AJ Lucas Group Limited annual report 2006-07

www.lucas.com.au

AJ LUCAS 2007
ANNUAL REPORT
sustaining
australia

Lucas is an integrated services provider
delivering infrastructure and construction
solutions to Australia’s water & wastewater,
oil & gas, resources and property sectors.
Activities include pipelines and related
infrastructure, drilling services, construction
and civil engineering, project management
and other professional engineering services.

HIGHLIGHTS 2006-07
Record revenue $216.4 m +26.4%
EBITDA $14.9 m +77.0%
Net profit after tax $6.4m +111.0%
Resumed dividend 2.5c fully franked
Strong order book $234.0 m
Award of Western Corridor Recycled Water Project with Transfield Services
Market leadership in drilling and coal seam gas services
Establishment of civil engineering capability inside growing Lucas Stuart
Exploration drilling accelerated at Gloucester Basin and ATP 651
Sydney’s Pittwater is one
of the dozens of precious
waterways Lucas has safely
crossed with a pipeline.

2
3 SUSTAINING
“Sustainability” is probably this year’s most
misused word. Australia’s (and almost all of the
world’s) current way of life is not sustainable,
whatever some may assert. We are consuming
resources faster than they’re being renewed.
And, of course, many aren’t renewable.
wastewater treatment, desalination plants
coal seam gas, Horizontal Directional Drilling, mine gas drainage,
AJ LUCAS
It’s always about people.
Their safety, prosperity
and commitment.
Without them, we
don’t have a business.
Kevin Lester General Manager, Pipelines
If we continue to increase our
consumption at current rates, the
outcome is catastrophic, inevitable
and not that distant.
Defining sustainability
Here’s the definition of a sustainable
activity: you can keep doing it forever.
Truly sustainable activities rely entirely
on renewable or reusable resources and
renewable energy. There are precious few
of these, in spite of the many claims of
‘sustainable’ business activities.
The challenge is to change our
behaviour promptly enough, and in the
right ways, to avert immediate problems
and give us time to develop truly
sustainable ways to exist.
“Sustainability” sums up the main
challenge facing humanity. And it’s not
one we’ll solve by avoiding the truth.
Lucas and sustainability
Sustainability and care for the environment
have always been among Lucas’ values.
More recently we’ve worked to turn that
notional value into specific action, with
a ground-up review of our activities from
an environmental and sustainability
perspective. This started with squarely
facing the effects of our activities.
Few current economic activities are
sustainable in the long term, giving all of
us a responsibility to do what we can.
Improving the sustainability of our completed projects
We’re establishing benchmarks for our
energy and materials use so we can identify
opportunities and measure our success in
improving Lucas’ sustainability.
Improving safety and welfare
Sustainability is not just
about the environment.
It’s about sustaining our
way of life. Any action that
improves the safety and
welfare of Lucas people or
the general public helps
achieve this.
As a participant in the energy industry
– probably the highest profile producer of
carbon dioxide – we must acknowledge
its environmental consequences.
But the greenhouse gases being
generated through energy production are
not just the responsibility of the energy
industry. This flows right through to
everyone who uses energy.
We see sustainability as a process.
Just as any well-run business strives to
improve its use of financial capital, we
are striving to improve our use (and
minimise our abuse) of our planet’s
environmental capital.
Reducing greenhouse gases
Ultimately, humanity will have to rely on
renewable energy. Climate change aside,
coal, oil, gas and uranium are finite.
Until renewable energy can take the
load, we need to husband our energy
resources to get the most use of them
with the least environmental cost. Climate
change makes this urgent.
We believe two key interim energy
technologies are gas – in particular,
coal seam gas – and clean coal. Gas
technology is well developed and delivers

AUSTRALIA
Lucas projects that deliver a net environmental benefit
Western Corridor
Recycled Water Project
Gas pipelines: Lucas has been
involved in pipelines deliverinG Gas
to Sydney, Melbourne, Canberra
Adelaide, Brisbane and Hobart,
among many other communities.
Gas pipeline landfalls at
Minerva, Casino and Pohokura
Wastewater pipelines at Chatswood,
Illawarra, Hunter, Blue Mountains
HDD crossings of Pittwater,
Port Hacking, Hong Kong Harbour,
Murray River, Brisbane River,
Snowy River, Sydney’s Middle Harbour
and dozens of other waterways.
Coal seam gas projects
Willowood Nursing Home
A major improvement to
Queensland’s water resources.
Safe, energy efficient and
non-polluting energy transport.
Direct use of gas instead of
electricity reduces CO 2 emission
and avoids conversion and
transmission losses.
Carry pipelines under
fragile environments with no
damage or contamination.
Reduce sewage contamination
of waterways and avoid
pumping stations.
Avoid environmental damage
and risks to users. Place
pipelines safely out of danger.
Make mining safer and turn this
greenhouse gas offender into a
relatively clean energy source.
MBA Merit Award for
energy efficiency
The elements of a
more sustainable Lucas
(and world):
Better use of materials
Wasting less
Renewable, recycled
or recyclable materials
wherever possible
Improving recovery of
recyclable waste
Better use of energy
More energy-efficient equipment
Reducing energy use
Using lower polluting, more
efficient and renewable energy
Reducing our production
of environmental contaminants
Carbon dioxide
Other waste
Reducing environmental damage
This is where we already have
well-established practices which
we’ll continue to refine.
relatively efficient, clean energy. When
used to generate electricity, gas produces
about half the CO 2 of coal.
Where it is coal seam gas that would
otherwise be vented, there’s a 21-fold
reduction in greenhouse consequences.
A review of Australia’s energy options
in the journal Energy Policy concluded
that “Natural gas and coal seam methane
can play important roles in the transition
to a renewable energy future.”
Carbon capture and storage:
an opportunity
One way to reduce carbon dioxide
emission is to capture CO 2
from stationary
sources like power stations and place it
into permanent storage in depleted gas
reservoirs and other geological structures.
The technology to separate CO 2
from
a mixture of gases is well-established
in producing natural gas and in other
industries. Pilot projects are underway
around the world to develop these for use
with coal-fired power generation.
The captured CO 2
can be transported
by pipeline to be pumped into natural
reservoirs. This has been done for over
a decade and is regarded by the UN’s
Intergovernmental Panel on Climate Change
(IPCC) as a safe and appropriate technology.
An effective carbon pricing scheme will
make this competitive with ‘dirty’ coal
and enable the continued use of coal as
an energy source. Carbon capture and
storage is an opportunity for Lucas, as a
leader in both drilling and pipelines.
Applying our expertise to solving
environmental problems
Although our work
has environmental
consequences, many of
our projects deliver net
environmental benefits.
Economics vs the environment
Debates often speak of ‘balancing
environmental and economic interests’.
This is risky. Economics is a human
creation we can define any way we want.
We can (and do) assign economic value to
anything we feel like. If scarcity pushes the
price of one thing up, another can take its
place. But our environment is much less
‘fungible’ (as the economists would put it):
its components can’t be freely substituted.
Every element of every ecosystem has
specific needs, dictated by physics and
chemistry. Apparently inconsequential
changes in one part of one system can
devastate other systems. Its reality isn’t a
subjective, arbitrary one.
The root cause of many environmental
problems is the failure to account for
costs of consumption and environmental
damage, making many damaging
activities artificially cheap and diverting
the costs of consequences to other parts
of the economy.
Sources: Intergovertnmental Panel
on Climate Change; US Dept of Energy,
Energy Policy journal

4
5 Water
pipelines, trenchless technology, civil engineering, project management, specialised construction,
pumping stations, water treatment facilities, drilling, desalination plants
AJ LUCAS
Australia is well known as the
driest inhabited continent.
Droughts and rainfall
fluctuations have always been
part of our weather pattern.
However it’s now clear that
long-term climatic changes are
increasing their severity.
Engineering and practical
construction expertise are
essential to a responsible
approach to water and
wastewater management.
Michael Arbon General Manager, Water
Mean annual runoff
(as % of AUSTRALIA’S total runoff)
Source: Bureau of Rural Sciences
0.5 % 22.1 %
1.7 %
These maps show Australia’s
12 main drainage divisions.
This shows the normal distribution of
runoff (water that flows into our rivers and
catchments) as a percentage of the total.
1.5 % 0.8 % 0.1 % 18.8 %
0.3 % 25.6 %
6 % 10.2 %
12.5 %
2004/05 runoff
(as % of mean annual runoff)
Source: Bureau of Rural Sciences
29 %
570 GL
110 %
7,140 GL
59 %
50,240 GL
23 %
1,380 GL
Runoff for 2004-05 was below the average
by between 23% and 93% in all but one
drainage division.
Water inflows are shrinking, populations
are growing, water restrictions and leak
reduction are approaching their limits.
So water security has quickly become a
national priority.
Falling inflows
Average water inflows to catchments
in many areas are falling rapidly. In
Melbourne, for instance, the long-term
average inflow from 1913 to 2006 was
590 gigalitres (GL) per year. The average
between 1997 and 2006 was just 387 GL,
a 35% drop. Canberra is even more
dramatic, with average intakes from
2001 to 2006 just 37% of the long-term
average. In 2006, the city’s inflows were
13% of the average.
And much of the rainfall we do
get falls in the wrong places. Three
of Australia’s 12 drainage divisions,
the northern coastal areas of Western
Australia, Northern Territory and
Queensland, get 67% of the nation’s
total runoff. Another 10% goes to
Tasmania, leaving just a quarter of
the nation’s total runoff to cover the
remaining eight divisions which include
Sydney, Melbourne, Adelaide, Perth
and Canberra as well as the Murray-
Darling Basin, where about 70% of
Australia’s irrigated crops and pasture
are grown.
54 %
1,730 GL
75 %
760 GL
62 %
62,060 GL
7%
20 GL
55 %
40,210 GL
77 %
17,790 GL 73 %
28,850 GL
66 %
32,080 GL
colour key
0
100

Water restrictions have worked,
but are reaching their limits
Stage 3 or higher water restrictions
are in place in all capitals apart from
Darwin and Hobart. These, together
with water conservation programmes,
including rebates for rainwater tanks,
water-efficient appliances and plumbing
fixtures, have been very effective. Sydney,
for instance, uses the same amount of
water as it did in 1974 — with over one
million more people.
Although the public recognises the
need for water restrictions, there are signs
of discontent as restrictions get harsher
and last longer. This will inevitably
translate into the political need to
increase the reliability of supplies.
Improvement in domestic water
conservation has mixed effects for the
wastewater system. Reduced flows are
helping some treatment plants work more
efficiently. But because sewers rely on
continuing flow to carry waste to treatment
plants and minimise growth of pathogens,
very low flows can present challenges too.
Leakage reduction in capital city systems is
also approaching practical limits.
Alternative sources
With the uncertainty of rainfall, water
sources that don’t depend on favourable
weather — principally desalination — are
being commissioned around Australia.
Desalination plants already planned or
underway include two 45 GL/year plants
in Perth; a 45 GL/year in South East
Queensland, a 90 GL/year in Sydney and
Australia’s largest, a 150 GL/year plant in
Victoria, with two proposed for Adelaide.
Treating wastewater for industrial and
domestic use is also becoming common.
The $2.4 billion Western Corridor
Recycled Water Project in SE Queensland
will be the largest of these, supplying up
to 73 GL/year of highly treated water.
The ABS is forecasting
Australia’s population
to increase by 35%
between now and 2030.
Investment and opportunities
According to the ABS, water is a $10
billion per year industry in Australia,
which has spent a similar amount on
assets over the last five years. The Water
Services Association of Australia (WSAA)
forecasts investment in urban water
infrastructure projects totalling around
$30 billion over the next five to ten years.
Capital city water utilities are committed
to projects worth $1.4 billion in the
07‐08 financial year and $2.3 billion the
following year. On top of this are state
government expenditures including the
$9 billion South East Queensland Water
Grid, the Victorian government’s $4.9
billion ‘Our Water, Our Future’ plan and
Sydney’s $1.8 billion desalination plant.
So for participants in the water
infrastructure industry, the future looks
assured but challenging. The biggest
challenge will be finding people and
companies with the necessary skills.
Wastewater
The other side of the water equation is
waste. Australian water utilities have
continued to extend sewer systems and
upgrade treatment plants, reducing
pollution of beaches, waterways and
catchments. As recycled water becomes
a significant element in our water supply,
management of the sewage stream — a
source for water recycling — is important.
“Sewer mining”, the extraction of
wastewater for treatment and further
use, is also affecting the management of
sewage systems.
Water restrictions, sewer mining,
domestic tanks and greywater recycling
have reduced flows and increased waste
concentration in many sewer systems,
with implications for system planning
and management.
Projected Population and water storage
Sources: ABS; National Water Commission; ABARE; WSAA
Total Capital expenditures of
australian water utilities ($ billion)
Source: WSAA
population ’000 storage restrictions
Jun 06 2050 Sep 06 Sep 07 sep 07
Sydney 4307.7 6267.8 41% 58% Stage 3
Melbourne 3682.6 5846.5 47% 39% Stage 3a
Brisbane 1864.0 4147.0 19% 19% Stage 5
Perth 1512.0 2965.9 32% 35% Permanent
Adelaide 1133.2 1324.5 52% 79% Stage 3
Canberra 330.3 542.3 50% 43% Stage 3
Hobart 206.3 285.4 82% 84% None
Darwin 114.7 290.4 100% 95% None
2005–06
Water
Wastewater
2006–07 2007–08 2008–09
64% of Australia’s population live in the capital cities.
98% of them are currently under water restrictions.
All water storages are below capacity and water supplies
are technically unsustainable in Sydney and Brisbane,
with other capitals approaching unsustainability.

energy
6
7
Australia currently produces around
17,000 petajoules of energy per year as coal,
petroleum, gas, uranium and renewables,
two-thirds of which is exported. We import
a net 860 PJ of petroleum.
gas pipelines, compressor stations, trenchless technology, coal seam gas,
petroleum pipelines, coal mine gas management
AJ LUCAS
Australia has abundant
energy sources. We need
efficient, environmentally
sound infrastructure to
deliver it economically.
John Bidwell General Manager, Queensland
Australia’s energy consumption is just
under 6,000 PJ per year, growing at a
little over two percent each year. This
is provided by 41% coal, 34% oil, 19%
natural gas and 5% renewables. A little
over a third of this primary energy is used
to produce electricity.
Gas
Australia produced over 2,000 PJ of natural
gas in 2006, of which 830 PJ was exported.
The major sources are Victoria’s
Gippsland, South Australia’s Cooper/
Eromanga basins, Bass Strait and the
Northwest Shelf. This will change over
coming years as production from the
Cooper/Eromanga declines.
Coal seam gas is rapidly increasing
and is forecast to overtake natural gas
from Gippsland as the East coast’s major
source around 2027.
25 companies own around 25,000 km
of high pressure transmission pipelines and
80,000 km of lower pressure distribution
pipelines. These serve a total of 4 million
customers through – currently – 19 energy
retailers. Some thousands of kilometres
of additional high pressure pipelines are
currently in planning.
Oil
Australia produced 1,062 PJ of oil and
condensate in 2006 exporting 689 PJ and
importing 1,550 PJ. The nation has been a
net importer of oil since 2003.
Exploration expenditure for 2006-07 is
estimated at $2.14 billion, a 64% increase
over the previous year, driven mainly by
higher world petroleum prices.
Electricity
In 2005-06, 794 PJ of grid electricity was
generated in Australia. 83.9% of the
country’s was produced with coal, 8.5%
with gas, 7.3% hydro and 0.3% renewable
and other fuels.
Capital investment grew 35% in
2004‐05 and 27% in 2005-06 to a total of
$8.1 billion. Over the last year, 3,600 MW
of additional generating capacity has
been added or is under construction, with
another 4,500 MW planned.
There are currently around 50 major
electricity companies, with 45,000 MW of
generating capacity and 865,204 km
of transmission cables servicing 9.5
million customers.
Nuclear
Australia has the world’s largest reserves
of uranium, 24% of the world total, and is
currently the second largest producer after
Canada. However there is no domestic use
of uranium for energy production.
Renewables
Overall Australia’s renewable energy
production has been relatively static over
the last five years. Although wind and
solar power generation have increased
dramatically in that time, reduced
hydroelectricity generation due to water
shortages has offset this.
PJ, MW and other units
Gas consumption is normally measured
in megajoules (10 6 joules) at the domestic
level and gigajoules, terajoules and
petajoules (10 15 joules) at national levels.
Electricity generating capacity is
measured in megawatts (MW) – millions
of watts. A MW is enough to supply
around 500 homes.
Electricity consumption is measured
in megawatt hours (MWh).
The average Australian home
consumed 8 MWh of electricity last year.
For comparison with other energy
sources, MWh is converted to petajoules
(PJ). One petajoule equals 277,778 MWh.
Sources: ESAA, PESA, ABARE, Aust. Solar Radiation Handbook.

Primary energy consumption by fuel (%)
Source ABARE
Australia’s energy resources (%)
Source ABS Year Book Australia 2007 & company reports for coal seam gas
coal
oil
renewables
(Hydro, Solar, Wind
Biomass, Biogas)
coal
oil
coal seam gas
uranium
natural Gas
coal seam gas
natural Gas
19
1,043 PJ
34
1,908 PJ
1
59 PJ
5
260 PJ
41
2,324 PJ
21
1,724 PJ
4
339 PJ
6
481 PJ
33
2,709 PJ
36
2,910 PJ
0.3
5,000 PJ
1.2
23,015 PJ
17.2
329,470 PJ
5.2
99,520 PJ
76.1
1,454,550 PJ
2006 2030
Total 5,594 PJ Total 8,163 PJ
Total 1,911,555 PJ
Economic demonstrated resources
australian energy flows 2004-05 (in Petajoules)
Source: ABARE
17,240
Primary
products
supply
12,040
Net
primary
export
5,200
Total
primary
energy
consumption
3,730
Available
energy
(Total final
energy
consumption)
Primary Exports
13,080
Transformed
Exports
150
equivalent
to 24 days of
sunshine on
australia.
LPG
Methane
refinery
feedstock
125
1,650
1,040
50
740
490
uranium
oxide
5,200
6,480
340
black coal
lignite
and coal
products
renewables
8,070
695
260
200
1,440
energy
transformation:
Electricity generation,
Oil refining etc
4,265
in
2,460
out
electricity
Petroleum
products
Coal products
150
770
1,684
37
energy
DISTRIBUTION
240
430
450
1,290
1,320
commerce
and services
residential
resource
industries
manufacturing
transport
70
1,040
410
stocks
Crude Oil imports
Refined oil imports

coal
design and engineering, work-over and hole maintenance, pipelines, reservoir analysis, drilling techniques,
gathering systems, drilling programmes, wellhead completion, compressor stations
AJ LUCAS
8
9
seam gas
Coal seam gas has developed rapidly in Australia
over the last decade. From being a coal mine
hazardous waste product, it’s become a proven
energy resource that is already supplying a
significant portion of the nation’s gas, principally
in Queensland where it has supplied as much as
60% of the state’s gas at times.
Coal seam gas, like conventional natural
Coal seam gas has moved
from idea to reality in
the last decade. The next
decade will establish it as
a major energy resource.
Paul Bilston General Manager, Lucas Energy
coal seam gas in australia
Sources for these pages: Australian Gas Association, Petroleum Exploration Society of Australia, IPCC, SPE
perth
Prospective
darwin
The red areas of the map show coal basins
with proven recoverable coal seam gas.
Exploration is underway in Victoria and
CSG is considered to be prospective in WA.
adelaide
brisbane
sydney
canberra
Exploration
underway
melbourne
gas, is mostly methane. The main
difference is in the way the gas occurs in
nature. Conventional natural gas is held
in reservoirs of porous rock surrounded
by impervious rock. Coal seam gas is
attached to the surface of coal particles
by ‘adsorption’ and is held there by the
pressure of water that permeates the
‘cleats’ of the coal seams.
glossary
A number of terms describe the
quantity of gas in a reservoir.
Gas in place or resource is an estimate
of the total gas in the formation,
without regard to its recoverability.
Reserves should be used to describe
gas that is expected to be economically
recoverable, based on careful analysis
of data from the gas field. They are
generally ranked in three tiers: proved,
probable and possible, based on
the likelihood of their recovery, This,
in turn, depends on the degree of
understanding of the reservoir.
Precise definitions are available from
www.spe.org/reservesdef.
In simple terms, proved reserves
have over 90% likelihood of recovery,
probable between 50% and 90% and
possible between 10% and 50%.
These lead to the terms 1P, 2P and 3P:
1P proved reserves
2P proved & probable reserves
3P proved, probable & possible reserves
PJ Petajoule (10 15 joule)
A measure of energy

