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					                         2007
                         Annual Report




Sun Resources NL
    ABN 69 009 196 810
Corporate Directory


      Directors                                               Registered Office
      Dr Bradford Lawrence Farrell, B.Sc.                     4 Bendsten Place
      (Hons Econ Geol), M.Sc., Ph.D., FAIMM                   Balcatta, Western Australia 6021
      MMICA, CP(Geol), MIMM, CEng, MPESA                      Telephone:       (08) 9345 4100
      30 Sudbury Way                                          Facsimile:       (08) 9345 4541
      City Beach, Western Australia 6015
      Executive Director and Chairman                         Corporate Managers
                                                              APSL Pty Ltd
      Mr William John Ashby                                   4 Bendsten Place
      B. Sc. (Geophysics), Grad. Dip. App. Sc. – Geophysics   Balcatta, Western Australia 6021
      34 Norbury Crescent                                     Telephone:       (08) 9345 4100
      City Beach, Western Australia 6015                      Facsimile:       (08) 9345 4541
      Executive Director and General Manager
                                                              Auditors
      Alan Peter Woods                                        BDO Kendalls Audit and
      FCPA, FTIA, MAICD                                       Assurance (WA)
      10 Palmer Street                                        256 St Georges Terrace
      Attadale, Western Australia 6156                        Perth, Western Australia 6000
      Executive Director and Company Secretary
                                                              Solicitors
      Dr Philip Linsley, B.Sc. (Hons Geol) (London)           Simon Watson LL.B., B.Ec
      Ph.D. (London), MBA (Kingston)                          17 Ord Street
      4 Birds Hill Road                                       West Perth, Western Australia 6005
      Oxshott, Surrey KT22 ONJ
      England                                                 Share Registry
      Non-Executive Director                                  Computershare Investor Services Pty Ltd
                                                              Level 2, Reserve Bank Building
      Dr Wolf Gerhard Martinick                               45 St Georges Terrace
      B.Sc, Ph.D., MAIMM, CP(Env)                             Perth, Western Australia 6000
      60 Jutland Parade                                       Telephone:      (08) 9323 2000
      Dalkeith, Western Australia 6009                        Facsimile:      (08) 9323 2033
      Non-Executive Director
                                                              Bankers
      Company Secretary                                       National Australia Bank Limited
      Alan Peter Woods                                        District Commercial Branch
      FCPA, FTIA, MAICD                                       Unit 7, 51 Kewdale Road
      10 Palmer Street                                        Welshpool, Western Australia 6106
      Attadale, Western Australia 6156
                                                              Home Exchange
      Technical/Administration Office                          Australian Stock Exchange Limited
      Unit 16 / Subiaco Village
      531 Hay Street                                          Exchange Plaza
      Subiaco, Western Australia 6008                         2 The Esplanade
      Telephone: (08) 9388 6501                               Perth, Western Australia 6000
      Facsimile: (08) 9388 7991                               ASX Code: SUR
      Email:        admin@sunres.com.au
      Website:      www.sunres.com.au
Table Of Contents


                                                                                               Page No.

Corporate Directory                                                                         Inside Front Cover

Review Of Activities                                                                                2

Tenement Directory As At 30 June 2007                                                              16

Directors’ Report                                                                                  17

Auditor’s Independence Declaration                                                                 26

Statement Of Corporate Governance Practices                                                        27

Income Statements For The Year Ended 30 June 2007                                                  32

Balance Sheets As At 30 June 2007                                                                  33

Statement Of Changes In Equity For The Year Ended 30 June 2007                                     34

Cash Flow Statements For The Year Ended 30 June 2007                                               35

Notes To And Forming Part Of The Financial Statements For The Year Ended 30 June 2007              37

Directors’ Declaration                                                                             60

Independent Audit Report To The Members Of Sun Resources NL And Controlled Subsidiaries            61

Additional Shareholder Information As At 14 September 2007                                         63




Location of Interests




Sun Resources NL and Controlled Subsidiaries                  1                           2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Review Of Activities


A      OIL AND GAS EXPLORATION
Sun Resources NL (“Sun Resources”) has undergone significant change in the last twelve months with the USA becoming the cornerstone
for cash flow generation from production by the Company. The Company’s projected net cash flow in financial year 2008 is expected to
grow to between A$2.5 to A$3 million pa as a result of successful exploration and development activities in financial year 2007 in South
Texas and Louisiana.

Following a review of assets in February 2007, the Company implemented a policy of continually reviewing current projects and
comparing those to potential future opportunities. As a result current projects that were deemed to be underperforming, offered limited
prospectivity or leverage to Sun Resources were considered for disposal either by farming out the interest, selling out or withdrawing
from these projects.

The Company’s business strategy is to apply the cash generated to additional cash flow generating projects in South Texas and
Louisiana and also to higher impact (company making) opportunities in Southeast Asia. A start on the latter objective was made by
participation late in financial year 2007 in the 20th Bid Round in Thailand process by tendering with other experienced companies on
highly prospective acreage for both oil and gas in the Chumphon and Phitsanulok Basins.

During the last twelve months, Sun Resources participated in the drilling of seven oil and gas wells (six wells on South Texas Project
Margarita prospects and one on a development project in the Lake Long Field area in Louisiana) and in a number of work overs and
completions. These workovers and completions are currently ongoing on five wells in the Flour Bluff Gas Field Project, South Texas.
The majority of these activities were successful and a significant increase in cash flow will be seen in financial year 2008.

The Company expects to participate in a further four to six wells in financial year 2008, mainly exploring the more high impact and
productive deep prospects delineated from 3D seismic on its South Texas Projects.




                                          North American
                                        Energy Consumption




1      USA - EXPLORATION AND DEVELOPMENT ACTIVITIES
Sun Resources increasing presence in the USA is due to excellent investment opportunities offered to small companies namely;
        •      An extremely large market for energy, with a demand supply imbalance that drives costs
        •      Ready access to infrastructure, even for smaller discoveries
        •      Lower technical risk within prolific hydrocarbon bearing basins
        •      Low exploration and development costs by world standards for onshore projects
        •      High energy pricing in particular for gas.

Gas prices received for production through the financial year have ranged from US$6 to 8.40 per thousand standard cubic feet (“mscf”),
which is some 3+ times the price received for gas within Australia. It is expected that future gas prices will continue to hold at similar
levels probably more in the range of US$7 to 8 per mscf. Gas price is a reflection of the current (and growing) 4 trillion cubic feet (“tcf”) pa
gas imports over 19 tcf pa gas production (23 tcf pa gas consumption). Gas price is also being underpinned by the prospect of increased
importation of liquefied natural gas (“LNG”) to satisfy demand.

Sun Resources current exploration and production emphasis is on both oil and gas in conventional geological settings and within
conventional reservoirs, principally located in Texas (Flour Bluff Gas Project, Project Margarita and Project Redback on the South Texas
Gulf Coast), Louisiana (Lake Long Project) and California (Eagle Oil/Gas Development Project in the San Joaquin Basin).
2007 ANNUAL REPORT                                                  2                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                        A.B.N. 69 009 196 810
Review Of Activities (Continued)




Project Interests USA
Planned 2008 Drilling




1.1     Hollywood Prospect, Lake Long Field, Louisiana – 10.00% Interest

In early April 2007, Sun Resources, through its USA subsidiary, Sun Delta Inc, (“Sun Delta”) farmed into a development project on State
Lease SL328 in the Lake Long Field area in Lafourche Parish, Louisiana Gulf Coast to earn a 10% Working Interest (“WI”) from farmee
and local operator, Kriti Exploration, Inc (“Kriti”). The farmin involved participation in the test of the Hollywood Prospect that lies within
the 1,325 acre lease that has been held by production (“HBP”) since the field was discovered in 1938.

Sun Delta entered the project on USA standard industry promoted terms of one third for one quarter on the drilling cost of the well to
the casing point, with well completion costs at earned WI% to earn in all the productive objective intervals between 11,000 to 13,500
feet vertical depth within a 160 acre producing unit around the initial well. Participation in further wells in the lease is on a non promoted
basis at Sun Delta’s 10% WI. Resulting production can be run through Kriti’s nearby production facilities based on a mutually agreeable
Production Handling Agreement. Currently there is spare capacity for 6 million standard cubic feet of gas per day (“mmscfgd”) per day
with associated condensate.

Historically the deepest production in the Lake Long Field was from the Upper Hollywood Sands. In 2004, the Middle Hollywood Sands
was found to be productive in the Palace #1 well which came on production at a daily rate of 6.8 mmscfgd with 363 barrels of condensate
(“boc”). Cumulative production to date from the Palace #1 well is 3.8 billion cubic feet of gas (“bcf”) plus 114,916 boc. The well is still
producing at 3.6 mmscfgd with 56 boc. The deeper Lower Hollywood Sands were also found to be gas productive in the field. Arco
tested the Lower Hollywood sand in an off structure well to the prospect, but did not make a completion due to a thin pay column and
sand production on test.

The Hollywood Prospect is a faulted structural high with Lower, Middle and Upper Hollywood Sands objectives with pre drill cumulative
unrisked potential of 21 bcf and 760,000 boc in the three objectives. The prospect was considered relatively low risk as there is good
3D seismic amplitude support of the multi-play targets which were interpreted as indicating gas. There are also nearby Hollywood
Sandstone productive pay analogues and the well location is located up dip from wells that have produced up to 6.8 bcfg from the Upper
Hollywood Sands.

The SL328 #9 well on the prospect commenced on 15 May 2007 and reached total depth of 13,284 feet (4,049 meters) on 4 July 2007.
Electric logs confirmed the presence of reported hydrocarbons in drilling, particularly from the Middle and Upper Hollywood Sandstones
where 42 feet (13 meters) of net log pay was indicated. Unfortunately the Lower Hollywood Sandstone appeared water wet from logs
and it is probable the trap structure had been breached at this level.

A decision was made to complete initially the 29 feet of net pay in the Middle Hollywood Sands behind pipe by perforating 21 feet of pay
and at a latter date on production decline, the 13 feet of net pay in the Upper Hollywood Sands by a recompletion through tubing. The
Middle Hollywood Sands was successfully completed and pay flow on restricted testing averaged 2.364 mmscfgd with 55 boc with no
water at 4,584 psig flowing pressure on 10/64” choke. Reservoir analysis suggested the well should easily produce at 4 mmscfgd with
+/- 200 boc. The well was shut in and a small permanent production platform built around the well head and well equipment installed.
Tie into sales was rapid through the Operator’s gas processing plant some 800 metres way and production, with sales to market should
be underway by mid September 2007 at the planned rate of 4 mmscfgd with associated condensate.

Sun Resources NL and Controlled Subsidiaries                        3                                                  2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Review Of Activities (Continued)


The lease has a 12 month continuous drilling option. The follow up potential of up to a further 30 bcfg and 1,085,000 boc in the
Hollywood objectives within the lease will be the subject of probable further drilling near option anniversary June quarter 2008 when all
the SL328 #9 well geological information is added to the project database and analysed.

Participants in the Hollywood Prospect production lease are Sun Resources 10.00%, Kriti (Operator) 55.90%, First Australian Resources
Limited (“First Australian”) 10.19%, Amadeus Energy Limited 21.91%, Parker Fannin Properties Ltd 1.00% and JVR Petroleum, Inc
1.00%.

1.2    Flour Bluff Gas Project Development, Texas – 20.00% to 24.167% Interest

The Flour Bluff Gas Project involves the redevelopment of three semi depleted gas fields on the outskirts of Corpus Christi on the
South Texas Gulf coast. These fields have produced 1.3 tcf of gas with 64 mmbo over a 65 year period with production coming from
40 separate reservoirs at shallow to moderate depths (above 2,400 metres). These shallow-moderate depth reservoirs are now largely
depleted, but significant potential reserves, up to 210 billion cubic feet of gas gross equivalent (“bcfge”) are prognosed to be reservoired
within the under developed deeper section between 2,750 to 3,600 metres depth. It is these reserves that are being targeted in the
redevelopment of Flour Bluff.
Due to the operation of the field over a long period of time, existing gas production infrastructure is extensive and allows for immediate
gas sales after wells have been drilled and or re-completed.
Sun Resources’ interests in the various fields are; West Flour Bluff Gas Field and Pita Island Gas Field 20.0000% and East Flour Bluff
Gas Field 24.1667%.

Phase 1 of the Development Program
Phase 1 of the development consisted of a three well exploration program, BG Webb #1 in the West Flour Bluff Field and D-10 and D-24
in the East Flour Bluff Field. These wells were principally designed to test the prospectivity of the deep Frio K sands and to prove up
the remaining potential within the drainage areas of the wells of the Frio J and upper K sands. This work was completed in mid March
quarter 2006. Well performance did not meet expectations; however production did improve to a total over the fields of 5.2 mmscfgd.
Further outcomes of the drilling program and in conjunction with work overs on existing wells, showed that the deep K sands below the
K15 level had sub economic minor gas saturations and that potential Miocene sands (above 2,400 meters) had been effectively drained
by prior production. With the above wells and workover results a new reserve position was independently determined by consultants
Ryder Scott effective 1 December 2005. The reserve review had a significant increase in the Proved (1P) category (the higher degree
of certainty category), with this component as a percentage of 3P reserves (Proved, Possible and Probable) increasing to 54% versus
38% from the prior review in October 2004.




                                            Well Head Installations
                                               East Flour Bluff
                                                  Gas Field




2007 ANNUAL REPORT                                                    4                          Sun Resources NL and Controlled Subsidiaries
                                                                                                                      A.B.N. 69 009 196 810
Review Of Activities (Continued)




Proposed 3P Reserve Drilling Locations
Flour Bluff Gas Project




A review of the Phase 1 well engineering and completion program on the BG Webb #1 and D-24 wells was commissioned (in part
undertaken by Sun Resources) and is currently ongoing. Results to date, including an independent study, have shown the less than
expected performance of reservoirs completed in BG Webb #1 and D-24 is not due to problems of reservoir per se but is most likely due
to inappropriate drilling and completion practices (over gauge hole when drilling and fracture stimulation procedure). The problem of
over gauge holes can be overcome by the use of synthetic based drilling mud with other additional minor changes to drilling procedures.
Studies to improve fracture stimulation procedures are the subject of the ongoing work. It is Sun Resources’ opinion that the individual
reservoirs when properly drilled and completed remain capable of production rates as high as 2 to 5 mmscfgd with a high recovery of
in place volumes.
Phase 2 of the Development Program
Phase 2 of the development program involves drilling up to 8 new wells targeting 40.9 bcfe of 3P recoverable reserves in the Frio J and
K sands in both the East and West Flour Bluff Gas Fields. The initial well planned in Phase 2 is the FB #1 well in the West Flour Bluff
Gas Field. Workovers of existing wells will also be conducted to optimise production and reserves. FB #1 is updip of the Petty #2 well,
which was a good producer that has produced nearly 2.6 bcfe from the J17 sand and still has about 1.2 bcfe in the remaining J sands.
Some 6.73 bcfe reserves is predicted in the K15, J33 and J17 sand of FB #1 by most current Ryder Scott report.
To date commencement of the Phase 2 program has been delayed, initially due to the lack of deep rigs as a consequence of a back up in
well schedule of the Operator’s favoured drilling contractor, and then in December 2006, the rescheduling of drilling by the Operator and
another member of the Joint Venture. These two parties have collectively a 49% vote and block a joint venture operation. These parties
have elected not to fund the FB #1 well until at least the latter half of June half year 2008. Commencement of Phase 2 is a priority for
Sun Resources and this has been communicated to the Operator. Sun Resources is examining other alternatives to enable the well to
be drilled with some certainty; this includes a non joint venture operation that could be managed by Sun Resources.
In the interim, the Operator commenced a workover program in May 2007 on East Flour Bluff Field wells D-13, D-18, D-19 and D–24,
and on West Flour Bluff well, Smith #1. This workover program will run until October 2007. The aim of the program is to arrest declining
production and bring daily production to above 3 mmscfe from the current (May) 1.6 mmscfe level by carrying out completions on up
hole reserves behind pipe in these wells with immediate delivery of ensuing production to the gas processing plant for sales. These
workovers are the result of Sun Resources’ active lobbying of the Operator and were considered and approved at a technical meeting
in Houston in early February 2007.
Sun Resources NL and Controlled Subsidiaries                     5                                                 2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Review Of Activities (Continued)


Preliminary results to date of the workover program have met and exceeded targeted flow rates from the individual wells recompleted.
and the objective of raising overall field production above 3 mmscfde. Successful workovers have been achieved on the D-13 and
D–24 wells with workovers still progressing on the remaining wells. The J64 sand in the D-24 well was completed and resulted in a final
stabilised gas flow to the gas processing plant for sales in July 2007 of 635,000 scfd with 26 boc (791,000 scfdge gas) and 8 bw at 1,137
psig flowing pressure on 10/64” choke. The forward plan is to clean up and stabilise the current 791,000 scfdge gas flow for 3 months
before fraccing to enhance flow from the J64 zone and to commingle gas production with presently shut in J90 sand gas. The J64 sand
has 3.68 bcfg and 92,000 bo proved reserves.

The J02 sand in the D-13 well was completed and gas flowed to the gas processing plant for sales in late August 2007 at rates of up to
1,720,000 scfd with 24 boc (1,864,000 scfdge) and <1bw at 3,275 psig flowing pressure on 10/64” choke. The J02 sand is estimated to
have 0.5 bcfge of reserves. The I94 and Upper I80 sands above the J02 were also considered for completion, but will now remain behind
pipe for 2-3 years until the J02 has produced. These two zones will then be perforated and production commingled with remaining J02
production.




Location of South Texas
Projects




1.3     Project Margarita, Texas – 20.00% to 37.50% Interest

Sun Resources is participating in Project Margarita, the exploration of a prolific oil and gas prospective portion of the onshore Texas
Gulf Coast through a ground floor Joint Venture with Wandoo Energy, LLC (“Wandoo”). Wandoo is the project operator. This opportunity,
which commenced in December 2005, has a 530 km2 3D seismic data base covering portions of four main producing trends. Sun
Resources holds a 37.5% WI in the overall project and will farm down to a carried 20.00% WI in the drilling of high graded prospects.

Technical work by the joint venture on the 3D seismic data has identified > 50 leads and prospects in prospective stratigraphic/structural
settings at depths ranging from 1,000 to 4,000 metres. These leads and prospects have been systematically evaluated and high graded,
and eventually ranked for drilling.

Historic production and plays in the project area and environs are Frio and Vicksburg sands at <2,000 metres depth and deeper Yegua
and Wilcox sands between 2,000 and 4,000 metres depth. The Yegua and Wilcox are under explored with only five wells >2,400 metres
drilled within the 530 km2 3D seismic area, with four of these drilled prior to the 3D seismic. A significant number of high impact Wilcox
gas prospects have been recognised and these lie along trend from significant recent discoveries. These prospects are the high upside
of the project.




