star energy group plc
star energy group plc
ground floor
burdett house
1516 buckingham street
london 
wc2n 6du 
t 44 0 20 7925 2121
f 44 0 20 7930 9919
wwwstarenergycouk
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 multisite 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 qa
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
 watthour
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 251 million boe as at 31 december 2006 2005 263 million boe
average oil production for the year was 4093 bopd  
2005 4178 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 £571 million 2005 £247 million
profit before tax of £146 million 2005 £21 million
basic earnings per share of 472 pence per ordinary share  
2005 182 pence
click to return to contents 02 star energy group plc annual report and accounts 2006
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 longterm relationships with 
these communities
during 2006 we explored other opportunities 
to move our business towards our strategic 
goal of being a multisite gas storage operator 
these included both offshore uk and nonuk 
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 4000 feet but 
the total well path will be in excess of 14000 
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 438 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  
65 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 1000 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 longterm 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
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 wintersummer gas price differentials widen
oil  electricity 
star energy continues to be the second largest onshore oil and 
gas producer producing 4595 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 46 
2005 34
community
star energy continues to support scope the 
disability organisation whose focus is people 
with cerebral palsy during the year star 
energy donated £75000 2005 £25000 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
click to return to contents job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 247 basis with a fulltime 
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 
precontract use of the gas store contracted and special 
arrangement revenues were £109 million and £13 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
click to return to contents 08 star energy group plc annual report and accounts 2006
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
qa
gas storage qa
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 aboveground plant is screened 
from public view where necessary with no 
part greater than 165 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
click to return to contents 10 star energy group plc annual report and accounts 2006
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
gas storage qa
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 
click to return to contents 11 star energy group plc annual report and accounts 2006
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
click to return to contents 12 star energy group plc annual report and accounts 2006
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
gas storage
a depleted reservoir  
gas storage facility 
storing natural gas in porous rocks  
in excess of 3500ft 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
click to return to contents 14 star energy group plc annual report and accounts 2006
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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  1494047  1178107
– bopd   4093   4178
1
  20
electricity production 
– mwhs  57041  88191 353
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 1000 
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 
workover 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
•
•
click to return to contents annual report and accounts 2006 star energy group plc 15
a portfolio of 
opportunities
a portfolio of 
opportunities
click to return to contents 16 star energy group plc annual report and accounts 2006
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 oneoff natural gas sales and the 
fullyear 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 £324 million 131 
to £571 million 2005 £247 million of this 
increase £136 million has been contributed by 
the oil and electricity operations £114 million 
from gas storage and £74 million from oneoff 
natural gas sales
crude oil and electricity sales of £375 million 
2005 £239 million represent the majority of 
the group’s turnover accounting for 66 of the 
total 2005 97 gas storage revenues of £122 
million 2005 £08 million represent 21 of 
total turnover 2005 3 and sales of natural 
gas of £74 million 2005 nil account for 13 of 
total turnover
the effective oil price achieved by the group 
was 4450 per barrel 2005 3401 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 6514 2005 5438 
combined with an average effective us dollar 
exchange rate for the year of 183 2005 184 
the average sterling revenue per barrel for the 
year was increased to £2434 2005 £1852
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 £13 million and £109 million 
from the effective start date to 31 december 
2006 giving total gas storage revenues for the 
year of £122 million 2005 £08 million
175 million therms 2005 nil of natural gas 
were sold in the year at an average price of 
£043 per therm providing revenues of £74 
