New Zealand Oil & Gas Limited Annual Report 2021

In last year’s annual report,
I shared our optimism that
challenging industry conditions
would create opportunities to
acquire attractive assets.
I am pleased to report that our
ambition to grow the company
is beginning to bear fruit.

We have signed an agreement to purchase producing
gas assets in the Amadeus basin in Australia’s Northern
Territory. The three assets we intend to acquire will provide
revenue from well-established fields delivering product
into a strong Australian gas market. They will also provide
significant upside potential from on-going development
activity. The Amadeus transaction is expected to complete
at about the time that this report is published. In the
following pages, we provide more information on the
associated increase to our reserves.

In addition to our direct stake, we will participate further
in the Amadeus transaction through our Cue subsidiary,
who will take an additional share of the same portfolio of
assets. We expect that the Amadeus assets will establish a
foundation upon which we can continue to grow our presence
in the Australian market.

In addition to acquisition activity, we also added to the
Group's reserves organically. Cue's Mahato field in Indonesia
began producing during the reporting period. Further
development activity is on-going, and we expect that
development to increase production from the current rate of
approximately 3,600 barrels a day.

With development programs continuing in the coming year
in both the Amadeus basin and the Mahato field, we look
forward to an active year ahead.

New Zealand Oil & Gas Annual Report 2021Mereenie oil and gas field, Amadeus Basin, Nothern Territory, Australia.

In New Zealand, the Kupe production field has been as
reliable as ever. The Kupe compression project is due to
come online in the third quarter of calendar year 2021.
That project will increase production and return the field to
plateau. Fundamentals suggest that New Zealand gas prices
should remain elevated and we expect to benefit from our
interest in Kupe for years to come.

Having surrendered our remaining exploration blocks in
New Zealand, the remaining domestic opportunity set is
relatively limited. We will continue to evaluate opportunities
in New Zealand as they arise, but we will also focus on
opportunities elsewhere in our region.

In support of our increased activity in Australia, we
re-established our listing on the ASX, where the investor
community is very familiar with natural resources
exploration and production. While we were of course
disappointed by the outcome of the Ironbark exploration
well, we expect that Australia will continue to provide
opportunities to acquire producing assets with upside
potential through development and near-field exploration.

As our society and our industry become increasingly
focused on environmental, social and governance
priorities, we will continue to make each an area of focus
for the company. I am proud that we have maintained our
Rainbow Tick accreditation during the year, demonstrating
our commitment to diversity and inclusion.

These principles reflect the values and priorities of the
communities to which we belong and from which we
produce resources. Commitment to these values also helps
us recruit and retain high quality people.

Our staff continue to perform at a high level and, as the
Amadeus transaction demonstrates, are delivering on our
strategic priorities. I thank them for their efforts during an
especially challenging period.

We are on the cusp of adding another promising revenue
stream to our portfolio and we have material development
activity ahead. We have started down the path towards
meaningful growth. I would like to thank shareholders for
your continued support and look forward to keeping you
updated on our continued progress.

Samuel Kellner
Chairman

New Zealand Oil & Gas Annual Report 2021Production
and Reserves
to 2021

AMADEUS BASIN ASSETS

This production and reserves report includes data from
the Mereenie, Palm Valley and Dingo fields in the
Amadeus Basin. On 25 May 2021, New Zealand Oil & Gas
and Cue announced they had agreed to acquire interests
in the Amadeus Basin assets. The transaction was subject
to certain conditions including shareholder and regulatory
approvals, with an effective economic date of 1 July 2020.

On 20 September 2021 the Company announced that all
conditions precedent to the transaction had been satisfied
and the parties expect to complete the transaction on
1 October 2021 in accordance with the terms of the sale
and purchase agreement.

Unless otherwise stated, shares indicated include Cue’s full
interest. New Zealand Oil & Gas has a 50.04% interest in Cue.

Actual and Forecast 2P Production
millions of barrels of oil equivalent

Mahato

Dingo

Palm Valley

Mereenie

Wortel

Oyong

Maari

Kupe

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

Actual

Forecast

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

New Zealand Oil & Gas Annual Report 2021
Production
New Zealand Oil & Gas share (net)

Maari

Kupe

Sampang PSC

Some rounding. The New Zealand Oil & Gas interest in Maari and Sampang is held through Cue Energy. New Zealand Oil & Gas has a 50.04% interest in Cue.
Graphic shows Cue’s full interest.

120,000140,000160,000100,00080,00060,00040,00020,0000barrelsOilGasLPG1,8002,1002,4001,5001,2009006003000terajoulestonnes3,6004,2004,8003,0002,4001,8001,20060002017201820198981,0281,0222017201820192,3501,507202020219309202017201820193,1134,4033,933202020214,0533,999202020211,2841,6471,662201720182019152,201115,823130,28120202021108,93288,33320172018201945,84341,12228,24346,3292020202132,57720172018201938,1213,03820205,02120212,4843,207New Zealand Oil & Gas Annual Report 2021

Reserves

at 30 June 2021

Proved (1P) Reserves at 1 July 2021

Developed

Undeveloped

Total

Gas
(PJ)

LPG
(kt)

Oil &
Condensate
(mmb)

Total
(mmboe)

Gas
(PJ)

LPG
(kt)

Oil &
Condensate
(mmb)

Total
(mmboe)

Gas
(PJ)

LPG
(kt)

Oil &
Condensate
(mmb)

Total
(mmboe)

0.00

5.56

24.45

0.26

0.15

0.26

1.26

0.00

0.87

0.00

3.81

0.00

0.03

0.00

0.20

0.00

6.42

28.26

0.26

0.18

0.26

1.46

33.70

11.57

6.69

0.00

2.26

0.00

0.35

0.00

0.32

5.85

1.89

1.09

2.64

0.00

7.47

0.00

0.37

0.32

0.00

0.04

0.00

0.47

0.00

1.22

36.35

11.57

14.16

0.00

2.26

0.00

0.38

0.00

0.32

6.32

1.89

2.31

0.37

0.32

59.78

24.45

1.09

11.05

10.98

3.81

0.07

1.89

70.75

28.26

1.15

12.94

Geographic area

New Zealand

Maari*

Kupe

Amadeus Basin,
Australia

Mereenie**

Palm Valley**

Dingo**

Indonesia

Sampang PSC*

Mahato*

Total

1.26 mmboe

0.26 mmboe

0.32 mmboe

0.37 mmboe

1.09 mmboe

.
8

9
oe

0.20 mmboe

1.46 mmboe

0.26 mmboe

0.32 mmboe

0.37 mmboe

0.4
7m
m
b

5.85
m boe
m

1.2 2
mmb o e

1.89
mboe

6.32
m bo
m

m
m

Maari

Kupe

Mereenie

Palm Valley

Dingo

Sampang PSC

Mahato

As at evaluation date. Some rounding. Includes 100 per cent of Cue’s interests. New Zealand Oil & Gas has a 50.04% interest in Cue. See statement Page 12.

New Zealand Oil & Gas Annual Report 2021

Proved + Probable (2P) Reserves at 1 July 2021

Developed

Undeveloped

Total

Gas
(PJ)

LPG
(kt)

Oil &
Condensate
(mmb)

Total
(mmboe)

Gas
(PJ)

LPG
(kt)

Oil &
Condensate
(mmb)

Total
(mmboe)

Gas
(PJ)

LPG
(kt)

Oil &
Condensate
(mmb)

Total
(mmboe)

0.00

7.36

32.37

0.65

0.19

0.65

1.66

0.00

1.76

0.00

7.73

0.00

0.07

0.00

0.42

0.00

9.11

40.10

0.65

0.26

0.65

2.07

42.39

13.08

9.52

0.00

4.94

0.00

0.43

0.00

0.01

0.44

7.36

2.14

1.56

8.20

0.00

8.01

0.00

0.82

0.44

0.00

0.02

0.00

1.36

0.00

1.31

50.59

13.08

17.53

0.00

4.94

0.00

0.45

0.00

0.01

0.44

8.71

2.14

2.86

0.82

0.44

77.28

32.37

1.73

14.62

17.96

7.73

0.08

3.08

95.24

40.10

1.81

17.70

Geographic area

New Zealand

Maari*

Kupe

Amadeus Basin,
Australia

Mereenie**

Palm Valley**

Dingo**

Indonesia

Sampang PSC*

Mahato*

Total

1.66 mmboe

0.65 mmboe

0.44 mmboe

0.82 mmboe

2.07 mmboe

0.65 mmboe

0.44 mmboe

0.82 mmboe

0 . 4 2
m m b oe

1
.

m
m

4
oe

7.36
m boe
m

.
3

2.14
boe

8.71
m boe
m

m
m

Maari

Kupe

Mereenie

Palm Valley

Dingo

Sampang PSC

Mahato

As at evaluation date. Some rounding. Includes 100 per cent of Cue’s interests. New Zealand Oil & Gas has a 50.04% interest in Cue. See statement Page 12.

Remaining Proven & Probable (2P) Oil & Gas Reserves Change (mmboe)

EOFY20

Amadeus
Acquisition

***

FY21
Production

EOFY20
Adjusted

In Year
Revisions

EOFY21

Geographic area

New Zealand

Maari*

Kupe

Amadeus Basin, Australia

Mereenie**

Palm Valley**

Dingo**

Indonesia

Sampang PSC*

Mahato*

Total

0.6

2.3

1.1

3.9

9.2

2.4

2.9

14.5

0.1

0.2

0.5

0.2

0.1

0.3

1.3

0.5

2.0

8.7

2.1

2.9

0.8

17.1

0.2

0.0

0.4

0.6

*Includes 100% of Cue's equity. **New Zealand Oil & Gas and Cue equity. ***Effective 1 July 2020, as announced on 25 May 2021.

0.7

2.1

8.7

2.1

2.9

0.8

0.4

17.7

New Zealand Oil & Gas Annual Report 2021

New Production from 2021
in the Amadeus Basin

Amadeus Basin

Oil Field

Gas Field

Permit

Gas Pipeline

Oil Pipeline

Railway

Road

NORTH EAST

GAS INTERCONNECTOR

PROPOSED WEST-EAST PIPELINE

Central Petroleum 50%

New Zealand Oil & Gas 50%*

Alice Springs

MEREENIE
OL4 + OL5

PALM VALLEY
OL3

Macquarie Mereenie 50%

Central Petroleum 25%

New Zealand Oil & Gas 25%*

*Includes Cue’s full share. New Zealand Oil & Gas has a 50.04% interest in Cue.

DINGO

100

New Zealand Oil & Gas Annual Report 2021Amadeus Basin

Oil Field

Gas Field

Permit

Gas Pipeline

Oil Pipeline

Railway

Road

NORTH EAST
GAS INTERCONNECTOR

PROPOSED WEST-EAST PIPELINE

Alice Springs

DINGO
L7

Central Petroleum 50%

New Zealand Oil & Gas 50%*

100

MEREENIE

OL4 + OL5

PALM VALLEY

OL3

New Zealand Oil & Gas Annual Report 2021Amadeus assets,
possible incremental
effects on revenue
and profit

A$40m

A$30m

A$20m

A$10m

A$37–40m

A$30–33m

A$14–17m

A$9–12m

2
2
0
2

3
2
0
2

2
2
0
2

3
2
0
2

NPAT

Revenue

Bars indicate range of estimated incremental impact from Amadeus
assets in 2022 and 2023. Not a forecast. Actual result will depend on asset
performance, oil and gas prices & timing of development work.

Reserves
Compliance
Statements

Oil and gas reserves, and prospective
resources, are reported as at 1 July 2021
and follow the SPE PRMS Guidelines (2018).
Volumes are net to New Zealand Oil & Gas,
including Cue Energy’s share.

Cue currently holds an equity position of 5%, 15% and 12.5%
in the Maari, Sampang and Mahato assets respectively,
though Production Sharing Contract adjustments at the
Sampang & Mahato fields affect the net equity differently
across the various reserve categories.

In the Amadeus basin, all fields and prospects are non-
operated, with the operator being Central Petroleum Limited.
New Zealand Oil & Gas has a 17.5% participating interest
in Mereenie and Cue has 7.5%. At Palm Valley and Dingo,
New Zealand Oil & Gas has 35% and Cue has 15% equity.
(Amadeus basin assets are subject to completion of the
acquisition transaction, which is expected on 1 October 2021
with an effective economic date of 1 July 2020.)

Mereenie, Palm Valley and Dingo reserves are based on
historical field production data and various well intervention
and drilling campaigns. This data has been combined with
seismic data, analytical and numerical analysis methods,
and deterministic reservoir simulation and network models.
In place volumes have been developed using probabilistic
methods, with deterministic workflows used for recoverable
volumes. The reserves and resource volumes stated have
not been adjusted for risk.

In New Zealand, all fields and prospects are non-operated.
The operator at Kupe is Beach Energy and at Maari the
operator is OMV.

Kupe reserves are determined by deterministic reservoir
simulation modelling conducted by the operator, Beach
Energy. At Maari, a combination of deterministic and
analytical methods have been applied by New Zealand
Oil & Gas.

In Indonesia, all fields and prospects are non-operated. The
operator at Sampang is Medco and at Mahato the operator
is Texcal. At Sampang, a combination of deterministic and
analytical methods have been applied in tandem with a review
of the available simulation models by New Zealand Oil & Gas.

New Zealand Oil & Gas Annual Report 2021At all fields, economic modelling has been conducted to
determine the economically recoverable quantities.
For the conversion to equivalent units, standard industry
factors have been used of 6bcf to 1mmboe, 1bcf to 1.05PJ,
1 tonne of LPG to 8.15 boe and 1TJ of gas to 163.4 boe.

Proven (1P) reserves are estimated quantities of oil and
gas which geological and engineering data demonstrate
with reasonable certainty (90% chance) to be recoverable
in future years from known reservoirs, under existing
economic and operating conditions.

Probable (2P) reserves have a 50% chance or better
of being technically and economically producible using
discounted cashflows. The oil price assumptions are based
on a futures price curve, followed by a flat real price.
For gas volumes in excess of current contracts, a future
base market price from an independent expert report is
assumed for gas sales.

Known accumulations are reserves or contingent
resources that have been discovered by drilling a well and
testing, sampling or logging a significant quantity
of recoverable hydrocarbons.

Developed reserves are expected to be recoverable from
existing wells and facilities. Undeveloped reserves will
be recovered through future investments (e.g. through
installation of compression, new wells into different but
known reservoirs, or infill wells that will increase recovery).
Total reserves are the sum of developed and undeveloped
reserves at a given level of certainty.

All reserves and resources reported refer to hydrocarbon
volumes post-processing, net of fuel, and immediately prior
to point of sale. The volumes refer to standard conditions,
defined as 14.7psia and 60°F. The extraction method is via
the Mereenie and Palm Valley Gas Plants which includes
compression and dehydration.

Tables combining reserves have been calculated
arithmetically and some differences may be present
due to rounding.

This reserves and resources statement for all fields except
Mahato (see below) is approved by, based on, and fairly
represents information and supporting documentation
prepared by New Zealand Oil & Gas Assets & Engineering
Manager Daniel Leeman. Daniel is a Chartered Engineer
with Engineering New Zealand and holds Masters degrees
in Petroleum and Mechanical Engineering as well as a
Diploma in Business Management and has over 10 years of
experience. Daniel is also an active professional member of
the Society of Petroleum Engineers and the Royal Society
of New Zealand. New Zealand Oil & Gas reviews reserves
holdings twice a year by reviewing data supplied from the
field operator and comparing assessments with this and
other information supplied at scheduled meetings. Daniel
is currently an employee of New Zealand Oil & Gas Limited,
which at the time of this report is a related party to Cue
Energy. Daniel has been retained under a services contract by
Cue Energy Resources Ltd (Cue) to prepare an independent
report on the current status of the entity’s reserves.
New Zealand Oil & Gas has a 50.04% interest in Cue.

Mahato
The reserves stated for Mahato are effective 1 July 2021
and follow the SPE PRMS Guidelines (2018). Net reserves
are presented net of equity, determined by economic
modelling on discounted cash flows performed at the gross
field level as approved under the standard SKK Migas Plan of
Development process.

All reserves and resources reported refer to hydrocarbon
volumes post-processing, net of fuel, and immediately prior
to point of sale. The volumes refer to standard conditions,
defined as 14.7psia and 60°F. The extraction method is via
EPF facilities, which includes an oil and water separation
system with the oil then piped 6 kilometres to the CPI
operated Petapahan Gathering Station.

This resources statement is based on, and fairly represents
information and supporting documentation prepared by
PT Gada Energi, a company owned by the Institut Teknologi
Bandung (ITB) as the relevant certifying authority in
accordance with the SPE PRMS Guidelines (2018).

New Zealand Oil & Gas Annual Report 2021Where we’re active

Australia

Indonesia

Northwest Shelf, Western Australia

East Java

WA-389-P

Goodwyn

WA-389-P

WA-409-P

Exeter

Angel

North
Rankin

Madura Island

Wortel

Oyong

Jeruk

Sampang PSC

Karratha

WA-389-P – Cue Energy 100%*
WA-409-P Cue Energy 20%*

Western Australia

East Java

Sampang PSC – Cue Energy 15%*

Amadeus Basin, Northern Territory

Sumatra

Mereenie

Palm Valley

Alice Springs

Dingo

Mereenie OL4 & OL5 – NZO 17.5%, Cue Energy 7.5%*
Palm Valley OL3 – NZO 35%, Cue Energy 15%*
Dingo L7 - NZO 35%, Cue Energy 15%*

In the Amadeus basin, much of the development focus in
late FY21 was on the program of well re-completes (four)
and infill drilling (two new wells) on the Mereenie field. The
re-completes were largely finished (‘first gas’ from three
wells) and, with a rig in field and first gas expected in 1H22,
the associated volumes have moved from Undeveloped to
Developed categories.

Work continues to progress on planned exploration and
appraisal drilling at Palm Valley and Dingo. Adjustments
have been made to reserves associated with actual
production. New Zealand Oil & Gas knows of no other reason
to change the current reserves bookings.

Mahato PSC

Mahato – Cue Energy 12.5%*

The Mahato field was brought into production. The reserves
booking stated in this report reflects the approved Plan
of Development by operator Texcal, and approved by SKK
Migas. Development drilling in the field is currently ongoing.
New Zealand Oil & Gas will continue to review results
through FY22. Production from the field is exceeding
the full PoD expectations, with only 5 wells to date, by
approximately 1.5 times.

New Zealand Oil & Gas Annual Report 2021New Zealand

Taranaki

New Plymouth

Kupe

Maari

Kupe – New Zealand Oil & Gas 4%
Maari – Cue Energy Resources 5%*

Kupe production continued to decline in line with
expectations. The major new piece of work was an inlet
compression project. This project was successfully
progressed by the operator, with first gas expected in
1Q FY22. As sufficient progress and commitment of the
compressor has been completed, and sufficient confidence
is present in the reserves, the associated volumes have
moved from Undeveloped to Developed categories.

* New Zealand Oil & Gas has a 50.04% interest in Cue.

Cue's full interest is shown.

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYSustainability,
social
responsibility
and climate
change report

New Zealand Oil & Gas Annual Report 2021WHO WE ARE

We are an oil and gas company with
an Australasian focus. We are ethical,
values‑based, and nimble.

We are an experienced, Wellington‑based
exploration and production company,
and we are growth ready.

Industry experts trusted by our stakeholders,
providing support and advice.

WHERE WE ARE GOING

Growing: Efficiently deploy our resources
purchasing additional production that
has development upside and exploration
that fits our asset base.

Improving: Use our skillsets, optimising
our processes, and extracting additional
value from our physical assets and the
wider group.

Realising: Support our operating partners,
Cue subsidiary, and stakeholders,
to identify mutual value add.

HOW WE WILL GET THERE

We use our technical capability,
relationships, values, shareholder support
and flexibility to create opportunities,
execute reliably and in a way that makes
us proud, so that high quality people
want to work with us.

Our
Compass

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYStrength today and
growth tomorrow

Indonesia
production through
our Cue subsidiary

Australia production
and development
in the NT Amadeus
basin

New Zealand
production through
Kupe and Maari

Ambition to acquire
production with
development upside
with support from our
global-scale parent

We see natural gas assets in many markets replacing
higher carbon fuel sources as the world undergoes
a decades‑long energy transformation. We will pursue
quality investment opportunities.

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYOur Values

New Zealand Oil & Gas Annual Report 2021

SUSTAINABILTY

TIKANGA: THE RIGHT THINGS THE RIGHT WAY

We operate safely, and do what we say we will do.

We display respect and understanding for other
people, opinions and cultures.

We respect values, rules and laws.

MAHI TAHI: WORK TOGETHER, COLLABORATE, COOPERATE, WITH TEAMWORK

We are open, honest and transparent.

We actively pitch in and help.

We have fun and work with passion.

We put big issues on the table so they
can be resolved.

PAˉKIKI: CONSUMED WITH CURIOSITY

We seek to better understand ourselves, and the
world, with the goal of constantly improving.

We explore new areas to add value to our work.

We work with initiative and imagination.

TAUHOKOHOKO: BARTER, BARGAIN, TRADE

We seek to continually add value through the
application of skills, brains and hard work.

We develop mutually beneficial relationships with
key stakeholders and partners.

We deliver excellent commercial outcomes.

New Zealand Oil & Gas Annual Report 2021

Sustainability
Framework
2022 – Value
Creation
Process

FINANCIAL
CAPITAL

Our prudent ﬁnancial management and ability

to attract investment.

HUMAN
CAPITAL

Expertise, skills and engagement

of our people.

FIXED
CAPITAL

Our physical infrastructure and assets,

primarily owned and operated through joint

venture or other commercial arrangements.

INTELLECTUAL
CAPITAL

Our technical expertise, data, models,

brand and reputation.

NATURAL
CAPITAL

Inputs from the natural world including access

to oil and gas reserves, water, land and

minerals/materials required to support infrastructure

required in production.

SOCIAL &
RELATIONSHIP
CAPITAL

Relationships are crucial to our success.

Within our joint venture partners, with our

communities, regulators and prospective

commercial partners, our social license to

operate is key.

Tikanga
—
The right things
the right way

Mahi Tahi
—
Work together,
collaborate, cooperate,

with teamwork

Tauhokohoko

—

Barter,

bargain, trade

Pakiki:

—

Consumed

with curiosity

ENERGY

SECURITY AND

AFFORDABILITY

We help deliver energy value through the supply of

natural gas in New Zealand, which supports renewable

energy electricity, and internationally, by providing

supply, price stability, and aﬀordability.

∂ Leadership through

industry, policy and

regulatory forums

∂ Delivering gas to

market, in NZ, Australia

and beyond

A CLEAN AND

LOWER-CARBON

ECONOMY

We help deliver gas and light oil into the energy

system, bringing health and lower carbon beneﬁts.

∂ Reporting commercial

and non-commercial

value transparently

WEALTH

CREATION &

PRODUCTIVITY

Gas and light oil energy inputs help to produce

goods and services society needs to prosper.

We contribute to wealth and productivity

through royalties and tax contributions

that help to fund hospitals, schools and other

essential social services.

∂ Delivering commercial

value via annual taxes

and royalties,

job creation,

shareholder value

COMMUNITY

WELLBEING

Local environments and communities are

strengthened through open engagement and

contributions particularly relating to science

education, energy eﬃciency and conservation.

∂ Community and

Iwi Engagement

∂ Community Partnerships

and Investment

$36.0

million revenue

2,567

TJ of
NATURAL GAS

119,060

barrels of oil

$31,600

for COMMUNITY

PROJECTS

4,014

Trees Planted

A GREAT PLACE

TO WORK

We are a highly engaged, skilled, safe, sustainable,

diverse and inclusive workplace

∂ Proactive diversity and

inclusion practices

∂ Greater environmental

contributions

OUTPUTSOUR VALUESVALUETHROUGHOUTCOMESOURINPUTSUN SustainableDevelopment Goals(UNSDGs)New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY

FINANCIAL

CAPITAL

Our prudent ﬁnancial management and ability

to attract investment.

