Cue Biopharma Annual Report 2014

Plain-text annual report

10 October 2014 PAGES (including this page):81 ABN 45 066 383 971 ASX Market Announcements ASX Limited Exchange Centre Level 4, 20 Bridge Street Sydney NSW 2000 Annual Report 2013/14 Attached please find Cue Energy Resources Limited’s release with respect to the above mentioned. Yours faithfully Andrew M Knox Chief Financial Officer CUE ENERGY OVERVIEW Cue is an Australian based oil & gas company with activities in Australia, New Zealand, Indonesia and PNG. THE COMPANY HAS:  Long life production  A strong balance sheet  An active exploration program CUE ENERGY DIRECTORS  Geoffrey King (Chairman)  Stuart Brown  Rowena Sylvester  Andrew Young CUE ENERGY MANAGEMENT  David Biggs (CEO)  Andrew Knox (CFO)  Jeffrey Schrull (Exp Man) OFFICE Level 19 357 Collins Street Melbourne Vic 3000 CONTACT DETAILS Tel: +613 8610 4000 Fax: +613 9614 2142 EMAIL mail@cuenrg.com.au WEBSITE www.cuenrg.com.au LISTINGS ASX: ADR/OTCQX: CUEYY CUE C U E E N E R G Y R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 3 / 1 4 ABN 45 066 383 971 Level 19, 357 Collins Street, Melbourne Victoria 3000 Australia T: +61 3 8610 4000 F: 61 3 9614 2142 W: www.cuenrg.com.au E: mail@cuenrg.com.au New Frontiers Annual Report 2013/14 ANNUALREPORT CUE ENERGY RESOURCES About Us Cue Energy Resources Limited is an oil and gas exploration and production company with a focus on South East 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 Resources’ 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 the capture of new exploration acreages developing a balanced portfolio of exploration, development and production assets • actively pursuing value accretive acquisitions Company snapshot Ordinary Shares 12 Month Trading Range Cash at 30 June 2014 Debt 698,119,720 10.5¢-15.0¢ $40.6 million Nil Avg FY14 Production ~1800 boe/day Cue Energy Resources Limited: Annual Report 2013/14 In the Maari field the Ensco 107 jack-up rig is on location and drilling field development wells. As a result of better than expected production in the Sampang PSC, additional gas compression and oil well workovers are planned to maintain and extend production. Grati Gas Plant, onshore Java, Indonesia 1 About Us 2013/14 ANNUAL REPORT Contents 3 4 6 8 Corporate Directory Key Points for 2014 Joint Operations Chairman’s Overview 10 Chief Executive Officer’s Review 22 Corporate Governance Statement 26 Directors’ Report 39 Financial Report 40 Consolidated Statement of Profit or Loss and Other Comprehensive Income 41 Consolidated Statement of Financial Position 42 Consolidated Statement of Changes in Equity 43 Consolidated Statement of Cash Flows 37 Auditor’s Independence Declaration 44 Notes to the Financial Statements 38 Directors’ Declaration 73 75 Independent Auditor’s Report Shareholder Information 2 Cue Energy Resources Limited: Annual Report 2013/14Corporate Directory 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 BOQ Specialist Bank 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 Directors Geoffrey J. King BA, LL.B (Chairman) Stuart A. Brown BSc (Hons) Rowena A. Sylvester BBS 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 19, 357 Collins Street Melbourne Victoria 3000 Australia Telephone: + 61 3 8610 4000 Facsimile: + 61 3 9614 2142 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 UNITED STATES OF AMERICA OTCQX OTC Markets 304 Hudson Street, 3rd Floor New York, NY 10013 USA Grati Gas Plant, onshore Java, Indonesia 3 3 Contents / Corporate Directory CUE ENERGY RESOURCES Key Points for 2014 Asset portfolio realignment underway • Cue is currently testing the market for sale of its PNG assets portfolio • • • • Farming down Mahakam Hilir PSC, Indonesia Farming down WA-359-P permit, Carnarvon Basin Actively seeking new exploration acreage onshore Australia and Asia Actively seeking to acquire additional production Corporate Results • Production revenue $34.0 million • Sales production 0.65 million boe • Gross profit of $15.8 million • Net loss after tax of $2.2 million • Cash at year end $40.6 million • Group is debt free New Zealand • Repairs completed to Maari facilities and oil production restarted December 2013 • Maari Growth Project drilling underway Indonesia • Sampang PSC Joint Venture has: - - approved a work over programme at Oyong to improve oil production approved a Wortel compressor upgrade to maintain gas production 4 Cue Energy Resources Limited: Annual Report 2013/14Production Revenue 2013/14 Corporate Information $34.0 million Cue’s Debt Zero Cash at Year End $40.6 million Net Daily Production boe/d Net Production (2014f-2016f) Million boe 1,000 900 800 700 600 500 400 300 200 100 0 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Maari Oyong Wortel SE Gobe 2014f 2015f Calendar year 2016f SE Gobe (PNG) Sampang PSC (Indonesia) Maari (NZ) Kan Tan - IV drilling rig, New Zealand 5 Key Points for 2014 CUE ENERGY RESOURCES Joint Operations Cue Energy Resources has a balanced portfolio of assets with emphasis on increasing near term production. INDONESIA PAGE 16 Indonesia Papua New Guinea Australia PAGE 12 AUSTRALIA 6 PAPUA NEW GUINEA PAGE 18 NEW ZEALAND PAGE 14 Head Office Melbourne New Zealand Cue Energy Resources Limited: Annual Report 2013/14Joint Operation Legend INDONESIA Sampang PSC Santos# .......................... 45% SPC ................................ 40% Cue(i)............................... 15% Mahakam Hilir PSC SPC# ............................... 60% Cue ................................ 40% Additional Information # Operator (i) (ii) 8.181878% in the Jeruk field 5% in the Whio prospect on commercial success ^^ Title held by North West Shelf Exploration Pty Ltd *** Title held by Barracuda Ltd PAPUA NEW GUINEA NEW ZEALAND AUSTRALIA PDL 3 Santos#*** ...................15.921718% SHP ................................40.149650% Oil Search ....................36.35974% Cue ................................5.568892% (SE Gobe Unit .............3.285651%) PRG ...............................2.0% PRL14 Oil Search# .......................62.556% Murray ...............................26.497% Cue .....................................10.947% PRL9 Santos*** .........................40% Oil Search# .......................45.106% Cue .....................................14.894% Maari and Manaia Oil Fields PMP 38160 OMV# ............................. 69% Todd ............................... 16% Horizon ......................... 10% Cue ................................ 5% PEP 51149 Todd# ............................. 80% Cue ................................ 20% PEP 51313 OMV# ............................. 30% Todd ............................... 35% Horizon ......................... 21% Cue(ii) .............................. 14% PEP 54865 Todd# ............................. 80% Cue ................................ 20% Carnarvon Basin Permits WA-389-P BHP Billiton#.................. 60% Cue ................................ 40% WA-359-P Cue# ............................... 100% WA-360-P MEO#^^ ........................... 62.5% Cue ................................ 37.5% WA-361-P MEO#^^ ........................... 50% Mineralogy .................... 35% Cue ................................ 15% WA-409-P Apache# ......................... 40% Cue ................................ 30% Rankin Trend ................ 30% 7 Joint Operations GEOFFREY KING Chairman’s Overview Cue Energy Resources is firmly set on a path of prudential reserves replacement and growth and has sufficient resources to undertake significant production asset acquisitions. Dear Shareholders It gives me no joy to report to shareholders that the year ended 30 June 2014 was a difficult one for the Company in both an operational and financial sense. Significantly, Cue and its partners lost Maari production for five months due to required repairs to the FPSO mooring system and turret. This deferral of production reduced our annual oil production by 30% with consequent negative impact on our cashflows for the year. Our operating and exploration costs were adversely affected by the unbudgeted costs of the repairs to the Maari FPSO mooring system and turret, and the drilling costs for Naga Utara-2 onshore Indonesia well which ran considerably over budget due to operational issues. Significant drilling costs have not been paid for drilling associated with Naga Utara-2 since the Company considers that those costs resulted from inadequate operational provisions by the drilling contractor. In the past year we lost from the Board the capacities and contributions of Tim Dibb and Paul Moore. Both Tim and Paul resigned as the result of their moves from Australia/ New Zealand to overseas locations that made it impractical for them to continue as directors of the Company. I thank both Tim and Paul on behalf of the Board and shareholders for their valuable contributions to the business and growth of the Company. As mentioned last year, the Board has resolved that a Board of four meets the current needs of Cue as it seeks to grow. Consequent upon the resignation of both Tim Dibb and Paul Moore as directors, we recruited Rowena Sylvester and Stuart Brown to join the Board to maintain the optimum number of directors and enhance the blend of skills on the Board. I am delighted that both Rowena and Stuart have accepted our invitation to join the Board and their positive contribution has already become apparent. Apart from the maintenance of the Company’s base business, the key focus for both the 2013/14 year and the 2014/15 year is capturing growth opportunities for the Company. Your Board is well aware that the patience of shareholders has been tested as the Company seeks to expand beyond its current core set of producing and exploration assets. In keeping with its target to add at least 5 million barrels of reserves by the end of calendar year 2018, Cue is focussed on reserves replacement and growth through the acquisition of new, suitably prospective onshore exploration acreage and the acquisition of near term production. The objective is to continue to maintain current production levels to fund a lower cost and a lower risk exploration programme that is more suited to Cue’s size and resources to deliver short term returns in the event of a discovery. These initiatives, along with the monetisation of some of the Company’s static resources and value creation from the Company’s current exploration acreage remain the key components of Cue’s business plan going forward. In line with its exploration and growth strategy, the Company has stretched its technical and commercial resources by methodically screening a number of exploration and production opportunities to advance our goal of securing, in the short term, new suitably attractive exploration acreage where any discovery can be commercialised in a short time frame and, as well, securing additional hydrocarbon production by purchase. Turning to the performance of the Company during 2013/14, it is fair to say that it was a disappointing year for Cue. 8 Cue Energy Resources Limited: Annual Report 2013/14The Company is firmly set on a path of prudential reserves replacement and growth and has sufficient resources to undertake significant production asset acquisitions during the coming financial year. I would like to thank both directors and staff for their efforts and support during the year. We look forward to a more positive report in 2015. Geoffrey J. King Chairman 25th September 2014 Seagood Production Barge, Sampang PSC, Madura, Indonesia Our production income of $34 million, down $16 million compared with the 2012/13 year, were reduced primarily due to the interruption of production at Maari from July to December 2013 and natural field decline at Oyong. Consequently the Company reported a loss of $2.2 million. However, I am pleased to report that the Maari facilities were restored to production in December 2013 and investments are being made to stabilise production at Oyong and Wortel at current levels for another year through 2016. Due to the Maari production interruption, total oil sale volumes from Maari for the year were 0.083 million barrels, down 53.6% on the previous year. Total sales production for the year was 0.65 million boe compared to 0.95 million boe last year, down 32%. Unfortunately the Whio and Naga Utara-2 wells were unsuccessful. However, the Manaia-2 well did encounter hydrocarbons. Currently the implications of the Manaia-2 well results are still under technical review. Cue is also participating in development drilling at Maari. The drilling campaign is expected to add considerably to the reserves and should result in increased production at Maari during the 2015 calendar year. At Oyong and Wortel, the joint operation has committed to well interventions to increase oil production at Oyong and the installation of additional onshore compression at the Wortel Grati gas plant to maintain gas production at the current plateau rate. Further, the Company announced in July that it was testing the market for the sale of its PNG assets – the SE Gobe producing asset and two onshore retention leases. The Company participated in two exploration wells during the year: Manaia-2, offshore New Zealand and Naga Utara-2, onshore Indonesia. The Company is also working to farm down its five Carnarvon Basin permits, and the outcome of these farm downs will be the subject of a later announcement. Subsequent to year end, Cue also participated in the offshore New Zealand Whio exploration well where it was fully carried for its share of drilling costs. The Company’s balance sheet remains robust. At the end of the financial year Cue’s cash balance remained healthy at $40.6 million. Cue is currently putting in place a corporate debt facility to allow it to move quickly on any suitable production acquisition opportunity. 