million 2005 nil  of this 170 million therms 
were sold to vitol sa at arm’s length prices as 
part of the startup of the gas storage facility 
giving revenues of £73 million 2005 nil
operating result
the group made an operating profit of  
£200 million 2005 £36 million with cash 
flows from operations amounting to £219 
million 2005 £192 million
operating costs were £201 million 2005 £119 
million comprising £155 million 2005 £114 
million for the oil and electricity operations 
and £46 million 2005 £05 million for the gas 
storage operation the sales of natural gas had 
no associated cost of sale
the noncash depletion depreciation and 
amortisation charge of £113 million 2005 
£58 million includes £82 million 2005 £55 
million in respect of the oil and electricity 
operations and £31 million 2005 £03 million 
for gas storage 
administrative expenses for the year amounted 
to £58 million 2005 £37 million the increase 
of £21 million is attributable to the inclusion of 
the former pentex operations for the full year 
£11 million incremental employment costs 
and incentives £05 million and incremental 
legal and professional fees related to business 
development activities £05 million
interest and similar charges
the net interest charge for the year of £54 
million 2005 £16 million comprises interest 
costs and arrangement fees of £58 million 
2005 £14 million other bank fees of £04 
million 2005 £03 million interest received of 
£07 million 2005 £05 million and exchange 
gains of £01 million 2005 £04 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 £753 million 2005 £413 
million and the reduction in the 2005 interest 
charge as a result of the capitalisation of 
interest in that year amounting to £17 million 
during the construction of the humbly grove 
gas storage facility management of cash flow 
has generated interest income exchange gains 
of £01 million 2005 £04 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 £108 million 2005 £08 
million comprises a corporation tax charge 
of £27 million 2005 £08 million and a 
deferred tax charge of £81 million 2005 nil
the tax charge for the group results in an 
effective rate of 74 2005 39 on pretax 
profits of £146 million 2005 £21 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 £953 million as 
at 31 december 2006 £910 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 
£258 million 2005 £675 million of which 
£116 million 2005 £609 million was in 
respect of the humbly grove gas store 
£84 million 2005 £66 million in respect 
of the oil and electricity business and £58 
million 2005 £nil in respect of gas storage 
developments and enhancements capital 
commitments as at 31 december 2006 
amounted to £23 million 2005 £61 million 
as at 31 december 2006 net debt was £690 
million 2005 £542 million and the senior 
debt facility was drawn down in the amount 
of £768 million 2005 £722 million
subsequent to 31 december 2006 the 
group placed a further 13636364 ordinary 
shares for a gross consideration of £300 
million and agreed a revision to the senior 
debt facility which reduced the facility from  
£768 million to £650 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  q24  
     2006 2006 
type premium strike  put  call  bopd bopd
swap  4475   1500 
swap  5800    500 
swap  2750   1800 1800 
swap  5810    500 
zcc   5000 6600  600
put 083    600 600
total bopd     3900 4000
 
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 2700   1600 
swap 5710   200 
swap 5700   200 
swap 6000   500



 
zcc  5000 6400 600 
zcc  5000 9150  300
zcc  5000 9000  300
zcc  5000 9050  300
zcc  5500 9000  500
total bopd    3100 1400
 



 effective from 9 february 2007 to 31 december 2007 
zcc  zero cost collar
regarding us dollar hedging the group sold 
an average of 55 million per month for the 
period from june 2006 to december 2006 at 
an average of 18763 
the group has sold forward an average 
of 50 million per month at an average 
exchange rate of 18907 for the year ended  
31 december 2007 and an average of 21 
million per month at an average exchange 
rate of 18863 for the year ended  
31 december 2008
the group has entered into a contract to 
fix the interest rate at 7535 for 75 of 
the debt outstanding under the may 2004 
senior debt facility of £575 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 wwwstarenergycouk a 
restatement 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
click to return to contents 18 star energy group plc annual report and accounts 2006
job	 8644star	enfrontaw	 proof	 07	 proof read by
operator	suzanne	 date	 100407	
server	 studio	iii	 setup	 tim	 first	readrevisions
01 02 03
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 cofounded 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 overseasbased 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
nonexecutive 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 multidisciplinary 
teams in geology geophysics reservoir 
evaluation simulation field development 
and enhanced oil recovery studies 
06 stephen east 49
nonexecutive 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 
nonexecutive director of the regus  
group plc
07 david wertheim 62
senior independent nonexecutive 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  
nonexecutive director of the hallé  
concerts society
08 charles carter 40
nonexecutive 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 grouplevel 
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