HUMAN

CAPITAL

Expertise, skills and engagement

of our people.

FIXED

CAPITAL

Our physical infrastructure and assets,

primarily owned and operated through joint

venture or other commercial arrangements.

INTELLECTUAL

CAPITAL

Our technical expertise, data, models,

brand and reputation.

NATURAL

CAPITAL

Inputs from the natural world including access

to oil and gas reserves, water, land and

minerals/materials required to support infrastructure

required in production.

SOCIAL &

RELATIONSHIP

CAPITAL

Relationships are crucial to our success.

Within our joint venture partners, with our

communities, regulators and prospective

commercial partners, our social license to

operate is key.

Tikanga

—

The right things

the right way

Mahi Tahi

—

Work together,

collaborate, cooperate,

with teamwork

Tauhokohoko
—
Barter,
bargain, trade

Pakiki:
—
Consumed
with curiosity

ENERGY
SECURITY AND
AFFORDABILITY

We help deliver energy value through the supply of

natural gas in New Zealand, which supports renewable

energy electricity, and internationally, by providing

supply, price stability, and aﬀordability.

∂ Leadership through
industry, policy and

regulatory forums

∂ Delivering gas to
market, in NZ, Australia
and beyond

A CLEAN AND
LOWER-CARBON
ECONOMY

We help deliver gas and light oil into the energy

system, bringing health and lower carbon beneﬁts.

∂ Reporting commercial
and non-commercial
value transparently

WEALTH
CREATION &
PRODUCTIVITY

Gas and light oil energy inputs help to produce

goods and services society needs to prosper.

We contribute to wealth and productivity

through royalties and tax contributions

that help to fund hospitals, schools and other

essential social services.

∂ Delivering commercial
value via annual taxes
and royalties,
job creation,

shareholder value

COMMUNITY
WELLBEING

Local environments and communities are

strengthened through open engagement and

contributions particularly relating to science

education, energy eﬃciency and conservation.

∂ Community and
Iwi Engagement

∂ Community Partnerships
and Investment

$36.0

million revenue

2,567

TJ of

NATURAL GAS

119,060

barrels of oil

$31,600

for COMMUNITY
PROJECTS

4,014

Trees Planted

A GREAT PLACE
TO WORK

We are a highly engaged, skilled, safe, sustainable,

diverse and inclusive workplace

∂ Proactive diversity and

inclusion practices

∂ Greater environmental
contributions

OUTPUTSOUR VALUESVALUETHROUGHOUTCOMESOURINPUTSUN SustainableDevelopment Goals(UNSDGs)New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY

MATERIAL ISSUES

How materiality
was determined

We engage with shareholders,
regulators, our community including
directly with mana whenua, staff,
industry organisations and partners,
and we monitor public issues.

INVESTORS

Our board engages with larger shareholders during
the year, we use a range of tools to make it easy
for investors to contact us and we assess views of
potential financing interests.

STAFF

The Company surveys staff to measure engagement
and attitudes to key issues, including sustainability.

STAKEHOLDERS

We consider feedback from industry groups, officials,
business representatives at national and regional level,
and community groups. We engage directly with mana
whenua in areas where we operate. We sign relationship
agreements with community organisations and discuss
key issues through those agreements. We participate in
industry and business interactions with government and
political leaders.

Materiality Matrix

HIGH

Influence of
the issue on
stakeholder’s
assessments
and decisions

2 ENVIRONMENT, CLIMATE
AND ENERGY TRANSITION

MOST MATERIAL

1 TRANSPARENCY AND

OPEN COMMUNICATION

∫ Inform, engage
our community

∫ Be responsible about the corporate

∫ Comply with community

environmental footprint
∫ Do our bit to reduce emissions
∫ TCFD reporting

expectations
∫ Be proactive about

disclosing our activities

∫ Be part of the discussion
about energy transition

4 COMMERCIAL RETURNS
∫ Returns to investors
∫ Returns to NZ Inc
∫ Community Investment
∫ Local economic
development

GROWTH
OPPORTUNITIES

LOW

LESS MATERIAL

CRISIS PREPARATION

3 WELLBEING OF PEOPLE
∫ Health and Safety
performance

∫ Diversity
∫ Opportunities for

personal development

LOW

Significance of issue to the Company

HIGH

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY

Response to
material issues

The top four material issues identified are:

¬ Transparency and open communication;
¬ Environment, climate and energy transition;
¬ Wellbeing of People;
¬ Commercial opportunities.

For this report we provide more detailed responses to the
top four material issues below

1. Transparency and Open Communication

WHAT OUR STAKEHOLDERS EXPECT

¬ Inform and engage our community
¬ Comply with community expectations
¬ Be proactive about disclosing our activities
¬ Be part of the discussion about energy transition.

OUR RESPONSE

We are proud of our activities and how we go about them,
and we invest in open dialogue and relationships.

We understand that communities legitimately want to know
what impacts our activities have, what steps we take to
manage risk, and how the benefits will be felt. We formalise
relationship agreements with local communities where
we operate. These agreements commit us to respectful
engagement and to learning from each other. We engage
directly and early with mana whenua and mana moana.

We report openly on all of our activities, both to investors
and to the wider community, and we seek opportunities to
keep the industry, investors and the public informed.

We participate in discussions about energy transition
in business and industry forums, as well as directly
with government and political parties at ministerial and
officials levels.

We make submissions on relevant legislation and policy.

We are members of reputable national business
representative groups such as Business New Zealand and
Energy Resources Aotearoa.

All of our advocacy is open and published.

Our policies commit us to comply with laws and
regulations. The board monitors compliance and we
publicly report on our performance, impact and outcomes.

TCFD reporting in this document reports our climate
impact. We participate openly in public discussion about
climate-related policy.

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY2. Environment, climate and energy transition

3. Wellbeing of people

¬ Health and Safety performance
¬ Diversity
¬ Opportunities for personal development.

We make safe operating and the health of our workforce
our top priority because well-being of people regularly
features higher in internal materiality surveys than in
feedback from outside.

Staff incentives are linked directly to corporate health and
safety performance.

Health and safety reporting includes both our own sites,
and non-operated sites where we have an interest, and our
supplier code sets out requirements for companies that do
business with us.

Performance is monitored daily and reported through to
an HSE weekly meeting, as well as to weekly executive
management meetings. The ORS committee reviews
performance and policies and reports on performance to
the board.

We have had no exposure to Covid-19.

Our diversity committee is focused on improving diversity in
our workplace. We have retained a Rainbow Tick. Diversity
initiatives are reported at all staff meetings, staff attitudes
to diversity initiatives are surveyed, and we regularly engage
in cultural activities that are meaningful to our staff.

We invest in the development of all our staff. Regular
coaching and training opportunities are provided across
the business.

¬ Be responsible about the corporate environmental

footprint

¬ Do our bit to reduce emissions
¬ TCFD reporting. See our TCFD report.

We support carbon budgets and emissions pricing as the most
efficient and effective tools to manage carbon emissions.

In our view, an economy-wide response to the global issue
of climate is more effective than enterprise-level response,
but we are responsible about our own carbon footprint,
supporting initiatives such as recycling in our head office
and introducing a paperless head office initiative.

We report comprehensively on climate risks through our
TCFD reporting.

The Company has reduced or offset our emissions from
corporate travel and other office-related activities at our
corporate HQ and we financially support tree planting.

The use of oil and gas we produce helps to solve humanity’s
energy needs. In many cases, oil and gas will be the best
available energy technology. We support efforts by users
to offset their emissions from use, and by governments
to reduce avoidable carbon emissions through efficient
economic instruments.

We are committed to responsible management practices
that minimise adverse environmental impacts from our
activities, using soundly-based science as the basis for all
our environmental decisions.

Excellence in environmental performance is essential
to our business success. We comply with all applicable
environmental laws and regulations and good practice
industry standards.

We apply reasonable standards where regulatory legislative
requirements and standards do not exist. We work to
minimise pollution and the cumulative environmental
impact of our activities at a local, regional and global level,
and try to reduce waste and improve resource use. Our
environmental management plans for all our activities
identify, assess and manage environmental risks as low as
is reasonably practical.

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY4. Commercial returns

¬ Returns to investors
¬ Returns to NZ Inc
¬ Community Investment
¬ Local economic development.

Returns to investors are set out in the financial
statements of our annual report, found in the investor
section of our website.

Through our social investment we live our values as
good partners, committed to enduring relationships with
our neighbours and wider community. We make social
investments that make a sustainable difference.

Examples of our contribution include funding for
Dunedin’s curtain bank, that provides warmer housing
for vulnerable low-income families, funding for scientific
research, and planting trees in areas where community
groups are restoring the landscape.

The best investment we can make in the community
is economic activity. The upstream oil and gas sector
contributes billions to Gross Domestic Product (GDP)
in Australia and New Zealand. Governments in Australia
and New Zealand collect billions in royalties and income
tax annually. Oil and gas workers earn twice the national
average salary and create seven times the average value
earned per year, money that is spent in local communities.

The Company adopted a policy on Capturing Local
Economic Benefits in response to an earlier materiality
survey. The policy commits us to promoting local content
and capturing local benefits. We commit to studying
opportunities for the wider community to participate
commercially in our projects, and to producing a local
content plan for significant developments. We also
believe our expertise in areas such as health & safety and
international business processes can help local enterprise
compete on a commercial basis.

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYSustainable
Development
Goals

The UN’s 2030 Agenda for Sustainable Development represents the world’s plan
of action to end poverty, protect the planet and ensure prosperity for all. Its 17
Sustainable Development Goals has specific targets to be achieved by 2030.

IPIECA – the Global Oil and Gas Industry Association for Environmental and Social
Issues — produced a report in 2017: Mapping the Oil and Gas industry to the
Sustainable Development Goals: An Atlas. It encourages oil and gas companies
to incorporate SDGs into their business and operations, and investigate how the
industry can help to achieve the SDGs.

The 17 SDGs relevant to our sector are illustrated below and our activity related to
them is shown in the following table.

i
t

o
g
u
e

C
o
o
r
d

n
a
t

o
n

o
r
r
u

R
i
g

h
t
s

syste

m M
a

t
n
e
m
p
o
e
v
e
D

a
c
o
L

e
g
n
a
h
C
e
t
a
m
i
l
C

s
s
e
c
c

y A

g
r
e
n
E

Alignment of Activities
Shared-Use Infrastructure
Climate Change
Health Impact Assessments

Road Safety
W orker & C o

u nity Prote ctio n

n t e

n t S tr a t e
a l C
c
a
c
u
d
e E
W o
T e c h n o l o g y T r a i n i n g

t i o

MAPPING THE
OIL AND GAS INDUSTRY
TO THE SUSTAINABLE
DEVELOPMENT GOALS

e
nt

Mitigation Hierarchy
Biodiversity Offsets
Accident Prevention & Response
Environmental Assessments
Ocean Acidification Minimization

Resilience & Adaptive Capacity
E m i s s i o n s M i t i g a t i o n
r a t e g i c P l a n n i n g

S t

t
n
bilit y

e m e
g
a
a
u st ain

e M a
ain S

t W a
ply C

E ffi c i e

Pro d uct Ste w ardship
Cultural & Natural Heritage Protection
Operational Risk Assessment
Sustainable Urbanization
Impact Assessments

y
c
n
are
p
s
n
Tra

t
n
e
m
e
g
a
g
n
E

Gender-Sensitive Policies

Inclusive Decision-Making

Women’s Employment Opportunities
Water Strategy
Water Use Efficiency
Water Risk Management

atural G

erg

y E

tiv

ffi

cie

e
r
n

e
r
gie

T
e
c
h
n
o
l
o
g
y
T
r
a
n
s
f
e
r

S
h
a
r
e
d
U
s
e

n
f
r
a
s
t
r
u
c
t
u
r
e

S
u
s
t
a

n
a
b

n
f
r
a
s
t
r
u
c
t
u
r
e

i
l
l
s

KEY ISSUE AREAS FOR OIL AND GAS MAPPED TO THE SDGs

EXECUTIVE SUMMARY | ix

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY

Our business strategy of responsibly delivering energy
to help meet society’s energy needs supports the SDGs

Development
Goal

Initiatives by New Zealand Oil & Gas

The taxes and royalties we pay help the government fund essential
social services. Natural gas helps to keep energy costs affordable, and
produces less carbon than many alternatives in the global energy system

Affordable energy security is a crucial part of
New Zealand's agricultural exports to the world

More Information

Pages 85–113

Pages 6–12

Support for warm homes. Employee health and
well-being checks, safety focus

Pages 26, 31, 34, 66

www.nzog.com/dmsdocument/492

Support for primary and tertiary Science Fairs in Otago and Southland.

Working with O.G. Oil & Gas to deliver scholarships
and support industry research.

www.nzog.com/our-story/communities/
nzog-scholarships/the-eyal-and-marilyn-ofer-
family-foundation-scholarship-program/

Inclusive decision making through community engagement.

Pages 30–35, 60–61

Diversity Policy, family-friendly and flexible work place focus.

Rainbow Tick. Measurable objectives.

Commercial opportunities to help deliver energy
to meet society's changing needs

Pages 6–12

Our values – Ethics and Transparency

Capturing Local Economic Content Policy

Pages 18–21

www.nzog.com/dmsdocument/486

Socially responsible production

Pages 16–49

Advocate for regulatory change to support a price
on carbon and carbon capture and storage

Support for a price on carbon

TCFD reporting

Corporate office emissions reductions and offsets

Our values – Ethics and Transparency

Corporate Governance

Materiality Matrix and Stakeholder engagement

Promote industry sustainability reporting, and
industry use of SDGs and IPIECA material

Page 39

Pages 38–49

Pages 49

Pages 18–21

Pages 50–84

Page 24

This page and section from page 18

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYSupporting
Local
Communities

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYSupporting the very
foundations of life
for the benefit of all.

New Zealand Oil & Gas contributes
funding to support internationally
renowned and award‑winning
scientists at the Salk Institute who
explore the very foundations of life.

The Salk Institute is an independent
non‑profit organisation seeking new
understandings in neuroscience,
genetics, immunology, plant biology
and more.

Our support went directly to the
Harnessing Plants Initiative.

The internationally renowned researchers at the Salk
Institute pursue transformative discoveries in their field,
exploring innovative ways to tackle some of the most
pressing problems of our generation, including Alzheimer’s,
cancer, aging, infectious disease, climate change and more.

In 1957, Jonas Salk,
developer of the first
safe and effective
polio vaccine, began
his quest to fulfil
his second dream:
create a collaborative
environment where
researchers could
explore the basic
principles of life and
contemplate the wider
implications of their
discoveries for the
future of humanity.

The Institute’s consecutive four-star rating by Charity
Navigator is only achieved by three per cent of non-
profits for strong financial health and commitment to
accountability and transparency.

We contributed to Salk as an expression of our values:
we are a science-based business supporting science and
helping to improve the world we work in for the benefit of all.

See more of Salk’s work here:

www.facebook.com/salkinstitute/

www.salk.edu

www.salk.edu/harnessing-plants-initiative/

The Salk Institute was founded with the philosophy
that it should both drive scientific breakthroughs and
inspire the next generation of elite scientists.

1New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYTrees That Count.

We helped to plant 4,014 trees and
remove 914 tonnes of carbon.

Our funding supported ten community
tree planting projects.

PARADISE TRUST

Our support helped Paradise Trust to plant 100 kowhai trees.

Read more about Atarau Sanctuary

grow.treesthatcount.co.nz/planters/atarausanctuary/

Atarau Sanctuary provides predator-free sanctuary for
Paparoa Wildlife Trust’s roroa (great spotted kiwi) chicks,
which are hatched at Willowbank Wildlife Reserve and
then put in the sanctuary until they are old enough to fend
for themselves.

Atarau Sanctuary is the first land-based pest-proof crèche
specifically for kiwi in the South Island and the only facility
for roroa to take sanctuary until they are big enough to head
out into the world. Since opening in 2010, Atarau has given
sanctuary to 49 roroa chicks.

By planting this area in native plants it will replicate
an environment that will be comparable to the wild
environment in which the kiwi will be released.

Paparoa Wildlife Trust is a community conservation initiative
dedicated to running effective conservation projects in the
Paparoa Ranges near Greymouth.

Our support helped to plant 239 trees

Tomahawk Smaills Beachcare Trust's aim is to restore
the habitat and biodiversity of the sand dune ecosystem
in the Ocean Grove Reserve, and to provide long term
protection to the Ocean Grove community against the
threat of erosion.

Ocean Grove Reserve is a 28 hectare site of active sand
dunes located approximately 6 kilometres from Dunedin
city centre.

The Trust contributes to restoration through hands-on
participation in nursery activities and native planting.

The Trust sustains local relationships across a diverse
group of people by offering a positive opportunity to
contribute to a common environmental cause.

OTAGO FISH & GAME COUNCIL

Our support helped to plant 400 trees in a wetland area

Otago Fish and Game is a not for profit organisation charged
with maintaining and enhancing sportsfish and gamebirds
and their habitat.

Takitakitoa is an ongoing wetland restoration of
significance. The planting programme, which is designed to
convert a previously grazed area of the wetland back into
native shrubland, has been running for 4 years.

Read more about Otago Fish & Game Council

grow.treesthatcount.co.nz/planters/fishgamenewzealand/#funding

“ Support from organisations such as Trees that Count is really
important for helping us create a safe transition for our young kiwis,
and ultimately give them the best chance of survival.”

Rain, hail or shine, nothing
will stop the crew from
completing their planting
down at the Takitakitoa
Wetland! With all this good
quality habitat around, the
place is teeming with life.

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYNew Zealand Oil & Gas CEO
Andrew Jeffries visits
the Dunedin Curtain Bank.

Support for
the Dunedin
Curtain Bank.

The Dunedin Curtain Bank up-cycles unwanted and unused
curtains, lines them, and distributes them to those in need
in our community.

It saves huge amounts of material and plastic from landfill.
Curtains make a significant difference to the warmth of a
home. A third of all heat loss in an uninsulated home occurs
through windows.

New Zealand Oil & Gas proudly supported the curtain
bank with funding of $21,600 this year and over $60,000
over three years.

New Zealand Oil & Gas proudly
supports diversity and inclusion.

Rainbow Tick is a certification mark for organisations that
complete an LGBTQIA+ diversity & inclusion assessment
process in a number of areas.

Rainbow Tick is about accepting and valuing people in
the workplace, embracing diversity and recognising high
levels of inclusiveness.

The process involves an on-going quality improvement
process and is reviewed on an annual basis.

The Rainbow Tick is concerned with the health and
wellbeing of Rainbow communities in the workplace. We
are very proud of receiving a Rainbow Tick and are the only
New Zealand E&P company to have done so.

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY35

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYSustainability targets

The board Operational Risk and Sustainability Committee
annually reviews sustainability targets and performance.

Climate-related sustainability targets are reported below in
our TCFD report from page 38.

OUR RESULTS

Sustainability Targets for 2020–21

2020–21 Targets

Status

Maintain accessible information on the
benefits of Australasian regional gas
production (in line with Company strategy).

Advocate for the benefits of gas
exploration within the Australasian
region (e.g. through organisations)

Completed and ongoing.

Complete and ongoing.

Membership of Energy Resources Aotearoa, Business
Energy Council, and Business New Zealand.

Public submissions on relevant energy policy issues, such
as climate change and gas market settings.

Report transparently on financial and non-
financial value in Annual Report and online.

Completed and ongoing.

See https://www.nzog.com/sustainability/

http://www.nzog.com/investor-information/

and http://www.nzog.com/investor-information/company-reports/

Community investment budget
supporting focus areas

Financial support for Dunedin Curtain Bank, SALK Institute, Trees That Count.

See above, Supporting Our Community, Pages 30-34.

STEM education opportunities to support
diverse people in STEM education.

Financial support for Southland Science and Technology Fair.

Deliver staff wellbeing support

Completed and ongoing.

Includes annual flu vaccination & health check, Vitae workplace wellbeing,
wellness allowance, Intentional Generations workshops, Studio 41 seminars,
health insurance subsidy, parental leave bonuses, and parental sick leave.

Facilitate 1 x all-office volunteer opportunity

Planned volunteer day could not proceed but staff volunteered time at:

• Wellington youth sailing trust
Oranga Tamariki – foster care
•
SPCA – foster care
•
Beach clean up – Lyall Bay
•
School Boards of Trustees.
•

Completed, including:

Project paperless
Keep cups

•
•
• Waste/recycling bins, including organics compost bin.

Initiate office sustainability
improvement opportunities

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTY
OUR INTENTIONS

Sustainability Targets for 2021–22

Focus Area

Community

Reporting

Community

Target

Impact

Measured by

Maintain accessible information on
the benefits of Australasian regional
gas production (in line with Company
strategy), and advocate for the benefits
of gas exploration within the Australasian
region (e.g. through membership of
Energy Resources Aotearoa, Business
Energy Council and Business NZ).

Continue to report transparently on
financial and non-financial value
in Annual Report and online.

Continue to support community
activities aligned with focus areas
(supporting vulnerable families, science
education, mitigating impacts).

Increased social licence,
reduced regulatory risk

Publication of advocacy
where available.

Disclosure of relevant
performance and plans

This Annual Report

Social well-being,
improved stakeholder
support for our activity.

Value of investment.

Staff

Continue to deliver staff wellbeing support.

Staff wellbeing

Staff engagement survey

Community

Facilitate an all-office volunteer day.

Social wellbeing,
staff engagement

N/a

Environment

Initiate office sustainability improvement
opportunities and conduct staff survey.
Investigate a carbon emission audit and
reduction plan.

Reduced environmental
impact from head
office activities

Sustainability Report

New Zealand Oil & Gas Annual Report 2021SUSTAINABILTYTaskforce on
Climate‑related
Financial
Disclosures
(TCFD)
Statement

This section outlines the New Zealand Oil & Gas
approach to climate change. It addresses
themes recommended by the G20 Task Force on
Climate-Related Financial Disclosures (TCFD).

Statement from the Managing Director on TCFD and sustainability

New Zealand Oil & Gas is delighted to present our updated
Sustainability Report, including our TCFD (Taskforce on
Climate-related Financial Disclosures) Statement.

The point of sustainability reporting is so that our
stakeholders can understand two important dimensions of
our activity – our impact on our community, economy and
environment, and the risks associated with our business.
TCFD reporting is focused specifically on climate-related
financial risks.

On the first point, I am proud of the impact our business
has on the wider community, and the environment, and
the positive social difference we make. Our investors and
financial stakeholders are contributing to the wonderful
difference our industry makes, and I am delighted that they
can be rewarded for doing so.

In respect of climate-related financial disclosure, this
document records our risks in detail.

However, as I pointed out last year, relevant risks have
been carefully considered as a normal part of our
business for many years. The increasing social pressure
to report under the specific heading of climate might
be misunderstood by some readers to signify a change
in the risks themselves. We have long considered that
weather events may become more severe, that long
term demand and prices could change structurally, that
climate regulation may affect oil and gas investment,
or that access to capital might be more expensive as
financiers seek alternative sectors.

As a result of the TCFD process, we explicitly identified
these risks as climate-related. Our risk management has
assessed all types of risks for as long as I have been an oil
and gas executive. We apply price sensitivity to investments,
we model extreme weather events and future markets for
our product as well as our likely access to capital.

The oil and gas business depends on shrewd capital
allocation and we manage our risks accordingly.

We are very clear: We accept the science of climate
change. We accept that the prudent and responsible
course for those of us who can make a difference is to
support decarbonisation. Prudence supports urgency in
this global challenge.

