3D Oil Limited

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Annual Report 2010

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Contents

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1 Corporate Directory
3 Letter from Managing Director
5 Chairman’s Letter
6 Review of Operations
13 Schedule of Petroleum Exploration Permits
14 Directors’ and Remuneration Report
21 Independence Declaration
22 Directors’ Declaration
23 Independent Audit Report
25 Statement of Comprehensive Income
26 Statement of Financial Position
27 Statement of Changes in Equity
28 Statement of Cash Flows
29 Notes to the Financial Statements
50 Additional Shareholder Information
52 Corporate Governance Statement
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Year in brief

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New work on the Felix Prospect indicates it has the potential to contain over 100 MMbbl at the primary levels. The deeper horizons at Felix appear to increase in size with depth and provide very exciting additional prospectivity. The deeper prospectivity in the basin has recently been highlighted by the discovery in SE Remora-1 which is on trend with Felix.

Recent work on the Sea Lion Prospect has also uncovered a large, deeper, previously unrecognised prospect. The shallower, relatively low risk primary target is interpreted to contain potentially 20 MMbbl recoverable. State-of-the-art reprocessing of the Northern Fields 3D seismic data is currently being undertaken to better image, and thereby de-risk, the deeper section.

The company commenced the Front End Engineering and Design (FEED) for West Seahorse with WorleyParsons. The commencement of the FEED follows an exhaustive review of the most economic development options for the fi eld. 3D Oil believes that the development option chosen offers the lowest capital and operating costs, while also maximising the ultimate recovery from the fi eld.

Corporate directory

Board of Directors

Campbell Horsfall (Non-Executive Director and Chairman)

Noel Newell (Executive Managing Director)

Melanie J Leydin (Non-Executive Director) Philippa Kelly (Non-Executive Director)

Company Secretary

Melanie J Leydin

Place of Business

Level 5 164 Flinders Lane Melbourne Victoria 3000 Telephone 03 9650 9866 www.3doil.com.au

Auditor

Grant Thornton Audit Pty Ltd Chartered Accountants 215 Spring Street Melbourne Victoria 3000

Legal Advisors

Baker & McKenzie Level 19 181 William Street Melbourne Victoria 3000

Share Registry

Computershare Investor Services Pty Ltd 452 Johnson Street Abbotsford Victoria 3067 Telephone: (03) 9415 5000

Stock Exchange Listing

Home Exchange is Melbourne ASX Code Fully Paid Shares: TDO

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Noel Newell
Seismic attributes panel Managing Director
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3D image of the West Seahorse complex

“Ultimately we need to be more than a one project company for both growth and security. For this reason we continue to review new opportunities and the company is poised to take advantage of its strengths to identify and exploit niche positions.”

Letter from the Managing Director

Dear Shareholders

I write this letter at a time, which I believe, is at the cusp of a new beginning for 3D Oil.

Last year I stated that the company was ‘out of the woods’ with both the Global Financial Crisis (GFC) and the takeover battle behind us. While this was partly true the world is a signifi cantly different place since the GFC. Conditions remain diffi cult particularly for smaller companies trying to take the next step to become a producer. Access to capital is problematic while the oil price outlook remains fl at for at least the medium term.

The previous year has seen the company primarily focused on delivering a commercial solution to the West Seahorse development, both in fi nancing and engineering terms.

We have persevered in fi nding the right partner with a similar strategic alignment, at appropriate terms that refl ect the underlying value of the asset, and one which would allow the company to grow and provide a very positive result for existing shareholders. We believe that both our persistence and strong position on the terms will bear fruit very soon.

During this period we have also commenced the Front End Engineering and Design (FEED) for West Seahorse with WorleyParsons. The commencement of the FEED follows an exhaustive review of the most economic development options for the fi eld. 3D Oil believes that the development option chosen offers the lowest capital and operating costs, while also maximising the ultimate recovery from the fi eld. In addition it provides the most favourable NPV estimates, at both current and lower oil prices, and ultimately provides robust project economics.

In short, both fi nancing and engineering solutions to the West Seahorse development are well advanced.

It is our intention in 2011 to not only re-enter and complete West Seahorse-3 as a producer but to also drill the neighbouring Sea Lion prospect.

Continuing in-house evaluation of Sea Lion has strengthened its prospectivity with an unrisked potential of 20 MMbbl recoverable. Sea Lion, the next structure to the west along the Rosedale Fault System from West Seahorse and Seahorse, has many similar

attributes to those fi elds and consequent reduced risk profi le. The recent work has also identifi ed previously unrecognised deeper prospectivity providing a very exciting and large secondary target.

The prospectivity of the deeper section in the Gippsland Basin has only been sporadically revealed over many years, but has begun to become better appreciated in recent years as technological advances and economic viability have improved. This has been amply demonstrated by the basin’s major operator in the past year, with the initial development of the Kipper fi eld and the exciting sizeable discovery in South East Remora-1 exploration well.

The Sea Lion prospect, even in the event of only a small discovery, will provide substantial incremental value as an add-on to the West Seahorse development. In the event of a medium-sized discovery it will provided a multiplier of the NPV. Further work is continuing, particularly on the deeper levels, to provide greater understanding and additional de-risking of this less well known section.

State-of-the-art reprocessing of the Northern Fields 3D seismic data in this area is currently being undertaken to better image, and thereby de-risk, the deeper section.

The seismic reprocessing is also anticipated to signifi cantly improve the imaging over the Felix Prospect. Felix is a large untested anticline located between Esso’s two oil and gas fi elds, Moonfi sh and Wirrah, along the Rosedale Fault System. With the potential to contain over 100 MMbbl within the primary levels, it is arguably currently the best oil prospect in Australia. The deeper horizons at Felix appear to increase in size with depth and provide very exciting additional prospectivity. These deeper levels will be further evaluated as soon as the reprocessed seismic becomes available. The Felix prospect certainly has the potential to be a ‘company maker’.

There is plenty of follow-up to a discovery in the deeper section in Vic/P57. A trend of leads has been mapped which includes the Lucifer, Dexter and Kangafi sh structures, all low-side, fault-dependent structures associated with the Emperor fault, along the basin’s northern margin. The leads are on trend and of similar trapping style to the producing Longtom gas fi eld to the east.

The company was very disappointed it was not able to acquire the 3D seismic in

the Bass Basin permit T/41P. The company was left with no choice but to postpone its acquisition of the Dalrymple survey last summer due to circumstances beyond our control. The acquisition vessel availability was withdrawn at short notice, leaving insuffi cient time to obtain an alternative within the required period. Thankfully, an extension to our permit term was granted by the government, and arrangements are in place to ensure that the new survey is acquired this summer.

The perceived prospectivity of the Bass Basin signifi cantly improved over summer by the drilling activity conducted by Origin Energy. The Trefoil-2 well successfully appraised the southern extension of the Trefoil gas fi eld, and more importantly, underpinned the size for an eventual tie-in to the Yolla facilities. Further Rockhopper-1 intersected stacked reservoir pay but signifi cantly it included moveable oil. The commerciality of this oil discovery has not yet been determined but it does highlight 3D Oil’s belief that the Bass Basin is a good place to look for not only gas but oil.

One of the strategies I have consistently articulated since commencing 3D Oil is that I will strive to maximize value to shareholders by minimising the potential for the issue of new equity. Throughout the past year this philosophy has underpinned our endeavours to achieve a commercial solution for West Seahorse and discussions with potential partners.

While West Seahorse has been our main focus during the last year I am very cognizant of the need to look beyond this phase of 3D Oil. Ultimately we need to be more than a one project company for both growth and security. For this reason we continue to review new opportunities and the company is poised to take advantage of its strengths to identify and exploit niche positions.

Despite the team at 3D Oil being small we are extremely focused and committed to the growth of the company and to delivering value to our shareholders. I have the utmost faith we will.

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Noel Newell Managing Director

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“
3D images of the Vic/P57 subsurface
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Chairman’s letter

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Campbell Horsfall Chairman

This year has been one of consolidation for 3D Oil Limited. There have been two aspects of the company operations which have been particularly pleasing. The fi rst is the formal engagement of WorleyParsons to carry out the Front End Engineering and Design for the development of the West Seahorse fi eld. Once completed this will enable the company to fast track the production project and bring on stream signifi cant cash fl ow.

Once again, I would like to thank our shareholders for their continued support and patience and trust that you share my feeling of optimism after the important progress made in 2010.

I see some analogies with this company and Woodside Petroleum. In the 1990’s that company faced a number of challenges and its shares languished around the $2.00 mark. At the date of writing this letter the shares closed at around $43.70. Offshore drilling is not for the faint hearted but the rewards when they do come are enormous.

“Let me assure you that there has and continues to be signifi cant interest in both the development of the West Seahorse fi eld and the highly prospective exploration potential of Vic/P57.“

Whilst a farm out deal has not yet been announced the Company has been constrained by confi dentiality obligations about reporting every development in this area. Let me assure you that there has and continues to be signifi cant interest in both the development of the West Seahorse fi eld and the highly prospective exploration potential of Vic/P57. Our management have been rightly highly selective about both the terms of the offer and the quality of any potential partner. The company values its assets very highly and it is for this reason that two offers have already been rejected. That said, there have recently been some very encouraging developments and we look forward to entering into heads of agreement with a partner who can add value to our business.

I would also like to thank my fellow directors and staff for their efforts this past year. It is pleasing that see that the company now employs a team of highly qualifi ed professionals who are able to apply their considerable expertise to enable the successful development of our projects.

Campbell Horsfall Chairman

It is important that we acknowledge and appreciate the substantial encouragement from the Minister for Energy and Resources for the West Seahorse project. Clearly both State and Federal governments fully understand the substantial economic benefi ts that will accrue from the development and production of the oil

Review of operations

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Vic/P57
T/41-P
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3D Oil permit locations in the Gippsland and Bass basins
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Vic/P57
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Gippsland Basin wells and fi elds, with Vic/P57 location
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During the past year 3D Oil has primarily focused on our 100%-owned Vic/P57 permit. In particular studies have high-graded the Felix structure as a world class oil prospect, while the company has commissioned WorleyParsons to commence the Front End Engineering and Design (FEED) studies for the development of the West Seahorse Field.

Preparations were made for undertaking reprocessing of existing 3D seismic in the Vic/P57 area, to enable better delineation of the permit’s prospects and leads. This reprocessing commenced in August 2010 and will be completed in mid-2011.

All preparations to acquire a 3D seismic survey in our T/41P Bass Basin permit over the 2009/10 summer were fi nalized. However, this had to be cancelled at short notice when the proposed acquisition vessel became unavailable within the required timeframe, and a replacement could not be secured. (The survey will be acquired in the coming summer season).

The company also focused on seeking a joint venture partner to accelerate exploitation of its assets, especially the West Seahorse Field.

Review of potentially suitable new opportunities has continued, and 3D Oil is intending to add more high-quality permits to its existing acreage portfolio as they

Vic/P57, Gippsland Basin Offshore Victoria

Background

The Gippsland Basin, with initial reserves estimated at 4 billion barrels of oil and 11.5 trillion cubic feet of gas, is Australia’s most prolifi c oil-producing basin. Twenty one oil and gas fi elds are on production with most of the hydrocarbons reservoired within the world-class sandstones of the Latrobe Group.

The lightly explored Vic/P57 permit is located in the north-west of the offshore basin and extends across the oil-prone exploration fairway that runs from Moonfi sh to the West Seahorse area. West Seahorse fi eld contains oil at three levels within the upper Latrobe Group, and the main zone was production tested at 1800 BOPD through a half-inch choke. The Seahorse fi eld, in the neighbouring Vic/L8 Licence, has strong similarities to West Seahorse and has been on production since 1991.

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10 km
14 km umbilical
Onshore pipe
200DN oil and
65DN gaslift line 14km offshore pipe
150DN oil and
65DN gaslift line
Proposed West Seahorse
SS Tree (WSH)
Third party processing plant
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Proposed layout of the West Seahorse development

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MAX AMP
–2330
–1500
–1000
–500
0
500
1000
1500
2000
2500
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Seismic amplitude of N1 reservoir unit

Most of the historical success in the basin was based on the interpretation of 2D seismic data. The dominant acreage position of the Esso-BHPB joint venture, with a focus on large-scale projects has, to some extent, hindered the impact that 3D seismic-based exploration has had on similar basins, where smaller, but lower risk targets are pursued. 3D Oil has a valuebased exploration strategy based on the use of modern 3D seismic, where small-to medium-sized prospects, but with excellent commercial drivers form the core of the prospect portfolio.

