For personal use only - ASX · Gas (CSG) portfolio. We have achieved and increased independently...

SUNSHINE GAS LIMITED 2008 ANNUAL REPORT

For

per

sona

l use

onl

y

�

��

Li mitofC

oopersin

Ba

BRISBANE

Gladstone

Rockhampton

Gold Coast

Warwick

Dalby

Chinchilla

Wandoan

Clermont

Moranbah

Mackay

Collinsville

Taroom

Theodore

Moura

Rolleston

Springsure

EmeraldBlackwater

RomaMitchell

Injune

Wallumbilla

Moonie

St George

Toowoomba

Gympie

Maryborough

Bundaberg

EromangaQuilpie

COOPER

ATP 789P

ATP 688P

ATP 811P

ATP 693P

ATP 684P

ATP 722P ATP 769P

ATP 768P

ATP 685P

ATP 767P

ATP 795P

ATP 645P

ALTON

TILBROOK

FOXLEIGH

RED ROCKATRIA WEST

CULLIN

PARANUI

CHAMPAGNECREEK

TARDRUM

POLARISLACERTA

OVERSTON

ALTON

ATRIA

Sunshine Gas Interest

Petroleum Lease

Gas Pipeline Proposed

Oil Pipeline

LEGENDRoad

City/Major Town

Power Station

Bowen Basin

COOPER BASIN INSERT

Kilometres

PERMIT INTEREST

ATP 645P 100%ATP 684P 100%ATP 685P 50%ATP 688P 50%ATP 693P 100%ATP 722P 100%ATP 767P 100%ATP 768P 100%ATP 769P 50%ATP 789P 100%ATP 795P 100%ATP 811P 100%ALTON ~30%

0 50 100

Sunshine Gas Interests

For

per

sona

l use

onl

y

Sunshine Gas Annual Report 2008 | Page 1

Contents

Chairman’s Message 2

Managing Director’s Report 4

Review of Operations 9

Directors’ Report 15

Auditor’s Independence Declaration 22

Financial Report 23

Directors’ Declaration 46

Independent Auditor’s Report 47

Additional Information 49

Corporate Governance Statement 51

Glossary 55

Company Details 57

For

per

sona

l use

onl

y


Each of these events have been major milestones for the Company and played a major role in building Sunshine Gas.

We have seen great political and economic changes over the past year, both locally and worldwide. The energy sector has been key to many of these changes with the movement towards clean energy production positive for the gas industry. The political climate in Australia has seen a major shift away from the focus on coal as a resource for electricity production which has coincided with Sunshine Gas’s increase in gas reserves. This and the growing worldwide demand for LNG, has placed the Company in a very good position to maximise the value of our resources.

As Chairman, I have enjoyed helping steer the Company through these interesting times. Sunshine Gas has been well served by my colleagues on the Board, both through our long term directors Tony Gilby and James Hudleston and our newer members Peter Slaughter and Bruce Phillips, who both joined in calendar 2007. It is also important that I acknowledge the wonderful support from Sunshine’s shareholders over the years.

In closing, I particularly want to acknowledge the dedicated efforts of all our staff, ably led by Tony Gilby, who have built Sunshine Gas from a small start up in 2002 to a strong, vibrant energy company. This is refl ected in the company’s market capitalisation which has reached approximately $900 million as of the date of this report.

Shareholders and staff should take much pride in their contribution to the building of Sunshine Gas into what it is today.

James A. V. McKay Chairman

Dear Shareholder,

Sunshine Gas has had another year of progress and success culminating in the bid, post balance date, for the company by Queensland Gas Company Limited.

Sunshine Gas’s many major achievements during the year included:

• Continuing progress in the development of our Lacerta coal seam gas fi eld leading up to expected production second quarter 2009 with independently certifi ed reserves increased to 44 PJ 1P, 469 PJ 2P and 1097 PJ 3P

• Commencement of feasibility work on SUN LNG, a mid-size Liquefi ed Natural Gas (LNG) project at Gladstone. SUN LNG is designed to allow Sunshine Gas to maximise the value of its coal seam gas reserves

• The ongoing appraisal of Atria, a potential new coal seam gas fi eld

• Raising $44m to fund ongoing work programs

• The sale of our UK assets for approximately $31.0m. The sale of these offshore assets resulted in an excellent profi t for the Company and allowed us to further refi ne our focus towards onshore Queensland gas exploration and production

• Post balance date, exciting drilling results at Polaris, a new coal seam gas opportunity identifi ed in the highly prospective Walloon Coal Measures

JAM

ES

A V

MC

KA

Y, C

HA

IRM

AN

Chairman’s Message

For

per

sona

l use

onl

y


Lacerta production pilot well fl are

For

per

sona

l use

onl

y


Sunshine Gas has advanced signifi cantly since my last Managing Director’s report. The Company has maintained a strong cash position to fund its work programs in spite of the fi nancial market volatility and uncertainty caused by the international credit crisis.

During the past year we raised new capital through a highly successful placement and sold our UK assets for cash to further bolster our fi nancial reserves to allow greater focus on our growing Queensland Coal Seam Gas (CSG) portfolio.

We have achieved and increased independently certifi ed gas reserves for our Lacerta CSG project and progressed a number of other exciting CSG project areas, including Atria and Polaris, in the continuing drive to expand the Company’s reserve position.

The Lacerta project near Roma in Queensland subsequently moved from exploration and appraisal to the development stage comprising the current 40-well drilling program and the construction of a gas processing and delivery plant.

International interest in Queensland LNG proposals by major international energy sector players has increased dramatically during the past year. The gas market has also continued to fi rm in favour of the producer so we have maintained our strategy of targeting the shorter-term end of the market leading up to export LNG.

We see a major strategic advantage in leaving the bulk of the Company’s reserves uncontracted for as long as practicably possible in order to maximise upside potential through Queensland’s developing export LNG market.

The price of gas looks likely to remain strong for years to come as a result of the growing world reliance on LNG. Queensland’s CSG resources are ideally placed to capitalise on the growing LNG market – Australia being a politically stable country with reserves which far outweigh its domestic requirements.

Until alternative fuels are sufficiently cost-effective to compete with conventional forms of energy, hydrocarbons including CSG will remain the mainstay of the power generation industry world-wide, including Australia. In recognition of this, the Australian Government recently released its Green Paper for discussion on a Carbon Pollution Reduction Scheme to address climate change.

While CSG stands to benefi t greatly through its recognition as a “clean” fuel, the Green Paper does not appear to acknowledge the signifi cant role Australia’s vast gas reserves and LNG exports can and should play in assisting Australia and the world to reduce greenhouse gas emissions. We shall be working with our industry peers to ensure the opportunity to develop a new LNG export industry in Queensland is not adversely impacted.

Sunshine Gas’s projects have advanced considerably in the past year in parallel with the increasing number of experienced staff the Company has been able to attract in what remains a very competitive environment for both resources and people.

Rising costs and increasing levels of government regulation present the main impediments to a continued smooth growth story for Sunshine Gas.

The Company remains strategically well placed and debt free, and had over $81 million in cash and liquid assets as of 30 June 2008. I am therefore confi dent that with good planning and the maintenance of a keen eye on costs, we shall continue to generate increased wealth for shareholders.

Anthony (Tony) R. GilbyManaging Director

Managing Director’s Report

AN

THO

NY

GIL

BY,

MA

NA

GIN

G D

IRE

CTO

R

For

per

sona

l use

onl

y


Lacerta production pilot

For

per

sona

l use

onl

y


Delivered signifi cantly upgraded reserve statement for the Lacerta gas fi eld

Raised $44m to accelerate Lacerta development and to continue appraisal and exploration of other projects

Executed strategy to profi tably divest the Company’s offshore oil exploration portfolio to sharpen operational focus

Commenced 40-well drilling program as part of Lacerta Phase I CSG development

Commenced Front End Engineering and Design for construction of Lacerta gas processing plant

Signed non-binding Heads of Agreement with Sojitz Corporation for the development of a mid-scale export LNG project at Gladstone

Completed pre-feasibility study and progressed Environmental Impact Statement for proposed export LNG project SUN LNG

Completed 7-well Atria CSG appraisal well program

Commenced exploration work on new Polaris CSG project

Strengthened board with the addition of two new members

Admitted to the Standard & Poor’s ASX300 index

Achievements

Sunshine Gas Chief Commercial Offi cer Chris Pieters (left), planning ahead with Chief Financial Offi cer Paul Jobbins.

For

per

sona

l use

onl

y


Installing well casing at Lacerta

For

per

sona

l use

onl

y


Managing Director Tony Gilby at Lacerta with Chief Operating Offi cer John Phillips

For

per

sona

l use

onl

y


Review of Operations

Coal Seam Gas

ATP 795P & ATP 767P Lacerta Development Project, North Roma AreaSunshine Gas Limited 100%

Sunshine Gas has advised that Phase I development drilling is underway at the Company’s Lacerta Coal Seam Gas (CSG) fi eld near Roma.

The decision to begin development drilling followed receipt of an upgraded reserve assessment from MHA Petroleum Consultants, Inc (“MHA”) of Denver in October 2007.

In accordance with Society of Petroleum Engineers (SPE) guidelines, the following reserves have now been attributed to the Lacerta fi eld by MHA:

RESERVE CLASS VALUE (PJ)

1P Reserve (Proven) 44

2P Reserve (Proven + Probable) 469

3P Reserve (Proven + Probable + Possible) 1097

The reserves identifi ed in this statement were based on a report compiled in October 2007 by John P. Seidle, Vice President, MHA Petroleum Consultants, Inc (“MHA”) of Denver, United States. MHA have consented to the release of the statement in the form and context in which it appeared.

9

39 38 21

3731

19

41

42

3218

17

4

1

16

33 14

34

35

15

3036

9

13

12

2

10

311

22-25

26-29

5-8

20

PILOT 8

PILOT 9

PILOT 6

PILOT 4

PILOT 11

PILOT 10

PILOT 7

PILOT 3

PILOT 5

PILOT 2

PILOT 1

ATP 767P

ATP 795P ATP 767P

LEGENDProposed Corehole

Existing Wells

Corehole/Monitoring Well

Gas Pipeline

Seismic Line

Gas Field

SHG 100%

Kilometres

0 5

ROMA

BRISBANE

Wallum

billa – Gladstone

Gas Pipeline

LA

CE

RTA

GA

S F

IELD

For

per

sona

l use

onl

y


Review of Operations (cont’d)

The Company expects additions to reserves at Lacerta in the medium term following acquisition of additional well data.

A total of 41 core and pilot wells have been drilled throughout the Lacerta fi eld as part of the appraisal drilling program.

Work has now started on 40 planned development wells in the south-eastern portion of the Lacerta fi eld. Development wells have been employing a new well-completion technique devised to optimise gas fl ows from the Walloon coal seams.

Sunshine Gas aims to have two rigs running for the majority of the development program. Wells are taking approximately fi ve days to drill, log, under-ream, jet and complete.

Front End Engineering Design (FEED) work is continuing for the Lacerta gas processing and compression plant. FEED work is due for completion in September and the Company has already called for tenders for all long lead-time items.

Phase I of Lacerta’s fi eld development includes the construction of a 30Pj/a gas processing and dehydration plant, 8Pj/a compression capacity and the establishment of 40 wells for fi rst gas production, subject to FEED and regulatory approvals, in the second quarter of 2009. Additional compression units will be built into the plant as fi eld output grows.

Wallum

billa-G

ladstone

Ga

sPipeline

9

39 38 21

3731

19

41

42

3218

17

4

1

16

33 14

34

35

15

3036

9

13

12

2

10

311

22-25

26-29

5-8

20

PILOT 8

PILOT 9

PILOT 6

PILOT 4

PILOT 11

PILOT 10

PILOT 7

PILOT 3

PILOT 5

PILOT 2

PILOT 1

ATP 767P

ATP 795P ATP 767P

2224

2325

2628 27

29

30

36

3

2

5

67

8

13

11

10

9

12

43

44

CZ35

CO41CT41

CU35

CN35

CN47 CU47DA47

DA45

CY47

CY45

CY41

CY39

CY37

CY35

CW45

CW43

CW41

CW39

CW37

CW35

CU45

CU43

CU39

CU37

CS47

CS45

CS43

CS41

CS39

CS37

CS35

CQ37

CQ35

CP38

CN45

CQ47

CQ45

DA43

DA41

DA39

DA37

HoldingDam

CY43

LEGENDProposed Development Wells

ExistingDevelopment Wells

Existing Wells

Corehole/Monitoring Well

Seismic Line

SHG 100%

Kilometres

0 0.5 1

LA

CE

RTA

GA

S F

IELD

– P

HA

SE

1 D

EV

ELO

PM

EN

TF

or p

erso

nal u

se o

nly


ATP 768P Polaris ProjectSunshine Gas Limited 100%

Sunshine Gas has begun work on the Polaris Project, a new CSG opportunity identifi ed within the highly productive Walloon Coal Measures.

Recent work completed in adjacent permits has delineated certifi ed reserves and contingent resources within a highly productive northern section of the Walloon Fairway. Polaris is situated within this fairway.

Based on regional well and seismic control, Sunshine Gas believes that approximately 300km2 of permit area contains coal at suitable depths for CSG extraction. This data infers a signifi cant gas resource.

An exploration/appraisal drilling program has been designed to confi rm the net coal, gas content, permeability and productivity of both the Juandah and Taroom coal seams that make up the Walloon Coal

ATP 852P

ATP 651P

Wandoan

Gerar d 1

Daniel 1

Cameron 1

Holli 1Mt Organ 1

Cam 1

Kathleen 1

Ross 1

2Wo leebee Creek 1R

Mamdal 2Lawton 12

Wo leebee Creek 4

5

67

Wubagul 1

PL 171

8

9

7

6

4 5

2 3

10

Kilometres

0 15

LEGENDExisting Wells

Proposed Pilot

Proposed Core Hole

ATP 768P SHG 100%

Other Permits

Certified Reserves (BCF)

1P - 24.72P - 264.03P - 805.2Contingent Resource - 212.8

PO

LA

RIS

LO

CA

TIO

N M

AP

Measures. Up to 12 core and pilot wells will be drilled as part of this initial campaign over a three-month period.

Early results have been encouraging with results from wells drilled subsequent to year end intersecting high permeability coal seams in both the Juandah and Taroom coal sequences of the Walloon Coal Measures.

Following this initial drilling, Sunshine Gas will implement a production-testing program with a view to identifying commercial reserves in the permit. MHA Petroleum Consultants have been engaged for approval of a reserve certifi cation program.

Sunshine Gas was advised on 19 June that Beach Petroleum would not be exercising its option to take a 50% interest in ATP 768P. This decision followed an unsuccessful testing program at Champagne Creek 2A as part of the initial farm-in agreement. As a result, Sunshine Gas now has 100% ownership of ATP 768P.F

or p

erso

nal u

se o

nly


Review of Operations (cont’d)

Atria 1Atria 2 Atria 3

Atria 4

Atria 5

Atria 6

Atria 7

Atria 16

Atria 8Atria 8Atria 8Atria 8Atria 8Atria 8Atria 8Atria 8Atria 8

Kilometres

0 10 20

LEGENDExisting Wells

Seismic Line

SHG 100%

ATP 684P Atria ProjectSunshine Gas Limited 100%

Sunshine drilled Atria 1 and 2 core-holes in mid-2007 to test the presence of coal within the Permian Fair Hill formation. Following encouraging net coal intersections and gas desorption results, a 110km 2D seismic survey was acquired. Seismic defi nition was deemed necessary in this region to increase geological understanding, mainly due to the lack of well data.

