Cue Energy Resources Limited
Annual Report
2017/18
Section Heading 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.
Contents
Joint Operations
Chairman’s Overview
CEO Report and Overview of Operations and Finances
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
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Cover Image: Oyong Well Head Platform after conversion to gas only production.
1
Cue Energy Resources LimitedAnnual Report 2017/18 Joint Operations
INDONESIA
Mahato PSC
Interests1
Texcal (Operator)
Central Sumatra Energy
Bow Energy
Cue
Mahakam Hilir PSC
Interests
Cue (Operator)
Sampang PSC
Interests
Ophir Energy (Operator)
SPC
Cue
51%
16.5%
20%
12.50%
100%
45%
40%
15%
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%
NEW ZEALAND
Maari and Manaia Oil Fields
Interests
PMP 38160
OMV (Operator)
Horizon
Cue
69%
26%
5%
1 Approval pending from the Government of Indonesia for ownership changes to non-Cue participants.
2 Cue Energy Resources Limited
Annual Report 2017/18
NEW ZEALANDINDONESIAAUSTRALIAHead OfficeMelbourneCue JakartaOffice
Chairman’s Overview
Alastair McGregor
Dear Shareholders,
In this my first Chairman’s statement I am very pleased to report that we have had a smooth transition in ownership
structure, with O.G. Oil & Gas acquiring a controlling interest in New Zealand Oil & Gas during 2018 and new members
joining the Cue Board of Directors. The new board of directors combines both experience and diversification. We
welcome Peter Hood and Richard Malcolm on to the board as independent directors with considerable experience in
the oil and gas industry. The Cue board and management team intends to leverage this expertise to further develop and
add value to the business.
Cue reported a profit of $7.74 million for the financial year 2018 and increased its cash reserves by $4.56 million to
$16.98 million. This is a direct result of our improved cost control and increased revenues from the Maari fields, New
Zealand and the Sampang PSC, Indonesia.
We see the lronbark prospect in WA-359-P off Australia’s northwest shelf being at the center of the company’s strategy
in the coming year. This is a world class exploration asset that the board is actively looking to pursue. Considerable work
has been done to bring lronbark to market. In doing so it has attracted interest from BP, who hold an option to acquire
a 42.5% equity interest in the WA-359-P permit. Further, in November 2017, Beach Energy signed a farm-in agreement
with Cue to take a 21% equity interest and fund 4% of Cue’s costs of the lronbark-1 exploration well. The Beach Energy
farm-in agreement is conditional on BP exercising its option. We are now exploring funding options for Cue’s share of
the lronbark-1 exploration well.
For a long time now Cue has had exposure to exploration and production in Indonesia. This is not always the easiest
of operating environments, however we are pleased to see good progress in this geography. The Paus Biru-1 well in
Sampang PSC, Indonesia is due to be drilled later this year. We believe that this well has the potential to increase gas
production and extend the life of the permit.
I would like to take this opportunity to thank our staff in Australia and Indonesia. I acknowledge the work of the previous
board and thank Matthew Boyall for managing the company during this time of change.
With a sustainable business and the exciting prospect of Iron bark, I look forward to a successful future for Cue.
Sincerely
___________________________
Alastair McGregor
Non-Executive Chairman
24 September 2018
3
Cue Energy Resources LimitedAnnual Report 2017/18
Chairman’s Overview
4 Cue Energy Resources Limited
Annual Report 2017/18
CEO Report and Overview
of Operations and Finances
Matthew Boyall
During the FY2018 year, Cue achieved the strategic goals of stabilising
and building a sustainable, cash flow positive business while maintaining
exposure to step change opportunities.
The Sampang PSC underwent a significant change during the
year, with cessation of oil production and conversion to a gas only
project completed late in CY2017. The significantly lower operating
costs and simplified systems of gas only production has made the
Sampang PSC more sustainable and extended the life of the existing
production significantly.
In addition, the Sampang Joint Venture has approved the drilling
of the Paus-Biru -1 well. The well is expected to spud late October
2018 and will target the known producing Mundu reservoirs that
are seen at Oyong and Wortel. Success with this well will further
extend the life of the Oyong and Wortel fields.
Maari continued to provide Cue with consistent revenue and
exposure to the increased oil price seen over the year.
The Ironbark prospect in WA-359-P continued to be a main focus
for Cue and significant support for the opportunity was achieved
with Beach Energy executing a farm in agreement for 21% equity in
the Permit in November 2017. In addition, Cue extended BP’s option
over 42.5% equity until October 2018.
With a 15 Tcf prospective volume, Ironbark has the potential to
dramatically change the value of Cue if successful. The company
continues to progress well planning and review funding options,
targeting a 2019 drill date.
Subsequent to June 30, 2018, Cue announced that a suspension
and extension to the current permit term had been approved to
25th April 2019.
Financials
During the 2018 financial year, Cue produced strong financial results,
with an after tax profit of $7.74 million, cashflow from Operations of
$6.83 million and an increase in cash of $4.56 million.
Revenue of $24.5 million was a reduction on the previous year
due to no oil revenue from Oyong field and lower Sampang gas
production associated with the production system changes. The
Oyong and Wortel fields are now stabilised at their long term
production rates and annual revenues are expected to perform
more predictably in future years.
The operating costs at Sampang are expected to halve under gas
only production. Some of the benefits of this can be seen in the
25% reduction in Cue’s production costs and only slight reduction
in gross profit margin.
Overhead and administration costs were reduced significantly
from previous years as Cue operated under a simplified and more
focused model.
Production
NEW ZEALAND
PMP 38160
During the year, oil production from Maari averaged approximately
360 bopd to Cue (7200 bopd gross). Production was down from
the previous year due to natural field decline and production
interruptions while work was undertaken on the Well Head Platform
(WHP) and individual wells over the year.
A number of significant projects were undertaken during the year
to ensure the sustainability and life of the field. A workover of the
MN1 well to deepen the Electric Submersible Pump (ESP) and
complete new sections in the wellbore resulted in a 200% increase
in production from the well. Workovers were also completed on
other wells as part of routine maintenance or to gain access to new
production zones.
Compression was successfully added to the Well Head Platform to
lower the production pressure of the wells. Incremental production
increases from this project are being seen and it is expected that
further benefits will be realised in the future.
Permanent repairs to the Well Head Platform were completed early
in FY2018 .
5
Cue Energy Resources LimitedAnnual Report 2017/18 CEO Report and Overview of Operations
Production (Cont’)
NEW ZEALAND (CONT’)
PMP 38160 (Cont’)
CEO Report and Overview of Operations
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.
Production (Cont’)
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
NEW ZEALAND (CONT’)
unit and coiled tubing. The target wells for this drilling are likely to be
PMP 38160 (Cont’)
finalised during the first quarter of 2018.
The Joint Venture partners are reviewing a preliminary proposal to
Planned conversion of the MR5 well to a Water Injector has
develop the Moki reservoir at the Manaia field, approximately
been completed to provide pressure support and production
6 km from Maari, where the Manaia-2 well was drilled in 2013. The
enhancement for producing wells.
proposal has passed the first stage of the Operator’s tollgate process
and could include an appraisal well within 18-24 months and a
Sidetrack drilling opportunities are being investigated by the
further standalone or integrated development. Cue will carefully
Operator and are expected to be assessed by the Joint Venture
review this project as preliminary studies progress.
during this year. Reducing ongoing operating costs is also a focus
of the Joint Venture.
New Zealand
TARANAKI PENINSULA LOCATION MAP – NEW ZEALAND
TARANAKI PENINSULA LOCATION MAP – NEW ZEALAND
New Zealand
Tui
Taranaki
Peninsula
Taranaki
Peninsula
Tui
Maui
Maui
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
is sold directly to the Indonesia Power facility adjacent to the Joint
plant will also allow gas to be produced at lower reservoir pressures,
Venture operated Grati gas processing plant. The gas is sold on long
adding to recoverable reserves and making the field economic well
term fixed price contracts, which provides stable future revenues for
past 2020.
Cue.
Drilling at the Paus near field exploration prospect is in the final
The conversion to a gas only project resulted in considerable
stages of review by the Joint Venture and a decision is expected
reduction in operating costs in the Sampang PSC. These savings
during the 2018 fiscal year. The well would target the Mundu
were only realised during the final 6 months of the financial year,
reservoir which provides the gas production at Oyong.
and a full year of sustainable lower costs is anticipated to be
Cue is optimistic about the future production from the Sampang PSC.
achieved in FY2019 and beyond.
We have increased our estimate of Wortel 2P gas reserves by 36% this
year, based on the continued high performance of the reservoir and
As part of ongoing
review of production enhancement
plan to undertake independent analysis of Oyong field reserves after
opportunities, the Joint Venture perforated and tested the Upper
the current gas conversion project is complete and the wells have
Mundu reservoir in the Oyong-9 well, a reservoir section which was
stabilised in gas only mode.
previously untested sand thought to be non-productive. Oyong-9
flowed gas from the perforated section and has been contributing
to production since. The Joint Venture is now assessing the results
SAMPANG PSC LOCATION MAP – INDONESIA
for further upside potential.
Java
The Paus-Biru-1 exploration well, 27km East of the Oyong field
was approved by the Sampang Joint venture during the year and is
being finalised for drilling in late October 2018. The well is designed
Madura Island
to test a four way dip structural closure and will target the Mundu
globigerina formation, analogous to the gas producing zones at
Oyong and Wortel. If successful, the field would be tied into the
East Java
existing Oyong infrastructure.
Oyong
Wortel
Maleo
The COSL HYSY 937 jackup drilling rig has been contracted to drill
Paus Biru-1 and will be ready to drill after completing a series of
nearby wells for another operator.
Peluang
SAMPANG PSC LOCATION MAP – INDONESIA
Grati Onshore
Gas Facilities
Java
30km
Madura Island
East Java
Wortel
Oyong
Jeruk
Maleo
Peluang
Grati Onshore
Gas Facilities
30km
PMP 38160
Maari
Maari
PMP 38160
Manaia
Manaia
10km
Jeruk
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
INDONESIA
Sampang PSC
Cue Permit
Oil Field
Gas Field
Gas Discovery
SEG Unitisation
Gas Line
Liquids Line
Cue Energy Resources Limited
Annual Report 2016/17
During FY2018, Oyong gas production averaged 1.5 mmcfd and Wortel
gas production averaged 2.8 mmcfd net to Cue. Both these production
6
numbers are lower than the previous year due to the reconfiguration
of the production system to gas only. Future year’s production is not
expected to show such a change year on year.
