Cue Energy Resources Limited
Annual Report
2020
About Us
Cue Energy Resources Limited 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
Sustainability
Corporate Directory
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
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Cue Energy Resources LimitedAnnual Report 2020 Joint Operations
INDONESIA
Mahato PSC
Interests
Texcal (Operator)
Central Sumatra Energy
Bukit Energy
Cue
Mahakam Hilir PSC
Interests
Cue (Operator)
Sampang PSC
Interests
Medco Energi (Operator)
Singapore Petroleum Company
Cue
51%
11.5%
25%
12.50%
100%
45%
40%
15%
AUSTRALIA
Carnarvon Basin Permits
Interests
WA-359-P
BP (Operator)
Cue
Beach Energy
New Zealand Oil & Gas
WA-389-P
Cue (Operator)
WA-409-P
Cue
BP (Operator)
42.5%
21.5%
21%
15%
100%
20%
80%
2 Cue Energy Resources Limited
Annual Report 2020
NEW ZEALAND
Maari and Manaia Oil Fields
Interests
PMP 38160
OMV (Operator)
Horizon Oil
Cue
69%
26%
5%
SECTION HEADINGNEW ZEALANDINDONESIAAUSTRALIAHead OfficeMelbourneCue JakartaOffice
Chairman’s Overview
Alastair McGregor
Dear Shareholders,
As you read this annual report, we are all living through the unprecedented global COVID-19 pandemic. This is having
an unprecedented impact on how we all live our lives. Many are suffering with serious health consequences and through
the pandemic’s effect on the global economy. Like most industries, the Oil & Gas industry is not immune to effects of the
pandemic. Many companies have been forced to significantly scale back their development programs and, in many cases,
are dealing with a dramatically reduced demand outlook.
As with many other companies, our staff have had to adopt to new working conditions due to COVID-19 restrictions in both
our Melbourne and Jakarta offices. The team has performed well in limiting the disruptions this has had on our business and
in this regard I would like to thank all Cue’s staff for their continued efforts in adapting to the new demands this crisis has
imposed.
With this backdrop Cue has faired well compared to others in our industry. We have benefited from the diversity of our
portfolio, with both gas sold under fixed price contracts and oil sold on the spot market. These diverse revenue streams have
combined with our existing cash resources to provide continued support for our exploration and development programs.
As we move into FY21, Cue and its partners are in the final stages of preparation for the Ironbark-1 exploration well in WA-
359-P. This is the most exciting opportunity that Cue has participated in for many years. The well is expected to commence
drilling during Q2 FY21.
Cue has a 21.5% interest in the Ironbark well, which has an estimate of 15Tcf of prospective recoverable gas.The Ironbark
prospect is only 50km from the North West Shelf LNG infrastructure, where our operator, BP, is a partner. If successful,
Ironbark’s proximity to this existing infrastructure should provide a clear path to commercialisation. In addition, Cue’s interests
in the nearby WA-409-P and WA-389-P blocks, provide a significant upside value opportunity if gas is discovered in the Deep
Mungaroo formation targeted by the Ironbark-1 exploration well.
During the year, the Sampang and Maari assets continued to provide steady revenue and, although we saw extremely low
oil prices for a period of time, our operating revenue of $23.9 million was only $1.8 million lower than the previous year.
Cue’s cash balance increased by 22% to $31.9 million over the year. With no debt, we are in a strong position to fund our
share of Ironbark-1 well and other development opportunities.
The development of the Paus Biru gas field, Indonesia, is one such opportunity. As recently announced, the Indonesian
government has approved the plan of development and the joint venture will now complete FEED studies and gas contracting
with the aim of a final investment decision during the fiscal year.
Despite the challenging backdrop effecting our industry and our communities, we are all looking forward to the coming year.
After many years of work, a number of exciting opportunities are set to become reality. We look forward to seeing that hard
work come to fruition.
Sincerely
___________________________
Alastair McGregor
Non-Executive Chairman
21 September 2020
3
Cue Energy Resources LimitedAnnual Report 2020
Chairman’s Overview
4 Cue Energy Resources Limited
Annual Report 2020
Photo credit: Diamond Offshore
SECTION HEADING CEO Report and Overview
of Operations and Finances
Matthew Boyall
Cue’s financial results for FY2020 show the strength of the company’s
business model. Our mix of revenue, from fixed price gas in Indonesia and
Brent linked oil in New Zealand, resulted in $24 million in revenue, only 7%
lower than the previous year, even as the oil price went through lows of less
than US$20 per barrel.
Cue increased its cash balance during the year to $31.9 million and has
no debt. This is an enviable position as we participate in exploration
and development projects in the coming year.
Cash balance increase to $31.94 million, an increase of 22% over the
previous year, including $12.01m in escrow to fund the company’s
share of the Ironbark-1 well.
Gas production is expected to continue strongly in the Sampang
PSC and Maari is expected to return to full production, with ESP
replacements in 2 wells completed and a workover of MR6a being
planned.
The Ironbark-1 exploration well in the Carnarvon Basin, Western
Australia is due to be drilled in Q2 FY2021. This is a significant
opportunity for Cue. Ironbark is a very large structure and, if
successful, Cue’s 21.5% interest could be company changing.
Cue is in a unique position as we enter FY2021 with a strong balance
sheet, ongoing cashflow from production, development planning at
Paus Biru and the Ironbark-1 exploration well.
Financials
Cue reported another successful year, with a strong balance sheet,
cash flow from Operations of $7.4 million and an increase in cash
balance to $31.9 million.
Revenue for the year of $23.9 million, was down 7% on the previous
year due to lower oil price and lower Maari production. While
the second half of FY20 saw historically low oil prices and global
uncertainty due to the emergence of COVID- 19, Cue’s revenue mix,
with 60% from fixed price gas in Indonesia and 40% from Brent linked
oil, limited the impact on the full year financial results.
Profit for the year of $1.31 million was down 85% from the previous
year as a result of lower revenue, an increase in production costs and
$2.7 million impairment of the Maari production asset due to lower oil
price forecasts, in line with current market conditions.
Production costs increased by $0.9 million (7%) due to higher New
Zealand Royalty payments and higher inventory costs at Maari. Direct
operating costs at Sampang and Maari production assets were 4%
lower than the previous year.
This strong balance sheet and continuing positive cash flow put the
company in a good position as the Ironbark-1 well is drilled and Paus
Biru development moves forward in FY2021.
Throughout the year, Cue has maintained its position of having no
debt.
Production
MAARI
Maari field provided $9.5 million of revenue to Cue during the financial
year, a reduction of 12% on the previous year due to production
disruptions and the collapse of global oil prices from January 2020.
During the first half of the year, workovers were completed on MR3,
MR4 and MN1 production wells to replace Electric Submersible
Pumps (ESP) and undertake well maintenance. At the end of the
half, all wells had returned to production.
After a good start to production in the second half of the year, a
number of factors resulted in an overall 17% reduction in production
for the year. MR6a, one of the highest producing wells in the field,
was shut in mid-March after sudden sand production. Further
investigation has assessed the cause as failure of downhole sand
screens and a workover plan is currently being finalised to remediate
the well, which is likely to take pace in late calendar year 2020. The
MR2 well was also shut-in around this time with suspected water
breakthrough, which is still being reviewed.
March and April 2020 saw the collapse of the global oil price, with
Brent oil, the benchmark for Maari crude, trading at an average of
less than US$20/bbl over April. Significant revenue reduction was
experienced from scheduled liftings during this period.
Two further production wells, MR9 and MR7, suffered production
5
Cue Energy Resources LimitedAnnual Report 2020 CEO REPORT AND OVERVIEW OF OPERATIONS AND FINANCES
CEO Report and Overview of Operations
Production
MAARI
Production (Cont’)
disruptions late in the second half of the year due to electric
submersible pump (ESP) failures. The failures occurred after
NEW ZEALAND (CONT’)
significant run times for both pumps and installation of replacements
PMP 38160 (Cont’)
has been completed.
The most significant planned increase, expected to be in the
Apart from the associated oil price reductions, direct impacts
vicinity of 2000 bopd, should come from the t the installation of
from COVID-19 were limited in the field. Production continued
compression on the Maari WHP to lower the production pressure of
through the nationwide COVID-19 lockdown which took effect
the wells. Preliminary work has been undertaken during the year, with
in New Zealand at midnight on 25 March 2020, with offshore
the final installation expected to be completed by March 2018.
staffing reduced to minimum levels required in order to maintain
A number of sidetrack drilling opportunities are also being investigate
health, safety and environmental obligations. Some delays in well
by the operator to target unproduced reservoirs in existing well
workovers and increased logistics costs are still being experienced
bores. These operations can be undertaken using the WHP workover
but will not have material impacts.
unit and coiled tubing. The target wells for this drilling are likely to be
On November 18 2019, Jadestone Energy Inc. (AIM:JSE, TSXV:JSE),
finalised during the first quarter of 2018.
announced that it had executed a sales and purchase agreement
The Joint Venture partners are reviewing a preliminary proposal to
(SPA) with OMV to acquire OMV’s 69% operated interest in the
develop the Moki reservoir at the Manaia field, approximately
PMP 38160 Permit, containing the Maari and Manaia fields.
6 km from Maari, where the Manaia-2 well was drilled in 2013. The
Conditions for completion of the acquisition include acceptance of
proposal has passed the first stage of the Operator’s tollgate process
Jadestone as operator by the Joint Venture partners, and achieving
and could include an appraisal well within 18-24 months and a
Government approvals prior to 15 November 2020. Government
further standalone or integrated development. Cue will carefully
and JV approvals are still pending.
review this project as preliminary studies progress.
New Zealand
TARANAKI PENINSULA LOCATION MAP – NEW ZEALAND
TARANAKI PENINSULA LOCATION MAP – NEW ZEALAND
New Zealand
Tui
Maui
Tui
Taranaki
Peninsula
Taranaki
Peninsula
SAMPANG
INDONESIA
Sampang revenue was in line with the previous year as gas
production from Oyong and Wortel remained strong. The produced
Sampang PSC
gas is sold on fixed price contracts which were not affected by the
The Oyong and Wortel fields continued to provide stable revenue
collapse of the global oil price during the second half of the year.
and be operated in a safe and reliable manner. In times of lower oil
price, fixed, high price gas production from these established, well
Overall, production was 9% lower than the previous year, although
managed fields provides sustainable cashflow.
second half production was 11% higher than first half as the
During FY2017, Oyong production averaged 120 bopd and 4mmcf/d
positive effects of the upgraded compression at the Grati Onshore
of gas net to Cue. Wortel field production averaged 5 mmcf/d net.
Production Facility were realised.
High cost oil production from Oyong ceased in June 2017 as part
The compressor installation was completed in late January 2020 on
of the conversion to gas only production. The project is expected to
time and budget and is expected to extend the future productivity
be completed by December 2017. Operating costs are expected to
of the Oyong and Wortel fields by reducing the inlet pressure
halve due to gas production requiring significantly fewer production
required at the onshore gas processing plant, allowing the wells to
facilities. Installation of a new compressor at the Grati processing
produce for longer.
plant will also allow gas to be produced at lower reservoir pressures,
adding to recoverable reserves and making the field economic well
During the second half of the year, the Indonesian Government
past 2020.
introduced regulations to cap the price of gas sold by upstream
producers to power generators and industrial users in Indonesia.
Drilling at the Paus near field exploration prospect is in the final
stages of review by the Joint Venture and a decision is expected
The regulations include provisions that any loss of sales revenue
during the 2018 fiscal year. The well would target the Mundu
to producers from lower sales price will be provided from the
reservoir which provides the gas production at Oyong.
Government share of PSC revenue, so that producer revenue is
not affected overall. These regulations are being implemented
Cue is optimistic about the future production from the Sampang PSC.
for all gas producers and will apply to a portion of Sampang
We have increased our estimate of Wortel 2P gas reserves by 36% this
production. No effect to Cue future revenue is expected from these
year, based on the continued high performance of the reservoir and
new regulations. New developments, including Paus Biru, are not
plan to undertake independent analysis of Oyong field reserves after
included in the Government pricing regulations.
the current gas conversion project is complete and the wells have
stabilised in gas only mode.
The Plan of Development (POD) for the Paus Biru gas field,
discovered in December 2018 by the Paus Biru-1 exploration well,
SAMPANG PSC LOCATION MAP – INDONESIA
SAMPANG PSC LOCATION MAP – INDONESIA
Java
Maui
10km
Java
PMP 38160
Maari
Maari
Manaia
Manaia
PMP 38160
10km
LEGEND
LEGEND
LEGEND
LEGEND
Cue Permit
Gas Field
Prospect
Cue Permit
Oil Field
Gas Field
Prospect
Cue Permit
Oil Field
Gas Field
Gas Condensate Field
Onshore Gas
Cue Permit
Oil Field
Gas Field
Gas Discovery
SEG Unitisation
Gas Line
Liquids Line
Cue Energy Resources Limited
Annual Report 2016/17
6
6
Madura Island
Madura Island
East Java
East Java
Wortel
Oyong
Jeruk
Wortel
Jeruk
Oyong
Paus Biru
Maleo
Maleo
Peluang
Peluang
Grati Onshore
Gas Facilities
Grati Onshore
Gas Facilities
30km
30km
Cue Energy Resources LimitedAnnual Report 2020 CEO REPORT AND OVERVIEW OF OPERATIONS AND FINANCES
was approved subsequent to the end of the year. The approved POD
consists of a single horizontal development well with an unmanned
wellhead platform (WHP), connected by a subsea pipeline to the
existing WHP at the Oyong field, approximately 27km away.
From the Oyong WHP, gas from Paus Biru will be transported using
the existing pipeline to the Grati Onshore Production Facility, which is
operated by the Sampang PSC joint venture, where it will be processed.
The joint venture will now proceed into the Front End Engineering and
Design (FEED) phase and negotiation of gas sales agreements. A Final
Investment Decision (FID) for the development is expected to be taken
by the joint venture mid 2021, with first gas expected late 2022.
