A New Era
Annual Report 2021
Contents
06
08
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16
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36
38
40
75
76
126
127
133
135
139
FY2021 Operating and
Financial Highlights
Chairman & CEO’s Report
Operational and Financial Overview
Production and Development
Subsurface Evaluation and
New Ventures
Sustainability
Reserves and Resources
Strengths and Key Risks
Directors’ Report
Auditor’s Independence
Declaration
Consolidated Financial Statements
and Notes to the Consolidated
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Securities Exchange
Information
Glossary
Corporate Directory
Karoon Energy Ltd
Annual Report 2021
FPSO, Cidade de Itajaí
In November 2020, Karoon completed the
acquisition of a 100% operating interest in
the BM-S-40 concession in the Santos Basin
of Brazil, which contains the Baúna oil field.
This has transformed Karoon from an explorer
to an operating oil producer, with exposure
to the exciting Brazilian oil sector.
Karoon Energy Ltd
01
Annual Report 2021
Karoon has restructured its Board and
management teams in Brazil and Australia,
to ensure that the Company has the
relevant skills and experience to deliver
safe, reliable and sustainable operations,
and drive Karoon’s growth ambitions.
02
Karoon Energy LtdAnnual Report 2021
Karoon’s highest priority is the health, safety
and wellbeing of its staff and contractors, and
the communities where we operate. Despite
COVID-19’s impact on Brazil, the Company’s strict
COVID protocols have kept our people safe.
03
Karoon Energy LtdAnnual Report 2021
A Strategic Refresh, to guide the Company’s
corporate strategy and key objectives for the next
five years and beyond, is nearing completion.
The strategy refresh work considered operational
and financial issues, such as achieving
operational excellence, assessing organic and
inorganic growth opportunities, and optimising
capital management, as well as oil industry
and host country market dynamics.
04
Karoon Energy LtdAnnual Report 2021
In addition, a major focus of the Refresh
has been on Karoon’s environmental, social
and governance practises. In particular,
Karoon recognises societal and investor
expectations for oil and gas companies
to play a key role in the pathway to net
zero carbon emissions. The Company is
developing a comprehensive sustainability
strategy as part of the Refresh.
05
Karoon Energy LtdAnnual Report 2021
FY2021 Operating and Financial Highlights
Average realised oil price
US$59/bbl
Operating Cash Flow
US$29.8 million
Cash at 30 June 2021
US$133.2 million
Total oil production
3.14 MMbbl
from 7 November 2020
to 30 June 2021
Oil Sales Revenue
US$170.8 million
Net profit after tax
Reported
US$4.4 million
Underlying1
US$33.4 million
1. Non-IFRS measure that is unaudited but derived from audited financial statements and is presented to provide further insight into Karoon’s performance.
Rio de Janeiro, Brazil
06
Karoon Energy LtdAnnual Report 2021 Lost time injury rate
0.32
per 200,000 hours
Process safety
0 incidents
Tier 1 or Tier 2
Scope 1 & 2 Emissions
49,668
tonnes CO2 equivalent
Total recordable incident rate
0.64
per 200,000 hours
Environment
3 New projects initiated
to reduce or prevent
GHG emissions
Diversity
50%
female employees
(Karoon Group)
07
Karoon Energy LtdAnnual Report 2021
Chairman & CEO’s Report
Bruce Phillips
Chairman
Julian Fowles
Chief Executive Officer
and Managing Director
Our team has been
successful in mitigating
the impacts of COVID-19
by adopting flexible work
arrangements and actively
managing risks.
The 2021 financial year was one of the most
significant years in Karoon’s 17-year history.
Following the acquisition of the Baúna oil field
in Brazil in November 2020, the Company
has now entered a new era as a material oil
producer and operator.
As well as a high-quality production asset, the purchase has
provided Karoon with value-accretive brownfield production
growth opportunities, with the Baúna intervention program and
Patola field development both sanctioned during the year.
It was also a year of substantial change in the Board and
management team, including the retirement of our Founder and
Managing Director, Robert (Bob) Hosking and the appointment
of new Chief Executive Officer and Managing Director, Dr Julian
Fowles. Together with an organisational restructure and several
highly experienced senior management appointments, we are
confident we have the necessary skills and capabilities to support
our production, development and growth aspirations.
Karoon’s transformation has been delivered against a backdrop of
the unprecedented global COVID-19 pandemic, which continues
to cause significant hardship for many of our staff and contractors,
as well as disruption to normal operational practices. By adopting
a high degree of flexibility in work arrangements and active
management of the associated risk to personnel and operations,
our team has been successful in mitigating the potential impacts of
COVID-19. While Karoon managed a number of COVID-19 cases
in the Baúna operations and among our administrative staff in
Brazil during the reporting period, our employees and contractors
were kept safe and production was not impacted.
On a more positive note, the macro-oil environment has been
very supportive. The oil price increased from approximately
US$45/bbl at the beginning of the year to more than US$75/bbl
by the end of June 2021, reflecting a recovery in oil demand as
the global impacts of COVID-19 eased, combined with supply
constraints implemented by OPEC+. This has had a positive impact
on cash flows generated from operations, leading to a material
strengthening in our balance sheet over the period.
Delivery of core strategic goals
In last year’s Annual Report, we outlined our three-pillar strategy
to build a global exploration and production company, with long
term production and a prospective exploration portfolio to provide
a platform for growth.
The first pillar was to secure a quality production asset. On 6
November 2020, after successfully agreeing adjusted consideration
terms, we completed the acquisition of the BM-S-40 Concession
in the Santos Basin, offshore Brazil, from Petrobras S.A. This
purchase, which includes the producing Baúna oil field and nearby
Patola discovery, has transformed Karoon from a pure exploration
company into one of the largest oil producers on the ASX, with
material cash flows from operations.
The second pillar of Karoon’s strategy was to realise value from
development projects. Within five months of gaining control of
the Baúna assets, the Karoon Board endorsed plans to conduct
08
Karoon Energy LtdAnnual Report 2021
workovers in four of the six producing wells in BM-S-40. Two
months later, a final investment decision was taken to proceed
with the development of the Patola project.
Two major contracts were signed to support these projects:
• After an actively bid competitive tender, the Maersk Developer
rig was contracted for the Baúna workovers and to drill the
Patola development wells, with an option to extend the
contract for the potential drilling of a control well on the Neon
light oil discovery.
• An integrated Engineering, Procurement, Construction and
Installation contract was signed with TechnipFMC for the
subsea
the
design, manufacture and
infrastructure associated with the Patola development.
installation of
Project delivery teams have been formed with a focus on safely
completing the Baúna intervention and Patola projects on time
and on budget, with clear project, corporate governance and
risk management processes. Project execution, including the
remaining contract tenders and contract awards process, is now
well underway.
Together, the Baúna interventions and Patola development are
expected to add 15,000 – 20,000 bopd by early 2023, more than
doubling current production before natural decline resumes. The
total future capital commitment for these projects is approximately
US$300 million, representing a major investment in our heartland
of Brazil.
These approvals followed substantial analysis and due diligence
by our operational, technical, project planning, financial and
commercial staff in Brazil and Australia, and by independent
advisers and financiers.
Progress was also made on maturing and optimising the potential
development of the Neon discovery, with a thorough subsurface,
engineering and economic review of the previous development
concept initiated in March 2021. This has resulted in encouraging
alternatives which are being further evaluated. This work is expected
to be completed towards the end of calendar 2021, which will lead
to a decision in early calendar 2022 on whether to drill a Neon
control well using the Maersk Developer rig.
Brazil
Rio de Janeiro
office
Karoon assets,
Santos Basin
Shore Base, Itajaí
Australia
Head office
Melbourne
Karoon’s Brazilian assets are all located in the offshore Santos Basin,
Brazil’s prolific and premier petroleum province. These include a 100%
interest in concession BM-S-40, which contains the producing Baúna and
Piracaba light oil fields and the undeveloped Patola field, the nearby Neon
and Goiá oil discoveries and exploration block S-M-1537. Karoon also
manages major infrastructure onshore and offshore Brazil.
09
Karoon Energy LtdAnnual Report 2021
Chairman & CEO’s Report Continued
Karoon head office, Melbourne, Australia
10
Karoon Energy LtdAnnual Report 2021 •
•
In October 2020, Mr Peter Botten AC commenced as an
independent non-executive director, and long serving non-
executive directors, Mr Geoff Atkins and Mr José Coutinho
Barbosa, retired in November 2020.
In early 2021, the Company was restructured to help clarify
reporting lines and accountabilities, leading to improved
governance processes and faster decision making, which
is essential for Karoon as a substantial oil producer. The
restructure included the creation of a Brazil Business Unit,
which is responsible for executing all in-country activities, while
Karoon’s team in Melbourne has responsibility for corporate
governance and performance management and for providing
strategic, technical assurance and specialist services.
• South America General Manager, Mr Tim Hosking, left Karoon
at the end of March 2021.
• Mr Antonio Guimarães was appointed as Executive Vice
President and President Karoon Brazil in August 2021 and will
join Karoon in October 2021. Antonio, a Brazilian national who
has spent much of his career with Shell, will report directly to
the CEO, ensuring increased visibility of the Brazil Business
Unit at the highest level of the Company. With his extensive
and relevant oil and gas executive experience, Antonio is well
qualified to help build the organisation’s reputation as a safe,
reliable and sustainable operator as we seek to grow our
business further in Brazil.
• Mr Ray Church was appointed as Executive Vice President and
Chief Financial Officer (CFO) in August 2021 and will join Karoon
in September 2021, taking over from Karoon’s current CFO,
Scott Hosking, who will step down at the end of September
2021. Ray has more than 34 years of international experience
in finance roles, including TNK-BP and Chevron Corporation.
In addition, over the year, the Company ramped up materially its
operating capabilities in Brazil, with a team of highly experienced
technical, operational and commercial professionals located in Rio
de Janeiro and at our operational shore base in Itajaí.
Capital management
In July 2020, in light of the challenging oil market at the time,
Karoon successfully renegotiated with Petrobras the transaction
terms for the Baúna asset. The parties changed the structure of
the transaction from an upfront payment of US$665 million to a
firm consideration of US$380 million, adjusted for operating and
investing cash flows attributable to the asset from January 2019,
plus a tiered, contingent consideration of up to US$285 million
(plus interest at 2% per annum), dependent on future oil prices.
The reduction in the upfront payment, combined with strong
cash flows from operations since completion of the purchase, has
left the Company in a strong financial position, with cash of
US$133 million at the end of June 2021.
Work on the final pillar, to target strategic growth opportunities,
is ongoing. Baúna has created a strong platform to support
Karoon’s growth aspirations, with the opportunity to leverage
the Company’s infrastructure base in Brazil, a country where the
investment fundamentals are highly attractive.
Strategy Refresh underway, with a focus on long
term sustainability and providing attractive returns
to shareholders
Having completed our transformation into an oil producer, in April
2021, a Strategic Refresh commenced, aimed at updating Karoon’s
corporate strategy and our key objectives for the next five years and
beyond. Our goal is to create a sustainable oil business, anchored
by our current Brazilian producing assets and projects under
development, which delivers strong returns for our shareholders.
The Refresh has considered the Company’s operational and financial
objectives, such as achieving operational excellence and optimising
capital management, as well as evaluating organic and inorganic
growth options. In addition, a major component of the Refresh
has been on what is required to be a responsible operator, with an
emphasis on our approach to the communities where we operate
and managing our carbon footprint. Considering the accelerating
global energy transition, we recognise the challenges facing the
oil and gas industry. To ensure we have a sustainable business as
the world transitions to lower carbon energy, management of our
greenhouse gas (GHG) footprint will form a key component of our
strategy and how we position ourselves for both the challenges
and opportunities that the energy transition brings.
As a new operator, our focus this year has been on establishing
a baseline evaluation of our GHG emissions, estimating Karoon’s
future emissions profile based on our projected growth strategy,
identifying potential projects to reduce or prevent GHG emissions
in operations and developing a GHG mitigation strategy. As part of
the Strategic Refresh, we are developing a comprehensive carbon
management strategy that considers emission reduction targets,
including a net zero carbon emissions goal, as well as a climate
change action plan.
The Strategic Refresh is now nearing its conclusion and we intend
to share the outcomes with the market later in calendar 2021.
Refreshing the Board, management and corporate
structure
During the year, several changes were made to Karoon’s Board,
management and corporate structure, to ensure we have the
appropriate skills and capabilities, corporate and operational
processes and necessary accountabilities to safely and reliably
deliver the Company’s production and growth opportunities.
•
In November 2020, Founding Chief Executive Officer and
Managing Director, Mr Robert (Bob) Hosking retired.
• After an extensive and rigorous international search process,
Dr Julian Fowles was appointed as CEO and Managing Director
in November 2020. With a long career as a senior executive in
the upstream oil and gas industry, Julian has the necessary skills
and experience to lead the Company through our new phase
of corporate life as an oil producer and developer and in the
energy transition.
11
Karoon Energy LtdAnnual Report 2021
Chairman & CEO’s Report Continued
Karoon Energy Ltd
12
Annual Report 2021
Thanks
On behalf of all at Karoon, we would like to thank sincerely all the
departing senior personnel and non-executive directors for their
outstanding service over many years. In particular, we owe a debt
of gratitude to our former Managing Director, Bob Hosking, for
guiding Karoon for 16 years, from a fledgling exploration company
to our current position as one of the largest oil producers on the
ASX. It is very gratifying to see Bob’s vision of becoming a material
oil producer finally being realised.
We would like to acknowledge all our employees in Australia,
Brazil and Peru, and Karoon’s Board members for their dedication
and hard work during what has been both a challenging and
transformational year for the Company. We would also like to
thank the many people from our major contractors and financiers
for their hard work and the support which has enabled us to make
the Baúna and Patola sanction decisions.
Finally, thank you, our shareholders, for your continued support.
We look forward to building further on our achievements in FY2022.
Bruce Phillips
Chairman
Julian Fowles
Chief Executive Officer and Managing Director
The Baúna intervention program and Patola development will
be funded by a combination of cash flows from operations, our
existing cash, and a new US$160 million reserve‐based, non‐
recourse, syndicated facility agreement. The facility, with a high-
quality international syndicate comprising Deutsche Bank, ING,
Macquarie and Shell, represents the first time Karoon has accessed
the debt markets and provides a cost competitive source of finance.
As part of the terms of the loan, Karoon is planning to implement a
hedging program covering approximately 30 – 40% of production
over the first two years of the loan life. The program will protect
operating cash flows against the risk of lower oil prices on the
hedged barrels, while retaining material upside price exposure.
Karoon’s capital management priorities are first, to ensure safe and
reliable production from Baúna, and secondly, to continue to invest
in our already-sanctioned, high value brownfields growth projects,
the Baúna intervention program and Patola field development.
Further growth opportunities, both organic and inorganic, will be
subject to strict economic assessment and financial discipline.
While oil prices are currently buoyant, the speed of the decline
in early 2020 was a salutary lesson for all oil and gas industry
participants. The challenging conditions experienced in 2020
have emphasised the need for projects that are resilient to price
volatility, the importance of free cash flow generation and capital
discipline. A key area for the Board and management team will be
on ensuring Karoon’s future financial resilience to withstand any
future oil price shocks.
Outlook for the 2022 financial year (FY2022)
Our highest priority in FY2022 will be on continuing to deliver
safe and reliable production from the Baúna field. We will seek to
mitigate production decline from this mature field through active
well management and high facilities uptime, and will strive for zero
safety or environmental incidents. Financial discipline and strict
prioritisation of expenditure will continue to be vital in ensuring
operating costs remain low, while at the same time ensuring our
facilities are in the best possible condition and are robust for their
long-term future.
A key focus will be on progressing the Baúna intervention and
Patola projects, safely and on time and on budget. In addition, the
outcomes from the current Strategic Refresh will be implemented,
with a particular focus on establishing an appropriate carbon
management strategy that meets investor and stakeholder
expectations.
With continuing restrictions on family life, work and travel, we
recognise that these are very challenging times for our staff,
contractors and their families, and we will continue to implement
programs to promote health and wellbeing and to ensure our strict
COVID-19 protocols remain up to date.
Karoon Energy Ltd
13
Annual Report 2021
Operational and Financial Overview
The transition from an explorer to an oil producer and operator occurred
smoothly and without incident, despite the challenging backdrop of the global
COVID-19 pandemic.
Prioritising Health, Safety and the Environment
A key focus prior to, and since, taking over operatorship of Baúna
has been to ensure that Karoon’s high expectations for health,
safety and protection of the environment are embedded throughout
the organisation. The Company has developed a fully integrated
operating management system to ensure a robust and detailed risk
management process. In addition, Karoon implemented a range of
initiatives over the year, to reinforce a strong safety culture and to
ensure that all our staff and contractors understand that health,
safety, security and the environment are our highest priorities.
Financial results benefited from strong oil prices
Six oil cargoes were lifted from Baúna, totalling 2.9 MMbbl, which
were sold under the Company’s oil marketing agreement with
Shell at a weighted average realised price, net of selling expenses,
of US$59/bbl. The arrangement with Shell, under which oil from
Baúna is co-loaded onto large vessels with other similar grade
Brazilian crudes, provides Karoon with access to a much wider
range of potential international customers than if we conducted
the marketing ourselves, but still allows full transparency of the
process.
In the financial year ended 30 June 2021 (FY2021), there was one
Lost Time Incident on a supply vessel engaged in a pre-operatorship
training session. However, no Lost Time or other recordable
incidents occurred onboard the Baúna floating production storage
and offloading vessel (FPSO), the Cidade de Itajaí, during the period
and there were no significant environmental incidents.
The ongoing COVID-19 pandemic continued to pose major
challenges for Karoon’s employees and contractors, particularly
in Brazil, where case numbers remain high. As well as causing
severe disruption and travel restrictions for individuals, with staff
largely working from home, it meant a continued requirement
for flexibility in our working arrangements. Our strict quarantine
program and other COVID-19 safety protocols have been effective
in limiting COVID-19’s impact on our staff and contractors, and on
operations, with one outbreak of COVID-19 offshore early in 2021
managed within our existing protocols and with no interruptions
to production.
Karoon is well aware of the stresses that the pandemic has caused
to our workforce and has recently implemented a formal Employee
Assistance Program, to support the health and wellbeing of our
people.
Oil production in line with forecast
The transition of Baúna operatorship from Petrobras to Karoon
occurred safely and without incident. Oil production from 7
November 2020, when Karoon commenced operatorship of the
field, to 30 June 2021 was 3.14 MMbbl, produced at an average
rate of 13,317 bopd. This was in line with market guidance
provided at the time of the finalisation of the Baúna purchase and
with our half year results announcement in February 2021.
A key focus for Karoon over the year was to ensure the reliability
and integrity of the FPSO and the other key items of infrastructure.
As a result, the Company undertook some additional proactive
maintenance over the year, leading to eight days of unplanned
downtime. Despite this, total operational uptime was 92%, or
97% if the 11 days of scheduled maintenance is excluded.
14
sales
revenue
lifted was
from
Crude oil
US$170.8 million, resulting in a gross profit of US$59.4 million.
Adjusting production costs to reflect the FPSO charter lease, part of
which is disclosed as finance charges under AASB 16 ‘Leases’, unit
production costs for the period were US$25.11 per barrel.
the cargoes
Net profit after income tax (NPAT) for the financial year was US$4.4
million (2020: loss of US$86.1 million). This included an income
tax benefit of US$32.3 million (2020: US$0.6 million), of which
US$20.7 million related to the initial recognition of temporary
differences and historical Brazilian tax losses, which are available to
be carried forward to offset against future profits generated from
Baúna. Other key items which impacted profitability included net
foreign currency losses, an increase in the assessed fair value of the
contingent consideration payable to Petrobras, which is dependent
on future oil prices from 2022 to 2026, and the settlement of a
dispute with Pitkin in respect of Z-38, offshore Peru. When adjusted
for these items, as shown in the table opposite, underlying NPAT
was US$33.4 million (2020: loss of US$65.2 million).
Operating activities generated cash inflows of US$29.8 million,
compared to cash outflows of US$67.1 million in the previous
financial year. Receipts from oil sales since taking over operatorship
of Baúna were US$136.7 million. Significant operating cash
payments for the financial year included the following:
• Payments to suppliers and employees, including production
costs from 7 November 2020, of US$56.5 million (2020:
US$12.2 million).
• Transition expenditure to acquire the Baúna production asset of
US$15.9 million (2020: US$12.7 million).
• Payments for exploration and evaluation, including Marina-1
exploration well prior-year payables of US$15.2 million (2020:
US$41 million).
•
Interest and other costs of finance paid, largely relating to
finance charges on the FPSO lease, of US$13.2 million (2020:
US$0.4 million).
•
Income tax payments of US$10.8 million (2020: US$0.3 million).
Refer to pages 46 to 47 of the Directors’ Report for further
discussion of the results, cash flows and also changes to the
Group’s financial position.
Karoon Energy LtdAnnual Report 2021 FY2021 Financial Summary
Year to 30 June
Production volume (MMbbl)
Oil sales volume (MMbbl)
Unit production costs1,2 (US$/bbl)
Weighted average net realised oil price1 (US$/bbl)
Sales revenue
EBITDA1,3
Depreciation and amortisation4
Loss before income tax
Net profit/(loss) after income tax
Underlying net profit/(loss) after income tax1,5
Operating cash flows
Net assets
Investment Expenditure:
– Baúna intervention and Patola CAPEX6
– Exploration and evaluation expenditure and new ventures7
– Other plant and equipment8
2021
3.14
2.90
25.11
59.00
2020
-
-
-
-
US$ million
170.8
9.8
(37.6)
(27.8)
4.4
33.4
US$ million
-
(85.4)
(0.7)
(86.8)
(86.1)
(65.2)
29.8
380.3
(67.1)
359.5
18.6
7.1
6.1
-
53.6
1.3
1. EBITDA (earnings before interest, tax, depreciation, depletion and amortisation) and underlying net profit after tax are non-IFRS measures that are
unaudited but are derived from audited financial statements. These measures are presented to provide further insight into Karoon’s performance.
2. Unit production costs are based on operating costs as disclosed in Note 5(a) of the Financial Statements adjusted for depreciation on the FPSO right-of-use
asset and related finance costs to reflect the accounting expense related to the FPSO charter lease.
3. Includes depreciation on FPSO charter lease right-of-use asset refer Note 2 above.
4. Excludes depreciation on FPSO charter lease right-of-use asset refer Note 2 above.
5. The Statutory net profit after tax has been adjusted for the following items:
Year to 30 June
NPAT
Initial recognition of historical Brazilian tax losses and temporary differences
Baúna transition costs
Impairment and inventory write-down
Legal settlement
Foreign exchange losses/(gain)
Change in fair value of contingent consideration
Underlying NPAT
2021
US$ million
4.4
(20.7)
15.7
0.7
9.6
17.1
6.6
33.4
2020
US$ million
(86.1)
-
13.5
12.8
-
(5.4)
-
(65.2)
6. Excludes Baúna acquisition costs and capitalised borrowing costs associated with the Patola development.
7. Includes exploration and evaluation capitalised of US$1.9 million and exploration, evaluation and new venture expenses US$5.2 million.
8. Excludes leased right-of-use asset additions.
FY2021 oil production of 3.14 MMbbl, unit production costs
of US$25.11/bbl and unit depreciation and amortisation of
US$11.97/bbl were in line with market guidance.
15
Karoon Energy LtdAnnual Report 2021
Production and Development
On 6 November 2020, Karoon completed the acquisition of a 100% operating
interest in Concession BM-S-40, which is located approximately 220 kilometres
offshore Brazil in the southern Santos Basin. The concession holds the producing
Baúna and Piracaba light oil fields and the undeveloped Patola oil discovery.
The firm cash consideration paid to date, after operating and
investing cash flows from Baúna in the period from January
2019 to closing the transaction, was US$200 million. A deferred
consideration of US$41.5 million (plus interest at 1 month LIBOR
plus a 3% margin) is also payable in May 2022 and a tiered
contingent consideration of up to US$285 million (plus interest at
2% per annum). Any contingent payment is dependent on the
annual average Platts Dated Brent oil price in each of the years
from 2022 to 2026, and would be paid early in the year following
the annual assessment period.
Karoon worked closely with the concession vendor, Petrobras,
during a transition period between signing the Sales and Purchase
Agreement (SPA) in July 2019 and acquisition closure in November
2020, to ensure the safe and efficient transfer of operatorship to
Karoon.
Baúna Concession
Baúna originally came onstream in 2013. Production rates peaked
at approximately 70,000 bopd before the field entered its decline
phase, with production averaging 14,800 bopd when Karoon
SANTOS BASIN, BRAZIL
LEGEND
Oil and gas field
Oil field
Gas field
Lead
Oil pipeline
Gas pipeline
Karoon Blocks
Towns
Rio de Janeiro
São José dos Campos
São Paulo
Santos
Mexilhão Area
Belmonte
Cedro
Mexilhão
Corcovado
Mato do Gat
Libra
Franco
Merluza
Panoramix
Lagosta
Parati
Macunaima
Iara Entorno
Cernambi
Vampira
Guajamá
Piracucá
Piracucá
Neon
S-M-1037
Carcara
Lula
Jupiter
Bigua
Abaré Oeste
Caramba
Sapinhoa
S-M-1101
Goiá
Tubarao
Estrela do Mar
Coral
Caravela Sul
Cavalo Marinho
Baúna, Piracaba and Patola
BM-S-40
Baúna Sul
Clorita
S-M-1537
Brazil
Map Area
NORTH
200 km
South
America
Shore Base Location
Itajai
Florianopolis
Karoon Energy Ltd
16
Annual Report 2021
completed its purchase in November 2020. Baúna cumulative oil
production from commencement of production up to 30 June 2021
is 135 MMbbl, with an estimated 34.7 MMbbl of 2P recoverable
reserves remaining (excluding Patola – see Reserves and Resources
Report on page 36).
The Baúna and Piracaba development comprises six production
wells, three water injection wells and one gas injection well. All
wells have subsea completions, which are tied back to the FPSO.
The leased FPSO is owned by Altera and operated by a joint venture,
Altera & Ocyan (A&O), under an ‘operations and maintenance’
contract with Karoon. It has a processing capacity of 80,000 bopd
and a storage capacity of approximately 600,000 bbl.
The Baúna Oligocene reservoirs are located at a depth of
approximately 2,000 metres subsea in combined stratigraphic
and structural traps, which are well imaged on high resolution
3D seismic data. The reservoirs have excellent porosity and
permeability (greater than 30% and 2 - 6 darcys, respectively), with
net pay ranging from 10 metres to 40 metres in laterally extensive
sandstone reservoirs, providing strong aquifer pressure support and
high oil recovery factors. The water depth at the Baúna location is
approximately 280 metres.
Production and sales
FY2021 production performance
After a smooth transition of operatorship from Petrobras to
Karoon, with no safety incidents or interruptions to production,
oil production from Baúna was 3.14 MMbbl during the period
from 7 November to 30 June 2021, produced at an average rate
of 13,317 bopd.
Karoon was successful in partially mitigating the annual production
decline rate over its first eight months of operation, from more
than 15% over the past few years to approximately 10%. This
was achieved largely through the optimisation of gas-lift supply to
production wells, which led to higher total liquids production. In
addition, despite the maturity of the field, reservoir performance
was stronger than expected. Operational uptime, excluding 11
days of scheduled maintenance, was 97%. This reflected eight
days of unplanned outages, during which several maintenance
activities were implemented proactively to ensure the ongoing
integrity and reliability of the FPSO.
The Company is continuing to look for opportunities to enhance
production by refining its production management practises and
improving operational reliability, with a target of maintaining annual
decline rates below 15%, subject to the reservoir response over time.
Focus on safe and reliable operations
Karoon’s highest priority is maintaining safe and reliable operations.
During the year, the Company focused on ensuring its strong safety
culture was adopted for all Baúna operations. This included:
• Direct engagement between
the FPSO owner, Altera,
and Karoon up to CEO level to establish that Health, Safety,
Security and Environment (HSSE) is the primary priority
in decision making.
• Targeted safety behaviour campaigns during and following
handover of operatorship by Petrobras.
17
• Regular safety visits to the FPSO from the Karoon Operational
HSSE Coordinator.
• Pre-embarkation safety procedures enhanced.
• Strict protocols implemented to manage COVID risks.
While unfortunately one Lost Time Incident occurred during
FY2021 (on a supply vessel during a pre-operatorship training
session), there were no significant environmental incidents or
COVID-related interruptions to production. This strong HSSE
performance reflected the excellent commitment of all Karoon
staff and contractors, in both the onshore and offshore operations
teams, to delivering production safely and reliably.
(See Sustainability section on page 24 for further details)
FY2021 oil sales
During the year, Karoon lifted six oil cargoes from Baúna, totalling
2.9 MMbbl. The average price realised for the crude, net of selling
expenses, was US$59/bbl.
The cargoes were sold under the Company’s oil marketing
agreement with Shell Western Supply and Trading Limited (a
member of the Royal Dutch Shell Plc group). This agreement, which
was signed in October 2019 for a term of up to five years, provides
the Company with access to Shell’s global marketing and shipping
platform. Baúna crude is marketed by Shell on behalf of Karoon,
with the selection of the final customer made by Karoon. The oil is
loaded onto shuttle tankers and then co-loaded with other similar
grade oil produced in Brazil to larger vessels, to be transported to
the end-user.
The Baúna sweet light oil is regarded positively by the market, with
the crude’s excellent qualities attracting strong competition for
cargoes from a range of global refiners.
Karoon Energy LtdAnnual Report 2021
Production and Development Continued
Development activities
During the first half of calendar 2021, Karoon sanctioned two
projects that are expected to more than double current production
from the BM-S-40 Concession. The Baúna interventions and Patola
development are forecast to lift output to approximately 30,000
bopd in early calendar 2023, before natural decline resumes. By
utilising the existing FPSO and much of the other infrastructure,
the anticipated increase in production is also expected to result in
a material reduction in unit operating costs.
Baúna intervention campaign
In April 2021, following a competitive tender process involving 10
different rig owners, the drilling rig, Maersk Developer, operated
by Maersk Drilling, was contracted to undertake well intervention
work in four of the six oil production wells on Baúna. In addition,
Karoon secured options to extend the rig contract to drill two wells
on Patola, subsequently exercised, and to drill a potential control
well on the Neon field, which is still under evaluation. The rig is
expected to mobilise to Brazil and commence operations in mid-
calendar 2022, with the intervention program planned to take
approximately four months to complete.
The intervention campaign, which is expected to add between
5,000 bopd and 10,000 bopd to Baúna production, comprises
the following:
•
•
Installation of new electric submersible pumps (ESPs) in two
wells, SPS-92 and PRA-2, to replace the existing ESP pumps.
Installation of gas-lift equipment in the SPS-56 well, which is
currently producing without the assistance of downhole lift
from either a pump or gas-lift.
• Re-opening the lower zone of the BAN-1 well, which was shut-
in during a previous workover procedure, to allow production
from the lower reservoir zone to recommence.
Final investment decision (FID) taken on the Patola
field
Patola is a proven oil accumulation located adjacent to the
producing Baúna and Piracaba accumulations, and within the same
concession, BM-S-40. It was discovered by the SPS-91 exploration
well drilled by Petrobras in 2011. SPS-91 encountered nine metres
of net pay with 38° API oil, in a reservoir extension of the same
play of Oligocene turbidites sandstone reservoirs found at Baúna
and Piracaba, with similar petrophysical properties. 2P reserves are
estimated at 14.7 MMbbl (see Reserves and Resources Report on
page 36).
In June 2021, Karoon decided to proceed with the development
of Patola, which will comprise the following:
• Two near vertical subsea production wells, which will be drilled
and completed using the Maersk Developer rig immediately
following the completion of the Baúna intervention program.
• The design, manufacture and installation of subsea infrastructure
(subsea Christmas trees, flowlines, risers, umbilical, controls
and electro-hydraulic control equipment) by TechnipFMC under
an integrated Engineering, Procurement, Construction and
Installation (iEPCI™) contract. TechnipFMC is one of the world’s
leading experts in the design and installation of offshore energy
infrastructure.
• Following minor equipment additions, tying back the wells
to spare riser slots on the existing Baúna FPSO. A pipe-lay
support vessel will be mobilised from Rio de Janeiro to facilitate
the tie-backs.
Field commissioning works and first oil production, at a forecast
initial rate of 10,000 – 12,000 bopd, is expected to occur in
early calendar 2023. One of the two oil production wells may
switch to water injection depending on the reservoir response.
Associated gas production from Patola will be injected into the
Baúna reservoir through the SPS-89 gas injection well. Reservoir
simulation modelling indicates that this gas injection should result
in an Improved Oil Recovery (IOR) in the Baúna Field, due to greater
displacement of up-dip volumes and lower residual oil saturation.
The IOR has been included as an incremental resource attributable
to the Patola development project.
Outlook for FY2022
Karoon’s key focus in FY2022 is to continue to deliver safe, reliable
and sustainable operations. The Company has an ongoing program
to seek opportunities for continuous improvement in all aspects
of personal and process safety, and environmental practices. With
COVID-19 cases in Brazil remaining high, the COVID-safe protocols
to protect staff and contractors will continue to be implemented
during FY2022. It is anticipated that all onshore and offshore
Karoon employees in Brazil and Australia will be fully vaccinated
against COVID-19 by early calendar 2022.
Baúna FY2022 oil production is currently expected to be between
4.2 – 4.6 MMbbl. This assumes nine days of scheduled maintenance
on the FPSO and operational uptime of between 92% and 97%.
Activities on both the Baúna intervention campaign and Patola
development are expected to ramp up materially during the year.
Working closely with Maersk Drilling, Karoon’s Rio de Janeiro-
based Drilling and Completions teams have moved into the
detailed engineering phase of the Baúna intervention campaign
and the Patola drilling program. Key items of equipment, such
as subsea Christmas Tree tools required to enable access into the
Baúna workover wells, are being fabricated and expected to be
delivered to Brazil in late calendar 2021, while various Patola subsea
infrastructure components being manufactured by TechnipFMC
will be delivered in late calendar 2022.
The Maersk Developer is expected to commence the Baúna
intervention program in mid-calendar 2022 and commence drilling
the Patola wells late in calendar 2022, subject to the timing of
completion of the rig’s current drilling program.
18
Karoon Energy LtdAnnual Report 2021
Maersk Developer Rig
19
Karoon Energy LtdAnnual Report 2021
Subsurface Evaluation and New Ventures
As a result of the acquisition of Baúna and the sanction of the Baúna intervention
campaign and Patola development, Karoon has evolved into a substantial
production and development company. With a focus on short to medium term
production growth, the Company has realigned its subsurface focus away
from greenfield exploration to one of maximising near-field exploitation and
support for new production opportunities.
The Company now manages major infrastructure in the Santos
Basin, offshore Brazil, including a shore base, helicopters, support
vessels and project management personnel, as well as having an
experienced operational, financial and commercial team based in
Rio de Janeiro.
There are material operational and logistical synergies to be gained
by fully utilising this infrastructure and expertise. Therefore,
Karoon’s subsurface activities are now focused on finding and
developing low-risk, near-field opportunities in the Santos Basin
that can leverage off the Company’s infrastructure base, and on
supporting potential new business opportunities that can drive
short to medium term production growth.
Brazil has a stable, well-developed oil and gas industry, with
established and attractive fiscal terms. In addition, the Santos and
Campos Basins represent a world class petroleum province with an
abundance of opportunities. Karoon has a competitive advantage
due to its operational experience, network and knowledge of Brazil
and can use its world class technical expertise in advanced seismic
analysis to de-risk nearfield exploration and appraisal opportunities.
Karoon’s near-term subsurface and new ventures priorities are as
follows:
• Exit the Company’s greenfield exploration portfolio through
relinquishing or farming out the relevant interests as appropriate,
in as timely a manner as possible. The Company will not seek
any new greenfield exploration opportunities.
• Mature near field exploration and appraisal opportunities
close to Baúna and in our southern Santos Basin acreage.
Recent work to optimise the Neon development concept has
been encouraging. In addition, we will seek to exploit key
learnings from the Baúna field, leveraging geophysical studies
and detailed understanding of the reservoirs to efficiently de-
risk prospectivity. Studies indicate that there may be significant
remaining potential in post-salt reservoirs similar to the
Oligocene turbidite sandstones in Baúna.
• Evaluate acreage immediately adjacent to Karoon’s operational
footprint that becomes available through the regular bid rounds
and the Permanent Offer processes, and through potential
mergers and acquisitions, subject to strict risk and capital
management considerations.
Karoon’s Focus – Brazil and Australia
KEY
Karoon assets
WA-482-P
Northern Carnarvon
Basin
Four blocks offshore
Santos Basin,
including the Baúna
producing oil field, the
Patola field under
development and the
Neon and Goia oil
discoveries
20
Karoon Energy LtdAnnual Report 2021 While Karoon’s focus is primarily on Brazil, the Company’s
strategy also includes the evaluation of high-potential Australian
licences that have medium term production potential and provide
geographic diversity.
Exploration and evaluation activities in FY2021
Brazil
Santos Basin, Blocks S-M-1037, S-M-1101
100% Equity Interest, Operator
The Neon oil discovery (previously called Echidna) in BM-S-1037
and Goiá oil discovery (previously called Kangaroo) in S-M-1101,
located 50-60 kilometres north-east of Baúna, were discovered by
Karoon in 2015 and 2013, respectively. Together, they contain 2C
contingent oil resources of 82 MMbbl.
In June 2021, Karoon announced it had received approval from
the Agencia Nacional do Petroleo Gas Natural e Biocombustiveis
(ANP) for the integrated Development Plan for Neon and Goiá that
had been submitted to the ANP in December 2019. This approval
does not mean that Karoon has reached, or is compelled to reach,
a decision to proceed into a development of the fields.
