Cue Energy Resources LimitedAnnual Report 2016/17 About Us
Cue Energy Resources is an oil and gas
production and exploration company with
production assets in Indonesia and New
Zealand and exploration assets in Australia and
Indonesia. Offices are located in Melbourne,
Australia and Jakarta, Indonesia.
Cue Energy Resources aims to grow our shareholder value through
implementing a strategy of:
• Maintaining a sustainable business;
• Delivering disciplined growth;
• Pursuing step-change return opportunities
12 Month Trading Range
5.3¢-10.0¢
Ordinary Shares
698,119,720
Avg FY17 Production
~1600 boe/day
Contents
Joint Operations
Chairman’s Overview
CEO Report and Overview of Operations
Reserves and Resources Summary
Directors’ Report
Auditor’s Independence Declaration
Directors’ Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Independent Auditor’s Report
Shareholder Information
2
3
5
9
14
25
26
27
29
30
31
32
63
67
1
Cue Energy Resources Limited Annual Report 2016/17 Joint Operations
INDONESIA
Mahato PSC
Interests
Texcal (Operator)
Central Sumatra Energy
Bow Energy*
Cue
Mahakam Hilir PSC
Interests
Cue (Operator)
Sampang PSC
Interests
Santos (Operator)
SPC
Cue
51%
16.5%
20%
12.50%
100%
45%
40%
15%
*Subject to Government of Indonesia approval of
transfer from Bukit Energy
AUSTRALIA
Carnarvon Basin Permits
Interests
WA-359-P
Cue (Operator)
WA-389-P
Cue (Operator)
WA-409-P
Cue
BP (Operator)
100%
100%
20%
80%
2
Cue Energy Resources Limited
Annual Report 2016/17
NEW ZEALAND
Maari and Manaia Oil Fields
Interests
PMP 38160
OMV (Operator)
Todd
Horizon
Cue
69%
16%
10%
5%
Head OfficeMelbourneINDONESIAAUSTRALIANEW ZEALAND Chairman’s Overview
Chairman’s Overview
Grant Worner
Dear shareholder,
I am pleased to present to you the 2017 Annual Report of Cue Energy Resources Limited and wish to thank you for your support
throughout the year.
Oil traded between US$45 and US$55 per barrel throughout 2017 and current industry consensus is that prices will remain in the vicinity
of US$50 per barrel for the rest of this decade, forcing companies to adapt to operating in a longer, lower oil price environment. Cue’s
portfolio provides a somewhat hedged position in these economic conditions with more than two thirds of its income emanating from
gas sales that are independent of oil price. After assessing the economic environment and its internal capabilities, in June 2016 Cue reset
its strategy and announced three objectives to deliver short, medium, and long-term prosperity:
1. To have a sustainable business operating within its means;
2. To deliver disciplined growth; whilst
3. Pursuing opportunities that offer step-change returns to shareholders.
2016/2017 Performance
The last two years have been particularly challenging for Cue after re-setting its strategy and completing material transformation
activities. Cue impaired the exploration and evaluation expenditure previously capitalised, expensed current exploration and impaired
production assets owing to the lower oil price and diminishing reserves. In addition, exploration activities and overhead costs were right-
sized to match the Company’s simplified portfolio and maximise shareholder value by creating a sustainable business that could operate
within its means, deliver disciplined growth, and retain step-change growth options.
The impairments are the largest factor of over A$100m of ordinary activity losses in the last two years. In addition, since June 2015,
our cash position has continued to reduce from A$27m to $12.1m at June 2017 as we resolved & settled long outstanding commercial
disputes from 2011, paid redundancy payments and sold loss making overseas assets.
This year we have continued last year’s important overhead cost reduction initiatives, including reducing staff numbers and relocating to
cheaper offices and thereby aligning our cost base with our lower exploration activity levels, future production receipts and the expected
commodity price outlook.
The following material events and achievements through the year were:
• Securing funding for 50% of a well in the potentially high impact WA-359-P offshore licence in the North West Shelf if BP exercise
their equity option;
• Farming out 80% of North West Shelf WA-409-P licence to BP and securing funding to fully cover the primary work commitment on a
renewed 5-year tenure;
Identifying an appraisal well opportunity in the Naga Utara prospect in the Mahakim Hilir PSC;
•
• Funding the Company’s share of the conversion of the Oyong and Wortel fields to gas only production, reducing costs by
approximately 50% per annum, increasing 2P reserves by 37%, and increasing operating margins by 34%;
• Funding the Company’s share of the integrity repairs to the Maari Well Head Platform;
• Selling the loss making Pine Mills asset in the US;
• Exiting the high risk exploration licences in New Zealand;
• Resolving commercial disputes dating as far back as 2011; and
3
Cue Energy Resources Limited Annual Report 2016/17 Chairman’s Overview
• Lowering corporate overheads and administration expenses from the historic average of A$7.2 million to circa A$2 million
per annum by;
Lowering the cumulative Board fees to $160k per annum compared with 2016 fees of $501k;
•
• Right-sizing the organization and making redundant many of the higher paid personnel who’s remuneration was set in better
economic times; and
• Moving to a fit-for-purpose head office in Melbourne and lowering lease costs by more than 75%.
Cue is now in a far more robust position to capture growth opportunities and manage future challenges.
2017/18 Expectations
Shareholders should expect to see further progress in all three strategic objectives in the 2017/18 year. Cue’s cashflow from production
now exceeds its operating expenses and the Company will continue to seek initiatives to lower its overall cost of operations.
Production growth options are being pursued in the Maari and Sampang fields over the next 12 months and exploration and appraisal
wells are options in the other two Indonesian licences that Cue has a presence in.
The largest potential impact on the Company is the Ironbark prospect on the North West Shelf, offshore Western Australia. Despite the
limited appetite for large exploration plays the Company is hopeful that it will make further progress in attracting suitable partners to
WA-359-P in the next financial year.
In summary, Cue has undergone a significant transformation over the last 12 months and is now in a robust position. It retains 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 2017/18 Cue will continue to deliver its 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.
I would like to take this opportunity to thank the small but dedicated Cue team for their contributions over the year during a period of
significant transformation. At the end of 2017 I stepped back from the position of Executive Chairman and was very pleased to appoint
Mr Matthew Boyall into the CEO position. Matt has been integral to the changes at Cue and the Board and I are confident the Company is
in good hands and has a bright future under Matt’s leadership.
Grant A. Worner
Non-Executive Chairman
27 September 2017
4
Cue Energy Resources Limited Annual Report 2016/17 CEO Report and
Overview of Operations
Matthew Boyall
Cue’s priorities during FY2017 were to simplify our portfolio, reduce costs
and transform into a sustainable business which can take advantage of
growth and step change opportunities.
The Maari and Sampang assets continued to provide steady
revenue during the year, with the Sampang fixed gas price
providing natural revenue protection in the current low oil price
environment.
In New Zealand, at Maari, maintenance and repairs on the WHP
were conducted during FY2017 to repair existing issues and
deal with a crack that was identified in a leg of the WHP. This
expenditure will be the subject of insurance claims, which are likely
to be resolved during FY2018. Production from the Sampang PSC,
Indonesia, was strong and the conversion of the facilities to gas
only production is proceeding on time and budget. Unfortunately
Cue was unable to achieve stable increased production and cost
reductions during its two years of ownership of the Pine Mills
oilfield in the United States and therefore, in October 2016, Cue
sold it 80% interest.
Cue successfully farmed out equity in WA-409-P to BP
Developments Australia Pty Ltd (BP) to cover the primary
work commitment on a renewed 5 year term and executed an
option agreement for 42.5% equity in WA-359-P, also to BP.
If executed, this option agreement provides funding for 50% of the
Ironbark-1 well. These transaction show the confidence that BP has
in the Ironbark gas prospect. WA-359-P and WA-409-P offer the
largest step change value opportunities for Cue.
The Paus exploration well in Sampang PSC and the potential low
cost wells in Mahato and Mahakam Hilir PSCs provide further near
term growth options for Cue, which can be funded from cashflows
from existing oil and gas production.
Cue finalised withdrawal from all remaining exploration permits
in New Zealand during the year as their low prospectivity did not
make them a suitable part of a focussed portfolio.
With revenue from two production assets and reduced
administration costs of approximately $2 million per year forecast,
the Company’s operations should be cashflow positive in FY2018.
There are multiple avenues for near term company growth through
a farmout of WA-359-P, and drilling of a potentially company
changing well, and participation in exploration and appraisal wells
in the Indonesia permits.
Further details on individual assets are provided in the following
sections.
Financials
In the 2016/17 year, the Company’s production revenues from
continuing operations, fell by approximately 23% as a result of
natural field decline and production interruption at Maari and gross
profit fell by 11%. Cue’s net loss after tax was $17.3 million as a result
of impairment of Maari production assets, expensed exploration
expenditure and loss on sale of the Pine Mills asset.
Material one-off payments of $11.4 million were incurred to settle
long standing disputes and to pay for restructuring redundancies.
At year end Cue’s cash balance was $12.4 million, down from $20.5
million the previous year
Production
NEW ZEALAND
PMP 38160
During the year, average oil production from Maari field was
approximately 420 barrels of oil per day (bopd) net to Cue, which was
down from the previous year due to natural field decline and a shut in
period at the end of CY2016. Planned repairs to the production risers
and temporary repairs to stabilise a crack found in the Well Head
Platform (WHP) were undertaken during this period.
Permanent repairs to the WHP have been completed after the end of
the 2017 fiscal year.
At June 30 2017, the Maari field was producing approximately
9000 bopd gross. A number of initiatives to perforate and complete
additional zones in existing wells are planned for FY2018, aimed at
low cost incremental production increases.
5
Cue Energy Resources Limited Annual Report 2016/17 CEO Report and Overview of Operations
Production (Cont’)
NEW ZEALAND (CONT’)
PMP 38160 (Cont’)
The most significant planned increase, expected to be in the
vicinity of 2000 bopd, should come from the t the installation of
compression on the Maari WHP to lower the production pressure of
the wells. Preliminary work has been undertaken during the year, with
the final installation expected to be completed by March 2018.
A number of sidetrack drilling opportunities are also being investigate
by the operator to target unproduced reservoirs in existing well
bores. These operations can be undertaken using the WHP workover
unit and coiled tubing. The target wells for this drilling are likely to be
finalised during the first quarter of 2018.
The Joint Venture partners are reviewing a preliminary proposal to
develop the Moki reservoir at the Manaia field, approximately
6 km from Maari, where the Manaia-2 well was drilled in 2013. The
proposal has passed the first stage of the Operator’s tollgate process
and could include an appraisal well within 18-24 months and a
further standalone or integrated development. Cue will carefully
review this project as preliminary studies progress.
New Zealand
TARANAKI PENINSULA LOCATION MAP – NEW ZEALAND
Tui
Maui
Taranaki
Peninsula
10km
INDONESIA
Sampang PSC
The Oyong and Wortel fields continued to provide stable revenue
and be operated in a safe and reliable manner. In times of lower oil
price, fixed, high price gas production from these established, well
managed fields provides sustainable cashflow.
During FY2017, Oyong production averaged 120 bopd and 4mmcf/d
of gas net to Cue. Wortel field production averaged 5 mmcf/d net.
High cost oil production from Oyong ceased in June 2017 as part
of the conversion to gas only production. The project is expected to
be completed by December 2017. Operating costs are expected to
halve due to gas production requiring significantly fewer production
facilities. Installation of a new compressor at the Grati processing
plant will also allow gas to be produced at lower reservoir pressures,
adding to recoverable reserves and making the field economic well
past 2020.
Drilling at the Paus near field exploration prospect is in the final
stages of review by the Joint Venture and a decision is expected
during the 2018 fiscal year. The well would target the Mundu
reservoir which provides the gas production at Oyong.
Cue is optimistic about the future production from the Sampang PSC.
