2009 ANNUAL REPORT - Carnarvon Petroleum – Exploration ...4 Carnarvon Petroleum ltd CHIef exeCutIve’S revIeW (Continued) It is becoming clear that the L44/43 licence covers that

2009 ANNUAL REPORT

ii Carnarvon Petroleum ltd

CorPorate dIreCtorY

Directors

PJLeonhardt(Chairman)

EPJacobson(ChiefExecutiveOfficer)

NCFearis(Non-ExecutiveDirector)

KPJudge(Non-ExecutiveDirector)

companysecretary

RAAnderson

auDitors

WHKHorwathPerthAuditPartnership

Bankers AustraliaandNewZealandBankingGroupLimited

HSBC(Thailand)

registereDoffice

GroundFloor

1322HayStreet

WestPerthWA6005

Telephone: +61893212665

Facsimile: +61893218867

Email: [email protected]

Website: www.carnarvonpetroleum.com

shareregistry

ComputershareInvestorServicesPtyLimited

Level2

45StGeorgesTerrace

Perth,WA6000Australia

InvestorEnquiries: 1300557010(withinAustralia)

InvestorEnquiries: +61394154000(outsideAustralia)

Facsimile:+61893232033

stockexchangeListing

SecuritiesofCarnarvonPetroleumLimitedarelisted

onASXLimited

ASXCode:CVN-ordinaryshares

aBn60002688851

2009 annual rePort 1

ContentS

chairman’sreview 2

chiefexecutive’sreview 3-4

operatinganDfinanciaLreview 5-17

Directors’report 18-28

incomestatements 29

BaLancesheets 30

statementsofchangesinequity 31-32

statementsofcashfLows 33

notestothefinanciaLstatements 34-68

Directors’DecLaration 69

inDepenDentauDitreport 70-71

corporategovernancestatement 72-74

aDDitionaLsharehoLDerinformation 75-76

2 Carnarvon Petroleum ltd

CHaIrman’S revIeW

The2008/09financialyearwasaperiodofsevereturbulenceineconomicconditionsandIamdelightedtoreportthatCarnarvonhas

beensuccessful indelivering furthersignificantgrowth inoperationalandfinancialperformance. Importantly,wehavebuiltastrong

foundationforfuturedevelopmentandyourCompanyisnowverywellpositionedtopursuetheemergingopportunities.

Financialandoperatinghighlightsinclude:

• Salesrevenuegrewby59%to$100.8million.Duetoloweroilpricesthisdidnotmatchthe93%growthinoilsalesto1.35

millionbbls

• Profitaftertaxincreasedby133%to$36.4million

• Explorationanddevelopmentexpendituremorethandoubledto$35.5millionwhichwasfundedfromoperatingcashflows

• Provedandprobablereservesincreasedby46%to16.6millionbblsreflectingthesuccessfulexplorationanddevelopment

workprogramme

• Marketcapitalisationincreasedby54%to$556millionatyearendandCarnarvonwasincludedintheS&P/ASX200Indexfor

thefirsttime

Theseexcellentresultshavebeenachievedagainstabackgroundofacollapseintheoilpricefromrecordlevels,significantfluctuations

intheA$exchangerate,anduncertainmarketconditions.

OverthelasttwoyearsnumerousinvestmentopportunitieshavebeenconsideredbytheBoardandmanagementteam.Wehavebeen

mindfuloftherisk-rewardbalance,particularlyduringaperiodofenthusiasticvaluations,andhavetakenacautiousapproachtoexploration

commitments.AsaresultwebelieveCarnarvonnowhasthecapacitytopursuetheopportunitiesavailableatanopportunetimeinthe

businesscycle.

OurexistingPhetchabunBasinjointventureinterestscontinuetoprovideextensivescopeforfutureexplorationanddevelopment.Atthe

sametime,wehavegrownourregionalknowledgeandresourcesandaddedtoourThaiinterests.OutsideofThailandournewventures

teamisseeingmanyopportunities,andcurrentworkinprogressshouldflowthroughtotheannouncementofanumberofexcitingnew

interests.

AtanoperationallevelourThaiJointVenturepartnerPanOrientEnergyCorphasagaindeliveredexcellentresultsinthefieldnotwithstanding

the complexities and challenges of exploration and drilling in fractured volcanic reservoirs. The contributions of Pan Orient’s Chief

ExecutiveOfficer,JeffChisholm,andhisteamaregreatlyappreciated.Ourstrongworkingrelationshipwiththemisanimportantelement

ofoursuccess.

TocontinueCarnarvon’ssuccessfulgrowthweareconsciousoftheneedtoworkcloselywithallstakeholders includingjointventure

partners,suppliers,ourcorporateadvisersandshareholders.Iwouldliketothankallthosewhohavesupportedusduringtheyear.

Carnarvon’speoplehaveagainmadeoutstandingcontributionsandthehighcalibreofourrelativelysmallteamisakeytoourfuture

growth.OnbehalfoftheCarnarvonBoardIcongratulateourChiefExecutiveOfficerTedJacobsonandallofthestaff.Wealllookforward

toanotherexcitingyearin2010andbeyond.

peterLeonhardtChairman


CHIef exeCutIve’S revIeW

TheCompany’skeyperformanceindicatorspreparedinthisreportshowthatthe2008/2009reportingperiodhasbeenoneofsignificant

growthatalllevels.

ThisgrowthisthedirectresultofthediscoveryofoilwithinhighlyfracturedvolcanicreservoirsintheL44/43licencewithinonshore

ThailandwhereCarnarvonhasa40%interest.Whenwelookattheproductiongraphitappearsthatthisrapidgrowthhashappened

overaperiodofonlytwoyears.Butthisdoesn’tdojusticetotheextensivepreparatoryworkcarriedoutbythejointventureinThailand,

commencinginlate2005,withtherecordingof3Dseismicanddrillingofeightexplorationwellspriortothediscoveryofcommercialoil

infracturedvolcanicsinthePOE-9well.

Wearefortunatetohaveahighlycompetentandexperiencedoperator,PanOrientEnergyCorp,wholedourjointventuretothissuccess,

demonstratingtheimportanceofperforminggoodtechnicalworkandbeingopenmindedtonewideasandconcepts.

Whilstwearegratefulforthisnewdiscovery,thesefracturedreservoirsareunlikethehomogeneousreservoirsmorenormallydeveloped

foroilproductionelsewhereandpresentnumerousdifficulties.Thefracturesystemswithinthesevolcanicreservoirsarecomplexwith

adjacentwellsperformingquitedifferentlydependingonthenumber, intensity,distributionandsizeofthefractures intersected.This

makesfordifficultiesinpredictingflowratesandultimaterecoveriesforwellsdrilledacrossthefield.Duringthereportingperiod25wells

weredrilledwithasuccessof17wellsresultingincommercialproductionorextensivetesting.Thisisanexcellentresultconsideringthe

uncertaintiesposedbythesereservoirs.

Whilstdrillingthroughthesezonesthewellsoftenexperience“lostcirculation”withalldrillingfluidsbeinglostintothereservoirwithno

returnsarrivingbacktothesurface.Thismakesfordifficultdrillingandattimesresultsinwellstakinglongertodrillthanexpected.

TheL44/43licencehasproduced5.5mmbblstodatefromfracturedvolcanicreservoirs.NetreservestoCarnarvonestimatedbyour

ReservesAuditorat31December2008are16.6mmbbls.Thejointventurehastwodrillingrigsonlongtermcontractdrillingcontinuously.

Whilstitisimportanttodrillmanymoredevelopmentwellstogrowproduction,newdiscoveriessuchasBoRangandL44-Whavemeant

thatthedrillingprogrammehashadtobechangedfrequentlyatshortnoticetoappraisethesenewdiscoveriestoprovidetheinformation

requiredtoapplyforadevelopmentlicence.Whilstwehavefoundmorecommercialoilintheseotherstructures,thishasbeenatthe

expenseofnotbeingabletodrillasmanyproductionwellsaswewouldhaveliked.


CHIef exeCutIve’S revIeW (Continued)

It is becomingclear that theL44/43 licencecovers thatpart of thePhetchabunBasin that is generatingconsiderablequantitiesof

oil,trappedinnumerousstructures.Althoughthetestingofoilflowsathighratesinfracturedvolcanicreservoirshasledustodrilling

thesereservoirsexclusively,manyothertypesofprospectsoccuronthelicenceandneedtobeaddressedintime,particularlywithin

sandstonesdepositedwithintheseancientlakesystemssuchasattheWichianBurioilfieldinthenorthofthelicence.

Carnarvon also has a 40% interest in the L33/43 licence immediately to the north. Although we have drilled several unsuccessful

explorationwellshere,thediscoveryofagoodoilflowrateintheL44-WwellonastructurethatstraddlestheborderbetweenL44/43

andL33/43isencouragingthattheoilpotentialmaycontinuetothenorthintothislicence.Severalexplorationwellswillberequiredto

evaluatethistrend.

TheCompanyiskeentosearchforothersuchoilybasinsnotonlyinonshoreThailandbutelsewhereinSEAsia.In2008,Carnarvonwas

awardeda50%interestinpermitL20/50tothewestofL44/43.ThislicenceislocatedwithinthePhitsanulokBasinsouthofthelargest

oilfieldonshoreThailandatSirikit.HereCarnarvon,asoperator,hascommencedtherecordingandprocessingof550kmsof2Dseismic.

ThepreliminaryresultsfromthissurveyareencouragingandtheCompanyplanstodrilluptofourwellshereinearly2010.

FurthermoreCarnarvon,togetherwithPearlEnergyLtd,hasapplicationspendingwiththeThaiGovernmentforthegrantingoftwopermits

southofBangkokatL52/50andL53/50andisevaluatingotheronshoreopportunitiesintheSEAsianarea.

WithinAustralia,Carnarvonhastakena100%interestinalargepermitoffshoreWesternAustralia,withaHeadsofAgreementsignedto

exchange50%ofthispermitfor50%ofthreeadjacentpermits.Thesepermitscontainseverallargestructureswheretwopreviousdrilled

wells,Phoenix-1and2,intersectedseveralhundredmetresofgaswithinlowporositysandstonereservoirs.Thecompanyplanstorecord

3DseismicoverthePhoenixstructureslatethisyear.Theearliestthatappraisaldrillingcanbeundertakenislatein2010andCarnarvon

willattempttogetawelldrilledassoonaspossible.

Thiscertainlyhasbeenabusyyear.Aside fromall theactivity inThailand, theCompanyhasworkedhardtobuildanassetportfolio

thatwilldelivernearandmediumtermgrowth,diversifiedthroughseveralcountriesandindifferentgeologicalprovinces.Thenewand

interestingpermitadditionsIhavedescribedarejustthebeginning.OverthecomingmonthsIhopetobeabletoannounceseveralother

interestingopportunitieswehavebeennegotiating inotherhydrocarbon richareas,whichwill provideevenmoreexcitement toour

drillingprogramme.Withsuccess,alloftheseopportunitiesarecapableofgrowingourcompanysubstantially.Theoilproductionfrom

ourThailandoperationswillenableCarnarvontoexploreanddevelopthesenewopportunitiesusingfundsgeneratedfromtheCompany’s

cashflow,maintainingourstrongfinancialpositionwithoutdebt.

Wehavebeencareful inselectingthosenewopportunitieswherejointventurepartnersarelikemindedtoCarnarvon.TheCarnarvon

managementconsidersgoodrelationshipsanimportantingredientforsuccess.Thuswehavebeencarefultoselectthoseopportunities

thataresituatedinareaswithwelldemonstratedhydrocarbongeneratingsystemsandwherethejointventureisactiveincarryingout

goodtechnicalwork,encouragingthedrillingofwells.OursuccessinthePanOrientoperatedpermitsinThailandistestamenttothis

philosophy.

NoneofthiscouldhappenwithoutthesmallandhighlyloyalteamwehaveatCarnarvonandIsincerelythankthestaffandotherBoard

membersfortheirsupportandhardwork.

tedJacobsonChiefExecutiveOfficer


oPeratInG and fInanCIal revIeW

companyperformanceCarnarvontracksseveralkeyperformanceindicatorstoprovidearelativemeasureofthecompany’sgrowth,asshownbelow.

WellsDrilled

Period: 1July2008–30June2009

Measure: 25wells

PeriodChange: +9%

NetSales


Measure: 1,353,421bbls

PeriodChange: +93%

ProvedandProbableReserves

Period: Asat31December2008

Measure: 16.6millionbbls

PeriodChange: +46%

25

Financial Year

Wel

ls

2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008

20

15

10

5

02008 - 2009

Financial Year

Net

Oil

Sale

s (’

000

bb

ls)

2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008 2008 - 20090

200

400

600

800

1000

1200

1400

1600

Date

2P R

eser

ves

(MM

bb

ls)

2005 2006 2007 20080

2

4

6

8

10

12

14

16

18

2009


oPeratInG and fInanCIal revIeW (Continued)

ConsolidatedProfitAfterTax


Measure: A$36.4million

PeriodChange: +133%

SharePrice

Period: Asat30June2009

Measure: A$0.815

PeriodChange: +54%

MarketCapitalisation

Period: Asat30June2009

Measure: A$556million

PeriodChange: +54%

Financial Year

Co

nso

lidat

ed P

rofi

lt

(A$

mill

ion

)

2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008 2008 - 2009-10

-505

101520

2530354045

0.6

0.7

0.8

0.9

Date

Pric

e (A

$ /

shar

e)

2005 2006 2007 2008 2009

0.5

0.4

0.3

0.1

0.2

0

600

400

500

Date

Mar

ket

Cap

(A

$ /

mill

ion

)

2005 2006 2007 2008 2009

100

300

200

0



operatingreview

Summary

Carnarvonparticipatedinthedrillingof25wellswithintheSW1Agroupofpermitsresultingin17commercialproduction/testingwells.

Successfuldrillingandtestingalsoresultedinanincreasein2Preservesto16.6millionbbls.

Annualproductionincreasedsignificantly,compensatingforvaryingbutdecreasingoilprices,resultinginconsolidatedprofitaftertax

morethandoublingfromtheprioryear.

InCarnarvon’soperatedL20/50explorationconcession,a500km2Dseismicacquisitionprogramwasinitiated.

SubsequenttoyearendCarnarvonwasawardedanewpermitoffshoreWestAustraliaintheRoebuckbasinontheNorthWestShelf.A

HeadsofAgreementhasbeensignedwithathirdpartytoswap50%ofCarnarvon’spermitfor50%ofthreenewadjacentpermits,subject

toratificationbygovernmentauthorities.

Permits

Permit Basin Equity JointVenturePartner(s)

PartnerInterest

IndicativeProgram

Notes

Thailand

SW1A Phetchabun 40% PanOrientEnergy* 60% Production,Appraisal

Uptotwowellsplanned.

L33/43 Phetchabun 40% PanOrientEnergy* 60% Appraisal,Exploration

Uptotwowellsplanned.

L44/43 Phetchabun 40% PanOrientEnergy* 60% Production,Appraisal,Exploration

Upto20wellsplanned.

L20/50 Phitsanulok 50% SunResources 50% SeismicAcquisition,Exploration

500Km2Dseismicacquisition;Onetofourwellsinplanning

Australia

WA-435-P Roebuck 100.00% Studies Reprocessing

EP321 Perth 2.50%of38.25%(i) Appraisal

EP407 Perth 2.50%of42.5%(i) Appraisal

WA399P Carnarvon 50% RialtoEnergy 50% SeismicAcquisition,Exploration

315Km2DSeismicacquisition.

EP110/EP424

Carnarvon 35% StrikeOil*PancontinentalOilandGas

25%30%

Exploration Activefarmout.

Note: (*)DenotesoperatorwhereCarnarvonisnon-operatorpartner

(i) Carnarvonhasanoverridingroyaltyinterestintheseassets



Thailand

Carnarvon’s principal assets are the

producing fields in the L44/43 and

SW1AlicencesinthePhetchabunBasin

onshoreThailand.

L44/43, SW1A & L33/43 Thailand

Phetchabun Basin (“SW1A”)

(Carnarvon Petroleum 40%, Pan Orient

60% operator)

A total of 25 wells were drilled in the

SW1Apermitsresultingin17commercial

oilproduction/testingwells,delineation

of one new oil field, and several new

oil pools. The remaining eight wells

all contained promising oil shows and

severalhavesidetrackpotential.

Aproductionlicenseandenvironmental

approval were granted over the Na

SanunEast(“NSE”)oilfieldallowingfield

developmentdrillingtocommence.

Exploration drilling in the northern

exploration block L33/43 failed to

intersect commercial volumes of

hydrocarbons. However, the L44-W oil

discovery,inthenortheasterncornerof

L44/43,isinterpretedtospilloverinto

thesouthernendofL33/43.Appraisal

drilling of the L44-W oil discovery is

anticipatedinbothconcessionsoverthe

next12months.

PermitmapofThailand



Atotalofsixteendevelopment/appraisalwellshavebeendrilledintotheNSEstructure,withseveralotheroilpoolsdiscoveredabove

andbelowthemainproducingvolcanicreservoir.Itisevidentfromthevarieddrillingresultsthatthedevelopmentofoilreservesfrom

the fractured volcanic reservoirs atNa Sanun East and adjacent oil fields requires comprehensive understanding due to the severe

heterogeneityinthistypeofreservoir.

The geological setting of these

volcanicoilreservoirsisverycomplex,

featuringrapidchangesoflithofacies

and thicknesses, distributions of

fractures and pores/vugs, and

different oil well productivities with

neighbouringwells.

The most likely exploitation plan

for NSE incorporates 20 to 25

developmentwellsbeingdrilledfrom

mid2008throughtomid2010.

Thewellswill bedrilled froma total

of7to10wellclusterlocations,with

each location being designed and

built to accommodate a maximum

of fourwells.Each locationwillhave

oil treatment,storageandoffloading

capacity.

Theproductionprofileisdesignedfor

plateau production of 15,000 bopd

for 1-2 years before natural decline.

There is sufficient capacity in the

existingtruckingoperationinfrastructuretocaterfordeliveryoftheoilfromthefieldtotherefineryinBangkok.

Whileasignificantnumberofwellshavebeendrilled,andacomprehensive3Dgeologicalmodelhasbeencompleted,acomprehensive

developmentplanisstillinthecourseofdevelopmentbythejointventure.

LocationofoilfieldsandprospectswithinL44/43&L33/43ThailandPhetchabunBasin



L20/50 Thailand Phitsanulok Basin

(Carnarvon Petroleum 50% Operator, Sun Resources 50%)

Carnarvon,andpartnerSunResources,weregrantedtheL20/50explorationconcessioninJanuaryof2007.TheL20/50concessionis

situatedapproximately30kmstothesoutheastandontrendwiththelargestonshoreoilfieldinThailandatSirikit.Thepermitisaround

60kmtothewestofCarnarvon’s40%ownedPetchabunBasinproducingassets.Theconcessioncoversaround4,000km2andislightly

explored.Around1,000kmof1980’svintage2Dseismicdataisavailableinpaperformatandsixwellshavebeendrilledintheblock(three

shallowataround500mandthreedeeper).

One previously drilled well in 1982 at Nong Bua-1

intersectedoilshowswhichCarnarvonbelieveswere

notfullytested.Carnarvoniscontinuingtoinvestigate

thepossibilityoftwinningorre-drillingthiswell.