Results from the seismic survey indicated that multiple coal seam packages were present in ATP 684P at optimal depths for CSG development. A seven core-well appraisal program was completed to evaluate the extent, thickness, gas content and permeability of coals within the interpreted fairway.

This appraisal program confi rmed the presence of thick, highly gassy coals (up to 20m3/tonne) throughout the Permian Fair Hill Formation over an area of approximately 350km2 within ATP 684P.

Wells drilled to date have delineated fi ve main coal seams with strong geological correlation. A total of 62 coal samples have been put on desorption test to develop a comprehensive depth and gas-content analysis.

The results at Atria confi rm a signifi cant gas resource with the Company now in the process of calculating prospective resource fi gures for the project area. Sunshine will now work towards identifying an optimal production well-completion technique to maximise gas recovery from the seams.

A formal reserve certifi cation program is also being designed and will be run in conjunction with MHA Petroleum Consultants.

ATP 685P Crocker Gully / Tardrum Projects(Sunshine Gas Limited 50%; SANTOS 50%)

Following drilling of Crocker Gully 2, the joint venture has been refi ning the geological model of the Baralaba Coal Measures in ATP 685P. This review is ongoing.

The joint venture has also confi rmed a drilling location appraising the Tardrum structure. Tardrum 3 will further test a large anticlinal feature in ATP 685P with both CSG and conventional gas prospectivity. Drilling is expected to occur during the third quarter of 2008.

WESTSIDE project areas • ATP 769P Paranui

(Sunshine Gas Limited 50%; WestSide Corporation Limited 50%)

• ATP 688P Tilbrook (Sunshine Gas Limited 50%; WestSide Corporation Limited 50%)

• ATP 693P Cullin(Sunshine Gas Limited 100%)

• ATP 811P Foxleigh(Sunshine Gas Limited 100%)

WestSide Corporation has completed its farm-in obligations in ATP 769P (Paranui) and ATP 688P (Tilbrook), confi rming its 50% interest in those tenements. WestSide also confi rmed it will exit from ATP 693P (Cullin) and ATP 811P (Foxleigh) following a review of initial work performed.

WestSide reported that production testing at the Paranui CSG pilot has commenced, with the Paranui #6R well completed with pumping equipment.

Two wells were drilled at the Paranui CSG pilot with an additional appraisal well to be completed during the third quarter of 2008. These two wells were subjected to multi-stage fracture stimulation processes.

Production testing at the Tilbrook CSG pilot also recommenced, with the two appraisal wells currently dewatering.

Sunshine Gas is currently liaising with WestSide to formulate a longer term forward work program within both the Tilbrook and Paranui project areas.

Conventional Gas

ATP 645P Overston ProjectSunshine Gas Limited 100%

Following a full geological review of ATP 645P, Sunshine Gas has delineated several leads and prospects. The greater Overston area still remains the Company’s top priority in the permit but will require a rig with suffi cient capacity to meet the drilling requirements.

AT

P 6

84

P –

AT

RIA

LO

CA

TIO

N

For

per

sona

l use

onl

y


ATP 684P Red Rock ProjectSunshine Gas Limited 100%

The Triangulum seismic survey targeting coals as part of the Atria CSG project indentifi ed a series of large conventional structures within ATP 684P. These structures are along strike with the large Red Rock anticline and show structural relief in the Aldebaran Sandstone target.

Sunshine Gas has fi nalised interpretation of the seismic for conventional gas prospectivity within the permit with several leads identifi ed. Further seismic is required to progress these leads towards drillable prospects with an acquisition plan to be developed during the third quarter of 2008.

Other Projects

Proposed Export LNG Project – SUN LNG

Sunshine Gas and Japanese trading house Sojitz Corporation, announced in December 2007 a proposed export LNG project at Gladstone utilising gas from the Lacerta CSG project as feedstock. The joint venture was subsequently named SUN LNG.

A non-binding Heads of Agreement (HOA) was signed between the parties outlining the following non-exhaustive key terms:

• Develop an LNG Plant with Sunshine 30% / Sojitz 70% equity spilt

• Initial train of 0.5Mt (Mega tonne) LNG / year

• Sojitz to take up to 20% equity in Lacerta CSG project

• Gas sourced from Lacerta CSG fi eld

• Utilise LNG Japan as a strategic partner and LNG offtaker

• LNG product linked to world oil price with fl ow through to upstream producer

• Final Investment Decision targeted in December 2008

• First LNG shipment in Q1 2012

• Explore opportunities for LNG plant expansion in 0.5 Mt/ year tranches

Sunshine’s decision to pursue an export LNG project stems from the experience and quality of the joint venture partners involved and an expected shortage of LNG within the Asian region. Similarly, the lucrative Japanese LNG market provides an opportunity for higher gas prices than achievable domestically in eastern Australia.

The joint venture has solicited multiple feasibility studies for the Engineering, Procurement and Construction (EPC) of an LNG facility at Fishermans Landing Wharf (FLW) in Gladstone. The successful completion of FEED will result in the selection of an EPC contractor.

FLW has been nominated by the Gladstone Port Corporation as a preferred LNG site. Situated on reclaimed land, FLW is 5km from the Queensland Gas Pipeline (QGP) Gladstone City Gate. A pipeline survey licence application for the required 5km feed gas pipeline has been lodged with the Department of Mines and Energy and an ‘environmental authority’ granted.

A Quantitative Risk Assessment of the SUN LNG project was prepared and lodged with the regulator for review and a Cultural Heritage agreement was signed with the Port Curtis People to cover the pipeline route from the Gladstone City Gas Gate to the Fishermans Landing Wharf site.

Dialogue with the Gladstone Port Corporation has been ongoing to fi nalise a lease agreement with the Gladstone Port Corporation for the Fisherman’s Landing site.

A voluntary Environmental Impact Statement (EIS) study was undertaken by the SUN LNG joint venture in December 2007 with relevant component studies complete and lodged with the Environmental Protection Agency (EPA).

An Environment Protection and Biodiversity Conservation Act (EPBC) referral has been lodged with the Department of Environment, Heritage, Water and the Arts with a subsequent decision from the department that the proposed LNG plant is “not a controlled action”.

SUN LNG and its shipping partner LNG Japan have also engaged with other Gladstone LNG proponents and the Gladstone Port Corporation in discussions to establish protocols for shipping and navigation of LNG vessels in the Port of Gladstone.

ATP 789P Cooper Basin ProjectSunshine Gas Limited 100%

Sunshine Gas has fi nalised the selection of a suitable drilling location within ATP 789P. The Company is currently evaluating the merit of acquiring further seismic to strengthen the lead portfolio or alternatively drilling a well. A decision to progress to drilling will be dependent on rig availability.

PL 1368 and PL 1485 United Kingdom Continental shelf (UKCS) ProjectSunshine Gas announced during the year that it had received GB£15.0 million (approx AU$31.0m) from the sale of its UK subsidiary Sunshine Oil plc to UK partner Hurricane Exploration plc.

The sale of the UK assets allows the company to focus solely on development of the Company’s coal seam and conventional gas assets in Queensland.

LNG

TA

NK

ER

For

per

sona

l use

onl

y


Core drilling operations at Lacerta

For

per

sona

l use

onl

y


Directors’ Report Sunshine Gas Limited and Controlled Entities

The Directors present the following report on the Economic Entity consisting of Sunshine Gas Limited and the entities it controlled for the fi nancial year ended 30 June 2008.

Principal Activities The principal activity of the Economic Entity during the fi nancial year was the exploration, evaluation and development of conventional gas and coal seam gas and oil reserves.

There have been no signifi cant changes in the nature of these activities during the year.

Review of Operations After receiving initial certifi ed reserves, which were subsequently upgraded, the Economic Entity progressed exploration at its most advanced coal seam gas project at Lacerta, north of Roma, Queensland with a view to commencing development of the fi eld.

Exploration also continued across other areas within the group’s extensive acreage portfolio including Atria and Champagne Creek.

The sale of UK subsidiary, Sunshine Oil plc, refocused the Company to be a Queensland-based gas explorer on route to development and production.

In addition, throughout the year, the group developed and progressed a strategy for exporting gas via a mid-scale liquefi ed natural gas (LNG) facility to be developed at Gladstone, Queensland, with Japanese trading house Sojitz Corporation.

Financial ReviewThe net profi t of the Economic Entity after income tax for the fi nancial year was $7,308,390 (2007: net loss $11,435,371).

Included in the consolidated result for the year was profi t from the sale of Sunshine Oil plc of approximately $25.0m. Exploration costs of approximately $6.5m were written off, relating mostly to the group’s Red Rock project and Champagne Creek project in joint venture with Beach Petroleum Limited. Losses on the sale of investments in fl oating rate notes and collateral debt obligations with a face value of $20.0m were approximately $3.9m.

Cash on hand at end of the fi nancial year totalled $81.9m. During the year, approximately $43.9m (before costs) was raised by way of a share placement and the sale of Sunshine Oil plc generated cash of approximately $31.0m. $14.7m was spent on exploration of the group’s extensive acreage, $5.6m on administration and $3.1m on property, plant and equipment.

Signifi cant Changes to the State of Affairs The following signifi cant changes to the State of Affairs of the Economic Entity occurred during the fi nancial year:

1. On 7 August 2007, the Company received confi rmation of an initial certifi ed reserve statement from MHA Petroleum Consultants, Inc (MHA) of Denver. On 22 October 2007, the Company announced upgraded reserves as follows:

1P Reserve (Proven) 44 PJ

2P Reserve (Proven + Probable) 469 PJ

3P Reserve (Proven + Probable + Possible) 1,097 PJ

The reserves identifi ed in this statement were based on a report compiled in October 2007 by John P. Seidle, Vice President, MHA Petroleum Consultants, Inc (“MHA”) of Denver, United States. MHA have consented to the release of the statement in the form and context in which it appeared.

2. On 10 December 2007, the Company announced that it had completed a pre-feasibility statement and signed a Heads of Agreement with Japanese trading house, Sojitz Corporation to jointly develop a mid-scale LNG facility at Gladstone, Queensland.

3. In March 2008, the Company raised $43,890,000 (before costs) by way of a placement of 39,900,000 shares to institutional and sophisticated investors. In addition to progressing the fi rst phase of the Lacerta CSG project’s commercial development, funds were raised for the further assessment of the proposed mid-scale LNG plant at Gladstone and to continue appraisal and exploration of the Company’s signifi cant pipeline of other CSG and conventional gas projects.

4. On 13 June 2008, the Company completed the sale of its subsidiary, Sunshine Oil plc, to its joint venture partner. Settlement funds of GB£15.0m (approximately AU$31.0m) were received as consideration for the sale of shares in the company and the repayment of an intercompany loan.

Signifi cant After Balance Date Events On 14 July 2008 shareholders approved the terms of an Employee Share Plan. On 19 August 2008 216,055 shares were issued to employees as bonuses in accordance with the Plan.

In July 2008 the Company announced encouraging results from drilling at its Polaris Coal Seam Gas project near Wandoan in Queensland.

On 20 August 2008 the Company announced that its Board had reached agreement with Queensland Gas Company Limited (QGC) for QGC to offer to acquire all the issued shares of Sunshine Gas Limited by way of off-market takeover. In the absence of a superior proposal, and subject to an independent expert concluding that the offer is fair and reasonable, all non-confl icted Directors have recommended that shareholders accept the offer.

No other matters or circumstances have arisen since the end of the fi nancial year that have signifi cantly affected or may signifi cantly affect:

a) the operations of the Economic Entity;

b) the results of those operations; or

c) the state of affairs of the Economic Entity.For

per

sona

l use

onl

y


Likely Future Developments and Expected ResultsDuring the 2009 fi nancial year, the Company will progress development of its Lacerta coal seam gas project. It is currently envisaged that gas produced from the fi eld will initially be sold short term in the domestic market and in the longer term be used to supply the proposed mid-scale LNG project which the Company is jointly developing with Sojitz Corporation.

The Company will continue to be involved in further assessment of gas discoveries and if successful, will again look to further development of these other projects.

The continuing assessment of properties will be made both with and without farm-out partners.

Environmental RegulationsThe Company’s operations are subject to signifi cant environmental obligations and other regulations under both State and Federal laws in Australia.

It is the Company’s policy to engage appropriately experienced contractors and consultants to advise on, and ensure compliance with, environmental regulations regarding exploration activities.

There have been no reports of breaches of environmental regulations in the fi nancial year, and at the date of this report.

Dividends No dividend has been recommended out of the profi ts of the Company for the year ended 30 June 2008 nor has a dividend been paid or declared since the end of the previous fi nancial year.

Directors The following persons were Directors of Sunshine Gas Limited during the fi nancial year and up to the date of this report:

James A.V. McKayB.Com, LLBNon-executive Chairman

(Appointed 17 February 2004)

James McKay (age 41) brings to Sunshine Gas a strong commercial background, with sound fi nance, business management and legal expertise. He holds degrees in commerce and law, and has been involved in the establishment and development of a number of other businesses.

In addition to his role as Chairman of Sunshine Gas, James is also a member of the Remuneration and Nomination Committee and the Audit and Risk Committee.

James is a shareholder and director of a privately-owned funeral services group with interests in two cemeteries and crematoria. He is a past president of the Australasian Cemeteries and Crematoria Association, having served on its board for over 8 years.

Anthony R. GilbyB.Sc. (First Class Honours)Managing Director

(Appointed 31 October 2001)

Anthony Gilby (age 47) was awarded a Bachelor of Science (First Class Honours) degree in Geology from the University of Adelaide in 1984, and also won the University Medal in Geology. He began his career as a geologist for Delhi Petroleum in the Cooper Basin. He subsequently held positions with Delhi Petroleum and with ESSO (after the Delhi acquisition). His roles included exploration geology, geophysics, petrophysics and working in the Exxon Production Research Centre in Houston.

On his return to Australia, he continued to work with ESSO prior to relocating to Brisbane where he worked for MIM Petroleum and the Louisiana Land and Exploration Company (LL&E). In 1996, he left LL&E to take on a variety of consulting roles as well as the acquisition of prospective Queensland acreage in a private capacity. This work culminated with the founding of Sunshine Gas.

Anthony is a member of the Petroleum Exploration Society of Australia and the American Association of Petroleum Geologists.

James W. HudlestonNon-executive Director

(Appointed 22 May 2003)

James Hudleston (age 56) brings to the Board considerable experience in international investment fi nance. James has a background in stockbroking, investment banking and corporate fi nance.

James assists companies that he is associated with in strategic planning and attracting international institutional investors to those companies. Current interests include a majority shareholding in the Somerset mine, a producing gold mine with exploration upside in Botswana. James also has interests in gold and junior mineral exploration companies, Patagonia Gold Exploration plc, Landore Resources plc and fuel cell company, Intelligent Energy plc.

Directors’ Report (cont’d) Sunshine Gas Limited and Controlled Entities

For

per

sona

l use

onl

y


Peter J. SlaughterBE (Hons), Grad Dip (AICD), FAusIMM, FAICD, FAIM, FIODNon-executive Director

(Appointed 14 June 2007)

Peter Slaughter (age 64) graduated from the University of Queensland with an Honours degree in Metallurgical Engineering in 1966. Since that time, his career has been in the resource and related manufacturing sectors. Peter has signifi cant Australian and international experience in the non-ferrous, iron ore, nickel, coal and precious metal sectors, spanning over 40 years, fi rstly with M.I.M Holdings Limited and currently as a management consultant. In recent years, Peter’s experience has broadened to the service sector and other industries.