We have increased our estimate of Wortel 2P gas reserves by 36% this
year, based on the continued high performance of the reservoir and
plan to undertake independent analysis of Oyong field reserves after
the current gas conversion project is complete and the wells have
stabilised in gas only mode.
SAMPANG PSC LOCATION MAP – INDONESIA
Java
Madura Island
PMP 38160
Maari
Manaia
East Java
Wortel
Oyong
Jeruk
Maleo
Peluang
LEGEND
LEGEND
LEGEND
LEGEND
Cue Permit
Gas Field
Prospect
Cue Permit
Oil Field
Gas Field
Prospect
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
6
Grati Onshore
Gas Facilities
30km
Cue Energy Resources Limited Annual Report 2016/17 CEO Report and Overview of Operations
WA-389-P
The operator, BHP Billiton, notified Cue of their withdrawal from
WA-389-P during the year. All work commitments have been
completed to date.
Cue believes that WA-389-P contains a structure and reservoir similar
to the Ironbark prospect in WA-359-P and have taken 100% equity
and operatorship of this licence. To allow time to further review the
prospectivity of the Deep Mungaroo Triassic in WA-389-P, Cue have
applied to the National Offshore Petroleum Titles Administrator
(NOPTA) for a suspension and extension of the current permit year.
CARNARVON BASIN LOCATION MAP – AUSTRALIA
WA-389-P
WA-389-P
WA-389-P
WA-359-P
WA-409-P
WA-359-P
North Rankin
Angel
25km
Goodwyn
Exploration
AUSTRALIA
WA-359-P
The Ironbark Prospect in WA-359-P is a Deep Mungaroo Triassic gas
prospect that can be correlated to the Gorgon field further south,
which supports the Gorgon LNG plant. These reservoirs have not
been tested in the WA-359-P area and Cue’s analysis shows that the
numerous dry holes drilled to shallower targets were unsuccessful
due to a thick regional seal which has inhibited the penetration of
hydrocarbons into the upper sections.
Based on the areal size of the fault bound closure, Cue’s estimate of
the prospective recoverable gas resource is 15Tcf in WA-359-P. If this
is correct, then this prospect would be larger than several existing
LNG developments, such as Pluto and Wheatstone. Located 50km
from the North West Shelf gas infrastructure, which is speculated to
have spare capacity in the early 2020s, Ironbark is geographically and
commercially well positioned.
Cue’s estimate of the geological chance of success for this giant
prospect is 25% and the value that a success would bring to the
company is many times Cue’s current market value.
BP shares our enthusiasm for WA-359-P and Cue has granted them
an option over 42.5% equity, exercisable by the end of October
2017. A process to find other partners to form a Joint Venture with
BP is ongoing during a very difficult time in the farmout market in
Australia.
A commitment exploration well is currently due in the first half of
2018. If BP exercises their option, 50% of this well will be funded.
WA-409-P
WA-409-P contains a portion of the Ironbark structure that could
contain significant gas resource if Ironbark is successful in WA-359-P.
Io/Jansz
The permit was renewed for a further 5 year exploration period
in October 2016.
During the year, Cue farmed out 80% equity in WA-409-P to BP
in exchange for BP funding the primary term commitment of the
renewal, which includes seismic reprocessing. The reprocessing is
expected to be completed during before the end of 2017.
Eurytion
Wheatstone
Pluto
Iago
LEGEND
LEGEND
LEGEND
LEGEND
West Tryal Rocks
Cue Permit
Gas Field
Prospect
Cue Permit
Oil Field
Gas Field
Prospect
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
7
Cue Energy Resources Limited Annual Report 2016/17 CEO Report and Overview of Operations
Exploration (Cont’)
INDONESIA
Mahakam Hilir PSC
Fieldwork and data acquisition was undertaken during the year
resulting in a positive review of the prospectively in the Naga Utara
prospect, adjacent to the producing Sambutan gas field.
Gravity Gradiometry data collection and analysis revealed a gravity
anomaly in the northen area of the permit, which aligns with
the location of the Sambutan field. This feature was previously
unnoticeable on the available seismic data and renewed Cue’s
technical interest in the Naga Utara prospect area.
Reprocessing of existing seismic data has providing a clearer
understanding of why the Naga Utara 1 and 2 wells, drilled in
2012/2013 did not discover commercial quantities of hydrocarbons.
Cue has also received an additional 9 lines of seismic data which
ties the well data from the neighbouring Sambutan field through the
Naga Utara prospect and allows correlation of the gas bearing sands.
Additional fieldwork undertaken has uncovered the locations and
logs of wells drilled in the 1930s including Sambutan-8, which lies
within the Mahakam Hilir PSC and contains valuable log data showing
interpreted gas sands over a 100m interval that has never been tested
or produced from. Cue is currently planning for an appraisal well to
assess the the reservoirs shown in the Sambutan-8 well.
Pelarang Samarinda
MAHAKAM HILIR PSC LOCATION MAP – INDONESIA
Sambutan
5km
Naga Utara-4
Prospect
Mahakam Hilir
PSC
Sanga Sanga
Pamaguan
Nangka
To allow further time to integrate all new data, confirm the
prospectivity of the Naga Utara prospect and plan for a potential well,
Cue has initiated discussions with the Indonesian Government for
a variation to the 2 well work programme which is currently due by
May 2018.
Cue has also commenced a farmout process to attract a partner to
participate in the permit.
After a negative outcome from further analysis of the results of the
Naga Selatan-2 well in January 2016, Cue has decided to plug and
abandon the well.
Mahato PSC
The Mahato PSC is in a highly prospective area close to several
large producing oilfields. During the year, progress continued to
be delayed by the lack of a legally binding agreement between the
partners in the PSC.
Cue is continuing to work with the partners to solve outstanding
issues to enable the drilling of a well in the Petapahan area during
the 2018 fiscal year.
MAHATO PSC LOCATION MAP – INDONESIA
Mahato
PSC
40km
Bangko
Balam South
Duri
Libo SE
Minas
Kotabatak
Petapahan
LEGEND
LEGEND
LEGEND
LEGEND
Cue Permit
Gas Field
Prospect
Cue Permit
Oil Field
Gas Field
Prospect
8
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 2016/17 Reserves and
Resources Summary
Net To Cue Energy Resources Limited As At 30 June 2017
RESERVES
PROVED (1P)
PROVED & PROBABLE (2P)
DEVELOPED
UNDEVELOPED
DEVELOPED
UNDEVELOPED
FIELD (LICENCE)
INDONESIA
Oyong (1)(3) (Sampang PSC)
Wortel (1)(2) (Sampang PSC)
NEW ZEALAND
Maari (2) (PMP 38160)
Total Reserves
CUE
INTEREST
OIL &
CONDEN-
SATE
MMBBL
15%
15%
5%
0.00
0.01
0.37
0.38
OIL &
CONDEN-
SATE
MMBBL
-
-
0.09
0.09
GAS
BCF
0.06
3.2
-
3.26
OIL &
CONDEN-
SATE
MMBBL
0.00
0.02
0.69
0.71
GAS
BCF
0.42
1.22
-
1.64
OIL &
CONDEN-
SATE
MMBBL
-
0.01
0.13
0.14
GAS
BCF
1.18
4.53
-
5.71
CONTINGENT RESOURCES
FIELD (LICENCE)
CUE
INTEREST
INDONESIA
Jeruk (Sampang PSC)
8%
Total Contingent Resources
Table numbers may not add up due to rounding
BEST ESTIMATE (2C)
OIL & CONDENSATE
MMBBL
1.24
1.24
GAS
BCF
0.37
2.15
-
2.52
GAS
BCF
-
0
(1) Cue reserves are net of Indonesian Government share of production.
(2) Maari and Wortel reserves are based on an independent technical review conducted by New Zealand Oil & Gas Limited (NZOG) and calculated using NZOG’s technical
recoverable quantities and Cue’s cost and oil price assumptions. Deterministic methods were used for reserves.
(3) Oyong reserves are based on the Operator’s reserve reporting at 1 Jan 2017 adjusted for production to 30 June 2017
(4) Contingent resources are quantities of petroleum estimated to be potentially recoverable through development of known accumulations but which are not currently
considered to be commercially recoverable due to one or more contingencies. The term 2C refers to a best estimate scenario of contingent resources. A ‘best estimate’ is
the most realistic assessment of recoverable quantities if only a single result were reported. If probabilistic methods are used, there should be at least a 50% probability (P50)
that the quantities actually recovered will equal or exceed the best estimate.
9
Cue Energy Resources Limited Annual Report 2016/17
Reserves and Resources
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.
Cue has engaged the services of New Zealand Oil & Gas Limited
(NZOG) to independently assess the Maari and Wortel reserves.
Cue reviews and updates its oil and reserves position on an annual
basis, or as frequently as required by the magnitude of the petroleum
reserves and changes indicated by new data and reports the updated
estimates as of 30 June each year as a minimum.
Qualified Petroleum Reserves and
Resources Evaluator Statement
The reserves assessment has been completed and approved by
Daniel Leeman and is based on, and fairly represents, information
and supporting documentation reviewed. Daniel has 9 years of
experience within the petroleum industry. Daniel has a MENG in
Mechanical Engineering with a diploma in Business Management, a
MSc in Petroleum Engineering and is a certified professional Engineer
with the Institute of Professional Engineers New Zealand. Daniel
is also an active member of the Society of Petroleum Engineers,
Association of International Petroleum Negotiators and the Royal
Society of New Zealand.
Reserves are quantities of petroleum anticipated to be commercially
recoverable from known accumulations from a given date forward;
that are judged to be discovered, recoverable, commercial and
remaining. Probable (2P) reserves have a 50 per cent chance or
better of being technically and economically producible. Proven (1P)
reserves are those with a 90 per cent chance or higher and Possible
(3P) are those with a 10 per cent chance or lower of being technically
and economically producible. Developed reserves are expected to
be recovered from existing wells and facilities. Undeveloped reserves
are quantities expected to be recovered through future investments
(e.g. new wells, compressors, and other facilities). Total reserves are
the sum of developed and undeveloped reserves at a given level of
certainty. Oil and gas reserves reported in this statement are as at
1 July 2017.
All reserves and resources reported refer to hydrocarbon volumes
post-processing and immediately prior to point of sale. The volumes
refer to standard conditions, defined as 14.7psia and 60°F. All reserves
reported are net of equity and government take, where summation
has been applied it has been conducted arithmetically, so some
numbers presented in tables may not add due to rounding.
Daniel is currently an employee of New Zealand Oil & Gas Limited
whom, at the time of this report, are a related party to Cue Energy.
Daniel has been retained under a services contract by Cue Energy
Resources Ltd (Cue) to prepare an independent report on the current
status of the entity’s reserves. As of the 6th of September 2017, NZOG
held an equity of 50.04% of Cue.