New Zealand Oil & Gas Annual Report 2021TCFDWe all have a role to play, and oil and gas businesses
need to be leaders because we have special knowledge
about energy impacts.

No one believes that the world can de-carbonise overnight.
There will be a transition. The starting point of our
transition should be to allocate carbon emissions to their
highest value uses. Any alternative course means more
carbon will be emitted for a given amount of economic
activity. The mathematical logic holds regardless of
whether policy-makers choose to respond by reducing our
economic (and human) activity, or to restrict responses to
only some countries.

The only mechanism ever proven to allocate resources
efficiently to their highest value uses is market price signals.
Emissions pricing is an efficient, fair and transparent tool
for reducing carbon emissions.

New Zealand Oil & Gas is making our own efforts regardless
of the price signals sent our way. We pay for trees to be
planted to offset our head office emissions. Our emissions
are modest, however. Scope 3 emissions, those from the oil
and gas products we produce, are best addressed through
transparent regulatory tools that allow users to make their
own decisions.

At New Zealand Oil & Gas, climate-related risks and
opportunities are considered in a structured way. Board-
level oversight is led by the board Operational Risk and
Sustainability Committee (ORSC).

Climate risk and opportunities are a standing item on the
ORSC agenda; Staff consider climate issues in monthly
HSSE meetings. The corporate risk register clearly identifies
climate-related risk.

A constant theme of our analysis is that natural gas and
LNG are crucial to reducing carbon emissions.

Emerging economies are looking to substitute lower carbon
alternatives like natural gas for higher emission coal. If we
can produce more natural gas in Australia for activities
such as electricity generation, then we help to reduce
emissions and help the transition to renewable energy and
electrification of industry and transport. Renewable energy
requires back up generation. Renewable energy systems
literally cannot meet modern energy needs without thermal
energy. Natural gas is the best form of thermal back up
available in New Zealand or Australia.

Plants such as Kupe in south Taranaki, New Zealand, and
the Amadeus basin in Australia’s Northern Territory, produce
natural gas as ethically as just about anywhere on Earth.
Labour standards and environmental performance compare
favourably to third world coal mines, or the world's lithium
and cobalt sources (key ingredients in batteries).

Our activities help to make the world a better place.

The following disclosures help to explain how.

Andrew Jefferies
Managing Director

New Zealand Oil & Gas Annual Report 2021TCFDOur action

WE WILL

Actively identify, manage and mitigate
material climate risk to our business,
and report our governance, strategy,
risk management, and targets and
metrics transparently.

Actively promote the benefits of gas
as a lower-emitting transition fuel that
supports energy reliability and affordability,
and is a strong companion for the uptake
of renewables.

Employ carbon capture and storage
technology if it is viable.

Disclose our carbon emissions.

Minimise the carbon impact
of our own operations.

Respond meaningfully to stakeholder views
and expectations around climate change as
it pertains to our activities.

WHAT WE HAVE DONE

Aligned risk management processes,
governance and reporting with Taskforce for
Climate Financial Disclosures framework.

Analysed investment prices
using an internal price on carbon.

Developed and adopted a climate policy.

We planted trees to offset our
Scope 1 emissions.

Disclosed our climate risks.

Supported carbon pricing through
regulatory advocacy.

Produced ethical, low-emissions natural gas in
Australia and New Zealand to support renewable
generation and replace high carbon alternatives.

Our climate change policy is here:

www.nzog.com/dmsdocument/493

New Zealand Oil & Gas Annual Report 2021TCFD41

New Zealand Oil & Gas Annual Report 2021TCFDClimate risk governance

Compliance with NZX Code Recommendations

TCFD category

Recommendation

/ X

Explanation for non-compliance

Governance

Disclose the organisation’s governance around
climate-related risks and opportunities

Describe the board’s oversight of climate
related risks and opportunities

Describe management’s role in assessing and managing
climate-related risks and opportunities

BOARD OF DIRECTORS

¬ Board Charter

¬ New Zealand Oil & Gas Risk Management System

¬ ISO 31000 Risk Management

¬ NZX Listing Rules and Corporate Governance Code eg. Principle 6: Risk Management

¬ ASX Corporate Goverance Principles including Principle 7: Recognise and Manage Risk

¬ Reviews risk analysis received from ORSC and adjusts strategy accordingly.

BOARD OPERATIONAL RISK
AND SUSTAINABILITY COMMITTEE (ORSC)

¬ Reviews risks annually including changes derived
from Risk Owners and the management team

¬ Reports risk and opportunites to Board.

MANAGEMENT TEAM

¬ Regularly to review risks and update Risk Register

¬ Report Risk Register to ORSC.

STAFF HEALTH, SAFETY
AND ENVIRONMENT COMMITTEE

¬ Meets weekly and monthly to identify and review
HSE incidents (actual or potential) and where
appropriate feed these into the Risk Register.

New Zealand Oil & Gas Annual Report 2021TCFDThis governance process

Specific measurable goals

The board has responsibility for reviewing all risks, including
climate-related risk and opportunities, and ensuring these
are appropriately managed to support delivery of our
business strategy.

¬ Make climate risks identifiable as climate-related risks

in the corporate risk register.

¬ Assess the company’s emissions and purchase trees

that offset carbon emitted by the Company’s activities.

¬ Assess investment opportunities using a shadow

THE BOARD’S CHARTER REQUIRES IT TO:

carbon price.

“ Understand the material risks faced by the
Company and ensure the Company has appropriate
risk management strategies and control measures
in place and is actively managing these.”

The process for considering risks is set out in the
risk management system framework. The framework
aligns with International Standard ISO 31000 Risk
Management – Principles and Guidelines and meets the
requirements of the ASX Corporate Governance Principles
and Recommendations, Principle 7: Recognise and
Manage Risk.

The board Operational Risk and Sustainability Committee
committee monitors risk, including climate risk, and
reviews the Company’s policies, including its response to
climate change, and climate-related risk.

A series of formal policies and risk management
processes relate to climate issues, including the climate
change policy, environment policy, risk management
framework and sustainability framework.

The Company’s risk register assesses climate impacts,
both as stand-alone risks, and as risks embedded in
individual management plans.

For example, asset management plans assess risks of
increased severe weather impacts and coastal erosion
effects that are forecast effects of climate change.

Management is responsible for identifying, assessing and
managing risk and reporting this to the board through the
ORSC. Management risk owners continuously identify and
manage risks. Management reviews the corporate risk
framework including the risk register, regularly. The ORSC
receives a report on updates to the register.

The Health, Safety and Environment committee meets
weekly and more formally monthly to identify and review
actual or potential HSE incidents, including those at
partner operated facilities. These reviews are integrated
into the risk register, where appropriate. Climate-related
risks may be raised in these processes.

Members of the Management Team, including the
chief financial officer and general counsel, undertook
TCFD training.

At an operational level, responsibility for day-to-day
oversight of climate risk and opportunity (including
managing climate objectives and targets that sit within the
Sustainability Framework), rests with the general counsel.

All corporate charters and policies are available in the
corporate governance section of the Company’s website.

The Operational Risk and Sustainability Committee charter is here:

www.nzog.com/dmsdocument/370

Environment policy is here:

www.nzog.com/dmsdocument/491

The risk management system framework is here:

www.nzog.com/dmsdocument/1-risk-management-procedure

New Zealand Oil & Gas Annual Report 2021TCFDClimate risk strategy

Compliance with NZX Code Recommendations

TCFD category

Recommendation

/ X

Explanation for non-compliance

Strategy

Disclose the actual and potential impacts of climate-related risks
and opportunities on the organisation’s businesses, strategy
and financial planning where such information is material.

Describe the climate related risks and opportunities the organisation
has identified over the short, medium and long term.

Describe the impact of these risks on businesses,
strategy and financial planning.

Describe the resilience of the organisation’s strategy,
taking into consideration different climate related
scenarios including a 2ºC or lower scenario.

Relevant risks are shown in the table below, in the
Risk management section on Page 47.

Climate change and climate-related financial and regulatory
behaviour creates opportunities for production of natural
gas. The Company preferences natural gas in its strategic
planning processes.

Gas demand is expected to increase
between now and 2050.

While global gas demand fell by 2.5%, or 100 billion cubic
metres, in 2020 as a result of the pandemic suppressing
demand, gas trade globalisation increased. Globally, natural
gas consumption increased from around 44,000PJ of gas
in 1990 to around 75,000 less than 30 years later, in 2018.
Demand is expected to grow at an average 1.7% annual rate
between 2022-2024, driven by both economic activity and
fuel switching from coal and oil.*

The IEA identifies growing interest in Asian markets for
diversified price risk management strategies. Orders for LNG
carrier vessels and new LNG import capacity are relatively
strong in 2020. “Nearly two-thirds of new regasification
capacity under development is located in growth markets in
Asia, where new infrastructure is required to accommodate
increasing gas demand,” the IEA says.†

Regulation is likely to increase in New Zealand and Australia,
carbon prices are likely to rise, and limits are likely to be
imposed on emissions from domestic consumption.

In anticipation of higher carbon prices, the Company applies
a shadow carbon price to screening new investments and
impairment testing existing assets.

Regulatory risks are somewhat mitigated by diversifying
jurisdiction risk.

The Company offsets its emissions. Scope 3 emissions,
which are emissions of carbon from use of the oil and
gas that the Company sells, are mitigated in New Zealand
through a tradable carbon price instrument.

* https://www.iea.org/reports/gas-market-report-q3-2021

† IEA (2020), World Energy Outlook 2020, IEA, Paris https://www.iea.org/reports/gas-market-report-q3-2021

New Zealand Oil & Gas Annual Report 2021TCFDResilience in alternative scenarios

In all scenarios, we expect to see swiftly increased demand
for gas in Asian markets. A more rapid decarbonisation
outlook implies a faster switch to gas in Asian markets,
and reduced or stable use in Australia and New Zealand.
In Indonesia we see a faster switch to natural gas from coal,
and steady demand for oil as the economy develops.

Impairment testing is applied to all assets. Resilience to
physical risks, such as weather events, is a normal part of
engineering risk management.

The Company monitors the International Energy
Agency’s World Energy Outlook and forecasts such as the
BP Energy Outlook.

To further support our modelling assumptions, we seek
information from our JV partners, including scenario
analysis where undertaken, following the structure of TCFD.

New Zealand Oil & Gas Annual Report 2021TCFDClimate risk management

Compliance with NZX Code Recommendations

TCFD category

Recommendation

/ X

Explanation for non-compliance

Risk
management

Disclose how the organisation identifies, assesses
and manages climate-related risks

Describe the process for identifying and assessing climate risks.

Describe processes for managing climate risks.

Describe how processes for identifying, assessing and
managing are integrated into overall risk management.

How we identify, assess and manage climate-related risks

How we model climate risk

For our New Zealand Kupe asset, New Zealand Oil & Gas uses
the New Zealand ETS market pricing for carbon emissions.
The Company has sufficient forward emissions credits for
future demand. As these were purchased at much lower
carbon prices, the emissions trading system carbon costs
represent a positive opportunity for competitive advantage.

For impairment testing prices are based on forward market
prices in July 2020, notwithstanding New Zealand Oil & Gas
holding carbon credits.

For investment into Amadeus basin assets, New Zealand
Oil & Gas uses an internal price to test economics of
investments based on market prices in other comparable
international regimes. Expectations of forward prices reflect
the market consensus on the likelihood and level of future
carbon charges and market demand. Potential increased
carbon pricing or reduced prices are part of the Company’s
sensitivity testing.

For example the Californian-Quebec May auction prices
were USD18.80 per tonne of carbon. Korean prices were
around USD35 per tonne prior to COVID-19 effects, and
the European ETS units were trading historically at around
USD30 per tonne prior to COVID-19 effects (although after
changes to the European scheme and a colder than normal
winter heating season, carbon prices increased to ca.
USD65 per tonne.)

Currently, New Zealand Oil & Gas tests Australian investment
economics with a price of USD20 per tonne, with scenarios
testing this price increasing to USD60 per tonne by 2040.

The Company’s Risk Management System Framework
applies consistent and comprehensive risk management
practices. Climate risks are recorded in the central risk
register, which considers the risks, reviews the controls,
assigns ownership of risk and tracks treatment plans.

Climate risks are identified on an ongoing basis.
Consideration is given to industry and peer information and
expertise, shareholder and community feedback, regulatory
changes, and analysis by our own staff and contractors.

Risk assurance and oversight of climate risk management
is provided through internal review by the board Operation
Risk and Sustainability committee.

The Risk Management System Framework is described in
the corporate governance section on pages 76–77.

Responsibility for identifying, documenting and managing
risks and opportunities is delegated to the appropriate level
of management.

The general counsel has responsibility for climate risk.
Asset managers are responsible for risks to individual
assets. The chief financial officer has management
responsibility for financial and investment risks associated
with climate change.

Potential risks to New Zealand Oil & Gas from climate
change are assessed under the following headings:

¬ Policy and Legal,
¬ Physical (acute and chronic),
¬ Financial and Market,
¬ Social/Political/Regulatory, and
¬ Technological.

All these risks have potential financial and operational
implications due to lost profitability and increased delays.

New Zealand Oil & Gas Annual Report 2021TCFDThe table uses the following time horizon categories: Short (S): 0–5 years, Medium (M) 5–10 years, Long (L) 10+ years.

Risk type

Description

Time

Control

Non physical risks

Policy and legal risks

Litigation against companies and/or
directors on climate grounds (claiming
causation or seeking greater action to
mitigate effects) could have reputational,
development and operating cost impacts.

Changing regulations including bans and restrictive
regulations, taxes and emissions limits across
all jurisdictions risk viability of projects.

S M L

Board and management understand their
fiduciary duties around climate change risk.

Internal processes, including due
diligence and joint venture processes,
identify and manage climate risk.

Monitor jurisdictions where we undertake
activities. Look to diversify jurisdictions to mitigate
changes to any individual regulatory environment.

Participate in New Zealand’s environmental
regulation framework through reputable
industry advocacy bodies, including Energy
Resources Aotearoa, Business New Zealand
and the Business Energy Council.

Develop evidence for the role of natural
gas in a net carbon-zero future.

Reputational and
social license risks

Stakeholder disengagement and oppositional
activism. Loss of social license, leading
to project delays or stoppages.

Recruitment and retention risk.

Risk of partner misalignment from divergent
approaches to carbon management.

S M L

Manage environmental performance
through sustainability framework.

Promote corporate values, including
our pride in our work.

Due diligence screening of commercial
opportunities and joint ventures.

Financial risks

Divestment movement increases, affecting
availability and cost of capital.

Insurance premiums increase. Potential for classes
of assets and locations to become uninsurable.

Capital cost increases if new environmental
standards require more expensive
supplies relative to alternatives.

Carbon pricing adopted across jurisdictions,
or inconsistently between them.

Changes to price and cost forecasts result
in stranded assets or reserves.

Physical assets, especially our coastally-
located gas production plant, may be subject to
increased frequency and intensity of extreme
weather events such as storms, flooding, coastal
inundation, lack of water availability, or slips.

Offshore drilling and production delayed or
shut in by increased weather events.

Physical risks

Acute & Chronic

S M L

Shadow price on carbon to sensitivity
testing in investment decisions.

Due diligence screening of commercial
opportunities and joint venture processes.

M L

Assurance relating to insurance forecasts.

S M L

Access to a range of funding options.

Reporting on ESG matters, including
TCFD compliant reporting.

Jurisdictional diversification to avoid impact
of sudden, unilateral changes, confiscation
or value destruction by regulation.

M L

Engineering anticipates environmental conditions.

Carbon policy provides for review of climate
issues in strategic and operational decisions.

Opportunities

Commercial

Global reduction in high carbon sources such
as coal is increasing demand for natural gas
as a lower carbon partner to renewables.

Reputational

Partnering with local communities to
support low carbon initiatives.

S M L

Strategic preference for natural gas.

Support for our joint venture partners
pursuing low carbon innovations on sites.

Ongoing investigation of investment
opportunities in lower emission technologies,
including carbon capture and storage.

S M L

Local relationships and discussions
about contributing to socially
desirable low carbon outcomes.

New Zealand Oil & Gas Annual Report 2021TCFD
Climate related
measurements and targets

Compliance with NZX Code Recommendations

TCFD category

Recommendation

/ X Explanation for non-compliance

Targets
and Metrics

Disclose the metrics and targets used to assess
and manage relevant climate-related risks and
opportunities where such information is material.

Disclose the metrics used by the organisation to
assess climate related risks and opportunities in
line with its strategy and risk management process.

Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse gas
emissions, and the related risks.

The Company does not disclose Scope 3 emissions, as the
information is not obtainable and the value is obviated by
the existence of a carbon emissions price in New Zealand.

Scope 1 and 2 CO2 emissions (metric tonnes).

7000

6000

5000

4000

3000

2000

1000

FY18

FY19

FY20

FY21

FY18

6,166

FY19

5,670

FY20

5,529

FY21

5,728

Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.

Scope 1 emissions relate to New Zealand Oil & Gas-
operated activities. Currently these include corporate office
activities only. These emissions are too small to be practical
to precisely measure. New Zealand Oil & Gas prepares
an annual estimate of carbon emissions from corporate
activity, using inputs such as electricity bills, air travel and
rental car use, waste disposal contracts, and government
figures for average building carbon intensity. The company
purchases trees through the Trees That Count marketplace
to offset these emissions. Air travel is offset through
purchases of carbon offsets with tickets.

Emissions from the Kupe gas fields and production station
are reported below using data gathered by the operator for
Emissions Trading Scheme reporting.

Cue Energy Resources separately compiles its own TCFD
reporting, which is available at www.cuenrg.com.au.

Metrics

Total greenhouse gas emissions (Metric tonnes CO2e)
New Zealand Oil & Gas surrenders credits under the
New Zealand Emissions Trading Scheme for its share of
production emissions. The company also offsets emissions
from its corporate head office by planting trees through the
Trees That Count initiative.

Read more about how we offset our emissions through
Trees That Count.

grow.treesthatcount.co.nz/funders/nzog/#plantings

New Zealand Oil & Gas Annual Report 2021TCFDOUR RESULTS

TCFD Targets for 2020–21

2020-21 Targets

Maintain TCFD statements and reporting
online and in the 2021 Annual Report.

Undertake analysis of an internal price
on carbon to inform TCFD risk and
commercial decisions by end FY 2021

Status

Complete.

Offset emissions from corporate
flights, annually.

Completed. Internal price applied to Kupe impairment testing and carbon price sensitivity
testing applied to Australian investment. See above, How We Model Climate Risk, Page 46.

Offset emissions from corporate head
office through Trees That Count

Completed and ongoing.

Initiate office sustainability
improvement opportunities

Completed, including:
•
•
• Waste/recycling bins, including organics compost bin.

Project paperless.
Keep cups.

OUR INTENTIONS

TCFD Targets for 2021–22

Focus Area

Reporting

Target

Impact

Measured by

Maintain TCFD statements
and reporting online and in
the 2022 Annual Report.

Disclosure of risks, impacts
and climate responsiveness

Emissions
offsets

Continue to offset emissions from
corporate flights and head office.

Makes the company close to net
zero carbon on Scope 1 emissions

Publication. This report, and
on the corporate website
at https://www.nzog.com/
sustainability/climate-change/

Emissions from flights are
calculated by the airline.
Contributions to Trees That
Count are publicly reported.

Emissions
reductions

Initiate ongoing office sustainability
improvement opportunities.

Ongoing emissions reductions

Staff sustainability survey.

Investigate a carbon emission
audit and reduction plan.

Potential reductions and
detailed reporting.

Publicly reported.

Review of opportunities and
projects to support or invest
in R&D or other low-carbon
commercial opportunities.

Potential reduction in overall
Scope 2 emissions reductions

Any new investment segment
is publicly reported.

New Zealand Oil & Gas Annual Report 2021TCFD
Corporate
Governance

New Zealand Oil & Gas Limited (the Company) is a limited
liability company registered under the New Zealand
Companies Act 1993.

The Company is listed and its shares quoted on the Main
Board equity security market operated by NZX Limited (NZX)
and on the official list of the Australian Securities Exchange
(ASX) as a foreign exempt entity. On both exchanges the
Company’s code is “NZO”.

This statement sets out the main corporate governance
practices adopted by the Company.

It is current to 30 June 2021 (except where a more recent
date is expressly stated) and has been approved by the board.

Corporate Governance Best Practice Codes

The Company reviews and assesses governance processes,
policies, and its compliance with corporate governance best
practice at least annually.

This includes assessing compliance with the NZX Listing Rules
and Corporate Governance Code 10 December 2020 (NZX code).

This section of the report is structured to report performance
against the principles of the NZX Code. Information presented
under each principle is followed by the NZX Corporate
Governance checklist.

In complying with the NZX Code, the Company’s corporate
governance outcomes also substantially meet the principles
of the FMA Corporate Governance Handbook. The Company is
compliant with these rules and guidelines except as otherwise
noted in the following pages.

This statement was approved by the board on 25 August 2021.

New Zealand Oil & Gas Annual Report 2021PRINCIPLE 1

Code of Ethical Behaviour

“ Directors should set high standards of ethical behaviour, model this behaviour and hold
management accountable for these standards being followed throughout the organisation.”

New Zealand Oil & Gas Limited practices the highest
standards of corporate governance and aspires to
continuous improvement in its governance performance.

The board has adopted the following overarching
governance objectives:

¬ Lay solid foundations for management and oversight.
¬ Achieve high standards of transparency and ethical and

responsible decision-making.
¬ Structure itself to add value.
¬ Make timely and balanced disclosure.
¬ Respect the rights of its shareholders.
¬ Safeguard integrity in its financial reporting.
¬ Recognise and manage risks.
¬ Encourage enhanced performance.
¬ Promote a corporate culture that upholds

agreed Company values.

Code of Business Conduct and Ethics

The Company’s Code of Business Conduct and Ethics sets
out values and ethics expected of the Company’s directors,
management, employees and contractors.

The Company strives to create a strong culture of
honesty, integrity, loyalty, fairness, forthrightness and
ethical behaviour.

Company representatives are required to:

¬ act with high standards of honesty, integrity, fairness,
and equity in all aspects of their involvement with the
Company;

¬ comply fully with the content and spirit of all laws

and regulations governing the Company’s operations,
business environment, and employment practices;
¬ not knowingly participate in illegal or unethical activity;
¬ actively promote compliance with laws, rules, regulations,
and the Company’s Code of Business Conduct and Ethics;
and

¬ not do anything that would be likely to negatively affect

the Company’s reputation.

The Code addresses in detail issues such as:

¬ conflicts of interest and corporate opportunities;
¬ protection and proper use of Company assets;
¬ confidential and proprietary information;
¬ intellectual property;
¬ competition and fair dealing;
¬ business entertainment and gifts;
¬ anti-bribery and corruption;
¬ cash koha;
¬ insider trading or tipping: and
¬ reporting Code violations.

The Code of Business Conduct and Ethics is available in the
corporate governance section of the Company's website at:

www.nzog.com/dmsdocument/487

New Zealand Oil & Gas Annual Report 2021Securities Trading Policies

Protected Disclosures (Whistleblower) Policy

The Company’s Securities Trading Policies set out
procedures about when and how an employee, dedicated
contractor or director can deal in Company securities.

These policies are consistent with the Financial Markets
Conduct Act 2013 and its insider trading procedures, and
they comply with the NZX listing rules.

The board ensures that these policies are up-to-date and
compliant at all times with changes to the law and to NZX
listing rules.

The Securities Trading Policies are available
on the Company’s website at:

For directors

www.nzog.com/dmsdocument/496

For employees and contractors

www.nzog.com/dmsdocument/497

The Company has a Protected Disclosures (Whistleblower)
Policy that provides a procedure for employees and
contractors to raise concerns or make disclosures about
what they observe happening at work.

