2016 for personal use only

2016ANNUAL REPORT

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CORPORATE DIRECTORY

DirectorsWilliam Bloking Non-Executive ChairmanMichael Fischer Managing DirectorAndrew Edwards Non-Executive DirectorChaiwat Kovavisarach Non-Executive DirectorKrairit Nilkuha Non-Executive DirectorVichien Usanachote Non-Executive Director

Company SecretaryJohn Newman

OfficersKris Thirakaosal Commercial ManagerStuart Nichol Production ManagerJani Surjan Financial Controller

Registered andPrincipal OfficeLevel 31 Preston StreetCOMO WA 6152

Telephone: +61 8 9474 0000 Facsimile: +61 8 9474 0099Email: [email protected]: www.nido.com.au

Share RegistryComputershare LimitedLevel 11, 172 St Georges TerracePERTH WA 6000

Telephone: +61 8 9323 2000Facsimile: +61 8 9323 2033

SolicitorsAllens 250 St Georges TerracePERTH WA 6000


Romulo Mabanta Law Office 30th FloorCitibank Tower8741 Paseo de RoxasMakati CityPHILIPPINES


AuditorsKPMG235 St Georges TerracePERTH WA 6000


SecuritiesExchangeListingThe Company’s securitiesare listed on the official listof ASX Limited.

ASX CodeShares: NDO

ABN 65 086 630 373

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CONTENTS 2016 SUMMARY 2

CHAIRMAN’S LETTER 3

ANNUAL RESERVES STATEMENT 4

PETROLEUM PERMIT INTEREST SCHEDULE 5

OPERATIONS REVIEW 6

DIRECTORS’ REPORT 8

AUDITOR’S INDEPENDENCE DECLARATION 28

DIRECTORS’ DECLARATION 29

STATEMENT OF COMPREHENSIVE INCOME 30

BALANCE SHEET 31

STATEMENT OF CASH FLOWS 32

STATEMENT OF CHANGES IN EQUITY 33

NOTES TO THE FINANCIAL STATEMENTS 34

INDEPENDENT AUDITOR’S REPORT 77

ADDITIONAL SECURITIES EXCHANGE INFORMATION 81

GLOSSARY 83

2016ANNUAL REPORT

12016 ANNUAL REPORT NIDO PETROLEUM

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2016 SUMMARYProduction and Development

• 1,873,149bblsgross(1,046,707bblsnettoNido)wereproducedfromtheGalocoilfield.

• ProductionuptimeatGalocaveraged99.77%duringtheyear.

• TheNidoandMatinlocoilfieldscontinuedtoproduceoilonacyclicalbasiswithtotalproductionof126,388bblsgross(32,637bblsnettoNido).

• Revenuefromcrudeoilsalestotalled$42.601millionfortheyear.

Exploration and Appraisal• TheGalocJointVentureapprovedtheGaloc-7/7ST

appraisalwellinordertoconfirmthecommercialityofapotentialPhaseIIIdevelopmentproject.

• TheCompanycontinuedtoreviewnewventureopportunitiesthroughouttheyearaspartofitslongertermstrategyofexpansion.

• TheDepartmentofEnergyapprovedtheCompany’srequestforamoratoriumandanamendmenttotheSub-Phase3WorkProgramforSC63.

Health, Safety, Security and Environment (HSSE)TheCompanyachievedexcellentHSSEperformanceacrossallassetsandactivitiesduring2016withaTotalRecordableInjuryFrequencyRate(TRIFR)for2016ofzerocomparedwiththeAustralianNationalOffshorePetroleumSafetyandEnvironmentManagementAuthority(NOPSEMA)benchmarkof5.3.

Corporate and Financial• Cashonhandatyearendwas$31.974millionand

debtdrawnundertherevolvingtermloanfacilitywas$78.200millionatyearend.

• TheCompanyraisedatotalof$19.778million(beforecosts)fromapro-rataentitlementoffertofundtheCompany’sparticipatinginterestshareoftheGaloc-7/7STappraisalwell.

• Grosslossforthe2016yearwas$5.538millionandnetlossaftertaxwas$17.255million.

• NidosuccessfullycompletedarestructureofitsFacilityAgreementwiththeBangchakPetroleumPublicCompanyLimitedon11March2016.Underthetermsoftherestructure,principalandinterestpaymentsaredeferreduntilMarch2018andthefacilityinterestnolongerincreasesby2%peryearbutiscappedat6%plusLIBORforthetermoftheloan.

2 NIDO PETROLEUM 2016 ANNUAL REPORT

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CHAIRMAN’S LETTERDearShareholder,

IampleasedtopresenttoyoutheCompany’s2016AnnualReport.

2016wasaverychallengingyearfortheoilandgasindustryastheoilpricecollapse,whichcommencedin2015,continuedwithpricesfallingbelowUS$40/bblduringthefirstquarter.ThisfallinpricescreatedaverydifficultenvironmentforallE&PCompanies,requiringafocusoncoststomaintainprofitabilityandriskmanagementtoensurelong-termviability.

InthiscontexttheCompanyaggressivelyreducedcostsacrossthebusinessinresponsetotheexternalenvironment,minimisinganynon-commitmentexpenditure.TheManagementteam,thestaffandtheBoardimplementedavoluntaryreductioninremunerationduringthefirsthalfof2016todemonstratetheircollectivecommitmenttothesustainabilityoftheCompany.

OneofthekeychallengesfacingtheCompanyaretheongoingrepaymentobligationsassociatedwiththedebtfacilitywithourmajorityshareholder,TheBangchakPetroleumPublicCompanyLimited(“BCP”).TheManagementteamworkedconstructivelywithBCPduringthefirsthalfoftheyeartore-negotiatethefacilityresultinginadeferraloffurtherprincipalandinterestpaymentsuntilMarch2018andprovidingtheCompanywiththeflexibilitytomanageitscashflowrequirementsandmeetitsfinancialcommitmentsin2016and2017.

TheCompanycontinuedtoprioritisethemanagementofhealth,safetyandtheenvironmentandinAugust2016theGalocJointVenturecelebratedtheachievementoffouryearsofoperationsattheGalocoilfieldwithoutaLostTimeInjury.ThishasbeenanexcellentperformanceandIwouldliketotakethisopportunitytothankeveryoneinvolvedintheoperation,togetherwiththeFPSOOperatorRubiconOffshoreInternationalPteLtd,fortheircommitmentinachievingthismajormilestone.

Despitethedifficultexternalenvironment,theCompanyremainedfocussedondeliveringvaluetoshareholders.Thefallinoilpricehasresultedinadecreaseindemandforoilfieldservices,suchasdrillingrigs,withaconsequentsignificantreductioninday-rates.TheCompany,on

behalfoftheGalocJointVenture,hastakenadvantageofthisopportunitytocommittodrillingoftheGaloc-7/7STappraisalwell.ThiswellwillassessthepotentialofacurrentlyuntestedareaoftheGalocFieldand,ifsuccessful,willaddconsiderablytotheprovenreservesat,andproductionfrom,theField.Astheyearended,Nido,onbehalfoftheGalocJointVenture,wasactivelyplanningandprocuringthenecessaryservicesandequipmentforthewell.Thedrillingcampaignisscheduledtocommenceinthefirstquarterof2017.

InordertofundtheCompany’sshareoftheGaloc-7/7STwell,arenounceableentitlementofferingwaslaunchedon21October2016raising$19.778million(beforecosts)withBCPEtakingupitsfullpro-rataentitlement.BCPEhasincreaseditsholdinginNidoto96.97%andBCPEarenowconsideringitsoptionsinrelationtothepotentialcompulsoryacquisitionoftheremainingsharesintheCompany.

TheCompanycontinuedtoconsiderbusinessdevelopmentopportunitiesintheSouth-EastAsiaregion.TheemphasishasbeenonproducingassetsinordertoimprovetheCompany’scash-flowpositionandwehaveconsideredbothoilandgasproductioninordertobuildabalancedportfolio.AlargenumberofopportunitieshavebeenscreenedbytheCompanybut,todate,nonehaveachievedthedealmetricswebelieveareappropriateinthecurrentenvironment.TheCompanywillthereforecontinuetoseektosecureasecondproducingassetbutwillmaintainadisciplinedapproachtothisprocess.

Finally,IwouldliketothankourLeadershipTeamandStafffortheircontinuedcommitmenttotheCompanyandtotheshareholdersofNidofortheirongoingsupport.

Yourssincerely

Yourssincerely

William Bloking

Chairman

Nido Petroleum Limited

“InthiscontexttheCompanyaggressively

reducedcostsacrossthebusinessinresponse

totheexternalenvironment,minimisinganynon-

commitmentexpenditure.TheManagementteam,

thestaffandtheBoardimplementedavoluntary

reductioninremunerationduringthefirsthalfof2016

todemonstratetheircollectivecommitmenttothe

sustainabilityoftheCompany.”32016 ANNUAL REPORT NIDO PETROLEUM

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ANNUAL RESERVES STATEMENTANNUAL RESERVES STATEMENT TheCompany’sAuditandRiskManagementCommitteeistaskedwiththeresponsibilityofoverseeingandreviewingonanannualbasistheCompany’scompliancewiththerelevantstandardsapplicableforreservesandresourcesreportingincludingoversightoftheCompany’sAnnualReservesStatement.

Gaffney,Cline&Associates(GCA)hascompleteditsIndependentReservesAssessmentoftheGalocoilfieldinaccordancewiththeSPE/WPC/AAPG/SPEEPetroleumResourcesManagementSystem(SPEPRMS)DefinitionsandGuidelinesandtheASXListingRulesincludingListingRules5.25-5.44whereapplicable.

Therevisionstoreservesvolumeshavebeenassessedaftertakingintoconsiderationtherecentfieldperformanceandthecurrentoilpriceenvironment.

TheCompanyhasnotobtainedanindependentassessmentofContingentResourcesvolumesfortheGalocoilfieldasat31December2016giventhattheGaloc-7/7STappraisalwellwillbedrilledinthefirstquarterof2017.FurthercontingentresourceandreservesanalysiswillbeundertakenfollowingthedrillingofGaloc-7/7STandassociatedpost-drillingtechnicalstudies.

ThetablesbelowsummarisetheCompany’sReservespositionfortheGalocoilfieldasat31December2016andcomparedwith31December2015whereapplicable.

SC 14C1: Galoc Oil Field

NetOilReservesasat31December2015(MMstb)

OilProductionandRevisions(MMstb)

NetOilReservesasat31December2016(MMstb)

DEVELOPEDRESERVES

Proved(1P) 2.65 (1.11) 1.54

ProvedplusProbable(2P) 4.14 (1.54) 2.60

ProvedplusProbableplusPossible(3P) 5.91 (1.69) 4.22

UN-DEVELOPEDRESERVES

Proved(1P) - - -

ProvedplusProbable(2P) - - -

ProvedplusProbableplusPossible(3P) - - -

TOTALRESERVES

Proved(1P) 2.65 (1.11) 1.54

ProvedplusProbable(2P) 4.14 (1.54) 2.60

ProvedplusProbableplusPossible(3P) 5.91 (1.69) 4.22

1. In accordance with ASX Listing Rule 5.44, the Companyconfirms that the hydrocarbon reserves information containedin thisdocument in relation to theGalocoil field isbasedon,andfairlyrepresents,informationandsupportingdocumentationpreparedbyGaffney,Cline&AssociatesunderthesupervisionofMrStephenM.Lane.MrLaneholdsaB.Sc.(Hons.)degreeinGeology,isaTechnicalDirectorofGaffneyCline&Associates,is a member of the Society of Petroleum Engineers and hasover thirty-five years’ experience in the sector. Mr Lane is notanemployeeof theCompanyandconsented inwriting to theinclusion of the hydrocarbon reserves information in the formandcontextinwhichitappearsinthisAnnualReport.

2. ThehydrocarbonReservesinformationoutlinedabovecomplieswiththeSPEPRMSandwithASXListingRulesforthedisclosureofoilandgasreservesandresources.

3. Oilvolumesarequotedinmillionsofstocktankbarrels(MMstb).NooilproducedfromtheGalocfieldisusedasfuel.

4. OilReservesestimates for theGalocfieldareprovidedonthebasisofNido’sNetEntitlementShareafterthesubtractionoftheGovernment’sentitlement.

OilReservesassessmentsfortheNidoandMatinlocoilfieldshavenotbeenundertakenasNido’snetentitlementshareofthesereservesisnegligible.

TheCompanyhasnotobtainedanindependentassessmentofContingentResourcesvolumesfortheWestLinapacanoilfieldasat31December2016giventhatnofurthertechnicalworkwasconductedduring2016.


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PETROLEUM PERMIT INTEREST SCHEDULEThefollowingtablesummarisestheCompany’sequityinterestsinitspermitsasat31December2016:

PhilippinesNido

Interest(%)

Approx. Area

(sq. km.) OperatorPermit Basin

SC14BlockA NorthWestPalawan 22.49 24 Philodrill (1)

SC14BlockB NorthWestPalawan 28.28 155 Philodrill (1)

SC14BlockC-1(2) NorthWestPalawan 55.88(8) 164 GPC(3)

SC14BlockC-2(4) NorthWestPalawan 22.28 178 Philodrill (1)

SC14BlockD NorthWestPalawan 31.42 173 Philodrill (1)

SC6B NorthWestPalawan 7.81 537 Philodrill (1)

SC54A NorthWestPalawan 42.40 399 Nido

SC54B NorthWestPalawan 60.00 624.5 Nido

SC58 NorthWestPalawan 50.00(5) 13,487 Nido(6)

SC63 NorthWestPalawan 20.00 10,666 PNOC(7)

(1)ThePhilodrillCorporation

(2)GalocBlock

(3)GalocProductionCompanyW.L.L.

(4)WestLinapacanBlock

(5)SubjecttoNidocompletingitsobligationunderitsFarm-inAgreementwithPNOCExplorationCorporation

(6)SC58operatorshiprevertstoPNOCExplorationCorporationuponcompletionofNido’sfarm-inobligations

(7)PNOCExplorationCorporation

(8) Nido’sworkinginterestincreasedfrom22.88%to55.88%on17February2015withthecompletionoftheGalocProductionCompanyW.L.L.acquisition

IndonesiaNido

Interest(%)

Approx. Area

(sq. km.) OperatorPermit Basin

BaronangPSC WestNatunaBasin 10.00(4),(5) 2,825 LundinPetroleum(1),(5)

CakalangPSC WestNatunaBasin 10.00(5) 3,339 LundinPetroleum(2),(5)

GuritaPSC PenyuSub-Basin 10.00(5) 7,938 LundinPetroleum(3),(5)

(1) LundinBaronangBV

(2) LundinCakalangBV

(3) LundinGuritaBV

(4) Nidoexerciseditsrighttoacquireanadditional5%workinginterestbutthistransferofinterestisyettoreceiveregulatoryapproval

(5) NidoisintheprocessofwithdrawingfromthisPSC


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OPERATIONS REVIEWPRODUCTION AND DEVELOPMENT - PHILIPPINES

2016 PRODUCTION SUMMARY

FieldGross Oil Production Net Production to Nido

Year Total Average Daily Year Total Average Daily

bbls bopd bbls bopd

Galoc 1,873,149 5,118 1,046,707 2,860

Nido&Matinloc 126,388 346 32,637 89

TOTAL 1,999,537 5,464 1,079,344 2,949

GALOC – SC 14 BLOCK C1, NORTH WEST PALAWAN BASIN, PHILIPPINESTheCompanycurrentlyretainsacombined55.879%interestinServiceContract14C1whichcontainstheGalocoilfielddevelopment.TheCompany’sinterestinthefieldisheldbyitswhollyownedsubsidiaries,NidoProduction(Galoc)PtyLtdandGalocProductionCompanyW.L.L.(‘GPC’)whichholda22.879%interestand33%interestinServiceContractSC14C1respectively.GPCistheOperatoroftheproject.

Fivecargoeswereliftedduringtheyear,withtwocargoesbeingsoldtoSKEnergyinSouthKorea,onecargobeingsoldtoSingaporePetroleumCompanyinSingapore,onecargobeingsoldtoThaiOilPublicCo.LtdinThailandandonecargobeingsoldtoChevronUSAInc.inSingapore.

DuringtheyeartheGalocJointVentureapprovedthedrillingofanappraisalwellinthemid-GalocareaofthefieldtoconfirmthecommercialityofapotentialPhaseIIIdevelopmentproject.InthiscontexttheCompanylaunchedaA$31.9millionpro-ratarenounceableentitlementofferon21October2016toraisefundsforNido’sparticipatinginterestshareofthedrillingoftheGaloc-7/7STappraisalwell.

TheCompanyraisedatotalof$19.8million(beforecosts)fromthepro-rataentitlementoffertofundtheCompany’sparticipatinginterestshareoftheGaloc-7/7STappraisalwellandisnowactivelyprogressingitspreparationsforthedrillingcampaignwhichisscheduledtocommenceinthefirstquarterof2017.

PRODUCTION ACTIVITIESTheaverageproductionuptimefortheyearwas99.77%andthegrossaveragedailyproductionwas5,118bopd,withtotaloilproducedof1,873,149bblsgross(1,046,707bblsnettoNido).Cumulativeproductionfromtheinitialstart-upin2008totheendoftheyearwas18.7mmbblsgross.

RevenuefromcrudeoilsalesrelatingtotheGalocoilfieldtotalled$41.6millionfortheyear(2015:$67.1million).

NIDO AND MATINLOC – SC 14 BLOCKS A & B, NORTH WEST PALAWAN BASIN, PHILIPPINESDuring2016,bothfieldsproducedacombinedtotalof126,388bblsgross(32,637nettoNido),averaging346bopd(approximately89bopdnettoNido).RevenuefromcrudeoilsalesrelatingtotheNidoandMatinlocfieldstotalled$1.0millionfortheyear(2015:$1.3million).

EXPLORATION & APPRAISAL - PHILIPPINES

SC 14 BLOCK C2 – WEST LINAPACAN, NORTH WEST PALAWAN BASIN, PHILIPPINESTheCompany’swhollyownedsubsidiaryNidoProduction(Galoc)PtyLtdholdsa22.279%workinginterestintheWestLinapacanblock.

Duringtheyear,ThePhilodrillCorporation(‘Philodrill’)asOperatoroftheJointVenturecontinuedtocarryoutareviewandstatusauditoftheJointVentureactivitiesfollowingtheremovalofRMAWestLinapacanPteLtdfromtheServiceContract.

Priortoyear-endtheJointVentureapprovedthe2017workprogramandbudgetwhichincludesthereprocessingofapproximately480sqkmoffullfoldseismicdata.ItisanticipatedthatthisreprocessingwillassistinbettermodellingtheWestLinapacanstructure.Itmayalsoserveasabasistoupdatewelldesignanddrilling/developmentplans.

SC 54 BLOCK A AND SC 54 BLOCK B, NORTH WEST PALAWAN BASIN, PHILIPPINESTheCompany’swhollyownedsubsidiaryNidoPetroleumPhilippinesPtyLtdholdsa42.4%workinginterestinBlockAofSC54anda60%workinginterestinBlockBofSC54.

ServiceContract54isinaperiodofmoratoriumfrom5August2014to5August2017.ThemoratoriumprovidesboththeBlockAandBlockBventuressufficienttimetostudythepresentlysub-commercialareasandotherareasofinterestwithinthecontractarea.

TheCompanycontinuestoconsiderlowcostdevelopmentopportunitiesandotheralternativestomaximisevaluefromthisasset.


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OPERATIONS REVIEWSC 58, NORTH WEST PALAWAN BASIN, PHILIPPINESTheCompany’swhollyownedsubsidiary,NidoPetroleumPhilippinesPtyLtd,holdsa50%workinginterestintheSC58block.

Nido’sworkinginterestisdependentuponthecompletionofitsobligationsundertheFarm-inAgreementwithPNOCExplorationCorporation(‘PNOC-EC’)dated17July2006(whichincludespaymentof100%ofthecostofdrillinganexplorationwellinSub-Phase3).

During2016thePermanentCourtofArbitrationintheHagueruledinfavourofthePhilippinesoverthePeoplesRepublicofChina(‘China’)regardingownershipoftheWestPhilippineSeainwhichSC58islocated.ChinadidnotparticipateinthearbitrationandtheServiceContractremainsinaperiodofsuspensionasChinahasissuedstatementsrejectingtheCourt’srulingandnotingitwillthereforenotabidebyit.TheCompanycontinuestomonitorthesituationcloselyanditspotentialimpactonSC58.

SC 63, NORTH WEST PALAWAN BASIN, PHILIPPINESTheCompany’swhollyownedsubsidiaryNidoPetroleumPhilippinesPtyLtdcurrentlyholdsa20%workinginterestinSC63.

During2015,PNOC-ECrequestedamoratorium,anamendmenttotheSub-Phase3WorkProgramandarelinquishmentof50%oftheinitialcontractarea.

DuringtheyeartheDOEgrantedathreeyearmoratoriumandanamendmenttotheSub-Phase3WorkProgram.TherevisedWorkProgramforthemoratoriumandSub-Phase3isasfollows:

Sub-Phase Work Program and Budget

Moratorium(24Nov2015to24Nov2018)

(3years)

Year 1(24Nov2015to24Nov2016)

1)Technical/CommercialStudies=US$ 50,000

2)GeologicalandGeophysicalAssessment(GG&A)=US$ 30,000

Year 2(24Nov2016to

24Nov2017)


2)GG&A=US$ 30,000Year 3

(24Nov2017to24Nov2018)


2)GG&A=US$ 30,000SP3

(24Nov2018to24Nov2019)

(1Year)

1)Drillone(1)firmwell=US$ 6,000,000and/or

2)Drillone(1)contingentwell=$US 6,000,000

Areviewoftheremainingprospectivityoftheblockiscurrentlyongoing.

DragonOilisintheprocessofwithdrawingfromthisServiceContractandPNOC-ECandNidohaveexecutedanassignmentagreementwithDragonOil.UponapprovaloftheassignmentbytheDOE,PNOC-ECandNidowilleachholda50%participatinginterestintheServiceContract.

SC 6 BLOCK B - BONITA, NORTH WEST PALAWAN BASIN, PHILIPPINES TheCompany’swhollyownedsubsidiaryNidoPetroleumPhilippinesPtyLtdholdsa7.81%workinginterestinBlockBofSC6.

TheJointVenturehasrecentlyfocusedonmaturingleadsinthenorthernpartoftheblockandtheEastCadlaostructurelocatedtotheeastoftheCadlaooilfieldinSC6.Reprocessingofapproximately402sqkmoftheexistingTQ3Dseismicsurveywascompletedin2016andisstillunderreviewbytheOperator.

EXPLORATION & APPRAISAL - INDONESIA

BARONANG PRODUCTION SHARING CONTRACTTheCompany’swhollyownedsubsidiaryNidoPetroleumIndonesia(Baronang)PtyLtdholdsa10%workinginterestintheBaronangPSC.TherewasnoactivityundertakenintheBaronangPSCduringtheyearastheJointVentureisawaitingapprovalfromtheregulatorSKKMigastorelinquishthePSC.NidoisintheprocessofwithdrawingfromthisProductionSharingContract.

CAKALANG PRODUCTION SHARING CONTRACTTheCompany’swhollyownedsubsidiaryNidoPetroleumIndonesia(Cakalang)PtyLtdholdsa10%workinginterestintheCakalangPSC.TherewasnoactivityundertakeninCakalangPSCduringtheyearastheJointVentureisawaitingapprovalfromtheregulatorSKKMigastorelinquishthePSC.NidoisintheprocessofwithdrawingfromthisProductionSharingContract.

GURITA PRODUCTION SHARING CONTRACTTheCompany’swhollyownedsubsidiaryNidoPetroleumIndonesia(Gurita)PtyLtdholdsa10%workinginterestintheGuritaPSC.

TheOperatorLundinGuritaBV(‘Lundin’)advisedtheCompanyinNovember2015thatsubjecttothereceiptofanynecessaryregulatoryapprovalsitintendedtowithdrawfromthePSC.Therewasthereforenomaterialexplorationactivityduringthe2016year.

Subsequenttoyear-endtheCompanyelectedtowithdrawfromtheGuritaPSCalongwiththeOperator,Lundin.

EXPLORATION & APPRAISAL & NEW BUSINESSTheCompanycontinuedtoreviewnewventureopportunitiesthroughouttheyearaspartofitslongertermstrategytoreplenishandgrowitsportfoliowithqualityassetsprimarilyintheSEAsiaregion.

HEALTH, SAFETY, SECURITY AND ENVIRONMENT (HSSE)HSSEperformancefor2016basedon177,207manhoursresultedinzerofatalities,zeroLostTimeInjuriesandaTotalRecordableInjuryFrequencyRate(‘TRIFR’)ofzero.


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DIRECTORS’ REPORTDirectorsTheDirectorsofNidoPetroleumLimitedarepleasedtopresenttheAnnualFinancialReportfortheyearended31December2016.ThenamesanddetailsoftheCompany’sDirectorsinofficeduringthefinancialyearanduntilthedateofthisreportareasfollows.Directorswereinofficefortheentireperiodunlessotherwisestated.

William Bloking FAICDBachelor of Science, Mechanical Engineering (Summa cum Laude) (University of South Carolina)

Chairman, Independent (Appointed 15 May 2009, previously Non-Executive Director appointed 6 February 2008)

Member and Chairman, Remuneration and Nomination Committee (Appointed as Chairman on 20 November 2014)

Member, Audit & Risk Management Committee (Appointed 6 September 2010)

Billhasover40yearsofexperienceintheenergysector,33ofthosewithExxonMobilandtheBHPBillitonGroup,holdingseniorexecutivepositionsinAustralia,Asia,SouthAmericaandtheUnitedStates.UntilhisretirementinJanuary2007,BillwasPresidentofAustralia/AsiaGasatBHPBillitonPetroleum,wherehehadoverallstrategic,commercialandcorporateaccountabilityforBHPBilliton’sinternationalLNGbusinessanditsdomesticgasbusinessinAustralia.

BilliscurrentlyExecutiveChairmanandPresidentofKALEnergy,Inc.(appointed26June2007)andaNon-ExecutiveChairmanofTorrensMiningLimited(appointed25January2016).HeisaNon-ExecutiveDirectorofChallengerEnergyLimited(appointed27February2014)andSunResourcesNL(appointed25October2016).BillisalsoaFellowoftheAustralianInstituteofCompanyDirectors.