10
Cue Energy Resources Limited Annual Report 2016/17 Reserves and Resources
TABLE 1: Oil and Condensate Reserves and Resources Reconciliation with 30 June 2016
Proved Oil and Condensate Reserves (MMBBL)
30 JUNE 2016
CUE INTEREST
RESERVES PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2017
RESERVES
Total Proved Oil and Condensate Reserves
Proved & Probable Oil and Condensate Reserves (MMBBL)
FIELD (LICENCE)
INDONESIA
Oyong (Sampang PSC)
Wortel (Sampang PSC)
NEW ZEALAND
Maari (PMP 38160)
US
Pine Mills
FIELD (LICENCE)
INDONESIA
Oyong (Sampang PSC)
Wortel (Sampang PSC)
NEW ZEALAND
Maari (PMP 38160)
US
Pine Mills
FIELD (LICENCE)
INDONESIA
Jeruk (Sampang PSC)
NEW ZEALAND
Maari (PMP 38160)
Total Proved & Probable Oil and Condensate Reserves
2C Contingent Oil and Condensate Resources (MMBBL)
Total Contingent Oil and Condensate Resources
15%
15%
5%
80%
0.04
0.00
0.51
0.37
0.93
(0.04)
(0.00)
(0.15)
-
(0.19)
0.00
0.00
0.10
-
0.11
-
-
-
(0.37)
(0.37)
0.00
0.01
0.46
0.00
0.47
30 JUNE 2016
CUE INTEREST
RESERVES PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2017
RESERVES
15%
15%
5%
80%
0.06
0.01
1.30
0.48
1.84
(0.04)
0.00
(0.02)
0.02
(0.15)
(0.21)
-
-
-
-
(0.19)
-
(0.32)
(0.48)
(0.48)
0.00
0.03
0.82
-
0.85
30 JUNE 2016
CONTINGENT
CUE INTEREST
RESOURCES PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2017
CONTINGENT
RESOURCES
8%
5%
1.24
1.32
2.56
-
-
-
-
(1.32)
(1.32)
-
-
-
1.24
-
1.24
11
Cue Energy Resources Limited Annual Report 2016/17
Reserves and Resources
TABLE 2: Gas Reserves and Resources Reconciliation with 30 June 2016
Proved Gas Reserves (BCF)
FIELD (LICENCE)
INDONESIA
Oyong (Sampang PSC)
Wortel (Sampang PSC)
Total Proved Gas Reserves
Proved & Probable Gas Reserves (BCF)
FIELD (LICENCE)
INDONESIA
Oyong (Sampang PSC)
Wortel (Sampang PSC)
Total Proved & Probable Gas Reserves
2C Contingent Gas Resources (BCF)
FIELD (LICENCE)
INDONESIA
Oyong (Sampang PSC)
Total Contingent Gas Resources
30 JUNE 2016
CUE INTEREST
RESERVES PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2017
RESERVES
15%
15%
0.91
5.63
6.54
(0.91)
(1.33)
(2.24)
0.47
0.12
0.60
-
-
-
0.48
4.42
4.90
30 JUNE 2016
CUE INTEREST
RESERVES PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2017
RESERVES
15%
15%
1.85
6.29
8.13
(1.00)
(1.37)
(2.24)
0.70
1.76
2.47
-
-
-
1.55
6.68
8.23
30 JUNE 2016
CONTINGENT
RESOURCES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2017
CONTINGENT
RESOURCES
CUE INTEREST
15%
1.90
1.90
-
-
(1.90)
(1.90)
-
-
0
0
12
Cue Energy Resources Limited Annual Report 2016/17
Cue Energy Resources Limited
Corporate directory
30 June 2017
Directors
Mr. Grant A. Worner (Non-Executive Chairman)
Mr. Koh Ban Heng (Non-Executive Director)
Mr. Duncan Saville (Non-Executive Director)
Chief Executive Officer
Mr. Matthew Boyall
Company secretary
Ms. Melanie Leydin
Registered office
Principal place of business
Level 3, 10-16 Queen Street
Melbourne, VIC 3000
Australia
Level 3, 10-16 Queen Street
Melbourne, VIC 3000
Australia
Share register
Auditor
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford, VIC 3067
Australia
BDO East Coast Partnership
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne, VIC 3008
Australia
Stock exchange listing
Cue Energy Resources Limited shares are listed on the Australian Securities Exchange
(ASX code: CUE)
Website
www.cuenrg.com.au
Cue Energy Resources Limited Annual Report 2016/1713
Cue Energy Resources Limited
Directors' report
30 June 2017
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of Cue Energy Resources Limited (referred to hereafter as the 'company' or 'parent entity')
and the entities it controlled at the end of, or during, the year ended 30 June 2017.
Directors
The names of Directors of the Company in office during the year and up to the date of this report were:
Executive Chairman and interim CEO (appointed 23 March 2016, completed 30 June 2017)
Non-Executive Chairman (appointed 1 July 2017)
Mr. Grant A. Worner
-
-
Mr. Koh Ban Heng
Mr. Duncan Saville (appointed 18 August 2016)
Mr. Brian L. Smith (resigned 24 November 2016)
Mr. Andrew T.N. Knight (resigned 18 August 2016)
Chief Executive Officer
Mr. Matthew Boyall (appointed 1 July 2017)
Mr. Grant A. Worner (Interim CEO, appointed 23 March 2016 and completed 30 June 2017)
Chief Financial Officer/Company Secretary
Mr. Andrew M. Knox (contract terminated on 3 July 2017)
Ms. Melanie Leydin (appointed 3 July 2017)
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.
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
located at: www.cuenrg.com.au/irm/content/corporate-
governance.aspx?RID=296
the website
is
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Financial performance
The last two years have been particularly challenging for Cue as the Company re-set its strategy and completed material
transformation activities. Cue impaired the exploration and evaluation expenditure previously capitalised, expensed current
exploration and impaired production assets owing to the lower oil price and diminishing reserves, resulting in over $100m of
ordinary activity losses in FY 16 and FY 17. In addition, exploration activities and overhead costs were right-sized to match
the Company’s simplified portfolio and maximise shareholder value by creating a sustainable business that could operate
within its means, deliver disciplined growth, and retain step-change growth options.
Since June 2015, the Company’s cash position has continued to reduce from $27m to $12.4m at 30 June 2017 as long
outstanding commercial disputes from 2011 were resolved and settled, redundancy payments paid and loss making overseas
assets sold.
This year, important overhead cost reduction initiatives initiated during FY 16 continued, including reducing staff numbers
and relocating to cheaper offices; aligning our cost base with our lower exploration activity levels, future production receipts
and the expected commodity price outlook.
Cue Energy Resources Limited Annual Report 2016/1714
Cue Energy Resources Limited
Directors' report
30 June 2017
Summary of Results for Year ended 30 June 2017
Revenues from ordinary activities of continuing operations
Loss from ordinary activities after tax attributable to the owners of
Cue Energy Resources Limited
Loss for the year attributable to the owners of Cue Energy
Resources Limited
EBITDA
Down 22.9% to
2017
$ ‘000
35,000
2016
$ ‘000
45,412
Down 80.1% to
(17,299)
(86,835)
Down 80.1% to
Up 96% to
(17,299)
(2,835)
(86,835)
(71,445)
Cash Position
Excluding one off items associated with restructuring and the Jeruk Project reimbursement, Cue achieved positive
cashflow of $4.3 million, in a year when the price of oil continued to remain low and Maari production suffered a 6-week
interruption.
Net Cash Outflow for the year
Addback: Non-Recurring Cash Expenditure
- Jeruk Project Reimbursement
- Restructuring
Normalised Net Cash inflow/(outflow) for the year
The company ended the year with cash and cash equivalents of $12.4 million and no debt.
Refer to the detailed Review of Operations preceding this Director’s Report.
Significant changes in the state of affairs
During the financial year the Company: -
•
Sold its interest in the Pine Mills Field in East Texas USA.
2017
$ ‘000
(7,121)
9,631
1,750
4,260
2016
$ ‘000
(6,167)
-
202
115
(5,850)
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2017 that has significantly affected, 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.
Likely developments and expected results of operations
The following activities may affect the expected results of operations:
●
●
●
Farming down WA-359-P permits with the option to be exercisable by 25 October 2017 and can be extended to 1
December 2017 subject to certain conditions
Farming down the Mahakam Hilir PSC, Indonesia
Actively seeking to acquire additional production
Environmental regulation
Within the last year there have been zero incidents, zero lost time injuries and zero significant spills within Cue Energy
Resources. Among the joint venture operations there have been a number of incidents that have been reported and
investigated by all the relevant parties. The increased reporting is showing a growth in the reporting culture and an openness
to share learnings in order to reduce risk not only within Cue Energy Resources but within the industry. Cue Energy
Resources continues to monitor the progress and close out of these incidents and work with the joint venture operation
partners and operators to improve overall health and safety and minimise any impact on the environment.
Cue Energy Resources Limited Annual Report 2016/1715
Cue Energy Resources Limited
Directors' report
30 June 2017
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Mr. Grant A. Worner
Executive Chairman and interim CEO (appointed 23 March 2016, completed 30 June
2017)
Non-Executive Chairman (appointed 1 July 2017)
BE (Chemical 1st Hons), MBA, GAICD
Mr Worner has more than 25 years’ experience in the oil industry with more than 22
years working for BP in 3 continents. He has led teams and businesses in exploration,
trading, refining, and marketing in Europe, the US, Papua New Guinea, New Zealand
and Australia.
Pan Pacific Petroleum NL
Other current directorships:
Former directorships (last 3 years): New Guinea Energy Ltd
Special responsibilities:
Interests in shares:
Member of Audit and Risk Committee
None
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Mr. Koh Ban Heng
Non-Executive Director
BSc, GDipBA
Mr Koh joined Singapore Petroleum Co Ltd (SPC) in March 1974 and held several
key positions in the company before being appointed CEO in August 2003. He retired
as CEO on 30 June 2011 and subsequently served as Senior Advisor from 1 July
2011 until 31 December 2014. Currently Mr Koh is an independent director of Keppel
Infrastructure Holdings Pte Ltd, a fully owned subsidiary of Keppel Corporation,
Independent Director and Non-Executive Chairman of Keppel Infrastructure Fund
Management Pte Ltd as Trustee-Manager of Keppel Infrastructure Trust which is
listed on SGX and an independent director of Tipco Asphalt PLC, a listed company in
Thailand. He also serves as Advisor to Dialog Group Berhad of Malaysia.
Tipco Asphalt Ltd PLC
Keppel Infrastructure Holdings Pte Ltd
Keppel Infrastructure Fund Management Pte Ltd
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Chair of Audit and Risk Committee
None
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Mr. Duncan P. Saville
Non-Executive Director
BCom (Hons), BSc (Hons), FCA, F FIn, FAICD
Mr Saville is a Chartered Accountant and director of New Zealand Oil & Gas Limited,
the Company’s largest shareholder. He is an experienced non-executive director who
has held directorships in the resource, utility & technology sectors, both in listed and
unlisted companies. In addition, he is Chairman of ICM Limited an international Funds
Management Company. Duncan is a Fellow of both Chartered Accountants Australia
and New Zealand and the Australian Institute of Company Directors.
New Zealand Oil & Gas Limited
ICM Limited
Somers Limited
Homeloan Limited (Alternate)
West Hamilton Holdings Limited
Former directorships (last 3 years): Infratil Limited
Special responsibilities:
Interests in shares:
Interests in options:
Touchcorp Limited
Member of Audit and Risk Committee
349,368,803 fully paid ordinary shares
None
Cue Energy Resources Limited Annual Report 2016/1716
Cue Energy Resources Limited
Directors' report
30 June 2017
Name:
Title:
Experience and expertise:
Name:
Title:
Qualifications:
Experience and expertise:
Mr. Brian L. Smith - resigned 24 November 2016
Non-Executive Director
Mr Smith is a solicitor admitted to practice in 1975 who has had more than 30 years’
experience in the energy industry. He has had experience working in private practice,
government and corporate fields and was the General Counsel to the Australian Gas
Light Company, a listed entity, for over 17 years. He currently runs his own practice in
Sydney specialising in commercial, energy and corporations law.
Mr. Andrew T.N. Knight - resigned 18 August 2016
Non-Executive Director
BMS (Hons) CA
Mr Knight was CEO of New Zealand Oil and Gas Limited between 2011 and 2016 and
was on their Board from 2008 to 2015. He has previously held executive management
roles with Vector and NGC and worked in New Zealand and Australia with The
Australian Gas Light Company, Fletcher Challenge Energy and Coopers & Lybrand.
Mr Knight is a director of the Petroleum Exploration and Production Association of New
Zealand, Gas Industry Company Ltd, Taranaki Iwi Holdings Management Ltd, and Sea
Group Holding Ltd. Mr Knight is a chartered accountant and graduate of Waikato
University with a BMS (Hons) and is a member of Chartered Accountants Australia and
New Zealand.
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Company secretary
Ms. Melanie Leydin was appointed Company Secretary on 3 July 2017.