Carnarvonhasalsodigitizedandreprocessedthebulk

oftheavailable2Dseismicdataandtheinterpretation

of that dataset showed the potential for a large

numberofstructuresofsignificantpotentialsize.

500kmofnew2Dseismicisbeingacquiredandis

dueforcompletioninSeptemberof2009.

Reprocessed1980’svintage2Dseismic

lineindicatespotentialstructuring

The processing and interpretation of the new data, incorporating the

reprocesseddata,willbefasttrackedtoallowforadecisiononthelocation

andnumberofexplorationwellstobedrilledin2010.

Geologicalanalysisofseismicandpreviousdrillingdatahasconcludedthat

anumberofplaytypesareapparent,includingSirikitstylefans,WichianBuri

stylesandstones,andNaSanunstylevolcanics.



L52/50 and L53/50 Thailand Surat-Khiensa Basin

(Carnarvon Petroleum 50%, Pearl Oil 50% operator)

TheCompanyhasappliedtotheDepartmentofMineralFuels(“DMF”) inThailandforconcessionrights inpetroleumexplorationand

productionfortwoareasdescribedasBlocksL52/50andL53/50(“theConcessions”)onshoreThailandwithintheSurat-KhiensaBasin.

PearlOil(Petroleum)Ltd(“Pearl”),anindependent

oil and gas company with exploration and

production (E&P) activities focused exclusively

in South East Asia, submitted the bid as

operatoronbehalfofPearlandCarnarvon,each

company participating at a 50% equity level.

Thecombinedareaof the twoblocks is large,

comprising approximately 6,950km2, however

both are lightly explored with only two deep

wellsandlimitedseismicdataavailable.

There has been minimal exploration over the

area and little public knowledge is available

about the Surat-Khiensa Basin, however work

completed to date and Carnarvon’s regional

knowledge suggests this is an areawith good

potentialforhydrocarbonexploration.

Carnarvon and Pearl were together the sole

bidders for this block and the Company

anticipatesawardinlate2009.

Australia

WA-435-P Australia Offshore Northwest Shelf

(Carnarvon Petroleum 100% Operator)

Subsequenttobeingawarded100%ofexplorationpermitWA-435-P,Carnarvonenteredintoaheadsofagreementwithprivateexploration

companyFinderExploration(“Finder”)toswap50%ofCarnarvon’sWA-435-Pfor50%ofthethreenewadjacentFinderpermitsWA-436-P,

WA-437-PandWA-438-P,subjecttoratificationbythegovernmentauthorities.Finderwillassumeoperatorshipofallfourpermits.

The fourpermitsaresituated in thenorth-westernpartof theBedoutSub-basinwithin thegreaterRoebuckBasin,offshoreWestern

Australia.Theblockslieinanunder-exploredareathathasreceivedlittlerecentattention,betweentheprolificCarnarvonBasinhydrocarbon

provincetothesouthwestandtheBrowseBasintothenortheast.ThetownofPortHedlandliesapproximately150kmtothesouthofthe

permitsandBroomelies250kmtothenortheast.Waterdepthsrangefrom35to265metresandthepermitscoveraverylargeareaof

morethan21,000km2(268graticularblocks).

BasinlocationswithinApplicationPermitsL52/50andL53/50



Onlysixwellshavebeendrilledinthepermitstodate.Thetwowells,Phoenix-1andPhoenix-2,drilled

onthe largePhoenixstructure inWA-435-Pboth intersectedextensivegascolumnswithin lower-

porosity,mid-Triassic reservoirs. In particular, Phoenix-1 recorded110metres of net gas-bearing

section;however,furtherworkisrequiredtodeterminewhetherthegasdiscoveryatPhoenixcould

flowatcommercialrates.A larger,untestedstructure inWA-435-P liesdirectlyontrendwiththe

Phoenixstructure,5to15kmtothesouthwest.FurthertothesoutheastinWA-437-Pliesyetanother

large, untested structure. Regional geology suggests that reservoir quality improves southward

towardtheseprospects,butthismodelwillneedtobeconfirmedbydrilling.TheseTriassicstructures

havesignificantpotentialoftheorderofseveralTcf’sofrecoverablegas,ifexplorationandappraisal

drillingaresuccessful.

Otherviableplaysarerecognisedintheseblocksincludingpossibleoilexplorationpotentialatthe

shallowerCretaceous-aged levels.CarnarvonandFinder intend tocarryoutnumerousstudies to

evaluatethispotential.

TheGovernmentapprovedworkprogrammeforthesepermits,fortheinitialfirmthree-yearterm,

comprises seismic reprocessing, the recording of an aeromagnetic survey and technical studies,

whichwillincludeacompleteanalysisofthegasintersectionsinthePhoenix-1andPhoenix-2wells.

Thesecondthree-yeartermisplannedtoconsistofseismicacquisitionandthedrillingofatleastone

wellineachpermit.Theresultsoftheinitialtechnicalstudieswillbeusedtomodify/acceleratethis

secondperiodworkprogrammeasappropriate.

Carnarvon’sproposednewpermits,offshoreWesternAustralia.



WA-399 P – Australia Offshore Northwest Shelf

(Carnarvon Petroleum 50% Operator, Rialto Energy 50%)

WA-399-Pwasawardedon7May2007.Thepermitcoversanareaof50km2locatedbetweenthePyreneesandMacedonoilandgas

fieldsandtheLeatherbackoilaccumulation.Carnarvonhascompletedthereprocessingofallavailableseismicoverthepermit(550

km2).Thecurrentworkprogrammerequiresacquisitionof315kmofnew2DseismicandCarnarvonisreviewingvesselavailability

andprices.

EP 424 / EP 110 - Australia Offshore Northwest Shelf

(Carnarvon Petroleum 35%, Strike Oil 40% operator, Pancontinental 25%)

AvariationtothepermittermsofEP424hasbeengrantedfromtheDepartmentofIndustryandResourcestoaltertherequirement

forthedrillingofonewellby13April2011.

Furtherdetailedseismicanalysisof‘amplitudeversusoffset’wascarriedoutbytheoperatorovertheBaniyasProspecttorefinethe

natureofhydrocarbonsexpected.TheBaniyasProspectissituatedonthedownthrownsideoftheFlindersFaultandbrightseismic

amplitudesonthecrestaresimilartotheCyranoandNasutusdiscoverieselsewherealongtrendwhichencounteredagascapon

anoilleg.BaniyasisestimatedtohavepotentialforPmeanprospectiveresourcesof26millionbarrelsoiland56Bcfgas(34million

BarrelsofOilEquivalent).Theseprospectiveresourcesareofaspeculativenatureuntiltheprospecthasbeenevaluatedbydrilling.

Thejointventureisactivelyfarmingoutthedrillingofawellintothisprospect.

NorthWestShelfpermits–locationmap



reserveassesment

Petroleum Resource Classification, Categorisation and Definitions

CarnarvoncalculatesreservesandresourcesaccordingtotheSPE/WPC/AAPG/SPEE1PetroleumResourceManagementSystem(“SPE-

PRMS”)definitionofpetroleumresources.Thisdefinitionwasfirstpublishedin1997bytheSPE,andinanefforttostandardisereserves

reporting,hasbeenfurtherclarifiedbytheSPE-PRMSin2007.CarnarvonreportsreservesinlinewithASXListingRules.

PRODUCTION

RESERVES

Proved Proved&Probable

Proved,

Probable&

Possible

Commercial

CONTINGENTRESOURCES

Discovered,butnotcurrentlycommercial

PROSPECTIVERESOURCES

Explorationprospectivity

Proved and Probable (2P) Reserves Thailand Carnarvon’sreservesbasehasbeencertifiedbyanindependentreservesauditor.OverthelastfewyearsGaffney,ClineandAssociates

(“GCA”),oneofthelargestindependentreservescertifiersintheworld,hasperformedthisserviceinlinewithendofcalendaryear

requirementsfortheDepartmentofMineralFuels(“DMF”)inThailand.GCAcertified16.6millionbarrelsofoilof2Poilreservesnetto

Carnarvonasat31December2008,whichisanincreaseof46%percentcomparedto31December2007reserves.

NetCarnarvonReserves

Proved

1P

Proved+Probable

2P

Proved+Probable+Possible

3P

GCA31Dec2008 3.72(millionbbls) 16.62(millionbbls) 36.85(millionbbls)

Thisreport isbasedoninformationwhichhasbeencompiledbytheCompany’sChiefOperatingOfficer,MrPhilipHuizenga,whoisa

full-timeemployeeoftheCompany.MrHuizengaisqualifiedinaccordancewithASXListingRule5.11andhasconsentedtotheformand

contextinwhichthisstatementappears.

1 SocietyofPetroleumEngineers (SPE);WorldPetroleumCouncil (WPC);AmericanAssociationofPetroleumGeologist (AAPG)&SocietyofPetroleumEvaluation

Engineers(SPEE)



Contingent Resources Thailand

In addition to its certified reserves,Carnarvonhas anumberof discoveredoil andgas resourceswhich currently donot classify as

reserves.

NetCarnarvonContingentResource

2C(millionbbls)

NSE-F1 2.5

NSENorthA 5.0

NSE-I1 2.2

BoRangA 3.7

BoRangB 9.7

L44-W 3.6

SiThep(Deep) 5.8

L44-R 2.6

Carnarvon30June2009 35.1

Carnarvonhasanestimated35million

barrels of contingent oil resources.

These resources are not reserves,

because further work is required to

mature them, most notably appraisal

drillingandwell testing.During2008

around2.5millionbblsof contingent

resources were matured into 2P

reserves. Contingent resources have

beenreplenishedbytherecentL44-W,

NSE-I1andNSE-F1oildiscoveries.

Mapshowinglocationofcontingent

resources



Prospective Resources

UndertheSPE-PRMSdefinitionsprospectiveresourcescanalsobeclassifiedasexplorationresources.

Carnarvonhasagrowingnumberof exploration licences. Theseexploration licencesareevaluatedusing techniques likegravity and

magnetic surveys, geochemical surveys, seismic surveys andbasin analysis. This analysis results in a long list of leads anddrillable

prospects.Onlydrillableprospects,whichhavebeenincludedondrillingschedules,arecategorisedasprospectiveresourcesbyCarnarvon.

Leadsareidentifiedaspotentialhydrocarbonaccumulationsthatwillrequireadditionalstudybeforetheyarematuredtoprospectsand

appearindrillingplans.Itisimportanttorealisethatprospectsandleadscarryexplorationrisks,whichresultinachanceofnotfinding

commercialhydrocarbons.TheserisksareidentifiedbyCarnarvonandhelpmanagementinrankingexplorationactivities.

Atthetimeofwritingthisreport,Carnarvonhasaseriatimofleadsinanumberofexplorationblocks,mostnotablyL20/50,L33/43and

L44/43inThailand,butisstillintheprocessofundertakingadditionalworktoprogressthoseleadstodrillableprospects.Notwithstanding,

anumberofexplorationwellsarescheduledforthelatterpartof2009andfor2010.

growthanDnewventures

Carnarvonhascontinuedtoachievesignificantgrowthfromitssuccessfulexplorationanddevelopmentefforts in itsThailandassets,

L44/43andSW1A.TheseareascontinuetobeaprimaryfocusfortheCompanyandtheyarenowdeliveringsignificantsustainedoil

productionandrevenues.CashflowfromtheseproducingfieldsfacilitatesCarnarvon’spursuitofothernewventureopportunitiestogrow

thecompany.

ThroughtheyearCarnarvonhasaddedfournewexplorationpermitsoffshoreNorthWestShelfAustraliaandisactivelypursuingseveral

otherneartermdrillingopportunities.

Thenewventuresteamhasimplementedastrategytoacquirequalityexplorationacreageandappraisalprojectswithpreferenceforthe

following:

• lowcost,non-operatedinterestswithcompetentpartneroperators

• ontrendwithcommercialoildiscoveries

• necessaryinfrastructureandmarketsinplace

• leveragingCarnarvon’sknowledgeandexpertisetodevelophealthy,long-termrelationshipswithlargeroperators

• organicgrowthaswellasgrowthviamergersandacquisitions

Carnarvonisatanadvancedstageofprogressingseveraladditionalexplorationandappraisalopportunitiestodeliveronthisstrategy

overthenextfewmonths.



financiaLsummary

TheGroup’srevenuefromcontinuingoperationsfortheyearended30June2009,beingitsshareofthePhetchabunBasinJointVenture

(“JointVenture”)inThailand,was$100,758,000(2008:$63,033,000).

ThehigherA$oil revenue resulted fromCarnarvon’s shareofhigher JointVentureoil salesof1,353,421bbls (2008:702,084bbls),

howeverthiswasoffsetbyareducedoilsalepriceofUS$56.92perbbl(2008:US$82.19).TheweakeningintheA$/US$exchangerate

fromUS$0.96toUS$0.80overthereportingperiodalsohadapositiveimpactonA$revenue.

TheGroup’sprofitafterincometaxfortheyearended30June2009was$36,423,000(2008:$15,651,000profit).Itsshareofthepre

tax(incomeandspecialremuneratorybenefit)cashoperatingprofitoftheJointVentureincreasedto$83,194,000(2008:$52,734,000)

asaresultofimprovedproductionandthelowvariableoperating,transportation,royaltyandsellingcostofperbarrelof$12.95(2008:

$13.87).Depreciationcostperbarrelincreasedto$7.43(2008:$3.78);estimatedfuturecostsofmaintainingexistingproductionhave

beenincluded,effective1July2008,inthedepreciablecostbase.

New venture costs of $963,000 (2008: $973,000) are indicative of the Company’s continued effort to diversify its project base.

Corporateandadministrationcostsfortheyearof$2,909,000(2008:$2,129,000),excludingshare-basedpayments,reflectageneral

increase in corporate costs, including larger office premises, together with staff costs devoted towards expanding the Company’s

technicalcapability.


dIreCtorS’ rePort

ThedirectorspresenttheirreporttogetherwiththefinancialreportofCarnarvonPetroleumLimited(“Company”)andoftheGroup,beingtheCompany,itscontrolledentities,andtheGroup’sinterestinjointlycontrolledassets,forthefinancialyearended30June2009,andtheauditor’sreportthereon.

CarnarvonPetroleumLimitedisalistedpubliccompanyincorporatedanddomiciledinAustralia.

Directors

ThenamesanddetailsoftheCompany’sdirectorsinofficeatanytimeduringorsincetheendofthefinancialyearareasfollows.Directorswereinofficeforthisentireperiodunlessotherwisestated.

Peter J LeonhardtChairman

FCA,FAICD(Life)Appointedasadirectoron17March2005andappointedChairmaninApril2005.

Mr Leonhardt is an independent companydirector andadviserwith extensivebusiness, financial and corporate experience.He is aCharteredAccountantandaformerSeniorPartnerwithPricewaterhouseCoopersandManagingPartnerofCoopers&LybrandinWesternAustralia.

DuringthepastthreeyearsMrLeonhardthasservedasadirectorofthefollowinglistedcompanies:CTILogisticsLimited(fromAugust1999);CentrepointAllianceLimited(fromMay2002toJune2009).HeisalsoadirectoroftheWesternAustralianInstituteforMedicalResearch.

MrLeonhardtisamemberoftheAuditCommitteeandtheRemunerationCommittee.

Edward (Ted) P JacobsonChief Executive Officer

B.Sc(HonsGeology)Appointedasadirectoron5December2005.

MrJacobsonisapetroleumgeophysicistwith38years’experienceinpetroleumexplorationprincipallyintheEuropeanNorthSea,SouthEastAsia,SouthAmericaandAustralia.WithinAustraliahehasbeenresponsibleforinitiatinganumberofpetroleumdiscoverieswithintheCooperBasin,BarrowSubBasinandTimorSea.In1986,TedestablishedtheconsultingcompanyExplorationStudyProjectsPtyLtdwhichadvisedcompaniesonnewventureopportunitiesinAustraliaandSouthEastAsiaandassistedincapitalraisingsandcorporateactivity.In1991Tedwasco-founderofDiscoveryPetroleumNLandfrom1996co-founderandtechnicaldirectorofTapOilLtdwhichgrewtoamarketcapitalisationofover$400millionunderhistechnicalleadership.TedretiredfromTapinSeptember2005.

DuringthepastthreeyearsMrJacobsonhasservedasdirectorofthefollowinglistedcompanies:RialtoEnergyLimited(fromJuly2006).MrJacobsonwasalsoadirectorofSmartRichEnergyFinance(Holdings)Ltd(fromJanuary2007toNovember2007),listedontheHongKongStockExchange.

Neil C FearisNon-Executive Director

LL.B(Hons),MAICD,FFinAppointedasadirectoron30November1999.

MrFearishasover32years’experienceasacommerciallawyerintheUKandAustralia.

DuringthepastthreeyearsMrFearishasservedasadirectorofthefollowinglistedcompanies:KrestaHoldingsLimited(from1997);PerseusMiningLimited(from2004);LibertyResourcesLimited(fromJune2007toNovember2008).MrFearisisalsoamemberofseveralprofessionalbodiesassociatedwithcommerceandlaw.

MrFearisisChairmanoftheAuditCommitteeandChairmanoftheRemunerationCommittee.


dIreCtorS’ rePort (Continued)

Directors(continueD)

Kenneth P JudgeNon-Executive Director

B.Com,B.Juris,LL.BAppointedasadirectoron1April2005.

Mr.Judgehasextensivelegalandbusinessmanagementexperiencehavingheldanumberofpubliccompanydirectorshipsandhasbeenengagedintheestablishmentorcorporaterestructureoftechnology,mining,andoilandgascompaniesinAustralia,UnitedKingdom,USA,Brazil,Argentina,MexicoandthePhilippines.

Mr. Judge isadirectorandChairmanofBrazilianDiamondsLimited (fromFebruary2001),which is listedonboth theTorontoStockExchangeandtheAIMmarketoftheLondonStockExchangePlc.HeisalsoChairmanofHidefieldGoldPlc(fromOctober2003)andadirectorofGulfsandsPetroleumPlc.(fromOctober2006),bothofwhicharelistedonAIM.HeisalsoadirectorandChairmanofAltoVenturesLtd(fromApril2004)whichislistedontheTSXVentureExchange.

MrJudgeisamemberoftheAuditCommitteeandtheRemunerationCommittee.

companysecretary

MrRobertAndersonwasappointedCompanySecretaryinNovember2005.MrAndersonisaCharteredAccountantwhohaspreviouslyheldcompanysecretarialpositionsinbothASX-listedcompaniesandprivateentities.

Directors’meetings

Thenumberofdirectors’meetingsheldandattendedbyeachofthedirectorsduringthereportingperiodwasasfollows:

(a) (b)PeterLeonhardt 6 6TedJacobson 6 6 NeilFearis 6 6KenJudge 6 6 (a) Numberofmeetingsheldduringperiodofoffice (b) Numberofmeetingsattended

auDitcommittee

Names and qualifications of Audit Committee members

TheCommitteeistoincludeatleast3membersfrom1July2009.CurrentmembersofthecommitteeareNeilFearis(Chairman),PeterLeonhardt,andKenJudge.MrJudgewasappointedamemberon1July2009.QualificationsofAuditCommitteemembersareprovidedintheDirectorssectionofthisdirectors’report.