2007 ANNUAL REPORT                                               6                             Sun Resources NL and Controlled Subsidiaries
                                                                                                                    A.B.N. 69 009 196 810
Review Of Activities (Continued)


Shallow Wells Drilling Program

In the December 2006 quarter, a farmout on a six well drilling program of shallow gas prospects at <2,000 metres depth was agreed
with AIM listed Empyrean Energy PLC (“Empyrean”). Empyrean committed to drilling back to back three of six wells from the inventory
of shallow gas prospects. These three wells were called the Initial Wells Program. A commercial success in any of the Initial Wells
triggered the drilling of a further three wells back to back on prospects from the shallow prospect inventory (the Final Wells Program).
Empyrean also had the election to participate in further shallow wells in addition to the Initial and Final Wells and also to farm into the
drilling of three of the deep prospects (>2,000 metres depth) on the same promoted terms and conditions as the shallow drilling program.
Final WI% on well completions on individual prospects are Sun Resources 20%, Victoria 20%, Wandoo 16% and Empyrean 44%.

Initial Wells Program
The Initial Wells Program on the El Viejito, Dos Dedos and Milagro Prospects was successfully completed in March quarter 2007 with
gas discoveries and gas flows to surface on all prospects. From log analysis and side wall core data Milagro was also deemed to be
an oil discovery, most likely to produce gas initially then to switch over to oil at a later date, ie the feature is oil bearing but with a high
gas ratio. Reservoir engineering analysis calculated potential reserves within the structure at 150,000 bo, but further production and
pressure data is required to more accurately predict potential reserves. Milagro #1 was connected to a gas sales line on 3 April 2007
producing at 532,000 scfd with 2 bod and no water. Since that date oil production has gradually become more prominent with oil peaking
at 87 bod with 92,000 scfd in August 2007.

Dos Dedos #1 was connected to the gas sales line on 26 April 2007 and commenced production from the uppermost gas bearing sand
at 150,000 scfd. Towards the end of May 2007 production choked off due to water production. Rather than attempting a workover
operation on the thin hydrocarbon bearing interval, it was decided to plug and abandon the well and transfer the gas facility to the
successful Dona Carlota gas discovery made in the Final Wells Program.

El Viejito #1 gas was tested and flowed to surface. However, the well was not connected to a sales line because further testing resulted
in water coning of the thin gas reservoir due to excellent, though atypical vertical permeability of the reservoir. Based on the analysis of
reservoir data, the gas bearing interval without water coning would have been an excellent producer, producing at a rate >1 mmscfgd if
a base seal was present separating the gas from the water.




       Drilling activity at Milagro #1 with subsequent oil tank
       battery on completion




Sun Resources NL and Controlled Subsidiaries                         7                                                   2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Review Of Activities (Continued)


Final Wells Program
As advised above, a commercial success in any of the Initial Wells triggered the funding by Empyrean of the drilling of a further three
wells, back to back, on prospects from the shallow prospect inventory under the same terms and conditions as the Initial Wells. The
three chosen prospects, Agavero, Dona Carlota and Climaco, were also analogues of Frio and Vicksburg fields in the immediate area.

The Final Wells drilling program, commenced in early June 2007 and ran through to early August 2007. Its scheduled start was delayed
by record unseasonal rains and associated flooding which continued through the drilling and completion program. Notwithstanding
this, the program was successful with two gas discoveries being made in Frio sands on the Dona Carlota and Agavero Prospects.
The prominent seismic amplitude anomalies in the Lower Vicksburg Formation sands in the Climaco Prospect were due to tight gas in
siltstones rather than gas in productive sandstone reservoirs.

Dona Carlota #1 on completion and cleanup in mid August 2007 flowed 1,024,000 scfgd with no water as predicted. It was brought onto
production at a reduced rate of 550,000 sfd as sand control of the excellent reservoir is needed. This operation is currently underway
and when completed production will be raised to 1 mmscfd. Agavero #1 on completion and clean up in mid August 2007 flowed
647,000 scfgd with no water and has also been hooked up to sales.

Deep Wells Program

Five prospects are in the deeps gas prospect inventory and have potential unrisked recoverable volumes of 30 to 200 bcfeg. These
prospects have been mapped from 3D seismic and have direct hydrocarbon indicators associated with Cook Mountain and/or Wilcox
sand objectives. The first prospect to be drilled in early 2008 is the lower risk Cazadores Prospect with stacked Upper Wilcox sand
objectives below 14,400 feet to the 15,500 feet total well depth in a three way dip closure. Unrisked recoverable reserves are up to
61bcfeg, if hydrocarbons are present. Depending on the outcome of the current farmout campaign Sun Resources will retain a 15 to
20% WI level in the well and prospect.

1.4    Project Redback, Texas – 20.00% to 37.50% Interest

Following the successful outcome of the start of the initial shallow drilling program on the Project Margarita area, Sun Resources further
strengthened its exploration activities through a further joint venture with Wandoo. The new joint venture, called “Redback”, is on a
393 km2 3D seismic data base covering a small portion of an again highly productive, onshore Gulf Coast, oil and gas trend in South
Texas. This regional trend to date has produced some 1.2 billion barrels of oil (“bbo”) and 6 trillion cubic feet of gas (“tcf”) from near
surface to 10,000 feet depth.

The objective of the joint venture is to target the very under explored prospective stratigraphy below 10,000 feet depth in the Redback
3D seismic data base. A pilot screening program on the Redback 3D seismic data, in part funded by Sun Resources, has already
recognised at least 7 good prospects in the 12,000 to 15,000 feet depth range with accompanying seismic attributes thought to reflect
the presence of significant hydrocarbons.

A number of these prospects have multiple targets with high upside potential for both gas and accompanying condensate. One prospect
in particular has an upside to 116 bcfg with 6 million boc (ie up to 152 bcfge). On trend to the Redback area are production analogues
of the recognised prospects from the same targeted stratigraphic level. Individual wells from these analogues have produced up to 10
bcfg plus 250,000 boc at high initial daily well production rates of up to 10 mmscfgd with 300 boc.

Interests in the Joint Venture are Sun Resources 37.5%, Victoria 37.5% and Wandoo 25%. The basic terms of the Joint Venture are
similar to the Margarita Project whereby Sun Resources and Victoria will fund a six months evaluation of the seismic data ending
30 October 2007 for a first right of refusal to earn a 75% WI in any individual prospects generated within the Redback area by drilling a
well on individual prospects on a non promoted “ground floor” basis. With respect to completing successful wells, Sun Resources and
Victoria will only carry part of Wandoo’s 25% WI (i.e. a 10% WI) in the first well on any prospect to completion.

The joint venture aims to fast track Project Redback to drilling a high graded prospect in March quarter 2008. The joint venture will
expose Sun Resources to a choice of quality drillable prospects of various risked size potential on a ground floor basis. The Company
will mitigate drilling risk and offset the cost of any drilling by farming portion of its current 37.5% WI in individual prospects to a 20.0%
WI level.




2007 ANNUAL REPORT                                                 8                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                       A.B.N. 69 009 196 810
Review Of Activities (Continued)




Location of Eagle Development,
San Joaquin Basin, USA




1.5    Eagle Oil & Gas Development, California – 10.00% Interest
The Eagle Oil/Gas Development Project is a stratigraphic trap prognosed to contain gross recoverable volumes ranging from a 8.8
mmbo and 33 bcfg case (mean estimate) to a 34 mmbo and 58 bcfg case (P10 estimate) in the Eocene age Upper and Lower Gatchell
Sandstone. These volumes and reservoir were the target of the drilling and testing of the Eagle North #1 well in 2006. Eagle North #1
established the presence of moveable oil in the target Gatchell sand zone over 177 metres of horizontal extent, ie from 4,209 to 4,386
metres measured depth (“MD”) in the well.
Regrettably Eagle North #1 could not be tested due to completion assembly mechanical failures. In particular, the production valve
in the completion string was assessed to be too damaged to allow a successful retrieval and replacement of the completion string,
and therefore on a risk assessed basis, continuing operations were not justified. It was determined that further funds, with a higher
probability of successfully testing the Gatchell sands, would be better spent on a possible potential future re-entry and side track from
the current Eagle North #1 well bore.
The Eagle Oil Pool, now geologically derisked by the well results, remains a valid target. It is considered that a horizontal well such as
Eagle North #1 should have a three to five fold flow rate to that of the vertical Mary Bellocchi-1 well on the oil pool. Mary Bellochi 1
flowed 223 bod and 0.7 mmscfgd from a 12 metre interval of Lower Gatchell Sandstone. This also provides sufficient encouragement
to attempt to achieve a successful flow test of a well on the Eagle Oil Pool, and hopefully, eventually its development, through a multi
horizontal well development.
During the June 2007 half year, an independent review and report into the operations carried out within the Eagle North #1 well was
carried out as part of the planning process for a potential future operation on the Eagle Oil Pool. This review was extended and critically
examined all past well operations with the objective to significantly improve the drilling, evaluation and completion performance of any
future well. The outcome of the report was a recommendation to the Operator to drill a new well with a larger bore hole diameter to target
the good oil shows seen in the 177 metres of horizontal well in the Lower Gatchell Sandstone of Eagle North #1 rather than a re-entry of
the current suspended Eagle North #1 well bore. The small diameter of the final Eagle North #1 bore hole allows no flexibility in carrying
out operations and limits the selection of down hole equipment used in drilling, logging and testing and hence carries the high risk of a
repeat outcome as Eagle North #1.
Post financial year, the majority of the joint venture decided to join the Operator on a farmout of the Eagle Oil Pool Development. The
joint venture is offering a farminee, who will become the new project Operator, the choice of drilling; Shannon-1, a modest, low ,risk step
out well to the Mary Bellochi-1 well, testing the 1.2 mmbo and 3 bcfg potential of the small structural closure on the regional stratigraphic
trap; or Tulago-1, an aggressive step out 1,200 metre updip of the Mary Bellochi-1 well, testing the mean case (8.8 mmbo and 33 bcfg)
potential of the stratigraphic trap. The exact timing of either well is currently unknown, but is tenatively placed in early 2008 and is
obviously subject to a successful farmout and availability of a deep rig and experienced personel.
Current project equities on completion of the Eagle North #1 well are Sun Resources (10%), Operator Victoria (20%), Empyrean Energy
(38.5%), First Australian (15%), Lakes Oil NL (15%) and a USA private investor (1.5%).
Sun Resources NL and Controlled Subsidiaries                       9                                                   2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Review Of Activities (Continued)




Project Area, Malta




2       OFFSHORE MALTA FARMIN, SOUTHERN MEDITERRANEAN SEA
2.1     Area 4, Block 3, ESA and Area 5 – 20.00% Interest

Anadarko International Energy Company (“Anadarko”), a subsidiary of Anadarko Petroleum Corporation (NYSE:APC), concluded a
Participation (Farmin) Agreement in June 2005 with the then Malta Joint Venture comprising Sun Resources (20%) and Pancontinental
Oil & Gas NL (“Pancontinental”) (80%). This agreement provides for Anadarko to earn an interest by funding agreed activities on two
contiguous permit areas - ESA Area 4, Block 3 and ESA Area 5. These ESA’s total 14,800 square kilometres and are located on the
Pelagian Platform in southern Maltese waters abutting Tunisia and Libya.

The farmin activities to be carried out by Anadarko are further infill 2D seismic on ESA Area 5 and for Anadarko at its option to enter into
a Production Sharing Contract with Sun Resources, Pancontinental and the Government of Malta to drill up to two wells within the areas.
Anadarko, under the Agreement, has options to earn a 65% interest in the Production Sharing Contract on completion of one well, and
to increase its interest to 75% by again drilling a further well at no cost to Sun Resources and Pancontinental.

Large prospects such as Chianti and Limoncello were delineated in 2004 by Sun Resources and Pancontinental in ESA Area 5, and
these have speculative reserve potential, ranging from a mean recoverable oil potential of 455 mmbo for Chianti to 968 mmbo for
Limoncello. The potential estimates are based on neighbouring commercial field analogues in Libyan and Tunisian waters.

At the end of June 2005, Anadarko was tendering for a seismic vessel for the 2D infill seismic program in ESA Area 5 that was expected
to take four weeks in September 2005. However, at the Maltese Government’s request, the Joint Venture suspended the seismic survey
to assist the government in facilitating the resolution of the maritime border issues it has with both Tunisia and Libya. These border
issues affect the western and southern boundaries of ESA Area 5. The 2004 seismic survey was conducted within undisputed Maltese
waters away from these unresolved border areas and it was this seismic survey that revealed a number of significant world class
prospects and leads in undisputed Maltese waters which motivated Anadarko to conclude a Participation (Farmin) Agreement with Sun
Resources and Pancontinental.

Progress, albeit slow, continues to be made on resolution of the maritime borders, particularly between Malta and Tunisia and Malta and
Tunisia. An Agreement between Malta and Tunisia was signed on 27 February 2006 for joint oil and gas exploration and exploitation
in zones of the Continental Shelf located between Malta and Tunisia which in part encompasses the western area of the ESA in Area
5. Since the agreement, Malta and Tunisia, through a joint expert committee reporting to the two country’s Ministers of Foreign Affairs,
Dr Frendo (Malta) and H.E. Abdallah (Tunisia) have been working on the determination of the exact coverage of the joint exploration
and exploitation zone between the two countries.


2007 ANNUAL REPORT                                               10                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                      A.B.N. 69 009 196 810
Review Of Activities (Continued)


Similar discussions between Malta and Libya are current on resolving the southern boundary issue in the southern area of the ESA, and
it is hoped that a similar agreement between Malta and Libya will be forthcoming in the very near future. A number of meetings have
occurred between the two governments during the period February to June 2007 with both parties agreeing to identify opportunities for
co-operation on maritime boundaries, including determining territorial boundaries for oil and gas exploration.

Anadarko continues to actively monitor and lobby on the border situation with the Government of Malta and is keen to commence
seismic and has been proactive by seeking tenders and or seeking to align seismic surveys that they have, or with third parties in
adjacent Tunisian waters, with potential seismic operations within the Malta ESA’s. This objective has been communicated to Maltese
government officials. Seismic activity in the Mediterranean Sea is seasonal in nature being restricted to the months of February to
September because of inclement weather associated with the winter season in the Mediterranean Sea. The joint venture is hopeful that
a decision on the boundary issue will be resolved to carry out seismic in the weather window commencing February 2008.




                                                                                          Bangkok

                                                                         Burma


                G30/50 Bid Block outline in Gulf                                        G30/50
                of Thailand (looking north to
                Bangkok)

                                                         Thailand




3      THAILAND
Sun Resources participated in the 20th Bid Round in Thailand in late financial year 2007 and after reviews of available technical data on
specific blocks lodged two block bids post financial year. Thailand offers explorers large acreage positions in prospective sedimentary
basins through a transparent annual bidding system. The country has an excellent fiscal regime for oil and gas development in a lower
cost operating environment with highly skilled local technical and engineering services personnel.

Notwithstanding Thailand produces significant oil and gas, it is a net energy importer because of its growing population and rapid
industrialisation. As such energy pricing is extremely favourable with oil at current world prices and gas approximating US$4 to 5 per
mcf at the well head. Gas is the main source of energy and prices are predicted to rise further because of energy demand coupled with
a shortage of domestic gas reserves.

Sun Resources bid on two blocks, G3/50 - offshore Gulf of Thailand and L20/50 - onshore Thailand. Both of these blocks offer an
excellent opportunity for encountering commercial hydrocarbon accumulations. The results of the bids will not be known until early
October 2007.

3.1    Offshore Block G3/ 50, Chumpon Basin – 50.00% Interest

The G3/50 block is located within the Chumphon Basin in the western portion of the Gulf of Thailand. The 8,141 km2 block was assessed
by Sun Resources as Operator of the bidding consortium (Sun Resources 50% and Adelphi Energy Limited 50%) to have significant
reserve potential for both oil and gas, with a significant untested gas/condensate discovery having already been made within the block.
This discovery has a potential of 150 bcfg with 15 million boc and natural gas liquids. The highly prospective nature of the block was
confirmed as it attracted a significant number of bids, eight in total.




Sun Resources NL and Controlled Subsidiaries                        11                                            2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Review Of Activities (Continued)



                                                                                           Application L20/50,
                                                                                           Phitsanulok Basin, Thailand




3.2    Onshore Block L20/50, Phitsanulok Basin – 50.00% Interest

The L20/50 block located in the southernmost portion of the Phitsanulok Basin is targeting oil. Carnarvon Petroleum Ltd (“Carnarvon”)
and Sun Resources were the sole bidders on the 4,000 km2 block. The Phitsanulok Basin is the prolific onshore basin in Thailand and
contains the Sirikit Field. Sirikit is the largest onshore oil and gas accumulation in Thailand with reserves in excess of 200 mmboe and
is located approximately 40 kilometres to the northwest of L20/50. Carnarvon, as Operator of the bidding consortium, will utilise their
onshore Thailand operating experience from their successful exploration and development of the Phetchabun Basin an analogue to
the Phitsanulok Basin, 50 kilometres to the east. Carnarvon has a 40% interest in four oilfields in the Phetchabun basin analogue, two
of which are new discoveries. These fields have 7.5 mmbo (P2) reserves and total field production has recently increased from 50 to
1,400 bod.

4      CARNARVON BASIN, WESTERN AUSTRALIA




Carnarvon Basin Permits,
Western Australia




2007 ANNUAL REPORT                                              12                            Sun Resources NL and Controlled Subsidiaries
                                                                                                                   A.B.N. 69 009 196 810
Review Of Activities (Continued)


4      CARNARVON BASIN, WESTERN AUSTRALIA (Continued)
During the financial year Sun Resources was part of various consortiums of companies exploring four permits in the Dampier Sub-Basin
(WA-254-P, WA-257-P, WA-261-P and WA-340-P). Near financial year end exploration activity was reduced to two permits (WA-254-P
and WA-257-P) because of Sun Resource’s policy of continually reviewing assets and selling out or withdrawing from assets that have
reduced prospectivity or do not match the Company’s business model. To the north and south of these remaining permits lie substantial
oil fields (Cossack, Wanea, Wandoo, Stag) and gas fields (Angel, North Rankin, Goodwyn). It is probable from developments outlined
below that 4 to 6 wells will be drilled on these permits in the next few years commencing first half of 2008.

4.1       WA-254-P - 7.86% To 9.25% Interest

During the financial year, the Operator of the permit, Apache Energy Northwest Pty Ltd (“Apache”) has directed activities to maturing
prospects, Duomonte and Dr Zeus, for drilling. However new deeper levels of interest in structures, particularly in matured prospects,
are now indicated in new seismic reprocessing carried out on the permit’s seismic database that need to be resolved before drilling can
take place. From developments outlined below two to three wells will be drilled in 2008 and onwards in the last three year term of the
permit which was granted renewal in the March 2006 quarter.

Even though the permit to date has exceeded the required statutory well commitments, the Operator is hoping to drill prospects as
they mature. The driver for this is the gradual decline of the nearby Legendre Oilfield facility which is owned by Apache, the majority
participant in WA-254-P. Any discoveries made in the graticular blocks comprising the permit nearby to the Legendre Oilfield facility
could be tied back to this facility with a substantial saving to the joint venture in the cost of infrastructure.

The Duomonte Prospect remains as a potential drill candidate, but now in 2008, because of the now recognised potential of deeper
formations from recently acquired reprocessed seismic data (the Panaeus refresh data) and the need to integrate this information into
the prospect data base. The Duomonte Prospect consists of two similar sized lobes, one in WA-254-P the other in adjacent WA-1-P. WA-
254-P potential ranges from 20 (mean) to 44 mmbo (P10) with primary target formation (pre recent seismic developments) being shallower
Legendre Formation sands at approximately 2,500 metres depth.




