ACN 110 393 292 AUSTRALIA For personal use only - ASX · ACN 110 393 292 PO Box 18199 VIC 8003...

AED Oil Limited ACN 110 393 292 PO Box 18199 COLLINS STREET EAST VIC 8003 AUSTRALIA

Page | 1

ASX APPENDIX 4E Preliminary final report Financial Report for year ended 30 June 2008 RESULTS FOR ANNOUNCEMENT TO THE MARKET (All comparison to year ended 30 June 2007)

30 June 2008 $’M

30 June 2007 $’M

Percentage increase/

(decrease) (1) Revenue 144.4 - -

Net profit/(loss) for the period 242.6 (20.6) 1277.7

Net profit/(loss) attributable to members 242.6 (20.6) 1277.7

Dividends Amount per security

Franked amount per security

Special dividend 20 cents 20 cents Interim dividend NIL NIL Previous corresponding period:

Final dividend NIL NIL Interim dividend NIL NIL

Record date for determining entitlements to the ordinary dividend: 18 August 2008

Date dividend payable 5 September 2008 Net Tangible Assets per Share 30 June 2008 30 June 2007 Net tangible assets per share $2.02 $0.36 (1) Operations commenced on 6th October 2007, therefore there is no corresponding

comparative for sales revenue. Review of Results A review of the consolidated entity’s operations is included in the Directors’ Report of the Annual Financial Report for the financial year ended 30 June 2008.

For

per

sona

l use

onl

y

AED Oil Limited ACN 110 393 292 PO Box 18199 COLLINS STREET EAST VIC 8003 AUSTRALIA

Page | 2

Consolidated Income Statement See attached financial statements Consolidated Balance Sheet See attached financial statements Consolidated Cash Flow Statement See attached financial statements Dividends On 30 July 2008, the directors declared a fully franked special dividend of 20 cents per share. Dividend reinvestment plans There are no dividends reinvestment plans in place. Consolidated retained earnings Refer to the Statement of Changes in Equity in the attached financial statements. Details of entities over which control has been gained or lost during the period There was no control lost or gained during the period. Details of associate and joint venture entities Refer to note 15 of the attached financial statements. Any other significant information needed by an investor to make an informed assessment of the economic entity’s financial performance and financial position Refer to the commentary on results and the attached financial statements. Foreign entities Refer to note 15 of the attached financial statements.

For

per

sona

l use

onl

y

AED OIL LIMITED ABN 61 110 393 292

ANNUAL FINANCIAL REPORT 30 JUNE 2008

F

or p

erso

nal u

se o

nly

AED OIL LIMITED – ANNUAL FINANCIAL REPORT 2008

Page 2

Contents COMPANY DETAILS AND CONTENT ........................................................................ 3 DIRECTORS’ REPORT ................................................................................................ 4 CORPORATE GOVERNANCE STATEMENT ........................................................... 22 FINANCIAL STATEMENTS INCOME STATEMENT .............................................................................................. 28 BALANCE SHEET ...................................................................................................... 29 STATEMENT OF CHANGES IN EQUITY .................................................................. 30 CASH FLOW STATEMENT ....................................................................................... 31 NOTES 1. CORPORATE INFORMATION ............................................................................ 32 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................. 32 3. SEGMENT INFORMATION .................................................................................. 42 4. GAINS ON DISPOSAL OF ASSETS .................................................................... 43 5. REVENUES AND EXPENSES ............................................................................ 43 6. INCOME TAX ....................................................................................................... 45 7. EARNINGS PER SHARE .................................................................................... 47 8. DIVIDENDS .......................................................................................................... 48 9. NOTES TO THE CASH FLOW STATEMENT ..................................................... 48 10. TRADE AND OTHER RECEIVABLES ............................................................. 50 11. PREPAYMENTS ............................................................................................... 50 12. PLANT AND EQUIPMENT ............................................................................... 50 13. DEFERRED EXPLORATION, EVALUATION AND DEVELOPMENT COSTS 51 14. PRODUCTION ASSETS .................................................................................. 52 15. INVESTMENTS ................................................................................................ 52 16. TRADE AND OTHER PAYABLES ................................................................... 53 17. DERIVATIVES .................................................................................................. 54 18. INTEREST BEARING LOANS AND BORROWINGS ...................................... 54 19. PROVISIONS ................................................................................................... 55 20. CONTRIBUTED EQUITY ................................................................................. 55 21. RETAINED EARNINGS/(ACCUMULATED LOSSES) ..................................... 56 22. RESERVES ...................................................................................................... 57 23. SHARE-BASED PAYMENT PLANS ................................................................ 57 24. AUDITORS REMUNERATION ......................................................................... 58 25. COMMITMENTS AND CONTINGENCIES ....................................................... 59 26. FINANCIAL INSTRUMENTS ............................................................................ 60 27. KEY MANAGEMENT PERSONNEL ................................................................ 70 28. RELATED PARTY DISCLOSURE ................................................................... 76 29. SIGNIFICANT EVENTS AFTER THE BALANCE DATE .................................. 76 DIRECTORS DECLARATION .................................................................................... 77 AUDITORS REPORT ................................................................................................. 78 ASX ADDITIONAL INFORMATION SHAREHOLDER AND OTHER INFORMATION ....................................................... 80

For

per

sona

l use

onl

y


Page 3

COMPANY DETAILS AND CONTENT Directors David Dix B.Ec; LLB; Grad Dip (Tax Law) Kenneth Tregonning B.Sc (Physics) (Hons), PhD (Theoretical Physics) George Edward (Barry) McGuiness Diploma of Public Administration John Branson LLB, FAICD Richard Graham Price B.Eng (Civil) (Hons), MBA Chief Financial Officer Richard Little B.Ec, CA Chief Operating Officer John Fear MEI (UK) Company Secretary Trevor Slater B.Bus (Acctng) FCPA FCSA Registered Office and Head Office Level 41, 55 Collins Street Melbourne VIC 3000 Phone: (03) 9654 7002 Fax: (03) 9654 7006 Email: [email protected] Postal Address PO Box 18199 COLLINS STREET EAST VIC 8003 Website www.aedoil.com Share Registry Link Market Services Limited Level 1 333 Collins Street MELBOURNE VIC 3000 Postal address: PO Box 1736P MELBOURNE VIC 3001 Enquiries within Australia: Ph: 1300 554 474 or (02) 8280 7111 Enquiries outside Australia: Ph: + 61 (2) 8280 7111 Email: [email protected] Home Stock Exchange Solicitors Australian Stock Exchange Limited Corrs Chambers Westgarth Rialto Towers Level 45 600 Bourke Street 525 Collins Street MELBOURNE VIC 3000 MELBOURNE VIC 3000 Auditors Bankers Ernst & Young Commonwealth Bank of Australia 8 Exhibition Street Level 14, 385 Bourke Street MELBOURNE VIC 3000 MELBOURNE VIC 3000

For

per

sona

l use

onl

y


Page 4

DIRECTORS’ REPORT Your directors present their report on the results of AED Oil Limited (“Company” or “AED”) for the year ended 30 June 2008. 1. DIRECTORS

The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Names, Qualifications, Experience and Special Responsibilities

David Dix

B.Ec; LLB; Grad Dip (Tax Law) Executive Chairman Appointed 6 August 2004 David Dix jointly formed AED Oil Limited in August 2004. He has a background in economics, law and taxation and has extensive experience in the resources industry. He has held various positions with Shell Australia Limited and worked for 16 years in corporate advisory at UBS AG and Macquarie Bank. At UBS AG, Mr. Dix was employed as Head of Resources for Asia Pacific and Head of Mining in London. During the past three years Mr. Dix has served as a Director of the following public or listed companies: • Aquarius Platinum Limited* • Quadrem Limited* • Centro Shopping America Trust * denotes current directorship Kenneth Tregonning

B.Sc (Physics)(Hons) PhD (Theoretical Physics) Managing Director Appointed 6 August 2004

Ken Tregonning jointly formed AED Oil Limited in August 2004 and has over two decades of experience in the oil and gas industry. He has had broad international experience working for Shell International in Europe and subsequently as a consultant in Australia, Europe, Asia and North America. He has also had extensive experience in oil and gas projects based in the Timor Sea. Dr Tregonning is a former managing director and chief executive officer of Carnarvon Petroleum NL which is listed on the ASX. He is a member of the Society of Petroleum Engineers, and has held positions including chairman of the NSW/ACT Chapter and member of the Kuala Lumpur Executive Committee. He is also a member of SEAPEX, the South East Asian Petroleum Exploration Society. George Edward (Barry) McGuiness Diploma of Public Administration Chairman, Audit and Risk Committee Non Executive Director Appointed 14 February 2005

Barry McGuiness has extensive corporate and board experience. He has acted as managing director and chief executive officer of Australian National Line, managing partner of the consulting division of Arthur Andersen (now Accenture), a member of the Business Council and Committee for Melbourne. Barry has previously served as the managing partner of Minter Ellison, Melbourne, and international managing partner and chairman of partners for Minter Ellison Melbourne. Barry was previously the deputy chairman of SPC Limited, Chairman of William Buck & Co and director of Vision Systems Limited. He is currently a director of City Wide Services Pty Limited, Applied International, Chairman of Woleco Hotel Supplies (Singapore) and is on the advisory Board of the CB Group. During the past three years Mr. McGuiness has served as a director of the following public or listed companies: • Vision Systems Limited * denotes current directorship

For

per

sona

l use

onl

y


Page 5

DIRECTORS’ REPORT (cont.)

1. DIRECTORS (cont.)

John Branson LLB, FAICD Chairman, Nomination and Remuneration Committee Non Executive Director Appointed 14 February 2005 John Branson has a background in law and corporate finance and has over 30 years experience in the professional services and resources industries. He is a former chairman of Australian Zircon NL, former senior partner of Fisher Jeffries, he has held various positions at McGuigan Simeon Wines Limited, Pipeline Authority of South Australia and South Australian TAB. Currently, John is the chairman of Stuart Petroleum Limited, Flinders Partners Pty Ltd and Pembrook School Inc. John is also a director of the Bank SA Advisory Board and Hytorc (South Pacific) Pty Ltd. During the past three years Mr. Branson has served as a director of the following public or listed companies: • Stuart Petroleum Limited* • Australian Zircon NL * denotes current directorship Richard Graham Price B.Eng (Civil) (Hons), MBA Non Executive Director Appointed 14 May 2007 Richard Price has had extensive experience in the provision of strategic, corporate and financial advice to major public companies over the last 20 years. Richard is an Executive Director within Macquarie Bank’s Investment Banking Group, with particular expertise in the resources and energy sectors. He has an honours degree in Civil Engineering and a Masters of Business Administration, both from the University of Melbourne. Prior to entering investment banking, Richard practised as a consulting Civil Engineer with Camp Scott Furphy, and is actively involved in the philanthropic sector, including his role as chairman of The Song Room. Peter Behrenbruch B.Sc (Physics), M.Sc (Nuclear Engineering) Director (Appointed 21 November 2007 and resigned 23 July 2008) and Chief Operating Officer (Appointed 30 January 2007 and resigned 23 July 2008) Peter Behrenbruch has over 30 years experience in the petroleum industry. He is a member of the Sinopec International Exploration and Production Corporation. He has held various technical positions with Shell International Petroleum, and senior management positions with BHP Billiton Limited, including member on the executive committee of BHP Petroleum Limited. During his employment at BHP Billiton Limited, Peter was heavily involved in petroleum projects worldwide but most notably Australian FPSO developments. Being a strong supporter of the Society of Petroleum Engineers (SPE), he was a director of the board (SPE International) and director for the Asia Pacific region. Peter was the founding head of the former school of Petroleum Engineering and Management (Adelaide), now the Australian School of Petroleum. COMPANY SECRETARY Trevor Slater B.Bus (Acctg), FCPA, FCSA Trevor Slater has been the company secretary for AED Oil Limited for 4 years. Trevor Slater has over 30 years experience in the resources, construction, IT and services industries. He has held senior finance positions within public listed entities for over 18 years. Prior to joining the Company Trevor held senior finance positions with Ballarat Goldfields NL, Coal Corporation of Victoria , North Limited ( King Island ), Bestobell Limited and the Ballarat School of Mines and Industries. Trevor was one of the initial employees engaged in the listing of AED.

For

per

sona

l use

onl

y


Page 6


2. DIRECTORS’ MEETINGS

The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director was as follows:

Meetings of Committees

Directors Meetings

Audit and Risk

Remuneration and Nomination

Number of meetings held 11 4 1

Number of meetings attended

David Dix 11 - -

Kenneth Tregonning 10 - -

Barry McGuiness 11 4 1

John Branson 11 4 1

Richard Price 9 4 1 Peter Behrenbruch (appointed 21 November 2007, resigned 23 July 2008) 7 - -

During the period there were a number of matters which were confirmed by circular resolutions of Directors. All directors were eligible to attend all meetings, except for Peter Behrenbruch, who was eligible to attend 7 of the Directors’ meetings.

3. COMMITTEE MEMBERSHIP

As at the date of this report, the Company had an Audit and Risk Committee and a Nomination and Remuneration Committee of the Board.

Members acting on the committees of the Board during the year were:

Audit and Risk Nomination and Remuneration Barry McGuiness * Barry McGuiness

John Branson John Branson * Richard Price Richard Price

* Designates the chairman of the committee.

4. NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES

The principal activities of the Company during the period were the activities associated with the planning, development and production of the Puffin Field. The Puffin North East Field operations commenced production on 6 October 2007. Subsequent to the sale of 60% interest in its Puffin and Talbot field assets, AED and SIPC formed a joint venture. As a result, AED moved from operator to non-operator of these assets.

5. OPERATING AND FINANCIAL REVIEW

Puffin North East Operations The Company reached a major milestone in the financial year when production commenced on 6 October 2007 and the total production for the year was 1.379 million barrels. The achievement of First Oil was the culmination of the Phase 1 and Phase 1A in Puffin North East of the Puffin oil field development program. During the period five offtakes totalling 1.324 million barrels were successfully completed. Assays performed by an independent party indicate that crude oil quality (similar characteristics to Tapis) continues to meet or outperform initial expectations. The API gravity for the Puffin Crude oil was calculated at 43.6 which correspond with the previously published API. Puffin crude oil sells at a premium to the APPI Tapis crude oil bench mark.

For

per

sona

l use

onl

y


Page 7


5. OPERATING AND FINANCIAL REVIEW (cont.)

Puffin South West Following on from the drilling of Puffin-10, the Puffin South West continues to be reassessed. A new plan to commercialise reserves within this region is currently being developed with an appraisal well being drilled in the 2nd half of 2008. For this purpose, additional seismic reprocessing is being carried out, with the objective of selecting a firm drilling and development program. Talbot Subsurface studies for potential development of this field have been continuing with the intention of developing this field in 2009/10. To further progress this development, additional seismic data is being acquired and plans for reprocessing are in place. Strategic Review During the financial year, as a result of initial production from Puffin North East being lower than expectations, AED undertook a strategic review of the directions of the Company. This review resulted in the following key outcomes:

• Entering into an agreement with Sinopec International Petroleum Exploration and Production Corporation (“SIPC”) to form an unincorporated joint venture for the Puffin and Talbot oil field;

• Securing funding to enable the future development of the Puffin, Talbot and other fields; • Restructuring the balance sheet of the Company by repaying all bank debt, settling trade

creditors and closing out hedging • Planning and assessing a program to increase production through the development of

additional wells and the potential rectification of existing production wells. Sale of 60% Interest to Sinopec On 28 March 2008, the Company entered into formal binding agreement with Sinopec International Petroleum Exploration and Production Corporation (“SIPC”), a wholly owned subsidiary of China Petrochemical Corporation (“Sinopec Group”), in which SIPC acquired 60% joint venture interest in the Company’s assets held under AC/P22, AC/L6 and AC/RL1 (which include the Puffin and Talbot fields). The effective date of this transaction was 31 March 2008. On 18 June 2008, the Company completed the joint venture transaction. SIPC paid AED an upfront cash payment of US$561 million for the 60% joint venture interest. The cash received was used to repay all of AED’s bank debt (leaving only existing convertible bonds in place), settle trade creditors and close out hedging positions. This has resulted in AED having a significant cash balance of approximately A$348 million after completion. This sale leaves AED with a restructured balance sheet, with no bank debt, which puts it in a very strong financial position to pursue and expedite the significant future development of the Assets in conjunction with SIPC and other growth opportunities. Future Development Activity

The proposed development activities of the Company’s assets and any remedial actions in relation to existing wells are now Joint Venture decisions following execution of the sale to Sinopec. The Joint Venture has developed initial plans to drill a third development well in the North East 1 reservoir and an appraisal well in the South West in the 2nd half of 2008. The timing of the hook-up and installation is subject to the availability of suitable installation vessels. F

or p

erso

nal u

se o

nly


Page 8



FINANCIAL RESULTS OVERVIEW FINANCIAL & OPERATIONAL HIGHLIGHTS

• Production commenced on the 6th October 2007 and produced 1.379 million barrels for the financial year.