Audit Committee meetings

ThenumberofAuditCommitteemeetingsheldandattendedbythemembersduringthereportingperiodwasasfollows:

(a) (b) PeterLeonhardt 3 3NeilFearis 3 3

(a) Numberofmeetingsheldduringperiodofoffice (b) Numberofmeetingsattended



remunerationcommittee

InAugust2008theBoarddeterminedtheCompanywasofasizetojustifytheexistenceofaRemunerationCommitteethatnowcomprisesNeilFearis(Chairman),PeterLeonhardt,andKenJudge.

Remuneration Committee meetings

ThenumberofRemunerationCommitteemeetingsandthenumberattendedbyeachofthemembersduringthereportingperiodwereasfollows: (a) (b) PeterLeonhardt 2 2NeilFearis 2 2KenJudge 2 2 (a)Numberofmeetingsheldduringperiodofoffice (b)Numberofmeetingsattended

The Remuneration Committee is responsible for the remuneration arrangements for directors and executives of the Company. TheRemunerationCommitteeconsidersremunerationpackagesandpoliciesapplicable to theexecutivedirectors,seniorexecutives,andnon-executivedirectors.Itisalsoresponsibleforshareoptionschemes,theEmployeeSharePlan,incentiveperformancepackages,andretirementandterminationentitlements.remunerationreport

UntilAugust2008theBoarddeterminedremunerationpoliciesandpractices,evaluatedtheperformanceofseniormanagement,andconsideredremunerationforthoseseniormanagers.

The Remuneration Committee now assesses the appropriateness of the nature and amount of remuneration on an annual basis byreferencetoindustryandmarketconditions,andwithregardtotheCompany’sfinancialandoperationalperformance.

Totalnon-executivedirectors’feesareapprovedbyshareholdersandtheBoardisresponsiblefortheallocationofthosefeesamongsttheindividualmembersoftheBoard.

ThevalueofremunerationisdeterminedonthebasisofcosttotheCompanyandtheGroup.

Principles of compensation

Remunerationofdirectorsandexecutivesisreferredtoascompensationthroughoutthisreport.

CompensationlevelsforkeymanagementpersonneloftheCompanyandtheGrouparecompetitivelysettoattractandretainappropriatelyqualifiedandexperienceddirectorsandseniorexecutives.Thedirectorsobtain,whenrequired,independentadviceontheappropriatenessofremunerationpackages,giventrendsincomparativecompaniesbothlocallyandinternationally.

CompensationarrangementsrecognisetherelativelysmallsizeofthestaffandstageofdevelopmentoftheCompanyandincludeamixoffixedandperformancebasedcompensation.Acomponentofshare-basedcompensationmaybeawardedatthediscretionoftheBoard,subjecttoshareholderapprovalwhenrequired.

Compensationstructurestakeintoaccounttheoveralllevelofcompensationforeachdirectorandexecutive,thecapabilityandexperienceof the directors and senior executives, the executive’s ability to control the financial performanceof the relative business segment,theGroup’sperformance(includingearningsandthegrowthinshareprice),andtheamountofanyincentiveswithineachexecutive’sremuneration.

On1August2008theBoardadoptedapolicythatprohibitsthosethatareissuedshare-basedpaymentsaspartoftheirremunerationfromenteringintootherarrangementsthatlimittheirexposuretolossesthatwouldresultfromsharepricedecreases.TheCompanyrequiresallexecutivesanddirectorstosignannualstatementsofcompliancewiththispolicythroughouttheprecedingyear.



remunerationreport(continueD)

Principles of compensation (continued)

InconsideringtheGroup’sperformanceandbenefitsforshareholderwealth,theBoardhashadregardtothefollowingindicesinrespectofthecurrentfinancialyearandthepreviousfouryears.Nodividendshavebeenpaidordeclaredduringthisperiod.

30June2005 30June2006 30June2007 30June2008 30June2009 Shareprice $0.018 $0.052 $0.24 $0.53 $0.815

Consolidatednetprofit/(loss)fromcontinuingoperations($000) ($1,007) ($1,246) ($1,542) $15,651 $36,423 ThedirectorsbelievetheincreaseinsharepricesinceJune2005reflectsanumberoffactors,includingtheappointmentofTedJacobsonasChiefExecutiveOfficerinFebruary2006.ThedevelopmentoftheGroup’soilandgasinterestsinThailandsincehisappointmenthasresultedinasubstantialincreaseinproductionandoperationalrevenues,asevidencedbytheoperatingprofitinthecurrentandpriorreportingperiod.

Fixed compensation

Fixedcompensationconsistsofbasecompensationaswellasemployercontributionstosuperannuationfunds.Basecompensationmaybesupplementedbyanelementofshare-basedcompensation.

Therewasnoshare-basedcompensationinthecurrentorpriorreportingperiods,otherthanthatsetoutintheEmployeeSharePlansectionofthisremunerationreport.

Non-executive directors

Totalremunerationforallnon-executivedirectors, lastvoteduponbyshareholdersataGeneralMeetinginNovember2008,isnottoexceed$300,000perannum.

Anon-executivedirector’sbasefeeiscurrently$60,500perannum.TheChairmanreceives$103,500perannum.Non-executivedirectorsdonotreceiveanyperformance-relatedremuneration.Directors’feescoverallmainBoardactivitiesandmembershipofBoardcommittees.TheCompanydoesnothaveanytermsorschemesrelatingtoretirementbenefitsfornon-executivedirectors.

Service contracts

Thecontractduration,periodofnoticeandterminationconditionsforkeymanagementpersonnelareasfollows:

(i) TedJacobson,ChiefExecutiveOfficer,isengagedthrougharolling12monthEmploymentAgreement.TerminationbytheCompanyiswith3months’notice(orpaymentinlieuthereof)andpaymentof9monthsremuneration.TerminationbyMrJacobsoniswith3months’notice.

(ii) RobertAnderson,CompanySecretaryandChiefFinancialOfficer,isengagedthrougharolling12monthConsultancyAgreement.TerminationbytheCompanyiswith6months’noticeorpaymentinlieuthereof.Terminationbytheconsultantiswith3months’notice.

(iii) PhilipHuizenga,ChiefOperatingOfficer,isengagedasanemployee.TerminationbytheCompanyiswith4weeks’noticeorpaymentinlieuthereof.TerminationbyMrHuizengaiswith4weeks’notice.




Employee Share Plan

SharesareissuedunderanEmployeeSharePlan(“ESP”),whichhasbeenapprovedbyshareholdersinAnnualGeneralMeeting(“AGM”).

ThepurposeoftheESPistoattract,retainandmotivatethosewhohavebeeninvitedtoparticipateintheESPandtherebyaligntheirinterestswiththoseofothershareholdersasameansofencouragingthemtoensurethatCompanyperformanceincreasesshareholderwealththroughlongtermgrowth.SharesareissuedbasedupontheassessedperformanceofeachpersonagainsttheirjobspecificationsandtherecommendationsoftheChiefExecutiveOfficer,andinthecaseofdirectors,withtheapprovalofshareholders.TherewerenoESPsharesissuedtodirectorsandkeymanagementpersonnelduringthereportingperiod.

2008 numberof issueprice executiveofficers sharesissued issuedate pershare LoanRAAnderson 100,000 07/01/2008 $0.701 $70,100PPHuizenga 100,000 07/01/2008 $0.701 $70,100

Theseissueswerenotsubjecttoaperformanceconditionbutweremadehavingregardtomarketadviceontherelevantbasepackages.Theissuepricewascalculatedbasedonthe5dayweightedaverageclosingpricepriortothedateofoffer.Thepurchaseswerefundedbyinterest-freeloanswithalimitedrecoursesecurityovertheplansharesandsubjecttothedetailedrulesoftheESP.

Analysis of bonuses included in remuneration

Allcashbonusesawardedduringtheperiodandincludedinremuneration,assetoutonpage23,fullyvestedtoeachofthedirectors,namedCompanyexecutives,andkeymanagementpersonnelduringtheperiod.

Directors’ and executive officers’ remuneration (Company and consolidated)

DetailsofthenatureandamountofeachmajorelementoftheremunerationofeachdirectoroftheCompanyandeachofthenamedCompanyandGroupexecutivesreceivingthehighestremunerationaresetoutonthefollowingpage.

Thefairvalueofoptions,includingESPsharestreatedinprincipleasanoptionovertheCompany’sshares,iscalculatedatthedateofgrantusingtheBlack-ScholesOptionPricingModel.SharesissuedundertheESPvestimmediatelyandtheirfairvalueisrecognisedasanexpenseinthecurrentperiod.ThefollowingfactorsandassumptionswereusedindeterminingthefairvalueofESPsharesatgrantdateinthecurrentandpriorreportingperiod:

2008 assumed fairvalue exercise priceofshares expected riskfree Dividendgrantdate expirydate peroption price atgrantdate volatility interestrate yield

07/01/2008 06/01/2011 $0.31 $0.701 $0.701 55% 7.5% 0%


dIreCtorS’ rePort (Continued)re

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Equity instruments

(i) Shares

TherewerenosharesintheCompanyissuedascompensationtokeymanagementpersonnelduringthereportingperiod,otherthantheESPsharestreatedinprincipleasanoptionovertheCompany’ssharesasdescribedunder(ii)below.

(ii) OptionsandESPshares

TherewerenooptionsoversharesorESPshares in theCompany issuedascompensationtokeymanagementpersonnelduringthereportingperiod.Nooptionshavebeenissuedsincetheendofthefinancialyear.

ShareissuesundertheCompany’sESParetreatedinprincipleasanoptionovertheCompany’ssharesandareincludedintheoptiontablesbelow.Theseoptionsareassumedtohavealifeof3years.

Detailsofoptions,includingESPsharestreatedinprincipleasoptions,issuedandvestedtodirectorsandexecutivesareasfollows.Alloptionswereissuedfornilcashconsideration,vestimmediately,andhavebeenrecognisedasanexpenseinthecurrentperiod.

2008 numberof fairvalueper exercise espshares issue optionatissue priceper assumedexecutiveofficers issued date date option expirydate

RAAnderson 100,000 07/01/2008 $0.31 $0.701 06/01/2011PPHuizenga 100,000 07/01/2008 $0.31 $0.701 06/01/2011Thefollowingshareswereissuedontheexerciseofoptionsissuedascompensationinpriorperiods.TheseoptionswereissuedtoDirectorsin2006atatimetheCompanyhadnofull-timeemployees,verylimitedcashresources,andrecognisedtheunusualcontributionoftheDirectors.

2009Directors numberofshares amountpaidpershare

EPJacobson 4,000,000 $0.10 PJLeonhardt 3,000,000 $0.10 NCFearis 2,000,000 $0.10 KPJudge 1,000,000 $0.10

2008Directors numberofshares amountpaidpershare EPJacobson 4,000,000 $0.07 PJLeonhardt 3,000,000 $0.07 KPJudge 2,000,000 $0.07 KPJudge 1,000,000 $0.10

Therearenoamountsunpaidonsharesissuedasaresultoftheexerciseofoptions.Duringthereportingperiodtherewasnoforfeitureorvestingofoptionsissuedinpreviousperiods.Attheendofthereportingperiodtherewerenounvestedoptionsonissue.Alloptionsexpireontheexpirydatebutdonotexpireasaresultoftheterminationoftheholder’sengagementwiththeCompany.




Equity instruments (continued)

(ii) OptionsandESPshares(continued)

Themovementduringthereportingperiod,byvalue,ofoptionsoverordinaryshares,includingsharesissuedundertheCompany’sESP,foreachcompanydirectorandcompanyexecutiveandissuedaspartofremunerationisdetailedbelow.TheseshouldbereadinthecontextofthecommentsaboveaboutthestatusoftheCompanyin2006atthetimetheoptionswereissued.

valueofoptions issued exercisedin forfeitedin totalDirectors inyear($) year($) year($) valueinyear($)

EPJacobson - 1,160,000 - 1,160,000PJLeonhardt - 870,000 - 870,000KPJudge - 290,000 - 290,000NCFearis - 580,000 - 580,000 valueofoptions issued exercisedin forfeitedin totalexecutiveofficers inyear($) year($) year($) valueinyear($)

PPHuizenga - 359,000 - 359,000

ThevalueofoptionsissuedintheyearisthefairvalueoftheoptionsatgrantdateusingtheBlack-ScholesOptionPricingModel.

ThevalueofoptionsexercisedduringtheyeariscalculatedasthemarketpriceofsharesoftheCompanyonASXLimitedasatcloseoftradingonthedatetheoptionswereexercisedortheESPloanrepaid,afterdeductingthepricepaidtoexercisetheoptionsorrepaytheloan.

non-auDitservices

Theauditorshavenotperformedanynon-auditservicesoverandabovetheirstatutorydutiesduringthecurrentreportingperiod.

DetailsoftheamountspaidorpayabletotheauditoroftheGroupforauditservicesprovidedduringtheyeararesetoutbelow:

auditservices consolidated2009($)

Auditors of the Company: Auditandreviewoffinancialreports 108,000Directors’interests

Atthedateofthisreport,therelevantinterestsofthedirectorsinsecuritiesoftheCompanyareasfollows:

name ordinaryshares optionsoverordinaryshares

PJLeonhardt 17,000,000 -EPJacobson 30,917,335 -NCFearis 8,400,000 -KPJudge 10,932,855 -

SharesissuedundertheCompany’sESPareincludedundertheheadingOrdinaryShares.



shareoptions

Options issued to directors and executives of the Company

TherewerenooptionsoversharesorESPsharesintheCompanyissuedascompensationtodirectorsornamedexecutivesduringorsincetheendofthefinancialyear.

Shares under option

ThefollowingunissuedordinarysharesoftheCompanywereunderoption.TheseexcludeshareissuesmadeundertheCompany’sESP.

exercise numberexpiryDate price 1July2008 issued exercised expired 30June2009 31/03/2009 $0.10 10,000,000 - 10,000,000 - - 10,000,000 - 10,000,000 - -Alloptionsexpireontheexpirydatebutdonotexpireasaresultoftheterminationoftheholder’sengagementwiththeCompany.Optionholdersdonothaveanyright,byvirtueoftheoption,tovoteortoparticipateinanyshareissueoftheCompanyoranyrelatedbodycorporate.Noshareshavebeenissuedasaresultoftheexerciseofoptionssincetheendofthefinancialyear.Therearenoamountsunpaidon theshares issuedasa resultof theexerciseofoptions in the reportingperiod.During the reportingperiod therewasnoforfeitureorvestingofoptionsissuedinpreviousperiods.Attheendofthereportingperiodtherewerenounvestedoptionsonissue.

LikeLyDeveLopmentsThelikelydevelopmentsforthe2010financialyeararecontainedintheoperatingandfinancialreviewassetoutonpages5to17.Thedirectorsareoftheopinionthatfurther informationastothelikelydevelopmentsintheoperationsoftheGroupwouldprejudicetheinterestsoftheCompanyandtheGroupandithasaccordinglynotbeenincluded.

environmentaLreguLationanDperformance

The Group’s oil and gas exploration and development activities are concentrated in Thailand and Western Australia. EnvironmentalobligationsareregulatedunderbothStateandFederalLawinWesternAustraliaandundertheDepartmentofMineralFuelsregulationsinThailand.Nosignificantenvironmentalbreacheshavebeennotifiedbyanygovernmentagencyduringtheyearended30June2009.

DiviDenDs

Nodividendswerepaidduringtheyearandthedirectorsdonotrecommendpaymentofadividendinrespectofthecurrentfinancialyear.

auDitor’sinDepenDenceDecLaration

Theauditor’sIndependenceDeclarationunderSection307CoftheCorporationsActissetoutonpage28andformspartofthedirectors’reportforthefinancialyearended30June2009.

principaLactivities

Duringthecourseofthe2009financialyeartheGroup’sprincipalactivitiescontinuedtobedirectedtowardsoilandgasexploration,developmentandproduction.iDentificationofinDepenDentDirectors

TheindependentdirectorsareidentifiedintheCorporateGovernanceStatementsectionofthisAnnualReportassetoutonpages72to74.



significantchangesinstateofaffairs

IntheopinionofthedirectorsnosignificantchangesinthestateofaffairsoftheGroupoccurredduringthecurrentfinancialyearotherthanasoutlinedintheoperatingandfinancialreviewassetoutonpages5to17.

inDemnificationanDinsuranceofDirectorsanDofficers

DuringtheperiodtheCompanypaidapremiumtoinsurethedirectorsandofficersoftheCompanyanditscontrolledentities.Thepolicyprohibitsthedisclosureofthenatureoftheliabilitiescoveredandtheamountofthepremiumpaid.

proceeDingsonBehaLfofthecompany

NopersonhasappliedforleaveofCourttobringproceedingsonbehalfoftheCompanyorinterveneinanyproceedingstowhichtheCompanyisapartyforthepurposeoftakingresponsibilityonbehalfoftheCompanyforalloranypartoftheproceedings.TheCompanywasnotapartytoanysuchproceedingsduringtheyear.

operatinganDfinanciaLreview

AnoperatingandfinancialreviewoftheGroupforthefinancialyearended30June2009issetoutonpages5to17andformspartofthisreport.

inDemnityofDirectorsanDcompanysecretary

DeedsofAccessandIndemnityhavebeenexecutedbytheCompanywitheachofthedirectorsandCompanySecretary.ThedeedsrequiretheCompanytoindemnifyeachdirectorandCompanySecretaryagainstanylegalproceedings,totheextentpermittedbylaw,madeagainst,suffered,paidorincurredbythedirectorsorCompanySecretarypursuantto,orarisingfromorinanywayconnectedwiththedirectororCompanySecretarybeinganofficeroftheCompany.

eventssuBsequenttoreportingDate

On28July2009theCompanyannouncedthat itsapplicationto theAustralianGovernment toacquire100%ofanewoffshoreWestAustralianpermitcoveringapplicationblockWA-435-Phadbeensuccessful.Theapplicationblockissituatedinthenorth-westernpartoftheBedoutSub-basinwithinthegreaterRoebuckBasin.InthesamebiddingroundFinderExploration(“Finder”)wasalsosuccessfulinbeingawarded100%ofthreepermitssurroundingWA-435-P.Subjecttoratificationbythegovernmentauthorities,CarnarvonandFinderhaveenteredintoaheadsofagreementtoswap50%ofCarnarvon’sWA-435-Pfor50%ofthethreenewFinderpermitsWA-436-P,WA-437-PandWA-438-P.Finderwillassumeoperatorshipofallfourpermits.

Noothermatterorcircumstancehasarisensince30June2009thatintheopinionofthedirectorshassignificantlyaffected,ormaysignificantlyaffectinfuturefinancialyears:

(i) theGroup’soperations,or(ii) theresultsofthoseoperations,or(iii) theGroup’sstateofaffairs

rounDingoff

TheCompanyisanentitytowhichASICClassOrder98/100dated10July1998applies.InaccordancewiththatClassOrderamountsinthefinancialreportanddirectors’reporthavebeenroundedofftothenearestthousanddollars,unlessotherwisestated.