West Seahorse Field

Following an exhaustive review during the year of several economic development options for the fi eld, the company commenced FEED for the West Seahorse oil fi eld development. The review resulted in the re-assessment of the sub-sea well option tied to shore with a production pipeline. Once onshore the production will either be sent to a new crude oil stabilisation plant or linked to existing onshore third-party facilities.

The company believes this development option offers the lowest capital and operating costs, while also maximising the ultimate recovery from the fi eld. Furthermore, it provides the most favourable NPV estimate at both current and lower oil prices, and ultimately provides the most robust project economics.

The FEED process is being undertaken in three stages. These are:

Concept Finalisation being undertaken by WorleyParsons in Houston to review the pipeline-to-shore options, including an innovative fl exible steel pipeline that can be installed by a work boat and does not require the mobilisation of a pipe-lay barge. This will result in signifi cant cost savings.
Full FEED of the fi nalised concept and further develop the engineering defi nition. This will include performing key reviews such as HAZOP, constructability, risk reviews, etc.
Extended FEED which will further develop the project so that a bankable feasibility study is generated. This is required to

Review of operations Continued

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Seahorse
West Seahorse
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3D structural image of Seahorse and West Seahorse
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1 8000 8
.9
7000 7
.8
6000 6
.7
5000 5
.6
.5 4000 4
.4
3000 3
.3
2000 2
.2
1000 1
.1
0 0 0
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Production simulation based on planned development of West Seahorse
Water Cut (frac)
Oil/Water Rate (bbl/d)
WCT
OPR, WPR Cumulative OIl Production (MMbb1)
OPT
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During the year the company continued to review all aspects of the West Seahorse Field. The purpose was to construct a detailed subsurface model to ultimately provide a simulation of the reservoir throughout the life of the producing fi eld. This review has included reservoir analysis, detailed mapping, depth conversion and reservoir fl uid analysis. The reservoir simulation provides production forecasting and reserve assessment.

The neighbouring, and very similar, Seahorse Field provides an excellent analogue and calibration for West Seahorse Field. The fi eld, which produces from equivalent reservoir units, has approximately 20 years of production history. A feature of the reservoir model is the very high production rates predicted, with the proposed development well modeled to commence production at over 6500 BOPD. This is typical of the Gippsland Basin, where the combination of strong natural water drive and excellent reservoir properties result in very high fl ow rates. Clearly, high production rates during the start-up phase will provide a strong revenue stream with early project pay-back, enhancing the commerciality of the fi eld.

Exploration

The prospectivity of the permit, with a portfolio of high-quality prospects and leads, is continually re-evaluated by way of regional and detailed mapping and geology, particularly along the Rosedale Fault inversion trend. The recent signifi cant discovery along trend at South East Remora-1 highlights the continuing prospectivity associated with improved imaging of the Northern Fields 3D seismic data. Within Vic/P57, attractive prospects located along this inversion trend include the Sea Lion and Felix prospects.

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Vic/P57
Scooter
Kangafi sh Lucifer
Salsa Sweetlips
Flinders
West Moonfi sh
Dexter
Sea Monkey Moonfi sh
Sea Lion West Seahorse Felix
Hippo Wardie Seahorse Wirrah Snapper
Whiting
Golden Beach Gas Field
Barracouta km
Oil Field
0 5 10 Prospects and leads
Latrobe Group
Golden Beach or
Vic/P57 prospects and leads Emperor Group
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Moonfi sh
West Moonfi sh
Felix
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3D structural image of the Felix prospect

During the year an extensive reassessment of the Felix Prospect was undertaken which focused on mapping and geological modeling. This work indicates the prospect has the potential to contain over 100 MMbbl of recoverable oil. The prospect is located within an established oil production fairway between the Moonfi sh oil fi eld and the Wirrah discovery, and is structurally very

The Felix prospect is anticipated to contain at least the same productive horizons currently being exploited in the nearby Moonfi sh Field. It also has a high likelihood of containing multiple other hydrocarbon zones, as is seen in the adjacent Wirrah fi eld. The recent mapping has also identifi ed secondary targets below the primary objective with the potential to contain an additional 60 MMbbls of oil resource equivalent. Deeper potential has not been adequately investigated in this immediate area, but it has been proven to be prospective at along-trend discoveries such as the Sunfi sh, Remora, South East Remora, Longtom and Kipper fi elds.

The combination of its location and 3D seismic defi nition makes Felix a low-to medium-risk exploration target which is mature for drilling. 3D Oil is currently undertaking reprocessing of the 3D seismic data over much of the permit, including the Felix prospect, to improve imaging at the deeper levels with the aim of reducing risk prior to drilling.

The Sea Lion prospect is located just seven kilometres to the west of the West Seahorse oil fi eld and, in addition to Felix, represents one of the last remaining undrilled Top of Latrobe Group inversion anticlines in the Gippsland Basin. Sea Lion has the potential to add signifi cant value to the West Seahorse development. The West Seahorse and Seahorse structures provide good analogues to Sea Lion, with nearidentical geology and closures mapped at the same levels below the Top of Latrobe unconformity. This play type, which developed during the same compressional episode that formed the giant Gippsland fi elds, has had a very high historical success rate. As currently mapped, Sea Lion has a closure height of about 25m, with a mean prospective resource volume of 13 MMbbl of recoverable oil and upside potential in excess of 30 MMbbl.

Review of operations Continued

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Barracouta Wirrah Felix Snapper
West
Moonfi sh
Oil & Gas
Seismic section illustrating the Felix prospect
Seahorse
West Seahorse
Sea Lion
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3D Oil continues to evaluate the leads in the emerging Emperor Subgroup play, exemplifi ed by the along-trend Longtom and Judith gas discoveries, with a view to advancing them to prospect status. Emperor Subgroup leads in Vic/P57 include Lucifer, Dexter and Kangafi sh, which are low-side, fault-dependent structures associated with the east-west fault system along the basin’s northern margin.

Work to date confi rms that the requisite play components are present across the permit. In particular, the trapping style appears to be identical to the Longtom gas fi eld. However, once the seismic reprocessing is complete, more detailed mapping is required to progress these leads to prospect status (i.e. potentially ready to drill).

To the north-east, the Salsa lead is another inversion anticline associated with the Rosedale Fault system at the Top of Latrobe level, providing attractive followup potential. Although potentially a large structure, Salsa may be diffi cult to de-risk due to it being on the edge of the 3D seismic data set.

The Scooter lead is a Top of Latrobe feature formed by erosion of the Marlin Channel leaving a remnant closure, with lateral seal provided by shale subsequently fi lling the channel. This style of hydrocarbon trap has been effective elsewhere in the basin.

Nicholson and Hector are additional Top of Latrobe leads, where extensive channeling that cross-cuts regional dip at the Top of Latrobe unconformity surface has created the potential for a combination structural and stratigraphic trap. These leads will be the subjected to further technical work in the coming year.

3D structural image of the Sea Lion prospect

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Sea Lion West Seahorse
Soft layer
Hard layer
Seismic image of the Sea Lion prospect and West Seahorse fi eld
T/41P
Tolpuddle
Pembroke
Delamere
Tamar
Humbug
Strathlyn
Glengarry
Leads
[Top Eastern View]
Dalrymple
Chat-1 [Intra Eastern View]
10 km
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Location of leads, T41/P
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T/41P, Bass Basin, Offshore Tasmania Background

The Bass Basin has long been recognized to contain excellent quality source rocks and has had a high strike rate for intersecting hydrocarbons, but commercial success has proven to be more diffi cult. In 2006 the opening of the Bass Gas project, centred on the Yolla oil and gas discovery, marked the fi rst commercialization of hydrocarbons in the basin.

Undaunted by the challenges, the industry has recognised the potential of the basin with the vast majority of it continuing to be under permit. Exploration activity in recent years has included seismic acquisition and drilling. In particular, Origin’s Trefoil-2 and Rockhopper-1 wells have continued to maintain interest in the basin. Trefoil-2 successfully appraised the southern extension of the Trefoil Gas Field, which may be eventually tied to Yolla, while Rockhopper-1 intersected stacked zones of hydrocarbons with moveable oil, although the size and commerciality of the fi eld are yet to be announced.

The eastern portion of the basin now contained in 3D Oil Limited’s 100%-owned T/41P exploration permit has only been lightly explored in the past, with the only well drilled in 1986. Located on a broad 2D seismic grid, Chat-1 tested a reactivated fault block and encountered a residual oil column which suggests that the trap was originally hydrocarbon-bearing, but has subsequently leaked. However, this result is important in that it indicates the permit has had access to hydrocarbon charge.

Existing seismic coverage within T/41P was only sparse, consisting of data from six surveys ranging in vintage from 1975 to 1990. Four moderate-sized leads (40 – 140 MMbbls recoverable) were identifi ed from the broad 2D grid, but more seismic was required to mature these to prospect status.

In 2008, 3D Oil acquired 2200 line kilometres of 2D seismic within the permit. The survey was designed to target the southwestern area of the permit, where leads had been identifi ed and technical studies suggested the best access to hydrocarbons. Detailed mapping resulted in confi rmation of and addition to the portfolio of leads. In total, fi fteen leads have been identifi ed, with the potential to contain over 800 MMbbl of recoverable oil equivalent, on

Review of operations Continued

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Squid Sand Eq.
T. Olig Sand
T. Demons Bluff
TEV Sand
TEV Coals
IEV Coal
IEV UNC.
T. Paleocene
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Seismic section of the Dalrymple lead

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leads have seismic amplitude anomalies associated with them, often indicative of the presence of hydrocarbons, as evidenced by other discoveries in the basin. The largest individual leads each have the potential to contain over 100 MMbbl of recoverable oil.

To better delineate the prospective leads, the 250 square kilometre Dalrymple 3D seismic survey was planned for early in 2010, again focusing on the south-west of the permit area. Prior to mid-January 2010, 3D Oil fi nalised and submitted environmental and other regulatory documentation for this survey and acquisition was planned to occur prior to mid-April, before the whale migration and unstable weather seasons commenced.

However, just prior to formalising contracts, notice was given that the tendered seismic vessel would not be available in the required timeframe. Attempts to secure alternative vessels at short notice were unsuccessful, so the survey had to be postponed. A 12-month suspension and extension to the work program conditions and permit term for Year 5 have been granted by the Joint Authority, and the seismic acquisition is now being planned for late 2010 or early 2011.

PGS seismic vessel to acquire data in T41/P

Schedule of petroleum exploration permits as at 30 June 2010

Project name	Locality	Tenement	Equity
Gippsland Basin	Victoria	Exploration Permit Vic/P57	100%
Bass Basin	Tasmania	Exploration Permit T/41P	100%

Directors’ Report

Directors

The Directors of 3D Oil Limited (the “Company”) submit herewith the annual fi nancial report of the Company for the fi nancial year ended 30 June 2010. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

The names and details of the Company’s Directors in offi ce during the fi nancial year and until the date of this report are as follows. Directors were in offi ce for this entire period unless otherwise stated.

