OPHIR ENERGY PLC
ANNUAL REPORT
AND ACCOUNTS 2012
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OPHIR ENERGY CREATES
VALUE BY EXPLORING AND
APPRAISING OIL AND GAS
ASSETS, OFFSHORE AND
IN DEEPWATER.
THE GROUP HAS AN EXTENSIVE AND DIVERSE PORTFOLIO OF ASSETS
ACROSS EAST AND WEST AFRICA AND IS FOCUSED ON MAXIMISING THEIR
VALUE AS WELL AS CONTINUING TO EXPLORE NEW OPPORTUNITIES.
OPHIR IS LISTED ON THE LONDON STOCK EXCHANGE (FTSE 250).
OPERATIONAL HIGHLIGHTS
Drilling success
100%
8 successes from 8 wells
(6 exploration and 2 appraisal)
Net contingent (2C)
resources (bboe)
1.0021 +377%1
New seismic programmes
New deepwater blocks
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Acquiring data covering over
13,000km²
Increasing total acreage by
10,000km² to 106,702km²
New country entries
For more information go to:
www.ophir-energy.com
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1 Post-government back-in
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BUSINESS
REVIEW
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CONSOLIDATED
FINANCIAL STATEMENTS
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Chairman’s and Chief Executive
Officer’s joint review
76 Independent Auditor’s Report
78 Consolidated income statement
12 Where we operate
14 Our business model
16 Our competitive advantages
18 Key performance indicators
20 Review of operations
32 Financial review
34 Corporate and
social responsibility
38 Principal risks and uncertainties
and statement of
comprehensive income
79 Consolidated statement
of financial position
80 Consolidated statement
of changes in equity
Consolidated statement
of cash flows
81
82 Notes to the financial
statements
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GOVERNANCE
42 Board of Directors
44 Directors’ Report
48 Corporate Governance Report
54 Report of the Audit Committee
57 Report of the HSE Committee
58 Report of the
Nomination Committee
60 Remuneration Report
73 Statement of
Directors’ Responsibilities
110 Statement of Directors’
responsibilities in relation to the
Company financial statements
111 Independent Auditor’s Report
113 Company statement
of financial position
114 Company statement
of changes in equity
115 Company statement
of cash flows
116 Notes to the financial
statements
133 Shareholder information
136 Glossary
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ANNUAL REPORT AND ACCOUNTS 2012 HIGHLIGHTS OF 2012
OPHIR HAD A SUCCESSFUL
2012 WITH MAJOR
OPERATIONAL PROGRESS
THROUGH THE YEAR
MARCH
The Jodari-1 well discovered gas
estimated at 3.4TCF mean
recoverable, exceeding pre-drill
estimates. This was Ophir’s fourth
consecutive gas discovery in
Tanzania and its biggest discovery
to date.
APRIL
The Group successfully
placed 30.5 million shares,
raising US$242 million.
JANUARY
Ophir announced the start of a
three-well exploration programme
in Tanzania to be operated by Joint
Venture partner BG Group: Jodari-1
and Mzia-1 in Block 1 and Papa-1 in
Block 3. On the East Pande Block
in Tanzania a 2,200km2 3D seismic
programme began, designed
to identify and define prospects
for drilling.
In Gabon, a 2,198km2 3D seismic
programme across Ophir’s Mbeli and
Ntsina licences began, designed to
identify and define pre-salt targets
for drilling.
In Equatorial Guinea, the semi-
submersible Eirik Raude rig was
contracted to drill Ophir’s
exploration campaign.
FEBRUARY
Ophir completed the acquisition
of Dominion Petroleum Ltd
(Dominion) and added assets
including Block 7 in Tanzania and
Blocks L9 and L15 in Kenya –
extending the Group’s East African
acreage position to the north of
its existing Tanzanian assets.
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MAY
The Mzia-1 well discovered gas then
estimated at 3.5TCF mean in-place.
It was the play-opening well in the
Upper Cretaceous of the Rovuma
Delta and Ophir’s fifth consecutive
gas discovery in Tanzania. This
was another major step towards a
Tanzanian hub development in Block 1.
SEPTEMBER
Additional seismic and petrophysical
analysis of the Mzia-1 discovery in
Tanzania increased the mean estimate
gas in-place resource to 6TCF. This
took total discovered gas in-place
resources for Blocks 1, 3 and 4 to
13.5-21TCF, meeting the threshold
for a two-train LNG development.
JULY
Ophir began its three-well drilling
campaign in Equatorial Guinea: Tonel-1,
Fortuna West and Fortuna East.
The Tonel-1 well was successful and
discovered an estimated 814BCF of gas
mean recoverable. This was Ophir’s
third gas discovery in Block R.
In Equatorial Guinea, the Fortuna
West-1 well discovered gas
estimated at 677BCF mean
recoverable, including resources
in the underlying Viscata discovery,
and significantly derisked other
exploration targets in the Block.
As a result, the Group increased
its 2C resource estimate for Block R
to 2.3 TCF and reduced the risk
on the remaining estimated 10TCF
of inventory.
In Tanzania, the Joint Venture
resumed its drilling in Block 1 with
a three-well appraisal programme:
Jodari South-1, Jodari South ST-1
(a deviated side-track) and Jodari
North 1. Its objective was to confirm
the Jodari field as an anchor asset
to support Tanzania’s first multi-
train LNG development.
AUGUST
In Tanzania, the Papa-1 well
discovered gas estimated at 0.5 –
2.0TCF in-place in Block 3. This
was Ophir’s first discovery in
Block 3 and its sixth consecutive
discovery in Tanzania.
In Equatorial Guinea, the
Fortuna East-1 well discovered
gas estimated at 421BCF mean
recoverable. This was Ophir’s fourth
gas discovery in Block R and the
sixth in the block to date.
All resource values are Ophir
management estimates.
ANNUAL REPORT AND ACCOUNTS 2012
DECEMBER
Ophir entered Ghana with a 20%
participating interest in the Offshore
Accra Contract area and took over
operatorship.
The Jodari South-1 and Jodari North-1
wells encountered gas columns of 50m
and 32.4m respectively, confirming
high quality Oligocene reservoir
properties. Gross recoverable
resources for the Jodari accumulation
were re-confirmed at a mean case of
3.4TCF, with an upside P10 case of
3.7TCF. Separately the Jodari South
ST-1 confirmed the viability of high
angle or horizontal development wells
for future exploitation. This will help
development planning and will reduce
the number of producing wells
required and therefore field
development costs.
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BUSINESS REVIEW
OPHIR’S STRATEGIC,
OPERATIONAL AND
FINANCIAL PERFORMANCE
THROUGH THE YEAR
6
Chairman’s and Chief Executive
Officer’s joint review
12 Where we operate
14 Our business model
16 Our competitive advantages
18 Key performance indicators
20 Review of operations
32 Financial review
34 Corporate and
social responsibility
38 Principal risks and uncertainties
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
CHAIRMAN’S AND
CHIEF EXECUTIVE
OFFICER’S JOINT REVIEW
OPHIR MADE OUTSTANDING OPERATIONAL PROGRESS IN 2012
– REINFORCING ITS REPUTATION AS A LEADING AFRICAN EXPLORER.
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NICHOLAS SMITH
Chairman of the Board
NICK COOPER
Chief Executive Officer
The Group drilled six exploration and two appraisal
wells with a 100% success rate. Ten seismic programmes
were acquired and two new country entries were
completed, into Kenya and Ghana. Financially the Group
completed a US$242 million placing in April1 and ended
the year with a cash position of US$228 million.
The past year has reaffirmed Ophir’s reputation as a
leading African explorer. The success of 2012 is a direct
result of continued focus on creating value with the
drill bit. The Group’s competitive advantage rests in a
commitment to geoscience, a diverse and prospective
portfolio, effective capital management and deepwater
drilling excellence.
Ophir’s business model is firstly to secure significant,
operated equity positions in plays with substantial
running room; secondly to fund extensive 3D seismic
acquisition; and thirdly to partner with leading oil
companies for deepwater exploration around Africa.
As the sixth largest net acreage holder offshore Africa
and having recently acquired a significant library of
additional high quality 3D seismic data across most of
this acreage, the Group is positioned to create further
value from this model in the coming years. The ongoing
seismic interpretations have further increased Ophir’s
drilling inventory to over 3.0bboe of net risked
prospective resources before Government back-in.
This inventory will enable near continuous, high
impact drilling through 2013 and beyond.
Commitments to Health, Safety and the Environment
(HSE) and to corporate social responsibility (CSR) are
fundamental to Ophir’s business practices. The Group
is dedicated to high quality HSE performance and is
pleased to report another lost time incident free year
in 2012. At the same time, the Group strives to make
a lasting, positive difference to the countries and
communities that host its operations. Ophir values
highly its country relationships, its reputation as a
responsible corporate citizen and is committed to
sensitive and sustained CSR programmes.
In 2012, Ophir has again delivered against its business
plan and created significant value for shareholders:
the Group discovered an estimated 896mmboe of net
contingent resources2 (an increase of 377%) for a top
quartile finding cost of US$0.58/boe.
1 The placing occurred on 28 March 2012, with funds received
in April 2012.
2 Pre-Government back-in, 792mmboe post-Government back-in.
Net increase and finding cost calculated on post-Government
back-in result.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S JOINT REVIEW CONTINUED
Acreage (km2)
+10%
2011
2012
Seismic (km2)
2011
2012
19,017
Net resources (bboe)1,2
2c contingent
0.210
2011
2012
96,941
106,702
+70%
32,398
+377%
1.002
Risked prospective
+45%
2011
2012
1.882
2.725
In East Africa, 2012 highlights include the Group’s three
significant, back-to-back exploration gas discoveries
with the Jodari, Mzia and Papa wells, drilled with its
Joint Venture partner BG Group in Tanzania, adding
a combined 631mmboe of net contingent resources3.
The appraisal of the Jodari and Mzia discoveries began
towards year end. In addition, with the completion in
February 2012 of the acquisition of Dominion Petroleum
Ltd (Dominion), the Group secured new acreage in Block
7 (Tanzania) and Blocks L9 and L15 (Kenya). These
additions made Ophir the largest independent oil and
gas exploration company in terms of net acreage in the
deepwater East African play. Seven additional seismic
programmes have been acquired in 2012 by the Group
across its East African acreage, a substantial investment
that is now starting to pay off with the identification of
significant new plays and prospects that are scheduled
for drilling in 2013 and beyond.
In northern Tanzania, the initial mapping of recently
received seismic data in Block 7 has identified exciting
new prospectivity off the Dar es Salaam coastline,
including the estimated 20+TCF estimated recoverable
resource Mlinzi prospect. The Group plans to target
Mlinzi as part of its 2013 operated drilling campaign.
In southern Tanzania, preliminary interpretation of the
newly acquired outboard Kusini 3D seismic in Block 1,
located across the international border from the
significant recent Mozambique discoveries, has identified
a series of prospects in both amalgamated channel and
basin floor settings.
Looking to 2013 in East Africa, Ophir and BG Group will
complete Tanzania’s first offshore testing programme
and then plan to recommence exploration and expect
to drill the first well into this outboard terrain. Elsewhere,
Ophir will begin its own operated exploration drilling in
2H 2013, with potential play opening wells planned in the
Block 7 and East Pande licences (Tanzania) and in the
L9 licence (Kenya)4.
In West Africa, 2012 highlights include the Group’s
three successful exploration wells in Block R, Equatorial
Guinea. The Tonel, Fortuna East and Fortuna West
discoveries added a combined 262mmboe of net
contingent resources and have partially de-risked a
further drilling inventory. Total net contingent resources
on Block R have exceeded pre-drill expectations and
are now estimated at 312mmboe5. Discussions are now
in progress with the authorities and with prospective
partners regarding commercialisation of these resources
via LNG export.
1 Ophir management estimates including the previous operator’s
estimate for the Starfish prospect in Ghana.
2 Assuming all Governments exercise their back-in rights in full.
3 Management estimate (pre-Government back-in), 526mmboe
post-Government back-in, 358mmboe from the 2012 MER.
4 Advanced negotiations are underway to farm down the Group’s
participating interest to third parties.
5 Management estimate, 256mmboe 2012 MER.
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Net contingent Resource and Prospective Resource
mmboe
4
6
2
,
1
0
9
9
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1
7
0
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3
,
3
4
2
,
3
6
0
4
3
,
9
9
4
3
,
9
3
6
3
,
7
2
7
3
,
4,000
3,000
2,000
1,000
0
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In December 2012, Ophir entered Ghana by taking a
20% operated stake in the Offshore Accra PSC, targeting
potential continuation of the regional West African
Transform Margin play. In Gabon, Ophir acquired three
3D surveys during 2012 – one focused on the pre-salt
play and the other two targeted the Maastrichtian play
that has been recently identified in the offsetting
Sergipe-Alagoas Basin of Brazil. Processing of these
datasets is nearing completion.
In 2013 in West Africa, planning for an extensive drilling
programme is underway. Ophir intends to drill one well
in Ghana commencing in July and up to three wells in
Gabon commencing in late 2013, two of which will be
pre-salt targets with our Joint Venture partner Petrobras.
A further exploration and appraisal drilling programme
is also envisaged in Equatorial Guinea, after the
introduction of new partners into the licence. Ophir plans
to use a combination of effective portfolio management
and/or equity to fund the next twelve months forecast
expenditure. On 4 March 2013 the Company announced
its intention to raise equity proceeds by way of a Placing
and Right’s Issue.
The Board is justifiably proud of Ophir’s talented
team, who are based in various locations in Africa, in
Australia and in the UK. The Board thanks them for their
contribution to the successes in 2012. This team has
continued to grow during the year, particularly in the key
geoscience and drilling functions, and Ophir is proud to
be able to continue to attract top talent. In 2012, Dr Alan
Stein, a co-founder of the Company, stepped down from
his executive and Board roles. Alan’s contribution to
Ophir’s growth has been immense and the Board thanks
him and wishes him well for the future.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S JOINT REVIEW CONTINUED
2012 proved to be a successful and significant year
for Ophir, with the eight wells drilled delivering six
exploration successes and two appraisal successes and
finding 896mmboe of additional net resource6. 2013 sees
the Group planning a 10+ well programme across four oil
plays and two gas plays. The Board would like to thank
Ophir’s shareholders for their continued support
in 2012. Looking forward, the 2013 drilling programme
has the potential to transform the portfolio yet again.
NICHOLAS SMITH
Chairman of the Board
NICK COOPER
Chief Executive Officer
6 Pre-Government back-in, 792mmboe post Government back-in,
565mmboe 2012 MER.
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OPHIR CONTINUES TO ESTABLISH ITSELF
AS A PRE-EMINENT AFRICAN ENERGY
COMPANY THROUGH THE STRENGTH
OF ITS RELATIONSHIPS AND TEAM AND
THE WAY IT EXPLORES AND MANAGES
ITS PORTFOLIO.
1. ESTABLISH RELATIONSHIPS
IN AFRICA
Ophir’s overarching strategy continues to consolidate
the Group’s position as the leading independent
African energy company. To this end Ophir has access
to an extensive network of relationships in Africa. By
combining these relationships with its geoscience and
commercial expertise Ophir has acquired and developed
a diverse portfolio of oil and gas interests in Africa.
Ophir intends to build on its success as the leading
explorer in its areas of interest and to enhance its
reputation for delivering value to its various
stakeholders. As part of this, the full Board visited
Tanzania in November. The visit included meeting
members of Government and national agencies, the
business community and a visit to Mtwara. There was
a full site review of the oil field supply facility and visits
to Ophir’s local CSR initiatives.
2. MAKE THE MOST OF AN
EXPERIENCED AND MOTIVATED
MANAGEMENT TEAM
Ophir recruits, develops and retains an experienced
and motivated group of senior staff with a view to
identifying attractive investment opportunities,
decreasing exploration risk and adding value to its
portfolio by applying advanced geoscience technology.
3. CONTROL THE PACE AND
DIRECTION OF EXPLORATION
Wherever practical, Ophir seeks to accelerate its
exploration activities, while maintaining high
professional and corporate responsibility standards –
demonstrating the Group’s commitment to realise value
from its assets in a timely fashion for shareholders and
partners. Ophir believes that continuing this approach
will enhance its ability to win new business in the future.
4. ACTIVELY MANAGE
OPHIR’S PORTFOLIO
Ophir prefers to take significant early entrant equity
positions in core projects while retaining the flexibility
to divest through farm-outs or exchanges of interests
as projects mature.
Ophir intends to expand its portfolio by investing in new
ventures, particularly where the application of advanced
geoscience technology can add significant value by
reducing exploration risk.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
WHERE WE OPERATE
OPHIR HAS AN EXTENSIVE PORTFOLIO OF ASSETS, INCLUDING
20 LICENCES, 18 OF WHICH ARE OFFSHORE, IN 10 COUNTRIES
ACROSS EAST AND WEST AFRICA.
Ophir’s headquarters
London (UK)
Operational offices
Perth (Australia)
Malabo (Equatorial Guinea)
Dar es Salaam and Mtwara (Tanzania)
Libreville and Port Gentil (Gabon)
Accra (Ghana)
Nairobi (Kenya)
Brazzaville (Congo)
Ophir holds the sixth largest deepwater acreage
portfolio in Africa, is present in four key emerging
sub-Saharan exploration areas, and has the largest net
acreage in offshore East Africa of any independent oil
and gas exploration and production company in the play.
106,700km2
Overall, Ophir has over 100,000km2 of offshore
and onshore assets across East and West Africa
Net acreage
.
2
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OIL PLAYS GAS PLAYS
1. SAHARAWI ARAB
DEMOCRATIC REPUBLIC (SADR)
A 50% operated interest in four blocks, Daora, Haouza,
Mahbes and Mijek, with a gross area of 74,327km2 in
water depths of 200m to 2,500m.
See page 30
2. OFFSHORE SENEGAL AND GUINEA
BISSAU JOINT DEVELOPMENT ZONE (AGC)
A 44.2%1 operated interest in the Profond Block with a
gross area of 9,838km² in water depths of 75m to 3,500m
See page 30
3. GHANA
A 20% operated interest in the Offshore Accra Contract
Area with a gross area of 2,000km² in water depths of
20m to 3,000m.
See page 29
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4. EQUATORIAL GUINEA
An 80% operated interest in Block R with a gross area of
2,447km² in water depths of 600m to 1,950m.
See page 26
5. GABON
Operated interests in four blocks, Manga (100%), Gnondo
(100%), Mbeli (50%) and Ntsina (50%), with a gross area
of 12,712km² in water depths of 100m to 2,500m.
See page 28
6. CONGO
A 48.46% operated interest in the Marine IX Block
with a gross area of 1,044km² in water depths of
400m to 1,600m.
See page 29
7. SOMALILAND
A 75% operated interest in the Berbera blocks
(SL 9 and SL 12), with a gross area of 24,420km²
in water depths up to 1,425m.
See page 25
8. KENYA
90% operated interests2 in two offshore blocks,
L9 and L15, with a gross area of 7,441km² in water
depths up to 1,400m.
See page 24
9. TANZANIA
Interests in five blocks (two operated) with a gross area
of 33,078km² in water depths up to 3,000m – a 40%
interest in Blocks 1, 3 & 4, an 80% operated interest in
Block 7 and a 70% operated interest in East Pande.
See page 21
10. MADAGASCAR
An 80% operated interest in the onshore Marovoay
Block with a gross area of 8,447km².
See page 25
1 L’Entreprise AGC S.A. (“Entreprise”) has a 12%. carried participating
interest, with an option to increase such participating interest by a
maximum of 5%. in return for the reimbursement of 5%. of the costs
expended on petroleum operations prior to such date and is carried
through the exploration and appraisal phases. Noble Energy and
Rocksource assigned their respective participating interests to Ophir
Profond on 31 December 2012.
A letter of no objection to the assignments, dated 29 January 2013,
has been received from the AGC and approval of the assignments is
pending the issue of an order by the AGC. Following the issue of such
order, Ophir’s participating interest will be 79.2%.
2 The Group currently has a 90% participating interest with the
Government of Kenya having a 10% carried interest. In Block L9, DPK
is currently in advanced negotiations to offer up to 40% of its interest
in the PSC to third parties.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
OUR BUSINESS MODEL
OPHIR CREATES VALUE WITH THE DRILL BIT: FOCUSING ITS
GEOSCIENCE EXPERTISE, DIVERSE AND PROSPECTIVE PORTFOLIO,
EFFECTIVE CAPITAL MANAGEMENT AND DEEPWATER DRILLING
CAPABILITY ON MAXIMISING VALUE AT EVERY STAGE OF
EXPLORATION AND APPRAISAL.
OUR BUSINESS MODEL
IDENTIFY AND
SECURE ASSETS
ACQUIRE AND
INTERPRET SEISMIC
EXPLORATION
DRILLING
• Select and
acquire blocks
• Agree commercial terms
• Identify and rank prospect inventory
• Prepare exploration drilling programme
• Work up investment thesis for farminees
• Risk prospect inventory
with exploration drilling
and continued
seismic calibration
EQUATORIAL GUINEA
TANZANIA
1,3,4
GHANA
GABON
TANZANIA
EAST PANDE; BLOCK 7
KENYA
SOMALILAND
AGC
SADR
MADAGASCAR
CONGO
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APPRAISAL
DRILLING
FID
PRODUCTION
• Optimise monetisation
• Invest capital to develop asset
opportunities
• Strategically explore
and appraise resource
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
OUR COMPETITIVE
ADVANTAGES
OPHIR HAS FOUR COMPETITIVE ADVANTAGES:
GEOSCIENCE EXPERTISE, A DIVERSE AND PROSPECTIVE
PORTFOLIO, EFFECTIVE CAPITAL MANAGEMENT AND
DEEPWATER DRILLING CAPABILITY.
