Notes To The Financial Statements: For The Year Ended 30 June 2010

37 AURORA OIL & GAS LIMITED | 2010 Annual Report
1. Summary of signicant accounting policies

The principal accounting policies adopted in the preparation of the nancial statements are set out below.
These policies have been applied consistently to all the years presented, unless otherwise stated. The nancial
statements consist of consolidated nancial statements for Aurora Oil & Gas Limited and its subsidiaries (Group
or Consolidated Entity).
(a) Basis of preparation
These general purpose nancial statements have been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues
Group Interpretations and the Corporations Act 2001.
Compliance with International Financial Reporting Standards
The consolidated nancial statements comply with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the
nancial statements of Aurora Oil & Gas Limited comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
Early adoption of standards
AASB 9 Financial instruments
The Company has early adopted AASB 9 Financial Instruments, with effect 1 July 2009, as the Directors believe
the revised accounting policy for fair value adjustments to these investments more reliably presents the nancial
position of the Group. AASB 9 allows, and the Group has made, an irrevocable election on initial recognition to
present gains and losses on investments in equity instruments that are not held for trading in other comprehensive
income. No further impairment of the available for sale asset will be recognised.
AASB 9 does not require Companies that adopt the Standard for reporting period beginning before 1 January
2012 to restate prior periods, however, the opening retained earnings are restated to recognise the effects of the
adoption of AASB 9 on prior periods. The nancial effect of this has been to decrease the opening retained losses
at 1 July 2009 by $6,289,000 and decrease reserves. This change in accounting policy was therefore applied
prospectively and has not had a material impact on prior period earnings per share.
Historical cost convention
These nancial statements have been prepared under the historical cost convention, as modied by the revaluation
of available-for-sale nancial assets.
Critical accounting estimates and signicant judgements
The preparation of nancial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the Groups accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are signicant to
the nancial statements are disclosed in note 2.
Financial statement presentation
The Group has applied the revised AASB 101 Presentation of Financial Statements, which became effective as
of 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive
income and a statement of changes in equity. All non-owner changes in equity must now be presented in the
statement of comprehensive income. As a consequence, the Group had to change the presentation of its nancial
statements. Comparative information has been re-presented so that it is also in conformity with the revised
standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on loss
per share.
Notes to the Financial Statements
for the year ended 30 June 2010
1. Summary of signicant accounting policies (contd)
(b) Principles of consolidation
(i) Subsidiaries
The consolidated nancial statements incorporate the assets and liabilities of Aurora Oil & Gas Limited and its
subsidiaries as at 30 June 2010 and the nancial performance of the Company and its subsidiaries for the year
then ended.
Subsidiaries are all those entities (including special purpose entities) over which the group has the power to
govern the nancial and operating policies, generally accompanying a shareholding of more than one-half of the
voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Company controls another entity.
Subsidiaries are consolidated from the date on which control is transferred to the Company. They are de-
consolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.
Intercompany transactions, balances and unrealised gains on transaction between Group entities are eliminated.
Unrealised losses are eliminated unless the transaction provides evidence of the impairment of the assets
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Consolidated Entity.
Investments in subsidiaries are accounted for at cost in the individual nancial statements of the Company.
(ii) Joint ventures
The Groups proportionate interests in the assets, liabilities and expenses of a joint venture activity have been
incorporated in the nancial statements under the appropriate headings. Details of joint ventures are set out in
note 22.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identied as the Board of Directors.
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment
Reporting. AASB 8 requires a management approach under which segment information is presented on the
same basis as that used for internal reporting purposes. In addition, the segments are reported in a manner that
is consistent with the internal reporting provided to the chief operating decision makers.
The Board of Directors review internal management reports on a monthly basis that is consistent with the
information provided in the statement of comprehensive income, statement of nancial position and statement of
cash ows. As a result no reconciliation is required, because the information as presented is used by the Board
to make strategic decisions.
Management has determined, based on the reports reviewed by the Board of Directors and used to make strategic
decisions, that the Group has one reportable segment being oil & gas exploration and production in the United
States of America. The Groups management and administration ofce is located in Australia. There has been
no other impact on the measurement of the companys assets and liabilities. Comparative information has been
restated.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the nancial statements of the Group are measured using the currency of the primary economic
environment in which the Group operates (the functional currency). The consolidated nancial statements are
presented in Australian dollars, which is Auroras functional and presentation currency.
The functional currency of US subsidiaries has changed. As from 1 July 2009 the functional currency was
changed to USD, primarily because the trend in the source currency of the majority of the costs of the US
subsidiaries from AUD to USD, was not considered temporary. Cash receipts from the US operations, which
comprises 100% of revenue from continuing operations, is received in USD. The majority of US subsidiaries
payments, including operating expenses and income tax, are also payable in USD.
The change was implemented by translating the assets and liabilities of the US subsidiaries at spot rates at the
date of the change and application of accounting for subsidiaries with a different functional currency being
applied prospectively.
(ii) Translation and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the
dates of the transactions.
Foreign currency monetary assets and liabilities at the reporting date are translated at the exchange rate existing
at reporting date.
Exchange differences are recognised in prot or loss in the period in which they arise.
(iii) Group companies
The results and nancial position of all the Group companies that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
assets and liabilities for each statement of nancial position presented are translated at the closing rate at the
date of the statement of nancial position,
income and expense for each statement of comprehensive income are translated at average exchange rates,
and
exchange differences arising on translation of intercompany payables and/or receivables of foreign operations,
in a currency that is not the same as the parents functional currency, are recognised in the foreign currency
translation reserve, as a separate component of equity. These differences are only recognised in the prot or
loss upon disposal of the foreign operations.
(e) Revenue recognition
(i) Oil and Gas Sales
Revenue from the sale of hydrocarbons is recognised when the Consolidated Entity has transferred to the buyer
the signicant risks and rewards of ownership of the goods. Generally this will occur when the hydrocarbons are
transferred into a third partys sales pipeline.
(ii) Other revenue
Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate
basis that takes into account the effective yield on the nancial asset.
(iii) Service income
Revenue from the provision of services is recognised when the Consolidated Entity has a legally enforceable right
to receive payment for services rendered.
(f) Income tax
The income tax expense/(benet) for the period is the tax payable on the current periods taxable income/(loss)
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated nancial statements. However, the
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor taxable prot
or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted at the reporting date and are expected to apply when the related deferred income tax assets is realised
or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in controlled entities where the Company is able to control the timing of the reversal of
the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in other comprehensive income /
equity are also recognised directly in other comprehensive income / equity.

(g) Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to
sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identiable cash inows which are largely independent of the cash inows from other
assets or groups of assets (cash-generating units). Non-nancial assets, other than goodwill, which have been
previously impaired, are reviewed for possible reversal of the impairment at each reporting date.
(h) Cash and cash equivalents
For cash ow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held
at call with nancial institutions and other short-term highly liquid investments with original maturities of three
months or less.
(i) Financial assets
Classication
The Group classies its nancial assets in the following categories: available-for-sale nancial assets, and
loans and receivables. The classication depends on the purpose for which the nancial assets were acquired.
Management determines the classication of its nancial assets at initial recognition.
(i) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest rate method, less provision for impairment. Trade receivables are generally due for
settlement within 30 days.
(ii) Financial assets at fair value through other comprehensive income
At initial recognition the Group may make an irrevocable election (on an instrument-by-instrument basis) to
recognise the change in fair value of investments in equity instruments in other comprehensive income. This
election is permitted for equity instruments that are not held for trading purposes.
These instruments are initially recognised at fair value plus transaction costs. Subsequent to initial recognition,
they are measured at fair value and changes therein are recognised in other comprehensive income and
presented within equity in the fair value reserve. When an instrument is derecognised, the cumulative gain or loss
is transferred directly to retained earnings and is not recognised in prot or loss.
Dividends or other distributions received from these investments are still recognised in prot or loss as part of
nance income.
Change in accounting policy
The Group early adopted AASB 9 Financial Instruments for the rst time from 7 December 2009, being the
earliest date it was available for adoption in Australia.
AASB 9 species the basis for classifying and measuring nancial assets. Classication is determined based on
the Groups business model and the contractual cash ow characteristics of the nancial assets. Financial assets
will be classied as either amortised cost or fair value. AASB 9 replaces the classication and measurement
requirements relating to nancial assets in AASB 139 Financial Instruments: Recognition and measurement
(AASB 139).
(i) Financial assets (contd)
A nancial asset is measured at amortised cost if the following conditions are met:
the objective of the Groups business model in relation to those instruments is to hold the asset to collect the
contractual cash ows; and
the contractual cash ows give rise, on specic dates, to cash ows that are solely payments of principal and
interest on the principal outstanding.
If these criteria are not met then the nancial asset must be classied as fair value through prot and loss except
as discussed below. Alternatively, similar to the requirements in AASB 139, the Group may irrevocably elect at
inception to classify a nancial asset as fair value through prot or loss to reduce an accounting mismatch.
Amortised cost is still measured using the effective interest rate method and amortised cost assets must be
assessed for impairment losses. There are no changes to the measurement method for fair value through prot
or loss requirements in AASB 139.
Under AASB 9 only equity instruments that are not held for trading are able to be classied as fair value through
other comprehensive income rather than fair value through prot or loss. On disposal, in contrast to AASB 139,
the cumulative gains or losses recognised in equity over the period the Group held the equity instrument are
transferred directly to retained earnings and are not permitted to be recognised in prot or loss. Equity instruments
fair valued through other comprehensive income are no longer required to be assessed for impairment.
The change in accounting policy was applied retrospectively only to those nancial assets that the Group held
at the date of initial application of AASB 9 (7 December 2009) or acquired subsequent to that date. Financial
instruments disposed of prior to 7 December 2009 were accounted for under AASB 139. In accordance with the
transitional provisions of AASB 9, the classication of nancial assets that the Group held at the date of initial
application was determined based on conditions that existed at that date.