• Completion of AED-SIPC Sale Agreement and implementation of the Joint Venture • Repayment of Project Debt Facilities • Special Dividend is Announced

Financial Highlights 30 June 2008

$M 30 June

2007 $M

Underlying EBITDA 65.1 (8.7) Underlying Profit before Tax 50.6 (8.7) Net Profit on Sale of Asset to SIPC (pre-tax) 346.1 - Net Profit/(loss) after Tax 242.6 (20.6) Proceeds from Sale of Assets to SIPC 595.8 - Special Dividend Payment 20c per share -

AED has delivered strong operating results and recorded a maiden net profit after tax of A$242.6 million, following the sale of 60% interest in its assets to SIPC. AED’s overall net profit after tax of $242.6 million reflects: AED achieved a first year net underlying profit before tax of $50.6 million. The Puffin North East field commenced production on 6 October 2007 and produced 1.379 million barrels. There were five offtakes totalling 1.32 million barrels resulting in sales revenue from spot oil prices of A$144.4 million at an average spot price received in the year of A$109/bbl. The fair value loss on financial instruments of A$32.6 million comprise a A$73.8 million loss on the settlement of project debt related oil commodity hedges, partly offset by a A$41.2 million fair value gain on the revaluation of convertible notes. The accounting profit on the sale of its 60% interest in Puffin and Talbot Field assets was $346.1 million (pre-tax). The income tax expense in the year of $105.3 million reflects the tax attributable to operations and the accounting profit made on the sale of assets to SIPC. The actual current tax payable provision of A$50.6 million recognises that AED will utilise all previous carry forward tax losses and accounts for adjustments for tax depreciation and immediate deductions available for capital expenditure incurred for exploration and evaluation. ASSET SALE As announced on 18 June 2008, AED and SIPC completed the Joint Venture agreement. Under the Agreement, SIPC acquired from AED a 60% joint venture interest in the assets held under the various exploration and production permits, AC/P22, AC/L6 and AC/RL1 (which include the Puffin and Talbot fields). Proceeds received were US$561 million (paid at completion and equivalent to A$595.8 million at settlement) which at date of the transaction valued 100% of the assets at approximately A$1 billion. The transaction has enabled AED to restructure its balance sheet, clear bank debt, align with a strong and substantial operating partner, move forward on an unhedged crude oil sales basis and provide the ability to apply funds to both ongoing field development and for other opportunities.

For

per

sona

l use

onl

y


Page 9



FINANCIAL COMMENTARY Operating Profit Overview Volume - Physical Production, Sales & Inventory Production commenced on the 6th October 2007 and produced 1.37 million barrels. There were five offtakes during the year. The following table summarises production sales and inventory balances:

2008

Oil (‘000 bbl)

Opening Inventory (production commenced 6 October 2007)

-

Production (AED share) 1,379

Sales (AED share) 1,324

Closing Inventory 55

Prices Spot sales revenue of $144.4 million benefited from the significant increase in spot oil prices during the year and the Puffin crude oil continues to attract premium pricing to APPI Tapis placing it amongst one of the premium crude oils in the world. This resulted in an average spot price received in the year of A$109/bbl. Operating Costs Operating and royalty costs of $77.7 million principally comprise:

• Lease payments relating to the FPSO • Operating and crew costs of the FPSO • Supply boat and support costs • Fuel and other running costs • Technical and operations team costs • Royalty payments

Depreciation Depreciation expense relates to the commencement of depreciation on assets related the Puffin North East Production field. Depreciation expensed in the period of A$14.5 million is calculated on units of use basis, on an area of interest for production assets associated with the Puffin North East Field. Administration Costs Administration expenses of $13.4 million represent corporate expenses and employee costs, including the fair value of share based payments from the issue of employee options. Other Income / Revenue Net revenue and other income of $11.8 million relates to foreign exchange gains, interest received, rental recovery and terminal fees recovered. Foreign exchange gains mainly related to exchange rate gains made on the repayment of USD denominated debt. F

or p

erso

nal u

se o

nly


Page 10



Profit on Sale of Assets to SIPC Proceeds received on sale of AED’s 60% interest in its assets to SIPC were US$561 million (paid at completion and equivalent to A$595.8 million at settlement) which at date of the transaction valued 100% of the assets at approximately A$1 billion. The accounting profit on the sale of its interest in these assets was $346.1 million (pre-tax). Fair Value Changes on Financial Instruments Fair value loss on financial instruments of A$32.6 million comprise a A$73.8 million loss on the settlement of oil commodity swaps, partly offset by a A$41.2 million fair value gain on the revaluation of convertible notes. During the current period, the Company settled 2,200,000 barrels of hedging, entered into as a requirement of the Company’s bank provided funding facility, at an average forward rate of US76/bbl. All hedges have now been closed out. The convertible notes are traded on the Singapore stock exchange and are recorded on the balance sheet at their fair value. Adjustments to fair value are reported through the profit and loss account. Borrowing Costs Gross borrowing costs were $20.9 million relating to interest on the USD project debt facility, convertible notes and finance cost on the unwind of the present value of the rehabilitation provision. $16.2 million was expensed during the financial year and $4.8 million was capitalised relating up to the period before production commenced. Tax The income tax expense in the year of $105.3 million reflects the tax attributable to operations and the accounting profit made on the sale of assets to SIPC. AED has recognised a current tax payable provision of A$50.6 million. This provision recognises that AED will utilise all previous carry forward tax losses and accounts for adjustments to the accounting operating profit for tax timing differences. The tax value of the asset sale to SIPC recognises a 60% disposal of the tax written down value of assets and immediate deductions available for capital expenditure incurred for exploration and evaluation. CASH FLOW Cash Flow – Operating Activities There were five offtakes during the year resulting in cash receipts from the Puffin North East operations of A$143.2M. The operations from the Puffin field contributed significant net cash flow from operations of A$60.4 million (excluding interest and hedging settlements) and AED continues to trade on a cash flow positive basis. This net cash flow was offset by settlement of project debt related hedges in the year which resulted in a cash out flow of $66.1 million and net interest costs of $16.2 million. Cash Flow – Investing Activities Payments for exploration, evaluation and development costs of $205.6 million mainly comprised development expenditure to complete the installation and hook-up of the Puffin North East Field and exploration and evaluation expenditure relating to the Puffin South West region. Proceeds received as a result of the 60% sale of interest in the Puffin and Talbot field assets was $595.8 million offset by transaction costs paid of $1.7 million. Further transaction costs of approximately A$6.9 million were paid subsequent to year end.

For

per

sona

l use

onl

y


Page 11



Cash Flow – Financing Activities Major movements in cash flow from financing activities included:

• $23.1 million proceeds from the issue of 36.9 million new shares from the exercise of share options and a private placement.

• $117.2 million was drawn down from the project debt facility during the period to fund capital expenditure.

• Upon completion of the sale of assets transaction to SIPC, the project debt facility of A$163.6 million was repaid in full.

BALANCE SHEET The consolidated entities Net Assets and Total Equity increased during the current year from $42.5 million to $312 million. This was primarily due to the development expenditure incurred during the year to complete the installation and hook-up of the North East field and commencement of production and the sale of 60% interest in the Puffin and Talbot assets. Other major balance sheet movement relates to the provision for tax payable primarily arising from the sale of assets of $50.6 million and trade creditors of $45.8 million mainly reflect settlement of hedge contracts, transaction costs relating to the asset sale and normal operating trade creditors. As previously announced, the Company has restructured its balance sheet as a result of selling its 60% interest in its Puffin and Talbot assets. The Company desired to reduce its exposure to debt and accordingly part of the cash settlement was applied to repay all of AED’s bank project debt facility (leaving only existing convertible bonds in place, USD 85M). After the debt reduction, payment of trade creditors and the close out of the small remaining oil hedge positions the Company was left with a significant cash balance of approximately A$348 million. DIVIDEND Subsequent to year-end, AED announced it had declared a fully franked special dividend of 20 cents per share (approximately A$30.9 million). The dividend payment represents part of the strategic and capital management review undertaken as part of the sale of 60% of AED’s assets to SIPC, giving rise to the cash proceeds mentioned previously in this report. The result of this transaction has allowed the Company to restructure its balance sheet and to advance development and to seek new opportunities. The Directors of AED have decided that all shareholders should directly benefit from the successfully completed sale of asset transaction. The fully franked dividend will be paid on 5 September 2008 to shareholders with details registered at the close of business on 22 August 2008, with an ex-dividend date of 18 August 2008. SUMMARY Following the completion of the sale of a 60% interest in AED Oil’s Puffin and Talbot fields AED is effectively debt free (save for convertible notes), with significant cash reserves to fund its 40% interest of the costs to develop the Puffin and Talbot fields and to undertake an expansion of its interests into new projects in Australia and the South East Asian region. The Company is pleased to report that the implementation of the Joint Venture has gone to plan and that both East Puffin Pty Ltd (East Puffin or the Operator) and AED are looking forward to the ongoing development of the Puffin Oil field. The asset sale transaction has enabled the Company combine forces with a major global oil company. AED will continue to implement its medium term growth strategy by seeking projects with short to medium term development potential using the model devised in relation to the Puffin development and to distribute funds when available. The Company will commence in September a two well drilling programme. One well will be drilled in the Puffin South West field to appraise updip potential to the Puffin 9 & 10 wells, and a development well will be drilled in the Puffin North East field. F

or p

erso

nal u

se o

nly


Page 12


6. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 6 October, 2007, the Company’s Puffin North East Development commenced production.

On 28 March 2008, the Company entered into a formal binding agreement with Sinopec International Petroleum Exploration and Production Corporation (“SIPC”), a wholly owned subsidiary of China Petrochemical Corporation (“Sinopec Group”), in which SIPC acquired a 60% joint venture interest in the Company’s assets held under AC/P22, AC/L6 and AC/RL1 (which include the Puffin and Talbot fields). The effective date of this transaction was 31 March 2008. On 18 June 2008, the Company completed the joint venture transaction and AED moved from operator to non-operator of these assets. The completion of the joint venture transaction had allowed the Company to restructure its balance sheet.

7. SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On 30 July 2008, the directors declared a fully franked special dividend of 20 cents per share to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2008, to be paid to shareholders on 5 September 2008. The dividend will be paid to all shareholders on the Register of Members on 22 August 2008. The total estimated dividend to be paid is $30.9 million. There has not been any other matter or circumstances occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

8. FUTURE DEVELOPMENTS

Further information on future developments in the operations and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.

9. DIVIDENDS

On 30 July 2008, the directors declared a fully franked special dividend of 20 cents per share to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2008, to be paid to shareholders on 5 September 2008. The dividend will be paid to all shareholders on the Register of Members on 22 August 2008. The total estimated dividend to be paid is $30.9 million.

10. EARNINGS PER SHARE 2008 2007

Cents Cents

Basic earnings per share 165.3 (18.2)

11. SEGMENTS

The Company operates in the oil and gas segment within Australian territorial waters.

12. EMPLOYEES

The Company employed 30 Employees (27 staff and 3 Non Executive Directors) as at 30 June 2008. Subsequent to year end 14 of AED’s staff moved over to East Puffin Pty Ltd (operator of the AED/SIPC joint venture).

13. ENVIRONMENTAL REGULATION

The Company is subject to environmental regulation. The Directors are satisfied that environmental regulations have been complied with. During the period no fines were imposed, no prosecutions were instituted and no notice of non compliance was received from a regulatory body.

14. PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the period.

For

per

sona

l use

onl

y


Page 13


15. INSURANCE OF OFFICERS

During the financial period the Company has paid a premium of $64,402 to insure individual Directors and Officers against damages, out of court settlements or legal costs arising from any wrongful act committed by them in their capacity as a director or officer, other than conduct involving a willful breach of duty in relation to the Company.

16. UNISSUED SHARES

At the date of this report, there were 3,030,000 unissued ordinary shares under options (2,765,000 at the reporting date). Refer to Note 20 of the financial statements for further details of the options outstanding. Option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body corporate or in the interest issue of any other registered scheme.

17. SHARES ISSUED AS A RESULT OF THE EXERCISE OF OPTIONS

During the financial year, 34,937,559 options were exercised to acquire fully paid ordinary shares in the Company at a weighted average exercise price of $0.22. Since the end of the year, 265,000 options at a weighted average exercise price of $0.85 have been exercised.

18. ROUNDING

The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors’ report and the financial report have been rounded to the nearest thousand dollars, unless otherwise indicated.

19. REMUNERATION REPORT (AUDITED)

This Remuneration Report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the parent and the group receiving the highest remuneration.

For the purposes of this report, the term ‘executive’ encompasses the Executive Chairman, the Managing Director, senior executives and the Company Secretary of the parent and the group.

Remuneration Philosophy

The objective of the Company’s executive reward framework is to ensure reward for performance, this objective must embody the principle that remuneration is both competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders. The Board endeavours to ensure that executive reward satisfies the following key criteria:

• competitive and reasonable; • acceptability to shareholders; • performance linkage/alignment of executive compensation; • transparency; and • capital management.

The Board recognises that the attraction and retention of high calibre executives is critical to generating shareholder value.

Nomination and Remuneration Committee

The purpose of the nomination and remuneration committee is to make recommendations to the Board regarding the appointment, retirement and remuneration of senior executives, Non Executive and Executive Directors and advising on general personnel issues, including recruitment and termination policies, succession planning and salary packages. The committee also monitors the education and performance of Directors.

Remuneration Structure

The structure of Non-Executive Director and of Executive Director remuneration is separate and distinct.

For

per

sona

l use

onl

y


Page 14


19. REMUNERATION REPORT (AUDITED) (cont.)

Non-Executive Director Remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

Non Executive Directors are entitled to remuneration for their services as determined by the Company in general meeting (the current limit is $250,000 plus superannuation) to be apportioned among them in such a manner as the Directors agree, and, in default of agreement, equally. Options may be issued based on individual performance, on the recommendation of the Remuneration Committee at the discretion of the Board and subject to shareholder approval.

If a Non Executive Director performs services, which in the opinion of the Directors are outside the scope of the ordinary duties of a Director, the Company may remunerate that Director by payment of a fixed sum determined by the Directors in addition to or instead of the remuneration referred to above. However, no payment can be made if the effect would be to exceed the maximum aggregate amount payable to Non Executive Directors. A Director is entitled to be paid traveling and other expenses properly incurred by them in attending Director’s or general meetings of the Company or otherwise with the business of the Company.

Executive Director and Senior Manager Remuneration

Objective

The Company aims to reward Executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to:

• align the interests of executives with those of shareholders; and • ensure total remuneration is competitive by market standards.

Structure

The Company has entered into employment contracts with David Dix, Kenneth Tregonning, Trevor Slater, Peter Behrenbruch and Richard Little. In specified circumstances justifying summary dismissal, the Company may terminate the agreement immediately without notice. In all circumstances, the Company may terminate the agreement by giving the Employee three months notice or payment in lieu of notice. The Employee may terminate the agreement by giving the Company three months notice in writing. In addition to annual salary, each Employee is entitled to superannuation and to be reimbursed for reasonable expenses incurred related to the performance of their duties.

Each Executive is required to continuously monitor their affairs so that there is no conflict between their interests and those of the Company. The executive service agreements do not, however, prevent the Employee from serving as a company officer of other companies, including those disclosed in their respective agreements or otherwise with prior written consent of the Company.

The agreements contain acknowledgements by the executives that any intellectual property developed by them in connection with the agreement and which may otherwise be owned by them belongs to the Company.

Remuneration consists of the following key elements: • Fixed Remuneration; and • Variable Remuneration - Short Term Incentive (STI).

Fixed Remuneration

Objective

Fixed remuneration is reviewed by the remuneration committee. The process consists of a review of the performance of the Executives using a formal staff appraisal. Reference is made by the committee to the Company’s performance, individual performance relevant comparative remuneration, and where appropriate independent external advice.

Structure

Executives receive their fixed remuneration in the form of cash salary.