Peter has served on various public company boards in Australia, Europe and Canada. He has also been involved in waste recycling, manufacturing, the service sector and research and development companies at a senior level in Australia and internationally.

He is a Fellow of the Australasian Institute of Mining & Metallurgy, Australian Institute of Management, the Australian Institute of Company Directors and the Institute of Directors in the United Kingdom.

Peter is non-executive Chairman of Monto Minerals Ltd (ASX:MOO & AIM:MON), a non-executive director of Nomad Building Systems Limited (ASX:NOD) and a non-executive director of India Gold Limited, an unlisted company. He has close associations with Wilson HTM Corporate Finance Limited.

Peter is on the Advisory Council of the Sporting Wheelies, and is a past President of the Australian Institute of Management (Qld & NT) Limited and a Past Chairman of the Southern Queensland and North Western Queensland Branches of the Australasian Institute of Mining and Metallurgy.

Peter Slaughter is the Chair of the Audit and Risk Committee and a member of the Operations Risk Committee.

Bruce J. PhillipsBSc (Hons) GeolNon-executive Director

(Appointed 17 October 2007)

Bruce Phillips (age 53) is a petroleum explorationist with over 30 years of technical, fi nancial and managerial experience in the upstream sector of the oil and gas industry. He has broad domestic and international

exploration and production experience throughout Australia, SE Asia, Africa and South America.

Bruce is an active member of PESA and the Australian Society of Exploration Geophysicists.

Bruce founded Australian Worldwide Exploration Limited (ASX: AWE) in 1997 and served as that company’s Managing Director until he stepped down in August 2007. He is currently a director of AGL Energy Limited (ASX: AGK).

Mr Phillips is Chair of the Remuneration and Nomination Committee and the Operations Risk Committee, and is a member of the Audit and Risk Committee.

Christopher J. BlameyFCPAFinance Director

(Appointed 13 December 2002, resigned 1 February 2008)

Company Secretary:

Paul S. JobbinsBBus (Accounting), CA, GDipAppFin

Paul Jobbins held the position of Company Secretary at the end of the fi nancial year. He was appointed to the position of Chief Financial Offi cer and Company Secretary on 7 January 2008. Previously, he has held the position of Chief Financial Offi cer and Company Secretary of ASX listed companies, Avastra Sleep Centres Limited and Reverse Corp Limited.

Interests of Directors At the date of this report, the following interests were held by Directors:

Ordinary Shares

James A.V. McKay 1,342,866

Anthony R. Gilby 12,956,667

James W. Hudleston 2,615,800

Peter J. Slaughter 116,666

Bruce J. Phillips 3,552

For

per

sona

l use

onl

y


Meetings of Directors The number of meetings of the Company’s Board of Directors and Board committees held during the year ended 30 June 2008, and the number of meetings attended by each Director and committee member were:

Directors Meetings

ARC Meetings

RNC Meetings

ORC Meetings

A B A B A B A B

James A.V. McKay 17 17 3 3 3 3

Anthony R. Gilby 17 17

Christopher J. Blamey 8 8

James W. Hudleston 15 15 3 2 3 2

Peter J. Slaughter 17 15 3 3 2 2

Bruce J. Phillips 11 10 2 2 2 2

A: Number of meeting eligible to attendB: Number of meetings attended

ARC: Audit and Risk CommitteeRNC: Remuneration and Nomination CommitteeORC: Operations Risk Committee

Remuneration Report – AuditedRemuneration of the Non-executive Directors is approved by the Board and set in aggregate within the maximum amount approved by the shareholders from time to time. The fees have been determined by the Board having regard to industry practice and the need to obtain appropriately qualifi ed independent persons. The aggregate pool of remuneration paid to Non-executive Directors was approved by shareholders on 17 October 2007 and is currently $500,000. The amount paid to Non-executive Directors during the year to 30 June 2008 was $230,293.

Remuneration and terms and conditions of employment for Executive Directors and company executives are reviewed annually having regard to performance and relative comparative information, and are approved by the Board after the Remuneration and Nomination Committee has sought independent professional advice, as required. In this respect, consideration is given to normal commercial rates of remuneration for similar levels of responsibility. To 30 June 2008, emoluments include salaries, bonus payments, contributions to superannuation funds and other non-cash benefi ts.

A bonus element of remuneration for senior executives is determined in relation to the increases in the Company’s share price and the achievement of established goals in certifi ed reserves.

The key management personnel of Sunshine Gas Limited and the consolidated entity includes the directors as per pages 3 to 5 above and

the following executive offi cers who have authority for planning, directing and controlling the activities of the company and the consolidated entity:

• C Blamey, Finance Director & Company Secretary (until 1 February 2008)

• J Phillips, Chief Operating Offi cer

• P Jobbins, Chief Financial Offi cer & Company Secretary (from 7 January 2008)

• C Pieters, Chief Commercial Offi cer

Service contractsIt is the Board’s policy that employment agreements are entered into with all Directors, executives and employees. Details of the contract with Managing Director, Anthony Gilby are as follows:

Anthony Gilby’s contract has been extended for a further period of three years from 1 August 2007 to 31 July 2010. The base salary and superannuation under the contract is $450,000 per year. A bonus scheme tied to the achievement of signifi cant commercial milestones by the Company has also been introduced. This bonus scheme includes a cash bonus of $100,000, payable on share price appreciations of 20% from a base share price maintained for 30 days and a cash bonus of $500,000 when the Company’s gas fi elds average a commercial production rate of 50 TJ of gas per day over a period not less than 90 days.

Performance criteria were chosen to attract capable and experienced executives appropriately aligned with shareholders’ interests. In assessing whether the performance criteria have been met, the Board closely monitors the Company’s share price and its commercial gas production.

The Company can terminate the contract on the grounds of non-performance, incapacity and misconduct, and the Managing Director can resign by giving six months notice. In these circumstances, the Managing Director will only be entitled to receive statutory and accrued but unpaid entitlements as at the date of termination. If the Company terminates the contract for any other reason, it must pay out the unexpired balance of the three-year term.

The Managing Director may also resign if he reasonably believes that he will not be able to implement his strategy or plans for the development of the Company or its projects as a result of material changes to the policies, strategies or future plans of the Board following a change of control. If Mr Gilby resigns in these circumstances, the Company will pay him in recognition of his past service to the Company the equivalent of 18 months of his then base salary and superannuation.

On termination, the Managing Director can be restrained for up to six months from competing with the Company and its business, being retained by a competing business without consent of the Company, or attempting to engage or hire any employee of the Company.

All other employment agreements are not considered to be service agreements.


For

per

sona

l use

onl

y


Remuneration Report – Audited (cont’d) Non-executive Directors received the following remuneration for the fi nancial year ended 30 June 2008:

Name Short Term

Superannuationcontributions

$

Share-based payments

$Total

$

Proportion of remuneration performance

related %

Salary or fees$

Cash bonus$

Non-monetarybenefi ts

$

J McKay, Chairman 78,899 — — 7,101 — 86,000 —

J Hudleston 52,500 — — — — 52,500 —

P Slaughter 48,165 — — 4,335 — 52,500 —

B Phillips (i) 36,049 — — 3,244 — 39,293 —

TOTAL 215,613 — — 14,680 — 230,293

(i) Bruce Phillips was appointed as a Director on 17 October 2007.

Executive Directors and company executives received the following remuneration for the fi nancial year ended 30 June 2008:

Name Short Term


$

Share-based payments

$Total

$


related %

Salary or fees$

Cash bonus$


$

A Gilby, Managing Director 381,728 1,300,000 8,272 50,000 100,000 1,840,000 76.1%

C Blamey, Finance Director & Company Secretary (ii) 25,360 — 25,757 206,145 — 257,262 —

J Phillips, Chief Operating Offi cer 223,911 50,000 18,960 21,129 619,072 933,072 71.7%

P Jobbins, Chief Financial Offi cer & Company Secretary (iii) 72,927 — 4,904 29,068 100,000 206,899 48.3%

C Pieters, Chief Commercial Offi cer 110,092 5,000 — 10,358 389,103 514,553 76.6%

TOTAL 814,018 1,355,000 57,893 316,700 1,208,175 3,751,786

(ii) Christopher Blamey retired on 1 February 2008. His termination payment was a salary sacrifi ce to a nominated superannuation fund.

(iii) Paul Jobbins, Chief Financial Offi cer and Company Secretary, commenced employment on 7 January 2008.

The bases of cash bonuses paid to Anthony Gilby during the year are detailed above. The cash bonus paid during the year to John Phillips was based on initial reserve certifi cation. The cash bonus paid to Chris Pieters during the year was discretionary.

Share-based payments were either made during the year or the employee was entitled to receive 100% of the amount disclosed by the end of the year. The maximum and minimum bonus that could be received is represented by the addition of cash bonuses and share-based payments.

The fair value of share-based payments is based on the market value of the shares to which each executive was entitled to receive or did receive.

For

per

sona

l use

onl

y


Remuneration Report – Audited (cont’d)

Equity settled share-based payments and cash-settled shared-based payments included in remunerationDuring the year the following shares were issued as bonuses to executives:

Executive Date issuedNumber of

shares

Fair value per share

$Total

$

J Phillips26 September 2007 100,000 1.02 102,000

C Pieters26 September 2007 100,000 1.02 102,000

J Phillips2 December 2007 243,902 1.71 417,072

C Pieters2 December 2007 80,177 1.71 137,103

TOTAL 524,079 758,175

Shares were issued to executives in accordance with bonus schemes based on increases in market capitalisation of the Company of $100 million and increases in independently certifi ed 2P reserves. The bonus scheme has since been revised so that executives are entitled to bonuses based on share price appreciation. The fair value of the shares issued was calculated based on the share price on the date of issue of the shares to the executives. The executives are restricted from selling the shares within 12 months of the issue date. In the event of a takeover bid, scheme of arrangement, selective capital reduction, selective buy-back or other transaction the Board may waive the restriction.

On 15 June 2008, a bonus of $100,000 was paid to Anthony Gilby by way of a cash-settled share-based payment. The payment is included as a share-based payment in the table above. By the end of the fi nancial year, Mr Gilby was eligible to be paid a further cash bonus of $100,000. Refer to the earlier section in this Remuneration Report for details of Mr Gilby’s contract.

The Company’s Chief Operating Offi cer, Chief Financial Offi cer and Chief Commercial Offi cer are each eligible to participate in a bonus scheme where they are issued shares on share price appreciations of 20% from a base share price maintained for 30 days. Each executive will be issued shares to the value of $50,000 when each condition is met. By the end of the fi nancial year the executives were eligible to be issued shares to the value of $350,000.

The Company has adopted a policy in respect of employees and directors trading in the Company’s securities. No formal policy has been adopted regarding employees and directors hedging exposure to holdings of the Company’s securities. No employees or directors have hedged their exposures.

Options No options have been granted over unissued shares during or since the end of the year.

There are no options over unissued shares on issue at the date of this report.

No shares have been issued during or since the end of the year as a result of the exercise of an option over unissued shares.

Indemnifi cation and Insurance of Offi cers and AuditorsThe Company has agreed to indemnify current and former directors of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

No indemnifi cation has been provided to auditors of the Company.

During the fi nancial year, the Company has paid insurance premiums of $41,900 in respect of directors’ and offi cers’ liability insurance for current and former directors and offi cers, including senior executives, of the Company and its controlled entities. The policy covers against a liability incurred by a director or offi cer to the extent permitted by the Corporations Act 2001, in defending any legal proceedings arising out of their conduct while acting in a capacity of director or offi cer, other than conduct involving a wilful breach of duty in relation to the Company.

Non-Audit ServicesDuring the year, PKF Chartered Accountants, the Company’s auditor, has performed certain other services in addition to their statutory duties.

The board has considered the non-audit services provided during the year by the auditor and is satisfi ed that the provision of those non-audit services is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor;

• the non-audit services do not undermine the general principles relating to auditor independence;

• as set out in APES110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Details of the amounts paid to the auditor of the Economic Entity, PKF, and its related practices for audit and non-audit services provided during the year are set out in note 17 to the fi nancial statements.


For

per

sona

l use

onl

y


Auditor’s Independence DeclarationThe lead auditor’s independence declaration is set out on page 22 and forms part of the Directors’ Report for the fi nancial year ended 30 June 2008.

AuditorPKF Chartered Accountants continues in offi ce in accordance with section 327 of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act 2001.

For and on behalf of the Directors

James A.V. McKayChairman

28 August 2008

For

per

sona

l use

onl

y


Auditor’s Independence Declaration

To: The Directors of Sunshine Gas Limited

As lead auditor for the audit of Sunshine Gas Limited for the year ended 30 June 2008 I declare that, to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Sunshine Gas Limited and the entities it controlled during the year.

PKF

Chartered Accountants

Wayne Wessels

Partner

Dated at Brisbane this 28th day of August 2008

For

per

sona

l use

onl

y


SUNSHINE GAS LIMITED 2008 FINANCIAL REPORT

For

per

sona

l use

onl

y


Economic Entity Parent Entity

Note 2008 2007 2008 2007

$ $ $ $

Revenue from continuing operations

Rent 28,981 81,802 28,981 81,802

Interest 1,938,357 885,588 1,927,759 869,817

TOTAL REVENUE 1,967,338 967,390 1,956,740 951,619

Other income

Profi t on sale of subsidiary 24,973,205 — 17,770,080 —

Foreign exchange gains 58,173 60,483 58,173 60,483

Other 54,528 163,433 54,528 223,917

TOTAL OTHER INCOME 25,085,906 223,916 17,882,781 284,400

Expenses

Administration (2,596,521) (2,046,595) (2,563,621) (1,367,190)

Employee benefi ts expense (4,606,295) (1,908,098) (4,606,295) (1,908,098)

Occupancy (290,854) (288,062) (290,854) (288,062)

Marketing (158,983) (143,143) (158,983) (143,143)

Borrowing costs — (16,729) — (16,729)

Rehabilitation (1,637,500) (1,642,500) (1,637,500) (1,642,500)

Write-off exploration costs (6,528,507) (7,075,619) — —

(Loss)/Gain on sale of assets (3,926,194) 494,069 (3,926,194) —

TOTAL EXPENSES (19,744,854) (12,626,677) (13,183,447) (5,365,722)

Profi t/(Loss) from continuing operations before income tax expense 2 7,308,390 (11,435,371) 6,656,074 (4,129,703)

Income tax 3 — — — —

NET PROFIT/(LOSS) ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY 15 7,308,390 (11,435,371) 6,656,074 (4,129,703)

Cents Cents

Basic earnings/(loss) per share 4 2.60 (5.19)

Diluted earnings/(loss) per share 4 2.60 (5.19)

The above Income Statements are to be read in conjunction with the accompanying notes.

