20 October 2016
PAGES (including this page): 89
ABN 45 066 383 971
ASX Market Announcements
ASX Limited
Exchange Centre
Level 4, 20 Bridge Street
Sydney NSW 2000
Annual Report 2015/16
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 and
gas company with activities in
Australia, New Zealand, Indonesia
and the USA.
THE COMPANY HAS:
Long life production
A strong balance sheet
An active exploration programme
CUE ENERGY DIRECTORS
Grant Worner (Executive Chairman)
Koh Ban Heng
Duncan Saville
Brian Smith
CUE ENERGY MANAGEMENT
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:
CUE
ADR/OTC: CUEYY
Annual
Report
2015/16
Contents
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About
Snapshot of 2015/16
Activity Overview
Joint Ventures
Corporate Directory
Executive Chairman’s Overview
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2
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4
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13 Reserves and Resources
18 Directors’ Report
33 Auditor’s Independence Declaration
34 Directors’ Declaration
35
Financial Statements
36 Consolidated Statement of Profit or Loss and
Other Comprehensive Income
38 Consolidated Statement of Financial Position
39 Consolidated Statement of Changes in Equity
40 Consolidated Statement of Cash Flows
41 Notes to the Financial Statements
Independent Auditor’s Report
81
83 Shareholder Information
About
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, Indonesia, Australia and the USA.
Cue Energy Resources’ three strategic objectives
to deliver short, medium, and long-term
prosperity are:
1. To have a sustainable business operating within
its means;
COMPANY SNAPSHOT
Ordinary Shares
698,119,720
12 Month Trading Range
4.8¢-8.1¢
Cash at 30 June 2016
$20.5 million
Debt
Nil
2. To deliver disciplined growth; whilst
Avg FY16 Production
~2285 boe/day
3. Pursuing opportunities that offer step-change
returns to shareholders.
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Snapshot
2015/16
The Company achieved significant growth in production and revenues from continuing
operations that enabled gross profit to grow by 15% to $14.83 million from a 24% increase
in production revenue to $45.41 million. However as a result of non-cash impairments of
exploration and production assets and a change in accounting policy from full cost to
successful efforts for exploration and evaluation expenditure, Cue delivered a net loss
after tax of $87.46 million.
15%
INCREASE
GROSS PROFIT
FROM
PRODUCTION
2016: $14.83 million
2015: $12.92 million
24%
INCREASE
PRODUCTION
REVENUE
2016: $45.41 million
2015: $36.70 million
24%
INCREASE
BARRELS OF OIL
EQUIVALENT
PRODUCED
2016: 0.83 million
2015: 0.66 million
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CUE HAS
RATIONALISED
EXPLORATION
PORTFOLIO
2 WELLS
DRILLED
CUE ENERGY
HAS $20.5M
CASH AND
NO DEBT
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 Activity
Overview
USA
• Cue operated the Pine Mills field in East
Texas during the year and through a
number of projects stabilized production
at ~100 bopd. There were no Lost
Time Injuries or safety incidents during
the year. Due to a strategic change in
direction the company announced it
expects to sell the field in the second
half of 2016.
3
Indonesia
• The Sampang PSC benefitted from
Australia
• Cue has identified and matured the
very consistent gas production from
Oyong and Wortel of ~65-70 mmcfd
and also the previously announced
improved terms of the new Oyong
Gas Sales Agreement which started in
July 2015. Oil production continued
to decline to ~1,000 bopd and the
Operator (Santos) has proposed a
Sampang Sustainability Project which
would switch the operations to gas only,
significantly reducing operating costs
and extending field life beyond 2020.
The Joint Venture also evaluated the
remaining exploration potential in the
PSC, upgrading the Paus prospect to a
possible drill candidate.
• The Naga Selatan-2 well (Mahakam Hilir
PSC) was drilled and suspended with no
Lost Time Injuries or safety incidents.
The well encountered numerous
hydrocarbon shows and recovered
both oil and gas samples to the surface.
The well data and additional G&G
studies were progressed to develop an
appropriate appraisal programme which
is planned for 2017. The company is also
considering farming down from the
current 100% equity as a possible means
for funding future drilling and testing.
Final terms of the Joint Operating
agreement are being negotiated in the
Mahato PSC in Indonesia.
•
world class Ironbark gas prospect which
straddles the WA-359-P and WA-409-P
permits offshore Western Australia (Cue
100% and operator). Cue received an
extension of the drilling commitment
in WA-359-P until April 2018 and
have received an offer for renewal of
WA-409-P. A farm-out process was
initiated in September 2015 to find a
suitable partner(s) to participate in the
Ironbark-1 exploration well. Discussions
are still underway and Cue are hopeful
a Joint Venture will be formed in the
second half of 2016.
New Zealand
• The Maari Field Growth drilling
campaign in New Zealand was
completed in July 2015. The Field now
has 10 producing wells and 1 injection
well. An intervention was completed
on schedule and budget in early 2016
to fully repair and upgrade the mooring
system which should now last beyond
2023. A project is planned for late 2016
to repair the water injection line, which
was suspended during the year, and
restart the critical pressure maintenance
for the field. The Operator (OMV) is now
focused on implementing a production
optimization strategy along with
appropriate cost reduction measures.
ACTIVITY OVERVIEW / SNAPSHOT 2015/16 INDONESIA
AUSTRALIA
Joint
Ventures
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CANADA
UNITED STATES
MEXICO
Head Office
Melbourne
NEW ZEALAND
NEW ZEALAND
Maari and Manaia Oil Fields
PMP 38160
*OMV ...................................................... 69%
Todd .........................................................16%
Horizon ...................................................10%
Cue .............................................................5%
UNITED STATES
Pine Mills Permit
*Cue ........................................................80%
Gale Force Petroleum ........................ 20%
Additional Information
(i)
*
8.181878% in the Jeruk field
Operator
INDONESIA
Mahakam Hilir PSC
*Cue ......................................................100%
Sampang PSC
*Santos ................................................... 45%
SPC ..........................................................40%
Cue(i) .........................................................15%
Mahato PSC
*Texcal Central Sumatra ............. 62.50%
Bukit Energy ........................................ 25%
Cue .....................................................12.50%
AUSTRALIA
Carnarvon Basin Permits
WA-359-P
*Cue ......................................................100%
WA-389-P
*BHP Billiton .........................................60%
Cue ..........................................................40%
WA-409-P
*Cue ......................................................100%
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 CANADA
UNITED STATES
MEXICO
Directors
Grant A. Worner (Executive Chairman)
BE(Chemical Ist Hons), MBA, GAICD
Koh Ban Heng
BSc, GDipBA
Duncan P. Saville
BCom. (Hons), BSc (Hons), FCA, F Fin, FAICD
Brian L. Smith
Chief Financial Officer/
Company Secretary
A.M. Knox
BCom, CA, CPA, FAICD
Co-Company Secretary
P.M. Moffatt
BCom, FGIA, AAICD
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
OTC
OTC Markets
304 Hudson Street 3rd Floor
New York, NY 10013 USA
Auditor
BDO East Coast Partnership
Level 14, 140 William Street
Melbourne Victoria 3000 Australia
Bankers
ANZ Banking Group Limited
91 William Street
Melbourne Victoria 3000 Australia
National Australia Bank Limited
Level 4, 330 Collins Street
Melbourne Victoria 3000 Australia
Green Bank
2900 North Loop West
Houston TX 77092 US
PT. Bank Mandiri (Persero) Tbk
Corporate Banking V Group
Plaza Mandiri, 1st Floor
Jl. Jend. Gatot Soebroto Kav 36-38
Jakarta 12190, Indonesia
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
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Executive
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Overview
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Cue has a solid cash position, earns significant free cash flow from
its production of oil in New Zealand and gas in Indonesia, is debt
free, retains an attractive portfolio of assets and opportunities.
Dear shareholder,
I am pleased to provide my first report to shareholders as
Chairman of the Board. At the outset I wish to acknowledge
and thank Cue’s staff for their efforts over the last twelve
months and assistance since my arrival.
Since 2013, Cue has operated under a strategy of aiming
to increase production and reserves in Asia, Australia, and
New Zealand with a goal of adding 5 million barrels of
reserves by the end of calendar year 2018. At that time the
Company declared its only measures of success would
be material increases to production and reserves. In
attempting to achieve these stated goals over the last three
years Cue used a large portion of their cash balance and
revenues earned to fund exploration, development and
asset acquisitions.
The outcome from these exploration and production growth
initiatives have been mixed. The Sampang field life has
successfully been extended and the Maari Growth Project has
delivered additional production, though less than expected.
Four non-operated exploration wells were drilled in New
Zealand and Indonesia and all have been unsuccessful or
uncommercial. A fifth operated well, the Naga-Selatan-2 in
Indonesia, was drilled in the first quarter of 2016 and its results
are under technical review. To date, the returns and value
accretion from the asset acquisitions in the USA and Indonesia
have been disappointing. Unfortunately Cue’s implementation of
the strategy of growing reserves and production coincided with
a significant decline in oil prices, contributing to disappointing
financial returns. The Company’s cash balance declined for a
third consecutive year and at the end of June 2016 was $20.5
million compared with $58.8 million at the end of June 2013.
As shareholders you would be aware that the mixed results
from growth initiatives, a declining cash balance, and lower
oil prices have resulted in a diminished valuation of Cue
over the last three years.
In the 2015/16 year shareholders exercised their rights and
chose to refresh the Company’s Board of Directors. On
the back of these appointments the new Board reset Cue’s
strategy, setting three objectives for Cue:
1. To have a sustainable business operating within its
means;
c. Production at Pine Mills has been disappointing. The
expected production growth did not eventuate because
attention and investment was required to ensure
the integrity of the assets. By the end of June 2016
production had stabilized at a little over 100 bopd. Cue
has recently announced a plan to exit the USA.
d. Drilling results have been a disappointment
• The non-operated onshore Te Kiri North -1 well in
the Taranaki Basin in New Zealand was drilled and
abandoned as a dry hole in late January 2016;
2. To deliver disciplined growth; whilst
• The 100% owned and operated Naga-Selatan-2
3. Pursuing opportunities that offer step-change returns
to shareholders.
2015/2016 PERFORMANCE
Production
Cue’s share of sales production for the year from our
New Zealand and Indonesian fields was 0.833 million
barrels of oil equivalent (mmboe), a 24% increase from the
previous year.
Growth Initiatives
a. The Sampang joint venture in Indonesia focused on
extending field life until at least 2018 and evaluating
the remaining exploration potential in the permit. The
extension of the predominantly gas production from
the Oyong and Wortel fields and the gas sales on long-
term contracted prices provides a level of financial
protection against weak crude oil prices. The Oyong
and Wortel Fields produced approximately 1,000
barrels of oil per day (bopd) and 60-65 million cubic
feet per day (mmcf/d), equivalent to 10 to 11 thousand
barrels of oil per day, with no major capex projects
or planned shut-downs required. The Sampang
Sustainability Project was launched aiming to extend
the field life of the Oyong and Wortel fields from 2018
to 2020 or beyond;
b. The Maari joint venture in New Zealand focused on
ensuring the asset integrity of the Floating Production
Storage Offloading (FPSO) vessel and well-head
platform while maximising current and ultimate
recovery from the field. A major intervention was
planned for the first half of 2016 to fully repair the
mooring system and repair the damaged water
injection line. The mooring repair was achieved on
schedule and budget but due to weather constraints
the water injection line is now scheduled to be
completed in December 2016. Daily production from
the Maari field varied during the fiscal year between
about 9,000 – 16,000 bopd as a function of well work-
overs and natural decline of the reservoirs with the rate
at end June 2016 of circa 12,000 bopd;
well in the Mahakam Hilir PSC onshore Kutei Basin
in Indonesia encountered oil shows and high
background gas. Cue subsequently received a
4-year extension of the exploration permit in May
2016;
• Two wells were expected to be drilled in the first
half of 2016 in the Mahato PSC in onshore central
Sumatra in Indonesia but progress stalled as the
joint venture partners have not signed a legally
binding Joint Venture agreement; and
e. Farming out the highly significant Ironbark prospect
in offshore Western Australia commenced with major
oil companies accessing the data room and reviewing
the opportunity. Pleasingly, the Company received
an extension for the drilling of the Ironbark well in
WA-359-P from NOPTA in the first half of 2016 which
allows for an exploration well to be deferred to April
2018.
Financials
In the 2015/16 year, the Company’s production revenues,
from continuing operations, grew by circa 24% supporting
a 15% gross profit growth. However when taking account of
overheads and exploration expenses, but before insurance
proceeds ($3.7 million), tax ($4.9 million expense) and
impairments ($76.3 million) are taken into account, Cue
operated at a loss of $10.0 million for the year.
As declared in the Preliminary Financial Report, at the end
of the 2015/16 year Cue impaired a number of exploration
and production assets and in addition, changed its
accounting policy from capitalising full cost to successful
efforts for exploration and evaluation expenditure. As a
result of these changes Cue’s net loss after tax in 2015/16
was $87.5 million.
At year end Cue’s cash balance was $20.5 million, down
from $27.6 million the previous year. A key short-term
objective of Cue’s new strategy is to limit further cash
erosion by continuing to reduce overheads and manage
exploration expenses carefully.
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2016/17 EXPECTATIONS
Shareholders should expect to see progress in all three
strategic objectives in the 2016/17 year.
Sustainable business
If the current economic conditions persist approximately
two-thirds of Cue’s revenues will continue to emanate
from gas sales that are independent of oil price, meaning
the Company is substantially protected from any further
declines in oil prices and has the potential for revenue
upside if oil prices rise. The historic investment in
development project initiatives at Maari and Sampang,
barring any production interruptions, should enable
consistent production in 2016/17.
Historic overheads were too high for a Company of Cue’s
size and actions were taken to reduce corporate overheads
and administration expenses by 40% on a cash basis from
approximately $7.2 million each calendar year to a run rate
of $4.4 million per annum by the end of December 2016.
The Company will have a more focused portfolio and will
reduce overheads further with a view to becoming cash
flow positive. Consistent with this objective, Cue’s Directors
have agreed to an additional reduction in remuneration
such that after the Annual General Meeting the cumulative
Board fees will be $160k per annum compared with the
2015 fees of $466k and $481k in 2016.
Disciplined growth
There are minimal interventions or major capital projects
anticipated for either Maari or Sampang in the 2016/17
year. Sampang’s field life extension to 2020 or beyond will
require minimal capital and will largely be funded within
operating expenses. The project to convert the Oyong and
Wortel fields to produce and process only gas and cease
uneconomic oil production should reduce production
costs by approximately 50% per annum, increase 2P
reserves by 37%, and increase operating margins by 34%.
The Sampang joint venture has identified near term
exploration potential that if successful, could further extend
the gas production from the Sampang PSC beyond 2020.
The Paus prospect is believed to be a low risk opportunity
and a potential drilling candidate for the 2017/18 year.
The joint venture should make a decision on whether to
proceed within the next 12 months.
Additional geology and geophysics activities are planned
in the Mahakam Hilir PSC in 2016/17 to assess the Naga-
Selatan prospect and have a firmly defined appraisal
strategy for the licence. The Company will consider
obtaining funding for future drilling in the Mahakam Hilir
permit by seeking a suitable industry partner(s).
