AMITY OIL LIMITED - AnnualReports.com

AMITY OIL LIMITEDANNUAL REPORT 30 JUNE 2003

ACN 009 230 835

For more information & images visitwww.amityoil.com.au

AMITY OIL LIMITED AND CONTROLLED ENTITIES

ACN 009 230 835

COMPANY DIRECTORY

DIRECTORS

Anthony Barton, Non-Executive ChairmanFraser Campbell, Non-Executive DirectorRichard Elliott, Non-Executive DirectorGavin Rezos, Non-Executive DirectorHoward McLaughlin, Managing Director& Chief Executive Offi cer

COMPANY SECRETARY

David Rich

REGISTERED OFFICE

2nd Floor, 18 Richardson StreetWest Perth, WA, 6005Telephone: +61 8 9324 2177Facsimile: +61 8 9324 1224Email: [email protected]: www.amityoil.com.au

AUDITORS

Ernst & YoungLevel 34, Central Park152 St Georges TerracePerth WA 6000

SOLICITORS

Allens Arthur RobinsonLevel 840 The EsplanadePerth WA 6000

BANKERS

Bank of Western Australia Ltd1215 Hay StreetWest Perth, WA, 6005

SHARE REGISTRY

Security Transfer Registrars Pty Ltd770 Canning HighwayApplecross WA 6153Telephone: + 61 8 9315 0933Facsimile: + 61 8 9315 2233

1

AMITY OIL LIMITED ANNUAL REPORT 30 JUNE 2003

Chairman’s Report

Company Operations Report

Directors’ Report

Statements of Financial Position

Statements of Financial Performance

Statements of Cash Flows

Notes to the Financial Statements

Directors’ Declaration

Independent Audit Report

Corporate Governance Policy

Shareholder Information

Oil and Gas Interests

CONTENTS

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4

13

17

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19

20

45

46

47

63

65


2 3


CHAIRMAN’S REPORT

Dear Shareholders,

On behalf of the Board of Amity I would

like to sincerely thank all shareholders

for their support and interest in Amity

over the last financial year.

Amity has had an excellent year,

delivering a number of material

outcomes to shareholders. Fortunately

this success has been well reflected in

Amity’s share price, where shareholders

have enjoyed a positive re-rating and

acceptance of our Turkish exposure,

new profitability, a steady increase in gas

sales, and recent exploration successes

at Adatepe and Cayidere, which provide

further growth potential in the

coming year.

Amity was privileged to have been

promoted by Standard and Poors to the

S&P/ASX 200 index in July 2003, as

well as having attracted the investment

attention of some of Australia’s largest

and most professional institutional

investors.

During the year, Amity shareholders

benefited from a 1 for 4 bonus issue

of options, as well as the current

opportunity to participate in a

convertible note issue of up to $10

million. The company is now very well

funded to be able to maintain an ongoing

aggressive program of exploration

and development, both in Turkey, and

potentially at Whicher Range in Western

Australia.

During the last 12 months, Amity was

very fortunate to recruit Mr Howard

McLaughlin as its new Chief Executive

Officer. Howard has extensive experience

in the oil and gas business, having

worked with BHPBilliton Petroleum for

the past 20 years, most recently as Vice

President of Global Exploration.

With the transition, Amity’s founder,

Mr Peter Allchurch, stepped down from

the company on 25 August 2003. To

complete the transition, I also plan to

retire as Chairman at the upcoming

AGM, and hand over the investor

relations responsibilities to Howard

and the new Chairman, Richard Elliott.


2 3


CHAIRMAN’S REPORT

I would like to make special mention

of Mr Fatih Alpay, our Turkish General

Manager, who first identified the exciting

opportunities in Turkey for our company,

and who continues to play a key role in

the company today.

A disciplined focus on exploration

opportunities in Turkey, which leverage

on Amity’s existing infrastructure,

contacts and credibility, is still

considered by the Board as the best

means to materially grow shareholder

wealth.

In Australia, Amity has now

recommenced exploration at Whicher

Range. Many shareholders have been

very patient for this opportunity, and

Amity achieved an important objective

when it farmed out 35% of the permit

to Korea National Oil Corporation and

Seoul City Gas Co., Ltd, thus reducing

Amity’s exposure to a level at which it

was commercially prudent to be able

to proceed.

In closing, I would like to express the

Board’s appreciation to all Amity staff in

Turkey and Australia who contributed,

in different ways, to this year’s excellent

achievements.

Yours sincerely,

AMITY OIL LIMITED

ANTHONY BARTON

Chairman


4 5


COMPANY OPERATIONS REPORT

OVERVIEWAmity Oil Limited has had an

outstanding year highlighted by

steadily increasing gas production and

exploration successes in Turkey.

The Amity operated Gocerler gas plant

is now producing an average of over

18 million cubic feet of gas per day

following two successful upgrades to the

plant, which were completed without

interruption to gas production.

The successful discovery of the Adatepe

and Cayirdere fields has continued to

prove the potential of Amity’s Thrace

basin acreage in Western Turkey. The

acquisition of modern 3D seismic has

made identification of new gas bearing

features much easier, thus reducing

exploration risk and increasing Amity’s

probability of drilling success.

In Australia we are preparing to test

the Whicher Range gas field with new

“air drilling” technology designed to

eliminate formation damage caused by

conventional drilling.

This year has been a major turning point

for Amity, consolidating itself into a

proven international exploration and

production company and joining the

ranks of the S&P/ASX 200. Amity is now

comfortably within the top ten oil and

gas E&P companies in Australia.

Step by Step Growth in Value> in Discoveries> in Reserves> in Production

Financial Years

Our Strategy is Clear:

> Create Value for Shareholders- Increase high margin production- Build reserve base through exploration- Low opex & capex environments

> Stay Focused & Disciplined- Small number of core areas- Market demand drives gas exploration- Applied technology to reduce risk

Development

Wells

Adatepe-2

Adatepe-3

Cayirdere-2

Cayirdere-3

East Adatepe-1

Whicher Range-5

Yukeskkoy-1

Alpullu-1

New 3D seismic

Production to

increase

- Adatepe

- Cayirdere

Development

Wells

Gocerler-4

Gocerler-5

New

Discoveries

Cayirdere-1

Adatepe-1

Production

increases

3D seismic

New acreage

acquired

Yesiltepe-1

Operating

cashflow

$9.4 m

Successful

Appraisal

Gocerler-2 & 3

First production

3D seismic

acquired

Discovery Well

Gocerler-1

Acquire

Turkish Acreage

2000 2001 2002 2003 2004

G1

G2 G3

G5G4 A1C1

A3A2


4 5



TURKEYThe first exploration licence was granted

to Amity in 2000, and since then Amity

has discovered three gas fields and

brought the first field, Gocerler, into

production. Since the first discovery

well in October 2000, Amity’s strategy

for Turkey was to quickly achieve

commercial production and build a

broad customer base.

GOCERLER GAS PROJECT The Gocerler gas project is located in

Area “A” of the Thrace Joint Venture.

The Thrace Joint Venture participants

are Amity (50%) and the Turkish

Government-owned Turkiye Petrolleri

A.O. (TPAO) (50%). Amity is the

Operator of Area “A”. The field is located

some 150 kilometres west of Istanbul, in

the Republic of Turkey. Since the first

delivery of sales gas on 5 January 2002

the Gocerler gas field had delivered a

total of 5 BCF of gas and over 30,000

barrels of condensate by 30 June 2003.

During the year two new producing wells

were added to the field bringing the total

to five. Both Gocerler-4 and Gocerler-5

have been tied into the facilities and are

now producing gas.

The initial gas delivery rate from the field

was around 3 million cubic feet per day,

which has now grown to a present rate

of approximately 18-19 million cubic

feet per day. A production lease over the

Gocerler field has been applied for and

when granted, the remaining Exploration

Licence will revert to day one for

exploration obligations.

Two successful upgrades to the

plant have been completed without

interruption to gas production. These

capacity upgrades allow the production

of up to 30 million cubic feet per

day during peak demand periods.

However, reservoir, facility and reserve

management considerations dictate the

optimum production rate should average

between 18-20 million cubic feet

per day.

Amity Oil’s strategy in Turkey is to focus on the Thrace basin acreage and drill more low risk exploration wells to build our gas reserves.

We will work towards building an attractive inventory of drillable prospects and leads so we will be in a position to test the very best opportunities.

We will continue to acquire attractive acreage and will relinquish acreage we feel has low potential. In this way we will maintain a healthy and high potential portfolio of acreage.


6 7



Our CustomersThe first contracted customer, a

privately owned Turkish electric power

generating station, has paved the way

to an expanded customer base that now

includes three power stations and 15

industrial customers. Amity, on behalf of

the Joint Venture, signed an agreement

with an established Turkish energy-

marketing group, Tamgaz, to market

Gocerler gas into that group’s extensive

client network.

Additionally, in an agreement reached

with joint venture partner TPAO,

Amity now accesses the TPAO main gas

pipeline to transport Joint Venture gas to

customers east of Gocerler.

The gas market in Thrace is very large

and not fully supplied. Thrace is the

region between the mega-city of Istanbul

and the western border of Turkey.

It includes numerous industrial areas,

several regional cities with populations

up to 1 million, and many smaller

towns and villages, all in a fertile rural

setting. The population of Thrace,

including greater Istanbul, exceeds that

of Australia.

Licence to Trade Gas in TurkeyThe Energy Marketing Regulatory

Authority of Turkey has granted Amity a

Wholesale Gas Licence. As the holder of

a Wholesale Gas Licence, Amity is able

to not only market its own gas, but is

entitled to buy additional gas from other

sources to market to Free Consumers.

(Free Consumers are defined in the

Natural Gas Market Law as electricity

generators and co-generators and any

other consumers purchasing more than

one million cubic metres of gas per year).

Turkish Gas PricesTurkey is a major gas market, consuming

some 1,700 million cubic feet per day.

Long pipelines from Russia, Iran and

Iraq deliver around 97% of Turkish

gas imports. A new import pipeline

crossing the Black Sea from Russia

is under construction and due for

completion in 2003-4. When completed,

gas will be more readily available,

but prices are not expected to change

significantly, due to the massive capital

cost of the pipeline project and the

take-or-pay contract system.

The Government Energy Marketing

Regulatory Authority sets imported gas

prices in Turkish currency each month.

Prices are high by Australian standards.

The 30 June posted price, converted to

US dollars, for interruptible gas for

power stations and industrial consumers

was US$5.45 (A$8.11) per thousand

standard cubic feet (mcf).

Joint Venture gas is sold at the posted

interruptible price, less a small

negotiated discount.


6 7



ExplorationThe successful discovery of the Adatepe

and Cayirdere fields has continued to

prove the potential of Amity’s Thrace

basin acreage in Western Turkey. The

acquisition of modern 3D seismic has

made identification of new gas bearing

features much easier, thus reducing

exploration risk and increasing Amity’s

probability of drilling success.

Additional 3D seismic is currently in the

planning stages to build the inventory of

drillable prospects in the joint venture

areas. The 332 square kilometre Gocerler

3D seismic survey was completed on 26

October 2002, and the 554 kilometres

2D seismic survey acquired in five

exploration licences was completed in

February 2003. Three new exploration

licences in the Southern Thrace Basin

bring the total to eight in Thrace and 19

in the other exploration areas.

Adatepe FieldThe Adatepe field is approximately 6

kilometres southeast of the Gocerler gas

field and about 140 kilometres west of

Istanbul, in the Thrace Basin, Turkey.

The Adatepe-1 wildcat exploration well,

spudded on the 9th of May 2003, was

the fourth well in Amity’s 2003 drilling

program. The well flowed gas at a

stabilized rate of 13.5 million cubic feet

per day from 18.5 metres of perforations

between 1,173 metres and 1,206 metres.

Wire-line logs indicated commercial

gas in good quality reservoirs in the

Danismen Formation. The gas occurs in

five stacked zones totalling 51.3 metres

gross (28.8 metres net) spread over 268

metres between 938 metres and 1,206

metres. The thickest gas zone occurred

in sandstones from 1,173 metres to

1,206 metres, a total of 33 metres of

gross gas pay.

The Adatepe-2 appraisal well is located

438 metres southeast of the Adatepe-

1 well, and flowed gas at a rate of 6.8

million cubic feet of gas per day from a

9 metre interval between 1195 and 1204

metres.

The Adatepe-3 appraisal well is located

430 metres northwest of the Adatepe-1

well, and flowed gas at 5.92 million cubic

feet of gas per day, from an 11.5 metre

net interval between 1171 and 1194

metres.


8 9



The joint venture is fast tracking the

development of Adatepe with a goal

of commencing gas production before

the end of the year. A gas processing

plant, based on the proven Gocerler

design, will be constructed with an

initial capacity of 10mmcfd. The plant is

designed to double capacity rapidly by

adding a second separation module.

Pipeline construction is underway to

deliver gas directly to customers in the

Cerkezkoy Industrial area.

Cayirdere FieldThe Cayirdere gas discovery is located

about 33 kilometres east of the Gocerler

gas field. The gas is good quality, with

low condensate content.

The Cayirdere-1 gas discovery was also

made in the Danismen Formation. The

joint venture has given approval for early

development of this discovery, being two

appraisal/development wells, seismic,

surface facilities and a pipeline.

TPAO’s Cayirdere development plan is

also aimed at achieving first commercial

production before the end of December

2003. A 9 kilometre, 6 inch diameter

pipeline, with a capacity of 10 million

cubic feet per day is planned to connect

the discovery to the TPAO trunk pipeline

system and then to Joint Venture

industrial gas customers.

A gas processing plant, with a capacity

of 10 million cubic feet per day, will be

constructed near the discovery well.

TPAO will operate a two well appraisal/

development drilling program to start

in the northern spring of 2004. Initial

development will be from the discovery

well only.

A 42 square kilometre 3D seismic survey

is being acquired over the field to better

locate the development wells. TPAO will

operate the Cayirdere project.

EXPLORATION PROGRAMME

Yesiltepe-1During the year exploration drilling also

took place in the Iskenderun Basin in

Southern Turkey.

Yesiltepe-1 was officially spudded on

26 May 2003 to preserve rights in five

licences. It resumed drilling on 24

June 2003. Amity successfully farmed

out a 20% interest in the permits for a

promoted share of the well and

past costs.

This was a higher risk exploration well

targeting a very large structure that

unfortunately proved only to have a

small gas resource within a thin interval.

On production test the interval flowed

gas to surface at commercial rates

however the test data indicates the

volume of the resource to be very small.

The Yesiltepe well did however prove

that producible hydrocarbons are present

in the Iskendren basin and further

evaluation of the basin continues.


8 9



Yuksekkoy-1 Located in the Adana basin, this well

tested the prospectivity of a relatively

shallow domal structure initially

believed to be a reefal complex overlain

by salt and shales.

The well did not encounter any

significant reservoir units or

hydrocarbons and was plugged and

abandoned in October 2003.

In the Adana basin, Amity holds a 90%

interest in four Exploration Licences

which include the Yuksekkoy structure.

Alpullu-1 Permit 3599 (formerly updip Pancarkoy)Following release from Yuksekkoy-1, the

rig is scheduled to move immediately

to the Thrace Basin to drill in Amity’s

100% held Exploration Licence 3599.

The planned well Alpullu-1 is updip

from the Pancarkoy-1 well, and will

test a robust and shallow structural

closure, well defined by high quality

2D seismic, shot by Amity late last year.

The old Pancarkoy-1 well had strong

gas shows and possible by-passed gas

pay, interpreted from limited wire-line

log data. The structure has a coincident

seismic amplitude anomaly, suggesting

the presence of gas.

This is an attractive and relatively low

risk exploration target, which can be

drilled at low cost, close to a regional

city of about 500,000 people and large

industrial areas.

The Exploration Licence has several

other attractive drilling targets, all

with seismic amplitude anomalies.

Considering the low cost and high

quality of the prospect, Amity intends

to retain a 100% interest through the

drilling of at least this first prospect in

the Exploration Licence.

Amity Moves its Drilling Rig to TurkeyTo speed the implementation of its

exploration and development strategy in

Turkey, Amity shipped its mobile drilling

rig to Turkey in January/February 2003.

The rig was then sold to a Turkish

drilling contractor for $3,603,370,

realising a book profit to Amity of over

$900,000 ($408,109 is recognised in

this financial year). The sale price will

be paid back over three and a half years

maximum out of proceeds from drilling.

Amity has priority use of the rig while

there is a debt outstanding.

The sale of the drilling rig is consistent

with Amity’s corporate philosophy of

maintaining modest corporate overheads

and outsourcing/sub-contracting staffing

requirements where possible, whilst

maintaining access to equipment and

highly skilled personnel that will enable

us to fully control our own destiny. The

rig began its first well at Yesiltepe-1 in

late June 2003.


10 11



AUSTRALIA

Whicher Range Gas Field

BackgroundThe Whicher Range field was discovered

by Union Oil Development Corporation

in 1968 and drilled near the centre of

a large domal structure approximately

12 kilometres by 6 kilometres in size.

