pan pacific petroleum nl · pan pacific petroleum nl ... mosman and masala ... exploration report...

PAN PACIFIC PETROLEUM NL

Annual Rep

ort

2002

Pan Pacific Petroleum NL ACN 000 749 799

Notice of MeetingNotice is given that the 32nd Annual General Meeting of members of Pan Pacific Petroleum NL

(the Company) will be held at the offices of the Company, Level 3, Compaq House, 76 Berry Street,

North Sydney, New South Wales on Thursday, 31st October 2002 at 10:00am.

Ordinary Business

1 Annual ReportTo receive and consider the Annual Report for the year ended 30 June 2002, and the Directors’

and independent audit reports.

2 Election of DirectorsTo consider, and if thought fit, to pass the following resolution as an ordinary resolution:

“That Mr E R Matthews, being a director of the Company who retires by rotation pursuant to

the Company’s Constitution, and being eligible, is re-elected as a director of the Company.”

To consider, and if thought fit, to pass the following resolution as a special resolution:

“That pursuant to S201C (8) of the Corporations Act 2001, Mr AKR Watson, being a director of

the Company who has attained the age of 73, be re-appointed as a director of the Company.”

Snapshot DateThe Directors have determined that for the purposes of section 1109N of the Corporations Act, the

persons eligible to vote at the meeting will be those persons who are registered shareholders at

10:00am on Tuesday, 29th October 2002.

ProxiesA Proxy Form accompanies this Notice and to be effective must be received at the Company’s

registered office (Level 3, Compaq House, 76 Berry Street, North Sydney, New South Wales, 2060)

or by facsimile: +61 2 9925 0564, by no later than 10:00am on Tuesday, 29th October 2002.

Each shareholder is entitled to appoint a proxy. The proxy does not need to be a member of the

Company. A shareholder that is entitled to cast 2 or more votes may appoint 2 proxies and may

specify the proportion or number of votes each proxy is appointed to exercise.

By Order of the Board

Dated: 25 September 2002

K M Ware

Company Secretary

The Company Pan Pacific Petroleum NL is listed on the Australian Stock Exchange and the New Zealand Stock Exchange.The Company has petroleum exploration and production interests in the Carnarvon Basin, Western Australiaand exploration interests in the Taranaki Basin, New Zealand.

1

During the past year Pan Pacific’s main focus has been on extracting results from

the major 3D seismic coverage of its TL2 and TP7 permits in the offshore Carnarvon

Basin. Rapid progress has recently been made with interpretation of this seismic,

which has established the existence of some substantial new prospects, notably

Clove and Mosman.

In addition to these new prospects, Taunton and Immortelle (previously identified

from 2D seismic) have been confirmed and drilling is scheduled for late this year. In

other Carnarvon permits where Pan Pacific is active, 3D seismic has also been used

to define the Montgomery and Argos prospects, also soon to be drilled.

Thus four wells are firmly committed for drilling. This is likely to be followed by

drilling of large new prospects in TL2 such as Clove and Mosman, each of which

could make discoveries in the order of 20-50 million barrels of oil.

There was limited activity regarding the Company’s licence in New Zealand’s

Taranaki Basin. The Tui prospect in that licence is an outstanding ‘play’ which may

be drilled when a semi-submersible drilling unit is in the area early next year and an

expansion of the number of participants in the venture has been achieved.

While oil production from the Chervil field within TL2 was suspended indefinitely

in March 2002, the facilities, particularly at Airlie Island, should assist economic

development of any new discoveries in the licence area.

The $1.8 million loss for the year as set out in the accompanying financial

statements includes the impact of absorbing $2 million of prior year expenditures

on drilling the Corvus gas discovery, which directors decided to write off, given the

uncertainty of development. Despite the accounting loss, Pan Pacific’s cash position

substantially improved during the year and the $7.4 million on hand at 30 June

2002 is primarily earmarked to fund the Carnarvon drilling programme.

In the meantime, the Tubridgi project continues as a useful source of revenue for the

Company. Tubridgi field production is likely to continue for several years, although at

reducing rates, while associated gas gathering is expected to run to at least 2010.

R A Radford

Chairman

18th September 2002

Chairm

an’s Report Pan Pacific Petroleum

2002 1

Chairman’s Report

Exploration

Carnarvon BasinPan Pacific has interests in five offshore permits

in the Carnarvon, including contiguous licences

TL2 and TP7. Acquisition of 700 km2 of 3D

seismic was completed over these two areas in

September 2001, and interpretation of this data

is well advanced. It is expected that at least six

of the prospects which have been defined, or

refined, by the 3D seismic program, will be

drilled before mid 2003.

The first wells will test Immortelle (TP7) and

Taunton (updip from the initial 1991 well in TL2)

before the end of 2002. Elsewhere, Argos, an

analog to the Legendre Field, in WA254P and

Montgomery (a stacked 4 way dip closure) in

WA-149P will be drilled in late 2002 / early 2003.

TP7/TL2

Immortelle (TP7)

The Immortelle prospect is an elongate rollover

along the downthrown side of the Flinders Fault.

It is on trend and analogous in structural setting,

style and size to the Roller-Skate Field, 75km

to the southwest. The primary target is the

Cretaceous Birdrong Sandstone at 850m, with

a deeper secondary target in the late Jurassic

Dupuy Formation at 1200m.

Mid-case oil potential for the primary target

is 15 million barrels with an upside case of

50 million barrels.

Taunton-2 (TL2)

Taunton-2 is a relatively low risk-modest reward

prospect, updip from an interpreted by-passed

oil column in Taunton-1. The primary target is

a quartzose sandstone reservoir within the

Cretaceous Mardie Greensand at 1350m.

Mid-case potential is 3 million barrels, with upside

potential of 5 million barrels.

A discovery at Taunton could be developed using

horizontal wells and tied back to the TL2 joint

venture existing facilities at Airlie Island, some

6km away.

Clove (TL2/TP7)

Clove is a dip closure covering 10 km2

at the Top Malouet level. It is associated with

anomalously high seismic amplitudes, which may

indicate trapped hydrocarbons. Mid-case oil

potential is 30 million barrels with an upside of

50 million barrels. Secondary structural targets

are present within the overlying Barrow Group.

Mosman and Masala (TL2)

Mosman and Masala prospects are both

stratigraphic traps, delineated by anomalously

high seismic amplitudes. Oil potential is in the

order of 20-45 million barrels for Mosman and

10-20 million barrels for Masala.

WA149P

The WA149P permit area lies between the Barrow

Island, East Spar, and Woollybutt fields. The

Exploration & Production Report

PPP PPP Gross Area Net Area

Permit Interest % km2 km2

TL2 23.1660 401 93

TP7 4.1570 1248 51

WA149P (1) 10.0000 704 70

WA246P (1) 10.0000 323 32

WA254P (1,3,4) 2.9914 243 6

WA254P (2) 5.2350 81 4

3,000 256

Pan Pacific’s offshore Carnarvon Basin acreage – excludes onshore Carnarvon & Taranaki acreage.

Exploration Rep

ort Pan Pacific Petroleum2002

3

Maitland gas discovery was made in WA149P in 1993,

since which time 3D seismic has been reprocessed to

better image targets in the block.

The seismic reprocessing has defined the Montgomery

prospect as a robust 4-way dip closure at base

Cretaceous level, with some 60-80 metres of vertical

relief, extending over 20km2. This prospect is expected

to be drilled around February 2003. The well will test

multiple targets within the Cretaceous and Jurassic

sequence. The proximity of this target sequence to oil-

mature Jurassic source rocks strongly indicates this

prospect to be oil rather than gas-prone. Mid case

potential is about 30 million barrels, with upside

around 70 million barrels.