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the Corporations Act 2001, the Directors entire period unless otherwise stated.
report as follows:
Name Particulars
Mr Campbell Horsfall Non-Executive Director and Chairman
Qualifi cations B.Comm., LL.B (Melb)
Experience Campbell Horsfall is a solicitor with extensive experience in the petroleum industry
and has held positions as Company Solicitor for BP Australia Ltd, BHP Petroleum, Japan
Australia LNG (MIMI) Pty Ltd and has, until recently, been General Counsel of Vicpower.
Campbell holds Degrees in Law and Commerce from the University of Melbourne and a
Diploma from the Securities Institute and practices as a lawyer in Melbourne.
He has been a director of two public companies and was a non-executive director of
Orchard Petroleum Limited. Orchard Petroleum is listed on the ASX and focuses exclusively
on oil and gas exploration and development in California’s prolifi c hydrocarbon regions of
the Sacramento and San Joaquin basins.
Directorships in listed entities Orchard Petroleum Limited (resigned 30 June 2007)
Relevant interests in shares and options 38,000 ordinary fully paid shares
500,000 options expiring 31 January 2011, exercisable at $0.50.
Mr Noel Newell Executive Director
Qualifi cations B App Sc (App Geol)
Experience Noel Newell holds a Bachelor of Applied Science and has over 25 years experience in the
oil and gas industry, with 20 years of this time with BHP Billiton and Petrofi na. With these
companies, he has been technically involved in exploration of areas around the globe,
particularly South East Asia, and all major Australian offshore basins. Prior to leaving
BHP Billiton in 2002, Noel was Principal Geologist, working within the Southern Margin
Company and primarily responsible for exploration within the Gippsland Basin. Noel has
a number of technical publications and has co-authored Best Paper and runner up Best
Paper at the Australian Petroleum Production & Exploration Association conference and
Best Paper at the Western Australian Basins Symposium.
Noel is the founder of 3D Oil. Immediately prior to starting 3D Oil, Noel was a technical
advisor to Nexus Energy Limited and directly involved in their move to explore in the
offshore of the Gippsland Basin.
Directorships in listed entities Nil
Relevant interests in shares and options 37,700,150 ordinary fully paid shares
4,000,000 options expiring 31 January 2011, exercisable at $0.50
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*Name*	*Particulars*
Ms Melanie Leydin	Non-executive Director(appointed 23 January 2009) Company Secretary
Qualif cations	B.Bus CA
Experience	Ms Leydin is a Chartered Accountant and principal in a chartered accounting f rm specialising in audit and company secretarial services. Ms Leydin has 18 years experience in the accounting profession and is a director and company secretary for a number of oil and gas, junior mining and exploration entities listed on the Australian Stock Exchange.
Directorships in listed entities	Jervois Mining Limited (resigned 29 December 2008)
Relevant interests in shares and options	150,000 ordinary fully paid shares Nil options

Ms Philippa Kelly	Non-Executive Director(appointed 5 January 2010)
Qualif cations	Philippa qualif ed with a Bachelor of Laws from the University of Western Australia and has a Graduate Diploma in Applied Finance & Investment. She is a graduate member of the Australian Institute of Company Directors.
Experience	Philippa has over 25 years experience in the corporate sector, with a background in law and investment banking. She is Chief Operating Off cer of the Juilliard Group of Companies, a private property group. Philippa was previously an investment banker with Goldman Sachs JBWere, involved in equity raisings, corporate structuring and acquisitions and mergers for a broad range of resources companies. She has a longstanding exposure and involvement with public boards, with a strong governance and risk management focus. Philippa is also a member of Deakin University Council and its Audit & Risk Committee and Treasurer of the Australian Drug Foundation.
Directorships in listed entities	Nil
Relevant interests in shares and options	145,000 ordinary fully paid shares Nil options
Principal Activities	Based on the above the Directors believe the the Company, the results of those operations,
The principal activities of the Company are	Company is in a strong and stable position to or the state of affairs of the Company in
the production and development of upstream	expand and grow its current operations. future f nancial years.
oil and gas.	Changes in State of Affairs Dividends
Operation Results	There were no signif cant changes in the No dividend has been declared or paid
The Company’s net loss for the year	State of Affairs during the year. during the f nancial year and the Directors do
after applicable income tax was $857,435 (2009: $940,340). Review of Operations	Future Developments Disclosure of further information regarding likely developments in the operations of the not recommend the payment of any dividend in respect of the current or preceding f nancial years.
Refer to the Review of Operations preceding this Directors’ Report. Financial Position Th t t f th C h	Company in future f nancial years and the expected results of those operations is likely to result in unreasonable prejudice to the Company. Accordingly, this information has not been disclosed in this report. Environmental Regulations The Company holds participating interests in a number of oil and gas areas. The various authorities granting such tenements require

The Company holds participating interests in a number of oil and gas areas. The various authorities granting such tenements require the licence holder to comply with the terms of the grant of the licence and all directions given to it under those terms of the licence. There have been no known breaches of the tenement conditions, and no such breaches have been notifi ed by any government agencies during the year ended 30 June 2010.

The net assets of the Company have decreased by $793,684 to $30,051,177 as at 30 June 2010 due to normal operating costs.

Events Subsequent to Balance Date

There has not been any matter or circumstance, other than that referred to in Note 28, that has arisen since the end of the fi nancial year that has signifi cantly affected, or may signifi cantly affect, the operations of

The Company’s working capital, being current assets less current liabilities, was $8,348,495 compared with working capital of $9,804,968 in 2009.

Directors’ Report Continued

Share Options

There were no share options granted to Directors and executives or their nominees during and since the end of the fi nancial year. On 27 August 2009 189,000 options were issued to staff and on 2 June 2010 615,000 options were issued to staff.

Share options on issue at year end or exercised during the year: Details of unissued ordinary shares of the Company under option at the date of this report are as follows:

etas o unssue ornary sares o te ompany uner opton at te ate o ts report are as oows:
Item
Number of Shares
Exercise Price
Expiry Date
under option
of options
of options
Unlisted Options
6,100,000
$0.50
31January2011
Unlisted Options
6,330,000
$0.60
31January2011
Unlisted Options
400,000
$0.75
31 March 2013
Unlisted Options
189,000
$0.25
30June 2014
Unlisted Options
615,000
$0.40
30 November 2014
During the year and up to the date of this report 804000 options were issued. At 30 June 2010 13634000 options were on issue.

During the year and up to the date of this report 804,000 options were issued. At 30 June 2010 13,634,000 options were on issue.

Proceedings on Behalf of the Company

No person has applied for leave of the Court under Section 327 of the Corporations Act 2001 to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any proceedings during the year.

Directors’ Meetings

The following table sets out the number of Directors’ meetings held during the fi nancial year and the number of meetings attended by each Director. During the fi nancial year, 11 Board meetings were held, 2 audit committee meetings and 1 remuneration committee meeting.

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Board of Directors Audit Committee Remuneration Committee
Directors Held Attended Held Attended Held Attended
Mr C Horsfall 11 11 2 2 1 1
Mr N Newell 11 11 2 2 1 1
Ms M Leydin 11 11 2 2 1 1
Ms P Kelly [(1)] 11 5 2 1 1 1
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(1) Appointed 5 January 2010

There were no non-audit services provided by the Company’s auditors during the year to 30 June 2010.

The Company has not otherwise, during or since the end of the fi nancial year, except to the extent permitted by law, indemnifi ed or agreed to indemnify an offi cer or auditor of the Company or of any related body corporate against a liability incurred as such by an offi cer or auditor.

Indemnifi cation of Offi cers and Auditors

Auditor’s Independence Declaration

During the fi nancial year, the Company paid a premium in respect of a contract insuring the Directors of the Company (as named above), the company secretary and all executive offi cers of the Company and of any related body corporate against a liability incurred as such a director, secretary or executive offi cer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

A copy of the auditor’s independence declaration under s.307C of the Corporation Act 2001 in relation to the audit of the full year is included on page 21.

Non-Audit Services

The Directors are satisfi ed that the provision of non-audit services, during the year by the auditor (or by another person or fi rm on the auditor’s behalf) is compatible with the general standards of independence for auditors imposed by the Corporations Act 2001.

Directors’ Report Remuneration Report (Audited)

This report outlines the remuneration arrangements in place for Directors and executives of 3D Oil Limited (the “Company”).

The Board policy for determining the nature and amount of remuneration of Directors and executives is agreed by the Board of Directors as a whole. The Board obtains professional advice where necessary to ensure that the Company attracts and retains talented and motivated Directors and employees who can enhance Company performance through their contributions and leadership.

Remuneration Philosophy

The remuneration of the Company has been designed to align Director and executive objectives with shareholder and business objectives by providing both a fi xed and variable remuneration component and offering long-term incentives based on key performance areas. The Board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best Executives and Directors to run and manage the Company, as well as create goal congruence between Directors, Executives and shareholders.

Executive Director Remuneration

In determining the level and make-up of executive remuneration, the Board negotiates a remuneration to refl ect the market salary for a position and individual of comparable responsibility and experience. Remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable executive roles.

Remuneration consists of a fi xed remuneration and a long term incentive portion as appropriate.

All Executives are eligible to receive a base salary (which is based on factors such as experience and comparable industry information) or consulting fee. The Board reviews the Managing Director’s remuneration package, and the Managing Director reviews the senior Executives’ remuneration packages annually by reference to the Company’s performance, executive performance and comparable information within the industry.

The performance of Executives is measured against criteria agreed annually with each executive and is based predominantly on the overall success of the Company in achieving its broader corporate goals. Bonuses and incentives are linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses, and options, and can require changes to the Managing Director’s recommendations. This policy is designed to attract the highest caliber of Executives and reward them for performance that results in long-term growth in shareholder wealth.

All remuneration paid to Directors and Executives is valued at the cost to the Company and expensed. Options are valued using the Black-Scholes or Binomial methodology.

Non-Executive Director Remuneration

Non-Executive Directors’ fees are paid within an aggregate limit which is approved by the shareholders from time to time. The limit of Non-Executive Director fees was set at a maximum of $200,000 by shareholders at the AGM on 14 December 2006. Retirement payments, if any, are agreed to be determined in accordance with the rules set out in the Corporations Act 2001 at the time of the Directors retirement or termination. Non-Executive Directors’ remuneration may include an incentive portion consisting of bonuses and/or options, as considered appropriate by the Board, which may be subject to shareholder approval in accordance with the ASX Listing Rules.

Performance Based Remuneration

Remuneration packages do not include performance-based components. An individual member of staff’s performance assessment is done by reference to their contribution to the Company’s overall achievements. The intention of this program is to facilitate goal congruence between Executives with that of the business and shareholders. Generally, the executive’s remuneration is tied to the Company’s successful achievement of certain key milestones as they relate to its operating activities. Further information has not been disclosed as it is commercially confi dential.

Directors’ Report Remuneration Report (Audited) Continued

Relationship between the remuneration policy and company performance

The tables below set out summary information about the Company’s earnings and movements in shareholder wealth for the year since 30 June 2005:

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30 June 2010 30 June 2009 30 June 2008 30 June 2007 30 June 2006
Revenue 414,898 587,992 1,740,306 228,396 3,833
Net profi t/(loss) before tax (857,435) (940,340) (19,741,448) (1,471,727) (79,221)
Net profi t/(loss) after tax (857,435) (940,340) (19,741,448) (1,471,727) (79,221)
Share price at start of year $0.11 $0.26 $0.50 N/A N/A
Share price at end of year $0.20 $0.11 $0.26 N/A N/A
Basic earnings per share (0.42) (0.46) (10.05) (1.67) N/A
Diluted earnings per share (0.42) (0.46) (10.05) (1.67) N/A
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**3D Oil Limited listed on the Australian Stock Exchange in November 2007.

The remuneration of the Directors and executives are not linked to the performance, share price or earnings of the Company.

Key Management Personnel Compensation

Details of Remuneration for Year Ended 30 June 2010

The remuneration for each Director and each of the two executive offi cers of the Company receiving the highest remuneration during the year was as follows:

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2010 Short –term Post-employment Termination Share-based payments
employment benefi ts benefi ts
benefi ts Equity-settled
Salary, Fees and Superannuation Shares Options Total
Commissions Contribution Received as Received as
$ $ Compensation Compensation $
$ $
Directors
Mr C Horsfall 100,000 9,000 – – – 109,000
Mr N Newell 294,000 26,460 – – – 320,460
Ms M Leydin 108,948 – – – – 108,948
Ms P Kelly [(1)] 21,798 1,962 – – – 23,760
Executives
Mr J Keall [(2)] 100,625 9,056 12,795 – – 122,476
Mr K Lanigan [(3)] 150,743 13,308 – – 1,222 165,273
776,114 59,786 12,795 – 1,222 849,917
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(1) Appointed 5 January 2010

2) Resigned 27 November 2009

(3) Appointed 7 December 2009

Details of Remuneration for Year Ended 30 June 2009

The remuneration for each Director and each of the executive offi cers of the Company receiving the highest remuneration during the year was as follows:

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2009 Short –term Post-employment Termination Share-based payments
employment benefi ts benefi ts
benefi ts Equity-settled
Salary, Fees and Superannuation Shares Options Total
Commissions Contribution Received as Received as
$ $ Compensation Compensation $
$ $
Directors
Mr P Willcox [(1)] 73,500 6,615 – – – 80,115
Mr N Newell 294,000 30,460 – – – 324,460
Mr C Horsfall [(2)] 67,503 5,085 – – – 72,588
Ms M Leydin [(3)] 94,564 – – – – 94,564
Executives
Mr J Keall [(2)] 241,490 21,734 – – – 263,224
771,057 63,894 – – – 834,951
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(1) Resigned 23 January 2009

2) Appointed Chairman 23 January 2009

(3) Appointed Director 23 January 2009

Shares Issued as Part of Remuneration for the Year Ended 30 June 2010

There were no shares issued as part of remuneration during the year ended 30 June 2010.

Shares Issued as Part of Remuneration for the Year Ended 30 June 2009

There were no shares issued as part of remuneration during the year ended 30 June 2009.

Options Issued as Part of Remuneration for the Year Ended 30 June 2010

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Number of Grant date Fair value Value of Exercise Vesting Expiry Total
Options at grant options price of date date of remuneration
Granted date granted at options options representated
grant date by options
$ $
Directors
Mr C Horsfall – – – – – – – –
Mr N Newell – – – – – – – –
– – – – – – – –
Ms M Leydin
– – – – – – – –
Ms P Kelly
Executives
– – – – – – – –
Mr J Keall
Mr K Lanigan 265,000 02/06/10 0.083 21,995 0.40 30/11/2011 30/11/2014 13.41%
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The value of options granted during the fi nancial year is recognised in compensation over the vesting period of the grant, in accordance with Australian Accounting Standards.