Income Statements for the year ended 30 June 2008

For

per

sona

l use

onl

y



Note 2008 2007 2008 2007

$ $ $ $

Current Assets

Cash and cash equivalents 5 81,270,945 13,433,652 81,270,939 12,831,915

Financial assets 5 — 20,000,000 — 20,000,000

Receivables 6 236,321 935,319 236,321 717,773

Other investments 7 1,270,000 — 670,000 —

Other assets 8 109,695 — 81,334 —

TOTAL CURRENT ASSETS 82,886,961 34,368,971 82,258,594 33,549,688

Non-current Assets

Property, plant and equipment 9 4,224,252 1,777,444 1,163,041 263,208

Exploration and evaluation expenditure 10 38,120,383 35,033,030 951,806 —

Other investments 7 — 470,000 51,183,048 48,793,379

Other assets 8 100,125 615,000 71,125 586,000

TOTAL NON-CURRENT ASSETS 42,444,760 37,895,474 53,369,020 49,642,587

TOTAL ASSETS 125,331,721 72,264,445 135,627,614 83,192,275

Current Liabilities

Payables 11 2,878,491 2,920,138 2,878,491 2,264,374

Provisions 12 159,323 149,026 159,323 149,026

TOTAL CURRENT LIABILITIES 3,037,814 3,069,164 3,037,814 2,413,400

Non-current Liabilities

Payables 11 — — 9,272,329 9,280,218

Provisions 12 4,330,000 2,692,500 4,330,000 2,692,500

TOTAL NON-CURRENT LIABILITIES 4,330,000 2,692,500 13,602,329 11,972,718

TOTAL LIABILITIES 7,367,814 5,761,664 16,640,143 14,386,118

NET ASSETS 117,963,907 66,502,781 118,987,471 68,806,157

Equity

Contributed equity 13 128,757,146 85,526,313 128,757,146 85,526,313

Reserves 14 480,000 (441,903) 350,000 55,593

Accumulated losses 15 (11,273,239) (18,581,629) (10,119,675) (16,775,749)

TOTAL EQUITY 117,963,907 66,502,781 118,987,471 68,806,157

The above Balance Sheets are to be read in conjunction with the accompanying notes.

Balance Sheets as at 30 June 2008

For

per

sona

l use

onl

y


Statements of Changes in Equity for the year ended 30 June 2008

Contributed Equity Reserves

Accumulated Losses Total

$ $ $ $

ECONOMIC ENTITY

At 1 July 2006 46,854,689 80,267 (7,146,258) 39,788,698

Issue of share capital (after costs) 38,671,624 — — 38,671,624

Foreign currency movement — (522,170) — (522,170)

Loss for the year — — (11,435,371) (11,435,371)

AT 30 JUNE 2007 85,526,313 (441,903) (18,581,629) 66,502,781

At 1 July 2007 85,526,313 (441,903) (18,581,629) 66,502,781


Foreign currency movement — 441,903 — 441,903

Available-for-sale investments revaluation reserve — 130,000 — 130,000

Share-based payments reserve — 350,000 — 350,000

Profi t for the year — — 7,308,390 7,308,390

AT 30 JUNE 2008 128,757,146 480,000 (11,273,239) 117,963,907

PARENT ENTITY

At 1 July 2006 46,854,689 — (12,646,046) 34,208,643


Foreign currency movement — 55,593 — 55,593

Loss for the year — — (4,129,703) (4,129,703)

AT 30 JUNE 2007 85,526,313 55,593 (16,775,749) 68,806,157

At 1 July 2007 85,526,313 55,593 (16,775,749) 68,806,157


Foreign currency movement — (55,593) — (55,593)

Share-based payments reserve — 350,000 — 350,000

Profi t for the year — — 6,656,074 6,656,074

AT 30 JUNE 2008 128,757,146 350,000 (10,119,675) 118,987,471

The above Statements of Changes in Equity is to be read in conjunction with the accompanying notes.

For

per

sona

l use

onl

y


Cash Flow Statements for the year ended 30 June 2008


2008 2007 2008 2007

Note $ $ $ $

Cash Flows from Operating Activities

Receipts from customers 28,981 245,235 28,981 245,235

Payments to suppliers and employees (5,876,721) (3,585,782) (5,305,688) (3,474,030)

Interest received 1,938,357 885,588 1,927,759 869,817

Interest paid — (16,729) — (16,729)

Loss on sale of bonds (2,758,826) — (2,758,826) —

NET CASH FLOWS USED IN OPERATING ACTIVITIES 19 (6,668,209) (2,471,688) (6,107,774) (2,375,707)

Cash Flows from Investing Activities

Payments for property, plant and equipment (2,999,439) (1,584,158) (997,085) (69,922)

Loan repaid by/(advanced to) related entities 13,188,712 — (2,520,221) (20,213,156)

Payment for exploration and evaluation expenditure (14,625,789) (19,351,950) (951,806) —

Payments for other investments (155,125) (400) (155,125) —

Proceeds from sale of interests in permits — 1,000,000 — —

Proceeds from sale of subsidiary 17,873,045 — 17,873,045 —

Proceeds from sale of investments 133,000 — 133,000 —

NET CASH FROM INVESTING ACTIVITIES 13,414,404 (19,936,508) 13,381,808 (20,283,078)

Cash Flows from Financing Activities

Proceeds from issue of shares 43,890,000 39,091,827 43,890,000 39,091,827

Capital raising costs (1,425,010) (1,226,203) (1,425,010) (1,226,203)

Convertible note redemption — (3,294,000) — (3,294,000)

NET CASH FROM FINANCING ACTIVITIES 42,464,990 34,571,624 42,464,990 34,571,624

Net Increase/(Decrease) in Cash and cash equivalents 49,211,185 12,163,428 49,739,024 11,912,839

Cash and cash equivalents at 1 July 2007 33,433,652 21,270,224 32,831,915 20,919,076

Net foreign exchange difference (73,892) — — —

Reclassifi cation of investments in bonds (1,300,000) — (1,300,000) —

CASH AND CASH EQUIVALENTS AT 30 JUNE 2008 5 81,270,945 33,433,652 81,270,939 32,831,915

The above Cash Flow Statements are to be read in conjunction with the accompanying notes.For

per

sona

l use

onl

y


1. Summary of Signifi cant Accounting Policies

This fi nancial report covers the fi nancial statements of Sunshine Gas Limited for the year ended 30 June 2008. The fi nancial report was authorised for issue by the directors of Sunshine Gas Limited on 28 August 2008.

Sunshine Gas is a public company, listed on the Australian Stock Exchange, incorporated and domiciled in Australia. The Company’s operations comprise conventional and coal seam gas exploration, development and production, as well as exploration for oil.

It is recommended that the fi nancial report be considered together with any public announcements made by Sunshine Gas Limited during the year ended 30 June 2008 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

The fi nancial statements presented are that of the holding company, Sunshine Gas Limited (the ‘Company’ or ‘Parent Entity’) and its controlled entities together referred to in this fi nancial report as the ‘Economic Entity’ or ‘Group’.

(a) Basis of preparationThe fi nancial report is presented in Australian dollars.

The fi nancial report has been prepared on the historical cost basis, except for available-for-sale fi nancial assets and land and buildings that have been measured at fair value.

Statement of Compliance

The fi nancial report is a general purpose fi nancial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board.

The fi nancial report of the Economic Entity and the Parent Entity comply with International Financial Reporting Standards (IFRSs) and Interpretations adopted by the International Accounting Standards Board.

(b) Principles of consolidationThe consolidated fi nancial statements are prepared by combining the fi nancial statements of all entities comprising the Economic Entity, being the Company and its subsidiaries as defi ned in Accounting Standard AASB 127 ‘Consolidated and Separate Financial Statements’. Consistent accounting policies are employed in the preparation and presentation of the consolidated fi nancial statements.

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifi able net assets acquired is recognised as goodwill. If, after reassessment, the fair value of the identifi able net assets acquired exceeds the cost of acquisition, the defi ciency is credited to the income statement in the period of acquisition.

The consolidated fi nancial statements include the information and results of each subsidiary from the date on which the company obtains control and until such time as the company ceases to control such entity.

In preparing the consolidated fi nancial statements, all intercompany balances and transactions, and unrealised profi ts arising within the Economic Entity are eliminated in full.

(c) Revenue recognition(i) Interest revenue

Interest revenue is recognised using the effective interest method.

Notes to the Financial Statements for the year ended 30 June 2008

(d) Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash at bank and term deposits with maturities of three months or less.

(e) Foreign currencyForeign exchange differences that arise on the translation of monetary items that form part of the net investment in a foreign operation are recognised in equity in the consolidated fi nancial statements.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.

Financial statements of foreign operations

The assets and liabilities of foreign operations, including fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the date of the transactions. Foreign exchange differences arising on retranslation are recognised directly in the foreign currency translation reserve.

Net investment in foreign operations

Exchange differences arising from the translation of the net investment in foreign operations and of related hedges are taken to the foreign currency translation reserve. They are released into the income statement upon disposal of the foreign operation.

(f) Impairment of assetsAt each reporting date, the Economic Entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash fl ows that are independent from other assets, the Economic Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Goodwill, intangible assets with indefi nite useful lives and intangible assets not yet available for use, are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time-value of money and the risks specifi c to the asset for which the estimates of future cash fl ows have not been adjusted.

Oil and gas assets and plant and equipment are assessed for impairment on a cash generating unit (CGU) basis. This is the smallest grouping of assets that generates independent cash fl ows, and generally represents an individual oil or gas fi eld. Impairment losses recognised in respect of cash generating units are allocated to reduce the carrying amount of the assets in the unit on a pro-rata basis.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the income statement immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that would have been

For

per

sona

l use

onl

y


determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in the income statement immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

(g) Income taxCurrent tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profi t or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or subsequently enacted by reporting date. Current tax losses for current and prior periods are not recognised as an asset as the future income tax benefi t can only be carried forward as an asset where realisation of the benefi t can be regarded as being probable.

Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the fi nancial statements and the corresponding tax base of those items.

Tax consolidation

The company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Sunshine Gas Limited is the head entity in the tax-consolidated group.

Entities within the tax-consolidated group have entered into a tax funding arrangement with the head entity. Under the terms of the tax funding arrangement, Sunshine Gas Limited and each of the entities in the tax-consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity.

(h) Joint venturesJointly controlled assets

Interests in jointly controlled assets are reported in the fi nancial statements by including the Economic Entity’s share of assets employed in the joint ventures, the share of liabilities incurred in relation to the joint ventures and the share of any expenses incurred in relation to the joint ventures in their respective classifi cation categories.

(i) PayablesTrade payables and other accounts payable are recognised when the Economic Entity becomes obliged to make future payments resulting from the purchase of goods and services.

(j) Financial InstrumentsLoans and receivables

Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

Financial liabilities

Non-derivative fi nancial liabilities are recognised at amortised cost, comprising original debt, less principal payments and amortisation.

Available-for-sale fi nancial assets

Available-for-sale fi nancial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classifi ed in any of the other categories.

They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Investments in subsidiaries

Investments in subsidiaries are accounted for at cost. Such investments include both investments in shares issued by the subsidiary and other parent entity interests that in substance form part of the parent entity’s investment in the subsidiary. These include investments in the form of interest-free loans which have no fi xed repayment terms and which have been provided to subsidiaries as an additional source of long-term capital.

Financial assets at fair value through profi t or loss

Financial assets at fair value through profi t of loss are fi nancial assets held for trading. A fi nancial asset is classifi ed in this category if acquired principally for the purposes of selling in the short term. Assets in this category are classifi ed as current assets.

Financial assets carried at fair value through profi t or loss are initially recognised at fair value and transaction costs are expensed in the income statement.

Gains or losses arising from changes in the fair value of the ‘fi nancial assets at fair value through profi t and loss’ category are presented in the income statement within other income or other expenses in the period in which they arise.

The fair values of quoted investments are based on current bid prices. If the market for a fi nancial asset is not active, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash fl ow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specifi c inputs.

Derivative instruments

Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the income statement unless they are designated as hedges.

(k) Property, plant and equipmentLand and buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Land is not depreciated. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash fl ow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred.

Depreciation is calculated on a straight line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

For

per

sona

l use

onl

y


Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

The following estimated useful lives are used in the calculation of depreciation:

Buildings 20 years

Offi ce equipment 4 – 10 years

Motor vehicles 5 years

Plant and equipment 5 years

(l) Exploration and evaluation expenditureExploration and evaluation expenditure incurred is accumulated in respect of each identifi able area of interest.

An area of interest refers to an individual geological area where the presence of oil or a natural gas fi eld is considered favourable or has been proved to exist, and in most cases will comprise an individual oil or gas fi eld.

Exploration and evaluation expenditure is recognised in relation to an area of interest when the rights to tenure of the area of interest are current and either:

(a) such expenditure is expected to be recovered through successful development and commercial exploitation of the areas of interest; or

(b) the exploration activities in the area of interest have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active and signifi cant operations in, or in relation to, the area of interest are continuing.

When an oil or gas fi eld enters the development phase, the accumulated exploration and evaluation expenditure is transferred to oil and gas assets.

(m) Oil and gas assetsAssets in Development

When the technical and commercial feasibility of an undeveloped oil or gas fi eld has been demonstrated, the fi eld enters its development phase. Oil and gas assets in the development and producing phase are separately accounted for as tangible or intangible assets, and include past exploration and evaluation costs, development drilling and other subsurface expenditure, surface plant and equipment and any associated land and buildings.

When production begins in an area of interest, accumulated exploration and evaluation, and development costs for that area are amortised on a units of production basis over the useful life of the fi eld, determined by reference to the estimated proved and probable reserves.

(n) Restoration ProvisionWhere applicable, a provision for material rehabilitation and restoration obligations is recognised. The amount recognised includes cost of reclamation and site rehabilitation after taking into account restoration works that are carried out during exploration. Costs are determined from estimates of future costs.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date taking into account the risks and uncertainties surrounding the obligation. Where the time value of money is material, the amount of the provision is the present value of the expected future cash fl ows required to settle

the obligation. In each subsequent reporting period, the amount of the provision may be adjusted by any change in the estimated future rehabilitation and restoration costs of existing and new workings, and any discount associated with the change in the life of the project and the discount rate.

(o) Earnings per shareBasic earnings per share

Basic earnings per share is determined by dividing the operating profi t or loss after income tax attributable to the members of the Company, by the weighted average number of ordinary shares outstanding during the fi nancial period.

Diluted earnings per share

Diluted earnings per share adjusts the fi gures used in the determination of basic earnings per share by taking into account any reduction in earnings per share that will arise from the exercise of options outstanding during the fi nancial period.

(p) Share-based paymentsThe fair value of shares granted to employees is recognised as an expense over the period that the employees become unconditionally entitled to the shares, with a corresponding increase in equity.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in equity, is recognised as an expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the rights. The rights are remeasured at each reporting date and at settlement date. Any changes in the fair value of the rights are recognised as personnel expense in profi t or loss.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense, with a corresponding increase in liabilities, over the period that the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in profi t or loss.

(q) Critical accounting estimates and judgementsEstimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a fi nancial impact on the Economic Entity and Parent Entity and that are believed to be reasonable under the circumstances.

Critical judgements in applying the entity’s accounting policies

Restoration

The Economic Entity assesses restoration requirements at each reporting date by evaluating the cost of reclamation and site rehabilitation. A provision is recognised in the accounting period when the related disturbance occurs, based on the net present value of estimated future costs.

Recoverability of exploration costs

The Economic Entity assesses the recoverability of the carrying value of capitalised exploration costs at each reporting date (or at closer intervals should the need arise). In completing this assessment, regard is given to the Group’s intentions with respect to proposed future exploration and development plans for individual exploration areas, to the success or otherwise of activities undertaken in individual areas in recent times, to the likely success of future planned exploration activities, and to any potential plans for divestment of individual areas. Any required adjustments to the carrying value of capitalised exploration is completed based on the results of this assessment.