BillwasformerlyaNon-ExecutiveDirectorofStrandlineResourcesLimited(appointedasManagingDirectoron1August2013,resignedasManagingDirectoron23October2014andcontinuingontheBoardasaNon-ExecutiveDirectoruntil1March2015).BillwasalsotheManagingDirectorofEurekaEnergyLimited(appointed22February2012,resigned20June2012),aNon-ExecutiveDirectoroftheLionsEyeInstitute(appointed1October2003andresigned17April2013),ChairmanofTranservEnergyLimited(appointed14March2011andresigned19November2013)andhewasaNon-ExecutiveDirectoroftheWestAustralianSymphonyOrchestra(appointed19August2005,resigned28April2014).

HewasformerlyaNon-ExecutiveDirectoroftheJohnHollandGroup(appointed1January2007,resigned7November2012)andMiclynExpressOffshoreLimited(appointed19February2010,resigned29October2012).

Dr Michael Fischer GAICDBSc Hons. University of Leeds

PhD. University of Wales

Managing Director, Non-Independent (Appointed 26 August 2015)

MikestartedhiscareerasanExplorationGeologistwithBPinAberdeenandprogressedintoseniortechnicalrolesworkingonBP’sPNGandChineseportfolios.HethenjoinedWoodsideEnergyLimitedinPerth,whereheservedinanumberofrolesincludingChiefGeoscientist,responsiblefortechnicalassurance,andavarietyofexplorationleadershiproles,includingtheNorthwestShelf.MikewaspartoftheteamresponsibleforthedevelopmentofWoodside’sinternationalportfolioandsubsequentlyledtheteamthatwasresponsibleforWoodside’ssuccessinWestAfrica.

FollowingabriefperiodwithOMV,whereheheldthepositionofSeniorVicePresidentofExploration,OperationsandProjectsandoversaw340,000barrelsofoilequivalentproductionperdayaswellasaglobalexplorationportfolioandsignificantcapitalprojects,DrFischerjoinedOphirEnergy.InMike’snineyearswithOphir,hemovedprogressivelythroughrolesofincreasingexecutiveresponsibility,includingGMofExploration,DirectorofOperations,ChiefOperatingOfficer,SeniorVicePresident,andfinallyDirector,AfricaBusinessUnitwithfullresponsibilityforOphir’shighlysuccessfulAfricanoperations.

MikejoinedNidoon26August2015intheroleofManagingDirector.HeisamemberoftheAustralianInstituteofCompanyDirectors.


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DIRECTORS’ REPORT

Andrew Edwards FAICDB.Com (University of Western Australia)

Non-Executive Director, Independent (Appointed 11 December 2009)

Member and Chair, Audit and Risk Management Committee (Appointed 11 December 2009)

Member Remuneration and Nomination Committee (Appointed 20 November 2014)

AndrewisaformerManagingPartnerofPriceWaterhouseCoopers,PerthOffice(PWC),pastNationalVicePresidentofthe(then)SecuritiesInstituteofAustralia(nowtheFinancialServicesInstituteofAustralasia)andpastPresidentoftheWesternAustraliandivisionofthatInstitute,pastStateChairmanofthe(then)InstituteofCharteredAccountants(nowtheCharteredAccountantsAustraliaandNewZealand)localEducationCommitteeandapastmemberofitsNationalEducationCommittee.

AndrewisacurrentBoardmemberofMMAOffshoreLimited(appointed18December2009),thePresidentofActivFoundationInc(appointedtotheBoardon27October2008)andChairmanofMACALimited(appointed1October2010).HeisaformerDirectorofAspireMiningLimited(appointed1July2011,resigned7May2014).HeisalsoaFellowoftheAustralianInstituteofCompanyDirectors.

Vichien Usanachote BS (Engineering) (Chulalongkorn University, Thailand)

Master of Engineering (Ohio State University)

Advanced Diploma in Public Law and Management (King Prajadhipok’s Institute)

Diploma, Senior Executive Program (Sasin Graduate Institute of Business Administration of Chulalongkorn University)

Director Certification Program (Thai Institute of Directors)

Non-Executive Director, Independent (Appointed 1 October 2014)

Member Audit and Risk Management Committee (Appointed 20 November 2014)

Vichienhasover35years’experienceinthedownstreamoilandgassector.VichienretiredfromtheroleofPresidentatTheBangchakPetroleumPublicCompanyLtd,Thailand(‘Bangchak’),on1January2015.VichienhadworkedatBangchaksince1993whereheheldvariousseniorexecutivepositionsuntilhisretirement.

VichienwasChairmanofBangchakBiofuelCompanyLimited(asubsidiaryofBangchak)between2013and2014andChairmanofUbonBioEthanolCompanyLimitedbetween2013andJanuary2015.


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DIRECTORS’ REPORT

Chaiwat Kovavisarach M. Eng (Asian Institute of Technology)

M.B.A. (Thammasat University, Thailand)

B.Eng (Honor) (King Mongkut’s Institute of Technology Ladkrabang)

Investment Banking (Kellogg Business School, Northwestern University)

Director Certification Program (Thai Institute of Directors)

National Defence Course (The National Defence College Association of Thailand)

Non-Executive Director, Non-Independent (Appointed 1 October 2014)

Member Remuneration and Nomination Committee (Appointed 20 November 2014)

Chaiwathasover25years’experienceinengineering,investmentbankingandseniorexecutivemanagement.Hecommencedhiscareerin1987withTheSiamCementPublicCompanyLtdinThailandasaprojectengineerandthensubsequentlyasaproductionengineer.

Hesubsequentlymovedintoinvestmentbankingin1993workingforAssetPlusCompanyLimitedinThailandasaninvestmentbankerbeforetakingonaroleasadirectorwithSGCrosby(Thailand)/SGSecurities(Singapore)PteLtdbetween1996-2002.HewasafellowdirectoroftheAssociationofThaiSecuritiesCompaniesin2000.

In2002ChaiwatfoundedTURNAROUNDCompanyLtd,aboutiquefinancialadvisory/investmentbankingcompanyinThailand,holdinghismanagingdirectorpositionuntil2007beforebecominganadvisorforAvantgardeCapitalCompanyLimitedinThailanduntil2014.

ChaiwatiscurrentlythePresidentandCEOofTheBangchakPetroleumPublicCompanyinThailand(appointed1January2015)andadirectorofAsiaInsuranceCompanyLimited,GovernmentofThailand’sPensionFundandvarioussubsidiariesofBangchak.

Krairit Nilkuha BSc Mechanical Engineering (Kasetsart University)

MSc Petroleum Engineering (New Mexico Institute of Mining and Technology)

Non-Executive Director, Non-Independent (Appointed 21 August 2015)

Krairithasmorethan30yearsofexperienceintheoilandgasindustryacrosstheprivatesectorandGovernment,bothasaseniorexecutiveandasaNon-ExecutiveDirector.KrairitiscurrentlytheChairmanoftheBoardofDirectorsfortheTechnicalPetroleumTrainingInstituteofThailand.

KrairitwasformerlyaNon-ExecutiveDirectoroftheBangchakPetroleumPublicCompanyLtdandservedastheChairmanofBangchak’sRiskManagementCommittee.HewasalsoaformerNon-ExecutiveDirectorofthePTTPublicCompanyLimitedandaDeputyPermanentSecretaryoftheMinistryofEnergyinThailand.


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DIRECTORS’ REPORT

COMPANY SECRETARY

John Newman MAICDBEc, LLB (Monash University)

(Appointed 4 November 2009)

Johnisalawyerwithover24yearsofexperience,14ofwhichhavebeenintheenergyandresourcessector.JohnmanagestheCompanygroup’scommercial,legal,insurance,complianceandcompanysecretarialaffairs.John’spreviousexperienceincludesseniorpositionswiththeTimorSeaDesignatedAuthority,theNorthernTerritoryGovernmentandCridlandsLawyers.

JohnalsoworkedfortheNorthernLandCouncilwhereherepresentedtraditionalAboriginalownersinrelationtoresourcedevelopmentprojects.PriortoworkinginaresourcescontextJohnwastheprincipalsolicitoroftheRefugeeandImmigrationLegalCentreinMelbourne.

JohniscurrentlyamemberoftheLawSocietyofWesternAustralia,AustralianInstituteofCompanyDirectors(AICD)andtheAssociationofInternationalPetroleumNegotiators(AIPN).


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DIRECTORS’ REPORTDIRECTORS’ INTERESTS IN SECURITIES OF THE COMPANYAsatthedateofthisReport,theinterestsoftheDirectorsintheshares,options,performancerightsandretentionrightsofNidoPetroleumLimitedwere:

Director Ordinary SharesOptions Over

Ordinary Shares

Unissued Ordinary Share Rights

(Retention Rights)Performance

Rights

WBloking Nil Nil Nil Nil

MFischer 131,250 Nil 218,750 Nil

AEdwards Nil Nil Nil Nil

VUsanachote Nil Nil Nil Nil

CKovavisarach Nil Nil Nil Nil

KNilkuha Nil Nil Nil Nil

DIRECTORS’ AND COMMITTEE MEETINGS ThefollowingtabledetailsthenumberofDirectors’andCommitteemeetingsheldduringthefinancialyearandthenumberofmeetingsattendedbyeachDirector.

Board of Directors Meetings 2016Directors Held(1) Attended

WBloking 5 4

MFischer 5 5

AEdwards 5 5

VUsanachote 5 5

CKovavisarach 5 5

KNilkuha 5 5

Audit & Risk Management Committee Meetings 2016

Directors Held(1) Attended

WBloking 3 3

AEdwards 3 3

VUsanachote 3 3

Remuneration & Nomination Committee Meetings 2016


WBloking 2 2

AEdwards 2 2

CKovavisarach 2 2

Related Party and Conflicts Committee Meetings 2016


WBloking 3 2

AEdwards 3 3

CKovavisarach 3 3

(1)Numberofmeetingsheldduringtermofoffice.

SHARE AND OPTION SCHEMESUnissued sharesAsatthedateofthisReporttherewerenoperformancerightsoroptionsonissue(2015:nil).Therewere218,750ManagingDirectorretentionrightsonissue(2015:nil).RefertoNote23oftheFinancialStatementsforfurtherdetails.

Shares issued as a result of the exercise of options and performance rightsDuringthefinancialyearanduptothedateofthisReport,therewereneitheranyperformancerightsoutstandingnoranyperformancerightsissuedorexercisedbyemployeesanddirectors(2015:nil).

Shares issued as a result of the vesting of retention rightsDuring2016therewere350,000retentionrightsgrantedtoDr.FischerpursuanttothetermsofhisemploymentcontractfollowingshareholderapprovalattheCompany’sAnnualGeneralMeetingheldon6May2016.87,500shareswereissuedtoDrFischeruponthevestingofthefirst2tranchesofretentionrightsin2016(2015:nil).

CORPORATE GOVERNANCE Recognisingtheneedforthehigheststandardsofcorporatebehaviourandaccountabilitytoshareholders,theDirectorsoftheCompanysupportthePrinciplesofCorporateGovernancewhicharedetailedintheCompany’sCorporateGovernanceStatement.


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DIRECTORS’ REPORT PRINCIPAL ACTIVITIES Theprincipalactivitiesoftheconsolidatedentityduringthefinancialyear,whichoccurredprimarilyinthePhilippines,included:

• Productionandsaleofoil;

• Developmentofitsoilassets;and

• Explorationforoilandgas.

Therewerenosignificantchangesinthenatureoftheprincipalactivitiesduringtheyear.

OPERATING AND FINANCIAL REVIEWAfullreviewofoperationsoftheconsolidatedentityduringtheyearended31December2016isincludedinthesectionentitled“OperationsReview”precedingthisDirectors’Report.

SUMMARY OF FINANCIAL PERFORMANCEAsummaryofkeyfinancialindicatorsfortheCompany,withprioryearcomparison,issetoutinthefollowingtable:

Consolidated2016

US$’000

Consolidated2015

US$’000

Revenuefromsaleofcrudeoil

42,601 68,374

Gross(loss) (5,538) (3,964)

Net(loss)fortheyearaftertax

(17,255) (31,128)

Basic(loss)pershare(cents)fromcontinuingoperations

(24.16) (71.12)

Netcashfromoperatingactivities

8,023 8,534

Netcash(usedin)investingactivities

(2,822) (76,778)

Netcashfromfinancingactivities

8,933 76,972

ThenetlossoftheGroupfortheyearended31December2016of$17.255million(2015:lossof$31.128million),wasimpactedbythefollowingsignificantitems:

• Oilrevenuetotalled$42.601million,ofwhichrevenuefromtheGalocoilfieldfortheyearwas$41.607million(2015:$67.052million)arisingfromfiveliftingsduringtheyear.RevenuefromtheNidoandMatinlocoilfieldsfortheyearwas$0.994million(2015:$1.322million);

• Costofsalesfortheyeardecreasedby$24.204millionto$48.144million(2015:$72.348million)primarilyrelatedtooperationalsavingsinrenegotiatingtheFPSOcontract,reducedamortisationchargesfromthenaturaldeclineincrudeoilproduction,anddeferralofinventory-relatedopexcostsasaresultoflargerGalocphysicalinventorybalancesatyearend;

• Totalfinancingcostsof$6.747million(2015:$8.089million)primarilyrelatedtotheBangchaktermloanfacilities.Thedecreaseinfinancingcostsof

$1.342millionwasmainlyduetothefullrepaymentoftheCreditSuissefinancefacilityin2015andtherenegotiationoftheinterestrateontheBangchaktermloanfacilityinMarch2016;

• Incometaxbenefitof$1.636million(2015:Incometaxbenefitof$3.238million)primarilyrelatedtotheunwindingofthedeferredtaxliabilitiesassociatedwiththedifferenttaxandaccountingtreatmentsoftheGalocOilandGasPropertyassets;

• TherewerenoimpairmentsofOilandGasPropertiesin2016(2015:impairmentof$19.457million).TheprioryearimpairmentintheGalocoilfieldassetwastheresultofthesignificantfallinoilpricesin2015andalsoalowerreservespositionbasedonthe2015reservesstatementpreparedbyGCA;

• Totaladministrativeandotherexpenses(netofimpairmentcosts)of$6.763million(2015:$9.521million),primarilyresultedfromthefollowing:

º Employeebenefitsexpense(inclusiveofsharebasedpaymentsexpense)of$5.705million(2015:$5.033million);

º Explorationexpenseof$1.700million(2015:$2.142million);

º Officeandotherexpenses/(revenue),netoftimewritingrecoveriesof$(0.642)million(2015:expense$2.342million).

• Netforeigncurrencygainof$0.285million(2015:$4.706million)wasmainlytheresultofsmallfavourablemovementsintheAustraliandollaragainsttheUSdollaracrosstheyear.ThesignificantlylargerprioryeargainresultedfromthefavourableimpactoftheweakerAustraliandollaroverthefirstquarterof2015(priortothechangeoffunctionalcurrencyon1April2015),whichhadapositiveimpactonnetUSdollarbalances.

SUMMARY OF FINANCIAL POSITIONTheCompany’scashreservesattheendof2016totalled$31.974millioncomparedto$17.531millionasat31December2015.

Theincreaseincashreservesof$14.443millionovertheyearwasdueprimarilyto:

• Netproceedsfromoilproductionof$17.909million;

• Netproceedsof$0.593millionfromcrudeoilderivativegainsonsettlement;

• Netproceedsof$19.236millionfromcompletionoftheCompany’srenounceableentitlementoffering;

offset by:• Explorationexpenditureof$3.149millionprimarily

comprisingincreasedspendonnewventureactivitiesandpre-drillsupportoftheGaloc-7/7STappraisalwell;

• Debtprincipalrepaymentsof$10.000millionandinterestexpenseof$4.373millionrelatingtotheBangchakrevolvingdebtfacilities.Otherfinancingcoststotalled$0.303millionandwereassociatedwithevaluationofotherreservesbaselendingoptions;and

• Overheadsandotherexpendituresincludingforeignexchangemovementsof$5.470million.


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DIRECTORS’ REPORT PRODUCTION AND DEVELOPMENT ACTIVITIESIn2016,thefollowingkeyproductiondevelopmentmilestonesoccurred:

• 18.7mmbblsgross(5.5mmbblsnettoNido)wereproducedfromtheGalocoilfield;

• ProductionuptimeatGalocaveraged99.77%duringtheyear;and

• TheNidoandMatinlocoilfieldscontinuedtoproduceoilonacyclicalbasis.Oilproductionfromthesefieldsintheyeartotalled126,388bblsgross(32,637bblsnettoNido).

EXPLORATION & APPRAISAL ACTIVITIES• TheGalocJointVentureapprovedtheGaloc-7/7ST

appraisalwellinordertoconfirmthecommercialityofapotentialPhaseIIIdevelopmentproject.

• TheCompanycontinuedtoreviewnewventureopportunitiesthroughouttheyearaspartofitslongertermstrategyofexpansion.

HEALTH, SAFETY, SECURITY AND ENVIRONMENT • TheCompanyachievedexcellentHSSEperformance

acrossallassetsandactivitiesduring2016withaTotalRecordableInjuryFrequencyRate(TRIFR)ofzeroandaLostTimeInjuryFrequencyRate(LTIFR)for2016ofzero.

CORPORATE• Cashonhandatyearendwas$31.974millionand

debtdrawnundertherevolvingtermloanfacilitywithBangchakwas$78.200millionatyearend;

• TheCompanyraisedatotalof$19.778million(beforecosts)fromapro-rataentitlementoffertofundtheCompany’sparticipatinginterestshareoftheGaloc-7/7STappraisalwell.

• Grosslossfromcontinuingoperationsforthe2016yearwas$5.538millionandnetlossaftertaxwas$17.255million;

• NidosuccessfullycompletedarestructureofitsFacilityAgreementwiththeBangchakPetroleumPublicCompanyLimitedon11March2016.Underthetermsoftherestructure,principalandinterestpaymentsaredeferreduntilMarch2018andthefacilityinterestnolongerincreasesby2%peryearbutiscappedat6%plusLIBORforthetermoftheloan.

ANNUAL GENERAL MEETING• TheCompany’sAnnualGeneralMeetingwasheld

on6May2016attheCompany’sofficesatLevel3,1PrestonStreet,Como,WA6152;

• Shareholdersapproved:

º there-electionofMrWilliamBlokingandtheelectionofMrKrairitNilkuhaasDirectorsoftheCompany;

º theadoptionoftheremunerationreport;and

º theissueof350,000RetentionRightstoDrMichaelFischer,ManagingDirector.

DIVIDENDSNodividendswerepaidordeclaredbytheconsolidatedentityduringthefinancialyear.

CORPORATE STRUCTURETheCompanyislimitedbysharesandisincorporatedanddomiciledinAustralia.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS SignificantchangesinthestateofaffairsoftheCompanyduringthefinancialyeararedetailedinthefinancialandactivitiesreviewinthisReport.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS TheCompanycontinuestopursuestrategicopportunitieswithrespecttoitsassetsandisindiscussionswithanumberofpotentialpartnersconcerningpossiblefarm-outtransactions.

CORPORATE SOCIAL RESPONSIBILITYNidoiscommittedtoenhancingshareholdervaluebyconductinginternationaloilandgasexploration,developmentandproductioninamannerthat,throughitsCorporateSocialResponsibilityPrograms,sharespartofthebenefitsofthisactivitywiththecommunitiesinwhichitoperates.

NidohasadoptedatwoprongedapproachtoitsCorporateSocialResponsibilityPrograms.ThisinvolvestheNidoPetroleumFoundation,Inc.(‘NidoFoundation’)inthePhilippinesandtheCompany’sCharitableDonationsCommittee,whichactivelyencouragesandsupportsstaffastheyworkinarangeofcommunityorganisationsinAustraliaandthePhilippines.

Ourcommunitysponsorshipprogramprovidesopportunitiesforourcompanyandemployeestobecomeinvolvedandsupportinitiativesthatcanmakeapositivedifferenceinthecommunity.

FurtherdetailsontheCompany’sCorporateSocialResponsibilityactivitiescanbeaccessedfromtheCompany’swebsite.


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DIRECTORS’ REPORT HEALTH, SAFETY, SECURITY AND THE ENVIRONMENT (HSSE)ThesafetyoftheCompany’speopleandourinteractionwiththeenvironmentareaccordedthehighestprioritythroughouttheorganisation.Sincecommencingoffshoreseismicanddrillingoperationalactivityin2007theCompanyhasmaintainedanexcellentsafetyrecordofzerofatalities,zeroLostTimeInjuries(LTIs).TheTotalRecordableInjuryFrequencyRate(TRIFR)andLostTimeInjuryFrequencyRate(LTIFR)for2016waszero.

TheCompanyrecognisesthatwhileitisasmallexplorationandproductioncompany,itshouldstrivetoattainthehighestlevelsofHSSEstandardsandpracticesineveryfacetofitscurrentoperationalactivitiesandbusinessculture.Inthiscontext,theCompanyhasestablishedaHSSESystemcomprising16StandardswhichprovidecomprehensiveguidelinesformanagingallHSSEaspectsoftheCompany’sbusinessactivities.

TheDirectorshaveconsideredcompliancewiththeNationalGreenhouseandEnergyReportingAct2007whichrequiresentitiestoreportannualgreenhousegasemissionsandenergyuse.TheDirectorshaveassessedthattherearenocurrentreportingrequirements,butmayberequiredtodosointhefuture.

REMUNERATION REPORT (Audited)

A. INTRODUCTIONForthepurposesofthisreporttheterm“Executive”includesthoseKeyManagementPersonnelwhoarenotDirectorsoftheparentcompanyordidnotactinthatcapacityduringthereportingperiod.TheCompany’sKeyManagementPersonnelarepersonshavingauthorityandresponsibilityforplanning,directingandinfluencingtheGroup’sstrategicdirectionandperformancethroughtheiractions,eithercollectively(inthecaseoftheBoard)orasindividualsactingunderdelegatedauthorities(inthecaseoftheExecutives).ThenamesandpositionsoftheindividualswhowereKeyManagementPersonnelduring2016aresetoutbelow.

DETAILS OF KEY MANAGEMENT PERSONNEL

(i) Directors

WBloking Chairman(Non-Executive)

MFischer ManagingDirector

AEdwards Director(Non-Executive)

VUsanachote Director(Non-Executive)

CKovavisarach Director(Non-Executive)

KNilkuha Director(Non-Executive)

(ii) Executives

JPattilloHeadofExplorationceasedemploymentwiththeCompanyon30December2016

JNewman GeneralCounselandCompanySecretary

KThirakaosal CommercialManager

SNichol ProductionManager

JSurjanFinancialController(KMPeffectivefrom17April2016)

AGilbertChiefFinancialOfficerceasedemploymentwiththeCompanyon16April2016

B. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION AND SERVICE AGREEMENTS

REMUNERATION POLICY AND PRINCIPLESTheCompanyhasadoptedthefollowingprinciplesinitsremunerationframework:

Non-Executive Directors

Managing Director & Executives

• TheBoardseekstosetaggregateremunerationatalevelwhichprovidestheCompanywiththeabilitytoattractandretainDirectorsofthehighestcalibrewhilstincurringacostwhichisacceptabletoshareholders.

• Providingfair,consistentandcompetitivecompensationandrewardstoattractandretainhighcalibreemployees;

• Ensuringthattotalremunerationiscompetitivebymarketstandards;

• IncorporatingintheremunerationframeworkbothshortandlongtermincentiveslinkedtothestrategicgoalsandperformanceoftheCompanyandtotalshareholderreturn;

• Demonstratingaclearrelationshipbetweenindividualperformanceandremuneration;and

• MotivatingemployeestopursueandachievethelongtermgrowthandsuccessoftheCompany.


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DIRECTORS’ REPORT REMUNERATION REPORT (Audited)

COMPANY PERFORMANCE & REMUNERATIONTheCompanysharepriceandearningspershare(EPS),showninthetablebelow,reflectCompanyperformanceduringthepreviousfourfinancialyearsandforthecurrentyearended31December2016.

31 Dec 2016

31 Dec 2015

31 Dec 2014

31 Dec 2013

31 Dec 2012

EPS (USD cents) (1) (24.16) (71.12) (15.19) 48.29 31.10

Share price AUD (2) 0.07 0.25 1.40 1.80 1.35

(1) Prior year EPS comparatives have been restated to reflect the change in functional currency to US dollars on 1 April 2015, and the 1:50 share consolidation on 29 May 2015

(2) Prior year share price comparatives have been restated to reflect the 1:50 share consolidation on 29 May 2015

REMUNERATION STRUCTUREInaccordancewiththeASXCorporateGovernanceCouncil’sPrinciplesofGoodCorporateGovernanceandBestPracticeRecommendations(ASXPrinciplesandRecommendations)thestructureoftheCompany’sNon-ExecutiveandExecutiveremunerationisclearlydistinguished.

NON-EXECUTIVE REMUNERATION STRUCTURETheCompany’sConstitutionandtheASXListingRulesspecifythattheaggregatefeestobepaidtoNon-ExecutiveDirectorsaretobeapprovedbyshareholdersataGeneralMeeting.ThelatestdeterminationwasmadeattheCompany’sAnnualGeneralMeetingheldon9May2008whereshareholdersapprovedanaggregateamountofA$450,000peryear(allinclusive).

ThefeestructureforNon-ExecutiveDirectorsisreviewedannuallywhichincludesanalysisofthefeespaidtoNon-ExecutiveDirectorsofcomparablecompanies,whenundertakingtheannualreviewprocess,andmayincludetheuseofexternalconsultants.TheCompanyhastakenthepositionthatindependentexternaladvicewillgenerallybesoughteverysecondyear.

In2015theBoardreceivedadvicefromanindependentremunerationconsultant,GerardDaniels,inrelationtotheremunerationofNon-ExecutiveDirectorsandExecutives.FollowingtherecommendationsofGerardDaniels,theBoardresolvedin2015tochangetheNon-ExecutiveDirectorfeestructuresuchthatEachDirectorispaidafeeofA$85,000peryearinclusiveoftheirmembershipofanyBoardCommitteesapartfromtheChairmanoftheBoardwhoreceivesafeeofA$130,000.

Forthe2016yearbasedoninternalanalysisoffeespaidtoNon-ExecutiveDirectorsofcomparablesizedASXlistedcompanies,theBoardresolvedtoretainfeesforNon-ExecutiveDirectorsat2015levels.HoweverasaresultofthelowoilpriceenvironmentandinordertoreducegeneralandadministrativeexpendituretheNon-ExecutiveDirectorsvoluntarilyagreedtoaccepta10%reductionintheirrespectivefeesduringtheperiodfrom1February2016to30June2016.