nonexecutive directors
stephen gutteridge
chairman
david wertheim
senior independent director
chairman of the remuneration committee
stephen east
chairman of the audit committee 
charles carter
nonexecutive
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
1516 buckingham street
london wc2n 6du 
t el 44 0 20 7925 2121 
fax 44 0 20 7930 9919 
wwwstarenergycouk
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 sainthonoré 
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 
£3750000 2005 £1264000 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 £107579 2005 £39696 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 13636364 ordinary shares for a gross 
consideration of £300 million these shares rank pari passu with 
those already in issue 
 the group agreed a reduction to the senior debt facility from  
£768 million to £650 million 
 the costs incurred in relation to the above placing and revision of the 
senior debt facility totalled £11 million
on 30 march 2007 the group signed a letter of intent for the sale of 
its 79125 interest in the singleton oil field as at 31 december 2006 
the singleton oil field was estimated to have 1938 million barrels of 
commercial reserves 77 of the group’s estimated total if the sale 
proceeds it is envisaged the group will receive a consideration in the 
region of £110 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 18130675 1949
credit suisse fb mm 11491817 1235
ecofin ltd 8877902 954
artemis investment management  8037796 864 
lansdowne partners  5935656 638
lehman brothers international  5502326 592
tudor capital uk  4367113 470
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
click to return to contents 22 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 nonexecutive 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 longterm 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
shortterm 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 
longterm 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 threeyear 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 
fouryear 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 527470 shares 
by subscription so as to be able to satisfy the awards 
during the year the remuneration committee recommended the 
award of a further 3356 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 510748 shares under award 
2005 527470 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 5000
between 5 and 10 years 10000
over 10 years 15000
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 171765 options to 35 employees at a price of 26225p 
following the grant of these options on 2 december 2006 the total 
number of options outstanding was 1344196 171765 at 26225p 
409098 at 27600p and 763333 at 18500p
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 126666 options to 75 employees at a price of 28000p 
click to return to contents 24 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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
nonexecutive directors’ terms conditions and fees
the nonexecutive directors have been engaged under the terms of letters of appointment their engagements can be terminated upon three 
months’ notice by either party reappointment 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 nonexecutive 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 nonexecutive 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 nonexecutive directors were in cash 
from october 2006 the chairmen of the audit and the remuneration committees were each compensated at the annual rate of £5000 
from october 2005 £2500 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 nonexecutive 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 215000 14781 21500 251281 189679 17347 207026
melvyn horgan 165000 12917 16500 194417 155117 14286 169403
colin judd 175000 14470 17500 206970 156480 14286 170766
adrian fernando 155000 12477 15500 182977 147065 13470 160535
roger pearson
2
 155000 11899 15500 182399 37218 3319 40537
sub total 865000 66544 86500 1018044 685559 62708 748267
       
nonexecutive directors       
stephen gutteridge  52250 – – 52250 45750 – 45750
charles carter
3
 27249 – – 27249 25250 – 25250
stephen east
4
 30125 – – 30125 25875 – 25875
david wertheim
5
 30125 – – 30125 25875 – 25875
sub total 139749 – – 139749 122750 – 122750
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 nonexecutive director as at 31 december 2006 
vitol holding sarl relinquished its right to appoint a nonexecutive director to the board on 10 january 2007 the nominations committee confirmed that 
charles carter would remain a nonexecutive 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       869427 813740
melvyn horgan       558420 558420
colin judd       363840 463840
adrian fernando       342010 452010
roger pearson       – –
stephen gutteridge       – –
charles carter       – –
stephen east       – –
david wertheim
1
       60000 50000
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  111005 67934 – 67934 009 25965 310808
  111005 67934 – 67934 009 25965 310809
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  111005 33568 – 33568 004 25965 310808
  111005 33568 – 33568 004 25965 310809
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  111005 39162 – 39162 005 25965 310808
  111005 39162 – 39162 005 25965 310809
t o t a l 	 a w a r d s 	 	 	 78 3 2 4 	 – 	 78 3 2 4 	 0  1 0 	 	