Notes to the Financial Statements (cont’d) for the year ended 30 June 2008

For

per

sona

l use

onl

y


(r) New accounting standards and interpretationsCertain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2008 reporting period. The Economic Entity’s and the Parent Entity’s assessment of the impact of these new standards and interpretations is set out below.

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8

AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a signifi cant change in the approach to segment reporting, as it requires adoption of a ’management approach’ to reporting on fi nancial performance. The information being reported will be based on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. Application of AASB 8 may result in different segments, segment results and different types of information being reported in the segment note of the fi nancial report. However, at this stage, it is not expected to affect any of the current disclosures.

(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]

The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and — when adopted — will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. The Group currently does not incur borrowing costs.

(iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101

A revised AASB 101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the fi nancial statements. If an entity has made a prior period adjustment or has reclassifi ed items in the fi nancial statements, it will need to disclose a third balance sheet (statement of fi nancial position), this one being as at the beginning of the comparative period. The Group intends to apply the revised standard from 1 July 2009.

(iv) Revised AASB 3 Business Combinations

The revised AASB 3 Business Combinations changes the application of acquisition accounting for business combinations and the accounting for non-controlling (minority) interests. Key changes include the immediate expensing of all transaction costs, measurement of contingent consideration at acquisition date with subsequent changes through the income statement, measurement of non-controlling (minority) interests at full fair value or the proportionate share of the fair value of the underlying net assets and the inclusion of combinations by contract alone and those involving mutuals. The revised standard becomes mandatory for the Group’s 30 June 2009 fi nancial statements.

(v) Revised AASB 127 Consolidated and Separate Financial Statements

Revised AASB 127 Consolidated and Separate Financial Statements changes the accounting treatment for investments in subsidiaries. Key changes include the remeasurement to fair value of any previous / retained investment when control is obtained / lost, with any resulting gain or loss being recognised in profi t or loss; and the treatment of increases in ownership interest after control is obtained as transactions with equity holders in their capacity as equity holders. The revised standard will become mandatory for the Group’s 30 June 2009 fi nancial statements.

(vi) Revised AASB 2008-1 Amendments to Australian Accounting Standard – Share-based payments: Vesting Conditions and Cancellations [AASB 2]

The amendment clarifi es that vesting conditions are restricted to service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. This restriction was not clearly stated in the pre-amended standards. This means that all other terms and conditions are accounted for in the value of the share or option at grant date. It also specifi es that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The revised standard will become mandatory for the Group’s 30 June 2010 fi nancial report. The Group has not yet determined the potential effect of these improvements on the fi nancial report.

(vii) AASB 2008-5 and AASB 2008-6 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project.

A number of accounting standards have been amended under the improvement project. The fi rst part contains amendments that result in accounting changes for presentation, recognition and measurement purposes. The second part contains amendments that are terminology or editorial changes only, which is expected to have no or minimal effect on accounting. The revised standard will become mandatory for the Group’s 30 June 2010 fi nancial report. The Group has not yet determined the potential effect of these improvements on the fi nancial report.

(viii) AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate.

The key changes include dividends received from a subsidiary, jointly controlled entity or associate out of pre-acquisition income will be recorded as income; a dividend from a subsidiary, jointly controlled entity or associate is recognised in the income statement when the right to receive the dividend is established; and the recognition of a dividend received by the parent is an impairment indicator in specifi ed circumstances. The revised standard will become mandatory for the Group’s 30 June 2010 fi nancial report. The Group has not yet determined the potential effect of these improvements on the fi nancial report.

(s) ComparativesWhere necessary, comparative information has been reclassifi ed to achieve consistency in disclosure with current fi nancial year amounts and other disclosures.

For

per

sona

l use

onl

y



2008 2007 2008 2007

$ $ $ $

2. Profi t/(loss) from Continuing ActivitiesThe profi t/(loss) from continuing activities before income tax has been determined after:

Expenses

Depreciation of property, plant and equipment 97,252 44,944 97,252 44,944

Amortisation of development expenditure — 706,965 — —

Loss on sale of bonds 3,925,826 — 3,925,826 —

Loss on sale of property, plant and equipment 368 — 368 —

3. Income TaxReconciliation of effective tax rate

The prima facie tax expense/(benefi t) on profi t/(loss) from continuing activities before income tax is reconciled to the income tax expense in the accounts as follows: 7,308,390 (11,435,371) 6,656,074 (4,129,703)

Prima facie tax expense/(benefi t) on the profi t/(loss) from continuing activities before income tax at 30% (2007: 30%) 2,192,517 (3,430,611) 1,996,822 (1,238,911)

Less:

Tax effect of non-temporary differences (i) (7,394,308) 4,225 (5,218,370) 25,098

Tax effect of equity raising costs charged to equity (216,922) (135,327) (216,922) (135,327)

Tax effect of tax losses and temporary differences not recognised 5,418,713 (3,262,565) 3,438,470 (1,349,140)

Income tax expense — — — —

Unrecognised deferred tax assets and liabilities

Deferred tax assets

• deductible temporary differences 1,357,597 880,825 1,374,918 880,825

• tax losses 18,947,347 8,296,549 7,248,132 4,280,936

Deferred tax liabilities

• taxable temporary differences 11,356,374 5,647,517 4,952 (17,867)

Net unrecognised deferred tax asset 8,948,570 3,529,857 8,618,098 5,179,628

(i) Non-temporary differences includes the gain on sale of the UK subsidiary, Sunshine Oil plc, which is taxed neither in the United Kingdom nor Australia.

Tax losses

Unused tax losses for which no deferred tax asset has been recognised 63,157,823 27,655,163 24,160,440 14,269,788

Potential tax benefi t 18,947,347 8,296,549 7,248,132 4,280,936


For

per

sona

l use

onl

y


The taxation benefi ts will only be obtained if:

(a) the Economic Entity derives future assessable income of a nature and of an amount suffi cient to enable the benefi t from the deduction for the loss to be realised;

(b) the Economic Entity continues to comply with the conditions for deductibility imposed by law; and

(c) no changes in tax legislation adversely affect the Economic Entity in realising the benefi t from the deductions for the loss.


2008 2007 2008 2007

$ $ $ $

4. Earnings Per ShareNet profi t/(loss) from continuing operations attributable to members of the parent entity. 7,308,390 (11,435,371)

Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earnings per share 281,032,688 220,192,943

Weighted average number of share appreciation rights used in the calculation of diluted earnings per share 7,159 — — —

Weighted average number of ordinary shares outstanding during the year used in the calculation of diluted earnings per share 281,039,847 220,192,943 — —

5. Cash and cash equivalents and other fi nancial assets

Cash at bank and on hand 81,270,945 13,433,652 81,270,939 12,831,915

Bonds — 20,000,000 — 20,000,000

Collateral debt obligations with a face value of $20,000,000 were held at 1 July 2007. On 31 December 2007 bonds with a face value of $1,300,000 were retained. At that date these bonds, previously classifi ed as Cash and Cash Equivalents, were reclassifi ed as Investments. By 30 June 2008 all bonds were sold and a loss of $3,925,826 was realised.

81,270,945 33,433,652 81,270,939 32,831,915

6. ReceivablesCurrent

Trade and other receivables 236,321 935,319 236,321 717,773

For

per

sona

l use

onl

y



2008 2007 2008 2007

$ $ $ $

7. Other investmentsCurrent

Term deposits 670,000 — 670,000 —

Investments held for sale (1,000,000 fully paid ordinary shares in WestSide Corporation Limited (ASX: WCL) 600,000 — — —

TOTAL 1,270,000 — 670,000 —

Westpac Bank holds a charge over the term deposit totalling $670,000 as security for a bank guarantee facility.

Non-current

Investments held for sale (1,000,000 fully paid ordinary shares in WestSide Corporation Limited (ASX: WCL). When issued the shares were held in escrow for 12 months. — 470,000 — —

Investments in controlled entities at cost — — 2,103,669 2,226,331

Loans to controlled entities — — 49,079,379 46,567,048

TOTAL — 470,000 51,183,048 48,793,379

Loans to controlled entities are non interest bearing with no fi xed repayment terms. On this basis they have been classifi ed as and included in Investments in Controlled Entities.

Loans to controlled entities are repayable on demand and were previously classifi ed as Current Receivables. The comparatives have been restated to refl ect the reclassifi cation.

8. Other AssetsCurrent

Prepayments 109,695 — 81,334 —

Non—current

Deposits paid 100,125 — 71,125 —

Security deposits for tenements — 615,000 — 586,000

100,125 615,000 71,125 586,000


For

per

sona

l use

onl

y


Economic Entity

Land and buildings

Offi ce equipment Motor vehicles

Plant and equipment Total

$ $ $ $ $

9. Property, Plant and EquipmentAt 30 June 2007

Cost or fair value — 294,391 80,837 1,549,207 1,924,435

Less: accumulated depreciation — (141,019) (418) (5,554) (146,991)

— 153,372 80,419 1,543,653 1,777,444

Year ended 30 June 2007

Opening net book amount — 171,050 15,954 6,282 193,286

Additions — 21,515 80,838 1,540,677 1,643,030

Disposals — — (13,928) — (13,928)

Depreciation — (39,193) (2,445) (3,306) (44,944)

CLOSING NET BOOK AMOUNT — 153,372 80,419 1,543,653 1,777,444

At 30 June 2008

Cost or fair value 485,181 668,308 168,250 3,601,767 4,923,506

Less: accumulated depreciation (1,109) (200,645) (24,346) (473,154) (699,254)

484,072 467,663 143,904 3,128,613 4,224,252


Opening net book amount — 153,372 80,419 1,543,653 1,777,444

Additions 485,181 374,246 87,413 2,052,599 2,999,439

Disposals — (368) — — (368)

Depreciation (1,109) (59,586) (23,928) (467,640) (552,263)

CLOSING NET BOOK AMOUNT 484,072 467,664 143,904 3,128,612 4,224,252

Parent Entity

Land and buildings

Offi ce equipment Motor vehicles

Plant and equipment Total

$ $ $ $ $

At 30 June 2007

Cost or fair value — 294,391 80,837 34,971 410,199

Less: accumulated depreciation — (141,019) (418) (5,554) (146,991)

— 153,372 80,419 29,417 263,208



Additions — 21,515 80,838 26,441 128,794

Disposals — — (13,928) — (13,928)

Depreciation — (39,194) (2,445) (3,306) (44,944)

CLOSING NET BOOK AMOUNT — 153,372 80,419 29,418 263,208

At 30 June 2008

Cost or fair value 485,181 668,308 168,250 85,545 1,407,284

Less: accumulated depreciation (1,109) (200,645) (24,346) (18,143) (244,243)

484,072 467,663 143,904 67,402 1,163,041



Additions 485,181 374,246 87,413 50,613 997,453

Disposals — (368) — — (368)

Depreciation (1,109) (59,586) (23,928) (12,629) (97,252)

CLOSING NET BOOK AMOUNT 484,072 467,664 143,904 67,401 1,163,041

For

per

sona

l use

onl

y



2008 2007 2008 2007

$ $ $ $

10. Exploration and Evaluation ExpenditureNon-current

Exploration and evaluation expenditure 38,120,383 35,033,030 951,806 —

Carrying amount at the start of the year 35,033,030 22,822,707 — —

Additions 15,080,800 20,261,473 951,806 —

Disposal of subsidiary (5,464,940) — —

Disposal of interests in permits — (975,531)

Expenditure written off (6,528,507) (7,075,619) — —

Carrying amount at the end of the year 38,120,383 35,033,030 951,806 —

The recoverability of the carrying amount is dependent on the successful development and commercial exploitation, or alternatively the sale, of the respective areas of interest.

11. PayablesCurrent

Trade payables and accruals 2,878,491 2,863,638 2,878,491 2,207,874

Other current liabilities — 56,500 — 56,500

2,878,491 2,920,138 2,878,491 2,264,374

Non-current

Amounts payable to wholly owned controlled entities — — 9,272,329 9,280,218

In the 2007 fi nancial statements amounts owed to controlled entities were offset against amounts owed by wholly owned controlled entities. Comparatives have been restated to show these amounts separately. (Refer also Note 7)

12. ProvisionsCurrent

Provision for employee entitlements 159,323 149,026 159,323 149,026

Number of employees at year end 15 13 15 13

The provision for employee benefi ts relates to annual leave expected to be taken within 12 months of year end.

Non-current

Provision for rehabilitation 4,330,000 2,692,500 4,330,000 2,692,500

Carrying amount at the start of the year 2,692,500 1,050,000 2,692,500 1,050,000

Additional provision recognised 1,637,500 1,642,500 1,637,500 1,642,500

Carrying amount at the end of the year 4,330,000 2,692,500 4,330,000 2,692,500

The measurement and recognition criteria has been included in Note 1 to this report.


For

per

sona

l use

onl

y


13. Contributed Equity

(a) Share capital309,969,121 fully paid ordinary shares quoted on the ASX (2007: 269,540,450)

(b) Movements in ordinary share capital

Date Details No. of SharesIssued Price

($)Value

$

Balance 1 July 2006 191,490,848 46,854,689

Jul 2006 Convertible notes converted to shares 2,015,000 0.40 806,000

Aug 2006 Options converted 1,830,000 0.20 366,000

Oct 2006 Options converted 2,500,000 0.20 500,000

Nov 2006 Options converted 28,277,500 0.20 5,655,500

May 2007 Shares issued 33,900,000 0.75 25,425,000

Costs of issue (997,453)

Jun 2007 Shares issued 9,527,102 0.75 7,145,327

Costs of issue (228,750)

BALANCE 30 JUNE 2007 269,540,450 85,526,313

Jul 2007 Costs of issue (1,260)

Sep 2007 Shares issued 200,000 1.02 204,000

Dec 2007 Shares issued 324,079 1.71 554,175

Dec 2007 Shares issued 4,592 1.67 7,669

Mar 2008 Shares issued 39,900,000 1.10 43,890,000

Costs of issue (1,423,751)

BALANCE 30 JUNE 2008 309,969,121 128,757,146

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders’ meetings, each ordinary share is entitled to one vote if a poll is called, otherwise each shareholder has one vote on a show of hands.

(c) Options over unissued shares(i) Class A (2006) options exercisable at $0.20 per share on or before 15 November 2006

Date Details No. of options

1 July 2006 Balance 32,657,500

Aug 2006 Options converted (1,830,000)

Oct 2006 Options converted (2,500,000)

Nov 2006 Options converted (28,277,500)

Nov 2007 Options lapsed (50,000)

30 June 2007 —

(ii) Class C (2006) options exercisable at $0.47 per share on or before 15 November 2006

Date Details No. of options

1 July 2006 Balance 6,500,000

Nov 2007 Options lapsed (6,500,000)

30 June 2007 —

For

per

sona

l use

onl

y



2008 2007 2008 2007

$ $ $ $

14. ReservesForeign currency translation reserve — (441,903) — 55,593

Available-for-sale investments revaluation reserve 130,000 — — —

Share-based payments reserve 350,000 — 350,000 —

480,000 (441,903) 350,000 55,593

15. Accumulated Losses

Accumulated losses at the start of the fi nancial year (18,581,629) (7,146,258) (16,775,749) (12,646,046)

Net profi t/(loss) attributed to members of Sunshine Gas Limited 7,308,390 (11,435,371) 6,656,074 (4,129,703)

ACCUMULATED LOSSES AT END OF FINANCIAL YEAR (11,273,239) (18,581,629) (10,119,675) (16,775,749)

16. Key Management Personnel Disclosures The following were key management personnel of the Economic Entity during the year and unless otherwise indicated were key management personnel for the entire period:

Non-executive Directors

James A.V. McKay, Chairman

James W. Hudleston

Peter J. Slaughter

Bruce J. Phillips (appointed 17 October 2007)

Executive Directors

Anthony R. Gilby (Managing Director)

Christopher J. Blamey (resigned 1 February 2008)

Executives

John M. Phillips, Chief Operating Offi cer

Paul S. Jobbins, Chief Financial Offi cer, Company Secretary (appointed 7 January 2008)

Christopher J.P. Pieters, Chief Commercial Offi cer

The following table details the remuneration received by all of the Company’s Non-executive Directors during the 2008 fi nancial year.