The top of the reservoir sequence is at a

depth of approximately 3700 metres.

A 450 metre interval of gas bearing

Permian sandstones was intersected in

Whicher Range-1. Three additional wells

have been drilled on the Whicher Range

field and all recovered gas at low rates

from many tested intervals.

Two wells, Whicher Range 1 and 4,

are presently capable of producing at

about one million cubic feet per day

(1.1 terajoules/day) and three million

cubic feet per day (3.2 terajoules/day),

respectively. The gas is clean and of

high quality.

Much has been learned from the existing

wells about drilling, completion and

reservoir stimulation practices. Water is

particularly damaging to the reservoirs.

In 1999, Amity successfully increased

gas flow in the Whicher Range 4 well,

from about one million cubic feet per day

(1.1 terajoules/day) to about 3 million

cubic feet per day (3.2 terajoules/day),

with a pilot liquid carbon dioxide frac

(fracture stimulation operation).

This was the first frac to increase gas

flow. All 12 previous fracs used water

and as a result, decreased gas flow

due to reservoir damage. The field has

estimated gas in place of 4 trillion cubic

feet (more than 4,000 Petajoules).

Well LocationThe Whicher Range field is located

onshore, approximately 200 kilometres

south of the city of Perth, Western

Australia and 22 kilometres south

of the town of Busselton. The well is

located at Latitude 33 deg 50’ 54.35”S

and Longitude 115 deg 21’ 36.83”E in

Petroleum Exploration Permit EP 408.

The ground elevation is 124.8 metres

above mean sea level.

The favourable location of the field,

about 35 kilometres south west of the

southern end of the main gas pipeline

from the North-West Shelf, means it can

compete on price and transport tariff

with gas from the North-West-Shelf.

A gas supply from Whicher would be

strategically advantageous for Perth and

the south west, by reducing dependence

on the long single pipeline from the

North-West-Shelf.


10 11



ObjectiveThe objective of Whicher Range-5 is to

appraise the flow potential of the gas

bearing Sue group in the same general

area as Whicher Range 1 and 4. There

is virtually no exploration risk at this

location of not intersecting the gas

bearing zone. A great deal of effort will

be expended to protect the formation

from reservoir damage.

By drilling the main objective with

only air there will be no water based

formation damage, which is one of the

main reasons for the poor results in

previous wells. Gas will be allowed to

flow out of the reservoir continuously

while drilling and be burnt in a specially

designed flare pit. If a commercial rate is

achieved in the top part of the Sue group,

the drilling will be terminated and the

commercial flow potential evaluated.

Drilling ProgramThe drilling program is designed so

that the Sue Group objective section can

be drilled with air, while the overlying

formations are behind casing. Drilling

to the top of the Sue Group will be by

conventional over-balanced, water based

drilling fluids, which proved effective

and virtually trouble free during the

drilling of Whicher Range-4. The gas

reservoirs will be drilled underbalanced

with air to avoid reservoir damage and

to attempt to obtain commercial gas flow

rates (greater than 6 million cubic feet

per day) without reservoir stimulation.

If reservoir stimulation is required, a

full-scale liquid carbon dioxide frac will

be applied.

OwnershipFarmout of interests to Korea National

Oil Corporation and Seoul City Gas Co.,

Ltd was signed on 30 April 2003 for 20%

and 15% respectively. This leaves Amity

with 47.957% and Geopetro Resources

Company with 17.043%.

USAUnder Amity’s Strategic Plan, the USA

producing interests were considered

non-core and were scheduled for

disposal. In January, agreement was

reached for a USA company to purchase

the majority of Amity’s USA interests for

US$ 415,000 cash. The transaction was

effective from 1 January 2003 and was

settled on 31 January 2003. A further

three interests were sold in July 2003

for US$ 5,012, leaving just two interests

which Amity is seeking to dispose of or

relinquish. There is minor production

currently from the remaining interests.


12 COMPANY OPERATIONS REPORT

CORPORATE

Bonus Issue of OptionsOn 3 September 2002, Amity made

a bonus issue of 38,232,582 options

exercisable at $1.00 and expiring on 4

September 2004. The issue was made on

the basis of one free option for every four

shares held by shareholders recorded

on the Company’s Share Register at the

close of business on 30 August 2002.

The options are quoted on the ASX

under code AYOO.

Exercise of 35c OptionsDuring the year, 36,335,361 of the

AYOOA 35c options were exercised,

raising $12,717,376. The AYOOA options

expired on 16 September 2002. At the

close of business on 16 September 2002

668,280 of the options had not been

exercised and therefore expired. This

means that 98.3% of the issued options

were exercised - an outstanding result.

European ListingOn 23 October 2002, Amity was listed

on the Berlin and Frankfurt stock

exchanges.

S&P/ASX 200 On 23 July 2003 Amity was added to the

S&P/ASX 200. This was a fitting reward

for Amity’s hard-earned achievements

during the financial year ended

30 June 2003.

Proposed Issue of Convertible NotesOn 22 September 2003, the Company

issued a prospectus seeking to raise

between $5 million and $10 million

through the issue of unsecured

convertible notes. The notes will be

issued at $2.00 each, have an interest

rate of 10% per annum and initially be

convertible at the rate of one for one.

The term of the notes is ten years, with

a reset of the conversion and interest

rates after three years and subsequently

at the Company’s discretion. The funds

are to be used primarily to fast track the

development of Amity’s two new Turkish

discoveries at Adatepe and Cayirdere

without having to impact on the current

drilling programme.

This year has been a major turning point for Amity, consolidating itself into a proven international exploration and production company.

13


The directors of Amity Oil Limited

(“Amity” or “the Company”) present

their report and the fi nancial report of

Amity and the entities it controlled (“the

Consolidated Entity”) at the end of, or

during the year ended 30 June 2003.

1. DIRECTORSThe directors in offi ce at any time during

the fi nancial year and until the date of

this report are:

Anthony Peter Barton

- Non-Executive Chairman.

Appointed 4 June 2002.

Mr. Barton is a graduate of the Royal

Melbourne Institute of Technology with

a Bachelor of Business (Accountancy)

degree and has 25 years of commercial

experience, having acted in senior

executive capacities in two leading

Australian stockbroking fi rms.

Mr. Barton is an executive director of

the publicly listed investment bank,

Australian Heritage Group Limited and

a non-executive director of Mineral

Securities Limited. Mr. Barton is a

member of the remuneration committee

and Chairman of the nomination

committee.

Fraser David Campbell, MA, MSc

- Non-Executive Director.

Appointed 26 March 2002.

Mr. Campbell was formerly General

Manager Australasia for the Bank of

Scotland and brings to the Company

a wealth of experience and strong

associations with international corporate

fi nance. He was elected a Fellow of

the Institute of Bankers in 1998 and

is also a director of Hartleys Limited.

Mr. Campbell is a member of the audit

and compliance, remuneration and

nomination committees.

Richard Alden Elliott, BS(Hons), MS


Appointed 6 July 2001.

Mr Elliott is a member of AAPG

(American Association of Petroleum

Geologists) and the AICD (Australian

Institute of Company Directors). He

was Managing Director of Australian

Occidental Petroleum during its

discovery of the Jabiru, Challis, Harriet

and Blina oil fi elds. After leaving

Occidental he was principal of a resource

consultancy fi rm in Western Australia

and spent 6 years as Consultant to

the Premier of Western Australia. Mr.

Elliott is a non-executive director of

Arc Energy NL. Mr Elliott provided

executive services to the Company

from July through November 2002. Mr.

Elliott is Chairman of the remuneration

committee and is a member of the

audit and compliance and nomination

committees.

Gavin John Rezos, B. Juris, LLB, BA


Appointed 17 October 2001.

Mr. Rezos has extensive Australian

and international investment banking

experience across a range of industries

and in a number of geographical

locations including Europe, Latin

America, the Middle East and Asia. He

was formerly an Investment Banking

Director of the HSBC Investment Bank

plc, one of the world’s largest fi nancial

service organisations, with previous

regional roles based in London, Sydney

and Dubai. Mr. Rezos is also Managing

Director of ASX listed pSivida Limited.

Mr. Rezos is Chairman of the audit and

compliance committee and a member of

the nomination committee.

Howard Mark McLaughlin

- Managing Director.

Appointed 29 July 2003.

Mr. McLaughlin has over 25 years

experience in the petroleum industry,

with 19 of the last 20 years working with

BHPBilliton Petroleum. Mr. McLaughlin’s

most recent position was as Vice

President Global Exploration, based in

Houston Texas, where he had overall

stewardship of BHPBilliton Petroleum’s

global oil and gas exploration businesses.

Prior to joining BHPBilliton in 1983, he

worked for ESSO Resources Canada Ltd

for 6 years in Calgary, Alberta.

Mr. McLaughlin’s extensive international

background has focused on exploration,

appraisal and business development,

and in addition he has held key roles in

marketing and strategic planning.

In addition to the above, Mr. Peter

Allchurch was an executive director

from the beginning of the fi nancial year

until 25 August 2003 and Mr. Michael

Blakiston was a non-executive director

from the beginning of the fi nancial year

up to 6 September 2002.

DIRECTORS’ REPORT

At the date of this report, the directors’ share and option holdings and relevant

interests therein were:

Name of Director Fully Paid Shares Listed Options Unlisted Options

A.P. Barton 15,879,735 4,142,211 -

F.D. Campbell 125,000 31,250 400,000

R.A. Elliot 304,854 - 400,000

G.J. Rezos 130,000 55,000 400,000

H.M. McLaughlin - - 1,500,000


14 15


DIRECTORS’ REPORT

During the fi nancial year 11 directors’

meetings were held. The number of

meetings attended by each director and

the number of meetings held during

each director’s term of offi ce during the

fi nancial year are shown above.

Mr.McLaughlin is not included

in the above table as he was not a

director during the fi nancial year. The

Nomination Committee was formed on

27 June 2003 and did not meet during

the fi nancial year.

Remuneration Committee

At the commencement of the fi nancial

year, the Remuneration Committee

comprised of Messrs Elliott and

Blakiston (Chairman). On 26 July

2002, Mr. Barton replaced Mr. Elliott

on the Remuneration Committee.

On 6 September 2002, Mr. Blakiston

resigned from the Board. Mr. Rezos

and Mr. Campbell were appointed to

the Committee on 1 October 2002, Mr.

Rezos as Chairman. On 16 December

2002, Mr. Elliott replaced Mr. Rezos

as Chairman of the Remuneration

Committee.

As at the date of this report, the

Remuneration Committee comprises of

Messrs Elliott (Chairman), Barton and

Campbell.

Audit and Compliance Committee

The Audit and Compliance Committee

currently comprises of Messrs Rezos

(Chairman), Campbell and Elliott.

At 1 July 2002, the Committee was

comprised of all of the members of the

Board, namely Messrs Barton, Blakiston,

Campbell, Elliott, Rezos and Allchurch.

On 26 July 2002, the Board reconstituted

the Committee and appointed Messrs

Rezos (Chairman) and Campbell as

members. Mr. Elliott was appointed on

27 June 2003.

Nomination Committee

A Nomination Committee was formally

constituted on 27 June 2003 and

comprises Messrs Barton (Chairman),

Campbell, Elliott, Rezos and

McLaughlin.

2. PRINCIPAL ACTIVITIESThe principal activities of the entities

within the Consolidated Entity during

the fi nancial year were hydrocarbon

exploration in Australia and hydrocarbon

production and exploration in Turkey

and the United States of America.

3. FINANCIAL RESULTSThe Consolidated Entity generated

earnings before interest, tax,

depreciation, amortisation and

exploration write-offs of $9,199,199

and reported an operating cashfl ow

of $9,436,767. The net profi t after

Income Tax of the Consolidated Entity

for the fi nancial year ended 30 June

2003 totalled $287,240 (2002: loss of

$6,748,467). This is equivalent to a profi t

of 0.2 cents per share (2002: loss of 6.1

cents).

4. DIVIDENDThe directors do not recommend the

payment of a dividend and no amount

has been paid or declared by way of

dividend since the end of the previous

fi nancial year, or to the date of this

report.

5. OPTIONSDuring the year ended 30 June, 2003

and to the date of this report 36,340,862

fully paid ordinary shares in the capital

of Amity were issued following exercise

of options (36,337,134 during the year

to 30 June 2003 and 3,728 post 30 June

2003).

Board of Directors’ Meetings

Remuneration Committee Meetings

Audit & Compliance Committee Meetings

Held Attended Held Attended Held Attended

A.P. Barton 11 11 2 2 - -

M.G. Blakiston 2 2 - - - -

F.D. Campbell 11 11 3 3 4 4

R.A. Elliot 11 11 2 2 - -

G.J. Rezos 11 11 1 1 4 4

P.D. Allchurch 11 11 - - - -


14 15


DIRECTORS’ REPORT

At the date of this report, the Company

has 44,357,081 options for ordinary fully

paid shares on issue as above.

Due to the resignation of Mr. Allchurch

as a director on 25 August 2003, the

$1.00 unlisted options expiring on 10

January 2006 will lapse on 25 November

2003 if not exercised beforehand.

Refer to Notes 18 and 22 of the fi nancial

statements for more details.

6. CORPORATE STRUCTUREAmity Oil Limited is a company limited

by shares that is incorporated and

domiciled in Australia.

7. REVIEW OF OPERATIONS A review of operations is included in the

Operations Report.

8. LIKELY DEVELOPMENTS AND EXPECTED RESULTSLikely developments and expected

results are covered in the Operations

Report.

9. ENVIRONMENTAL COMPLIANCEAmity is subject to a range of

environmental laws and regulations,

with the most signifi cant being:

• The West Australian Environmental

Protection Act, 1986;

• The Petroleum (Submerged Lands) Act

1967;

• Petroleum Law No. 6326 (Turkey); and

• Environment Act No. 2872 (Turkey).

During the year, Amity met all reporting

requirements in relation to the above

Acts. No circumstances arose during

the year which resulted in an incident

to be reported under environmental

legislation.

10. DIRECTORS’ AND EXECUTIVE OFFICERS’ EMOLUMENTSThe Company’s Remuneration Policy is

outlined in the Corporate Governance

Policy.

The following table sets out

remuneration paid to directors and

senior executives of the Consolidated

Entity during the reporting period.

DIRECTORS

Directors’Fees

Base Salary

Bonuses SuperannuationBenefi ts &

AllowancesConsulting

OptionBenefi t

Total

$ $ $ $ $ $ $ $

A.P. Barton 40,420 - - 3,638 - - - 44,058

M.G. Blakiston 15,240 - - 1,266 - - - 16,506

F.C. Campbell 30,357 - - - - - 13,501 43,858

R.A. Elliot 61,157 - - 4,965 - 172,000 25,333 263,455

G.J. Rezos 38,893 - - - - - 25,333 64,226

P.D. Allchurch - 252,195 50,000 10,519 22,599 - 33,753 369,066

EXECUTIVES

S.F. Alpay - 150,000 50,000 7,353 - - - 207,353

D.J. Rich - 184,242 - 10,266 - 1,091 3,,858 199,457

Number of Options Exercise Price Expiry Date

38,227,081 - listed (AYOO) $1.00 4th September 2004

1,000,000 - unlisted $0.50 26th September 2005

800,000 - unlisted $1.22 29th November 2005

1,000,000 - unlisted $1.00 10th January 2006

400,000 - unlisted $1.22 11th November 2006

815,000 - unlisted $1.22 20th December 2006

100,000 - unlisted $1.22 24th January 2007

240,000 - unlisted $1.22 24th April 2007

250,000 - unlisted $1.22 15th May 2007

1,500,000 - unlisted $1.35 1st July 2007

25,000 - unlisted $1.22 30th July 2007

44,357,081


16 17


Metro West Investments Pty Ltd, a

company of which Mr. Elliott is a

principal, was paid consulting fees for

executive services provided between

1 July 2002 and 30 November 2002.

The option benefi t represents the

amortised value of options vesting in

the fi nancial year. The options have

been valued using the Black and Scholes

model. Details of the options and inputs

used are set out in Note 18.

Mr. McLaughlin is not included in the

above table as he was not a director or

executive during the fi nancial year.

11. INDEMNIFICATION OF OFFICERSAn indemnity agreement has been

entered into with each of the directors

of the Company named earlier in

this report. Under the agreement, the

Company has agreed to indemnify

those offi cers against any claim or

for any expenses or costs which may

arise as a result of work performed in

their respective capacities. There is no

monetary limit to the extent of this

indemnity.

The Company paid an insurance

premium of $49,731 for a period of one

year commencing 31 March 2003 in

respect of a contract insuring each of

the directors against all liabilities and

expenses arising as a result of work

performed in their respective capacities,

to the extent permitted by law.

12. STATE OF AFFAIRSSignifi cant changes in the state of affairs

of the Consolidated Entity during the

fi nancial year ended 30 June, 2003 were

as follows.

