ac4967911e1d6e35bb3c62.pdf
ABN 45 066 383 971
7 October 2015 PAGES (including this page): 105
ASX Market Announcements ASX Limited
Exchange Centre
Level 4, 20 Bridge Street
Sydney NSW 2000
Annual Report 2014/15
Attached please find Cue Energy Resources Limited's release with respect to the above mentioned.
Yours faithfully
Andrew M Knox
Chief Financial Officer
CUE ENERGY OVERVIEW
Cue is an Australian based oil & gas company with activities in Australia, New Zealand, Indonesia and the USA.
THE COMPANY HAS:
OFFICE
Level 19
357 Collins Street
Melbourne Vic 3000
CONTACT DETAILS
Tel: +613 8610 4000
Fax: +613 9614 2142
EMAIL
[email protected]
WEBSITE
www.cuenrg.com.au
LISTINGS
ASX: CUE
ADR/OTC: CUEYY
IMPLEMENTING OUR STRATEGY
ANNUAL REPORT 2014/15
ABOUT
CUE ENERGY RESOURCES
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2014/15
Cue Energy Resources Limited is an oil and gas exploration and production company with a focus on South East Asia, Australasia and now the United States.
Cue Energy Resources has petroleum assets in New Zealand, Indonesia, Australia and the USA. The company has continuously grown over recent years through a mix of acquisitions and discoveries.
It is Cue Energy Resources' objective to develop a robust and substantial E & P company with a focus on the SE Asia and Australasia region through:
-
maximising value of existing assets
-
building organisational capability
-
aggressively pursuing the capture of new exploration acreages
-
developing a balanced portfolio of exploration, development
and production assets
-
actively pursuing value accretive acquisitions
COMPANY SNAPSHOT
|
Ordinary Shares
|
698,119,720
|
|
12 Month Trading Range
|
7.8¢-12.8¢
|
|
Cash at 30 June 2015
|
$27.6 million
|
|
Debt
|
Nil
|
|
Avg FY15 Production
|
~1800 boe/day
|
CORPORATE DIRECTORY
CORPORATE DIRECTORY AND CONTENTS
Directors
Paul G. Foley (Chairman) BCA, LL.B Stuart A. Brown B.Sc (Hons)
C. Peter Hazledine B.Sc (Hons) Koh Ban Heng B.Sc
Brian L. Smith
Chief Executive Officer
D.A.J. Biggs LL.B
Chief Financial Officer/ Company Secretary
A.M. Knox B.Com
Co-Company Secretary
P.M. Moffatt B.Com
Registered Office
Level 19, 357 Collins Street Melbourne Victoria 3000 Australia
Telephone: + 61 3 8610 4000
Facsimile: + 61 3 9614 2142 Website: www.cuenrg.com.au Email: [email protected]
ABN 45 066 383 971
CONTENTS
Stock Exchange Listings
AUSTRALIA
Australian Securities Exchange Ltd
525 Collins Street
Melbourne, Victoria 3000 Australia
UNITED STATES OF AMERICA OTC
OTC Markets
304 Hudson Street 3rd Floor New York, NY 10013 USA
Auditor
BDO East Coast Partnership Level 14, 140 William Street Melbourne Victoria 3000 Australia
Bankers
ANZ Banking Group Limited
91 William Street
Melbourne Victoria 3000 Australia
National Australia Bank Limited Level 4, 330 Collins Street Melbourne Victoria 3000 Australia
Green Bank
2900 North Loop West Houston TX 77092 US
PT. Bank Mandiri (Persero) Tbk Corporate Banking V Group Plaza Mandiri, 1st Floor
Jl. Jend. Gatot Soebroto Kav 36-38 Jakarta 12190, Indonesia
1
Share Registry
AUSTRALIA
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street Abbotsford, Victoria 3067 Australia
GPO Box 2975
Melbourne, Victoria 3000 Australia
Telephone: 1300 850 505 (within Australia)
or +61 3 9415 4000 (outside Australia) Email: [email protected] Website: www.computershare.com.au
-
Corporate Directory
-
Snapshot of 2014/15
4 Joint Operations
6 Chairman's Overview
8 Chief Executive Officer's Review
17 Reserves and Resources
22 Corporate Governance Statement
32 Directors' Report
-
Auditor's Independence Declaration
-
Directors' Declaration
-
Financial Statements
-
Consolidated Statement of Profit or Loss and Other Comprehensive Income
-
Consolidated Statement of Financial Position
-
Consolidated Statement of Changes in Equity
-
Consolidated Statement of Cash Flows
-
Notes to the Financial Statements
97 Independent Auditor's Report
99 Shareholder Information
Images courtesy of OMV and Santos
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2014/15
SNAPSHOT OF 2014/15
AT CUE ENERGY RESOURCES
2
Cue Energy has delivered a strong financial result for the year ended 30 June 2015,
reporting gross profit from production, up on the previous year. The net profit result is heavily influenced by non-cash items due principally to a 60% increase in the value of the Mahakam Hilir PSC ($36.02 million) and a write down of $18.01 million on the carrying value of the Maari oil field development in New Zealand.