COMPETITIVE ADVANTAGES
GEOSCIENCE
EXPERTISE
DIVERSE AND
PROSPECTIVE
PORTFOLIO
EFFECTIVE
CAPITAL
MANAGEMENT
DEEPWATER
DRILLING
CAPABILITY
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PROGRESS IN 2012
PLANS FOR 2013
• Ten seismic surveys, over 13,000km2
• Four new deepwater licences, totalling 17,916km2
• 100% drilling success: six discoveries from six
exploration wells
• Net 2C resource increase from 0.21bboe to greater
than 1.0bboe
• Net risked prospective resource increase from
1.88bboe to 3.07bboe1
• Increased geology and geophysics team by 18%
• Successfully completed corporate acquisition of
Dominion Petroleum Ltd (Dominion), increasing
Ophir’s acreage position by +9% and significantly
increasing its prospect inventory
• Rationalised portfolio: sold Democratic Republic of
the Congo (DRC) asset and commenced Uganda exit
• Farmed into Accra Block in offshore Ghana under
attractive terms
• Interpret 2012 inventory of seismic to increase, and
mature existing prospect inventory
• Target additional resources through exploration drilling
• Secure strategic partnerships in advance of drilling
across the portfolio
• Advance Tanzania and Equatorial Guinea
commercialisation plans
• Efficient use of capital – discovered 792mmboe
• Maintain low finding cost
contingent resource2 at a finding cost of US$0.58/boe
• Successfully placed 30.5 million shares to raise
US$242 million to fund exploration activities
• Continue to strengthen balance sheet for
increased exploration pace and preserve strategic
high-equity stakes
• Optimise commercialisation opportunities
• Safely operated drilling of three wells in Equatorial
• Planning to operate multiple deepwater drilling
Guinea in water depths ranging from 1,600m to 1,853m
programmes in East and West Africa
• Successfully supported transition of deepwater
Tanzanian drilling operations in Blocks 1, 3 and 4 to
BG Group
1 Pre-Government back-in.
2 Post-Government back-in.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
KEY PERFORMANCE
INDICATORS
LOST TIME INCIDENT FREQUENCY (LTIF)
STAFF TURNOVER
Ophir Energy Group – LTIF
Period
Average Number
of Employees
Includes London,
Perth and Senior
Expat Staff
2012
2011
57
41
2012 staff turnover was
8.6%
Total Man Hours Worked
99,561
72,747
LTI’s
LTIF Rate
0
0
0
0
Strategy
The health, safety and welfare of people working for
and on behalf of our business underpins everything
we do. Our health and safety culture is based on
individual responsibility and commitment from the
very top of the organisation.
Accountability rests within each and every employee
including our shareholders and senior executives, who
uphold their obligations through a resolute commitment
that includes the active management of our health and
safety agenda.
Performance
With safety our number one priority, and in a year
when we drilled eight wells with 100% success, we are
proud there were no lost time accidents. Staying safe
requires vigilance, effort and investment at all levels
of the organisation and is testament to the quality
and professionalism of our team.
Classification
The rate of turnover relates to employees who
have left the Company voluntarily during the year.
The figure excludes employees who left as a direct
result of redundancy or dismissal on the grounds
of poor performance.
Business Impact
Turnover rates have been steady across the Group.
They have, however, remained within manageable levels
and have not had a negative impact upon our technical
disciplines. New hires to replace leavers have been less
easy to source particularly within support functions.
Outlook
The Company aims to monitor and reduce turnover
rates and will continue to provide highly competitive
pay and benefits to attract and retain key personnel.
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FINDING COST
2012 Finding Cost
RESOURCES (mmboe)
M
2011
0
1
2
2012
1,002
Mean contingent
Risked prospective
1,882
2,092
2,725
3,727
$0.58/boe
Our net working interest resources have been
significantly increased during 2012 by successful
drilling campaigns in Tanzania and Equatorial Guinea.
In addition to the drilling campaigns, ten seismic
surveys were carried out which have already indicated
excellent prospectivity. We are confident that this
provides a sound basis for continuing resource
growth in 2013 and future years.
The chart shows the Group’s net resources at
31 December 2011 and at 31 December 2012,
assuming that Governments exercise their back-in
right in every case.
The basis of the finding cost calculation is
straightforward – all expenditure other than acquisition
costs (which will return benefit over several years) is
divided by Contingent Resources discovered in the year.
It is, however, an onerous definition as all seismic, G & G
and overhead expenditure is included even though this
will probably not lead to reserve additions in the year
of expenditure. We, as a purely exploration company,
nevertheless believe that this is the truest measure of
the Group’s efficiency over time.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
REVIEW OF
OPERATIONS
OPHIR HAD A STRONG YEAR ACROSS ALL ASPECTS OF
ITS BUSINESS — FROM THE SUCCESS OF ITS SEISMIC AND
DRILLING PROGRAMMES THROUGH TO THE ACQUISITION
OF NEW ASSETS, PORTFOLIO MANAGEMENT AND A
STRENGTHENED BALANCE SHEET.
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EAST AFRICA
TANZANIA
East Pande
Block 7
Block 4
Block 3
Block 1
Gross area:
33,078km2
Water depth:
3,000m
Overview
Ophir has interests in five blocks with a gross
area of 36,828km² in water depths up to 2,220m –
a 40% interest in Blocks 1, 3 and 4, an 80% operated
interest in Block 7 and a 70% operated interest in
East Pande.
• The BG Group-Ophir Joint Venture has carried out a
successful six-well exploration and two-well appraisal
drilling programme on the intraslope play from 2010
to date
• Block 1 significantly de-risked, underpinning its
potential to anchor Tanzania’s first multi-train
LNG development
• Play opening discoveries at Mzia and Papa in the Upper
Cretaceous intraslope play of the Rovuma and Rufiji Deltas
• First gas discovery in Block 3
• Kusini outboard 3D was acquired to explore for
the basin floor play that has proven so prolific
off Mozambique
• Ophir acquired and is interpreting new 3D seismic data
for Block 7 and East Pande to prepare for a 2013/2014
operated drilling programme in both blocks.
Blocks 1, 3 and 4 are a Joint Venture with the BG Group,
which holds 60% and operates.
Further appraising and de-risking Block 1
In 2012 the Joint Venture successfully completed a
two-well appraisal programme on the Jodari field in
Block 1, using the Deep Sea Metro 1 drillship.
The appraisal programme achieved its objectives:
demonstrating the consistent, high quality reservoir
across the Jodari field; confirming the 3.4TCF mean
recoverable resource estimate; and confirming the
feasibility of high-angle (sub-horizontal) drilling, thereby
reducing development costs and positively impacting
the economics of the asset and potentially increasing
well recoveries.
The Jodari-1 well discovery, at 3.4TCF recoverable,
materially exceeded pre-drill estimates.
The two wells drilled into the discovery were Jodari
South-1 (including Jodari South ST-1 a deviated
side-track from the Jodari South well) and Jodari
North-1.
Jodari South-1 was drilled 3.5km southwest of the
Jodari-1 discovery well in 1,040m of water to a total
depth of 3,441m TVDSS in order to evaluate the
southern end of the Jodari field. The well was side-
tracked to drill Jodari South ST-1 and drilled to 3,282m
TVDSS as a high angle (sub-horizontal) well into the
reservoir. Jodari North-1 was then drilled 6km north of
the original Jodari-1 discovery well in 1,288m of water to
3,389m TVDSS to evaluate the northern accumulation.
The Jodari South-1 and Jodari North-1 wells encountered
gas columns of 50m and 32.4m respectively. These
appraisal results were in line with pre-drill prognoses and
have confirmed the widespread, high quality Oligocene
reservoir properties. Gross recoverable resources for the
Jodari asset have been re-confirmed at a mean case of
3.4TCF, with an upside P10 case of 3.7TCF. Separately
the Jodari South ST-1 has confirmed the viability of high
angle or horizontal development wells. This will help
development planning studies and will reduce the
number of producing wells required, with a consequent
positive impact on field development costs.
The appraisal programme has significantly de-risked the
Jodari field, confirming its potential to anchor Tanzania’s
first multi-train LNG development.
The Deep Sea Metro 1 drillship then moved to the Mzia
discovery in Block 1 to drill the Mzia-2 exploration and
appraisal well, located 4km to the southeast of the
Mzia-1 discovery well.
A play-opening discovery in the Upper Cretaceous of
the Rovuma Delta, Mzia-1 was Ophir’s fifth consecutive
gas discovery in Tanzania. The four previous wells had
discovered total mean recoverable resources of 7TCF.
Mzia-1 added substantially to this field.
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ANNUAL REPORT AND ACCOUNTS 2012
Successful exploration wells
during 2012
6
Successful drilling campaigns
during 2012
2
BUSINESS REVIEW
REVIEW OF OPERATIONS CONTINUED
Mzia-2 was completed successfully in late January 2013.
Mzia-2 encountered 62m of net gas pay in Cretaceous
reservoirs and established pressure communication
between the Mzia-2 and Mzia-1 gas columns. This result
confirms a vertical gas column of at least 200m for the
Mzia field.
Management estimates for gas in-place for Mzia have
been revised upwards from 2-6TCF to 4-9TCF with a
mean of 6TCF. The Jodari and Mzia discoveries in Block 1
are both now likely to be anchor assets for Tanzania’s
first LNG development.
In 2012 the Joint Venture acquired the Kusini 3D seismic
survey in the outboard eastern area of Block 1 and
interpretation of the data continues. Basin floor fans and
amalgamated channel sequences of Tertiary age have
been interpreted, which are geologically analogous to
those seen on the adjacent, Mozambique side of the
Rovuma Delta, where significant recent success has
been announced.
Discovering gas in Block 3
Papa-1 was the first Cretaceous gas discovery outboard
of the Rufiji Delta in Block 3 and the sixth consecutive
discovery by the Joint Venture offshore Tanzania. Based on
the available preliminary data, Ophir estimates in-place gas
volumes of 0.5 – 2.0TCF. Detailed core and petrophysical
analysis will confirm the scale of the discovered resource.
The Papa-1 discovery further de-risks the deeper, Upper
Cretaceous intraslope play in Tanzania.
Joint Venture collaboration
Ophir was originally awarded a 100% interest in Block 1
on 29 October 2005. Blocks 3 and 4 were subsequently
awarded on 19 June 2006, again on a 100% basis. The
Tanzania Petroleum Development Corporation (TPDC)
has back-in rights of 12% in Block 1 and 15% in Blocks 3
and 4.
In April 2010 Ophir entered into a farm-out agreement
with BG Group for a 60% interest in each block, with
Ophir retaining 40%. After drilling the first three
discovery wells, on 1 July 2011 operatorship of all three
blocks was formally transferred to BG Group. As part of
this arrangement, BG Group also took over operatorship
of the Mtwara port facility on behalf of the other
participating operators (Ophir, Petrobras and Statoil).
During 2011 the Mtwara base was upgraded to
accommodate multiple operators working simultaneously.
BG Group and Ophir continue to collaborate on the
commercialisation and development options for the
Joint Venture, including commencing site selection
for the LNG plant.
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The Joint Venture is currently analysing data from
Mzia-2, with a view to the Deep Sea Metro 1 drillship
re-entering the well to conduct a DST of the Cretaceous-
aged Mzia reservoir. The Mzia flow test will confirm
deliverability from the core part of the Mzia field and
would be expected to be completed in April. Test rates
from the Cretaceous reservoir at Mzia are expected to
be lower than from the Tertiary reservoir at Jodari due
to differences in burial depth and the relative porosity-
permeability characteristics of the two reservoir types.
Following completion of testing, the Joint Venture plans
to recommence exploration drilling in Block 1 with an
anticipated three-well programme starting in May 2013.
The Joint Venture is actively interpreting and mapping
an inventory of prospects, following which Ophir will
update the market with both target sizes and proposed
well locations. Subject to Joint Venture approval, the
first of these wells is likely to be on the recently acquired
outboard Block 1 3D dataset.
The acquisition of a new 2,500km² Block 1 inboard
3D seismic survey is also underway. This will further
broaden Ophir’s understanding of the prospects across
Block 1 and potentially open up additional drilling
targets going forward.
In its operated Tanzanian acreage, Ophir continues to
analyse data for East Pande and Block 7 in order to
identify drilling prospects in preparation for a planned
drilling programme commencing Q4 2013. Suitably
qualified parties may be invited to farm-in to East Pande
and Block 7 in advance of the planned drilling.
Acquiring and analysing 3D seismic in East Pande
Ophir has 70% of the East Pande licence and operates
the block. Ophir’s partner, Ras Al Khaimah Gas Company
(RAK Gas), holds the remaining 30%. Adjacent and to
the west of Blocks 1, 3 and 4, East Pande is strategically
located. Any discoveries in East Pande are likely to
be close to the export pipeline which will be used to
transport gas to any future onshore LNG plant supplied
from Blocks 1, 3 and 4.
East Pande is believed to contain the up-dip extension
of the Tertiary and Cretaceous intraslope play systems,
which have been proven in the deep water. In 2012 Ophir
acquired the 2,200km² Ndizi 3D seismic survey and
interpretation commenced at the end of the year. Ophir
is continuing to map prospects and is currently planning
to drill in Q4 2013. In addition to the gas potential, Ophir
believes East Pande also has potential for an oil charge.
Gathering data for drilling prospects in Block 7
Ophir is the Operator in Block 7 with an 80%
participating interest. Mubadala Oil and Gas holds the
remaining 20%. The 8,475km² block is located offshore
east of Dar es Salaam.
In May 2012, Ophir took advantage of a seismic vessel
which became available at short notice and which
provided an opportunity to acquire three 3D seismic
surveys back to back, across Tanzania Block 7 and Kenya’s
Blocks L9 and L15. The Block 7 survey (Upanga) covers
1,828km² and Ophir is currently working to interpret the
data and identify potential drilling prospects, in advance
of the planned drilling of one well in Q4 2013. The initial
indications are very promising and interpretation of
the preliminary 3D seismic validates the earlier 2D
interpretation of the potentially 20+TCF Mlinzi prospect.
Looking ahead
In Block 1, the Joint Venture is commencing a programme
to flow test earlier discoveries. These will be the first drill
stem tests (DSTs) in the Tanzania deepwater offshore
area. The Deep Sea Metro 1 drillship is currently on
location at the Jodari field, where gas is in Oligocene-
aged reservoirs. The testing programme is expected to
be completed in March. Due to the high quality reservoir
properties proven by drilling in the Jodari field, the Joint
Venture anticipates that the actual flow rate obtained on
test may be constrained by the limits of testing equipment.
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ANNUAL REPORT AND ACCOUNTS 2012
Exploring the potential
Capitalising on synergies with its Tanzanian Block 7,
Ophir acted quickly to acquire two 3D seismic surveys in
2012 in order to enable the Group to unlock the potential
of its Kenyan assets. The Ndoto 3D survey in Block L-15
was designed to target two plays: the western edge of
the Lamu Toe Thrust and Tertiary and Cretaceous Fault
Blocks of the Davy Walu High. The Nala 3D survey in
Block L-9 was designed to test three targets: the
southern extent of the Mbawa Inversion zone; Mbawa
South, an en-echelon play; and the Simba Graben, an
onlap play.
Ophir is currently analysing the data from these surveys
with a view to drilling high-graded prospect(s) in the
first half of 2014. Suitably qualified parties may be
invited to farm-in to Block L-9 in advance of the
planned drilling.
1 The Group currently has a 90% participating interest with the
Government of Kenya having a 10% carried interest. In Block L9, DPK
is currently in advanced negotiations to offer up to 40% of its interest
in the PSC to third parties.
BUSINESS REVIEW
REVIEW OF OPERATIONS CONTINUED
KENYA
Block L-15
Block L-9
Gross area:
7,441km2
Water depth:
1,400m
Overview
Ophir holds a 90% interest1 in two offshore blocks,
L9 and L15, with a gross area of 7,441km² in water
depths up to 1,400m.
• Acted quickly to acquire 3D seismic data across
our acreage
• Currently analysing the data and plan to drill in 2014
Ophir has a good footprint in the rapidly emerging play
offshore Kenya.
Exciting prospects
Block L-9 covers 5,110km² offshore Kenya on the
Davy-Walu structural trend. During the first two-year
exploration period, Ophir has a commitment to shoot
500km² of 3D seismic data, reprocess 2,500km² of
2D seismic and carry out geological and geophysical
field studies.
The Lamu Basin has the potential to contain both gas
and liquids as demonstrated by previous wells in the
area. Synthetic aperture radar has also identified
possible oil seeps locally. Adjacent to L-9 are blocks
being operated by Apache and Anadarko. The Mbawa-1
discovery, which was drilled by Operator Apache in 2012
in Block L-8, is along trend lines from similar features in
L-9 and has proven the presence of hydrocarbons in the
area. Ophir signed an agreement to work together with
Apache to acquire a 3D seismic programme in 2012 over
the L-8/L-9 Mbawa South area.
Block L-15 lies in the Lamu Basin offshore Kenya and
covers an area of 2,331km². It lies to the north of L-9
and also extends onto the Davy-Walu structural high.
Kofia-1, which was drilled by Union Oil in 1985, is the
only well which has been drilled to date in Block L-15 and
encountered oil and gas shows in the Palaeogene and
Upper Cretaceous intervals. The L-15 PSC was signed on
5 October 2011 and Ophir now holds 90% working
interest and operatorship in the block.
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MADAGASCAR
SOMALILAND
Gross area:
8,444km²
Overview
Ophir holds an 80% operated interest in the onshore
Marovoay Block with a gross area of 8,444km².
• Continued our technical assessment of the block
• Plan to introduce partners and drill during 2014.
Ophir carried out the final interpretation of seismic data
in 2012 and elected to take on a drilling commitment
in the block. Ophir has begun operational planning for
a well which, due to weather-related restrictions on
operations, it plans to drill during 2014. Its focus on
exploring the onshore potential in north west
Madagascar is reinforced by the exploration of
contiguous plays offshore by other companies.
Gross area:
24,420km²
Water depth:
1,425m
Overview
Ophir holds a 75% operated interest in the Berbera
blocks (SL 9 and SL 12) with a gross area of
24,420km² in water depths of 0m to 1,425m.
• Continued to explore the potential of its interests
in Somaliland
• Plan to acquire an additional 750km of 2D seismic
data in 2013.
Ophir continues to work closely with the Government
of Somaliland to agree a forward timetable and revise
the Petroleum Sharing Contract to reflect the expected
work programme prior to taking on a drilling commitment.
The agreed amendments to date have included the
award of additional acreage to the west of the original
block boundary.
During 2012 Ophir’s geoscience team continued to
interpret existing legacy data and to fully integrate
surface geological information with the seismic data.
Ophir is in discussion with a number of companies
regarding plans to acquire an additional 750km of 2D
seismic data. This data gathering and analysis will be
used to determine possible future drill locations.
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BUSINESS REVIEW
REVIEW OF OPERATIONS CONTINUED
WEST AFRICA
EQUATORIAL GUINEA
Block R
Gross area:
2,450km2
Water depth:
1,900m
Overview
Ophir has an 80% operated interest in Block R with
a gross area of 2,450km² in water depths of 1,500m
to 1,900m.
• Drilled a further three successful exploration wells
in 2012
• Increased gross Block R contingent resources (2C) from
697BCF (116mmboe) to circa 2.3TCF (390mmboe)
• Reduced the risk on the remaining estimated 10TCF
(1.6bboe) of inventory
• Progressing discussions towards commercialisation.
Ophir continues to develop its assets in Equatorial
Guinea towards commercialisation. So far, Ophir has
made five gas discoveries in Block R and, subject to the
introduction of a suitably qualified farm-in partner in
2013, is planning a further post farm-in drilling campaign
of up to six wells in 2013/2014. First gas in from the
block is provisionally estimated as 2017/2018.
Drilling three successful wells
2012 saw significant success in Equatorial Guinea, with
three successful exploration and appraisal wells and
continued progress towards commercialisation. Based
on the results of the drilling, Ophir has increased its
Block R contingent resources (2C) from 697BCF
(116mmboe) to 2.3TCF (390mmboe) and has reduced
the risk on the remaining estimated 10TCF (1.6bboe) of
inventory.
The three-well drilling campaign in 2012 included
Fortuna East and Fortuna West, representing both
appraisal and satellite exploration drilling around Ophir’s
previous Fortuna-1 (R-2) gas discovery. The Tonel
well targeted a prospect on acreage acquired via the
addition of part of the relinquished Block C to Block R in
2011. The additional acreage covered an area of 773km²
26
and increased the area of Block R to 2,447km². The
acreage had previously been relinquished by Repsol and
Exxon and includes two gas discoveries (Oreja Marina
and Estrella del Mar which together contain circa 250BCF
of dry gas in place) as well as the Tonel prospect.
At the beginning of 2012 Ophir contracted the Eirik
Raude, a sixth generation semi-submersible deepwater
rig, for the three-well drilling campaign. To maximise the
efficiency of the campaign, the Eirik Raude drilled the
top-hole sections at both Fortuna East and Fortuna
West before moving to Tonel-1, where it drilled the entire
well. The rig then returned to complete the Fortuna
West and Fortuna East drilling.
All three wells exceeded pre-drill recoverable
resource estimates.
The Tonel-1 (R-4) well discovered an estimated mean
gas in-place of 1.1TCF (177mmboe) and a recoverable
mean resource of 814BCF (136mmboe). A 182m gas
column was encountered in the mid-Miocene sandstone
target with a total 117m of net pay. This was the fifth and
largest gas discovery in Block R to date, representing
a very strong start to Ophir’s 2012 campaign in
Equatorial Guinea.