13. SIGNIFICANT EVENTS AFTER BALANCE DATE No matters or circumstances have

arisen since the end of the fi nancial year

which have signifi cantly affected or may

signifi cantly affect the operations, results

or state of affairs of the Consolidated

Entity in subsequent fi nancial years,

except for:

(a) Exploration

Amity completed its Yesiltepe-1 well in

the Iskenderun Basin and testing showed

small amounts of gas which Amity does

not consider commercial. Amity decided

not to proceed with future operation.

The other two joint venture partners

have done some further testing and

may still do more. Amity has written off

$609,855, being the costs incurred up

to 30 June 2003 and expects to write

off approximately $1,100,000 of costs

incurred post 30 June 2003 in the 2004

fi nancial year.

(b) Convertible Notes

On 3 September 2003 the Company

announced that it was seeking to raise

between $5 million and $10 million

through the issue of 3 year reset

unsecured convertible notes. The notes

will be issued at $2.00 each, have an

interest rate of 10% per annum and be

convertible at the rate of one for one.

The term of the notes is ten years, with

a reset of the conversion and interest

rates after three years and subsequently

at the Company’s discretion. The funds

are to be used primarily to fast track the

development of Amity’s two new Turkish

discoveries at Adatepe and Cayirdere

without having to impact on the current

aggressive drilling programme.

14. CORPORATE GOVERNANCEOn 27 June 2003, the Board adopted a

revised Corporate Governance Policy

which is included as part of this report.

The Corporate Governance Policy

and the Charters for the Board’s

sub-committees are available on the

Company’s website at:

www.amityoil.com.au

Signed in accordance with a resolution of

directors.

A.P. BARTONChairman

West Perth, Western Australia

10th September 2003

DIRECTORS’ REPORT

An increase in share capital from $46,407,466 to $59,126,615 as follows:

Opening Balance, 1 July 2002 $46,407,466

Issue of 36,335,361 fully paid ordinary shares on exercise of 35c options $12,717,376

Issue of 1,773 fully paid ordinary shares on exercise of $1.00 options $1,773

Closing Balance, 30 June 2003 $59,126,615


16 17


STATEMENTS OF FINANCIAL POSITIONAMITY OIL LIMITED AND ITS CONTROLLED ENTITIES AS AT 30TH JUNE 2003

Consolidated ParentNote 2003 2002 2003 2002

$ $ $ $

CURRENT ASSETS

Cash assets 13,904,258 9,167,112 9,434,498 8,568,718

Receivables 5 6,323,645 1,922,886 23,781,042 8,957,582

Inventories 6 1,076,915 1,595,111 - 481,781

Total current assets 21,304,818 12,685,109 33,215,540 18,008,081

NON-CURRENT ASSETS

Receivables 7 2,162,022 - 2,162,022 -

Other fi nancial assets 8 - - 10,664,394 10,631,493

Property, plant and equipment 9 7,081,651 5,336,799 263,721 460,181

Deferred exploration expenditure 10 16,500,838 9,302,756 122,268 3,682,621

Intangibles 11 - - - -

Total non-current assets 25,744,511 14,639,555 13,212,405 14,774,295

TOTAL ASSETS 47,049,329 27,324,664 46,427,945 32,782,376

CURRENT LIABILITIES

Payables 12 4,422,917 1,618,722 1,323,543 278,658

Current tax liabilities 4 230,450 (2,218) - -

Provisions 13 295,629 83,719 295,629 83,719

Total current liabilities 4,948,996 1,700,223 1,619,172 362,377

NON-CURRENT LIABILITIES

Payables 14 192,388 - 6,852,381 6,795,558

Provision for deferred tax 4 3,437,927 - - -

Total non-current liabilities 3,630,315 - 6,852,381 6,795,558

TOTAL LIABILITIES 8,579,311 1,700,223 8,471,553 7,157,935

NET ASSETS 38,470,018 25,624,441 37,956,392 25,624,441

EQUITY

Contributed equity 15 59,126,615 46,407,466 59,126,615 46,407,466

Reserves 16 293,969 454,781 - -

Accumulated losses 17 (20,950,566) (21,237,806) (21,170,223) (20,783,025)

TOTAL EQUITY 38,470,018 25,624,441 37,956,392 25,624,441

The statements of fi nancial position are to be read in conjunction with the notes to the fi nancial statements.


18 19


STATEMENTS OF FINANCIAL PERFORMANCEAMITY OIL LIMITED AND ITS CONTROLLED ENTITIES AS AT 30TH JUNE 2003


$ $ $ $

Sales revenue from ordinary activities 2 15,515,799 2,054,992 - -

Cost of goods sold 3 (5,587,626) (1,036,487) - -

9,928,173 1,018,505 - -

Revenues from non-operating activities 2 4,427,226 247,903 5,688,485 303,563

Expenses from non-operating activities 3 (2,771,444) - (4,435,253) -

11,583,955 1,266,408 1,253,232 303,563

General and administrative expenses 3 (3,619,876) (1,840,024) (2,513,770) (1,060,039)

Exploration expenditure written off 3 (4,317,761) (3,653,484) (2,440,828) (3,225,572)

Provision for non-recovery of loans to

controlled entities - - 3,329,285 (3,527,685)

Borrowing costs (13,919) - (13,919) -

Foreign exchange gain/(loss) 293,869 (2,502,685) (1,198) 2,500

Profi t/(loss) from ordinary activities

before income tax expense 3,926,268 (6,729,785) (387,198) (7,507,233)

Income tax expense relating to ordinary

activities 4 (3,639,028) (18,682) - -

Profi t/(loss) from ordinary activities after

income tax attributable to members of

Amity Oil Limited 17 287,240 (6,748,467) (387,198) (7,507,233)

Share issue costs 15 - (594,034) - (594,034)

Net exchange differences on translation of

net assets of controlled overseas entity 16 (160,812) (34,691) - -

Total changes in equity other than those

resulting from transactions with owners

as owners 126,428 (7,377,192) (387,198) (8,101,267)

Basic earnings/(loss) per share (cents): 25 0.2 (6.1)

Diluted earnings/(loss) per share (cents): 25 0.2 (6.1)

The statements of fi nancial performance are to be read in conjunction with the notes to the fi nancial statements.


18 19


STATEMENTS OF CASH FLOWSAMITY OIL LIMITED AND ITS CONTROLLED ENTITIES AS AT 30TH JUNE 2003


$ $ $ $

Cash fl ows from operating activities

Receipts from customers 14,448,620 1,227,876 199,641 -

Payments to suppliers and employees (5,687,667) (4,643,537) (719,910) (1,789,936)

Interest received 658,166 193,623 645,482 189,283

Interest paid (13,919) - (13,919) -

Income tax (paid)/received 31,567 (18,682) - -

Net cash infl ows/(outfl ows) from operating activities 23 9,436,767 (3,240,720) 111,294 (1,600,653)

Cash fl ows from investing activities

Payments for property, plant and equipment (6,035,984) (2,642,848) (2,689,082) (214,896)

Exploration and development expenditure (12,179,381) (714,476) (624,013) 542,578

Loans to subsidiaries - - (8,514,804) (4,820,598)

Investment in subsidiaries - - (32,901) -

Proceeds of loans from related party - - (102,665) -

Proceeds from sale of non-current assets 663,538 - - -

Net cash infl ows/(outfl ows) from investing activities (17,551,827) (3,357,324) (11,963,465) (4,492,916)

Cash fl ows from fi nancing activities

Proceeds from issue of shares 12,719,149 14,692,493 12,719,149 14,692,493

Payment of share issue costs - (594,034) - (594,034)

Net cash infl ows/(outfl ows) from fi nancing activities 12,719,149 14,098,459 12,719,149 14,098,459

Net increase in cash held 4,604,089 7,500,415 866,978 8,004,890

Cash at the beginning of the fi nancial year 9,167,112 1,701,357 8,568,718 561,300

Effects of exchange rate changes on cash 133,057 (34,660) (1,198) 2,528

Cash at the end of the fi nancial year 13,904,258 9,167,112 9,434,498 8,568,718

The statements of cash fl ows are to be read in conjunction with the notes to the fi nancial statements.


20 21


NOTES TO THE FINANCIAL STATEMENTSAMITY OIL LIMITED AND ITS CONTROLLED ENTITIES AS AT 30TH JUNE 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of accounting

The fi nancial report is a general-

purpose fi nancial report, which has

been prepared in accordance with the

requirements of the Corporations Act

2001 including applicable Accounting

Standards. Other mandatory professional

reporting requirements (Urgent Issues

Group Consensus Views) have also been

complied with.

The fi nancial report has been prepared

in accordance with the historical cost

convention.

(b) Changes in accounting policies

The accounting policies adopted are

consistent with those of the previous

year except for the accounting policies

with respect to the provision for

employee benefi ts.

The Consolidated Entity has adopted

the revised Accounting Standard AASB

1028 “Employee Benefi ts”, which has

resulted in a change in the accounting

policy for the measurement of employee

benefi t liabilities. Previously, the

Consolidated Entity measured the

provision for employee benefi ts based

on remuneration rates at the date of

recognition of the liability. In accordance

with the requirements of the revised

Standard, the provision for employee

benefi ts is now measured based on the

remuneration rates expected to be paid

when the liability is settled. The effect

of the revised policy is not material to

retained profi ts or the current provisions

and accordingly, no adjustments have been

made.

(c) Principles of consolidation

The consolidated fi nancial statements

are those of the Consolidated Entity,

comprising Amity Oil Limited (the

parent Company) and all entities that

Amity Oil Limited controlled from time

to time during the year and at reporting

date.

Information from the fi nancial

statements of subsidiaries is included

from the date the parent company

obtains control until such time as control

ceases. Where there is loss of control of

a subsidiary, the consolidated fi nancial

statements include the results for the

part of the reporting period during

which the parent company has control.

Subsidiary acquisitions are accounted

for using the purchase method of

accounting.

The fi nancial statements of subsidiaries

are prepared for the same reporting

period as the parent company, using

consistent accounting policies.

Adjustments are made to bring into line

any dissimilar accounting policies that

may exist.

All inter-company balances and

transactions, including unrealised profi ts

arising from intra-group transactions,

have been eliminated in full. Unrealised

losses are eliminated unless costs cannot

be recovered.

(d) Foreign currencies

Translation of foreign currency

transactions

Transactions in foreign currencies of

entities within the Consolidated Entity

are converted to local currency at the

rate of exchange ruling at the date of the

transaction.

Foreign currency monetary items that

are outstanding at the reporting date

(other than monetary items arising under

foreign currency contracts where the

exchange rate for that monetary item is

fi xed in the contract) are translated using

the spot rate at the end of the fi nancial

year.

Translation of fi nancial reports of

overseas operations

The operations of Roebuck Resources,

Inc (a controlled entity) are deemed

self-sustaining, as it is fi nancially and

operationally independent of Amity

Oil Limited. Its fi nancial reports are

translated using the current rate method

and any exchange differences are

taken directly to the foreign currency

translation reserve.

All other overseas operations are deemed

to be integrated, as they are fi nancially

and operationally dependent on Amity

Oil Limited. Their fi nancial reports are

translated using the temporal method

and exchange differences are taken

directly to the Statements of Financial

Performance.

(e) Cash and cash equivalents

Cash on hand and in banks and short-

term deposits are stated at nominal

value.

For the purposes of the Statement of

Cash Flows, cash includes cash on

hand and in banks, and money market

investments readily convertible to

cash within 2 working days, net of any

outstanding bank overdrafts.


20 21



(f) Receivables

Trade receivables are recognised and

carried at original invoice amount less

any provision for any uncollectible debts.

(g) Investments

Investments in subsidiaries are carried

at the lower of cost and recoverable

amount.

(h) Inventories

Manufacturing and maintenance

Inventories are valued at the lower of

cost and net realisable value. The cost

of raw materials is determined as the

cost incurred in bringing each product

to its present location and condition on

a fi rst-in-fi rst-out basis.

(i) Property, plant and equipment

Cost and valuation

All classes of property, plant and

equipment are measured at cost.

Depreciation

Depreciation is provided on a straight-

line basis on all property, plant and

equipment.

Major depreciation rates used are:

(j) Joint venture operations

Interests in joint venture operations are

recognised by including in the respective

classifi cations, the share of individual

assets employed and share of liabilities

and expenses incurred.

The Consolidated Entity does not have

any interests in joint venture entities.

(k) Exploration, evaluation,

development and restoration costs

Costs carried forward

Costs arising from exploration and

evaluation activities are carried forward

provided such costs are expected

to be recouped through successful

development, or by sale, or where

exploration and evaluation activities

have not, at reporting date, reached a

stage to allow a reasonable assessment

regarding the existence of economically

recoverable reserves.

Costs carried forward in respect of an

area of interest that is abandoned are

written off in the year in which the

decision to abandon is made.

Amortisation

Costs on productive areas are amortised

over the life of the area of interest

to which such costs relate on the

production output basis.

Restoration

Restoration costs that are expected to

be incurred are provided for as part of

the cost of the exploration, evaluation,

development, construction or production

phases that give rise to the need for

restoration. Accordingly, these costs

are recognised gradually over the life of

the facility as these phases occur. The

costs relate mainly to obligations for the

restoration of operational sites.

These estimates of the restoration

obligations are based on existing

technology and legal requirements

and future costs, which have not been

discounted to their present value. Any

changes in the estimates are adjusted on

a retrospective basis. In determining the

restoration obligations, the entity

has assumed no signifi cant changes

will occur in the relevant Government

legislation in relation to restoration of

such sites in the future.

Recoverable amount

Non-current assets measured using the

cost basis are not carried at an amount

above their recoverable amount, and

where a carrying value exceeds this

recoverable amount, the asset is written

down. In determining the recoverable

amount, the expected net cash fl ows

have not been discounted.

2003 2002

Plant and equipment

20% Straight Line

20% Straight Line

Motor vehicles

22.5% Diminishing

Value

22.5% Diminishing

Value

All other assets

33% Straight Line

33% Straight Line


22 23



(l) Other non-current assets

Receivables

Receivables expected to be realised

more than one year after the end of the

fi nancial year are discounted to the net

present value at an appropriate discount

rate, being the Company’s incremental

borrowing rate.

(m) Payables

Liabilities for trade creditors and other

amounts are carried at cost which is

the fair value of the consideration to be

paid in the future for goods and services

received, whether or not billed to the

Consolidated Entity.

Payables to related parties are carried at

the principal amount.

(n) Provisions

Provisions are recognised when

the Consolidated Entity has a legal,

equitable or constructive obligation

to make a future sacrifi ce of economic

benefi ts to other entities as a result of

past transactions or other past events,

it is probable that a future sacrifi ce of

economic benefi ts will be required and

a reliable estimate can be made of the

amount of the obligation.

(o) Contributed equity

Issued and paid up capital is recognised

at the fair value of the consideration

received by the Company.

Any transaction costs arising on the

issue of ordinary shares are recognised

directly in equity as a reduction of the

share proceeds received.

(p) Revenue recognition

Revenue is recognised to the extent that

it is probable that the economic benefi ts

will fl ow to the entity and the revenue

can be reliably measured. The following

specifi c recognition criteria must also be

met before revenue is recognised:

Sale of goods and assets

Control of the goods and assets has

passed to the buyer.

Interest

Control of the right to receive the

interest payment.

(q) Taxes

Income taxes

Tax-effect accounting is applied using

the liability method whereby income

tax is regarded as an expense and is

calculated on the accounting profi t after

allowing for permanent differences.

To the extent timing differences occur

between the time items are recognised in

the fi nancial statements and when items

are taken into account in determining

taxable income, the net related taxation

benefi t or liability, calculated at current

rates, is disclosed as a future income

tax benefi t or a provision for deferred

income tax. The net future income tax

benefi t relating to tax losses and timing

differences is not carried forward as

an asset unless the benefi t is virtually

certain of being realised.

Goods and Services Tax (GST)

Revenues, expenses and assets are

recognised net of the amount of GST

except:

• Where the GST incurred on a purchase

of goods and services is not recoverable

from the taxation authority, in which

case the GST is recognised as part of

the cost of acquisition of the asset or as

part of the expense item as applicable;

and

• Receivables and payables are stated

with the amount of GST included.

The net amount of GST recoverable from,

or payable to, the taxation authority

is included as part of receivables or

payables in the Statement of Financial

Position.

Cash fl ows are included in the Statement

of Cash Flows on a gross basis and the

GST component of cash fl ows arising

from investing and fi nancing activities,

which is recoverable from, or payable to,

the taxation authority are classifi ed as

operating cash fl ows.

Commitments and contingencies are

disclosed net of the amount of GST

recoverable from, or payable to, the

taxation authority.


22 23



(r) Employee benefi ts

Provision is made for employee benefi ts

accumulated as a result of employees

rendering services up to the reporting

date. These benefi ts include wages and

salaries, annual leave, sick leave and long

service leave.