The purpose is to facilitate disclosure and investigation
of serious wrongdoing. It provides a mechanism for
concerns being raised and dealt with at an early stage and
in an appropriate manner. The person making the report
is protected from any adverse consequences where the
concern is raised in good faith.

The protected Disclosures (Whistleblower) Policy is available in the
corporate governance section of the Company's website at:

www.nzog.com/dmsdocument/495

New Zealand Oil & Gas Annual Report 2021 Compliance with NZX Code Recommendations

NZX Code Recommendation

/ X Explanation for non-compliance

1.1 The board should document minimum standards of
ethical behaviour to which the issuer’s directors and
employees are expected to adhere (a code of ethics).

1.2 The code of ethics and where to find it should be

communicated to the issuer’s employees. Training should
be provided regularly. The standards may be contained
in a single policy document or more than one policy.

The code of ethics should outline internal reporting
procedures for any breach of ethics, and describe
the issuer’s expectations about behaviour,
namely that every director and employee:

a) acts honestly and with personal integrity in all actions;

b) declares conflicts of interest and proactively

advises of any potential conflicts;

c) undertakes proper receipt and use of corporate

information, assets and property;

d) in the case of directors, gives proper
attention to the matters before them;

e) acts honestly and in the best interests of the issuer,

shareholders and stakeholders and as required by law;

f) adheres to any procedures around giving and

receiving gifts (for example, where gifts are given
that are of value in order to influence employees and
directors, such gifts should not be accepted);

g) adheres to any procedures about whistle blowing (for

example, where actions of a whistle blower have complied
with the issuer’s procedures, an issuer should protect
and support them, whether or not action is taken); and

h) manages breaches of the code.

1.2 An issuer should have a financial product dealing
policy which applies to employees and directors.

New Zealand Oil & Gas Annual Report 2021PRINCIPLE 2

Board Composition & Performance

“ To ensure an effective board, there should be a balance of independence,
skills, knowledge, experience and perspectives.”

Samuel Kellner
Board Chair

Dr Rosalind Archer
Independent Director

Dr Rosalind Archer joined the board of New Zealand
Oil & Gas in November 2014. Dr Archer graduated with
a BE from University of Auckland. She holds a PhD in
Petroleum Engineering, and PhD minor in Geological and
Environmental Studies from Stanford University.

Dr Archer is currently Deputy Dean of the Faculty of
Engineering at the University of Auckland, and head of
its Department of Engineering Science. She will leave in
December to take up a new role as Head of the School of
Engineering and Built Environment at Griffith University
in Queensland.

Dr Archer is the President of Engineering New Zealand.
She runs a consulting practice as a reservoir engineer
with clients locally and internationally. She regularly
speaks on reservoir engineering topics at international
conferences. Dr Archer is also director of the University
of Auckland Geothermal Institute.

Samuel Kellner has held a variety of senior executive
positions with the Ofer Global Group since joining the Group
in 1980. He has been deeply involved in various Ofer Global
Group business lines, with a particular emphasis on offshore
oil and gas, shipping and real estate, and has advised the
Ofer Global Group companies on investments in a variety
of investment managers, hedge funds and private equity
funds. Most recently, Mr Kellner served as president of
Global Holdings Management Group (US) Inc where he led
North American real estate acquisition, development and
financing activities. Mr Kellner serves as a director of O.G.
Energy, O.G. Oil & Gas and Cue Energy Resources. He is also
an executive director of the main holding companies for
the Zodiac shipping group and Omni Offshore Terminals,
a leading provider of floating production, storage and
offloading (FSO and FPSO) solutions to the offshore oil and
gas industry.

As a member of the O.G. Energy Senior Management
Committee, he helps drive the strategy for the Ofer Global
Group’s energy activities. Mr Kellner graduated with a BA
degree from Hebrew University in Jerusalem. He has an MBA
from the University of Toronto, and taught at the University
of Toronto while working toward a PhD in Applied Economics.
Mr Kellner was appointed in December 2017. He is the Chair
of the Board of Directors and a member of the Nomination
and Remuneration Committee.

New Zealand Oil & Gas Annual Report 2021Marco Argentieri
Director

Alastair McGregor
Director

Marco Argentieri is Senior Vice President and General
Counsel for O.G. Energy, and a member of the Board of
Directors of both O.G. Energy and O.G. Oil & Gas.

As a member of the O.G. Energy Senior Management
Committee, he helps drive the strategy for the Ofer Global
Group’s energy activities. Mr Argentieri serves as the chief
legal counsel for the O.G. Energy Group, where he advises on
financing activities, acquisitions, and other commercial and
corporate matters.

Mr Argentieri has worked for the Ofer Global Group since
2006, where he previously served as chief legal counsel
responsible for Ofer Global Group finance activities, with
a particular focus on the Group’s offshore oil services and
shipping businesses.

Prior to joining Ofer Global, Mr Argentieri was an attorney at
the New York offices of Latham & Watkins LLP and Skadden,
Arps, Slate, Meagher & Flom LLP. He holds a B.A. from the
University of Rochester, a J.D. from New York University and
an MBA from Columbia University. Mr Argentieri joined the
board in July 2018.

Alastair McGregor has been actively involved in the oil & gas
sector since 2003. He is currently chief executive of O.G.
Energy, which holds the Ofer Global Group’s broader energy
interests, and O.G. Oil & Gas Limited, a company that holds
directly or indirectly oil & gas exploration and production
interests onshore and offshore. He leads the O.G. Energy
Senior Management Committee, driving the strategy for the
Ofer Global Group’s energy activities.

Mr McGregor is also the chair of Cue Energy Resources.
In addition, Mr McGregor is chief executive of Omni
Offshore Terminals Limited, a leading integrated provider
of floating production and storage and offloading (FPSO
& FSO) solutions to the offshore oil & gas industry. Omni’s
operations span the globe from New Zealand, Australia,
South East Asia, Middle East and South America.

Prior to entering the oil & gas industry Alastair spent 12
years as a banker with Citigroup and Salomon Smith Barney.
Alastair holds a BEng from Imperial College, London and an
MSc from Cranfield University in the UK. Mr McGregor joined
the board in October 2017.

Andrew Jefferies
Managing Director

Rod Ritchie
Independent Director

Andrew Jefferies joined New Zealand Oil & Gas in 2013.
He started his career with Shell in Australia after graduating
with a BE Hons (Mechanical) from the University of Sydney
in 1991, an MBA in technology management from Deakin
University in Australia, and an MSc in petroleum engineering
from Heriot – Watt University in Scotland.

Mr Jefferies is also a graduate of the Australian Institute
of Company Directors (GAICD), and a Certified Petroleum
Engineer with the Society of Petroleum Engineers.
He has worked in oil and gas in Australia, Germany, the
United Kingdom, Thailand and Holland.

Rod Ritchie joined the board of New Zealand Oil & Gas
in 2013. He graduated with a BSc, University of Tulsa.
He has 38 years of experience as a line manager and
a Health, Safety, Security and Environment executive in the
oil and gas industry – including being the corporate senior
vice president of HSSE at OMV based in Vienna.
He is a member of the Society of Petroleum Engineers.

New Zealand Oil & Gas Annual Report 2021Composition of the Board

Independent Directors

The number of directors is specified in the constitution as a
minimum of three and up to a maximum of seven. At least
two directors must be ordinarily resident in New Zealand.
Dr Archer and Mr Jefferies are ordinarily resident in
New Zealand.

The Company’s constitution was amended at the December
2019 Annual Meeting to align with new NZX Listing Rules
that require directors to retire at the third Annual Meeting
since their last appointment, or every three years (whichever
is longer). If eligible, each retiring director may offer
themselves for re-election.

Directors holding office during
1 July 2020 to 30 June 2021.

Directors

Date elected

Year first
appointed

Dr Rosalind Archer

2 November 2018

2014

Marco Argentieri

2 November 2018

2018

Andrew Jefferies

2 November 2018

2017

Samuel Kellner

2 November 2018

2017

Alastair McGregor

5 November 2020

2017

Rod Ritchie

12 December 2019

2013

ir
s

t A

ir
s

t A

The board has determined in terms of the NZX Listing Rules
that as at 30 June 2021, Dr R Archer and Mr R Ritchie are
independent directors as none of the factors described in
the NZX Code that may impact independence are applicable
to either.

Mr Kellner, Mr Argentieri, and Mr McGregor are not
independent because of their association with O.G. Oil & Gas
Limited, which is a substantial shareholder in New Zealand
Oil & Gas Ltd.

Mr Jefferies is not independent because he is the managing
director of New Zealand Oil & Gas.

Board Gender Composition

oin
t

e
nt

2018

2020

2021

Male

Female

New Zealand Oil & Gas Annual Report 2021Board skills

Role of the Board

The NZX Code recommends that, to ensure an effective
board, there should be a balance of independence, skills,
knowledge, experience and perspectives.

Board skills are set out in the accompanying chart. Board
members’ experience and knowledge are set out in the
biographical information in this section.

The board is responsible for the overall corporate
governance of the Company including strategic direction,
determination of policy, and the approval of significant
contracts, capital and operating costs, financial
arrangements and investments. In addition to statutory and
constitutional requirements, the board has a formal charter
that sets out its functions and structure.

The Board Charter is available in the corporate governance section
of the Company's website at

www.nzog.com/dmsdocument/371

Number of Directors with Specific Skillset

Oil & Gas

Finance & Economics

Engineering
& Operations

Exploration

M&A

Legal

S
h
a
r
e
h
o
d
e
r
s

ORS

Committee

ORS

Committee

M
a
n
a
g
e
m
e
n
t
a
n
d
N
S
o
t
a
ﬀ

R
e
m
min
u
n
eration
ation &

C
h

e
f

E
x
e
c
u
t
i
v
e

B
o
a
r
d

N
o

C
o
m

R
e
m
min
u
mittee
n
eration
ation &
C
ommit
omme

tee
rcial

C
ommit
omme

tee
rcial

HSSE

Executive Management

C
h

e
f

E
x
e
c
u
t
i
v
e

M
a
n
a
g
e
m
e
n
t
a
n
d
S
t
a
ﬀ

New Zealand Oil & Gas Annual Report 2021

Board Proceedings

Responsibilities of the Board

The board meets on a formal scheduled basis four times per
year, and holds other meetings as required.

As the pandemic has caused travel restrictions, the board
met by video conference call.

The board operates under a written charter which sets out
the roles and responsibilities of the board. The board charter
clearly distinguishes and discloses the respective roles and
responsibilities of the board and management.

The Commercial Committee establishes the agenda for each
board meeting.

A copy of the charter is available in the corporate governance
section of the Company’s website at

The chief executive keeps the board informed of material or
potentially material matters between meetings and provides
a weekly update on all relevant matters to the board.
A report is prepared for each meeting, which includes:

¬ updates on exploration and production activities and

financial management;

¬ summaries of new business opportunities;
¬ an update on human resources and facilities;
¬ an investor relations report;
¬ updates on stakeholder engagement, media and

sustainability; and

¬ other reports as relevant.

Key strategic issues and opportunities are also presented to
the board by management as part of each meeting.

To ensure that independent judgement is achieved and
maintained, the board has adopted a number of processes
in respect of its decision making. These include:

¬ any director may, with the prior consent of the chair of the
Audit Committee (or in the case of the Audit Committee
chair’s absence, the prior consent of the chair of the
board), obtain independent advice at the Company’s
expense where the director considers it necessary to carry
out their duties and responsibilities as a director. Such
consent shall not be withheld unreasonably; and

¬ directors must comply with the Directors’ Interests Policy.
It addresses disclosable interests, conflicts of interest,
director information obligations, board review and
determination obligations, and the rules for participation
in board deliberations in the event of a conflict of interest.

On appointment, each director has also acknowledged their
individual disclosure obligations.

www.nzog.com/dmsdocument/371

The procedure for nomination and appointment of directors
to the board is set out in the Charter.

The board is accountable for the performance of the
Company. The specific responsibilities of the board include:

¬ approving corporate strategy and performance objectives;
¬ establishing policies appropriate for the Company;
¬ oversight of the Company, including its control and

accountability systems;

¬ approving major investments and monitoring the return of

those investments;

¬ the overall risk management and control framework for

the Company and ensuring appropriate risk management
systems are established and applied;

¬ appointing, removing and evaluating the performance of

the chief executive;

¬ reviewing the performance of senior management;
¬ appointing and removing the company secretary;
¬ setting broad remuneration policy;
¬ reviewing implementation of strategy and ensuring

appropriate resources are available;

¬ nominating and appointing new directors to the board;
¬ evaluating the performance of the board, committees of

the board, and individual directors;

¬ reviewing and ratifying systems of risk management,

internal compliance and control, codes of conduct, and
legal compliance;

¬ approving and monitoring the progress of any major

capital expenditure, capital management and acquisitions
and divestitures;

¬ reviewing and ratifying HSSE Sustainability and

Operational Risk policies, the HSSE Sustainability and
Operational Risk Management System and monitoring its
implementation and performance;

¬ approving and monitoring financial and other reporting;
¬ ensuring that the Company provides continuous

disclosure of information such that shareholders and
the investment community have available all information
to enable them to make informed assessments of the
Company’s prospects;

¬ overall corporate governance of the consolidated entity;
¬ determining the key messages that the Company wishes

to convey to the market from time to time; and

¬ monitoring information commitments and continuous

disclosure obligations.

New Zealand Oil & Gas Annual Report 2021Delegation to Management

While the board has overall and final responsibility for the
business of the Company, it has delegated substantial
responsibility for the conduct and administration of the
Company’s business and policy implementation to the
chief executive and his management team. Board approved
policies and procedures are in place to set parameters for
the delegated responsibilities, including:

¬ Health and Safety Policy;
¬ Environment Policy;
¬ Climate Change Policy;
¬ Community Engagement Policy;
¬ Capturing Local Economic Benefit Policy;
¬ Code of Business Conduct and Ethics;
¬ Communications, Market Disclosure and Social Media

Policy;

¬ Securities Trading Policies for Directors, Employees and

Dedicated Contractors;
¬ Directors’ Interests Policy;
¬ Protected Disclosure (Whistleblower)Policy;
¬ Diversity Policy;
¬ Delegated Authorities Manual;
¬ Remuneration and Performance Appraisal Policy;
¬ Treasury Policy;
¬ Email and Internet Use Policy;
¬ Anti-Harassment Policy;
¬ Drugs and Alcohol Policy;
¬ Paid Parental Leave Policy; and
¬ Workplace Flexibility Policy.

These policies are reviewed regularly. The board may
establish other policies and practices to ensure it fulfils
its functions.

Delegated Authorities Manual

The board has established formal limits of authority to
provide clarity to the chief executive and management so
that they are in a position to carry out the business of the
Company efficiently and effectively within the parameters of
proper corporate governance.

The Delegated Authorities Manual set limits to financial
commitments and other decision-making, and is monitored
by the board through the audit function.

New Zealand Oil & Gas Annual Report 2021The board establishes measurable objectives for achieving
gender diversity. The board may establish measurable
objectives for other aspects of diversity, and will assess
annually both the set objectives and the progress in
achieving them.

The Nomination and Remuneration Committee makes
an annual assessment of success in achieving and
implementing the policy and the set objectives, then reports
to the board with recommendations.

The board has determined that the Company has
complied with the Diversity Policy and with the NZX Code
recommendation 2.5, which provides that an issuer should
have a written diversity policy, including:

¬ requirements for measurable objectives

for achieving diversity which, at a minimum, should
address gender diversity;

¬ annual assessment of both the objectives and

the entity’s progress in achieving them.

The Diversity Policy is available in the corporate governance section
of the Company's website at

www.nzog.com/dmsdocument/490

Diversity Policy

Through its Diversity Policy the Company is committed to an
inclusive workplace that embraces diversity.

The Company is proud of receiving a Rainbow Tick, as the
only New Zealand E&P company to have done so. Rainbow
Tick is a certification mark for organisations that complete
an LGBTQIA+ diversity & inclusion assessment process.

More about Rainbow Tick is reported at page 34.

The Company values, respects and leverages the unique
contributions of people with diverse backgrounds,
experiences and perspectives.

Diversity is about commitment to equality and treating all
individuals with respect, and includes, but is not limited to,
gender, age, disability, ethnicity, marital or family status,
religion, sexual orientation, gender identity or expression,
and cultural background.

The board monitors the scope and currency of the
Diversity Policy.

The policy provides that the Company will recruit from a
diverse pool of candidates, who will be considered with no
conscious or unconscious bias that might discriminate
against certain candidates. It takes into account the
domestic responsibilities of employees and adopts flexible
work practices.

The Company supports the determination of self-identity
by all employees including using the titles, names and
pronouns of their choice, and seeking advice from external
organisations to appropriately support staff.

Diversity Performance 2020-21
The following charts show gender diversity across the Company (excluding contractors) as at 30 June 2021, and compares that to numbers as at 30 June 2020.

2 021

2 020

2 021

2 020

2 021

2 020

Board

Senior
Executives

Other
Employees

Female

Male

Gender Diverse

New Zealand Oil & Gas Annual Report 2021MEASURABLE OBJECTIVES FOR 2020-21

Compliance with the Diversity Policy
With respect to the provision of the diversity policy, the board has determined that the Company has complied with the policy.

Objective

Status

Progress

Investigate pay parity and develop an
appropriate pay parity strategy.

Progressed and
ongoing

Promote staff engagement
with diversity initiatives.

Progressed and
ongoing

The Nominations and Remuneration Committee undertook a review,
which indicated that current pay parity and diversity strategy
settings are appropriate for the organisation in its current form.
Further role reviews and pay scales will be commissioned in the
forthcoming cycle.

The Diversity Committee created a cultural calendar, which
celebrates cultural events that have meaning to the Company’s
staff. These have been tied to all staff gatherings, and have
included Thanksgiving, St Patricks day, Burns night, Diwali, Matariki,
Christmas, and Pride Month.

The Company is a participant in Diversity Works and staff have
participated in workshops, webinars and networking opportunities
as well as the Rainbow Tick trainings and events

Promote awareness about and
engagement with pro-diversity policies.

Progressed and
ongoing

Pro-diversity initiatives have been promoted actively at all-staff
meetings and morning teas and directly communicated to staff.

Flexible working arrangements are available and several staff
have long-term flexible working arrangements. Increased use of
flexible working arrangements has been enabled following the
success of working from home during the pandemic lockdowns.

A flexible work guideline was drafted, which is a set of practices
and undertakings.

Staff have access to, and make use of, family sick leave.

Car-parking is allocated to assist a staff member with commuting
requirements that are determined by childcare requirements.

The company held an industry-wide forum to inform peers about
its journey to a Rainbow Tick, the lessons about how to champion
diversity in an energy organisation, and the steps we took.

Providing talent management support
for female leaders and further staff
specific development and training
opportunities, with a particular emphasis
on overcoming cultural challenges.

Completed and
ongoing

Leadership coaching and training courses have been arranged.

Training was affected by pandemic restrictions on travel, but the
Company has planned a further focus in the 2021-22 financial year.

Securing a Rainbow Tick.

Achieved

The Company was accredited a Rainbow Tick in September 2020.
Review for re-accreditation is required (we have received a pass
mark for this), along with ongoing training and initiatives.

New Zealand Oil & Gas Annual Report 2021MEASURABLE OBJECTIVES FOR 2020-21

¬ Promote ongoing engagement with diversity initiatives, policies and

guidelines to ensure they are continuing to evolve as needed.

¬ Provide talent management support for diverse and emerging leaders.
¬ Retain Rainbow Tick.

Compliance with NZX Code Recommendations

NZX Code Recommendation

/ X Explanation for non-compliance

2.1 The board of an issuer should operate under a written

charter which sets out the roles and responsibilities
of the board. The board charter should clearly
distinguish and disclose the respective roles and
responsibilities of the board and management.

2.2 Every issuer should have a procedure for the nomination

and appointment of directors to the board.

2.3 An issuer should enter into written agreements
with each newly appointed director establishing
the terms of their appointment.

Upon appointment to the Company’s board,
directors are advised of salient requirements.

Obligations such as disclosure of interests, managing
conflicts, and share trading are managed through policies.

Governance arrangements reflect that a majority
of the board is not independent.

2.4 Every issuer should disclose information about each director
in its annual report or on its website, including a profile of
experience, length of service, independence and ownership
interests and director attendance at board meetings.

2.5 An issuer should have a written diversity policy which
includes requirements for the board or a relevant
committee of the board to set measurable objectives
for achieving diversity (which, at a minimum, should
address gender diversity) and to assess annually both the
objectives and the entity’s progress in achieving them.
The issuer should disclose the policy or a summary of it.

2.6 Directors should undertake appropriate training
to remain current on how to best perform
their duties as directors of an issuer.

Independent directors received detailed advice and training
about their responsibilities during multiple previous takeover
offers and a scheme of arrangement, including training and
advice about the specific scheme proposed in 2019 and their
role in negotiating the scheme. That training and advice was
specifically implemented during the scheme process.

Further training about how to best perform their duties as
directors was not facilitated by the Company during the
reporting period as the Company has robust policies around
director duties and the board’s skills are appropriate.

New Zealand Oil & Gas Annual Report 2021NZX Code Recommendation

/ X Explanation for non-compliance

2.7 The board should have a procedure to regularly assess

director, board and committee performance.

The board charter states: The board shall undertake regular
reviews of the operations and performance of the board, its
committees and individual directors. Where appropriate, the
board may engage external consultants to conduct this review.

In addition to compliance with each committee’s
individual charter, the review shall consider:

¬ the skills required by the board, including

processes to satisfy any skill-gaps;

¬ how the required skills are best represented on the board; and
¬ the process for identifying suitable candidates

for appointment to the board.

Reviews are undertaken by way of a questionnaire submitted
to directors. Responses are collated and reviewed by the
chair of the Nominations and Remuneration Committee or
delegated representative. The chair of the Nominations and
Remuneration Committee (or delegated representative)
then undertakes an overall review on the outcomes and
produces a written report which is reviewed by the full
board. Individual director performance is addressed by
one-on-one review with the chair of the Nominations and
Remuneration Committee (or delegated representative).

For this financial year the above process has been followed, led
by the chair of the Nominations and Remuneration Committee.

2.8 A majority of the board should be independent directors.

Two out of six directors are independent.

In considering the appropriate board composition account will be
given to whether or not the company has a shareholder that owns
a majority of the shares in the company. The board composition
is a consequence of the Company’s ownership structure.

2.9 The chair of the board should be independent.

If the chair is not independent, the chair and
the CEO should be different people.

The chair is not independent, reflecting the
ownership structure of the Company.

The chair and CEO are different people.

New Zealand Oil & Gas Annual Report 2021
PRINCIPLE 3

Board Committees

“ The board should use committees where this will enhance its effectiveness
in key areas, while still retaining board responsibility.”

Meetings during pandemic travel restrictions

Audit Committee

Scheduled committee meetings were held by video
conference.

Board Committees

The board has four formally constituted committees to
provide specialist assistance with defined aspects of
governance:

¬ the Audit Committee;
¬ the Commercial Committee;
¬ Operational Risk and Sustainability Committee (ORS); and
¬ the Nomination and Remuneration Committee.

Each committee has a written charter setting out its roles and
responsibilities, which is available from the Company’s website at

www.nzog.com/investor-information/shareholders-information/

corporate-governance/

Alastair McGregor (Chair)
Dr Rosalind Archer
Rod Ritchie

What the Committee does
The Audit Committee, together with the chief executive,
is responsible to the board for overseeing the financial and
internal controls, financial reporting and audit practices of
the Company.

The chair of the Audit Committee also oversees and
authorises any trading in securities by directors, employees
or contractors.