WA246P

WA246P is adjacent to the Reindeer-Caribou gas fields,

and includes the Corvus gas and Tusk oil discoveries,

made in 1999 and 2000 respectively. The Corvus gas

discovery may be considered for development when

Carnarvon Basin - Western Australia

Onslow

Dampier

Griffin

WA-246-P

WA-149-P

TP7 (1)

TP7 (4) TL2

TL2

TP7(3)

EP110L9

TP7 (2)

WA-254-P

Clove

Mosman

Masala

Immortelle

Taunton 2

Montgomery

Argos

0 10 20 30 40 50

KILOMETRES

OIL FIELDSOIL FIELDS

GAS FIELDSGAS FIELDS

OIL PIPELINESOIL PIPELINES

PAN PACIFIC CONCESSIONSPAN PACIFIC CONCESSIONS

GAS PIPELINESGAS PIPELINES

PROSPECTSPROSPECTS

an appropriate market for gas can be identified.

Drilling success in adjacent permits could also

improve the economics of developing the Corvus

resource through joint use of production facilities.

WA254P

The Argos prospect to be drilled in November

2002, is a dip closure on the downthrown side of

the Rosemary Fault, on trend and analogous with

the Legendre South field, some 4km to the north.

The primary target is the “B. reticulatum

sandstone”, which is productive in the Legendre

fields. Based on intersections in nearby wells, this

turbidite sandstone is typically massive with only

minor claystone interbeds and exhibits excellent

reservoir quality. Mid-case oil potential for the

prospect is 4 million barrels, with an upside case

of 8 million barrels.

Taranaki Basin

PEP38460

The Tui prospect is a four-way-dip depth closure

at Kapuni D Sand level, some 20km northwest of

the giant Maui Field. Based on form and seismic

character, the D Sand at Tui is interpreted to be

a series of stacked sandstone and shales. Five

discrete reservoir/seal pairs have been mapped.

Three of these are associated with direct

hydrocarbon indications.

Taranaki Basin - New Zealand

Kapuni

MaariMaui-4

New Plymouth

Maui

Kupe

Pohokura

Tahuroa

Hector

Ngatoro

Rimu

Tui location

PEP38460

0 10 20 30 40 50

KILOMETRES

OIL FIELDSOIL FIELDS

GAS FIELDSGAS FIELDS

OIL PIPELINESOIL PIPELINES

PAN PACIFIC CONCESSIONSPAN PACIFIC CONCESSIONS

GAS PIPELINESGAS PIPELINES

PROSPECTSPROSPECTS

5

Exploration Rep


Pan Pacific has demonstrated that the large Tui prospect

was originally part of one large oil pool, thought to

extend right across Maui and Tui. Late tectonic

movements have since pushed the Maui area up and

caused a lot of oil to escape through associated faults.

Several modest oil pools remain and are produced at

Maui, but the simpler dip closure at Tui is not affected

by the late tectonism and therefore might still be intact.

If so, the structure has potential for 200-700 million

barrels of oil.

In addition to the D Sands, secondary targets are the

Moki (mid-case 400 million barrels potential) and the

deeper Kapuni F Sands (mid-case 50 million barrels).

Depending on rig availability and farmout to cover Pan

Pacific’s share of costs, it is anticipated that Tui will be

drilled to a total depth of 4000m in 2003.

Production

Tubridgi Project

The Tubridgi project comprises production of gas from

the onshore Tubridgi field, plus the transportation and

trading of gas produced from the offshore Griffin field.

Net operating cash flow from the Tubridgi project for

the year was $3.1million.

A new sales contract for Tubridgi gas has operated from

November 2001. It is expected that field production will

continue until 2004, although at reducing levels.

Arrangements to purchase and resell gas from Griffin

are contracted to March 2004. However, it is expected

that there will be substantial volumes of Griffin gas

produced at least until 2010. Daily sales until November

2001 averaged 8.5 Tj/day. Under the new contract (of

November 2001) daily sales averaged 6.5 Tj/day.

Last year sales averaged 15 Tj/day. Griffin resales

averaged 26 Tj/day compared to 22 Tj/day in the

last financial year.

Chervil

Chervil field oil production was shut-in as a result of

operational difficulties, the rectification of which was

not justified by the low rate of production.

Chervil produced 12,000 barrels of oil for Pan Pacific

until shut-in during this year compared with 23,000

barrels in the last financial year. One oil sale of 27,357

barrels occurred during the year generating revenue of

$1 million.

Drilling Schedule

Prospect Permit PPP Potential + Risk ++ Play type Expected Well

equity (mmbbl) % Depth Drilling Status

Date

2002

Immortelle TP7 4.16 15-50 24 Top Barrow Oct Firm*

Taunton TL2 10.00 3-5 26 Mardie Nov Firm*

Argos WA254P 2.99 4-8 20 Lower Barrow Nov Firm*

2003

Montgomery WA149P 10.00 30-70 15 Barrow/Dupuy Feb Firm*

Mosman TL2 23.17 20-45 19 Lower Barrow Mar Indicative **

Clove TL2/TP7 23.17/4.16 30-50 24 Lower Barrow Mar Indicative **

Tui PEP38460 20.00 ^ 200-700 26 Kapuni D Mar Indicative **

* Firm: Committed well or Joint Venture has approved

** Indicative: Yet to be proposed/approved by joint venture

^ Pan Pacific’s indicative equity, post intended farmout

+ Midcase to upside estimate

++ PPP estimate of midcase chance of success eg Immortelle is believed to have a 24% or 1 in 4 chance of success.

Shareholder Information

Substantial Shareholder

New Zealand Oil & Gas Limited had a relevantinterest in 19,019,160 shares in Pan PacificPetroleum NL (8.7% of issued capital) at thetime of its last substantial shareholder notice.

Shareholdings Analysis at 11 September 2002

Pan Pacific had 11,094 shareholders holdingtotal issued ordinary shares of 218,552,177.Of those, 6,227 shareholders held less than amarketable parcel as defined in the AustralianStock Exchange listing rules. Each share carriesone vote. The distribution of shareholdings was:

Holding Number of Shareholders1 - 1,000 868

1,001 - 5,000 5,359

5,001 - 10,000 2,177

10,001 - 100,000 2,443

100,001 and over 247

Top 20 Shareholders at 11 September 2002

Name of shareholder Shareholding %ANZ Resources Pty Limited 10,991,225 5.0

Resources Trust Limited 9,220,970 4.2

Equitas Nominees Pty Limited 8,518,997 3.9

NZOG Nominees Limited 6,690,593 3.0

New Zealand Central Securities

Depository Limited 2,707,691 1.2

Mr Denis Howe Donovan 2,270,000 1.0

Chung King Tan 2,194,727 1.0

Sik-On Chow 2,000,000 0.9

ANZ Nominees Limited 1,942,820 0.9

Dr Robert Albert Boas 1,600,000 0.7

Mr Ron Dusseldorp 1,513,283 0.7

Mr Albert Maxwell Baxter Brown 1,412,080 0.6

Mr Geoffrey Stewart Wilkinson 1,340,000 0.6

National Nominees Limited 1,292,980 0.6

Mehasu Pty Limited 1,217,987 0.6

Kerstin Spangberg-Wenig 1,195,122 0.5

Mr K O & Mrs M B Kuhnemann 1,000,000 0.5

Nergar Nominees Pty Ltd 950,000 0.4

G M Robinson & D J Bradley 900,000 0.4

Mr W G & Mr D M Evans 885,500 0.4

59,843,975 27.4

7

Exploration Rep


Directors and Management

R A Radford Executive Chairman

A K R Watson AM Non-Executive Director

E R Matthews Director, Exploration Manager

G A Ward Finance Manager

K M Ware Company Secretary

Registered Office

3rd Floor, Compaq House

76 Berry Street

North Sydney, NSW 2060

Australia

Telephone: 61 2 9957 2177

Facsimile: 61 2 9925 0564

Share Registries

Australia

Registries Limited

PO Box R67

Royal Exchange

Sydney NSW 1225

Telephone: 61 2 9279 0677

Facsimile: 61 2 9279 0664

New Zealand

B K Registries

PO Box R67

138 Tancred Street

Ashburton, New Zealand

Telephone: 64 3 308 8887

Facsimile: 64 3 308 1311

Internet Site

www.panpacpetroleum.com.au

Financial Report

Contents Page No.