Cue will limit its exploration expenditure in the Mahato
licence until the Company’s legal rights are protected.
Furthermore, Pine Mills in the USA is expected to be sold
and the remaining exploration acreage in New Zealand will
be surrendered.
Consequently, Cue should have a more focused production
and exploration portfolio in the next 12 months. Following
the portfolio changes mentioned above Cue will continue
to receive revenues from oil production in Maari and mainly
gas production in Sampang with near-term reserve growth
opportunities in Indonesia.
Step-change Opportunities
Cue completed a comprehensive regional study using
15,000km2 of 3D and 2D seismic data and 17 well ties to
map the Triassic intra-Mungaroo sands (as encountered at
the Gorgon gas field) and identified a drillable target within
the Ironbark prospect which straddles the 100% owned
WA-359-P and WA-409-P in moderate water depths.
Ironbark is a giant Mungaroo Formation prospect that is
mapped with an area of up to 400km with a best technical
estimate of 15 Trillion cubic feet (Tcf) of recoverable gas
resource based on an internal technical assessment
performed by Cue. To put this into perspective, if Cue’s
assessment is proven to be correct, Ironbark would be
three times the size of the Scarborough, Wheatstone, or
Pluto fields. The Ironbark prospect is only about 60km
from the North Rankin platform and Wood Mackenzie
forecast that the associated Northwest shelf LNG plants and
infrastructure will have spare capacity from 2021.
Having de-risked the opportunity as much as it could
afford, Cue recognised it needed partners that have the
credibility, balance sheet and technical expertise to drill
an exploration well and subsequently began a farm-
out process in 2015/16. The Company is hopeful that it
will have a joint venture formed with a suitable major
industry partner(s) in the next financial year. To aid in the
attractiveness of the opportunity Cue applied for a renewal
of WA-409-P to ensure sufficient tenure of the licence.
In summary, Cue has a solid cash position, earns significant
free cash flow from its production of oil in New Zealand
and gas in Indonesia, is debt free, retains an attractive
portfolio of assets and opportunities, and is strongly
supported by shareholders who have taken large stakes in
the Company.
In 2016/17 Cue will deliver a three part strategy of;
controlling costs to ensure there is a sustainable business
that is funded by producing assets, operating with a more
focused portfolio investing in near term and affordable
growth opportunities, and seeking industry partnerships
capable of executing and funding our high impact step
change opportunity.
Mr Brian Smith has chosen not to seek re-election at the
upcoming Annual General Meeting and won’t be replaced.
On behalf of the Board I would like to thank Brian and
former Cue Directors, Mr Andrew Knight, Mr Paul Foley,
Mr Stuart Brown, Mr Peter Hazledine, Mr Geoffrey King,
and Mr Andrew Young, for their contribution to Cue
during the year.
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CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 PRODUCTION
NEW ZEALAND
PMP 38160
Cue Interest: 5%
Operator: OMV New Zealand Limited
Maari and Manaia Fields
The Maari Field now has a total of 10 producers and one
water injector and was averaging ~12,000 bopd at the
end of June 2016. No further drilling is currently planned
and the focus going forward is to maximise production
by optimising the up-time and deliverability of the wells.
The only naturally flowing well is the MR6A well which was
drilled as a producer in the Mangahewa reservoir during
the growth project. The other 9 producers all rely on
pumps (ESP’s) for continued production and the Operator
is optimising the use of the ESP’s and top-sides facilities to
enhance production. There is a work-over rig on the well-
head platform to perform well interventions as required.
An exciting production enhancement now being
undertaken is adding additional perforations that are
currently behind pipe of existing producers. The first one
of these was the previously announced MR8A well which
initially added ~1600 bopd. Similar workovers are planned
for the MR9 and MN1 wells in Q3, calendar 2016.
The only planned shut-down over the next year is in
December 2016 to repair the water injection line.
Once this project is complete water injection will be
reinitiated and is anticipated to provide pressure support
to some of the producing wells, increasing production
and ultimate recovery.
New Zealand
TARANAKI PENINSULA LOCATION MAP
INDONESIA
Sampang PSC- Madura Strait
Cue Interest: 15%
Operator: Santos (Sampang) Pty Ltd
Oyong and Wortel Fields
Kalimantan
The Sampang JV plans to agree on a Final Investment
Decision for the Sampang Sustainability Project (SSP) in
Q4, calendar 2016 with project planning and execution
starting in early 2017. This project will extend the Field
life and estimated ultimate recovery for both Oyong
and Wortel. Further details of this exciting project, which
will add significant value to Cue will be disclosed once
the Joint Venture has approved the SSP. Production is
anticipated to continue at current rates of ~1000 bopd
and the combined gas rate of 60-65 mmcfgd.
Sumatra
The Joint Venture in addition will be making decisions
about the remaining exploration potential, in the
Sampang PSC in H2, calendar 2016.
SAMPANG PSC LOCATION MAP
Java
Java
Madura Island
East Java
Wortel
Oyong
Jeruk
Maleo
Peluang
Tui
Maui
Taranaki
Peninsula
Grati Onshore
Gas Facilities
LEGEND
LEGEND
10km
LEGEND
Cue Permit
Gas Field
Prospect
PMP 38160
Maari
Cue Permit
Oil Field
Gas Field
Manaia
Cue Permit
Oil Field
Gas Field
Gas Condensate Field
Onshore Gas
LEGEND
LEGEND
New Zealand
LEGEND
LEGEND
Cue Permit
Gas Field
Prospect
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
30km
LEGEND
Cue Permit
Oil Field
Gas Field
Gas Discovery
SEG Unitisation
Gas Line
Liquids Line
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EXPLORATION
INDONESIA
Mahakam Hilir PSC Kutei Basin
Cue Interest: 100%
Operator: Cue Kalimantan Pte Ltd
Cue now holds a 100% interest in, and is the Operator of,
the Mahakam Hilir PSC in the prolific Kutei Basin onshore
Kalimantan. A four year extension to the exploration phase
of the Mahakam Hilir PSC was received in May 2016. The
extension includes 2 contingent wells in the first 2 years,
in which Cue can elect to drill or withdraw from the PSC
or continue for the following 2 years with the wells as firm
commitments.
Analysis of the Naga Selatan-2 discovery is continuing
focusing on estimating flow potential for oil and gas from
both matrix and fracture porosity. Several data collection
initiatives are also underway to fully assess the resource
focused on delineating areas of optimal reservoir quality
and fractures for potential appraisal locations. These
USA
Pine Mills – East Texas
Cue Interest: 80%
Operator: Cue Resources, Inc
Cue’s new strategic direction no longer includes on-shore
production in the USA and a disposition strategy for Pine
Mills is being implemented with a closing date anticipated
in H2, calendar 2016.
United States
PINE MILLS LOCATION MAP
MAHAKAM HILIR PSC LOCATION MAP
Pelarang Samarinda
10
Wood County, Texas
Yantis
Winsboro
Quittman
Alba
Nola-Edwards
10 km
McCrary
Pine Mills
Sambutan
5km
Mahakam Hilir
PSC
Sanga Sanga
Haynesville Dome
Hawkins
LEGEND
United States
LEGEND
NS-2 Well
Nangka
LEGEND
LEGEND
Pamaguan
LEGEND
LEGEND
LEGEND
LEGEND
Cue Permit
Gas Field
Prospect
Cue Permit
Oil Field
Gas Field
Kalimantan
Cue Permit
Cue Permit
Oil Field
Gas Field
Prospect
Gas Field
Cue Permit
Cue Permit
Oil Field
Oil Field
Gas Field
Gas Field
Gas Condensate Field
Gas Discovery
Gas Condensate Field
Onshore Gas
Sumatra
SEG Unitisation
Gas Line
Liquids Line
Cue Permit
Oil Field
Gas Field
Onshore Gas
Cue Permit
Oil Field
Gas Field
Gas Discovery
SEG Unitisation
Gas Line
Liquids Line
Java
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 include: airborne gravity data, high resolution topographic
relief (LIDAR) data, extensive field mapping and shallow
coring. This information is critical in making resource
assessment estimates and planning for any future appraisal
drilling of the Naga Selatan resource. Further drilling
is required for the project to move forward towards
development. The company will also consider future
testing of the suspended NS-2 well pending results of
our studies and considered in conjunction with future
plans for drilling.
Given the Company holds 100% working interest, a suitable
industry partner(s) will likely be sought in H1, calendar
2017 to help fund the appraisal programme of the exciting
Naga Selatan opportunity.
Mahato PSC Central Sumatra Basin
Cue Interest: 12.5%
Operator: Texcal Mahato Ltd
The Mahato PSC covers a highly prospective area, close
to several large producing oil fields. Multiple appraisal and
exploration opportunities have been mapped. The permit
has a minimum work commitment of 1 well and 2D seismic
acquisition by May 2018.
NEW ZEALAND
PEP 51149
Cue Interest: 20%
Operator: Todd Exploration Limited
The Te Kiri North-1 was drilled and abandoned as a dry
hole and all of Cue’s commitments have been fulfilled.
Cue have withdrawn from the Joint Venture with no further
obligations and are in the process of assigning its equity to
Todd Exploration Limited.
PEP 54865
Cue Interest: 20%
Operator: Todd Exploration Limited
The Joint Venture is in the process of surrendering
the permit.
PEP 51313
Cue Interest: 14% interest
Operator: OMV New Zealand Limited
The Joint Venture have received approval
to surrender the permit from
the Government.
MAHATO PSC LOCATION MAP
Bangko
Balam South
Duri
Libo SE
Minas
Kotabatak
Petapahan
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LEGEND
LEGEND
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
Mahato
PSC
40km
Kalimantan
LEGEND
Sumatra
Cue Permit
Gas Field
Prospect
Java
AUSTRALIA
WA-359-P
Cue Interest: 100%
Operator: Cue Exploration Pty Ltd
Cue has evaluated the regional prospectivity in its Northern
Carnarvon Basin permits and has identified an exciting
new play type now referred to as the Deep Mungaroo
Play (DMP). The Ironbark prospect has been identified as
the primary candidate for testing the DMP and the ideal
location is in WA-359-P where Cue currently has a well
commitment. Cue has received approval to have the Permit
Year 3 well commitment suspended to allow further time to
mature the prospect and plan for drilling. The well is now
required to be drilled by April 2018. Cue is continuing a
farm-out process to find suitable joint venture partner(s) to
participate in the drilling of the well.
WA-409-P
Cue Interest: 100%
Operator: Cue Exploration Pty Ltd
Cue acquired 100% of WA-409-P in February 2015 and is
now Operator of the permit. The primary term expired in
April 2016 and Cue have requested a renewal of the permit
based on a work programme targeting the Deep Mungaroo
Play focussed on the portion of the Ironbark prospect
which extends into the Block. Cue expect to be granted
the renewal in Q3, calendar 2016 and plan to continue the
farm-out process for the Ironbark prospect.
WA-360-P
Cue Interest: 37.5%
Operator: MEO Australia Limited
The WA-360-P Joint Venture has relinquished the permit
with no outstanding obligations.
WA-361-P
Cue Interest: 15%
Operator: MEO Australia Limited
The WA-361-P Joint Venture has relinquished the permit
with no outstanding obligations.
WA-389-P
Cue Interest: 40%
Operator: BHP Billiton Petroleum (Australia) Pty Ltd
Reprocessing of existing 2D and 3D seismic data is
completed and fulfils the Joint Venture’s minimum work
obligations. The data is now being interpreted to compile a
block wide prospect portfolio.
Grant A. Worner
Executive Chairman
30 September 2016
12
CARNARVON BASIN LOCATION MAP
WA-389-P
WA-389-P
WA-389-P
WA-359-P
WA-409-P
WA-359-P
Australia
North Rankin
Angel
LEGEND
LEGEND
LEGEND
LEGEND
Io/Jansz
Wheatstone
Pluto
Eurytion
Goodwyn
25km
Cue Permit
Gas Field
Prospect
Cue Permit
Oil Field
Gas Field
Iago
West Tryal Rocks
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
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 Reserves and
Resources
ANNUAL RESERVES AND RESOURCES SUMMARY
NET TO CUE ENERGY RESOURCES LIMITED AS AT 30 June 2016
RESERVES
PROVED (1P)
PROVED AND PROBABLE (2P)
DEVELOPED
UNDEVELOPED
DEVELOPED
UNDEVELOPED
CUE
INTEREST
OIL AND
CONDEN-
SATE
MMBBL
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
15%
15%
0.036
0.003
NEW ZEALAND
Maari (2) (PMP 38160)
5%
0.512
US
Pine Mills (3) (TX)
80%
0.373
OIL AND
CONDEN-
SATE
MMBBL
OIL AND
CONDEN-
SATE
MMBBL
GAS
BCF
-
-
0.003
2.711
-
-
-
-
0.057
0.003
1.301
0.477
GAS
BCF
0.914
2.917
-
-
OIL AND
CONDEN-
SATE
MMBBL
GAS
BSCF
-
-
0.004
3.335
-
-
-
-
GAS
BCF
1.845
2.951
-
-
Total Reserves
0.924
3.831
0.003
2.711
1.838
4.796
0.004
3.335
CONTINGENT RESOURCES
FIELD (LICENCE)
CUE
INTEREST
INDONESIA
Oyong (1)(4) (Sampang PSC)
Jeruk (Sampang PSC)
NEW ZEALAND
Maari (2) (PMP 38160)
Total Contingent Resources
NOTE:
15%
8%
5%
BEST ESTIMATE (2C)
OIL AND
CONDENSATE
MMBBL
-
1.24
1.32
2.56
GAS
BCF
1.90
-
-
1.90
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(1)
CUE reserves are net of Indonesian government share of production. Estimates of in-place and recoverable sales gas volumes include both free gas and
solution gas.
(2) Maari field’s reserves are based on an independent technical review conducted by RISC and calculated using RISC’s technical recoverable quantities,
cost and CUE’s oil price assumptions. Deterministic methods were used for reserves and a combination of deterministic and probabilistic methods used
for contingent resources.
(3)
Pine Mills reserves are CUE’s net entitlement.
(4) Oyong Contingent Gas Resources were based on CUE’s analysis of Sampang Sustainability Project. Deterministic methods were used.
(5) Oil equivalent conversion factor: 5.4 MSCF per BOE (Barrel of Oil Equivalent).
Pine Mills Reserves review was carried out in accordance
with the SPE Reserves Auditing Standards and the SPE-
PRMS guidelines by Mr. Christian Snyder who is contracted
by CUE Resources Inc. Mr. Snyder holds a Bachelor’s
Degree in Petroleum Engineering from Texas A&M
University and has over 19 years of experience in the Oil
& Gas industry and is a member of the Society of Petroleum
Engineers. Mr. Snyder is a qualified person as defined in the
ASX Listing Rule 5.41.
RISC CONSENTS
Information on the Reserves and Contingent Resources
in this release relating to the Maari fields is based on an
independent review conducted by RISC Operations Pty Ltd
(RISC) and fairly represents the information and supporting
documentation reviewed. The review was carried out in
accordance with the SPE Reserves Auditing Standards and
the SPE-PRMS guidelines under the supervision of
Mr. Geoffrey J Barker, a Partner of RISC, a leading
independent petroleum advisory firm.