Liabilities arising in respect of wages

and salaries, annual leave, sick leave and

any other employee benefi ts expected

to be settled within twelve months of

the reporting date are measured at their

nominal amounts based on remuneration

rates which are expected to be paid when

the liability is settled. All other employee

benefi t liabilities are measured at the

present value of the estimated future

cash outfl ow to be made in respect of

services provided by employees up to

the reporting date. In determining the

present value of future cash outfl ows, the

market yield as at the reporting date on

national government bonds, which have

terms to maturity approximating the

terms of the related liability, are used.

Employee benefi t expenses and revenues

arising in respect of the following

categories:

• Wages and salaries, non-monetary

benefi ts, annual leave, long service

leave, sick leave and other leave

benefi ts; and

• Other types of employee benefi ts

are recognised against profi ts on a net

basis in their respective categories.

The value of the equity based

compensation scheme described in

Note 18 is not being recognised as an

employee benefi ts expense.

(s) Earnings per share

Basic EPS is calculated as net profi t

attributable to members, adjusted to

exclude costs of servicing equity (other

than dividends) divided by the weighted

average number of ordinary shares.

Diluted EPS is calculated as net profi t

attributable to members, adjusted for:

• Costs of servicing equity (other than

dividends);

• The after tax effect of dividends and

interest associated with dilutive

potential ordinary shares that have

been recognised as expenses; and

• Other non-discretionary changes in

revenues or expenses during the

period that would result from the

dilution of potential ordinary shares;

divided by the weighted average number

of ordinary shares and dilutive potential

ordinary shares, adjusted for any bonus

element.

(t) Leases

Leases are classifi ed at their inception

as either operating or fi nance leases

based on the economic substance of the

agreement so as to refl ect the risks and

benefi ts incidental to ownership.

Operating Leases

The minimum lease payments of

operating leases, where the lessor

effectively retains substantially all of

the risks and benefi ts of ownership of

the leased item, are recognised as an

expense on a straight-line basis.

(u) Comparatives

Where necessary, comparatives have

been reclassifi ed and repositioned

for consistency with current year

disclosures.


24 25



Consolidated ParentNOTE 2 REVENUE FROM ORDINARY ACTIVITIES

2003 2002 2003 2002

$ $ $ $

Revenues from operating activities:

Sales Revenue 15,515,799 2,054,992 - -

Revenues from non-operating activities:

Interest Received 658,166 193,623 645,482 189,283

Proceeds from disposal of licence interests 663,538 - 1,743,538 -

Proceeds from disposal of drilling rig 3,099,824 - 3,099,824 -

Other 5,698 54,280 199,641 114,280

Total revenues from non-operating activities 4,427,226 247,903 5,688,485 303,563

Total revenues from ordinary activities 19,943,025 2,302,895 5,688,485 303,563

For the year ended 30 June 2002 cost recoveries

from joint venturers were disclosed as revenue.

These have been reclassifi ed as an offset against

expenses.

NOTE 3 EXPENSES AND LOSSES/(GAINS)

(a) Expenses

Cost of goods sold:

Production costs 4,331,728 751,926 - -

Depreciation and amortisation expense 1,255,898 284,561 - -

Total cost of goods sold 5,587,626 1,036,487 - -

Expenses from non-operating activities:

Net book value of drilling rig sold 2,691,715 - 2,691,715 -

Net book value of licence interests sold 79,729 - 1,743,538 -

Total expenses from non-operating activities 2,771,444 - 4,435,253 -


24 25



Consolidated ParentNOTE 3 EXPENSES AND LOSSES/(GAINS) (Cont.)

2003 2002 2003 2002

$ $ $ $

(a) Expenses (Cont.)

General and administrative expenses include:

Provisions for employee entitlements 54,910 34,212 54,910 34,212

Auditors’ remuneration:

Current auditors of parent entity (Ernst & Young)

- Audit and review of the fi nancial statements 45,000 - 45,000 -

- Other services - taxation 164,333 - 164,333 -

Previous auditors (HLB Mann Judd)

- Audit and review of the fi nancial statements 5,000 39,400 5,000 39,400

- Other services 24,435 2,357 24,435 2,357

Exploration expenditure written off includes:

Provision for loss on disposal of inventory 293,166 - - -

Provision for restoration 157,000 - 157,000 -

Reconciliation of depreciation and

amortisation:

Depreciation of property, plant & equipment 1,229,290 261,937 193,827 237,389

Amortisation of costs of areas of interest in

production 370,127 284,561 - -

Total depreciation and amortisation expenses 1,599,417 546,498 193,827 237,389

Charged to the following areas:

- included in cost of goods sold 1,255,898 284,561 - -

- included in general and administrative 343,519 261,937 193,827 237,389

Total depreciation and amortisation charges 1,599,417 546,498 193,827 237,389

(b) Gains

Gain on disposal of property, plant and equipment 412,717 - 412,717 -

Gain on disposal of licence interests 583,809 - - -


26 27



NOTE 3 EXPENSES AND LOSSES/(GAINS) (Cont.)

(b) Gains (Cont.)

Disposal of drilling rig

A gain on disposal of property, plant and equipment of $408,109 arises from the sale of a drilling rig to a company in Turkey.

The consideration for the sale is $3,603,370 which is payable over a period of up to 42 months from a portion of the revenues

earned by the purchaser from the provision of drilling services to customers. Consideration less costs results in an estimated profi t

of $911,655, however as the consideration will be received over a deferred period, the $3,603,370 has been discounted to a net

present value of $3,099,824, resulting in a gain on disposal of $408,109 shown in this fi nancial year and the balance of $503,546

being booked to deferred income as a current portion of $311,158 and a non-current portion of $192,388 (See Notes 12 and 14).

$1,441,348 of the consideration is expected to be received within 12 months and is included in current receivables (Note 5).

The balance of $2,162,022 is included in non-current receivables (Note 7). The receivable is secured over the assets until paid.

Consolidated Parent

NOTE 4 INCOME TAX 2003 2002 2003 2002

$ $ $ $

The prima facie income tax, using tax rates

applicable in the country of operation, on profi t

differs from the income tax provided in the

fi nancial statements as follows:

Prima facie tax on profi t from ordinary

activities 2,372,261 (2,018,935) (116,159) (2,252,170)

Tax effect of permanent and other differences:

- future income tax benefi t not brought to account 1,266,767 2,037,617 116,159 2,252,170

Income Tax Expense 3,639,028 18,682 - -

Tax assets and liabilities

Current tax payable 230,450 (2,218) - -

Provision for deferred income tax - non-current 3,437,927 - - -

Income tax losses

Future income tax benefi t arising from tax

losses not recognised at reporting date as

realisation of the benefi t is not regarded as

virtually certain 8,803,186 7,536,419 8,803,186 5,809,564

Income tax on Turkish profi ts

Under Turkish tax legislation, most exploration expenditure, including wells and seismic, is fully tax deductible in the year it is

incurred. Under Australian Accounting Standards such exploration, if successful, may be carried forward and amortised over a period of time.

Applying Australian Accounting Standards, income tax expense is calculated by multiplying the amount of profi t from the Turkish

operations, excluding exploration expenditure written off in Turkey (but carried forward in Australia), by the effective Turkish tax rate of 44%.

The Australian tax losses are not able to be offset against this income.

The Company is not currently in a tax payable situation in Turkey and does not expect to be in the immediate future as a result of

Amity’s planned on-going exploration programme.


26 27



NOTE 4 INCOME TAX (Cont.)

Provision for deferred income tax

The provision for deferred income tax relates to the Turkey operations and recognises the tax effect of the difference in net tax value

of non-current assets in Turkey and their carrying value in the Consolidated Entity’s books.

Future income tax benefi t

This future income tax benefi t will only be obtained if:

(i) future assessable income is derived of a nature and of an amount suffi cient to enable the benefi t to be realised;

(ii) the conditions for deductibility imposed by tax legislation continue to be complied with; and

(iii) no changes in tax legislation adversely affect the Consolidated Entity in realising the benefi t.

Tax consolidation

Effective 1 July 2002, for the purposes of income taxation, Amity Oil Limited and its 100% owned subsidiaries intends to form a tax

consolidated group. Members of the group intend to enter into a tax sharing arrangement. The form of the tax sharing agreement

has not been fi nalised. However, the intent of the tax sharing agreement is to provide for the allocation of income tax liabilities

between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is

remote. The head entity of the tax consolidated group is Amity Oil Limited.

Consolidated Parent

NOTE 5 RECEIVABLES (CURRENT) 2003 2002 2003 2002

$ $ $ $

Trade debtors 2,140,175 1,072,996 - 417,027

Receivable (Note 3) 1,441,348 - 1,441,348 -

Other receivables and prepayments 2,742,122 849,890 244,412 -

Loans to controlled entities - - 22,293,682 12,068,240

Less provision for non-recovery of loans to controlled

entities - - (198,400) (3,527,685)

6,323,645 1,922,886 23,781,042 8,957,582

The loans to Controlled Entities have no set

repayment terms and are non-interest bearing.

NOTE 6 INVENTORIES

Inventory - at cost 1,370,081 1,595,111 - 481,781

Less provision for diminution in value (293,166) - - -

1,076,915 1,595,111 - 481,781


28 29


Consolidated Parent

NOTE 7 RECEIVABLES (NON-CURRENT)

2003 2002 2003 2002

$ $ $ $

Receivables (Note 3) 2,162,022 - 2,162,022 -

NOTE 8 OTHER FINANCIAL ASSETS(NON-CURRENT)

The investments included in the fi nancial statements

comprise:

Shares in controlled entities - at cost - - 10,664,394 10,631,493

Country of Incorporation

Class of Share

2003 % Held

2003 $ Cost

2002 % Held

2002 $ Cost

Controlled entities of Amity Oil Limited:

Roebuck Resources Inc. USACommon

Stock 100 143 100 143

Preferred Stock 100 226,111 100 226,111

Amity Oil International Pty Ltd Australia Ord Shares 100 - 100 -

International Oil and Gas Services B.V. Netherlands Ord Shares 100 32,901 - -

Amity Oil New Zealand Limited New Zealand Ord Shares - - 100 -

Southern Amity Limited Australia Ord Shares 100 - 100 -

Great Southern Oil NL Australia Ord Shares 100 7,622,785 100 7,622,785

Southern Amity, Inc British Vir Isl. Ord Shares 100 2,782,454 100 2,782,454

Controlled entities of Southern Amity

Limited:

Bonaparte Gulf Oil & Gas Pty Ltd Australia Ord Shares 100 - 100 -

Latrobe Oil & Gas Pty Ltd Australia Ord Shares 100 - 100 -

Controlled entities of Great Southern Oil NL

Bonaparte Gulf Petroleum NL Australia Ord Shares 100 - 100 -

10,664,394 10,631,493

During the fi nancial year ended 30 June 2003:

(a) Southern Amity NL changed its name to Southern Amity Limited.

(b) Bonaparte Gulf Petroleum NL sold its shares in Bonaparte Gulf Oil & Gas Pty Ltd to Southern Amity Limited.

(c) Great Southern Oil NL sold its shares in Latrobe Oil & Gas Pty Ltd to Southern Amity Limited.

(d) Amity Oil New Zealand Limited was voluntarily liquidated.

(e) International Oil & Gas Services B.V. was incorporated at a cost of $32,901.

(f) Amity Oil Limited is the ultimate parent entity.



28 29


Consolidated Parent

NOTE 9 PROPERTY, PLANT AND EQUIPMENT

2003 2002 2003 2002

$ $ $ $

Plant, equipment, vehicles and furniture - cost 1,354,092 4,085,368 996,897 3,777,383

Less: Accumulated depreciation (883,176) (3,374,553) (733,176) (3,317,202)

470,916 710,815 263,721 460,181

Producing wells, plant and equipment - cost 7,833,243 5,684,085 - -

Less: Accumulated Amortisation (1,516,432) (1,058,101) - -

6,316,811 4,625,984 - -

Producing assets under construction:

Production facilities - Turkey - cost 293,924 - - -

Total Property, Plant and Equipment 7,081,651 5,336,799 263,721 460,181

Consolidated Parent2003 2003

$ $

Reconciliation of the carrying amounts of property,

plant and equipment at the beginning and end of the

current fi nancial year:

Plant, equipment, vehicles and furniture - cost

Balance at start of year 710,815 460,181

Additions 2,715,606 2,689,082

Disposals – at cost (5,446,882) (5,412,825)

Depreciation (343,519) (193,827)

Disposals – accumulated depreciation 2,834,896 2,721,110

Balance at end of year 470,916 263,721

Producing wells, plant and equipment - cost

Balance at start of year 4,625,984 -

Additions 3,026,454 -

Disposals - at cost (877,296) -

Depreciation and amortisation (1,255,898) -

Disposals - accumulated depreciation 797,567 -

Balance at end of year 6,316,811 -



30 31


Consolidated Parent

NOTE 9 PROPERTY, PLANT AND EQUIPMENT (Cont.)

2003 2003

$ $

Producing assets under construction

Balance at start of year - -

Additions 293,924 -

Transfers to producing wells, plant and equipment - -

Balance at end of year 293,924 -

NOTE 10 DEFERRED EXPLORATION EXPENDITURE

2003 2002 2003 2002

$ $ $ $

Exploration and evaluation costs carried forward in

respect of areas of interest:

Exploration and/or evaluation phase 16,500,838 9,302,756 122,268 3,682,621

The ultimate recoupment of costs carried forward for

the exploration and evaluation phase is dependent

on the successful development and commercial

exploitation or sale of the respective areas.

2003 2003

$ $

Reconciliation:

Reconciliation of carrying amounts of exploration and

evaluation expenditure at the beginning and end of

the current fi nancial year:

Balance at start of year 9,302,756 3,682,621

Additions 11,515,843 624,013

Expenditure written off (4,317,761) (2,440,828)

Sale of prospects - (1,743,538)

Balance at end of year 16,500,838 122,268



30 31


Consolidated Parent

NOTE 11 INTANGIBLES

2003 2002 2003 2002

$ $ $ $

Goodwill on acquisition of Southern Amity, Inc at cost - 1,643,296 - -

Accumulated amortisation - (178,022) - -

Transfer to deferred exploration expenditure - (1,465,274) - -

- - - -

At 30 June 2002, the company transferred the balance

of goodwill of $1,465,274 to deferred exploration

expenditure as the directors considered that it was

more appropriate to classify the cost of acquiring

a company which holds an interest in the Whicher

Range prospect to the prospect itself.

NOTE 12 PAYABLES (CURRENT)

Trade creditors and accruals 4,111,759 1,618,722 1,012,385 278,658

Deferred income (Note 3) 311,158 - 311,158 -

4,422,917 1,618,722 1,323,543 278,658

NOTE 13 PROVISIONS (CURRENT)

Restoration costs 157,000 - 157,000 -

Employee leave benefi ts 138,629 83,719 138,629 83,719

295,629 83,719 295,629 83,719

NOTE 14 PAYABLES (NON-CURRENT)

Loan from Controlled Entities - - 6,659,993 6,795,558

Deferred income (Note 3) 192,388 - 192,388 -

192,388 - 6,852,381 6,795,558

The loans from Controlled Entities have no set

repayment terms and are non-interest bearing.



32 33


Consolidated Parent

NOTE 15 CONTRIBUTED EQUITY

2003 2002 2003 2002

$ $ $ $

(a) Issued and paid up capital:

158,830,063 (30 June 2002: 122,492,929)

ordinary shares fully paid 59,126,615 46,407,466 59,126,615 46,407,466

2003 2002

NO. OF SHARES $ NO. OF SHARES $

(b) Movement in shares on issue:

Beginning of the fi nancial year 122,492,929 46,407,466 102,174,363 32,308,977

Shares issued on exercise of 35c options 36,335,361 12,717,376 2,576,068 901,624

Shares issued on exercise of $1.00 options 1,773 1,773 - -

Share placements - - 15,509,735 12,091,999

Shares issued pursuant to Shareholder Share

Purchase Plan - - 2,232,763 1,698,900

Less transaction costs - - - (594,034)

End of the fi nancial year 158,830,063 59,126,615 122,492,929 46,407,466

(c) Terms and conditions of contributed equity:

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in

the proceeds of the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle the holder to one vote, either in person or by proxy, at a meeting of the Company.

Consolidated Parent

NOTE 16 RESERVES

2003 2002 2003 2002

$ $ $ $

The foreign currency translation reserve is used

to record exchange differences arising from the

translation of the fi nancial statements of self-

sustaining operations.