During the year, the Company commenced subsurface development
planning and engineering studies on Neon, aimed at optimising
the development concept. This work has identified attractive
alternative development concepts, which will be further evaluated
during FY2022. Karoon has an option to extend its contract with
the Maersk Developer to potentially drill a control well on Neon,
following the completion of the two Patola development wells.
The major objectives of the control well would be to delineate
further the southern region of the field, confirm reservoir quality
and assist with the planning and design of development wells and
supporting infrastructure.
Progress into the potential Neon development is contingent on the
results of these studies and drilling the control well.
Santos Basin, Block S-M-1537
100% Equity Interest, Operator
During the year, geological and geophysical studies took place on
Block S-M-1537 block, which was acquired in the ANP 14th Bid
Round in 2018, to de-risk the main Clorita Prospect. This prospect
is targeting the same high-quality Oligocene turbidite reservoirs
seen in the producing Baúna field, 50 kilometres to the north. The
studies are designed to exploit key learnings from the Baúna field,
leveraging advanced seismic analysis and detailed understanding
of the play to efficiently de-risk the prospect.
Peru
Tumbes Basin, Block Z-38
75% Equity Interest1, Operator
Evaluation of technical data from the unsuccessful Marina-1
exploration well, drilled in the first quarter of calendar 2020, and
reprocessed 2D seismic showed that there was no meaningful
prospectivity remaining in the block. Having fulfilled the Third
Period work program obligations under the concession agreement,
the Joint Venture did not submit an election to proceed into the
Fourth Period and consequently the Block Z-38 licence contract
lapsed on 27 July 2021.
Tumbes Basin, Area 73
Technical Evaluation Agreement, Operator
During the year, seismic reprocessing and interpretation, and
geological studies were completed on offshore Area 73, adjacent
to and south of Block Z-38. Based on the results of this work,
Karoon decided not to proceed to negotiate a licence contract in
respect of the Area.
Australia
Northern Carnarvon Basin, Permit WA-482-P
50% Equity Interest, Non-Operator
Over the year, the WA-482-P Joint Venture completed the
reprocessing of existing 3D seismic data and continued geological
and geophysical studies, with a focus on de‐risking the numerous
prospects in the licence and attracting a farmin partner for the next
period, for a full carry on a future well.
Ceduna Sub-basin, Great Australian Bight, Permit EPP46
100% Equity Interest, Operator
In late 2019, Karoon submitted a formal application to surrender
Permit EPP46 to the regulatory authorities. On 12 July 2021,
Karoon was advised by the National Offshore Petroleum Titles
Administrator that the Commonwealth-South Australia Offshore
Petroleum Joint Authority had issued a notice of the intention to
cancel EPP46.
Browse Basin
In relation to Karoon’s sale of a 40% interest in permits WA-
315-P and WA-398-P, including the Poseidon gas discovery, to
Origin Energy Browse Pty Ltd in June 2014, at the end of FY2021,
outstanding deferred milestone payments remain contingent.
These comprise US$75 million due at FID, US$75 million due at
first production and a resource step-up payment of up to US$50
million payable on first production.
Outlook for FY2022
The Baúna acquisition has cemented the southern Santos Basin
as a key area of subsurface focus, and has brought operational
synergies and improved economics to all Karoon’s Santos Basin
assets.
Work will continue on subsurface assessment and development
planning for the Neon light oil discovery. A decision will be made
in early calendar 2022 on whether to exercise the option to drill
a control well in Neon using the Maersk Developer, following the
completion of the two Patola development wells.
Karoon’s geoscience teams will continue to work on subsurface
evaluation of opportunities to enhance production and to
evaluate the regular bid rounds and Permanent Offer processes for
opportunities that can leverage off the Company’s infrastructure
base and extend the Baúna economic field life.
1. Karoon’s 75% equity interest remains subject to farm-in obligations and regulatory approval.
21
Karoon Energy LtdAnnual Report 2021
Karoon recognises societal and investor
expectations for oil and gas companies
to play a key role in the pathway to net
zero greenhouse gas emissions.
Federal Conservation Unit REBIO Arvoredo in Santa Catarina (SC) Ilha Deserta photo credit Joao Paulo Krajewski – Arquivos Projeto
Karoon Energy Ltd
22
Annual Report 2021
The Company is developing a comprehensive
sustainability strategy and a full review of Karoon’s
other environmental, social and governance
practises is being undertaken as part of our
Strategic Refresh.
Karoon Energy Ltd
23
Annual Report 2021
Sustainability
TRIR
0.64
per 200,000 hours
LTIR
0.32
per 200,000 hours
0
Recordable
safety incidents
on the FPSO
0
Lost production
due to COVID-19
24
~US$21million
Paid in taxes and royalties to
the Brazilian Government
50%
Female employees
across the Karoon Group
3
New projects
initiated to reduce
or prevent GHG
emissions
Karoon Energy LtdAnnual Report 2021 Karoon is pleased to provide the Company’s first Sustainability Report
as an oil producer. Karoon’s longstanding commitment to transparent
and responsible reporting has continued throughout our transition.
This report provides a summary of Karoon’s sustainability
performance over the FY2021 reporting period, with an emphasis
on health and safety, environmental performance including
emissions, and examples of our social and environmental projects.
This has been a time of significant change for Karoon, with
our transition from an explorer to a successful oil producer and
developer. Highlights have included our strong safety performance
with no Lost Time Incidents on board the FPSO, our successful
management of COVID-19 with no impact on production, and
the identification of projects to reduce or prevent Greenhouse Gas
(GHG) emissions in operations.
Karoon is currently in the process of finalising a Strategic Refresh
that considers changes in stakeholder expectations as well as
recognising our desire to continue to grow our business in a
responsible, sustainable way. Our corporate strategy, which is
expected to be shared with the market later in 2021, will reflect
Karoon’s new era as a production and development company.
Developing our Sustainability Strategy
Karoon remains absolutely committed to ensuring the health and
safety of our people and safeguarding the environment in which we
operate. A key element of the Strategic Refresh is the development
of a new sustainability strategy, with a focus on addressing the
climate change impacts of Karoon’s operations.
We look forward to launching
Karoon’s new sustainability
strategy later this year, detailing
our approach to environmental,
social and governance issues,
including climate change,
community engagement
and diversity.
Karoon began developing its sustainability strategy before taking
ownership of the Baúna asset in 2020 and, in conjunction with the
Strategic Refresh, has followed a thoughtful and detailed process
of mapping stakeholders, issues, opportunities and actions.
The strategy process enabled various scenarios to be considered
to facilitate the most effective growth options for the Company,
while recognising our commitment to safe, reliable and sustainable
operations. The Company’s sustainability strategy will be launched
with the corporate strategy later this year. Core environmental,
social and governance elements of the sustainability strategy are
shown below.
Environment
Social
Governance
• Meaningful and responsible
approach to climate change
• Safe reliable operations
that avoid any adverse
environmental, including
air quality, impacts
• Protect biodiversity
• Minimise waste
• Prioritise health and safety
• Clear and responsible reporting
• Engage with communities
• Look for opportunities to develop
and support projects that work
toward the UN Sustainable
Development Goals
• Promote diversity within Karoon
• Promote human rights within our
supply chain
between Board, management and
stakeholder groups
• Clear expectations of conduct of
all employees in all aspects of the
business
• Robust anti-bribery, fraud and
corruption policies and processes
• Transparent reporting
• Executive remuneration linked
to financial, operating and
sustainability outcomes
25
Karoon Energy LtdAnnual Report 2021
Sustainability Continued
On-board the FPSO
Karoon Energy Ltd
26
Annual Report 2021
Health, Safety, Security and Environment
Safety is our First Priority
People are at the heart of our business and their safety is our highest
priority. A focus on health, safety, security and environment (HSSE)
during our recent transition from explorer to producer led to the
development of a fully integrated operating management system
that reflects Karoon’s high expectations of safety and integrity in
all our operations.
Since taking operatorship of the Baúna oil producing field in
November 2020, Karoon has been working closely with the Baúna
FPSO operator, Altera & Ocyan, to ensure Karoon’s commitment
to HSSE is embedded in Baúna operations, as it is throughout the
Company.
One Lost Time Incident was recorded in Karoon’s Brazil operations
during the FY2021 reporting period. This occurred on a supply
vessel in October 2020 during a pre-operatorship training session.
No Lost Time or other recordable incidents occurred onboard the
FPSO during the FY2021 reporting period.
There were no Tier 1 or Tier 21 process safety events during the
reporting period. There was one High Potential incident relating to
a dropped object on the FPSO. A dropped objects safety campaign
has since been implemented.
improvement
is seeking continuous
Karoon
in all aspects
of operations, particularly in safety and emergency incident
management. Several exercises were undertaken in the reporting
period to refine and improve Karoon’s emergency and incident
management response, including medevac drills and two exercises
that included the corporate crisis management response.
Karoon has undertaken several safety audits and inspections
onboard the FPSO since taking operatorship, including more than
ten safety inspection visits to the FPSO and other vessels and more
than ten regulatory (third-party) audits. In addition, together with
Altera & Ocyan, Karoon has conducted targeted safety campaigns
and introduced safety messages for all personnel as part of the
embarkation process.
Karoon will continue to look for ways to further optimise safety
in operations.
Karoon’s HSSE statistics, 1 July 2020 – 30 June 2021
Location
Baúna FPSO
All Baúna Operations
Karoon Group
* Per 200,000 work hours.
Lost Time Injury
Rate*
Total Recordable
Incident Rate*
0.00
0.49
0.32
0.00
0.49
0.64
Karoon has been working
to ensure our commitment
to safety is embedded in the
Baúna operations including
strict COVID-19 protocols.
COVID-19
Karoon’s operations, and the majority of Karoon’s employees, are
located in Brazil, a country which has been hit particularly hard
by the COVID-19 pandemic. Brazil recorded more than 17 million
cases of COVID-19 during the FY2021 reporting period and more
than 450,000 deaths.
Despite the significant challenges posed by COVID-19, there was
only one minor outbreak of the disease recorded in Karoon’s
operations during the reporting period, without any interruption
to production. This positive outcome is largely due to the rigorous
adherence to the quarantine program and other COVID-19 safety
protocols implemented throughout our operations. This includes
isolation requirements prior to entering hotel quarantine, testing
protocols in hotel quarantine and before embarkation, 24-hour
security and medical services at the quarantine facility, dedicated
transport between quarantine and air transport, and isolation
groups onboard for a period after each embarkation.
While Karoon’s offices in Brazil have remained closed and most
of our Brazil employees have been in lockdown since March 2020,
21 employees have been infected with the virus since the beginning
of the pandemic, albeit, thankfully, all of them have recovered.
The Company has provided support to employees during the
pandemic, particularly for those who have become ill and have
experienced extended lockdown. This includes online wellbeing
programs, such as mindfulness and yoga programs, fitness classes
and the delivery of care baskets. Ongoing support continues to
be provided to all employees to facilitate working from home,
including provision of IT and ergonomic equipment and availability
of flexible working arrangements.
Fortunately, the vaccine rollout in Brazil has been progressing well
and it is hoped that all onshore and offshore Karoon employees
will be fully vaccinated (two doses of a vaccine) against COVID-19
by early calendar 2022.
1. Tier 1 and Tier 2 Loss of Primary Containment (LOPC) events are defined in the International Oil and Gas Producers (IOGP) Report Number 456: “Process
safety – Recommended practice on Key Performance Indicators”.
27
Karoon Energy LtdAnnual Report 2021
Sustainability Continued
Environmentally responsible operations
Karoon uses several environmental
to monitor
indicators
environmental performance in operations. These include produced
water discharge, oily water discharge, unplanned releases and
flaring volumes.
Environmental
Indicator
Produced
water discharge
Oily water
discharge
Unplanned
releases
Flaring
volumes
Performance
No occurrences of produced water discharge
exceeding the maximum allowable monthly
average limit (29 ppm oil in water per day)
occurred, with all monthly averages below
15 ppm.
There were three oily water discharges in the
period, all well below the maximum daily limit
of 15 ppm.
There was one unplanned release from the
FPSO in April 2021 totalling approximately
30L, conservatively classified as minor
(code 1 incident – sheen)1
There were three incidences of flaring volumes
above the daily limit of 27% of produced
associated gas, due to start-up/shutdown
processes, which is allowable for safety
reasons. The monthly average volumes were
well below 20%, with all but one month
below 10%.
The Karoon operations team have been investigating ways in
which flaring can be further reduced, with plans to replace the
low-pressure flare blower to improve flaring efficiency and reduce
potential fugitive methane emissions.
Karoon takes its environmental obligations very seriously and has
a target of zero environmental incidents. We are working with
Altera & Ocyan to take action to prevent any future incidents,
including preventative pipeline maintenance and replacement and
a thorough integrity audit of the FPSO which will commence in
quarter three of the 2021 calendar year.
Karoon is committed to spending
nearly US$1.8 million in federal and
state government environmental
contributions to support and
protect marine reserves and
national parks in Brazil.
Social-Environmental Projects
Karoon has risen to the challenge of transitioning from an explorer
to an oil producer and embraced the social and environmental
opportunities of responsible operations.
Karoon is currently committed to more than 12 social and
environmental projects related to our Baúna operations and will
look for opportunities to expand our commitments to communities
in Brazil through our new sustainability strategy.
stakeholder
engagement,
its current projects Karoon undertakes a range
Through
of
environmental monitoring
and environmental protection activities. These are carefully
implemented with appreciation and respect for local communities,
our people and for the biodiversity of the areas in and around
our operations, all within our commitment to safe, reliable and
sustainable operations.
Set out on the following page is information summarising three of
our current projects, being Project Rumo (a social and environmental
project), the Sun Coral Project (an environmental project) and an
environmental education project. This project, aimed at workers,
ensures all involved in Baúna operations understand and respect
the importance of protecting the local environment and minimising
any impacts from operations.
In addition to these projects Karoon has committed nearly
US$1.8 million in federal and state government environmental
contributions to support and protect marine reserves and national
parks in Brazil.
1. Code 1 refers to “Sheen” (40-300L) under the Bonn Agreement Oil Appearance Code (BAOAC).
Mouth of the Itajaí-Açu river
28
Karoon Energy LtdAnnual Report 2021 Karoon supports the UN
Sustainable Development
Goals through its social-
environmental projects.
Project Rumo
Prevention and
control of exotic
species – Sun
Coral Project
Environmental
Education of
Workers
commenced
Karoon
Project Rumo
during 2021, which is expected to take
approximately two years to complete.
The name
‘RUMO’ was chosen as
it stands for Resiliance and Unity in
Marine Organisation in both English and
Portuguese. The project will document,
through an episodic documentary video,
the issues of shared use of the maritime
and coastal zone of the mouth of the
Itajaí-Açu River, which is used by the
Baúna operations support vessels. The
issues to be explored include traditional
activities, land and water use conflicts
and political-economic interests.
is an exotic species that
Sun coral
threatens
the native biodiversity of
the waters around Baúna operations
and in waters elsewhere in Brazil. The
Sun Coral Project aims to monitor the
occurrence of sun coral and to evaluate
the reproductive, nutritional and growth
aspects of the invasive species. This data
will help to identify and manage early
points of invasion and to develop and
apply new management technologies for
effective control. The project, sponsored
by Karoon, will be undertaken by the
Chico Mendes Institute for Biodiversity
Conservation (ICMBio) and the Federal
University of Santa Catarina State (UFSC).
All workers on the Baúna FPSO are
provided with environmental education
and training to ensure they are aware
of, and familiar with, the environmental
management system and environmental
monitoring projects.
this
ensures that workers understand the
potential environmental impacts of oil
production operations and are trained to
prevent and respond to environmental
incidents and the management of waste,
effluents and atmospheric emissions.
Importantly,
29
Karoon Energy LtdAnnual Report 2021
Sustainability Continued
Governance
Karoon has built a sustainability management framework that
enables us to identify and manage climate change risks and
opportunities at all levels throughout the organisation, with ultimate
oversight resting with the Karoon Board and its committees.
The Sustainability and Operational Risk Committee of the Board
has oversight of Karoon’s operations including HSSE, social and
environmental projects, the regulatory environment, our operating
management system and operational risks, which include physical
climate change risks. The committee meets at least four times
annually to review management and performance in each of these
areas. A key document for review is the Operational Risk Register,
which is maintained by the Chief Operating Officer but will come
under the the responsibility of the Executive Vice President and
President of Karoon Brazil in the future. The Sustainability and
Operational Risk Committee is responsible for monitoring Karoon’s
climate change metrics and will review performance against any
emissions reduction targets under a new sustainability strategy.
The Audit and Risk Committee has oversight of overall risk at
Karoon, including the Corporate Risk Register that includes climate
change transition risks. The Corporate Risk Register is maintained
by the Chief Financial Officer. The committee meets at least four
times annually and considers the financial impacts of climate
change risks, ensuring that these are considered in commercial
decision making. With responsibility for risk at Karoon, the
Audit and Risk Committee also oversees the risk management
framework for the Company including risk tolerance and our risk
management policy.
Itajaí shoreline
Climate Change
Our climate change reporting has been prepared using the Taskforce
on Climate-Related Financial Disclosure (TCFD) framework. As
Karoon has not yet completed a full year of operatorship of Baúna,
our initial priority has been to establish a baseline of emissions
from which we can measure reduction targets. In addition, we
have undertaken significant analysis of available information,
including stakeholder mapping and consultation and investigated
the potential to avoid or reduce emissions within our existing
operations.
Karoon recognises the
challenges facing the oil and
gas industry globally and our
role as a responsible operator.
We believe we have a duty
to reduce our GHG emissions
where possible and to
mitigate what cannot be
removed, thereby helping
with the global effort to
reduce the impact of climate
change. This is core to our
sustainability strategy, to
be released later this year.
30
Karoon Energy LtdAnnual Report 2021 Risk Management
Strategy
Risks are assessed based on several criteria in keeping with the
risk tolerance set by the Board. These criteria include safety,
environmental, financial, legal and reputational impacts. Climate
change risks are integrated within the overall business risk registers
at both the operational and corporate level, ensuring the full range
of physical and transition climate change risks are considered.
Where possible, due consideration is given to both the current
and likely future risk environment, for example when considering
potential regulatory changes related to GHG emissions.
Regular monitoring of risk registers at senior management,
executive management and Board
level ensures mitigation
measures can be assessed and further action taken as needed. The
relative priority of climate-related risks informs Karoon’s financial
decision making and is being taken into account in developing
Karoon’s corporate strategy.
During 2021, senior and executive management, in consultation
with the Board, engaged in an extensive Strategy Refresh to
establish a revised corporate strategy that will specifically include a
new sustainability strategy, expected to be released later this year.
The Strategy Refresh team has been working to establish growth
options for Karoon in the short, medium and long term that
will enable Karoon to grow as a producer. Karoon is focused
on delivering safe and reliable operations and strong returns to
shareholders, while recognising the climate-related risks and
opportunities that impact the business at each stage. These risks
and opportunities have been identified through a process of
research and collaboration across all streams of the business and
are summarised below.
Physical Risks and Opportunities
Transition Risks and Opportunities
Short term
(1–3 years)
Increased frequency and severity of
extreme weather events resulting in a
potential increase in HSSE or equipment
incidents or interruptions to operations
Project to improve localised weather
forecasting and monitoring to assist
activity planning to optimise safety
and reliability
Changes to the emissions management regulatory
environment in Karoon’s jurisdictions (eg introduction of an
Emissions Trading Scheme in Brazil)
Change in oil demand influencing commerciality of key projects
or assets in the Karoon current or future portfolio
Access to equity or debt funding impacted by ESG strategies
of investors or lenders
Investment in research and development of technological
solutions to reduce or offset emissions in Karoon’s operations
Changes to sustainability reporting requirements in Karoon’s
jurisdictions (eg mandatory reporting of Scope 1, 2 and 3
GHG emissions)
Medium
term
(3–8 years)
Increased frequency and severity of
extreme weather events resulting in:
Changes to the emissions management regulatory
environment in Karoon’s operational jurisdictions
• A potential increase in HSE or
equipment incidents or interruptions
to operations
• Disruptions in the operations supply
chain
• Disruptions to operations at the
shorebase (Port of Itajaí)
Change in oil demand influencing commerciality of key projects
or assets in the Karoon current or future portfolio
Changes to sustainability reporting requirements in Karoon’s
jurisdictions (eg mandatory reporting of Scope 1, 2 and 3 GHG
emissions) and/or introduction of mandatory GHG emissions
or other climate metric targets beyond those set by Karoon
Inclusion of transition or alternative fuel assets, renewable
assets and/or nature based solutions in Karoon’s portfolio
Long term
(9+ years)
Increased frequency and severity of
extreme weather events resulting in:
Change in oil demand influencing commerciality of key
projects or assets in the Karoon current or future portfolio
Inclusion of transition or alternative fuel assets, renewable
assets and/or nature based solutions in Karoon’s portfolio
• A potential increase in HSE or
equipment incidents or interruptions
to operations
• Disruptions in the operations supply
chain
• Disruptions to operations at the shorebase
31
Karoon Energy LtdAnnual Report 2021
Sustainability Continued
The financial impacts of climate change related risks and
opportunities have been integrated into Karoon’s Strategic
Refresh, using known operational cost data where appropriate and
a range of climate-related scenarios and carbon price scenarios to
assess future transition risks and opportunities. Karoon is using this
modelling to ensure its corporate strategy will be resilient to future
climate change related impacts and to integrate potential climate
change impacts into specific project decision making.
Metrics and Targets
As a new producer Karoon has yet to complete a full year of
operations to establish a baseline of climate-related metrics.
However, we have been working to establish an internal framework
for reporting on our GHG emissions. Karoon has developed, with
its external advisors, a new emissions inventory tool to analyse
fuel use and flaring data direct from our operations team. The
tool facilitates monthly reporting on emissions and enables
management and the Board to monitor performance relative to
future emission reduction targets. The tool was used to calculate
Karoon’s Scope 1 and 2 emissions for the FY2021 reporting period.
All Scope 2 emissions were generated from electricity usage in
offices in Melbourne, Lima and Rio and the Baúna shorebase in
Itajaí, with the majority generated from our Melbourne office.
During the 2022 financial year Karoon intends opting into green
power to ensure all its electricity supplied in Australia is from
renewable-linked sources.
Karoon’s Scope 1 emissions were almost entirely generated
from our Baúna operations, at an intensity of approximately
15.3 kgCO2e/bbl.
The FY2021 emissions do not represent Karoon’s baseline for
future emissions reduction targets because Karoon took ownership
of Baúna during the reporting period and has yet to record a full
year of emissions data.
Scope 1
49,525
tCO2e
Scope 2
143
tCO2e
Intensity
15.3
kgCO2e/bbl
32
Karoon Energy LtdAnnual Report 2021 Actively Reducing and Preventing GHG Emissions
Since taking ownership of Baúna, and ahead of releasing future
emissions reductions targets through our sustainability strategy,
Karoon has already started looking for ways to reduce our
emissions from operations. Three specific projects have been
identified for further investigation and, if possible, implementation.
Karoon intends to investigate further opportunities for emissions
reduction projects that reflect our commitment to safe and reliable
operations. Further details of Karoon’s climate change response
will be disclosed with the release of Karoon’s sustainability strategy,
expected later this year.
Mooring Buoy
• Karoon is required to have two support vessels in Baúna operations to support operations and ensure unplanned releases
can be fully controlled quickly and effectively. These vessels are diesel fuelled and consume fuel while stationary.
• Karoon has identified a mooring tool that will enable the support vessels to anchor safely to the buoy while on standby,
alleviating the need to consume diesel while stationary.
• This is expected to result in a reduction of Scope 1 emissions of more than 2,000 tCO2e per year.
Low Pressure Flare Blower
• Flaring is required on the Baúna FPSO for safety reasons.
• Since taking ownership of Baúna in November 2020, Karoon has been conducting ongoing inspections of the FPSO.
• Blowers play a critical role in improving the efficiency of flaring. During an inspection, it was discovered that the low pressure
flare blower was not operational thus enabling excess GHG emissions from flaring.
• Karoon investigated options to rectify the issue and is planning to replace the faulty blower before the end of the 2021
calendar year, which will improve the efficiency of flaring and reduce GHG emissions.
Gas well inversion to power the Baúna FPSO
• The majority of emissions from the Baúna FPSO are generated by large turbines. The turbines have historically been powered
by produced gas, however this gas is now in decline, with the turbines likely to require diesel fuel which will significantly
increase emissions.
•
In order to prevent this emissions increase, Karoon, through the planned Baúna well intervention program, is investigating
converting a gas injection well to a gas producer to power the FPSO.
• The well inversion would prevent a significant increase in Karoon’s GHG emissions.
33
Karoon Energy LtdAnnual Report 2021
Sustainability Continued
The sharing of ideas across disciplines and
cultures has brought an appreciation of issues
and improved understanding at all levels.
34
Karoon Energy LtdAnnual Report 2021 Leadership and Culture
Karoon’s smooth transition from explorer to producer following the
successful completion of the acquisition of Baúna is testament to
the skill, experience and dedication of our staff. Karoon recognises
that our people are our most valuable assets and understands the
importance of ensuring they are engaged and supported within
the Company.
An inaugural staff engagement survey in Australia, Brazil and
Peru was conducted in March 2021 to help the Board and the
executive management team better understand the Karoon
cultural environment and identify any areas for improvement. The
most common words staff used to describe Karoon were Friendly,
Collaboration, Respect and Commitment, highlighting the way in
which teams are working together to achieve success as we grow.
Importantly staff also provided valuable suggestions to further
improve on the way we can engage and motivate our people
to ensure they are able to achieve their best. Karoon’s executive
management team is continuing to foster the core elements of our
culture identified in the survey through ongoing communication
with, and support for, our staff during the extended COVID-19
lockdowns. This is particularly important for our teams in Peru and
Brazil who have been working remotely since March 2020.
In our Melbourne office we have been encouraging engagement
between teams and between offices through sessions such as
Lunch and Learn to develop cross-discipline knowledge within
the Company and improve awareness and understanding of
operational issues at the corporate level.
Transparency
All Karoon staff are expected to undertake their responsibilities
in accordance with the high standards set out in our Code of
Conduct. This is complemented with other corporate policies, such
as the Anti – Bribery, Fraud and Corruption Policy, available on
our website. All personnel are encouraged to speak up regarding
any potential breach of Karoon’s policies, including our Code
of Conduct. An anonymous reporting service is available to all
personnel in accordance with our Whistleblower Protection Policy.
No reports were made to the service during the reporting period.
Diversity
Karoon recognises the value that comes from diversity of thinking
and has taken steps over the past year to increase the opportunities
for consultation and collaboration between offices, particularly
between Brazil and Australia. The sharing of ideas across disciplines
and cultures has brought an appreciation of issues and improved
understanding at all levels and has been instrumental in helping
shape the Strategic Refresh. This is led by the Board and key
management personnel, who undertook unconscious bias training
during the reporting period.
Gender diversity is important to Karoon and we have set an
objective of achieving 30% female participation by 2025 at Board
level, in the senior executive and across the Company as a whole.
Karoon is planning to achieve these targets through a strong
commitment to diversity and inclusion in our recruitment and
management practices including:
• A Flexible Working Arrangement Policy;
• Monitoring recruitment and remuneration processes to ensure
there is no unintended gender bias;
• Maintaining a zero-tolerance approach to gender pay gap; and
• Ensuring at least one female candidate is considered when the
Board is appointing a new director or member of the KMP.
Progress against our diversity objectives is monitored by senior
management and reviewed at least annually by the Board through
the People, Culture and Governance Committee. Karoon remains
confident in achieving these objectives.
Commitment to Brazil
Karoon’s transformation from an explorer to a producer has had
a significant impact on our management and people, not just
our operations. During the reporting period, Karoon increased
the number of employees in Brazil by around 65% to support
our production operations and upcoming workover and drilling
campaign, further cementing our commitment to our business in
Brazil.
Karoon is pleased to be able to support the local economy in Brazil
and in FY2021 paid wages of more than US$4 million to employees
in Brazil and approximately US$5 million in taxes and nearly
US$16 million in royalties to the Brazilian government.
Karoon’s sustainability strategy, to be released later in 2021, will
provide further details of Karoon’s commitment to Brazil and
its people, particularly through investment in environmental
protection and social projects.
Karoon Board
Karoon Senior Management
Karoon Group
17%
Female
26%
Female
50%
Female
35
Karoon Energy LtdAnnual Report 2021
Reserves and Resources
Karoon took over operatorship of
BM-S-40 on 7 November 2020,
with an effective date of the
transaction of 1 January 2019.
Karoon’s internal assessment of 2P Reserves at 30 June 2021 are
49.4 MMbbl oil. Major 2P Reserves movements over the year were
due to field production, the reclassification of Patola Resources to
Reserves following a FID on the development, and revisions related
to better than expected field decline from existing wells through
the period.
Oil Reserves at 30 June 2021 (MMbbl)
BM-S-40 (Baúna)
Developed1
Undeveloped2
Total
1. Baúna producing.
2. Patola under development.
1P
30.0
1.11
41.1
2P
34.7
14.7
49.4
3P
46.8
19.3
66.1
Year-on-year movement in Oil Reserves (MMbbl)
BM-S-40 (Baúna)
Reserves at 30 June 20201
Production2
Contingent Resources to Reserves3
Revisions4
Reserves at 30 June 2021
1P
34.7
-5.1
11.1
0.4
41.1
2P
39.2
-5.1
14.7
0.6
49.4
3P
53.2
-5.1
19.0
-1.0
66.1
1. Disclosed to the ASX on 9 November 2020.
2. Reflects total production from 1 July 2020 to 30 June 2021, including
the period to 6 November 2020 when Petrobras was the concession
holder of BM-S-40.
3. Reclassification of Patola Resources following FID, announced to the
ASX on 3 June 2021.
4. Based on production performance analysis.
2C Contingent Resources at 30 June 2021 are assessed at
86 MMbbl oil. The major 2C Contingent Resources movement
over the year was due to the reclassification of Patola Resources to
Reserves, following the FID on the development. No changes have
been made to Neon and Goiá Contingent Resource estimates.
36
Contingent Oil Resources at 30 June 2021 (MMbbl)
BM-S-40 (Baúna)
S-M-1037 (Neon)
S-M-1101 (Goiá)
Total
1C
2
30
16
2C
4
55
27
3C
8
92
46
47.9
86.2
146.3
Year-on-year movement in Contingent Oil Resources
(MMbbl)
1C
2C
3C
Contingent Resources at 30 June 20201
58.7
100.9
166.5
Contingent Resources to Reserves2
-11.1
-14.7
-19.0
Revisions3
0.3
0.0
-1.2
Contingent Resources at 30 June 2021
47.9
86.2
146.3
1. Baúna, Patola disclosed to the ASX 9 November 2020, and Neon,
Goiá disclosed to the ASX 8 May 2018.
2. Reclassification of Patola Resources following FID, announced to the
ASX on 3 June 2021.
3. Baúna, Patola.
2P Oil Reserves and 2C Contingent Oil Resources
(MMbbl)
27.0
34.7
14.7
4.0
55.0
2P Baúna
2P Patola
2C Baúna
2C Neon
2C Goia
Karoon Energy LtdAnnual Report 2021 All Reserves and Resources statements in this report are based
on, and fairly represent, information and supporting documents
prepared by, or under the supervision of, Mr Lino Barro, Karoon
Energy Ltd, Engineering Manager. Mr Barro holds a Bachelor
of Engineering (Chemical – Hons) and a Master of Business
Administration and is a member of the Society of Petroleum
Engineers. Mr Barro has consented in writing to the inclusion of
this information in the format and context in which it appears.
Forward Looking Statements
Petroleum exploration and production operations rely on the
interpretation of complex and uncertain data and information
which cannot be relied upon to lead to a successful outcome in any
particular case. Petroleum exploration and production operations
are inherently uncertain and involve significant risk of failure. All
information regarding reserve and contingent resource estimates
and other information in relation to Karoon’s assets is given in light
of this caution.
This Annual Report may contain certain “forward‐looking
statements” with respect to the financial condition, results of
operations and business of Karoon and certain plans and objectives
of the management of Karoon. Forward-looking statements can
generally be identified by words such as ‘may’, ‘could’, ‘believes’,
‘plan’, ‘will’, ‘likely’, ‘estimates’, ‘targets’, ‘expects’, or ‘intends’
and other similar words that involve risks and uncertainties, which
may include, but are not limited to, the outcome and effects of the
subject matter of this Annual Report. Indications of, and guidance
on, future earnings and financial position and performance, well
drilling programs and drilling plans, estimates of reserves and
contingent resources and information on future production are
also forward‐looking statements.
You are cautioned not to place undue reliance on forward-looking
statements as actual outcomes may differ materially from forward-
looking statements. Any forward‐looking statements, opinions
and estimates provided in this Annual Report necessarily involve
uncertainties, assumptions, contingencies and other factors, and
unknown risks may arise (including, without limitation, in respect
of imprecise reserve and resource estimates, changes in project
schedules, operating and reservoir performance, the effects
of weather and climate change, the results of exploration and
development drilling, demand for oil, commercial negotiations
and other technical and economic factors) many of which are
outside the control of Karoon. Such statements may cause the
actual results or performance of Karoon to be materially different
from any future results or performance expressed or implied by
such forward-looking statements. Forward‐looking statements
including, without limitation, guidance on future plans, are
provided as a general guide only and should not be relied upon as
an indication or guarantee of future performance. Such forward-
looking statements speak only as of the date of this Annual Report.
Karoon disclaims any intent or obligation to update publicly
any forward‐looking statements, whether as a result of new
information, future events or results or otherwise.
Oil loading from FPSO to Shell tanker
Notes on calculation of Reserves and Resources
Reserves and Resources estimates are prepared in accordance
with the guidelines of the Petroleum Resources Management
System (SPE-PRMS) 2018 jointly published by the Society of
Petroleum Engineers (SPE), World Petroleum Council (WPC), and
American Association of Petroleum Geologists (AAPG) and Society
of Petroleum Evaluation Engineers (SPEE).
All statements are net to Karoon’s interests at 30 June 2021 and
use a combination of deterministic and probabilistic methods.
The reference point for reserves calculation is at the fiscal meter
situated on the FPSO Cidade de Itajaí.
Governance and Competent Persons Statement
Karoon notes that it has previously provided a summary of
the Competent Persons Report prepared by an independent
consultancy (specialising in, among other things, petroleum
reservoir evaluation, reserves auditing and economic analysis),
for the Reserves and Contingent Resources relating to Santos
Basin concession BM-S-40 containing the Baúna oilfield and Patola
oil discovery.
It is noted that the Reserves and Resource statements in this report
have not been prepared by an independent consultant.
Members of Karoon’s Subsurface and Engineering teams have
considered and assessed all proposed changes and additions to
the Company’s Reserves and Resources (as set out in this report),
considering advice and contributions from subject matter experts
and external consultants.
37
Karoon Energy LtdAnnual Report 2021
Strengths and Key Risks
Strengths
Successful transition from explorer to oil producer following acquisition of Baúna.
100% owner and operator of quality production asset producing 33-38 API crude oil with no impurities.
Building reputation as safe and reliable operator.
Production growth through sanctioned Baúna intervention campaign and Patola development.
Additional growth potential at Neon and Goiá light oil discoveries.
Strong cash flows at relatively low operating cost per barrel, set to improve with production growth
through sanctioned project delivery over the next 18 months.
Agile organisation, able to exploit opportunities quickly, with experienced Board and management team.
Robust financial position with a robust balance sheet.
Demonstrated ability to access debt financing.
Knowledgeable and experienced operations and development teams.
One of the only companies with pure oil exposure listed on the ASX.
38
Karoon Energy LtdAnnual Report 2021 Key Risks
Unplanned interruptions to production may result in inability
to meet production forecasts and generate revenue to
support delivery of base business and to fund growth.
Geographic, social and political risks resulting from
production located in a single jurisdiction (Brazil).
Production concentration risk.
Ongoing health and economic impacts of COVID-19
pandemic affecting Karoon’s offshore operations.
Geological evaluation relies on the interpretation of complex
and often uncertain data, which may not lead to expected
outcomes. Oil production and recovery volumes may differ
from Karoon’s assumptions and forecasts.
Lower than expected demand for oil or low oil prices may
negatively impact revenues, available liquidity or access to
capital markets, resulting in a funding shortfall and/or an
inability to service debt.
Changes to the rate of taxes imposed on Karoon, changes
in tax legislation or changing interpretations enforced by
taxation authorities, whether in Australia, Brazil or other
foreign jurisdictions in which Karoon operates.
Changes in foreign exchange rates and interest rates may
negatively impact the Group’s liquidity.
Interruptions or delays in the supply or availability of required
infrastructure (including drilling rigs), equipment, goods or
services could impact production.
Cyber-attacks could result in interruptions to, or the failure
of, the Company’s operations and business.
Litigation or actions by activist groups could impact the
execution of Karoon’s strategy.
Regulatory approvals or required licences may not be
forthcoming or may be delayed.
Insufficient cash flows could result in an inability to
meet contingent payment obligations to Petrobras
that might arise under the Baúna acquisition oil-linked
contingent consideration regime.
Insurance coverage may be insufficient to cover all risks
associated with oil and gas production, development,
exploration and evaluation.
Karoon may be required, but unable, to raise or attract debt
or equity finance to fund its ongoing operations.
Policies related to climate change and the energy transition
may adversely affect oil demand, oil prices, carbon costs, oil
industry investment and funding behaviour. Further, climatic
changes and extreme weather events may result in physical
damage to assets or interruption to operations.
Development work has inherent risks and is subject to
various hazards including unexpected geological conditions,
equipment failures, environmental incidents and risks to the
health and safety of personnel and other incidents.
Oil and gas exploration, development and production
activities may damage the environment. If Karoon is
responsible, it will be required to remediate such damage
which may involve substantial expenditure
and adversely affect Karoon’s reputation.
Karoon has entered into a debt facility agreement.