9 Chairman’s Overview DAVID BIGGS Chief Executive Officer’s Review During the 2013/14 year Cue’s priorities were to drill our existing exploration acreage and refocus our exploration portfolio going forward such that it is better suited to our financial capabilities and desire to book early reserves. During the 2013/14 year Cue’s priorities were to drill our existing exploration acreage and refocus our exploration portfolio going forward such that it is better suited to our financial capabilities and desire to book early reserves. The year was also notable due to the Maari production facilities being unavailable for five months which significantly impacted the Company’s cashflow for the year. Looking forward, 2014/15 promises a step up in production for the Company with development drilling underway or to commence in New Zealand and Indonesia over the next 12 months, and the capture of new exploration acreage. 2013/14 Cue’s share of sales production for the year from our New Zealand, Indonesian and Papua New Guinea fields was 0.65 mmboe. This was significantly down from last year primarily as a result of Maari being offline for five months for repairs and maintenance. The Maari facility is now fully back online with a new FPSO swivel and a refurbished mooring system. The opportunity was taken while the facility was offline to bring forward maintenance work on the FPSO and the wellhead platform which had been scheduled for calendar year 2014. Insurance claims have been lodged in respect of the failure of the turret and the mooring system but it is not expected that the result of these claims will be known until well into calendar year 2015. Oil prices remained robust during the year, contributing to total production income of $34 million. The Company participated in two exploration wells during the year - Naga Utara-2 in the Mahakam Hilir PSC, onshore Kalimantan Indonesia and Manaia-2 offshore Taranaki, New Zealand. Subsequent to year end, we also participated in the Whio well, also offshore Taranaki where we were free carried. Disappointingly, both Naga Utara-2 and Whio were unsuccessful. The results of the Manaia-2 well are still under technical review by the operator, OMV. Post the restoration of Maari production, we continue to generate strong cash flows which are used to fund our further development and exploration activities. The Company’s financial position is healthy with $40.6 million in cash reserves as at 30 June 2014 and no debt. A large part of the year was spent preparing for a very active 2014/15 year with development wells to be drilled in Indonesia and New Zealand. This significant activity comprises the Maari growth project which continues the appraisal and development of the Maari field in New Zealand, and workovers at Oyong and a new compressor at Wortel to maintain production from the Sampang PSC. Our producing fields in Indonesia (Oyong and Wortel) performed well during the year. Production from the fields in the Sampang PSC averaged 14,158 boes per day (1,534 boes Cue share). The Maari field produced 5,112 barrels per day (256 barrels per day Cue share). 10 Cue Energy Resources Limited: Annual Report 2013/14Grati Gas Plant, onshore Java, Indonesia 2014/15 As a result of the development activities at Maari and Sampang, the Company can look forward to strong production for calendar year 2015. However, post 2015, forecast production, assuming no near term exploration or appraisal success, begins to reduce due to natural field decline, largely driven by the reduction in oil production at Oyong, despite the increase in forecast Maari production from the current round of development drilling. Cue’s Board and management are acutely aware of the challenge this presents and are very focused on taking steps to secure and at least maintain Cue’s ongoing reserves position and production levels post 2015. Cue is actively seeking out opportunities to purchase existing production assets on suitable terms as one avenue to maintain and enhance the Company’s production levels. At present, the Company is in the enviable position of being able to fund its exploration commitments and activities from existing cash flows. As I reported last year, the Company has revised its exploration strategy with a focus on increasing its presence onshore in Australia, in New Zealand and in Asia and is actively seeking to replenish its existing exploration acreage portfolio by securing positions in those areas, in accordance with its announced strategy, to grow the Company’s reserve base. As a result, Cue is currently reviewing a number of new exploration acreage capture opportunities that are consistent with its strategy. Also consistent with the exploration strategy, we have continued to recruit skilled technical staff to enable the company to properly work its existing exploration portfolio and to capture new exploration acreage in our focus areas. The Company also continues to look to extract value from its current exploration assets. During 2013/14, we announced that we were seeking expressions of interest to purchase our PNG assets. We are also working the farm down of our position in the Mahakam Hilir PSC. At the time of writing, this process is well advanced and I expect that the Company will be in a position to make an announcement around the future of its Mahakam Hilir asset before the AGM. We are also actively working the farm down of our Canarvon Basin blocks offshore Western Australia. Looking briefly at our current assets: 11 Chief Executive Officer’s Review Indonesia Papua New Guinea CHIEF EXECUTIVE OFFICER’S REVIEW Continued Australia Australia Head Office Melbourne New Zealand Exploration WA-359-P Cue Interest: 100% WA-409-P Cue Interest: 30% WA-360-P Cue Interest: 37.5% Operator: Cue Exploration Pty Ltd Operator: Apache Northwest Pty Ltd Operator: MEO Australia Ltd The Operator is conducting reprocessing of existing 3D seismic data, seismic attribute studies and other technical work. The Joint Operation applied for a Suspension and Extension of the Year 6 work programme and extension of time to allow completion of the seismic reprocessing and selection of a potential well location. NOPTA granted a nine-month Suspension and Extension of the permit on 18 March 2014. The decision to renew the permit will now be taken during the fourth quarter of calendar 2014. Under the terms of a farmout agreement with Apache, Cue is carried through the work programme and any well the Joint Operation elects to drill. The WA-360-P Joint Operation has commenced reprocessing of approximately 650 km² of existing 3D seismic data over the Maxwell prospect to improve imaging of the structure. On completion of the reprocessing, it is expected that activity to farm down our interest in the permit will recommence before the end of the primary term of the permit in 2015. There is no well commitment in the primary term. WA-361-P Cue Interest: 15% Operator: MEO Australia Ltd NOPTA has approved an application for a work programme variation to allow the Joint Operation to complete geotechnical studies ahead of making any commitment to drill a well. The reduced work programme concludes 30 January 2016. Reprocessing of the existing multi-client 3D over the permit was completed and pre-stack depth migrated volume has been received. Interpretation of the reprocessed data has confirmed the key Sherlock prospect, with an estimated 300 million bbls of oil in place. Cue is marketing the prospect to interested parties to farm down its interest in the permit. WA-389-P Cue Interest: 40% Operator: BHP Billiton Petroleum (Australia) Pty Ltd The permit was renewed by NOPTA on 9 October 2013 for a five year term on a reduced area. The Primary Term work commitment includes reprocessing of existing 2D and 3D seismic data and it is expected that this work will commence in the second half calendar year 2014. There is an exit point from the permit at the end of the third year of the renewal (October 2016) prior to a well obligation in the fifth year of the renewal. 12 Cue Energy Resources Limited: Annual Report 2013/14Drill ship and seismic vessel, Carnarvon Basin, Western Australia AUSTRALIA - Carnarvon Basin Location Map LEGEND LEGEND LEGEND Cue Permit Oil Field Gas Field Cue Permit Oil Field Gas Field WA-389-P Gas Condensate Field Onshore Gas Cue Permit Oil Field Gas Field Gas Discovery SEG Unitisation Gas Line Liquids Line WA-389-P WA-389-P WA-359-P WA-409-P WA-359-P Scale: 25km WA-361-P WA-361-P WA-360-P WA-361-P WA-360-P 13 Chief Executive Officer’s Review: Australia Indonesia Papua New Guinea Australia CHIEF EXECUTIVE OFFICER’S REVIEW Continued New Zealand Head Office Melbourne New Zealand Exploration PEP 51149 Cue Interest: 20% Operator: Todd Exploration Limited Planning for the commitment well, Te Kiri North-1 has commenced, however due to rig availability issues, drilling is now expected in the fourth quarter of calendar 2015. The well will be deviated from the surface location to intersect a potentially oil-bearing objective in the Miocene- age Mount Messenger Formation and a deeper Eocene-age gas-bearing objective. Te Kiri North-1 will be drilled up dip of hydrocarbon shows in the Te Kiri-1 well. The well has the potential, in Cue’s estimate, of mean prospective resources of 2 million boe recoverable net to Cue. Existing infrastructure nearby will facilitate early commercialisation. PEP 54865 Cue Interest: 20% Operator: Todd Exploration Limited The permit carries a minimum work program of 285 km² of 3D seismic to be acquired, processed and interpreted prior to June 2015, at which time the Joint Operation may elect to drill a well before December 2016 to test Early Tertiary and Late Cretaceous reservoir objectives, or surrender the permit. Planning for the 3D seismic survey has commenced, however data acquisition is not expected to start until late 2014 or early 2015. The Joint Operation is seeking a farminee to fund the seismic programme. PEP 51313 Cue Interest: 14% Operator: OMV New Zealand Ltd The Whio-1 exploration well was spud on 23 July 2014. The well was located approximately 5 km from the Maari production facilities and was drilled using the Kan Tan IV semi-submersible drilling rig. Water depth at the well location was approximately 100m and the well had a total depth of 2700m. All targeted reservoirs were water wet and the well was plugged and abandoned. Additional exploration potential exists along the Tasman Ridge to the south of Maari where several