The Group has determined that it is impracticable to apply the effective interest rate method retrospectively
to those instruments that are now required to be carried at amortised cost. In accordance with the traditional
provision in AASB 9, the Group has assumed that the fair value of the nancial assets at the end of each
comparative period is its amortised cost, and the effective interest method will be applied prospectively from the
date of initial application.
Recognition and de-recognition
Regular purchases and sales of nancial assets are recognised on trade date the date on which the Group
commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for
all nancial assets not carried at fair value through prot or loss. Financial assets are derecognised when the
rights to receive cash ows from the nancial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Subsequent measurement
Loans and receivables are carried at amortised cost less impairment using the effective interest method.
Details on how the fair value of nancial instruments is determined are disclosed in note 2(a)(iv).
Impairment
The Group assesses at each balance date whether there is objective evidence that a nancial asset or group of
nancial assets is impaired.
If there is evidence of impairment for any of the Groups nancial assets carried at amortised cost, the loss is
measured as the difference between the assets carrying amount and the present value of estimated future cash
ows, excluding future credit losses that have not been incurred. The cash ows are discounted at the nancial
assets original effective interest rate. The loss is recognised in the prot or loss.
(j) Property, plant and equipment (other than oil & gas properties)
Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes
expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of
the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to
their present value as at the date of acquisition.
Depreciation is provided on property, plant and equipment. Depreciation is calculated on a straight line basis so
as to write down the net cost or fair value of each asset over its expected useful life to its estimated residual value.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual
reporting period.
The following estimated useful lives are used in the calculation of depreciation:
Fixtures and ttings 5 years
Plant and equipment 5 - 15 years
(k) Non-operator interests in oil & gas properties
Exploration & evaluation expenditure
The Groups accounting policy for the cost of exploring and of evaluating discoveries is based on the successful
efforts method of accounting.
This approach is strongly linked to the Companys oil and gas reserves determination and reporting process and
is considered to most fairly reect the results of the Companys exploration and evaluation activity because only
assets with demonstrable value are carried on the balance sheet.
Once a well commences producing commercial quantities of oil and gas, capitalised exploration and evaluation
costs are transferred to Oil & Gas Properties Producing Projects and amortisation commences.
This method allows the costs associated with the acquisition, exploration and evaluation of a prospect to be
aggregated on the balance sheet and matched against the benets derived from commercial production once
this commences.
(k) Non-operator interests in oil & gas properties (contd)
Costs
Exploration and evaluation expenditure is accounted for in accordance with the area of interest method. Exploration
lease acquisition costs relating to greeneld oil and gas exploration provinces are expensed as incurred while the
costs incurred in relation to established or recognised oil and gas exploration provinces are initially capitalised and
then amortised over the shorter term of the lease or the expected life of the project.
All other exploration and evaluation costs, including general permit activity, geological and geophysical costs and
new venture activity costs are charged as expenses as incurred except where:
the expenditure relates to an area of interest that, at balance date, no assessment of the existence or otherwise
of economically recoverable reserves has been made; or
where there exists an economically recoverable reserve, and it is expected that the capitalised expenditure will
be recouped through successful exploitation of the area of interest, or alternatively, by its sale.
Areas of Interest are recognised at eld level. Subsequent to the recognition of an area of interest, all further
costs relating to the area of interest are initially capitalised. Each area of interest is reviewed at least bi-annually
to determine whether economic quantities of reserves exist or whether further exploration and evaluation work is
required to support the continued carry forward of capitalised costs. To the extent it is considered that the relevant
expenditure will not be recovered, it is written off.
The costs of drilling exploration wells are initially capitalised pending the results of the well. Costs are expensed
where the well does not result in the successful discovery of economically recoverable hydrocarbons. To the
extent that it is considered that the relevant expenditure will not be recovered, it is immediately expensed.
Transfer of capitalised exploration and evaluation expenditure to producing projects (oil and gas properties)
When a well comes into commercial production, accumulated exploration and evaluation expenditure for the
relevant area of interest is transferred to producing projects and amortised on a units of production basis.
Prepaid drilling and completion costs
Where the Company has a non-operator interest in an oil or gas property, it may periodically be required to make
a cash contribution for its share of the operators drilling and/or completion costs, in advance of these operations
taking place.
Where these contributions relate to a prepayment for exploratory or early stage drilling activity, prior to a decision
on the commerciality of a well having been made, the costs are capitalised as prepaid drilling costs within
Exploration and Evaluation and/or Development Projects.
Where these contributions relate to a prepayment for well completion, these costs are capitalised as prepaid
completion costs within exploration and evaluation.
As the operator noties the Company as to how funds have been expended, the costs are reclassied from
prepaid costs to the appropriate expenditure category.
Amortisation and depreciation of producing projects
The Consolidated Entity uses the units of production (UOP) approach when amortising and depreciating eld-
specic assets. Using this method of amortisation and depreciation requires the Consolidated Entity to compare
the actual volume of production to the reserves and then to apply the rate of depletion to the carrying value of
depreciable asset.
Capitalised exploration and evaluation costs relating to commercially producing wells are depreciated/amortised
using the UOP basis once commercial quantities are being produced within an area of interest. The reserves used
in these calculations are reviewed at least annually.
Future restoration costs
The Consolidated Entitys aim is to avoid or minimise environmental impact resulting from its operations.
Provision is made in the balance sheet for restoration of operating locations. The estimated costs are capitalised
as part of the cost of the related project where recognition occurs upon acquisition of an interest in the operating
locations. The costs are then recognised as an expense on a unit of production basis during the production phase
of the project.
Work scope and cost estimates for restoration are reviewed annually and adjusted to reect the expected cost of
restoration.
Restoration costs are based on the latest estimated future costs, determined on a discounted basis, which are
re-assessed regularly and exclude any allowance for potential changes in technology or material changes in
legislative requirements.
The Group accounts for changes in cost estimates on a prospective basis.
(l) Trade and other payables
Trade payables and other accounts payable are recognised when the Consolidated Entity becomes obliged to
make future payments resulting from the purchase of goods and services. They are initially recognised at fair
value and subsequently at amortised cost using the effective interest rate method.
(m) Employee benets
Provision is made for benets accruing to employees in respect of employee entitlements when it is probable that
settlement will be required and these benets can be measured reliably.
Provisions made in respect of employee benets expected to be settled within 12 months are measured at their
nominal values using the remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee entitlements which are not expected to be settled within 12 months are
measured as the present value of the estimated future cash outows to be made by the consolidated entity in
respect of services provided by employees up to reporting date.
(n) Provisions
Provisions are recognised when the Consolidated Entity has a present obligation as a result of a past event, the
future sacrice of economic benets is probable, and the amount of the provision can be reliably estimated.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash ows estimated to settle the present obligation, its carrying amount is the
present value of those cash ows.
When some or all of the economic benets required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount
of the receivable can be measured reliably.
An onerous contract is considered to exist where the Consolidated Entity has a contract under which the
unavoidable cost of meeting the contractual obligations exceed the economic benets estimated to be received.
Present obligations arising under onerous contracts are recognised as a provision to the extent that the present
obligation exceeds the economic benets estimated to be received.
(o) Borrowings
Borrowings are initially recognised at fair value net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Borrowings are classied as current liabilities unless the Consolidated Entity has
an unconditional right to deferred settlement for at least 12 months after the reporting date. Costs incurred in
establishing borrowings are expensed immediately.
(p) Contributed equity
Ordinary shares are classied as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the
acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
If the Company reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments
are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the prot
or loss and the consideration paid, including any directly attributable incremental costs (net of income taxes), is
recognised directly in equity.
(q) Borrowing costs
Borrowing costs are expensed in the period in which they are incurred, except to the extent to which they are
directly attributable to the acquisition, construction or production of a qualifying asset and it is probable that they
will result in future economic benets to the entity and the costs can be measured reliably.
(r) Good and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the
cost of acquisition of an asset or as part of an item of expense; or
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables. Cash ows are included in the cash ow statement on a gross basis. The GST component of cash
ows arising from investing and nancing activities which is recoverable from, or payable to, the taxation authority
is classied as operating cash ows.
(s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the prot (or loss) attributable to equity holders of the company,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the nancial year, adjusted for bonus elements in ordinary shares issued during
the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the gures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other nancing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation
to dilutive potential ordinary shares.
(t) Share-based payments
The Group provides benets to its employees and consultants (including key management personnel) in the form
of share-based payments, whereby services are rendered partly or wholly in exchange for shares or rights over
shares. These benets are awarded at the discretion of the board, or following approval by shareholders (equity-
settled transactions).
The costs of these equity-settled transactions are measured by reference to the fair value of the equity instruments
at the date on which they are granted. The fair value is determined using a risked statistical analysis, further
details of which are disclosed in note 18.
The costs of these equity-settled transactions is recognised, together with a corresponding increase in equity, over
the period in which the performance and / or service conditions are fullled (the vesting period), ending on the
date on which the relevant employees become fully entitled to the equity instrument (vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the income statement is the product of
(i) the fair value at grant date of the award; (ii) the current best estimate of the number of equity instruments that
will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and
the likelihood of non-market performance conditions being met and (iii) the expired portion of the vesting period.
(t) Share-based payments (contd)
The charge to the income statement for the period is the cumulative amount as calculated above less the amounts
already charged in previous periods. There is a corresponding credit to equity.
Until an equity instrument has vested, any amounts recorded are contingent and will be adjusted if more or fewer
equity instruments vest than were originally anticipated to do so. Any equity instrument subject to a market
condition is considered to vest irrespective of whether or not that market condition is fullled, provided that all
other conditions are satised.
If the terms of an equity-settled award are modied, as a minimum, an expense is recognised as if the terms had
not been modied. An additional expense is recognised for any modication that increases the total fair value of
the share based payment arrangement, or is otherwise benecial to the recipient of the award, as measured at
the date of modication.
If an equity-settled transaction is cancelled (other than a grant cancelled by forfeiture when the vesting conditions
are not satised), it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for
the award is recognised immediately. However, if a new equity instrument is substituted for the cancelled award
and designated as a replacement award on the date that it is granted, the cancelled and new equity instrument
are treated as if they were a modication of the original award, as described in the preceding paragraph.