Directors’ Report Remuneration Report (Audited) Continued

Options Issued as Part of Remuneration for the Year Ended 30 June 2009

There were no options granted as part of remuneration during the year ended 30 June 2009.

Employment contracts

The Managing Director, Mr N Newell, is employed under contract. The employment contract commenced on 1 November 2006 and has no fi xed term. Under the terms of the present contract:

Mr Newell may resign from his position and thus terminate this contract by giving 6 months written notice.
The Company may terminate this employment agreement by providing 6 months written notice.
The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, Mr Newell is only entitled to that portion of remuneration which is fi xed, and only up to the date of termination.
On termination of the agreement, Mr Newell will be entitled to be paid those outstanding amounts owing to him up until the Termination Date.

The Chairman, Mr C Horsfall, is employed under contract. The current employment contract commenced on 23 January 2009 and has no fi xed term. Under the terms of the present contract:

Mr Horsfall may resign from his position and thus terminate this contract by giving 6 months written notice.
The Company may terminate this employment agreement by providing 6 months written notice.
The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, Mr Horsfall is only entitled to that portion of remuneration which is fi xed, and only up to the date of termination.
On termination of the agreement, Mr Horsfall will be entitled to be paid those outstanding amounts owing to him up until the Termination Date.

The Non-Executive Director, Ms M Leydin, is employed under contract. The current employment contract commenced on 23 January 2009 and has no fi xed term. Under the terms of the present contract:

Ms Leydin may resign from her position and thus terminate this contract by giving 6 months written notice.
The Company may terminate this employment agreement by providing 6 months written notice.
The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, Ms Leydin is only entitled to that portion of remuneration which is fi xed, and only up to the date of termination.

• On termination of the agreement, Ms Leydin will be entitled to be paid those outstanding amounts owing to her up until the Termination Date.

The Non-Executive Director, Ms P Kelly, is employed under contract. The current employment contract commenced on 5 January 2010 and has no fi xed term. Under the terms of the present contract:

Ms Kelly may resign from her position and thus terminate this contract by giving 6 months written notice.
The Company may terminate this employment agreement by providing 6 months written notice.
The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, Ms Kelly is only entitled to that portion of remuneration which is fi xed, and only up to the date of termination.
On termination of the agreement, Ms Kelly will be entitled to be paid those outstanding amounts owing to her up until the Termination Date.

The Exploration Manager, Mr K Lanigan, is employed under contract. The current employment contract commenced on 7 December 2009 and has no fi xed term. Under the terms of the present contract:

Mr Lanigan may resign from his position and thus terminate this contract by giving 3 months written notice.
The Company may terminate this employment agreement by providing 6 months written notice.
The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, Mr Lanigan is only entitled to that portion of remuneration which is fi xed, and only up to the date of termination.
On termination of the agreement, Mr Lanigan will be entitled to be paid those outstanding amounts owing to him up until the Termination Date.

The Exploration and Development Manager, Mr J Keall, was employed under contract during the year. The employment contract ceased on his resignation on 27 November 2009.

Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the Directors

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Noel Newell Managing Director Melbourne, 30 September 2010

Independence Declaration

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Directors’ Declaration

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Top Latrobe structure Vic/P57
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The Directors declare that:

a) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
b) the attached fi nancial statements are in compliance with International Financial Reporting Standards, as stated in Note 3 to the fi nancial statements;
c) in the Directors’ opinion, that attached fi nancial statements and the notes thereto, are in accordance with accounting standards and give a true and fair view of the fi nancial position and performance of the Company; and

Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

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Noel Newell Managing Director Melbourne, 30 September 2010

d) The Directors have been given the declarations required by s.295A of the Corporations Act 2001.

Independent Audit Report

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Independent Audit Report Continued

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Statement of Comprehensive Income

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For the year ended 30 June 2010

Note
2010
2009
$
$
Continuing operations
Revenue
5
414,898
587,992
Unrealisedgain on foreign currencytranslation
11,479
1,188,051
Corporate expenses
(218,930)
(1,024,295)
Administrative expenses
(71,557)
(80,143)
Occupancyexpenses
(87,169)
(83,681)
Employment expenses
(641,904)
(545,242)
Share basedpayments
(63,751)
(59,540)
Depreciation and amortisation
(27,971)
(35,829)
Realised loss on foreign currencytranslation
(139,653)
–
Loss on sale of f xed assets
(939)
–
Exploration costs written off
(31,938)
(887,653)
Loss Before Income Tax
6
(857,435)
(940,340)
Income tax expense
7
–
–
Loss for theyear
(857,435)
(940,340)
Other comprehensive income
Other comprehensive income
–
–
Total comprehensive income for theperiod
(857,435)
(940,340)
Loss attributable to:
Owners of the company
(857,435)
(940,340)
Total comprehensive income attributable to:
Owners of the company
(857,435)
(940,340)
Lossper share
Centsper Share
Centsper Share
Basic Lossper share
26
(0.42)
(0.46)
Diluted Lossper share
26
(0.42)
(0.46)

Statement of Financial Position

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As at 30 June 2010

Note
2010
2009
$
$
Current Assets
Cash and cash equivalents
10
8,378,658
8,469,223
Trade and other receivables
11
114,386
245,763
Other current assets
12
56,802
2,461,760
Total Current Assets
8,549,846
11,176,746
Non-Current Assets
Property,plant and equipment
13
14,214
22,260
Intangibles
14
38,230
29,016
Other non-current assets
15
22,177,579
21,506,108
Total Non-Current Assets
22,230,023
21,557,384
Total Assets
30,779,869
32,734,130
Current Liabilities
Trade and otherpayables
16
147,874
1,159,742
Provisions
17
53,477
212,036
Total Current Liabilities
201,351
1,371,778
Non-Current Liabilities
Provisions
17
527,342
517,491
Total Non-Current Liabilities
527,342
517,491
Total Liabilities
728,693
1,889,269
Net Assets
30,051,177
30,844,861
Equity
Issued Capital
18
50,620,867
50,620,867
Reserves
19
2,023,826
1,960,075
Accumulated losses
(22,593,516)
(21,736,081)
Total Equity
30,051,177
30,844,861

Statement of Changes in Equity

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For the year ended 30 June 2010

Issued Capital
Accumulated
Option Reserves
Total
Note 18
Losses
Note 19
Balance as at 1July 2008
50,620,867
(21,505,341)
2,610,135
31,725,661
Prof t/(loss) for theyear
–
(940,340)
–
(940,340)
Total comprehensive income
for theperiod
–
(940,340)
–
(940,340)
Share basedpayments
–
59,540
59,540
Options lapsed
709,600
(709,600)
–
Balance as at 30 June 2009
50,620,867
(21,736,081)
1,960,075
30,844,861
Balance as at 1July 2009
50,620,867
(21,736,081)
1,960,075
30,844,861
Prof t/(loss) for theyear
–
(857,435)
–
(857,435)
Total comprehensive income
for theperiod
–
(857,435)
–
(857,435)
Share basedpayments
–
–
63,751
63,751
Balance as at 30 June 2010
50,620,867
(22,593,516)
2,023,826
30,051,177

Statement of Cash Flows

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For the year ended 30 June 2010

Note
2010
2009
$
$
Cash f ows from operating activities
Receipts from customers
13,666
20,203
Interest received
383,627
641,177
Payments to suppliers and employees
(1,857,752)
(1,693,161)
Net cash used in operatingactivities
24.2
(1,460,459)
(1,031,781)
Cash f ows from investing activities
Payments for exploration and development expenditure
(703,409)
(6,910,407)
Deposits refunded for exploration and
development expenditure
2,231,555
–
Proceeds from foreign exchange investment
(128,175)
1,188,051
Proceeds from sale ofplant and equipment
200
–
Payment forplant and equipment
(5,178)
–
Payment for intangibles (software)
(25,100)
(5,318)
Net cash used in investingactivities
1,369,894
(5,727,674)
Net decrease in cash and cash equivalents
(90,565)
(6,759,455)
Cash and cash equivalents at beginning
of the f nancialyear
8,469,223
15,228,678
Cash and cash equivalents at the end of
the f nancialyear
10
8,378,658
8,469,223

Notes to the Financial Statements

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For the year ended 30 June 2010

1. General Information

3D Oil Limited (the Company) is a limited company incorporated in Australia. The addresses of its registered offi ce and principal place of business are disclosed in the introduction to the annual report. The principal activities of the Company are described in the Review of Operations.

2. Adoption of new and revised Accounting Standards

2.1 Standards and Interpretations affecting amounts reported in the current period

The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported in these fi nancial statements. Details of other Standards and Interpretations adopted in these fi nancial statements but that have had no effect on the amounts reported are set out in section 2.2.

Standards affecting presentation and disclosure

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AASB 101 Presentation of Financial Statements (as revised in AASB 101 (September 2007) has introduced terminology changes
September 2007), AASB 2007-8 Amendments to Australian (including revised titles for the fi nancial statements) and changes
Accounting Standards arising from AASB 101 and AASB 2007-10 in the format and content of the fi nancial statements.
Further Amendments to Australian Accounting Standards arising
from AASB 101
AASB 8 Operating Segments AASB 8 is a disclosure Standard that has resulted in a redesignation
of the Company’s reportable segments (see Note 22).
AASB 2009-2 Amendments to Australian Accounting Standards – The amendments to AASB 7 expand the disclosures required in
Improving Disclosures about Financial Instruments respect of fair value measurements and liquidity risk. The Company
has elected not to provide comparative information for these
expanded disclosures in the current year in accordance with the
transitional reliefs offered in these amendments.
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Standards and Interpretations affecting the reported results or fi nancial position

There have been no standards introduced during the year which have affected the reported results of fi nancial position.

2.2 Standards and Interpretations adopted with no effect on the fi nancial statements

The following new and revised Standards and Interpretations have also been adopted in these fi nancial statements. Their adoption has not had any signifi cant impact on the amounts reported in these fi nancial statements but may affect the accounting for future transactions or arrangements.

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AASB 2008-1 Amendments to Australian Accounting Standard – The amendments clarify the defi nition of vesting conditions for
Share-based Payments: Vesting Conditions and Cancellations the purposes of AASB 2, introduce the concept of ‘non-vesting’
conditions, and clarify the accounting treatment for cancellations.
AASB 2008-5 Amendments to Australian Accounting Standards In addition to the changes affecting amounts reported in the
arising from the Annual Improvements Project and AASB 2008-6 fi nancial statements described at 2.1 above, the amendments
Further Amendments to Australian Accounting Standards arising have led to a number of changes in the detail of the Company’s
from the Annual Improvements Project accounting policies – some of which are changes in terminology
only, and some of which are substantive but have had no material
effect on amounts reported.
AASB 2009-4 Amendments to Australian Accounting Standards In addition to the amendments to AASB 5 and AASB 107 described
arising from the Annual Improvements Project and AASB 2009-5 earlier in this section, and the amendments to AASB 117 discussed
Further Amendments to Australian Accounting Standards arising in section 2.3 below, the amendments have led to a number of
from the Annual Improvements Project changes in the detail of the Company’s accounting policies – some
of which are changes in terminology only, and some of which are
substantive but have had no material effect on amounts reported.
Except as noted in 2.3 below, the changes in AASB 2009-5 have
been adopted in advance of their effective dates of 1 January 2010.
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2.3 Standards and Interpretations in issue not yet adopted

At the date of authorisation of the fi nancial statements, the Standards and Interpretations listed below were in issue but not yet effective. None of these is expected to have a signifi cant effect on the Company’s fi nancial statements in the period of initial application.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

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Standard/Interpretation Effective for annual Expected to be
reporting periods initially applied in
beginning on or after the fi nancial year
ending
AASB 2009-5 Further Amendments to Australian Accounting 1 January 2010 30 June 2011
Standards arising from the Annual Improvements Project
AASB 2009-8 Amendments to Australian Accounting Standards – 1 January 2010 30 June 2011
Company Cash-Settled Share-based Payment Transactions
AASB 2009-10 Amendments to Australian Accounting Standards – 1 February 2010 30 June 2011
Classifi cation of Rights Issues
AASB 124 Related Party Disclosures (revised December 2009), AASB 1 January 2011 30 June 2012
2009-12 Amendments to Australian Accounting Standards
AASB 9 Financial Instruments, AASB 2009-11 Amendments to 1 January 2013 30 June 2014
Australian Accounting Standards arising from AASB 9
AASB 2009-14 Amendments to Australian Interpretation – 1 January 2011 30 June 2012
Prepayments of a Minimum Funding Requirement
Interpretation 19 Extinguishing Financial Liabilities with 1 July 2010 30 June 2011
Equity Instruments
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3. Signifi cant accounting policies

3.1 Statement of compliance

These fi nancial statements are general purpose fi nancial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the fi nancial statements and notes of the Company comply with International Financial Reporting Standards (‘IFRS’).

