2008 annual report - Carnarvon · aBn: 60 002 688 851. 2008 annual report 1 ContentS Chairman’S...
Transcript of 2008 annual report - Carnarvon · aBn: 60 002 688 851. 2008 annual report 1 ContentS Chairman’S...
2008 annual report
ii Carnarvon petroleum ltd
Corporate dIreCtorY
Directors
PJLeonhardt(Chairman)
EPJacobson(ChiefExecutiveOfficer)
NCFearis(Non-ExecutiveDirector)
KPJudge(Non-ExecutiveDirector)
Company SeCretary
RAAnderson
auDitorS
WHKHorwathPerthAuditPartnership
BankerS
AustraliaandNewZealandBankingGroupLimited
HSBC(Thailand)
regiStereD offiCe
GroundFloor
1322HayStreet
WestPerthWA6005
Telephone: +61893212665
Facsimile: +61893218867
Email: [email protected]
Website: www.carnarvonpetroleum.com
Share regiStry
ComputershareInvestorServicesPtyLimited
Level2
45StGeorgesTerrace
Perth,WA6000Australia
InvestorEnquiries: 1300557010(withinAustralia)
InvestorEnquiries: +61394154000(outsideAustralia)
Facsimile: +61893232033
StoCk exChange LiSting
SecuritiesofCarnarvonPetroleumLimitedarelistedon
ASXLimited.
ASXCode: CVN-ordinaryshares
aBn: 60 002 688 851
2008 annual report 1
ContentS
Chairman’S review 2
Chief exeCutive’S review 3
operating anD finanCiaL review 4-16
DireCtorS’ report 17-29
inCome StatementS 30
BaLanCe SheetS 31
StatementS of ChangeS in equity 32-33
StatementS of CaSh fLowS 34
noteS to the finanCiaL StatementS 35-69
DireCtorS’ DeCLaration 70
inDepenDent auDit report 71-72
Corporate governanCe Statement 73-75
aDDitionaL SharehoLDer information 76-77
2 Carnarvon petroleum ltd
ChaIrman’S revIew
Iampleasedtoreportthatthe2008financialyearhasbeenanotherexcitingperiodofgrowthforCarnarvon.Thegroundworkundertaken
overtheprevioustwoyearstoestablishastrongplatformforgrowthhasbeentranslatedintoverysignificantoperatingachievements
bothinthefieldandfinancially.Salesrevenuejumpedfrom$3.7millionto$63millionand,togetherwithourfirstprofitaftertaxof$16.7
million,theseresultsillustratethescaleofthetransformationtakingplace.
Carnarvonisnowwellestablishedinthemid-caprankingsoftheAustralianstockmarketasawellcapitalisedoilproducerwithgrowing
production,reservesandcashflow.GrowthhasbeenunderpinnedbythestrongperformanceofourjointventureinterestinthePhetchabun
BasinfieldincentralThailand.
Wehavecontinuedtheexcellentworkingrelationshipwithourpartnerandoperator,PanOrientEnergyCorp.Thedevelopmentprogramme
andresultsachievedoverarelativelyshorttimeframehavebeenimpressiveparticularlyinsuchacompetitiveenvironmentforskilled
peopleandphysicalresourcesintheoilindustry.
WhileourprimaryThaiinterestsprovidesignificantfurthergrowthpotentialCarnarvonhasaddedtoitssmallbuthighlyskilledtechnical
teamandaugmentedourphysicalpresenceandrepresentationinBangkok.Thishasenabledustoaccelerateournewventureactivities.
InThailandwehavesuccessfullydevelopedourregionalknowledge,addedtoourexplorationacreageandbuiltrelationshipswithhighly
regardedregionaloperators.Elsewhere,inSouthEastAsiaparticularly,wehaveactivelycontinuedtoreviewopportunities.
Overthelasttwelvemonthstheoilandgasindustryhasexperiencedextremelybuoyantconditionswithrecordhighoilprices.Atthesame
timetherehasbeenasignificantshortageofexperiencedpeopleandintensecompetitionforaccesstooilandgaspropertiesinmany
casesresultingincommerciallyunrealisticprices.
Morerecentlywehaveenteredaperiodofuncertainandhighlyvolatilefinancialmarketsandcommodityprices.Oursharepricehasbeen
adverselyaffectedalongwithmanyofourpeercompanies.Whilewearemindfulofthechallengesineffectivelydeployingvaluablecash
resourcesinthisclimate,Carnarvoniswellpositionedtotakeadvantageoftheopportunitiesthatwearenowstartingtoseeemerge.
Carnarvon’ssuccessislargelydependentontheeffortsofthepeopleinvolved.Wearefortunatetohaveanexperiencedanddedicated
team.Ithankmyfellowdirectors,ChiefExecutiveOfficerTedJacobsonandallofthestafffortheiroutstandingcontribution.Iamconfident
thatwiththeCompany’sstrongpositionandtheirenthusiasmandeffortswecanlookforwardtoanotherrewardingyear.
peter LeonhardtChairman
2008 annual report 3
ChIef exeCutIve’S revIew
Carnarvonhasgrownsignificantlyinthepasttwelvemonthstobecomeawellrespectedmid-tierAustralianoilexplorationandproducing
company.InrecognitionofthesuccesswehaveachievedinouronshoreThailandassets,thecompanywasawarded“ExploreroftheYear”
bytherecentGoodOilConferenceinPerth.
Carnarvon’soilproductionnowcomesfromfourfieldswithinthePhetchabunBasininwhichithasa40%interest:atWichianBuri,Na
SanunEast,NaSanunandSiThep.Atthecloseofthe2007/2008financialyear,onthebackofdrillingover20wellsinThailandthe
companyhassignificantlyincreaseditsnetaveragemonthlyproductiontoapproximately2,600bopd,bookedreservesof11.38mmblsof
oil,discoveredvaluablecontingentresourcesof31mmbblsofoil,andrealisedtangibleresultswithaconsolidatedcashbalanceof$31.4
million,includingdepositslodgedtosecureexplorationcommitments,atyearend.
FullscaledevelopmentoftheNaSanunEastOilFieldhascommencedfollowingthegrantofaproductionlicenceandenvironmental
approvals.Carnarvonisplanningforanticipated2008calendaryearendnetproductionofaround6,000bopd.Appraisalanddevelopment
drillingwillcontinuethroughouttheremainderofthisyearandintonextyearwiththenextexplorationwellsplannedtocommencein
early2009.
Significantexplorationandappraisaloilupsidehasalsobeenidentifiedthroughoutthepermits.Furtherappraisalanddevelopmentof
theWichianBuriOilFieldhascommencedandappraisaloftheSiThepOilField,BoRanggasdiscoveryandL44-Roildiscoverywillbe
undertakenin2009.
The Carnarvon team has considerable knowledge of onshore Thailand geology, and has successfully applied for and been granted
operatorshipand50%equityinexplorationconcessionL20/50.ThispermitliesimmediatelysouthofthelargeSirikitOilFieldwithinthe
PhitsanulokBasin.Carnarvoniscommittedtoacquiring2Dseismicin2009andthedrillingofatleastonewellby2010.Anaeromagnetic
surveywillcommencesoon,onceapprovalsarefinalised.
CarnarvonhasalsoappliedfortwootherconcessionsonshoreThailandaspartofanequalpartnershipwithPearlOil(Petroleum)Ltd.
The company will continue to progress new business opportunities, with a current focus in and around Thailand, concentrating on
opportunitiesthatcouldprovidefurthernear-termcashflow.
CarnarvonisalsoactivelylookingforfurtheropportunitiestoaddtoitsexistingacreageinAustralia,wheretheCompanyhasthreepermits
intheoffshoreCarnarvonBasinanda2.5%ORRIinterestinthePerthBasintightgasfieldatWarro.Ifsuccessfullydeveloped,Warrowould
leadtoapositivecashflowtoCarnarvonfrom2009or2010.
AsyourChiefExecutiveOfficer,onbehalfofallshareholders,IwouldliketothanktheBoardofDirectors,managementandstaffofCarnarvon
inhelping toachieve this transformationof thecompany, laying the foundation forcontinuedgrowth in theyears tocome.Carnarvon’s
technicalteam,withinternationalexperienceandprovenoilfindingcapabilities,providesthebasefromwhichwewillcontinuetogrow.
OnbehalfofCarnarvonIwouldliketoexpressmygratitudetoourjointventurepartners,inparticulartheveryactiveandcommittedPan
OrientEnergyCorp.,fortheirhardworkinhelpingCarnarvonachievetheseexcellentresults.
AsashareholderofthecompanyIampleasedatourpastprogress.Ibelievewehavethefundamentalsinplacetocontinuethisgrowth
andeagerlylookforwardtothenexttwelvemonthsofactivity.
ted JacobsonChiefExecutiveOfficer
4 Carnarvon petroleum ltd
operatInG and fInanCIal revIew
Company performanCe
key performance indicators
Carnarvontracksseveralkeyperformanceindicatorstoprovidearelativemeasureofthecompany’sgrowth,asshownbelow.
wells DrilledPeriod: 1July2007–30June2008
Measure: 23Wells
PeriodChange: +92%
annual net SalesPeriod: 1July2007–30June2008
Measure: 702,084bbls
PeriodChange: +1000%
25
Financial Year
Wel
ls
2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008
20
15
10
5
0
Financial Year
Net
Oil
Pro
du
ctio
n (
’000
BB
LS)
2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007 2007 - 20080
100
200
300
400
500
600
700
800
2008 annual report 5
operatInG and fInanCIal revIew (Continued)
Consolidated profit after taxPeriod: 1July2007–30June2008
Measure: $16.2million
PeriodChange: N/A
Share pricePeriod: Asat30June2008
Measure: A$0.53
PeriodChange: +121%
market CapitalisationPeriod: Asat30June2008
Measure: A$361million
PeriodChange: +129%
Financial Year
Co
nso
lidat
ed P
rofi
lt a
fter
Tax
(A$
mill
ion
)
2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008-4-202468
1012141618
0.6
Date
Pric
e (A
$ /
shar
e)
2004 2005 2006 2007 2008
0.5
0.4
0.3
0.1
0.2
0
400
Date
Mar
ket
Cap
(A
$ /
mill
ion
)
2004 2005 2006 2007 2008
350
300
100
250
200
50
150
0
6 Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
operationS review
“OverthecourseofthefinancialyearCarnarvonPetroleumhasincreasednetproductionfrom500bopdto3,000bopd,converted9
mmbblsof contingent resources to2P reserves, andsignificantly increasedoverall resources throughaconstantdrillingand testing
campaign.”
(1) THAILAND
Carnarvon’scornerstoneassets
aretheproducingfieldsinthe
L44/43andSW1Alicencesin
thePhetchabunBasinonshore
ThailandinwhichtheCompany
hasa40%interest.
permit map of thailand
2008 annual report 7
operatInG and fInanCIal revIew (Continued)
L44/43, Sw1a & L33/43 thailand phetchabun Basin(Carnarvon petroleum 40%, pan orient energy Corp. 60% and operator)
Exploration
SuccessfulexplorationandappraisaldrillinghasledtothedelineationofthecentralandnortherncompartmentsoftheNaSanunEast
(“NSE”)oilfield,aswellasthediscoveryofanewseparateoilpoolatL44-R.
Anexplorationwell,WB-1(Deep),whichwasdrilledintothevolcanicsbeneaththeproducingWichianBurisandstonereservoir,provedthe
existenceofreservoirqualityvolcanicsbutfailedtorecovercommercialflowsofoil.Itisinterpretedthatstructuremaybepresentupdip
ofthislocationandfurtherworkisplannedtoevaluatethispotential.
ExplorationdrillinginthenorthernexplorationblockL33/43failedtointersectcommercialvolumesofhydrocarbons.Furtherexploration
isplannedtobeundertakeninthesouthernpartofthispermitclosertotheprovedpetroleumsystemexistingaroundtheWichianBuri
oilfield.
Another3to4explorationwellsareplannedfor2009,withtimingdependentprimarilyonrigavailabilityanddevelopmentwellrequirements.
ThesewellsareplannedtotargetvolcanicreservoirssouthoftheWichianBurifieldandalsosandstonereservoirsnorthoftheWichian
Burifield.
Appraisal
ThesuccessfulappraisalofNSEinlate2007ledtoindependentcertificationof2Preservesinthatfieldof20.6millionbbls(grosstojoint
venture),theapplicationforaproductionlicenseoverNSE,andimplementationofadevelopmentplanthatisdetailedbelow.
Furtherappraisaldrillingisanticipatedforlaterin2008and2009toappraisetheL44-Roildiscovery,thevolcanicreservoirpotentialat
theSiThepandWichianBuristructures,furtherdelineationofthesandstoneoilreservoiratWichianBuri,andinvestigationofapotential
oillegundertheBoRanggasdiscovery.
8 Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
Development
AproductionlicenseovertheNSEoilfieldwasgrantedearlyin2008.Environmentalapprovaltodrillwasdelayedforafurthersixmonths,
inturndelayingthestartofthedevelopmentdrilling.
ThedevelopmentplanforNSEincorporates20to25developmentwellsbeingdrilledfrommid2008throughtomid2010.Thefirstof
thesewells,NSE-A1,wasdrilledandsuccessfullycompletedinmid2008withpositiveresults.
Thewellswillbedrilled froma totalof5or6wellcluster locations,witheach locationbeingdesignedandbuilt toaccommodatea
maximumoffourwells.Eachlocationwillhaveoiltreatment,storageandoffloadingcapacity.Fivelocationshavebeencompleted,with
thesixthlocationoptionaldependinguponindividualwellperformance.
Thedevelopmentplanisdesignedforplateauproductionof15,000bopdgrossfor1to2yearsbeforenaturaldecline.Thereissufficient
capacityinexistinginfrastructuretocaterfordeliveryoftheoilfromthefieldtotherefineryinBangkok.
SuccessfulappraisaloftheWichianBuriandotherdiscoveriescouldleadtofurtherdevelopmentdrillingin2009,ultimatelytargeting
4,000 bopd gross from the SW1A concession incorporating Na Sanun, Wichian Buri and Si Thep, with peak production anticipated
in2010.
Production
ExplorationandappraisalwellswithintheonshoreThailandpermitsareextensivelytested,withproducedvolumesbeingsoldatcommercial
rates.Consequently,duetothehighsuccessrateofexplorationandproductionoverthe2007/2008financialyear,productionrates
havebeensubstantiallyincreasedduringthatperiod.AverageratesforJune2008wereover2,600bopdnettoCarnarvoncomparedto
approximately500bopdinJune2007.
WiththecommencementofdevelopmentdrillinginJune2008,productionratesareanticipatedtoincreaseto6,000bopdnetbythe
endof theyear.Furtherdevelopmentdrilling in2009willensureanextendedplateaurateofaround6,000bopdnetandconsistent
dailyrates.
2008 annual report 9
operatInG and fInanCIal revIew (Continued)
L20/50 thailand phitsanulok Basin(Carnarvon petroleum 50% and operator, Sun resources nL 50%)
TheL20/50concessionissituatedapproximately30kmstothesoutheastandontrendwiththelargestonshoreoilfieldinThailandat
Sirikit.PreviousdrillinghasdemonstratedthatoilhasbeengeneratedwithintheL20/50concession.
Onepreviouslydrilledwellin1982atNongBua-1intersectedsignificantoilshowswhichCarnarvonbelieveswerenotfullytested.Carnarvon
iscontinuingto investigatethepossibilityoftwinningorre-drillingthiswell,howevertheearliestdatetogainrequiredenvironmental
approvalswoulddelaythespuddinguntil2009.
Carnarvon has commenced reprocessing available seismic data within the permit, which, combined with a planned imminent high
resolutionaeromagneticsurvey,willprovidea3dimensionalviewofthesubsurface.Thiswillenabletherecordingofnewseismicinthe
mostprospectivepartoftheconcessionduring2009andthedrillingofatleastoneexplorationwellwithinthefirstthreeyearobligation
period.
L52/50 and L53/50 thailand Surat-khiensa Basin(Carnarvon petroleum 50%, pearl oil (petroleum) Limited 50% and operator)
TheCompanyhasappliedtotheDepartmentofMineralFuels(“DMF”) inThailandforconcessionrights inpetroleumexplorationand
productionfortwoareasdescribedasBlocksL52/50andL53/50(“theConcessions”)onshoreThailandwithintheSurat-KhiensaBasin.
Pearl Oil (Petroleum) Ltd (“Pearl”), an independent oil and gas company with exploration and production (“E&P”) activities focused
exclusively inSouthEastAsia,submittedthebidasoperatoronbehalfofPearlandCarnarvon,eachcompanyparticipatingata50%
equitylevel.
Thecombinedareaofthetwoblocksislarge,comprisingapproximately6,950km2.However,botharelightlyexplored,withonlytwodeep
wellsandlimitedseismicdataavailable.
TherehasbeenminimalexplorationovertheareaandlittlepublicknowledgeisavailableabouttheSurat-KhiensaBasin.Workcompleted
todateandCarnarvon’sregionalknowledgesuggeststhisisanareawithgoodpotentialforhydrocarbonexploration.
Carnarvon and Pearl were together the sole bidders for this block and anticipate the block being formally awarded in late 2008 or
early2009.
10 Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
(2) auStraLia
ep 321, ep 407 australia onshore perth Basin(Carnarvon petroleum 2.5% overriding royalty - orri)
TheWarroGasFieldislocatedintheEP321andEP407permits,withintheonshorepartofthePerthBasin,WesternAustralia.Carnarvon
holdsa2.5%overridingroyaltyofnetwellheadvaluefromanyproductionwithinthepermits.Carnarvonisnotrequiredtocommittoany
expenditureindevelopment,production,appraisalandexplorationoperations.Theoperatorofthepermits,LatentPetroleum,isplanning
tobringtheWarroGasfieldintoproductionduring2009.Theoperator,whohasestimatedthefieldcontainsapproximately7Tcfofgasin
place,hasannouncedplansforthefieldtocommenceproductionataninitialrateof20mmcfgd,peakingat100mmcfgd.
onshore perth Basin – location map
2008 annual report 11
operatInG and fInanCIal revIew (Continued)
wa 399 p – australia offshore north west Shelf(Carnarvon petroleum 50% and operator, rialto energy Limited 50%)
WA-399-Pwasawardedon7May2007.Thepermitcoversanareaof50km2locatedbetweenthePyreneesandMacedonoilandgas
fieldsandtheLeatherbackoilaccumulation.Theminimumguaranteedworkprogramme(Years1-3)comprisesgeotechnicalstudiesand
315km2new2Dseismicdata.