The dilutive effect, if any, of outstanding options is reected as additional share dilution in the computation of
diluted earnings per share (see note 21).
(u) Rounding of amounts
The Company is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments
Commission, relating to the rounding off of amounts in the nancial statements. Amounts in the nancial
statements have been rounded off in accordance with the Class Order to the nearest thousand dollars, or in
certain cases, the nearest dollar.
(v) New accounting standards and interpretations
The Group has chosen not to early-adopt any accounting standards that have been issued, but are not yet
effective. Set out below is a summary of issued accounting standards, relevant to the Consolidated Entity, which
are not yet effective and a description of their expected effect on the Groups nancial statements(if any).
AASB 2009-5 Amendments to Australian Accounting Standards Presentation of Financial Statements
[AASB 101] (effective 1 January 2010)
In May 2009 the AASB issued an amendment to AASB 101 Presentation of Financial Statements, which claries
that terms of a liability that could, at the option of the counterparty, result in the liability being settled by the
issue of equity instruments, do not affect its classication. This means that unless the terms of such liabilities
require a transfer of cash or other assets within 12 months, they do not necessarily have to be classied as
current liabilities. Initial adoption of this amendment will have no impact as the consolidated entity does not have
any current liabilities where the counterparty has the option to have the liabilities settled by the issue of equity
instruments.
AASB 2009-5 Amendments to Australian Accounting Standards Statement of Cash Flows
In May 2009 the AASB issued an amendment to AASB 107 Statement of Cash Flows, which claries that only
expenditures that result in a recognised asset in the statement of nancial position are eligible for classication
as cash ows from investing activities. Initial adoption of this amendment will have no impact as the entity only
recognises cash ows from investing activities for expenditures that result in a recognised asset in the statement
of nancial position.
AASB 2009-5 Amendments to Australian Accounting Standards Impairment of Assets
In May 2009 the AASB issued an amendment to AASB 136 Impairment of Assets, which claries that CGUs to
which goodwill is allocated cannot be larger than an operating segment as dened in AASB 8 Operating Segments
before aggregation. There will be no impact as these requirements are only required to be applied prospectively
to goodwill impairment calculations for periods commencing on or after 1 July 2010.
AASB 2010-3 Amendments to Australian Accounting Standards Business Combinations
[AASB 3] (effective 1 July 2010)
In June 2010 the AASB issued an amendment to AASB 3 Business Combinations, which Conrms that any
balances of contingent consideration that relate to acquisitions under the superseded AASB 3 must be accounted
for under the superseded standard, i.e. not via prot or loss. There will be no impact on initial adoption as
adjustments to contingent consideration on acquisitions prior to 1 July 2009 have been accounted for in
accordance with the superseded AASB 3.
AASB 2010-4 Amendments to Australian Accounting Standards Financial Instruments: Disclosures
In June 2010 the AASB issued an amendment to AASB 7 Financial Instruments: Disclosures, which deletes
various disclosures relating to credit risk, renegotiated loans and receivables and the fair value of collateral held.
There will be no impact on initial adoption to amounts recognised in the nancial statement as the amendments
result in fewer disclosures only.
AASB 2010-4 Amendments to Australian Accounting Standards Presentation of Financial Statements
In June 2010 the AASB issued an amendment to AASB 101 Presentation of Financial Statements, which allows
that a detailed reconciliation of each item of other comprehensive income may be included in the statement of
changes in equity or in the notes to the nancial statements. There will be no impact on initial adoption of this
amendment as a detailed reconciliation of each item of other comprehensive income has always been included
in the statement of changes in equity.
AASB 2009-8 Amendments to Australian Accounting Standards Group Cash-Settled Share-based Payment
Transactions [AASB 2] (effective from 1 January 2010)
The amendments made by the AASB to AASB 2 conrm that an entity receiving goods or services in a group
share-based payment arrangement must recognise an expense for those goods or services regardless of which
entity in the group settles the transaction or whether the transaction is settled in shares or cash. They also
clarify how the group share-based payment arrangement should be measured, that is, whether it is measured
as an equity or cash-settled transaction. The group will apply these amendments retrospectively for the nancial
reporting period commencing on 1 July 2010. There will be no impact on the groups nancial statements.
(v) New accounting standards and interpretations (contd)
AASB 2009-10 Amendments to Australian Accounting Standards Classication of Rights Issues
[AASB 132] (effective from 1 February 2010)
In October 2009 the AASB issued an amendment to AASB 132 Financial Instruments: Presentation, which
addresses the accounting for rights issues that are denominated in a currency other than the functional currency
of the issuer. Provided certain conditions are met, such rights issues are now classied as equity regardless of
the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as
derivative liabilities. The amendment must be applied retrospectively in accordance with AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors. The group will apply the amended standard from 1 July
2010. As the performance rights issue made by the group is denominated in the groups functional currency
(AUD), the amendment will not have any effect on the groups nancial statements.
Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting
Standards (effective from 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting
periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment removes the
requirement for government-related entities to disclose details of all transactions with the government and other
government-related entities and claries and simplies the denition of a related party. The group will apply the
amended standards from 1 July 2011. When the amendments are applied, the group and the parent will need
to disclose any transaction between its subsidiaries. However, it has yet to put systems in place to capture the
necessary information. It is therefore not possible to disclose the nancial impact, if any, of the amendment to the
related party disclosures.
AASB Interpretation 19 Extinguishing nancial liabilities with equity instruments and AASB 2009-13 Amendments
to Australian Accounting Standards arising from Interpretation 19 (effective from 1 July 2010)
AASB Interpretation 19 claries the accounting when an entity renegotiates the terms of its debt with the results
that the liability is extinguished by the debtor issuing its own equity instrument to the creditor (debt for equity
swap). It requires a gain or loss to be recognised in prot or loss which measured as the difference between the
carrying amount of the nancial liability and the fair value of the equity instruments issued. The group will apply
the interpretation from 1 July 2010. It is not expected to have any impact on the groups nancial statements
since it is only retrospectively applied from the beginning of the earliest period presented (1 July 2009) and the
group has not entered into any debt for equity swaps since that date.
2. Critical accounting estimates & judgements
In preparing these nancial statements the Group has been required to make certain estimates and assumptions
concerning future occurrences. There is an inherent risk that the resulting accounting estimates will not equate
exactly with actual events and results.
(a) Signicant accounting judgements
In the process of applying the Groups accounting policies, management has made the following judgements,
apart from those involving estimations, which have the most signicant effect on the amounts recognised in the
nancial statements:
(i) Functional currency of US-based subsidiary operations
The functional currency of US subsidiaries has changed. As from 1 July 2009 the functional currency was
changed to USD, primarily because the trend in the source currency of the majority of US subsidiaries costs,
from AUD to USD, was not considered temporary. Cash receipts from the US operations, which comprises 100%
of revenue from continuing operations, is received in USD. The majority of US subsidiaries payments, including
operating expenses and income tax, are also payable in USD.
(ii) Exploration and evaluation expenditure (Oil & Gas Properties)
The Group has capitalised signicant exploration and evaluation expenditure on the basis either that this is
expected to be recouped through future successful development (or alternatively sale) of the Areas of Interest
concerned or on the basis that it is not yet possible to assess whether it will be recouped. Although a small
amount of production revenue was received during the year ended 30 June 2010, exploration and evaluation
expenditure as at balance date had not reached a stage, which would have enabled an independent assessment
of economically recoverable reserves to have been made. As a result, the Directors deem that it is appropriate to
continue to classify Auroras Oil and Gas Properties as exploration and evaluation assets under AASB 6 Exploration
for and evaluation of mineral resources as at 30 June 2010.
Subsequent to year-end, as disclosed more fully elsewhere in this report, Aurora announced the ndings of an
independent reserves report conducted by Netherland Sewell and Associates, Inc. in respect of the Groups
interest in the Sugarloaf project. It is therefore expected that for the 2011 nancial year, capitalised exploration
and evaluation expenditure relating to the Groups interest in the Sugarloaf project will be classied as a production
asset and costs will be amortised in line with the exploitation of associated reserves. As at 30 June 2010 the
carrying amount of Oil & Gas Properties is $25,290,579 (2009: $24,562,716).
(iii) Deferred tax assets
The Consolidated Entity has carried forward tax losses which have not been recognised as deferred tax assets as
it is not considered sufciently probable that these losses will be recouped by means of future prots taxable in
the appropriate jurisdictions.
In addition, the Consolidated Entitys interests in jointly controlled oil & gas operations are held through the
Companys wholly-owned US entities (note 19 (b)). Taxation of oil & gas activities in the US allows a number of
alternative treatments which are not available under Australian taxation legislation. In particular, companies may
elect to:
claim an immediate deduction for Intangible Drilling Costs (IDC); and
must use either the cost or percentage depletion method, whichever yields the largest tax deduction, when
calculating applicable tax deductions in relation to the entities economic interest in its oil and gas properties.

2. Critical accounting estimates & judgements (contd)
(a) Signicant accounting judgements (contd)
The election to expense IDC applies to all expenditures incident to and necessary for the drilling of wells and the
preparation of wells for the production of oil or gas. Once the election to expense IDC is made, the election is
binding upon the taxpayer for the rst taxable year for which it is effective and for all subsequent taxable years.
At balance date a determination had not been made as to whether the cost or percentage depletion method would
apply for the current years US income tax calculation. The directors have not recognised or disclosed a deferred
tax asset or liability in respect of this potential difference in the tax base of these properties as they do not believe
it is capable of being reliably estimated at balance date.
(iv) Financial assets are fair value through other comprehensive income
The group holds an investment in shares classied as nancial assets at fair value through other comprehensive
income (classied as available for sale in 2009). As the Group has early adopted AASB 9 Financial Instruments,
with effect from the half-year period ending on 31 December 2009, the Group has made, an irrevocable election
on initial recognition to present gains and losses on investments in equity instruments that are not held for
trading in other comprehensive income. No further impairment of the nancial assets at fair value through other
comprehensive income will be recognised.