For

per

sona

l use

onl

y


Page 15



Variable Remuneration – Short Term Incentives (STI)

Objective

The objective of the STI program is to link the achievement of the Company’s performance with the remuneration received by the executives charged with meeting those targets.

Structure

Actual short term incentives are granted to Executives in the form of cash bonus and Company share options as a part of the Company’s share option scheme, at the discretion of the remuneration committee. Due to the small number of staff, the grading of performance is on an individual basis.

For

per

sona

l use

onl

y


Page 16



Remuneration of Key Management Personnel

Table 1: Remuneration of Key Management Personnel Short-Term Post Employment Long-Term Share-based

Payment Total Total

Performance Related Salary &

Fees Cash

Bonus Non Monetary

Benefits Other Super. Retirement benefits

Incentive Plans Options(1)

$ $ $ $ $ $ $ $ $ % Executive Directors David Dix 2008 480,000 - - - 57,600 - - - 537,600 - Chairman and Chief Executive Officer 2007 400,000 200,000 - - 40,000 - - 2,690,000 3,330,000 87%

Kenneth Tregonning 2008 360,000 - - - 43,200 - - - 403,200 - Managing Director 2007 300,000 50,000 - - 30,000 - - 2,690,000 3,070,000 89% Peter Behrenbruch(2) 2008 420,000 - - - 50,400 - - - 470,400 - Director and Chief Operating Officer 2007 184,372 - - - 18,437 - - 1,088,342 1,291,151 84%

Non-Executive Directors Barry McGuiness 2008 75,000 - - - 9,000 - - - 84,000 - Non-Executive Director 2007 75,000 - - - 7,500 - - - 82,500 - John Branson 2008 75,000 - - - 9,000 - - - 84,000 - Non-Executive Director 2007 75,000 - - - 7,500 - - - 82,500 - Richard Price 2008 65,000 - - - 7,800 - - - 72,800 - Non-Executive Director 2007 8,903 - - - 890 - - - 9,793 - Executives Trevor Slater 2008 276,000 - - - 33,120 - - 152,000 461,120 33% Company Secretary 2007 230,000 - - - 23,000 - - - 253,000 - Richard Little 2008 300,000 - - - 36,000 - - 305,587 641,587 48% Chief Financial Officer 2007 34,243 - - - 3,424 - - 162,064 199,731 81% Total 2008 2,051,000 - - - 246,120 - - 457,587 2,754,707 17% Total 2007 1,307,518 250,000 - - 130,751 - - 6,630,406 8,318,675 83% (1) Further details of the options granted are contained in Table 2 of Note 19 to Directors’ Report and Note 27(c) to the financial statements. (2) Peter Behrenburch was Chief Operating Officer throughout the financial year. He was appointed a Director on 21 November 2007 and resigned on 23 July 2008. (3) John Fear was appointed Chief Operating Officer on 25 July 2008.

For

per

sona

l use

onl

y


Page 17

DIRECTORS’ REPORT (cont.) 19. REMUNERATION REPORT (AUDITED) (cont.)

Compensation Options: Granted and vested during the year (Consolidated)

During the year options were granted as equity compensation benefits under the short term incentive plan to certain key management personnel as tabled below. Share options were issued free of charge. The contractual life of each option granted is five years. For further details relating to the options, refer to Note [23].

Table 2: Compensation Options: Granted and vested during the year (Consolidated)

Granted Terms & Conditions for each Grant Vested

30 June 2008 No. Grant Date

Fair Value per option at grant

date ($) (Note 23)

Exercise price per option ($) (Note 23)

Expiry Date First Exercise Date

Last Exercise Date No. %

Executive Directors D. Dix - - - - - - - - -

K. Tregonning - - - - - - - - -

P. Behrenbruch - - - - - - - - -

Executives

R. Little 50,000 9 Aug 2007 3.04 7.00 9 Aug 2012 10 Oct 2007 9 Aug 2012 50,000 100

T. Slater 50,000 9 Aug 2007 3.04 7.00 9 Aug 2012 10 Oct 2007 9 Aug 2012 50,000 100

Total 100,000 100,000

For

per

sona

l use

onl

y


Page 18



Table 2: Compensation Options: Granted and vested during the year (Consolidated) (cont.)

Granted Terms & Conditions for each Grant Vested

30 June 2007 No. Grant Date Fair Value per option at grant

date ($)

Exercise price per option ($)

Expiry Date First Exercise Date

Last Exercise

Date No. %

Executive Directors D. Dix 1,000,000 22 Nov 2006 2.69 0.85 22 Nov 2011 22 Nov 2006 22 Nov 2011 1,000,000 100

K. Tregonning 1,000,000 22 Nov 2006 2.69 0.85 22 Nov 2011 22 Nov 2006 22 Nov 2011 1,000,000 100

P. Behrenbruch 250,000 29 Jan 2007 2.40 4.38 29 July 2014 29 July 2009 29 July 2014 - -

P. Behrenbruch 500,000 29 Jan 2007 2.33 2.50 29 July 2015 29 July 2010 29 July 2015 - -

Executives

R. Little 100,000 14 May 2007 3.14 5.05 14 Aug 2012 14 Aug 2007 14 Aug 2012 - -

Total 2,850,000 2,000,000

For

per

sona

l use

onl

y


Page 19



Table 3: Options granted as part of remuneration

Value of

options granted during the year

(i)

Value of options exercised during

the year (ii)

Value of

options lapsed during the year

Total value of options granted,

exercised and lapsed during the

year

% remuneration consisting of options for

the year Directors

P. Behrenbruch - 350,000 - 350,000 -

G. McGuiness - 175,000 - 175,000 -

Executives

R. Little 152,000 - - 152,000 31%

T. Slater 152,000 - - 152,000 33%

(i) The value of options granted during the year is recognised in employee compensation over the vesting period in accordance with Australian Accounting Standards. For details on the valuation of the options, including models and assumptions used, please refer to Note 23. There were no alterations to the terms and conditions of options granted as remuneration since their grant date.

(ii) The value of options exercised during the year reflects the fair value of the option as at the date it was exercised.

Table 4: Shares issued on Exercise of Compensation Options (Consolidated)

Shares Issued No.

Paid Per Share (Note 23)

$ Unpaid Per Share

$

30 June 2008

Directors

G. McGuiness 125,000 0.85 -

P. Behrenbruch 250,000 0.85 -

375,000

Shares Issued No.

Paid Per Share (Note 23)

$ Unpaid Per Share

$

30 June 2007

Directors

D. Dix 1,000,000 0.85 -

K. Tregonning 1,000,000 0.85 -

G. McGuiness 125,000 0.85 -

2,125,000

For

per

sona

l use

onl

y


Page 20


20. INTEREST IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE

As at the date of this report, the interests of the Directors or their related companies in the Shares and Options of the Company were:

Ordinary Shares Options over Ordinary Shares

D. Dix 37,558,613 -

K. Tregonning (1)

27,166,699 -

J. Branson 20,000 250,000

G. McGuiness 280,000 -

R. Price 3,092,102 -

P. Behrenbruch (2)

250,000 750,000 (1)

Kenneth Tregonning has an interest in shares and options held by Winlen Pty Ltd, an initial shareholder. Dr Tregonning and his wife are the sole directors of Winlen Pty Ltd and hold 51% and 49% respectively of the issued shares in the company.

(2) Peter Behrenbruch resigned as a director on 23 July 2008.

For

per

sona

l use

onl

y


Page 21


21. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

The Directors received the following declaration from the auditor of AED Oil Limited.

Non-Audit Services

The following non-audit services were provided by the Company’s auditor, Ernst & Young. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Accounting advice and assurance related services $45,068

For

per

sona

l use

onl

y


Page 22

CORPORATE GOVERNANCE STATEMENT The Board of Directors of AED Oil Limited are committed to ensuring that the Company is properly managed to protect and enhance shareholders’ interests. Accordingly, the Board has adopted corporate governance policies and practices designed to promote responsible management and conduct of the company.

AED Oil Limited’s Corporate Governance Statement is structured with reference to the ASX Corporate Governance Council’s principles and recommendations, which are as follows:

Principle 1 - Lay solid foundations for management and oversight

The responsibilities of the Board include:

- Providing strategic guidance to the Company including contributing to the development of, and approving, the corporate strategy;

- Reviewing and approving business plans, the annual budget and financial plans including available resources and major capital expenditure initiatives;

- Overseeing and monitoring organizational performance and the achievement of the Company’s strategic goals and objectives;

- Monitoring progress and major capital expenditures;

- Monitoring financial performance including approval of the annual and half-year financial reports and liaison with the Company’s auditors;

- Appointment, performance assessment and, if necessary, the removal of the Managing Director;

- Ratifying the appointment and/or removal and contributing to the performance assessment for the members of the senior management team including the Managing Director and Company Secretary;

- Ensuring there are effective management processes in place and approving major corporate initiatives;

- Enhancing and protecting the reputation of the organisation;

- Approving remuneration of management and Employees;

- Approval of delegation of authority to management; and

- Approval and compliance with policies including quality, health, safety, security and environment (QHSE).

The Chairman is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their roles and responsibilities, facilitating Board discussion and managing the Board’s relationship with the Company’s senior management.

Principle 2 – Structure of the Board to add value

The Board has adopted a Board charter which outlines requirements in relation to the size, composition and independence of the Board and the expectations of Directors. It also sets out the Board’s role and responsibilities, the role and responsibilities of the Board Committees and the division of responsibilities between the Executive Chairman and the Managing Director.

The ASX Recommendations state that the:

- majority of a company’s board should comprise independent directors (that is non executive directors who meet the criteria specified in the ASX Recommendations); and

- chairman should be an independent director.

The Board currently comprises five Directors.

The Board considers that a majority of the current Directors, namely Barry McGuiness, John Branson and Richard Price, satisfy the criteria for independence in the ASX recommendations. David Dix and Kenneth Tregonning are not considered independent as they are employed by the Company in executive positions.

As Mr. Dix is an Executive Chairman, the Board does not currently comply with the recommendation that the chairman of the Board be an independent director. The Board supports having Mr. Dix as Executive Chairman because he founded the Company and all Shareholders have invested in the knowledge of his role and he has a thorough knowledge of the Company’s operations. Recognising that an Executive Chairman is not able to provide an independent review of the performance of management, the Board has:

- appointed a majority of independent Directors;

- appointed only Non Executive, independent Directors to the Audit and Risk Committee and Nomination and Remuneration Committee; and

- established clear protocols for handling conflicts of interest.

For

per

sona

l use

onl

y


Page 23

CORPORATE GOVERNANCE STATEMENT (cont.)

Principle 2 – Structure of the Board to add value (cont.)

Board Committees

The Board discharges its duties in relation to specific functions through the committees as set out below.

Audit and Risk Committee

The Board has established an audit and risk committee to assist the Board in fulfilling its corporate governance responsibilities.

The committee charter provides that the committee’s role is to review the appropriateness of the Company’s accounting and risk management systems, procedures and controls, identifying, prioritising and monitoring regulatory and statutory compliance and conducting reviews of the internal and external audit function. The committee also reviews and implements processes to identify measure and reduce business risk. The committee meets regularly and make appropriate recommendations to the Board as required.

The ASX Recommendations provide that the audit committee of an ASX listed company should only consist of non executive directors with a majority of the committee comprising independent directors. The chairman of the committee must also be an independent director and should not be the Chairman.

The current committee members are Barry McGuiness, John Branson, Richard Price and Trevor Slater – Company Secretary. Barry McGuiness, an independent Director, is the chairman of the committee. As such, the current composition of the committee is in compliance with the ASX Recommendations.

The Company’s auditor, Ernst & Young, are invited to participate in the committee meetings as required.

Nomination and Remuneration Committee

The purpose of the nomination and remuneration committee is to make recommendations to the Board regarding the appointment, retirement and remuneration of senior executives, Non Executive and Executive Directors and advising on general personnel issues, including recruitment and termination policies, succession planning and salary packages. The committee also monitors the education and performance of Directors.

The committee’s charter, in line with the ASX Recommendations, provides that the committee must comprise at least three Directors. The committee’s members must be Non Executive Directors with a majority being independent Directors. The chairman of the committee must be an independent Director and may not be the Chairman except in limited circumstances.

The current committee members are Barry McGuiness, John Branson and Richard Price. John Branson, an independent Director, is the chairman of the committee. As such, the current composition of the committee is in compliance with the ASX Recommendations.

One third of the Directors are subject to re-election at each annual general meeting. The respective tenure of each Director is set out below:

Name Initial Appointment

D. Dix 6 August 2004

K. Tregonning 6 August 2004

G. McGuiness 14 February 2005

J. Branson 14 February 2005

R. Price 14 May 2007

An independent review of the conduct of the performance of each Director, and the Board as a whole has not been undertaken during the past period.

The Board schedules meetings to occur in each calendar month, and holds as many additional meetings as the operations of the Company may require. The number of meetings of the Company’s Board is disclosed in the Director’s report.

Directors have the right in connection with their duties and responsibilities, to seek independent professional advice at the Company’s expense. Prior written approval of the Chairman is required, but this will not be unreasonably withheld.

For

per

sona

l use

onl

y


Page 24


Principle 2 – Structure of the Board to add value (cont.)

Performance

The performance of the Board and key executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period, the Nomination and Remuneration Committee conducted performance evaluations that involved an assessment of each Board member’s and key executive’s performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which Directors and executives are assessed are aligned with the financial and non-financial objectives of AED Oil Limited. Directors whose performance is consistently deemed unsatisfactory may be asked to retire.

Principle 3: Promote Ethical and responsible Decision Making

In accordance with the Corporations Act and the Constitution, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company.

All Directors and Employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

Directors Code of Conduct

The Board has adopted a director’s code of conduct. This code sets out the practices necessary for directors to take into account their legal obligation and the reasonable expectation of stakeholders. The code addresses the general principle covered under the Corporations Law and the principles set out in the ASX corporate governance counsels recommendations.

Corporate Code of Conduct

The code of conduct expresses certain basic principles that AED, their employees and external consultants should follow in all dealings related to AED. The code reflects the requirement for the high business intregrity, the preservation of confidentiality of information;

• Commitment to shareholders • Compliance with relevant laws • Environment protection • Whistleblower protection • Occupational health and safety • Confidentiality • Conflicts of interest • General conduct

Share trading guidelines

The Company has adopted guidelines for dealing in securities which:

(a) prohibit certain dealing in securities; and

(b) establish a best practice procedure in relation to dealing in securities by Directors, Management and Employees.

Subject to the overriding restriction that no person may deal in Shares while they are in possession of materially price sensitive information, Directors, Management and Employees will only be permitted to deal in securities during certain window periods, such as following the release of Company’s financial results, quarterly reports and the annual general meeting. Outside these periods, Directors, Management and Employees must receive clearance for any proposed dealing in securities, which must only be given in specified circumstances.

The Company’s trading policy is discussed with each new Employee as part of their induction. The holding of Company securities and options by Directors and Employees is reported to the Board at each meeting.

As a part of the finalisation of the half yearly and annual accounts, the Chief Financial Officer reviews with the Directors, all issues of relevance in preparing the accounts including the impact of changes in Accounting Principles and carrying value of assets.

The Executive Chairman and the Chief Financial Officer are required to state in writing that the Company’s Financial Reports present a true and fair view in all material respects of the Company’s financial condition and operational results in accordance with relevant accounting standards.

For

per

sona

l use

onl

y


Page 25


Principle 4: Safeguard integrity in financial reporting

After completion of the half-yearly review and the annual statutory audit, a meeting takes place between the external auditors, the Board and management of the Company. Audit recommendations, internal control matters and any other matter arising from the audit are reviewed and discussed. Recommendations from the auditors are considered, and if deemed appropriate implemented.

If necessary, the Directors also meet separately with the auditors to discuss any matters raised by them in relation to the management of the Company.

The Directors review the performance of the external auditors on an annual basis and meet with them at least twice during the year. Ernst & Young was appointed in 2004.

An analysis of fees paid to the external auditors, including a breakdown of fees for non- audit services, is provided in the notes of the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Board.

Principle 5: Make timely and balanced disclosure

The Company has adopted a continuous disclosure policy. The Company Secretary has been nominated as the person responsible for communications with the Australian Stock Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirement in the ASX Listing Rules and overseeing and co-coordinating information disclosure to the ASX, analysts, brokers, Shareholders, the media and the public.

All material information concerning the Company, including its financial situation, performance, ownership and governance are posted on the Company website to ensure all investors have equal and timely access.