Carnarvon has completed the reprocessing of all available seismic over the permit (550km2) and is incorporating the results into a
revisedstructuralinterpretationofthepermit.Oncefinalizedthisisexpectedtodeterminetheoptimumlocationforthenew2Dseismic
programme.
ep 424 / ep 110 - australia offshore northwest Shelf(Carnarvon petroleum 35%, Strike oil Limited 40% and operator, pancontinental oil and gas Limited 25%)
AvariationtothepermittermsofEP424hasbeenrequestedfromtheDepartmentofIndustryandResources(“DOIR”)underwhichthe
drillingofonewellisnowrequiredby13April2009.Theoutcomeisawaited.
Furtherdetailedseismicanalysisof‘amplitudeversusoffset’wascarriedoutbytheoperatorovertheBaniyasProspecttorefinethenature
ofhydrocarbonsexpected.TheBaniyasProspectissituatedonthedownthrownsideoftheFlindersFault,theeasternboundingfaultof
theCarnarvonBasin.BrightseismicamplitudesonthecrestofthestructurearesimilartotheCyranoandNasutusdiscoverieselsewhere
alongthisfaulttrendwhichencounteredagascaponoilleg.BaniyasisestimatedtohavepotentialforPmeanprospectiveresourcesof
26millionbarrelsoiland56Bcfgas(34millionBarrelsofOilEquivalent).Theseprospectiveresourcesareofaspeculativenatureuntil
theprospecthasbeenevaluatedbydrilling.EP-110isoperatedinconjunctionwithEP-424andanapplicationtorenewthepermitwas
submittedtotheDOIRinJuly2006.Theoutcomeisalsoawaited.
north west Shelf permits – location map
12 Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
reServe aSSeSment
Petroleum Resource Classification, Categorisation and Definitions
CarnarvoncalculatesreservesandresourcesaccordingtotheSPE/WPC/AAPG/SPEE1PetroleumResourceManagementSystem(“SPE-
PRMS”)definitionofpetroleumresources.Thisdefinitionwasfirstpublishedin1997bytheSPE,andinanefforttostandardisereserves
reportinghasbeenfurtherclarifiedbytheSPE-PRMSin2007.
PRODUCTION
RESERVES
Proved Proved&Probable
Proved,
Probable&
Possible
Commercial
CONTINGENTRESOURCES
Discovered,butnotcurrentlycommercial
PROSPECTIVERESOURCES
Explorationprospectivity
Proved and Probable (2P) Reserves
Reservesaredefinedasthosequantitiesofpetroleumwhichareanticipatedtobecommerciallyrecoveredfromknownaccumulations
fromagivendateforward.Estimationofreservesisinherentlyuncertainandtoexpressanuncertaintyrange,reservesaresubdivided
inProved,ProbableandPossiblecategories.CarnarvonreportsitsreservesasProvedplusProbablereserves,alsoabbreviatedas2P.
Carnarvon’sreservesarecalculatedusingforwardprojectionsofproductionlevels,workprogrammesandtheassociatedcapitalinvestment
andoperatingcostlevels.Fromtheseprojectionsthelastyearofeconomicproductioniscalculated,givenanassumedoilpricescenario.
Theaggregateproductionuntilthiseconomiccut-offpointconstitutesthereserves.
1 SocietyofPetroleumEngineers(SPE);WorldPetroleumCouncil(WPC);AmericanAssociationofPetroleumGeologist(AAPG)&SocietyofPetroleumEvaluationEngineers(SPEE)
2008 annual report 13
operatInG and fInanCIal revIew (Continued)
Carnarvon’sreservesbasehasbeencertifiedbyanindependentreservesauditor.OverthelastfewyearsGaffney,ClineandAssociates
(“GCA”)hasperformedthisserviceinlinewithendofcalendaryearrequirementsfortheDepartmentofMineralFuels(“DMF”)inThailand.
GCAisoneofthelargestindependentreservescertifiersintheworldandthisyearGCAcertified11.38millionbarrelsofoilof2Poil
reservesnettoCarnarvonasat1January2008,whichisanincreaseofover300%comparedtoDecember2006reserves.Inparticular,
2PreservesincreasedasaresultofsuccessfulappraisaldrillingintheNSEoilfield.
NetCarnarvonReserves
Proved
1P
Proved+Probable
2P
Proved+Probable+Possible
3P
GCA31Dec2007 2.59(millionbbls) 11.38(millionbbls) 45.69(millionbbls)
TheinformationinthisReservesStatementhasbeencompiledbyPhilipHuizenga,afull-timeemployeeoftheCompany.PhilipHuizengais
qualifiedinaccordancewithASXlistingrule5.11andhasconsentedtotheformandcontextinwhichthisstatementappears.
Contingent Resources
In addition to its certified reserves,Carnarvonhas anumberof discoveredoil andgas resourceswhichdonot currently classify as
reserves.AccordingtotheSPE-PRMS,theseclassifyascontingentresources.Contingentresourcesarethosequantitiesofpetroleum
whichareestimated,onagivendate,tobepotentiallyrecoverablefromknownaccumulations,butwhicharenotcurrentlyconsidered
tobecommercially recoverable. Inaddition, a viabledevelopment strategyhas tobedeveloped toallowcontingent resources tobe
categorisedasreserves.
Carnarvonhasanestimated31millionbarrelsofcontingentoil resources.Theseresourcesarenotreservesbecausefurtherwork is
requiredtomaturethem,mostnotablyappraisaldrilling.During2007/2008around9millionbblsofcontingentresourceswereconverted
into2Preserves.ContingentresourceshavebeenreplenishedbytherecentL44-Roildiscoveryandfurtheranalysisofvolcanicsinwells
atBoRang,SiThepandNSE.
Carnarvonhasanactiveworkprogramme toconvert furthercontingent resources into reserves.However, thiswould requiredrilling
additionalappraisalwellsandpotentiallyacquiringfurther3Dseismic.Studyworkisunderwaytoidentifyadditionaldevelopmenttargets.
Appraisaldrilling inWichianBuriandNSE isscheduled for late2008and2009.Thetimingof thesewellswilldictate theamountof
resourcesthatmaybeconvertedintoreservesbeforethenextGCAreservesauditscheduledforcalendaryearend2008.
14 Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
Carnarvonestimatesitscontingentresourcesinasimilarmannerasitsreserves,requiringforwardprojectionsofproductionlevelsand
workprogrammesandtheassociatedcapitalinvestmentandoperatingcostlevels.Thereisachancethatidentifiedresourceswillnot
convertintoreserves.
NetCarnarvonContingentResource
Proved+Probable2C
(millionbbls)
NSE 14
BoRang 7
SiThep 7
L44-R 3
CVN30Jun2008 31
Fortheremainderof2008Carnarvon isplanningtodrilla further8development/appraisalwellsand2or3explorationwells.The
appraisalandexplorationwellswillbetargeting18millionbblsofunriskedcontingentresourcesnet.Carnarvonestimatesthatmore
than13millionbblsofunriskedcontingentresources,plus34millionbblsofpossiblereserves,willbetargetedbyappraisaldrillingwork
programmesin2009andbeyond.
Prospective Resources
Carnarvon’scontingentresourcesarenotthesameasitsprospectiveresources.UndertheSPE-PRMSdefinitionsprospectiveresources
canalsobeclassifiedasexplorationresources.Prospectiveresourcesarethosequantitiesofpetroleumwhichareestimated,onagiven
date,tobepotentiallyrecoverablefromundiscoveredaccumulations.
Carnarvonhasanumberofexploration licences.Theseexploration licencesareevaluatedusingtechniques likegravityandmagnetic
surveys,geochemicalsurveys,seismicsurveysandbasinanalysis.Thisanalysisresultsinalonglistofleadsanddrillableprospects.Only
drillableprospectswhichhavebeenincludedondrillingschedulesarecategorisedasprospectiveresourcesbyCarnarvon.Leadsare
identifiedaspotentialhydrocarbonaccumulationsthatwillrequireadditionalstudybeforetheyarematuredtoprospectsandappearin
drillingplans.Prospectsandleadscarryexplorationriskswhichresultinthepossibilityofnotfindingcommercialhydrocarbons.These
risksareidentifiedbyCarnarvonandhelpmanagementinrankingexplorationactivities.
Explorationwellsscheduledfor2009willtargetprospectiveresourceswhichhaveyettobecalculated.
2008 annual report 15
operatInG and fInanCIal revIew (Continued)
new ventureS
Organic Growth
Asanintegratedexplorationandproductioncompany,Carnarvoniscontinuouslyaimingtogrowthebusinessbyidentifyingexploration
targetsandmaturingthemintodrillableprospects,thusincreasingitsprospectiveresourcebase.Successfulexplorationdiscoveriesresult
inprospectiveresourcesmovingintocontingentresources.Successfulappraisaldrilling,incombinationwithadevelopmentstrategyand
demonstratingcommerciality,resultincontingentresourcesbeingmovedintoreserves.
Other
Carnarvonhascontinuedtoachievesignificantgrowthfromitssuccessfulexplorationanddevelopmentefforts in itsThailandassets,
L44/43andSW1A. These areas continue to be a primary focus for theCompany and they are nowdelivering significant sustained
oilproductionandrevenuesaspredicted.Cashflowfromtheseproducingfields facilitatesCarnarvon’spursuitofothernewventure
opportunitiestogrowthecompany.
Identifyingandsuccessfullynegotiating theseopportunities requiresaconcentratedeffort.Carnarvonhas recruitedaNewVentures
Managertoleadthisendeavourwhoisageologist/geophysicistwithsignificantindustryexperienceinSouthEastAsia,Australiaand
globally.Thenewventuresteamiscurrentlyimplementingastrategytoacquirequalityexplorationacreageandappraisalprojectswith
preferenceforthefollowing:
• Near-termproductionandrevenue
• Producingfieldswithpotentialupsideviainfilldrilling,near-fieldexplorationorworkovers
• Lowcost,non-operatedinterestswithcompetentpartneroperators
• Ontrendwithcommercialoildiscoveries
• Necessaryinfrastructureandmarketsinplace
• LeveragingCarnarvon’sknowledgeandexpertisetodevelophealthy,long-termrelationshipswithlargeroperators
• Organicgrowthaswellasgrowthviamergersandacquisitions
Carnarvonisprogressingatanadvancedstagewithseveralexplorationandappraisalopportunitiestodeliveronthisstrategy.Anew
explorationblockinonshoreThailand,L20/50,wasawardedtoCarnarvonintherecentbidround.Thisblocklieswithinthesameproven
basinastheSirikitandS1oilfields.BidshavealsobeenmadefortwofurtherblocksonshoreThailand.
16 Carnarvon petroleum ltd
operatInG and fInanCIal revIew (Continued)
finanCiaL Summary
TheGroup’srevenuefromcontinuingoperationsfortheyearended30June2008,beingitsshareofthePhetchabunBasinJointVenture
(“JointVenture”)inThailand,was$63,033,000(2007:$3,674,000).
The higherA$ oil revenue resulted fromhigher Joint Venture oil sales of 1,755,209bbls (2007: 147,904bbls) complemented by an
improvementintheachievedoilsalepricetoUS$82.19perbbl(2007:US$50.24),partlyoffsetbyanappreciationintheA$fromUS$0.85
toUS$0.96overthereportingperiod.Theincreaseinoilsalesisexplainedearlierinthisoperatingandfinancialreview.
TheGroup’sprofitafterincometaxfortheyearended30June2008was$16,174,000(2007:$1,542,000loss),howeveritsshareofthe
pre-tax(incomeandspecialremuneratorybenefit)cashoperatingprofitofthePhetchabunBasinJointVentureinThailandincreasedto
$52,734,000(2007:$882,000)asaresultofsignificantlyimprovedproductionandthelowvariableoperating,transportation,royaltyand
sellingcostperbarrelof$13.87(2007$48.26).
Corporate and administration costs for the year were $2,129,000 excluding share-based payments (2007: $966,000). This increase
reflectsageneralincreaseincorporatecostsaswellasstaffcostsassociatedwithexpandingtheCompany’stechnicalcapability.
2008 annual report 17
dIreCtorS’ report
ThedirectorspresenttheirreporttogetherwiththefinancialreportofCarnarvonPetroleumLimited(“Company”)andoftheGroup,being
theCompany,itscontrolledentities,andtheGroup’sinterestinjointlycontrolledassets,forthefinancialyearended30June2008,and
theauditor’sreportthereon.
CarnarvonPetroleumLimitedisalistedpubliccompanyincorporatedanddomiciledinAustralia.
DireCtorS
ThenamesanddetailsoftheCompany’sdirectorsinofficeatanytimeduringorsincetheendofthefinancialyearareasfollows.Directors
wereinofficeforthisentireperiodunlessotherwisestated.
peter J Leonhardt FCA,FAICD(Life)
ChairmanAge61.Appointedasadirectoron17March2005andappointedChairmaninApril2005.
MrLeonhardtisanindependentcompanydirectorandadviserwithextensivebusiness,financialandcorporateexperience.Heis
aCharteredAccountantandaformerSeniorPartnerwithPricewaterhouseCoopersandManagingPartnerofCoopers&Lybrandin
WesternAustralia.
DuringthepastthreeyearsMrLeonhardthasservedasadirectorofthefollowinglistedcompanies:CentrepointAllianceLimited
(fromMay2002);CTILogisticsLimited(fromAugust1999);VoyagerEnergyLimited(fromMarch2001toSeptember2005);Titan
ResourcesLimited(fromJune2005toJune2006).HeisalsoadirectoroftheWesternAustralianInstituteforMedicalResearch.
MrLeonhardtisChairmanoftheAuditCommittee.
Edward (Ted) P Jacobson B.Sc(HonsGeology)
Chief Executive OfficerAge59.Appointedasadirectoron5December2005.
Mr Jacobson isapetroleumgeophysicistwith38years’experience inpetroleumexplorationprincipally in theEuropeanNorth
Sea,SouthEastAsia,SouthAmericaandAustralia.WithinAustraliahehasbeenresponsibleforinitiatinganumberofpetroleum
discoverieswithintheCooperBasin,BarrowSubBasinandTimorSea.In1986,TedestablishedtheconsultingcompanyExploration
StudyProjectsPtyLtdwhichadvisedcompaniesonnewventureopportunitiesinAustraliaandSouthEastAsiaandassistedin
capital raisingsandcorporateactivity. In1991Tedwasco-founderofDiscoveryPetroleumNLand from1996co-founder and
technicaldirectorofTapOilLtdwhichgrewtoamarketcapitalisationofover$400millionunderhistechnicalleadership.Tedretired
fromTapinSeptember2005.
DuringthepastthreeyearsMrJacobsonhasservedasdirectorofthefollowinglistedcompanies:RialtoEnergyLimited(fromJuly
2006);TapOilLtd (fromSeptember1996toSeptember2005).Mr JacobsonwasalsoadirectorofSmartRichEnergyFinance
(Holdings)Ltd(fromJanuary2007toNovember2007),listedontheHongKongStockExchange.
18 Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
Neil C Fearis LL.B(Hons),MAICD,FFin
Non-Executive DirectorAge57.Appointedasadirectoron30November1999.
MrFearishasover30years’experienceasacommerciallawyerintheUKandAustralia.
DuringthepastthreeyearsMrFearishasservedasadirectorofthefollowinglistedcompanies:KrestaHoldingsLimited(from
1997);PerseusMiningLimited(from2004);LibertyResourcesLimited(from25June2007).MrFearisisalsoamemberofseveral
professionalbodiesassociatedwithcommerceandlaw.
MrFearisisamemberoftheAuditCommittee.
Kenneth P Judge B.Com,B.Juris,LL.B
Non-Executive DirectorAge53.Appointedasadirectoron1April2005.
Mr.Judgehasextensivelegalandbusinessmanagementexperiencehavingheldanumberofpubliccompanydirectorshipsandhas
beenengagedintheestablishmentorcorporaterestructureoftechnology,mining,andoilandgascompaniesinAustralia,United
Kingdom,USA,Brazil,Argentina,MexicoandthePhilippines.
Mr.JudgeisadirectorandChairmanofBrazilianDiamondsLimited(fromFebruary2001),whichislistedonboththeTorontoStock
ExchangeandtheAIMmarketoftheLondonStockExchangePlc.HeisadirectorofBlockShieldCorporationPlc(fromFebruary
2004),directorandChairmanofHidefieldGoldPlc(fromOctober2003)andadirectorofGulfsandsPetroleumPlc.(fromOctober
2006),allofwhicharelistedonAIM.
HeisalsoadirectorandChairmanofAltoVenturesLtd(fromApril2004),ColumbusGoldCorporation(fromSeptember2004),
ColumbusSilverCorporation(fromMay2007)andEmpireMiningLtd(fromJanuary2005),allofwhicharelistedontheTSXVenture
Exchange.
Company SeCretary
MrRobertAndersonwasappointedCompanySecretaryinNovember2005.MrAndersonisaCharteredAccountantwhohaspreviously
heldcompanysecretarialpositionsinbothASX-listedcompaniesandprivateentities.
DireCtorS’ meetingS
Thenumberofdirectors’meetingsandthenumberofmeetingsattendedbyeachofthedirectorsoftheCompanyduringthefinancial
yearareasfollows:
(a) (b)
PeterLeonhardt 5 5
TedJacobson 5 5
NeilFearis 5 5
KenJudge 5 5
(a) Numberofmeetingsheldduringperiodofoffice
(b) Numberofmeetingsattended
2008 annual report 19
dIreCtorS’ report (Continued)
auDit Committee
Names and qualifications of Audit Committee members
The Committee is to include at least 2 members. Current members of the committee are Mr Peter Leonhardt and Mr Neil Fearis.
QualificationsofAuditCommitteemembersareprovidedintheDirectorssectionofthisdirectors’report.
Audit Committee meetings
The number of Audit Committee meetings and the number attended by each of the members during the reporting period were as
follows:
(a) (b)
PeterLeonhardt 3 3
NeilFearis 3 3
(a) Numberofmeetingsheldduringperiodofoffice
(b) Numberofmeetingsattended
remuneration Committee
InAugust2008theBoarddeterminedtheCompanywasofasizetojustifytheexistenceofaRemunerationCommitteethatnowcomprises
MrLeonhardt,MrJudgeandMrFearis.TherewerenoRemunerationCommitteemeetingsduringthereportingperiod.
TheRemunerationCommitteeisresponsiblefortheremunerationarrangementsfordirectorsandexecutivesoftheCompany.