(b) Critical accounting estimates
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions
of future events. The key estimates and assumptions that have a signicant risk of causing a material adjustment
to the carrying amounts of certain assets and liabilities within the next annual reporting period are:
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees and consultants by reference to the
fair value of the equity instruments at the date at which they are granted. The fair value is determined using a
risked statistical analysis, using the assumptions detailed in note 18.
Rehabilitation and decommissioning obligations
The liability for future removal and remediation costs of oil and gas production facilities, wells and pipelines at
the time of acquisition or installation of the assets remains with the operator. As at 30 June 2010 rehabilitation
obligations have a carrying value of Nil (2009: $933,000).
Amortisation and depreciation
In relation to the amortisation of capitalised exploration and evaluation expenditure and the depreciation of
property plant and equipment related to producing oil and gas properties, the Consolidated Entity uses a unit of
production reserve depletion model to calculate amortisation and depreciation. This method of amortisation and
depreciation necessitates the estimation of the oil and gas reserves over which the carrying value of the relevant
assets will be expensed to the income statement. The calculation of oil and gas reserves is extremely complex
and requires management to make judgements about commodity prices, future production costs and geological
structures. The nature of reserve estimation is such that reserves are not intended to be 100% accurate but
rather provide a statistically probable outcome in relation to the economically recoverable reserve. As the actual
reserve can only be accurately determined once production has ceased, amortisation and depreciation expensed
during the production may not on a year to year basis accurately reect the actual percentage of reserve depleted.
However, over the entire life of the producing assets all capitalised costs will be expensed to the income statement
when production ceases.
Impairment of assets
In the absence of readily available market prices, the recoverable amounts of assets are determined by discounting
the expected future net cash ows from production and comparing these to the carrying value of the relevant
asset or group of assets to determine the assets net present value. The calculation of net present value is based
on assumptions concerning discount rates, reserves, future production proles, commodity prices and costs. As
at 30 June 2010, the carrying value of Oil & Gas Properties is $25,290,579 (2009: $24,562,716).
3. Segment information
Management has determined, based on the reports reviewed by the Board of Directors and used to make strategic
decisions, that the Group has one reportable segment being oil & gas exploration and production in the United
States of America. The Groups management and administration ofce is located in Australia.
The Board of Directors review internal management reports on a monthly basis that are consistent with the
information provided in the statement of comprehensive income, statement of nancial position and statement of
cash ows. As a result no reconciliation is required, because the information as presented is used by the Board
to make strategic decisions.
2010 2009
$000 $000
Revenue from external sources 321 3,408
Reportable segments (loss) (1,691) (16,222)
Reportable segments assets 25,561 24,660
Reconciliation of reportable segment prot or loss
Reportable segment (loss) (1,691) (16,222)
Unallocated:
Other income 204 437
Corporate expenses (1,532) (2,185)
Prot before tax (3,019) (17,970)
4. Revenue
Consolidated
2010 2009
$000 $000
Continuing operations
Sales revenue
Oil and gas sales 306 1,224
Other revenue
Interest 203 439
509 1,663
5. Other income
Consolidated
Note 2010 2009
$000 $000
Net foreign exchange gains - 2,178
Prot on sale of project (i) 15 -
Other income 1 4
16 2,182
(i) During the year the Consolidated Entity realised a prot of $15,491 on disposal of its interests in the West
Black Lake gas eld.
6. Expenses
Loss before income tax is arrived at after deducting the following expenses:
Consolidated
Note 2010 2009
$000 $000
Amortisation of oil & gas properties (i) 209 4,943
Exploration, evaluation and development costs written off (ii) 833 7,178
Borrowing costs (iii) 96 160
Share-based payment expense (iv) 180 215
Loss on disposal of project (v) 281 -
(i) Amortisation for the year was calculated based on estimated remaining proven producing reserves. For the
comparative year ended 30 June 2009, the calculation was also performed based on estimated remaining
proven producing reserves, whereas in periods prior to 30 June 2009 it was based on estimated total remaining
proven reserves. The effect of this change in estimate was to increase amortisation charged by $4,312,000 in
the comparative year.
(ii) During the year ended 30 June 2010 management reviewed the carrying value of the Groups oil and gas
properties for indicators of impairment and expensed an amount of $54,814 in relation to its remaining
interests in the Flour Bluff gas eld. For the comparative year ended 30 June 2009 impairment expense of
$6,993,274 was recognised for the Groups interests in the Sugarloaf oil and gas properties.
(iii) Borrowing costs were incurred by the Group in connection with the BOS International borrowing facility repaid
during the year ended 30 June 2010.
(iv) On the 19 February 2010 the Group issued performance rights to key management personal. As at 30 June
2010 vested performance right expense of $133,178 (2009: Nil) and vested options expense of $46,329
(2009: $214,995) was recognised. All options on issue were fully vested at 30 June 2010.
(v) During the year ended 30 June 2010 the Consolidated Entity realised a loss of $281,298 on disposal of the
majority of its interests in the Flour Bluff gas eld.
7. Income tax
(a) Income tax charge
Consolidated
2010 2009
$000 $000
Current tax - -
Deferred tax - -
- -
A reconciliation between tax expense and prima facie tax payable is as follows:
Accounting loss before tax (3,019) (17,970)
Tax at the Australian statutory income tax rate of 30% (2009: 30%) (906) (5,391)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income
Add tax effect of:
Share-based payment expense 54 64
Revenue losses not recognised 821 5,866
Overseas revenue losses not recognised 144 53
Less tax effect of:

Revenue gains not recognised - (502)
Other (113) (90)
Income tax (benet) / expense - -
Consolidated
2010 2009
$'000 $'000
(b) Deferred tax liabilities
Arising from temporary differences attributable to:
Available-for-sale nancial assets (92) (473)
Oil & gas properties (7,587) (7,369)
Other (1) (1)
Total deferred tax liabilities (7,680) (7,843)
Less set off of deferred tax assets under set-off provisions (c) 7,680 7,843
Amounts recognised in equity - -
Consolidated
2010 2009
$'000 $'000
(c) Deferred Tax Assets
Arising from temporary differences attributable to:
Tax losses
(1)
9,037 8,340
Other 22 291
Share issue expenses 115 175
Total deferred tax assets 9,174 8,806
Less set off of deferred tax liabilities under set-off provisions (b) (7,680) (7,843)
1,494 963
Deferred tax assets not brought to account (1,494) (963)
- -
(1)
The deferred tax assets arising from accumulated tax losses for US taxpaying entities have been calculated at
the marginal tax rate of 30%.
8. Cash and cash equivalents
Consolidated
2010 2009
$'000 $'000
Cash at bank and in hand 28,163 766
Deposits at call 230 10,107
28,393 10,873
(a) Cash at bank and on hand
Funds held at bank bear interest at market rate (oating), the Groups exposure to interest rate risk is discussed
in Note 26.
(b) Deposit at call
The deposits bear interest at 3.27% oating rate (2009: 2.3%).
(c) Interest rate risk exposure
The Groups exposure to interest rate risk is discussed in note 26.
9. Trade and other receivables
Consolidated
2010 2009
$'000 $'000
Trade receivables 378 110
(a) Impaired trade receivables
No Group trade receivables were past due or impaired as at 30 June 2010 (2009: nil) and there is no indication
that amounts recognised as trade and other receivables will not be recovered in the normal course of business.
10. Other nancial assets
Consolidated
2010 2009
$'000 $'000
Non-current
Financial assets at fair value through other comprehensive
income 1,200 1,440
As at 30 June 2010, Aurora held 24,000,000 fully paid ordinary shares in Elixir Petroleum Ltd, representing
approximately 12.70% of its total issued capital. The market value of these securities at 30 June 2010 was
$1,200,000 (2009: $1,440,000).
Included in the statement of comprehensive income is $240,000 (2009: $500,000) which represents the decline
in the fair value of the available-for-sale assets.
11. Oil & gas properties
Consolidated
2010 2009
$'000 $'000
Producing projects
At cost - 13,165
Accumulated amortisation - (11,155)
Net carrying value - 2,010
Exploration & evaluation projects
At cost 25,291 29,550
Written off - (6,997)
Net carrying value 25,291 22,553
Total 25,291 24,563
A reconciliation of movements in Oil & Gas Properties during the year is as follows:
Tangible Costs
Intangible
Costs
Prepaid Drilling,
Completion and
Lease Acquisition
Costs Total
$'000 $'000 $'000 $'000
Producing projects
2010
Cost
At 1 July 2009 2,365 9,867 - 12,232
Additions 5 11 - 16
Disposals (2,370) (9,748) - (12,118)
Impairment - (55) - (55)
Transfer to Exploration Projects - (67) (67)
Foreign exchange movement - (8) - (8)
At 30 June 2010 - - - -
Provision for future restoration costs
At 1 July 2009 186 747 - 933
Disposals (186) (747) - (933)
At 30 June 2010 - - - -
Accumulated amortisation
At 1 July 2009 (2,230) (8,925) - (11,155)
Charge for the Year (108) (101) - (209)
Disposals 2,348 9,036 - 11,384
Foreign exchange movement (10) (10) - (20)
At 30 June 2010 - - - -
Net carrying value
At 1 July 2009 321 1,689 - 2,010
At 30 June 2010 - - - -
2009
Cost
At 1 July 2008 2,294 9,716 - 12,010
Additions 71 151 - 222
At 30 June 2009 2,365 9,867 - 12,232
Provision for future restoration costs
At 1 July 2008 186 747 - 933
At 30 June 2009 186 747 - 933
Accumulated amortisation
At 1 July 2008 (2,108) (4,105) - (6,213)
Charge for the Year (122) (4,820) - (4,942)
At 30 June 2009 (2,230) (8,925) - (11,155)
Net carrying value
At 1 July 2008 372 6,358 - 6,730
At 30 June 2009 321 1,689 - 2,010
11. Oil and gas properties (contd)
Tangible Costs
Intangible
Costs
Prepaid Drilling,
Completion and
Lease Acquisition
Costs Total
$'000 $'000 $'000 $'000
Exploration & evaluation projects
2010
Cost
At 1 July 2009 966 20,956 631 22,553
Additions 2 2,795 2,797
Net movement in prepaid costs - - 1,351 1,351
Transfer from Producing Projects - 67 - 67
Foreign exchange movement (73) (1,366) (38) (1,477)
At 30 June 2010 895 22,452 1,944 25,291
2009
Cost
At 1 July 2008 1,075 17,639 3,572 22,286
Additions 1,111 9,094 - 10,205
Written off (1,220) (5,777) - (6,997)
Net movement in prepaid costs - - (2,941) (2,941)
At 30 June 2009 966 20,956 631 22,553
The ultimate recoupment of exploration expenditure carried forward is dependent on successful development
and exploitation, or alternatively sale, of the respective area of interest.