Movements in the reserve:

Balance at beginning of the year 454,781 489,472 - -

Loss on translation of overseas controlled entities (160,812) (34,691) - -

Balance at end of year 293,969 454,781 - -



32 33



Consolidated Parent

NOTE 17 ACCUMULATED LOSSES

2003 2002 2003 2002

$ $ $ $

Balance at beginning of year (21,237,806) (14,489,339) (20,783,025) (13,275,792)

Net gain/(loss) attributable to members of

Amity Oil Limited 287,240 (6,748,467) (387,198) (7,507,233)

Balance at end of year (20,950,566) (21,237,806) (21,170,223) (20,783,025)

NOTE 18 OPTIONS

The parent entity has granted certain options that are exercisable in whole or in part on or before the expiry dates shown

below. Apart from the 35 cent options which expired on 16 September 2002, which were issued for 2 cents each, all options

were issued at no cost. At balance date the following options remain to be exercised:

Date of Grant Date of Expiry Note35 CentOptions

50 CentOptions

$1.00Options

$1.22Options

2003

3 September 2002 4 September 2004 18(a) - - 38,230,809 -

26 September 2000 26 September 2005 - 1,000,000 - -

29 November 2001 29 November 2005 - - - 800,000

10 January 2001 10 January 2006 18(c) - - 1,000,000 -

11 November 2002 11 November 2006 18(b) - - - 1,400,000

20 December 2002 20 December 2006 18(d) - - - 815,000

24 January 2003 24 January 2007 18(d) - - - 100,000

23 April 2003 23 April 2007 - - - 240,000

15 May 2003 15 May 2007 18(d) - - - 250,000

- 1,000,000 39,230,809 3,605,000

2002

16 March 2000 16 September 2002 18(a) 37,003,641 - - -

26 September 2000 26 September 2005 - 1,000,000 - -

29 November 2001 29 November 2005 - - - 1,200,000

10 January 2001 10 January 2006 18(c) - - 2,000,000 -

37,003,641 1,000,000 2,000,000 1,200,000

During the fi nancial year ended 30 June 2003:

(i) 36,335,361 35c options expiring on 16 September 2002 were exercised for a value of $12,717,376.

(ii) 668,280 of the 35c options expired on 16 September 2002 unexercised.

(iii) 1,773 $1.00 options expiring on 4 September 2004 were exercised for a value of $1,773.

(iv) 400,000 $1.22 options expiring on 29 November 2005 lapsed following the resignation of Mr Blakiston as a director on

6 September 2002.


34 35



NOTE 18 OPTIONS (Cont.)(a) These options are quoted on ASX.

(b) 1,000,000 of the $1.22 options expiring on 11 November 2006 lapsed on 25 August 2003 when Mr. Allchurch resigned as

an executive director of the Company.

(c) Amity Option Incentive Plan:At a general meeting of shareholders held on 15 December 2000, shareholders approved the Amity Option Incentive Plan. The Plan was terminated on 1 October 2002. 2,000,000 options were issued under the plan on 10 January 2001. These options were exercisable at any time prior to 10 January 2006. 1,000,000 options lapsed during the year ended 30 June 2003 due to the holders ceasing to be Eligible Persons under the Plan. At 30 June 2003, Mr. Allchurch, a director of the Company, held 1,000,000 of the options issued under the Plan. Mr. Allchurch resigned on 25 August 2003 and under the rules of the Plan, has three months to exercise his options before they lapse.

(d) Employee Option Plan:An employee option plan was approved by shareholders at the Company’s Annual General Meeting on 7 November 2002. Under the plan, Amity Oil Limited may, at the discretion of the Board, grant options over the ordinary shares of Amity Oil Limited to employees of the Consolidated Entity. The options, issued for nil consideration, are granted in accordance with performance guidelines established by the directors of Amity Oil Limited. The options are issued for a term of 4 years and vest one third on each of the fi rst, second and third anniversary of the date of grant. The options cannot be transferred and will not be quoted on the ASX. No options issued under the Plan vested or were exercised during the year ended 30 June 2003. As at 30 June 2003, the Consolidated Entity had 16 employees.

The fair value of each option is estimated on the date of grant using a Black and Scholes option-pricing model with the following weighted average assumptions used for grants made during the year ended 30 June 2003:

Dividend yield 0%

Expected volatility 57.6%

Historical volatility 57.6%

Risk-free interest rate 5.57%

Expected life of the option 4 years

The dividend yield is assumed to remain at zero. The expected life of the options is not necessarily indicative of exercise patterns that may occur. The expected volatility refl ects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

The resulting weighted average fair value per option for those granted during the year ended 30 June 2003 under the Employee Option Plan is 12 cents.

Currently, these fair values are not recognised as expenses in the fi nancial statements. However, should these grants be expensed they would be amortised over the vesting periods, resulting in an increase in employee benefi ts expense of $15,894 for the 2003 fi nancial year. The plan was not in place during the 2002 fi nancial year. Note that no adjustment to these amounts have been made to refl ect estimated or actual forfeitures (i.e. options that do not vest).

NOTE 19 SEGMENT REPORTING(a) Geographical Segments

During the year the Consolidated Entity operated in three geographical segments, being Turkey, USA and Australia. The majority of the Consolidated Entity’s exploration and production currently takes place in Turkey. Some production interests were owned in the USA, but most were disposed of during the fi nancial year. The head offi ce and investment activities of the group and some exploration takes place in Australia.

(b) Industry SegmentThe Consolidated Entity operates in the Hydrocarbon Exploration and Production Industry Segment only.


34 35



NOTE 19 SEGMENT REPORTING (Cont.)

Primary Reporting - Geographical

Segments

Turkey USA Australia Eliminations Consolidated Entity

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002$ $ $ $ $ $ $ $ $ $

REVENUE

External sales 15,052,701 1,456,369 463,098 598,623 - - - - 15,515,799 2,054,992

Other revenue 19,078 - 663,538 - 3,744,610 247,903 - - 4,427,226 247,903

Other segments - - - - 275,986 142,370 (275,986) (142,370) - -

Total segment revenue 15,071,779 1,456,369 1,126,636 598,623 4,020,596 390,273 (275,986) (142,370) 19,943,025 2,302,895

Unallocated revenue - -

Total revenue from ordinary activities 19,943,025 2,302,895

RESULT

Segment result 8,163,676 (2,363,465) 735,227 113,476 (5,128,210) (6,240,103) 155,575 1,760,307 3,926,268 (6,729,785)

Unallocated expenses net of unallocated revenue - -

Profi t/(loss) from ordinary activities before income tax 3,926,268 (6,729,785)

Income tax expense (3,639,028) (18,682)

Net profi t 287,240 (6,748,467)

ASSETS

Segment assets 26,268,974 8,291,225 2,402,662 2,115,962 45,638,700 45,147,432 (27,261,007) (28,229,955) 47,049,329 27,324,664

Unallocated assets - -

Total assets 47,049,329 27,324,664

LIABILITIES

Segment liabilities (23,575,811) (10,323,809) (231,201) (72,652) (18,828,430) (18,359,621) 34,056,131 27,055,859 (8,579,311) (1,700,223)

Unallocated liabilities - -

Total liabilities (8,579,311) (1,700,223)

OTHER

Acquisition of non-current segment assets 3,346,902 2,335,025 - - 2,689,082 307,822 - - 6,035,984 2,642,847

Depreciation and amortisation of segment assets (1,405,590) (276,260) - (8,301) (193,827) (261,936) - - (1,599,417) (546,497)

Secondary Reporting - Industry Segments

Hydrocarbon exploration and production:

Revenue 19,943,025 2,302,895

Total assets 47,049,329 27,324,664

Acquisition of non-current segment assets 6,035,984 2,642,847


36 37


NOTE 20 COMMITMENTS FOR EXPENDITURE AND CONTINGENT LIABILITIES

There are no outstanding commitments or contingent liabilities not provided for in the fi nancial statements of the Consolidated

Entity as at 30 June 2003 other than:

Exploration Commitments

a) In order to maintain rights of tenure to its petroleum exploration permits the Consolidated Entity is committed to outlay

aggregate amounts as shown below for permit rentals and to meet permit minimum expenditure conditions.

Consolidated Parent2003 2002 2003 2002

$ $ $ $

Not later than one year 7,967,250 3,143,540 426,700 1,678,630

Later than one year but not later than fi ve years 3,205,152 7,703,110 63,750 1,142,300

Later than fi ve years - - - -

Total 11,172,402 10,846,650 490,450 2,820,930

b) Native Title Claims

Legislative developments and judicial decisions (in particular the uncertainty created in the area of Native Title rights by the

High Court’s decisions in the “Mabo”, “Wik” and “Miriuwung-Gajerrong” cases and native title legislation) may have an adverse

impact on the Consolidated Entity’s exploration and production activities and its ability to fund those activities. It is impossible

at this stage to quantify the impact (if any) which these developments may have on the Consolidated Entity’s operations.

The Company is aware of native title claims in respect of areas in which the Consolidated Entity currently has an interest. It

is possible that further claims could be made in the future. However, the Company cannot determine whether any current or

future claims, if made, will succeed and if so, what the implications would be for the Consolidated Entity.

Operating Lease Commitments

The Consolidated Entity leases offi ce space under an operating lease expiring in April 2006. The Lease provides the Consolidated

Entity with an option to renew, at which time all terms are renegotiated. The rental rates are reviewed to fair market value at 18

month intervals throughout the lease term and any option period.


$ $ $ $

Not later than one year 156,266 158,643 156,266 158,643

Later than one year but not later than fi ve years 284,547 477,089 284,547 477,089

Later than fi ve years - - - -

Total 440,813 635,732 440,813 635,732



36 37



Consolidated Parent

NOTE 21 REMUNERATION OF DIRECTORS AND EXECUTIVES

2003 2002 2003 2002

$ $ $ $

(a) Remuneration of Directors

Income received, or due and receivable by directors

from entities in the Consolidated Entity and related

parties in connection with the management of affairs

of the Parent Entity or its controlled entities. 801,169 421,577 801,169 421,577

The number of Parent Entity directors whose income from the Parent Entity or related

parties was within the specifi ed bands are as follows:

2003 2002

Number Number

$ 0 – $ 9,999 - 3

$ 10,000 – $ 19,999 1 1

$ 20,000 – $ 29,999 - 1

$ 40,000 – $ 49,999 2 -

$ 60,000 – $ 69,999 1 -

$ 160,000 – $ 169,999 - 1

$ 200,000 – $ 209,999 - 1

$ 260,000 – $ 269,999 1 -

$ 360,000 – $ 369,999 1 -


$ $ $ $

(b) Remuneration of Executives

Income received, or due and receivable by executive

offi cers (including directors) from entities in the

Consolidated Entity and related parties in connection

with the management of affairs of the Parent Entity or

its controlled entities and whose income was at least

$100,000. 1,039,331 521,577 831,978 371,577

The number of executives (including directors) whose

income from entities in the Consolidated Entity and

related parties was within the specifi ed bands are as

follows:

2003 2002 2003 2002

Number Number Number Number

$150,000 – $159,999 - 1 - -

$160,000 – $169,999 - 1 - 1

$190,000 – $199,999 1 - 1 -

$200,000 – $209,999 1 1 - 1

$260,000 – $269,999 1 - 1 -

$360,000 – $369,999 1 - 1 -

The above remuneration includes the fair value of options attributable for the fi nancial year. These fair values are not recognised as

expenses in the fi nancial statements.


38 39


NOTE 22 RELATED PARTY DISCLOSURES

DIRECTORS

(a) The directors of the Parent Entity who have held offi ce during the fi nancial year are:

A.P. Barton

M.G. Blakiston (resigned 6 September 2002)

F.D. Campbell

R.A. Elliott

G.J. Rezos

P.D. Allchurch (resigned 25 August 2003)

(b) Information on the remuneration of directors is set out in Note 21.

TRANSACTIONS WITH DIRECTORS AND DIRECTOR RELATED ENTITIES

The Company paid an amount of $172,000 to Metro West Investments Pty Ltd, a company of which Mr Elliott is a principal, to

procure executive services during the period July through November 2002.

The Company paid legal fees on normal commercial terms to Blakiston and Crabb, a legal fi rm of which Mr. M.G. Blakiston, a

director of the Company until 6 September 2002, is a partner. The amount paid by the Company to Blakiston and Crabb for the

year to 30 June, 2003 was $76,819.

During the year, an amount of $22,913 was paid to a director related entity, Allchurch Communications, which is a business

operated by the daughter of Mr. Allchurch. Allchurch Communications provides advice to the Company on media and

public relations. All fees are based on commercial terms and conditions. Mr. Allchurch has no fi nancial interest in Allchurch

Communications.

EQUITY INSTRUMENTS OF DIRECTORS

Ordinary SharesFully Paid

Listed Options OverOrdinary Shares

Unisted Options OverOrdinary Shares

2003Number

2002Number

2003Number

2002Number

2003Number

2002Number

A.P. Barton 15,879,735 12,206,285 4,142,211 4,089,141 - -

F.D. Campbell 125,000 125,000 31,250 - 400,000 -

R.A. Elliott 304,854 123,947 - 105,000 400,000 400,000

G.J. Rezos 130,000 28,947 55,000 - 400,000 400,000

P.D. Allchurch 4,703,424 4,108,218 1,325,859 1,195,206 2,000,000 1,000,000

21,143,013 16,592,397 5,554,320 5,389,347 3,200,000 1,800,000

During the fi nancial year:

(a) the Company issued 1,000,000 options exercisable at $1.22 each on or before 11 November, to Mr. Allchurch at no cost. The

value of these options attributed for the fi nancial year was $33,753. These 1,000,000 options lapsed on 25 August 2003 when he

resigned as an executive director of the Company;

(b) the Company issued 400,000 options exercisable at $1.22 each on or before 11 November 2006, to Mr. Campbell at no cost. The

value of these options attributed for the fi nancial year was $13,501.

(c) Mr. Blakiston resigned as a director on 6 September 2002. As at 30 June 2002, Mr. Blakiston held 170,000 ordinary shares,

65,000 listed 35c options and 400,000 unlisted options. The 400,000 unlisted options lapsed on 6 December 2002 as per their

terms and conditions.



38 39



NOTE 22 RELATED PARTY DISCLOSURES (Cont.)

(d) excluding on-market dealings, the following movements occurred in relation to listed options:

Number of Ordinary shares Issued following the

Excercise of 35c Options

Number of $1 Options Issuedas part of Pro-rata

Bonus Issue

A.P. Barton 1,161,582 3,891,459

M.G. Blakiston 65,000 71,250

F.D. Campbell - 31,250

R.A. Elliot 250,907 93,714

G.J. Rezos - 25,000

P.D. Allchurch 1,195,206 1,325,859

Apart from on-market dealings, there have been no other transactions concerning equity instruments during the fi nancial year with

directors or their director-related entities. All equity dealings with directors have been entered with terms and conditions no more

favourable than those that the entity would have adopted if dealing at arms length.

WHOLLY OWNED GROUP TRANSACTIONS

The wholly-owned group consisted of Amity Oil Limited and its wholly-owned controlled entities, Great Southern Oil NL, Latrobe

Oil & Gas Pty Ltd, Bonaparte Gulf Oil & Gas Pty Ltd, Bonaparte Gulf Petroleum NL, Roebuck Resources, Inc, Amity Oil New

Zealand Limited, Southern Amity, Inc, Southern Amity Limited, Amity Oil International Pty Ltd and International Oil and Gas

Services B.V. Ownership interests in these controlled entities are set out in Note 8.

Transactions between Amity Oil Limited and other entities in the wholly-owned group during the years ended 30 June 2003 and

2002 consisted of:

(a) loans advanced by Amity Oil Limited;

(b) loans repaid to Amity Oil Limited;

(c) the charging of a service fee by Amity Oil Limited to Roebuck Resources, Inc; and

(d) the charging of time by Amity Oil Limited employees to the wholly-owned controlled entities.

Parent

Aggregate amounts included in the determination of operating result before income tax that

resulted from transactions with entities in the wholly-owned group:

2003 2002

$ $

Service fee 60,000 60,000

Recovery of costs 1,852,687 1,217,131

The recovery of costs for the year ended 30 June 2002 includes $1,214,949 reclassifi ed from

revenue (see Note 2).

Aggregate amounts receivable from/(payable to) entities in the wholly-owned group at balance

date:

- receivable from 22,293,682 12,068,240

- provision for non-recovery (198,400) (3,527,685)

22,095,282 8,540,555

- payable to (6,659,993) (6,795,558)


40 41


NOTE 23 (a) RECONCILIATION OF NET CASH INFLOWS FROM OPERATING ACTIVITIES TO PROFIT/(LOSS) FROM ORDINARY ACTIVITIES AFTER INCOME TAX


$ $ $ $

Profi t/(loss) from ordinary activities after income tax 287,240 (6,748,467) (387,198) (7,507,233)

Non-cash items:

Depreciation and amortisation 1,599,417 628,662 193,827 237,389

Exploration expenditure written off 4,317,761 3,653,484 2,440,828 3,225,572

Gain on disposal of drilling rig (408,109) - (408,109) -

Provision for non-recovery of loan to subsidiary - - (3,329,285) 3,527,685

Foreign exchange movement (293,869) - 1,198 (2,500)

Overhead recoveries from exploration - (1,214,949) - (1,217,432)

Change in operating assets and liabilities:

Decrease (increase) in receivables (2,959,411) (272,656) 172,615 (111,844)

Decrease (increase) in inventory 518,196 - 481,781 -

Increase (decrease) in creditors and payables 2,493,037 733,545 733,727 213,498

Increase (decrease) in provisions 211,910 (20,339) 211,910 34,212

Increase (decrease) in tax provision 232,668 - - -

Increase (decrease) in deferred income tax liability 3,437,927 - - -

Net cash infl ows/(outfl ows) from operating activities 9,436,767 (3,240,720) 111,294 (1,600,653)

(b) NON-CASH FINANCING AND INVESTING ACTIVITIES

Rig Sale

During the fi nancial year ended 30 June 2003 the Company sold its drilling rig for $3,603,370. Refer Note 3. As the consideration

will be received over a deferred period, the $3,603,370 has been discounted to net present value of $3,099,824. As at 30 June 2003

no cash had yet been received. Since 30 June 2003 $461,822 cash has been received.