Mr. Barker is a member of SPE and his qualifications
include a Master of Engineering Science (Petroleum
Engineering) from Sydney University. Mr Barker has
more than 30 years of global experience in the upstream
hydrocarbon industry and is a qualified petroleum reserves
and resources evaluator (QPRRE) as defined by ASX oil and
gas listing rules. Mr Barker consents to the inclusion of this
information in this report.
GOVERNANCE ARRANGEMENTS
AND INTERNAL CONTROLS
CUE estimates and reports its petroleum reserves and
resources in accordance with the definitions and guidelines
of the Petroleum Resources Management
System 2007 (SPE-PRMS), published by the Society of
Petroleum Engineers (SPE).
All estimates of petroleum reserves reported by CUE
are prepared by, or under the supervision of, a qualified
petroleum reserves and resources evaluator.
To ensure the integrity and reliability of data used in the
reserves estimation process, the reserves and production
data is reviewed and quality controlled by senior
professional reservoir and geological staff at CUE. During
each petroleum reserves review, this data is updated,
analysed and reconciled against the previous year’s data.
CUE has engaged the services of RISC to independently
assess the Maari reserves.
CUE reviews and updates its oil reserves position on an
annual basis and reports the updated estimates as of 30
June each year. CUE reviews and updates its gas reserves
position as frequently as required by the magnitude of the
petroleum reserves and changes indicated by new data.
QUALIFIED PETROLEUM
RESERVES AND RESOURCES
EVALUATOR STATEMENT
The reserves and contingent resources report as at 30
June 2016 was prepared in accordance with the SPE-PRMS.
This reserve and resource information contained in this
summary is based on and fairly represents information
and supporting documentation prepared by, or under
the supervision of Aung Moe (Senior Reservoir Engineer)
who is a full time employee of the Company. Mr Moe is a
is a member of SPE and his qualifications include a Master
of Science (Petroleum Engineering) from Norwegian
University of Science & Technology. Mr. Moe has more
than 16 years of experience in the Oil & Gas industry and
is a qualified petroleum reserves and resources evaluator
(QPRRE) as defined by ASX oil and gas listing rules.
14
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 SUMMARY OF MOVEMENTS IN RESERVES AND RESOURCES
TABLE 1: Oil and Condensate Reserves and Resources Reconciliation with 30 June 2015
Proved Oil and Condensate Reserves (MMBBL)
CUE
INTEREST
30 JUNE 2015
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2016
RESERVES
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
NEW ZEALAND
Maari (2) (PMP 38160)
US
15%
15%
5%
0.002
0.005
(0.051)
(0.001)
0.085
0.002
0.920
(0.226)
(0.182)
Pine Mills (3) (TX)
80%
0.566
Total Proved Oil and
Condensate Reserves
1.493
(0.018)
(0.295)
(0.175)
(0.270)
Proved & Probable Oil and Condensate Reserves (MMBBL)
-
-
-
-
-
0.036
0.006
0.512
0.373
0.927
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
NEW ZEALAND
Maari (2) (PMP 38160)
US
Pine Mills (3) (TX)
Total Proved & Probable Oil and
Condensate Reserves
CUE
INTEREST
30 JUNE 2015
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2016
RESERVES
15%
15%
5%
80%
0.068
0.008
1.740
0.702
2.518
(0.051)
(0.001)
0.040
-
(0.226)
(0.213)
(0.018)
(0.295)
(0.208)
(0.381)
-
-
-
-
-
0.057
0.007
1.301
0.477
1.842
2C Contingent Oil and Condensate Resources (MMBBL)
FIELD (LICENCE)
INDONESIA
Jeruk (Sampang PSC)
NEW ZEALAND
Maari (2) (PMP 38160)
Total Contingent Oil and
Condensate Resources
CUE
INTEREST
30 JUNE 2015
CONTINGENT
RESOURCES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2016
CONTINGENT
RESOURCES
8%
5%
1.24
0.46
1.70
-
-
-
-
0.86
0.86
-
-
-
1.24
1.32
2.56
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TABLE 2: Gas Reserves and Resources Reconciliation with 30 June 2015
Proved Gas Reserves (BCF)
FIELD (LICENCE)
INDONESIA
CUE
INTEREST
30 JUNE 2015
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2016
RESERVES
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
15%
15%
Total Proved Gas
Reserves
0.699
5.188
5.887
(1.123)
(1.788)
(2.911)
1.338
2.228
3.566
-
-
-
0.914
5.628
6.542
Proved & Probable Gas Reserves (BCF)
CUE
INTEREST
30 JUNE 2015
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2016
RESERVES
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
15%
15%
Total Proved & Probable Gas Reserves
2.784
8.441
11.225
(1.123)
(1.788)
(2.911)
0.183
(0.367)
(0.183)
-
-
-
1.845
6.286
8.131
2C Contingent Gas Resources (BCF)
CUE
INTEREST
30 JUNE 2015
CONTINGENT
RESOURCES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2016
CONTINGENT
RESOURCES
FIELD (LICENCE)
INDONESIA
Oyong (4) (Sampang PSC)
15%
Total Contingent Gas Resources
-
-
-
-
1.90
1.90
-
-
1.90
1.90
16
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
Proved (1P)
Oil and Condensate Reserves
(MMBBL)
Proved & Probable (2P)
Oil & Condensate Reserves
(MMBBL)
Contingent (2C)
Oil & Condensate Resources
(MMBBL)
0.04
0.01
0.06
0.01
0.37
0.93
0.51
0.48
1.24
1.32
1.84
1.30
2.56
Proved (1P)
Gas Reserves (BCF)
Proved & Probable (2P)
Gas Reserves (BCF)
Contingent (2C)
Gas Resources (BCF)
0.91
1.84
6.54
5.63
8.13
6.29
1.90
1.90
Proved (1P)
Oil Equivalent (MMboe)
Proved & Probable (2P)
Oil Equivalent (MMboe)
2P + 2C
Oil Equivalent (MMboe)
0.21
0.37
0.48
0.40
0.75
1.24
0.51
2.14
1.05
1.30
3.35
1.17
0.48
6.26
1.17
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2.62
LEGEND
Oyong (Indonesia)
Wortel (Indonesia)
Jeruk (Indonesia)
Maari (New Zealand)
Pine Mills (US)
Directors’
Report
Your Directors present their report on the Company
and its controlled entities (“the Group” or “consolidated
entity”) consisting of Cue Energy Resources Limited (“the
Company” or “Parent Entity”) and the entities it controlled
at the end of, or during, the financial year ended
30 June 2016.
MANAGEMENT
Chief Executive Officer
Grant A. Worner
(Interim CEO appointed 23 March 2016)
DIRECTORS
The names of Directors of the Company in office during
the year and up to the date of this report were:
Grant A. Worner
Executive Chairman
(appointed 4 March 2016)
Koh Ban Heng
(appointed 29 July 2015)
Duncan Saville
(appointed 18 August 2016)
Brian L. Smith
Paul G. Foley
(resigned 4 March 2016)
Stuart A. Brown
(resigned 4 March 2016)
C. Peter Hazledine
(resigned 4 March 2016)
Geoffrey J. King
(removed 29 July 2015)
Andrew T.N. Knight
(appointed 4 March 2016,
resigned 18 August 2016)
Andrew A. Young
(removed 29 July 2015)
18
David A.J. Biggs
(resigned 15 April 2016)
Chief Financial Officer/
Company Secretary
Andrew M. Knox
Co-Company Secretary
Pauline M. Moffatt
PRINCIPAL ACTIVITIES
The principal activities of the group are petroleum
exploration, development and production.
Cue Energy Resources Limited (‘Cue’) is listed on the
Australian Securities Exchange. The Company has an
American Depositary Receipt (ADR) programme sponsored
by the Bank of New York and these are traded via the OTC
Market in the US.
Registered Office & Principal Place of Business
Level 19, 357 Collins Street
Melbourne 3000
Australia
CORPORATE GOVERNANCE
STATEMENT
Details of the Company’s corporate governance practices
are included in the Corporate Governance Statement set
out on the Company’s website. This URL on our website is
located at: www.cuenrg.com.au/irm/content/corporate-
governance.aspx?RID=296.
DIVIDENDS
No dividends were paid during the financial year or have
been approved subsequent to the reporting date (2015: nil).
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 Environmental disclosure
Within the last year there have been zero incidents, zero
lost time injuries and zero significant spills within Cue
Energy Resources. Among the joint venture operations
there have been a number of incidents that have been
reported and investigated by all the relevant parties. The
increased reporting is showing a growth in the reporting
culture and an openness to share learnings in order to
reduce risk not only within Cue Energy Resources but
within the industry. Cue Energy Resources continues to
monitor the progress and close out of these incidents
and work with the joint venture 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.
REVIEW OF OPERATIONS
Production revenue from continuing operations for the
year ended 30 June 2016 was $45.41 million (2015:
$36.70 million).
Production and amortisation expenses from continuing
operations totalled $30.59 million for the year (2015:
$23.79 million).
Loss before income tax expense for the year from
continuing operations was $79.60 million (2015: profit
$26.92 million). Tax expense for the year was $4.80 million
(2015: benefit $5.27 million), resulting in loss after income
tax expense of $84.40 million for the year (2015: profit
$32.19 million).
Loss from discontinuing operations amounted to
$3.06 million (2015: profit $8.75 million) resulting in loss
after income tax benefit for the year of $87.46 million
(2015: profit $40.95 million).
Further information on the operations and financial
position of the group and its business strategies and
prospects is set out in the Executive Chairman’s Overview
in this annual report.
Significant changes in the state
of affairs
During the financial year the Company:
• Changed its accounting policy from full costs to
successful efforts for exploration and evaluation
expenditure. This resulted in impairments of
exploration and evaluation expenditure of $49.96
million (2015: nil) and exploration and evaluation
expenditure expensed of $16.33 million (2015:
$2.10 million).
• Resolved to divest of the 80% interest in the Pine Mills
production in East Texas USA.
Apart from the above, there was no further significant
change in the state of affairs of the consolidated entity.
Equity and capital structure
Total equity as at 30 June 2016 $42.59 million (2015:
$131.67 million). At the reporting date, Cue had issued
share capital of $152.42 million (2015: $152.42 million).
No further shares have been issued subsequent to the
reporting date.
The total number of shares on issue at 30 June 2016 was
698,119,720 (2015: 698,119,720).
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Likely developments and expected results of operations
The following activities may affect the expected results of operations:
Farming down WA-409-P and WA-359-P permits, Carnarvon Basin
•
Farming down the Mahakam Hilir PSC, Indonesia
•
• Actively seeking to acquire additional production
Apart from the above, no other matter or circumstance has arisen since 30 June 2016 that has significantly, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of
affairs in future financial years.
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
2
8
-
10
8
8
8
1
2
1
2
8
-
10
7
8
8
1
2
1
-
2
-
2
-
-
-
-
-
-
-
2
-
2
-
-
-
-
-
-
-
-
-
-
-
2
2
-
-
-
-
-
-
-
-
2
2
-
-
-
Grant A. Worner(i)
Koh Ban Heng (ii)
Duncan P. Saville(iii)
Brian L. Smith
Paul G. Foley(v)
Stuart A. Brown(iv)
C. Peter Hazledine(vi)
Geoffrey J. King(vii)
Andrew T.N. Knight(viii)
Andrew A. Young(ix)
20
(i)
(ii)
Grant Worner, Executive Chairman (appointed 4 March 2016)
Koh Ban Heng (appointed 29 July 2015)
(iii) Duncan P. Saville (appointed 18 August 2016)
(iv)
(v)
(vi)
Stuart A. Brown (resigned 4 March 2016)
Paul G. Foley, (resigned 4 March 2016)
C. Peter Hazledine (resigned 4 March 2016)
(vii) Geoffrey J. King (removed 29 July 2015)
(viii) Andrew T.N. Knight (appointed 4 March 2016, resigned 18 August 2016)
(ix)
Andrew A. Young (removed 29 July 2015)
Held: represents the number of meetings held during the time the director held office or was a member of the
relevant committee.
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
Information on directors and executives, including qualifications and experience is as follows:
DIRECTORS
QUALIFICATIONS AND EXPERIENCE
SPECIAL
RESPONSIBILITIES
PARTICULARS OF
DIRECTORS’ INTERESTS IN
SHARES OF CUE ENERGY
RESOURCES LIMITED AT THE
DATE OF THIS REPORT
INDIRECT
DIRECT
Executive Chairman
Nil
Nil
G.A. Worner
BE(Chemical Ist Hons), MBA, GAICD
Executive Chairman of Cue Energy
Resources Limited(i)
-Appointed 4 March 2016
Non-Executive Director of
New Guinea Energy Ltd(i)
-Appointed 15 July 2015
Executive Director of Pan Pacific Petroleum NL(ii)
-Appointed 24 August 2015
B.H. Koh
BSc, GDipBA
Non-Executive Director of
Cue Energy Resources Limited(i)
-Appointed 29 July 2015
Non-Executive Director
Member of Audit and
Risk Committee
Nil
Nil
D.P. Saville
Non-Executive Director of Tipco Asphalt Ltd PLC
-Appointed 1 July 2011
Non-Executive Director of Keppel Infrastructure
Holdings (KIH) Pte Ltd
-Appointed 15 March 2013
Non-Executive Chairman of Keppel Infrastructure
Fund Management Pte Ltd
-Appointed 1 May 2015
BCom. (Hons), BSc (Hons), FCA, F Fin, FAICD
Non-Independent Director of
Cue Energy Resources Limited(i)
-Appointed 18 August 2016
Non-Executive Director of Touchcorp Limited
-Appointed 17 February 2014
Non-Executive Director of Infratil Limited
-Resigned 24 August 2016
Non-independent Director of New Zealand
Oil & Gas Limited
Non-Independent
Director
Nil
337,623,791
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B.L. Smith
-Appointed 4 November 2014
Non-Executive Director of
Cue Energy Resources Limited(i)
-Appointed 13 April 2015
Non-Executive Director
Chairman of Audit and
Risk Committee
Nil
Nil
DIRECTORS
QUALIFICATIONS AND EXPERIENCE
S.A. Brown
BSc Hons (First Class)
Non-Executive Director of
Cue Energy Resources Limited(i)
-Appointed 24 July 2014
-Resigned 4 March 2016(iii)
Non-Executive Director of
Galicia Energy Limited(i)
-Appointed February 2014
-Resigned 19 February 2015(iii)
Non-Executive Director of Empire Oil & Gas NL(ii)
-Appointed January 2014
Non-Executive Chairman of WHL Energy Limited(i)
P.G. Foley
-Appointed 6 December 2013
-Resigned 17 November 2015(iii)
BCA, LL.B
Non-Executive Chairman of
Cue Energy Resources Limited(i)
-Appointed 13 April 2015
-Resigned 4 March 2016(iii)
Non-Executive Director of
New Zealand Oil & Gas Limited(i)
-Appointed July 2000
-Resigned November 2014(iii)
Chairman of Grosvenor Financial
Services Limited(ii)
-Appointed April 2012
Deputy Chairman of Board of the
National Provident Fund(ii)
-Appointed September 2012
-Resigned June 2015(iii)
Chairman of Racing Integrity Unit Limited(ii)
C.P.