To ensure that all Company announcements are factual, clear and balanced approval is required from a Director. Subject to availability this is normally the Chairman.

Principle 6: Respect the rights of shareholders

The Board recognises its responsibility to ensure that its Shareholders are informed of all major developments affecting the Company.

All Shareholders receive a copy of the Company’s annual report and both the annual and half yearly reports are posted on the Company’s website.

Quarterly reports are prepared in accordance with ASX listing rules. A copy is posted on the Company’s website.

Regular updates on operations are made via ASX releases.

All information disclosed to the ASX is posted on the Company’s website as soon as possible after it is disclosed to the ASX. When analysts are briefed on aspects of the Company’s operation, the material used in the presentation is released to the ASX and posted on the Company’s website.

The external auditor is requested to attend the annual general meeting and be available to answer shareholder questions about the conduct of the preparation and content of the audit report.

Principle 7: Recognise and manage risk

A key element of the quality, health, safety, security and environment policy and procedures is risk management. The policy covers the Company’s day-to-day internal operations.

Two key risks for the Company are project completion and oil prices.

The Company is developing the Project utilising ‘compression methods’ for project development and implementation. Most key engineering components have now been secured. The Company validates estimates, project design and the completion schedule by utilising external and independent consultants along with a peer review process.

The Company is subject to commodity price fluctuation through the sale of crude oil denominated in $US. The Company continues to monitor its policy to manage those risks.

The Board is responsible for approval of acquisition and disposal of exploration and development interests. The Board is also responsible for overseeing identification and development of strategies to mitigate price risk, including hedging and also asset protection and potential liabilities via insurance.

The Company has in place internal control processes, and undertakes such modifications as are necessary to ensure reasonable levels of control are maintained.

Authorisation of equity raisings, entering into debt facilities and major capital expenditure or commitments requires Board approval. All routine operating expenditures are the responsibility of management in accordance with programmes and budgets approved by the Board.

For

per

sona

l use

onl

y


Page 26


Principle 7: Recognise and manage risk (cont.)

In relation to its responsibilities the Board’s consideration includes the following:

• Review of internal controls and recommendations of enhancements;

• Monitoring of compliance with the Corporations Act 2001, Australian Stock Exchange, Australian Taxation Office and Australian Securities Investments Commission requirements;

• Improving the quality of the management and accounting information; and

• Follow-up and rectification by management of deficiencies or breakdown in controls or procedures.

The Company has established a delegation of authority under which the Board delegates authority to senior managers as appropriate.

Principle 8: Encourage enhanced performance

The Board is of the view that the Directors have the knowledge and information to discharge their responsibilities. The performance of Company executives is reviewed annually by the Chairman. The performance of the Executive Chairman is reviewed by the Nominations and Remuneration Committee

Principle 9: Remunerate fairly and responsibly

The objective of the Company’s executive reward framework is to ensure reward for performance and is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for Shareholders. The Board endeavours to ensure that executive reward satisfies the following key criteria for good reward governance practices:

• Competitive and reasonable;

• Acceptability to shareholders;

• Performance linkage/alignment of executive compensation;

• Transparency; and

• Capital Management.

The Board recognises that the attraction and retention of high calibre executives is critical to generating Shareholder value.

Non Executive Directors

Fees and payments to Non Executive Directors reflect the demands that are made on, and the responsibilities of, the Directors. The Board reviews Non Executive Director’s fees and payments annually and any increase over $250,000 stipulated in the company’s constitution, would be subject to Shareholder approval.

Superannuation payments are in accordance with the requirements of the Superannuation Guarantee legislation.

Executives

Each member of the executive team signed a formal employment contract at the time of their appointment covering a range of matters including their rights, responsibilities and any entitlements on termination. The standard contract refers to a specific formal job description.

Further information to Directors’ and executives’ remuneration is set out in the Directors report and Note 27 to the financial statements.

The Board has awarded options to key executives at its discretion in establishing the terms of their employment contracts.

The Company has established a Directors’ and employees’ remuneration and reward plan, which will include issue of securities to employees. The plan for Directors will be submitted to shareholders for approval. F

or p

erso

nal u

se o

nly


Page 27


Principle 10: Recognise the legitimate interests of stakeholders

The Company recognises the legal and other interests of stakeholders including:

• Regulators;

• Native title groups;

• Shareholders;

• Employees; and

• Consultants, contractors and suppliers.

AED Oil Limited’s corporate governance practices were in place throughout the year ended 30 June 2008 and were fully compliant with the Council’s best practice recommendations.

Structure of the Board

The skills, experience and expertise relevant to the position of director held by each Director in office at the date of the annual report is included in the Directors’ Report. Directors of AED Oil Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement.

In the context of director independence, 'materiality' is considered from both the Company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors that point to the actual ability of the director in question to shape the direction of the Company’s loyalty.

In accordance with the definition of independence above, and the materiality thresholds set, the following directors of AED Oil Limited are considered to be independent:

Name Position G. McGuiness Non-Executive Director J. Branson Non-Executive Director R. Price Non-Executive Director

The term in office held by each director in office at the date of this report is as follows:

Name Term in Office D. Dix 4 years K. Tregonning 4 years G. McGuiness 3-4 years J. Branson 3-4 years R. Price 1-2 years

For

per

sona

l use

onl

y

AED OIL LIMITED - ANNUAL FINANCIAL REPORT 2008

Page 28

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

Note CONSOLIDATED PARENT

2008 $’000

2007 $’000

2008 $’000

2007 $’000

Revenue 5(a) 144,388 - 144,388 - Operating Costs (72,402) - (72,954) - Royalty (5,258) - (5,258) - Depreciation and Amortisation (14,515) - (14,515) - Total Cost of sales (92,175) - (92,727) - Gross operating profit 52,213 - 51,661 - Other revenue 5(b) 1,072 - 1,072 - Other income 5(c) 10,678 3,602 11,320 3,602 Administrative and other expenses 5(d) (3,852) (2,322) (3,739) (2,262) Employee benefit expense 5(e) (9,549) (9,936) (9,549) (9,929) Underlying profit/(loss) before tax 50,562 (8,656) 50,765 (8,589) Profit on sale of assets (4) 346,078 - 346,078 - Fair value change on financial instruments 5(f) (32,627) (17,561) (32,627) (17,561) Finance costs 5(g) (16,194) - (16,194) - Profit/(loss) before income tax 347,819 (26,217) 348,022 (26,150) Income tax benefit/(expense) 6 (105,276) 5,660 (105,500) 5,650 Net profit/(loss) for the period 242,543 (20,557) 242,522 (20,500)

Earnings/(loss) per share Basic (cents per share) 7 165.3 (18.2) Diluted (cents per share) 7 128.4 (18.2) The above income statement should be read in conjunction with the accompanying notes.

For

per

sona

l use

onl

y


Page 29

BALANCE SHEET AS AT 30 JUNE 2008

CONSOLIDATED PARENT

Note 2008 $’000

2007 $’000

2008 $’000

2007 $’000

ASSETS Current Assets Cash and cash equivalents 9 348,008 18,166 348,008 18,166 Trade and other receivables 10 5,722 4,735 6,179 40,697 Inventories (at cost) 3,963 - 3,963 - Prepayments 11 41 661 41 661 Total Current Assets 357,734 23,562 358,191 59,524 Non-Current Assets Plant and equipment 12 353 161 353 161 Deferred exploration, evaluation and development costs 13 43,356 283,057 43,356 240,243 Production assets 14 158,999 - 159,553 - Investments 15 - - - - Deferred tax assets 6 9,626 28,352 9,391 21,920 Total Non-Current Assets 212,334 311,570 212,653 262,324 TOTAL ASSETS 570,068 335,132 570,844 321,848

LIABILITIES Current Liabilities Trade and other payables 16 45,824 27,341 46,564 20,422 Derivatives 17 - 4,825 - 4,825 Interest-bearing loans and borrowings 18 - 62,305 - 62,305 Provisions 19 319 154 319 154 Income tax payable 6 50,603 - 50,603 - Total Current Liabilities 96,746 94,625 97,486 87,706 Non-Current Liabilities Interest-bearing loans and borrowings 18 83,004 124,197 83,004 124,197 Provisions 19 22,932 54,262 22,932 54,262 Deferred tax liabilities 6 55,444 19,498 55,444 13,076 Total Non-Current Liabilities 161,380 197,957 161,380 191,535 TOTAL LIABILITIES 258,126 292,582 258,866 279,241 NET ASSETS 311,942 42,550 311,978 42,607

EQUITY Contributed equity 20 89,732 60,837 89,732 60,837 Retained earnings/(accumulated losses) 21 216,554 (25,989) 216,590 (25,932) Reserves 22 5,656 7,702 5,656 7,702 TOTAL EQUITY 311,942 42,550 311,978 42,607 The above balance sheet should be read in conjunction with the accompanying notes.

For

per

sona

l use

onl

y


Page 30

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008

CONSOLIDATED Contributed

equity $’000

Retained earnings/(Accumulated

losses) $’000

Employee equity

reserve $’000

Total $’000

At 1 July 2006 57,925 (5,432) 503 52,996 Net income recognised directly in equity - - - - Loss for the period - (20,557) - (20,557) Total recognised income and expense - (20,557) - (20,557) Cost of share based payments - - 7,199 7,199 Options exercised during the year 2,912 - - 2,912 At 30 June 2007 60,837 (25,989) 7,702 42,550 At 1 July 2007 60,837 (25,989) 7,702 42,550 Net income recognised directly in equity - - - -

Profit for the period - 242,543 - 242,543 Total recognised income and expense - 242,543 - 242,543 Cost of share based payments - - 3,729 3,729 Transfer from employee equity reserve 5,775 - (5,775) - Options exercised during the year 7,720 - - 7,720

Issue of shares 15,400 - - 15,400

At 30 June 2008 89,732 216,554 5,656 311,942

PARENT

Contributed equity $’000

Retained earnings/(Accumulated

losses) $’000

Employee equity

reserve $’000

Total $’000

At 1 July 2006 57,925 (5,432) 503 52,996 Net income recognised directly in equity - - - - Loss for the period - (20,500) - (20,500) Total recognised income and expense - (20,500) - (20,500) Cost of share based payments - - 7,199 7,199 Options exercised during the year 2,912 - - 2,912 At 30 June 2007 60,837 (25,932) 7,702 42,607 At 1 July 2007 60,837 (25,932) 7,702 42,607 Net income recognised directly in equity - - - - Profit for the period - 242,522 - 242,522 Total recognised income and expense - 242,522 - 242,522 Cost of share based payments - - 3,729 3,729 Transfer from employee equity reserve 5,775 - (5,775) - Options exercised during the year 7,720 - - 7,720

Issue of shares 15,400 - - 15,400

At 30 June 2008 89,732 216,590 5,656 311,978 The above statement of changes in equity should be read in conjunction with the accompanying notes.

For

per

sona

l use

onl

y


Page 31

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

CONSOLIDATED PARENT

Note 2008 $’000

2007 $’000

2008 $’000

2007 $’000

Cash flows from operating activities Receipts from customers 143,172 - 143,149 -Settlement of oil commodity swaps (66,131) - (66,131) -

Payments to suppliers and employees (82,832) (4,819) (81,416) (4,721)

Interest received 944 - 944 -

Interest paid (17,166) - (17,166) -

Net cash used in operating activities 9(b) (22,013) (4,819) (20,620) (4,721)

Cash flows from investing activities

Purchase of plant and equipment (329) (99) (329) (99)

Payments for exploration, evaluation and development costs (200,508) (113,992) (243,817) (76,522)

Borrowing costs capitalised (4,755) (5,840) (4,755) (5,840)

Proceeds from sale of 60% of assets 9(c) 595,858 - 595,858 -

Transaction costs paid on sale of assets 9(c) (1,773) - (1,773) - Net cash provided by/(used in) investing activities 388,493 (119,931) 345,124 (82,461)

Cash flows from financing activities

Proceeds from issue of shares 23,120 2,912 23,120 2,912

Proceeds from bank borrowings 117,238 22,119 117,238 22,119

Proceeds from 6.5% convertible note issue - 107,759 - 107,759

Repayment of bank borrowings (163,569) - (163,569) -

(Loans to)/repayment from subsidiaries - - 37,703 (37,568)

Loans to joint venture operator (4,273) - - -

Net cash provided by/(used in) financing activities (27,484) 132,790 14,492 95,222

Net increase/(decrease) in cash and cash equivalents 338,996 8,040 338,996 8,040

Net foreign exchange differences (9,154) (3,547) (9,154) (3,547)

Cash and cash equivalents at beginning of year 18,166 13,673 18,166 13,673

Cash and cash equivalents at end of year 9(a) 348,008 18,166 348,008 18,166

The above cash flow statement should be read in conjunction with the accompanying notes.

For

per

sona

l use

onl

y


Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2008

Page 32

1. CORPORATE INFORMATION The financial report of AED Oil Limited (the Company) for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Directors on 28 August 2008.

AED Oil Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation

The financial report of AED Oil Limited is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.

The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.

The financial report complies with Australian Accounting Standards. The financial report also complies with International Reporting Standards (IFRS) as issued by the International Accounting Standard Board.

The financial report has been prepared on a historical cost basis, except for derivative financial instruments which have been measured at fair value.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

(b) Adoption of new accounting standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. Details of the impact of the adoption of these new accounting standards are set out in the individual accounting policy notes set out below. The Group has also adopted the following Standards as listed below which only impacted on the Group’s financial statements with respect to disclosure.

• AASB 101 ‘Presentation of Financial Statements (revised October 2006) • AASB 7 ‘Financial Instruments: Disclosures’

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of AED Oil Limited and its subsidiaries (“the Group”).

Subsidiaries are all those entities over which the Company has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

Adjustments are made to bring into line any dissimilar accounting policies that may exist.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Subsidiaries are consolidated from the date on which control is transferred to the Company and cease to be consolidated from the date on which control is transferred out of the Company.

Investments in subsidiaries held by AED Oil Limited are accounted for at cost in the separate financial statements of the Company.

For

per

sona

l use

onl

y



Page 33

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(d) Interest in a jointly controlled operations and assets

The Group has interests in joint ventures that are jointly controlled operations and assets. The Group recognises its interest in the jointly controlled operations and assets by recognising the Group’s share of assets, liabilities, revenue and expenses of jointly controlled operations and assets in the appropriate items of the Income Statement and Balance Sheet.

(e) Significant accounting judgements, estimates and assumptions

(i) Significant accounting judgements

In the process of applying the Company's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Operating lease commitments

A charter agreement has been entered into with Frontline FPSO for a floating production storage and offloading vessel to be used at the Puffin Field. The Company has determined that all of the significant risks and rewards of ownership of the FPSO are retained by Frontline FPSO as such the lease has been classified as an operating lease.

Capitalised development costs

Development costs are only capitalised by the Group when it can be demonstrated that the technical feasibility of completing the asset is valid so that the asset will be available for use or sale.

Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors. These include the level of reserves and resources, future technological changes, which could impact the cost of development, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.

In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the period in which this determination is made.

Taxation

The Group’s accounting policy for taxation requires management’s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits.

Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volumes, operating costs, restoration costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.

For

per

sona

l use

onl

y



Page 34


(e) Significant accounting judgements, estimates and assumptions (cont.)

(ii) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Impairment of plant and equipment, development assets, exploration and evaluation costs

Plant and equipment, development assets, exploration and evaluation costs and production assets are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use’ (being the net present value of expected future cash flows of the relevant cash generating unit) and ‘fair value less costs to sell’.

In determining value in use, future cash flows are based on:

• estimates of the quantities of reserves for which there is a high degree of confidence of economic extraction;

• future production levels; • future commodity prices; and • future cash costs of production and capital expenditure.

The management have concluded that there are no indications of impairment.

Restoration Provision

Restoration costs that are expected to be incurred are provided for as part of the cost of the preproduction, exploration, evaluation and development costs that give rise to the need for restoration. Accordingly these costs are recognised gradually over the life of the facility as these phases occur. The costs include obligations relating to plug, abandonment and restoration costs. These estimates of the restoration obligations are based on anticipated technology, legal requirements and future costs, which have been discounted to their present value. Any changes in the estimates are accounted for prospectively. In determining the restoration obligations, the Company has assumed no significant changes will occur in the relevant federal and state legislation to such restoration in the future.

Share-based payment transactions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial option pricing model, using the assumptions detailed in Note 23.