WA-254-P, Prospects
and Leads




Dr Zeus (formerly Lead Z) is a mid M. australis (Saffron Sand equivalent) stratigraphic trap with some structural closure, outlined by
a prominent amplitude anomaly. Prospect potential ranges from, 23 (mean) to 52 mmmbo (P10). The prospect is also available for
drilling and as with Duomonte, the deeper seismic events in Dr Zeus in the new Panaeus refresh seismic data have been highlighted,
particularly at Angel Formation level. The Angel Formation needs assessment in the light of the recent reassessment of the Janus #1
well as this formation near the prospect is in faulted juxta position to Eliassen Formation sands with by passed oil pay.



Sun Resources NL and Controlled Subsidiaries                    13                                               2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Review Of Activities (Continued)


The potential of the Eliassen basin floor sands also has recently been highlighted by the January 2005 discovery of a 76 metre gas
condensate column in the Hurricane 1 well in northern adjacent WA-208-P. This gas condensate discovery was of note as a gas – water
contact was not encountered and suggested the possibility of a down dip oil leg which was confirmed in July 2007 by the discovery of
a 20 metre oil column in the follow up Hurricane 2 well. Eliassen sand hosted prospects exist in WA-254-P such as the Jayasuriya and
Kleopatra Prospects. These require more interpretative work, especially as the new Paneus refresh seismic data is now available to
determine if they are also drilling candidates.

Participants in WA-254-P are Sun Resources (7.86% to 9.25%), Operator Apache (64.95% to 72.28%), First Australian (10.71% to
11.25%), Victoria (6.17% to 9.30%) and New Zealand Oil and Gas NL (2.99% to 5.23%). The above larger interests of the junior
participants reflect their equity in the graticular block containing the stranded Sage Oilfield. The Sage Oilfield, 8.3 (mean) to 13.4 (P10)
million barrels of oil recoverable in three reservoirs, is currently waiting for a nearby discovery to be made to move forward by sharing
development costs.




WA-257-P, Prospects
and Leads




4.2    WA-257-P – 9.64% Interest
During financial year 2007, Operator Apache, has focused on bringing two structural – stratigraphic traps to final drill status. These are;
the previously known W. spectabilis sands Hekla Prospect, with up to 100 mmbo (P10) and the up to 300 mmbo (P10) P. inhiense (Angel
Formation) sands, Sextant Prospect.
Both now have higher geological risk; Hekla – higher structural risk and Sextent – higher reservoir risk. The joint venture was advised in
January 2007 that the target reservoir in the nearby Libris 1 well in eastern adjacent permit WA-246-P held by Apache, Kufpec Australia
Pty Ltd (“Kufpec”) and Pan Pacific Petroleum NL was poor, notwithstanding oil was present in the reservoir. A well on the Sextant
Prospect could be reconsidered if the new Corvus West Prospect under Sextant became a drilling candidate. This is a new small
Jurassic structural prospect that is related to the Corvus gas field on trend in eastern adjacent WA-246-P.

A 3D seismic survey covering the western two thirds of the permit area where previous 2D seismic coverage and quality are poor was
completed in June quarter 2007. Processing of this data is underway with interpretation scheduled in December quarter 2007 in an
endeavour to add more prospects and leads to the prospect inventory before a permit drilling commitment becomes due in June half
year 2008.

Participants in WA-257-P are Sun Resources (9.64%), Operator Apache (51.78%) and Kufpec Australia Pty Ltd (38.58%).




2007 ANNUAL REPORT                                               14                             Sun Resources NL and Controlled Subsidiaries
                                                                                                                     A.B.N. 69 009 196 810
Review Of Activities (Continued)


5.      ABANDONED PROJECTS
5.1     Sydney Basin, Illawarra CSM/CMM Projects
Following a review of assets in February 2007 and in conjunction with Sun Resource’s implemented business strategy, it was determined
that the Sydney Basin Illawarra Coal Seam Methane (“CSM”) and Coal Mine Methane (“CMM”) Projects should be disposed of. On
the 23 April 2007, the Company received $1 million for the sale of Sun Resources (NSW) Pty Ltd bringing its interest to a close in the
Illawarra Coal Seam Methane CSM and CMM Projects. Sun Resources (NSW) Pty Ltd had interests in the following project assets;
•      A 20% interest in the Wollongong CSM and CMM Project comprising granted Petroleum Exploration Licences PEL 442 and PEL 444.
•      A 20% interest in an Access Agreement to Helensburgh Coal Pty Ltd’s Metropolitan Mine Coal Concession Leases CCL 703 and
       CCL 379 to exploit known CSM and CMM gas.
•      A 14% interest in the Burragong CSM and CMM Project in PEL78.

Significant CSM and CMM resources were being targeted and had been indicated in the project licences to feed small scale energy projects
such as local “green” power generation, mini CNG and LNG schemes. The projects have two main attributes for success; the presence of
large amounts of gas above the water table and a doorstep market of large population bases at Wollongong – Port Kembla and Sydney.
Notwithstanding the projects have attributes for success, Sun Resources made a decision to dispose of its interests due to the fact that
an inordinate period of time (24 months) had passed and little positive project activity and outcomes from the Operator had occurred.
Money received from the disposal was invested in the well researched Hollywood Prospect, Lake Long, Louisiana, which on drilling had
a successful outcome with near instant cash flow from significant gas production.
5.2    Carnarvon Basin Projects
WA-261-P
On going work with Operator, Apache, during financial year 2007 was directed towards fully maturing the Hestia Prospect (potential
reserves 11.5 (mean) to 23.2 (P10) mmbo) for drilling, and interpretation of better imaged deeper stratigraphic levels from new reprocessed
seismic data. The largest risk for the Hestia Prospect was top seal at the Athol Formation reservoir sub crop interface with the basal
Cretaceous unconformity. At a January 2007 joint venture meeting the Operator confirmed the seal risk, and showed as a consequence,
the probability of drill success on the prospect was reduced from 25% to a marginal 10%. Based on this risk outcome Hestia is no longer
on the Operator’s proposed drilling list. Deeper stratigraphic levels were also shown to have little remaining prospectivity.
As the permit had run out of obvious prospectivity some of the members of the joint venture (Sun Resources being one) declined to
participate in the permit renewal and withdrew from the permit on 11 May 2007, before the statutory renewal date. A further reason
for withdrawal was the renewal work program involved the acquisition of an OBC 3D seismic survey that was both expensive and,
importantly from Sun Resources’ perspective, could not be targeted to mature leads to drillable prospect as the permit prospectivity had
not identified any suitable leads for this survey to address.
WA-340-P
Operator Strike Oil completed seismic studies on WA-340-P to upgrade four Jurassic to Cretaceous age structural stratigraphic leads.
Further seismic was acquired in December quarter 2005 and old seismic was reprocessed to integrate with the new seismic data to
bring the adjacent Sherlock 23 (mean) to 45 (P10) mmbo and Peawah 8 (mean) to 14 (P10) mmbo leads to prospect status for possible
drilling. However interpretation of the seismic resulted in prospects becoming considerably smaller with very high drilling risk.
The joint venture’s consensus was to add the permit with its prospect inventory to Strike Oil’s farm out of surrounding permits and if no
interest occurred by January 2007 drop the permit rather than enter into a drilling commitment with the Federal Authority at the end of March
quarter 2007. As no farm in interest to the permit occurred the permit was surrendered to the Federal Authority in late January 2007.
B       MINERAL EXPLORATION / INVESTMENT
The Joint Venture on the vestigial mineral interest of the Butterfly gold tenement in the North Coolgardie Mineral Field, Western Australia
in which the Company has a 5% NPI interest remains current with Barminco Limited, a successful underground mining contractor, and
Atlantic Gold Limited.
C      NEW PROJECT DEVELOPMENT
During financial year 2007, Sun Resources continued its involvement in new project generation and development to the benefit of its
Shareholders in the USA and Thailand. USA activity has resulted in discoveries of significant oil and gas in Louisiana and Texas. These
discoveries have been rapidly brought into production and will generate a significant increase in cash flow. Participation late in financial
year 2007 in the 20th Bid Round in Thailand and a subsequent post financial year bid on two prospective blocks if successful will give
the Company exposure to higher impact (company making) opportunities.

Sun Resources NL and Controlled Subsidiaries                       15                                                  2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Tenement Directory



  PROSPECT                         TENEMENTS                  INTEREST                    COMMENTS
  OIL & GAS


  Western Australia
  Offshore Northern Carnarvon Basin

  Dampier Sub-Basin                WA-254-P                    7.86% to 9.25%             Blocks 1,3 & 4 - 7.86%
                                                                                          Block 2 – 9.25%
  Dampier Sub-Basin                WA-257-P                    9.64%


  California, USA
  San Joaquin Basin
  Eagle                            Private lease land         10.00%


  Louisiana, USA
  Gulf Basin
  Lake Long                        SL328                      10.00%


  Texas, USA
  Texas Gulf Basin
  East Flour Bluff Gas Field       State lease land           24.17%
  West Flour Bluff Gas Field       BLM lease land             20.00%
  Pita Island Gas Field            State lease land           20.00%
  Agavero                          Private lease land         20.00%
  Milagro                          Private lease land         20.00%
  Dona Carlota                     Private lease land         20.00%
  El Viejito                       Private lease land         20.00%


  Malta
  Pelagian Platform
                                   Area 4, Block 3 ESA        20.00%
                                   Area 5, ESA                20.00%


  Western Australia
  North Coolgardie Mineral Field                                                         Joint Venture with
                                                                                         Kookynie Resources NL
  Butterfly                         M40/110                     5.00% NPI                 on that portion of the
                                                                                         lease covered by former
                                                                                         P40/462.




2007 ANNUAL REPORT                                       16                     Sun Resources NL and Controlled Subsidiaries
                                                                                                     A.B.N. 69 009 196 810
                                               Directors’ Report




Sun Resources NL and Controlled Subsidiaries          17           2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Director’s Report


In accordance with a resolution of the directors, the following report is submitted in respect of the results of the economic entity constituted by
the Company and the subsidiaries it controlled during all or part of, or at the end of, the financial year ended 30 June 2007 and the state of
affairs of the economic entity as at that date.

Directors
The names of the directors of the Company in office at the date of this report are:
            Dr B L Farrell     Director and Chairman – Executive
            Mr W J Ashby       Director and Managing - Executive
            Mr A P Woods       Director and Company Secretary - Executive
            Dr P Linsley       Director - Non Executive
            Dr W G Martinick   Director - Non Executive

Bradford L Farrell, B.Sc (Hons Econ Geol), M.Sc, Ph.D. (Executive Director and Chairman)
Dr Farrell was appointed to the Board on 1 May 1987. Dr Farrell is a graduate of the University of Adelaide where he obtained a Bachelor
of Science, Honours Economic Geology. Subsequently post graduate qualifications of Master of Science and Doctor of Philosophy were
obtained at the University of Leicester, United Kingdom. He is a Fellow of the Australasian Institute of Mining and Metallurgy, Member of
the Mineral Industry Consultants Association, Chartered Professional Geologist, and a Member of the Institution of Mining and Metallurgy, a
Chartered Engineer of that body and a Member of the Petroleum Exploration Society of Australia. He has had thirty-nine years experience in
resource exploration and senior project management and evaluation. During this time he has managed numerous and extensive exploration
programmes within Australia and overseas for a variety of mineral commodities for both major and junior exploration companies. Some of
these programmes have resulted in significant discoveries, which are currently in production or will see future production. Dr B L Farrell held
no other directorships in listed companies in the last 3 years.
Dr Farrell holds 19,525,255 fully paid ordinary shares and 1,200,000 unlisted partly paid contributing shares in the Company.
William J Ashby, B. Sc. (Geophysics), Grad. Dip. App. Sc. – Geophysics (Executive Director and Managing Director)
Mr Ashby was appointed on 1 July 2006 as General Manager and on 9 November 2006 to his current role in the Company as Managing
Director. Mr Ashby has had some 22 years of professional experience in the oil and gas industry in Australia, North and South America. He has
had a distinguished career in technical management of operated ventures in a number of companies, namely Ampolex, and through takeover
of that entity in Mobil, and of late in Conoco-Phillips, Australia. With respect to Conoco-Phillips, he was the Director of Exploration – Australia
Business Unit. His team was responsible for the recent significant Caldita gas discovery in exploration permit NT/P61 in the Bonaparte Basin,
offshore Northern Territory, which lies approximately 270 kilometres north/north east of Darwin. Mr Ashby is a member of the Audit Committee
and attended all meetings held. Mr W J Ashby held no other directorships in listed companies in the last 3 years.
Mr Ashby holds 1,500,000 listed options in the Company.
Alan P Woods, FCPA, FTIA, MAICD (Executive Director and Company Secretary)
Mr Peter Woods was appointed to the Board on 17 October 1989. Mr Peter Woods is a shareholder and founding Managing Director of APSL
Pty Ltd which commenced operations in June 1984. APSL Pty Ltd provides corporate and management services to exploration, mining and
technology companies in Australia and overseas. He is a Fellow of the Taxation Institute of Australia, a Member of the Australian Institute of
Company Directors and he has thirty-seven years experience in corporate accounting and financial management areas. He has had extensive
experience in the provision of management, financial and taxation advice to clients, including several public companies. In recent years,
he has developed a close involvement with oil, gas, gold exploration and mining companies. This work has included professional advice in
respect to equity capital raisings, corporate reconstructions, mergers, acquisitions, developing extensive gold hedging programs and financing
packages in relation to a number of public companies. Mr A P Woods held no other directorships in listed companies in the last 3 years.
Mr Woods holds 6,459,526 fully paid ordinary shares and 1,200,000 unlisted partly paid contributing shares in the Company.
Philip Linsley, B.Sc. (Hons Geol), Ph.D, MBA (Non-Executive Director)
Dr Linsley was appointed to the Board on 7 May 1997. Dr Linsley is a Non-Executive Director whose primary role is to assist the Board in
the acquisition of oil production and to investigate exploration opportunities outside Australia and Oceania. Dr Linsley is also a Director of
Carpathian Resources Limited which is listed on both the ASX and AIM and a Director of PXP Management Limited, a well known United
Kingdom based consultancy firm focusing on the oil and gas exploration and production industry. He has had some thirty two years experience
in oil exploration and production in many parts of the world (Australia, South East Asia, Africa, America, Kazakhstan, Europe and the Middle
East) initially in employment with Texaco and Mesa and later as a consultant to companies that include Occidental, Tricentrol, Ashland, Ranger,
Svenska and Chase Manhattan Bank. Dr Linsley is a member of the Audit and Remuneration Committees and attended where applicable all
meetings held. Dr P Linsley held no other directorships in listed companies in the last 3 years.
Dr Linsley holds 1,220,902 fully paid ordinary shares and 1,200,000 unlisted partly paid contributing shares in the Company.

2007 ANNUAL REPORT                                                   18                               Sun Resources NL and Controlled Subsidiaries
                                                                                                                           A.B.N. 69 009 196 810
Director’s Report (Continued)


Wolf G Martinick, B.Sc, Ph.D. (Non-Executive Director)
Dr Martinick was appointed to the Board on 19 February 1996. Dr Martinick is a scientist with extensive experience in the resource industry. For
over thirty three years he has been associated with the exploration and mining industry in Australasia, especially with respect to environmental,
water, land access and Native Title issues. He is a Fellow and Chartered Professional of the Australian Institute of Mining and Metallurgy
and a past Vice President of the Association of Mining and Exploration Companies. In 2003 he became Executive Chairman of ASX listed
Ezenet Limited, in 2005 Non-Executive Chairman of AIM listed Weatherly International PLC, in 2006 a Non-Executive Director of ASX listed
Precious Metals Australia Limited and Uran Limited and in September 2007, a Non-Executive Director of Azure Minerals Limited; and he is
also Non-Executive Chairman of MBS Environmental, a company that provides environmental consultancy services to the resource industry.
Dr Martinick is a member of the Remuneration Committee and attended all meetings as required.

Dr Martinick holds 10,984,139 fully paid shares and 1,200,000 unlisted partly paid contributing shares in the Company.

All directors held their positions as a director throughout the entire financial year and up to the date of this report with the exception of
Mr W J Ashby who was appointed to his position on the 9 November 2006.

Company Secretary
The Company Secretary is Mr A P Woods FCPA, FTIA, MAICD. Mr Woods was appointed to the position of Company Secretary in 1993 and
has held many similar positions in listed public companies.

Board Committees
The Company has three committees at the date of this report:
-         Nomination Committee
-         Audit and Compliance Committee
-         Remuneration Committee

(1)       Nomination Committee
The Nomination Committee comprises the full Board and meets as a Committee at least once a year and as required. The Committee ensures
the Board has the appropriate number and blend of directors with the necessary commercial, financial and relevant industry experience to
oversee the corporate direction and daily management of the Company, and is functional in its own right in its performance and competency.

(2)       Audit and Compliance Committee
The purpose of the Audit Committee is to assist the Board in discharging its responsibility to exercise due care, diligence and skill in to the
Company, in the areas of:
-         Application of accounting policies, standards, and reporting of financial information;
-         Business risk management;
-         Internal control systems;
-         Corporate conduct and business ethics; and
-         Reporting requirements.

The Board requires that the Company conducts itself in accordance with acceptable ethical standards and complies with all applicable laws,
regulations, Board policies and directives. In addition, it requires that adequate procedures and mechanisms should be in place to mitigate the
risk that the Company’s business goals and objectives are met.

The Board is responsible for the establishment of the Audit Committee, its composition and Charter.

The Audit Committee has met three times during the financial year.

A majority of the members of this committee are independent of the management of the Company.

The members of the Audit Committee are:
          Mr S J Mann         (Independent Chairperson)
          Dr P Linsley        (Non-Executive Director)
          Mr W J Ashby        (Executive Director)

Sun Resources NL and Controlled Subsidiaries                        19                                                    2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Director’s Report (Continued)


(3)       Remuneration Committee

The purpose of the Remuneration Committee is to discharge the board’s responsibility relating to the compensation of the Company’s directors
and executives.

The Remuneration Committee makes recommendations to the Board on remuneration packages and policies applicable to the Managing
Director, senior management and directors themselves.

The members of the Remuneration Committee are:
          Mr S J Mann      (Independent Chairperson)
          Dr W G Martinick (Non-Executive Director)
          Dr P Linsley     (Non-Executive Director)

The Remuneration Committee operates in accordance with its charter and ensures that the levels of remuneration are sufficient to attract
and retain the directors and key executives needed to run the Company successfully, while avoiding paying more than is necessary for this
purpose.

The committee meets as frequently as may be required to undertake its role effectively, but generally no less than once per year to:
-         Determine the remuneration policy including fixed, performance based and equity based remuneration;
-         Determine the remuneration of executive directors and key executives; and
-         Review and approve all equity based plans, equity based remuneration and equivalent incentive plans.

In financial year 2007, no meetings were convened as the above matters were determined and reviewed in June 2006. A review of renumeration
in general is scheduled in early financial year 2008.

Principal Activities of the Consolidated Entity

The principal activities of the Company and controlled subsidiaries during the financial year were oil and gas exploration and investment.
There was no significant change in these activities during the year.

The economic entity’s activities and operations on exploration projects are summarised in the “Review of Activities” preceding the report.