Hazledine
-Appointed February 2013
-Resigned January 2014(iii)
BSc (Hons)
Non-Executive Director of
Cue Energy Resources Limited(i)
-Appointed 13 April 2015
-Resigned 4 March 2016(iii)
PARTICULARS OF
DIRECTORS’ INTERESTS IN
SHARES OF CUE ENERGY
RESOURCES LIMITED AT THE
DATE OF THIS REPORT
INDIRECT
DIRECT
Nil
Nil
SPECIAL
RESPONSIBILITIES
Non-Executive Director
Chairman of
Remuneration and
Nomination Committee
Chairman
Nil
Nil
Non-Executive Director
Member of
Remuneration and
Nomination Committee
Nil
Nil
22
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
PARTICULARS OF
DIRECTORS’ INTERESTS IN
SHARES OF CUE ENERGY
RESOURCES LIMITED AT THE
DATE OF THIS REPORT
INDIRECT
DIRECT
20,000
2,500
SPECIAL
RESPONSIBILITIES
Non-Executive Director
Member of Audit and
Risk Committee
Non-Executive Director
Member of Audit and
Risk Committee
Nil 335,854,341(iv)
Non-Executive Director
Chairman of
Remuneration and
Nomination Committee
Nil
450,000
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QUALIFICATIONS AND EXPERIENCE
G.J. King
BA, LLB
Non-Executive Chairman of Cue Energy
Resources Limited(i)
-Appointed 24 November 2011
-Removed 29 July 2015(iii)
Deputy Chairman and Non-Executive Director
of High Peak Royalties Limited(i)
-Appointed 17 December 2008
A.T.N. Knight
A.A. Young
BMS (Hons) CA
Non-Executive Director of
Cue Energy Resources Limited(i)
-Appointed 4 March 2016
-Resigned 18 August 2016(iii)
CEO of New Zealand Oil & Gas Limited(ii)
-Appointed 8 December 2011
-Resigned 26 August 2016
Director of Gas Industry Company Ltd(ii)
-Appointed June 2012
Taranaki Iwi Holdings Management Ltd(ii)
-Appointed December 2015
BE (Chemical Engineering), MBA (Hons)
Non-Executive Director of
Cue Energy Resources Limited(i)
-Appointed 13 December 2011
-Removed 29 July 2015(iii)
Non-Executive Director of
New Guinea Energy Limited(i)
-Appointed 20 October 2010
-Resigned 20 May 2015(iii)
Non-Executive Director of Cliq Energy Berhad(ii)
-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(iii)
Non-Executive Chairman of
Galilee Energy Limited
-Appointed 19 August 2013(i)
-Resigned October 2013(iii)
EXECUTIVES
QUALIFICATIONS AND EXPERIENCE SPECIAL RESPONSIBILITIES
A.M. Knox
BCom, CA, CPA, FAICD
Chief Financial Officer
Company Secretary
DIRECT
2,321,007
INDIRECT
2,137,244
(i)
(ii)
(iii)
Refers to ASX listed directorships held over the past three years.
Refers to unlisted public company directorships held over the past three years.
As at date of ceasing to be a director or executive.
(iv) As at date of resignation 18 August 2016
OTHER
QUALIFICATIONS AND EXPERIENCE SPECIAL RESPONSIBILITIES
P.M. Moffatt
BCom, FGIA, AAICD
Co Company Secretary
DIRECT
INDIRECT
114,645
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. There are no
Performance rights held by executives.
24
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 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 2016, 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
(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.A. Worner (Executive Chairman) –
appointed 4 March 2016 and
(Interim CEO appointed 23 March 2016)
D.P. Saville (Non-Executive Director) –
appointed 18 August 2016
B.H. Koh (Non-Executive Director) –
appointed 29 July 2015
B.L. Smith (Non-Executive Director)
P.G. Foley (Non-Executive Chairman) –
resigned 4 March 2016
S.A. Brown (Non-Executive Director) –
resigned 4 March 2016
C.P. Hazledine (Non-Executive Director) –
resigned 4 March 2016
G.J. King (Non-Executive Director) –
removed 29 July 2015
A.T.N. Knight (Non-Executive Director) –
appointed 4 March 2016, resigned 18 August 2016
A.A. Young (Non-Executive Director) –
removed 29 July 2015
The term “Key Management Personnel” is used in this
Remuneration Report to refer to the following persons:
A.M. Knox (Chief Financial Officer/Company Secretary)
J.L. Schrull (Production & Exploration Manager)
D.A.J. Biggs (Chief Executive Officer) –
resigned 15 April 2016
Unless otherwise stated the persons named above held
their current position for the whole of the financial year and
since the end of the financial year.
(B) Remuneration policy
The Board’s policy for remuneration of Executives and
Directors is detailed below.
Remuneration packages are set at levels that are intended
to attract and retain high calibre directors and employees
and align the interest of the Directors and Executives with
those of the company’s shareholders. The Remuneration
policy is established and implemented solely by the Board.
Remuneration and other terms and conditions of
employment are reviewed annually by the Board 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 Board, which is always subject
to shareholder approval.
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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:
Employment contracts
Remuneration and other terms of employment for key
executives G.A. Worner and J.L. Schrull is formalised in
service agreements. Details of the agreements are as
follows:
G.A. Worner
Title: Executive Chairman
Agreement commenced: 23 March 2016
Details: The Company will pay the Executive (and
in the case of superannuation, contribute) a total
remuneration package having a total cost to the
Company of $35,000 per month (comprising salary and
superannuation contributions).
Terms of this agreement is a period for six months.
J.L. Schrull
Title: Production and Exploration Manager
Agreement commenced: 18 August 2014
Details: Base salary of $431,375 including
superannuation to be reviewed annually by the Board.
3 months termination notice by either party. Non
solicitation and non-compete clauses included.
Compensation levels are reviewed each year to take into
account cost of living changes, any change in the scope of
the role performed and any changes to meet the principles
of the compensation policy.
Details of the nature and amount of each major element of
remuneration of each Director of the Company and other
Key Management Personnel of the consolidated entity are:
•
•
•
Fixed compensation component inclusive of base
salary, superannuation, non-monetary benefits and
consultancy fees.
Short term incentive programme.
Long term employee benefits.
• Cash bonus scheme paid 1 February 2016.
The Board is currently reviewing policies going forward in
relation to short and long term incentives.
The Board is responsible for determining and reviewing
remuneration arrangements and in doing so 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.
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 2016, the Board
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 on 1 July each year.
There is no guaranteed base salary increase included in any
executive’s contracts.
Cash Bonuses
In the first quarter of 2016 the Board approved a cash
bonus payment equivalent to 30% of base salary to staff
that remained with Cue for the 12 months following the
on market take-over bid for the Company in February 2015
that resulted in New Zealand Oil and Gas Limited owning
48.11% of Cue. A total cash bonus of $1,143,799 (inclusive
of super) was paid to Cue staff at the time.
26
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
Compensation of key management personnel – 2016:
2016
SHORT-TERM
POST-EMPLOYMENT
CASH
BONUSES
$
LONG
SERVICE
LEAVE
$
SUPER-
ANNUATION
$
TERMIN-
ATION
PAYMENTS
$
NON
MONETARY
BENEFITS (I)
$
-
-
-
-
-
-
-
-
-
-
-
CONSULT-
ING FEES
$
105,168
-
-
-
-
61,875
-
-
-
-
167,043
-
-
-
-
-
-
-
-
-
-
-
CASH
SALARY
AND
FEES
$
31,875
-
84,218
91,827
85,575
61,719
67,582
10,245
24,519
7,880
465,440
NAME
G.A. Worner(ii)
D.P. Saville(iii)
B.H. Koh(iV)
B.L. Smith
P.G. Foley(v)
S.A. Brown(vi)
C.P. Hazledine(vii)
G.J. King(viii)
*A.T.N. Knight(ix)
A.A. Young(ix)
Total
Other Key Management Personnel
A.M. Knox
J.L. Schrull
D.A.J. Biggs(xi)
Total
Total
remuneration of
Executives and
Directors
199,121
412,067
398,134
1,009,322
1,474,762
TOTAL
$
147,036
-
84,218
91,827
85,575
129,457
67,582
10,245
24,519
7,880
648,339
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,993
-
-
-
-
5,863
-
-
-
-
15,856
35,000
19,308
35,000
89,308
125,049
143,792
158,783
427,624
149,699
-
-
149,699
-
-
-
-
12,317
6,358
-
18,675
-
-
76,173
76,173
521,186
581,525
668,090
1,770,801
**427,624
149,699
167,043
18,675
105,164
76,173
2,419,140
* A Knight director fees paid directly to NZOG.
** Cash bonus disclosures paid.
(i)
(ii)
Non-performance based salary sacrifice benefits, including motor vehicle expenses
G.A. Worner appointed 4 March 2016
(iii) D.P. Saville appointed 18 August 2016
(iv)
(v)
(vi)
B.H. Koh appointed 29 July 2015
P.G. Foley resigned 4 March 2016
S.A. Brown resigned 4 March 2016
(vii) C.P. Hazledine resigned 4 March 2016
(viii) G.J. King removed 29 July 2015
(ix)
(x)
A.T.N. Knight appointed 4 March 2016, resigned 18 August 2016
A.A. Young removed 29 July 2015
(xi) D.A.J. Biggs resigned 15 April 2016
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2015
SHORT-TERM
POST-EMPLOYMENT
CASH
BONUSES
$
NON
MONETARY
BENEFITS (I)
$
LONG
SERVICE
LEAVE
$
SUPER-
ANNUATION
$
TERMINATION
PAYMENTS
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,396
36,990
63,750
-
171,136
-
87,415
-
-
87,415
2,270
2,304
2,038
-
6,612
-
5,965
-
-
-
-
28,723
34,688
34,992
35,000
16,360
35,000
121,352
-
-
-
-
-
-
-
-
-
-
-
105,000
105,000
TOTAL
$
21,703
93,750
21,703
21,703
130,000
100,000
77,473
466,332
541,450
417,218
435,950
199,759
1,594,377
CASH
SALARY AND
FEES
$
21,703
87,785
21,703
21,703
130,000
100,000
48,750
431,644
NAME
P.G. Foley(ii)
S.A. Brown(iii)
C.P. Hazledine(iv)
B.L. Smith(v)
G.J. King(vi)
A.A. Young(vii)
R.A. Sylvester(viii)
Total
Other Key Management Personnel
D.A.J. Biggs
A.M. Knox
J.L. Schrull(ix)
D. B. Whittam(x)
Total
Total
remuneration of
Executives and
Directors
433,792
255,509
353,802
59,759
1,102,862
1,534,506
171,136
87,415
6,612
156,040
105,000
2,060,709
28
(i) Non performance based salary sacrifice benefits, including motor
vehicle expenses.
(ii)
(iii)
(iv)
(v)
P.G. Foley appointed 13 April 2015.
S.A. Brown appointed 24 July 2014.
C.P. Hazledine appointed 13 April 2015.
B.L. Smith appointed 13 April 2015.
(vi) G.J. King removed 29 July 2015.
(vii)
A.A. Young removed 29 July 2015.
(viii) R.A. Sylvester resigned 10 April 2015.
(ix)
(x)
J.L. Schrull appointed 18 August 2014.
D.B. Whittam resigned 22 August 2014.
All remuneration paid to D.A.J. Biggs, J.L. Schrull and
A.M. Knox 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
2016
2015
NAME
Non-Executive Directors:
G.A. Worner
D.P. Saville
B.H. Koh
B.L. Smith
P.G. Foley
S. A. Brown
C.P. Hazledine
G.J. King
A.T.N. Knight
A.A. Young
Other Key Management Personnel:
A.M. Knox
J.L. Schrull
D.A.J. Biggs
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 (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.
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.
No share options or performance rights were granted during the financial year to 30 June 2016 (2015: nil) (refer note 25).
All previously issued performance rights had lapsed as at 30 June 2014.
(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 2016.
PROFIT PERFORMANCE
Production income from
continuing operations
(Loss)/profit before income tax expense
from continuing operations
(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)
(i)
restated due to change in accounting policy
30 JUNE 2016
$000’S
RESTATED
30 JUNE 2015
$000’S
30 JUNE 2014
$000’S
30 JUNE 2013
$000’S
30 JUNE 2012
$000’S
45,412
36,704
32,246
49,798
41,222
(79,598)
(84,398)
26,916
32,191
753
(2,166)
2,419
2,061
1,713
8,409
6,369
2,729
13,621
5,663
2,050
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 30 JUNE 2013 30 JUNE 2012
26.5
18.0
-
0.81
0.81
7.60
8.10
-
(12.44)
(12.44)
12.0
7.60
-
5.86(i)
5.86 (i)
11.0
12.0
-
(0.31)
(0.31)
18.0
11.0
-
0.91
0.91
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 financial performance.
29
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Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
BALANCE AT
THE START OF
YEAR (1)
ADDITIONS(2)
DISPOSALS/
OTHER
BALANCE AT
THE END OF
THE YEAR (3)
-
-
335,854,341
-
-
-
-
22,500
335,854,341
450,000
8,045
4,458,251
308,797
-
-
1,769,450
-
-
-
-
-
-
-
-
-
144,312
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
337,623,791
-
-
-
-
22,500
335,854,341
450,000
8,045
4,458,251
453,109
ORDINARY SHARES
Non-Executive Directors
Grant A. Worner
Koh Ban Heng
Duncan P. Saville
Brian Smith
Paul D. Foley
Stuart A. Brown
C. Peter Hazledine
Geoffrey J. King
Andrew T.N. Knight
Andrew A. Young
Other Key Management Personnel
David A.J. Biggs
Andrew M. Knox
Jeffrey L. Schrull
(1)
(2)
(3)
or date of appointment
acquisition of shares, after the end of the financial year
or date of Directors Report
30
This concludes the Remuneration Report which has been audited.
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
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.
• 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:
2016
$
2015
$
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 33.
ROUNDING OFF OF AMOUNTS
1. The Company is a company of the kind referred
to in ASIC Legislative Instrument 2016/191, 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 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
Audit or review of the
financial statements
Other Services:
Advisory Services
Tax compliance
Tax consulting
Total
121,700
115,500
Subsequent to the end of the financial year:
2,000
20,000
85,693
229,393
1,000
36,900
-
153,400
(i) Mr Andrew Knight resigned as a director, and
Mr Duncan Saville was appointed as a director, effective
18 August 2016.
(ii) Cue together with all joint venture partners has elected
to withdraw from PEP54865 and PEP51313, offshore
New Zealand. These were fully impared as at 30 June
2016.
Apart from these matters 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.
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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.
This report is made in accordance with a resolution of
directors, pursuant to section 298(a) of the Corporations
Act 2001.
On behalf of the Board
Grant A. Worner
Executive Chairman
30 September 2016
32
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 Auditor’s
Independence
Declaration
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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 25 to 30, 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 2016 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 2016.
Signed in accordance with a resolution of the Directors.
Dated in Melbourne 30th day of September 2016.