TheRemunerationCommitteeconsidersremunerationpackagesandpoliciesapplicabletotheexecutivedirectors,seniorexecutives,and
non-executivedirectors.Itisalsoresponsibleforshareoptionschemes,theEmployeeSharePlan,incentiveperformancepackages,and
retirementandterminationentitlements.
prinCipaL aCtivitieS
Duringthecourseofthe2008financialyeartheGroup’sprincipalactivitiescontinuedtobedirectedtowardsoilandgasexploration,
developmentandproduction.
iDentifiCation of inDepenDent DireCtorS
TheindependentdirectorsareidentifiedintheCorporateGovernanceStatementsectionofthisAnnualReportassetoutonpages73to
75.
20 Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
remuneration report
DuringthereportingperiodtheBoarddeterminedremunerationpoliciesandpractices,evaluatedtheperformanceofseniormanagement,
andconsideredremunerationforthoseseniormanagers.
The Remuneration Committee now assesses the appropriateness of the nature and amount of remuneration on an annual basis by
referencetoindustryandmarketconditions,andwithregardtotheCompany’sfinancialandoperationalperformance.
Totalnon-executivedirectors’feesareapprovedbyshareholdersandtheBoardisresponsiblefortheallocationofthosefeesamongstthe
individualmembersoftheBoard.
ThevalueofremunerationisdeterminedonthebasisofcosttotheCompanyandtheGroup.
Principles of compensation
Remunerationofdirectorsandexecutivesisreferredtoascompensationthroughoutthisreport.
CompensationlevelsforkeymanagementpersonneloftheCompanyandtheGrouparecompetitivelysettoattractandretainappropriately
qualifiedandexperienceddirectorsandseniorexecutives.Thedirectorsobtain,whenrequired,independentadviceontheappropriateness
ofremunerationpackages,giventrendsincomparativecompaniesbothlocallyandinternationally.
Compensationarrangementsincludeamixoffixedandperformancebasedcompensation.Acomponentofshare-basedcompensationis
awardedatthediscretionoftheBoard,subjecttoshareholderapprovalwhenrequired.
Compensationstructurestakeintoaccounttheoveralllevelofcompensationforeachdirectorandexecutive,thecapabilityandexperience
of the directors and senior executives, the executive’s ability to control the financial performanceof the relative business segment,
theGroup’sperformance(includingearningsandthegrowthinshareprice),andtheamountofanyincentiveswithineachexecutive’s
remuneration.
On1August2008theBoardadoptedapolicythatprohibitsthosethataregrantedshare-basedpaymentsaspartoftheirremuneration
fromenteringintootherarrangementsthatlimittheirexposuretolossesthatwouldresultfromsharepricedecreases.TheCompany
requiresallexecutivesanddirectorstosignannualstatementsofcompliancewiththispolicythroughouttheprecedingyear.
InconsideringtheGroup’sperformanceandbenefitsforshareholderwealth,theBoardhashadregardtothefollowingindicesinrespect
ofthecurrentfinancialyearandthepreviousfouryears.Nodividendshavebeenpaidordeclaredduringthisperiod.
30 June 2004 30 June 2005 30 June 2006 30 June 2007 30 June 2008
Shareprice $0.015 $0.018 $0.052 $0.24 $0.53
Consolidatednetprofit/(loss)from
continuingoperations($000) ($1,417) ($1,007) ($1,246) ($1,542) $16,174
ThedirectorsbelievetheincreaseinsharepricesinceJune2004reflectsanumberoffactors,includingtheappointmentofTedJacobson
asChiefExecutiveOfficer inFebruary2006.Thedevelopmentof theGroup’soilandgas interests inThailandsincehisappointment
hasresultedinasubstantialincreaseinproductionandoperationalrevenues,asevidencedbytheoperatingprofitintheperiodunder
review.
2008 annual report 21
dIreCtorS’ report (Continued)
remuneration report (continued)
Principles of compensation (continued)
Fixed compensation
Fixedcompensationconsistsofbasecompensationaswellasemployercontributionstosuperannuationfunds.Basecompensationmay
besupplementedbyanelementofshare-basedcompensation.
Therewasnoshare-basedcompensationintheperiodunderreview,otherthanthatsetoutintheEmployeeSharePlansectionofthis
remunerationreport.
Non-executive directors
Totalremunerationforallnon-executivedirectors, lastvoteduponbyshareholdersataGeneralMeetinginNovember2005,isnotto
exceed$200,000perannum.
Anon-executivedirector’sbasefeeiscurrently$55,000perannum.TheChairmanreceives$90,000perannum.Non-executivedirectors
donotreceiveanyperformance-relatedremuneration.Directors’feescoverallmainBoardactivitiesandmembershipofBoardcommittees.
TheCompanydoesnothaveanytermsorschemesrelatingtoretirementbenefitsfornon-executivedirectors.
Service contracts
Thecontractduration,periodofnoticeandterminationconditionsforkeymanagementpersonnelareasfollows:
(i) TedJacobson,ChiefExecutiveOfficer,isengagedthrougharolling12monthEmploymentAgreement.TerminationbytheCompany
iswith3months’notice(orpaymentinlieuthereof)andpaymentof9monthsremuneration.TerminationbyMrJacobsoniswith3
months’notice.
(ii) RobertAnderson,CompanySecretaryandChiefFinancialOfficer,isengagedthrougharolling12monthConsultancyAgreement.
TerminationbytheCompanyiswith6months’noticeorpaymentinlieuthereof.Terminationbytheconsultantiswith3months’
notice.
(iii) Philip Huizenga, Chief Operating Officer, is engaged as an employee. Termination by the Company is with 4 weeks’ notice or
paymentinlieuthereof.TerminationbyMrHuizengaiswith4weeks’notice.
Employee Share Plan
SharesareissuedunderanEmployeeSharePlan(“ESP”),whichhasbeenapprovedbyshareholdersinAnnualGeneralMeeting(“AGM”).
ThepurposeoftheESPistoattract,retainandmotivatethosewhohavebeeninvitedtoparticipateintheESPandtherebyaligntheir
interestswiththoseofothershareholdersasameansofencouragingthemtoensurethatCompanyperformanceincreasesshareholder
wealththroughlongtermgrowth.Sharesareissuedbasedupontheassessedperformanceofeachpersonagainsttheirjobspecifications
andtherecommendationsoftheChiefExecutiveOfficer,andinthecaseofdirectors,withtheapprovalofshareholders.ThefollowingESP
shareswereissuedtodirectorsandkeymanagementpersonnel:
22 Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
remuneration report (continued)
Employee Share Plan (continued)
2008executive officers number of issue date issue price Loan shares issued per share
RAAnderson 100,000 07/01/2008 $0.701 $70,100
PPHuizenga 100,000 07/01/2008 $0.701 $70,100
2007
Directors number of issue date issue price Loan shares issued per shareEPJacobson 6,000,000 30/04/2007 $0.09 $540,000
PJLeonhardt 3,000,000 30/04/2007 $0.09 $270,000
Theseissueswerenotsubjecttoaperformancecondition.Theissuepricewascalculatedbasedonthe5dayweightedaverageclosing
pricepriortothedateofoffer.Thepurchaseswerefundedbyinterest-freeloanswithalimitedrecoursesecurityovertheplansharesand
subjecttothedetailedrulesoftheESP.
Analysis of bonuses included in remuneration
Allcashbonusesawardedduringtheperiodandincludedinremuneration,assetoutonpage23,fullyvestedtoeachofthedirectors,
namedCompanyexecutives,andkeymanagementpersonnelduringtheperiod.
Directors’ and executive officers’ remuneration (Company and consolidated)
DetailsofthenatureandamountofeachmajorelementoftheremunerationofeachdirectoroftheCompanyandeachofthenamed
CompanyandGroupexecutivesreceivingthehighestremunerationaresetoutonthefollowingpage.
Thefairvalueofoptions,includingESPsharestreatedinprincipleasanoptionovertheCompany’sshares,iscalculatedatthedateof
grantusingtheBlack-ScholesOptionPricingModel.SharesissuedundertheESPvestimmediatelyandtheirfairvaluerecognisedasan
expenseinthecurrentperiod.ThefollowingfactorsandassumptionswereusedindeterminingthefairvalueofESPsharesatgrantdate,
beingthedateofshareholderapproval,inthecurrentandpreviousreportingperiod:
assumed fair value exercise price of shares expected risk free Dividendgrant date expiry date per option price at grant date volatility interest rate yield
2008
07/01/2008 06/01/2011 $0.31 $0.701 $0.701 55% 7.5% 0%
2007
30/04/2007 30/04/2010 $0.07 $0.09 $0.135 55% 5.5% 0%
2008 annual report 23
dIreCtorS’ report (Continued)
rem
un
erat
ion
rep
ort
(con
tinu
ed)
Dir
ecto
rs’ a
nd e
xecu
tive
offic
ers’
rem
uner
atio
n, C
ompa
ny a
nd c
onso
lidat
ed (c
ontin
ued)
Sh
ort
term
po
st e
mpl
oym
ent
Shar
e-ba
sed
paym
ents
Sh
ort
term
val
ue o
f opt
ions
Sa
lary
and
ca
sh
Supe
rann
uati
on
as
a %
of
nam
e fe
es ($
) bo
nus(
$)
cont
ribu
tion
s ($
) Sh
ares
($)
opt
ions
($)
tota
l ($)
re
mun
erat
ion
Dir
ecto
rs
Non
-Exe
cutiv
e
Mr
PJL
eonh
ardt
(Cha
irman
)
2008
$8
2,50
0-
--
-$8
2,50
0-
2007
$6
0,00
0-
--
$222
,263
$2
82,2
63
78.7
%
Mr
NC
Fea
ris
2008
$5
0,00
0-
--
-$5
0,00
0-
2007
-
-$3
7,50
0-
-$3
7,50
0-
Mr
KPJu
dge
2008
$5
0,00
0-
--
-$5
0,00
0-
2007
$3
7,50
0-
--
-$3
7,50
0-
Exec
utiv
e
Mr
EPJa
cobs
on
(Chi
efE
xecu
tive
Offi
cer)
2008
$3
15,3
67
$50,
000
$9,6
33
--
$375
,000
-
2007
$2
50,0
00
--
-$4
44,5
27
$694
,527
64
.0%
exec
utiv
es
Mr
RA
Ande
rson
(CFO
/C
ompa
nyS
ecre
tary
)
2008
$2
25,0
00
$26,
214
--
$30,
734
$281
,948
10
.9%
2007
$1
49,9
36
--
--
$149
,936
-
Mr
Phili
pH
uize
nga
(Chi
efO
pera
ting
Offi
cer,
from
1Ja
nuar
y20
08)
2008
$1
37,2
00
-$1
2,34
8-
$30,
734
$180
,282
17
.0%
Tota
lcom
pens
atio
n:k
ey
man
agem
entp
erso
nnel
(Com
pany
and
Con
solid
ated
)
2008
$8
60,0
67
$76,
214
$21,
981
-$6
1,46
8$1
,019
,730
2007
$4
97,4
36
-$3
7,50
0-
$666
,790
$1
,201
,726
MrP
eter
Leo
nhar
dt,t
heC
hairm
an,i
scu
rren
tlya
ctin
gin
ap
artt
ime
exec
utiv
eca
paci
tyto
sup
port
the
Chi
efE
xecu
tive
Offi
cer.
MrL
eonh
ardt
’sfu
lfillm
ento
fthi
sro
leg
oing
forw
ard
will
be
mon
itore
dre
lativ
eto
the
Com
pany
’ss
tage
ofd
evel
opm
ent.
Dire
ctor
s’fe
esa
rep
aid
orp
ayab
leto
the
dire
ctor
or
adi
rect
orr
elat
ede
ntity
.
Non
eof
the
rem
uner
atio
nin
the
curr
ento
rpr
ior
perio
dw
asp
erfo
rman
cer
elat
ed.
24 Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
remuneration report (continued)
Equity instruments
(i) Shares
TherewerenosharesintheCompanygrantedascompensationtokeymanagementpersonnelduringthereportingperiod,otherthanthe
ESPsharestreatedinprincipleasanoptionovertheCompany’ssharesasdescribedunder(ii)below.
(ii) OptionsandESPshares
TherewerenooptionsoversharesintheCompanygrantedascompensationduringthereportingperiod.Nooptionshavebeengranted
sincetheendofthefinancialyear.
ShareissuesundertheCompany’sESParetreatedinprincipleasanoptionovertheCompany’ssharesandareincludedintheoption
tablesbelow.Theseoptionsareassumedtohavealifeof3years.
Detailsofoptions,includingESPsharestreatedinprincipleasoptions,grantedandvestedtodirectorsandexecutivesareasfollows.All
optionswereissuedfornilcashconsideration,vestimmediately,andhavebeenrecognisedasanexpenseinthecurrentperiod.
2008 number of fair value per exercise eSp shares issue option at issue price per assumedexecutive officers issued date date option expiry dateRAAnderson 100,000 07/01/2008 $0.31 $0.701 06/01/2011
PPHuizenga 100,000 07/01/2008 $0.31 $0.701 06/01/2011
2007 number of fair value per exercise eSp shares issue option at issue price per assumedDirectors issued date date option expiry date
EPJacobson 6,000,000 30/04/2007 $0.074 $0.09 29/04/2010
PJLeonhardt 3,000,000 30/04/2007 $0.074 $0.09 29/04/2010
Thefollowingshareswereissuedontheexerciseofoptionsgrantedascompensationinpriorperiods:
2008Directors number of shares amount paid per share EPJacobson 4,000,000 $0.07
PJLeonhardt 3,000,000 $0.07
KPJudge 2,000,000 $0.07
KPJudge 1,000,000 $0.10
2007Directors number of shares amount paid per share NCFearis 2,000,000 $0.07
Therearenoamountsunpaidonsharesissuedasaresultoftheexerciseofoptionsinthereportingperiod.
2008 annual report 25
dIreCtorS’ report (Continued)
remuneration report (continued)
Equity instruments (continued)
(ii) OptionsandESPshares(continued)
Duringthereportingperiodtherewasnoforfeitureorvestingofoptionsgrantedinpreviousperiods.Attheendofthereportingperiod
therewerenounvestedoptionsonissue.
Alloptionsexpireontheexpirydatebutdonotexpireasaresultoftheterminationoftheholder’sengagementwiththeCompany.
Themovementduringthereportingperiod,byvalue,ofoptionsoverordinaryshares,includingsharesissuedundertheCompany’sESP,
foreachcompanydirectorandcompanyexecutiveandgrantedaspartofremunerationisdetailedbelow:
value of options granted exercised in forfeited in totalDirectors in year ($) year ($) year ($) value in year ($)
EPJacobson - 1,720,000 - 1,720,000
PJLeonhardt - 1,290,000 - 1,290,000
KPJudge - 1,540,000 - 1,540,000
value of options granted exercised in forfeited in totalexecutive officers in year ($) year ($) year ($) value in year ($)
PPHuizenga 30,734 - - 30,734
RAAnderson 30,734 1,141,373 - 1,172,107
ThevalueofoptionsgrantedintheyearisthefairvalueoftheoptionsatgrantdateusingtheBlack-ScholesOptionPricingModel.
ThevalueofoptionsexercisedduringtheyeariscalculatedasthemarketpriceofsharesoftheCompanyonASXLimitedasatcloseof
tradingonthedatetheoptionswereexercisedortheESPloanrepaid,afterdeductingthepricepaidtoexercisetheoptionsorrepaythe
loan.
non-auDit ServiCeS
Theauditorshavenotperformedanynon-auditservicesoverandabovetheirstatutorydutiesduringthecurrentreportingperiod.
DetailsoftheamountspaidorpayabletotheauditoroftheGroupforauditservicesprovidedduringtheyeararesetoutbelow:
audit Services Consolidated 2008 ($)
Auditors of the Company:
Auditandreviewoffinancialreports 78,428
26 Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
DireCtorS’ intereStS
Atthedateofthisreport,therelevantinterestsofthedirectorsinsecuritiesoftheCompanyareasfollows:
name ordinary Shares options over ordinary Shares
PJLeonhardt 14,900,000 3,000,000EPJacobson 28,917,335 4,000,000NCFearis 6,400,000 2,000,000KPJudge 14,332,855 1,000,000
SharesissuedundertheCompany’sESPareincludedundertheheadingOrdinaryShares.
Share optionS
Options granted to directors and executives of the CompanyTherewerenooptionsoversharesintheCompanygrantedascompensationtodirectorsornamedexecutivesduringorsincetheendofthefinancialyear.
ShareissuesundertheCompany’sESParetreatedinprincipleasanoptionovertheCompany’ssharesandareincludedinthetablebelow.Theseoptionsareassumedtohavealifeof3years.
DetailsofESPsharesissuedtodirectorsandnamedexecutivesduringthereportingperiod,andtreatedasoptionsforvaluationpurposes,areasfollows.Theseshareswereissuedfornilcashconsideration,vestimmediately,andhavebeenrecognisedasanexpenseinthecurrentperiod. number of eSp exercise price assumedexecutive officers shares granted per share expiry dateRAAnderson 100,000 $0.701 06/01/2011PPHuizenga 100,000 $0.701 06/01/2011
Shares under optionThefollowingunissuedordinarysharesoftheCompanyareunderoption.TheseexcludeshareissuesmadeundertheCompany’sESP.
exercise numberexpiry Date price 1 July 2007 issued exercised expired 30 June 2008 31/03/2008 $0.07 9,000,000 - 9,000,000 - -31/03/2009 $0.10 16,000,000 - 6,000,000 - 10,000,000 25,000,000 - 15,000,000 - 10,000,000
Alloptionsexpireontheexpirydatebutdonotexpireasaresultoftheterminationoftheholder’sengagementwiththeCompany.Optionholdersdonothaveanyright,byvirtueoftheoption,tovoteortoparticipateinanyshareissueoftheCompanyoranyrelatedbodycorporate.
Noshareshavebeenissuedasaresultoftheexerciseofoptionssincetheendofthefinancialyear.Therearenoamountsunpaidonthesharesissuedasaresultoftheexerciseofoptionsinthereportingperiod.
Duringthereportingperiodtherewasnoforfeitureorvestingofoptionsgrantedinpreviousperiods.Attheendofthereportingperiod
therewerenounvestedoptionsonissue.
