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
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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 2013/14 Corporate 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 2013/14 Production 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 2013/14 Joint 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 2013/14 The 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 2013/14 Grati 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 2013/14 Drill 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 2013/14 includes 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 2013/14 Production
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 2013/14 SE 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 2013/14 Recommendation 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 2013/14 Remuneration and other terms and
conditions of employment are reviewed
annually by the committee having regard to
the performance and relevant comparative
data. As well as a base salary, remuneration
packages include superannuation,
termination entitlements, fringe benefits,
annual cash bonuses linked to short term
performance and shares and options linked
to long term Company performance.
Remuneration packages are set at levels that
are intended to attract and retain high calibre
staff and align the interest of the executives
with those of the Company’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 2013/14 Board 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 2013/14 Particulars 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 2013/14 The 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 2013/14 Compensation 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 2013/14 The following performance rights granted to Key Management Personnel of the Company lapsed during the year as a result of a failure to meet a
vesting condition (including employment conditions):
Participant
A.M. Knox
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 2013/14 Financial Report 2013/14
For the financial year ended 30 June 2014
39
39
ANNUALREPORT FINANCIAL 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 2013/14 FINANCIAL 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 2013/14 The 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 Statements NOTES 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 2013/14 The gain or loss arising on disposal of a non-current asset
is included as other income at the date control of the asset
passes to the buyer. The gain or loss on disposal is calculated
as the difference between the carrying amount of the asset at
the time of disposal and the net proceeds on disposal.
(h)
Exploration and evaluation project expenditure
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 Statements NOTES 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 2013/14 The tax consolidated group has applied the group allocation
approach in determining the appropriate amount of taxes to
allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the
head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entitles in the tax
consolidated group.
Assets or liabilities arising under tax funding agreement with
the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax
consolidated group. The tax funding arrangement ensures
that the intercompany charge equals the current tax liability
or benefit of each tax consolidated group member, resulting
in neither a contribution by the head entity to the subsidiaries
nor a distribution by the subsidiaries to the head entity.
(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 Statements NOTES 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 2013/14 2
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 2013/14 2
Financial Instruments (cont’)
At the reporting date, if the currencies set out in the table above, strengthened or weakened against the Australian dollar by the percentage
shown, with all other variables held constant, net profit for the year would increase/(decrease) and net assets would increase / (decrease) by:
Impact on post-tax profit
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 Statements NOTES 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 2013/14 3
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 Statements NOTES 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 2013/14 8
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 2013/14 13 Production Properties
Balance at beginning of year
Expenditure incurred during the year
Amortisation expense
Balance at end of year
Net accumulated costs incurred on areas of interest:
-
PNG PDL 3 (unitized)
- Oyong and Wortel – Sampang PSC
- Maari – PMP 38160
Total
Consolidated
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 Statements NOTES 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 2013/14 17
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 2013/14 18 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
$000’s
-
265
611
-
876
62
-
-
-
62
Premises lease term for 5 years from the commencement date of 12 September 2013, with a fixed increase of 3.75% p.a. and
further option term of 5 years.
65
Financial Report 2013/14: Notes To The Financial Statements NOTES TO THE FINANCIAL STATEMENTS (cont’)
19 Events Subsequent To The Reporting Date
The Directors are not aware of any matter or circumstance since the end of the financial year, not otherwise dealt with in this report
that has significantly or may significantly affect the operations of Cue Energy Resources Limited, the results of those operations or the
state of affairs of the Company or Group.
20 Earnings Per Share
Basic (loss)/earnings per share (cents)
Diluted (loss)/earnings per share (cents)
Consolidated
2014
(0.31)
(0.31)
2013
0.91
0.91
Basic earnings per share is calculated by dividing profit after income tax expense for the year attributable to ordinary equity holders of
the Parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit after income tax expense for the year attributable to ordinary equity of the
Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
Earnings used in the calculation of basic and diluted earnings per share:
(Loss)/profit for the year attributable to ordinary equity holders of the Parent from
continuing operations ($’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 2013/14 21 Financial Reporting By Segments
Segment Information
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (“CODM”)) in assessing
performance and in determining the allocation of resources.
The CODM assesses the performance of the operating segments based upon a measure of earnings before interest expense, tax,
depreciation and amortisation. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in
the financial statements.
The principal business of the group is the production and exploration for hydrocarbons in Australia, New Zealand, Indonesia and PNG. The
board considers the business from both a product and geographic perspective and has identified four reportable segments. Information
regarding the Group’s reportable segments is presented below:
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 Statements NOTES 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 2013/14 23 Key Management Personnel And Related Party Disclosures
The following were Directors of Cue Energy Resources
Limited during the financial year:
Chairman
G.J. King (Non-Executive)
Non-Executive Directors
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 Statements NOTES 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 Statements NOTES 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 2013/14 73
Independent Auditor’s Report
74
Cue Energy Resources Limited: Annual Report 2013/14 CUE 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 2013/14 C
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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