adrian fernando  111005 31649 – 31649 004 25965 310808
  111005 31649 – 31649 004 25965 310809
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  111005 29971 1678 31649 004 25965 310808
  111005 29971 1678 31649 004 25965 310809
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  
click to return to contents 26 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 031204 10000 – – 10000 18500 031207 021214
melvyn horgan 031204 10000 – – 10000 18500 031207 021214
colin judd 031204 10000 – – 10000 18500 031207 021214
adrian fernando 031204 5000 – – 5000 18500 031207 021214
roger pearson 031204 5000 – – 5000 18500 031207 021214
roger pearson 021205 5000 – – 5000 27600 021208 011215
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 – – – – – – 010809 310110
melvyn horgan – – – – – – 010809 310110
colin judd 280406 – 1335 – 1335 28000 010809 310110
adrian fernando – – – – – – 010809 310110
roger pearson 280406 – 2003 – 2003 28000 010809 310110
t o t a l 	 	 – 	 3  3 3 8 	 – 	 3  3 3 8   
during 2006 the highest midmarket price of the group was 35400p and the lowest was 26000p the year end price was 28300p
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 nonexecutive chairman to the board a senior independent 
nonexecutive director and two further nonexecutive directors 
thus providing the board with four nonexecutive and five 
executive directors
 an audit committee comprising three nonexecutive directors 
having documented terms of reference and chaired by an 
independent nonexecutive director with recent and relevant 
financial experience
 a remuneration committee comprising all nonexecutive 
directors having documented terms of reference and chaired by 
the senior independent nonexecutive director
 a nominations committee comprising all nonexecutive directors 
having documented terms of reference and chaired by the non
executive chairman
board of directors
the board currently comprises a nonexecutive chairman three  
nonexecutive 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 nonexecutive director was until  
31 december 2006 pursuant to the right of vitol holding sarl  
as a significant shareholder in the group with effect from 1 january 
2007 vitol holding sarl relinquished its right to appoint a  
nonexecutive director charles carter accepted an invitation from 
the board to continue serving as a nonexecutive 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 sarl 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 reelection at the 
annual general meeting agm each year in addition the articles 
state that all directors should submit themselves for reelection at 
least every three years
corporate governance statement
click to return to contents 28 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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  
wwwstarenergycouk 
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 faceto
face meetings general presentations at the time of the release of 
interim and full year results and news releases the group’s website 
wwwstarenergycouk 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 
nonexecutive 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
click to return to contents 30 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 24712
operating costs        2 0  1 2 1  11869
depletion depreciation and amortisation        1 1  3 4 2  5771
t o t a l 	 c o s t 	 o f 	 s a l e s        3 1  4 6 3  17640
g r o s s 	 p r o f i t       2 5  6 3 4 7072
administrative expenses         5  7 9 7  3721
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 	      2i 2 0  0 7 9 3639
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 3639
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  2108
 – 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 2059
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 1264
        
       p e n c e pence
basic profit per share      7 4  72 182
diluted profit per share      7 4  6 3 181
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
click to return to contents 32 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
  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  173852
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  8118 
cash in hand and at bank    23 6  4 5 6  17283
	 	 	 	 	 1 7  8 2 5  25762
c r e d i t o r s  amounts falling due within one year    13  1 8 0 6 1   32983
n e t 	 c u r r e nt 	 l i a b i l i t i e s       2 3 6   7221
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  166836
c r e d i t o r s amounts falling due after more than one year    14 	  6 6  1 1 6   57693
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   18099
n e t 	 a s s e t s      9 5  3 4 2  91044
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  7937
share premium account    20 	 1 2 5  4 5 7  125457
merger reserve    20 	  4 5  0 9 3   45093
profit and loss account    20  7  0 4 1  2743
s h a r e h o l d e r s ’ 	 f u n d s      9 5  3 4 2  91044
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  100372
c u r r e nt 	 a s s e t s        
debtors    12 1 1 1  2 3 6  100818 
cash in hand and at bank     4  1 1 2  11143
     1 1 5  3 4 8  111961 
c r e d i t o r s  amounts falling due within one year    13  1 6  9 9 7   21438 
n e t 	 c u r r e nt 	 a s s e t s      9 8 3 51  90523
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  190895
c r e d i t o r s  amounts falling due after more than one year    14   6 5  9 1 6   57612