Ms. Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the Institute of
Chartered Accountants and is a Registered Company Auditor. She graduated from Swinburne University in 1997, became a
Chartered Accountant in 1999 and since February 2000 has been the principal of Chartered accounting firm, Leydin Freyer.
The practice provides outsourced company secretarial and accounting services to public and private companies specialising
in the resources, technology, bioscience and biotechnology sector.
Melanie has over 25 years' experience in the accounting profession and has extensive experience in relation to public
company responsibilities, including ASX and ASIC compliance, control and implementation of corporate governance,
statutory financial reporting, reorganisation of Companies and shareholder relations.
Mr Andrew Knox was the CFO and Company Secretary for the year ending 30 June 2017. His contract with the Company
was terminated on 3 July 2017. Ms Pauline Moffatt was the Co Company Secretary for the period between 1 July 2016 and
17 February 2017.
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2017, and
the number of meetings attended by each director were:
Full Board
Audit and Risk Committee
Attended
Held
Attended
Held
Grant A. Worner
Koh Ban Heng
Duncan P. Saville*
Brian L. Smith**
Andrew T.N. Knight***
7
7
5
3
2
7
7
5
3
2
2
2
1
1
1
2
2
1
1
1
Held: represents the number of meetings held during the time the director held office.
* Duncan P. Saville (appointed 18 August 2016)
** Brian L. Smith (resigned on 24 November 2016)
*** Andrew T.N. Knight (resigned 18 August 2016)
Cue Energy Resources Limited Annual Report 2016/1717
Cue Energy Resources Limited
Directors' report
30 June 2017
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 2017, in accordance with the Corporations Act 2001 and its regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
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:
●
Grant A. Worner - Executive Chairman and interim CEO (appointed 23 March 2016, completed 30 June 2017)
Non-Executive Chairman (appointed 1 July 2017)
Duncan P. Saville (Non-Executive Director) - appointed 18 August 2016
Koh Ban Heng (Non-Executive Director) - appointed 29 July 2015
Brian L. Smith (Non-Executive Director) - resigned 24 November 2016
Andrew T.N. Knight (Non-Executive Director) - resigned 18 August 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.
The term “Key Management Personnel” is used in this Remuneration Report to refer to the following persons:
Andrew Knox (Chief Financial Officer/Company Secretary) – contract terminated on 3 July 2017
● Matthew Boyall (Chief Executive Officer) - appointed 1 July 2017
●
● Melanie Leydin (Chief Financial Officer/Company Secretary) - appointed 3 July 2017
●
Jeffrey Schrull (Production and Exploration Manager) - resigned 5 December 2016
(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.
Cue Energy Resources Limited Annual Report 2016/1718
Cue Energy Resources Limited
Directors' report
30 June 2017
(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.
Executives
Executives receive a mixture of fixed and variable pay and a blend of short and long term incentives as appropriate.
Remuneration packages contain the following key elements:
●
●
●
Fixed compensation component inclusive of base salary, superannuation, non-monetary benefits and consultancy fees
Short term incentive programme
Long term employee benefits
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 2017, 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
There were no cash bonuses paid in this financial year.
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:
Grant A. Worner
Title: Executive Chairman and interim CEO (appointed 23 March 2016, completed on 30 June 2017), Non-Executive
Chairman (commence 1 July 2017)
Agreement period: 23 March 2016 to 30 June 2017
Details: A fixed remuneration package of $35,000 per month (comprising salary and superannuation contributions). The
original terms of this agreement were for a period of six months and revised to a variable remuneration package of up to
$35,000 per month and extended to 30 June 2017. From 1 July 2017, Mr Worner receives Non-Executive Chairman fees of
$75,000 per annum.
Matthew Boyall
Title: CEO (appointed 1 July 2017)
Agreement commenced on 1 July 2017.
Details: Base salary of $300,000 per annum plus superannuation to be reviewed annually by the Board. Mr Boyall also
entitled up to 20% of the base salary at the discretion of the Board at the end of each year dependent on the success of
meeting key deliverables.
Andrew M. Knox
Title: CFO and Company Secretary (contract terminated on 3 July 2017)
Details: Salary package of $393,067 per annum including superannuation. Mr Knox was made redundant on 3 July 2017,
Termination payment comprised of: Unused Annual Leave $167,602; Unused Long Service Leave $215,838;
Termination payment $719,346. Mr Knox’s termination benefit was calculated in accordance with the Board resolution in
March 2000.
Cue Energy Resources Limited Annual Report 2016/1719
Cue Energy Resources Limited
Directors' report
30 June 2017
Compensation levels are reviewed each year to take into account cost of living changes, any change in the scope of the role
performed and any changes to meet the principles of the compensation policy.
Details of the nature and amount of each major element of remuneration of each Director of the Company and other Key
Management Personnel of the consolidated entity are:
Compensation of key management personnel - 2017
Short-term benefits
Post-employment
Cash salary
and fees
$
Cash
bonuses
$
Non-
monetary
benefits (i)
$
Consulting
fees
$
Long
service
leave
$
Superannua
tion
$
Termination
payments
$
Total
$
75,000
32,609
43,505
29,959
9,986
332,010
207,828
-
730,897
-
-
-
-
-
-
-
-
-
-
-
-
-
-
347,967
-
-
-
-
19,703
-
-
19,703
-
-
-
347,967
-
-
-
-
-
-
-
-
-
19,616
-
-
-
-
-
-
-
-
-
442,583
32,609
43,505
29,959
9,986
35,000 1,102,786 1,489,499
216,265
-
1,102,786 2,264,406
8,437
-
63,053
-
-
2017
Name
G.A. Worner
D.P. Saville (ii)
B.H. Koh
B.L. Smith (iii)
*A.T.N. Knight (iv)
Other Key
Management
Personnel:
A.M. Knox (v)
J.L. Schrull (vi)
M Boyall(vii)
* A Knight director fee paid directly to NZOG.
(i) Non-performance based salary sacrifice benefits, including motor vehicle expenses.
(ii) D.P. Saville appointed 18 August 2016.
(iii) B.L. Smith resigned 24 November 2016.
(iv) A.T.N. Knight resigned 18 August 2016.
(v) A.M. Knox was made redundant on 3 July 2017; Termination payment comprises of: Unused Annual Leave $167,602; Unused Long Service
Leave$215,838; Termination payment $719,346. Mr Knox’s termination benefit was calculated in accordance with the Board resolution in March
2000.
(vi) J.L. Schrull resigned 5 December 2016.
(vii) M Boyall appointed to the position of CEO on 1 July 2017.
Cue Energy Resources Limited Annual Report 2016/1720 Cue Energy Resources Limited
Directors' report
30 June 2017
Short-term benefits
Post-employment
Cash salary
and fees
$
Cash
bonuses**
$
Non-
monetary
benefits (i)
$
Consulting
fees
$
Long
service
leave
$
Superannua
tion
$
Termination
payments
$
Total
$
31,875
84,218
91,827
85,575
61,719
67,582
10,245
24,519
7,880
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
105,168
-
-
-
61,875
-
-
-
-
-
-
-
-
-
-
-
-
-
9,993
-
-
-
5,863
-
-
-
-
-
-
-
-
-
-
-
-
-
147,036
84,218
91,827
85,575
129,457
67,582
10,245
24,519
7,880
199,121
412,067
398,134
1,474,762
125,049
143,792
158,783
427,624
149,699
-
-
149,699
-
-
-
167,043
12,317
6,358
-
18,675
35,000
19,308
35,000
105,164
521,186
-
581,525
-
76,173
668,090
76,173 2,419,140
2016
Name
G.A. Worner (ii)
B.H. Koh (iii)
B.L. Smith
P.G. Foley (iv)
S.A. Brown (v)
C.P. Hazledine
(vi)
G.J. King (vii)
*A.T.N. Knight
(viii)
A.A. Young (ix)
Other Key
Management
Personnel:
A.M. Knox
J.L. Schrull
D.A.J. Biggs (x)
* A Knight director fee paid directly to NZOG.
** Cash bonus disclosures paid.
(i) Non-performance based salary sacrifice benefits, including motor vehicle expenses
(ii) G.A. Worner appointed 23 March 2016
(iii) B.H. Koh appointed 29 July 2015
(iv) P.G. Foley resigned 4 March 2016
(v) S.A. Brown resigned 4 March 2016
(vi) C.P. Hazledine resigned 4 March 2016
(vii) G.J. King removed 29 July 2015
(viii) A.T.N Knight appointed 4 March 2016, resigned 18 August 2016
(ix) A.A. Young removed 29 July 2015
(x) D.A.J. Biggs resigned 15 April 2016
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
G.A. Worner
D.P. Saville
B.H. Koh
B.L. Smith
A.T.N. Knight
P.G. Foley
S.A. Brown
C.P. Hazledine
G.J. King
A.A. Young
Other Key Management
Personnel:
A.M. Knox
J.L. Schrull
D.A.J. Biggs
Fixed remuneration
2016
2017
At risk - STI
At risk - LTI
2017
2016
2017
2016
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 2016/1721
Cue Energy Resources Limited
Directors' report
30 June 2017
All remuneration paid to J.L. Schrull and A.M. Knox was incurred by the parent entity.
A.M. Knox was a Director of all the subsidiaries in the Group and an Executive of the parent company until his termination
on 3 July 2017.
Matthew Boyall was appointed as Director of all the subsidiaries in the Group on 4 July 2017, except for Cue Resources Inc.
Melanie Leydin was appointed as President, Secretary and Treasurer of Cue Resources Inc on 1 August 2017.
(D) Equity based remuneration
Overview of share options and performance rights
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 2017 (2016: nil) (refer note 35).
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 2017.
The earnings of the consolidated entity for the five years to 30 June 2017 are summarised below:
2017
$'000
2016
$'000
Restated
2015
$'000
2014
$'000
2013
$'000
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
35,000
45,412
36,704
32,246
49,798
(6,975)
(15,032)
(79,599)
(84,399)
26,916
32,191
753
(2,166)
2,264
2,419
2,061
1,713
8,409
6,369
2,729
2017
2016
2015
2014
2013
Share price at start of year (cents)
Share price at end of year (cents)
Basic (loss)/earnings per share (cents)
Diluted (loss)/earnings per share (cents)
8.10
5.50
(2.48)
(2.48)
7.60
8.10
(12.44)
(12.44)
12.00
7.60
5.86
5.86
11.00
12.00
(0.31)
(0.31)
18.00
11.00
0.91
0.91
Cue Energy Resources Limited Annual Report 2016/1722 Cue Energy Resources Limited
Directors' report
30 June 2017
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
the year
Received
as part of
remuneration
Additions
Disposals/
other
Balance at
the end of
the year
Ordinary shares*
Non-Executive Directors
Duncan P. Saville
Andrew T.N. Knight (i)
Andrew A. Young (i)
Geoffrey J. King (i)
Other Key Management Personnel
Andrew M. Knox
Jeffrey L. Schrull
-
335,854,341
450,000
22,500
4,458,251
453,109
341,238,201
- 349,368,803
-
-
-
- (335,854,341)
(450,000)
-
(22,500)
-
-
349,368,803
-
-
-
-
-
-
4,458,251
-
349,368,803 (336,779,950) 353,827,054
-
(453,109)
-
-
* Grant A. Worner (Non-Executive Chairman) and Koh Ban Heng (Non-Executive Director) do not hold any ordinary shares
(i) Non-Executive Director resigned during 2017 financial year, there is no share balance as at 30 June 2017.
This concludes the remuneration report, which has been audited.
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 auditor of
the company or any related body corporate against a liability incurred as an officer or auditor.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility
on behalf of the company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 26 to the financial statement.
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.