The Fortuna East-1 (R5) step out exploration well
followed Tonel and successfully achieved all three of its
objectives, encountering gas in the eastern lobe of the
Fortuna Complex. The estimated recoverable mean
resource in the eastern lobe is 421BCF (71mmboe),
exceeding by 40% the mean pre-drill recoverable
resource expectation of 304BCF (51mmboe). In
addition, the well discovered gas in the deeper Viscata
exploration target. The well also encountered the lateral
stratigraphic equivalent interval of the Tranquilla and
Iambe exploration prospects, confirming good quality
reservoir and significantly de-risking the Forethrust
play across the block.
Three successful exploration and
appraisal wells
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The Fortuna West-1 (R6) step-out exploration test
added 677BCF (113mmboe) of recoverable resources
and significantly de-risked other exploration targets
within the block. The well encountered gas in the
primary target of the western lobe of the Fortuna
Complex, in the secondary deeper Viscata prospect and
there is further potential upside in the Felix prospect.
Progress towards commercialisation
Ophir is working closely with the Government of
Equatorial Guinea and other partners on the best
route to commercialisation. Equatorial Guinea has
an established 3.7mmtpa LNG plant at Punta Europa
(EGLNG 1) that is operated by Marathon with Sonagas,
Mitsui and Marubeni as joint venture partners.
The Government has established a Project Delivery
Team (PDT) which is responsible for ensuring the
effective development of gas resources in the country.
This team consists of representatives from the Ministry
of Energy (MMIE), the National Oil Company (GEPetrol)
and the National Gas Company (Sonagas).
In 2012, together with all partners across Blocks O, I and
R, Ophir agreed with the Government further principles
for the commercial structure of a second LNG train.
The partners are now moving to the next phase of the
project, which will determine the development plan,
plant size and timing. One option being reviewed by
the partners would result in Final Investment Decision
during 2014, with first LNG from Block R being targeted
by management for 2018.
A further option which is being considered is to supply
gas from Block R to the first LNG train at Punta Europa
as recovery from the Alba Field declines and a final
decision will depend on the results of ongoing
commercial discussions.
A third possibility as an alternative development
using floating LNG (FLNG) technology is also under
consideration. The dry nature of the gas, together with
the benign metocean conditions in the Gulf of Guinea,
makes this an ideal location for such a development.
FLNG technology is sufficiently advanced to provide
a viable alternative to a conventional onshore LNG
scheme and thus will continue to be an option until
the project Final Investment Decision (FID), planned
for 2014.
Looking ahead
Ophir’s drilling successes through 2012 have
increased the Group’s confidence in resource volumes
and provided further encouragement to proceed with
commercialising gas via LNG export.
Ophir will look to introduce partners into Block R in 2013
and, post farm-in, is planning a follow-up exploration
and drilling programme of up to six wells, commencing
in late 2013 to further advance its valuable gas asset
towards development.
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REVIEW OF OPERATIONS CONTINUED
GABON
Mbeli
Ntsina
Manga
Gnondo
Gross area:
12,712km²
Water depth:
2,500m
Overview
Ophir has operated interests in four blocks,
Manga (100%), Gnondo (100%), Mbeli (50%) and
Ntsina (50%), with a gross area of 12,712km² in water
depths of 100m to 2,500m.
• A 3D seismic survey, specifically designed to image
pre-salt has been acquired and processed in the
northern two blocks
• Two additional 3D surveys have been acquired in the
southern two blocks
• Exploring post-salt Maastrichtian plays analogous to
recent discoveries on the Brazilian conjugate margin
• Plan to drill a number of exploration wells in late 2013.
Ophir has the largest offshore footprint in the North
Gabon Basin. This has the potential to be a major new oil
play for Ophir and the Group is looking to drill towards
the end of 2013.
Across its four blocks Ophir has identified three primary
plays: the pre-salt play, the Ogooué Delta play and the
deepwater, post-salt Maastrichtian play.
The pre-salt play
The pre-salt play exists in Ophir’s two northern blocks,
Mbeli and Ntsina. It has recently come to prominence
through a series of world-class discoveries on the
conjugate margin in Brazil, and in 2012 in Angola.
Across the conjugate margin from Gabon, Petrobras’
Carmopolis Field has an estimated 1.7bbbl in place.
The pre-salt play exists onshore from Ophir’s two
northern blocks, where more than a billion barrels
has been discovered in the Rabi Kounga Field, as
well as offshore in South Gabon.
Based on the relative immaturity of the play, Ophir
elected to bring a joint venture partner with significant
pre-salt experience and consequently concluded a
farm-out to Petrobras for 50% equity in each of the
Mbeli and Ntsina Blocks in 2011. Under the terms of
the agreement, Petrobras funded the cost of a new
2,200km² 3D seismic survey (the Stenella survey)
specifically designed to image the pre-salt play system.
The survey was acquired by PGS early in 2012 and
detailed pre-stack depth migration (PSDM) processing
of the data is now being completed.
Preliminary products from the new 3D have provided
significant encouragement – they have refined the initial
mapping and have confirmed the presence of two
pre-salt mega-closures. Each mega-closure has a
number of sub-culminations with billion barrel potential.
Interpretation of the final dataset early in 2013 will
further improve Ophir’s understanding of risk and define
drillable prospects with a view to drilling in late 2013.
Across Ophir’s two 100% owned blocks, Manga and
Gnondo, the Group is focusing principally on the
deepwater, post-salt Maastrichtian play.
The deepwater, post-salt Maastrichtian play
This is considered to be analogous to the successful
Barra play, discovered in 2010/11 by Petrobras in the
conjugate Sergipe Alagoas basin of Brazil.
The play has promise in Ophir’s southern blocks,
particularly in the area to the west of the Loiret Dome
where a series of stratigraphic onlap plays and leads have
been identified. The Afo structure has the potential to be
volumetrically significant. Ophir undertook a 3D seismic
programme in Manga in early 2012 with the intention to
mature these into drillable prospects. The play system
also extends into the southern part of the Ntsina Block
and the 3D survey has extended into this block.
Data from this survey is now available and, once this
has been interpreted, Ophir will look to bring in a
partner for the next stage, which will include potential
drilling in late 2013.
Looking ahead
Ophir intends to drill up to three wells in 2013 across
the Gabonese plays. The most likely targets based
on current data and interpretation are Padouck Deep
(pre-salt), in the Ntsina Block, with 1.15 BBbls mean
recoverable; the Northern Cluster (pre-salt), in the
Mbeli Block, with approximately 885mmbbl mean
recoverable; and Affanga Deep in the Gnondo Block,
with approximately 220mmbbl mean recoverable.
Suitably qualified parties may be invited to farm-in
to the Gnondo Marin and Manga Marin Blocks in 2013.
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GHANA
CONGO
Gross area:
2,000km²
Water depth:
3,000m
Gross area:
1,044km²
Water depth:
1,600m
Overview
Ophir has a 20% participating interest in the Offshore
Accra Contract Area of Ghana with a gross area of
2,000km² in water depths of 20m to 3,000m.
Overview
Ophir has a 48.46% operated interest in the Marine IX
Block with a gross area of 1,044km² in water depths
of 400m to 1,600m.
• Received governmental approval to take a 20%
• Continue to explore a pre-salt play
participating interest in December 2012
• The assessment will underpin a decision on possible
• Obtained consent to operate in December 2012
future drilling.
• Exploration drilling of the Starfish prospect is planned
for mid 2013.
An exciting oil play
The newest addition to Ophir’s portfolio is in Ghana –
an exciting new oil play for the Group. The acreage is
located in the West African Transform Margin play that
includes, further to the west, the Jubilee, Tweneboa,
Odum, Teak and Pecan discoveries. An inventory of oil
prospects within pre- and post-rift Cretaceous has been
identified in the block from the 2011 3D seismic dataset.
Ophir obtained consent to operate in December 2012
and is looking to drill the Starfish prospect in mid 2013.
Starfish-1 will target the stratigraphic onlap of a stacked
Turonian-Albian sequence – the proven reservoir
interval for the West African Transform Margin play.
Ophir has been the Operator of the block since 1 May
2011 and has identified three play systems. Two of these
systems (a Tertiary play and an Albian ‘raft’ play) have
been fully explored and have limited potential. The Joint
Venture gained a 12-month extension to the current PSC
term in 2011 in order to carry out a full assessment of the
third, pre-salt play and acquired a gradiometry survey
in February 2012 to advance this. Results of this survey
are currently being integrated with existing seismic
data and in parallel the Joint Venture is discussing the
commercial basis for a pre-salt exploration programme
with the Government in order to make a final decision
on possible future drilling.
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BUSINESS REVIEW
REVIEW OF OPERATIONS CONTINUED
OFFSHORE SENEGAL AND GUINEA BISSAU
JOINT DEVELOPMENT ZONE (AGC)
SAHARAWI ARAB
DEMOCRACTIC REPUBLIC (SADR)
Daora
Haouza
Manbes
Mijek
Gross area:
9,838km²
Water depth:
3,500m
Gross area:
74,327km²
Water depth:
2,500m
Overview
Ophir has a 44.2% operated interest1 in the Profond
Block with a gross area of 9,838km² in water depths
of 75m to 3,500m.
Overview
Ophir has a 50% operated interest in four blocks,
Daora, Haouza, Mahbes and Mijek, with a gross area
of 74,327km2 in water depths of 200m to 2,500m.
• Continued to carry out technical assessments following
the drilling of Kora-1 in 2011
• Ophir continues to monitor regional activity and
opportunities to commence operations in SADR.
• A decision will be made regarding future drilling targets
during 2013.
Ophir drilled Kora-1, the first well on the block, to a total
depth of 4,447.5m subsea in July 2011. The primary
(Albian) and secondary (Coniacian and Barremian)
reservoir intervals were penetrated close to their
anticipated depths, but the well encountered a
predominantly claystone and thinly bedded limestone
sequence, rather than the predicted sandstone reservoir
facies. Kora-1 was subsequently plugged and
abandoned. The well did, however, provide valuable
information on the potential charging mechanisms in the
block and encouragement for future exploration.
Through 2012 Ophir therefore continued to integrate the
well results with the seismic datasets to characterise the
remaining potential of the Profond Block. This
assessment will be completed during 2013 when a
decision will be taken regarding the identification of
further drilling targets for a possible future drilling
programme. Suitably qualified parties may be invited to
farm-in to the Profond Block in 2013.
1 L’Entreprise AGC S.A. (“Entreprise”) has a 12% carried participating
interest, with an option to increase such participating interest by a
maximum of 5%. in return for the reimbursement of 5%. of the costs
expended on petroleum operations prior to such date and is carried
through the exploration and appraisal phases. Noble Energy and
Rocksource assigned their respective participating interests to Ophir
Profond on 31 December 2012. A letter of no objection to the
assignments, dated 29 January 2013, has been received from the
AGC and approval of the assignments is pending the issue of an order
by the AGC. Following the issue of such order, Ophir’s participating
interest will be 79.2%.
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DEPOSITIONAL ENVIRONMENTS
1 INCISED SLOPE CHANNEL
2 INTRA SLOPE PONDING
3 CHANNEL LEVEE COMPLEX
4 CREVASSE SPLAY
5 UPPER FAN
6 DISTAL FAN
WELL LOCATION
7 AMALGAMATED CHANNEL COMPLEXES
INTRASLOPE
PLAY
BASIN FLOOR
PLAY
1
2
7
3
4
SHELF
EDGE
MID TO
UPPER SLOPE
LOWER SLOPE
(TOE OF SLOPE)
BASIN FLOOR
5
6
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
FINANCIAL REVIEW
CORPORATE AND FINANCIAL ACTIVITIES
Ophir acquired Dominion Petroleum Ltd (Dominion)
in February 2012 and then successfully integrated the
acquired assets in 2012. This added Block 7 in Tanzania
and Blocks L9 and L15 in Kenya to Ophir’s East African
offshore footprint, making Ophir the largest independent
oil and gas exploration company in the play by net
acreage position.
In April 20121, Ophir strengthened its balance sheet by
offering 30.5 million shares for subscription which raised
US$242 million.
Ophir divested Block V in the Democratic Republic of the
Congo (DRC) receiving US$8.7 million in July. The Company
is in the process of relinquishing and exiting the Area 4B
Block in Uganda. Both these assets were acquired as a
result of the Dominion acquisition.
RESULT FOR THE PERIOD
The Group recorded a post-tax loss of US$40.7 million for
the year ended 31 December 2012 (31 December 2011:
US$19.1 million). No dividends were paid or declared by
the Group during the period.
The loss for the period includes exploration expenditure
expensed of US$4.5 million (31 December 2011:
US$15.7 million), administrative costs of US$36.4 million
(31 December 2011: US$16.2 million), finance income of
US$0.6 million (31 December 2011: expense of US$1.0
million) interest income of US$1.0 million (31 December
2011: US$0.8 million) and other expenses of US$1.7 million
(31 December 2011: US$0.9 million).
Exploration expenditure
Exploration expenditure of US$4.5 million (31 December
2011: US$15.7 million) resulted from our exploration and
appraisal activities predominantly focused in Tanzania,
Kenya, and Equatorial Guinea, and to a lesser extent in
AGC, Somaliland, Gabon, Congo (Brazzaville), Madagascar
and Ghana. It comprises pre-licence exploration costs
of US$4.5 million (31 December 2011: US$2.3 million)
charged directly to the Income Statement. Unsuccessful
exploration expenditure was nil compared to the same
period last year when US$13.4 million was written off in
accordance with the Group’s accounting policy.
32
General & administration expenses
General & administrative expenses including personnel
costs, share-based payments charges, administration
costs, professional and corporate costs (audit, legal,
other professional advisors’ costs and Directors’ fees)
totalled US$36.4 million (31 December 2011:
US$16.2 million). The result was impacted by increased
share option incentive costs of US$7.7 million
(31 December 2011: US$2.7 million); additional personnel
and administration costs associated with expansion of
the Group’s operations and increase in headcount to
71 (2011: 42); and increased corporate related activity.
Finance income and expenses
Finance income for the period of US$0.6 million
(31 December 2011: expense of US$1.0 million) was
associated with foreign exchange gains and losses
arising on the fluctuation of the Group’s functional
currency, the US Dollar, against other currencies the
Group holds.
Cash flow
Overall, the Group cash outflow was US$167.6 million
(31 December 2011: inflow of US$306.7 million).
Operating cash flow
The Group’s net cash used in operating activities was
US$29.9 million (31 December 2011: US$22.5 million).
Investing activities
Cash flow used in investing was US$380.7 million
(31 December 2011: US$43.9 million). Investment of
US$359.4 million on exploration (31 December 2011:
US$65.6 million) and acquisition of Dominion
US$38.7 million was offset by a cash inflow of
US$15.9 million for cash acquired with Dominion.
The exploration expenditure incurred mainly related to:
• BG Joint Venture and drilling programme in
Blocks 1, 3 and 4 in Tanzania
• Drilling programme in Block R in Equatorial Guinea
• Seismic activity in Blocks L9 and L15 in Kenya
• Seismic activity in Block 7 and East Pande in Tanzania
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Funding of activities
Ophir currently conducts its exploration activities using
existing funds from capital raised in the June 2011
IPO and the March 2012 equity placing. Ophir plans to
use a combination of effective portfolio management
and/or equity to fund the next 12 months’ forecast
expenditure. On 4 March 2013 the Company announced
its intention to raise equity proceeds by way of a Placing
and Rights Issue. Accordingly, the financial statements
have been prepared on a going concern basis as the
Directors are of the opinion that the Company will have
sufficient funds to meet its obligations and committed
capital expenditure requirements over the next
12 months.
OUTLOOK
Ophir Energy has started 2013 well with the successful
appraisal of our Mzia discovery, and our drilling and
operational programmes proceed to schedule. During
the next 12 months, we are planning 10+ wells targeting
approximately 1.3bboe net risked resource.2 This is a high
impact pan African drilling programme with both gas
and liquid targets. Based on the prospectivity of our
acreage, Ophir possesses the potential in 2013 to deliver
value to shareholders on a scale commensurate with our
exploration programmes of previous years.
1 Placing occurred on 28 March 2012; funds received in April 2012.
2 Ophir Management estimates as at February 2013.
Financing activities
The net cash inflow for financing activities was
US$243.0 million (31 December 2011: US$373.1 million)
which was as primarily a result of the funds raised
from the share placement completed in April 20121.
Gross funds received from issuing of shares were
US$250.4 million with associated costs of US$7.4 million.
At year end the Group’s cash and cash equivalents were
US$227.7 million (31 December 2011: US$396.6 million).
Exploration and evaluation assets
As at 31 December 2012, exploration and evaluation
assets totalled US$961.7 million (31 December 2011:
US$327.1 million). The movement was due to
expenditure incurred during the year of US$415.5 million
(31 December 2011: US$70.4 million) and US$219.2 million
net fair value adjustments resulting from the acquisition
of Dominion in February and subsequent sale of the
Group’s interest in Block V in DRC which took place
in July.
The main areas of exploration expenditure were:
• Tanzania Blocks 1, 3 and 4 drilling programme and
expenditure of US$159.0 million as Joint Venture
partner with BG
• Tanzania Block 7 (US$16.1 million) and East Pande
(US$23.6 million) of expenditure was incurred relating
to seismic data acquisition and studies
• Kenya Block L9 and L15 seismic activity resulted in
expenditure of US$48.9 million
• Drilling programme costs of US$144.0 million in
Equatorial Guinea
Current assets
The Group held cash and short term deposits of
US$227.7 million (31 December 2011: US$396.6 million).
Inventories of US$12.8 million (31 December 2011:
US$6.2 million) comprise of drilling materials for
future drilling campaigns held in Tanzania and
Equatorial Guinea.
Trade and other receivables were US$9.5 million
(31 December 2011: US$9.2 million).
Liabilities
The Group continues to have no borrowings
(31 December 2011: Nil).
Trade and other payable including accruals were
US$119.4 million (31 December 2011: US$27.7 million).
The notable increase in trade and other payables is
mainly as a result of ongoing drilling programmes
in Tanzania.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
CORPORATE AND
SOCIAL RESPONSIBILITY
OPHIR AIMS TO LEAD THE WAY IN RESPONSIBLE EXPLORATION
– MAKING A LASTING CONTRIBUTION TO THE COUNTRIES
AND COMMUNITIES THAT HOST ITS OPERATIONS.
OPHIR’S CORE COMMITMENT
Ophir is committed to establishing and following
the highest standards of Corporate and Social
Responsibility (CSR) across the Group. CSR is a
fundamental part of Ophir’s business and
as with all core activities the Group follows the same
principles of determination, innovation and excellence.
Ophir aims for best practice wherever it operates –
acting in an ethical, responsible, apolitical, independent
and transparent way at all times.
Ophir’s commitment to CSR not only plays an important
part in managing and mitigating risks but moreover
reflects its belief that responsibly exploring for oil and
gas to the highest international standards is the right
thing to do.
Ophir encourages all its employees and contractors
to work to the highest CSR standards.
The Group focuses CSR activities on four key areas:
the site to its original condition as part of its commitment
to close down the drill site and exit from Uganda in a
responsible and ethical way.
In all cases Ophir leads with high standards and best
practices. When the Group is shooting seismic or drilling
offshore, it communicates and follows up fully with all
local villages to ensure full project close out. This forms
part of Ophir’s strategy to build and maintain good
relations with all the coastal communities.
In line with the Group-wide HSE policy, before initiating
any exploration project Ophir conducts comprehensive
and integrated Environmental Impact Assessments
(EIAs). Ophir repeats these assessments at each stage
of the project using recognised consultants and
methods. As part of this process Ophir consults with
local authorities, NGOs and communities to ensure the
Group complies with both industry best practices and
any local regulations and guidelines.
• Environment initiatives
• Healthcare initiatives
• People initiatives
• Community development initiatives
This year Ophir has expanded its reporting to include
all services companies and contractors employed on
our projects.
ENVIRONMENT
Ophir is committed to meeting all its environmental
obligations and to limiting its environmental impact
wherever it operates.
Environment highlights
Ophir applies the same high international standards and
best practices for the environment wherever it operates,
taking into account each local situation.
In Uganda, where Ophir acquired assets as part of its
purchase of Dominion Petroleum Ltd (Dominion), the
Group worked closely with the Government on the
clean-up of a previous drilling site to international best
practice standards. Ophir is in the process of returning
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The Group focuses CSR activities on four key areas:
• Environment initiatives
• Healthcare initiatives
• People initiatives
• Community development initiatives
Managing waste locally
In Equatorial Guinea, Ophir was the first oil and gas
operating company to use a local incinerator to handle
waste from its offshore and onshore operations. Ophir
approached the local facility, ensured it was properly
tested and licensed and that it met Group HSE standards
and began using it. This eliminated the financial costs
and environmental impact of transporting the waste
to another more distant site for processing while also
supporting the locally owned and operated business.
HEALTH AND SAFETY
It is paramount that Ophir puts health and safety first
and carries out all its operations in accordance with
local and international health and safety best practices.
Ophir expects all its employees and contractors to work
to the highest HSE standards. The Group also expects
subcontractors and suppliers to provide a safe and
healthy working environment for their employees and to
provide appropriate training and protective equipment.
Regular checks are carried out to ensure HSE compliance.
These standards are regularly reviewed by Ophir’s HSE
Committee, which takes responsibility for monitoring
Group-level health, safety, security and environmental
(HSSE) risk assessments. In addition, the Committee
reviews reports on serious accidents and fatalities to
ensure that management is responding appropriately.
The Committee also ensures the Company is fully
compliant by commissioning periodic independent
audits on HSE matters.
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BUSINESS REVIEW
CORPORATE AND SOCIAL RESPONSIBILITY CONTINUED
Reorganising Group-wide HSE
In 2012, with the help of an expert external consultant,
Ophir reorganised and harmonised to a high standard
the way it manages HSE across the business. As a result
it has further upgraded procedures and policies and
has applied these consistently across the Group.
A comprehensive suite of new documentation sets
out for everyone, both employees and contractors,
how Ophir approaches HSE and spells out clearly the
Group HSE expectations.