2008 annual report 27
dIreCtorS’ report (Continued)
LikeLy DeveLopmentS
Thelikelydevelopmentsforthe2009financialyeararecontainedintheoperatingandfinancialreviewassetoutonpages4to16.The
directorsareoftheopinionthatfurther informationastothelikelydevelopmentsintheoperationsoftheGroupwouldprejudicethe
interestsoftheCompanyandtheGroupandithasaccordinglynotbeenincluded.
environmentaL reguLation anD performanCe
The Group’s oil and gas exploration and development activities are concentrated in Thailand and Western Australia. Environmental
obligationsareregulatedunderbothStateandFederalLawinWesternAustraliaandundertheDepartmentofMineralFuelsregulationsin
Thailand.Nosignificantenvironmentalbreacheshavebeennotifiedbyanygovernmentagencyduringtheyearended30June2008.
DiviDenDS
Nodividendswerepaidduringtheyearandthedirectorsdonotrecommendpaymentofadividendinrespectofthecurrentfinancial
year.
auDitor’S inDepenDenCe DeCLaration
Theauditor’sIndependenceDeclarationunderSection307CoftheCorporationsActissetoutonpage29andformspartofthedirectors’
reportforthefinancialyearended30June2008.
SignifiCant ChangeS in State of affairS
IntheopinionofthedirectorsnosignificantchangesinthestateofaffairsoftheGroupoccurredduringthecurrentfinancialyearother
thanasoutlinedintheoperatingandfinancialreviewassetoutonpages4to16.
inDemnifiCation anD inSuranCe of DireCtorS anD offiCerS
DuringtheperiodtheCompanypaidapremiumtoinsurethedirectorsandofficersoftheCompanyanditscontrolledentities.Thepolicy
prohibitsthedisclosureofthenatureoftheliabilitiescoveredandtheamountofthepremiumpaid.
proCeeDingS on BehaLf of the Company
NopersonhasappliedforleaveofCourttobringproceedingsonbehalfoftheCompanyorinterveneinanyproceedingstowhichthe
CompanyisapartyforthepurposeoftakingresponsibilityonbehalfoftheCompanyforalloranypartoftheproceedings.TheCompany
wasnotapartytoanysuchproceedingsduringtheyear.
operating anD finanCiaL review
AnoperatingandfinancialreviewoftheGroupforthefinancialyearended30June2008issetoutonpages4to16andformspartof
thisreport.
28 Carnarvon petroleum ltd
dIreCtorS’ report (Continued)
inDemnity of DireCtorS anD Company SeCretary
It is intendedthatDeedsofAccessand IndemnitywillshortlybeexecutedbytheCompanywitheachof thedirectorsandCompany
Secretary.ThedeedswillrequiretheCompanytoindemnifyeachdirectorandCompanySecretaryagainstanylegalproceedings,tothe
extentpermittedbylaw,madeagainst,suffered,paidorincurredbythedirectorsorCompanySecretarypursuantto,orarisingfromorin
anywayconnectedwiththedirectororCompanySecretarybeinganofficeroftheCompany.
eventS SuBSequent to reporting Date
Nomatterorcircumstancehasarisensince30June2008thatintheopinionofthedirectorshassignificantlyaffected,ormaysignificantly
affectinfuturefinancialyears:
(i) theGroup’soperations,or
(ii) theresultsofthoseoperations,or
(iii) theGroup’sstateofaffairs
rounDing off
TheCompanyisanentitytowhichASICClassOrder98/100dated10July1998applies.InaccordancewiththatClassOrderamountsin
thefinancialreportanddirectors’reporthavebeenroundedofftothenearestthousanddollars,unlessotherwisestated.
Signedinaccordancewitharesolutionofthedirectors.
pJ LeonhardtDirector Perth,25September2008
2008 annual report 29
IndependenCe deClaratIon
30 Carnarvon petroleum ltd
InCome StatementS for the year enDeD 30 June 2008
ConSoLiDateD Company 2008 2007 2008 2007
notes $000 $000 $000 $000
Salesrevenuefromcontinuingoperations 63,033 3,674 - -
Otherincome 4 318 247 251 240
Costofsales 5 (11,346) (3,162) - -
Administrativeexpenses (1,032) (628) (1,032) (628)
Directors’fees (183) (135) (183) (135)
Employeebenefitsexpense (637) (145) (637) (145)
Travelrelatedcosts (311) (38) (311) (38)
Unrealisedforeignexchange(loss)/gain (656) 54 (1,851) (1,416)
Explorationexpenditurewrittenoff - (75) - (75)
Newventures (973) (380) (973) (380)
Share-basedpayments (119) (934) (119) (934)
Financecosts 34 (20) - (1)
profit / (loss) before income tax 48,128 (1,542) (4,855) (3,512)
Taxes
Incometaxexpense 9 16,975 - - -
Specialremuneratorybenefit 14,979 - - -
Totaltaxes 31,954 - - -
profit / (loss) from continuing operations 16,174 (1,542) (4,855) (3,512)
profit / (loss) attributable to members of the Company 16,174 (1,542) (4,855) (3,512)
Basicearnings/(loss)persharefrom
continuingoperations(centspershare) 8 2.4 (0.3)
Dilutedearnings/(loss)persharefrom
continuingoperations(centspershare) 8 2.4 (0.3)
Theaboveincomestatementsshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
2008 annual report 31
BalanCe SheetSaS at 30 June 2008
ConSoLiDateD Company 2008 2007 2008 2007
notes $000 $000 $000 $000
Current assets
Cashandcashequivalents 21(b) 28,281 8,927 570 6,520
Tradeandotherreceivables 10 12,443 1,684 2,788 123
Inventories 12 1,586 1,111 - -
Otherassets 13 299 639 96 34
total current assets 42,609 12,361 3,454 6,677
non-current assets
Tradeandotherreceivables 10 - - 12,713 13,024
Property,plantandequipment 11 172 104 49 70
Explorationandevaluation 14 379 - 379 -
Oilandgasassets 15 23,124 12,129 - -
Otherinvestments 16 - - 1,483 1,483
total non-current assets 23,675 12,233 14,624 14,577
total assets 66,284 24,594 18,078 21,254
Current liabilities
Tradeandotherpayables 17 3,368 3,028 531 297
Employeebenefits 24 13 4 13 4
Provisions 18 24,152 - - -
total current liabilities 27,533 3,032 544 301
non-current liabilities
Deferredtax 19 3,738 - - -
Provisions 18 - 105 - -
total non-current liabilities 3,738 105 - -
total liabilities 31,271 3,137 544 301
net assets 35,013 21,457 17,534 20,953
equity
Issuedcapital 66,738 65,041 66,738 65,041
Reserves (6,211) (1,896) 1,226 1,487
Accumulatedlosses (25,514) (41,688) (50,430) (45,575)
total equity 35,013 21,457 17,534 20,953
Theabovebalancesheetsshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
32 Carnarvon petroleum ltd
StatementS of ChanGeS In eQuItY for the year enDeD 30 June 2008
Share-based issued accumulated translation payments group capital losses reserve reserve total $000 $000 $000 $000 $000
Balance at 1 July 2006 50,220 (40,146) (1,646) 278 8,706
Sharesissued,netoftransactioncosts 14,778 - - - 14,778
Exchangedifferencesontranslation
offoreignoperations - - (1,737) - (1,737)
Sharebasedpayments 43 - - 1,209 1,252
LossattributabletomembersofCompany - (1,542) - - (1,542)
Balance at 30 June 2007 65,041 (41,688) (3,383) 1,487 21,457
Sharesissuednetoftransactioncosts 1,226 - - - 1,226
Exchangedifferenceson
translationofforeignoperations - - (4,054) - (4,054)
Sharebasedpayments 471 - - (261) 210
ProfitattributabletomembersofCompany - 16,174 - - 16,174
Balance at 30 June 2008 66,738 (25,514) (7,437) 1,226 35,013
Theabovestatementsofchangesinequityshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
2008 annual report 33
StatementS of ChanGeS In eQuItYfor the year enDeD 30 June 2008
Share-based issued accumulated payments Company capital losses reserve total $000 $000 $000 $000
Balance at 1 July 2006 50,220 (42,063) 278 8,435
Sharesissued,netoftransactioncosts 14,778 - - 14,778
Sharebasedpayments 43 - 1,209 1,252
LossattributabletomembersoftheCompany - (3,512) - (3,512)
Balance at 30 June 2007 65,041 (45,575) 1,487 20,953
Sharesissued,netoftransactioncosts 1,226 - - 1,226
Sharebasedpayments 471 - (261) 210
LossattributabletomembersoftheCompany - (4,855) - (4,855)
Balance at 30 June 2008 66,738 (50,430) 1,226 17,534
Theabovestatementsofchangesinequityshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
34 Carnarvon petroleum ltd
StatementS of CaSh flowS for the year enDeD 30 June 2008
ConSoLiDateD Company 2008 2007 2008 2007
notes $000 $000 $000 $000
Cash flows from operating activities
ReceiptsfromcustomersandGSTrecovered 56,145 2,782 275 139
Paymentstosuppliersandemployees (13,616) (3,794) (3,153) (1,345)
Incometaxpaid (3,666) - - -
Interestreceived 236 213 204 206
Interestpaid (8) (1) - (1)
net cash flows generated from / (used in) operating activities 21(a) 39,091 (800) (2,674) (1,001)
Cash flows from investing activities
Explorationanddevelopmentexpenditure (17,399) (7,188) (628) (334)
Cashheldassecurity (3,156) - (2,656) -
Acquisitionofproperty,plantandequipment (218) (87) (13) (26)
Net(advancesto)controlledentities - - (1,293) (8,830)
net cash flows (used in) investing activities (20,773) (7,275) (4,590) (9,190)
Cash flows from financing activities
Proceedsfromissueofsharecapital 1,230 15,960 1,230 15,960
Paymentofshareissuecosts (3) (881) (3) (881)
Proceedsfromrepaymentof
EmployeeSharePlanloans 90 77 90 77
net cash flows from financing activities 1,317 15,156 1,317 15,156
net increase in cash and cash equivalents 19,635 7,081 (5,947) 4,965
Cashandcashequivalentsatthebeginning
ofthefinancialyear 8,927 1,898 6,520 1,559
Effectofexchangeratefluctuationson
cashandcashequivalents (281) (52) (3) (4)
Cash and cash equivalents at the end of the financial year 21(b) 28,281 8,927 570 6,520
Theabovestatementsofcashflowsshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
2008 annual report 35
noteS to the fInanCIal StatementS
1. reporting entity
The consolidated financial report of theCompany for the financial year ended 30 June 2008 comprises theCompany and itscontrolledentities(the“Group”)andtheGroup’sinterestinjointlycontrolledassets.
Thefinancialreportwasauthorisedforissuebythedirectorson25September2008.
2. Basis of preparation of the financial report
Statement of compliance
ThefinancialreportisageneralpurposefinancialreportpreparedinaccordancewithAustralianAccountingStandards(“AASBs”),includingAustralianAccountingInterpretations,otherauthoritativepronouncementsoftheAustralianAccountingStandardsBoard(“AASB”),andtheCorporationsAct2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial reportcontaining relevant and reliable information about transactions, events and conditions to which they apply. Compliance withAustralianAccountingStandardsensuresthatthefinancialstatementsandnotesalsocomplywithInternationalFinancialReportingStandards(“IFRSs”).Materialaccountingpoliciesadoptedinthepreparationofthisfinancialreportarepresentedbelow.Theyhavebeenconsistentlyappliedunlessotherwisestated.
Basis of measurement
Thefinancialreportispreparedonahistoricalcostbasis,exceptforavailable-for-salefinancialassetsandfinancialinstrumentsatfairvaluethroughprofitandlosswhicharemeasuredatfairvalue.
Functional and presentation currency
The consolidated financial statements are stated in Australian dollars, which is the Company’s functional and presentationcurrency.
Use of estimates and judgements
The preparation of the financial report requiresmanagement tomake judgements, estimates and assumptions that affect theapplicationofaccountingpoliciesandthereportedamountsofassetsandliabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.
Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognizedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.
Keyestimate–impairment
TheGroupassessesimpairmentateachreportingdatebyevaluatingconditionsspecifictothegroupthatmayleadtotheimpairmentof assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculationsperformedinassessingrecoverableamountsincorporateanumberofkeyestimates.
TherewasnotconsideredtobeanyimpairmenttriggeroverthecarryingvalueoftheGroup’sinterestinthePhetchabunBasinJointVentureatthedateofthisreport.
Keyestimate–incomeandcapitalgainstaxes
Judgementisrequiredindetermininganyprovisionforincomeandcapitalgainstaxes.TheGrouprecognizesliabilitiesofanticipatedtaxbasedonestimatesoftaxesdue.Wherethefinaltaxoutcomeofthesemattersisdifferentfromtheamountsthatwereinitiallyrecognised,suchdifferenceswillimpacttheincometaxanddeferredtaxexpenses,assetsorprovisionsintheyearinwhichsuchdeterminationismade.
36 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
2. Basis of preparation of the financial report (continued)
Use of estimates and judgements (continued)
Keyestimate–specialremuneratorybenefittaxandincometax
TheGroup’sPhetchabunBasinJointVentureissubjecttoThaiincometaxat50%andaspecialremuneratorybenefit(“SRB”)taxonprofits,atslidingscalerates(0%-75%byconcession)in2008andbeyond.
TheSRB,whichistaxdeductibleinthecalculationofThaiincometaxes,involvesahighlydetailedcalculationdoneonaconcessionby concessionbasis. Thebasis of the calculation is petroleumprofits, adjusted for capital spent, being subjected to a slidingscaleSRBratesuchthatprofitsarenottaxeduntilallcapitalhasbeenrecovered.TheslidingscalerateisprincipallydrivenbyproductionandpricingbutissubjecttootheradjustmentssuchaschangesinThailand’sconsumerpriceindex,wholesalepriceindex,cumulativemetresdrilledontheconcession,and,forcertainconcessions,changesintheexchangeratebetweentheThaiBahtandtheUSD.
TheSRBcalculationisperformedandpaidannuallyforeachconcessionatthecalculatedannualrateattheendofeachcalendaryear.Judgementisrequiredindeterminingprovisionswhicharebasedonestimatesofamountsdue.Wherethefinaloutcomeofthosemattersisdifferentfromtheamountsthatwereoriginallyrecognised,suchdifferencemayimpactthoseprovisionsintheperiodinwhichsuchadeterminationismade.
Keyestimate–functionalcurrency
ThedeterminationofthefunctionalcurrencyoftheCompany’scontrolledentitiesrequiresconsiderationofanumberoffactors.These factors includethecurrencies thatprimarily influencetheirsalesandcostsandtheeconomicenvironment inwhichtheentitiesoperate.
Keyestimates–other
Other areas of judgement are in the determination of oil reserves, rehabilitation provisions, capitalisation of exploration andevaluationcosts,determinationofareasofinterest,andtheunitsofproductionmethodofdepreciation.
3. Significant accounting policies
Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheconsolidatedfinancialreport.The accounting policies have been applied consistently by all entities in the Group. Certain comparative amounts have beenreclassifiedtoconformtothecurrentyear’spresentation.
(a) Basis of consolidation
Controlled entities
TheconsolidatedfinancialreportcomprisesthefinancialstatementsoftheCompanyanditscontrolledentities.AcontrolledentityisanyentitycontrolledbytheCompanywherebytheCompanyhasthepowertocontrolthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Allinter-companybalancesandtransactionsbetweenentitiesintheeconomicentity,includinganyunrealisedprofitsorlosses,havebeeneliminatedonconsolidation.AccountingpoliciesofcontrolledentitieshavebeenchangedwherenecessarytoensureconsistencywiththoseappliedbytheCompany.
Where controlled entities enter or leave the economic entity during the year, their operating results are included or excludedfromthedatecontrolwasobtainedoruntilthedatecontrolceased.InvestmentsincontrolledentitiesarecarriedatcostintheCompany’sfinancialstatements.
Jointly controlled assets
TheGroup'sshareoftheassets,liabilities,revenueandexpensesofjointventureassetsareincludedinthefinancialstatementsundertheappropriateheadings.
2008 annual report 37
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(b) income tax and special remuneratory benefit
Income tax
Thechargeforcurrentincometaxexpenseisbasedontheresultfortheyearadjustedforanynon-assessableordisalloweditems.Itiscalculatedusingtaxratesthathavebeenenactedoraresubstantivelyenactedbybalancesheetdate.
Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectoftemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsinthefinancialstatements.Nodeferredincometaxwillberecognisedfromthe initialrecognitionofanassetor liability,excludingabusinesscombination,wherethere isnoeffectonaccountingortaxableprofitorloss.
Deferredtaxiscalculatedatthetaxratesthatareexpectedtoapplytotheperiodwhentheassetisrealisedorliabilityissettled.Deferredtaxisrecognisedintheincomestatementexceptwhereitrelatestoitemsrecogniseddirectlyinequity,inwhichcaseitisrecognisedinequity.Deferredincometaxassetsarerecognisedfordeductibletemporarydifferencesandunusedtaxlossesonlyifitisprobablethatfuturetaxableamountswillbeavailabletoutilisethosetemporarydifferencesandtaxlosses.Deferredtaxassetsandliabilitiesareoffsetwhentheyrelatetoincometaxesleviedbythesametaxationauthorityandthecompany/groupintendstosettleitscurrenttaxassetsandliabilitiesonanetbasis.
Theamountofbenefitsbroughttoaccountorwhichmayberealisedinthefuture isbasedontheassumptionthatnoadversechangewilloccurinincometaxationlegislationandtheanticipationthattheeconomicentitywillderivesufficientfutureassessableincometoenablethebenefittoberealisedandcomplywiththeconditionsofdeductibilityimposedbythelaw.Thecarryingamountofdeferredtaxassetsisreviewedateachbalancedateandonlyrecognisedtotheextentthatsufficientfutureassessableincomeisexpectedtobeobtained.
Special remuneratory benefit
TheGroup’sPhetchabunBasinJointVentureissubjecttoaspecialremuneratorybenefit(“SRB”)taxonprofits,atslidingscalerates(0%-75%byconcession)in2008andbeyond.
TheSRB,whichistaxdeductibleinthecalculationofThaiincometaxes,involvesahighlydetailedcalculationdoneonaconcessionby concessionbasis. Thebasis of the calculation is petroleumprofits, adjusted for capital spent, being subjected to a slidingscaleSRBratesuchthatprofitsarenottaxeduntilallcapitalhasbeenrecovered.TheslidingscalerateisprincipallydrivenbyproductionandpricingbutissubjecttootheradjustmentssuchaschangesinThailand’sconsumerpriceindex,wholesalepriceindex,cumulativemetresdrilledontheconcession,and,forcertainconcessions,changesintheexchangeratebetweentheThaiBahtandtheUSD.TheSRBcalculationisperformedandpaidannuallyforeachconcessionatthecalculatedannualrateattheendofeachcalendaryear.
