Balance at
start of
year or
appointment
date

Granted during
year as
remuneration

Exercised
during
year

Expired
during
year

Balance at end
of year

Vested and
exercisable at
end of year

2013

Directors

R.G. Tweedie(i)

T.E. Dibb

G.J. King

S.J. Koroknay(ii)

L. Musca(iii)

P.D. Moore

A.A. Young

Executives

M.J. Paton(iv)

D.A.J. Biggs(v)

A.M. Knox

D.B. Whittam

A.B Parks(vi)

(i) R.G. Tweedie retired 25 February 2013

(iv) M.J. Paton resigned 14 November 2012

(ii) S.J. Koroknay deceased 6 June 2013

(v) D.A.J. Biggs commenced 22 April 2013

(iii) L. Musca retired 15 November 2012

(vi) A.B. Parks resigned 30 August 2012

Balance at
start of
year or
appointment
date

1,500,000

2012

Directors

R.G. Tweedie

T.E. Dibb(i)

G.J. King(ii)

S.J. Koroknay

L. Musca

P.D. Moore(iii)

A.A. Young(iv)

Executives

M.J. Paton

D.B. Whittam

A.B. Parks

T. White

A.M. Knox

Granted during
year as
remuneration

Exercised
during
year

Expired
during
year

Balance at end
of year

Vested and
exercisable at
end of year

(1,500,000)

(i) T.E. Dibb appointed 24 November 2011

(ii) G.J. King appointed 24 November 2011

(iii) P.D. Moore appointed 24 November 2011

(iv) A.A. Young appointed 13 December 2011

23 Key Management Personnel and Related Party Disclosures (cont’)
Options issued have been valued using the Black Scholes option valuation methodology in prior financial years and are not
based on Company performance, but industry practice. There are no further conditions attached to these options.

Performance Rights Holdings

The number of performance rights in ordinary shares in the Company held during the financial year by each Director of
Cue Energy Resources Limited and each of the Executives, noted above, including their personally related entities are set
out below:

Balance at
start of
the year

Granted
during
the year

Lapsed
during
the year

Forfeited
during
the year

Balance at
end of
the year

Vested and
exercisable
at end of
the year

Expiry Date

Number

2013

M.J. Paton(i)

30 June 2014

1,600,000

(3,200,000)

A.M. Knox

30 June 2014

A.B. Parks(ii)

30 June 2014

D.B. Whittam

30 June 2014

(i) M.J. Paton resigned 14 November 2012.

(ii) A.B. Parks resigned 30 August 2012.

800,000

(800,000)

800,000

(800,000)

800,000

Balance at
start of
the year

Granted
during
the year

Lapsed
during
the year

Forfeited
during
the year

Balance at
end of
the year

Vested and
exercisable
at end of
the year

Expiry Date

Number

2012

M.J. Paton

A.M. Knox

A.B. Parks

T. White(i)

30 June 2013

D.B. Whittam(ii) 30 June 2013

(i) T. White retired 17 May 2012.

(ii) D.B. Whittam commenced 18 June 2012.

1,600,000

800,000

1,600,000

800,000

(800,000)

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/1323 Key Management Personnel and Related Party Disclosures (cont’)

Ordinary Shareholdings

Balance at
start of year or
appointment date

Acquired during
year on exercise of
options

Other purchases

Purchases as
part of Directors’
Savings Plan*

Balance at report
date, resignation
date or retirement
date

Directors 2013

R.G. Tweedie(i)

T.E. Dibb

G.J. King

S.J. Koroknay(ii)

P.D. Moore

L. Musca(iii)

A.A. Young

3,932,261

2,500

100,000

12,771,227

(i) R.G. Tweedie retired 25 February 2013

(ii) S.J. Koroknay deceased 6 June 2013

(iii) L. Musca retired 15 November 2013

Directors 2012

R.G. Tweedie

T.E. Dibb(i)

G.J. King(ii)

S.J. Koroknay

P.D. Moore(iii)

L. Musca

A.A. Young(iv)

3,641,018

2,500

100,000

12,771,227

20,000

150,000

3,932,261

22,500

250,000

12,771,227

150,000

291,243

3,932,261

2,500

100,000

12,771,227

* Share purchases made on behalf of Directors as part of their remuneration for the year ended 30 June 2012.