The Sampang PSC is not being significantly affected by the ongoing
COVID-19 situation in Indonesia. The Operator has an COVID-19
plan in place to manage the health and safety of staff and minimise
the risk of disruptions to the operations.
Exploration
AUSTRALIA
WA-359-P
WA-359-P contains the Ironbark gas prospect which will be tested
by the Ironbark-1 exploration well, scheduled to be drilled in Q2
FY2021 by the Ocean Apex drill rig.
During the year, a site survey of the well location was completed,
detailed well and operations planning progressed and procurement
plans and purchasing of long lead items continued on target.
The Environment Plan (EP) for the Ironbark-1 exploration well
in exploration permit WA-359-P was approved by the National
Offshore Petroleum Safety and Environment Management Authority
(NOPSEMA) in July 2020.
Exploration permit WA-359-P is located in the Carnarvon Basin,
offshore Western Australia, approximately 50km from existing North
West Shelf LNG infrastructure. The Ironbark-1 well is expected to
drill to approximately 5500 metres and will be the first test of the
Ironbark gas prospect.
Cue is fully funded for its expected participating interest costs of the
well through funding from farm-in agreements with partners BP,
Beach Energy and New Zealand Oil & Gas and approximately $12
million of cash reserves which have been escrowed.
WA-409-P
WA-409-P adjoins the WA-359-P exploration permit and is mapped
as containing a portion of the Ironbark structure.
During the year, the Joint Venture was granted a variation,
suspension and extension to the permit terms which deferred
the requirement to drill an exploration well until October 2022,
suspended Permit Year 3 for 12 months and extended the permit
term by 12 months.
In conjunction with these amended permit terms, Cue executed
agreements with Beach Energy and New Zealand Oil & Gas to extend
the option periods for both companies until 90 days prior to the
expiry of Permit Year 4, in line with the suspension, extension and
variation to the drilling commitment in the Permit. As consideration
of the extended period Beach Energy and New Zealand Oil & Gas
each paid Cue an upfront fee equal to the estimated work program
costs of each company’s option interests until the end of Permit
Year 4.
Geophysical studies being undertaken by the joint venture to further
define the Ironbark prospect within WA-409-P include stochastic
inversion of existing seismic data.
CARNARVON BASIN LOCATION MAP – AUSTRALIA
Australia
WA-389-P
WA-389-P
WA-389-P
WA-359-P
WA-409-P
WA-359-P
North West Shelf
Angel
LEGEND
Cue Permit
Gas Field
Ironbark Prospect
Deep Mungaroo Leads
Wheatstone
Pluto
N
25km
NWS LNG
Pluto LNG
7
Cue Energy Resources LimitedAnnual Report 2020 CEO REPORT AND OVERVIEW OF OPERATIONS AND FINANCES
Exploration
AUSTRALIA
WA-389-P
WA-389-P adjoins WA-359-P to the West and is mapped to contain
part of a deep Mungaroo prospect which is the updip extension of
the Ironbark structure, with similar scale.
Cue was granted a variation, suspension and extension of the permit
terms in October 2019 which removed the requirement to drill an
exploration well during the permit term and replaced it with 250km2
of seismic reprocessing and interpretation and other geological
and geophysical studies. The permit term was also extended by 6
months to April 2021.
Reprocessing of 900km2 of seismic data over the Southern portion
of the permit and surrounding areas to further delineate the Deep
Mungaroo structure which is on trend with the immediately east
and downdip horst block containing the Ironbark Prospect is
almost complete.
Quantitative geophysical analysis of a shallower, Jurassic seismic
amplitude play and a review of the existing charge model and
sequence stratigraphy for both the Deep Mungaroo and the Jurassic
plays is underway.
MAHAKAM HILIR PSC LOCATION MAP – INDONESIA
Pelarang Samarinda
INDONESIA
Mahakam Hilir PSC
The Mahakam Hilir PSC contains the Naga Utara prospect and the
Naga Utara-4 appraisal well opportunity.
During the year, planning for the drilling of the well and discussions
with potential farm-in partners were progressed.
With the implementation of COVID-19 restrictions in Indonesia
during the second half of the year, planning and execution of drilling
operations was delayed indefinitely, and Cue initiated discussions
with the regulator to work out a practical way forward.
An extension to the exploration period of the PSC was granted by
the Indonesian regulator, extending the end date from May 2020 to
April 2021. As part of the extension, a condition was placed on the
PSC restricting title transfers during the extension period.
Cue was in discussions with a potential partner prior to the extension
grant and is assessing the impact of the title transfer restriction and
continuing COVID-19 situation on any future dealings and activities.
Mahato PSC
Two exploration wells were drilled in the Mahato PSC during
the year, resulting in the announcement of a 61.8 mmbbl OOIP
discovery at the PB field, by SKK Migas, the Indonesian Regulator,
on 16 April 2020.
Sambutan
MAHATO PSC LOCATION MAP – INDONESIA
Mahakam Hilir
PSC
Sanga Sanga
Bangko
Balam South
Sumatra
Mahato
PSC
Duri
Libo SE
Pamaguan
Nangka
LEGEND
Cue Permit
PB Oil Discovery
Major Oil Fields
PB
Minas
Kotabatak
Petapahan
40km
Kalimantan
Scale: 5km
LEGEND
Cue Permit
Oil Field
Gas Field
8
Cue Energy Resources LimitedAnnual Report 2020 CEO REPORT AND OVERVIEW OF OPERATIONS AND FINANCES
CORPORATE
As previously disclosed, Cue Energy Resources Ltd and Cue
Resources Inc. were named as defendants, along with a number of
other companies, in litigation in Texas, USA in relation to the Pine
Mills oilfield. As previously disclosed, 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. The case is entitled Hammerhead
Managing Partners, LLC v. Nostra Terra Oil & Gas Company, PLC,
et al., In the United States District Court For the Northern District
of Texas, No. 3:18-cv-1160. On March 27, 2019 the court dismissed
the claims against Cue in their entirety, giving the plaintiff leave to
refile its compliant. On April 26, 2019, the plaintiff filed an amended
complaint against Cue and the other defendants.
Cue Energy Resources Ltd and Cue Resources Inc. filed a motion to
dismiss the amended complaint, which was denied by the court on 5
March 2020 without commentary. A request by all parties to extend
the current case timetable due to the impacts of COVID-19 was
not approved by the court. The trial did not proceed as scheduled
during July 2020, however, due to a health issue affecting one of
the parties. The case currently does not have a new trial date.
The PB-1 exploration well commenced on 19 November 2019,
targeting the Early Miocene Bekasap sands, with a secondary
target, the overlying Telisa sands. Cue announced on 10 December
2019, that the PB-1 well was drilled to total depth and cased. Cue
was issued a default notice by the Operator, Texcal Mahato EP Ltd
(Texcal), referencing a deficient cash call which was not settled
by Cue. Cue stopped receiving full information from the operator
around the time of this notice.
On 17 December 2019 Cue announced that the cash call, which was
not material, and was the subject of the default notice referred to in
the ASX announcement of 10 December, had been paid.
Texcal, and other joint venture participants, are continuing their
claim to have excluded Cue from participation in operations at
the PB prospect, based on the issued default notice and claimed
decisions made around the time. These claims are rejected by Cue
as having no basis under the Joint Operating Agreement (JOA).
Cue is not receiving information from the Operator as required
under the JOA, in order to be able to fully assess the announcement
by SKKMigas or the status of current operations.
During the second half of the year, Texcal refused to refund Cue’s
share of the PSC performance bond, amounting to approximately
US$268,750 which was released by the Indonesian Government on
completion of the PSC work commitment. The return of the bond
is governed by a separate agreement with Texcal and is unrelated to
the claims being made by Texcal under the JOA.
Cue has Indonesian legal representation and continues to assert all
its legal rights under the JOA and the agreement which governs the
performance bond.
9
Cue Energy Resources LimitedAnnual Report 2020 Reserves and
Resources
NET TO CUE ENERGY RESOURCES LIMITED AS AT 30 JUNE 2020
RESERVES
PROVED (1P)
PROVED & PROBABLE (2P)
DEVELOPED
UNDEVELOPED
DEVELOPED
UNDEVELOPED
FIELD (LICENCE)
NEW ZEALAND
Maari
INDONESIA (1)
Oyong
Wortel
Total Reserves (2)
CUE
INTEREST
OIL &
CONDEN-
SATE
MMBBL
OIL &
CONDEN-
SATE
MMBBL
GAS
BCF
OIL &
CONDEN-
SATE
MMBBL
GAS
BCF
5%
0.24
-
15%
15%
-
0.01
0.24
1.47
2.25
3.72
-
-
-
-
-
-
-
-
0.55
-
0.02
0.57
OIL &
CONDEN-
SATE
MMBBL
-
-
-
-
GAS
BCF
-
2.63
3.64
6.27
CONTINGENT RESOURCES (3)
FIELD (LICENCE)
INDONESIA
Paus Biru (Samang PSC) (4)
Jeruk (Sampang PSC)
Total Contingent Resources (5)
CUE
INTEREST
15%
8%
OIL & CONDENSATE
MMBBL
-
1.24
1.24
GAS
BCF
-
-
-
-
GAS
BCF
6.7
-
6.7
(1) Cue Indonesian Reserves are net of Indonesian Government share of production
(2) Reserves for all fields 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. Totals may vary due to rounding
(3) 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
(4) Paus Biru Contingent Resources have been sub-classified as “Development Unclarified” under the PRMS, which represents a discovered accumulation where project
activities are under evaluation and where justification as a commercial development is unknown based on available information and plans to develop are not yet considered
near-term. As such, further work is required on the development and commercialisation options before bringing forward to reserves status. The Contingent Resource
figures are gross, full well-stream gas, including all non-hydrocarbon components and potential gas utilities for field operation. The gas composition is 97.02% methane.
A deterministic methodology was used to categorise the contingent resources
(5) Mahato PSC PB field Contingent resources have not been included due to ongoing assessment of available data
Prospective Resource Estimates Cautionary Statement
With respect to the Prospective Resource estimates contained in this report, it should be noted that the estimated quantities of petroleum that may potentially be recoverable
by the application of a future development project(s) may relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of
development. Further exploration, appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
10
Cue Energy Resources LimitedAnnual Report 2020 GOVERNANCE ARRANGEMENTS
AND INTERNAL CONTROLS
Cue estimates and reports its petroleum reserves and resources in
accordance with the definitions and guidelines of the Petroleum
Resources Management System 2007 (SPE-PRMS), published by the
Society of Petroleum Engineers (SPE).
All estimates of petroleum reserves reported by Cue are prepared
by, or under the supervision of, a qualified petroleum reserves and
resources evaluator.
Cue has engaged the services of New Zealand Oil & Gas Limited
(NZOG) to independently assess the Maari, Oyong 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.
RESERVES AND RESOURCES
QUALIFIED PETROLEUM RESERVES
AND RESOURCES EVALUATOR STATEMENT
This resources statement is approved by, based on, and fairly
represents information and supporting documentation prepared
by New Zealand Oil & Gas Engineering & Assets Manager Daniel
Leeman. Daniel
is a Chartered Professional Engineer with
Engineering New Zealand and holds Masters degrees in Petroleum
and Mechanical Engineering as well as a Diploma in Business
Management and has over 10 years of experience. Daniel is also an
active professional member of the Society of Petroleum Engineers
and the Royal Society of New Zealand.
Reserves are quantities of petroleum anticipated to be commercially
recoverable from known accumulations from a given date forward;
that are judged to be discovered, recoverable, commercial and
remaining. Probable (2P) reserves have a 50 per cent chance or
better of being technically and economically producible. Proven
(1P) reserves are those with a 90 per cent chance or higher and
Possible (3P) are those with a 10 per cent chance or lower of being
technically and economically producible. Developed reserves
are expected to be recovered from existing wells and facilities.
Undeveloped reserves are quantities expected to be recovered
through future investments (e.g. new wells, compressors, and other
facilities). Total reserves are the sum of developed and undeveloped
reserves at a given level of certainty. Oil and gas reserves reported
in this statement are as at 1 July 2020.
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 17th January 2017
NZOG held an equity of 50.04% of Cue.
11
Cue Energy Resources LimitedAnnual Report 2020 RESERVES AND RESOURCES
TABLE 1: OIL AND CONDENSATE RESERVES AND RESOURCES RECONCILIATION WITH 30 JUNE 2019
1P 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 2019
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2020
RESERVES
15%
15%
5%
0.00
0.01
0.30
0.31
0.00
-0.003
-0.11
-0.11
0.00
0.00
0.05
0.05
-
-
-
0.00
0.00
0.01
0.24
0.25
2P Proved & Probable Oil and Condensate Reserves (MMBBL)
CUE INTEREST
30 JUNE 2019
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2020
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)
15%
15%
5%
0.00
0.02
0.65
0.67
0.00
-0.003
-0.11
-0.11
0.00
0.00
0.01
0.01
0.00
0.00
0.00
0.00
0.00
0.02
0.55
0.57
30 JUNE 2019
CONTINGENT
RESOURCES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2020
CONTINGENT
RESOURCES
CUE INTEREST
8%
1.24
1.24
-
-
-
0
-
-
1.24
1.24
FIELD (LICENCE)
INDONESIA
Jeruk (Sampang PSC)
Total Contingent Oil and Condensate Resources
12
Cue Energy Resources LimitedAnnual Report 2020 RESERVES AND RESOURCES
TABLE 2: GAS RESERVES AND RESOURCES RECONCILIATION WITH 30 JUNE 2019
1P Proved Gas Reserves (BCF)
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
Total Proved Gas Reserves
CUE INTEREST
30 JUNE 2019
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2020
RESERVES
0.15
0.15
1.34
2.66
4.00
-0.56
-0.74
-1.30
0.69
0.33
1.02
-
-
-
1.47
2.25
3.72
2P Proved & Probable Gas Reserves (BCF)
CUE INTEREST
30 JUNE 2019
RESERVES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2020
RESERVES
0.15
0.15
3.08
4.11
7.19
-0.56
-0.74
-1.30
0.11
0.27
0.38
-
-
-
2.63
3.64
6.27
FIELD (LICENCE)
INDONESIA
Oyong (1) (Sampang PSC)
Wortel (1) (Sampang PSC)
Total Proved & Probable Gas Reserves
2C Contingent Gas Resources (BCF)
FIELD (LICENCE)
INDONESIA
Paus Biru (Sampang PSC)
Total Contingent Gas Resources
CUE INTEREST
15%
30 JUNE 2019
CONTINGENT
RESOURCES
PRODUCTION
DISCOVERIES/
EXTENSIONS/
REVISIONS
ACQUISITIONS/
DIVESTMENTS
30 JUNE 2020
CONTINGENT
RESOURCES
-
-
-
-
6.7
6.7
-
-
6.7
6.7
13
Cue Energy Resources LimitedAnnual Report 2020 Sustainability
HEALTH SAFETY AND ENVIRONMENT
Cue operates under an HSE Policy approved by the Board of
Directors.