Non-ExecutiveDirectorsarenotentitledtoretirementbenefitsandarenotentitledtothegrantofoptionsorperformancerightsinaccordancewiththeCompany’spolicyprohibitingsuchgrants.

ApartfromtheirdutiesasDirectors,someNon-ExecutiveDirectorsfromtimetotimeundertakeworkfortheCompanyonaconsultancybasispursuanttothetermsofconsultancyservicesagreements.

ThenatureofconsultancyworkvariesdependingontheexpertiseoftherelevantNon-ExecutiveDirector.Underthetermsoftheseconsultancyagreements,Non-ExecutiveDirectorsreceiveadailyratefortheworkperformedandsuchrateiscomparabletomarketratesthattheywouldotherwisereceivefortheirconsultancyservicesintheopenmarket.

BeforeanyconsultancyisenteredintotheCompanycarriesoutarigorousarm’slengthassessmentprocesstoensurethearm’slengthnatureoftherelevantconsultancyservicesagreement.Thisarm’slengthassessmentisconductedeachtimearequestforservicesisinitiatedbytheManagingDirector,whichisthenrequiredtobeapprovedbytheChairmanoftheAuditandRiskManagementCommitteeifthefeesfortherelevantservicesareA$20,000orless.IfthefeesareinexcessofA$20,000thentheBoardmustendorsetherequest.

TheremunerationofNon-ExecutiveDirectorsfortheyearsended31December2016and31December2015isdetailedfurtherinthisRemunerationReport.

ALTERNATE DIRECTORSNoseparateremunerationisofferedtoorreceivedbyAlternateDirectorsfortheperformanceoftheirrolesasAlternateDirectors.AtpresenttheCompanydoesnothaveanyAlternateDirectors.

MANAGING DIRECTOR AND EXECUTIVE REMUNERATION STRUCTURETheCompanymaintaineditsperformancemanagementprocedureforExecutivesandstaffandaspartofsuchprocedureeachExecutiveundertakesanannualperformanceappraisalwiththeManagingDirector.TheManagingDirector’sperformanceisinturnreviewedbytheBoard.

ExecutiveRemunerationconsistsofthefollowingkeyelements:

• Fixedremuneration;and

• Variableremuneration,comprisingShortTermIncentives(STI)andLongTermIncentives(LTI).

TheproportionoffixedremunerationandvariableremunerationisestablishedforeachExecutivebytheRemunerationandNominationCommitteeandapprovedbytheBoardinaccordancewiththeRemunerationPolicyandtheSTIandLTIPlanshavingregardtotheCompanyandindividualperformance,andrelevantcomparableremunerationintheoilandgasindustry.

Duringthe2016year,however,theCompanychosenottoallocateanawardofLongTermIncentivesastheBoarddecidedthattheexistingEmployeePerformanceRightsPlanwasnolongerappropriateinthecircumstancesoftheCompany.TheformofLongTermIncentivecontinuestoremainunderreviewbytheBoard.


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SIGN-ON AND RETENTION BONUSDuring2015theCompanyprovidedaSign-onandRetentionBonusof350,000retentionrightstoDrFischeraspartofhisremunerationpackageandsubjecttoshareholderapproval.TherationaleforthisparticularbenefitwastoprovidearetentionincentiveforDrFischer.TheSign-onandRetentionBonuswasapprovedbyshareholdersattheCompany’sAGMon6May2016.350,000retentionrightswereissuedtoDr.FischerfollowingtheAGMheldon6May2016ofwhichatotalof87,500ordinaryshareswereissuedtoDrFischerduringthe2016yearintwoequaltranchesof43,750ordinaryshares.

FIXED REMUNERATIONExecutivesreceivetheirfixedremunerationintheformofcashandvariousfringebenefits.Forthe2016yearexecutiveremunerationwasbenchmarkedinternallyusingmarketdatawithrespecttoremunerationpaidtoExecutivesofcomparableASXlistedcompanies.InthiscontexttheBoardresolvedtoretainfixedremunerationforExecutivesforthe2016yearat2015levels.

Howeverduetothelowoilpriceenvironmentinthefirsthalfof2016Executivesvoluntarilyaccepteda10%reductioninhoursandcorrespondinglyinwagesbetween1February2016and30June2016toreducegeneralandadministrativeexpenditure.

ThespecificamountoffixedremunerationforeachExecutiveisdetailedfurtherinthisReport.

VARIABLE REMUNERATION – SHORT TERM INCENTIVEUndertheCompany’sSTIPlan,STIpaymentsaregrantedannuallytostaffandExecutivesdependingontheCompany’sannualperformancegoalsandindividualperformancetargetsovertheprecedingyear.TheRemunerationandNominationCommitteeretainsthediscretiontoadjustindividualbonusestorewardoutstandingindividualperformance.

IndeterminingtheamountoftheSTIpooleachyear,theCompanygenerallysetsanumberofperformancecriteriaatthebeginningoftheyearandassignsaweightingtoeachcriterion.Asagainsteachcriteriontherearethreelevelsofperformancewhichcanattractanawardtothepool:threshold,targetandstretch.

IftheCompanyachievesthethresholdlevelofperformance,theCompanyawards80%ofthetargetpoolforthatcriterion.IftheCompanyachievesthetargetlevelofperformancetheCompanyawards100%ofthetargetpoolforthatcriterionandiftheCompanyachievesthestretchlevelofperformance,theCompanyawards120%ofthetargetpoolforthatcriterion.

TotheextentthattheCompanyachieveslessthanthethresholdlevelthereisnoawardforthiscriterionandthepoolisreducedaccordingly.

TheoveralltargetSTIpoolavailableis15%ofthegrossbasesalaryoftheCompany’sstaff.TheBoard,however,retainsdiscretiontowithholdtheawardofanypaymentsdependingontheCompany’sclosingcashpositionandits

abilitytocomplywithitscommitmentsforthefollowingyearafterbonusesarepaid.

Keyperformanceindicators(KPI’s)undertheSTIPlanarechosenfromfinancialmetricsintermsofbudgetaryperformance,sharepriceperformance,operationalmetricsintermsofprojectprogress,explorationactivitiesandproductionactivities,healthandsafetymetricsaswellasprofessionalservicemetricsforthetimelinessandaccuracyofadviceandsupportprovidedtothetechnicalandoperationalpartsofthebusiness.TheseKPIsarechosenbecausetheyalignindividualperformancewiththeachievementofNido’sstrategicplan.

SubjecttotheoverallpoolthattheCompanyhasavailablefordistribution,whichisdependentontheCompany’sperformanceagainsttheCompanytargets,ifanindividualachievestargetonalloftherelevantKPIs,thebonussuchindividualreceivesisdependentontheirpositionwithintheCompanyasfollows:

Staffareeligibletoreceive15%ofbase(gross)salary;

ExecutivesapartfromtheManagingDirectorareeligibletoreceive25%ofbase(gross)salary;and

TheManagingDirectoriseligibletoreceive32%ofbase(gross)salary.

Priortothe2016yearallstaffincludingExecutiveswereeligibletoreceive15%forattargetperformanceonly.TheBoardresolvedtochangetheSTIframeworkforExecutivesin2016suchthattheManagingDirectorwouldbeeligibleforan‘attarget’32%awardofhisbasesalaryasaSTIandthebalanceoftheExecutiveswouldbeeligibleforan‘attarget’25%awardoftheirrespectivebasesalariesasaSTI.

2015 Targets – STI Payment Awarded in March 2016Inrelationtothe2015STIprogramandgiventhetransitioninleadershipoftheCompany,theBoarddidnotformallysetanytargetsundertheSTIPlanatthecommencementoftheyear.TheBoardinsteaddeterminedthatitwouldreviewExecutiveperformanceagainsttheactivitiesundertakenbytheCompanyoverthecourseoftheyear.

InthiscontexttheBoardnotedthattheCompanyhadperformedwellwithrespecttoHSSErelatedmatters,performedwellagainstbudgetandthattheCompanyhadalsosignificantlyreducedoperatingcostswithintheGalocJointVenturefollowingtheassumptionoftheroleofOperatoroftheJointVenture.

GiventhesecircumstancestheBoardresolvedtoawardapooloffundsforallocationtostaffandExecutivesequivalenttoathresholdlevelofperformanceof12%ofbaseExecutiveandstaffremunerationasaSTIpaymentforperformanceforthe2015year(withtheManagingDirectortoreceivea12%awardpro-ratedbasedonhistenureduringthe2015year).

Notwithstandingthispositionandasaresultofthedeterioratingoilpriceenvironmentinthelatterpartofthe2015year,theCompanyreviseditspositionwithrespecttotheSTIawardandinMarch2016resolvedtoallocatea5%STIawardtotheCompany’sstaffandExecutivesaswellasanadditionalfiveannualleavedaystotherespectiveleavebalancesofeachstaffmemberandExecutiveswithrespecttoperformanceagainstthe2015targets.


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2016 Targets – No STI Payment Inrelationtothe2016STIprogramtheBoardsettargetsundertheSTIPlanatthecommencementoftheyear.Thespecifictargetschosenwereperformancewithrespecttoproduction,budget,HSSE,strategy,portfoliomanagementandhumanresources.TheseKPIswerechoseninordertoalignindividualperformancewiththeCompany’sobjectives.

InadditiontheBoardmadeanySTIawardunderthe2016STIprogramsubjecttoapositiveEBITDAthresholdcriteriasuchthatafailuretomeetthecriteriawouldpreventtheawardofanySTIpaymentsforthisyear.

DuetotheCompany’sfailuretomeettheEBITDAthresholdcriteriatherewerenopaymentsmadeundertheformalSTIprogramforperformanceagainstthe2016targets.

2016 Discretionary BonusNotwithstandingtheCompany’sfailuretomeettherelevantthresholdSTIcriteriafor2016theBoardconsidereditwasappropriatetoallocateapoolofmoneyforawardasadiscretionarybonustoExecutivesandstaff.TheBoardconsideredthiswasappropriateinthecircumstancesgiventhatExecutiveshadvoluntarilyassumeda10%reductioninhoursandwagesduringthefirsthalfof2016andgiventhattheCompanyhadnotawardedanyLongTermIncentivestoExecutivesandstaffsince2014.

Inthesecircumstances,on22November2016theBoardapprovedabonuspoolof$180,000forallocationatthediscretionoftheChairmanandtheManagingDirectortopersonswhointheirviewhadperformedexceptionallyoverthecourseoftheyear.InthiscontextDrFischerwasawardedabonusof$49,631,MrNewmanwasawardedabonusof$49,006andMrSurjanwasawardedabonusof$31,025.

Variable Remuneration – Long Term IncentiveTheCompany’sEmployeePerformanceRightsPlan(Plan)andLongTermIncentivepolicyarecurrentlyunderreviewbytheBoard.Therewasthereforenoallocationofperformancerightsduring2015or2016toExecutivesoftheCompany.

Managing Director and Executive Employment Contracts

Managing Director AsummaryofthekeytermsofDrMichaelFischer’semploymentcontractisasfollows:

• BaseSalary-A$500,000perannum;

• Superannuation12%-A$60,000perannum;

• Shorttermincentive–DrFischerwillparticipateintheCompany’sperformancebasedShortTermIncentiveScheme;

• Longtermincentive–DrFischerwillparticipateinNido’sEmployeePerformanceRightsPlan(subjecttoshareholderapproval);

• ASignonandRetentionBonuswasgrantedof350,000fullypaidordinarysharesintotalissuedineight(8)equaltranchesatsix(6)monthintervalscommencingsix(6)monthsafterthecommencementofemploymentandapprovedbytheCompany’sshareholdersattheAGMon6May2016;and

• Termination-IntheeventofterminationoftheEmploymentContractbytheCompanytheCompanyisrequiredtopayasumequivalentto6monthsofhisbasesalaryandissueuptoamaximumof43,750ordinarysharesinthecompanyinrespectofanyyet-to-be-awardedSignonandRetentionBonus,subjecttoanylimitationsoutlinedintheCorporationsAct2001.


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ThetablebelowsetsouttheSignonandRetentionBonusgrantedtoDrFischeraspartofhisemploymentcontract.TheretentionrightswereissuedfreeofchargeandentitletheholdertosubscribeforonefullypaidordinaryshareintheCompanysubjecttocertainconditions.

Terms and Conditions of Each Grant

Number of

Rights Granted

Number ofShares

Vesting in the Year

Percentage of Cumulative

Shares Vested (%)

ServiceCommencement

Date 1Grant Date 1

Value at Grant

Date A$ 1

Number of SharesCancelled

Percentage of Shares

Cancelled (%) Exercise

Price

2016

Director

MFischer 350,000 87,500 25% 26/8/15 6/5/16 0.175 - - Nil

Total 350,000 87,500 25%

2015

Director

MFischer - - 26/8/15 31/12/15 0.25 - - Nil

Total - - -

1 InregardstoretentionrightsissuedpursuanttoDrFischer’sSign-onandRetentionBonus,theserviceperiodcommencedinthe2015yearwith$14,921expensedto31December2015.ForaccountingpurposesunderAASB2“ShareBasedPayments”wheregrantdateoccursafteryearend,theestimatedvalueofthegrantdateistheendofthereportingperiod31December2015.Theactualgrantdatehasnowbeenestablishedas6May2016(thedateofShareholderapprovalattheAnnualGeneralMeeting),andtheestimatedfairvaluewasrevisedin2016tousethefairvalueoftheretentionrightsontheactualgrantdate.Atotalof$15,221hasbeenexpensedintheyearended31December2016.

Termination ClausesThecontractswithKeyManagementPersonnel(‘KMP’)(otherthantheManagingDirectorwhoseterminationbenefitisdescribedaboveunderthesummaryofhiskeytermsandconditions)specifiedundertheRemunerationofDirectorsandExecutivestablehavenoterminationdateandunderthetermsofthecontracts:

• TheExecutivemayresignfromhisorherpositionandthusterminatehisorhercontractbygivingonemonth’swrittennotice;and

• IntheeventthattheCompanywishestoterminateanExecutive’semployment,exceptincircumstancesofmisconductormaterialbreachesoftheircontractand,withtheexceptionofMrNicholandMrThirakaosal,theCompanywillpaytheExecutiveasumequivalentto12monthsofhisorherfixedremunerationpackage.MrThirakaosal’s(BusinessDevelopmentManager)andMrNichol’s(ProductionManager)employmentcontractsprovideforaterminationbenefitequivalentto6monthsoftheirrespectivefixedremunerationpackages.


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C. REMUNERATION OF KEY MANAGEMENT PERSONNEL

REMUNERATION OF KEY MANAGEMENT PERSONNEL – DIRECTORS

Short TermPost

EmploymentLong-term

BenefitsShare Based

Payments (LTI)

Salary & Fees

Cash Bonus (STI)(**) Other(#)

Super-annuation

Long Service

LeavePerformance

Rights* Shares*

Termination, Severance & Redundancy

Payments Total

% Comprising Share and

Performance Rights**

% Performance

Related

WBloking(1)

• 2016 64,969 - - 27,814 - - - - 92,783 - -

•2015 188,548 - - 13,583 - - - - 202,131 - -

MFischer(2)

• 2016 357,376 49,631 18,222 48,862 1,801 - 15,221 - 491,113 3.1% 10.1%

•2015 124,750 7,620 52,543 15,702 659 - 14,921 - 216,195 6.9% 3.5%

AEdwards

• 2016 55,402 - - 5,263 - - - - 60,665 - -

•2015 58,359 - - 5,544 - - - - 63,903 - -

VUsanachote

• 2016 55,402 - - 5,263 - - - - 60,665 - -

•2015 58,359 - - 5,544 - - - - 63,903 - -

CKovavisarach

• 2016 55,402 - - 5,263 - - - - 60,665 - -

•2015 58,359 - - 5,544 - - - - 63,903 - -

KNilkuha(2)

• 2016 55,402 - - 5,263 - - - - 60,665 - -

•2015 20,247 - - 1,923 - - - - 22,170 - -

PByrne(3)

• 2016 - - - - - - - - - - -

•2015 159,719 - 9,915 9,962 (18,129) - - - 161,467 - -

Total Remuneration: Directors

• 2016 643,953 49,631 18,222 97,728 1,801 - 15,221 - 826,556 1.8% 6.0%

•2015 668,341 7,620 62,458 57,802 (17,470) - 14,921 - 793,672 1.9% 1.0%


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REMUNERATION OF KEY MANAGEMENT PERSONNEL – EXECUTIVES

Short TermPost

EmploymentLong-term

BenefitsShare Based

Payments (LTI)

Salary & Fees

Cash Bonus (STI)(**) Other(#)

Super-annuation

Long Service

LeavePerformance

Rights* Shares*

Termination, Severance & Redundancy

Payments Total

% Comprising Share and

Performance Rights**

% Performance

Related

JPattillo(4)

• 2016 438,550 - 9,633 36,441 (79,429) - - 457,747 862,942 0% 0.0%

•2015 341,118 20,116 8,697 40,705 8,992 - - - 419,628 0% 4.8%

AGilbert(5)

• 2016 112,526 - 3,492 5,413 (25,469) - - 274,548 370,510 0% 0.0%

•2015 254,680 14,790 8,148 24,674 6,586 - - - 308,878 0% 4.8%

JNewman

• 2016 209,786 49,006 7,375 22,307 5,903 - - - 294,377 0% 16.6%

•2015 228,162 13,375 6,485 24,544 7,750 - - - 280,316 0% 4.8%

KThirakaosal

• 2016 401,095 - 44,595 22,307 1,535 - - - 469,532 0% 0.0%

•2015 466,374 17,409 91,209 29,037 5,691 - - - 609,720 0% 2.9%

SNichol

• 2016 257,344 - 7,124 22,294 1,249 - - - 288,011 0% 0.0%

•2015 187,270 17,008 4,807 16,339 924 - - - 226,348 0% 7.5%

JSurjan(6)

• 2016 126,326 31,025 7,498 10,454 4,982 - - - 180,285 0% 17.2%

Total Remuneration: Executives

• 2016 1,545,627 80,031 79,717 119,216 (91,229) - - 732,295 2,465,657 - 3.2%

•2015 1,477,604 82,698 119,346 135,299 29,943 - - - 1,844,890 - 4.5%

Theamountsdisclosedabovedonotincludeinsurancepremiumspaidinrelationtodirectors’andofficers’liabilityinsuranceasthetermsoftheinsurancepolicyprecludedisclosureoftheseamounts.

#Includesnon-cashbenefitspaid.

1DuringtheperiodbetweenPByrne’sresignationandMFischer’sappointment,WBlokingactedasInterimCEOandExecutiveChairmanoftheCompanyonashorttermconsultancybasisprovidedbyarelatedentity.Feespaidtotherelatedentityof$135,430havebeenincludedinthetableabove.2MFischerappointed26August2015,andKNilkuhaappointed21August2015.3PByrneresigned30April2015.4JPattilloceasedemploymentwiththeCompanyon30December2016.5AGilbertceasedemploymentwiththeCompanyon16April2016.6JSurjanappointedKMPeffective17April2016.

* Theamountincludedasremunerationrelatingtoperformancerightsisnotrelatedtoorindicativeofthebenefit(ifany)thattheindividualmayultimatelyrealise.ThefairvalueoftheseinstrumentsasattheirdateofgrantwasdeterminedinaccordancewithAASB2“ShareBasedPayments”applyingvaluationmodels.DetailsoftheassumptionsunderlyingthevaluationsaresetoutinNote23totheFinancialStatements.

** Thedetailsforcashbonusespaidaresetoutinthetablebelow.


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REMUNERATION OF KEY MANAGEMENT PERSONNEL - NOTESDetailsofcashbonusespaidandincludedintheremunerationtablesprecedingthistable:

Key Management Personnel

Vesting Date

Date Paid

Amount Paid US$ Nature

Max. Potential Entitlement*

Percentage Granted*

Percentage Forfeited*

2016 (2016performanceyear)

MFischer N/A 7/12/2016 $49,631 Cash N/A N/A N/A

JPattillo N/A N/A N/A N/A N/A N/A N/A

AGilbert N/A N/A N/A N/A N/A N/A N/A

JNewman N/A 7/12/2016 $49,006 Cash N/A N/A N/A

SNichol N/A N/A N/A N/A N/A N/A N/A

KThirakaosal N/A N/A N/A N/A N/A N/A N/A

JSurjan N/A 7/12/2016 $31,025 Cash N/A N/A N/A

2015(2015performanceyear)**

PByrne N/A N/A N/A N/A N/A N/A N/A

MFischer N/A 16/12/2015 7,620 Cash 6% 2.1% 64.4%

JPattillo N/A 16/12/2015 20,116 Cash 18% 6.4% 64.4%

AGilbert N/A 16/12/2015 14,790 Cash 18% 6.4% 64.4%

JNewman N/A 16/12/2015 13,375 Cash 18% 6.4% 64.4%

SNichol N/A 16/12/2015 17,008 Cash 18% 6.4% 64.4%

KThirakaosal N/A 16/12/2015 17,409 Cash 18% 6.4% 64.4%

* UndertheCompany’sSTIPolicy,themaximumpotentialentitlementforthe2016yearwas25%ofanExecutive’sbasesalarywiththeManagingDirectorentitledto32%.Priorto2016themaximumawardwas15%.Forthe2016performanceyeartherewasnoawardundertheformalSTIprogram.BonusesweregrantedbytheBoardonadiscretionarybasis.Refertopage18forfurtherdetails.

** TheCompanydidnotawardKeyManagementPersonnelanySTIpaymentsin2015inrespectoftheirperformanceagainst2014targets(refertosectionBinthisreport,sub-heading‘VariableRemuneration–Short-termIncentives’forcommentary).

D. SHARE-BASED COMPENSATION

COMPENSATION PERFORMANCE RIGHTS TO DIRECTORS – GRANTED AND VESTED DURING THE YEARTherewerenoperformancerightsgrantedduringthe2015and2016yearstoDirectors.TheCompany’sLTIpolicyremainsunderreviewbytheBoard.

COMPENSATION PERFORMANCE RIGHTS TO EXECUTIVES – GRANTED AND VESTED DURING THE YEARTherewerenoperformancerightsgrantedduringthe2015and2016yearstoExecutives.TheCompany’sLTIpolicyremainsunderreviewbytheBoard.

TherewerenooptionsgrantedaspartofremunerationtoDirectorsorExecutivesin2016or2015.


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E. EQUITY HOLDINGS AND MOVEMENTS DURING THE YEAR(a) Rights Holdings of Key Management Personnel

Balance at 1 January

Granted as remuneration

Rights exercised *

Cancelled/ Forfeited /

Expired

Change due to appointment /

(resignation)Balance at

31 December Vested Non

Vested

2016

Directors

MFischer - 350,000 87,500 - - 262,500 - 262,500

Executives

JPattillo - - - - - - - -

JNewman - - - - - - - -

AGilbert - - - - - - - -

KThirakaosal - - - - - - - -

SNichol - - - - - - - -

JSurjan - - - - - - - -

- - - - - - - -

2015

Directors

PByrne - - - - - - - -

MFischer - - - - - - - -

Executives

JPattillo - - - - - - - -

JNewman - - - - - - - -

AGilbert - - - - - - - -

KThirakaosal

SNichol - - - - - - - -

- - - - - - - -

* TherightsvestedrelatetoDrFischer’ssign-onandretentionbonus.PerthetermsoftheSign-onandRetentionBonusunderDrFischer’semploymentcontract350,000retentionrightswereapprovedbyShareholdersattheCompany’sAGMon6May2016.


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(b) Shareholdings of Key Management Personnel

Balance at 1 January

On exercise of share rights

(retention rights) / performance

rights

Change due to appointment /

(resignation)Net change

otherBalance at

31 December

2016

Directors

WBloking - - - - -

MFischer - 87,500 - - 87,500

AEdwards - - - - -

VUsanachote - - - - -

CKovavisarach - - - - -

KNilkuha - - - - -

Executives

AGilbert - - - - -

JPattillo - - - - -

JNewman - - - - -

KThirakaosal - - - - -

SNichol - - - - -

JSurjan - - - - -

- 87,500 - - 87,500

2015

Directors

WBloking - - - - -

MFischer - - - - -

AEdwards - - - - -

VUsanachote - - - - -

CKovavisarach - - - - -

KNilkuha - - - - -

PByrne - - - - -

Executives

AGilbert - - - - -

JPattillo - - - - -

JNewman - - - - -

KThirakaosal - - - - -

SNichol - - - - -

- - - - -

* AllequitytransactionswithKeyManagementPersonnelotherthanthosearisingfromtheexerciseofremunerationoptionsandperformancerightshavebeenenteredintoundertermsandconditionsnomorefavourablethanthosetheentitywouldhaveadoptedifdealingatarm’s-length.


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F. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNELTherewerenorelatedpartytransactionswithKeyManagementPersonnelduringthe2016year.

Noloansoradvancesto/fromKeyManagementPersonnelwereoutstandingatyearend.

G. USE OF REMUNERATION CONSULTANTSNoremunerationconsultantswereengagedbyNidoduringthe2016year.

End of Remuneration Report.


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DIRECTORS’ REPORT INDEMNIFICATION OF DIRECTORS, OFFICERS AND AUDITORSDuringtheyeartheCompanypaidpremiumsinrespectofacontractinsuringallDirectorsandOfficersoftheCompanyanditscontrolledentitiesagainstliabilitiesincurredwhileperformingdutiesasDirectorsorOfficerstotheextentpermittedbytheCorporations Act 2001.Duetoaconfidentialityclauseinthecontract,theamountofthepremiumhasnotbeendisclosed.

TheCompanyhasagreedtoindemnifyitsauditors,KPMG,aspartofthetermsofitsauditengagementagreementagainstclaimsbythirdpartiesarisingfromtheaudit.NopaymenthasbeenmadetoindemnifyKPMGduringorsincethefinancialyear.

ENVIRONMENTAL REGULATION AND PERFORMANCE TheCompany’senvironmentalobligationsareregulatedunderthelawsofthecountriesinwhichNidohasoperations.ItistheCompany’spolicytocomplywithitsenvironmentalperformanceobligationsand,wherepossible,adheretohigherstandardsthanwhatisrequired.