(i) T. Dibb appointed 24 November 2011

(ii) G.J. King appointed 24 November 2011

(iii) P.D. Moore appointed 24 November 2011

(iv) A.A. Young appointed 13 December 2011

23 Key Management Personnel and Related Party Disclosures (cont’)

Key Management Personnel 2013

Balance at
start of year or
appointment date

Acquired during
year on exercise of
options

Other Purchases

Purchases as
part of Directors’
Savings Plan*

Balance at report
date, resignation
date or retirement
date

D.A.J. Biggs(i)

M.J. Paton(ii)

A.M. Knox

D.B. Whittam

A.B. Parks(iii)

1,492,881

4,458,252

139,421

(i) D.A.J. Biggs commenced 22 April 2013

(ii) M.J. Paton resigned 14 November 2012

(iii) A.B. Parks resigned 30 August 2012

Key Management Personnel 2012

M.J. Paton

A.M. Knox

A.B. Parks

T. White(i)

D.B. Whittam(ii)

1,492,881

2,337,245

139,421

24,000

(i) T. White retired 17 May 2012

(ii) D.B. Whittam commenced18 June 2012

1,500,000

621,007

* Share purchases made on behalf of Directors as part of their remuneration for the year ended 30 June 2012.

1,492,881

4,458,252

139,421

1,492,881

4,458,252

139,421

24,000

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/1323 Key Management Personnel and Related Party Disclosures (cont’)

Related Party Transactions

Members of the Board of Directors

The Directors in office during the year were R.G. Tweedie, L. Musca, S.J. Koroknay, A.A. Young, T.E. Dibb, P.D. Moore and
G.J. King. During the year Directors’ fees were paid by the parent company of $596,769 (2012: $536,141).

Director’s fees
$

Consulting fees
$

Total fees
$

Expenses
$

100,000

93,407

65,862

37,500

596,769

4,800

23,000

286,500

314,300

104,800

100,000

123,000

386,500

93,407

65,862

37,500

911,069

11,137

862

12,946

55,598

7,064

8,271

20,644

116,522

2013

G.J. King(i)

P.D. Moore(ii)

T.E. Dibb(iii)

A.A. Young(iv) (viii)

S.J. Koroknay(v)

R.G. Tweedie(vi)

L. Musca(vii)

Total

(i) G.J. King & Associates

(ii) Heriot Nominees Limited

(iii) 50% Heriot Nominees Limited and 50% T. Dibb/Colonial First State FirstChoice Wholesale Personal Super

(iv) Andrew A. Young and Associates

(v) S.J. Koroknay/SJK Superannuation (deceased 6 June 2013)

(vi) R.G. Tweedie (retired 25 February 2013)

(vii) Leon Nominees Pty Ltd (retired 15 November 2012)

(viii) A.A. Young was acting CEO/Executive Director 14 November 2012 to 21 April 2013.

2012

G.J. King(i)

P.D. Moore(ii)

T.E. Dibb(iii)

A.A. Young(iv)

S.J. Koroknay

R.G. Tweedie

L. Musca

Total

Director’s fees
$

Consulting fees
$

Total fees
$

60,326

55,163

100,000

536,141

60,326

55,163

100,000

536,141

Expenses
$

1,121

1,065

1,936

12,233

16,355

(i) G.J. King appointed 24 November 2011

(ii) P.D. Moore appointed 24 November 2011

(iii) T.E. Dibb appointed 24 November 2011

(iv) A.A. Young appointed 24 November 2011

The expenditure has been included in profit or loss and any amounts payable included in note 15.

Total
$

115,937

100,862

135,946

442,098

100,471

74,133

58,144

1,027,591

Total
$

61,447

60,326

56,228

101,936

112,233

100,000

552,496

23 Key Management Personnel and Related Party Disclosures (cont’)

Consolidated Entities

Details of controlled entities are shown in note 11.