Restrictions on trading are outlined in the Securities Trading
Policy and Guidelines for Directors, and in the Securities
Trading Policy and Guidelines for Employees and Dedicated
Contractors.

Committee composition
As recommended by the NZX Code, a majority of members
of the audit committee are independent and none are
executive directors. The chair of the audit committee,
Mr McGregor, is not the chair of the board, and has a
financial background.

Committee meetings
Meetings of the Audit Committee are held at least twice a year.

The chair of the board, directors, the chief executive and
other staff may be invited by the Audit Committee to attend
these meetings.

The Audit Committee can meet with the external auditors and
senior management in separate sessions. An annual process
considers engagement of auditors, having regard to the
auditors’ independence and policies for rotation of partners.

Read the Audit Committee Charter here

www.nzog.com/dmsdocument/372

New Zealand Oil & Gas Annual Report 2021Committee composition
As recommended by the NZX Code, the Committee
comprises at least three non-executive directors of the
board. The chair, Dr Archer, is independent.

The Committee meets as required, at least twice per year,
and it may invite executive directors or management to
participate in all or part of meetings.

NZX Code Principle 3.4 recommends that a majority of the
nomination committee should be independent directors.
Half of the committee is independent, and the committee is
chaired by an independent director. A majority of the board
is not independent and the composition of the committee
also reflects this.

Read the Committee's Charter here

www.nzog.com/dmsdocument/373

The Nominations and Remuneration Committee

Dr Rosalind Archer (Chair)
Marco Argentieri
Samuel Kellner
Alastair McGregor
Rod Ritchie

What the Committee does
The Nomination and Remuneration Committee is
responsible to the board for:

¬ providing recommendations to the board in relation
to the director selection and appointment practices
of the Company;

¬ evaluation and remuneration of directors and board

succession;

¬ Chief Executive remuneration, appointment, performance

criteria and review;

¬ reviewing and providing recommendations to the board in

relation to:
- senior executive and key staff succession plans;
- the Company’s remuneration, recruitment,

retention and termination policies and procedures for
all employees;

- implementing the Company’s Diversity Policy and

achieving any associated measurable objectives; and
- other relevant matters identified from time to time by

the board.

New Zealand Oil & Gas Annual Report 2021Operational Risk and Sustainability Committee

Rod Ritchie (Chair)
Dr Rosalind Archer
Andrew Jefferies
Alastair McGregor

What the Committee does
The Operational Risk and Sustainability Committee’s
role is to advise and support the board in meeting its
responsibilities in relation to health, safety, security,
environment, sustainability, operational risk and community
engagement matters arising out of the activities and
operations of the Group.

The committee’s responsibilities include:

¬ Monitoring the performance and effectiveness of the
Company’s Risk Management Framework, compliance
with the framework and the adequacy of risk controls.

¬ Setting, reviewing and agreeing operational risk and

sustainability policies, practices, frameworks and targets,
including performance against these, including:
- Sustainability performance framework, targets and

reporting;

- Community and iwi engagement;
- Environmental policies and programmes including

Climate Change responses.

¬ Seeking assurance of the Company’s compliance

with all operational risk and sustainability legislative
requirements, licence conditions and stakeholder
commitments.

¬ Supporting the board and management in defining the

Company’s operational risk and sustainability objectives.
¬ Working with management to agree how operational risk
and sustainability objectives will be achieved, monitored
and reviewed.

¬ Supporting a culture of continuous improvement by

reviewing significant incidents and system failures and
monitoring actions and measures to minimise recurrence.
¬ Ensuring the necessary skills are obtained and maintained
to achieve operational risk and sustainability objectives.

¬ Providing leadership to the board and support the

Company in aspiring to proactively manage ORS issues.

¬ Ensuring that significant issues are brought to the

attention of the full board.

Company policies, frameworks and strategies relevant
to this Committee:

¬ Health and Safety Policy
¬ Environment Policy
¬ Capturing Local Economic Benefits Policy
¬ Community Engagement Policy
¬ HSSE Management Framework and Management System
¬ Risk Register
¬ Risk Management Procedure
¬ Sustainability Framework
¬ Climate Change Policy

Committee composition
As recommended by the NZX Code, the Committee
comprises at least three board members. The chair is
a non-executive director.

Read the committee's charter here

www.nzog.com/dmsdocument/370

Commercial Committee

Alastair McGregor
Andrew Jefferies
Marco Argentieri

What the Committee does
The committee exists to allow management to bring
commercial opportunities to a state that they can be
brought to the full board for final investment decision.

The committee may approve routine budgets and
contracts, including due diligence budgets, for projects
and opportunities.

The committee includes the chief executive and one
director appointed by the board. Other directors may be
invited to join the Committee from time to time with the
approval of the board.

The Committee meets twice weekly as required, and
generally resolves its business by email or teleconference.

Read the committee's charter here

www.nzog.com/investor-information/shareholders-information/

corporate-governance

New Zealand Oil & Gas Annual Report 2021Board and Committee meeting attendance

1 July 2020 to 30 June 2021

Director

Board meetings

Audit Committee

Nominations and
Remuneration Committee

Operational Risk and
Sustainability Committee

Samuel Kellner

Dr Rosalind Archer

Marco Argentieri*

Andrew Jefferies

Alastair McGregor

Rod Ritchie

6/6

2/2

1/1

2/2

*Appointed to Nominations and Remuneration Committee April 2021.
The Commercial Committee meets as required, most weeks. Members attend all meetings.

Compliance with NZX Code Recommendations

2/2

1/2

2/2

NZX Code Recommendation

/ X Explanation for non-compliance

3.1 An issuer’s audit committee should operate under a written charter.

Membership on the audit committee should be majority independent and
comprise solely non-executive directors of the issuer. The chair of the audit
committee should be an independent director and not chair of the board.

3.2 Employees should only attend audit committee meetings

at the invitation of the audit committee.

3.3 An issuer should have a remuneration committee which operates under
a written charter (unless this is carried out by the whole board). At
least a majority of the remuneration committee should be independent
directors. Management should only attend remuneration committee
meetings at the invitation of the remuneration committee.

3.4 An issuer should establish a nomination committee to recommend

director appointments to the board (unless this is carried out by the
whole board), which should operate under a written charter. At least a
majority of the nomination committee should be independent directors

3.5 An issuer should consider whether it is appropriate to have

any other board committees as standing board committees.
All committees should operate under written charters.

3.6 An issuer should identify the members of each of its

committees, and periodically report member attendance.

The board should establish appropriate protocols that set out the procedure
to be followed if there is a takeover offer for the issuer, including any
communication between insiders and the bidder. The board should disclose the
scope of independent advisory reports to shareholders. These protocols should
include the option of establishing an independent takeover committee, and the
likely composition and implementation of an independent takeover committee.

The committee is chaired by an independent
director. A majority of the board is not
independent and the composition of the
committee reflects the composition of the
board as a whole.

No formal takeover committee exists. The
Company and its staff are highly familiar with
the processes and appropriate protocols.

The board formed a committee of independent
directors to respond to multiple takeover offers
and a proposed scheme of arrangement in
recent years. There have been no board changes
since then and the experience and processes
for responding to takeovers are part of the
Company’s ongoing institutional knowledge.

New Zealand Oil & Gas Annual Report 2021PRINCIPLE 4

Reporting & Disclosure

“ The board should demand integrity in financial and non-financial reporting,
and in the timeliness and balance of corporate disclosures.

Communications, Market
and Social Media Disclosure Policy

The Communications, Market Disclosure and Social Media
Policy’s purpose is to:

¬ reinforce the Company’s commitment to the continuous

disclosure obligations imposed by law and stock exchange
rules;

¬ describe the processes to ensure compliance;
¬ outline the Company’s general communications approach

aimed at ensuring timely and accurate information is
provided to shareholders, market participants and market
observers; and

¬ provide ground rules for the use of social media.

The Communications, Market and Social Media Disclosure Policy
is available in the corporate governance section of the Company's
website at:

www.nzog.com/dmsdocument/488

See also Principle 8, Shareholders’ Rights, on pages 80–81.

Reports and policies are easily available

The Company publishes an Annual Report and quarterly
reports. Condensed financial statements are announced for
the half-year.

Security holders can elect to receive the Annual Report
in printed or electronic format. Quarterly reports are
published electronically.

These documents are also posted on the Company’s website
in a clearly marked Company Reports section, which is
located within the investor section. A link to the latest
quarterly and annual reports is provided prominently on the
front page of the website.

Along with reports, the company’s Code of Business Conduct
and Ethics, board and committee charters and the policies
recommended in the NZX Code are published in the Corporate
Governance section of the website:

www.nzog.com/investor-information/shareholders-information/

corporate-governance

New Zealand Oil & Gas Annual Report 2021Continuous Disclosure

Non-financial reporting

New Zealand Oil & Gas is committed to meeting
the continuous disclosure obligations required by the
Listing Rules.

The Listing Rules contain general and continuous disclosure
requirements based on principles which encompass investor
protection, the need to protect the reputation of the market
and the interests of listed entities.

The company promptly and without delay releases to the
markets information that a reasonable person would expect
to have a material effect on the price of its securities.
The only exceptions to this disclosure principle are those
permitted under the Listing Rules.

The board is responsible for monitoring commitments and
continuous disclosure obligations and initiating action as
warranted to ensure reporting is fair and reasonable.

The chief executive is accountable for the release
of information.

The continuous disclosure policy is found in the wider
Communications, Market Disclosure and Social Media Policy,
available online here:

www.nzog.com/dmsdocument/488

The Company publishes a sustainability report as part
of the Annual Report. Sustainability reporting includes
material exposure to environmental, economic and social
sustainability risks and other key risks. It explains how the
Company manages those risks and how operational or non-
financial targets are measured.

Components of sustainability reported include:

¬ a summary of the company’s values;
¬ the Company’s sustainability and corporate responsibility

strategy;

¬ a summary of the company’s approach to stakeholder

engagement,

¬ summary of the company’s contribution to local

communities;

¬ a materiality matrix.
¬ relationship between business strategy and the UN’s

Sustainable Development Goals

The Sustainability section of this report is on pages 17–49

Information about the Company’s sustainability activity
is available at:

www.nzog.com/sustainability

Compliance with NZX Code Recommendations

NZX Code Recommendation

/ X Explanation for non-compliance

4.1 An issuer’s board should have a written

continuous disclosure policy.

4.2 An issuer should make its code of ethics, board and
committee charters and the policies recommended
in the NZX Code, together with any other key
governance documents, available on its website.

4.3 Financial reporting should be balanced, clear and objective.

An issuer should provide non financial disclosure at
least annually, including considering material exposure
to environmental, economic and social sustainability
factors and practices and other key risks. It should
explain how operational or non-financial targets are
measured. Non-financial reporting should be informative,
include forward-looking assessments, and align with
key strategy and metrics monitored by the board.

New Zealand Oil & Gas Annual Report 2021PRINCIPLE 5

Remuneration

“ The remuneration of directors and executives should be transparent, fair and reasonable.”

New Zealand Oil & Gas aims to attract, retain and
motivate professional staff capable of achieving the goals
of the Company.

The Company wants to encourage and reward its staff fairly
and appropriately within the market to reflect performance
and contribution.

Remuneration and Performance Appraisal Policy

The Remuneration Policy sets out a process to assess the
competitiveness of remuneration.

The Nomination and Remuneration Committee is
responsible for receiving and making recommendations
on remuneration policies for the chief executive and
senior managers based on assessment of relevant
market conditions and linking remuneration to the
Company’s financial and operational performance and
individual performance.

Executive remuneration may comprise salary, short-term
incentive payments and share options.

Options to acquire ordinary shares are issued in accordance with
Scheme Rules, which are available here:

www.nzog.com/dmsdocument/480-nzog-share-option-scheme-

rules-pdf

Director’s remuneration

At the 2008 Company Annual Meeting, shareholders
approved a resolution that director’s fees be set at a
maximum of $600,000 per annum, being the combined total
for all non-executive directors. There has been no increase
in the fee level since 2008 and in March 2016 the board and
directors volunteered a reduction in their fees.

OGOG representative directors have not yet drawn any fees
for their services.

Directors do not receive any performance-based
remuneration. Mr Jefferies does not receive fees because
he is the chief executive.

The total remuneration and other benefits to directors
for services in all capacities during the year ended
30 June 2021 was:

Dr R Archer

Mr M Argentieri

Mr A Jefferies*

Mr S Kellner

Mr A McGregor

Mr R Ritchie

$70,000

$836,073

$70,000

* Includes remuneration received as chief executive.

New Zealand Oil & Gas Annual Report 2021Directors Interests Policy

Directors ’Interests Register

Directors are required to recognise that the possibility
of conflict of interest exists, and are expected to declare
potential conflict of interest situations to the board and
manage conflicts of interest in accordance with the
Directors Interests Policy, the Code of Business Conduct and
Ethics, and the Company’s Constitution.

The Company maintains an interests register in compliance
with the Companies Act 1993, which records particulars of
certain transactions and matters involving directors.

The Directors’ Interests Policy is available in the corporate
governance section of the Company's website at:

www.nzog.com/dmsdocument/489

Directors Securities Interests

The interests of Directors in securities of the Company at
30 June 2021 were:

Direct
Interest

Indirect Interest

Mr A Jefferies

25,000

1,000,000 partly paid shares

885,506 share options

Directors interests recorded in the Interests Register of the
Company as at 30 June 2021 are detailed below.

Notices given or adjusted during the financial year ended
30 June 2020 are marked with an asterisk (*).

Each such Director will be regarded as interested in all
transactions between the Company and the disclosed entity.

Mr S Kellner

O.G. Oil & Gas Ltd

O.G. Energy Holdings Ltd

Omni Holdings Ltd

Cue Energy Resources Ltd

Mr M Argentieri

O.G. Energy Holdings Ltd

O.G. Oil & Gas Ltd

OGOG (Kohatukai) Ltd

OGOG (Otway)
Holdings Pty Ltd

OGOG (Otway) Pty Ltd

OGOG (1) Limited

OGOG (2) Limited

OGOG (3) Limited

OGOG (4) Limited

OGOG (5) Limited

OGOG (GOM 1) Inc.

OGOG (GOM Management) Inc.

Director

Vice-
President/
Treasurer/
Secretary/
Director

OGOG (Management) Limited

Director

OGOG (GOM NZ) Limited

Cue Energy Resources Ltd

Director

Dr R Archer

Engineering New Zealand

President

University of Auckland
Geothermal Institute

Director

Capricorn Solutions Ltd

Director

New Zealand Oil & Gas Annual Report 2021Mr A Jefferies

88 Energy Ltd

Shareholder

Mr A McGregor

Cue Energy Resources Ltd

Ansila Energy

Shareholder

Carnarvon Petroleum Limited

Shareholder

Central Petroleum

Shareholder

Cue (Ashmore Cartier) Pty Ltd

Director

Cue Energy Resources Ltd

Cue Exploration Pty Ltd

Cue Mahakam Hilir Pty Ltd

Cue Mahato Pty Ltd

Cue Sampang Pty Ltd

Cue Taranaki Pty Ltd

Director &
Shareholder

Director

Energy Resources Aotearoa

Director

Exxon Mobil Corporation

Shareholder

First Australian Resources Ltd

Shareholder

Horizon Oil

Oil Search Ltd

Pancontinental Oil

Talos Energy Inc

Shareholder

Tuatara Energy Limited

Director

Warrego

Mr R Ritchie

Cue Energy Resources Ltd

SPARC NZ consulting

Sparc (Aust) Pty Ltd

SacGasCo

Shareholder

Director

Shareholder

Cue Kalimantan Pte Ltd

Omni Holdings Limited

Omni Offshore
Terminals Pte Ltd

Omni Offshore Terminals
(Operations) Pte Ltd

Omni Offshore Terminals
(Manora) Pte Ltd

Omni Offshore Terminals
(Nong Yao) Pte Ltd

Omni Offshore Terminals
Malaysia Sdn Bhd

Gading Megah Sdn Bhd

Omni Offshore Terminals
(Operations) (Thailand) Co Ltd

Aurora FSO Ltd

Manora FSO Ltd

O.G. Oil & Gas
(Singapore) Pte Ltd

O.G. Oil & Gas Ltd

O.G. Energy Holdings Ltd

OGOG (Kohatukai) Ltd

OGOG (Otway) Pty Ltd

OGOG (Otway)
Holdings Pty Ltd

OGOG (1) Limited

OGOG (2) Limited

OGOG (3) Limited

OGOG (4) Limited

OGOG (5) Limited

O.G. Oil & Gas
(Oceania) Pte. Ltd

OGOG (GOM 1) Inc.

OGOG (GOM Management) Inc.

Director

President/
Director

OGOG (GOM NZ) Limited

Director

OGOG (GOM Management)
Limited

President/
Director

*^ Name change from previous declaration

New Zealand Oil & Gas Annual Report 2021Directors and Officers Liability Insurance

Employees Remuneration

The Company and its subsidiaries have arranged policies
of directors and officers ’liability insurance, which,
together with a deed of indemnity, seek to ensure to the
extent permitted by law that directors and officers will
incur no monetary loss as a result of actions legitimately
taken by them as directors and officers.

Chief Executive’s Remuneration

Salary

Benefits 1

Cash STI 2

LTI: Share Options 3

Total

592,813

39,899

172,119

31,242

836,073

1. Benefits include Kiwisaver at 3% and health insurance

2. 50% of the STI is based on company performance and 50% on personal

performance assessed by the Nominations and Remunerations
Committee. Half of the personal performance criteria is determined
by behaviours, and half by performance measures agreed at periodic
intervals throughout the year between the CEO and the Nominations and
Remunerations committee.

3. The chief executive participates in the employee share options scheme,
the Rules for which are available at www.nzog.com/dmsdocument/480-
nzog-share-option-scheme-rules-pdf

During the reporting period the chief executive was awarded 353,191
options. The value of the options in this table was calculated using
the Black Scholes valuation method. The scheme rules provide that
share options are allocated at the direction of the board. The board
allocated share options to the chief executive as a long term incentive
to promote retention and align the chief executive’s incentives with
those of shareholders.

During the year ended 30 June 2021, 17 New Zealand Oil
& Gas employees (including the chief executive) received
individual remuneration over $100,000.

$110,001 – $120,000

$140,001 – $150,000

$150,001 – $160,000

$160,001 – $170,000

$180,001 – $190,000

$190,001 – $200,000

$200,001 – $210,000

$210,001 – $220,000

$260,001 – $270,000

$290,001 – $300,000

$300,001 – $310,000

$330,001 – $340,000

$420,001 – $430,000

$520,001 – $530,000

$830,001 – $840,000

New Zealand Oil & Gas Annual Report 2021Short Term Incentive

Officers’ Securities Interests

Officers of the company may receive payments under a
short term incentive scheme.

50% of the STI is based on company performance and
50% on personal performance. Half of the personal
performance criteria is determined by behaviours, and
half by performance measures agreed at periodic intervals
throughout the year between the CEO and direct reports.

In 2020-21 the company factors affecting short term
incentive payments were

Acquisitions

Board approval to make binding offer on two
opportunities, execution of one sales and
purchase agreement, completion of one deal,

Financial
Performance

Reserves
replacement

Asset strategy

HSSE

Corporate
discretion

Overhead costs to meet budget.

2P reserves replacement.

Approval of board paper to
pursue specific strategies.

Sustainability targets met, influence of
process safety with operating JV partners.

Awarded on overall company
performance, share price performance
and oil and gas market conditions

The board may issue share options to senior managers
from time to time as part of a strategy to align their
interests with the interests of shareholders, and to assist
retention of key personnel. During the reporting period,
options were issued to senior manager/company officers
subject to the Scheme Rules available at www.nzog.com/
dmsdocument/480-nzog-share-option-scheme- rules-pdf

Each Option is an option to acquire one fully paid ordinary
share. Option holders will be able to exercise the Options
for a period of three years, from three years post issue.
The Board, in its discretion, fixes the exercise price,
typically at a premium to the market. Shares issued on
the exercise of Options will be issued on the same terms
and will rank equally in all respects with ordinary shares
currently on issue. Options do not carry voting rights or
any entitlement to receive dividends unless and until
exercised and converted to shares. The Board may permit
participants to exercise Options by way of a cashless
exercise, through which the company would only issue to
a participant the number of shares equal in value to the
difference between the exercise price otherwise payable
in respect of the Options and the market value of shares
at the time of exercise.

New Zealand Oil & Gas Annual Report 2021The interests of the current Company Officers (excluding
the Chief Executive) in securities of the Company at 30 June
2021 were:

Officer

Paris Bree

Dr Chris McKeown

Catherine McKelvey

Michael Wright

Number of shares
at 30 June 2020

Number of shares
at 30 June 2021

223,075
share options

361,488
share options

223,075
share options
and 7,500
ordinary shares

293,151
share options

351,288
share options

569,254
share options

351,288
share options

459,992
share options

Compliance with NZX Code Recommendations

NZX Code Recommendation

/ X Explanation for non-compliance

5.1 An issuer should recommend director remuneration
to shareholders for approval in a transparent
manner. Actual director remuneration should be
clearly disclosed in the issuer’s annual report.

5.2 An issuer should have a remuneration policy for

remuneration of directors and officers, which
outlines the relative weightings of remuneration
components and relevant performance criteria.

5.3 An issuer should disclose the remuneration arrangements
in place for the CEO in its annual report. This should
include disclosure of the base salary, short term incentives
and long term incentives and the performance criteria
used to determine performance based payments

New Zealand Oil & Gas Annual Report 2021PRINCIPLE 6

Risk Management

“ Directors should have a sound understanding of the material risks faced by the
issuer and how to manage them. The Board should regularly verify that the issuer has
appropriate processes that identify and manage potential and material risks.”

The Company does not have an internal audit function.
The process employed for evaluating and improving the
effectiveness of risk management and internal control
processes is:

¬ risks are formally reviewed by risk owners;
¬ management regularly reviews the risk register to ensure

adherence and continuous improvement;

¬ the ORS Committee regularly reviews the risk register,

with a particular emphasis on reducing key risks to as low
as reasonably practicable;

¬ for specific operational activities (including seismic

acquisition campaigns), the board reviews the intended
operational activity against activities related to elements
of the Company’s HSSE management framework to
ensure a compliant work programme, achieving desired
objectives safely; and

¬ after-action reviews of an operational phase of a project
are undertaken by the HSSE Advisor and project team, to
identify improvement in control processes. The after-
action review is then reviewed by the HSSE Committee.

The ORS Committee reviews specific risks at each meeting
of the committee and, at least annually, reviews the risk
register and framework document to satisfy itself that the
system continues to be sound.

The Board Operational Risk and Sustainability Committee Charter,
is available in the corporate governance section of the Company's
website at:

www.nzog.com/dmsdocument/370

Recognising and Managing Risk

The Company has a risk management system
framework, which outlines the Company’s approach to
risk management. It provides a framework for applying
consistent and comprehensive risk management practices
across all functional areas of the business.

The Risk Management System Framework is available in the
corporate governance section of the Company’s website at:

www.nzog.com/dmsdocument/1

A central Company risk register, which considers the risks,
reviews the controls, assigns ownership of a risk and
tracks treatment plans, is maintained. Risk assurance is
provided through a prioritised programme of audits and
internal review.

The board’s accountabilities include overseeing the
effectiveness of the risk management system framework,
monitoring compliance and approving polices and
systems for the ongoing identification and management
of risks. The board’s responsibilities include approving the
Company’s risk capacity and appetite, reviewing material
risks and reviewing the risk register. The board allocates
oversight of risk management in relation to health,
safety and environment and company operations to the
HSSE Committee and oversight in relation to accounting
standards and principles, financial statement compliance
and reliability and the audit process to the Audit Committee.