Determination of reserve estimates

Estimates of recoverable quantities of proven and probable reserves reported include judgemental assumptions regarding commodity prices, exchange rates, discount rates and production and transportation costs for future cash flows. It also requires interpretation of complex and difficult geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reservoirs, and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Changes in reported reserves can impact asset carrying values, provision for restoration and the recognition of deferred tax assets, due to changes in expected future cash flows.

(f) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of Oil

Revenue from the sale of oil is recoginsed when all significant risks and rewards of ownership have been transferred to the customer, this is typically at the time of offtake from the FPSO. The sales price is determined based on the average monthly Tapis price plus a premium in the month of bill of lading.

For

per

sona

l use

onl

y



Page 35


(f) Revenue recognition (cont.)

Interest

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

(g) Borrowing Costs

Borrowing costs are capitalised when they are directly attributable to qualifying assets and expensed when they are not.

(h) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Company as a lessee

Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

Company as a lessor

Leases in which the Company retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initially direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income.

(i) Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

(j) Inventory

Stocks of oil products have been valued at the lower of cost and net realisable value. Stocks of oil produced and held prior to offtake are ascribed a value based on their weighted average cost of production.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(k) Foreign currency translation

The functional and presentation currency of AED Oil Limited is Australian dollars (A$).

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

All differences in the consolidated financial report are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

For

per

sona

l use

onl

y



Page 36


(l) Income Tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

• when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

(m) Other Taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from or payable to the taxation authority, are classified as operating cash flows.

For

per

sona

l use

onl

y



Page 37


(m) Other Taxes (cont.)

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

Petroleum Resource Rent Tax (PRRT) is assessed before company income tax and the amount of PRRT paid is a deduction for the purpose of calculating company income tax. Exploration expenditure incurred in PRRT areas must be offset (to the extent possible) against PRRT liabilities elsewhere in the same group of companies. PRRT is payable when project cash flows become positive, after taking account all allowable exploration, development and operating costs, and after a stipulated return on the project has been achieved. For exploration and project expenditures after 1 July 1990, an exploration expenditure has a stipulated return of 15% plus the Australian Government long term bond rate (LTBR), and a project expenditure has a stipulated return of 5% plus the LTBR. The PRRT rate is 40%.

(n) Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Office Equipment – over 5 years. Computer Equipment – over 3 years.

Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to the recoverable amount.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period the item is derecognised.

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.

(o) Exploration and evaluation assets

Costs carried forward

Costs arising from exploration and evaluation activities are carried forward provided such costs are expected to be recouped through successful development, or by sale, or where exploration and evaluation activities have not, at reporting date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves.

(p) Assets in development

Expenditure incurred associated with the development of an area of interest are carried at cost. Upon successful completion of commissioning these costs are reclassified as production assets.

(q) Production assets

The costs of assets in the production phase are separately accounted for, and include past exploration and evaluation costs, preproduction costs, development costs and ongoing costs of continuing to develop reserves for production and to expand or replace plant and equipment.

Depreciation of capitalised costs relating to the North East Area of Interest is calculated on a combination of units of production basis with reference to proved and probable reserves.

For

per

sona

l use

onl

y



Page 38


(r) Recoverable amount of assets

At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Company makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount with a charge to the income statement.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(s) Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(t) Employee entitlements

(i) Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of Employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

(ii) Superannuation commitments

The Company contributes to each employee’s nominated plan based upon a percentage of each Employee’s salary. These contributions are recognised as an expense when they are made.

(u) Share-based payment transactions

The Company provides benefits to employees (including Directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

There is currently one plan in place to provide this benefit – The Employee Share Option Plan (ESOP), which provides benefits to Directors, senior executives and employees.

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).

For

per

sona

l use

onl

y



Page 39


(u) Share-based payment transactions (cont.)

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of the period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award is treated as if they were a modification of the original award, as described in the previous paragraph.

(v) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(w) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share are calculated as net profit or loss attributable to members of the parent, adjusted for:

• Costs of servicing equity (other than dividends);and

• The after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, and

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(x) Financial instruments

Trade and other receivables

Trade receivables are recognised on trade date, being the date the Group commits to sell goods.

Trade receivables which generally have 30 day terms are recognised and carried at invoice amount less an allowance for any uncollectible amount.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for impairment loss is established and recognised as a separate balance from trade receivables, when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

For

per

sona

l use

onl

y



Page 40


(x) Financial instruments (cont.)

The amount of the provision is recognised in the income statement in other expenses. When a trade receivable for which a provision for impairment had been recognised becomes uncollectible in a subsequent period, it is written off against the provision for impairment account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

In addition, if an allowance for impairment loss is raised in the future, a reconciliation of the movement in the provision is required.

Trade and other payables

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Financial liabilities

Financial liabilities are classified as either financial liabilities at Fair value through profit and loss (“FVTPL”) or other financial liabilities.

Financial liabilities designated at FVTPL

A financial liability is designated at FVTPL upon initial recognition if it forms part of a contract containing one or more embedded derivatives, and AASB 139 permits the entire combined contract (asset or liability) to be designated at FVTPL because the embedded derivative does not meet the requirements to be separated from the host contract.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in Note [26].

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Derivative financial instruments and hedging

The Company uses derivative financial instruments such as commodity swaps to hedge its risks associated with fluctuations in the future selling price of oil. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

The fair value of forward oil hedge (commodity swaps) contracts is calculated using market rates by reference to forward TAPIS oil prices and forward foreign exchange rates for contracts with similar maturity profiles.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to net profit or loss for the year. F

or p

erso

nal u

se o

nly



Page 41


(y) Standards and Interpretations issued not yet effective

At the date of authorisation of the financial report, the Standards and Interpretations listed below were on issue but not yet effective.

Initial application of the following Standard will not affect any of the amounts recognised in the financial report, but will change the disclosures presently made in relation to the Group and the Company’s financial report:

AASB 101 ‘Presentation of Financial Statement’(revised September 2007)

Effective for annual reporting periods beginning on or after 1 January 2009

AASB 8 and AASB 2007-3 ‘Operating Segments and consequential amendments to other Accounting Standards’


Initial application of the following Standards and Interpretations is not expected to have any material impact on the financial report of the Group and the Company:

AASB Interpretation 12 ‘Service Concession Arrangements’


AASB Interpretation 14 ‘AASB 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’


AASB Interpretation 13 ‘Customer Loyalty Programmes’


AASB 123 ‘Borrowing Costs’ (revised) Effective for annual reporting periods beginning on or after 1 January 2009

AASB 127 (Revised) ‘Consolidated and Separate Financial Statements’

Effective for annual reporting periods beginning on or after 1 July 2009

AASB 2008-2 ‘Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations arising on Liquidation


AASB 2008-3 ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127’

Effective for annual reporting periods beginning on or after 1 July 2009

AASB 2008-7 ‘Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate’


For

per

sona

l use

onl

y



Page 42


(y) Standards and Interpretations issued not yet effective (cont.)

The potential effect of the initial application of the expected issue of an Australian equivalent accounting standard to the following Standard has not yet been determined:

IFRS 3 ‘Business Combinations’ and IAS 27 ‘Separate and Consolidated Financial Statements’


AASB 2008-1 ‘Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations’


AASB 2008-1 ‘Improvements to IFRSs’ Effective for annual reporting periods beginning on or after 1 January 2009, except for amendments to IFRS 5, which are effective from 1 July 2009

(z) Comparative figures

Where necessary, comparative figures have been restated to be consistent with current period disclosure requirements.

3. SEGMENT INFORMATION The Company operates solely in the oil production and oil and gas exploration industry in Australia.

For

per

sona

l use

onl

y



Page 43

4. GAINS ON DISPOSAL OF ASSETS On 28 March 2008, the Company entered into a formal binding agreement with Sinopec International Petroleum Exploration and Production Corporation (“SIPC”), a wholly owned subsidiary of China Petrochemical Corporation (“Sinopec Group”), in which SIPC acquired a 60% joint venture interest in the Company’s assets held under AC/P22, AC/L6 and AC/RL1 (which include the Puffin and Talbot fields). The effective date of this transaction was 31 March 2008. On 18 June 2008, the Company completed the joint venture transaction.

SIPC paid US$561million (A$596million) for the 60% interest in the assets. The completion of the joint venture transaction allowed the Company to retire its debt, settle its creditors and fund its joint venture interest and development opportunities.

Details of the disposals are as follows:

CONSOLIDATED PARENT

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Consideration

Cash and cash equivalents 595,858 - 595,858 -

Book value of net assets sold

Exploration assets (66,611) - (66,611) -

Production assets (209,596) - (209,596) -

Rehabilitation provision 35,091 - 35,091 -

Net assets disposed (241,116) - (241,116) -

Transaction costs (8,664) - (8,664) -

Gains on disposal 346,078 - 346,078 -

5. REVENUES AND EXPENSES CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Revenue and Expenses from Continuing Operations (a) Revenue

Revenue from the sale of oil 144,388 - 144,388 -

(b) Other revenue

Interest 923 - 923 -

Rental revenue 149 - 149 -

1,072 - 1,072 -

For

per

sona

l use

onl

y



Page 44

5. REVENUES AND EXPENSES (cont.)

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

(c) Other income

Net foreign exchange differences 10,678 3,602 11,320 3,602

(d) Administrative and other expenses

Travel 833 478 833 478

Legal and professional services 261 85 157 24

Accounting and consulting 814 368 805 368

Office rent and administration costs 422 275 422 275

Insurance 277 69 277 69

Compliance costs 201 153 201 153

Depreciation 137 55 137 55

Other expenses from ordinary activities 907 839 907 840

Total administrative and other expenses 3,852 2,322 3,739 2,262

(e) Employee benefits expense

Wages and salaries 5,820 2,732 5,820 2,725

Share based option payments expense 3,729 7,199 3,729 7,199

Termination benefits - 5 - 5

9,549 9,936 9,549 9,929

(f) Fair value change on financial instruments

Fair value change on oil commodity swaps (Note 26) 73,820 1,123 73,820 1,123

Fair value change on convertible note (Note 18(c)) (41,193) 16,438 (41,193) 16,438

32,627 17,561 32,627 17,561 (g) Finance costs

Interest on loans 10,576 3,658 10,576 3,658

Interest on convertible notes 6,159 2,280 6,159 2,280

Unwind of discount – rehabilitation provision 3,686 - 3,686 -

Borrowing costs 528 3,633 528 3,633

20,949 9,571 20,949 9,571

Less: Borrowing costs capitalised (4,755) (9,571) (4,755) (9,571)

16,194 - 16,194 - For

per

sona

l use

onl

y



Page 45

6. INCOME TAX CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

The major components of income tax benefit are:

Income Statement

Current income tax

Current income expense/(benefit) 73,091 (11,178) 66,727 (4,746)

Adjustment in respect of current income tax of previous years (41) 12 (41) 12

Deferred income tax

Relating to origination and reversal of temporary differences 32,226 5,506 38,814 (916)

Income tax expense/(benefit) reported in the income statement 105,276 (5,660) 105,500 (5,650)

Statement of changes in equity

Deferred income tax related to items charged or credited directly to equity - - - -

Income tax expense/(benefit) reported in equity - - - -

A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Company 's applicable income tax rate is as follows:

Accounting profit/(loss) before income tax 347,819 (26,217) 348,022 (26,150)

Tax benefit at the applicable statutory income tax rate 104,183 (7,856) 104,407 (7,846)

Non-deductible employee option expense 1,118 2,160 1,118 2,160

Other non-deductible expenses 16 24 16 24

Adjustment in respect of previous years (41) 12 (41) 12

Income tax expense recognised in equity - - - -

Income tax benefit not/(now) recognised - - - -

Income tax benefit reported in the consolidated income statement 105,276 (5,660) 105,500 (5,650)

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period. F

or p

erso

nal u

se o

nly



Page 46

6. INCOME TAX (cont.)

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000 Deferred income tax

Deferred income tax at 30 June 2008 relates to the following:

Deferred tax liabilities

Capitalised exploration and development costs (48,018) (19,498) (48,018) (13,076)

Deferred gain on convertible note (7,426) - (7,426) -

(55,444) (19,498) (55,444) (13,076)

Deferred tax assets

Equity raising costs 222 450 222 450

Deferred losses on commodity swap contracts and convertible note - 6,379 - 6,379

Losses available for offset against future taxable income - 21,364 - 14,932

Other provisions and accruals 7,172 159 7,006 159

Unrealised foreign exchange adjustments 2,232 - 2,163 -

9,626 28,352 9,391 21,920

Recognised deferred tax assets and liabilities CONSOLIDATED PARENT 2008 2008 2007 2007 2008 2008 2007 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Current

Income Tax

Deferred Income

Tax

Current Income

Tax

Deferred Income

Tax

Current Income

Tax

Deferred Income

Tax

Current Income

Tax

Deferred Income

Tax Opening balance - 8,854 - 3,194 - 8,844 - 3,194 Charged to income (73,050) (32,226) - 5,660 (66,727) (38,773) - 5,650 Utilisation of tax losses 22,447 (22,447) - - 16,124 (16,124) - - Closing balance (50,603) (45,818) - 8,854 (50,603) (46,053) - 8,844

Tax expense/(benefit) in income statement 105,276 (5,660) 105,500 (5,650) Amounts recognised in the balance sheet: Deferred tax asset 9,626 28,352 9,391 21,920 Deferred tax liability (55,444) (19,498) (55,444) (13,076) (45,818) 8,854 (46,053) 8,844

The Company has tax losses arising in Australia and Singapore of $nil (2007:$21,364,000) that are available indefinitely for offset against future taxable profits of the Company. For the year ended 30 June 2008, these losses have been utilised.

Petroleum Resource Rent Tax (PRRT) applies to all petroleum projects in offshore areas under the Petroleum Act, other than some specified production licences. PRRT is assessed on a project basis or production licence area and is levied on the taxable profits of a petroleum project at a rate of 40%. Certain specified undeducted expenditures are eligible for compounding. The expenditures can be compounded annually at set rates, and the compounded amount can be deducted against assessable receipts in future years.

For

per

sona

l use

onl

y



Page 47

6. INCOME TAX (cont.)

The Company estimates that past holders of the Permit and AED Oil Limited have incurred expenditure resulting in total carried forward undeducted expenditure able to be set off against income, derived in future years of $214,496,000 (2007: $308,009,000). This amount has not yet been recognised. As a result of the sale transaction to SIPC (Note 4), PRRT credits of $287,117,283 were transferred to SIPC.

The Company intends to undertake further work to confirm the extent of any undetected expenditure available. In order for the Company to utilise undeducted expenditures for PRRT purposes from prior years, it will be required to substantiate eligible expenditure in relation to the Permit since the date of its grant. Any amount that the Company is not able to substantiate cannot be utilised by the Company against assessable receipts in future years.

7. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent (after deducting fair value adjustments and interest on the convertible redeemable preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

CONSOLIDATED

2008 2007 $’000 $’000

Earnings/(loss) used in calculation of basic EPS 242,543 (20,557) Fair value change of Convertible Note (41,193) - Convertible Notes interest 3,760 - Tax benefit on adjustments 11,230 - Earnings/(loss) used in calculation of diluted EPS 216,340 (20,557)

2008 2007

No.’000 No.’000

Weighted average number of ordinary shares used in the calculation of basic EPS 146,770 113,214

Shares deemed to be issued for no consideration in respect of:

Employee options 8,043 - Convertible unsecured notes 13,712 -

Weighted average number of ordinary shares used in the calculation of diluted EPS 168,525 113,214

2008 2007

Earnings per share Cents Cents

Basic EPS 165.3 (18.2)

Diluted EPS 128.4 (18.2)

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

For

per

sona

l use

onl

y



Page 48

8. DIVIDENDS CONSOLIDATED PARENT

Cents per

share

Total Amount $’000

Cents per

share Total Amount

$’000 30June 2008

Unrecognised amounts – dividends declared post year end

Fully paid ordinary shares Special dividend:

Fully franked at a 30% tax rate 20.0 30,905 20.0 30,905

On 30 July 2008, the directors declared a fully franked special dividend of 20 cents per share to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2008, to be paid to shareholders on 5 September 2008. The dividend will be paid to all shareholders on the Register of Members on 22 August 2008. This dividend was declared after the balance date, and has not been included as a liability in these financial statements. The dividend is franked based on the income tax payable as at 30 June 2008.

No dividends were paid to members during the financial period 30 June 2007.