Signedinaccordancewitharesolutionofthedirectors.

pJLeonhardtDirector Perth,28August2009


audItor’S IndePendenCe deClaratIon


InCome StatementSfortheyearenDeD30June2009

consoLiDateD company 2009 2008 2009 2008 notes $000 $000 $000 $000 (restated)

salesrevenuefromcontinuingoperations 100,758 63,033 - -

Otherincome 4 896 318 214 251

Costofsales 5 (27,847) (12,392) - -

Administrativeexpenses (1,445) (1,032) (1,445) (1,032)

Directors’fees (212) (183) (212) (183)

Employeebenefitsexpense (829) (637) (829) (637)

Travelrelatedcosts (424) (311) (424) (311)

Unrealisedforeignexchangegain/(loss) 2,305 (656) 2,759 (1,851)

Newventures (963) (973) (963) (973)

Share-basedpayments (122) (119) (122) (119)

Financecosts (1) 34 (1) -

profitbeforeincometax 72,116 47,082 (1,023) (4,855)

Taxes

Incometaxexpense 9 22,132 16,452 - -

Specialremuneratorybenefit 13,561 14,979 - -

Totaltaxes 35,693 31,431 - -

profit/(loss)fromcontinuingoperations 36,423 15,651 (1,023) (4,855)

profit/(loss)attributabletomembersofthecompany 36,423 15,651 (1,023) (4,855)

Basicearningspersharefromcontinuing

operations(centspershare) 8 5.4 2.4

Dilutedearningspersharefromcontinuing

operations(centspershare) 8 5.4 2.3

The above income statements should be read in conjunction with the accompanying notes to the financial statements.


BalanCe SHeetSasat30June2009

consoLiDateD company 2009 2008 2009 2008 notes $000 $000 $000 $000 (restated)

currentassets

Cashandcashequivalents 21(b) 31,099 28,281 3,380 570

Tradeandotherreceivables 10 11,904 12,443 2,730 2,788

Inventories 12 3,865 1,586 - -

Otherassets 13 677 299 415 96

totalcurrentassets 47,545 42,609 6,525 3,454

non-currentassets

Tradeandotherreceivables 10 - - 10,273 12,713

Property,plantandequipment 11 353 172 115 49

Explorationandevaluation 14 1,219 379 438 379

Oilandgasassets 15 49,701 22,078 - -

Otherinvestments 16 - - 1,483 1,483

totalnon-currentassets 51,273 22,629 12,309 14,624

totalassets 98,818 65,238 18,834 18,078

currentliabilities

Tradeandotherpayables 17 6,901 3,368 1,017 531

Employeebenefits 24 49 13 49 13

Incometaxprovision 3,521 9,304 - -

Provisions 18 3,122 14,848 - -

totalcurrentliabilities 13,593 27,533 1,066 544

non-currentliabilities

Deferredtax 19 8,964 3,215 - -

totalnon-currentliabilities 8,964 3,215 - -

totalliabilities 22,557 30,748 1,066 544

netassets 76,261 34,490 17,768 17,534

equity

Issuedcapital 68,090 66,738 68,090 66,738

Reserves (2,215) (6,211) 1,131 1,226

Retainedprofits/(accumulatedlosses) 10,386 (26,037) (51,453) (50,430)

totalequity 76,261 34,490 17,768 17,534

The above balance sheets should be read in conjunction with the accompanying notes to the financial statements.


StatementS of CHanGeS In eQuItY fortheyearenDeD30June2009

retained profits/ share-based issued (accumulated translation paymentsgroup capital losses) reserve reserve total $000 $000 $000 $000 $000 (restated)

Balanceat1July2007 65,041 (41,688) (3,383) 1,487 21,457

Sharesissuednetoftransactioncosts 1,226 - - - 1,226

Exchangedifferencesontranslationof

foreignoperations - - (4,054) - (4,054)

Sharebasedpayments 471 - - (261) 210

Profitattributabletomembers

ofCompany - 15,651 - - 15,651

Balanceat30June2008 66,738 (26,037) (7,437) 1,226 34,490

Sharesissuednetoftransactioncosts 996 - - - 996

Exchangedifferencesontranslationof

foreignoperations - - 2,839 - 2,839

Exchangedifferencesonchangein

functionalcurrency - - 1,252 - 1,252

Sharebasedpayments 356 - - (95) 261

Profitattributabletomembers

ofCompany - 36,423 - - 36,423

Balanceat30June2009 68,090 10,386 (3,346) 1,131 76,261

The above statements of changes in equity should be read in conjunction with the accompanying notes to the financial statements.


StatementS of CHanGeS In eQuItY fortheyearenDeD30June2009

share-based issued accumulated payments company capital losses reserve total $000 $000 $000 $000

Balanceat1July2007 65,041 (45,575) 1,487 20,953

Sharesissuednetoftransactioncosts 1,226 - - 1,226

Sharebasedpayments 471 - (261) 210

LossattributabletomembersoftheCompany - (4,855) - (4,855)

Balanceat30June2008 66,738 (50,430) 1,226 17,534

Sharesissuednetoftransactioncosts 996 - - 996

Sharebasedpayments 356 - (95) 261

LossattributabletomembersoftheCompany - (1,023) - (1,023)

Balanceat30June2009 68,090 (51,453) 1,131 17,768

The above statements of changes in equity should be read in conjunction with the accompanying notes to the financial statements.


StatementS of CaSH floWSfortheyearenDeD30June2009

consoLiDateD company 2009 2008 2009 2008 notes $000 $000 $000 $000

cashflowsfromoperatingactivities

ReceiptsfromcustomersandGSTrecovered 114,038 56,145 221 275

Paymentstosuppliersandemployees (34,238) (13,616) (3,832) (3,153)

Incometaxandspecialremuneratorybenefitpaid (48,177) (3,666) - -

Interestreceived 973 236 291 204

Interestpaid - (8) - -

netcashflowsgeneratedfrom/(usedin)operatingactivities 21(a) 32,596 39,091 (3,320) (2,674)

cashflowsfrominvestingactivities

Explorationanddevelopmentexpenditure (35,550) (17,399) (346) (628)

Jointventurecashassignedtosubsidiary - - (341) -

Cashheldassecurity (429) (3,156) (581) (2,656)

Acquisitionofproperty,plantandequipment (300) (218) (139) (13)

Netrepaymentsfrom/(advancesto)

controlledentities - - 6,366 (1,293)

netcashflows(usedin)/frominvestingactivities (36,279) (20,773) 4,959 (4,590)

cashflowsfromfinancingactivities

Proceedsfromissueofsharecapital 1,000 1,230 1,000 1,230

Paymentofshareissuecosts (4) (3) (4) (3)

ProceedsfromrepaymentofEmployee

SharePlanloans 140 90 140 90

netcashflowsfromfinancingactivities 1,136 1,317 1,136 1,317

net(decrease)/increaseincashandcashequivalents (2,547) 19,635 2,775 (5,947)

cashandcashequivalentsatthebeginningofthefinancialyear 28,281 8,927 570 6,520

Effectofexchangeratefluctuationsoncashand

cashequivalents 5,365 (281) 35 (3)

cashandcashequivalentsattheendofthefinancialyear 21(b) 31,099 28,281 3,380 570

The above statements of cash flows should be read in conjunction with the accompanying notes to the financial statements.


noteS to tHe fInanCIal StatementS

1. reportingentity

TheconsolidatedfinancialreportoftheCompanyforthefinancialyearended30June2009comprisestheCompanyanditscontrolledentities(the“Group”)andtheGroup’sinterestinjointlycontrolledassets.

Thefinancialreportwasauthorisedforissuebythedirectorson28August2009.

2. Basisofpreparationofthefinancialreport

Statement of compliance

ThefinancialreportisageneralpurposefinancialreportpreparedinaccordancewithAustralianAccountingStandards(“AASBs”),includingAustralianAccountingInterpretations,otherauthoritativepronouncementsoftheAustralianAccountingStandardsBoard(“AASB”),andtheCorporationsAct2001.

AustralianAccountingStandardssetoutaccountingpoliciesthattheAASBhasconcludedwouldresultinafinancialreportcontainingrelevant and reliable information about transactions, events and conditions to which they apply. Compliance with AustralianAccountingStandardsensuresthatthefinancialstatementsandnotesalsocomplywithInternationalFinancialReportingStandards(“IFRSs”).Material accountingpoliciesadopted in thepreparationof thisfinancial report arepresentedbelow.Theyhavebeenconsistentlyappliedunlessotherwisestated.

Basis of measurement

Thefinancialreportispreparedonahistoricalcostbasis,exceptforavailable-for-salefinancialassetsandfinancialinstrumentsatfairvaluethroughprofitandlosswhicharemeasuredatfairvalue.

Functional and presentation currency

The consolidated financial statements are presented in Australian dollars,which is theCompany’s functional and presentationcurrency.

Use of estimates and judgements

The preparation of the financial report requires management to make judgements, estimates and assumptions that affect theapplicationofaccountingpoliciesandthereportedamountsofassetsandliabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognizedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.

Keyestimate–impairment

TheGroupassessesimpairmentateachreportingdatebyevaluatingconditionsspecifictothegroupthatmayleadtotheimpairmentofassets.Whereanimpairmenttriggerexists,therecoverableamountoftheassetisdetermined.Value-in-usecalculationsperformedinassessingrecoverableamountsincorporateanumberofkeyestimates.

TherewasnotconsideredtobeanyimpairmenttriggeroverthecarryingvalueoftheGroup’sinterestinexplorationandevaluationoroilandgasassetsatthedateofthisreport.

Keyestimate–incomeandcapitalgainstaxes

Judgementisrequiredindetermininganyprovisionforincomeandcapitalgainstaxes.TheGrouprecognizesliabilitiesofanticipatedtaxbasedonestimatesoftaxesdue.Wherethefinaltaxoutcomeofthesemattersisdifferentfromtheamountsthatwereinitiallyrecognised,suchdifferenceswillimpacttheincometaxanddeferredtaxexpenses,assetsorprovisionsintheyearinwhichsuchdeterminationismade.


noteS to tHe fInanCIal StatementS (Continued)

2. Basisofpreparationofthefinancialreport(continued)

Use of estimates and judgements (continued)

Keyestimate–specialremuneratorybenefittaxandincometax

TheGroup’sPhetchabunBasinJointVentureissubjecttoThaiincometaxat50%andaspecialremuneratorybenefit(“SRB”)taxonprofits,atslidingscalerates(0%-75%byconcession).

TheSRB,whichistaxdeductibleinthecalculationofThaiincometaxes,involvesahighlydetailedcalculationdoneonaconcessionbyconcessionbasis.Thebasisofthecalculationispetroleumprofits,adjustedforcapitalspent,beingsubjectedtoaslidingscaleSRBratesuchthatprofitsarenottaxeduntilallcapitalhasbeenrecovered.TheslidingscalerateisprincipallydrivenbyproductionandpricingbutissubjecttootheradjustmentssuchaschangesinThailand’sconsumerpriceindex,wholesalepriceindex,cumulativemetresdrilledontheconcession,and,forcertainconcessions,changesintheexchangeratebetweentheThaiBahtandtheUSD.

TheSRBcalculationisperformedandpaidannuallyforeachconcessionatthecalculatedannualrateattheendofeachcalendaryear.Judgementisrequiredindeterminingprovisionswhicharebasedonestimatesofamountsdue.Wherethefinaloutcomeofthosematters isdifferentfromtheamountsthatwereoriginallyrecognised,suchdifferencemayimpactthoseprovisionsintheperiodinwhichsuchadeterminationismade.

Keyestimate–functionalcurrency

ThedeterminationofthefunctionalcurrencyoftheCompany’scontrolledentitiesrequiresconsiderationofanumberoffactors.These factors include thecurrencies thatprimarily influence their salesandcostsand theeconomicenvironment inwhich theentitiesoperate.

Keyestimates–other

Otherareasofjudgementareinthedeterminationofoilreserves,rehabilitationprovisions,capitalisationofexplorationandevaluationcosts,determinationofareasofinterest,andtheunitsofproductionmethodofdepreciation.

3. significantaccountingpolicies

Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheconsolidatedfinancialreport.TheaccountingpolicieshavebeenappliedconsistentlybyallentitiesintheGroup.Certaincomparativeamountshavebeenreclassifiedtoconformtothecurrentyear’spresentation.

(a)Basisofconsolidation

Controlled entities

TheconsolidatedfinancialreportcomprisesthefinancialstatementsoftheCompanyanditscontrolledentities.AcontrolledentityisanyentitycontrolledbytheCompanywherebytheCompanyhasthepowertocontrolthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.All inter-companybalancesandtransactionsbetweenentities intheeconomicentity,includinganyunrealisedprofitsorlosses,havebeeneliminatedonconsolidation.AccountingpoliciesofcontrolledentitieshavebeenchangedwherenecessarytoensureconsistencywiththoseappliedbytheCompany.

Wherecontrolledentitiesenterorleavetheeconomicentityduringtheyear,theiroperatingresultsareincludedorexcludedfromthedatecontrolwasobtainedoruntilthedatecontrolceased.InvestmentsincontrolledentitiesarecarriedatcostintheCompany’sfinancialstatements.

Jointly controlled assets

TheGroup’sshareoftheassets,liabilities,revenueandexpensesofjointventureassetsareincludedinthefinancialstatementsundertheappropriateheadings.



3. significantaccountingpolicies(continued)

(b)incometaxandspecialremuneratorybenefit

Income tax

Thechargeforcurrentincometaxexpenseisbasedontheresultfortheyearadjustedforanynon-assessableordisalloweditems.Itiscalculatedusingtaxratesthathavebeenenactedoraresubstantivelyenactedbybalancesheetdate.

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectoftemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsinthefinancialstatements.Nodeferredincometaxwillberecognisedfromtheinitialrecognitionofanassetorliability,excludingabusinesscombination,wherethereisnoeffectonaccountingortaxableprofitorloss.

Deferredtaxiscalculatedatthetaxratesthatareexpectedtoapplytotheperiodwhentheassetisrealisedorliabilityissettled.Deferredtaxisrecognisedintheincomestatementexceptwhereitrelatestoitemsrecogniseddirectlyinequity,inwhichcaseitisrecognisedinequity.Deferredincometaxassetsarerecognisedfordeductibletemporarydifferencesandunusedtaxlossesonlyifitisprobablethatfuturetaxableamountswillbeavailabletoutilisethosetemporarydifferencesandtaxlosses.Deferredtaxassetsandliabilitiesareoffsetwhentheyrelatetoincometaxesleviedbythesametaxationauthorityandthecompany/groupintendstosettleitscurrenttaxassetsandliabilitiesonanetbasis.

Theamountofbenefitsbroughttoaccountorwhichmayberealisedinthefutureisbasedontheassumptionthatnoadversechangewilloccurinincometaxationlegislationandtheanticipationthattheeconomicentitywillderivesufficientfutureassessableincometoenablethebenefittoberealisedandcomplywiththeconditionsofdeductibility imposedbythelaw.Thecarryingamountofdeferredtaxassetsisreviewedateachbalancedateandonlyrecognisedtotheextentthatsufficientfutureassessableincomeisexpectedtobeobtained.

Special remuneratory benefit

TheGroup’sPhetchabunBasinJointVentureissubjecttoaspecialremuneratorybenefit(“SRB”)taxonprofits,atslidingscalerates(0%-75%byconcession).

TheSRB,whichistaxdeductibleinthecalculationofThaiincometaxes,involvesahighlydetailedcalculationdoneonaconcessionby concession basis. The basis of the calculation is petroleum profits, adjusted for capital spent, being subjected to a slidingscaleSRBratesuchthatprofitsarenottaxeduntilallcapitalhasbeenrecovered.Theslidingscalerate isprincipallydrivenbyproductionandpricingbutissubjecttootheradjustmentssuchaschangesinThailand’sconsumerpriceindex,wholesalepriceindex,cumulativemetresdrilledontheconcession,and,forcertainconcessions,changesintheexchangeratebetweentheThaiBahtandtheUSD.TheSRBcalculationisperformedandpaidannuallyforeachconcessionatthecalculatedannualrateattheendofeachcalendaryear.

TheSRBisconsidered,foraccountingpurposes,tobeataxonincome.

Tax consolidation

CarnarvonPetroleumLimitedand itswholly-ownedAustralian residentcontrolledentities formeda tax-consolidatedgroupwitheffectfrom1July2003andarethereforetaxedasasingleentityfromthatdate.CarnarvonPetroleumLimitedistheheadentityofthetax-consolidatedgroup.Infutureperiodsthemembersofthegroupwill,ifrequired,enterintoataxsharingagreementwherebyeachcompanyinthegroupcontributestotheincometaxpayableinproportiontotheircontributiontothenetprofitbeforetaxofthetaxconsolidatedgroup.




(c)property,plantandequipment

Recognition and measurement

Allproperty,plantandequipmentisstatedatcostlessaccumulateddepreciationandimpairmentlosses.Thecostofanitemalsoincludestheinitialestimateofthecostsofdismantlingandremovinganitemandrestoringthesiteonwhichitislocated.

Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothegroupandthecostoftheitemcanbemeasuredreliably. All other repairs andmaintenance are charged to the income statement during the financial period inwhich they areincurred.

Impairment

Thecarryingamountofproperty,plantandequipmentisreviewedateachbalancedatetodeterminewhetherthereareanyobjectiveindicatorsofimpairmentthatmayindicatethecarryingvaluesmaynotberecoverableinwholeorinpart.ImpairmenttestingiscarriedoutinaccordancewithNote3(f).

Whereanassetdoesnotgeneratecashflowsthatarelargelyindependentitisassignedtoacashgeneratingunitandtherecoverableamounttestappliedtothecashgeneratingunitasawhole.

Ifthecarryingvalueoftheassetisdeterminedtobeinexcessofitsrecoverableamount,theassetorcashgeneratingunitiswrittendowntoitsrecoverableamount.

Depreciation

Depreciationonpropertyplantandequipmentiscalculatedonastraight-linebasisoverexpectedusefullifetotheeconomicentitycommencingfromthetimetheassetisheldreadyforuse.Themajordepreciationratesusedforallclassesofdepreciableassetsare:

Property,plantandequipment: 10%to33%

Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,atleastannually.

Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.

Gainsandlossesondisposalsaredeterminedbycomparingproceedswiththecarryingamount.Thesegainsandlossesareincludedintheincomestatement.

(d)oilandgasassets

Oilandgasassetsincludecoststransferredfromexplorationandevaluationoncetechnicalfeasibilityandcommercialviabilityofanareaofinterestaredemonstrable,togetherwithsubsequentcoststodeveloptheassettotheproductionphase.

Wherethedirectorsdecidethatspecificcostswillnotberecoveredfromfuturedevelopment,thosecostsarechargedtotheincomestatementduringthefinancialperiodinwhichthedecisionismade.

Depreciationofoilandgasassetsiscalculatedonaunitofproductionbasissoastowriteoffcosts,includinganelementoffuturecosts, in proportion to the depletion of the estimated recoverable reserves.Refer toNote (y) for further details on changes inaccountingpolicy.




(e)explorationandevaluation

Explorationandevaluationexpenditureincurredisaccumulatedinrespectofeachidentifiableareaofinterest.ThesecostsareonlycarriedforwardtotheextentthattheGroup’srightsoftenuretotheareaarecurrentandthatthecostsareexpectedtoberecoupedthroughthesuccessfuldevelopmentofthearea,orwhereactivitiesintheareahavenotyetreachedastagethatpermitsreasonableassessmentoftheexistenceofeconomicallyrecoverablereserves.

Eachareaofinterestisassessedforimpairmenttodeterminetheappropriatenessofcontinuingtocarryforwardcostsinrelationtothatareaofinterest.ImpairmenttestingiscarriedoutinaccordancewithNote3(f).