CLIMATE CHANGE
Cue considers the potential effect of climate change actions and
policies as part of the risk management of our business.
We are committed to achieving and maintaining good health, safety
and environmental performance, which we consider critical to the
success of our business.
We support and challenge our joint venture partners in our shared
HSE goal and take an active role in oversight of our non-operated
projects.
The Operational Risk and Sustainability (ORS) committee of the
Board of Directors meets regularly to review the company’s HSE
activities and operational risks
There were no Lost Time Incidents (LTI) reported at any of Cue’s
operated or non-operated projects during the year. At Maari, 3
Years LTI free was reported in July 2020 and at the end of the year
Sampang PSC had recorded over 12 years LTI free.
Protecting our staff from COVID-19 risks has been an important
priority in the second half of this year. All staff in Melbourne and
Jakarta offices continue to work from home and an Employee
Assistance Program has been put in place to provide support
opportunities for employees.
Societies around the world will continue to face two interdependent
challenges of maintaining secure energy supplies to meet growing
demand and addressing the risks posed by greenhouse gas
emissions and climate change.
Hydrocarbon exploration and production has an important role to
play in supporting the transition to low emissions energy sources
to meet these challenges. Natural gas is a cost effective alternative
to replace higher emissions fuels and complement renewable
electricity generation, providing significant emissions reductions
and air quality benefits.
The Sampang PSC supplies gas to Indonesia Power’s Grati power
plant, which supplies electricity to East Java and reduces the need
for coal fired generation.
Our Ironbark gas prospect, if successful, could provide a significant
source of lower emission fuel for many years when converted
to LNG and utilised to reduce the greenhouse gas emissions of
Australia’s trading partners.
Our non-operated production projects
in New Zealand and
Indonesia continue to investigate emissions reduction opportunities.
In the Sampang PSC, a significant project approved this year was
the conversion of the Grati gas processing plant from onsite power
generation to more efficient grid supplied power.
Cue is a participant in the New Zealand Emissions Trading Scheme
and purchases credits to offset carbon emissions from our share of
the Maari Production facilities.
Projects within Cue offices to reduce greenhouse gas emissions
include replacement of ageing IT infrastructure with lower power
consumption equipment and installation of low energy use LED
lighting.
14
Cue Energy Resources LimitedAnnual Report 2020 SUSTAINABILITY
SUPPORTING COMMUNITIES
Cue aims to support local communities in the areas that we operate
or participate in operations.
As part of this support, recognising the need for Personal Protective
Equipment in Indonesia during the COVID-19 pandemic, Cue
purchased and donated medical Personal Protective equipment
to 3 hospitals and medical centres in Jakarta and Samarinda (East
Kalimantan).
Cue encourages and supports our partner’s involvement in local
communities.
OMV New Zealand, the operator of the Maari joint venture, is active
in the Taranaki community with projects including large scale tree
planting, supporting WISE Better Homes and the Roderique Hope
Trust and continued support for the Taranaki Air ambulance.
joint venture supports Native ARC
(Animal
The WA-359-P
Rehabilitation Centre) in Perth, who provide medical care and
rehabilitation services for over 4000 injured, sick and orphaned
native wildlife each year , and is contributing to the Indigenous
Preferential Procurement Programs Research Project, being led by
the University of Melbourne, to measure the economic impacts of
Indigenous Procurement Policies and provide evidence towards
understanding the contribution Indigenous businesses make to the
Australian Economy.
Cue Donation of Equipment to RSUP Fatmawati (Jakarta)
Cue Donation of Equipment to Community Health Centre Sambutan (Samarinda)
15
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited
Corporate Directory
30 June 2020
Directors
Alastair McGregor (Non-Executive Chairman)
Andrew Jefferies (Non-Executive Director)
Peter Hood AO (Non-Executive Director)
Richard Malcolm (Non-Executive Director)
Rod Ritchie (Non-Executive Director)
Samuel Kellner (Non-Executive Director)
Marco Argentieri (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 2500
Fax: +61 3 9473 2500
KPMG
Level 36, Tower Two, Collins Square
727 Collins Street
Melbourne, VIC 3008
Australia
Stock exchange listing
Cue Energy Resources Limited securities are listed on the
Australian Securities Exchange.
(ASX code: CUE)
Website
www.cuenrg.com.au
16
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Directors’ Report
30 June 2020
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter
as the ‘consolidated entity’ or the ‘Group’) consisting of Cue Energy Resources Limited (referred to hereafter as the
‘company’, ‘parent entity’ or ‘Cue’) and the entities it controlled at the end of, or during, the year ended 30 June 2020.
Directors
The names of Directors of the Company in office during the year and up to the date of this report were:
Alastair McGregor
Andrew Jefferies
Peter Hood AO
Rebecca DeLaet (resigned 20 December 2019)
Richard Malcolm
Rod Ritchie
Samuel Kellner
Marco Argentieri (appointed 14 January 2020)
Chief Executive Officer
Matthew Boyall
Chief Financial Officer/Company Secretary
Melanie Leydin
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 consolidated entity reported a net profit after tax of $1.31 million for the financial year, a decrease of $7.24 million from
its $8.55 million profit in 2019. The 2020 operating results included an impairment of $2.7 million for the Maari production
assets. This was mainly driven by the lower oil price forecasts, in line with current market conditions.
Production revenue for the year was $23.92 million, a decrease of $1.81 million from the previous period (2019: $25.73
million). Production costs increased to $12.94 million (2019: $12.08 million).
The net assets of the consolidated entity increased by $2.15 million to $43.56 million for the year ended 30 June 2020 (30
June 2019: $41.41 million). Working capital, being current assets less current liabilities, was $32.57 million (30 June 2019:
$26.28 million).
The consolidated entity achieved positive cashflow from operating activities of $7.4 million for the year ended 30 June
2020. The consolidated entity ended the year with a cash balance of $31.94 million, including cash and cash equivalents
of $19.94 million and $12.01 million restricted cash in an escrow account designated for Ironbark-1 drilling programme.
The consolidated entity has no debt.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic,
which continues to spread globally as well as in Australia. The spread of COVID-19 has caused significant volatility in
Australian and international markets and had an impact on global oil prices. There is significant uncertainty around the
breadth and duration of business disruptions related to COVID-19. To protect the health and safety of employees and comply
with local regulations, the Company has closed its offices temporarily and arranged for employees to work remotely. At the
date of this report, the impact of these measures is not expected to significantly affect the Company’s business operations.
Refer to the CEO Report and Overview of Operations and Finances preceding this Director’s Report.
17
Cue Energy Resources LimitedAnnual Report 2020
Significant changes in the state of affairs
On 29 July 2019, the Company issued 4,277,888 unlisted options to eligible employees under the share option scheme,
exercisable at $0.07 (7 cents). The options will vest on 1 July 2021 and expire on 1 July 2023.
On 4 October 2019, the Company issued 3,853,298 unlisted options to eligible employees under the share option
scheme, exercisable at $0.09 (9 cents). The options will vest on 1 July 2022 and expire on 1 July 2024.
On 21 April 2020, the Company advised that through its 100% subsidiary, Cue Mahato Pty Ltd, it had become aware
that the Indonesian Ministry of Energy and Mineral Resources has announced a 61.8 million barrel oil discovery at the
PB field in the Mahato PSC.
Two wells had been drilled in the Mahato PSC. The operator, Texcal Mahato EP Ltd (Texcal) and other joint venture
parties are claiming to have excluded Cue from participation in these operations. These claims are rejected by Cue as
having no basis under the Joint Operating Agreement (JOA). Cue continues to assert all its legal rights under the JOA
and is currently evaluating its available options.
Cue is not receiving information from the operator as required under the JOA to enable full assessment of the SKK Migas
announcement but interprets the 61.8 million barrels reference as an oil in place P50 resource estimate.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
On 16 July 2020, the Company issued 3,743,260 unlisted options to eligible employees under the share option scheme,
exercisable at $0.1175 (11.75 cents), The options will vest on 1 July 2023 and expire on 1 July 2025.
On 17 July 2020, the Consolidated Entity announced that the Environment Plan (EP) for the Ironbark-1 exploration
well in exploration permit WA-359-P had been approved by the National Offshore Petroleum Safety and Environment
Management Authority (NOPSEMA).
On 19 August 2020, the Company announced the Indonesian Government approval of the Paus Biru gas field Plan of
Development in the Sampang PSC and an independent certification of the contingent resources in the field.
No other matter or circumstances has arisen since 30 June 2020 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 the Mahakam Hilir PSC, Indonesia
● Actively seeking to acquire additional production
● Progress on Paus Biru Front End Engineering and Design and Final Investment Decision
● Continuing claims by the Mahato PSC operator excluding Cue Mahato Pty Ltd from the PB field oil discovery
The Coronavirus/COVID-19 global pandemic presents strategic, operational and commercial uncertainties for the
Company. There are increased uncertainties around the duration, scale and impact of the Coronavirus/COVID-19
outbreak. The Company is taking various measures to mitigate the impact on its operations including employees,
partners and customers. The Board and management team continue to assess the potential impacts on the business,
however given the continued uncertainties the future financial impact, if any, cannot be determined.
Environmental regulation
Within the last year there have been zero incidents, zero lost time injuries and zero significant spills within Cue Energy
Resources Limited. Among the joint operations there have been a number of incidents that have been reported and
investigated by all the relevant parties. Cue Energy Resources Limited continues to monitor the progress of reported
incidents and work with the joint venture operation partners and operators to improve overall health and safety and
minimise any impact on the environment.
18
Cue Energy Resources LimitedAnnual Report 2020Cue Energy Resources Limited Directors’ Report 30 June 2020
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Alastair McGregor
Non-Executive Chairman
BEng, MSc
Mr McGregor has been actively involved in the oil and gas sector since 2003.
He is currently chief executive of O.G. Energy, which holds Ofer Global’s
broader energy interests, and Oil & Gas Limited, a company that holds
directly or indirectly oil & gas exploration and production interests onshore and
offshore. He leads the O.G. Energy Senior Management Committee, driving
the strategy for Ofer Global’s energy activities. Mr McGregor is also a director
of New Zealand Oil & Gas Limited. In addition, Mr McGregor is 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 Mr McGregor spent 12 years as a banker with Citigroup
and Salomon Smith Barney. Mr McGregor holds a BEng from Imperial College,
London and an MSc from Cranfield University in the UK.
New Zealand Oil & Gas Limited
O.G. Energy Holdings Ltd.
O.G. Oil & Gas Limited
None
Member, Remuneration and Nomination Committee
None
None
Andrew Jefferies
Non-Executive Director
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. Mr Jefferies 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.
NZOG Offshore Limited
New Zealand Oil & Gas Limited
Tuatara Energy Limited
None
Member, Audit and Risk Committee
Member, Remuneration and Nomination Committee
Member, Operational Risk and Sustainability Committee
8,000 fully paid ordinary shares
None
19
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited Directors’ Report 30 June 2020
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
20
Peter Hood (AO)
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.
De Grey Mining Ltd
GR Engineering Ltd
Matrix Composites and Engineering Ltd
None
Member, Audit and Risk Committee
80,000 fully paid ordinary shares
None
Rebecca DeLaet
Non-Executive Director (resigned on 20 December 2019)
M.Fin, B.Science
Ms DeLaet has worked for the Ofer Global group of companies since 1990. Prior
to focusing exclusively on O.G. Energy activities in 2019, Ms DeLaet spent the
previous ten years overseeing Ofer Global’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 Ofer
Global. Since then, she has been responsible for all of the financing activities for
the Omni organisation. Ms DeLaet is a director of O.G. Energy, O.G. Oil & Gas
and New Zealand Oil & Gas, where she chairs the audit committee. As a member
of the O.G. Energy Senior Management Committee, she helps drive strategy
for Ofer Global’s energy activities. Ms. DeLaet has a Masters in Finance and
Bachelor of Science from the Wharton School at the University of Pennsylvania.
Richard Malcolm
Non-Executive Director
Mr 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
Chairman, Remuneration and Nomination Committee
Member, Operational Risk and Sustainability Committee
None
None
Cue Energy Resources LimitedAnnual Report 2020Cue Energy Resources Limited Directors’ Report 30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Rod Ritchie
Non-Executive Director
B.Sc
Mr Ritchie is a director of New Zealand Oil and Gas limited. Mr Ritchie joined the
board of New Zealand Oil and Gas in 2013. He began his career as a petroleum
engineer with Schlumberger for 28 Years and then joined OMV where he worked
for a further 12 years. Mr Ritchie has over 40 years of global experience in
leadership roles and as a Health, Safety, Environmental and Security (HSSE)
executive in the Oil and Gas industry, including being the corporate Senior Vice
President of HSSE and Sustainability at OMV based in Vienna, Austria. He has
also worked closely with the International Association of Oil and Gas produces
(IOGP) to create Industry best practice standards for the Oil and Gas Industry.