DIRECTORS’ REPORT 9

INDEPENDENT AUDITORS’ REPORT 13

DIRECTORS’ DECLARATION 14

STATEMENTS OF FINANCIAL PERFORMANCE 15

STATEMENTS OF FINANCIAL POSITION 16

STATEMENTS OF CASH FLOWS 17

NOTES TO THE FINANCIAL STATEMENTS 19

CORPORATE GOVERNANCE STATEMENT 36

9

Financials Pan Pacific Petroleum2002 9

Directors’ Report

The directors present their report together with the financial report of Pan Pacific Petroleum NL ("the company") and the

consolidated financial report of the consolidated entity, being the company and its controlled entities, for the year ended

30 June 2002 and the independent audit report thereon.

Principal Activities

The consolidated entity is predominantly involved in petroleum exploration and production.

No significant change in the nature of these activities occurred during the year.

Dividends

No dividends or distributions have been paid or declared by the company during the year.

When sustainable post-tax profits and cash flows have been established, it is the directors’ intention to pay dividends after first

providing funds for active ongoing exploration and development activities which are sufficient to achieve growth and maximise

value of the company to shareholders.

Results of Operations

The operating loss after tax for the year amounted to $1,812,562 (2001 loss of: $395,844)

Corporate Governance

The corporate governance principles adopted by the consolidated entity is set out on page 36 of this annual report.

Directors

The directors of the company at any time during or since the financial year are:

Name and Qualifications Age Experience and Special Responsibilities

R A Radford ACA(NZ) 64 Mr Radford is a chartered accountant (ACA, NZ) with extensive experience in the

(Chairman) resources sector. He is Chairman of Pan Pacific Petroleum NL. Director since 1979.

E R Matthews PhD, MSc, BSc 48 Dr Matthews is a petroleum exploration geologist with extensive experience primarily in

(Exploration Manager) the Taranaki Basin of New Zealand and the Carnarvon Basin in Western Australia.

Director since 1994.

A K R Watson AM, FAIBF 73 Mr Watson has considerable expertise in the banking and finance sector. He is Chairman

(Independent Non-Executive of Plan B Financial Services Ltd and is a Director of other companies. He holds senior

Director) positions in community groups including Chairman of Bethesda Hospital Inc. and Director

of WA Opera Company. He is a Member of the Order of Australia. Chairman of the Audit

Committee. Director since 1992.

Director’s Report

Meetings of Directors

The following table sets out the number of meetings of the company’s directors, (including meetings of

committees of directors) held during the year ended 30 June 2002, and the number of meetings attended

by each director. At the date of this report the company had an audit committee.

Directors’ Meetings Audit Committee Meetings

Director Number Held Number Attended Number Held Number Attended

R A Radford 11 11 5 5

A K R Watson, AM 11 11 5 5

E R Matthews 11 11 5 5

Environmental Regulation

The consolidated entity’s production and exploration operations are subject to significant environmental

regulations under both Commonwealth and State legislation.

Pan Pacific has in place an Environmental Policy under which the company, in seeking to locate and

develop petroleum resources, is committed to achieving a high standard of environmental performance.

Resources commensurate with this priority are made available to comply as a minimum with all relevant

legislation to ensure that safety in design, safe systems and places of work are maintained to high oil

industry standards and that all reasonable steps are taken to ensure no individual or the environment is

placed in a situation of endangerment.

Pan Pacific’s production and exploration activities are carried out through other companies acting as joint

venture operators and therefore Pan Pacific’s environmental objectives are achieved through

encouragement and monitoring of the performance of these operators.

Chervil - The operator is required by the Western Australian Environmental Protection Act to produce a

brief annual and comprehensive triennial report on operations on Airlie Island. The reports cover the major

monitoring and research programs namely, vegetation and bird life monitoring; marine monitoring;

Shearwater monitoring; groundwater monitoring; and discharge monitoring.

Tubridgi – Operations at Tubridgi are subject to one environmental licence under the Western Australian

Environmental Protection Act. The operator is required to report to both the Department of Minerals and

Energy and the Department of Environmental Protection on matters such as air pollution; water and waste

disposal; chemical consumption; groundwater monitoring and spillage. In addition all environmentally

sensitive activities on site, such as drilling or facilities upgrade, are done with the approval of the DEP.

The directors are not aware of any significant breaches during the period covered by this report and there

were no fines incurred.

11


Director’s Report

Directors’ and Senior Executives’ Emoluments

The company conducts a formal annual review process. The broad remuneration policy is to ensure the remuneration package

properly reflects the person’s duties and responsibilities and that remuneration is competitive in attracting, retaining and

motivating people who will contribute to the success of the company.

The company's non-executive director did not receive any performance related remuneration/benefits during the year. Executive

directors and senior executives participate in the employee option plan established by the former ultimate holding company, New

Zealand Oil & Gas Limited (“NZOG”). Further details are contained in note 23 to the annual financial statements.

Details of the nature and amount of each major element of the emoluments of each director of the company and of the named

officer (excluding executive directors) of the company and the consolidated entity (being the same for both) in respect of the

period receiving the highest emoluments are set out below, calculated on the basis of cost to the consolidated entity net of and

therefore excluding costs recovered from outside the consolidated entity.

Base Non-cash Superannuation Total

emolument benefits(1) contributions

$ $ $ $

Director

Dr E R Matthews 23,400 2,414 2,054 27,868

Mr A K R Watson, AM 13,500 149 - 13,649

Mr R A Radford 104,607 2,318 5,462 112,387

Officer (2)

Mr G A Ward 33,885 149 1,683 35,717

Ms K M Ware 53,866 149 4,309 58,324

(1) Includes where applicable, fringe benefits, fringe benefits tax and premiums for directors’ and officers’ liability insurance.

(2) Includes all of the senior executives of the consolidated entity (other than executive directors).

Directors’ Interests

The relevant interest of each director in the share capital of the companies within the consolidated entity and other related body

corporates as notified by the directors to the Australian Stock Exchange in accordance with S205G(1) of the Corporations Act

2001, at the date of this report is as follows:

Pan Pacific Petroleum NL

Relevant Interests

Mr R A Radford 5,087,342

Mr A K R Watson 125,400

Dr E R Matthews 825,148

Director’s Report

Indemnification and Insurance of Officers

The company has agreed to indemnify the current directors and officers of the consolidated entity against

all liabilities that may arise from their position as directors or officers, except where the liability arises out of

conduct involving a lack of good faith. The agreement stipulates that the company will meet the full

amount of any such liabilities, including costs and expenses.

During or since the end of the financial year the company made payments of $7,463 for this directors’ and

officers’ liability insurance covering the consolidated entity, its directors and its officers.

Significant Changes in State of Affairs

In the opinion of the directors there were no significant changes in the state of affairs of the consolidated

entity that occurred during the financial year under review not otherwise disclosed in this report or the

consolidated financial report.

Events Subsequent to Balance Date

There has not arisen in the interval between the end of the financial year and the date of this report any

item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect

significantly the operations of the consolidated entity, the results of those operations, or the state of affairs

of the consolidated entity in subsequent financial years.

Likely Developments

Likely developments and expected results are outlined in the exploration and production report where

those results can be reasonably determined.

Rounding

The company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance

with that Class Order, amounts in the financial report and directors’ report have been rounded off to the

nearest thousand dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors.

R A Radford A K R Watson AM

Director Director

Dated this 16th day of August 2002.

13


Independent Auditors’ Report

Scope

We have audited the financial report of Pan Pacific Petroleum NL for the financial year ended 30 June, 2002 consisting of the

statements of financial performance, statements of financial position, statements of cash flows, accompanying notes, and the

directors’ declaration set out on pages 14 to 35. The financial report includes the consolidated financial statements of the

consolidated entity, comprising the company and the entities it controlled at the end of the year or from time to time during the

financial year. The company’s directors are responsible for the financial report. We have conducted an independent audit of the

financial report in order to express an opinion on it to the members of the company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the

financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the

amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting

estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is

presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements and statutory

requirements in Australia so as to present a view which is consistent with our understanding of the company’s and the

consolidated entity’s financial position, and performance as represented by the results of their operations and their cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In our opinion, the financial report of Pan Pacific Petroleum NL is in accordance with:

(a) the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2002 and of

their performance for the year ended on that date; and

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

(b) other mandatory professional reporting requirements in Australia.