Accumulatedcostsinrelationtoanabandonedareaarewrittenoffinfullagainstprofitintheyearinwhichthedecisiontoabandontheareaismade.

Oncethetechnicalfeasibilityandcommercialviabilityoftheextractionofmineralresourcesinanareaofinterestaredemonstrable,exploration and evaluation costs attributable to that area of interest are first tested for impairment and then reclassified fromexplorationandevaluationtooilandgasassets.

(f)recoverableamountofassetsandimpairmenttesting

Assetsthathaveanindefiniteusefullifearenotsubjecttodepreciationandaretestedannuallyforimpairmentbyestimatingtheirrecoverableamount.

Assetsthataresubjecttodepreciationarereviewedannuallytodeterminewhetherthereisanyindicationofimpairment.Wheresuchanindicatorexists,aformalassessmentofrecoverableamountisthenmade.Wherethisislessthancarryingamount,theassetiswrittendowntoitsrecoverableamount.

Recoverableamountisthegreateroffairvaluelesscoststosellandvalueinuse.Valueinuseisthepresentvalueofthefuturecashflowsexpectedtobederivedfromtheassetorcashgeneratingunit.Inestimatingvalueinuse,apre-taxdiscountrateisusedwhichreflectsthecurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Anyresultingimpairmentlossisrecognisedimmediatelyintheincomestatement.

Forthepurposesofimpairmenttestingassetsaregroupedtogetherintothesmallestgroupofassetsthatgeneratescashinflowsfromcontinuingusethatarelargelyindependentofthecashinflowsofotherassetsorgroupsofassets.

(g)tradereceivables

Tradereceivablesarestatedatfairvalueandsubsequentlymeasuredatamortisedcost,lessimpairmentlosses.ImpairmenttestingiscarriedoutinaccordancewithNote3(f).

(h)provisions

ProvisionsarerecognisedwhentheGrouphasalegalorconstructiveobligation,asaresultofpastevents,forwhichitisprobablethatanoutflowofeconomicbenefitswillresultandthatoutflowcanbereliablymeasured.Provisionsaredeterminedbydiscountingtheexpectedfuturecashflowsatapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyand,whereappropriate,therisksspecifictotheliability.

Restoration costs

AnyprovisionforfuturerestorationandrehabilitationcostsiscapitalisedanddepreciatedinaccordancewiththepolicysetoutinNote3(c).Theunwindingoftheeffectofdiscountingontheprovisionisrecognisedasafinancecost.




(i)investmentsandotherfinancialinstruments

TheGroupdeterminestheclassificationofitsfinancialinstrumentsatinitialrecognitionandre-evaluatesthisdesignationateachreportingdate.

Fairvalueisthemeasurementbasis,withtheexceptionofheld-to-maturityinvestmentsandloansandreceivableswhicharemeasuredatamortisedcost.Fairvalueisinclusiveoftransactioncosts.Changesinfairvalueareeithertakentotheincomestatementortoanequityreserve(referbelow).Amortisedcostistheamountmeasuredatinitialrecognition,lessprincipalrepayments,adjustedforthedifference,ifany,betweeninitialmeasurementandthematurityamountcalculatedusingtheeffectiveinterestmethod,lessanyreductionforimpairment.Theeffectiveinterestmethodistheratethatdiscountsfutureexpectedcashflowsthroughtheexpectedlifeofthefinancialinstrumenttoitsnetcarryingamount.Revisionstoexpectedcashflowswillrequireanadjustmenttothecarryingvaluewithaconsequentialrecognitionofanincomeorexpenseinprofitandloss.

Fairvalueisdeterminedbasedoncurrentbidpricesforallquotedinvestments.Ifthereisnotanactivemarketforafinancialassetfairvalueismeasuredusingestablishedvaluationtechniques.

TheGroupassessesateachbalancedatewhetherthere isobjectiveevidencethatafinancialassetorgroupoffinancialassetsareimpaired.Inthecaseofequitysecuritiesclassifiedasavailable-for-sale,asignificantorprolongeddeclineinthefairvalueofasecuritybelowitscostisconsideredindeterminingwhetherthesecurityisimpaired.Ifanysuchevidenceexiststhecumulativelossisremovedfromequityandrecognisedintheincomestatement.

(i) Financial assets at fair value through profit and loss

Afinancialassetisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshorttermorifsodesignatedbymanagement.Realisedandunrealisedgainsandlossesarisingfromchangesinthefairvalueoftheseassetsareincludedintheincomestatementintheperiodinwhichtheyarise.

(ii) Loans and receivables

Loansand receivablesarenon-derivativefinancialassetswithfixedordeterminablepayments thatarenotquoted inanactivemarketandarestatedatamortisedcostusingtheeffectiveinterestratemethod,lessanyimpairmentlosses.

(iii) Held-to-maturity investments

These investmentshavefixedmaturities,and it is thegroup’s intention tohold these investments tomaturity.Held-to-maturityinvestmentsarestatedatamortisedcostusingtheeffectiveinterestratemethod.

(iv) Available-for-sale financial assets

Availableforsalefinancialassets,comprisingprincipallymarketableequitysecurities,arenon-derivativesthatareeitherdesignatedinthiscategoryornotincludedinanyoftheabovecategories.Available-for-salefinancialassetsarereflectedatfairvalue.Unrealisedgains and losses arising from changes in fair value are taken directly to equity in an available-for-sale investments revaluationreserve.Whensecuritiesclassifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentsareincludedintheincomestatementasgainsandlossesfrominvestmentsecurities.

(j)segmentreporting

Abusinesssegmentisagroupofassetsandoperationsengagedinprovidingproductsorservicesthataresubjecttorisksandreturnsthataredifferenttothoseofotherbusinesssegments.

Ageographicalsegmentisengagedinprovidingproductsorserviceswithinaparticulareconomicenvironmentandissubjecttorisksandreturnsthataredifferentfromthoseofsegmentsthatareoperatinginothereconomicenvironments.




(k)foreigncurrency

Functional and presentation currency

Thefunctionalcurrencyofeachofthegroup’sentitiesismeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichthatentityoperates(the“functional”currency).TheconsolidatedfinancialstatementsarepresentedinAustraliandollarswhichistheCompany’sfunctionalandpresentationcurrency.

Transactions and balances

Foreigncurrencytransactionsaretranslatedintofunctionalcurrencyusingtheexchangeratesprevailingatthedateofthetransaction.Foreigncurrencymonetaryassetsandliabilitiesaretranslatedattheexchangerateatbalancesheetdate.Non-monetary itemsmeasuredathistoricalcostcontinuetobecarriedattheexchangerateatthedateofthetransaction.

Exchangedifferencesarisingonthetranslationofmonetaryitemsarerecognisedintheincomestatement,exceptwheredeferredinequityasaqualifyingcashflowornetinvestmenthedge.

Translationdifferencesarisingonnon-monetaryitems,suchasequitiesheldatfairvaluethroughprofitandloss,arereportedaspartofthefairvaluegainorloss.Translationdifferencesonnon-monetaryitems,suchasequitiesclassifiedasavailable-for-salefinancialassets,areincludedinthefairvaluereserveinequity.

Foreign operations

ThefinancialperformanceandpositionofforeignoperationswhosefunctionalcurrencyisdifferentfromtheGroup’spresentationcurrencyaretranslatedasfollows:

• assetsandliabilitiesaretranslatedatexchangeratesprevailingatbalancesheetdate• incomeandexpensesaretranslatedataverageexchangeratesfortheperiod

Exchangedifferencesarisingontranslationofforeignoperationsaretransferreddirectlytothegroup’sforeigncurrencytranslationreserveasaseparatecomponentofequity.Thesedifferencesarerecognisedintheincomestatementupondisposaloftheforeignoperation.

(l)Leases

Leasesareclassifiedattheirinceptionaseitheroperatingorfinanceleasesbasedontheeconomicsubstanceoftheagreementsoastoreflecttherisksandbenefitsincidentaltoownership.

Operating leases

Aleasewhereasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsinrelationtooperatingleasesarechargedtotheincomestatementonastraight-linebasisovertheperiodofthelease.

(m)sharecapital

Incrementalcostsdirectlyattributabletoanequitytransactionareshownasadeductionfromequity,netofanyrecognisedincometaxbenefit.

(n)inventories

Inventoriesarestatedatthelowerofcostandnetrealisablevalue.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusinesslessanyestimatedsellingcosts.

Costincludesthosecostsincurredinbringingeachcomponentofinventorytoitspresentlocationandcondition.




(o)employeebenefits

Wages and salaries, annual leave

Provision ismade for theGroup’s liability for employeebenefits arising from services rendered by employees to balancedate.Employeebenefitsthatareexpectedtobesettledwithinoneyearhavebeenmeasuredattheamountsexpectedtobepaidwhentheliabilityissettled,plusrelatedon-costs.

Share based payments – shares and share options

Thefairvalueofsharesandshareoptionsissuedisrecognisedasanexpensewithacorrespondingincreaseinequity.Fairvalueismeasuredatgrantdateandrecognisedovertheperiodduringwhichthegranteesbecomeunconditionallyentitledtothesharesorshareoptions.

Thefairvalueofsharegrantsatgrantdateisdeterminedbythesharepriceatthattime.

ThefairvalueofshareoptionsatgrantdateisdeterminedusingaBlack-Scholesoptionpricingmodelthattakesintoaccounttheexerciseprice,thetermoftheoption,anyvestingandperformancecriteria,thesharepriceatgrantdate,theexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyieldandtherisk-freerateforthetermoftheoption.

Share based payments – Employee Share Plan

SharebasedcompensationhasbeenprovidedtoeligiblepersonsviatheCarnarvonEmployeeSharePlan(“ESP”),financedbymeansofinterestfreelimitedrecourseloans.UnderAASB2“Share-basedPayments”,theESPsharesaredeemedtobeequitysettled,sharebasedremunerationandtreatedasanin-substancegrantofoptions.

Forlimitedrecourseloansissuedtoeligiblepersonsonorafter1January2005,theGroupisrequiredtorecognisewithintheincomestatementaremunerationexpensemeasuredatthefairvalueofthe“shareoption”inherentintheissuetotheeligibleperson,withacorrespondingincreasetoashare-basedpaymentsreserveinequity.Thefairvalueismeasuredatgrantdateandrecognisedwhentheeligiblepersonbecomesunconditionallyentitledtotheshares,effectivelyongrant.Aloanreceivableisnotrecognised.

Thefairvalueatgrantdateisdeterminedusingapricingmodelthatfactorsinthesharepriceatgrantdate,theexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyield,andtheriskfreeratefortheassumedtermofthe“option”.Upontheexerciseofthe“option”,thebalanceoftheshare-basedpaymentsreserverelatingtothe“option”istransferredtoissuedcapital.

(p)earningspershare

TheGrouppresentsbasicanddilutedearningspershare(“EPS”)foritsordinaryshares.

BasicEPS is calculatedbydividing theprofit attributable to equityholdersof theCompanyby theweightednumberof sharesoutstandingduringtheperiod.

DilutedEPSisdeterminedbyadjustingtheprofitorlossattributabletoordinaryshareholdersandtheweightedaveragenumberofordinarysharesoutstandingfortheeffectsofallpotentialordinaryshares,whichcompriseshareoptionsissued.




(q)cashandcashequivalents

Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquidinvestments.

(r)revenue

Revenuefromthesaleofgoodsismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.

Revenue is recognisedwhenthesignificant risksandrewardsofownershiphavebeentransferredto thebuyer, recoveryof theconsiderationisprobable,andtheamountofrevenuecanbemeasuredreliably.Forthesaleofoilthetransferofrisksandrewardsoccursondeliveryofoiltotherefinery.

(s)goodsandservicestax

Revenues,expensesandassetsarerecognisednetoftheamountofgoodsandservicestax(“GST”),exceptwheretheamountofGSTincurredisnotrecoverablefromtheAustralianTaxOffice.InthesecircumstancestheGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.ReceivablesandpayablesinthebalancesheetareshowninclusiveofGST.

Cashflowsarepresentedinthecashflowstatementonagrossbasis,exceptfortheGSTcomponentofinvestingandfinancingactivities,whicharedisclosedasoperatingcashflows.

(t)tradeandotherpayables

Tradeandotherpayablesarestatedatamortisedcost.Theamountsareunsecuredandusuallypaidwithin60daysofrecognition.

(u)financeincomeandexpenses

Interestrevenueonfundsinvestedisrecognisedasitaccrues,usingtheeffectiveinterestratemethod.

Financeexpensescompriseinterestexpenseonborrowingsandtheunwindingofthediscountonprovisions.

(v)royalties

Royaltiesaretreatedastaxationarrangementswhentheyhavethecharacteristicsofatax.Thisisconsideredtobethecasewhentheyareimposedundergovernmentauthorityandtheamountpayableiscalculatedbyreferencetorevenuederived(netofanyallowabledeductions)afteradjustmentforitemscomprisingtemporarydifferences.Forsucharrangements,currentanddeferredtaxisprovidedonthesamebasisasdescribedaboveforotherformsoftaxation.

Obligationsarisingfromroyaltyarrangementsthatdonotsatisfythesecriteriaarerecognisedascurrentprovisionsandincludedinexpenses.

(w)comparativefigures

WhenrequiredbyAccountingStandards,comparativefigureshavebeenadjustedtoconformtochanges inpresentationforthecurrentfinancialyear.




(x)newstandardsandinterpretationsnotyetadopted

Certainnewaccountingstandardsand interpretationshavebeenpublished thatarenotmandatory for30 June2009 reportingperiods.Theconsolidatedentity’sandtheparententity’sassessmentoftheimpactofthesenewstandardsandinterpretationsissetoutbelow.

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standardsarising from AASB 8 (effective from 1 January 2009).

AASB8willresultinasignificantchangeintheapproachtosegmentreporting,asitrequiresadoptionofa‘managementapproach’toreportingonfinancialperformance.Theinformationbeingreportedwillbebasedonwhatthekeydecisionmakersuseinternallyforevaluatingsegmentperformanceanddecidinghowtoallocateresourcestooperatingsegments.TheconsolidatedentitywilladoptAASB8from1July2009.Itmayresultinanincreaseinthenumberofreportablesegmentspresented.Inaddition,thesegmentswillbereportedinamannerthatismoreconsistentwiththeinternalreportingprovidedtothechiefoperatingdecision-maker.

(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian AccountingStandards arising from AASB 123 (effective from 1 January 2009)

TherevisedAASB123hasremovedtheoptiontoexpenseallborrowingcostsand,whenadopted,willrequirethecapitalisationofallborrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofaqualifyingasset.Therewillbenoimpactonthefinancialreportoftheconsolidatedentity.

(iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments toAustralian Accounting Standards arising from AASB 101 (effective from 1 January 2009)

TheSeptember2007revisedAASB101requiresthepresentationofastatementofcomprehensiveincomeandmakeschangestothestatementofchangesinequity,butwillnotaffectanyoftheamountsrecognisedinthefinancialstatements.Ifanentityhasmadeapriorperiodadjustmentorhasreclassifieditemsinthefinancialstatements,itwillneedtodiscloseathirdbalancesheet(statementoffinancialposition),thisonebeingasatthebeginningofthecomparativeperiod.Theconsolidatedentitywillapplytherevisedstandardfrom1July2009.

(iv) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: VestingConditions and Cancellations (effective from 1 January 2009)

AASB2008-1clarifiesthatvestingconditionsareserviceconditionsandperformanceconditionsonlyandthatotherfeaturesofashare-basedpaymentarenotvestingconditions.Italsospecifiesthatallcancellations,whetherbytheentityorbyotherparties,shouldreceivethesameaccountingtreatment.Theconsolidatedentitywillapplytherevisedstandardfrom1July2009,butitisnotexpectedtoaffecttheaccountingfortheconsolidatedentity’sshare-basedpayments.

(v) Revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate FinancialStatements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 (effective 1 July 2009)

TherevisedAASB3continuestoapplytheacquisitionmethodtobusinesscombinations,butwithsomesignificantchanges.Forexample,allpaymentstopurchaseabusinessaretoberecordedatfairvalueattheacquisitiondate,withcontingentpaymentsclassifiedasdebtsubsequentlyremeasuredthroughtheincomestatement.Thereisachoiceonanacquisition-by-acquisitionbasistomeasurethenon-controllinginterestintheacquireeeitheratfairvalueoratthenon-controllinginterest’sproportionateshareoftheacquiree’snetassets.Allacquisition-relatedcostsmustbeexpensed.

The revisedAASB127 requires theeffectsof all transactionswithnon-controlling interests tobe recorded inequity if there isnochangeincontrolandthesetransactionswillnolongerresultingoodwillorgainsandlosses.Thestandardalsospecifiestheaccountingwhencontrolislost.Anyremaininginterestintheentityisremeasuredtofairvalue,andagainorlossisrecognisedinprofitorloss.Theconsolidatedentitywillapplytherevisedstandardsprospectivelytoallbusinesscombinationsandtransactionswithnon-controllinginterestsfrom1July2009.




(x)newstandardsandinterpretationsnotyetadopted(continued)

(vi) AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the AnnualImprovements Project (effective 1 July 2009)

TheamendmentstoAASB5DiscontinuedOperationsandAASB1First-TimeAdoptionofAustralian-Equivalentsto InternationalFinancialReportingStandardsarepartoftheIASB’sannualimprovementsprojectpublishedinMay2008.Theyclarifythatallofasubsidiary’sassetsandliabilitiesareclassifiedasheldforsaleifapartialdisposalsaleplanresultsinlossofcontrol.Relevantdisclosuresshouldbemadeforthissubsidiaryifthedefinitionofadiscontinuedoperationismet.Theconsolidatedentitywillapplytheamendmentsprospectivelytoallpartialdisposalsofsubsidiariesfrom1July2009.

(vii) AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 July 2009)

InJuly2008,theAASBapprovedamendmentstoAASB1First-timeAdoptionofInternationalFinancialReportingStandardsandAASB127ConsolidatedandSeparateFinancialStatements.Theconsolidatedentitywillapplytherevisedrulesprospectivelyfrom1July2009.Afterthatdate,alldividendsreceivedfrominvestmentsinsubsidiaries,jointlycontrolledentitiesorassociateswillberecognisedasrevenue,eveniftheyarepaidoutofpre-acquisitionprofits,buttheinvestmentsmayneedtobetestedforimpairmentasaresultofthedividendpayment.Furthermore,whenanewintermediateparententityiscreatedininternalreorganisationsitwillmeasureitsinvestmentinsubsidiariesatthecarryingamountsofthenetassetsofthesubsidiaryratherthanthesubsidiary’sfairvalue.

(viii) AASB 2008-8 Amendment to IAS 39 Financial Instruments: Recognition and Measurement (effective 1 July 2009)

AASB 2008-8 amends AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively inaccordancewithAASB108AccountingPolicies,ChangesinAccountingEstimatesandErrors.Theamendmentmakestwosignificantchanges.Itprohibitsdesignatinginflationasahedgeablecomponentofafixedratedebt.Italsoprohibitsincludingtimevalueintheone-sidedhedgedriskwhendesignatingoptionsashedges.Theconsolidatedentitywillapplytheamendedstandardfrom1July2009.Itisnotexpectedtohaveanimpactontheconsolidatedentity’sfinancialstatements.