n e t 	 a s s e t s      1 3 3  1 6 5  133283
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  7937
capital reserve account    20  5 4 8  190
share premium account    20  1 2 5  4 5 7  125457
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  133283
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
click to return to contents 34 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
  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  19219
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   1710 
 interest element of finance lease rental payments    	  2 7   77 
       6  1 4 4   1259
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   69922
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     –   45845 
 purchase of interest in associate    	  1 0 0   – 
     	  2  2 6 6   45845
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   98022
        
f i n a n c i n g        
 issue of ordinary share capital     –  35000 
 issue costs of equity shares     –  3060 
 decrease in shortterm borrowing      3  8 7 7   – 
 increase in longterm borrowing     8 3 7 1  72230 
 debt arrangement fee    	  3 0 0   – 
 capital element of finance lease rental payments      6 1 5   1064
      3  5 7 9  103106
 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   5084
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 1264
issue of shares       – 34999
share issue costs       – 2234
costs relating to share incentive plans note 19      	 5 4 8 242
net addition to shareholders’ funds      	 4  2 9 8 34271
opening shareholders’ funds       	 9 1  0 4 4 56773
closing shareholders’ funds      	 9 5  3 4 2 91044
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
click to return to contents 36 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 2304 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 colicensee 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 farmsin 
to a farmout agreement it accounts for its proportion of revenues 
costs assets and liabilities in accordance with the provisions of the 
farmout 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 prefeasibility 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 straightline 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
click to return to contents 37 star energy group plc annual report and accounts 2006
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
shortterm incentive plan
the group operates a shortterm 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 
sharebased payments
in accordance with frs 20 ‘sharebased 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 straightline 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
click to return to contents 38 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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  5697
 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 £603000 were included in the costs 
of acquisition of pentex management limited 
2 ii segmental analysis of turnover operating profitloss 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 21885 1959 – 810 58 24712
operating profitloss 1 0  3 8 6 	  5 3 8  	 7  3 88 	 2  88 4 	  1 2 6  	 1 9  9 94 4661 304 – 699 19 3639
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 70935 7009 – 66572 701 145217 
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      145217 
cash      6  4 5 6      17283 
loans       7 5  1 8 5       70758 
hp and finance leases       3 0 3       698
net assets per consolidated
 balance sheet      9 5  3 4 2      91044
included within the above amounts are
 turnover of £nil 2005£nil operating loss of £26000 2005 £nil and net assets of £1215000 2005 £nil relating to operations based  
in denmark 
 turnover of £nil 2005£nil operating loss of £85000 2005 £nil and net assets of £3000 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 4350 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 5136 1069
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 1035
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 2108
click to return to contents 40 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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    
originationreversal 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 2059
 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 3139
losses generated      	  2  3 9 1  2661
interest not allowed for supplementary charge        3 4 8  152
tax rate differences on profitslosses 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 £405000
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 nonqualifying 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  1610
arising on acquisition of pentex management limited        – 8791
profit and loss charge for the year        8 1 3 7  35
at end of year      	  1 8 5 7 3  10436
accelerated capital allowances      	  2 8 3 9 7  18374
tax losses carried forward       7  7 5 2 6268
decommissioning       1  9 7 0 1762
other timing differences       1 0 2 92
      	  1 8 5 7 3  10436
at 31 december 2006 a deferred tax asset of £7752000 2005 £6268000 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 £566000 2005 £566000 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 £379000 2005 £223000 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 1264000 69261413 182
dilutive share schemes and options   	 1  5 5 0  1 7 6   711544 
diluted eps   3  7 5 0  0 0 0 	 8 0  9 2 4  6 2 2 4  6 3 1264000 69972957 181