The final phase of the Sampang Sustainability Project, the removal
of the Seagood production facility and the installation of a new
compressor at the Grati onshore gas processing plant was completed
in December 2017. The Oyong field now produces gas only, which
6
Cue Energy Resources LimitedAnnual Report 2017/18 CEO Report and Overview of Operations
Exploration
AUSTRALIA
WA-359-P
Cue is excited about the progress of the Ironbark gas prospect,
which has the potential to add company changing value to Cue in
the near term if successful.
and geophysical studies over the area. A decision on entering
Permit year 5 and committing to a well in WA-389-P is not required
until October 2019.
Ironbark is a Deep Mungaroo Triassic gas prospect, which is located
50km from the Northwest Shelf LNG infrastructure at North Rankin,
making it geographically and commercially well positioned to
provide backfill to the existing LNG plants along the Western
Australia coastline.
During the year, Cue executed an agreement with Beach Energy Limited
(Beach), for Beach to acquire 21% equity in the WA-359-P. Under
this agreement, Cue will be carried for 4% of the costs of drilling the
Ironbark-1 well and Beach will reimburse Cue $900,000 for past costs.
The agreement is conditional on BP exercising its option to acquire
42.5% equity in the WA-359-P and other customary approvals.
CARNARVON BASIN LOCATION MAP – AUSTRALIA
Australia
WA-389-P
LEGEND
Cue Permit
Gas Field
Ironbark Prospect
Deep Mungaroo Leads
WA-389-P
WA-389-P
WA-359-P
WA-409-P
WA-359-P
North West Shelf
Angel
BP’s option to acquire 42.5% equity in the WA-359-P permit and
participate in the Ironbark-1 exploration well was extended during
the year and currently expires in October 2018.
Wheatstone
Pluto
Both of the BP and Beach agreements include a funding commitment
to Cue for a portion of the Ironbark-1 well cost. Cue is currently
reviewing options to fund the remaining approximately 25% of the
estimated well cost.
On 9 August 2018, a suspension of the current work commitment and
extension of the permit term was approved until 25 April 2019.
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.
The Operator, BP, is mapping the Ironbark structure in WA-409-P
using recently reprocessed seismic data. BP is funding Cue’s share of
primary term work commitment costs under a farmout agreement
signed in October 2016.
In November 2017, Cue granted Beach Energy an option to acquire
7.5% equity in WA-409-P. If exercised, this option includes a free
carry to Cue for 7.5% of the costs of drilling a well in WA-409-P and a
10% royalty to Cue on all future revenue from Beach’s 7.5% equity in
the Permit. The option may be exercised until July 2019.
WA-389-P
NWS LNG
Pluto LNG
N
25km
INDONESIA
Mahakam Hilir PSC
Analysis of newly available data continued to support Cue’s view of
the Naga Utara-4 (NU-4) prospect in the Mahakam Hilir PSC.
This data included additional 2D seismic lines and well data from
the Sambutan producing gas field, which lies adjacent to the Naga
Utara prospect in an adjoining permit.
The revised geological model has also uncovered the potential for
further exploration in other underexplored areas of the PSC.
WA-389-P contains a large structure and reservoir which Cue
believes is similar to the Ironbark prospect.
A 2 year suspension to Year 4 of the permit term was approved in
October 2017, which allows time for Cue to complete geological
A variation in the work programme was approved by the Indonesian
Government which resulted in the 2 well work programme being
deferred to May 2019. Cue is continuing with the planning process
for the Naga Utara-4 well, which would test the 100m interpreted
interbedded gas sands logged in the 1930s Sambutan 8 well.
7
Cue Energy Resources LimitedAnnual Report 2017/18 If the ownership changes and extension are approved, Cue believes
that exploration of the PSC will proceed quickly, with the possibility
of drilling 2 wells within 12-18 months.
MAHATO PSC LOCATION MAP – INDONESIA
Bangko
Balam South
Sumatra
Mahato
PSC
Duri
LEGEND
Petapahan
Cue Permit
Major Oil Fields
Libo SE
Kotabatak
Minas
40km
CORPORATE
During the year, Cue Energy Resources Ltd and Cue Resources
Inc. were named as defendants, along with a number of other
companies, in litigation pending in Texas, USA in relation to the Pine
Mills oilfield. Cue Energy Resources Ltd and Cue Resources Inc.
believe the suit has no merit and have filed motions to dismiss the
proceedings.
CEO Report and Overview of Operations
Exploration (Cont’)
INDONESIA (CONT’)
Mahakam Hilir PSC (Cont’)
A farmout process is currently underway to attract a partner to
participate in the permit.
Cue is proceeding with the plug and abandon of the Naga Selatan-2
well, which was drilled in January 2016. The works are expected to
be started and completed during September 2018.
MAHAKAM HILIR PSC LOCATION MAP – INDONESIA
Pelarang Samarinda
Sambutan
Mahakam Hilir
PSC
Sanga Sanga
Pamaguan
Nangka
Kalimantan
Scale: 5km
LEGEND
Cue Permit
Oil Field
Gas Field
Mahato PSC
The Mahato PSC, is located in the highly prospective Central
Sumatra Basin, close to the largest discovered Indonesian oilfields.
During the year, exploration progress in the PSC has been delayed
due to partner funding problems and the lack of a legally binding
operating agreement.
Subsequent to June 30, 2018, Cue has been informed of changes
in ownership structure of the other parties to the PSC, subject to
Government of Indonesia approval, which the Company is hopeful
will result in progress being made towards exploring this highly
prospective permit.
The exploration term of the PSC officially ended on the 19th July
2018. Prior to this, the Operator, submitted an extension application
to the Government of Indonesia for replacement of up to 2 years of
time lost due to land ownership issues. The Operator has engaged
with the government and Cue is optimistic about the extension
being granted.
8
Cue Energy Resources LimitedAnnual Report 2017/18 Reserves and
Reserves and
Resources
Resources
Net To Cue Energy Resources Limited As At 30 June 2018
RESERVES
PROVED (1P)
PROVED & PROBABLE (2P)
DEVELOPED
UNDEVELOPED
DEVELOPED
UNDEVELOPED
CUE
INTEREST
OIL &
CONDEN-
SATE
MMBBL
OIL &
CONDEN-
SATE
MMBBL
GAS
BCF
OIL &
CONDEN-
SATE
MMBBL
GAS
BCF
OIL &
CONDEN-
SATE
MMBBL
GAS
BCF
GAS
BCF
5%
15%
15%
0.28
-
0.03
-
0.01
0.29
1.11
2.28
3.39
-
0.002
0.032
-
-
0.62
0.62
0.55
-
0.12
-
0.02
0.57
1.72
3.87
5.59
-
0.005
0.125
-
-
0.93
0.93
FIELD (LICENCE)
NEW ZEALAND
Maari (2)
INDONESIA (1)
Oyong (3)
Wortel (2)
Total Reserves
CONTINGENT RESOURCES
FIELD (LICENCE)
INDONESIA
Jeruk (Sampang PSC)
Total Contingent Resources
CUE
INTEREST
8%
OIL & CONDENSATE
MMBBL
1.24
1.24
GAS
BCF
-
0
Table numbers may not add up due to rounding
(1) Cue Indonesian 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 2018 adjusted for production to 30 June 2018.
(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 LimitedAnnual Report 2017/18 Reserves and Resources
Governance Arrangements and Internal
Controls
Qualified Petroleum Reserves and
Resources Evaluator Statement
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.
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 30
June 2018.
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 23 August 2018,
NZOG held an equity of 50.04% of Cue.
10
Cue Energy Resources LimitedAnnual Report 2017/18 Reserves and Resources
TABLE 1: Oil and Condensate Reserves and Resources Reconciliation with 30 June 2018
Proved Oil and Condensate Reserves (MMBBL)
FIELD (LICENCE)
INDONESIA
Oyong (Sampang PSC)
Wortel (1) (Sampang PSC)
NEW ZEALAND
Maari (2) (PMP 38160)
Total Proved Oil and Condensate Reserves
CUE INTEREST
30 JUNE 2017
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUI-
SITIONS/
DIVESTMENTS
30 JUNE 2018
RESERVES
15%
15%
5%
0.00
0.01
0.46
0.47
0.00
-0.003
-0.13
-0.13
0.00
0.01
-0.02
-0.02
-
-
-
0.00
0.00
0.01
0.31
0.32
Proved & Probable Oil and Condensate Reserves (MMBBL)
CUE INTEREST
30 JUNE 2017
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2018
RESERVES
FIELD (LICENCE)
INDONESIA
Oyong (Sampang PSC)
Wortel (1) (Sampang PSC)
NEW ZEALAND
Maari (2) (PMP 38160)
Total Proved & Probable Oil and Condensate Reserves
2C Contingent Oil and Condensate Resources (MMBBL)
FIELD (LICENCE)
INDONESIA
Jeruk (Sampang PSC)
Total Contingent Oil and Condensate Resources
15%
15%
5%
0.00
0.03
0.82
0.85
0.00
0.00
-0.13
-0.13
0.00
0.00
-0.02
-0.02
0.00
0.00
0.00
0.00
0.00
0.01
0.67
0.70
CUE INTEREST
30 JUNE 2017
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2018
RESERVES
8%
1.24
1.24
-
-
-
0
-
-
1.24
1.24
11
Cue Energy Resources LimitedAnnual Report 2017/18 Reserves and Resources
TABLE 2: Gas Reserves and Resources Reconciliation with 30 June 2018
Proved Gas Reserves (BCF) – 1P
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
Total Proved Gas Reserves
CUE INTEREST
30 JUNE 2017
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2018
RESERVES
0.15
0.15
0.48
4.42
4.90
-0.57
-1.02
-1.58
1.20
-0.50
0.69
-
-
-
1.11
2.90
4.01
Proved & Probable Gas Reserves (BCF) – 2P
CUE INTEREST
30 JUNE 2017
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2018
RESERVES
0.15
0.15
1.55
6.68
8.23
-0.57
-1.02
-1.58
0.74
-0.86
-0.13
-
-
-
1.72
4.80
6.52
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
Total Proved & Probable Oil and Condensate Reserves
12
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited
Corporate Directory
30 June 2018
Directors
Alastair McGregor (Non-Executive Chairman)
Koh Ban Heng (Non-Executive Director)
Andrew Jefferies (Non-Executive Director)
Peter Hood (Non-Executive Director)
Rebecca DeLaet (Non-Executive Director)
Richard Malcolm (Non-Executive Director)
Rod Ritchie (Non-Executive Director)
Samuel Kellner (Non-Executive Director)
Chief Executive Officer
Matthew Boyall
Chief Financial Officer and Company Secretary
Melanie Leydin
Registered office
Principal place of business
Share register
Auditor
Level 3, 10-16 Queen Street
Melbourne, VIC 3000
Australia
Telephone: 61 3 8610 4000
Fax: 61 3 9614 2142
Level 3, 10-16 Queen Street
Melbourne, VIC 3000
Australia
Telephone: 61 3 8610 4000
Fax: 61 3 9614 2142
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford, VIC 3067
Australia
Telephone: 61 3 9415 5000
Fax: 61 3 9473 2500
BDO East Coast Partnership
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne, VIC 3000
Australia
Stock exchange listing
Cue Energy Resources Limited securities are listed on the
Australian Securities Exchange.