Advances to/(from) controlled entities from/by Cue Energy Resources Limited, net of provisions for impairment, at the
reporting date are as follows:

Cue Exploration Pty Ltd

Cue PNG Oil Pty Ltd

Cue (Ashmore Cartier) Pty Ltd

Cue Mahakam Hilir Pty Ltd

Cue Sampang Pty Ltd

Cue Taranaki Pty Ltd

Cue Energy Holdings Ltd

Cue Energy Malaysia Sdn Bhd

Total

2012
$

4,745,227

1,166,146

(6,778,780)

9,555,953

16,293,891

16,028,376

(573,720)

747,171

41,184,264

Movement
$

409,885

404,554

4,552,451

2,250,843

(1,365,790)

(1,628,829)

573,720

(747,171)

4,449,663

2013
$

5,155,112

1,570,700

(2,226,329)

11,806,796

14,928,101

14,399,547

45,633,927

Repayment of amounts owing to the Company as at 30 June 2013 and all future debts due to the Company, by the
controlled entities are subordinated in favour of all other creditors. Cue Energy has agreed to provide sufficient financial
assistance to the controlled entities as and when it is needed to enable the controlled entities to continue operations.

The parent company has provided a financial guarantee for Cue Taranaki’s performance, as required by the Maari FPSO
lease and contract.

The parent company provides management, administration and accounting services to the subsidiaries. A management
fee of $480,000 (2012: $480,000) and interest of $422,873 (2012: $385,561) were charged by the parent company to Cue
PNG Oil Company Pty Ltd. Management fees of $2,494,234 (2012: $1,406,289) and interest of $858,562 (2012: $nil) were
charged by the parent company to Cue Taranaki Pty Ltd.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13
24 Notes to the Statement of Cash Flows

(a) Reconciliation of operating profit to net cash flows from operating activities:

Profit after income tax expense for the year

Adjustments for:

Depreciation

Amortisation

Share based payments

Net gain on foreign currency conversion

Impact of changes in working capital items

Decrease/(increase) in assets

Increase in liabilities

Net cash flows from operating activities

(b) Cash comprises cash balances held in Australia dollars and foreign currencies,
principally US dollars, within Australia and overseas:

Australia

New Zealand

Papua New Guinea

Indonesia

Cash and bank balances

Cash Flow Statement cash balance

Consolidated

2013
$’000

2012
$’000

6,369

5,663

17,520

(3,752)

7,101

5,430

32,729

57,554

102

1,164

58,828

10,500

(1,625)

(4,967)

2,080

11,729

32,573

1,152

33,733

25 Parent Entity Information

Information relating to Cue Energy Resources Limited:

Financial position

Current assets

Non-current assets

Total assets

Current liabilities

Non-current liabilities

Total liabilities

Net assets

Contributed equity

Reserves

Accumulated losses

Net assets

Financial performance

Profit/(loss) for the year

Comprehensive profit/(loss) for the year

Capital Commitments

Parent Entity

2013
$’000

2012
$’000

59,457

46,282

105,739

(1,300)

(38)

(1,338)

33,977

41,853

75,830

(664)

(44)

(708)

104,401

75,122

152,416

(48,037)

104,401

152,416

425

(77,719)

75,122

29,257

(35)

The parent entity has no commitments for the acquisition of capital assets as at 30 June 2013 (2012: nil).

Finance Leases

The parent entity has no commitments in relation to finance leases as at 30 June 2013 (2012: nil).

Contingent Liabilities

As a result of an economic project arrangement in the Jeruk field within the Sampang PSC, Indonesia, Cue may in certain
circumstances have an obligation to reimburse certain monies spent by the incoming party from future profit oil within
the Sampang PSC. There is a dispute between Cue and the incoming party as to the quantum of monies that they may be
entitled to claim by way of such reimbursement and when any such reimbursement would be payable. The Company is of
the view that any amount which might eventually become payable would not be likely to exceed the amount of USD5.3
million which has been provided for in the accounts. The Company awaits the outcome of an arbitration hearing.

Apart from the above, the parent entity is not subject to any liabilities that are considered contingent upon events known
at the reporting date.

