Page 67 - Sun Resources 2014 Annual Report

19 Financial Risk Management (continued)
d Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting
date. The quoted market price used for financial assets held by the Group is the current bid price.
The carrying value less impairment provision for trade receivables and trade payables are assumed to approximate
their fair values due to their short-term nature.
20 Interest in Joint Venture Operations
The consolidated entity’s share of assets employed in joint ventures, referred to in the “Review of Activities” set out on
pages 8 to 15 and in the “Tenement Directory” on page 16, are included in the Consolidated Statement of Financial
Position under the classifications shown below. The joint ventures do not have separate books of account and relate
solely to contribution/interest in a well or expenditure on an area of interest. This is distinct from operating/producing joint
ventures, which have assets and liabilities. Please refer to “Tenement Directory” for details of the Company’s percentage
interest in each joint venture area.
Consolidated
2014
$
2013
$
Oil and gas properties 34,173,717 59,212,806
21 Contingencies
Contingent Liability
Richland Bankruptcy
Sun has entered into a Settlement Agreement with the Bankruptcy Trustee and the other working interest owners
of the Beeler Oil Project. The Company is waiting for approval of the Settlement Agreement from the Bankruptcy
Judge. A hearing is scheduled in September 2014 for the purpose of hearing objections to the Settlement
Agreement made by certain trade creditors of Richland Resources Corporation (“Richland”). Approval of the
Settlement Agreement will resolve all matters between Sun, Richland and the Richland creditors. It is unlikely that all
matters will be resolved in September 2014 as the Judge will most likely schedule additional hearings in connection
with the objections to the Settlement Agreement.
The amount of the proposed settlement is US$172,000 and this amount has been recorded as a liability at 30
June 2014. The likely maximum legal amount that can be claimed against Sun is US$172,000 which is the amount
of Sun’s unpaid Joint Interest Billings to Richland from the time when Richland was the Operator of the Beeler Oil
Project. In the event the Settlement Agreement is not approved it is anticipated that Sun’s exposure will only increase
by the amount of additional attorneys’ fees that will be required to dispute cases that might be brought by individual
trade creditors of Richland.
Amerril Dispute
Sun is currently in a legal dispute with Amerril Energy LLC (“Amerril”) regarding certain drilling, completion and
production issues within the T. Keeling #1H and Seale #1H production units. As a consequence, the outstanding
recorded amounts unpaid by Sun relating to previous operations are subject to further negotiation and could
become due and payable. The amounts are likely to be less than US$2.3 million, but the actual amount is not yet
clearly measurable and is still subject to future and further negotiation. Sun expects to progress this matter through
the court system in Texas.
Amerril has also advised that there is a lien over the Seale #1H well from Weatherford Inc. that could lead to a future
contingent financial liability of US$2.5 million net to Sun. However, that is currently the subject of litigation between
Amerril and Weatherford Inc. whereby Amerril and Sun have counter claims against Weatherford in the amount of
approximately US$4-5 million, net to Sun.
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS
SUN RESOURCES ANNUAL REPORT 2014  65