(ASX code: CUE)
Website
www.cuenrg.com.au
13
Cue Energy Resources LimitedAnnual Report 2017/18
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 2018.
Directors
The names of Directors of the Company in office during the year and up to the date of this report were:
Alastair McGregor (appointed 23 February 2018)
Koh Ban Heng
Andrew Jefferies (appointed 23 February 2018)
Peter Hood (appointed 23 February 2018)
Rebecca DeLaet (appointed 11 April 2018)
Richard Malcolm (appointed 23 February 2018)
Rod Ritchie (appointed 23 February 2018)
Samuel Kellner (appointed 23 February 2018)
Grant Worner (resigned 23 April 2018)
Melanie Leydin (appointed Executive Director on 14 December 2017, resigned on 23 February 2018)
Duncan Saville (resigned 14 December 2017)
Chief Executive Officer
Matthew Boyall (appointed 1 July 2017)
Chief Financial Officer/Company Secretary
Melanie Leydin (appointed 3 July 2017)
Principal activities
The principal activities of the group are petroleum exploration, development and production.
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 the website is located at: http://www.cuenrg.com.au/irm/content/corporate-
directory.aspx?RID=295
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Financial performance
The profit for the consolidated entity after providing for income tax amounted to $7.74 million (30 June 2017: loss of
$17.34 million).
The net assets of the consolidated entity increased by $7.40 million to $33.27 million as at 30 June 2018. (30 June 2017:
$25.87 million). Working capital, being current assets less current liabilities, was $16.62 million (30 June 2017: $8.99
million).
The consolidated entity achieved positive cashflow from operating activities of $6.83 million for year ended 30 June
2018. The consolidated entity ended the year with cash and cash equivalents of $16.98 million and no debt.
Refer to the detailed CEO Report and Overview of Operations and Finances preceding this Director’s Report.
Significant changes in the state of affairs
During the 2018 financial year, O.G. Oil & Gas (Singapore) Pte. Ltd. acquired 69.87% interest in New Zealand Oil &
Gas (Cue’s immediate parent entity), consequently became the ultimate parent entity of Cue Energy Resources Limited.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
14
Cue Energy Resources LimitedAnnual Report 2017/18Cue Energy Resources Limited Director’s Report 30 June 2018
Matters subsequent to the end of the financial year
On 9 August 2018, the consolidated entity announced that its 100% owned subsidiary, Cue Exploration Pty Ltd,
has received notification from the National Offshore Petroleum Titles Administrator (NOPTA) of the approval of a 12
month suspension of Exploration Permit WA-359-P Permit Year 3, 4 and 5 work program commitments, a Year 4 work
commitment variation, and a 12 month extension of the permit until 25 April 2019.
The suspension and extension will allow time for detailed well planning using newly available data and preparing for
drilling the Ironbark-1 well, targeted for 2019.
No other matter or circumstance has arisen since 30 June 2018 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 or funding alternatives for WA-359-P exploration permit, Western Australia
● Farming down or funding alternatives for 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.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Alastair McGregor
Non-Executive Chairman (appointed as Non-Executive Director on 23 February
2018, becoming Chairman of the Board on 24 April 2018)
BEng, MSc
Alastair McGregor is a director of New Zealand Oil & Gas Limited. Alastair has
been actively involved in the oil and gas sector since 2003. He is currently
chief executive of O.G. Oil & Gas Limited, a company that holds directly or
indirectly oil & gas exploration and production interests onshore and offshore.
In addition, Alastair is also chief executive of Omni Offshore Terminals Limited,
a leading provider of floating, production, storage and offloading (FSO and
FPSO) solutions to the offshore oil and gas industry. Omni’s operations have
spanned the globe from New Zealand, Australia, South East Asia, Middle East
and South America. Prior to entering the oil and gas industry Alastair spent 12
years as a banker with Citigroup and Salomon Smith Barney. Alastair holds a
BEng from Imperial College, London and an MSc from Cranfield University in
the UK.
New Zealand Oil & Gas Limited
None
None
15
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited Director’s Report 30 June 2018
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
16
Mr. Koh Ban Heng
Non-Executive Director
BSc (Hons), 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
Director, Chung Cheng High School Ltd
in Singapore
Chairman of Audit and Risk Committee, Keppel Infrastructure Holdings Pte Ltd
Member of Audit and Risk Committee, and Member of Remuneration and
Nomination Committee, Keppel Infrastructure Fund Management Pte Ltd
None
None
registered
Andrew Jefferies
Non-Executive Director (appointed 23 February 2018)
BE Hons (Mechanical), MBA, MSc in petroleum engineering, GAICD, Certified
Petroleum Engineer
Mr. Jefferies is managing director of New Zealand Oil & Gas Limited. He started
his career with Shell in Australia after graduating with a BE Hons (Mechanical)
from the University of Sydney in 1991, an MBA in technology management from
Deakin University in Australia, and an MSc in petroleum engineering from Heriot
- Watt University in Scotland. Andrew is also a graduate of the Australian Institute
of Company Directors (GAICD), and a Certified Petroleum Engineer with the
Society of Petroleum Engineers. He has worked in oil and gas in Australia,
Germany, the United Kingdom, Thailand and Holland.
New Zealand Oil & Gas Limited
None
Member, Audit and Risk Committee
Chair, Remuneration and Nomination Committee
8,000 fully paid ordinary shares
None
Peter Hood
Non-Executive Director
Mr. Hood is a professional chemical engineer with 45 years’ experience in the
development of projects in the resources and chemical industries. He began his
career with WMC Ltd and then was chief executive officer of Coogee Chemicals
Pty Ltd and Coogee Resources Ltd from 1998 to 2009. He is a graduate of the
Harvard Business School Advanced Management Programme and is currently
Chairman of Matrix Composites and Engineering Ltd and a non-executive director
of GR Engineering Ltd. He has been Vice- Chairman of the Australian Petroleum
Production and Exploration Association Limited (APPEA), Chairman of the APPEA
Health Safety and Operations Committee, and is a past President of the Western
Australian and Australian Chambers of Commerce and Industry.
GR Engineering Ltd
Matrix Composites and Engineering Ltd
Mossgrove Nominees Pty Ltd
None
Member, Audit and Risk Committee
80,000 fully paid ordinary shares
Cue Energy Resources LimitedAnnual Report 2017/18Cue Energy Resources Limited Director’s Report 30 June 2018
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Rebecca DeLaet
Non-Executive Director (appointed 11 April 2018)
M.Fin, B.Sicence
Ms. DeLaet has worked for the Ofer Global Group of companies since 1990.
For the last ten years she has overseen the Group’s finance activities, including
debt and equity financing, treasury operations and risk management. Ms.
DeLaet was responsible for the initial structuring and capitalisation of Omni
Offshore Terminals’ assets in 1994, establishing an independent oil and gas
arm for the Ofer Global Group. Since then, she has been responsible for all of
the financing activities for the Omni organisation. Ms DeLaet has a Masters in
Finance and Bachelor of Science from the Wharton School at the University of
Pennsylvania.
New Zealand Oil & Gas Limited
None
Chair, Audit and Risk Committee
None
Richard Malcolm
Non-Executive Director (appointed 23 February 2018)
Richard Malcolm is a professional geoscientist with 34 years of varied oil and
gas experience within seven international markets. He began his career as
a Petroleum Geologist with Woodside Petroleum in Perth exploring for oil
and gas on the Northwest Shelf. He spent ten years with Ampolex Limited
(Perth and Sydney) as a Senior Explorationist and then Exploration Manager
in Western Australia and Asset Manager in Northern & Eastern Australia.
Following Mobil’s takeover of Ampolex, Mr Malcolm was appointed manager of
Mobil’s assets in Papua New Guinea. Three years later he joined OMV, initially
as Exploration Manager for Australia & New Zealand and later as Exploration
& Reservoir Manager for OMV Libya, General Manager Norway and in 2006,
Managing Director of OMV UK. Between 2008 and 2013, Mr Malcolm was chief
executive of Gulfsands Petroleum plc, an AIM listed production, exploration
and development company with operations in Syria, Tunisia, Morocco, USA
and Colombia. He is currently a director of Larus Energy Limited.
Larus Energy Limited
Puravida Energy NL
Member, Remuneration and Nomination Committee
None
Rod Ritchie
Non-Executive Director (appointed 23 February 2018)
B.Sc
Mr. Ritchie is a director of New Zealand Oil & Gas Limited. Rod joined the
board of New Zealand Oil & Gas in 2013. He graduated with a BSc, University
of Tulsa. He has 38 years of experience as a line manager and a Health, Safety,
Security and Environment executive in the oil and gas industry – including
being the corporate senior vice president of HSSE at OMV based in Vienna.