as disclosed in note 28 on 5 march 2007 the group placed a further 13636364 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 1265 
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     156164 79045 3746 238955 
additions     12784 11556 1475 25815
transfers     12241 12241 – –
disposals     1229 – 133 1362 
changes to abandonment liabilities     944 – – 944
at end of year     179016 78360 5088 262464 
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     63469 506 1128 65103 
charge for year     7927 3134 397 11458
transfers     73 73 – –
disposals      456 – 126 582
at end of year     71013 3567 1399  75979
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     92695 78539 2618  173852 
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 £834000
click to return to contents 42 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 £77523000 in respect of the humbly grove gas store 
star energy hg gas storage limited £3430000 in respect of enhancements to the humbly grove gas store star energy hg gas storage 
limited and £1087000 2005 £1016000 in respect of the welton gas store star energy east midlands limited additions to gas storage 
assets include £11485000 2005 £60904000 in respect of the humbly grove gas store star energy hg gas storage limited and £71000 
2005 £17000 in respect of the welton gas store star energy east midlands limited
included within the net book value of other fixed assets is £3136000 2005 £1894000 relating to land and buildings £220000 2005 
£219000 relating to motor vehicles £242000 2005 £414000 relating to fixtures fittings tools and equipment and £91000 2005 £91000 
relating to assets in the course of construction included within amounts relating to land and buildings is £58000 2005 £58000 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 £327000 2005 £817000 in respect of assets held under finance leases and similar hire 
purchase contracts depreciation for the year on these assets was £232000 2005 £696000
included in the cost of tangible fixed assets is £1735000 2005 £1735000 in respect of capitalised interest cost depreciation for the year on 
these assets was £75000 2005 £17000 net book value for capitalised interest is £1623000 2005 £1698000
the £944000 credit 2005 £146000 debit relating to the changes to abandonment liabilities is the net effect of a £944000 credit 2005 
£161000 debit relating to the effects of a change in the timing of abandonment and £nil 2005 £15000 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 £82077000 2005 £74982000 of costs and £3567000 2005 £506000 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  4400 per bbl in 2007
  5 5  0 0 	 p e r 	 b b l 	 i n 	 2 0 0 8 4000 per bbl in 2008
  6 0  0 0 	 p e r 	 b b l 	 i n 	 2 0 0 9  4000 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 £2477 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 £175
 £   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  35 
discount rate 1 0  0  100
the oil price of 4400 shown for 2006 2005 4400 is the average of hedged and unhedged sales to the end of 2007 based on a market 
rate of 6000 2005 5000 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        100372
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 4075 – –
other debtors     1  9 3 9 2172 4 1 6 168
amounts owed by related parties     2 0 0 – – –
amounts owed by group undertakings     – – 1 1 0  6 6 9 100599
uk corporation tax     9 3 3 	 – 	 – – 
prepayments and accrued income      3  0 8 5 1871 1 51 51
     1 0  2 3 5 8118 	 1 1 1  2 3 6 100818
included in other debtors relating to the group are amounts due from partners in joint ventures that are not entities totalling £631000 
2005 £1050000 in respect of vat time writing and shortterm financing
included in other debtors relating to the company is £379000 2005 £158000 deferred tax debtor
all debtors fall due within one year
click to return to contents 44 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 13146 9  2 6 9 13146
obligations under finance leases and hp contracts     1 0 3 617 – –
trade creditors     6  6 4 9 14855 78 15
amount owed by group undertaking     – – 7  3 2 2 7962
other creditors     1 3 7 182 1 6 – 
taxation and social security     1 9 8 188 4 4 33
uk corporation tax     – 1663 – –
accruals and deferred income      1  7 0 5 2332 2 6 8 282
     1 8 0 6 1 32983 1 6  9 9 7 21438
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 57612 6 5  9 1 6 57612
obligations under finance leases and hp contracts     2 0 0 81 – –
     6 6  1 1 6 57693 6 5  9 1 6 57612
analysis of debt        
debt can be analysed as falling due       
within one year or on demand     9  3 72 13763 9  2 6 9 13146
between one and two years     8 7 7 9 12360 8 7 4 2 12279
between two and five years     5 8 8 5 6 39257 5 8 7 1 4 39257
in five years or more     2 1 7548 – 7548
     7 7  0 2 8 72928 7 6  72 5 72230
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 £1540000 2005 £1473000 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 sterlingus dollar exchange rate the sterlingeuro 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 7535 for 75 of the debt outstanding under the senior debt facility of £575 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 shortterm debtors and creditors have been 
excluded from certain disclosures
with the exception of the above the group has no material financial assets other than shortterm debtors and cash and no financial 