TheSRBisconsidered,foraccountingpurposes,tobeataxonincome.
Tax consolidation
CarnarvonPetroleumLimitedand itswholly-ownedAustralianresidentcontrolledentities formedatax-consolidatedgroupwitheffectfrom1July2003andarethereforetaxedasasingleentityfromthatdate.CarnarvonPetroleumLimitedistheheadentityofthetax-consolidatedgroup.Infutureperiodsthemembersofthegroupwill,ifrequired,enterintoataxsharingagreementwherebyeachcompanyinthegroupcontributestotheincometaxpayableinproportiontotheircontributiontothenetprofitbeforetaxofthetaxconsolidatedgroup.
38 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(c) property, plant and equipment
Recognition and measurement
Allproperty,plantandequipmentisstatedatcostlessaccumulateddepreciationandimpairmentlosses.Thecostofanitemalsoincludestheinitialestimateofthecostsofdismantlingandremovinganitemandrestoringthesiteonwhichitislocated.
Subsequentcostsareincludedintheasset'scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothegroupandthecostoftheitemcanbemeasuredreliably.All other repairsandmaintenancearecharged to the incomestatementduring thefinancial period inwhich theyareincurred.
Impairment
The carrying amount of property, plant and equipment is reviewed at each balance date to determine whether there are anyobjectiveindicatorsofimpairmentthatmayindicatethecarryingvaluesmaynotberecoverableinwholeorinpart.ImpairmenttestingiscarriedoutinaccordancewithNote3(f).
Whereanassetdoesnotgeneratecashflowsthatarelargelyindependentitisassignedtoacashgeneratingunitandtherecoverableamounttestappliedtothecashgeneratingunitasawhole.
Ifthecarryingvalueoftheassetisdeterminedtobeinexcessofitsrecoverableamount,theassetorcashgeneratingunitiswrittendowntoitsrecoverableamount.
Depreciation
Depreciation on plant and equipment is calculated on a straight-line basis over expected useful life to the economic entitycommencingfromthetimetheassetisheldreadyforuse.Themajordepreciationratesusedforeachclassofdepreciableassetsare:
Plantandequipment: 20%to33% Theassets'residualvaluesandusefullivesarereviewed,andadjustedifappropriate,atleastannually.
Anasset'scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset'scarryingamountisgreaterthanitsestimatedrecoverableamount.
Gains and losses on disposals are determined by comparing proceedswith the carrying amount. These gains and losses areincludedintheincomestatement.
(d) oil and gas assets
Oilandgasassetsincludecoststransferredfromexplorationandevaluationoncetechnicalfeasibilityandcommercialviabilityofanareaofinterestaredemonstrable,togetherwithsubsequentcoststodeveloptheassettotheproductionphase.
Wherethedirectorsdecidethatspecificcostswillnotberecoveredfromfuturedevelopment,thosecostsarechargedtotheincomestatementduringthefinancialperiodinwhichthedecisionismade.
Depreciationofoil andgasassets iscalculatedonaunitofproductionbasissoas towriteoff thecosts inproportion to thedepletionoftheestimatedrecoverablereserves.
2008 annual report 39
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(e) exploration and evaluation
Explorationandevaluationexpenditureincurredisaccumulatedinrespectofeachidentifiableareaofinterest.ThesecostsareonlycarriedforwardtotheextentthattheGroup’srightsoftenuretotheareaarecurrentandthatthecostsareexpectedtoberecoupedthroughthesuccessfuldevelopmentofthearea,orwhereactivitiesintheareahavenotyetreachedastagethatpermitsreasonableassessmentoftheexistenceofeconomicallyrecoverablereserves.
Eachareaofinterestisassessedforimpairmenttodeterminetheappropriatenessofcontinuingtocarryforwardcostsinrelationtothatareaofinterest.ImpairmenttestingiscarriedoutinaccordancewithNote3(f).
Accumulatedcostsinrelationtoanabandonedareaarewrittenoffinfullagainstprofitintheyearinwhichthedecisiontoabandontheareaismade.
Oncethetechnicalfeasibilityandcommercialviabilityoftheextractionofmineralresourcesinanareaofinterestaredemonstrable,explorationandevaluationcostsattributable to thatareaof interestarefirst tested for impairmentand then reclassified fromexplorationandevaluationtooilandgasassets.
(f) recoverable amount of assets and impairment testing
Assetsthathaveanindefiniteusefullifearenotsubjecttodepreciationandaretestedannuallyforimpairmentbyestimatingtheirrecoverableamount.
Assetsthataresubjecttodepreciationarereviewedannuallytodeterminewhetherthereisanyindicationofimpairment.Wheresuchanindicatorexists,aformalassessmentofrecoverableamountisthenmade.Wherethisisinexcessofcarryingamount,theassetiswrittendowntoitsrecoverableamount.
Recoverableamountisthegreateroffairvaluelesscoststosellandvalueinuse.Valueinuseisthepresentvalueofthefuturecashflowsexpectedtobederivedfromtheassetorcashgeneratingunit.Inestimatingvalueinuse,apre-taxdiscountrateisusedwhichreflectsthecurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Anyresultingimpairmentlossisrecognisedimmediatelyintheincomestatement.
Forthepurposesofimpairmenttestingassetsaregroupedtogetherintothesmallestgroupofassetsthatgeneratescashinflowsfromcontinuingusethatarelargelyindependentofthecashinflowsofotherassetsorgroupsofassets.
(g) trade receivables
Tradereceivablesarestatedatfairvalueandsubsequentlymeasuredatamortisedcost,lessimpairmentlosses.ImpairmenttestingiscarriedoutinaccordancewithNote3(f).
(h) provisions
ProvisionsarerecognisedwhentheGrouphasalegalorconstructiveobligation,asaresultofpastevents,forwhichitisprobablethatanoutflowofeconomicbenefitswillresultandthatoutflowcanbereliablymeasured.Provisionsaredeterminedbydiscountingtheexpectedfuturecashflowsatapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyand,whereappropriate,therisksspecifictotheliability.
Restoration costs
TheamountoftheprovisionforfuturerestorationandrehabilitationcostsiscapitalisedanddepreciatedinaccordancewiththepolicysetoutinNote3(c).Theunwindingoftheeffectofdiscountingontheprovisionisrecognisedasafinancecost.
40 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(i) investments and other financial instruments
TheGroupdeterminestheclassificationofitsfinancialinstrumentsatinitialrecognitionandre-evaluatesthisdesignationateachreportingdate.
Fair value is themeasurement basis,with the exception of held-to-maturity investments and loans and receivableswhich aremeasured at amortised cost. Fair value is inclusive of transaction costs.Changes in fair value are either taken to the incomestatementortoanequityreserve(referbelow).
Fairvalueisdeterminedbasedoncurrentbidpricesforallquotedinvestments.Ifthereisnotanactivemarketforafinancialassetfairvalueismeasuredusingestablishedvaluationtechniques.
TheGroupassessesateachbalancedatewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetsareimpaired.Inthecaseofequitysecuritiesclassifiedasavailable-for-sale,asignificantorprolongeddeclineinthefairvalueofasecuritybelowitscostisconsideredindeterminingwhetherthesecurityisimpaired.Ifanysuchevidenceexiststhecumulativelossisremovedfromequityandrecognisedintheincomestatement.
(i) Financial assets at fair value through profit and loss
Afinancialassetisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshorttermorifsodesignatedbymanagement.Realisedandunrealisedgainsandlossesarisingfromchangesinthefairvalueoftheseassetsareincludedintheincomestatementintheperiodinwhichtheyarise.
(ii) Loans and receivables
Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquoted inanactivemarketandarestatedatamortisedcostusingtheeffectiveinterestratemethod,lessanyimpairmentlosses.
(iii) Held-to-maturity investments
These investmentshavefixedmaturities,and it is thegroup’s intentiontoholdthese investmentstomaturity.Held-to-maturityinvestmentsarestatedatamortisedcostusingtheeffectiveinterestratemethod.
(iv) Available-for-sale financial assets
Availableforsalefinancialassets,comprisingprincipallymarketableequitysecurities,arenon-derivativesthatareeitherdesignatedinthiscategoryornotincludedinanyoftheabovecategories.Available-for-salefinancialassetsarereflectedatfairvalue.Unrealisedgainsand lossesarising fromchanges in fair valueare takendirectly toequity in anavailable-for-sale investments revaluationreserve.Whensecuritiesclassifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentsareincludedintheincomestatementasgainsandlossesfrominvestmentsecurities.
(j) Segment reporting
Abusinesssegmentisagroupofassetsandoperationsengagedinprovidingproductsorservicesthataresubjecttorisksandreturnsthataredifferenttothoseofotherbusinesssegments.
Ageographicalsegmentisengagedinprovidingproductsorserviceswithinaparticulareconomicenvironmentandissubjecttorisksandreturnsthataredifferentfromthoseofsegmentsthatareoperatinginothereconomicenvironments.
2008 annual report 41
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(k) foreign currency
Functional and presentation currency
Thefunctionalcurrencyofeachofthegroup’sentitiesismeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichthatentityoperates(the“functional”currency).TheconsolidatedfinancialstatementsarepresentedinAustraliandollarswhichistheCompany’sfunctionalandpresentationcurrency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of thetransaction. Foreign currency monetary assets and liabilities are translated at the exchange rate at balance sheet date.Non-monetaryitemsmeasuredathistoricalcostcontinuetobecarriedattheexchangerateatthedateofthetransaction.
Exchangedifferencesarisingonthetranslationofmonetaryitemsarerecognisedintheincomestatement,exceptwheredeferredinequityasaqualifyingcashflowornetinvestmenthedge.
Translationdifferencesarisingonnon-monetaryitems,suchasequitiesheldatfairvaluethroughprofitandloss,arereportedaspartofthefairvaluegainorloss.Translationdifferencesonnon-monetaryitems,suchasequitiesclassifiedasavailable-for-salefinancialassets,areincludedinthefairvaluereserveinequity.
Foreign operations
ThefinancialperformanceandpositionofforeignoperationswhosefunctionalcurrencyisdifferentfromtheGroup’spresentationcurrencyaretranslatedasfollows:
• assetsandliabilitiesaretranslatedatexchangeratesprevailingatbalancesheetdate • incomeandexpensesaretranslatedataverageexchangeratesfortheperiod
Exchangedifferencesarisingontranslationofforeignoperationsaretransferreddirectlytothegroup’sforeigncurrencytranslationreserveasaseparatecomponentofequity.Thesedifferencesarerecognisedintheincomestatementupondisposaloftheforeignoperation.
(l) Leases
Leasesareclassifiedattheirinceptionaseitheroperatingorfinanceleasesbasedontheeconomicsubstanceoftheagreementsoastoreflecttherisksandbenefitsincidentaltoownership.
Operating leases
Aleasewhereasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsinrelationtooperatingleasesarechargedtotheincomestatementonastraight-linebasisovertheperiodofthelease.
(m) Share capital
Incrementalcostsdirectlyattributabletoanequitytransactionareshownasadeductionfromequity,netofanyrecognisedincometaxbenefit.
(n) inventories
Inventoriesarestatedatthelowerofcostandnetrealisablevalue.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusinesslessanyestimatedsellingcosts.
Costincludesthosecostsincurredinbringingeachcomponentofinventorytoitspresentlocationandcondition.
42 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(o) employee benefits
Wages and salaries, annual leave
Provision ismade for theGroup’s liability foremployeebenefitsarising fromservices renderedbyemployees tobalancedate.Employeebenefitsthatareexpectedtobesettledwithinoneyearhavebeenmeasuredattheamountsexpectedtobepaidwhentheliabilityissettled,plusrelatedon-costs.
Share based payments – shares and share options
Thefairvalueofsharesandshareoptionsgrantedisrecognisedasanexpensewithacorrespondingincreaseinequity.Fairvalueismeasuredatgrantdateandrecognisedovertheperiodduringwhichthegranteesbecomeunconditionallyentitledtothesharesorshareoptions.
Thefairvalueofsharegrantsatgrantdateisdeterminedbythesharepriceatthattime.
The fairvalueofshareoptionsatgrantdate isdeterminedusingaBlack-Scholesoptionpricingmodel that takes intoaccounttheexerciseprice,thetermoftheoption,anyvestingandperformancecriteria,thesharepriceatgrantdate,theexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyieldandtherisk-freerateforthetermoftheoption.
Share based payments – Employee Share Plan
Sharebasedcompensationhasbeenprovided toeligiblepersonsvia theCarnarvonEmployeeSharePlan (“ESP”),financedbymeansofinterestfreelimitedrecourseloans.UnderAASB2“Share-basedPayments”,theESPsharesaredeemedtobeequitysettled,sharebasedremunerationandtreatedasanin-substancegrantofoptions.
For limitedrecourse loans issuedtoeligiblepersonsonorafter1 January2005, theGroup is requiredtorecognisewithin theincomestatementaremunerationexpensemeasuredatthefairvalueofthe“shareoption”inherentintheissuetotheeligibleperson,withacorrespondingincreasetoashare-basedpaymentsreserveinequity.Thefairvalueismeasuredatgrantdateandrecognisedwhentheeligiblepersonbecomeunconditionallyentitledtotheshares,effectivelyongrant.Aloanreceivableisnotrecognised.
Thefairvalueatgrantdateisdeterminedusingapricingmodelthatfactorsinthesharepriceatgrantdate,theexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyield,andtheriskfreeratefortheassumedtermofthe“option”.Upontheexerciseofthe“option”,thebalanceoftheshare-basedpaymentsreserverelatingtothe“option”istransferredtoissuedcapital.
(p) earnings per share
TheGrouppresentsbasicanddilutedearningspershare(“EPS”)foritsordinaryshares.
BasicEPS iscalculatedbydividing theprofitattributable toequityholdersof theCompanyby theweightednumberofsharesoutstandingduringtheperiod.
DilutedEPSisdeterminedbyadjustingtheprofitorlossattributabletoordinaryshareholdersandtheweightedaveragenumberofordinarysharesoutstandingfortheeffectsofallpotentialordinaryshares,whichcompriseshareoptionsgranted.
2008 annual report 43
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(q) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquidinvestments.
(r) revenue
Revenuefromthesaleofgoodsismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.
Revenueisrecognisedwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothebuyer,recoveryoftheconsiderationisprobable,andtheamountofrevenuecanbemeasuredreliably.Forthesaleofoilthetransferofrisksandrewardsoccursondeliveryofoiltotherefinery.
(s) goods and services tax
Revenues,expensesandassetsarerecognisednetoftheamountofgoodsandservicestax(“GST”),exceptwheretheamountofGSTincurredisnotrecoverablefromtheAustralianTaxOffice.InthesecircumstancestheGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.ReceivablesandpayablesinthebalancesheetareshowninclusiveofGST.
Cashflowsarepresentedinthecashflowstatementonagrossbasis,exceptfortheGSTcomponentofinvestingandfinancingactivities,whicharedisclosedasoperatingcashflows.
(t) trade and other payables
Tradeandotherpayablesarestatedatamortisedcost.Theamountsareunsecuredandusuallypaidwithin60daysofrecognition.
(u) finance income and expenses
Interestrevenueonfundsinvestedisrecognisedasitaccrues,usingtheeffectiveinterestratemethod.
Financeexpensescompriseinterestexpenseonborrowingsandtheunwindingofthediscountonprovisions.
(v) royalties
Royaltiesaretreatedastaxationarrangementswhentheyhavethecharacteristicsofatax.Thisisconsideredtobethecasewhentheyareimposedundergovernmentauthorityandtheamountpayableiscalculatedbyreferencetorevenuederived(netofanyallowabledeductions)afteradjustmentforitemscomprisingtemporarydifferences.Forsucharrangements,currentanddeferredtaxisprovidedonthesamebasisasdescribedaboveforotherformsoftaxation.
Obligationsarisingfromroyaltyarrangementsthatdonotsatisfythesecriteriaarerecognisedascurrentprovisionsandincludedin
expenses.
(w) Comparative figures
WhenrequiredbyAccountingStandards,comparativefigureshavebeenadjustedtoconformtochangesinpresentationforthecurrentfinancialyear.
44 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(x) new standards and interpretations not yet adopted
TheAASBhasissuedanumberofAASBsandamendmentstoAASBswhichareavailableforearlyadoption.
TheCompanyandGrouphavenotearlyadoptedanyoftheseaccountingstandardsoramendmentsastheyarenotexpectedtohaveamaterialimpactonthefinancialresultsoftheCompanyorGroup.TheymayhaveaneffectonthedisclosuresoftheCompanyandGroup,howeveradetailedassessmentofthepotentialimpacthasnotbeenundertakenatthedateofthisreport.
ThefollowingAustralianAccountingStandardshavebeenissuedoramendedandareapplicabletotheparentandconsolidatedgroupbutarenotyeteffective.Theyhavenotbeenadoptedinpreparationofthefinancialstatementsatreportingdate.
aaSB amendment Standards affected outline of amendment application Date of Standard
application Date for group
AASB2007-3AmendmentstoAustralianAccountingStandards
AASB5 NonCurrentAssetsheldforSaleandDiscontinuedOperations
AASB6 ExplorationforandEvaluationofMineralResources
AASB102 Inventories AASB107 CashFlowStatements
AASB119 EmployeeBenefits
AASB127 ConsolidatedandSeparateFinancialStatements
AASB134 InterimFinancialReporting
AASB136 ImpairmentofAssets
AASB1023 GeneralInsuranceContracts
AASB1038 LifeInsuranceContracts
ThedisclosurerequirementsofAASB114:SegmentReportinghavebeenreplacedbytheissueofAASB8:SegmentReportinginFebruary2007.Theseamendmentswillinvolvechangestosegmentreportingdisclosureswithinthefinancialreport.However,itisanticipatedthattherewillbenodirectimpactonrecognitionandmeasurementcriteriaamountsincludedinthefinancialreport.