AssetoutintheCompany’sHealth,Safety,SecurityandEnvironmentPolicy,theCompanyiscommittedtoenhancingshareholdervaluethroughinternationaloilandgasexploration,developmentandproductionactivitiesinamannerthatprotectshealth,safety,securityandtheenvironment.TheCompanyiscommittedtoconductingitsbusinessinamannerthatminimisestheadverseimpactonemployees,contractors,thecommunityandtheenvironmentthatmaybeaffectedbyitsworkactivities.

Toachievethis,theCompany:

• Demonstratesastrongcommitmenttohealth,safety,securityandenvironmentalcarethroughitsbehaviour;

• Complieswithhealth,safety,securityandenvironmentalobligationsandregulationsofthecountryofoperationswhilststrivingforhigherstandards;

• Commitstothecontinuousimprovementofitshealthandsafetybehaviourandenvironmentalculture;

• Respectslocalcultureandisproactiveinrecognisingitsresponsibilitytomeetandexceedcommunityexpectations;and

• Designslocalsolutionsforlocalissues,creatingpositivechange.

TheCompanybelievesthatnotaskissourgentthatitcannotbedonesafelyandthathealth,safety,securityandtheenvironmentareofparamountconcerninplanningandcarryingouteverytask.TheCompanyiscommittedtocaringforthepeopleandtheenvironmentconnectedwithitswork.

TheCompanyhasalsoadoptedanemergencyresponseplanandhealth,safety,securityandenvironmentalprocedureswhichhavebeenthesubjectofinformationdisseminationandtrainingtostaffandcontractors.Environmentalliabilityrisksarealsomanagedthroughcontracttermsandinsurancepolicies.Theabove

measuresrepresentprudentriskmanagementcontrolsdesignedtominimisetheriskofnegativeenvironmentalimpacts.

NoenvironmentalbreacheshavebeennotifiedbyanyapplicablegovernmentagencyasatthedateofthisReport.

DetailsinrelationtotheabandonmentandrestorationobligationsoftheCompanyinthePhilippinesassociatedwithitsexistingoperationsandfacilitiesaresetoutinNote17oftheNotestotheFinancialStatements.

TheDirectorshaveconsideredcompliancewiththeNationalGreenhouseandEnergyReportingAct2007whichrequiresentitiestoreportannualgreenhousegasemissionsandenergyuse.TheDirectorshaveassessedthattherearenocurrentreportingrequirements,butmayberequiredtodosointhefuture.

TheCompanyregularlyreviewschangestoenvironmentalregulationsthatmayaffectorposearisktotheCompany’sbusinessactivitiesandwhereappropriate,amendssuchpoliciesandproceduresasnecessary.

SUBSEQUENT EVENTS TheCompanyhasidentifiedthefollowingaseventsoccurringafteryearend:

1. On25January2017GPCenteredintoadrillingrigcontractwithGoldenCloseMaritimeCorp.Ltdforthedrillship“DeepseaMetroI”todrilltheGaloc-7/7STappraisalwellonbehalfoftheGalocJointVenture.

2. On24February2017theCompany’swhollyownedsubsidiaryNidoPetroleumIndonesia(Gurita)PtyLtdadvisedtheOperatoroftheGuritaPSC,LundinGuritaB.V.(‘Lundin’),ofitsintentiontojoinLundininwithdrawingfromthisPSC,subjecttothereceiptofanynecessaryregulatoryapprovals.ThecarryingvalueofcapitalisedexpenditurerelatingtotheGuritaPSCwas$3.176Mat31December2016andallremainingcapitalisedexpenditureatthedateofrelinquishmentwillbefullyimpairedinthefirstquarterof2017.

ROUNDINGTheamountscontainedinthisReportandintheFinancialStatementshavebeenroundedtothenearest$1,000(whereroundingisapplicable)undertheoptionavailabletotheCompanyunderASICCorporations(RoundinginFinancial/Directors’Reports)Instrument2016/191.TheCompanyisanentitytowhichtheClassOrderapplies.


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DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE AND NON-AUDIT SERVICES

AUDITOR’S INDEPENDENCE DECLARATIONTheAuditor’sIndependenceDeclarationisincludedinthenextpageofthisreport.

NON-AUDIT SERVICES

Thefollowingnon-auditserviceswereprovidedbytheentity’sauditor,KPMG.TheDirectorsaresatisfiedthattheprovisionofnon-auditservicesiscompatiblewiththegeneralstandardofindependenceforauditorsimposedbytheCorporationsAct.Thenatureandscopeofeachtypeofnon-auditserviceprovidedmeansthatauditorindependencewasnotcompromised.KPMGreceived,orareduetoreceive,thefollowingamountsfortheprovisionofnon-auditservices:

2016 US$

2015 US$

Taxcomplianceandadviceservices 7,492 4,421

SignedinaccordancewithaResolutionoftheDirectors.

Yourssincerely

WILLIAM BLOKING FAICDCHAIRMAN21March2017


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AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF NIDO PETROLEUM LIMITED

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF NIDO PETROLEUM LIMITED ___________________________________________________________________________

37


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DIRECTORS’ DECLARATIONInaccordancewitharesolutionofDirectorsofNidoPetroleumLimited,intheopinionoftheDirectors,Istatethat:

(a) theFinancialStatements,NotesandadditionaldisclosuresincludedintheDirectors’Reportdesignatedasaudited,oftheconsolidatedentityareinaccordancewiththeCorporations Act 2001,including:

(i) givingatrueandfairviewoftheconsolidatedentity’sfinancialpositionasat31December2016andofitsperformancefortheyearendedonthatdate;and

(ii) complyingwithAccountingStandards(includingtheAustralianAccountingInterpretations)andCorporationsRegulations2001.

(b) theFinancialStatementsandNotesalsocomplywithInternationalFinancialReportingStandardsasdisclosedinnote1;and

(c) atthedateofthisstatementtherearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheyfalldueandpayable.

ThisdeclarationhasbeenmadeafterreceivingthedeclarationsrequiredtobemadetotheDirectorsinaccordancewithSection295AoftheCorporations Act 2001forthefinancialyearended31December2016.

ForandonbehalfoftheBoard

Yourssincerely

William Bloking FAICDChairman21 March 2017


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STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016

Consolidated

Notes2016

US$’0002015

US$’000

Revenuefromsaleofcrudeoil 42,601 68,374

Otherrevenue 2(a) 5 10

Total revenue 42,606 68,384

Costofsales 3(a) (48,144) (72,348)

Gross (loss) (5,538) (3,964)

Otherincome 2(b) (128) 1,959

Administrativeandotherexpenses 3(b) (6,763) (9,521)

Impairmentwritedownofoilandgasproperties 10 - (19,457)

Foreigncurrencygains/(losses) 285 4,706

Financecosts 3(c) (6,747) (8,089)

(Loss) before income tax from continuing operations (18,891) (34,366)

Incometaxbenefit/(expense) 4 1,636 3,238

Net (Loss) for the year from continuing operations (17,255) (31,128)

Other comprehensive income / (loss)

Items that may be reclassified subsequently to profit or loss:

Exchangedifferencesontranslationofforeignoperations,netofincometax

138 (5,136)

Other comprehensive income /(loss) for the year, net of tax 138 (5,136)

Total comprehensive (loss) for the year (17,117) (36,264)

US Cents US Cents

Earnings / (loss) per share attributable to the ordinary equity holders of the Company:

Basic(loss)pershare 20 (24.16) (71.12)

Diluted(loss)pershare 20 (24.16) (71.12)


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BALANCE SHEET AS AT 31 DECEMBER 2016Consolidated

Notes2016

US$’0002015

US$’000

ASSETS

Current Assets

Cashandcashequivalents 5 31,974 17,531

Tradeandotherreceivables 6 5,071 13,930

Inventories 7 8,325 5,086

Currenttaxasset 4 911 1,388

Otherfinancialassets 8 56 51

Total Current Assets 46,337 37,986

Non-Current Assets

Plantandequipment 9 169 236

Oilandgasproperties 10 35,777 57,918

Explorationandevaluationexpenditure 11 72,577 71,023

Otherfinancialassets 8 18,357 17,998

Total Non-Current Assets 126,880 147,175

Total Assets 173,217 185,161

LIABILITIES

Current Liabilities

Tradeandotherpayables 14 17,813 20,553

Incometaxpayable 428 299

Provisions 16 409 517

Financialliabilities 15 - 2,663

Total Current Liabilities 18,650 24,032

Non-Current Liabilities

Provisions 17 24,209 24,320

Deferredtaxliabilities 4 3,018 6,609

Financialliabilities 15 83,156 88,200

Total Non-Current Liabilities 110,383 119,129

Total Liabilities 129,033 143,161

Net Assets 44,184 42,000

EQUITY

Contributedequity 18 170,853 151,567

Otherreserves 19 469 316

Accumulatedlosses (127,138) (109,883)

Total Equity 44,184 42,000


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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016

Consolidated

Notes2016

US$’0002015

US$’000

Cash Flows From Operating Activities

Receiptsfromcustomers 50,160 57,272

Paymentstosuppliersandemployees (37,109) (41,250)

Interestreceived 5 17

Interestpaid (4,373) (4,772)

Incometaxpaid (1,253) (3,919)

Putoptionandoilswapderivativegain 593 1,186

Netcashfromoperatingactivities 25(a) 8,023 8,534

Cash Flows From Investing Activities

Refundofoilandgasproperties 379 -

Expenditureonexplorationandevaluationassets (3,149) (3,681)

Paymentsforplantandequipment (52) (56)

Acquisitionofsubsidiary,netofcashacquired - (73,041)

Netcashusedininvestingactivities (2,822) (76,778)

Cash Flows From Financing Activities

Proceedsfromborrowings - 108,000

Paymentsforfinancingcosts (303) (687)

Repaymentofborrowings (10,000) (30,341)

Proceedsfromissueofequitysecurities 19,778 -

Paymentforequityissuecosts (542) -

Netcashfromfinancingactivities 8,933 76,972

Netincreaseincashandcashequivalents 14,134 8,728

Effectofforeignexchangerates 309 (108)

Cashandcashequivalentsatbeginningofyear 17,531 8,911

Cash and cash equivalents at end of year 5 31,974 17,531


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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016

Contributed Equity

US$’000

Share Based Payment ReserveUS$’000

Foreign Currency

TranslationReserveUS$’000

Accumulated Losses

US$’000Total Equity

US$’000

Consolidated

At1January2015 151,567 10,111 (4,674) (78,755) 78,249

Profit/(loss)fortheyear - - - (31,128) (31,128)

Othercomprehensiveincome/(loss) - - (5,136) - (5,136)

Total comprehensive loss for the period, net of tax - - (5,136) (31,128) (36,264)

Transactions with owners in their capacity as owners:

Sharebasedpayments - 15 - - 15

- 15 - - 15

As at 31 December 2015 151,567 10,126 (9,810) (109,883) 42,000

At1January2016 151,567 10,126 (9,810) (109,883) 42,000

Profit/(loss)fortheyear - - - (17,255) (17,255)

Othercomprehensiveincome/(loss) - - 138 - 138

Total comprehensive loss for the period, net of tax - 138 (17,255) (17,117)

-

Transactions with owners in their capacity as owners:

-

Issueofsharecapital 19,778 - - - 19,778

Costofissueofsharecapital (492) - - - (492)

Sharebasedpayments - 15 - - 15

19,286 15 - - 19,301

As at 31 December 2016 170,853 10,141 (9,672) (127,138) 44,184


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 20161. SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

CORPORATE INFORMATION ThisfinancialreportofNidoPetroleumLimitedfortheyearended31December2016wasauthorisedforissueinaccordancewitharesolutionoftheDirectorson17March2017.

NidoPetroleumLimitedisacompanylimitedbysharesincorporatedanddomiciledinAustraliawhosesharesarepubliclytradedontheAustralianSecuritiesExchangeandtheentityisaforprofitentity.

ThenatureoftheoperationsandprincipalactivitiesoftheGrouparedescribedintheDirectors’Report.

(a) BASIS OF PREPARATION The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, with the exception of derivative financial instruments and non-current assets held for sale which have been measured at fair value.

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

Except as noted below and in note 1(d), the accounting policies set out below have been consistently applied to all periods presented in the financial report.

The Group has adopted all new and amended Australian Accounting Standards and AASB Interpretations issued by the AASB that are relevant to operations and effective for the current reporting period. The adoption of these new and revised Standards and Interpretations have not had a material impact on the Group for the year ended 31 December 2016.

(b) GOING CONCERNThefinancialstatementshavebeenpreparedadoptingthegoingconcernassumptionwhichassumescontinuityofnormalbusinessactivitiesandtherealisationofassetsandthesettlementofliabilitiesintheordinarycourseofbusiness.

TheGrouphasincurredanetlossfortheyearfromcontinuingoperationsof$17.255million.Cashinflowsfromoperatingactivitieswere$8.023millionandcashoutflowsfrominvestingactivitieswere$2.822million.Asat31December2016,theGroup’scurrentassetsexceededcurrentliabilitiesby$27.687millionand

theGrouphadcashandcashequivalentsof$31.974million.TheGroupraised$19.778million(beforecosts)inNovember2016fromapro-rataentitlementoffertofundtheCompany’sparticipatinginterestshareoftheGaloc-7/7STappraisalwellwhichistobedrilledinMarch2017.

TheGroupsuccessfullycompletedarestructureofitsFacilityAgreementwithitsultimateparentcompanyTheBangchakPetroleumPublicCompanyLimited(“Bangchak”)on11March2016.Underthetermsoftherestructure,principalandinterestpaymentsweredeferredand$20.8millionisdueinMarch2018.TheGroupisinvestigatingavarietyofoptionsrelatingtotherepaymentorrenegotiationofprincipalandinterestundertherestructuredFacilityAgreementwithBangchakascurrentcashflowforecastsdonotsupportanabilitytomeetthisrepaymentonschedule.

BangchakhasconfirmeditsintentiontorearrangetherepaymentscheduleundertherestructuredFacilityAgreementsoastoenabletheGrouptocontinueasagoingconcernforthe12monthsfollowingthesigningofthe31December2016financialreport.IftheGroupisunabletocontinueasagoingconcernitmayberequiredtorealiseitsassetsandextinguishitsliabilitiesotherthaninthenormalcourseofbusinessandatamountsdifferentfromthosestatedinthefinancialstatements.

(c) STATEMENT OF COMPLIANCETheFinancialReportcomplieswithAustralianAccountingStandardasissuedbytheAustralianAccountingStandardsBoardandInternationalFinancialReportingStandards(IFRS)asissuedbytheInternationalAccountingStandardsBoard.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 20161. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

(d) NEW ACCOUNTING STANDARDS NOT YET EFFECTIVEApplicableAustralianAccountingStandardsandInterpretationsthathaverecentlybeenissuedoramendedbutarenotyeteffectiveandhavenotbeenadoptedbytheGroupfortheannualreportingperiodended31December2016.

Reference Title Summary

Application date of standard

Impact on Group financial report

Application date for Group

AASB9 FinancialInstruments

AASB9includesrequirementsfortheclassificationandmeasurementoffinancialassets.ItwasfurtheramendedbyAASB2010-7toreflectamendmentstotheaccountingforfinancialliabilities.

TheserequirementsimproveandsimplifytheapproachforclassificationandmeasurementoffinancialassetscomparedwiththerequirementsofAASB139.Themainchangesaredescribedbelow.

(a) Financialassetsthataredebtinstrumentswillbeclassifiedbasedon(1)theobjectiveoftheentity’sbusinessmodelformanagingthefinancialassets;(2)thecharacteristicsofthecontractualcashflows.

(b) Allowsanirrevocableelectiononinitialrecognitiontopresentgainsandlossesoninvestmentsinequityinstrumentsthatarenotheldfortradinginothercomprehensiveincome.Dividendsinrespectoftheseinvestmentsthatareareturnoninvestmentcanberecognisedinprofitorlossandthereisnoimpairmentorrecyclingondisposaloftheinstrument.

1January2018 TheGrouphasnotyetdeterminedtheextentoftheimpactoftheamendments,ifany.

1January2018


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AASB9-continued

FinancialInstruments

(c) Financialassetscanbedesignatedandmeasuredatfairvaluethroughprofitorlossatinitialrecognitionifdoingsoeliminatesorsignificantlyreducesameasurementorrecognitioninconsistencythatwouldarisefrommeasuringassetsorliabilities,orrecognisingthegainsandlossesonthem,ondifferentbases.

(d) Wherethefairvalueoptionisusedforfinancialliabilitiesthechangeinfairvalueistobeaccountedforasfollows:

- Thechangeattributabletochangesincreditriskarepresentedinothercomprehensiveincome(OCI);and

- Theremainingchangeispresentedinprofitorloss.

Ifthisapproachcreatesorenlargesanaccountingmismatchintheprofitorloss,theeffectofthechangesincreditriskarealsopresentedinprofitorloss.

ConsequentialamendmentswerealsomadetootherstandardsasaresultofAASB9,introducedbyAASB2009-11andsupersededbyAASB2010-7&2010-10.

TheAASBissuedarevisedversionofAASB9(AASB2013-9)duringDecember2013.Therevisedstandardincorporatesthreeprimarychanges:

1. Newhedgeaccountingrequirementsincludingchangestohedgeeffectivenesstesting,treatmentofhedgingcosts,riskcomponentsthatcanbehedgedanddisclosures;

2. EntitiesmayelecttoapplyonlytheaccountingforgainsandlossesfromowncreditriskwithoutapplyingtheotherrequirementsofAASB9atthesametime;and

3. Themandatoryeffectivedatemovedto1January2018.


1January2018


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AASB15 RevenuefromContractswithCustomers

Thecoreprincipleofthisstandardisthatanentityrecognisesrevenuetodepictthetransferofpromisedgoodsorservicestocustomersinanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices.Anentityrecognisesrevenueinaccordancewiththatcoreprinciplebyapplyingthefollowingsteps:

(a)Step1:Identifythecontract(s)withacustomer

(b)Step2:Identifytheperformanceobligationsinthecontract

(c)Step3:Determinethetransactionprice

(d)Step4:Allocatethetransactionpricetotheperformanceobligationsinthecontract

(e)Step5:Recogniserevenuewhen(oras)theentitysatisfiesaperformanceobligation


1January2018

AASB16 Leases IFRS16removestheclassificationofleasesaseitheroperatingleasesorfinanceleases–forthelessee–effectivelytreatingallleasesasfinanceleases.Short-termleases(lessthan12months)andleasesoflowvalueassets(suchaspersonalcomputers)areexemptfromtheleaseaccountingrequirements.Therearealsochangesinaccountingoverthelifeofthelease.Inparticular,companieswillnowrecogniseafront-loadedpatternofexpensefrommostleases,evenwhentheypayconstantannualrentals.Lessoraccountingremainssimilartocurrentpractice–i.e.lessorscontinuetoclassifyleasesasfinanceandoperatingleases.


1January2019

-



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ACCOUNTING POLICIES - continued

(d) NEW ACCOUNTING STANDARDS NOT YET EFFECTIVE - continuedThefollowingneworamendedstandardsarenotexpectedtohaveasignificantimpactontheGroup’sconsolidatedfinancialstatements:

- RecognitionofDeferredTaxAssetsforUnrealisedLosses–AmendmentstoIAS12.

- Disclosureinitiative–AmendmentstoIAS7.

- AASB2014-10AmendmentstoAustralianAccountingStandards–SaleofContributionofAssetsbetweenanInvestoranditsAssociateorJointVenture.

- AASB2015-10AmendmentstoAustralianAccountingStandards–EffectiveDateofAmendmentstoAASB10andAASB128.

- AASB2015-2AmendmentstoAustralianAccountingStandards–DisclosureInitiative:AmendmentstoAASB101.

- AASB2015-1AmendmentstoAustralianAccountingStandards–AnnualImprovementstoAustralianAccountingStandards2012-2014Cycle.

(e) BASIS OF CONSOLIDATION TheconsolidatedFinancialStatementscomprisetheFinancialStatementsofNidoPetroleumLimitedanditssubsidiariesasat31Decembereachyear(theGrouporConsolidatedEntity).

TheFinancialStatementsofsubsidiariesarepreparedforthesamereportingperiodastheparentcompany,usingconsistentaccountingpolicies.

Allintercompanybalancesandtransactionshavebeeneliminatedinfull.

ConsolidationofasubsidiarybeginswhentheGroupobtainscontroloverthesubsidiaryandceaseswhentheGrouplosescontrolofthesubsidiary.Assets,liabilities,incomeandexpensesofasubsidiaryacquiredordisposedofduringtheyearareincludedinthestatementofcomprehensiveincomefromthedatetheGroupgainscontroluntilthedatetheGroupceasestocontrolthesubsidiary.

Profitorlossandeachcomponentofothercomprehensiveincome(OCI)areattributedtotheequityholdersoftheparentoftheGroupandtothenon-controllinginterests,evenifthisresultsinthenon-controllinginterestshavingadeficitbalance.Whennecessary,adjustmentsaremadetothefinancialstatementsofsubsidiariestobringtheiraccountingpoliciesintolinewiththeGroup’saccountingpolicies.Allintra-groupassetsandliabilities,equity,income,expensesandcashflowsrelatingtotransactions

betweenmembersoftheGroupareeliminatedinfullonconsolidation.

Wherethereisalossofcontrolofasubsidiary,theconsolidatedFinancialStatementsincludetheresultsofthepartofthereportingperiodduringwhichNidoPetroleumLimitedhashadcontrol.

Theacquisitionofsubsidiariesisaccountedforusingtheacquisitionmethodofaccounting.

(f) SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

SIGNIFICANT ACCOUNTING JUDGMENTSIntheprocessofapplyingtheGroup’saccountingpolicies,managementhasmadethefollowingjudgments,apartfromthoseinvolvingestimations,whichhavethemostsignificanteffectontheamountsrecognisedintheFinancialStatements.

(i) Exploration and evaluation assets and oil and gas properties

TheGroup’saccountingpolicyforexplorationandevaluationexpenditureandoilandgaspropertiesissetoutatNote1(n)andNote1(m)respectively.Theapplicationofthispolicynecessarilyrequiresmanagementtomakecertainestimatesandassumptionsastofutureeventsandcircumstances,inparticular,theassessmentofwhethereconomicquantitiesofreserveshavebeenfound.Anysuchestimatesandassumptionsmaychangeasnewinformationbecomesavailable.If,afterhavingcapitalisedexpenditureunderthepolicy,itisconcludedthattheexpendituresareunlikelytoberecoveredbyfutureexploitationorsale,thentherelevantcapitalisedamountwillbewrittenoffthroughprofitorloss.

(ii) Recovery of deferred tax assets

Deferredtaxassetsarerecognisedfordeductibletemporarydifferenceswheremanagementconsidersthatitisprobablethatfuturetaxableprofitswillbeavailabletoutilisethosetemporarydifferences.Significantmanagementjudgementisrequiredtodeterminetheamountofdeferredtaxassetsthatcanberecognised,baseduponthelikelytimingandtheleveloffuturetaxableprofitstogetherwithfuturetaxplanningstrategies.Deferredincometaxassetsanddeferredincometaxliabilitiesareoffset,ifalegallyenforceablerightexiststoset-offcurrentincometaxassetsagainstcurrentincometaxliabilitiesanddeferredincometaxesrelatetothesametaxableentityandthesametaxationauthority.


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(f) SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS - continued

SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONSThecarryingamountsofcertainassetsandliabilitiesareoftendeterminedbasedonestimatesandassumptionsoffutureevents.Thekeyestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofcertainassetsandliabilitieswithinthenextannualreportingperiodare:

(i) Impairment of assets

Indeterminingtherecoverableamountofassets,estimationsaremaderegardingthepresentvalueoffuturecashflowsusingasset-specificdiscountratesanda“fairvaluelesscostofdisposal”discountingcashflowmethodology.AdditionaldisclosuresareprovidedaboutthediscountrateandanyothersignificantassumptionsintheNotes.ForOilandGasproperties,expectedfuturecashflowestimationisbasedonreserves,futureproductionprofiles,commoditypricesandcosts.

(ii) Restoration obligations

Wherearestorationobligationexists,theGroupestimatesthefutureremovalcostsofoffshoreoilandgasplatforms,productionfacilities,wellsandpipelinesatthetimeofinstallationoftheassets.Inmostinstances,removalofassetsoccursmanyyearsintothefuture.Thisrequiresjudgmentalassumptionsregardingremovaldate,futureenvironmentallegislation,theextentofreclamationactivitiesrequired,theengineeringmethodologyforestimatingcost,futureremovaltechnologiesindeterminingtheremovalcostandliabilityspecificdiscountratestodeterminethepresentvalueofthesecashflows.FormoredetailregardingthepolicyinrespectoftheprovisionforrestorationrefertoNote1(s).

(iii) Share-based payment transactions

TheGroupmeasuresthecostofequity-settledtransactionswithemployeesbyreferencetothefairvalueoftheequityinstrumentsatthedateatwhichtheyaregranted.ThefairvalueofoptionsisdeterminedusingaBlackScholesmodel,andthefairvalueofperformancerightsisdeterminedusingaMonteCarlosimulationmodel.

(iv) Estimates of reserves quantities

TheestimatedquantitiesofProvedplusProbablehydrocarbonreservesreportedbytheCompanyareintegraltothecalculationofdepletionanddepreciationexpenseandtoassessmentofpossibleimpairmentofassets.Estimatedreservequantitiesarebaseduponinterpretationofgeologicalandgeo-physicalmodelsandassessmentsoftechnicalfeasibilityandcommercialviabilityofproducingthereserves.Theseassessmentsrequireassumptionstobemaderegardingfuturedevelopmentandproductioncosts,commodityprices,exchangeratesandfiscalregimes.Theestimatesofreservesmaychangefromperiodtoperiodastheeconomicassumptionsusedtoestimatethereservescanchangefromperiodtoperiod,andasadditionalgeologicaldataisgeneratedduringthecourseofoperations.ReservesestimatesarepreparedinaccordancewiththeCompany’spoliciesandproceduresforreserveestimationwhichconformtoguidelinespreparedbytheSocietyofPetroleumEngineers.