12. Trade and other payables
Consolidated
2010 2009
$'000 $'000
Trade payables 678 709
Trade and other payable are normally settled within 30 days. Information about the Groups exposure to foreign
exchange risk on nancial instruments is provided in note 26. All amounts recognised as trade and other payable
are expected to be settled within the next 12 months.
13. Provisions
Consolidated
2010 2009
$'000 $'000
Provision for restoration - 933
The Groups policy with regard to providing for its share of future restoration costs for jointly controlled assets is
documented in Notes 2(b) and 1(n). The provision for restoration related to producing projects disposed of during
the year ended 30 June 2010 and was therefore written off to nil.
14. Borrowings
Consolidated
2010 2009
$'000 $'000
Long-term loan - 4,040
As at balance date the Consolidated Entity had no outstanding credit facilities.
During the year ended 30 June 2010 the Group cancelled the US$10 million loan facility with BOS International
(BOSI) that was established for the development of gas reserves at the Flour Bluff Field, Texas. The Groups
continued focus on the signicant gas and condensate discovery at Sugarkane, also located in Texas, has resulted
in a lower priority of allocation of capital to Flour Bluff. The Board therefore determined that these circumstances
no longer justied the continued payment of costs associated with carrying the BOSI facility and accordingly the
loan has been repaid from cash reserves.
15. Contributed capital
2010 2009 2010 2009
Shares Shares $'000 $'000
Share capital
Ordinary shares 253,583,676 202,474,962 90,036 62,637
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting
or by proxy, is entitled to one vote. Upon a poll every holder is entitled to one vote per share held.
15. Contributed capital (contd)
Movements in contributed equity during the current and prior nancial years are as follows:
Date Number of shares Issue Price $'000
Balance 30 June 2008 162,492,417 43,119
Placement 30-Jul-07 20,000,000 $0.53 10,600
Option exercise 8-Aug-07 115,000 $0.20 23
Option exercise 21-Sep-07 460,000 $0.20 92
Rights issue 7-Nov-07 2,780,913 $0.53 1,474
Placement 7-Nov-07 15,426,632 $0.53 8,176
Option exercise 25-Feb-08 1,200,000 $0.19 228
Share issue costs (1,075)
Balance 30 June 2009 202,474,962 62,637
Option exercise 15-Oct-09 115,000 $0.19 22
Option exercise 24-Feb-10 8,415,000 $0.19 1,599
Option exercise 8-Mar-10 714,286 $0.24 171
Option exercise 1-Apr-10 1,984,127 $0.24 476
Option exercise 1-Apr-10 500,000 $0.29 145
Option exercise 22-Apr-10 1,833,000 $0.30 550
Placement 24-Jun-10 33,000,000 $0.75 24,750
Share issue cost (1,307)
Balance 30 June 2010 253,583,676 90,036
16. Reserves and accumulated losses
Consolidated
2010 2009
$'000 $'000
(a) Share-based payment reserve
Opening balance 3,368 3,153
Share-based payment expense 179 215
Balance 30 June 3,547 3,368
(b) Fair value reserve
Opening balance (1,032) (2,808)
Transfer from accumulated losses to restate opening fair value reserve for
the adoption of AASB 9 (6,289) -
Impairment of available-for-sale nancial assets transferred to prot or loss - 2,276
Change in nancial assets at fair value through other comprehensive income (240) (500)
Balance 30 June (7,561) (1,032)
(c) Foreign exchange reserve
Opening balance - -
Currency translation differences arising during the year (1,039) -
Balance 30 June (1,039) -
(d) Accumulated losses
Opening balance (33,669) (15,699)
Transfer to fair value reserve to restate opening fair value reserve for the
adoption of AASB 9 6,289 -
Net loss for the year (3,019) (17,970)
Balance 30 June (30,399) (33,669)
The share-based payment reserve is used to record the fair value of share-based payments. When securities
related to the amount recognised in the share-based payment reserve are exercised the value of those securities
is transferred to contributed equity.
With respect to the payment of dividends (if any) by Aurora Oil & Gas Limited in subsequent nancial years, no
franking credits are currently available, or are likely to become available in the next 12 months.
The fair value reserve is used to record changes in the fair value of available-for-sale nancial assets.
17. Options and Performance Rights
As at balance date, the Consolidated Entity has the following classes of options and performance rights
on issue:
2010 2009 Exercise Expiry
Number Number Price
Type 1 AUTAK - 8,000,000 $0.19 22-Feb-10
Type 2 AUTAK - 4,285,714 $0.24 14-Apr-10
Type 3 AUTAK - 2,185,000 $0.19 14-Apr-10
Type 4 AUTAK - 805,000 $0.19 14-Apr-10
Type 5 AUTAK - 1,000,000 $0.29 14-Apr-10
Type 6 AUTAK - 1,833,000 $0.30 28-Apr-10
Type 8 AUTAQ 500,000 500,000 $0.50 30-Mar-11
Type 11 AUTAW 500,000 500,000 $0.60 30-Sep-10
Type 12 AUTAW 500,000 500,000 $0.70 30-Sep-10
Type 13 AUTAW 500,000 500,000 $0.60 30-Sep-10
Type 14 AUTAW 500,000 500,000 $0.70 30-Sep-10
Type 15 AUTAS 250,000 250,000 $0.60 31-Dec-10
Type 16 AUTAM 500,000 500,000 $0.70 31-Dec-11
Type 17 AUTAW 25,000 25,000 $0.53 30-Sep-10
Type 18 AUTAZ 4,530,000 - Nil 19-Feb-15
Total 7,805,000 21,383,714
The options and performance rights are not listed and carry no dividend or voting rights. Upon exercise, each option or
performance right is convertible into one ordinary share to rank pari passu in all respects with the Companys existing
fully paid ordinary shares.
Movements in the number of options and performance rights on issue during the year are as follows:
Date Number
At 1 July 2008 23,608,714
Granted during the year
9-Jul-08 Type 15 AUTAS 250,000
9-Jul-08 Type 16 AUTAM 500,000
9-Oct-08 Type 17 AUTAW 25,000
Expired during the year
31-Jan-09 Type 10 AUTAU (3,000,000)
At 30 June 2009 21,383,714
Granted during the year
19-Feb-10 Type 18 AUTAZ 4,530,000
Exercised during the year
15-Oct-09 Type 3 AUTAK (115,000)
24-Feb-10 Type 1 AUTAK (8,000,000)
24-Feb-10 Type 3 AUTAK (415,000)
8-Mar-10 Type 2 AUTAK (714,286)
19-Mar-10 Type 3 AUTAK (230,000)
24-Mar-10 Type 2 AUTAK (238,095)
24-Mar-10 Type 3 AUTAK (690,000)
25-Mar-10 Type 3 AUTAK (115,000)
31-Mar-10 Type 3 AUTAK (230,000)
1-Apr-10 Type 2 AUTAK (1,984,127)
1-Apr-10 Type 5 AUTAK (500,000)
7-Apr-10 Type 4 AUTAK (690,000)
9-Apr-10 Type 4 AUTAK (115,000)
12-Apr-10 Type 2 AUTAK (238,095)
12-Apr-10 Type 3 AUTAK (115,000)
13-Apr-10 Type 2 AUTAK (317,460)
13-Apr-10 Type 3 AUTAK (275,000)
15-Apr-10 Type 5 AUTAK (500,000)
16-Apr-10 Type 2 AUTAK (793,651)
22-Apr-10 Type 6 AUTAK (1,833,000)
At 30 June 2010 7,805,000
18. Share-based payments
(a) Performance rights
Performance rights over shares in Aurora Oil & Gas Limited were granted under the Aurora Oil & Gas Limited
Performance Rights Plan (Plan) which was approved by shareholders at the general meeting held on the 19
February 2010. The Plan is designed to align the interests of executives with shareholders by providing direct
participation in the benets of future Company performance over the medium to long term.
The participants of the plan to date are:
- Jonathan Stewart
- Ian Lusted
- Malcolm Bult
Under the plan, participants were granted performance rights which only vest if certain performance standards
(as disclosed in the Directors Report) are met and the executive remains employed by the Company to the end
of the vesting period. The selection of suitable performance benchmarks were considered critical to securing
the objective of this Plan, and have been set at signicantly higher levels than those prevailing at the time of
structuring the Plan.
The fair value of performance rights granted (see note above) during the year was calculated using a risked
statistical analysis. Expense has been apportioned pro-rata to reporting periods where vesting periods apply.
Key inputs to the model used in the calculation were as follows (see also Directors Report):
2010
Type 18
AUTAZ
Grant date: 19-Feb-10
Expected price volatility
(i)
85%
Exercise price
Nil
Expiry dates
19-Feb-2010
Share price at grant date
$0.29
Risk free interest rate
(ii)
4.8%
(1)
Expected price volatility was 85% (based on the historical volatility adjusted for any expected changes to future
volatility due to publicly available information).
(2)
Risk free rate of securities with comparable terms to maturity.
Performance rights can only be exercised if they have vested and can be exercised until they lapse. The exercise
of any vested performance right may only be effected in such form and manner as the Board may prescribe.