34
Grant A. Worner
Executive Chairman
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 35
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FOR THE YEAR ENDED 30 JUNE 2015
Financial
Statements
2015/16
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
Production revenue from continuing operations
Production costs
Gross profit from production
Other Income
Net foreign currency exchange (loss)/gain
Impairment - production
Impairment - E&E
E&E expenditure
Administration expenses
(Loss)/profit before income tax benefit/(expense)
from continuing operations
Income tax benefit/(expense)
(Loss)/profit after income tax benefit/(expense) from
continuing operations
(Loss)/profit after income tax benefit/(expense) from
discontinuing operations
2016
$000’S
45,412
(30,585)
14,827
3,780
(90)
(25,103)
(49,963)
(16,329)
(6,720)
(79,598)
(4,800)
RESTATED
2015
$000’S
36,704
(23,787)
12,917
36,129
6,916
(18,015)
-
(2,099)
(8,932)
26,916
5,275
(84,398)
32,191
(3,062)
8,754
NOTE
3
4
3
3
15
13
12
4
6
23
(Loss)/profit after income tax benefit/(expense) for the year
(87,460)
40,945
36
Other comprehensive income
Items that may be reclassified subsequent to profit or loss
Foreign currency translation
Total comprehensive income for the year
(Loss)/profit for the year is attributable to:
Owners of Cue Energy Resources Limited
Non-controlling interest
Total comprehensive income for the year is attributable to:
Owners of Cue Energy Resources Limited
Continuing operations
Discontinuing operations
Non-controlling interest
Continuing operations
Discontinuing operations
Non-controlling interest
(1,624)
1,666
(89,084)
42,611
(86,834)
(626)
40,943
2
(87,460)
40,945
(85,396)
(3,062)
33,855
8,754
(88,458)
42,609
-
(626)
(626)
2
-
2
(89,084)
42,611
The accompanying notes form part of and are to be read in conjunction with these Financial Statements.
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME (Cont’)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
Earnings per share for profit/(loss) from continuing operations
attributable to the owners of Cue Energy Resources Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit/(loss) from discontinuing operations
attributable to the owners of Cue Energy Resources Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit/(loss) attributable to the owners of Cue
Energy Resources Limited
Basic earnings per share
Diluted earnings per share
NOTE
22
22
22
22
22
22
2016
CENTS
(12.09)
(12.09)
(0.35)
(0.35)
(12.44)
(12.44)
RESTATED
2015
CENTS
4.61
4.61
1.25
1.25
5.86
5.86
The accompanying notes form part of and are to be read in conjunction with these Financial Statements.
37
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(Loss)/profit after income tax benefit/(expense) for the year
(87,460)
40,945
Production revenue from continuing operations
Production costs
Gross profit from production
Other Income
Net foreign currency exchange (loss)/gain
Impairment - production
Impairment - E&E
E&E expenditure
Administration expenses
(Loss)/profit before income tax benefit/(expense)
from continuing operations
Income tax benefit/(expense)
(Loss)/profit after income tax benefit/(expense) from
continuing operations
(Loss)/profit after income tax benefit/(expense) from
discontinuing operations
Other comprehensive income
Items that may be reclassified subsequent to profit or loss
Foreign currency translation
Total comprehensive income for the year
(Loss)/profit for the year is attributable to:
Owners of Cue Energy Resources Limited
Non-controlling interest
Total comprehensive income for the year is attributable to:
Owners of Cue Energy Resources Limited
Continuing operations
Discontinuing operations
Non-controlling interest
Continuing operations
Discontinuing operations
Non-controlling interest
NOTE
3
4
3
3
15
13
12
4
6
23
2016
$000’S
45,412
(30,585)
14,827
3,780
(90)
(25,103)
(49,963)
(16,329)
(6,720)
(79,598)
(4,800)
RESTATED
2015
$000’S
36,704
(23,787)
12,917
36,129
6,916
(18,015)
-
(2,099)
(8,932)
26,916
5,275
(84,398)
32,191
(3,062)
8,754
(1,624)
1,666
(89,084)
42,611
(86,834)
(626)
40,943
2
(87,460)
40,945
(85,396)
(3,062)
33,855
8,754
(88,458)
42,609
-
(626)
(626)
2
-
2
(89,084)
42,611
The accompanying notes form part of and are to be read in conjunction with these Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-Current assets classified held for sale
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
Liabilities directly associated with assets classified
as held for sale
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
Contributed equity
Reserves
Accumulated losses
Equity attributable to the owners of
Cue Energy Resources Limited
Non-controlling interest
Total Equity
NOTES
27(b)
8
10
16
9
6
12
14
16
17
6
18
6
18
7(a)
2016
$000’S
20,490
4,481
1,609
4,095
30,675
59
-
-
42,564
42,623
73,298
2,017
9,050
1,865
640
13,572
4,167
12,970
17,137
30,709
42,589
152,416
42
(109,245)
43,213
(624)
42,589
RESTATED
2015
$000’S
RESTATED
1 JULY 2014
$000’S
27,605
4,761
3,728
-
36,094
76
70
51,629
78,131
129,906
166,000
-
15,936
580
584
17,100
5,818
11,409
17,227
34,327
131,673
152,416
1,666
(22,411)
131,671
2
131,673
40,558
3,542
843
-
44,943
118
71
8,674
79,458
88,321
133,264
-
21,184
2,398
563
24,145
14,430
5,627
20,057
44,202
89,062
152,416
-
(63,354)
89,062
-
89,062
The accompanying notes form part of and are to be read in conjunction with these Financial Statements
38
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
CONTRIBUTE
EQUITY
$000’S
ACCUMULATED
LOSSES
$000’S
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$000’S
NON-
CONTROLLING
INTEREST
$000’S
TOTAL
$000’S
152,416
(22,411)
1,666
2
131,673
-
-
-
(86,834)
-
(626)
(87,460)
-
(1,624)
-
(1,624)
(86,834)
(1,624)
(626)
(89,084)
Balance at 1 July 2015 restated
Loss after income tax benefit for
the year
Other comprehensive income for
the year, net of tax
Total comprehensive profit
for the year
Balance at 30 June 2016
152,416
(109,245)
42
(624)
42,589
CONTRIBUTE
EQUITY
$000’S
ACCUMULATED
LOSSES
$000’S
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$000’S
NON-
CONTROLLING
INTEREST
$000’S
Balance at 1 July 2014
Balance of restatements –
refer note 1(d)
Balance at 1 July 2014 restated
Profit after income tax benefit for
the year
Other comprehensive income for
the year, net of tax
Total comprehensive profit
for the year
152,416
(23,013)
-
(40,341)
152,416
(63,354)
-
-
-
40,943
-
40,943
Balance at 30 June 2015 restated
152,416
(22,411)
-
-
-
-
1,666
1,666
1,666
-
-
-
2
-
2
2
The accompanying notes form part of and are to be read in conjunction with these Financial Statements.
TOTAL
$000’S
129,403
(40,341)
89,062
40,945
1,666
42,611
131,673
39
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
Cash Flows from Operating Activities
Receipts from customers
Insurance refunds received
Interest received
Payments to suppliers (inclusive of GST)
Exploration and evaluation expenditure
Income tax paid
Royalties paid
NOTES
2016
$000’S
45,166
3,720
58
(23,946)
(17,891)
(5,160)
(836)
RESTATED
2015
$000’S
35,992
-
115
(28,680)
(13,602)
(5,159)
(998)
Net cash provided by (used in) operating activities
27(a)
1,111
(12,332)
Cash Flows from Investing Activities
Payments with respect to production properties
Payments for plant and equipment
Proceeds from sale of prospects, less costs of sale
Net cash used in investing activities
Net Decrease in Cash Held
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
(7,122)
(156)
-
(17,927)
(7)
8,289
(7,278)
(9,645)
(6,167)
27,605
(21,977)
40,558
(948)
9,024
Cash and cash equivalents at the end of the year
27(b)
20,490
27,605
40
The accompanying notes form part of and are to be read in conjunction with these Financial Statements.
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
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
statements are presented in Australian Dollars, which is
the Company’s functional currency. The financial report
was authorised for issue by the Directors on the date the
Directors’ Declaration was signed.
The previous accounting policy was to capitalise and carry
forward exploration and evaluation expenditure as an asset
when rights to tenure of the area of interest were current
and costs were expected to be recouped or activities in
the area of interest had not, at the reporting date, reached
a stage that permitted a reasonable assessment of the
existence or otherwise of economically recoverable
reserves and active and significant operations in, or in
relation to, the area of interest were continuing.
(a) Operations and principal activities
Operations comprise petroleum exploration, development
and production activities.
(b) Statement of compliance
The financial report is a general purpose financial report
presented in Australian dollars which has been prepared
in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting
Standards Board (“AASB”) and the Corporations Act 2001,
as appropriate for for-profit oriented entities. International
Financial Reporting Standards (“IFRSs”) form the basis of
Australian Accounting Standards adopted by the AASB. The
financial reports of the consolidated entity also comply
with IFRS and interpretations adopted by the International
Accounting Standards Board.
The accounting policies set out below have been applied
consistently to all periods presented in this report.
(c) Basis of preparation
The financial report has been prepared on a going concern
basis using the historical cost convention.
In accordance with the Corporations Act 2001, these
financial statements present the results of the consolidated
entity only. Supplementary information about the parent
entity is disclosed in note 28.
(d) Changes in accounting policy
AASB 6 Exploration for and Evaluation of Mineral Resources
allows to either capitalise or expense the exploration and
evaluation expenditure incurred by the Group.
The Group has made a voluntary change to its accounting
policy relating to exploration and evaluation expenditure.
The new accounting policy was adopted for the year 30
June 2016 with effect from 1 July 2015 and has been
applied retrospectively.
The new exploration and evaluation accounting policy is
to charge exploration and evaluation expenditure against
profit and loss as incurred, except for expenditure incurred
after a decision to proceed to development is made, in
which case the expenditure is capitalised as an asset. This
does not include acquisition costs or costs capitalised as a
result of a business combination totalling $49.96 million.
The impact on the consolidated statement of cash flows
is a movement from investing activities to a movement in
operating activities. This amendment to the accounting
policy has had a significant effect on the consolidated
financial performance and consolidated financial position
of the Group because it previously capitalised exploration
expenditure in the period it was incurred. The Group has
transferred at the beginning of the comparative period
$45.40 million of exploration expenditure costs carried
forward to accumulated losses as a result of the change in
accounting policy.
The Group is of the view that the change in policy will result
in the financial report providing more relevant and no less
reliable information because capitalisation of costs will only
begin once a decision to proceed with development has
been made.
The following tables summarises the impact of the
voluntary change in the accounting policy on exploration
and evaluation costs, set out in the Group’s consolidated
financial statements.
41
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
30 JUNE
2015 AS
PREVIOUSLY
REPORTED
$000’S
EFFECT OF
RESTATEMENT IN
DISCONTINUED
OPERATIONS
$000’S
EFFECT OF
CHANGE IN
ACCOUNTING
POLICY
$000’S
30 JUNE 2015
AS RESTATED
$000’S
Production revenue from continuing operations
Production costs
Gross profit from production
Other revenue
Net foreign currency exchange (loss)/gain
Impairment - production
E&E expenditure
Administration expenses
(Loss)/profit before income tax benefit/(expense)
from continuing operations
Income tax benefit/(expense)
(Loss)/profit after income tax benefit from
continuing operations
36,925
(24,253)
12,672
41,986
6,911
(18,015)
-
(8,932)
34,622
5,200
39,822
(221)
466
245
(8,704)
5
-
-
-
(8,454)
(70)
(8,524)
Profit after income tax benefit from
discontinuing operations
230
8,524
Profit after income tax benefit for the year
40,052
Other comprehensive income
Items that may be reclassified subsequent to
profit or loss
Foreign currency translation
Total comprehensive income for the year
Profit for the year is attributable to:
Owners of Cue Energy Resources Limited
Non-controlling interest
Total comprehensive income for the year is
attributable to:
Continuing operations
Discontinuing operations
Owners of Cue Energy Resources Limited
Continuing operations
Discontinuing operations
Non-controlling interest
2,448
42,500
40,050
2
40,052
42,268
230
42,498
2
-
2
42,500
-
-
-
-
-
-
(8,524)
8,524
-
-
-
-
-
-
-
-
2,847
-
-
(2,099)
-
748
145
893
-
893
(782)
111
893
-
893
111
-
111
-
-
-
36,704
(23,787)
12,917
36,129
6,916
(18,015)
(2,099)
(8,932)
26,916
5,275
32,191
8,754
40,945
1,666
42,611
40,943
2
40,945
33,855
8,754
42,609
2
-
2
111
42,611
The accompanying notes form part of and are to be read in conjunction with these Financial Statements
42
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
*Earnings per share for profit/(cents per share)
Basic earnings per share
Diluted earnings per share
*Earnings per share for profit/(loss) (cents per share) –
continuing operations
Basic earnings per share
Diluted earnings per share
*Earnings per share for profit/(loss) (cents per share) –
discontinued operations
Basic earnings per share
Diluted earnings per share
* refer to Note 22 for detailed calculation of EPS
30 JUNE 2015
AS PREVIOUSLY
REPORT
$000’S
EFFECT OF
RESTATEMENT
$000’S
30 JUNE 2015
AS RESTATED
$000’S
5.74
5.74
5.71
5.71
0.03
0.03
0.12
0.12
(1.10)
(1.10)
0.41
0.41
5.86
5.86
4.61
4.61
1.25
1.25
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2015
$000’S
EFFECTS OF
RESTATEMENT
$000’S
30 JUNE 2015
RESTATED
$000’S
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
Contributed equity
Reserves
Accumulated gain/(losses)
Equity attributable to the owners of Cue Energy Resources Limited
Non-controlling interest
Total Equity
27,605
4,761
3,728
36,094
76
70
97,058
78,131
175,335
211,429
15,936
580
584
17,100
11,017
11,409
22,426
39,526
171,903
152,416
2,448
17,037
171,901
2
171,903
-
-
-
-
-
-
(45,429)
-
(45,429)
(45,429)
-
-
-
-
(5,199)
-
(5,199)
(5,199)
(40,230)
-
(782)
(39,448)
(40,230)
-
(40,230)
27,605
4,761
3,728
36,094
76
70
51,629
78,131
129,906
166,000
15,936
580
584
17,100
5,818
11,409
17,227
34,327
131,673
152,416
1,666
(22,411)
131,671
2
131,673
44
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 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
Contributed equity
Reserves
Accumulated losses
Equity attributable to the owners of Cue Energy Resources Limited
Non-controlling interest
Total Equity
1 JULY 2014
$000’S
EFFECTS OF
RESTATEMENT
$000’S
1 JULY 2014
RESTATED
$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
129,403
152,416
-
(23,013)
129,403
-
129,403
-
-
-
-
-
-
(45,395)
-
(45,395)
(45,395)
-
-
-
-
(5,054)
-
(5,054)
(5,054)
(40,341)
-
-
(40,341)
(40,341)
-
(40,341)
40,558
3,542
843
44,943
118
71
8,674
79,458
88,321
133,264
21,184
2,398
563
24,145
14,430
5,627
20,057
44,202
89,062
152,416
-
(63,354)
89,062
-
89,062
45
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’)
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Exploration and evaluation expenditure
Net cash (used in) operating activities
Cash flows from investing activities
Exploration and evaluation expenditure
Net cash (used in) investing activities
30 JUNE
2015 AS
PREVIOUSLY
REPORTED
EFFECT OF
RESTATEMENT
30 JUNE 2015
AS RESTATED
$’000
$’000
$’000
-
-
(13,602)
(13,602)
(13,602)
(13,602)
13,602
13,602
(13,602)
(13,602)
-
-
(e) Critical accounting estimates and judgements
(iii) Useful Life of Production Property Assets
The preparation of a financial report in conformity with
Australian Accounting Standards requires management to
make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets
and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience
and various other factors that are believed to be reasonable
under the circumstances, the results of which form the
basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
These accounting policies have been consistently applied
by each entity in the consolidated entity, and the estimates
and underlying assumptions are reviewed on an ongoing
basis.