Cue Energy Resources Limited Annual Report 2016/1723
Cue Energy Resources Limited
Directors' report
30 June 2017
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 and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
●
Rounding of amounts
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.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
In accordance with the provisions of the Corporations Act 2001 the Company’s auditor, BDO East Coast Partnership,
continues in office.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the Board
___________________________
Grant A. Worner
Non-Executive Chairman
27 September 2017
Cue Energy Resources Limited Annual Report 2016/1724 Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF CUE ENERGY RESOURCS
LIMITED
As lead auditor of Cue Energy Resources Limited for the year ended 30 June 2017, I declare that, to the
best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Cue Energy Resources Limited and the entities it controlled during the
period.
David Garvey
Partner
BDO East Coast Partnership
Melbourne, 27 September 2017
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Cue Energy Resources Limited
Directors' declaration
30 June 2017
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Australian Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
30 June 2017 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Grant A. Worner
Non-Executive Chairman
27 September 2017
Cue Energy Resources Limited Annual Report 2016/1726
Cue Energy Resources Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
Revenue
Production revenue from continuing operations
Production costs
Gross profit from production
Other income
Net foreign currency exchange loss
Expenses
Impairment - Production
Impairment of exploration and evaluation expenditure
Exploration and evaluation expenditure
Administration expenses
Note
Consolidated
2017
$'000
2016
$'000
5
6
7
8
10
9
35,000
(21,860)
13,140
219
(451)
(6,386)
-
(8,369)
(5,128)
45,412
(30,585)
14,827
3,779
(90)
(25,103)
(49,963)
(16,329)
(6,720)
Loss before income tax expense from continuing operations
(6,975)
(79,599)
Income tax expense
11
(8,057)
(4,800)
Loss after income tax expense from continuing operations
(15,032)
(84,399)
Loss after income tax expense from discontinued operations
12
(2,312)
(3,062)
Loss after income tax expense for the year
(17,344)
(87,461)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Reversal of Non-Controlling interest
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Loss 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
Discontinued operations
Non-controlling interest
Continuing operations
Discontinued operations
Non-controlling interest
12
(42)
669
627
(1,624)
-
(1,624)
(16,717)
(89,085)
(17,299)
(45)
(86,835)
(626)
(17,344)
(87,461)
(14,405)
(2,267)
(16,672)
(86,023)
(2,436)
(88,459)
-
(45)
(45)
-
(626)
(626)
(16,717)
(89,085)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Cue Energy Resources Limited Annual Report 2016/1727
Earnings per share for 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 loss from discontinued operations attributable to the
owners of Cue Energy Resources Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for loss attributable to the owners of Cue Energy
Resources Limited
Basic earnings per share
Diluted earnings per share
34
34
34
34
34
34
Cents
Cents
(2.15)
(2.15)
(12.09)
(12.09)
(0.32)
(0.32)
(0.35)
(0.35)
(2.48)
(2.48)
(12.44)
(12.44)
Cue Energy Resources Limited Annual Report 2016/1728
Cue Energy Resources Limited
Statement of financial position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets classified as held for sale
Total current assets
Non-current assets
Property, plant and equipment
Production properties
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Tax liabilities
Provisions
Liabilities directly associated with assets classified as held for sale
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
Consolidated
Note
2017
$'000
2016
$'000
13
14
15
16
17
18
11
19
20
21
22
12,420
4,372
547
-
17,339
38
30,082
30,120
20,490
4,481
1,609
4,095
30,675
59
42,564
42,623
47,459
73,298
3,931
3,942
475
-
8,348
3,401
9,839
13,240
9,050
1,865
640
2,017
13,572
4,167
12,971
17,138
21,588
30,710
25,871
42,588
152,416
-
(126,545)
25,871
-
152,416
42
(109,246)
43,212
(624)
25,871
42,588
The above statement of financial position should be read in conjunction with the accompanying notes
Cue Energy Resources Limited Annual Report 2016/1729
Cue Energy Resources Limited
Statement of changes in equity
For the year ended 30 June 2017
Consolidated
Foreign
Currency
Translation
Reserve
$'000
Accumulated
Losses
$'000
Non-
controlling
Interest
$'000
Contributed
Equity
$'000
Total equity
$'000
Balance at 1 July 2015 (Restated)
152,416
1,666
(22,411)
2
131,673
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
-
-
-
-
(86,835)
(626)
(87,461)
(1,624)
-
-
(1,624)
(1,624)
(86,835)
(626)
(89,085)
Balance at 30 June 2016
152,416
42
(109,246)
(624)
42,588
Consolidated
Contributed
Equity
$'000
Foreign
currency
translation
Reserve
$'000
Accumulated
losses
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2016
152,416
42
(109,246)
(624)
42,588
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
-
-
-
-
(17,299)
(42)
(42)
-
(17,299)
(45)
669
624
(17,344)
627
(16,717)
Balance at 30 June 2017
152,416
-
(126,545)
-
25,871
The above statement of changes in equity should be read in conjunction with the accompanying notes
Cue Energy Resources Limited Annual Report 2016/1730
Cue Energy Resources Limited
Statement of cash flows
For the year ended 30 June 2017
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
Consolidated
Note
2017
$'000
2016
$'000
35,608
-
160
(16,312)
(13,900)
(6,736)
(470)
45,166
3,720
58
(23,946)
(17,891)
(5,160)
(836)
Net cash (used in)/from operating activities
33
(1,650)
1,111
Cash flows from investing activities
Payments with respect to production properties
Payments for plant and equipment
Proceeds from disposal of investments
Net cash used in investing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(6,434)
(11)
974
(7,122)
(156)
-
(5,471)
(7,278)
(7,121)
20,490
(949)
(6,167)
27,605
(948)
Cash and cash equivalents at the end of the financial year
13
12,420
20,490
The above statement of cash flows should be read in conjunction with the accompanying notes
Cue Energy Resources Limited Annual Report 2016/1731
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 1. General information
The financial statements cover Cue Energy Resources Limited as a consolidated entity consisting of Cue Energy Resources
Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian
dollars, which is Cue Energy Resources Limited's functional and presentation currency.
Cue Energy Resources Limited is a listed public company limited by shares, incorporated and domiciled in Australia, whose
shares are publicly traded on the Australian Securities Exchange.
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 September 2017. The
directors have the power to amend and reissue the financial statements.
Note 2. 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.
(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 29.
Cue Energy Resources Limited Annual Report 2016/1732 Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 2. Summary of significant accounting policies (continued)
(d) 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 2017 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.
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.
(e) 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.
(f) Property, plant and equipment
Class of Fixed Asset
Office and computer equipment 20-40%
Depreciation Rate
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.
Cue Energy Resources Limited Annual Report 2016/1733
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
(g) 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
2016/191. The Company is an entity to which the Class Order applies.
(h) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for
the current financial year.
(i) Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses 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.
(j) Foreign currency
Functional and presentation currency
The financial statements of each group entity are measured using their relevant functional currency, which is the currency of
the primary economic environment in which that entity operates. The consolidated financial statements are presented in
Australian dollars, as this is the parent entity’s functional and presentation currency.
Transactions and balances
Transactions in foreign currencies of entities within the consolidated entity are translated into functional currency at the rate
of exchange ruling at the date of the transaction. 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 are translated into its presentation currency using the following
procedures:
(a) assets and liabilities for each statement of financial position presented (i.e. 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 (i.e. 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.
Cue Energy Resources Limited Annual Report 2016/1734 Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 2. Summary of significant accounting policies (continued)
(k) 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 2017. 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
The Group does not hold complex financial instruments. The classification of its financial instruments will not change under
the new accounting standard. Therefore, management does not expect the adoption of this accounting standard will have a
material impact on the Group's financial performance.
AASB 15 Revenue from Contracts with Customers
The Group holds contracts with operators in Indonesia and New Zealand where production income is generated. These
contracts do not have complex performance obligations. Therefore, management does not expect the adoption of this
accounting standard will have a material impact on the Group's financial performance.
AASB 16 Leases (applicable to annual reporting periods beginning on or after 1 January 2019)
The consolidated entity will adopt this standard from 1 January 2019. The standard will affect primarily the accounting for the
Group’s operating leases. As at reporting date, the Group has non-cancellable operating lease commitments of $0.5 million
(refer note 28). Management does not expect the adoption of this accounting standard will have a material impact on the
Group's financial performance.
Note 3. Critical accounting estimates and judgements
The preparation of a financial report in conformity with Australian Accounting Standards requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the
judgement 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 are only recognised if management considers it is probable that future
tax profits will be available to utilise the unused tax losses. No deferred tax assets were recognised as at 30 June 2017.
(ii) Impairment of production properties
Production properties impairment testing requires an estimation of the value-in-use of the cash generating units to which
deferred costs have been allocated. The value-in-use calculation requires the entity to estimate the future cash flows
expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. Other
assumptions used in the calculations which could have an impact on future years includes USD rates, available reserves
and oil and gas prices.
(iii) Useful life of production properties
As detailed at note 17 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.
Cue Energy Resources Limited Annual Report 2016/1735
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 3. Critical accounting estimates and judgements (continued)
(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) 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.
Note 4. 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.
Cue Energy Resources Limited Annual Report 2016/1736 Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 4. Financial reporting by segments (continued)
At reporting date, the Group operates primarily in Australia but also has international operations in Indonesia, New Zealand
and USA. Therefore, the Group is organised into four principles geographic segments: Australia, New Zealand, Indonesia
and USA. On 1 November 2016, the Group sold its interest in Pine Mills production property in East Texas, USA. This has
been separately disclosed as Discontinued Operations in the table below. These segments are based on the internal reports
that are 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.
Information regarding the Group’s reportable segments is presented below:
2017
Revenue
Gas revenue from continuing operations
Oil revenue from continuing operations
Production revenue from continuing
operations
Production revenue from discontinuing
operations
Production revenue
Production expenses (excluding amortisation)
Gross profit
Other revenue
Impairment - production
Exploration and evaluation expenditure
Foreign exchange movement
Earnings before interest expense, tax,
depreciation and amortisation
Australia
$'000
Continuing operations
Indonesia
$'000
NZ
$'000
USA
$'000
Disc. Ops
USA*
$'000
Total
$'000
-
-
-
-
-
-
215
-
(2,490)
(407)
-
10,485
21,597
2,918
10,485
24,515
-
10,485
(5,708)
4,777
-
(6,386)
6
-
-
24,515
(9,756)
14,759
4
-
(5,885)
(34)
-
-
-
-
-
(34)
(34)
-
-
-
(10)
-
-
-
593
593
(845)
(252)
123
-
-
29
21,597
13,403
35,000
593
35,593
(16,343)
19,250
219
(6,386)
(8,369)
(422)
(7,780)
(1,603)
8,844
(44)
(2,252)
(2,835)
2016
Australia
$'000
NZ
$'000
Indonesia
$'000
USA*
$'000
Total
$'000
Revenue
Gas revenue from continuing operations
Oil revenue from continuing operations
Production revenue from continuing operations
Production revenue from discontinuing
operations
Production revenue
Production expenses (excluding amortisation)
Gross profit
Other revenue
Impairment - production
Impairment - E&E
Foreign exchange movement
Earnings before interest expense, tax,
depreciation and amortisation
-
-
-
-
-
-
60
-
-
(90)
-
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)
-
-
-
-
984
984
(2,720)
(1,736)
123
-
-
-
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)
Cue Energy Resources Limited Annual Report 2016/1737
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
TOTAL SEGMENT ASSETS
Current Assets
Non-current Assets
Total 30 June 2017 Assets
Current Assets
Non-current Assets
Total 30 June 2016 Assets
TOTAL SEGMENT LIABILITIES
Current Liabilities
Non-current Liabilities
Total 30 June 2017 Liabilities
Current Liabilities
Non-current liabilities
Total 30 June 2016 Liabilities
* discontinuing/discontinued operations
Major customers
Australia
$'000
Continuing operations
Indonesia
$'000
NZ
$'000
USA
$'000
Disc. Ops
USA*
$'000
Total
$'000
10,439
38
10,477
16,588
59
16,647
1,680
24
1,704
1,323
31
1,354
1,923
21,857
23,780
1,911
32,629
34,540
1,079
9,500
10,579
1,209
12,421
13,630
4,968
8,225
13,193
8,081
9,935
18,016
5,589
3,716
9,305
9,023
4,686
13,709
9
-
9
-
-
-
-
-
-
-
-
-
-
-
-
4,095
-
4,095
-
-
-
2,017
-
2,017
17,339
30,120
47,459
30,675
42,623
73,298
8,348
13,240
21,588
13,572
17,138
30,710
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 (2016: 100%).