KPMG T van Veen

Partner

Sydney

Dated this 16th day of August 2002

to the members of Pan Pacific Petroleum NL

Directors’ Declaration

In the opinion of the directors of Pan Pacific Petroleum NL:

(a) the financial statements and notes, set out on pages 15 to 35, are in accordance with the

Corporations Act 2001, including:

(i) giving a true and fair view of the financial position of the company and consolidated entity

as at 30 June 2002 and of their performance, as represented by the results of their

operations and their cash flows, for the year ended on that date; and

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

(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when

they become due and payable.

Signed in accordance with a resolution of the directors.

R A Radford A K R Watson AM

Director Director

Dated this 16th day of August 2002.

15


Statement of Financial Performance

Consolidated Parent Company

2002 2001 2002 2001

Note $’000 $’000 $’000 $’000

Sales revenue 2(a) 12,412 13,247 11,398 11,153

Production and other costs 3(a) (10,506) (11,451) (9,100) (10,170)

Gross profit 1,906 1,796 2,298 983

Other revenue from ordinary activities 2(b) 219 280 191 149

Exploration expenses written off (2,203) (1,770) (40) (7)

Loans to associates written off (58) - (58) -

Provision for loans to controlled entities - - (1,857) -

Other expenses from ordinary activities 3(b) (1,236) (1,256) (1,816) (899)

Operating (loss)/profit from ordinary

activities before income tax expense (1,372) (950) (1,282) 226

Income tax (expense)/benefit 5(a) (340) 554 (490) (529)

Net loss (1,712) (396) (1,772) (303)

Net Profit attributable to outside

equity interests 17 (101) - - -

Net loss attributable to members

of the parent entity (1,813) (396) (1,772) (303)

Basic earnings per share:

Ordinary share (cents) 25 (0.83) (0.18)

Diluted earnings per share:

Ordinary share (cents) 25 (0.83) (0.18)

The Statements of Financial Performance are to be read in conjunction with the Notes to and Forming Part of the Financial

Statements set out on pages 19 to 35.

for the year ended 30 June 2002

Statement of Financial Position


2002 2001 2002 2001

Note $’000 $’000 $’000 $’000

Current Assets

Cash 6 7,381 4,206 6,052 3,489

Receivables 7 885 1,678 615 1,095

Inventories 8 276 976 24 24

Other 12 - 135 - 79

Total Current Assets 8,542 6,995 6,691 4,687

Non-Current Assets

Receivables 7 - 86 189 1,957

Plant and equipment 10 1,125 2,153 1,034 2,073

Exploration evaluation & development

expenditure 11 3,469 5,731 62 628

Other financial assets 9 - - 1,303 1,303

Deferred tax assets 5(d) 958 814 296 272

Total Non-Current Assets 5,552 8,784 2,884 6,233

Total Assets 14,094 15,779 9,575 10,920

Current Liabilities

Payables 13 1,669 1,992 2,478 2,040

Provisions 14 2,122 1,792 - -

Provision for current income tax 5(b) 707 - 198 -

Total Current Liabilities 4,498 3,784 2,676 2,040

Non-Current Liabilities

Deferred tax liabilities 5(c) 668 1,431 24 267

Provisions 14 832 756 790 756

Total Non-Current Liabilities 1,500 2,187 814 1,023

Total Liabilities 5,998 5,971 3,490 3,063

NET ASSETS 8,096 9,808 6,085 7,857

EQUITY

Contributed equity 15 19,942 19,942 19,942 19,942

Accumulated losses 16 (11,947) (10,134) (13,857) (12,085)

Total parent entity interest 7,995 9,808 6,085 7,857

Outside equity interest 17 101 - - -

TOTAL SHAREHOLDERS EQUITY 8,096 9,808 6,085 7,857

The Statements of Financial Position are to be read in conjunction with the Notes to and Forming Part of

the Financial Statements set out on pages 19 to 35.

as at 30 June 2002

17


Statement of Cash Flows


2002 2001 2002 2001

$’000 $’000 $’000 $’000

Cash Flows from Operating Activities

Cash receipts in the course of operations 15,077 13,050 13,182 10,956

Cash payments in the course of operations (11,150) (7,948) (9,658) (7,456)

Interest received 239 196 185 137

Income taxes paid (402) (223) (458) (169)

Net cash provided by operating activities 3,764 5,075 3,251 3,468

Cash Flows from Investing Activities

Payments for plant and equipment (76) (36) (25) -

Proceeds on disposal of non-current assets - 26 - -

Payments in respect of areas of interest in:

- Exploration and/or evaluation phase (461) (2,440) 7 (5)

- Production phase - (672) - (432)

Advances from associated entities - 9 - 9

Advances to controlled entities - - (670) (1,199)

Refunds from security deposits - 232 - 232

Net cash used in investing activities (537) (2,881) (688) (1,395)

Net increase in cash held 3,227 2,194 2,563 2,073

Cash at the beginning of the financial year 4,206 2,033 3,489 1,416

Effects of exchange rate fluctuations on the balances

of cash held in foreign currencies (52) (21) - -

Cash at the end of the financial year 7,381 4,206 6,052 3,489

The Statements of Cash Flows are to be read in conjunction with the Notes to and Forming Part of the Financial Statements set

out on pages 19 to 35.


Statement of Cash Flows (continued)


2002 2001 2002 2001

$’000 $’000 $’000 $’000

(a) Reconciliation of Cash

For purposes of the statements of cash flows,

cash is defined as:

Cash at bank 6,407 4,307 5,338 3,832

Cash held by joint ventures 974 (101) 714 (343)

Cash at the end of the financial year 7,381 4,206 6,052 3,489

(b) Reconciliation of Cash Flow from

Operations with Operating Loss after

Income Tax

Operating loss from ordinary activities

after income tax (1,712) (396) (1,772) (303)

Non-cash flows in operating loss:

Amortisation 520 1,963 520 1,406

Depreciation 1,104 1,866 1,064 1,822

Write-off of exploration expenditure 2,203 1,770 40 7

Write-down of investment in

associated entities 58 - 58 -

Provision for loan to controlled entities - - 1,857 -

Non-cash acquisition of tax losses

from controlled entities - - 799 1,219

Movements in provisions:

Restoration 275 98 34 98

Income tax 707 - 198 -

Deferred income tax liability (763) (630) (243) (716)

Future income tax benefit (144) (11) (24) (64)

Employee provision entitlements 131 24 - -

Items included as investment activities:

Loss on sale of fixed assets - 3 - -

Changes in assets and liabilities;

Decrease/(increase) in receivables 879 (209) 509 (210)

Decrease/(increase) in inventories 700 (92) - -

(Decrease)/increase in payables (329) 865 132 288

Decrease/(increase) in other assets 135 (176) 79 (79)

Cash flows from operations 3,764 5,075 3,251 3,468

The statements of cash flows are to be read in conjunction with the notes to and forming part of the

financial statements set out on pages 19 to 35.


19


Notes to and Forming Part of theFinancial Statements

1. Statement of Significant Accounting Policies

The significant policies which have been adopted in the preparation of this financial report are:

(a) Basis of Accounting The financial report is a general purpose financial report which has been prepared in accordance with Accounting

Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting

Standards Board and the Corporations Act 2001. It has been prepared on the basis of historical costs and does not take

into account, except where stated, changing money values or fair values of non-current assets. The accounting policies

have been consistently applied by the entities included in the consolidated entity and are consistent with those of the

previous financial year, except where indicated.

(b) Principles of consolidationThe consolidated financial statements of the consolidated entity include the financial statements of the company, being

the parent entity, and its controlled entities.