He is a member of the Society of Petroleum Engineers.
New Zealand Oil & Gas Limited
Sparc NZ
None
Member, Remuneration and Nomination Committee
None
17
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited Director’s Report 30 June 2018
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Name:
Title:
Qualifications:
Experience and expertise:
Name:
Title:
Qualifications:
Experience and expertise:
Samuel Kellner
Non-Executive Director (appointed 23 February 2018)
BA, MBA
Mr. Kellner is the Chairman of New Zealand Oil & Gas Limited. He has held a variety
of senior executive positions with the Ofer Global Group since joining the Group in
1980. He has been deeply involved in all Ofer Global Group’s business lines, with
a particular emphasis on offshore oil and gas, shipping and real estate, and has
advised Ofer Global Group companies on investments with a variety of investment
managers, hedge funds and private equity funds. Most recently, Mr. Kellner served
as President of Global Holdings Management Group (US) Inc. where he led North
American real estate acquisition, development and financing activities. Mr. Kellner
serves as an Executive Director of the main holding companies for the Zodiac
Maritime Limited shipping group and Omni Offshore Terminals Limited, a leading
provider of floating, production, storage and offloading (FSO and FPSO) solutions
to the offshore oil and gas industry. Mr Kellner graduated with a BA degree from
Hebrew University in Jerusalem. He has an MBA from the University of Toronto,
and taught at the University of Toronto while working toward a PhD in Applied
Economics.
New Zealand Oil & Gas Limited
Miller Global Properties, LLC
Omni Offshare Terminals Pte Ltd
Zodiac Shipping Group
None
None
Grant Worner
Non-Executive Chairman (resigned on 23 April 2018)
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.
Melanie Leydin
Executive Director (appointed 14 December 2017, resigned on 23 February 2018)
B.Business, CA, RCA
Ms. Leydin has 25 years’ experience in the accounting profession including
13 years in the Corporate Secretarial professions and is a company secretary
and finance officer for a number of entities listed on the Australian Securities
Exchange. She is a Chartered Accountant and a Registered Company Auditor.
Since February 2000, she has been the principal of Leydin Freyer, specialising
in outsourced company secretarial and financial duties.
Duncan Saville
Non-Executive Director (resigned 14 December 2017)
BCom (Hons), BSc (Hons), FCA, F Fin, FAICD
Mr. Saville is a Chartered Accountant. 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.
‘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.
18
Cue Energy Resources LimitedAnnual Report 2017/18Cue Energy Resources Limited Director’s Report 30 June 2018
Company secretary
Melanie Leydin
Ms. 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.
Meetings of directors
The number of meetings of the company’s Board of Directors (‘the Board’) held during the year ended 30 June 2018,
and the number of meetings attended by each director were:
Full Board
Remuneration and
Nomination Committee
Audit and Risk
Committee
Attended
Held
Attended
Held
Attended
Held
Alastair McGregor*
Koh Ban Heng
Andrew Jefferies*
Peter Hood*
Rebecca DeLaet**
Richard Malcolm*
Rod Ritchie*
Samuel Kellner*
Grant Worner***
Melanie Leydin****
Duncan Saville*****
2
8
2
2
1
2
2
1
8
1
5
2
9
2
2
1
2
2
2
8
1
6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
-
-
-
-
2
-
1
-
2
-
-
-
-
-
-
2
-
2
Held: represents the number of meetings held during the time the director held office.
* Alastair McGregor, Andrew Jefferies, Peter Hood, Richard Malcom, Rod Ritchie and Samuel Kellner were appointed on 23 February 2018.
** Rebecca DeLaet was appointed on 11 April 2018.
*** Grant Worner resigned from the Board on 23 April 2018.
**** Melanie Leydin was appointed as Executive Director on 14 December 2017 and resigned on 23 February 2018.
***** Duncan Saville resigned from the Board on 14 December 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 2018, 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.
19
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited Director’s Report 30 June 2018
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
Alastair McGregor (appointed Non-Executive Director on 23 February 2018, became Chairman of the Board on 24 April 2018)
(A) Director and executive details
The following persons acted as Directors of the company during or since the end of the financial year:
●
● Koh Ban Heng (Non-Executive Director)
● Andrew Jefferies (Non-Executive Director) - appointed 23 February 2018
● Peter Hood (Non-Executive Director) - appointed 23 February 2018
● Rebecca DeLaet (Non-Executive Director) - appointed 11 April 2018
● Richard Malcolm (Non-Executive Director) - appointed 23 February 2018
● Rod Ritchie (Non-Executive Director) - appointed 23 February 2018
● Samuel Kellner (Non-Executive Director) - appointed 23 February 2018
● Grant Worner (Non-Executive Chairman) - resigned 23 April 2018
● Melanie Leydin (Executive Director) - appointed 14 December 2017, resigned on 23 February 2018)
● Duncan Saville (Non-Executive Director) - resigned 14 December 2017
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:
● Matthew Boyall (Chief Executive Officer) - appointed 1 July 2017
● Melanie Leydin (Chief Financial Officer/Company Secretary) - appointed 3 July 2017
(B) Remuneration policy
The Board’s policy for remuneration of Executives and Directors is detailed below.
Remuneration packages are set at levels that are intended to attract and retain high calibre directors and employees and
align the interest of the Directors and Executives with those of the company’s shareholders. The Remuneration policy is
established and implemented solely by the Board.
Remuneration and other terms and conditions of employment are reviewed annually by the Board having regard to
performance and relevant employment market information. As well as a base salary, remuneration packages include
superannuation, termination entitlements and fringe benefits.
The Board is conscious of its responsibilities in relation to the performance of the Company. Directors and Executives
are encouraged to hold shares in the Company to align their interests with those of shareholders.
No remuneration or other benefits are paid to Directors or Executives by any subsidiary companies.
(C) Details of remuneration
The structure of non-executive Director and Executive remuneration is separate and distinct.
Non-Executive Directors
Remuneration of Non-Executive Directors is determined by the Board within the maximum amount approved by the
shareholders from time to time. The amount currently approved is $700,000, which was approved at the Annual General
Meeting held on 24 November 2011. The Company’s policy is to remunerate Non-Executive Directors at a fixed fee based on
their time involvement, commitment and responsibilities. Remuneration for Non-Executive Directors is not linked to individual
or company performance, however, to align Directors’ interests with shareholders’ interests, Non-Executive Directors are
encouraged to hold shares in the Company. The Board retains the discretion to award options or performance rights to Non-
Executive Directors based on the recommendation of the Board, which is always subject to shareholder approval.
Alastair McGregor, Andrew Jefferies, Rebecca DeLaet and Samuel Kellner have elected not to be paid by the Company.
20
Cue Energy Resources LimitedAnnual Report 2017/18Cue Energy Resources Limited Director’s Report 30 June 2018
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 2018, 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
A cash bonus was paid during this financial year. Details are disclosed in remuneration table below.
Employment contracts
Remuneration and other terms of employment for key executives Matthew Boyall is formalised in service agreement.
Details of the agreement is as follows:
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 is 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.
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.
21
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited Director’s Report 30 June 2018
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 - 2018
2018
Directors
*Alastair McGregor(i)
Koh Ban Heng
*Andrew Jefferies (i)
Peter Hood (i)
*Rebecca DeLaet (i)
Richard Malcolm (i)
Rod Ritchie (i)
*Samuel Kellner (i)
Grant Worner (iii)
Melanie Leydin (iv)
Duncan Saville (v)
Other Key
Management
Personnel:
Matthew Boyall
Short-term benefits
Cash
salary
and fees
$
Cash
bonuses
$
Non-
monetary
benefits
$
Consulting
fees
$
Long
service
leave
$
Post employment
Super-
annuation
Termination
payments
Total
$
$
$
-
47,500
-
13,151
-
12,010
13,151
-
60,976
7,400
17,018
-
-
-
-
-
-
-
-
-
-
-
300,000
471,206
25,774
25,774
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,141
-
-
-
-
-
6,798
6,798
20,049
21,190
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,500
-
13,151
-
13,151
13,151
-
60,976
7,400
17,018
352,621
524,968
*Alastair McGregor, Andrew Jefferies, Rebecca DeLaet and Samuel Kellner have elected not to be paid by the Company.
(i) Alastair McGregor, Andrew Jefferies, Peter Hood, Richard Malcolm, Rod Ritchie and Samuel Kellner were appointed on 23 February 2018.
(ii) Rebecca DeLaet was appointed on 11 April 2018.
(iii) Grant Worner resigned on 23 April 2018.
(iv) The balance disclosed represents the director fees paid to Melanie Leydin in her compacity as an Executive Director between 14 December 2017
and 23 February 2018. The Company also paid $108,000 for the year ended 30 June 2018 to Leydin Freyer Corp Pty Ltd (which Melanie is a Director)
in respect of Company Secretarial and Accounting services. This has not been disclosed in the remuneration table.
Short-term benefits
Cash
bonuses**
Non-
monetary
benefits (i)
$
Consulting
fees
$
Long
service
leave
$
Post employment
Super-
annuation
Termination
payments
Total
$
$
$
Cash
salary
and fees
$
2017
Name
Grant Worner
Duncan Saville (ii)
Koh Ban Heng
Brian Smith (iii)
*Andrew Knight (iv)
Other Key
Management
Personnel:
Andrew Knox (v)
Jeffrey Schrull (vi)
Matthew Boyall (vii)
22
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
8,437
-
63,053
1,102,786 1,489,499
216,265
-
1,102,786 2,264,406
-
-
Cue Energy Resources LimitedAnnual Report 2017/18Cue Energy Resources Limited Director’s Report 30 June 2018
* Andrew Knight director fee paid directly to NZOG.
(i) Non-performance based salary sacrifice benefits, including motor vehicle expenses.
(ii) Duncan Saville appointed 18 August 2016.
(iii) Brian Smith resigned 24 November 2016.
(iv) Andrew Knight resigned 18 August 2016.
(v) Andrew 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.