The judgements, estimates and assumptions that have
a significant risk of causing a material adjustment to the
carrying values of assets and liabilities within the next
financial year are discussed below.
(i) Recovery of Deferred Tax Assets
Deferred tax assets resulting from unused tax losses have
been recognised on the basis that management considers
it is probable that future tax profits will be available to utilise
the unused tax losses.
(ii) 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.
As detailed at note 1 (l) 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.
(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.
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 (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 USD4.5 million (AUD6.1
million) which has been provided for in the financial
statements.
(f) 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.
The adoption of these Accounting Standards and
Interpretations did not have any significant impact on the
financial performance or position of the consolidated
entity.
(g) 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 2016 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
control. The consolidated entity controls an entity when
it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect
these returns through its power to direct the activities of the
entity. 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.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. 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 acquired is recognised
directly in equity attributable to the parent.
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.
Non-controlling interest is the results in equity of
subsidiaries are shown separately in the statement of profit
or loss and other comprehensive income, statement of
financial position and statement of changes in equity of the
consolidated entity. Losses incurred by the consolidated
entity are attributed to the non-controlling interest in full,
even if that results in a deficit balance.
Investments in subsidiaries are accounted for at cost in the
individual financial statements of Cue Energy Resources
Limited.
(h) 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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’)
Interest income
Impairment
(j)
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.
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.
(i) Exploration and evaluation project expenditure
AASB 6 Exploration for and Evaluation of Mineral Resources
allows to either capitalise or expense the exploration and
evaluation expenditure incurred by the Group.
The previous accounting policy was to capitalise and carry
forward exploration and evaluation expenditure as an asset
when rights to tenure of the area of interest were current
and costs were expected to be recouped or activities in
the area of interest had not, at the reporting date, reached
a stage that permitted a reasonable assessment of the
existence or otherwise of economically recoverable
reserves and active and significant operations in , or in
relation to, the area of interest were continuing.
The Group has made a voluntary change to its accounting
policy relating to exploration and evaluation expenditure.
The new accounting policy was adopted for the year 30
June 2016 with effect from 1 July 2015 and has been
applied retrospectively.
The new exploration and evaluation accounting policy is
to charge exploration and evaluation expenditure against
profit and loss as incurred, except for expenditure incurred
after a decision to proceed to development is made, in
which case the expenditure is capitalised as an asset. This
does not include acquisition costs or costs capitalised
as a result of a business combination. The impact on the
consolidated statement of cash flows is a movement from
investing activities to a movement in operating activities.
This amendment to the accounting policy has had a
significant effect on the consolidated financial performance
and consolidated financial position of the Group because it
previously capitalised exploration expenditure in the period
it was incurred. The Group has transferred at the beginning
of the comparative period exploration expenditure costs
carried forward to accumulated losses as a result of the
change in accounting policy (refer note 1(d)).
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.
(k) Calculation of recoverable amount
For oil and gas assets the estimated future cash flows
are based on value-in-use calculations using estimates
of hydrocarbon reserves, future production profiles,
commodity prices, operating costs and any future
development costs necessary to produce the reserves.
Estimates of future commodity prices are based on
contracted prices where applicable or based on forward
market prices where available. The recoverable amount
of other assets is the greater of their net selling price and
value-in-use.
In assessing value-in-use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
(l) 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.
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 (m) Property, plant and equipment
Restoration
CLASS OF FIXED ASSET
Office and computer equipment
DEPRECIATION RATE
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.
(n) 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.
(o) 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.
(p) 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.
(q) 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.
(r) 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.
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.
(s) 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.
(t) 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.
(u) 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.
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
(v) Foreign currency
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’)
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.
Transactions and balances
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.
50
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right
to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly in
equity.
Cue Energy Resources Limited (the ‘head entity’) and
its wholly-owned Australian controlled entities have
formed an income tax consolidated group under the tax
consolidation regime effective 1 July 2010. The head entity
and the controlled entities in the tax consolidated group
continue to account for their own current and deferred tax
amounts. The tax consolidated group has applied the group
allocation approach in determining the appropriate amount
of taxes to allocate to members of the tax consolidated
group.
In addition to its own current and deferred tax amounts,
the head entity also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused
tax losses and unused tax credits assumed from controlled
entities 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.
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.
Non-monetary items measured at historical cost continue
to be carried at the exchange rate at the date of the
transaction. Non-monetary items measured at fair value are
reported at the exchange rate at the date when fair values
were determined.
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.
Exchange differences arising on the translation of
non-monetary items are recognised directly in other
comprehensive income to the extent that the underlying
gain or loss is recognised in other comprehensive income;
otherwise the exchange difference is recognised in profit
or loss.
Foreign Operations
The results and financial position of Cue’s foreign
operations shall be translated into its presentation currency
using the following procedures:
(a) assets and liabilities for each statement of financial
position presented (ie including
comparatives) shall be translated at the closing rate
at the date of that statement of financial
position;
(b) income and expenses for each statement presenting
profit or loss and other comprehensive
income (ie including comparatives) shall be translated
at exchange rates at the dates of the
transactions; and
(c) all resulting exchange differences shall be recognised
in other comprehensive income.
(w) Leases
Operating leases are leases which the lessor effectively
retains substantially all the risks and benefits incidental to
ownership of the leased asset.
Operating lease payments, net of any incentives received
from the lessor, are charged to profit or loss on a straight
line basis over the term of the lease.
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
(x) Contributed equity
Ordinary share capital is recognised at the fair value of the
consideration received by the Company. Any transaction
costs arising on the issue of ordinary shares are recognised
directly in equity as a reduction of the share proceeds
received. Ordinary share capital bears no special terms or
conditions affecting income or capital entitlements of the
shareholders.
(y) Rounding
The amounts contained in this financial report have
been rounded to the nearest $1,000 (where rounding is
applicable) under the option available to the Company
under ASIC Corporations (Rounding in Financials and
Directors Reports) instrument 206/191. The Company is an
entity to which the Class Order applies.
(z) Comparative Figures
When required by Accounting Standards, comparative
figures have been adjusted to conform to changes in
presentation for the current financial year.
Where the Group restrospectively applies an accounting
policy, makes a retrospective restatement or reclassifies
items in its financial statements, an additional (third)
statement of financial position as at the beginning of the
preceding period in addition to the minimum comparative
financial statements is presented.
(aa) Non-current Assets Held for Sale Discontinued
Operations
Non-current assets and disposal groups are classified as
held for sale and measured at the lower of carrying amount
and fair value less costs to sell, where the carrying amount
will be recovered principally through sale as opposed to
continued use. No depreciation or amortisation is charged
against assets classified as held for sale.
Classification as “held for sale” occurs when: management
has committed to a plan for immediate sale; the sale
is expected to occur within one year from the date of
classification; and active marketing of the asset has
commenced. Such assets are classified as current assets.
A discontinued operation is a component of an entity,
being a cash-generating unit (or a group of cash generation
units), that either has been disposed of, or is classified
as held for sale, and: represents a separate major line of
business or geographical area of operations; is part of a
single coordinated plan to dispose of a separate major
line of business or geographical area of operations; or is a
subsidiary acquired exclusively with the view to resale.
Impairment losses are recognised for any initial or
subsequent write down of an asset (or disposal group)
classified as held for sale to fair value less costs to sell. Any
reversal of impairment recognised on classification as held
for sale or prior to such classification is recognised as a gain
in profit or loss in the period in which it occurs.
(ab) 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.
(ac) New Accounting Standards and Interpretations not
yet mandatory or early adopted
Australian Accounting Standards and Interpretations
that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the
consolidated entity for the annual reporting period ended
30 June 2016. 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
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018. The standard replaces
all previous versions of AASB 9 and completes the project
to replace IAS 39 ‘Financial Instruments: Recognition
and Measurement’. AASB 9 introduces new classification
and measurement models for financial assets. A financial
asset shall be measured at amortised cost, if it is held
within a business model whose objective is to hold assets
in order to collect contractual cash flows, which arise
on specified dates and solely principal and interest. All
other financial instrument assets are to be classified and
measured at fair value through profit or loss unless the
entity makes an irrevocable election on initial recognition
to present gains and losses on equity instruments (that
are not held-for-trading) in other comprehensive income
(‘OCI’). For financial liabilities, the standard requires the
portion of the change in fair value that relates to the entity’s
own credit risk to be presented in OCI (unless it would
create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely
align the accounting treatment with the risk management
activities of the entity. New impairment requirements will
use an ‘expected credit loss’ (‘ECL’) model to recognise an
allowance. Impairment will be measured under a 12-month
ECL method unless the credit risk on a financial instrument
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’)
has increased significantly since initial recognition in which
case the lifetime ECL method is adopted. The standard
introduces additional new disclosures. The consolidated
entity will adopt this standard from 1 July 2018 but
the impact of its adoption is yet to be assessed by the
consolidated entity.
AASB 16 Leases (applicable to annual reporting periods
beginning on or after 1 January 2019).
When effective, this Standard will replace the current
accounting requirements applicable to leases in AASB 117:
Leases and related interpretations. AASB 16 introduces
a single lessee accounting model that eliminates the
requirement for leases to be classified as operating or
finance leases.
The main changes introduced by the new Standard include:
•
recognition of a right-to-use asset and liability for all
leases (excluding short-term leases with less than 12
months of tenure and leases relating to low-value
assets);
• depreciation of right-to-use assets in line with AASB
116: Property, Plant and Equipment in profit or loss
and unwinding of the liability in principal and interest
components;
variable lease payments that depend on an index or a
rate are included in the initial measurement of the lease
liability using the index or rate at the commencement
date;
•
• by applying a practical expedient, a lessee is permitted
to elect not to separate non-lease components and
instead account for all components as a lease; and
additional disclosure requirements.
•
The transitional provisions of AASB 16 allow a lessee to
either retrospectively apply the Standard to comparatives
in line with AASB 108 or recognise the cumulative effect
of retrospective application as an adjustment to opening
equity on the date of initial application.
Although the directors anticipate that the adoption of
AASB 16 will impact the Group’s financial statements, it is
impracticable at this stage to provide a reasonable estimate
of such impact.
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AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018. The standard
provides a single standard for revenue recognition.
The core principle of the standard is that an entity will
recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled
in exchange for those goods or services. The standard
will require: contracts (either written, verbal or implied)
to be identified, together with the separate performance
obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit
risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone
selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and
recognition of revenue when each performance obligation
is satisfied. Credit risk will be presented separately as an
expense rather than adjusted to revenue. For goods, the
performance obligation would be satisfied when the
customer obtains control of the goods. For services, the
performance obligation is satisfied when the service has
been provided, typically for promises to transfer services to
customers. For performance obligations satisfied over time,
an entity would select an appropriate measure of progress
to determine how much revenue should be recognised
as the performance obligation is satisfied. Contracts with
customers will be presented in an entity’s statement of
financial position as a contract liability, a contract asset,
or a receivable, depending on the relationship between
the entity’s performance and the customer’s payment.
Sufficient quantitative and qualitative disclosure is
required to enable users to understand the contracts with
customers; the significant judgments made in applying the
guidance to those contracts; and any assets recognised
from the costs to obtain or fulfil a contract with a customer.
The consolidated entity will adopt this standard from 1 July
2018 but the impact of its adoption is yet to be assessed by
the consolidated entity.
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 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
2016
$’000’S
2015
$’000’S
2016
$’000’S
2015
$’000’S
20,490
4,481
27,605
4,761
20,490
4,481
27,605
4,761
Non-traded financial assets
24,971
32,366
24,971
32,366
Financial liabilities
Trade and other payables
9,050
15,936
9,050
15,936
Non-traded financial liabilities
9,050
15,936
9,050
15,936
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.
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
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.
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
2016
$000’S
20,490
2015
$000’S
27,605
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 balance of net exposure at the year end, 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
2016
$000’S
2015
$000’S
205
(205)
205
(205)
341
(341)
341
(341)
A movement of + and – 1% is selected because this is historically within a range of rate movements and available economic
data suggests this range is reasonable.
54
(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 2016
NZD
$’000’S
USD
$’000’S
IDR
$’000’S
USD
$’000’S
30 JUNE 2015
NZD
$’000’S
IDR
$’000’S
19,264
4,207
7,357
495
258
911
129
16
60
26,635
4,394
384
240
12,659
1,408
186
-
357
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
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’S
NZD
$’000’S
IDR
$’000’S
1,611
(1,611)
1,611
(1,611)
15.8
(15.8)
15.8
(15.8)
8.5
(8.5)
8.5
(8.5)
USD
$’000’S
NZD
$’000’S
IDR
$’000’S
(1,837)
1,837
(1,837)
1,837
75
(75)
75
(75)
17
(17)
17
(17)
CONSOLIDATED
2016
TOTAL
$’000’S
1,989
(1,989)
1,989
(1,989)
CONSOLDIATED
2015
TOTAL
$’000’S
(1,745)
1,745
(1,745)
1,745
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 2016 the Group had no open oil price swap contracts (2015: 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:
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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
2016
$000’S
2015
$000’S
3,662
(3,662)
3,662
(3,662)
3,872
(3,872)
3,872
(3,872)
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.
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
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 2016.
Consolidated 2016
Non-derivative financial liabilities
Trade and other payables (Note 17)
Consolidated 2015
Non-derivative financial liabilities
Trade and other payables
56
(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
9,050
9,050
15,936
15,936
-
-
-
-
-
-
-
-
-
-
-
-
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.
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 3. REVENUE AND OTHER INCOME
Revenue from continuing operations:
Production income
Other income:
Interest from cash and cash equivalents
Maari insurance refund
Gain on acquisition of 60% Mahakam Hilir PSC(1)
Total other revenue from continuing operations
Net foreign currency exchange (loss)/gain
(1)
Gain on bargain purchase of exploration assets
CONSOLIDATED
2016
$000’S
2015
$000’S
45,412
36,704
60
3,720
-
3,780
(90)
107
-
36,022
36,129
6,916
4. EXPENSES
Profit before income tax expense from continuing operations includes the following specific areas:
Production Expenses
Production costs
Amortisation of production properties
Total production expenses
Administration Expenses
Depreciation of property, plant and equipment
Employee expense
Superannuation contribution expense
Operating lease expenses
Takeover defence related costs
Other expenses
Business development expenses
Total administration expenses
2016
$000’S
19,653
10,932
2015
$000’S
12,989
10,798
30,585
23,787
34
4,793
245
254
-
1,005
389
6,720
49
4,150
221
265
2,003
765
1,479
8,932
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
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
Tax consulting
Total
No other services were provided by the auditor during the year, other than those set out above.