The new approach covers every aspect of Ophir’s
HSE functions, from drilling risk assessments to crisis
management, and applies to everyone. Training is a key
aspect and Ophir has been educating everyone on their
responsibilities in line with its commitment to making
high HSE standards part of the everyday Group-wide
Ophir culture.
Ophir applied the new approach to its drilling
programme in Equatorial Guinea in the summer of 2012,
where it drilled three wells in Block R – Tonel, Fortuna
East and Fortuna West. The wells were all drilled
successfully with no major HSE incidents recorded.
The drilling programme was followed up with a major
review in November where Ophir refined the entire
approach to HSE ahead of rolling it out across the Group
while taking into account local differences.
Ophir’s HSE team is based in Dar es Salaam and
in London.
Health and safety highlights
In 2012 Ophir had no lost time incidents (LTIs) at any
of its operations.
Ophir’s operated activities included drilling three wells
in Equatorial Guinea, three seismic programmes in
Gabon, a further two seismic programmes in Kenya
and one in Tanzania.
Ophir continued to provide maritime security in
Tanzania and Kenya in response to offshore security
risks, notably piracy. Working closely with the naval
forces of each country, Ophir meticulously plans
and executes full offshore security plans to protect
personnel and assets. There were no security incidents
through the year.
Ophir provides all staff and contractors who are
working in high disease risk areas appropriate
education, prevention kits for testing and medicine.
The Group’s offices in Gabon and Equatorial
Guinea have also implemented mosquito
eradication programmes.
The Group provides internationally accredited driving
and first aid courses to all local employees as part
of a comprehensive training programme tailored for
the staff. Road Traffic Accidents (RTAs) are widely
acknowledged worldwide as a major risk that can be
effectively mitigated using simple measures such as
driver training.
PEOPLE
Ophir relies on and values the skills and expertise of its
people. They are at the heart of the Group’s success and
Ophir recognises the importance of looking after them
and developing their potential.
People highlights
Across its operations Ophir employs local people
wherever possible and looks to train and develop them
so they can realise their potential and contribute as
much as possible. This includes structured development
programmes for key staff and educational sponsorships.
Through annual reviews Ophir looks at how all its people
can develop in their roles to provide value to Ophir and
to increase their skills and performance. The objective
is to help individuals advance in their interests and the
interests of Ophir through a combination of on the job
experience, external training and internal development.
Ophir places great emphasis on the safety and well-
being of everyone who works for the Group. As in other
key areas of its business Ophir encourages continuous
improvement. To this end in 2012, as part of its Group-
wide reorganisation of HSE, Ophir further developed its
duty of care services for employees and contractors.
This includes procedures and services for medical
evacuation, safety and security and travel tracking.
In November 2012, Ophir’s Board visited several
of the Group’s CSR initiatives and reviewed certain
HSE procedures in Tanzania.
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COMMUNITY DEVELOPMENT
Ophir is proud to contribute to the development of
the local communities where it operates and to have a
sustainable positive impact. To this end, Ophir takes a
highly collaborative approach, working closely with all
stakeholders to identify and carry out activities that
benefit communities sustainably and for the long term.
Community development highlights
In 2012 Ophir established a consistent Group-wide
approach to community development. It is based on
a bottom-up needs analysis carried out with the local
community to identify the best fit for laying the
foundation of Ophir’s contribution in order to build
progressively from a solid base and make a valuable
difference. Ophir focuses on three core areas for this
foundation: medical, education and social.
In Tanzania for example, Ophir has built rooms in a local
primary school and donated desks, text books and
computers. In January 2012 Ophir held an art competition
in Mtwara, Tanzania for primary school students to learn
about the oil and gas industry and its benefits to Mtwara
and the community. Students were given the chance to
express their knowledge and thoughts of the industry
through art.
Ophir has been active in Tanzania for a number of years.
The Group has invested in developing the Mtwara port
as an international oil and gas supply base, a project
which is bringing significant employment to the
surrounding region. The project was backed up by a
comprehensive Environmental Impact Assessment.
Other schemes Ophir has supported in the Mtwara port
town include the Mtwara local clinic for women which is run
by Benedictine nuns. The clinic provides support, education
and facilities for local women and new-born babies.
In Equatorial Guinea, Ophir contributes to the ITNHGE
Programme, a collaborative educational initiative run
for adult students in Equatorial Guinea.
Ophir also sponsored the construction of a nursery
school in the village of Ebein Yenkeng in the Niefang
Region, Central South Equatorial Guinea. Stage 1 has
been completed; stage 2 is progressing.
The Group has also acquired and installed electricity
generators into hospitals in Evinayong, Kogo Mbini
and Acurenam.
Zero lost time incidents
0
CASE STUDY
Community Development
Funding health care in a remote area
In 2012 construction of an accommodation site for
the doctors and nurses working at the Tchisseka
Health Care Centre was completed. Located in the
remote village of Tchisseka, Brazzaville, Congo and
funded by Ophir Congo (Marine IX) Limited and joint
venture partners Kufpec Congo (Marine IX) Limited,
the Centre provides much needed health care for the
local community, and the accommodation provides
a much needed place to stay for the people
working there.
CASE STUDY
People
Improving the skills of local people
Ophir tailors the training of its people and contractors
to their particular needs and the local needs of the
business. In Equatorial Guinea and Gabon Ophir
ran a comprehensive training programme for staff
including English language courses and IT and
word processing classes.
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ANNUAL REPORT AND ACCOUNTS 2012
BUSINESS REVIEW
PRINCIPAL RISKS
AND UNCERTAINTIES
OPHIR RECOGNISES THAT AS AN UPSTREAM OIL AND GAS BUSINESS IT IS
POTENTIALLY EXPOSED TO MANY DIFFERENT RISKS. EFFECTIVE RISK MANAGEMENT
IS AN INTEGRAL PART OF THE GROUP’S ACTIVITIES. IT INVOLVES IMPLEMENTING
ACTION PLANS AROUND AND WITHIN THE GROUP’S ACTIVITIES IN ORDER TO
PROTECT BUSINESS INTERESTS FROM RISKS.
Ophir’s executive directors, Senior Management Team
and Country Managers are responsible for identifying,
evaluating and managing risks.
Risk identification and management
Risk management is embedded within Ophir’s
organisation structure, operations and management.
The executive directors continually monitor the Group’s
risk matrix and register and report updates to the Audit
Committee and Board of Directors on a six monthly
basis, or more frequently if required.
The key elements of Ophir’s Group risk management
processes are:
• Risk assessment
• Risk analysis and evaluation
• Risk mitigation
• Risk monitoring and reviewing
• Communication and consultation
The principal risks that have been identified within
the Group are summarised as follows:
Type
Strategic
Risk
Mitigants
Political risk
• The Group maintains a balanced asset portfolio across different
jurisdictions in a region where the Group is most accustomed
to operating
• The Group strives continually to maintain positive relationships in
all host countries that it operates. Ophir aims to work to the highest
industry standards with all regulators and compliance with the
Company’s licence and PSC obligations is closely monitored
Inadequate
resource and
reliance on
key personnel
Investment
decisions
• Ophir relies on a small team of experienced oil and gas professionals
for its operational success. In order to retain, motivate and recruit
suitably qualified employees it ensures its remuneration packages are
competitive. It has established a long term incentive programme for
executives and a deferred share plan for staff
• The Group and its advisors are experienced within the industry in
which it operates and complete a proper review against the Group’s
strategy and investment criteria. Full due diligence is undertaken on
all potential new entries. The current portfolio is closely monitored
Operational
Drilling
operations risk
• Maintenance of clearly defined operational procedures whereby
compliance is always expected
HSE incident
risk
• The contracting & procurement process ensures suitably qualified
contractors are employed
• Regular training in the processes and continual monitoring of
adherence are undertaken
• Maintenance of a comprehensive system of HSE procedures that
should always be followed and the undertaking of pre-project risk
assessments. The systems are overseen by management and the HSE
Committee which regularly meets to review and monitor compliance
• Comprehensive Environmental Impact Assessments are performed.
Oil spill and emergency response plans are in place. Provision of
equipment and regular training in the procedures occurs with
specialist service providers
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Type
Risk
Mitigants
Discovery
risk and
success rate
IT risk
Availability
of rigs and
services
• The Group has a technically and regionally experienced management
and a geoscience team who have a proven track record of success.
To reduce risk, substantial technical analysis is undertaken to
evaluate and manage opportunities
• All exploration and appraisal programmes are consistently reviewed
and monitored before being recommended to the Board for approval
• Systems are in place to manage unscheduled power loss, virus
outbreaks and network disruptions and thereby minimise downtime
to operations and corporate offices
• Regular market review of services and rig availability occurs.
Engagement of experienced advisors to ensure a rapid response
to opportunities and an ability to close binding agreements quickly
• A dedicated drilling project manager and C&P manager ensure a clear
contracting strategy and project plan are produced early in the
procurement planning stage
Financial
Inability to fund
exploration work
programmes
• Regular review of cash flow, working capital and funding options and
a prudent approach to budgeting and planning to ensure sufficient
capital to meet commitments
Counterparty
credit risk
Cost and capital
spending
Interest rate
and foreign
exchange risk
External
Sovereign and
country risk
Legal,
regulatory or
litigation risk
• Close monitoring of all trade debtors who are subject to internal
credit review
• A formalised annual budget process and ongoing monthly reviews
of actual versus budget analysis. Delegation of authority, approval
processes and contracts & procurement procedures. Board approval
of Annual Work Programme
• Cash balances are primarily held in US Dollars to provide a natural
hedge to reflect majority of the Group’s business is managed and
conducted using US Dollars. Small balances are retained in other
currencies for operating and administrative needs
• Cash balances are held in current or short term deposits
• Further details on principal financial risks are addressed in Note 19
in the Group’s consolidated financial statements
• Regular monitoring for changes and reviewing of all jurisdictions in
which it operates. The Group’s management are experienced within
the industry and maintain close relations and continually focus on
working with each jurisdiction’s Governments
• Activities are subject to various different jurisdictional laws, customs,
fiscal and administrative regulations. The Group employs suitably
experienced and qualified staff and when required external advisors
to ensure full compliance
• Key policies and procedures consider the requirements of the
UK Bribery Act
• Legal risk assessment and due diligence (where appropriate)
is undertaken for all counterparties the Group deals with
• Maintenance and monitoring of a Business Code of Conduct and
Anti-corruption policies. Ongoing training take places with all
employees on policies implemented
Investor and
stakeholder
sentiment
• The Group fosters strong relations with the local communities
and host country governments in jurisdictions that it operates.
It proactively interacts with all relevant stakeholders
• Maintaining regular dialogue and provision of information to all
key shareholders. Internal investor relations and advisers ensure
all material information is released to the market on a timely basis
and in accordance with applicable regulations
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GOVERNANCE
OPHIR’S ONGOING
COMMITMENT TO
HIGH STANDARDS OF
CORPORATE GOVERNANCE
42 Board of Directors
44 Directors’ Report
48 Corporate Governance Report
54 Report of the Audit Committee
57 Report of the HSE Committee
58 Report of the Nomination Committee
60 Remuneration Report
73 Statement of Directors’ Responsibilities
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1. NICHOLAS SMITH
Chairman of the Board
Nicholas Smith was appointed as a non-executive
director in October 2007 and as Chairman in September
2009. He is a member of the Remuneration Committee
and Chairman of the Nomination Committee.
6. JOHN LANDER
Independent non-executive director
John Lander was appointed as a non-executive
director in November 2008. He is Chairman of the
Remuneration Committee and a member of the
Audit and HSE Committees.
Nicholas Smith trained as a chartered accountant before
joining the Jardine Fleming Group, becoming Chief
Financial Officer from 1993-1997. He is a non-executive
director of Schroder Asia Pacific Fund plc, Asian Citrus
Holdings Ltd and Aberdeen New Thai Investment Trust plc.
2. NICK COOPER
Chief Executive Officer
Nick Cooper was appointed as a director and Chief
Executive Officer in June 2011.
Prior to joining Ophir, Nick Cooper was Chief Financial
Officer and co-founder of Salamander Energy plc.
He began his career as a geophysicist with BG and
Amoco before joining Booz-Allen & Hamilton. From
1999-2005 he was a member of the oil and gas
team at Goldman Sachs. Nick has a BSc and PhD in
Geophysical Sciences and an MBA from INSEAD.
3. JONATHAN TAYLOR
Executive director and founder
Jonathan Taylor was a founding director of Ophir
in 2004 and is a member of the HSE Committee.
Jonathan Taylor was Exploration Director of Fusion
Oil & Gas plc from November 1998 until March 2004.
Before Fusion he held a range of technical and asset
management roles in Africa, Europe, the Far East and
the Middle East for Amerada Hess Ltd, Clyde Petroleum
plc and Gulf Canada Resources Ltd.
4. DENNIS MCSHANE
Executive director of Corporate Strategy
Dennis McShane was appointed as a non-executive
director in October 2007 and as senior independent
director in September 2009. On 18 February 2013,
Dennis was appointed as Director of Corporate
Strategy and a member of the executive management.
Dennis McShane is a founding principal of Midas
Resource Partners. From 2004 to 2008 he was
executive director of strategy for the Ferrexpo group
of companies. Prior to this he was an investment banker
with JPMorgan Chase emerging markets and mining
and metals practices in New York, London and Sydney.
5. RONALD BLAKELY
Senior independent non-executive director
Ronald Blakely was appointed as a non-executive
director in July 2011 and as senior independent
director on 18 February 2013. He is Chairman of the
Audit Committee and a member of the Remuneration
and Nomination Committees.
Ronald Blakely spent over 38 years working for Royal
Dutch Shell companies. On his retirement in October
2008 he held the role of Executive Vice President
Global Downstream Finance, while previous roles
included CFO of Shell Oil Products in the USA and
CFO of Shell Canada.
ANNUAL REPORT AND ACCOUNTS 2012
John Lander has over 40 years’ experience in the
international oil and gas industry. He began as a
geophysicist with Shell prior to holding executive
positions at RTZ Oil and Gas Limited, Pict Petroleum plc,
Premier Oil plc, British-Borneo Petroleum Syndicate plc
and Tullow Oil plc. He is a non-executive director of
Neon Energy Limited.
7. LYNDON POWELL
Independent non-executive director
Lyndon Powell was appointed as a non-executive
director in November 2008. He is Chairman of the HSE
Committee and a member of the Remuneration and
Nomination Committees.
Lyndon Powell spent the majority of his career in the
armed services, gaining a wide spectrum of experience
in operational and strategic security management.
This included providing protection to the Foreign &
Commonwealth Office and commanding four major
units. He is director and owner of Barbican Global Ltd,
specialising in providing independent security advice
to the corporate sector.
8. WILLIAM (BILL) SCHRADER
Independent non-executive director
Bill Schrader was appointed as a non-executive director
on 18 February 2013.
Bill Schrader has over 25 years’ experience working
at BP, including as Chief Executive Officer of several
country operations, as President of the Azerbaijan
International Operating Company and as chief operating
officer of TNK-BP. Throughout his career Bill Schrader
has been commended for his strong leadership qualities,
strategic vision and capability in managing complex
operating and government relationships.
Directors who resigned and retired during the year
ALAN STEIN
Deputy Chairman and founder
Retired 19 June 2012
RAJAN TANDON
Non-executive director, shareholder representative
Resigned 19 June 2012
JAROSLAW PACZEK
Alternate to Rajan Tandon, shareholder representative
Resigned 19 June 2012
PATRICK SPINK
Independent non-executive director
Resigned 6 August 2012
43
GOVERNANCE
DIRECTORS’ REPORT
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
The Company’s results for the financial year are
shown in the consolidated financial statements on
pages 78 to 81.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
Ophir is a FTSE 250 independent oil and gas exploration
business with a focus on Africa. Ophir Energy plc,
the parent company of the Group, is incorporated in
England and Wales with headquarters in London and
operational offices in Perth (Australia), Dar es Salaam
and Mtwara (Tanzania), Malabo (Equatorial Guinea),
Port Gentil (Gabon), Brazzaville (Congo), Nairobi
(Kenya) and Accra (Ghana).
Since its foundation in 2004, the Company has acquired
an extensive portfolio of oil and gas interests and its
current portfolio comprises 20 licences in 10 countries
in Africa. The majority of these interests lie offshore in
water depths greater than 250m and are thus classified
as “deepwater”. Through its drilling campaigns to date,
the Company has made a total of 11 gas discoveries:
six in Tanzania and five in Equatorial Guinea.
Through this Annual Report, including the Chairman’s
and Chief Executive Officer’s joint review and the
business review sections (pages 6 to 39) and the
corporate governance and remuneration reports which
follow on pages 48 to 72, the Board seeks to present
a balanced and clear assessment of the Company’s
activities, position and prospects. Each of these sections
is incorporated by reference into this Directors’ Report.
DIVIDEND POLICY
The Directors have not recommended a final dividend
for the year ended 31 December 2012 and did not
declare any interim dividends during the year. The
Directors do not anticipate that the Company will pay
dividends in the near future. The Directors envisage
that, as the Company advances the development of its
operations, a dividend policy will be determined based
on, and dependent on, the results of the Company’s
operations, financial condition, cash requirements,
prospects, profits available for distribution and other
factors deemed to be relevant at the time.
SHARE CAPITAL
The called-up share capital of the Company, together
with details of shares allotted during the year, is shown
in note 13 to the Company financial statements.
The Company does not hold any shares in treasury.
At the 2012 AGM, the Company was authorised by
shareholders to repurchase 39.75 million of its own
ordinary shares, representing just under 10% of its
issued share capital as at the date of the AGM.
No buyback programme has been undertaken to
date. While the Board does not currently intend to
exercise the authority, it will seek a further renewal at the
2013 AGM and will keep the use of the authority under
review, taking into account other investment
opportunities.
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2012 and 4 March 2013 being the
date of this report, the Company was notified of the
following substantial holdings of voting rights in the
issued share capital of the Company in accordance
with the Disclosure and Transparency Rules:
No. shares held
at 31.12.12
% holding
at 31.12.12
No. shares held
on 04.03.13
% holding at
04.03.13
13.02%
10.17%
56,105,773
40,433,833
14.02%
10.17%
9.16%
below threshold
below threshold
9.09%
18,081,895
12,163,223
4.51%
3.04%
Name
Capital Group Companies Inc.
Kulczyk Group
Och-Ziff Group
Mittal Investments S.à.r.l.
52,074,532
40,433,833
36,399,266
36,163,790
RS Global Natural Resources Fund
below threshold
below threshold
44
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SHAREHOLDERS’ RIGHTS
The following section summarises the rights and
obligations in the Company’s articles of association (the
articles) relating to the ordinary shares of the Company.
The articles can be found on the Company’s website.
Dividends: The Company may, by ordinary resolution,
declare final dividends to be paid to its shareholders.
However, no dividend shall be declared unless it has
been recommended by the Directors and does not
exceed the amount recommended by the Directors.
Voting: At a general meeting, subject to any special
rights or restrictions attached to any class of shares:
(a) on a show of hands, every member present in person
and every duly appointed proxy present shall have one
vote; (b) on a show of hands, a proxy has one vote for
and one vote against the resolution if the proxy has
been duly appointed by more than one member entitled
to vote on the resolution and the proxy has been so
instructed; and (c) on a poll, every member present in
person or by proxy has one vote for every share held by
him. Unless the Directors resolve otherwise, no member
shall be entitled to vote either personally or by proxy
or to exercise any other right in relation to general
meetings if any call or other sum due from him to the
Company in respect of that share remains unpaid.
Transfer of shares: Transfers of certificated shares must
be effected in writing, and signed by or on behalf of the
transferor and, except in the case of fully paid shares,
by or on behalf of the transferee. The transferor shall
remain the holder of the shares concerned until the
name of the transferee is entered in the register of
members in respect of those shares. The Directors may
decline to register any transfer of a certificated share,
unless (a) the instrument of transfer is in respect of
only one class of share, (b) the instrument of transfer is
lodged at the transfer office, duly stamped if required,
accompanied by the relevant share certificate(s) or
other evidence reasonably required by the Directors to
show the transferor’s right to make the transfer or, if the
instrument of transfer is executed by some other person
on the transferor’s behalf, the authority of that person to
do so, and (c) the certificated share is fully paid up. The
Directors may refuse to register an allotment or transfer
of shares in favour of more than four persons jointly.
Directors’ powers: The Directors shall manage the
business and affairs of the Company and may exercise
all powers of the Company other than those that are
required by the Companies Act 2006 (the 2006 Act)
or by the articles to be exercised by the Company at
the general meeting. The Directors may delegate any of
their powers or discretions, including those involving the
payment of remuneration or the conferring of any other
benefit to the Directors, to such person or committee
and in such manner as they think fit. Any such person or
committee shall, unless the Directors otherwise resolve,
have the power to sub-delegate any of the powers or
discretions delegated to them.
If the Directors believe that the profits of the Company
justify such payment, they may pay dividends on any
class of share where the dividend is payable on fixed
dates. They may also pay interim dividends on shares
of any class in amounts and on dates and periods as
they think fit. Unless the share rights otherwise provide,
all dividends shall be declared and paid according to the
amounts paid up on the shares on which the dividend
is paid, and apportioned and paid pro rata according
to the amounts paid on the shares during any portion or
portions of the period in respect of which the dividend
is paid. Any unclaimed dividends may be invested or
otherwise applied for the benefit of the Company until
they are claimed. Any dividend unclaimed for 12 years
from the date on which it was declared or became due
for payment shall be forfeited and shall revert to the
Company. The Directors may, if authorised by ordinary
resolution, offer to ordinary shareholders the right to
elect to receive, in lieu of a dividend, an allotment of
new ordinary shares credited as fully paid.