The fi nancial statements were authorised for issue by the directors on 30 September 2010.

3.2 Basis of preparation

The fi nancial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and fi nancial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The following signifi cant accounting policies have been adopted in the preparation and presentation of the fi nancial report:

3.3 Going concern

The fi nancial report has been prepared on the going concern basis, which contemplates continuity of normal business activities and realization of assets and settlement of liabilities in the ordinary course of business. The going concern of the Company is dependent upon it maintaining suffi cient funds for its operations and commitments. The Directors continue to monitor the ongoing funding requirements of the Company. The Directors are confi dent that suffi cient funds can be secured if required by a combination of capital raising, sale of assets or farm-outs to enable the Company to continue as a going concern and as such are of the opinion that the fi nancial report has been appropriately prepared on a going concern basis.

3.4 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

3.4.1 Interest Revenue

Interest revenue is recognised when it is probable that the economic benefi ts will fl ow to the Company and the amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial asset to that asset’s net carrying amount on initial recognition.

3.5 Employee Benefi ts

A liability is recognised for benefi ts accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of short-term employee benefi ts, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of long term employee benefi ts are measured as the present value of the estimated future cash outfl ows to be made by the Company in respect of services provided by employees up to reporting date.

Contributions to defi ned contribution retirement benefi t plans are recognised as an expense when employees have rendered service entitling them to the contributions.

3.6 Share based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 27.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profi t or loss such that the cumulative expense refl ects the revised estimate, with a corresponding adjustment to the equity-settled employee benefi ts reserve.

The policy described above is applied to all equity-settled share-based payments that were granted after 7 November 2002 and vested after 1 January 2005.

3.7 Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

3.7.1 Current tax

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

3.7.2 Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred tax liabilities are generally recognised for all taxable temporary differences.

Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profi ts will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profi t nor the accounting profi t.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

3.7.3 Current and deferred tax for the period

Current and deferred tax are recognised as an expense or income in profi t or loss, except when they relate to items that are recognised outside profi t or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profi t or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination.

3.8 Petroleum and Exploration

Development Expenditure

Petroleum and exploration development expenditure incurred is accumulated in respect of each identifi able area of interest. These costs are only carried forward in relation to each area of interest to the extent the following conditions are satisfi ed:

(a) the rights to tenure of the area of interest are current; and
(b) at least one of the following conditions is also met:
(i) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and
(ii) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and signifi cant operations in, or in relation to, the area of interest are continuing.

Accumulated costs in relation to an abandoned area are written off in full against profi t in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward cost in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the cost of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

3.9 Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is recognised so as to write off the cost or valuation of plant and equipment less their residual values over their useful lives, using the straightline method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

Depreciation rates and methods are reviewed at least annually and, where changed, are accounted for as a change in accounting estimate as illustrated in Note 4.2.1. Where depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance with the new depreciation rate or method. Depreciation recognised in prior fi nancial years is not changed, that is, the change in depreciation rate or method is accounted for on a ‘prospective’ basis.

Assets held under fi nance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profi t or loss.

3.10 Impairment of tangible and Intangible assets excluding goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identifi ed, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identifi ed.

Intangible assets with indefi nite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset for which the estimates of future cash fl ows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profi t or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profi t or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

3.11 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount is the present value of those

When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

3.11.1 Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefi ts expected to be received under it.

3.12 Financial Assets

All fi nancial assets are recognised and derecognised on trade date where the purchase or sale of a fi nancial asset is under a contract whose terms require delivery of the fi nancial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those fi nancial assets classifi ed as at fair value through profi t or loss (FVTPL), which are initially measured at fair value.

3.12.1 Loans and receivables

Trade receivables, loans, and other receivables that have fi xed or determinable payments that are not quoted in an active market are classifi ed as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

3.12.2 Effective interest method

The effective interest method is a method of calculating the amortised cost of an instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the fi nancial instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for fi nancial instruments.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

3.12.3 Impairment of fi nancial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash fl ows of the investment have been affected.

For certain categories of fi nancial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For fi nancial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the fi nancial asset’s original effective interest rate.

The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profi t or loss.

Reclassifi cation is only permitted in rare circumstances and where the asset is no longer held for the purpose of selling in the short-term. In all cases, reclassifi cations of fi nancial assets are limited to debt instruments. Reclassifi cations are accounted for

3.12.5 Derecognition of fi nancial assets

The Company derecognises a fi nancial asset only when the contractual rights to the cash fl ows from the asset expire, or when it transfers the fi nancial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred fi nancial asset, the Company continues to recognise the fi nancial asset and also recognises a collateralised borrowing for the proceeds received.

3.13 Financial liabilities and equity instruments issued by the Company

3.13.1 Classifi cation as debt or equity

Debt and equity instruments are classifi ed as either fi nancial liabilities or as equity in accordance with the substance of the contractual arrangement.

3.13.2 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

3.13.3 Derecognition of fi nancial liabilities

The Company derecognises fi nancial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.

3.14 Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

i. 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

ii. 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 fl ows are included in the statement of cash fl ows on a gross basis. The GST component of cash fl ows arising from investing and fi nancing activities which is recoverable from, or payable to, the taxation authority is classifi ed within operating

3.15 Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profi t attributable to equity holders of the entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the fi nancial year, adjusted for bonus shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the fi gures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other fi nancing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

3.16 Cash and cash equivalents

For the purposes of the statement of cash fl ows, cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amount of cash, which are subject to an insignifi cant risk of changes in value and have a maturity of three months or less at date of acquisition.

3.17 Foreign currency translation

Both the functional and presentation currency of 3D Oil Limited is Australian dollars (A$).

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Company’s accounting policies, which are described in Note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

4.1 Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see 4.2 below), that the directors have made in the process of applying the Company’s accounting policies and that have the most signifi cant effect on the amounts recognised in the fi nancial statements.

4.1.1 Recognition of Deferred Tax Assets

Judgement is required in determining whether deferred tax assets should be recognized in the Statement of Financial Position. Deferred tax assets are recognised to the extent that it is probable that suffi cient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilized.

4.2 Key sources of estimation uncertainty

4.2.1 Estimation of useful lives of property, plant and equipment

The estimation of useful lives of property, plant and equipment has been based on historical experience. Adjustments to useful lives are made when considered necessary and reviewed at each reporting date.

The following useful lives are used in the calculation of depreciation: Plant and equipment 2.5 years

5. Revenue


5. Revenue	2010	2009
	$	$
Continuing operations
Operating activities
Rent received	13,666	20,203
Investment revenue
Interest revenue	401,232	567,789
Total Revenue	414,898	587,992

Notes to the Financial Statements For the year ended 30 June 2010 Continued

6. Loss for the Year	2010	2009
	$	$
Depreciation and amortisation of non-current assets:
– Plant and equipment	(12,085)	(17,122)
– Software	(15,886)	(18,707)
	(27,971)	(35,829)
Post employment benef tplans – Superannuation contributions	(80,335)	(67,877)
Share basedpayments:
– Equitysettled share basedpayments	(63,751)	(59,540)
Charges toprovisions:
– Employment entitlements	(27,607)	(10,149)
Foreign Currency:
Realisedgain/loss on foreign currencytranslation	(139,653)	1,188,051
Unrealisedgain on foreign currencytranslation	11,479	–
	(128,174)	1,188,051
Operatingleasepayments
– Off ce lease	(83,260)	(79,815)
Expenses from takeover offer	–	(727,990)

7. Income Tax	2010	2009
	$	$
*7.1 The components of tax expense comprise:*
Current Tax	–	–
Deferred Tax	–	–
	–	–
*7.2 The prima facie tax from ordinary activities before income*
*tax is reconciled to the income tax expense as follows:*
Prof t/(Loss) from Ordinary Activities	(857,435)	(940,340)

Income tax expense/(benef t) calculated at 30%	(257,231)	(282,102)
Add:
Tax Effect of Permanent Differences:
– Share basedpayments	19,125	17,862
– Other Permanent Differences	1,203	2,657
	(236,903)	(261,583)
Add/(Less) Temporary Differences:
– Capitalised deductible exploration expenditure	(338,445)	(375,619)
– Realised foreign exchangegain	(3,444)	(376,906)
– Deductible share issue costs	(186,299)	(186,299)
– Other timingdifferences	(44,228)	27,827
Tax benef t for theyear	(809,319)	(1,172,580)
Income tax losses not taken upas benef t	809,319	1,172,580
Tax Expense	–	–
*7.3 Deferred tax assets not brought to account as assets:*
– Tax Losses	13,269,790	12,460,472
– TemporaryDifferences	(6,824,593)	(6,252,177)
	6,445,197	6,208,295

The taxation benefi ts of tax losses and temporary differences not brought to account will only be obtained if:

i) The Company derives future assessable income of a nature and of an amount suffi cient to enable the benefi t from the deductions for the losses to be realised.

ii) The Company continues to comply with the conditions for deductibility imposed by law, and

iii) No change in tax legislation adversely affects the Company in realizing the benefi ts from deducting the losses.

7.4 Petroleum Resource Rent Tax (PRRT)

PRRT applies to all petroleum projects in offshore areas under the Petroleum Act, other than some specifi c production licences. PRRT is assessed on a project basis or production licence area and is levied on the taxable profi ts of a petroleum project at a rate of 40%. Certain specifi ed undeducted expenditures are eligible for compounding. The expenditures can be compounded annually at set rates, and the compounded amount can be deducted against assessable receipts in future years.

The Company estimates that it has incurred expenditure for Vic/P57 resulting in a total carried forward undeducted expenditure against income, derived in future years of $52,298,000 as at 30 June 2010. At 1 July 2010 this estimated amount is $62,603,000 as compounding occurs annually on 1 July.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

In order for the Company to utilise undeducted expenditures for PRRT purposes from prior years, it will be required to substantiate eligible expenditure in relation to the permit since the date of its grant. Any amount that the Company is not able to substantiate cannot be utilised against assessable receipts in future years. Interests in the undeducted expenditure can be transferred between projects by the Company or to other entities on acquisition of interests in the project.

The Company has not recognised a deferred tax asset with respect to the carried forward undeducted expenditure.

8. Key Management Personnel

The key management personnel of 3D Oil Limited during the year were:

Mr C Horsfall (Chairman and Non-Executive Director) Mr N Newell (Managing Director) Ms M Leydin (Non-Executive Director, Company Secretary and Chief Financial Offi cer) Ms P Kelly (Non-Executive Director) – Appointed 5 January 2010 Mr J Keall (Exploration and Development Manager) – Resigned 27 November 2009 Mr K Lanigan (Exploration Manager) – Appointed 7 December 2009

8.1 Key Management Personnel Compensation

Details of key management personnel compensation are in the Remuneration Report within the Directors’ Report.

8.2 Aggregate Key Management Personnel Compensation

The aggregate compensation of the key management personnel of the Company is set out below:

	2010	2009
	$	$
Short-term employment benef ts	776,114	771,057
Post employment benef ts	57,824	63,894
Other long-term benef ts	–	–
Termination benef ts	12,795	–
Share basedpayments	1,222	–
	847,955	834,951

Information regarding individual directors and executives compensation and some equity instruments disclosures as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 are provided in the Remuneration Report section of the Directors’ Report.