opportunities including the Matariki prospect have been identified on existing 3D seismic data. Production PMP 38160 Cue Interest: 5% Operator: OMV New Zealand Ltd Maari and Manaia Fields Cue’s net share of oil sales in the year from the Maari and Manaia fields was 82,569 barrels which generated $10.16 million in revenue. Maari was shut-in for a period of 145 days during which time the FPSO was disconnected from its mooring, towed to Port Nelson where a new production swivel was installed and refurbishment of the vessel and the on board process facilities was undertaken. Whilst the FPSO was off-station, repairs to several of the mooring lines were successfully completed. Production of oil from the Maari and Manaia fields restarted on 17 December 2013 following the successful reconnection of the FPSO Raroa to its mooring on 20 November 2013. The drilling campaign supporting the Maari Growth Project commenced. The Ensco 107 jack-up rig has been drilling a Mangahewa Formation production well at Maari. The remainder of the programme 14 Cue Energy Resources Limited: Annual Report 2013/14includes a second production well to exploit the Mangahewa reservoir at Manaia, two additional production wells and a water injection well to exploit the Moki Formation at Maari. Production is expected to fluctuate whilst drilling the development wells as operations require individual wells to be temporarily shut in. The Growth Project is expected to add approximately 11,000 bopd gross (Cue net: 550 bopd) to production when complete in the first half of calendar year 2015. Kan Tan - IV drilling rig, New Zealand NEW ZEALAND - Taranaki Peninsula Location Map Taranaki Peninsula Tui PEP 51149 PEP 54865 Scale: 10km Maui Maari PMP 38160 Manaia LEGEND LEGEND PEP 51313 LEGEND Cue Permit Oil Field Gas Field Cue Permit Oil Field Gas Field Gas Condensate Field Onshore Gas Cue Permit Oil Field Gas Field Gas Discovery SEG Unitisation Gas Line Liquids Line 15 Chief Executive Officer’s Review: New Zealand CHIEF EXECUTIVE OFFICER’S REVIEW Continued Indonesia Indonesia Papua New Guinea Exploration Mahakam Hilir PSC - Kutei Basin Cue Interest: 40% Operator: SPC Mahakam Hilir Pte Ltd Naga Utara The third well in the licence, Naga Utara-2, was plugged and abandoned in early January 2014. Cue is attempting to farm down its interest in the permit before drilling a fourth well in the licence. INDONESIA - Mahakam Hilir PSC Location Map Australia Pelarang Samarinda Oil Field Sambutan Gas/Oil Field Mahakam Hilir PSC South Pelarang-1 Head Office Melbourne New Zealand Sanga Sanga Oil Field 500mmbbls recoverable Scale: 5km Sei Nangka Oil Field LEGEND LEGEND LEGEND Pamaguan Gas Field Cue Permit Oil Field Gas Field Cue Permit Oil Field Gas Field Gas Condensate Field Onshore Gas Cue Permit Oil Field Gas Field Gas Discovery SEG Unitisation Gas Line Liquids Line 16 Cue Energy Resources Limited: Annual Report 2013/14Production Sampang PSC - Madura Strait Cue Interest: 15% Operator: Santos (Sampang) Pty Ltd Oyong Field During the year, Cue’s share of oil sales from the Oyong field was 49,699 barrels which generated $5.81 million in production income. Cue’s share of condensate sales from the Oyong field was 581 barrels which generated $0.042 million in revenue and its share of gas sales was 1,117,608 Mcf which generated $3.33 million in production income. Based on continued improved production rates, the Joint Operation approved extension of the contracts for the Oyong production barge and FSO until September 2015. A programme of well interventions and recompletions, which will take place later this calendar year was also approved. The planned workovers will improve Oyong oil production with the potential to extend field life beyond the end of 2015. NU-2 drilling, Mahakam Hilir PSC, Indonesia INDONESIA - Sampang PSC Madura Strait Location Map Madura Island East Java Wortel Field Oyong Field Grati Onshore Gas Facilities LEGEND LEGEND Cue Permit Oil Field Gas Field Gas Condensate Field Onshore Gas Cue Permit Oil Field Gas Field Gas Discovery SEG Unitisation Gas Line Liquids Line LEGEND Wortel Field Cue’s gas sales during the year was 1,866,870 Mcf, which generated $12.85 million in production income. Gas Field Condensate sales was 795 barrels which generated $0.057 million in revenue. Oil Field Cue Permit The Joint Operation has approved the installation of compression at the Grati gas plant which will ensure that the Wortel project will continue to meet its gas sales contract volumes. Installation of the compressors will take place during the 2014 fourth quarter so that compression is available in early 2015. Gas-lift compressors will also be installed on the Oyong platform offshore. 17 Chief Executive Officer’s Review: Indonesia CHIEF EXECUTIVE OFFICER’S REVIEW Continued Papua New Guinea Indonesia Papua New Guinea Head Office Melbourne New Zealand Exploration PRL14 Cue Interest: 10.947% Operator: Oil Search (PNG) Limited PRL9 Cue Interest: 14.894% Operator: Oil Search (PNG) Limited Australia Production PDL 3 SE Gobe Field Cue Interest: 5.568892% SE Gobe Unit Cue Interest: 3.285646% Operator: Oil Search (PNG) Limited Cue’s share of oil sales was 14,361 barrels of oil from the SE Gobe field during the year, which generated $1.76 million in production income. 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. Cue is seeking offers for the purchase of the Company’s PNG asset portfolio. The marketing of the portfolio is well advanced. David Biggs Chief Executive Officer 25th September 2014 18 Cue Energy Resources Limited: Annual Report 2013/14SE Gobe Production Facilities, Southern Highlands, Papua New Guinea Gobe Main PAPUA NEW GUINEA - Location Map Gobe Main LEGEND LEGEND LEGEND Cue Permit SE Gobe Oil Field Field Unitisation Gas Field Cue Permit Oil Field Gas Field PDL 3 Gas Condensate Field Cobra Onshore Gas Bilip k n i l e b o G Cue Permit Oil Field Gas Field Gas Discovery SEG Unitisation Gas Line Liquids Line Iehi PRL 14 PRL 9 Barikewa K u t u b u t o P N K u G m SE Gobe Field Unitisation k n i l e b o G PDL 3 Cobra Bilip Iehi PRL 14 PRL 9 Barikewa K u t u b u t o P N K u G m L N G ul pip elin e P i p e li n e L N G ul pip elin e P i p e li n e 19 Chief Executive Officer’s Review: Papua New Guinea CHIEF EXECUTIVE OFFICER’S REVIEW Continued 2013 Reserves and Resources Summary RESERVES AND RESOURCES AS AT 31 DECEMBER 2013 NET TO CUE ENERGY RESOURCES LIMITED* PROVED (1P) PROVED & PROBABLE (2P) CUE INTEREST LIQUIDS MMBBL OIL EQUIVALENT(4) MMBOE GAS BSCF LIQUIDS MMBBL OIL EQUIVALENT(4) MMBOE GAS BSCF FIELD (LICENCE) Reserves INDONESIA Oyong (1)(2) (Sampang PSC) Wortel(1) (Sampang PSC) 15% 15% 0.006 0.007 0.673 4.490 0.119 0.755 0.034 0.010 2.825 5.940 0.504 1.000 NEW ZEALAND Maari (PMP 38160) 5% 1.009 - 1.009 2.344 - 2.344 PAPUA NEW GUINEA SE Gobe(3) (PDL 3) 3.286% Total Reserves Contingent Resources INDONESIA 0.029 1.051 3.760 8.924 0.656 2.539 0.045 2.431 4.584 13.349 0.809 4.656 BEST ESTIMATE (2C) Jeruk (Indonesia) 8.182% 1.244 - 1.244 PAPUA NEW GUINEA Barikewa (PRL 9) Cobra(5) (PRL 14) Iehi(5) (PRL 14) Bilip(5) (PRL 14) Total Contingent Resources 14.894% 10.947% 10.947% 10.947% - - - - 44.533 33.826 27.368 3.941 1.244 109.668 Total Reserves and Resources 1.051 8.924 2.539 3.675 123.016 Rounded * (1) CUE reserves are net of Indonesian government share of production. (2) Estimates of in-place and recoverable gas volumes include both free gas and solution gas. (3) SE Gobe 1P and 2P Gas reserves are pending the expected conclusion of an agreement to commercialise the gas. (4) Oil equivalent conversion factor: 6MSCF per BOE (Barrel of Oil Equivalent). (5) PRL 14 Contingent Resource estimates were based on Mean recoverable gas resource estimates in the operator’s submission to PNG Govt. 7.422 5.638 4.561 0.657 19.522 24.178 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 Total as at 31 December 2012 Plus/(less) adjustments Production Total as at 31 December 2013 PROVED (1P) PROVED & PROBABLE (2P) LIQUIDS MMBBL 1.199 (0.001) (0.147) 1.051 GAS BSCF 12.259 - (3.335) 8.924 OIL EQUIVALENT MMBOE LIQUIDS MMBBL GAS BSCF OIL EQUIVALENT MMBOE 3.242 - (0.703) 2.539 2.478 0.1 (0.147) 2.431 16.837 (0.153) (3.335) 13.349 5.284 0.075 (0.703) 4.656 20 Cue Energy Resources Limited: Annual Report 2013/14 NET TO CUE ENERGY RESOURCES LIMITED NET TO CUE ENERGY RESOURCES LIMITED NET TO CUE ENERGY RESOURCES LIMITED FIELD (LICENCE) CUE INTEREST CUE INTEREST CUE INTEREST Reserves FIELD (LICENCE) FIELD (LICENCE) Reserves Oyong (Indonesia) Reserves Oyong (Indonesia) Wortel (Indonesia) Oyong (Indonesia) Wortel (Indonesia) Maari (NZ) Wortel (Indonesia) Maari (NZ) SE Gobe (PNG) Maari (NZ) Total Reserves SE Gobe (PNG) SE Gobe (PNG) Contingent Resources Total Reserves Total Reserves Contingent Resources Jeruk (Indonesia) Contingent Resources Jeruk (Indonesia) Barikewa (PNG) Jeruk (Indonesia) Barikewa (PNG) Cobra (PNG) Barikewa (PNG) Cobra (PNG) Iehi (PNG) Cobra (PNG) Iehi (PNG) Bilip (PNG) Iehi (PNG) Total Contingent Resources Bilip (PNG) Bilip (PNG) Total Contingent Resources Total Contingent Resources Total Reserves and Resources 15% 15% 15% 15% 15% 5% 15% 3.29% 5% 5% 3.29% 3.29% 8.18% 8.18% 14.89% 8.18% 14.89% 10.95% 14.89% 10.95% 10.95% 10.95% 10.95% 10.95% 10.95% 10.95% 10.95% PROVED (1P) PROVED (1P) PROVED (1P) GAS EQUIVALENT(4) OIL OIL OIL EQUIVALENT(4) MMBOE EQUIVALENT(4) MMBOE 0.119 MMBOE LIQUIDS LIQUIDS MMBBL LIQUIDS MMBBL 0.034 MMBBL PROVED & PROBABLE (2P) PROVED & PROBABLE (2P) PROVED & PROBABLE (2P) GAS EQUIVALENT )4( OIL OIL OIL EQUIVALENT )4( MMBOE EQUIVALENT )4( MMBOE 0.504 MMBOE LIQUIDS LIQUIDS MMBBL LIQUIDS MMBBL 0.006 MMBBL 0.006 0.007 0.006 0.007 1.009 0.007 1.009 0.029 1.009 1.051 0.029 0.029 1.051 1.051 BSCF GAS GAS BSCF 0.673 BSCF 0.673 4.490 0.673 4.490 4.490 3.760 8.924 3.760 3.760 8.924 8.924 0.119 0.755 0.119 0.755 1.009 0.755 1.009 0.656 1.009 2.539 0.656 0.656 2.539 2.539 BEST ESTIMATE (2C) 13.349 BEST ESTIMATE (2C) BEST ESTIMATE (2C) BSCF GAS GAS BSCF 2.825 BSCF 2.825 5.940 2.825 5.940 5.940 4.584 13.349 4.584 4.584 13.349 44.533 44.533 33.826 44.533 33.826 27.368 33.826 27.368 3.941 27.368 109.668 3.941 3.941 109.668 109.668 123.016 123.016 123.016 0.034 0.010 0.034 0.010 2.344 0.010 2.344 0.045 2.344 2.431 0.045 0.045 2.431 2.431 1.244 1.244 1.244 1.244 1.244 1.244 3.675 3.675 3.675 0.504 1.000 0.504 1.000 2.344 1.000 2.344 0.809 2.344 4.656 0.809 0.809 4.656 4.656 1.244 1.244 7.422 1.244 7.422 5.638 7.422 5.638 4.561 5.638 4.561 0.657 4.561 19.522 0.657 0.657 19.522 19.522 24.178 24.178 24.178 1.051 1.051 1.051 8.924 8.924 8.924 2.539 2.539 2.539 Total Reserves and Resources (1) CUE reserves are net of Indonesian government share of production. Total Reserves and Resources (2) Estimates of in-place and recoverable gas volumes include both free gas and solution gas. (1) CUE reserves are net of Indonesian government share of production. (3) (2) (1) CUE reserves are net of Indonesian government share of production. SE Gobe 1P Gas reserves are pending the expected conclusion of an agreement to commercialise the gas. Estimates of in-place and recoverable gas volumes include both free gas and solution gas. (4) Oil equivalent conversion factor: 6MSCF per BOE (Barrel of Oil Equivalent). 