Participants will not be required to make any payment for the grant of the performance rights or on the exercise of
a vested performance right. The maximum number of performance rights that could vest, and hence be exercised
by the Participants are as follows:
Earliest exercise date: 31 July 2010 31 July 2011 31 July 2012 31 July 2013
Jonathan Stewart 450,000 750,000 900,000 900,000
Ian Lusted 240,000 360,000 390,000 -
Malcolm Bult 150,000 180,000 210,000 -
For the full entitlement of these performance rights to vest, the top range of the Performance Hurdle would need
to be met in the last 15 trading days in July for each year from 2010 to 2013.
On this basis the weighted average fair value of each of the performance rights at the date of grant is as follows:
Vesting date: 31 July 2010 31 July 2011 31 July 2012 31 July 2013
Weighted average fair value $0.13 $0.09 $0.06 $0.03
As at 30June 2010 the vested value of performance rights is therefore:
Vested and
exercisable
Vesting
expense
Number $000
Jonathan Stewart - 75
Ian Lusted - 37
Malcolm Bult - 21
Total - 133
(b) Options
No options were granted during the year ended 30 June 2010.
During the prior year options were granted to consultants. The fair value of options granted during the prior year
was calculated using the Binomial options pricing model. Expense was apportioned pro-rata to reporting periods
where vesting periods apply.
Key inputs to the model used in the calculation were as follows:
2009
Type 15 Type 16 Type 17
AUTAS AUTAM AUTAW
Grant date: 9-Jul-08 9-Jul-08 3-Oct-08
Expected price volatility
(i)
65% 65% 65%
Exercise price $0.60 $0.70 $0.53
Expiry dates 31-Dec-10 31-Dec-11 30-Sep-10
Share price at grant date $0.39 $0.39 $0.29
Risk free interest rate
(ii)
6.5% 6.5% 7.0%
(i)
Expected price volatility was 65% (based on the historical volatility adjusted for any expected changes to future
volatility due to publicly available information).
(ii)
Risk free rate of securities with comparable terms to maturity.
The weighted average fair value of options granted during the prior year was $0.09 per option.
19. Parent entity information
The following details information related to the parent entity, Aurora Oil & Gas Limited, at 30 June 2010.
The information presented here has been prepared using accounting policies consistent with those presented in
Note 1.
Company
2010 2009
$'000 $'000
Current assets 53,954 10,409
Non-current assets 1,201 21,232
Total assets 55,155 31,641
Current liabilities 570 337
Non-current liabilities - -
Total liabilities 570 337
Contributed equity 90,036 62,637
Share-based payment reserve 3,547 3,368
Fair value reserve (7,561) (1,032)
Accumulated losses (31,437) (33,669)
Total equity 54,585 31,304
(Loss) for the year (4,058) (17,970)
Other comprehensive income for the year 240 500
Total comprehensive (loss) for the year (3,818) (17,470)
The parent company restated opening fair value reserve and accumulated losses at 1 July 2009 for the adoption
of AASB 9. Details of the adoption of AASB 9 can be found in Note 1.
At balance date amounts receivable from controlled entities totalled $55,363,391 (at cost) (2009: $45,795,635).
The transactions were made interest free with no xed terms for repayment. Following guidance issued by the
Australian Standards Board, this receivable has been included within the cost of investment in subsidiaries.
(a) Whollyowned Group
Details of interests in wholly-owned controlled entities are set out at part (b) of this note. Details of dealings with
controlled entities are as follows:
Inter-company Account
Aurora Oil & Gas Limited provides working capital to its controlled entities. Transactions between Aurora Oil & Gas
Limited and other controlled entities in the wholly owned Group during the year ended 30 June 2010 consisted of:
(i) Working capital advanced by Aurora Oil & Gas Limited;
(ii) Provision of services by Aurora Oil & Gas Limited; and
(iii) Expenses paid by Aurora Oil & Gas Limited on behalf of its controlled entities.
The above transactions were made interest free with no xed terms for the repayment of principal on amounts
advanced by Aurora Oil & Gas Limited.
Details of transactions with controlled entities during the year are as follows:
Company
2010 2009
$'000 $'000
Sale of goods and services
Management fees & recharges to subsidiaries 1,131 155
Loans to subsidiaries
Beginning of the year 45,797 45,074
Loans advanced 8,435 568
End of year 55,363 45,797
19. Parent entity information (contd)
(b) Investments in Controlled Entities
Name of Entity Country of
Incorporation
Class of
Shares
Equity Holding
2010 2009
% %
Corpus Christi Gas Inc USA Ordinary 100 100
Corpus Christi Gas General LLC USA Ordinary 100 100
Corpus Christi Gas Limited LLC USA Ordinary 100 100
Corpus Christi Gas LP USA Ordinary 100 100
Sugarloaf Oil & Gas Inc USA Ordinary 100 100
Sugarloaf Oil & Gas General LLC USA Ordinary 100 100
Sugarloaf Oil & Gas Limited LLC USA Ordinary 100 100
Sugarloaf Oil & Gas LP USA Ordinary 100 100
West Black Lake Oil & Gas Inc USA Ordinary 100 100
West Black Lake Oil & Gas General LLC USA Ordinary 100 100
West Black Lake Oil & Gas Limited LLC USA Ordinary 100 100
West Black Lake Oil & Gas LP USA Ordinary 100 100
Aurora West Coast Oil Inc USA Ordinary 100 100
Meelup Oil & Gas Inc USA Ordinary 100 100
Meelup Oil & Gas General LLC USA Ordinary 100 100
Meelup Oil & Gas Limited LLC USA Ordinary 100 100
Meelup Oil & Gas LP USA Ordinary 100 100
Mullaloo Oil & Gas Inc USA Ordinary 100 100
Mullaloo Oil & Gas General LLC USA Ordinary 100 100
Mullaloo Oil & Gas Limited LLC USA Ordinary 100 100
Mullaloo Oil & Gas LP USA Ordinary 100 100
Yallingup Oil & Gas Inc USA Ordinary 100 100
Yallingup Oil & Gas General LLC USA Ordinary 100 100
Yallingup Oil & Gas Limited LLC USA Ordinary 100 100
Yallingup Oil & Gas LP USA Ordinary 100 100
Trigg Oil & Gas Inc USA Ordinary 100 100
Trigg Oil & Gas General LLC USA Ordinary 100 100
Trigg Oil & Gas Limited LLC USA Ordinary 100 100
Trigg Oil & Gas LP USA Ordinary 100 100
(c) Ultimate Parent Company
Aurora Oil & Gas Limited, a listed public company incorporated and domiciled in Australia is the Ultimate Holding
Company of the Consolidated Entity.
20. Reconciliation of loss after income tax to net cash outow from operating activities
Consolidated
2010 2009
$'000 $'000
Loss for the year (3,019) (17,970)
Add/(less) non-cash items:
Depreciation and amortisation 209 4,942
Exploration and evaluation costs expensed 507 7,178
Impairment available-for-sale nancial asset - 6,288
Share based payment 180 215
Loss on disposal of project 281 -
Prot on disposal of project (15) -
Net foreign exchange (gains)/losses 20 (2,178)
Add/(less) items classied as investment cash ows
Net interest (205) (279)
Change in assets and liabilities during the nancial year
Increase in receivables (268) -
(Decrease) / increase in payables (31) (198)
Net cash inow / (outow) from operating activities (2,341) (2,002)
As at balance date the Consolidated Entity had no outstanding credit facilities.
During the year ended 30 June 2010, the Group cancelled the US$10 million loan facility with BOS International
(BOSI) that was established for the development of gas reserves at the Flour Bluff Field, Texas. The Groups
continued focus on the signicant gas and condensate discovery at Sugarkane, also located in Texas, resulted
in a lower priority of allocation of capital to Flour Bluff and the subsequent sale of all the WI associated with and
infrastructure at Flour Bluff (note: the Group retained a 20% WI in approximately 1,400 acres that remains for
exploration). The Board therefore determined that these circumstances no longer justied the continued payment
of costs associated with carrying the BOSI facility and accordingly the loan has been repaid from cash reserves.
21. Loss per share
Consolidated
2010 2009
Cents Cents
Basic / diluted loss per share
Loss attributable to the ordinary equity holders of the Company (1.19) (8.9)
Loss used in calculation of basic / diluted loss per share $'000 $'000
Loss after tax (3,019) (17,970)
Weighted average number of ordinary shares used as the
denominator in calculating basic / diluted loss per share 253,583,676 201,921,752
Options on issue (note 17) represent potential ordinary shares but are not dilutive as they would decrease the
loss per share. Accordingly they have been excluded from the weighted average number of ordinary shares and
potential ordinary shares used in the calculation of diluted earnings per share.
22. Jointly controlled assets
At balance date, the Group has non-operating working interests in joint operating agreements for the following
projects:
Project Activity Working Interest*
2010 2009
Sugarloaf Gas/Condensate prospect, exploration (USA) 11.46 10% 20%
Ipanema Gas/Condensate prospect, exploration (USA) 30% 100 - 80%
Longhorn Gas/Condensate prospect, exploration (USA) 25% 100 - 50%
* Working Interest denotes the percentage share of costs to be borne by the Group in relation to its interest in
projects. The Working Interest and Net Revenue Interests are subject to varying terms in the relevant agreements
for each project. Pursuant to farmout arrangements announced on 21 September 2009, in return for being free
carried for up to 7 new horizontal wells and the stimulation of the 3 existing wells, Auroras working interest in
Sugarloaf and Longhorn will be reduce by a maximum of 50% and 5/8th for the Ipanema AMI. Once drilled by
the Farminee, the rst well within each of the Longhorn and Ipanema AMIs will be considered as having met the
Auroras obligation well commitments within these areas.
Flour Bluff Gas eld development and production project (USA) 20% 20 24.7%
West Black Lake Gas eld development and production project (USA) - 40.3 - 20.15%
North Belridge Oil wells (USA) 32.5% 32.5%
The interests in land, wells and infrastructure at West Black Lake were sold at auction in December 2009. Aurora
no longer holds any interest in this eld.