PARENT

2008 2007

$’000 $’000

Franking account balance - -

Impact on franking account balance of dividends not recognised - -

9. NOTES TO THE CASH FLOW STATEMENT (a) Reconciliation of cash and cash equivalents

CONSOLIDATED PARENT 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Cash at bank and in hand 41,042 4,550 41,042 4,550

Short-term deposits 306,966 13,616 306,966 13,616

348,008 18,166 348,008 18,166

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates.

Included within the cash balance at 30 June 2008 is $29,733,000 provided as security for the settlement of $22,519,000 derivatives which occurred on 7 July 2008 and security was subsequently released.

The fair value of cash and cash equivalents is $348,008,000 (2007: $18,166,000). For

per

sona

l use

onl

y



Page 49

9. NOTES TO THE CASH FLOW STATEMENT (cont.)

(b) Reconciliation of profit/(loss) for the period to net cash flows from operating activities

CONSOLIDATED PARENT

2008 2007 2008 2007 $’000 $’000 $’000 $’000Reconciliation of net profit/(loss) after tax to net cash flows from operations

Net profit/(loss) after tax 242,543 (20,557) 242,522 (20,500)

Adjustments for:

Depreciation 14,652 54 14,652 54

Net fair value change on derivatives (41,193) 17,562 (41,193) 17,562

Employee option expense 3,729 7,199 3,729 7,199

Net exchange differences (10,678) (3,602) (11,320) (3,602)

Profit on sale of assets (346,078) - (346,078) -

Changes in assets and liabilities

((Increase)/decrease in trade and other receivables 3,285 210 1,692 241

(Increase)/decrease in prepayments 620 - 620 -

(Increase)/decrease in inventory (3,963) - (3,963) -

(Increase)/decrease in deferred tax assets 18,726 (18,212) 12,529 (11,780)

(Decrease)/increase in current tax liabilities 50,603 - 50,603 -

(Decrease)/increase in deferred tax liabilities 35,946 12,552 42,368 6,130

Decrease)/increase in derivatives (4,825) - (4,825) -

(Decrease)/increase in trade and other payables 18,053 (3) 21,477 (3)

(Decrease)/increase in provisions (3,433) (22) (3,433) (22)

Net cash used in operating activities (22,013) (4,819) (20,620) (4,721)

(c) Assets disposed

During the year, the Company disposed of 60% interest in assets to SIPC. Refer Note 4 for details.

(d) Disclosure of non-cash financing and investment activities

The Company did not have any non-cash financing and investing activities during the year.

For

per

sona

l use

onl

y



Page 50

10. TRADE AND OTHER RECEIVABLES CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Trade receivables(i) 5,668 - 5,668 -

Goods and services tax refunds 4 3,761 - 2,187

Deposits 8 73 - 64

Other receivables(i) 42 901 42 878

Inter company loan – AED Services Pte Ltd - - - 34,148

Inter company loan – Puffin Installation Services Pte Ltd - - 469 3,420

5,722 4,735 6,179 40,697

Terms and conditions (i) Receivables and other receivables are non–interest bearing and have repayment terms of under 30 days.

At 30 June 2008, there is no allowance for impairment loss, and no assets past due.

11. PREPAYMENTS CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Insurance 39 661 39 661

Software maintenance 2 - 2 -

41 661 41 661

12. PLANT AND EQUIPMENT CONSOLIDATED PARENT

Plant and equipment

Plant and equipment

$’000 $’000 Year ended 30 June 2008

At 1 July 2007 net of accumulated depreciation and impairment 161 161

Additions 329 329

Depreciation charge for the year (137) (137)

At 30 June 2008, net of accumulated depreciation and impairment 353 353

At 30 June 2008

Cost 580 580

Accumulated depreciation (227) (227)

Net carrying amount 353 353 At 30 June 2008, there was no allowance for impairment loss.

For

per

sona

l use

onl

y



Page 51

12. PLANT AND EQUIPMENT (cont.)

CONSOLIDATED PARENT

Plant and equipment

Plant and equipment

$’000 $’000 Year ended 30 June 2007

At 1 July 2006 net of accumulated depreciation and impairment 117 117

Additions 99 99

Depreciation charge for the year (55) (55)

At 30 June 2007, net of accumulated depreciation and impairment 161 161

At 30 June 2007

Cost 252 252

Accumulated depreciation (91) (91)

Net carrying amount 161 161

13. DEFERRED EXPLORATION, EVALUATION AND DEVELOPMENT COSTS CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Carrying amount at beginning of financial year 283,057 96,103 240,243 96,103 Expenditure during the period 186,292 145,276 229,106 102,462 Transfer to producing assets (361,553) - (361,553) - Restoration asset 2,171 41,678 2,171 41,678 Disposals (66,611) - (66,611) - Carrying amount at end of financial year 43,356 283,057 43,356 240,243

Comprises:

Development – Puffin North East - 205,013 - 162,199Exploration and evaluation – Puffin South West

41,688 23,782 41,688 23,782

Exploration and evaluation – Talbot acquisition

800 - 800 -

Restoration asset 868 54,262 868 54,262

43,356 283,057 43,356 240,243

For

per

sona

l use

onl

y



Page 52

14. PRODUCTION ASSETS CONSOLIDATED PARENT

2008 2007 2008 2007 Producing assets $’000 $’000 $’000 $’000 Carrying amount at beginning of financial year - - - -

Transfer from assets in development 361,553 - 361,553 -

Additions 21,557 - 22,111 -

Disposals (217,790) - (217,790) -

Carrying amount at end of financial year 165,320 - 165,874 -

Accumulated depreciation

Carrying amount at beginning of financial year - - - -

Amortisation expense (14,515) - (14,515) -

Disposals 8,194 - 8,194 -

Carrying amount at end of financial year (6,321) - (6,321) -

Net book value 158,999 - 159,553 -

15. INVESTMENTS (a) Investment in Subsidiaries

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Ashmore Oil Pty Ltd - - - -

AED Services Pte Ltd - - - -

- - - -

Investment in Controlled Entities

Name of the Entity Country of Incorporation Class of shares Equity holding

Ashmore Oil Pty Ltd Australia Ordinary 100%

AED Services Pte Ltd Singapore Ordinary 100%

For

per

sona

l use

onl

y



Page 53

15. INVESTMENTS (cont.)

(b) Interest in Jointly Controlled Operations and Assets

Joint Venture Details

The Group is a venture in the following jointly controlled operations and assets:

Output interest

Name of venture Principal activity 2008

%

2007

% Puffin Installation Services Pte Ltd (i) Subsea equipment installation 50 50 Sinopec-AED Unincorporated Joint Venture (ii)

Oil exploration, development and production 40 -

(1) The Group has a 50% participating interest in Puffin Installation Services Pte Ltd, an incorporated Joint Venture with Puffin FPSO Limited, via its subsidiary AED Services Pte Ltd. Under the joint venture agreement AED Services Pte Ltd and Puffin FPSO Limited will pay the respective project costs 70% and 30% respectively.

(2) On 28 March 2008, the Company entered into formal binding agreement with Sinopec International Petroleum Exploration and Production Corporation (“SIPC”), a wholly owned subsidiary of China Petrochemical Corporation (“Sinopec Group”), in which SIPC acquired a 60% joint venture interest in the Company’s assets held under AC/P22, AC/L6 and AC/RL1 (which include the Puffin and Talbot fields). The effective date of this transaction, for economic purposes, was 31 March 2008. On 18 June 2008, the Company completed the joint venture transaction.

(c) Commitments related to joint venture operations and assets

Refer to Note 25 for disclosure of commitments related to joint venture operations and assets.

(d) Contingent Liabilities

Nil.

(e) Impairment

No assets employed in the jointly controlled operation or assets were impaired during the year (2007: Nil).

16. TRADE AND OTHER PAYABLES CONSOLIDATED PARENT

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Trade creditors (Note 26) 43,628 24,966 43,628 18,047

Accruals 183 95 183 95

Convertible Note Interest accrual (Note 26) 2,013 2,280 2,013 2,280

45,824 27,341 45,824 20,422

Related party payables

Inter-company loan – AED Services Pte Ltd (Note 26)

- - 740 -

45,824 27,341 46,564 20,422

Terms and conditions

Trade creditors are non-interest bearing and are normally settled on 30 days.

For

per

sona

l use

onl

y



Page 54

17. DERIVATIVES CONSOLIDATED PARENT

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Financial Liabilities

Oil commodity swaps - 4,825 - 4,825

All outstanding contracts were closed out in the year with the final cash settlement of contracts that matured in June of $22,519,000 were settled on 7 July 2008. This amount was recorded in accounts payable at 30 June 2008. The entire movement in the fair value of oil commodity swaps is taken to the income statement (refer Note 5(f)).

18. INTEREST BEARING LOANS AND BORROWINGS CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Current

Project financing facility – secured(1) - 62,305 - 62,305

Non-current

Convertible notes – unsecured (Note 26) 83,004 124,197 83,004 124,197

(1) As a result of the sale of assets to SIPC (refer Note 4), all project financing facilities were repaid on 18 June 2008.

(a) Project Financing Facility

The carrying value of the project financing facility at 30 June 2008 was $NIL (2007: $62,305,000). There was no security over the assets of the Company at 30 June 2008. At 30 June 2007, the project financing facility was secured by a fixed and floating charge over the assets of the Company.

(b) Financing facilities available

At reporting date, there are no financing facilities available (2007: $62,699,000).

(c) Convertible Note

On 23 February 2007, the Group issued an unsecured and unsubordinated Convertible Note raising USD 85 million (AUD 107.8 million). The convertible notes were issued at par and carry a coupon rate of 6.50% per annum paid semi-annually. They will mature on 23 February 2012 at par. The convertible note is designated as fair value through profit or loss account. The classification adopted is due to the convertible notes containing multiple embedded derivatives and the designation was elected as Accounting Standards would otherwise require separate and fair valuations of all the embedded derivatives. Noteholders can convert their holdings into shares from 23 August 2008 and from 23 February 2010, they can redeem their capital. Noteholders will have the right to require the Company to redeem the Note at its principal amount together with accrued interest. In the period to 30 June 2008, the change in the fair value of the convertible note amounted to $41,193,000 (2007: $16,439,000). The carrying value of the convertible note is equal to the fair value. (Refer further details on fair value in Note 26).

(d) Capitalised Borrowing Costs

All net interest and borrowing costs of $4,755,000 (2007: $9,571,000) were incurred for the purpose of obtaining a qualifying asset (up to first oil production) and have been capitalised in Development Costs (Note 13).

For

per

sona

l use

onl

y



Page 55

19. PROVISIONS CONSOLIDATED PARENT 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Current liabilities - provisions

Employee Entitlements 319 154 319 154

Non current liabilities:

Provision for Restoration

At beginning of the year 54,263 12,585 54,263 12,585

Arising during the year and adjustments 74 41,677 74 41,677

Unwinding and discount rate adjustment 3,686 - 3,686 -

Decrease in provision due to sale of 60% interest to joint venture (Note 4) (35,091) - (35,091) -

At end of the year 22,932 54,262 22,932 54,262

The Restoration provision represents the present value of the Director’s best estimate of the future cost to remove equipment and abandon wells and to meet environmental obligations for the areas under the Company’s Permit after production activities have been completed. The estimate has been based on quotes and estimates obtained from an independent well management consultant.

The present value has been calculated based on a discount rate of 9% over a period of six years representing the best estimate of when the costs are expected to be incurred.

20. CONTRIBUTED EQUITY (a) Ordinary shares.

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

154,526,782 fully paid ordinary shares (2007: 117,589,223) 89,732 60,837 89,732 60,837

Movement in ordinary shares on issue Shares No. ‘000 $’000

At 1 July 2006 109,937 57,925

Exercise of share options 7,652 2,912

At 1 July 2007 117,589 60,837

Transfer from Employee Equity Reserves (note 22) - 5,775

Exercise of share options 34,938 7,720

Additional Shares Issued 2,000 15,400

At 30 June 2008 154,527 89,732

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

For

per

sona

l use

onl

y



Page 56

20. CONTRIBUTED EQUITY (cont.)

(b) SHARE OPTIONS

The Company has granted Options over unissued shares in the Company, each option conferring the right to subscribe for one fully paid ordinary share. The Options do not confer the right to dividends or to vote at meetings of members. Shares allotted on exercise of the Options will rank pari passu in all respects with other fully paid ordinary shares. Each option will entitle the holder to participate in new issues in which shares or other securities are offered to members on the prior exercise of the option.

CONSOLIDATED PARENT

Reconciliation of Options 2008 No.

2007 No.

2008 No.

2007 No.

Seed Capital:

Seed capital options at the beginning of the year 34,012,559 39,539,505 34,012,559 39,539,505

Options exercised during the year (34,012,559) (5,526,946) (34,012,559) (5,526,946)

Seed capital options at the end of the year - 34,012,559 - 34,012,559

Remuneration Options: Remuneration options at the beginning of the year 2,790,000 1,605,000 2,790,000 1,605,000 Options issued during the year 1,165,000 3,310,000 1,165,000 3,310,000

Options exercised during the year (925,000) (2,125,000) (925,000) (2,125,000)

Total remuneration options at the end of the year (Note 23) 3,030,000 2,790,000 3,030,000 2,790,000

Total options at the end of the year 3,030,000 36,802,559 3,030,000 36,802,559

21. RETAINED EARNINGS/(ACCUMULATED LOSSES) CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Balance at beginning of year (25,989) (5,432) (25,932) (5,432)

Net profit/(loss) for the year 242,543 (20,557) 242,522 (20,500)

Balance at end of year 216,554 (25,989) 216,590 (25,932)

For

per

sona

l use

onl

y



Page 57

22. RESERVES CONSOLIDATED PARENT

2008 2007 2008 2007

Employee Equity Reserves $’000 $’000 $’000 $’000

As at beginning of the year 7,702 503 7,702 503

Share-based payment 3,729 7,199 3,729 7,199

Transfer to share capital (5,775) - (5,775) -

As at end of the year 5,656 7,702 5,656 7,702

The Employee Equity Reserves arises on the grant of share options to executives and employees under the employee share option plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised, and it is transferred to retained earnings when the options lapse. Further information about share-based payments to employees is made in Note 23 to the financial statements.

23. SHAREBASED PAYMENT PLANS (a) Employee Share Option Plan (ESOP)

Share options are granted to executives and employees under the ESOP. The ESOP is designed to align participants’ interests with those of the shareholders by increasing the value of the Company’s shares. Under the ESOP, the exercise price of the options is set at the market price of the shares on the date of the grant and may include individual performance criteria. The contractual life of each option is five years and there are no cash settlement alternatives.

The following table is a summary of options granted under ESOP:

Reconciliation of ESOP Options 2008 No.

2008 WAEP

2007 No.

2007 WAEP

Employees and executives options at the beginning of the year 2,790,000 $2.25 1,605,000 $0.85 Options issued during the year 1,165,000 $7.50 3,310,000 $2.03

Options exercised during the year (925,000) $0.99 (2,125,000) $0.85

Total employees and executives options at the end of the year 3,030,000 $4.65 2,790,000 $2.25

Total options at the end of the year 3,030,000 $4.65 2,790,000 $2.25

The outstanding balance as at 30 June 2008 is represented by:

• 765,000 options over ordinary shares with an exercise price of $0.85 each, exercisable immediately until 30 June 2010;

• 1,195,000 options over ordinary shares with a weighted average exercise price of $3.57 each, exercisable upon completion of one year service, with average contractual life of 5.84 years;

• 1,070,000 options over ordinary shares with a weighted average exercise price of $7.73 each, exercisable upon completion of one year service, with average contractual life of 4.73 years.

The range of exercise prices for options outstanding at the end of the year was $0.85-$11.00 (2007: $0.85-$5.05).

The weighted average fair value of options granted during the year was $3.03 (2007: $2.43)

The weighted average remaining life for the share options outstanding as at 30 June 2008 was 4.48 years (2007: 0.50 years)

For

per

sona

l use

onl

y



Page 58

23. SHARE-BASED PAYMENT PLANS (cont.)

(b) Summary of ESOP Option Valuation Model

The following table lists the inputs to the model used for options granted during the year:

2008 2007

Dividend yield (%) - -

Weighted average expected volatility (%) 45.0 44.6

Weighted average risk Free Interest Rate (%) 6.40 5.87

Expected Life of Options (years) 5.0 5.0

Weighted average option exercise price ($) 7.50 1.76

Weighted average share price at grant date ($) 7.12 3.64

Model used Binomial Binomial

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value.