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. (2) (3) (5) PRL 14 Contingent Resource estimates were based on Mean recoverable gas resource estimates in the operator’s submission to PNG Govt. SE Gobe 1P Gas reserves are pending the expected conclusion of an agreement to commercialise the gas. (3) (4) Oil equivalent conversion factor: 6MSCF per BOE (Barrel of Oil Equivalent). (4) Oil equivalent conversion factor: 6MSCF per BOE (Barrel of Oil Equivalent). (5) PRL 14 Contingent Resource estimates were based on Mean recoverable gas resource estimates in the operator’s submission to PNG Govt. (5) PRL 14 Contingent Resource estimates were based on Mean recoverable gas resource estimates in the operator’s submission to PNG Govt. PROVED (1P) Oil Reserves (MMbbls) 0.006 0.006 0.006 0.029 0.029 0.029 0.007 0.007 0.007 PROVED & PROBABLE (2P) Oil Reserves (MMbbls) 0.034 0.034 0.034 0.045 0.045 0.045 0.010 0.010 0.010 PROVED & PROBABLE (2P) Gas Reserves (BSCF) 4.584 4.584 4.584 PROVED (1P) Gas Reserves (BSCF) 3.760 3.760 3.760 1.009 1.009 1.009 0.673 0.673 0.673 4.490 4.490 4.490 CONTINGENT RESOURCES (2C) Oil Reserves (MMbbls) CONTINGENT RESOURCES (2C) Gas Reserves (BSCF) 1.244 1.244 1.244 3.941 3.941 27.368 3.941 27.368 27.368 33.826 33.826 33.826 2.344 2.344 2.344 2.825 2.825 2.825 5.940 5.940 5.940 44.533 44.533 44.533 Oyong (Indonesia) Wortel (Indonesia) Oyong (Indonesia) Oyong (Indonesia) Maari (New Zealand) Wortel (Indonesia) Wortel (Indonesia) SE Gobe (Papua New Guinea) Maari (New Zealand) Maari (New Zealand) SE Gobe (Papua New Guinea) SE Gobe (Papua New Guinea) Oyong (Indonesia) Wortel (Indonesia) Oyong (Indonesia) Oyong (Indonesia) Maari (New Zealand) Wortel (Indonesia) Wortel (Indonesia) SE Gobe (Papua New Guinea) Maari (New Zealand) Maari (New Zealand) SE Gobe (Papua New Guinea) SE Gobe (Papua New Guinea) Jeruk (Indonesia) Barikewa (Papua New Guinea) Jeruk (Indonesia) Jeruk (Indonesia) Cobra (Papua New Guinea) Barikewa (Papua New Guinea) Barikewa (Papua New Guinea) Iehi (Papua New Guinea) Cobra (Papua New Guinea) Cobra (Papua New Guinea) Bilip (Papua New Guinea) Iehi (Papua New Guinea) Iehi (Papua New Guinea) Bilip (Papua New Guinea) Bilip (Papua New Guinea) 21 Chief Executive Officer’s Review: 2013 Reserves and Resources Summary CUE ENERGY RESOURCES Corporate Governance Statement 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 strategic direction and 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 independent non-executive directors. The chairman is non-executive and independent: • Geoffrey J. King (Chairman) • • • Stuart A. Brown Rowena A. Sylvester Andrew A. Young 22 Cue Energy Resources Limited: Annual Report 2013/14Recommendation 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 Company’s website; and 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 2014 the proportion of women in the whole organisation is 5 out of 13 (38%), the proportion of women in senior executive positions is 0 of 3 (0%) and proportion of women on the Board is 1 of 4 (25%). This is reviewed against the discussed and agreed objectives of the Company and their 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’s 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. 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 on the Company’s website and on pages 28 to 29 of this report. Each of the directors is entitled to seek independent advice at the Company’s expense to assist them to carrying out their responsibilities. 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’s businesses and its objectives. One third of the Directors retires annually and is free to seek re-election by shareholders. 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’s website. The committee is comprised of: • • Andrew A. Young (Chairman) Stuart A. Brown Paul Moore was also Chairman 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. 23 Corporate Governance Statement Principle 4: Safeguarding Integrity in Financial Reporting Recommendation 4.1: The board should establish an audit committee. 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 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’s website. The Committee consists of: • Rowena A. Sylvester (Chairman) • Geoffrey J. King Timothy Dibb was also Chairman of this committee whilst a director of the company. 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 the 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 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’s 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; and 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’s 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. 24 Cue Energy Resources Limited: Annual Report 2013/14Remuneration 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’s 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 26 to 35 of this report. The Remuneration and Nomination committee charter is available on the Company’s website. 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: • • Andrew A. Young (Chairman) Stuart A. Brown Paul Moore was also Chairman of this committee whilst a director of the company. 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. 25 Corporate Governance Statement CUE ENERGY RESOURCES Directors’ 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 2014. 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) Stuart A. Brown (appointed 24 July 2014) Rowena A. Sylvester (appointed 30 May 2014) Andrew A. Young Timothy E. Dibb (resigned 20 February 2014) Paul D. Moore (resigned 15 May 2014) Chief Executive Officer David A.J. Biggs Chief Financial Officer/ Company Secretary Andrew M. Knox Co-Company Secretary Pauline M. Moffatt Principal Activities Dividends The principal activities of the group are petroleum exploration, development and production. No dividends were paid during the financial year or have been approved subsequent to the reporting date (2013: nil). Cue Energy Resources Limited (‘Cue’) is listed on the Australian Securities Exchange. The Company has an American Depositary Receipt (ADR) programme sponsored by the Bank of New York and these are traded via the OTCQX Market in the US. Principal Place of Business Level 19 357 Collins Street Melbourne 3000 Australia Registered Office Level 19 357 Collins Street Melbourne 3000 Australia Review of operations Production income for the year ended 30 June 2014 was $34.0 million (2013: $49.8 million). Production and amortisation expenses totalled $27.5 million for the year (2013: $36.7 million). Profit before income tax expense for the year was $0.1 million (2013: $8.4 million). Tax expense for the year was $2.2 million (2013: $2.0 million), resulting in loss after income tax expense of $2.2 million for the year (2013: profit $6.4 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. 26 Cue Energy Resources Limited: Annual Report 2013/14Board of Directors from left: Geoffrey King, Andrew Young, Stuart Brown, Rowena Sylvester 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 2014 was $129.4 million (2013: $131.6 million). At the reporting date, Cue had issued share capital of $152.4 million (2013: $152.4 million). No further shares have been issued subsequent to the reporting date. The total number of shares on issue at 30 June 2014 was 698,119,720 (2013: 698,119,720). Share options and performance rights The 1,600,000 performance rights outstanding at 30 June 2013 all lapsed during the year ended 30 June 2014. 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 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 joint operation 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 following activities may affect the expected results of operations: • Cue is currently testing the market for sale of its PNG assets portfolio; • • • • farming down Mahakam Hilir PSC, Indonesia; farming down WA-359-P permit, Carnarvon Basin; actively seeking new exploration acreage onshore Australia and Asia; and actively seeking to acquire additional production. 27 Directors’ Report 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 9 - - 9 7 9 9 - - 8 7 5 2 - - - 2 - 2 - - - 2 - - - - 1 - 1 - - - 1 - 1 Geoffrey J. King Stuart A. Brown(i) Rowena A. Sylvester(ii) Andrew A. Young Timothy E. Dibb(iii) Paul D. Moore(iv) (i) (ii) (iii) (iv) Stuart A. Brown (appointed 24 July 2014) Rowena A. Sylvester (appointed 30 May 2014) Timothy E. Dibb (resigned 20 February 2014) Paul D. Moore (resigned 15 May 2014) Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. Information on directors and executives, including qualifications and experience is as follows: Particulars of Directors’ Interests in shares of Cue Energy Resources Limited at the date of this report Direct 20,000 Indirect 2,500 Non-Executive Chairman Board of Directors Member of Audit and Risk Committee Non-Executive Director Nil Nil Member of Remuneration and Nomination Committee Qualifications and Experience Special Responsibilities Directors G.J. King S.A. Brown BA, LL.B Non-Executive Chairman of Cue Energy Resources Limited(i) -Appointed 24 November 2011 Deputy Chairman and Non-Executive Director – High Peak Royalties Limited(i) -Appointed 17 December 2008 BSc Hons (First Class, Geology) Non-Executive Director of Cue Energy Resources Limited(i) -Appointed 24 July 2014 Non-Executive Director – Cossack Energy Limited(i) -Appointed February 2014 Non-Executive Director – Empire Oil & Gas NL(ii) -Appointed January 2014 Non-Executive Director – WHL Energy Limited(i) -Appointed December 2013 R.A. Sylvester BBS Non-Executive Director of Cue Energy Resources Limited(i) -Appointed 30 May 2014 Non-Executive Director of Essential Energy(ii) -Appointed March 2002 -Resigned June 2012 Non-Executive Director Chairman of Audit and Risk Committee Nil Nil 28 Cue Energy Resources Limited: Annual Report 2013/14Particulars of Directors’ Interests in shares of Cue Energy Resources Limited at the date of this report Direct Nil Indirect 150,000 Qualifications and Experience Special Responsibilities Non-Executive Director Chairman of Remuneration and Nomination Committee Directors A.A. Young BE (Chemical Engineering), MBA (Hons) Non-Executive Director of Cue Energy Resources Limited(i) -Appointed 13 December 2011 Non-Executive Director of New Guinea Energy Limited(i) -Appointed 20 October 2010 Non-Executive Director of Cliq Energy Berhad -Appointed May 2012 -Resigned 31 March 2013 -Re-appointed June 2013 Non-Executive Director of National Safety Council of Australia Limited(ii) -Appointed March 2009 -Resigned July 2014 Non-Executive Chairman of Real Energy Corporation Limited(ii) -Appointed 1 July 2012 -Resigned 31 March 2013 Non-Executive Chairman of Galilee Energy Limited -Appointed 19 August 2013(i) -Resigned October 2013 P.D. Moore(iii)(iv) BSc-Civil Eng, MBA Non-Executive Director Nil Nil 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 -Resigned 15 May 2014 BSc, PhD, Dip M’gmt Non-Executive Director of Cue Energy Resources Limited(i) -Appointed 24 November 2011 -Resigned 20 February 2014 T.E. Dibb(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) -Appointed 8 July 2005 -Resigned 31 March 2011 Director of Axis Mining NL(ii) -Appointed 8 July 2005 -Resigned 31 March 2011 D.B. Whittam(iv) BSc, MSc Other Qualifications and Experience P.M. Moffatt B. Com, CSA(Cert) Chairman of Remuneration and Nomination Committee (until 15 May 2014) Non-Executive Director Nil Nil Chairman of the Audit and Risk Committee (until 20 February 2014) Special Responsibilities Chief Executive Officer Chief Financial Officer Company Secretary Direct 8,045 Indirect Nil 2,321,007 2,137,244 Exploration Manager Appointed 18 June 2012 Resigned 22 August 2014 Special Responsibilities Co Company Secretary Nil Nil 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. (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. 29 Directors’ 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 2014, 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 (C) Details of Remuneration of Directors and Executives (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) S.A. Brown (Non-Executive Director) – appointed 24 July 2014 R.A. Sylvester (Non-Executive Director) – appointed 30 May 2014 A.A. Young (Non-Executive Director) T.E. Dibb (Non-Executive Director) – resigned 20 February 2014 P.D. Moore (Non-Executive Director) – resigned 15 May 2014 The term “Key Management Personnel” is used in this Remuneration Report to refer to the following persons: D.A.J. Biggs (Chief Executive Officer) A.M. Knox (Chief Financial Officer/Company Secretary) D.B. Whittam (Exploration Manager) – resigned 22 August 2014 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. Subsequent to year end J.L. Schrull was appointed Exploration Manager on 22 August 2014. (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, termination entitlements and fringe benefits. 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 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. Superannuation. 30 Cue Energy Resources Limited: Annual Report 2013/14The Board is currently reviewing policies going forward in relation to short and long term incentives. 