Borrowing powers: The Board may exercise all the
powers of the Company to borrow money, to guarantee,
to indemnify, to mortgage or charge its undertaking,
property, assets (present and future) and uncalled capital,
and to issue debentures and other securities whether
outright or as collateral security for any debt, liability
or obligation of the Company or of any third party.
DIRECTORS
Biographical details for the Directors of the Company
at the date of this report are set out on pages 42 to 43.
Details of directors’ service contracts or letters of
appointment, their interests in the ordinary shares of the
Company and in any of the Group’s long term incentive
and other share schemes are set out in the Directors’
Remuneration Report which can be found on
pages 60 to 72.
EMPLOYEES
The Company is committed to actively communicating
with employees in many ways, including regular
briefings on financial performance and training on
health and safety matters.
The Group continues to have a diverse workforce
comprising local employees, contractors and expatriates
at most sites. The Group is an equal opportunities
employer and where existing employees become
disabled, it is the Company’s policy to provide
continuing employment under similar terms and
conditions, wherever practicable, and to provide training
and career development.
As at 31 December 2012, the Group employed 71 people
(2011: 42 people).
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CHARITABLE AND POLITICAL DONATIONS
The Group made donations of US$10,859 to charitable
causes during 2012 (2011: Nil). These donations focused
on African causes. As part of its commitments to the
various countries where Ophir operates, it participates
in social and community-related as well as economic
programmes. Further information on these activities is
set out in the Corporate Responsibility Report on pages
34 to 37.
The Company does not make political donations
and has no intention of making donations to what
are generally regarded as political parties. As a
precautionary measure, and in the light of the wide
definitions of European Union political organisations for
the purposes of the 2006 Act, a resolution permitting
the Company to make political donations and incur
political expenditure will be proposed at the 2013 AGM.
A similar resolution was proposed and passed at the
AGM in 2012.
CORPORATE RESPONSIBILITY, BUSINESS CONDUCT
AND ETHICS
The Company is committed to sound business conduct
in its relationships with stakeholders (shareholders,
employees, customers, business partners and suppliers),
governments and regulators, communities and the
environment. The Group seeks to conduct its operations
with honesty, integrity and openness, and with respect
for the human rights and interests of our employees
and, as such, ensures that its anti-bribery policy is fully
understood and implemented by all employees and
other key stakeholders.
The Board is also fully committed to ensuring that high
standards of health, safety and environmental practices
are implemented and maintained by the Group.
Further details are set out in the Corporate
Responsibility Report on pages 34 to 37.
SUPPLIER PAYMENT POLICY
The Company’s policy, and that of the Group, is to settle
all debts on a timely basis and within terms of payment
agreed with each supplier on the approval of the
relevant contract. At 31 December 2012, the Group
had an average of 34 days’ purchases outstanding in
creditors (2011: 29 days).
CHANGE OF CONTROL
The Group has entered into a number of commercial
contracts which might take effect, alter or terminate
on a change of control of the Company. However, none
of these is considered to be significant in terms of their
likely impact on the business of the Group as a whole.
Details of change of control clauses contained in the
contracts of employment of the executive directors
are set out on page 66 of the Directors’ Remuneration
Report. Certain members of the Group’s senior
management team have agreements providing
for compensation for loss of office or employment
that occurs because of a change of control.
All the Company’s share incentive plans contain
provisions relating to a change of control and full
details of these plans are provided in the Directors’
Remuneration Report on pages 64 to 65. Generally,
outstanding awards under the Foundation Incentive
Plan, the 2006 Plan and the Deferred Share Plan will
vest in full and become exercisable on or before a
change of control. The Remuneration Committee may
allow outstanding awards under the Long Term
Incentive Plan (LTIP) to vest to the extent that any
performance condition is satisfied at the date of that
event and, unless the Remuneration Committee decides
otherwise, such level of vesting to be reduced to take
account of the fact that the award is vesting early.
LTIP awards may instead be exchanged for equivalent
awards over shares in the acquiring company.
DIRECTORS’ STATEMENT AS TO DISCLOSURE
OF INFORMATION TO AUDITORS
The Directors who were members of the Board at the
time of approving the Directors’ Report are listed on
page 43. Having made enquiries of fellow directors
tand of the Company‘s auditors, each of these directors
confirms that:
• To the best of each director’s knowledge and belief,
there is no information (that is information that is
needed by the Group’s auditors in connection with
preparing their report) of which the Group’s auditors
are unaware.
• Each director has taken all the steps a Director might
reasonably be expected to have to be aware of relevant
audit information and to establish that the Company’s
auditors are aware of that information.
AUDITOR
Details of the Company’s policy on external auditor
rotation are set out on page 55 of the Corporate
Governance Report. Notwithstanding that the Company
will undertake a review of its external audit services
during 2013, the current auditor, Ernst & Young LLP,
has indicated its willingness to continue in office and
resolutions to re-appoint Ernst & Young LLP as the
Company’s auditor and to authorise the Directors to
set the auditor’s remuneration will be proposed at
the 2013 AGM.
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The Group’s business activities, together with the
factors likely to affect its future development,
performance and position are set out in the business
review on pages 6 to 39. The financial position of the
Group, consisting of cash resources of US$227.7 million,
its cash flows, liquidity position and borrowing facilities
are described in the Financial review on pages 32 to 33.
In addition, note 19 to the financial statements include
the Group’s objectives, policies and processes for
managing its capital; its financial risk management
objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk
and liquidity risk.
In making their going concern assessment, the Directors
have considered Group budgets and cash flow forecasts
for a period of at least the next 12 months. Ophir plans
to use a combination of effective portfolio management
and/or equity to fund the next 12 months’ forecast
expenditure. On 4 March 2013 the Company announced
its intention to raise equity proceeds by way of a Placing
and Rights Issue. As a consequence, the Directors
believe that the Group is now well placed to meet its
exploration and appraisal expenditure commitments
for at least the next 12 months.
As a result of this review the Directors have a reasonable
expectation that the Group has adequate resources to
continue in operational existence for the foreseeable
future. Thus they continue to adopt the going
concern basis of accounting in preparing the annual
financial statements.
POST BALANCE SHEET EVENTS
A summary of the key post balance sheet events is
set out in note 28 to the Group financial statements.
By order of the Board
LISA MITCHELL
Chief Financial Officer and Company Secretary
4 March 2013
Registered office:
50 New Bond Street, London W1S 1BJ
Company registered in England and Wales No. 5047425
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CHAIRMAN’S OVERVIEW
Dear Shareholder
The Board regards the implementation of high
standards of corporate governance throughout the
Group as one of its fundamental responsibilities.
It is imperative that the policies and practices adopted
by the Board are fully integrated into the Company’s
business and strategy. In this way, corporate governance
can benefit all stakeholders rather than being seen as
a regulatory necessity with no discernible link to the
day-to-day business of the Group.
2012 was the Company’s first full year as a listed entity
following its admission to the premium segment of the
UK Listing Authority’s Official List and to trading on the
main market of the London Stock Exchange in July 2011.
As a premium listed entity, the Company is required to
comply with the principles and provisions of the UK
Corporate Governance Code (the Code) or to explain
to shareholders the reason for any non-compliance.
The Code sets out main and supporting principles
and provisions in five areas: Leadership, Effectiveness,
Accountability, Remuneration and Relations with
Shareholders. It is available on the website of the
Financial Reporting Council — www.frc.org.uk.
Compliance with the Code
The Board is pleased to confirm that, for the year ended
31 December 2012, the Company fully complied with the
provisions of the UK Corporate Governance Code. In
the following pages, made up of the Directors’ Report
on pages 44 to 47, the Corporate Governance Report
on pages 48 to 53, and the Directors’ Remuneration
Report on pages 60 to 72 Ophir provides details of
the Company’s governance policies, processes and
structures and how putting these into practice has
enabled the Company to comply with the Code.
Evaluation
Towards the end of 2012, the Board undertook its first
formal evaluation. Socia Ltd was appointed to facilitate
the evaluation, which focused on the structure of the
Board together with the skills, experience and
development of its members. Details of the process
undertaken and a summary of the conclusions reached
are set out on page 52.
Board structure
On 19 February 2013 Ophir announced that Dennis
McShane had accepted an offer to become part of
the Company’s executive team. He will fulfil his role
as Director of Corporate Strategy alongside Nicholas
Cooper and Jonathan Taylor and will be a key member
of the Executive Committee and senior management
team. Dennis’ contractual terms and conditions are in
line with the Company’s policy as set out in the
Remuneration Report on pages 60 to 72.
On 19 February 2013 Ophir also announced the
appointment of William (Bill) Schrader as a non-
executive director. Bill brings with him a wealth
of energy industry experience with over 25 years’
experience working at BP, including as Chief Executive
Officer of several of the company’s country operations.
Bill also led BP’s joint ventures in the Caucasus and in
Russia for five years as President of the Azerbaijan
International Operating Company and chief operating
officer of TNK-BP. Throughout his career Bill Schrader
has been commended for his strong leadership qualities,
his strategic vision and his capability in managing
complex operating and government relationships. The
Board is confident that this experience and expertise will
prove valuable for Ophir as it continues to build and
expand its portfolio across the African region.
NICHOLAS SMITH
Chairman
LEADERSHIP
The Board
The Board is collectively responsible to shareholders for
the continuing success of the Company. To achieve this,
the Board provides leadership to the business and, either
directly or through the operation of its Committees and
delegating authority, brings an independent judgement
on all matters of strategy, performance, resources,
standards of conduct and accountability. As at
31 December 2012, the Board and its Committees
were structured as set out in the chart on page 49.
The Board has adopted a formal schedule of matters
reserved for its approval and has delegated other
specific responsibilities to its Committees. The matters
specifically reserved for the Board are set out in writing
and summarised below:
• To approve the Group’s long term objectives,
commercial and scientific strategy and attitudes to risk;
• To approve the corporate operating and capital
expenditure budgets;
• To approve the interim and final results, the annual
report and accounts, including the corporate
governance statement and remuneration report,
the dividend policy and any declaration of dividend;
• To approve any material acquisition, disposal, contract
or expenditure;
• To approve, following recommendation from the
Nomination or Remuneration Committees as appropriate,
appointments to the Board, that of the Company Secretary
and other key senior management, committee membership
and remuneration for directors and senior executives;
• To review, following recommendation from the Audit
Committee the effectiveness of the Company’s internal
control and risk management systems;
• To approve, following recommendation from the HSE
Committee, the Group’s health, safety, environmental
and other relevant policies; and
• To approve the Company’s corporate governance
policies and procedures and set the Company’s
values and standards.
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Chairman, 2 executive directors and
4 independent non-executive directors
AUDIT COMMITTEE
3 independent
non-executive directors
NOMINATION COMMITTEE
2 independent
non-executive directors
and Company Chairman
CHIEF EXECUTIVE
OFFICER
HSE COMMITTEE
1 executive and
2 non-executive directors
REMUNERATION COMMITTEE
4 independent
non-executive directors
and Company Chairman
EXECUTIVE COMMITTEE
SENIOR
MANAGEMENT TEAM
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Roles of the Chairman and Chief Executive Officer
The roles and responsibilities of the Chairman and
Chief Executive Officer are clearly established, separate
and have been set out in writing. Their respective roles
and responsibilities were reviewed during the 2012
evaluation, updated and re-approved.
Nicholas Smith was appointed as Chairman of the
Company in 2009, having been a non-executive director
since 2007. As Chairman, he is responsible for the
effective running of the Board and for ensuring that it
plays a full and constructive part in the development
and determination of the Company’s strategy. Together
with the Chief Executive Officer and the Company
Secretary, the Chairman sets the agenda for Board
meetings, ensuring that the decision making process
adopted by the Board allows for open and constructive
debate. The Chairman works closely with the Chief
Executive Officer, providing support and advice as well
as ensuring that the strategies and actions agreed by
the Board are effectively implemented.
The Chairman was considered to be independent in
character and judgement on his appointment.
Nick Cooper was appointed as Chief Executive Officer in
June 2011. He is responsible for managing the day-to-
day business of the Company, proposing and
developing strategy and overall commercial objectives
in consultation with the Board and, as leader of a strong
and experienced executive team, implementing
the decisions of the Board and its Committees.
A summary of the division of responsibilities between
the Chairman and Chief Executive Officer as at
31 December 2012 is set out in the box to the right.
Role of the Chairman
The Chairman is responsible for leadership of the
Board. In particular, he will:
• Ensure that the Board and its Committees operate
in a way that conforms to expected high standards
of corporate governance.
• Set the style and tone of Board discussions, promote
constructive debate and ensure an accurate, timely
and clear flow of information to the Directors.
• Lead the Nomination Committee in the appointment
of an effective and complementary Board, review
succession planning and evaluate the performance
of the Board, its Committees and individual directors.
• Foster effective Board relationships between the
executive and non-executive members, support
and advise the Chief Executive Officer generally and
in the implementation of agreed strategy.
• Ensure effective communication with the Company’s
stakeholders and that their views are understood
by the Board.
Role of the Chief Executive Officer
The Chief Executive Officer is responsible for day-to-
day management of the business within the authorities
delegated by the Board. In particular, he will:
• Propose, develop and supervise the Group’s strategy
and overall commercial objectives and ensure that
agreed strategies are implemented by the business.
• Build and develop an appropriate organisational
structure for the business, establish processes and
systems and plan resourcing to ensure that the
Company has the capability to achieve its aims.
• Lead the executive team including undertaking
appraisals, reviewing development needs and
making recommendations to the Remuneration
Committee with regard to remuneration.
• Promote and conduct the affairs of the Group with
the highest standards of integrity, probity and
corporate governance.
• Progress the Company’s communication programme
with shareholders and ensuring that financial results,
business strategies and targets are appropriately
communicated to Company’s investors.
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CORPORATE GOVERNANCE REPORT CONTINUED
Non-executive directors
The independent non-executive directors bring a wealth
of knowledge and business experience from other
sectors and industries to the Board and its Committees.
Through their contributions, the independent non-
executive directors provide the Company with
independent views on matters of strategy, performance,
risk and conduct.
Non-executive directors are appointed for an initial three
year term with the expectation that a further term will
follow, subject to review by the Board. The terms and
conditions of appointment of the non-executive directors
are available for inspection at the registered office
during normal business hours. While the expected time
commitment from non-executive directors is set out in
their letter of appointment as approximately 2-4 days per
month, plus preparation time, each is required to confirm
that they are able to devote such time as is necessary for
the satisfactory performance of their duties.
The length of tenure and independence of the non-
executive directors as at year end is shown below:
Date of
Appointment
Tenure from
appointment to
2013 AGM
Considered
to be
independent
Ronald
Blakely
July 2011
2 years
John Lander November
2008
Dennis
McShane1,2
Lyndon
Powell
October
2007
October
2007
4½ years
5½ years
5½ years
1 Dennis McShane ceased to be a non-executive director following
his appointment as executive director of Corporate Strategy on
18 February 2013.
2 William (Bill) Schrader was appointed as an independent
non-executive director on 18 February 2013.
The Board considers that all its non-executive directors
at year end, namely Ronald Blakely, John Lander, Dennis
McShane and Lyndon Powell, were independent in
character and judgement and free from relationships or
circumstances that might affect their judgement. During
the year under review, the majority of the non-executive
directors, excluding the Chairman, were independent
non-executive directors and met the criteria for
independence set out in the Code.
Throughout 2012 and up to the date of publication of
this annual report, a majority of the Board members,
excluding the Chairman, were independent non-
executive directors.
Senior independent director
Dennis McShane was the senior independent director
during the year under review. In light of his appointment
to an executive role on the Board, Ronald Blakely
assumed the role of senior independent director
with effect from 18 February 2013.
The senior independent director is charged with
maintaining a communication channel between the
Chairman and the non-executive directors and for
leading the non-executive directors in the annual
performance evaluation of the Chairman. In addition, the
senior independent director is available to shareholders
who have concerns that have not, or cannot, be resolved
through the normal channels of the Chairman or the Chief
Executive Officer or where such contact is inappropriate.
The specific terms of the role of the senior independent
director have been set out in writing and approved by
the Board.
Company Secretary
Lisa Mitchell, Chief Financial Officer, was appointed
as Company Secretary in August 2012. Prior to
Ms Mitchell’s appointment, the role of Company
Secretary was undertaken by Prism Cosec Ltd. Prism
Cosec continues to provide corporate governance
advice and services to the Company and to act as
minute secretary to the Board and its Committees.
EFFECTIVENESS
Board composition
At 31 December 2012 the Board was comprised of the
Chairman, two executive directors and four independent
non-executive directors. Subsequently, on 18 February
2013, Bill Schrader was appointed as a non-executive
director and Dennis McShane as an executive director.
As at the date of this report therefore, the Board
comprises the Chairman, three executive directors
and four independent non-executive directors.
The Board believes that this balance of executive and
non-executive directors provides for high quality
discussion and consideration of the key issues
concerning the Company.
The composition of the Board is regularly reviewed
to ensure that the Directors have the required skills,
knowledge and experience to meet the needs of the
business. Biographical details for each of the current
directors are set out on page 43.
The following changes to the Board took place during
the year ended 31 December 2012 and up to the date
of this report:
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Board Meetings
held at short
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5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
4/5
4/5
1/3
0/1
3/3
1/3
2/2
1/1
Current directors
Nicholas Smith, Chairman
Nick Cooper,
Chief Executive Officer
Jonathan Taylor,
executive director
Ronald Blakely,
non-executive director
John Lander,
non-executive director
Dennis McShane,
non-executive director
Lyndon Powell,
non-executive director
Former directors
Alan Stein,
Executive Deputy
Chairman1
Patrick Spink,
non-executive director2
Rajan Tandon,
non-executive director3
1 Alan Stein retired from the Board at the conclusion of the Company’s
AGM on 19 June 2012.
2 Patrick Spink resigned from the Board on 6 August 2012.
3 Rajan Tandon resigned from the Board at the conclusion of the
Company’s AGM on 19 June 2012.
19 June 2012
As announced in December 2011, Alan Stein, executive
deputy Chairman and founder of the Company, retired
from the Board at the conclusion of the 2012 Annual
General Meeting (the AGM).
Rajan Tandon, non-executive director and
representative for Mittal Investments S.a.r.l. (Mittal)
under the terms of the Relationship Agreement
between Mittal and the Company, also retired from
the Board at the conclusion of the 2012 AGM. As a
consequence of this retirement, the appointment
of Jaroslaw Paczek as Rajan Tandon’s alternate
also terminated.
6 August 2012
Patrick Spink, independent non-executive director,
resigned from the Board to pursue other interests.
18 February 2013
Dennis McShane, independent non-executive director
and senior independent director was appointed as an
executive director.
William (Bill) Schrader was appointed as an
independent non-executive director.
Diversity
The Board is committed to equal opportunities in its
recruitment and succession planning policies and
continues to welcome the current emphasis on diversity
in general.
While, as yet, none of the Board Directors are women,
women made up 20% of the Executive Committee, 22%
of the Senior Management Team and 42% of the total
workforce as at 31 December 2012. Ophir remains
dedicated to encouraging diversity at all levels of the
business, acknowledging that a more diverse workforce,
with the right mix of skills, experience and knowledge,
can make a valuable contribution to the Company.
Meeting attendance
The Board held five formal meetings during 2012,
including a meeting to consider the strategic direction
of the business. In addition, five further meetings were
called at short notice in order to consider specific items
of business. Details of the attendance of all Directors who
served during the year ended 31 December 2012 and up
to the date of this report at the formal and short-notice
Board meetings are shown in the table below:
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ANNUAL REPORT AND ACCOUNTS 2012 GOVERNANCE
CORPORATE GOVERNANCE REPORT CONTINUED
Board process
Directors are provided with full and timely information
before meetings, including detailed financial information
where applicable. The Chief Executive Officer sets the
agenda for Board meetings in consultation with the
Company Secretary and the Chairman and formal
minutes are prepared to record all decisions made.
To facilitate the efficient dissemination of information
to directors, the Board is in the process of implementing
electronic board meeting software.
Minutes of Board and committee meetings are formally
approved at the next full meeting. In the meantime,
draft minutes are circulated to each director or
committee member as appropriate as soon as
practicable after the conclusion of the meeting. Minutes
of committee meetings may be made available to other
Board members on request and as appropriate.
If a director objects to a particular proposal, this will
be recorded in the minutes of the relevant meeting.
During the year ended 31 December 2012 there were
no such objections.
Insurance and indemnification
The Company provides its directors and officers with
the benefit of appropriate insurance, which is reviewed
annually. In addition, directors and officers have
received an indemnity from the Company against
(a) any liability incurred by or attaching to the director
or officer in connection with any negligence, default,
breach of duty or breach of trust by them in relation to
the Company or any associated company; and (b) any
other liability incurred by or attaching to the director
or officer in the actual or purported execution and/or
discharge of his duties and/or the exercise or purported
exercise of his powers and/or otherwise in relation to
or in connection with his duties, powers or office other
than certain excluded liabilities including to the extent
that such an indemnity is not permitted by law.
Appointment, induction and training
The Chairman is responsible for ensuring that an
appropriate induction is given to new Board members.
The induction programme is specifically tailored to the
needs of the incoming director and will include training
on the business and strategy of the Company, copies
of Board policies and procedures, meetings with senior
management and site visits, where appropriate.
Ongoing development and training is provided to
directors at Board and committee meetings.
During 2012, the Directors received specific training on:
• Macro, equity markets and gas market trends;
• Asia-Pacific liquefied natural gas;
• Competitor activity in East and West Africa;
• UK Bribery Act update;
• HSE, including crisis management; and
• Updates on specific areas of risk.
In November 2012 the Directors participated in a site
visit to Tanzania including a visit to the port facility
located at Mtwara, Tanzania.
Independent advice
All directors have access to the advice and services of
the Company Secretary and the Board has established a
procedure whereby any director may take independent
professional advice at the Company’s expense on any
matter in the furtherance of their duties.