1.1.2009 1.7.2009
AASB8OperatingSegments
AASB114 Segmentreporting Asabove 1.1.2009 1.7.2009
2008 annual report 45
noteS to the fInanCIal StatementS (Continued)
3. Significant accounting policies (continued)
(x) new standards and interpretations not yet adopted (continued)
aaSB amendment Standards affected outline of amendment application Date of Standard
application Date for group
AASB2007-6AmendmentstoAustralianAccountingStandards
AASB1 FirstTimeadoptionofAIFRS
AASB101 PresentationofFinancialStatements
AASB107 CashFlowStatements AASB111 ConstructionContracts AASB116 Property,Plantand
Equipment AASB138 IntangibleAssets
TherevisedAASB123:BorrowingCostsissuedinJune2007hasremovedtheoptiontoexpenseallborrowingcosts.Thisamendmentwillrequirethecapitalisationofallborrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofaqualifyingasset.However,therewillbenodirectimpacttotheamountsincludedinthefinancialgroupastherearecurrentlynoborrowingcosts.
1.1.2009 1.7.2009
AASB123BorrowingCosts
AASB123 BorrowingCosts Asabove 1.1.2009 1.7.2009
AASB2007-8AmendmentstoAustralianAccountingStandards
AASB101 PresentationofFinancialStatements
TherevisedAASB101:PresentationofFinancialStatementsissuedinSeptember2007requiresthepresentationofastatementofcomprehensiveincomeandmakeschangestothestatementofchangesinequity.
1.1.2009 1.7.2009
AASB101 AASB101 PresentationofFinancialStatements
Asabove 1.1.2009 1.7.2009
46 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
4. other income Financeincomeonbankdeposits 283 240 251 233Reversalofprovisionfornon-recoveryofEmployeeSharePlanloans - 7 - 7Other 35 - - - 318 247 251 240 5. Cost of sales Production (1,800) (1,386) - -Royaltyandexcise (4,374) (410) - -Transportation (1,920) (168) - -Depreciation-developmentcostsandproducingassets (1,605) (307) - -Selling,generalandadministration (1,647) (891) - - (11,346) (3,162) - - 6. other expenses Depreciation–otherplantandequipment (37) (28) (34) (28)Rentalpremises–operatingleases (131) (60) (66) (60)
7. auditors’ remuneration Auditservices: AuditorsoftheCompany 78 48 78 48
8. earnings per share
Thecalculationofbasicanddilutedearningspersharewasbasedonaweightedaveragenumberofsharescalculatedasfollows:
number of shares
Issuedordinarysharesat1July 657,537,134 411,787,134Effectofsharesissued 186,849 95,027,860Effectofshareoptionsexercised 6,979,452 98,630Weightedaveragenumberofordinaryshares30June(basic) 664,703,435 506,913,624Effectofshareoptionsonissue 19,163,014 22,750,685Weightedaveragenumberofordinaryshares30June(diluted) 683,866,449 529,664,309Profit/(loss)usedincalculatingbasicanddilutedearnings/(loss)persharefromcontinuingoperations $16,174,000 ($1,542,000)
2008 annual report 47
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
9. income tax expense Numerical reconciliation between pre-tax profit / (loss) and income tax expense / (benefit): Primafacieincometaxexpense/(benefit)onpre-taxprofit/(loss)at30%(2007:30%) 14,438 (463) (1,457) (1,054) Taxeffectof: Foreignsourcedincome - (167) - - Specialremuneratorybenefit (7,552) - - - Effectofhigheroverseastaxrate 10,438 - - - Unrealizedforeignexchangegains/(losses) - (16) 554 425 Non-assessableincome - (2) - (2) Non-deductibleexpenditure 322 295 277 295 Prioryearlossesrecognised (3,064) - - - Prioryeartemporarydifferencesrecognised 1,814 - - -Currentyeartaxbenefitnotbroughttoaccount 579 353 626 336Incometaxexpenseonpretaxprofit/(loss) 16,975 - - -
Currentincometax 13,237 - - -Deferredtax 3,738 - - - 16,975 - - -
Tax Consolidation
Effective1July2003,forthepurposesofAustralian incometaxation,Carnarvonandits100%-ownedcontrolledentitiesformedataxconsolidatedgroup.TheheadentityofthetaxconsolidatedgroupisCarnarvon.
TheimpactofconsolidatingfortaxpurposesisthatCarnarvon’sAustraliancontrolledentitiesaretreatedasdivisionsofCarnarvonratherthanasseparateentitiesfortaxpurposes.Themembersofthegroupwill,ifrequired,enterintoataxsharingarrangementinordertoallocategrouptaxrelatedliabilitiestocontributingmembersonareasonablebasis.Theagreementwillprovidefortheallocationofincometaxliabilitiesbetweenentitiesshouldtheheadentitydefaultonitstaxpaymentobligations.
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
10. trade and other receivables Current Tradeandotherreceivables 8,995 1,534 132 123Cashheldassecurity 3,156 - 2,656 -OwingbyPhetchabunBasinJointVenturepartner 292 150 - - 12,443 1,684 2,788 123 Non-current Amountsreceivablefromcontrolledentities - - 13,406 13,717Provisionfornon-recovery - - (693) (693) - - 12,713 13,024
TheGroup’sexposuretocreditandcurrencyrisksisdisclosedinNote32.
48 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
11. property, plant and equipment Plant and equipment Cost: Balanceatbeginningoffinancialyear 89 65 - -Additions 56 27 - -Disposals (63) - - -Effectsofmovementsinforeignexchange (8) (3) - -Balanceatendoffinancialyear 74 89 - - Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 56 29 - -Disposals (3) - - -Depreciationchargeforyear 14 27 - -Balanceatendoffinancialyear 67 56 - - Carryingamountopening 33 36 - -Carryingamountclosing 7 33 - - Fixtures and fittings Cost: Balanceatbeginningoffinancialyear 204 262 108 80Additions 121 79 13 28Transfers - (111) - -Effectsofmovementsinforeignexchange (6) (26) - -Balanceatendoffinancialyear 319 204 121 108 Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 133 119 38 10Transfers - (22) - -Depreciationchargeforyear 58 36 34 28Balanceatendoffinancialyear 191 133 72 38 Carryingamountopening 71 143 70 70Carryingamountclosing 128 71 49 70
Land and buildings Cost: Balanceatbeginningoffinancialyear - - - -Additions 38 - - -Balanceatendoffinancialyear 38 - - - Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear - - - -Depreciationchargeforyear 1 - - -Balanceatendoffinancialyear 1 - - - Carryingamountopening - - - -Carryingamountclosing 37 - - -
2008 annual report 49
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company11. property, plant and equipment (continued) 2008 2007 2008 2007
$000 $000 $000 $000
Total Cost: Balanceatbeginningoffinancialyear 293 327 108 80Additions 215 106 13 28Transfers - (111) - -Disposals (63) - - -Effectsofmovementsinforeignexchange (14) (29) - -Balanceatendoffinancialyear 431 293 121 108 Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 189 148 38 10Transfers - (22) - -Disposals (3) - - -Depreciationchargeforyear 73 63 34 28Balanceatendoffinancialyear 259 189 72 38 Carryingamountopening 104 179 70 70Carryingamountclosing 172 104 49 70 12. inventories Current Rawmaterialsandconsumables 1,586 1,111 - - 13. other assets Current Depositsandprepayments 299 639 96 34
14. exploration and evaluation Cost: Balanceatbeginningoffinancialyear - - - -Additions 379 - 379 -Balanceatendoffinancialyear 379 - 379 - 15. oil and gas assets Cost: Balanceatbeginningoffinancialyear 12,773 7,167 - -Additions 14,475 6,676 - -Transfers - 111 - -Effectsofmovementsinforeignexchange (1,908) (1,181) - -Balanceatendoffinancialyear 25,340 12,773 - - Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 644 350 - -Transfers - 22 - -Depreciationchargeforyear 1,572 272 - -Balanceatendoffinancialyear 2,216 644 - -
Carryingamountopening 12,129 6,817 - -Carryingamountclosing 23,124 12,129 - -
50 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
16. other investments
Non-current Investmentsincontrolledentities–atcost - - 1,483 1,483TheGrouphasthefollowinginterestsinjointventureassets:
Joint venture Principal activities Ownership interest % Thailand
PhetchabunBasinConcession, Exploration,developmentand 40%ExplorationBlocksL44/43andL33/43 productionofhydrocarbons3/2546/60and5/2546/62Concessions
ExplorationBlockL20/50 Explorationforhydrocarbons 50%7/2551/98Concession
Western Australia EP110&424,CarnarvonBasin Explorationforhydrocarbons 35%WA-399-P,CarnarvonBasin Explorationforhydrocarbons 50%
Summaryfinancialinformationforjointventureassets,asincludedintheconsolidatedbalancesheetandincomestatement,isshownbelow:
2008 2007 $000 $000Currentassets Cashandcashequivalents 28,130 2,407 Tradeandotherreceivables 9,124 1,594 Inventories 1,586 1,111 Otherassets 738 572Totalcurrentassets 39,578 5,684Non-currentassets Property,plantandequipment 123 34 Explorationandevaluation 363 - Oilandgasassets 24,037 12,129Totalnon-currentassets 24,523 12,163Totalassets 64,101 17,847Currentliabilities Tradeandotherpayables 2,863 2,730 Provisions 24,152 -Totalcurrentliabilities 27,015 2,730Non-currentliabilities Deferredtax 3,738 - Provisions - 105Totalnon-currentliabilities 3,738 105Totalliabilities 30,753 2,836Netassets 33,348 15,011 Income 63,033 3,681Expenses (43,857) (3,125)Netprofitaftertax 19,176 556 CapitalcommitmentsandcontingentliabilitiesforthejointventuresaredisclosedinNotes22and23respectively.
2008 annual report 51
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
17. trade and other payables
Current Tradepayables 2,352 955 308 206Non-tradepayablesandaccruedexpenses 948 2,073 155 91Owingtorelatedparties 68 - 68 - 3,368 3,028 531 297
TheGroup’sexposuretocurrencyandliquidityriskrelatedtotradeandotherpayablesisdisclosedinNote32.
CompanytradepayablesdenominatedincurrenciesotherthanitsfunctionalcurrencycompriseA$10,000denominatedinUS$(2007:A$84,000)andA$36,000denominatedinGBP(2007:A$Nil).
18. provisions Current Incometax 9,304 - - -SpecialRemuneratoryBenefit-Thailand 14,848 - - - 24,152 - - - Non-current Siterestoration: Balanceatbeginningoffinancialyear 105 68 - -Provision(reversed)/madeduringtheyear (105) 37 - -Balanceatendoffinancialyear - 105 - -
TherearenorestorationprovisionsrequiredinrespectoftheGroup’sactivities.Theunusedprovisionof$105,000atthepreviousyearendhasbeenreversedinfullduringthecurrentperiod.
19. Deferred tax
Recognised deferred tax assets and liabilities
Thenetdeferredtaxliabilityisattributabletothefollowing: Oilandgasassets(liability) 5,918 - - -Taxvalueoflosscarryforwardsrecognised(asset) (2,180) - - -Nettaxliability 3,738 - - -
Themovementinthedeferredtaxliabilityduringthereportingperiodhasallbeenrecognizedinincome.
Unrecognised deferred tax assets and liabilities
Deferredtaxassetshavenotbeenrecognizedinrespectofthefollowingitems:
Deductibletemporarydifferences 212 288 1,518 1,037Taxloses 1,631 1,070 1,631 1,054 1,843 1,358 3,149 2,091
Thedeductibletemporarydifferencesandtaxlossesdonotexpireundercurrenttaxlegislation.DeferredtaxassetshavenotbeenrecognisedinrespectoftheseitemsbecauseitisnotprobablethatfuturetaxableprofitwillbeavailableagainstwhichtheGroupcanutilisethebenefits.
52 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
20. Capital and reserves Company and consolidated 2008 2007 number of sharesIssued capitalBalanceatbeginningoffinancialyear 657,537,134 411,787,134Sharesissuedforcash - 230,000,000EmployeeSharePlanissues 387,500 13,750,000Sharesissuedonexerciseofshareoptions 15,000,000 2,000,000Balanceatendoffinancialyear 672,924,634 657,537,134
Company and consolidated 2008 2007 $000 $000Issued capitalBalanceatbeginningoffinancialyear 65,041 50,220Sharesissuedforcash - 15,820Transactioncosts (3) (1,182)EmployeeSharePlanrelatedmovements 380 43EmployeeSharePlanloansrepaid 90 -Sharesissuedonexerciseofshareoptions 1,230 140Balanceatendoffinancialyear 66,738 65,041
OrdinaryshareshavetherighttoonevotepershareatmeetingsoftheCompany,toreceivedividendsasdeclaredand,intheeventofawinding-upoftheCompany,toparticipateintheproceedsfromthesaleofallsurplusassetsinproportiontothenumberof,andamountspaidupon,sharesheld.
TheCompanydoesnothaveauthorisedcapitalorparvalueinrespectofitsissuedshares.
Translation reserve
MovementsinthetranslationreservearesetoutintheStatementinChangesinEquityonpage32.
Thetranslationreservecomprisesallforeignexchangedifferencesarisingfromthetranslationofthefinancialstatementsofforeignoperationswheretheirfunctionalcurrencyisdifferenttothepresentationcurrencyofthereportingentity.
Share based payments reserve
MovementsinthesharebasedpaymentsreservearesetoutintheStatementsofChangesinEquityonpages32and33.
Thisreserverepresentsthefairvalueatgrantofshareoptionsissued,includingthevalueofsharesissuedundertheCompany’sESP.Thisreserveisreversedagainstissuedcapitalwhensharesareissuedonexerciseoftheoptions,or,inthecaseofthesharesissuedundertheESP,theloanisrepaid.
2008 annual report 53
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
21. reconciliation of cash flows from operating activities
(a) Cash flows from operating activities Aftertaxprofit/(loss)fortheperiod 16,174 (1,542) (4,855) (3,512)Adjustmentsfor: Equitysettledsharebasedpaymentexpense 119 934 119 934Deferredtaxexpense 3,738 - - -Reversalofprovisionforimpairmentlosses - (7) - (7)Depreciation 1,642 335 34 28Financecostsassociatedwithrehabilitationprovisions (39) 19 - -Explorationexpenditurewrittenoff - 75 - 75Foreignexchangelosses/(gains) 656 (54) 1,851 1,416Operatingprofit/(loss)beforechangesinworkingcapitalandprovisions: 22,290 (240) (2,851) (1,066) Changesinassetsandliabilities: (Increase)intradeandotherreceivables (7,789) (1,292) (9) (76)(Increase)ininventories (604) (908) - -Decrease/(increase)inotherassets 273 (683) (62) (15)Increaseintradeandotherpayables 760 2,319 239 152Increaseinprovisionsandemployeebenefits 24,161 4 9 4Netcashflowsgeneratedfrom/(usedin)operatingactivities 39,091 (800) (2,674) (1,001)
(b) Reconciliation of cash and cash equivalents Cashatbankandatcall 28,281 8,927 570 6,520 TheGroup’sexposuretointerestrateriskandasensitivityanalysisforfinancialassetsandliabilitiesaredisclosedinNote32.
Restrictedcashof$2,656,000Companyand$3,156,000consolidatedisincludedundertradeandotherreceivables(2007:$NilCompanyandconsolidated),seeNotes10and23.
54 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
22. Capital and other commitments (a) Joint venture commitments Shareofcapitalcommitmentsofjointventureassets: Withinoneyear 1,721 204 - -CapitalcommitmentsoftheGrouptojointventureassets: Withinoneyear 187 1,950 187 1,950
(b) Exploration expenditure commitments
DuetothenatureoftheGroup'soperationsinexploringandevaluatingareasofinterest,itisdifficulttoaccuratelyforecastthenatureoramountoffutureexpenditure,althoughitwillbenecessarytoincurexpenditureinordertoretaintheentity'spresentpermitinterests.Expenditurecommitmentsonexplorationpermitscanbereducedbyselectiverelinquishmentofexplorationtenure,bytherenegotiationofexpenditurecommitments,orbyfarmingoutportionsoftheentity'sequity.
Explorationexpenditurecommitmentsforecastbutnotprovidedforinthefinancialstatementsareasfollows:
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
Lessthanoneyear 500 568 500 132Betweenoneandfiveyears 3,000 213 3,000 213 3,500 781 3,500 345
(c) Capital expenditure commitments
Datalicencecommitments 96 107 96 107
2008 annual report 55
noteS to the fInanCIal StatementS (Continued)
23. Contingencies
Thedirectorsareoftheopinionthatprovisionsarenotrequiredinrespectofthesemattersasitisnotprobablethatafuturesacrificeofeconomicbenefitswillberequiredortheamountisnotcapableofreliablemeasurement.
Contingent liabilities not considered remote
UnderthetermsofanInvestmentAgreementtheGroupisrequiredtopayapercentageofsalesproceedsfromspecifiedzoneswithintheWichianBuriProductionLicencesIandIIinThailandtoGeminiOilandGasLimited,anindependentoilandnaturalgasinvestmentfund.Thepercentageis12.5%toamaximumcumulativepaymentofUS$800,000,afterwhichthepercentagefallsto7.5%.
TheGrouphasexpensedUS$371,000inthecurrentperiod(2007:US$184,000).CumulativeamountspaidandpayableatbalancedateunderthetermsofthisagreementareUS$820,000.
Contingent liabilities considered remote
a)ThePhetchabunBasinJointVentureoperation,inwhichtheGrouphasa40%interest,hasissuedbankguaranteesforanamountof40.5millionThaiBahtassecurityinlieuofbonds.TheGroup’s“tradeandotherreceivables”includeA$500,000ofrestrictedcashheldbythebankassecurityfortheseguarantees.
b)TheCompanyhasprovidedacashbondofUS$2,125,000totheDepartmentofMineralFuelsinThailandinrespectofitsobligationsforits50%interestintheL20/50concessioninThailand.ThebondissecuredbyacashdepositofA$2,656,000heldwithCompany’sAustralianbank.TheCompanyanditsjointventurepartner,whohasprovidedasimilarguaranteetotheDepartmentofMineralFuels,arenegotiatingaCrossDeedofIndemnityinrespectoftheirrespectiverightsandinterests.
c)Inaccordancewithnormalpetroleumindustrypractice,theGrouphasenteredintojointventuresandfarminagreementswithotherpartiesforthepurposeofexploringanddevelopingitspetroleumpermitinterests.Ifapartytoajointventuredefaultsanddoesnotcontributeitsshareofjointventureobligations,thentheotherjointventurersareliabletomeetthoseobligations.Inthisevent,theinterestinthepermitheldbythedefaultingpartymayberedistributedtotheremainingjointventurers.