Where an entity either began or ceased to be controlled during the year, the results are included only from the date

control commenced or up to the date control ceased.

The balances, and effects of transactions, between controlled entities in the consolidated financial statements have

been eliminated.

(c) Exploration, Evaluation and Development ExpenditureExploration, evaluation and development expenditure carried forward represents an accumulation of costs incurred in

relation to separate areas of interest for which rights of tenure are current and in respect of which:

(i) Such costs are expected to be recouped through successful development and exploitation of the area of interest,

or alternatively, by its sale; or

(ii) Exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable

assessment and/or evaluation of the existence or otherwise of economically recoverable reserves and active and

significant operations in, or in relation to, the areas are continuing.

Exploration and evaluation expenditure (together with certain advances to and investments in controlled entities relative

to those expenditures) is written off in the statement of financial performance, under the successful efforts method of

accounting, in the period that exploration work demonstrates that an area of interest or any part thereof, is no longer

prospective for economically recoverable reserves or when the decision to abandon an area of interest is made. An area of

interest is defined by the consolidated entity, as being a permit area.

A further write-down of accumulated expenditure is made where the expenditure in an area of interest exceeds the

directors’ valuation of that area of interest. The directors’ valuations of areas of interest, especially projects at a pre-

development stage, are dependent upon a number of factors which are uncertain or tentative at the time of valuation and

which may be subject to change. Such factors include the ability to secure sales contracts, levels of reserves, production

profiles, estimates of future product sales prices, operating costs and capital expenditures, availability of financing and of

tax losses and legislative changes.

No amortisation is provided, in respect of development areas of interest, until they are reclassified as production areas

following commencement of petroleum production.

The ultimate value to the company and its controlled entities of these permits and exploration expenditures incurred

thereon is contingent upon the results of further exploration and agreements entered into with other parties and also

upon meeting commitments under the terms of permits granted and joint venture agreements.


(d) Production Expenditure Production expenditure carried forward represents the accumulation of all exploration, evaluation

and development expenditure (excluding fixed asset expenditure) incurred by the consolidated

entity in relation to areas of interest in which petroleum production has commenced. Expenditure

on production areas of interest and any future expenditure necessary to develop proven and

probable reserves to meet current commitments under sales contracts, are amortised, using the

production output method, the straight line method or on a basis consistent with the recognition

of revenue, whichever is considered the more appropriate. The production output method results

in an amortisation charge proportional to the depletion of economically recoverable proven or

contracted reserves whichever is the lesser. The straight line method results in an amortisation

charge over time based on current sales contracts in place. Where such costs are considered not to

be fully recoverable under existing conditions, an amount is provided to cover the shortfall.

The effective remaining life of the production assets has been assessed at between 1 and 4 years.

(e) Plant and Equipment

Fixed assets are stated at cost less an allowance for depreciation.

Depreciation has been provided for on a straight line basis so as to charge the cost of fixed assets

over their estimated economic lives assessed as follows:

2002 2001

Plant and Equipment 15-33% 15-33%

Pipelines and production facilities 1-4 years 1-4 years

Pipelines and associated production facilities are depreciated over their economic life on a basis

consistent with the recognition of revenue over their economic life, or straight line basis whichever is

more appropriate. Thus, the economic life of such equipment is dependent on future production and

remaining reserves, and therefore varies from project to project. Where such costs are not considered

to be fully recoverable under existing conditions, an amount is provided to cover the shortfall.

Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When

changes are made, adjustments are reflected prospectively in current and future periods only.

(f) Recoverable amount of non-current assets valued on cost basis

The carrying amount of non-current assets valued on the cost basis, other than exploration and

evaluation expenditure carried forward (refer note 1(c)), are reviewed annually to determine

whether they are in excess of their recoverable amount at balance date. If the carrying amount of a

non-current asset exceeds its recoverable amount, the asset is written down to the lower amount.

The write-down is recognised as an expense in the net profit or loss in the reporting period in

which it occurs.

(g) Restoration and Rehabilitation Expenditure

Significant restoration and rehabilitation expenditure to be incurred subsequent to the cessation of

production from production areas of interest, when its extent can be reasonably estimated, is

accrued in the statement of financial position, in proportion to production on an undiscounted

basis.

Changes in estimates are dealt with on a prospective basis.

(h) InvestmentsControlled Entities

Investments in controlled entities are valued in the company’s accounts at cost except where in the

opinion of directors, there is an impairment in value, in which case a provision is made to write

down to their estimated recoverable amount.

(Continued)

21



(i) Advances to Controlled and Associated Entities Advances to controlled and associated entities are stated at cost. Where considered necessary, the advances are written

off or provided against in the financial statements for possible loss on realisation of the advances. The write-off or loss on

realisation for each advance is calculated to be the difference between the advance made to the controlled or associated

entities and the company or economic consolidated entity's equity in the net assets of the controlled or associated entity.

(j) InventoriesOil inventories are carried at the lower of cost and net realisable value. Costs are allocated on an average basis and include

direct production expenses, royalties and other fixed and variable overhead costs directly related to production activities.

(k) Foreign Currency Transactions and BalancesTransactions in foreign currencies are translated to Australian currency at the rate of exchange ruling at the date of the

transaction. At balance date foreign currency monetary assets and liabilities are translated at the closing rate, unless the

amount receivable and payable can be determined under a forward exchange contract, and exchange variations are

included in the statement of financial performance as operating items.

(l) Revenue RecognitionRevenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST).

Sale of goods

Sales comprise revenue earned from the provision of petroleum products to entities outside the consolidated entity.

Revenue from gas and oil sales is recognised on delivery and shipment, respectively.

Interest revenue

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

Sale of non-current assets

The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the buyer,

usually when an unconditional contract is signed.

The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of

disposal and the net proceeds on disposal.

(m) Goods and services taxRevenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the

amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is

recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

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

The net amount of GST recoverable from, or payable to, the ATO is included as a current liability in the statement of

financial position.

Cashflows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from

investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(n) TaxationThe consolidated entity adopts the income statement liability method of tax effect accounting.

Income tax expense is calculated on operating profit adjusted for permanent differences between taxable and accounting

income. The tax effect of timing differences, which arise from items being brought to account in different periods for

income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax

benefit or a provision for deferred income tax.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt.

Future income tax benefits relating to losses are only brought to account when their realisation is virtually certain. The

effects of capital losses are not recorded unless realisation is virtually certain.

(o) Employee Entitlements

Wages, salaries, annual leave and sick leave

Liabilities for employee entitlements to wages, salaries, annual leave and sick leave represent

present obligations resulting from employees’ services provided up to the reporting date,

calculated at undiscounted amounts based on current wage and salary rates including

related on-costs.

Long service leave

The provision for employee entitlements to long service leave represents the present value of the

estimated future cash outflows to be made resulting from employees’ services provided to

reporting date.

The provision is calculated using estimated future increases in wage and salary rates including

related on-costs and expected settlement dates based on turnover history and is discounted using

the rates attaching to national government securities at balance date which most closely match the

terms of maturity of the related liabilities.

Superannuation plan

The Company and other controlled entities contribute to a defined contribution superannuation

plan. Contributions are charged against income as they are made.

(p) Payables

Liabilities are recognised for amounts to be paid in the future for goods or services received.

Trade accounts payable are normally settled within 30-60 days.

(q) Receivables

The collectibility of debts is assessed at balance date and specific provision is made for any

doubtful accounts.

Trade debtors

Trade debtors to be settled within 60 days are carried at amounts due.