Reconciliation of earnings before interest expense, tax, depreciation and amortisation (EBITDA) to Loss before Income Tax:
EBITDA
Depreciation
Amortisation
Loss before income tax expense (including discontinued operations)
Note 5. Production costs
Production costs
Amortisation of production properties
Consolidated
2017
$'000
2016
$'000
(2,835)
(32)
(6,420)
(71,445)
(34)
(11,107)
(9,287)
(82,586)
Consolidated
2017
$'000
2016
$'000
15,498
6,362
19,653
10,932
21,860
30,585
Cue Energy Resources Limited Annual Report 2016/1738 Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 6. Other income
Interest from cash and cash equivalents
Maari insurance refund
Other income
Accounting policy for other income
Consolidated
2017
$'000
2016
$'000
154
-
65
219
59
3,720
-
3,779
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 recognised 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.
Accounting policy for interest income
Interest revenue is recognised as interest accrues using the effective interest method. This is a method calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets to the
net carrying amount of the financial asset.
Note 7. Impairment - Production
At 30 June 2017, the Group reassessed the carrying amount of its oil and gas assets, Production Properties (refer note 17),
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
$6.39 million (2016: $25.10 million), primarily as a result of reduced oil prices and reduction in oil reserves, was recognised
during the year. The Pine Mills oil field development in the USA was impaired by $1.2 million in the 2016 financial 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% (2016: 14.3%) equivalent
to post-tax discount rates of 10% (2016: 10%) depending on the nature of the risks specific to each asset. Recoverable
amounts are estimated as follows:
Maari
Carrying value as at 30 June 2017
Less abandonment provision
Recoverable amount as at 30 June 2017
$’000
21,857
9,500
12,357
The abandonment provision is deducted from the carrying value of the asset as the cost of abandonment is included in its
cost base. This adjustment is required to allow a true reflection of its carrying value against its recoverable value.
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.
Cue Energy Resources Limited Annual Report 2016/1739
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 7. Impairment – Production (continued)
Accounting policy for Impairment
The carrying amounts of the consolidated entity’s assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds the
recoverable amount. Impairment losses are recognised in profit or loss, unless an asset has previously been revalued, in
which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess
recognised through profit or loss.
Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets
in the unit (group of units) on a pro rata basis.
Note 8. Impairment of exploration and evaluation expenditure
Impairment of Exploration Assets
Impairment Write Down
Cue Mahakam Hilir PSC*
Mahato PSC
PEP51313
PEP51149
Consolidated
2017
$'000
2016
$'000
-
-
-
-
-
40,712
5,330
2,634
1,287
49,963
* 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.
Note 9. Administration expenses
Depreciation of property, plant and equipment
Employee expenses*
Superannuation contribution expense
Operating lease expenses
Other expenses
Business development expenses
Total administration expenses
*2017 balance includes one off office restructuring costs of $1.75 million.
Consolidated
2017
$'000
2016
$'000
32
3,647
169
290
808
182
5,128
34
4,793
245
254
1,003
391
6,720
Cue Energy Resources Limited Annual Report 2016/1740 Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 10. Exploration and evaluation expenditure
Loss before income tax from continuing operations includes the following specific expenses:
Costs carried forward in respect of areas of interest in exploration and evaluation phase
Impairment of exploration asset (i)
Closing balance at 30 June
(i) 2016 balance Includes foreign currency translation revenue of $1.67 million.
Exploration Costs Expensed
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
Total exploration and evaluation expenditure
Consolidated
2017
$'000
2016
$'000
-
-
-
51,629
(51,629)
-
3,953
1,768
164
162
-
-
311
2,017
(25)
-
19
8,369
213
9,113
346
488
19
23
1,504
537
159
3,860
67
16,329
Accounting policy for 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. Commencing in the 2016 financial year, the Group’s exploration and evaluation
accounting policy changed 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. As a consequence of the change
in accounting policy in the 2016 financial year and its retrospective application, $45.40 million of previously capitalised
exploration expenditure was transferred to accumulated losses as at 1 July 2014.
Prior to the 2016 financial year, the 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 made a voluntary change to its accounting policy relating to exploration and evaluation expenditure in the previous
financial year. The new accounting policy was adopted for the financial year ending 30 June 2016 with effect from 1 July
2015 and was applied retrospectively.
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.
Cue Energy Resources Limited Annual Report 2016/1741
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 11. Income tax expense
Income tax expense
Current tax
Adjustment recognised for current tax in prior periods
Deferred tax
Aggregate income tax expense
Income tax expense is attributable to:
Loss from continuing operations
Loss from discontinued operations
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense from continuing operations
Loss before income tax expense from discontinued operations
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Unrealised foreign exchange movements
Non-taxable gain reversal on bargain purchase
Non-assessable intercompany interest
Non-deductible / (deductible) mining deductions
Unrecognised temporary differences
Unrecognised tax losses
Derecognition of deferred tax assets - continuing operations
Derecognition of deferred tax assets - discontinuing operations
Difference in overseas tax rates
Adjustment recognised for current tax in prior periods
Income tax expense
Consolidated
2017
$'000
2016
$'000
6,564
2,259
(766)
4,744
1,706
(1,576)
8,057
4,874
8,057
-
8,057
4,800
74
4,874
(6,975)
(2,312)
(79,599)
(2,988)
(9,287)
(82,587)
(2,786)
(24,776)
119
-
-
54
906
4,180
-
-
3,325
5,798
2,259
8,057
58
11,287
(470)
(407)
11,532
8,183
(3,279)
74
966
3,168
1,706
4,874
During the 2017 financial year, following a tax audit, Cue Kalimantan received notices of amended assessment in relation to
underpayment of 2011 tax for USD$1.3 million by SPC Mahakam Hilir Pte Ltd, the previous operator of the Mahakam Hilir
SPC. Cue Kalimantan is currently disputing the amended assessment on behalf of SPC Mahakam Hilir. On the basis of
conservatism, the full amount and penalty has been provided for as at 30 June 2017 in case of a negative result in the dispute
and failure to pay the resulting obligation be SPC Mahakam Hilir.
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 liabilities and has provided for the balance of $1.4 million.
Cue Energy Resources Limited Annual Report 2016/1742
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 11. Income tax expense (continued)
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences attributable to:
Restoration provision
Employee provisions
Tax losses
Less deferred tax liabilities not recognised - Production properties
Less deferred tax liabilities not recognised - Inventories
Net deferred tax assets not recognised
Consolidated
2017
$'000
2016
$'000
2,660
150
27,712
(667)
(153)
3,672
199
23,615
(611)
(266)
29,702
26,609
The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been recognised in
the statement of financial position as the recovery of this benefit is uncertain.
Accounting policy for Income tax
The income tax expense for the year is the tax payable on the current period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Cue Energy Resources Limited (the ‘head entity’) and its wholly-owned Australian controlled entities have formed an income
tax consolidated group under the tax consolidation regime effective 1 July 2010.
The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred
tax amounts. 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.
Cue Energy Resources Limited Annual Report 2016/1743
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 12. Discontinued operations
Description
On 1 November 2016, the consolidated entity sold its interest in Pine Mills production property in East Texas. During the
prior period, the interest in the Pine Mills production property in East Texas and the Pine Mills net asset was classified as
held for sale (refer note 16 and 19). Cue intends to focus on core business in South East Asia and Australasia.
Financial performance information
Production revenue
Foreign currency exchange gain
Total revenue
Operating expense
Impairment expense
Amortisation expense
Loss on disposal
Total expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense
Reversal of Non-controlling interest
Income tax expense
Consolidated
2017
$'000
2016
$'000
593
29
622
(845)
-
(60)
(1,360)
(2,265)
(1,643)
-
984
123
1,107
(2,720)
(1,200)
(175)
-
(4,095)
(2,988)
(74)
(1,643)
(3,062)
(669)
-
(669)
-
-
-
Loss after income tax expense from discontinued operations
(2,312)
(3,062)
Cash flow information
Net cash used in operating activities
Net cash used in investing activities
Net cash from financing activities
Net decrease in cash and cash equivalents from discontinued operations
Consolidated
2017
$'000
2016
$'000
(446)
(22)
-
(468)
(2,239)
(173)
2,232
(180)
Cue Energy Resources Limited Annual Report 2016/1744
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 12. Discontinued operations (continued)
Carrying amounts of assets and liabilities disposed
Bond
Accounts receivables
Acquisition cost
Capitalised expenditure
Pine Mills abandonment assets
Cheetah Rig Asset
Total assets
Acquisition carry
Capital contributions
Opex contributions
Abandonment provision
Pine Mills impairment write down
Total liabilities
Net assets
Details of the disposal
Total sale consideration
Carrying amount of net assets disposed
Loss on disposal before income tax
Loss on disposal after income tax
Note 13. Current assets - cash and cash equivalents
Cash at bank
2017
$'000
67
347
3,824
336
554
115
5,243
1,008
67
79
559
1,196
2,909
2,334
2017
$'000
974
(2,334)
(1,360)
(1,360)
Consolidated
2017
$'000
2016
$'000
12,420
20,490
Accounting policy for 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.
Cue Energy Resources Limited Annual Report 2016/1745
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 14. Current assets - trade and other receivables
Trade receivables
Less provision for doubtful debts
Other receivables and prepayments
The aging of trade receivables at the reporting date was as follows:
Less than one month
3 to 6 months overdue
Consolidated
2017
$'000
2016
$'000
4,241
(38)
169
4,372
4,201
-
280
4,481
Consolidated
2017
$'000
2016
$'000
1,711
2,492
4,203
4,201
-
4,201
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 2017, $38,885 current trade receivables were impaired (2016: nil).
Management will endeavour to recover the amount in full in 2018 financial year.
The Directors consider that the carrying value of receivables reflects their fair values.
Accounting policy for 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.
Note 15. Current assets - inventories
Inventories
Accounting policy for inventories
Consolidated
2017
$'000
2016
$'000
547
1,609
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.
Cue Energy Resources Limited Annual Report 2016/1746
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 16. Current assets - non-current assets classified as held for sale
Production asset reclassified as asset held for sale
Trade and other receivables
Inventories
Property, plant and equipment
Production properties
Consolidated
2017
$'000
2016
$'000
-
-
-
-
-
371
37
139
3,548
4,095
The Pine Mills asset was sold in the 2017 financial year (refer Note 12). There was no non-current asset held for sale as at
30 June 2017.
Liabilities directly associated with Pine Mill assets held for sale are disclosed in Note 19.
Accounting policy for non-current assets classified as held for sale
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.
Cue Energy Resources Limited Annual Report 2016/1747
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 17. Non-current assets - Production properties
Production properties
Consolidated
2017
$'000
2016
$'000
30,082
42,564
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2015
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
Changes in abandonment provision - production
Amortisation expense from continuing operations
Amortisation expense from discontinuing operations (Pine Mills)
Balance at 30 June 2016
Impairment - production from continuing operations
Expenditure during the year
Amortisation expense from continuing operations
Changes in abandonment provision - production
Balance at 30 June 2017
Net accumulated costs incurred on areas of interest
Joint Venture assets:
- Oyong and Wortel – Sampang PSC
- Maari – PMP 38160
Total
Accounting policy for production properties
Total
$'000
78,131
(3,548)
(1,200)
(25,103)
4,461
930
(10,932)
(175)
42,564
(6,386)
3,349
(6,362)
(3,083)
30,082
8,225
21,857
30,082
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.