(vi) Jeffrey Schrull resigned 5 December 2016.
(vii) Matthew Boyall appointed to the position of CEO on 1 July 2017.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
2018
2017
2018
2017
2018
2017
Fixed remuneration
At risk - STI
At risk - LTI
Directors:
Koh Ban Heng
Peter Hood
Richard Malcolm
Rod Ritchie
Grant Worner
Melanie Leydin
Duncan Saville
Brian Smith
Andrew Knight
Other Key Management
Personnel:
Matthew Boyall
Andrew Knox
Jeffrey Schrull
100%
100%
100%
100%
100%
100%
100%
-
-
93%
-
-
100%
-
-
-
100%
-
100%
100%
100%
-
100%
100%
-
-
-
-
-
-
-
-
-
7%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
All remuneration paid to Matthew Boyall was incurred by the parent entity.
Matthew Boyall was appointed as Director of all the subsidiaries in the Group on 4 July 2017. Andrew Jefferies was
appointed as Director of all the subsidiaries (except for Cue Kalimantan Pte Ltd) in the Group on 23 April 2018.
(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 2018 (2017: nil).
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 2018.
23
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited Director’s Report 30 June 2018
The earnings of the consolidated entity for the five years to 30 June 2018 are summarised below:
2018
$’000
2017
$’000
2016
$’000
Restated
2015
$’000
2014
$’000
Production income from continuing operations
24,547
35,000
45,412
36,704
32,246
Profit/(Loss) before income tax expense from continuing
operations
5,058
(6,975)
(79,599)
26,916
753
Profit/(Loss) after income tax benefit/(expense)
7,739
(15,032)
(84,399)
32,191
(2,166)
Total Key Management Personnel Remuneration
525
2,264
2,419
2,061
1,713
Share price at start of year (cents)
Share price at end of year (cents)
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
2018
2017
2016
2015
2014
5.50
5.70
1.11
1.11
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)
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:
1Ordinary shares*
Non-Executive Directors
Andrew Jefferies
Peter Hood
Andrew Knox**
Balance at
the start of
the year
Balance on
date of Board
appointment
Additions
Disposals/
other
Balance at
the end of the
year
-
-
4,458,251
4,458,251
8,000
80,000
-
88,000
-
-
-
-
-
-
(4,458,251)
(4,458,251)
8,000
80,000
-
88,000
* Alastair McGregor, Koh Ban Heng, Rebecca DeLaet, Richard Malcolm, Rod Ritchie, Grant Worner, Melanie Leydin,
Duncan Saville and Matthew Boyall do not hold any fully paid ordinary shares.
** Andrew Knox was made redundant on 3 July 2017; his shareholding is no longer disclosed in this table.
1NZOG Offshore Limited (a related entity to Alastair McGregor, Andrew Jefferies, Rebecca DeLaet, Rod Richie and
Samuel Kellner) holds 349,368,803 fully paid ordinary shares in Cue.
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.
24
Cue Energy Resources LimitedAnnual Report 2017/18Cue Energy Resources Limited Director’s Report 30 June 2018
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 21 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.
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
___________________________
Alastair McGregor
Non-Executive Chairman
24 August 2018
25
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited Director’s Report 30 June 2018
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
Tel: +61 3 9603 1700
www.bdo.com.au
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Collins Square, Tower Four
Melbourne VIC 3008
Level 18, 727 Collins Street
GPO Box 5099 Melbourne VIC 3001
Melbourne VIC 3008
Australia
GPO Box 5099 Melbourne VIC 3001
Australia
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF CUE ENERGY RESOURCES
LIMITED
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF CUE ENERGY RESOURCES
LIMITED
As lead auditor of Cue Energy Resources Limited for the year ended 30 June 2018, I declare that, to the
best of my knowledge and belief, there have been:
As lead auditor of Cue Energy Resources Limited for the year ended 30 June 2018, 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
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
2. No contraventions of any applicable code of professional conduct in relation to the audit.
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.
This declaration is in respect of Cue Energy Resources Limited and the entities it controlled during the
period.
David Garvey
Partner
David Garvey
Partner
BDO East Coast Partnership
BDO East Coast Partnership
Melbourne, 24 August 2018
Melbourne, 24 August 2018
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
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
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
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.
26
Cue Energy Resources LimitedAnnual Report 2017/18
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 2018 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
___________________________
Alastair McGregor
Non-Executive Chairman
24 August 2018
27
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited Director’s Report 30 June 2018
Cue Energy Resources Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Note
Consolidated
2018
$’000
2017
$’000
Revenue
Production revenue from continuing operations
Production costs
Gross profit from production
Other income
Net foreign currency exchange gain/(loss)
Expenses
Impairment - Production
Exploration and evaluation expenditure
Administration expenses
Profit/(loss) before income tax benefit/(expense)
from continuing operations
Income tax benefit/(expense)
Profit/(loss) after income tax benefit/(expense) from continuing operations
Loss after income tax expense from discontinued operations
Profit/(loss) after income tax benefit/(expense) for the year
5
6
7
9
8
10
11
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
Profit/(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
24,547
(16,526)
8,021
432
475
-
(1,509)
(2,361)
5,058
2,681
7,739
35,000
(21,860)
13,140
219
(451)
(6,386)
(8,369)
(5,128)
(6,975)
(8,057)
(15,032)
-
(2,312)
7,739
(17,344)
(340)
-
(340)
(42)
669
627
7,399
(16,717)
7,739
-
7,739
7,399
-
7,399
-
-
-
7,399
(17,299)
(45)
(17,344)
(14,405)
(2,267)
(16,672)
-
(45)
(45)
(16,717)
28
Cue Energy Resources LimitedAnnual Report 2017/18The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes Cue Energy Resources Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Note
Consolidated
2018
$’000
Cents
2017
$’000
Cents
Earnings per share for profit/(loss) from continuing operations attributable
to the owners of Cue Energy Resources Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for 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 profit/(loss) attributable to the owners of Cue
Energy Resources Limited
Basic earnings per share
Diluted earnings per share
29
29
29
29
29
29
1.11
1.11
(2.15)
(2.15)
-
-
(0.32)
(0.32)
1.11
1.11
(2.48)
(2.48)
29
Cue Energy Resources LimitedAnnual Report 2017/18 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
Cue Energy Resources Limited
Statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Production properties
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Note
Consolidated
2018
$’000
2017
$’000
12
13
10
14
10
16
15
16
17
16,983
7,593
519
25,095
24
26,814
2,733
29,571
54,666
3,456
4,946
69
8,471
12,420
4,372
547
17,339
38
30,082
-
30,120
47,459
3,931
3,942
475
8,348
3,052
9,873
12,925
3,401
9,839
13,240
21,396
21,588
33,270
25,871
152,416
(340)
(118,806)
152,416
-
(126,545)
33,270
25,871
The above statement of financial position should be read in conjunction with the accompanying notes
30
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited
Statement of changes in equity
For the year ended 30 June 2018
Foreign
Currency
Translation
Reserve
$’000
Contributed
Equity
$’000
Accumulated
Losses
$’000
Non-
controlling
interest
$’000
Total
equity
$’000
Consolidated
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)
(45)
(17,344)
(42)
(42)
-
669
627
(17,299)
624
(16,717)
Balance at 30 June 2017
152,416
-
(126,545)
-
25,871
Foreign
Currency
Translation
Reserve
$’000
Contributed
Equity
$’000
Accumulated
Losses
$’000
Non-
controlling
interest
$’000
Total
equity
$’000
Consolidated
Balance at 1 July 2017
152,416
Profit after income tax benefit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
-
-
-
-
-
(340)
(340)
(126,545)
7,739
-
7,739
Balance at 30 June 2018
152,416
(340)
(118,806)
-
-
-
-
-
25,871
7,739
(340)
7,399
33,270
The above statement of changes in equity should be read in conjunction with the accompanying notes
31
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Interest received
Payments to suppliers (inclusive of GST)
Exploration and evaluation expenditure
Income tax paid
Royalties paid
Note
Consolidated
2018
$’000
2017
$’000
25,682
172
(13,666)
(1,832)
(2,972)
(552)
35,608
160
(16,312)
(13,900)
(6,736)
(470)
Net cash from/(used in) operating activities
28
6,832
(1,650)
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
Cash flows from financing activities
Net cash from financing activities
Net increase/(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
Cash and cash equivalents at the end of the financial year
(2,766)
-
-
(6,434)
(11)
974
(2,766)
(5,471)
-
-
4,066
12,420
497
(7,121)
20,490
(949)
16,983
12,420
The above statement of cash flows should be read in conjunction with the accompanying notes
32
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
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 24 August 2018. 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 parent entity’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 24.
33
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
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 2018 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) 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.
(g) Inventories
Inventories consist of hydrocarbon stock. Inventories are valued at the lower of cost and net realisable value. Cost
is determined on a weighted average basis and includes direct costs and an appropriate portion of fixed production
overheads where applicable.
34
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 2. Summary of significant accounting policies (continued)
(h) 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.
(i) 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.
(j) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
(k) 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.
(l) Foreign currency
Functional and presentation currency
The Group’s relevant functional currency is the currency of the primary economic environment in which it operates. The
consolidated financial statements are presented in Australian dollars, as this is the Group’s 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.
35
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 2. Summary of significant accounting policies (continued)
Foreign operations
The results and financial position of Cue’s foreign operations are translated into its presentation currency using the
following procedures:
(a)
(b)
(c)
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;
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 month end; and
all resulting exchange differences shall be recognised in other comprehensive income.
(m) 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 2018.
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 consolidated entity holds the following financial instruments (refer note 19):
• Cash and cash equivalents
• Trade and other receivables
• Trade and other payables
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
Management performed detailed assessment using the five step model to determine the potential impact consequential
to AASB 15 adoption.
Step 1: Identify the contracts with the customers and consider the potential combination of contracts.
The consolidated entity holds contracts with operators, joint venture partners and customers in Indonesia and New
Zealand where production income is generated.
Step 2: Identify separate performance obligations
Crude oil - the contract indicates a principal agency relationship between the consolidated entity and the buyer, whether
the buyer ensures to sell crude oil lifted for the consolidated entity. The performance obligation is to provide crude oil for
passage to the permanent flange connection of the receiving vessel. This constitutes a single performance obligation.