In certain circumstances, the facility may be terminated,
funding unavailable or withdrawn and/or repayments
accelerated.
Each of the key risks set out above, if they were to materialise, could have a material and adverse impact on (among other aspects) Karoon’s
business, reputation, growth, financial position and/or financial performance.
Karoon has an established risk management framework in place to identify, assess and mitigate risks in accordance with the materiality
and risk tolerance parameters set by the Board of Directors. A corporate and operational risk register is maintained by senior management
with oversight from the executive leadership team. The executive reports regularly to the Board through the Audit and Risk Committee
(in respect of corporate risks) and the Sustainability and Operational Risk Committee (in respect of operational risks), including mitigation
and monitoring plans for all key risks.
39
Karoon Energy LtdAnnual Report 2021
Directors’ Report
The Board of Directors submits its Directors’
Report on Karoon Energy Ltd (the ‘Company’)
and its subsidiaries (the ‘Group’) for the financial
year ended 30 June 2021 (the ‘financial year’).
Board of Directors
Under the Company’s Constitution, the minimum number of Directors that may comprise the Board of Directors is currently 3 and the
maximum number of Directors is 10. Directors are elected and re‑elected at annual general meetings of the Company.
The names of the Directors of the Company during the financial year and up to the date of this Directors’ Report are set out below:
Mr Phillips has approximately 45 years of technical, financial and commercial experience in the global
energy industry, encompassing a number of corporate entities. Bruce has extensive experience in
upstream oil and gas exploration and production via involvement in projects in Australasia, Africa,
Europe and the Americas. He also has considerable experience in governing publicly listed companies,
including the chairmanship of four companies listed on the ASX.
Since founding AWE Limited in 1997, Mr Phillips has held positions as CEO, Chairman and Non‑executive
Director. He is currently the Chairman of ALS Limited (ALQ: ASX), is the former Chairman of Platinum
Capital and AWE Limited (now part of Mitsui Corporation), and a former Non‑Executive Director of
AGL Energy Limited (AGL: ASX) and Sunshine Gas Limited (formerly SHG: ASX: pre‑merger with QGC).
During Mr Phillips’ executive career he held varied positions within the industry initially as a geophysicist
for AMAX and Esso, graduating to a business development role at Command Petroleum Limited and
General Manager of Petroleum Securities Australia Limited.
He is a member of the Petroleum Society of Australia and the Australian Society of Exploration Geophysicists.
Current directorships of other listed companies include: Chair, ALS Limited.
Member of the People, Culture and Governance Committee.
Chairman of the Board of Directors.
Mr Bruce Phillips
BSc. (Hons), (Geology)
Independent
Non‑Executive Chairman
Appointed 1 January 2019.
40
Karoon Energy LtdAnnual Report 2021 Dr Fowles started his career with Shell International where he spent 17 years working across the
upstream sector in Europe, West Africa, Australasia, South Asia and Latin America, including 5 years
as the Exploration and New Ventures Manager in Shell Brazil. Following Shell, he held senior executive
positions with Cairn India, Petra Energia, and most recently Oil Search, where he firstly led exploration
and new business and then the PNG operated and non‑operated oil and LNG production and
development businesses. Leaving Oil Search in late 2018, Dr Fowles joined the boards of Central
Petroleum and FAR Limited in 2019 as an independent non‑executive director, roles he relinquished
prior to joining Karoon.
Dr Fowles speaks Portuguese and is a Graduate of the Australian Institute of Company Directors.
He holds a BSc (Hons) degree in Geology from the University of Edinburgh and a PhD from the University
of Cambridge. Dr Fowles also holds a Graduate Diploma in Applied Finance and Investment from the
Australian Securities Institute.
Ms Rachid has over 40 years’ experience in the oil and gas industry in both technical and senior
leadership roles in Brazil, including 20 years in the Exploration and Production Division of Petrobras.
Ms Rachid’s technical experience covers a variety of project evaluation, development and management
roles, the design of the first offshore platforms in the Campos Basin, the production, handling and
processing of natural gas onshore and offshore, the coordination of the Petrobras E&P Deepwater
Strategic Project.
Ms Rachid has also held positions in the Petrobras financial team including Executive Manager of
Investor Relations and Executive Manager of Financial Planning and Risk Management. She also
served as Chief Executive Officer of Transportadora Brasileira Gasoduto Bolivia‑Brasil SA (TBG) and
Chief Executive Officer of Transportadora Associada de Gás SA (TAG), each of which is a subsidiary
of Petrobras.
Ms Rachid also has a number of years’ experience serving on Boards in Brazil. She has represented
Petrobras as Chairperson of TBG and Gás Brasiliano Distribuidora SA as well as a Director of TAG,
Companhia de Gás de Minas Gerais and Companhia Paranaense de Gás.
Chair of the Sustainability and Operational Risk Committee.
Mr Davey is a professional independent Company Director with over 40 years of experience in the
natural resources industry as a taxation and strategy advisor. Clark was a partner at Price Waterhouse
and PricewaterhouseCoopers for a number of years with an oil and gas and natural resources specialty
holding industry leadership roles in both firms. Clark is a member of the Australian Institute of Company
Directors.
The wealth of taxation and business advisory experience Clark brings to Karoon includes input on
international company tax, Australian and overseas resource and indirect taxation and oversight of
accounting, governance and capital management procedures. Clark has advised many companies with
both tax and management of joint venture interests as well as merger and acquisition transactions. He has
also assisted both listed and unlisted companies expand their resource industry interests internationally.
Clark is a former director of Redflex Holdings Limited.
Chair of the Audit and Risk Committee.
Member of the People, Culture and Governance Committee.
41
Dr Julian Fowles
BSc (Hons), PhD,
Grad Dip App Fin Inv
Chief Executive Officer
and Managing Director
Appointed 27 November 2020.
Ms Luciana Bastos
de Freitas Rachid
B Chem Eng. Post Grad
Degree Corporate Finance
Independent
Non‑Executive Director
Appointed 26 August 2016.
Mr Clark Davey
B. Commerce, FTIA, MAICD
Independent
Non‑Executive Director
Appointed 1 October 2010.
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Mr Peter Turnbull AM
B. Commerce, LLB,
FGIA (Life), FAICD
Independent
Non‑Executive Director
Appointed 6 June 2014.
Mr Peter Botten AC, CBE
BSc ARSM, MICD
Independent Non‑Executive
Director
Appointed 1 October 2020
Mr Turnbull is an ASX experienced independent non‑executive director and chair with significant
exposure to the global mining, energy and technology sectors.
Peter brings to the board significant commercial, legal and governance experience gained from working
with boards and management to conceive, structure, fund and complete corporate transactions and to
prioritise and maximise the value of organic growth strategies for shareholders.
Peter also has significant regulatory and public policy experience from prior executive roles including
as a Director of the Securities & Futures Commission of Hong Kong and roles with ASIC. Over time,
Peter has held roles as a director or senior officer of several global organisations which promote best
practice governance and is a regular contributor and speaker in Australia and overseas on corporate
governance issues. Peter is a former President and current Life Member of the Governance Institute of
Australia and the current president of the global Chartered Governance Institute.
Peter’s senior executive roles over 30 years involved significant experience in very large publicly listed
organisations with global operations, particularly South East Asia, Europe and the USA. This experience
included over a decade in energy markets and the resources sector including as Company Secretary of
Newcrest Mining Limited, Company Secretary and General Counsel of BTR Nylex Limited and General
Manager, Legal and Corporate Affairs with Energex Limited.
In June 2020, Peter was made a member of the Order of Australia for services to business and corporate
governance institutes.
Current directorships of other listed companies include: Chair, Calix Limited, since its ASX listing on
20 July 2018.
Chair of the People, Culture and Governance Committee.
Member of the Audit and Risk and the Sustainability and Operational Risk Committees.
Mr Botten is a highly experienced and successful former Chief Executive and internationally recognised
business leader with over 40 years’ experience in the international resources sector. His executive career
was dominated by his 26‑year tenure as CEO of Oil Search, where he was synonymous with its growth
from a market capitalisation of A$200 million to a peak of A$15 billion.
Peter’s executive experience spanned all aspects of the upstream petroleum sector, including deep
experience in upstream oil and gas exploration, development and production operations through his
involvement in projects in PNG, Australia, Africa, the Middle East and North America.
Peter also has considerable experience in governing and growing ASX‑listed companies and other
business entities. Apart from his previous involvement at Oil Search, he is currently the non‑executive
Chairman of AGL Energy Limited (2021‑present), Chairman of NiuPower (2019‑present), Chairman
of Hela Provincial Health Authority (2015‑present) and Chairman of the Oil Search Foundation
(2011‑present).
Peter holds a Bachelor of Science (Geology) from the Imperial College of Science and Technology,
London University and the Royal School of Mines. In recognition of building relations between Australia
and PNG, along with services to business and communities in PNG, Peter was awarded Companion of
the Order of Australia (AC) along with Commander of the British Empire (CBE).
Current directorships of other listed companies include: Chair, AGL Energy Limited.
Member of the Audit and Risk and Sustainability and Operational Risk Committees from
1 December 2020.
42
Karoon Energy LtdAnnual Report 2021 Mr Hosking is the founding Director of the Company and has more than 35 years of commercial
experience in the management of several companies. Robert has been involved in the oil and gas
industry for more than 20 years and was a founding director/shareholder of Nexus Energy Limited.
Robert also has a background of more than 18 years commercial experience in the steel industry.
He jointly owned and managed businesses involved in the trans global sourcing, shipping and distribution
of steel‑related products, with particular expertise gained in Europe and the Asia/Pacific Rim.
Mr Atkins has over 45 years’ experience in investigation, planning, design, documentation and project
management of numerous significant port, harbour and maritime projects. These include container
terminals, LNG jetties, oil and gas wharves, heavy lift facilities, cement, coal, bauxite, iron ore and other
bulk terminals, shipping logistics and naval bases.
Geoff has gained substantial overseas experience completing marine projects in Indonesia, Malaysia,
Thailand, Vietnam, Sri Lanka, India, South Africa, Namibia, New Zealand and the United Kingdom.
LNG, oil, gas, bulk ports and other large maritime infrastructure projects that Geoff has been involved in
have included the design of Woodside Petroleum Limited’s LNG jetty, tender design of ConocoPhillips’
Darwin LNG jetty and concept designs for the Sunrise LNG jetty. Geoff has also been involved
in investigations of proposed LNG marine terminals in Taiwan, Iran and Israel for BHP Petroleum and
the West Kingfish and Cobia oil drilling platforms for ESSO/BHP in Bass Strait.
Member of the Audit and Risk and People, Culture and Governance Committees until 27 November 2020.
Mr Robert Hosking
Managing Director
Appointed 11 November 2003.
Retired 27 November 2020.
Mr Geoff Atkins
FIE Aust. CP Eng.
Independent
Non‑Executive Director
Appointed 22 February 2005.
Retired 27 November 2020.
43
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Mr José Coutinho
Barbosa
Bsc. (Geology),
Msc. (Geophysics)
Non‑Executive Director
Appointed 31 August 2011.
Retired 27 November 2020.
Company Secretary
Mr Coutinho spent 38 years with Petrobras, beginning his career in several technical and management
positions, culminating with his appointment as Acting President and CEO of Petrobras, one of the
world’s largest petroleum exploration and production companies.
Earlier in his career, as an explorer, José Coutinho worked in most sedimentary basins in Brazil, onshore
and offshore, as well as in basins in the Middle East, Africa and the Gulf of México, having incorporated
Petrobras America Inc., in the USA, and directing the company as CEO for four years. After that, he
returned to Brazil to assume the position of Executive Vice‑President and CEO of Petrobras Internacional
SA (also known as Braspetro).
During the period from 1999 to 2002, José Coutinho worked as Managing Director for Exploration and
Production of Petrobras, leading up the production ramp from 700,000 bopd to 1,500,000 bopd. In
that period, the giant oil fields of Roncador, Albacora, Marlin and Marlim South in the Campos Basin
were developed.
After that, José Coutinho retired and has managed, since then, his own independent consulting firm,
Net Pay Óleo & Gás Consultoria Ltda, operating in areas of the petroleum industry.
José Coutinho brought knowledge and experience to the Company, including experience with
geology, exploration and production as well as local knowledge of the oil and gas industry in Brazil
and internationally.
José Coutinho is also the Temasek Representative Director on the Board of Directors of Odebrecht Oleo
e Gas (unlisted).
Member of the Sustainability and Operational Risk Committee until 27 November 2020.
Mr Kennedy is an experienced lawyer and company secretary with over 15 years’ experience in corporate
and commercial law, including particular expertise in public and private mergers and acquisitions,
equity and debt capital markets, energy and resources and corporate governance.
Prior to joining the Company, Nick was a Head of Legal at ENGIE ANZ and before that worked in top
tier law firms in Australia and London.
Nick Kennedy
B.Com., LLB (Hons.), Grad Dip
Applied Corporate Governance,
FGIA
Appointed on 25 June 2020.
44
Karoon Energy LtdAnnual Report 2021 Meetings
The number of Directors’ meetings (including meetings of committees of Directors) and attendance by each Director of the Company
during the financial year were:
Director
Mr Bruce Phillips
Dr Julian Fowles
(Appointed 27 November 2020)
Mr Robert Hosking
(Retired 27 November 2020)
Ms Luciana Rachid
Mr Geoff Atkins
(Retired 27 November 2020)
Mr Clark Davey
Mr Peter Turnbull
Mr José Coutinho Barbosa
(Retired 27 November 2020)
Mr Peter Botten
(Appointed 1 October 2020)
Board Meetings
B
A
12
12
6
6
12
6
12
12
6
8
6
6
12
6
12
12
6
8
Audit and Risk
Committee Meetings
Sustainability
and Operational Risk
Committee Meetings
People, Culture
and Governance
Committee Meetings
A
–
–
–
–
4
8
8
–
4
B
–
–
–
–
4
8
8
–
4
A
–
–
–
4
–
–
4
2
2
B
–
–
–
4
–
–
4
1
2
A
6
–
–
–
3
6
6
–
–
B
6
–
–
–
3
5
6
–
–
A. The number of meetings held during the time the Director held office during the financial year.
B. The number of meetings attended during the time the Director held office during the financial year.
Directors’ Interests in the Company’s Shares, Share Options and Performance Rights
As at the date of this Directors’ Report, the Directors held the following number of ordinary shares (and did not hold any share options or
performance rights over unissued ordinary shares) in the Company:
Director
Dr Julian Fowles
Mr Bruce Phillips
Ms Luciana Rachid
Mr Clark Davey
Mr Peter Turnbull
Mr Peter Botten
Ordinary Shares,
Fully Paid
107,659
1,750,000
52,960
147,214
146,269
–
Principal Activities
Karoon is an international oil and gas exploration and production company with projects in Australia, Brazil and Peru.
Significant Changes in State of Affairs
During the financial year, the Group completed the acquisition of a 100% operating interest in Concession BM‑S‑40 containing the
producing Baúna oil field and the undeveloped Patola oil discovery (‘Baúna’) located in the Santos Basin, offshore Brazil. The acquisition
transformed Karoon into one of the largest oil producers on the ASX.
45
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Results
The consolidated result for the financial year was a profit after income tax of $4,384k (2020: loss of $86,138k).
The profit for the financial year included crude oil sales revenue of $170,809k at a weighted average net realised price of $59 per barrel.
Since taking over ownership and operatorship of Baúna between 7 November 2020 and 30 June 2021, 3.14 mmbbl of oil were produced,
resulting in a gross profit of $59,434k, which includes a total cost of sales of $111,375k. The total cost of sales includes depreciation
associated with the right‑of‑use asset being the FPSO lease, but does not include finance charges on the FPSO right‑of‑use asset of
$12,389k, which are disclosed as part of finance costs.
The financial year result includes a significant income tax benefit of $32,257k (2020: $634k) relating predominantly to the initial
recognition of historical Brazilian tax losses, which are available to be carried forward to offset against future profits generated from
Baúna. Furthermore, temporary differences have been recognised arising from foreign exchange movements in the US$/Brazilian Real
exchange rate, resulting in a decrease in the accounting carrying value of non‑monetary assets denominated in US$ compared to their
taxable carrying values denominated in the Brazilian Real as at 30 June 2021. The income tax benefit was partially offset by current income
tax expense incurred in Brazil and Australia totalling $15,321k (2020: $3,140k).
Other key items impacting the profit during the financial year were as follows:
• net foreign currency losses of $17,053k (2020: net foreign currency gains of $5,389k) almost entirely attributable to losses resulting
from the depreciation of the US$ against the A$ on the transfer of US$’s by the Australian ultimate parent entity during the year to fund
overseas operations and on US$ cash and cash equivalents held by the Australian ultimate parent entity at 30 June 2021;
• transition costs associated with the Baúna acquisition prior to completion on 6 November 2020 of $15,748k (2020: $13,550k);
• finance costs of $15,241k (2020: $2,180k) including finance charges on right‑of‑use assets of $12,501k (2020: $95k) relating
predominantly to the recognition of the FPSO right‑of‑use asset acquired as part of the acquisition of Baúna of $12,389k;
• corporate costs of $10,421k (2020: $9,360k) which include net employee benefits expense, insurance and director fees;
• settlement costs of $9,600k relating to the Company’s wholly owned branch KEI (Peru Z‑38) Pty Ltd, Sucursal del Peru, without admitting
any liability, entering into a deed of settlement and release in respect of its dispute with Pitkin Petroleum Peru Z‑38 SRL (Pitkin) relating to
Block Z‑38, offshore Peru. Under the deed of settlement and release, Pitkin has agreed to full and final settlement of all claims of Pitkin
and its associates in connection with Block Z‑38;
• expense of $6,632k relating to the fair value movement of the contingent consideration payable to Petrobras from acquisition date
to 30 June 2021, which is dependent on meeting future oil prices each calendar year from (and including) 2022 to (and including)
2026; and
• exploration and evaluation expenditure expensed or impaired of $3,416k (2020: $52,526k, which related predominately to the
unsuccessful Marina‑1 exploration well drilled during the prior year in Block Z‑38, Peru).
Cash Flows
Operating activities resulted in cash inflows for the financial year of $29,786k compared to cash outflows of ($67,116k) in the previous
financial year. The positive operating cash flows are attributable to receipts received from oil sales of $136,978k since taking over
operatorship of Baúna. Significant operating cash payments for the financial year included payments to suppliers and employees, including
production costs from 7 November 2020, of $56,461k (2020: $12,176k), transition expenditure to acquire the Baúna production asset of
$15,941k (2020: $12,714k), payments for exploration and evaluation, including prior year Marina‑1 exploration well payables, of $15,231k
(2020: $40,980k), interest and other costs of finance paid, predominately relating to finance charges on the FPSO lease, of $13,246k
(2020: $351k) and payment of income tax $10,823k (2020: $266k).
Cash outflow from investing activities for the financial year was $169,213k (2020: $52,650k), which included the Baúna completion
payment of $150,000k (2020: $49,875k relating to payment of a deposit for Baúna). $16,031k was also paid during the year for CAPEX
relating to the planned Baúna intervention campaign and Patola development.
Cash outflow from financing activities for the financial year was $23,411k in relation to principal elements of right‑of‑use asset lease
payments (2020: $188,111k inflow resulting from a successful equity raising).
46
Karoon Energy LtdAnnual Report 2021 Financial Position
At the end of June 2021, the Group had a cash and cash equivalents balance of $133,209k (30 June 2020: $296,420k).
The Group’s working capital, being current assets less current liabilities, decreased from $285,988k as at 30 June 2020 to $53,572k as at
30 June 2021 predominantly as a result of the Baúna completion payment of $150,000k, payments for Baúna transition expenditure and
exploration and evaluation expenditure, including the Marina‑1 exploration well creditors, recognition of deferred consideration for Baúna
payable to Petrobras of $42,422k and recognition of the current lease liability associated with the FPSO right‑of‑use asset. The current lease
liabilities have increased from $203k as at 30 June 2020 to $45,393k as at 30 June 2021.
During the financial year, total assets increased from $398,013k to $1,013,956k, total liabilities increased from $38,531k to $633,706k
and total equity increased by $20,768k to $380,250k. The major changes in the consolidated statement of financial position were largely
due to completion of the Baúna transaction on 6 November 2020 and ongoing operations at Baúna, which included:
• oil and gas assets of $736,422k as at 30 June 2021 incorporating a production asset of $411,665k, development asset of $19,020k
and a right‑of‑use asset associated with the charter of the FPSO of $305,737k. The impact on the Group’s net asset position was largely
offset by the recognition of a lease liability relating to the right‑of‑use asset, provision for a future restoration obligation relating to
the oil and gas assets outstanding liabilities in relation to deferred and contingent consideration payable for the oil and gas assets, and
payment made at completion of the transaction;
• Baúna transition costs expensed prior to transaction completion;
• positive cash flows generated from Baúna from 7 November 2020 including crude oil sales receivable at 30 June 2021 of $33,831k;
• bringing to account a deferred tax asset in relation to historical Brazilian tax losses and recognising a deferred tax asset in relation to the
temporary differences for the financial year ended 30 June 2021;
• reduction of deferred tax liabilities resulting from crystallising foreign currency gains on the payment for Baúna completion and
exploration costs denominated in USD; and
• oil in inventory at the end of the financial year at a total cost of $10,952k.
Review of Operations
Information on the operations of the Group is set out in the Operations Review on pages 14 to 21 of this Annual Report.
Business Strategies and Prospects, Likely Developments and Expected Results of Operations
The Operations Review sets out information on the business strategies and prospects for future financial years, refers to likely developments
in operations and the expected results of those operations in future financial years. Information in the Operations Review is provided to
enable shareholders to make an informed assessment of the business strategies and prospects for future financial years of the Group.
Details that could give rise to likely material detriment to Karoon, for example, information that is confidential, commercially sensitive
or could give a third party a commercial advantage has not been included. Other than the matters included in this Directors’ Report or
elsewhere in the Annual Report, information about other likely developments in the Group’s operations and the expected results of those
operations have not been included.
Dividends
No dividend has been paid or declared by the Company to shareholders since the end of the previous financial year. The Company may
pay future dividends during financial periods when appropriate to do so.
47
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Share Options and Performance Rights
As at the date of this Directors’ Report, the details of share options over unissued ordinary shares in the Company were as follows:
Type of Share Option
ESOP options
ESOP options
Total ESOP options
Grant Date
21 September 2018
31 December 2018
Date of Expiry
30 June 2022
30 June 2022
Exercise Price
Per Share
Option
$1.40
$1.40
Number of
Share Options
2,996,437
1,069,686
4,066,123
As at the date of this Directors’ Report, the details of performance rights over unissued ordinary shares in the Company were as follows:
Type
Performance rights
Performance rights
Performance rights
Performance rights
Performance rights
Performance rights
Performance rights
Performance rights
Performance rights
Total performance rights
Grant Date
21 September 2018
31 December 2018
12 November 2019
12 November 2019
18 October 2019
18 October 2019
29 November 2019
25 September 2020
25 September 2020
Date of Expiry
30 June 2022
30 June 2022
30 June 2022
30 June 2023
30 June 2022
30 June 2023
30 June 2023
30 June 2023
30 June 2024
Exercise Price
Per Performance
Right
$–
$–
$–
$–
$–
$–
$–
$–
$–
Number of
Performance
Rights
760,265
280,298
143,980
685,621
428,256
2,367,643
666,323
2,880,420
4,172,267
12,385,073
For details of share options and performance rights issued to Directors and other key management personnel of the Group as remuneration,
refer to the Remuneration Report in this Directors’ Report.
665,496 fully paid ordinary shares have been issued since 1 July 2021 as a result of the vesting and conversion of performance rights under
the 2016 Performance Rights Plan and the 2019 Performance Rights Plan (each being a ‘PRP’).
Information relating to the Company’s PRP and share options, including details of performance rights and share options granted, exercised,
vested and converted, cancelled, cash‑settled, forfeited and expired during the financial year and performance rights and share options
outstanding at the end of the financial year, is set out in Note 30 of the consolidated financial statements.
No share option or performance right holder has any right under the share options or performance rights to participate in any other share
issue of the Company or any other entity.
Indemnification of Directors, Officers and External Auditor
An indemnity agreement has been entered into between the Company and the Directors of the Company named earlier in this Directors’
Report and with the full‑time executive officers, directors and secretaries of the Company and all Australian subsidiaries. Under this
agreement, the Company has agreed to indemnify, to the extent permitted by law, these Directors, full‑time executive officers, directors
and secretaries against any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities.
The Company has also entered into a contract of insurance in respect of any liability incurred by the Directors, full‑time executive officers,
directors and secretaries (referred to above) in such capacity. The contract of insurance prohibits disclosure of the nature of the liability and
the amount of the premium (which is paid by the Company).
As approved by shareholders at the 2009 Annual General Meeting, the Company will continue to pay those Director insurance premiums
for a period of ten years following termination of their directorships of the Company and will provide each Director with access, upon
ceasing for any reason to be a Director of the Company and for a period of ten years following cessation, to any Company records which
are either prepared or provided to the Director during the time period they were a Director of the Company.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed
to indemnify an officer or external auditor of the Company or of any related body corporate against a liability incurred as such by an officer
or external auditor.
48
Karoon Energy LtdAnnual Report 2021 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.
The Company was not a party to any such proceeding during the financial year.
Corporate Governance
In recognising the need for the highest standards of corporate governance in order to drive performance and accountability, the Directors
support the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. The Company’s Corporate
Governance Statement can be found under the Governance tab on the Company’s website at www.karoonenergy.com.au.
Environmental Regulation
The Company and its subsidiaries are subject to a range of relevant Commonwealth, State and International environmental laws.
The Board of Directors believes the Company has adequate systems in place for managing its environmental obligations and is not
aware of any material breach of those environmental obligations as they apply to the Company and/or Group. Other than in respect
of two minor incidents which were required to be reported to the Brazilian regulator, Agência Nacional do Petróleo, Gás Natural e
Biocombustiveis, no circumstances arose during the financial year that required an incident to be reported by the Company and/or Group
under environmental legislation.
Greenhouse Gas Emissions and Reporting Requirements
Relevant entities are required to report greenhouse gas emissions, energy consumption and energy under the National Greenhouse and
Energy Reporting Scheme. The Group was not required to register and report greenhouse gas emissions, energy consumption, or energy
production under the scheme for this financial year, as it did not meet the relevant Australian thresholds for the reporting period. As
expected, the Group’s global carbon footprint during the financial year was higher than recent previous years, approximately 49,668 tonnes
of carbon dioxide equivalent based on equity share and including scope 1 and scope 2 emissions (2020: 20,140 tonnes) predominantly
due to fuel consumed in the Baúna operations. The Company’s corporate emissions were approximately 152 tonnes of carbon dioxide
equivalent based on equity share and including scope 1 and scope 2 emissions, which is slightly lower than past years (2020: 226) due
to the closure of Karoon’s office in Zorritos in Peru and less travel in fleet vehicles as a result of the impacts of the COVID‑19 pandemic.
The emissions are generally higher than previous years as a result of the Baúna asset acquisition in November 2020. Given that this does not
reflect a full year of production operations it is anticipated that future years’ emissions will rise further. The Company will seek to establish a
base level of emissions following a full year of operatorship, from which to assess targets for emissions reduction. The Company is aware of
the need to continue to seek cost‑effective, reliable and environmentally efficient methods for addressing future greenhouse gas emissions
and energy consumption and is developing a new sustainability strategy through the corporate strategy refresh currently in progress.
Further details of the Company’s approach to Climate Change risks and opportunities can be found in the Sustainability Report, contained
within this Annual Report.
Non‑Audit Services
The Company may decide to engage its external auditor, PricewaterhouseCoopers, on assignments additional to its statutory audit duties
where the external auditor’s expertise and experience with the Company and/or Group are important.
Details of the amounts paid or payable to the external auditor for audit and non‑audit services provided during the financial year are set
out in Note 7 of the consolidated financial statements.
The Board of Directors has considered the position and, in accordance with written advice received from the Audit and Risk Committee,
is satisfied that the provision of non‑audit services is compatible with the general standard of independence for external auditors imposed
by the Corporations Act 2001. The Board of Directors is satisfied that the provision of non‑audit services by the external auditor did not
compromise the external auditor independence requirements of the Corporations Act 2001 for the following reasons:
(a) all non‑audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and
objectivity of the external auditor; and
(b) none of the services undermine the general principles relating to external auditor independence as set out in APES 110 ‘Code of Ethics
for Professional Accountants’, including reviewing or auditing the external auditor’s own work, acting in a management or a decision
making capacity for the Group, acting as advocate for the Group or jointly sharing economic risk and reward.
49
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
External Auditor’s Independence Declaration
A copy of the external Auditor’s Independence Declaration for the financial year, as required under Section 307C of the Corporations Act
2001, is set out on page 75 of this Annual Report.
No officer of the Company has previously belonged to an audit practice auditing the Company during the financial year.
Matters Arising Subsequent to the End of the Financial Year
Other than the matters disclosed in Note 33 of the consolidated financial statements, no other matter or circumstance has arisen since
30 June 2021 that has significantly affected, or may significantly affect:
(a) the Group’s operations in future financial years;
(b) the results of those operations in future financial years; or
(c) the Group’s state of affairs in future financial years.
50
Karoon Energy LtdAnnual Report 2021 Remuneration Report (Audited)
Dear Shareholders,
On behalf of the Board of Directors I am pleased to present to you the Karoon Energy Ltd Remuneration Report for the financial year ended
30 June 2021.
In the midst of an on‑going global pandemic it has been a year in which a range of challenges have been encountered and managed
head‑on by the team at Karoon who have all worked very well together across multiple countries. The team has successfully advanced the
strategic plan, including, importantly, making the very significant transition from an exploration led company to a significant production
entity, thus building enterprise value and a future growth platform for shareholders.
The COVID‑19 pandemic has affected different parts of the world in varying degrees with Brazil impacted significantly. In this environment
Karoon has focussed on protecting and assisting its workforce whilst at the same time doing everything possible to keep moving forward
by achieving the various elements of our strategic plan. In this regard, good progress has been made.
Over the 2021 financial year, the following significant strategic and operational milestones have been achieved:
• Acquisition of Baúna – after successfully agreeing adjusted consideration terms;
• Commencing safe and reliable production operations – Karoon successfully transitioned to Operator of Baúna and transformed into one
of the largest oil producers on the ASX;
• Baúna workover campaign – decision taken to proceed with the workover of 4 wells in BM‑S‑40 and the contracting of the Maersk
Developer drilling rig for the workover campaign and the Patola development and for the potential drilling of a control well on the Neon
light oil discovery;
• Patola Development – FID being taken to proceed with the development of the Patola discovery and, in connection with this, Karoon
entering into:
» an integrated Engineering, Procurement, Construction and Installation (iEPCItm) contract with TechnipFMC; and
» a US$160 million reserve‑based, non‑recourse, syndicated facility agreement;
• Leadership – Dr Julian Fowles being appointed as Chief Executive Officer and Managing Director following the retirement of the
founding Managing Director, Mr Robert Hosking;
• Board succession – long serving non‑executive directors (‘NED’s), Mr Geoff Atkins and Mr José Coutinho Barbosa retiring on
27 November 2020;
• NED appointment – Mr Peter Botten AC, CBE commencing as an independent non‑executive director on 1 October 2020;
• Organisational restructure – the creation of a Brazil Business Unit and the restructure of the management team to enhance and deepen
executive capability.
During the 2021 financial year Karoon continued to maintain conservative remuneration settings. In this regard, it is noted that:
• senior executive base salaries remained unchanged;
• base Board fees remained unchanged (with minor changes made to committee fees to reflect the structural change of one less Board
committee being in place necessitating a re‑ordering of committee responsibilities);
• from 1 July 2020 to 31 October 2020, the Board and key management personnel (‘KMP’) in Australia took a 20% reduction in fees and
salary to help preserve capital given the serious COVID‑19 uncertainties;
• based on the significant operational progress detailed above, and achieving Karoon’s strategic targets set at the beginning of the 2021
financial year, 61.5% of the possible Short‑Term Incentive (‘STI’) outcome vested (subject to the satisfaction of a 12 month employment
retention period);
• given the company’s share price out‑performance relative to the requisite peer group and with a 34.6% absolute total shareholder
return, the Long Term Incentive (‘LTI’) hurdles were satisfied and 100% of the possible LTI outcome as judged over the previous three
years was achieved; and
• no Board discretion was exercised in connection with the STI and LTI outcomes set out above and, over the past 5 years, this financial
year is the first in respect of which LTIs have vested to executives.
51
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
1. Remuneration Strategy and Guiding Principles
Our overriding aim continues to be to ensure that executive performance outcomes are aligned with building asset value and securing
long‑term cash flow in order to support share price growth for all shareholders over the longer term. Remuneration outcomes need to align
with shareholder value accretion through achieving strategic and operational milestones.
Karoon’s guiding principles for its remuneration framework have not significantly changed and remain as follows:
• Safety, culture and ethics: ensuring that clear vesting gateways exist based on appropriate safety and ethical outcomes.
• Shareholder value is paramount:
» remuneration outcomes (particularly incentive‑based outcomes) are designed to take account of share price movements across the
reporting period and therefore, the value delivered to shareholders; and
» a close alignment is created between operational performance, reward and sustained growth in shareholder value. This is done
through achieving robust company building milestones year‑on‑year via the STI Plan and, in respect of the period 1 July 2018 to
30 June 2021, through achieving an absolute total shareholder return of at least 10% per annum and aiming to outperform a select
group of 19 industry peer companies via the LTI Plan.
• People:
» our remuneration structures are designed to attract, motivate and retain the best people whilst remunerating them reasonably and
competitively; and
» we encourage our people to hold equity in Karoon which builds a culture of viewing management decisions as an owner, thereby
helping to further align executives’ and shareholders’ interests.
• Transparency: remuneration measures, outcomes and reporting are as simple and transparent as possible for shareholders and
other stakeholders.
• Longer term focus: we aim to ensure that key decision making is always appropriately longer term in its nature and focus (including
by continuing to have STI hurdles linked to sustainability outcomes).
Karoon commenced a broad review of its remuneration policies during the 2021 financial year which is currently ongoing. In respect of
executive base salaries, the following will be implemented for the 2022 financial year:
• Salaries: noting there have been no increases to KMP base salary levels for 6 years, in respect of the majority of:
» Australian staff members – a standard 3.1% increase will be applied to their base salary; and
» Brazilian staff members – in recognition of a higher inflationary environment, a standard 5.5% increase will be applied to their base salary.
It is noted that, in select individual cases where a relevant employee’s salary was significantly below the applicable benchmark salary
for that position or for retention purposes, the relevant employee may receive a greater increase than that set out above.
• 2022 STI: 50% of any STI will be payable in cash, and 50% of any STI will be awarded in performance rights (subject to a 12 month
employment retention period). The number of performance rights awarded will be based on a 20 day value weighted average price
(VWAP) of the Company’s share price following the release of the Company’s 2022 financial results.
• Board fees: there will be no change to Board and Board committee fees for the 30 June 2022 financial year.
2. 2021 Financial Year Remuneration Outcomes:
• STI – a 61.5% STI outcome was awarded for the 2021 financial year based on the achievement of the previously approved STI performance
hurdles including objectives associated with operating and capital expenses, the Baúna Acquistion, Intervention campaign, the Patola
development and changes to the Company’s ‘corporate operating model’.
This award was earned due to the significant performance achieved during the year (as set out above).
For KMP other than a Managing Director, a component of their STI role‑specific objectives was granted depending on individual
performance in accordance with pre‑set proportions of STI.
• LTI – a 100% LTI outcome was earned due to an absolute total shareholder return (‘TSR’) of 10% per annum, and the Company’s
relative shareholder return rating it between the 75th to 99th percentile (as compared to a group of peer companies), over the prior
3 year period.
52
Karoon Energy LtdAnnual Report 2021 3. Summary
During the financial year, Karoon significantly advanced its strategic plan by achieving key milestones and by successfully enacting the
necessary succession plans at the Board and management level to ensure the best possible team is in place to build shareholder value.
In summary, our corporate strategy and remuneration related targets are designed and managed to link remuneration outcomes to
shareholder value. Given this, Karoon’s STI and LTI have worked as they should to responsibly and fairly reward the achievement of key
performance milestones for the Company and returns generated by the Company’s performance when compared to its peers.
As always, we will continue to engage with our shareholders, proxy advisors and our wider group of stakeholders to seek feedback so we
can continue to improve our remuneration framework and associated disclosures.
Mr Peter Turnbull AM
Chair, People, Culture and Governance Committee
20 September 2021
53
Karoon Energy LtdAnnual Report 2021
Directors’ Report Continued
Remuneration Report (Audited) continued
Section 1.
Section 2.
Section 3.
Section 4.
Section 5.
Introduction
People, Culture and Governance Committee Oversight
Executive Remuneration
A. Executive Remuneration Framework for the Financial Year Ended 30 June 2021
B. Executive Remuneration Outcomes
C. Executive Agreements
Independent Non‑Executive Chairman and Non‑Executive Directors
Statutory and Share‑based Reporting
Page 54
Page 55
Page 55
Page 63
Page 65
Section 1. Introduction
The Board of Directors is pleased to provide Karoon’s Remuneration Report, which details the remuneration for its KMP, defined as those
persons having the authority and responsibility for planning, directing and controlling, directly or indirectly, the activities of the Group.