Re-election
In accordance with the provision of the Code, all
continuing directors of the Company offer themselves
for annual re-election at the AGM.
External directorships
The Company had adopted a policy which allows the
executive directors to accept directorship of other
quoted companies provided that they have obtained the
prior permission of the Chairman. As set out in the Code,
no executive director would be permitted to take on
more than one non-executive directorship in a FTSE 100
company or the chairmanship of such a company.
During the year ended 31 December 2012, none of the
Company’s executive directors held directorships in any
other quoted company.
Board evaluation
Socia Ltd was appointed to undertake the first
evaluation of the Board, its members and processes.
The evaluation focused on three key areas: ensuring the
fitness of the Board to meet the demands of the future
of this fast-developing business; ensuring the Board has
the right blend of skills and experience; and continuing
to develop the dynamics of the Board so that it remains
an effective decision making body.
The external facilitator conducted interviews with each
Board member, the Chief Financial Officer, General
Counsel and Company Secretary, asking each to assess
the Board’s performance in five areas. The resulting
report, including recommendations for action, was
considered by the Board and a response plan agreed.
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The main focus of the response plan is to strengthen
and develop the skills and knowledge of the Directors
and senior management team. Formal monthly
meetings have been instigated between the Chairman,
Chief Executive Officer and the senior independent
director. The appointment of a new non-executive
director in February 2013 enhanced the Board’s African
operational experience. The Chairman and Company
Secretary will monitor progress over the year and the
findings will play a key role in the structure and focus of
the 2013 evaluation.
The senior independent director led a review of the
Chairman’s performance by the non-executive directors.
The result of the Chairman’s review, where he was
perceived to be performing well in all categories,
was consistent with the findings of the evaluation
undertaken by Socia.
Socia Ltd does not provide any other services to
the Company.
Conflicts of interest
Every director has a duty to avoid a conflict between
their personal interests and those of the Company. The
provisions of Section 175 of the Companies Act 2006
and the Company’s articles of association permit the
Board to authorise situations identified by a director in
which he or she has, or may have, a direct or indirect
interest that conflicts, or may conflict, with the interests
of the Company.
Prior to year end, the Board reviewed the outside
positions and interests or arrangements with third parties
held by each director and, following consideration, the
positions and interests disclosed were authorised.
The Board will continue to undertake an annual review
of directors’ situational conflicts. Notwithstanding the
above, each director is aware of his duty to notify the
Board should there be any material change to their
positions or interests during the year.
Directors do not participate in Board discussion or
decisions which relate to any matter in which they
have or may have a conflict of interest.
RELATIONS WITH SHAREHOLDERS
Dialogue with shareholders
The Chief Executive Officer is primarily responsible for
investor relations within the Group, supported by the
investor relations function. Presentations were made to
analysts on publication of the Company’s full year 2011
results in April and half-year results in August 2012. The
Company also held its second capital markets day in
London in October to enhance investor knowledge of
the Company and its strategy.
All financial and regulatory announcements, as well
as other important business announcements, are
published to the investor relations section of the
Company’s website and stakeholders can subscribe
to receive new updates by email by registering online
on the website.
Annual General Meeting
Our first Annual General Meeting (AGM) as a premium
listed entity was held in London in June 2012 and was
attended by all continuing members of the Board. The
AGM included a presentation about the business by the
Chief Executive Officer and an opportunity for
shareholders to ask questions, both on the formal
business of the meeting and generally.
Voting on all resolutions at the AGM was by means of a
poll. The results of the poll, including votes withheld on
each resolution, are available on the investor relations
section of the Company’s website.
The 2013 AGM will be held on 6 June 2013 at the offices
of Linklaters LLP, One Silk Street, London EC2Y 8HQ.
Full details of the business of the AGM will be set out in
the Notice of Meeting and sent to shareholders, together
with any related documentation, at least 20 clear
business days before the date of the meeting in
accordance with the requirement of the Code.
COMMITTEES OF THE BOARD
In order to facilitate the business of the Company,
the Board has delegated certain responsibilities to its
standing committees in line with the provisions of
the Code. The reports of the Audit, Health, Safety
and Environment, Nomination, and Remuneration
Committees, are set out on the following pages.
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ANNUAL REPORT AND ACCOUNTS 2012 GOVERNANCE
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE AUDIT COMMITTEE
Dear Shareholder
During this first full year as a listed entity, the Audit
Committee developed an agenda to include regular
reviews of controls in the various financial and business
processes. To highlight examples, a third party was
contracted to review the procurement process and
as a result of that work, several changes were
implemented to improve processes and controls.
An independent review was also completed to
review the accounts payable process, where control
weaknesses were identified and steps taken to
strengthen the controls.
In general, as Ophir moved from a private to a listed
entity, the control framework was good. However,
given a relatively small staff and paper intensive work
processes, a number of controls have been identified
to improve areas such as segregation of duties and
documentation. These reviews will form an ongoing
part of the Committee agenda in the coming year.
Also during the year, the decision was taken to
establish an internal audit function which will initially
MEMBERSHIP AND ATTENDANCE
The members of the Committee during the year
ended 31 December 2012, together with details of their
individual attendance at Committee meetings held
during the year, are set out below:
Committee Members
Ronald Blakely (Committee Chairman)
John Lander
Dennis McShane
Meeting
attendance
3/3
3/3
3/3
The Board considers all members of the Committee
to be independent and that Ronald Blakely has recent
and relevant financial experience and competence in
accounting as required by section C.3.1 of the Code
and section 7.1.1 of the Disclosure and Transparency
Rules respectively.
The Chief Executive Officer, Chief Financial Officer and
representatives of the external auditor attend
Committee meetings on a regular basis. In addition,
the Group Financial Controller and the General Counsel
may be invited to attend all or part of Committee
meetings as required. The external auditors are also
given the opportunity to meet with the Committee
without executive management being present.
Following Dennis McShane’s appointment as executive
director in February 2013, Mr McShane will step down
from his position on the Audit Committee and a
replacement will be appointed in due course.
54
be performed by third party contractors with the
specialist skills for joint venture as well as internal
auditing. The first of these audits will be performed in
2013 and the Committee will receive reports on the
internal audits at each of its meetings going forward.
The Committee also gave oversight to the implementation
of training, education and communication related to the
UK Bribery Act such that all employees understand their
responsibilities. Particular emphasis was given to the
implementation with third party service providers.
During the year, the Committee refined the risk
management process with management to ensure
a systematic evaluation of the major risks to the
Company such that particular risks can be reviewed
and discussed by the Board at future meetings.
The past year saw good progress in improvements
to the control framework.
RONALD BLAKELY
Audit Committee Chairman
ROLE AND RESPONSIBILITIES OF THE AUDIT COMMITTEE
During 2012, the Committee reviewed its objectives
and terms of reference to ensure that they remained
appropriate. The Committee’s full terms of reference
are available on the Company’s website but, in summary,
the Committee’s main role and responsibilities are:
• monitoring the integrity of the financial statements
of the Company, including its annual and half-yearly
reports, interim management statements and any
other formal announcement relating to its financial
performance, reviewing significant financial reporting
issues and judgements which they contain;
• keeping under review the effectiveness of the
Company’s internal financial controls and internal
control and risk management systems together with
reviewing and approving statements to be included in
any public document concerning internal controls and
risk management;
• reviewing the adequacy and security of the Company’s
procedures and arrangements for detecting fraud,
bribery and money laundering and ensuring that
employees and contractors are able to raise concerns,
in confidence, about possible wrongdoing in financial
reporting or other matters;
• monitoring and reviewing the effectiveness of the
Company’s internal audit processes in the context of
the Company’s overall risk management system;
WWW.OPHIR-ENERGY.COM • considering and making recommendations to the
Board, to be put to shareholders for approval at the
Annual General Meeting, in relation to the appointment,
re-appointment and removal of the Company’s external
auditor, their terms of appointment and remuneration
and assessing annually their independence and
objectivity; and
• developing and implementing a policy on the supply
of non-audit services by the external auditor.
FINANCIAL REPORTING
During the year, the Committee reviewed and approved
for consideration by the Board the financial results
for the year ended 31 December 2011 together with
the results for the half-year to 30 June 2012. On both
occasions, the Committee considered the appropriateness
of preparing the accounts on a going concern basis, a
particular area of scrutiny and review given that the
Company continues to be an exploration rather than
producing entity. The going concern reviews included
consideration of forecast plans and supporting
assumptions as well as the options available to the
Company for obtaining additional funding, such as
portfolio management and equity.
At both full and half-year, the Committee agreed that
the Company’s financial position was such that it
continued to be appropriate for accounts to be prepared
on a going concern basis.
Other matters considered by the Committee during
the year, and which are not covered elsewhere in this
report, include:
• purchase price allocation and financial system
integration following the acquisition of Dominion
Petroleum Ltd;
• control processes for contracts and procurement;
• full and half-year external audit plans;
• processes and controls for analysing exploration
results and contingent reserves;
• review of fraud detection procedures; and
• review of insurance cover.
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EXTERNAL AUDITOR
Ernst & Young LLP (Ernst & Young) has acted as auditor
since 2004. During the year, the Committee considered
and agreed that the Company’s external audit services
should be put out to tender at least once every 10 years,
as set out in the revised Code. The Chief Financial
Officer, on behalf of the Committee, has therefore been
delegated with the task of undertaking a review of audit
services, including a tender by suppliers, ahead of the
2014 audit.
The Company’s audit partner will mandatorily rotate
from the account following the conclusion of the
2012 audit in accordance with the requirements of the
ethical standards of the Accounting Practices Board.
The Committee Chairman discussed the Company’s
requirements with Ernst & Young and met the proposed
audit partner prior to his appointment. The new audit
partner attended his first Committee meeting in
November 2012.
The Committee has reviewed and confirmed the
Company’s policy governing the provision of audit
and non-audit services provided by the auditor and its
associates. The policy clearly identifies permitted and
prohibited services and sets out the procedure to be
followed for the approval of all audit and non-audit
services. All engagements with an expected fee in
excess of US$100,000 require the prior approval of the
Committee. The Committee reviews statements on the
independence and objectivity of the external auditor at least
twice a year in order to satisfy itself that independence and
objectivity has been safeguarded.
During the year ended 31 December 2012 the Committee
approved fees for audit services of US$302,000 together
with fees for non-audit work of US$709,000. The nature
of the services provided is set out in note 5 to the
consolidated financial statements. There is no limitation
of liability in the terms of appointment of Ernst & Young
as auditor to the Company.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Board has delegated its responsibility for
monitoring the Group’s system of internal control and
for reviewing its effectiveness on a continual basis
to the Committee.
The Group’s system of internal control is designed to
safeguard the Company’s assets and to ensure the
reliability of financial information for internal and
external use. Any system of controls can provide only
reasonable, not absolute, assurance that assets are
safeguarded, transactions authorised and correctly
recorded and that any material errors and irregularities
are detected within a reasonable timeframe. The
Group’s internal controls are therefore designed to
manage, rather than eliminate, risk, recognising that
not all risks can be eliminated and the cost of control
procedures should not exceed the expected benefits.
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ANNUAL REPORT AND ACCOUNTS 2012 GOVERNANCE
REPORT OF THE AUDIT COMMITTEE CONTINUED
The Committee regularly reviews the effectiveness of
the Group’s system of internal controls which covers
financial, operational and risk management processes.
Lines of responsibility have been clearly defined
and a delegated authority schedule approved
and implemented.
During the year, the Company undertook a bottom-up
review of risk. The Group operates a risk management
process under which key risks are identified, their
likelihood and impact considered and actions taken to
manage those risks. The Committee reviews the Group’s
risk register every six months. The principal risks
identified by the Group are set out on pages 38 to 39.
The Board has reviewed the effectiveness of the internal
control systems in operation during the financial year
and, where necessary and appropriate, action has been
taken to remedy any identified failings or weaknesses.
The processes as set out above have been in place
for the year under review and up to the date of this
annual report.
INTERNAL AUDIT
During the year the Committee reviewed the
requirement for the Company to establish an internal
audit function. It was agreed that the Company’s
development over the year warranted the establishment
of an internal audit function, albeit on an outsourced
basis initially. The tender for internal audit services is
expected to complete in early 2013.
ANTI-BRIBERY AND WHISTLEBLOWING
During the year, the Committee reviewed the Company’s
processes and procedures in relation to The UK Bribery
Act 2010 (the Act) and obtained confirmation that these
were being properly implemented.
The main emphasis during the year has been to ensure
that third party contractors were following the
Company’s anti-bribery policy and to the
implementation of contracting and procurement
procedures. In addition, a gifts and hospitality register
had been developed and a system for dealing with per
diems for government officials was being considered
prior to developing a formal policy.
The Company is committed to the highest standards
of business conduct and has adopted a whistleblowing
policy as a mechanism to support the achievement of
this goal. Employees are encouraged to raise genuine
concerns which are carefully and thoroughly
investigated to assess what action, if any, should be
taken. Employees, officers and business partners are
able to raise any concerns in a confidential manner
with either the compliance officer (who is the General
Counsel), Lyndon Powell (independent non-executive
director), or the Chief Executive Officer.
During the year ended 31 December 2012, no issues
were raised via the whistleblowing policy.
AUDIT COMMITTEE EVALUATION
Before the year end, the Committee undertook
a questionnaire-based evaluation of itself and its
responsibilities. The evaluation focused on whether
members of the Committee were satisfied that it was
fulfilling all its duties and whether more or less time
should be spent considering certain topics. Committee
members were also asked whether they were satisfied
with the advice obtained from the Company on
audit issues.
As a result of the evaluation, minor amendments
were proposed to the Committee’s terms of reference,
which were subsequently approved by the Board.
No additional topics were identified for the Committee’s
consideration and all members were comfortable
with the level of advice and openness from
executive management.
Finally, it was agreed that consideration should be
given to undertaking an externally facilitated Committee
evaluation during 2013.
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REPORT OF THE HSE COMMITTEE
REPORT OF THE HSE COMMITTEE
Dear Shareholder
Ophir’s enhanced seismic and drilling programme
for 2012 has been a major focus of the Committee’s
schedule during the year. Maritime security issues
were key components of the drilling campaigns in
both East and West Africa and will continue to be at
the forefront of the Committee’s considerations as
the Group explorations expand.
During the year, the Committee reviewed and
approved several key policies and ensured that
appropriate training was provided to all stakeholders,
including contractors. In July, Ian Borthwick, an HSE
consultant and advisor to the Company, provided the
Board with HSE training and engaged all Perth-based
employees in HSE requirements. He also mentored
Ophir’s Crisis Management Team in the procedures
for managing a crisis.
There have been no fatalities or significant HSE
incidents during the year. Although there has been
excellent HSE performance in 2012, the Committee’s
main focus will continue to be the oversight of the
Group’s safety performance, and to this end the
Committee encourages all stakeholders to continue
their diligence and commitment to the Group’s HSE
policies and practices.
LYNDON POWELL
HSE Committee Chairman
MEMBERSHIP AND ATTENDANCE
The members of the Committee, the majority of whom
are independent non-executive directors, together
with details of their individual attendance at meetings
held during the year ended 31 December 2012, are set
out below:
Committee Members
Lyndon Powell (Committee Chairman)
John Lander
Patrick Spink (to 6 August 2012)
Meeting
attendance
3/3
3/3
2/2
ROLE AND RESPONSIBILITIES OF THE HSE COMMITTEE
The role of the Committee is to ensure that appropriate
policies and systems are developed and implemented
in order to identify and manage health, safety, social,
security and environmental matters within all Group
operations. Full terms of reference for the Committee
are available on the Company’s website but, in summary,
its main responsibilities include to:
• evaluate the effectiveness of the Group’s policies and
systems for identifying and managing health, safety,
social, security and environmental risks within the
Group’s operations and assess the performance of the
Group with regard to the impact of its HSE decisions;
• receive, on behalf of the Board, reports from
management concerning all fatalities and serious
accidents within the Group and actions taken by
management as a result;
• review external stakeholder reporting concerning
health, safety, security, social and environmental
performance and issues; and
• review the results of independent audits of the Group’s
performance in regard to health, safety, social, security
or environmental matters, and to review any strategies
and action plans developed by management in
response to issues raised.
HSE COMMITTEE ACTIVITIES
The focus for the Committee during the year ended
31 December 2012 has been marititme security for the
Group’s drilling campaigns in East and West Africa.
While there has been a significant reduction in piracy
activity overall, the Committee ensured that appropriate
maritime security plans were developed and
implemented, including the modus operandi for the use
of armed personnel, during drilling off Tanzania and
Equatorial Guinea in 2012 and for the drilling campaigns
scheduled for 2013.
The Committee reviewed the policies on health, safety
and environment and corporate social responsibilities
during the year which, following Board approval, have
been disseminated through the Group. The Committee
also received information on other policies being
implemented by the Company.
During the year, the Committee also considered:
• HSE key performance indicators;
Jonathan Taylor
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• crisis management plans;
Jonathan Taylor was unable to attend one meeting
during the year due to being overseas on business for
the Company.
• HSE training for the Board, all employees
and contractors;
• appropriateness of undertaking HSE audits of joint
venture partners;
The Company Chairman and Chief Executive Officer
have an open invitation to attend all Committee
meetings. In addition, the Group HSE Manager is invited
to attend each meeting to present his report to the
Committee. Other senior members of staff and external
advisors may be invited to attend as necessary.
• reports on health, safety and environmental incidents
within the Group, including a particular focus on lost
time injuries and the results of any investigations;
• HSE and CSR external communications; and
• approval of the 2013 HSE budget for submission
to the Board.
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ANNUAL REPORT AND ACCOUNTS 2012
GOVERNANCE
REPORT OF THE HSE COMMITTEE CONTINUED
Further information on the Company’s approach to
corporate responsibility and HSE matters can be found in
the Corporate Responsibility Report on pages 34 to 37.
HSE COMMITTEE EVALUATION
Before the year end, the Committee undertook a
questionnaire-based evaluation of itself and its
responsibilities. Stakeholders (including institutional and
retail shareholders, voting agencies, environmental
groups and local communities) are placing increasing
importance on whether companies are being managed
in a socially responsible manner and companies are
expected to demonstrate that sustainability is
integrated into the business model.
The evaluation focused on ascertaining whether the
members believed that the Committee was adequately
fulfilling all of its duties. This included consideration of
whether the Committee composition was appropriate,
whether satisfactory advice was being received from the
Company and the level of engagement with and advice
and guidance from external advisers. As a result of the
responses received, the Committee will invite operational
members of the senior management team and third
party providers to attend and report to future meetings.
REPORT OF THE NOMINATION COMMITTEE
REPORT OF THE
NOMINATION COMMITTEE
Dear Shareholder
In February 2013 I succeeded Dennis McShane as
Chairman of the Nomination Committee, having
served as a member of the Committee since it was
established in 2008. I would like to congratulate
Dennis on his appointment as executive director of
Corporate Strategy and thank him for his excellent
chairmanship during the last three years.
Following the successful IPO in 2011, the
Committee focused on the key issues of reinforcing
the senior executive team, succession planning
and Board composition.
With regard to the latter, Rajan Tandon, Mittal
Investments’ representative on the Board, stepped
down as a director in June 2012. Paddy Spink did
the same in August 2012. Their wise counsel has
been missed.
During the latter part of the year Egon Zehnder
was appointed to assist with the selection of further
non-executives to the Board. The criteria of expertise
were strong technical, engineering and/or gas
commercialisation expertise. I am pleased that Bill
Schrader has now joined the Board and we are sure
that his wealth of energy industry experience will be
of utmost value to the Company.
Succession planning will remain a key focus for 2013.
This has been helped by the development and
adoption of a robust response plan to the points
identified in the 2012 Board evaluation.
NICHOLAS SMITH
Nomination Committee Chairman
MEMBERSHIP AND ATTENDANCE
The membership of the Nomination Committee,
together with details of their individual attendance at
meetings held during the year ended 31 December 2012,
are set out below:
Committee Members
Dennis McShane (Committee Chairman)
John Lander (retired from the Committee
14 November 2012)
Nicholas Smith
Ronald Blakely (with effect from
14 November 2012)
Meeting
attendance
3/3
3/3
3/3
0/0
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NOMINATION COMMITTEE ACTIVITIES
The key focus of the Committee during 2012 has
been succession planning and Board composition. In
particular, the Committee reviewed the constituents
of the Company’s senior management team, whether
further appointments were required to strengthen the
team and how best to provide appropriate training to
current members.
Following the retirement of Rajan Tandon at the
conclusion of the AGM and the resignation of Patrick
Spink in August 2012, the Committee considered Board
composition and the importance of refreshing Board
and committee membership. Egon Zehnder, a
professional search agency specialising in the
recruitment of high calibre non-executive directors, was
engaged to identify candidates with strong technical
or engineering or gas commercialisation expertise. As
a result of this process, Bill Schrader was appointed
to the Board in February 2013.
During its deliberations, the Committee also reviewed
the membership of all Board committees and made a
recommendation for minor changes to the Board for
approval. Egon Zehnder does not provide any other
services to the Company.
NOMINATION COMMITTEE EVALUATION
Before the year end, the Committee undertook a
questionnaire-based evaluation of itself which focused
on whether its terms of reference remained fit for
purpose. The outcome of the evaluation was that the
Committee did not believe that any changes to its terms
of reference were necessary at the present time.
However, as with the Audit Committee, the Nomination
Committee agreed that consideration should be given
to undertaking an externally facilitated evaluation of all
Board committees during 2013.
In order to adopt a more even allocation of Committee
membership among the independent non-executive
directors, the Board approved the appointment of
Ronald Blakely as a member of the Committee in place
of John Lander on 14 November 2012. No Committee
meetings were held following this change and prior
to the year end.
The Board considers all members of the Committee
who served during the year to be independent,
including the Chairman of the Board, who was
independent on appointment.