He is also an active leadership and cultural change consultant, and an author
on the subject of Safety Leadership and several Society of Petroleum Engineers
papers on the subject of HSSE and safety Leadership.
New Zealand Oil & Gas Limited
None
Member, Remuneration and Nomination Committee
Chair, Operational Risk and Sustainability Committee
None
None
Samuel Kellner
Non-Executive Director
BA, MBA
Mr Kellner has held a variety of senior executive positions with Ofer Global
since joining the group in 1980. He has been deeply involved in all Ofer Global’s
business lines, with a particular emphasis on offshore oil and gas, shipping
and real estate, and has advised Ofer Global 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 a director of O.G. Energy, O.G.
Oil & Gas and New Zealand Oil & Gas, where he is Chairman of the Board of
Directors. As a member of the O.G. Energy Senior Management Committee, he
helps drive strategy for Ofer Global’s energy activities. He is also 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.
O.G. Energy Holdings Ltd.
O.G. Oil & Gas Limited
New Zealand Oil & Gas Limited
None
Chair, Audit and Risk Committee
None
None
21
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited Directors’ Report 30 June 2020
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Mr Marco Argentieri
Non-Executive Director (appointed 14 January 2020)
Mr Argentieri is a Director of New Zealand Oil and Gas Limited, Senior Vice
President and General Counsel for O.G. Energy, and a member of the Board
of Directors of both O.G. Energy and O.G. Oil & Gas. Prior to O.G. Energy, Mr
Argentieri worked extensively in finance, offshore oil services and shipping. Mr
Argentieri started his career as an attorney at the New York offices of Skadden,
Arps, Slate, Meagher & Flom LLP and Latham & Watkins LLP. He holds a B.A.
from the University of Rochester, a J.D. from New York University and an MBA
from Columbia University.
New Zealand Oil and Gas Limited
None
None
None
None
‘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.
22
Cue Energy Resources LimitedAnnual Report 2020Cue Energy Resources Limited Directors’ Report 30 June 2020
Company secretary
Ms Melanie Leydin, BBus (Acc. Corp Law) CA FGIA
Ms Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the Institute
of Chartered Accountants, Fellow of the Governance Institute of Australia 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 Leydin Freyer. The practice provides outsourced company secretarial and accounting services
to public and private companies across a host of industries including but not limited to the Resources, technology,
bioscience, biotechnology and health sectors.
Ms Leydin has over 25 years’ experience in the accounting profession and over 15 years as a Company Secretary. She
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’) and of each Board committee held during the
year ended 30 June 2019, and the number of meetings attended by each director were:
Full Board
Remuneration
and Nomination
Committee
Audit and Risk
Committee
Operational Risk
and Sustainability
Committee
Attended Held
Attended Held
Attended Held
Attended Held
Alastair McGregor
Andrew Jefferies
Peter Hood
Rebecca DeLaet*
Richard Malcolm
Rod Ritchie
Samuel Kellner
Marco Argentieri**
6
6
6
1
6
6
6
4
6
6
6
2
6
6
6
4
-
3
-
-
3
3
-
-
-
3
-
-
3
3
-
-
-
2
2
1
-
-
1
-
-
2
2
1
-
-
1
-
-
3
-
-
3
3
-
-
-
3
-
-
3
3
-
-
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
* Ms Rebecca DeLaet resigned from the Board on 20 December 2019.
** Mr Marco Argentieri appointed as Non-Executive Director on 14 January 2020.
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 2020, in accordance with the Corporations Act 2001 and its regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the entity, directly or indirectly, including all directors.
The prescribed details for each person covered by this report are detailed below under the following headings:
(A) Director and executive details
(B) Remuneration policy
(C) Details of remuneration
(D) Equity based remuneration
(E) Relationship between remuneration policy and company performance
23
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited Directors’ Report 30 June 2020
Cue Energy Resources Limited
Directors’ Report
30 June 2020
(A) Director and executive details
The following persons acted as Directors of the company during or since the end of the financial year:
● Alastair McGregor (Non-Executive Chairman)
● Andrew Jefferies (Non-Executive Director)
● Peter Hood (Non-Executive Director)
● Rebecca DeLaet (Non-Executive Director) - resigned on 20 December 2019
● Richard Malcolm (Non-Executive Director)
● Rod Ritchie (Non-Executive Director)
● Samuel Kellner (Non-Executive Director)
● Marco Argentieri (Non-Executive Director) - appointed on 14 January 2020
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 “Executive” is used in this Remuneration Report to refer to the following persons:
● Matthew Boyall (Chief Executive Officer)
(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*, Samuel Kellner and Marco Argentieri have elected not to be
paid by the Company.
* Ms Rebecca DeLaet resigned from the Board on 20 December 2019. She has elected not to be paid by the Company up to the date of her resignation.
24
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Directors’ Report
30 June 2020
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 2020 financial year, the Board reviewed the salaries paid to peer company executives in
determining the salary of the Company’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 as required.
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 executive Matthew Boyall is formalised in a service agreement.
Details of the agreement is as follows:
Matthew Boyall
Title: Chief Executive Officer
Original Agreement effective from 1 July 2017, with salary terms revised on 1 October 2018.
Term: Permanent employment contract, no fixed terms.
Details: Base salary of $360,000 per annum plus superannuation to be reviewed annually by the Board. Mr Boyall is also
entitled to short-term incentive up to 30% (2019: 30%) of his base salary at the discretion of the Board at the end of each
financial year dependent on the success of meeting key deliverables.
Notice period: 3 months
Compensation levels are reviewed each year to take into account cost of living changes, any change in the scope of the
role performed and any changes to meet the principles of the compensation policy.
Details of the nature and amount of each major element of remuneration of each Director of the Company and other Key
Management Personnel of the consolidated entity are:
25
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Directors’ Report
30 June 2020
Compensation of Key Management Personnel – 2020
Short-term benefits
Cash
bonuses
Cash salary
and fees
2020
$
$
Long-term
benefits
Long
service
leave
$
Post
employ-
ment
Super-
annuation
Share-
based
payments
Equity-
settled
Total
$
$
$
Directors
Alastair McGregor*
Andrew Jefferies*
Peter Hood
Rebecca DeLaet*
Richard Malcolm
Rod Ritchie
Samuel Kellner*
Marco Argentieri*
Other Key Management
Personnel:
Matthew Boyall**
-
-
45,662
-
43,379
47,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,338
-
4,121
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
-
47,500
47,500
-
-
356,003
492,544
91,800
91,800
21,193
21,193
25,000
33,459
51,334
545,330
51,334
690,330
*
**
Alastair McGregor, Andrew Jefferies, Rebecca DeLaet, Samuel Kellner and Marco Argentieri have elected not to be paid by the Company.
Matthew Boyall’s cash bonus consists of $91,800 for achieving 85% weighting against 2019 key performance indicators (KPIs). The KPIs were
measured against the actual results for the calendar year ending 31 December 2019. Mr Boyall is entitled to up to 30% of base salary in short
term incentives.
26
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Directors’ Report
30 June 2020
Compensation of Key Management Personnel – 2019
Short-term benefits
Cash
bonuses
Cash salary
and fees
2019
$
$
Long-term
benefits
Long
service
leave
$
Post
employ-
ment
Super-
annuation
Share-
based
payments
Equity-
settled
Total
$
$
$
Directors
Alastair McGregor*
Koh Ban Heng**
Andrew Jefferies*
Peter Hood
Rebecca DeLaet*
Richard Malcolm
Rod Ritchie
Samuel Kellner*
Other Key Management
Personnel:
Matthew Boyall***
-
12,534
-
44,698
-
41,077
42,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,151
-
3,902
-
-
-
-
-
-
-
-
-
-
-
12,534
-
46,849
-
44,979
42,459
-
345,000
485,768
112,200
112,200
16,638
16,638
20,531
26,584
10,307
10,307
504,676
651,497
Alastair McGregor, Andrew Jefferies, Rebecca DeLaet and Samuel Kellner have elected not to be paid by the Company.
*
** Koh Ban Heng resigned from the Board on 30 October 2018.
*** Matthew Boyall’s cash bonus consists of the following:
• $60,000 once-off discretionary bonus in recognition of the Ironbark farmout; and
•
$52,200 for achieving 72.5% weighting against 2018 key performance indicators (KPIs). The KPIs were measured against the actual results
for the calendar year ending 31 December 2018. Mr Boyall is entitled to up to 30% of base salary in short term incentives.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
2020
2019
2020
2019
2020
2019
Fixed
remuneration
At risk - STI
At risk - LTI
Directors:
Koh Ban Heng
Peter Hood
Richard Malcolm
Rod Ritchie
-
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Key Management Personnel:
Matthew Boyall
74%
76%
17%
22%
9%
2%
27
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Directors’ Report
30 June 2020
(D) Equity based remuneration
Overview of share options
The Board in their meeting held on 24 June 2019 approved the Employee Share Option Plan (‘ESOP’), which was
subsequently approved by shareholders at 2019 Annual General Meeting.
The ESOP has been developed to provide the greatest possible flexibility in choice to the Board in implementing the
executive incentive schemes. The ESOP enables the Board to offer employees a number of Options.
A summary of material terms of the ESOP is set out as follows:
●
the ESOP sets out the framework for the offer of Options by the Company, and is typical for a document of this
nature;
in making its decision to issue Options, the Board may decide the number of securities and the vesting conditions
which are to apply in respect of the securities. The Board has flexibility to issue Options having regard to a range of
potential vesting criteria and conditions;
in certain circumstances, unvested Options will immediately lapse and any unvested Shares held by the participant
will be forfeited if the relevant person is a “bad leaver” as distinct from a “good leaver”;
if a participant acts fraudulently or dishonestly or is in breach of their obligations to the Company or its subsidiaries,
the Board may determine that any unvested Options held by the participant immediately lapse and that any unvested
Shares held by the participant be forfeited;
in certain circumstances Options can vest early upon a change of control event as defined under the Plan rules.
the total number of Options and Shares which may be offered by the Company under these Rules shall not at any
time exceed 5% of the Company’s total issued Shares when aggregated with the number of Options and Shares
issued or that may be issued as a result of offers made at any time during the previous three year period under an
employee incentive scheme.
the Board has discretion to impose restrictions (except to the extent prohibited by law or the ASX Listing Rules) on
Shares issued or transferred to a participant on vesting of an Option or a Performance Right, and the Company may
implement appropriate procedures to restrict a participant from so dealing in the Shares;
the Board is granted a certain level of discretion under the EIP, including the power to amend the rules under which
the EIP is governed and to waive vesting conditions, forfeiture conditions or disposal restrictions.
●
●
●
●
●
●
●
The options will vest on the date determined by the Board and as specified in the Invitation Letter.
8,131,186 options were granted under the ESOP during the financial year to 30 June 2020 (2019: Nil), of which 493,863
were forfeited due to employee departure from the Company. These options did not have any other vesting conditions
other than time.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2020.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of key management
personnel in this financial year or future reporting years are as follows:
Name
Number
of options
granted
Grant date
Vesting
date and
exercisable
date
Expiry date
Exercise
price
Fair value
per option at
grant date
Matthew Boyall
Matthew Boyall
1,288,338
29 July 2019
1 July 2021
1 July 2023
1,399,595
4 October 2019
1 July 2022
1 July 2024
$0.070
$0.090
$0.040
$0.059
Options granted carry no dividend or voting rights.
28
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Directors’ Report
30 June 2020
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 2020.
2020
$’000
2019
$’000
2018
$’000
2017
$’000
2016
$’000
Production income from continuing operations
Profit/(Loss) before income tax expense from continuing
operations
23,916
5,099
25,730
12,856
24,547
35,000
45,412
5,058
(6,975)
(79,599)
Profit/(Loss) after income tax benefit/(expense)
Total Key Management Personnel Remuneration
1,313
690
8,549
651
7,739
(15,032)
(84,399)
525
2,264
2,419
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)
2020
2019
2018
2017
2016
8.30
9.50
0.19
0.19
5.70
8.30
1.22
1.22
5.50
5.70
1.11
1.11
8.10
5.50
(2.48)
(2.48)
7.60
8.10
(12.44)
(12.44)
The Company remuneration policy also seeks to reward staff members on achieving non-financial key performance
indicators, including safety and operational performance.
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:
Ordinary shares*
Non-Executive Directors
Andrew Jefferies
Peter Hood
Other Key Management
Personnel
Matthew Boyall
Balance at
the start of
the year
Balance on
date of Board
appointment
Additions
Disposals/
other
Balance at
the end of the
year
8,000
80,000
200,000
288,000
-
-
-
-
-
-
-
-
-
-
-
-
8,000
80,000
200,000
288,000
*
Alastair McGregor, Koh Ban Heng, Rebecca DeLaet, Richard Malcolm, Rod Ritchie, Samuel Kellner and Marco Argentieri do not hold any fully
paid ordinary shares.
NZOG Offshore Limited (a related entity to Alastair McGregor, Andrew Jefferies, Rebecca DeLaet, Rod Richie, Samuel
Kellner and Marco Argentieri) holds 349,368,803 fully paid ordinary shares in Cue.
29
Cue Energy Resources LimitedAnnual Report 2020
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
Options over ordinary shares
Matthew Boyall
1,288,338
1,399,595
-
-
2,687,933
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Cue Energy Resources Limited under option at the date of this report are as follows:
Grant date
29/07/2019
04/10/2019
16/07/2020
Expiry date
01/07/2023
01/07/2024
01/07/2025
Vesting date
01/07/2021
01/07/2022
01/07/2023
Exercise
price
Number
under option
$0.07
$0.09
$0.12
3,784,025
3,853,298
3,743,260
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Cue Energy Resources Limited issued on the exercise of options during the year
ended 30 June 2020 and up to the date of this report.
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 the auditor
of the company or any related body corporate against a liability incurred as an officer or auditor.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking
responsibility on behalf of the company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the
auditor are outlined in note 23 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, 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
30
Cue Energy Resources LimitedAnnual Report 2020Cue Energy Resources Limited Directors’ Report 30 June 2020
●
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.