8.3 Option holdings by Key Management Personnel or their nominees

2010	Balance	Granted as	Net Change	Balance	Vested and	Vested and	Not vested and
	1.7.2009	Compensation	Other	30.6.2010	exercisable	unexercisable	unexercisable
Mr C Horsfall	500,000	–	–	500,000	500,000	–	–
Mr N Newell	4,000,000	–	–	4,000,000	4,000,000	–	–
Ms M Leydin	–	–	–	–	–	–	–
Ms P Kelly (1)	–	–	–	–	–	–	–
MrJKeall(2)	1,500,000	–	(1,500,000)	–	–	–	–
Mr K Lanigan(3)	–	265,000	–	265,000	–	–	265,000
	6,000,000	265,000	(1,500,000)	4,765,000	4,500,000	–	265,000

(1) Appointed 5 January 2010

(2) Resigned 27 November 2009

(3) Appointed 7 December 2009

2009	Balance	Granted as	Net Change	Balance	Vested and	Vested and	Not vested and
	1.7.2008	Compensation	Other	30.6.2009	exercisable	unexercisable	unexercisable
Mr C Horsfall	500,000	–	–	500,000	500,000	500,000	–
Mr P Willcox(1)	4,000,000	–	(4,000,000)	–	–	–	–
Mr N Newell	4,000,000	–	–	4,000,000	4,000,000	4,000,000	–
Ms M Leydin(2)	–	–	–	–	–	–	–
MrJKeall	1,500,000	–	–	1,500,000	1,500,000	1,500,000	–
Mr D Vuckovic	500,000	–	(500,000)	–	–	–	–
	10,500,000	–	(4,500,000)	6,000,000	6,000,000	6,000,000	–

(1) Resigned as a Director on 23 January 2009

(2) Appointed as Director on 23 January 2009

8.4 Shareholdings by Key Management Personnel or their nominees

2010			Balance	Received as	Net Change		Balance
		1.7.2009		Compensation	Other		30.6.2010
Mr C Horsfall			–	–	38,000		38,000
Mr N Newell	37,461,450			–	238,700		37,700,150
Ms M Leydin			150,000	–	–		150,000
Ms P Kelly (1)			–	–	145,000		145,000
MrJKeall(2)			–	–	–		–
Mr K Lanigan(3)			–	–	–		–
	37,611,450			–	421,700		38,033,150
(1)Appointed 5 January 2010
(2)Resigned 27 November	2009
(3)Appointed 7 December	2009
2009			Balance	Received as	Net Change		Balance
			1.7.2008	Compensation	Other		30.6.2009
Mr P Willcox(1)			25,000	–	(25,000)		–
Mr N Newell	37,061,450			–	400,000		37,461,450
Mr C Horsfall			–	–	–		–
MrJKeall			–	–	–		–
Ms M Leydin(2)			–	–	150,000		150,000
	37,086,450			–	525,000		37,611,450
(1)Resigned as a Director on 23			January 2009
(2)Appointed as Director on 23		January 2009
						2010	2009
9. Auditors Remuneration						$	$
Auditor of the Company	– Grant Thornton Audit			Pty Ltd
Auditingor reviewingthe f nancial report						33,000	28,700
						33,000	28,700

Notes to the Financial Statements For the year ended 30 June 2010 Continued

	2010	2009
10. Cash and Cash Equivalents	$	$
Cash at bank and in hand	2,169,962	2,204,004
Short term bank deposits	6,208,696	6,265,219
	8,378,658	8,469,223
11. Trade and Other Receivables
Current
Goods and services tax receivable	17,894	166,876
Interest receivable	96,492	78,887
	114,386	245,763

The average credit period on trade and other receivables is 30 days. No interest is charged on the receivables.	The average credit period on trade and other receivables is 30 days. No interest is charged on the receivables.	The average credit period on trade and other receivables is 30 days. No interest is charged on the receivables.
The Company has f nancial risk management policies in place to ensure	that all receivables are received within the
credit timeframe. Due to the short term nature of these receivables, their carrying value is assumed to approximate
their fair value.
12. Other Current Assets
Prepayments	36,089	33,177
Depositspaid for exploration expenditure	20,713	2,428,583
	56,802	2,461,760
13. Plant & Equipment
Plant and equipment – at cost	67,556	66,306
Less: accumulated depreciation	(53,341)	(44,046)
	14,214	22,260
Movement in carrying value of plant and equipment
Openingcarryingvalue	22,260	39,382
Additions	5,178	–
Disposals	(1,139)	–
Depreciation expense	(12,085)	(17,122)
Carrying amount at end of theyear	14,214	22,260
14. Intangibles
Software – at cost	85,660	60,560
Less accumulated amortisation	(47,430)	(31,544)
	38,230	29,016
Movement in carrying value of intangibles
Openingcarryingvalue	29,016	42,405
Additions	25,100	5,318
Amortisation expense	(15,886)	(18,707)
Closingcarryingvalue	38,230	29,016

	2010	2009
15. Other Non-current Assets	$	$
Exploration and development expenditure	22,177,579	21,506,108
Movement in exploration and development expenditure
Openingcarryingvalue	21,506,108	19,838,046
Currentyear expenditure	703,409	7,340,884
Refunds received	–	(4,785,169)
Write-off expenditure	(31,938)	(887,653)
Balance at end ofyear	22,177,579	21,506,108

The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

16. Trade and Other Payables

16. Trade and Other Payables
Current
Tradepayables(1)	75,403	655,344
Amountspayable to:
– Keymanagementpersonnel	9,496	10,002
Sundry payables and accrued expenses	62,975	494,396
	147,874	1,159,742

(1) The average credit period on purchases is 30 days. No interest is charged on the trade payables. The Company has fi nancial risk management policies in place to ensure that all payables are paid within the credit timeframe. Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

17. Provisions

17. Provisions
Current
Provision for employee benef ts(1)	53,477	35,721
Provision for demobilisation	–	176,315
	53,477	212,036
Non-current
Provision for employee benef ts(1)	27,342	17,491
Provision for well abandonment	500,000	500,000
	527,342	517,491

Movement inprovisionfor well abandonment
Openingcarryingvalue	500,000	500,000
Provisions for theperiod	–	–
Closingcarryingvalue	500,000	500,000

(1) A provision has been recognised for employee entitlements relating to annual and long service leave. In calculating the present value of the future cash fl ows in respect of the long service leave, the probability of long service leave taken is based on historical data. The measurement and recognition criteria relating to employee benefi ts have been included in Note 3.5 of this report.

(2) The provision for well abandonment represents the present value of the director’s best estimate for the costs to abandon the Wardie-1 Well. This abandonment is expected to take place within the next 5 years.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

	2010 2009 18. Issued Capital $ $
	206,560,000 fully paid ordinaryshares
	(2009: 206,560,000) 50,620,867 50,620,867
	2010 2009

	No. $ No. $

	*18.1 Fully paid ordinary shares*
	Balance at beginningofperiod 206,560,000 50,620,867 206,560,000 50,620,867
	Balance at end of f nancialyear 206,560,000 50,620,867 206,560,000 50,620,867

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Changes to the corporations’ law abolished the authorised capital and par value concept in relation to the Share Capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

18.2 Terms and Conditions of Issued Capital

Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held.

At the shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

shareholder has one vote on a show of hands.
	2010	2009
*18.3 Options*	No.	No.
Balance at beginningof the f nancialyear	12,830,000	17,625,000
Granted duringthe f nancialyear	804,000	–
Exercised duringthe f nancialyear	–	–
Cancelled duringthe f nancialyear	–	(795,000)
Lapsed duringthe f nancialyear	–	(4,000,000)
“ Balance at end of the f nancialyear	13,634,000	12,830,000
Exercisable at reportingdate	12,644,000	12,430,000

6,100,000 options entitle the holder to subscribe for one ordinary share in 3D Oil Limited upon the payment of $0.50. These options will lapse at 5.00pm (AEST) on 31 January 2011 and are exercisable from 16 December 2006. The options are transferable. The options carry neither rights to dividends nor voting rights.

6,330,000 options entitle the holder to subscribe for one ordinary share in 3D Oil Limited upon the payment of $0.60. These options will lapse at 5.00pm (AEST) on 31 January 2011 and are exercisable from 16 December 2006. The options are transferable. The options carry neither rights to dividends nor voting rights.

400,000 options entitle the holder to subscribe for one ordinary share in 3D Oil Limited upon the payment of $0.75. These options will lapse at 5.00pm (AEST) on 31 March 2013 and are exercisable from 31 March 2008. The options are transferable. The options carry neither rights to dividends nor voting rights.

189,000 options entitle the holder to subscribe for one ordinary share in 3D Oil Limited upon the payment of $0.25. These options will lapse at 5.00pm (AEST) on 30 June 2014. 64,000 are exercisable from 27 August 2009 and 125,000 are exercisable from 30 June 2011. The options are transferable. The options carry neither rights to dividends nor voting rights.

615,000 options entitle the holder to subscribe for one ordinary share in 3D Oil Limited upon the payment of $0.40. These options will lapse at 5.00pm (AEST) on 30 November 2014. 150,000 are exercisable from 2 June 2010, 265,000 are exercisable from 30 November 2011 and 200,000 are exercisable from 1 January 2012. The options are transferable. The options carry neither rights to dividends nor voting rights.

Directors Options

Options granted to Directors or their nominees are disclosed in the Remuneration Report.

19. Reserves

Option Reserve

The option reserve records items recognised as expenses on valuation of employee share options.

During the current year the following options were granted to Directors, executives and employees:

125,000 options to an employee valued at $0.049 per option
64,000 options to an employee valued at $0.044 per option
465,000 options to employees valued at $0.083 per option
150,000 options to an employee valued at $0.076 per option

Details of the option valuations are included in Note 27.

Details of the option valuations are included in Note 27.
	2010	2009
Movement in Option Reserve	$	$
Balance at beginningof the f nancialyear	1,960,075	2,610,135
Share basedpayments	63,751	59,540
Lapsed and transferred to accumulated losses	–	(709,600)
Balance at end of the f nancialyear	2,023,826	1,960,075

20. Dividends

There have been no dividends paid or proposed in the 2009 or 2010 fi nancial years.

21. Commitments For Expenditure

21. Commitments For Expenditure
*21.1 Operating Lease Commitments*
Not longer than 1year	86,743	83,007
Longer than 1year and not longer than 5years	136,360	221,879
Longer than 5years	–	–
	223,103	304,886

21.2 Exploration Licenses – Commitments for Expenditure

In order to maintain current rights of tenure to exploration tenements, the
Company is required to outlay rentals and to meet the minimum expenditure
requirements of the Mineral Resources Authority. Minimum expenditure
commitments may be subject to renegotiation and with approval may
otherwise be avoided by sale, farm out or relinquishment. These obligations
are not provided in the accounts and are payable:
Not longer than 1year	4,500,000	4,250,000
Longer than 1year and not longer than 5years	15,000,000	15,000,000
Longer than 5years	–	–
	19,500,000	19,250,000

The Minimum Guaranteed Dry Hole Work Programme commitments for Exploration Permit Vic/P57 have been fulfi lled with the drilling of Wardie-1 and West Seahorse-3 wells. The Secondary Work Programme commitments are on a year by year basis and the commitment is $500,000.

The conditions of Exploration Permit T/41P are on a year by year basis. On 23 March 2010 a 12-month Suspension and Extension to the Work Program was granted. The current commitment is $19,000,000.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

22. Segment Information

The Group has adopted AASB 8 Operating Segments with effect from 1 July 2009. AASB 8 requires operating segments to be identifi ed on the basis of internal reports about the components of the Company that are regularly reviewed by the chief decision maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (AASB 114 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risk and returns approach, with the entity’s ‘system of internal fi nancial reporting to key management personnel’ serving only as the starting point for the identifi cation of such segments.

Upon the adoption of AASB 8, there has been no change to the reportable segments. The Company has therefore not changed any reporting for the previous corresponding period. 3D Oil Limited operates in the development of oil and gas within Australia. The Company’s activities are therefore classifi ed as one business segment.

23. Related Party Disclosures

Key Management Personnel Compensation

Details of key management compensation are disclosed in the Remuneration Report and Note 8.

Transactions with Key Management Personnel

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

During the year ended 30 June 2010 there were no related party transactions other than those detailed in the Remuneration Report and Note 8.

Remuneration Report and Note 8.
	2010	2009
24. Notes to the Cash Flow Statement	$	$
*24.1 Financing Facilities*
The Companyhas no f nancingfacilities inplace at 30June 2010.
*24.2 Reconciliation of Net Loss from ordinary activities after related*
*income tax to net cashf owsfrom operating activities*
Loss after related income tax	(857,435)	(940,340)
Less: Non-cash activities:
~~“~~ Depreciation and amortisation of non-current assets	27,971	35,829
Share basedpayments expense	63,751	59,540
Exploration costs written off	31,936	887,653
Realised (gain)/loss on foreign currencytranslation	139,653	(1,188,051)
Unrealisedgain on foreign currencytranslation	(11,479)	–
Loss on sale ofplant and equipment	939	–
Annual and longservice leaveprovisions	27,607	10,149
Changes in net assets and liabilities:
(Increase)/Decrease in assets:
Trade and other receivables	131,378	253,485
Prepayments	(2,912)	(26,656)
Increase/(Decrease) in liabilities:
Trade and otherpayables	(1,011,868)	(123,388)
Net cash from (used in) operatingactivities	(1,460,459)	(1,031,779)

25. Financial Instruments

The Company’s principal fi nancial instruments comprise cash and cash equivalents.

The main purpose of these fi nancial instruments is to fi nance the Company’s operations. The Company has various other fi nancial assets and liabilities such as receivables and trade payables, which arise directly from its operations. It is, and has been throughout the entire period, the Company’s policy that no trading in fi nancial instruments shall be undertaken.