(y)changeinaccountingpolicy

Theconsolidatedentitychangeditsaccountingpolicyrelatingtothedepreciationofoilandgasassetsforthefinancialyearending30June2009.

Depreciation is now calculated using a unit of production method which amortises capitalised costs carried forward plus theestimatedfuturefielddevelopmentcostsforprovedandprobable(“2P”)reservesoverthelifeofthe2Preserves.Previouslyonlycapitalisedcostswereincludedinthedepreciationcalculation.Thischangehasbeenimplementedasthedirectorsareoftheopinionthatacostbasethatreflectsthefuturecostsofmaintainingcurrentproductionprovidesmorerelevant informationandamoreaccuratecarryingvalueofoilandgasassetsatbalancedate.

Totalcostssubjecttodepletionincluded$62.5millionofestimatedfuturedevelopmentcoststodepletetheprovedandprobablereserves.Sinceanapproveddevelopmentplanhasnotyetbeensanctionedbythejointventure,futurecostshavebeenestimatedbyCarnarvonmanagementbasedonhistoricaldepletionratesofaround500,000bblsperwellandestimatedcostsfordrillingandcompletionofUS$1.5millionperwell.Itisanticipatedthatanapproveddevelopmentplanwillsupersedetheseestimates.

Theaggregateeffectofthechangeinaccountingpolicyontheannualfinancialstatementsisasfollows:

2009 2009 2009 2008 2008 2008 previously adjusted restated previously adjusted restated stated stated $000 $000 $000 $000 $000 $000

Consolidated Incomestatement Costofsales 23,080 4,767 27,847 11,346 1,046 12,392Profitbeforeincometax 76,883 (4,767) 72,116 48,128 (1,046) 47,082Profitafterincometax 38,807 (2,384) 36,423 16,174 (523) 15,651 Balancesheet Oilandgasassets 55,514 (5,813) 49,701 23,124 (1,046) 22,078Deferredtaxliability 11,871 (2,907) 8,964 3,738 (523) 3,215Openingretainedearnings (25,514) (523) (26,037) (41,688) - (41,688) cents cents cents cents cents cents

Basicearningspershare 5.7 (0.3) 5.4 2.4 - 2.4Dilutedearningspershare 5.7 (0.3) 5.4 2.4 (0.1) 2.3 TherewerenoadjustmentstotheCompanyincomestatementorbalancesheetfiguresin2008or2009.



consoLiDateD company 2009 2008 2009 2008 $000 $000 $000 $000

4. otherincome

Financeincomeonbankdeposits 896 283 214 251 Otherincome - 35 - - 896 318 214 251

5. costofsales

Productionexpenses (3,892) (1,800) - - Royaltyandexcise (7,331) (4,374) - - Transportation (3,827) (1,920) - - Depreciation-developmentcostsand producingassets (10,057) (2,651) - - Selling,generalandadministration (2,740) (1,647) - - (27,847) (12,392) - -

6. otherexpenses

Depreciation–property,plantandequipment (162) (73) (57) (34) Rentalpremises–operatingleases (234) (131) (184) (66)

7. auditors’remuneration

Auditservices: AuditorsoftheCompany 108 78 108 78

8. earningspershare

Thecalculationofbasicanddilutedearningspersharewasbasedonaweightedaveragenumberofsharescalculatedasfollows: 2009 2008 numberofshares

Issuedordinarysharesat1July 672,924,634 657,537,134Effectofsharesissued 583,699 186,849Effectofshareoptionsexercised 2,493,151 6,979,452Weightedaveragenumberofordinaryshares30June(basic) 676,001,484 664,703,435Effectofshareoptionsonissue - 19,163,014Weightedaveragenumberofordinaryshares30June(diluted) 676,001,484 683,866,449

Profitusedincalculatingbasicanddilutedearningspersharefromcontinuingoperations $36,423,000 $15,651,000




9. incometaxexpense

Numerical reconciliation between pre-tax profit / (loss) and income tax expense / (benefit):

Primafacieincometaxexpense/(benefit)onpre-taxprofit/(loss)at30%(2008:30%) 21,634 14,124 (307) (1,457)

Taxeffectof: Specialremuneratorybenefit (6,781) (7,552) - - Effectofhigheroverseastaxrate 12,988 10,229 - - Foreignexchange(gains)/losses (3,220) - (836) 554 Non-deductibleexpenditure 350 322 350 277 Prioryearlossesrecognised (198) (3,064) - - Prioryeartemporarydifferencesrecognised (3,434) 1,814 - -Currentyeartaxbenefitnotbroughttoaccount 793 579 793 626Incometaxexpenseonpre-taxprofit 22,132 16,452 - -

Currentincometax 16,383 13,237 - -Deferredtax 5,749 3,215 - - 22,132 16,452 - -

Tax Consolidation

Effective1July2003,forthepurposesofAustralianincometaxation,Carnarvonandits100%-ownedcontrolledentitiesformedataxconsolidatedgroup.TheheadentityofthetaxconsolidatedgroupisCarnarvon.

TheimpactofconsolidatingfortaxpurposesisthatCarnarvon’sAustraliancontrolledentitiesaretreatedasdivisionsofCarnarvonratherthanasseparateentitiesfortaxpurposes.Themembersofthegroupwill,ifrequired,enterintoataxsharingarrangementinordertoallocategrouptaxrelatedliabilitiestocontributingmembersonareasonablebasis.Theagreementwillprovidefortheallocationofincometaxliabilitiesbetweenentitiesshouldtheheadentitydefaultonitstaxpaymentobligations.


10. tradeandotherreceivables

Current Tradeandotherreceivables 8,318 9,287 90 132Cashheldassecurity 3,586 3,156 2,640 2,656 11,904 12,443 2,730 2,788

Non-current Amountsreceivablefromcontrolledentities - - 10,966 13,406Provisionfornon-recovery - - (693) (693) - - 10,273 12,713

TheGroup’sexposuretocreditandcurrencyrisksisdisclosedinNote32.




11. property,plantandequipment

Plant and equipment Cost: Balanceatbeginningoffinancialyear 74 89 - -Additions - 56 - -Transfers (43) - - -Disposals - (63) - -Effectsofmovementsinforeignexchange 11 (8) - -Balanceatendoffinancialyear 42 74 - -

Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 67 56 - -Disposals - (3) - -Transfers (43) - - -Depreciationchargeforyear 8 14 - -Balanceatendoffinancialyear 32 67 - -

Carryingamountopening 7 33 - -Carryingamountclosing 10 7 - -

Fixtures and fittingsCost: Balanceatbeginningoffinancialyear 319 204 121 108Additions 271 121 139 13Transfers 43 - - -Disposals (58) - (58) -Effectsofmovementsinforeignexchange 51 (6) - -Balanceatendoffinancialyear 626 319 202 121

Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 191 133 72 38Disposals (41) - (42) -Transfers 43 - - -Depreciationchargeforyear 141 58 57 34Balanceatendoffinancialyear 334 191 87 72

Carryingamountopening 128 71 49 70Carryingamountclosing 292 128 115 49

Land and buildingsCost: Balanceatbeginningoffinancialyear 38 - - -Additions 21 38 - -Effectsofmovementsinforeignexchange 6 - - -Balanceatendoffinancialyear 65 38 - -

Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 1 - - -Depreciationchargeforyear 13 1 - -Balanceatendoffinancialyear 14 1 - -

Carryingamountopening 37 - - -Carryingamountclosing 51 37 - -




11. property,plantandequipment(continued)

TotalCost: Balanceatbeginningoffinancialyear 431 293 121 108Additions 292 215 139 13Disposals (58) (63) (58) -Effectsofmovementsinforeignexchange 68 (14) - -Balanceatendoffinancialyear 733 431 202 121

Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 259 189 72 38Disposals (41) (3) (42) -Depreciationchargeforyear 162 73 57 34Balanceatendoffinancialyear 380 259 87 72

Carryingamountopening 172 104 49 70Carryingamountclosing 353 172 115 49

12. inventories

Current Rawmaterialsandconsumables 3,865 1,586 - -

13. otherassets

Current Depositsandprepayments 677 299 415 96

14. explorationandevaluation

Cost: Balanceatbeginningoffinancialyear 379 - 379 -Additions 915 379 134 379Assignmentofjointventuretosubsidiary (75) - (75) -Balanceatendoffinancialyear 1,219 379 438 379

15. oilandgasassets

Cost: Balanceatbeginningoffinancialyear 25,340 12,773 - -Additions 31,233 14,475 - -Effectsofmovementsinforeignexchange 6,341 (1,908) - -Balanceatendoffinancialyear 62,914 25,340 - -

Depreciationandimpairmentlosses: Balanceatbeginningoffinancialyear 3,262 644 - -Depreciationchargeforyear 9,951 2,618 - -Balanceatendoffinancialyear 13,213 3,262 - -

Carryingamountopening 22,078 12,129 - -Carryingamountclosing 49,701 22,078 - -

FordetailsofthechangeinoilandgasassetsdepreciationpolicyrefertoNote3(y).




16. otherinvestments

Non-current Investmentsincontrolledentities–atcost - - 1,483 1,483TheGrouphasthefollowinginterestsinjointventureassets:

Joint venture Principal activities Ownership interest %

Thailand

PhetchabunBasinConcession,Exploration Exploration,developmentand 40%BlocksL44/43andL33/43 productionofhydrocarbons3/2546/60and5/2546/62Concessions

ExplorationBlockL20/50 Explorationforhydrocarbons 50%7/2551/98Concession

Western Australia

EP110&424,CarnarvonBasin Explorationforhydrocarbons 35%WA-399-P,CarnarvonBasin Explorationforhydrocarbons 50%

Summaryfinancialinformationforjointventureassets,asincludedintheconsolidatedbalancesheetandincomestatement,isshownbelow: 2009 2008 $000 $000Currentassets Cashandcashequivalents 27,758 28,130 Tradeandotherreceivables 9,176 9,124 Inventories 3,865 1,586 Otherassets 384 738Totalcurrentassets 41,183 39,578Non-currentassets Property,plantandequipment 238 123 Explorationandevaluation 1,189 363 Oilandgasassets 50,401 22,991Totalnon-currentassets 51,828 23,477Totalassets 93,011 63,055Currentliabilities Tradeandotherpayables 5,889 2,863 Provisions 6,643 24,152Totalcurrentliabilities 12,532 27,015Non-currentliabilities Deferredtax 8,964 3,215Totalnon-currentliabilities 8,964 3,215Totalliabilities 21,496 30,230Netassets 71,515 32,825

Income 100,758 63,033 Expenses (63,313) (44,380)Netprofitaftertax 37,445 18,653

CapitalcommitmentsandcontingentliabilitiesforthejointventuresaredisclosedinNotes22and23respectively.




17. tradeandotherpayables

Current Tradepayables 2,686 2,352 368 308Non-tradepayablesandaccruedexpenses 4,163 948 597 155Owingtorelatedparties 52 68 52 68 6,901 3,368 1,017 531

TheGroup’sexposuretocurrencyandliquidityriskrelatedtotradeandotherpayablesisdisclosedinNote32.

18. provisions

Current SpecialRemuneratoryBenefit-Thailand 3,122 14,848 - - 3,122 14,848 - -

Non-current Siterestoration: Balanceatbeginningoffinancialyear - 105 - -Provision(reversed)duringtheyear - (105) - -Balanceatendoffinancialyear - - - -

TherearenorestorationprovisionsrequiredinrespectoftheGroup’sactivities.

19. Deferredtax

Recognised deferred tax assets and liabilities

Thenetdeferredtaxliabilityisattributabletothefollowing: Oilandgasassets 11,232 5,395 - -Taxvalueoflossescarryforward (2,268) (2,180) - -Nettaxliability 8,964 3,215 - -

Themovementinthedeferredtaxliabilityduringthereportingperiodhasallbeenrecognisedinincome.

Unrecognised deferred tax assets and liabilities

Deferredtaxassetshavenotbeenrecognisedinrespectofthefollowingitems:

Deductibletemporarydifferences 159 212 459 1,518Taxlosses 2,571 1,631 2,571 1,631 2,730 1,843 3,030 3,149

Thedeductibletemporarydifferencesandtaxlossesdonotexpireundercurrenttaxlegislation.DeferredtaxassetshavenotbeenrecognisedinrespectoftheseitemsbecauseitisnotprobablethatfuturetaxableprofitwillbeavailableagainstwhichtheGroupcanutilisethebenefits.



20. capitalandreserves

consoLiDateD&company 2009 2008 numberofshares

Issued capital Balanceatbeginningoffinancialyear 672,924,634 657,537,134EmployeeSharePlanissues 750,000 387,500Sharesissuedonexerciseofshareoptions 10,000,000 15,000,000Balanceatendoffinancialyear 683,674,634 672,924,634

consoLiDateD&company 2009 2008 $000 $000

Issued capital Balanceatbeginningoffinancialyear 66,738 65,041EmployeeSharePlanrelatedmovements 216 380EmployeeSharePlanloansrepaid 140 90Sharesissuedonexerciseofshareoptions 1,000 1,230Shareissuetransactioncosts (4) (3)Balanceatendoffinancialyear 68,090 66,738

OrdinaryshareshavetherighttoonevotepershareatmeetingsoftheCompany,toreceivedividendsasdeclaredand,intheeventofawinding-upoftheCompany,toparticipateintheproceedsfromthesaleofallsurplusassetsinproportiontothenumberof,andamountspaidupon,sharesheld.

Translation reserve

MovementsinthetranslationreservearesetoutintheStatementinChangesinEquityonpage31.

Thetranslationreservecomprisesallforeignexchangedifferencesarisingfromthetranslationofthefinancialstatementsofforeignoperationswheretheirfunctionalcurrencyisdifferenttothepresentationcurrencyofthereportingentity.

Share based payments reserve

MovementsinthesharebasedpaymentsreservearesetoutintheStatementsofChangesinEquityonpages31and32.

Thisreserverepresentsthefairvalueatgrantofshareoptionsissued,includingthevalueofsharesissuedundertheCompany’sESP.Thisreserveisreversedagainstissuedcapitalwhensharesareissuedonexerciseoftheoptions,or,inthecaseofthesharesissuedundertheESP,theloanisrepaid.




21. reconciliationofcashflowsfromoperatingactivities

(a) Cash flows from operating activities

Aftertaxprofit/(loss)fortheperiod 36,423 15,651 (1,023) (4,855)Adjustmentsfor: Equitysettledsharebasedpaymentexpense 122 119 122 119Deferredtaxexpense 5,749 3,215 - -Depreciation 10,114 2,688 57 34Financecostsforrehabilitationprovisions - (39) - -Lossondisposalofproperty,plantandequipment 16 - 16 -Foreignexchange(gains)/losses (2,305) 656 (2,787) 1,851Operatingprofitbeforechangesinworkingcapitalandprovisions: 50,119 22,290 (3,615) (2,851)

Changesinassetsandliabilities: Decrease/(increase)intradeandotherreceivables 2,682 (7,789) 74 (9)(Increase)ininventories (1,972) (604) - -(Increase)/decreaseinotherassets (185) 273 (319) (62)Increaseintradeandotherpayables 150 760 504 239(Decrease)/increaseinprovisionsandemployeebenefits (18,198) 24,161 36 9Netcashflowsgeneratedfrom/(usedin)operatingactivities 32,596 39,091 (3,320) (2,674)

(b) Reconciliation of cash and cash equivalents

Cashatbankandatcall 31,099 28,281 3,380 570

TheGroup’sexposuretointerestrateriskandasensitivityanalysisforfinancialassetsandliabilitiesisdisclosedinNote32.

Restrictedcashof$2,640,000Companyand$3,586,000consolidatedisincludedundertradeandotherreceivables(2008:$2,656,000Companyand$3,156,000consolidated),seeNotes10and23.




22. capitalandothercommitments (a) Joint venture commitments

Shareofcapitalcommitmentsofjointventureassets: Withinoneyear 1,189 1,721 - -CapitalcommitmentsoftheGrouptojointventureassets: Withinoneyear 2,264 187 2,264 187

(b) Exploration expenditure commitments

DuetothenatureoftheGroup’soperationsinexploringandevaluatingareasofinterest,itisdifficulttoaccuratelyforecastthenatureoramountoffutureexpenditure,althoughitwillbenecessarytoincurexpenditureinordertoretaintheentity’spresentpermitinterests.Expenditurecommitmentsonexplorationpermitscanbereducedbyselectiverelinquishmentofexplorationtenure,bytherenegotiationofexpenditurecommitments,orbyfarmingoutportionsoftheentity’sequity.

Explorationexpenditurecommitmentsforecastbutnotprovidedforinthefinancialstatementsareasfollows:


Lessthanoneyear 4,100 500 4,100 500Betweenoneandfiveyears 1,700 3,000 1,700 3,000 5,800 3,500 5,800 3,500

(c) Capital expenditure commitments

Datalicencecommitments 126 96 126 96

23. contingencies

Thedirectorsareoftheopinionthatprovisionsarenotrequiredinrespectofthesemattersasitisnotprobablethatafuturesacrificeofeconomicbenefitswillberequiredortheamountisnotcapableofreliablemeasurement.

Contingent liabilities not considered remote

a)UnderthetermsofanInvestmentAgreementtheGroupisrequiredtopayapercentageofsalesproceedsfromspecifiedzoneswithintheWichianBuriProductionLicencesIandIIinThailandtoGeminiOilandGasLimited,anindependentoilandnaturalgasinvestmentfund.Thecurrentpercentageis7.5%.

TheGrouphasexpensedUS$85,000inthecurrentperiod(2008:US$371,000).CumulativeamountspaidandpayableatbalancedateunderthetermsofthisagreementareUS$905,000.



23. contingencies(continued)

Contingent liabilities considered remote

a)ThePhetchabunBasinJointVentureoperation,inwhichtheGrouphasa40%interest,hasissuedbankguaranteesforanamountof40millionThaiBahtassecurityinlieuofbonds.

TheL20/50Jointventure,inwhichtheGrouphasa50%interest,hasissuedbankguaranteesforanamountof20millionThaiBahtassecurityinlieuofbonds.

TheCompanyhasprovidedacashbondofUS$2,125,000totheDepartmentofMineralFuelsinThailandinrespectofitsobligationsfor its 50% interest in the L20/50 concession in Thailand. The bond is secured by a cash deposit of US$2,125,000 held withCompany’sAustralianbank.TheCompanyanditsjointventurepartner,whohasprovidedasimilarguaranteetotheDepartmentofMineralFuels,havesignedaCrossDeedofIndemnityinrespectoftheirrespectiverightsandinterests.

Therestrictedcashheldbythebanksassecurityfortheseguaranteestotaling$3,586,000(2008:$3,156,000)isclassifiedunder“tradeandotherreceivables”.

b)Inaccordancewithnormalpetroleumindustrypractice,theGrouphasenteredintojointventuresandfarminagreementswithotherpartiesforthepurposeofexploringanddevelopingitspetroleumpermitinterests.Ifapartytoajointventuredefaultsanddoesnotcontributeitsshareofjointventureobligations,thentheotherjointventurersareliabletomeetthoseobligations.Inthisevent,theinterestinthepermitheldbythedefaultingpartymayberedistributedtotheremainingjointventurers.


