Cue Energy Resources Limited Notes to the financial statements 30 June 2023 Note 3. Critical accounting estimates and judgements (continued) 10 (iv) Estimates of reserve quantities The estimated quantities of Consolidated Entity's reported Proven and Probable hydrocarbon reserves are integral to the calculation of the amortisation expense relating to Production Property Assets and to the assessment of possible impairment of these assets. Estimated reserve quantities are based upon certain interpretations of geological and geophysical models and assessments of the technical feasibility and commercial viability of producing the reserves. These assessments require assumptions to be made regarding future development and production costs, commodity prices, exchange rates and fiscal regimes. The estimates of reserves may change from period to period as the economic assumptions used to estimate the reserves change from period to period, and as additional geological data is generated during the course of operations. Reserves estimates are prepared in accordance with the Consolidated Entity’s policies and procedures for reserves estimation, which conform to guidelines prepared by the Society of Petroleum Engineers. (v) Restoration (rehabilitation or rehab) provisions Provisions for future environmental restoration are recognised where there is a present obligation as a result of exploration, development, production, transportation or storage activities having been undertaken, and it is probable that an outflow of economic benefits will be required to settle the obligation. The estimated future obligations include the costs of removing facilities, abandoning wells and restoring the affected areas in accordance with the terms of the respective permits and relevant legislation in the various jurisdictions in which the Consolidated Entity operates. There is inherent uncertainty in the definition of the works undertaken, technology used to complete the works, the estimation of the relevant costs associated with the defined works and the timing of settlement of restoration obligations. Details of restoration provisions are disclosed in note 12. (vi) Capitalised exploration and evaluation costs Exploration and evaluation costs have been capitalised on the basis that the consolidated entity expects to commence commercial production in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resources. Key judgements are applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are expected to be recovered either through successful development or sale of the relevant mining interest. Factors that could impact the future commercial production at the mine include the level of reserves and resources, future technology changes, which could impact the cost of mining, future legal changes and changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. (vii) Development assets Development costs have been capitalised on the basis that the Consolidated Entity expects to commence commercial production in the future, from which time the costs will be amortised in proportion to the depletion of mineral resources. Key judgements are applied in considering costs to be capitalised that are expected to be recovered either through successful development or sale of the relevant mining interest. The primary assumption made in respect of development assets is that these assets will be able to be realised through the successful development of the relevant mining tenement or through its sale. Assumptions are also made, that could impact the future commercial production at the mine, when concluding on the level of reserves and resources, the impact on future technology changes on mining techniques which could impact the cost of mining, future legal changes, the impact of climate change and changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. Note 4. Financial reporting by segments Segment Information AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (“CODM”)) in assessing performance and in determining the allocation of resources. The CODM assesses the performance of the operating segments based upon EBITDAX, an adjusted measure of earnings before interest expense, tax, depreciation and amortisation, which allows peer comparison when assessing performance. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the Group financial statements. 56 Cue Energy Resources Limited Annual Report 2023
RkJQdWJsaXNoZXIy MjE2NDg3