Coal seam gas is extracted by drilling
into coal seams and pumping out the
water in them, reducing the pressure and
releasing the gas. It is a major resource for
Australia, with an estimated 275,000 PJ of
gas in place, mainly in black coal deposits
in Queensland and NSW.
The environmental element
One factor encouraging the use of coal
seam gas as a fuel is the greenhouse
effect of simply letting it vent into the
atmosphere during mining, as has been
done in the past.
It’s essential to drain gas for the safety
of underground coal mines. The standard
approach for some years has been to drill
from the mine face into the seam, letting
the methane escape through the mines’
ventilation system. This solves the safety
problem, but creates an environmental
one — methane is 21 times more intense
than carbon dioxide as a greenhouse gas
according to the IPCC. This is irresponsible
and, as greenhouse gases acquire a
financial value through carbon trading,
will have financial implications.
The water that’s pumped out to release
the gas is also valuable. In some areas it
can be used without treatment for stock or
agricultural use. In other areas it’s usable
with suitable treatment.
Technical developments
Newer techniques, drilling from the
surface down into the seam, make it
possible to capture and collect the gas
for use as a fuel.
For miners, surface to in-seam (SIS)
drainage also has the advantage that it
can be completed well ahead of mining,
eliminating the delays of underground
drilling and consequent costs of idle
equipment. It also increases safety by
avoiding the need to have drilling rigs
and crews underground.
SIS for coal mine drainage (also called
coal mine methane or CMM) is normally
completed over a few years. For longterm
use as a resource, a typical coal
seam gas well will produce gas for eight
to fifteen years and potentialy for as long
as 20 years.
The right place, the right time
Most of Australia’s coal seam gas is in
New South Wales and Queensland, much
of it fairly close to existing major gas
pipelines. This helps makes coal seam
gas attractive to power station operators,
large industrial users and gas retailers.
As for timing, with the gas reservoirs of
the Cooper Basin in South Australia now
declining, the east coast of the country
has been looking for new sources.
What’s underway
There are currently 17 listed companies
operating in coal seam gas in Australia
with over 5,000 PJ of 2P reserves.
Five are delivering gas, another six
have 2P reserves and six are exploring or
assessing the value of gas reserves.
There is currently an estimated $2
billion of capital expenditure, including
approximately 3,000 wells planned for
NSW and Queensland. Apart from the
initial drilling, each producing well needs
an annual workover.
Several companies have ambitions to
make coal seam gas an export industry
with a plant planned at Gladstone.
An Ideal immediate energy solution
While long-term we need to move to
renewable energy resources, coal seam
gas is among the best immediate options
environmentally. By capturing the gas and
using it as fuel, the greenhouse impact
is reduced by a factor of 21 compared
with venting mine gas. Gas is a cleaner
fuel for power generation than coal. With
newer technology such as combined cycle
gas turbines, gas is more responsive and
efficient than coal for power generation.
Coal seam gas extraction is now
proven technology without the political
and environmental risks of nuclear power.
how SIS gas drainage works
Surface drilling rig Drain in
advance of mine workings; higher capacity
than underground rigs; More technologies
available; Fewer people underground
Exploration information
as drainage drilling is carried out,
data is gathered about the coal
seam, further improving understanding
of its geology.
water Treated as needed
for stock, agricultural or
other use.
To gas network Gas
can be used locally, for
small-scale generation or to
pipelines for distribution.
SIS drilling can be used for both
coal mine gas drainage (coal mine
methane or CMM) and for recovery
of gas from coal formations that
aren’t being mined.
de-watering/
de-gasification
borehole
lateral branching to increase
effective gas drainage
Coal seam 250–900m
underground

esources
Australia’s largest primary industry, the mineral
industry contributes 6.5% of the country’s GDP
and more than 60% of its export income.
exploration drilling, gas pipelines, power stations, mining services, water treatment plants,
project management, mine gas drainage, Slurry pipelines
AJ LUCAS
10
11
Lucas is a specialist
service provider to
Australia’s resources
boom. Technology and
training are our focus.
Brett Tredinnick Gen. Manager, Drilling
Australia’s resource
exports were a
record $106.5 billion
in 2006-07, with
production increases
in most commodities.
Exploration expenditure
was a record $1.7 billion.
Australia is the world’s largest producer
of alumina, bauxite, ilmenite, rutile,
zircon and tantalum; the second-largest
of iron ore, lead, zinc, uranium, gold,
diamonds and titanium; third in nickel,
silver, manganese and vanadium; fourth in
coal and in the top ten for copper, cobalt,
gypsum, magnesite and salt.
Overall, Australia is the world’s third
largest producer and the largest exporter of
minerals. Australia has the world’s largest
economic demonstrated resources (EDR)
of brown coal, lead, nickel, rutile, tantalum,
uranium, zinc and zircon. It ranks in the
top six for bauxite, black coal, copper, gold,
iron ore, ilmenite, lithium, manganese,
niobium, silver and industrial diamond.
In all, over 60 minerals are mined
and processed in Australia, making us
virtually self-sufficient.
Just under two-thirds of Australia’s major
minerals and energy commodities recorded
production increases in 2006-07. Exports
rose to a record $106.5 billion, an increase
of more than $15 billion or 17 per cent
greater than the year before. This strong
performance reflects higher export prices for
almost two-thirds of all minerals and energy
commodities exported, along with increased
export volumes for nearly three-quarters of
the commodities.
Exploration and capital
expenditure continues to grow
The resources industry relies on exploration
to identify new sources of minerals and
develop existing ones. In 2005-06, $1,240
million was spent on minerals exploration,
a 20% increase on the preceding year.
Among other activities was 6,827,000
metres of exploration drilling.
Exploration for iron ore, copper,
nickel and silver/lead/zinc is estimated
at $880 million, an increase of around
two-thirds on the previous year, reflecting
substantial increases in world prices and
continuing strong demand.
The minerals industry represents 26%
of Australia’s total capital investment.
According to the ABS, the mining sector’s
new capital expenditure has been
growing rapidly, reaching an estimated
$23 billion in 2006-07 and forecast at
over $30 billion for 2007-08.
ABARE identified 91 energy, mining
and minerals processing projects, with
a total value of over $43 billion, that were
either committed or underway at the end
of April 2007. Another 188 projects are on
ABARE’s list as ‘uncommitted’, with an
approximate value of $112 billion.
An increasing proportion of this work
is around existing or known deposits.
Higher commodity prices have made
many formerly marginal areas viable.
exports 06 – 07 ($M)
Sources: ABARE, ABS, Minerals Council of Australia,
Coal
Iron ore, Iron and steel
Aluminium, alumina, bauxite
Gold
Nickel (ore and metal)
Copper (ore and metal)
Zinc (ore and metal)
Lead (ore and metal)
Titanium minerals & OXIDE
DiamondS
Uranium OXIDE
Manganese
Salt
Silver
Tin

LUCAS EXPERTISE
Lucas provides essential
infrastructure and
engineering solutions
to Australia’s water, energy
and resources industries.
Our focus on these
sectors gives us a deep
understanding of our
clients’ business needs, and
practical knowledge of their
technical, commercial and
legislative constraints.
Engineering, technical
competence and a thorough
understanding of the work
underpin our activities.
Kerry Brydon
General Manager,
McDermott Drilling
Mike McDermott
Managing Director,
McDermott Drilling
Bronwen Otto
OHS&T Manager,
Coal & Gas
Brian Burden
General Manager,
Lucas Stuart
Lee Levsen
Project Engineer
Ian Redfern
Chief Operating Officer
Mark Ainsworth
Chief Estimator
Michael Robertson
Project Manager
Lucas services water energy resources
Pipeline engineering & construction
Trenchless technologies
Exploration drilling
Gas drainage & gathering systems
Turnkey energy solutions
Water & wastewater pipelines
Gas & petroleum pipelines
Slurry pipelines
Compressor stations
Power plants
Water treatment plants
Wellhead completion
Well workovers
Civil engineering
Construction
Facilities management
Tank farms and storage
Coal seam gas services
Project management
Operations & maintenance

12
13
AJ LUCAS year in review

the year
in review
Once again, Lucas’ development continues apace,
affirming our strategy of complementary niche
businesses offering vertically integrated services
in key sectors of the Australian economy: water
and wastewater, oil and gas, resources and property.
western corridor
recycled water
project, Queensland
It is also clear that the Lucas philosophy
of innovative solutions, our “can-do”,
harmonious work approach and the
paramount importance we place on
safety and the environment put us in great
demand. With increasing competition
for resources and a significant domestic
requirement for infrastructure, these
corporate characteristics are much
required to deliver infrastructure quickly,
cost efficaciously, safely and with the
least environmental impact.
Lucas is very much concerned with
sustaining Australia’s future. We design,
deliver and maintain vital infrastructure
in a most socially responsible manner.
Highlights of the past year
McDermott Drilling has been an excellent
acquisition. To complement it we have,
since balance date, acquired Capricorn
Weston, a similar business based in
Queensland. Together, Lucas, McDermott
Drilling and Capricorn Weston provide a
substantial base to service our clients in
the coal and coal seam gas sectors in New
South Wales and Queensland. From this
base, we expect to develop the business
significantly during the next two years.
The continuing exploration and
development of Lucas’ own coal seam
gas assets is no exception. We now have
a full-time coal seam gas team operating
from our new Melbourne office, dedicated
to the development of these assets. In
particular, work on the Gloucester Basin
is proceeding at great pace, with a hefty
drilling programme which commenced
in June this year. Pilot production has
started at Stratford and we expect that by
the end of this year or early 2008 we will
release an initial reserves certification
report. Our principal thrust at this stage
is to fully understand the basin and the
keys required to unlock it.
One of the areas we
are concentrating on
is safety and training.
Improvement is a neverending
exercise and we
are well aware of the
importance of ensuring
not only a safe workplace,
but the inculcation of
a culture which places
people’s safety at the
forefront of everything.
During the year Lucas commenced
its specialist civil engineering activity as
part of the construction division. Our first
project is the design and construction of
the new Sydney Slipways shipping repair
facility underneath the Anzac Bridge in
Sydney’s Rozelle. The skill sets employed
here have particular relevance, together

14
15
Lucas’ responsibilities: to
our employees for a safe,
rewarding career; to our
clients for innovative,
reliable infrastructure.
Allan Campbell Chairman and CEO
with other Lucas activities, in delivering
major civil engineering infrastructure
projects such as the Western Corridor
Recycled Water Project.
Lucas is well positioned going forward.
We believe our strategy has been correct
and, certainly, the sectors in which
we operate are experiencing a great
deal of activity at present. We believe
this is likely to continue well into the
foreseeable future. We have therefore
strengthened our senior management
team considerably during the year and
are now in the process of upgrading
systems and procedures, to ensure we
can manage our expected growth.
One of the areas on which we are
particularly concentrating is safety and
training. Improvement in these is a neverending
exercise and we are well aware
of the importance of ensuring not only a
safe workplace, but the inculcation of a
culture which places people’s safety at
the forefront of everything. While Lucas
historically has been particularly good
in these areas, we can — and will — keep
doing better. Lucas people remain the
best and we will ensure they continue
to be trained as the best.
The issue of people — availability
and retention — remains the biggest one
facing the Group. We try very hard with
our people at all levels but, as Lucas
continues to grow and develop, we must
be more systemised and disciplined in
career development. This applies to all
levels of the business.
We have therefore reviewed our HR and
remuneration packages and introduced
an equity component into remuneration
and retention packages. We have set
goals and established career paths for the
2006–07 selected projects
AJ LUCAS year in review
blue mountains
wastewater Pipeline
In an alliance with Sydney Water,
we completed two HDD boreholes
of approximately 2,400 metres
at a 1° gradient into the main
sewer tunnel to provide additional
wastewater solutions in the Blue
Mountains. The bores travelled
directly beneath the Cascades
Dams (shown above).
This project set a new standard,
and involved a very high degree
of technical and practical
competence. By combining the
appropriate resources from
the alliance organisations, we
delivered this difficult project
under budget and well within time
to create the world’s longest HDD
wastewater installation.
western corridor water
The Queensland Government’s
Western Corridor Recycled Water
Project is the second largest civil
engineering undertaking ever
attempted in Australia – after the
Snowy Mountains Scheme. In an
alliance with Transfield Services,
GHD and Sunwater, Lucas is
responsible for the design,
engineering and construction of
the Eastern Pipeline section. The
number of planning, engineering
and logistics problems requiring
resolution in very tight timeframes
is monumental. Working together
with the government, all have
been overcome and we achieved
first water on 24th August 2007.
The project is scheduled for
completion in 2008 and will form
part of the solution to South East
Queensland’s water needs.
goro nickel WATER pipeline
Within very difficult
circumstances, the 35km pipeline
from Lake Yaté to the Goro
Nickel Project’s power station
in New Caledonia has now
been completed. This project
demonstrated Lucas’ ability to
work in adverse environments,
stretched logistic and supply lines,
sensitive local political issues and
a long way from head office.

senior middle executives and others who
wish to progress through the Group. We
are establishing more formalised training
procedures so that people can not only
enjoy their work at Lucas, but obtain very
real and transferable skill sets.
On the issue of people, it is of course
absolutely true that we couldn’t achieve
any of the things in the development of
Lucas without great people. We have
great people and we intend to secure
and retain more great people. We thank
them all for their efforts during the year in
contributing to the continued success and
development of the Lucas Group.
People at all levels have combined to
create a group which is well positioned
in the marketplace, which has the right
technology (and is developing more),
continuing to innovate and develop better
solutions where required, which has very
competent people with the right set of
values and a management team with the
necessary knowledge and experience and
which provides first rate leadership.
We are proud of this Company and
confident in our future. It is a future
which involves social responsibility and
a future which necessitates corporate
accountability. As a Group, we are up to
this challenge. We believe that the Lucas
formula is right in sustaining Australia
into the future.
Allan Campbell Chairman and CEO
ivy
Lucas Stuart is constructing
the new Ivy lifestyle and
entertainment complex in George
Street Sydney for the Merivale
Group. This $150m development is
designed to be an icon for Sydney
and involves, as one would
expect, very interesting design
techniques — making it one of the
most difficult construction projects
Lucas Stuart has ever undertaken.
Despite early delays in obtaining
necessary consents and heritage
clearance, the project is on track
to open in December this year.
coal seam gas
There are two elements to Lucas’
involvement in coal seam gas.
The first is providing services to
mines and gas developers: drilling,
steering, wellhead completion and
gathering systems. The second
element is developing our own
gas resources, particularly at
Gloucester Basin, through our
subsidiary, Lucas Energy.
The services business has
continued to develop over the
year, undertaking projects for
Xstrata at Oaky North, Anglo
Coal at Moranbah North and BHP
Billiton in the Gunnedah Basin.
As a coal seam gas pioneer in
Australia, Lucas’ gas extraction
techniques are now being widely
used within the industry. We
are continuing to innovate and
develop new degasification
procedures which, if proven, will
again revolutionise the cost of
extracting this very important
clean energy required as an
essential for Australia’s future.
Lucas Energy has spent the
year improving our understanding
of Gloucester with a series of
exploratory drills and laying the
groundwork for the development
of the Basin.
As we’d planned, the two
businesses have proven to be
complementary: with the services
business supporting Lucas
Energy’s development, and
Lucas Energy’s ‘big picture’
perspective helping improve the
service we deliver to our clients.

16
17
AJ LUCAS financial report
directorS’ report
18
income statements
26
statements of recognised
income and expense
balance sheets
27 28

statements of cash flows
notes to the financial statements
directoRS’ declaration
independent auditor’s report
australian stock exchange
additional information
directory
29 30 58 59 60 61

18
19
The Directors of AJ Lucas Group Limited (the Company) at any time during or since the end of the financial year are as follows:
Name, qualifications, age, experience and special responsibilities
Allan Campbell BCom LLB
Executive chairman and CEO. Age 51. Director since 1995.
Mr Campbell acquired a controlling interest in Lucas in 1995 following a successful
career in investment banking and commerce including property, construction and building materials.
Since acquiring his shareholding, he has been responsible for the Company’s strategic direction and
has established its position as the leading outsourced provider of infrastructure services in Australia.
Andrew Lukas BE
Executive director. Age 60. Director since 1995.
Mr Lukas joined Lucas in 1975, initially as a project manager and was appointed a director in
1985. After graduating in civil engineering from UNSW, followed by postgraduate studies at the
Pipeline School of the University of Texas, he gained valuable experience with Williams Bros in the
US and MacDonald Wagner & Priddle and Transfield in Australia.
He pioneered the development of directional drilling in Australia and is an authority on this
technology and pipelines. He is also a leading proponent of HDD in coal seam gas extraction.
He is an executive committee member and past president of the Australian Pipeline Industry
Association (APIA), a director and president of the International Pipeline and Offshore Contractors
Association (IPLOCA) and a director of CRC Mining Technology & Equipment.
Ian Stuart-Robertson AAIQS
Executive director. Age 57. Director since 1995.
Mr Stuart-Robertson is a qualified quantity surveyor with over 30 years experience in civil and
building construction. He has considerable expertise in general construction and project cost
reporting systems and also makes a vital contribution to the Group in his role as chairman of the
tender review committee.
He is also non-executive director of quantity surveyors John Hollis & Partners.
Martin Green FCA
Independent non-executive director, Chairman of audit committee. Age 62. Director since 1999.
Mr Green is a Fellow of the Institute of Chartered Accountants and an official liquidator of the
Supreme Court of NSW. He has been in public practice for 36 years, mainly specialising in business
recovery and insolvency. He has substantial business and finance experience at senior levels.
He is currently a principal at GHK Green Krejci Chartered Accountants, a former honorary director/
treasurer of the National Trust of Australia (NSW) and has served at various times in many public
roles and capacities.
AJ LUCAS annual report 2007
DIRECTORS’ REPORT
Garry O’Meally BSc BE
Independent non-executive director, member of audit committee. Age 71. Director since 1999.
Mr O’Meally has over 40 years experience in the oil and gas industries, mainly with Australian
Gas Light Company where he served as general manager of AGL Gas Companies and later of AGL
Petroleum. He was also general manager of Queensland and Northern Territory for Santos Limited
and has consulted to many energy companies.
He was previously president of the Australian Gas Association, councillor and Queensland chairman
of the Australian Petroleum Production and Exploration Association and an executive manager of the
Australian Pipeline Industry Association. Mr O’Meally’s knowledge of the energy industries has been
vitally important in the Group’s expansion into its gas management activities.

Company secretary
Mr Nicholas Swan, MA, ACA, MBA, AFIN was appointed as company
secretary on 15 November 2001. Mr Swan has also served as
the company secretary of several listed public companies and a
responsible entity for managed investment schemes.
Directors’ meetings
The number of directors’ meetings (including meetings of
committees of directors) held during the financial year during the
period of each director’s tenure and number of such meetings
attended by each of the directors is:
Board of Directors Audit committee
Held Attended Held Attended
Allan Campbell 9 9 — —
Andrew Lukas 9 8 — —
Ian Stuart-Robertson 9 8 — —
Martin Green 9 9 3 3
Garry O’Meally 9 9 3 3
Corporate governance statement
The Board of directors is responsible for the corporate governance of
the Group. This statement outlines the main corporate governance
practices. Unless otherwise stated, these practices were in place for
the entire year.
Board of directors
The directors of the Company are accountable to shareholders for
the proper management of the business and affairs of the Company.
The key responsibilities of the Board are to:
• establish and monitor the corporate strategies of the Company;
• ensure proper corporate governance;
• monitor the performance of management;
• ensure that appropriate risk management systems, internal
controls, reporting systems and compliance frameworks are in
place and operating effectively;
• monitor financial results;
• approve decisions concerning investments, acquisitions and
dividends; and
• comply with reporting and other requirements of the law.
The Board’s role and responsibilities are documented in a written
Board charter.
Composition of the Board
The constitution of the Company requires between three and ten
directors. Currently there are five, of whom two are independent
non-executive and the rest executive.
The Board is committed to having a majority of independent
non-executive directors and at some stage will appoint other
directors to achieve this.
Directors are appointed for their industry-specific expertise and
commercial acumen. The Board believes that all the directors can
make, and do make, quality and independent judgements in the
best interest of the Company. While the chairman is also the chief
executive officer, his contribution to the Company is considered
vital to direct the strategy of the Company. The directors are able to
obtain independent advice at the expense of the Company.
There is no nomination committee. Instead, the Board assesses
the performance of individual directors and the Board as a whole.
Ethical and responsible decision making
The Company has a code of conduct to guide the directors and key
executives. It includes disclosure of conflicts of interest and use of
information not otherwise publicly known or available. Any director
with an interest in matters being considered by the Board must take
no part in decisions relating to those matters.
Trading in Company securities
The Company has a share trading policy prohibiting directors, senior
management and their associates from trading in the Company’s
securities other than in certain nominated periods (between two
and thirty days following the release of the half yearly and annual
results and the annual general meeting) and at such other times as
the Board permits. Such persons must obtain prior approval before
conducting any trade.
Integrity in financial reporting
The Board has established an audit committee which provides
assistance to the Board in fulfilling its corporate governance and
oversight responsibilities in relation to the Company’s financial
reporting, internal control systems, risk management systems,
regulatory compliance and external audit.
The committee must have at least two members. All members
must be independent non-executive directors. At least one member
must have financial expertise and some members shall have an
understanding of the industry in which the Company operates.
The principal roles of the committee are to:
• assess whether the accounting methods and statutory reporting
applied by management are consistent and comply with
accounting standards and applicable laws and regulations;
• make recommendations on the appointment of the external
auditors, assess their performance and independence and
ensure that management responds to audit findings and
recommendations;
• discuss the adequacy and effectiveness of the Company’s
internal control systems and policies to assess and manage
business risks and its legal and regulatory compliance
programmes; and
• ensure effective monitoring of the Company’s compliance with
its codes of conduct and Board policy statements.
The audit committee meets with the external auditors at least twice
a year. The committee is authorised to seek information from any
employee or external party and obtain legal or other professional
advice.
Timely and balanced disclosure
The Company has established policies and procedures designed to
ensure compliance with ASX listing rules disclosure requirements
so that investors have equal and timely access to all material
information. All broker and analyst presentations are released to the
ASX. The Company also posts all information disclosed to the ASX on
its website.
Clear communication with shareholders
The Company has a communications strategy to promote effective
communication with shareholders. The company secretary has been
nominated as the person responsible for communications with the
Australian Stock Exchange (ASX). This role includes responsibility for
ensuring compliance with the continuous disclosure requirements in
the ASX listing rules.
Risk identification and management
The Board has established policies on risk management. The
systems of internal financial controls have been determined by
senior management and are designed to provide reasonable but
not absolute protection against fraud, material mis-statement or
loss. The chief executive officer and chief financial officer provide
representation to the audit committee and the Board on the risk
management, compliance and control systems for the Group.
Encourage enhanced performance
The performance of committees, individual directors and key
executives is evaluated regularly by the Board.