56 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
24. employee benefits
Current: Liabilityforannualleave 13 4 13 4
Share options
Thenumberandweightedaverageexercisepriceofemployeeshareoptionsisasfollows: weighted weighted average average exercise number exercise number price of options price of options 2008 2008 2007 2007 Outstanding1July $0.09 20,000,000 $0.09 22,000,000Exercisedduringtheperiod $0.07 10,000,000 $0.07 2,000,000Outstanding30June $0.10 10,000,000 $0.09 20,000000Exercisableat30June $0.10 10,000,000 $0.09 20,000000
Alloptionsonissueat30June2008haveanexercisepriceof$0.10,expireon31March2009,andareissuedtodirectorsortheirrelatedparties.
Theweightedaveragesharepriceatthedateofexerciseforemployeeshareoptionsexercisedduringtheperiodwas$0.53(2007:$0.22)
Share based payments - Employee Share Plan
UnderthetermsoftheCarnarvonEmployeeSharePlan(“ESP”),asapprovedbyshareholders,theCompanymay,initsabsolutediscretion,makeanofferofordinaryfullypaidsharesintheCompanytoanyeligibleperson,tobefundedbyalimitedrecourseloangrantedbytheCompany.
TheissuepriceisdeterminedbythedirectorsandisnottobelessthantheweightedaveragemarketpriceoftheCompany’ssharesonthefivetradingdayspriortothedateofoffer.Eligiblepersonsreceiveaninterestfreeadvancetoacquiretheshares.
ThemovementsintheESPduringthefinancialyear,includingthoseheldbyKeyManagementPersonnel,wereasfollows: 1 July 2007 issued repaid 30 June 2008 Numberofshares 16,250,000 387,500 1,785,000 14,852,500Loan $1,573,992 $271,638 $90,277 $1,755,353Averageissuepricepershare $0.10 $0.70 $0.05 $0.12
InaccordancewithAASB2theissueofsharesundertheESPareaccountedforasaninprincipleoption.
2008 annual report 57
noteS to the fInanCIal StatementS (Continued)
24. employee benefits (continued)
ThefairvalueofservicesreceivedinreturnforoptionsforboththeCompanyandGroup,includingsharesissuedundertheESPandvaluedasoptions,ismeasuredbyreferencetothefairvalueofshareoptionsgrantedusingtheBlack-Scholesmodel,assetoutbelow. key key management management other other fair value of share options personnel personnel employees employeesand related assumptions 2008 2007 2008 2007 Fairvalueatmeasurementdate(cents) 30.7 7.4 30.7 5.1to6.0Sharepriceatdateofissue(cents) 70.1 13.5 70.1 12.2to14.3Exerciseprice(cents) 70.1 9.0 70.1 12.2to14.3Expectedvolatility 55% 55% 55% 55%Actual/assumedoptionlife 3years 3years 3years 3yearsExpecteddividends Nil Nil Nil NilRisk-freeinterestrate 7.5% 5.5% 7.5% 5.5%Share-basedexpenserecognised $61,468 $666,790 $57,627 $267,029
ThecurrentyearvolatilityapproximatestheCompany’shistoricvolatilityovera90dayperiodending30June2008andisintendedtoreflectthemovementoftheCompany’ssharepricevolatilitytowardsitspeersasitsoilandgasinterestsmature.
FurtherdetailsofsharesandoptionsissuedtodirectorsaresetoutinNote27,andintheRemunerationReportsetoutonpages20to25.
58 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
25. related party disclosures
Ultimate parent
CarnarvonPetroleumLimitedistheultimateparentcompany.
Wholly-owned group transactions
DuringthereportingperiodtherehavebeentransactionsbetweentheCompanyanditscontrolledentitiesandjointventures.TheCompanyprovidedaccountingandadministrativeservicestoitscontrolledentitiesandjointventuresforwhichitdidnotchargeamanagementfee.
Duringthefinancialyearended30June2008netloanstocontrolledentitiestotalled$1,293,000(2007:$9,088,000).
Thecarryingvalueofloanstocontrolledentitiesat30June2008was$12,713,000(2007:$13,024,000)afterprovisionsof$693,000(2007:$693,000).Theseloansareunsecured,non-interestbearing,andhavenofixedtermsofrepayment.
Other related party balances
At30June2008anamountof$68,548(2007:$Nil)isincludedinCompanyandconsolidatedtradeandotherpayablesforoutstandingdirectorfeesandexpenses.
26. operating leases
Leases as lessee
Non-cancellableoperatingleaserentalsarepayableasfollows:
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
Lessthanoneyear 170 232 71 119Betweenoneandfiveyears 12 149 - 64 182 381 71 183
Duringthereportingperiod$344,000wasrecognisedasanexpenseintheconsolidatedincomestatementinrespectofoperatingleases(2007:$240,000).
27. Segment information
SegmentinformationispresentedinrespectoftheGroup’sprimaryformat,geographicalsegments,whichisbasedontheGroup’smanagementandinternalreportingstructure.
Segmentresults,assetsandliabilitiesincludeitemsdirectlyattributabletoasegmentaswellasthosethatcanbeallocatedonareasonablebasis.Inpresentinginformationonthebasisofgeographicalsegments,segmentrevenueisbasedonthegeographicallocationofcustomers,andsegmentassetsarebasedonthegeographicallocationoftheassets.
TheGroupoperatedonebusinesssegmentduringthereportingperiod,beingoilandgasexploration,developmentandproduction.
2008 annual report 59
noteS to the fInanCIal StatementS (Continued)
27. Segment information (continued)
Geographical Segments australia thailand Consolidated 2008 2007 2008 2007 2008 2007 $000 $000 $000 $000 $000 $000
Revenue
Sales - - 63,033 3,674 63,033 3,674Other 251 240 67 7 318 247Totalrevenue 251 240 63,100 3,681 63,351 3,921 Segmentresult Resultfromcontinuingoperations (3,001) (2,098) 19,195 556 16,174 (1,542)Totalsegmentresult (3,001) (2,098) 19,175 556 16,174 (1,542)
Assets
Oilandgasassets - - 23,124 12,129 23,124 12,129Property,plantandequipment 49 70 123 34 172 104Other 3,454 6,677 39,534 5,684 42,988 12,361Totalsegmentassets 3,503 6,747 62,781 17,847 66,284 24,594
Liabilities Totalsegmentliabilities 544 301 30,727 2,836 31,271 3,137
Othersegmentinformation:
Capitalexpenditure 13 285 14,614 6,915 14,627 7,200Depreciation 34 28 1,608 307 1,642 335
60 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
28. key management personnel disclosures
(a) Key management personnel compensation
Keymanagementpersonnelcompensationincludedinemployeebenefitsexpense,directorsemoluments,sharebasedpaymentsandadministrationexpensesisasfollows:
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
Shorttermemployeebenefits 936,281 534,936 936,281 534,936Post-employmentbenefits 21,981 - 21,981 -Share-basedpayments 61,468 666,790 61,468 666,790 1,019,730 1,201,726 1,019,730 1,201,726
Informationregardingindividualdirectorsandexecutives’compensationandsomeequityinstrumentsdisclosures,aspermittedbyCorporationsRegulation2M.3.03,areprovidedintheRemunerationReportsectionofthedirectors’reportassetoutonpages20to25.
Apartfromthedetailsdisclosedinthisnote,nodirectorhasenteredintoamaterialcontractwiththeCompanyortheGroupsincetheendofthepreviousfinancialyearandtherewerenomaterialcontractsinvolvingdirectors’interestsexistingatyearend.
(b) Options and rights over equity instruments
ThemovementduringthereportingperiodinthenumberofoptionsoverordinarysharesintheCompanyheld,directly,indirectlyorbeneficially,byeachkeymanagementperson,includingtheirrelatedparties,isasfollows:
held at held atDirectors 1 July 2007 exercised 30 June 2008 PJLeonhardt 6,000,000 (3,000,000) 3,000,000EPJacobson 8,000,000 (4,000,000) 4,000,000NCFearis 2,000,000 - 2,000,000KPJudge 4,000,000 (3,000,000) 1,000,000
held at held atDirectors 1 July 2006 exercised 30 June 2007 PJLeonhardt 6,000,000 - 6,000,000EPJacobson 8,000,000 - 8,000,000NCFearis 4,000,000 (2,000,000) 2,000,000KPJudge 4,000,000 - 4,000,000
Optionsgrantedascompensationvestimmediately.Duringthefinancialyeartherewasnoforfeitureorvestingofoptionsgrantedinpreviousperiods.Therewerenooptionsonissuethatwerestilltovestattheendofthereportingperiod.
2008 annual report 61
noteS to the fInanCIal StatementS (Continued)
28. key management personnel disclosures (continued)
(c) Loans to key management personnel and their related parties
Detailsofloanstokeymanagementpersonnelandtheirrelatedparties,whichareallinterestfreeloanswithlimitedrecoursesecurityovertheplansharesprovidedinaccordancewiththeCompany’sEmployeeSharePlan(“ESP”),areasfollows:
Balance Balance highest balance Loaned repaid 1 July 2007 ($) 30 June 2008 ($) in period ($) in period ($) in period ($)
Directors PJLeonhardt 270,000 270,000 270,000 - -EPJacobson 540,000 540,000 540,000 - -
Executives PPHuizenga 244,000 314,100 314,100 70,100 -RAAnderson 101,242 81,065 101,242 70,100 90,277
Balance Balance highest balance Loaned repaid 1 July 2006 ($) 30 June 2007 ($) in period ($) in period ($) in period ($)
Directors PJLeonhardt - 270,000 270,000 270,000 -EPJacobson - 540,000 540,000 540,000 -NCFearis 17,000 - 17,000 - 17,000
Executive RAAnderson 101,242 101,242 101,242 - -
Detailsregardingtheaggregateofloans,allofwhichareinterestfree,madebytheGrouptokeymanagementpersonnelandtheirrelatedparties,andthenumberofindividualineachgroup,areasfollows:
opening Closing number in balance ($) balance ($) group at 30 June 2008 911,242 1,205,162 4
2007 118,242 911,242 4
MrHuizengawasonlyclassifiedasakeymanagementpersoneffective1January2008,andhisloansarethereforenotincludedinthe1July2007openingbalance.
(d) Other key management personnel transactions
Amountspayabletokeymanagementpersonnelortheirrelatedpartiesatreportingdateinrespectofoutstandingdirectorandconsultingfeesandexpensesareasfollows:
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
Current Tradeandotherpayables 68 - 68 -
62 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
28. key management personnel disclosures (continued)
(e) Movements in shares
ThemovementduringthereportingperiodinthenumberofordinarysharesinCarnarvonPetroleumLimitedheld,directly,indirectlyorbeneficially,byeachkeymanagementperson,includingtheirrelatedparties,isasfollows:
award under received on held at net employee Share exercise of held at 1 July 2007 acquired/(sold) plan options 30 June 2008
Directors PJLeonhardt 11,900,000 - - 3,000,000 14,900,000EPJacobson 24,313,793 300,000 - 4,000,000 28,613,793NCFearis 6,316,186 - - - 6,316,186KPJudge 15,068,596 (2,500,000) - 3,000,000 15,568,596 Executives PPHuizenga 2,000,000 - 100,000 - 2,100,000RAAnderson 4,443,490 (1,439,049) 100,000 - 3,104,441
MrHuizengabecameakeymanagementpersoneffective1January2008.
award under received on held at net employee Share exercise of held at 1 July 2006 acquired/(sold) plan options 30 June 2007
Directors PJLeonhardt 7,510,504 1,389,496 3,000,000 - 11,900,000EPJacobson 13,189,307 5,124,486 6,000,000 - 24,313,793NCFearis 5,871,400 (1,555,214) - 2,000,000 6,316,186KPJudge 14,168,596 900,000 - - 15,068,596 Executive RAAnderson 3,464,998 978,492 - - 4,443,490 SharesallottedundertheESPwerefundedbyinterest-freeloanswithalimitedrecoursesecurityovertheplansharesandsubjecttothedetailedrulesoftheESP.
InaccordancewithAASB2theissueofsharesundertheESPisaccountedforasaninprincipleoption.Thefairvalueofshareoptions,includingESPsharesissuedandvaluedasoptions,andtheirvaluationassumptionsaresetoutinNote24.
Informationregardingindividualdirectors’andexecutives’compensation,includingcompanyloansusedtofinancethepurchaseoftheESPshares,isprovidedintheRemunerationReportsectionofthedirectors’reportassetoutonpages18to23.
2008 annual report 63
noteS to the fInanCIal StatementS (Continued)
29. non-key management personnel disclosures
Identity of related parties
TheGrouphasarelatedpartyrelationshipwithitscontrolledentities(seeNote30),jointventureassets(seeNote16),andwithitskeymanagementpersonnel(seeNote28).
30. Consolidated entities
ownership interestname Country of incorporation 2008 2007 Company CarnarvonPetroleumLtd Controlled entities CarnarvonThailandLtd BritishVirginIslands 100% 100%LassocPtyLtd Australia 100% 100%SRLExplorationPtyLtd Australia 100% 100%
InvestmentsincontrolledentitiesaremeasuredatcostinthefinancialstatementsoftheCompany.
31. Subsequent events
Nomatterorcircumstancehasarisensince30June2008thatintheopinionofthedirectorshassignificantlyaffected,ormaysignificantlyaffectinfuturefinancialyears:
(i) theGroup’soperations;or (ii) theresultsofthoseoperations;or (iii) theGroup’sstateofaffairs
64 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
32. financial risk management
TheGroup’sactivitiesexposeittomarketrisk(includingcurrencyrisk,commoditypriceriskandinterestraterisk),creditriskandliquidityrisk.
ThisnotepresentsqualitativeandquantitativeinformationabouttheCompany’sandGroup’sexposuretoeachoftheaboverisks,theirobjectives,policiesandproceduresformanagingrisk,andthemanagementofcapital.TheBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheriskmanagementframework.
TheGroup’soverallriskmanagementapproachfocusesontheunpredictabilityoffinancialmarketsandseekstominimizethepotentialadverseeffectsonthefinancialperformanceoftheGroup.TheGroupdoesnotcurrentlyusederivativefinancialinstrumentstohedgefinancialriskexposuresandthereforeitisexposedtodailymovementsintheinternationaloilprices,exchangerates,andinterestrates.TheGroupusesvariousmethodstomeasuredifferenttypesofrisktowhichitisexposed.Thesemethodsincludesensitivityanalysisinthecaseofinterestrate,foreignexchange,andcommoditypriceriskandageinganalysisforcreditrisk.
TheBoard’spolicyistomaintainastrongcapitalbasesoastomaintaininvestor,creditor,andmarketconfidenceandtosustainfuturedevelopmentofthebusiness.GiventhestageoftheGroup’sdevelopmenttherearenoformaltargetssetforreturnoncapital.TherewerenochangestotheGroup’sapproachtocapitalmanagementduringtheyear.NeithertheCompanynoranyofitscontrolledentitiesaresubjecttoexternallyimposedcapitalrequirements.
(a) Commodity price risk
CommoditypriceriskistheriskoffinanciallossresultingfrommovementsinthepriceoftheGroup’scommodityoutput,beingcrudeoil.
RevenuesundertheGroup’scontractualarrangementswithitscustomeraredenominatedinUS$,linkedtotheUS$pricesofabasketofoilproducts,andpaidinThaiBahtattheaveragemonthlyexchangerate.TheGroupdoesnotcurrentlyusederivativefinancialinstrumentstohedgecommoditypriceriskandtherefore isexposedtodailymovements in thepricesof theseoilproducts.TheCompany isnotexposedtocommoditypricerisk.Sensitivityanalysis
Anincreaseof10%intheachievedmonthlyoilsalepricewouldhaveincreasedequityandpretaxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesotherthanroyalties,whicharedirectlyrelatedtooilrevenues,remainconstant.Theanalysisisperformedonthesamebasisfor2007:
ConSoLiDateD Company equity profit and loss equity profit and loss
$000 $000 $000 $000
30June2008 5,867 5,867 - -30June2007 336 336 - -
Adecreaseof10%intheachievedmonthlyoilsalepricewouldhavedecreasedequityandpretaxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesotherthanroyalties,whicharedirectlyrelatedtooilrevenues,remainconstant.Theanalysisisperformedonthesamebasisfor2007:
ConSoLiDateD Company equity profit and loss equity profit and loss
$000 $000 $000 $000
30June2008 (5,867) (5,867) - -30June2007 (336) 336) - -
2008 annual report 65
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(b) Interest rate risk
ThesignificanceandmanagementoftheriskstotheGroupandtheCompanyisdependentonanumberoffactorsincluding:
Interestrates(currentandforward)andthecurrenciesthatareheld;Levelofcashandliquidinvestmentsandtheirterm;Maturitydatesofinvestments;Proportionofinvestmentsthatarefixedrateorfloatingrate.
TheriskismanagedbytheGroupbymaintaininganappropriatemixbetweenfixedandfloatingrateinvestments.
AtthereportingdatetheeffectiveinterestratesofvariablerateinterestbearingfinancialinstrumentsoftheCompanyandtheGroupwereasfollows.Therewerenointerest-bearingfinancialliabilities:
ConSoLiDateD Company 2008 2007 2008 2007
Carrying amount (A$000) Financialassets 28,281 8,927 570 6,520
Weighted average interest rate (%)Financialassets 0.25% 5.16% 6.14% 6.23%
Sensitivityanalysis
Anincreasein50basispointsfromtheweightedaverageyear-endinterestratesat30Junewouldhaveincreasedequityandprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesremainconstant.Theanalysisisperformedonthesamebasisfor2007:
ConSoLiDateD Company equity profit and loss equity profit and loss
$000 $000 $000 $000
30June2008 141 141 3 330June2007 45 45 33 33
Adecreasein50basispointsfromtheweightedaverageyear-endinterestratesat30Junewouldhavedecreasedequityandprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesremainconstant.Theanalysisisperformedonthesamebasisfor2007:
ConSoLiDateD Company equity profit and loss equity profit and loss
$000 $000 $000 $000
30June2008 (141) (141) (3) (3)30June2007 (45) (45) (33) (33)
66 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(c) Credit risk
CreditriskreferstotheriskthatacounterpartywilldefaultonitscontractualobligationsresultinginafinanciallosstotheCompanyorGroup,andarisesprincipallyfromtheGroup’sreceivablesfromcustomersandcashdeposits.TheCompanyhasnotradereceivablesatJune2008orJune2007andhasnosignificantconcentrationofcreditrisk.
TheGroup’s trade receivablesatboth June2008and June2007arealldue fromanentity located inThailandandcontrolledby itsgovernment.ThisentityhasanappropriatecredithistorywiththeGroup.