Accounting policy for 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.
Cue Energy Resources Limited Annual Report 2016/1748
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 18. Current liabilities - trade and other payables
Trade payables and accruals
Amounts due to directors and director related entities
Consolidated
2017
$'000
2016
$'000
3,860
71
3,931
8,961
89
9,050
Refer to note 24 for further information on financial instruments.
The Directors consider the carrying amount of payables reflect their fair values. Trade creditors are generally settled within
30 days.
Accounting policy for 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.
Note 19. Current liabilities - liabilities directly associated with assets classified as held for sale
Trade and other payables
Provisions
The Pine Mills production asset held for sale and accounting policy are disclosed in note 16.
Note 20. Non-current liabilities - deferred tax liabilities
Deferred tax liability recognised comprise of
Production properties
Inventories
Less deferred tax assets - Restoration provision
Deferred tax liability
Consolidated
2017
$'000
2016
$'000
-
-
-
1,447
570
2,017
Consolidated
2017
$'000
2016
$'000
3,539
-
(138)
3,401
4,104
290
(227)
4,167
Cue Energy Resources Limited Annual Report 2016/1749
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 21. Non-current liabilities - provisions
Employee benefits
Restoration
Movements in each class of provision during the financial year are set out below:
Consolidated - 2017
Carrying amount at the start of the year
Adjustment due to change in estimate
Provisions used during the year
Carrying amount at the end of the year
Consolidated
2017
$'000
2016
$'000
24
9,815
31
12,940
9,839
12,971
Employee
Benefits
$'000
Restoration
$'000
671
-
(172)
12,940
(3,125)
-
499
9,815
Accounting policy for provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation
as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risk specific to the liability.
Restoration
Provisions for future environmental restoration are recognised where there is a present obligation as a result of exploration,
development, production, transportation or storage activities having been undertaken, and it is probable that an outflow of
economic benefits will be required to settle the obligation. The estimated future obligations include the costs of removing
facilities, abandoning wells and restoring the affected areas. Cue is expecting to make payments on restoration provision as
part of its cash calls within the next 12 months from reporting date.
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.
Accounting policy for 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.
Cue Energy Resources Limited Annual Report 2016/1750
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 22. Equity – contributed equity
Ordinary shares - fully paid
Consolidated
2017
Shares
2016
Shares
2017
$'000
2016
$'000
698,119,720 698,119,720
152,416
152,416
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.
Accounting policy for 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.
Note 23. Equity - 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 will assess 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 2017 management did not pay any dividends (2016: 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 2017 and 30 June 2016 are calculated as follows:
Trade and other payables
Tax liabilities
Less cash and cash equivalents
Total Equity
Total capital
Consolidated
2017
$'000
2016
$'000
(3,931)
(3,942)
12,420
25,871
(9,050)
(1,865)
20,490
42,588
30,418
52,163
The gearing ratio is nil for both 2016 and 2017 financial year, as the Group does not have external debt other than trade
payables and tax liabilities.
Cue Energy Resources Limited Annual Report 2016/1751
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 24. 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
2017
$'000
2016
$'000
2017
$'000
2016
$'000
12,420
4,372
20,490
4,481
12,420
4,372
20,490
4,481
Non-traded financial assets
16,792
24,971
16,792
24,971
Financial liabilities
Trade and other payables
Non-traded financial liabilities
Risk Exposures and Responses
(a) Fair value risk
3,931
3,931
9,050
9,050
3,931
3,931
9,050
9,050
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 2. In all instances, the fair value of financial amounts and liabilities
approximates to their carrying value.
Basis for determining fair value
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.
Cue Energy Resources Limited Annual Report 2016/1752
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 24. Financial instruments (continued)
(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
2017
$'000
12,420
2016
$'000
20,490
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
2017
$'000
124
(124)
124
(124)
2016
$'000
205
(205)
205
(205)
A movement of +1% and – 1% is selected because this is historically within a range of rate movements and available
economic data suggests this range is reasonable.
(c) Foreign exchange risk
The Group is subject to foreign exchange risk on its international exploration and appraisal activities where costs are incurred
in foreign currencies, in particular United States dollars.
The Board approved the policy of holding certain funds in United States dollars to manage foreign exchange risk.
The Group’s exposure to foreign exchange risk at the reporting date was as follows (holdings are shown in AUD equivalent):
CONSOLIDATED
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
30 June 2017
NZD
$’000
96
93
USD
$’000
7,831
4,203
30 June 2016
IDR
$’000
199
15
USD
$’000
19,264
4,207
NZD
$’000
495
258
IDR
$’000
129
16
1,927
742
15
7,357
911
60
Cue Energy Resources Limited Annual Report 2016/1753
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 24. Financial instruments (continued)
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
1,011
(1,011)
1,011
(1,011)
USD
$’000
1,611
(1,611)
1,611
(1,611)
Consolidated
2017
TOTAL
$’000
1,086
(1,086)
1,086
(1,086)
Consolidated
2016
TOTAL
$’000
1,989
(1,989)
1,989
(1,989)
IDR
$’000
19.9
(19.9)
19.9
(19.9)
IDR
$’000
8.5
(8.5)
8.5
(8.5)
NZD
$’000
55.3
(55.3)
55.3
(55.3)
NZD
$’000
15.8
(15.8)
15.8
(15.8)
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 2017, the Group had no open oil price swap contracts (2016: nil).
If the US dollar oil price changed by +/-20% from the average oil price during the year, with all other variables held constant,
the estimated impact on post-tax profit and equity would have been:
Impact on post-tax profit
US dollar oil price +20%
US dollar oil price -20%
Impact on equity
US dollar oil price +20%
US dollar oil price -20%
Consolidated
2017
$'000
2,681
(2,681)
2,681
(2,681)
2016
$'000
3,662
(3,662)
3,662
(3,662)
Management believes the risk exposures as at the reporting date are representative of the risk exposure inherent in the
financial instruments. A movement of + 20% and – 20% is selected because a review of historical oil price movements and
economic data suggests this range is reasonable.
Cue Energy Resources Limited Annual Report 2016/1754 Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 24. Financial instruments (continued)
(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 2017.
12 months or
less
$'000
1 to 2 years
$'000
2 to 5 years
$'000
More than 5
years
$'000
3,931
3,931
9,050
9,050
-
-
-
-
-
-
-
-
-
Consolidated 2017
Non-derivative financial liabilities
Trade and other payable (Note 18)
Consolidated 2016
Non-derivative financial liabilities
Trade and other payables
(f) Credit risk
Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents and trade and other
receivables. The Group’s exposure to credit risk arises from potential default by the counter-party, with maximum exposure
equal to the carrying amount of these instruments. Exposure at the reporting date is addressed in each applicable note.
The Group does not hold any credit derivatives to offset its credit exposure.
The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s
policy to securitize its trade and other receivables.
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures
including an assessment of their independent credit rating, financial position, past experience and industry reputation. The
risks are regularly monitored.
At the reporting date, there are no significant concentrations of credit risk within the Group.
Cue Energy Resources Limited Annual Report 2016/1755
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 25. Key management personnel disclosures and related party disclosures
Other key management personnel
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
Consolidated
Short term employment benefits (including non-monetary benefits)
Cash bonuses
Consulting fees*
Long term employee benefits
Post-employment benefits
Termination payments**
2017
$
750,600
-
347,967
-
63,053
1,102,786
2,264,406
Total employee benefits
*Consulting fees relate to service agreement with Grant Worner (former Executive Chairman), which were completed on 30 June 2017.
**2017 balance consists of one off termination payment to Andrew Knox (former Chief Financial Officer).
Other related party transactions
2016
$
1,624,461
427,624
167,043
18,675
105,164
76,173
2,419,140
During the financial year, the consolidated entity subleased part of its office at 357 Collins Street, Melbourne to VIX Mobility
Pty Ltd, where Duncan Saville is the Chairman. The arrangement is on normal commercial terms. The consolidated entity
received $64,868 in sublease income for the year ended 30 June 2017 (2016: Nil).
Repayment of amounts owing to the Company as at 30 June 2017 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. No Management
fees were charged to subsidiaries in 2017 financial year. $1,565,065 were charged by the parent company to Cue Taranaki
Pty Ltd in 2016.
The ultimate parent company is New Zealand Oil and Gas Limited, a company incorporated in New Zealand.
Note 26. Auditors remuneration
During the financial year the following fees were paid or payable for services provided by the auditor of the company:
Consolidated
Audit services -
Audit or review of the financial statements
Other services -
Advisory services
Tax compliance
Tax consulting
No other services were provided by the auditor during the year, other than those set out above.
2017
$
2016
$
183,614
121,700
2,678
50,950
-
2,000
20,000
85,693
53,628
107,693
237,242
229,393
Cue Energy Resources Limited Annual Report 2016/1756
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 27. Contingent assets and liabilities
The Group has no contingent assets or liabilities as at 30 June 2017.
In 2016 financial year, as a result of an economic project arrangement in the Jeruk field within the Sampang PSC, Indonesia,
Cue had an obligation to reimburse certain monies spent by the incoming party from future profit oil within the Sampang
PSC.
The matter was in dispute as to the quantum of monies that the incoming party was entitled to claim by way of such
reimbursement and as to when it was payable. The dispute had been active since late 2011 and was settled through an
arbitration hearing and an award was made.
On 23 May 2017, the Group made a payment of USD $6.80 million in settlement of these monies owing.
Note 28. Commitments for expenditure
a) Exploration tenements*
The Group participates in a number of licences, permits and production sharing contracts for
which the Group has made commitments with relevant governments to complete minimum
work programmes.
Within one year
One to five years
b) Production development expenditure**
The Group participates in a number of development projects that were in progress at the end
of the period. These projects require the Group, either directly or through joint venture
arrangements, to enter into contractual commitments for future expenditures.
Within one year
One to five years
c) Operating lease commitments***
Non-cancellable operating lease are payable as follows:
Within one year
One to five years
Consolidated
2017
$'000
2016
$'000
31,300
-
24
30,310
31,300
30,334
2,122
-
2,122
363
124
487
1,765
408
2,173
293
409
702
* 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.
** All development expenditure commitments relate to the development of oil and gas fields.
*** New premises lease term of 5 years commenced on 12 April 2017, with a fixed increase of 3.75% p.a. and further term of 5 years, at the Company's
option.
Accounting policy for 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.
Cue Energy Resources Limited Annual Report 2016/1757
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 29. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Accumulated losses
Total equity
Parent
2017
$'000
2016
$'000
(16,170)
(65,855)
(16,170)
(65,855)
Parent
2017
$'000
2016
$'000
12,345
20,510
27,554
43,357
1,669
1,693
1,293
1,324
152,416
(126,555)
152,416
(110,385)
25,861
42,031
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for the acquisition of capital assets as at 30 June 2017 (2016: nil).
Lease commitments
The parent entity has no commitments in relation to leases as at 30 June 2017 other than disclosed in note 28.
Cue Energy Resources Limited Annual Report 2016/1758
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 30. Shares in subsidiaries
Shares held by parent entity at the reporting date:
Name
Cue Mahato Pty Ltd
Cue Mahakam Hilir Pty Ltd
*Cue Kalimantan Pte Ltd
Cue (Ashmore Cartier) Pty Ltd
Cue Sampang Pty Ltd
Cue Resources Inc
**Buccaneer Operating LLC (i)
**Cheetah Energy LLC (i)
Cue Taranaki Pty Ltd
Cue Cooper Pty Ltd
Cue Exploration Pty Ltd
Principal place of business /
Country of incorporation
Australia
Australia
Singapore
Australia
Australia
USA
USA
USA
Australia
Australia
Australia
Ownership interest
2016
2017
%
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
All companies in the Group have a 30 June reporting date.