24. AUDITORS REMUNERATION CONSOLIDATED PARENT 2008 2007 2008 2007 $ $ $ $

The auditor of AED Oil Ltd is Ernst & Young

Amounts received or due and receivable by Ernst & Young for:

- an audit or review of the financial report of the entity

148,500 97,500 139,500 97,500

- other services in relation to the entity

- assurance related (convertible note) - 118,622 - 118,622

- assurance related (AIFRS) 16,068 52,822 16,068 52,822

- assurance related (asset sale transaction)

16,000 - 16,000 -

- other 13,000 - 13,000 -

193,568 268,944 184,568 268,944

For

per

sona

l use

onl

y



Page 59

25. COMMITMENTS AND CONTINGENCIES Operating lease commitments – Company as lessee

The Company has entered into commercial leases on the premises at Level 41, 55 Collins Street Melbourne which expires in June 2009. There are no restrictions placed upon the lessee by entering into these leases and the Company’s net commitment to June 2009 is $363,000.

Joint Venture commitments

Sinopec and AED Oil have entered into an unincorporated joint venture (refer Note 15(b)). The commitments disclosed below represent AED’s 40% share.

(a) Frontline FPSO Limited

The joint venture has a Charter agreement with Frontline FPSO Ltd for the supply and operation of the Front Puffin to be used as a Floating Production Storage and Offloading facility, for a period of 2 years from 5 June 2007, with an option for a further 4 x 1 year options.

Future minimum rentals payable under non-cancellable operating leases as at 30 June 2008 are as follows:

CONSOLIDATED PARENT 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Within one year 39,497 95,578 39,497 95,578 After one year but not more than five years - 87,895 - 87,895 More than five years - - - - 39,497 183,473 39,497 183,473

(b) Exploration expenditure commitments

Expenditure commitments being the minimum work requirements under exploration permits for petroleum. As a condition of the acquisition of the interest in AC/P22, the following work is committed to be performed:

Year Commitment Estimated Cost A$

2009 Drill one well 2,400,000

Expenditure commitments include obligations arising from farm-in arrangements, and minimum work obligations for the initial 3 year period of exploration permits, and thereafter annually. Minimum work obligations, may, subject to negotiation and approval, be varied.

Overriding Royalty Interests

The interests of the Company in respect of the Permit are subject to certain Overriding Royalty Interests relating to Petroleum produced from the Permit Area.

Overriding Royalty Interests have been granted to the following parties and is payable based on AED’s share of production:

Existing Overriding Royalty Interest holder Existing Overriding Royalty Interest %

Geoscience Works 0.25 Plexor 0.45 Westranch 1.25 Attune 1.25 Total 3.20

For

per

sona

l use

onl

y



Page 60

25. COMMITMENTS AND CONTINGENCIES (cont.)

Contingencies

Legal Claim

The Company and its 50% owned incorporated joint venture (Puffin Installation Services Pte Ltd) received a claim for costs from its installation contractor seeking US$14,333,107 alleged to be owing arising out of the installation contract. The Company has issued proceedings in the Supreme Court of Victoria against the installation contractor, its directors, legal advisers and others for an amount substantially greater than the amount claimed by the installation contractor. Further, the Company has other claims against the installation contractor.

The Company disputes it is indebted to the installation contractor. As such, no provision has been made in the financial statements.

26. FINANCIAL INSTRUMENTS Financial Risk Management Objectives and Policies

The Company’s principal financial instruments at year end comprise cash, short-term deposits, receivables, payables and convertible notes. During the financial year all derivatives were terminated and bank loans were repaid.

It is, and has been throughout the period under review, the Company’s policy that no trading in financial instruments shall be undertaken. The use of financial derivatives requires approval by the Board.

The Company has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

The accounting classification of each category of financial instruments, and their carrying amounts are set out below:

30 June 2008

CONSOLIDATED Note

Loans & Receivables

$’000

At FVTPL

$’000

Designated at FVTPL

$’000


measured at amortised

cost

$’000

Total carrying amount

$’000

Financial Assets Cash and cash equivalents 9 348,008 - - - 348,008 Trade and other receivable 10 5,722 - - - 5,722 Financial Liabilities Trade creditors 16 - - - (43,628) (43,628) Convertible Note interest 16 - - - (2,013) (2,013) Convertible Note 18 - - (83,004) - (83,004) 353,730 - (83,004) (45,641) 225,085

PARENT Financial Assets Cash and cash equivalents 9 348,008 - - - 348,008 Trade and other receivable 10 6,179 - - - 6,179 Financial Liabilities Trade creditors 16 - - - (44,368) (44,368) Convertible Note interest 16 - - - (2,013) (2,013) Convertible Note 18 - - (83,004) - (83,004) 354,187 - (83,004) (46,381) 224,802

For

per

sona

l use

onl

y



Page 61

26. FINANCIAL INSTRUMENTS (cont.)

Financial Risk Management Objectives and Policies (cont.)

30 June 2007

CONSOLIDATED Note

Loans & Receivables

$’000

At FVTPL

$’000

Designated at FVTPL

$’000


measured at

amortised cost

$’000

Total carrying amount

$’000

Financial Assets Cash and cash equivalents 9 18,166 - - - 18,166 Trade and other receivables 10 4,735 - - - 4,735 Financial Liabilities Trade creditors 16 - - - (24,966) (24,966) Convertible Note interest 16 - - - (2,280) (2,280) Convertible Note 18 - - (124,197) (124,197) Derivatives 17 - (4,825) - - (4,825) Interest bearing loans and borrowings 18 (62,305) - - - (62,305)

(39,404) (4,825) (124,197) (27,246) (195,672)

PARENT Financial Assets Cash and cash equivalents 9 18,166 - - - 18,166 Trade and other receivables 10 40,697 - - - 40,697 Financial Liabilities Trade creditors 16 - - - (18,047) (18,047) Convertible Note interest 16 - - - (2,280) (2,280) Convertible Note 18 - - (124,197) (124,197) Derivatives 17 - (4,825) - - (4,825) Interest bearing loans and borrowings 18 (62,305) - - - (62,305)

(3,442) (4,825) (124,197) (20,327) (152,791)

Market Risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates, commodity prices and quoted exchange risk will affect the Group’s income or the value of its holdings in financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Foreign Exchange Rate Risk

The Group is exposed to foreign currency risk on sales, purchases, cash, accounts receivable, accounts payable, project debt, convertible notes and derivatives.

The majority of the Group’s net cash flows from business operations are denominated in USD and, as a result, the Group has a natural position in USD. The foreign exchange exposure arising from financial instruments is considered in the context of the underlying natural exposure of the group.

Where a payable is significant, US dollars are purchased on incurring the liability or commitment.

For

per

sona

l use

onl

y



Page 62


Foreign Exchange Rate Risk (cont.)

The Group’s sensitivity to foreign currency risk has decreased during the current period mainly due to the Group’s exposure to foreign currency liabilities being reduced as the USD floating rate debt facility of was repaid during the current period and all oil commodity swap positions have been closed out.

The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Assets

Cash and cash equivalents 290,307 17,108 290,307 17,108

Trade receivables 3,490 - 3,490 -

293,797 17,108 293,797 17,108

Liabilities

Derivatives - (4,825) - (4,825)

Trade payables (38,389) - (38,389) -

Convertible note (85,017) (126,477) (85,017) (126,477)

Bank loan - (62,305) - (62,305)

(123,406) (193,607) (123,406) (193,607)

170,391 (176,499) 170,391 (176,499) Sensitivity analysis

The following table demonstrates the estimated sensitivity to a 10% increase and decrease in the Australian dollar exchange rate against the US dollar exchange rate, where all other variables are held constant. The sensitivity is based on the foreign currency exposures in existence as at balance date:

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Judgements of reasonably possible movements

Impact on post tax profit

AUD/USD +10% (11,927) 12,195 (11,927) 12,195

AUD/USD -10% 11,927 (12,195) 11,927 (12,195)

There is no impact on equity other than the impact of the above post tax profit sensitivities would have on retained earnings.

For

per

sona

l use

onl

y



Page 63


Commodity Price Risk

The Group is exposed to commodity price fluctuations denominated in US dollars, primarily the movement in oil prices. The Group has commodity price risk exposure with respect to sales, accounts receivable and derivatives.

The Group’s exposure relating to sales and accounts receivable has changed during the year, with the commencement of its first oil production in the Puffin Field in October 2007.

The Group has previously entered into commodity swaps to fulfill its requirements under the project financing facility and mitigate its exposure to commodity price risk.

30 June 2008

In June 2008, the Group closed out outstanding commodity contracts and there are no oil commodity swaps in existence at year-end.

30 June 2007

As at 30 June 2007, there were 1,200,000 barrels of oil commodity swaps at a strike price range of USD 69.65 and USD 73.30, due less than 1 year. The fair value of the swaps was a liability of $4,825,000.

Sensitivity analysis

There is no material exposure to oil price fluctuation on financial derivatives at 30 June 2008 as the Group has closed out all its oil commodity swap positions.

For comparative purposes, the following table shows the estimated impact on profit and equity for 30 June 2007, if the US dollar oil price changed by 10% from the average oil price during the year, with all other variables held constant,

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000


US dollar oil price +10% - 7,240 - 7,240

US dollar oil price -10% - (7,240) - (7,240)


Credit risk

With respect to credit risk arising from the other financial assets of the Company, which primarily comprise cash and cash equivalents and accounts receivable, the Company’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.

The Company trades only with recognized, creditworthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant.

Since the Company trades only with recognized third parties, there is no requirement for collateral.

For

per

sona

l use

onl

y



Page 64


Concentration of credit risk

Cash and Cash Equivalents

The Group has a concentration of credit to Commonwealth Bank and Westpac Corporation, with its cash and short term deposits being held at these two financial institutions at year-end. The significant cash held at 30 June 2008 arose from the proceeds from sale of assets to SIPC.

Subsequent to year-end the Group formulated an appropriate investment strategy for the funds going forward, including approval of appropriate counterparty limits and credit ratings, and as a result the concentration risk existing at year-end has been effectively managed and reduced.

Accounts Receivable

The Group has a concentration of credit risk with Totsa Total Oil Trading Asia Pte Ltd being its only Trade receivables counterparty. This risk is short term, with 90% of the Group’s sales being paid within 30 days on provisional invoice. There are no invoices overdue or impaired as at year-end.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of debt facilities.

The Groups approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its obligations when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by adopting policies to maintain adequate banking facilities and borrowing facilities to meet ongoing operational requirements, exploration and development commitments and ad-hoc projects that may arise. The need for available funds is monitored through the preparation and maintenance of future rolling cash flow forecasts.

At year-end the Group had repaid all its project debt facility and has a significant cash reserve as a result of the sale of its assets to SIPC (refer Note [4]), thereby reducing its liquidity risk.

For

per

sona

l use

onl

y



Page 65


Liquidity risk (cont.)

The following table illustrates management’s expectation on the financial assets and financial liability’s contractual maturity:

Year ended 30 June 2008 <1 month >1-<3 months

>3-<12 months

>1-<5 years

> 5 years

CONSOLIDATED $’000 $’000 $’000 $’000 $’000

FINANCIAL ASSETS Cash and cash equivalents 41,042 306,966 - - - Trade and other receivables(i) 5,722 - - - - 46,764 306,966 - - - FINANCIAL LIABILITIES Trade and other payables (27,186) (2,989) (13,453) - - Convertible Note Interest - (2,870) (2,870) (17,219) - Convertible Note (ii) - - - (88,303) - (27,186) (5,859) (16,323) (105,522) - Net maturity 19,578 301,107 (16,323) (105,522) -


>3-<12 months

>1-<5 years > 5 years

PARENT $’000 $’000 $’000 $’000 $’000

FINANCIAL ASSETS Cash and cash equivalents 41,042 306,966 - - - Trade and other receivables(i) 6,179 - - - - 47,221 306,966 - - - FINANCIAL LIABILITIES Trade and other payables (27,925) (2,989) (13,453) - - Convertible Note Interest - (2,870) (2,870) (17,219) - Convertible Note (ii) - - - (88,303) - (27,925) (5,859) (16,323) (105,522) - Net maturity 19,296 301,107 (16,323) (105,522) -

(i) There were no assets that are past due but not impaired at 30 June 2008. (ii) The contractual maturity value of the convertible note equals its redemption value assuming it is not

converted into shares. The carrying value of $83,004,000 (Note 18) is equal to the fair value of 30 June 2008. F

or p

erso

nal u

se o

nly



Page 66


Liquidity risk (cont.)


>3-<12 months

>1-<5 years

> 5 years

CONSOLIDATED $’000 $’000 $’000 $’000 $’000

FINANCIAL ASSETS Cash and cash equivalents 18,166 - - - - Trade and other receivables(i) 4,735 - - - - 22,901 - - - - FINANCIAL LIABILITIES Trade and other payables (24,966) - - - - Convertible Note Interest - (3,251) (3,251) (26,019) - Derivatives (402) (804) (3,619) - - Bank Loan - - - (62,305)- - Convertible Note(ii) - - - (100,035) - (25,368) (4,055) (6,870) (188,477) - Net maturity (2,467) (4,055) (6,870) (188,477) -


>3-<12 months

>1-<5 years

> 5 years

PARENT $’000 $’000 $’000 $’000 $’000

FINANCIAL ASSETS Cash and cash equivalents 18,166 - - - - Trade and other receivables(i) 40,697 - - - - 58,863 - - - - FINANCIAL LIABILITIES Trade and other payables (18,047) - - - - Convertible Note Interest - (3,251) (3,251) (26,019) - Derivatives (402) (804) (3,619) - - Bank Loan - - - (62,305)- - Convertible Note(ii) - - - (100,035) - (18,449) (4,055) (6,870) (188,477) - Net maturity (40,414) (4,055) (6,870) (188,477) -

(i) There were no assets that are past due but not impaired at 30 June 2008. (ii) The contractual maturity value of the convertible note equals its redemption value assuming it is not

converted into shares. The carrying value of $83,004,000 (2007: $124,197,000) (Note 18) is equal to the fair value of 30 June 2008.

For

per

sona

l use

onl

y



Page 67


Interest Rate Risk

The Group’s exposure to the risk of changes in market interest rates related to the Group’s cash and cash equivalents with a floating interest rate and the floating rate project debt facility that was repaid during the period.

The Group’s exposure to interest rate risk has reduced as the floating rate debt facility was repaid during the current period.

Short term deposits are made for varying periods of between one and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates.

The Group’s policy is to manage it finance costs using a mix of fixed and variable rate debt. The Directors believed that because of the short term duration of the Company’s floating rate borrowings (that were repaid during the year), it was not necessary to hedge against interest rate fluctuations during the year.

At balance date, the Group and the Company had the following mix of financial assets and liabilities exposed to Australian and US variable interest rate risk that are not designated in cash flow hedges:

CONSOLIDATED PARENT

2008 2007 2008 2007

Financial Assets $’000 $’000 $’000 $’000

Cash and cash equivalent 348,008 18,166 348,008 18,166


Bank loans - (62,305) - (62,305)

Net exposure 348,008 (44,139) 348,008 (44,139)


Taking into account past performance, future expectations, economic forecasts, and management’s knowledge and experience of the financial markets, the Group and parent believes the impact on profit or loss and the impact on equity in the following table are ‘reasonably possible’ over the next 12 months if interest rates had changed by +/- 1% from the year-end rates with all other variables including foreign exchange rates held constant:

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000


+ 1% (100 basis points) 2,436 (309) 2,436 (309)

- 1% (100 basis points) (2,436) 309 (2,436) 309


The Group’s sensitivity to interest rates on financial liabilities has decreased during the current period mainly due to the extinguishment of variable rate debt instruments.

For

per

sona

l use

onl

y



Page 68


Fair Values (i)

Convertible Notes: The fair value of the convertible note is based on market price as at 30 June 2008 as listed and quoted on the Singapore Stock Exchange.

CONSOLIDATED PARENT

$’000 $’000

Fair value at inception 107,759 107,759

Changes in fair value attributable to:

- Credit Risk 2,473 2,473

- Market Risk 13,965 13,965

Fair value at 30 June 2007 124,197 124,197

Changes in fair value attributable to:

- Credit Risk 650 650

- Market Risk (41,843) (41,843)


Fair value at inception 107,759 107,759

Cumulative changes in fair value attributable to:

- Credit Risk 3,123 3,123

- Market Risk (27,877) (27,877)


The above table reflects the change in fair value of the convertible bond since inception. This has been split between changes due to credit risk and market risk. The Company estimates changes in fair value due to credit risk by estimating the amount of change in the fair value that is not due to changes in market conditions that give rise to market risk.