For the financial year ended 30 June 2021, KMP disclosed in the Remuneration Report are as follows:
Name
Executive Directors
Mr Robert Hosking
Position
Managing Director
Dr Julian Fowles
Chief Executive Officer and Managing Director
Term as KMP
Retired as a Director
on 27 November 2020
Commenced as a Director
on 27 November 2020
Independent Non‑Executive Chairman
Full financial year
Non‑Executive Chairman
Mr Bruce Phillips
Non‑Executive Directors
Ms Luciana Rachid
Mr Geoff Atkins
Independent Non‑Executive Director
Independent Non‑Executive Director
Mr Clark Davey
Mr Peter Turnbull
Mr José Coutinho Barbosa
Independent Non‑Executive Director
Independent Non‑Executive Director
Non‑Executive Director
Mr Peter Botten
Independent Non‑Executive Director
Other KMP
Mr Edward Munks
Mr Scott Hosking
Mr Tim Hosking
Chief Operating Officer
Chief Financial Officer (Group)
South American General Manager
and Chief Executive Officer Brazil
Mr Ricardo Abi‑Ramia
Senior VP Operations
Full financial year
Retired as a Director
on 27 November 2020
Full financial year
Full financial year
Retired as a Director
on 27 November 2020
Commenced as a Director
on 1 October 2020
Full financial year
Full financial year
Ceased as South American
General Manager and
Chief Executive Officer Brazil
on 31 March 2021
Commenced as Senior VP
Operations from 31 March 2021
For the purposes of the Remuneration Report, the term ‘executive’ refers to the former Managing Director or the Chief Executive Officer
and Managing Director (as applicable) and other KMP of the Group.
The Remuneration Report for the financial year ended 30 June 2021 outlines the remuneration arrangements of KMP of the Group in
accordance with the requirements of the Corporations Act 2001 and its regulations. The information provided in this Remuneration Report
has been audited by Karoon’s external auditor, as required by Section 308(3C) of the Corporations Act 2001. The Remuneration Report
forms part of this Directors’ Report.
54
Karoon Energy LtdAnnual Report 2021 Section 2. People, Culture and Governance Committee Oversight
To assist in ensuring good remuneration governance at Karoon, the Board of Directors established a People, Culture and
Governance Committee that provides oversight and recommendations on all aspects of the remuneration arrangements for executives
and Non‑Executive Directors.
The People, Culture and Governance Committee currently consists of a majority of independent Non‑Executive Directors and is responsible
for reviewing and making recommendations to the Board of Directors regarding (among other things):
• the quantum of executive remuneration;
• the executive remuneration framework, including the operation of and performance‑based outcomes under Karoon’s share‑based
incentive schemes;
• the recruitment, retention and termination policies and procedures for executives; and
• related party remuneration.
The Board of Directors, assisted by the People, Culture and Governance Committee, conducts annual remuneration reviews for its
Non‑Executive Chairman, Non‑Executive Directors, executives and all employees to ensure that remuneration remains market competitive,
fair and aligned with both market practice and the best interests of shareholders.
Further information on the role and responsibilities of the People, Culture and Governance Committee is contained in the People, Culture
and Governance Committee Charter, which can be found under the Governance tab on Karoon’s website at www.karoonenergy.com.au.
2020 Remuneration Report Vote
At the Company’s 2020 Annual General Meeting, Karoon’s 2020 Remuneration Report received a 97.56% vote FOR on a poll.
At the Annual General Meeting, a question was asked as to whether the Company would consider revising its remuneration policy to
reflect its new status as an oil producer with cash generating assets. In relation to this, it is noted that the Company’s 2021 performance
hurdles included various operational considerations, including in relation to production volumes, operating costs, capital costs and a
smooth transition of the Baúna asset from Petrobras to the Company.
Share Trading Policy
The trading of ordinary shares by Non‑Executive Directors and executives is subject to, and conditional upon, compliance with Karoon’s
Share Trading Policy.
Under Karoon’s Share Trading Policy, an individual may not limit his or her exposure to risk in relation to securities (including unlisted share
options and performance rights). Directors and executives are prohibited from entering into any hedging arrangements over unvested
share options or performance rights under Karoon’s share‑based remuneration schemes. To gain approval to trade and ensure that trading
restrictions are not in force any employee wishing to trade in Karoon securities must consult the Company Secretary, the Executive Vice
President and President Karoon Brazil, the Company Secretary or any Director wishing to trade in Karoon securities must consult the
Chairman, whilst the Chairman must consult and seek approval of the Audit and Risk Committee Chair. All trades by Directors and
executives during the financial year ended 30 June 2021 were conducted in compliance with Karoon’s Share Trading Policy.
Karoon’s Share Trading Policy can be found under the Governance tab on Karoon’s website at www.karoonenergy.com.au.
Section 3. Executive Remuneration
The Board of Directors has developed a remuneration policy that ensures executive remuneration supports the current business strategy
and needs of the business. In particular, the decision to use performance tested share‑based grants for its incentive plans reflects the Board
of Directors’ belief that this best aligns executive and shareholder interests in the short and long‑term. Karoon’s success is measured by the
delivery of its strategic objectives in the short‑term and a clear demonstration of shareholder value creation in the long‑term.
Broadly, the objectives of Karoon’s executive remuneration framework are to ensure:
• remuneration is reasonable and competitive in order to attract, retain and motivate talented and high calibre executives capable of
managing Karoon’s diverse international operations;
• remuneration is set at a level acceptable to shareholders, having regard to Karoon’s performance, and rewards individual achievements;
• remuneration structures create alignment between performance, reward and sustained growth in shareholder value;
• remuneration outcomes provide recognition of contribution to overall long‑term growth in the value of Karoon’s asset portfolio and are
transparent to both participants and shareholders; and
• remuneration incentivises the best possible outcomes for the broader stakeholder community, including sustainability and safety, along
with best practice in preventing bribery and/or corruption.
55
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 3. Executive Remuneration continued
A. Executive Remuneration Framework for the Financial Year Ended 30 June 2021
The following table summarises the target remuneration mix for executives for the financial year ended 30 June 2021, based on maximum
achievement of incentive plan outcomes:
Remuneration Mix – financial year ending 30 June 2021
Other KMPs(1)
Former
Managing
Director
CEO and
Managing
Director
0%
20%
40%
60%
80%
100%
Fixed
At ‘Risk’ STI
At ‘Risk’ LTI
(1) “Other KMPs” excludes the remuneration mix of Mr Ricardo Abi‑Ramia who commenced as a KMP on 31 March 2021. Mr Abi‑Ramia’s remuneration
mix comprises 50% ‘fixed’, 25% at ‘risk’ STI and 25% at ‘risk’ LTI.
Fixed Remuneration
Fixed remuneration consists of cash salary, superannuation contributions and any salary sacrifice items or non‑monetary benefits including
health insurance, motor vehicles, expatriate travel, certain membership and associated fringe benefits tax, depending on each individual’s
respective employment arrangements.
Fixed remuneration is reviewed annually by the Board. Broadly, fixed remuneration is positioned within a range that references the median
of the relevant market for each role. In recognition of the current economic climate, primarily caused by COVID‑19 and oil and gas industry
market conditions, base salary for Executive Directors and other KMP did not increase for the financial year ended 30 June 2021.
It is also noted that, during the financial year until 31 October 2020, Australian KMP fixed remuneration was reduced by 20% as part of
the Company’s COVID‑19 response.
Superannuation
Other than the Chief Executive Officer and Managing Director who receives superannuation contributions equal to 9.5% of his cash
salary, the Australian executives of the Company received statutory superannuation contributions of 9.5% of cash remuneration up to the
maximum statutory contribution. Individuals may choose to sacrifice part of their salary to increase payments towards superannuation.
Social Security and Indemnity Fund Contributions
Karoon’s Brazilian based executives are subject to specific Brazilian employment regulations, whereby the Group is required to contribute
27.3% of Brazilian cash compensation as social security to fund Government pensions paid in retirement. However, the executives upon
retirement will only be entitled to a portion of this contribution. A further 8% of their cash remuneration is required to be contributed to
a Federal Severance Indemnity Fund (‘FGTS’). In the situation of unfair dismissal without just cause, the Group would have to pay a fine
equivalent to 50% of the accumulated balance of the individual’s FGTS account.
‘At Risk’ Remuneration
Karoon aims to align the interests of executives with those of shareholders by having a significant proportion of executive remuneration
‘At Risk’. ‘At Risk’ remuneration represents the proportion of remuneration that requires pre‑determined performance conditions to be met
before the remuneration is vested to the executive. Annually, the Board reviews the financial and operational goals and targets, looking
broadly at where the building blocks for long‑term value exist, then sets performance conditions that generate a link between operating
performance, remuneration received and value created for shareholders.
56
Karoon Energy LtdAnnual Report 2021 All executives that received grants of performance rights during the financial year ended 30 June 2021 received performance rights that
were issued under the 2019 Performance Rights Plan (‘2019 PRP’).
STI Plan
The key features of the STI grant for the financial year ended 30 June 2021 (‘FY21 award’) are outlined in the table below:
Participation
All executives.
Participation in the STI Plan is at the discretion of the Board of Directors on the recommendation of the People,
Culture and Governance Committee.
STI Opportunity
The STI opportunity level of each executive is a pre‑determined proportion of an executives’ total remuneration.
The quantum of performance rights received is determined by dividing the STI opportunity for each employee
by Karoon’s weighted average share price in the 20‑trading day period leading up to the first day of the
performance period.
The STI opportunity available to an executive is between 25%‑33.33% of total remuneration dependant on
seniority in the Group.
The Board calculates the incentive value and establishes a maximum number of performance rights ’At Risk’
at the beginning of the period.
It is noted that, in respect of:
• the former Managing Director it was decided, given his retirement occurred part way through the financial
year, that an at‑risk pro rata cash STI (as opposed to an STI to be received in performance rights) would be
available (with no Deferral Period); and
• in respect of the current Chief Executive Officer and Managing Director it was decided, given his appointment
occurred part way through the financial year, that an at‑risk pro rata cash STI (as opposed to an STI to be
received in performance rights) would be available.
Executives receive performance rights. The quantum of performance rights received was determined by
dividing the STI opportunity for each executive by the six month weighted average share price at the beginning
of the test period. Maximum amount of performance rights available were determined in connection with the
finalisation of the 30 June 2020 audited accounts and remained ’At Risk’ until tested during July 2021 and the
satisfaction of retention conditions to be met on 1 July 2022.
Performance rights do not have a strike price. Each performance right provides the participant with the right to
receive one fully paid ordinary share in Karoon, or its equivalent value, for no consideration. Under the rules of
the PRP, ordinary shares issued as a result of the exercise of vested and converted performance rights may be
issued as new ordinary shares, ordinary shares acquired on‑market or an equivalent value in cash at Karoon’s
discretion.
Form of Incentive
Performance Period
1 year.
Deferral Period
Vested performance rights are subject to a retention period of 12 months, being the continuation of
employment, immediately following the satisfaction of performance conditions.
57
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 3. Executive Remuneration continued
A. Executive Remuneration Framework for the Financial Year Ended 30 June 2021 continued
STI Plan continued
Performance
Conditions
As part of the 2021 remuneration review, for the financial year ended 30 June 2021 the Board set out the FY21
award for short‑term incentives based on a mix of the following performance hurdles:
Executive Directors
Other KMP
Company‑wide Objectives
Company‑wide
Objectives
100%
80%
Role‑specific
Objectives
Nil%
20%
Company‑wide Objectives were set by the Board at the beginning of the performance period.
The Company‑wide Objectives included strategic and operational targets, along with cost management goals.
Role‑specific Objectives
Role‑specific Objectives were set at the beginning of the performance period and related directly to the
individual’s specific portfolio of responsibility.
All short‑term performance outcomes are tempered by both a gateway for safety outcomes and a clawback
(negative discretion) provision in relation to bribery and/or corruption issues.
Further details on the performance conditions, targets and outcomes for the FY21 award are outlined below
in the STI outcomes within Section 3B on page 61.
Grant Date
Grant date occurs following the offer and acceptance of performance rights. However, any performance
rights offered and accepted by an Executive Director are subject to shareholder approval at the next Annual
General Meeting.
Termination
of Employment
Unvested performance rights will lapse upon cessation of employment with Karoon, subject to the discretion
of the Board of Directors depending on the nature and circumstances of the termination.
Change of Control
Upon a change of control, the Board of Directors may determine that a portion of the individual’s unvested
performance rights will vest based on pro‑rata achievement of the performance conditions.
Link Between
Performance and
Reward
The STI framework is based on a set of challenging Company building goals, granted on a rolling short‑term
basis. Linking outcomes to operational performance develops an essential alignment between Karoon’s
year‑to‑year inherent value growth and rewards those who establish that value only when the goals are met.
The Board assess the goals for the performance period annually in light of the long‑term strategic building
blocks and upcoming key value drivers within Karoon’s operations, allowing for transparent measurement of
performance against these objectives,
The Board recognises the risks associated with offshore production and drilling and considers safety, anti‑bribery
and zero corruption paramount to its operations. Safety is used as a gateway for vesting conditions, while
bribery and corruption can be utilised to clawback incentives.
58
Karoon Energy LtdAnnual Report 2021 LTI Plan
The key features of the LTI grant for the financial year ended 30 June 2021 are outlined in the table below:
Participation
All executives.
Participation in the LTI plan is at the discretion of the Board of Directors on the recommendation of the People,
Culture and Governance Committee.
LTI Opportunity
The LTI opportunity available to an executive is between 25%‑40% of total remuneration dependent on
seniority in the Company.
Form of
Incentive
The quantum of performance rights received was determined by dividing the LTI opportunity for each executive
by the six month weighted average share price at the beginning of the test period.
Performance rights do not have a strike price. Each performance right provides the participant with the
right to receive one fully paid ordinary share in Karoon, or its equivalent value, for no consideration. Under the
rules of the PRP, ordinary shares issued as a result of the exercise of vested and converted performance rights
may be issued as new ordinary shares, ordinary shares acquired on‑market or an equivalent value in cash at
Karoon’s discretion.
Performance Period
3 years.
Performance
Conditions
The LTI performance hurdles for the period commencing 1 July 2020 and ending 30 June 2023 are split 50%
relative to TSR performance as assessed against a list of closely comparable and representative industry peer
group companies, whose business models and/or regions of operations are similar to those of Karoon; and
50% Absolute TSR, which is set at a range of 10% to 18%.
Vesting consideration details for the industry peer group companies is outlined below:
Performance Against Industry Peer Group
Less than 50th percentile
At 50th percentile
Between 50th and 75th percentile
At or above 75th percentile
At 100% percentile
Proportion of Performance Rights Vesting
Nil%
50%
50% plus 2% for each additional percentile
ranking above the 50th percentile
100%
100%
Vesting consideration details for the Absolute TSR measure are set out below.
Absolute TSR
Less than 10%
At 10%
Between 10.01% and 17.99%
At or above 18.00%
Proportion of Performance Rights Vesting
Nil %
50%
50% plus 6.25% for each additional percentage
point above the 10% threshold
100%
Grant Date
Grant date occurs following the offer and acceptance of performance rights. However, any performance
rights offered and accepted by an Executive Director are subject to shareholder approval at the next Annual
General Meeting.
Exercise Period
Performance rights will remain exercisable for a period of 1 year following vesting.
Termination
of Employment
Unvested (and unconverted) performance rights will lapse upon cessation of employment with Karoon, subject
to the discretion of the Board of Directors depending on the nature and circumstances of the termination.
59
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 3. Executive Remuneration continued
A. Executive Remuneration Framework for the Financial Year Ended 30 June 2021 continued
LTI Plan continued
Change of Control
Upon a change of control, the Board of Directors may determine that a portion of the individual’s unvested
performance rights will vest, based on pro‑rata achievement of the performance conditions.
Link Between
Performance and
Reward
The Board of Directors and People, Culture and Governance Committee consider it important to link
remuneration to share price performance relative to Karoon’s industry peer group companies and overall share
price performance over the long‑term. In the case where performance does not reach the 50th percentile, no
incentive will be paid.
B. Executive Remuneration Outcomes
Relationship between the Executive Remuneration Framework and Company Performance
Karoon has a transparent performance‑based remuneration structure in place that provides a direct link between Company performance and
remuneration in the short and long‑term. As part of this structure, executive rewards are directly linked to operational, safety and financial
performance metrics along with relative market and absolute performance. ‘At Risk’ remuneration is only awarded if pre‑determined
Company building milestones are achieved or the Company outperforms an industry peer group of companies or achieves a minimum
level of absolute return in the long term.
Notwithstanding the Company has progressed its Southern Santos Basin strategy and has maintained a robust financial position in a
difficult oil and gas industry environment, the Company’s share price has fluctuated during the past five financial years.
Over the past 5 years, this financial year is the first in respect of which LTI’s have vested to Executives. This result is directly
correlated to the Company’s share price and performance against its peer group.
Further, it is noted that whilst Karoon achieved various key milestones in the performance testing period for the current financial year, the
hurdle related to closing the Baúna acquisition in the third quarter of calendar year 2020 did not occur within that time and therefore, the
STI linked to this hurdle did not satisfy the performance condition.
Given the above, the Board of Directors, believes its current policy is effective in linking remuneration to Company performance.
The tables below set out summary information about the Company’s earnings, net assets and movements in shareholder wealth from
1 July 2016 to 30 June 2021.
Financial Year Ended
Revenue
Profit (loss) before income tax
Profit (loss) for financial year
Net assets at end of financial year
Financial Year Ended
Share price at beginning of financial year
Share price at end of financial year
Basic profit (loss) per ordinary share (US$)
Diluted profit (loss) per ordinary share (US$)
30 June 2021
US$’000
170,809
(27,873)
4,384
380,250
30 June 2021
A$0.61
A$1.33
0.0079
0.0077
30 June 2020
US$’000
–
(86,772)
(86,138)
359,482
30 June 2019A 30 June 2018A,B 30 June 2017A,B
US$’000
–
(70,557)
(62,711)
572,584
US$’000
–
(142,699)
(140,932)
410,367
US$’000
–
(11,351)
(13,316)
298,831
30 June 2020
A$0.96
A$0.61
(0.1936)
(0.1936)
30 June 2019A
A$1.13
A$0.96
(0.0550)
(0.0550)
30 June 2018A
A$1.28
A$1.13
(0.5740)
(0.5740)
30 June 2017A
A$1.285
A$1.28
(0.2559)
(0.2559)
(A) The comparative financial information for the financial year ended 30 June 2019 and prior financial years have been restated for the voluntary change
in presentation currency from A$ to US$ at the prevailing average exchange rates for the profit and loss and year‑end rate for the balance sheet for each
respective year.
(B) The comparative financial information for the financial year ended 30 June 2017 and 30 June 2018 have not been restated for the impact of the
voluntary change to successful efforts method of accounting for exploration and evaluation expenditure.
60
Karoon Energy LtdAnnual Report 2021 Performance Hurdles and STI Outcomes for the Financial Year Ended 30 June 2021
The table below outlines the Company‑wide Objectives for the financial year ended 30 June 2021:
Criteria
Hurdle
Safety (0% – gateway)
Zero fatalities and a TRIR of < 2 required for any award to proceed.
Financial and Operational Objectives (65%)
• Operational Performance
Achieve the challenging Baúna approved budget operational targets.
and Budgeting
• Baúna Operatorship
Successful transition to operatorship of the Baúna asset.
• Baúna Schedule
Secure relevant regulatory approvals for planned Baúna workovers.
Obtain FID for the Patola field development.
• COVID‑19 Response
Demonstrate effective management of the COVID‑19 pandemic.
Strategic (35%)
• Completion of the
Baúna Acquisition
Achieve a legal settlement and financial close of the Baúna acquisition by the third quarter of
calendar year 2020.
• Balance Sheet Protection
Develop and implement certain strategies to strengthen the Group’s balance sheet.
• Further evolution of the
corporate operating model
Continued refinement of the corporate operating model towards a lower cost and more development
and production centric business model.
Anti‑bribery and Corruption
(0% – clawback)
Negative discretion will be applied, if necessary, by the Board of Directors should any material event
which constitutes a breach of Karoon’s Anti‑bribery and Corruption Policy occur.
Based on actual results, in respect of the current Chief Executive Officer and Managing Director, a total of 61.5% of the available STI
opportunity (pro‑rated from employment start date) in the form of a cash bonus, which is subject to a one year employment retention,
satisfied the requisite STI performance targets outlined above. For other KMP, between 59.2% and 73.3% of the available STI opportunity
satisfied requisite performance targets (based on the results of Role‑specific performance targets).
Performance rights (associated with the STI) that have satisfied requisite performance hurdles have a 1‑year retention period ending
30 June 2022 before they become exercisable and convertible into fully paid ordinary shares or paid for the equivalent value in cash. These
STI performance rights expire on 30 June 2023.
LTI Outcomes
Karoon’s 2019 LTI performance conditions of achieving an absolute total shareholder return (‘TSR’) of 10% per annum and a minimum 50th
percentile against the Company’s Relative TSR when compared with a select group of peer companies over the period from 1 July 2018 to
30 June 2021 was met. Karoon was at or above the 75th to 99th percentile when compared against the relevant industry peer group and,
accordingly, 100% of the 2019 LTI entitlement vested.
Voluntary Information: 2021 ‘Remuneration Received’
The amounts disclosed below reflect the actual benefits received by each executive during the financial year ended 30 June 2021 and have
been translated into US$ from local currencies using the average exchange rate for the 2021 financial year. The average rate used for A$/
US$ was 0.7472 and BRL/US$ was 0.1857. The amounts disclosed below include the actual value of any equity‑settled and/or cash‑settled
award received from STI and/or LTI.
The amounts disclosed in the table below are not the same as the statutory remuneration expensed in relation to each executive in
accordance with Australian Accounting Standards shown in the statutory table in Section 5 of the Remuneration Report. The remuneration
values disclosed below have been determined as follows:
Fixed Remuneration
Fixed remuneration includes cash salary and fees, non‑monetary benefits, superannuation contributions and paid long service leave.
Fixed remuneration excludes any accruals of annual or long service leave.
61
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 3. Executive Remuneration continued
B. Executive Remuneration Outcomes continued
Short‑term Incentives
Includes cash bonuses and the equity‑settled and/or cash‑settled award received from STI incentives by executives. The value of STI
equity‑settled and cash‑settled awards received reflects the amounts disclosed to the relevant tax authorities during the financial year
ended 30 June 2021.
Cash bonus
Bonus paid during the 2021 financial year relates to a one off payment relating to the successful completion of the Baúna acquisition.
Long‑term Incentives
Includes the equity‑settled and/or cash‑settled award received from LTI incentives by executives. The value of LTI equity‑settled awards and
cash‑settled awards received reflects the amounts disclosed to the relevant tax authorities during the financial year ended 30 June 2021.
Fixed
Remuneration
US$
Cash Bonus
US$
Short‑term
Incentives
US$
Long‑term
Incentives
US$
Termination
Benefit
US$
Total
Remuneration
Received
US$
Executive Directors
Dr Julian Fowles
Mr Robert Hosking
Other KMP (Group)
Mr Scott Hosking
Mr Tim Hosking
Mr Edward Munks
Mr Ricardo Abi‑Ramia
(Commenced as Senior VP
Operations from 31 March 2021)
362,676
325,105
320,473
246,447
382,126
–
–
–
112,080
44,832
23,643
22,416
33,460
29,780
50,067
68,781
–
–
–
–
–
–
–
–
–
–
–
469,609
–
362,676
437,185
398,765
769,479
454,609
–
68,781
The Board of Directors believes that ‘remuneration received’ is more relevant to shareholders for the following reasons:
• the statutory remuneration expensed through share‑based payments (ESOP options and/or performance rights) is based on historic cost
and does not reflect the value of equity‑settled and/or cash‑settled amounts when they are actually received;
• the statutory remuneration shows benefits before they are actually received by executives;
• where ESOP options or performance rights do not vest because a market‑based performance condition is not satisfied (for example, an
increase in Karoon’s share price), Karoon must still recognise the full amount of the share‑based payments expense even though the
executives do not receive the benefit; and
• share‑based payment awards are treated differently under Australian Accounting Standards depending on whether the performance
conditions are market conditions (no reversal of share‑based payments expense) or non‑market conditions (reversal of share‑based
payments expense when ESOP options or performance rights fail to vest), even though the benefit received by the executive is the same
($Nil where the ESOP option or performance right fail to vest).
The information in this section has been audited together with the rest of the Remuneration Report.
C. Executive Agreements
Remuneration and other terms of employment for the executives are formalised in employment agreements. Each of these agreements
may provide for the provision of benefits such as health insurance, motor vehicles, one expatriate business class flight for an executive and
his family, and participation, when eligible, in the Company’s PRP. Other major provisions of the agreements relating to remuneration are
set out below.
Termination payments for executives, if any, are agreed by the Board and/or People, Culture and Governance Committee in advance of
employment and stated in the relevant employment agreements. Upon retirement, executives are paid employee benefit entitlements
accrued to the date of retirement.
62
Karoon Energy LtdAnnual Report 2021 Details of existing employment agreements between the Company and the Executive Director and other KMP are as follows:
Name
Executive Directors
Dr Julian Fowles
Term
Expiry
Notice/
Termination
Period
Termination Payments
Share Option
Eligible
Performance
Right Eligible
From
27 November 2020,
ongoing
Ongoing
In writing
six months
Not applicable.
Yes
Yes
Other KMP
Mr Scott Hosking
Ongoing
Ongoing
Mr Edward Munks
From 1 July 2011,
ongoing
Mr Ricardo Abi‑Ramia Ongoing
Ongoing
Ongoing
In writing
six months
In writing
six months
In writing
one month
Fundamental change upon a
change of control: one year,
two weeks’ salary for each
year of service.
Fundamental change upon a
change of control: one year.
Not applicable (statutory
entitlements).
Yes
Yes
Yes
Yes
Yes
Yes
All termination payments are subject to the limits prescribed under Section 200B of the Corporations Act 2001.
Other than in respect Mr Scott Hosking who will cease as an employee during the financing year ending 30 June 2022, and subject to any
further changes to the executive team as a result of recent executive appointments, the employment agreements of executives are on a
continuing basis, the terms of which are not expected to change in the immediate future.
Section 4. Independent Non‑Executive Chairman and Non‑Executive Directors
Fees and payments to the independent Non‑Executive Chairman and other Non‑Executive Directors reflect the demands, which are
placed on, and the responsibilities of the Directors of Karoon. The Company reviews Independent Non‑Executive Chairman and other
Non‑Executive Director remuneration annually and assesses the change to the Company’s activities and overall responsibilities of each
Non‑Executive Director.
Subject to a 20% reduction between 1 July 2020 to 31 October 2020, there have been no changes to Non‑Executive Directors’ base or
individual committee fees during the course of the financial year ending 30 June 2021. The tables at the end of this section provides a
summary of Karoon’s Non‑Executive Director fee policy for the 2021 financial year.
Non‑Executive Director fees are determined within an aggregate Directors’ fee pool limit, which is periodically approved by shareholders.
The maximum aggregate amount, including superannuation contribution, that may be paid to Non‑Executive Directors of the Company as
remuneration for their services per annum is A$1,200,000, as approved by shareholders at the Company’s 2015 Annual General Meeting.
For the financial year ended 30 June 2021, the total fees paid to Non‑Executive Directors was A$838,917.
Superannuation contributions are paid, in accordance with Australian superannuation guarantee legislation, on Directors’ fees paid to
Australian resident Non‑Executive Directors.
Share‑based Remuneration
Non‑Executive Directors do not ordinarily receive performance‑related remuneration. The Company has determined that it will not grant
bonus or incentive related share‑based remuneration to Non‑Executive Directors. Non‑Executive Directors will continue to be encouraged
to purchase ordinary shares in the Company on‑market in accordance with the Director Minimum Shareholding Policy.
Retirement Allowance for Directors
Karoon does not provide any Non‑Executive Director with a retirement allowance.
63
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 4. Independent Non‑Executive Chairman and Non‑Executive Directors continued
Non‑Executive Director Fees for the Financial Years Ending 30 June 2021
Non‑Executive Directors’ fees for the financial year ended 30 June 2021 (excluding superannuation contribution) are outlined in the
following table:
Base fee:
Non‑Executive Chairman*
Non‑Executive Directors
Committee member fees
Audit and Risk Committee
Chairman
Member
People, Culture and Governance Committee
Chairman
Member
Sustainability and Operational Risk Committee
Chairman
Member
* Non‑Executive Chairman base fee includes compensation for the appointment to relevant Committees.
A$220,000
A$100,000
A$25,000
A$20,000
A$20,000
A$15,000
A$20,000
A$15,000
64
Karoon Energy LtdAnnual Report 2021
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Karoon Energy LtdAnnual Report 2021
Directors’ Report Continued
Remuneration Report (Audited) continued
Section 5. Statutory and Share‑based Reporting continued
Details of the Remuneration of the Directors and Other Key Management Personnel continued
Financial Year Ended 30 June 2020
Short‑term Benefits
Post‑employment Benefits
Long‑term
Benefits
Share‑based
Payments
Expense
Name
Executive Directors
Mr Robert Hosking
Mr Mark Smith (retired as a Director
on 29 November 2019 and remained
as other KMP until 15 March 2020)
Non‑Executive Directors
Mr Bruce Phillips
Ms Luciana Rachid
Mr Geoff Atkins
Mr Clark Davey
Mr Peter Turnbull
Mr José Coutinho Barbosa
Total Directors’ remuneration
Other KMP (Group)
Mr Scott Hosking
Mr Tim Hosking
Mr Edward Munks
Cash Salary
and Fees
US$
Non‑
monetary
Benefits
US$
Super‑
annuation
Contributions
US$
389,211
32,598
14,101
289,849
11,053
10,576
142,784
77,659
87,461
103,798
107,267
68,662
1,266,691
271,290
229,103
339,113
–
–
–
–
–
–
43,651
13,831
29,076
851
14,032
–
8,579
10,141
10,492
–
67,921
14,101
–
14,101
–
–
–
–
–
–
–
–
–
–
40,395
–
Social
Security &
Indemnity
Fund
Contributions
US$
Long Service
Leave
US$
Remuneration
Consisting
of Share
Options and
Performance
Rights*
%
Share
Options/
Performance
Rights
US$
Total
Remuneration
US$
2,496
249,792
36.3%
688,198
–
86,209
21.7%
397,687
–
–
–
–
–
–
2,496
5,605
–
7,875
–
–
–
–
–
–
336,001
27,106
26,246
253,336
–
–
–
–
–
–
8.2%
8.1%
41.2%
156,816
77,659
96,040
113,939
117,759
68,662
1,716,760
331,933
324,820
615,276
1,272,029
2,988,789
Total other KMP (Group)
839,506
43,758
28,202
40,395
13,480
306,688
Total KMP remuneration (Group)
2,106,197
87,409
96,123
40,395
15,976
642,689
*
The percentage of total remuneration consisting of share options and performance rights, based on the value of share options and performance rights
expensed in the consolidated statement of profit or loss and other comprehensive income during the financial year.
The amounts disclosed for the remuneration of Directors and other key management personnel include the assessed fair values of share
options and performance rights granted during the financial year, at the date they were granted, with the exception of cash‑settled share
base payments which are revalued at year end and long‑term performance rights granted to Dr Julian Fowles which have been valued at year
end as they remain subject to approval by shareholders at the 2021 AGM. The value attributable to share options and performance rights
is allocated to particular financial periods in accordance with AASB 2 ‘Share‑based Payment’, which requires the value of a share option
and performance right at grant date to be allocated equally over the period from grant date to vesting date, adjusted for not meeting the
vesting condition. For share options and performance rights that vest immediately, the value is disclosed as remuneration immediately, in
accordance with the accounting policy described in Note 1(s) of the consolidated financial statements. In addition, acceleration of vesting
occurs for share options and performance rights up to the end of an employee’s respective service period, where the options and rights
are retained post cessation of employment.
Fair value of share options is assessed under the Black‑Scholes option pricing model. The Black‑Scholes option pricing model considers the
exercise price, the term of the share option, 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 share option. With the exception of long‑term performance rights granted
during the current financial year, the fair value of performance rights were based on the Company’s closing share price at grant date.
Long‑term performance rights granted during the current financial year, which are subject to market‑based performance conditions, have
been valued using a Monte Carlo simulation approach.
66
Karoon Energy LtdAnnual Report 2021 :
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F
Karoon Energy LtdAnnual Report 2021
Directors’ Report Continued
Remuneration Report (Audited) continued
Section 5. Statutory and Share‑based Reporting continued
Share‑based Remuneration
The exercise price of share options on issuance is currently $1.40. There are currently 4,066,123 share options and 12,385,073 performance
rights issued under the 2016 ESOP, 2016 PRP and 2019 PRP respectively, representing approximately 2.97% of the Company’s total
number of ordinary shares issued.
The terms and conditions of each grant of share options and performance rights over unissued ordinary shares in the Company affecting
remuneration in the current or a future financial year are as follows:
Date Vested
and Exercisable Expiry Date
Exercise Price
Per Share
Option or
Performance
Right
Fair Value
Per Share
Option or
Performance
Right at Grant
Date
% Vested
Performance
Condition Achieved
1 July 2021
1 July 2021
30 June 2022
30 June 2022
A$1.40
A$1.40
A$0.285
A$0.100
100
100
2021 Performance condition
2021 Performance condition
1 July 2021
1 July 2021
1 July 2021
1 July 2022
1 July 2021
1 July 2022
1 July 2021
1 July 2022
1 July 2022
1 July 2023
1 July 2023
30 June 2022
30 June 2022
30 June 2022
30 June 2023
30 June 2022
30 June 2023
30 June 2022
30 June 2023
30 June 2023
30 June 2024
30 June 2024
$–
$–
$–
$–
$–
$–
$–
$–
$–
$–
$–
A$1.150
A$0.850
A$1.060
A$1.060
A$1.075
A$1.075
A$1.115
A$1.115
A$0.740
A$0.587
A$1.195
100
100
21
–
43
–
7.5
–
69
–
–
2021 Performance condition
2021 Performance condition
2020 Performance condition
To be determined
2020 Performance condition
To be determined
2020 Performance condition
To be determined
2021 Performance condition
To be determined
To be determined
Grant Date
ESOP options
21 September 2018
31 December 2018
Performance rights
21 September 2018
31 December 2018
12 November 2019
12 November 2019
18 October 2019
18 October 2019
29 November 2019
29 November 2019
25 September 2020
25 September 2020
27 November 2020
Share options and performance rights are granted for no consideration. Share options and performance rights granted carry no dividend
or voting rights.
68
Karoon Energy LtdAnnual Report 2021 Number of Share Options and Performance Rights Provided as Remuneration During the Financial Year
Details of share options and performance rights over unissued ordinary shares in the Company provided as remuneration to each Director
and each of the other KMP, including their personally related parties, are set out below:
Number
of Share
Options and
Performance
Rights Granted
During
Financial Year
Fair Value
Per Share
Options and
Performance
Rights at Grant
Date*
Value of Share
Options and
Performance
Rights at Grant
Date*
Number
of Share
Options and
Performance
Rights Vested
During
Financial Year
Number
of Share
Options and
Performance
Rights
Forfeited
Value of Share
Options and
Performance
Rights
Forfeited**
–
–
–
–
–
–
574,172
A$419,146
819,252
A$598,054
18,100
A$13,213
–
–
14,925
A$10,895
222,340
A$162,308
Name
Executive Directors
Dr Julian Fowles
– Performance rights (LTI)
Mr Robert Hosking
– ESOP options
– Performance rights (LTI)
Non‑Executive Director
Mr José Coutinho Barbosa
– ESOP options
– Performance rights (STI)
– Performance rights (LTI)
502,989
A$1.195
A$601,072
–
–
–
–
–
–
–
–
–
74,331
74,331
A$0.740
A$55,005
9,706
13,838
A$10,102
A$0.587
A$43,647
Other key management personnel (Group)
Mr Scott Hosking
– ESOP options
–
–
–
– Performance rights (STI)
– Performance rights (LTI)
Mr Tim Hosking
– ESOP options
– Performance rights (STI)
– Performance rights (LTI)
Mr Edward Munks
– ESOP options
– Performance rights (STI)
– Performance rights (LTI)
Total key management personnel
– Share options
– Performance rights
464,444
A$0.740
A$343,689
38,704
275,183
A$200,884
464,444
A$0.587
A$272,722
–
–
–
–
–
78,571
$57,357
215,290
A$157,162
449,717
A$0.740
A$332,791
48,331
266,458
A$194,514
449,717
A$0.587
A$264,074
–
–
–
–
–
76,080
A$55,538
166,755
A$121,731
580,556
A$0.740
A$429,611
48,380
343,979
A$251,105
580,556
A$0.587
A$340,902
–
137,500
A$100,375
–
3,641,085
–
A$2,683,513
–
145,121
1,196,657
2,025,786
A$873,560
A$1,478,824
*
The value at grant date, calculated in accordance with AASB 2, of share options and performance rights granted during the financial year as part of
their remuneration.
** The value of share options and performance rights forfeited during the financial year because a vesting condition was not satisfied was determined at
the time of forfeit (28 August 2020), but assuming the condition was satisfied, based on the underlying value of the share options or performance rights
at that date.
No share options or performance rights over unissued ordinary shares in the Company, held by any Director or other KMP, lapsed during
the financial year, except for 1,196,657 share options and 2,025,786 performance rights that were forfeited by Directors and other KMP.
69
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 5. Statutory and Share‑based Reporting continued
Shares Issued on the Exercise of Share Options Provided as Remuneration
No share options were exercised by any Director or other KMP, including their personally related parties, during the financial year.
Shares Issued on the Conversion of Performance Rights Provided as Remuneration
Details of fully paid ordinary shares in the Company issued, as a result of the exercise and conversion of remuneration performance rights
to each Director and other KMP, during the financial year, including their personally related parties, are set out below:
Name
Other KMP (Group)
Mr Edward Munks
Date of Conversion
of Performance Rights
7 June 2021
Number of
Ordinary Shares
Issued
Value at
Conversion
Date*
Amount Paid
per Performance
Right
48,380
48,380
A$67,006
A$67,006
$–
*
The value at conversion date of performance rights that were granted as part of their remuneration and were converted during the financial year has
been determined as the underlying value of the performance rights at that date.
No amounts are unpaid on any ordinary shares issued on the conversion of the above remuneration performance rights.