The main risks arising from the Company’s fi nancial instruments are cash fl ow interest rate risk and foreign exchange risk. Other minor risks are summarised below. The Board reviews and agrees policies for managing each of these risks.

25.1 Cash fl ow interest rate risk

The Company’s exposure to the risks of changes in market interest rates relates primarily to the Company’s short-term deposits with a fl oating interest rate. These fi nancial assets with variable rates expose the Company to cash fl ow interest rate risk. All other fi nancial assets and liabilities in the form of receivables and payables are non-interest bearing. The Company does not engage in any hedging or derivative transactions to manage interest rate risk.

The following tables set out the carrying amount by maturity of the Company’s exposure to interest rate risk and the effective weighted average interest rate for each class of these fi nancial instruments. Also included is the effect on profi t and equity if interest rates at that date had been 30% (40% 2009) higher or lower with all other variables held constant as a sensitivity analysis.

The Company has not entered into any hedging activities to cover interest rate risk. In regard to its interest rate risk, the Company continuously analyses its exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative

There has been no change in cash fl ow interest rate risk since the prior year.

	Float	Interest Rate	Non-Interest Bearing	Non-Interest Bearing	Total Carrying Amount	Total Carrying Amount
	2010	2009	2010	2009	2010	2009
	$	$	$	$	$	$
Financial Assets
Cash and cash equivalents	8,378,658	8,469,223	–	–	8,378,658	8,469,223
Trade and other receivables	–	–	114,386	245,763	114,386	245,763
Other current assets	–	–	56,802	2,461,760	56,802	2,461,760
Total	8,378,658	8,469,223	171,188	2,707,523	8,549,845	11,176,746
Weighted average interest rate	3.66%	4.24%
Financial Liabilities
Trade and otherpayables	–	–	147,874	1,159,742	147,874	1,159,742
Total	–	–	147,874	1,159,742	147,874	1,159,742
Weighted average interest rate	–	–
Net f nancial assets (liabilities)	8,378,658	8,469,223	23,314	1,547,781	8,401,972	10,017,004
			-30%	-40%	30%	40%
			2010	2009	2010	2009
Interest Rate Sensitivity			$	$	$	$
Change inprof t			(91,998)	(143,638)	91,998	143,638

Change in equity			(91,998)	(143,638)	91,998	143,638

A sensitivity of 30% has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. A 30% sensitivity would move short term interest rates at 30 June 2010 from 3.66% to 4.76% representing a 110 basis points shift. This would represent two to three increases which is reasonably possible in the current environment with the bias coming from the Reserve Bank of Australia and confi rmed by market expectations that interest rates in Australia are more likely to move up than down in the coming period. This sensitivity used in the previous fi nancial year was 40%.

Based on the sensitivity analysis only interest revenue from variable rate deposits and cash balances is impacted resulting in a decrease or increase in overall income.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

25.2 Liquidity risk

The Company is exposed to liquidity risk by having to maintain suffi cient cash reserves to close out market positions in a timely manner and manages this risk by maintaining suffi cient cash reserves and through the continuous monitoring of budgeted and actual cash fl ows. The Company aims at maintaining fl exibility in funding by having plans in place to source additional capital as required.

Financial Assets

The following table details the Company’s expected maturity for its non-derivative fi nancial assets.

	2010	2009
	$	$
Contracted maturities of receivables and cash and cash equivalents at reportingdate:
Receivable:
– less than 6 months	2,284,091	706,835
– 6 to 12 months	6,208,954	8,008,151
– 1 to 5years	–	–
– later than 5years	–	–
Total	8,493,045	8,714,986

Financial Liabilities

The following tables the Company’s remaining contractual maturity for its

	2010	2009
	$	$
Contracted maturities ofpayables as at reportingdate:
Payable:
– less than 6 months	147,874	1,159,742
– 6 to 12 months	–	–
– 1 to 5years	–	–
– later than 5years	–	–
Total	147,874	1,159,742

25.3 Commodity Price Risk

The Company is exposed to commodity price risk. This risk arises from its activities directed at exploration and development mineral commodities. If commodity prices fall, the market for companies exploring for these commodities is affected. The Company does not hedge its exposures.

25.4 Foreign Exchange Risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company’s functional currency. The Company manages foreign currency risk by minimising the amounts of foreign currency required and buying foreign currency only at the time it is required. Cash at bank, prepayments and trade payables may be held in United States Dollars (USD).

The following tables set out the carrying amount by maturity of the Company’s exposure to foreign exchange risk. Also included is the effect on fi nancial assets at that date if exchange rates had been 10% (20% 2009) higher or lower with all other variables held constant as a sensitivity analysis.

The Company has not entered into any hedging activities to cover foreign exchange risk. In regard to its foreign exchange risk, the company continuously analyses its exposure. Within this analysis consideration is given to forward rates and the effects of hedging.

There has been no change in foreign exchange rate risk since the prior year.

	Amounts in foreign currency	Amounts in foreign currency	Foreign	Exchange	Rate Risk Sensitivity 2010	Rate Risk Sensitivity 2010
			10%	20%	–10%	-20%
	2010	2009	2010	2009	2010	2009
	USD	USD	$	$	$	$
Financial Assets
Cash and cash equivalents	117,489	215,867	10,014	35,035	(10,014)	(35,035)
Other current assets	8,298	1,482,169	707	240,556	(707)	(240,556)
Total	125,787	1,698,036	10,721	275,591	(10,721)	(275,591)
Financial Liabilities
Trade and otherpayables	–	–	–	–	–	–
Total	–	–	–	–	–	–

Net Financial assets (liabilities)	125,787	1,698,036

A sensitivity of 10% (2009 20%) has been selected as this is considered reasonable given the current level of both short term and long term exchange rate movement for this currency and the above analysis assumes all other variables remain constant.

25.5 Net Fair Values

For fi nancial assets and liabilities, the net fair value approximates their carrying value. No fi nancial assets and fi nancial liabilities are readily traded on organised markets in standardised form. The Company has no fi nancial assets where carrying amount exceeds net fair value at reporting date.

25.6 Credit Risk

Credit risk arises from cash and cash equivalents and outstanding receivables. The cash balances are held in fi nancial institutions with high ratings and the receivables comprise interest receivable from fi nancial institutions and GST input tax credits refundable by the ATO. The Company has assessed that there is minimal risk that the cash and receivables balances are impaired.

The Company’s receivables at reporting date are detailed in Note 11.

The maximum exposure to credit risk on fi nancial assets of the Company which have been recognised in the Statement of Financial Position is generally the carrying amount.

25.7 Capital Risk Management

When managing capital, management’s objective is to ensure the Company continues as a going concern as well as to maintain optimal returns to shareholders and benefi ts for other stakeholders. Management also maintains a capital structure that ensures the lowest cost of capital available to the Company.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholder, issue new shares, enter into joint ventures or sell shares.

Notes to the Financial Statements For the year ended 30 June 2010 Continued

The Company does not have a defi ned share buy-back plan. No dividends were paid in 2009 or in 2010.

There is no current intention to incur debt funding on behalf of the Company for on-going petroleum exploration expenditure which will be funded via equity or joint ventures with other companies. Debt funding may be required in progressing the development assets of the Company. The Company is not subject to any externally imposed capital requirements. Management reviews management accounts on a monthly basis and reviews actual expenditure against budget on a monthly basis.

26. Earnings Per Share

	2010
2009
	Cents per share
Centsper share
Basic earnings (loss)per share	(0.42)	(0.46)
Diluted earnings (loss)per share	(0.42)	(0.46)
(i) Calculated on a post-split basis
The earnings and weighted average number of ordinary shares used in the
calculation of basic and diluted earningsper share are as follows
Earnings(i)	(857,435)	(940,340)
	2010	2009
	No.	No.
Weighted average number of ordinaryshares(ii)	206,560,000	206,560,000
(i)Earnings are the same as loss after tax in the statement of
comprehensive income.
(ii)The following weighted average of potential ordinary shares are not
dilutive and are therefore excluded from the weighted average number of
shares, used in the calculation of diluted earningsper share.	219,548,967	223,772,027

Diluted Earnings Per Share

The rights to options held by option holders have not been included in the weighted average number of ordinary shares for the purposes of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 “Earnings per Share”. The rights to options are non-dilutive as the exercise price was signifi cantly higher than the Company’s share price as at 30 June 2009 and 2010.

27. Share Based Payments

Volatility in all cases below has been measured with reference to the historical volatility of share price returns for companies comparable to 3D Oil Limited.

During the current year the Company issued 125,000 options to an employee, exercisable at $0.25 and expiring 30 June 2014. The options having been valued using the Binomial methodology incorporating a Hull-White adjustment at $0.049. The following variables were used in this calculation:

Share Price:	$0.115
Exercise Price:	$0.25
Volatility:	80%
Time to Maturity:	4.84 years
Risk Free Interest Rate:	5.16%

During the current year the Company issued 64,000 options to an employee, exercisable at $0.25 and expiring 30 June 2014. The options having been valued using the Binomial methodology incorporating a Hull-White adjustment at $0.044. The following variables were used in this calculation:

Share Price:	$0.115
Exercise Price:	$0.25
Volatility:	80%
Time to Maturity:	4.84 years
Risk Free Interest Rate:	5.16%
During the current year the Company issued 265,000 options to an employee, exercisable at $0.40 and expiring
30 November 2014. The options having been valued using the Binomial methodology incorporating a Hull-White
adjustment at $0.083. The following variables were used in this calculation:
Share Price:	$0.20
Exercise Price:	$0.40
Volatility:	80%
Time to Maturity:	4.5 years
Risk Free Interest Rate:	4.97%
During the current year the Company issued 200,000 options to an employee, exercisable at $0.40 and expiring
30 November 2014. The options having been valued using the Binomial methodology incorporating a Hull-White
adjustment at $0.083. The following variables were used in this calculation:
Share Price:	$0.20
Exercise Price:	$0.40
Volatility:	80%
Time to Maturity:	4.5 years
Risk Free Interest Rate:	4.97%
During the current year the Company issued 150,000 options to an employee, exercisable at $0.40 and expiring
30 November 2014. The options having been valued using the Binomial methodology incorporating a Hull-White
adjustment at $0.076. The following variables were used in this calculation:
Share Price:	$0.20
Exercise Price:	$0.40
Volatility:	80%
Time to Maturity:	4.5 years
Risk Free Interest Rate:	4.97%

28. Events After The Balance Sheet Date

There has not been any matter or circumstance that has arisen since the end of the fi nancial year, that has signifi cantly affected, or may signifi cantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in future fi nancial years, other than:

On 3 August 2010, conditions of Exploration Permit for Petroleum Vic/P57 were varied to remove well expenditure from Year 6 and replace this with reprocessing of 360sq km of Northern Fields open fi le 3D seismic data.

Additional Shareholder Information

==> picture [35 x 52] intentionally omitted <==

The shareholder information set out below was applicable as at 22 September 2010.

1. Distribution of Shareholders

(a) Analysis of number of shareholders ordinary fully paid shares by size of holding.

Category of holding	Holders	Number of Shares	% of Capital
1 – 500	13	799	0.00%
501 – 1,001	17	16,030	0.01%
1,001 – 5,000	182	580,931	0.28%
5,001 – 10,000	192	1,678,671	0.81%
10,001 – 100,000	494	19,902,898	9.64%
100,001 and over	164	184,380,671	89.26%
Total	1,062	206,560,000	100.00%
Less than marketableparcels	94	132,359	0.06%

2. Twenty Largest Shareholders

The names of the twenty largest holders by account holding of ordinary shares (partly paid and fully paid) are listed below:

(partly paid and fully paid) are listed below:
Shareholder	Holding	%
Noel Newell	37,061,450	17.94%
GKI Resort Pty Limited	13,680,000	6.62%
Bond Street Custodians Limited	12,108,693	5.86%
H Louey Pang & Co. Pty Ltd	11,600,000	5.62%
Furgo Multi Client Services Pty Ltd	6,475,000	3.13%
Bill Hopper	6,475,000	3.13%
Pand Jr Pty Ltd	6,458,360	3.13%
J K Demaria Pty Ltd	4,128,994	2.00%
National Nominees Limited	3,520,000	1.70%
Andrew Paterson	3,237,500	1.57%
Pengold Pty Ltd	3,237,500	1.57%
DMG & Partners Securities Pte Ltd	3,098,943	1.50%
V Haidu & W Naidu	3,037,500	1.47%
Noel Mainwaring	3,000,000	1.45%
Mr R Barwick	2,500,000	1.21%
Ellie Sunshine Pty Ltd	2,500,000	1.21%
Phillip Securities Pte Ltd	2,370,000	1.15%
Vobe Resources Pty Ltd	2,300,000	1.11%
Mr J Hannah	1,993,200	0.96%
Nefco Nominees Pty Ltd	1,914,821	0.93%
Total Top 20 Holders	130,696,961	63.27%
Balance of Holders	75,863,039	36.73%
Total Holders	206,560,000	100.00%

3. Restricted Securities

As at 22 September 2010, the Company had no securities subject to escrow arrangement.