Officers of the company who are former partners of KPMG
There are no officers of the company who are former partners of KPMG.
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 and forms part of the directors’ report.
Auditor
In accordance with the provisions of the Corporations Act 2001 the Company’s auditor, KPMG, 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
20 August 2020
31
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited Directors’ Report 30 June 2020
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Cue Energy Resources Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Cue Energy Resources
Limited for the financial year ended 30 June 2020 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Vicky Carlson
Partner
Melbourne
20 August 2020
KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG
International Cooperative
(“KPMG International”), a Swiss entity.
32
Liability
approved
Standards Legislation.
limited by a scheme
Professional
under
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Revenue
Production revenue from operations
Production costs
Gross profit from production
Other income
Net foreign currency exchange gain
Expenses
Impairment - Production properties
Exploration and evaluation expenditure
Administration expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year attributable to the owners
of Cue Energy Resources Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners
of Cue Energy Resources Limited
Note
Consolidated
2020
$’000
2019
$’000
6
7
15
9
8
10
23,916
(12,944)
10,972
831
79
(2,722)
(1,438)
(2,623)
25,730
(12,081)
13,649
3,058
785
-
(2,176)
(2,460)
5,099
12,856
(3,786)
(4,307)
1,313
8,549
691
691
(444)
(444)
2,004
8,105
Cents
Cents
Basic earnings per share
Diluted earnings per share
31
31
0.19
0.19
1.22
1.22
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
33
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited
Statement of financial position
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Inventories
Total current assets
Non-current assets
Other financial assets
Property, plant and equipment
Right-of-use assets
Exploration and evaluation assets
Production properties
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Note
Consolidated
2020
$’000
Restated
2019
$’000
11
11
12
13
14
15
10
16
10
10
17
18
20
19,936
12,008
4,715
458
37,117
14,671
11,523
5,297
1,003
32,494
5,713
5,278
64
90
4,605
18,682
2,888
32,042
69,159
2,044
80
2,287
140
4,551
16
4,058
16,970
21,044
25,595
43,564
21
-
3,401
24,645
3,002
36,347
68,841
1,907
-
4,227
81
6,215
-
3,947
17,270
21,217
27,432
41,409
152,416
152,416
83
(750)
(108,935)
(110,257)
43,564
41,409
Refer to note 4 for detailed information on Restatement of comparatives.
The above statement of financial position should be read in conjunction with the accompanying notes
34
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Statement of changes in equity
For the year ended 30 June 2020
Consolidated
Balance at 1 July 2018
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share-based payments
Contributed
Equity
$’000
Reserves
$’000
Accumulated
Losses
$’000
Total
Equity
$’000
152,416
-
-
-
-
(340)
-
(444)
(444)
34
(118,806)
33,270
8,549
-
8,549
8,549
(444)
8,105
-
34
Balance at 30 June 2019
152,416
(750)
(110,257)
41,409
Consolidated
Balance at 1 July 2019
Contributed
Equity
$’000
Reserves
$’000
Accumulated
Losses
$’000
Total
equity
$’000
152,416
(750)
(110,257)
41,409
Adjustment to opening accumulated losses for change in
accounting standard (Note 2)
-
-
5
5
Balance at 1 July 2019 - restated
152,416
(750)
(110,252)
41,414
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share-based payments
Transfer
-
-
-
-
-
Balance at 30 June 2020
152,416
-
691
691
146
(4)
83
1,313
-
1,313
-
4
1,313
691
2,004
146
-
(108,935)
43,564
The above statement of changes in equity should be read in conjunction with the accompanying notes
35
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited
Statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers
Other receipts
Interest received
Payments to suppliers and employees
Payments for exploration and evaluation expenditure
Income tax paid
Royalties paid
Reimbursement of Ironbark past costs
Note
Consolidated
2020
$’000
2019
$’000
23,004
606
374
(9,298)
(1,496)
(4,314)
(1,476)
-
28,154
1,070
368
(10,114)
(3,127)
(4,593)
(715)
1,780
Net cash from operating activities
30
7,400
12,823
Cash flows from investing activities
Payments with respect to production properties
Payments for plant and equipment
Payments for exploration and evaluation (Capex)
Net cash used in investing activities
Cash flows from financing activities
Payments of principal element of lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents and restricted cash
14
(881)
(62)
(729)
(1,042)
(7)
(3,401)
(1,672)
(4,450)
(85)
(85)
5,643
26,194
107
-
-
8,373
16,983
838
Cash and cash equivalents and restricted cash at the end of the financial year
11
31,944
26,194
The above statement of cash flows should be read in conjunction with the accompanying notes
36
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
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 20 August 2020.
Note 2. Significant accounting policies
Significant accounting policies have been disclosed in the respective notes to the financial statements and below.
(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, except for the
adoption of AASB 16 Leases from 1 July 2019 (see Note 2 (i) below).
(c) Basis of preparation
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
and in accordance with that instrument, amounts in the consolidated financial statements and directors’ report have been
rounded off to the nearest thousand dollars, unless otherwise stated.
The consolidated financial statements 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 26.
(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 2020 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 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.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Cue Energy Resources Limited.
37
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
(e) Production revenue
The consolidated entity generates production revenue from its interest in producing crude oil and gas fields. Revenue
from oil production is recognised at a point in time when crude oil is delivered to the buyer. Oil contract price is negotiated
when the operator lifts for the group. Revenue from gas production is recognised during the month when gas is delivered
to the buyer, based on fixed price contracts.
(f) 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.
(g) 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.
(h) Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of
the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently
measured at either amortised cost or fair value depending on their classification. Classification is determined based on
both the business model within which such assets are held and the contractual cash flow characteristics of the financial
asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, it’s carrying value is written off.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a
business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms
of the financial asset represent contractual cash flows that are solely payments of principal and interest.
(i) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
Certain comparative amounts in the statement of financial position have been restated as a result of a correction of a
prior period error (refer to note 4)
(j) 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.
38
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax
authority.
(k) Foreign currency
Functional and presentation currency
The functional currencies of Group companies 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.
Management have previously determined that in accordance with AASB 121 Foreign Currency Translation, the Group’s
interest in foreign operations Cue Sampang (Indonesia) and Cue Taranaki (New Zealand) are held in USD functional
entities. During the current period management reviewed its functional currency translation practices and identified
prior period errors in the translation of certain balances residing in these USD functional entities. These errors were
not material and accordingly has been corrected in the 30 June 2020 financial statements through an adjustment of
$846K to increase production properties (refer note 15) and a corresponding credit to the functional currency translation
reserve.
Transactions and balances
Transactions in foreign currencies of entities within the consolidated entity are translated into functional currency at the
rate of exchange ruling at the date of the transaction. Non-monetary items measured at historical cost continue to be
carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at
the exchange rate at the date when fair values were determined.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under
foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using
the spot rate at the end of financial year.
Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive
income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the
exchange difference is recognised in profit or loss.
Foreign operations
The results and financial position of Cue’s foreign operations are translated into its presentation currency using the
following procedures:
(a) assets and liabilities for each statement of financial position presented (i.e. including comparatives) shall be translated
at the closing rate at the date of that statement of financial position;
(b) income and expenses for each statement presenting profit or loss and other comprehensive income (i.e. including
comparatives) shall be translated at exchange rates at the month end; and
(c) all resulting exchange differences shall be recognised in other comprehensive income.
(l) New or amended Accounting Standards and Interpretations adopted
The Consolidated Entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the Consolidated Entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for
lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases
of low value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial
position. Straight line operating lease expense recognition is replaced with a depreciation charge for the right-of-use
assets (included in administration expenses) and an interest expense on the recognised lease liabilities (included in
39
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher
when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit
or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and
the principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting, the
standard does not substantially change how a lessor accounts for leases.
Impact on application
The consolidated entity has adopted AASB 16 using the modified retrospective approach whereby the consolidated
entity has recognised the cumulative effect of initially applying this standard as an adjustment to the opening balance
of equity as at 1 July 2019. Accordingly, the consolidated entity has not restated comparative balances in this set of
financial statements.
On adoption of AASB 16, the consolidated entity recognised lease liabilities in relation to leases which had previously
been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The
weighted average incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 5.5%. The associated right-of-
use assets for these leases were measured on a modified retrospective basis, with the incremental borrowing rate applied as
at each lease’s commencement date and the assets depreciated on a straight-line basis over the term of the lease.
Right-of-use assets
Lease liabilities
Accumulated losses
Operating lease commitments at 30 June 2019 as disclosed under AASB 117 in the Group’s
consolidated financial statements
Discounting adjustment using the incremental borrowing rate at 1 July 2019
Lease liabilities recognised at 1 July 2019
Transitional
impact at
1 July 2019
$’000
172
(167)
(5)
Transitional
impact at
1 July 2019
$’000
189
(22)
167
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except
where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased
asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to
impairment or adjusted for any remeasurement of lease liabilities.
Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit
40
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease
payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an
index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when
the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use
asset is fully written down.
Accounting Policy for leases before 1 July 2019
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.
AASB Interpretation 23 Uncertainty over Income Tax Treatments
Interpretation 23 requires the assessment of whether the effect of uncertainty over income tax treatments should be
included in the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax
rates. The Interpretation outlines the requirements to determine whether an entity considers uncertain tax treatments
separately, the assumptions an entity makes about the examination of tax treatments by taxation authorities, how an
entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates and how an
entity considers changes in facts and circumstances.
The Company has adopted Interpretation 23 from 1 July 2019, based on an assessment of whether it is ‘probable’ that a
taxation authority will accept an uncertain tax treatment. The Company’s existing accounting policy for uncertain income
tax treatment is consistent with the requirements under Interpretation 23. There has been no impact from the adoption
of Interpretation 23 in this reporting period.
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 are only recognised if management considers it is probable that future tax profits will be available to
utilise the unused tax losses (refer to note 10).
(ii) Impairment of production properties
Production properties impairment testing requires an estimation of recoverable amount using a value-in-use model for
respective cash generating units. The recoverable amount 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 (refer to note 15).
(iii) Useful life of production properties
As detailed at note 15 production properties are amortised on a unit-of-production basis, with separate calculations being
41
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 3. Critical accounting estimates and judgements (continued)
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.
(vi) Capitalised exploration and evaluation costs
Exploration and evaluation costs have been capitalised on the basis that the consolidated entity expects to commence
commercial production in the future, from which time the costs will be amortised in proportion to the depletion of the mineral
resources. Key judgements are applied in considering costs to be capitalised which includes determining expenditures
directly related to these activities and allocating overheads between those that are expensed and capitalised. In addition,
costs are only capitalised that are expected to be recovered either through successful development or sale of the
relevant mining interest. Factors that could impact the future commercial production at the mine include the level of
reserves and resources, future technology changes, which could impact the cost of mining, future legal changes and
changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the future, they
will be written off in the period in which this determination is made.
(vii) Coronavirus (COVID-19) pandemic
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic,
which continues to spread globally as well as in Australia. The spread of COVID-19 has caused significant volatility
in Australian and international markets and had an impact on global oil prices. There is significant uncertainty around
the breadth and duration of business disruptions related to COVID-19. To protect the health and safety of employees
and comply with local regulations, the Company has closed its offices temporarily and arranged for employees to work
remotely. At the date of this report, the impact of these measures is not expected to significantly affect the Company’s
business operations.
Note 4. Restatement of comparatives
Correction of error
The Group, through its wholly owned subsidiary, Cue Sampang Pty Ltd contributed to the Abandonment and Site
Restoration (ASR) fund as agreed by Indonesian Government through SKKMigas. Cue Sampang Pty Ltd contributed
AUD$5.27 million to the ASR fund up to 30 June 2019. Historically, the Group set off the funded portion of the ASR
against its restoration provision on the balance sheet.
During 2020 financial year, the Group reviewed the contractual agreement and concluded that a prior year restatement is
required to gross up the funded portion of the restoration provision, as Cue Sampang retains the obligation to fully fund
its share of the rehabilitation. As such, the Group retrospectively recognised other financial asset of AUD$5.27 million
as at 30 June 2019, with corresponding adjustments for Production properties ($0.1 million) and restoration provision
($5.38 million). There was no impact to the statement of profit or loss and other comprehensive income.
42
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 4. Restatement of comparatives (continued)
Statement of profit or loss and other comprehensive income
When there is a restatement of comparatives, it is mandatory to provide a statement of profit or loss and other
comprehensive income for the year ended 30 June 2019. However, as there were no adjustments made, the consolidated
entity has elected not to show the statement of profit or loss and other comprehensive income.
Statement of financial position at the beginning of the earliest comparative period
When there is a restatement of comparatives, it is mandatory to provide a third statement of financial position at the
beginning of the earliest comparative period, being 1 July 2018. The following tables summarise the impacts on the
Group’s consolidated financial statements.
Statement of financial position at the start of the earliest comparative period - 1 July 2018
Extract
Assets
Non-current assets
Other financial assets
Production properties
Total non-current assets
Total assets
Liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
1 July
2018
$’000
Reported
Consolidated
$’000
Adjustment
1 July
2018
$’000
Restated
-
26,814
29,571
54,666
9,873
12,925
21,396
33,270
4,699
(11)
4,688
4,699
26,803
34,259
4,688
59,354
4,688
4,688
4,688
14,561
17,613
26,084
-
33,270
43
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 4. Restatement of comparatives (continued)
Statement of financial position at the end of the earliest comparative period – 30 June 2019
Extract
Assets
Non-current assets
Other financial assets
Production properties
Total non-current assets
Total assets
Liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Consolidated
2019
$’000
Reported
$’000
Adjustment
2019
$’000
Restated
-
24,547
30,971
63,465
11,894
15,841
22,056
41,409
5,278
98
5,376
5,376
5,376
5,376
5,376
5,278
24,645
36,347
68,841
17,270
21,217
27,432
-
41,409
There is no impact on the Group’s basic or diluted earnings per share and no impact on the total operating, investing
or financing cash flows for year ended 30 June 2019.