Cash‑settled Payments on the Cancellation of Performance Rights Provided as Remuneration
Details of cash‑settled payments by the Company, as a result of the cancellation of remuneration performance rights to each Director and
other KMP during the financial year, including their personally related parties, are set out below:
Name
Mr José Coutinho Barbosa
Mr Scott Hosking
Mr Tim Hosking
Date of Cancellation
of Performance Rights
14 August 2020
5 May 2021
9 February 2021
Number of
Performance
Rights Cancelled
9,706
38,704
48,331
96,741
Cash‑settled
Payment Value*
A$7,194
A$44,781
A$47,767
A$99,742
Amount Paid
per Performance
Right
$–
$–
$–
*
The cash‑settled value of performance rights that were granted as part of their remuneration and were cancelled during the financial year was determined
based on a ten day volume weighed average Company share price.
70
Karoon Energy LtdAnnual Report 2021 Details of Remuneration – Share Options and Performance Rights
For each grant of share options or performance rights in current or previous financial years which resulted in a share‑based payment
expense to Directors and other KMP, the percentage of the grant that vested and percentage that was forfeited because the individual did
not meet the service and/or pre‑determined performance conditions is set out below:
Name
Executive Directors
Dr Julian Fowles
– Performance rights (LTI)
Mr Robert Hosking
– Performance rights (LTI)
– Performance rights (STI)
Other KMP (Group)
Mr Scott Hosking
– ESOP options (LTI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
Mr Tim Hosking
– ESOP options (LTI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
Mr Edward Munks
– ESOP options (LTI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
Mr Ricardo Abi‑Ramia
– ESOP options (LTI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
– Performance rights (STI)
– Performance rights (LTI)
Financial Year End
Granted
Vested
%
Forfeited
%
Financial Years
in Which Share
Options or
Performance
Rights May Vest
Maximum Total
Value of Grant
Yet to Vest
US$
30 June 2021
30 June 2020
30 June 2020
30 June 2019
30 June 2019
30 June 2020
30 June 2020
30 June 2021
30 June 2021
30 June 2019
30 June 2019
30 June 2020
30 June 2020
30 June 2021
30 June 2021
30 June 2019
30 June 2019
30 June 2020
30 June 2020
30 June 2021
30 June 2021
30 June 2019
30 June 2019
30 June 2020
30 June 2020
30 June 2021
30 June 2021
–
–
7.5
100
100
21
–
63.2
–
100
100
21
–
59.2
–
100
100
21
–
63.2
–
100
100
53.8
–
73.3
–
–
30 June 2024
346,573
–
92.5
30 June 2023
30 June 2022
–
–
–
–
79
–
36.8
–
–
–
79
–
40.8
–
–
–
79
–
36.8
–
–
–
46.2
–
26.7
–
30 June 2022
30 June 2022
30 June 2022
30 June 2023
30 June 2023
30 June 2024
30 June 2022
30 June 2022
30 June 2022
30 June 2023
30 June 2023
30 June 2024
30 June 2022
30 June 2022
30 June 2022
30 June 2023
30 June 2023
30 June 2024
30 June 2022
30 June 2022
30 June 2022
30 June 2023
30 June 2023
30 June 2024
–
–
–
154,095
165,328
300,034
–
–
–
–
–
–
–
–
–
129,338
114,984
184,289
–
–
–
46,455
38,053
60,898
No share options or performance rights will vest if the service and/or pre‑determined performance conditions are not met, therefore the
minimum value of the share option or performance right yet to vest is $Nil.
The maximum value of share options and performance rights yet to vest was determined as the amount of the grant date fair value of the
share options or performance rights that is yet to be expensed in the consolidated statement of profit or loss and other comprehensive income.
71
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 5. Statutory and Share‑based Reporting continued
Share Options and Performance Rights over Unissued Ordinary Shares in the Company as at 30 June 2021
During the financial year 3,641,085 performance rights over unissued ordinary shares in the Company were issued to Directors and other
KMP, including their personally related parties.
The movement of share options and performance rights over unissued ordinary shares in the Company held by Directors and other KMP,
including their personally related parties, during the financial year was as follows:
Exercised
Share
Options/
Vested and
Converted
Performance
Rights Cash‑settled
Share
Options or
Performance
Rights
Forfeited
Total
Vested and
Exercisable
as at
30 June
2021
Total
Unvested as
at 30 June
2021
Balance as
at 30 June
2021
Other
Balance as
at 1 July
2020
Granted as
Remun‑
eration
–
502,989
Executive Directors
Dr Julian Fowles
– Performance rights1
Mr Robert Hosking
– ESOP options
– Performance rights
574,172
1,535,549
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67,486
97,410
–
148,662
591,598
910,700
–
928,888
572,839
892,678
–
899,434
Non‑Executive Directors
Mr Bruce Phillips
Ms Luciana Rachid
Mr Geoff Atkins
Mr Clark Davey
Mr Peter Turnbull
Mr Peter Botten
Mr José Coutinho
Barbosa
– ESOP options
– Performance rights
Other KMP
Mr Scott Hosking
– ESOP options
– Performance rights
Mr Tim Hosking
– ESOP options
– Performance rights
Mr Edward Munks
– ESOP options
– Performance rights
Mr Ricardo Abi‑Ramia
– ESOP options
– Performance rights
Total key management
– Share options
– Performance rights
628,327
1,177,663
–
1,161,112
–
(48,380)
–
–
–
–
–
–
personnel
2,434,422
4,614,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(574,172)
(819,252)
–
–
(716,297)2
–
–
–
–
–
–
–
–
–
–
–
–
–
(9,706)
(18,100)
(28,763)
(49,386)2
(207,603)2
502,989
–
–
–
–
–
–
–
–
–
–
–
(38,704)
(222,340)
(353,754)
–
–
369,258
1,447,130
–
(48,331)
(215,290)
(342,538)
(357,549)3
(1,401,243)3
–
–
–
–
–
–
(166,755)
(481,479)
–
–
461,572
1,808,916
–
–
258,1384
692,3534
258,138
692,353
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
502,989
–
–
–
–
–
–
–
–
–
–
369,258
1,447,130
–
–
461,572
1,808,916
258,138
692,353
1,088,968
4,451,388
–
3,641,085
–
(48,380)
–
(96,741)
(1,196,657)
(2,025,786)
(148,797)
(1,632,790)
1,088,968
4,451,388
1
Long‑term performance rights issued to Dr Julian Fowles and subsequent holding remain subject to shareholder approval at the 2021 Annual General Meeting.
2 Reflects respective holdings, held both individually and personally via related parties, when each director retired on 27 November 2020.
3 Reflects Tim Hosking’s holdings when he ceased his employment on 31 March 2021.
4 Reflects Ricardo Abi‑Ramia holdings when he commenced his role as Senior VP Operations on 31 March 2021.
All performance rights issued during the financial year were issued under the 2019 PRP.
72
Karoon Energy LtdAnnual Report 2021 The number of ordinary shares held by Directors and other KMP, including their personally related parties, as at 30 June 2021 was
as follows:
Exercised
(Share
Options)/
Vested and
Converted
(Performance
Rights)
Balance as at
1 July 2020
Received as
Remuneration
Ordinary
Shares
Purchased
Ordinary
Shares Sold
Balance as at
30 June 2021
Other^
Executive Directors
Dr Julian Fowles
(commenced as Director
on 27 November 2020)
Mr Robert Hosking
(retired as a Director
on 27 November 2021)
Non‑Executive Directors
Mr Bruce Phillips
Mr Geoff Atkins
(retired as a Director
on 27 November 2021)
Mr Clark Davey
Mr Peter Turnbull
Ms Luciana Rachid
Other KMP
Mr Scott Hosking
Mr Tim Hosking
(ceased as South American
General Manager and
Chief Executive Officer
Brazil on 31 March 2021)
Mr Edward Munks
Mr Ricardo Abi‑Ramia
(commenced as Senior
VP Operations from
31 March 2021)
Total KMP
–
12,813,506
1,750,000
726,676
47,214
146,269
52,960
606,913
298,334
1,066,552
–
17,508,424
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100,000
–
7,659
107,659
–
–
(12,813,506)
–
675,000
(675,000)
–
1,750,000
–
100,000
–
–
–
–
–
–
(726,676)
–
–
–
–
147,214
146,269
52,960
123,290
(115,569)
–
614,634
–
48,380
–
–
–
48,380
–
998,290
–
–
–
(790,569)
(298,334)
–
–
1,114,932
173,402
(13,657,455)
173,402
4,107,070
^ Other reflects the respective director or other KMP shareholdings (held both individually and by personally related parties) when they either commenced
or ceased their role as a KMP during the year.
None of the ordinary shares are held nominally by any Director or any of the other key management personnel. ‘Held nominally’
refers to the situation where the ordinary shares are in the name of the Director or other key management person, but he is not the
beneficial owner.
73
Karoon Energy LtdAnnual Report 2021 Directors’ Report Continued
Remuneration Report (Audited) continued
Section 5. Statutory and Share‑based Reporting continued
Other Transactions with Directors and Other KMP
A formal Related Party Protocol requires the approval by the People, Culture and Governance Committee and, thereafter, the Board of
Directors of all new related party transactions.
During the financial year, Mr José Coutinho Barbosa, a Non‑Executive Director, had an interest in Net Pay Óleo & Gás Consultoria Ltda
that provided business and geology consulting services to the Group. The value of these transactions from 1 July 2020 to the date of his
retirement of 27 November 2020 was $103,927 (2020: $254,562). Given Karoon’s size relative to other operators in Brazil, the consulting
services provided by Net Pay Óleo & Gás Consultoria Ltda were required for Karoon to operate effectively within the Brazilian oil industry.
The Consultancy Agreement under which such services were provided was terminated with effect on and from 28 February 2021.
During the financial year, Ms Flavia Barbosa, the daughter of a Non‑Executive Director (who retired on 27 November 2020), was employed
by the Group as the in‑house Legal Counsel in Brazil. The total value of her remuneration (including share‑based payments expense) from
1 July 2020 to 27 November 2020 was $112,724 (2020: $151,048). Ms Barbosa has been an employee of the Company since 2011 and
has a comprehensive understanding of the Brazilian legal and regulatory framework.
During the financial year, Ms Marina Sayão, the wife of Mr Tim Hosking (a KMP until 31 March 2021), received a payment relating to
2019 STIs during the financial year of $8,110 (2020: $122,531). The prior financial year included remuneration Ms Sayão received as the
Sustainability and Communications Manager, South America until the position was made redundant during the 2020 financial year and
she ceased as an employee.
The related party transactions referred to above will not be recurring in respect of the financial year ending 30 June 2022.
Amounts paid to Mr Tim Hosking in connection with the cessation of his employment (as disclosed in this Remuneration Report) include
payments and benefits required to be paid under Brazilian law.
Loans to Directors and Other KMP
There were no loans to Directors or other KMP during the financial year.
Rounding
The amounts in the financial report are rounded to the nearest thousand dollars (US$’000) unless otherwise indicated, under the option
available to the Company under ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191. The Company is an
entity to which this legislative instrument applies.
This Directors’ Report, incorporating the Remuneration Report, is made in accordance with a resolution of the Directors.
On behalf of the Directors:
Mr Bruce Phillips
Independent Non‑Executive Chairman
Dr Julian Fowles
Chief Executive Officer and Managing Director
20 September 2021
74
Karoon Energy LtdAnnual Report 2021 Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Karoon Energy Ltd for the year ended 30 June 2021, I declare that to
the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Karoon Energy Ltd and the entities it controlled during the period.
Anthony Hodge
Partner
PricewaterhouseCoopers
Melbourne
20 September 2021
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
75
Karoon Energy LtdAnnual Report 2021
Consolidated Financial Statements
For the Financial Year Ended 30 June 2021
Karoon Energy Ltd (the ‘Company’) is a public company limited by shares and is listed on the ASX. It is incorporated and domiciled
in Australia.
The registered office and principal place of business of Karoon Energy Ltd is Suite 3.02, Level 3, 6 Riverside Quay, Southbank VIC 3006.
The consolidated financial statements are for the consolidated entity consisting of the Company and its subsidiaries.
The consolidated financial statements are presented in United States dollars.
Note 25. Segment Information
Note 26. Joint Operations
Note 27. Contingent Liabilities and Contingent Assets
Note 28. Commitments
Note 29. Reconciliation to the Consolidated
Statement of Cash Flows
Note 30. Share‑based Payments
Note 31. Related Party Transactions
Note 32. Parent Company Financial Information
Note 33. Subsequent Events
112
115
116
117
119
120
122
124
125
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Note 1. Significant Accounting Policies
Note 2.
Significant Accounting Estimates,
Assumptions and Judgements
Note 3. Financial Risk Management
Note 4 Revenue and Other Income
Note 5. Expenses
Note 6.
Income Tax
Note 7. Remuneration of External Auditors
Note 8. Dividends
Note 9. Earnings Per Share
Note 10. Cash and Cash Equivalents
Note 11. Receivables
Note 12. Inventories
Note 13. Security Deposits
Note 14. Other Assets
Note 15. Property, Plant and Equipment
Note 16. Intangible Assets
Note 17. Exploration and Evaluation Expenditure
Carried Forward
Note 18. Oil and Gas Assets
Note 19. Trade and Other Payables
Note 20. Provisions
Note 21. Leases
Note 22. Other financial liabilities
77
78
79
80
81
81
91
93
99
99
101
103
103
104
104
104
105
105
106
106
107
107
108
109
109
110
110
Note 23. Contributed Equity and Reserves Within Equity
111
Note 24. Subsidiaries
112
76
Karoon Energy LtdAnnual Report 2021 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the Financial Year Ended 30 June 2021
Revenue
Cost of Sales
Gross Profit
Other income
Business development and transition costs
Exploration expenses
Finance costs
Net foreign currency losses
Change in fair value of contingent consideration
Other expenses
Loss before income tax
Income tax benefit
Profit (Loss) for financial year attributable to equity holders
of the Company
Other comprehensive income, net of income tax:
Items that may be reclassified subsequently to profit or loss
Exchange differences arising from the translation of financial statements
into presentation currency
Other comprehensive income (loss) for financial year, net of income tax
Total comprehensive income (loss) for financial year attributable
to equity holders of the Company, net of income tax
Note
4(a)
5(a)
4(b)
5(b)
5(c)
5(d)
22(a)
5(e)
6
Consolidated
2021
US$’000
170,809
(111,375)
59,434
305
(17,564)
(3,416)
(15,241)
(17,053)
(6,632)
(27,706)
(27,873)
32,257
Restated*
2020
US$’000
–
–
–
8,078
(14,474)
(52,526)
(2,180)
–
–
(25,670)
(86,772)
634
4,384
(86,138)
13,493
13,493
(44,344)
(44,344)
17,877
(130,482)
Profit (Loss) per share attributable to equity holders of the Company:
Basic profit (loss) per ordinary share
Diluted profit (loss) per ordinary share
9
9
0.0079
0.0077
(0.1936)
(0.1936)
* The comparative statement for the year ended 30 June 2020 has been restated to show the effect of the voluntary change in presentation currency.
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
77
Karoon Energy LtdAnnual Report 2021
Consolidated Statement of Financial Position
As at 30 June 2021
Current assets
Cash and cash equivalents
Receivables
Inventories
Security deposits
Other assets
Total current assets
Non‑current assets
Deferred tax assets
Inventories
Property, plant and equipment
Intangible assets
Exploration and evaluation expenditure carried forward
Oil and gas assets
Security deposits
Other assets
Total non‑current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Lease liabilities
Provisions
Total current liabilities
Non‑current liabilities
Trade and other payables
Other financial liabilities
Deferred tax liabilities
Lease liabilities
Provisions
Total non‑current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Share‑based payments reserve
Foreign currency translation reserve
Total equity
Note
10
11
12
13
14
6
12
15
16
17
18
13
14
19
21
20
19
22
6
21
20
23
Consolidated
Restated*
2020
US$’000
296,420
9,380
–
3,775
1,645
311,220
–
7,213
2,806
211
41,204
–
1,298
34,061
86,793
398,013
21,899
2,721
203
409
25,232
183
–
11,720
1,313
83
13,299
38,531
359,482
905,281
(418,749)
47,156
(174,206)
359,482
2021
US$’000
133,209
34,162
10,952
209
5,317
183,849
36,528
6,536
8,260
102
40,853
736,422
1,406
–
830,107
1,013,956
76,174
8,253
45,393
457
130,277
4,261
71,161
1,775
267,447
158,785
503,429
633,706
380,250
905,138
(414,365)
50,190
(160,713)
380,250
Restated*
1 July 2019
US$’000
228,758
1,319
1,490
376
851
232,794
–
22,083
556
376
59,957
–
5,268
–
88,240
321,034
5,177
–
–
411
5,588
383
–
16,148
–
84
16,615
22,203
298,831
716,502
(332,611)
44,802
(129,862)
298,831
* The comparative statements for the year ended 30 June 2020 and opening balance 1 July 2019 have been restated to show the effect of the voluntary
change in presentation currency.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
78
Karoon Energy LtdAnnual Report 2021 Consolidated Statement of Changes in Equity
For the Financial Year Ended 30 June 2021
Note
Contributed
Equity
US$’000
716,502
–
Accumulated
Losses
US$’000
(332,611)
(86,138)
Consolidated
Share‑based
Payments
Reserve
US$’000
44,802
–
Foreign
Currency
Translation
Reserve
US$’000
(129,862)
–
Total
Equity
US$’000
298,831
(86,138)
–
–
–
(86,138)
195,456
–
–
–
–
(44,344)
(44,344)
(44,344)
(130,482)
–
195,456
(6,677)
–
188,779
905,281
–
–
–
(418,749)
–
2,354
2,354
47,156
–
–
–
(174,206)
(6,677)
2,354
191,133
359,482
–
–
–
4,384
–
4,384
–
–
–
–
4,384
13,493
13,493
13,493
17,877
(143)
–
(143)
905,138
–
–
–
(414,365)
–
3,034
3,034
50,190
–
–
–
(160,713)
(143)
3,034
2,891
380,250
23
23
23
Restated balance as at 1 July 2019
Restated loss for financial year
Restated exchange differences arising from
the translation of financial statements into
presentation currency
Restated total comprehensive
loss for financial year
Transactions with owners in their
capacity as owners:
Restated ordinary shares issued
Restated transaction costs arising
on ordinary shares issued, net of tax
Restated share‑based payments expense
Restated balance as at 30 June 2020
Profit for financial year
Exchange differences arising from the
translation of financial statements into
presentation currency
Total comprehensive loss for financial year
Transactions with owners in their
capacity as owners:
Deferred tax adjustment on transaction
costs arising on ordinary shares issued
in prior period
Share‑based payments expense
Balance as at 30 June 2021
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
79
Karoon Energy LtdAnnual Report 2021
Consolidated Statement of Cash Flows
For the Financial Year Ended 30 June 2021
Note
29(a)
Cash flows from operating activities
Receipts from customers (inclusive of GST refunds)
Payments to suppliers and employees (inclusive of GST)
Net refunds (payments) for Peruvian VAT
Payments for exploration and evaluation expenditure expensed
Payments for Baúna transition expenditure
Interest received
Interest and other costs of finance paid
Income taxes paid
Net cash flows from (used in) operating activities
Cash flows from investing activities
Purchase of plant and equipment and computer software
Acquisition of oil and gas assets
Payments for oil and gas assets
Borrowing costs paid
Payments for exploration and evaluation expenditure capitalised
Release/refund of security deposits
Proceeds from disposal of non‑current assets
Net cash flows used in investing activities
Cash flows from financing activities
Principal elements of lease payments
Proceeds from issue of ordinary shares
Payment of equity raising costs
Net cash flows from (used in) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effect of exchange rate changes on the balance of cash and cash equivalents
held in foreign currencies
Cash and cash equivalents at end of financial year
10
Consolidated
2021
US$’000
136,978
(56,461)
4,247
(15,231)
(15,941)
263
(13,246)
(10,823)
29,786
(4,717)
(150,000)
(16,031)
(191)
(1,915)
3,621
20
(169,213)
(23,411)
–
–
(23,411)
(162,838)
296,420
(373)
133,209
Restated*
2020
US$’000
1,527
(12,176)
(4,518)
(40,980)
(12,714)
2,362
(351)
(266)
(67,116)
(1,462)
(49,875)
–
–
(1,401)
70
18
(52,650)
(254)
195,456
(7,091)
188,111
68,345
228,758
(683)
296,420
* The comparative statement for the year ended 30 June 2020 has been restated to show the effect of the voluntary change in presentation currency.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
80
Karoon Energy LtdAnnual Report 2021 Notes to the Consolidated Financial Statements
For the Financial Year Ended 30 June 2021
Note 1. Significant Accounting Policies
The consolidated financial statements are for the consolidated entity consisting of the Company and its subsidiaries (the ‘Group’).
Information on the nature of the operations and principal activities of the Group are described in the Directors’ Report.
The following is a summary of significant accounting policies adopted by the Group in the preparation of these consolidated financial
statements. The accounting policies have been consistently applied to all the financial years presented, unless otherwise stated. As a result
of acquiring an Oil and Gas asset during the financial year a number of new accounting policies were adopted. These new accounting
policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.
Currency of Presentation
The Directors elected to change the Group’s presentation currency in accordance with AASB 108 ‘Accounting Policies, Changes in
Accounting Estimates and Errors’ from Australian dollars (‘A$’) to United States dollars (‘US$’), effective from 1 July 2020. The Directors
believe that the change provides investors and other stakeholders with a clearer and more reliable understanding of the Group’s global
business performance as a whole and is more comparable to the Company’s peers, most of which are presented in US$. The change is
accounted for retrospectively and as such comparative information has been restated in US$, including presentation of Statement of
Financial Position as at 1 July 2019.
The financial report has been restated to US$ using the procedures below:
Foreign currency amount
Income and expenses
Assets and liabilities
Equity
Statement of cash flows
Applicable exchange rate
Average rate prevailing for the relevant period1
Period‑end rate
Historical rate
Average rate prevailing for the relevant period
1. Unless this is not a reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions.
The average rate used for the current financial year was A$/US$ 1:0.7472 (2020: 1:0.6714) and the period‑end exchange rate used was
A$/US$ 1:0.7518 (2020: 1:0.6863).
In addition, the Company has changed the presentation in the profit or loss to aggregate expenses according to their function as opposed
to nature. It is the view of the Company that following the completion of Baúna, presenting expenses in this manner provides information
that is more relevant and enhances comparability to other international oil and gas companies.
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with financial year amounts and
other disclosures.
(a) Basis of Preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board (the ‘AASB’) and the Corporations Act 2001 (Cth). The Company is a for‑profit entity
for the purpose of preparing financial statements.
Rounding
The amounts in the financial statements are rounded to the nearest thousand dollars (US$’000) unless otherwise indicated, under the
option available to the Company under ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191. The Company
is an entity to which this legislative instrument applies.
Historical Cost Convention
The consolidated financial statements have been prepared on an accrual basis under the historical cost convention as modified, when
relevant, by the revaluation of selected financial assets and financial liabilities for which the fair value basis of accounting has been applied.
Significant Accounting Estimates, Assumptions and Judgements
The preparation of financial statements requires the use of certain significant accounting estimates. It also requires management to exercise
its judgement in the process of applying Group accounting policies. The areas involving a high degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.
Compliance with International Financial Reporting Standards
Compliance with Australian Accounting Standards ensures that the consolidated financial statements comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
81
Karoon Energy LtdAnnual Report 2021 Note 1. Significant Accounting Policies continued
(a) Basis of Preparation continued
New, Revised or Amended Australian Accounting Standards and Interpretations that are First Effective in the Current Reporting Period
The Group has adopted all of the new, revised and/or amended Australian Accounting Standards and Interpretations issued by the AASB
that are relevant to its operations and effective for the financial year ended 30 June 2021.
New and revised Australian Accounting Standards and amendments thereof and Interpretations effective for the financial year include:
(i) Amendments to AASB 3 ‘Business Combinations’: Definition of a Business;
(ii) Amendments to AASB 101 ‘Presentation of Financial Statements’ and AASB 108 ‘Accounting Policies, Changes in Accounting Estimates
and Errors’: Definition of Material;
(iii) Amendments to AASB 7 ‘Financial Instruments Disclosures’, AASB 9 ‘Financial Instruments’ and AASB 139 ‘Financial Instruments:
Recognition and Measurement ‘: Interest rate benchmark reform;
(iv) Amendments to AASB 2019‑1,’Amendments to Australian Accounting Standards’ Reference to the Conceptual Framework; and
(v) Amendments to AASB 16 ‘Leases’: COVID‑19 Related Rent Concessions.
The initial adoption of all of these new, revised and/or amended Australian Accounting Standards and Interpretations has not resulted in
any changes to the Group’s accounting policies and has had no effect on either the amounts reported for the current or previous years.
Early Adoption of Australian Accounting Standards
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
(b) Basis of Consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 30 June 2021 and the
results of all subsidiaries for the financial year then ended.
Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
Interests in subsidiaries are set out in Note 24.
All subsidiaries have a financial year end of 30 June, with the exception of: Karoon Petróleo & Gas Ltda; Karoon Peru Pty Ltd, Sucursal del
Peru; and KEI (Peru Z38) Pty Ltd, Sucursal del Peru which have a financial year end of 31 December in accordance with relevant Brazilian
and Peruvian tax and accounting regulations respectively.
Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with the policies applied by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.
Unrealised losses are also eliminated, unless the transaction provides evidence of the impairment of the asset transferred.
(c) Segment Information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for assessing performance and in determining the allocation of resources of the
operating segments, has been identified as the Chief Executive Officer and Managing Director.
(d) Revenue
Revenue from contracts with customers is recognised when the performance obligations are considered met, which is when control of
the products or services provided are transferred to the customer. Revenue is recognised at an amount that reflects the consideration the
Group expects to be entitled to, net of goods and services tax or similar taxes.
Where part or all of the transaction is price variable, revenue is recognised only to the extent that it is highly probable that a significant
reversal of revenue will not occur.
82
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Oil sales
Performance obligations are satisfied when the control of oil is transferred to the customer at the despatch point to the offtake vessel.
The transaction price for oil sales may not be finalised at the date the customer takes control of the product. In such cases, a provisional
transaction price is used until a final transaction price can be determined. The difference between the provisional and the final transaction
price is recognised at the point when the final price is determined.
Credit terms for crude cargoes are between 30 and 45 days.
Interest Income
Interest income on financial assets at amortised cost calculated using the effective interest method is recognised in the statement of profit
or loss and other comprehensive income as other income. Interest income is calculated by applying the effective interest rate to the gross
carrying amount of the relevant financial asset, except for financial assets that subsequently become credit impaired. For credit‑impaired
financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).
(e) Foreign Currency Transactions and Balances
Functional and Presentation Currency
Items included in the financial statements of each of the Group’s subsidiaries are measured using the currency of the primary economic
environment in which the subsidiary or branch operates (the ‘functional currency’).
The functional currency of the Company is Australian dollars. During the year the Group’s Brazilian subsidiary’s functional currency changed
from Brazilian REAL to US$ following the acquisition of a producing oil and gas asset (refer Note 1 above). The Peruvian Branches also have
a functional currency of US$.
The presentation currency of the consolidated financial statements is US$.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using the foreign exchange rates prevailing at the dates of the
transactions. Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at financial year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of
profit or loss and other comprehensive income, except when they are attributable to part of the net investment in a foreign operation.
Non‑monetary items measured at historical cost continue to be carried at the foreign exchange rate at the date of the transaction. Foreign
exchange differences arising on the translation of non‑monetary items are recognised directly in equity to the extent that the gain or loss
is directly recognised in equity, otherwise foreign exchange differences are recognised in the consolidated statement of profit or loss and
other comprehensive income.
Foreign exchange gains and losses are presented in the consolidated statement of profit or loss and other comprehensive income on a net
basis within other income or expenses.
Group Companies
The results and financial position of entities within the Group that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities are translated at the foreign exchange rates prevailing at the end of each reporting period.
• income and expenses are translated at the average foreign exchange rates for the financial period (unless this is not a reasonable
approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the
transactions); and
• all resulting foreign exchange differences are recognised in other comprehensive income.
On consolidation, foreign exchange differences arising on translation of foreign currency financial statements are transferred directly
to the foreign currency translation reserve in the consolidated statement of financial position. The relevant differences are recognised in
the consolidated statement of profit or loss and other comprehensive income during the financial period when the investment in the entity
is disposed.
83
Karoon Energy LtdAnnual Report 2021 Note 1. Significant Accounting Policies continued
(f) Income Taxes and Other Taxes
Current Tax
Current tax (expense) income is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable
profit or loss for the financial period. It is calculated using income tax rates and tax laws that have been enacted or are substantively
enacted by the end of each reporting period in the countries where the Company’s subsidiaries operate and generate taxable income.
Current tax for current and previous financial periods is recognised as a liability (or asset) to the extent that it is unpaid or refundable.
Deferred Tax
Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The tax base of an asset or liability is the
amount attributed to that asset or liability for income taxation purposes.
No deferred tax is recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect
on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are enacted or substantively enacted by the end of the financial period and are expected to
apply to the financial period when the asset is realised, or liability is settled. Deferred tax is credited in the consolidated statement of profit
or loss and other comprehensive income except where it relates to items that may be credited directly to equity, in which case the deferred
tax is adjusted directly against equity.
Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible
temporary tax differences or unused tax losses and tax offsets can be utilised.
Deferred tax assets and tax liabilities are offset when there is a legally enforceable right to offset current tax assets and tax liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the Group 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.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will
occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit
to be realised and comply with the conditions of deductibility imposed by law.
Tax Consolidation
The Company and its wholly owned Australian subsidiaries are part of an income tax‑consolidated group under Australian taxation law.
The Company is the head entity in the income tax‑consolidated group. Tax income (expense), deferred tax liabilities and deferred tax assets
arising from temporary tax differences of the members of the income tax‑consolidated group are recognised in the separate financial
statements of the members of the income tax‑consolidated group using the ‘stand‑alone taxpayer’ approach, by reference to the carrying
amounts in the separate financial statements of each company and the tax values applying under tax consolidation. Current tax liabilities
and tax assets and deferred tax assets arising from unused tax losses and tax credits of members of the income tax‑consolidated group are
recognised by the Parent Company (as head entity of the income tax‑consolidated group).
Due to the existence of a tax funding agreement between the companies in the income tax‑consolidated group, each company contributes
to the income tax payable or receivable in proportion to their contribution to the income tax‑consolidated group’s taxable income.
Differences between the amounts of net tax assets and tax liabilities derecognised and the net amounts recognised pursuant to the funding
agreement are recognised as either a contribution by, or distribution to, the head entity.
Goods and Services Tax (‘GST’)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from
the Australian Taxation Office (’ATO’). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or equity
or as part of an item of expense.
Receivables and payables in the consolidated statement of financial position are shown inclusive of GST.
The net amount of GST recoverable from, or payable to, the ATO, is included as current receivables or payables respectively in the
consolidated statement of financial position.
Cash flows are included on a gross basis in the consolidated statement of cash flows. The GST components of cash flows arising from
investing and financing activities, which are recoverable from, or payable to, the ATO, are classified as operating cash flows.
84
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the ATO.
Petroleum Resource Rent Tax (‘PRRT’)
PRRT is accounted for as income tax under AASB 112 ‘Income Taxes’.
(g) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statement of financial position and for presentation in the consolidated statement of cash
flows comprise cash at bank and on hand (including share of joint operation cash balances) and short‑term bank deposits that are readily
convertible to known amounts of cash and are subject to insignificant risk of changes in value.
(h) Receivables
Receivables, which normally have 30‑45 day terms, are generally non‑interest‑bearing amounts. They are recognised initially at the amount
of the consideration that is unconditional unless they contain significant financing components, when they are recognised initially at fair
value. The Group holds receivables with the objective to collect the contractual cash flows. They are presented as current assets unless
collection is not expected for more than 12 months after reporting date. For receivables expected to be settled within 12 months, these
are subsequently measured at amortised cost using the effective interest method, less any loss allowance. For receivables expected to be
settled later than 12 months, these are subsequently measured at amortised cost based on discounted cash flows using an effective interest
rate, less any loss allowance.
Cash flows relating to non‑current receivables are not discounted if the effect of discounting would be immaterial.
Refer Note 3(c) for a description of the Group’s receivable impairment policies.
(i) Inventories
Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and selling expenses.
Cost for petroleum products, which comprise extracted crude oil stored in the FPSO, are valued using the absorption cost method.
Other inventories are represented by assets acquired from third parties, in the form of casing and other drilling inventory to be consumed
or used in exploration and evaluation activities or production activities. They are presented as current assets unless inventories are not
expected to be consumed or used in exploration and evaluation activities within 12 months. The cost of casing and other drilling inventory
includes direct materials, direct labour and transportation costs.
(j) Security Deposits
Certain financial assets have been pledged as security for performance guarantees, bank guarantees and bonds related to exploration
tenements and operating lease rental agreements. Their realisation may be restricted subject to terms and conditions attached to the
relevant exploration tenement agreements or operating lease rental agreements.
Security deposits are non‑derivative financial assets that are not quoted in an active market. Security deposits are initially recognised at fair
value. Such assets are subsequently carried at amortised cost using the effective interest method, less any loss allowance. They are included
in current assets, except for those with maturities greater than 12 months after the end of the reporting period which are classified as
non‑current assets.
Security deposits are derecognised when the terms and conditions attached to the relevant exploration tenement agreements or lease
rental agreements have expired or been transferred.
Refer Note 3(c) for a description of the Group’s security deposit impairment policies.
(k) Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes
the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major
inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for
capitalisation. All other repairs and maintenance are recognised as an expense in the consolidated statement of profit or loss and other
comprehensive income as incurred.
Commencing from the time the plant and equipment is held ready for use, depreciation expense is calculated on a straight‑line basis to
allocate their cost amount, net of their residual values, over their estimated useful lives ranging from 2 to 10 years.
Plant and equipment residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at the end of each
reporting period.
85
Karoon Energy LtdAnnual Report 2021 Note 1. Significant Accounting Policies continued
(k) Property, Plant and Equipment continued
Gains and losses on disposals are determined by comparing proceeds with the net carrying amount. These gains and losses are included in
the consolidated statement of profit or loss and other comprehensive income.
Property, plant and equipment are tested for impairment in accordance with the accounting policy described in Note 1(p).
(l) Oil and Gas Assets
Production assets
Production assets are stated at cost less accumulated amortisation and impairment charges. Production assets include the costs to acquire,
construct, install or complete production and infrastructure facilities, capitalised borrowing costs, transferred exploration and evaluation
assets, development wells and the estimated cost of dismantling and restoration. Subsequent capital costs, including major maintenance,
are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be reliably measured.
Assets in development
When the technical and commercial feasibility of an undeveloped oil or gas field has been demonstrated and approval of commercial
development occurs, the field enters its development phase. The costs of oil and gas assets in development are separately accounted for
and include past exploration and evaluation costs, development drilling and other subsurface expenditure, surface plant and equipment and
any associated land and buildings. When the committed development expenditure programs are completed and commercial production
commences, these costs are subject to amortisation.
Amortisation of production assets
Amortisation is calculated using the units of production method for an asset or group of assets from the date of commencement of
production. Depletion charges are calculated using the units of production method over the life of the estimated proved plus probable
(‘2P’) reserves for an asset or group of assets.
(m) Intangibles
Computer Software
Computer software is stated at cost less accumulated amortisation and any accumulated impairment losses. Computer software costs have
a finite life.
Commencing from the time the computer software is held ready for use, amortisation expense is calculated on a straight‑line basis to
allocate their cost amount, net of their residual values, over their estimated useful lives ranging from 2 to 2.5 years.
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at the end of each reporting period.
Computer software is tested for impairment in accordance with the accounting policy described in Note 1(p).
(n) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in
the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing
of funds.
(o) Exploration and Evaluation Expenditure
Exploration and evaluation activity involves the search for hydrocarbon resources, the determination of technical feasibility and the
assessment of commercial viability of an identified resource. Expenditure in respect of each area of interest is accounted for using the
‘successful efforts’ method of accounting. The ‘successful efforts’ method requires all exploration and evaluation expenditure in relation
to an area of interest to be expensed in the period it is incurred, except the cost of successful wells, the costs of acquiring interests in new
exploration assets, and appraisal costs relating to determining development feasibility, which are capitalised as intangible exploration and
evaluation assets.
Exploration and evaluation assets are recognised in relation to an area of interest when the rights to tenure of the area of interest are
current and either:
• it is expected to be recovered through sale or successful development and exploitation of the area of interest; or
• relates to an exploratory discovery for which at balance date a reasonable assessment of the existence or otherwise of economically
recoverable reserves is not yet complete, or additional appraisal work is underway or planned.
86
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued All exploration expenditure in relation to directly attributable general administration costs, geological and geophysical costs, seismic and
pre‑tenure costs is expensed in the consolidated statement of profit or loss and other comprehensive income as incurred.
For exploration wells, costs directly associated with drilling the wells are initially capitalised on a well‑by‑well basis pending the evaluation of
whether potentially economic reserves of hydrocarbons have been discovered. If no recoverable hydrocarbons are identified, or discoveries
are deemed non‑commercial, then the capitalised costs are expensed.
As capitalised exploration and evaluation expenditure is not available for use, it is not amortised.
Cash flows associated with exploration and evaluation expenditure expensed are classified as operating activities in the consolidated statement
of cash flows. Whereas cash flows associated with capitalised exploration and evaluation expenditure are classified as investing activities.
When the technical feasibility and commercial viability of extracting economically recoverable reserves have been demonstrated, any
related capitalised exploration and evaluation expenditure is reclassified as development expenditure in the consolidated statement of
financial position. Prior to reclassification, capitalised exploration and evaluation expenditure is assessed for impairment.
Petroleum tenement acquisition costs capitalised, along with licence costs paid in connection with a right to explore in an existing
exploration area.