Name

Short Term


$

Share based payments

$Total

$


related %

Salary or fees

$

Cash bonus

$


$

J McKay 78,899 — — 7,101 — 86,000 —

J Hudleston 52,500 — — — — 52,500 —

P Slaughter 48,165 — — 4,335 — 52,500 —

B Phillips (i) 36,049 — — 3,244 — 39,293 —

TOTAL 215,613 — — 14,680 — 230,293

(i) Bruce Phillips was appointed as a Director on 17 October 2007.


For

per

sona

l use

onl

y


The following table details the remuneration received by all of the Company’s Non-executive Directors during the 2007 fi nancial year.

Name

Short Term


$


$Total

$


related %

Salary or fees

$Cash bonus

$


$

J McKay (ii) 88,807 — — 6,193 — 95,000 —

J Hudleston 41,594 — — 3,406 — 45,000 —

P Slaughter (iii) 1,835 — — 165 — 2,000 —

TOTAL 132,236 — — 9,764 — 142,000

(ii) Fees paid to James McKay include consultancy covering additional requirements during the absence of Finance Director and Company Secretary, Christopher Blamey, and were covered under section 41 of the Sunshine Gas Limited Constitution. The benefi ts were considered reasonable and in line with section 211 of the Corporations Act 2001.

(iii) Peter Slaughter was appointed as a Director on 14 June 2007.


Name

Short Term


$


$Total

$


related %

Salary or fees

$Cash bonus

$


$

A Gilby 381,728 1,300,000 8,272 50,000 100,000 1,840,000 76.1%

C Blamey (iv) 25,360 — 25,757 206,145 — 257,262 —

J Phillips 223,911 50,000 18,960 21,129 619,072 933,072 71.7%

P Jobbins (v) 72,927 — 4,904 29,068 100,000 206,899 48.3%

C Pieters 110,092 5,000 — 10,358 389,103 514,553 76.6%

TOTAL 814,018 1,355,000 57,893 316,700 1,208,175 3,751,786

(iv) Christopher Blamey retired on 1 February 2008. His termination payment was a salary sacrifi ce to a nominated superannuation fund.

(v) Paul Jobbins, Chief Financial Offi cer and Company Secretary, commenced employment on 7 January 2008.


Name

Short Term


$


$Total

$


related %

Salary or fees

$Cash bonus

$


$

A Gilby 262,012 200,000 11,609 53,546 — 527,167 37.9%

C Blamey 135,075 — 31,238 53,687 — 220,000 —

J Phillips 195,342 — 19,972 24,686 — 240,000 —

C Pieters 74,007 — — 6,661 — 80,668 —

TOTAL 666,436 200,000 62,819 138,580 — 1,067,835

Further remuneration information is provided in the Remuneration Report included in the Directors’ Report.For

per

sona

l use

onl

y


Interests of DirectorsOrdinary shares

The movement during the reporting period in the number of ordinary shares in the Company held directly, indirectly or benefi cially by each director is as follows:

Director1 July 2006

Options converted Purchases

30 June 2007

1 July 2007 Purchases

30 June 2008

J McKay 1,108,200 225,000 9,666 1,342,866 1,342,866 — 1,342,866

A Gilby 8,000,001 4,950,000 6,666 12,956,667 12,956,667 — 12,956,667

J Hudleston 2,615,800 — — 2,615,800 2,615,800 — 2,615,800

P Slaughter — — 116,666 116,666 116,666 — 116,666

B Phillips — — — — — 3,552 3,552

C Blamey 500,000 2,000,000 — 2,500,000 2,500,000 — 2,500,000*

TOTAL 12,224,001 7,175,000 132,998 19,531,999 19,531,999 3,552 19,535,551

* Represents shares held at date of resignation

Class A Options (exercisable at $0.20 on or before 15 November 2006)

The movement during the reporting period in the number of options in the Company held directly, indirectly or benefi cially by each director is as follows:

Director 1 July 2006 Converted Lapsed 30 June 2007

J McKay 225,000 (225,000) — —

A Gilby 4,950,000 (4,950,000) — —

J Hudleston — — — —

C Blamey 2,000,000 (2,000,000) — —

TOTAL 7,175,000 (7,175,000) — —

Class C Options (exercisable at $0.47 on or before 15 November 2006)

The movement during the reporting period in the number of options in the Company held directly, indirectly or benefi cially by each director is as follows:

Director 1 July 2006 Converted Lapsed30 June

2007

J McKay 500,000 — (500,000) —

A Gilby 2,000,000 — (2,000,000) —

J Hudleston 3,000,000 — (3,000,000) —

C Blamey 1,000,000 — (1,000,000) —

TOTAL 6,500,000 — (6,500,000) —

Other transactions with key management personnel

The Economic Entity’s exploration permits below are subject to overriding royalties:

Gilby Resources Limited (1) ATP 645P, ATP 684P, ATP 693P 2.50%

Gilby Resources Limited (1) ATP 688P 1.25%

(1) Company associated with Anthony R. Gilby (Managing Director)

A number of key management persons, or their related parties, hold positions in other entities that result in them having control or signifi cant infl uence over the fi nancial and operating policies of those entities. Where those entities have transacted with the Company or its subsidiaries the terms and conditions of the transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions on an arm’s length basis.

Non-executive Director, Mr James Hudleston, holds shares in Hurricane Exploration plc and may have had signifi cant infl uence over that company. The sale of Sunshine Oil plc to Hurricane Exploration plc was transacted on an arm’s length basis.


For

per

sona

l use

onl

y



2008 2007 2008 2007

$ $ $ $

17. Auditor’s RemunerationAudit services

Audit and review of fi nancial reports

• PKF Australia 54,450 74,062 54,450 74,062

• Overseas PKF fi rms 9,424 10,080 — —

Other services

Taxation and restructuring advice

• PKF Australia 18,675 — 18,675 —

• Overseas PKF fi rms 14,125 18,103 — —

TOTAL 96,674 102,245 73,125 74,062

18. Financial Risk Management Objectives and Policies Financial instruments comprise cash and cash equivalents, trade and other receivables, available for sale fi nancial assets, trade and other payable.

(a) Capital risk managementThe Economic Entity manages its capital to ensure that it will be able to continue as a going concern.

The capital structure of the Economic Entity consists of cash and cash equivalents and equity attributable to equity holders of the Parent Entity, comprising issued capital and reserves as disclosed in the Statement of Changes in Equity. In common with many other exploration companies, the parent raises fi nance for the Economic Entity’s exploration and appraisal activities in discrete tranches. The Economic Entity’s overall strategy remains unchanged from 2007.

(b) Signifi cant accounting policiesDetails of the signifi cant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expense are recognised, in respect of each class of fi nancial asset, fi nancial liability, and equity instrument are disclosed in Note 1 to the fi nancial statements.

(c) Financial risk management objectivesThe fi nancial risks of the Economic Entity include market risk (including currency risk and price risk), credit risk, liquidity risk and cash fl ow interest rate risk. The Economic Entity does not hedge these risk exposures. The Economic Entity does not enter into or trade fi nancial instruments, including derivative fi nancial instruments, for speculative purposes.

(d) Market riskThe Economic Entity’s and Parent Entity’s activities expose it primarily to the fi nancial risks of changes in interest rates on its cash and cash equivalents and equity price risk arising from its available-for-sale equity securities. There has been no change to the Economic Entity’s exposure to market risks or the manner in which it manages and measures the risk from the previous period.

(i) Foreign currency risk management

The Economic Entity and the Parent Entity undertake certain transactions denominated in foreign currencies, hence exposures to exchange rate fl uctuations arise. The carrying amount of the Economic Entity’s and Parent Entity’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:


2008 2007 2008 2007

$ $ $ $

Cash held in British pounds (GBP) bank accounts 159,836 601,731 159,836 —

Trade payables, British pounds (GBP) 158,312 639,889 158,312 —

Trade payables, United States dollars 627,674 — 627,674 —

For

per

sona

l use

onl

y


Foreign currency sensitivity

The Economic Entity’s main foreign currency risk arises from US dollar purchases. The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant, of the Economic Entity and the Parent Entity’s profi t/loss before taxes through the impact on trade payables with a decrease or an increase of 10% in exchange rates.


2008 2007 2008 2007

$ $ $ $

Sensitivity

US dollar trade payables 627,674 — 627,674 —

Effect on income before taxes increase 10% 57,061 — 57,061 —

decrease 10% (69,742) — (69,742) —

(ii) Interest risk management

Interest rate risks are caused by fl uctuations in interest rates which, in turn, are due to market factors. On the one hand, they have an effect on the amount of interest received by the Economic Entity and Parent Entity and they infl uence the market value of fi nancial instruments.

Interest rate sensitivity

The Economic Entity’s and Parent Entity’s main interest rate risk arises from cash and cash equivalents. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Economic Entity and the Parent Entity’s profi t/loss before taxes through the impact on cash and cash equivalents with a decrease or an increase of 0.25% in interest rates.


2008 2007 2008 2007

$ $ $ $

Sensitivity

Cash, cash equivalents and term deposits 81,940,945 33,433,652 81,940,939 32,831,915

Effect on income before taxes increase 0.25% 204,852 83,584 204,852 82,080

decrease 0.25% (204,852) (83,584) (204,852) (82,080)

(iii) Price risk management

The Economic Entity is exposed to equity securities price risk. This arises from investments held by the Economic Entity and classifi ed on the balance sheet as available-for-sale. The Economic Entity’s equity investments, excluding investments in wholly owned subsidiaries which are unlisted, are publicly traded on the ASX.

The price risk for the unlisted securities is immaterial in terms of the possible impact on profi t or loss or total equity.

(e) Liquidity risk managementLiquidity risks are caused by the inability to raise the money needed to meet the payment of liabilities as and when they fall due. The economic entity manages liquidity risk by maintaining adequate reserves and by continually monitoring forecast and actual cash fl ows and cash balances. The parent entity raises fi nance for the economic entity’s exploration and appraisal activities in discrete tranches.

At 30 June 2008 and 30 June 2007 the only fi nancial liabilities of the economic entity and the parent entity were trade payables and accruals. All trade payables and accruals have a contractual maturity of 6 months or less.

(f) Credit risk managementIn relation to fi nancial assets, credit risk arises from the potential failure of counterparties to meet their obligations under a contract or arrangement. Credit risk for the economic entity and the parent entity arises from cash and cash equivalents and outstanding receivables. The economic entity and the parent entity are not exposed to any material credit risks and only trade with credit worthy third parties.

(g) Fair valuesAll fi nancial assets and liabilities comprising cash and cash equivalents, trade and other receivables, available for sale fi nancial assets, and trade and other payables are stated at their fair value.


For

per

sona

l use

onl

y


19. Reconciliation of Cash Flows from Operating Activities


2008 2007 2008 2007

$ $ $ $

Profi t/(loss) from continuing activities after income tax 7,308,390 (11,435,371) 6,656,074 (4,129,703)

Non-cash fl ows in profi t/loss from continuing activities:

Depreciation 97,252 44,944 97,252 44,944

Share based payments 1,115,844 — 1,115,844 —

Loss on sale of investments 1,167,000 — 1,167,000 —

Exploration costs written off 6,528,506 — — —

Gain on sale of subsidiary (24,973,205) — (17,770,080) —

Change in assets and liabilities relating to operations:

(Increase)/decrease in receivables 95,394 (18,386) 95,394 (18,441)

(Increase)/decrease in other receivables and prepayments 478,785 22,762 289,599 22,762

(Increase)/decrease in investments — (469,600) — —

Increase/(decrease) in capitalised costs — 7,756,940 — 108,532

(Decrease)/increase in creditors and accruals (133,971) (64,860) 593,347 (95,684)

Increase/(decrease) in provisions 1,647,796 1,691,883 1,647,796 1,691,883

NET CASH USED IN OPERATING ACTIVITIES (6,668,209) (2,471,688) (6,107,774) (2,375,707)

20. Segment InformationSunshine Gas Limited carries out the business of oil and gas exploration, appraisal and development. The majority of the exploration has been carried out in Queensland, Australia.

During the year, the Company’s wholly owned UK subsidiary, Sunshine Oil plc, participated in a 50:50 joint venture to explore for oil in the United Kingdom Continental Shelf. On 13 June 2008 the company was sold to its joint venture partner.

Sunshine Oil plc incurred a loss of AU$22,296 (2007: AU$7,094,423). The loss in 2007 was primarily due to the write off of exploration costs incurred during the drilling of the Wellington 1 well in August 2006.

21. Capital and Leasing Commitments

(a) Exploration expenditure commitmentsIn accordance with its Authorities to Prospect, the Economic Entity is required to incur certain minimum committed expenditure to maintain current rights of tenure to exploration tenements. These obligations may be subject to renegotiation, farmed out, relinquished or be accelerated; however, the minimum committed expenditure is as follows:

ATP 645P, ATP 684P, ATP 685P, ATP 688P, ATP 693P, ATP 722P, ATP 767P, ATP 768P, ATP 769P, ATP 789P, ATP 795P and ATP 811P


2008 2007 2008 2007

$ $ $ $

Within one year 2,900,000 1,449,000 — —

Between two and fi ve years 1,281,000 5,349,000 — —

4,181,000 6,798,000 — —

For

per

sona

l use

onl

y


(b) RoyaltiesThe Economic Entity’s exploration permits, ATP 645P, ATP 684P, ATP 688P and ATP 693P are subject to a 5% overriding royalty on the net wellhead value of petroleum production from each tenement area.

(c) Operating Lease CommitmentsThe Parent Entity leases its corporate offi ce under a non-cancellable operating lease, contracted for, but not capitalised in the fi nancial statements:


2008 2007 2008 2007

$ $ $ $

Within one year 304,329 290,573 304,329 290,573

Between two and fi ve years 208,648 512,064 208,648 512,064

512,977 802,637 512,977 802,637

22. Controlled Entities

Percentage Held

Country of Incorporation

%

Parent Entity:

Sunshine Gas Limited Australia

Controlled Entities:

BNG (Surat) Pty Ltd 100 Australia

Hamilbent Pty Ltd 100 Australia

Sunshine Gas Operations Pty Ltd 100 Australia

Sunshine 685 Pty Ltd 100 Australia

New South Oil Pty Ltd 100 Australia

Interstate Energy Pty Ltd 100 Australia

Interstate Pipelines Pty Ltd 100 Australia

ACN 002 820 555 100 Australia

ACN 081 118 292 100 Australia

Sunshine Cooper Pty Ltd 100 Australia

During the year, the Parent Entity sold its 100% controlled entity, Sunshine Oil plc, a company incorporated in the United Kingdom.

23. Interests in Joint VenturesThe Economic Entity has the following participating interests in joint ventures whose principal activities are oil and gas exploration. The joint ventures are not separate legal entities, but are contractual arrangements between the participants for the sharing of costs and output.