50
%
INCREASE
GROSS PROFIT FROM PRODUCTION
2015: $23.73 million
(2014: $15.79 million)
384
%
INCREASE IN EBITDA
TO $45.73 M
(2014: $9.44 million)
11
%
INCREASE
PRODUCTION REVENUE
2015: $37.67 million
(2014: $34.00 million)
40.05
$
MILLION
NET PROFIT AFTER TAX
(2014: Loss $2.17 million)
0.66
MILLION
BARRELS OF OIL EQUIVALENT PRODUCED
60
%
ADDITIONAL
EQUITY IN MAHAKAM HILIR
5.83
$
MILLION
PROFIT ON SALE OF PNG ASSETS
100
PER CENT
RESERVES REPLACEMENT RATIO
SNAPSHOT OF 2014/15
3
ACTIVITY OVERVIEW
Indonesia
-
The Sampang PSC well workover programme in Indonesia, to increase production and extend field life, concluded in August with the Oyong-7 well brought on production, initially as an oil producer. Installation of onshore gas
compression at the Grati gas plant was completed in July. This will maintain gas production from Oyong and Wortel and extend field life.
-
Preparations in Indonesia continue for drilling in the Mahakam Hilir PSC with civil construction activities commenced for the Naga Selatan-2 well, which is planned to be drilled in Q4 2015.
-
Planning is underway by the operator to drill 2 wells in the Mahato PSC in Indonesia in early 2016.
Australia
-
Cue has identified and matured a significant Mungaroo formation gas prospect which straddles both the WA-359-P and WA-409-P permits offshore Western Australia (Cue 100% and operator). A process has been initiated to farm- out a material interest in both permits.
New Zealand
-
The Maari Growth drilling campaign in New Zealand was completed with the last of 4 new wells, MR10, put on production in early July. The Ensco 107 rig was demobilised in early July and a multi well workover campaign commenced in August 2015 to further increase production.
USA
-
Cue finalised the purchase of an 80% working interest in the conventional Pine Mills Woodbine oilfield in the prolific East Texas Basin, USA. Cue is operator of the field, which is currently producing
~80 bopd, and is implementing a plan to stabilise and grow production over the coming months.
OUR JOINT OPERATIONS
CUE ENERGY RESOURCES
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2014/15
4
INDONESIA
Mahakam Hilir PSC
*Cue...................................... 100%
Sampang PSC
*Santos................................. 45%
SPC ...................................... 40%
Cue(i) ...................................... 15%
Mahato PSC
*Texcal ................................. 51%
Central Sumatra
Energy .................................. 11.5%
Bukit Energy........................ 25%
Cue ...................................... 12.50%
AUSTRALIA
Carnarvon Basin Permits WA-359-P
*Cue...................................... 100%
WA-360-P
*MEO**................................ 62.5%
Cue ...................................... 37.5%
WA-361-P
*MEO**................................ 50%
Mineralogy .......................... 35%
Cue ...................................... 15%
WA-389-P
*BHP Billiton....................... 60%
Cue ...................................... 40%
WA-409-P
*Cue...................................... 100%
NEW ZEALAND
Maari and Manaia Oil Fields PMP 38160
*OMV.................................... 69%
Todd...................................... 16%
Horizon ................................ 10%
Cue ...................................... 5%
PEP 51149
*Todd.................................... 80%
Cue ...................................... 20%
PEP51313
*OMV.................................... 30%
Todd...................................... 35%
Horizon ................................ 21%
Cue ...................................... 14%
PEP 54865
*Todd.................................... 80%
Cue ...................................... 20%
UNITED STATES
Pine Mills Permit
*Cue...................................... 80%
Gale Force Petroleum...... 20%
Additional Information
(i) 8.181878% in the Jeruk field
* Operator
** Title held by North West Shelf Exploration Pty Ltd
OUR JOINT OPERATIONS
5
CHAIRMAN'S OVERVIEW
PAUL FOLEY
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2014/15
6
I am pleased to report that your company performed well in the year
to 30 June 2015, despite a difficult oil price environment for the latter half of the financial year.
Dear Shareholder,
I am pleased to report that your company performed well in the year to 30 June 2015, despite a difficult oil price environment for the latter half of the financial year.
The company reported a gross profit of $23.73 million, an increase of 50% over the prior year; and production revenue of $37.67 million, an increase of 11% over the prior year.