Operating Results

The consolidated net loss of the economic entity for the financial year after income tax was ($3,018,979), 2006: ($617,325).

Dividends

No dividends were paid or declared during the financial year or subsequent to the year end.

Environmental And Occupational Health And Safety Regulation Performance

The Company’s environmental and occupational, health and safety (“OHS”) obligations are regulated under both State and Federal Law or
in the case of Company’s overseas interests, by the governing laws of that country. All environmental and OHS performance obligations are
monitored by the Board and subjected from time to time to Government agency audits and site inspections. The Company has a policy of
at least complying, but in most cases exceeding its performance obligations. No environmental breaches or OHS incidents have occurred
or have been notified to or by any Government agencies during the year ended 30 June 2007. The Company ensures that it complies with
all necessary conditions when exploring its permits. The Company has established Environmental and OHS Board Policies under which all
exploration is carried out. Both Policies ensure all employees, contractors and other service providers are fully acquainted with the Company’s
environmental and OHS programs. The Company’s primary goal in the environmental management of exploration activities is to prevent
unnecessary environmental impact and reinstate sites where disturbance cannot be avoided, whilst its goal in OHS is to provide and foster a
culture of carrying out exploration activities in a safe working environment at best exploration practice.

Significant Changes in the State of Affairs

In the opinion of the directors, there were no significant changes in the state of affairs of the Company that occurred during the financial year
under review.




2007 ANNUAL REPORT                                                 20                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                        A.B.N. 69 009 196 810
Director’s Report (Continued)


Significant Events after Balance Date
The SL 328 #9 well on the Hollywood Prospect in the Lake Long field area, Louisiana, USA, flowed 2,364,000 scfgd with 53 bocd with no water
on restricted testing on 25 July 2007. Production with sales to market commenced in September 2007. Sun Resources has a 10% working
interest in the well.
Likely Developments and Expected Results - Review of Operations
The information required under this section has been included in the “Review of Activities”. The review of operations and financial position of
the group and its business strategies and prospects is set out on pages 2 to 15.
Remuneration Report
This report details the nature and amount of remuneration for each director of Sun Resources NL. There were no specified executives involved
in the management of the company who were not directors.
The remuneration report is set out under the following main headings:
A      Principles used to determine the nature and amount of remuneration
B      Details of remuneration
C      Service agreements
D      Share-based compensation
E      Additional information
The information provided under headings A-D includes remuneration disclosures that are required under Accounting Standard AASB 124 Related
Party Disclosures. These disclosures have been transferred from the financial report and have been audited. The disclosures in Section E are
additional disclosures required by the Corporations Act 2001 and the Corporations Regulations 2001 which have not been audited.
A      Principles used to determine the nature and amount of remuneration (audited)
The performance of Sun Resources NL depends upon the quality of its directors, executives and staff. To achieve its financial and operating
activities, the Company must attract, motivate and retain highly skilled directors and executives.
The Company embodies the following principles in its remuneration framework:
-     Provide competitive awards to attract high calibre executives;
-     Structure remuneration at a level and mix commensurate with their position and responsibilities within the Company so as to reward
      executives for Company and individual performance;
-     Align executive incentive rewards with the creation of value for shareholders; and
-     Link rewards with the performance of the Company.
The performance of executives is measured against criteria agreed annually with each executive and is based predominantly on the performance
of the Company. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its
discretion in relation to approving incentives, bonuses and options, and can recommend changes to the committee’s recommendations. Any
changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives
and reward them for performance that results in long-term growth in shareholder wealth.
Executives are also entitled to participate in the employee share and option arrangements.
The executive directors and executives receive a superannuation guarantee contribution required by the government, which is 9%. Some
individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation. Mr A P Woods has a post
employment benefit on termination or expiry of his consultancy contract refer, “Post Employments Benefits” page 23.
All remuneration paid to directors and executives is valued at the cost to the company and expensed. Shares given to directors and executives
are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options and
contributing shares are valued using the Black-Scholes or binomial valuation models.
The Board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The remuneration
committee determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties
and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-
Executive Directors is subject to approval by shareholders at the Annual General Meeting and is currently $170,000. Fees for Non-Executive
Directors are not linked to the performance of the consolidated entity. However, to align directors’ interests with shareholder interests, the
directors are encouraged to hold shares in the company.

Sun Resources NL and Controlled Subsidiaries                       21                                                  2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Director’s Report (Continued)


The board’s policy for determining the nature and amount of compensation of key management for the group is as follows:
The compensation structure for key management personnel is based on a number of factors, including length of service, particular experience
of the individual concerned, and overall performance of the company. The contracts for service between the Company and key management
personnel are on a continuing basis. Upon retirement key management personnel are paid employee benefit entitlements accrued to the date
of retirement. Dr B L Farrell and Mr A P Woods each have separate consultancy contracts and have retirement benefit schemes which on
termination or on expiry of those contracts, the Company is required to pay 1.2 months of present annual monthly fees for each year or part
year of service since 1 July 1993. Dr B L Farrell’s contract was terminated on 1 July 2006 and a retirement benefit of $218,400 was paid out.
Dr B L Farrell continues to serve the Company as the Executive Chairman.
The remuneration committee determines the proportion of fixed and variable compensation for each key mangement personnel.

B       Details of remuneration (audited)

Amounts of remuneration

Details of the remuneration of the directors and key management personnel (as defined in AASB 124 Related Party Disclosures) of Sun
Resources NL are set out in the following tables

The key management personnel included the Directors who have the responsibility for planning, directing and controlling the activities of the
entity:

i)      Chairman - executive
        Dr B L Farrell

ii)     Executive directors
        Mr W J Ashby - Managing Director
        Mr A P Woods - Chief Financial Officer

iii)    Non-executive directors
        Dr P Linsley
        Dr W G Martinick

Other than the Directors there were no other key management personnel.
The company secretary of the company is Mr A P Woods.
Key management personnel and other executives of the Group Remuneration
2007
                                      Short-term employee benefits                  Post-employment benefits         Share based
                                                                                                                    payments
Name                       Cash salary, consulting Non monetary  Other Superannuation               Retirement      Equity and       Total
                           fees and directors’ fees  benefits    expenses                             benefits         options
                                      $                 $          $         $                           $              $              $

Executive
Dr B L Farrell                    168,000               20,617               -        45,120         218,400              -        452,137
Mr W J Ashby                      221,316                1,706               -        48,084               -         17,298        288,404
Mr A P Woods                       99,600                    -               -             -               -              -         99,600

Sub-total executives              488,916               22,323               -        93,204         218,400         17,298        840,141

Non-executive
Dr P Linsley                       30,000                     -        10,319               -                -             -        40,319
Dr W Martinick                     30,000                     -             -               -                -             -        30,000

Sub-total non-executives           60,000                     -        10,319               -                -             -        70,319

Total                             548,916               22,323         10,319         93,204         218,400         17,298        910,460

2007 ANNUAL REPORT                                                22                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                       A.B.N. 69 009 196 810
Director’s Report (Continued)


2006
                                       Short-term employee benefits                     Post-employment benefits    Share based
                                                                                                                   payments
Name                       Cash salary, consulting Non monetary  Other Superannuation                Retirement    Equity and         Total
                           fees and directors’ fees  benefits    expenses                              benefits       options
                                      $                 $          $         $                            $            $               $

Executive
Dr B L Farrell                    198,000               38,975                -            2,477             -       98,400         337,852
Mr A P Woods                       90,000                    -                -                -             -       98,400         188,400

Sub-total executives              288,000               38,975                -            2,477             -      196,800         526,252

Non-executive
Dr P Linsley                        30,000                     -         11,843                -             -       98,400         140,243
Dr W Martinick                      30,000                     -              -                -             -       98,400         128,400

Sub-total non-executives            60,000                     -         11,843                -             -      196,800         268,643

Total                             348,000               38,975           11,843            2,477             -      393,600         794,895
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name                                           Fixed remuneration               At risk - STI                At risk - LTI
                                               2007         2006             2007           2006          2007           2006

Executive
Dr B L Farrell                                 100%           71%                 0%           0%           0%            29%
Mr W J Ashby                                    94%            0%                 6%           0%           0%             0%
Mr A P Woods                                   100%           48%                 0%           0%           0%            52%

Non-executive
Dr P Linsley                                   100%           30%                 0%           0%           0%            70%
Dr W G Martinick                               100%           23%                 0%           0%           0%            77%
C       Service agreements (audited)
Mr A P Woods has a consultancy contract with a retirement benefit scheme. On termination or on expiry of the contract, the Company is
required to pay 1.2 months of the present annual monthly fees for every year or part year of service since 1 July 1993. Dr B L Farrell and Mr
W J Ashby have contracts with the company as employees with no special benefits. There are no service agreements with Dr P Linsley or Dr
W G Martinick.
D       Share-based Compensation (audited)
2007
The following incentive options convertible to shares on payment of an exercise price on or before expiry date of the options were granted
to Mr W J Ashby as part of his remuneration package following his letter of appointment on 1 July 2006. Issued on appointment - 1,500,000
options with an expiry date of 30 December 2008 and exercise price of $0.20 per share. These options have vested and have a value of
$17,298. To be issued; on 1 January 2008, 1,500,000 options with an expiry date of 30 June 2009 and exercise price of $0.25 per share, and;
on 1 January 2009, 1,000,000 options with an expiry date of 9 December 2009 and exercise price of $0.30 per share.
2006
At the AGM on 27 October 2005 shareholders approved the grant to each of the Directors listed below unlisted incentive 25 cent contributing
shares each paid to 2.5 cents by the recipients. The valuation of the shares at grant date was determined using the binomial valuation model.

Director                        Vested No.     Granted No.          Grant Date           Value at         Exercise Date         Exercise Price
                                                                                       Grant Date
Dr B L Farrell                   1,200,000       1,200,000         27 Oct 2005          8.2 cents     30 December 2010            22.50 cents
Mr A P Woods                     1,200,000       1,200,000         27 Oct 2005          8.2 cents     30 December 2010            22.50 cents
Dr P Linsley                     1,200,000       1,200,000         27 Oct 2005          8.2 cents     30 December 2010            22.50 cents
Dr W G Martinick                 1,200,000       1,200,000         27 Oct 2005          8.2 cents     30 December 2010            22.50 cents
Sun Resources NL and Controlled Subsidiaries                        23                                                 2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Director’s Report (Continued)


E       Additional Information (unaudited)

Share-based compensation: Options
Further details relating to options are set out below.
Name                                 A                        B                    C                     D                           E
                              Remuneration           Value at grant date Value at exercise date Value at lapse date        Total of columns B-D
                           consisting of options              $                    $                     $                            $
Dr B L Farrell                       -                        -                     -                     -                           -
Mr W J Ashby                        6%                     17,298                   -                     -                           -
Mr A P Woods                         -                        -                     -                     -                           -
Dr P Linsley                         -                        -                     -                     -                           -
Dr W G Martinick                     -                        -                     -                     -                           -
A= The percentage of the value of remuneration consisting of options, based on the value of options expensed during the current year.
B= The value at grant date calculated in accordance with AASB 2 Share-based payment of options granted during the year as part of
   remuneration.
C= The value at exercise date of options that were granted as part of remuneration and were exercised during the year, being the intrinsic
   value of the options of that date.
D= The value at lapse date of options that were granted as part of remuneration and that lapsed during the year. Lapsed options refer to
   options that vested but expired unexercised.
Loans to subsidiaries, directors and executives
Information on loans to subsidiaries, directors and executives, including amounts, interest rates and repayment terms are set out in note 23
to the financial statements.
Shares under options
Unissued ordinary shares of the Company under option at the date of this report are as follows:

       Date options granted                        Expiry date                 Issue price of shares                 Number under option
           21 March 2006                     29 February 2008                          $0.25                                 2,000,000
           21 March 2006                           30 April 2008                       $0.35                                 2,000,000
           21 March 2006                           30 June 2008                        $0.45                                 2,000,000
         17 October 2006                   30 December 2008                            $0.20                                12,500,000

No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
Indemnification of Officers
Insurance and indemnity arrangements established in the previous year concerning officers of the Company were retained during the year
ended 30 June 2007. The Company has paid insurance premiums in respect of directors’ and officers’ liability and legal expenses’ insurance
contracts, for current and former directors and officers, including executive officers of the Company and directors, executive officers and
secretaries of the Company. The insurance premiums relate to:
(i)      costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome;
(ii)     other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of
         information or position to gain a personal advantage.
Meetings of the Company’s Directors
Of the 10 directors’ meetings held during the financial year ended 30 June 2007 the details of directors’ attendances were as follows:
                     Dr B L Farrell     attended 10 meetings out of a total of 10 meetings held
                     Mr A P Woods       attended 10 meetings out of a total of 10 meetings held
                     Dr P Linsley       attended 9 meetings out of a total of 10 meetings (8 by conference call)
                     Dr W G Martinick attended 5 meetings out of a total of 10 meetings held
                     Mr W J Ashby       attended 10 meetings out of a total of 10 meetings held
In addition a total of 20 circular resolutions were resolved during the financial year ended 30 June 2007.
Three Audit Committee meetings were held during the year.

2007 ANNUAL REPORT                                                   24                                Sun Resources NL and Controlled Subsidiaries
                                                                                                                            A.B.N. 69 009 196 810
Director’s Report (Continued)


Auditor’s Independence Declaration
The Auditor’s Independence Declaration as required under section 307c of the Corporations Act 2001 on page 26 forms part of the Directors’
Report for the financial year ended 30 June 2007.

Non-audit services
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-
related audit firms:
                                                                                 CONSOLIDATED                                 PARENT ENTITY
                                                                         2007               2006                      2007                 2006
                                                                            $                   $                         $                    $

a.      Audit Services
        BDO Kendalls Audit and Assurance (WA)
            Audit and review of financial reports                      26,920              24,469                    26,920               24,469
            Non-BDO Kendalls (WA) for the audit
            and review of financial reports of an
            entity in the Group                                        1,186               4,370                     1,186                4,370
        Total remuneration for audit services                         28,106              28,839                    28,106               28,839
b.      Non-audit services
        BDO Kendalls (WA)
            Taxation services                                            7,100             7,050                      7,100                7,050
Total remuneration for non-audit services                                7,100             7,050                      7,100                7,050

The board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act
2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out above, did not compromise the auditor
independence requirements of the Corporations Act 2001 for the following reasons:
-       all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the
        auditor
-       none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
        Professional Accountants.
Proceedings on Behalf of Company
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company
is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a
party to any such proceedings during the year.
Board of Directors’ Declaration for Year Ended 30 June 2007
The Board of Directors’ Declaration for year ended 30 June 2007 on page 60 forms part of the above Directors’ Report.
This relates to the integrity of the financial statements, risk management and internal compliance and control systems of the Company for the
financial year as set out in this Annual Report.
For and on behalf of the Board.




Bradford L Farrell                                             Alan P Woods
Director                                                       Director
Perth, Western Australia                                       Perth, Western Australia

24 September 2007                                              24 September 2007

Sun Resources NL and Controlled Subsidiaries                        25                                                    2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Auditor’s Independence Declaration


                                                                                     BDO Kendalls Audit & Assurance (WA)
                                                                                     128 Hay Street
                                                                                     SUBIACO WA 6008
                                                                                     PO Box 700
                                                                                     WEST PERTH WA 6872
                                                                                     Phone 61 8 9380 8400
                                                                                     Fax 61 8 9380 8499
                                                                                     aa.perth@bdo.com.au
                                                                                     www.bdo.com.au

                                                                                     ABN 90 360 101 594

         24 September 2007




         The Directors
         Sun Resources NL
         PO Box 322
         GREENWOOD WA 6024




         Dear Sirs

         DECLARATION OF INDEPENDENCE BY BDO KENDALLS TO THE DIRECTORS OF SUN
         RESOURCE NL

         As lead auditor of Sun Resources NL for the year ended 30 June 2007, I declare that, to the best
         of my knowledge and belief, there have been no contraventions of:

         x   the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
             and

         x   any applicable code of professional conduct in relation to the audit.

         This declaration is in respect of Sun Resources NL and the entities it controlled during the period.

         Yours faithfully
         BDO Kendalls Audit & Assurance (WA)




         Glyn O’Brien
         Partner




                                                                                         BDO Kendalls is a national association of
                                                                                         separate partnerships and entities



2007 ANNUAL REPORT                                        26                           Sun Resources NL and Controlled Subsidiaries
                                                                                                            A.B.N. 69 009 196 810
Statement of Corporate
Governance Practices

The Board of Directors of Sun Resources NL has adopted the following set of principles for the corporate governance of the Company. These
principles establish the framework of how the Board carries out its duties and obligations on behalf of the shareholders and were in place
throughout the financial year.

The Board of Directors

Role of the Board

The Board of Directors is responsible for setting the strategic direction and establishing the policies of Sun Resources NL and its subsidiaries.
It is responsible for overseeing the financial position and for monitoring the business and affairs of the Company and the economic subsidiaries
on behalf of the shareholders, by whom the directors are elected and to whom they are accountable. It also addresses issues related to
internal controls and approaches to risk management.

The Board reviews the remuneration and policies applicable to Non-Executive and Executive Directors and the Managing Director on an
annual basis. When reviewing directors fees the Board takes into account the size and scope of the Company’s activities. Remuneration levels
are competitively set to attract the most qualified and experienced directors and senior executives. Where necessary the Board will obtain
independent advice on the appropriateness of remuneration packages.

Composition of the Board and Functions

The Directors’ report contains details of the directors’ qualifications, experience and special responsibilities.

Under the Constitution the minimum number of directors is three and the maximum is ten. Directors are not appointed for a fixed term. At
each annual general meeting one third of the directors other than the Managing Director must resign by rotation, with those serving the longest
resigning first. Resigning directors may stand for re-election.

As at 30 June 2007, the Board was comprised of five directors, three acting in an executive capacity and two acting in a non executive capacity.
Dr B L Farrell as Executive Chairman and Mr W J Ashby as Managing Director, were responsible for managing the overall operations of the
Company; Mr A P Woods as an Executive Director and also Company Secretary, was responsible for corporate compliance and financial
administration, Dr W G Martinick and Dr P Linsley were non-Executive Directors.

Details of Directors’ shareholdings are disclosed in the directors’ report and financial report.

Mr A P Woods has a separate consultancy contract which has a retirement benefit scheme on termination or on expiry of the contract. The
Company is required to pay 1.2 month of present annual monthly fees for every year or part year of service since 1 July 1993 as a retirement
benefit.

Any equity based compensation of directors is required to be approved in advance by shareholders.

Board Access To Information

All directors have unrestricted access to all Company employees and consultants and, subject to the law, access to all Company records
and information held by employees and external advisers. The Board receives regular detailed financial and operational reports from senior
management to enable it to carry out its duties.

Consistent with ASX Principle 2, each director may, with the prior written approval of the Chairman, obtain independent professional advice to
assist the director in the proper exercise of powers and discharge of duties as a director or as a member of a Board Committee. The Company
will reimburse the director for the reasonable expense of obtaining that advice.

Conflict Of Interest

In the event that a potential conflict of interest may arise, involved directors must withdraw from all deliberations concerning the matter. They
are not permitted to exercise any influence over other Board members.