Note 5. 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 in 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.
Australia
The parent entity resides in Melbourne, Australia. The Group, through its wholly owned subsidiary, Cue Exploration Pty
Ltd, holds exploration permits in the Carnarvon Basin, Offshore Western Australia.
New Zealand
The Group, through its wholly owned subsidiary, Cue Taranaki Pty Ltd, holds 5% interest in petroleum production
property, PMP38160 (Maari) in New Zealand.
Indonesia
The Group, through its wholly owned subsidiary, Cue Sampang Pty Ltd, holds 15% interest in gas production property
in Indonesia (Sampang). The Group also holds interest in exploration permits in East Kalimantan, through Cue
44
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 5. Financial reporting by segments (continued)
Mahakam Hilir Pty Ltd and Cue Kalimantan Pte Ltd (both wholly owned subsidiaries) and in Central Sumatra, through
Cue Mahato Pty Ltd.
Information regarding the Group’s reportable segments is presented below:
2020
Revenue
Revenue from continuing operations
Production expenses (excluding amortisation)
Gross profit (excluding amortisation)
Other revenue
Depreciation
Amortisation
Impairment of production properties
Exploration and evaluation expenditure
Other expenditure
Share-based payments
Foreign exchange movement
Australia
$’000
NZ
$’000
Indonesia
$’000
Total
$’000
-
-
-
438
(73)
-
-
(747)
(2,404)
(106)
130
9,489
(6,227)
3,262
-
-
(3,032)
(2,722)
-
-
-
(192)
14,427
(2,577)
11,850
393
-
(1,108)
-
(691)
-
(40)
141
23,916
(8,804)
15,112
831
(73)
(4,140)
(2,722)
(1,438)
(2,404)
(146)
79
Profit/(loss) before income tax expense
(2,762)
(2,684)
10,545
5,099
2019
Revenue
Revenue from continuing operations
Production expenses (excluding amortisation)
Gross profit (excluding amortisation)
Other revenue
Depreciation
Amortisation
Impairment of production properties
Exploration and evaluation expenditure
Other expenditure
Share-based payments
Foreign exchange movement
Australia
$’000
NZ
$’000
Indonesia
$’000
Total
$’000
-
-
-
1,986
(10)
-
-
(1,133)
(2,416)
(34)
858
10,836
(5,343)
5,493
1,070
-
14,894
(2,386)
12,508
2
-
(2,986)
(1,366)
-
-
-
-
(496)
-
(1,043)
-
-
423
25,730
(7,729)
18,001
3,058
(10)
(4,352)
-
(2,176)
(2,416)
(34)
785
Profit/(loss) before income tax expense
(749)
3,081
10,524
12,856
45
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 5. Financial reporting by segments (continued)
TOTAL SEGMENT ASSETS
Current Assets
Non-current Assets
Total 30 June 2020 Assets
Current Assets
Non-current Assets*
Total 30 June 2019 Assets*
TOTAL SEGMENT LIABILITIES
Current Liabilities
Non-current Liabilities
Total 30 June 2020 Liabilities
Current Liabilities
Non-current Liabilities*
Total 30 June 2019 Liabilities*
*Restated, refer to Note 4.
Australia
$’000
NZ
$’000
Indonesia
$’000
Total
$’000
28,982
123
29,105
23,822
21
23,843
536
97
633
218
101
319
789
14,970
15,759
1,487
20,906
22,393
692
10,315
11,007
905
10,722
11,627
7,346
16,949
24,295
7,185
15,420
22,605
3,323
10,632
13,955
5,092
10,394
15,486
37,117
32,042
69,159
32,494
36,347
68,841
4,551
21,044
25,595
6,215
21,217
27,432
Major customers
The Group has a number of customers to whom it provides oil products. The Group supplies a single external customer
in the gas segment who accounts for 100% of external gas revenue (2019: 100%).
Note 6. Production costs
Production costs
Amortisation of production properties
Note 7. Other income
Interest from cash and cash equivalents and restricted cash
Maari insurance refund
Other income
Reimbursement of Ironbark back costs
Performance bond receivable*
Consolidated
2020
$’000
(8,804)
(4,140)
2019
$’000
(7,729)
(4,352)
(12,944)
(12,081)
Consolidated
2020
$’000
2019
$’000
360
-
80
-
391
831
381
1,070
65
1,542
-
3,058
*During the year ending 30 June 2020, Texcal Mahato EP Ltd, operator of the Mahato PSC refused to refund Cue’s
share of the PSC performance bond, amounting to approximately AUD$391K (US$269K) which was released by the
Indonesian Government on completion of the PSC work commitment. The return of the bond is governed by a separate
agreement with Texcal and is unrelated to the claims being made by Texcal under the Joint Operating Agreement
46
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 7. Other income (continued)
(‘JOA’). Cue continues to assert its rights under the agreement which governs the performance bond and is evaluating
its available options.
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 8. Administration expenses
Depreciation expense
Employee expenses
Superannuation contribution expense
Office rent and utilities*
Legal expenses
Other expenses
Business development expenses
Share based payments
Finance costs
Total administration expenses
Consolidated
2020
$’000
2019
$’000
73
1,275
70
35
409
482
128
146
5
2,623
10
1,329
67
147
250
509
114
34
-
2,460
*2019 balance includes $109K lease payment for the Melbourne office. This lease was recognised under AASB 16
Leases from 1 July 2019.
Note 9. Exploration and evaluation expenditure
Profit before income tax includes the following specific expenses:
Exploration Costs Expensed
Sampang PSC
Mahakam Hilir PSC
Mahato PSC
WA-359-P
WA-389-P
WA-409-P
Total exploration and evaluation expenditure
Consolidated
2020
$’000
2019
$’000
12
679
-
157
550
40
1,438
28
806
209
899
148
86
2,176
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. During the financial year the consolidated entity reviewed its criteria
under its successful efforts method of accounting. The costs of a successful exploration well are capitalised and carried
forward as exploration and evaluation assets pending the evaluation of the success of the well (refer note 14). If a well
does not result in a successful discovery, the previously capitalised costs are immediately expensed.
47
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 10. Income tax expense
Income tax expense
Current tax
Adjustment recognised for current tax in prior periods
Deferred tax – origination and reversal of temporary differences(i)
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Unrealised foreign exchange movements
Unrecognised temporary differences
Unrecognised tax losses
Recognition of deferred tax (assets)/liabilities (ii)
Difference in overseas tax rates
Share-based payments
Other
Adjustment recognised for current tax in prior periods
Income tax expense
(i) Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Deferred tax – origination and reversal of temporary differences
Consolidated
2020
$’000
2019
$’000
4,217
(656)
225
3,786
3,678
3
626
4,307
5,099
12,856
1,530
3,857
(146)
(139)
1,756
101
1,109
32
199
4,442
(656)
3,786
(186)
(930)
672
1,495
(614)
10
-
4,304
3
4,307
Consolidated
2019
$’000
2018
$’000
114
111
225
(269)
895
626
During the year, Cue was notified that it had been successful in an Indonesian Tax Court case against the Indonesian
Tax Department for over-payment of AUD$659K in taxes relating to 2011, resulting in a partial refund of AUD$451K
which was received in December 2019. The remaining balance was accrued at year end.
(ii) During the year, the consolidated entity capitalised Mahato PB exploration wells drilling costs (refer note 14). As a
result, a deferred tax liability of $510K was recognised in the financial statements.
During the prior year, the consolidated entity capitalised Paus Biru-1 exploration well drilling costs pending the
determination of the success of the well. As a result, a deferred tax liability of $1.5 million was recognised in the financial
statements.
48
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 10. Income tax expense (continued)
Current tax liabilities
Consolidated
2020
$’000
2019
$’000
2,287
4,227
The Group 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.
Deferred tax assets recognised
Restoration provision - Maari
Deferred tax liability recognised comprise of:
Sampang:
Production property
Exploration and evaluation assets
Restoration provision offset
Right of use assets
Deferred tax liability
Deferred tax not recognised
Deferred tax not recognised comprises temporary differences attributable to:
Employee provisions
Tax losses
Less deferred tax liabilities not recognised - Production properties
Less deferred tax liabilities not recognised - Inventories
Net deferred tax not recognised
Consolidated
2020
$’000
2019
$’000
2,888
3,002
Consolidated
2020
$’000
2019
$’000
2,395
2,026
(377)
14
4,058
2,923
1,495
(471)
-
3,947
Consolidated
2020
$’000
2019
$’000
68
35,752
(1,695)
(128)
33,997
55
34,079
(1,570)
(281)
32,283
The above net potential tax benefit has not been recognised in the statement of financial position as the recovery of this
benefit is uncertain.
At 30 June 2020 no franking and imputation credits were held for subsequent reporting periods (2019: nil).
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.
49
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 10. Income tax expense (continued)
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.
Note 11. Current assets - cash and cash equivalents and restricted cash
Unrestricted operating accounts
Restricted - Ironbark Drilling Program Account
Total as disclosed in the statement of cash flows
Consolidated
2020
$’000
19,936
12,008
2019
$’000
14,671
11,523
31,944
26,194
The Ironbark drilling programme account represents cash held by the entity as required under the funding arrangement
of the WA-359-P Co-ordination Agreement and is not available as free cash for the purposes of the group’s operations
until BP Developments Australia Pty Ltd, as the operator, draws down on the balance for the purposes of the Ironbark-1
drilling work programme agreed by all parties.
Accounting policy for cash and cash equivalents and restricted cash
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation
purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current
liabilities on the statement of financial position.
50
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 12. Current assets - trade and other receivables
Trade receivables
Other receivables
Prepayments
Consolidated
2020
$’000
2019
$’000
1,970
2,596
4,566
149
4,715
1,249
4,038
5,287
10
5,297
Allowance for expected credit losses
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped
based on shared credit risk characteristics and the days past due.
The consolidated entity has not recognised any losses in profit or loss in respect of the expected credit losses for the
year ended 30 June 2020 (2019: Nil).
The aging of trade receivables at the reporting date was as follows:
Not overdue
Less than one month overdue, not impaired
1 to 6 months overdue, not impaired
Consolidated
2020
$’000
2019
$’000
3,866
700
-
4,566
4,038
591
658
5,287
Trade and other receivables are non-interest-bearing and settlement terms are generally within 30 days.
Trade and other receivables are not impaired and relate to a number of independent customers for whom there is no
recent history of default.
Accounting policy for trade and other receivables
Trade and other receivables are amounts due from customers for goods sold in the ordinary course of business. They are
generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised
initially at the amount of consideration that is unconditional unless they contain significant financing components, when
they are recognised at fair value.
Note 13. Non-current assets - exploration and evaluation assets
Prepaid restoration fund - Sampang
Consolidated
2020
$’000
Restated
2019
$’000
5,713
5,278
51
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 13. Non-current assets - exploration and evaluation assets (continued)
During 2020 financial year, the Group reviewed the contractual agreement and concluded that a prior year restatement is
required to gross up the funded portion of the restoration provision, as Cue Sampang retains the obligation to fully fund
its share of the rehabilitation. As such, the Group retrospectively recognised other financial asset of AUD$5.28 million as
at 30 June 2019 (refer to note 4).
Cue Sampang contributed a further AUD$435K to the restoration fund during the year ended 30 June 2020.
Accounting policy for other financial assets
Other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement,
except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised
cost or fair value depending on their classification. Classification is determined based on both the business model within
which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting
mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, it’s carrying value is written off.
Note 14. Non-current assets - exploration and evaluation assets
Exploration and evaluation – Paus Biru-1 Exploration well*
Exploration and evaluation – PB exploration wells**
Consolidated
2020
$’000
2019
$’000
3,446
1,159
4,605
3,401
-
3,401
Under the criteria the costs of a successful exploration well are capitalised and carried forward as exploration and
evaluation assets pending the evaluation of the success of the well. If a well does not result in a successful discovery,
the previously capitalised costs are immediately expensed.
*The plan of development (POD) for the Paus Biru discovery was approved on the 30th July 2020. Nothing has come to
the attention of the Directors to indicate future economic benefits will not be achieved.
**Two exploration wells had been drilled in the Mahato PSC. The operator, Texcal Mahato EP Ltd (Texcal) and other joint
venture parties are claiming to have excluded Cue from participation in these operations. These claims are disputed by
Cue as having no basis under the Joint Operating Agreement (JOA). Cue continues to assert all its legal rights under the
JOA and is currently evaluating its available options.
On 16 April 2020, the Indonesia regulator, SKKMigas made a public announcement of a 61.8 million (OOIP) barrel oil
discovery in the Mahato PSC.
Note 15. Non-current assets - production properties
Consolidated
2020
$’000
Restated
2019
$’000
18,682
24,645
Production properties
52
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 15. Non-current assets - production properties (continued)
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 30 June 2018
Expenditure during the year
Changes in restoration provision – production
Amortisation expense
Balance at 30 June 2019
Expenditure during the year
Changes in restoration provision – production (note 17)
Changes in foreign currency translation (note 2(j))
Amortisation expense
Impairment of Maari production property*
Balance at 30 June 2020
Net accumulated cost incurred on areas of interest
Joint operation assets
Oyong and Wortel - Sampang PSC
Maari - PMP 38160
Balance as at 30 June 2020
Restated
Total
$’000
26,803
912
1,282
(4,352)
24,645
744
(691)
846
(4,140)
(2,722)
18,682
Consolidated
2020
$’000
Restated
2019
$’000
6,600
12,082
6,740
17,905
18,682
24,645
* At 30 June 2020, the Group reassessed the carrying amount of its oil and gas assets for indicators of impairment such
as changes in future prices, future costs and reserves. As a result, the recoverable amounts of Maari cash generating unit
were formally reassessed. An impairment of the Maari oil field development in New Zealand of $2.72 million, primarily
as a result of reduced oil prices, was recognised during the year.
Estimates of recoverable amounts are based on the assets’ value-in-use, determined by discounting each asset’s
estimated future cash flows at asset specific discount rates and based upon the Group’s long term pricing assumptions.