Farm‑out
The Group does not record any exploration and evaluation expenditure made by a farmee, including any carries incurred by the farmee to
earn an ownership interest.
Any cash consideration received on sale or farm‑out of an area within an exploration area of interest is recognised as revenue in the
consolidated statement of profit or loss and other comprehensive income, unless any of the consideration is attributable to capitalised
exploration and evaluation expenditure. Cash consideration received in relation to capitalised exploration and evaluation expenditure
is offset against the carrying value of the capitalised exploration and evaluation expenditure. Where the total carrying value has been
recouped in this manner, the balance of the proceeds is brought to account as income as a gain on disposal.
Impairment of Capitalised Exploration and Evaluation Expenditure
The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the asset level whenever facts and
circumstances (as defined in AASB 6 ‘Exploration for and Evaluation of Mineral Resources’) suggest that the carrying amount of the asset
may exceed its recoverable amount. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.
An impairment loss exists when the carrying amount of an asset or cash‑generating unit exceeds its estimated recoverable amount.
The asset or cash‑generating unit is then written‑down to its recoverable amount. Impairment losses are recognised as an expense in the
consolidated statement of profit or loss and other comprehensive income.
Capitalised exploration and evaluation expenditure impairment during previous reporting periods are tested for possible reversal of the
impairment loss whenever facts or changes in circumstances indicate that the impairment may have reversed.
(p) Impairment of Assets (Other than Capitalised Exploration and Evaluation Expenditure)
All other current and non‑current assets (other than receivables, inventories, security deposits and deferred tax assets) are tested for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
At the end of each reporting period, the Group conducts an internal review of asset values, which is used as a source of information
to assess for any indicators of impairment. External factors, such as changes in economic conditions, are also monitored to assess for
indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.
An impairment loss exists when the carrying amount of an asset or cash‑generating unit exceeds its estimated recoverable amount.
The asset is then written down to its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash‑generating units).
Impairment losses are recognised as an expense in the consolidated statement of profit or loss and other comprehensive income.
Assets that suffered impairment are tested for possible reversal of the impairment loss whenever events or changes in circumstances
indicate that the impairment may have reversed.
87
Karoon Energy LtdAnnual Report 2021 Note 1. Significant Accounting Policies continued
(q) Trade and Other Payables
Trade and other payables are initially recognised at their fair value and subsequently measured at amortised cost using the effective interest
method. These amounts represent liabilities for goods and services provided to the Group prior to the end of the reporting period that
are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of goods and services. The
amounts are unsecured and are usually paid within 30 days of recognition. They are presented as current liabilities unless payment is not
due within 12 months from the reporting date.
(r) Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. A derivative embedded in a hybrid
contract, with a financial liability or non‑financial host, is separated from the host and accounted for as a separate derivative if the economic
characteristics and risks are not closely related to the host, a separate instrument with the same terms as the embedded derivative would
meet the definition of a derivative, and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are
measured at fair value with changes in fair value recognised in profit or loss. All financial liabilities are recognised initially at fair value and,
in the case of loans and borrowings and payables, net of directly attributable transaction costs.
For purposes of subsequent measurement, financial liabilities are classified in two categories: financial liabilities at fair value through profit
or loss and financial liabilities at amortised cost (loans and borrowings).
The Group’s financial liabilities include trade and other payables, and a derivative financial instrument relating to contingent consideration
for the acquisition of an asset.
(s) Employee Benefits
Wages, Salaries, Annual Leave and Personal Leave
Liabilities for wages and salaries, including non‑monetary benefits and annual leave expected to be settled within 12 months after the
end of the reporting period in which the employees render the related services are recognised in respect of employees’ services up to the
end of the reporting period. They are measured at the amounts expected to be paid when the liabilities are settled plus related on‑costs.
Expenses for non‑vesting personal leave are recognised when the leave is taken and are measured at the rates paid or payable.
The obligations are presented as current liabilities in the consolidated statement of financial position if the Group does not have an
unconditional right to defer settlement for at least 12 months after the reporting date, regardless of when the actual settlement is expected
to occur.
Share‑based Payments
Share‑based remuneration benefits are provided to Executive Directors and employees via the Company’s PRP and ESOP (refer Note 30).
The Group issues equity‑settled and cash‑settled share‑based payments to certain employees.
The fair value of share options and performance rights granted is recognised as a share‑based payments expense in the consolidated
statement of profit or loss and other comprehensive income. The total amount to be expensed is determined by reference to the fair value
of the share options and performance rights granted, which includes any market performance conditions, but excludes the impact of any
service and non‑market performance vesting conditions. Non‑market performance vesting conditions are included in assumptions about
the number of share options or performance rights that are expected to vest.
The fair value is measured at grant date. For equity‑settled share‑based payments the corresponding credit is recognised directly in the
share‑based payments reserve in equity. For cash‑settled share‑based payments a liability is recognised based on fair value of the payable
earned by the end of the reporting period. The liability is re‑measured to fair value at each reporting date up to, and including the
vesting date, with changes in fair value recognised in share‑based payments expense. The total expense is recognised over the vesting
period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the
Group revises its estimates of the number of share options and performance rights that are expected to vest based on the non‑market
performance vesting conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated statement of profit
or loss and other comprehensive income.
The fair value of share options at grant date is determined using a Black‑Scholes option pricing model that takes into account the exercise
price, the term of the share option, the impact of dilution, the non‑tradeable nature of the share option, 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 share option.
88
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued The fair value of performance rights, granted for $Nil consideration, at grant date is based on the Company’s closing share price at that
date, with the exception of long term performance rights granted during the current financial year.
Long term performance rights granted during the current financial year, which are subject to market‑based performance conditions, have
been valued using a Monte Carlo simulation approach.
(t) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) 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.
Restoration costs
A provision for restoration is provided by the Group where there is a present obligation as a result of exploration, development or
production activities having been undertaken, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Site restoration costs are capitalised within the cost of the associated assets and the provision is stated in the statement of
financial position at total estimated present value and amortised on the same basis as the associated asset. These costs are based on
judgements and assumptions regarding removal dates, technologies, industry practice and relevant legislation. Over time, the liability is
increased for the change in the present value based on a risk adjusted pre‑tax discount rate appropriate to the risks inherent in the liability.
The costs of restoration are brought to account in the statement of comprehensive income through depletion of the associated assets over
the economic life of the projects with which these costs are associated. The unwinding of the discount is included as an accretion charge
within finance costs.
Long Service Leave
A provision has been recognised for employee entitlements relating to long service leave measured at the discounted value of estimated
future cash outflows. In determining the provision, consideration is given to employee wage increases and the probability that the
employee may satisfy vesting requirements. The cash outflows are discounted using market yields with terms of maturity that match the
expect timing of cash outflows.
Employee entitlements relating to long service leave are presented as a current provision in the consolidated statement of financial position
if the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of
when the actual settlement is expected to occur.
(u) Contributed Equity
Ordinary shares are classified as equity.
Transaction costs directly attributable to the issue of new ordinary shares, share options or performance rights are shown in equity as a
deduction, net of any related income tax, from the proceeds. Transaction costs are the costs that are incurred directly in connection with
the issue of new ordinary shares, and which would not have been incurred had those ordinary shares not been issued. These directly
attributable transaction costs include registration and other regulatory fees, amounts paid to legal, accounting and other professional
advisers, printing costs and marketing costs.
Where the Company acquires its own ordinary shares, as a result of a share buy‑back, those ordinary shares are cancelled. No gain or loss
is recognised, and the consideration paid to acquire the ordinary shares, including any transaction costs directly attributable, net of any
related income tax, is recognised directly as a reduction from equity.
(v) Interests in Joint Operations
A joint operation is a joint arrangement whereby the participants that have joint control of the arrangement (i.e. joint operators) have rights
to the assets, and obligations for the liabilities, relating to the arrangement.
The Group recognises assets, liabilities, revenues and expenses according to its share in the assets, liabilities, revenues and expenses
of a joint operation or similar as determined and specified in contractual arrangements (joint operating agreements). These have been
incorporated in the consolidated financial statements under the appropriate headings.
The Group’s share of assets, liabilities, revenues and expenses employed in joint operations is set out in Note 26.
89
Karoon Energy LtdAnnual Report 2021 Note 1. Significant Accounting Policies continued
(w) Leases
The Group has lease contracts for property, an FPSO vessel and other equipment used in its operations.
The Group recognises a right‑of‑use asset and a lease liability at the lease commencement date.
The lease liability is initially measured at the present value of the lease payments expected to be paid over the lease term, discounted
using the interest rate implicit in the lease or, if the rate cannot be readily determined, the Group’s estimated incremental borrowing rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. The lease
liability is further remeasured if the estimated future lease payments change as a result of index or rate changes, residual value guarantees
or likelihood of exercise of purchase, extension or termination options.
The Group has applied judgement to determine the lease term for lease contracts that include renewal options. The assessment of whether
the Group is reasonably certain to exercise such options impacts the lease term, which affects the measurement of lease liabilities and
right‑of‑use assets recognised.
Right‑of‑use assets
The right‑of‑use asset is initially measured at cost (present value of the lease liability plus deemed cost of acquiring the asset), and
subsequently at cost less any accumulated depreciation, impairment losses and adjustment for remeasurement of the lease liability.
Property leases generally have terms between 2 and 5 years. The FPSO vessel lease has a fixed term to February 2026 with renewal
options available.
(x) Earnings Per Share
Basic Earnings Per Share
Basic earnings per ordinary share is calculated by dividing the profit or loss attributable to owners of the Company, 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 any bonus elements in ordinary shares issued during the financial year.
Diluted Earnings Per Share
Diluted earnings per ordinary share adjusts the figures used in the determination of basic earnings per ordinary 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 ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
(y) Parent Company Financial Information
The financial information for the Parent Company, Karoon Energy Ltd, disclosed in Note 32 has been prepared on the same basis as the
consolidated financial statements, except as set out below:
Investments in Subsidiaries
Investments in subsidiaries are accounted for at cost in the Parent Company’s financial statements.
The Parent Company does not designate any investments in subsidiaries as being subject to the requirements of Australian Accounting
Standards specifically applicable to financial instruments. They are held for strategic and not trading purposes.
Investments in subsidiaries and receivables from subsidiaries are tested for impairment in accordance with the accounting policy described
in Note 1(p).
Share‑based Payments
The grant by the Company of equity‑settled share options and performance rights over its ordinary shares to the employees of subsidiary
companies in the Group is treated as a capital contribution to that subsidiary company. The fair value of employee services received,
measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investments in subsidiaries, with
a corresponding credit to equity.
(z) New Australian Accounting Standards and Interpretations for Application in Future Financial Years
There are no relevant new Australian Accounting Standards or Interpretations that are not yet effective and that are expected to have
a material impact on the Group in the current or future financial years and on foreseeable future transactions.
90
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 2. Significant Accounting Estimates, Assumptions and Judgements
Revenues and expenses and the carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions
of future events. In applying the Group’s significant accounting policies, the Board of Directors and management evaluate estimates and
judgements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future
events and are based on current trends and economic data obtained both externally and within the Group.
Significant estimates, assumptions and/or judgements made by the Board of Directors and management in the preparation of the
consolidated financial statements were:
(a) Impairment of oil and gas assets
The Group assesses whether oil and gas assets are impaired at least on a semi‑annual basis. This requires review of the indicators of
impairment and/or an estimation of the recoverable amount of the cash‑generating unit to which the assets belong. For oil and gas
properties, expected future cash flow estimation is based on reserves, future production profiles, commodity prices and costs. Current
climate change legislation is also considered in relation to the cash‑generating unit’s useful life and future uncertainty around climate
change risks continue to be monitored.
(b) Capitalised Exploration and Evaluation Expenditure
Capitalised exploration and evaluation expenditure is carried forward on the basis that exploration and evaluation operations in the areas
of interest have not at the end of the reporting period reached a stage that permits a reasonable assessment of the existence or otherwise
of economically recoverable reserves, and active and significant operations in, or in relation to, the areas of interest are continuing.
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether
the Group decides to exploit the related exploration tenement itself or, if not, whether it successfully recovers the related exploration and
evaluation asset through sale. Factors that could affect the future recoverability include the level of economically recoverable reserves,
future technological changes which could impact the cost of development, future legal changes (including changes to environmental
and restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is
determined not to be recoverable in the future, the relevant capitalised amount will be impaired in the consolidated statement of profit
or loss and other comprehensive income and net assets will be reduced during the financial period in which this determination is made.
Information on the reasonable existence or otherwise of economically recoverable reserves is progressively gained through geological
analysis and interpretation, drilling activity and prospect evaluation during a normal exploration tenement term. A reasonable assessment
of the existence or otherwise of economically recoverable reserves can generally only be made, therefore, at the conclusion of those
exploration and evaluation activities.
(c) Provision for Restoration
Restoration costs are a normal consequence of operating in the oil and gas industry. In determining an appropriate level of provision,
consideration is given to the expected future costs to be incurred, the timing of these expected future costs, the estimated future level
of inflation and appropriate discount rate. The ultimate costs of restoration are uncertain and costs can vary in response to many factors
including changes to the relevant legal and legislative requirements, the emergence of new restoration techniques or experience at other
fields. The expected timing of expenditure can also change. Changes to any of the estimates could result in a significant change to the
level of provisioning required, which would in turn impact future financial results.
(d) Estimates of reserves quantities
The estimated quantities of Proved plus Probable (“2P’’) hydrocarbon reserves reported by the Group are integral to the calculation of
depletion and depreciation expense and to the assessment of impairment or impairment reversals.
Estimated reserves quantities are based upon management’s interpretations of geological and geophysical models, reservoir engineering
and production engineering analyses and models, and assessments of the technical feasibility and commercial viability of producing the
reserves, taking into consideration reviews by an independent third party. An external reserves assessment is planned to be undertaken at
least every 3 years.
Assessments require assumptions to be made regarding future development and production costs, commodity prices, exchange rates and
fiscal regimes. The Group prepares its reserves estimates in accordance with the Petroleum Resources Management System (PRMS 2018)
published by the Society of Petroleum Engineers and the Australian Securities Exchange Listing rules. All estimates of reserves reported by
the Group are prepared by, or under the supervision of a qualified petroleum reserves and resources evaluator.
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. These changes may impact depreciation, amortisation,
asset carrying values, restoration provisions and deferred tax balances. If proved and probable reserves estimates are revised downwards,
earnings could be affected by a higher depreciation and/or amortisation charge or immediate write‑down of the assets carrying value.
91
Karoon Energy LtdAnnual Report 2021 Note 2. Significant Accounting Estimates, Assumptions and Judgements continued
(e) Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on
quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The fair
value of the contingent consideration (refer to Note 22) is based on the Group’s internal assessment of future oil prices, which considers
industry consensus and observable prices, inflation and an appropriate risk‑free rate. Changes in assumptions relating to these factors
could affect the reported fair value of the financial instrument.
(f) Share‑based Payments
Estimating fair value for share based payment transactions requires determination of the most appropriate valuation model, which depends
on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model
including the expected life of the share option or performance right, volatility and dividend yield and making assumptions about them at
grant date. The fair value of share options is ascertained using the Black‑Scholes option pricing model taking into account the terms and
conditions upon which the share options were granted. The fair value of long term performance rights issued during the current financial
year are valued using a Monte Carlo simulation approach taking into account the terms and conditions upon which the performance rights
were granted. The cumulative share‑based payments expense recognised reflects the extent, in the opinion of management, to which
the vesting period has expired and the number of share options and performance rights granted that will ultimately vest or be settled in
cash. At the end of each reporting period, the unvested share options, performance rights and cash‑settled share‑based payment liability
are adjusted by the number forfeited during the reporting period to reflect the actual number of share options and performance rights
outstanding and cash liability to be settled. In addition, the fair value of cash‑settled share‑based payments are remeasured, up to the date
of settlement, to reflect the cash liability at the end of each reporting period with changes in the fair value recognised in the profit or loss.
(g) Income Tax
The Group is subject to income taxes in Australia, Brazil and other jurisdictions where it has foreign operations. There are many transactions
and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group
estimates its tax liabilities based on the Group’s understanding of the relevant tax laws. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and deferred tax balances in the financial
period in which such determination is made.
The Group has not recognised deferred tax assets in respect of Peruvian tax losses and temporary tax differences as the future utilisation of
these losses and temporary tax differences is not considered probable at this point in time. Assessing the future utilisation of tax losses and
temporary tax differences requires the Group to make significant estimates related to expectations of future taxable income. Estimates of
future taxable income are based on forecast cash flows from operations and the application of existing tax laws. To the extent that future
utilisation of these tax losses and temporary tax differences becomes probable, this could result in significant changes to deferred tax assets
recognised, which would in turn impact future financial results.
(h) Joint Arrangements
Exploration and evaluation activities of the Group are conducted primarily through arrangements with other participants. Each arrangement
has a contractual agreement (joint operating agreement) that provides the participants with rights to the assets and obligations for the
liabilities of the arrangement. Under certain agreements, more than one combination of participants can make decisions about the relevant
activities and therefore joint control does not exist. Where the arrangement has the same legal form as a joint operation, but is not subject
to joint control, the Group accounts for its interest in accordance with the contractual agreement by recognising its share of jointly held
assets, liabilities, revenues and expenses of the arrangement.
(i) Determining the lease term of contracts with renewal options
The Group determines the lease term as the non‑cancellable term of the lease, together with any periods covered by an option to extend
the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain
not to be exercised.
The Group has several lease contracts that include renewal options. The Group applies judgement in evaluating whether it is reasonably
certain whether or not to exercise the option to renew the lease. That is, it considers all relevant factors that create an economic incentive
for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or
change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate.
The Group included the renewal periods as part of the lease term for the FPSO right‑of‑use asset as there will be a significant negative
effect on production if a replacement asset is not readily available.
92
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 3. Financial Risk Management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk); commodity
price risk; credit risk; and liquidity risk. The Group’s overall financial risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods
to measure the different types of financial risk to which it is exposed. These methods include sensitivity analysis in the case of foreign
exchange, interest rates and commodity prices.
The overall financial risk management strategy of the Group is governed by the Board of Directors through the Audit and Risk Committee
and is primarily focused on ensuring that the Group is able to finance its business plans, while minimising potential adverse effects on
financial performance. The Board of Directors provides written principles for overall financial risk management, as well as written policies
covering specific areas, such as mitigating foreign exchange, interest rate, commodity price and credit risks, use of derivative financial
instruments and investment of excess cash. Financial risk management is carried out by the Company’s finance function under policies
approved by the Board of Directors. The finance function identifies, evaluates and if necessary, hedges financial risks in close co‑operation
with the Chief Executive Officer and Managing Director. Risk management policies and systems are reviewed regularly to reflect changes
in market conditions and Group activities.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the
basis on which income and expenses are recognised in respect of each class of financial asset and financial liability are disclosed in Note 1.
The Group’s financial instruments consist of cash and cash equivalents, receivables, security deposits, trade and other payables, lease
liabilities and embedded derivatives.
The totals for each category of financial instruments in the consolidated statement of financial position are as follows:
Financial assets
Cash and cash equivalents
Receivables
Security deposits
Total financial assets
Financial liabilities
Trade and other payables (refer note (i) below)
Other financial liabilities (refer note (ii) below)
Lease liabilities
Total financial liabilities
Consolidated
2021
US$’000
133,209
34,162
1,615
168,986
79,066
71,161
312,840
463,067
Restated
2020
US$’000
296,420
9,380
5,073
310,873
21,167
–
1,516
22,683
Note
10
11
13
22
21
(i) Trade and other payables above exclude amounts relating to annual leave liabilities, which are not considered a financial instrument.
(ii) Other financial liabilities relate to the contingent consideration payable to Petrobras as part of the acquisition of Baúna (refer Note 22).
(a) Market Risk
(i) Foreign Exchange Risk
Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates. Foreign exchange risk arises when future commercial transactions and recognised financial assets and financial liabilities
are denominated in a currency that is not the Company’s functional currency.
The Group’s revenue, significant operating expenditure including the FPSO charter lease and a large component of capital obligations are
predominantly denominated in US$.
The Group’s remaining foreign exchange risk exposures relate to administrative and business development expenditures incurred at the
corporate level in A$; and operating and capital expenditures incurred by the Group in relation to operating the Baúna production asset
in Brazil in Brazilian REAL. These items are restated to US$ equivalents at each period end, and the associated gain or loss is taken to the
Statement of Profit and Loss and Other Comprehensive Income.
93
Karoon Energy LtdAnnual Report 2021 Note 3. Financial Risk Management continued
(a) Market Risk continued
(i) Foreign Exchange Risk continued
The Group manages foreign exchange risk at the corporate level by monitoring forecast cash flows in currencies other than US$ and
ensuring that adequate Brazilian REAL and A$ cash balances are maintained.
Foreign currencies are bought on the spot market in excess of immediate requirements. Where currencies are purchased in advance of
requirements, these balances do not usually exceed 3 months’ requirements. The appropriateness of A$ and Brazilian REAL holdings are
reviewed regularly against future commitments and current $A and Brazil REAL market expectations.
Periodically, sensitivity analysis is conducted to evaluate the potential impact of unfavourable exchange rates on the Group’s future financial
position. The results of this evaluation are used to determine the most appropriate risk mitigation tool to be used. The Group will hedge
when it is deemed the most appropriate risk mitigation tool to be used. Foreign currency hedging transactions were not entered into
during the financial year or previous financial year.
The Group is not exposed to material translation exposures at the end of the current financial year as the majority of its financial assets and
liabilities are denominated in US$ and as such, no foreign currency sensitivity analysis has been disclosed.
(ii)
Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of financial assets and financial liabilities will fluctuate because of changes
in market interest rates. Interest rate risk is managed on a Group basis at the corporate level.
As at 30 June 2021 and 30 June 2020, there was no interest rate hedging in place.
The Group’s interest rate risk arises from relevant financial assets, primarily cash and cash equivalents deposited at variable rates of interest
and security deposits related to Australia and Brazil. As the majority of cash and cash equivalents is in US$ dollars, the primary exposure
is to US$ interest rates. At year end, as a result of the Baúna acquisition during the financial year, the Group is also exposed to interest
on the deferred consideration payable to Petrobras of $41.4 million ($42.4 million including interest at year end) at 1 month LIBOR plus
a 3% margin.
An analysis of the Group’s exposure to interest rate risk for financial assets and financial liabilities at the end of the financial year is set
out below:
2021
Financial assets
Cash and cash equivalents
Receivables
Security deposits
Total financial assets
Financial liabilities
Trade and other payables
Other financial liabilities
Lease liabilities
Total financial liabilities
Fair Value
US$’000
133,209
34,162
1,615
168,986
79,066
71,161
312,840
463,067
Carrying
Amount
US$’000
133,209
34,162
1,615
168,986
79,066
71,161
312,840
463,067
Weighted
Average
Interest Rate
% p.a.
Floating
Interest
Rate
US$’000
Consolidated
Fixed
Interest
Rate
US$’000
Non‑interest
Bearing
US$’000
–
–
169
169
–
71,161
–
71,161
61,722
34,162
73
95,957
36,643
–
312,840
349,483
0.11
–
3.27
3.10
2.00
–
71,487
–
1,372
72,859
42,422
–
–
42,422
94
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued
Consolidated
Weighted
Average
Interest Rate
% p.a.
Floating
Interest Rate
US$’000
Fixed
Interest Rate
US$’000
Non‑interest
Bearing
US$’000
0.06
–
1.30
–
–
260,545
–
1,134
261,679
–
–
–
20,058
–
3,854
23,912
–
–
–
15,817
9,380
85
25,282
21,167
1,516
22,683
Fair Value
US$’000
296,420
9,380
5,073
310,873
Carrying
Amount
US$’000
296,420
9,380
5,073
310,873
21,167
1,516
22,683
21,167
1,516
22,683
Restated 2020
Financial assets
Cash and cash equivalents
Receivables
Security deposits
Total financial assets
Financial liabilities
Trade and other payables
Lease liabilities
Total financial liabilities
Interest Rate Sensitivity Analysis
The following table details the Group’s sensitivity to a 1% p.a. increase or decrease in interest rates, with all other variables held constant.
The sensitivity analysis is based on the balance of floating interest rate amounts held at the end of the financial year.
The sensitivity analysis is not fully representative of the inherent interest rate risk, as the financial year end exposure does not necessarily
reflect the exposure during the course of a financial year. These sensitivities should not be used to forecast the future effect of movements
in interest rates on future cash flows.
Change in profit (loss) before income tax
– Increase of interest rate by 1% p.a.
– Decrease of interest rate by 1% p.a.
Change in financial instruments
– Increase of interest rate by 1% p.a.
– Decrease of interest rate by 1% p.a.
Consolidated
2021
US$’000
304
(43)
304
(43)
Restated
2020
US$’000
2,617
(24)
2,617
(24)
(b) Commodity Price Risk
The Group is exposed to commodity price fluctuations associated with the production and sale of oil. Commodity price risk is managed on
a Group basis at the corporate level. The Group may enter into crude oil price swap and option contracts to manage its commodity price
risk. However, there are no oil price swap nor option contracts in place as at 30 June 2021.
Commodity Price Sensitivity Analysis
As part of the acquisition of Baúna, the Group has agreed to pay Petrobras contingent consideration of up to US$285 million plus interest
of 2% per annum accruing from 1 January 2019. The fair value of the contingent consideration has been accounted for as an embedded
derivative and was estimated calculating the present value of the future expected cash out flows. The estimates are based on the Group’s
internal assessment of future oil prices. A discount rate of 0.36% and 2% inflation factor has also been applied. Refer to Note 22 for
more details.
95
Karoon Energy LtdAnnual Report 2021
Note 3. Financial Risk Management continued
(b) Commodity Price Risk continued
Commodity Price Sensitivity Analysis continued
The following table details the Group’s sensitivity to a 10% increase or decrease in its internal assessment of future oil prices on the
contingent consideration payable to Petrobras.
Change in profit (loss) before income tax
– Increase of oil price by 10%
– Decrease of oil price by 10%
Change in financial liabilities
– Increase of oil price by 10%
– Decrease of oil price by 10%
Consolidated
2021
US$’000
2020
US$’000
(77,791)
54,696
77,791
(54,696)
–
–
–
–
(c) Credit Risk
The maximum exposure to credit risk at the end of the financial year is the carrying amount of the financial assets as disclosed in the
consolidated statement of financial position and notes to the consolidated financial statements.
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit
risk arises from cash and cash equivalents and security deposits held with banks, financial institutions and joint operators, as well as credit
exposures to customers, including outstanding receivables and refundable tax credits.
Credit risk is managed on a Group basis at the corporate level. To minimise credit risk, the Group has adopted a policy of only dealing
with recognised and creditworthy third parties. Receivable balances are monitored on an ongoing basis with the result being the Group’s
exposure to bad debts is minimised. The Group does not currently hold collateral, nor does it securitise its receivables.
The Group has policies in place to ensure that services are made to customers with an appropriate credit history.
Cash and cash equivalents and security deposit counterparties are limited to credit quality banks and financial institutions. For banks and
financial institutions in Australia, only independently rated counterparties with a minimum rating of Aa3/A2 are accepted. For banks
and financial institutions in Brazil and Peru, only independently rated counterparties with a minimum rating of Baa1 are accepted. For
banks and financial institutions in Brazil and Peru with independently rated counterparty ratings below Baa1, exposure cannot exceed
the short‑term country specific cash requirements unless they are associated banks of an International Bank with a higher credit rating.
Cash and cash equivalents are held offshore by the Group’s Brazilian subsidiary out of London with an International Bank with a rating of
Aa3. The Group’s credit exposure and external credit ratings of its counterparties are monitored on a periodic basis. Where commercially
practical, the Group seeks to limit the amount of credit exposure to any one bank or financial institution.
(i)
Impairment of Financial Assets
The Group has 2 types of financial assets that are subject to AASB 9’s ‘expected credit loss’ model: receivables and security deposits.
The Group has applied the AASB 9 general model approach to measuring expected credit losses for all receivables and security deposits.
While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the identified impairment loss was considered
not significant given the counterparties and/or the short maturity.
Expected Credit Loss
When required, the carrying amount of the relevant financial asset is reduced through the use of a loss allowance account and the amount
of any loss is recognised in the statement of profit or loss and other comprehensive income. When measuring expected credit losses,
balances are reviewed based on available external credit ratings, historical loss rates and the days past due.
96
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Security Deposits
The Group’s security deposits relating to Australia and Peru are considered to have low credit risk on the basis that there is a low risk
of default with the relevant bank counterparty. Management considers ‘low credit risk’ for security deposits with banks and financial
institutions to be an investment grade credit rating with at least 1 major rating agency.
The Group is exposed to credit risk in relation to a security deposit of $1,273k (30 June 2020: $1,130k) held with Itau Unibanco SA in
Brazil. The Group provided the ANP (the Brazilian oil and gas regulator) a letter of credit to carry out the minimum work program in relation
to exploration in Santos Basin Block S‑M‑1537. The letter of credit is fully funded by way of payment of a security deposit (refer Note
13(b)), which will be released once the work program is met. The credit rating of Itau Unibanco SA is Ba2 (30 June 2020: Ba3), which is a
non‑investment grade rating that carries substantial credit risk. The credit rating of Itau Unibanco SA in Brazil is monitored on a periodic
basis for credit deterioration. In addition, Management continually monitors Brazilian macro‑economic factors for any deterioration which
directly impacts the credit ratings of Brazilian financial institutions. As there has not been a significant increase in credit risk since initial
recognition of this security deposit, which is predominantly impacted by negative macro‑economic factors in Brazil, any impairment test
uses a 12‑month expected credit loss model measure.
As at 30 June 2021, there were $Nil (30 June 2020: $Nil) security deposits past due. The loss allowance recognised during the financial year
for security deposits was $Nil. Accordingly, interest income revenue has been calculated on the gross carrying amount during the financial
year (30 June 2020: $Nil).
Receivables
The Group’s receivables relating to Brazil and Australia are considered to have low credit risk on the basis that there is a low risk of default
and the debtor has a strong (robust) capacity to meet its obligations in the short‑term. Accordingly, for receivables any impairment test
uses a 12‑month expected credit loss model measure.
The Group is exposed to credit risk in relation to an interest receivable of $173k (30 June 2020: $164k) predominantly related to the
security deposit held with Itau Unibanco SA in Brazil. As there has not been a significant increase in credit risk since initial recognition of
the security deposit, which is predominantly impacted by negative macro‑economic factors in Brazil, any impairment test uses a 12‑month
expected credit loss model measure.
As at 30 June 2021, there were $Nil (30 June 2020: $Nil) receivables past due. The loss allowance for receivables recognised during the
financial year was considered to be $Nil (30 June 2020: $Nil).
(d) Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.
At the end of the financial year, the Group held cash and cash equivalents at call of $133,209k (30 June 2020: $296,420k) that are
expected to readily generate cash inflows for managing liquidity risk.
The Group manages liquidity risk by ensuring that there are sufficient funds available to meet financial obligations on a day‑to‑day basis
and to meet unexpected liquidity needs in the normal course of business. Emphasis is placed on ensuring there is sufficient funding in place
to meet the ongoing operational requirements of the Group’s production activities, exploration, evaluation and development expenditure,
and other corporate initiatives.
The following mechanisms are utilised to manage liquidity risk:
• preparing and maintaining rolling forecast cash flows in relation to operational, investing and financing activities;
• comparing the maturity profile of financial liabilities with the realisation profile of financial assets;
• managing credit risk related to financial assets;
• when necessary, utilising short‑term and long‑term loan facilities;
• investing surplus cash only in credit quality banks and financial institutions; and
• maintaining a reputable credit profile.
97
Karoon Energy LtdAnnual Report 2021 Note 3. Financial Risk Management continued
(d) Liquidity Risk continued
An analysis of the Group’s financial liabilities contractual maturities at the end of the financial year is set out in the tables below.
The amounts disclosed in the table are the contractual undiscounted cash flows comprising principal and interest repayments.
Consolidated
Less than 6
Months
US$’000
6‑12
Months
US$’000
1‑3
Years
US$’000
3‑5
Years
US$’000
Over 5
Years
US$’000
Total
US$’000
2021
Financial liabilities
Non‑derivative financial liabilities
Trade and other payables
Lease liabilities
Derivative financial liabilities
Contingent consideration – embedded
derivative
Total financial liabilities
2020
Financial liabilities
Non‑derivative financial liabilities
Trade and other payables
Lease liabilities
Total financial liabilities
32,382
32,596
42,422
29,513
4,262
110,269
–
109,518
–
94,563
79,066
376,459
–
64,978
–
71,935
37,263
151,794
28,414
137,932
7,052
101,615
72,729
528,254
20,984
101
21,085
–
101
101
183
677
860
–
636
636
–
–
–
21,167
1,515
22,682
(e) Fair Value Estimation
For disclosure purposes only, the fair values of financial assets and financial liabilities as at 30 June 2021 and 30 June 2020 are presented in
the table under Note 3(a)(ii) and can be compared to their carrying values as presented in the consolidated statement of financial position.
Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in
an arm’s length transaction. Fair values estimated for disclosure purposes are based on information that is subject to judgement, where
changes in assumptions may have a material impact on the amounts estimated.
The following summarises the significant methods and assumptions used in estimating fair values of financial assets and financial liabilities
for disclosure purposes:
Cash and Cash Equivalents
The carrying amount is fair value due to the liquid nature of these assets.
Receivables
The carrying amounts of current receivables are assumed to approximate their fair values due to their short‑term nature.
Security Deposits
The carrying amounts of security deposits are assumed to represent their fair values based on their likely realisability profile.
Trade and Other Payables
Due to the nature of these financial liabilities, their carrying amounts are a reasonable approximation of their fair values.
Lease Liabilities
Fair value is calculated based on the present value of the lease payments expected to be paid over the lease term, discounted using the
interest rate implicit in the lease or, if the rate cannot be readily determined, the Group’s estimated incremental borrowing rate.
Other Financial Liabilities – Embedded Derivative
The fair value of the contingent consideration was estimated calculating the present value of the future expected cash outflows.
The estimates are based on the Group’s internal assessment of future oil prices, which considers industry consensus and observable oil price
forecasts. A discount rate of 0.36% and 2% inflation factor has also been applied.
98
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
• Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 which are observable
for the asset or liability, either directly or indirectly; and
• Level 3: fair value measurements are those derived from valuation techniques which include inputs for the asset or liability that are not
based on observable market data.
All of the Group’s financial instruments were valued using the Level 2 valuation technique.
Note 4. Revenue and Other Income
(a) Revenue
Crude oil sales (refer (i) below)
Total revenue from contracts with customers
(i) Sales from Baúna, which was acquired on 6 November 2020.
(b) Other Income
Interest income
Net foreign currency gains
Services revenue from joint operations
Net gain on disposal of non‑current assets
Total other income
Note 5. Expenses
(a) Cost of sales
Operating costs
Royalties
Depreciation and amortisation – oil and gas assets
Change in inventories
Total cost of sales
(b) Business development and transition costs
Baúna transaction costs (refer (i) below)
Business development and other project costs
Total Business development and transition costs
Consolidated
2021
US$’000
170,809
170,809
286
–
–
19
305
38,393
18,972
64,962
(10,952)
111,375
15,748
1,816
17,564
Restated
2020
US$’000
–
–
2,309
5,389
365
15
8,078
–
–
–
–
–
13,550
924
14,474
(i) Represents costs incurred on transition, development initiatives and other project activities associated with Baúna prior to the acquisition. Expenditure
includes internal time allocation of employees and consultants and associated office charges, insurance, travel expenses, geotechnical data, success fee,
professional fees and external advice relating to due diligence and legal reviews. The current period costs also include standby costs for support vessels
and helicopters and FPSO charter costs prior to taking over operatorship of the asset.
99
Karoon Energy LtdAnnual Report 2021 Note 5. Expenses continued
(c) Exploration expenses
Exploration and evaluation expenditure expensed
Exploration and evaluation expenditure impaired
Total exploration and evaluation expenditure expensed or impaired
(d) Finance costs
Finance charges on right-of-use assets
Discount unwinding on net present value of provision for restoration
Bank and interest charges
Total finance costs
(e) Other Expenses
Corporate
Legal settlement (refer (i) below)
Depreciation and amortisation – non-oil and gas assets
Share-based payments expense
Loss on disposal of non-current assets
Write-down of inventory to net realisable value (refer (ii) below)
Other expenses
Total other expenses
Consolidated
2021
US$’000
3,326
90
3,416
12,501
942
1,798
15,241
10,421
9,600
744
4,906
9
577
1,449
27,706
Restated
2020
US$’000
52,445
81
52,526
95
–
2,085
2,180
9,360
–
704
2,266
53
12,717
570
25,670
(i) Relates to the Company’s wholly owned branch, KEI (Peru Z-38) Pty Ltd, Sucursal del Peru, without any admission of liability, entering into a deed of
settlement and release in respect of its dispute with Pitkin Petroleum Peru Z-38 SRL (Pitkin) relating to Block Z-38, offshore Peru. Under the deed of
settlement and release, Pitkin has agreed to full and final settlement of all claims of Pitkin and its associates in connection with Block Z-38.
(ii) Prior financial year relates to write-down of the carrying value of inventory holdings in Peru to net realisable value.