Further to his appointment as executive director in
February 2013, Dennis McShane stepped down from
his position as Chairman of the Committee, and was
replaced by Nicholas Smith. At the same time Lyndon
Powell was appointed to the Committee.
ROLE AND RESPONSIBILITIES OF
THE NOMINATION COMMITTEE
The full terms of reference of the Committee are
available on the Company’s website. In summary,
the Committee’s main responsibilities include to:
• regularly review the structure, size and composition
(including the skills, knowledge, experience and
diversity) of the Board and make recommendations
to the Board with regard to any changes;
• give full consideration to succession planning for
directors and other senior executives;
• ensure that on appointment to the Board, non-
executive directors receive a formal letter of
appointment setting out clearly what is expected of
them in terms of time commitment, Committee service
and involvement outside Board meetings and review
annually the time commitment required from the
Company’s non-executive directors;
• review the results of the Board performance evaluation
process that relate to the composition of the Board;
• review the membership of the Audit and Remuneration
Committees and any other Board committees as
appropriate, in consultation with the chairmen of
those committees; and
• consider the re-appointment of any non-executive
director at the conclusion of their specified term of
office, giving due regard to their performance and
ability to continue to contribute to the Board in the
light of the knowledge, skills and experience required.
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ANNUAL REPORT AND ACCOUNTS 2012 GOVERNANCE
REMUNERATION REPORT
INTRODUCTION FROM THE CHAIRMAN
OF THE REMUNERATION COMMITTEE
Dear Shareholder
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for 2012. As usual, we
will be seeking your approval of this report at our AGM
on 6 June 2013.
Performance and reward
As described in the Chairman’s and Chief Executive
Officer’s joint review, 2012 was another year of
significant progress at Ophir. Our success has come
in terms of successful drilling results in Tanzania and
Equatorial Guinea and in the acquisition of major
3D seismic data in a number of our key countries of
operation. All operations were conducted safely. These
activities result in our net risked prospective resources
growing to circa 900 million barrels of oil equivalent,
based on independent audits.
Against this background, the Remuneration Committee
(the Committee) considers the remuneration paid
to our management team to fairly reflect their
performance during the year. Ophir includes a broad
range of the Company’s KPIs in its annual bonus plan
and the Company delivered substantial progress
against each metric during the year in delivering the
strong performance noted above. As a result, annual
bonuses were paid at 89.33% of the maximum.
There were no long term incentive awards vesting
during the year in light of the relatively short period
since the Company listed on the FTSE All-Share Index
(November 2011).
Remuneration policy for 2013
In line with the Company’s policy, remuneration for
executive directors is generally weighted towards
variable pay, with fixed pay set below comparable
median benchmarks.
Since the Company operates in a sector where
investment decisions have multi-year impacts, the
majority of variable pay is weighted towards long term
share-based incentives which operate in tandem with
minimum share ownership guidelines. This structure
ensures that clear alignment is achieved between
executives and shareholders.
For 2013, the Committee approved modest increases
in basic salary of 3.5% with effect from 1 January 2013
for the executive directors. This increase was also
consistent with the typical salary budget operated
for the Group as a whole.
With the exception of introducing clawback provisions
into the Company’s incentive plans for executive
directors for 2013, there are no changes to our annual
bonus or our long term incentive policies for 2013
(either in terms of quantum or structure). Full details
of these are set out on pages 61 to 63. Clawback
provisions have been introduced in response to
developments in best practice.
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Risk
The Committee undertakes a careful review of its
remuneration policy annually to ensure that it is
consistent with the business strategy and does not,
as an unintended consequence, encourage or reward
inappropriate risk-taking by the executives. The
Committee is comfortable that the current structure,
weighted towards long-term variable pay, and operating
with share ownership guidelines and clawback provisions,
does not inadvertently encourage undue risk taking.
Voting at the 2012 AGM
As required by the regulations, the Directors’
Remuneration Report for 2011 was put to shareholders
for an advisory vote at the 2012 AGM. The report was
approved by 87.61% of those shareholders who voted
(being 76.87% of the total issued capital as at the date
of the AGM).
In addition, the Exceptional Long-Term Incentive Award
granted to the Chief Executive Officer during the year
under review, was also the subject of shareholder vote
at our 2012 AGM. The binding vote was approved by
81.21% of those shareholders who voted (being 78.78%
of the total issued capital as at the date of the AGM).
These results followed extensive discussion with
a number of our major shareholders and I remain
committed to continuing engagement with
shareholders as our remuneration policy develops.
UK legislative changes
In June 2012, the Department for Business, Innovation
& Skills (BIS) published the draft legislation in relation
to directors’ remuneration reporting regulations. The
final regulations are expected to be published in July
2013 and will change the way in which all companies,
including Ophir, are required to report and make
decisions in respect of executive directors’
remuneration. The revised reporting requirements
are anticipated to apply to Ophir for the financial year
commencing on 1 January 2014.
In order to provide for a smooth transition towards the
first year of mandatory disclosure, and in order to
comply as much as possible with current best practice
reporting amongst FTSE 350 companies, the Company
has elected to present the Directors’ Remuneration
Report for 2012 in two sections: a forward looking
Remuneration Policy Report and backward looking
Remuneration Implementation Report. However, the
overall report will remain subject to a single advisory
vote, in line with current legislation, at the 2013 AGM
and the ‘Remuneration Policy Report’ section will
not be put to a binding vote at this stage.
Finally, reflecting the current legislative requirements,
this report continues to satisfy the reporting
requirements of the Companies Act 2006 and
Schedule 8 of the Large and Medium sized Companies
and Groups (Accounts and Reports) Regulations 2008.
JOHN LANDER
Remuneration Committee Chairman
4 March 2013
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PART A: UNAUDITED INFORMATION
REMUNERATION POLICY REPORT
A key element of the Company’s remuneration policy
is to achieve a level of remuneration which will attract,
motivate and retain executives of the highest calibre.
The Company operates in a sector where investment
decisions have multi-year impacts. For this reason the
Committee has elected to adopt an executive
remuneration policy which is structured so that a
significant proportion is made up of long term share-
based incentives.
The Committee has elected to retain the basic level of
pay, benefits and pension contributions for executive
directors at or below the average benchmark industry
levels, and to more adequately reward the Directors if
they meet or exceed the targets set under the variable
components of their remuneration packages. The
effect of this approach is to ensure that executive
management are neither encouraged to undertake,
nor rewarded, for inappropriate risk-taking and their
interests are more closely aligned with those of the
Company’s shareholders.
The remuneration structure for executive directors
is made up of two elements: fixed remuneration
(consisting of base salary, benefits (including non-
contributory health insurance and life assurance) and
pension contributions) and variable remuneration
(annual bonus scheme and long term share incentives).
New Board appointments
Base salary levels will be set to reflect the experience
of the individual, appropriate market data and internal
relativities but with a view to operating within the
Company’s overall policy framework. If it is considered
appropriate to appoint a new director on a below
market salary, they may be the subject of a series
of increases to a desired salary positioning over an
appropriate timeframe (e.g. 2 to 3 years) subject
to performance in post.
Normal policy will be for the new director to participate
in the remuneration structure detailed above. The
Committee may also grant a share option award to a
newly appointed executive director to assist facilitating
his recruitment under the Company’s 2006 share
option scheme.
Should it be the case that the Committee considered it
necessary to buyout incentive pay which an individual
would forfeit on leaving their current employer, such
compensation, where possible, would be structured
so that the terms of the buy-out mirrored the form and
structure of the remuneration being replaced (e.g.
vested share awards may be replaced with shares in
Ophir while recently granted long term incentive awards
may be replaced with an exceptional performance
related LTIP award or share option award).
Base salary
Base salaries are reviewed annually. New Bridge Street
periodically provides the Committee with benchmark
data for review. After considering the performance of
the executives and the Company as a whole over the
year, an increase of 3.5% to the basic salary of executive
directors was agreed, effective from 1 January 2013.
As for the prior year, the increase is in line with the
cost of living index and comparable to that provided
to Group employees.
With effect from 1 January 2013 the basic salaries for
the executive directors will therefore be: Nick Cooper
– £407,530 and Jonathan Taylor – £380,363.
Pension and other benefits
Executive directors are also provided with the following
benefits: (i) Company pension superannuation
contributions of the greater of the statutory minimum
or 11% of basic salary paid into their personal pension
arrangements; (ii) eligibility to participate in any share
option scheme for employees; (iii) permanent health
insurance; (iv) private health insurance (including
spouse and children); (v) life assurance; (vi) medical
evacuation insurance; (vii) 25 days’ paid holiday in
addition to British bank and other public holidays;
and (viii) six consecutive months’ paid sick leave in
any 12-month period.
Annual bonus
The annual bonus plan has been designed to provide
reward for above average performance. The
performance targets for the bonus plan, linked to
agreed key performance indicators (KPI), are reviewed
by the Committee annually.
In relation to performance-related annual bonuses for
the year ending 31 December 2013, the Committee has
set KPI targets relating to the following measures:
Measure
Health, safety and
environmental
performance/corporate
social responsibility
Personal performance
Increase in Reserves
and Resources
Financial Planning
and Control
Portfolio Management/
new business
As a percentage of maximum
bonus opportunity*
30%
30%
30%
30%
30%
*
The Committee retains discretion to reduce the total bonus payment
to executive directors in the event of a serious HSE incident or series
of incidents.
The maximum annual bonus opportunity for executive
directors is 150% of basic salary. No bonus is payable
for below target performance, with bonuses earned on
a sliding scale (where appropriate) based on the
Committee’s assessment of achievement against
the targets set.
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ANNUAL REPORT AND ACCOUNTS 2012
GOVERNANCE
REMUNERATION REPORT CONTINUED
Long term incentives
Details of long term incentives held by the executive
directors in post during the year under review are shown
in the table on page 71. No executive directors exercised
any share options during the year (2011: Nil).
2006 Share Option Plan
As previously advised, the Company’s 2006 Share
Option Plan (2006 Plan) is no longer being used as
a principal feature of the Company’s remuneration
arrangements. In order to retain flexibility when
considering the remuneration arrangements for senior
executive management, the Committee has retained the
2006 Plan for use on an exceptional basis only (e.g. to
facilitate a senior recruitment). No awards under the
2006 Plan were made to the executive directors during
the year ended 31 December 2012.
Long-Term Incentive Plan 2011
The Company operates a Long Term Incentive Plan
(LTIP) under which conditional awards or nominal cost
options may be granted linked to the long term
performance of the Group. The maximum value of
shares that can be granted to any participant is 200%
of salary each year, although awards can be made up
to 300% of salary in exceptional circumstances.
Awards in 2013 (and subsequent years) will be
determined using the weighted average share price
for the period from 15 November to 14 February. This
policy employs the same averaging period as per 2012
(three months to smooth short term fluctuations) but
establishes a new policy that will take the average up
to the time that the Committee normally approves the
individual LTIP allocations (i.e. its February meeting).
This is considered to result in the number of shares
comprising individual awards better reflecting the
information presented to the Committee at the time of
approving the awards in principle. Awards will continue
to be granted as soon as the preliminary results are
announced (or later if a close period continues to apply
as of that date). The normal LTIP performance period
would remain as three calendar years beginning on
1 January of the year of grant and ending on
31 December of the third year.
Awards vest on a straight line basis relative to the
Company’s total shareholder return (TSR) performance
over a three year period compared to a comparator
group set on grant. No vesting occurs for below median
performance. At median 25% of the award vests,
with full vesting at the upper quartile. In addition, the
Committee may reduce the number of shares in respect
of which an award would otherwise vest based upon
TSR performance if it considers that the TSR achieved
over the three year period does not reflect the
underlying financial performance of the Company
or that key operational metrics have not been met.
The Committee has also confirmed that relative TSR
performance remains the most appropriate metric for
use by the Company in relation to LTIP awards. The
constituents of the comparator group were reviewed
during the year and, for the 2013 award, Petroceltic
International plc replaced Melrose Resources plc
following their merger. The constituents of the LTIP
comparator group are therefore:
Afren plc
Bowleven plc
Cairn Energy plc
Chariot Oil & Gas Limited
Cobalt International
Energy, Inc.
Kosmos Energy Ltd
EnQuest plc
Essar Energy plc
Faroe Petroleum plc
Genel Energy plc
Gulf Keystone
Petroleum Limited
Heritage Oil plc
JKX Oil & Gas plc
Maurel & Prom
Petroceltic International plc
Premier Oil plc
Rockhopper Exploration plc Salamander Energy plc
Soco International plc
Tullow Oil plc
For 2013, the Committee is also to introduce clawback
provisions that will enable the Committee to clawback
value overpaid in the event of a material misstatement
of the Company’s results within a two year period in
relation to the award.
Deferred Share Plan 2012
The Deferred Share Plan 2012 was approved by
shareholders at the 2012 AGM. It is intended to facilitate
the deferral of a portion of participants’ annual bonuses
into ordinary shares.
Awards under the Deferred Share Plan 2012 are on
broadly the same terms as the LTIP.
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WWW.OPHIR-ENERGY.COM Chief Executive Officer’s exceptional LTIP award
In June 2012, following consultation with the Company’s
major shareholders and their approval at the AGM, an
exceptional one-off award of ordinary shares (the
exceptional award) was granted to Nick Cooper under
the LTIP. The purpose of the exceptional award was
to put Nick Cooper in a position which would partially
replicate that of the Company’s founders and thereby
ensure that he remained motivated to continue
generating substantial returns to shareholders.
To ensure that the exceptional award, totalling 880,000
shares, encouraged Nick Cooper to generate
sustainable long term returns to shareholders, the award
was effectively split into three tranches which
will vest based on independent three year performance
periods for which relative TSR and/or absolute TSR
targets are intended to apply, as follows:
Performance
period
Performance
conditions
Award
Tranche
Tranche 1
Tranche 2
Size of
award
240,000
shares
320,000
shares
19.06.2012-
18.06.2015
19.06.2013-
18.06.2016
Tranche 3
320,000
shares
19.06.2014-
18.06.2017
Absolute TSR
50:50 relative
TSR: absolute
TSR
50:50 relative
TSR: absolute
TSR
For Tranche 1, the absolute TSR performance condition
will be based on the 90 day average share price ending
on the last day of the relevant performance period. 25%
of the award will vest at 20% compound annual growth
rate (CAGR) above £4.95 (£8.55 at the end of the three
year period) with full vesting at 35% CAGR (£12.18).
Straight line vesting takes place between performance
points. In setting these targets, the Committee
considered Ophir’s cost of capital and the expectations
of investors. This award was granted in addition to an
award under the LTIP in 2012 (see page 71) so that his
aggregate incentive incorporated both a relative TSR
and absolute TSR performance target. Both awards
formed part of the 2012 consultation with shareholders
prior to the AGM.
For Tranche 2, the same relative TSR performance
target as described for the 2013 LTIP awards above will
apply to half of the shares comprising Tranche 2 (with
the performance period running from 19 June 2013 to
18 June 2016) with the remaining half subject to absolute
TSR targets that require the same compound annual
growth rates as detailed above for Tranche 1.
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For Tranche 3, the same broad outline of performance
targets is anticipated to apply with the Committee to
review the composition of the TSR comparator group
prior to the start of the performance period to ensure
it remains fit for purpose and companies may be
removed, replaced or added as the Committee thinks
appropriate. The Committee will also consider whether
it remains appropriate to apply the same CAGR targets
of 20%-35% before start of Tranche 3’s performance
period. Shareholders will be consulted in the event that
the Committee considers that any material changes
are necessary to Tranche 3’s performance conditions.
For each of the above tranches, the extent of vesting
based on the TSR conditions may be reduced if the
vesting result is not considered a fair reflection of the
underlying financial performance of the Company
(which will also enable the Committee to take into
account the Company’s HSE performance).
The above award is also subject to clawback provisions
that will enable the Committee to clawback value
overpaid in the event of a material misstatement of
the Company’s results within a two year period.
Following the grant of the exceptional award, Nick
Cooper will not receive any further LTIP awards until 2015.
Share ownership guidelines
The Board has adopted share ownership guidelines
requiring all executive directors in post as at
31 December 2012 to hold ordinary shares equivalent
in value to 300% of their annual salary (the guidelines).
Until the required holding is achieved, the Chief Executive
Officer will be expected to retain 100% of shares resulting
from the exercise of share options granted to him or
shares received under the LTIP (net of any shares sold to
meet tax liabilities or exercise costs) while other executive
directors will be expected to retain 50% of shares.
Any executive director appointed after 31 December
2012 will be expected to hold ordinary shares equivalent
in value to 100% of their annual salary.
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REMUNERATION REPORT CONTINUED
The table below sets out the key elements of executive director pay as at 1 January:
Purpose and link to strategy
Operation
Opportunity
Performance Metric
Changes for 2013
Base salary
To provide the core reward for the role.
Reviewed annually and effective from 1 January.
Sufficient level to help recruit and retain employees.
Reflects role and experience of individual.
Decision influenced by:
• Role, experience and performance
• Average change in total workforce salary
• Total organisational salary budgets
Salaries are set by reference to companies of a similar size and complexity.
Continuing directors’ salaries are
None
eligible for review annually in line
with the Company’s policy.
The salaries for the executive
directors for 2012 were:
• Nick Cooper: £393,750
• Jonathan Taylor: £367,500
The Committee retains discretion
to grant greater increases following
promotion or mid-year changes in
responsibility or to new or recent
hires where the initial base salary
is significantly below
benchmarked salaries.
Benefits
To recruit and retain employees.
Pension
To provide long term savings via pension provision.
Annual Bonus
Directors are entitled to health insurance, life assurance, medical evacuation
insurance, holiday pay and sick leave.
n/a
n/a
The Company operates a defined contribution pension scheme or may contribute
directly into an executive director’s personal pension. Pension benefits are
accrued according to length of service up to retirement.
The executive directors receive a
n/a
Company contribution into their
personal pensions to the greater
of the statutory minimum and 11%
of salary.
To incentivise the execution of business strategy.
Targets are renewed annually and relate to the business as a whole.
The maximum award under the
The bonus is based on the achievement of a number of equally weighted business
Reflecting developments in
Rewards the achievement of annual financial and strategic business
targets and delivery of personal objectives.
Bonus level, payable in cash, is determined by the Committee following the end of
the financial year and is based on performance against targets.
annual bonus scheme is 150%
objectives, including:
of salary.
1. Health, safety and environmental performance/corporate social responsibility
Directors’ salaries will increase by
3.5% in 2013 in line with the pay
review for UK based employees
No change
No change
Long term Incentive Plan
To incentivise the achievement of business strategy over the
longer term.
The Company’s Long Term Incentive Plan (LTIP) was approved by shareholders
in 2011 and amended in 2012.
Awards are granted subject to challenging three year performance targets.
Chief Executive Officer Exceptional Long-Term Incentive Award
To motivate the Chief Executive Officer to continue generating
substantial returns to shareholders.
An exceptional one-off award of 880,000 shares was made to the Chief Executive
Officer on 19 June 2012.
Award structured to align the individual with the founders of Ophir
and reflect additional responsibilities applying to the Chief Executive
Officer following the 2012 Board restructuring.
The award has three separate tranches (Tranche 1: 240,000 shares, Tranche 2:
320,000 shares and Tranche 3: 320,000 shares).
The performance period for each tranche is three years.
Clawback provisions apply that will enable the Committee to clawback value
overpaid in the event of a material misstatement of the Company’s results within
a two year period.
Share ownership
To align the interests of directors with those of the
Company’s shareholders.
64
300% of salary holding required for executive directors in post as at 31 December
2012. Executive directors appointed after this date to hold 100% of salary.
The Chief Executive Officer is required to retain 100% of the vested or exercised
shares (net of tax) until the shareholding guideline is met. Any other executive
director is required to retain 50% of the vested or exercised shares (net of tax)
until the shareholding guideline is met.
2. Personal objectives
3. Reserves and Resources
4. Finance
5. Portfolio Management/new business
The Committee retains discretion to reduce the bonus payment in the event of
a serious HSE incident or series of incidents.
institutional investors’ best practice,
clawback provisions will apply to the
2013 annual bonus that will enable
the Committee to clawback value
overpaid in the event of a material
misstatement of the Company’s
results within a two year period.
The maximum annual award is
200% of salary although the
Committee is able to grant an
award of up to 300% in
exceptional circumstances.
grant.
Awards vest based on the Company’s total shareholder return (TSR) performance
The Chief Executive Officer will not
over a three year performance period compared to a comparator group set on
receive an LTIP award in 2013 as a
25% of the award vests at median, rising on a straight line basis to 100% for upper
quartile performance. No vesting occurs for below median performance.
An underpin applies that enables the TSR vesting result to be scaled back if the
vesting result is not consistent with underlying financial performance and/or key
operational financial metrics have not been achieved.
result of his Exceptional Long-Term
Incentive Award granted in 2012.
Clawback provisions will also apply
for awards granted in 2013 which
broadly mirror the clawback
provisions for the annual
bonus above.
The three tranches comprising the
Tranche 1 is subject to an absolute TSR performance condition which will require
No change
award vest independently in 2015,
compound TSR growth of at least 20% p.a. (from a share price of £4.95) for 25%
2016 and 2017.
to vest through to 35% p.a. TSR growth for full vesting. Performance is measured
from 19 June 2012 to 18 June 2015.
An underpin applies that enables the TSR vesting result to be scaled back if the
vesting result is not consistent with underlying financial performance and/or key
operational financial metrics have not been achieved.
Tranche 2 is subject to an equal split of relative TSR (as above for the LTIP) and
absolute TSR performance (as above for Tranche 1). Performance is measured
from 19 June 2013 to 18 June 2016.
It is intended that Tranche 3 will operate based on the same conditions.
Performance will be measured from 19 June 2014 to 18 June 2017. This target will
be subject to review prior to becoming effective with any changes subject to
dialogue with shareholders.