24. employeebenefits

Current: Liabilityforannualleave 49 13 49 13

Share options

Thenumberandweightedaverageexercisepriceofemployeeshareoptionsisasfollows:

weighted weighted average average exercise numberof exercise numberof price options price options 2009 2009 2008 2008

Outstanding1July $0.10 10,000,000 $0.09 20,000,000Exercisedduringtheperiod $0.10 10,000,000 $0.07 10,000,000Outstanding30June - - $0.10 10,000,000Exercisableat30June - - $0.10 10,000,000

Alloptionsonissueat30June2008hadanexercisepriceof$0.10,expiredon31March2009,andwereissuedtodirectorsortheirrelatedparties.

Theweightedaveragesharepriceatthedateofexerciseforemployeeshareoptionsexercisedduringtheperiodwas$0.36(2008:$0.53)



24. employeebenefits(continued)

Share based payments - Employee Share Plan

UnderthetermsoftheCarnarvonEmployeeSharePlan(“ESP”),asapprovedbyshareholders,theCompanymay,initsabsolutediscretion,makeanofferofordinaryfullypaidsharesintheCompanytoanyeligibleperson,tobefundedbyalimitedrecourseloangrantedbytheCompany.

TheissuepriceisdeterminedbythedirectorsandisnottobelessthantheweightedaveragemarketpriceoftheCompany’ssharesonthefivetradingdayspriortothedateofoffer.Eligiblepersonsreceiveaninterestfreeadvancetoacquiretheshares.

ThemovementsintheESPduringthefinancialyear,includingthoseheldbyKeyManagementPersonnel,wereasfollows:

1July2008 issued repaid 30June2009

Numberofshares 14,852,500 750,000 895,000 14,707,500Loan $1,755,353 $285,750 $139,895 $1,901,208Averageloanpershare $0.12 $0.38 $0.16 $0.13

InaccordancewithAASB2theissueofsharesundertheESPareaccountedforasaninprincipleoption.

ThefairvalueofservicesreceivedinreturnforoptionsforboththeCompanyandGroup,includingsharesissuedundertheESPandvaluedasoptions,ismeasuredbyreferencetothefairvalueofshareoptionsissuedusingtheBlack-Scholesmodel,assetoutbelow.

key key management management other otherfairvalueofshareoptionsand personnel personnel employees employeesrelatedassumptions 2009 2008 2009 2008

Fairvalueatmeasurementdate(cents) - 30.7 11.2to20.8 30.7Sharepriceatdateofissue(cents) - 70.1 26.1to48.5 70.1Exerciseprice(cents) - 70.1 26.1to48.5 70.1Expectedvolatility - 55% 60% 55%Actual/assumedoptionlife - 3years 3years 3yearsExpecteddividends - Nil Nil NilRisk-freeinterestrate - 7.5% 3.5% 7.5%Share-basedexpenserecognised - $61,468 $122,208 $57,627

ThecurrentyearvolatilityisintendedtoreflectthemovementoftheCompany’ssharepricevolatilitytowardsitspeersasitsoilandgasinterestsmature.

FurtherdetailsofsharesandoptionsissuedtodirectorsaresetoutinNote28,andintheRemunerationReportsetoutonpages20to25.



25. relatedpartydisclosures

Ultimate parent

CarnarvonPetroleumLimitedistheultimateparentcompany.

Wholly-owned group transactions

DuringthereportingperiodtherehavebeentransactionsbetweentheCompanyanditscontrolledentitiesandjointventures.TheCompanyprovidedaccountingandadministrativeservicestoitscontrolledentitiesforwhichitdidnotchargeamanagementfee.

During thefinancial yearended30 June2009net repayments fromcontrolledentities totalled$6,366,000 (2008:net loans tocontrolledentities$1,293,000).

Thecarryingvalueofloanstocontrolledentitiesat30June2009was$10,273,000(2008:$12,713,000)afterprovisionsof$693,000(2008:$693,000).Theseloansareunsecured,non-interestbearing,andhavenofixedtermsofrepayment.

Other related party balances

At30June2009anamountof$52,070(2008:$68,548)is includedinCompanyandconsolidatedtradeandotherpayablesforoutstandingdirectorfeesandexpenses.

26. operatingleases

Leases as lessee

Non-cancellableoperatingleaserentalsarepayableasfollows:


Lessthanoneyear 231 170 163 71Betweenoneandfiveyears 271 12 - - 502 182 163 71

Duringthereportingperiod$371,000wasrecognisedasanexpenseintheconsolidatedincomestatementinrespectofoperatingleases(2008:$344,000).



27. segmentinformation

SegmentinformationispresentedinrespectoftheGroup’sprimaryformat,geographicalsegments,whichisbasedontheGroup’smanagementandinternalreportingstructure.

Segmentresults,assetsandliabilitiesincludeitemsdirectlyattributabletoasegmentaswellasthosethatcanbeallocatedonareasonablebasis.Inpresentinginformationonthebasisofgeographicalsegments,segmentrevenueisbasedonthegeographicallocationofcustomers,andsegmentassetsarebasedonthegeographicallocationoftheassets.

TheGroupoperatedonebusinesssegmentduringthereportingperiod,beingoilandgasexploration,developmentandproduction.

Geographical Segments (A$000)

australia thailand consolidated 2009 2008 2009 2008 2009 2008 $000 $000 $000 $000 $000 $000

Revenue Sales - - 100,758 63,033 100,758 63,033Other 214 251 682 67 896 318Totalrevenue 214 251 101,440 63,100 101,654 63,351 Segmentresult

Resultfromcontinuingoperations (1,023) (3,001) 37,446 18,652 36,423 15,651Totalsegmentresult (1,023) (3,001) 37,446 18,652 36,423 15,651 Assets Oilandgasassets - - 49,701 22,078 49,701 22,078Property,plantandequipment 115 49 238 123 353 172Other 6,963 3,833 41,801 39,155 48,764 42,988Totalsegmentassets 7,078 3,882 91,740 61,356 98,818 65,238

Liabilities Totalsegmentliabilities 1,066 544 21,491 30,204 22,557 30,478 Othersegmentinformation: Capitalexpenditure 139 13 31,400 14,614 31,539 14,627Depreciation 57 34 10,057 2,657 10,114 2,691



28. keymanagementpersonneldisclosures

(a) Key management personnel compensation

Keymanagementpersonnelcompensationincludedinemployeebenefitsexpense,directorsemoluments,sharebasedpaymentsandadministrationexpensesisasfollows:

consoLiDateD company 2009($) 2008($) 2009($) 2008($)

Shorttermemployeebenefits 1,157,213 936,281 1,157,213 936,281Post-employmentbenefits 68,997 21,981 68,997 21,981Share-basedpayments - 61,468 - 61,468 1,226,210 1,019,730 1,226,210 1,019,730

Informationregardingindividualdirectorsandexecutives’compensationandsomeequityinstrumentsdisclosures,aspermittedbyCorporationsRegulation2M.3.03,areprovidedintheRemunerationReportsectionofthedirectors’reportassetoutonpages20to25.

Apartfromthedetailsdisclosedinthisnote,nodirectorhasenteredintoamaterialcontractwiththeCompanyortheGroupsincetheendofthepreviousfinancialyearandtherewerenomaterialcontractsinvolvingdirectors’interestsexistingatyearend.

(b) Options and rights over equity instruments

ThemovementduringthereportingperiodinthenumberofoptionsoverordinarysharesintheCompanyheld,directly,indirectlyorbeneficially,byeachkeymanagementperson,includingtheirrelatedparties,isasfollows:

heldat heldatDirectors 1July2008 exercised 30June2009

PJLeonhardt 3,000,000 (3,000,000) -EPJacobson 4,000,000 (4,000,000) -NCFearis 2,000,000 (2,000,000) -KPJudge 1,000,000 (1,000,000) -

heldat heldatDirectors 1July2007 exercised 30June2008

PJLeonhardt 6,000,000 (3,000,000) 3,000,000EPJacobson 8,000,000 (4,000,000) 4,000,000NCFearis 2,000,000 - 2,000,000KPJudge 4,000,000 (3,000,000) 1,000,000

Optionsissuedascompensationvestimmediately.Duringthefinancialyeartherewasnoforfeitureorvestingofoptionsissuedinpreviousperiods.Therewerenooptionsonissuethatwerestilltovestattheendofthereportingperiod.



28. keymanagementpersonneldisclosures(continued)

(c) Loans to key management personnel and their related parties

Details of loans to keymanagementpersonnel and their relatedparties,whichare all interest free loanswith limited recoursesecurityovertheplansharesprovidedinaccordancewiththeCompany’sEmployeeSharePlan(“ESP”),aresetoutbelow.Theloanstodirectorsweremadein2006inlieuofnormalremunerationatatimetheCompanyhadnofulltimeemployeesandlimitedcashresources.

Balance Balance highestbalance Loaned repaid 1July2008($) 30June2009($) inperiod($) inperiod($) inperiod($)

Directors PJLeonhardt 270,000 270,000 270,000 - -EPJacobson 540,000 540,000 540,000 - -

Executives PPHuizenga 314,100 253,100 314,100 - 61,000RAAnderson 81,065 81,065 81,065 - -

Balance Balance highestbalance Loaned repaid 1July2007($) 30June2008($) inperiod($) inperiod($) inperiod($)

Directors PJLeonhardt 270,000 270,000 270,000 - -EPJacobson 540,000 540,000 540,000 - -

Executives PPHuizenga 244,000 314,100 314,100 70,100 -RAAnderson 101,242 81,065 101,242 70,100 90,277

Detailsregardingtheaggregateofloans,allofwhichareinterestfree,madebytheGrouptokeymanagementpersonnelandtheirrelatedparties,andthenumberofindividualsineachgroup,areasfollows:

opening closing numberin balance($) balance($) groupat30June

2009 1,205,165 1,144,165 42008 911,242 1,205,165 4

MrHuizengawasonlyclassifiedasakeymanagementpersoneffective1January2008,andhisloansarethereforenotincludedinthe1July2007openingbalance.

(d) Other key management personnel transactions

Amountspayabletokeymanagementpersonnelortheirrelatedpartiesatreportingdate inrespectofoutstandingdirectorandconsultingfeesandexpensesareasfollows:

consoLiDateD company 2009 2008 2009 2008

$000 $000 $000 $000Current Tradeandotherpayables 212 68 212 68



28. keymanagementpersonneldisclosures(continued)

(e) Movements in shares

ThemovementduringthereportingperiodinthenumberofordinarysharesinCarnarvonPetroleumLimitedheld,directly,indirectlyorbeneficially,byeachkeymanagementperson,includingtheirrelatedparties,isasfollows:

awardunder receivedon heldat net employeeshare exerciseof heldat 1July2008 acquired/(sold) plan options 30June2009

DirectorsPJLeonhardt 14,900,000 (900,000) - 3,000,000 17,000,000EPJacobson 28,613,793 (1,696,458) - 4,000,000 30,917,335NCFearis 6,316,186 83,814 - 2,000,000 8,400,000KPJudge 15,568,596 (5,635,741) - 1,000,000 10,932,855

Executives PPHuizenga 2,100,000 (500,000) - - 1,600,000RAAnderson 3,104,441 (1,619,441) - - 1,485,000

awardunder receivedon heldat net employeeshare exerciseof heldat 1July2007 acquired/(sold) plan options 30June2008

DirectorsPJLeonhardt 11,900,000 - - 3,000,000 14,900,000EPJacobson 24,313,793 300,000 - 4,000,000 28,613,793NCFearis 6,316,186 - - - 6,316,186KPJudge 15,068,596 (2,500,000) - 3,000,000 15,568,596

Executives PPHuizenga 2,000,000 - 100,000 - 2,100,000RAAnderson 4,443,490 (1,439,049) 100,000 - 3,104,441

SharesallottedundertheESPwerefundedbyinterest-freeloanswithalimitedrecoursesecurityovertheplansharesandsubjecttothedetailedrulesoftheESP.

InaccordancewithAASB2theissueofsharesundertheESPisaccountedforasaninprincipleoption.Thefairvalueofshareoptions,includingESPsharesissuedandvaluedasoptions,andtheirvaluationassumptionsaresetoutinNote24.

Informationregardingindividualdirectors’andexecutives’compensation,includingcompanyloansusedtofinancethepurchaseoftheESPshares,isprovidedintheRemunerationReportsectionofthedirectors’reportassetoutonpages20to25.



29. non-keymanagementpersonneldisclosures

Identity of related parties

TheGrouphasarelatedpartyrelationshipwithitscontrolledentities(seeNote30),jointventureassets(seeNote16),andwithitskeymanagementpersonnel(seeNote28).

30. consolidatedentities ownership interest

name countryofincorporation 2009 2008

Company CarnarvonPetroleumLtd

Controlled entities CarnarvonThailandLtd BritishVirginIslands 100% 100%LassocPtyLtd Australia 100% 100%SRLExplorationPtyLtd Australia 100% 100%

InvestmentsincontrolledentitiesaremeasuredatcostinthefinancialstatementsoftheCompany.

31. subsequentevents

On28July2009theCompanyannouncedthatitsapplicationtotheAustralianGovernmenttoacquire100%ofanewoffshoreWestAustralianpermitcoveringapplicationblockWA-435-Phadbeensuccessful.Theapplicationblockissituatedinthenorth-westernpartoftheBedoutSub-basinwithinthegreaterRoebuckBasin.InthesamebiddingroundFinderExploration(“Finder”)wasalsosuccessfulinbeingawarded100%ofthreepermitssurroundingWA-435-P.Subjecttoratificationbythegovernmentauthorities,CarnarvonandFinderhaveenteredintoaheadsofagreementtoswap50%ofCarnarvon’sWA-435-Pfor50%ofthethreenewFinderpermitsWA-436-P,WA-437-PandWA-438-P.Finderwillassumeoperatorshipofallfourpermits.

Noothermatterorcircumstancehasarisensince30June2009thatintheopinionofthedirectorshassignificantlyaffected,ormaysignificantlyaffectinfuturefinancialyears:

(i) theGroup’soperations;or(ii) theresultsofthoseoperations;or(iii) theGroup’sstateofaffairs



32. financialriskmanagement

TheGroup’sactivitiesexposeittomarketrisk(includingcurrencyrisk,commoditypriceriskandinterestraterisk),creditriskandliquidityrisk.

ThisnotepresentsqualitativeandquantitativeinformationabouttheCompany’sandGroup’sexposuretoeachoftheaboverisks,theirobjectives,policiesandprocedures formanaging risk,and themanagementofcapital. TheBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheriskmanagementframework.

TheGroup’s overall riskmanagement approach focuseson the unpredictability of financialmarkets and seeks tominimize thepotentialadverseeffectsonthefinancialperformanceoftheGroup.TheGroupdoesnotcurrentlyusederivativefinancialinstrumentstohedgefinancialriskexposuresandthereforeitisexposedtodailymovementsintheinternationaloilprices,exchangerates,andinterestrates.TheGroupusesvariousmethodstomeasuredifferenttypesofrisktowhichitisexposed.Thesemethodsincludesensitivityanalysisinthecaseofinterestrate,foreignexchange,andcommoditypriceriskandageinganalysisforcreditrisk.

TheBoard’spolicyistomaintainastrongcapitalbasesoastomaintaininvestor,creditor,andmarketconfidenceandtosustainfuturedevelopmentof thebusiness.Given the stageof theGroup’sdevelopment there areno formal targets set for returnoncapital.TherewerenochangestotheGroup’sapproachtocapitalmanagementduringtheyear.NeithertheCompanynoranyofitscontrolledentitiesaresubjecttoexternallyimposedcapitalrequirements.

(a) Commodity price risk

CommoditypriceriskistheriskoffinanciallossresultingfrommovementsinthepriceoftheGroup’scommodityoutput,beingcrudeoil.

RevenuesundertheGroup’scontractualarrangementswithitscustomeraredenominatedinUS$, linkedtotheUS$pricesofabasketofoilproducts,andpaidinThaiBahtattheaveragemonthlyexchangerate.TheGroupdoesnotcurrentlyusederivativefinancialinstrumentstohedgecommoditypriceriskandthereforeisexposedtodailymovementsinthepricesoftheseoilproducts.TheCompanyisnotexposedtocommoditypricerisk.Sensitivity analysisAnincreaseof10%intheachievedmonthlyoilsalepricewouldhaveincreasedequityandpre-taxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesotherthanroyalties,whicharedirectlyrelatedtooilrevenues,remainconstant.Theanalysisisperformedonthesamebasisfor2008:

consoLiDateD company equity profitandloss equity profitandloss $000 $000 $000 $000

30June2009 9,344 9,344 - -30June2008 5,867 5,867 - -

Adecreaseof10%intheachievedmonthlyoilsalepricewouldhavedecreasedequityandpre-taxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesotherthanroyalties,whicharedirectlyrelatedtooilrevenues,remainconstant.Theanalysisisperformedonthesamebasisfor2008:


30June2009 (9,344) (9,344) - -30June2008 (5,867) (5,867) - -



32.financialriskmanagement(continued)

(b) Interest rate risk

ThesignificanceandmanagementoftheriskstotheGroupandtheCompanyisdependentonanumberoffactorsincluding:

• Interestrates(currentandforward)andthecurrenciesthatareheld;• Levelofcashandliquidinvestmentsandtheirterm;• Maturitydatesofinvestments;• Proportionofinvestmentsthatarefixedrateorfloatingrate.

TheGroupmanagestheriskbymaintaininganappropriatemixbetweenfixedandfloatingrateinvestments.

AtthereportingdatetheeffectiveinterestratesofvariablerateinterestbearingfinancialinstrumentsoftheCompanyandtheGroupwereasfollows.Therewerenointerest-bearingfinancialliabilities:


Carrying amount (A$000) Financialassets 31,099 28,281 3,380 570

Weighted average interest rate (%)Financialassets 0.4% 0.25% 2.95% 6.14%

Sensitivity analysisAnincreasein50basispointsfromtheweightedaverageyear-endinterestratesat30Junewouldhaveincreasedequityandprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesremainconstant.Theanalysisisperformedonthesamebasisfor2008:


30June2009 140 140 17 1730June2008 141 141 3 3

Adecreasein50basispointsfromtheweightedaverageyear-endinterestratesat30Junewouldhavedecreasedequityandprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesremainconstant.Theanalysisisperformedonthesamebasisfor2008:


30June2009 (47) (47) (17) (17)30June2008 (141) (141) (3) (3)



32. financialriskmanagement(continued)

(c) Credit risk

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in a financial loss to theCompanyorGroup,andarisesprincipallyfromtheGroup’sreceivablesfromcustomersandcashdeposits.TheCompanyhasnotradereceivablesatJune2009orJune2008andhasnosignificantconcentrationofcreditrisk.

TheGroup’stradereceivablesatbothJune2009andJune2008areallduefromanentitylocatedinThailandandcontrolledbyitsgovernment.ThisentityhasanappropriatecredithistorywiththeGroup.Therewerenoreceivablesat30June2009or30June2008thatwerepastdue.

Cashtransactionsarelimitedtofinancialinstitutionsconsideredtohaveasuitablecreditrating.

Creditriskfurtherarisesinrelationtofinancialguaranteesgiventocertainparties,refertoNote23.

Exposure to credit risk is considered minimal but is monitored on an ongoing basis. The maximum exposure to credit risk isrepresentedbythecarryingamountofeachfinancialassetinthebalancesheet.