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 2014, 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. Long term incentives Previously the Board implemented a Performance Rights Plan. As at 30 June 2014, all Performance Rights had lapsed. 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 (resigned 22 August 2014) 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: D.B. Whittam Title: 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. Non solicitation and non compete clauses included. 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. Non solicitation and non compete clauses included. 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. 31 Directors’ Report 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 – 2014: 2014 Name Non-Executive Directors G.J. King S.A. Brown(iii) R.A. Sylvester(iv) A.A. Young T.E. Dibb(v) P.D. Moore(vi) Total Other Key Management Personnel D.A.J. Biggs A.M. Knox D.B. Whittam(vii) Total Total remuneration of Executives and Directors Short-Term Post Employment Cash Salary and Fees $ Non Monetary Benefits (i) $ Super- annuation $ Performance Rights (ii) $ 100,000 - 8,791 100,000 83,167 87,363 379,321 448,776 243,333 415,004 1,107,113 1,486,434 - - - - - - - - 126,774 - 126,774 126,774 - - - - 25,000 - 25,000 24,996 24,996 24,996 74,988 99,988 - - - - - - - - - - - - Total $ 100,000 - 8,791 100,000 108,167 87,363 404,321 473,772 395,103 440,000 1,308,875 1,713,196 (i) Non performance based salary sacrifice benefits, including motor vehicle expenses. (ii) See note 22 for more information. (iii) S.A. Brown appointed 24 July 2014. (iv) R.A. Sylvester appointed 30 May 2014. (v) T.E. Dibb resigned 20 February 2014. (vi) P.D. Moore resigned 15 May 2014. (vii) D.B. Whittam resigned 22 August 2014. 32 Cue Energy Resources Limited: Annual Report 2013/14Compensation of Key Management Personnel – 2013: Short-Term Post Employment Cash Salary and Fees $ Non Monetary Benefits (i) $ 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 - - - 25,060 25,060 - 25,000 - - - - 7,712 32,712 6,249 25,000 16,664 6,865 2,746 57,524 90,236 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 11,200 - - 22,400 1,817,479 22,400 2,728,548 (i) Non performance based salary sacrifice benefits, including motor vehicle expenses. (ii) See note 22 for more information. (iii) L Musca retired 15 November 2012. (iv) R.G. Tweedie retired 25 February 2013. (v) S.J. Koroknay deceased 6 June 2013. (vi) D.A.J. Biggs commenced 22 April 2013. (vii) M.J. Paton resigned 14 November 2012. (viii) A.B. Parks resigned 30 August 2012. (ix) A.A. Young was acting CEO/Executive Director 14 November 2012 to 21 April 2013. 33 Directors’ Report 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. Fixed remuneration At risk – STI At risk - LTI Name Non-Executive Directors: G.J. King R.A. Sylvester A.A. Young T.E. Dibb P.D. Moore R.G. Tweedie L. Musca S.J. Koroknay Other Key Management Personnel: D.A.J. Biggs A.M. Knox D.B. Whittam M.J. Paton A.B. Parks 2014 100% 100% 100% 100% 100% - - - 100% 100% 100% - - 2013 100% - 100% 100% 100% 100% 100% 100% 100% 98% 98% 100% 100% 2014 2013 2014 2013 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2% 2% - - (D) Equity Based Remuneration Overview of Share Options and Performance Rights Historically, the Company has granted performance rights to certain Key Management Personnel. 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 has a mechanism for providing a share based performance incentive for Key Management Personnel and to achieve alignment between Key Management Personnel and Shareholder objectives. Performance rights were granted under the plan for no consideration, neither carry dividend or voting rights. No share options or performance rights were granted during the financial year to 30 June 2014 (2013: see 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 was 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. The Board is currently reviewing policies going forward in relation to short and long term incentives. 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. All previously issued performance rights have lapsed as at 30 June 2014. 34 Cue Energy Resources Limited: Annual Report 2013/14The 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 D.B. Whittam Tranche 2013/2014 Plan 2013/2014 Plan Number of Performance Rights Lapsed 800,000 800,000 Value at lapse date* $96,000 $96,000 * 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, were 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 would 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 above basis, the implied value of the 2012/2013 performance rights was 0.28 cents per right. (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 2014. Profit Performance Production Income Profit/(loss) before income tax expense (Loss)/profit after income tax expense Total Key Management Personnel Remuneration Share Performance Share price at start of year (cents) Share price at end of year (cents) Dividends (cents) Basic (loss)/earnings per share (cents) Diluted (loss)/earnings per share (cents) 30 June 2014 $000’s 30 June 2013 $000’s 30 June 2012 $000’s 30 June 2011 $000’s 30 June 2010 $000’s 34,005 78 (2,166) 1,713 49,798 8,409 6,369 2,729 41,222 13,621 5,663 2,050 52,506 25,761 19,107 2,237 54,700 39,351 27,510 963 30 June 2014 30 June 2013 30 June 2012 30 June 2011 30 June 2010 11.0 12.0 - (0.31) (0.31) 18.0 11.0 - 0.91 0.91 26.5 18.0 - 0.81 0.81 25.0 26.5 - 2.7 2.7 14.5 25.0 - 4.0 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. 35 Directors’ Report Auditor 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; and 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 Amounts paid or due and payable to the auditor – BDO East Coast Partnership for: Audit or review of the financial statements Other Services: Advisory Services Tax compliance and other services Total 2014 $ 2013 $ 87,000 84,000 7,000 31,000 125,000 - 37,000 121,000 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. 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 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 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. Proceedings on behalf of the company 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. 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. Geoffrey J. King Chairman 25th September 2014 36 Cue Energy Resources Limited: Annual Report 2013/14 37 Auditors’ Independence Declaration 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 30 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 2014 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) the financial report also complies with International Financial Reporting Standards as disclosed in note 1; and (c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. 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 2014. Signed in accordance with a resolution of the Directors. Dated in Melbourne 25th day of September 2014 Geoffrey J. King Chairman 38 Cue Energy Resources Limited: Annual Report 2013/14Financial Report 2013/14 For the financial year ended 30 June 2014 39 39 ANNUALREPORTFINANCIAL REPORT 2013/14 Consolidated Statement Of Profit Or Loss And Other Comprehensive Income For the financial year ended 30 June 2014 Production income Production costs Gross profit from production Other income Loss on sale of fixed assets Amortisation of production properties Interest expense Net foreign currency exchange gain Other expenses Profit before income tax expense Income tax expense (Loss)/profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year (Loss)/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 3 4 3 4 4 3 4 6 2014 $000’s 34,005 (18,213) 2013 $000’s 49,798 (19,131) 15,792 30,667 162 (3) (9,262) - 81 (6,692) 160 - (17,520) (3) 3,702 (8,597) 78 8,409 (2,244) (2,040) (2,166) 6,369 - - (2,166) 6,369 (2,166) 6,369 (2,166) 6,369 Basic earnings per share (cents) Diluted earnings per share (cents) 20 20 (0.31) (0.31) 0.91 0.91 The accompanying notes form part of and are to be read in conjunction with these Financial Statements. 40 Cue Energy Resources Limited: Annual Report 2013/14 FINANCIAL REPORT 2013/14 Consolidated Statement Of Financial Position As at ended 30 June 2014 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 The accompanying notes form part of and are to be read in conjunction with these Financial Statements. 41 Note 24(b) 8 10 9 6 12 13 15 6 16 6 16 2014 $000’s 2013 $000’s 40,558 3,542 843 44,943 118 71 54,069 79,458 133,716 178,659 21,184 2,398 563 24,145 19,484 5,627 25,111 49,256 58,828 5,096 1,157 65,081 63 214 36,944 73,935 111,156 176,237 11,977 3,973 475 16,425 22,106 6,137 28,243 44,668 129,403 131,569 7 (a) 7 (b) 152,416 - (23,013) 152,416 22 (20,869) 129,403 131,569 Financial Report 2013/14 FINANCIAL REPORT 2013/14 Consolidated Statement Of Changes In Equity For the financial year ended 30 June 2014 Issued Capital $’000 Accumulated Losses $’000 Share-based Payments Reserve $’000 Balance at 1 July 2013 152,416 Loss 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 - - - - (20,869) (2,166) - (2,166) 22 - - - 22 (22) - Balance at 30 June 2014 152,416 (23,013) - 129,403 Issued Capital $’000 Accumulated Losses $’000 Share-based Payments Reserve $’000 Balance at 1 July 2012 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 Balance at 30 June 2013 (27,663) 6,369 - 6,369 425 - - - 152,416 - - - - 425 (403) 22 152,416 (20,869) 22 131,569 Total $’000 131,569 (2,166) - (2,166) Total $’000 125,178 6,369 - 6,369 The accompanying notes form part of and are to be read in conjunction with these Financial Statements. 42 Cue Energy Resources Limited: Annual Report 2013/14FINANCIAL REPORT 2013/14 Consolidated Statement Of Cash Flows For the financial year ended 30 June 2014 Note 2014 $000’s 2013 $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 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 (Decrease)/Increase 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 35,801 167 (23,319) (6,298) (731) - 5,620 (9,666) (14,035) (155) (23,856) - - - (18,236) 58,828 (34) 58,127 149 (23,420) (244) (1,880) (3) 32,729 (4,932) (5,905) (18) (10,855) - - - 21,874 33,733 3,221 Cash and Cash Equivalents at the End of the Year 24(b) 40,558 58,828 The accompanying notes form part of and are to be read in conjunction with these Financial Statements. 43 Financial Report 2013/14 FINANCIAL REPORT 2013/14 Notes To The Financial Statements For the financial year ended 30 June 2014 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. 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. (a) Operations and Principal Activities (i) Recovery of Deferred Tax Assets 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. (d) Critical accounting estimates and judgements 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 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. 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) Impairment of Production Properties Assets 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. (iii) Useful Life of Production Property Assets 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. (iv) 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. 44 Cue Energy Resources Limited: Annual Report 2013/14The following Accounting Standards and Interpretations are most relevant to the consolidated entity: AASB 10 Consolidated Financial Statements The consolidated entity has applied AASB 10 from 1 July 2013, which has a new definition of ‘control’. Control exists when the reporting entity is exposed, or has the rights, to variable returns 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 that give it the current ability to direct the activities that significantly affect the investee’s returns. The consolidated entity not only has 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. AASB 11 Joint Arrangements The consolidated entity has applied AASB 11 from 1 July 2013. The standard defines which entities qualify as joint arrangements 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 are accounted for using the equity method. Joint operations, where the parties to the agreements have the rights to the assets and obligations for the liabilities, will account for its share of the assets, liabilities, revenues and expenses separately under the appropriate classifications. AASB 12 Disclosure of Interests in Other Entities The consolidated entity has applied AASB 12 from 1 July 2013. The standard contains the entire disclosure requirement associated with other entities, being subsidiaries, associates, joint arrangements (joint operations and joint ventures) and unconsolidated structured entities. 