2002 2001 2002 2001

$’000 $’000 $’000 $’000

2. Revenue from ordinary activities

(a) Oil and gas sales 12,412 13,247 11,398 11,153

(b) Other revenues from ordinary activities

Interest from

- other companies 219 199 191 141

- related parties - 8 - 8

Insurance proceeds received - 47 - -

Proceeds from sale of non-current assets - 26 - -

Total other revenues 219 280 191 149

Total revenue from ordinary activities 12,631 13,527 11,589 11,302


(Continued)

23




2002 2001 2002 2001$’000 $’000 $’000 $’000

3. (Loss)/profit from ordinary activities before income tax

(Loss)/profit from ordinary activities,

before income tax has been arrived at after

charging/(crediting) the following items:

(a) Production and other costs:

Amortisation of costs in respect of

petroleum permits which are at the

production phase (520) (1,963) (520) (1,406)

Depreciation of plant &

equipment (1,104) (1,866) (1,064) (1,822)

Government royalties (326) (290) (153) (208)

Production & delivery costs (8,556) (7,332) (7,363) (6,734)

(10,506) (11,451) (9,100) (10,170)

(b) Other expenses from ordinary activities:

Corporate expenses (140) (531) (1,145) (219)

Employee entitlements provision (132) (24) - -

Exchange losses (52) (21) - -

Office service charges (637) (582) (637) (582)

Restoration provision (275) (98) (34) (98)

(1,236) (1,256) (1,816) (899)

(c) Individually significant items of expense:

Provision for loan to controlled entities - - (1,857) -

(d) Loss on sale of non-current assets - (3) - -


2002 2001 2002 2001

$ $ $ $

4. Auditors’ Remuneration

Amounts received or due and receivable by

the auditors of the company for:

- audit services 38,000 37,000 38,000 37,000

- other services 39,036 24,889 18,166 5,950


2002 2001 2002 2001

$’000 $’000 $’000 $’000

5. Taxation

(a) Income tax expense

Operating (loss)/profit from operating

activities before income tax (1,372) (950) (1,282) 226

Prima facie income tax (benefit)/expense

calculated @ 30% (2001: 34%)

on operating profit/(loss) (411) (323) (384) 77

Tax effect of permanent differences 7 1 819 -

Recovery of tax losses of controlled

entity not previously brought to account - (226) - -

Income tax (benefit)/expense on operating

(loss)/profit before individually significant

tax items (404) (548) 435 77

Restatement of deferred tax balance due

to change in company tax rate - 75 - 93

(404) (473) 435 170

Add income tax under/(over) provided

in prior year 744 (81) 55 359

Income tax expense/(benefit) attributable

to operating loss 340 (554) 490 529

Income tax expense/(benefit) attributable to

operating (loss)/profit is made up of:

Payment for tax losses transferred from a

controlled entity - - 22 780

Net movement in deferred tax assets/liabilities (732) (641) (267) (780)

Current income tax provision 447 168 623 170

Under/(over) provision in prior year 625 (81) 112 359

340 (554) 490 529

(b) Provision for current income tax

Movements during the year

Balance at beginning of year (135) - (79) -

Income tax paid

– operating activities (402) - (458) -

Current years income tax expense on

profit from ordinary activities 447 - 623 -

Under provision in prior year 797 - 112 -

707 - 198 -


(Continued)

25




2002 2001 2002 2001

$’000 $’000 $’000 $’000

(c) Provision for deferred income tax

Provision for deferred income tax comprises the estimated expense

at the applicable rate of 30% (2001: 30%) on the following items:

Difference in depreciation and amortisation

of property plant and equipment for accounting

and income tax purposes - 75 - 78

Difference in treatment of exploration

and production phase expenditure for

accounting and income tax purposes 666 1,756 19 189

Sundry items 2 - 5 -

Less: associated future income tax benefits - (400) - -

668 1,431 24 267

Associated future income tax benefits consist of excess exploration expenditure claimed for tax, the benefit of which

would otherwise be unrecognised.

(d) Future income tax benefit

Future income tax benefit comprises the estimated future benefit

at the applicable rate of 30% (2001: 30%) on the following items:

Sundry items 72 50 59 45

Provision for restoration and accrued employee

entitlements not currently deductible 886 764 237 227

958 814 296 272

(e) Future income tax benefit not taken

to account

Future income tax benefit not brought

to account because realisation is not

virtually certain

Foreign tax losses at 33% 2,581 2,581 - -

These benefits will only be obtained if:

(i) the company and consolidated entity derive future assessable income of a nature and of an amount sufficient to

enable the benefit from the deductions for the losses to be realised;

(ii) the company and consolidated entity continue to comply with the conditions for deductibility imposed by law;

(iii) no change in income tax legislation adversely affects the company and consolidated entity in realising the benefit

from the deductions for the losses; and

(iv) in respect of foreign losses, the relevant company derives future assessable income in the relevant jurisdiction of a

nature and amount sufficient to enable the benefit to be realised.

5. Taxation (continued)

(f) Dividend franking account

As at 30 June 2002 and 2001, the company and consolidated entity had no franking credits.


2002 2001 2002 2001

$’000 $’000 $’000 $’000

6. Cash

Cash - at bank 6,407 4,307 5,338 3,832

- held by joint ventures 974 (101) 714 (343)

7,381 4,206 6,052 3,489

7. Receivables Current

Trade debtors 885 1,678 615 1,095

Non-Current

Advances to controlled entities - - 7,214 7,321

Less provision against advances - - (7,025) (5,450)

- - 189 1,871

Advances to associated entities - 86 - 86

- 86 189 1,957

Advances by the company to controlled entities are unsecured, interest free and have no fixed term

for repayment. Advances by the company to an associated entity for the year ended 30 June 2001

were unsecured, with no fixed term for repayment and were made at commercial rates of interest;

the weighted average rate of interest on such advances for the year ended 30 June 2001 was

12.75%. There were no advances made during the year ended 30 June 2002.

8. Inventories

Field operation consumables - at cost 276 276 24 24

Oil stocks – at cost - 700 - -

276 976 24 24


(Continued)

27




2002 2001 2002 2001

$’000 $’000 $’000 $’000

9. Other Financial Assets

Investments in Controlled Entities

Unlisted shares at cost - - 1,303 1,303

Note Interest Held

2002 2001

Particulars in relation to Controlled Entities % %

Pan Pacific Petroleum NL

Controlled Entities

Carnarvon Oil & Gas NL 100 100

Pafule Pty Limited (c) 40 100

Pan Pacific Petroleum (South Aust) Pty Limited 100 100

Pan Pacific Petroleum (Qld) Pty Limited 100 100

Surat Basin Petroleum Pty Limited 100 100

Pan Pacific Petroleum (Otway) Pty Limited 100 100

WM Holdings Limited (a) 100 100

WM Petroleum Limited (a)(b) 100 100

(a) WM Holdings Limited and WM Petroleum Limited are incorporated in New Zealand. All other controlled entities

are incorporated in Australia.

(b) With the exception of the investment in WM Petroleum Limited all controlled entities are carried at nominal value.

(c) Pafule Pty Limited (‘Pafule’) is a controlled subsidiary by virtue of Pan Pacific having rights to appoint or remove

Pafule directors.

Associated Company

The company also holds a 50% shareholding in an associated company, Resource Office Services Pty Ltd, which

has a nil value.


2002 2001 2002 2001

$’000 $’000 $’000 $’000

10. Plant and Equipment

At cost 18,391 18,315 15,969 15,944

Accumulated depreciation (17,266) (16,162) (14,935) (13,871)

1,125 2,153 1,034 2,073

Reconciliation

Carrying amount at beginning of year 2,153 4,009 2,073 3,895

Additions 76 36 25 -

Disposals - (26) - -

Less depreciation (1,104) (1,866) (1,064) (1,822)

1,125 2,153 1,034 2,073


2002 2001 2002 2001

$’000 $’000 $’000 $’000

11. Petroleum Interests

Costs carried forward in respect of

areas of interest which are at:

- Exploration and/or evaluation phase 3,407 5,149 - 46

- Production phase 20,842 20,842 10,467 10,467

Less accumulated amortisation (20,780) (20,260) (10,405) (9,885)

62 582 62 582

Total exploration, evaluation and

development expenditure 3,469 5,731 62 628

The ultimate recoupment of costs carried forward for exploration of evaluation phases is dependent

on the successful development and commercial exploitation or sale of respective areas.