ThecarryingamountoftheGroup’sfinancialassetsrepresentsthemaximumcreditexposure.TheGroup’smaximumexposuretocreditriskatthereportingdatewas:


$000 $000 $000 $000

Carrying amount: Cashandcashequivalents 31,099 28,281 3,380 570Tradeandotherreceivables 11,904 12,443 13,003 15,501 43,003 40,724 16,383 16,071

TheagingoftheGroup’stradereceivablesatreportingdatewas:

gross impairment gross impairment 2009 2009 2008 2008

$000 $000 $000 $000 Notpastdue 7,218 - 9,255 - 7,218 - 9,255 -

Basedonhistoricdefaultrates,theGroupbelievesthatnoimpairmentallowanceisnecessaryinrespectoftradereceivables.




(d) Currency risk

Currency risk arises from sales, purchases, assets and liabilities that are denominated in a currency other than the functionalcurrenciesoftheentitieswithintheGroup,beingtheA$,THBandUS$.

TheGroupoperatespredominantly inThailandand isexposedtocurrencyriskarising fromvarious foreigncurrencyexposures,mainlywithrespecttotheUS$andThaiBaht(THB).ThefunctionalcurrencyofitsThaioperationschangedfromUS$toTHBfrom1January2009,primarilybecausethetrendinthesourcecurrencyofthemajorityofitscostsfromUS$toTHBwasnotconsideredtemporary.TheeffectofthischangewastoincreaseProperty,PlantandEquipmentandtheTranslationReserveby$1,252,000.

CashreceiptsfromtheThaioperations,whichcomprise100%oftheGrouprevenues,arereceivedinThaiBaht.ThemajorityoftheGroup’spayments,includingThaiSRBandincometax,arealsopayableinTHBwhicheffectivelycreatesanaturalhedge.TheCompany’sforeignexchangeriskpredominantlyresidesinitsUS$loantooneofitscontrolledentities.

TheGroupdoesnotcurrentlyusederivativefinancialinstrumentstohedgeforeigncurrencyriskandthereforeisexposedtodailymovementsinexchangerates.However,theGroupintendstomaintainsufficientTHBcashbalancestomeetitsTHBobligations,inparticularitsSRBandincometaxliabilities.

TheCompanyandGroup’sexposuretoforeigncurrencyriskatbalancedatewasasfollows,basedoncarryingamounts. thB usD gBp a$000 a$000 a$000Consolidated 2009 Cashandcashequivalents 27,405 48 -Tradeandotherreceivables 8,208 - -Tradepayablesandaccruals (5,304) (754) -SRBandincometaxprovisions (6,643) - -Grossbalancesheetexposure 23,666 (706) -

Company 2009 Cashandcashequivalents - 14 -Tradeandotherreceivables - 10,760 -Tradepayablesandaccruals - (11) -Grossbalancesheetexposure - 10,763 -

Consolidated 2008 Cashandcashequivalents 27,634 114 -Tradeandotherreceivables 9,255 - -Tradepayablesandaccruals (1,561) (493) (36)SRBandincometaxprovisions (24,152) - -Grossbalancesheetexposure 11,176 (379) (36)

Company 2008 Tradeandotherreceivables - 13,625 -Tradepayablesandaccruals - (10) (36)Grossbalancesheetexposure - 13,615 (36)

Thefollowingsignificantexchangeratesappliedduringtheyear:

averagerate reportingdatespotrateauDto: 2009 2008 2009 2008

1Thaibaht 0.040 0.036 0.037 0.0311USD 1.36 1.12 1.24 1.04




(d) Currency risk (continued)

Sensitivity analysis

A10%strengtheningoftheAUDagainsttheUS$forthe6monthsto31December2008andagainsttheTHBforthe6monthsto30June2009,reflectingthechangeinfunctionalcurrencyofthePhetchabunBasinJointVenturefrom1January2009,andagainsttheTHBasat30June2009,wouldhavedecreasedequityandpre-taxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestratesandtheexchangeratebetweentheThaiBahtandUSD,remainconstant:


30June2009 THBandUS$ (7,752) (5,077) (1,232) (1,232)30June2008 USD (3,439) (2,137) (1,237) (1,237)

A10%weakeningoftheAUDagainsttheUS$forthe6monthsto31December2008andagainsttheTHBforthe6monthsto30June2009,reflectingthechangeinfunctionalcurrencyofthePhetchabunBasinJointVenturefrom1January2009,andagainsttheTHBasat30June2009,wouldhaveincreasedequityandpre-taxprofitandlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestratesandtheexchangeratebetweentheThaiBahtandUSD,remainconstant:


30June2009 THBandUSD 9,412 6,206 1,232 1,23230June 2008 USD 4,203 2,612 1,515 1,515

(e) Fair values

Thefairvaluesoffinancialassetsandfinancialliabilities,togetherwiththeircarryingamountsshowninthebalancesheet,areasfollows:

carrying carrying amount fairvalue amount fairvalue 2009 2009 2008 2008 $000 $000 $000 $000

Consolidated Loansandreceivables 11,904 11,904 12,443 12,443Cashandcashequivalents 31,099 31,099 28,281 28,281Tradeandotherpayables (6,901) (6,901) (3,368) (3,368) 36,102 36,102 37,356 37,356

Company Loansandreceivables 13,003 13,003 15,501 15,501Investmentincontrolledentities 1,483 1,483 1,483 1,483Cashandcashequivalents 3,380 3,380 570 570Tradeandotherpayables (1,017) (1,017) (531) (531) 16,849 16,849 17,023 17,023

ThebasisfordeterminingfairvaluesisdisclosedinNote3(i).




(f) Liquidity risk

Liquidityrisk is theriskthat theGroupwillnotbeabletomeet itsfinancialobligationsasandwhenthey falldue.TheGroup’sapproachtomanagingthisriskistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitieswhendueunder a rangeof financial conditions. Thenet cashflowsarising from its Thai assets are considered to generate sufficientworkingcapitaltoadequatelyaddressthisrisk.

NeithertheCompanynortheGroupcurrentlyhasanyavailablelinesofcredit.

Thefollowingarethecontractualmaturitiesoffinancialliabilities,includingestimatedinterestpaymentsandexcludingtheimpactofanynettingagreements:

carrying contractual 6months 6to12 amount cashflows orless months $000 $000 $000 $000

Consolidated2009

Non-derivative financial liabilities Tradeandotherpayables 6,901 6,901 6,901 -SRBandincometaxprovisions 6,643 6,643 3,521 3,122 13,544 13,544 10,422 3,122

Company2009 Non-derivative financial liabilities Tradeandotherpayables 1,017 1,017 1,017 - 1,017 1,017 1,017 -

Consolidated2008

Non-derivative financial liabilities Tradeandotherpayables 3,368 3,368 3,368 -SRBandincometaxprovisions 24,152 24,152 9,304 14,848 27,520 27,520 12,672 14,848

Company2008

Non-derivative financial liabilities Tradeandotherpayables 531 531 531 - 531 531 531 -


dIreCtorS’ deClaratIon

(1) IntheopinionofthedirectorsofCarnarvonPetroleumLimited:

(a) thefinancialstatementsandnotesoftheCompanyandoftheGroupsetoutonpages29to68areinaccordancewiththeCorporationsAct2001,including:

(i) givingatrueandfairviewoftheCompany’sandGroup’sfinancialpositionasat30June2009andoftheirperformance,asrepresentedbytheresultsoftheiroperationsandtheircashflows,forthefinancialyearendedonthatdate;and

(ii) complyingwithAustralianAccountingStandards(includingtheAustralianAccountingInterpretations)andtheCorporationsRegulations2001;and

(b) therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.

(2) Thisdeclarationhasbeenmadeafterreceivingthedeclarationsrequiredtobemadetothedirectorsinaccordancewithsection

295AoftheCorporationsAct2001forthefinancialperiodending30June2009.

Signedinaccordancewitharesolutionofthedirectors.

pJLeonhardtDirectorPerth,28August2009


audIt rePort


audIt rePort (Continued)


CorPorate GovernanCe Statement

introDuction

TheCompany’sdirectorsarefullycognisantoftheCorporateGovernancePrinciplesandBestPracticeRecommendationspublishedbytheASXCorporateGovernanceCouncil(“CGC”)andhaveadoptedthoserecommendationswheretheyareappropriatetotheCompany’scircumstances.

However,anumberofthoseprinciplesandrecommendationsaredirectedtowardslistedcompaniesconsiderablylargerthanCarnarvon,whosecircumstancesand requirementsaccordinglydiffermarkedly from theCompany’s. Forexample, thenatureof theCompany’soperationsanditslowdirectemployeecountmeanthatanumberoftheboardcommitteesandothergovernancestructuresrecommendedbytheCGCarenotonlyunnecessaryinCarnarvon’scase,buttheeffortandexpenserequiredtoestablishandmaintainthemwould,inthedirectors’view,beanunjustifieddiversionofshareholders’funds.

Carnarvon’sdirectorsareawarethataccordingtooneschoolofthoughtlistedcompanieswillberatedbytheinvestmentcommunityaccordingtotheircompliancewiththeCGC’sBestPracticeRecommendations.However,inthedirectors’viewthatapproachisnotsoundlybased,particularlywhereunquestioningcompliancewiththerecommendationswouldproducemarginalornobenefittoshareholders.

IndischargingitsfunctionsCarnarvon’sboardofdirectorsreceivescompetentlegalandotherprofessionaladvice.Basedonthatadvicetheboardissatisfiedthat,notwithstandingnon-compliancewiththeBestPracticeRecommendations(totheextentnotedbelow),theCompany’s governance structures are appropriate for its circumstances and the board acts at all times in the best interests of theCompanyanditsshareholders.

ThefollowingadditionalinformationabouttheCompany’scorporategovernancepracticesissetoutontheCompany’swebsiteatwww.carnarvonpetroleum.com:

• Corporategovernancedisclosuresandexplanations;• StatementofBoardandmanagementfunctions;• CompositionoftheBoardandnewappointments;• CommitteesoftheBoard;• Summaryofcodeofconductfordirectors;• Summaryofpolicyonsecuritiestrading;• AuditCommitteeCharter;• SummaryofpolicyandproceduresforcompliancewithASXListingRuledisclosurerequirements;• Summaryofarrangementsregardingcommunicationwithandparticipationofshareholders;• SummaryofCompany’sriskmanagementpolicy;and• Corporatecodeofconduct.

skills,experience,expertiseandtermofofficeofeachdirector

Aprofileofeachdirectorcontainingtheapplicableinformationissetoutinthedirectors’report.

statementconcerningavailabilityofindependentprofessionaladvice

Ifadirectorconsidersitnecessarytoobtainindependentprofessionaladvicetoproperlydischargetheresponsibilityofhis/herofficeasadirectorthen,providedthedirectorfirstobtainsapprovalforincurringsuchexpensefromthechairman,theCompanywillpaythereasonableexpensesassociatedwithobtainingsuchadvice.


CorPorate GovernanCe Statement (Continued)

explanationsfordeparturesfrombestpracticerecommendations

From1 July2008 to30 June2009 (theReportingPeriod ) theCompanycompliedwitheachof theEssentialCorporateGovernancePrinciples (Note1below)andthecorrespondingBestPracticeRecommendations (Note2below)aspublishedbytheASXCorporateGovernanceCouncil(“ASXPrinciplesandRecommendations”),otherthaninrelationtothemattersspecifiedbelow:

principlereference

recommendationreference

notificationofDeparture explanationforDeparture

2 2.4 AseparateNominationCommitteehasnotbeenformed.

TheBoardconsidersthattheCompanyisnotcurrentlyofasizetojustifytheformationofaNominationCommittee.TheBoardasawholeundertakestheprocessofreviewingtheskillsbaseandexperienceofexistingdirectorstoenableidentificationorattributesrequiredinnewdirectors.WhereappropriateindependentconsultantsareengagedtoidentifypossiblenewcandidatesfortheBoard.

4 4.2 TheAuditCommitteecomprisedtwoindependentdirectors.Anadditionalindependentdirectorwasappointedon1July2009.

InaccordancewithListingRule12.7,theCompanywasnotrequiredtocomplywithRecommendation4.2priortoadmissiontotheASXtop300.

8 8.1 ARemunerationCommitteewasappointedon1August2008.

PriortoitsformationtheBoardconsideredthattheCompanywasnotofasizetojustifytheformationofaRemunerationCommittee.TheBoardasawholeundertooktheroleofthiscommitteepriortoitsformation.

Notes(1)AcopyoftheTenEssentialCorporateGovernancePrinciplesissetoutontheCompany’swebsiteunderthesectionentitled“CorporateGovernance”.(2) A copy of the Best Practice Recommendations is set out on the Company’s website under the section entitled “CorporateGovernance”.


CorPorate GovernanCe Statement (Continued)

existenceandtermsofanyschemesforretirementbenefitsfornon-executivedirectors

TheCompanydoesnothaveanytermsorschemesrelatingtoretirementbenefitsfornon-executivedirectors.

company’sremunerationpolicies

TheCompany‘sremunerationpoliciesaresetoutintheRemunerationReportonpages20to25.

TheCompanyhasseparateremunerationpoliciesforexecutiveandnon-executivedirectors.Non-executivedirectorsreceiveafixedfeeand,whenappropriate,shareoptionsorparticipationintheEmployeeShareScheme.

Executivedirectorsreceiveasalaryorfeeand,whenappropriate,shares,shareoptions,orparticipationintheEmployeeShareScheme.

materialbusinessrisks

ManagementhasreportedtotheBoardastotheeffectivenessoftheCompany’smanagementofitsmaterialbusinessrisks.

performanceevaluationoftheBoard,itscommitteesandseniorexecutives

TheBoardreviewsandevaluatestheperformanceoftheBoardanditscommittees,whichinvolvesconsiderationofalltheBoard‘skeyareasofresponsibility.

Aperformanceevaluationofseniorexecutiveswasundertakenduringtheyear,inthecaseoftheChiefExecutivebytheBoard,andinallothercasesbytheChiefExecutiveOfficerandtheChairman.

identificationofindependentdirectors

TheCompany’sindependentdirectorsareconsideredtobePeterLeonhardt,NeilFearis,andKenJudge.

NoneofthesedirectorswasconsideredtohaveamaterialrelationshipwiththeCompanyoranothergroupmemberduringtheReportingPeriodasprofessionaladvisor,consultant,supplier,customer,orthroughanyothercontractualrelationship,nordidtheyhaveanybusinessorotherrelationshipwhichcould,orcouldreasonablybeperceivedto,materiallyinterferewiththedirector’sabilitytoactinthebestinterestsoftheCompany.

TheBoardconsidersmaterialinthiscontexttobewhereanydirector-relatedbusinessrelationshiprepresentsthelesserofatleast5%oftheCompany’sorthedirector-relatedbusiness‘srevenue.

numberofauditcommitteemeetingsandnamesofattendees

ThenumberofAuditCommitteemeetingsandnamesofattendeesissetoutinthedirectors’report.

namesandqualificationsofauditcommitteemembers

ThenamesandqualificationsofAuditCommitteemembersaresetoutinthedirectorsreport.


addItIonal SHareHolder InformatIon

AdditionalinformationrequiredbytheASXLimited(“ASX”)ListingRulesandnotdisclosedelsewhereinthisreportissetoutbelow.

a) shareholdingsasat26august2009

Substantial shareholders

ThefollowingsubstantialshareholdernoticesarelodgedwiththeCompany:

NameofShareholder NumberofShares %held

BarclaysGlobalInvestorsAustraliaLimited 36,107,227 5.28

Voting Rights

ThevotingrightsattachingtoOrdinarySharesaregovernedbytheConstitution.Onashowofhandseverypersonpresentwhoisamemberorrepresentativeofamembershallhaveonevoteandonapoll,everymemberpresentinpersonorbyproxyorbyattorneyordulyauthorisedrepresentativeshallhaveonevoteforeachshareheld.Nooptionshaveanyvotingrights.

Twenty Largest Shareholders

nameofshareholder numberofshares %held

HSBCCustodyNominees(Australia)Limited 59,302,913 8.67NationalNomineesLimited 56,695,602 8.29JPMorganNomineesAustraliaLimited 53,743,584 7.86ANZNomineesLimited<CashIncomeA/C> 18,024,980 2.64MrEdwardPatrickJacobson 12,917,903 1.89CiticorpNomineesPtyLimited 11,143,997 1.63PendomerInvestmentsPtyLtd<LawSettlementsFundA/C> 8,400,000 1.23CogentNomineesPtyLimited 8,132,673 1.19JacobsonGeophysicalServicesPtyLtd 8,000,000 1.17MrPeterJamesLeonhardt 7,700,000 1.13ArneInvestmentsPtyLtd 6,710,493 0.98CogentNomineesPtyLimited<SMPAccounts> 6,354,899 0.93MrGregoryJohnMunyard+MrsMariaAnnMunyard+MissCarmenHeleneMunyard<RivieraSuperFundA/C> 6,164,000 0.90GeolynPtyLtd 6,000,000 0.88MrEdwardPatrickJacobson 6,000,000 0.88QueenslandInvestmentCorporation 4,105,911 0.60UBSNomineesPtyLtd 4,105,900 0.60AustralianRewardInvestmentAlliance 4,028,214 0.59AtholSteelPtyLtd 4,000,000 0.59ArneInvestmentsPtyLtd 3,991,906 0.58 295,522,975 43.23

Distribution of equity security holders

numberof numberof sizeofholding shareholders fullypaidshares

1 to 1,000 520 360,3381,001 to 5,000 2,273 7,175,1575,001 to 10,000 1,854 15,712,03410,001 to 100,000 3,576 124,650,381100,001 andover 618 535,776,724 8,841 683,674,634

Thenumberofshareholdersholdinglessthanamarketableparcelofordinarysharesis896.


addItIonal SHareHolder InformatIon (Continued)

b) optionholdingsasat26august2009

Therewerenoshareoptionsonissue.

c) on-marketbuyback

Thereisnocurrenton-marketbuyback.

d) scheduleofpermits

Jointventure equitypermit Basin/country partners % operator

SW1A Phetchabun/Thailand Carnarvon 40% PanOrientEnergy PanOrientEnergy 60% L33/43 Phetchabun/Thailand Carnarvon 40% PanOrientEnergy PanOrientEnergy 60% L44/43 Phetchabun/Thailand Carnarvon 40% PanOrientEnergy PanOrientEnergy 60% L20/50 Phitsanulok/Thailand Carnarvon 50% Carnarvon SunResources 50% EP321&EP407 Perth/Australia Carnarvon 2.5%ORRI LatentPetroleumWA-399-P Carnarvon/Australia Carnarvon 50% Carnarvon RialtoEnergy 50%EP110& Carnarvon/Australia Carnarvon 35% StrikeOilEP424 StrikeOil 40% PancontinentalOil andGas 25% WA-345-P Roebuck/ Carnarvon 100% Carnarvon Australia

GroundFloor

1322HayStreet

WestPerthWA6005

Telephone:+61893212665


Email:[email protected]

Website:www.carnarvonpetroleum.com

GroundFloor

1322HayStreet

WestPerthWA6005

Telephone:+61893212665


Email:[email protected]

Website:www.carnarvonpetroleum.com

Documents

2009 ANNUAL REPORT - Carnarvon Petroleum – Exploration ...4 Carnarvon Petroleum ltd CHIef exeCutIve’S revIeW (Continued) It is becoming clear that the L44/43 licence covers that