100
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 6. Income Tax
(a) Income Tax Recognised in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income
Tax Income (expense) comprises:
Current income tax
Current income tax under/(over)
Deferred income tax
Total income benefit
The prima facie tax on loss before income tax is reconciled to tax income as follows:
Consolidated
Note
2021
US$’000
(15,321)
(88)
47,666
32,257
Restated
2020
US$’000
(3,140)
38
3,736
634
Prima facie tax benefit on loss before income tax, calculated at the
Australian tax rate of 30%
8,362
26,032
(Add)/subtract the tax effect of:
Share‑based payments expense (non‑cash)
Non‑deductible legal settlement
Other non‑deductible items
Tax losses and temporary tax differences not recognised
Adjustment for current tax of previous financial years
Difference in overseas tax rates
Recognition of temporary differences and tax losses not previously brought to account
Foreign exchange differences
Non‑assessable income
Total income tax benefit
(b) Amounts Recognised Directly in Equity
Aggregate current and deferred tax arising during the financial year and not
recognised in net profit or loss, but directly debited or credited in equity:
Deferred tax – credited directly in contributed equity
(910)
(2,880)
(3,582)
(961)
(88)
(665)
20,701
11,952
328
32,257
(709)
–
(2,571)
(23,649)
38
739
–
–
754
634
23(b)
143
415
101
Karoon Energy LtdAnnual Report 2021 Note 6. Income Tax continued
Consolidated
Recognition
of temporary
differences
and tax losses
not previously
brought to
account
US$’000
Restated
Balance as at
1 July 2020
US$’000
Charged
(Credited) to
Profit or Loss
US$’000
Charged
(Credited)
Directly to
Equity
US$’000
Net foreign
currency
difference on
translation
of financial
statements to
presentation
currency
US$’000
Balance as at
30 June 2021
US$’000
(c) Deferred Tax Balances
Temporary differences
Provisions and accruals
Equity raising transaction costs
Unrealised foreign currency (gains)/losses
Translation adjustment
Fair value movement of financial liabilities
Farm‑out expenditures
Right‑of‑use assets
Lease liabilities
Other
Total temporary differences
Unused tax losses
Tax losses
Total unused tax losses
Net deferred tax assets/ (liabilities)
Presented in the consolidated statement
of financial position as follows:
Deferred tax assets
Deferred tax liabilities
250
–
–
–
–
–
(191)
206
–
265
20,434
20,434
20,699
7,631
21
20,960
(1,387)
2,255
–
(104,738)
106,237
2
30,981
(4,014)
(4,014)
26,967
–
(143)
–
–
–
–
–
–
–
(143)
–
–
(143)
39
31
(1,133)
–
–
9
(21)
25
–
(1,050)
–
–
(1,050)
397
340
(12,570)
–
–
88
(222)
242
1
(11,724)
4
4
(11,720)
–
(11,720)
(d) Unrecognised Deferred Tax Assets
A deferred tax asset has not been recognised in the consolidated statement of financial
position as the benefits of which will only be realised if the conditions for deductibility
set out in Note 1(f) occur:
Unrecognised temporary tax differences relating to deferred tax assets at a tax rate of 34%
Tax losses: Brazilian operating losses at a tax rate of 34%
Tax losses: Peruvian operating losses at a tax rate of 32%
Potential tax income
(e) Unrecognised Taxable Temporary Differences
Temporary tax differences relating to deferred tax liabilities
Offset by deferred tax assets relating to operating losses
Total deferred tax liabilities (unrecognised)
Consolidated
2021
US$’000
16,982
–
6,168
23,150
–
–
–
102
8,317
249
7,257
(1,387)
2,255
97
(105,172)
106,710
3
18,329
16,424
16,424
34,753
36,528
(1,775)
Restated
2020
US$’000
49,667
27,733
5,331
82,731
(193)
193
–
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued PRRT
PRRT applies to all the Group’s Australian petroleum projects in offshore areas under the Petroleum Resource Rent Tax Assessment Act
1987, other than some specific production licences. PRRT is assessed on a project basis or production licence area and will be levied on the
taxable profits of a relevant petroleum project at a rate of 40%. Certain specified undeducted expenditures are eligible for compounding.
The expenditures can be compounded annually at set rates and the compounded amount can be deducted against assessable receipts in
future financial years.
The Group estimates that it has incurred compounded carried forward undeducted PRRT expenditure in excess of accounting carrying
values as at 30 June 2021 of $29,143k (2020: $25,353k). The resulting deferred tax asset calculated at an effective tax rate of 28%, that
has not been recognised in the consolidated statement of financial position, was $8,160k, (2020: $7,098k).
In order for the Group to utilise undeducted expenditures for PRRT purposes from previous financial years, it will be required to substantiate
eligible expenditure in relation to respective Australian offshore permits since the date of their granting to the Group. Any amount that the
Group is not able to substantiate will not be able to be utilised against assessable receipts in future financial years. Interests in undeducted
PRRT expenditure may be transferred, subject to satisfying certain conditions, between projects within the Group or to other third parties
on acquisitions of interests in the Group’s Australian offshore permits.
Note 7. Remuneration of External Auditors
Remuneration received or due and receivable by the external auditor of the Company for:
(a) PricewaterhouseCoopers Australia
(i) Audit and other assurance services
Audit and review of financial statements
Other assurance services
Total remuneration for audit and other assurance services
(ii) Other services
Due diligence services
Taxation services
All other services
Total remuneration of PricewaterhouseCoopers Australia
(b) Related Practices of PricewaterhouseCoopers Australia
(i) Audit and other assurance services
Audit and review of financial statements
Total remuneration for audit and other assurance services of related
practices of PricewaterhouseCoopers Australia
Total remuneration of external auditors
Note 8. Dividends
There were no ordinary dividends declared or paid during the financial year by the Group (2020: $Nil).
Consolidated
2021
US$’000
Restated
2020
US$’000
195
–
195
–
–
30
225
118
118
343
127
54
181
25
10
2
218
98
98
316
Balance of franking account available for subsequent reporting periods
12,927
9,035
The above amount is calculated from the balance of the Company’s franking account as at the end of the financial year. Franking credits
are based on the Australian tax rate of 30%.
103
Karoon Energy LtdAnnual Report 2021 Note 9. Earnings Per Share
Profit (loss) for the financial year used to calculate basic and diluted earnings per ordinary share:
(a) Basic profit (loss) per ordinary share
(b) Diluted profit (loss) per ordinary share*
* Diluted loss per ordinary share equates to basic loss per ordinary share in the current and previous
financial year because a loss per ordinary share is not considered dilutive for the purposes of
calculating earnings per share pursuant to AASB 133 ‘Earnings per Share’.
Consolidated
2021
US$’000
4,384
0.0079
0.0077
Restated
2020
US$’000
(86,138)
(0.1936)
(0.1936)
Weighted average number of ordinary shares on issue during the financial year used in
calculating basic earnings per ordinary share:
553,552,881
444,985,726
Weighted average number of potential ordinary shares:
13,525,080
8,777,337
Weighted average number of ordinary shares and potential ordinary shares used in calculating
diluted earnings per ordinary share (excluding anti‑dilutive share options outstanding):
567,077,961
453,763,063
Weighted average number of anti‑dilutive share options:
4,750,911
7,618,174
Potential ordinary shares
Share options and performance rights over unissued ordinary shares of the Company outstanding at the end of the financial year are
considered to be potential ordinary shares and have been included in the determination of diluted earnings per ordinary share to the extent
to which they are dilutive. The potential ordinary shares have not been included in the determination of basic earnings per ordinary share.
Note 10. Cash and Cash Equivalents
Cash at bank and on hand (refer note (a) below)
Short‑term bank deposits (refer note (b) below)
Total cash and cash equivalents
Consolidated
2021
US$’000
133,209
–
133,209
Restated
2020
US$’000
275,168
21,252
296,420
(a) Cash and Cash Equivalents of Joint Operations
Cash and cash equivalents include share of joint operation cash and short‑term bank deposit balances. Refer to Note 26 for further details.
(b) Short‑term Bank Deposits
Short‑term bank deposits are made for varying periods, depending on the immediate cash requirements of the Group, and earn interest
at the respective short‑term bank deposit rates.
Note 11. Receivables
Trade debtors – crude oil sales
Other receivables
Total current receivables
(a) Financial Risk Management
Information concerning the Group’s exposure to financial risks on receivables is set out in Note 3.
Consolidated
2021
US$’000
33,831
331
34,162
Restated
2020
US$’000
–
9,380
9,380
104
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 12. Inventories
Current
Petroleum inventories
Total current inventories
Non‑current
Casing and other drilling inventory
Total non‑current inventories
Note 13. Security Deposits
Current
Karoon Peru Pty Ltd, Sucursal del Peru (refer note (a)(i) below)
Karoon Energy Ltd (refer note (a)(ii) below)
Karoon Petróleo & Gas Ltda, KEI (Peru Z38) Pty Ltd, Sucursal del Peru (refer note (d) below)
Total current security deposits
Non‑current
Karoon Petróleo & Gas Ltda (refer note (b) below)
Karoon Energy Ltd (refer note (c) below)
KEI (Peru Z38) Pty Ltd, Sucursal del Peru (refer note (d) below)
Total non‑current security deposits
Consolidated
2021
US$’000
10,952
10,952
6,536
6,536
62
–
147
209
1,237
169
–
1,406
Restated
2020
US$’000
–
–
7,213
7,213
62
3,700
13
3,775
1,130
158
10
1,298
(a) Performance Guarantee
(i) Performance guarantee (via a letter of credit) provided to Perupetro SA (the Peruvian oil and gas regulator) for Area 73 by the Group.
The performance guarantee was returned and released during July 2021 having met all work commitments and submission of relevant
reports to Perupetro SA.
(ii) The performance guarantee (via a letter of credit) provided to Perupetro SA in the previous financial year for Block Z‑38 was returned
during the financial year.
(b) Guarantee Bond
The Group has provided the ANP a letter of credit (refer Note 27) to carry out the minimum work program in relation to exploration in
Santos Basin Block S‑M‑1537. The letter of credit is fully funded by way of payment of a security deposit, which will be released once the
work program is met.
(c) Bank Guarantees
Cash deposits are held as security against bank guarantee facilities for bank guarantees (refer Note 27) given to lessors for the Group’s
compliance with its obligations in respect of lease rental agreements for office premises.
(d) Bonds
Cash deposits are held as bonds predominately for the Group’s compliance with its obligations in respect of agreements for the guarantee
(refer Note 27) of payment obligations for various accommodation in Brazil and Peru.
(e) Financial Risk Management
Information concerning the Group’s exposure to financial risks on security deposits is set out in Note 3.
105
Karoon Energy LtdAnnual Report 2021 Note 14. Other Assets
Current
Prepayments
Sundry assets
Total current other assets
Non‑current
Deposit paid for production asset
Total non‑current other assets
Note 15. Property, Plant and Equipment
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
Reconciliation
The reconciliation of the carrying amount for plant and equipment is set out below:
Balance at beginning of financial year
Additions
Disposals
Depreciation expense
Net foreign currency differences
Carrying amount at end of financial year
Right‑of‑use assets – property and other leases
At cost
Accumulated depreciation
Total Right‑of‑use assets – property and other leases
Reconciliation
The reconciliation of the carrying amount for plant and other leases is set out below:
Balance at beginning of financial period
Additions
Disposals
Depreciation expense
Net foreign currency differences
Carrying amount at end of financial year
Total property, plant and equipment
Note
25(c)
25(c)
Consolidated
2021
US$’000
2,890
2,427
5,317
Restated
2020
US$’000
1,645
–
1,645
–
–
34,061
34,061
8,722
(1,549)
7,173
2,809
(1,394)
1,415
1,415
6,039
(14)
(276)
9
7,173
1,681
(594)
1,087
1,391
43
(45)
(362)
60
1,087
8,260
556
1,222
(78)
(222)
(63)
1,415
1,725
(334)
1,391
–
2,257
(572)
(327)
33
1,391
2,806
106
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 16. Intangible Assets
Computer software
At cost
Accumulated amortisation
Total intangibles
Reconciliation
The reconciliation of the carrying amounts for computer software is set out below:
Balance at beginning of financial year
Additions
Disposal
Amortisation expense
Net foreign currency differences
Carrying amount at end of financial year
Note 17. Exploration and Evaluation Expenditure
Carried Forward
The reconciliation of exploration and evaluation expenditure carried forward is
set out below:
Balance at beginning of financial year
Additions
Transfer to development assets (refer note (a) below)
Exploration and evaluation expenditure expensed (refer note (b) below)
Exploration and evaluation expenditure impaired (refer note (c) below)
Net foreign currency differences
Total exploration and evaluation expenditure carried forward
Note
25(c)
25(c)
25(c)
5(c)
Consolidated
2021
US$’000
1,187
(1,085)
102
211
34
(39)
(106)
2
102
41,204
1,932
(1,553)
–
(90)
(640)
40,853
Restated
2020
US$’000
1,604
(1,393)
211
376
81
–
(159)
(87)
211
59,957
1,173
–
(2,619)
(81)
(17,226)
41,204
(a) Exploration and evaluation expenditure relating to the Patola discovery, which has been transferred to development assets following declaring of a FID
during the current financial year.
(b) Exploration and evaluation expenditure expensed relates drilling costs incurred on the Marina 1 exploration well, which was drilled as an unsuccessful
well during the prior financial year.
(c) As part of the review of the Group’s non‑current assets as at 30 June 2021, exploration and evaluation expenditure carried forward has been impaired
for continuing appraisal expenditure incurred on the Group’s Goiá light oil discovery in Block S‑M‑1101.
The expenditure is carried forward on the basis that exploration and evaluation activities in the areas of interest have not reached a
stage that permits reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant
operations in, or in relation, to the areas is continuing. The future recoverability of the carrying amount of capitalised exploration and
evaluation expenditure is dependent on successful development and commercial exploitation or, alternatively, the sale of the respective
areas of interest.
107
Karoon Energy LtdAnnual Report 2021 Note 18. Oil and Gas Assets
Production asset
At cost
Accumulated depreciation
Total production asset
Reconciliation
The reconciliation of the carrying amount for production asset is set out below:
Balance at beginning of financial period
Acquisition (refer note (a) below)
Additions
Impact of increase in discount rate on provision for restoration at year‑end
Depreciation
Carrying amount at end of financial year
Development asset
At cost
Accumulated depreciation
Total development asset
Reconciliation
The reconciliation of the carrying amount for right of use assets is set out below:
Balance at beginning of financial period
Additions
Capitalised borrowing costs (refer note (b) below)
Transfer from exploration and evaluation
Carrying amount at end of financial year
Right‑of‑use assets – FPSO Vessel
At cost
Accumulated depreciation
Total right of use assets – FPSO Vessel
Reconciliation
The reconciliation of the carrying amount for right of use assets is set out below:
Balance at beginning of financial period
Acquisition (refer note (a) below)
Additions
Depreciation expense
Carrying amount at end of financial year
Total oil and gas assets
Note
25(c)
25(c)
20(b)
25(c)
25(c)
25(c)
25(c)
25(c)
Consolidated
2021
US$’000
448,492
(36,827)
411,665
–
458,973
1,141
(11,622)
(36,827)
411,665
19,020
–
19,020
–
16,254
1,213
1,553
19,020
333,872
(28,135)
305,737
–
329,815
4,057
(28,135)
305,737
736,422
Restated
2020
US$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(a) On 6 November 2020, Karoon Petróleo & Gás Ltda, a wholly owned subsidiary of Karoon, successfully completed the acquisition of a 100% operating
interest in Baúna from Petrobras for a firm consideration of $380 million plus a tiered contingent consideration payable of up to $285 million (plus
interest at 2% per annum). The purchase was accounted for as an asset acquisition, with the purchase consideration allocated against identifiable assets
and liabilities acquired, based on their relative fair values determined on the acquisition date.
Pursuant to the SPA $150 million (in addition to $50 million deposit already paid on the signing of the SPA in the prior financial year) was paid at
completion of the transaction with a deferred consideration of $41.5 million (plus interest at 1 month LIBOR plus a 3% margin) payable 18 months
following completion during May 2022. The deferred consideration represented the firm consideration of $380 million less the $200 million in cash
payments and the operating and investing cash flows (attributable to the assets to be transferred to Karoon under the SPA) in the period from the
transaction effective date of 1 January 2019 up to the closing date of 6 November 2020. The deferred consideration liability, including interest accrued
from 6 November to 30 June 2021, is included in current trade and other payables as at 30 June 2021 (refer Note 19).
The fair value of the contingent consideration was estimated calculating the present value of the future expected cash out flows as at 6 November 2020
and was included as part of the cost of the acquisition (refer Note 22 for further details).
(b) The capitalised borrowing costs relate to legal and external advisor fees incurred in connection with negotiating a Syndicated Facility Agreement for an
Underwritten Secured Term Loan Facility (refer Note 28(c)) and the expected funding to be used for Patola development, which represents a qualifying
asset. An apportionment of a ticking fee charged at 0.85% per annum of the available facility has also been capitalised.
108
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued
Note 19. Trade and Other Payables
Current (unsecured)
Trade payables
Petrobras deferred consideration
Sundry payables and accruals
Cash‑settled share‑based payments
Total current trade and other payables
Non‑current (unsecured)
Sundry payables and accruals
Cash‑settled share‑based payments
Total non‑current trade and other payables
Note
18(a)
Consolidated
2021
US$’000
30,286
42,422
2,933
533
76,174
2,761
1,500
4,261
(a) Financial Risk Management
Information concerning the Group’s exposure to financial risks on trade and other payables is set out in Note 3.
Note 20. Provisions
Current
Provision for long service leave (refer note (a) below)
Total current provision
Non‑current
Provision for long service leave (refer note (a) below)
Provision for restoration (refer note (b) below)
Total non‑current provisions
Consolidated
2021
US$’000
457
457
82
158,703
158,785
Restated
2020
US$’000
18,698
–
3,165
36
21,899
–
183
183
Restated
2020
US$’000
409
409
83
–
83
(a) Provision for Long Service Leave
A provision was recognised for employee entitlements relating to long service leave. The measurement and recognition criteria relating to
long service leave entitlements are as described in Note 1(t).
The current portion of this provision includes all the unconditional entitlements to long service leave where employees have completed the
required period of service and also those where employees are entitled to pro‑rata payments in certain circumstances.
(b) Reconciliation of provision for restoration
Balance at beginning of financial period
Additions (refer note (i) below)
Discount unwinding on provision for restoration
Impact of increase in discount rate at year‑end
Total provision for restoration
–
169,384
942
(11,623)
158,703
–
–
–
–
–
(i) A provision was recognised for a Brazilian restoration obligation relating to the producing oil and gas asset acquired during the period (refer Note 18).
The measurement and recognition criteria relating to restoration obligations are as described in Note 1(t).
109
Karoon Energy LtdAnnual Report 2021 Note 21. Leases
Current
Non‑current
Total lease liabilities
Reconciliation
Balance at beginning of financial year
Acquisitions (refer note (i) below)
Additions
Disposals
Adjustment to fixed lease payments
Accretion of interest
Payments
Net foreign currency differences
Total lease liabilities
Consolidated
2021
US$’000
45,393
267,447
312,840
1,516
329,815
4,109
(45)
(1,107)
12,501
(34,090)
141
312,840
Restated
2020
US$’000
203
1,313
1,516
741
–
1,031
–
–
95
(351)
–
1,516
(i) A right‑of‑use asset was recognised as part of the oil and gas assets acquired during the period in relation to an FPSO Charter agreement (refer Note 18).
Note 22. Other financial liabilities
Non‑Current
Embedded derivative – contingent consideration payable (refer note (a) below)
Total non‑current other financial liabilities
(a) reconciliation of contingent consideration payable
Balance at beginning of financial year
Additions
Unrealised fair value changes recognised in profit or loss during the period
Total contingent consideration payable at fair value
Consolidated
2021
US$’000
71,161
71,161
–
64,529
6,632
71,161
Restated
2020
US$’000
–
–
–
–
–
–
–
As part of the acquisition of Baúna (refer Note 18), Karoon’s wholly owned subsidiary, Karoon Petróleo & Gás Ltda., has agreed to pay
Petrobras contingent consideration of up to $285 million (plus interest of 2% per annum). The fair value of the contingent consideration
was estimated calculating the present value of the future expected cash out flows. The estimates are based on Group’s internal assessment
of future oil prices, which considers industry consensus and observable oil price forecasts. A discount rate of 0.36% and 2% inflation
factor has also been applied.
The contingent consideration accrues interest at 2% per annum from 1 January 2019 with any amounts payable by 31 January after the
completion of the relevant testing period. The relevant testing periods are each calendar year from (and including) 2022 to (and including)
2026 and are based on the achievement of annual average Platts Dated Brent oil prices thresholds commencing at ≥US$50 and ending at
≥US$70 a barrel.
After the testing of each year, any amount deemed not payable is cancelled and not carried forward. The amount payable each calendar
year excluding interest depending on achievement of certain oil prices is disclosed below:
Average Brent Price (in US$ units)
B < 50
50 <= B < 55
55 <= B < 60
60 <= B < 65
65 <= B < 70
B >= 70
CY2022
–
3
17
34
53
78
CY2024
–
3
17
34
53
78
CY2025
–
2
8
15
24
36
CY2026
–
2
4
6
10
15
Total
–
13
63
123
193
285
CY2023
–
3
17
34
53
78
110
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 23. Contributed Equity and Reserves Within Equity
(a) Contributed Equity
Ordinary shares, fully paid
Total contributed equity
Consolidated
Consolidated
2021
Number
553,770,529
553,770,529
2020
Number
552,984,693
552,984,693
2021
US$’000
905,138
905,138
Restated
2020
US$’000
905,281
905,281
Ordinary shares have no par value, and the Company does not have a limited amount of authorised capital.
Voting rights of shareholders are governed by the Company’s Constitution. In summary, on a show of hands every holder of ordinary shares
present at a meeting in person or by proxy is entitled to one vote, and upon a poll each such attending shareholder is entitled to one vote
for every fully paid ordinary share held.
Ordinary shares participate in dividends as declared from time to time and the proceeds on winding up of the Company in proportion to
the number of fully paid ordinary shares held.
(b) Movement in Ordinary Shares
Date
1 July 2019
30 June 2020
30 June 2021
Details
Opening balance in previous financial year
Deferred tax credit recognised directly in equity
Performance rights conversion
Balance at end of financial year
Deferred tax credit recognised directly in equity
Performance rights conversion
Balance at end of financial year
Note
30(c)
30(c)
Number of
Ordinary Shares
246,216,477
–
1,261,747
552,984,693
–
785,836
553,770,529
US$’000
716,502
415
–
905,281
(143)
–
905,138
(c) Capital Management
The Board of Directors controls the capital of the Company in order to ensure that the Group can fund its operations and continue as a
going concern. The aim is to maintain a capital structure that ensures the lowest cost of capital to the Company.
The Chief Executive Officer and Managing Director manages the Company’s capital by monitoring future rolling cash flows and adjusting its
capital structure, as required, in consultation with the Board of Directors to meet Group business objectives. As required, the Group will balance
its overall capital structure through the issue of new ordinary shares, share buy‑backs and utilising short‑term and long‑term loan facilities
when necessary.
There were no externally imposed capital management restrictions on the Group during the financial year.
(d) Reserves Within Equity
(i) Share‑based Payments Reserve
The share‑based payments reserve is used to recognise the grant date fair value of equity‑settled share‑based payments to Executive
Directors, other key management personnel and employees as part of their remuneration, as described in Note 1(s).
(ii) Foreign Currency Translation Reserve
The foreign currency translation reserve is used to recognise exchange differences arising from the translation of financial statements
into the presentation currency as described in Note 1(e). The relevant amounts included in the foreign currency translation reserve will be
recognised in the consolidated statement of profit or loss and other comprehensive income when each relevant investment in the entity
is disposed.
111
Karoon Energy LtdAnnual Report 2021 Note 24. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in Note 1(b):
Name
Parent Company:
Karoon Energy Ltd
Country of
Incorporation or
Registration
Percentage of Equity and Voting
Interests Held by the Group
Business Activities
Carried on in
2021
%
2020
%
Australia
Australia
Unlisted subsidiaries of Karoon Energy Ltd:
Karoon Energy International Pty Ltd
Karoon Gas Browse Basin Pty Ltd
Karoon Gas (FPSO) Pty Ltd
Unlisted subsidiaries of Karoon Energy
International Pty Ltd:
KEI (Brazil Santos) Pty Ltd
Karoon Peru Pty Ltd
KEI (Peru Z38) Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Unlisted subsidiary of KEI (Brazil Santos) Pty Ltd:
Karoon Petróleo & Gas Ltda
Brazil
Branch of KEI Peru Pty Ltd:
Karoon Peru Pty Ltd, Sucursal del Peru
Branch of KEI (Peru Z38) Pty Ltd:
KEI (Peru Z38) Pty Ltd, Sucursal del Peru
Peru
Peru
Australia
Australia
Australia
Australia
Australia
Australia
Brazil
Peru
Peru
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Note 25. Segment Information
(a) Description of Segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Chief Executive Officer and
Managing Director (identified as the ‘chief operating decision maker’) in assessing performance and in determining the allocation of resources.
The operating segments are based on the Group’s geographical location of its operations.
The Group has identified operating segments based on the following three geographic locations:
• Australia – in which the Group is currently involved in the exploration and evaluation of hydrocarbons in an offshore exploration permit
area: WA‑482‑P.
• Brazil – in which the Group is currently involved in the exploration, development and production of hydrocarbons in four offshore blocks:
Block BM‑S‑40, Block S‑M‑1037, Block S‑M‑1101, and Block S‑M‑1537; and
• Peru – in which the Group is currently involved in the exploration and evaluation of hydrocarbons in offshore exploration Block Z‑38
and Area 73.
All other segments include amounts not specifically attributable to an operating segment.
The accounting policies of the reportable operating segments are the same as the Group’s accounting policies.
Segment revenues and results do not include transfers between segments as intercompany balances are eliminated on consolidation.
Employee benefits expense and other expenses, that are associated with exploration and evaluation activities and specifically relate to an
area of interest, are allocated to the area of interest and are either expensed or capitalised using the successful efforts method of accounting.
Employee benefits expense and other expenses, that are directly attributable to the production of goods are allocated to operating costs
as part of cost of sales.
112
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued The amounts provided to the chief operating decision maker with respect to total assets and total liabilities are measured in a
manner consistent with that of the consolidated financial statements. Reportable segment assets and segment liabilities are equal to
consolidated total assets and total liabilities respectively. These assets and liabilities are allocated in accordance with the operations of
the segment.
(b) Operating Segments
Segment Performance
Result for financial year ended 30 June 2021
Revenue
Other income
Total segment revenue
Expenses
Business development and transition costs
Cost of sales
Depreciation and amortisation expense
– non‑oil and gas assets
Exploration expenses
Finance costs
Inventory write‑down
Net foreign currency losses
Change in fair value of contingent consideration
Legal settlement
Share‑based payments expense
Other
Profit/ (loss) before income tax
Income tax benefit
Profit/ (loss) for financial year
Segment Performance
Restated result for financial year ended
30 June 2020
Revenue
Other income
Total segment revenue
Expenses
Business development and transition costs
Cost of sales
Depreciation and amortisation expense
– non‑oil and gas assets
Exploration expenses
Finance costs
Inventory write‑down
Net foreign currency losses
Share‑based payments expense
Other
(Loss) before income tax
Income tax benefit
(Loss) for financial year
Australia
US$’000
–
93
93
(81)
–
(287)
254
(102)
–
(16,839)
–
–
(2,873)
(7,483)
(27,318)
7,816
(19,502)
Brazil
US$’000
170,809
206
171,015
(17,386)
(111,375)
(271)
(2,580)
(15,131)
(577)
154
(6,632)
–
(2,033)
(3,065)
12,119
24,442
36,560
Peru
US$’000
All Other
Segments
US$’000
Consolidated
US$’000
–
6
6
(97)
–
(186)
(1,090)
(8)
–
(368)
–
(9,600)
–
(1,331)
(12,674)
–
(12,674)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
170,809
305
171,114
(17,564)
(111,375)
(744)
(3,416)
(15,241)
(577)
(17,053)
(6,632)
(9,600)
(4,906)
(11,879)
(27,873)
32,257
4,384
Australia
US$’000
Brazil
US$’000
Peru
US$’000
All Other
Segments
US$’000
Consolidated
US$’000
–
336
336
(14,474)
–
(362)
(788)
(2,109)
–
–
(559)
(2,258)
(20,214)
–
(20,214)
–
(12)
(12)
–
–
(169)
(51,006)
(22)
(12,717)
–
–
(1,172)
(65,098)
–
(65,098)
–
–
–
–
–
–
(103)
–
–
–
–
–
(103)
26
(77)
–
8,078
8,078
(14,474)
–
(704)
(52,526)
(2,180)
(12,717)
–
(2,266)
(9,983)
(86,772)
634
(86,138)
–
7,754
7,754
–
–
(173)
(629)
(49)
–
–
(1,707)
(6,553)
(1,357)
608
(749)
113
Karoon Energy LtdAnnual Report 2021 Note 25. Segment Information continued
(b) Operating Segments continued
Segment Performance
Total Segment Assets
As at 30 June 2021
As at 30 June 2020 (restated)
Australia
US$’000
64,560
282,594
Brazil
US$’000
947,806
89,414
Peru
US$’000
1,590
26,005
Total Segment liabilities
As at 30 June 2021
As at 30 June 2020 (restated)
(c) Other Segment Information
Additions to non‑current assets, other than financial assets (refer Note 3), during the reporting periods were:
617,632
5,045
9,807
15,734
6,267
17,752
All Other
Segments
US$’000
Consolidated
US$’000
1,013,956
398,013
633,706
38,531
–
–
–
–
Financial year ended 30 June 2021
Property, plant and equipment^
Oil and gas assets^
Intangible assets
Exploration and evaluation expenditure
carried forward
Restated financial year ended
30 June 2020
Property, plant and equipment^
Intangible assets
Exploration and evaluation expenditure
carried forward
^
Includes right‑of‑use assets.
Australia
US$’000
Brazil
US$’000
Peru
US$’000
All Other
Segments
US$’000
Consolidated
US$’000
43
–
34
–
1,189
9
–
6,039
813,006
–
379
2,078
71
1,173
–
–
–
–
212
1
–
–
–
–
–
–
–
–
6,082
813,006
34
379
3,479
81
1,173
114
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 26. Joint Operations
The Group has an equity interest in the following joint operations as at 30 June 2021 as follows:
Petroleum
Tenement
WA‑482‑P
Block Z‑38
Business Activities
Carried on in
Northern Carnarvon
Basin, Australia
Tumbes Basin, Peru
Unincorporated
Equity Interest (%)
2021
50
2020
50
Principal Activities
Exploration and evaluation Santos WA Energy Limited
Operator of Joint Operation
75
40
Exploration and evaluation KEI (Peru Z38) Pty Ltd, Sucursal del Peru
The following amounts represented the Group’s share of assets, liabilities, revenues and expenses employed in joint operations.
The amounts are included in the consolidated financial statements, in accordance with the accounting policy described in Note 1(v), under
the following classifications:
Cash and cash equivalents
Receivables (current)
Inventory
Trade and other payables (current)
Share of net assets employed in joint operations
Interest income from unrelated entities
Other income
Other expenses
Exploration and evaluation expenditure expensed or impaired
Write‑down of inventory to net realisable value
There are no contingent liabilities in respect of joint operations as at year end.
Consolidated
2021
US$’000
303
–
135
(233)
205
–
–
(1)
(1,133)
–
Restated
2020
US$’000
13,806
4,782
135
(15,710)
3,013
1
365
(360)
(51,515)
(2,508)
During the period the Parent Company guarantee provided to Tullow guaranteeing KEI (Peru Z38) Pty Ltd, Sucursal del Peru’s performance
under the joint operating agreement covering Block Z‑38 was effectively released following Tullow’s withdrawal from the licence agreement.
115
Karoon Energy LtdAnnual Report 2021 Note 27. Contingent Liabilities and Contingent Assets
(a) Contingent Liabilities
The Group has contingent liabilities as at 30 June 2021 that may become payable in respect of:
Consolidated
2021
US$’000
Restated
2020
US$’000
A Parent Company guarantee totalling BRL117.7 million provided to the ANP in respect
of existing decommissioning obligations relating to the Baúna field.
20,866
(i)
(ii)
(iii
(iv)
(v)
Performance guarantee (via a letter of credit) provided to Perupetro SA for Area 73 by
the Group (refer Note 13). The performance guarantee was returned and released during
July 2021 having met all work commitments and submission of relevant reports to
Perupetro SA.
Performance guarantee (via a letter of credit) provided to Perupetro SA for Block Z‑38 by
the Group for its share of third period work commitments was released during the year
with the commitments being met.
The Group has provided the ANP a letter of credit (refer Note 13) to carry out the minimum
work program in relation to exploration in Santos Basin Block S‑M‑1537. The Directors are
of the opinion that the work program commitments will be satisfied. The letter of credit
is fully funded by way of payment of a security deposit, which will be released once the
work program is met.
Bank guarantees were provided in respect of rental agreements for office premises of the
Group. These guarantees may give rise to liabilities in the Group if obligations are not met
under these guarantees. The bank guarantees given to lessors are fully funded by way of
payment of security deposits (refer Note 13).
(vi) Cash deposits (refer Note 13) are held as bonds for the Group’s compliance with its
obligations in respect of agreements for the guarantee of payment obligations for various
accommodation in Brazil and Peru.
–
62
3,700
62
–
1,237
1,130
304
–
158
23
(vii) Block Acquisition
As part of the acquisition of Pacific Exploration and Production Corp’s equity interest of Santos Basin Blocks S‑M‑1037, S‑M‑1101,
S‑M‑1102, S‑M‑1165 and S‑M‑1166 during the 2017 financial year, the Group agreed to pay Pacific Exploration and Production Corp. a
deferred contingent consideration of $5.0 million payable upon first production reaching a minimum of 1 million barrels of oil equivalent
from the Blocks. The deferred contingent obligation has not been provided for as at 30 June 2021, as it is dependent upon uncertain
future events.
(viii) Brazilian Local Content
The Concession Contracts for Santos Basin Blocks S‑M‑1037, S‑M‑1101, S‑M‑1102, S‑M‑1165, S‑M‑1537 and S‑M‑1166 require Karoon
Petróleo & Gas Ltda to acquire a minimum proportion of goods and services from Brazilian suppliers, with the objective to stimulate industrial
development, promote and diversify the Brazilian economy, encourage advanced technology and develop local capabilities. The minimum
Brazilian local content requirement under the Concession Contracts during the exploration and appraisal phase is up to 55%. If Karoon
Petróleo & Gas Ltda fails to comply with this minimum requirement, Karoon Petróleo & Gas Ltda may be subject to a fine by the ANP.
It is not practical to estimate a potential shortfall in meeting the local content requirement as at 30 June 2021, nor the financial effect of
any potential fine by the ANP.
(ix) Joint Operations
In accordance with normal industry practice, the Group has entered into joint operations with other parties for the purpose of exploring
and evaluating its exploration tenements. If a participant to a joint operation defaults and does not contribute its share of joint operation
obligations, then the remaining joint operation participants are jointly and severally liable to meet the obligations of the defaulting
participant. In this event, the equity interest in the exploration tenements held by the defaulting participant may be redistributed to the
remaining joint operation participants.
In the event of a default, a contingent liability exists in respect of expenditure commitments due to be met by the Group in respect of the
defaulting joint operation participant.
(x) Other Matters
There are also legal claims and exposures, which arise from the Group’s ordinary course of business. No material loss to the Group is
expected to result.
116
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued (b) Contingent Assets
The Group has no contingent assets as at 30 June 2021 (30 June 2020: $Nil).
Note 28. Commitments
(a) Capital and Service Expenditure Commitments
Contracts for capital and service expenditure in relation to assets not provided for in
the consolidated financial statements and payable. Note the service commitments as
at 30 June 2021 include the provision of services related to the charter of the FPSO
acquired as part of the Baúna acquisition.
Capital commitments for Baúna workovers and Patola Development
Not later than one year
Later than one year but not later than five years
Total capital commitments
Service commitments
Not later than one year
Later than one year but not later than five years
Total service commitments
Total capital and service expenditure commitments
(b) Exploration Expenditure Commitments
The Group has guaranteed commitments for exploration expenditure arising from obligations
to governments to perform minimum exploration and evaluation work and expend minimum
amounts of money pursuant to the award of exploration tenements WA‑482‑P and Block
S‑M‑1537 (30 June 2020: WA‑482‑P, Block S‑M‑1537 and Block Z‑38) not provided for in the
consolidated financial statements and payable.
Consolidated
2021
US$’000
Restated
2020
US$’000
79,269
26,691
105,960
11,990
42,504
54,494
160,454
–
–
–
286
–
286
286
Not later than one year
Later than one year but not later than five years
Later than five years
Total guaranteed exploration expenditure commitments
102
3,500
–
3,602
178
417
1,125
1,720
In addition to the guaranteed exploration expenditure commitments shown above, the Group
has non‑guaranteed government work commitments in relation to these exploration tenements
due later than one year but not later than five years of $15,224k (30 June 2020: $80,048k). These
commitments will become firm commitments if the Group elects to retain the tenements by
proceeding into the unguaranteed work periods.
Exploration expenditure commitments, including farm‑in, obligations in respect of joint
operations are set‑out below:
Not later than one year
Later than one year but not later than five years
Total joint operation guaranteed exploration expenditure commitments
102
–
102
178
80,464
80,642
117
Karoon Energy LtdAnnual Report 2021 Note 28. Commitments continued
(b) Exploration Expenditure Commitments continued
Note, the figures above do not include any commitments in relation to Exploration Blocks S‑M‑1037 and S‑M‑1101 relating to the
Neon and Goiá light oil discoveries. In accordance with Brazilian regulatory requirements, during January 2019 Karoon submitted a Final
Discovery Evaluation Report and Declaration of Commerciality for the discoveries. This transitioned the Blocks for Brazilian regulatory
requirements only, from the exploration phase to the development phase, akin to receiving a Retention Licence over the oil discoveries.
However, it does not mean that Karoon has reached, nor is compelled to reach, a FID to proceed into a development of the discoveries.
Prior to a FID being reached, Karoon anticipates drilling a ‘control well’ to assist with delineating the southern region of the field, confirming
reservoir quality and assisting with the planning and design of both development wells and infrastructure. Karoon is evaluating options to
drill the control well on the Neon discovery during the planned Baúna intervention campaign and Patola development which is dependent
on ongoing evaluation work. As at 30 June 2021, Karoon had not entered into a firm commitment to drill the control well.