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’. AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 The consolidated entity has applied AASB 13 and its consequential amendments from 1 July 2013. The standard provides a single robust measurement framework, with clear measurement objectives, for measuring fair value using the ‘exit price’ and provides guidance on measuring fair value when a market becomes less active. The ‘highest and best use’ approach is used to measure non-financial assets whereas liabilities are based on transfer value. The standard requires increased disclosures where fair value is used. (v) Joint Arrangements The entity is subject to a number of joint arrangements in relation to both its production properties and exploration assets. The joint arrangement agreements require unanimous consent from all parties in some instances for all relevant activities, all assets are held jointly in common and all parties are severally liable for the liabilities incurred. These arrangements are therefore classified as Joint Operations and the consolidated entity recognises its direct rights to jointly held assets, liabilities, revenues and expenses. (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 financial statements. During the year, an arbitration hearing found in favour of Cue’s position, however claims made by the incoming party are yet to be settled and hence there is still significant judgement and estimation in relation to these legal claims. (e) 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. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. 45 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 1 Summary Of Significant Accounting Policies (cont’) AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) The consolidated entity has applied AASB 119 and its consequential amendments from 1 July 2013. The standard eliminates 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 standard also changed the definition of short-term employee benefits, from ‘due to’ to ‘expected to’ be settled within 12 months. Annual leave that is not expected to be wholly settled within 12 months is now discounted allowing for expected salary levels in the future period when the leave is expected to be taken. AASB 127 Separate Financial Statements (Revised), AASB 128 Investments in Associates and Joint Ventures (Reissued) and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards The consolidated entity has applied AASB 127, AASB 128 and AASB 2011-7 from 1 July 2013. AASB 127 and AASB 128 have been modified to remove specific guidance that is now contained in AASB 10, AASB 11 and AASB 12 and AASB 2011- 7 makes numerous consequential changes to a range of Australian Accounting Standards and Interpretations. AASB 128 has also been amended to include the application of the equity method to investments in joint ventures. AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities The consolidated entity has applied AASB 2012-2 from 1 July 2013. The amendments enhance AASB 7 ‘Financial Instruments: Disclosures’ and requires disclosure of information about rights of set-off and related arrangements, such as collateral agreements. The amendments apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement. (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 2014 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. Sales revenue 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 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. 46 Cue Energy Resources Limited: Annual Report 2013/14The 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 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. (l) Property, plant and equipment Class of Fixed Asset Depreciation Rate Office and computer equipment 5-40% 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 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. 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. (i) Impairment The carrying amounts of the consolidated entity’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication 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. 47 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 1 Summary Of Significant Accounting Policies (cont’) (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. Restoration 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. 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 operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. The consolidated entity has recognised its share of jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the financial statements under the appropriate classifications. (t) Income tax 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. 48 Cue Energy Resources Limited: Annual Report 2013/14The 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. (u) Foreign currency Functional and presentation currency The financial statements of each group entity are measured using their relevant 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) 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. (w) 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. (x) 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. (y) 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 mandatary, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2014. 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 and its consequential amendments This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2017 and completes phases I and III of the IASB’s project to replace IAS 39 (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. Chapter 6 “Hedge Accounting” supersedes the general hedge accounting requirement in AASB 139 and provides a new simpler approach to hedge accounting that is intended to more closely align with risk management activities undertaken by entities when hedging financial and non-financial risks. The consolidated entity will adopt this standard and the amendments from 1 July 2017 but the impact of its adoption is yet to be assessed 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. 49 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 1 Summary Of Significant Accounting Policies (cont’) the scope of the portfolio exemption in AASB 13 ‘Fair Value Measurement’ includes all contracts accounted for with the scope of AASB 139 ‘Financial Instruments: Recondition and Measurement’ or AASB 9 ‘ Financial Instruments’, regardless of whether they meet the definitions of financial assets or financial liabilities are defined AASB 132 ‘Financial Instruments: Presentation’; and Clarifies that determining whether a specific transaction meets the definition of both a business combination as defined in AASB 3 ‘Business Combinations’ and investment property as defined in AASB 140 ‘Investment Property’ requires the separate application of both standards independently of each other. The adoption of these amendments from 1 July 2014 will not have a material impact on the consolidated entity. (z) 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. AASB 2013-3 Amendments to AASB 136- Recoverable amount Disclosures for Non-Financial Assets These amendments are applicable to annual reporting periods beginning on or after 1 January 2014. The disclosure requirements of AASB 136 ‘Impairment of Assets’ have been enhanced to require additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposals. Additionally, if measured using a present value technique, the discount rate is required be disclosed. The adoption of these amendments from 1 July 2014 may increase the disclosures by the consolidated entity. Annual Improvements to IFRSs 2010-2012 Cycle These amendments are applicable to annual reporting periods beginning on or after 1 July 2014 and affects several Accounting Standards as follows: Amends the definition of ‘vesting conditions’ and ‘market condition’ and adds definitions for ‘performance condition’ and ‘service condition’ in AASB 2 ‘Share-Based Payment’; Amends AASB 3 ‘Business Combinations’ to clarify that contingent consideration that is classified as an asset or liability shall be measured at fair value of each reporting date; Amends AASB 8 ‘Operating Segments’ to require entities to disclose the judgements made by management in applying the aggregation criteria; Clarifies that AASB 8 only requires a reconciliation of the total reportable segments assets to the entity’s assets, if the segment assets are reported regularly; clarifies that the issuance of AASB 13 “Fair Value Measurement’ and the amending of AASB 139 ‘Financial Instruments: Recondition and Measurement’ and AASB 9 ‘Financial Instruments’ did not remove the ability to measure short-term receivables and payables with not stated interest rate at their invoice amount, if the effect of discounting is immaterial; Clarifies that in AASB 116 ‘Property, Plant and Equipment’ and AASB 138 ‘Intangible Assets’, when an asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount (i.e. proportional restatement of accumulated amortisation); and Amends AASB 124 ‘Related Party Disclosure’ to clarify that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a ‘related party’ of the reporting entity. The adoption of these amendments from 1 July 2014 will not have a material impact on the consolidated entity. Annual Improvement to IFRSs 2011-2013 Cycle These amendments are applicable to annual reporting periods beginning or after 1 July 2014 and affects four Accounting Standards as follows: Clarifies the ‘meaning of effective IFRSs’ in AASB 1 ‘First-time Adoption of Australian Accounting Standards’; Clarifies that AASB 3 ‘Business Combination’ excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself’; Clarifies that 50 Cue Energy Resources Limited: Annual Report 2013/142 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 CARRYING AMOUNT NET FAIR VALUE 2014 $’000 2013 $’000 2014 $’000 2013 $’000 40,558 3,542 58,828 5,096 40,558 3,542 58,828 5,096 Non-traded financial assets 44,100 63,924 44,100 63,924 Financial liabilities Trade and other payables Tax liabilities - current 21,184 2,398 11,977 3,973 21,184 2,398 11,977 3,973 Non-traded financial liabilities 23,582 15,950 23,582 15,950 Risk Exposures and Responses (a) Fair Value Risk 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 the 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. 51 Financial Report 2013/14: Notes To The Financial Statements NOTES TO THE FINANCIAL STATEMENTS (cont’) 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 financial assets exposed to Australian and overseas variable interest rate risk that are not designated in cash flow hedges: Cash and cash equivalents Consolidated 2014 $000’s 2013 $000’s 40,558 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 2014 $000’s 2013 $000’s 497 (497) 497 (497) 463 (463) 463 (463) A movement of + and – 1% is selected because this is 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 30 June 2014 30 June 2013 USD $’000 39,913 2,687 15,603 NZD $000’s 400 842 947 PNG KINA $’000 8 - - USD $’000 57,908 4,473 NZD $000’s 102 614 3,543 1,966 PNG KINA $’000 8 - - 52 Cue Energy Resources Limited: Annual Report 2013/142 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 Exchange rates +10% Exchange rates -10% Impact on equity Exchange rates +10% Exchange rates -10% Impact on post-tax profit Exchange rates +10% Exchange rates -10% Impact on equity Exchange rates +10% Exchange rates -10% USD $’000 (2,700) 2,700 (2,700) 2,700 USD $’000 (5,884) 5,884 (5,884) 5,884 NZD $000’s (30) 30 (30) 30 NZD $000’s 125 (125) 125 (125) Consolidated 2014 Total $000’s (2,731) 2,731 (2,731) 2,731 Consolidated 2013 Total $000’s (5,760) 5,760 (5,760) 5,760 PNG KINA $’000 (1) 1 (1) 1 PNG KINA $’000 (1) 1 (1) 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 2014 the Group had no open oil price swap contracts (2013: 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 2014 $000’s 3,565 (3,565) 3,565 (3,565) 2013 $000’s 6,375 (6,375) 6,375 (6,375) 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. 