The interests in land, wells and infrastructure at Flour Bluff were sold at auction in December 2009. Aurora
elected to retain a 20% Working Interest in approximately 1,400 acres within the Flour Bluff eld that remains
prospective for further exploration activity. The company also retained some minor royalty interests within the
Flour Bluff eld.
Within the North Belridge prospect the company holds a working interest in the two wells to which it has contributed
funds and the associated acreage of 32.5%.
The total carrying value of Auroras interest in assets held by these projects as at balance date is $25,291,000
(2009: $24,563,000).
23. Key management personnel disclosures
(a) The directors of Aurora Oil Gas Limited during the periods being report on were:
Mr. Jonathan Stewart Executive Chairman
Mr. Graham Dowland Non-Executive Director
Mr. Michael Blakiston Non-Executive Director
Mr. Gren Schoch Non-Executive Director
Mr. Ian Lusted Technical Director
(b) Other key management personnel
In addition to the directors and the Company Secretary, Ms. Julie Foster (previously Mr. David Lim), Mr Malcolm
Bult was appointed as an executive on the 16 February 2010. No other persons had authority and responsibility
for planning, directing and controlling the activities of the Group, directly or indirectly during the current or prior
nancial years. Ms. Foster commenced as Company Secretary on 23 October 2009, while Mr. Lim ceased being
Company Secretary on 23 October 2009.
(c) Key management personnel compensation
Consolidated
2010 2009
$ $
Short term benets 540 481
Post-employment benets 12 6
Share-based payments 111 -
663 487
Detailed remuneration disclosures can be found in the section of the Directors Report headed Remuneration
Report.
23. Key management personnel disclosures (contd)
(d) Equity instrument disclosures relating to Key Management Personnel
(i) Option holdings
The numbers of options over ordinary shares in the Company held during the nancial year by each director of
Aurora Oil & Gas Limited and other Key Management Personnel of the Group, including their personally related
parties, are set out below.
Balance at
start of the
year
Granted as
compen-
sation Exercised
Net other
changes
Balance at
the end of
year
Vested and
exercisable
2010

Directors of Aurora Oil & Gas Limited
Jonathan Stewart
Note conversion
options 7,200,000 - (7,200,000) - - -
Performance rights - 3,000,000 - - 3,000,000 -
Subtotal J. Stewart 7,200,000 3,000,000 (7,200,000) - 3,000,000 -
Michael Blakiston
Note conversion
options 690,000 - (690,000) - - -
Incentive options 500,000 - (500,000) - - -
Subtotal M. Blakiston 1,190,000 - (1,190,000) - - -
Graham Dowland
Note conversion
options 800,000 - (800,000) - - -
Subtotal G. Dowland 800,000 - (800,000) - - -
Gren Schoch
Note conversion
options 793,651 - (793,651) - - -
Incentive options 500,000 - (500,000) - - -
Subtotal PG. Schoch 1,293,651 - (1,293,651) - - -
Ian Lusted
Incentive options 1,000,000 - - - 1,000,000 1,000,000
Performance rights - 990,000 - - 990,000 -
Subtotal I. Lusted 1,000,000 990,000 - - 1,990,000 1,000,000
Other key management personnel of the Group
Julie Foster
(1)
- - - - - -
David Lim
(2)
- - - - - -
(1)
Ms Foster appointed as Company Secretary on 23 October 2009.
(2)
Mr. Lim resigned as Company Secretary on 23 October 2009.
Balance at
start of the
year
Granted as
compen-
sation Exercised
Net other
changes
Balance at
the end of
year
Vested and
exercisable
2009
Jonathan Stewart
Note conversion
options 7,200,000 - - - 7,200,000 7,200,000
Incentive options 1,500,000 - - (1,500,000) - -
Subtotal J. Stewart 8,700,000 - - (1,500,000) 7,200,000 7,200,000
Michael Blakiston
Note conversion
options 690,000 - - - 690,000 690,000
Incentive options 500,000 - - - 500,000 500,000
Subtotal M. Blakiston 1,190,000 - - - 1,190,000 1,190,000
Graham Dowland
Note conversion
options 800,000 - - - 800,000 800,000
Subtotal G. Dowland 800,000 - - - 800,000 800,000
Gren Schoch
Note conversion
options 793,651 - - - 793,651 793,651
Incentive options 500,000 - - - 500,000 500,000
Subtotal G. Schoch 1,293,651 - - - 1,293,651 1,293,651
Ian Lusted
(1)
Incentive options 1,000,000 - - - 1,000,000 1,000,000
Subtotal I. Lusted 1,000,000 - - - 1,000,000 1,000,000
David Lim - - - - - -
Alex Neuling
(2)
Incentive options 250,000 - - (250,000) - -
(1)
Balance held on appointment as a director of the Company. These options were granted to Mr. Lusted in
his prior capacity as a technical consultant to the Company, and prior to him meeting the denition of key
management personnel.
(2)
Mr. Neuling ceased being Company Secretary on 9 April 2009.
Details of options provided as remuneration, and shares issued on exercise of such options, together with the
terms and conditions of the options, can be found in the section of the Directors Report headed Remuneration
Report.
23. Key management personnel disclosures (contd)
(ii) Share holdings
The numbers of shares in the Company held during the nancial year by each director of Aurora Oil & Gas Limited
and other Key Management Personnel of the Group, including their personally related parties, are set out below.
There were no shares granted during the reporting period as compensation.
Balance at start
of the year
Exercise of
options
Net other
changes
Balance at the
end of year
2010
Jonathan Stewart 10,019,434 7,200,000 - 17,219,434
Michael Blakiston 4,731,533 1,190,000 (149,435) 5,772,098
Graham Dowland 1,390,378 800,000 - 2,190,378
Gren Schoch 2,380,953 1,293,651 (91,500) 3,583,104
Ian Lusted 100,500 - 18,000 118,500
Julie Foster
(1)
- - - -
David Lim
(2)
- - - -

Balance at start
of the year
Exercise of
options
Net other
changes
Balance at the
end of year
2009
Jonathan Stewart 10,019,434 - - 10,019,434
Michael Blakiston 4,731,533 - - 4,731,533
Graham Dowland 1,390,378 - - 1,390,378
Gren Schoch 2,380,953 - - 2,380,953
Ian Lusted 67,000 - 33,500 100,500
David Lim
(2)
- - - -
Alex Neuling
(3)
46,059 - (46,059) -
(1)
Ms. Foster appointed as Company Secretary on 23 October 2009.
(2)
Mr. Lim resigned as Company Secretary on 23 October 2009.
(3)
Mr. Neuling resigned as Company Secretary on 9 April 2009.
24. Related party transactions
Transactions with controlled entities are disclosed in note 19. Compensation and equity transactions with Key
Management Personnel are disclosed at note 23.
Details of other transactions with related parties during the current and prior nancial year are set out below:
(a) Payments for goods and services
Consolidated
2010 2009
Note $000 $000
Payments for services (i) 232 182
(i) During the year $66,483 was paid on normal commercial terms for legal services to Blakiston & Crabb, a law
rm in which Mr. Michael Blakiston, a director, is a partner (2009: $949). The outstanding balance payable
at year end was $4,672 (2009: nil). Additionally, an amount of $165,441 was paid on commercial terms
for ofce accommodation (rental & outgoings), car parking & ofce equipment during the year to Epicure
Administration Pty Ltd, a company of which Mr. Jonathan Stewart, Chairman, is also a director and benecial
shareholder (2009: $181,484). The outstanding balance payable at year end was $31,142 (2009: $40,873).
25. Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Consolidated
Entity, its related practices and non-related audit rms:
Consolidated
2010 2009
$'000 $'000
BDO Audit (WA) Pty Ltd for:
Audit and review of nancial statements and other audit work under the
Corporations Act 2001 67 55
Total remuneration 67 55
26. Financial risk management objectives and policies
Auroras board of directors (Board) performs the duties of a risk management committee in identifying and
evaluating sources of nancial and other risks. The Board seeks to balance the potential adverse effects of
nancial risks on Auroras nancial performance and position with the upside potential made possible by
exposure to these risks and by taking into account the costs and expected benets of the various methods
available to manage them.
These nancial risks include risks such as market risks (including currency risk and cash ow interest rate risk
and commodity price risk), credit risk & liquidity risk. These disclosures are not, nor are they intended to be an
exhaustive list of risks to which Aurora is exposed.
26. Financial risk management objectives and policies (contd)
(a) Market risk
(i) Commodity price risk
As a result of its operations the Group is exposed to commodity price risk arising from uctuations in the prices
of natural gas and crude oil. The demand for, and prices of, natural gas and crude oil are dependent on a variety
of factors, including:
Supply and demand;
Weather conditions;
The price and availability of alternative fuels;
Actions taken by governments and international cartels; and
Global economic and political developments.
As at balance date, the Board has formed the view that it would not be benecial for the Group to purchase
forward contracts or other derivative nancial instruments to hedge the commodity price risk. Factors which
the Board considered in arriving at this position included the expense of purchasing such instruments and
the inherent difculties associated with forecasting future production levels while the Group is primarily at the
development stage of realising the value of its oil & gas assets. As development of these assets progresses and it
becomes possible to forecast future production levels with a greater degree of certainty, the board may reconsider
its position with regard to hedging against commodity price risk in the future. Commodity price variations would
not have any material impact on the value of nancial instruments held by Aurora in the current or prior year.
(ii) Foreign exchange risk
Aurora is based in Australia, its shares are listed on the Australian Securities Exchange and the Consolidated
Entity reports its nancial performance and position in Australian dollars ($A). On the 1 July 2009 the functional
currency of US subsidiaries changed to USD, primarily because the trend in the source currency of the majority of
the costs of the US subsidiaries from AUD to USD, was not considered temporary. As a result of the change in US
subsidiaries functional currency, the Group is now only exposed to foreign exchange risk arising from uctuations
in the $A/$US exchange rate at parent entity level.