The post-tax discount rates applied were 10% (2019: 10%) equivalent to pre-tax discount rates of 14.3% (2019: 14.3%)
depending on the nature of the risks specific to each asset. Recoverable amounts are estimated as follows:
Maari
Carrying value as at 30 June 2020
Less restoration provision
Recoverable amount as at 30 June 2020
$’000
12,082
(10,315)
1,767
53
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 15. Non-current assets - production properties (continued)
The restoration provision is deducted from the carrying value of the asset as the cost of restoration is included in its cost
base. This adjustment is required to allow a true reflection of its carrying value against its recoverable value.
Where an asset does not generate cash flows that are largely independent from other assets or groups of assets, the
recoverable amount is determined for the cash-generating unit to which the asset belongs.
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 expensed through the statement of profit or loss and
other comprehensive income.
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 consensus estimates of forward market prices where available. The recoverable amount of other
assets is the greater of their fair value less cost to dispose and value-in-use.
In assessing value-in-use, the estimated future cash flows are discounted to their present value using a post-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.
Accounting policy for Impairment
The carrying amounts of the consolidated entity’s assets are reviewed at each reporting date to determine whether there
is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds the
recoverable amount. Impairment losses are recognised in profit or loss, unless an asset has previously been revalued,
in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess
recognised through profit or loss.
Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the
assets in the unit (group of units) on a pro rata basis.
Note 16. Current liabilities - trade and other payables
Trade payables and accruals
Amounts due to directors and director related entities
Refer to note 21 for further information on financial instruments.
54
Consolidated
2020
$’000
2019
$’000
1,945
99
2,044
1,893
14
1,907
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 16. Current liabilities - trade and other payables (continued)
The Directors consider the carrying amount of payables reflect their fair values. Trade creditors are generally settled
within 30 days.
Accounting policy for trade and other payables
These amounts represent the principal amounts outstanding at the reporting date plus, where applicable, any accrued
interest. Trade payables are normally paid within 30 days, and due to their short term nature are generally unsecured
and not discounted.
Note 17. Non-current liabilities - provisions
Employee benefits
Restoration provisions
Movements in each class of provision during the financial year are set out below:
Consolidated - 2020
Carrying amount at the start of the year (Restated, refer note 4)
Balance sheet movement (note 15)
P&L movement
Carrying amount at the end of the year
Consolidated
2020
$’000
Restated
2019
$’000
81
16,889
101
17,169
16,970
17,270
Restoration
provisions
Restated
$’000
17,169
(691)
411
16,889
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.
Abandonment provision
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.
55
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 17. 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 18. Equity - contributed equity
Consolidated
2020
Shares
2019
Shares
2020
$’000
2019
$’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 19. 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 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, or issue new shares.
During 2020 management did not pay any dividends (2019: nil).
There has been no change during the year to the strategy adopted by management to control the capital of the entity.
The gearing ratio is nil for both 2019 and 2020 financial year, as the Group does not have external debt.
Note 20. Equity - reserves
Foreign currency reserve
Options reserve
56
Consolidated
2020
$’000
2019
$’000
(93)
176
83
(784)
34
(750)
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 20. Equity - reserves (continued)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars.
Options reserve
The reserve is used to recognise the value of equity benefits provided to employees under the Employee Share Option
Plan.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Foreign currency translation
Share-based payments
Balance at 30 June 2019
Foreign currency translation
Share-based payments
Transfer to accumulated losses
Balance at 30 June 2020
Note 21. Financial instruments
Foreign
currency
reserve
$’000
Options
reserve
$’000
Total
$’000
(340)
(444)
-
(784)
691
-
-
(93)
-
-
34
34
-
146
(4)
176
(340)
(444)
34
(750)
691
146
(4)
83
The Group’s principal financial instruments comprise receivables, payables, cash and cash equivalents (inclusive of
restricted balances).
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.
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 Board reviews and agrees management’s assessment for managing each of
the risks identified below.
In all instances the fair value of financial assets and liabilities approximates to their carrying value.
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. The Group has no debt and trade receivable, other financial
57
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 21. Financial instruments (continued)
assets and trade payables are reasonable approximation of their fair values due to the short-term nature. Therefore
there is no significant fair value risk.
(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:
Consolidated
2020
$’000
2019
$’000
Cash and cash equivalents and restricted cash
31,944
26,194
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 impact of interest rate movement is not
material to the Group.
(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. However, given the group generates and holds
significant balances of foreign currencies, the Group foreign exchange risk exposures are mitigated through natural
hedging.
The Group’s exposure to foreign exchange risk at the reporting date was as follows (holdings are shown in AUD
equivalent):
Consolidated
Financial assets
Trade and other receivables
Financial liabilities
Trade and other payables
Tax liabilities
30 June 2020
30 June 2019
USD
$’000
NZD
$’000
IDR
$’000
USD
$’000
NZD
$’000
IDR
$’000
394
41
21
5,033
127
622
-
608
-
27
20
957
-
794
-
9
10
-
Management believes the risk exposures as at the reporting date are representative of the risk exposure inherent in the
financial instruments.
(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.
58
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 21. Financial instruments (continued)
At 30 June 2020, the Group had no open oil price swap contracts (2019: nil).
(e) Liquidity risk
Liquidity Risk is the risk that the group, although balance sheet solvent, cannot meet or generate sufficient cash resources
to meet its payment obligations in full as they fall due, or can only do so at materially disadvantageous terms.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have established an
appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term
funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves,
banking facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
The Group is consequently able to meet its payment obligations in full as they fall due.
Prudent liquidity risk management implies maintaining sufficient cash to meet the Group’s obligations. 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.
12 months
or less
1 to 2 years 2 to 5 years More than
Consolidated 2020
Non-derivative financial liabilities
Trade and other payable (Note 16)
Lease liabilities
Consolidated 2019
Non-derivative financial liabilities
Trade and other payables
(f) Credit risk
$’000
$’000
$’000
2,044
80
-
16
1,907
-
5 years
$’000
-
-
-
-
-
-
Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents and restricted cash,
trade and other receivables and other financial assets. 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.
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are
59
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 21. Financial instruments (continued)
considered representative across all customers of the consolidated entity based on recent sales experience, historical
collection rates and forward-looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
As disclosed in note 4, the Group retrospectively recognised other financial asset of AUD$5.28 million as at 30 June
2019 for the funded portion of the restoration provision. Cue Sampang contributed a further AUD$435K to the restoration
fund during the year ended 30 June 2020. Management assessed the credit risk as low, given the funds are held in an
Indonesian state owned bank account, jointly controlled by Indonesian government and its agency, SSKMigas.
Note 22. Key management personnel disclosures and related party disclosures
Directors
The following persons were directors of Cue Energy Resources Limited during the financial year:
Alastair McGregor (Non-executive Chairman)*
Andrew Jefferies (Non-Executive Director)
Peter Hood AO (Non-Executive Director)
Rebecca DeLaet (Non-Executive Director) (resigned 20 December 2019)*
Richard Malcolm (Non-Executive Director)
Rod Ritchie (Non-Executive Director)
Samuel Kellner (Non-Executive Director)*
Marco Argentieri (Non-Executive Director) (appointed 14 January 2020)*
*Alastair McGregor, Andrew Jefferies, Rebecca DeLaet, Samuel Kellner and Marco Argentieri have elected not to be
paid by the Company.
Key management personnel
The following person also had the authority and responsibility for planning, directing and controlling the major activities
of the consolidated entity, directly or indirectly, during the financial year:
Matthew Boyall (Chief Executive Officer)
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 non-monetary benefits and consultancy fees
• Post employment benefits – superannuation and long service leave entitlements
• Long term employee benefits
Short term employment benefits (including non-monetary benefits)
Cash bonuses
Post employment benefits
Share-based payments
Total employee benefits
Other related party transactions
Consolidated
2020
2019
513,737
91,800
33,459
51,334
502,406
112,200
26,584
10,307
690,330
651,497
Repayment of amounts owing to the Company as at 30 June 2020 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.
60
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 22. Key management personnel disclosures and related party disclosures (continued)
The parent company provides management, administration and accounting services to the subsidiaries. No Management
fees were charged to subsidiaries in the 2019 and 2020 financial years.
The ultimate parent company is O.G. Oil & Gas (Singapore) Pte. Ltd., a company incorporated in Singapore. The
immediate parent company is New Zealand Oil & Gas, a company incorporated in New Zealand.
During the financial year, New Zealand Oil & Gas provided technical and legal services to the Group under consulting
agreements. The arrangements are on normal commercial terms. As at 30 June 2020, $99K was accrued for service
rendered from the immediate parent company (2019: $14K).
Note 23. Auditors remuneration
During the financial year the following fees were paid or payable for services provided by the auditor of the company:
Audit services - KPMG (2019: BDO East Coast Partnership)
Audit or review of the financial statements
Other assurance services
Other services - KPMG (2019: BDO East Coast Partnership)
Advisory services
Tax compliance
Consolidated
2020
$
2019
$
97,290
8,280
105,570
114,857
3,000
117,857
7,349
12,500
-
10,000
19,849
10,000
125,419
127,857
No other services were provided by the auditor during the year, other than those set out above.
Note 24. Contingent assets and liabilities
The Directors are not aware of any contingent assets or contingent liabilities as at 30 June 2020 (2019: Nil).
Note 25. Commitments for expenditure
a) Exploration tenements*
The Group participates in a number of licences, permits and production sharing contracts
for which the Group has made commitments with relevant governments to complete
minimum work programmes.
Within one year
One to five years
b) Production development expenditure**
The Group participates in a number of development projects that were in progress at
the end of the period. These projects require the Group, either directly or through joint
venture arrangements, to enter into contractual commitments for future expenditures.
Within one year
Consolidated
2020
$’000
2019
$’000
24,593
-
24,593
1,645
27,033
28,678
817
706
61
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 25. Commitments for expenditure (continued)
* 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.
$24.59 million included in “within one year” category refers to the total Cue commitment for the Ironbark well. Approximately
$12.1 million will be funded by joint venture partners, with the remaining $12.49 million funded from Cue’s cash reserves
which have been escrowed for this purpose (refer to note 11).
** All development expenditure commitments relate to the development of oil and gas fields.
Note 26. Parent entity information
Cue Energy Resources Limited is the parent entity.
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
Options reserve
Accumulated losses
Total equity
Parent
2020
$’000
2019
$’000
(2,502)
(1,390)
(2,502)
(1,390)
Parent
2020
$’000
2019
$’000
16,938
21,364
504
601
12,214
23,404
200
301
152,416
152,416
176
34
(131,829)
(129,346)
20,763
23,104
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2020 (2019: nil)
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 (2019: nil)
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for the acquisition of capital assets as at 30 June 2020 (2019: nil).
62
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 27. 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 Taranaki Pty Ltd
Cue Exploration Pty Ltd
Ownership interest
Principal place of business /
2020
Country of incorporation
%
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
2019
%
100%
100%
100%
100%
100%
100%
100%
All companies in the Group have a 30 June reporting date.
* Shares held by Cue Mahakam Hilir Pty Ltd
Note 28. Interests in joint operations
Property
Operator
Petroleum exploration properties
Carnarvon Basin – Western Australia
WA-359-P
BP Developments Australia 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 EP Ltd
Petroleum production properties
Cue
Interest
2020 (%)
Cue
Interest
2019 (%)
Gross
Area
(km2)
Net
Area
(km2)
Permit
expiry date
21.5
100
20
100
12.5
21.5
100
20
645
645
25/04/2021
1,939
775.60
08/04/2021
565
169.50
12/10/2022
100
12.5
222.14
5,600
88.90
15/04/2021
700
20/07/2042
New Zealand
PMP38160
Madura - Indonesia
Sampang
OMV New Zealand Limited
5
5
80.18
4
02/12/2027
Medco Energi Sampang Pty Ltd
15 (8.18
Jeruk
Field)
15 (8.18
Jeruk
Field)
534.50
80.20
04/12/2027
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.
63
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 29. Events after the reporting period
On 16 July 2020, the Company issued 3,743,260 unlisted options to eligible employees under the share option scheme,
exercisable at $0.1175 (11.75 cents), The options will vest on 1 July 2023 and expire on 1 July 2025.
On 17 July 2020, the Consolidated Entity announced that the Environment Plan (EP) for the Ironbark-1 exploration
well in exploration permit WA-359-P had been approved by the National Offshore Petroleum Safety and Environment
Management Authority (NOPSEMA).
On 19 August 2020, the Company announced the Indonesian Government approval of the Paus Biru gas field Plan of
Development in the Sampang PSC and an independent certification of the contingent resources in the field.
No other matter or circumstances has arisen since 30 June 2020 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 30. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Share-based payments
Abandonment provision expense
Impairment - production assets
Depreciation
Amortisation
Net gain on foreign currency conversion
Change in operating assets and liabilities:
Decrease in trade and other receivables
Decrease/(increase) in inventories
Decrease/(increase) in deferred tax assets
Decrease in trade and other payables
(Decrease)/Increase in tax liabilities
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in provisions
Net cash from operating activities
Note 31. Earnings per share
Consolidated
2020
$’000
2019
$’000
1,313
8,549
146
257
2,722
73
4,140
(95)
582
545
114
(327)
(1,940)
111
(241)
7,400
34
777
-
10
4,352
(1,141)
2,296
(484)
(269)
(1,549)
(719)
895
72
12,823
Consolidated
2020
$’000
2019
$’000
Profit after income tax attributable to the owners of Cue Energy Resources Limited
1,313
8,549
Weighted average number of ordinary shares used in calculating basic earnings per share 698,119,720
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
1,692,411
698,119,720
-
Weighted average number of ordinary shares used in calculating diluted earnings per share 699,812,131
698,119,720
Number
Number
Basic earnings per share
Diluted earnings per share
64
Cents
Cents
0.19
0.19
1.22
1.22
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 31. 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.