Gas - the sales contract indicates the performance obligation is to deliver gas to the buyer at agreed delivery pressure.
This constitutes a single performance obligation.
Step 3: Determine the transaction price
Crude oil - the consolidated entity entitles to receive sales revenue from each cargo of crude oil at a price agreed with
3rd party and the operator. This constitutes as a fixed price consideration.
Gas - the transaction price for delivering performance obligation is predetermined in the sales contract.
Step 4: Allocate the transaction price
The transaction price is allocated 100% to the single performance obligation.
Step 5: Recognise revenue when a performance obligation is satisfied
Crude Oil: the performance obligation is satisfied at a point in time when crude oil is delivered to the buyer.
Gas: the performance obligation is satisfied during the month when gas is delivered to the buyer.
36
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
The assessment indicates that the pattern of revenue recognition will retain the same under AASB 15 Revenue from
Contracts with Customers as it has been recognised under AASB 118 Revenue. Therefore management does not
believe the adoption of this accounting standard will have any impact to revenue recognition.
AASB 16 Leases (applicable to annual reporting periods beginning on or after 1 January 2019)
The consolidated entity will adopt this standard from 1 July 2019. The standard will affect primarily the accounting for the
consolidated entity’s operating leases. As at reporting date, the consolidated entity has non-cancellable operating leases
commitments of $0.1 million (refer to note 23). Management does not expect the adoption of this accounting standard
will have a material impact on the consolidated entity’s financial position.
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. $2.73 million deferred tax assets on Maari restoration
provision were recognised as at 30 June 2018 (2017: Nil) (refer to note 10).
(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 13 production properties are amortised on a unit-of-production basis, with separate calculations being
made for each resource. Estimates of reserve quantities are a critical estimate impacting amortisation of production
property assets.
(iv) Estimates of reserve quantities
The estimated quantities of Proven and Probable hydrocarbon reserves reported by the Company are integral to the
calculation of the amortisation expense relating to Production Property Assets, and to the assessment of possible
impairment of these assets. Estimated reserve quantities are based upon interpretations of geological and geophysical
models and assessments of the technical feasibility and commercial viability of producing the reserves. These
assessments require assumptions to be made regarding future development and production costs, commodity prices,
exchange rates and fiscal regimes. The estimates of reserves may change from period to period as the economic
assumptions used to estimate the reserves can change from period to period, and as additional geological data is
generated during the course of operations. Reserves estimates are prepared in accordance with the Company’s policies
and procedures for reserves estimation which conform to guidelines prepared by the Society of Petroleum Engineers.
(v) 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.
37
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
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.
At reporting date, the Group operates primarily in Australia but also has international operations in Indonesia and New
Zealand. On 18 December 2017, the Group deregistered its wholly owned subsidiary, Cue Resources Inc. The remaining
debtor was fully written off. Therefore, the Group is organised into three principle geographic segments: Australia, New
Zealand and Indonesia. 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 assessment performance and in
determining the allocation of resources.
Information regarding the Group’s reportable segments is presented below:
2018
Revenue
Revenue from continuing operations
Production expenses (excluding amortisation)
Gross profit (excluding amortisation)
Other revenue
Impairment - production
Exploration and evaluation expenditure
Foreign exchange movement
Earnings before interest expense, tax,
depreciation and amortisation
Australia
$’000
NZ
$’000
Indonesia
$’000
Total
$’000
-
-
-
431
-
(336)
519
10,616
(5,058)
5,558
-
-
-
(312)
13,931
(6,038)
7,893
1
-
(1,173)
268
24,547
(11,096)
13,451
432
-
(1,509)
475
(1,732)
5,245
6,989
10,502
2017
Revenue
Revenue from continuing operations
Revenue from discontinuing operations
Production expenses (excluding
amortisation)
Gross profit (excluding amortisation)
Other revenue
Impairment - production
Exploration and evaluation expenditure
Foreign exchange movement
Earnings before interest expense,
tax, depreciation and amortisation
* discontinued operations
Australia
$’000
NZ
$’000
Indonesia
$’000
USA*
$’000
Disc. Ops
USA*
$’000
Total
$’000
-
-
-
-
215
-
(2,490)
(407)
10,485
-
(5,708)
4,777
-
(6,386)
6
-
24,515
-
(9,756)
14,759
4
-
(5,885)
(34)
-
-
(34)
(34)
-
-
-
(10)
-
593
(845)
(252)
123
-
-
29
35,000
593
(16,343)
19,250
219
(6,386)
(8,369)
(422)
(7,780)
(1,603)
8,844
(44)
(2,252)
(2,835)
38
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 4. Financial reporting by segments (continued)
TOTAL SEGMENT ASSETS
Current Assets
Non-current Assets
Total 30 June 2018 Assets
Current Assets
Non-current Assets
Total 30 June 2017 Assets
TOTAL SEGMENT LIABILITIES
Current Liabilities
Non-current Liabilities
Total 30 June 2018 Liabilities
Current Liabilities
Non-current Liabilities
Total 30 June 2017 Liabilities
Major customers
Australia
$’000
NZ
$’000
Indonesia
$’000
Total
$’000
17,027
24
17,051
10,448
38
10,486
353
41
394
1,680
24
1,704
2,414
22,538
24,952
1,923
21,857
23,780
1,392
9,760
11,152
1,079
9,500
10,579
5,654
7,009
12,663
4,968
8,225
13,193
6,725
3,124
9,849
5,589
3,716
9,305
25,095
29,571
54,666
17,339
30,120
47,459
8,471
12,925
21,396
8,348
13,240
21,588
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 (2017: 100%).
Reconciliation of earnings before interest expense, tax, depreciation and amortisation (EBITDA) to Profit/(Loss) before
Income Tax:
EBITDA
Depreciation
Amortisation
Profit/(Loss) before income tax expense (including discontinued operations)
Note 5. Production costs
Production costs
Amortisation of production properties
Consolidated
2018
$’000
10,502
(14)
(5,430)
5,058
2017
$’000
(2,835)
(32)
(6,420)
(9,287)
Consolidated
2018
$’000
2017
$’000
(11,096)
(5,430)
(16,526)
(15,498)
(6,362)
(21,860)
39
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 6. Other income
Interest from cash and cash equivalents
Other income
Accounting policy for other income
Consolidated
2018
$’000
2017
$’000
173
259
432
154
65
219
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 2018 the Group reassessed the carrying amount of its oil and gas assets, Production Properties (refer note
13), 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. There was no impairment over the production assets for
the year ended 30 June 2018.
In 2017 financial year, the Maari production asset was impaired by $6.39m to ensure that its closing carrying value of
$21.86 million less the abandonment provision of $9.5 million was less than its recoverable value of $12.36 million. The
abandonment provision was deducted from the carrying value of the asset as the cost of abandonment was included
in its cost base. This adjustment was necessary to allow an equitable comparison of its carrying value against its
recoverable value.
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% (2017: 14.3%) equivalent to
post-tax discount rates of 10% (2017:10%) depending on the nature of the risks specific to each asset.
Where an asset does not generate cash flows that are largely independent from other assets or groups of assets, the
recoverable amount is determined for the cash-generating unit to which the asset belongs.
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.
40
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 8. 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.
Note 9. Exploration and evaluation expenditure
Profit/(loss) before income tax from continuing operations includes the following specific
expenses:
Exploration Costs Expensed
Sampang PSC
Mahakam Hilir PSC
Mahato PSC
WA-359-P
WA-389-P
WA-409-P
PEP51313
PEP54865
Total exploration and evaluation expenditure
Consolidated
2018
$’000
2017
$’000
14
1,232
100
341
556
118
2,361
32
3,647
169
290
808
182
5,128
Consolidated
2018
$’000
2017
$’000
147
821
205
206
60
70
-
-
1,509
3,953
1,768
164
162
311
2,017
(25)
19
8,369
Accounting policy for exploration and evaluation project expenditure
AASB 6 Exploration for and Evaluation of Mineral Resources allows the Group to either capitalise or expense the
exploration and evaluation expenditure incurred. From the 2016 financial year, the Group elected to expense all
exploration and evaluation expenditure against profit and loss as incurred, until a decision to proceed to development is
made, in which case the expenditure is capitalised as an asset.
41
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 10. Income tax expense
Income tax expense
Current tax
Adjustment recognised for current tax in prior periods
Current tax (reversal)/recognition related to Cue Kalimantan
Deferred tax
Aggregate income tax (benefit)/expense
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Profit/(loss) before income tax expense/(benefit) 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-deductible / (deductible) mining deductions
Unrecognised temporary differences
Unrecognised tax losses
Recognition of deferred tax assets (i)
Difference in overseas tax rates
Adjustment recognised for current tax in prior periods
Income tax (benefit)/expense
Consolidated
2018
$’000
2017
$’000
2,970
7
(2,578)
(3,080)
6,564
(319)
2,578
(766)
(2,681)
8,057
5,058
-
5,058
(6,975)
(2,312)
(9,287)
1,517
(2,786)
(168)
-
(1,200)
1,794
(2,733)
680
(110)
(2,571)
119
54
906
4,180
-
3,325
5,798
2,259
(2,681)
8,057
(i) During the year there was a change in New Zealand tax laws which now allow a refundable credit for activities to
restore certain sites to their original condition. The deferred tax asset of $2.7 million relating to the Maari restoration
provision, which was previously not recognised in the financial statements, has been recognised as at 30 June 2018.
Cue has an ongoing Indonesian Tax matter relating to a notice of amended assessment which is being disputed by
Cue Kalimantan Pte Ltd on behalf of SPC E&P Pte Ltd. Cue is indemnified by SPC for any losses arising from this
disputed notice of assessment and has recognised a liability and receivable on the balance sheet.
Current tax liabilities
Deferred tax assets recognised
Restoration provision - Maari
Total deferred tax assets recognised
42
4,946
3,942
Consolidated
2018
$’000
2017
$’000
2,733
2,733
-
-
Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 10. 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
2018
$’000
2017
$’000
-
33
34,333
(901)
(156)
33,309
2,660
150
27,712
(667)
(153)
29,702
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.