40 41


NOTE 24 JOINT VENTURE (Cont.) Consolidated Parent2003 2002 2003 2002

$ $ $ $

The Consolidated Entity has interests in various

unincorporated joint ventures. Details of the total net

assets of joint ventures are as follows:

CURRENT ASSETS

Cash 516,165 262,362 33,238 185,959

Receivables 2,418,736 59,536 278,561 -

Inventories 1,076,915 1,285,226 - 481,781

Total current assets 4,011,816 1,607,124 311,799 667,740

NON-CURRENT ASSETS

Property, plant and equipment 6,610,735 4,537,742 - -

Deferred exploration and development expenditure 15,392,123 7,389,908 122,268 3,850,708

Total non-current assets 22,002,858 11,927,650 122,268 3,850,708

TOTAL ASSETS 26,014,674 13,534,774 434,067 4,518,448

CURRENT LIABILITIES

Payables 2,915,274 659,464 12,866 43,036

Total current liabilities 2,915,274 659,464 12,866 43,036

TOTAL LIABILITIES 2,915,274 659,464 12,866 43,036

NET ASSETS 23,099,400 12,875,310 421,201 4,475,412

(i) Disclosure of commitments and contingent liabilities specifi c to the joint ventures are not materially different from those in

Note 20.

(ii) Details of the name and percentage interest of the joint venture operations are set out in the Oil and Gas Interests section of the

Annual Report.



42 43


NOTE 25 EARNINGS PER SHARE

Consolidated2003 2002

$ $

Basic earnings/(loss) per share 0.002 (0.061)

Diluted earnings/(loss) per share 0.002 (0.061)

The following refl ects the income and share data used in the calculations of basic earnings

per share:

Net profi t/(loss) from ordinary activities 287,240 (6,748,467)

Adjustments - -

Earnings used in calculation of Earnings per share 287,240 (6,748,467)

Number Number

Weighted average number of ordinary shares on issue during the year used in calculation

of basic earnings per share 152,831,039 111,497,865

Share options 4,088,009 -

Adjusted weighted average number of ordinary shares used in calculating diluted earnings

per share 156,919,048 111,497,865



42 43


NOTE 26 FINANCIAL INSTRUMENT DISCLOSURES

(a) The Consolidated Entity’s exposure to interest rate risk, which is the risk that a fi nancial instrument’s value will fl uctuate as a

result of changes in market interest rates and the effective weighted average interest rates on those fi nancial assets and

liabilities, are as follows:

2003Weighted average effective

enterest rates%

Floating interest rate

$

Fixed Interest Rate Maturing In:

Non interest bearing

$Total

$

1 year or less

$

Over 1 to 5 years

$

More than 5 years

$

FINANCIAL ASSETS

Cash and deposits 4.60 10,033,700 - - - 3,870,558 13,904,258

Trade debtors and receivables - - - - 8,485,667 8,485,667

10,033,700 - - - 12,356,225 22,389,925

FINANCIAL LIABILITIES

Trade creditors and accruals - - - - 4,422,917 4,422,917

- - - - 4,422,917 4,422,917

Net Financial Assets 10,033,700 - - - 7,933,308 17,967,008

2002Weighted average effective

enterest rates%

Floating interest rate

$

Fixed Interest Rate Maturing In:

Non interest bearing

$Total

$

1 year or less

$

Over 1 to 5 years

$

More than 5 years

$

FINANCIAL ASSETS

Cash and deposits 4.65 9,167,112 - - - - 9,167,112

Trade debtors and receivables - - - - 1,922,886 1,922,886

9,167,112 - - - 1,922,886 11,089,998

FINANCIAL LIABILITIES

Trade creditors and accruals - - - - 1,618,722 1,618,722

- - - - 1,618,722 1,618,722

Net Financial Assets 9,167,112 - - - 304,164 9,471,276

(b) Credit Risk

The Consolidated Entity’s maximum exposure to credit risk, excluding the value of any collateral or other security, in relation

to each class of recognised fi nancial assets, is the carrying amount, net of any provisions for doubtful debts, as disclosed in the

Statements of Financial Position and notes to the fi nancial statements.

The Consolidated Entity does not have any material credit risk to any single debtor group or group of debtors under fi nancial

arrangements entered into by the Consolidated Entity.



44 45


NOTE 26 FINANCIAL INSTRUMENT DISCLOSURES (Cont.) (c) Net Fair Value

The net fair values of all monetary fi nancial assets and liabilities approximate their carrying values. No fi nancial assets or

fi nancial liabilities are readily traded on organised markets in standardised form.

The aggregate net fair values and carrying amounts of fi nancial assets and liabilities are disclosed in the Statements of

Financial Position and in the notes to and forming part of the fi nancial statements.

NOTE 27 SUBSEQUENT EVENTS

No matter or circumstance has arisen since 30 June 2003 that has signifi cantly affected or may signifi cantly affect the

operation, results or state of affairs of the Consolidated Entity in the following or future years:

(a) Exploration

Amity completed its Yesiltepe-1 well in the Iskenderun Basin and testing showed small amounts of gas which Amity does not

consider commercial. Amity decided not to proceed with future operation. The other two joint venture partners have done

some further testing and may still do more. Amity has written off $609,855, being the costs incurred prior to 30 June 2003

and expects to write off approximately $1,100,000 in the 2004 fi nancial year.

(b) Convertible Notes

On 3 September 2003 the Company announced that it was seeking to raise between $5 million and $10 million through the

issue of 3 year reset unsecured convertible notes. The notes will be issued at $2.00 each, have an interest rate of 10% per

annum and be convertible at the rate of one for one. The term of the notes is ten years, with a reset of the conversion and

interest rates after three years and subsequently at the Company’s discretion. The funds are to be used primarily to fast track

the development of Amity’s two new Turkish discoveries at Adatepe and Cayirdere without having to impact on the current

aggressive exploration and drilling programme.

NOTE 28 CONTINGENT ASSETS

Under Turkish Petroleum Law, overseas funds invested in exploration and drilling operations in Turkey were recorded at the

exchange rate applicable on the day of conversion to Turkish Lira. Such transfers were registered with the General Directorate

of Petroleum Affairs. Under the law, any foreign exchange loss resulting from the difference between the current and historical

exchange rates at the time of repayment were to be fi nanced by the Turkish Treasury Department. Turkey Treasury ceased such

payments in 1997 and applied to the Supreme Court in Turkey with the argument that this arrangement had no legal basis. A

recent ruling from the Supreme Court has upheld the legislation under Turkish Petroleum Law, however, Treasury have now

applied to the General Assembly of the Supreme Court to overturn the ruling.

Given the uncertainty surrounding the situation, the directors have decided not to include the value of the capital guarantee in

the consolidated accounts.


$ $ $ $

Amount of unrealised foreign exchange losses

pursuant to Capital Guarantee 519,148 1,558,039 - -



44 45


DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Amity Oil Limited, I state that:

1) In the opinion of the directors:

(a) the fi nancial statements and notes of the Company and of the Consolidated

Entity are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s and Consolidated Entity’s

fi nancial position as at 30 June 2003 and of their performance for the year

ended on that date; and

(ii) complying with Accounting Standards and Corporations Regulations

2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its

debts as and when they become due and payable.

On behalf of the Board

A.P. BARTONChairman

West Perth, Western Australia

Perth, 10 September, 2003


46 47


INDEPENDENT AUDIT REPORT


46 47


CORPORATE GOVERNANCE POLICY

1. ADOPTION

This corporate governance policy (the “Policy”) was adopted by the board (the “Board”) of Amity Oil Limited (the “Company”) on 27 June 2003.

2. PURPOSE

The purpose of this Policy is to outline to shareholders, investors, employees and the public the system by which the Company is directed and managed. It is designed to infl uence how the objectives of the Company are set and achieved, how risk is monitored and assessed and how performance is optimised.

3. RESPONSIBILITY AND STRUCTURE OF THE BOARD

3.1 The structure of the BoardThe Company recognises the importance of having a Board comprising of directors with an appropriate range of backgrounds, skills and experience to suit the Company’s current and future strategies and requirements.

The Company considers that the Board should have at least fi ve directors and will aim to have a majority of independent directors (as required) but acknowledge that this may not be possible at all times due to the size of the company. The Board will determine each director’s independence using the guiding principle that an independent director is independent of management and free of any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement.

In applying the guiding principle, the Board will take into consideration the defi nition in the ASX Principles of Good Corporate Governance and Best Practice Recommendations and appropriate materiality thresholds.

The composition of the board is determined by the application of the following principles:

• Persons nominated as non-executive directors shall be expected to have qualifi cations, experience and expertise of benefi t to the company and to bring an independent view to the board’s deliberations. Persons nominated as executive directors must be of suffi cient stature and security of employment to express independent views on any matter.

• The Chairman should ideally be independent, but in any case be non-executive and be elected by the Board based on his suitability for the position.

• All non-executive directors are expected voluntarily to review their membership of the board from time-to-time taking into account length of service, age, qualifi cations and expertise relevant to the company’s then current policy and programme, together with the other criteria considered desirable for composition of a balanced board and the overall interests of the company.

• Executive directors shall be expected to retire from the board on the relinquishment of their executive position with the company.

Under the Company’s Constitution, the minimum number of Directors is three. At each Annual General Meeting, one third of the Directors (excluding the Managing Director) must resign, with Directors resigning by rotation based on the date of their appointment. Directors resigning by rotation may offer themselves for re-election.

3.2 The Board’s roleThe board is responsible for ensuring that the Company is managed in a manner which protects and enhances the interests of its shareholders and takes into account the interests of all stakeholders. The relationship between the board and management is a partnership that is crucial to the Company’s long term success.

The separation of responsibilities between the board and management is clearly understood and respected. The board is responsible for setting the strategic directions for the company, establishing goals for management and monitoring the achievement of these goals. The Managing Director is responsible to the board for the day-to-day management of the Company. The Chairman is to meet regularly with the Chief Executive at least monthly to discuss the general performance of the company and any issues arising.


48 49



The board’s responsibilities and duties include:

• oversight of the company, including its control and accountability systems;• appointing and removing the chief executive offi cer (or equivalent);• ratifying the appointment and, where appropriate, the removal of the chief fi nancial offi cer (or equivalent) and the company

secretary;• input into and fi nal approval of management’s development of corporate strategy and performance objectives;• identifying the principal risks faced by the company and reviewing and ratifying systems of risk management and internal

compliance and control, codes of conduct, compliance with accounting standards and legal compliance;• monitoring the CEO’s performance and implementation of strategy, and ensuring appropriate resources are available;• approving and monitoring the progress of budgets, business plans, major capital expenditure, capital management, and

acquisitions and divestitures;• approving and monitoring fi nancial and other reporting;• monitoring the operational and fi nancial position and performance of the company;• ensuring that fi nancial results are appropriately and accurately reported on a timely basis;• ensuring shareholders and the market are fully informed of all material developments; and• reviewing and approving the remuneration of the CEO and senior management.

4. ETHICAL AND RESPONSIBLE DECISION MAKING

4.1 Code of ConductThe Board has adopted a Code of Conduct for Directors and Offi cers and this is attached as Schedule 2 to this Policy. The Code of Conduct embraces the values of:

• Honesty• Integrity• Enterprise• Excellence• Accountability• Justice• Independence• Equality of shareholder opportunity.

The Board encourages all stakeholders to report unlawful/unethical behaviour and actively promotes ethical behaviour and protection for those who report potential violations in good faith.

4.2 Trading in Securities by Directors and OthersThe Board has adopted two separate and specifi c policies in relation to Directors and offi cers, employees and other potential insiders buying and selling shares. The Trading Policies are attached as Schedule 1 to this Policy.

5. BOARD APPOINTED COMMITTEES

Committees are established to assist the Board in performing its duties. Except for the standing committees, the Board is free to form and disband committees as it sees fi t. The Board has three standing committees, an Audit and Compliance Committee, a Remuneration Committee and a Nomination Committee.

5.1 Audit and Compliance CommitteeThe Audit and Compliance Committee should comprise of three non-executive Directors, the majority of whom are independent. The audit committee should include members who are all fi nancially literate (ie. are able to read and understand fi nancial statements); at least one member who has fi nancial expertise (ie is a qualifi ed accountant or other fi nancial professional with experience of fi nancial and accounting matters); and some members who have an understanding of the industry in which the entity operates.


48 49



The Audit and Compliance Committee’s role is to:

(a) review the Company’s statutory fi nancial statements, including the annual report and ensure the reliability of the fi nancial information presented and compliance with current laws, relevant regulations and accounting standards;

(b) monitor compliance of the accounting records and procedures, in conjunction with the Company’s auditor, on matters overseen by the Australian Securities and Investments Commission, Australian Stock Exchange Limited (“ASX”) and Australian Taxation Offi ce;

(c) oversee compliance with statutory responsibilities;

(d) review internal controls and recommend enhancements, including the appropriateness of an internal audit function;

(e) ensure that Group operating and management reporting procedures, and the system of internal control, are of a suffi ciently high standard to provide timely, accurate and relevant information as a sound basis for management of the Group’s business;

(f) review audit reports and management letters to ensure prompt action is taken by the Company’s management;

(g) via a process, nominate the external auditor and at least annually review the external auditor in terms of their independence and performance in relation to the adequacy of the scope and quality of the annual statutory audit and half-year review and the fees charged; and

(h) action any other business processes or functions which may be referred to it by the Board of Directors.

Where appropriate, the Audit Partner responsible for the audit of the Company may be invited to attend Audit and Compliance Committee meetings. The Audit and Compliance Committee may meet at any time without any members of management being present.

The Board considers that the Audit and Compliance Committee will improve the quality of fi nancial reporting, by reviewing the fi nancial statements of behalf of the Board and increase shareholder confi dence in the credibility and objectivity of the fi nancial statements.

5.2 Remuneration CommitteeThe Remuneration Committee should comprise three non-executive directors, the majority of whom are independent. The Remuneration Committee should be chaired by an independent director. The Remuneration Committee meets at least once every year.

The role of the Remuneration Committee is to ensure that appropriate remuneration policies are in place which are designed to meet the needs of the company and to enhance corporate and individual performance.

The Remuneration Committee is responsible for reviewing and recommending to the board on:

• executive remuneration and incentive policies;• the remuneration packages of senior management;• the company’s recruitment, retention and termination policies and procedures for senior management;• incentive schemes;• superannuation arrangements;• the performance management process in place throughout the organisation and its effectiveness; and• the remuneration framework for directors.

As required by law, the remuneration for each Director is set out in the notes to the Company’s fi nancial reports.

5.3 Nomination CommitteeThe Nomination Committee should comprise of a minimum of three directors, the majority of whom are independent. The Nomination Committee should be chaired by the Chairperson of the Board or an independent director. The Nomination Committee meets at least once every year.


50 51



The Nomination Committee is responsible for the:

• assessment of the necessary and desirable competencies of board members;• review of board succession plans;• evaluation of the board’s performance; and• recommendations for the appointment and removal of directors.

6. CONTINUOUS DISCLOSURE

The Board has a Market Disclosure Policy to ensure the compliance of the Company with the various laws and ASX Listing Rule obligations in relation to disclosure of information to the market. The Chief Executive Offi cer is to ensure that all employees are familiar with and comply with the policy. The Market Disclosure Policy is attached at Schedule 3.

This Market Disclosure Policy is reviewed at least once each year.

7. MANAGEMENT ACCOUNTABILITY

The Board encourages management accountability for the Company’s fi nancial reports by requiring the Chief Executive Offi cer and the Chief Financial Offi cer to state in writing to the board that:

(a) the company’s fi nancial reports present a true and fair view, in all material respects, of the company’s fi nancial condition and operational results and are in accordance with relevant accounting standards;

(b) the statement given above is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board; and

(c) the company’s risk management and internal compliance and control system is operating effi ciently and effectively in all material respects.

8. SHAREHOLDERS

8.1 Communication with shareholdersThe Company places signifi cant importance on effective communication with shareholders. Information is communicated to shareholders through the distribution of the annual and half yearly fi nancial reports, quarterly reports on activities, announcements through the Australian Stock Exchange and the media and the Chairman’s address at the annual general meeting.