Percentage Interest

ATP 685P Joint Venture 50.00%

Alton Joint Venture 36.50%

Kooroon Joint Venture 24.25%

All joint venture agreements include production agreements.


For

per

sona

l use

onl

y


The Economic Entity’s share of assets employed in the joint ventures is:

2008 2007

$ $

Current assets

Deposits 29,000 29,000

Prepayments 28,360 —

TOTAL CURRENT ASSETS 57,360 29,000

Non-current assets

Other costs carried forward in respect of the areas of interest 1,302,329 5,042,605

TOTAL NON-CURRENT ASSETS 1,302,329 5,042,605

SHARE OF TOTAL ASSETS OF JOINT VENTURES 1,359,689 5,071,605

24. Contingent LiabilitiesBank guarantees totalling $654,000 are issued for the fulfi lment of obligations under exploration licences and an offi ce lease. The guarantees are secured by a charge over a term deposit totalling $670,000 (2007: $615,000).

Sunshine Gas Limited has confi rmed its intention to provide fi nancial support for all its subsidiaries for twelve months from 1 July 2008.

25. Events Subsequent to Reporting DateOn 14 July 2008 shareholders approved the terms of an Employee Share Plan. On 19 August 2008 216,055 shares were issued to employees as bonuses in accordance with the Plan.

In July 2008 the Company announced encouraging results from drilling at its Polaris Coal Seam Gas project near Wandoan in Queensland.

On 20 August 2008 the Company announced that its Board had reached agreement with Queensland Gas Company Limited (QGC) for QGC to offer to acquire all the issued shares of Sunshine Gas Limited by way of off-market takeover. In the absence of a superior proposal, and subject to an independent expert concluding that the offer is fair and reasonable, all non-confl icted Directors have recommended that shareholders accept the offer.

No other matters or circumstances have arisen since the end of the fi nancial year that have signifi cantly affected or may signifi cantly affect:

a) the operations of the Economic Entity;

b) the results of those operations; or

c) the state of affairs of the Economic Entity.

26. Company DetailsRegistered Offi ce:

Level 19 Waterfront Place1 Eagle StreetBrisbane QLD 4000

Principal Places of Business:

Level 19 Waterfront Place1 Eagle StreetBrisbane QLD 4000

60-62 Spencer StreetRoma QLD 4455

For

per

sona

l use

onl

y


Directors’ Declaration

The directors of Sunshine Gas Limited declare that:

(a) in the directors’ opinion the fi nancial statements and notes on pages 28 to 45, and the remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report, set out on pages 18 to 20, are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s and the Economic Entity’s fi nancial position as at 30 June 2008 and of their performance, for the fi nancial year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.

(b) the fi nancial report also complies with International Financial Reporting Standards as disclosed in note 1; and

(c) the remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act 2001 and the Corporations Regulations 2001; and

(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

The directors have been given the declarations by the Managing Director and Chief Financial Offi cer for the fi nancial year ended 30 June 2008, required by Section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors.

Dated this 28th day of August 2008.

James A.V. McKay

Chairman

For

per

sona

l use

onl

y


Independent Auditor’s ReportTo the members of Sunshine Gas Limited

Report on the Financial ReportWe have audited the accompanying fi nancial report of Sunshine Gas Limited, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash fl ow statement for the year ended on that date, a summary of signifi cant accounting policies and other explanatory notes and the directors’ declaration for both Sunshine Gas Limited (“the company”) and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the fi nancial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the fi nancial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the fi nancial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with Australian Accounting Standards ensures that the fi nancial report, comprising the fi nancial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the fi nancial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial report whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the fi nancial report.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion

In our opinion:

(a) the fi nancial report of Sunshine Gas Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s fi nancial position as at 30 June 2008 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

(b) the fi nancial report also complies with International Financial Reporting Standards as disclosed in Note 1.

For

per

sona

l use

onl

y


Report on the Remuneration ReportWe have audited the Remuneration Report included in pages 18 to 20 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Sunshine Gas Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

PKF

Chartered Accountants

Wayne Wessels

Partner

Dated at Brisbane this 28th day of August 2008

For

per

sona

l use

onl

y


Additional Information

The following information is included in accordance with Listing Rules of the Australian Stock Exchange Limited.

1. Shareholding

(a) Distribution of Shareholders as at 22 August 2008

Size of Holding Number of Shareholders Ordinary Shares Held %

Ordinary Shares

1–1,000 732 482,343 0.16

1,001–5,000 1,514 4,723,582 1.52

5,001–10,000 910 7,486,765 2.41

10,001–100,000 1,263 36,409,343 11.74

100,001 and over 154 261,083,143 84.17

TOTAL 4,573 310,185,176

Shareholders holding less than a marketable parcel: 1,489

(b) Twenty Largest Security Holders as at 22 August 2008

Rank Name

Number of Fully Paid

Ordinary

Shares Held

% Held of Issued

Ordinary Shares

1 NATIONAL NOMINEES LIMITED 57,261,368 18.46

2 ANZ NOMINEES LIMITED 38,429,695 12.39

3 CITICORP NOMINEES PTY LTD 27,213,582 8.77

4 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 16,310,220 5.26

5 BELL POTTER NOMINEES LIMITED 14,781,950 4.77

6 J P MORGAN NOMINEES AUSTRALIA LIMITED 13,575,786 4.38

7 GILBY RESOURCES PTY LTD 11,925,000 3.84

8 RLMS PTY LTD 5,792,666 1.87

9 COGENT NOMINEES PTY LTD <SMP ACCOUNTS> 4,700,024 1.52

10 MITCHELL GAS PTY LTD 6,477,945 2.09

11 RESOURCE & LAND MANAGEMENT SERVICES 3,673,000 1.18

12 CITICORP NOMINEES PTY LTD <CFSIL CFS WS SMALL COMP A/C> 2,794,461 0.90

13 UCAN NOMINEES PTY LTD 2,638,099 0.85

14 MRS PATRICE LORRAINE MCKAY 2,456,666 0.79

15 MR CHRISTOPHER JOHN BLAMEY & MRS ANNE MARGARET BLAMEY 1,750,000 0.56

16 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LTD 1,651,324 0.53

17 WARRANT TRUSTEES LIMITED 1,615,800 0.52

18 HSBC CUSTODY NOMINEES (AUST) LIMITED – GSCO ECSA 1,424,496 0.46

19 COGENT NOMINEES PTY LTD 1,369,720 0.44

20 MR PAUL SKERMAN & MRS VICKI SKERMAN 1,350,000 0.44

TOTAL 217,191,802 70.02

For

per

sona

l use

onl

y


2. Voting RightsAt general meetings, each member entitled to vote may vote in person, or by proxy or attorney.

A holder of a fully paid ordinary share at any general meeting is entitled to one vote on a show of hands and one vote for each fully paid share of which he or she is a holder on a poll.

3. Restricted SecuritiesThere are 744,152 restricted securities in the Company. Restricted securities are Ordinary shares held by staff members of the Company. In the event of a takeover bid, scheme of arrangement, selective capital reduction, selective buy-back or other transaction the Board may waive the restrictions.

Date restriction lifted Number of securities

26 September 2008 200,000

2 December 2008 324,079

19 August 2009 216,055

20 December 2010 4,018

4. Substantial ShareholdersThe securities held by substantial shareholders are as follows:

Name Number of Shares Percentage Interest

SAAD Investments Company Limited 67,086,632 21.63%

SAAD Investments Company Limited is the benefi cial owner of the securities detailed above. Citigroup Global Markets Limited and Queensland Gas Company Limited have disclosed a relevant interest in the securities. AGL Energy Limited has disclosed a deemed relevant interest in the securities.

5. Interests in Petroleum Tenements Authority to Prospect, Joint Venture & Petroleum Lease Interests

ATP/PL Location Interest* Operator

ATP 645P Southern Bowen/Surat Basin 100.00% Sunshine Gas




ATP 684P Northern Bowen Basin 100.00% Sunshine Gas

ATP 688P Northern Bowen Basin 50.00% WestSide Corporation+



ATP 769P Northern Bowen Basin 50.00% WestSide Corporation+


ATP 789P Cooper/Eromanga Basin 100.00% Sunshine Gas

Alton JV in PL 2C Southern Bowen/Surat Basin 36.50% Santos

Kooroon JV in PL 2A and 2B Southern Bowen/Surat Basin 24.25% Santos

* Interests are held either by Sunshine Gas Limited or one of its wholly owned subsidiaries.

+ Under agreement

Additional Information (cont’d)

For

per

sona

l use

onl

y


Sunshine Gas is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve, the Company has turned to the ASX Corporate Governance Council’s “Good Corporate Governance Principles and Recommendations”. The Company’s practices are largely consistent with those of the ASX guidelines.

In the limited circumstances where the Company’s corporate governance practices do not correlate with the practices recommended by the Council, the Company does not consider that the practices are appropriate due to the size of the Company, the size of the Board or due to the current development and growth taking place in the Company.

To illustrate where the Company has addressed each of the Council’s recommendations, the following table cross-references each recommendation with sections of this report. The table does not provide the full text of each recommendation but rather the topic covered. Details of all of the recommendations can be found on the ASX Corporate Governance Council’s website at http://www.asx.com.au/supervision/governance/revised_corporate_governance_principles_recommendations.htm

Recommendation Section

Recommendation 1.1 Functions of the Board and Management 1.1

Recommendation 2.1 Independent Directors 1.2

Recommendation 2.2 Independent Chairman 1.2

Recommendation 2.3 Role of the Chairman and CEO 1.2

Recommendation 2.4 Establishment of Nomination Committee 2.2

Recommendation 2.5 Reporting on Principle 2 1.2, 1.4.6, 2.2 and the Directors’ Report

Recommendation 3.1 Directors’ and Key Executives’ Code of Conduct 1.1

Recommendation 3.2 Company Securities Trading Policy 1.4.9

Recommendation 3.3 Reporting on Principle 3 1.1 and 1.4.9

Recommendation 4.1 Attestations by CEO and CFO 1.4.11

Recommendation 4.2 Establishment of Audit Committee 2.1

Recommendation 4.3 Structure of Audit Committee 2.1.2

Recommendation 4.4 Audit Committee Charter 2.1

Recommendation 4.5 Reporting on Principle 4 2.1

Recommendation 5.1 Policy for Compliance with Continuous Disclosure 1.4.4

Recommendation 5.2 Reporting on Principle 5 1.4.4

Recommendation 6.1 Communications Strategy 1.4.8

Recommendation 6.2 Attendance of Auditor at General Meetings 1.4.8

Recommendation 7.1 Policies on Risk Oversight and Management 2.1.3

Recommendation 7.2 Attestations by CEO and CFO 1.4.11

Recommendation 7.3 Reporting on Principle 7 2.1.3

Recommendation 8.1 Evaluation of Board, Directors and Key Executives 1.4.10

Recommendation 9.1 Remuneration Policies 2.2.4

Recommendation 9.2 Establishment of Remuneration Committee 2.2

Recommendation 9.3 Executive and Non-Executive Director Remuneration 2.2.4

Recommendation 9.4 Equity-Based Executive Remuneration 2.2.3

Recommendation 9.5 Reporting on Principle 9 2.2.2 and 2.2.4

Recommendation 10.1 Company Code of Conduct 3

1. Board of Directors

1.1 Role of the BoardThe Board’s role is to govern the Company rather than to manage it. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.

Corporate Governance

For

per

sona

l use

onl

y


In carrying out its governance role, the main task of the Board is to drive the performance of the Company. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. The Board has the fi nal responsibility for the successful operations of the Company.

To assist the Board in carrying out its functions, it has developed a Code of Conduct to guide the Directors, the Chief Executive Offi cer, the Chief Financial Offi cer and other key executives in the performance of their roles.

1.2 Composition of the BoardTo add value to the Company, the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties. The names of the Directors and their qualifi cations and experience are stated in the Directors’ Report along with the term of offi ce held by each Director. Directors are appointed based on the specifi c skills required by the Company and on the independence of their decision making and judgment.

The Company recognises the importance of Non-executive Directors and the external perspective and advice that Non-executive Directors can offer.

Mr James Hudleston, Mr Peter Slaughter, Mr Bruce Phillips and Mr James McKay are all Non-executive Directors. In addition to being Non-Executive Directors, Mr James McKay, Mr Bruce Phillips and Mr Peter Slaughter also meet the following criteria for independence adopted by the Company.

An Independent Director:

1. is a Non-executive Director;

2. is not a substantial shareholder of the Company or an offi cer of, or otherwise associated directly with, a substantial shareholder of the Company;

3. within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment;

4. within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provided;

5. is not a material supplier or customer of the Company or another group member, or an offi cer of or otherwise associated directly or indirectly with a material supplier or customer;

6. has no material contractual relationship with the Company or other group member other than as a Director of the Company;

7. has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and

8. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.

The Board is made up of fi ve directors, a majority of whom are considered to be independent.

1.3 Responsibilities of the BoardIn general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company.

Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following:

1. Leadership of the Organisation: overseeing the Company and establishing codes that refl ect the values of the Company and guide the conduct of the Board, management and employees.

2. Strategy Formulation: working with senior management to set and review the overall strategy and goals for the Company, and ensuring that there are policies in place to govern the operation of the Company.

3. Overseeing Planning Activities: overseeing the development of the Company’s strategic plan and approving that plan, as well as the annual and long-term budgets.

4. Shareholder Liaison: ensuring effective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Company.

5. Monitoring, Compliance and Risk Management: overseeing the Company’s risk management, compliance, control and accountability systems and monitoring and directing the fi nancial and operational performance of the Company.

6. Company Finances: approving expenses in excess of those approved in the annual budget and approving and monitoring acquisitions, divestitures and fi nancial and other reporting.

7. Human Resources: appointing and, where appropriate, removing the Chief Executive Offi cer (CEO) and Chief Financial Offi cer (CFO) as well as reviewing the performance of the CEO and monitoring the performance of senior management in their implementation of the Company’s strategy.

8. Ensuring the Health, Safety and Wellbeing of Employees: in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Company’s occupational health and safety systems to ensure the wellbeing of all employees.

9. Delegation of Authority: delegating appropriate powers to the CEO to ensure the effective day-to-day management of the Company and establishing and determining the powers and functions of the Committees of the Board.

Full details of the Board’s role and responsibilities are contained in the Board Charter which is available on the Company’s website at http://www.sunshinegas.com.au

1.4 Board Policies 1.4.1 Confl icts of Interest

Directors must:

• disclose to the Board, actual or potential confl icts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the Company; and

• if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any confl ict of interest.

If a Director cannot or is unwilling to remove a confl ict of interest, then the Director must, as per the Corporations Act, absent himself or herself from the room when discussion and/or voting occurs on matters about which the confl ict relates.

1.4.2 Commitments

Each member of the Board is committed to spending suffi cient time to enable them to carry out their duties as a Director of the Company.

1.4.3 Confi dentiality

In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Company have agreed to keep confi dential, information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated.

Corporate Governance (cont’d)

For

per

sona

l use

onl

y


1.4.4 Continuous Disclosure

The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with the ASX Listing Rules, the Company immediately notifi es the ASX of information:

1. concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities; and

2. that would, or would be likely to, infl uence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities.

Upon confi rmation of receipt from the ASX, the Company posts all information disclosed in accordance with this policy on the Company’s website in an area accessible by the public.