12. Other Assets

Current

Income tax refund receivable - 135 - 79

13. Payables

Current

Trade creditors 1,669 1,992 1,330 1,204

Amounts owing to controlled entities - - 1,148 836

1,669 1,992 2,478 2,040

Amounts owing to controlled entities are unsecured, interest free and have no fixed terms for

repayment.

14. Provisions

Current

Employee entitlements 271 182 - -

Petroleum permit restoration 1,851 1,610 - -

2,122 1,792 - -

Number of employees at year end 11 11 - -

Non-Current

Employee Entitlements 42 - - -

Petroleum permit restoration 790 756 790 756

832 756 790 756


(Continued)

29




2002 2001 2002 2001

$’000 $’000 $’000 $’000

15. Contributed Equity

Issued and Paid up Capital

218,552,177 (2001 - 218,552,177)

ordinary shares fully paid 19,942 19,942 19,942 19,942

16. Accumulated Losses

Accumulated losses at the

beginning of year (10,134) (9,738) (12,085) (11,782)

Net loss attributable to members of

the parent entity (1,813) (396) (1,772) (303)

Accumulated losses at the end of the year (11,947) (10,134) (13,857) (12,085)

Consolidated

2002 2001

$’000 $’000

17. Outside Equity Interests

Outside Equity interests in controlled entities comprise:

Interests in operating profit after income tax 101 -

Interest in retained profits at the end of the financial year 101 -

Interest in share capital - -

Total outside equity interests 101 -


2002 2001 2002 2001

$ $ $ $

18. Directors’ and Executives’ Remuneration

(a) Remuneration of Directors

Total income paid or payable, or otherwise made available

to all directors, including executive directors, from entities

in the consolidated entity and related bodies corporate in

connection with the management of the affairs of the

consolidated entity, whether as a director or otherwise 153,903 371,262 153,903 371,262

18. Directors' and Executives' Remuneration (continued)

(a) Remuneration of Directors (continued)

During the 2001 year remuneration included a non-cash

benefit of $101,500 made by way of an allocation of

options under an Employee Share Option Plan sponsored

by the then parent company.

The number of directors of the company, including executive

directors, whose income from the company or related bodies

corporate in connection with the management of the affairs

of the consolidated entity, whether as a director or otherwise

was within the specified bands are as follows:

Income $ 2002 2001

10,000 - 19,999 1 1

20,000 - 29,999 1 -

90,000 - 99,999 - 1

110,000 - 119,999 1 -

250,000 - 259,999 - 1

(b) Directors

The names of the company’s directors who have held office during the financial year are Roy

Antony Radford, Albert Kevin Robert Watson and Eric Richard Matthews.


2002 2001 2002 2001

$ $ $ $

(c) Remuneration of Executives

Income received, or due and receivable,

by Australian-based executive officers

(including executive directors) of the

consolidated entity from all entities in the

consolidated entity and any related entities

in connection with the management of the

affairs of the consolidated entity, whether

as an executive officer or otherwise whose

income is $100,000 or more 112,387 255,587 112,387 255,587

During the 2001 year remuneration

included a non-cash benefit of $101,500

made by way of an allocation of options

under an Employee Share Option Plan

sponsored by the then parent company.

The number of executive officers whose income was within the following bands:

Income $ 2002 2001 2002 2001

110,000 – 119,999 1 - 1 -

250,000 – 259,999 - 1 - 1


(Continued)

31



19. Segment Reporting

Primary ReportingGeographical Segments Australia New Zealand Consolidated

2002 2001 2002 2001 2002 2001

$’000 $’000 $’000 $’000 $’000 $’000

Total segment revenue 12,412 13,247 - - 12,412 13,247

Other unallocated revenue 219 280 - - 219 280

Total revenue 12,631 13,527 - - 12,631 13,527

Segment result (1,465) (511) - - (1,465) (511)

Unallocated corporate expense 93 (439) - - 93 (439)

Loss from ordinary activities

before income tax (1,372) (950) - - (1,372) (950)

Income tax (expense)/benefit (340) 554 - - (340) 554

Net loss (1,712) (396) - - (1,712) (396)

Depreciation and amortisation 1,624 3,829 - - 1,624 3,829

Non-cash expenses other than

depreciation and amortisation 608 (131) - - 608 (131)

Exploration expenditure written-off in

respect of areas of interest abandoned 2,203 1,770 - - 2,203 1,770

Segment assets 12,196 13,647 1,304 1,339 13,500 14,986

Unallocated corporate assets 594 793

Consolidated total assets 14,094 15,779

Segment liabilities 5,827 5,167 - - 5,827 5,167

Unallocated corporate liabilities 171 804

Consolidated corporate liabilities 5,998 5,971

The consolidated entity operates predominantly in two geographical segments – Australia and New Zealand. Segment

assets for New Zealand comprise exploration expenditure relating to petroleum exploration permit 38460.

Secondary reporting

Business Segment

The consolidated entity predominantly operates in the petroleum industry.

20. Joint Ventures

The economic consolidated entity has interests in unincorporated joint ventures established to

explore, develop and produce petroleum products, as follows:

Percentage Interest at Percentage Interest at

30 June 2002 30 June 2001

Consolidated Company Consolidated Company

Joint Venture Notes % % % %

TL/2 23.2 - 23.2 -

TP/7 4.2 - 4.2 -

WA149P 10.0 - 10.0 -

WA246P 10.0 - 10.0 -

L9 43.0 43.0 43.0 43.0

EP110 (a) 18.6 - 37.2 -

PEP38460 40.0 - 40.0 -

EPPSA24 (b) - - 5.0 5.0

WA254P (Parts 1,3 & 4) 2.9 2.9 2.9 2.9

WA254P (Part 2) 5.2 5.2 5.2 5.2

VIC/P36 (b) - - 15.0 -

VIC/P40 (b) - - 10.0 -

ATP244 (b) - - 20.0 20.0

The joint ventures are not separate legal entities. They are contractual arrangements between the

participants for the sharing of costs and output and do not in themselves generate revenue or

profit.

NOTES

(a) During the 1995 financial year, a native title claim by the Thalanyji people was made over

an area of land which lies within the borders of EP110. Any financial effects of this claim are

unknown as at 30 June 2002 but are not expected to be material.

(b) Permit relinquished during the 2001 year.

Included in the assets and liabilities of the company and the consolidated entity are the following

items which represent the company’s and the consolidated entity's interest in the assets and

liabilities employed in the joint ventures.


2002 2001 2002 2001

$’000 $’000 $’000 $’000

Current Assets

Cash 974 (101) 714 (343)

Receivables 1 1 - -

Inventories 276 975 24 24

Total Current Assets 1,251 875 738 (319)


(Continued)

33



20. Joint Ventures (continued)


2002 2001 2002 2001

$’000 $’000 $’000 $’000

Non-Current Assets

Plant and equipment at written

down value 1,035 2,074 1,035 2,074

Deferred exploration and

evaluation phase expenditure 3,407 5,149 - 46

Deferred production phase expenditure 62 582 62 582

Total Non-Current Assets 4,504 7,805 1,097 2,702

Total Assets 5,755 8,680 1,835 2,383

Current Liabilities

Payables 1,204 824 1,138 777

Total Liabilities 1,204 824 1,138 777

21. Commitments and Contingencies

Contingent Assets Griffin Joint Venture

On the 24th May 2001 the Full Court of the Supreme Court of Western Australia dismissed the Griffin Joint Venture parties

appeal on contract interpretation, relating to the 1997/98 contract claim. The matter will now proceed to rectification and

should be heard in the current half year. The company’s share of this claim is approximately $600,000. In light of this

decision the company may in future pursue a further claim.

Capital Expenditure Commitments

Capital expenditure commitments not capitalised

in the financial statements as at 30 June

- Payable not later than one year 105 121 105 90

Exploration Expenditure CommitmentsIn order to maintain the various permits in which the consolidated entity and its respective joint venture partners are

involved, and/or to meet contractual obligations, the consolidated entity has ongoing commitments as part of its normal

operations to meet various operational expenditures. The actual costs will be dependent on a number of factors such as

joint venture decisions including final scope of work and timing of operations.