The Company posts all reports, Australian Stock Exchange and media releases, copies of signifi cant business presentations and speeches on the company’s website - www.amityoil.com.au

In addition, news announcements and other information are sent by email to all persons who have requested their name to be added to the e-List via our website. If requested, the Company will provide general information by email, facsimile or post.

The Company will, wherever practicable, take advantage of new technologies that provide greater opportunities for more effective communications with shareholders.

8.2 Annual General Meeting

The Company will ensure that the annual general meeting is held in a manner that enables as many shareholders as possible to

attend and encourages effective participation by shareholders.

The Company will request that its external auditor attend the Company’s annual general meeting and be available to answer

shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report. The chairperson of

that meeting will allow a reasonable opportunity for members to ask questions about the company’s performance and operations

and ask questions of the external auditor concerning the conduct of the audit and the preparation and content of the auditor’s report.


50 51



9. RISK MANAGEMENT

The Company is currently completing the introduction of an organisational risk management system. The aim of the system is to

provide the Board (through the Audit and Compliance Committee) with the assurance that the major risks facing the Company have

been identifi ed and assessed by management and that there are controls planned or in place for these risks. The system requires

regular reviews by management in order to ensure that all controls are still relevant and in place and that any changes in the risk

profi les are captured and addressed.

The Board, through the Audit and Compliance Committee, is overseeing the establishment and implementation of the risk

management system, and will be responsible for monitoring and reviewing the performance of the system and in particular the

operational effectiveness of the policies and procedures for identifying and controlling risks.

10. ACCESS TO INFORMATION

Management will supply the board with information in a form, timeframe and quality that will enable the board to effectively

discharge its duties. Directors are entitled to request additional information where they consider that the information supplied by

management is insuffi cient to support informed decision-making.

11. ROLE OF THE COMPANY SECRETARY

Under this Corporate Governance Policy all directors have access to the company secretary and the appointment and removal of the

company secretary is a matter for decision by the board as a whole. The company secretary supports the effectiveness of the board

by monitoring that board policy and procedures are followed, and coordinating the completion and despatch of board agenda and

briefi ng materials. The company secretary is accountable to the board, through the chairperson, on all governance matters.

12. INDEPENDENT PROFESSIONAL ADVICE

Each director has the right, subject to the Chairman’s prior approval, to seek independent professional advice at the Company’s

expense on matters arising in the course of their Board duties.

13. REMUNERATION

As an overall policy, the Company will remunerate in such a way that it:

• motivates directors and management to pursue the long-term growth and success of the company within an appropriate

control framework; and

• demonstrates a clear relationship between key executive performance and remuneration.

13.1 Executives

Executive remuneration packages involve a balance between fi xed and incentive pay, refl ecting short and long-term performance

objectives appropriate to the company’s circumstances and goals. A proportion of executive directors’ remuneration should

be structured in a manner designed to link rewards to corporate and individual performance. This is done by considering the

following remuneration components:

• Fixed remuneration;

• Performance-based remuneration;

• Equity-based remuneration within thresholds set in plans approved by shareholders; and

• Termination payments.


52 53



13.2 Non-executivesa) Non-executive directors are remunerated by way of fees (in the form of cash, non-cash benefi ts or superannuation contributions).

They do not participate in schemes designed for the remuneration of executives.

b) Non-executive directors do not receive options or bonus payments. In the past this has occurred, however this has now ceased.

c) Non-executive directors are not provided with retirement benefi ts other than statutory superannuation.

14. REGULAR BOARD REVIEWS

14.1 Board Composition and PerformanceAt least once a year the Board meets with the specifi c purpose of conducting a review of its composition and performance. This review includes:

a) Determining the appropriate balance of skills and experience required to suit the Company’s current and future strategies;

b) Comparing the requirements in a) above against the skills and experience of current directors;

c) Assessing the independence of each director;

d) Assess the effectiveness of the Board’s Committees;

e) Measuring the contribution and performance of each director based on both measurable and qualitative indicators;

f) Assessing any education requirements or opportunities;

g) Recommending any changes to Board procedures, Committees or the Board composition;

h) Performance of the Managing Director; and

i) Performance of the Company Secretary.

14.2 Corporate GovernanceAt least once a year the Board meets with the specifi c purpose of conducting a review of its corporate governance policy. This review includes:

a) Confi rming the separation of responsibilities between itself and management;

b) Division of responsibilities between the Chief Executive and the Chairman; and

c) Compliance by the Company and its offi cers and employees with the Market Disclosure Policy.

14.3 Meeting without Management.At least twice a year the non-executive directors meet without management present to discuss the following:

a) The performance of management in supplying the board with information in a form, timeframe and quality that enables the board to effectively discharge its duties;

b) Any particular concerns regarding any or all executive directors; and

c) Performance reviews of executive directors.


52 53


CORPORATE GOVERNANCE POLICYSCHEDULE 1

AMITY OIL LIMITED SHARE TRADING POLICYTRADING IN SECURITIES BY DIRECTORS AND OFFICERS

The Board has adopted the following policy in relation to Directors and Offi cers buying and selling shares:

A Director or Offi cer should not deal in the company’s securities:

• in the four weeks prior to, and the 24 hours after the release of the company’s half-yearly results, and preliminary fi nal results to the Australian Stock Exchange (ASX), and in the two weeks prior to and the 24 hours after the annual general meeting of the company;

• when a well, in which the company participates, has been spudded, until the testing programme of that well has been completed with its results released. The Chairman will confi rm by email when trading can commence;

• where the dealing is of a short-term nature;• where the Director or Offi cer is aware of material information that has not yet been released to the market;• where the dealing by its timing, size or regularity will have the effect or likely effect of bringing the company into disrepute

amongst shareholders or potential investors; or• where it is unlawful to do so.

At times other than as set out above or if there is any overlap between the prohibited trading and permitted trading windows referred to above, a Director should advise the Chairman, prior to entering into any dealing in securities. This is for information purposes and does not constitute approval or disapproval.

Generally, there is no objection to a dealing in securities notifi ed in accordance with this procedure if the following factors are satisfi ed:

1) the company is currently in compliance with its continuous disclosure obligations under ASX Listing Rule 3.1;2) the company is not withholding any material information from disclosure by reason of the exceptions to Listing Rule 3.1

(namely under Listing Rules 3.1.1, 3.1.2 and 3.1.3); and3) the Director or Offi cer does not possess any information in relation to the company’s securities which is not generally available

but, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the company’s securities.

In the event of a breach by a Director or Offi cer, a written warning shall be issued to the Director or Offi cer specifying the breach. A warning should be recorded against the Director or Offi cer unless the Director or Offi cer convinces the majority of the Board (excluding the Director) that a warning should not be given.

In the event of a Director or Offi cer receiving a second notice of breach, after a recorded warning, then, unless the Director or Offi cer convinces the majority of the Board (excluding the Director) that a second breach should not be recorded, then the Director (or Offi cer) shall resign immediately from the Board of (or their employment with) the company without any claim other than for unpaid but due fees and documented out of pocket expenses. Neither the company nor the Director or Offi cer will publicly comment on the reasons for the resignation.

Where special or unforeseen circumstances arise, Directors or Offi cers may request approval to deal in the Company’s securities from the Chairman. The Chairman has complete discretion to either approve or not approve the request. The request and the Chairman’s decision should be communicated in writing.


54 55



AMITY OIL LIMITED SHARE TRADING POLICYTRADING IN SECURITIES BY EMPLOYEES AND POTENTIAL INSIDERS

The Board has adopted the following policy in relation to employees and potential insiders (including such parties as advisors and consultants who have access to, or are involved with confi dential information) buying and selling shares:

The employee or potential insider should not deal in the company’s securities:

• in the four weeks prior to the release of the company’s half-yearly results, and preliminary fi nal results to the Australian Stock Exchange (ASX), and in the two weeks prior to the annual general meeting of the company;

• when a well, in which the company participates, has been spudded, until the testing programme of that well has been completed with its results released. The Chairman will confi rm by email when trading can commence;

• where the dealing is of a short-term nature;• where the employee or potential insider is aware of material information that has not yet been released to the market;• where the dealing by its timing, size or regularity will have the effect or likely effect of bringing the company into disrepute

amongst shareholders or potential investors; or• where it is unlawful to do so.

Except where the above applies, there is no objection to dealings 24 hours after the release of the company’s half-yearly results, preliminary fi nal results and annual report to the ASX and after the conclusion of the annual general meeting of the company.

In the event of a breach by an employee or potential insider, a written warning shall be issued to the employee or potential insider specifying the breach. A warning should be recorded against the employee or potential insider unless the employee or potential insider convinces the majority of the Board that a warning should not be given.

In the event of an employee or potential insider receiving a second notice of breach, after a recorded warning, then, unless the employee or potential insider convinces the majority of the Board that a second breach should not be recorded, the employee (or potential insider) will be deemed to be guilty of misconduct and the employee (potential insider’s contract) shall be terminated immediately. Neither the company nor the employee or potential insider will publicly comment on the reasons for the termination.

Where special or unforeseen circumstances arise, an employee or potential insider may request approval to deal in the Company’s securities from the Chairman. The Chairman has complete discretion to either approve or not approve the request. The request and the Chairman’s decision should be communicated in writing.


54 55



CODE OF CONDUCT

1. A director must act honestly, in good faith and in the best interests of the company as a whole.

2. A director has a duty to use due care and diligence in fulfi lling the functions of offi ce and exercising the powers attached to that offi ce.

3. A director must use the powers of offi ce for a proper corporate purpose.

4. A director must recognize that the primary responsibility is to the company’s shareholders as a whole but should, where appropriate, have regard for the interests of all stakeholders of the company.

5. A director must not use information acquired as a director improperly to gain advantage for the director or for someone else or to cause detriment to the company.

6. A director must not misuse the position of director improperly to gain advantage for the director or for someone else or to cause detriment to the company.

7. A director must not give preference to personal interests, or to the interests of any associate or other person, where to do so would be in confl ict with the interests of the company.

8. A director has an obligation to be independent in judgment and actions and to take all reasonable steps to be satisfi ed as to the soundness of all decisions taken by the board of directors.

9. Confi dential information received by a director in the course of the exercise of directional duties remains the property of the company from which it was obtained and it is improper to disclose it, or allow it to be disclosed, unless that disclosure has been authorized by that company, or the person from whom the information is provided, or is required by law.

10. A director should not engage in conduct likely to bring discredit upon the company.

11. A director has an obligation, at all times, to comply with the spirit, as well as the letter, of the law and with the principles of this Code.

12. A director must disclose to all other directors any material personal interest that he or she or any associate may have in a matter that relates to the affairs of the company.

13. When making a business decision, a director must make the decision in good faith for a proper purpose and without material personal interest, inform himself or herself about the subject matter of the decision, and rationally believe the decision to be in the best interests of the company.

14. A director has a duty to account to the company for business opportunities which arise as a result of his or her being a director of the company and to use company resources only for the benefi t of the company.

15. A director may rely on information or advice from company Board committees, offi cers and competent experts and advisers provided he or she does so in good faith and makes an independent assessment of the information or advice.

16. When delegating powers, a director must enquire as to a delegate’s reliability and competency and must reasonably believe in good faith that the delegate will act in conformity with the director’s duties and the company constitution.


56 57



Guidelines for the interpretation of the principles of the Code of ConductThe following guidelines are intended to assist directors in complying with the core principles of the Code of Conduct. They are not meant to be exhaustive and may be added to over time to address issues of importance as they arise.

1. Duties to the Company1.1 Each director should endeavour to ensure that the functions of the board have been specifi ed clearly, are properly understood

and are competently discharged in the interests of the company.

1.2 A director should endeavour to ensure that the management of the company is competent and is devoting its best endeavours in the interests of the company.

1.3 In evaluating the interests of the company, a director should take into account the interests of the shareholders as a whole, but where appropriate or required by law should take into account the interests of creditors and others.

2. Duties to Shareholders2.1 Each director should endeavour to ensure that the company is fi nancially viable, properly managed and constantly improved

so as to protect and enhance the interests of the shareholders.

2.2 A director should seek to ensure that all shareholders or classes of shareholders are treated fairly according to their rights as between each other.

2.3 A director should consider whether any benefi t to be received by the director or an Associated Person is of suffi cient magnitude that the approval of the shareholders should be sought, even though not required by law.

2.4 A director who is appointed to a board at the instigation of a party with a substantial interest in the company, such as a major shareholder or a creditor, should recognise the particular sensitivity of the position. Fiduciary duty requires the director to make a contribution in the interests of the company and the shareholders as a whole and not only in the interest of the nominator. Where obligations to other people or bodies preclude an independent position on an issue the director should disclose the position and seriously consider whether to be absent or refrain from participating in the board’s consideration of the issue (see also Guideline 6.2). Before taking the decision to be absent, a director should consider whether that absence would deprive the board of essential background or experience. The matter should be disclosed to and resolved by the rest of the board.

3. Duties to Creditors3.1 While the obligations of a director are primarily owed to the company (that is to the shareholders as a whole), there are

situations in which it is necessary to evaluate the interests of the creditors. This is particularly so where the company’s fi nancial position is uncertain or where insolvency may be pending. In cases of doubt, a director should, with some urgency, seek professional advice.

4. Duties to other Stakeholders4.1 All companies and their directors must comply with the legal framework governing their operations and must be conscious

of the impact of their business on society. Without limiting in any way the nature of the issues with which the director must be concerned in the running of the business, particular attention should be paid to the environment, questions of occupational health and safety, industrial relations, equal opportunity for employees, the impact of competition and consumer protection rules, and other legislative initiatives that may arise from time to time.

Although the director owes primary duty to the shareholders of the company as a whole, the responsibilities imposed on companies and the director under various Acts of Parliament clearly demand that the director evaluate actions in a broader social context.


56 57



5. Due Diligence5.1 A director should attend all board meetings but where attendance at meetings is not possible appropriate steps should be

taken to obtain leave of absence.

5.2 A director must acquire knowledge about the business of the company, the statutory and regulatory requirements affecting directors in the discharge of their duties to the company, and be aware of the physical, political and social environment in which it operates.

5.3 In order to be fully effective, a director should insist upon access to all relevant information to be considered by the board. This information should be made available in suffi cient time to allow proper consideration of all relevant issues. In the extreme circumstances where information is not provided, the director should make an appropriate protest about the failure on the part of the company to provide the information and if necessary abstain from voting on the particular matter on the basis that there has not been the time necessary to consider the matter properly. Any abstention, and the reasons for it, should be included in the minutes. It may also be appropriate to vote against the motion or move for deferment until proper information is available.

5.4 A director should endeavour to ensure that systems are established within the company to provide the board, on a regular and timely basis, with necessary data to enable them to make a reasoned judgment and so discharge their duties of care and diligence. An internal audit of systems supporting the board should be conducted regularly.

5.5 A director should endeavour to ensure that relations between the board and the auditors are open, unimpeded and constructive. Similarly, the auditors should have direct and unimpeded access to the board. A director should be satisfi ed that the scope of the audit is adequate and that it is carried out thoroughly and with the full co-operation for management and the internal auditors.

5.6 A director should endeavour to ensure that any company on whose board the director sits complies with the law and strives for the highest standards of business and ethical conduct.

5.7 A director should endeavour to ensure that the company complies with the listing and business rules and in particular those rules relating to any benefi ts that may be received by a director or an Associated Person from the company by way of an issue of shares or any other transaction of a similar nature.

5.8 A director from time to time may need expert advice (whether it be legal, fi nancial or some other professional advice and whether it relates to fi duciary or other duties) in order to discharge the director’s duties properly. The director should ensure, to the extent possible, that any advice obtained is independent of the company. In that regard the services of advisers independent of those advising the company may need to be sought. In any case of doubt, separate independent advice should always be sought by the directors on matters that may impact on their position vis-a-vis the company. There should be an agreed procedure for directors in the furtherance of their duties to take independent professional advice if necessary, at the company’s expense.

6. Confl icts of Interest6.1 A director must not take improper advantage of the position as director to gain, directly or indirectly, a personal advantage or

an advantage for any Associated Person, which might cause detriment to the company.

6.2 The personal interests of a director, and those of the director’s family must not be allowed to prevail over those of the company’s shareholders generally. A director should seek to avoid confl icts of interest wherever possible. Full disclosure of any confl ict, or potential confl ict, must be made to the board. In considering these issues, account should be taken of the signifi cance of the potential confl ict for the company and the possible consequences if it is not handled properly.

Where a confl ict does arise, a director must consider whether to refrain from participating in the debate and/or voting on the matter, whether to be absent from discussion of the matter, whether to arrange that the relevant board papers are not sent, or, in an extreme case, whether to resign from the board. Where a director chooses to be absent from the meeting, consideration should be given as to whether expertise that would be contributed by the director is otherwise available. In the case of a continuing material confl ict of interest, a director should give careful consideration to resigning from the board and consider the provisions of Guideline 7.3.


58 59



6.3 An executive director must always be alert to the potential for confl ict of interest between management interests and the director’s fi duciary duties.