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.
43
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 11. Discontinued operations
Description
On 1 November 2016, Cue Resources Inc. (a wholly owned subsidiary of Cue Energy Resources Limited) sold its
interest in Pine Mills production property in East Texas. On 18 December 2017, Cue Resources Inc. was wound up and
deregistered.
Financial performance information
Production revenue
Foreign currency exchange gain
Total revenue
Operating 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
Loss on disposal after income tax expense
Loss after income tax expense from discontinued operations
Cash flow information
Net cash used in operating activities
Net cash used in investing activities
Net decrease in cash and cash equivalents from discontinued operations
Consolidated
2018
$’000
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
593
29
622
(845)
(60)
(1,360)
(2,265)
(1,643)
-
(1,643)
(669)
-
(669)
(2,312)
Consolidated
2018
$’000
2017
$’000
-
-
-
(446)
(22)
(468)
44
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 11. 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 12. Current assets - trade and other receivables
Trade receivables
Less: Provision for doubtful debts
Other receivables and prepayments
Consolidated
2018
$’000
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67
347
3,824
336
554
115
5,243
1,008
67
79
559
1,196
2,909
2,334
Consolidated
2018
$’000
-
-
-
-
2017
$’000
974
(2,334)
(1,360)
(1,360)
Consolidated
2018
$’000
2017
$’000
3,639
-
3,954
7,593
4,241
(38)
169
4,372
45
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 12. Current assets - trade and other receivables (continued)
The aging of trade receivables at the reporting date was as follows:
Less than one month
1 to 6 months overdue
Consolidated
2018
$’000
2017
$’000
2,850
789
3,639
1,711
2,492
4,203
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
$38K impaired receivables from 2017 financial year has been written off during 2018 financial year.
The Directors consider that the carrying value of receivables reflects their fair values.
Accounting policy for trade and other receivables
Trade 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 13. Non-current assets - Production properties
Production properties
Consolidated
2018
$’000
2017
$’000
26,814
30,082
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 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
Expenditure during the year
Amortisation expense
Changes in abandonment provision – production (note 16)
Balance at 30 June 2018
46
Total
$’000
42,564
(6,386)
3,349
(6,362)
(3,083)
30,082
2,640
(5,430)
(478)
26,814
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 13. Non-current assets - Production properties (continued)
Net accumulated costs incurred on areas of interest
Joint Venture assets
- Oyong and Wortel – Sampang PSC
- Maari – PMP 38160
Balance at 30 June 2018
$’000
7,009
19,805
26,814
Accounting policy for production properties
Production properties are carried at the reporting date at cost less accumulated amortisation and accumulated impairment
losses. Production properties represent the accumulation of all exploration, evaluation, development and acquisition
costs in relation to areas of interest in which production licences have been granted.
Amortisation of costs is provided on the unit-of-production basis, separate calculations being made for each resource.
The unit-of-production basis results in an amortisation charge proportional to the depletion of economically recoverable
reserves (comprising both proven and probable reserves), and is shown as a separate line item in profit or loss.
Amounts (including subsidies) received during the exploration, evaluation, development or construction phases which
are in the nature of reimbursement or recoupment of previously incurred costs are offset against such capitalised costs.
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.
Note 14. Current liabilities - trade and other payables
Trade payables and accruals
Amounts due to directors and director related entities
Refer to note 19 for further information on financial instruments.
Consolidated
2018
$’000
2017
$’000
3,414
42
3,456
3,860
71
3,931
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.
47
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 15. Non-current liabilities - deferred tax liabilities
Deferred tax liability recognised comprise of
Production properties
Less deferred tax assets - Restoration provision
Deferred tax liability
Note 16. Non-current liabilities - provisions
Employee benefits
Restoration
Movements in each class of provision during the financial year are set out below:
Balance sheet movement (note 13)
P&L movement
Total
Consolidated
2018
$’000
2017
$’000
3,084
(32)
3,539
(138)
3,052
3,401
Consolidated
2018
$’000
41
9,832
2017
$’000
24
9,815
9,873
9,839
2018
$’000
(478)
495
17
2017
$’000
(3,083)
(41)
(3,124)
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. Expected timing of outflow of restoration
liabilities is not within the next 12 months from the 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.
48
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 16. Non-current liabilities - provisions (continued)
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.
Note 17. Equity - contributed equity
Consolidated
2018
Shares
2017
Shares
2018
$’000
2017
$’000
Ordinary shares - fully paid
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 18. 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 2018 management did not pay any dividends (2017: nil).
There has been no change during the year to the strategy adopted by management to control the capital of the entity.
49
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 18. Equity - Capital management (continued)
The gearing ratios for the years ended 30 June 2018 and 30 June 2017 are calculated as follows:
Trade and other payables
Tax liabilities
Less cash and cash equivalents
Total Equity
Total capital
Consolidated
2018
$’000
(3,456)
(4,946)
16,983
30,537
39,118
2017
$’000
(3,931)
(3,942)
12,420
25,871
30,418
The gearing ratio is nil for both 2017 and 2018 financial year, as the Group does not have external debt other than trade
payables and tax liabilities.
Note 19. 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
2018
$’000
2017
$’000
2018
$’000
2017
$’000
16,983
7,593
12,420
4,372
16,983
7,593
12,420
4,372
Non-traded financial assets
24,576
16,792
24,576
16,792
Financial liabilities
Trade and other payables
Non-traded financial liabilities
3,456
3,456
3,931
3,931
3,456
3,456
3,931
3,931
50
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 19. Financial instruments (continued)
Risk Exposures and Responses
(a) Fair value risk
The financial assets and liabilities of the Group are recognised in the statement of financial position at their fair value in
accordance with the accounting policies set out in note 2. In all instances the fair value of financial assets 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.
(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
2018
$’000
2017
$’000
16,983
12,420
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.
51
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 19. Financial instruments (continued)
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
2018
$’000
2017
$’000
170
(170)
170
(170)
124
(124)
124
(124)
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 2018
30 June 2017
USD
$’000
12,940
7,215
NZD
$’000
294
65
2,017
1,093
IDR
$’000
8
15
41
USD
$’000
7,831
4,203
NZD
$’000
96
93
IDR
$’000
199
15
1,927
742
15
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:
Consolidated
USD
$’000
NZD
$’000
IDR
$’000
1,814
(1,814)
1,814
(1,814)
73
(73)
73
(73)
2
(2)
2
(2)
2018
TOTAL
$’000
1,889
(1,889)
1,889
(1,889)
Impact on post-tax profit
Exchange rates +10%
Exchange rates -10%
Impact on equity
Exchange rates +10%
Exchange rates -10%
52
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 19. Financial instruments (continued)
Impact on post-tax profit
Exchange rates +10%
Exchange rates -10%
Impact on equity
Exchange rates +10%
Exchange rates -10%
Consolidated
USD
$’000
NZD
$’000
IDR
$’000
1,011
(1,011)
1,011
(1,011)
55
(55)
55
(55)
20
(20)
20
(20)
2017
TOTAL
$’000
1,086
(1,086)
1,086
(1,086)
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 2018, the Group had no open oil price swap contracts (2017: 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
2018
$’000
2017
$’000
2,123
(2,123)
2,681
(2,681)
2,123
(2,123)
2,681
(2,681)
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.
(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.
53
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 19. Financial instruments (continued)
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 2018.
Consolidated 2018
Non-derivative financial liabilities
Trade and other payable (Note 14)
Consolidated 2017
Non-derivative financial liabilities
Trade and other payables
(f) Credit risk
12 months
or less
$’000
1 to 2
years
$’000
2 to 5
years
$’000
More than
5 years
$’000
3,456
3,456
3,931
3,931
-
-
-
-
-
-
-
-
-
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.
Note 20. 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
54
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 20. Key management personnel disclosures and related party disclosures (continued)
Short term employment benefits (including non-monetary benefits)
Cash bonuses
Consulting fees*
Post employment benefits
Termination payments**
Total employee benefits
Consolidated
2018
$
471,206
25,774
-
27,988
-
2017
$
750,600
-
347,967
63,053
1,102,786
524,968
2,264,406
*2017 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
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 $259,474 in sublease income for the year ending 30 June 2018 (2017: 64,868).
During the financial year, the consolidated entity engaged Leydin Freyer Corp Pty Ltd (where Melanie Leydin is a
Director) to provide CFO and company secretarial services. The arrangement is on normal commercial terms. The
consolidated entity paid $108,000 in relation to these services for the year ending 30 June 2018 (2017: Nil).
Repayment of amounts owing to the Company as at 30 June 2018 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 and 2018 financial year.
The ultimate parent company is O.G. Oil & Gas (Singapore) Pte. Ltd., a company incorporated in Singapore.
Note 21. Auditors remuneration
During the financial year the following fees were paid or payable for services provided by the auditor of the company:
Audit services -
Audit or review of the financial statements
Other services -
Advisory services
Tax compliance
No other services were provided by the auditor during the year, other than those set out above.
Consolidated
2018
$
2017
$
114,799
183,614
-
20,375
20,375
135,174
2,678
50,950
53,628
237,242
55
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 22. Contingent assets and liabilities
The Group has no contingent assets or liabilities as at 30 June 2018 (2017: Nil).
Cue Energy Resources Limited and Cue Resources Inc. have been named as defendants, along with a number of other
companies, in litigation pending in Texas, USA in relation to the Pine Mills oilfield. Cue Energy Resources Limited and
Cue Resources Inc. believe the suit has no merit and have filed motions to dismiss the proceedings.
Note 23. Commitments for expenditure
Consolidated
2018
$’000
2017
$’000
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
34,800
31,300
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
c) Operating lease commitments***
Non-cancellable operating lease are payable as follows:
Within one year
One to five years
-
2,122
122
2
124
363
124
487
* 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.
*** The operating lease commitments consist of the following:
- Property lease at Level 3, 10-16 Queen Street Melbourne is due to expire in September 2018. Management is currently negotiating new lease terms.
- Property lease at 357 Collins Street Melbourne is due to expire in October 2018. Management will not be renewing this lease.