Estimates for future exploration expenditure commitments to government are based on estimated well and seismic costs, which will
change as actual drilling locations and seismic surveys are completed and are calculated in current dollars on an undiscounted basis. The
exploration and evaluation obligations may vary significantly as a result of renegotiations with relevant parties. The commitments may
also be reduced by the Group entering into farm‑out agreements, which are typical of the normal operating activities of the Group, or by
relinquishing exploration tenements.
Where exploration and evaluation expenditure included in this category relates to an existing contract for expenditure and/or signed
Authorities for Expenditure, the amount will be included in both categories (a) and (b) above.
(c) Syndicated Facility Agreement for an Underwritten Secured Term Loan Facility for Baúna
On 1 June 2021 Karoon Energy Ltd’s wholly owned subsidiary Karoon Petróleo e Gás Ltda signed a secured term loan facility
(the ‘syndicated facility’) of up to $160 million, including an option to potentially establish an additional $50 million accordion facility.
The syndicated facility will be used as part of the funding of the Patola field development, intervention campaign in relation the Baúna
and Piracaba fields or deferred consideration payable to Petrobras under the SPA.
The syndicated facility agreement has been fully underwritten by Deutsche Bank AG, Sydney Branch, ING Belguim SA/NV, Macquarie Bank
Limited and Shell Western Supply and Trading Limited. The syndicated facility is priced at a 4.25% margin over LIBOR over the term of
the loan until the final maturity date (being the earlier of 31 March 2025 or the quarter where the remaining reserves are forecast to be
≤ 25% of the initial approved reserves). A ticking fee of 0.85% per annum is payable on the $160 million available commitment from
1 June 2021 until closing date or the facility is otherwise cancelled. At Closing Date an up‑front fee of $3.5 million is also payable. Closing
Date is the date on which the first drawdown is made. Except for the ticking fee, no fees are payable unless the closing date occurs. As at
30 June 2021 the first drawdown remained subject to the satisfaction of a number of conditions precedent.
118
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued Note 29. Reconciliation to the Consolidated Statement of Cash Flows
(a) Reconciliation of Loss for Financial Year to Net Cash Flows Used in Operating Activities
Consolidated
Profit (loss) for financial year
Add (subtract)
Non‑cash items included in loss for financial year:
Depreciation and amortisation
Change in fair value of contingent consideration
Discount unwinding on provision for restoration and deferred consideration
Share‑based payments expense
Gain on disposal of right‑of‑use asset
Net foreign currency losses (gains)
Items classified as investing/ financing activities:
Net (gain) loss on disposal of non‑current assets
Exploration and evaluation expenditure impaired or written‑off
Net foreign currency gains (losses)
Write‑down of inventory to net realisable value
Change in operating assets and liabilities:
(Increase) decrease in assets
Receivables – current
Oil Inventories
Deferred tax assets
Other assets
Increase (decrease) in liabilities
Trade and other payables – current
Trade and other payables – non‑current
Provisions – current
Provisions – non‑current
Current tax liabilities
Deferred tax liabilities
Net cash flows provided by (used in) operating activities
2021
US$’000
4,384
65,706
6,632
1,797
3,034
(1)
17,092
(10)
90
(151)
577
(24,783)
(10,952)
(36,528)
(3,673)
7,003
4,078
48
(1)
5,532
(10,088)
29,786
Restated
2020
US$’000
(86,138)
704
–
–
2,362
(38)
(6,433)
75
2,700
(900)
12,717
(8,061)
–
–
(793)
18,592
(200)
4
–
2,721
(4,428)
(67,116)
Non‑cash financing activities disclosed in other notes is the acquisition of right‑of‑use assets (refer to Note 15 and 18).
119
Karoon Energy LtdAnnual Report 2021 Note 30. Share‑based Payments
The share‑based payment plans are described below. There has been no cancellation to a plan during the financial year.
(a) Employee Share Option Plan (‘ESOP’)
The Company currently only has the 2016 ESOP in place. ESOP options expire up to 4 years after they are granted. The exercise price of
ESOP options is based on the volume weighted average price at which the Company’s ordinary shares are traded on the ASX during the
20 days of trading before the ESOP options were offered plus a premium to the market price.
Each ESOP option provides eligible employees with the right to acquire one fully paid ordinary share of the Company at the exercise price
determined upon grant, or its equivalent value, subject to the achievement of the relevant performance conditions.
Share options granted under the ESOP carry no dividend or voting rights.
If there is a change of control of the Company, for all unexercised ESOP options, a percentage amount of unvested ESOP options may vest
on the basis of the pro‑rata achievement of pre‑determined performance conditions.
During the financial year, the Group did not grant any ESOP options (2020: $Nil) over unissued ordinary shares in the Company to
Executive Directors.
The following summary reconciles the outstanding ESOP options over unissued ordinary shares in the Company at the beginning and end
of the financial year:
Balance at beginning of financial year
Granted during financial year
Exercised during financial year
Cancelled during financial year
Expired during financial year
Forfeited during financial year
Balance at end of financial year
Exercisable at end of financial year
Consolidated
2021
2020
Weighted
Average Exercise
Price A$
$1.54
–
–
–
–
$1.73
$1.40
–
Number
7,230,019
–
–
–
–
(3,163,896)
4,066,123
–
Weighted
Average Exercise
Price A$
$1.61
–
–
–
–
$1.79
$1.54
–
Number
9,995,521
–
–
–
–
(2,765,502)
7,230,019
–
ESOP options outstanding as at 30 June 2021 had an exercise price of A$1.40 (30 June 2020: range of exercise prices from A$1.40 to
A$1.77) with a weighted average remaining contractual life of 365 days (30 June 2020: 573 days).
Details of ESOP options outstanding at the end of the financial year are:
Grant Date
21 September 2018
31 December 2018
Total ESOP options
Date of Expiry
30 June 2022
30 June 2022
Exercise Price
Per ESOP Option
$1.40
$1.40
Number
2,996,437
1,069,686
4,066,123
(b) Fair Value of Share Options
The fair value of each share option issued during previous financial years was estimated on grant date using the Black‑Scholes option
pricing model. The Black‑Scholes option pricing model takes into account the exercise price, the term of the share option, 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 share option. The last grant of share options was during the year ended 30 June 2019.
120
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued (c) Performance Rights Plan (‘PRP’)
The Company currently has two PRPs in place, the 2016 PRP and 2019 PRP. The 2019 PRP was approved by shareholders at the 2019
Annual General Meeting.
Under the PRP, eligible employees are given performance rights to be issued and allotted fully paid ordinary shares in the Company, or
equivalent cash value, for no consideration provided certain conditions have been met. Vesting of performance rights is conditional on
the achievement of performance measures, over a one‑year performance period, and provided the employee remains employed by the
Company for an additional year. In each case, the People, Culture and Governance Committee will be responsible for assessing whether the
performance measures have been achieved. When vested, each performance right is convertible into one ordinary share of the Company.
Performance rights granted carry no dividend or voting rights.
If there is a change of control of the Company, for all unexercised performance rights issued pursuant to the Company’s PRP, a percentage
amount of unvested performance rights may vest on the basis of the pro‑rata achievement of pre‑determined performance conditions.
During the financial year, the Group granted 502,989 performance rights (2020: 1,332,646) over unissued ordinary shares in the Company
to Executive Directors. The performance rights were provided to the Chief Executive Officer and Managing Director but remain subject to
approval by shareholders at the 2021 Annual General Meeting. Performance rights issued to Directors are approved on a case‑by‑case basis
by shareholders at relevant general meetings.
The following summary reconciles the outstanding performance rights over unissued ordinary shares in the Company at the beginning and
end of the financial year:
Balance at beginning of financial year
Granted during financial year
Vested and converted during financial year
Cancelled during financial year
Cash‑settled during financial year
Forfeited during financial year
Balance at end of financial year
Consolidated
2021
Number
10,935,950
8,847,523
(785,836)
–
(96,741)
(4,039,410)
14,861,486
2020
Number
7,762,137
7,630,152
(1,261,747)
–
(297,317)
(2,897,275)
10,935,950
Performance rights issued during the financial year were issued under the 2019 PRP.
The weighted average fair value of performance rights granted during the financial year was A$0.69 (2020: A$1.08). Fair values of STI
performance rights were based on the Company’s closing share price at grant date whereas LTI performance rights were based on a Monte
Carlo simulation valuation at grant date. Refer to details at Note 30(d) below.
Performance rights outstanding as at 30 June 2021 had a weighted average remaining contractual life of 789 days (30 June 2020: 784 days).
Details of performance rights outstanding at the end of the financial year are:
Grant Date
21 September 2018
31 December 2018
12 November 2019
12 November 2019
18 October 2019
18 October 2019
29 November 2019
29 November 2019
25 September 2020
25 September 2020
30 June 2021^
Total performance rights
Date of Expiry
30 June 2022
30 June 2022
30 June 2022
30 June 2023
30 June 2022
30 June 2023
30 June 2022
30 June 2023
30 June 2023
30 June 2024
30 June 2024
Number
785,178
280,298
143,980
685,621
1,034,946
2,367,643
49,974
666,323
4,172,267
4,172,267
502,989
14,861,486
^
The performance rights were provided to the Chief Executive Officer and Managing Director during the financial year but remain subject to approval by
shareholders at the 2021 Annual General meeting.
121
Karoon Energy LtdAnnual Report 2021 Note 30. Share‑based Payments continued
(d) Fair Value of Performance Rights
The fair value of each LTI performance right issued during the financial year was estimated on grant date using the Monte Carlo valuation
methodology. The Monte Carlo valuation methodology takes into account the exercise price, the term of the performance right, 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 performance right. The fair value of STI performance rights issued during the financial year was based on the Company’s
closing share price at grant date. The fair value of all performance rights issued prior to the current financial year were based on the
Company’s closing share price at grant date.
The Group applied the following assumptions and inputs in estimating the weighted average fair value for LTI performance rights:
Weighted average exercise price
Weighted average life of performance rights
Weighted average share price
Expected share price volatility
Risk free interest rate
Weighted average performance rights value
2021
$A Nil
1,383 days
A$0.80
60.00%
0.17%
A$0.65
2020
–
–
–
–
–
–
Historical volatility was the basis for determining expected share price volatility as it is assumed that this is indicative of future trends, which
may not eventuate.
(e) Share‑based Payments Expense
Total expenses arising from share‑based payment transactions recognised during the financial year, included as part of other expenses in
the consolidated statement of profit or loss and other comprehensive income, were as follows:
Share options issued under ESOP
Performance rights issued under PRP
Share‑based payments expense (non‑cash)
Share‑based payments expense (cash‑settled)
Total share‑based payments expense
Consolidated
2021
US$’000
190
2,844
3,034
1,872
4,906
Restated
2020
US$’000
388
1,946
2,334
(68)
2,266
Note 31. Related Party Transactions
Transactions between related parties are on normal commercial terms and conditions, no more favourable than those available to other
parties, unless otherwise stated.
(a) Subsidiaries
Interests in subsidiaries are set out in Note 24.
During the financial year, the Parent provided accounting, administrative and technical services to subsidiaries at cost or at cost plus a
mark‑up where required under relevant tax transfer pricing legislation. This allocation was based on costs recharged on a relevant time
allocation of employees and consultants and associated office charges.
Other transactions that occurred were provision of funding by the Parent Company to its overseas subsidiaries via an increase in contributed
equity and intercompany loans to the Australian subsidiaries. The intercompany loans provided are at a Nil% interest rate (2020: Nil%) and
no fixed term for repayment and therefore will not be repaid within 12 months. Loans are unsecured and are repayable in cash.
Where equity‑settled share options and performance rights are issued to employees of subsidiaries within the Group, the transaction is
recognised as an investment in the subsidiary by the Parent Company and in the subsidiary, a share‑based payments expense and an equity
contribution by the Parent Company.
The above transactions are eliminated on consolidation.
122
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued (b) Remuneration of Key Management Personnel
Directors and other key management personnel remuneration is summarised as follows:
Short‑term employee benefits
Post‑employment benefits
Long‑term employee benefits (non‑cash)
Termination benefits
Share‑based payments expense
Total key management personnel remuneration
Consolidated
2021
US$’000
2,390
175
18
470
2,764
5,817
Restated
2020
US$’000
2,193
137
16
–
643
2,989
Detailed remuneration disclosures for the Directors and other key management personnel are provided in Sections 5 of the audited
Remuneration Report on pages 65 to 74.
In addition to the above, the Group is committed to pay other key management personnel up to $897k (2020: $1,657k, which also included
the former Managing director) in the event their role is fundamentally reduced upon a change in control of the Group. Termination of the
Executive Director’s and other key management personnel’s employment is subject to a minimum notice period as disclosed in Section 5
of the audited Remuneration Report.
Apart from the details disclosed in this note, no Director or other key management personnel has entered into a material contract with
the Group since the end of the previous financial year and there were no material contracts involving Directors’ or other key management
personnel interests subsisting as at 30 June 2021.
(c) Other Related Party Transactions Within the Group
During the financial year, Mr José Coutinho Barbosa, a Non‑Executive Director, had an interest in Net Pay Óleo & Gás Consultoria Ltda
that provided business and geology consulting services to the Group. The value of these transactions from 1 July 2020 to the date of his
retirement of 27 November 2020 was $103,927 (2020: $254,562). Given Karoon’s size relative to other operators in Brazil, the consulting
services provided by Net Pay Óleo & Gás Consultoria Ltda were required for Karoon to operate effectively within the Brazilian oil industry.
The Consultancy Agreement under which such services were provided was terminated with effect on and from 28 February 2021.
During the financial year, Ms Flavia Barbosa, the daughter of a Non‑Executive Director (who retired on 27 November 2020), was employed
by the Group as the in‑house Legal Counsel in Brazil. The total value of her remuneration (including share‑based payments expense) from
1 July 2020 to 27 November 2020 was $112,724 (2020: $151,048). Ms Barbosa has been an employee of the Company since 2011 and
has a comprehensive understanding of the Brazilian legal and regulatory framework.
During the financial year, Ms Marina Sayão, the wife of Mr Tim Hosking (a KMP until 31 March 2021), received a payment relating to
2019 STIs during the financial year of $8,110 (2020: $122,531). The prior financial year included remuneration Ms Sayão received as the
Sustainability and Communications Manager, South America until the position was made redundant during the 2020 financial year and
she ceased as an employee.
(d) Related Party Payables
As part of his ‘At Risk’ remuneration Mr Scott Hosking was issued cash‑settled share‑based payments for which a liability is recognised
based on fair value earned by the end of the reporting period. The balance outstanding included in current trade and other payables is
$250,397 (2020: $35,661) and in non‑current trade and other payables $435,781 (2020: $154,730). The previous year also included
amounts for Mr Tim Hosking and Ms Flavia Barbosa.
123
Karoon Energy LtdAnnual Report 2021 Note 32. Parent Company Financial Information
(a) Summary Financial Information
The individual financial statements for the Parent Company show the following aggregate amounts:
Statement of financial position
Current assets
Non‑current assets
Total assets
Current liabilities
Non‑current liabilities
Total liabilities
Net assets
Contributed equity
Accumulated losses
Share‑based payments reserve
Foreign currency translation reserve
Total equity
Loss for financial year
Total comprehensive loss for financial year
(b) Contingent Liabilities of Parent Company
(i)
Bank guarantees were provided in respect of operating lease rental agreements.
These guarantees may give rise to liabilities in the Parent Company if obligations are not
met under these guarantees. The bank guarantees given to lessors are fully funded by way
of payment of security deposits (refer Note 13).
(ii) During the period, the Performance Guarantee (via a letter of credit) as at 30 June 2020,
provided to Perupetro SA for Block Z‑38 for Karoon’s share of third period work
commitments, was released with the respective commitments being satisfied.
(iii) The Company’s present intention is to provide the necessary financial support for all
Australian incorporated subsidiaries, whilst they remain wholly owned subsidiaries, as is
necessary for each company to pay all debts as and when they become due.
Company
2021
US$’000
63,387
253,939
317,326
3,234
3,111
6,345
310,981
905,138
(574,852)
50,190
(69,495)
310,981
Restated
2020
US$’000
281,225
32,361
313,586
3,997
12,743
16,740
296,846
905,281
(557,870)
47,156
(97,721)
296,846
(16,982)
(123,051)
11,244
(128,452)
169
158
–
3,700
(c) Guarantees Entered into by Parent Company
A Parent Company guarantee was provided to Petrobras for payment of all amounts that may become payable under the SPA (Note 27(a)).
A Parent Company guarantee totalling Brazilian REALS 117.7 million (US$20.9 million equivalent as at 30 June 2021) was provided to the
ANP in respect of existing decommissioning obligations relating to the Baúna field. In addition, the Parent has provided deeds of guarantee
to, respectively, OOG‑TKP FPSO GMBH & CO KG (the FPSO operator) and OOG‑TKP Produção de Petróleo Ltda (the FPSO service provider)
in relation to satisfying Karoon Petróleo & Gás Ltda’s payment obligations in respect of the charter of an FPSO for Baúna and the provision
of related services.
124
Karoon Energy LtdAnnual Report 2021Notes to the Consolidated Financial Statements Continued During the year a Parent Company guarantee provided to Perupetro SA guaranteeing KEI (Peru Z 38) Pty Ltd, Sucursal del Peru obligations
under a licence agreement covering Tumbes Basin Block Z‑38 in Peru was released with the respective commitments being satisfied. In
addition, a Parent Company guarantee with respect Block Z‑38 provided to Tullow guaranteeing KEI (Peru Z 38) Pty Ltd, Sucursal del Peru’s
performance under the joint operating agreement was effectively released during the year with the assignment of Tullow’s interest in the
joint operating agreement to KEI (Peru Z 38) Pty Ltd, Sucursal del Peru.
Parent Company guarantees have been provided to the ANP guaranteeing a subsidiary’s obligations under Concession Agreements
covering Santos Basin Blocks S‑M‑1037, S‑M‑1101, S‑M‑1102 and S‑M‑1537 in Brazil.
Note 33. Subsequent Events
This Annual Report was authorised for issue by the Board of Directors on 20 September 2021. The Board of Directors has the power to
amend and reissue the consolidated financial statements and notes.
Since 30 June 2021, the following material event has occurred. As announced on 16 September 2021, and as reflected in the consolidated
financial statements, Karoon’s wholly owned branch, KEI (Peru Z‑38) Pty Ltd, Sucursal del Peru, has entered into a deed of settlement and
release in respect of its dispute with Pitkin Petroleum Peru Z‑38 SRL in respect of Block Z‑38, offshore Peru. Under the deed of settlement
and release, without any admission of liability, Karoon has agreed to pay US$9.6 million to Pitkin in full and final settlement of all claims
of Pitkin and its associates in connection with Block Z‑38.
125
Karoon Energy LtdAnnual Report 2021 Directors’ Declaration
The Directors’ declare that:
(a) in the Directors’ opinion, the consolidated financial statements and notes, set out on pages 77 to 125, are in accordance with the
Corporations Act 2001, including:
(i)
complying with relevant Australian Accounting Standards and the Corporations Regulations 2001; and
(ii) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year ended
on that date; and
(b) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
Note 1(a) confirms that the consolidated financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Managing Director, and Chief Financial Officer required
by Section 295A of the Corporations Act 2001.
This Directors’ Declaration is made in accordance with a resolution of the Directors.
On behalf of the Directors:
Mr Bruce Phillips
Independent Non‑Executive Chairman
Dr Julian Fowles
Chief Executive Officer and Managing Director
20 September 2021
126
Karoon Energy LtdAnnual Report 2021 Independent Auditor’s Report
Independent auditor’s report
To the members of Karoon Energy Ltd
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Karoon Energy Ltd (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2021
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & 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 also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
127
Karoon Energy LtdAnnual Report 2021
Independent Auditor’s Report Continued
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
● For the purpose of our audit we used overall Group materiality of US$10.1 million, which represents
approximately 1% of the Group’s total assets.
● We applied this threshold, together with qualitative considerations, to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on
the financial report as a whole.
● We chose the Group’s total assets as it is an appropriate benchmark that reflects the Group’s interests in oil
and gas assets.
● We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
● The Group has three operating segments in Australia, Brazil and Peru. In establishing the overall approach
to the Group audit, we determined the type of work that needed to be performed by us, as the Group
engagement team, and by component auditors under our instruction.
128
Karoon Energy LtdAnnual Report 2021
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit 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. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
Accounting for the acquisition of the Bauna
production asset
(Refer to note 18)
The Group acquired the Bauna production asset
during the year for total consideration consisting of
firm consideration of US$380 million plus a tiered
contingent consideration payable of up to US$285
million (plus interest at 2% per annum) as described
in note 18 of the financial report.
The accounting for the acquisition was a key audit
matter because it was a significant transaction for the
year given the financial and operational impacts on
the Group. The Group made complex determinations
when accounting for the acquisition, including
whether the acquisition met the criteria for an asset
acquisition or should be accounted for under the
requirements of Australian Accounting Standard
AASB 3 Business Combinations and in calculating the
contingent consideration. The Group also recognised
a number of new material balances and adopted new
accounting policies for items it had not previously had
to account for.
Assessing the carrying value of the
production asset
(Refer to note 18)
As at 30 June 2021 the Group’s consolidated
statement of financial position includes a production
asset of US$411.7 million.
How our audit addressed the key audit
matter
To assess the accounting for the acquisition of the
Bauna production asset, we performed the following
procedures, amongst others:
● Evaluated the Group’s accounting against the
requirements of Australian Accounting
Standards, key transaction agreements, our
understanding of the asset acquired and its
industry, and other selected transaction related
documentation.
● Evaluated the Group’s assessment that the
purchase of the Bauna production asset met the
criteria for an asset acquisition.
● Assessed the appropriateness of methods,
assumptions and inputs to the calculation of the
fair value of the contingent consideration.
● Assessed the recognition and measurement of
material assets and liabilities related to the
purchase in light of the requirements Australian
Accounting Standards. This included the
provision for restoration, right-of-use assets,
lease liabilities and deferred tax assets and
liabilities.
● Evaluated the new accounting policies adopted
as a result of the acquisition in light of the
requirements of Australian Accounting
Standards.
To assess the carrying value of the production asset
we performed the following procedures, amongst
others:
● Evaluated the Group’s assessment of whether
there were any indicators of production asset
impairment, including consideration of
movement in oil prices, reserves and resources
and asset performance over the period.
129
Karoon Energy LtdAnnual Report 2021
Independent Auditor’s Report Continued
Group policy is to assess for indicators of impairment
annually or more frequently if indicators of
impairment exist.
Assessing the carrying value of the production asset
was a key audit matter because of the judgement
involved in the Group assessing impairment
indicators and the financial significance of the
production asset.
● Compared the value of the net assets of the
Group at year end to the market capitalisation.
Assessing the impact of the change in
presentation currency
To assess the impact of the change in presentation we
performed the following procedures, amongst others:
(Refer to note 1)
As outlined within Note 1, during the financial year
the Group changed its presentation currency from
Australian Dollars (AUD) to United States Dollars
(USD). This change in accounting policy requires
retrospective restatement, therefore comparative
information is restated to show the impacts of this
change.
The change in presentation currency was a key audit
matter given the adoption adjustments are pervasive
to the financial report.
● Compared underlying financial information
converted for the current and previous years
to the trial balance and audited financial
statements.
● Compared rates used to convert financial
information to external sources and assessed
that the basis of rates used were consistent
with the guidance of Australian Accounting
Standard AASB 121 The Effects of Changes
in Foreign Exchange Rates.
● Tested the mathematical accuracy of the
translation calculations.
● Assessed the impact of the retrospective
application of the successful efforts method
to the calculation of retained earnings and
the foreign currency translation reserve.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2021, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
130
Karoon Energy LtdAnnual Report 2021
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
131
Karoon Energy LtdAnnual Report 2021
Independent Auditor’s Report Continued
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 51 to 74 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the remuneration report of Karoon Energy Ltd for the year ended 30 June 2021
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Anthony Hodge
Partner
Melbourne
20 September 2021
132
Karoon Energy LtdAnnual Report 2021
Additional Securities Exchange Information
Additional information required by the ASX Listing Rules and not disclosed elsewhere in the Annual Report is set out below. The information
was applicable for the Company as at 13 September 2021.
Distribution of Shareholding
The number of shareholders ranked by size of holding is set out below:
Size of Holding
Less than 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
More than 100,000
Total
Number of
Holders
2,618
3,386
1,599
2,451
308
10,362
Number of
Ordinary Shares
on Issue
1,237,003
9,566,223
12,444,999
77,284,986
453,902,814
554,436,025
There were 1,183 shareholders holding less than a marketable parcel of ordinary shares to the value of A$500.
Substantial Shareholders
The number of ordinary shares held by substantial shareholders and their associates (who held 5% or more of total fully paid ordinary
shares on issue), as disclosed in substantial holder notices given to the Company, is set out below:
Shareholder
Yarra Management Nominees Pty Ltd and related entities
L1 Capital Pty Ltd
Total
Twenty Largest Shareholders
The names of the twenty largest shareholders of the Company’s ordinary shares are listed below:
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
CS Third Nominees Pty Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
Ropat Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Shareholder
1
2
3
4
5
6
7
8
9
10 Mr Kenneth Rudy Kamon
11 BNP Paribas Nominees Pty Ltd
12 HSBC Custody Nominees (Australia) Limited ‑ A/C 2
13 Mr Kenneth Joseph Hall
14 One Managed Invt Funds Ltd
15 Mr Leendert Hoeksema + Mrs Aaltje Hoeksema
16 National Nominees Limited
17 Greenhill Road Investments Pty Ltd
18 HSBC Custody Nominees (Australia) Limited
19 UBS Nominees Pty Ltd
20 Mr Steven Mark Sinclair
Total
133
Fully Paid Ordinary Shares
Number Held
48,002,822
31,221,457
79,224,279
% of Issued
Ordinary Shares
8.66
5.63
14.29
Fully Paid Ordinary Shares
Number Held
109,974,764
72,353,098
56,052,904
48,028,015
23,125,731
15,389,627
11,290,775
7,492,637
7,344,028
4,300,000
2,849,756
2,441,052
2,050,000
1,786,596
1,720,000
1,551,121
1,536,224
1,444,006
1,357,042
1,288,583
373,375,959
% of Issued
Ordinary Shares
19.84
13.05
10.11
8.66
4.17
2.78
2.04
1.35
1.32
0.78
0.51
0.44
0.37
0.32
0.31
0.28
0.28
0.26
0.24
0.23
67.34
Karoon Energy LtdAnnual Report 2021 Additional Securities Exchange Information Continued
Unlisted Equity Securities: Share Options and Performance Rights
The following share options and performance rights over unissued ordinary shares of the Company are not quoted:
Share options issued pursuant to Company’s Employee Share Option Plan
Performance rights issued pursuant to Company’s Performance Rights Plans
Total
Number of
Unlisted Share
Options and
Performance
Rights on Issue
4,066,123
12,385,073
16,451,196
Number of
Holders
25
35
60
Voting Rights
(a) Ordinary Shares, Fully Paid
Voting rights of shareholders are governed by the Company’s Constitution. In summary, on a show of hands every holder of ordinary shares
present at a meeting in person or by proxy is entitled to one vote, and upon a poll each such attending shareholder is entitled to one vote
for every fully paid ordinary share held.
(b) Unlisted Share Options and Performance Rights
No voting rights.
Other Information
The Company was incorporated as a public company on 11 November 2003.
On 30 November 2018 the Company changed its name from Karoon Gas Australia Ltd to Karoon Energy Ltd.
The Company was admitted to the ASX official list during June 2004 and quotation of its ordinary shares commenced on 8 June 2004.
The register of securities is held at Computershare Investor Services Pty Limited, GPO Box 2975 Melbourne VIC 3001 Australia. Investor
enquiries can be made via telephone on 1300 850 505 (within Australia).
Schedule of Interests in Petroleum Tenements
Exploration Permit/Block
EPP46
WA‑482‑P
Concession BM‑S‑40
Block S‑M‑1037
Block S‑M‑1101
Block S‑M‑1537
Block Z‑38
Basin
Ceduna Sub‑basin, Australia
Northern Carnarvon, Australia
Santos, Brazil
Santos, Brazil
Santos, Brazil
Santos, Brazil
Tumbes, Peru
Operator
Karoon
Santos
Karoon
Karoon
Karoon
Karoon
Karoon
% Equity Interest
Held
100#
50^
100
100
100
100
75
# A formal request to withdraw from the permit was submitted to the regulatory authorities during the year. The Joint Authority has issued a notice of
intention to cancel EPP46.
^
Liberty Petroleum Corporation is entitled to certain milestone cash bonuses and an overriding royalty in the event of production. Phoenix Oil and Gas
Limited is entitled to an overriding royalty in the event of production.
134
Karoon Energy LtdAnnual Report 2021 Glossary of Terms
Term
2D seismic
3D seismic
A$ or AUD
AASB
ANP
API
Definition
Two‑dimensional seismic.
Three‑dimensional seismic.
Australian Dollars.
Australian Accounting Standards Board.
Agência Nacional do Petróleo, Gás Natural e Biocombustíveis.
American Petroleum Institute’s inverted scale for denoting the ‘lightness’ or ‘heaviness’ of crude oils
and other liquid hydrocarbons.
appraisal well
A well drilled to confirm the size or quality of a hydrocarbon discovery.
ASX
ATO
AVO
ASX Limited (ACN 008 624 691), trading as Australian Securities Exchange.
Australian Taxation Office.
Amplitude versus offset.
barrel or bbl
Barrel of oil, inclusive of condensate. A quantity of 42 United States gallons; equivalent to approximately
159 litres.
basin
Baúna
block
bopd
Company or Parent
Company
contingent resources
A natural depression on the earth’s surface in which sediments, eroded from higher surrounding ground
levels, accumulated and were preserved.
Concession BM‑S‑40 containing the producing Baúna light oil field and the undeveloped Patola oil
discovery, Brazil.
A licence or concession area. It may be almost any size or shape, although usually part of a grid pattern.
Barrels of oil per day.
Karoon Energy Ltd.
Those quantities of hydrocarbons estimated, as of a given date, to be potentially recoverable from known
accumulations by application of development projects, but which are not currently considered to be
commercially recoverable (as evaluation of the accumulation is insufficient to clearly assess commerciality).
1C‑ Denotes low estimate scenario of contingent resources.
2C‑ Denotes best estimate scenario of contingent resources.
3C‑ Denotes high estimate scenario of contingent resources.
CO2e
Director
Carbon dioxide equivalent.
A Director of the Karoon Energy Ltd.
discovery well
The first successful well on a new prospect.
economically
recoverable reserves
The estimated quantity of hydrocarbons in an area of interest that can be expected to be profitably extracted,
processed and sold under current and foreseeable economic conditions.
EIA
E&P
ESG
ESOP
Environmental Impact Assessment. A report on the study of the effect of proposed works on the local people
and environment.
Exploration and production.
Environmental, social and governance.
Karoon Gas Australia 2016 Employee Share Option Plan.
135
Karoon Energy LtdAnnual Report 2021 Glossary of Terms Continued
Term
ESP
exploration
Definition
Electric submersible pump (downhole equipment).
The process of identifying, discovering and testing prospective hydrocarbon regions and structures,
mainly by interpreting regional and specific geochemical, geological, geophysical survey data and drilling.
farm‑in and farm‑out
A commercial agreement in which an incoming joint operation participant (the ‘farmee’) earns an interest
in an exploration tenement by funding a proportion of exploration and evaluation expenditures, while the
participant owning the interest in the exploration tenement (the ‘farmor’) pays a reduced contribution.
The interest received by a farmee is a farm‑in while the interest transferred by the farmor is a farm‑out.
FBT
FEED
FID
field
Fringe Benefits Tax in Australia.
Front End Engineering and Design.
Final Investment Decision.
An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual
geological structural feature or stratigraphic condition. The field name refers to the surface area although it
may refer to both the surface and underground productive formation.
financial year
Financial year ended 30 June 2021.
FPSO
GAB
G&G
GHG
GST
HSSE
Floating production, storage and off‑loading facility.
Great Australian Bight.
Geological and geophysical.
Greenhouse Gas.
Goods and Services Tax in Australia.
Health, safety, security and environment.
hydrocarbon
A compound of the elements hydrogen and carbon, in either liquid or gaseous form. Natural gas and
petroleum are mixtures of hydrocarbons.
IBAMA
IOR
e Brazilian environmental agency, the Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renovaveis.
Improved Oil Recovery.
Karoon or Group
Karoon Energy Ltd and its subsidiaries.
km
lead
LIBOR
LTI
Kilometres.
A potential hydrocarbon target which has been identified, but requires further evaluation before it is drill
ready, at which point it becomes a prospect.
London interbank offered rate.
Long‑term incentive.
market capitalisation
The product of a company’s share price multiplied by the total number of ordinary shares issued by the company.
m
MMbbl
NOPTA
OMS
Million.
Millions of barrels (1,000,000 barrels).
National Offshore Petroleum Titles Administrator.
Operating Management System.
136
Karoon Energy LtdAnnual Report 2021 Term
Operator
Definition
One joint operation participant that has been appointed to carry out all operations on behalf of all the joint
operation participants.
ordinary shares
The ordinary shares in the capital of the Karoon Energy Ltd.
p.a.
Per annum.
performance rights
Performance rights issued under the PRP.
permit
PEN
A hydrocarbon tenement, lease, licence, concession or block.
Peruvian Sol, being currency of Peru.
Petrobras
Petróleo Brasileiro SA.
play
ppm
A trend within a prospective basin that has common geologic elements containing one or more fields,
prospects or leads with common characteristics.
Parts per million.
previous financial year
Financial year ended 30 June 2020.
PRP
prospect
Karoon Gas Australia 2016 and Karoon Energy Ltd 2019 Performance Rights Plans.
A geological or geophysical anomaly that has been surveyed and defined, usually by seismic data, to the
degree that its configuration is fairly well established, and on which further exploration such as drilling can
be recommended.
prospectivity
Referring to the likelihood of finding commercial hydrocarbons.
PRRT
REAL
reserves
Petroleum Resource Rent Tax in Australia.
Brazilian currency.
Those quantities of petroleum anticipated to be commercially recoverable by application of development
projects to known accumulations from a given date forward under defined conditions.
1P denotes low estimate of Reserves (proved Reserves)
2P denotes best estimate of Reserves (the sum of Proved plus Probable Reserves)
3P denotes high estimate of Reserves (the sum of Proved plus Probable plus Possible)
Note, definition reflects the revised 2018 Petroleum Resources Management System.
reservoir
A porous and permeable rock formation to store and transmit fluids such as hydrocarbons and water.
rig
risk
seismic survey
The equipment needed for drilling a well. It includes the onshore and offshore vehicles, mobile platforms or
vessel on which the equipment is stored.
Prospect risk or geologic risk is the assessed chance that the drilling of the prospect will be successful in
finding significant volumes of hydrocarbons. The risk is calculated by multiplying the chance of success of
each of the petroleum system elements involved in the prospect.
A type of geophysical survey where the travel times of artificially created seismic waves are measured as they
are reflected in a near vertical plane back to the surface from subsurface boundaries. This data is typically
used to determine the depths and form of stratigraphic units and in making subsurface structural contour
maps and ultimately in delineating prospective structures.
sq km
SPA
Square kilometres.
Sale and Purchase Agreement.
137
Karoon Energy LtdAnnual Report 2021 Glossary of Terms Continued
Term
STI
t
TRIR
TSR
Tullow
UN
unrisked
Definition
Short‑term incentive.
Tonne.
Total Recordable Incident Rate.
Total shareholder return.
Tullow Peru Limited Sucursal del Peru or Tullow Oil plc.
United Nations.
A risk value has not been applied to an estimate of hydrocarbon volume either in place or recoverable.
$, US$ or USD
United States dollars.
138
Karoon Energy LtdAnnual Report 2021 Corporate Directory
Board of Directors
Mr Bruce Phillips – Independent Non‑Executive Chairman
Dr Julian Fowles – Chief Executive Officer and Managing Director
Mr Peter Turnbull – Independent Non‑Executive Director
Ms Luciana Rachid – Independent Non‑Executive Director
Mr Clark Davey – Independent Non‑Executive Director
Mr Peter Botten – Independent Non‑Executive Director
Company Secretary
Mr Nick Kennedy
Audit and Risk Committee Members
Mr Clark Davey (Chairman of Committee)
Mr Peter Botten
Mr Peter Turnbull
People, Culture and Governance
Committee Members
Mr Peter Turnbull (Chairman of Committee)
Mr Bruce Phillips
Mr Geoff Atkins
Mr Clark Davey
Sustainability and Operational
Risk Committee Members
Ms Luciana Rachid (Chair of Committee)
Mr Peter Botten
Mr Peter Turnbull
Registered Office
Suite 3.02
Level 3, 6 Riverside Quay
Southbank VIC 3006
Australia
ACN
ABN
107 001 338
53 107 001 338
Telephone + 613 9616 7500
Website www.karoonenergy.com.au
Email
info@karoonenergy.com.au
External Auditor
PricewaterhouseCoopers Australia
2 Riverside Quay
Southbank VIC 3006
Australia
Telephone + 61 3 8603 1000
+ 61 3 8603 1999
Facsimile
External Legal Adviser
Arnold Bloch Leibler
Level 21, 333 Collins Street
Melbourne VIC 3000
Australia
Telephone + 61 3 9229 9999
+ 61 3 9229 9900
Facsimile
Share Registrar
Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne VIC 3001
Australia
Telephone 1300 555 159 (within Australia)
+ 61 3 9415 4062 (outside Australia)
Website www.computershare.com.au
Securities Exchange Listing
The Company’s ordinary shares are listed on the ASX.
The home exchange is Melbourne VIC.
ASX code KAR
139
Karoon Energy LtdAnnual Report 2021