Since 5 May 2000 the Board has had a written Policy of a Code of Conduct with respect to Directors and Officers trading in securities of the
Company.




Sun Resources NL and Controlled Subsidiaries                          27                                                  2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Statement of Corporate
Governance Practices (Continued)

Shareholders Relations And Communications
The Company’s shareholders are responsible for voting on the appointment of directors. The Board informs shareholders of all major
developments affecting the Company by:

•         Preparing half yearly and annual financial reports and making these available to all shareholders.
•         Advising the market of matters requiring disclosure under Australian Stock Exchange Continuous Disclosure Rules.
•         Maintaining a record of significant ASX announcements on the Company’s website.
•         Submitting proposed major changes in the Company’s affairs to a vote of shareholders, as required by the Corporations Law.
•         Reporting to shareholders at annual general meetings on the Company’s activities during the year. All shareholders that are unable
          to attend these meetings are encouraged to communicate issues or ask questions by writing to the Company.

Board Committees
The Board where appropriate, may establish a number of committees to assist in carrying out its responsibilities in an effective and efficient manner.
Three standing Board Committees assist the Board in the discharge of its responsibilities and are governed by their respective Charters, as
approved by the Board. These are:

•         Nomination Committee;
•         Remuneration Committee;
•         Audit and Compliance Committee.

Nomination Committee
The Nomination Committee comprises the full Board and meets as a Committee at least once a year and as required. The Committee ensures
the Board has the appropriate number and blend of directors with the necessary commercial, financial and relevant industry experience to
oversee the corporate direction and daily management of the Company, and is functional in its own right in its performance and competency.

Remuneration Committee
Among the specific responsibilities set out in its Charter, the Remuneration Committee reviews and makes recommendations to the Board
on the Board’s operation and performance; reviews and makes recommendations on remuneration policies for the Company including, in
particular, those governing the directors, the Managing Director and senior management.

The members of the Remuneration Committee at the date of this report are:

          Mr S J Mann      (Independent Chairperson)
          Dr W G Martinick (Non-Executive Director)
          Dr P Linsley     (Non-Executive Director)

The composition, operation and responsibilities of the Committee are generally consistent with ASX Principles 2 and 9. Consistent with ASX
Principle 2, a summary of the Remuneration Committee Charter has been posted on the Corporate Governance section of the Company’s
website.

Audit and Compliance Committee
The Audit and Compliance Committee monitors internal control policies and procedures designated to safeguard Company assets and to
maintain the integrity of financial reporting, consistent with ASX Principle 4.
The role of the Committee is to provide a direct link between the Board and the external auditors.
It also gives the Board of Directors additional assurance regarding the quality and reliability of financial information prepared for use by the
Board in determining policies or for inclusion in financial statements.
The responsibilities of the Audit and Compliance Committee include:

•         Monitoring compliance with regulatory requirements;
•         Improving the quality of the accounting function;
•         Reviewing external audit reports to ensure that where major deficiencies or breakdowns in controls or procedures have been
          identified, appropriate and prompt remedial action is taken by management;
•         Liaising with external auditors and ensuring that the annual audit and half-year review are conducted in an effective manner.

2007 ANNUAL REPORT                                                    28                                Sun Resources NL and Controlled Subsidiaries
                                                                                                                             A.B.N. 69 009 196 810
Statement of Corporate
Governance Practices (Continued)

The Committee reviews the performance of the external auditors on an annual basis and meets with them at least twice during the year.
Nomination of auditors will be at the discretion of the Committee.

The members of the Audit and Compliance Committee at the date of this report are:
          Mr S J Mann         (Independent Chairperson)
          Dr P Linsley        (Non-Executive Director)
          Mr W J Ashby        (Executive Director)

Consistent with ASX Principle 4, the Committee Charter has been posted to the new corporate governance section of the Company’s website.
Audit Process
As part of the Company’s commitment to safeguarding integrity in financial reporting, the Company’s accounts are subject to an annual audit
by an independent professional auditor who also reviews the half yearly accounts.
Consistent with ASX Principle 6, the Auditor attends and is available to answer questions at the Company’s annual general meetings.
Auditor Independence
The Company has implemented procedures and policies to monitor the independence and competence of the Company’s external auditors.
Details of the amounts paid for both audit work and non-audit services are set out in this annual report.
The Board requires that adequate hand-over in the year prior to rotation of an audit partner to ensure an efficient and effective audit under the
new partner.
Internal Control Framework And Business Risk Management
The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost effective internal control
system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated an internal control
framework that includes the following:
•         Financial reporting – there is a comprehensive budgeting and forecasting system with updates provided to the Board at each Board
          meeting. Periodic reports are provided to the Board. Quarterly, half yearly and annual reports are prepared in accordance with the
          Corporations Act 2001 and ASX Listing Rules.
•         The Executive Chairman and/or the Managing Director and the Company Secretary are required to confirm in writing that the
          Company’s financial reports present a true and fair view, in all material respect, of the Company’s financial condition and operational
          results and are in accordance with relevant accounting standards.
•         The Company has written policies covering Health, Safety and the Environment.
Ethical Standards
The Board adopts a proactive approach to promoting the practice of high ethical standards. All directors and employees are expected to act
with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company, in the following areas;
•         professional conduct;
•         dealings with suppliers, advisers and regulators;
•         dealings with the community and specifically in dealings with traditional landowners; and
•         dealings with other employees.
Privacy
The Company has resolved to comply with the National Privacy Principles contained in the Privacy Act 1988, to the extent required for a
company the size and nature of Sun Resources NL.
ASX Guidelines On Corporate Governance
The majority of the Board of Directors, four of five directors, under the ASX definition of independent, are independent directors and as such the
Board acts with Independence and in accordance with the Statement of Corporate Governance Practices. ASX considers that a person who
is an executive and also has an interest in the Company as a substantial shareholder (>5.00%) in the reporting company is not independent.
Dr B L Farrell, Chairman and Executive Director of Sun Resources NL who controls 11.43% of the issued shares of the Company is not an
independent Director.
The ASX guidelines also prescribe that the Company should maintain a dedicated corporate governance information section on its website.
The Annual Reports, Half Yearly Reports and all ASX announcements pertaining to the Company’s activities can be presently viewed on the
company’s website.

Sun Resources NL and Controlled Subsidiaries                         29                                                    2007 ANNUAL REPORT
A.B.N. 69 009 196 810
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2007 ANNUAL REPORT            30                Sun Resources NL and Controlled Subsidiaries
                                                                     A.B.N. 69 009 196 810
                                           Financial Statements




Sun Resources NL and Controlled Subsidiaries       31             2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Income Statements
For The Year Ended 30 June 2007


                                                                                    CONSOLIDATED                                PARENT ENTITY
                                                  Note                     2007                2006                     2007                 2006
                                                                               $                  $                         $                    $


Revenue from continuing operations                    2            1,140,966             1,806,665                   61,201              312,563
Other income                                          3            1,162,726                 6,140                1,162,726                      -


Administration expense                                              (384,532)             (406,606)                (341,359)            (374,193)
Depreciation and amortisation expense                             (2,012,072)                (7,121)                  (7,953)              (7,121)
Finance expense                                                             (31)           (43,395)                      (31)             (43,395)
Occupancy expense                                                     (41,496)             (42,253)                  (41,496)             (42,253)
Employee expenses                                                   (473,946)             (589,754)                (473,947)            (589,754)
Exploration and evaluation costs
written off                                                       (2,240,321)            (1,341,001)             (2,240,321)           (1,341,001)
Distribution of capital reserve                                    2,500,000                      -               2,500,000                      -
Cost of investments written off                                   (2,500,000)                     -              (2,500,000)                     -
Foreign currency translation loss                                   (170,273)                     -                   (7,585)                    -
Provision for inter-company loss                                               -                  -                   (6,056)                    -
(Loss) Before income tax expense                    2,4           (3,018,979)             (617,325)              (1,894,821)           (2,085,154)


Income tax (expense)/benefit                           5                        -                  -                         -                    -
(Loss) for the year                                               (3,018,979)             (617,325)              (1,894,821)           (2,085,154)


(Loss) for the year attributable
to equity holders of Sun Resources NL                             (3,018,979)             (617,325)              (1,894,821)           (2,085,154)


Basic (loss) per share (cents)                        7                    (1.84)             (0.46)
Diluted (loss) per share (cents)                      7                    (1.84)             (0.46)




The above income statements should be read in conjunction with the accompanying notes.

2007 ANNUAL REPORT                                                    32                               Sun Resources NL and Controlled Subsidiaries
                                                                                                                            A.B.N. 69 009 196 810
Balance Sheets
As At 30 June 2007


                                                                              CONSOLIDATED                            PARENT ENTITY
                                         Note                     2007                      2006           2007                  2006
                                                                      $                        $              $                     $
Current assets
Cash and cash equivalents                      8           1,769,590                   1,866,035       712,613               952,329
Trade and other receivables                    9             154,556                    134,915         88,075                43,510
Financial assets - available for sale       10                  4,000                   427,000          2,000               427,000
Total current assets                                       1,928,146                   2,427,950       802,688             1,422,839


Non-current assets
Receivables                                 11                       -                         -    11,549,140            12,679,685
Other financial assets                       12                       -                         -     4,182,045             2,501,500
Plant and equipment                         13                 27,276                    24,667         27,276                24,667
Oil and gas properties                      14            16,888,504                  16,855,766     1,398,022             3,584,829
Total non-current assets                                  16,915,780                  16,880,433    17,156,483            18,790,681


Total assets                                              18,843,926                  19,308,383    17,959,171            20,213,520


Current liabilities
Payables                                   15a               470,129                     22,905         58,079                22,905


Non-current liabilities
Payables                                   15b                       -                         -    10,437,130            12,939,130
Total liabilities                                            470,129                     22,905     10,495,209            12,962,035


Net assets                                                18,373,797                  19,285,478     7,463,962             7,251,485


Equity
Contributed equity                          17            27,909,806                  25,819,806    27,909,806            25,819,806
Reserves                                    17               410,898                    393,600        410,898               393,600
Retained earnings                                          (9,946,907)                (6,927,928)   (20,856,742)          (18,961,921)


Total equity                                              18,373,797                  19,285,478     7,463,962             7,251,485




The above balance sheets should be read in conjunction with the accompanying notes.

Sun Resources NL and Controlled Subsidiaries                             33                                        2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Statements Of Changes In Equity
For The Year Ended 30 June 2007

Consolidated
                                                          Contributed                     Retained                                            Total
                                                                Equity                    Earnings               Reserves                   Equity
                                                                    $                             $                       $                      $
Balance at the 1 July 2005                                20,140,667                    (6,310,603)                       -            13,830,064
Net loss for the period                                               -                   (617,325)                       -              (617,325)
Total income and expense for the
year                                                                  -                   (617,325)                       -              (617,325)
Issued share capital                                        5,840,280                               -                     -             5,840,280
Share transaction costs                                      (281,141)                              -                     -              (281,141)
Receipt from partly-paid shares                               120,000                               -                                     120,000
Share-based payment expense                                           -                             -             393,600                 393,600
Balance at the 30 June 2006                               25,819,806                    (6,927,928)               393,600              19,285,478
Net loss for the period                                               -                 (3,018,979)                       -            (3,018,979)
Total income and expense for the
year                                                                  -                 (3,018,979)                       -            (3,018,979)
Issued share capital                                        2,200,000                               -                     -             2,200,000
Share transaction costs                                      (110,000)                              -                    -                (110,000)
Share-based payment expense                                         -                               -               17,298                  17,298
Balance at the 30 June 2007                               27,909,806                    (9,946,907)               410,898              18,373,797

Parent Entity
                                                          Contributed                     Retained                                            Total
                                                                Equity                    Earnings               Reserves                   Equity
                                                                    $                            $                        $                      $
Balance at the 1 July 2005                                20,140,667                  (16,876,767)                        -             3,263,900
Net loss for the period                                               -                 (2,085,154)                       -            (2,085,154)
Total income and expense for the
year                                                                  -                 (2,085,154)                       -            (2,085,154)
Issued share capital                                        5,840,280                               -                     -             5,840,280
Share transaction costs                                      (281,141)                              -                     -              (281,141)
Receipt from partly-paid shares                               120,000                               -                     -               120,000
Share-based payment expense                                           -                             -             393,600                 393,600
Balance at the 30 June 2006                               25,819,806                  (18,961,921)                393,600               7,251,485
Net loss for the period                                               -                 (1,984,821)                       -            (1,984,821)
Total income and expense for the
year                                                                  -                 (1,894,821)                       -            (1,894,821)
Issued share capital                                        2,200,000                               -                     -             2,200,000
Share transaction costs                                      (110,000)                              -                    -                (110,000)
Share-based payment expense                                         -                               -               17,298                  17,298
Balance at the 30 June 2007                               27,909,806                  (20,856,742)                410,898               7,463,962




The above changes of equity statements should be read in conjunction with the accompanying notes.

2007 ANNUAL REPORT                                                        34                            Sun Resources NL and Controlled Subsidiaries
                                                                                                                             A.B.N. 69 009 196 810
Cash Flow Statements
For The Year Ended 30 June 2007

                                                                                  CONSOLIDATED                              PARENT ENTITY
                                                                           2007                  2006               2007              2006
                                                                              $                     $                  $                 $
                                               Note        Inflows (Outflows) Inflows (Outflows)             Inflows (Outflows) Inflows (Outflows)


Cash flows from operating activities
Receipts from customers (Flour Bluff)                              1,029,681               1,379,769                   -                 -
Proceeds from the sale of subsidiary                               1,000,000                        -          1,000,000                 -
Payments to suppliers and employees                                 (927,067)               (524,568)           (885,895)        (492,156)
Receipts from exploration                                             33,755                        -                  -                 -
Payments for exploration                                          (3,865,128)              (8,619,459)           (53,514)        (674,183)
Dividends received                                                    37,249                  10,000             37,249            10,000
Interest received                                                    100,205                 118,020             58,952           106,818
Finance costs                                                              (31)              (43,395)                (31)         (43,395)
Net cash flow provided by/ (used in)
                                               (a)                (2,591,336)              (7,679,633)          156,761         (1,092,916)
operating activities


Cash flows from investing activities
Payments for plant and equipment                                     (10,562)                  (6,696)           (10,562)           (6,696)
Proceeds from sale of shares                                         589,726                  30,865            589,726                  -
Purchase of shares                                                    (4,000)                  (8,775)            (2,000)           (6,775)
Loan repaid from controlled subsidiaries                                     -                      -          1,124,489           28,652
Loan advanced to controlled subsidiaries                                     -                      -         (4,180,545)       (7,343,715)
Net cash flow provided by/ (used in)
                                                                     575,164                  15,394          (2,478,892)       (7,328,534)
investing activities


Cash flows from financing activities
Proceeds from issue of shares                                      2,200,000               6,571,922           2,200,000        6,571,922
Payment of equity raising expenses                                  (110,000)               (281,141)           (110,000)        (281,141)
Net cash flow provided by/ (used in)
                                                                   2,090,000               6,290,781           2,090,000        6,290,781
financing activities
Net decrease in cash and cash equivalents
                                                                      73,828               (1,373,458)          (232,131)       (2,130,669)
held
Cash and cash equivalents at the beginning
                                                                   1,866,035               3,131,355            952,329         2,974,860
of the financial year
Exchange rate adjustments                                           (170,273)                108,138              (7,585)         108,138
Cash and cash equivalents at the end of the
                                                                   1,769,590               1,866,035            712,613           952,329
financial year




The above cash flow statements should be read in conjunction with the accompanying notes.

Sun Resources NL and Controlled Subsidiaries                          35                                               2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Cash Flow Statements
For The Year Ended 30 June 2007 (Continued)

Cash flow information


(a)       Reconciliation of (Loss) after income tax with Cash Flow from Operations.

                                                                             CONSOLIDATED                                    PARENT ENTITY
                                                                   2007                     2006                   2007                   2006
                                                                         $                     $                       $                      $


(Loss) after income tax                                      (3,018,979)               (617,325)             (1,894,821)            (2,085,154)


Cash flows excluded from (loss) attributable to
operating activities
      - Cost of exploration                                  (3,865,128)              (8,619,459)               (53,514)             (674,183)


Non-cash flows in (loss)
      - Depreciation and amortisation                         2,012,072                   7,121                   7,953                  7,121
      - Exploration expenditure written off                   2,240,321               1,341,001              2,240,321              1,341,001
      - Exchange rate differences                               170,273                (108,138)                  7,585              (108,138)
      - Share-based payment                                      17,298                 513,600                  17,298               513,600



Changes in assets and liabilities
      - (Increase)/decrease in trade and other
                                                                (19,641)               (129,577)                (43,510)               (38,172)
        receivables

      - Increase/(decrease in trade and other
                                                               (127,552)                (22,266)               (124,551)               (22,266)
        payables



Cashflow from operations                                      (2,591,336)              (7,679,633)              156,761              (1,092,916)




2007 ANNUAL REPORT                                                  36                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                         A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007

1.      Statement of Significant Accounting Policies

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including
Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group
Interpretations and the Corporations Act 2001.

The financial report covers the consolidated entity of Sun Resources NL and controlled subsidiaries, and Sun Resources NL as an individual
parent entity. Sun Resources NL is a listed public company, incorporated and domiciled in Australia.

The financial report of Sun Resources NL and controlled subsidiaries, and Sun Resources NL as an individual parent entity comply with all
Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety.

The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial report. The
accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation

Statement of Compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to Internation Financial Reporting
Standards (AIRFRS). The financial report also complies with International Financial Reporting Standards (IFRS). The parent entity financial
statements and notes comply with IFRS except that it has been elected to apply the relief provided to parent entities in respect to certain
disclosure requirements contained in AASB 132 Financial Instuments: Disclosure and Presentation.

Except for the amendments to various Australian Accounting Standards made as a result of AASB 2007-4 Amendments to Australian
Accounting Standards arising from ED 151 and Other Amendments, which the Group has early adopted, Australian Accounting Standards
and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual
reporting period ending 30 June 2007.

These are outlined in the table below.