1.4.5 Education and Induction

New Directors undergo an induction process in which they are given a full briefi ng on the Company. Information conveyed to new Directors includes:

• details of the roles and responsibilities of a Director with an outline of the qualities required to be a successful Director;

• formal policies on Director appointment as well as conduct and contribution expectations;

• details of all relevant legal requirements;

• a copy of the Board Charter;

• guidelines on how the Board processes function;

• details of past, recent and likely future developments relating to the Board including anticipated regulatory changes;

• background information on and contact information for key people in the organisation including an outline of their roles and capabilities;

• an analysis of the Company;

• a synopsis of the current strategic direction of the Company including a copy of the current annual budget; and

• a copy of the Constitution of the Company.

To achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. Specifi cally, Directors are provided with the resources and training to address skills gaps where they are identifi ed.

1.4.6 Independent Professional Advice

The Board collectively and each Director has the right to seek independent professional advice at the Company’s expense, up to specifi ed limits, to assist them to carry out their responsibilities.

1.4.7 Related Party Transactions

Related party transactions include any fi nancial transaction between a Director and the Company and will be reported in writing to each Board meeting. Unless there is an exemption under the Company’s Constitution and the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction.

1.4.8 Shareholder Communication

The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company has adopted a Shareholder Communication Policy which is available on the Company’s website. The policy detailed the Company’s commitment to:

1. communicating effectively with shareholders through releases to the market via the ASX, the Company’s website, information mailed and e- mailed to shareholders, and the general meetings of the Company;

2. giving shareholders ready access to balanced and understandable information about the Company and corporate proposals;

3. making it easy for shareholders to participate in general meetings of the Company; and

4. requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

1.4.9 Trading in Company Shares

The Company has a Securities Trading Policy, which is available on the Company’s website, under which, and consistent with the law, designated offi cers are prohibited from trading in the Company’s securities while in the possession of unpublished price-sensitive information concerning the Company. Unpublished price-sensitive information is information regarding the Company of which the market is not aware and that a reasonable person would expect to have a material effect on the price or value of the Company’s securities.

Notice of an intention to trade must be given prior to trading in the Company’s securities, as well as a confi rmation that the person is not in possession of any unpublished price-sensitive information. The completion of any such trade by a Director must also be notifi ed to the Company Secretary who in turn advises the ASX.

1.4.10 Performance Review/Evaluation

The Board conducts an annual evaluation of its performance.

1.4.11 Attestations by CEO and CFO

In accordance with the Board’s policy, the CEO and the CFO made the attestations recommended by the ASX Corporate Governance Council as to the Company’s fi nancial condition prior to the Board approving this Annual Report.

2. Board Committees

2.1 Audit and Risk Committee The Audit and Risk Committee was formed by a resolution of the Board on 3 July 2002. Below is a summary of the role, composition and responsibilities of the Committee. Further details are contained in the Audit and Risk Committee Charter which is available on the Company’s website.

2.1.1 Role

The Audit and Risk Committee is responsible for reviewing the integrity of the Company’s fi nancial reporting, and overseeing the independence of the external auditors.

2.1.2 Composition

Due to the size and composition of the Board the Committee consisted of two members until 16 July 2007. Members are appointed by the Board from the Non-executive Directors, all of whom are also independent. The current members of the Committee are Mr Peter Slaughter (Chair), Mr James McKay and Mr Bruce Phillips. All members can read and understand fi nancial statements and are otherwise fi nancially literate. The details of the members’ qualifi cations may be found in their profi les included in the Directors’ Report.

Details of the meetings of the Committee held during the year are included in the Directors’ Report.

2.1.3 Responsibilities

The Committee reviews the audited annual and half-yearly fi nancial statements and any reports that accompany published fi nancial statements before submission to the Board and recommends their approval.

The Committee also recommends to the Board the appointment of the external auditor and, each year, reviews the appointment of the external auditor, their independence, the audit fee and any questions of resignation or dismissal.

For

per

sona

l use

onl

y


The Committee is also responsible for establishing policies on risk oversight and management.

2.2 Remuneration and Nomination Committee The Remuneration and Nomination Committee was formed by a resolution of the Board on 3 July 2002. Below is a summary of the role, composition and responsibilities of the Committee. Further details are contained in the Remuneration and Nomination Committee Charter which is available on the Company’s website.

2.2.1 Role

The role of the Remuneration and Nomination Committee is to assist the Board in fulfi lling its responsibilities in respect of establishing appropriate remuneration levels and incentive policies for employees.

2.2.2 Composition

Mr Bruce Phillips (Chair) and Mr James McKay are the current members of the Committee. Both members are Independent Directors. Throughout the year Mr James Hudleston was also a member of the Committee. Due to the size of the Company and composition of the Board it has been determined that two members can adequately fulfi l the obligations of the Committee.

Details of the meetings of the Committee held during the year are included in the Directors’ Report.

2.2.3 Responsibilities and Objectives

The responsibilities of the Committee are to achieve the Company’s objective to provide maximum stakeholder benefi t from the retention of a high quality board and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions.

To assist in achieving the objective, the Committee links the nature and amount of executive directors’ and senior offi cers’ emoluments to the Company’s fi nancial and operational performance. The expected outcomes of the remuneration structure are the retention and motivation of key executives, the attraction of quality management to the Company and provision of performance incentives which allow executives to share the rewards of the success of the Company.

2.2.4 Current Director Remuneration

For details on the amount of remuneration, including monetary and non-monetary components, for senior executives and directors during the year, refer to the Remuneration Report included in the Directors’ Report.

Non-executive Directors are paid fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-executive Directors. Non-executive Directors are entitled to statutory superannuation.

The aggregate amount of remuneration paid to Non-executive Directors was approved by shareholders on 17 October 2007 and is currently $500,000. Refer to the Directors’ Report for further details of the remuneration paid to Non-executive and Executive Directors.

3. Company Code of Conduct As part of its commitment to recognising the legitimate interests of stakeholders, the Company has established a Code of Conduct to guide compliance with legal and other obligations to legitimate stakeholders. These stakeholders include employees, clients, customers, government authorities, creditors and the community as whole. The Company Code of Conduct, adopted by a resolution of the Board on 25 August 2004 and amended on 30 April 2008, is available on the Company’s website. This Code includes the following:

Responsibilities to Shareholders and the Financial Community Generally The Company complies with the spirit as well as the letter of all laws and regulations that govern shareholders’ rights. The Company has processes in place designed to ensure the truthful and factual presentation of the Company’s fi nancial position, and prepares and maintains its accounts fairly and accurately in accordance with the generally accepted accounting and fi nancial reporting standards.

Each employee has an obligation to use their best efforts to deal in a fair and responsible manner with each of the Company’s stakeholders.

Employment Practices The Company endeavours to provide a safe workplace in which there is equal opportunity for all employees and contractors at all levels of the Company. The Company does not tolerate the offering or acceptance of bribes or the misuse of Company assets or resources.

Obligations Relative to Fair Trading and Dealing The Company aims to conduct its business fairly and to compete ethically and in accordance with relevant competition laws. The Company strives to deal fairly with the Company’s customers, suppliers, competitors and other employees, and encourages its employees to strive to do the same.

Responsibilities to the Community As part of the community the Company:

• is committed to conducting its business in accordance with applicable environmental laws and regulations, and encourages all employees to have regard for the environment when carrying out their jobs;

• encourages all employees to engage in activities benefi cial to their local community; and

• supports community charities.

Responsibility to the Individual The Company is committed to keeping private information from employees, clients, customers, consumers and investors, confi dential and protected from uses other than those for which it was provided.

Confl icts of Interest Employees and Directors must avoid confl icts as well as the appearance of confl icts between personal interests and the interests of the Company.

How the Company Complies with Legislation Affecting its Operations Within Australia, the Company strives to comply with the spirit and the letter of all legislation affecting its operations. Outside Australia, the Company will abide by local laws in all countries in which it operates. Where those laws are not as stringent as the Company’s operating policies, particularly in relation to the environment, workplace practices, intellectual property and the giving of ‘gifts’, Company policy will prevail.

How the Company Monitors and Ensures Compliance with its Code The Board, management and all employees of the Company are committed to implementing this Code of Conduct, and each individual is accountable for such compliance. Disciplinary measures may be imposed for violating the Code.

Corporate Governance (cont’d)

For

per

sona

l use

onl

y


1P Hydrocarbon volume considered to be proven by the drilling of the well. There is a very high chance that this volume exists in the ground around the well bore.

2P Hydrocarbon volume considered likely (probable) to have been found by the drilling of the well, given the mapping that has taken place. 2P is then proved plus probable volumes.

3P An estimate of the volume of hydrocarbons that possibly exist in the trap area. 3P is then proved plus probable plus possible volumes.

Anticlinal trap A hydrocarbon trap formed by the upward bowing of strata into an arch or dome.

Anticline A tectonic structure in which strata are folded so as to form an arch or dome.

Appraisal well A well drilled to determine the extent of hydrocarbons discovered in a previous well on the same structure.

ASX Australian Securities Exchange Limited.

ATP Authority to Prospect.

Barrel (bbl) The unit of volume measurement used for petroleum and its products.

1 barrel = 42 U.S. Gallons= 35 Imperial Gallons (approx.) or 159 litres (approx.)

Basin A depression of large size in which sediments have accumulated.

BCF Billion cubic feet (1 BCF = 1.08 PJ).

bopd Barrels of oil per day.

Closure The area within the lowest closing contour of a structure, and also a closed structure.

Coal seam gas (CSG) Natural gas (mostly methane) contained within coal.

Company Sunshine Gas Limited ACN 098 563 663.

Condensate Hydrocarbons (predominantly pentane and heavier compounds) which spontaneously separate out from natural gas at the wellhead and condense to liquid.

Director A Director of the Company.

Dry hole A well drilled without fi nding gas or oil in commercial quantities.

Drill stem test (DST) The controlled fl owing of the fl uids from a reservoir so that estimates of the fl ow rate and fl uid type can be made. The test, which is usually conducted for a short time only, can be run in open hole or through perforations in a cased hole.

Exploration well A well drilled to determine whether hydrocarbons are present in a particular area or structure.

Fault A fracture in the earth’s crust along which the rocks on one side are displaced relative to those on the other.

Fault trap A hydrocarbon trap which relies on the termination of a reservoir against a seal due to fault displacement.

Field A geographical area under which an oil or gas reservoir lies.

Formation A unit in stratigraphy defi ning a succession of rocks of the same type.

Gas in place (GIP) An estimated measure of the total amount of gas contained in a reservoir and, as such, a higher fi gure than recoverable gas.

Geology The science relating to the history and development of the earth’s crust.

Geophysics The physics of the earth; a hybrid discipline involving a combination of physical and geological principles.

Gigajoule (Gj) 109 joules.

Horizon A term used in seismic interpretation to identify the signal refl ected from a particular layer of rock.

Hydrocarbon pay A net sand interval containing moveable (recoverable) hydrocarbons.

Hydrocarbons Naturally-occurring organic compounds containing only the elements hydrogen and carbon, which may exist as solids, liquids or gases.

Interstate Group of Companies

A term used when referring to the companies acquired on 1 July 2003 (Interstate Energy Pty Ltd, Interstate Pipelines Pty Ltd, ACN 002 820 555 Pty Ltd and ACN 081 118 292 Pty Ltd).

Lead Inferred geologic feature or structural pattern requiring investigation.

Licence An authority to explore for or produce oil or gas in a particular area issued to a company by the governing state.

Lithology The physical and mineralogical characteristics of a rock.

LNG Liquefi ed natural gas

Log interpretation Technical analysis of the results of well logging leading to quantitative estimates of various rock properties including contained liquids and gases.

Glossary

For

per

sona

l use

onl

y


Glossary (cont’d)

Migration The movement of hydrocarbons from regions of higher to lower pressure.

MMBBL 1 million barrels of oil.

MMcfd 1 million cubic feet per day = 28,317 cubic metres per day.

Oil A mixture of liquid hydrocarbons of different molecular weights.

Permeability A measure of the capacity of rock or stratum to allow water or other fl uids such as oil to pass through it – typically measured in darcies or millidarcies.

Permian A geological time period approximately 298 to 251 million years ago.

Petroleum A generic name for hydrocarbons, including crude oil, natural gas liquids, natural gas and their products.

PJ Petajoule (one million gigajoules).

PL Petroleum lease.

Potential oil/gas (in-place)

An estimate of the potential size of a trap expressed in terms of either oil in place or gas in place. In deriving this estimate it is fi rst assumed there is an accumulation present, and then a theoretical model is employed to calculate the size of the accumulation, using informed estimates of key factors such as geometric fi ll factors, net pay, reservoir quality, hydrocarbon type, and water saturation.

Prospect A feature suffi ciently defi ned to warrant the drilling of a well without the necessity of further investigation.

Recoverable gas An estimated measure of the total amount of gas that could be brought to the surface from a given reservoir.

Recoverable oil An estimated measure of the total amount of oil that could be brought to the surface from a given reservoir.

Reserves The volume of hydrocarbons contained in a trap or stored in coals, which is economically recoverable.

Reservoir Permeable and porous rocks (usually sandstone, limestone or dolomite) capable of containing signifi cant quantities of hydrocarbons.

Sandstone A sedimentary rock composed predominantly of sand-sized grains, usually quartz.

Santos Santos (QNT) Pty Ltd.

Seal An impermeable rock (usually claystone or shale) that prevents the passage of hydrocarbons.

Sediment Solid material, whether mineral or organic, which has been moved from its position of origin and redeposited.

Seismic survey A technique for determining the detailed structure of the rocks underlying a particular area by passing acoustic shock waves into the strata and detecting and measuring the refl ected signals.

Show An indication of oil or gas from an exploratory well.

Stratigraphy The study of stratifi ed rocks, especially their age, correlation and character.

Structure Deformed sedimentary rocks, where the resultant bed confi guration is such as to form a trap for migrating hydrocarbons

Sunshine Gas Sunshine Gas Limited ACN 098 563 663.

Trap A body of reservoir rock, vertically or laterally sealed, the attitude of which allows it to retain the hydrocarbons that have migrated into it.

Trend A strike direction of a geological feature.

Wireline log A geophysical tool lowered into the well on a wireline to measure resistivity, gamma radiation, density and other parameters from which rock properties such as porosity and water saturation can be measured.

For

per

sona

l use

onl

y


Directors James A. V. McKay Chairman

Anthony R. GilbyManaging Director

James W. HudlestonNon-executive Director

Bruce J. PhillipsNon-executive Director

Peter J. SlaughterNon-executive Director

Company SecretaryPaul S. Jobbins

Registered Offi ceLevel 19 Waterfront Place1 Eagle StreetBrisbane Queensland 4000Telephone: (+61 7) 3221 4400Facsimile: (+61 7) 3221 4477Website: www.sunshinegas.com.auE-mail: [email protected]

AuditorsPKFLevel 6 AMP Place10 Eagle StreetBrisbane Queensland 4000

SolicitorsHWL EbsworthLevel 2, 500 Queen StreetBrisbane Queensland 4000

Share RegistryLink Market Services LimitedLevel 12, 300 Queen StreetBrisbane Queensland 4000Telephone: (+61 2) 8280 7454Facsimile: (+61 2) 9287 0303

Home Stock ExchangeAustralian Stock Exchange LimitedLevel 5 Riverside Centre123 Eagle Street Brisbane Queensland 4000

ASX CodeOrdinary Shares: SHG

Company Details

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y

For personal use only - ASX · Gas (CSG) portfolio. We have achieved and increased independently...

Documents

Transcript of For personal use only - ASX · Gas (CSG) portfolio. We have achieved and increased independently...