As at balance date, the Board has formed the view that it would not be benecial for the Group to purchase
forward contracts or other derivative nancial instruments to hedge this foreign exchange risk. Factors which the
Board considered in arriving at this position included: The expense of purchasing such instruments; the inherent
difculties associated with forecasting the timing and quantum of $US cash inows and outows.
The Groups exposure to foreign currency risk at the reporting date was as follows:
Consolidated
2010 2009
US$'000 US$'000
Cash 3,293 3,532
Trade Receivables - 79
Trade Payables - (309)
Loans payable - (3,250)
Prepaid exploration, evaluation and lease acquisition expenses - 508
Group sensitivity
Based on the nancial instruments held at reporting date, with all other variables assumed to be held constant,
the table below sets out the notional effect on consolidated loss after tax for the year and equity at reporting date
under varying hypothetical uctuations in the prevailing A$/US$ exchange rate:
Consolidated
2010 2009
$'000 $'000
Hypothetical 20%
(1)
strengthening of $A relative to $US
Increase / (decrease) in loss after tax 641 116
Increase / (decrease) in equity (641) (116)
Hypothetical 20%
(1)
weakening of $A relative to $US
(1)
A hypothetical change of 20% in the $US and $A exchange rates was used to calculate the Groups sensitivity
to foreign exchange rate movements as this is managements estimate of possible rate movements over the
coming year taking into account current market conditions and past volatility (2009: 20%).
(iii) Interest rate risk
As at and during the year ended on balance date the Group had no signicant interest-bearing assets or liabilities
other than liquid funds on deposit. As such, the Groups income and operating cash ows (other than interest
income from funds on deposit) are substantially independent of changes in market interest rates. The Board
manages the Consolidated Entitys exposure to interest rate risk by continuously assessing the companys
exposure and taking into account funding requirements, selects appropriate investments to manage its exposure.
The Groups exposure to interest rate risk and the effective weighted average interest rate for each class of
nancial assets and liabilities is set out below.
Consolidated
2010 2009
$'000 $'000
Financial Assets
Cash assets 28,393 10,873
Loans payable Floating rate - (4,040)
Weighted average effective interest rate of funds on deposit is 3.27% (2009: 2.3%)
Group sensitivity
Based on the nancial instruments held at reporting date, with all other variables assumed to be held constant,
the table below sets out the notional effect on consolidated loss after tax for the year and equity at reporting date
under varying hypothetical changes in prevailing interest rates:
Consolidated
2010 2009
$'000 $'000
Hypothetical 90
(1)
basis point increase
Increase / (decrease) in loss after tax (256) (62)
Increase / (decrease) in equity 256 62
Hypothetical 90
(1)
basis point decrease
(1)
A hypothetical change of 90 basis points was used to calculate the Groups sensitivity to future interest rate
movements as this gure approximates the movement in bond yields published by the Reserve Bank of
Australia for bonds with a 12 month maturity (2009: 0.90%).
(iv) Price risk
The Group is exposed to equity securities price risk in relation to its investment in Elixir Petroleum Ltd.
The Group at present holds no other equity securities and consequently the equity price risk associated with this
investment is not reduced through portfolio diversication. The carrying value of this investment is $1,200,000 as
at 30 June 2010. The impact of uctuations in the fair value of this investment on post-tax loss for the year would
depend on whether such uctuations were as a result of impairment or of short-term market movements. In the
table below movements in share price are assumed to be short-term market movement related and the movement
in the fair value would be recognised in the statement of comprehensive income.
Consolidated
2010 2009
$'000 $'000
Hypothetical 50%
(1)
increase in price (2009: 30%)
Increase / (decrease) in loss after tax - -
Increase / (decrease) in equity 600 432
Hypothetical 20%
(1)
decrease in price (2009: 10%)
Increase / (decrease) in loss after tax - -
(1)
Management has determined that the above hypothetical outcomes are the most appropriate estimation of
share price movements given the current market and economic conditions.
(b) Credit risk
The Group trades only with recognised, trustworthy third parties and it is the Groups policy to perform credit
verication procedures in relation to any customers wishing to trade on credit terms with the Group.
Notwithstanding the above, the Group is exposed to level of credit risk arising from the fact that a large proportion
of its receivables and non-current oil & gas assets relate to its interests in projects operated by a single US private
company.
The Board are of the opinion that the credit risk arising as a result of this concentration of the Groups assets is
more than offset by the potential benets to be gained through continuing to build on the Groups relationship
with the operator of its existing projects.
The maximum exposure to credit risk at the reporting date is the carrying amount of the assets as summarised
below, none of which are impaired or past due. The Group has a number of recourse options available in the
event of counterparty default, including but not limited to de facto security over jointly held assets.
Consolidated
2010 2009
$'000 $'000
Trade receivables 378 110
Prepaid exploration, development and lease acquisition expenses 1,944 631
Total 2,322 741
Credit risk also arises from cash and cash equivalents and deposits with nancial institutions. For banks and
nancial institutions, only independently rated parties with minimum rating of A are accepted.
Consolidated
2010 2009
$'000 $'000
Cash at bank and short-term bank deposits
AA Rated 28,393 10,397
A Rated - 476
28,393 10,873
(c) Liquidity risk
Prudent liquidity management involves the maintenance of sufcient cash, marketable securities, committed
credit facilities and access to capital markets. It is the policy of the board to ensure that the Group is able to meet
its nancial obligations and maintain the exibility to pursue attractive investment opportunities through keeping
committed credit lines available where possible, ensuring the Group has sufcient working capital and preserving
the 15% share issue limit available to the Company under the ASX Listing Rules.
Financing arrangements
During the current year the Group cancelled the US$10,000,000 (oating rate) project nance facility available
for use primarily in developing proved reserves at Flour Bluff. The Groups continued focus on signicant gas and
condensate discovery Sugarkane, also located in Texas, resulted in a lower priority of allocation of capital to Flour
Bluff and the subsequent sale of all WI associated with wells and infrastructure. The Board therefore determined
that these circumstances no longer justied the continued payment of costs associated with carrying the facility
and accordingly repaid the outstanding US$3,250,000 drawn down in previous years, from cash reserves.
Maturities of nancial liabilities
As at reporting date the Group had total nancial liabilities of $677,738 (2009: $5,247,820). This comprised of
non interest-bearing trade creditors and accruals with a maturity of less than 6 months totalling $677,738 (2009:
$708,838).
The table below analysis the Groups nancial liabilities in relevant maturity groups. The amounts are the
contractual undiscounted cash ows.
Group Less than
12 months
Over 12
months
Carrying
Amount
$000 $000 $000
Non derivative
Non-interest bearing 678 - 678
Variable rate - - -
Total non derivative 678 - 678
(d) Fair value estimation
The fair value of nancial assets and liabilities held by the Group must be estimated for recognition, measurement
and / or disclosure purposes.
As at 1 July 2009, the Group has adopted the amendment to AASB 7 Financial Instruments: Disclosures which
requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(i) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(ii) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (level 2); and
(iii) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The Groups investment in the equity securities of Elixir Petroleum Ltd is measured under level 1 disclosure
requirements. The fair value of $1,200,000 (2009: $1,440,000) was determined based on the securitys quoted
market closing bid price.
The fair value of nancial instruments traded in active markets (such as available-for-sale securities) is based on
quoted market prices at the reporting date. The quoted market price used for nancial assets held by the Group
is the current bid price.
The carrying values (net of any applicable impairment provision) of trade receivables and payables are assumed
to approximate their fair values due to their short-term nature.
(e) Capital risk management
The Group manages its capital to ensure entities in the Group will be able to continue as a going concern while
maximising the potential return to shareholders.
The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders
of the parent.
None of the Groups entities are subject to externally imposed capital requirements.
27. Subsequent events
The following events occurred subsequent to the end of the year:
(a) On 26 July 2010, Aurora announced the results of a General Meeting held on that date to ratify the Tranche
1 placement of 33,000,000 ordinary shares at an issue price of $0.75; to approve the Tranche 2 placement
of 13,666,666 ordinary shares at an issue price of $0.75; and to approve the issue of 8,000,000 shares at
an issue price of $0.75 pursuant to the underwritten share purchase plan in accordance with the Notice of
Meeting released to the ASX on 25 June 2010. All resolutions were passed on a show of hands.
(b) Aurora issued 600,000 ordinary fully paid shares at an issue price of $0.60 per share, 250,000 ordinary fully
paid shares at an issue price of $0.50 per share and 25,000 ordinary fully paid shares at an issue price of
$0.53 per share to option holders from the exercise of options.
(c) Aurora issued 840,000 ordinary fully paid shares at no cost per share to performance rights holders from the
exercise of performance rights.
(d) On 18 August 2010, Aurora released a summary of a maiden reserves certication independently carried
out by the USA based consultancy rm, Netherland, Sewell & Associates, Inc. (NSAI) in respect of the
Groups interest in the Sugarkane Field. The following reserve allocations were made with an effective date of
1 July 2010:
1P 1,523,000 bbls, 8.3 Bcf and NPV(10) US$70.2 million
2P 4,317,000 bbls, 24.9 Bcf and NPV(10) US$190.1 million
3P 33,207,000 bbls, 138.0 Bcf and NPV(10) US$986.2 million.
Other than as disclosed above, no event has occurred since 30 June 2010 that would materially affect the
operations of the Consolidated Entity, the results of the Consolidated Entity or the state of affairs of the Consolidated
Entity not otherwise disclosed in the Consolidated Entitys nancial statements (including the Directors Report).
28. Commitments & contingencies
The Consolidated Entity has no contingent assets or liabilities at balance date and has no rm contractual
commitments for expenditure not reected in the nancial statements (2009: nil).

Notes To The Financial Statements: For The Year Ended 30 June 2010

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Notes To The Financial Statements: For The Year Ended 30 June 2010

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37 AURORA OIL & GAS LIMITED | 2010 Annual Report

1. Summary of signicant accounting policies

Less tax effect of:

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