4. Substantial Shareholders

As at 22 September 2010 the substantial shareholders were as follows:

Name of Shareholder	No of Shares	% of Issued Capital
Noel Newell	37,061,450	17.94%
GKIResort PtyLimited	13,680,000	6.62%
Bond Street Custodians Limited	12,108,693	5.86%
H LoueyPang& Co. PtyLtd	11,600,000	5.62%

5. Voting Rights

At a general meeting of shareholders:

(a) On a show of hands, each person who is a member or sole proxy has one vote.

(b) On a poll, each shareholder is entitled to one vote for each fully paid share.

Corporate Governance Statement

==> picture [114 x 52] intentionally omitted <==

The directors of 3D Oil Limited believe fi rmly that benefi ts will fl ow from the maintenance of the highest possible standards of corporate governance. A description of the company’s main corporate governance practices is set out below. The Company has adopted the 2nd Edition of the “Corporate Governance Principals and Recommendations of the ASX Corporate Governance Council” issued by the ASX Corporate Governance Council in August 2007.

Principal	Best Practice Recommendation	Compliance	Reason for Non-compliance
No
1.1	Establish the functions reserved	The board has adopted a formal	Not applicable.
	to the board and those delegated to	charter setting out the responsibilities
	senior executives and disclose	of the Board. This charter can be
	those functions.	accessed at www.3doil.com.au. Any
		functions not reserved for the Board
		and not expressly reserved for members
		by the Corporations Act andASX
		Listing Rules are reserved for
		senior executives.
1.2	Disclose the process for evaluating	The Board meets annually to review	Not applicable.
	the performance of senior executives.	the performance of executives. The
		senior executives’ performance is
		assessed against the performance
		of the company as a whole.
1.3	Provide the information indicated	A performance evaluation has been	Not applicable.
	in the Guide to reporting on	completed during the reporting
	Principal 1.	period in accordance with the
		process detailed in 1.2 above.
2.1	A majority of the Board should	Currently 3D Oil Limited has two	Due to the Company’s size, the
	be independent of directors.	independent directors and two non	Board considers that a majority
		independent directors.	of independent Directors is not
			currently warranted. As the
			Company’s activities expand, the
			policy will be reviewed, with a
			view to aligning the Company’s
			policies to conformity with this
			recommendation.
2.2	The chair should be an	The Chairman, Mr Campbell	Not applicable.
	independent director.	Horsfall, is independent.
2.3	The roles of chair and chief executive	The Chairman is Mr Campbell	Not applicable.
	off cer should not be exercised by the	Horsfall and the Managing Director is
	same individual.	Mr Noel Newell.
2.4	The board should establish a	The board has a nomination committee	Not applicable.
	nomination committee.	with the following members:
		Mr Campbell Horsfall (Chairman)
		Ms Melanie Leydin
2.5	Disclose the process for evaluating	The performance evaluation of board	Not applicable.
	the performance of the board, its	members occurs by way of an informal
	committee and individual directors.	review by the full board (in the absence
		of the relevant Board member).

Principal	Best Practice Recommendation	Compliance	Reason for Non-compliance
No
2.6	Provide the information indicated in	The skills, experience and expertise relevant	Not applicable.
	the Guide to reporting on Principle 2.	to the position held by each director is
		disclosed in the Directors’ Report which
		forms part of the Annual Report.
		The name of the Independent Directors is
		disclosed above.
		The directors are entitled to take
		independent professional advice at the
		expense of the company. The period of
		off ce held by each director is disclosed in
		the Directors’ Report which forms part of
		this Annual Report.
3.1	Establish a code of conduct and	The Company has adopted a Board Code	Not applicable.
	disclose the code for a summary of	of Conduct and a Company Code of
	the code as to:	Conduct, both of which can be accessed
	• the practice necessary to	at www.3doil.com.au
	maintain conf dence in the
	Company’s integrity;
	• the practices necessary to take
	into account their legal obligations
	and the reasonable expectations of
	their stakeholders;
	• the responsibility and
	accountability of individuals for
	reporting and investigating reports
	of unethical practices.
3.2	Establish a policy concerning trading	The Company has adopted a Trading	Not applicable.
	in Company securities by directors,	Policy which can be accessed at
	senior executives and employees, and	www.3doil.com.au.
	disclose the policy or a summary of
	that policy.
3.3	Provide the information indicated in	The information has been disclosed	Not applicable.
	the Guide to reporting on Principle 3.	in the Annual Report.
4.1	The board should establish an	The company has an established an	Not applicable.
	audit committee.	Audit Committee.
4.2	The audit committee should be	The Audit Committee has two members,	Not applicable.
	structured so that it: consists only of	consisting of Campbell Horsfall and
	non-executive directors;	Melanie Leydin.
	• consists of a majority of independent directors;	The Audit Committee is chaired by Melanie Leydin.
	• is chaired by an independent chair,
	who is not chair of the board;
	• has at least three members.
4.3	The audit committee should	The formal charter can be accessed at	Not applicable.
	have a formal charter.	www.3doil.com.au.

Corporate Governance Statement Continued

Principal	Best Practice Recommendation	Compliance	Reason for Non-compliance
No
4.4	Provide the information in the Guide	The names of the members of the Audit	Not applicable.
	to reporting on Principle 4.	Committee are disclosed above. The
		qualif cations of the members of the Audit
		Committee are disclosed in the Directors’
		Report which forms part of this Annual
		Report. The audit committee will meet
		twice in each year, before sign off of the
		annual and half year f nancial statements.
		The external auditor, Grant Thornton Audit
		Pty Ltd, has a rotation policy such that
		lead partners are rotated every 5 years and
		review partners are rotated every 5 years.
5.1	Establish written policies and	The Company has adopted a Disclosure	Not applicable.
	procedures designed to ensure	Policy which can be accessed at
	compliance withASXListing Rule	www.3doil.com.au
	disclosure requirements and to
	ensure accountability at a senior
	executive level for that compliance
	and disclose those policies or a
	summary of those policies.
5.2	Provide the information indicated in	The information has been disclosed in	Not applicable.
	the Guide to reporting on Principle 5.	the Annual Report.
6.1	Design a communications policy for	The Company has adopted a Shareholder	Not applicable.
	promoting effective communication	Communications Policy which can be
	with shareholders and encouraging	accessed at www.3doil.com.au.
	their participation at general meetings
	and disclose that policy or a summary
	of that policy.
6.2	Provide the information indicated in	The information has been disclosed in	Not applicable.
	the Guide to reporting on Principle 6.	the Annual Report
7.1	Establish policies for the oversight	The Company has adopted Risk	Not applicable.
	and management of material business	Management Policy which can be
	risk and disclose a summary of those	accessed at www.3doil.com.au. This
	policies.	policy outlines the material risks faced
		by the Company as identif ed by the
		Board. Given the size and scale of
		3D Oil Limited it does not have
		a Risk sub-committee or Internal
		Audit function.
7.2	The board should require	The Board believes the risk management	Management has not formally
	management to design and	and internal controls systems designed	reported to the board as to the
	implement the risk management	and implemented by the Directors and	effectiveness of the company’s
	and internal control system to manage	the Chief Financial Off cer are adequate	management of its material
	the Company’s material business risks	given the size and nature of the Company’s	business risks. Given the nature
	and report to it on whether those	activities. The Board informally reviews	and size of the Company and the
	risks are being managed effectively.	and requests management to report on risk	Board’s ultimate responsibility to
	The board should disclose that	management and internal control.	manage the risks of the Company
	management has reported to it as		this is not considered critical.
	to the effectiveness of the Company’s		The Company intends to develop
	management of its material		the risk reporting framework
	business risks.		into a detailed policy as its
			operations continue to grow.

Principal	Best Practice Recommendation	Compliance	Reason for Non-compliance
No
7.3	The board should disclose whether	The Board receives assurance from Mr Noel	Not applicable.
	it has received assurance from the	Newell (Managing Director) and the chief
	chief executive off cer (or equivalent)	f nancial off cer in the form of a declaration,
	and the chief f nancial off ce (or	prior to approving f nancial statements.
	equivalent) that the declaration
	provided in accordance with section
	295A is the Corporations Act is
	founded on a sound system of risk
	management and internal control and
	that the system is operating effectively
	in all material respects in relation to
	f nancial reporting risks.
7.4	Companies should provide the	The information has been disclosed in	Not applicable.
	information indicated in the Guide to	the Annual Report.
	reporting on Principle 7.
8.1	The board should establish a	The Board has an established Remuneration	Not applicable.
	remuneration committee.	Committee. The Remuneration Committee
		has two members, consisting of the
		Directors, Campbell Horsfall and Melanie
		Leydin. There was a single meeting of
		the Remuneration Committee during the
		reporting period which was attended by all
		member of the Remuneration Committee.
		The Remuneration Committee is chaired
		by Campbell Horsfall. The Remuneration
		committee charter can be accessed at
		www.3doil.com.au.
8.2	Companies should clearly distinguish	The structure of non-executive	Not applicable.
	the structure of non-executive	directors’ remuneration is clearly
	directors’ remuneration from that	distinguished from that of executive
	of executive directors and senior	directors and senior executives, as
	executives.	described in the Directors’ Report which
		forms part of this Annual Report.
8.3	Companies should provide the	The information has been disclosed in	Not applicable.
	information indicated in the guide to	the Annual Report.
	reporting on Principle 8.

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AI assistant

3D ENERGI LIMITED — Annual Report 2010

65904_rns_2010-10-28_b062df9f-e9ad-4a8d-80ff-4b228fa8457c.pdf

3D Oil Limited

Corporate directory

Board of Directors

Company Secretary

Place of Business

Auditor

Legal Advisors

Share Registry

Stock Exchange Listing

Dear Shareholders

Vic/P57, Gippsland Basin Offshore Victoria

Background

West Seahorse Field

Exploration

T/41P, Bass Basin, Offshore Tasmania Background

Directors

Events Subsequent to Balance Date

Share Options

Proceedings on Behalf of the Company

Directors’ Meetings

Indemnifi cation of Offi cers and Auditors

Auditor’s Independence Declaration

Non-Audit Services

This report outlines the remuneration arrangements in place for Directors and executives of 3D Oil Limited (the “Company”).

Remuneration Philosophy

Executive Director Remuneration

Non-Executive Director Remuneration

Performance Based Remuneration

Relationship between the remuneration policy and company performance

Key Management Personnel Compensation

Details of Remuneration for Year Ended 30 June 2010

Details of Remuneration for Year Ended 30 June 2009

Shares Issued as Part of Remuneration for the Year Ended 30 June 2010

Shares Issued as Part of Remuneration for the Year Ended 30 June 2009

Options Issued as Part of Remuneration for the Year Ended 30 June 2010

Options Issued as Part of Remuneration for the Year Ended 30 June 2009

Employment contracts

1. General Information

2. Adoption of new and revised Accounting Standards

2.1 Standards and Interpretations affecting amounts reported in the current period

Standards affecting presentation and disclosure

Standards and Interpretations affecting the reported results or fi nancial position

2.2 Standards and Interpretations adopted with no effect on the fi nancial statements

2.3 Standards and Interpretations in issue not yet adopted

3. Signifi cant accounting policies

3.1 Statement of compliance

3.2 Basis of preparation

3.3 Going concern

3.4 Revenue recognition

3.4.1 Interest Revenue

3.5 Employee Benefi ts

3.6 Share based payments

3.7 Taxation

3.7.1 Current tax

3.7.2 Deferred tax

3.7.3 Current and deferred tax for the period

3.8 Petroleum and Exploration

Development Expenditure

3.9 Plant and equipment

3.10 Impairment of tangible and Intangible assets excluding goodwill

3.11 Provisions

3.11.1 Onerous contracts

3.12 Financial Assets

3.12.1 Loans and receivables

3.12.2 Effective interest method

3.12.3 Impairment of fi nancial assets

3.12.5 Derecognition of fi nancial assets

3.13 Financial liabilities and equity instruments issued by the Company

3.13.1 Classifi cation as debt or equity

3.13.2 Equity instruments

3.13.3 Derecognition of fi nancial liabilities

3.14 Goods and services tax

3.15 Earnings per share

Basic earnings per share

Diluted earnings per share

3.16 Cash and cash equivalents

3.17 Foreign currency translation

3D ENERGI LIMITED Annual Report 2010