(v) Taxes

Uncertaintiesexistwithrespecttotheinterpretationofcomplextaxregulations,changesintaxlaws,andtheamountandtimingoffuturetaxableincome.Giventhewiderangeofinternationalbusinessrelationshipsandthelong-termnatureandcomplexityofexistingcontractualagreements,differencesarisingbetweentheactualresultsandtheassumptionsmade,orfuturechangestosuchassumptions,couldnecessitatefutureadjustmentstotaxincomeandexpensealreadyrecorded.TheGroupestablishesprovisions,basedonreasonableestimates,forpossibleconsequencesofauditsbythetaxauthoritiesoftherespectivecountriesinwhichitoperates.Theamountofsuchprovisionsisbasedonvariousfactors,suchasexperienceofprevioustaxauditsanddifferinginterpretationsoftaxregulationsbythetaxableentityandtheresponsibletaxauthority.SuchdifferencesofinterpretationmayariseonawidevarietyofissuesdependingontheconditionsprevailingintherespectivedomicileoftheGroupcompanies.

Deferredtaxassetsarerecognisedforunusedtaxlossestotheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichlossescanbeutilised.Significantmanagementjudgementisrequiredtodeterminetheamountofdeferredtaxassetsthatcanberecognised,baseduponthelikelytimingandtheleveloffuturetaxableprofitstogetherwithfuturetaxplanningstrategies.


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(g) FOREIGN CURRENCY TRANSLATION BoththefunctionalandpresentationcurrencyofNido

PetroleumLimitedanditssubsidiariesareUnitedStatesDollars.

Transactionsinforeigncurrenciesareinitiallyrecordedinthefunctionalcurrencyattheexchangeratesprevailingatthedateofthetransaction.MonetaryassetsandliabilitiesdenominatedinforeigncurrenciesareconvertedattherateofexchangeprevailingattheBalanceSheetdate.

Asatthereportingdate,theassetsandliabilitiesofthesubsidiariesoperatingoverseasaretranslatedintothepresentationcurrencyofNidoPetroleumLimitedattherateofexchangeprevailingatthebalancesheetdateandtheitemsofincomeorexpenditurearetranslatedattheaverageexchangeratesfortheperiod.

Theexchangedifferencesarisingontheretranslationaretakendirectlytoaseparatecomponentofequity.Ondisposalofaforeignentity,thedeferredcumulativeamountrecognisedinequityrelatingtothatparticularforeignoperationisrecognisedinprofitorloss.

(h) INTERESTS IN JOINT OPERATIONS Jointarrangementsarearrangementsofwhichtwo

ormorepartieshavejointcontrol.Jointcontrolisthecontractuallyagreedsharingofcontrolofthearrangementwhichexistsonlywhendecisionsaboutrelevantactivitiesrequireunanimousconsentofthepartiessharingcontrol.

Ajointoperationisatypeofjointarrangementwherebythepartiesthathavejointcontrolofthearrangementhaverightstotheassetsandobligationsfortheliabilities,relatingtothearrangement.

Inrelationtoitsinterestinjointoperations,theGrouprecognises:

- Assets,includingitsshareofanyassetsheldjointly

- Liabilities,includingitsshareofanyliabilitiesincurredjointly

- Revenuefromthesaleofitsshareoftheoutputarisingfromthejointoperation

- Shareoftherevenuefromthesaleoftheoutputbythejointoperation

- Expenses,includingitsshareofanyexpensesincurredjointly

(i) CASH AND CASH EQUIVALENTS Cashandshort-termdepositsinthebalancesheet

comprisecashatbankandinhand,short-termdepositswithanoriginalmaturityofthreemonthsorlessandmoneymarketinvestmentsreadilyconvertibletocashwithintwoworkingdays.

Forthepurposesofthecashflowstatement,cashandcashequivalentsconsistofcashandcashequivalentsasdefinedabove,netofoutstandingbankoverdrafts.

(j) TRADE AND OTHER RECEIVABLES Tradereceivablesarecarriedattheamountsdue.

Specificallowanceismadeforanyamountswhencollectionisconsidereddoubtful.Baddebtsarewrittenoffwhenidentified.

Receivablesfromrelatedpartiesarerecognisedandcarriedatamortisedcost.

Collectabilityoftradeandotherreceivablesisreviewedonanongoingbasis.Individualdebtsthatareknowntobeuncollectiblearewrittenoffwhenidentified.AnimpairmentallowanceisrecognisedwhenthereisobjectiveevidencethattheGroupwillnotbeabletocollectthereceivable.Financialdifficultiesofthedebtor,defaultpaymentsordebtsmorethan90daysoverdueareconsideredobjectiveevidenceofimpairment.Theamountofimpairmentlossisthereceivablecarryingamountcomparedtothepresentvalueofestimatedcashflow,discountedattheoriginaleffectiveinterestrate.

(k) INVENTORIES Inventoriesarevaluedatthelowerofcostandnet

realisablevalue.Costisdeterminedasfollows:

(i) Materials,whichincludedrillingandmaintenancestocks,arevaluedatthecostofacquisitionwhichincludesexpenditureincurredinacquiringtheinventoriesandbringingthemtotheirexistinglocationandcondition;and

ii) Petroleumproducts,comprisingextractedcrudeoilstoredinFPSOtanks,arevaluedusingthefullcostabsorptionmethod.

InventoriesandmaterialstocksareaccountedforonaFIFO(firstin,firstout)basis.

(l) PLANT AND EQUIPMENT Plantandequipmentarestatedatcostless

accumulateddepreciationandaccumulatedimpairmentlosses.

Depreciationofplantandequipmentiscalculatedonastraightlinebasisovertheexpectedusefullifetoestimatedresidualvalue.Theestimatedusefullives,residualvaluesanddepreciationmethodarereviewedattheendofeachannualreportingperiod.

Thefollowingestimatedusefullivesareusedinthecalculationofdepreciation

• PlantandEquipment2–3years


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(l) PLANT AND EQUIPMENT - continued Disposal

Anyitemofproperty,plantandequipmentisderecognisedupondisposalorwhennofurthereconomicbenefitsareexpectedfromitsuseordisposal.

Anygainorlossarisingonderecognisingoftheasset(calculatedasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheasset)isincludedintheincomestatementintheyeartheassetisderecognised.

(m) OIL AND GAS PROPERTIES Assets in Development

Whenthetechnicalandcommercialfeasibilityofanundevelopedoilorgasfieldhasbeendemonstratedthefieldentersitsdevelopmentphase.Thecostsofoilandgasassetsaretransferredfromexplorationandevaluationexpenditureintodevelopmentphaseandincludepastexplorationandevaluationcosts,developmentdrillingandothersubsurfaceexpenditures,surfaceplantandequipment,andanyassociatedlandandbuildings.

Producing assets

Thecostsofoilandgasassetsinproductionareseparatelyaccountedforastangibleassets,andincludepastexplorationandevaluationcosts,pre-productiondevelopmentcostsandtheongoingcostsofcontinuingtodevelopreservesforproductionandtoexpandorreplaceplantandequipmentandanyassociatedlandandbuildings.

Depletionchargesarecalculatedusingaunitofproductionmethodwhichwillamortisethecostofcarriedforwardexploration,evaluationanddevelopmentexpenditureoverthelifeoftheestimatedProvedreserves(1P),inacashgeneratingunit.

Provisionsforfuturerestorationaremadewherethereisapresentobligationasaresultofdevelopmentandarecapitalisedasacomponentofthecostofthoseactivities.TheprovisionforrestorationpolicyisdiscussedinfullatNote1(s).

(n) EXPLORATION AND EVALUATION EXPENDITURE

Deferred Expenditure

Costsrelatedtotheacquisitionofpropertiesthatcontainresourcesareallocatedseparatelytospecificareasofinterest.Thesecostsarecapitaliseduntiltheviabilityoftheareaofinterestisdetermined.

Explorationandevaluationexpenditureisstatedatcostandisaccumulatedinrespectofeachidentifiableareaofinterest.

Suchcostsareonlycarriedforwardtotheextentthattheyareexpectedtoberecoupedthroughthesuccessfuldevelopmentoftheareaofinterest(oralternativelybyitssale),orwhereactivitiesintheareahavenotyetreachedastagewhichpermitsareasonableassessmentoftheexistenceofeconomicallyrecoverablereserves.

Accumulatedcostsinrelationtoanabandonedareaarewrittenoffthroughprofitorlossintheperiodinwhichthedecisiontoabandontheareaismade.

TheDirectorsreviewthecarryingvalueofeachareaofinterestasatthebalancedateandanyexplorationexpenditurewhichnolongersatisfiestheabovepolicyiswrittenoff.

Onceanareaofinterestentersthedevelopmentphase,allcapitalisedacquisition,explorationandevaluationexpendituresaretransferredtooilandgasproperties.

Farm-outs

TheGroupdoesnotrecordanyexpendituremadebythefarmeeonitsaccount.Italsodoesnotrecogniseanygainorlossonitsexplorationandevaluationfarmoutarrangementsbutredesignatesanycostspreviouslycapitalisedinrelationtothewholeinterestasrelatingtothepartialinterestretainedandanyconsiderationreceiveddirectlyfromthefarmeeiscreditedagainstcostspreviouslycapitalised.

(o) IMPAIRMENT OF NON-FINANCIAL ASSETS

Oneachreportingdate,theGroupassesseswhetherthereisanyindicationthatanassetmaybeimpaired.Whereanindicatorofimpairmentexists,theGroupmakesaformalestimateofrecoverableamount.Wherethecarryingamountofanassetexceedsitsrecoverableamounttheassetisconsideredimpairedandiswrittendowntoitsrecoverableamount.

Recoverableamountisthegreateroffairvaluelesscoststosellandvalueinuse.Itisdeterminedforanindividualasset,unlessitdoesnotgeneratecashinflowsthatarelargelyindependentofthosefromotherassetsorgroupsofassets,inwhichcase,therecoverableamountisdeterminedforthecash-generatingunittowhichtheassetbelongs.

Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.

Whereanimpairmentlosssubsequentlyreverses,thecarryingamountoftheassetisincreasedtotherevisedestimateofitsrecoverableamount,butonlytotheextentthattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedfortheassetinprioryears.


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(p) INVESTMENTS AND OTHER FINANCIAL ASSETS

InvestmentsandfinancialassetswithinthescopeofAASB139FinancialInstruments:RecognitionandMeasurementarecategorisedaseitherfinancialassetsatfairvaluethroughprofitorloss,loansandreceivables,held-to-maturityinvestments,oravailable-for-salefinancialassets.Theclassificationdependsonthepurposeforwhichtheinvestmentswereacquired.

Whenfinancialassetsarerecognisedinitially,theyaremeasuredatfairvalueplus,inthecaseofassetsnotatfairvaluethroughprofitorloss,directlyattributabletransactioncosts.

Recognition and De-recognition

Allregularwaypurchasesandsalesoffinancialassetsarerecognisedonthetradedate,i.e.thedatethattheGroupcommitstopurchasetheasset.Regularwaypurchasesorsalesarepurchasesorsalesoffinancialassetsundercontractsthatrequiredeliveryoftheassetswithintheperiodestablishedgenerallybyregulationorconventioninthemarketplace.Financialassetsarederecognisedwhentherighttoreceivecashflowsfromthefinancialassetshaveexpiredorhavebeentransferred.

(q) TRADE AND OTHER PAYABLES Tradeandotherpayablesarecarriedatamortised

costandrepresentliabilitiesforgoodsandservicesprovidedtotheGrouppriortotheendofthefinancialyearthatareunpaidandarisewhentheGroupbecomesobligedtomakefuturepaymentsinrespectofthepurchaseofthesegoodsandservices.

(r) BORROWINGS Borrowingsareinitiallyrecognisedatthefairvalueof

theconsiderationreceivedlessdirectlyattributabletransactioncosts.Afterinitialrecognition,interest-bearingborrowingsaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.Feespaidontheestablishmentofloanfacilitiesthatareyieldrelatedareincludedaspartofthecarryingamountoftheborrowings.

BorrowingsareclassifiedascurrentliabilitiesunlesstheGrouphasanunconditionalrighttodefersettlementoftheliabilityforatleast12monthsafterthereportingdate.

(s) PROVISIONS ProvisionsarerecognisedwhentheGrouphasa

presentobligation(legalorconstructive)asaresultofapastevent;itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillbe

requiredtosettletheobligationandareasonableestimatecanbemadeoftheamountoftheobligation.

WhentheGroupexpectssomeorallofaprovisiontobereimbursed,thereimbursementisrecognisedasaseparateassetbutonlywhenthereimbursementisvirtuallycertain.Theexpenserelatingtoanyprovisionisrecognisedthroughprofitorlossnetofanyreimbursement.

Theamountrecognisedasaprovisionisthebestestimateoftheconsiderationrequiredtosettlethepresentobligationatreportingdate,takingintoaccounttherisksanduncertaintiessurroundingtheobligation.Whereaprovisionismeasuredusingthecashflowsestimatedtosettlethepresentobligation,itscarryingamountisthepresentvalueofthosecashflows.

Restoration Provisions

TheGrouprecognisesanylegalorconstructiverestorationobligationasaliabilityatitspresentvalueatthetimealegalliabilityorconstructiveobligationexistsandwhenareliableestimateoftheamountoftheobligationcanbemade.Thecarryingamountofthelonglivedassetstowhichtheobligationrelatesisincreasedbytheassetretirementobligationcostsandamortisedovertheproducinglifeoftheasset.Restorationprovisionsarebasedontheestimatedcostofrestorationworkrequiredattheendoftheusefullifeoftheproducingfields,includingremovaloffacilitiesandequipmentrequiredorintendedtoberemoved,togetherwithabandonmentofproducingwells.Theseestimatesoftheassetretirementobligationsarebasedoncurrenttechnology,legalrequirementsandfuturecosts,whichhavebeendiscountedtotheirpresentvalue.Indeterminingtheassetretirementobligations,theCompanyhasassumednosignificantchangeswilloccurintherelevantlegislationinrelationtorestorationofsitesinthefuture.

Wherearestorationobligationisassumedaspartoftheacquisitionofanassetorobligation,theliabilityisinitiallymeasuredatthepresentvalueofthefuturecashflowstosettlethepresentobligationasattheacquisitiondate.

Overtime,theliabilityisaccretedtoitspresentvalueeachperiodbasedonariskadjustedpre-taxdiscountrateappropriatetotherisksinherentintheliability.Theunwindingofthediscountisrecordedwithinfinancecosts.Uponsettlementoftheliability,theCompanyeithersettlestheobligationforitsrecordedamountorincursagainorlossuponsettlement.

(t) SHARE BASED PAYMENT TRANSACTIONS

TheGroupprovidesbenefitstoemployees(andExecutiveDirectors)oftheGroupintheformofsharebasedpaymenttransactions,wherebyemployeesrenderservicesinexchangeforsharesorrightsovershares(“equity-settledtransactions”).


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(t) SHARE BASED PAYMENT TRANSACTIONS - continued

Thecostofequity-settledtransactionsisrecognised,togetherwithacorrespondingincreaseinequity,overtheperiodinwhichtheperformanceconditionsarefulfilled,endingonthedateonwhichtherelevantemployeebecomesfullyentitledtotheaward(vestingdate).

Thecumulativeexpenserecognisedforequity-settledtransactionsateachreportingdateuntilvestingdatereflects:

(i) Thegrantdatefairvalueoftheaward;

(ii) Theextenttowhichthevestingperiodhasexpired;and

(iii) Thenumberofawardsthat,intheopinionoftheDirectorsoftheGroup,willultimatelyvesttakingintoaccountsuchfactorsasthelikelihoodofnon-marketperformanceconditionsbeingmet.

Thisopinionisformedbasedonthebestavailableinformationatbalancedate.

Noexpenseisrecognisedforawardsthatdonotultimatelyvest,exceptforawardswherevestingisconditionaluponamarketcondition.Thedilutiveeffect,ifany,ofoutstandingawardsisreflectedasadditionalsharedilutioninthecomputationofearningspershare.

Ifthetermsofanequity-settledawardaremodified,asaminimumanexpenseisrecognisedasifthetermshadnotbeenmodified.Anadditionalexpenseisrecognisedforanymodificationthatincreasesthetotalfairvalueoftheshare-basedpaymentarrangement,orisotherwisebeneficialtotheemployee,asmeasuredatthedateofmodification.

Ifanequity-settledawardiscancelled,itistreatedasifithadvestedonthedateofcancellation,andanyexpensenotyetrecognisedfortheawardisrecognisedimmediately.However,ifanewawardissubstitutedforthecancelledawardanddesignatedasareplacementawardonthedatethatitisgranted,thecancelledandnewawardaretreatedasiftheywereamodificationoftheoriginalaward,asdescribedinthepreviousparagraph.

EquitysettledawardsgrantedbytheParenttoemployeesofSubsidiariesarerecognisedintheParent’sseparateFinancialStatements.TheexpenserecognisedbytheGroupisthetotalexpenseassociatedwithsuchaward.

Performance Rights

PerformancerightsareissuedundertheEmployeePerformanceRightsPlanapprovedbyShareholders.SubjecttoShareholderapproval,ExecutiveDirectorsmaybeissuedperformancerightsunderthesametermsandconditionsastheplan.

Thecostoftheseequity-settledtransactionsismeasuredbyreferencetothefairvalueatthedateatwhichtheyaregranted.ThefairvalueisdeterminedusingaMonteCarlosimulationmodel.

Managing Director Sign on and Retention Bonus

AspartoftheemploymentcontractenteredintobetweenNidoPetroleumLimitedandManagingDirector,DrMichaelFischer*,NidoissuedrightstofullypaidordinarysharesasaSign-onandRetentionBonus,subjecttoshareholderapproval.

Thecostoftheseequity-settledtransactionsismeasuredbyreferencetothefairvalueatthedateatwhichtheyaregranted.SeeNote23(b)(ii)forfurtherinformation.

*DrFischerwasappointedManagingDirectoreffectivefrom26August2015.

(u) EMPLOYEE BENEFITS(i) Wages, salaries and annual leave

Liabilitiesforwagesandsalaries,includingnon-monetarybenefitsandannualleaveexpectedtobesettledwithin12monthsofthereportingdatearerecognisedinrespectofemployees’servicesuptothereportingdate.Thesearemeasuredattheamountsexpectedtobepaidwhentheliabilitiesaresettled.Expensesfornon-accumulatingsickleavearerecognisedwhentheleaveistakenandaremeasuredattheratespaidorpayable.

(ii) Long service leave

Aliabilityforlongserviceleaveisrecognisedandmeasuredasthepresentvalueoftheestimatedfuturecashoutflowtobemadeinrespectofemployees’servicesuptothereportingdate.Theobligationiscalculatedusingexpectedfutureincreasesinwageandsalaryrates,experienceofemployeedeparturesandperiodsofservice.ExpectedfuturepaymentsarediscountedusingtheratesattachedtotheCommonwealthGovernmentbondsatthereportingdatewhichhavematuritydatesapproximatingthetermsoftheGroup’sobligations.

(iii) Defined contribution plan

Contributionstoemployeesuperannuationfunds,beingdefinedcontributionplansofchoice,areexpensedasincurred.

(iv) Defined benefits plan

NidoPetroleumLimitedoperatesadefinedbenefitretirementplaninthePhilippines,whichrequirescontributionstobemadetoaseparatelyadministeredfund.Thecostofprovidingbenefitsunderthedefinedbenefitplanisdeterminedusingtheprojectedunitcreditvaluationmethod.

Theschemeisfundedtotheextentthata‘minimumfundingamount’hasbeensetasideinfundassets.Re-measurementsarerecognisedimmediatelyinthebalancesheetwithacorrespondingdebitorcredittoOtherComprehensiveIncome.Re-measurementsarenotreclassifiedtoprofitorlossinsubsequentperiods.


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(v) LEASES Thedeterminationofwhetheranarrangementisor

containsaleaseisbasedonthesubstanceofthearrangementandrequiresanassessmentofwhetherthefulfilmentofthearrangementisdependentontheuseofaspecificassetorassetsandthearrangementconveysarighttousetheasset.

Financeleases,whichtransfertotheGroupsubstantiallyalltherisksandbenefitsincidentaltoownershipoftheleaseditem,arecapitalisedattheinceptionoftheleaseatthefairvalueoftheleasedassetor,iflower,atthepresentvalueoftheminimumleasepayments.

Operatingleasepaymentsarerecognisedasanexpenseintheprofitorlossonastraight-linebasisovertheleaseterm.Operatingleaseincentivesarerecognisedasaliabilitywhenreceivedandsubsequentlyreducedbyallocatingleasepaymentsbetweenrentalexpenseandreductionoftheliability.

(w) REVENUE Revenueisrecognisedinprofitorlosswhenthe

significantrisksandrewardsofownershiphavebeentransferredtothebuyer.Revenueisrecognisedandmeasuredatthefairvalueoftheconsiderationreceivedorreceivable,totheextentitisprobablethattheeconomicbenefitswillflowtotheGroupandtherevenuecanbereliablymeasured.

Sale of crude oil

SalesrevenueisrecognisedonthebasisoftheGroup’sinterestinaproducingfield(“entitlements”method),whenthephysicalproductandassociatedrisksandrewardsofownershippasstothepurchaser,whichisgenerallyatthetimeofshiploading.Revenueearnedunderaservicecontract(“SC”)isrecognisedonanetentitlementsbasisaccordingtothetermsoftheSCandthefarm-inagreements.

Interest

Revenueisrecognisedasinterestaccruesusingtheeffectiveinterestmethod.

(x) BORROWING COSTS Borrowingcostsareexpensedintheperiodinwhich

theyareincurredexceptborrowingcoststhataredirectlyattributabletotheacquisition,construction,orproductionofaqualifyingassetthatnecessarilytakesasubstantialperiodtogetreadyforitsintendeduseorsale.Inthiscase,borrowingcostsarecapitalisedaspartofthecostofsuchaqualifyingasset.

(y) INCOME TAX Currenttaxassetsandliabilitiesforthecurrentand

priorperiodsaremeasuredattheamountexpectedtoberecoveredfromorpaidtothetaxationauthoritiesbasedonthecurrentperiod’staxableincome.Thetaxratesandtaxlawsusedtocomputetheamountarethosethatareenactedorsubstantivelyenactedatthebalancesheetdate.

Deferredincometaxisprovidedonalltemporarydifferencesatthebalancedatebetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsforfinancialreportingpurposes.

Deferredincometaxliabilitiesarerecognisedforalltaxabletemporarydifferencesexcept:

• Whenthedeferredincometaxliabilityarisesfromtheinitialrecognitionofanassetorliabilityinatransactionthatisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss;and

• Whenthetaxabletemporarydifferencesareassociatedwithinvestmentsinsubsidiaries,associatesandinterestsinJointOperations,exceptwherethetimingofthereversalofthetemporarydifferencescanbecontrolledanditisprobablethatthetemporarydifferenceswillnotreverseintheforeseeablefuture.

Deferredincometaxassetsarerecognisedforalldeductibletemporarydifferences,carry-forwardofunusedtaxassetsandunusedtaxlosses,totheextentthatitisprobablethattaxableprofitwillbeavailableagainstthedeductibletemporarydifferences,andthecarry-forwardofunusedtaxassetsandunusedtaxlosses,canbeutilisedexcept:

• Whenthedeferredincometaxassetrelatingtothedeductibletemporarydifferencesarisesfromtheinitialrecognitionofanassetorliabilityinatransactionthatisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss;and

• Whenthedeductibletemporarydifferencesareassociatedwithinvestmentsinsubsidiaries,associatesandinterestsinJointOperations,inwhichcasedeferredtaxassetsareonlyrecognisedtotheextentthatitisprobablethatthetemporarydifferenceswillreverseintheforeseeablefutureandtaxableprofitwillbeavailableagainstwhichthetemporarydifferencescanbeutilised.

Thecarryingamountsofdeferredincometaxassetsarereviewedateachbalancedateandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitwillbeavailabletoallowallorpartofthedeferredincometaxassetstobeutilised.

Deferredincometaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplytotheyearwhentheassetisrealisedortheliabilityissettled,basedontaxrates(andtaxlaws)thathavebeenenactedorsubstantivelyenactedatthebalancesheetdate.


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(y) INCOME TAX - continued Incometaxesrelatingtoitemsrecogniseddirectlyin

equityarerecognisedinequityandnotintheprofitorloss.

Deferredtaxassetsanddeferredtaxliabilitiesareoffsetonlyifalegallyenforceablerightexiststosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandthedeferredtaxassetsandliabilitiesrelatetothesametaxableentityandthesametaxationauthority.

Unrecogniseddeferredincometaxassetsarereassessedateachbalancesheetdateandarerecognisedtotheextentthatithasbecomeprobablethatfuturetaxableprofitwillallowthedeferredtaxassettoberecovered.

(z) OTHER TAXES Revenues,expensesandassetsarerecognisednetof

theamountofGSTexcept:

• WheretheamountoftheGSTincurredisnotrecoverablefromthetaxationauthority.InthesecircumstancestheGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense;and

• ReceivablesandpayablesarestatedwiththeamountofGSTincluded.

ThenetamountofGSTrecoverablefrom,orpayableto,thetaxationauthorityisincludedasacurrentassetorliabilityintheBalanceSheet.

Cashflowsareincludedinthecashflowstatementonagrossbasis.TheGSTcomponentsofeachcashflowarisingfrominvestingactivitieswhicharerecoverablefromorpayabletothetaxationauthorityareclassedasoperatingcashflows.

CommitmentsandcontingenciesaredisclosednetoftheamountofGSTrecoverablefrom,orpayableto,thetaxationauthority.

(aa) CONTRIBUTED EQUITY Contributedequityisrecognisedatthefairvalueof

theconsiderationreceivedbytheCompany.Anytransactioncostsarisingontheissueofordinarysharesarerecogniseddirectlyinequityasareductionoftheproceedsreceived.

(bb) EARNINGS PER SHARE BasicEPSiscalculatedasnetprofit/(loss)

attributabletomembers,adjustedtoincludecostsofservicingequityotherthandividends,dividedbytheweightedaveragenumberofordinaryshares,adjustedforanybonuselement.

DilutedEPSiscalculatedasnetprofit/(loss)attributabletomembers,adjustedfor:

(i) Costsofservicingequity(otherthandividends);

(ii) Theaftertaxeffectofdividendsandinterestassociatedwiththedilutivepotentialordinarysharesthathavebeenrecognisedasexpenses;and

(iii) Othernon-discretionarychangesinrevenuesorexpensesduringtheperiodthatwouldresultfromthedilutionofpotentialordinaryshares,

dividedbytheweightedaveragenumberofordinarysharesanddilutivepotentialordinaryshares,adjustedforanybonuselement.

(cc) FINANCIAL INSTRUMENTS ISSUED BY THE COMPANY Debtandequityinstrumentsareclassifiedas

eitherliabilitiesorasequityinaccordancewiththesubstanceofthecontractualarrangement.