Responsibility for identifying, documenting and managing
risks and opportunities is delegated to the appropriate
level of management. The chief executive is responsible
for such things as integrating risk management into core
business processes, managing the Company’s corporate
strategic risks and opportunities, and regularly reviewing
the Company’s risk profile. The chief executive has ultimate
responsibility to the board for design, development and
improvement of the risk management framework system
and maintains the Company’s risk register.

New Zealand Oil & Gas Annual Report 2021TCFD Risk disclosure

Environment

The Company values our natural environment and is
committed to responsible management practices that
minimise environmental impacts arising from our activities,
using soundly-based science as the basis for all of our
environmental decisions.

All employees, contractors and joint venturers engaged
in activities under the Company’s operational control
are responsible for applying the Environment Policy. The
Company’s managers are responsible for promoting the
policy in non-operated joint ventures.

The full Environment Policy is available in the corporate governance
section of the Company's website at:

www.nzog.com/dmsdocument/491

TCFD risks, and the framework for managing risk, are
comprehensively reported in the section beginning page 42
of this document.

Health and Safety

The Company values the wellbeing of employees,
contractors and communities in which we operate. It is
fully committed to the provision of a safe and healthy
environment for all employees, contractors and visitors to
New Zealand Oil & Gas sites, and to achieving a health and
safety aspiration of 'no one gets hurt’ and ‘no incidents’.

All employees, contractors and joint venture parties
engaged in activities under the Company’s operational
control are responsible for the application of the Health and
Safety Policy.

All employees are responsible for taking all practical steps
to avoid harm to themselves or to others in the workplace.
They must report any potentially hazardous situations,
maintain good housekeeping in all areas and comply with
safe work practices and procedures.

The Company’s managers are responsible for promoting the
Health and Safety Policy in non-operated joint ventures.

The full Health and Safety Policy is available in the corporate
governance section of the Company's website at:

www.nzog.com/dmsdocument/492

Compliance with NZX Code Recommendations

NZX Code Recommendation

/ X Explanation for non-compliance

6.1 An issuer should have a risk management framework for its

business and the issuer’s board should receive and review
regular reports. An issuer should report the material risks
facing the business and how these are being managed.

6.2 An issuer should disclose how it manages its health
and safety risks and should report on its health and
safety risks, performance and management.

New Zealand Oil & Gas Annual Report 2021PRINCIPLE 7

Auditors

“ The board should ensure the quality and independence
of the external audit process.”

Oversight of the Company’s external audit is the
responsibility of the Audit Committee, which also oversees
financial and internal controls and financial reporting.

The external auditor of New Zealand Oil & Gas is KPMG. The
Audit Committee reviewed the appointment in February
2021 and a new letter was approved.

An External Auditor Independence Policy was adopted by
Board in June 2018

Total fees paid to KPMG in its capacity as group auditor in FY
2021 were $252,000, which includes fees earned as Cue’s
auditor. Fees for audit services for New Zealand Oil & Gas
Limited were $116,000.

Total fees paid to KPMG for other professional services were
$407,000. Other services included:

¬ Tax advice.
¬ Tax compliance.
¬ Other assurance services.

The NZX and New Zealand Oil & Gas require rotation of Lead
Audit Partners every five years.

In 2020 the lead partner changed after a five year rotation.

KPMG has supplied the Company with a written statement
confirming its independence, and systems use to ensure
independence is maintained.

The external auditor attends the Annual Meeting to answer
questions from shareholders in relation to the audit.

New Zealand Oil & Gas Annual Report 2021Compliance with NZX Code Recommendations

NZX Code Recommendation

/ X Explanation for non-compliance

7.1 The board should establish a framework for
the issuer’s relationship with its external
auditors. This should include procedures:

(a) for sustaining communication with
the issuer’s external auditors;

(b) to ensure that the ability of the external auditors to
carry out their statutory audit role is not impaired,
or could reasonably be perceived to be impaired;

(c) to address what, if any, services (whether by type
or level) other than their statutory audit roles may
be provided by the auditors to the issuer; and

(d) to provide for the monitoring and approval by
the issuer’s audit committee of any service
provided by the external auditors to the issuer
other than in their statutory audit role.

7.2 The external auditor should attend the issuer’s
Annual Meeting to answer questions from
shareholders in relation to the audit.

7.3 Internal audit functions should be disclosed.

The Company does not have an internal audit function. The
process employed for evaluating and improving the effectiveness
of risk management and internal control processes is:

¬ risks are formally reviewed by risk owners;
¬ management regularly reviews the risk register to
ensure adherence and continuous improvement;

¬ the Operational Risk and Sustainability Committee regularly

reviews the risk register, with a particular emphasis on
reducing key risks to as low as reasonably practicable;

¬ for specific operational activities (including seismic acquisition

campaigns), the board reviews the intended operational
activity against activities related to elements of the Company’s
HSSE management framework to ensure a compliant work
programme, achieving desired objectives safely; and
¬ after action reviews of an operational phase of a project
are undertaken by the HSSE Advisor and project team,
to identify improvement in control processes. The after-
action review is then reviewed by the ORS Committee.

New Zealand Oil & Gas Annual Report 2021PRINCIPLE 8

Shareholder Rights & Relations

“ The board should respect the rights of shareholders and foster constructive
relationships with shareholders that encourage them to engage with the issuer.”

Shareholder participation

Website

The Company maintains a website, nzog.com,
where comprehensive information about its
activities is maintained.

Shareholders and interested parties can subscribe
via the website to receive notice of the
Company’s market announcements by email.

The dedicated investor relations section of the
website makes available share price information,
detail about shareholdings, statutory reports,
corporate governance information, and
market updates about the Company’s activities.

The Company encourages shareholder participation at
the annual meeting by inviting questions in advance
and discussion from the floor. Meeting agendas and
supporting documents such as presentations are posted
on the Company’s website.

In 2020, the annual meeting was held online so that
all shareholders could participate despite restrictions
on travel and Covid-19 alert levels. In 2021, a Special
Meeting of Shareholders was held online as well as in
person to facilitate full participation in the circumstances,
and the same procedures are expected to be in place at
future meetings, including the 2021 Annual Shareholder
Meeting, for at least as long as restricted travel conditions
are in place.

The Notice of Annual Meeting of Shareholders is posted
when it is available and at least 20 working days prior to
the meeting.

Shareholders can directly message the Company at any
time through the website and it aims to respond promptly.

The Company makes available key staff and directors to
answer questions about major initiatives.

The chief executive actively contacts shareholders who
seek to engage.

Shareholders have the right to vote on major decisions
that change the nature of the company’s activities. All
shares participate equally with other shares on the basis
of one share, one vote. There are no special voting rights
attached to any stock nor any restricted stock.

Voting is conducted by poll, not by show of hands, as
recommended by the NZX Code in order to respect the
principle of one share, one vote.

In 2020 the board undertook a listening tour with a number
of larger shareholders about the Company’s strategy.

New Zealand Oil & Gas Annual Report 2021Compliance with NZX Code Recommendations

NZX Code Recommendation

/ X Explanation for non-compliance

8.1 An issuer should have a website where investors
and interested stakeholders can access financial
and operational information and key corporate
governance information about the issuer.

8.2 An issuer should allow investors the ability to easily

communicate with the issuer, including providing the option
to receive communications from the issuer electronically.

8.3 Quoted equity security holders should have the right
to vote on major decisions which may change the
nature of the company in which they are invested.

8.4 If seeking additional equity capital, issuers of quoted
equity securities should offer further equity securities
to shareholders of the same class on a pro rata
basis, and on no less favourable terms, before further
equity securities are offered to other investors.

8.5 The board should ensure that notices of annual or special

meeting of shareholders are posted on the website as soon
as possible and at least 20 working days prior to the meeting.

New Zealand Oil & Gas Annual Report 2021Stock Exchange Listing

The Company’s securities are listed on the Main Board equity
security market operated by NZX Limited and the official list of
the Australian Securities Exchange (ASX) as a foreign exempt
entity. On both exchanges the Company’s code is “NZO”.

Securities On Issue

As at 25 August 2021 New Zealand Oil & Gas Limited had the
following securities

Listed Ordinary Shares

Options to acquire
ordinary shares

164,430,718

4,708,978

Options have been issued subject to the Scheme Rules available here:
www.nzog.com/dmsdocument/482

Each Option is an option to acquire one fully paid ordinary share. Option holders
will be able to exercise the Options within a three year period, three years post
issue. The Board fixes the exercise price of the Option. To date, there have been
two tranches of options issued, one has an exercise price of $0.61 per Option
and the other $0.65 per Option. Shares issued on the exercise of Options will
be issued on the same terms and will rank equally in all respects with ordinary
shares currently on issue. Options do not carry voting rights or any entitlement
to receive dividends unless and until exercised and converted to shares. In
the event of a change of control event, generally the vesting date of Options
will accelerate and the Options will become exercisable. Options are generally
forfeited by a participant on the occurrence of a lapse event, which includes
when the participant ceases to be an employee of the company.

Substantial Shareholders

Substantial Product Holder Notices are received pursuant to
the Financial Markets Conduct Act 2013. Shareholders are
required to disclose their holding to the issuer and the issuer’s
registered exchanges when:

¬ they have a substantial holding (5% or more of the listed

voting securities);

¬ subsequent movements of 1% or more in a substantial

holding from prior notification;

¬ any change is made in the nature of any relevant interest in

the substantial holding; and

¬ they cease to have a substantial holding.

According to the company’s records and Substantial Product
Holding Notices previously released to NZX, as at 30 June
2021, no Substantial Product Holder Notices were received
since the date of the last Annual Report, in respect of holdings
of ordinary shares of New Zealand Oil & Gas Limited.

Shareholder
Information

New Zealand Oil & Gas Annual Report 2021Top 20 Shareholders
As at 25 August 2021

Security Holder

O.G. OIL AND GAS SINGAPORE PTE. LTD

RESOURCE NOMINEES LIMITED

ACCIDENT COMPENSATION CORPORATION - NZCSD

SIK-ON CHOW

ASB NOMINEES LIMITED <414354 ML - A/C>

RIUO HAURAKI LIMITED

NEW ZEALAND DEPOSITORY NOMINEE LIMITED

RUIHUI ZHANG

AMALGAMATED DAIRIES LIMITED

TRIBAL NOMINEES LIMITED

RICHARD BRUCE LEES

AOTEAROA RENTAL ENTERPRISES LIMITED

CHIN-YI LIN & YU-CHING LIN-CHAO

MURRAY ION DENHOLM

ASB NOMINEES LIMITED

BNP PARIBAS NOMINEES (NZ) LIMITED - NZCSD

NEW ZEALAND OIL & GAS LIMITED - GNA TRUSTEE

ROY ANTHONY RADFORD

FNZ CUSTODIANS LIMITED

SHENG-FEI WANG

Totals: Top 20 Holders Of Ordinary Shares

Total Remaining Holders Balance

Substantial Shareholders

Substantial Product Holder Notices are received pursuant
to the Financial Markets Conduct Act 2013. Shareholders
are required to disclose their holding to the issuer and the
issuer’s registered exchanges when:

¬ they have a substantial holding (5% or more of the listed

voting securities);

¬ subsequent movements of 1% or more in a substantial

holding from prior notification;

¬ any change is made in the nature of any relevant interest

in the substantial holding; and

¬ they cease to have a substantial holding.

Units

114,876,016

3,334,000

3,149,936

2,140,000

2,085,500

1,500,000

1,264,906

845,000

706,334

599,500

564,000

556,595

540,000

515,500

514,585

510,386

443,151

392,000

362,094

340,000

69.86

2.03

1.92

1.3

1.27

0.91

0.77

0.51

0.43

0.36

0.34

0.33

0.31

0.27

0.24

0.22

0.21

135,239,503

29,191,215

82.25

17.75

According to the company’s records and Substantial
Product Holding Notices previously released to NZX,
as at 30 June 2021, no Substantial Product Holder Notices
were received since the date of the last Annual Report, in
respect of holdings of ordinary shares of New Zealand Oil &
Gas Limited.

New Zealand Oil & Gas Annual Report 2021Distribution of Security Holders
As at 16 August 2021

Range

1 – 99

100 – 199

200–499

500–999

1,000 – 1,999

2,000 – 4,999

5,000 – 9,999

10,000 – 49,999

50,000 – 99,999

100,000 – 499,999

500,000 – 999,999

1,000,000 – 9,999,999

10,000,000 Over

Rounding

Total

Total Holders

1,140

934

995

439

501

Units

742

1,615

6,830

796,488

1,292,725

3,071,297

2,912,138

9,484,717

4,755,531

8,406,377

5,351,900

13,474,342

114,876,016

4,198

164,430,718

% Issued Capital

0.48

0.79

1.87

1.77

5.77

2.89

5.11

3.25

8.19

69.86

0.02

100

Share Buy-backs

Direct Crediting of Dividends Payments

No shares were bought back in the period.

Trading Statistics

For the 12 months ended 30 June 2021

High

NZX (Trading Code NZO) cps, AUD

ASX (trading Code NZO, from
25 Sept 2020) cps AUD

0.750

Low

0.410

0.380

Track the share price and volumes at:

http://www.nzog.com/investor-information/shareholders-

information/share-price-graph/

Dividend Payments

No dividend payments have been made during the
financial year.

Dividend Reinvestment Plan

The Dividend Reinvestment Plan will not apply to future
dividends until advised otherwise.

To minimise the risk of fraud and misplacement of dividend
cheques shareholders are strongly recommended to have all
payments made by way of direct credit to their nominated
New Zealand or Australian bank account. This can be done
by contacting the share registry, Computershare Investor
Services Ltd, Private Bag 92119, Auckland, New Zealand.
Email: enquiry@computershare.co.nz

Share Registry

The Company’s share registry is managed by Computershare.

Shareholders with enquiries about share transactions, changes
of address can email them at enquiry@computershare.co.nz

Donations

The Company made a donation to:

¬ Dunedin Curtain Bank;
¬ Trees that Count
¬ Salk Institute

Details are shown at pages 31–34.

New Zealand Oil & Gas Annual Report 2021Consolidated
Financial
Statements

For the year ended 30 June 2021

Authorised on behalf of the New Zealand Oil & Gas Limited
Board of Directors on 24 August 2021:

Samuel Kellner
Chairman

Rosalind Archer
Director

New Zealand Oil & Gas Annual Report 2021

Notes

2021
$000

2020
$000

32,369

(10,927)

(9,779)

132

(4,334)

(1,831)

409

6,039

(33,354)

(5,288)

(75)

(38,717)

(273)

(32,951)

110,754

(7,044)

70,759

38,163

(10,724)

(11,652)

1,580

(4,555)

(3,069)

1,164

10,907

(5,458)

(2,690)

(199)

(8,347)

(7)

(242)

(249)

2,311

105,586

2,857

110,754

Consolidated Statement
of Cash Flows

For the year ended 30 June 2021

Cash flows from operating activities

Customer receipts

Production and marketing payments

Supplier and employee payments (inclusive of GST)

Interest received

Income tax paid

Royalties paid

Other

Net cash inflow from operating activities

Cash flows from investing activities

Exploration and evaluation expenditure

Oil and gas asset expenditure

Property, plant and equipment expenditure

Net cash outflow from investing activities

Cash flows from financing activities

Forfeited shares

Lease liabilities principal element payments

Net cash outflow from financing activities

Net (decrease)/increase in cash, cash equivalents and funds held in escrow

Cash and cash equivalents at the beginning of the year

Exchange rate effects on cash, cash equivalents and funds held in escrow

Cash, cash equivalents and funds held in escrow at end of the year

The notes to the financial statements are an integral part of these financial statements

New Zealand Oil & Gas Annual Report 2021CONSOLIDATED FINANCIAL STATEMENTSReconciliation of loss for the year to net cash inflow from operating activities

Notes

Loss for the year

Depreciation and amortisation

Deferred tax

Exploration expenditure included in investing activities

Asset impairment

Emissions Costs settled by units

Net foreign exchange differences

Unwind of discount on rehabilitation provision

Share based payments

Lease payments in financing

Other

Change in operating assets and liabilities

Movement in receivables

Movement in payables

Movement in inventories

Movement in financial assets

Movement in provisions

Movement in tax payable

Net cash inflow from operating activities

The notes to the financial statements are an integral part of these financial statements

2021
$000

(43,262)

6,760

1,326

35,247

246

7,655

169

358

184

(10)

(2,258)

1,204

(348)

(1,313)

6,039

2020
$000

(772)

8,410

454

3,615

2,856

(2,365)

414

341

(58)

1,142

(508)

207

(597)

(258)

(1,974)

10,907

New Zealand Oil & Gas Annual Report 2021CONSOLIDATED FINANCIAL STATEMENTSConsolidated Statement
of Comprehensive Income

For the year ended 30 June 2021

Revenue

Operating costs

Exploration and evaluation expenditure

Other income

Other expenses

Results from operating activities excluding amortisation,
impairment and net finance costs

Amortisation of production assets

Asset impairment

Net finance (loss)/income

(Loss)/profit before income tax and royalties

Income tax expense

Royalties expense

Loss for the year

Loss for the year attributable to:

Loss attributable to shareholders

Loss attributable to non-controlling interest (NCI)

Loss for the year

Other comprehensive income:

Items that may be classified to profit or loss

Foreign currency translation reserve (FCTR) differences

Asset revaluation reserve

Total other comprehensive (loss)/profit for the year

Total comprehensive (loss)/profit for the year is attributable to:

Equity holders of the Group

Non-controlling interest

Total comprehensive (loss)/profit for the year

Loss per share

Basic loss per share (cents)

Diluted loss per share (cents)

The notes to the financial statements are an integral part of these financial statements

Notes

2021
$000

36,007

(10,359)

(35,417)

887

2020
$000

37,270

(9,894)

(3,615)

1,980

(13,134)

(12,241)

(22,016)

13,500

(6,506)

(6,913)

(35,435)

(5,989)

(1,838)

(43,262)

(36,435)

(6,827)

(43,262)

(1,245)

1,144

(43,363)

(35,952)

(7,411)

(43,363)

(21.7)

(7,956)

(2,856)

3,455

6,143

(4,211)

(2,704)

(772)

(1,382)

610

(772)

1,660

888

(68)

956

888

(0.8)

New Zealand Oil & Gas Annual Report 2021CONSOLIDATED FINANCIAL STATEMENTSConsolidated Statement
of Financial Position

For the year ended 30 June 2021

ASSETS

Current assets

Cash and cash equivalents

Funds held in escrow

Receivables and prepayments

Inventories

Right of use assets

Total current assets

Non-current assets

Exploration and evaluation assets

Oil and gas assets

Property, plant and equipment

Other intangible assets

Other financial assets

Right of use assets

Total non-current assets

Total assets

LIABILITIES

Current liabilities

Payables

Lease provision

Current tax liabilities

Total current liabilities

Non-current liabilities

Rehabilitation provision

Other provisions

Deferred tax liability

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Share capital

Reserves

Retained earnings

Attributable to shareholders of the Group

Non-controlling interest in subsidiaries

Total equity

Net asset backing per share (cents)

Net tangible asset backing per share (cents)

The notes to the financial statements are an integral part of these financial statements

Notes

2021
$000

2020
$000

70,730

9,144

1,137

151

97,904

12,850

6,604

788

132

81,191

118,278

53,477

173

1,875

6,276

330

62,131

6,549

52,237

294

1,728

6,123

67,022

143,322

185,300

7,283

215

2,164

9,662

26,088

282

3,391

29,761

39,423

5,467

217

2,340

8,024

27,909

1,793

29,718

37,742

103,899

147,558

211,901

4,961

(117,543)

99,319

4,580

103,899

61.9

60.8

211,901

4,111

(80,445)

135,567

11,991

147,558

87.9

83.9

New Zealand Oil & Gas Annual Report 2021CONSOLIDATED FINANCIAL STATEMENTSConsolidated Statement
of Changes in Equity

For the year ended 30 June 2021

Share
capital
$000

Reserves
$000

Retained
earnings
$000

Non-
controlling
interest
$000

Total
$000

Total
equity
$000

Balance as at 1 July 2019

211,908

2,460

(79,071)

135,297

11,036

146,333

(Loss)/profit for the year

Foreign currency translation differences

Partly paid shares issued

Share based compensation expense

Exercised and expired share options

(7)

(1,382)

1,315

344

(8)

(1,382)

1,315

(7)

344

610

345

(772)

1,660

(7)

344

Balance as at 30 June 2020

211,901

4,111

(80,445)

135,567

11,991

147,558

Loss for the year

Foreign currency translation differences

Share based compensation expense

Asset revaluation reserve

(36,435)

(661)

367

1,144

(663)

(661)

367

481

(6,827)

(584)

(43,262)

(1,245)

367

481

Balance as at 30 June 2021

211,901

4,961

(117,543)

99,319

4,580

103,899

New Zealand Oil & Gas Annual Report 2021CONSOLIDATED FINANCIAL STATEMENTSNotes to
Financial Statements

Basis of consolidation
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date that
control ceases. Consistent accounting policies are employed
in the preparation and presentation of the Group financial
statements. Intra-group balances, transactions, unrealised
income or expenses arising from intra-group transactions
and dividends are eliminated in preparing the Group
financial statements. A list of subsidiaries and associates is
shown in note 12.

Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions
and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement,
except when deferred in the statement of comprehensive
income and held in equity reserves as qualifying cash flow
hedges and qualifying net investment hedges. Translation
differences on non-monetary items, such as equities
classified as fair value through other comprehensive
income, are included in the statement of comprehensive
income and held in the fair value reserves in equity.

1 Basis of accounting

Reporting entity
New Zealand Oil & Gas Limited (the Group) is a company
domiciled in New Zealand, registered under the Companies
Act 1993 and listed on the New Zealand Stock Exchange
(NZX) and the Australian Stock Exchange (ASX). The Group
is an FMC reporting entity for the purposes of the Financial
Markets Conduct Act 2013. The financial statements
presented are for New Zealand Oil & Gas Limited, its
subsidiaries and interests in associates and jointly
controlled operations (together referred to as the “Group”).

The ultimate parent company is O.G. Oil & Gas (Singapore)
Pte. Ltd. (OGOG), a company incorporated in Singapore,
which forms part of the Ofer Global Group.

Basis of preparation
The financial statements have been prepared in accordance
with New Zealand Generally Accepted Accounting Practices
(‘NZ GAAP’) and the Financial Reporting Act 2013. They
comply with the NZ equivalents to International Financial
Reporting Standards (‘NZ IFRS’) as appropriate for profit-
oriented entities, and with International Financial Reporting
Standards (‘IFRS’).

The presentation and reporting currency used in the
preparation of the financial statements is New Zealand
dollars (NZD or $) rounded to the nearest thousand unless
otherwise stated. The financial statements are prepared on
a goods and services tax (GST) exclusive basis except billed
receivables and payables which include GST.

These financial statements are prepared on the basis of
historical cost except where otherwise stated in specific
accounting policies contained in the accompanying notes.

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS2 Critical accounting estimates and judgements

3 Segment information

The preparation of financial statements requires
management to make judgements, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
these estimates.

The estimates and assumptions that have the most
significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year relate to:

¬ Recoverability of oil and gas assets and exploration

and evaluation. Assessment includes future commodity
prices, future cash flows, an estimated discount rate
and estimates of reserves. Management performs an
assessment of the carrying value of investments at
each reporting date and considers objective evidence
for impairment on each investment taking into account
observable data on the investment, the fair value, the
status or context of capital markets, its own view of
investment value and its long term intentions (refer to
note 14, 15 and 22(a)(ii)).

¬ Provision for rehabilitation obligations includes estimates
of future costs, timing of required rehabilitation and an
estimated discount rate (refer to note 18); and
¬ Recoverability of deferred tax asset includes an

assessment of the ability of entities in the Group to
generate future taxable income (refer to note 8).