                                                                                 Application                                             Application
     Reference                  Title                      Summary                 date of        Impact on Group Financial Report        date for
                                                                                  standard                                                 Group
 AASB 2005-10        Amendments to Australian     Amendments arise from        1 January 2007   AASB 7 is a disclosure standard          1 July 2007
                     Accounting Standards         the release in August                         so will have no direct impact on the
                     [AASB 132, AASB 101,         2005 of AASB 7 Financial                      amounts included in the Group’s
                     AASB 114, AASB 117,          Instrument Disclosures                        financial statements. However, the
                     AASB 133, AASB 139,                                                        amendments will result in changes to
                     AASB 1, AASB 4, AASB                                                       the financial instrument disclosures
                     1023 and AASB 1038]                                                        included in the Group’s financial
                                                                                                report.
 AASB 7              Financial Instruments:       New standard replacing       1 January 2007   As above.                                1 July 2007
                     Disclosures                  disclosure requirements of
                                                  AASB 132
 AASB 2007-1         Amendments to Australian     Amendments arise             1 March 2007     Unless the Group enters into such        1 July 2007
                     Accounting Standards         from release of AASB                          share-based payment transactions
                     arising from AASB            Interpretation 11 Group                       in future reporting periods, these
                     Interpretation 11 [AASB 2]   and Treasury Share                            amendments are not expected to
                                                  Transactions                                  have any impact on the Group’s
                                                                                                financial report
 AASB                AASB 2 - Group               Addresses whether            1 March 2007     Unless the Group enters into such        1 July 2007
 Interpretation 11   and Treasury Share           certain share-based                           share-based payment transactions in
                     Transactions                 payment transactions                          future periods, this interpretation is
                                                  with employees should be                      not expected to have any impact on
                                                  accounted for as equity-                      the Group’s financial report.
                                                  settled or cash-settled
                                                  transactions under AASB 2


Sun Resources NL and Controlled Subsidiaries                          37                                                      2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

                                                                                      Application                                             Application
    Reference                   Title                        Summary                    date of        Impact on Group Financial Report        date for
                                                                                       standard                                                 Group
AASB 2007-2         Amendments to Australian        Amendments arise                1 January 2008   Unless the Group enters into such        1 July 2008
                    Acounting Standards arising     from release of AASB                             service concession arrangements
                    from AASB Interpretation 12     Interpretation 12 Service                        in future reporting periods, these
                    [AASB 1, AASB 117, AASB         Concession Arrangements                          amendments are not expected to
                    116, AASB 120, AASB 121,                                                         have any impact on the Group’s
                    AASB 127, AASB 131 and                                                           financial report.
                    AASB 139]
AASB                Service Concession              Addresses service               1 January 2008   Unless the Groups enters into such       1 July 2008
Interpretation 12   Arrangements                    concession arrangements                          service concession arrangments
                                                    under which private sector                       in future reporting periods, this
                                                    entities participate in the                      interpretation is not expected to have
                                                    development, financing,                           any impact on the Group’s financial
                                                    operation and maintenance                        report.
                                                    of infrastructure for the
                                                    provision of public services,
                                                    such as transport, water
                                                    and energy facilities
AASB 2007-3         Amendments to Australian        Amendments arise                1 January 2009   AASB 8 is a disclosure standard          1 July 2009
                    Accounting Standards            from release of AASB 8                           so will have no direct impact on the
                    arising from AASB 8 [AASB       Operating Segments                               amounts included in the Group’s
                    5, AASB 6, AASB 102,                                                             financial statements. However, the
                    AASB 107, AASB 119,                                                              amendments will result in changes to
                    AASB 127, AASB 134,                                                              the segment disclosures included in
                    AASB 136, AASB 1023 and                                                          the Group’s financial report.
                    AASB 103B]
AASB 8              Operating Segments              New standards replacing         1 January 2009   As above.                                1 July 2009
                                                    disclosure requirements of
                                                    AASB 114
AASB 2007-5         Amendments to Australian        This standard changes           1 July 2007      Not Applicable.                          1 July 2007
                    Accounting Standard             paragraph Aus9.1 to
                    - Inventories Held for          require inventories held for
                    Distribution by Not-for-Profit   distribution by not-for-profit
                    Entities [AASB 102]             entities to be measured
                                                    at cost, adjusted when
                                                    applicable for any loss of
                                                    service potential
AASB 2007-6         Amendments to Australian        Amendments arise from           1 January 2009   As it is the Group’s current policy to    1 July 2009
                    Accounting Standards            the issuance in June 2006                        capitilise interest on qualifying assets,
                    arising from AASB 123           of a revised AASB 123                            there will be no impact on the Group’s
                    [AASB 1, AASB 101, AASB         Borrowing Costs                                  financial statements.
                    107, AASB 111, AASB
                    116 and AASBB 138 and
                    Interpretations 1 and 12]
AASB 2007-7         Amendments to Australian        Amendments to standards         1 July 2007      Amendments will result in revised      1 July 2007
                    Accounting Standards                                                             disclosures in the financial statements
                    arising from AASB 1,
                    AASB 2, AASB 4, AASB 5,
                    AASB 107 and AASB 128
AASB 123            Borrowing costs                 Revised standard requiring      1 January 2009   As above.                                1 July 2009
                                                    the capitalisation of all
                                                    borrowing costs directly
                                                    attributable to the
                                                    acquisition, construction or
                                                    production of a qualifying
                                                    asset.




2007 ANNUAL REPORT                                                        38                                Sun Resources NL and Controlled Subsidiaries
                                                                                                                                 A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

                                                                                   Application                                            Application
      Reference                  Title                      Summary                  date of        Impact on Group Financial Report       date for
                                                                                    standard                                                Group
 AASB                Interim Financial Reporting   Prevents the reversal         1 November       There will be no impact because the     1 July 2007
 Interpretation 10   and Impairment                of impairment losses on       2006             entity has not previously made any
                                                   goodwill, investments in                       impairment write-downs on these
                                                   equity instruments carried                     items during an interim reporting
                                                   at cost and available-for-                     period (or has not subsequently
                                                   sale financial assets being                     reversed such impairment write-
                                                   reversed in the annual                         downs).
                                                   financial report.
 AASB                Customer Loyalty              The fair value of revenue     1 July 2008      There will be no impact as the entity   1 July 2008
 Interpretation 13   Programmes                    is to be allocated between                     does not have a customer loyalty
                                                   sales and reward credits,                      programme.
                                                   resulting in a portion of
                                                   revenue being deferred
                                                   until reward credits are
                                                   redeemed.
 AASB                AASB 119 - The Limit          Provides guidance on how      1 January 2008   There will be no impact as the entity   1 July 2008
 Interpretation 14   on a Defined Benefit            to assess the limit in AASB                    does contribute to a defined benefit
                     Asset, Minimum Funding        119 Employee Benefits                           fund.
                     Requirements and their        para 58 on the amount of
                     interaction                   the surplus that can be
                                                   recognised as an asset by
                                                   an employer sponsor
 AASB 101            Presentation of Financial     Removes Australian            1 January 2007   As these changes result in a            1 July 2007
                     Statements                    specific disclosure                             reduction of Australian specific
                                                   requirements.                                  disclosures, there will be no impact
                                                                                                  on amounts recognised in the
                                                                                                  financial statements.

Reporting Basis and Conventions

The financial report has been prepared on an accruals basis and is based on the historical costs modified by the revaluation of selected non-
current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Critical Accounting Estimates and Judgements

The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available
current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data,
obtained both externally and within the group.

Critical Accounting Estimates

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities
within the next annual reporting period are:

(a)     Share-based payment transactions
        The Group measure the cost of equity-settled transactions with employees and consultants by reference to the fair value of the equity
        instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model.
(b)     Impairment of assets
        In the absence of readily available market prices, the recoverable amounts of assets are determined using estimations of the present
        value of future cashflows using asset-specific discount rates. For Oil & Gas Properties, these estimates are based on assumptions
        concerning reserves, future production profiles and costs. Refer note 1(f). For amortisation policy refer note 1(f).
        As at 30 June 2007, the carrying value of Oil & Gas Properties is $ 16,888,504 (2006: $16,855,766).


Sun Resources NL and Controlled Subsidiaries                            39                                                      2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

1.      Statement of Significant Accounting Policies (Continued)

(a)     Principles of Consolidation

The consolidated entity accounts comprise the accounts of Sun Resources NL and all of its controlled subsidiaries. Control exists, where
Sun Resources NL has the power to control the functional and operating policies so as to obtain benefits from its activities. A list of controlled
subsidiaries is contained within Note 25 to the accounts.

All inter-company balances and transactions between subsidiaries in the consolidated entity, including any unrealised profits or losses have
been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with
those policies applied by the parent entity.

Where controlled subsidiaries have entered or left the consolidated entity during the year, their operating results have been included from the
date control was obtained or until the date control ceased.

(b)     Revenue Recognition

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
Revenue from Flour Bluff is recognised when received from the Operator and is two months in arrears due to lag between sales and when
received.
Dividend revenue is recognised when the right to receive a dividend has been established.
Revenue from rendering a service is recognised upon delivery of the service.
All revenue is stated net of the amount of goods and services tax (GST).

(c)     Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where that amount of GST incurred is not recoverable from
the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item
of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.

(d)     Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is
calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial
recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred
tax is credited to the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax
is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible
temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the
assumption that no adverse change will occur in income tax legislation and the anticipation that the economic subsidiary will derive sufficient
future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Sun Resources NL and its wholly owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation
regime. Sun Resources NL is responsible for recognising the current and deferred tax assets and liabilities for the tax consolidation group.
The Australian Taxation Office has not been notified of this decision. The tax consolidated group has not entered into a tax sharing agreement
whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the
tax consolidated group. The parent subsidiary will therefore have liability for all tax as the other companies in the group will not be liable.

2007 ANNUAL REPORT                                                    40                                Sun Resources NL and Controlled Subsidiaries
                                                                                                                             A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

1.      Statement of Significant Accounting Policies (Continued)
(e)     Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the group’s subsidiaries is measured using the currency of the primary economic environment in which
that subsidiary operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and
presentation currency.

Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign
currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried
at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date
when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as
a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is
directly recognised in equity, otherwise the exchange difference is recognised in the income statement.
Group companies
The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are
translated as follows:
•       assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
•       income and expenses are translated at average exchange rates for the period; and
•       retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in
the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.
(f)     Oil and gas properties
Exploration, evaluation and relevant acquisition expenditure incurred is accumulated in respect of each identifiable area of interest. These
costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where
activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable
reserves. Economically recoverable reserves are defined as the estimated quantity of product in an area of interest, which can be expected
to be profitably extracted, processed and sold under current and foreseeable economic conditions.
Exploration and evaluation expenditure, which does not satisfy these criteria, is written off in full against profit in the year in which a decision
to abandon the area is made.
Revenue received from the sale of product, material or services during the exploration and evaluation phase of operations is offset against
expenditure in respect of the area of interest or mineral resource concerned.
When production commences on an area of interest an exploration and evaluating cost relating to the area of interest is transferred to
producing projects within their oil and gas properties.
Sun uses the “Units of Production” (UOP) approach when depreciating and amortising field-specific assets. Amortisation of producing projects
for the year to 30 June 2007 was calculated based on proved and developed reserves.
Transferred development, exploration and evaluation costs are amortised on the relevant UOP basis for each area of interest. The reserves used
in these calculations are updated at least annually. Economic and technical developments are reviewed periodically in determining any rates.
Biannual reviews are undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to
that area of interest.
Costs of site restoration are provided over the life of the faclity from when exploration commences and are included in costs of that state.
Currently, the Company does not have any restoration liabilities.
(g)     Trade and other payables
These amounts represent unpaid liabilities for goods received by and services provided to the economic entity prior to the end of the financial
year. The amounts are unsecured and are normally settled within 30 days.

Sun Resources NL and Controlled Subsidiaries                         41                                                     2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

1.       Statement of Significant Accounting Policies (Continued)

(h)      Trade and other receivables

Other receivables represent prepayments and GST recoverable. Specific provision is made for doubtful debts.

(i)      Financial Instruments

Recognition

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or
obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Financial assets at fair value through profit and loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management
and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Derivatives are also categorised as held
for trading unless they are designated as hedges. Realised and unrealised gains and losses arising from changes in the fair value of these
assets are included in the income statement in the period in which they arise.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are
stated at amortised cost using the effective interest rate method.

Held-to-maturity investments

These investments are fixed maturities, and it is the group’s intention to hold these investments to maturity. Any held-to-maturity investments
held by the group are stated at amortised cost.

Available-for-sale financial assets

Available-for-sale financial assets include any financial assets not included in the above categories. Available-for-sale financial assets are
reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value
for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. In the case of
available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment
has arisen. Impairment losses are recognised in the income statement.

(j)      Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months of less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the
balance sheet.



2007 ANNUAL REPORT                                                    42                                Sun Resources NL and Controlled Subsidiaries
                                                                                                                             A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

1.      Statement of Significant Accounting Policies (Continued)

(k)     Plant and Equipment

Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment
losses.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these
assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probably that
future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets is depreciated on a diminishing value basis over their useful lives to the economic entity commencing
from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

                                                     Depreciation Rate
                         Plant and equipment             25% - 40%
                         Furniture and fittings              20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in
the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to
retained earnings.

(l)     Impairment of Assets

At each reporting date, the group reviews the carrying values of its tangible and intangible assets finite life to determine whether there is any
indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the
asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over
its recoverable amount is expensed to the income statement.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-
generating unit to which the asset belongs.

(m)     Interests in Joint Ventures

The economic entity’s share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of
the consolidated financial statements. Details of the economic entity’s expenses are shown at Note 28 in the accounts.

The economic and parent entity’s interests in joint venture entities are bought to account using the cost method.


Sun Resources NL and Controlled Subsidiaries                         43                                                   2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

1.      Statement of Significant Accounting Policies (Continued)

(n)     Provisions and Contingent Liabilities

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an
outflow of economic benefits will result and that outflow can be reliably measured. Contingent liabilities are only disclosed when the probability
for payment is not remote.

(o)     Earnings per share

        (i)     Basic earnings per share is determined by dividing net profit after income tax attributable to members of the company, excluding
                any costs of servicing the entity other than ordinary shares, by the weighted average number of ordinary shares outstanding
                during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

        (ii)    Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
                after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
                average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(p)     Segment Reporting

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be
allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of operating
cash, receivables, plant and equipment and other assets, net of related provisions. Segment liabilities consist primarily of other creditors and
provisions.

(q)     Share-based payments

In order to apply the requirements of AASB2 “Share-based Payments” estimates were made to determine the “fair value” of equity instruments
issued to Directors and incorporated into a Black and Scholes Valuation Model or Binomial Valuation Model.

(r)     Contributed equity

Ordinary shares are classified as equity.
Incremental costs directly attributed to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the
asquisition as part of the purchase consideration.

(s)     Employee benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee
benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled,
plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash
outflows to be made for those benefits.

(t)     Comparative Figures

Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current
financial year.




2007 ANNUAL REPORT                                                   44                               Sun Resources NL and Controlled Subsidiaries
                                                                                                                           A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)


                                                                                       CONSOLIDATED                                       PARENT ENTITY
                                                                                2007                2006                      2007                2006
                                                                                   $                     $                        $                  $

2.     Revenue from continuing operations

       Dividends received – other corporations                                 2,249             45,000                      2,249               45,000
       Interest received – other persons                                     100,205            118,020                     58,952              106,818
       Flour Bluff income                                                1,004,757            1,471,174                               -               -
       Other income                                                           33,755             25,883                               -          25,883
       Foreign currency translation gain                                           -            108,138                               -         108,138
       Write-back of provision for share loss                                      -             38,450                               -          26,724
       Total revenue                                                     1,140,966            1,806,665                     61,201              312,563


3.     Other income

       Profit on sale of financial assets (available for sale)                 162,726               6,140                  162,726                     -
       Profit on sale of subsidiary                                       1,000,000                      -               1,000,000                     -
                                                                         1,162,726                 6,140                1,162,726                     -
       In April 2007, the Company sold its subsidiary company Sun Resources (NSW) Pty Ltd for $1,000,000. There were no operations
       within this company.

4.     Expenses
       Profit/(loss) before income tax includes the
       following specific expenses;
                Depreciation and amortisation                (i)         2,012,072                 7,121                      7,953               7,121
                Exploration and evaluation costs
                written off                                              2,240,321            1,341,001                  2,240,321            1,341,001
                Finance expense – related subsidiaries                             -             43,395                               -          43,395
                Finance expense – other persons                                  31                     -                        31                   -
                Rental expense on operating lease                             32,421             34,695                     32,421               34,695
                Provision for inter-company loss                               6,056                    -                     6,056                   -

       (i)      The Company amortised $2,004,119 in exploration expenditure relating to Flour Bluff due to a reduction in reserves.


5.      Income Tax Expense

a.     The components of tax expense comprise:
       Current tax                                                                 -                    -                             -               -
       Deferred tax                                                                -                    -                             -               -
                                                                                   -                    -                             -               -




Sun Resources NL and Controlled Subsidiaries                            45                                                       2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)


                                                                                     CONSOLIDATED                               PARENT ENTITY
                                                                          2007                2006                       2007               2006
                                                                             $                   $                          $                   $
5.    Income Tax Expense (continued)

b.    The prima facie tax on profit before income tax is
                                                                  (3,018,979)             (617,325)               (1,894,821)         (2,085,154)
      reconciled to the income tax as follows:

      Prima facie tax payable on profit before income tax
      at 30% (2006: 30%)
      -       economic entity                                       (905,694)             (185,198)                         -                   -
      -       parent entity                                                  -                   -                  (568,446)           (625,546)
      -       other members of the income tax
              consolidated group net of intercompany                         -                   -                          -                   -
              transactions
                                                                    (905,694)             (185,198)                 (568,446)           (625,546)
      Add:
      Tax effect of:
      -       non-deductible depreciation and
                                                                             -                   -                          -                   -
              amortisation
      -       other non-allowable items                                (14,017)           253,786                    (14,017)           252,325
      -       write-downs to recoverable amounts                             -                   -                          -                   -
      -       share options expensed during year                             -                   -                          -                   -
      -       under provision for income tax in prior year                   -                   -                          -                   -
                                                                    (919,711)              68,588                   (582,463)           (373,221)
      Less:
      Recoupment of prior year tax losses not previously
                                                                                 -         (68,588)                         -                   -
      brought to account
      Deferred Tax Asset on current year losses not
                                                                       919,711                   -                  582,463             373,221
      recognised
      Income tax attributable to entity                                      -                   -                          -                   -
      Income tax expense to wholly-owned subsidiaries
                                                                             -                   -                          -                   -
      under the tax sharing agreement
      Income tax attributable to entity                                      -                   -                          -                   -


      The applicable weighted average effective tax
                                                                           0%                  0%                         0%                  0%
      rates are as follows:
      No deferred tax assets or deferred tax liabilities have been recognised as it is not probable that future tax profits will be available to
      offset these balances.




2007 ANNUAL REPORT                                                46                                  Sun Resources NL and Controlled Subsidiaries
                                                                                                                           A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

                                                                                        CONSOLIDATED                            PARENT ENTITY
                                                                             2007                2006                   2007               2006
                                                                                    $                  $                    $                  $
6.      Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-
related audit firms:
a.      Audit services

        BDO Kendalls Audit and Assurance (WA)
            Audit and review of financial reports                            26,920             24,469                 26,920             24,469
            Non-BDO Kendalls (WA) for the audit and
            review of financial reports of an entity in the
            Group                                                            1,186              4,370                  1,186               4,370
        Total remuneration for audit services                               28,106             28,839                 28,106             28,839

b.      Non-audit services
        BDO Kendalls (WA)
            Taxation services                                                7,100              7,050                  7,100               7,050

        Total remuneration for non-audit services                            7,100              7,050                  7,100               7,050
It is the Group’s policy to employ BDO Kendalls on assignments additional to their statutory audit duties where BDO Kendalls’ expertise and
experience to the Group are important. These assignments are principally tax advice and it is the Group’s policy to seek competitive tenders
for all major consulting projects.
7.        Earnings per Share
Earnings used to calculate basic earnings per share                   (3,018,979)            (617,325)

Weighted average number of ordinary shares outstanding
during the year used in calculating basic EPS                        164,246,196          133,910,629
Diluted earnings per share is not reflected as the result is anti-dilutive in nature.
8.      Cash and Cash Equivalents

Cash at bank and on hand                                               1,698,685            1,798,862              642,000             885,156
Term Deposits                                                              70,905             67,173                 70,905             67,173
                                                                       1,769,590            1,866,035              712,613             952,329
Cash at bank bears floating interest rates between 0% and 4.2% (2006: 0% and 4.1%). Term Deposits are for thirty days and bear 5.3%
interest (2006: 5.4%) and have an average maturity of 30 days.