Cue Energy Resources Limited Annual Report 2012/13Financial Report 2012/13

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Cue Energy Resources Limited Annual Report 2012/13

Shareholder Information

1) Spread of Shareholdings

Spread of holdings of quoted shares of no par value in the Company as at 30th of September 2013:

Number Held

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

Over 100,000

Total

Ordinary

285

1,238

945

2,464

530

5,462

2) Unmarketable Parcels

The number of shareholders holding less than a marketable parcel as at 30th of September 2013 is 1,100.

3) Substantial Shareholders

The names and holdings of substantial shareholders in the Company as at 30th of September 2013:

Todd Petroleum Mining Company Limited

UOB Kay Hian Private Limited

4) Voting Rights

At meeting of members or classes of members:

Quoted Shares Fully Paid

163,103,314

114,926,671

(a) each member entitled to vote may vote in person or by proxy, attorney or representative;

(b) on a show of hands, every person present who is a member or a proxy, attorney or representative of a member has one
vote; and

(i) for each fully paid share held by person, or in respect of which he/she is appointed a proxy, attorney or representative,

one vote for the share;

(ii) for each partly paid share, only the fraction of one vote which the amount paid (not credited) on the share bears to the

total amounts paid and payable on the share (excluding amounts credited).

Subject to any rights or restrictions attached to any shares or class or classes of shares.

Shareholder Information (cont’)
Shareholder Information (cont’)

5) Registered Top 20 Shareholders

The registered names and holdings of the 20 largest holdings of quoted ordinary shares in the Company as at
30th of September 2013:

Shareholder

Todd Petroleum Mining Co

UOB Kay Hian Private Limited

Todd Tasman Oil Pty Ltd

Portfolio Securities Pty Ltd

Custodial Services Limited

HSBC Custody Nominees (Australia) Limited

Gascorp Australia Pty Ltd

Citicorp Nominees Pty Ltd

JP Morgan Nominees Australia Limited

Reviresco Nominees Pty Ltd

Finot Pty Ltd

Douglas Financial Consultants Pty Ltd

Grizzley Holdings Pty Limited

Berne No 132 Nominees Pty Ltd

Ultragas Pty Ltd

Mr Ernest Geoffrey Albers

Bass Strait Group Pty Ltd

SCFI Pty Ltd

Great Missenden Holdings Pty Ltd

Mr Richard Tweedie

Ordinary Shares

Percentage Held

163,103,314

114,926,671

25,920,000

10,000,000

8,602,025

8,089,350

7,609,742

5,765,958

5,588,857

5,150,000

5,000,000

4,400,000

4,312,604

4,300,000

4,294,286

4,010,784

4,000,168

3,580,000

3,392,859

3,363,477

23.36%

16.46%

3.71%

1.43%

1.23%

1.16%

1.09%

0.83%

0.80%

0.74%

0.72%

0.63%

0.62%

0.57%

0.51%

0.49%

0.48%

395,410,095

56.64%

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Cue Energy Resources Limited Annual Report 2012/13
Shareholder Information (cont’)

6) Holders

The number of holders of each class of equity securities as at 30th of September 2013 was:

Class of Security

Ordinary Fully Paid Shares

Unlisted Performance Rights

Number

5,462

7) Vendor Securities

There are no restricted securities on issue as at 30th of September 2013.

8) Unquoted Securities

20 largest holders of Unlisted Performance Rights as at 30th of September 2013:

Name

A.M. Knox

D.B. Whittam

Number of Unlisted
Performance Rights
Held Expiring
30/06/2014

% Held of Total
30/06/2014
Issued Unlisted
Performance Rights

Total Number of
Performance Rights/
Shares Held

% Held of Total Issued
Unlisted Performance
Right/Shares

800,000

1,600,000

100

800,000

1,600,000

100

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ABN 45 066 383 971
Level 21, 114 William Street Melbourne Victoria 3000 Australia
T: +61 3 9670 8668 F: +61 3 9670 8661 W: www.cuenrg.com.au E: mail@cuenrg.com.au

Photo courtesy of OMV

Exciting times
ahead

Annual Report 2012/13