All operating segments’ operating results are reviewed
regularly by the Group’s chief executive officer (CEO),
the entity’s chief decision maker, and have discrete
financial information available. Segment results
that are reported to the CEO include items directly
attributable to a segment as well as those that can
be allocated on a reasonable basis. Unallocated items
comprise mainly corporate assets, office expenses,
and income tax assets and liabilities.

The following summaries describe the activities within
each of the reportable operating segments:

Kupe oil and gas field (Kupe): development, production
and sale of natural gas, liquefied petroleum gas (LPG)
and condensate (light oil) in the petroleum mining
licence area of PML 38146 located in the offshore
Taranaki basin, New Zealand. The Group purchased a
4% interest from Mitsui E&P Australia Pty Limited with
an acquisition date of 8 December 2017.

Oil & gas exploration: exploration and evaluation
of hydrocarbons in the offshore Taranaki basin and
offshore Canterbury basin in New Zealand as well as in
Australia and Indonesia.

Cue Energy Resources Limited (Cue): the Group
acquired a controlling interest in Cue during the
2015 financial year. Management have treated this
as a separate operating segment.

Major customers
The Group provides products to four external customers.

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS2021

Sales to external customers - NZ

Sales to external customers - other countries

Total sales revenue

Other income

Total sales revenue and other income

Impairment of oil and gas assets

Segment result

Other net finance income

(Loss)/profit before income tax and royalties

Income tax and royalties expense

Loss for the year

Segment assets

Unallocated assets

Total assets

Kupe
oil & gas
$000

Oil & gas
exploration
$000

Other &
unallocated
$000

Cue Energy
Resources
Ltd $000

10,165

1,712

11,877

671

24,130

216

24,346

Total
$000

10,165

25,842

36,007

887

36,894

6,175

(24,245)

(5,952)

(4,500)

(28,522)

29,828

(6,913)

(35,435)

(7,827)

(43,262)

49,534

93,788

143,322

19,706

320

3,122

6,936

Included in segment results:

Depreciation and amortisation expense

3,494

2020

Sales to external customers - NZ

Sales to external customers - other countries

Total sales revenue

Other income

Total sales revenue and other income

Segment result

Other net finance income

(Loss)/profit before income tax and royalties

Income tax and royalties expense

Loss for the year

Segment assets

Unallocated assets

Total assets

Included in segment results:

Kupe
oil & gas
$000

Oil & gas
exploration
$000

Other &
unallocated
$000

Cue Energy
Resources
Ltd $000

9,884

2,150

12,034

198

12,232

1,282

6,439

(2,064)

(8,132)

25,236

500

25,736

(2,856)

6,445

32,245

1,622

24,919

Total
$000

9,884

27,386

37,270

1,980

39,250

(2,856)

2,688

3,455

6,143

(6,915)

(772)

58,786

126,514

185,300

Depreciation and amortisation expense

3,451

341

4,618

8,410

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS$000

2021

2020

4 Revenue and other income

6 Other expenses

Sales comprise revenue earned from the sale of petroleum
products, when the significant risks and rewards of
ownership of the petroleum products have been transferred
to the buyer. Revenue is recognised at the fair value of the
consideration received net of the amount of GST.

CLASSIFICATION OF
OTHER EXPENSES BY NATURE

Audit fees paid to the
Group auditor – KPMG

$000

2021

2020

Directors’ fees

REVENUE

Petroleum sales

Total revenue

OTHER INCOME

Other income

Performance bond receivable

Total other income

36,007

37,270

887

1,561

419

1,980

Legal fees

Consultants’ fees

Employee expenses

Depreciation

Share based payment expense

IT and software expenses

Pre-permit expenditure

Registry and stock exchange fees

Other

Total income

36,894

39,250

Total other expenses

5 Operating Costs

$000

Production and sales
marketing costs

Carbon emission expenditure

Insurance expenditure

Movement in inventory

Total operating costs

2021

2020

(9,137)

(8,221)

(452)

(809)

(476)

(626)

(571)

(10,359)

(9,894)

FEES PAID TO THE
GROUP AUDITOR

Audit and review of financial
statements

Tax compliance services

Tax advisory services

Other assurance services

Total fees paid to Group auditor

7 Finance income and costs

$000

Bank fees

Unwind of discount on provision

Lease interest expense

Total finance costs

252

305

1,551

1,445

6,183

430

368

745

591

219

337

1,094

1,367

6,098

454

341

811

141

253

1,262

1,126

13,134

12,241

252

336

659

219

328

2021

2020

(27)

(332)

(9)

(368)

(9)

(414)

(9)

(432)

Interest income

106

1,522

Exchange (losses)/gains
on foreign currency balances

Total finance (loss)/income

(6,651)

(6,545)

2,365

3,887

Net finance (loss)/income

(6,913)

3,455

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS8

Taxation

Current and deferred tax is calculated on the basis of the
laws enacted or substantively enacted at balance date.
Current tax is the expected tax payable on the taxable
income for the year and any adjustment to tax payable in
respect of previous years.

Current and deferred tax are recognised in profit or loss
except when the tax relates to items recognised in other
comprehensive income, in which case the tax is also
recognised in other comprehensive income.

$000

INCOME TAX EXPENSE

Current tax

Deferred tax

(a) Total income tax expense

INCOME TAX EXPENSE CALCULATION

(Loss)/profit before
income tax and royalties

Less: royalties expense

2021

2020

4,396

1,593

5,989

3,757

454

4,211

(35,435)

6,143

(1,838)

(2,704)

(Loss)/profit before income tax

(37,273)

3,439

Tax at the New Zealand
tax rate of 28%

Tax effect of amounts which
are not deductible/(taxable):

Difference in overseas tax rate

Non-deductible expenses

Foreign exchange adjustments

Unrealised timing differences

Unrecognised tax losses

Other

Adjustment recognised for
current tax in prior years

(b) Total income tax expense

(10,436)

963

1,360

432

850

210

12,544

1,274

6,234

(245)

5,989

1,288

348

(154)

(630)

2,641

445

4,901

(690)

4,211

During the prior year, Cue was notified that it had been
successful in an Indonesian Tax Court case against the
Indonesian Tax Department for over-payment of $0.7 million
in taxes relating to 2011, resulting in a partial refund of
$0.5 million which was received in December 2019. The
remaining balance was accrued at year end.

During the prior year Cue capitalised Mahato PB exploration
wells drilling costs. As a result, a deferred tax liability of $0.5
million has been recognised.

At 30 June 2021 no imputation credits were held for
subsequent years (2020: nil).

(c) Deferred tax
Deferred taxation is recognised in respect of temporary
differences between the tax bases of assets and liabilities
and their carrying amounts in the financial statements.
Deferred tax assets and future tax benefits are recognised
where realisation of the asset is probable. Deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related
tax benefit will be realised.

Deferred tax is not recognised for the following temporary
differences: the initial recognition of assets or liabilities
in a transaction that is not a business combination and
that affects neither accounting nor taxable profit, and
differences relating to investments in subsidiaries to the
extent that they probably will not reverse in the foreseeable
future. Deferred tax is measured at the tax rates that are
expected to be applied to the temporary differences when
they reverse.

The utilisation of the deferred tax asset is dependent
on future taxable profits in excess of the profits arising
from the reversal of existing temporary differences. As
at 30 June 2021 the Group have accumulated losses in
New Zealand of $79.8 million (30 June 2020: $43.2 million),
together with unclaimed tax deductions for production and
development expenditure incurred previously. The Group
has not recognised a New Zealand deferred tax asset as
under current oil price assumptions it is not expected that
sufficient future taxable profits will be generated. The future
availability of accumulated tax losses remains subject to
the Group satisfying the relevant business and shareholder
continuity requirements for each jurisdiction.

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS8

Taxation (continued)

10 Cash and cash equivalents and funds held in escrow

As a result of the Ironbark exploration costs (note 14), the
Group has incurred an estimated tax loss of $41 million
in Australia. The Group has not recognised a deferred tax
asset of $11.5 million relating to these losses, however
an assessment of probable use will be carried out on
completion of acquisition of the Amadeus basin (note 26).

$000

2021

2020

THE BALANCE COMPRISES
TEMPORARY DIFFERENCES
ATTRIBUTABLE TO:

Deferred Tax Assets

Non-deductible provisions

Deferred Tax Liabilities

Exploration & evaluation assets

Oil & gas assets

Other items (including lease assets)

5,605

5,988

(8,979)

(17)

(2,164)

(5,604)

(13)

(8,996)

(7,781)

Net deferred tax liabilities

(3,391)

(1,793)

MOVEMENTS:

Net deferred tax liability at 1 July

Recognised in profit and loss

(1,793)

(1,593)

(1,309)

(454)

Closing balance at end of year

(3,391)

(1,793)

9 Royalties expense

Royalty expenses incurred by the Group relate to petroleum
royalty payments to the New Zealand Government in respect
of the Kupe and Maari oil and gas fields, and are recognised
on an accrual basis.

Cash and cash equivalents comprise cash on hand, cash
at bank, short-term deposits and deposits on call with an
original maturity of three months or less.

$000

Cash at bank and in hand

Deposits at call

Short term deposits

Share of oil and gas interests’ cash

Funds held in escrow – WA-359-P
Drilling Programme Account*

2021

18,040

9,889

42,735

2020

18,524

4,110

74,774

496

12,850

Total cash and cash
equivalents at end of year

70,759

110,754

Receivables and prepayments
denominated by currency $000

Base
Currency

NZD
Equivalent

2021

New Zealand dollar

United States dollar

Australian dollar

Indonesian rupiah

Total cash and cash
equivalents at end of year

2020

New Zealand dollar

Australian dollar

Indonesian rupiah

Total cash and cash
equivalents at end of year

28,851

3,963

33,680

546,211

29,929

48,651

4,493

2,840,563

28,851

5,674

36,180

70,759

29,929

75,710

4,808

307

110,754

Deposits at call and short-term deposits
The deposits at call and short term deposits are currently
bearing interest rates between 0.00% and 0.22% (2020:
0.06% and 0.50%).

*The WA-359-P Drilling Programme Account is held under the Ironbark
funding arrangement of the WA-359-P joint operating agreement (for JV
account) and is not available for the purposes of the Group's operations until
BP Developments Australia Pty Limited, as the operator, uses the account
for the purposes of the remaining work programme matters as agreed by all
joint venture parties.

Recognised in other
comprehensive income

(5)

(30)

United States dollar

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS11 Receivables and prepayments

12 Investments in subsidiaries

Subsidiaries are entities controlled by the Group. The Group
controls an entity when it has power over the entity, has
exposure or rights to variable returns from this involvement
and when it has the ability to use its power to affect the
amount of the returns.

At 30 June 2021 the Group holds a 50.04 per cent interest
in Cue Energy Resources Limited (30 June 2020: 50.04
per cent). Cue entities on the next page reflect the Group’s
50.04 per cent interest in Cue subsidiaries.

Non-controlling interests in the results and equity of
subsidiaries are shown separately in the Consolidated
Statement of Comprehensive Income and Consolidated
Statement of Financial Position respectively.

The financial statements of each of the Group’s entities
are measured using the currency of the primary economic
environment in which the entity operates ("the functional
currency"). The functional currency of the subsidiaries
within the Group are shown on the next page.

$000

Trade receivables

Share of oil and gas
interests’ receivables

Prepayments

Other

2021

3,236

5,593

315

2020

4,136

2,097

361

Total receivables and
prepayments at end of year

9,144

6,604

Receivables and prepayments
denominated by currency $000

Base
Currency

NZD
Equivalent

2021

New Zealand dollar

United States dollar

Australian dollar

Indonesian rupiah

Total cash and cash
equivalents at end of year

2020

New Zealand dollar

United States dollar

Australian dollar

Indonesian rupiah

Total cash and cash
equivalents at end of year

1,296

5,465

1,530

3,163

135

208,275

1,296

7,821

9,144

1,530

4,907

144

6,604

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS12 Investments in subsidiaries (continued)

The consolidated financial statements incorporate the assets, liabilities and results of the following entities:

Name of entity

Country of incorporation

NEW ZEALAND OIL & GAS

Australia and New Zealand Petroleum Limited

New Zealand

NZOG Onshore Limited

NZOG Canterbury Limited

NZOG 2013 O Limited

NZOG Bohorok Pty Limited

NZOG Devon Limited

NZOG GNA Trustee Limited

NZOG 2013 T Limited

NZOG Energy Limited

NZOG Offshore Limited

NZOG Pacific Holdings Pty Limited

NZOG Pacific Limited

NZOG Services Limited

NZOG Taranaki Limited

Petroleum Resources Limited

NZOG MNK Bohorok Pty Limited

NZOG (Ironbark) Pty Limited

NZOG Mereenie Pty Limited (i)

NZOG Palm Valley Pty Limited (i)

NZOG Dingo Pty Limited (i)

CUE ENERGY RESOURCES

Cue Energy Resources Limited

Cue Mahakam Hilir Pty Limited

Cue (Ashmore Cartier) Pty Ltd

Cue Sampang Pty Limited

Cue Taranaki Pty Limited

Cue Kalimantan Pte Ltd

Cue Mahato Pty Ltd

Cue Exploration Pty Limited

Cue Mereenie Pty Limited (i)

Cue Palm Valley Pty Limited (i)

Cue Dingo Pty Limited (i)

New Zealand

Australia

New Zealand

Australia

New Zealand

Australia

Singapore

Australia

(i) These companies were set up during the current financial year.

Equity
Holding
2021

Equity
Holding
2020

Functional
Currency

100%

50.04%

100%

50.04%

NZD

USD

NZD

USD

NZD

USD

AUD

USD

AUD

USD

AUD

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS
13 Oil and gas interests

The Group has interests in a number of joint arrangements which are classified as joint operations. The Group financial
statements include a proportionate share of the oil and gas interests’ assets, liabilities, revenue and expenses with items of a
similar nature on a line by line basis, from the date that joint control commences until the date that joint control ceases.

The Group held the following oil and gas production, exploration, evaluation and appraisal interests at the end of the year.

Name

Type

Country

Ownership
2021

Ownership
2020

NEW ZEALAND OIL & GAS

PML 38146 – Kupe

PEP 52717 – Clipper (i)

PEP 55794 – Toroa (ii)

Bohorok PSC (iii)

WA-359-P (iv)

CUE ENERGY RESOURCES *

WA-359-P (iv)

WA-389-P

WA-409-P

Mahakam Hilir PSC

PMP 38160 – Maari

Sampang PSC

Mahato PSC

(i) On 18 March 2021 permit surrendered.

(ii) On 4 June 2021 permit was surrendered.

Mining Licence

Exploration Permit

Production Sharing Contract

Exploration Permit

Production Sharing Contract

Mining Permit

Production Sharing Contract

New Zealand

Indonesia

Australia

Indonesia

New Zealand

Indonesia

4.0%

0.0%

45.0%

0.0%

100.0%

20.0%

100.0%

5.0%

15.0%

12.5%

4.0%

50.0%

100.0%

45.0%

15.0%

21.5%

100.0%

20.0%

100.0%

5.0%

15.0%

12.5%

(iii) On 12 December 2018 a sale and purchase agreement was signed to sell the Group's interest in the Bohorok PSC to Bukit Energy Bohorok Pte Ltd (an entity now
owned by Bow Energy), however this failed to complete due to non- satisfaction of condition precedents in this case regulatory approval not received. Amendments
are being pursued so that the agreement can still be progressed.

(iv) On 25 April 2021 permit expired.

* represents the percentage interest held by Cue Energy Resources Limited. The Group interest is 50.04% (2020: 50.04%) of the Cue interest.

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS14 Exploration and evaluation

The Group uses the successful efforts method of accounting
for oil and gas exploration costs. All general exploration and
evaluation costs are expensed as incurred except the direct
costs of acquiring the rights to explore, drilling exploratory
wells and evaluating the results of drilling. These direct
costs are capitalised as exploration and evaluation assets
pending the determination of the success of the well. If a
well does not result in a successful discovery, the previously
capitalised costs are immediately expensed.

Key judgement: recoverability
of exploration and evaluation assets
Assessment of the recoverability of capitalised exploration
and evaluation expenditure requires certain estimates
and assumptions to be made as to future events and
circumstances, particularly in relation to whether economic
quantities of reserves have been discovered. Therefore, such
estimates and assumptions may change as new information
becomes available. If it is concluded that the carrying
value of an exploration and evaluation asset is unlikely to
be recovered by future development or sale, the relevant
amount will then be expensed in the profit and loss.

Capitalised exploration and evaluation assets, including
expenditure to acquire mineral interests in oil and gas
properties, related to wells that find proven reserves are
classified as development assets within oil and gas assets
at the time of sanctioning the development project.

Opening balance

Expenditure expensed to profit and
loss relating to Ironbark permit

Expenditure transferred to
oil and gas assets relating to
Sampang PSC and Mahato PSC

Revaluation of foreign currency
exploration and evaluation assets

Total exploration and evaluation
assets at end of year

2021
$000

6,549

2020
$000

3,646

(1,622)

2,820

(3,502)

(1,425)

6,549

100

On 29 December 2020, the Group announced the drilling
results of the Ironbark-1 exploration well in WA-359-P in the
Carnarvon Basin, offshore Western Australia. The primary
target interval was intersected at a depth of 5,275 metres,
with no significant hydrocarbon shows encountered in any
of the target sands. The well was plugged and abandoned
and the Group's share of costs have been expensed.

Exploration and evaluation expenditure of $35.4 million has
been recognised in the year (2020: $3.6 million).

During the year, the Paus Biru gas field Plan of Development,
in the Sampang PSC, was approved by the Indonesian
Government. The Group subsequently reclassified and
transferred the exploration and evaluation assets to oil and
gas assets.

The Mahato PSC Exploration and evaluation assets included
the PB-1 and PB-2 wells which were drilled as exploration
wells in late 2019 and early 2020. The Group has now
reclassified and transferred the Exploration and evaluation
assets to oil and gas assets. On 15 January 2021 the PB-1
well commenced production.

15 Oil and gas assets

Development
Development assets include construction, installation and
completion of infrastructure facilities such as pipelines
and development wells. No amortisation is provided in
respect of development assets until they are reclassified as
production assets.

Production assets
Production assets capitalised represent the accumulation
of all development expenditure incurred by the Group in
relation to areas of interest in which petroleum production
has commenced. Expenditure on production areas of
interest and any future estimated expenditure necessary to
develop proven and probable reserves are amortised using
the units of production method or on a basis consistent with
the recognition of revenue.

Subsequent costs
Subsequent costs are included in the assets carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the asset will flow to the Group and the cost
of the item can be measured reliably. All other repairs and
maintenance are expensed in the income statement during
the financial year in which they are incurred.

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTSImpairment
The carrying value is assessed for impairment each
reporting date. An impairment loss is recognised if the
carrying amount of an asset or its cash generating unit
exceeds its recoverable amount. A cash generating unit is
the smallest identifiable asset group that generates cash
flows that are largely independent from other assets and
groups. Impairment losses are recognised in the profit or
loss, and in respect of cash generating units, are allocated
first to reduce the carrying amount of any goodwill allocated
to the units and then to reduce the carrying amount of the
other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash generating unit
is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a post-tax
discount rate, that reflects current market assessments of
the time value of money, and the risks specific to the asset.

Impairment losses recognised in prior years are reassessed
at each reporting date and the loss is reversed if there
has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to
the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised previously.

Opening balance

Expenditure capitalised

Expenditure transferred
from Exploration and
evaluation (see note 14)

Impairment

Amortisation for the year

Revaluation of foreign
currency oil and gas assets

Rehabilitation provision

Total oil and gas assets
at end of year

2021
$000

52,237

6,561

3,502

(6,506)

(1,618)

(699)

2020
$000

58,609

2,760

(2,856)

(7,956)

1,391

289

53,477

52,237

At 30 June 2021 the Group assessed each asset to
determine whether an indicator of impairment existed.
Indicators of impairment include changes in future selling
prices, future costs and reserves.

Estimates of recoverable amounts are based on the assets’
value-in-use, determined by discounting each asset’s
estimated future cash flows at asset specific discount
rates. The discount rate applied was 10%. The oil price
assumptions used were based on forward prices, rising to
consensus mean after 4 years.

16 Other financial assets

Other financial assets are initially measured at fair value.
Transaction costs are included as part of the initial
measurement, except for financial assets which are
measured at fair value through profit or loss. Such assets
are subsequently measured at amortised cost.

Financial assets are derecognised when the rights to receive
cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the
risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, it's
carrying value is written off.

Opening balance

Security deposits

Abandonment and Site
Restoration Fund (ASR) – Cue
Sampang rehabilitation

Total other financial
assets at end of year

2021
$000

6,123

2020
$000

5,526

587

6,276

6,123

Cue Sampang contributed a further $0.1 million to the ASR
fund during the year ended 30 June 2021.

101

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS17 Payables

18 Rehabilitation Provision

Trade payables

Royalties payable

Share of oil and gas
interests' payable

Other payables

Total payables at end of year

2021
$000

3,050

795

2,318

1,120

7,283

2020
$000

1,451

703

2,577

736

5,467

Payables denominated
by currency $000

Base
Currency

NZD
Equivalent

2021

New Zealand dollar

United States dollar

Australian dollar

Indonesian rupiah

Total payables at end of year

2020

New Zealand dollar

United States dollar

Australian dollar

Indonesian rupiah

Total payables at end of year

4,350

1,356

918

6,910

3,594

916

394

271,452

4,350

1,940

992

7,283

3,594

1,421

423

5,467

102

Provisions for rehabilitation have been recognised where
the Group has an obligation, as a result of its operating
activities, to restore certain sites to their original condition.
There is uncertainty in estimating the timing and amount of
the future expenditure. The provision is estimated based on
the present value of the expected expenditure. The discount
rate used is the risk-free interest rate obtained from the
country related to the currency of the expected expenditure.
In the current year, the discount rate used to determine the
provision was 1.73%. The initial provision and subsequent
re-measurement are recognised as part of the cost of the
related asset. The unwind of the discount is recognised in
finance costs in the profit and loss.

Carrying amount at start of year

27,909

26,449

2021
$000

2020
$000

(Reduction)/addition in
provision recognised

Unwind of discount on provision

Revaluation of foreign currency
rehabilitation provision

Total rehabilitation
provision at end of year

19 Share capital

137

332

(25)

414

(2,290)

1,071

26,088

27,909

Number
of shares
000s

2020
$000

Balance at 30 June 2019

211,908

167,849

Partly paid ESOP shares expired

(7)

Balance at 30 June 2020

211,901

167,849

Balance at 30 June 2021

211,901

167,849

Comprised of:

Fully paid shares

Partly paid shares

211,891

164,431

3,418

Balance at 30 June 2021

211,901

167,849

The Group retains 2.4 million of unallocated partly
paid shares that have not yet been cancelled. All
fully paid shares have equal voting rights and share
equally in dividends and equity.

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS20 Reserves

(a) Reserves

Asset revaluation reserve

Share based payments reserve

Foreign currency translation reserve

Total reserves at end of year

MOVEMENTS:

Asset revaluation reserve

Opening balance at 1 July

Asset revaluation reserve

Closing balance at end of year

SHARE BASED PAYMENTS RESERVE

Opening balance at 1 July

Share based payment
expense for the year

Exercised and expired ESOP awards

Closing balance at end of year

FOREIGN CURRENCY
TRANSLATION RESERVE

2021
$000

1,144

786

3,031

4,961

1,144

419

367

786

2020
$000

419

3,692

4,111

344

(8)

419

Opening balance at 1 July

3,692

2,377

Other foreign currency translation
differences for the year

Closing balance at end of year

(661)

3,031

1,315

3,692

(b) Nature and purpose of reserves

Asset revaluation reserve
Revaluation gains on Emissions Trading Scheme (ETS) units
are transferred to the asset revaluation reserve.