20
21
AJ LUCAS annual report 2007
DIRECTORS’ REPORT
There has been no formal performance evaluation of the
Board, directors or committees during the reporting period.
The Board informally evaluates its performance and that of the
individual directors and committees each time it meets. The Board
believes that the individuals on the Board have made quality and
independent judgements in the best interests of the Company on
all relevant issues during the reporting period. There has been a
formal performance evaluation of all key executives (other than the
executive directors) during the reporting period.
Recognise the interests of all stakeholders
The Company has established various codes of conduct to guide
compliance with legal and other obligations to stakeholders and
the community at large. These include ethical and work standards,
employment practices including occupational health and safety
and employment opportunities, and environmental protection.
The Company’s compliance and that of its employees is monitored
through internal review.
Principal activities
AJ Lucas Group is a diversified infrastructure and mining services
and construction group specialising in providing services to the water
and wastewater, oil and gas, resources and property sectors.
The Group has in excess of 500 employees and a client base that
includes local and State governments and blue chip corporations.
The Group is structured into three principal business segments:
Pipelines: the Group is an Australian market-leading provider for
the installation of pipelines including hydrostatic testing.
Drilling: the Group is Australia’s foremost provider of drilling
services to the coal and coal seam gas industries for the
degasification of coal mines and the recovery and commercialisation
of coal seam gas and associated services.
Construction and civil: the Group is a provider of construction
and civil engineering services together with facilities management.
Review and results of operations
Overview of the consolidated entity
The consolidated entity recorded a net profit of $6,396,000 (2006:
$3,030,000). A summary of the results is set out in the following table:
Summary of financial results
2007
$’000
2006
$’000
Total revenue 216,369 171,232
EBITDA 14,907 8,419
EBIT 5,941 3,114
Profit/(loss) before tax 4,178 1,320
Net profit/(loss) attributable to members 6,396 3,030
Total assets 150,948 91,512
Net assets 30,438 22,236
Basic earnings per share 11.9 ¢ 5.9 ¢
Divisional performance
Contributions from the business divisions were as follows:
Revenue
$’000
EBIT
$’000
Margin
%
2007
Pipelines 73,219 3,965 5.4
Drilling 67,625 6,121 9.1
Construction and civil 75,525 414 0.5
2006
Pipelines 41,951 3,294 7.9
Drilling 50,909 1,652 3.2
Construction and civil 78,377 1,685 2.2
Pipelines
Projects undertaken during the year included the commencement
of the Western Corridor Recycled Water Project, the Otway Pipeline
for Technip/Woodside and the Moomba to Sydney pipeline for APA
Group. The Goro Project in New Caledonia was also substantially
completed. This was a difficult project with the result impacted by
adverse local conditions including civil unrest.
The Western Corridor Recycled Water Project in Brisbane, running
from Luggage Point to Bundamba, is being undertaken in an alliance
with Transfield Services Limited, GHD and Sunwater and is expected
to be completed during Q4 2008.
The division’s result was also adversely affected by a write down
of $1.8 million in respect of certain pipeline rights which, in the
event that the related project is reignited, the directors may review.
As a consequence of these events, the result for the pipeline
division was not as expected, however this is not a reflection of the
division’s performance. In fact, the pipeline division is performing
particularly well. Experienced senior personnel have been recruited
to assist in the division’s growth, as well as additional plant and
equipment purchased. Lucas’ combination of engineering excellence
and delivery capability are necessary skill sets in a market
competing for resources and the division is expected to perform
well in the future.
Drilling
Revenues within this division increased by 33% to $67.6 million
with a similar increase expected during the current financial year.
Operating margins, while much improved, should be higher and,
as the market in surface to seam and horizontal directional drilling
has developed to create more realistic risk/reward relationships,
operating margins are expected to improve.
A new yard has also been purchased subsequent to year end
in Wyong where the Group’s drilling activities will be based. It is
expected that this new level of operations including the business
of Capricorn Weston Drilling Group purchased in August 2007
will allow the Group to crystallise the inherent synergies of its
geographically diverse operations and improve margin performance.
Plant under-recoveries and “one-off contract hits” resulting from
unexpected ground conditions are not expected to affect drilling
profit materially in the future, as has been the case in the past.
Construction and civil
The construction and civil division recorded a normalised operating
profit of $1.7 million on a turnover of $75.5 million after adjusting
for write downs and legal fees, little changed from the previous
financial year. This division continues to perform well and, during
the year, has undertaken a number of significant and, in some cases,
difficult trophy projects such as Wildlife World in Sydney’s Darling
Harbour, high rise residential housing in Pyrmont, aged care/self care
nursing facilities in Lindfield, a 12 storey commercial building in
Kent Street, Sydney and the design and construction of the new Ivy
Entertainment Complex in George Street, Sydney.
The 2007 result was adversely affected by the write-down
of goodwill recognised on the acquisition of the Mace facilities
maintenance business and legal fees in connection therewith
totalling $1.3 million. This acquisition has proved to be totally
unsatisfactory and legal proceedings against the vendor have been
commenced as a consequence.
Coal Seam Gas
All of Lucas’ interest in coal seam gas are housed in a wholly owned
subsidiary known as Lucas Energy Pty Limited. Capital expenditure
on these assets significantly increased during the financial year,
in particular on the further exploration and development of the
Gloucester Basin. This asset is held in a joint venture with Molopo
Australia Limited (30%).

A dedicated team based in Melbourne has been assembled
to manage and develop our CSM resources. Together with Lucas’
profound drilling and steering knowledge and expertise, the Lucas
CSM team is well placed to offer services to the industry as a whole,
as well as placing Lucas in a favourable position to enhance the
value of its own coal seam gas assets.
The Group hopes to be in a position to understand more fully
ATP651 located in the Bowen Basin (held in joint venture with
Queensland Gas Company and in which Lucas holds a 15% interest)
and ATP285 (the Gloucester Basin referred to above), by the
beginning of 2008; by which time an initial assessment of proven
and probable reserves should be available.
Investments for future performance
The consolidated entity acquired plant and equipment totalling
$15,810,000 (2006: $10,434,000) during the year. The capital
expenditure is part of the normal pattern of investing and upgrading
required to maintain the Group’s plant and equipment, enhance
safety and keep pace with technological advances.
On 10 August 2007, the consolidated entity acquired Capricorn
Weston Drilling Group for a purchase consideration of $21.0 million
including $4.5 million of debt. The acquisition will give Lucas an
extra dimension in offering a full service to the coal and coal seam
gas mining and production sectors in both NSW and Queensland.
Review of financial condition
Capital structure
The Company’s capital structure is managed in a manner to
maximise the return to shareholders subject to consideration of
the financing risk of the business and the cash flows generated
from operations. No shares were issued by the Company during
the year other than arising from the exercise of management rights,
consideration for the acquisition of McDermott Drilling Pty Limited
and settlement of various liabilities.
The Company issued 25 million $1.00 unsecured redeemable
convertible notes during the year out of which $10.0 million was
used to redeem the existing note issue. The new notes carry a fixed
coupon of 10.0% per annum and have a term of three years unless
converted or redeemed beforehand. The notes are convertible from
28 June 2008 at a 15% discount to the volume weighted average
sale price over the 30 days prior to conversion.
Cash flows from operations
Cash flow generated from operations during the year amounted
to $9,602,000, a reduction from the previous year’s amount of
$15,721,000 principally due to increased working capital needs
reflecting the growth in the Group’s consolidated turnover.
Impact of legislation and other external
requirements
There were no changes in environmental or other legislative
requirements during the year that have significantly impacted the
results or operations of the consolidated entity.
Dividends
No dividends were paid or declared by the Company during the
financial year.
After the balance sheet date, the directors have declared a final
ordinary dividend as follows:
Cents
per share
Total amount
$’000
Franked/
unfranked
Date of
payment
2.5 1,362 100% franked 28 Sept 2007
The financial effect of this dividend has not been brought to
account in the financial statements for the year ending 30 June
2007 and will be recognised in the 2008 financial report.
State of affairs
In the opinion of the Directors, there were no significant changes in
the state of affairs of the consolidated entity during the financial year
under review.
Environmental regulations and native title
As infrastructure engineers, meeting stringent environmental and
land use regulations, including native title issues, are an important
element of our work. One of the key benefits of directional drilling is
its ability to avoid or substantially mitigate environmental impact.
Lucas is committed to identifying environmental risks and
engineering solutions to avoid, minimise or mitigate them. We work
closely with all levels of government, landholders, Aboriginal land
councils and other bodies to ensure our activities have minimal or
no effect on land use and areas of environmental, archaeological or
cultural importance.
Group policy requires all operations to be conducted in a manner
that will preserve and protect the environment.
The directors are not aware of any significant environmental
incidents, or breaches of environmental regulations during or since
the end of the year.
Events subsequent to reporting date
On 10 August 2007, the Company acquired 100% of the issued
capital of each of Jaceco Drilling Pty Limited and Geosearch Drilling
Service Pty Limited trading as a partnership known as Capricorn
Weston Drilling Group, a Queensland based drilling group, for a
purchase consideration of $21.0 million including assumption
of existing debt of $4.5 million. The consideration is payable in
instalments with $10.0 million paid at settlement and the balance
payable over three years in equal annual instalments. The initial
consideration was paid entirely out of borrowings. The financial
effects of this transaction have not been brought to account in the
2007 financial report.
Other than this matter, there has not arisen in the interval
between the end of the financial year and the date of this report any
item, transaction or event of a material or unusual nature likely, in
the opinion of the directors of the Company, to affect significantly the
operations of the Group, the results of those operations, or the state
of affairs of the Group, in future financial years.
Likely developments
The consolidated entity has successfully established itself as a
leading supplier in each of its chosen activities. The principal focus
of the Company is now on establishing a more consistent cash
flow and maintainable recurring income stream capitalising on the
consolidated entity’s premier knowledge of infrastructure assets.
Partnering with selected entities through joint ventures and alliances,
and the development and applications of innovative technology and
practices, are expected to contribute to achieving this objective.
The acquisition of Capricorn Weston Drilling Group in August
2007 will allow the consolidated entity to offer a full range of
drilling services to the coal and coal seam gas sectors. This is
expected to lead to increased utilisation of plant, improved plant
recovery rates, longer term contracts and a closer relationship with
the leading mining and energy companies.
The consolidated entity also proposes to continue its drilling
at Gloucester Basin to prove up its reserves and gain a greater
understanding of its commercial viability.
Further information about likely developments in the operations
of the consolidated entity and the expected results of those
operations in future financial years has not been included in this
report because disclosure of the information would be likely to result
in unreasonable prejudice to the consolidated entity.

22
23
Remuneration report
This report outlines the remuneration policy for directors and senior
managers of the Company.
Remuneration philosophy - audited
The key principle of the Company’s executive remuneration policy
is to set remuneration at a level that will attract and retain qualified
and experienced personnel and motivate and reward them to
achieve strategic objectives and improve business results.
Remuneration is structured to reward employees for
increasing shareholder value. This is achieved by providing a
fixed remuneration component together with short and long term
performance-based incentives.
Through creating goal congruence between directors, executives
and shareholders, it is hoped to maximise shareholder value.
AJ Lucas aims to set fixed annual remuneration at market
median levels for jobs of comparable size and responsibility using
established job evaluation methods and to provide incentives to
enable top performers to be remunerated at the upper end of the
market, subject always to the performance of the Group.
The aim of the incentive plans is to drive performance to
successfully implement annual business plans and increase
shareholder value.
The remuneration for executives and staff is reviewed annually,
using a formal performance appraisal process and market
data derived from independent surveys of people with similar
competencies and responsibilities.
Remuneration structure - audited
Remuneration packages include a mix of fixed and variable
remuneration and long term incentives.
Fixed remuneration
Fixed remuneration consists of base remuneration (which is
calculated on a total cost basis and includes any fringe benefit tax
(FBT) charges related to employee benefits including motor vehicles)
as well as employer contributions to superannuation.
Incentive based remuneration
Incentive based remuneration includes long term and short term
incentives and is designed to reward executive directors and senior
executives for meeting or exceeding their financial and personal
objectives. The short term incentive (STI) is an “at risk” bonus
provided in the form of cash and is subject to the over-riding
discretion of the senior executive team.
The long term incentive is provided as rights over ordinary share
of the Company under the rules of the Management Rights Plan, as
approved by shareholders at the November 2006 annual general
meeting. Each right entitles the holder to one ordinary share in the
Company subject to performance hurdles, where applied, being
Executive directors
Allan Campbell
Andrew Lukas
Ian Stuart-Robertson
Salary/
fees
$
Bonus
$
Short-term
Non-monetary
benefits (1)
$
Total
$
Post
employment
Other
long term
Superannuation
benefits
$ $
2007 393,883 — — 393,883 — —
2006 364,410 — — 364,410 — —
2007 254,255 — 4,440 258,695 21,345 —
2006 215,385 — 6,485 221,870 15,000 3,332
2007 252,554 — 12,138 264,692 20,271 —
2006 243,707 — 3,392 247,099 15,483 —
Non-executive directors
2007 45,000 — — 45,000 — —
Martin Green
2006 45,000 — — 45,000 — —
Julian Gregory (3) 2006 33,750 — — 33,750 — —
2007 45,000 — — 45,000 — —
Garry O’Meally
2006 45,000 — — 45,000 — —
AJ LUCAS annual report 2007
DIRECTORS’ REPORT
Executive officers
Kevin Lester
2007 268,665 111,167 968 380,800 18,620 —
General Manager Pipelines 2006 214,200 38,833 — 253,033 14,449 3,209
Tim Herlihy (4)
2007 104,415 — 20,261 124,676 10,000 —
Chief Financial Officer
2006 188,046 — 17,138 205,184 16,667 —
Ian Redfern
2007 249,327 — 5,693 255,020 12,686 —
General Manager Construction 2006 235,610 — 2,286 237,896 10,125 —
Mark Tonkin
2007 181,355 — 1,844 183,199 16,200 —
General Manager
2006 198,090 — 1,548 199,638 13,380 8,309
Brian Burden
2007 203,252 — 2,257 205,509 17,062 —
Chief Estimator
2006 181,426 — 11,194 192,620 15,290 2,733
Mark Summergreene (4) 2007 219,914 37,381 6,629 263,924 16,503 —
Chief Financial Officer
Total compensation key
management personnel
2007 2,217,620 148,548 54,230 2,420,398 132,687 —
2006 1,964,624 38,833 42,043 2,045,500 100,394 17,583

attained and the holder remaining in employment with the Group
until the rights vest. The performance hurdles are set by the Board.
The hurdles applying to the rights issued to executive directors
during the year are subject to a performance condition which
measures the Company’s Total Shareholder Return (TSR) compared
with each company in the comparator group over their three year
vesting period. There are no hurdles applying for the rights granted
to other persons other than the requirement to be in employment
with the Group at the vesting date.
Other benefits
The remuneration policy provides that directors and senior
executives may obtain loans from the Group. All such loans are
made at commercial rates and therefore do not represent a benefit
to the recipient or attract fringe benefit tax. Interest on the loans is
payable quarterly in arrears. No loan amounts have been written
down as the balances are considered fully collectible.
Service agreements - audited
All executive directors and senior executives are employed
under a standard AJ Lucas contract. The service contract outlines
the components of remuneration but does not prescribe how
remunerations levels are modified year to year. Remuneration levels
are reviewed every year to take into account cost of living changes,
any change in the scope of the role performed and any changes
required to meet the principles of the remuneration policy.
The service contracts are unlimited in term. All contracts can be
terminated without notice by the Company with compensation, if any,
payable to the employee in accordance with the law or by negotiated
agreement.
Non-executive directors - audited
The remuneration of the non-executive directors, currently each
$45,000 per annum, is determined by the Board within the
aggregate amount approved by shareholders.
In recognition that the amount of the individual fees paid to
non-executive directors is less than generally paid to persons in such
roles in comparable sized companies, the Company has in the past
periodically awarded them shares under its Deferred Share Plan. Such
shares vest from the date of issue but cannot be disposed of until
the earlier of 10 years from the date of issue or the date their service
with AJ Lucas ceases. 100,000 such shares were issued in November
2006 following approval being granted by shareholders.
Details of the nature and amount of each major element of
remuneration of each director of the Company and each of the five
named highest paid executives of the Company and Group are as per
the table set out below:
Share based
payments
Value of rights
and shares (2)
$
Total
$
Proportion of
remuneration
performance
related
%
Value of rights
and shares
as proportion of
remuneration
%
12,476 406,359 — 3.1
— 364,410 — —
7,486 287,526 — 2.6
— 240,202 — —
7,486 292,449 — 2.6
— 262,582 — —
40,500 85,500 — 47.4
— 45,000 — —
— 33,750 — —
40,500 85,500 — 47.4
— 45,000 — —
— 399,420 27.8 —
— 270,691 14.3 —
— 134,676 — —
— 221,851 — —
10,000 277,706 — 3.6
25,000 273,021 — 9.1
— 199,399 — —
— 221,327 — —
— 222,571 — —
6,192 216,835 — 2.8
— 280,427 13.3 —
118,448 2,671,533
31,192 2,194,669
Amounts disclosed for remuneration of key management
persons exclude insurance premiums of $22,884
(2006: $23,059) paid by the consolidated entity in
respect of directors’ and officers’ liability insurance
contracts which cover current and former directors
and officers of the Company and its controlled entities,
This amount has not been allocated to the individuals
covered by the insurance policy as the directors believe
that no reasonable basis for such allocation exists.
(1) Non-monetary benefits comprise benefits subject to
FBT.
(2) The fair value of the rights has been calculated
using a Black-Scholes pricing model and allocated
to each reporting period evenly over the period from
grant date to vesting date. The value disclosed is the
portion of the fair value of the rights allocated to this
reporting period.
The following factors and assumptions were used in
determining the fair value of rights issued during the
year on grant date:
Grant date Nov 2006
Expiry date Nov 2009
Share price on grant date $1.08
Exercise price $1.10
Volatility 44%
Risk free interest rate 5.7%
Dividend yield 4.8%
Fair value per right $0.25
100,000 shares were issued under the Deferred
Share Plan during the year and were also valued
using a Black-Scholes pricing model.
(3) Mr Gregory resigned as a director on 31 March
2006.
(4) Mr Herlihy resigned on 31 December 2006.
Mr Summergreene was appointed Chief Financial
Officer in his place from 1 January 2007.

24
25
Rights over equity instruments granted as compensation - audited
Details on rights granted to each key management person that vested during the reporting period are as follows:
Number of rights
vested
during 2007
Fair value
per rights at
grant date
$
Exercise price
per rights
$ Expiry date
Grant date
Executives
I Redfern June 2005 25,000 1.20 — May 2009
During the financial year, 550,000 options over unissued ordinary shares in the Company were issued to the executive directors as
approved by shareholders at the 2006 Annual General Meeting. These options do not vest until November 2009 being three years after
their date of issue. No rights have been issued since the end of the financial year.
Exercise of rights granted as compensation
During the reporting period, the following shares were issued on the exercise of rights previously granted as compensation to key
management persons:
Number
of shares
2007 2006
Amount paid Number
$/share of shares
Amount paid
$/share
Directors
AS Campbell 83,333 — — —
AJ Lukas 83,333 — — —
Executives
TW Herlihy — — 100,000 —
MP Tonkin — — 120,000 —
There are no amounts unpaid on the shares issued as a result of the exercise of the rights.
Analysis of share-based payments granted as remuneration - unaudited
Details of the vesting profile of the rights granted as remuneration to each director of the Company and each of the five named executives is
detailed below:
Rights granted
Financial years
Value yet to vest
Vested Forfeited in in which
Number Date in year year 1 grant vests Min 2 Max 3
Directors % % $ $
AS Campbell 250,000 27 Dec 02 — 66.7 A — —
250,000 24 Nov 06 — — B — 215,000
AJ Lukas 250,000 27 Dec 04 — 66.7 A — —
150,000 24 Nov 06 — — B — 129,000
I Stuart-Robertson 150,000 24 Nov 06 — — B — 129,000
Company and consolidated entity executives
K Lester 60,000 27 May 04 — — C — —
I Redfern 75,000 27 Jun 05 33.3 — A — —
B Burden 20,000 27 May 04 — — D — —
A Options vest in three equal tranches over 2005, 2006 and 2007
B Options vest in 2009
C Options vest in 2005
D Options vest in two equal tranches over 2005 and 2006
AJ LUCAS annual report 2007
DIRECTORS’ REPORT
(1) The % forfeited in the year represents the reduction from the maximum number of rights available to vest due to the performance
hurdle not being achieved.
(2) The minimum value of rights yet to vest is $nil as the performance criteria may not be met and consequently the right may not vest.
(3) The maximum value of rights yet to vest is not determinable as it depends on the market price of shares of AJ Lucas Group on the ASX
on the date the right is exercised. The maximum values presented above are based on the closing share price at 30 June 2007 of $1.96
less the exercise price.

Analysis of movements in rights - unaudited
The movement during the reporting period by value, of rights over
ordinary shares of the Company held by each Company director and
each of the named executives is detailed below:
(i)
Granted
in year
$
(ii)
Value of rights
exercised in year
$
Total rights
value in year
$
AS Campbell 12,476 95,833 108,309
AJ Lucas 7,486 95,833 103,319
I Stuart-Robertson 7,486 — 7,486
27,448 191,666 219,114
(i) The value of rights is their fair value calculated at grant date
using a Black-Scholes pricing model. This amount is allocated to
remuneration over the vesting period.
(ii) The value of the rights is calculated as the market price of the
Company’s shares on the Australian Stock Exchange as at close
of trading on the date the rights were exercised after deducting
the price paid to exercise the rights.
Other Disclosures
Unissued shares under rights
At the date of this report, unissued shares of the Company under
rights are:
Expiry date Exercise price Number of shares
28 May 2009 — 498,333
26 November 2011 $1.10 550,000
All rights expire on the earlier of their expiry date or termination
of the employee’s employment or cessation of the officer’s service.
14,000 rights were cancelled during the financial year because of the
cessation of the employees’ employment.
The rights do not entitle the holders to participate in any share issue
of the Company.
Shares issued on exercise of rights
During or since the end of the financial year, the Company issued
ordinary shares as result of the exercise of rights:
Amount paid
Number of shares
on each share
343,666 $Nil
There were no amounts unpaid on the shares issued.
Directors’ shareholdings and other interests
The relevant interest of each director and their director-related
entities in the shares and rights over shares issued by the Company,
as notified by the directors to the Australian Stock Exchange in
accordance with Section 205G(1) of the Corporations Act 2001, at
the date of this report are:
Rights issued under
Management
Ordinary Shares Rights Plan
Allan Campbell 10,140,083 250,000
Andrew Lukas 6,204,833 150,000
Ian Stuart-Robertson 1,386,750 150,000
Martin Green 125,000 —
Garry O’Meally 209,180 —
Indemnification and insurance
of officers and auditors
Indemnification
The Company has agreed to indemnify all directors and officers of
the Company against all liabilities including expenses to another
person or entity (other than the Company or a related body
corporate) that may arise from their position as directors or officers
of the Group, except where the liability arises out of conduct
involving a lack of good faith.
No indemnity has been provided to the auditors of the Company.
Insurance premiums
Since the end of the previous financial year, the Company has paid
premiums in respect of Directors’ and Officers’ liability and legal
expenses insurance contracts for the year ended 30 June 2007 and,
since the end of the financial year, the Company has paid or agreed
to pay premiums in respect of Directors’ and Officers’ insurance for
the year ending 30 June 2008.
Non-audit services
The Board has considered the non-audit services provided during the
year by the auditor and in accordance with written advice provided
by resolution of the audit committee, is satisfied that the provision
of those non-audit services during the year by the auditor is
compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001.
Payments to the auditor of the Company, KPMG, and its related
practices for non-audit services provided during the year, as set
out in note 5 in the notes to the financial statements, amounted to
$92,939 (2006: $113,634).
Lead auditor’s independence declaration
The Lead auditor’s independence declaration is set out on this page
and forms part of the directors’ report for financial year ended 30
June 2007.
Rounding off
The Company is of a kind referred to in ASIC 98/100 dated 10
July 1998 and, in accordance with that Class Order, amounts in
the directors’ report and the financial report are rounded off to the
nearest thousand dollars, unless otherwise stated.
Signed in accordance with a resolution of the directors pursuant to
s.298 (2) of the Corporations Act 2001.
Allan Campbell, Director
Dated at Sydney, this 27th day of September 2007.
Lead auditor’s independence declaration
under Section 307C of the Corporations Act 2001
To the directors of AJ Lucas Group Limited
I declare that, to the best of my knowledge and belief, in relation to
the audit for the financial year ended 30 June 2007 there have been:
• no contraventions of the auditor independence requirements as
set out in the Corporations Act 2001 in relation to the audit;
and
• no contraventions of any applicable code of professional conduct
in relation to the audit.
KPMG
Malcolm Kafer
Partner
Sydney,
27 September 2007
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member firms affiliated with KPMG International, a Swiss cooperative.

26
27
AJ Lucas Group Limited
and its controlled entities
INCOME STATEMENTS
for the year ended 30 june 2007
The income statements are to be read in conjunction with the
notes to the financial statements set out on pages 30 to 57.
Consolidated
Company
Note
2007 2006 2007 2006
$’000 $’000 $’000 $’000
Revenue 2 216,369 171,232 — —
Total revenue 216,369 171,232 — —
—
Sub-contractor costs (75,272) (69,049) — —
Material costs (65,779) (49,296) — —
Plant and other construction costs (16,380) (12,843) — —
Employee expenses (34,707) (24,509) — —
Depreciation and amortisation expenses 4 (8,966) (5,305) — —
Debt recovery and legal costs (3,615) (577) — —
Impairment of receivables 4 (143) (215) — —
Impairment of plant and equipment 4 (500) (1,003) — —
Impairment of intangible assets 4 (2,779) — (1,786) —
Profit on acquisition of business 30 2,723 — — —
Other expenses (5,010) (5,321) (620) (187)
Results from operating activities 5,941 3,114 (2,406) (187)
Financial income 3 781 172 386 140
Financial expenses 3 (2,544) (1,966) (1,055) (1,732)
Net financing costs 3 (1,763) (1,794) (669) (1,592)
Profit/(loss) before income tax 4,178 1,320 (3,075) (1,779)
Income tax benefit 6 2,218 1,710 1,866 297
Profit/(loss) attributable to equity holders of the company 22 6,396 3,030 (1,209) (1,482)
Earnings per share:
Basic earnings per share (cents) 7 11.9 5.9
Diluted earnings per share (cents) 7 11.8 5.7
AJ LUCAS annual report 2007
FINANCIAL STATEMENTS

statements of RECOGNISED INCOME AND EXPENSE
for the year ended 30 june 2007
The statements of recognised income and expense are to be read in conjunction
with the notes to the financial statements set out on pages 30 to 57.
Consolidated
Company
Note
2007 2006 2007 2006
$’000 $’000 $’000 $’000
Exchange differences on translation of foreign operations 22 306 — — —
Income and expense recognised directly in equity 306 — — —
Profit/(loss) for the year 22 6,396 3,030 (1,209) (1,482)
Total recognised income and expense for the year 22 6,702 3,030 (1,209) (1,482)

28
AJ Lucas Group Limited
and its controlled entities
29
Balance Sheets
As at 30 june 2007
The balance sheets are to be read in conjunction with the notes
to the financial statements set out on pages 30 to 57.
Note
Consolidated
2007
$’000
2006
$’000
2007
$’000
Company
2006
$’000
Current assets
Cash and cash equivalents 8 18,222 5,889 13,512 53
Trade and other receivables 9 28,261 20,380 4,189 2,612
Construction work in progress 10 53,418 25,570 — —
Assets classified as held for sale 11 — 1,828 — —
Other 12 435 509 — 204
Total current assets 100,336 54,176 17,701 2,869
Non-current assets
Trade and other receivables 9 — — 31,795 38,202
Intangible assets 13 7,851 7,747 2,061 3,847
Plant and equipment 14 30,921 21,110 — —
Deferred tax assets 15 5,602 4,603 10,126 5,204
Investments 16 63 57 1,260 1,260
Exploration assets 6,175 3,819 — —
Total non-current assets 50,612 37,336 45,242 48,513
Total assets 150,948 91,512 62,943 51,382
Current liabilities
Trade and other payables 17 66,319 40,190 84 739
Interest-bearing loans and borrowings 18 10,706 6,989 — 3,381
Income tax payable 19 75 — — —
Provisions 20 2,702 1,705 — —
Total current liabilities 79,802 48,884 84 4,120
AJ LUCAS annual report 2007
FINANCIAL STATEMENTS
Non-current liabilities
Payables 17 — — 16,217 15,176
Interest-bearing loans and borrowings 18 37,181 16,802 24,188 9,923
Provisions 20 3,527 3,590 — —
Total non-current liabilities 40,708 20,392 40,405 25,099
Total liabilities 120,510 69,276 40,489 29,219
Net assets 30,438 22,236 22,454 22,163
Equity
Issued capital 22 30,736 29,236 30,736 29,236
Reserves 22 1,010 704 — —
Accumulated losses 22 (1,308) (7,704) (8,282) (7,073)
Total equity 22 30,438 22,236 22,454 22,163

statements of cash flows
for the year ended 30 june 2007
The statements of cash flows are to be read in conjunction with
the notes to the financial statements set out on pages 30 to 57.
Note
Consolidated
2007
$’000
2006
$’000
2007
$’000
Company
2006
$’000
Cash flows from operating activities
Cash receipts from customers 200,553 162,259 — —
Cash payments to suppliers and employees (187,970) (143,718) (100) (226)
Cash generated from operations 12,583 18,541 (100) (226)
Interest received 60 32 — —
Income taxes paid (497) (964) — —
Interest and other costs of finance paid (2,544) (1,888) (1,172) (1,063)
Net cash from operating activities 29(b) 9,602 15,721 (1,272) (1,289)
Cash flows from investing activities
Proceeds from sale of plant and equipment 457 1,697 — —
Loans to controlled entities — — — (950)
Repayment of loans by controlled entities — — 5,532 —
Payments for plant and equipment (5,953) (10,434) — —
Exploration and evaluation expenditure (2,676) (852) — —
Loans to related entity (1,608) (2,560) (1,608) (2,560)
Repayment of loan from related entity — 88 — 88
Acquisition of subsidiary net of cash acquired (3,198) (37) — —
Net cash from investing activities (12,978) (12,098) 3,924 (3,422)
Cash flows from financing activities
Proceeds of borrowings 4,004 — — —
Repayment of borrowings (147) (489) — —
Proceeds from issue of convertible notes 24,188 — 24,188 —
Repayment of convertible notes (10,000) — (10,000) —
Payment of finance lease liabilities (3,521) (2,217) — —
Net cash from financing activities 14,524 (2,706) 14,188 —
Net increase/(decrease) in cash and cash equivalents 11,148 917 16,840 (4,711)
Cash and cash equivalents at beginning of the year 1,411 494 (3,328) 1,383
Cash and cash equivalents at end of the year 29(a) 12,559 1,411 13,512 (3,328)

30
31
Notes to the
financial statements
Note Page Content
1 30 Significant accounting policies
2 36 Segment reporting
3 37 Net financing costs
4 37 Other expenses
5 37 Auditor’s remuneration
6 38 Income tax
7 38 Earnings per share
8 39 Cash and cash equivalents
9 39 Trade and other receivables
10 39 Construction work in progress
11 39 Non-current assets held for sale
12 39 Other current assets
13 40 Intangible assets
14 41 Plant and equipment
15 42 Deferred tax assets and liabilities
16 43 Investments
17 43 Trade and other payables
18 44 Interest-bearing loans and borrowings
19 45 Current tax liabilities
20 46 Provisions
21 46 Employee benefits
22 48 Capital and reserves
23 49 Financial instruments
24 51 Interests in joint ventures
25 51 Change in accounting policy
26 52 Contingencies
27 52 Consolidated entities
28 53 Operating leases
29 53 Reconciliation of cash flows from operating activities
30 54 Acquisition of subsidiary
31 54 Key management personnel disclosures
32 57 Non-key management and personnel disclosures
33 57 Events subsequent to balance date
Statement of compliance
The financial report is a general purpose financial report which has
been prepared in accordance with Australian Accounting Standards
(‘AASBs’) adopted by the Australian Accounting Standards Board
(‘AASB’) and the Corporations Act 2001.
The consolidated financial report of the consolidated entity
also complies with the IFRSs and interpretations adopted by the
International Accounting Standards Board. The Company’s financial
report does not comply with IFRSs as the Company has elected to
apply the relief provided to parent entities by AASB 132 Financial
Instruments: Presentation and Disclosure in respect of certain
disclosure requirements.
The financial statements were approved by the Board of Directors
on 27 September 2007.
Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis.
Functional and presentation currency
The financial report is presented in Australian dollars which is the
Company’s functional currency and the functional currency of the
majority of the consolidated entity. The Company is of a kind referred
to in ASIC Class Order 98/100 dated 10 July 1998 (updated by CO
05/641 effective 28 July 2005 and CO 06/51 effective 31 January
2006) and in accordance with that Class Order, amounts in the
financial report and commentary on results have been rounded off
to the nearest thousand dollars, unless otherwise stated.
AJ LUCAS annual report 2007
notes to the financial statements
1. SIGNIFICANT ACCOUNTING POLICIES
AJ Lucas Group Limited (the ‘Company’) is a company domiciled
in Australia. The address of the Company’s registered office is 157
Church Street Ryde, NSW 2112. The consolidated financial report of
the Company for the financial year ended 30 June 2007 comprises
the Company and its subsidiaries (together referred to as the
‘consolidated entity’) and the consolidated entity’s interest in jointly
controlled entities.
The accounting policies set out below have been applied
consistently to all periods presented in the consolidated financial
statements, and have been applied consistently by all entities in the
consolidated entity.
Use of estimates and judgments
The preparation of financial statements requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amount of assets,
liabilities, income and expenses. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of estimation
uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amount recognised in the
financial statements are described in the following notes:
• Note 10 – construction work in progress
• Note 13 – intangible assets
• Note 20 – provisions
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the consolidated entity. Control
exits when the Company has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities. In assessing control, potential
voting rights that presently are exercisable or convertible are taken
into account. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control
commences until the date that control ceases.

Joint ventures
Joint ventures are those entities over whose activities the
consolidated entity has joint control, established by contractual
agreement.
Jointly controlled operations and assets: The interest of
the Company and of the consolidated entity in joint venture entities,
unincorporated joint ventures and jointly controlled assets are
brought to account by recognising in its financial statements the
consolidated entity’s share of assets, liabilities, expenses and income
that it earns from the sale of goods or services by the joint venture.
The Company and consolidated entity has chosen to early adopt
AASB 2007-4: Amendments to Australian Accounting Standards
arising from ED 151 and Other Amendments. The effect of this
early adoption is outlined in Note 25.
Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and losses or income
and expenses arising from intragroup transactions, are eliminated in
preparing the consolidated financial statements.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective
functional currencies of the consolidated entity’s entities at exchange
rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the foreign exchange rate at
that date. The foreign currency gain or loss on monetary items is the
difference between amortised cost in the functional currency at the
beginning of the period, adjusted for effective interest and payments
during the period, and the amortised cost in foreign currency
translated at the exchange rate at the end of the period. Nonmonetary
assets and liabilities denominated in foreign currencies
that are measured at fair value are retranslated to the functional
currency at the exchange rate at the date that the fair value was
determined. Foreign currency differences arising on retranslation are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated to
Australian dollars at exchange rates at the reporting date. The
income and expenses of foreign operations, are translated to
Australian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised directly in equity.
Since 1 July 2004, the Consolidated entity’s date of transition to
AASBs, such differences have been recognised in the foreign currency
translation reserve (FCTR). When a foreign operation is disposed of,
in part or in full, the relevant amount in the FCTR is transferred to
profit or loss.
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, loans and borrowings, and
trade and other payables.
Non-derivative financial instruments are recognised initially at
fair value plus, for instruments not at fair value through profit or
loss, any directly attributable transaction costs. Subsequent to initial
recognition, non-derivative financial instruments are measured as
described below.
A financial instrument is recognised if the consolidated entity
becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the consolidated entity’s
contractual rights to the cash flows from the financial assets expire
or if the consolidated entity transfers the financial asset to another
party without retaining control or substantially all risks and rewards
of the asset. Regular way purchases and sales of financial assets are
accounted for at trade date, i.e., the date that the consolidated entity
commits itself to purchase or sell the asset. Financial liabilities are
derecognised if the consolidated entity’s obligations specified in the
contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and form
an integral part of the consolidated entity’s cash management are
included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.
Non-derivative financial instruments are measured at amortised
cost using the effective interest method, less any impairment losses.
Compound financial instruments
Compound financial instruments issued by the consolidated entity
comprise convertible notes that can be converted to share capital at
the option of the holder, and the number of shares to be issued does
not vary with changes in their fair value.
The liability component of a compound financial instrument is
recognised initially at the fair value of a similar liability that does
not have an equity conversion option. The equity component is
recognised initially at the difference between the fair value of the
compound financial instrument as a whole and the fair value of the
liability component. Any directly attributable transaction costs are
allocated to the liability and equity components in proportion to
their initial carrying amounts.
Subsequent to initial recognition, the liability component of a
compound financial instruments is measured at amortised cost
using the effective interest method, unless it is designated at fair
value through profit or loss. The equity component of a compound
financial instruments is not remeasured subsequent to initial
recognition.
Share capital
Ordinary shares: Incremental costs directly attributable to issue
of ordinary shares and share options are recognised as a deduction
from equity, net of any related income tax benefit.
Dividends: Dividends are recognised as a liability in the period in
which they are declared.
Leased assets
Leases in terms of which the consolidated entity assumes
substantially all the risks and rewards of ownership are classified
as finance leases. Upon initial recognition, the leased asset is
measured at an amount equal to the lower of its fair value and
the present value of the minimum lease payments. Subsequent to
initial recognition, the asset is accounted for in accordance with the
accounting policy applicable to that asset.
Other leases are operating leases and the leased assets are not
recognised on the consolidated entity’s balance sheet.
The consolidated entity adopted Interpretation 4 Determining
whether an Arrangement Contains a Lease, which is mandatory for
annual periods beginning on or after 1 January 2006, in its 2006
consolidated financial statements.
Revenue
Services rendered
Revenue from services rendered is recognised in the income
statement in proportion to the stage of completion of the transaction
at the balance sheet date. The stage of completion is assessed by
reference to surveys of work performed. No revenue is recognised
if there are significant uncertainties regarding recovery of the
consideration due or if the costs incurred or to be incurred cannot be
measured reliably.
Construction contracts
As soon as the outcome of a construction contract can be estimated
reliably, contract revenue and expenses are recognised in the income
statement in proportion to the stage of completion of the contact.

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AJ LUCAS annual report 2007
notes to the financial statements
Contract revenue includes the initial amount agreed in the contract
plus any variations in contract work, claims and incentive payments
to the extent that it is probable that they will result in revenue and
can be measured reliably.
The stage of completion is assessed by reference to surveys
of work performed. When the outcome of a construction contract
cannot be estimated reliably, contract revenue is recognised only to
the extent of contract costs incurred that are likely to be recoverable.
An expected loss on a contract is recognised immediately in the
income statement.
Cost plus contracts: Revenue and expenses arising from cost
plus contracts are recognised in the income statement by reference
to the stage of completion of the contract when the following
conditions are satisfied:
• it is probable that the economic benefits arising from the
contract will flow to the consolidated entity; and
• costs related to the contract, whether or not specifically
reimbursable, can be clearly identified and measured reliably.
Stage of completion: Stage of completion is measured by
reference to an assessment of total labour hours and other costs
incurred to date as a percentage of estimated total costs for each
contract, unless an alternative measurement method provides a
more accurate indication of the stage of completion.
Asset sales
The net proceeds of asset sales are recognised at the date an
unconditional contract of sale is signed.
The gain or loss on disposal is calculated as the difference
between the carrying amount of the asset at the time of disposal and
the net proceeds on disposal and is recognised in other income.
Lease payments
Payments made under operating leases are recognised in the income
statement on a straight-line basis over the term of the lease.
Minimum lease payments made under finance leases are
apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period
during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
Finance income and expenses
Finance income comprises interest income on funds invested and
foreign currency gains that are recognised in the income statement.
Interest income is recognised as it accrues, using the effective
interest method.
Finance expenses comprise interest expense on borrowings,
unwinding of the discount on provisions, foreign currency losses and
impairment losses recognised on financial assets that are recognised
in the income statement. All borrowing costs are recognised in the
income statement using the effective interest method.
Income tax
Income tax in the income statement comprises current and deferred
tax. Income tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantially enacted at the
balance sheet date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided using the balance sheet liability method,
providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of goodwill
and other assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable
future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will
be realised.
Additional income taxes that arise from the distribution of
dividends are recognised at the same time as the liability to pay the
related dividend is recognised.
Tax consolidation
The Company and its wholly-owned Australian resident entities have
formed a tax-consolidated group and are therefore taxed as a single
entity. The head entity within the tax-consolidated group is AJ Lucas
Group Limited.
Current tax expense/income, deferred tax liabilities and deferred
tax assets arising from temporary differences of the members of
the tax-consolidated group are recognised in the separate financial
statements of the members of the tax-consolidated group using the
group allocation approach.
Any current tax liabilities (or assets) and deferred tax assets
arising from unused tax losses of the subsidiaries is assumed by the
head entity in the tax-consolidated group and are recognised by the
Company as amounts payable/(receivable) to/(from) other entities
in the tax-consolidated group in conjunction with any tax funding
arrangement amounts (refer below). Any difference between these
amounts is recognised by the Company as an equity contribution or
distribution.
The Company recognises deferred tax assets arising from unused
tax losses of the tax-consolidated group to the extent that it is
probable that future taxable profits of the tax-consolidated group will
be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising
from unused tax losses as a result of revised assessments of the
probability of recoverability is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing
arrangements
The head entity, in conjunction with other members of the taxconsolidated
group, has entered into a tax funding arrangement
which sets out the funding obligations of members of the taxconsolidated
group in respect of tax amounts.
The tax funding arrangements require payments to/from the head
entity equal to the current tax liability/(asset) assumed by the head
entity and any tax-loss deferred tax asset assumed by the head entity,
resulting in the head entity recognising an inter-entity receivable/
(payable) equal in amount to the tax liability/(asset) assumed. The
inter-entity receivable/(payable) are at call.
Contributions to fund the current tax liabilities are payable as
per the tax funding arrangement and reflect the timing of the head
entity’s obligation to make payments for tax liabilities to the relevant
tax authorities.
The head entity in conjunction with other members of the taxconsolidated
group, has also entered into a tax sharing agreement.
The tax sharing agreement provides for the determination of the
allocation of income tax liabilities between the entities should the
head entity default on its tax payment obligations. No amounts
have been recognised in the financial statements in respect of
this agreement as payment of any amounts under the tax sharing
agreement is considered remote.

Earnings per share
The consolidated entity presents basic and diluted earnings per
share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of
the Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders and
the weighted average number of ordinary shares outstanding for
the effects of all dilutive potential ordinary shares, which comprise
convertible notes and share options granted to employees.
Segment reporting
A segment is a distinguishable component of the consolidated entity
that is engaged either in providing related products or services
(business segment), or in providing products or services within a
particular economic environment (geographical segment), which is
subject to risks and rewards that are different from those of other
segments. The consolidated entity’s primary format for segment
reporting is based on business segments.
Construction work in progress
Construction work in progress represents the gross unbilled amount
expected to be collected from customers for contract work performed
to date. It is measured at cost plus profit recognised to date less
progress billings and recognised losses. Cost includes all expenditure
related directly to specific projects and an allocation of fixed and
variable overheads incurred in the consolidated entity’s contract
activities based on normal operating capacity.
If payments received from customers exceed the income
recognised, then the difference is presented as deferred income in
the balance sheet.
Investments
Investments in controlled entities are carried at cost. Cost includes
the purchase price of the entity as well as directly attributable
costs associated with the acquisition. Directly attributable costs are
capitalised only once there is written agreement to acquire the entity.
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses. The cost of
property, plant and equipment at 1 July 2004, the date of transition
to AASBs, was determined by reference to its carrying value at that
date.
Cost includes expenditures that are directly attributable to
the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials, direct labour, the initial estimate,
where relevant, of the costs of dismantling and removing the items
and restoring the site on which they are located, an appropriate
proportion of production overheads and any other costs directly
attributable to bringing the asset to a working condition for its
intended use. Purchased software that is integral to the functionality
of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
Leased assets
Leases in terms of which the consolidated entity assumes
substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are stated at an amount equal
to the lower of fair value and the present value of minimum lease
payments at inception of the lease, less accumulated depreciation
and impairment losses.
Sale of non-current assets
The net gain or loss on disposal is included in the income statement
at the date control of the asset passes to the buyer, usually when an
unconditional contract for sale is signed.
The gain or loss on disposal is calculated as the difference
between the carrying amount of the asset at the time of disposal and
the net proceeds on disposal (including incidental costs).
Subsequent costs
The cost of replacing part of an item of property, plant and
equipment is recognised in the carrying amount of the item if it is
probable that the future economic benefits embodied within the part
will flow to the consolidated entity and its cost can be measured
reliably. The costs of the day-to-day servicing of property, plant and
equipment are recognised in profit or loss as incurred.
Depreciation
Depreciation is charged to the income statement on a straight-line
basis over the estimated useful lives of each part of an item of plant
and equipment commencing from the time the asset is ready for use.
The estimated useful lives in the current and comparative periods
are as follows:
Plant and equipment
Years
Plant and equipment 4-10
Motor vehicles 7
Office equipment 4-8
Computer equipment 4
Leased plant and equipment 4-10
The residual value, the useful life and the depreciation method
applied to an asset are reassessed at least annually.
Depreciation methods, useful lives and residual values are
reassessed at the reporting date.
Intangible assets
Goodwill
Goodwill and negative goodwill arise on the acquisition of
subsidiaries and joint ventures.
Acquisitions: Goodwill represents the excess of the cost of the
acquisition over the consolidated entity’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities of
the acquiree. When the excess is negative (negative goodwill), it is
recognised immediately in the income statement.
Subsequent measurement: Following initial recognition,
goodwill stated at cost less any accumulated impairment losses.
Research and Development
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in the income statement as an expense as incurred.
Expenditure on development activities, whereby research
findings are applied to a plan or design for the production of new
or substantially improved products and processes, is capitalised
if the product or process is technically and commercially feasible
and the consolidated entity has sufficient resources to complete
development. The expenditure capitalised includes the cost of
materials, direct labour and an appropriate proportion of overheads.
Other development expenditure is recognised in the income
statement as an expense as incurred.
Capitalised development expenditure is stated at cost less
accumulated amortisation and impairment losses.

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AJ LUCAS annual report 2007
notes to the financial statements
Customer relationships
Customer relationship intangibles that are acquired by the
consolidated entity that have finite lives are measured at cost less
accumulated amortisation and impairment losses.
Other intangible assets
Other intangible assets that are acquired by the consolidated entity are
stated at cost less accumulated amortisation and impairment losses.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other
expenditure is recognised in the income statement as incurred.
Amortisation
Amortisation is charged to the income statement on a systematic
basis over the estimated useful lives of intangible assets unless such
lives are indefinite. Goodwill and intangible assets with an indefinite
useful life are systematically tested for impairment at each balance
sheet date. Other intangible assets are amortised from the date they
are available for use. The estimated useful lives in the current and
comparative periods are as follows:
Years
Development costs 5
Customer intangibles 5
Exploration and evaluation assets
Exploration and evaluation costs, including the costs of acquiring
licences, are capitalised as exploration and evaluation assets on an
area of interest basis. Costs incurred before the consolidated entity
has obtained legal rights to explore an area are recognised in the
income statement.
Exploration and evaluation assets are only recognised if the rights
of the area of interest are current and either:
(i) the expenditures are expected to be recouped through successful
development and exploitation of the area of interest; or
(ii) activities in the area of interest have not at the reporting date,
reached a stage which permits a reasonable assessment of the
existence or otherwise of economically recoverable reserves and
active and significant operations in, or in relation to, the area of
interest are continuing.
Exploration and evaluation assets are assessed for impairment if:
(i) sufficient data exists to determine technical feasibility and
commercial viability; and
(ii) facts and circumstances suggest that the carrying amount
exceeds the recoverable amount. For the purposes of impairment
testing, exploration and evaluation assets are allocated to cashgenerating
units to which the exploration activity relates. The
cash generating unit shall not be larger than the area of interest.
Once the technical feasibility and commercial viability of
the extraction of mineral resources in an area of interest are
demonstrable, exploration and evaluation assets attributable to that
area of interest are first tested for impairment and then reclassified
from intangible assets to mining property and development assets
within plant and equipment.
When the area of interest enters the development phase, the
accumulated exploration and evaluation is transferred to gas assets
in development.
Gas assets
Assets in development
When the technical and commercial feasibility of an underdeveloped
gas field in an area of interest has been demonstrated, the field
enters the development phase. The costs of the area of interest
field assets in the development phase are separately accounted
for as assets and include past exploration and evaluation costs,
development drilling and other surface and subsurface expenditure,
surface plant and equipment and any associated land and buildings.
When commercial operations commences, the accumulated costs
are transferred to gas producing assets.
Producing assets
The costs of gas assets in production are separately accounted for
as assets and include past exploration and evaluation costs, preproduction
development costs and ongoing costs of continuing to
develop resources for production and to expand or replace plant and
equipment and any associated land and buildings. These costs will
be subject to depreciation and depletion and also tested annually for
impairment.
Impairment
Financial assets
A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the
estimated future cash flows of that asset.
Individually significant financial assets are tested for impairment
on a individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the income statement. An
impairment loss is reversed if the reversal can be related objectively
to an event occurring after the impairment loss was recognised that
changes those factors that led to the loss.
Non-financial assets
The carrying amounts of the consolidated entity’s non-financial
assets, other than construction work in progress and deferred tax
assets, are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists;
then the asset’s recoverable amount is estimated. For goodwill
and intangible assets that have indefinite lives or that are not yet
available for use, recoverable amount is estimated at each reporting
date.
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its recoverable amount.
A cash-generating unit is the smallest identifiable asset group that
generates cash flows that largely are independent from other assets
and groups. Impairment losses are recognised in profit or loss.
Impairment losses recognised in respect of cash-generating units
are allocated first to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying amount of the
other assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and
the risks specific to the asset.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior periods
are assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
Non-current assets held for sale
Non-current assets (or disposal groups comprising assets and
liabilities) that are expected to be recovered primarily through sale
rather than through continuing use are classified as held for sale.
Immediately before classification as held for sale, the assets (or
components of a disposal group) are remeasured in accordance with
the consolidated entity’s accounting policies. Thereafter generally
the assets (or disposal group) are measured at the lower of their

carrying amount and fair value less cost to sell. Any impairment
loss on a disposal group first is allocated to goodwill, and then
to remaining assets and liabilities on pro rata basis, except that
no loss is allocated to inventories, financial assets and deferred
tax assets which continue to be measured in accordance with the
consolidated entity’s accounting policies. Impairment losses on
initial classification as held for sale and subsequent gains or losses
on re-measurement are recognised in the income statement. Gains
are not recognised in excess of any cumulative impairment loss.
Employee benefits
Defined contribution superannuation funds
Obligations for contributions to defined contribution superannuation
funds are recognised as an expense in profit or loss when they are due.
Other long-term employee benefits
The consolidated entity’s net obligation in respect of long-term
employee benefits is the amount of future benefit that employees
have earned in return for their service in the current and prior
periods plus related on costs; that benefit is discounted to determine
its present value. The discount rate is the yield at the reporting date
on AA credit-rated bonds that have maturity dates approximating
the terms of the consolidated entity’s obligations. The calculation is
performed using the projected unit credit method.
For a number of employees, the consolidated entity is required to
remit 5% of eligible wages to a third party in accordance with the Coal
Mining Industry (Long Service Leave) Payroll Collection Levy Act 1992.
Short-term benefits
Liabilities for employee benefits for wages, salaries, annual
leave and sick leave represent present obligations resulting from
employees’ services provided to reporting date and are calculated
at undiscounted amounts based on remuneration wage and salary
rates that the consolidated entity expects to pay as at reporting
date including related on-costs, such as workers compensation
insurance and payroll tax. Non-accumulating non-monetary benefits,
such as medical care, housing, cars and free or subsidised goods
and services, are expensed based on the net marginal cost to the
consolidated entity as the benefits are taken by the employees.
Share-based payment transactions
The grant date fair value of options granted to employees is recognised
as an employee expense, with a corresponding increase in equity, over
the period in which the employees become unconditionally entitled
to the options. The amount recognised is adjusted to reflect the actual
number of share options that vest, except for those that fail to vest
due to market conditions not being met.
The fair value of the amount payable to employees in respect of
share appreciation rights, which are settled in cash, is recognised
as an expense, with a corresponding increase in liabilities, over the
period in which the employees become unconditionally entitled to
payment. The liability is re-measured at each reporting date and
at settlement date. Any changes in the fair value of the liability are
recognised as personnel expense in profit or loss.
Provisions
A provision is recognised if, as a result of a past event, the
consolidated entity has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions
are determined by discounting the expected future cash flows at
a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability.
Goods and services tax
Revenue, expenses and assets are recognised net of the amount
of goods and services tax (GST), except where the amount of
GST incurred is not recoverable from the taxation authority. In
these circumstances, the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or payable to, the
ATO is included as a current asset or liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross
basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the
ATO are classified as operating cash flows.
New standards and interpretations
not yet adopted
The following standards, amendments to standards and
interpretations have been identified as those which may impact the
entity in the period of initial application. They are available for early
adoption at 30 June 2007, but have not been applied in preparing
this financial report:
• AASB 7 Financial Instruments: Disclosures (August 2005)
replaces the presentation requirements of financial instruments
in AASB 132. AASB 7 is applicable for annual reporting periods
beginning on or after 1 January 2007, and will require extensive
additional disclosures with respect to the consolidated entity’s
financial instruments and share capital. The potential impact on
the consolidated entity has not yet been determined.
• AASB 2005-10 Amendments to Australian Accounting Standards
(September 2005) makes consequential amendments to AASB
132 Financial Instruments: Disclosure and Presentation, AASB
101 Presentation of Financial Statements, AASB 114 Segment
Reporting, AASB 117 Leases, AASB 133 Earnings Per Share,
AASB 139 Financial Instruments: Recognition and Measurement,
AASB 1 First time Adoption of Australian Equivalents to
International Financial Reporting Standards, AASB 4 Insurance
Contracts, AASB 1023 General Insurance Contracts and AASB
1038 Life Insurance Contracts arising from the release of AASB
7. AASB 2005-10 is applicable for annual reporting periods
beginning on or after 1 January 2007 and is expected to only
impact disclosures contained within the consolidated financial
report.
• AASB 8 Operating Segments replaces the presentation
requirements of segment reporting in AASB 114 Segment
Reporting. AASB 8 is applicable for annual reporting periods
beginning on or after 1 January 2009 and is not expected to
have an impact on the financial results of the Company and
the consolidated entity as the standard is only concerned with
disclosures.
• AASB 2007-3 Amendments to Australian Accounting Standards
arising from AASB 8 makes amendments to AASB 5 Non-current
Assets Held for Sale and Discontinued Operations, AASB 6
Exploration for and Evaluation of Mineral Resources, AASB
102 Inventories, AASB 107 Cash Flow Statements, AASB 119
Employee Benefits, AASB 127 Consolidated and Separate
Financial Statements, AASB 134 Interim Financial Reporting,
AASB 136 Impairment Assets, AASB 1023 General Insurance
Contracts and AASB 1038 Life Insurance Contracts. AASB
2007-3 is applicable for annual reporting periods beginning on
or after 1 January 2009 and must be adopted in conjunction
with AASB 8 Operating Segments. This standard is only expected
to impact disclosures contained within the financial report.
• Interpretation 10 Interim Financial Reporting and Impairment
prohibits the reversal of an impairment loss recognised in a
previous interim period in respect of goodwill, an investment
in an equity instrument or a financial asset carried at cost.
Interpretation 10 will become mandatory for the consolidated
entity’s 2008 financial statements, and will apply to goodwill
and financial assets carried at cost prospectively from the date
that the consolidated entity first applied the measurement
criteria of AASB 136 and AASB 139 respectively (i.e., 1
July 2004 and 1 July 2005, respectively). The adoption of

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Interpretation 10 is not expected to have an impact on retained
earnings or goodwill.
• Interpretation 11 AASB 2 Share-based Payment -- Group and
Treasury Share Transactions addresses the classification of a
share-based payment transaction (as equity or cash settled), in
which equity instruments of the parent or another group entity
are transferred, in the financial statements of the entity receiving
the services. Interpretation 11 will become mandatory for the
consolidated entity’s 2008 financial report. Interpretation 11
is not expected to have any impact on the financial report. The
potential effect of the Interpretation on the Company’s financial
report has not yet been determined.
• AASB 2007-1 Amendments to Australian Accounting Standards
arising from AASB Interpretation II amends AASB 2 Share-based
Payments to insert the transitional provisions of AASB 2,
previously contained in AASB 1 First-time Adoption of Australian
Equivalents to international Financial Reporting Standards. AASB
2007-1 is applicable for annual reporting periods beginning on
or after 1 March 2007 and is not expected to have any impact
on the consolidated financial report. The potential impact on the
consolidated entity has not yet been determined.
• AASB 2007-2 Amendments to Australian Accounting Standards
arising from AASB Interpretation 12 makes amendments
to AASB 1 First-time Adoption of Australian Equivalents to
International Financial Reporting Standards, AASB 117 Leases,
AASB 118 Revenue, AASB 120 Accounting for Government
Grants and Disclosures of Government Assistance, AASB 121
The Effects of Changes in Foreign Exchange Rates, AASB 127
Consolidated and Separate Financial Statement, AASB 131
Interest in Joint Ventures, and AASB 139 Financial Instruments:
Recognition and Measurement. AASB 2007-2 is applicable for
annual reporting periods beginning on or after 1 January 2008
and must be applied at the same time as Interpretation 12
Service Concession Arrangements. The potential impact on the
consolidated entity has not yet been determined.
2. SEGMENT REPORTING
Segment information is presented in respect of the consolidated entity’s business and geographical segments. The primary format, business
segment, is based on the consolidated entity’s management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items mainly comprise interest-earning assets and revenue, interest-bearing loans, borrowings and expenses,
and corporate assets and expenses. Inter-segment pricing is determined on an arm’s length basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more
than one period.
Business segments
The Group comprises the following main business segments based on the Group’s reporting system:
Pipelines
Construction and installation of pipelines including hydrostatic testing.
Drilling
Drilling services for degasification of underground coal mines, recovery and commercialisation of coal seam gas
and associated services and trenchless installation of pipes and conduits.
Construction and civil Construction and civil engineering together with facilities management.
2007
$’000
Drilling
2006
$’000
2007
$’000
Pipelines
2006
$’000
Construction
& civil
2007
$’000
2006
$’000
Consolidated
2007
$’000
Total segment revenue 67,625 50,904 73,219 41,951 75,525 78,377 216,369 171,232
2006
$’000
AJ LUCAS annual report 2007
notes to the financial statements
Segment result 6,121 1,652 3,965 3,294 414 1,685 10,500 6,631
Unallocated expenses (4,559) (3,517)
Results from operating activities 5,941 3,114
Net finance costs (1,763) (1,794)
Profit before tax 4,178 1,320
Income tax benefit 2,218 1,710
Net profit for the year 6,396 3,030
Depreciation and amortisation 8,480 4,841 357 303 129 161 8,966 5,305
Impairment of plant and equipment 500 1,003 — — — — 500 1,003
Impairment of intangibles — — 1,786 — 993 357 2,779 357
Assets
Segment assets 65,995 40,614 50,586 24,015 28,662 23,040 145,243 87,669
Unallocated assets 5,705 3,843
Total Assets 150,948 91,512
Liabilities
Segment liabilities 61,816 33,042 35,203 15,074 22,307 19,258 119,326 67,374
Unallocated liabilities 1,184 1,902
Total Liabilities 120,510 69,276
Capital expenditure 22,716 11,157 202 — 3 13 22,921 11,170

Secondary reporting — geographical segments
Geographical segment revenue and assets are based on the respective geographical location of customers and assets.
Australia Asia/Pacific Consolidated
2007
$’000
2006
$’000
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Revenue from customers 190,333 127,415 26,034 43,770 216,367 171,185
Other revenue 2 47 — — 2 47
Total revenue 190,335 127,462 26,034 43,770 216,369 171,232
Assets 148,939 90,366 2,009 1,146 150,948 91,512
Capital expenditure 22,921 11,170 — — 22,921 11,170
3. NET FINANCING COSTS
Consolidated Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Interest income 446 172 386 140
Net foreign exchange gain 335 — — —
Financial income 781 172 386 140
Interest expense 2,544 1,927 1,055 1,732
Net foreign exchange loss — 39 — —
Financial expenses 2,544 1,966 1,055 1,732
Net financing costs 1,763 1,794 669 1,592
4. OTHER EXPENSES
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Profit before income tax has been arrived at after charging the
following items:
Depreciation of plant and equipment 4,838 3,779 — —
Amortisation of:
Leased plant and equipment 2,121 1,354 — —
R&D expenditure 222 172 — —
Contracts and customer relationships 1,785 — — —
4,128 1,526 — —
Total depreciation and amortisation 8,966 5,305 — —
Movement in provision for doubtful debts 143 — — —
Impairment of plant and equipment 500 1,003 — —
Impairment of intangible assets
Goodwill 993 357 — —
Impairment of pipeline rights 1,786 — 1,786 —
Total impairment of intangible assets 2,779 357 1,786 —
5. Auditor’s Remuneration
2007
$
Consolidated Company
2006 2007
$
$
Audit services
Auditors of the Company — KPMG
Audit and review of financial reports
Australia 244,850 237,382 17,500 18,500
Overseas 4,866 52,587 — —
249,716 289,969 17,500 18,500
Other services
Auditors of the Company — KPMG
Taxation services 75,939 60,354 — —
Other professional services 17,000 53,280 — —
92,939 113,634 — —
2006
$

38
39
6. INCOME TAX
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Recognised in the income statement
Current tax (benefit)/expense
Current year (2,731) (2,356) (242) (256)
Adjustment for prior periods (347) (1,111) (2) —
(3,078) (3,467) (244) (256)
Deferred tax (benefit)/expense
Origination and reversal of temporary differences 2,664 1,757 182 (41)
Utilisation of previously unrecognised tax losses (1,804) — (1,804) —
860 1,757 (1,622) (41)
Total income tax benefit (2,218) (1,710) (1,866) (297)
Numerical reconciliation between tax benefit and
pre-tax net profit/(loss)
Profit/(loss) before tax 4,178 1,320 (3,075) (1,779)
Prima facie income tax expense/(benefit) calculated at 30% (2006:30%) 1,253 396 (923) (533)
Non-deductible expenses 140 35 24 15
Impairment of goodwill 298 107 — —
Impairment of pipeline rights 536 — 536 —
Foreign income taxable in Australia — — 226 221
Expenses deductible in foreign country only at lower tax rate 49 — — —
Write-off of non-collectible intercompany loans — — 77 —
Foreign tax loss not earned forward 49 — — —
Foreign exchange gain on translation of foreign subsidiary — (89) — —
Research and development allowance (1,576) (863) — —
Gain on acquisition (816) — — —
Income assessable in foreign country only at lower tax rate — (82) — —
Tax losses not previously recognised — (103) — —
Recognition of previously unrecognised tax losses (1,804) — (1,804) —
(1,871) (599) (1,864) (297)
Income tax under/(over) provided in prior year (347) (1,111) (2) —
Income tax benefit attributable to operating profit/(loss) (2,218) (1,710) (1,866) (297)
7. EARNINGS PER SHARE
The following information shows the income and share data used
in the calculations of basic and diluted earnings per share: Consolidated
2007
$’000
2006
$’000
Profit attributable to ordinary shareholders
Net profit for the year 6,396 3,030
AJ LUCAS annual report 2007
notes to the financial statements
2007
Number
2006
Number
Basic earnings per share
Weighted average number of ordinary shares
Issued ordinary shares at 1 July 51,981,937 51,582,937
Effect of shares issued 1,519,239 —
Effect of exercise of management rights 169,291 184,836
Weighted average number of ordinary shares at 30 June 53,670,467 51,767,773
Diluted earnings per share
Weighted average number of ordinary shares
Weighted average number of ordinary shares at 30 June 53,670,467 51,767,773
Effect of conversion of management rights 646,993 1,032,133
Weighted average number of ordinary shares (diluted) at 30 June 54,317,460 52,799,906

8. CASH AND CASH EQUIVALENTS
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
Bank balances 18,222 5,889 13,512 53
2006
$’000
9. TRADE AND OTHER RECEIVABLES
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Note
Current
Trade debtors 22,954 16,177 66 —
Other receivables 755 1,194 — —
Other loans 6,789 6,789 — —
Impairment loss on other loans (6,789) (6,789) — —
Sundry debtors 429 397 — —
Loan to related entity 31 4,123 2,612 4,123 2,612
28,261 20,380 4,189 2,612
Non-current
Loans to controlled entities 32 — — 31,795 38,202
The amounts receivable from wholly owned controlled entities are unsecured interest free and payable on demand.
The loan to the related party comprises a loan made to Mr Campbell, the Company’s Chairman of the Board of Directors and Chief
Executive Officer.
10. Construction Work In Progress
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
Construction work in progress 53,418 25,570 — —
2006
$’000
Construction work in progress comprises:
Contract costs incurred to date 296,367 227,241 — —
Profit recognised to date 38,570 20,785 — —
334,937 248,026 — —
Less: progress billings (281,519) (222,456) — —
Net construction work in progress 53,418 25,570 — —
11. NON-CURRENT ASSETS HELD FOR SALE
During the prior year, it was decided to sell certain items of plant and equipment following a strategic review of the consolidated entity’s
business and an impairment loss of $1,003,000 recognised on such equipment reducing its carrying amount to $1,828,000. During
the current year, following a further strategic review, it was decided to retain the nominated plant and equipment and not offer it for sale.
However, no reversal was undertaken of the impairment loss previously provided for as it was considered that the carrying value, net of
impairment, reflected its true value.
12. OTHER CURRENT ASSETS
Consolidated Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Prepayments 435 509 — 204

40
41
13. INTANGIBLE ASSETS
Customer
Relationships
$’000
Development
costs
$’000
Consolidated
Goodwill
$’000
Pipeline
rights
$’000
Total
$’000
Cost
Balance at 1 July 2005 — 2,067 5,432 1,786 9,285
Acquisitions — internally developed — 209 — — 209
Balance at 30 June 2006 — 2,276 5,432 1,786 9,494
Acquisitions internally developed — 92 — — 92
Acquisitions — through business combinations 4,758 — — — 4,758
Balance at 30 June 2007 4,758 2,368 5,432 1,786 14,344
Amortisation and impairment losses
Balance at 1 July 2005 — 958 250 — 1,208
Amortisation for the year — 182 — — 182
Impairment loss — — 357 — 357
Balance 30 June 2006 — 1,140 607 — 1,747
Amortisation for the year 1,785 182 — — 1,967
Impairment loss — — 993 1,786 2,779
Balance at 30 June 2007 1,785 1,322 1,600 1,786 6,493
Carrying amounts
At 1 July 2005 — 1,109 5,182 1,786 8,077
At 30 June 2006 — 1,136 4,825 1,786 7,747
At 1 July 2006 — 1,136 4,825 1,786 7,747
At 30 June 2007 2,973 1,046 3,832 — 7,851
Company
Goodwill
$’000
Pipeline
rights
$’000
Total
$’000
Cost
Balance at 1 July 2005 2,061 1,786 3,847
Acquisitions — internally developed — — —
Balance at 30 June 2006 2,061 1,786 3,847
Acquisitions internally developed — — —
Acquisitions — through business combinations — — —
Balance at 30 June 2007 2,061 1,786 3,847
AJ LUCAS annual report 2007
notes to the financial statements
Amortisation and impairment losses
Balance at 1 July 2005 — — —
Amortisation for the year — — —
Impairment loss — — —
Balance 30 June 2006 — — —
Amortisation for the year — — —
Impairment loss — 1,786 1,786
Balance at 30 June 2007 — 1,786 1,786
Carrying amounts
At 1 July 2005 2,061 1,786 3,847
At 30 June 2006 2,061 1,786 3,847
At 1 July 2006 2,061 1,786 3,847
At 30 June 2007 2,061 — 2,061

Impairment tests for cash generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the consolidated entity’s operating divisions which represent the lowest level
within the consolidated entity at which the goodwill is monitored for internal management purposes.
The aggregate carrying amounts allocated to each unit are:
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
Construction and civil 3,832 4,825 2,061 2,061
The recoverable amount of the cash generating unit is based on value in use calculations. The calculations use cash flow projections based
on the following year’s budget and plan extended over a period of 5 years. A pre-tax discount rate of 12.5% is applied adjusted for the risk
of the industry in which each unit operates. During the year, an impairment charge of $993,000 (2006: $357,000) was made because of
impairments in the value of customer relationships.
2006
$’000
14. PLANT AND EQUIPMENT
Leasehold
improvements
$’000
Plant &
equipment
$’000
Leased plant
& equipment
$’000
Capital works
in progress
$’000
Total
$’000
Consolidated 2007
At cost 105 32,284 18,850 2 51,241
Accumulated depreciation/amortisation (81) (13,704) (6,535) — (20,320)
24 18,580 12,315 2 30,921
Consolidated 2006
At cost 105 19,416 12,550 198 32,269
Accumulated depreciation/amortisation (70) (8,380) (2,709) — (11,159)
35 11,036 9,841 198 21,110
Reconciliations
Reconciliations of the carrying amounts for each class of plant and equipment are set out below.
Leasehold
improvements
$’000
Plant &
equipment
$’000
Leased plant
& equipment
$’000
Capital works
in progress
$’000
Total
$’000
Consolidated 2007
Carrying amount at 01/07/06 35 11,036 9,841 198 21,110
Additions — 3,773 2,376 (196) 5,953
Acquisitions through subsidiaries acquired — 9,236 621 — 9,857
Disposals — (354) (14) — (368)
Depreciation (11) (4,827) — — (4,838)
Amortisation — — (2,121) — (2,121)
Impairment — (500) — — (500)
Transfer from non-current assets held for sale — 216 1,612 — 1,828
Carrying amount at 30/06/07 24 18,580 12,315 2 30,921
Consolidated 2006
Carrying amount at 01/07/05 46 11,574 8,708 359 20,687
Additions — 5,151 5,444 (161) 10,434
Disposals — (1,385) (662) — (2,047)
Depreciation (11) (3,768) — — (3,779)
Amortisation — — (1,354) — (1,354)
Transfer to non-current assets held for sale — (536) (2,295) — (2,831)
Carrying amount at 30/06/06 35 11,036 9,841 198 21,110

42
43
15. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
2007
$’000
Assets Liabilities Net
2006 2007 2006 2007
$’000 $’000 $’000 $’000
2006
$’000
Consolidated
Construction work in progress — — (6,110) (3,679) (6,110) (3,679)
Intangibles — — (631) — (631) —
Development costs — — (274) (314) (274) (314)
Exploration, evaluation and development expenditure — — (2,082) (962) (2,082) (962)
Convertible note issue cost — — (244) (61) (244) (61)
Plant and equipment 15 393 — — 15 393
Impairment of trade debtors 2,177 2,137 — — 2,177 2,137
Provisions for employee benefits 974 585 — — 974 585
Trade creditors 971 795 — — 971 795
Other creditors and accruals 192 59 — — 192 59
Interest-bearing loans and borrowings 310 452 — — 310 452
Tax value of loss carry-forwards recognised 10,304 5,198 — — 10,304 5,198
Tax assets/(liabilities) 14,943 9,619 (9,341) (5,016) 5,602 4,603
Set off of tax (9,341) (5,016) 9,341 5,016 — —
Net tax assets 5,602 4,603 — — 5,602 4,603
Company
Convertible note issue cost — — (244) (61) (244) (61)
Interest-bearing loans and borrowings 276 276 — — 276 276
Tax value of loss carry-forwards recognised 10,094 4,989 — — 10,094 4,989
Tax assets/(liabilities) 10,370 5,265 (244) (61) 10,126 5,204
Set off of tax (244) (61) 244 61 — —
Net tax assets 10,126 5,204 — — 10,126 5,204
Movement in temporary differences during the year:
AJ LUCAS annual report 2007
notes to the financial statements
Acquired
Balance in business
01 Jul 06 combinations
$’000 $’000
Consolidated
Recognised
in income
$’000
Balance
30 Jun 07
$’000
Balance
01 Jul 06
$’000
Company
Recognised
in income
$’000
Balance
30 Jun 07
$’000
2007
Construction work in progress (3,679) — (2,431) (6,110) — — —
Intangibles — (1,167) 536 (631) — — —
Development costs (314) — 40 (274) — — —
Exploration, evaluation and
development expenditure
(962) — (1,120) (2,082) — — —
Convertible note issue cost (61) — (183) (244) (61) (183) (244)
Plant and equipment 392 — (377) 15 — — —
Doubtful debts impairment
recognised
2,137 — 40 2,177 — — —
Provisions for employee benefits 584 — 390 974 — — —
Trade creditors 795 — 176 971 — — —
Other creditors and accruals 58 — 134 192 — — —
Interest-bearing loans and
borrowings
452 — (142) 310 276 — 276
Tax value of loss carry-forward
recognised
5,201 — 5,103 10,304 4,989 5,105 10,094
4,603 (1,167) 2,166 5,602 5,204 4,922 10,126

Balance
01 Jul 05
$’000
Consolidated
Recognised
in income
$’000
Balance
30 Jun 06
$’000
Balance
01 Jul 05
$’000
Recognised
in income
$’000
Company
Recognised
in intercompany
Balance
30 Jun 06
$’000
2006
Construction work in progress (2,070) (1,609) (3,679) — — — —
Development costs (303) (11) (314) — — — —
Exploration, evaluation and
development expenditure
(778) (184) (962) — — — —
Convertible note issue cost (102) 41 (61) (102) 41 — (61)
Plant and equipment 640 (248) 392 — — — —
Doubtful debts impairment
recognised
2,095 42 2,137 — — — —
Provisions for employee benefits 504 80 584 — — — —
Trade creditors 291 504 795 — — — —
Other creditors and accruals 68 (10) 58 — — — —
Interest-bearing loans and
borrowings
169 283 452 276 — — 276
Tax value of loss carry-forwards
recognised
2,333 2,868 5,201 2,136 — 2,853 4,989
2,847 1,756 4,603 2,651 41 2,853 5,204
16. INVESTMENTS
Consolidated Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Investments 22 22 1,260 1,260
Deferred expenditure 41 35 — —
63 57 1,260 1,260
17. TRADE AND OTHER PAYABLES
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Note
Current
Trade payables 31,506 23,565 — —
Other payables and accruals 34,813 16,150 84 264
Loan from related entity — 475 — 475
66,319 40,190 84 739
Non-current
Other loans — controlled entities 32 — — 16,217 15,176
Other than the loan from the Company’s Hong Kong subsidiary, the loans payable to controlled entities are interest free, unsecured and
repayable on demand.

44
45
AJ LUCAS annual report 2007
notes to the financial statements
18. INTEREST-BEARING LOANS AND BORROWINGS
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Current
Bank overdraft — secured 5,663 4,478 — 3,381
Other borrowings — unsecured 277 167 — —
Other borrowings — secured 836 252 — —
Deferred subsidiary acquisition consideration 1,250 — — —
Lease liabilities — secured 2,680 2,092 — —
10,706 6,989 — 3,381
Non-current
Lease liabilities — secured 6,727 6,526 — —
Other borrowings - secured 3,516 353 — —
Deferred subsidiary acquisition consideration 2,750 — — —
Convertible notes — unsecured 24,188 9,923 24,188 9,923
37,181 16,802 24,188 9,923
Financing facilities
(a) The consolidated entity has access to the following lines of credit and
bank guarantees
Bank overdraft 5,500 3,000 5,500 3,000
Bank indemnity guarantees 3,084 2,000 1,557 1,014
Credit card facility 142 — — —
Secured loan 4,004 — — —
Financial lease 11,546 — — —
Bank standby letter of credit 2,900 — 2,900 —
27,176 5,000 9,957 4,014
Total facilities utilised at balance date:
Bank overdraft 5,663 4,478 — 3,381
Less: Right of set off (5,663) (4,478) — (3,381)
Net overdraft — — — —
Bank indemnity guarantees 2,123 1,662 — 980
Credit card facility 39 — — —
Secured loan 4,004 — — —
Financial lease 9,755 — — —
Bank standby letter of credit — — — —
15,921 1,662 — 980
Total facilities not utilised at balance date:
Bank overdraft 5,500 3,000 5,500 3,000
Bank indemnity guarantees 961 338 1,557 34
Credit card facility 103 — — —
Secured loan — — — —
Financial lease 1,791 — — —
Bank standby letter of credit 2,900 — 2,900 —
11,255 3,338 9,957 3,034
(b) Bond facilities provided by surety entities
Bank facilities in aggregate 40,000 40,180 — —
Amount utilised (13,935) (9,734) — —
Unused bond facilities (26,065) 30,446 — —
Of the bonds utilised, $9,660,573 (2006:$7,040,000) are on projects which are yet to achieve practical completion.
Bank facilities
The bank overdraft, indemnity guarantee and standby letter of credit are all secured by a registered fixed and floating charge over all the
assets of the consolidated entity and are subject to annual review.

Finance lease facilities
The consolidated entity’s lease liabilities are secured by the leased assets of $12,315,000 (2006: $9,840,000) which, in the event of
default, revert to the lessor.
Consolidated Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Finance lease liabilities
Minimum lease payments:
Within 1 year 3,304 2,679 — —
Between one and five years 7,273 7,252 — —
10,577 9,931 — —
Less: interest
Within 1 year (624) (587) — —
Between one and five years (546) (726) — —
(1,170) (1,313) — —
Total lease liabilities 9,407 8,618 — —
Lease liabilities provided for in the financial statements:
Current 2,680 2,092 — —
Non-current 6,727 6,526 — —
Total lease liabilities 9,407 8,618 — —
The consolidated entity leases plant and equipment under finance leases expiring from one to four years. At the end of the lease terms, the
consolidated entity has the option to purchase the plant and equipment.
Convertible notes
In June 2007, the Company issued 25,000,000 $1.00 unsecured redeemable convertible notes. The notes carry a fixed coupon of 10.0%
per annum and have a term of three years unless converted or redeemed beforehand. Interest is cumulative in the event that an interest
payment is not made.
Consolidated Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Carrying amount at beginning of year 9,923 9,872 9,923 9,872
Accreted interest capitalised 77 51 77 51
Redemption of notes (10,000) — (10,000) —
Proceeds of issue of 25,000,000 $1.00 convertible notes 25,000 — 25,000 —
Transaction costs (812) — (812) —
Carrying amount at end of year 24,188 9,923 24,188 9,923
The notes mature on 28 June 2010. From 28 June 2008, note holders have the right to convert the notes into ordinary shares at a 15%
discount to the volume weighted average sale price of the shares over the 30 day period prior to conversion. Alternatively, if the Company
decided to spin off and list its equity interests in coal seam gas assets including the Gloucester Basin project, the notes are convertible into
ordinary shares in the new company at a 15% discount to the Initial Public Offering issue price.
On or after 28 June 2008, the Company may redeem up to 50% of the notes. The Company’s right of redemption prevails over the
conversion rights of the holder. The notes carry no voting rights
19. CURRENT TAX LIABILITies
The current tax liability for the consolidated entity of $75,000 (2006:$nil) represents the amount of income tax payable in respect
of current and prior financial periods. In accordance with the tax consolidation legislation, the parent entity as head entity of the taxconsolidated
group has assumed the current tax liabilities initially recognised by the members of the tax-consolidated group.

46
47
20. PROVISIONS
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Note
Current
Employee benefits 21 2,702 1,705 — —
2,702 1,705 — —
Non-current
Employee benefits 21 586 244 — —
Provision for contractual dispute 2,941 3,346 — —
3,527 3,590 — —
As reported in the 2004 Annual Report, the Company and entities within the consolidated entity are engaged in litigation with DrillTec GUT
GmbH in Germany over a contract undertaken in Hong Kong in 2000 and 2001. A judgement was awarded in 2004 against the Company
for which full provision was made. The consolidated entity refutes the judgement and has appealed the decision and initiated separate
proceedings to recover amounts paid. The consolidated entity has appealed to the Federal Court in Germany on both jurisdictional grounds
and points of law. Additionally, claims and counterclaims totalling approximately HK$31 million were filed against DrillTec in Hong Kong.
The nature of the claims are complex and are unlikely to be resolved in the next 12 months. Accordingly, the provision has been classified
as non-current. The movement in the year is because of changes in exchange rates.
21. EMPLOYEE BENEFITS
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Note
Provision for employee benefits, including on-costs:
Current 20 2,702 1,705 — —
Non-current 20 586 244 — —
3,288 1,949 — —
Superannuation plans
Benefits provided under the superannuation funds to which the consolidated entity contributes are based on accumulated contributions and
earnings for each employee. The consolidated entity has a legal obligation to contribute to the funds in accordance with the Superannuation
Guarantee Charge legislation. The amount recognised as an expense for the financial year was $1,968,683 (2006:$1,368,603).
Employee share plan
The Company has three employee incentive schemes approved by shareholders at the 2001 and 2006 annual general meetings. Total
securities granted but unissued under these schemes cannot exceed 15% of the total number of shares on issue.
AJ LUCAS annual report 2007
notes to the financial statements
a) Management rights plan: The management rights plan (MRP) is available to employees, non-executive directors and other persons
at the discretion of the Board. Nominated persons are granted rights to acquire shares in the Company. The issue of these rights can take the
form of the award of shares for no monetary consideration, traditional priced options or performance rights (which have no exercise price).
Each right is convertible to one ordinary share. There are no voting or dividend rights attaching to the rights nor are there voting rights
attaching to the unissued ordinary shares.
During the year, 550,000 (2006: nil) options were granted to the executive directors as approved by shareholders at the annual general
meeting held in November 2006. The options vest after three years and are subject to a performance condition which measures the
Company’s Total Shareholder Return (TSR) compared with each company in the comparator group over the vesting period as follows:
Lucas TSR percentile ranking relative to the comparator Group Percentage of options that vest
Below 50th percentile
Nil
50th percentile 50%
Greater than 50th percentile and less than 75th percentile Pro-rata between 50% and 100%
75th percentile and above 100%
The fair value of services received in return for the share options granted was calculated using a Black-Scholes technique incorporating a
probability of the relative TSR vesting condition being met, with the following inputs:
Fair Value at grant date $0.25
Share price on grant date $1.08
Volatility 44%
Risk free interest rate 5.72%
Dividend yield 4.83%
The fair value of the rights granted in previous years has been calculated using a Black-Scholes pricing model and allocated to each
reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the rights
allocated to this reporting period. There is no performance hurdle for any of the residual rights to be exercised and no consideration is
payable on their exercise.

The following factors and assumptions were used in determining the fair value of rights on grant date:
Grant date June 2005 May 2004
Expiry date May 2009 May 2009
Share price on grant date $1.52 $1.66
Exercise price Nil Nil
Volatility 39% 38%
Risk free interest rate 5.1% 5.6%
Dividend yield 5.6% 5.4%
Fair value per right $1.20 $1.29
Details of rights in aggregate over unissued ordinary shares at the beginning and ending of the reporting period and movements during
the year are set out below.
Number of
rights at
beginning
of year
Number of rights
at end of year
Exercise date
Rights Rights Rights
Grant date on or after Expiry date
issued exercised cancelled
On issue Vested
Consolidated & Company 2007
23 Dec 2002 23 Dec 2004 23 Dec 2007 166,666 — (166,666) — — —
23 Dec 2002 23 Dec 2005 23 Dec 2007 166,666 — — (166,666) — —
23 Dec 2002 23 Dec 2006 23 Dec 2007 166,668 — — (166,668) — —
28 May 2004 30 Jun 2004 28 May 2009 311,999 — (89,999) — 222,000 222,000
28 May 2004 30 Jun 2005 28 May 2009 219,334 — (55,001) (2,000) 162,333 162,333
28 May 2004 30 Jun 2006 28 May 2009 48,000 — (22,000) (2,000) 24,000 24,000
27 June 2005 30 Jun 2005 28 May 2009 30,000 — — — 30,000 30,000
27 June 2005 30 Jun 2006 28 May 2009 40,000 — (10,000) — 30,000 30,000
27 June 2005 30 Jun 2007 28 May 2009 40,000 — — (10,000) 30,000 30,000
24 Nov 2006 24 Nov 2009 24 Nov 2011 — 550,000 — — 550,000 —
1,189,333 550,000 (343,666) (347,334) 1,048,333 498,333
b) Deferred share plan: The deferred share plan (DSP) is available to chosen directors, including non-executives, and employees
to allow them to take a part of their annual remuneration in the form of shares in the Company. Shares vest from the date of issue but
cannot be disposed of until the earlier of 10 years from the date of issue or the date their employment or service with the consolidated
entity ceases. 100,000 (2006: nil) shares were issued during the year, as approved by shareholders at the annual general meeting held in
November 2006. The fair value of the shares was calculated at grant date by an independent valuer using a Black-Scholes technique with
the following assumptions:
Fair Value at grant date $0.81
Share price on grant date $1.08
Exercise price $1.08
Volatility 46%
Risk free interest rate 5.9%
Dividend yield 1.9%
The discount in the fair value of the deferred shares on their grant date relative to the share price reflects the trading restriction on the
disposal of the shares.
c) Employee share acquisition plan: The employee share acquisition plan (ESAP) is available to all eligible employees to acquire
ordinary shares in the Company for no consideration as a bonus component of their remuneration. The ESAP complies with current
Australian tax legislation, enabling permanent employees to have up to $1,000 of free shares per annum, in respect of an employee share
scheme, excluded from their assessable income.
Employees must have been employed by any entity within the consolidated entity for a minimum period of one year to be eligible.
Shares issued under the ESAP rank equally with other fully paid ordinary shares including full voting and dividend rights from the date they
vest. No consideration for the shares is receivable from the employees.
Shares are issued in the name of the participating employee and vest from the date of issue. However, they cannot be disposed of until
the earlier of 3 years from the date of issue or the date their employment with the consolidated entity ceases. The Board has the discretion
to vary this restriction. The ESAP has no conditions that could result in a recipient forfeiting ownership of shares.
No shares under this plan were issued during the year (2006:nil). All shares previously issued under this plan passed the three year
trading restriction during the year and were released from escrow.
Summary of movements in the ESAP:
Opening balance
Trading restriction
lifted during the year
Closing balance
Number Number Number
2007 41,040 (41,040) —
2006 48,450 (7,410) 41,040

48
49
22. CAPITAL AND RESERVES
Reconciliation of movement in capital and reserves attributable to equity holders of the parent.
Share
capital
$’000
Employee equity
benefit reserve
$’000
Consolidated entity
Translation
reserve
$’000
Accumulated
losses
$’000
Total
equity
$’000
Balance at 1 July 2005 29,236 652 — (10,734) 19,154
Total recognised income and expense — — — 3,030 3,030
Equity settled share based payments — 52 — — 52
Balance at 30 June 2006 29,236 704 — (7,704) 22,236
Balance at 1 July 2006 29,236 704 — (7,704) 22,236
Total recognised income and expense — — 306 6,396 6,702
Shares issued 1,419 — — — 1,419
Equity settled share based payments 81 — — — 81
Balance at 30 June 2007 30,736 704 306 (1,308) 30,438
Nature and purpose of reserves
Employee equity benefits reserve: The employee equity benefits reserve represents expense associated with equity settled
compensation under the employee management rights plan.
Translation reserve: The translation reserve comprises all foreign currency differences arising from the translation of the financial
statements of foreign operations.
2007
No. of
Shares
Company
2006
No. of
Shares
Share capital - ordinary shares
Movements during the year
Balance at beginning of year 51,981,937 51,582,937
Shares issued for business acquisition 1,333,333 —
Exercise of rights under the Management Rights Plan 343,666 399,000
Equity settled share based payments 100,000 —
Payment of fees and costs 441,600 —
Balance at end of year 54,200,536 51,981,937
Holders of ordinary shares are entitled to receive dividends and, in the event of a winding up of the Company, to any proceeds of liquidation
after all creditors and other stockholders.
On a show of hands, every holder of ordinary shares present at a shareholder meeting in person or by proxy is entitled to one vote and
upon a poll, each share is entitled to one vote.
AJ LUCAS annual report 2007
notes to the financial statements
Subsequent event: In July 2007, the Company issued 285,550 shares at $2.19 per share as the first instalment for the deferred
consideration for the acquisition of McDermott Drilling Pty Limited (refer to Note 30).
Dividends
No dividends were recognised by the Company during the current or prior year.
Dividend not recognised at year end
Since the year end, the directors have recommended the following dividend. The declaration and subsequent payment of the dividend has
no income tax consequences.
Cents Total amount Franked/
per share
$’000 unfranked Date of payment
Final ordinary 2.5 1,362 100% franked 28 September 2007

Company
Share
capital
$’000
Accumulated
losses
$’000
Total
equity
$’000
29,236 (5,591) 23,645
— (1,482) (1,482)
— — —
29,236 (7,073) 22,163
29,236 (7,073) 22,163
— (1,209) (1,209)
1,419 — 1,419
81 — 81
30,736 (8,282) 22,454
2007
$’000
Company
2006
$’000
Dividend franking account
30% franking credits available to shareholders of the Company for subsequent financial years. 1,738 777
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact on
dividend franking account of dividends proposed after the balance date but not recognised as a liability together with the franking credits
acquired on the acquisition of the Capricorn Weston Drilling Group (refer to note 33) is to increase it by $680,000 to $2,418,000.
23. FINANCIAL INSTRUMENTs
Exposure to credit, interest rate and credit risk arises in the normal course of the consolidated entity’s business.
(a) Interest rate risk
The consolidated entity’s exposure to interest rate risk, which is the risk that the financial instrument’s value will fluctuate as a result of
changes in market interest rates, and the effective weighted average interest rate for classes of financial assets and financial liabilities and
the periods in which they reprice, is set out below:
Effective
interest
rate
6 months
or less
6-12
months
1-2
years
2-5
years
More than
5 years Total
2007 Note % $’000 $’000 $’000 $’000 $’000 $’000
Consolidated
Cash and cash equivalents 8 3.90 18,222 — — — — 18,222
Finance lease liabilities * 18 7.93 (1,439) (1,241) (2,909) (3,818) — (9,407)
Unsecured bank facility * 18 5.10 (277) — — — — (277)
Bank overdrafts 18 10.10 (5,663) — — — — (5,663)
Other borrowings * 18 6.85 (1,376) (126) (1,346) (1,500) — (4,348)
Term Loan 18 9.16 (165) (419) (838) (2,512) (70) (4,004)
Convertible notes * 18 10.00 — — — (24,188) — (24,188)
9,302 (1,786) (5,093) (32,018) (70) (29,665)
2007
Company
Cash and cash equivalent 8 3.90 13,512 — — — — 13,512
Loans from controlled entities * 32 7.00 — — (10,680) — — (10,680)
Convertible notes * 18 10.00 — — — (24,188) — (24,188)
13,512 — (10,680) (24,188) — (21,356)

50
51
AJ LUCAS annual report 2007
notes to the financial statements
23. FINANCIAL INSTRUMENTs (cont)
Effective
interest
rate
6 months
or less
6-12
months
1-2
years
2-5
years
More than
5 years Total
2006 Note % $’000 $’000 $’000 $’000 $’000 $’000
Consolidated
Cash and cash equivalents 8 5.25 5,889 — — — — 5,889
Finance lease liabilities * 18 7.37 (1,016) (1,076) (1,961) (4,565) — (8,618)
Unsecured bank facility * 18 5.50 (167) — — — — (167)
Bank overdrafts 18 9.35 (4,778) — — — — (4,478)
Other borrowings * 18 7.91 (126) (126) (252) (101) — (605)
Convertible notes * 18 9.50 — — (9,923) — — (9,923)
102 (1,202) (12,136) (4,666) — (17,902)
2006
Company
Cash and cash equivalent 8 5.00 53 — — — — 53
Loans from controlled entities * 32 7.00 — — (10,419) — — (10,419)
Bank overdrafts 18 9.35 (3,381) — — — — (3,381)
Convertible notes * 18 9.50 — — (9,923) — — (9,923)
(3,328) — 20,342 — — 23,670
* These assets/liabilities bear interest at a fixed rate.
Consolidated Company
(b) Foreign currency risk
2007
$’000
2006
$’000
2007
$’000
2006
$’000
The Australian dollar equivalents of unhedged amounts payable or
receivable in foreign currencies calculated at year-end exchange rates, are
as follows:
United States Dollars
Amounts payable:
Current 1,637 — — —
Amounts receivable:
Current 8,619 8,604 — —
Hong Kong Dollars
Amounts payable:
Current 3 3 — —
Amounts receivable:
Current 1,840 755 — —
Euro Currency
Amounts payable:
Current 1,061 — — —
Central Pacific Francs
Amounts payable:
Current 5,256 — — —
New Zealand Dollars
Amounts payable:
Current 1 — — —
(c) Credit risk exposure
Credit exposure represents the extent of credit related losses to which the consolidated entity may be subject on amounts to be received
from financial assets. The consolidated entity’s exposures to on-balance sheet credit risk are as indicated by the carrying amounts of its
financial assets. The consolidated entity is not materially exposed to any individual customer.
(d) Fair values
The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair
values. The following summarises the major methods and assumptions used in estimating the fair values of financial instruments:
Interest bearing loans and borrowings: Fair value is calculated based on discounted expected future principal and interest cash flows.
Finance lease liabilities: The fair value is estimated as the present value of future cash flows, discounted at market rates interest for
homogeneous lease agreements. The estimated fair values reflect change in interest rates.
Trade and other receivables/payables: All trade and other receivables and payables are current and therefore carrying amount
equals fair value.

24. INTERESTS IN JOINT VENTURES
Joint venture name Principal activities
Participation
interest
Operating results
contribution
2007
%
2006
%
2007
$’000
2006
$’000
Clough Lucas Pipe laying and related construction activities 50 50 (77) 9
Clough Lucas Bundeena Pipe laying and related construction activities 20 20 4 3
Amec Spie Capag Lucas
Engineering, design, procurement & construction of
pipeline
50 50 157 (59)
Lucas Molopo Exploration for methane gas 70 70 — —
Eastern Pipeline Alliance Pipe laying and related construction activities 47.5 — 4,848 —
Included in the assets and liabilities of the consolidated entity are the following assets and liabilities employed in the joint ventures.
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Assets
Current assets
Cash assets 493 757 — —
Receivables 40 220 — —
Work in progress 28,791 (130) — —
Total current assets 29,324 847 —
Non-current assets
Exploration assets 6,175 3,819 — —
Total assets 35,499 4,666 — —
Liabilities
Current liabilities
Payables 24,068 279 — —
Total liabilities 24,068 279 — —
The exploration and evaluation assets relates to the consolidated entity’s interests in the Gloucester and Bowen Basins. The recoverability of
their carrying amounts is dependent of the successful development and commercial exploitation or sale of the respective area of interest.
25. Change in accounting policy
In the current financial year, the consolidated entity has early adopted AASB 2007-4: Amendments to Australian Accounting Standards
arising from ED 151 and Other Amendments.
The adoption of AASB 2007-4 has resulted in the consolidated entity proportionately consolidating its investments in joint venture
entities. Previously, the consolidated entity’s interests in joint venture entities were accounted for using the equity method of accounting.
This change has been adopted to provide users with more reliable and relevant information with respect to the scale of the consolidated
entity’s operations and activities.
The impact of the adoption of the standard in the current year is as follows:
• Revenues have increased by $38,113,066
• Construction costs have increased by $33,265,234
• The consolidated entity’s share of profit of associates has decreased by $4,847,832
• Current construction work in progress has increased by $29,019,931
• Current trade and other payables have increased by $23,985,894
• Investments accounted for using the equity method have decreased by $4,847,832
There is no change to net profit after tax or net assets as a result of the adoption of this standard. There was no impact on the results
reported in the prior year because the consolidated entity did not have any interests in joint venture entities.

52
53
26. CONTINGENCIES
Details of contingent liabilities and contingent assets where the probability of future payments/receipts is not considered remote are set out
below, as well as details of contingent liabilities and contingent assets, which although considered remote, the directors consider should be
disclosed.
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of
economic benefits will be required or the amount is not capable of reliable measurement.
Guarantees and surety bonds
Bank guarantees and surety bonds are issued to third parties arising out of dealings in the normal course of business by controlled entities
(see Note 18(a) and (b)).
Joint ventures
Under the joint venture agreements (see note 24) the relevant AJ Lucas Group company is jointly and severally liable for all the liabilities
incurred by the joint ventures. As at 30 June 2007, the assets of the joint venture were sufficient to meet such liabilities. The liabilities of
the joint ventures not included in the consolidated financial statements amounted to $26,593,000 (2006:$279,000).
Indemnities
Indemnities have been provided to directors and certain executive officers of the Company in respect of liabilities to third parties arising
from their positions, except where the liability arises out of conduct involving a lack of good faith. No monetary limit applies under these
indemnities. There is no known current exposure under these indemnities.
Consolidated Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Total estimated contingent liabilities 15,769 8,702 15,769 8,702
27. CONSOLIDATED ENTITIES
The financial statements at 30 June 2007 include the following controlled entities. The financial years of all the controlled entities are the
same as that of the parent entity.
AJ LUCAS annual report 2007
notes to the financial statements
Name of entity
Country of
incorporation
Ownership interest
2007 2006
%
%
Parent entity
AJ Lucas Group Limited
Controlled entities
AJ Lucas Operations Pty Limited Australia 100 100
AJ Lucas Plant & Equipment Pty Limited Australia 100 100
AJ Lucas Drilling Pty Limited Australia 100 100
AJ Lucas Pipelines Pty Limited Australia 100 100
AJ Lucas Testing Pty Limited Australia 100 100
Smart Electrical & Power Services Pty Limited Australia 100 100
AJ Lucas Joint Ventures Pty Limited Australia 100 100
Coastal Sand Technologies Pty Limited Australia 100 100
AJ Lucas (Hong Kong) Limited Hong Kong 100 100
Lucas Energy Pty Limited * Australia 100 100
AJ Lucas Coal Technologies Pty Limited Australia 100 100
AJ Lucas (USA) Inc. USA 100 100
Lucas Contract Drilling Pty Ltd Australia 100 —
Wholly owned subsidiary of Lucas Contract Drilling Pty Ltd
McDermott Drilling Pty Ltd Australia 100 —
Lucas Stuart Pty Limited Australia 100 100
Wholly owned subsidiaries of Lucas Stuart Pty Ltd
Ketrim Pty Limited Australia 100 100
Stuart Painting Services Pty Ltd Australia 100 100
Lucas Stuart Projects Pty Ltd Australia 100 100
* Lucas Coal Seam Gas Pty Limited changed its name to Lucas Energy Pty Limited during the financial year.

28. OPERATING LEASES
2007
$’000
Consolidated Company
2006 2007
$’000 $’000
2006
$’000
Non-cancellable operating lease rentals are payable as follows:
Less than one year 532 516 — —
Between one and five years 226 433 — —
758 949 — —
The consolidated entity leases properties under non-cancellable operating leases expiring from one to three years. The leases generally
provide the consolidated entity with a right of renewal.
During the financial year, $839,000 (2006:$516,000) was recognised as an expense in the income statement in respect of operating
leases.
29. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated Company
Notes
2007
$’000
2006
$’000
2007
$’000
2006
$’000
(a) Reconciliation of cash
For the purposes of the statements of cash flows, cash includes
cash at bank and on hand. Cash as at the end of the financial
year as shown in the statements of cash flows is reconciled to
the related items in the balance sheet as follows:
Cash assets 8 18,222 5,889 13,512 53
Bank overdraft 18 (5,663) (4,478) — (3,381)
Total cash 12,559 1,411 13,512 (3,328)
(b) Cash flows from operating activities
Profit/(loss) for the year 6,396 3,030 (1,209) (1,482)
Adjustments for:
Interest on capitalised leases 767 566 — —
(Gain)/loss on sale of non-current assets (87) 350 — —
Depreciation 4,838 4,782 — —
Impairment of plant and equipment 500 — — —
Impairment losses 144 — — —
Amortisation of:
Leased assets 2,121 1,354 — —
Intangibles 1,785 — — —
Development expenditure 222 172 — —
Unrealised foreign exchange gains — (87) — —
Share based payments 473 — 339 —
Discount on acquisition of subsidiary (2,723) — — —
Change in provisions for employee entitlements 1,339 268 — —
Change in other provisions (405) 111 — —
Change in loans to controlled entities — — 2,776 (56)
Impairment of intangible assets 2,779 — 1,786 —
Increase in equity compensation reserve — 52 — —
Change in tax balances (924) (2,652) (4,922) (2,553)
Operating profit/(loss) before changes in working capital and
provisions
17,225 7,946 (1,230) (4,091)
Change in receivables (6,453) (6,282) (66) (140)
Change in other current assets 74 277 204 136
Change in construction work in progress (27,848) (11,949) — —
Change in other non-current assets — 539 — —
Change in payables 26,604 19,961 (180) 2,755
Change in other liabilities — 5,229 — 51
Net cash from operating activities 9,602 15,721 (1,272) (1,289)
(c) Non-cash financing and investment activities
During the year, the consolidated entity acquired plant and equipment with an aggregate fair value of $2,376,000 (2006:$5,444,000) by
means of finance leases. These purchases are not reflected in the Statements of Cash Flows.
(d) Financing arrangements
Refer note 18.

54
55
30. ACQUISITION OF SUBSIDIARY
On 31 July 2006, the Company acquired McDermott Drilling Pty Limited, a New South Wales based drilling company, for a consideration
of $8.0 million of which $4.0 million was deferred and is payable in equal instalments on the first three anniversary dates after the date
of acquisition. The initial consideration was funded as to $1.0 million through the issue of 1,333,333 shares at an issue price of $0.75
cents per share, being a discount of 2.5% to their market price at the date of purchase, with the balance by a combination of the Group’s
resources and debt. In the period to 30 June 2007, McDermott Drilling contributed a net profit before interest and tax of $5,930,000. If the
acquisition had occurred on 1 July 2006, management estimate that consolidated revenue would have been $217,663,000 and net profit
before interest and tax would have been of $5,839,000.
The acquisition had the following effect on the consolidated entity’s assets and liabilities on acquisition date:
Recognised values
on acquisition
$’000
Fair value
adjustments
$’000
Pre-acquisition
carrying amounts
$’000
Trade and other receivables 3,595 — 3,595
Plant and equipment 9,858 4,981 4,877
Other assets 1,628 — 1,628
Intangibles 4,757 4,757 —
Trade and other payables (1,063) — (1,063)
Other financial liabilities (4,989) — (4,989)
Deferred tax liability (1,167) (1,167) —
Provisions (1,041) — (1,041)
Net identifiable assets and liabilities 11,578 8,571 3,007
Discount on acquisition (2,723)
Consideration 8,855
Less deferred consideration payable (4,000)
Less consideration satisfied by the issue of shares (1,027)
Less debt funding and other finance (3,499)
Net cash inflow 329
The consideration above includes acquisition costs of $855,000.
The Company commissioned an independent expert to conduct an analysis of the fair value of the assets and liabilities of McDermott
Drilling Pty Limited on its acquisition. Following this analysis, the Company has determined a carrying value of $4,757,000 for customer
contracts and relationships.
31. KEY MANAGEMENT PERSONNEL DISCLOSURES
The following were key management personnel of the consolidated entity at any time during the reporting period and unless otherwise
indicated were key management personnel for the entire period.
Executive directors
• Allan Campbell (Chairman and Chief Executive Officer)
• Andrew Lukas (Executive Director)
• Ian Stuart-Robertson (Executive Director)
Non-executive directors
• Martin Green
• Garry O’Meally
AJ LUCAS annual report 2007
notes to the financial statements
Executives
• Kevin Lester (General Manager Pipelines)
• Timothy Herlihy (Chief Financial Officer) – resigned 31 December 2006
• Ian Redfern (Chief Operating Officer)
• Mark Tonkin (General Manager – Strategy and Planning)
• Brian Burden (General Manager – Tendering)
• Mark Summergreene (Chief Financial Officer)

Key management personnel compensation
The key management personnel compensation is:
Consolidated
2007
$
2006
$
Short-term employee benefits 2,420,398 2,055,124
Other long term benefits — 17,583
Post-employment benefits 132,687 100,394
Equity compensation benefits 118,448 31,192
2,671,533 2,204,293
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the Remuneration report section of the Directors’
report on pages 22 to 25.
Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the consolidated entity
since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year-end.
Loans to key management personnel and their related parties (consolidated)
Details regarding loans outstanding at the reporting date to key management personnel and their related parties, where the individual’s
aggregate loan balance exceeds $100,000 at any time in the reporting period, are as follows:
Interest
Balance
1 July 2006
$
Balance
30 June 2007
$
payable in
the reporting
period
$
Highest
balance
in period
$
Allan Campbell 2,612,026 4,122,759 385,814 4,122,759
The loan is due for repayment by 30 June 2008 and is secured by a Deed of Guarantee and Indemnity. Interest is payable at 12.5% per annum.
Andial Holdings Pty Ltd, a company associated with Messrs Campbell, Lukas and Stuart-Robertson, loaned the Company the following
amounts during the reporting period:
Interest
Balance
1 July 2006
$
Balance
30 June 2007
$
payable in
the reporting
period
$
Highest
balance
in period
$
474,639 — 16,149 481,722
The loans were made at an interest rate of 8.75% and without security.
Other key management personnel transactions with the Company or its controlled entities
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or
significant influence over the financial or operating policies of those entities. A number of these entities transacted with the Company or
its subsidiaries in the reporting period. The terms and conditions of the transactions with management persons and their related parties
were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated
entities on an arm’s length basis.
The aggregate amounts recognised during the year relating to key management personnel and their related parties, were as follows:
Key management persons Transaction Note
2007
$
2006
$
Allan Campbell Executive director services (i) 406,359 364,410
Ian Stuart-Robertson Quantity surveyors (ii) 143,907 162,791
Garry O'Meally Business expenses (iii) 16,967 9,624
(i) Mr Campbell’s services are provided through Argyll Capital Partners Pty Limited. Such services were provided in the ordinary course of
business and on normal terms and conditions. The amount payable for these services is shown in the Remuneration report.
(ii) Mr Stuart-Robertson is a director of John Hollis & Partners which provided quantity surveying services. Amounts were billed based at
normal market rates for such services and were due and payable under normal payment terms.
(iii) Mr O’Meally was reimbursed for expenses incurred conducting business on behalf the consolidated entity.

56
57
31. KEY MANAGEMENT PERSONNEL DISCLOSURES (cont)
Equity holdings and transactions
The movement during the reporting period in the number of ordinary shares of the Company held directly, indirectly or beneficially by each
key management person, including their related parties, is as follows:
Held at
1 July 2006
Received on
exercise of
rights
Received
as part of
compensation
Held at
30 June 2007
2007
Purchases
Directors
Allan Campbell 10,056,750 83,333 — — 10,140,083
Andrew Lukas 6,121,500 83,333 — — 6,204,833
Ian Stuart-Robertson 1,386,750 — — — 1,386,750
Martin Green 75,000 — 50,000 — 125,000
Garry O’Meally 139,180 — 50,000 — 189,180
Executives
Tim Herlihy (resigned 31/12/06) 100,000 — — — 100,000
Mark Tonkin 120,000 — — — 120,000
2006
Held at
1 July 2005
Received on
exercise of
rights
Received
as part of
Compensation
Purchases
Held at
30 June 2006
Directors
Allan Campbell 10,056,750 — — — 10,056,750
Andrew Lukas 6,121,500 — — — 6,121,500
Ian Stuart-Robertson 1,386,750 — — — 1,386,750
Martin Green 75,000 — — — 75,000
Garry O’Meally 109,180 — — 30,000 139,180
Executives
Tim Herlihy (resigned 31/12/06) — 100,000 — — 100,000
Mark Tonkin — 120,000 — — 120,000
Options and rights over equity instruments granted as compensation
The movement during the reporting period in the number of rights or options over ordinary shares in the Company held directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
AJ LUCAS annual report 2007
notes to the financial statements
Held at
1 July 2006 Cancelled Exercised
Granted as
compensation
Held at
30 June 2007
Vested
during
the year
Vested and
exercisable at
30 June 2007
2007
Directors
Allan Campbell 250,000 (166,667) (83,333) 250,000 250,000 — —
Andrew Lukas 250,000 (166,667) (83,333) 150,000 150,000 — —
Ian Stuart-Robertson — — — 150,000 150,000 — —
Executives
Kevin Lester 180,000 — — — 180,000 — 180,000
Ian Redfern 75,000 — — — 75,000 25,000 75,000
Brian Burden 30,000 — — — 30,000 — 30,000
Held at
1 July 2005 Cancelled Exercised
Granted as
compensation
Held at
30 June 2006
Vested
during
the year
Vested and
exercisable at
30 June 2006
2006
Directors
Allan Campbell 250,000 — — — 250,000 83,333 83,333
Andrew Lukas 250,000 — — — 250,000 83,333 83,333
Executives
Kevin Lester 180,000 — — — 180,000 — 180,000
Tim Herlihy 100,000 — (100,000) — — — —
Ian Redfern 75,000 — — — 75,000 25,000 50,000
Mark Tonkin 120,000 — (120,000) — — — —
Brian Burden 30,000 — — — 30,000 10,000 30,000

32. NON-KEY MANAGEMENT PERSONNEL DISCLOSURES
The consolidated entity has a related party relationship with its subsidiaries (see note 27) and joint ventures (see note 24). These entities
trade with each other from time to time on normal commercial terms.
Other than amounts owing to AJ Lucas (Hong Kong) Limited, on which interest is paid at 7.0% per annum, no interest is payable on
inter-company balances. The aggregate amounts included in the profit/(loss) from ordinary activities before income tax that resulted from
transactions between entities in the consolidated entity are:
2007 2006
$’000 $’000
Interest expense 749 737
Receivables:
Aggregated amount receivable from wholly owned controlled entities of the Company:
Coastal Sand Technologies Pty Limited 55 55
Less: Provision for doubtful loan (55) (55)
— —
AJ Lucas Joint Ventures Pty Limited 3,940 4,339
AJ Lucas Operations Pty Limited 14,386 24,618
Lucas Energy Pty Limited 4,552 2,876
AJ Lucas Coal Technologies Pty Limited 7,669 6,342
McDermott Drilling 1,207 —
Smart Electrical & Power Services Pty Limited 14 —
AJ Lucas (USA) Inc. 27 27
31,795 38,202
Payables:
Aggregate amount payable to wholly controlled entities of the Company:
Lucas Stuart Pty Limited 5,537 4,757
AJ Lucas (Hong Kong) Limited 10,680 10,419
16,217 15,176
33. EVENTS SUBSEQUENT TO BALANCE DATE
On 10 August 2007, the Company acquired 100% of the issued capital of each of Jaceco Drilling Pty Limited and Geosearch Drilling
Service Pty Limited trading as a partnership known as Capricorn Weston Drilling Group, a Queensland based drilling group, for a purchase
consideration of $21.0 million including assumption of existing debt of $4.5 million. The consideration is payable in instalments with
$10.0 million paid at settlement and the balance payable over three years in equal annual instalments. The initial consideration was paid
entirely out of borrowings. The financial effects of this transaction have not been brought to account in the 2007 financial report.
Other than this matter, there has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the
operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

58
59
DIRECTORS’ DECLARATION
1 In the opinion of the directors of AJ Lucas Group Limited (the Company):
(a) the financial statements and notes set out on pages 26 to 57 and the remuneration disclosures that are contained in the
Remuneration report in the Directors’ report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2007 and of their
performance for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001;
(b) the financial report of the consolidated entity also complies with International Financial Reporting Standards as disclosed in note 1;
(c) the remuneration disclosures that are contained in the Remuneration report in the Directors’ report comply with Australian
Accounting Standard AASB 124 Related Party Disclosures; and
(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2 The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer
and chief financial officer for the financial year ended 30 June 2007.
Signed in accordance with a resolution of the directors:
Allan Campbell
Director
27 September 2007
AJ LUCAS annual report 2007
DIRECTORS’ DECLARATION

Independent auditor’s report to the members of AJ lucas group limited
Report on the financial report and AASB 124
remuneration disclosures contained in the
directors’ report
We have audited the accompanying financial report of AJ Lucas
Group Limited (the Company), which comprises the balance sheets
as at 30 June 2007, and the income statements, statements of
recognised income and expense and cash flow statements for
the year ended on that date, a summary of significant accounting
policies and other explanatory notes 1 to 33 and the directors’
declaration set out on page 58 of the consolidated entity comprising
the Company and the entities it controlled at the year’s end or from
time to time during the financial year.
As permitted by the Corporations Regulations 2001, the
Company has disclosed information about the remuneration of
directors and executives (remuneration disclosures), required by
Australian Accounting Standard AASB 124 Related Party Disclosures,
under the heading “Remuneration report” on pages 22 to 25 of the
directors’ report and not in the financial report. We have audited the
part of these remuneration disclosures that are described as being
audited.
Directors’ responsibility for the financial report and the AASB 124
remuneration disclosures contained in the directors’ report
The directors of the Company are responsible for the preparation
and fair presentation of the financial report in accordance with
Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility
includes establishing and maintaining internal control relevant to
the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.
In note 1, the directors also state, in accordance with Australian
Accounting Standard AASB 101 Presentation of Financial Statements,
that the financial report of the consolidated entity, comprising the
financial statements and notes, complies with International Financial
Reporting Standards
The directors of the Company are also responsible for the
remuneration disclosures contained in the directors’ report.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report
based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require
that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable
assurance whether the financial report is free from material
misstatement. Our responsibility is also to express an opinion on the
remuneration disclosures contained in the directors’ report based on
our audit.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial report and
the audited remuneration disclosures contained in the directors’
report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the
financial report and the remuneration disclosures contained in the
directors’ report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation
of the financial report and the audited remuneration disclosures
contained in the directors’ report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall
presentation of the financial report and the audited remuneration
disclosures contained in the directors’ report.
We performed the procedures to assess whether in all material
respects the financial report presents fairly, in accordance with
the Corporations Act 2001 and Australian Accounting Standards
(including the Australian Accounting Interpretations), a view which
is consistent with our understanding of the Company’s and the
Consolidated entity’s financial position and of their performance and
whether the audited remuneration disclosures are in accordance
with Australian Accounting Standard AASB 124.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Auditor’s opinion on the financial report
In our opinion:
(a) the financial report of AJ Lucas Group Limited is in accordance
with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and the
Consolidated entity’s financial position as at 30 June 2007
and of their performance for the year ended on that date;
and
(ii) complying with Australian Accounting Standards (including
the Australian Accounting Interpretations) and the
Corporations Regulations 2001
(b) the financial report of the consolidated entity also complies
with International Financial Reporting Standards as disclosed in
note 1.
Auditor’s opinion on AASB 124 remuneration disclosures
contained in the directors’ report
In our opinion the remuneration disclosures that are described
as being audited and that are contained in the section titled
“Remuneration report” on pages 22 to 25 of the directors’ report
comply with Australian Accounting Standard AASB 124 Related Party
Disclosures.
KPMG
Malcolm Kafer
Partner
Sydney,
27 September 2007
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member firms affiliated with KPMG International, a Swiss cooperative.

60
61
AUSTRALIAN STOCK EXCHANGE ADDITIONAL INFORMATION
a) Distribution of ordinary shareholders (as at 31 August 2007)
Number of Security Holders
Securities held Ordinary Shares Rights
Redeemable
convertible notes
1 - 1,000 396 — —
1,001 - 5,000 1,059 2 —
5,001 - 10,000 521 5 —
10,001 - 100,000 476 8 2
100,001 and over 37 4 14
Total 2,489 19 16
25 shareholders held less than a marketable parcel of ordinary shares.
b) Twenty largest ordinary shareholders
Name
Number of Ordinary
Shares held
% of
Issued Shares
Andial Holdings Pty Limited 13,990,000 25.68
HSBC Custody Nominees (Australia) Limited 3,939,825 7.23
Amalgamated Dairies Limited 2,090,000 3.84
Gwynvill Trading Pty Limited 1,681,946 3.09
Forty Traders Limited 1,538,001 2.82
National Nominees Limited 1,392,140 2.56
McDermott Drilling Pty Ltd Superannuation Fund A/C 884,533 1.62
Viewjet Pty Ltd 771,000 1.42
Citicorp Nominees Pty Limited 741,429 1.36
ANZ Nominees Limited 554,498 1.02
Aust Executor Trustees NSW Ltd Patriot Small Co Fund A/C 550,000 1.01
Invia Custodian Pty Limited 429,700 0.79
Race Capital Pty Limited 400,000 0.73
Sandhurst Trustee Ltd JMFG Consol A/C 390,000 0.72
Jayaparittam Pty Ltd Aradhanan Paritta A/C 368,666 0.68
Aust Executor Trustees NSW Ltd Patriot Aust Share Fund A/C 350,000 0.64
JP Morgan Nominees Australia Limited 339,635 0.62
Ms Camilla Susan Hunter The Clouseau A/C 325,000 0.60
NZ Guardian Trust Company Ltd 01035700 A/C 290,950 0.53
IMAJ Pty Ltd Super Fund A/C 220,000 0.40
Total 31,247,323 57.36
AJ LUCAS annual report 2007
AUSTRALIAN STOCK EXCHANGE ADDITIONAL INFORMATION
c) Substantial shareholders
Name
Number of Ordinary
Shares held
% of
Issued Shares
Andial Holdings Pty Limited 17,490,000 32.10
Amalgamated Dairies Group 4,290,000 7.87
On-market buy back
There is no current on-market buy back.
Unquoted equity securities
As at 31 August 2007, there were 1,048,333 rights over unissued ordinary shares in the Company.
Redeemable convertible notes
The following entities hold more than 20% of the redeemable convertible notes on issue.
Name
Number of
Notes held
% of
Notes
HSBC Custody Nominees (Australia) Limited - A/C2 8,000,000 32.0%
Perry Partners International, Inc. 8,000,000 32.0%
Voting rights
Ordinary shares - Refer to Note 22.
Redeemable convertible notes - Refer to Note 18.
Rights - Refer to Note 21.

Directory
Company secretary
Nicholas Swan MA, ACA, MBA, AFIN
Registered office
157 Church Street
RYDE NSW 2112
Tel +61 2 9809 6866
Fax +61 2 9807 6088
Share registry
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
ADELAIDE SA 5000
GPO Box 1903
ADELAIDE SA 5001
Enquiries within Australia: 1300 556 161
Enquiries outside Australia: +61 3 9615 5970
Email: web.queries@computershare.com.au
Website: www.computershare.com
Stock exchange
The Company is listed on the Australian Stock Exchange with the code ‘AJL’. The Home Exchange is Sydney.
Auditors
KPMG
10 Shelley Street
Sydney NSW 2000
Bankers
ANZ Bank
20 Martin Place
Sydney NSW 2000
Quality certifiers (AS/NZS ISO 9001:2000)
BVQI
Australian business number
12 060 309 104
Other information
AJ Lucas Group Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.

62
63
Safety statistics 2006-07
Safety continues as a major theme at Lucas.
To further increase our emphasis on it, we’ve decided to include
details of every injury that’s required medical treatment or resulted
in lost time in our annual report.
Although all the sectors we operate in have inherent risks, the
exemplary performance of our underground drilling team – operating
in the highest-risk environment of underground mines – have set the
standard we intend to see across the group, with a single medical
treatment case and no lost time injuries. This is the third year they
have achieved this, so it is definitely not just “good luck”.
Pipeline and HDD employees and sub-contractors had four
medical treatment cases and two lost-time injuries.
Lucas Stuart employees have had a safe year, with one medical
treatment case and a single lost time injury. Unfortunately some of
Lucas Stuart’s sub-contractors haven’t matched this level of safety,
affecting our overall performance.
The aboveground drilling teams had the group’s highest injury
frequency rate, with seven lost-time injuries and one medical
treatment case.
AJ Lucas Group (employees & subcontractors)
Man-hours worked – total 1,286,779
Medical treatment cases 12
Lost time injuries (LTI) 17
Fatalities 0
Working days lost 87
LTIFR 12.8
Coal technology underground drilling
Man-hours worked 44,940
Medical treatment cases 1
Lost time injuries 0
Fatalities 0
Working days lost 0
LTIFR 0
Lucas Stuart
Man-hours worked 529,408
Medical treatment cases 6
Lost time injuries 8
Fatalities 0
Working days lost 27
LTIFR 15.1
The year’s incidents – Lucas Stuart employees
Cut to leg from sharp tie wire; required suturing.
Twisted knee when changing direction suddenly.
Grinder spark in eye; entered under safety glasses.*
Subcontractors
Plumber: cut to leg from nail left in concrete.
Formwork carpenter: stepped on nail.
Formwork carpenter: pinched finger between crowbar and
concrete; severe bruising.
Formwork carpenter: Cut to leg from sharp reinforcing bar;
required stitching.
Plumber: cut to knee on sharp reo bar in pit.*
Carpenter: nail gun pin penetrated finger.*
Prestress labourer: cut finger from sharp steel; stitches required.*
Formwork carpenter: pinched finger between bearer and U-jack.*
Formwork carpenter: nail flicked up hitting eye causing scratching.*
Crane dogman: tripped on reinforcing steel, placed hand out to
break fall and was cut on steel.*
Formwork carpenter: deep cut to wrist from sharp bolt.*
Drilling (above ground)
Man-hours worked 270,398
Medical treatment cases 1
Lost time injuries 7
Fatalities 0
Working days lost 45
LTIFR 22.1
AJ LUCAS annual report 2007
safety statistics 2006-07
The year’s incidents – underground drilling
Underground driller: strained forearm.
Pipelines & HDD
Manhours worked 442,033
Medical treatment cases 4
Lost time injuries 2
Fatalities 0
Working days lost 15
LTIFR 4.5
The year’s incidents: Lucas Pipelines employees
Cut by sharp steel item on pile cage, stitches required.
Arm severely bruised by a timber pallet failing.*
Hand caught in hydraulic ram bracket, stitches required.
Tripped in rain, and bruised hand in preventing fall.
Subcontractors
Fainted after Q Fever vaccination.
Wire strand from wire brush embedded in thigh.*
The year’s incidents – drilling
Rig hand: strained back.*
Rig hand: soft tissue injury to ankle when stepping on hose.*
Rig hand: slipped on oil, fell on sharp object required surgical
repair to knee.*
Rig hand: strained back lifting gas cylinder.*
Rig hand: fractured finger when heavy pipe fell on finger.*
Rig hand: strained lower back getting out of motor vehicle.
Mechanic: strained lower back working on vehicle.*
Wellhead operator: using Stillson to tighten pipe, slipped
and fell, fracturing tibia.*
* Lost-time injuries.
All other incidents noted are medical treatment incidents.
LTIFR is the lost time injury frequency rate in accordance with
Australian Standard AS 1885.1 - 1990 “Workplace injury and
disease recording standard”

Annual report credits
Writing & management Ad Verbum Pty Ltd
Design & production de Luxe & Associates
Photography
Richard Glover Photography – all photography except:
Western Corridor Project pages 12 & 14 – Chris Lee Photography
Coal seam gas drilling rig page 15 – Wricor Photography
Men at work on Pohokura landfall page 63 – James Heremaia
Printed in Sydney by Pettaras Press using soy-based inks on Novatech Satin, a Forest Stewardship Council certified stock.