liabilities other than shortterm 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     5886 37 – 5  9 2 3
cash at bank on which no interest is received     510 – 23 5 3 3
fixed rate debt     57803 – –  5 7  8 0 3 
floating rate debt     19225 – –  1 9  2 2 5 
net debtcash     70632 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     16154 7 – 16161
cash at bank on which no interest is received     1068 – 54  1122
fixed rate debt     58198 – –  58198
floating rate debt     14730 – – 14730
net debtcash     55706 7 54 55645
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 £380000 2005 £277000
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 6734  
2005 4601
click to return to contents 46 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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      – 2566 2  5 6 6
creditors      172 595  7 6 7 
      135 1994 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 3703  3901
creditors      1 308  309
      205 4064 4269
as at 31 december 2006 the group had sold forward an average of 50 million per month for 2007 at an average rate of 18907 and an average of 21 
million per month for 2008 at an average of 18863 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 semiannually 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 £768 million 2005 £775 million
this credit facility incurs a commitment fee for undrawn balances of 06 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 7535 based on the may 2004 senior debt facility of £575 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       – 2864
after more than five years       – 551
       – 5270
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 threeyear 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 820000 –
average fixed price per bbl       3 7  5 7 	 – 2800 –
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 £135 million –
net reduction in average revenues per bbl       2 0  1 0 	  0  3 2 1163 –
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      730000 219000 – 511000
average fixed price per bbl     3301 – – –
average put price per bbl     – 5000 – 5179
average call price per bbl     – 6400 – 9043
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 gainloss 
    £ ’ 0 0 0 	 £ ’ 0 0 0 	 £ ’ 0 0 0 £’000 £’000 £’000
oil hedges   – 	  1 1  2 1 2  	  1 1  2 1 2  – 25968 25968
currency exchange    – 	 1  5 3 8 	 1  5 3 8 – – –
interest rate   – 	  2 0 1  	  2 0 1  – 1164 1164
total   – 	  9  8 7 5  	  9  8 7 5  – 27132 27132
of which         
expected to be recognised in 2006     –   14528
expected to be recognised in 2007      1 0  3 9 8    12216
expected to be recognised in 2008     5 2 3   388
total      9  8 7 5    27132
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 4202
acquisition of subsidiary undertakings       – 3131
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 7663
other provisions       7 3 –
deferred tax provision – group note 6       1 8 5 7 3 10436
       2 5  6 9 0 18099
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 £15000 is in respect of a decrease in the estimated recoverable 
reserves which reduced the economic life of certain fields
click to return to contents 48 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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
142000000 ordinary 10p shares       1 4  2 0 0  0 0 0 14200000
      	 1 4  2 0 0  0 0 0 14200000
   
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   
79374446 2005 60248762 ordinary shares of 10p each at beginning of year     7  9 3 7  4 4 4 6024876
issue of 19125684 ordinary shares of 10p each       – 1912568
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 7937444
on 8 august 2005 the group placed 19125684 ordinary shares of 10p each for a gross consideration of £35000000 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 13636364 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 longt 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 fromto 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 763333 – – – 763333 3 dec 2007 to 18500p  none
       2 dec 2014  
options 2 dec 2005 449773 – 4806 35869 409098 2 dec 2008 to 27600p none
       1 dec 2015  
options 2 dec 2006 – 171765 – – 171765 2 dec 2009 to  26225p  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 263735 1678 – 10039 255374 1 sept 2008 –   
         
‘tranche 2’ restricted share awards 11 oct 2005 263735 1678 – 10039 255374 1 sept 2009 –   
        
s h a r e s a v e 	 s c h e m e         
options 24 may 2006 – 126666 – 1335 125331 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 fromto 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 778333 – – 15000 763333 3 dec 2007 to 18500p none
       2 dec 2014  
options 2 dec 2005 – 449773 – – 449773 2 dec 2008 to 27600p 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 – 263775 – – 263775 1 sept 2008 –   
      
‘tranche 2’ restricted share awards 11 oct 2005 – 263775 – – 263775 1 sept 2009 –  
 tsr performance condition
the weighted average share price for the exercise date on which the 4806 share options held under the approved share option scheme were 
exercised was 29175 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 straightline 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   18500p 27600p 26225p 26000p 26000p 30800p
exercise price   18500p 27600p 26225p – – 28000p
volatility   30 30 30 30 30 30