Share based payments reserve
The reserve is used to recognise the value of equity
benefits provided to employees under the Share Option
Scheme and ESOP.

Foreign currency translation reserve
Exchange differences arising on translation of companies
within the Group with a different functional currency to the
Group are taken to the foreign currency translation reserve.
The reserve is recognised in other comprehensive income
when the net investment is disposed of.

21 Loss per share

Loss attributable to
shareholders ($000)

Weighted average number
of ordinary shares (000)

Basic and diluted loss
per share (cents)

2021

2020

(36,435)

(1,382)

167,849

(21.7)

(0.8)

22 Financial risk management

Risk exposure to market, credit, liquidity, capital
management, sensitivity, financial instruments arises in the
normal course of the Group’s business.

(a) Market risk

(i) Foreign exchange risk
The Group is exposed to foreign currency risk on cash
and cash equivalents, oil sales, recoverable value of
oil and gas assets and capital commitments that are
denominated in foreign currencies. The Group manages
its foreign currency risk by monitoring its foreign
currency cash balances and future foreign currency
cash requirements. The Group may enter into foreign
currency hedge transactions in circumstances where
the risk-adjusted returns to shareholders are enhanced
as a consequence.

(ii) Commodity price risk
Commodity price risk is the risk that the Group’s sales
revenue and recoverable value of oil and gas assets will
be impacted by fluctuations in world commodity prices.
The Group is exposed to commodity prices through its
petroleum interests. The Group may enter into oil price
hedge transactions in circumstances where the risk-
adjusted returns to shareholders are enhanced as a
consequence. The Group had no call option contracts at
30 June 2021 (2020: nil).

(iii) Concentrations of interest rate exposure
The Group has no external bank debt and therefore
its main interest rate risk arises from short-term
deposits held.

103

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS

(d) Capital management
The Group manages its capital through the use of cash
flow and corporate forecasting models to determine
its future capital requirements and maintains a flexible
capital structure which allows access to debt and equity
markets to draw upon and repay capital as required. In
July 2009 the Group established a Dividend Reinvestment
Plan which applies to dividends declared after 29 July
2009. The Group has an adequate capital base and
significant cash reserves.

(e) Sensitivity analysis
The Group’s reporting result at the end of each year
is sensitive to financial risks from fluctuations in
interest rates, commodity prices and foreign currency
exchange rates. The sensitivity table below shows the
impact of exchange rate changes on current assets
and liabilities and the impact of interest rate changes
on current cash balances.

($m)

Risk area

Sensitivity

2021

2020

Impact on Group
profit before tax

Impact on foreign
currency translation
reserves in equity

Exchange
rate

Impact on
interest income

Interest
rate

+5%

-5%

+5%

-5%

+1%

-1%

(1.1)

(2.2)

1.2

2.5

(1.1)

(1.6)

1.2

0.7

1.8

0.5

(0.7)

(0.5)

22 Financial risk management (continued)

(b) Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to
the Group. The Group has adopted a policy of only dealing
with credit worthy counterparties and obtaining sufficient
collateral where appropriate as a means of minimising
the risk of financial defaults. Financial instruments
which potentially subject the Group to credit risk consist
primarily of securities and short-term cash deposits,
trade receivables and short-term funding arrangements.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings, with
funds required to be invested with a range of separate
counterparties. The Group’s maximum exposure to credit
risk for trade and other receivables is its carrying value.

The Group may be exposed to financial risk if one or
more of their joint venture partners is unable to meet
their obligation in relation to the rehabilitation costs for
jointly owned oil and gas assets. Under the joint venture
operating agreement if one or more partners fails to meet
their financial obligation, the other partners may become
proportionately liable for their share of the financial
obligations but would have contractual rights of recovery
against the defaulting party.

(c) Liquidity risk
Liquidity risk represents the Group’s ability to meet its
contractual obligations. The Group evaluates its liquidity
requirements on an ongoing basis. In general, the Group
generates sufficient cash flows from its operating activities
to meet its obligations arising from its financial liabilities
and has liquid funds to cover potential shortfalls.

The following table sets out the contractual cash flows for
all non-derivative financial liabilities and for derivatives that
are settled on a gross cash flow basis:

$000

30 JUNE 2021

Payables

Total non-derivative liabilities

30 JUNE 2020

Payables

Total non-derivative liabilities

6 months
or less

6–12
months

1–2
years

2–5
years

More than
5 years

Contractual
cash flows

7,283

5,467

7,283

5,467

At 30 June 2021 the Group had no derivatives to settle (2020: nil).

104

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS

(f) Financial instruments by category

$000

ASSETS

Cash and cash equivalents

Funds held in escrow

Trade and other receivables

LIABILITIES

Payables

2021
carrying
value

2020
carrying
value

70,730

8,829

79,588

97,904

12,850

6,242

116,996

7,283

5,467

The fair value and amortised cost of financial instruments is
equivalent to their carrying value.

23 Related party transactions

Related parties of the Group include those entities identified
in notes 12 and 13 as subsidiaries and oil and gas interests.
All transactions and outstanding balances with these
related parties are in the ordinary course of business on
normal trading terms.

On 23 May 2019 New Zealand Oil & Gas Limited farmed
into the WA-359-P permit forming a joint venture with
Cue, BP and Beach. Transactions related to Cue have been
eliminated from the Group financial statements.

During the year certain activities were undertaken between
the Group and OGOG. The inter-group services agreement,
which was entered into on 21 June 2019, allows the Group
to provide technical services and related activities to OGOG.
For the year ended 30 June 2021 $0.6 million (30 June
2020: $0.9 million) of income has been included in the profit
and loss.

No directors' fees are charged for the three representatives
of OGOG who are directors of the Group. Directors' expenses
are reimbursed and are not separately disclosed as they are
not material.

Key management personnel have been defined as the
directors, the chief executive and the executive team for the
Group. Key Cue management personnel have been included.

$000

Short term employee benefits

Share based payments

Post employment benefits

2021

2,854

160

132

2020

3,384

142

113

Total related party transactions

3,146

3,639

24 Share-based payments

Accounting policy
Share-base payments are equity or cash settlements to
employees in exchange for services. Equity transactions are
settled in shares or options over shares. Cash settlements
are determined by the share price.

The cost of equity settled transactions are measured at fair
value on grant date. Fair value is independently determined
using either the binomial or Black-Scholes option pricing
model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at grant
date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the
term of the option, together with non-vesting conditions that
do not determine whether the consolidated entity received
the services that entitle the employees to receive payment
no account is taken of any other vesting conditions.

Market conditions are taken into consideration in
determining fair value. Therefore any awards subject to
market conditions are considered to vest irrespective
of whether or not that market condition has been met,
provided all other conditions are satisfied.

Equity transactions are recognised as an expense with the
corresponding increase in equity over the vesting period.
The cumulative charge to a profit or loss is calculated based
on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the
expired portion of the vesting period.

If the non-vesting condition is within the control of the
consolidated entity or employee the failure to satisfy the
condition is treated as a cancellation. If the condition
is not within the control of the consolidated entity or
employee and is not satisfied during the vesting period,
any remaining expense for the award is recognised
over the remaining vesting period, unless the award is
forfeited. Cancellations are accounted for on the date of
cancellation, as if it had vested.

105

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS24 Share-based payments (continued)

The Company has the following share based payment schemes:
(a) New Zealand Oil & Gas Share Option Scheme – established 19 March 2020.

(b) Cue Energy Share Option Scheme – established July 2019.

(c) Employee Share Option Plan (ESOP) – this scheme was terminated in 2017,
however there is one tranche remaining which expires in February 2022.

(a) New Zealand Oil & Gas Share Option Scheme
On 8 October 2020, the Group issued 1,876,930 unlisted options to eligible New Zealand Oil & Gas Limited employees under
the share option scheme. The options are exercisable at $0.65 (65 cents) per option, will vest on 1 July 2023 and expire on
1 July 2026. The exercise price was determined by adding a 20% premium to the average market price on the date of the offer
(being the volume weighted average market price over the previous 10 business days) at 30 June 2020.

Set out below are summaries of options granted under the plan:

Grant date

Expiry date

2021

Exercise
price

Balance at
the start of
the year

Granted

Exercised

Expired/
forfeited/
other

Balance at
the end of
the year

19/03/2020

1/07/2025

8/10/2020

1/07/2026

$0.61

$0.65

2,832,048

1,876,930

Weighted average exercise price

2020

19/3/2020

1/7/2025

$0.61

Weighted average exercise price

2,832,048

1,876,930

$0.65

2,832,048

$0.61

2,832,048

1,876,930

4,708,978

$0.63

2,832,048

$0.61

For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant
date, are as follows:

Grant date

Expiry date

Share price
at grant date

8/10/2020

30/6/2026

$0.73

Exercise
price

$0.65

Expected
volatility

33%

Dividend
yield

Risk-free
interest rate

Fair value
at grant date

0.28%

$0.24

106

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS24 Share-based payments (continued)

(b) Cue Energy Share Option Scheme – shown in AU dollars
On 16 July 2020, the Company issued 3,743,260 unlisted options to eligible employee under the share option scheme.
The options are exercisable at $0.12 (11.7 cents) per option, and will vest on 1 July 2021 and expire on 1 July 2025.

The options were valued using Black-Scholes option pricing model. $47,740 of share-based payment expense was recorded
in relation to these options for the financial year ending 30 June 2021.

Set out below are summaries of options granted under the plan:

Grant date

Expiry date

Exercise price

Balance at
the start of
the year

Granted

Exercised

Expired/
forfeited/
other

Balance at
the end of
the year

2021

29/7/2019

1/7/2023

4/10/2019

16/7/2020

1/7/2024

1/7/2025

Weighted average exercise price

$0.07

$0.09

$0.12

3,784,025

3,853,298

3,743,260

7,637,323

3,743,260

$0.08

$0.12

2020

29/7/2019

4/10/2019

1/7/2023

1/7/2024

$0.07

$0.09

4,277,888

3,853,298

Weighted average exercise price

4,277,888

3,853,298

$0.07

$0.09

3,784,025

3,853,298

3,743,260

11,380,583

$0.00

$0.09

(493,863)

3,784,025

3,853,298

(493,863)

7,637,323

$0.07

$0.08

For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant
date, are as follows:

Grant date

Expiry date

Share price
at grant date

16/7/2020

1/7/2025

$0.11

Exercise
price

$0.12

Expected
volatility

57%

Dividend
yield

Risk-free
interest rate

Fair value
at grant date

0.43%

$0.05

107

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS24 Share-based payments (continued)

(c)

New Zealand Oil & Gas Employee Share Option Plan
(ESOP)

The Employee Share Option Plan (ESOP) was terminated
in 2017, of which there is one remaining shareholder. No
allocations of new ESOP shares were made in the financial
year ending 30 June 2021 (2020: nil). The details below
relate to the old scheme which will end as final dates are
reached and shares expire.

The Group's ESOP was open to nominated employees. Under
the plan there are currently 3.4 million (2020: 3.4 million)
partly paid shares for which employees have paid $0.01
per share. After 2 years, and under certain conditions, the
employee has the option to fully pay for the shares. This
option lasts for 3 years. The cost of the ESOP to the Group
is calculated using the Black- Scholes option pricing model.
As there was no new allocation of ESOP shares during the
year, no new valuation took place and nothing was expensed
through the Consolidated Statement of Comprehensive
Income (2020: nil). No shares were exercised in the year
ending June 2021 (2020: nil) and no expired/forfeited shares
were converted to ordinary shares and sold (2020: nil).

Participation in the ESOP was open to any employee
(including a non-executive director) of the Group to
whom an offer to participate was made by the Nomination
and Remuneration Committee. The Nomination and
Remuneration Committee, in its discretion, was responsible
for determining which employees were to be offered the
right to participate in the ESOP, and the number of partly
paid shares that could be offered to each participating
employee. Under the ESOP partly paid shares were issued on
the following terms:

Restriction periods – each partly paid share was issued
on terms that require an escrow period to pass before the
holder can complete payment for, and thereafter transfer,
the shares. This was usually 2 years. There was also a date
5 years after the offer date by which the issue price for the
shares must be paid (this is called the "Final Date").

108

Issue price – this was set for each partly paid share at the
time the offer was made to the participant and was the
lesser of:

ii)

20% premium to the average market price on the date
of the offer (being the volume weighted average market
price over the previous 20 business days); and

The last sale price of the Group's ordinary shares
on the business day prior to the Final Date (or such
greater amount that represents 90% of the weighted
average price of the Group's ordinary shares over the 20
Business Days prior to the Final Date).

The pricing model ensures that the participant does not
receive a share at a discount to market price at the time the
final payment is made but does provide some protection if
the market price reduces after the original offer date.

Rights – the rights attached to partly paid shares issued
under the ESOP are the same as those attached to ordinary
shares in the Group. The partly paid shares rank equally
with the ordinary shares in the Group. However, the rights of
each partly paid share to vote on a poll, and to dividends or
other distributions of the Group, are a fraction, equal to the
proportion represented by the amount paid up in respect of
the share as against the issue price set under the ESOP.

The fair value of partly paid shares issued to employees is
recognised as an employee expense, with a corresponding
increase in equity over the period in which the employees
become unconditionally entitled to the partly paid shares.
The amount recognised as an expense is adjusted to reflect
the actual number of partly paid shares that vest.

There is one remaining tranche of awards with a final date
of August 2022. There remains 1 million partly paid shares
with a weighted average exercise price of $0.74 and 2.4
million unallocated partly paid shares.

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTS25

Development commitments and contingent assets
and liabilities

(a) Development and exploration expenditure
In order to maintain the various permits in which the Group
is involved the Group has ongoing operational expenditure
as part of its normal operations. The actual costs will be
dependent on a number of factors such as joint venture
decisions including final scope and timing of operations.

(b) Contingent assets and liabilities
The Directors are not aware of any contingent assets or
contingent liabilities as at 30 June 2021.

26 Events occurring after balance date

On 25 May 2021, the Group announced that it had agreed
to purchase three gas producing assets located in
Australia's Northern Territory. The agreement is subject
to certain conditions being met.

New Zealand Oil & Gas will acquire 70% and Cue Energy
Resources (New Zealand Oil & Gas' 50.04% owned
subsidiary) will acquire 30%, of assets sold by Central
Petroleum. On completion, Central Petroleum will receive
a cash payment of A$29.0 million (New Zealand Oil & Gas
will pay A$20.3 million, and Cue will pay A$8.7 million).

New Zealand Oil & Gas and Cue Energy will also fund
Central Petroleum's share of the costs of exploration,
appraisal and development up to a capped total of A$40
million (New Zealand Oil & Gas will pay A$28.0 million,
and Cue will pay A12.0 million).

On 24 June 2021, shareholders of the Group voted 99.9%
in favour of the transaction. This satisfies a key condition
precedent of the transaction.

On 2 July 2021, the Group announced that it had received
a 'no objections' notice from the Australian Foreign
investment Review Board. This satisfies a key condition
precedent of the transaction.

Regulatory approval and contract assignments remain the
key outstanding conditions precedents of the transaction.

The initial accounting for the acquisition of the assets is
incomplete at the date these financial statements were
authorised for issue (as completion is yet to occur and
control has not been transferred). Business combination
accounting for the acquisition will be applied from
completion date. Completion is anticipated in the next
two months.

109

New Zealand Oil & Gas Annual Report 2021NOTES TO FINANCIAL STATEMENTSIndependent
Auditor’s Report

To the shareholders of
New Zealand Oil & Gas Limited

REPORT ON THE AUDIT
OF THE CONSOLIDATED
FINANCIAL STATEMENTS

Opinion

In our opinion, the accompanying consolidated financial
statements of New Zealand Oil & Gas Limited (the
’company’) and its subsidiaries (the 'group') on pages
85 to 109:

—

present fairly in all material respects the group’s
financial position as at 30 June 2021 and its financial
performance and cash flows for the year ended on that
date; and

comply with New Zealand Equivalents to International
Financial Reporting Standards and International
Financial Reporting Standards.

We have audited the accompanying consolidated financial
statements which comprise:

—

the consolidated statement of financial position as at
30 June 2021;

the consolidated statements of comprehensive income,
changes in equity and cash flows for the year then
ended; and

—

notes, including a summary of significant accounting
policies and other

© 2021 KPMG, a New Zealand Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved.

110

New Zealand Oil & Gas Annual Report 2021INDEPENDENT AUDITOR’S REPORTBasis for opinion

Scoping

We conducted our audit in accordance with International
Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We
believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

We are independent of the group in accordance with
Professional and Ethical Standard 1 International Code of
Ethics for Assurance Practitioners (Including International
Independence Standards) (New Zealand) issued by the

New Zealand Auditing and Assurance Standards Board and
the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants
(including International Independence Standards)
(‘IESBA Code’), and we have fulfilled our other ethical
responsibilities in accordance with these requirements and
the IESBA Code.

Our responsibilities under ISAs (NZ) are further described
in the auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.

Our firm has also provided other services to the group in
relation to tax compliance and advisory services and other
assurance services. Subject to certain restrictions, partners
and employees of our firm may also deal with the group on
normal terms within the ordinary course of trading activities
of the business of the group. These matters have not
impaired our independence as auditor of the group. The firm
has no other relationship with, or interest in, the group.

The consolidated financial statements include the 50.04%
shareholding in Cue Energy Limited (‘Cue’) and its three
production assets; Mahato PSC and Sampang PSC in
Indonesia and Maari in New Zealand, in addition to the Kupe
asset held by the parent company.

The scope of our audit is designed to ensure that we
perform adequate work to be able to give an opinion on the
consolidated financial statements as a whole, taking into
account the structure of the group, the financial reporting
systems, processes and controls, and the industry in which
it operates.

In establishing the scope of audit work to be performed
by Cue’s auditor, for group consolidation purposes,
we determined the nature and extent of work to be
performed would be a full scope audit. We kept in regular
communication with the component audit team throughout
the year with discussions and formal instructions, including
review of their work performed, where appropriate. We also
ensured that the component audit team had the appropriate
skills and competencies which are needed for the audit.

Materiality

The scope of our audit was influenced by our application
of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and
on the consolidated financial statements as a whole. The
materiality for the consolidated financial statements

as a whole was set at $1.2 million (2020: $1.3 million)
determined with reference to a benchmark of group
total assets.

111

New Zealand Oil & Gas Annual Report 2021INDEPENDENT AUDITOR’S REPORTKey audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements in the current period. We summarise below those matters and our key audit
procedures to address those matters in order that the shareholders as a body may better understand the process by
which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose
of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete
opinions on separate elements of the consolidated financial statements.

The key audit matter

How the matter was addressed in our audit

RECOVERABILITY OF OIL AND GAS ASSETS

The recoverability of oil and gas
assets is a key audit matter due to the
judgement involved in assessing the
recoverable value of the oil and gas
assets. Key assumptions include:

— future oil and gas prices;

— oil and gas reserves, and future

production levels

— discount rate; and

— future operating and capital costs.

Our audit procedures to assess the reasonableness of the recoverable value of
the oil and gas assets are described below.

−

Testing key internal controls in the group’s impairment assessment
process. This included the determination, review and approval by the group
of indicators of impairment or impairment reversals and key impairment
model inputs.

Evaluating the group’s impairment indicator assessment, utilising our
knowledge of the group and the Oil and Gas industry, in which the group
operates. Our assessment of impairment indicators included:

−

Comparing management’s assessment against market data, including
forecast oil prices;

Comparing management’s assessment against contracted and
current market gas prices;

Assessing if there has been a significant decline in the group’s share
of oil and gas reserves from 30 June 2020;

Reviewing operator budgets and forecasts of operating costs and
capital programmes;

Evaluating movements in the market interest rates or risks that would
impact the discount rate; and

Performing sensitivity analysis over key assumptions included in the
group’s impairment assessment.

Where an indicator of impairment was identified, in conjunction
with our valuation specialists we assessed the integrity of the
impairment model and evaluated the key inputs and assumptions
included in the model.

Comparing the carrying amount of the net assets of the group to its
market capitalisation and evaluating whether any differences would
suggest further impairments are required.

112

New Zealand Oil & Gas Annual Report 2021INDEPENDENT AUDITOR’S REPORT

Other information

The Directors, on behalf of the group, are responsible for
the other information included in the entity’s Annual Report.
Other information may include the Chairman and Chief
Executive’s report, production and reserve information,
corporate governance and statutory information. Our
opinion on the consolidated financial statements does not
cover any other information and we do not express any form
of assurance conclusion thereon.

The Annual Report is expected to be made available to us
after the date of this Independent Auditor's Report. Our
responsibility is to read the Annual Report when it becomes
available and consider whether the other information it
contains is materially inconsistent with the consolidated
financial statements, or our knowledge obtained in the
audit, or otherwise appear misstated. If so, we are required
to report such matters to the Directors.

Use of this independent auditor’s report

This independent auditor’s report is made solely to the
shareholders as a body. Our audit work has been undertaken
so that we might state to the shareholders those matters
we are required to state to them in the independent
auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the shareholders as a
body for our audit work, this independent auditor’s report, or
any of the opinions we have formed.

Responsibilities of the Directors for the consolidated
financial statements

The Directors, on behalf of the company, are responsible for:

— the preparation and fair presentation of the consolidated

financial statements in accordance with generally accepted
accounting practice in New Zealand (being New Zealand
Equivalents to International Financial Reporting Standards)
and International Financial Reporting Standards;

— implementing necessary internal control to enable
the preparation of a consolidated set of financial
statements that is fairly presented and free from material
misstatement, whether due to fraud or error; and

— assessing the ability to continue as a going concern. This

includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting
unless they either intend to liquidate or to cease
operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated
financial statements

Our objective is:

— to obtain reasonable assurance about whether the

consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or
error; and

— to issue an independent 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 ISAs NZ will always detect a material misstatement
when it exists.

Misstatements can arise from fraud or error. They are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.

A further description of our responsibilities for the audit of
these consolidated financial statements is located at the
External Reporting Board (XRB) website at:

http://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors-responsibilities/audit-report-1/

This description forms part of our independent
auditor’s report.

The engagement partner on the audit resulting in this
independent auditor's report is Brent Manning

For and on behalf of

KPMG
Wellington

24 August 2021

113

New Zealand Oil & Gas Annual Report 2021INDEPENDENT AUDITOR’S REPORTCorporate
Directory

Registered and Head Office

Level 1, 36 Tennyson Street
Wellington 6011, New Zealand

Telephone
Email

+64 4 495 2424
enquiries@nzog.com

Auditors

KPMG

KPMG Centre, 10 Customhouse Quay
PO Box 996
Wellington, New Zealand

Share Registrar

Computershare Investor Services Ltd
Level 2, 159 Hurstmere Road
Takapuna
Private Bag 92119
Auckland 1142
New Zealand

Telephone
Freephone
Facsimile
Email

+64 9 488 8777
0800 467 335 (within NZ)
+64 9 488 8787
enquiry@computershare.co.nz

114

New Zealand Oil & Gas Annual Report 2021

115

EXPLORERS FROM NEW ZEALAND NEW ZEALAND OIL & GAS SINCE 1981New Zealand Oil & Gas Annual Report 2021Get the latest
investor news
at nzog.com

New Zealand Oil & Gas Ltd
Level 1, 36 Tennyson Street
Wellington 6011, New Zealand
+64 4 495 2424

www.nzog.com

Other annual reports

2024 Report ↗ 2023 Report ↗ 2022 Report ↗ 2021 Report ↗ 2020 Report ↗

Peers & competitors

MCB.TO McCoy Global Inc. ↗ PRSEF Prosafe SE ↗ AKKVF Akastor ASA ↗ ENGT Energy & Technology, Corp. ↗ MATR.TO Mattr Corp. ↗