Transactioncostsarisingontheissueofequityinstruments,netofassociatedtax,arerecogniseddirectlyinequityasareductionoftheproceedsoftheequityinstrumenttowhichthecostsrelate.Transactioncostsarethecoststhatareincurreddirectlyinconnectionwiththeissueofthoseequityinstrumentsandwhichwouldnothavebeenincurredhadthoseinstrumentsnotbeenissued.

(dd) DERIVATIVE FINANCIAL INSTRUMENTS

TheGroupmayusederivativefinancialinstruments,suchasforwardcommoditycontracts,tomanageitscommoditypricerisks.Suchderivativefinancialinstrumentsareinitiallyrecognisedatfairvalueonthedateonwhichaderivativecontractisenteredintoandaresubsequentlyremeasuredatfairvalue.

Derivativesarecarriedasfinancialassetswhenthefairvalueispositiveandasfinancialliabilitieswhenthefairvalueisnegative.

Commoditycontractsthatareenteredintoandcontinuetobeheldforthepurposeofthereceiptordeliveryofanon-financialiteminaccordancewiththeGroup’sexpectedpurchase,saleorusagerequirementsareheldatcost.

Anygainsorlossesarisingfromchangesinthefairvalueofderivativesaretakendirectlytoprofitorloss.


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(ee) OPERATING SEGMENTS Anoperatingsegmentisacomponentofanentity

thatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses(includingrevenuesandexpensesrelatingtotransactionswithothercomponentsofthesameentity),whoseoperatingresultsareregularlyreviewedbytheentity’schiefoperatingdecisionmakertomakedecisionsaboutresourcestobeallocatedtothesegmentandassessitsperformanceandforwhichdiscretefinancialinformationisavailable.Thisincludesstart-upoperationswhichareyettoearnrevenues.ManagementwillalsoconsiderotherfactorsindeterminingoperatingsegmentssuchastheexistenceofalinemanagerandthelevelofsegmentinformationpresentedtotheboardofDirectors.

Operatingsegmentshavebeenidentifiedbasedontheinformationprovidedtothechiefoperatingdecisionmakers–beingtheexecutivemanagementteam.

Thegroupaggregatestwoormoreoperatingsegmentswhentheyhavesimilareconomiccharacteristics,andthesegmentsaresimilarineachofthefollowingrespects:

• natureoftheproductsandservices;

• natureoftheproductionprocesses;

• typeorclassofcustomerfortheproductsandservices;

• methodsusedtodistributetheproductsorprovidetheservices,andifapplicable;and

• natureoftheregulatoryenvironment.

OperatingsegmentsthatmeetthequantitativecriteriaasprescribedbyAASB8arereportedseparately.

However,anoperatingsegmentthatdoesnotmeetthequantitativecriteriaisstillreportedseparatelywhereinformationaboutthesegmentwouldbeusefultousersoftheFinancialStatements.

(ff) FAIR VALUE MEASUREMENT TheGroupmeasuresfinancialinstruments,suchas

derivatives,atfairvalueateachbalancesheetdate.Also,anyfairvaluesoffinancialinstrumentsmeasuredatamortisedcostaredisclosed.

Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Thefairvaluemeasurementisbasedonthepresumptionthatthetransactiontoselltheassetortransfertheliabilitytakesplaceeither:

• Intheprincipalmarketfortheassetorliability,or

• Intheabsenceofaprincipalmarket,inthemostadvantageousmarketfortheassetorliability.

TheprincipalorthemostadvantageousmarketmustbeaccessibletotheGroup.

Thefairvalueofanassetoraliabilityismeasuredusingtheassumptionsthatmarketparticipantswouldusewhenpricingtheassetorliability,assumingthatmarketparticipantsactintheireconomicbestinterest.

Whereapplicable,afairvaluemeasurementofanon-financialassettakesintoaccountamarketparticipant’sabilitytogenerateeconomicbenefitsbyusingtheassetinitshighestandbestuseorbysellingittoanothermarketparticipantthatwouldusetheassetinitshighestandbestuse.

TheGroupusesvaluationtechniquesthatareappropriateinthecircumstancesandforwhichsufficientdataisavailabletomeasurefairvalue,maximisingtheuseofrelevantobservableinputsandminimisingtheuseofunobservableinputs.

Allassetsandliabilitiesforwhichfairvalueismeasuredordisclosedinthefinancialstatementsarecategorisedwithinthefairvaluehierarchy,describedasfollows,basedonthelowestlevelinputthatissignificanttothefairvaluemeasurementasawhole:

• Level1—Quoted(unadjusted)marketpricesinactivemarketsforidenticalassetsorliabilities

• Level2—Valuationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvaluemeasurementisdirectlyorindirectlyobservable

• Level3—Valuationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvaluemeasurementisunobservable

Forassetsandliabilitiesthatarerecognisedinthefinancialstatementsonarecurringbasis,theGroupdetermineswhethertransfershaveoccurredbetweenLevelsinthehierarchybyre-assessingcategorisation(basedonthelowestlevelinputthatissignificanttothefairvaluemeasurementasawhole)attheendofeachreportingperiod.

TheGroup’smanagementdeterminethepoliciesandproceduresforbothrecurringfairvaluemeasurementandfornon-recurringmeasurement,suchasassetsheldfordistributionindiscontinuedoperation.

Ateachreportingdate,managementanalysesthemovementsinthevaluesofassetsandliabilitieswhicharerequiredtobere-measuredorre-assessedaspertheGroup’saccountingpolicies.Forthisanalysis,managementverifiesthemajorinputsappliedinthelatestvaluationbyagreeingtheinformationinthevaluationcomputationwithregardtocontractsandotherrelevantdocuments.Comparisonismadeofeachofthechangesinthefairvalueofeachassetandliabilitywithrelevantexternalsourcestodeterminewhetherthechangeisreasonable.


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(ff) FAIR VALUE MEASUREMENT - continued Managementpresentthevaluationresultstotheaudit

committeeandtheGroup’sindependentauditors.Thisincludesadiscussionofthemajorassumptionsusedinthevaluations.

Forthepurposeoffairvaluedisclosures,theGrouphasdeterminedclassesofassetsandliabilitiesonthebasisofthenature,characteristicsandrisksoftheassetorliabilityandthelevelofthefairvaluehierarchyasexplainedabove.

Consolidated

2016US$’000

2015US$’000

2. Revenues (a) Other Revenue

Interestrevenue–otherparties 5 10

(b) Other Income

Gain/(loss)onsettlementofcrudeoilputoptionsandswaps (128) 1,907

Other - 52

Total Other Income (128) 1,959


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

Consolidated

2016US$’000

2015US$’000

3. Expenses(a) Cost of Sales

Amortisationofoilandgasproperties 21,452 25,526

Productioncostsnetofinventorymovement 26,692 46,822

Total cost of sales 48,144 72,348

ProductioncostsexpenseincludesSC14C1GalocoilfieldpaymentsfortheFPSOof$21,403,000(2015:$22,995,000).Itisimpracticabletosplitnon-leasecomponentsfromtheoperatingleasepayments.

(b) Administrative and Other Expenses

(i) Administrative expenses

Employee Benefits

Wagesandsalaries 5,028 4,356

Definedcontributionsuperannuationexpense 331 279

Sharebasedpaymentsexpense 15 15

Otheremployeebenefits 331 383

Totalemployeebenefits 5,705 5,033

Office and other expenses

Officeandotherexpenses,netoftimewritingrecoveries (1,157) 1,783

Depreciation, amortisation and impairment expenses

Depreciationofplantandequipment 117 96


Impairmentwrite-downofinventory(note7) - 337

Impairmentwrite-down/(write-back)ofexplorationassets - (335)

Totaldepreciation,amortisationandimpairment 21,569 25,624

Less:amortisationincludedincostofsales (21,452) (25,526)

Totaldepreciation,amortisationandimpairmentincludedinotherexpenses 117 98

Lease payments

Operatingleaserental 398 465

Total Administrative Expenses 5,063 7,379

(ii) Other

Explorationandevaluationexpenditureexpensed 1,700 2,142

Total other 1,700 2,142

Total Administrative and Other Expenses 6,763 9,521

(c) Finance Costs

(i) RBL facility finance costs

Interestexpense - 1,860

(ii) BCP Revolving term loan facility costs

Interestexpense 6,530 5,916

(iii) Other finance costs

Unwindoftheeffectofdiscountingonprovisions 217 313

Total finance costs 6,747 8,089


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Consolidated

2016US$’000

2015US$’000

4. Income Tax(a) Income tax (benefit)

Themajorcomponentsofincometaxexpenseare:

Current income tax

Currentincometaxcharge 1,955 2,600

Prioryearunderprovision - -

Deferred income tax

Temporarydifferencesoriginatingandreversing (3,591) (6,040)

Prioryearunder/(over)provision - 202

Income tax (benefit) reported in income statement (1,636) (3,238)

Thereisnoincometax(benefit)inrelationtoitemschargedorcrediteddirectlytoequity.

(b) Numerical reconciliation between aggregate tax (benefit) recognised in the income statement and tax (benefit) calculated per the statutory income tax rate

Lossbeforeincometax (18,891) (34,366)

AttheGroup’sstatutoryincometaxrateAustralia30%,Philippines30%(2015:Australia30%,Philippines30%) (5,667) (10,310)

Adjustments in respect of current year income tax

Non-deductibleexpenses 737 5,100

Non-assessableincome (1,348) (1,438)

Prioryearunder-provision - 202

DifferencebetweenstandarddeductionsandOSD (448) (893)

DeferredtaxliabilitiesnotrecognisedduetouseofOSD 1,245 2,949

Deferredtaxassetsnotrecognised 3,999 1,156

Effectofforeignexchangedifferences (124) (4)

Other (30) -

Income tax (benefit) for the year (1,636) (3,238)


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 20164. Income Tax - continued

BalanceSheet

2016US$’000

BalanceSheet

2015US$’000

Profit or Loss

2016US$’000

Profit or Loss

2015US$’000

(c) Deferred tax assets and liabilities

CONSOLIDATED

(i) Deferred tax liabilities

Oilandgasassets - 473 473 (7,723)

Restorationassets 2,505 2,849 210 380

Financialliabilities - - - (23)

Unrealisedforeignexchangemovement (3) (82) (79) (6,864)

Set-offofdeferredtaxassets 516 3,369 2,987 14,230

3,018 6,609 3,591 -

(ii) Deferred tax assets

Provisions - - - 243

Oilandgasassets 3,477 - (3,477) -

Other (469) (469) - 726

Rehabilitation 5,317 5,070 (381) (969)

Explorationassets 4,586 4,687 101 (1,575)

Revenuetaxlosses - 871 871 16,717

Unrecogniseddeferredtaxasset (13,427) (13,528) (101) (6,952)

Set-offagainstdeferredtaxliabilities 516 3,369 2,987 (14,230)

- - - (6,040)

Thebenefitoftaxlossesnotbroughttoaccountforthe2016yearwillonlybeobtainedif:

(i) Futureassessableincomeisderivedofanatureandofanamountsufficienttoenablethebenefittoberealised;

(ii) Theconditionsfordeductibilityimposedbythetaxlegislationcontinuetobecompliedwith;and

(iii) Thecompaniesareabletomeetthecontinuityofownershipand/orcontinuityofbusinesstests.

Australianrevenuetaxlossesof$53.006million(2015:$53.879million)areavailableindefinitelyforoffsettingagainstfutureAustraliantaxableprofitssubjecttocontinuingtomeetrelevantstatutorytests.

RevenuetaxlossesduetooperationsinthePhilippinesof$9.419million(2015:$16.101million)areavailableforoffsetagainstfuturePhilippinetaxableprofitssubjecttocontinuingtomeetrelevantstatutorytests.

(d) CURRENT TAX ASSETTheCurrentTaxAssetincludesincometaxcreditsof$0.911milliontobeoffsetagainstfuturetaxableprofitsofNidoProduction(Galoc)PtyLtdBranch(2015:$1.388million).

(e) NO TAX CONSOLIDATED GROUPAsatthereportingdate,aconsolidatedgroupfortaxpurposeshasnotbeenformed.


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Consolidated

2016US$’000

2015US$’000

5. Cash and Cash EquivalentsCashatbankandinhand 31,968 17,490

Shorttermdeposits 6 41

31,974 17,531

Cashatbankandinhandearnsinterestatfloatingratesbasedondailybankdepositrates.ShorttermdepositsaremadeforvaryingperiodsofbetweenonedayandonemonthdependingontheimmediatecashrequirementsoftheGroupandearninterestattherespectiveshorttermdepositrates.

6. ReceivablesTrade and Other Receivables – Current

Crudeoilreceivables 87 5,529

DepositsheldbyJointOperations 3,962 4,455

GSTreceivables 34 94

Prepayments 507 1,378

Other 481 2,474

5,071 13,930

FairValueandRiskExposures

(i) Duetotheshorttermnatureofthesereceivables,theircarryingvalueapproximatestheirfairvalue;

(ii) Themaximumexposuretocreditriskisthefairvalueofreceivables.Collateralisnotheldassecurity;

(iii) Detailsregardingforeignexchangeandinterestrateriskexposurearedisclosedinnote31;and

(iv)Otherreceivablesgenerallyhaverepaymentsbetween0and30days.

Ageing analysis of current receivables: Total 0-30 days 31-60 days

2016 5,071 5,071 -

2015 13,930 13,930 -

Therewerenocurrentreceivablespastdueasat31December2016.Noimpairmentofreceivableswasrequiredasat31December2016(2015:Nil).

7. InventoriesCasing,pipeanddrillinginventory–atnetrealisablevalue1 2,135 2,227

Oilinstorage–atcost 6,190 2,859

Totalinventories 8,325 5,086

Noinventorieswereimpairedorwrittendowntonetrealisablevalueduringtheyear(2015:$336,962).

1Duringtheyear$nil(2015:$450,783)wasreclassedfromoilandgaspropertiestoinventory.


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Consolidated

2016US$’000

2015US$’000

8. Other Financial AssetsCurrent:

Receivables-securitydeposits 56 51

Non-Current:

Receivables-securitydeposits 11,447 11,398

Receivables–decommissioningescrowfund 6,910 6,600

18,357 17,998


(i) Themaximumexposuretocreditriskislimitedtothecarryingamountofthesecuritydeposits,whichapproximatesthefairvalue;

(ii) DetailsregardingforeignexchangeandinterestrateriskexposurearedisclosedinNote31.

9. Plant and EquipmentPlantandequipment,atcost 2,215 2,163

Accumulateddepreciation (2,046) (1,927)

169 236

Reconciliation

Asat1January 236 187

Additions 52 155

Disposals (1) -

Depreciationexpense (117) (96)

Currencytranslationdifferences (1) (10)

Netcarryingvalue 169 236

10. Oil and Gas PropertiesProductionphase,atcost 186,533 187,222

Accumulatedamortisationandimpairmentlosses (150,756) (129,304)

35,777 57,918

Reconciliations

Production phase – net

Asat1January 57,918 33,095

Additionsincludingrestorationasset - 5,058

Acquisitionofsubsidiary(includingtransactioncosts*)–refernote13 - 65,198

Refundofexpenditure (689) -

Otherreclasstoinventory - (450)

Impairment1 - (19,457)

Amortisationofoilandgasproperties (21,452) (25,526)

Netcarryingvalue 35,777 57,918


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201610. Oil and Gas Properties - continued

Oilandgaspropertiescapitalisedintheproductionphaseasat31December2016comprisedonlyoftheSC14C1Galocoilfield.ThisistheGroup’sprimaryCashGeneratingUnit(‘CGU’).

*IncludesallocationofGalocProductionCompanyWLLtransactioncostsofUS$1.585million(netoftransactioncostsUS$63.613million).

1Withthereductioninglobaloilpricestowardstheendofthe2015financialyearanddownwardrevisedreserves,thecarryingvalueoftheSC14C1Galocoilfieldwasreviewedasat31December2015.ItwasdeterminedthatthecarryingvalueoftheSC14C1Galocoilfieldwas$19.457millioninexcessofitsrecoverableamountandthereforetheassetvaluewasimpairedaccordingly.

Impairment

InaccordancewiththeGroup’saccountingpoliciesandprocesses,theGroupperformsitsimpairmenttestingannuallyat31December.Non-financialassetsarereviewedateachreportingperiodtodeterminewherethereisanindicationofimpairment.Whereanindicatorofimpairmentexists,aformalestimateoftherecoverableamountismade.

2016

Nidorevieweditsoilandgaspropertiesasat31December2016andassessedthattherewasnoindicationthatanassetmaybeimpaired.Therewerenoexternalorinternalindicatorsthatreflectedmaterialchangesinstatusandassumptions,includingoilpricecurveassumptions.

2015

Thesignificantreductioninthecrudeoilpricesinthelastquarterof2015representedapossibleindicatorofimpairmentasat31December2015.Asaresult,theGroupassessedtherecoverableamountsofeachoftheOilandGasPropertiesintheassetportfolio.AccordinglytheSC14C1Galocoilfieldwastestedforimpairmentasat31December2015.

Unlessotherwiseidentified,thefollowingdiscussionof(a)impairmenttestingand(b)sensitivityanalysisisapplicabletotheassessmentoftherecoverableamountofalloftheGroup’sOilandGasPropertyassets.

a) Impairment testing - 2015

i) Methodology

Impairmentisrecognisedwhenthecarryingvalueexceedstherecoverableamount.TherecoverableamountofeachOilandGasPropertyhasbeenestimatedusingitsfairvaluelesscostsofdisposal.

Fairvaluelesscostsofdisposalisestimatedbasedonthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweentwomarketparticipantsatthemeasurementdate,lessthecostsofdisposal.

Estimatesofquantitiesofrecoverableoilreserves,productionlevelsandoperatingcostsaresourcedfromtheJointOperation’slifeofwellmodelling,budgetsandforecastedoutlook.The2015JointOperationbudgetandforecastweredevelopedinthecontextofthecurrentoilpriceenvironmentandoutlook,andtheGroup’scontinuedfocusofmaximisingfreecashflow.

Significantjudgementsandassumptionsarerequiredinmakingestimatesoffairvaluelesscostsofdisposal.Thisisparticularlysointheassessmentoflonglifeassets.Itshouldbenotedthatfairvaluelesscostsofdisposalcalculationsaresubjecttovariabilityinkeyassumptionsincluding,butnotlimitedto,long-termoilprices,discountrates,productionprofilesandoperatingcosts.AnadversechangeinoneormoreoftheassumptionsusedtoestimatefairvaluelesscostsofdisposalcouldresultinareductioninanOilandGasPropertyasset’srecoverableamount.

ii) Key assumptions

Thetablebelowsummarisesthekeyassumptionsusedinthe2015endofyearcarryingvalueassessments:

2015

2016-2021Long Term

(2022+)

Oilprice(US$perbbl) $43-$79 $81-$84

Reserves 2P 2P

Discountrate(%) 9.5% 9.5%


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201610. Oil and Gas Properties - continued

Oil Prices

Oilpricesareestimatedwithreferencetonominalexternalmarketpriceforecasts.Thesizeablereductioninquotedoilpricesthroughoutthefinancialyearhasresultedinsignificantlylowershort-termandlong-termoilpriceassumptionsappliedtotheimpairmentreviewsat31December2015.TheprimaryimpactofthischangewasareductionintherecoverableamountoftheGalocOilandGasAssetfrombothreducedoilrevenuesandshorteningfieldeconomiclife.

Discount Rate

IndeterminingthefairvaluelesscostofdisposalforOilandGasassets,thefuturecashflowswerediscountedusingnominalratesbasedonpre-taxdiscountratesadjustedforrisksspecifictotheCGU.ThediscountratesthatappliedtoindividualOilandGasPropertyassetsthatrecognisedimpairmentswere:

Oil and Gas Property - 2015

Functional Currency 2015

Galocoilfield USD 9.5%

FortheGalocoilfieldasset,productionactivityisassumedtodeclineuntiltheendofthewelllifeinamannerconsistentwithdepletiontodate.

Production activity and operating costs

ProductionactivityandoperatingcostsassumptionsarebasedontheGroup’slatestlifeofwellmodels,budgetsandforecasts.WhereprojectsareoperatedbyajointoperationwhichisnotwithintheGroup,informationissoughtfromtheoperatoratregularintervalsandthemostrecentmodellingfromtheoperatorisusedasthebasisforproductionactivityandoperatingcostsusedinthefairvaluelesscostofdisposalcalculations.

iii) Impacts

Afterconductingtheimpairmentanalysis,theGrouphasrecognisedanimpairmentlossonassetswithintheCGUasfollows:

Oil and Gas Property Assets - 2015

Impairment – Other Assets $’000

Galocoilfields 19,457

ThekeydriveroftheimpairmentfortheGalocoilfieldassetwasthereducedoilpriceandrevisedproductionprofilefor2016-2021.Othercostassumptionsremainedrelativelystaticfortheremainingwelllife.

TherecoverableamountoftheCGUisUS$44,946,798.

b) Sensitivity Analysis - 2015

Anyvariationinthekeyassumptionsusedtodeterminefairvaluelesscostofdisposalwouldresultinachangeoftheestimatedrecoverableamount.Ifthevariationinassumptionhadanegativeimpactonrecoverableamountitcouldindicatearequirementforadditionalimpairmenttonon-currentassets.

ItisestimatedthatchangesinthekeyassumptionswouldhavethefollowingapproximateimpactontherecoverableamountoftheGalocoilfieldassetinitsfunctionalcurrency.

Oil and Gas Property Assets - 2015 Galoc Oil Field

US$’000

$10changeperbarreloilprice 17,543

0.25%increase/decreaseinthediscountrate 238

5%increase/decreaseintheassumedoperatingcosts 2,892

Itmustbenotedthateachofthesensitivitiesaboveassumesthatthespecificassumptionmovesinisolation,whilstallotherassumptionsareheldconstant.Inreality,achangeinoneoftheaforementionedassumptionsmayaccompanyachangeinanotherassumptionwhichmayhaveanoffsettingimpact.Actionisalsousuallytakentorespondtoadversechangesineconomicassumptionsthatmaymitigatetheimpactofanysuchchange.


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Consolidated

2016US$’000

2015US$’000

11. Exploration and Evaluation Expenditure Explorationandevaluationexpenditure,atcost 72,577 71,023

Reconciliation


Additions 1,554 1,381

Acquisitionofsubsidiary(includingtransactioncosts*)–refernote13 - 26,406


*IncludesallocationofGalocProductionCompanyWLLtransactioncostsof$0.642million(netoftransactioncosts$25.764million).

Theultimaterecoupmentofcostscarriedforwardforexplorationandevaluationphasesisdependentonthesuccessfuldevelopmentandcommercialexploitationorsaleoftherespectiveoilandgaspermits.

12. Information Relating to Nido Petroleum Limited (Parent Entity)

Parent Company

2016US$’000

2015US$’000

Currentassets 2,359 5,869

Non-currentassets 125,667 128,064

Currentliabilities (667) (1,058)

Non-currentliabilities (83,175) (90,875)

Netassets 44,184 42,000

Contributedequity 170,853 151,567

Sharebasedpaymentsreserve 10,140 10,126

Foreigncurrencytranslationreserve (9,818) (9,818)

Accumulatedlosses (126,991) (109,875)

Totalequity 44,184 42,000

Lossoftheparententityfortheyear (17,116) (29,306)

Totalcomprehensivelossoftheparententity (17,116) (34,566)

NidoPetroleumLimitedhasprovidedaletterofundertakingdated14November2006totheDepartmentofEnergyinthePhilippinestoprovidetechnicalandfinancialsupporttoNidoPetroleumPhilippinesPtyLtdinrelationtoworkobligationsintheSC58FarmInAgreementexecutedbetweenPNOCExplorationCorporationandNidoPetroleumPhilippinesPtyLtdon17July2006.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201613. Acquisition of Galoc Production Company WLL(a) Acquisition Summary and Consideration - 2015

On17February2015,theGroupacquired100%ofthesharesinGalocProductionCompanyWLL(‘GPC’)forcashconsiderationof$87.423million.GPCholds33%interestintheGalocoilfield,locatedinServiceContract14C1inthePhilippines.TheGroupnowholds55.88%workinginterestintheGalocoilfieldandhasOperatorshipoftheproject.Theacquisitionwasaccountedforasanassetacquisition.

Nidofundedthecashacquisitionthroughacombinationofcashreservesanddebt.Thenetcostoftheacquisitionofthesubsidiaryisasfollows:

US$’000

Initialconsiderationoffered(asat1July2014) 108,000

Finalpricepaidonsettlementafterclosingadjustments(17February2015) 87,423

Add:Transactionrelatedcosts 2,227

Total consideration 89,650

*$10.800millionwaspaidinDecember2014asadeposit,with$76.623millionpaidinFebruary2015.

(b) Assets Acquired and Liabilities Assumed

Thefollowingtablesummarisestherecognisedamountsofassetsacquiredandliabilitiesassumedatthedateofacquisition(includingcostsofacquisitionof$2.227million):

US$’000

Currentassets:

Cashandcashequivalents 6,206

Tradeandotherreceivables 5,016

Inventories 6,899

Otherfinancialassets 581

Non-currentassets:

Oilandgasproperties 65,198

Explorationandevaluationexpenditure 26,406

Otherfinancialassets 6,600

Currentliabilities:

Tradeandotherpayables (8,354)

Provisions (1,746)

Non-currentliabilities:

Provisions (9,018)

Otherliabilities (8,138)

Total net assets acquired 89,650


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201613. Acquisition of Galoc Production Company WLL – continued

(c) Measurement of Fair ValuesThevaluationtechniquesusedformeasuringthefairvalueofmaterialassetsacquiredwereasfollows:

Asset Acquired Valuation Technique

Inventories Thefairvalueisdeterminedbasedontheestimatedsellingpriceintheordinary courseofbusinesslesstheestimatedcostsofcompletionandsale,anda reasonableprofitmarginbasedontheeffortrequiredtocompleteandsellthe inventories.

Oil&gaspropertiesand Thefairvalueisdeterminedbyconsideringdiscountedcashflowsandmarketexploration&evaluationassets comparisontechniquesandapplyingjudgementinrelationtowhatmarket participantswouldapply.Discountedcashflowsconsiderthepresentvalueofthe netcashflowsexpectedtobegeneratedbytheproject,applyingarisk-adjusted discountrate.Marketcomparisontechniquesconsiderthevalueofidentified hydrocarbonreservesandresourcesassociatedwiththeproject.