2016
$
121,700
2015
$
115,500
2,000
20,000
85,693
229,393
1,000
36,900
-
153,400
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
6. TAXATION
INCOME TAX BENEFIT/(EXPENSE)
Current tax
Adjustment recognised for current tax in prior periods
Deferred tax
CONSOLIDATED
2016
$000’S
(4,744)
(1,706)
1,576
RESTATED
2015
$000’S
(3,266)
-
8,611
Aggregate income tax benefit/(expense)
(4,874)
5,345
Income tax expense is attributable to:
Continuing operations
Discontinued operations
Numerical reconciliation of income tax expense and tax at the statutory rate
(Loss)/profit before income tax benefit/(expense) from continuing operations
(Loss)/profit before income tax benefit/(expense) from discontinuing operations
(4,800)
(74)
(4,874)
(79,598)
(2,989)
5,275
70
5,345
26,916
8,684
(Loss)/profit before income tax benefit/(expense)
(82,587)
35,600
Tax expense at Australian tax rate of 30% (2015: 30%)
24,776
(10,680)
Unrealised foreign exchange movements
Non-taxable gain reversal on bargain purchase
Non-assessable intercompany interest
Non-deductible / (deductible) mining deductions
Non-taxable gain on disposal of subsidiary
Unrecognised temporary differences
Unrecognised tax losses
Adjustments to current tax from prior periods(i)
Derecognition of deferred tax assets - continuing operations
Derecognition of deferred tax assets - discontinued operations
Difference in overseas tax rates
(58)
(11,287)
470
407
-
(11,532)
(8,183)
(1,706)
3,279
(74)
(966)
1,666
10,805
86
3,529
2,535
(175)
(2,179)
-
-
-
(242)
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Income tax benefit/(expense)
(4,874)
5,345
(i)
During the 2016 income year, Cue Sampang Pty Ltd received notices of amended assessments in respect of the 2011 tax year. Under the amended
assessments the additional tax payable including penalties and interest is $1.7 million . Cue Sampang Pty Ltd is currently disputing these amended
assessments. Cue Sampang Pty Ltd has paid $0.6 million of the additional tax liability and has provided for the balance of $1.1 million.
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
6. TAXATION (Cont’)
Current tax liabilities
Deferred tax assets recognised comprise of
Restoration provision
Tax losses
Total deferred tax assets recognised
Deferred tax liabilities recognised comprise of
Production properties
Inventories
Total deferred tax liabilities recognised
Net deferred tax liabilities recognised
Presentation in the consolidated statement of financial position as follows:
Deferred tax asset
Deferred tax liability
Net
60
Deferred tax assets not recognised comprise of
Restoration provision
Employee provisions
Tax losses
Total deferred tax assets not recognised
Deferred tax liabilities not recognised comprise of
Production properties
Inventories
Total deferred tax liabilities not recognised
CONSOLIDATED
2016
$000’S
RESTATED
2015
$000’S
1,865
580
228
-
228
(4,104)
(290)
(4,395)
3,238
5,267
8,505
(12,731)
(1,522)
(14,253)
(4,167)
(5,748)
-
(4,167)
(4,167)
3,672
199
23,615
27,487
(611)
(266)
(877)
70
(5,818)
(5,748)
-
191
18,579
18,770
-
-
-
Net deferred tax assets not recognised
26,610
18,770
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
7. CAPITAL AND RESERVES
(a) Issued Capital
Issued and paid up ordinary fully paid shares
Balance at 1 July
Options exercised
Closing balance at 30 June
CONSOLIDATED
2016
$000’S
2015
$000’S
2016
SHARES ON
ISSUE
2015
SHARES ON
ISSUE
152,416
-
152,416
152,416
698,119,720
698,119,720
-
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) 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 2016 management did not pay any dividends (2015: 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 2016 and 30 June 2015 are as follows:
Trade and other payables
Tax liabilities
Total
Less cash and cash equivalents
Surplus cash
Total equity
Total capital
Gearing ratio
CONSOLIDATED
2016
$000’S
(9,050)
(1,865)
(10,915)
20,490
9,575
42,589
52,164
RESTATED
2015
$000’S
(15,936)
(580)
(16,516)
27,605
11,089
131,673
142,762
nil%
nil%
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
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
2016
$000’S
2015
$000’S
4,201
280
4,481
4,201
4,201
3,288
1,473
4,761
3,288
3,288
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 2016 there were no current trade receivables that were impaired (2015: nil).
The balance of the allowance for impairment in respect of trade receivables at 30 June 2016 was nil (2015: nil). There has
been no movement in the allowance during the year.
The Directors consider that the carrying value of receivables reflects their fair values.
9. PROPERTY, PLANT AND EQUIPMENT
62
Office and computer equipment
Cost
Accumulated depreciation
CONSOLIDATED
2016
$000’S
2015
$000’S
267
(208)
59
258
(182)
76
Reconciliation of the carrying amount of office and computer equipment at the beginning and end of the current financial
year is set out below:
Balance at beginning of year
Additions
Depreciation expense
Balance at end of year
10. INVENTORIES
Current Assets
Inventory at cost
CONSOLIDATED
2016
$000’S
76
17
(34)
59
2015
$000’S
118
7
(49)
76
CONSOLIDATED
2016
$000’S
2015
$000’S
1,609
3,728
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
2016
$
2015
$
INTEREST
HELD
PARENT
COUNTRY OF
100% Australia
100% Australia
100% Singapore
100% Australia
100% Australia
INCORPORATION PRINCIPAL ACTIVITY
Petroleum exploration
Petroleum exploration
Petroleum exploration
Petroleum exploration
Petroleum production and
exploration
Petroleum production and
exploration
Petroleum production and
exploration
Petroleum production and
exploration
Petroleum production and
exploration
Petroleum exploration
Petroleum exploration
100% USA
100% USA
100% USA
100% Australia
100% Australia
100% Australia
11. SHARES IN SUBSIDIARIES
Shares held by the parent entity at the reporting date:
SUBSIDIARY COMPANIES
Cue Mahato Pty Ltd
Cue Mahakam Hilir Pty Ltd
Cue Kalimantan Pte Ltd1
Cue (Ashmore Cartier) Pty Ltd
Cue Sampang Pty Ltd
2
1
2
2
1
2
1
2
2
1
Cue Resources, Inc
1,371
1,371
Buccaneer Operating LLC2
Cheetah Energy LLC2
Cue Taranaki Pty Ltd
Cue Cooper Pty Ltd3
Cue Exploration Pty Ltd
Less accumulated impairment
losses
1
1,388
1
-
1
2
1,929,077
1
-
1,929,077
(1,343,808)
585,269
(1,343,808)
585,269
Total
588,040
586,650
All companies in the Group have a 30 June reporting date.
1
2
3
shares held by Cue Mahakam Hilir Pty Ltd.
shares held by Cue Resources, Inc.
shares held by Parent Company (incorporated 18 August 2015).
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
12. EXPLORATION AND EVALUATION EXPENDITURE
Costs carried forward in respect of areas of interest in exploration and evaluation phase
Expenditure assets acquired during the year
Fair value of assets acquired
Impairment of exploration asset(i)
Closing balance at 30 June
Accumulated costs incurred on current areas of interest net of amounts written off -
Joint Venture assets:
- Mahato PSC
PEP 51313
-
PEP 51149
-
Controlled assets:
- Mahakam Hilir PSC
(i)
Includes foreign currency translation revenue of $1.67 million.
Exploration Costs Expensed
Exploration & Evaluation Expenditure
Sampang PSC
Mahakam Hilir PSC
Mahato PSC
WA-359-P
WA-360-P
WA-361-P
WA-389-P
WA-409-P
PEP51313
PEP51149
PEP54865
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CONSOLIDATED
2016
$000’S
51,629
-
-
(51,629)
-
-
-
-
-
-
-
RESTATED
2015
$000’S
8,674
5,330
37,625
-
51,629
5,330
2,634
1,287
9,251
42,378
51,629
2016
$000’S
2015
$000’S
213
9,113
346
488
19
23
1,504
537
159
3,860
67
16,329
(34)
(721)
51
1,249
106
4
208
663
165
321
87
2,099
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
AASB 6 Exploration for and Evaluation of Mineral Resources allows to either capitalise or expense the exploration and
evaluation expenditure incurred by the Group.
The previous accounting policy was to capitalise and carry forward exploration and evaluation expenditure as an asset
when rights to tenure of the area of interest were current and costs were expected to be recouped or activities in the
area of interest had not, at the reporting date, reached a stage that permitted a reasonable assessment of the existence
or otherwise of economically recoverable reserves and active and significant operations in , or in relation to, the area of
interest were continuing.
The Group has made a voluntary change to its accounting policy relating to exploration and evaluation expenditure.
The new accounting policy was adopted for the year 30 June 2016 with effect from 1 July 2015 and has been applied
retrospectively.
The new exploration and evaluation accounting policy is to charge exploration and evaluation expenditure against profit
and loss as incurred, except for expenditure incurred after a decision to proceed to development is made, in which
case the expenditure is capitalised as an asset. This does not include acquisition costs or costs capitalised as a result of a
business combination. The impact on the consolidated statement of cash flows is a movement from investing activities to a
movement in operating activities. This amendment to the accounting policy has had a significant effect on the consolidated
financial performance and consolidated financial position of the Group because it previously capitalised exploration
expenditure in the period it was incurred. The Group has transferred at the beginning of the comparative period exploration
expenditure costs carried forward to accumulated losses as a result of the change in accounting policy.
Refer to Note 1(d) for further details.
13. IMPAIRMENT OF EXPLORATION & EVALUATION EXPENDITURE
Impairment of Exploration Assets
Impairment Write Down
Cue Mahakam Hilir PSC(i)
Mahato PSC
PEP51313
PEP51149
2016
$000’S
40,712
5,330
2,634
1,287
49,963
2015
$000’S
-
-
-
-
-
(i)
This includes the $36 million fair value on bargain purchase of the Mahakam Hilir PSC in accordance with AASB136. The full impairment of the Mahakam
Hilir PSC was made as a result of the post well evaluation of the Naga Selatan -2 well drilling results. Although the results of the well were encouraging,
as far as the original play concept was proven, the well could not be considered as a stand alone commercial discovery as at the current resource and
cost estimates and oil price projections, development of the field would be sub-economic.
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
14. PRODUCTION PROPERTIES
Balance at beginning of year
Production asset reclassified as Asset held for sale (Pine Mills)
Impairment – production from discontinuing operations (Pine Mills)
Impairment – production from continuing operations
Expenditure incurred during the year
Acquisition of production asset
Disposal of production asset
Changes in abandonment provision - production
Amortisation expense from continuing operations
Amortisation expense from discontinuing operations (Pine Mills)
Balance at end of year
Net accumulated costs incurred on areas of interest
Joint Venture assets:
- Oyong and Wortel – Sampang PSC
- Maari – PMP 38160
Controlled assets:
- Pine Mills
Total
66
CONSOLIDATED
2016
$000’S
2015
$000’S
78,131
(3,548)
(1,200)
(25,103)
4,461
-
-
930
(10,932)
(175)
42,564
9,935
32,629
42,564
-
42,564
79,458
-
-
(18,015)
17,332
3,906
(553)
6,831
(10,798)
(30)
78,131
13,075
61,132
74,207
3,924
78,131
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
15. IMPAIRMENT OF PRODUCTION PROPERTY ASSETS
At 30 June 2016 the Group reassessed the carrying amount of its oil and gas assets, Production Properties (refer note
14 and note 1(i)), 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. An impairment of the Maari oil field development
in New Zealand of $25.10 million (2015: $18.01 million) and the Pine Mills oil field development in the USA of $1.2 million
(2015: nil), primarily as a result of significantly reduced oil prices, was recognised during the year).
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% (2015: 14.3%) equivalent to
post-tax discount rates of 10% (2015: 10%) depending on the nature of the risks specific to each asset. Recoverable amounts
are estimated as follows:
Maari
$20.46 million
Pines Mills
$2.08 million
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.
16. PRODUCTION ASSET RECLASSIFIED AS ASSET HELD FOR SALE
Current Assets
Trade and other receivables
Inventories
Total Current Assets
Non-Current Assets
Property, plant and equipment
Production properties
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
It is expected the Pine Mills asset will be sold within six months.
2016
$000’S
371
37
408
139
3,548
3,687
4,095
1,447
1,447
570
570
2,017
2,078
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
17. TRADE AND OTHER PAYABLES
Current
Trade payables and accruals
Amounts due to directors and director related entities
2016
$000’S
2015
$000’S
8,961
89
9,050
15,637
299
15,936
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 $6.1 million relating to liabilities associated with a
dispute in relation to the Jeruk field within the Sampang PSC. Refer to note 29 for more information.
18. PROVISIONS
Current
Employee benefits
Non-Current
Employee benefits
Restoration
Movements in each class of provision during the financial year are set out below:
68
Consolidated
Balance at 1 July 2015
Provisions made during the year
Unused amounts reversed
Provisions used during the year
Balance at 30 June 2016
CONSOLIDATED
2016
$000’S
2015
$000’S
640
584
31
12,939
12,970
96
11,313
11,409
EMPLOYEE
BENEFITS RESTORATION
$000’S
$000’S
680
250
-
(259)
671
11,313
1,888
(262)
-
12,939
Restoration
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.
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
19. INTERESTS IN JOINT OPERATIONS
OPERATOR
PROPERTY
PETROLEUM EXPLORATION PROPERTIES
Carnarvon Basin – Western Australia
CUE
INTEREST
(%)
GROSS AREA
(KM2)
NET AREA
(KM2)
PERMIT
EXPIRY
DATE
WA-359-P
WA-389-P
*WA-409-P
New Zealand
**PEP51149
Indonesia
Cue Exploration Pty Ltd
BHP Billiton (Australia) Pty Ltd
Cue Exploration Pty Ltd
100
40
100
645
1,939
565
645
775.60
169.50
25/04/2018
08/10/2018
20/07/2016
Todd Exploration Limited
20
217
43.40
22/09/2018
Mahakam Hilir PSC
Mahato PSC
Cue Kalimantan Pte Ltd
Texcal Mahato Pte Ltd
100
12.50
222.14
5,600
88.90
700
12/05/2020
20/07/2018
PETROLEUM PRODUCTION PROPERTIES
New Zealand
PMP 38160
Madura - Indonesia
Sampang PSC
USA
OMV New Zealand Limited
5
80.18
4
01/12/2027
Santos (Sampang) Pty Ltd
15
(8.181818
Jeruk field)
534.50
80.20
04/12/2027
Pine Mills
Cue Resources, Inc
80
8,903.08
7122.47
N/A
*
Renewal for this permit has been submitted.
**
Surrender of license has been submitted by the Operator.