Note 32. Share-based payments
On 29 July 2019, the Company issued 4,277,888 unlisted options to eligible employee under the share option scheme. The
options are exercisable at $0.07 (7 cents) per option and will vest on 1 July 2021 and expire on 1 July 2023.
Under IG4, which is set out in the Appendix to AASB 2 Share Based Payments, the service commencement date of these
options were deemed to be 1 July 2018. The options were valued using Black-Scholes option pricing model. $34,255 of
share-based payment expense was recorded in relation to these options for the financial year ending 30 June 2019.
On 4 October 2019, the Company issued 3,853,298 unlisted options to eligible employees under the share option scheme,
exercisable at $0.09 (9 cents). The options will vest on 1 July 2022 and expire on 1 July 2024.
Set out below are summaries of options granted under the plan:
2020
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
29/07/2019
01/07/2023
04/10/2019
01/07/2024
$0.070
$0.090
4,277,888
-
-
3,853,298
4,277,888
3,853,298
Weighted average exercise price
$0.070
$0.090
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
29/07/2019
01/07/2023
$0.07
Weighted average exercise price
-
-
-
4,277,888
4,277,888
$0.070
Expired/
forfeited/
other
Balance at
the end of
the year
(493,863)
3,784,025
-
3,853,298
(493,863)
7,637,323
$0.070
$0.080
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
4,277,888
4,277,888
$0.070
-
-
-
-
-
-
-
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at
the grant date, are as follows:
65
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Notes to the financial statements
30 June 2020
Note 32. Share-based payments (continued)
Grant date
Expiry date
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant
date
29/07/2019
01/07/2023
04/10/2019
01/07/2024
$0.092
$0.115
$0.070
$0.090
55.00%
53.00%
-
-
0.99%
0.64%
$0.040
$0.059
Accounting policy for share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount
of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of
the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that
do not determine whether the consolidated entity receives the services that entitle the employees to receive payment.
No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts
already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition
is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not
satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting
period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
66
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Directors’ Declaration
30 June 2020
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 2020 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
20 August 2020
67
Cue Energy Resources LimitedAnnual Report 2020
Independent Auditor’s Report
To the shareholders 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).
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including:
•
•
giving a true and fair view of the Group's
financial position as at 30 June 2020 and of
its financial performance for the year ended
on that date; and
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Financial Report comprises:
•
•
Consolidated statement of financial position as at
30 June 2020;
Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement
of changes in equity, and Consolidated statement
of cash flows for the year then ended;
• Notes
including a summary of significant
accounting policies; and
• Directors' Declaration.
The Group consists of Cue Energy Resources Limited
(the Company) and the entities it controlled at the year
end or from time to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 (including Independence Standards) (the Code) that are relevant to our audit of the Financial
Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG
International Cooperative
(“KPMG International”), a Swiss entity.
55
68
Liability
approved
Standards Legislation.
limited by a scheme
Professional
under
Cue Energy Resources LimitedAnnual Report 2020 Key Audit Matters
The Key Audit Matters we identified
are:
•
•
Impairment of production
properties; and
Restoration provisions
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 properties
Non-current assets – production properties: $18.7m (refer to Note 15)
Impairment of production properties: $2.7m (refer to Note 15)
The key audit matter
How the matter was addressed in our audit
We identified the assessment of possible
indicators of impairment and where required
impairment testing of CGUs as a key audit
matter. This was due to the size of production
properties and the complex auditor judgement
and level of specialised skills needed to
evaluate certain assumptions used in this
process.
As part of their assessment of indicators of
impairment, the Group determines an estimate
of future cash flows for each cash generating
unit (‘CGU’), considering different internal and
external factors.
Our procedures included:
•
internal controls
Testing key
in the Group’s
impairment assessment process. This included the
determination, review and approval by the Group of
indicators of impairment and key impairment model
inputs;
• Assessing the appropriateness of the impairment
testing methodology applied by the Group against
the requirements of accounting standards;
•
the Group’s
Evaluating
indicator
assessment utilising our knowledge of the Group
and the Oil and Gas industry;
impairment
The Group determined
there was an
impairment indicator for the Maari CGU and
recognised an impairment expense of $2.7m.
• Assessing the integrity of the impairment model
including the accuracy of the underlying calculation
formulas;
•
for
identifying
The process
impairment
indicators and the recoverable amount of the
Maari CGU use forward looking assumptions
which are inherently difficult to determine with
precision and require judgement to be applied.
These conditions require additional scrutiny by
us, in particular to address the objectivity of the
inputs, and their consistent application. Key
inputs into these forward looking estimates
that we focused on, include:
•
Future oil and gas prices. The Group’s
models are sensitive to small changes in
price assumptions;
• Reserves, future production volumes and
future capital expenditure and operating
Evaluating key
impairment model for the Maari CGU by:
inputs used
in
the Group’s
− Working with our valuation specialists we
evaluated
future oil and gas prices by
comparing to published forecast commodity
prices and views of market commentators on
future trends;
− Comparing
future capital and operating
expenditures and reserves to board approved
asset plans and long term budgets. We
assessed
to budget
the Group’s ability
accurately by comparing prior years’ estimated
cash flows to actual results;
− Evaluating
the scope, competency, and
56
69
Cue Energy Resources LimitedAnnual Report 2020 cash flows. These are determined by the
Group based on historical performance
adjusted for expected changes. This drives
additional audit effort around the feasibility
of forecasts; and
• Discount rates. These are complicated in
nature and vary according to the conditions
and environment that the CGUs are subject
to from time to time.
involved
valuation
We
to
supplement our senior audit team members in
assessing this key audit matter.
specialists
reserve estimates and
objectivity of the Group’s external experts who
future
produced
production volumes used in the impairment
model. We assessed the methodology used by
the Group’s external experts against industry
accepted practice. We also compared for
consistency the assumptions used by the
Group’s external experts
in the reserves
estimate and future production volumes to
publicly available information from joint venture
partners and assumptions used by the Group in
their impairment model;
− Assessed the feasibility of future operating and
capital expenditure and future production
volumes by comparing to publically available
information from joint venture partners, past
performance and the Group’s
long term
budgets;
− Working with our valuation specialists we
analysed the Group’s discount rate against
publicly available risk free rates and data of a
group of comparable entities; and
− Considering the sensitivity of the model by
varying key assumptions, such as future oil and
gas prices, production volumes, capital and
operating expenditures, and discount rates,
within a reasonably possible range. We did this
to identify those assumptions at higher risk of
bias or inconsistency in application and to focus
our further procedures.
• Re-calculating the impairment charge for the Maari
CGU against the recorded amount disclosed; and
• Assessing the appropriateness of the Group’s
disclosures
in the financial report using our
understanding obtained from our testing and
against the requirements of accounting standards.
70
57
Restoration provisions
Non-current liabilities – restoration: $16.9m (refer to Note 17)
The key audit matter
How the matter was addressed in our audit
We identified restoration provisions as a key
audit matter due to:
•
•
The Group’s assets being long-life, which
increases estimation uncertainty relating
to forecast restoration cash flows which
require auditor judgement and specialised
skills to evaluate their appropriateness;
The significant size of the restoration
provisions relative to the Group’s financial
position; and
the
• Our audit focus being first year as auditor
and
the
identification of errors in accounting of the
restoration provision in the previously
issued 30 June 2019 financial report.
restatement due
to
The Group incurs obligations to close, restore
and rehabilitate
its sites and associated
facilities. We focussed on the following key
estimates made by the Group in determining
its restoration provision:
•
•
•
The useful life of asset including the
economic reserves and production profiles;
The interpretation of legislative regulatory
requirements governing its sites;
The cost and timing of future rehabilitation
costs; and
•
•
• Discount rates applied to the Group’s net
present value of forecast cash flows used
to determine the restoration provision.
Our procedures included:
•
Testing key controls in the Group’s process to
determine the restoration provision. This included
the determination, review and approval by the
Group of key inputs included in the calculation such
as life of asset reserves and production profiles,
discount rates, future restoration costs, and timing
of future cash flows;
future
• Assessing the nature and extent of the work
performed by the Group’s external expert in
restoration activities and
identifying
assessing the timing and likely cost of such
activities. We compared the nature and extent of
regulatory
restoration work
timing of
requirements. We compared
restoration activities to the Group’s reserves and
resources estimates, expected production profile
and useful life;
relevant
the
the
to
• Using our knowledge of the Group and our industry
experience, and considering other publically
available
joint venture
partners, we assessed the feasibility of the future
restoration costs and their timing;
information
from
the
Evaluating the scope, competency and objectivity
of the Group’s external expert;
Evaluating the discount rates applied to the Group’s
net present value of the restoration provision
against publicly available data, including risk free
rates;
• Assessing the integrity of the provision calculation
including the accuracy of the underlying calculation
formulas; and
• Assessing the appropriateness of the Group’s
disclosures in the financial report, including the
restatement of the 30 June 2019 restoration
provision, using our understanding obtained from
our testing and against the requirements of
accounting standards.
58
71
Cue Energy Resources LimitedAnnual Report 2020 Other Information
Other Information is financial and non-financial information in Cue Energy Resources Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report, CEO
Report and Review of Operations and Finances and the Shareholder Information. The Chairman’s Overview,
Reserves and Resources Summary and Sustainability are expected to be made available to us after the date
of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error; and
assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend to
liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
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 Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They 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 the
Financial Report.
72
59
Cue Energy Resources LimitedAnnual Report 2020 A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration
Report of Cue Energy Resources
Limited for the year ended 30 June
2020, complies with Section 300A of
the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in the
Directors’ report for the year ended 30 June 2020.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Vicky Carlson
Partner
Melbourne
20 August 2020
60
73
Cue Energy Resources LimitedAnnual Report 2020 Cue Energy Resources Limited
Shareholder information
30 June 2020
Shareholder Information
1. Distribution of equitable securities
The shareholder information set out below was applicable as at 15 September 2020:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Number
of holders
of
ordinary
shares
Number
of
ordinary
shares
%
of
ordinary
shares
Number
of
holders of
unquoted
options
Number
of
unquoted
options
%
of
holders of
unquoted
options
62
175
493
1,490
313
10,788
563,205
4,410,347
50,531,631
642,603,749
0.00
0.08
0.63
7.24
92.05
-
-
-
-
-
-
-
-
8 11,380,584
-
-
-
-
100.00
2,533
698,119,720
100.00
8 11,380,584
100.00
Holding less than a marketable parcel
134
261,864
0.02
-
-
-
2. Registered Top 20 Shareholders
The registered names and holdings of the 20 largest holdings of quoted ordinary shares in the Company as at 15 September
2020:
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. Citicorp Nominees Pty Limited
8. Finot Pty Ltd
9. Andrew Mark Wilmot Seton
10. Grizzley Holdings Pty Limited
11. Lakemba Pty Ltd
12. Berne No 132 Nominees Pty Ltd (52293 A/C)
13. Milliara Nominees (Aust) Pty Limited (Gill Family A/C)
14. Beira Pty Limited
15. Ms Rachel Irene Alembakis
16. HSBC Custody Nominees (Australia) Limited - A/C 2
17. Equity Trustees Limited (Lowell Resources Fund A/C)
18. BNP Paribs Nominees Pty Ltd (IB AU Noms Retailclient DRP)
19. Mr Damiano Giorgio Pilla
20. Jarden Scrip Limited
74
Ordinary shares
Number
held
349,368,803
116,029,828
12,197,050
10,000,000
7,500,000
6,376,611
5,824,919
5,000,000
4,328,587
3,202,203
3,084,051
3,000,000
2,818,289
2,762,159
2,700,000
2,211,040
2,150,176
2,024,206
1,996,427
1,825,000
544,399,349
% of total
shares
issued
50.04
16.62
1.75
1.43
1.07
0.91
0.83
0.72
0.62
0.46
0.44
0.43
0.40
0.40
0.39
0.32
0.31
0.29
0.29
0.26
77.98
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Shareholder information
30 June 2020
3. Unquoted equity securities
Unquoted options over ordinary shares
The following persons hold 20% or more of unquoted equity securities:
Number on
issue
Number of
holders
11,380,584
8
Name
Balakrishnan Kunjan
Matthew Boyall
4. Substantial holders
Class
Unquoted options
Unquoted options
Number held
3,932,514
3,790,540
Substantial holders in the company are set out below:
Ordinary shares
Number
held
% of total
share
issued
349,368,803
116,029,828
50.04
16.62
NZOG Offshore Limited
BNP Paribas Noms Pty Ltd (DRP)
5. Vendor Securities
There are no restricted securities on issue as at 15 September 2020.
6. 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)
(ii)
for each fully paid share held by person, or in respect of which he/she is appointed a proxy, attorney or
representative, one vote for the share;
for each partly paid share, only the fraction of one vote which the amount paid (not credited) on the share bears
to the total amounts paid and payable on the share (excluding amounts credited).
Subject to any rights or restrictions attached to any shares or class of shares.
7. Annual General Meeting and Director Nominations Closing date
Cue Energy Resources Limited advises that its Annual General Meeting will be held on or about Friday 30 October 2020.
The time and other details relating to the meeting will be advised in the Notice of Meeting to be sent to all Shareholders
and released to ASX immediately upon despatch.
The Closing date for receipt of nomination for the position of Director is Friday 18 September 2020. Any nominations
must be received in writing no later than 5.00pm (Melbourne time) on Friday, 18 September 2020 at the Company’s
Registered Office.
The Company notes that the deadline for nominations for the position of Director is separate to voting on Director
elections. Details of the Director’s to be elected will be provided in the Company’s Notice of Annual General Meeting in
due course.
75
Cue Energy Resources LimitedAnnual Report 2020
Cue Energy Resources Limited
Shareholder information
30 June 2020
8. 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
9. Sharecodes
ASX Share Code: CUE
76
Cue Energy Resources LimitedAnnual Report 2020
Level 3, 10-16 Queen Street, Melbourne VIC 3000, Australia
Phone: +61 3 8610 4000
WWW.CUENRG.COM.AU