Forallotherassetsandliabilities,thefairvalueisequaltotheircarryingamounts.

Consolidated

2016US$’000

2015US$’000

14. Trade and Other PayablesTradecreditors 5,647 8,531

Othercreditors 12,166 12,022

17,813 20,553


(i) Duetotheshorttermnatureofthesepayables,theircarryingvalueisassumedtoapproximatetheirfairvalue.

(ii) Detailsregardingforeignexchange,interestrateriskexposureandliquidityriskaredisclosedinNote31.

(iii) Tradeandotherpayablesareunsecuredandusuallypaidwithin60daysofrecognition.

15. Financial liabilities

Current

Accruedinterest - 2,663

- 2,663

Non-Current

Financialliabilitymeasuredatamortisedcost 78,200 88,200

Accruedinterest 4,956 -

83,156 88,200

Thedebtcomponentofthedebtfacilityisrecordedatamortisedcost.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201615. Financial liabilities - continued

(a) Nature and Fair Value

Bangchak Petroleum Public Company Limited Facility

On12December2014,NidoPetroleumLimited(Nido)enteredintoarevolvingdebtloanfacilityforuptoUS$120millionwiththeBangchakPetroleumPublicCompanyLimited(’Bangchak’).TheprimarypurposeofthefacilitywastofundtheacquisitionofoilandgasassetsapprovedbyBangchak.NidohaspreviouslyusedthefacilitytoacquireOttoEnergyLtd’s(OEL)sharesinGalocProductionCompanyWLL(‘GPC’).Inthefirstquarterof2016NidoandBangchakagreedtorestructurethefacilitywitheffectfrom11March2016.

ThekeytermsoftherestructuredFacilityAgreementwereasfollows:

• NidoprovidedanadvancedprincipalpaymentofUS$10million,aswellasapaymentofUS$0.890millionofinterestaccruedto15March2016,leavingaresidualbalanceof$US78.2millionofprincipaloutstandingundertheFacilityAgreement,;

• repaymentofallotherprincipalpaymentswasdeferredeffectivefromFebruary2016andscheduledtorecommenceinMarch2018;

• theinterestrateontheFacilitywascappedat6%+LIBORfortheremainderoftheterm(previouslyinterestincreasedby2percentperannum);

• interestontheoutstandingloanbalanceaccruesuntilthere-commencementofprincipalpaymentsinMarch2018;

• BangchakagreedtoprovideadditionalfinancialsupporttoensureNidowillhavesufficientfundstomeetcontractualobligations,uptoacumulativecapof$US4millionsubjecttocertainconditionsbeingmet;

• iftheoilpricerecoveredsuchthattherealisedpriceforasinglecargoexceededUS$45/barrel,NidoandBangchakagreedtodiscusswhetherNidohasatthatpointanyabilitytoacceleratetherepaymentofdeferredinterestontheexistingloan;and

• NidoprovidedanegativepledgewithrespecttothecreationofanynewsecurityoverNidogroupassets(saveforsecuritiescreatedintheordinarycourseofbusiness).

(b) Risk exposures

Detailsregardingforeignexchange,interestrateriskexposureandliquidityriskaredisclosedinNote31.

Consolidated

2016US$’000

2015US$’000

16. Current Provisions Employeebenefits–AnnualLeaveandLongServiceLeave 409 517

17. Non-Current ProvisionsEmployeebenefits–LongServiceLeave 19 12

Employeebenefits–DefinedBenefitPlanPhilippines(1) 754 814

Restoration(2) 23,436 23,494

24,209 24,320


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201617. Non-Current Provisions – continued

(1)Defined Benefit Plan – Philippines

TheGrouphasadefinedbenefitretirementplaninthePhilippines.TheplanisafinalsalaryplanforemployeesinthePhilippineswherecontributionsarerequiredtobemadetoaseparatelyadministeredfund.

Thelevelofbenefitsprovideddependsonthemember’slengthofserviceandsalaryatretirementage.ThefundisgovernedbyretirementcommitteeappointedbytheGroupandisresponsibletoensuretheadministrationofandcontributionsmadeonbehalfofthemembersofthefund.

TheretirementplanisexposedtothePhilippinesinflation,interestraterisksandchangesinthelifeexpectancyoftherecipients.(2)Restoration

Consolidated2016

US$’0002015

US$’000

Movements in non-current restoration provision


Acquisitionofsubsidiary–refernote13 - 8,778

Arisingduringtheyear - 1,053

Discountrateadjustment (275) -

Unwindingoftheeffectofdiscountingonprovisions 217 313


Nature and timing of the restoration provision:

TheGrouphasrecognisedaprovisionforrestorationrelatedtotheestimatedcostofrestorationworkrequiredattheendoftheusefullifeoftheproducingfields,includingremovaloffacilitiesandequipmentrequiredorintendedtoberemoved.TheprovisionincludesabandonmentofproducingwellsinServiceContract14,inparticularfortheGalocoilfieldinSC14BlockC-1(currentlyestimatedtobeabandonedaround2019),NidoandMatinlocoilfieldsinSC14AandSC14B(currentlyestimatedtobeabandonedaround2018)andrecognisedaprovisionforrestorationrelatingtotheexistingnon-producingwellsandinfrastructureinSC14BlockC-2(WestLinapacan).TheestimatedcostsrelatingtotheabandonmentofWestLinapacanhavebeencapitalisedastherestorationobligationisrecognisedduringtheevaluationstage,withabandonmentofthefieldtobecompletedbeforetheexpirationoftheServiceContracttermin2025.

TheseprovisionshavebeencreatedbasedonfieldOperatorestimates.Theseestimatesarereviewedregularlytotakeintoaccountanymaterialchangestotheassumptions.Howeveractualdecommissioningcostswillultimatelydependuponfuturemarketpricesforthenecessarydecommissioningworksrequiredwhichwillreflectmarketconditionsattherelevanttime.Furthermore,thetimingofthedecommissioningislikelytodependonwhenthefieldsceasetoproduceateconomicallyviablerates.This,inturn,willdependuponfutureoilprices,whichareinherentlyuncertain.Theseestimatesofrestorationaresubjecttosignificantestimatesandassumptions;referNote1(s).

18. Contributed EquityIssuedandfullypaidordinaryshares 170,853 151,567

TheCompany’sshareshavenoparvalueandthereisnolimittotheamountofauthorisedcapital.Fullypaidordinarysharescarryonevotepershareandcarrytherighttodividends.

(a) Movement of shares on issue2016 2015

Number of Shares US$’000

Number of Shares US$’000

Beginningoftheyear 43,765,712 151,567 2,188,266,468 151,567

Consolidationofcapital(1for50): - - (2,144,500,756) -

Issuedduringtheyear:

• issuesofnewshares(i) 404,357,996 19,778 - -

• issueofnewsharesunderemploymentcontract(ii) 87,500 - - -

• lesstransactioncosts - (492) - -

Endoftheyear 448,211,208 170,853 43,765,712 151,567


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201618. Contributed Equity - continued

On29May2015,NidoconsolidatedtheCompany’ssharecapital,onthebasisof1shareforevery50existingshares,asapprovedbyshareholdersattheAnnualGeneralMeetingon22May2015.

(i) Newsharesissued

2016

On6December2016,404,357,996ordinaryshareswereissuedaspartofapro-ratarenounceableentitlementofferof11.2ordinarysharesforeveryshareheld.

2015

Nonewsharesissued.

(ii) Sharesissuedunderemploymentcontract

2016

On11May2016,43,750ordinaryshares(Tranche1)andon26August2016,43,750ordinaryshares(Tranche2)wereissuedtoDrFischer,ManagingDirector,pursuanttoaSign-onandRetentionBonuswhichformspartoftheemploymentcontractenteredintobetweenNidoPetroleumLimitedandDrFischer.

2015

None.

(b) Performance rights on issue

Thetotalnumberofperformancerightsonissueasat31December2016isnil(2015:nil).RefertoNote23forfurtherdetailsincludinginformationontheSignOnandRetentionBonusshareentitlement.

(c) Capital Management

Whenmanagingcapital,management’sobjectiveistoensuretheentitycontinuesasagoingconcernaswellastomaintainoptimalreturnstoshareholdersandbenefitsforotherstakeholders.Managementalsoaimstomaintainacapitalstructurethatensuresthelowestcostofcapitalavailabletotheentity.

Managementmayinthefutureadjustthecapitalstructuretotakeadvantageoffavourablecostsofcapitalandissuefurthersharesinthemarket.Managementhasnocurrentplanstoissuefurthershares.Therearenoplanstodistributedividendsinthenextyear.

TheGroupisnotsubjecttoanyexternallyimposedcapitalrequirements.

Thegearingratiosbasedonoperationsat31December2016and2015wereasfollows:

Consolidated

2015US$’000

2015US$’000

Totalpayablesandborrowings* 101,723 112,231

Lesscashandcashequivalents (31,974) (17,531)

Netdebt 69,749 94,700

Totalequity 44,184 42,000

Totalcapital 113,933 136,700

* Includes interest bearing loans and borrowings and trade and other payables. Trade and other payables for the group as at 31 December 2016 is $17,813,000 (2015: $20,553,000).

Gearingratio** 61% 69%

** Gearing excluding trade and other payables for the group is 54% (2015: 64%).


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Consolidated

2016US$’000

2015US$’000

19. Reserves Share-basedpaymentreserve 10,141 10,126

Foreigncurrencytranslationreserve (9,672) (9,810)

469 316

Natureandpurposeofreserves:

Share-based payment reserve

Theshare-basedpaymentreserveisusedtorecordthevalueofsharebasedpaymentsprovidedtoemployees,includingKeyManagementPersonnel,aspartoftheirremuneration.RefertoNote23forfurtherdetailsofemployeesharebasedremunerationplans.

Foreign currency translation reserve

Theforeigncurrencytranslationreserveisusedtorecordexchangedifferencesarisingfromthetranslationofthefinancialstatementofforeignsubsidiaries.

Movement in Share-based payment reserve:


Sharebasedpayments 15 15

10,141 10,126

Movement in Foreign currency translation reserve:

Asat1January (9,810) (4,674)

Translationofforeignsubsidiaries 138 (5,136)

(9,672) (9,810)

20. Earnings Per ShareThefollowingreflectstheincomeandsharedatausedinthecalculationsofbasicanddilutedearningspershare.DetailsofperformancerightsaresetoutinNote23.

(a) Earnings used in calculating earnings per share

Consolidated2016

US$’0002015

US$’000

Profit/(loss)attributabletoordinaryequityholdersoftheCompanyusedincalculating:

-basicprofit/(loss) (17,255) (31,128)

-dilutedprofit/(loss) (17,255) (31,128)

(b) Weighted average number of shares

2016#

2015#

Weightedaveragenumberofordinarysharesusedinthecalculationofthebasicearningspershare. 71,428,946 43,765,712

Adjustmentforcalculationofdilutedearningspershare

- optionsandrights n/a n/a

Weightedaveragenumberofordinarysharesoutstandingduringtheyearusedinthecalculationofdilutedearningspershare

71,428,946 43,765,712


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201620. Earnings Per Share - continued

Therewasnoadjustmentfor2016or2015totheweightedaveragenumberofsharesforcalculationofthedilutedEPSasthiswouldbeantidilutive.

TherehavebeennotransactionsinvolvingordinarysharesorpotentialordinarysharesthatwouldsignificantlychangethenumberofordinarysharesorpotentialordinarysharesoutstandingbetweenthereportingdateandthedateofcompletionoftheseFinancialStatements.

(c) Information on the classification of securities

Performancerightsgrantedtoemployees(includingKeyManagementPersonnel)asdescribedinNote23areconsideredtobecontingentlyissuablepotentialordinaryshares.Accordingly,performancerights,ifany,areexcludedinthedeterminationofdilutedearningspershare.

21. Dividends paid and proposed Nodividendhasbeenpaidordeclaredduringthe2016and2015financialyears.

22. Operating Segments

Identification of reportable segments

TheGrouphasidentifieditsoperatingsegmentsbasedontheinternalreportsthatarereviewedandusedbytheManagingDirectorandhismanagementteam(thechiefoperatingdecisionmakers)inassessingperformanceandindeterminingtheallocationofresources.

Theoperatingsegmentsareidentifiedbymanagementbasedonthephaseofoperationwithintheoilandgasindustry.DiscretefinancialinformationabouteachoftheseoperatingbusinessesisreportedtotheManagingDirectorandhismanagementteamonatleastamonthlybasis.

Thereportablesegmentsarebasedonoperatingsegmentsdeterminedbythesimilarityofactivitytypeandphaseofoperations,asthesearethesourcesoftheGroup’smajorrisksandhavethemosteffectontheratesofreturn.

Reportable Operating Segments Identified

Formanagementpurposes,theGrouphasorganiseditsoperatingsegmentsintotworeportablesegmentsasfollows:

• Production&DevelopmentAssetsSegment:Thissegmentincludesoilproducingassetsandassetsandactivitiesthatareinthedevelopmentphasebuthavenotyetachievedfirstoiland/orgasproduction.

• ExplorationandEvaluationAssetsSegment:Thissegmentincludesassetsandactivitiesthatareassociatedwiththedeterminationandassessmentoftheexistenceofcommercialeconomicreserves.

Managementmonitorstheoperatingresultsofitsbusinessunitsseparatelyforthepurposeofmakingdecisionsaboutresourceallocationandperformanceassessment.Segmentperformanceisevaluatedbasedonoperatingprofitorlossandismeasuredconsistentlywithoperatingprofitorlossintheconsolidatedfinancialstatements.However,theGroup’sfinancing(includingfinancecosts,financeincomeandforeignexchangemovements)aremanagedonagroupbasisandarenotallocatedtooperatingsegments.

Accounting Policies

TheaccountingpoliciesusedbytheGroupinreportingsegmentsinternallyarethesameasthosecontainedinNote1totheaccounts.

Incometaxexpenseisallocatedtotheappropriatesegmentsbasedonthetaxableprofitsgeneratedbyeachsegment.

Therehavebeennointer-segmenttransactions.

ItistheGroup’spolicythatifitemsofrevenueandexpensearenotallocatedtooperatingsegmentsthenanyassociatedassetsandliabilitiesarealsonotallocatedtosegments.Thisistoavoidasymmetricalallocationswithinsegmentswhichmanagementbelievewouldbeinconsistent.

ThefollowingitemsarenotallocatedtosegmentsastheyarenotconsideredpartofcoreoperationsofanysegmentNetgainsondisposalofavailableforsaleassets

• Netgainsondisposalofavailableforsaleassets

• Financecostsandrevenues

• Interestrevenue

• Foreigncurrencygains/(losses)

• Corporatecosts


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201622. Operating Segments - continued

Thefollowingtablepresentsrevenueandprofitinformationforreportablesegmentsfortheyearsended31December2016and31December2015.

Operating Segments

Production and Development

US$’000

Exploration and Evaluation

US$’000

Total Operations

US$’000

Year ended 31 December 2016

Revenue

Revenuefromsaleofcrudeoil–externalcustomers 42,601 - 42,601

Total segment revenue 42,601

Otherrevenue 5

Total revenue 42,606

Result

Total segment result (3,782) (669) (4,451)

Segmentresultincludes:

Amortisation (21,452) - (21,452)

Incometaxbenefit 1,636 - 1,636

Reconciliation of segment result after tax to net profit after tax

Financecosts (6,747)

Foreigncurrencygains 285

Corporatecosts (6,220)

Otherrevenueandincome (122)

Net (loss) after tax (17,255)


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Operating Segments


US$’000


US$’000

Total Operations

US$’000

Year ended 31 December 2015

Revenue

Revenuefromsaleofcrudeoil–externalcustomers 68,374 - 68,374

Total segment revenue 68,374

Otherrevenue 10

Total revenue 68,384

Result

Total segment result (20,176) (2,474) (22,650)

Segmentresultincludes:

Amortisation (25,526) - (25,526)

Impairmentofinventory - (337) (337)

Impairmentofoilandgasassets (19,457) - (19,457)

Impairment/(write-back)ofexplorationandevaluationexpenditure

- 335 335

Incometaxbenefit/(expense) 3,238 - 3,238

Reconciliation of segment result after tax to net profit after tax

Financecosts (7,776)

Foreigncurrencygains 4,706

Corporatecosts (7,377)

Otherrevenueandincome 1,969

Net (loss) after tax (31,128)



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Major Customers and Geographical Areas

Revenuereceivedfromthesaleofcrudeoil,whichisattributablesolelytotheProductionandDevelopmentOperatingSegment,wascomprisedoffivedifferentbuyersin2016.

Customer

2016Revenue received from

Sale of Crude Oil US$’000



#1 14,622 24,883

#2 9,266 23,150

#3 8,947 19,020

#4 8,772 1,321

#5 994 -

Total 42,601 68,374

Theprincipalactivitiesoftheconsolidatedentityduringthefinancialyear,whichoccurredprimarilyinthePhilippines,included:

• Explorationforoilandgas;and

• Productionandsaleofoil.

Revenuefromexternalcustomersbygeographicallocationsisdetailedbelow.Revenueisattributedtogeographiclocationsbasedonthelocationofcustomers.Thecompanydoesnothaveexternalrevenuesfromexternalcustomersthatareattributabletoanyotherforeigncountryotherthanasshown.

Country





Singapore 17,719 19,020

SouthKorea 14,622 24,883

Thailand 9,266 23,150

Philippines 994 1,321

Total Revenue 42,601 68,374


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2016

Segmentassets,liabilitiesandcapitalexpenditurewereasfollows:

Operating Segments


US$’000


US$’000Total Operations

US$’000

Segment Operating Assets

Cashandcashequivalents 30,568 -

Tradeandotherreceivables 3,761 -

Inventories 7,444 881

Oilandgasproperties 35,777 -

Explorationandevaluationassets - 72,577

Currenttaxassets 911 -

Othercurrentfinancialassets 56 -

Othernon-currentfinancialassets 18,212 -

96,729 73,458 170,187

Reconciliation of segment assets to total assets

Unallocated assets:

Cashandcashequivalents 1,406


Plantandequipment 169

Othernon-currentfinancialassets 145

Total Assets 173,217

Segment Operating Liabilities

31December2016 (42,680) (216) (42,896)

Reconciliation of segment liabilities to total liabilities

Unallocatedliabilities–other (86,137)

Total Liabilities (129,033)

Segment Capital Expenditure

31December2016 - 1,554 1,554

Reconciliation of capital expenditureto total capital expenditure

Unallocatedadditions -

Total Capital Expenditure 1,554

Thepercentageofthelocationofnon-currentassetsotherthanfinancialinstrumentsfortheyearended31December2016is96%withinthePhilippines,and4%withinIndonesia.


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2015

Segmentassets,liabilitiesandcapitalexpenditurewereasfollows:

Operating Segments


US$’000


US$’000Total Operations

US$’000

Segment Operating Assets

Cashandcashequivalents 16,576 39

Tradeandotherreceivables 12,729 -

Inventories 3,754 1,332

Oilandgasproperties 57,918 -

Explorationandevaluationassets - 71,023

Currenttaxassets 1,388 -

Othercurrentfinancialassets 51 -

Othernon-currentfinancialassets 17,851 -

110,267 72,394 182,661

Reconciliation of segment assets to total assets

Unallocated assets:

Cashandcashequivalents 916


Plantandequipment 236

Othernon-currentfinancialassets 147

Total Assets 185,161

Segment Operating Liabilities

31December2015 (54,462) (204) (54,666)

Reconciliation of segment liabilities to total liabilities

Unallocatedliabilities–other (88,495)

Total Liabilities (143,161)

Segment Capital Expenditure

31December2015 5,058 1,381 6,439

Reconciliation of capital expenditureto total capital expenditure

Unallocatedadditions -

Total Capital Expenditure 6,439

Thepercentageofthelocationofnon-currentassetsotherthanfinancialinstrumentsfortheyearended31December2015is96%withinthePhilippinesand4%withinIndonesia.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201623. Share-based Payments(a) Recognised Share Based Payments Expenses

Theexpensesrecognisedforemployeeservicesreceivedduringtheyearareasfollows:

Consolidated

2016US$’000

2015US$’000

Sharebasedpaymentsexpensed 15 15

(b) Share-based Plans

(i) Performance Rights Plan

TherewerenoperformancerightsissuedtoEmployeesorDirectorsunderNido’sPerformanceRightsPlanin2016(2015:nil).TherewasalsonoexpenserecognisedinrelationtothePerformanceRightsPlaninthe2016financialyear(2015:nil).

(ii) Managing Director Performance Rights

DrMichaelFischer

AsaconditionofDrFischer’semploymentcontract,theCompanyisrequiredtoissue350,000fullypaidordinarysharestoDrFischerasasign-onandretentionbonussubjecttoShareholderapproval.Thesesharesaretobeissuedineight(8)equaltranchesof43,750sharesatsix(6)monthintervalscommencingsix(6)monthsafterthecommencementofemploymenton26August2015.Foraccountingpurposes,thegrantdateoftherightstoissuefutureshareswas6May2016,whenshareholderapprovalwasobtainedattheCompany’sAnnualGeneralMeeting.TheserviceperiodcommencedwhenDrFischerjoinedthecompany,witharesulting$14,920expensedinthepriorfinancialyearforthepro-rataperiodoftotalexpense.Theestimatedfairvaluewasrevisedin2016tousethefairvalueoftheretentionrightsontheactualgrantdate,resultinginatotalof$15,221havingbeenexpensedintheyearended31December2016.

(c) Sign-on and Retention Bonus

Asnotedin(b)(ii)aspartoftheemploymentcontractenteredintobetweenNidoPetroleumLimitedandDrMikeFischer,NidoisrequiredtoissuefuturegrantsoffullypaidOrdinarySharesasaSign-onandRetentionBonus.

Theestimatedfairvalueoftheseshareswasoriginallydeterminedinthe2015AnnualReportbasedonmarketpricesprevailingon31December2015.ThefullfairvalueoftheshareswasA$87,500being350,000atA25cpershareatgrantdate.Notethatwherethegrantdateoccursafteryearend,theestimatedvalueofthegrantdateisdeterminedattheendofthereportingperiodbeing31December2015.

InthiscontextanamountofUS$14,920(A$20,592)sharebasedpaymentsexpensewasrecognisedfortheyearended31December2015inaccordancewithAccountingStandardAASB2ShareBasedPaymentsastheserviceperiodhadcommenced.

GiventhattheactualgrantdatewasestablisheduponShareholderapprovalon6May2016,thefairvalueofthesharebasedpaymenthasbeenrevisedtoreflectthefairvalueoftheshareson6May2016.ThefullfairvalueoftheshareswasrevisedtoA$61,250being350,000atA17.5cpershareatactualgrantdate.

InthiscontextanamountofUS$15,221(A$19,849)sharebasedpaymentexpensewasrecognisedfortheyearended31December2016inaccordancewithAccountingStandardAASB2ShareBasedPayments.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201624. Auditor’s Remuneration

Consolidated

2016US$

2015US$

TheauditorofNidoPetroleumLimitedisKPMG.

AmountsreceivedordueandreceivablebyKPMGfor:

• Anauditorreviewofthefinancialreportoftheentityandanyotherentityintheconsolidatedentity

145,790 136,646

• Otherservicesinrelationtotheentityandanyotherentityintheconsolidatedentity(taxandrelatedservices)

7,492 4,421

153,282 141,067

(a) Reconciliation of profit / (loss) from ordinary activities:

Consolidated

2016US$’000

2015US$’000

Profit/(loss)fromordinaryactivitiesafterincometax (17,255) (31,128)

Adjustments for:

Depreciationofplantandequipment 117 96


Impairmentofinventory - 337

Impairmentofoilandgasassets - 19,457

Impairmentofexplorationassets - (335)

Accretionexpense 217 313

Netexchange(gains)/losses (275) (4,765)

Sharebasedpayments 15 15

Explorationexpenditureexpensed 1,700 2,142

Financingcosts 2,157 3,004

Changes in assets and liabilities:

(Increase)/decreaseinreceivables 9,353 (8,171)

(Increase)/decreaseininventories (3,239) 6,741

(Increase)/decreaseinotherassets 466 290

Increase/(decrease)inpayables (2,520) (221)

Increase/(decrease)inotherliabilities 2,293 2,661

Increase/(decrease)inprovisions (6,458) (7,428)

Netcashfromoperatingactivities 8,023 8,534


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201626. Related Parties(a) Compensation of Key Management Personnel

Consolidated

2016US$

2015US$

Short-termemploymentbenefits 3,149,476 2,418,067

Post-employmentbenefits 216,944 193,101

Long-term (89,428) 12,473

Sharebasedpayment 15,221 14,921

3,292,213 2,638,562

(b) Loans from Related Parties

Consolidated

2016US$

2015US$

TotalLoanFacilitywithBangchakPetroleumPublicCompanyLtd 120,000 120,000

Drawnamount 78,200 88,200

Undrawnamount 41,800 31,800

On12December2014,NidoPetroleumLimited(Nido)enteredintoarevolvingtermloanfacilityforuptoUS$120millionwiththeBangchakPetroleumPublicCompanyLimited(’Bangchak’).

TheprimarypurposeofthedebtfacilityistofundtheacquisitionofoilandgasassetsapprovedbyBangchak.NidohasusedthefacilitytoacquireOttoEnergyLtd’s(‘OEL’)sharesintheGalocProductionCompanyW.L.L.(‘GPC’).

Thekeytermsofthedebtfacilityareasfollows:

• Facilitysize:US$120million;

• Interestpayableisinitially6%perannumplusLIBORincreasingannuallyby2%toamaximumrateof12%plusLIBOR;and

• Maturitydate:December2020amortisingonasemi-annualbasisinaccordancewiththefacilityavailableamount.

Nido’sRelatedPartyTransactionsandConflictsCommitteeassessedthearms-length-natureoftheloantermsofferedbyBangchak.TheCommitteereviewedtheproposedloantermsagainsttheCompany’sexistingdebtfacilityarrangementsandothermarketbasedterms.InthiscontexttheCommitteeformedtheviewthattheloantermsproposedbyBangchakwereatleastasfavourabletoNidoasarm’slengthterms.

On15March2016Nidomadeaprincipalrepaymentof$10millionofthedebtfacilitywithBangchakaspartoftherestructureoftherevolvingtermloanfacilityandrevisedtheagreement.RefertoNote15.