(i) The carrying values of all financial instruments are approximate fair value.

For

per

sona

l use

onl

y



Page 69


Quoted Exchange Risk

The Group’s convertible notes are designated as fair value through profit and loss and are stated at fair value, with any resultant gain or loss recognised in profit or loss. The fair value is determined by reference to a quoted market price.

The Group’s profit and loss is therefore exposed to movements in the fair value of convertible notes arising from changes in the price quoted on the Singapore exchange.


Taking into account past performance, future expectations, economic forecasts, and management’s knowledge and experience of the financial markets, the table below shows the impact on profit or loss in the following table if the quoted price of the convertible notes moved by +10%/-10% at year-end:

CONSOLIDATED PARENT

2008 2007 2008 2007

$’000 $’000 $’000 $’000


+ 10% share price movement (5,810) (8,694) (5,810) (8,694)

- 10% share price movement 5,810 8,694 5,810 8,694


Capital Management

The Group manages its capital to ensure the Group will be able to continue as a going concern while maximising the return to stakeholders through optimization of the debt and equity balance.

The Group manages this by maintaining adequate cash balances and banking facilities as required and monitoring its future rolling cash flows by running long term forecasts and reviewing appropriate capital structures for expected future operations and developments. With the sale of its 60% assets to SIPC, the Group maintains a significant cash reserves to meet future development and operating activity needs.

For

per

sona

l use

onl

y



Page 70

27. KEY MANAGEMENT PERSONNEL (a) Details of Key Management Personnel

The directors and other members of key management personnel of the Group during the year were:

(i) Directors

D. Dix Chairman and Chief Executive Officer (Executive) K. Tregonning Managing Director (Executive) P. Behrenbruch Director and Chief Operating Officer (Executive)

(appointed 21 November 2007, resigned 23 July 2008) G. McGuiness Director (Non Executive) J. Branson Director (Non Executive) R. Price Director (Non Executive)

(ii) Executives

R. Little Chief Financial Officer T. Slater Company Secretary and General Manager, Marketing

(b) Compensation of Key Management Personnel

The aggregate compensation made to key management personnel of the Group and the Company is set out below:

CONSOLIDATED PARENT 2008 2007 2008 2007 $ $ $ $

Short-Term 2,051,000 1,557,518 2,051,000 1,557,518

Post Employment 246,120 130,751 246,120 130,751

Share-based Payment 457,587 6,630,406 457,587 6,630,406

2,754,707 8,318,675 2,754,707 8,318,675

(i) Contract for Services

The Company has entered into employment contracts with David Dix, Kenneth Tregonning, Trevor Slater, Peter Behrenbruch and Richard Little. In specified circumstances justifying summary dismissal, the Company may terminate the agreement immediately without notice. In all circumstances, the Company may terminate the agreement by giving the employee three months notice or payment in lieu of notice. The Employee may terminate the agreement by giving the Company three months notice in writing.

On termination on notice by the Company, any Options that have vested, or that will vest during the notice period, will be released. Options that have not yet vested will be forfeited.

For

per

sona

l use

onl

y



Page 71

27. KEY MANAGEMENT PERSONNEL (cont.)

Remuneration of Key Management Personnel

Short-Term Post Employment Long-Term Share-based Payment Total

Total Performance

Related Salary & Fees

Cash Bonus

Non Monetary Benefits Other Super. Retirement

benefits Incentive

Plans Options(1)

$ $ $ $ $ $ $ $ $ % Executive Directors David Dix 2008 480,000 - - - 57,600 - - - 537,600 - Chairman and Chief Executive Officer 2007 400,000 200,000 - - 40,000 - - 2,690,000 3,330,000 87%

Kenneth Tregonning 2008 360,000 - - - 43,200 - - - 403,200 - Managing Director 2007 300,000 50,000 - - 30,000 - - 2,690,000 3,070,000 89% Peter Behrenbruch(2) 2008 420,000 - - - 50,400 - - - 470,400 - Director and Chief Operating Officer 2007 184,372 - - - 18,437 - - 1,088,342 1,291,151 84%

Non-Executive Directors Barry McGuiness 2008 75,000 - - - 9,000 - - - 84,000 - Non-Executive Director 2007 75,000 - - - 7,500 - - - 82,500 - John Branson 2008 75,000 - - - 9,000 - - - 84,000 - Non-Executive Director 2007 75,000 - - - 7,500 - - - 82,500 - Richard Price 2008 65,000 - - - 7,800 - - - 72,800 - Non-Executive Director 2007 8,903 - - - 890 - - - 9,793 - Executives Trevor Slater 2008 276,000 - - - 33,120 - - 152,000 461,120 33% Company Secretary 2007 230,000 - - - 23,000 - - - 253,000 - Richard Little 2008 300,000 - - - 36,000 - - 305,587 641,587 31% Chief Financial Officer 2007 34,243 - - - 3,424 - - 162,064 199,731 81% Total 2008 2,051,000 - - - 246,120 - - 457,587 2,754,707 17% Total 2007 1,307,518 250,000 - - 130,751 - - 6,630,406 8,318,675 83% (1) Further details of the options granted are contained in Table 2 of Note 19 to Directors’ Report and Note 27(c) to the financial statements. (2) Peter Behrenburch was Chief Opearting Officer throughout the financial year. He was appointed a Director on 21 November 2007 and resigned on 23 July 2008. (3) John Fear was appointed Chief Operating Officer on 25 July 2008.

For

per

sona

l use

onl

y



Page 72

27. KEY MANAGEMENT PERSONNEL (cont.) (c) Option holdings of Key Management Personnel

30 June 2008 Balance at

beginning of period 01-Jul-07

Granted as Remuneration Options Exercised Granted Other

Balance at end of period 30-Jun-08

Vested at 30 June 2008

Total Exercisable Not Exercisable

Directors D. Dix Direct 3,952,642 - (3,952,642) - - - - Indirect 14,210,550 - (14,210,550) - - - -K. Tregonning (1) Direct 27 - (27) - - - - Indirect 13,703,290 - (13,703,290) - - - -P. Behrenbruch Direct 1,000,000 - (250,000) - 750,000 - 750,000 Indirect - - - - - - -G. McGuiness Direct 125,000 - (125,000) - - - - Indirect - - - - - - -J. Branson Direct - - - - - - - Indirect 250,000 - - - 250,000 250,000 -R. Price Direct - - - - - - - Indirect - - - - - - -Executives T. Slater Direct 850,000 50,000 (350,000) - 550,000 550,000 - Indirect - - - - - - -R. Little Direct 100,000 50,000 - - 150,000 150,000 - Indirect - - - - - - -Total 34,191,509 100,000 (32,591,509) - 1,700,000 950,000 750,000

(1) Kenneth Tregonning has an interest in shares and options held by Winlen Pty Ltd, an initial shareholder. Dr Tregonning and his wife are sole directors of Winlen Pty Ltd and hold 51% and 49% respectively of the issued shares in the Company.

For

per

sona

l use

onl

y



Page 73


(c) Option holdings of Key Management Personnel

30 June 2007 Balance at

beginning of period 01-Jul-06

Granted as Remuneration Options Exercised Granted Other

Balance at end of period 30-Jun-07

Vested at 30 June 2007

Total Exercisable Not Exercisable

Directors D. Dix Direct 4,952,642 1,000,000 (2,000,000) - 3,952,642 3,952,642 - Indirect 14,210,550 - - - 14,210,550 14,210,550 -K. Tregonning (1) Direct 27 1,000,000 (1,000,000) - 27 27 - Indirect 13,703,290 - - - 13,703,290 13,703,290 -P. Behrenbruch Direct 250,000 750,000 - - 1,000,000 250,000 750,000 Indirect - - - - - - -G. McGuiness Direct 250,000 - (125,000) - 125,000 125,000 - Indirect - - - - - - -J. Branson Direct - - - - - - - Indirect 250,000 - - - 250,000 250,000 -R. Price Direct - - - - - - - Indirect - - - - - - -Executives T. Slater Direct 850,000 - - - 850,000 850,000 - Indirect - - - - - - -R. Little Direct - 100,000 - - 100,000 - 100,000 Indirect - - - - - - -Total 34,466,509 2,850,000 (3,125,000) - 34,191,509 33,341,509 850,000

(1) Kenneth Tregonning has an interest in shares and options held by Winlen Pty Ltd, an initial shareholder. Dr Tregonning and his wife are sole directors of Winlen Pty Ltd and hold 51% and 49% respectively of the issued shares in the Company.

For

per

sona

l use

onl

y



Page 74


(d) Shareholdings of Key Management Personnel (Consolidated)

Shares held in AED Oil Limited

30 June 2008 Balance 01-Jul-07

Granted as Remuneration On Exercise of Options Net Change Other Balance 30 June 2008

Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Direct Indirect Direct Indirect Direct Indirect Direct Indirect Direct Indirect

Directors

D. Dix 7,032,677 14,210,550 - - 3,952,642 14,210,550 (9,985,319) 8,137,513 1,000,000 36,558,613

K. Tregonning(1)

1,010,092 13,703,290 - - 27 13,703,290 - (1,250,000) 1,010,119 26,156,580

P. Behrenbruch - - - - 250,000 - - - 250,000 -

G. McGuiness - 155,000 - - - 125,000 - - - 280,000

J. Branson - 20,000 - - - - - - - 20,000

R. Price - 3,092,102 - - - - - - - 3,092,102

Executives

T. Slater 350,000 - - - 350,000 - - - 700,000 -

R. Little - - - - - - - 5,000 - 5,000

Total 8,392,769 31,180,942 - - 4,552,669 28,038,840 (9,985,319) 6,892,513 2,960,119 66,112,295

The Company has not issued any Preference Shares. (1)

Kenneth Tregonning has an interest in shares and options held by Winlen Pty Ltd, an initial shareholder. Dr Tregonning and his wife are sole directors of Winlen Pty Ltd and holding 51% and 49% respectively of the issued shares in the Company.

For

per

sona

l use

onl

y



Page 75


(d) Shareholdings of Key Management Personnel (Consolidated)

Shares held in AED Oil Limited

30 June 2007 Balance 01-Jul-06

Granted as Remuneration On Exercise of Options Net Change Other Balance 30 June 2007

Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Direct Indirect Direct Indirect Direct Indirect Direct Indirect Direct Indirect

Directors

D. Dix 5,032,677 14,210,550 - - 2,000,000 - - - 7,032,677 14,210,550

K. Tregonning(1)

10,092 13,703,290 - - 1,000,000 - - - 1,010,092 13,703,290

P. Behrenbruch - - - - - - - - - -

G. McGuiness - 30,000 - - 125,000 - (125,000) 125,000 - 155,000

J. Branson - 20,000 - - - - - - - 20,000

R. Price - - - - - - - 3,092,102 - 3,092,102

Executives

T. Slater 350,000 - - - - - - - 350,000 -

R. Little - - - - - - - - - -

Total 5,392,769 27,963,840 - - 3,125,000 - (125,000) 3,217,102 8,392,769 31,180,942

The Company has not issued any Preference Shares. (1)

Kenneth Tregonning has an interest in shares and options held by Winlen Pty Ltd, an initial shareholder. Dr Tregonning and his wife are sole directors of Winlen Pty Ltd and holding 51% and 49% respectively of the issued shares in the Company.

For

per

sona

l use

onl

y



Page 76

28. RELATED PARTY DISCLOSURE Subsidiary

Refer Note 10 and Note 16 for related party loans. The loans are non-interest bearing and at call.

During the year, the parent Company transacted with wholly owned subsidiaries. These transactions were on normal commercial terms and conditions and in relation to reimbursement of capital installation services and operating costs incurred by the subsidiaries.

Barry McGuiness resigned during the year as a consultant to the firm of Minter Ellison, which provided legal services to the Company during the year of $137,475 (2007: $1,038,033) on normal commercial terms and conditions.

No consulting services were sought from Bear and Brook Consulting Pty Ltd, a company related to Peter Behrenbruch, during the financial year (2007: $14,000).

Ultimate Parent

AED Oil Limited is the ultimate parent company.

29. SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On 30 July 2008, the directors declared a fully franked special dividend of 20 cents per share to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2008, to be paid to shareholders on 5 September 2008. The dividend will be paid to all shareholders on the Register of Members on 22 August 2008. The total estimated dividend to be paid is $30,905,000.

There has not been any matter or circumstances occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

For

per

sona

l use

onl

y


Page 77

DIRECTORS DECLARATION

For

per

sona

l use

onl

y


Page 78

AUDITORS REPORT

For

per

sona

l use

onl

y


Page 79

For

per

sona

l use

onl

y


Page 80

SHAREHOLDER AND OTHER INFORMATION COMPILED AS AT 25 AUGUST 2008 NUMBER OF EQUITY HOLDERS

Ordinary Share Capital

154,791,782 paid ordinary shares are held by 8,652 individual shareholders.

VOTING RIGHTS

At meetings of members or classes of members:

(a) each member entitled to vote may vote in person or by proxy, attorney or representative;

(b) on a show of hands, every person present who is a member or a proxy, attorney or representative of a member has one vote; and

(c) on a poll, every person present who is a member or a proxy, attorney or representative of a member has:

(i) for each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, one vote for the share;

(ii) for each partly paid share; only the fraction of one vote which the amount paid (not credited) on the share bears to the total amounts paid and payable on the share (excluding amounts credited),

subject to any rights or restrictions attached to any shares or class or classes of shares.

DISTRIBUTION OF ORDINARY SHARES

Number of members by size of holding and total number of shares on issue:

Ordinary Shares No. of Holders Securities % Issued Capital

1 – 1,000 2,583 1,613,976 1.04 1,001 – 5,000 3,709 10,438,957 6.74

5,001 – 10,000 1,163 9,305,926 6.01 10,001 – 100,000 1,118 29,639,521 19.15 100,001 and over 79 103,793,402 67.05

TOTAL 8,652 154,791,782 100.00 UNMARKETABLE PARCELS

The number of security investors holding less than a marketable parcel of 61 securities ($134,222 on 25 August 2008) is 456 and they hold 72,947 securities.

SUBSTANTIAL SHAREHOLDERS Shares %

UBS Wealth Management 38,752,194 25.04

Winlen Pty Limited 25,695,269 16.60

64,447,463 41.64

For

per

sona

l use

onl

y


Page 81

SHAREHOLDER AND OTHER INFORMATION COMPILED AS AT 25 AUGUST 2008

THE 20 LARGEST HOLDERS OF ORDINARY SHARES Shares %

UBS Wealth Management 38,752,194 25.04

Winlen Pty Limited 25,695,269 16.60

HSBC Custody Nominees (Australia) Limited 6,536,855 4.22

ANZ Nominees Limited 3,464,935 2.24

Capro Pty Ltd 2,842,102 1.84

Wise Plan Pty Ltd 2,357,102 1.52

National Nominees Limited 1,951,419 1.26

J P Morgan Nominees Australia Limited 1,600,771 1.03

Citicorp Nominees Pty Limited 1,102,415 0.71

Mr Kenneth Tregonning 1,000,000 0.65

Mr David Russell Dix 1,000,000 0.65

Merrill Lynch (Australia) Nominees Pty Limite 888,333 0.57

Dansar Pty Ltd 805,439 0.52

Bedale Investments Limited 799,340 0.52

Irrewarra Investments Pty Ltd 744,194 0.48

Mr Trevor Slater 700,000 0.45

Samang Nominees Pty Ltd 690,522 0.45

Mr Thomas Iovino 673,638 0.44

Dr Hao Jame Kuo & Mrs Shirley Joan Kuo 600,000 0.39

Netwealth Investments Limited 560,891 0.36

Equitas Nominees Pty Ltd 463,000 0.30

93,228,419 60.23

Option Holders Options %

Options issued under the AED Employee Option Plan 2,765,000 100.00

Schedule of Interests in Mining Tenements Location Tenement Percentage held

Ashmore Cartier Reef, Timor Sea AC/P22 40

Ashmore Cartier Reef, Timor Sea AC/L6 * 40

* AC/L6 is a production licence contained within the AC/P22 area

For

per

sona

l use

onl

y

ACN 110 393 292 AUSTRALIA For personal use only - ASX · ACN 110 393 292 PO Box 18199 VIC 8003...

Documents

Transcript of ACN 110 393 292 AUSTRALIA For personal use only - ASX · ACN 110 393 292 PO Box 18199 VIC 8003...