69
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
19. 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)
Production Properties (note 14)
Total Assets
Current Liabilities:
Payables
Current Tax Liabilities
Non-Current Liabilities:
Restoration Provisions
Deferred Tax Liabilities
Total Liabilities
Net Assets
70
Income and expenses of the consolidated entity attributable to joint ventures:
Production Income
Production Expenses
Refer to note 29 in relation to contingent liabilities of the Group.
Commitments for expenditure are disclosed in note 20.
CONSOLIDATED
2016
$000’S
2015
$000’S
4,201
1,609
-
42,564
48,374
8,298
1,865
12,940
4,167
27,270
21,104
45,412
16,684
4,192
3,714
9,251
74,207
91,364
6,596
576
11,312
5,818
24,302
67,062
37,450
15,637
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
20. 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
2016
$000’S
24
30,310
-
-
30,334
2015
$000’S
21,260
413
-
-
21,673
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.
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 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
2016
$000’S
1,765
408
-
-
2,173
2015
$000’S
4,982
-
-
-
4,982
CONSOLIDATED
2016
$000’S
2015
$000’S
293
302
107
-
702
217
276
383
-
876
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 term of 5 years, at the Company’s option.
71
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
21. EVENTS SUBSEQUENT TO THE REPORTING DATE
Subsequent to the end of the financial year:
(i) Mr Andrew Knight resigned as a director, and Mr Duncan Saville was appointed as a director, effective 18 August 2016.
(ii) Cue together with all joint venture partners has elected to withdraw from PEP54865 and PEP51313, offshore New
Zealand. These were fully impaired as at 30 June 2016.
Apart from these matters 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.
22. EARNINGS PER SHARE
Earnings/(loss) per share for profit/(loss) from continuing operations
Profit/(loss) after income tax
Non-controlling interest
Profit/(loss) after income tax attributable to the owners of
Cue Energy Resources Limited
CONSOLIDATED
2016
$000’S
(84,398)
-
2015
$000’S
32,191
(2)
(84,398)
32,189
NUMBER
NUMBER
Weighted average number of ordinary shares used in calculating basic earnings per share
698,119,720
698,119,720
Weighted average number of ordinary shares used in calculating diluted earnings
per share
698,119,720
698,119,720
Basic earnings per share
Diluted earnings per share
72
Earnings/(loss) per share for profit/(loss) from discontinued operations
Profit/(loss) after income tax attributable to the owners of Cue Energy Resources Limited
Non-controlling interest
Profit/(loss) after income tax attributable to the owners of
Cue Energy Resources Limited
Weighted average number of ordinary shares used in calculating basic earnings
per share
Weighted average number of ordinary shares used in calculating diluted earnings
per share
Basic earnings per share
Diluted earnings per share
CENTS
12.09
12.09
CENTS
4.61
4.61
CONSOLIDATED
2016
$000’S
2015
$000’S
(3,062)
8,754
626
-
(2,436)
8,754
NUMBER
NUMBER
698,119,720
698,119,720
698,119,720
698,119,720
CENTS
(0.35)
(0.35)
CENTS
1.25
1.25
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
Earnings/(loss) per share for profit/(loss)
Profit/(loss) after income tax
Non-controlling interest
Profit/(loss) after income tax attributable to the owners of
Cue Energy Resources Limited
CONSOLIDATED
2016
$000’S
(87,460)
626
2015
$000’S
40,945
(2)
(86,834)
40,943
NUMBER
NUMBER
Weighted average number of ordinary shares used in calculating basic earnings per share
Weighted average number of ordinary shares used in calculating diluted
earnings per share
698,119,720
698,119,720
698,119,720
698,119,720
Basic earnings per share
Diluted earnings per share
CENTS
(12.44)
(12.44)
CENTS
5.86
5.86
23. DISCONTINUING AND DISCONTINUED OPERATIONS
Description
The Company has resolved to divest of its subsidiary Cue Resources Inc during the 2016 financial year which holds the interest
in the Pine Mills production property in East Texas and the Pine Mills asset is held for sale (refer note 16). Cue intends to focus on
core business in South East Asia and Australasia.
On 20 November 2014 the consolidated entity sold Cue PNG Oil Company Pty Ltd (incorporated in Australia), a subsidiary of Cue
Energy Resources Limited, for consideration of USD7.03 million (AUD8.5 million) resulting in a profit on disposal before income
tax restated to $8.67 million. Whilst Cue PNG Oil Company Pty Ltd was sufficiently profitable up to the date of sale, future losses
were projected due to reduced production and expected exploration expenditure.
73
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
23. DISCONTINUING AND DISCONTINUED OPERATIONS (Cont’)
Financial performance information
Production revenue
Foreign currency exchange gain
Other Income
Total revenue
Operating expense
Impairment expense
E&E expenditure
Amortisation expense
Total expenses
(Loss)/profit before income tax expense
Income tax expense/benefit
(Loss)/profit after income tax expense from discontinued operations
Profit on disposal before income tax
Income tax expense
Profit on disposal after income tax
(Loss)/profit after income tax expense from discontinued operations
Carrying amounts of assets and liabilities being disposed/disposed
74
Production income receivables
Inventories
Deferred tax asset
Exploration permits
Production properties
Total assets
Trade and other payables
Abandonment provision
Total liabilities
Net assets
2016
$000’S
984
123
-
1,107
(2,720)
(1,200)
-
(175)
(4,095)
(2,988)
(74)
(3,062)
-
-
-
(3,062)
RESTATED
2015
$000’S
965
(6)
27
986
(949)
-
-
(30)
(979)
7
70
77
8,677
-
8,677
8,754
RESTATED
2015
$000’S
126
-
71
-
553
750
(69)
(1,083)
(1,152)
(402)
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
The net cash flows of the discontinuing operation, which is not incorporated into the statement of cash flows,
are as follows:
Net cash inflow/(outflow) from operating activities
Net cash inflow from investing activities
Net cash (outflow)/inflow from financing activities
Net increase in cash generated by the discontinuing operation
Details of the Cue PNG Oil Company Pty Ltd disposal
Total sale consideration
Carrying amount of net assets disposed
Disposal costs
Profit on disposal before tax income
Income tax expense
Profit on disposal after income tax
2016
$000’S
(2,239)
(173)
2,232
(180)
2016
$000’S
-
-
-
-
-
-
2015
$000’S
26
-
-
26
2015
$000’S
8,536
402
(261)
8,677
-
8,677
75
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
24. 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 Group financial statements.
The principal business of the group is the production and exploration for hydrocarbons in Australia, New Zealand, Indonesia
and USA. 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:
2016
Gas Revenue from continuing operations
Oil Revenue from continuing operations
Production Revenue from continuing operations
Production Revenue from discontinuing
oil operations
Production Revenue
Production Expenses
Gross Profit
Other revenue
Impairment - production
Impairment – E&E
Foreign exchange movement
Earnings before interest expense, tax, depreciation
and amortisation
AUSTRALIA
$000’S
-
-
-
-
-
-
-
60
-
-
(90)
NZ
$000’S
INDONESIA
$000’S
-
13,091
13,091
-
13,091
(6,608)
6,483
3,720
(25,103)
(3,921)
-
27,354
4,967
32,321
-
32,321
(13,045)
19,276
-
-
(46,042)
-
USA*
$000’S
-
-
-
984
984
(2,720)
(1,736)
123
-
-
-
TOTAL
$000’S
27,354
18,058
45,412
984
46,396
(22,373)
24,023
3,903
(25,103)
(49,963)
(90)
(9,289)
(22,907)
(36,438)
(2,811)
(71,445)
2015
Gas Revenue from continuing
operations
Oil Revenue from continuing
operations
Production Revenue from
continuing operations
Production Revenue from
discontinuing oil operations
Production Revenue
Production Expenses
Gross Profit
Other revenue
Impairment - production
Impairment – E&E
Foreign exchange movement
AUSTRALIA
$000’S
NZ
$000’S
INDONESIA
$000’S
USA*
$000’S
PNG*
$000’S
TOTAL
$000’S
-
-
-
-
-
-
-
107
-
-
7,322
-
18,308
14,269
4,127
14,269
22,435
-
14,269
(4,010)
10,259
-
(18,015)
-
-
-
22,435
(8,978)
13,457
36,022
-
-
(405)
-
-
-
221
221
(437)
(216)
27
-
-
(1)
-
-
-
745
745
(515)
230
8,677
-
-
-
18,308
18,396
36,704
966
37,670
(13,940)
23,730
44,833
(18,015)
-
6,916
Earnings before interest expense,
tax, depreciation and amortisation
(3,685)
(8,329)
49,778
(195)
8,908
46,477
76
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 TOTAL SEGMENT ASSETS
Current Assets
Non-current Assets
Total 30 June 2016 Assets
Current Assets
Non-current Assets
Total 30 June 2015 Assets
TOTAL SEGMENT LIABILITIES
Current Liabilities
Non-current Liabilities
Total 30 June 2016 Liabilities
Current Liabilities
Non-current liabilities
Total 30 June 2015 Liabilities
* discontinuing/discontinued operations
AUSTRALIA
$000’S
NZ
$000’S
INDONESIA
$000’S
USA
$000’S
TOTAL
$000’S
16,588
59
16,647
26,329
76
26,405
1,323
31
1,354
1,947
96
2,043
1,911
32,629
34,540
1,619
65,053
66,671
1,209
12,421
13,630
4,593
14,149
18,742
8,081
9,935
18,016
7,682
60,784
68,466
9,023
4,685
13,708
8,948
2,982
11,930
4,095
-
4,095
464
3,993
4,458
2,017
-
2,017
1,612
-
1,612
30,675
42,623
73,298
36,094
129,906
166,000
13,572
17,137
30,709
17,100
17,227
34,327
Major Customers
The Group has a number of customers to whom it provides both oil and gas products. The Group supplies a single external
customer in the gas segment who accounts for 100% of external gas revenue (2015: 100%).
Reconciliation of earnings before interest expense, tax, depreciation and amortisation (EBITDA) to Profit before Income Tax:
EBITDA
Depreciation
Amortisation
(Loss)/profit before income tax expense
includes discontinued operations
25. SHARE BASED PAYMENTS
No performance rights were outstanding as at 30 June 2016.
2016
$000’S
(71,445)
(34)
(11,107)
(82,586)
2015
$000’S
46,477
(49)
(10,828)
35,600
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
26. KEY MANAGEMENT PERSONNEL AND RELATED PARTY DISCLOSURES
Total remuneration payments and equity issued to Directors and key management personnel are summarised below.
Elements of Directors and executives remuneration includes:
Short term employment benefits, including superannuation, non-monetary benefits and consultancy fees
•
• Post employment benefits – superannuation
•
Long term employee benefits
Short term employment benefits (including non-monetary benefits)
Cash bonuses
Consulting fees
Long term benefits
Post employment benefits
Termination payments
Total employee benefits
Consolidated Entities
Details of controlled entities are shown in note 11.
CONSOLIDATED ENTITY
2016
$
2015
$
1,624,461
427,624
167,043
2,219,128
18,675
105,164
76,173
2,419,140
1,621,921
171,136
-
1,793,057
6,612
156,040
105,000
2,060,709
Advances to/(from) controlled entities from/to Cue Energy Resources Limited, net of provisions for impairment, at the
reporting date are as follows:
78
Cue Exploration Pty Ltd
Cue (Ashmore Cartier) Pty Ltd
Cue Resources, Inc
Cue Mahakam Hilir Pty Ltd
Cue Sampang Pty Ltd
Cue Mahato Pty Ltd
Cue Taranaki Pty Ltd
Total
2015
$
8,877,521
(2,226,329)
2,997,629
26,141,923
7,754,247
5,380,786
32,823,362
81,749,139
MOVEMENT
$
2,689,337
-
2,332,111
9,413,652
(14,792,285)
29,060
1,758,832
1,430,707
2016
$
11,566,858
(2,226,329)
5,329,740
35,555,575
(7,038,038)
5,409,846
34,582,194
83,179,846
Repayment of amounts owing to the Company as at 30 June 2016 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 provides management, administration and accounting services to the subsidiaries. Management fees
of $1,565,065 (2015: $3,714,214) were charged by the parent company to Cue Taranaki Pty Ltd.
The ultimate parent company is New Zealand Oil and Gas Limited, a company incorporated in New Zealand.
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
27. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of operating profit to net cash flows from operating activities:
Reported profit/(loss) after tax
Impact of changes in working capital items
Increase/(decrease) in assets
(Increase)/decrease in liabilities
Items not involving cash flows
Production property write down
Exploration impairments
Depreciation
Amortisation
Gain on purchase of assets
Profit on sale of assets
Net gain on foreign currency conversion
Decrease net cash flows from operating activities
(b) Cash comprises cash balances held in Australia and foreign currencies,
principally US dollars, within Australia and overseas:
Australia
New Zealand
Indonesia
USA
Cash Flow Statement cash balance
CONSOLIDATED ENTITY
2016
$000’S
RESTATED
2015
$000’S
(87,460)
40,945
2,060
16
26,303
49,990
34
11,107
-
-
(939)
1,111
16,501
495
3,413
81
20,490
(18,227)
(11,564)
18,015
2,099
49
10,828
(36,022)
(8,677)
(9,778)
(12,332)
26,197
384
763
261
27,605
79
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NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
28. PARENT ENTITY INFORMATION
Information relating to Cue Energy Resources Limited:
Financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Accumulated losses
Net assets
Financial performance
Profit/(loss) for the year
Total comprehensive income (loss)/profit for the year
Capital Commitments
PARENT ENTITY
2016
$000’S
2015
$000’S
20,510
22,847
43,357
1,293
31
1,324
27,369
82,411
109,780
1,798
96
1,894
42,033
107,886
152,416
-
(110,383)
152,416
-
(44,530)
42,033
107,886
(65,854)
(65,854)
7,441
7,441
The parent entity has no commitments for the acquisition of capital assets as at 30 June 2016 (2015: nil).
Leases Commitments
The parent entity has no commitments in relation to leases as at 30 June 2016 other than disclosed in note 20.
The parent entity has no contingent assets.
29. CONTINGENT LIABILITIES & 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 USD4.5
million (AUD 6.1 million) which has been provided for in the accounts. 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.
Contingent Assets
The Group has no contingent assets.
80
NOTES TO THE FINANCIAL STATEMENTS (Cont’) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16
Independent
Auditor’s
Report
81
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CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2015/16 Shareholder
Information
1. Distribution of Equity Securities
The distribution of equity security holders of quoted shares
in the Company as at 1 October 2016:
2. Unmarketable Parcels
The number of shareholders holding less than a marketable
parcel as at 1 October 2016 is 254.
NUMBER HELD
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Over 100,000
Total
ORDINARY
51
173
556
1,812
340
2,932
3. Substantial Shareholders
The names and holdings of substantial shareholders in the
Company as at 1 October 2016:
QUOTED
SHARES
FULLY PAID
337,646,620
% OF ISSUED
ORDINARY
SHARES
48.37
112,996,671
16.19
NZOG Offshore Limited
Singapore Petroleum
Company Limited
4. Registered Top 20 Shareholders
The registered names and holdings of the 20 largest holdings of quoted ordinary shares in the Company as
at 1 October 2016:
SHAREHOLDER
NZOG OFFSHORE LIMITED
BNP PARIBAS NOMS PTY LTD
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