6.4 Dealing in the shares of the company may give rise to dangers of breaching the duties of a director and should be undertaken with care. A director should not engage in the short term trading of the company’s shares. The board should lay down precisely when shares can be traded by a director of a company.

6.5 The payment of “success fees” in situations of potential confl ict of interest is unacceptable.

7. Use of Information7.1 A director must not make improper use of information acquired by virtue of the director’s position. This prohibition applies

irrespective of whether the director would gain directly or indirectly a personal advantage or an advantage for any Associated Person or might cause detriment to the company.

7.2 Matters such as trade secrets, processes, methods, advertising and promotional programs, sales and statistics affecting fi nancial results are particularly sensitive and must not be disclosed.

7.3 A director who takes the serious step of resignation on a point of principle should consider whether the reasons for resignation should be disclosed to shareholders (perhaps through the stock exchange) or the appropriate regulator. In deciding whether or not to make public the reasons for resigning and composing any resignation statement, a director should have regard to the following:

(a) the duty not to disclose confi dential information so as to damage the company; and

(b) the duty to act bona fi de in the interests of the company.

7.4 A director who has been nominated to a board by outside parties should recognise the particular sensitivity of the position and should be especially careful not to disclose to the nominators matters that are confi dential unless the prior agreement of the board has been obtained.

7.5 A director must not buy or sell shares as a director of a company while in possession of information which, if disclosed publicly, would be likely materially to affect the price of the company’s shares.

7.6 A director should ensure that any information which is not publicly available and which would have a material effect on the price or value of the company’s securities is not provided to anyone who may be infl uenced to subscribe for, buy or sell shares. Such information includes, but is not limited to:

(a) profi t forecasts;

(b) proposed share issues;

(c) borrowings;

(d) impending takeovers;

(e) impending litigation;

(f) signifi cant changes in operations;

(g) new products;

(h) new discoveries; and

(i) liquidity problems.

7.7 A director has a particular duty in this regard and should ensure that adequate and timely disclosure is made to the Australian Stock Exchange.


58 59


8. Professional Integrity8.1 An executive director should recognise that the position occupied is particularly sensitive. A director must be prepared,

if necessary, to express disagreement with colleagues including the managing director. However, in the absence of a need to express disagreement, an executive director should be prepared to implement the decisions of the board and the instructions of the managing director as a loyal member of the board.

8.2 If there is any doubt whether a proposed course of action is inconsistent with a director’s fi duciary duties then the course of action should not be supported. Independent advice should be sought as soon as possible to clarify the issue.

8.3 When a director feels so strongly as to be unable to acquiesce in a decision of the board, some or all of the following steps should be considered:

(a) making the extent of the dissent and its possible consequences clear to the board as a means of seeking to infl uence the decision;

(b) asking for additional legal, accounting or other professional advice;

(c) asking that the decision be postponed to the next meeting to allow time for further consideration and informal discussion;

(d) tabling a statement of dissent and asking that it be minuted;

(e) writing to the Chairman, or all members of the board, and asking that the letter be fi led with the minutes; and

(f) if necessary, resign, and consider advising the appropriate regulator.

8.4 ‘Opinion shopping’ and the search for loopholes in the law is unacceptable.

Defi nitions of terms

Associated Person in relation to a director includes any spouse (including a de facto spouse), parent, child, brother or sister of the director or any company, corporation, partnership, trust or other entity owned or controlled by the director or in which the director has a material personal interest within the meaning of the Corporations Act.

Directors includes all directors whether executive or non-executive.

Executive Director means a director who is employed by the company and is part of management.



60 61



MARKET DISCLOSURE POLICY1. AdoptionThis market disclosure policy (the “Market Disclosure Policy”) was adopted by the Board on 27 June 2003.

2. Commitment to market disclosureAmity Oil Limited (“Amity” or “Company”) is committed to:

(a) ensuring that shareholders and the market are provided with timely and balanced information about its activities;

(b) complying with the general and continuous disclosure principles contained in the Australian Stock Exchange Limited (“ASX”) Listing Rules and the Corporations Act 2001; and

(c) ensuring that all market participants have equal opportunities to receive externally available information issued by Amity.

3. Material information3.1 All management and staff must inform the Chief Executive Offi cer or, in his absence, the Company Secretary of any

potentially material information or proposal as soon as practicable after the manager becomes aware of that information.

3.2 Information is material if it is likely that the information would infl uence investors in deciding whether to buy or sell Amity securities.

3.3 Material information need not be disclosed if all of the following are satisfi ed:

(a) a reasonable person would not expect the information to be disclosed;

(b) the information is confi dential and the ASX has not formed the view that the information has ceased to be confi dential; and

(c) one of the following applies:(i) it would breach the law to disclose the information;(ii) the information concerns an incomplete proposal or negotiation;(iii) the information comprises matters of supposition or is insuffi ciently defi nite to warrant disclosure;(iv) the information is generated for internal management purposes; or(v) the information is a trade secret.

3.4 In situations where it is not clear whether certain information is material, the Board has appointed a disclosure committee (the “Disclosure Committee”), which is responsible for making decisions about what information is material.

3.5 Subject to and in accordance with the provisions of ASX Listing Rule 3.1, the Chairman and Chief Executive Offi cer must (following approval of the Disclosure Committee if required) immediately notify the market, via an announcement to the ASX, of any information concerning Amity that the Chief Executive Offi cer and/or Chairman believes a reasonable person would expect to have a material effect on the price or value of Amity securities. The Company Secretary is the Authorised Offi cer for Listing Rule purposes.

3.6 Amity must not, under any circumstances, disclose material information to the market prior to the ASX releasing the information to the market. If unreleased material information is unintentionally communicated, by Amity or an employee, in any forum, the Chief Executive Offi cer, or in his absence, the Company Secretary, must be advised immediately so the market can be informed.


60 61



4. False Market4.1 Leaks, rumours and inadvertent disclosure

The Company’s general policy is not to respond to reports or rumours about it published by analysts, fund managers or reporters. From time to time, however, it may be necessary to respond to the unauthorised or selective disclosure of information or market rumours concerning the Company, particularly where the information or rumour is having, or likely to have, an impact on the price of the Company’s securities. Such an event may trigger an enquiry from the ASX under Listing Rule 3.1B.

To ensure a consistent response from the Company to such occurrences, all instances of unauthorised or selective disclosure or rumours should be reported to the Chief Executive Offi cer or Company Secretary as soon as they become known.

4.2 Assessment of the Company’s responseWhen a matter is reported, the Chief Executive Offi cer or Company Secretary will discuss the signifi cance of the matter and possible disclosure responses with the Chairman.

4.3 Disclosure of informationIf the information the subject of the unauthorised or selective disclosure is considered material, or there is a signifi cant market rumour concerning the Company that is having or is likely to have an impact on the price of the Company’s securities, the Company Secretary will co-ordinate the development of a disclosure response to ASX.

The Company Secretary will circulate the draft announcement to the Board and relevant management and external advisers for review. Once the review process has been completed, the Company Secretary will disclose the information to ASX.

4.4 Referral of enquiriesAny queries by ASX, the media, analysts, brokers, shareholders or the public about a market rumour concerning the Company or regarding information that is subject to this Disclosure Policy must be referred to the Chief Executive Offi cer or, in his absence, the Company Secretary.

The only persons authorised to speak to the media or any other person outside the company about market rumours concerning the Company or about information that is subject to this Disclosure Policy are the Chairman or the Chief Executive Offi cer or those who are authorised by the Chairman or the Chief Executive Offi cer from time to time.

5. Release of reports as required by the Corporations Act and ASX Listing RulesAmity must lodge, in a timely fashion, the following reports if and as required by the ASX Listing Rules and the Corporations Act 2001:

(a) the annual report;(b) the half yearly report and accounts;(c) the preliminary fi nal report;(d) the annual audited fi nancial statements;(e) the quarterly cash fl ow report; and(f) any other reports required to be lodged under the ASX Listing Rules or the Corporations Act 2001.

The Company will include commentary on its fi nancial results to enhance the clarity and balance of reporting. This commentary will include information needed by an investor to make an informed assessment of the entity’s activities and results.

6. Information briefi ngs with analysts6.1 Amity may provide background and technical information in one-on-one briefi ngs with analysts, fund managers, brokers

or institutional investors to assist them in their understanding of Amity’s business activities. The Chief Executive Offi cer must review any written presentation material prepared for meetings prior to the meeting to determine whether all information has previously been disclosed to the market or may require disclosure.

6.2 A one-on-one briefi ng includes any communication between Amity and a broker, analyst, fund manager, or institutional investor including phone calls.


62 63


6.3 No previously undisclosed material information may be disclosed at these meetings. If an employee considers thatpreviously undisclosed material information has been disclosed, they must immediately inform the Company Secretary so that the previously undisclosed information can be released to the market.

7. Release of information to the public7.1 Only the Chairman, the Chief Executive Offi cer and the Executive Director are authorised to provide comment about the

Company, or speak on behalf of Amity, to the media. Any other employees providing comment on the Company must fi rst obtain the authorisation of the Chief Executive Offi cer or, in his absence, the Chairman.

7.2 Amity employees must not respond to any market speculation or rumours about the Company, unless authorised by the Chief Executive Offi cer or, in his absence, the Chairman to do so.

8. ProcedureThe Chief Executive Offi cer is responsible for the implementation of the Market Disclosure Policy.

9. Review of Procedure9.1 The Disclosure Committee must consist of the Chief Executive Offi cer, the Company Secretary and at least one non-executive

director, preferably the Chairman.

10. Disciplinary actionBreaches of this policy may lead to disciplinary action being taken against employees, including dismissal in serious cases.



62 63


SHAREHOLDER INFORMATIONAS AT 1 OCTOBER 2003

TWENTY LARGEST SHAREHOLDERS

Ordinary Shares Number of Shares % of issued shares

1 National Nominees Limited 16,533,229 10.41

2 Yandal Investments Pty Ltd 10,000,000 6.30

3 Citicorp Nominees Pty Limited CFS

W/Sale GBLRES Fund A/C 8,300,000 5.23

4 Turk Enerji Grubu Pty Ltd 7,650,000 4.82

5 ANZ Nominees Limited 6,106,003 3.84

6 Westpac Custodian Nominees 5,215,325 3.28

7 V Cyrtha Corporation N.V. 5,100,000 3.21

8 Merrill Lynch (Australia) 3,811,583 2.40

9 Citicorp Nominees Pty Ltd 3,574,730 2.25

10 Link Traders (Aust) Pty Ltd 3,007,894 1.89

11 Inglewood Lodge Pty Ltd 2,500,000 1.57

12 Athabasca Pty Ltd 1,900,000 1.20

13 Allchurch Peter Donald 1,768,497 1.11

14 Perpetual Custodians Limited 1,581,760 1.00

15 Custodial Commonwealth 1,484,983 0.93

16 A Eikofi n B V B 1,340,000 0.84

17 L & E Fisher Nominees Pty Ltd 1,234,855 0.78

18 Investment Holdings Pty Ltd 1,200,000 0.76

19 Universal Oil (Australia) 1,140,000 0.72

20 Laissez Faire Et Cie Pty Ltd 1,125,000 0.71

Total 84,573,859 53.25

Distribution of Shareholdings Number of Shareholders Number of Shares Held

1 - 1,000 896 419,723

1,001 - 5,000 1,625 4,961,262

5,001 - 10,000 881 7,131,058

10,001 - 100,000 943 27,806,412

100,001 - and over 144 118,521,080

Total 4,489 158,839,535

Substantial Shareholders Number of Shares % of Issued Shares

Anthony Barton (personal and relevant interests) 15,979,735 10.06

Yandal Investments Pty Ltd 10,000,000 6.30

Commonwealth Bank of Australia 8,179,000 5.15

Unmarketable ParcelsThere were 427 members holding less than a marketable parcel of shares in the Company.

Voting RightsVoting rights of members are governed by the Company’s Constitution. In summary, on a show of hands, every member

present in person or by proxy shall have one vote and in the event of a poll every such member shall be entitled to one vote for

each ordinary fully paid share held.


64 65


SHAREHOLDER INFORMATIONAS AT 1 OCTOBER 2003

TWENTY LARGEST OPTIONHOLDERSExpiring 4 September 2004

Options (Listed) for Ordinary Shares Number of Options % of Issued Options

1 Cruickshank Katharine Jane 5,000,000 13.08

2 National Nominees Limited 3,216,498 8.42

3 Yandal Investments Pty Ltd 1,875,000 4.91

4 V Cyrtha Corporation N.V 1,399,920 3.66

5 Valware Pty Limited 1,300,000 3.40

6 ANZ Nominees Limited 1,192,073 3.12

7 Link Traders (Aust) Pty Ltd 751,974 1.97

8 Newport Securities Pty Ltd 578,750 1.51

9 Kaysu Holdings No. 2 Pty Ltd 494,883 1.29

10 Paton, Anthony James 441,300 1.15

11 Westpac Custodian Nominees 440,688 1.15

12 Cheng, Edward Gang 400,000 1.05

13 Northgem Pty Ltd 396,800 1.04

14 Serenety Holdings Pty Ltd 381,000 1.00

15 83 Arrandale Pty Ltd 325,000 0.85

16 Custodial Commonwealth 303,746 0.79

17 Cridland George William 300,000 0.78

18 Overnight Nominees Pty Ltd 300,000 0.78

19 Cheng Edward Gang 269,500 0.71

20 Bearded Rooster Nominees 225,000 0.59

Total 19,592,132 51.25

Distribution of Optionholdings Number of Optionholders Number of Options Held

1 - 1,000 1,691 657,407

1,001 - 5,000 1,236 2,962,586

5,001 - 10,000 213 1,616,367

10,001 - 100,000 293 9,296,829

100,001 - and over 48 23,688,148

Total 3,481 38,221,337


64 65


OIL AND GAS INTERESTSAS AT 1 OCTOBER 2003

Interest or right to

acquire%

Interest or right to

acquire%

AUSTRALIA TURKEY

WESTERN AUSTRALIA Petroleum Exploration Licence AR/AON/XIV/3580 90.000

Exploration Permit 325 5.000 Petroleum Exploration Licence AR/AON/XIV/3581 90.000



Exploration Permit 408 47.957 Petroleum Exploration Licence AR/AON/XIII/3594 80.000

Exploration Permit Application 7/98-9

(North Perth Basin) 100.000

Petroleum Exploration Licence AR/AON/XIII/3586 80.000

Petroleum Exploration Licence AR/AON/XIII/3587 80.000

Petroleum Exploration Licence AR/AON/I/3589 50.000

NORTHERN TERRITORY Petroleum Exploration Licence AR/AON/XIII/3595 80.000

Exploration Permit Application 74 76.500 Petroleum Exploration Licence AR/AON/XIII/3596 80.000

Retention Licence 1 85.000 Petroleum Exploration Licence AR/AON/I/3599 100.000

Petroleum Exploration Licence AR/AOI/I/3648 50.000

VICTORIA Petroleum Exploration Licence AR/TPO/I/3791 50.000

Exploration Permit PEP 138

(Royalty Interest) 5.000

Petroleum Exploration Licence AR/TPO/I/3792 50.000



Petroleum Exploration Licence AR/AOI/II/3740 100.000

Petroleum Exploration Licence AR/AOI/II/3741 100.000

Petroleum Exploration Licence AR/AOI/IV/3742 100.000

Petroleum Exploration Licence AR/AOI/IV/3743 100.000

Petroleum Exploration Licence AR/AOI/III/3735 100.000





Petroleum Exploration Licence AR/AOI/X/3695 100.000




USA PRODUCTION LEASES

County Prospect Acreage Well NameWorking Interest

%

Net Revenue Interest

%

Hugoton Area - Oklahoma

Texas Okan 138 McMurray “A” #1-16 3.035 2.565

AMITY OIL LIMITED AND CONTROLLED ENTITIES

ACN 009 230 835

COMPANY DIRECTORY

DIRECTORS

Anthony Barton, Non-Executive ChairmanFraser Campbell, Non-Executive DirectorRichard Elliott, Non-Executive DirectorGavin Rezos, Non-Executive DirectorHoward McLaughlin, Managing Director& Chief Executive Offi cer

COMPANY SECRETARY

David Rich

REGISTERED OFFICE

2nd Floor, 18 Richardson StreetWest Perth, WA, 6005Telephone: +61 8 9324 2177Facsimile: +61 8 9324 1224Email: [email protected]: www.amityoil.com.au

AUDITORS

Ernst & YoungLevel 34, Central Park152 St Georges TerracePerth WA 6000

SOLICITORS

Allens Arthur RobinsonLevel 840 The EsplanadePerth WA 6000

BANKERS

Bank of Western Australia Ltd1215 Hay StreetWest Perth, WA, 6005

SHARE REGISTRY

Security Transfer Registrars Pty Ltd770 Canning HighwayApplecross WA 6153Telephone: + 61 8 9315 0933Facsimile: + 61 8 9315 2233

AMITY OIL LIMITEDANNUAL REPORT 30 JUNE 2003

ACN 009 230 835

For more information & images visitwww.amityoil.com.au

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