2002 2001 2002 2001

$’000 $’000 $’000 $’000

Exploration expenditure commitments not incorporated

in the financial statements as at 30 June

- Payable not later than one year 1,912 315 135 -

- Payable later than one and not

later than two years 5 305 5 5

1,917 620 140 5

21. Commitments and Contingencies (continued)

Contingent liabilities

The consolidated entity may be required to undertake restoration works of approximately $850,000

in addition to that provided at 30 June 2002. This obligation has not been recognised in the

financial statements as it is anticipated that it is unlikely to be incurred.

22. Related Party Disclosures

(1) Wholly Owned GroupPan Pacific Petroleum NL (‘Pan Pacific’) has made advances to its controlled entities, from time to

time, to fund exploration and/or evaluation, development production activities and the purchase of

office assets. These advances to controlled entities do not currently attract interest and have no

fixed term for repayment.

(2) Ultimate Holding CompanyNew Zealand Oil & Gas Limited (‘NZOG’) ceased to be the ultimate parent entity on 19 December

2001, as a result of a scheme of arrangement whereby the bulk of its shareholding in Pan Pacific

was distributed to its shareholders in the ratio of one Pan Pacific share for each NZOG share held.

As a result of this transaction NZOG ceased to have a controlling interest in Pan Pacific.

(3) Transactions with other Related Parties(a) The consolidated entity paid $Nil (2001 - $188,065) to Resource Office Services Pty Limited

("ROS") for the provision of office facilities on a cost reimbursement basis.

(b) The company received an interest repayment of $Nil (2001 - $8,652) from ROS. ROS is

charged interest on total advances at commercial interest rates.

(c) The company and a partially owned subsidiary within the consolidated entity, Pafule Pty

Limited (‘Pafule"), are parties to an agreement whereby Pafule provides employees and

office facilities to the consolidated entity, and its related corporations. During the year

pursuant to this agreement the company paid Pafule $637,232 (2001 - $582,405) for the

provision of personnel and office facilities.

23. Transactions with Directors and Director-Related Entities

(1) Directors RemunerationDetails of directors’ remuneration are set out in Note 18.

(2) Directors relevant interests in securities: In accordance with the scheme referred to in Note 22(2), directors having relevant interests in

NZOG shares obtained relevant interests in Pan Pacific ordinary paid up shares in the same 1:1 ratio

as other NZOG shareholders.

These interests arose in respect of:

Director RA Radford ER Matthews

Directly owned shares 1,003,877 51,748

Entitlements under the NZOG

Employee Share Ownership Plan 3,750,000 725,000

NOTE

As a result of the reduction in value of NZOG shares by the separation of Pan Pacific pursuant to the

scheme referred to in Note22 (2) above, all employee participants in the NZOG Employee Share

Ownership Plan who held rights to purchase existing issued NZOG shares, were granted equal

numbers of rights to purchase Pan Pacific shares which were received for account of the ESOP. The


(Continued)

35



23. Transactions with Directors and Director-Related Entities: (continued)

(2) Directors relevant interests in securities: (continued)purchase (exercise) price previously relating to NZOG shares, were split between the ex-distribution NZOG shares and the

Pan Pacific shares in the ratio 74.4:25.6 in accordance with the values set out in the scheme document.

This brought the total relevant interests of directors to 6,138,038 (2001: 207,265).

24. Financial Instrument DisclosureThe consolidated entity is exposed to changes in interest rates and foreign exchange rates from its activities.

The material financial instruments to which the consolidated entity has exposure include: cash and short term deposits;

receivables and petroleum security deposits; and accounts payable.

Interest rate riskAll of the consolidated entity’s financial instruments are either non-interest bearing or bear interest at commercial interest

rates. The weighted average interest rate on cash and short-term deposits at 30 June 2002 was 4.01% (2001: 4.5%). The

weighted average interest rates for receivables and payables are disclosed in note 7 to the financial statements.

Foreign exchange riskThe consolidated entity operates a United States dollar bank account for oil sale proceeds. At 30 June 2002 this account

held $612,021 (2001: $8,838). The consolidated entity assesses its foreign exchange risk on a periodic basis, but has not

hedged this exposure.

Credit riskFinancial instruments which potentially subject the consolidated entity to credit risk consist primarily of cash and trade

debtors. Credit risk on cash and trade debtors is largely minimised by dealing with listed Australian and multi-national

companies with acceptable credit ratings.

There is a concentration of credit risk in respect of trade debtors for gas sales. Most gas sales from the Tubridgi field are to

AlintaGas and Alcoa of Australia Limited under long term contracts, although future sales of gas to other parties are possible.

The consolidated entity has no reason to believe credit losses will arise from any of the above financial instruments.

However, the maximum amount of loss which may possibly be realised, is the carrying amount of the financial instrument.

Commodity price risk

The consolidated entity’s sales of oil are exposed to fluctuations in the commodity market price. The consolidated entity

assesses its commodity price risk on a periodic basis, but has not hedged this exposure.

Net Fair Value of Financial Instruments

The carrying amount of cash and short term deposits, receivables, petroleum security deposits and accounts payable

approximates fair value due to the nature and/or short maturity of these instruments. Adequate provision is held in respect

of trade debtors.

Consolidated

2002 2001

Cents Cents

25. Earnings per Share

Basic earnings per share (0.83) (0.18)

Dilutive earnings per share (0.83) (0.18)

Weighted average number of ordinary shares

outstanding during the year used in the calculation of

basic and dilutive earnings per share 218,552,177 218,552,177

Net loss used in the calculation of EPS is that shown on the statement of financial performance. Net loss does not differ for

the calculation of basic or dilute earnings per share.

This Statement outlines the main corporate governance practices that were in place throughout the

financial year unless otherwise stated.

Board of Directors and its CommitteesThe Board is responsible for the overall corporate governance of the consolidated entity including the

strategic direction, determination of policy and matters of finance, approval of contracts and expenditures

and monitoring of management’s achievement of the board’s instructions. To give further effect, it has

established an audit committee to assist in the execution of its responsibilities.

Independent Professional AdviceEach director has the right to seek independent professional advice - in relation to matters arising in the

conduct of his duties - at the consolidated entity’s expense, subject to prior approval of the Chairman,

which is not to be unreasonably withheld.

Audit CommitteeThe role of the audit committee is documented in the terms of reference, which is approved by the board

of directors, pursuant to which all members of the committee are members of the board. The quorum is

two. The objectives and functions of the committee are:

• to ensure that the requirements of the board for full and appropriate reporting by the company is in

accordance with financial reporting legislation, generally accepted accounting practice and stock

exchange listing requirements.

• to review the adequacy of administrative, operating and accounting control systems instituted by

management and to monitor their appropriateness.

• to provide an avenue of communication between auditors and the board, in particular in relation to

matters requiring consideration by the directors which relate to financial reporting.

• to act as a delegate of the board on financial reporting issues.

The members of the Audit Committee during the year were Mr A K R Watson (chairman) and

Mr R A Radford.

The external auditors are invited to audit committee meetings at the discretion of the committee and also

have direct access to the committee’s chairman.

Health, Safety and the EnvironmentPan Pacific has a Health and Safety Policy under which the company, in seeking to locate and develop

petroleum resources, is committed as the highest operational management priority, to the protection of

the health and safety of people employed directly and by contractors on company operations.

The company also has in place an Environmental Policy under which the company, in seeking to locate

and develop petroleum resources, is committed to achieving a high standard of environmental

performance. This will be achieved while ensuring that the needs of the community and the values

attached to natural and physical resources are taken into account in company planning and the way in

which business is conducted.

Corporate Governance Statement

Des

igne

d an

d p

rodu

ced

by T

ext

Cor

por

ate

Com

mun

icat

ions

/ w

ww

.tex

tmed

ia.c

om.a

u

Keep in touch with the company’s activties via our internet site at:


pan pacific petroleum nl · pan pacific petroleum nl ... mosman and masala ... exploration report...

Documents