* Shares held by Cue Mahakam Hilir Pty Ltd
** Shares held by Cue Resources, Inc.
(i) In November 2016, The Company disposed the Pine Mills production property in East Texas, together with Buccaneer Operations LLC and Cheetah
Energy LLC. The ownership interest as at 30 June 2017 is nil.
Note 31. Interests in joint operations
Property
Operator
Petroleum exploration properties
Cue Interest
(%)
Gross
Area
(km2)
Net
Area
(km2)
Permit expiry
date
Carnarvon Basin – Western Australia
WA-359-P
WA-389-P
WA-409-P
Cue Exploration Pty Ltd
Cue Exploration Pty Ltd
BP Developments Australia Pty Ltd
100.00
20.00
20.00
645.00
1,939.00
565.00
645.00
775.60
169.50
25/04/2018
08/10/2018
20/07/2021
Indonesia
Mahakam Hilir PSC
Mahato PSC
Cue Kalimantan Pte Ltd
Texcal Mahato Pte Ltd
Petroleum production properties
New Zealand
PMP38160
OMV New Zealand Limited
Madura - Indonesia
Sampang
Santos (Sampang) Pty Ltd
100.00
12.50
222.14
5,600.00
88.90
700.00
15/05/2020
20/07/2018
5.00
80.18
4.00
02/12/2027
15.00 (8.18
Jeruk Field)
534.50
80.20
04/12/2027
Cue Energy Resources Limited Annual Report 2016/1759
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 31. Interests in joint operations (continued)
Interests in joint operations are accounted for using the equity method of accounting. Information relating to joint operations
that are material to the consolidated entity are set out below:
Summarised financial information
Summarised statement of financial position
Receivables
Inventory
Production Properties (note 17)
Total assets
Payables
Current tax liabilities
Restoration provisions
Deferred tax liabilities
Total liabilities
Net assets
Summarised statement of profit or loss and other comprehensive income
Production income
Production expenses
Profit before income tax
Other comprehensive income
Total comprehensive income
Refer to note 27 in relation to contingent liabilities of the Group.
Commitments for expenditure are disclosed in note 28.
2017
$'000
2016
$'000
4,193
547
30,082
4,201
1,609
42,564
34,822
48,374
2,653
1,365
9,815
3,401
8,298
1,865
12,940
4,167
17,234
27,270
17,588
21,104
35,000
(13,739)
45,412
(16,684)
21,261
28,728
-
-
21,261
28,728
Accounting policy for 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.
Note 32. Events after the reporting period
No matter or circumstance has arisen since 30 June 2017 that has significantly affected, 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.
Cue Energy Resources Limited Annual Report 2016/1760
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 33. Reconciliation of loss after income tax to net cash (used in)/from operating activities
Loss after income tax expense for the year
Adjustments for:
Abandonment provision write back
Production property write down
Exploration impairment
Depreciation
Amortisation
Loss from discontinued operations
Reversal of Non-controlling interest
Net loss/(gain) on foreign currency conversion
Decrease/(increase) in trade and other receivables
Decrease in inventories
Decrease in deferred tax assets
Decrease in trade and other payables
Increase in tax liabilities
Decrease in deferred tax liabilities
(Decrease)/increase in provisions
Consolidated
2017
$'000
2016
$'000
(17,344)
(87,461)
3,083
6,446
-
32
6,362
2,312
(669)
422
109
1,063
-
(1,481)
2,077
(766)
(3,296)
-
23,241
49,990
34
11,107
3,062
-
(938)
(91)
2,081
70
(1,805)
1,285
(1,651)
2,187
Net cash (used in)/from operating activities
(1,650)
1,111
Note 34. Earnings per share
Earnings per share for loss from continuing operations
Loss after income tax attributable to the owners of Cue Energy Resources Limited
Consolidated
2017
$'000
2016
$'000
(15,032)
(84,399)
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
Earnings per share for loss from discontinued operations
Loss after income tax
Non-controlling interest
Cents
Cents
(2.15)
(2.15)
(12.09)
(12.09)
Consolidated
2017
$'000
2016
$'000
(2,312)
45
(3,062)
626
Loss after income tax attributable to the owners of Cue Energy Resources Limited
(2,267)
(2,436)
Cue Energy Resources Limited Annual Report 2016/1761
Cue Energy Resources Limited
Notes to the financial statements
30 June 2017
Note 34 Earnings per share (continued)
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
Number
Number
Basic earnings per share
Diluted earnings per share
Earnings per share for loss
Loss after income tax
Non-controlling interest
Cents
Cents
(0.32)
(0.32)
(0.35)
(0.35)
Consolidated
2017
$'000
2016
$'000
(17,344)
45
(87,461)
626
Loss after income tax attributable to the owners of Cue Energy Resources Limited
(17,299)
(86,835)
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
Number
Number
Basic earnings per share
Diluted earnings per share
Accounting policy for earnings per share
Cents
Cents
(2.48)
(2.48)
(12.44)
(12.44)
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Cue Energy Resources Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Note 35. Share-based payments
No performance rights were outstanding as at 30 June 2017 (2016: nil).
Cue Energy Resources Limited Annual Report 2016/1762 Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Cue Energy Resources Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Cue Energy Resources Limited (the Company) and its
subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30
June 2017, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial report, including a summary of significant accounting policies
and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Impairment of Production Assets
Key audit matter
How the matter was addressed in our audit
The total carrying value of the Oil and Gas production
During our audit, we evaluated management’s
property assets at 30 June 2017 is $30.082 million (2016:
assessment of the recoverable value of each
$ 42.564 million), which consists of Maari and Sampang
production asset.
(Oyong and Wortel) assets, as disclosed in Note 17.
The nature of these production property assets
requires management to assess for indicators of
impairment. The assessment of these indicators is
complex and highly judgemental, and includes
modelling a range of assumptions and cash flow
estimates that are affected by expected future
performance and market conditions.
Our procedures included, but were not limited to:
Obtaining and reviewing the reserve quantity
reports from an external expert. This
included assessing the competency,
objectivity and independence of the expert
and reviewing the report to determine if the
assumptions were reasonable and in line with
our understanding and expectations of the
asset and the industry.
Engaged a corporate valuation specialist to
assess the discount rates used by
management to other comparable
participants in the industry.
Benchmarking and analysing managements
future oil price assumptions against external
data.
Comparing the expected future costs to
operator budgets and other third party
reports.
Performing a sensitivity analysis over the
underlying variables to determine the impact
of unfavourable changes to cash flows and in
turn recoverable value of each production
asset.
Accounting for Deferred Tax and Uncertain Tax Positions
Key audit matter
How the matter was addressed in our audit
The consolidated entity recognised significant deferred
To assess the Group tax payable now and in the future,
tax liabilities as at 30 June 2017 of $3.4m (2016: 4.1m),
we involved our taxation specialists, to assist in our
which is disclosed in Note 20.
assessment of the deferred tax liabilities recorded at
Additional to this, there are several ongoing tax disputes
year end.
between Cue Kalimantan or Cue Sampang (100% wholly
We evaluated the assessment of these uncertain tax
owned subsidiaries of Cue Energy Resources Group) and
positions in the Indonesian subsidiaries through
the Indonesian taxation authorities for additional tax
enquiry with management and their Indonesian tax
levied and applicable penalties deemed payable and
consultants, reviewed correspondence with local tax
outstanding to the Indonesian tax authorities.
authorities to assess the completeness and accuracy
An inaccurate assessment for the quantum and
likelihood of these matters may result in the incorrect
amount disclosed in the financial report.
of the associated provisions and disclosures.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included pages 18 to 23 of the directors’ report for the year
ended 30 June 2017.
In our opinion, the Remuneration Report of Cue Energy Resources Limited, for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO East Coast Partnership
David Garvey
Partner
Melbourne, 27 September 2017
Cue Energy Resources Limited
Shareholder information
30 June 2017
Shareholder Information
1. Distribution of equitable securities
The shareholder information set out below was applicable as at 21 September 2017:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
2. Registered Top 20 Shareholders
Number
of holders
of ordinary
shares
56
170
527
1,698
307
2,758
418
The registered names and holdings of the 20 largest holdings of quoted ordinary shares in the Company as at 21 September
2017:
Shareholder
1. NZOG Offshore Limited
2. BNP Paribas Noms Pty Ltd (DRP)
3. ABN Amro Clearing Sydney Nominees Pty Ltd (Custodian A/C)
4. Portfolio Securities Pty Ltd
5. Reviresco Nominees Pty Ltd (Reviresco S/F A/C)
6. HSBC Custody Nominees (Australia) Limited
7. Finot Pty Ltd
8. Berne No 132 Nominees Pty Ltd (52293 A/C)
9. Grizzley Holdings Pty Limited
10. Tintern (Vic) Pty Ltd (A & P Miller Family A/C)
11. Custodial Services Limited (Beneficiaries Holding A/C)
12. Mr Richard Tweedie (Richard Tweedie S/F A/C)
13. Lakemba Pty Ltd
14. Mr Tze Min Goh
15. Ms Rachel Irene Alembakis
16. Milliara Nominees (Aust) Pty Limited (Gill Family A/C)
17. Citicorp Nominees Pty Ltd
18. Mr Damiano Giorgio Pilla
19. Mr Koo Sing Kuang + Mrs Lai Wah Kuang (Lakemba Super Fund A/C)
20. Brinkworth Investment Pty Ltd (Brinkworth A/C)
3. Vendor Securities
There are no restricted securities on issue as at 21 September 2017.
Ordinary shares
Number held
% of total
shares
issued
349,368,803
113,117,671
15,986,452
10,000,000
7,500,000
5,017,035
5,000,000
4,300,000
4,282,604
3,660,701
3,387,625
3,363,477
3,084,051
3,020,000
2,960,000
2,818,289
2,268,283
1,996,427
1,909,788
1,750,000
544,791,206
50.04
16.20
2.29
1.43
1.07
0.72
0.72
0.62
0.61
0.52
0.49
0.48
0.44
0.43
0.42
0.40
0.32
0.29
0.27
0.25
78.04
Cue Energy Resources Limited Annual Report 2016/1767
4. Voting rights
At meeting of members or classes of members:
(a) each member entitled to vote may vote in person or by proxy, attorney or respective;
(b) on a show of hands, every person present who is a member or a proxy, attorney or representative of a member has one
vote; and
(c) on a poll, every person present who is a member or a proxy, attorney or representative of a member has:
(i) for each fully paid share held by person, or in respect of which he/she is appointed a proxy, attorney or representative,
one vote for the share;
(ii) for each partly paid share, only the fraction of one vote which the amount paid (not credited) on the share bears to the
total amounts paid and payable on the share (excluding amounts credited).
Subject to any rights or restrictions attached to any shares or class of shares.
5. Annual General Meeting
Cue's 2017 Annual General Meeting will be held at Allens Lawyers, Level 37, 101 Collins Street, Melbourne VIC 3000,
Victoria, Australia on Monday 27th November 2017, commencing at 9.00am (AEDT).
6. Share registry
Enquiries
Cue's share register is managed by Computershare. Please contact Computershare for all shareholding and dividend related
enquiries.
Change of shareholder details
Shareholders should notify Computershare of any changes in shareholder details via the Computershare website
(www.computershare.com.au) or writing (fax, email, mail). Examples of such changes include:
• Registered name
• Registered address
• Direct credit payment details
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne, Victoria 3001 Australia
Telephone: 1300 850 505 (within Australia)
or +61 3 9415 4000 (outside Australia)
Facsimile: +61 3 9473 2500
Email: web.queries@computershare.com.au
Website: www.computershare.com.au
7. Sharecodes
ASX Share Code: CUE
ADR Share Code: CUEYY
8. Cue Energy Website
A wide range of information on Cue Energy is available on the Company's website, at www.cuenrg.com.au. The following
information for investors is available:
Share price information
•
Annual report
•
• Quarterly reports
Press releases
•
Cue Energy Resources Limited Annual Report 2016/1768