- Minor lease commitment on printer.
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.
56
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 24. 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
2018
$’000
(1,403)
(1,403)
2017
$’000
(16,170)
(16,170)
Parent
2018
$’000
2017
$’000
17,009
12,345
24,853
27,554
353
394
1,669
1,693
152,416
(127,957)
152,416
(126,555)
24,459
25,861
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for the acquisition of capital assets as at 30 June 2018 (2017: nil).
Lease commitments
The parent entity has no commitments in relation to leases as at 30 June 2018 other than disclosed in note 23.
57
Cue Energy Resources LimitedAnnual Report 2017/18
Note 25. 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**
Cue Taranaki Pty Ltd
Cue Cooper Pty Ltd***
Cue Exploration Pty Ltd
Principal place of business / Country
of incorporation
2018
%
2017
%
Ownership interest
Australia
Australia
Singapore
Australia
Australia
USA
Australia
Australia
Australia
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
** Cue Resources Inc. was deregistered in December 2017.
*** Cue Cooper Pty Ltd was a dormant entity which was deregistered in March 2018.
Note 26. Interests in joint operations
Property
Operator
Petroleum exploration properties
Carnarvon Basin – Western Australia
WA-359-P
Cue Exploration Pty Ltd
WA-389-P
WA-409-P
Cue Exploration Pty Ltd
BP Developments Australia Pty Ltd
Indonesia
Mahakam Hilir PSC Cue Kalimantan Pte Ltd
Mahato PSC
Texcal Mahato Pte Ltd
Petroleum production properties
Cue Interest
(%)
Gross
Area (km2)
Net Area
(km2)
Permit
expiry date
100
100
20
645
645
25/04/2019
1,939
775.60
08/10/2020
565
169.50
20/07/2021
100
12.50
222.14
5,600
88.90
15/05/2020
700 20/07/2018*
New Zealand
PMP38160
Madura - Indonesia
Sampang
OMV New Zealand Limited
5
80.18
4
02/12/2027
Santos (Sampang) Pty Ltd
15 (8.18 Jeruk Field)
534.50
80.20
04/12/2027
*The operator has submitted an application for an extension of the Exploration permit term due to lost time during the Exploration period.
58
Cue Energy Resources LimitedAnnual Report 2017/18
Note 26. Interests in joint operations (continued)
Interests in joint operations are accounted for using the equity method of accounting. Information relating to joint ventures
that are material to the consolidated entity are set out below:
Summarised financial information
Summarised statement of financial position
Cash and cash equivalents
Receivables
Inventory
Deferred tax assets
Production properties (note 13)
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
2018
$’000
2017
$’000
5
3,930
519
2,733
-
4,193
547
-
26,814
30,082
34,001
34,822
3,112
1,370
9,832
3,052
2,653
1,365
9,815
3,482
17,366
17,315
16,635
17,507
24,547
35,000
(9,881)
(13,739)
14,666
21,261
-
-
14,666
21,261
Refer to note 22 in relation to contingent liabilities of the Group.
Commitments for expenditure are disclosed in note 23.
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.
59
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 27. Events after the reporting period
On 9 August 2018, the consolidated entity announced that its 100% owned subsidiary, Cue Exploration Pty Ltd,
had received notification from the National Offshore Petroleum Titles Administrator (NOPTA) of the approval of a 12
month suspension of Exploration Permit WA-359-P Permit Year 3, 4 and 5 work program commitments, a Year 4 work
commitment variation, and a 12 month extension of the permit until 25 April 2019.
The suspension and extension will allow time for detailed well planning using newly available data and preparing for
drilling the Ironbark-1 well, targeted for 2019.
No other matter or circumstance has arisen since 30 June 2018 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.
Note 28. Reconciliation of profit/(loss) after income tax to net cash from/(used in) operating activities
Profit/(loss) after income tax (expense)/benefit for the year
Adjustments for:
Abandonment provision write back
Production property write down
Depreciation
Amortisation
Loss from discontinued operations
Reversal of Non-controlling interest
Net (gain)/loss on foreign currency conversion
Change in operating assets and liabilities:
(Increase)/Decrease in trade and other receivables
Decrease in inventories
Increase in deferred tax assets
Decrease in trade and other payables
Increase in tax liabilities
Decrease in deferred tax liabilities
Decrease in provisions
Consolidated
2018
$’000
2017
$’000
7,739
(17,344)
495
-
14
5,430
-
-
(728)
(3,222)
28
(2,733)
(475)
1,004
(348)
(372)
3,083
6,446
32
6,362
2,312
(669)
422
109
1,063
-
(1,481)
2,077
(766)
(3,296)
Net cash from/(used in) operating activities
6,832
(1,650)
60
Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 29. Earnings per share
Earnings per share for profit/(loss) from continuing operations
Profit/(loss) after income tax attributable to the owners of Cue Energy Resources Limited
Consolidated
2018
$’000
2017
$’000
7,739
(15,032)
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
Loss after income tax attributable to the owners of Cue Energy Resources Limited
Cents
Cents
1.11
1.11
(2.15)
(2.15)
Consolidated
2018
$’000
2017
$’000
-
-
-
(2,312)
45
(2,267)
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 profit/(loss)
Profit/(loss) after income tax
Non-controlling interest
Cents
Cents
-
-
(0.32)
(0.32)
Consolidated
2018
$’000
2017
$’000
7,739
(17,344)
-
45
Profit/(loss) after income tax attributable to the owners of Cue Energy Resources Limited
7,739
(17,299)
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
Cents
Cents
1.11
1.11
(2.48)
(2.48)
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Cue Energy Resources LimitedAnnual Report 2017/18
Cue Energy Resources Limited
Notes to the financial statements
30 June 2018
Note 29. Earnings per share (continued)
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the earnings 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.
62
Cue Energy Resources LimitedAnnual Report 2017/18
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 2018, 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 2018 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.
63
Cue Energy Resources LimitedAnnual Report 2017/18
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 2018 is $26.814 million
assessment of the recoverable value of each
(2017: $30.082 million), which consists of Maari and
production asset.
Sampang (Oyong and Wortel) assets, as disclosed in
Note 13.
The nature of these production property assets
requires management to assess for indicators of
impairment. For the year ended 30 June 2018,
management has undertaken a formal impairment test
of these production property assets using a value in use
(VIU) methodology. A VIU impairment assessment 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 management’s
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.
64
Cue Energy Resources LimitedAnnual Report 2017/18
Accounting for Tax and Uncertain Tax Positions
Key audit matter
How the matter was addressed in our audit
The consolidated entity recognised deferred tax assets
To assess the Group tax balances now and in the
($2.7million), deferred tax liabilities ($3.1million), and
future, we involved our taxation specialists, to assist
tax liabilities ($4.9million), which are disclosed in
in our assessment of the deferred tax asset, deferred
Notes 10 and 15.
tax liabilities and current tax liabilities recorded at
There are several ongoing tax disputes between Cue
year end.
Kalimantan or Cue Sampang (100% wholly owned
We have also evaluated the assessment of uncertain
subsidiaries of Cue Energy Resources Group) and the
tax positions in the Indonesian subsidiaries through
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 contained in the Group’s annual report for the year ended 30 June 2018, but does not
include the financial report and our auditor’s report thereon, which we obtained prior to the date of
this auditor’s report, and the Reserve Report and Chairman’s Report, which is expected to be made
available to us after that date.
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
identified above 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 on the other information that we obtained prior to the date
of this auditor’s report, 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.
When we read the Reserve Report and Chairman’s Report, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and will request
that it is corrected. If it is not corrected, we will seek to have the matter appropriately brought to the
attention of users for whom our report is prepared.
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Cue Energy Resources LimitedAnnual Report 2017/18
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 8 to 13 of the directors’ report for the year
ended 30 June 2018.
In our opinion, the Remuneration Report of Cue Energy Resources Limited, for the year ended 30 June
2018, 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, 24 August 2018
66
Cue Energy Resources Limited
Annual Report 2017/18
Cue Energy Resources Limited
Shareholder information
30 June 2018
Shareholder Information
1. Distribution of equitable securities
The shareholder information set out below was applicable as at 23 August 2018:
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
59
164
500
1,581
307
2,611
354
The registered names and holdings of the 20 largest holdings of quoted ordinary shares in the Company as at 23 August
2018:
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. First NZ Capital Scrip Limited
9. Mrs Janet Backhouse
10. Tintern (Vic) Pty Ltd (A & P Miller Family A/C)
11. Mr Richard Tweedie (Richard Tweedie S/F A/C)
12. Berne No 132 Nominees Pty Ltd (52293 A/C)
13. Grizzley Holdings Pty Limited
14. Lakemba Pty Ltd
15. Ms Rachel Irene Alembakis
16. Custodial Services Limited (Beneficiaries Holdings A/C)
17. Milliara Nominees (Aust) Pty Limited (Gill Family A/C)
18. Beira Pty Limited
19. Mr Damiano Giorgio Pilla
20. Mr Koo Sing Kuang and Mrs Lai Wah Kuang (Lakemba Super Fund A/C)
3. Vendor Securities
There are no restricted securities on issue as at 23 August 2018.
Ordinary shares
Number held
% of total
shares
issued
349,368,803
113,118,616
17,225,025
10,000,000
7,500,000
5,038,415
5,000,000
4,500,000
3,847,338
3,370,701
3,363,477
3,300,000
3,202,203
3,084,051
2,960,000
2,825,629
2,818,289
2,205,000
1,996,427
1,909,788
546,633,762
50.04
16.20
2.47
1.43
1.07
0.72
0.72
0.64
0.55
0.48
0.48
0.47
0.46
0.44
0.42
0.40
0.40
0.32
0.29
0.27
78.27
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Cue Energy Resources LimitedAnnual Report 2017/18 Cue Energy Resources Limited
Shareholder information
30 June 2018
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. 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
6. Sharecodes
ASX Share Code: CUE
ADR Share Code: CUEYY
68
Cue Energy Resources LimitedAnnual Report 2017/18 Level 3, 10-16 Queen Street,
Melbourne VIC 3000, Australia
Phone: +61 3 8610 4000
WWW.CUENRG.COM.AU