Cue reported a net profit after tax of $40.05 million, including adjustments to reflect an impairment of
$18.01 million for Maari, a $36.02 million gain on the acquisition of Singapore Petroleum's 60% interest in the Mahakam Hilir PSC in Indonesia, a profit on the sale of our PNG assets and a foreign exchange gain.
The Maari impairment was principally due to a reserves reduction as a result of lower than expected net outcomes from the Maari Growth Project and due to a significantly lower global oil price outlook. Overall however, during the year Cue successfully replaced one hundred per cent of its production over the previous 12 months.
During the year, there were also a number of changes at a corporate level for the company.
New Zealand Oil and Gas Limited (NZOG) made an on market take-over bid for the company in February 2015 which resulted in NZOG owning 48.11% of Cue. Consequent upon NZOG's shareholding in Cue, new appointments were made to the Cue Board with the
appointment of Peter Hazledine, Brian Smith and myself and the resignation of Rowena Sylvester, all in May 2015. Subsequently in July 2015, I assumed Chairmanship with the departure of Geoff King and Andrew Young from the Board and we also welcomed Koh Ban Heng as a director.
On behalf of the Board and shareholders, I thank Geoff, Andrew and Rowena for their service as directors of Cue.
The key focus for the Company in the 2015 financial year was the capture of new growth opportunities and the enhancement of our existing assets.
Consistent with the Company's onshore focus for new assets, Cue secured 100% of the Mahakam Hilir PSC onshore Kalimantan in Indonesia and a 12.5% interest in the Mahato PSC onshore Sumatra, Indonesia.
The decision to increase our interest in the Mahakam Hilir PSC was taken after the Company carried out a technical review of the prospectivity of the permit in 2014, post the drilling of the Naga Utara -2 well, and identified a shallow oil target which had not been tested by previous drilling in the PSC. A well is planned to be drilled in the permit in the fourth quarter of calendar 2015.
The Mahato PSC covers a highly prospective area onshore central Sumatra, close to several large producing oil fields. Multiple appraisal and exploration opportunities have been mapped and we expect to drill two wells in the field in the first half of calendar 2016.
Cue has also been working to maximize value from its existing producing assets - Maari and Sampang.
During the year the Maari operator undertook a development drilling programme which increased production from the field to 16,000 barrels of oil per day, although somewhat disappointingly with cost-overruns due to a range of drilling and weather factors. Well workovers currently underway are expected to further increase daily production in the 2015/16 year.
At Sampang, well workovers and the installation of compression has enabled an improvement in oil and gas production and extended field life to at least 2018.
In early June 2015, Cue purchased an 80% interest in the Pine Mills producing oil field in East Texas which was seen as a suitable opportunity to increase our net oil production and booked reserves at an acceptable cost. At acquisition, this field was producing approximately 80 barrels of oil
per day and the Company is taking steps through well interventions to increase production to around 130 barrels per day. Cue is also reviewing the feasibility of undertaking a 3D survey of the field to understand the production potential of the deeper structures in the field.
CHAIRMAN'S MESSAGE
7
The Company has recently launched the farm-out of
its 100% owned WA-359-P and WA-409-P permits in the offshore Carnarvon Basin, promoting the Ironbark prospect, a large gas opportunity which straddles both
permits. We recognise that we need significant partners in anything we do in this basin, both for their expertise and for their contribution to the costs of our activities. We should have an indication of market interest in the farm-out by late December 2015.
Cue's balance sheet remains robust. At the end of the financial year, Cue's cash balance was $27.6 million and the company has no debt. The Company is in a position to fund its planned activities for the next year, even in the current low oil price environment.
Your Board considers that we are likely to remain in a low oil price environment for some time, or at very least that we should plan on that basis. The resulting environment for small to mid-cap exploration and production companies
is difficult but also presents opportunities, especially for companies like Cue with cash reserves and production revenue. As we have signalled, Cue is undertaking a review of its strategy and its portfolio in light of the current market conditions and I expect to be able to update you on this work at the AGM in November.
I would like to thank both directors and staff for their efforts and support during the year and look forward to an active 2016.
Paul Foley Chairman
29 September 2015
CHIEF EXECUTIVE OFFICER'S REVIEW
DAVID BIGGS
CUE ENERGY RESOURCES LIMITED: ANNUAL REPORT 2014/15
8
Cue's priorities during the 2014/15 year were to capture new prospective exploration
acreage, work to maximise both the value of existing exploration acreage and work to maximise the value of our producing assets.
The year was notable for considerable activity in all these areas but was significantly impacted by a dramatic
reduction in the price of oil - falling from over US$100 per barrel in mid 2014 to around US$50 per barrel by mid 2015.