53 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 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 2014. Consolidated 2014 Non-derivative financial liabilities Trade and other payables Tax liabilities - current Consolidated 2013 Non-derivative financial liabilities Trade and other payables Tax liabilities - current (f) Credit Risk 12 months or less $000’s 1 to 2 years $000’s 2 to 5 years $000’s More than 5 years $000’s 21,184 2,398 23,582 11,977 3,973 15,950 - - - - - - - - - - - - - - - - - - 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. 54 Cue Energy Resources Limited: Annual Report 2013/143 Revenue And Other Income Revenue from continuing operations: Production income Other income: Interest from cash and cash equivalents 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 Other expenses 5 Auditors Remuneration Amounts paid or due and payable to the auditor – BDO East Coast Partnership for: Audit or review of the financial statements Other Services: Advisory Services Tax compliance and other services Total No other services were provided by the auditor during the year, other than those set out above. 55 Consolidated 2014 $000’s 2013 $000’s 34,005 49,798 162 81 160 3,702 18,213 9,262 - 100 3,582 170 911 793 1,136 6,692 19,131 17,520 3 39 4,556 134 887 208 2,773 8,597 2014 $ 2013 $ 87,000 84,000 7,000 31,000 - 37,000 125,000 121,000 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 6 Taxation INCOME TAX EXPENSE Current tax Adjustment recognised for prior periods Deferred tax Aggregate income tax expense Income tax expense is attributable to: Profit from continuing operations Deferred tax included in income tax comprises: (Increase)/decrease in deferred tax assets Increase/(decrease) in deferred tax liabilities Numerical reconciliation of income tax expense and tax at the statutory rate Profit from continuing operations before income tax expense Tax expense at Australian tax rate of 30% (2013: 30%) Unrealised timing differences Difference in overseas tax rates Allowable mining deductions Tax losses carried forward Adjustments to current tax from prior periods Disallowable intercompany interest Movements in deferred tax Unrealised foreign exchange movements 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 Consolidated Entity 2014 $000’s 2013 $000’s 4,843 (120) (2,479) 2,244 3,073 (149) (884) 2,040 2,244 2,040 (2,773) 294 (2,479) 78 23 169 1,354 (1,824) 5,319 (120) (174) (2,479) (24) 2,244 52,188 15,775 2,040 (2,924) (884) 8,409 2,523 (387) 456 (1,002) 2,766 (149) (175) (884) (1,108) 2,040 30,831 9,181 Current tax liabilities 2,398 3,973 Non-current assets – deferred tax assets Movements - Consolidated Opening balance Credit/(debit) to the income statement Closing balance 8,800 2,773 11,573 10,840 (2,040) 8,800 (i) 56 Cue Energy Resources Limited: Annual Report 2013/14 6 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 2014 $000’s 2013 $000’s (30,692) (294) (30,986) (33,616) 2,924 (30,692) (19,413) (21,892) (i) (i) 71 (19,484) (19,413) 214 (22,106) (21,892) Issued and paid up ordinary fully paid shares Balance at 1 July Options exercised Closing balance at 30 June Consolidated 2014 $000’s 2013 $000’s 2014 $000’s 2013 $000’s 152,416 152,416 698,119,720 698,119,720 - - - - 152,416 152,416 698,119,720 698,119,720 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 Nature and purpose of reserve Consolidated 2014 $000’s 2013 $000’s 22 - (22) - 425 22 (425) 22 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. 57 Financial Report 2013/14: Notes To The Financial Statements NOTES TO THE FINANCIAL STATEMENTS (cont’) 7 Capital And Reserves (cont’) 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: 2014 Number of Performance Share Rights 1,600,000 - - - (1,600,000) - 2014 Number of Options - - - - - - 2013 Number of Performance Share Rights 3,200,000 3,200,000 (4,000,000) - (800,000) 1,600,000 2013 Number of Options - - - - - - 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 2014 management did not pay any dividends (2013: nil). 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 years ended 30 June 2014 and 30 June 2013 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 2014 $000’s (21,184) (2,398) (23,582) 40,558 16,976 129,403 146,379 2013 $000’s (11,977) (3,973) (15,950) 58,828 42,878 131,569 174,447 nil% nil% 58 Cue Energy Resources Limited: Annual Report 2013/148 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 2014 $000’s 2013 $000’s 2,673 869 3,542 2,673 2,673 4,469 627 5,096 4,469 4,469 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 2014 there were no current trade receivables that were impaired (2013: nil). The balance of the allowance for impairment in respect of trade receivables at 30 June 2014 was nil (2013: 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. Property, Plant And Equipment 9 Office and computer equipment Cost Accumulated depreciation Consolidated 2014 $000’s 2013 $000’s 505 (387) 118 356 (293) 63 Reconciliation of the carrying amount of office and computer equipment at the beginning and end of the current financial year is set out below: Consolidated 2014 $000’s 63 155 (100) 118 2013 $000’s 84 18 (39) 63 Consolidated 2014 $000’s 2013 $000’s 843 1,157 Balance at beginning of year Additions Depreciation expense Balance at end of year 10 Inventories Current Assets Inventory 59 Financial Report 2013/14: Notes To The Financial Statements NOTES TO THE FINANCIAL STATEMENTS (cont’) 11 Shares In Subsidiaries Shares held by the parent entity at the reporting date: Subsidiary Companies Cue PNG Oil Company Pty Ltd Cue Mahakam Hilir Pty Ltd Cue (Ashmore Cartier) Pty Ltd Cue Sampang Pty Ltd Cue Taranaki Pty Ltd Cue Exploration Pty Ltd 2014 2013 $ 1 1 2 1 1 $ 1 1 2 1 1 1,929,077 1,929,077 Interest Held Country of Incorporation 100% 100% 100% 100% 100% 100% Australia Australia Australia Australia Australia Australia PARENT Principal Activity Petroleum production and exploration Petroleum exploration Petroleum exploration Petroleum production and exploration Petroleum production and exploration Petroleum exploration Less accumulated impairment losses (1,343,808) (1,343,808) 585,269 585,269 Total 585,275 585,275 All companies in the Group have a 30 June reporting date. 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 PEP 54865 Consolidated 2014 $000’s 36,944 17,125 2013 $000’s 31,765 5,179 54,069 36,944 8,862 27,017 2,221 416 209 1,670 1,979 561 2,888 201 6,073 1,889 83 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 54,069 36,944 60 Cue Energy Resources Limited: Annual Report 2013/1413 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 2014 $000’s 73,935 14,785 (9,262) 79,458 512 15,677 63,269 79,458 2013 $000’s 84,886 6,569 (17,520) 73,935 601 22,415 50,919 73,935 14 Impairment Of Production Property Assets At 30 June 2014 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 (2013: 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% (2013: 14.3%) equivalent to post-tax discount rates of 10% (2013: 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 21,119 65 21,184 11,652 325 11,977 The Directors consider the carrying amount of payables reflect their fair values. Trade creditors are generally settled within 30 days. Included within trade payable and accruals is an amount of $5.6 million relating to liabilities associated with a dispute in relation to the Jeruk field within the Sampang PSC. Refer to note 26 for more information. 61 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 16 Provisions Current Employee benefits Non-Current Employee benefits Restoration Consolidated 2014 $000’s 2013 $000’s 563 64 5,563 5,627 475 38 6,099 6,137 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 2013 Provisions made during the year Unused amounts reversed Provisions used during the year Balance at 30 June 2014 Restoration Employee Benefits $000’s Restoration $000’s 513 296 - (182) 627 6,099 242 (778) - 5,563 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. 62 Cue Energy Resources Limited: Annual Report 2013/1417 Interests In Joint Operations Property Operator Petroleum Exploration Properties Carnarvon Basin – Western Australia WA-359-P WA-360-P WA-361-P WA-389-P WA-409-P New Zealand PEP51313 PEP51149 PEP54865 Indonesia Cue Exploration Pty Ltd MEO Australia Limited MEO Australia Limited BHP Billiton (Australia) Pty Ltd Apache Northwest Pty Ltd OMV New Zealand Limited Todd Exploration Limited Todd Exploration Limited Mahakam Hilir PSC Singapore Petroleum Papua New Guinea PRL 9(i) PRL 14 Oil Search Ltd Oil Search Ltd Petroleum Production Properties New Zealand Cue Interest (%) Gross Area (Km2) Net Area (Km2) Permit Expiry Date 100 37.50 15 40 30 14 20 20 40 14.894 10.947 645 643 644 1,939 565 819 217 2,475 645 241.1 96.6 775.6 169.5 163.8 43.4 495 25/10/2017 05/03/2017 30/01/2016 08/10/2018 29/01/2015 29/07/2021 22/09/2018 10/12/2017 222.14 88.9 12/11/2014 598 427 80.18 534.5 89 46.7 17/12/2012 21/11/2015 4 01/12/2027 80.2 04/12/2027 PMP 38160 OMV New Zealand Limited 5 Madura - Indonesia Sampang PSC Santos (Sampang) Pty Ltd Papua New Guinea 15 (8.181818 Jeruk field) PDL 3 Barracuda Pty Ltd 5.568892 85 4.7 23/12/2021 (i) Renewal under consideration by the PNG government. 63 Financial Report 2013/14: Notes To The Financial Statements NOTES TO THE FINANCIAL STATEMENTS (cont’) 17 Interests In Joint Operations (cont’) The share of assets and liabilities of the joint operations and other financial liabilities attributed to Joint Operations 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 Provisions Deferred Tax Liabilities Total Liabilities Net Assets Income and expenses of the consolidated entity attributable to joint ventures: Income Expenses Refer to note 26 in relation to contingent liabilities of the Group. Commitments for expenditure are disclosed in note 18. Consolidated 2014 $000’s 2013 $000’s 2,998 843 54,069 71 79,458 137,439 20,199 2,398 5,563 19,484 47,644 89,795 34,005 18,213 4,469 1,157 36,944 214 73,935 116,719 11,159 3,973 6,099 22,106 43,337 73,382 49,798 19,131 64 Cue Energy Resources Limited: Annual Report 2013/1418 Commitments For Expenditure a) 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 2014 $000’s 9,480 28,641 740 - 38,861 2013 $000’s 12,700 4,000 20,000 - 36,700 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 Operation projects. b) 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. c) 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 2014 $000’s 15,406 4,945 266 - 20,617 2013 $000’s 18,988 10,906 1,161 - 31,055 Consolidated 2014 $000’s 2013 $000’s - 265 611 - 876 62 - - - 62 Premises lease term for 5 years from the commencement date of 12 September 2013, with a fixed increase of 3.75% p.a. and further option term of 5 years. 65 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 19 Events Subsequent To The Reporting Date The Directors are not aware of any matter or circumstance since the end of the financial year, not otherwise dealt with in this report that has significantly or may significantly affect the operations of Cue Energy Resources Limited, the results of those operations or the state of affairs of the Company or Group. 