Cashtransactionsarelimitedtofinancialinstitutionsconsideredtohaveasuitablecreditrating.
Creditriskfurtherarisesinrelationtofinancialguaranteesgiventocertainparties,refertoNote23.
Exposuretocreditriskisconsideredminimalbutismonitoredonanongoingbasis.Themaximumexposuretocreditriskisrepresentedbythecarryingamountofeachfinancialassetinthebalancesheet.
ThecarryingamountoftheGroup’sfinancialassetsrepresentsthemaximumcreditexposure.TheGroup’smaximumexposuretocreditriskatthereportingdatewas:
ConSoLiDateD Company 2008 2007 2008 2007
$000 $000 $000 $000
Carrying amount: Cashandcashequivalents 28,281 8,927 570 6,520Tradeandotherreceivables 12,443 1,684 15,501 13,147 40,724 10,611 16,071 19,667
TheagingoftheGroup’stradereceivablesatreportingdatewas:
gross impairment gross impairment
2008 2008 2007 2007
$000 $000 $000 $000
Notpastdue 9,255 - 1,001 - 9,255 - 1,001 -
Basedonhistoricdefaultrates,theGroupbelievesthatnoimpairmentallowanceisnecessaryinrespectoftradereceivables.
2008 annual report 67
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(d) Currency risk
Currencyriskarisesfromsales,purchases,assetsandliabilitiesthataredenominatedinacurrencyotherthanthefunctionalcurrenciesoftheentitieswithintheGroup,beingtheA$andUS$.
TheGroupoperatespredominantlyinThailandandisexposedtocurrencyriskarisingfromvariousforeigncurrencyexposures,primarilywithrespecttotheUS$andThaiBaht(“THB”).ThefunctionalcurrencyofitsThaioperationsisconsideredtobetheUS$,howeverthecashreceiptsfromthoseoperations,whichcomprise100%oftherevenuesoftheGroup,arereceivedinThaiBaht.ThemajorityoftheGroup’spayments,includingThaiSRBandincometax,arealsopayableinTHBwhicheffectivelycreatesanaturalhedge.TheCompany’sforeignexchangeriskpredominantlyresidesinitsUS$loantooneofitscontrolledentities.
The Group does not currently use derivative financial instruments to hedge foreign currency risk and therefore is exposed to dailymovements inexchange rates.However, theGroup intends tomaintain sufficient THBcashbalances tomeet its THBobligations, inparticularitsSRBandincometaxliabilities.
TheCompanyandGroup’sexposuretoforeigncurrencyriskatbalancedatewasasfollows,basedoncarryingamounts. thai Baht uSD gBp a$000 a$000 a$000Consolidated 2008 Cashandcashequivalents 27,634 114 -Tradereceivables 9,255 - -Tradepayables (1,561) (493) (36)SRBandincometaxprovisions (24,152) - -Grossbalancesheetexposure 11,176 (379) (36)
Company 2008 Tradereceivables - - -Tradepayables - (10) (36)Grossbalancesheetexposure - (10) (36)
Consolidated 2007 Cashandcashequivalents 2,181 234 -Tradereceivables 1,101 - -Tradepayables (669) (165) -Grossbalancesheetexposure 2,613 69 -
Company 2007 Tradepayables - (83) -Grossbalancesheetexposure - (83) -
Thefollowingsignificantexchangeratesappliedduringtheyear: average rate reporting date spot rateauD to: 2008 2007 2008 2007
1Thaibaht 0.036 0.036 0.031 0.0371USD 1.12 1.27 1.04 1.18
68 Carnarvon petroleum ltd
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(d) Currency risk (continued)
Sensitivityanalysis
A10%strengtheningoftheAUDagainstthefollowingcurrenciesat30Junewouldhavedecreasedequityandpretaxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestratesandtheexchangeratebetweentheThaiBahtandUSD,remainconstant.Theanalysisisperformedonthesamebasisfor2007:
ConSoLiDateD Company equity profit and loss equity profit and loss
$000 $000 $000 $000
30 June 2008 USD (3,439) (2,137) (1,237) (1,237)
30 June 2007 USD (1,553) (89) (1,289) (1,289)
A10%weakeningoftheAUDagainstthefollowingcurrenciesat30Junewouldhaveincreasedequityandpretaxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestratesandtheexchangeratebetweentheThaiBahtandUSD,remainconstant.Theanalysisisperformedonthesamebasisfor2007:
ConSoLiDateD Company equity profit and loss equity profit and loss
$000 $000 $000 $000
30 June 2008 USD 4,203 2,612 1,515 1,515
30 June 2007 USD 1,895 108 1,573 1,573
(e) Fair values
The fair values of financial assets and financial liabilities, together with their carrying amounts shown in the balance sheet, are asfollows: Carrying Carrying amount fair value amount fair value 2008 2008 2007 2007
$000 $000 $000 $000
Consolidated Loansandreceivables 12,443 12,443 1,684 1,684Cashandcashequivalents 28,281 28,281 8,927 8,927Tradeandotherpayables (3,368) (3,368) (3,028) (3,028) 37,356 37,356 7,583 7,583
Company Loansandreceivables 15,501 15,501 13,147 13,147Investmentincontrolledentities 1,483 1,483 1,483 1,483Cashandcashequivalents 570 570 6,520 6,520Tradeandotherpayables (486) (486) (297) (297) 17,068 17,068 20,853 20,853 ThebasisfordeterminingfairvaluesisdisclosedinNote3(i).
2008 annual report 69
noteS to the fInanCIal StatementS (Continued)
32. financial risk management (continued)
(f) Liquidity risk
LiquidityriskistheriskthattheGroupwillnotbeabletomeetitsfinancialobligationsasandwhentheyfalldue.TheGroup’sapproachtomanagingthisriskistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitieswhendueunderarangeoffinancialconditions.ThenetcashflowsarisingfromitsThaiassetsareconsideredtogeneratesufficientworkingcapitaltoadequatelyaddressthisrisk.
NeithertheCompanynortheGroupcurrentlyhasanyavailablelinesofcredit.
Thefollowingarethecontractualmaturitiesoffinancialliabilities,includingestimatedinterestpaymentsandexcludingtheimpactofanynettingagreements: Carrying Contractual 6 months 6 to 12 amount cashflows or less months $000 $000 $000 $000
Consolidated 2008 Non-derivativefinancialliabilities Tradeandotherpayables 3,368 3,368 3,368 -SRBandincometaxprovisions 24,152 24,152 9,304 14,848 27,520 27,520 12,672 14,848
Company 2008 Non-derivativefinancialliabilities Tradeandotherpayables 531 531 531 - 531 531 531 -Consolidated 2007 Non-derivativefinancialliabilities Tradeandotherpayables 3,028 3,028 3,028 - 3,028 3,028 3,028 -
Company 2007 Non-derivativefinancialliabilities Tradeandotherpayables 297 297 297 - 297 297 297 -
70 Carnarvon petroleum ltd
dIreCtorS’ deClaratIon
(1) IntheopinionofthedirectorsofCarnarvonPetroleumLimited:
(a) thefinancialstatementsandnotesoftheCompanyandoftheGroupsetoutonpages30to69areinaccordancewiththeCorporationsAct2001,including:
(i) givingatrueandfairviewoftheCompany’sandGroup’sfinancialpositionasat30June2008andoftheirperformance,asrepresentedbytheresultsoftheiroperationsandtheircashflows,forthefinancialyearendedonthatdate;and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
CorporationsRegulations2001;and
(b) therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.
(2) Thisdeclarationhasbeenmadeafterreceivingthedeclarationsrequiredtobemadetothedirectorsinaccordancewithsection
295AoftheCorporationsAct2001forthefinancialperiodending30June2008.
Signedinaccordancewitharesolutionofthedirectors.
pJ LeonhardtDirectorPerth,25September2008
2008 annual report 71
audIt report
72 Carnarvon petroleum ltd
audIt report (Continued)
2008 annual report 73
Corporate GovernanCe Statement
introduction
Carnarvon Petroleum Limited (“Carnarvon”) has addressed the Essential Corporate Governance Principles as published by the ASXCorporateGovernanceCouncil and has adopted theBest PracticeRecommendationswhich theBoard considers to be relevant andessentialfortheefficientmanagementoftheCompanyanditsbusinesswhilstsafeguardingshareholderassets.
ThefollowingadditionalinformationabouttheCompany'scorporategovernancepracticesissetoutontheCompany'swebsiteatwww.carnarvonpetroleum.com:
• Corporategovernancedisclosuresandexplanations;• StatementofBoardandmanagementfunctions;• CompositionoftheBoardandnewappointments;• CommitteesoftheBoard;• Summaryofcodeofconductfordirectors;• Summaryofpolicyonsecuritiestrading;• AuditCommitteeCharter;• SummaryofpolicyandproceduresforcompliancewithASXListingRuledisclosurerequirements;• Summaryofarrangementsregardingcommunicationwithandparticipationofshareholders;• SummaryofCompany'sriskmanagementpolicyandinternalcomplianceandcontrolsystem;and• Corporatecodeofconduct.
Skills, experience, expertise and term of office of each director
Aprofileofeachdirectorcontainingtheapplicableinformationissetoutinthedirectors'report.
Statement concerning availability of independent professional advice
Ifadirectorconsidersitnecessarytoobtainindependentprofessionaladvicetoproperlydischargetheresponsibilityofhis/herofficeasadirectorthen,providedthedirectorfirstobtainsapprovalforincurringsuchexpensefromthechairman,theCompanywillpaythereasonableexpensesassociatedwithobtainingsuchadvice.
number of audit Committee meetings and names of attendees
ThenumberofAuditCommitteemeetingsandnamesofattendeesissetoutinthedirectors'report.
names and qualifications of audit Committee members
ThenamesandqualificationsofAuditCommitteemembersaresetoutinthedirectors’report.
74 Carnarvon petroleum ltd
Corporate GovernanCe Statement (Continued)
explanations for departures from best practice recommendations
From1July2007to30June2008(the“ReportingPeriod”) theCompanycompliedwitheachof theEssentialCorporateGovernancePrinciples (Note1below)andthecorrespondingBestPracticeRecommendations (Note2below)aspublishedbytheASXCorporateGovernanceCouncil("ASXPrinciplesandRecommendations"),otherthaninrelationtothemattersspecifiedbelow:
PrincipleReference
RecommendationReference
NotificationofDeparture ExplanationforDeparture
2 2.1 TheBoarddidnotcompriseamajorityofindependentdirectors.TheBoardcurrentlyconsistsoftwoindependentandtwonon-independentdirectors.
MrPeterLeonhardt,theChairman,iscurrentlyactinginaparttimeexecutivecapacityasanon-independentdirectortosupporttheChiefExecutiveOfficer.MrLeonhardt’sfulfilmentofthisrolegoingforwardwillbemonitoredrelativetotheCompany’sstageofdevelopment.
2 2.2 TheChairmanisnotanindependentdirector. MrPeterLeonhardt,theChairman,iscurrentlyactinginaparttimeexecutivecapacityasanon-independentdirectortosupporttheChiefExecutiveOfficer.MrLeonhardt’sfulfilmentofthisrolegoingforwardwillbemonitoredrelativetotheCompany’sstageofdevelopment.
2 2.4 AseparateNominationCommitteehasnotbeenformed.
TheBoardconsidersthattheCompanyisnotcurrentlyofasizetojustifytheformationofaNominationCommittee.TheBoardasawholeundertakestheprocessofreviewingtheskillsbaseandexperienceofexistingdirectorstoenableidentificationorattributesrequiredinnewdirectors.WhereappropriateindependentconsultantsareengagedtoidentifypossiblenewcandidatesfortheBoard.
4 4.3 SinceFebruary2006theAuditCommitteehascomprisedtwodirectors,oneofwhomisnon-independent,operatesinaparttimeexecutivecapacity,andistheChairmanoftheBoard.ThisdoesnotmeetthecriteriainBestPracticeRecommendation4.3.
InaccordancewithListingRule12.7,theCompanyisnotrequiredtocomplywithRecommendation4.3.
9 9.2 AseparateRemunerationCommitteehasnotbeenformed.
TheBoardconsideredthattheCompanywasnotofasizeduringthereportingperiodtojustifytheformationofaRemunerationCommittee.TheBoardasawholeundertooktheroleofthiscommittee.SincetheendofthereportingperiodtheBoardhasdeterminedthattheCompanyisnowofasizetojustifytheformationofaRemunerationCommitteeandonewasformedon1August2008.
Notes(1)AcopyoftheTenEssentialCorporateGovernancePrinciplesissetoutontheCompany’swebsiteunderthesectionentitled"CorporateGovernance".(2)AcopyoftheBestPracticeRecommendationsissetoutontheCompany’swebsiteunderthesectionentitled"CorporateGovernance".
2008 annual report 75
Corporate GovernanCe Statement (Continued)
existence and terms of any schemes for retirement benefits for non-executive directors
TheCompanydoesnothaveanytermsorschemesrelatingtoretirementbenefitsfornon-executivedirectors.
Company’s remuneration policies
TheCompany’sremunerationpoliciesaresetoutintheRemunerationReportonpages20to25.
TheCompanyhasseparateremunerationpoliciesforexecutiveandnon-executivedirectors.Non-executivedirectorsreceiveafixedfeeand,whenappropriate,shareoptionsorparticipationintheEmployeeShareScheme.
Executivedirectorsreceiveasalaryorfeeand,whenappropriate,shares,shareoptions,orparticipationintheEmployeeShareScheme.
identification of independent directors
TheCompany’stwoindependentdirectorsareconsideredtobeMrNeilFearisandMrKenJudge.
NeitherofthesedirectorswasconsideredtohaveamaterialrelationshipwiththeCompanyoranothergroupmemberduringtheReportingPeriodasprofessionaladvisor,consultant,supplier,customer,orthroughanyothercontractualrelationship,nordidtheyhaveanybusinessorotherrelationshipwhichcould,orcouldreasonablybeperceivedto,materiallyinterferewiththedirector’sabilitytoactinthebestinterestsoftheCompany.
TheBoardconsidersmaterialinthiscontexttobewhereanydirector-relatedbusinessrelationshiprepresentsthelesserofatleast5%oftheCompany’sorthedirector-relatedbusiness’srevenue.
76 Carnarvon petroleum ltd
addItIonal Shareholder InformatIon
AdditionalinformationrequiredbytheASXLimited(ASX)ListingRulesandnotdisclosedelsewhereinthisreportissetoutbelow.
a) Shareholdings as at 18 September 2008
Substantial shareholders TherearenosubstantialshareholdernoticeslodgedwiththeCompany.
Voting Rights ThevotingrightsattachingtoOrdinarySharesaregovernedbytheConstitution.Onashowofhandseverypersonpresentwhoisa
memberorrepresentativeofamembershallhaveonevoteandonapoll,everymemberpresentinpersonorbyproxyorbyattorneyordulyauthorisedrepresentativeshallhaveonevoteforeachshareheld.Nooptionshaveanyvotingrights.
Twenty Largest Shareholders
NameofShareholder NumberofShares %held JPMorganNomineesAustraliaLimited 39,410,946 5.85HSBCCustodyNominees(Australia)Limited 33,297,035 4.95NationalNomineesLimited 24,783,893 3.68MrEdwardPatrickJacobson 14,917,903 2.22ANZNomineesLimited<CashIncomeA/C> 12,796,128 1.90CiticorpNomineesPtyLimited 10,143,800 1.51ArneInvestmentsPtyLtd 8,916,906 1.32MrPeterJamesLeonhardt 7,700,000 1.14MacquarieBankLimited 7,199,379 1.07ArneInvestmentsPtyLtd 6,710,493 1.00PendomerInvestmentsPtyLtd<LawSettlementsFundA/C> 6,400,000 0.95AtholSteelPtyLtd 6,100,000 0.91HSBCCustodyNominees(Australia)Limited- 6,074,941 0.90MrEdwardPatrickJacobson 6,000,000 0.89MrBrettSteeleWilliamson+MsNicoleDeanneRockliff 5,838,657 0.87MrGregoryJohnMunyard+MrsMariaAnnMunyard+MissCarmenHeleneMunyard<RivieraSuperFundA/C> 5,800,000 0.86CiticorpNomineesPtyLimited<CwlthBankOffSuperA/C> 5,271,720 0.78KaymacNomineesPtyLtd<McMullanSuperFundA/C> 4,939,372 0.73MrLawrenceAddisonBrown+MrsJillBrown 4,789,272 0.71BondStreetCustodiansLimited 4,636,199 0.69
221,726,644 32.93
Distribution of equity security holders
SizeofHolding Numberof Numberof shareholders fullypaidshares
1 to 1,000 287 190,3521,001 to 5,000 1,545 4,913,3755,001 to 10,000 1,418 12,071,08310,001 to 100,000 3,360 125,789,733100,001 andover 759 530,360,091 7,369 673,324,634
Thenumberofshareholdersholdinglessthanamarketableparcelofordinarysharesis492.
2008 annual report 77
addItIonal Shareholder InformatIon (Continued)
b) unlisted option holdings as at 18 September 2008
Unlisted10centoptionsexpiring31March2009Numberonissue 10,000,000Numberofholders 4Thoseholdingmorethan20%oftheclass: Numberheld
EPJacobson 4,000,000PJLeonhardt 3,000,000
c) on-market buyback
Thereisnocurrenton-marketbuyback.
d) Schedule of permits
permit BaSin/Country Joint venture equity operator partnerS %
SW1A Phetchabun/Thailand Carnarvon 40% PanOrientEnergy PanOrientEnergy 60%L33/43 Phetchabun/Thailand Carnarvon 40% PanOrientEnergy PanOrientEnergy 60%L44/43 Phetchabun/Thailand Carnarvon 40% PanOrientEnergy PanOrientEnergy 60%L20/50 Phitsanulok/Thailand Carnarvon 50% Carnarvon SunResources 50%EP321&EP407 Perth/Australia Carnarvon 2.5%ORRI LatentPetroleumWA-399-P Carnarvon/Australia Carnarvon 50% Carnarvon RialtoEnergy 50%EP110& Carnarvon/Australia Carnarvon 35% StrikeOilEP424 StrikeOil 40% Pancontinental OilandGas 25%
78 Carnarvon petroleum ltd
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2008 annual report 79
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80 Carnarvon petroleum ltd
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GroundFloor
1322HayStreet
WestPerthWA6005
Telephone:+61893212665
Facsimile:+61893218867
Email:[email protected]
Website:www.carnarvonpetroleum.com