option life   10 years 10 years 10 years 3 years 4 years 35 years
dividend yield   0 0 0 0 0 0
riskfree investment rate   45 45 44 45 45 47
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 sharebased payments
based on the above fair values and the company’s expectations of employee turnover the expense arising from equitysettled share options 
and share awards made to employees for 2006 was £547623 2005 £242213 there were no other sharebased 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      45093 125457 2743 
profit retained for the year for equity shareholders      – – 3750 
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	
click to return to contents 50 star energy group plc annual report and accounts 2006
job	 8644star	enbackaw	 proof	 05	 proof read by
operator	tim	 date	 020407	
server	 studio	iii	 setup	 tim	 first	readrevisions
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 125457 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 £501368 2005 £305514
there was a prepaid contribution of £nil 2005 £859 at 31 december 2006
contributions amounting to £40369 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 3639
non cash items       51 8 46
depletion depreciation amortisation and impairment charges net of loss on disposal    	 1 0  9 3 7 5936
increase in stock        7 7 3  15
increase in debtors      	  1  0 4 7  1175
decreaseincrease in creditors        7  7 7 4  10880
net cash inflow from operating activities       2 1  8 5 5 19219
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    17283  10918 – 91 6456
debt due within one year    13421  4495 8647 – 9269
debt due after one year    57336 3 8577 – 65916
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 £221000 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
decreaseincrease in cash in the year        1 0  9 1 8  5084
cash inflow from increase in debt financing        3  88 3  71166
change in net debt resulting from cash flows        1 4  8 0 1  66082
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 1473
movement in net debt in the year      	  1 4  8 6 1  65144
net debt at the start of the year      	  5 4  1 7 1  10973
net debt at the end of the year        6 9  0 3 2  54171
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 1125
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 6110 – – 
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 
£5127036 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 £1000000 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 farmout agreement farmed into during the year with virgo energy limited the group will undertake a feasibility study and 
in addition contribute up to £1000000 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 nonexecutive 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 £195 million 2005 £08 million and incurred costs from 
vitol sa totalling £07 million 2005 £nil as at 31 december 2006 £08 million 2005 £nil was due to and £06 million 2005 £nil was owing 
from the group to vitol sa
as at 31 december 2006 the group had a noninterest bearing loan due to it from its associate larchford limited of £200000 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 £3120000 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 5000 to satisfy part of the redundancy package for a former 
employee these shares were immediately allotted at 276p per share giving a consideration of £13800 
on 5 march 2007 the following took place 
 the group placed a further 13636364 ordinary shares for a gross consideration of £300 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 £768 million to £650 million 
the costs incurred in relation to the above placing and revision of the senior debt facility totalled £11 million
on 30 march 2007 the group signed a letter of intent for the sale of its 79125 interest in the singleton oil field as at 31 december 2006 
the singleton oil field was estimated to have 1938 million barrels of commercial reserves 77 of the group’s estimated total if the sale 
proceeds it is envisaged the group will receive a consideration in the region of £110 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      24464 11000 26297
changes during the year         
revisions of previous estimates      454 444 380 
purchases of reservesinplace      98 1310 317 
extensions discoveries and other additions      – 4556 759 
production      1494 2285 1875
total changes during the year      1850 4025 1179
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 251 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 multisite 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 qa
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
 watthour
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 star energy group plc
star energy group plc
ground floor
burdett house
1516 buckingham street
london 
wc2n 6du 
t 44 0 20 7925 2121
f 44 0 20 7930 9919
wwwstarenergycouk
star energy
group plc
annual report  accounts 
2006
star energy group plc  annual report  accounts 2006
click to return to contents


Summary:
 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 251 million boe as at 31 december 2006 2005 263 million boe
average oil production for the year was 4093 bopd  
2005 4178 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 £571 million 2005 £247 million
profit before tax of £146 million 2005 £21 million
basic earnings per share of 472 pence per ordinary share  
2005 182 pence
click to return to contents