20 Earnings Per Share Basic (loss)/earnings per share (cents) Diluted (loss)/earnings per share (cents) Consolidated 2014 (0.31) (0.31) 2013 0.91 0.91 Basic earnings per share is calculated by dividing profit after income tax expense for the year attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the profit after income tax expense for the year attributable to ordinary equity of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Earnings used in the calculation of basic and diluted earnings per share: (Loss)/profit for the year attributable to ordinary equity holders of the Parent from continuing operations ($’000) Consolidated 2014 $000’s 2013 $000’s (2,166) 6,369 Weighted average number of shares used for the purposes of calculating basic earnings per share 698,119,720 698,119,720 Weighted average adjustments for calculation of diluted earnings per share: Performance rights on issue Share options on issue - - 3,719,452 - Weighted average number of shares used for the purpose of calculating diluted earnings per share 698,119,720 701,839,172 During the year nil (2013: nil) share options and nil (2013: nil) performance rights were converted into ordinary shares. The diluted earnings per share calculation has not included any performance rights outstanding during the period as this would result in further dilution of the loss per share for the period. 66 Cue Energy Resources Limited: Annual Report 2013/1421 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: 2014 Production Revenue Production Expenses Gross Profit Loss on sale of fixed assets Other revenue Foreign exchange movement Earnings/(loss) before interest expense, tax, depreciation and amortisation Profit/(loss) after income tax expense 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 Total segment assets 30 June 2014 30 June 2013 Total segment liabilities 30 June 2014 30 June 2013 Depreciation and Amortisation 30 June 2014 30 June 2013 Additions to Non-Current Assets 30 June 2014 30 June 2013 Australia $’000 - - - (3) 162 (25) NZ Indonesia $’000 10,156 (5,688) 4,468 - - 34 $’000 22,090 (10,280) 11,810 - - 72 (6,458) (6,559) 4,502 1,206 11,882 3,885 Australia $’000 - - - 160 4,443 (3,955) (3,993) 47,200 63,905 1,927 1,340 (100) (39) 1,641 429 NZ Indonesia $’000 19,590 (8,450) 11,140 - (237) 10,903 5,426 73,342 61,394 15,582 13,949 (2,809) (4,048) 16,567 8,250 $’000 27,926 (9,201) 18,725 - (504) 18,221 4,501 54,282 46,912 30,477 27,651 (6,265) (13,378) 14,818 3,334 PNG $’000 1,759 (2,245) (486) - - - (486) (698) PNG $’000 2,282 (1,480) 802 - - 802 435 3,835 4,026 1,270 1,728 (188) (94) 278 402 Total $’000 34,005 (18,213) 15,792 (3) 162 81 9,440 (2,166) Total $’000 49,798 (19,131) 30,667 160 3,702 25,971 6,369 178,659 176,237 49,256 44,668 (9,362) (17,559) 33,304 12,415 67 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 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 2014 $000’s 9,440 - (100) (9,262) 78 2013 $000’s 25,971 (3) (39) (17,520) 8,409 Directors and Employee Benefits – Share Based Payment Plans 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 all outstanding performance rights had lapsed. Under the Plan, participants were granted performance rights which only vest if certain performance standards (as disclosed in the Remuneration Report) were met and the executive remained 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 was 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 2014, 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 as 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 2014 2014 2013 Number of Share Rights 1,600,000 - - - (1,600,000) - Number of Options Number of Share Rights - - - - - - 3,200,000 3,200,000 (4,000,000) - (800,000) 1,600,000 2013 Number of Options - - - - - - No performance rights were outstanding as at 30 June 2014. The fair value of performance rights previously granted was calculated using a risked statistical analysis. This expense has been apportioned pro-rata to reporting periods where vesting periods apply. 68 Cue Energy Resources Limited: Annual Report 2013/1423 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 R.A. Sylvester (appointed 30 May 2014) A.A. Young T.E. Dibb (resigned 20 February 2014) P.D. Moore (resigned 15 May 2014) Remuneration Management Personnel Key Management Personnel The following executives, in addition to those directors identified above, comprise Key Management Personnel: Name Position D.A.J. Biggs Chief Executive Officer A.M. Knox Company Secretary and Chief Financial Officer D.B. Whittam(i) Exploration Manager (i) D.B. Whittam resigned 22 August 2014 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 Short term employment benefits (including non-monetary benefits) Post employment benefits Share based payments Consolidated Entity 2014 $ 1,613,208 99,988 - 2013 $ 2,615,912 90,236 22,400 1,713,196 2,728,548 Refer to the Remuneration Report in the Director’s Report for detailed compensation disclosures on key management personnel. Consolidated Entities Details of controlled entities are shown in note 11. Advances to/(from) controlled entities from/to 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 Total 2013 $ 5,155,113 1,570,700 (2,226,329) 11,806,796 14,928,101 14,399,546 45,633,927 Movement $ 1,325,728 1,744,011 - 7,180,867 (5,633,185) 10,001,530 14,618,951 2014 $ 6,480,841 3,314,711 (2,226,329) 18,987,663 9,294,916 24,401,076 60,252,878 Repayment of amounts owing to the Company as at 30 June 2014 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 (2013: $480,000) and interest of $417,486 (2013: $422,873) were charged by the parent company to Cue PNG Oil Company Pty Ltd. Management fees of $1,706,042 (2013: $2,494,234) and nil interest (2013: $858,562) were charged by the parent company to Cue Taranaki Pty Ltd. 69 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 24 Notes To The Statement Of Cash Flows (a) Reconciliation of operating (loss)/profit to net cash flows from operating activities: (Loss)/profit after income tax expense for the year (2,166) 6,369 Consolidated 2014 $000’s 2013 $000’s Adjustments for: Depreciation Amortisation Share based payments Loss on sale of fixed assets Net gain on foreign currency conversion Impact of changes in working capital items Decrease in assets (Decrease)/increase in liabilities Net cash flows from operating activities 100 9,262 - 3 (73) 2,008 (3,514) 5,620 (b) Cash comprises cash balances held in Australian dollars and foreign currencies, principally US dollars, within Australia and overseas: Australia New Zealand Papua New Guinea Indonesia Cash and bank balances 39,873 400 8 277 40,558 39 17,520 22 - (3,752) 7,101 5,430 32,729 57,554 102 8 1,164 58,828 Cash Flow Statement cash balance 40,558 58,828 70 Cue Energy Resources Limited: Annual Report 2013/14 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 (Loss)/profit for the year Total comprehensive (loss)/profit for the year Capital Commitments The parent entity has no commitments for the acquisition of capital assets as at 30 June 2014 (2013: nil). Finance Leases The parent entity has no commitments in relation to finance leases as at 30 June 2014 (2013: nil). Contingent Liabilities The parent entity has no contingent liabilities. Contingent Assets The parent entity has no contingent assets. Parent Entity 2014 $000’s 2013 $000’s 41,102 60,956 102,058 (1,548) (64) (1,612) 59,457 46,282 105,739 (1,300) (38) (1,338) 100,446 104,401 152,416 - (51,970) 152,416 22 (48,037) 100,446 104,401 (3,955) (3,955) 29,257 29,257 71 Financial Report 2013/14: Notes To The Financial StatementsNOTES TO THE FINANCIAL STATEMENTS (cont’) 26 Contingent Liabilities And Assets 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. During the year, an arbitration hearing found in favour of Cue’s position, however claims made by the incoming party are yet to be settled and hence there is still significant judgement and estimation in relation to these legal claims. Apart from the above, the parent entity and the group are not subject to any liabilities that are considered contingent upon events known at the reporting date. Contingent Assets In relation to the legal claims above, the quantum of costs awarded cannot currently be reliably estimated and hence has not been recognised as a receivable at year end. However, this is a contingent asset that exists relating to these costs that will crystalise in future periods. 72 Cue Energy Resources Limited: Annual Report 2013/1473 Independent Auditor’s Report 74 Cue Energy Resources Limited: Annual Report 2013/14CUE ENERGY RESOURCES LIMITED Shareholder Information 1) Distribution of Equity Securities The distribution of equity security holders of quoted shares in the Company as at 30 September 2014: 4) 23.36% 16.23% 8.99% 3.71% 1.43% 1.20% 1.09% 1.08% 0.74% 0.72% 0.63% 0.62% 0.62% 0.62% 0.57% 0.57% 0.49% 0.48% Registered Top 20 Shareholders The registered names and holdings of the 20 largest holdings of quoted ordinary shares in the Company as at 30 September 2014: Shareholder Ordinary Shares Percentage Held Todd Petroleum Mining Company 163,103,314 UOB Kay Hian Private Limited 113,326,671 1 2 3 4 5 6 7 8 9 HSBC Custody Nominees (Australia) Limited Todd Tasman Oil Ltd Portfolio Securities Pty Ltd Custodial Services Limited Gascorp Australia Pty Ltd Citicorp Nominees Pty Limited Reviresco Nominees Pty Ltd 10 Finot Pty Ltd Douglas Financial Consultants Pty Ltd 11 12 Grizzley Holdings Pty Limited 62,748,846 25,920,000 10,000,000 8,358,375 7,609,742 7,548,277 5,150,000 5,000,000 4,400,000 4,312,604 13 Berne No 132 Nominees Pty Ltd 4,300,000 14 Ultragas Pty Ltd 15 Mr Ernest Geoffrey Albers 16 Bass Strait Group Pty Ltd 4,294,286 4,010,784 4,000,168 17 Great Missenden Holdings Pty Ltd 3,392,859 18 Mr Richard Tweedie 3,363,477 19 20 5) JP Morgan Nominees Australia Limited Mr Colin R Macewan & Ms Bronwyn Beder 3,294,478 0.47% 3,250,000 0.47% 447,383,881 64.08% Holders The number of holders of each class of equity securities as at 30 September 2014 was: Class of Security Ordinary Fully Paid Shares Number 4,947 Number Held 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 Over 100,000 Total Ordinary 282 1,162 885 2,187 431 4,947 2) 3) Unmarketable Parcels The number of shareholders holding less than a marketable parcel as at 30 September 2014 is 1,246. Substantial Shareholders The names and holdings of substantial shareholders in the Company as at 30 September 2014: Quoted Shares Fully Paid % of Issued Ordinary Shares 189,023,314 27.08% 112,996,671 59,566,296 16.19% 8.53% Todd Petroleum Mining Company Limited Singapore Petroleum Company Limited Zeta Energy Pte Ltd 75 Shareholder Information SHAREHOLDER INFORMATION (cont’) 6) 7) Vendor Securities There are no restricted securities on issue as at 30 September 2014. Voting Rights At meeting of members or classes of members: (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 (c) on a poll, every person present who is a member or a proxy, attorney or representative of a member has: (i) (ii) 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; 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. 8) Annual General Meeting Cue’s 2014 Annual General Meeting will be held at the Flinders Room, The Langham, Melbourne, 1 Southgate Avenue, Southbank, Melbourne 3006, Victoria, Australia on Thursday 27th November 2014, commencing at 10:00am (AEDT). 9) Share registry Enquiries Cue’s share register is handled by Computershare. Please contact Computershare for all shareholding and dividend related enquiries. Change of shareholder details Shareholders should notify Computershare of any changes in shareholder details via the Computershare website (www.computershare.com.au) or writing (fax, email, mail). Examples of such changes include: • • Registered name Registered address • Direct credit payment details Computershare Investor Services Pty Ltd GPO Box 2975 Melbourne, Victoria 3000, Australia Telephone: 1300 850 505 (within Australia) or +61 3 9415 4000 (outside Australia) Facsimile: +61 3 9473 2500 Email: web.queries@computershare.com.au Website: www.computershare.com.au 10) Sharecodes ASX Share Code: CUE ADR Share Code: CUEYY 11) Cue Energy Website A wide range of information on Cue Energy is available on the Company’s website, at www.cuenrg.com.au. The following information for investors is available: • • Share price information Annual reports • Quarterly reports • • Press releases Presentations 76 Cue Energy Resources Limited: Annual Report 2013/14C U E E N E R G Y R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 3 / 1 4 ABN 45 066 383 971 Level 19, 357 Collins Street, Melbourne Victoria 3000 Australia T: +61 3 8610 4000 F: 61 3 9614 2142 W: www.cuenrg.com.au E: mail@cuenrg.com.au New Frontiers Annual Report 2013/14 ANNUALREPORT

Continue reading text version or see original annual report in PDF format above