(c) Other transactions

Transactionsbetweenrelatedpartiesincluded:

(i) On31May2016NidosignedaDubaiFatehcrudeoilputoptioncontractwithBangchakfor90,000barrelsofcrudeoilatastrikepriceof$47.00perbarrel.ThepremiumpaidtoBangchakfortheoptionwas$162,000.TheaverageJune2016DubaiFatehoilpricewas$46.256perbarrel.Nidoexercisedtheputoptionandreceivedproceedsof$66,960fromBangchak.

(ii) On9September2016NidosignedacommoditypriceswapwithBangchakfor90,000barrelsofcrudeoilatfixedswappriceof$46.20perbarrel.TherewasnopremiumpaidtoBangchak.TheaverageNovember2016DubaiFatehoilpricewas$43.865perbarrel.Nidoexercisedthepriceswapandreceivedproceedsof$210,150.

(iii) On6December2016NidosignedacommoditypriceswapwithBangchakfor80,000barrelsofcrudeoilatafixedswappriceof$50.50perbarrel.TherewasnopremiumpaidtoBangchak.TheaverageJanuary2017DubaiFatehoilpricewas$53.717perbarrel.Netproceedsof$257,360werepaidtoBangchakon14February2017.

Therewerenotransactionswithotherrelatedpartiesduringthe2016year.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201627. Expenditure Commitments(a) Exploration Commitments

Inordertomaintaincurrentrightsoftenuretoexplorationpermits,theconsolidatedentityhascertainobligationstoperformminimumexplorationworkandexpendminimumamountsofmoney.Thesecommitmentsmaybevariedasaresultofrenegotiations,relinquishments,farm-outs,salesorcarryingoutworkinexcessofthepermitobligations.Thefollowingexplorationexpenditurerequirementshavenotbeenprovidedforinthefinancialreportandarepayable:

Consolidated

2016US$’000

2015US$’000

Withinoneyear 18,702 61

Morethanoneyearbutnotlaterthanfiveyears 6,000 6,000

24,702 6,061

(b) Joint Operations Commitments

Alloftheconsolidatedentity’scommitmentsarisefromitsinterestinJointOperations.Theconsolidatedentity’sshareofexpenditurescontractedforatthebalancedateforwhichnoamountshavebeenprovidedforintheFinancialStatementsarepayable:

Withinoneyear 4,817 5,079

(c) Non-cancellable Operating Lease Commitments

Theconsolidatedentityhasenteredintonon-cancellableoperatingleasesforofficepremisesanditsGalocoperationsFPSO.Commitmentsareasfollows:

Withinoneyear 44,714 44,975

Morethanoneyearbutnotlaterthanfiveyears 8,706 54,284

53,420 99,259

28. Interests in Joint Arrangements(a) Joint Operations

Permit Country Principal Activity Average Interest

SC14BlockC-1 Philippines Oilproduction&exploration 55.88%

SC54A Philippines Oilandgasexploration 42.40%

SC54B Philippines Oilandgasexploration 60.00%

SC58 Philippines Oilandgasexploration 50.00%1

1Nido’sparticipatinginterestinSC58isdependentuponthecompletionofitsfarm-inobligationsunderitsFarm-inAgreementwithPNOC–ECdated17July2006.Nido’sobligationsincludeawellcommitmentinSub-Phase3.

Theconsolidatedentityhasclassifiedtheseasjointoperationsunderthetermsoftheagreements,theconsolidatedentityhasjointcontrolinthearrangement,byvirtueofthevotingthresholdoftheJointOperatingAgreementspecifictotheServiceContractorProductionSharingContract,whichtheentityisapartyto,beingtheaffirmativevoteoftwoormorepartiesowninganaggregateofatleast70%forSC54AandSC54B,and75%forSC58.TheconsolidatedentityhasdeterminedthatitdidnothavejointcontrolfortheotherServiceContractsandProductionSharingContractsnotoutlinedintheabovetableforwhichitholdsaparticipatinginterestin.TheGrouphasaccountedforitsundividedinterestinthesearrangements.

Theconsolidatedentityrecognisesitspartnersshareinalltheassetsemployedinthejointarrangementandareliableforalltheliabilitiesofthejointarrangement,accordingtotheirparticipatingshare.

(b) Commitments relating to Joint Operations

CapitalexpenditurecommitmentsandcontingentliabilitiesinrespectoftheJointOperationsaredisclosedinNotes27and30,respectivelywhereapplicable.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201629. Information relating to Subsidiaries TheconsolidatedFinancialStatementsincludetheFinancialStatementsofNidoPetroleumLimitedandthe

subsidiarieslistedinthefollowingtable.Thefollowingwerecontrolledentitiesduringthefinancialyear,andhavebeenincludedintheconsolidatedFinancialStatements.Thefinancialyearsofallcontrolledentitiesarethesameasthatoftheparententity.

Place of Incorporationand Operation

PrincipalActivities

% ofShares Held2016%

2015%

Parent Entity:

NidoPetroleumLimited Australia

Subsidiaries:

NidoPetroleumPhilippinesPtyLtd Australia Oilandgasexploration 100 100

NidoPetroleum(China)PtyLtd Australia Investment 100 100

NidoManagementPtyLtd Australia Investment 100 100

NidoPetroleumIndonesia(Holding)PtyLtd BritishVirginIslands Investment 100 100

NidoPetroleumIndonesia(Gurita)PtyLtd1 BritishVirginIslands Oilandgasexploration 100 100

NidoPetroleumIndonesia(Baronang)PtyLtd BritishVirginIslands Oilandgasexploration 100 100

NidoPetroleumIndonesia(Cakalang)PtyLtd BritishVirginIslands Oilandgasexploration 100 100

NidoProduction(Galoc)PtyLtd2 BritishVirginIslands Oilproductionandexploration 100 100

NidoProduction(Holding)PtyLtd3 BritishVirginIslands Investment 100 100

GalocProductionCompanyW.L.L.4 Bahrain Oilproductionandexploration 100 100

NidoProduction(GPC)PtyLtd BritishVirginIslands Investment 100 100

1ControlisviaNidoPetroleumIndonesia(Holding)PtyLtd2ControlisviaNidoProduction(Holding)PtyLtd3ControlisviaNidoPetroleumPhilippinesPtyLtd4Refernote13

Subsidiaries

Theonlytransactionbetweentheparententityanditssubsidiarieswastheprovisionofloanfundsduringthefinancialyear.Therearenorestrictionsonaccesstoassetsandliabilitiesofthesubsidiaries.

30. Contingent Liabilities(a) Guarantees

NidoPetroleumLimitedhasprovidedaletterofundertakingdated14November2006totheDepartmentofEnergyinthePhilippinestoprovidetechnicalandfinancialsupporttoNidoPetroleumPhilippinesPtyLtdinrelationtoworkobligationsintheSC58FarmInAgreementexecutedbetweenPNOCExplorationCorporationandNidoPetroleumPhilippinesPtyLtdon17July2006.

NidoPetroleumPhilippinesPtyLtdhassecuredaUS$3millionbondinfavourofPNOCExplorationCorporationinrespectofSC58.Thisbondlapsedon6August2016butNidoPetroleumPhilippinesPtyLtdisintheprocessofrenewingit.

NidoPetroleumPhilippinesPtyLtdisduetosecureaUS$260,000bondinfavouroftheDepartmentofEnergytoguaranteeitsmoratoriumworkcommitmentforSC54.

NidoPetroleumLimitedhasprovidedaparentcompanyguaranteetotheDepartmentofEnergyinrespectoftheobligationsofNidoProduction(Holding)PtyLtdandNidoProduction(Galoc)PtyLtd.

NidoPetroleumPhilippinesPtyLtdhasalsoprovidedaletterofundertakingtotheJointOperationpartnersofSC14toguaranteetheworkobligationsofNidoProduction(Galoc)PtyLtdunderSC14.

NidoPetroleumLimitedhasprovidedRubiconOffshoreInternationalPteLtdwithaparentcompanyguaranteeinthesumofUS$3.75millionguaranteeingtheGalocProductionCompanyWLL’sobligationsundertheFPSOLeaseinrespectoftheGalocJointVenture.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201630. Contingent Liabilities - continued(b) Employment Contracts – Change of Control

IntheeventofaChangeofControl,employees,otherthanofficers,whoenteredintoemploymentcontractspriorto2009havetheoptiontoterminatetheiremployment,inwhichcasetheemployeewillbepaidaportionoftheirremunerationpackagevaryingbetweensixmonthsandoneyear.

Asat31December2016,thetotalamountthatwouldbepayablewasUS$311,847(2015:US$311,188).

31. Financial Risk Management Objectives and Policies TheGroup’sprincipalfinancialinstrumentscomprisecash,short-termdepositsandinterest-bearingloans.

ThemainpurposeofthesefinancialinstrumentsistoprovideworkingcapitalfortheGroup’soperations.

TheGrouphasvariousotherfinancialinstrumentssuchastradedebtorsandtradecreditors,whicharisedirectlyfromitsoperations.

Itis,andhasbeenthroughouttheperiodunderreview,theGroup’spolicythatnotradinginfinancialinstrumentsshallbeundertaken.

ThemainrisksarisingfromtheGroup’sfinancialinstrumentsareinterestraterisk,liquidityrisk,foreigncurrency,commodityriskandcreditrisk.TheBoardreviewsandagreesonpoliciesformanagingeachoftheserisks.

Interest Rate Risk

Atbalancedate,theGroup’sexposuretomarketriskforchangesininterestratesrelatesprimarilytotheCompany’sshort-termcashdepositsandlongtermdebtobligationswithaninterestratewhichisbasedonavariableUSLiborplusfixedmargininterestrate.

TheGroupconstantlyanalysesitsexposuretointerestrates,withconsiderationgiventopotentialrenewalofexistingpositions,themixoffixedandvariableinterestratesandtheperiodtowhichdepositsmaybefixed.Atbalancedate,theGrouphadthefollowingcashflowrisksarisingfromfinancialassetsexposedtovariableinterestratesthatarenotdesignatedincashflowhedges:

Consolidated

2016US$’000

2015US$’000

Financial Assets:

Cashandcashequivalents 31,974 17,531

Tradeandotherreceivables 4,883 4,601

Financial Liabilities:

Financialliabilities 78,200 88,200

Netexposure (41,343) (66,068)

Thefollowingsensitivityanalysisisbasedontheinterestrateriskexposuresinexistenceatthebalancesheetdate.Thesensitivityisbasedonreasonablypossiblechanges,overafinancialyear,usinganobservedrangeofhistoricalRBA($AUD)interestratesandUSLondonInter-BankOfferRate(LIBOR)overthelastyear.FinancialassetswhicharedenominatedinAUDincludecashandcashequivalents($0.3million)andtradeandotherreceivables($0.2million)whileUSDdenominatedbalanceincludecashandcashequivalents($31.4million),tradeandotherreceivables($4.7million)andfinancialliabilities($78.2million).


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201631. Financial Risk Management Objectives and Policies - continued

Interest Rate Risk - continued

At31December2016,ifAustralianinterestrateshadmoved,asillustratedinthetablebelow,withallothervariablesheldconstant,posttaxprofitandequityrelatingtofinancialassetsoftheGroupwouldhavebeenaffectedasfollows:

Judgementsofreasonablypossiblemovements: Consolidated

2016US$’000

2015US$’000

Post tax profit - higher / (lower)

+1.0%(2015:+1.0%) 152 212

-1.0%(2015:-1.0%) (152) (212)

Equity-higher/(lower)

+1.0%(2015:+1.0%) - -

-1.0%(2015:-1.0%) - -

The1.0%sensitivityisbasedonreasonablypossiblechanges,overafinancialyear,usinganobservedrangeofhistoricalLondonInter-BankOfferRate(LIBOR)($US)movementsoverthelastyear.At31December2016,iftheinterestrate(USLiborplusfixedmargininterestrate)appliedtothelongtermborrowingshadmoved,asillustratedinthetablebelow,withallothervariablesheldconstant,posttaxprofitandequityoftheGroupwouldhavebeenaffectedasfollows:

Judgementsofreasonablypossiblemovements: Consolidated

2016US$’000

2015US$’000

Post tax profit - higher / (lower)

+1.0%(2015:+1.0%) (906) (1,286)

-1.0%(2015:-1.0%) 906 1,286

Equity-higher/(lower)

+1.0%(2015:+1.0%) - -

-1.0%(2015:-1.0%) - -

Foreign Currency Risk

AsaresultofNidoPetroleumLimited’sfunctionalandpresentationcurrencytoUnitedStatesDollars(“USD”)(refernote1(c)),theGroup’sbalancesheetisnolongeraffectedsignificantlybymovementsintheUS$/A$exchangerates.TheCompanydoesnothedgeitsbalancesheetforeigncurrencyexposure.

TheGroupalsohastransactionalcurrencyexposures.Suchexposurearisesfromsalesorpurchasesbyanoperatingunitincurrenciesotherthantheunit’sfunctionalcurrency.

TheGroupmanagesitsforeignexchangeriskbyconstantlyreviewingitsexposuretocommitmentspayableinforeigncurrencyandensuringthatappropriatecashbalancesaremaintainedinbothPhilippinePesoandAustralianDollars,tomeetcurrentoperationalcommitments.

Commodity Price Risk

TheGroupisexposedtocommoditypricefluctuationsthroughthesaleofcrudeoildenominatedinUSdollars.TheGroupmayenterintocommoditycrudepriceoilswapandoptioncontractstomanageitscommoditypricerisk.

Asat31December2016,theGrouphadoneopenoilpriceswapwithBangchak(2015:nil).DetailsoftheopenoilpriceswaparedisclosedinNote26(c)(iii).

Thecompanyhadnooptioncontractsopenasat31December2016(2015:nil).


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201631. Financial Risk Management Objectives and Policies - continued

Credit Risk

CreditriskarisesfromthefinancialassetsoftheGroup,whichcomprisecashandcashequivalents,tradeandotherreceivablesandotherfinancialassetsandguaranteesandundertakings.TheGroup’sexposuretocreditriskarisesfrompotentialdefaultofthecounterparty,withamaximumexposureequaltothecarryingamountoftheseinstruments.Exposureatbalancedateisaddressedineachapplicablenote.

TheGrouptradesonlywithrecognised,creditworthythirdpartiesandhasadoptedapolicyofdealingwithcreditworthycounterpartsandobtainingsufficientcollateralorothersecuritywhereappropriate,asameansofmitigatingtheriskoffinanciallossfromdefaults.

CashbalancesfortheGroupareheldbythreemajorfinancialinstitutionswhohavecreditratingsofAAorgreater.

ReceivablebalancesaremonitoredonanongoingbasiswiththeresultthattheGroup’sexposuretobaddebtsisnotsignificant.

Specificconcentrationofcreditriskexistsprimarilywithintradedebtorsinrespectofthesaleofoil,aswellascashheldbynon-operatorJointOperationpartnersaswellasreceivablesduefromJointOperationpartners.

Asat31December2016,100%(2015:100%)oftheconsolidatedentity’scrudeoilreceivablewasowedbyPhilipinasShellPetroleumCorporationtotheJointOperationoperatedbyThePhilodrillCorporation(“Philodrill”)withrespecttothepurchaseofoilderivedfromtheNidoandMatinlocOilFields.PhilodrillalsoheldcashbalancesduetotheGroupandotherJointOperationparticipantsasat31December2016.GiventhatPhilodrillhasnohistoryofcreditdefaultwiththeGroupnoimpairmentallowanceisconsiderednecessary.

Otherthantheconcentrationofcreditriskdescribedabove,theconsolidatedentitydoesnothaveanysignificantcreditriskexposuretoanysinglecounterpartyoranygroupofcounterpartieshavingsimilarcharacteristics.ThecarryingamountoffinancialassetsrecordedintheFinancialStatements,netofanyprovisionsforlosses,representstheconsolidatedentity’smaximumexposuretocreditrisk.

Liquidity Risk

TheGroup’sobjectiveistomaintainabalancebetweencontinuityoffundingandflexibilitythroughtheuseofitscashandfundingrequirements.

Thetablebelowreflectsallcontractuallyfixedpay-offsforsettlement,repaymentandinterestresultingfromrecognisedliabilitiesasof31December2016.Cashflowsforfinancialassetsandliabilitieswithoutfixedamountortimingarebasedonconditionsexistingat31December2016.

TheremainingcontractualmaturitiesoftheGroup’sfinancialliabilitiesare:

Consolidated

2016

US$’0002015

US$’000

6monthsorless 18,241 23,515

6-12months - -

1-5years 83,156 88,200

101,397 111,715

TheGroupmanagesitsliquidityriskbymonitoringonamonthlybasisexpectedcashinflowsandoutflows.


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 201632. Fair Value Measurements

Thefollowingtablesetsoutthegroup’sassetsandliabilitiesthataremeasuredandrecognisedatfairvalue:

2016Date of

valuationTotal

US$’000

Quoted prices in active markets (Level 1)US$’000

Significant observable

inputs (Level 2)US$’000

Significant unobservable

inputs (Level 3)US$’000

Non-recurring

Assets measured at fair values:

None - - - - -

Recurring

Liabilities for which fair values are disclosed:

Interest-bearingloansandborrowings 31-12-2016 78,200 - 78,200 -

2015

Non-recurring

Assets measured at fair values:

None - - - - -

Recurring

Liabilities for which fair values are disclosed:

Interest-bearingloansandborrowings 31-12-2015 88,200 - 88,200 -

Transfer between categories

TherewerenotransfersbetweenLevel1andLevel2duringtheyear(2015:none).

Measurement Techniques

Interestbearingloanandborrowingsaremeasuredbydiscountingcashflowsatthemarketrateofinterest.

33. Subsequent Events TheCompanyhasidentifiedthefollowingaseventsoccurringafteryearend:

1. On25January2017GPCenteredintoadrillingrigcontractwithGoldenCloseMaritimeCorp.Ltdforthedrillship“DeepseaMetroI”todrilltheGaloc-7/7STappraisalwellonbehalfoftheGalocJointVenture.

2. On24February2017theCompany’swhollyownedsubsidiaryNidoPetroleumIndonesia(Gurita)PtyLtdadvisedtheOperatoroftheGuritaPSC,LundinGuritaB.V.(‘Lundin’),ofitsintentiontojoinLundininwithdrawingfromthisPSC,subjecttothereceiptofanynecessaryregulatoryapprovals.ThecarryingvalueofcapitalisedexpenditurerelatingtotheGuritaPSCwas$3.176Mat31December2016andallremainingcapitalisedexpenditureatthedateofrelinquishmentwillbefullyimpairedinthefirstquarterof2017.


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INDEPENDENT AUDITOR’S REPORTINDEPENDENT AUDITOR'S REPORT ___________________________________________________________________________

90


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91


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92


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INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR'S REPORT ___________________________________________________________________________

93


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ADDITIONAL SECURITIES EXCHANGE INFORMATION

AdditionalinformationrequiredbytheAustralianSecuritiesExchangeLimitedandnotshownelsewhereinthisreportisshownbelow.Theinformationiscurrentasat17March2017.

1. Substantial Shareholders Thenamesofthesubstantialshareholdersandthenumberofsharestowhichtheyareentitledare,pursuantto

noticesissuedbythoseentitiestoASXLimited:

Name Number of Shares Percentage

BCPEnergyInternationalPteLtd 434,686,685 96.97

2. Distribution of Equity Security Holders (a)Analysisofequityholdersbysizeofholding.

Size of HoldingNumber

of ShareholdersNumber of Fully

Paid Shares

1–1,000 219 34,105

1,001–5,000 389 1,317,801

5,001–10,000 405 3,358,515

10,001–100,000 1,430 57,306,323

100,001andover 476 2,126,249,724

Total 2,919 2,188,266,468

(b)Thenumberofshareholderswithlessthanamarketableparcelis1,264.

(c)Eachordinaryshareentitlestheholdertoonevote.


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ADDITIONAL SECURITIES EXCHANGEINFORMATIONTwenty Largest Shareholders as at 17 March 2017

NAME TOTAL UNITS % ISSUED CAPITAL

1. BCPENERGYINTERNATIONALPTELTD

298,334,60466.55

2. BCPENERGYINTERNATIONALPTELTD 113,777,432 25.38

3. BCPENERGYINTERNATIONALPTELTD 22,574,649 5.04

4. NAVIGATORAUSTRALIALTD<MLCINVESTMENTSETTA/C> 3,574,951 0.80

5. CITICORPNOMINEESPTYLIMITED 789,581 0.18

6. TOLTECHOLDINGSPTYLTD 475,000 0.11

7. MSPAMELAANNSMITHAM 431,250 0.10

8. BONOSPTYLTD 300,000 0.07

9. HSBCCUSTODYNOMINEES(AUSTRALIA)LIMITED 299,870 0.07

10. MRGEORGEMANIOS 251,500 0.06

11. TREPTYLTD<TIMEROADSUPERANNUATIONA/C> 244,000 0.05

12. JPMORGANNOMINEESAUSTRALIALIMITED 221,484 0.05

13. HSBCCUSTODYNOMINEES(AUSTRALIA)LIMITED–A/C2 167,323 0.04

14. HSBCCUSTODYNOMINEES(AUSTRALIA)LIMITED<EUROCLEARBANKSANVA/C> 162,400 0.04

15. FLITTONPTYLTD 160,369 0.04

16. LILYFIELDHOLDINGSPTYLTD<LILYFIELDSUPERFUNDA/C> 150,000 0.03

17. DRMICHAELWILLIAMFISCHER 131,250 0.03

18. DEAUVILLEINVESTMENTSPTYLIMITEDACN000665378 129,000 0.03

19. MISSDEBORAHANNIEMARTIN 120,000 0.03

20. MRSYINGCHUNWEN 118,022 0.03

Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL) 442,412,685 98.70

Total Remaining Holders Balance 5,842,273 1.30

3. Retention Rights Asat17March2017,therewasoneretentionrightsholderholding218,750unlistedretentionrights.


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GLOSSARY OF TERMSBangchak TheBangchakPetroleumPublicCompanyLimited

Bbl Barrels

BCPE BCPEnergyInternationalPteLtd

Bopd Barrelsofoilperday

CreditSuisse CreditSuisseAG

DOE DepartmentofEnergy

DragonOil DragonOilplc

FPSO FloatingProductionStorageandOfftakevessel

FEED Front-endengineeringanddesign

GCA Gaffney,ClineandAssociates

GPC GalocProductionCompanyWLL

Km Kilometre

KMP KeyManagementPersonnel

LTI Longtermincentive

LundinPetroleum LundinPetroleumB.V.

M Millions

MDT Modulardynamictesting

MerrillLynch MerrillLynchInternational(Australia)Limited

mmscfgd Millionstandardcubicfeetofgasperday

mmbbl Millionbarrels

mmstb Millionstock-tankbarrels

Nido NidoPetroleumLimited

Otto OttoEnergyLimited

Philippines TheRepublicofthePhilippines

Philodrill ThePhilodrillCorporation

Plan EmployeePerformanceRightsPlan

PNOC PNOCExplorationCorporation

ProvedReserves(1) Thosequantitiesofpetroleum,which,byanalysisofgeoscienceandengineeringdata,canbeestimatedwithreasonablecertaintytobecommerciallyrecoverable,fromagivendateforward,fromknownreservoirsandunderdefinedeconomicconditions,operatingmethods,andgovernmentregulations.Ifdeterministicmethodsareused,thetermreasonablecertaintyisintendedtoexpressahighdegreeofconfidencethatthequantitieswillberecovered.Ifprobabilisticmethodsareused,thereshouldbeatleasta90%probabilitythatthequantitiesactuallyrecoveredwillequalorexceedtheestimate.

ProbableReserves(1) ThoseadditionalReserveswhichanalysisofgeoscienceandengineeringdataindicatearelesslikelytoberecoveredthanProvedReservesbutmorecertaintoberecoveredthanPossibleReserves.ItisequallylikelythatactualremainingquantitiesrecoveredwillbegreaterthanorlessthanthesumoftheestimatedProvedplusProbableReserves(2P).Inthiscontext,whenprobabilisticmethodsareused,thereshouldbeatleasta50%probabilitythattheactualquantitiesrecoveredwillequalorexceedthe2Pestimate.

PossibleReserves(1) ThoseadditionalreserveswhichanalysisofgeoscienceandengineeringdatasuggestarelesslikelytoberecoverablethanProbableReserves.ThetotalquantitiesultimatelyrecoveredfromtheprojecthavealowprobabilitytoexceedthesumofProvedplusProbableplusPossible(3P)Reserves,whichisequivalenttothehighestimatescenario.Inthiscontext,whenprobabilisticmethodsareused,thereshouldbeatleasta10%probabilitythattheactualquantitiesrecoveredwillequalorexceedthe3Pestimate.


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Reserves(1) Thosequantitiesofpetroleumanticipatedtobecommerciallyrecoverablebyapplicationofdevelopmentprojectstoknownaccumulationsfromagivendateforwardunderdefinedconditions.Reservesmustfurthersatisfyfourcriteria:theymustbediscovered,recoverable,commercial,andremaining(asoftheevaluationdate)basedonthedevelopmentproject(s)applied.Reservesarefurthercategorisedinaccordancewiththelevelofcertaintyassociatedwiththeestimatesandmaybesub-classifiedbasedonprojectmaturityand/orcharacterisedbydevelopmentandproductionstatus.

RaiffeisenBank RaiffeisenBankInternationalAG

RMA RMA(WestLinapacan)PteLtd

SC6B ServiceContract6Bdated19September1973,asamended

SC14 ServiceContract14dated17December1975,asamended

SC54 ServiceContract54dated5August2005,asamended

SC58 ServiceContract58dated12January2006,asamended

SC63 ServiceContract63dated24November2006

sq.km. Squarekilometre

stb Stock-tankbarrels

StandardBank StandardBankPlc

STI ShortTermIncentive

STOIIP Stock–tankoilinitiallyinplace

TD Totaldepth

TRIFR TotalRecordableInjuryFrequencyRateinincidentspermillionmanhours

(1)FromPetroleumResourcesManagementSystemsponsoredbytheSocietyofPetroleumEngineers,AmericanAssociationofPetroleumGeologists,WorldPetroleumCouncil,SocietyofPetroleumEvaluation.


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www.nido.com.au

PERTH OFFICELevel 31 Preston StreetCOMO WA 6152P +61 (0) 8 9474 0000F +61 (0) 8 9474 0099

MANILA OFFICE4F Zaragosa Building102 Gamboa StreetLegaspi VillageMakati City 1229PHILIPPINESP +63 2 773 2700F +63 2 773 2701

ABN 65 086 630 373For

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