9.      Trade and other Receivables – Current
Other debtors                                                              79,556            134,915                 13,075              43,510
Prepayments (see note 23)                                                  75,000                  -                 75,000                    -
                                                                        154,556              134,415                 88,075              43,510
The payment period of other debtors is thirty days.

10.     Financial Assets - Current
Available-for-sale
        - listed investments, at fair value                                4,000             427,000                  2,000            427,000
Available-for-sale financial assets comprise investments in the ordinary issued capital of various entities. There are no fixed returns or fixed
maturity date attached to these investments.

Sun Resources NL and Controlled Subsidiaries                          47                                                  2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)


                                                                                 CONSOLIDATED                                      PARENT ENTITY
                                                                          2007                2006                         2007              2006
                                                                             $                   $                            $                 $
11.     Receivables – Non-current
Amounts receivable from controlled subsidiaries                             -                    -               13,671,958            14,853,065
Provision for loss on loans                                                  -                   -                (2,122,818)          (2,173,380)
                                                                             -                   -                11,549,140           12,679,685
12.     Other Financial Assets – Non-current
Other financial asset
        - unlisted shares at cost (see Note 25)                              -                   -                 4,182,045            2,501,500
Unlisted shares in subsidiaries are stated at amortised cost which equates to fair value. Capital reserves of $2,500,000 held by Nieuport Pty
Ltd were distributed to Sun Resources NL during the year. The capital distribution was offset against the cost of the investment as shown on
the Income Statement.
13.     Plant and Equipment
Plant and equipment – at cost                                           57,128             47,765                       57,128            47,765
        - Accumulated depreciation                                   (36,376)              (29,854)                     (36,376)          (29,854)
                                                                        20,752             17,911                       20,752             17,911
Furniture and fittings – at cost                                         30,019             28,820                       30,019            28,820
        - Accumulated depreciation                                   (23,495)              (22,064)                     (23,495)          (22,064)
                                                                         6,524              6,756                        6,524              6,756
                                                                        27,276             24,667                       27,276            24,667
Movements in Carrying Amounts
Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year.

2007                                                             Plant and Equipment           Furniture and Fittings                        Total
                                                                                      $                             $                           $
Balance at the beginning of the year                                             17,911                        6,756                      24,667
Additions                                                                         9,363                        1,199                      10,562
Disposals                                                                             -                             -                           -
Depreciation                                                                     (6,522)                      (1,431)                      (7,953)
Balance at the end of the year                                                   20,752                        6,524                      27,276

2006                                                             Plant and Equipment           Furniture and Fittings                        Total
                                                                                      $                             $                           $
Balance at the beginning of the year                                             16,647                        8,445                      25,092
Additions                                                                         6,696                             -                      6,696
Disposals                                                                             -                             -                           -
Depreciation                                                                     (5,432)                      (1,689)                      (7,121)
Balance at the end of the year                                                   17,911                        6,756                      24,667




2007 ANNUAL REPORT                                                 48                                 Sun Resources NL and Controlled Subsidiaries
                                                                                                                           A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

                                                                                    CONSOLIDATED                                PARENT ENTITY
                                                                         2007                2006                    2007                 2006
                                                                                $                  $                        $                $
14.     Oil and gas properties
Opening balance 1 July 2006                                       16,855,766            9,577,308              3,584,829            4,251,646
       -       Net exploration expenses incurred in the
                                                                   4,277,178            8,619,459                  53,514             674,184
               year and capitalised
       -       Expenditure written off                            (2,240,321)          (1,341,001)             (2,240,321)          (1,341,001)
       -       Amortisation of oil and gas properties              (2,004,119)                  -                       -                    -
Closing balance 30 June 2007                                      16,888,504           16,855,766               1,398,022            3,584,829

Analysis of Oil and Gas Properties are as follows:

Producing Projects
       At cost                                                    13,175,152           11,867,121                           -                -
       Accumulated amortisation                                    (2,004,119)                  -                           -                -
       Net Carrying value                                         11,171,033           11,867,121                           -                -
Development Projects
        At cost                                                             -                      -                        -                -
Exploration and evaluation projects
        At cost                                                    5,717,471            4,988,645              1,398,022            3,584,829

Total                                                             16,888,504           16,855,766              1,398,022            3,584,829

Exploration expenditure is carried forward in accordance with the accounting policy and comprises expenditure incurred on the acquisition and
exploration of tenement interests for oil and gas.
Recoverability of the carrying amount of exploration assets is dependant on the successful exploration and sale of oil and gas.
Capitalised costs amounting to $3,865,128 (2006: $8,619,459) have been included in cash flows from operating activities in the cash flow
statement of the economic entity and $53,514 (2006: $674,183) for the parent entity.

15a.    Payables - Current
Other creditors and accruals                                        470,129               22,905                   58,079              22,905
15b.    Payables – Non- current
Loan from subsidiary company                                                -                  -               10,437,130          12,939,130
16.     Tax

a.      Liabilities
        Current
                  Income Tax                                                -                      -                    -                    -
        Non-current
                  Deferred tax liability comprises:
                  Tax allowances relating to property, plant
                                                                            -                      -                    -                    -
                  and equipment
        Total                                                               -                      -                    -                    -

b.      Assets
        Deferred tax assets comprise:
               Provisions                                                   -                      -                    -                    -
        Total                                                               -                      -                    -                    -

Sun Resources NL and Controlled Subsidiaries                       49                                                  2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)


                                                                               CONSOLIDATED                                 PARENT ENTITY
                                                                          2007          2006                             2007        2006
                                                                             $             $                                $           $
17.      Contributed Capital
a)       Contributed capital:
         170,755,785 fully paid ordinary shares
         (2006:148,755,788)                                         28,497,397        26,297,397                  28,497,397       26,297,397
         Issue costs of share capital (cumulative)                    (587,591)         (477,591)                   (587,591)        (477,591)
                                                                    27,909,806        25,819,806                  27,909,806       25,819,806
2007
   Number of Shares                           Details of Movement                                            Contributed Capital
                                                                                                                              $

     Ordinary shares
          148,755,785                         1 July 2006                     Opening Balance                         26,177,397
           22,000,000                         27 October 2006                 Issue of share capital by
                                                                              prospectus                               2,200,000


          170,755,785                         30 June 2007                    Closing balance                         28,377,397


Contributing shares
             4,800,000                        1 July 2006                     Unlisted contributing                      120,000
                                                                              shares at 2.5 cents each

                                              30 June 2007                    Closing Balance                         28,497,397


2006
   Number of Shares                           Details of Movement                                            Contributed Capital
                                                                                                                              $

     Ordinary shares
          116,309,785                         1 July 2005                     Opening Balance                         20,337,117
           32,446,000                         14 December 2005                Issue of share capital by
                                                                              prospectus                               5,840,280


          148,755,785                         30 June 2006                    Closing balance                         26,177,397


Contributing shares
             4,800,000                        28 October 2005                 Unlisted contributing                      120,000
                                                                              shares at 2.5 cents each

                                              30 June 2006                    Closing Balance                         26,297,397
b)       Reserves
         Share-based payment reserve was created for the valuation of the 4,800,000 unlisted contributing shares at a value of 8.2 cents per
         share for $393,600 as part of a share-based payment in 2006 year. The directors each paid $30,000 or $120,000 together for the
         contributing shares on the 28 October 2005 as part of contributed capital.
         In the 2007 year this reserve was increased by $17,298 to reflect share options issued to give a cumulative reserve of $410,898.
2007 ANNUAL REPORT                                                  50                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                         A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

18.        Options over Unissued Shares

On 12 October 2006, 11.5 million listed free options were issued to shareholders who purchased ordinary shares with an excercise price of
20 cents per option on or before 30 December 2008 to fund exploration and development of the Company’s South Texas, USA, oil and gas
assets.
Unlisted options were issued in the following tranches of options in the previous year to Linq Capital Limited:
           -       2 million 29 February 2008 options with an exercise price of $0.25 per option;
           -       2 million 30 April 2008 options with an exercise price of $0.35 per option; and
           -       2 million 30 June 2008 options with an exercise price of $0.45 per option.

19.        Significant Events after Balance Sheet Date
The SL 328 #9 well on the Hollywood Prospect in the Lake Long field area, Louisiana, USA, flowed 2,364,000 scfgd with 53 bocd with no water
on restricted testing on 25 July 2007. Production with sales to market commenced in September 2007. Sun Resources has a 10% working
interest in the well.

20.            Capital and Leasing Commitments

Exploration expenditure commitments

The Company has joint venture and statutory expenditure commitments on its areas of interest of approximately $2,136,330 and 2006:
$2,564,992 (due within one year) as at 30 June 2007. Financial commitments for subsequent periods are contingent upon future exploration
results and cannot be estimated.
                                                                            CONSOLIDATED                              PARENT ENTITY
                                                                      2007             2006                      2007              2006
                                                                         $                 $                        $                  $
Operating lease commitments

Not later than one year                                                     46,906            22,704                   46,906           22,704
                                                                            46,906            22,704                   46,906           22,704

The directors are not aware of any other expenditure commitments other than the termination benefit owed to Mr A P Woods as part of his
consultancy contract for $107,520 at his current monthly fees rate.

21.        Share-based Payments

2007
The Company issued 1,500,000 listed options in July 2006 to Mr W J Ashby with an exercise price of $0.20 per option on or before 30 December
2008 as part of his remuneration package as Managing Director. These options have vested and are exercisable at the end of the year.
2006

At the AGM on 27 October 2005 shareholders approved the grant of an unlisted incentive of 25 cent contributing shares each paid to 2.5 cents
to each of the Directors listed below. Each of the Directors paid 2.5 cents on each share granted. The valuation of the shares at grant date
was determined using the binomial valuation model and included the 2.5 cents paid by each of the recipients. The inputs for this binomial
valuation model were as follows; closing share price as at 30 September 2005 was ($0.22), the risk free rate was 5.14%, the volatility factor
was between 50% and 100% and the dividend yield (0%).

Director                          Vested No.          Granted No.           Grant Date    Value at Grant Date     Exercise Date   Exercise Price

Dr B L Farrell                    1,200,000           1,200,000          27 Oct 2005          8.2 cents         30 December 2010 22.50 cents
Mr A P Woods                      1,200,000           1,200,000          27 Oct 2005          8.2 cents         30 December 2010 22.50 cents
Dr P Linsley                      1,200,000           1,200,000          27 Oct 2005          8.2 cents         30 December 2010 22.50 cents
Dr W G Martinick                  1,200,000           1,200,000          27 Oct 2005          8.2 cents         30 December 2010 22.50 cents



Sun Resources NL and Controlled Subsidiaries                           51                                                  2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

22.    Key Management Personnel Disclosures
(a)    Directors
       The following persons were Directors of the Company during the financial year:
       i)      Chairman - executive
               Dr B L Farrell
       ii)     Executive directors
               Mr WJ Ashby - Managing Director
               Mr A P Woods - Chief Financial Officer and Company Secretary
       iii)    Non-executive directors
               Dr P Linsley
               Dr W G Martinick
(b)    Other key management personnel
       Other than the Directors there were no other key management personnel.
(c)    Key management personnel compensation
                                                                                     CONSOLIDATED                                 PARENT ENTITY
                                                                             2007             2006                        2007             2006
                                                                                 $                $                           $                $
       Short-term employee benefits                                        581,558         398,818                      581,558          398,818
       Post-employment benefits                                            311,604            2,477                     311,604            2,477
       Long-term benefits                                                        -                -                           -                -
       Share-based payments                                                17,298         393,600                       17,298          393,600
                                                                          910,460         794,895                      910,460          794,895
The company has taken advantage of the relief provided by Corporations Regulation 2M.6.04 and has transferred the detailed remuneration
disclosures to the director’s report. The relevant information can be found in sections A-C of the remuneration report on pages 21 to 23.

(d)    Equity instrument disclosures relating to key management personnel

       i)      Options provided as remuneration and shares issued on exercise of those options
               Details of options provided as remuneration and shares issued on the exercise of such options, together with the terms and
               conditions of the options, can be found in section D of the remuneration report.
       ii)     Option Holdings
               The number of options over ordinary shares in the Company held during the financial year by each Director of the Company
               and other key management personnel of the Groups, including their personally related parties, are set out below.
               2007
                                  Balance at the    Granted as Exercised Other changes Balance at end                   Vested and      Unvested
                                 start of the year compensation                          of the year                    exercisable
               Director
               Mr W J Ashby              -           1,500,000             -              -            1,500,000         1,500,000          -
               None of the other directors held any options during the current year or in 2006.
               The options issued to Mr W J Ashby were valued at fair value at grant date on the 27 October 2006.
               Fair value at grant date was independently determined using a Black-Scholes option pricing model that takes into account the
               exercise price ($0.20), the impact of dilution, the share price at grant date ($0.11) and expected price volatility of the underlying
               share, the expected dividend yield (0%) and the risk-free interest rate (6.09%) for the term of the option (2.18 years).




2007 ANNUAL REPORT                                                   52                               Sun Resources NL and Controlled Subsidiaries
                                                                                                                           A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

       iii)    Share Holdings
                The number of shares in the Company held during the financial year by each Director of Sun Resources NL and other key
                management personnel of the Group, including their personnally related parties are set out below. There were no shares
                granted during the reporting year as compensation.
                Ordinary Shares
                2007
                Name                       Balance at start of the Received during the Other changes during    Balance at the end of
                                                   year            year on the exercise of   the year                the year
                                                                          options
                Directors
                Dr B L Farrell                  19,525,255                          -                 -             19,525,255
                Mr W J Ashby                             -                          -                 -                      -
                Mr A P Woods                     6,459,526                          -                 -              6,459,526
                Dr P Linsley                     1,220,902                          -                 -              1,220,902
                Dr W G Martinick                10,978,139                          -             6,000             10,984,139

                2006
                Name                       Balance at start of the Received during the Other changes during    Balance at the end of
                                                   year            year on the exercise of   the year                the year
                                                                          options
                Directors
                Dr B L Farrell                  19,525,255                          -                 -             19,525,255
                Mr W J Ashby                             -                          -                 -                      -
                Mr A P Woods                     6,659,526                          -          (200,000)             6,459,526
                Dr P Linsley                     1,220,902                          -                 -              1,220,902
                Dr W G Martinick                10,760,481                          -          217,658              10,978,139

                Unlisted Contributing Shares
                2007
                Name                       Balance at start of the         Granted as        Exercised         Balance at the end of
                                                   year                   compensation                               the year
                Directors
                Dr B L Farrell                   1,200,000                          -                 -              1,200,000
                Mr A P Woods                     1,200,000                          -                 -              1,200,000
                Dr P Linsley                     1,200,000                          -                 -              1,200,000
                Dr W G Martinick                 1,200,000                          -                 -              1,200,000

                2006
                Name                       Balance at start of the         Granted as        Exercised         Balance at the end of
                                                   year                   compensation                               the year
                Directors
                Dr B L Farrell                             -                1,200,000                 -              1,200,000
                Mr A P Woods                               -                1,200,000                 -              1,200,000
                Dr P Linsley                               -                1,200,000                 -              1,200,000
                Dr W G Martinick                           -                1,200,000                 -              1,200,000
(e)    Loans to key management personnel
       Details of loans made to/from Directors are detailed in note 23.
(f)    Other transactions with key management personnel
       There were no other transactions with key management personnel.

Sun Resources NL and Controlled Subsidiaries                         53                                          2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

23.    Related Parties Transactions
(a)    Parent entity
       Transactions between related parties are on normal commercial terms and conditions, no more favourable than those available to other
       parties unless otherwise stated.
       The Company’s technical office at 25 Prowse Street, West Perth, Western Australia is leased at a commercial rate from a company
       associated with Dr B L Farrell on an arms length basis.
       In June 2007, the Director’s of the Company each received $15,000 (Total $75,000) as a prepayment for Director’s fees due in July
       2007. This transfer was inadvertently paid a month early. This amount is reflected as a prepayment in note 9.
(b)    Subsidiaries
       Interests in subsidiaries are set out in note 25.
(c)    Key management personnel
       Disclosures relating to key management personnel are set out in note 22.
(d)    Loans to/from related parties
       i)     Loans to/from related parties during the year were $0 (2006: $2,900,000). In November 2005 the Company received a loan of
              $2,900,000 on arms length commercial terms from an entity related to Dr B L Farrell as bridging finance prior to the receipt of funds
              from a capital raising in December 2005. This loan was repaid in December 2005, once the capital raising was complete.
       ii)     Loans advanced to subsidiaries during the year were $4,180,545 (2006: $7,343,715) and loans repaid were $1,124,489
               (2006: $28,652). There was no interest charged on these loans.
24.    Segment Reporting
Description of segments
       Business segments
       The consolidate entity is organised on a global basis into the following segments based on function:
              - Corporate administration
              - Exploration
       Geographical segments
       Although the consolidated entity’s divisions are managed on a global basis they operate in two main geographical areas:
              - Australia
              - United States of America
(a) Primary Reporting
Business Segments                                             Corporate Administration                   Exploration               Consolidated
                                                                                     $                             $                          $
2007
Segment revenue                                                                298,935                   2,004,757                    2,303,692
Segment result (Loss)                                                         (813,051)                 (2,205,928)                  (3,018,979)
Segment assets                                                               1,955,442                  16,888,504                   18,843,926
Segment liabilities                                                             58,079                     412,050                      470,129
Segment acquisition of assets                                                   10,562                           -                       10,562
Segment amortisation and depreciation                                            7,953                   2,004,119                    2,012,072
Segment exploration expenditure written off                                          -                   2,240,321                    2,240,321
2006
Segment revenue                                                                341,631                   1,471,174                    1,812,805
Segment result (Loss)                                                          723,676                  (1,341,001)                    (617,325)
Segment assets                                                               2,452,617                  16,855,766                   19,308,383
Segment liabilities                                                             22,905                           -                       22,905
Segment acquisition of assets                                                    6,696                           -                        6,696
Segment amortisation and depreciation                                            7,121                           -                        7,121
Segment exploration expenditure written off                                          -                   1,341,001                    1,341,001



2007 ANNUAL REPORT                                                  54                               Sun Resources NL and Controlled Subsidiaries
                                                                                                                          A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

(b) Secondary Reporting
Geographical Segments                                                     Australia                     USA               Consolidated
                                                                                  $                       $                          $
2007
Segment revenue                                                         1,223,927                 1,079,765                 2,303,692
Segment result (Loss)                                                  (1,889,950)               (1,129,029)               (3,018,979)
Segment assets                                                          2,229,988                16,613,938                18,843,926
Segment liabilities                                                        58,079                   412,050                   470,129
Segment acquisition of assets                                              10,562                         -                    10,562
Segment acquisition of exploration assets                                 354,063                 3,923,115                 4,277,178


2006
Segment revenue                                                           330,428                 1,482,377                 1,812,805
Segment result (Loss)                                                  (2,072,583)                1,455,258                  (617,325)
Segment assets                                                          5,032,337                14,276,046                19,308,383
Segment liabilities                                                        22,905                         -                    22,905
Segment acquisition of assets                                               6,696                         -                     6,696
Segment acquisition of exploration assets                               1,624,730                 6,994,729                 8,619,459

25.    Investment in Controlled Subsidiaries
                                                                                                     2007                        2006
                                                       Country of Incorporation             Equity Holding              Equity Holding
                                                                                                        %                           %
Sun Resources NL and its subsidiaries:
Sun Resources NL                                (a)          Australia
Nieuport Pty Ltd                                (b)          Australia                                 100                        100
Sun Resources (New Caledonia) Pty Ltd           (c)          Australia                                 100                        100
Sun Resources (NSW) Pty Ltd                     (d)          Australia                                   -                        100
Highland Petroleum Limited                      (e)      Papua New Guinea                                -                        100
Sun Alpha LLC                                   (f)        Colorado, USA                               100                        100
Sun Beta LLC                                    (f)        Colorado, USA                               100                        100
Sun Delta Inc                                   (f)        Colorado, USA                               100                        100
(a)    The ultimate parent entity is Sun Resources NL.
(b)    Nieuport Pty Ltd carries out investments.
(c)    Sun Resources (New Caledonia) Pty Ltd carries out oil exploration activities in New Caledonia.
(d)    Sun Resources (NSW) Pty Ltd carried out oil exploration activities in New South Wales. This company was sold in April 2007.
(e)    Highland Petroleum Limited carried out oil exploration activities in Papua New Guinea. This company was deregistered in May 2007
       due to the ceasation of oil exploration activities.
(f)    Sun Alpha LLC, Sun Beta LLC, Sun Delta Inc carry out oil exploration in the USA.