In this environment, Cue has been deliberately selective in its application of funds and is focusing on opportunities with near term returns, consistent with a careful and prudent management of its cash resources. Cue is
also focused on managing its costs in this low oil price environment.
2014/15
Cue's share of sales production for the year from our New Zealand, Indonesian and Papua New Guinea fields was
0.66 mmboe. This was down on expectations due to the sale of the PNG producing assets in December 2014 and production interruptions at Maari due to a prolonged development drilling campaign. The Maari development drilling campaign in New Zealand was initially scheduled to be completed in 11 months, but took 18 months due to difficult drilling conditions.
The company's principal focus for its application of cash during the year was the Maari development drilling and well workovers and the installation of compression at Sampang in Indonesia. The Maari development drilling campaign comprised 4 wells which boosted total field production from ~9,000 bopd to ~16,000 barrels of oil per day (bopd). The joint venture is currently undertaking a series of well workovers which will further increase production by at least another 2,000 bopd.
At Sampang, the joint venture carried out a programme of well interventions at the Oyong field and installed compression for the Wortel field, both of which will maintain and enhance production until at least 2018. We also received a significant increase in the price of gas sold from Oyong from 1 July, 2015.
During the year, the company participated in one exploration well. Disappointingly the Whio- 1 well, offshore Taranaki, New Zealand, where we were free carried, was unsuccessful.
In January 2015, Cue agreed to purchase the 60% of the Mahakam Hilir PSC that it did not own from its joint venture partner, Singapore Petroleum. The deep wells drilled in
the PSC by the joint venture during 2012-14 encountered sub-commercial hydrocarbon shows, and Cue undertook a complete review of the prospectivity of the PSC and identified a number of shallow oil targets. The presence of these targets influenced Cue to remain in the PSC and to acquire a 100% interest. We expect to commence drilling operations at Naga Selatan - 2 in December 2015.
Cue also acquired a 12.5% interest in the Mahato PSC onshore Sumatra in Indonesia. The PSC sits close to several large producing oil fields and a seismic programme has been undertaken to establish optimum locations for two wells to be drilled in 2016. The PSC comprises a large area with multiple, independent oil targets.
During the year, Cue also undertook a review of its position in its three PNG permits - PRL14, PRL9 and PDL3. Considering the small interests held in some of these permits and the upcoming commitments in others, a decision was taken to sell Cue's position. This transaction closed in December 2014 and Cue took a profit on sale of
$5.83 million and avoided $14 million in future obligations in the permits.
In June 2015, Cue finalised an agreement to purchase an 80% working interest in a conventional Woodbine oil
field in the prolific East Texas Basin. Cue now operates the field, which on acquisition was producing ~80 bopd, and is implementing a plan to stabilise and grow production to
~130 bopd in the coming months.
As previously foreshadowed, we also received substantial insurance recoveries during the year and post 2014/15 year end in respect of the repairs to the Maari mooring system and swivel which were undertaken in late 2013.
It is rare that a company can replace its production in a year. Cue has managed to replace 100% of its 2014/15 production, despite a reserves reduction at Maari and sale of the SE Gobe oilfield, due to reserves improvements at Sampang and Pine Mills.
CHIEF EXECUTIVE OFFICER'S REVIEW
9
2015/16
As a result of the development activities at Maari and Sampang, and barring any production interruptions, Cue can look forward to strong production for 2015/16.
With the ongoing well workovers at Maari, production should increase post financial year end to over 16,000 bopd. The well workovers and the installation of compression at Sampang has already enabled the maintenance of gas production and the extension of field life until at least 2018.
We plan to increase daily oil production at Pine Mills by 60% with a series of well interventions and we are looking at the feasibility of conducting a 3D seismic survey to identify deeper oil targets.
In New Zealand, Cue is a 20% participant in the planned Te Kiri well onshore Taranaki, which is due to commence drilling in December 2015. The Operator is planning a deviated well to intersect a potentially oil bearing objective in the Miocene and a deeper Eocene gas bearing objective.
Cue has also embarked on the farm-out of its 100% owned WA-359-P and WA-409-P permits in the offshore Carnarvon Basin, off the coast of Western Australia. The Company is reviewing two of its other permits in the area - WA-360-P and WA-361-P in order to determine the best way to manage these assets based on the results of the farm-out effort.
The Ironbark prospect in WA 359-P/WA-409-P is a world class potential gas resource. At the time of writing Cue has already received expressions of interest from established LNG players and I expect we will be able to provide a progress update in respect of the farm-out effort at the Company's upcoming annual general meeting.
In summary, the Company's focus in 2015/16 will be to execute the work programme it currently has in front of it, carefully managing its commitments and cash in a very uncertain oil price environment.
Looking briefly at our current assets: