Star Energy Group plc
Star Energy Group plc
Ground Floor
Burdett House
15/16 Buckingham Street
London 
WC2N 6DU 
T: +44 (0) 20 7925 2121
F: +44 (0) 20 7930 9919
www.starenergy.co.uk
Star Energy
Group plc
ANNUAL REPORT & ACCOUNTS 
2006
Star Energy Group plc  ANNUAL REPORT & ACCOUNTS 2006
Click to return to contents Star Energy is an energy  
group with a distinctive  
business model.
Star Energy’s primary focus is to build a  
significant multi-site gas storage business.  
We aim to consolidate our existing oil and gas  
production business to provide the depleted  
reservoirs that form the basis of future gas  
stores. We will exploit our expertise in operating  
onshore oil and gas fields safely and responsibly  
in environmentally sensitive areas. Star Energy  
will take advantage of opportunities to expand  
its asset base in the UK and, where appropriate,  
continental Europe.
C o n t e n t s
01 Highlights
02 Chairman’s Statement
03 Chief Executive’s Review
04  Star Energy at a Glance
05  Corporate Social Responsibility Statement
06 Operational Review – Gas Storage
08 Gas Storage Q&A
12 Gas Storage Process
14 Operational Review – Oil & Electricity Production
16 Financial Review
18 Board of Directors
20 Shareholder Information
21 Directors’ Report
22 Directors’ Remuneration Report 2006 
27 Corporate Governance Statement
29 Statement of Directors’ Responsibilities in Respect  
   of the Preparation of the Financial Statements
30 Independent Auditors’ Report to the Members  
   of Star Energy Group plc
31 Consolidated Profit and Loss Account
32 Consolidated Balance Sheet
33 Company Balance Sheet
34 Consolidated Cash Flow Statement
35  Consolidated Reconciliation of Movements in Group 
  Shareholders’ Funds
36  Notes to the Financial Statements
52  Unaudited Statement of Net Commercial Oil and Gas    
   Reserve Quantities – Proven and Probable
Star Energy Group plc Glossary
bbl barrels
bcf billion (10
9
) cubic feet 
boe barrels of oil equivalent
bopd barrels of oil per day
boepd barrels of oil equivalent per day
km kilometre
mmbbl millions of barrels
mmscf million standard cubic feet
MW Mega (10
6
) Watt
MWh Mega (10
6
) Watt-hour
probable reserves  those reserves which are not yet proven but which 
are estimated to have a 50% chance of being 
technically and economically producible
proven reserves  those reserves which, on the available evidence, 
are reasonably certain to be technically and 
economically producible: that is, having a 90% 
chance of being produced
EPC Engineering, Procurement and Construction
Photography by Giles Barnard
Click on the page number or heading 
below to go direct to selected page
Click to return to contents 01 Star Energy Group plc Annual Report and Accounts 2006
Highlights 2006
Operational
The Humbly Grove gas store handed over to the customer, Vitol SA, 
for full customer nominations with effect from 1 February 2006
The Group adopted the Gas Act 1965 as the preferred approach 
for all of its future gas storage planning applications, with the 
expectation that it will provide enhanced certainty of planning 
application timelines
Proven and probable oil and gas reserves independently assessed  
at 25.1 million boe as at 31 December 2006 (2005: 26.3 million boe)
Average oil production for the year was 4,093 bopd  
(2005: 4,178 bopd weighted average oil production, including  
the Pentex acquisition) 
In March 2007, the Royal Society for the Prevention of Accidents 
(RoSPA) granted Star Energy the Gold Award for Occupational  
Safety for 2006
Financial
T urnover of £57.1 million (2005: £24.7 million)
Profit before tax of £14.6 million (2005: £2.1 million)
Basic earnings per share of 4.72 pence per ordinary share  
(2005: 1.82 pence)
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2006 began well for Star Energy with the 
Humbly Grove gas store being handed over  
to the customer, Vitol SA, for full customer 
nominations on 1 February 2006.
With slow progress towards obtaining planning 
permission for further gas storage capacity, 
2006 has consequently been very challenging. 
Following the refusal of Lincolnshire County 
Council to grant permission for our Welton 
gas store, despite a recommendation from 
local planning officers, the Company took the 
decision to adopt the Gas Act 1965 for future 
gas storage applications. Although this new 
approach has required significant extra work 
and resources, including extensive dialogue 
with the Department of Trade and Industry 
(DTI), the Company believes that it provides 
greater certainty of planning application 
timelines. We will continue with our strategy 
of progressing multiple gas storage projects 
simultaneously and 2007 will see our first 
planning submissions under this legislation. 
Further gas storage capacity remains critical to 
ensuring security of gas supply to householders 
in the coming winters, and we will continue 
to need clear direction and support from 
Central Government to ensure the timely 
commissioning of this capacity. 
As a Company operating onshore in the UK, 
often in quiet rural areas, Star Energy expended 
considerable time and effort in 2006 on 
engaging local communities and stakeholders 
in our plans. We will continue with our 
efforts to provide greater transparency and 
understanding of the impact of our operations 
on these communities, the benefits of what 
we are doing, and how we seek to mitigate the 
impact on their environment. In some cases, 
strong local concerns have caused us to rethink 
our options for well and plant locations, adding 
considerably to the project cost; however, we 
believe that our flexibility of approach will help 
build sustainable, long-term relationships with 
these communities.
During 2006 we explored other opportunities 
to move our business towards our strategic 
goal of being a multi-site gas storage operator. 
These included both offshore UK and non-UK, 
Western European opportunities, with the 
Company having entered into a joint venture  
to evaluate the possibility of converting the 
North Sea Forbes field into a gas store with  
up to 50 bcf of capacity.
We strongly value the support of our investors 
and remain committed to increasing the 
value of their investment through the delivery 
of new gas storage capacity. The Board and 
management expect to report real progress 
with this during 2007 and we are examining all 
options to deliver value to shareholders from 
our existing asset base.
On behalf of the Board, I would like to thank 
our management and staff for their hard work 
and support in 2006, and we look forward to 
the challenges of 2007.
Stephen Gutteridge
Chairman
Chairman’s Statement
Click to return to contents 03 Star Energy Group plc Annual Report and Accounts 2006
Chief Executive’s Review
2006 was in many ways a year of  
learning for Star Energy. 
Humbly Grove gas storage facility
A major milestone for the Company was 
passed on 1 February 2006 when the 
Humbly Grove gas store was handed 
over to the customer, Vitol SA, for full 
customer nominations. The gas store has 
performed broadly in line with expectations. 
The Humbly Grove gas store is the third 
largest in the UK and has made a material 
contribution to security of supply. The 
dispute with the EPC contractor, AMEC,  
was resolved commercially.
Gas storage planning activities
Despite fears of a gas supply shortage 
during February and March 2006 and 
a Parliamentary Statement of Need for 
additional gas infrastructure including gas 
storage, the difficulties in obtaining planning 
permissions for the Company’s new gas 
storage projects continued. In relation to the 
Welton gas storage project, the time from 
submission of the Company’s applications 
to final determination was 29 months. 
Planning permission was refused on final 
determination despite a highly detailed 
planning officers’ report recommending 
approval. The Company initiated an appeal 
against the refusal but decided to withdraw 
the appeal when it became clear that 
Lincolnshire County Council intended to raise 
procedural objections that could have been 
raised within the 29 month determination 
period. As a result of that experience, and 
following dialogue with the Company’s 
advisors and the DTI, the Company decided 
to adopt the Gas Act 1965 as the standard 
platform for all of its future gas storage 
planning applications. Although this 
legislation requires increased application 
detail and additional resources, the Company 
believes applications under the Gas Act 1965 
will provide enhanced certainty of planning 
application timelines.
Recognising the need to engage local 
stakeholders and provide increased 
transparency in the preparation of planning 
applications, the Company is committed 
to increasing local dialogue via liaison 
panels and adopting a flexible approach to 
development planning. T o achieve this, the 
Company is expanding its planning resources 
and adopting minimal impact developments 
including remote siting of plant and 
equipment and extended reach drilling. This 
was exemplified by the decision to drill an 
appraisal well from the Company’s existing 
well site at Albury in Surrey rather than create 
a new well site in an area of outstanding 
natural beauty. This will involve the drilling 
of an extended reach well (the true vertical 
depth of the well will be circa 4,000 feet but 
the total well path will be in excess of 14,000 
feet) in order to reach the required targets. 
Since this well path is beyond the capabilities 
of the Company’s previously contracted 
drilling rig, an agreement has been entered 
into for the lease of a new state of the art 
hydraulic rig from the Company’s Associate 
and nominated drilling contactor, Larchford 
Limited. This rig will not only be more 
powerful but will also be quieter than 
other commercially available rigs.
New opportunities
The Company has been actively seeking  
new gas storage development opportunities. 
This, together with an increase in awareness 
of the Company’s unique capabilities in 
operating oil and gas fields and developing 
and operating depleted reservoir gas storage 
facilities, has led to the Company being  
invited to collaborate on a number of new 
storage developments. 
One such project, relating to the North 
Sea Forbes field in Block 43/8, concerns the 
potential development of a new offshore gas 
storage facility. This project, a joint venture 
with Encore Oil for which Star Energy will 
provide the gas storage development lead, 
will augment the Company’s onshore gas 
storage projects. Initial modelling indicates 
Forbes could be converted into a gas store 
with a capacity of up to 50 bcf. The 
Company is scheduled to complete a 
feasibility study by the end of 2007. 
During 2006, the Company increased its 
continental European involvement with 
participation in an onshore Denmark 
exploration well. The well was a dry hole  
but data is being evaluated to ascertain 
whether there are gas storage possibilities. 
In addition, gas storage opportunities were 
evaluated in the Netherlands and Italy. This 
work is ongoing.
Other operating activities
The Company continued the successful 
integration of Pentex, the onshore UK  
oil and gas business acquired in August
2005, benefiting from both the addition  
of incremental oil and gas production and  
at least one new gas storage project, the  
6.5 bcf storage project at Gainsborough. 
A development well at the Stockbridge oilfield 
was brought into production in June 2006
at an initial rate of over 1,000 bopd. The 
Company was on track to achieve its  
oil production targets until a spate of 
well pump failures, exacerbated by the  
late delivery of a work over rig, caused 
production to fall in the fourth quarter. 
Conclusion
With continued strong cash flow from oil 
production as well as from the Humbly 
Grove gas storage facility, the Company 
will continue to invest heavily in the 
development of its six gas storage projects in 
the UK and pursue gas storage opportunities 
across continental Europe. The Company is 
confident that 2007 will yield positive results 
in relation to the planning and permitting 
efforts expended during the course of 
2006 and is convinced that its increased 
investment in gas storage development will 
provide an attractive long-term return to 
shareholders.
Roland Wessel
Chief Executive Officer
Click to return to contents East Midlands Oilfields
Eskdale
East Glentworth
Corringham & Glentworth
Welton, Scampton North 
Scampton, Stainton & 
Nettleham
Rempstone
Goodworth
Stockbridge
Avington
Long Clawson
South Leverton
Bothamsall
Gainsborough
Beckingham
Egmanton
Kirklington
Cold Hanworth
Palmers
Wood
Bletchingley
Albury
Humbly Grove
Horndean
Storrington
Singleton
Weald Basin Oil & Gas Fields
04 Star Energy Group plc Annual Report and Accounts 2006
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Star Energy at a Glance
WITH 156 EMPLOYEES, WE 
OWN AND OPERATE THE  
10 BCF GAS STORAGE 
FACILITY AT HUMBLY 
GROVE AND 26 OIL AND 
GAS FIELDS IN THE WEALD 
BASIN AND THE EAST 
MIDLANDS AREAS OF  
THE UK. 
Our portfolio of onshore UK fields 
includes five potential gas stores,  
which we are actively developing
to the planning application stage.
We have recently acquired an 
opportunity to assess the viability
of a depleted offshore gas field for
gas storage purposes.
Gas Storage
The fundamentals for additional gas storage in the UK remain 
firm with increasing import dependence in the context of UK gas 
storage capacity as a percentage of annual demand well below 
our European peers. 
Star Energy remains focussed on developing those fields in its 
portfolio which have geology suited to gas storage, with current 
development activities on Albury Phase 1, Gainsborough, Welton 
and Bletchingley. Our intention is to contract future gas stores  
to blue chip customers, securing a stable base cash flow, while  
retaining the ability to share in the upside in the longer term  
if winter/summer gas price differentials widen.
Oil & Electricity 
Star Energy continues to be the second largest onshore oil and 
gas producer, producing 4,595 boepd for 2006. The produced gas 
is used to generate electricity.
The portfolio of 26 oil and gas fields provides the Group with  
a strong cash flow, helping to fund the development of the 
Group’s gas storage opportunities. Our strategy is to continue  
the development of this portfolio to maintain the associated  
cash flow.
Our Sites
Click to return to contents 05 Star Energy Group plc Annual Report and Accounts 2006
The board and the employees of star energy 
are committed to continually improving 
health safety and environmental (hse) 
performance in all aspects of its activities. 
Star Energy prides itself on the HSE ethos 
which prevails within the Group at all levels of 
its operations, and ensures that HSE standards 
are not compromised through cost cutting. 
The Group Health Safety and Environment 
Manager reports directly to the Chief Executive 
Officer and plays a key and independent role 
in the way the HSE system is maintained and 
updated. HSE is an agenda item at the Board’s 
monthly meetings. 
Health & Safety
As part of the culture of HSE awareness 
nurtured throughout the Group, all employees 
are encouraged to report any HSE incident, 
however small. HSE procedures are fully 
documented and form the basis of appropriate 
training to all employees to assist them in 
maintaining a safe working environment. 
All operating activities are subject to risk 
assessment, with corrective training and 
procedural changes made to minimise the 
attendant risk. 
The former Pentex operations, acquired in 
August 2005, have been fully integrated into 
the Star Energy HSE culture.
Star Energy’s efforts in maintaining and 
improving its HSE standards were recognised 
in both 2005 and 2006 by the Royal Society 
for the Prevention of Accidents (RoSPA) 
through the granting of the Silver Award for 
Occupational Safety. The Group’s continued 
commitment to HSE standards, not just in 
terms of policy and procedures, but also in the 
way that policy and procedures are applied 
on a day to day basis throughout 2006, have 
been recognised by RoSPA in 2007 through the 
granting of the Gold Award for Occupational 
Safety. Star Energy is one of only about 20 
companies from the oil, gas and chemical 
industries in the UK, continental Europe and 
the Middle East to have been awarded  
the prestigious RoSPA Gold Award in respect  
of 2006.
Environment
No significant environmental incidents  
have occurred within Star Energy’s activities 
during 2006. 
In accordance with the UK government’s 
adoption of the Integrated Pollution Prevention 
and Control (IPPC) Directive, the Group lodged 
IPPC applications with the Environment  
Agency in August 2006 in accordance with  
the required timetable. The Group awaits 
responses from the Environment Agency to  
the applications.
Employees
Star Energy has a highly skilled and dedicated 
workforce. The Group recognises the value of 
its employees and in return offers them an 
attractive remuneration package together with 
a pleasant working environment. Through the 
offer of study assistance, the Group actively 
encourages employees who wish to further the 
development of their careers by undertaking 
relevant courses. The effectiveness of the 
Group’s recruitment and employment policies 
is demonstrated by the continuous low level of 
employee turnover which for 2006 was 4.6% 
(2005: 3.4%).
Community
Star Energy continues to support SCOPE, the 
disability organisation whose focus is people 
with cerebral palsy. During the year, Star 
Energy donated £75,000 (2005: £25,000) to 
SCOPE which helped to fund the conversion 
of residential accommodation in Nottingham, 
providing comfortable and convenient housing 
to five disabled young people. Star Energy 
employees have participated in SCOPE activities 
during the year.
Bill Grant
Group Health Safety and  
Environment Manager
Corporate Social Responsibility Statement
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gas storage
THE HUMBLY GROVE 
GAS STORE WAS UNDER 
CUSTOMER NOMINATION 
FROM 1 FEBRUARY 2006.
After a satisfactory commissioning period, the gas store was 
handed over to Vitol SA for full nominations with effect from 
1 February 2006. T o date, the store has run broadly in line with 
expectations, and has achieved its maximum storage capacity  
of 10 bcf. The facility operates on a 24/7 basis, with a full-time 
staff of five. 
The cold weather in March 2006 tested the export capabilities 
of the plant, with no problems being encountered. Whilst the 
plant is operating to specification, a comprehensive preventative 
maintenance system is in place to ensure its reliability. 
Furthermore, a planned maintenance shut down in June  
2006 was completed satisfactorily and on time.
The contract with Vitol SA for the use of the gas store started 
on 1 April 2006, with special arrangements in place for the 
pre-contract use of the gas store. Contracted and special 
arrangement revenues were £10.9 million and £1.3 million 
respectively. 
Annual Report and Accounts 2006 Star Energy Group plc 06
Operational Review
Click to return to contents Star Energy Group plc 07 Annual Report and Accounts 2006
responding 
to market 
demand
responding 
to market 
demand
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q&a
Gas Storage Q&A
Safety is the primary 
concern in the operation of 
our business. If the storage 
of natural gas in depleted 
oil and gas reservoirs 
was not safe, Star Energy 
would not be proposing its 
development. 
How safe is natural  
gas storage?
q1
By design, our gas storage 
plants have a minimal 
impact on the environment. 
What is the environmental 
impact of gas storage?
q2
Click to return to contents 09 Star Energy Group plc Annual Report and Accounts 2006
Oil and gas occurs naturally. Having been 
created millions of years ago by the burial 
of organic matter, the oil and gas has since 
been held under pressure in the minute 
pores of certain rocks several thousand feet 
beneath the earth’s surface. The volume 
of porous rock holding the oil and gas is 
referred to as a reservoir. Above the reservoir 
is a layer of cap rock which is impervious 
and prevents the oil and gas from escaping 
to the earth’s surface. The fact that the oil 
and gas has been contained within the 
reservoir for such a long time is testament 
that the reservoir provides reliable pressure 
containment. If this were not the case, the 
oil and gas would have long since escaped.
Drilling into the reservoir and extracting oil 
and gas reduces the residual quantity of oil 
and gas in the reservoir and the pressure 
under which it is held, creating what is 
termed a depleted reservoir. It is the depleted 
reservoir which provides the capacity for 
gas storage: by injecting natural gas back 
into the depleted pores, a situation which 
previously existed naturally is reproduced. 
Of course, gas storage involves extracting 
gas out of, as well as injecting gas into, 
a reservoir, thus changing the pressure 
within the reservoir. T o ensure that such 
pressure changes do not affect the integrity 
of the porous rock or the cap rock, checks 
are undertaken by independent expert 
consultants.
So, how do we ensure safety during  
the operation of a gas store?
We make certain that no uncontrolled release 
of natural gas can occur from the reservoir, 
pipes or gas plant through our design, 
construction and operating procedures: 
Design: The design of a gas store is 
fundamental to its safety. We use well 
established international engineering codes 
and standards for the design of the plant, 
pipelines and wells, incorporating safety 
margins in all areas of the operation. We 
conduct rigorous hazard identification 
and risk assessments which consider 
every conceivable failure, and require the 
minimising of all identified risks to an 
acceptable level. 
Construction: During the building process, 
quality checks are undertaken at all stages 
to ensure that a gas store is constructed 
as designed and that the design standards 
have been applied. The plant and pipelines 
are proof tested using water at pressures 
well in excess of any that will be experienced 
during operation, and all emergency systems 
are rigorously tested. 
Operation: Documented operating 
procedures are adhered to by trained staff, 
and preventative maintenance systems are 
employed to undertake regular servicing of 
the plant, ensuring its integrity at all times. 
At all stages of a gas store’s design, 
construction and operation, risk assessments 
are conducted to make certain that at no time 
is safety compromised. As demonstration of 
Star Energy’s commitment towards safety, all 
future planning applications for gas storage 
projects will include risk assessments and 
reservoir integrity findings. 
Environmental Impact Assessments 
are undertaken by independent expert 
consultants for all of our gas storage 
planning applications. Proposed sites are 
selected so as to cause minimal impact on 
local communities and to ensure no impact 
on any water resource or flood risk. 
Permanent above-ground plant is screened 
from public view where necessary, with no 
part greater than 16.5 metres high. Plant is 
designed to ensure energy efficiency and  
to operate within noise limits set by the 
planning authorities.
The construction of a gas store is expected 
to take approximately 18 months, during 
which time the plant is constructed, 
pipelines laid and gas wells drilled. Although 
during this time there is an increased 
level of traffic to and from the gas storage 
site, schemes are employed to minimise 
the impact on local roads, noise levels are 
controlled to prevent nuisance and, where 
necessary, screening is installed to prevent 
visual disturbance. 
A gas store is connected, via an underground 
pipeline, to the nearest access point to the 
national grid gas network. Independent 
expert consultants review the proposed 
route of the pipeline to ensure that 
ecological or archaeological sites are avoided. 
The land beneath which the pipeline is laid 
is returned to its natural condition once the 
pipeline is in place.
In this year’s annual report we are going  
to address a number of questions that  
are often asked about gas storage…
Humbly Grove gas storage and oil production facility
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Gas Storage Q&A
What is star energy  
doing to involve local 
communities in plans for 
gas storage developments?
q3
Star Energy has always 
adopted a proactive 
approach in consulting 
local people, parish, 
borough and county 
councils early in our plans 
to develop a gas store. 
q4
What is the Gas Act 1965 
and what does it mean for 
Star Energy?
The Gas Act 1965 (the Act) 
was passed specifically 
to allow for the storage 
of gas in natural porous 
strata such as depleted 
reservoirs, and includes 
provisions for the granting 
of planning permission 
to undertake gas storage 
activities. 
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We hold exhibitions in local venues, where 
local residents can view our plans and meet 
our senior employees to scrutinise the 
proposals. This also enables us to understand 
the local issues and concerns which we 
make a principle of addressing.
We welcome regular meetings with local 
communities through liaison panels where 
we can share with them our progress as a 
project goes through the conceptual and 
assessment stage. Where our pipelines pass 
through a number of different parishes we 
offer to meet parish councils and frequently, 
at their request, hold exhibitions for their 
parishioners.
Borough and county councils advise us 
of any local interest groups with whom 
we should consult regarding particular 
information for consideration and inclusion 
in the preparation of the Environmental 
Impact Assessment. A key tool in this 
process is the preparation by Star Energy of 
a ‘Scoping Report’, which enables the council 
and other consultees to advise on any 
particular aspects we must review.
Wide consultation is an important and 
integral part in developing our plans, allaying 
frequently unfounded local concerns and 
helping us where possible to adjust schemes 
in response to local issues.
An application under the Act is made 
directly to the Energy Minister (the Minister), 
who will ultimately determine the merits 
or otherwise of the application. The Act 
contemplates consultation with the normal 
consultees (including local planning 
authorities, the Health & Safety Executive, 
the Environment Agency and other 
interested parties) regarding the application 
to store gas. 
As the Act deals specifically with gas storage 
in depleted reservoirs, it is key legislation 
for Star Energy’s gas storage development 
programme. The Act involves a process of 
consultation with all relevant parties, but 
unlike planning applications made under the 
T own and Country Planning Act 1990 to local 
planning authorities, the planning application 
process under the Gas Act 1965 is conducted 
to a schedule controlled by the Minister, 
thereby avoiding unnecessary delays. 
The gas storage facility at Humbly Grove
A community meeting
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Gas Storage
a depleted reservoir  
gas storage facility 
storing natural gas in porous rocks  
in excess of 3,500ft below ground level.
Gas storage facility where gas is injected into 
the rock reservoir for storage and on export, 
processed and pumped back to the AGI.
Well bore lined with cemented 
steel casings leading to storage 
reservoir rocks.
Impervious cap rocks.
Click to return to contents 13 Star Energy Group plc Annual Report and Accounts 2006
Above ground installation (AGI) connecting 
the pipeline to the national grid gas network.
Under ground 24” pipeline connecting the AGI 
to the gas storage facility.
Gas is stored in the natural pore spaces in the 
reservoir rock.
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Operational Review
oil & 
electricity 
production
STAR ENERGY PRODUCES 
OIL AND GAS FROM UK 
ONSHORE FIELDS IN THE 
WEALD BASIN AND IN THE 
EAST MIDLANDS, WITH 
THE GAS BEING USED TO 
GENERATE ELECTRICITY. 
In addition to providing the feed stock 
for potential gas storage projects, the oil 
and gas fields provide cash flow to help 
fund the development of such projects. 
Table 1. Oil & electricity production comparison
  2006 2005 Change
Oil production: 
– barrels  1,494,047  1,178,107
– BOPD   4,093   4,178
(1)
  -2.0%
Electricity production: 
– MWhs  57,041  88,191 -35.3%
(1)
 Weighted average to reflect Pentex acquisition. 
Oil production
Table 1 provides a comparison of oil production in 2006 against 
that in 2005. Factors impacting production during 2006 included: 
A new well at Stockbridge which was drilled in Q1 2006. 
Although initial production rates were approximately 1,000 
bopd, this declined rapidly during the year to approximately 
180 bopd as at 31 December 2006. 
The rate at which remedial work could be undertaken on 
well problems was severely impeded for most of the year, 
and particularly in the last quarter, due to the Group’s second 
work-over rig becoming unserviceable. A replacement rig is 
due for delivery in April 2007. 
Electricity production
Table 1 provides a comparison of electricity production in 2006 
against that in 2005. The reduction in electricity production for 
2006 when compared to 2005 is because 15 MW of the Group’s 
35 MW of electricity generating equipment is now dedicated to 
running the Humbly Grove gas storage facility.
•
•
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a portfolio of 
opportunities
a portfolio of 
opportunities
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Stronger oil prices have improved the  
profitability of the business and enhanced  
our ability to fund the expenditure on  
engineering and planning activities for  
future gas storage projects.
The Humbly Grove gas storage facility, strong 
oil prices, one-off natural gas sales, and the 
full-year contribution of the Pentex business 
acquired in August 2005, have all contributed  
to the Group’s increased profitability in the year. 
Turnover
Turnover has increased by £32.4 million (131%) 
to £57.1 million (2005: £24.7 million). Of this 
increase, £13.6 million has been contributed by 
the oil and electricity operations, £11.4 million 
from gas storage, and £7.4 million from one-off 
natural gas sales.
Crude oil and electricity sales of £37.5 million 
(2005: £23.9 million) represent the majority of 
the Group’s turnover, accounting for 66% of the 
total (2005: 97%). Gas storage revenues of £12.2 
million (2005: £0.8 million) represent 21% of 
total turnover (2005: 3%), and sales of natural 
gas of £7.4 million (2005: nil) account for 13% of 
total turnover.
The effective oil price achieved by the Group 
was $44.50 per barrel (2005: $34.01), resulting 
from oil price hedging contracts in place during 
2006 as shown in Table 1, and an average Dated 
Brent price for the year of $65.14 (2005: $54.38). 
Combined with an average effective US dollar 
exchange rate for the year of $1.83 (2005: $1.84), 
the average sterling revenue per barrel for the 
year was increased to £24.34 (2005: £18.52).
The contract with Vitol SA for the use of the 
Humbly Grove gas storage facility had an 
effective start date of 1 April 2006 with specific 
provisions within the contract for Star Energy 
to earn revenues in the period from completion 
of construction of the facility up to 31 March 
2006. In the period 1 January 2006 to 31 March 
2006, revenues from the gas storage facility 
amounted to £1.3 million, and £10.9 million 
from the effective start date to 31 December 
2006, giving total gas storage revenues for the 
year of £12.2 million (2005: £0.8 million).
17.5 million therms (2005: nil) of natural gas 
were sold in the year at an average price of 
£0.43 per therm, providing revenues of £7.4 
million (2005: nil) . Of this, 17.0 million therms 
were sold to Vitol SA at arm’s length prices as 
part of the start-up of the gas storage facility, 
giving revenues of £7.3 million (2005: nil).
Operating result
The Group made an operating profit of  
£20.0 million (2005: £3.6 million) with cash 
flows from operations amounting to £21.9 
million (2005: £19.2 million).
Operating costs were £20.1 million (2005: £11.9 
million), comprising £15.5 million (2005: £11.4 
million) for the oil and electricity operations 
and £4.6 million (2005: £0.5 million) for the gas 
storage operation. The sales of natural gas had 
no associated cost of sale.
The non-cash depletion, depreciation and 
amortisation charge of £11.3 million (2005: 
£5.8 million) includes £8.2 million (2005: £5.5 
million) in respect of the oil and electricity 
operations and £3.1 million (2005: £0.3 million) 
for gas storage. 
Administrative expenses for the year amounted 
to £5.8 million (2005: £3.7 million). The increase 
of £2.1 million is attributable to the inclusion of 
the former Pentex operations for the full year 
(£1.1 million), incremental employment costs 
and incentives (£0.5 million) and incremental 
legal and professional fees related to business 
development activities (£0.5 million).
Interest and similar charges
The net interest charge for the year of £5.4 
million (2005: £1.6 million), comprises interest 
costs and arrangement fees of £5.8 million 
(2005: £1.4 million), other bank fees of £0.4 
million (2005: £0.3 million), interest received of 
£0.7 million (2005: £0.5 million), and exchange 
gains of £0.1 million (2005: £0.4 million losses). 
The year on year increase in interest costs 
reflects the senior debt facility being 
substantially drawn throughout 2006 at a 
weighted average of £75.3 million (2005: £41.3 
million) and the reduction in the 2005 interest 
charge as a result of the capitalisation of 
interest in that year amounting to £1.7 million 
during the construction of the Humbly Grove 
gas storage facility. Management of cash flow 
has generated interest income. Exchange gains 
of £0.1 million (2005: £0.4 million of losses) 
have arisen on US dollar balances held in the 
normal course of business. 
Financial Review
Click to return to contents 17 Star Energy Group plc Annual Report and Accounts 2006
 Taxation
The Group is subject to a combined statutory 
tax rate of 50% (2005: 40%) consisting of 
the standard rate of Corporation tax at 30% 
(2005: 30%) and a supplementary charge of 
20% (2005: 10%).
The tax charge of £10.8 million (2005: £0.8 
million) comprises a Corporation tax charge 
of £2.7 million (2005: £0.8 million) and a 
deferred tax charge of £8.1 million (2005: nil).
The tax charge for the Group results in an 
effective rate of 74% (2005: 39%) on pre-tax 
profits of £14.6 million (2005: £2.1 million). The 
charge for 2006 comprises an effective rate 
of 55% for the year and 19% in respect of a 
retrospective increase in the supplementary 
charge on brought forward deferred tax 
balances. The effective rate of 55% for 2006 
exceeds the combined statutory rate of 50% 
due principally to assets not qualifying for  
tax relief. 
 
Balance sheet
The increase in net assets to £95.3 million as 
at 31 December 2006 (£91.0 million as at  
31 December 2005) results from the retained 
profit for the year and the costs relating to 
share incentive plans. 
Fixed asset additions during 2006 totalled 
£25.8 million (2005: £67.5 million) of which 
£11.6 million (2005: £60.9 million) was in 
respect of the Humbly Grove gas store, 
£8.4 million (2005: £6.6 million) in respect 
of the oil and electricity business and £5.8 
million (2005: £nil) in respect of gas storage 
developments and enhancements. Capital 
commitments as at 31 December 2006 
amounted to £2.3 million (2005: £6.1 million). 
As at 31 December 2006, net debt was £69.0 
million (2005: £54.2 million) and the senior 
debt facility was drawn down in the amount 
of £76.8 million (2005: £72.2 million).
Subsequent to 31 December 2006, the 
Group placed a further 13,636,364 ordinary 
shares for a gross consideration of £30.0 
million and agreed a revision to the senior 
debt facility which reduced the facility from  
£76.8 million to £65.0 million. This refinancing 
will enable debt repayments to be reduced 
in the year ended 31 December 2007 and 
in addition will provide funds to increase 
planning and permitting resources, drill gas 
storage appraisal wells and fund accelerated 
engineering and commissioning work on the 
Group’s multiple gas storage opportunities, 
thus enabling the Group to react more quickly 
to the granting of planning approvals. 
Management of financial risk
The Group’s policy is to protect revenues 
through hedging and forward sales. Oil price 
hedging contracts for 2006, all of which 
were in place as at 31 December 2005, are 
detailed in Table 1.
Table 1: Oil Price Hedging in 2006
     Q1  Q2-4  
     2006 2006 
Type Premium Strike ($) Put ($) Call ($) bopd bopd
Swap  44.75   1,500 
Swap  58.00    500 
Swap  27.50   1,800 1,800 
Swap  58.10    500 
ZCC   50.00 66.00  600
Put 0.83    600 600
Total bopd     3,900 4,000
 
ZCC = Zero cost collar.
In line with Group policy, and to comply with 
the terms of the senior debt facility, oil price 
hedging as disclosed in Table 2 is in place for 
2007 onwards:
Table 2: Future Oil Price Hedging
    Cal  Cal  
    2007 2008 
Type Strike ($) Put ($) Call ($) bopd bopd
Swap 27.00   1,600 
Swap 57.10   200 
Swap 57.00   200 
Swap 60.00   500
(
*
)
 
ZCC  50.00 64.00 600 
ZCC  50.00 91.50  300
ZCC  50.00 90.00  300
ZCC  50.00 90.50  300
ZCC  55.00 90.00  500
Total bopd    3,100 1,400
 
(
*
)
 effective from 9 February 2007 to 31 December 2007. 
ZCC = Zero cost collar.
Regarding US Dollar hedging, the Group sold 
an average of $5.5 million per month for the 
period from June 2006 to December 2006 at 
an average of $1.8763. 
The Group has sold forward an average 
of $5.0 million per month at an average 
exchange rate of $1.8907 for the year ended  
31 December 2007 and an average of $2.1 
million per month at an average exchange 
rate of $1.8863 for the year ended  
31 December 2008.
The Group has entered into a contract to 
fix the interest rate at 7.535% for 75% of 
the debt outstanding under the May 2004 
senior debt facility of £57.5 million during the 
period to 31 December 2008.
International Financial Reporting  
Standards (IFRS)
In accordance with the mandatory 
requirement for AIM listed companies,  
the Group will adopt IFRS with effect  
from 1 January 2007. The first results to 
be prepared under IFRS will be the 2007 
interim results. The Group will release to 
the stock market and publish on the Star 
Energy website (www.starenergy.co.uk) a 
re-statement of the 2006 UK GAAP figures 
together with a reconciliation of the 
adjustments from UK GAAP to IFRS prior 
to the announcement of the 2007 interim 
results in September 2007.
Differences between UK GAAP and IFRS 
accounting practices will impact, principally, 
fixed assets, financial instruments and 
deferred tax. 
The process of transition is progressing well. 
Colin Judd
Financial Director
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04 06
07 08 09
05
Board of Directors
Click to return to contents 19 Star Energy Group plc Annual Report and Accounts 2006
01. Roland Wessel (53)
Chief Executive Officer
Roland is a geology graduate with over 25 
years’ experience in the oil and gas industry. 
The majority of Roland’s career has been 
spent in the drilling services sector and he 
has undertaken managerial assignments in 
most of the active oil and gas regions of the 
world including West Africa, the Middle East, 
the North Sea, and North and South America. 
Roland co-founded Star Energy in 1999. 
02. Colin Judd (53)
Financial Director
Colin has an honours degree in engineering 
and management, and qualified as a 
chartered accountant with Price Waterhouse 
in 1979. His experience includes various 
professional accounting positions with Price 
Waterhouse in the UK, Europe and the Far 
East, various UK and overseas-based financial 
management positions with the former 
Aggreko division of Christian Salvesen plc, 
and financial directorships with service 
companies to the oil and gas industry. 
03. Stephen Gutteridge (52)
Non-executive Chairman
Chairman of the Nominations Committee
Steve has held senior positions in a number 
of organisations in the energy sector, 
including Seeboard plc as a main board 
director responsible for their electricity and 
gas supply business, and the International 
Petroleum Exchange as business 
development director. Steve is currently a 
consultant to Marwyn Investments Group.
04. Adrian Fernando (44)
Business Development Director
Adrian graduated with a first class honours 
degree in Economics and an MPhil in 
Development Studies. Following a period of 
three years working as an economic adviser 
for the United Nations in Central America 
he joined Amerada Hess, latterly developing 
their energy marketing and trading business 
in his role as deputy managing director. 
05. Melvyn Horgan (51)
T echnical Director
Melvyn gained a PhD in Mathematics before 
training as a reservoir engineer with British 
Gas. His experience includes evaluating and 
appraising exploration projects, simulating 
field production and forecasting reservoir 
production for Burmah Oil. As technical 
director for Duke Engineering, he was 
responsible for managing multi-disciplinary 
teams in geology, geophysics, reservoir 
evaluation, simulation, field development 
and enhanced oil recovery studies. 
06. Stephen East (49)
Non-executive Director
Chairman of the Audit Committee
After qualifying as a chartered accountant 
with Binder Hamlyn, Stephen spent 13 
years with Redland plc, progressing to 
become group treasurer. Thereafter, he 
joined the property group MEPC plc, where 
he became finance director. In this role, he 
had major strategic involvement in the re-
focusing of the business and its subsequent 
sale. Currently group finance director of 
Woolworths Group plc, Stephen is also a 
non-executive director of The Regus  
Group plc.
07. David Wertheim (62)
Senior Independent Non-executive Director
Chairman of the Remuneration Committee
A biochemistry graduate with an MBA, David 
has a strong international background having 
held a number of senior management roles 
in the US, Australia and Europe. After joining 
soda ash manufacturer Brunner Mond as 
finance director, he became chief executive 
and led the Stock Exchange listing in 1996. 
David is currently a director of Optima 
Management Services Limited, and a  
non-executive director of the Hallé  
Concerts Society.
08. Charles Carter (40)
Non-executive Director
Charles is employed by the UK subsidiary  
of the Vitol oil and gas trading group. 
Qualifying as a chartered accountant 
with Deloitte Haskins & Sells, and initially 
specialising in mergers and acquisitions, 
he moved to National Grid where he 
held a number of international business 
development and finance roles, latterly 
director of corporate finance with group-level 
responsibility for a broad remit of financial 
management including corporate finance.
09. Roger Pearson (57)
Group Operations Director
Graduating as a chemical engineer, Roger 
has held a number of senior project 
management positions in the oil and gas 
industry on facilities such as Thistle, Beatrice, 
Rough Storage, Bruce and Liverpool Bay. He 
joined Star Energy in 2000 as Managing 
Director for the Company’s Weald Basin 
assets, and was appointed to the Board in 
2005 as Group Operations Director. Roger is 
a Chartered Engineer and a member of the 
Institution of Chemical Engineers.
Click to return to contents 20 Star Energy Group plc Annual Report and Accounts 2006
Shareholder Information
Non-executive directors
Stephen Gutteridge
Chairman
David Wertheim
Senior Independent Director
Chairman of the Remuneration Committee
Stephen East
Chairman of the Audit Committee 
Charles Carter
Non-executive
Executive directors
Roland Wessel 
Chief Executive Officer
Colin Judd 
Financial Director
Melvyn Horgan 
T echnical Director
Adrian Fernando
Business Development Director
Roger Pearson
Group Operations Director
Company Secretary
Colin Judd
Contact Details
Star Energy Group plc
Ground Floor
Burdett House
15/16 Buckingham Street
London WC2N 6DU 
T el: +44 (0) 20 7925 2121 
Fax: +44 (0) 20 7930 9919 
www.starenergy.co.uk
Registered Office
Kempson House 
Camomile Street 
London EC3A 7AN
Registered in England and Wales No. 5054503
Registrars
Lloyds TSB Registrars
The Causeway 
Worthing 
West Sussex BN99 6DA
Nominated Adviser
Hoare Govett Limited
250 Bishopsgate 
London EC2M 4AA
Legal Advisers
Norton Rose
Kempson House 
Camomile Street 
London EC3A 7AN
Auditors
BDO Stoy Hayward LLP
8 Baker Street 
London W1U 3LL
Principal Bankers
ABN Amro Bank NV
250 Bishopsgate 
London EC2M 4AA
Barclays Bank plc
7th Floor 
5 The North Colonnade 
Canary Wharf 
London E14 4BB
Bank of Scotland
New Uberior House 
11 Earl Grey Street 
Edinburgh EH3 9BN
BNP Paribas
21, Place du Marché Saint-Honoré 
75031 Paris Cedex 01 
France
Click to return to contents 21 Star Energy Group plc Annual Report and Accounts 2006
The directors present their Annual Report and the audited financial 
statements for the year ended 31 December 2006.
Principal activities
The principal activities of the Group are the exploration, development 
and production of crude oil, development and provision of gas 
storage facilities, sale of natural gas and electricity generation.
Business review
The results of the Group as at 31 December 2006 are set out on 
pages 31 to 35. The Group made a profit after tax for the year of 
£3,750,000 (2005: £1,264,000). The directors do not recommend  
the payment of a dividend.
A full review of the Group’s activities during the year, recent events 
and future developments is contained in the Chairman’s Statement 
on page 2, the Chief Executive’s Review on page 3, the Corporate 
Social Responsibility Statement on page 5, the Operational Reviews 
on pages 6 and 14, and the Financial Review on pages 16 to 17.
The Financial Review on pages 16 to 17 provides an explanation of the 
role financial instruments have had during the year. In addition, Note 
16 on page 45 details the risk factors affecting the Group and 
summarises the Group’s policies for mitigating such risks through 
holding and issuing financial instruments. These policies have been 
followed during the year.
Charitable and political donations
During the year, the Group made charitable contributions in the  
UK totalling £107,579 (2005: £39,696). In line with Group policy, no 
donations were made for political purposes.
Subsequent events
Since the balance sheet date the Group has continued to progress  
its development and business growth strategies.
On 5 March 2007, the following took place: 
 The Group placed a further 13,636,364 ordinary shares for a gross 
consideration of £30.0 million. These shares rank pari passu with 
those already in issue. 
 The Group agreed a reduction to the senior debt facility from  
£76.8 million to £65.0 million. 
 The costs incurred in relation to the above placing and revision of the 
senior debt facility totalled £1.1 million.
On 30 March 2007, the Group signed a Letter of Intent for the sale of 
its 79.125% interest in the Singleton oil field. As at 31 December 2006, 
the Singleton oil field was estimated to have 1.938 million barrels of 
commercial reserves (7.7% of the Group’s estimated total). If the sale 
proceeds, it is envisaged the Group will receive a consideration in the 
region of £11.0 million.
Directors
 The directors of the Company who served during the year and 
subsequent to the year end were as follows: 
Charles Carter 
Stephen East
Stephen Gutteridge 
David Wertheim 
Adrian Fernando
Melvyn Horgan
Colin Judd
Roger Pearson
Roland Wessel 
•
•
Details of the directors’ interests in the shares of the Company and in 
share options are set out on pages 22 and 26 in the Directors’ 
Remuneration Report.
Substantial shareholdings
Except for the holdings of shares listed below, the Company  
has not been notified by any person holding 3% or more of the 
issued ordinary shares of 10p each of the Company as at  
15 March 2007:
   
 Number %
Petronas International Corp. Ltd. 18,130,675 19.49
Credit Suisse FB (MM) 11,491,817 12.35
Ecofin Ltd 8,877,902 9.54
Artemis Investment Management  8,037,796 8.64 
Lansdowne Partners  5,935,656 6.38
Lehman Brothers International  5,502,326 5.92
Tudor Capital (UK)  4,367,113 4.70
Corporate Social Responsibility
The Group is fully committed to high standards of environment, 
health and safety management as reported on page 5. 
Supplier payment policy
It is Company and Group policy to settle all debts with creditors on a 
timely basis and in accordance with the terms of credit agreed with 
each supplier. 
Trade creditors of the Company and the Group at 31 December  
2006 were equivalent to 22 and 27 (2005: 5 and 22) days’ purchases 
respectively, based on the average daily amount invoiced by suppliers 
to the Company and the Group during the year.
Auditors
In accordance with the Companies Act 1985, a resolution for the re-
appointment of BDO Stoy Hayward LLP as auditors of the Company 
is to be proposed at the forthcoming Annual General Meeting.
All of the directors have taken all the steps that they ought to have 
taken to make themselves aware of any information needed by the 
Company’s auditors for the purpose of their audit and to establish 
that the auditors are aware of that information. The directors are not 
aware of any relevant audit information which has not been brought 
to the attention of the auditors.
Annual General Meeting
Your attention is drawn to the Notice of Meeting enclosed with this 
Annual Report which sets out the resolutions to be proposed at the 
forthcoming Annual General Meeting.
By order of the board
Colin Judd
Company Secretary
Kempson House
Camomile Street
London EC3A 7AN
30 March 2007
 
Directors’ Report
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Whilst the Company is not required to present a directors’ 
remuneration report, as it is not subject to the Listing Rules of the 
Financial Services Authority nor the requirements of the Directors’ 
Remuneration Report Regulations 2002, it has disclosed here certain 
information about directors’ remuneration policies and emoluments. 
The Directors’ Remuneration Report is not audited.
Remuneration Committee
The Remuneration Committee’s primary objective is to provide 
recommendations to the Board on the Company’s remuneration 
policies and to determine the remuneration of the executive 
directors and other key managers.
The Remuneration Committee comprises David Wertheim 
(Chairman), Charles Carter, Stephen East and Stephen Gutteridge,  
all of whom are deemed non-executive directors. Executive  
directors may be invited to attend meetings of the Remuneration 
Committee, but do not take part in any decision affecting their  
own remuneration. The Remuneration Committee meets as 
necessary: during the year the Committee met formally a total of  
five times (2005: four). The Remuneration Committee meetings held 
during the year were attended by all Committee members.
Remuneration policy
The Group’s policy is to maintain levels of remuneration so as to 
attract, motivate and retain directors of the highest calibre who can 
contribute their experience and views to the Group’s operations.
Executive directors’ terms, conditions and remuneration
The elements of the remuneration package consist of basic salary, 
benefits including car allowances and private health insurance, 
defined pension contributions, both short and long-term incentive 
plans, a share option scheme and a Save As You Earn scheme. Details 
of the individual executive directors’ remuneration are given on 
pages 24 to 26.
Pension scheme
The executive directors do not participate in the Group pension 
scheme; each executive director is entitled to receive 10% of their 
basic salary into their own private pension scheme.
Short-Term Incentive Plan (STIP)
The Group operates a STIP for executive directors and other key 
managers. Under the terms of the STIP , annual awards will be made 
to participants dependent upon the achievement of corporate and 
individual performance targets, such achievement to be agreed by 
the Remuneration Committee. Performance targets are reviewed 
annually. Corporate targets common to all participants account for at 
least 50% of the performance measures for each member of the 
plan. The maximum level of annual award as a percentage of basic 
salary for each executive director is:
 % of basic salary 
Roland Wessel 75
Colin Judd 50
Melvyn Horgan 50
Adrian Fernando 50
Roger Pearson 50
The maximum level of annual award as a percentage of basic salary 
for the key managers is in the range of 25% to 35%. On target 
performance is expected to generate a reward of 50% of the 
individual’s maximum. These annual awards are settled in cash in 
the year subsequent to that to which the award relates.
As at 31 December 2006, there were a total of 12 (2005: 14) 
participants covered by the STIP .
Long-Term Incentive Plan (LTIP)
On 11 October 2005, the Remuneration Committee made awards 
under the LTIP over ordinary shares in the Company to executive 
directors and other key managers. 
Under the terms of the LTIP , the number of shares awarded to a 
participant is divided into two equal numbers of shares: First Tranche 
shares and Second Tranche shares. 
Directors’ Remuneration Report 2006
Click to return to contents 23 Star Energy Group plc Annual Report and Accounts 2006
For awards made on 11 October 2005, First Tranche shares can vest at 
the end of a three-year performance period which commenced on  
1 September 2005. If the Company’s T otal Shareholder Return (TSR) is 
in the top quartile of companies in the FTSE Small Cap Index, the full 
number of First Tranche shares will be received. For performance 
between median and upper quartile, vesting will occur on a straight-
line basis so that 25% of the First Tranche shares are received for 
median performance and full vesting occurs for top quartile 
performance. No shares will be received if the Company’s TSR is 
below the median in that index. 
Receipt of the Second Tranche shares will be subject to the same 
conditions other than that performance will be measured over a 
four-year period which commenced on 1 September 2005, and no 
shares can be received until the end of that period. 
Awards will normally be forfeited if the recipient leaves the Group’s 
employment before vesting. 
Shares are intended to be acquired by the Company’s employee 
benefit trust (using funding provided or procured by the Company) 
as and when shares are to be transferred to participants. Bedell Trust 
Limited, the trustee of the Company’s employee benefit trust, was 
granted an option on 11 October 2005 to acquire up to 527,470 shares 
by subscription so as to be able to satisfy the awards. 
During the year, the Remuneration Committee recommended the 
award of a further 3,356 shares to Roger Pearson to adjust for his 
appointment to the Board of Directors in 2005. Due to the forfeiture 
resulting from two participants who had left the Company, there 
was no requirement for additional options to be granted to Bedell 
Trustees Limited in respect of the grant of awards to Roger Pearson. 
As at 31 December 2006 there were 510,748 shares under award 
(2005: 527,470) to a total of 12 (2005: 14) participants. 
Share options
Star Energy Group plc operates an Approved Share Option Scheme. 
Details of directors’ share options are given on page 26.
The Star Energy Group plc Approved Share Option Scheme was 
adopted by the Company by a resolution of the directors passed  
on 29 April 2004, and approved by the Inland Revenue on  
10 November 2004.
Under the scheme rules, options were initially granted to the 
executive directors and all eligible employees of the Group on 
3 December 2004, on the basis of their length of service with  
the Group.
Length of service Option shares granted
Between 1 and 5 years 5,000
Between 5 and 10 years 10,000
Over 10 years 15,000
Further grants of share options are made annually to directors  
and eligible employees who are either new to the Group or whose 
length of service is such that an incremental grant has been earned. 
Under the scheme rules, the right to exercise the share options is 
not contingent upon any performance criteria.
During the year, the Remuneration Committee recommended  
the grant of 171,765 options to 35 employees at a price of 262.25p. 
Following the grant of these options on 2 December 2006, the total 
number of options outstanding was 1,344,196 (171,765 at 262.25p, 
409,098 at 276.00p and 763,333 at 185.00p).
Save As You Earn scheme
Star Energy Group plc operates a Save As You Earn scheme 
(‘Sharesave Scheme’). Details of directors’ options under this 
Sharesave Scheme are given on page 26.
The Star Energy Group plc Sharesave Scheme was adopted by the 
Company by a resolution of the directors passed on 30 March 2006.
Under the Sharesave Scheme rules, executive directors and eligible 
employees of the Group were given the opportunity to commit to 
contributing a monthly amount ranging from £5 to £250 into a 
savings account operated by Lloyds TSB Bank plc. By participating in 
the scheme, executive directors and eligible employees are given an 
option to purchase shares at a 20% discount on the share price at 
the date of invitation when the options mature. 
Further grants of Sharesave Scheme options are made periodically to 
directors and eligible employees who are either new to the Group or 
who are existing participants whose monthly savings in previous 
years under the Sharesave Scheme does not aggregate to more than 
£250 (such that during no one month is a participant saving in excess 
of £250 under the Sharesave Scheme). 
Under the Sharesave Scheme rules, the right to exercise the share 
options is not contingent upon any performance criteria.
During the year, the Remuneration Committee approved the grant 
of 126,666 options to 75 employees at a price of 280.00p. 
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Directors’ Remuneration Report 2006 continued
Employment agreements
Each executive director agreement is based on similar terms, with no fixed duration.
All executive directors’ employment agreements can be terminated by either the director concerned or the Group on giving 12 months’  
written notice of termination. The Group may, in its absolute discretion, terminate an executive director’s employment agreement without 
prior notice, and make a payment in lieu of 127% of gross basic salary to which the executive director would have been entitled during the 
period of notice.
Each employment agreement sets out restrictions on the ability of the director to participate in businesses competing with those of the 
Group or to entice or solicit away from the Group any senior employees of the Group for a period of twelve months after the termination  
of their employment.
Non-executive directors’ terms, conditions and fees
The non-executive directors have been engaged under the terms of letters of appointment. Their engagements can be terminated upon three 
months’ notice by either party. Re-appointment is subject to the Group’s Articles of Association, which provide for retirement by rotation every 
three years. Compensation arrangements are limited to fees due for the notice period; however, if a takeover occurs, compensation is due 
amounting to 50% of annual fees.
The remuneration of the non-executive directors (other than the Chairman) is a matter for the Chairman of the Board and the Chief  
Executive while the remuneration of the Chairman is a matter for the Chairman of the Remuneration Committee and the Chief Executive.  
In setting the compensation levels of the Chairman and non-executive directors, the primary benchmark used was the median level for 
comparable Industrial and Service Companies as surveyed and published annually by the Monks Partnership. The remuneration of the non-
executive directors was reviewed and adjusted from the beginning of October 2006. All fees paid to the non-executive directors were in cash. 
From October 2006 the Chairmen of the Audit and the Remuneration Committees were each compensated at the annual rate of £5,000 
(from October 2005: £2,500). The Chairman of the Nominations Committee, who is also the Chairman of the Group, received no additional 
remuneration in relation to his role as Chairman of the Nominations Committee. No other members of these committees received any 
additional compensation for their committee roles.
Material contracts
Charles Carter, a non-executive director of the Company, is employed by Vitol Services Limited. Vitol SA, another company within the Vitol 
group of companies, has entered into a Gas Storage Agreement with Star Energy HG Gas Storage Limited for the exclusive use of the Humbly 
Grove gas storage facility until 1 May 2009. Vitol SA has the option to extend the contract for up to an additional six years. 
The remuneration of the directors for the year ending 31 December 2006 for both the Company and the Group was:
    Aggregate Aggregate   
    remuneration remuneration  Aggregate 
    for the year (excluding pension)  remuneration for 
 Salary Taxable  ending for the year ending  for the year ending 
 /fees benefits
(1)
 Pension 31 December 2006 31 December 2005 Pension 31 December 2005 
 £ £ £ £ £ £ £
Executive directors       
Roland Wessel 215,000 14,781 21,500 251,281 189,679 17,347 207,026
Melvyn Horgan 165,000 12,917 16,500 194,417 155,117 14,286 169,403
Colin Judd 175,000 14,470 17,500 206,970 156,480 14,286 170,766
Adrian Fernando 155,000 12,477 15,500 182,977 147,065 13,470 160,535
Roger Pearson
(2)
 155,000 11,899 15,500 182,399 37,218 3,319 40,537
Sub Total 865,000 66,544 86,500 1,018,044 685,559 62,708 748,267
       
Non-executive directors       
Stephen Gutteridge  52,250 – – 52,250 45,750 – 45,750
Charles Carter
(3)
 27,249 – – 27,249 25,250 – 25,250
Stephen East
(4)
 30,125 – – 30,125 25,875 – 25,875
David Wertheim
(5)
 30,125 – – 30,125 25,875 – 25,875
Sub Total 139,749 – – 139,749 122,750 – 122,750
T o t a l 	 1 , 0 0 4 , 7 4 9 	 6 6 , 5 4 4 	 8 6 , 5 0 0 	 1 , 1 5 7 , 7 9 3 	 8 0 8, 3 0 9 	 6 2 , 7 0 8 	 8 7 1 , 0 1 7
(1)
 Taxable benefits include private health insurance and car allowance.
(2)
  Roger Pearson was appointed to the Board on 21 October 2005. His remuneration disclosed above reflects payments from that date.
(3)
    Amounts in respect of Charles Carter were paid to Vitol Services Limited to make available his services as a non-executive director. As at 31 December 2006, 
Vitol Holding S.a.r.l relinquished its right to appoint a non-executive director to the Board. On 10 January 2007, the Nominations Committee confirmed that 
Charles Carter would remain a non-executive director but with effect from 1 January 2007 would be remunerated directly for his services.
(4)
 Including amounts in respect of Chairmanship of the Audit Committee.
(5)
 Including amounts in respect of Chairmanship of the Remuneration Committee.
Click to return to contents 25 Star Energy Group plc Annual Report and Accounts 2006
Directors’ interests in the share capital of the Company
The interests of the directors who held office at 31 December 2006 were:
       Number of shares Number of shares 
       as at 31 December as at 1 January 
Ordinary 10p shares       2006 2006 
Roland Wessel       869,427 813,740
Melvyn Horgan       558,420 558,420
Colin Judd       363,840 463,840
Adrian Fernando       342,010 452,010
Roger Pearson       – –
Stephen Gutteridge       – –
Charles Carter       – –
Stephen East       – –
David Wertheim
(1)
       60,000 50,000
T o t a l 	 	 	 	 	 	 	 2 , 1 9 3 , 6 9 7 	 2 , 3 3 8, 0 1 0
(1)
 David Wertheim is deemed to be interested in these shares by virtue of a discretionary trust.
There has been no change in the interest of any director between 1 January 2007 and the date of this report.
The following information shows the interests of the directors as at the end of the financial year in the Company’s LTIP , Approved Share 
Option Scheme and Sharesave Scheme: 
i )	 L T I P :
    Conditional   Market value of 
   No. of shares awards made No. of shares % of issued an ordinary 
   under award /(lapsed) under award  Share capital share as at date End of 
Ordinary 10p  Award as at 1 January during the as at 31 December as at 31 December of award performance 
share  date 2006 year 2006 2006 (pence) period
Roland Wessel  11.10.05 67,934 – 67,934 0.09 259.65 31.08.08
  11.10.05 67,934 – 67,934 0.09 259.65 31.08.09
T o t a l 	 a w a r d s 	 	 	 1 3 5 , 8 6 8 	 – 	 1 3 5 , 8 6 8 	 0 . 1 8 	 	
Melvyn Horgan  11.10.05 33,568 – 33,568 0.04 259.65 31.08.08
  11.10.05 33,568 – 33,568 0.04 259.65 31.08.09
T o t a l 	 a w a r d s 	 	 	 6 7 , 1 3 6 	 – 	 6 7 , 1 3 6 	 0 . 0 8 	 	
Colin Judd  11.10.05 39,162 – 39,162 0.05 259.65 31.08.08
  11.10.05 39,162 – 39,162 0.05 259.65 31.08.09
T o t a l 	 a w a r d s 	 	 	 78, 3 2 4 	 – 	 78, 3 2 4 	 0 . 1 0 	 	
Adrian Fernando  11.10.05 31,649 – 31,649 0.04 259.65 31.08.08
  11.10.05 31,649 – 31,649 0.04 259.65 31.08.09
T o t a l 	 a w a r d s 	 	 	 6 3 , 2 9 8 	 – 	 6 3 , 2 9 8 	 0 . 0 8 	 	
Roger Pearson  11.10.05 29,971 1,678 31,649 0.04 259.65 31.08.08
  11.10.05 29,971 1,678 31,649 0.04 259.65 31.08.09
T o t a l 	 a w a r d s 	 	 	 5 9 , 94 2 	 3 , 3 5 6 	 6 3 , 2 9 8 	 0 . 0 8 	 	
T o t a l 	 	 	 4 0 4 , 5 6 8 	 3 , 3 5 6 	 4 0 7 , 9 2 4 	 0 . 5 2  
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i i ) 	 A p p r o v e d 	 S h a r e 	 O p t i o n 	 S c h e m e :
  No. of shares   No. of shares 
  under award Granted Exercised options as at Option  
Ordinary 10p  as at 1 January during the during the 31 December price Date Expiry 
share Grant date 2006 year year 2006 (pence) exercisable date
Roland Wessel 03.12.04 10,000 – – 10,000 185.00 03.12.07 02.12.14
Melvyn Horgan 03.12.04 10,000 – – 10,000 185.00 03.12.07 02.12.14
Colin Judd 03.12.04 10,000 – – 10,000 185.00 03.12.07 02.12.14
Adrian Fernando 03.12.04 5,000 – – 5,000 185.00 03.12.07 02.12.14
Roger Pearson 03.12.04 5,000 – – 5,000 185.00 03.12.07 02.12.14
Roger Pearson 02.12.05 5,000 – – 5,000 276.00 02.12.08 01.12.15
T o t a l 	 	 4 5 , 0 0 0 	 – 	 – 	 4 5 , 0 0 0   
i i i ) 	 S h a r e s a v e 	 S c h e m e :
  No. of share   No. of shares 
  options as at Granted Exercised options as at Option  
Ordinary 10p  as at 1 January during the during the 31 December price Date Expiry 
share Invitation date 2006 year year 2006 (pence) exercisable date
Roland Wessel – – – – – – 01.08.09 31.01.10
Melvyn Horgan – – – – – – 01.08.09 31.01.10
Colin Judd 28.04.06 – 1,335 – 1,335 280.00 01.08.09 31.01.10
Adrian Fernando – – – – – – 01.08.09 31.01.10
Roger Pearson 28.04.06 – 2,003 – 2,003 280.00 01.08.09 31.01.10
T o t a l 	 	 – 	 3 , 3 3 8 	 – 	 3 , 3 3 8   
During 2006, the highest mid-market price of the Group was 354.00p and the lowest was 260.00p. The year end price was 283.00p.
On behalf of the Board of Directors of Star Energy Group plc.
David Wertheim
Chairman of the Remuneration Committee
30 March 2007
Directors’ Remuneration Report 2006 continued
Click to return to contents 27 Star Energy Group plc Annual Report and Accounts 2006
Although the Company, as an AIM quoted company, is not required 
to comply with the Combined Code on Corporate Governance, the 
directors support high standards of corporate governance and, in 
so far as is practical given the Company’s size, have established the 
following corporate governance provisions:
 A non-executive Chairman to the Board, a senior independent 
non-executive director, and two further non-executive directors, 
thus providing the Board with four non-executive and five 
executive directors.
 An Audit Committee, comprising three non-executive directors, 
having documented terms of reference, and chaired by an 
independent non-executive director with recent and relevant 
financial experience.
 A Remuneration Committee, comprising all non-executive 
directors, having documented terms of reference, and chaired by 
the senior independent non-executive director.
 A Nominations Committee, comprising all non-executive directors, 
having documented terms of reference, and chaired by the non-
executive Chairman.
Board of Directors
The Board currently comprises a non-executive Chairman, three  
non-executive directors and five executive directors. 
Whilst there is a clear division of responsibilities between the 
Chairman and the Chief Executive Officer, Stephen Gutteridge  
plays a role in the strategic development of the Group, and is not 
considered independent for the purposes of the Combined Code.
Charles Carter’s position as a non-executive director was, until  
31 December 2006, pursuant to the right of Vitol Holding S.a.r.l  
as a significant shareholder in the Group. With effect from 1 January 
2007, Vitol Holding S.a.r.l. relinquished its right to appoint a  
non-executive director. Charles Carter accepted an invitation from 
the Board to continue serving as a non-executive director from 
this date. For the purposes of the Combined Code, Charles Carter 
continues not to be considered as independent due to he remaining 
an employee of Vitol Services Limited, an associated company of Vitol 
Holdings S.a.r.l and Vitol SA, another company within the Vitol group 
of companies which has entered into an agreement with Star Energy 
HG Gas Storage Limited for the exclusive use of the Humbly Grove 
gas storage facility until 1 May 2009.
Both Stephen East and David Wertheim in their capacities as non-
executive director and senior independent director, respectively, bring 
considerable financial and commercial expertise to the Group, and 
both are considered independent for the purposes of the Combined 
Code. In the role of senior independent director, David Wertheim is 
available to shareholders to discuss matters which they consider 
cannot be addressed to the Chairman or other Board members.
•
•
•
•
The Board met eleven times in 2006 (2005: eleven times). Board 
meeting attendance is detailed below:
 Meetings attended
 2 0 0 6 2005
E x e c u t i v e 	 d i r e c t o r s  
Roland Wessel 1 1 10
Melvyn Horgan 1 1 10
Colin Judd 1 1 9
Adrian Fernando 1 0 10
Roger Pearson
(1)
 1 1 2
  
N o n - e x e c u t i v e 	 d i r e c t o r s  
Stephen Gutteridge  1 1 11
Charles Carter 1 1 11
Stephen East 9 11
David Wertheim 1 0 11
(1)
 Appointed 21 October 2005
All necessary information is supplied to the directors on a timely 
basis to enable them to discharge their duties effectively, and all 
directors have access to independent professional advice, at the 
Company’s expense, as and when required. 
The Articles of Association require that at least one third of the 
directors retire and may submit themselves for re-election at the 
Annual General Meeting (AGM) each year. In addition, the Articles 
state that all directors should submit themselves for re-election at 
least every three years.
Corporate Governance Statement
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Committees
Each of the Audit, Remuneration and Nomination Committees has  
its own terms of reference which are reviewed annually. The terms  
of reference of the Audit, Remuneration and Nomination Committees 
were last reviewed on 22 February 2007, 22 November 2006 and  
29 March 2007 respectively. The terms of reference for each of the 
committees can be accessed via Star Energy’s website  
(www.starenergy.co.uk). 
Audit Committee
The Audit Committee is responsible for monitoring the integrity of 
the financial statements of the Group, assessing the effectiveness 
of the Group’s internal controls and risk management systems, and 
reviewing the scope and effectiveness of the external audit function. 
The Audit Committee comprises Stephen East (Chairman), Charles 
Carter and David Wertheim.
The Committee met three times during 2006 (2005: four) to 
review financial statements and the Group’s internal controls. 
The Audit Committee meetings were attended by all Committee 
members except for one meeting where Stephen East was absent. 
Representatives from the Group’s auditors, BDO Stoy Hayward 
LLP attended two of the meetings. The Group’s auditors have 
unrestricted access to the Chairman of the Audit Committee. 
Remuneration Committee
The Remuneration Committee is responsible for making 
recommendations to the Board on the Company’s remuneration 
policies and for determining the remuneration of the executive 
directors and senior employees. 
The Remuneration Committee comprises David Wertheim 
(Chairman), Charles Carter, Stephen East and Stephen Gutteridge.
The Committee met formally five times during 2006 (2005: four). 
The Remuneration Committee meetings held during the year were 
attended by all Committee members.
Nominations Committee
The Nominations Committee is responsible for the composition 
of the Board and makes recommendations on the appointment of 
new directors as well as making recommendations to the Board on 
succession planning.
The Nominations Committee comprises of Stephen Gutteridge 
(Chairman), Charles Carter, Stephen East and David Wertheim.
The Committee met once in 2006 (2005: twice). This meeting was 
attended by all Committee members.
Shareholder relations
Communications with shareholders is undertaken through face-to-
face meetings, general presentations at the time of the release of 
interim and full year results, and news releases. The Group’s website 
(www.starenergy.co.uk) facilitates the publication of results and the 
posting of news regarding the Group and its developments.
The Chairman is available to meet with institutional shareholders to 
discuss any issues and concerns regarding the Group’s governance. 
Non-executive directors can also attend meetings with major 
shareholders if requested.
The participation of both private and institutional investors at the 
AGM is welcomed by the Board. 
Internal controls
The directors acknowledge their responsibility for the Company’s 
and the Group’s systems of internal control, which are designed 
to safeguard the assets of the Group and ensure the reliability of 
financial information for both internal use and external publication. 
The Group’s internal control procedures include Board, technical and 
financial approval for all significant projects. All major expenditures 
require senior management approval at the appropriate stages of 
each transaction. Overall control is ensured by a regular detailed 
reporting system covering both technical progress of a project and 
the state of the Group’s financial affairs. The Board has put in place 
procedures for identifying, evaluating and managing any significant 
risks that face the Group.
Any system of internal control can provide only reasonable, and 
not absolute, assurance that material financial irregularities will be 
detected or that the risk of failure to achieve business objectives is 
eliminated. The directors, having reviewed the effectiveness of the 
system of internal financial, operational and compliance controls 
and risk management, consider that the system of internal control 
operated effectively throughout the financial year and up to the date 
the financial statements were signed.
Going concern
After making enquiries, the directors have a reasonable expectation 
that the Company and the Group as a whole have adequate 
resources to continue in operational existence for the foreseeable 
future. For this reason, they continue to adopt the going concern 
basis in preparing the financial statements. 
 
Corporate Governance Statement continued
Click to return to contents 29 Star Energy Group plc Annual Report and Accounts 2006
The directors are responsible for preparing the Annual Report and 
the financial statements, in accordance with applicable law and 
United Kingdom Generally Accepted Accounting Practice.
Company law requires the directors to prepare financial statements 
for each financial year which give a true and fair view of the state 
of affairs of the Group and Company and of the profit or loss of the 
Group for that period. In preparing these financial statements, the 
directors are required to:
 select suitable accounting policies and then apply them 
consistently;
make judgements and estimates that are reasonable and prudent;
 state whether applicable accounting standards have been 
followed, subject to any material departures disclosed and 
explained in the financial statements; and
 prepare the financial statements on the going concern basis 
unless it is inappropriate to presume that the company will 
continue in business. 
The directors are responsible for keeping proper accounting records 
that disclose with reasonable accuracy at any time the financial 
position of the Company and Group and enable them to ensure that 
the financial statements comply with the Companies Act 1985. They 
are also responsible for safeguarding the assets of the Company and 
hence for taking reasonable steps for the prevention and detection of 
fraud and other irregularities.
Financial statements are published on the Group’s website in 
accordance with legislation in the United Kingdom governing the 
preparation and dissemination of financial statements, which may 
vary from legislation in other jurisdictions. The maintenance and 
integrity of the Group’s website is the responsibility of the directors. 
The directors’ responsibility also extends to the ongoing integrity of 
the financial statements contained therein.
 
•
•
•
•
Statement of Directors’ Responsibilities in Respect
of Preparation of the Financial Statements
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We have audited the consolidated and parent company financial 
statements (the ‘financial statements’) of Star Energy Group plc for 
the year ended 31 December 2006 which comprise the Consolidated 
Profit and Loss Account, the Consolidated and Company Balance 
Sheets, the Consolidated Cash Flow Statement, the Consolidated 
Reconciliation of Movements in Shareholders’ Funds and the related 
notes. These financial statements have been prepared under the 
accounting policies set out therein.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the financial statements 
in accordance with applicable law and United Kingdom Accounting 
Standards (United Kingdom Generally Accepted Accounting Practice) 
are set out in the Statement of Directors’ Responsibilities. Our 
responsibility is to audit the financial statements in accordance 
with relevant legal and regulatory requirements and International 
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial 
statements give a true and fair view and have been properly 
prepared in accordance with the Companies Act 1985 and whether 
the information given in the Directors’ Report is consistent with 
those financial statements. We also report to you if, in our opinion, 
the Company has not kept proper accounting records, if we have 
not received all the information and explanations we require for 
our audit, or if information specified by law regarding directors’ 
remuneration and other transactions is not disclosed. 
We read other information contained in the Annual Report,  
and consider whether it is consistent with the audited financial 
statements. This other information comprises the Highlights 2006, 
the Chairman’s Statement, the Chief Executive’s Review, the Corporate 
Social Responsibility Statement, the Operational Reviews, the Financial 
Review, the Directors’ Report, the Directors’ Remuneration Report, the 
Corporate Governance Statement and the Statement of Directors’ 
Responsibilities in Respect of Preparation of the Financial Statements. 
We consider the implications for our report if we become aware of any 
apparent misstatements or material inconsistencies with the financial 
statements. Our responsibilities do not extend to other information.
Our report has been prepared pursuant to the requirements of the 
Companies Act 1985 and for no other purpose. No person is entitled 
to rely on this report unless such a person is a person entitled to rely 
upon this report by virtue of and for the purpose of the Companies 
Act 1985 or has been expressly authorised to do so by our prior 
written consent. Save as above, we do not accept responsibility for 
this report to any other person or for any other purpose and we 
hereby expressly disclaim any and all such liability.
Basis of audit opinion
We conducted our audit in accordance with International Standards 
on Auditing (UK and Ireland) issued by the Auditing Practices Board. 
An audit includes examination, on a test basis, of evidence relevant 
to the amounts and disclosures in the financial statements. It also 
includes an assessment of the significant estimates and judgements 
made by the directors in the preparation of the financial statements, 
and of whether the accounting policies are appropriate to the Group 
and Company’s circumstances, consistently applied and adequately 
disclosed. We planned and performed our audit so as to obtain all 
the information and explanations which we considered necessary 
in order to provide us with sufficient evidence to give reasonable 
assurance that the financial statements are free from material 
misstatement, whether caused by fraud or other irregularity or  
error. In forming our opinion we also evaluated the overall adequacy 
of the presentation of information in the financial statements.
Opinion
In our opinion:
 the consolidated financial statements give a true and fair view, in 
accordance with United Kingdom Generally Accepted Accounting 
Practice, of the state of the Group’s affairs as at 31 December 2006 
and of its profit for the year then ended;
 the parent company financial statements give a true and fair 
view, in accordance with United Kingdom Generally Accepted 
Accounting Practice, of the state of the parent company’s affairs  
as at 31 December 2006;
 the financial statements have been properly prepared in 
accordance with the Companies Act 1985; and
 the information given in the Directors’ Report is consistent with 
the financial statements.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
London
30 March 2007
 
 
•
•
•
•
Independent Auditors’ Report to the Members of  
Star Energy Group plc
Click to return to contents 31 Star Energy Group plc Annual Report and Accounts 2006
        Y e a r 	 e n d e d 	 Year ended 
       	 3 1 	 D e c e m b e r 	 31 December 
        2 0 0 6 2005 
       Note £ ’ 0 0 0 £’000
T u r n o v e r      1 5 7 , 0 9 7 24,712
Operating costs       ( 2 0 , 1 2 1 ) (11,869)
Depletion, depreciation and amortisation       ( 1 1 , 3 4 2 ) (5,771)
T o t a l 	 c o s t 	 o f 	 s a l e s       ( 3 1 , 4 6 3 ) (17,640)
G r o s s 	 p r o f i t       2 5 , 6 3 4 7,072
Administrative expenses        ( 5 , 7 9 7 ) (3,721)
Other income       2 4 2 288
G r o u p 	 o p e r a t i n g 	 p r o f i t 	      2(i) 2 0 , 0 7 9 3,639
Share of operating loss in Associate       ( 8 5 ) –
T o t a l 	 o p e r a t i n g 	 p r o f i t : 	 G r o u p 	 a n d 	 s h a r e 	 o f 	 A s so c i a t e       1 9 , 9 94 3,639
Loss on sale of fixed assets       ( 2 ) –
Interest receivable and similar income – Group      4 7 9 2 528
Interest payable and similar charges  – Group      5 ( 6 , 1 9 7 ) (2,108)
 – Associate       ( 1 2 ) –
P r o f i t 	 o n 	 o r d i n a r y 	 a c t i v i t i e s 	 b e f o r e 	 t a x a t i o n       1 4 , 5 7 5 2,059
Tax charge on profit on ordinary activities      6 ( 1 0 , 8 2 5 ) (795)
R e t a i n e d 	 p r o f i t 	 f o r 	 t h e 	 f i n a n c i a l 	 y e a r      20 3 , 7 5 0 1,264
        
       P e n c e Pence
Basic profit per share      7 4 . 72 1.82
Diluted profit per share      7 4 . 6 3 1.81
The results reflected above relate to continuing activities.
There are no recognised gains and losses other than the amounts shown above.
The notes on pages 36 to 51 form an integral part of these financial statements.
 
 
Consolidated Profit and Loss Account
for the year ended 31 December 2006
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  2 0 0 6  2005
     Note £ ’ 0 0 0 	 £ ’ 0 0 0 £’000 £’000
F i x e d 	 a s s e t s         
Intangible assets    8  8 9 5  205
Tangible assets    9 	 1 8 6 , 4 8 5  173,852
Investment in Associate    10  4  –
C u r r e nt 	 a s s e t s        
Stocks    11 1 , 1 3 4  361
Debtors    12 1 0 , 2 3 5  8,118 
Cash in hand and at bank    23 6 , 4 5 6  17,283
	 	 	 	 	 1 7 , 8 2 5  25,762
C r e d i t o r s : amounts falling due within one year    13 ( 1 8, 0 6 1 )  (32,983)
N e t 	 c u r r e nt 	 l i a b i l i t i e s      ( 2 3 6 )  (7,221)
T o t a l 	 a s s e t s 	 l e s s 	 c u r r e nt 	 l i a b i l i t i e s     	 1 8 7 , 1 4 8  166,836
C r e d i t o r s: amounts falling due after more than one year    14 	 ( 6 6 , 1 1 6 )  (57,693)
P r o v i s i o n s 	 f o r 	 l i a b i l i t i e s 	 a n d 	 c h a r g e s    17 	 ( 2 5 , 6 9 0 )  (18,099)
N e t 	 a s s e t s      9 5 , 3 4 2  91,044
C a p i t a l 	 a n d 	 r e s e r v e s        
Called up share capital    18  7 , 9 3 7  7,937
Share premium account    20 	 1 2 5 , 4 5 7  125,457
Merger reserve    20 	 ( 4 5 , 0 9 3 )  (45,093)
Profit and loss account    20  7 , 0 4 1  2,743
S h a r e h o l d e r s ’ 	 f u n d s      9 5 , 3 4 2  91,044
These financial statements were approved by the Board of directors and authorised for issue on 30 March 2007 and were signed on its  
behalf by:
Colin Judd
Financial Director
The notes on pages 36 to 51 form an integral part of these financial statements.
 
 
Consolidated Balance Sheet
at 31 December 2006
Click to return to contents 33 Star Energy Group plc Annual Report and Accounts 2006
  2 0 0 6  2005
     Note £ ’ 0 0 0 	 £ ’ 0 0 0 £’000 £’000
F i x e d 	 a s s e t s         
Investments    10  1 0 0 , 7 3 0  100,372
C u r r e nt 	 a s s e t s        
Debtors    12 1 1 1 , 2 3 6  100,818 
Cash in hand and at bank     4 , 1 1 2  11,143
     1 1 5 , 3 4 8  111,961 
C r e d i t o r s : amounts falling due within one year    13 ( 1 6 , 9 9 7 )  (21,438) 
N e t 	 c u r r e nt 	 a s s e t s      9 8, 3 51  90,523
T o t a l 	 a s s e t s 	 l e s s 	 c u r r e nt 	 l i a b i l i t i e s     	 1 9 9 , 0 8 1  190,895
C r e d i t o r s : amounts falling due after more than one year    14  ( 6 5 , 9 1 6 )  (57,612)
N e t 	 a s s e t s      1 3 3 , 1 6 5  133,283
C a p i t a l 	 a n d 	 r e s e r v e s        
Called up share capital    18  7 , 9 3 7  7,937
Capital reserve account    20  5 4 8  190
Share premium account    20  1 2 5 , 4 5 7  125,457
Profit and loss account    20 	 ( 7 7 7 )  (301)
S h a r e h o l d e r s ’ 	 f u n d s      1 3 3 , 1 6 5  133,283
These financial statements were approved by the Board of directors and authorised for issue on 30 March 2007 and were signed on its  
behalf by:
Colin Judd
Financial Director
The notes on pages 36 to 51 form an integral part of these financial statements.
 
 
Company Balance Sheet
at 31 December 2006
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  2 0 0 6  2005
     Note £ ’ 0 0 0 	 £ ’ 0 0 0 £’000 £’000
C a s h 	 f l o w 	 f r o m 	 o p e r a t i n g 	 a c t i v i t i e s    22  2 1 , 8 5 5  19,219
R e t u r n s 	 o n 	 i n v e s t m e nt s 	 a n d 	 s e r v i c i n g 	 o f 	 f i n a n c e        
 Interest received     5 0 3  528 
 Interest paid    	 ( 6 , 6 2 0 )  (1,710) 
 Interest element of finance lease rental payments    	 ( 2 7 )  (77) 
      ( 6 , 1 4 4 )  (1,259)
T a x a t i o n      ( 5 , 2 8 3 )  (215)
C a p i t a l 	 e x p e n d i t u r e 	 a n d 	 f i n a n c i a l 	 i n v e s t m e nt        
 Purchase of tangible fixed assets     	 ( 2 2 , 6 5 9 )  (69,922)
A c q u i s i t i o n s        
 Purchase of additional interests in existing licences     ( 2 , 1 6 6 )  – 
 Purchase of subsidiary undertakings     –   (45,845) 
 Purchase of interest in Associate    	 ( 1 0 0 )  – 
     	 ( 2 , 2 6 6 )  (45,845)
C a s h 	 o u t f l o w 	 b e f o r e 	 m a n a g e m e nt 	 o f
 l i q u i d 	 r e so u r c e s 	 a n d 	 f i n a n c i n g      ( 1 4 , 4 9 7 )  (98,022)
        
F i n a n c i n g        
 Issue of ordinary share capital     –  35,000 
 Issue costs of equity shares     –  (3,060) 
 Decrease in short-term borrowing     ( 3 , 8 7 7 )  – 
 Increase in long-term borrowing     8, 3 7 1  72,230 
 Debt arrangement fee    	 ( 3 0 0 )  – 
 Capital element of finance lease rental payments     ( 6 1 5 )  (1,064)
      3 , 5 7 9  103,106
( D e c r e a s e ) / I n c r e a s e 	 i n 	 c a s h 	 i n 	 t h e 	 y e a r    23 	 ( 1 0 , 9 1 8 )  5,084
The notes on pages 36 to 51 form an integral part of these financial statements.
 
 
Consolidated Cash Flow Statement
for the year ended 31 December 2006
Click to return to contents 35 Star Energy Group plc Annual Report and Accounts 2006
        2 0 0 6  2005 
        £ ’ 0 0 0  £’000
R e t a i n e d 	 p r o f i t 	 f o r 	 t h e 	 f i n a n c i a l 	 y e a r      	 3 , 7 5 0 1,264
Issue of shares       – 34,999
Share issue costs       – (2,234)
Costs relating to share incentive plans (Note 19)      	 5 4 8 242
Net addition to shareholders’ funds      	 4 , 2 9 8 34,271
Opening shareholders’ funds       	 9 1 , 0 4 4 56,773
Closing shareholders’ funds      	 9 5 , 3 4 2 91,044
The notes on pages 36 to 51 form an integral part of these financial statements.
 
 
Consolidated Reconciliation of Movements in Group 
Shareholders’ Funds
for the year ended 31 December 2006
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1. Accounting policies
The following accounting policies have been applied consistently in 
dealing with items which are considered material in relation to the 
Group’s financial statements. 
Basis of preparation
The financial statements have been prepared on a going concern 
basis in accordance with applicable accounting standards and under 
the historical cost accounting rules, and in accordance with Statement 
of Recommended Practice: ‘ Accounting for Oil and Gas Exploration, 
Development, Production and Decommissioning Activities’. 
The Group and Company have taken advantage of the exemption 
contained in FRS 8: ‘Related Party Disclosures’, and has therefore not 
disclosed transactions or balances with entities which form part of 
the Group.
Changes in accounting policies
There have been no changes in accounting policies adopted during  
the year. 
Basis of consolidation
The consolidated financial statements include the financial 
statements of the Company and its subsidiary undertakings  
made up to 31 December 2006. 
In respect of subsidiaries controlled indirectly by the Company 
through Star Energy Limited, its 100% owned subsidiary, the 
acquisition method of accounting has been adopted. Under this 
method, the results of subsidiary undertakings acquired or disposed 
of in the year are included in the Consolidated Profit and Loss 
account from the date of acquisition or up to the date of disposal. 
Under section 230(4) of the Companies Act 1985 the Company  
is exempt from the requirement to present its own profit and  
loss account. 
Investments
In the Company’s financial statements, investments in subsidiary 
undertakings, associates and joint ventures are stated at cost, less 
any provision for impairment in value. 
Consortium accounting
A small proportion of the Group’s exploration, development and 
production activities are conducted as co-licensee in joint operations 
with other companies. The financial statements reflect the relevant 
proportions of production, capital expenditure and operating costs 
applicable to the Group’s interest. Where a Group company is party 
to a joint arrangement which is not an entity, that company accounts 
directly for its part of the income and expenditure, assets, liabilities 
and cash flows. Such arrangements are reported in the consolidated 
financial statements on the same basis. Where the Group farms-in 
to a farm-out agreement, it accounts for its proportion of revenues, 
costs, assets and liabilities in accordance with the provisions of the 
farm-out agreement. 
Associates
Associates are undertakings that are not subsidiaries or joint 
ventures over which the Group has significant influence and can 
participate in financial and operating decisions. Investments in 
associated undertakings are accounted for using the equity method. 
The Consolidated Profit and Loss Account includes the Group’s 
share of the associated undertaking’s results while the Consolidated 
Balance Sheet includes the Group’s share of the net assets or net 
liabilities of the associate. 
Intangible fixed assets
i)  Exploration and evaluation expenditure: Included here are costs 
which are directly attributable to gaining access rights to areas 
of interest, compiling pre-feasibility and feasibility studies and 
conducting exploratory activities. Once capitalised, exploration 
and evaluation expenditure is reviewed for impairment at each 
balance sheet date. Any impairment is charged through the profit 
and loss account. If it is decided to develop the areas to which the 
intangible fixed asset expenditure relates, the expenditure will be 
transferred to tangible fixed assets.
ii)  Emissions credits: The Group participates in the EU Emissions 
Trading Scheme. This is a ‘cap and trade’ scheme under which 
organisations are awarded emissions credits to cover carbon 
dioxide emissions. Under this scheme, the Group receives an 
allocation of emissions credits for each calendar year within a 
phase. These emissions credits can be used against carbon dioxide 
production or sold either in the current calendar year or in other 
calendar years within the same phase. The emissions credits are 
included in the balance sheet as an intangible fixed asset, recorded 
at the market price and exchange rate prevailing on the first day 
of the phase being 1 January 2005. No policy to revalue or mark 
to market has been adopted. The Group’s actual carbon dioxide 
production against the emissions credits allocation for each year 
is reflected in the profit and loss account together with any profit/
loss on credits sold and any cost of additional credits purchased.
Tangible fixed assets 
The Group follows the full cost method of accounting for oil and gas 
operations. Under this method all expenditure in connection with 
the acquisition, exploration, appraisal and development of oil and gas 
assets, including interest payable, exchange differences incurred on 
borrowings in respect of development projects and direct overheads are 
capitalised and accumulated in full cost pools on a geographical basis.
Cost pools are determined on the basis of the fields possessing, to 
a significant degree, common characteristics in at least one of the 
following factors: geological area, interdependence of infrastructure, 
common environment or common development of markets.
Any impairment in the value of the cost pool is charged through the 
profit and loss account as additional depletion where it is considered 
that an impairment of the asset value has occurred.
Proceeds from the disposal of oil and gas assets are credited against 
the relevant pool. Any overall surplus arising in the cost pool is 
credited to the profit and loss account.
Depletion and depreciation
Capitalised expenditure within each separate cost pool is depleted 
on a unit of production basis. The depletion charge is based on 
estimates of proven and probable reserves. The costs of undeveloped 
acreage and exploration assets are excluded from the capitalised 
cost pool to be depleted, pending determination of the recoverable 
reserves attributable to such assets. 
Other tangible fixed assets are stated at historical cost, net of 
depreciation and any provision for impairment. Depreciation is 
calculated on all other tangible fixed assets, other than freehold 
land, on a straight-line basis at rates calculated to write off the cost 
or valuation of those assets, less estimated residual value, over their 
expected useful life of between three and 25 years. 
Notes to the Financial Statements
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1. Accounting policies continued
Impairment tests
Where there is an indication that the value of an oil and gas cost 
pool may be impaired, the net amount at which the pool is recorded 
is assessed for recoverability against the discounted future estimated 
net cash flows expected to be generated from the estimated 
remaining commercial reserves. This assessment is made on the 
basis of future oil and gas prices, exchange rates and cost levels as 
forecast at the balance sheet date. A provision is made, by way of 
an additional depletion charge, where the carrying value of the pool 
exceeds the discounted future net cash flows to be derived from its 
estimated remaining commercial reserves.
Decommissioning provision and asset
Licensees have an obligation to restore producing fields to a 
condition acceptable to the relevant authorities at the end of their 
commercial lives. Under FRS 12: ‘Provisions, Contingent Liabilities 
and Contingent Assets’, the discounted present value of this future 
cost has been provided for and capitalised within the respective cost 
pool. The capitalised cost is amortised through the cost pool on a 
unit of production basis and the increase in the net present value of 
the future cost (the unwinding of the discount) is included within 
interest payable and other similar charges. 
The gas storage assets are considered to have infinite useful economic 
lives and therefore no provision is made. Annual assessments are 
conducted to support the continuation of this policy. 
Derivative financial instruments
The Group uses derivative financial instruments to reduce its 
exposure to fluctuations in foreign exchange rates, interest rates  
and movements in oil and gas prices.
Premiums paid to enter into such derivative financial instruments are 
charged to the profit and loss account over the period of the hedge. 
Payments and receipts arising under the financial instruments are 
recognised in the profit and loss account in the same periods as the 
hedged transactions.
The Group does not hold or issue derivative financial instruments for 
speculative purposes and it is the Group’s policy that no trading in 
financial instruments shall be undertaken.
Foreign currencies
Transactions in foreign currencies are recorded using the rate of 
exchange ruling at the date of the transaction or, if hedged forward, 
at the rate of exchange under the related forward currency contract. 
Monetary assets and liabilities denominated in foreign currencies 
are translated using the rate of exchange ruling at the balance sheet 
date. Exchange gains or losses on translation are included in the 
profit and loss account.
Post retirement benefits
The Group operates a defined contribution pension scheme. The 
assets of the scheme are held separately from those of the Group in 
an independently administered fund. The amount charged against 
profits represents the contributions payable to the scheme in respect 
of the accounting year.
Short-term incentive plan
The Group operates a short-term incentive plan for executive 
directors and other key managers. Under the terms of the plan, 
annual awards are made to plan participants dependent upon the 
achievement of individual performance targets. The performance 
targets are determined by the Remuneration Committee and 
reviewed annually. 
Share-based payments
In accordance with FRS 20: ‘Share-based payments’, the Group 
reflects the economic cost of awarding shares and share options to 
employees by recording an expense in the profit and loss account 
equal to the fair value of the benefit awarded. The expense is 
recognised in the profit and loss account over the vesting period of 
the award.
Stocks
Stocks are stated at the lower of cost and net realisable value. 
Taxation
The charge for taxation is based on the result for the year and takes 
into account taxation deferred because of timing differences between 
the treatment of certain items for taxation and accounting purposes.
Deferred tax is recognised, without discounting, in respect of all 
timing differences between the treatment of items for taxation and 
accounting purposes which have arisen but not reversed by the balance 
sheet date, except as otherwise required by FRS 19: ‘Deferred T ax’ . 
Turnover
Turnover is derived from sales of oil, electricity and natural gas to 
third party customers and from the rental of gas storage facilities. 
Forward contracts are sometimes used by the Group to hedge the 
price at which oil is sold. In such circumstances turnover is recorded 
at the actual hedged amount.
Turnover relating to oil is recognised when the oil is transferred  
into customer tanks. Electricity turnover is recognised on a monthly 
basis calculated from meter readings. Turnover relating to natural 
gas is recognised when the gas is transferred to the customer. Gas 
storage rental income is recognised in accordance with the relevant 
lease agreement. 
Gas storage
Gas storage facilities are considered to be leased to customers under 
operating leases. The total income arising over the duration of the 
contract is recognised evenly throughout the course of the contract 
subsequent to the gas storage asset being completed and becoming 
fully operational. 
Leases
Operating leases and the corresponding rental charges are charged 
to the profit and loss account on a straight-line basis over the life of 
the lease.
Assets under finance leases are included under tangible fixed assets 
at their capital value and depreciated over their useful lives. Lease 
payments consist of capital and finance charge elements, and the 
finance charge element is charged to the profit and loss account.
Cash
Cash, for the purpose of the cash flow statement, comprises cash  
in hand and deposits repayable on demand, less overdrafts payable 
on demand.
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Notes to the Financial Statements continued
2 (i). Operating profit 
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
P r o f i t 	 o n 	 o r d i n a r y 	 a c t i v i t i e s 	 b e f o r e 	 t a x a t i o n 	 i s 	 s t a t e d 	 a f t e r 	 c h a r g i n g / ( c r e d i t i n g)   
Fees payable to the Company’s current auditor for the audit of the Company’s annual accounts    7 1 57
Fees payable to the Company’s current auditor for other services:   
 – The audit of the Company’s subsidiaries pursuant to legislation      9 9 111
Other services pursuant to legislation (current auditor)      	 2 8 6
Fees payable to the Company’s previous auditor for the audit of the Company’s annual accounts    – 58
Fees payable to the Company’s previous auditor for other services:   
 – The audit of the Company’s subsidiaries pursuant to legislation      – 6
Tax services (previous auditor)       5 3 	 57
Depletion, depreciation and other amounts written off tangible fixed assets:   
 Oil and gas assets        9 , 8 9 7  5,697
 Other fixed assets – owned       1 , 3 8 1 227
 Other fixed assets – leased       1 8 0 12
Operating lease charges:   
 Land and buildings       9 8 5 751
 Other       1 3 4 	 70
Rentals receivable under operating leases       ( 8, 8 7 1 ) (810)
In addition to the fees paid by the Group to the previous auditor in respect of other services, £nil (2005: £603,000) were included in the costs 
of acquisition of Pentex Management Limited. 
2 (ii). Segmental analysis of turnover, operating profit/(loss) and net assets
All turnover is derived from UK based operations (except as noted below).
  2 0 0 6  2005
 Oi l 	 E l e c t r i c i t y 	 N a t u r a l 	 g a s 	 G a s 	 s t o r a g e 	 C o r p o r a t e 	 G r o u p Oil Electricity Natural gas Gas storage Corporate Group 
 £ ’ 0 0 0 	 £ ’ 0 0 0 	 £ ’ 0 0 0 	 £ ’ 0 0 0 	 £ ’ 0 0 0 	 £ ’ 0 0 0 £’000 £’000 £’000 £’000 £’000 £’000
Turnover 3 5 , 0 2 9 	 2 , 4 2 6 	 7 , 3 88 	 1 2 , 2 5 4 	 – 	 5 7 , 0 9 7 21,885 1,959 – 810 58 24,712
Operating profit/(loss) 1 0 , 3 8 6 	 ( 5 3 8 ) 	 7 , 3 88 	 2 , 88 4 	 ( 1 2 6 ) 	 1 9 , 9 94 4,661 (304) – (699) (19) 3,639
Net assets 7 3 , 9 3 6 	 4 , 0 6 1 	 7 , 3 88 	 7 5 , 1 94 	 3 , 7 9 5 	 1 6 4 , 3 7 4 70,935 7,009 – 66,572 701 145,217 
R e c o n c i l i a t i o n 	 o f 	 n e t 	 a s s e t s : 	
Net assets of the Group as  
per above      1 6 4 , 3 7 4      145,217 
Cash      6 , 4 5 6      17,283 
Loans      ( 7 5 , 1 8 5 )      (70,758) 
HP and finance leases      ( 3 0 3 )      (698)
Net assets per Consolidated
 Balance Sheet      9 5 , 3 4 2      91,044
Included within the above amounts are:
 Turnover of £nil (2005:£nil), operating loss of £26,000 (2005: £nil) and net assets of £1,215,000 (2005: £nil) relating to operations based  
in Denmark. 
 Turnover of £nil (2005:£nil), operating loss of £85,000 (2005: £nil) and net assets of £3,000 (2005: £nil) relating to the Group’s associate, 
Larchford Limited.
•
•
Click to return to contents 39 Star Energy Group plc Annual Report and Accounts 2006
3. Directors’ remuneration, staff numbers and costs 
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
Directors’ emoluments       1 , 0 7 1 809
Company contributions to pension schemes       8 7 63
       1 , 1 5 8 872
Amount attributable to the highest paid director:
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
Director’s emoluments       2 3 0 190
Company contributions to pension scheme       2 2 17
       2 5 2 207
 Number of directors
        2 0 0 6 2005
Retirement benefits accruing to directors under:   
Defined contribution pension scheme       5 5
The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:
 Number of employees
	 	 2 0 0 6  2005
      G r o u p 	 C o m p a n y Group Company
Technical      1 1 7 	 – 89 – 
Administrative     3 8 	 9 29 9 
     1 5 5 	 9 118   9 
The aggregate payroll costs of these persons were as follows:
  2 0 0 6  2005
      G r o u p 	 C o m p a n y Group Company 
      £ ’ 0 0 0 £ ’ 0 0 0 £’000 £’000
Wages and salaries     5 , 78 1 	 1 , 0 2 8 4,350 891
Social security costs     6 4 2 	 1 2 6 480 106
Other pension costs     5 0 1 	 8 7 306 72
     6 , 9 2 4 	 1 , 2 4 1 5,136 1,069
4. Interest receivable and similar income – Group
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
Bank interest receivable       7 0 1 528
Foreign exchange gains      	 9 1 –
       7 9 2 528
5. Interest payable and similar charges – Group and Associate
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
On bank loans and overdrafts       5 , 3 8 4 1,035
Other exchange losses       – 442
Other interest payable and similar charges       4 1 2 277
Finance charges payable in respect of finance leases and hire purchase contracts     2 7 77
Unwinding of discount and effect of change of timing of decommissioning (Note 17)     3 8 6 277
       6 , 2 0 9 2,108
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Notes to the Financial Statements continued
6. Taxation
Analysis of the Group tax charge in year:
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
UK Corporation tax charge:   
Current charge at tax rate of 50% (2005: 40%)       	 1 , 0 6 8 760
Adjustments in respect of previous periods      	 1 , 6 2 0 –
Total current tax      	 2 , 6 88 760
Deferred tax charge:    
Origination/reversal of timing differences       5 , 4 8 9 35
Effect of increased tax rate on opening liability       2 , 6 4 8 –
Total deferred tax       8, 1 3 7 35
   
Tax charge on profit on ordinary activities      	 1 0 , 8 2 5 795
Factors affecting the Group current tax charge for the current period
The Group records a current tax charge for the year. The standard rate of Corporation tax including supplementary charge is 50% (2005: 40%). 
The differences are explained below:
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
C u r r e nt 	 t a x 	 r e c o n c i l i a t i o n   
 Profit on ordinary activities before tax       1 4 , 5 7 5 2,059
 Current tax at 50% (2005: 40%)       ( 7 , 2 88 ) (824)
E f f e c t s 	 o f :   
Expenses not deductible for tax purposes (primarily goodwill amortisation)    	 ( 8 7 6 ) (188)
Capital allowances in excess of depreciation      	 9 , 51 1 3,139
Losses generated      	 ( 2 , 3 9 1 ) (2,661)
Interest not allowed for supplementary charge       ( 3 4 8 ) (152)
Tax rate differences on profits/(losses) outside ring fence activities     	 4 4 9 (30)
Adjustments in respect of previous periods      	 ( 1 , 6 2 0 ) –
Other       ( 1 2 5 ) (44)
Total current tax charge (see above)      	 ( 2 , 6 88 ) (760)
The adjustment in respect of previous periods has arisen as a result of the decision to defer capital allowances previously claimed in 2005 into 
2006, in order to take advantage of the additional 10% relief afforded by the increase in the supplementary charge to 20%, which has resulted 
in a one off tax benefit of £405,000.
Factors that may affect Group future tax charges
The future tax charge will depend on a number of factors: the generation of profits from oil and gas activities which will utilise brought 
forward tax losses in Star Energy UK Onshore Limited; the mix of activities going forward as the tax rate will change due to the 
supplementary charge only affecting oil extraction activities; and the amount of non-qualifying expenditure incurred and amortised  
in the profit and loss account.
        2 0 0 6 2005 
       	 £ ’ 0 0 0 £’000
G r o u p 	 d e f e r r e d 	 t a x 	 l i a b i l i t y
At beginning of year      	 ( 1 0 , 4 3 6 ) (1,610)
Arising on acquisition of Pentex Management Limited        – (8,791)
Profit and loss charge for the year       ( 8, 1 3 7 ) (35)
At end of year      	 ( 1 8, 5 7 3 ) (10,436)
Accelerated capital allowances      	 ( 2 8, 3 9 7 ) (18,374)
Tax losses carried forward       7 , 7 5 2 6,268
Decommissioning       1 , 9 7 0 1,762
Other timing differences       1 0 2 (92)
      	 ( 1 8, 5 7 3 ) (10,436)
At 31 December 2006, a deferred tax asset of £7,752,000 (2005: £6,268,000) arising in relation to brought forward trading losses has been 
recognised based on business projections of future profits.
At 31 December 2006, a deferred tax asset of £566,000 (2005: £566,000) arising in relation to brought forward capital losses has not been 
recognised in the balance sheet. This would be recognised if the realisation of capital gains could be foreseen for the purposes of FRS 19.
At 31 December 2006, the Company had a £379,000 (2005: £223,000) deferred tax asset arising in relation to current year excess 
management fees and non trade deficit. This deferred tax asset has been recognised based on business projections of future profits.
Click to return to contents 41 Star Energy Group plc Annual Report and Accounts 2006
7. Earnings per share (EPS)
Reconciliations of the earnings and the weighted average number of shares used in the calculations are set out below:
      
 2 0 0 6  2005
 
     W e i g ht e d   Weighted
     a v e r a g e 	 P e r 	 s h a r e  average Per share 
    E a r n i n gs 	 n u m b e r 	 o f 	 a m o u nt Earnings number of amount
    £ 	 s h a r e s 	 P e n c e £ shares Pence
Basic EPS   3 , 7 5 0 , 0 0 0 	 7 9 , 3 7 4 , 4 4 6 4 . 72 1,264,000 69,261,413 1.82
Dilutive share schemes and options   	 1 , 5 5 0 , 1 7 6   711,544 
Diluted EPS   3 , 7 5 0 , 0 0 0 	 8 0 , 9 2 4 , 6 2 2 4 . 6 3 1,264,000 69,972,957 1.81
As disclosed in Note 28, on 5 March 2007, the Group placed a further 13,636,364 ordinary shares. These shares are not included in the 
calculations of the weighted average number of shares for either 2006 or 2005.
The dilutive share schemes and options are detailed within Share Incentive Plans (Note 19). The calculation of the diluted EPS assumes all 
criteria giving rise to the dilution of the EPS are achieved and all outstanding share options are exercised. 
8. Intangible fixed assets
G r o u p
       Emissions Exploration  
       credits  expenditure Total 
       £’000 £’000 £’000
C o s t         
At beginning of year      374 – 374 
Additions      303 588 891
At end of year      677 588 1,265 
A m o r t i s a t i o n         
At beginning of year      169 – 169 
Charge for year      88 – 88
Impairment      113 – 113
At end of year      370 –  370
N e t 	 b o o k 	 v a l u e 	 a t 	 3 1 	 D e c e m b e r 	 2 0 0 6      3 0 7 	 5 88 	 8 9 5 
Net book value at 31 December 2005      205 –  205 
9. Tangible fixed assets
G r o u p      Western  Gas 
      European storage Other fixed 
      asset pool  assets  assets Total 
      £’000 £’000 £’000 £’000
C o s t         
At beginning of year     156,164 79,045 3,746 238,955 
Additions     12,784 11,556 1,475 25,815
Transfers     12,241 (12,241) – –
Disposals     (1,229) – (133) (1,362) 
Changes to abandonment liabilities     (944) – – (944)
At end of year     179,016 78,360 5,088 262,464 
D e pl e t i o n 	 a n d 	 d e p r e c i a t i o n         
At beginning of year     63,469 506 1,128 65,103 
Charge for year     7,927 3,134 397 11,458
Transfers     73 (73) – –
Disposals      (456) – (126) (582)
At end of year     71,013 3,567 1,399  75,979
N e t 	 b o o k 	 v a l u e 	 a t 	 3 1 	 D e c e m b e r 	 2 0 0 6     1 0 8, 0 0 3 	 7 4 , 7 9 3 	 3 , 6 8 9 	 1 8 6 , 4 8 5 
Net book value at 31 December 2005     92,695 78,539 2,618  173,852 
Following the acquisition of operations based in Denmark, the previously separate East Midlands and Weald Basin asset pools were combined 
into a single Western European asset pool. The impact on earnings of this change was to increase profit after tax by £834,000.
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Notes to the Financial Statements continued
9. Tangible fixed assets continued
Net book value for Gas storage assets includes assets under construction of £nil (2005: £77,523,000) in respect of the Humbly Grove gas store 
(Star Energy HG Gas Storage Limited), £3,430,000 in respect of enhancements to the Humbly Grove gas store (Star Energy HG Gas Storage 
Limited) and £1,087,000 (2005: £1,016,000) in respect of the Welton gas store (Star Energy (East Midlands) Limited). Additions to Gas Storage 
assets include £11,485,000 (2005: £60,904,000) in respect of the Humbly Grove gas store (Star Energy HG Gas Storage Limited) and £71,000 
(2005: £17,000) in respect of the Welton gas store (Star Energy (East Midlands) Limited).
Included within the net book value of Other fixed assets is £3,136,000 (2005: £1,894,000) relating to land and buildings, £220,000 (2005: 
£219,000) relating to motor vehicles, £242,000 (2005: £414,000) relating to fixtures, fittings, tools and equipment, and £91,000 (2005: £91,000) 
relating to assets in the course of construction. Included within amounts relating to land and buildings is £58,000 (2005: £58,000) which relates 
to freehold land on which no depreciation has been charged in 2006 (2005: £nil).
Included in the total net book value of fixed assets is £327,000 (2005: £817,000) in respect of assets held under finance leases and similar hire 
purchase contracts. Depreciation for the year on these assets was £232,000 (2005: £696,000).
Included in the cost of tangible fixed assets is £1,735,000 (2005: £1,735,000) in respect of capitalised interest cost. Depreciation for the year on 
these assets was £75,000 (2005: £17,000). Net book value for capitalised interest is £1,623,000 (2005: £1,698,000).
The £944,000 credit (2005: £146,000 debit) relating to the changes to abandonment liabilities is the net effect of a £944,000 credit (2005: 
£161,000 debit) relating to the effects of a change in the timing of abandonment and £nil (2005: £15,000 credit) in respect of an extension in the 
economic life of certain fields. 
Included within the total net book value of total fixed assets is £82,077,000 (2005: £74,982,000) of costs and £3,567,000 (2005: £506,000) of 
depreciation in respect of assets held for use in operating leases.
As at the year end, ceiling tests were performed in accordance with FRS 11: ‘Impairment of Fixed Assets and Goodwill’ over a period of 35 years  
(2005: 34 years). The results indicate that there has been no impairment and that the carrying value of fixed assets is appropriate. The 
assumptions made by the directors in performing the tests were:
   
 2 0 0 6 2005
Oil price $ 4 4 . 0 0 	 p e r 	 b b l 	 i n 	 2 0 0 7 , $44.00 per bbl in 2007,
 $ 5 5 . 0 0 	 p e r 	 b b l 	 i n 	 2 0 0 8, $40.00 per bbl in 2008,
 $ 6 0 . 0 0 	 p e r 	 b b l 	 i n 	 2 0 0 9 , $40.00 per bbl in 2009,
 i n f l a t e d 	 t h e r e a f t e r 	 a t 	 $ 2 . 0 0 	 p . a . inflated thereafter.
Electricity price £ 4 5 . 0 0 	 p e r 	 M W h r 	 f o r 	 2 0 0 7 	 a n d 	 2 0 0 8, £24.77 per MWhr
 i n f l a t e d 	 t h e r e a f t e r . 	 
Exchange rate £ / $ 1 . 9 2 	 i n 	 2 0 0 7 £/$1.75
 £ / $ 1 . 9 5 	 i n 	 2 0 0 8 
 £ / $ 2 . 2 0 	 t h e r e a f t e r . 
Inflation rate 3 . 5 % 3.5% 
Discount rate 1 0 . 0 % 10.0%
The oil price of $44.00 shown for 2006 (2005: $44.00) is the average of hedged and unhedged sales to the end of 2007 based on a market 
rate of $60.00 (2005: $50.00) bbl. There are hedges in place as shown in Note 16 (Financial instruments).
10. Investments
G r o u p
Net assets of associate:
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
G r o u p ’ s 	 s h a r e 	 o f :
Fixed assets      	 6 6 1 –
Current assets       3 3 –
Total assets      	 6 94 –
Liabilities due in less than one year      	 ( 6 9 0 ) –
Total liabilities      	 ( 6 9 0 ) –
N e t 	 a s s e t s       4 –
C o m p a n y
         Shares in Group  
         undertakings 
         £’000
F i x e d 	 a s s e t 	 i n v e s t m e nt s
Cost 
At beginning of year        100,372
Additions        358
A t 	 e n d 	 o f 	 y e a r 	 	 	 	 	 	 	 	 1 0 0 , 7 3 0
Click to return to contents 43 Star Energy Group plc Annual Report and Accounts 2006
10. Investments continued
The principal undertakings in which the Company’s interest at the year end is equal to or more than 20% are as follows (these undertakings 
are included on consolidation except where stated):
   Class and 
 Country of Principal percentage of 
 incorporation activity shares held
S u b s i d i a r y 	 u n d e r t a k i n gs   
H e l d 	 b y 	 p a r e nt 	 c o m p a n y :   
Star Energy Limited  United Kingdom Holding Company 100% of ordinary of £1 each
Star Energy Management Limited  United Kingdom Investment holding company 100% of ordinary of 10p each
H e l d 	 b y 	 i nt e r m e d i a t e 	 s u b s i d i a r y :   
Star Energy UK Onshore Limited United Kingdom Oil and gas exploration, 100% of ordinary of 5p each
  development and
  production, and  
  electricity generation
Star Energy (East Midlands) Limited United Kingdom Oil and gas exploration, 100% of ordinary of £1 each
  development and
  production, and  
  electricity generation
Star Energy HG Gas Storage Limited United Kingdom Gas storage services 100% of ordinary of £1 each
Star Energy Gas Storage Services Limited United Kingdom Gas storage services 100% of ordinary of £1 each
Star Energy Oil and Gas Limited  United Kingdom Oil and gas development  100% of ordinary of £1 each
  and production
Star Energy Oil UK Limited  United Kingdom Oil and gas development  100% of ordinary of £1 each
  and production
Star Energy Oil Limited  United Kingdom Investment holding company 100% of ordinary of 10p each
Star Energy Holdings Limited  United Kingdom Intermediate holding company 100% of ordinary of 1p each
Larchford Limited
(1)
 United Kingdom Oil rig contractor 20% of ordinary of £1 each
Star Energy Employee Benefits Trust Jersey Holding shares for Star *
  Energy Employee
  Benefits scheme 
   
* Star Energy Limited controls 100% of assets, liabilities and capital reserve.
(1)
 The 20% holding in Larchford Limited was acquired on 9 June 2006. This has been equity accounted for.
11. Stock
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
Oil stock       4 1 1 251
Drilling materials       5 3 2 65
Maintenance materials       1 9 1 45
       1 , 1 3 4 361
12. Debtors
  Group  Company
      2 0 0 6 	 2005 2 0 0 6 	 2005 
      £ ’ 0 0 0 	 £’000 £ ’ 0 0 0 	 £’000
Trade debtors     4 , 0 78 4,075 – –
Other debtors     1 , 9 3 9 2,172 4 1 6 168
Amounts owed by related parties     2 0 0 – – –
Amounts owed by Group undertakings     – – 1 1 0 , 6 6 9 100,599
UK Corporation tax     9 3 3 	 – 	 – – 
Prepayments and accrued income      3 , 0 8 5 1,871 1 51 51
     1 0 , 2 3 5 8,118 	 1 1 1 , 2 3 6 100,818
Included in Other debtors relating to the Group are amounts due from partners in joint ventures that are not entities totalling £631,000 
(2005: £1,050,000) in respect of VAT, time writing and short-term financing.
Included in Other debtors relating to the Company is £379,000 (2005: £158,000) deferred tax debtor.
All debtors fall due within one year.
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Notes to the Financial Statements continued
13. Creditors: amounts falling due within one year
  Group  Company
      2 0 0 6 	 2005 2 0 0 6 	 2005 
      £ ’ 0 0 0 	 £’000 £ ’ 0 0 0 	 £’000
Bank loans and overdrafts     9 , 2 6 9 13,146 9 , 2 6 9 13,146
Obligations under finance leases and HP contracts     1 0 3 617 – –
Trade creditors     6 , 6 4 9 14,855 78 15
Amount owed by Group undertaking     – – 7 , 3 2 2 7,962
Other creditors     1 3 7 182 1 6 – 
Taxation and social security     1 9 8 188 4 4 33
UK Corporation tax     – 1,663 – –
Accruals and deferred income      1 , 7 0 5 2,332 2 6 8 282
     1 8, 0 6 1 32,983 1 6 , 9 9 7 21,438
The senior debt facility was revised on 5 March 2007 (see Note 28). Note 14 discloses the impact of this revision on amounts due within  
one year.
14. Creditors: amounts falling due after more than one year
  Group  Company
      2 0 0 6 	 2005 2 0 0 6 	 2005 
      £ ’ 0 0 0 	 £’000 £ ’ 0 0 0 	 £’000
Bank loans (secured)      6 5 , 9 1 6 57,612 6 5 , 9 1 6 57,612
Obligations under finance leases and HP contracts     2 0 0 81 – –
     6 6 , 1 1 6 57,693 6 5 , 9 1 6 57,612
Analysis of debt:        
Debt can be analysed as falling due:       
Within one year or on demand     9 , 3 72 13,763 9 , 2 6 9 13,146
Between one and two years     8, 7 7 9 12,360 8, 7 4 2 12,279
Between two and five years     5 8, 8 5 6 39,257 5 8, 7 1 4 39,257
In five years or more     2 1 7,548 – 7,548
     7 7 , 0 2 8 72,928 7 6 , 72 5 72,230
Security is given for all debt falling due within one year and after more than one year. There are fixed and floating charges over the assets 
of the Group relative to the total amount of debt outstanding, with mortgages over the shares of the subsidiaries, and cross guarantees 
between all Group companies with the exception of Star Energy Employee Benefits Trust.
Subsequent to the revision of the senior debt facility on 5 March 2007 (see Note 28), the revised analysis of debt as at 31 December 2006 
would have been:
        Group Company 
        2 0 0 6 	 2 0 0 6 
        £ ’ 0 0 0 	 £ ’ 0 0 0
Debt can be analysed as falling due:       
Within one year or on demand       5 , 1 0 3 	 5 , 0 0 0
Between one and two years       5 , 2 0 0 	 5 , 0 0 0
Between two and five years       5 5 , 0 0 0 	 5 5 , 0 0 0
	 	 	 	 	 	 	 6 5 , 3 0 3 	 6 5 , 0 0 0
Please refer to Note 16 (Financial instruments) for loan facility available but undrawn at year end.
Netted off against the liability in the creditors is £1,540,000 (2005: £1,473,000) which relates to the arrangement cost of debt. 
15. Obligations under finance leases and hire purchase contracts
  Group  Company
      2 0 0 6 	 2005 2 0 0 6 	 2005 
      £ ’ 0 0 0 	 £’000 £ ’ 0 0 0 	 £’000
Amounts payable:        
Within one year     1 0 3 617 – – 
In second to fifth years exclusive    	 1 8 0 81 –  –
After five years     2 0 – – –
    	 3 0 3 698 –  – 
Click to return to contents 45 Star Energy Group plc Annual Report and Accounts 2006
16. Financial instruments
The Financial Review provides an explanation of the role that financial instruments have had during the year. The explanation summarises 
the Group’s policies for holding or issuing financial instruments. The strategies for achieving these policies have been followed during 
the year.
The principal external factors affecting the Group’s results, which are reported in UK sterling (‘sterling’), are the price of oil, which is 
denominated in US dollars, the sterling/US dollar exchange rate, the sterling/euro exchange rate, and the interest rate.
Commodity risk
The Group’s objective is to protect its exposure to falls in the oil price by entering into hedge contracts. The effect of current and future 
hedging arrangements are outlined in section (v) of this note. The Group’s policy is to protect a percentage of the oil produced.
Currency risk
The Group’s objective is to protect its exposure to the fluctuations of the US dollar to sterling. 
Interest rate risk
T o mitigate the Group’s exposure to increases in interest rates the Group entered into a hedging agreement to fix the interest rate  
at 7.535% for 75% of the debt outstanding under the senior debt facility of £57.5 million established in May 2004 for the Humbly Grove gas 
storage project. This is in place until December 2008. The numerical disclosures in this note deal with financial assets and liabilities as defined 
by FRS 13: ‘Derivatives and Other Financial Instruments: Disclosures’. As permitted by FRS 13, short-term debtors and creditors have been 
excluded from certain disclosures.
With the exception of the above, the Group has no material financial assets other than short-term debtors and cash, and no financial 
liabilities other than short-term creditors, bank loans and overdrafts and finance lease obligations. There are no material differences between 
the carrying amounts of the financial assets and liabilities and their fair values, with the exception of hedging instruments as disclosed in (v) 
of this note.
(i) Interest rate profile
The interest rate profile of the Group’s financial assets and liabilities at 31 December 2006 was as follows:
      Sterling  Euro US$ T o t a l 
      £’000 £’000 £’000 £ ’ 0 0 0
Cash at bank at floating interest rate     5,886 37 – 5 , 9 2 3
Cash at bank on which no interest is received     510 – 23 5 3 3
Fixed rate debt     (57,803) – – ( 5 7 , 8 0 3 )
Floating rate debt     (19,225) – – ( 1 9 , 2 2 5 )
Net (debt)/cash     (70,632) 37 23 ( 7 0 , 5 72 )
The profile at 31 December 2005 for comparison purposes was as follows:
      Sterling  Euro US$ Total 
      £’000 £’000 £’000 £’000
Cash at bank at floating interest rate     16,154 7 – 16,161
Cash at bank on which no interest is received     1,068 – 54  1,122
Fixed rate debt     (58,198) – –  (58,198)
Floating rate debt     (14,730) – – (14,730)
Net (debt)/cash     (55,706) 7 54 (55,645)
Cash at bank floating rate consisted of deposits which earn interest at rates set in advance from periods ranging from one night to one 
month by reference to sterling or US dollar LIBOR.
Floating rate debt comprises bank borrowing at interest rates fixed in advance from overnight up to a maximum of six months at rates 
determined by sterling LIBOR. The effect of the interest rate hedge was to increase interest paid by £380,000 (2005: £277,000).
Fixed rate debt consists of debt fixed by the hedging agreement in respect of the senior debt facility and obligations under finance leases and  
hire purchase contracts at rates set at the inception of the contracts. The average interest rate on these contracts for the year is 6.734%  
(2005: 4.601%).
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Notes to the Financial Statements continued
16. Financial instruments continued
(ii) Currency risk disclosures
Wherever possible the Group conducts and manages its business in sterling, euro, and US dollars.
The currency risk disclosures at 31 December 2006 are as follows:
        Euro US$ T o t a l 
       £’000 £’000 £ ’ 0 0 0
Cash      37 23 6 0
Debtors      – 2,566 2 , 5 6 6
Creditors      (172) (595) ( 7 6 7 )
      (135) 1,994 1 , 8 5 9
The currency risk disclosures at 31 December 2005 were as follows:
        Euro US$ Total 
       £’000 £’000 £’000
Cash      6 53 59
Debtors      198 3,703  3,901
Creditors      1 308  309
      205 4,064 4,269
As at 31 December 2006, the Group had sold forward an average of $5.0 million per month for 2007 at an average rate of 1.8907 and an average of $2.1 
million per month for 2008 at an average of 1.8863 (2005: no amounts were sold forward). 
(iii) Maturity of financial liabilities
The maturity of financial liabilities at 31 December 2006 is shown in Note 14. All financial liabilities are shown in sterling.
(iv) Undrawn committed borrowing facility
The maximum debt availability under the credit facility is determined semi-annually by reference to the net present value of the assets,  
using various technical and economic assumptions, subject to inclusion under the credit facility as well as certain other financial tests.  
At 31 December 2006 the maximum debt available was £76.8 million (2005: £77.5 million).
This credit facility incurs a commitment fee for undrawn balances of 0.6% and interest on outstanding debt at LIBOR plus 2%. This will 
continue until final maturity on 31 December 2012 or earlier if the debt has been repaid. The credit facility is hedged for 75% of the interest 
exposure to sterling LIBOR at a rate of 7.535%, based on the May 2004 senior debt facility of £57.5 million until 31 December 2008.
The maturity of the undrawn committed borrowing facility as at 31 December 2006 is as follows:
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
Within one year       – 959
After one but within two years       – 896
After two years but within five years       – 2,864
After more than five years       – 551
       – 5,270
Subsequent to the revision of the senior debt facility on 5 March 2007 (see Note 28), the term of the facility was adjusted to 31 Decmember 
2011. The revised committed borrowing facility as at 31 December 2006 would have been fully drawn down. 
(v) Derivative financial instruments
The Group policy is such that:
10% of production should remain unhedged or hedged on an uncapped basis (a put option) at all times during the year in question; 
in any three-year period, a minimum of 40% of annual production for each of the three years should be subject to hedging; and
the maximum percentage of forecasted production subject to hedges is:
 Fixed price hedge  Fixed (swap) and capped (collar) hedges 
Number of years ahead (% of forecasted production) (% of forecasted production) 
One 75 90 
Two  50 75 
Three 25 60
•
•
•
Click to return to contents 47 Star Energy Group plc Annual Report and Accounts 2006
16. Financial instruments continued
Prior to 1 January 2006, the Group had entered into oil price swaps and zero cost collars (ZCC) for 2006. The impact of these oil price financial 
instruments during the year is shown below:
  2 0 0 6  2005
      S W A P S 	 Z C C SWAPS 	 ZCC
Total number of barrels committed       1 , 0 6 8, 5 0 0 	 8 2 , 5 0 0 820,000 –
Average fixed price (per bbl)      $ 3 7 . 5 7 	 – $28.00 –
Average put price (per bbl)      – 	 $ 5 0 . 0 0 – –
Average call price (per bbl)      – 	 $ 6 6 . 0 0 – –
Net reduction in turnover      £ 1 5 . 9 	 m i l l i o n 	 	 £ 0 . 3 	 m i l l i o n £13.5 million –
Net reduction in average revenues (per bbl)      $ 2 0 . 1 0 	 $ 0 . 3 2 $11.63 –
Prior to 31 December 2006, further oil price financial instruments were entered into for 2007 and 2008 as detailed below:
 
  2007  2008
      SWAPS 	 ZCC SWAPS 	 ZCC
Total number of barrels committed      730,000 219,000 – 511,000
Average fixed price (per bbl)     $33.01 – – –
Average put price (per bbl)     – $50.00 – $51.79
Average call price (per bbl)     – $64.00 – $90.43
Derivative financial instruments held at the year end to manage its exposure:
  2 0 0 6  2005
    B o o k 	 	 F a i r 	 U n r e c o g n i s e d Book Fair Unrecognised 
    v a l u e 	 v a l u e 	 g a i n / ( l o s s ) value value gain/(loss) 
    £ ’ 0 0 0 	 £ ’ 0 0 0 	 £ ’ 0 0 0 £’000 £’000 £’000
Oil hedges   – 	 ( 1 1 , 2 1 2 ) 	 ( 1 1 , 2 1 2 ) – (25,968) (25,968)
Currency exchange    – 	 1 , 5 3 8 	 1 , 5 3 8 – – –
Interest rate   – 	 ( 2 0 1 ) 	 ( 2 0 1 ) – (1,164) (1,164)
Total   – 	 ( 9 , 8 7 5 ) 	 ( 9 , 8 7 5 ) – (27,132) (27,132)
Of which:         
Expected to be recognised in 2006     –   (14,528)
Expected to be recognised in 2007     ( 1 0 , 3 9 8 )   (12,216)
Expected to be recognised in 2008     5 2 3   (388)
Total     ( 9 , 8 7 5 )   (27,132)
17. Provisions for liabilities and charges
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
D e c o m m i s s i o n i n g 	 p r o v i s i o n 	 – 	 G r o u p
At beginning of year       7 , 6 6 3 4,202
Acquisition of subsidiary undertakings       – 3,131
Charge for the year:   
Unwinding of discount       3 8 6 277
Effect of change in timing of abandonment       ( 94 4 ) 161
Abandoned field       ( 6 1 ) (93)
Reassessment of abandonment liabilities       – (15)
At end of year       7 , 0 4 4 7,663
Other provisions       7 3 –
Deferred tax provision – Group (Note 6)       1 8, 5 7 3 10,436
       2 5 , 6 9 0 18,099
Provision has been made for the discounted future cost of restoring producing fields to a condition acceptable to the relevant authorities. The 
abandonment of the fields is expected to happen in one to 35 years.
The effect of change in timing of abandonment liabilities relates to the extension (2005: reduction) in the life of certain fields resulting from 
a reassessment of economic profiles as performed in the ceiling tests.
In relation to the reassessment of abandonment liabilities, £nil (2005: £15,000) is in respect of a decrease in the estimated recoverable 
reserves which reduced the economic life of certain fields.
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Notes to the Financial Statements continued
18. Called up share capital
        2 0 0 6 2005 
        £ £
A u t h o r i s e d
142,000,000 ordinary 10p shares       1 4 , 2 0 0 , 0 0 0 14,200,000
      	 1 4 , 2 0 0 , 0 0 0 14,200,000
   
A l l o t t e d , 	 c a l l e d 	 u p 	 a n d 	 f u l ly 	 p a i d   
79,374,446 (2005: 60,248,762) ordinary shares of 10p each at beginning of year     7 , 9 3 7 , 4 4 4 6,024,876
Issue of 19,125,684 ordinary shares of 10p each       – 1,912,568
7 9 , 3 7 4 , 4 4 6 	 ( 2 0 0 5 : 	 7 9 , 3 7 4 , 4 4 6 ) 	 o r d i n a r y 	 s h a r e s 	 o f 	 1 0 p 	 e a c h 	 a t 	 e n d 	 o f 	 y e a r      7 , 9 3 7 , 4 4 4 7,937,444
On 8 August 2005, the Group placed 19,125,684 ordinary shares of 10p each for a gross consideration of £35,000,000 in connection with the 
acquisition of Pentex. These shares rank pari passu with those already in issue. 
On 5 March 2007, the Group made a further placing of 13,636,364 ordinary shares (see Note 28).
The ordinary shares confer the right to vote at general meetings of the Company, to a repayment of capital in the event of liquidation or 
winding up and certain other rights as set out in the Company’s articles of association.
The ordinary shares also confer the right to receive dividends if declared by the directors and approved by the Company.
19. Share incentive plans
The Company operates an Approved Share Option Scheme, a Long-T erm Incentive Plan (LTIP) and a Save As You Earn scheme  
(‘Sharesave Scheme’).
The share options and share awards granted under these schemes as at 31 December 2006 were:
  Outstanding at    Outstanding as at   Additional 
 Date 1 January    31 December Exercisable Exercise vesting 
 granted 2006 Granted Exercised Forfeited 2006 from/to price conditions
A p p r o v e d 	 S h a r e 	 O p t i o n 	 S c h e m e
Options 3 Dec 2004 763,333 – – – 763,333 3 Dec 2007 to 185.00p  None
       2 Dec 2014  
Options 2 Dec 2005 449,773 – 4,806 35,869 409,098 2 Dec 2008 to 276.00p None
       1 Dec 2015  
Options 2 Dec 2006 – 171,765 – – 171,765 2 Dec 2009 to  262.25p  None 
       1 Dec 2016   
L o n g - T e r m 	 I n c e nt i v e 	 P l a n 
‘Tranche 1’ restricted share awards 11 Oct 2005 263,735 1,678 – 10,039 255,374 1 Sept 2008 – *  
         
‘Tranche 2’ restricted share awards 11 Oct 2005 263,735 1,678 – 10,039 255,374 1 Sept 2009 – *  
        
S h a r e s a v e 	 S c h e m e         
Options 24 May 2006 – 126,666 – 1,335 125,331 1 Aug 2009 to – None
       31 Jan 2010  
The share options and share awards granted under these schemes as at 31 December 2005 were:
  Outstanding at    Outstanding as at   Additional 
 Date 1 January    31 December Exercisable Exercise vesting 
 granted 2005 Granted Exercised Fortfeited 2005 from/to price conditions
A p p r o v e d 	 S h a r e 	 O p t i o n 	 S c h e m e
Options 3 Dec 2004 778,333 – – 15,000 763,333 3 Dec 2007 to 185.00p None
       2 Dec 2014  
Options 2 Dec 2005 – 449,773 – – 449,773 2 Dec 2008 to 276.00p None
       1 Dec 2015  
L o n g - T e r m 	 I n c e nt i v e 	 P l a n 
‘Tranche 1’ restricted share awards 11 Oct 2005 – 263,775 – – 263,775 1 Sept 2008 – *  
      
‘Tranche 2’ restricted share awards 11 Oct 2005 – 263,775 – – 263,775 1 Sept 2009 – * 
* TSR performance condition
The weighted average share price for the exercise date on which the 4,806 share options held under the Approved Share Option Scheme were 
exercised was 291.75 pence.
Click to return to contents 49 Star Energy Group plc Annual Report and Accounts 2006
19. Share incentive plans continued
The T otal Shareholder Return (TSR) Performance conditions of the LTIP are as follows: 
First Tranche shares can vest at the end of a three year performance period commencing on 1 September 2005. If the Company’s TSR is in the 
top quartile of companies in the FTSE Small Cap Index (‘the Index’), the full number of First Tranche shares will be received. For performance 
between median and upper quartile, vesting will occur on a straight-line basis so that 25% of the First Tranche shares are received for median 
performance and full vesting occurs for top quartile performance. No shares will be received if the Company’s TSR is below the median in  
that index.
Receipt of the Second Tranche shares are subject to the same conditions other than that performance is measured over a four year period 
beginning on 1 September 2005, and no shares can be received until the end of that period.
Fair Value of options
Inputs to the Valuation model
The fair values of awards granted under the Approved Share Option Scheme, the LTIP and the Sharesave Scheme have been calculated using 
a variation of the binomial option pricing model that takes into account factors specific to share incentive plans such as the vesting periods, 
the expected dividend yield on the Company’s shares and expected early exercise of share options. The TSR performance condition attached to 
the LTIP has been incorporated into the measurement of the fair value by means of actuarial modelling. The following principal assumptions 
were used in the valuation:
     Sharesave
 Approved Share Option Scheme  Performance Share Plan   Scheme
Grant date   3 Dec 2004 2 Dec 2005 2 Dec 2006 11 Oct 2005 11 Oct 2005 24 May 2006
Share price at date of grant   185.00p 276.00p 262.25p 260.00p 260.00p 308.00p
Exercise price   185.00p 276.00p 262.25p – – 280.00p
Volatility   30% 30% 30% 30% 30% 30%
Option life   10 years 10 years 10 years 3 years 4 years 3.5 years
Dividend yield   0% 0% 0% 0% 0% 0%
Risk-free investment rate   4.5% 4.5% 4.4% 4.5% 4.5% 4.7%
Employee turnover   10% 15% 15% 5% 7% 15%
Volatility has been based on the following:
(i) The annualised volatility of the Company’s shares since its floatation on the AIM market.
(ii)  The volatility of comparable listed companies in the oil and gas sector, based on historical share price information from the London 
Business School for an eleven year period dating back to 1995.
Based on the above assumptions, and after allowing for the effects of the TSR performance criteria, the fair values of the options granted are 
estimated to be:
     Sharesave
 Approved Share Option Scheme  Performance Share Plan   Scheme
Grant date   3 Dec 2004 2 Dec 2005 2 Dec 2006 11 Oct 2005 11 Oct 2005 24 May 2006
Fair value   68p 102p 97p 153p 171p 99p
Expense arising from share-based payments
Based on the above fair values and the Company’s expectations of employee turnover, the expense arising from equity-settled share options 
and share awards made to employees for 2006 was £547,623 (2005: £242,213). There were no other share-based payment transactions.
20. Share premium and reserves
       Merger  Share Profit 
       reserve  premium and loss 
       account  account account 
       £’000 £’000 £’000
G r o u p
At 1 January 2006      (45,093) 125,457 2,743 
Profit retained for the year for equity shareholders      – – 3,750 
Charge relating to share based payments      – – 548
A t 	 3 1 	 D e c e m b e r 	 2 0 0 6 	 	 	 	 	 	 ( 4 5 , 0 9 3 ) 	 1 2 5 , 4 5 7 	 7 , 0 4 1	
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Notes to the Financial Statements continued
20. Share premium and reserves continued
       Capital  Share Profit 
       reserve  premium and loss 
       account  account account 
       £’000 £’000 £’000
C o m p a n y  
At 1 January 2006      190 125,457 (301) 
Loss retained for the year for equity shareholders      – – (666) 
Charge relating to share based payments       358 – 190
A t 	 3 1 	 D e c e m b e r 	 2 0 0 6 	 	 	 	 	 	 5 4 8 	 1 2 5 , 4 5 7 	 ( 7 7 7 )	
21. Pension scheme
The Group operates a defined contribution pension scheme. The pension cost charge for the year ended 31 December 2006 represents 
contributions payable by the Group to pension funds and amounted to £501,368 (2005: £305,514).
There was a prepaid contribution of £nil (2005: £859) at 31 December 2006.
Contributions amounting to £40,369 (2005: £nil) were accrued at 31 December 2006 and are included in creditors.
22. Reconciliation of operating profit to operating cash flows
        2 0 0 6 2005 
        £ ’ 0 0 0 £’000
Operating profit        1 9 , 9 94 3,639
Non cash items       51 8 (46)
Depletion, depreciation, amortisation and impairment charges (net of loss on disposal)    	 1 0 , 9 3 7 5,936
(Increase) in stock       ( 7 7 3 ) (15)
(Increase) in debtors      	 ( 1 , 0 4 7 ) (1,175)
(Decrease)/increase in creditors       ( 7 , 7 7 4 ) 10,880
Net cash inflow from operating activities       2 1 , 8 5 5 19,219
23. Analysis of net debt
     At   Other 
     beginning   non cash Exchange At end of 
     of year Cash flow  charges movement year 
     £’000 £’000 £’000 £’000 £’000
Cash in hand and at bank    17,283  (10,918) – 91 6,456
Debt due within one year    (13,421)  (4,495) 8,647 – (9,269)
Debt due after one year    (57,336) (3) (8,577) – (65,916)
Obligations under finance leases and HP contracts    (697) 615 (221) – (303)
T o t a l 	 	 	 	 ( 5 4 , 1 7 1 ) 	 ( 1 4 , 8 0 1 ) 	 ( 1 51 ) 	 9 1 	 ( 6 9 , 0 3 2 )
During the year the Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the 
leases of £221,000 as at 31 December 2006 (2005: £nil).
 
        2 0 0 6 2005 
       	 £ ’ 0 0 0 £’000
R e c o n c i l i a t i o n 	 o f 	 n e t 	 c a s h 	 f l o w 	 t o 	 m o v e m e nt 	 i n 	 n e t 	 d e b t
(Decrease)/increase in cash in the year       ( 1 0 , 9 1 8 ) 5,084
Cash inflow from increase in debt financing       ( 3 , 88 3 ) (71,166)
Change in net debt resulting from cash flows       ( 1 4 , 8 0 1 ) (66,082)
Finance leases acquired on acquisition of Pentex Management Limited      – (377)
New finance leases       ( 2 2 1 ) –
Translation differences       9 1 (158)
Debt fees reclassified      	 7 0 1,473
Movement in net debt in the year      	 ( 1 4 , 8 6 1 ) (65,144)
Net debt at the start of the year      	 ( 5 4 , 1 7 1 ) 10,973
Net debt at the end of the year       ( 6 9 , 0 3 2 ) (54,171)
24. Operating lease commitments
 Land and buildings   
	 Other  
	  Total
    2 0 0 6   2005 2 0 0 6  2005 2 0 0 6 2005 
    £ ’ 0 0 0 £’000 £ ’ 0 0 0    £’000 £ ’ 0 0 0 £’000
Operating lease which expire:                         
 Within one year  	 8 4 9 849 1 0 10 8 5 9 859
  In the second to fifth years inclusive   1 6 5 132 3 , 2 5 4 134 	 3 , 4 1 9 266
Total operating lease commitments   1 , 0 1 4 981 3 , 2 6 4 144 4 , 2 78 1,125
Click to return to contents 51 Star Energy Group plc Annual Report and Accounts 2006
25. Capital commitments
Capital commitments at the end of the financial year, for which no provision has been made, are as follows:
  Group  Company
      2 0 0 6 	 2005 2 0 0 6 	 2005 
      £ ’ 0 0 0 	 £’000 £ ’ 0 0 0 	 £’000
Contracted     2 , 3 1 3 6,110 – – 
26. Contingent liabilities
The Company has cross guarantees in place between itself and its subsidiaries. These guarantees are considered to be insurance contracts. 
As part of the acquisition of Pentex Management Limited in 2005, the Company issued zero coupon loan notes to the principal amount of 
£5,127,036. These loan notes are redeemable contingent on the granting of planning permission for the installation of surface works which  
are necessary for the development for the operation of a gas storage facility at the gas cap at Gainsborough. The principal amount becomes 
payable on the latter of the fifth anniversary of the application for planning permission being submitted and the determination of any  
appeal process in relation to planning permission which was ongoing at the fifth anniversary. As yet, no planning permission application  
has been submitted. 
In accordance with a sale and purchase agreement dated 31 May 2006, the Group will become liable to pay £1,000,000 to Edinburgh Oil and 
Gas Limited should development approval for a gas store at Albury be granted prior to 1 June 2009. As yet, no planning permission application 
has been submitted. 
In relation to a farm-out agreement farmed into during the year with Virgo Energy Limited, the Group will undertake a feasibility study and 
in addition contribute up to £1,000,000 towards the cost of a 3D seismic survey on the Forbes field, a licence in which it has acquired a 25% 
interest. In addition to this 25% interest, the Group has an option to acquire a further 25% in return for undertaking and funding a Front End 
Engineering & Design study for the development of the Forbes field as a gas storage facility. As at 31 December 2006, the feasibility study had 
not commenced and no amounts had been paid to Virgo Energy Limited.
As part of an agreement entered into with its associate, Larchford Limited, the Group will incur, as yet unquantified, mobilisation and 
demobilisation costs on a rig it has contracted to hire. These costs will be incurred over the course of the three year contract period, the 
commencement of which has yet to occur.
Star Energy UK Onshore Limited is currently involved in litigation in connection with a claim by a landowner relating to drilling rights under 
its land for the extraction of petroleum or gas pursuant to the Company’s petroleum production license PL182. Star Energy UK Onshore 
Limited will maintain in its defence to the action that it has acted in accordance and in compliance with its rights granted pursuant to its 
license to undertake that drilling activity. 
27. Related party disclosures
Charles Carter, a non-executive director of the Company, is employed by Vitol Services Limited. Vitol SA, another company within the Vitol 
Group of companies, has entered into a Gas Storage Agreement with Star Energy HG Gas Storage Limited for the exclusive use of the Humbly 
Grove gas storage facility.
In addition to the amounts paid to Vitol Services Limited for the services of Charles Carter (as detailed on page 24 of the Directors’ 
Remuneration Report), during the year the Group recorded sales to Vitol SA totalling £19.5 million (2005: £0.8 million) and incurred costs from 
Vitol SA totalling £0.7 million (2005: £nil). As at 31 December 2006, £0.8 million (2005: £nil) was due to, and £0.6 million (2005: £nil) was owing 
from, the Group to Vitol SA.
As at 31 December 2006, the Group had a non-interest bearing loan due to it from its associate, Larchford Limited of £200,000 (2005: nil). The 
Group had also entered into a three year contract, to commence during 2007, with Larchford Limited for the lease of a drilling rig. Under the 
terms of the contract, the Group will pay an annual rental fee of £3,120,000 plus mobilisation and demobilisation fees to Larchford Limited.
28. Post balance sheet events
On 7 January 2007, Star Energy Group plc increased its issued share capital by 5,000 to satisfy part of the redundancy package for a former 
employee. These shares were immediately allotted at 276p per share giving a consideration of £13,800. 
On 5 March 2007, the following took place: 
 The Group placed a further 13,636,364 ordinary shares for a gross consideration of £30.0 million. These shares rank pari passu with those 
already in issue. 
The Group agreed a revision to its senior debt facility, reducing the facility from £76.8 million to £65.0 million. 
The costs incurred in relation to the above placing and revision of the senior debt facility totalled £1.1 million.
On 30 March 2007, the Group signed a Letter of Intent for the sale of its 79.125% interest in the Singleton oil field. As at 31 December 2006, 
the Singleton oil field was estimated to have 1.938 million barrels of commercial reserves (7.7% of the Group’s estimated total). If the sale 
proceeds, it is envisaged the Group will receive a consideration in the region of £11.0 million.
•
•
Click to return to contents 52 Star Energy Group plc Annual Report and Accounts 2006
The reserve estimates shown in this report are based on the joint reserve and resource definitions of the Society of Petroleum Engineers, the 
World Petroleum Congress, and the American Association of Petroleum Geologists.
 Western European Pool
       Oil Gas Boe 
       ’000 bbl mmscf ’000
(1)
Net commercial reserves as at 1 January 2006      24,464 11,000 26,297
Changes during the year         
Revisions of previous estimates      (454) 444 (380) 
Purchases of reserves-in-place      98 1,310 317 
Extensions, discoveries and other additions      – 4,556 759 
Production      (1,494) (2,285) (1,875)
Total changes during the year      (1,850) 4,025 (1,179)
N e t 	 c o m m e r c i a l 	 r e s e r v e s 	 a s 	 a t 	 3 1 	 D e c e m b e r 	 2 0 0 6 	 	 	 	 	 	 2 2 , 6 1 4 	 1 5 , 0 2 5 	 2 5 , 1 1 8
(1)
 ’000 boe equals mmsc divided by 6.
As at 1 January 2007, the Group has assessed its proven and probable reserves at 25.1 million boe based on an assessment undertaken by RPS 
Energy as at 31 December 2006. The principal reasons for the revisions to the 2005 assessment are: 
T echnical reassessment of oil reserves.
Purchase of Edinburgh Oil and Gas’ share of Albury and Singleton.
Compressed natural gas projects at Singleton.
•
•
•
Unaudited statement of net commercial oil and gas reserve 
quantities – proven and probable
for the year ended 31 December 2006
Click to return to contents Star Energy is an energy  
group with a distinctive  
business model.
Star Energy’s primary focus is to build a  
significant multi-site gas storage business.  
We aim to consolidate our existing oil and gas  
production business to provide the depleted  
reservoirs that form the basis of future gas  
stores. We will exploit our expertise in operating  
onshore oil and gas fields safely and responsibly  
in environmentally sensitive areas. Star Energy  
will take advantage of opportunities to expand  
its asset base in the UK and, where appropriate,  
continental Europe.
C o n t e n t s
01 Highlights
02 Chairman’s Statement
03 Chief Executive’s Review
04  Star Energy at a Glance
05  Corporate Social Responsibility Statement
06 Operational Review – Gas Storage
08 Gas Storage Q&A
12 Gas Storage Process
14 Operational Review – Oil & Electricity Production
16 Financial Review
18 Board of Directors
20 Shareholder Information
21 Directors’ Report
22 Directors’ Remuneration Report 2006 
27 Corporate Governance Statement
29 Statement of Directors’ Responsibilities in Respect  
   of the Preparation of the Financial Statements
30 Independent Auditors’ Report to the Members  
   of Star Energy Group plc
31 Consolidated Profit and Loss Account
32 Consolidated Balance Sheet
33 Company Balance Sheet
34 Consolidated Cash Flow Statement
35  Consolidated Reconciliation of Movements in Group 
  Shareholders’ Funds
36  Notes to the Financial Statements
52  Unaudited Statement of Net Commercial Oil and Gas    
   Reserve Quantities – Proven and Probable
Star Energy Group plc Glossary
bbl barrels
bcf billion (10
9
) cubic feet 
boe barrels of oil equivalent
bopd barrels of oil per day
boepd barrels of oil equivalent per day
km kilometre
mmbbl millions of barrels
mmscf million standard cubic feet
MW Mega (10
6
) Watt
MWh Mega (10
6
) Watt-hour
probable reserves  those reserves which are not yet proven but which 
are estimated to have a 50% chance of being 
technically and economically producible
proven reserves  those reserves which, on the available evidence, 
are reasonably certain to be technically and 
economically producible: that is, having a 90% 
chance of being produced
EPC Engineering, Procurement and Construction
Photography by Giles Barnard
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Click to return to contents Star Energy Group plc
Star Energy Group plc
Ground Floor
Burdett House
15/16 Buckingham Street
London 
WC2N 6DU 
T: +44 (0) 20 7925 2121
F: +44 (0) 20 7930 9919
www.starenergy.co.uk
Star Energy
Group plc
ANNUAL REPORT & ACCOUNTS 
2006
Star Energy Group plc  ANNUAL REPORT & ACCOUNTS 2006
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