All of the above subsidiaries are economically dependant on Sun Resources NL.




Sun Resources NL and Controlled Subsidiaries                    55                                                2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

26.        Financing Arrangements

The consolidated entity has access to the following financing facilities with its banking provider.
                                                                                     CONSOLIDATED                                   PARENT ENTITY
                                                                             2007                2006                      2007                2006
                                                                                 $                   $                         $                   $
Amounts used:
Bank overdraft facility                                                          -                    -                         -                   -
Credit card facilities                                                      31,155                986                    31,155                 986
                                                                            31,155                986                    31,155                 986
Amounts unused:
Bank overdraft facility                                                      5,000              5,000                      5,000               5,000
Credit card facilities                                                       8,845             39,014                      8,845             39,014
                                                                            13,845             44,014                    13,845              44,014
Total facilities                                                            45,000             45,000                    45,000              45,000

The terms and conditions of these overdraft facilities are in accordance with the bank’s standard terms and these facilities and conditions can
be continued.

27.      Financial Instruments

(a)      Financial Risk Management

The group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts
receivable and payable, loans to and from subsidiaries, leases and shares.
(i)      Treasury Risk Management
         The senior executives of the group meet on a regular basis to analyse currency and interest rate exposure and to evaluate treasury
         management strategies in the context of the most recent economic conditions and forecasts.
(ii)     Financial Risks
         The main risks the group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk, credit
         risk and price risk.
         Interest rate risk
         Interest rate risk is managed with a mixture of fixed and floating rate debt. The interest rate risk is summarised in the table below.
         Foreign currency risk
         The group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other
         than the group’s measurement currency
         Liquidity risk
         The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are
         maintained.
         Credit risk
         The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial
         assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to
         the financial statements.
         The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial
         instruments entered into by the economic entity.
         Price risk
         The group is exposed to commodity price risk. Oil and gas prices have fluctuated significantly during the past three years.

2007 ANNUAL REPORT                                                     56                                 Sun Resources NL and Controlled Subsidiaries
                                                                                                                               A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

(b)     Interest Rate Risk Exposures
        The economic entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets
        and financial liabilities comprises:
2007
                                                          Fixed interest rate maturing in

                                 Floating interest one year or less    one to five more than five Non-interest          Total         Average interest rate
                                           rate (i)                         years         years     bearing
                                                                                                                                      Floating     Fixed
                                                                                                                                            (i)       (ii)

                          Note                  $                $              $               $            $           $                  %          %
Financial Assets
Cash assets                  8       1,698,685                   -              -              -             -   1,698,685                4.2           -
Term deposits                8                  -         70,905                -              -             -     70,905                    -       5.3
Other debtors                9                  -                -              -              -     154,556      154,556                    -          -
Investments                 10                  -                -              -              -       4,000        4,000                    -          -
                                     1,698,685            70,905                -              -     158,556     1,928,146
Financial Liabilities
Payables                    15                  -                -              -              -     470,129      470,129                    -          -
Net financial assets                  1,698,685            70,905                -              -    (311,573)    1,458,017
(i)    Floating interest rates represent the most recently determined rate applicable to the instrument at balance sheet date.
(ii)   Fixed interest rates are one year or less.

Reconciliation of net financial assets to net assets
                                                                                            Reference Note                    $
Net financial assets as above                                                                                      1,458,017
Non financial assets and liabilities:
                 Producing projects                                                                              11,171,033
                 Exploration and evaluation projects                                                              5,717,471
        Oil and gas properties                                                                         14        16,888,504
        Plant and equipment                                                                            13            27,276
Net assets per balance sheet                                                                                     18,373,797




Sun Resources NL and Controlled Subsidiaries                               57                                                     2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

2006
                                                         Fixed interest rate maturing in
                                Floating interest one year or less    one to five more than five    Non-interest               Total     Average interest rate
                                          rate (i)                          years        years        bearing
                                                                                                                                            Floating     Fixed
                                                                                                                                                  (i)       (ii)

                        Note                  $                $                            $                $                  $                 %          %
Financial Assets
Cash assets                 8       1,798,862                 -                -             -            -            1,798,862                 4.2
Term deposits               8               -            67,173                -             -            -               67,173                   -       5.3
Other debtors               9               -                 -                -             -      134,915              134,915                   -         -
Investments                10               -                 -                -             -      427,000              427,000                   -         -
                                    1,798,862            67,173                -             -      561,915            2,427,950
Financial Liabilities
Payables                   15               -                 -                -             -       22,905               22,905                    -         -
Net financial assets                 1,798,862            67,173                -             -      539,010            2,405,045
(i)     Floating interest rates represent the most recently determined rate applicable to the instrument at balance sheet date.
(ii)    Fixed interest rates are one year or less

Reconciliation of net financial assets to net assets
                                                                                    Reference Note                             $
Net financial assets as above                                                                                           2,405,045
Non financial assets and liabilities:
               Producing projects                                                                                      11,867,121
               Exploration and evaluation projects                                                                      4,988,645
       Oil and gas properties                                                                       14                 16,855,766
       Plant and equipment                                                                          13                     24,667
Net assets per balance sheet                                                                                           19,285,478

(c)       Net Fair Values of Financial Assets and Liabilities
The carrying amounts of financial instruments on the balance sheet comprising cash, cash equivalents and non-interest bearing monetary
financial assets and liabilities equal their net fair value.
Net Fair Values
Aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date.

                                                                                   2007                                              2006
                                                                                                                         Carrying
                                                                   Carrying Amount        Net Fair Value                                      Net Fair Value
                                                                                                                         Amount
                                                                                    $                    $                      $                             $
Financial Assets
       Cash Assets                                                       1,698,685               1,698,685              1,798,862                  1,798,865
       Term Deposits                                                        70,905                  70,905                 67,173                     67,173
       Other Debtors                                                       154,556                 154,556                134,915                    134,915
       Investments                                                           4,000                   4,000                427,000                    427,000
                                                                         1,928,146               1,928,146              2,427,950                  2,427,950


Financial Liabilities
       Payables                                                              430,129              470,129                  22,905                       22,905
                                                                             430,129              470,129                  22,905                       22,905


2007 ANNUAL REPORT                                                      58                                   Sun Resources NL and Controlled Subsidiaries
                                                                                                                                  A.B.N. 69 009 196 810
Notes To And Forming Part Of The Financial Statements
For The Year Ended 30 June 2007 (Continued)

(d)    Foreign Exchange

The economic entity is exposed to currency exchange rate risk through primary financial assets comprising cash at bank in United States
dollars. The exposure comprises US $908,386 (2006: US$777,278) and is quantified in (e).

(e)    Foreign Currency Exposure

The Australian dollar equivalents of foreign currency monetary items included in the balance sheet under the heading Cash Assets, to the
extent that they are not effectively hedged comprise:

Cash assets

Cash at bank                                                         1,070,452          1,070,452                1,067,789          1,067,789

28.    Joint Ventures

The consolidated entity’s share of assets employed in joint ventures, referred to in the “Review of Activities” set out on pages 2 to 15 and in
the “Tenement Directory” on page 16, are included in the Consolidated Entity Balance Sheets under the classifications shown below. The joint
ventures do not have separate books of account and relate solely to contribution/interest in a well or expenditure on an area of interest. This
is distinct from operating/producing joint ventures, which have assets and liabilities. Please refer to “Tenement Directory” on the inside back
cover for details of the Company’s percentage interest in each joint venture area.

                                                                                   CONSOLIDATED                                PARENT ENTITY

                                                                           2007               2006                     2007              2006
                                                                               $                  $                        $                 $
Oil and gas properties                                               16,888,504         16,855,766                1,398,022         3,584,829

29.    Contingencies

The Directors are not aware of any contingencies.

30.    Employee Entitlements

Number of Employees

                                                                          2007                2006
Number of employees at year end                                               3                   2




Sun Resources NL and Controlled Subsidiaries                       59                                                   2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Directors’ Declaration


In the Directors’ opinion:

a)      the financial statements and notes set out on pages 32 to 59 are in accordance with the Corporations Act 2001, including:
        i)      complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
                requirements; and
        ii)     giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their
                performance for the financial year ended on that date; and
b)      there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;
        and
c)      the audited remuneration disclosures set out on pages 22 to 23 of the directors’ report comply with Accounting Standards AASB 124
        Related Party Disclosures and the Corporations Regulations 2001; and
d)      at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in
        note 25 will be able to meet any obligations or liabilities.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with the resolution of the directors.




BRADFORD L FARRELL                                                       ALAN P WOODS
Director                                                                 Director
Perth, Western Australia                                                 Perth, Western Australia

Dated this Wednesday, 24 September 2007




2007 ANNUAL REPORT                                                  60                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                         A.B.N. 69 009 196 810
Independant Audit Report To The Members Of Sun Resources NL
And Controlled Subsidiaries

                                                                                            BDO Kendalls Audit & Assurance (WA)
                                                                                            128 Hay Street
                                                                                            SUBIACO WA 6008
                                                                                            PO Box 700
                                                                                            WEST PERTH WA 6872
                                                                                            Phone 61 8 9380 8400
                                                                                            Fax 61 8 9380 8499
                                                                                            aa.perth@bdo.com.au
                                                                                            www.bdo.com.au

                                                                                            ABN 90 360 101 594
                                                   INDEPENDENT AUDITOR’S REPORT
                                               TO THE MEMBERS OF SUN RESOURCES NL

           We have audited the accompanying financial report of Sun Resources NL, which comprises the balance
           sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flow
           statement for the year ended on that date, a summary of significant accounting policies, other explanatory
           notes and the directors’ declaration 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.

           We have also audited the remuneration disclosures contained in the directors’ report. As permitted by the
           Corporations Regulations 2001, the consolidated entity has disclosed information about the remuneration of
           directors and executives (“remuneration disclosures”), required by Accounting Standard AASB 124 Related
           Party Disclosures, under the heading “Remuneration Report” of the directors’ report and not in the financial
           report.

           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
           Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian
           equivalents to International Financial Reporting Standards ensures that the financial report, comprising the
           consolidated 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 to
           also 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 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 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
           remuneration disclosures contained in the directors’ report

           We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
           audit opinions.


                                                                                               BDO Kendalls is a national association of
                                                                                               separate partnerships and entities




Sun Resources NL and Controlled Subsidiaries                     61                                                            2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Independant Audit Report To The Members Of Sun Resources NL
And Controlled Subsidiaries (Continued)




      Independence

      In conducting our audit, we have complied with the independence requirements of the Corporations Act
      2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the
      directors of Sun Resources NL on 24 September 2007, would be in the same terms if provided to the
      directors as at the date of this auditor’s report.

      Auditor’s Opinion on the Financial Report

      In our opinion:

      (a)   the financial report of Sun Resources NL is in accordance with the Corporations Act 2001, including:

            (i)    giving a true and fair view of the company’s and consolidated entity’s financial position as at
                   30 June 2007 and of its 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; and

      (b)   the consolidated financial statements and notes also complies with International Financial Reporting
            Standards as disclosed in Note 1.

      Auditor’s Opinion on the AASB 124 Remuneration Disclosures Contained in the Directors’ Report

      In our opinion the remuneration disclosures that are contained in the directors’ report comply with Accounting
      Standard AASB 124.

      BDO Kendalls Audit & Assurance (WA) (formerly BDO)




      Glyn O’Brien
      Partner

      Perth, Western Australia
      Dated this 24th day of September 2007




2007 ANNUAL REPORT                                          62                           Sun Resources NL and Controlled Subsidiaries
                                                                                                              A.B.N. 69 009 196 810
Additional Shareholder Information
As At 14 September 2007

The issued capital of the Company as at 14 September 2007 is 170,755,785 ordinary fully paid shares; 12,500,000 30 December 2008 listed
options with an exercise price of $0.20 per option; 2,000,000 29 February 2008 unlisted options with an exercise price of $0.25 per option;
2,000,000 30 April 2008 unlisted options with an exercise price of $0.35 per option; 2,000,000 30 June 2008 unlisted options with an exercise price
of $0.45 per option; 4,800,000 contributing shares paid to $0.025 with outstanding call of $0.225 expiring 30 December 2010.
Distribution of Shareholding as at 31 August 2006
                                                                                                                Fully Paid
                                                                                                          Ordinary Shares
Number of Shareholders                                                                                             1,806
Percentage holdings by twenty largest holders                                                                    54.93%
Holders of less than a marketable parcel                                                                             369

Number of holders in the following distribution categories:
0 - 1,000                                                                                                             49
1,001 - 5,000                                                                                                        199
5,001 - 10,000                                                                                                       276
10,001 - 100,000                                                                                                     703
100,001 and over                                                                                                     201
                                                                                                                   1,806

Twenty Largest Shareholders
The names of the twenty largest shareholders are as follows:
                                                                                                                                    No. of Shares
1.   Suparell Pty Ltd                                                                                                                 19,525,255
2.   Mr Brian Lesleigh Williams & Mrs Valerie Ruby Dawn Williams Super Fund                                                            11,750,000
3.   Martinick Group                                                                                                                  10,984,139
4.   RBC Dexia Investor Services Australia Nominees Pty Ltd                                                                             9,287,176
5.   Mr Peter Alfred Ternes                                                                                                             8,644,000
6.   Woods Group                                                                                                                        6,459,526
7.   ANZ Nominees Limited                                                                                                               3,735,275
8.   Berenes Nominees Pty Ltd                                                                                                           2,463,100
9.   Elko Interiors Pty Ltd Superfund                                                                                                   2,125,000
10. Mrs Melanie Maree Herpen                                                                                                            1,890,000
11. Douglas Financial Consultants Pty Ltd                                                                                               1,550,000
12. Rosewarne Superannuation Pty Ltd                                                                                                    1,523,027
13. Philip Linsley                                                                                                                      1,220,902
14. Mr Conran James Smith                                                                                                               1,204,000
15. Axwatch Pty Ltd                                                                                                                     1,150,000
16. Bell Potter Nominees Ltd                                                                                                            1,107,500
17. Elcos Pty Ltd                                                                                                                       1,100,000
17. Newlands and Co. Pty Ltd                                                                                                            1,100,000
18. Three Bears Super Fund                                                                                                              1,004,591
19. Chesilton Pty Ltd                                                                                                                   1,000,000
19. Forty Traders Pty Ltd                                                                                                               1,000,000
19. Mr Dean Andrew Herpen                                                                                                               1,000,000
19. Karraba Investments Pty Ltd                                                                                                         1,000,000
19. Ossart Holdings Pty Ltd                                                                                                             1,000,000
20. Mr Robert Hastings Smythe Super Fund                                                                                                  975,000


Sun Resources NL and Controlled Subsidiaries                         63                                                      2007 ANNUAL REPORT
A.B.N. 69 009 196 810
Additional Shareholder Information
As At 14 September 2007 (Continued)

Substantial Shareholders

In accordance with Section 671B of the Corporations Act 2001, the Company had been notified of the following substantial shareholders.

Dr Bradford Lawrence Farrell of 30 Sudbury Way, City Beach WA 6015 has a relevant interest in 19,525,255 ordinary shares which represent
11.43% of issued ordinary capital.

Mr Brian Lesleigh Williams and Mrs Valerie Ruby Dawn Williams (Williams Super Fund) of P.O. Box 5373, Manly QLD 4179, has a relevant
interest in 11,750,000 ordinary shares which represents 6.88% of issued ordinary capital.

Dr Wolf Gerhard Martinick of 60 Jutland Parade, Dalkeith WA 6009 has a relevant interest in 10,984,139 ordinary shares which represents
6.43% of issued ordinary capital.

RBC Dexia Investor Services Australian Nominees Pty Limited of GPO Box 5430, Sydney, NSW 2000 has a relevant interested in 9,287,176
ordinary shares which represents 5.44% of issued ordinary capital.

Mr Peter Alfred Ternes (Peter Ternes Super Fund) of 9 Allison Avenue, Lane Cove, NSW 2066 has a relelvant interest in 8,644,000 ordinary
shares which represent 5.06% of issued ordinary capital.

Details With Respect To Directors’ Shareholding as at 14 September 2007

The interest at 14 September 2007, of the directors in the shares of the Company are as follows:

                                      Fully Paid Ordinary         Unlisted Contributing
                                                                                                   Unlisted Options               Listed Options
                                                  Shares                       Shares
Dr B L Farrell                                19,525,255                     1,200,000                             -                             -
Mr W J Ashby                                             -                             -                           -                  1,500,000
Mr A P Woods                                   6,459,526                     1,200,000                             -                             -
Dr P Linsley                                   1,220,902                     1,200,000                             -                             -
Dr W G Martinick                              10,984,139                     1,200,000                             -                             -


Voting Rights

Ordinary Shares

On a show of hands every member present in person or by proxy or attorney or being a corporation by its authorised representative who is
present in person or by proxy, shall have one vote for every fully paid ordinary share of which he is a holder.

Contributing Shares

Contributing shares have no voting rights until each contributing share is fully paid up.

Listed and Unlisted Options

No options are currently listed. Both listed and unlisted options have no voting rights until such options are exercised as fully paid shares.




2007 ANNUAL REPORT                                                   64                              Sun Resources NL and Controlled Subsidiaries
                                                                                                                          A.B.N. 69 009 196 810
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               ABN 69 009 196 810
 (Incorporated in Western Australia)



                   ASX Code: SUR

         Unit 16, Subiaco Village
                      531 Hay St
   SUBIACO WA 6008 Australia

              P.O. Box 1786
WEST PERTH WA 6005 Australia

    Telephone:    +61 8 9388 6501
    Facsimile:    +61 8 9388 7991

    Email: admin@sunres.com.au
   Web Page: www.sunres.com.au

				
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