Tranches 2 and 3 will operate subject to the same underpin as Tranche 1.
n/a
n/a
No change
WWW.OPHIR-ENERGY.COM The table below sets out the key elements of executive director pay as at 1 January:
To provide the core reward for the role.
Reviewed annually and effective from 1 January.
Base salary
Sufficient level to help recruit and retain employees.
Reflects role and experience of individual.
Decision influenced by:
• Role, experience and performance
• Average change in total workforce salary
• Total organisational salary budgets
Salaries are set by reference to companies of a similar size and complexity.
Purpose and link to strategy
Operation
Opportunity
Performance Metric
Changes for 2013
Continuing directors’ salaries are
eligible for review annually in line
with the Company’s policy.
None
The salaries for the executive
directors for 2012 were:
• Nick Cooper: £393,750
• Jonathan Taylor: £367,500
The Committee retains discretion
to grant greater increases following
promotion or mid-year changes in
responsibility or to new or recent
hires where the initial base salary
is significantly below
benchmarked salaries.
To recruit and retain employees.
Directors are entitled to health insurance, life assurance, medical evacuation
n/a
insurance, holiday pay and sick leave.
To provide long term savings via pension provision.
The Company operates a defined contribution pension scheme or may contribute
directly into an executive director’s personal pension. Pension benefits are
accrued according to length of service up to retirement.
The executive directors receive a
Company contribution into their
personal pensions to the greater
of the statutory minimum and 11%
of salary.
n/a
n/a
Benefits
Pension
Annual Bonus
To incentivise the execution of business strategy.
Targets are renewed annually and relate to the business as a whole.
Rewards the achievement of annual financial and strategic business
Bonus level, payable in cash, is determined by the Committee following the end of
targets and delivery of personal objectives.
the financial year and is based on performance against targets.
The maximum award under the
annual bonus scheme is 150%
of salary.
The bonus is based on the achievement of a number of equally weighted business
objectives, including:
1. Health, safety and environmental performance/corporate social responsibility
2. Personal objectives
3. Reserves and Resources
4. Finance
5. Portfolio Management/new business
The Committee retains discretion to reduce the bonus payment in the event of
a serious HSE incident or series of incidents.
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Directors’ salaries will increase by
3.5% in 2013 in line with the pay
review for UK based employees
No change
No change
Reflecting developments in
institutional investors’ best practice,
clawback provisions will apply to the
2013 annual bonus that will enable
the Committee to clawback value
overpaid in the event of a material
misstatement of the Company’s
results within a two year period.
Long term Incentive Plan
To incentivise the achievement of business strategy over the
The Company’s Long Term Incentive Plan (LTIP) was approved by shareholders
longer term.
in 2011 and amended in 2012.
Awards are granted subject to challenging three year performance targets.
Chief Executive Officer Exceptional Long-Term Incentive Award
To motivate the Chief Executive Officer to continue generating
An exceptional one-off award of 880,000 shares was made to the Chief Executive
substantial returns to shareholders.
Officer on 19 June 2012.
Award structured to align the individual with the founders of Ophir
The award has three separate tranches (Tranche 1: 240,000 shares, Tranche 2:
and reflect additional responsibilities applying to the Chief Executive
320,000 shares and Tranche 3: 320,000 shares).
Officer following the 2012 Board restructuring.
The performance period for each tranche is three years.
Clawback provisions apply that will enable the Committee to clawback value
overpaid in the event of a material misstatement of the Company’s results within
a two year period.
Share ownership
To align the interests of directors with those of the
Company’s shareholders.
300% of salary holding required for executive directors in post as at 31 December
2012. Executive directors appointed after this date to hold 100% of salary.
The Chief Executive Officer is required to retain 100% of the vested or exercised
shares (net of tax) until the shareholding guideline is met. Any other executive
director is required to retain 50% of the vested or exercised shares (net of tax)
until the shareholding guideline is met.
The maximum annual award is
200% of salary although the
Committee is able to grant an
award of up to 300% in
exceptional circumstances.
Awards vest based on the Company’s total shareholder return (TSR) performance
over a three year performance period compared to a comparator group set on
grant.
25% of the award vests at median, rising on a straight line basis to 100% for upper
quartile performance. No vesting occurs for below median performance.
An underpin applies that enables the TSR vesting result to be scaled back if the
vesting result is not consistent with underlying financial performance and/or key
operational financial metrics have not been achieved.
The Chief Executive Officer will not
receive an LTIP award in 2013 as a
result of his Exceptional Long-Term
Incentive Award granted in 2012.
Clawback provisions will also apply
for awards granted in 2013 which
broadly mirror the clawback
provisions for the annual
bonus above.
The three tranches comprising the
award vest independently in 2015,
2016 and 2017.
No change
Tranche 1 is subject to an absolute TSR performance condition which will require
compound TSR growth of at least 20% p.a. (from a share price of £4.95) for 25%
to vest through to 35% p.a. TSR growth for full vesting. Performance is measured
from 19 June 2012 to 18 June 2015.
An underpin applies that enables the TSR vesting result to be scaled back if the
vesting result is not consistent with underlying financial performance and/or key
operational financial metrics have not been achieved.
Tranche 2 is subject to an equal split of relative TSR (as above for the LTIP) and
absolute TSR performance (as above for Tranche 1). Performance is measured
from 19 June 2013 to 18 June 2016.
It is intended that Tranche 3 will operate based on the same conditions.
Performance will be measured from 19 June 2014 to 18 June 2017. This target will
be subject to review prior to becoming effective with any changes subject to
dialogue with shareholders.
Tranches 2 and 3 will operate subject to the same underpin as Tranche 1.
n/a
n/a
No change
65
ANNUAL REPORT AND ACCOUNTS 2012 GOVERNANCE
REMUNERATION REPORT CONTINUED
Overall approach to reward
When setting the remuneration policy for executive
directors, the Committee takes into account the pay
and employment conditions for other employees in the
Group. This process ensures that any increase to the
basic pay of executive directors is not out of proportion
with that proposed for other employees.
Performance graphs
The following graph shows the Company’s TSR
performance since trading of the Company’s shares
began on the London Stock Exchange on 13 July 2011
against the group of companies used as the TSR
comparator group for the 2012 LTIP awards. The graph
also shows the Company’s TSR performance since
trading of the Company’s shares began on the London
Stock Exchange on 13 July 2011 against the FTSE 250,
the broad equity index of which Ophir is a constituent.
Total shareholder return
Source: Thomson Reuters
250
200
150
100
50
0
13 Jul 2011
Ophir
31 Dec 2011
FTSE 250
LTIP TSR Comparator Group
(Average)
31 Dec 2012
This graph shows the value, by 31 December 2012,
of £100 invested in Ophir Energy plc on 13 July 2011
(the date of listing on the London Stock Exchange)
compared with the value of £100 invested in the
FTSE 250 Index and the LTIP TSR Comparator
Group companies.
EXECUTIVE DIRECTORS: SERVICE CONTRACTS
AND REMUNERATION
Nick Cooper and Jonathan Taylor have rolling term
service agreements with the Company. The Company
may terminate either executive director’s employment
by giving not less than 12 months’ written notice and
Jonathan Taylor may terminate his employment by
giving not less than six months’ written notice. Nick
Cooper may terminate his employment by giving
not less than 12 months’ written notice.
Up to the date of his departure from the Company, Alan
Stein had a rolling term employment contract with the
Company and Ophir Services Pty Limited, a subsidiary
of the Company. Ophir Services was entitled to
terminate Dr Stein’s employment by giving not less than
12 months’ written notice and Alan Stein was entitled
to terminate his employment by giving not less than six
months’ written notice.
The service contracts each contain a payment in lieu
of notice provision together with a provision enabling
the relevant employer to put the executive director on
garden leave for up to six months at any time after
notice to terminate the service contract has been given
by the executive director or the relevant employer or
the executive director has resigned without giving due
notice and the relevant employer has not accepted the
resignation. Any payment in lieu of notice is limited to
basic salary.
The service contracts of Nick Cooper and Jonathan
Taylor provide that if within three months of a change of
control of the Company, the relevant employer and the
executive director have failed to agree new terms and
conditions of employment, then the relevant employer
shall be deemed to have terminated the service contract
immediately and the executive director will be entitled
to be paid 12 months’ basic salary. A similar clause was
contained within the service contract of Alan Stein
prior to his leaving employment on 19 June 2012. The
executive directors will not be entitled to any other
payment or notice or payment in lieu of notice in
addition to this change of control payment. The
inclusion of such provision on a change of control is
now considered a legacy issue by the Committee with
executives in post prior to the IPO having consistent
provisions in this regard. Such provisions will not form
part of future contracts for executive directors, in
accordance with best practice.
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A summary of the terms of the service contracts of
executive directors in position as at 31 December 2012
is set out below:
Name
Continuous
employment
Contract
date
Notice by
Company
Notice by
Executive
Nicholas
Cooper
1 June
2011
20 March
2012
12
months
12
months
Jonathan
Taylor
1 June
2004
16 October
2007
12
months
6
months
Copies of the service agreements for executive
directors, together with the letters of appointment for
the non-executive directors detailed below, are available
for inspection during normal business hours at the
Company’s registered office.
External appointments
With the prior permission of the Board, executive
directors are permitted to accept external directorships
and to retain any fees payable in respect of those roles.
Neither Nick Cooper nor Jonathan Taylor held any such
directorship during the year under review. Alan Stein
serves as Chairman of Neon Energy Limited, an
unrelated entity listed on the Australian Stock Exchange.
For the period to 19 June 2012, being the date on which
Alan Stein resigned as a director of the Company, he
received remuneration of US$28,918 in relation to this
appointment (2011 (full year): US$53,248).
NON-EXECUTIVE DIRECTORS: LETTERS OF APPOINTMENT
AND FEES
Each independent non-executive director during the
year, and to the date of this report being Nicholas Smith,
Ronald Blakely, John Lander, Dennis McShane (until
18 February 2013), Bill Schrader (from 18 February 2013)
and Lyndon Powell, has a letter of appointment from the
Company. The letters of appointment do not specifically
provide for terms of appointment, termination
notification periods or entitlement to payment on
termination, however there is an expectation that all
independent directors will serve for an initial three year
term. The Company may terminate the appointment
under each letter of appointment if the independent
non-executive director has committed a serious or
repeated breach or non-observance of his obligations
to the Company.
Prior to his resignation on 6 August 2012, Patrick Spink’s
letter of appointment as an independent non-executive
director of the Company contained the same terms as
above. Patrick Spink did not receive any payment on the
termination of his appointment.
The fees for the Company’s chairman and independent
non-executive directors are determined by the Board
as a whole (with the relevant individuals absenting
themselves from discussions relating directly to their
own remuneration). The Board’s policy in relation to
the fee payable to the Chairman is that it should be
comparable to the median fee payable for non-
executive chairmen of companies of a comparable size
and complexity. Remuneration paid to independent
non-executive directors is set at a level to attract
persons with the necessary experience and ability
to make a significant contribution to the Company’s
operations. Remuneration levels are agreed based
on external advice and give consideration to the time
commitment and responsibilities of the role.
Following a review of the fee payable to the Company’s
chairman and its independent non-executive directors
no increase has been proposed to the basic fee for 2013.
As a result, the fees payable to the Chairman and the
independent non-executive directors for 2012, and
proposed for 2013, are:
Chairman’s fee
£140,000 per annum
Non-executive director basic fee
£70,000 per annum
Committee chairmanship fee
£5,000 per annum
An additional one-off fee of £10,000 was paid to John
Lander in relation to the exceptional time commitment
required for chairing and preparing papers for the high
number of Committee meetings held in the year under
review. This additional commitment was, in part,
effected by Ophir’s transition to the Official List. The
Committee expects to hold a smaller number of
meetings during 2013 and beyond and the exceptional
time commitment required from the Committee
chairman in 2012 is not expected to recur.
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ANNUAL REPORT AND ACCOUNTS 2012 ROLE AND RESPONSIBILITIES OF THE
REMUNERATION COMMITTEE
The role of the Committee is to determine the
remuneration policy of the Company in order to
facilitate the recruitment, retention and motivation
the executive directors and key senior management.
The policy is reviewed at least annually in order to
ensure that it is consistent with business strategy.
The Committee also monitors the overall remuneration
structure across the Group to ensure that a balanced
approach is adopted in relation to all employees. The
Committee’s full terms of reference, which are reviewed
annually, are available on the Company’s website.
ADVISER TO THE COMMITTEE
New Bridge Street, an Aon Hewitt company, was
appointed as independent consultants to the
Committee in relation to advice on remuneration and
share incentives both for Executive directors and the
wider senior executive management population in
September 2011. New Bridge Street provides services to
the Company on a “called on” rather than retained basis.
New Bridge Street is a member of the Remuneration
Consultants Group and complies with its code of
conduct. Details of the terms of engagement for
New Bridge Street are available on request from the
Company Secretary. Neither New Bridge Street, nor any
other Aon Hewitt company, provide other services to
the Company.
GOVERNANCE
REMUNERATION REPORT CONTINUED
Prior to his retirement from the Board on 19 June 2012,
Rajan Tandon held office as a non-executive director by
virtue of a relationship agreement between the Mittal
Group and the Company. Neither Rajan Tandon nor the
Mittal Group received any remuneration in respect of
Rajan Tandon’s services as a director nor was he entitled
to any payment on the termination of his services.
The Chairman and non-executive directors are not
entitled to participate in the Company’s executive
remuneration programmes or pension arrangements.
During the year, the Company did not issue options to
any of the non-executive directors nor to any entity in
which they are deemed to be interested.
REMUNERATION IMPLEMENTATION REPORT
REMUNERATION COMMITTEE
MEMBERSHIP AND ATTENDANCE
The members of the Remuneration Committee during
the year ended 31 December 2012, together with details
of their individual attendance at Committee meetings
held during the year, are set out below:
Committee Member
John Lander, Committee Chairman
Ronald Blakely
Dennis McShane
Lyndon Powell
Nicholas Smith
Meeting
Attendance
10/10
2/2
10/10
10/10
10/10
Ronald Blakely was appointed to the Committee on
19 June 2012 and has attended every subsequent
meeting. Members of the Committee are appointed by
the Board and all of its members are considered to be
independent. The Chairman of the Company, Nicholas
Smith, who is a member of the Committee, was
independent on appointment.
The Chief Executive Officer and advisors to the
Committee may also be invited to attend meetings
as necessary. During the year, the Chief Executive
Officer, General Counsel and representatives from
New Bridge Street, Eversheds LLP and Prism Cosec
attended meetings and provided guidance and advice
as necessary.
Executive directors and other attendees are not entitled
to vote on any matter put before the Committee and
do not participate in any discussion relating to their
own remuneration or remit.
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PART B: AUDITED INFORMATION
DIRECTORS’ FEES AND EMOLUMENTS
The salaries, fees and benefits paid to the executive and non-executive directors for the year ended 31 December
2012 are detailed below:
Director
US$’000
Base Salary/
Fees
Bonus
Pension
Termination
Payments
Other
Benefits
Total
2012
Total
2011
Executive directors
Nick Cooper2
Jonathan Taylor2
Chairman and
Non-executive
directors
Nicholas Smith
Ronald Blakely3
John Lander4
Dennis McShane
Lyndon Powell
Former directors
Alan Stein6
Patrick Spink
Rajan Tandon
624
582
222
122
135
119
119
477
76
–
413
749
–
–
–
–
–
1,192
–
–
69
64
–
–
–
–
–
13
–
–
–
–
–
–
–
–
–
992
–
–
8
–
–
–
–
–
–
–
–
–
1,113
1,395
222
122
135
119
119
3821
990
177
52
104
1265
104
2,674
1,249
76
–
52
–
1 Prior year emoluments reflect the fact that Nick Cooper was only appointed as Chief Executive Officer and as a director of the Company on
1 June 2011.
2 Subsequent to the year end, Nick Cooper and Jonathan Taylor were awarded annual bonuses of £527,625 and £492,450 respectively,
in relation to 2012.
Includes US$2,900 Audit Committee chairmanship fee for 2011 paid during the year.
Includes a one-off fee of US$15,848 in relation to the exceptional time commitment provided in 2012.
3
4
5 Prior year included a one-off fee of US$22,187 in relation to additional duties undertaken during the reconstitution of the Board.
6 Following the 2012 AGM, at which he did not stand for re-election, Alan Stein’s service agreement with the Company terminated.
The payments received in 2012 by Alan Stein therefore, included:
– his base salary and pension for his period of employment through to 19 June 2012 of US$490,000;
– Payment in lieu of notice, to which he was entitled under the terms of his contract on termination of his employment, equal in value
to 12 months’ base salary plus accrued leave (including long service payments) to the value of US$992,000;
– Annual bonus payments of US$920,077 relating to performance in the 2011 financial year and US$272,255 relating to performance in the 2010
financial year (where the bonus payments were spread over four quarterly instalments commencing in July 2011 and concluding in April 2012).
– Alan Stein did not receive any bonus payments for performance in 2012.
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ANNUAL REPORT AND ACCOUNTS 2012
The performance condition that applied to the LTIP
awards granted to the executive directors in 2012, was
as per the description for the 2013 award on page 62.
The sole difference between the 2012 LTIP awards
and those for 2013 was the inclusion of Petroceltic
International plc in place of Melrose Resources plc in
the TSR comparator group following their merger.
DIRECTORS’ INTERESTS IN SHARES
Ordinary Shareholdings
The beneficial interests of the Directors and relevant
persons in the ordinary shares of the Company as at
31 December 2012 are:
As at
1 January
2012
Acquisitions
Disposals
As at
31 December
2012
108,000
0
0 108,000
120,000
572
0
120,572
6,836,320
12,000
0
0
0 6,836,320
0
12,000
172,000
51,960
0 223,960
104,000
24,000
0
0
0 104,000
0
24,000
Director
Nicholas
Smith1
Nick
Cooper2
Jonathan
Taylor3
Ronald
Blakely4
John
Lander5
Dennis
McShane6
Lyndon
Powell
1 Nicholas Smith holds a beneficial interest in 108,000 ordinary shares.
The legal interest is held by Chase Nominees Limited.
2 Nick Cooper and members of his family hold a beneficial interest in
120,572 ordinary shares. The legal interests are held by Goldman
Sachs International and James Capel (Nominees) Limited.
Includes 101,080 ordinary shares Jonathan Taylor holds on trust for
his children.
3
4 Ronald Blakely and members of his family hold a beneficial
interest in 12,000 ordinary shares. The legal interest is held by
Hanover Nominees.
5 John Lander and members of his family hold a beneficial interest
in 223,960 ordinary shares. The legal interest is held by WB
Nominees Ltd.
6 Dennis McShane holds a beneficial interest in 104,000 ordinary
shares. The legal interest is held by Greenwood Nominees Limited.
There were no changes to the holdings disclosed above
between 31 December 2012 and 4 March 2013 being the
date of this report.
GOVERNANCE
REMUNERATION REPORT CONTINUED
BASIC SALARY
As reported in last year’s Directors’ Remuneration
Report, the Committee approved an increase of 5% to
the base salaries of executive directors for 2012. This
increase, which took into account personal performance,
Company performance, changes in responsibilities and
competitive market practices, reflected the general
increases made to other members of the senior
executive team and was in line with the cost of
living index.
DIRECTORS’ PENSION ARRANGEMENTS
Nick Cooper and Jonathan Taylor do not participate in a
Group pension scheme. The Company contributes the
greater of the statutory minimum or 11% of basic salary
into their personal pension arrangements. Where the
level of contribution is higher than that which is eligible
for tax relief, the excess can be converted into
additional salary.
ANNUAL BONUS PLAN
For 2012, the Committee set KPI targets for the
executive directors in respect of Health, Safety and
Environmental performance (including and reviewing
HSE incidents during the period); Leadership
performance (including succession planning);
an increase in Reserves and Resources (to be
independently verified); Finance (including
maintenance of ongoing funding requirements);
and Portfolio Management/new business (including
drilling campaigns and asset management). Following
consideration of each executive director’s performance
during the year, the Committee recommended, and the
Board approved, bonus payments equivalent to 134%
of basic salary (being 89.33% of the maximum bonus
payable). As a result, Nick Cooper and Jonathan Taylor
received bonus payments of £527,625 and £492,450
respectively for 2012.
LONG TERM INCENTIVE PLAN
The award levels granted to the executive directors
in the year under review (calculated based on the
three month average share price prior to the date of
grant) were:
• Chief Executive Officer: 300% of salary; and
• Executive director & founder (Jonathan Taylor): 200%
of salary.
The 300% of salary LTIP award to the Chief Executive
Officer was in excess of the normal 200% of salary LTIP
limit and was granted in light of the Company’s
exceptional performance since Nick Cooper’s
appointment (e.g. encompassing completion of an
equity placing of 30.5 million new ordinary shares,
continued drilling successes etc.). This award was
granted in tandem with the Chief Executive Officer’s
exceptional LTIP award (described on page 63), with
both awards considered to align the individual’s interests
with those of Ophir’s founders and to reflect the
additional responsibilities applying to the Chief Executive
Officer following the 2012 Board restructuring. As
previously noted, the exceptional award received
shareholder approval with 81.21% of the shareholders
voting at last year’s AGM supporting the arrangement.
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Directors’ options and share-based awards
Date
of Grant
Vesting
Date
Lapse
Date
Shares
under
Award at
1 January
2012
Shares
lapsed/
cancelled or
forfeited
Shares
under
Award at
31 December
2012
Shares
Awarded
Exercise
Price
(pence)
Director
and Scheme
NICK COOPER
Share Option
Plan 2006
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
01/06/2011 01/06/2013 31/05/2021
500,000
01/06/20111 01/06/2013 31/05/2014
534,233
01/06/20113 01/06/2014 31/05/2015
150,000
01/06/20113 01/06/2014 31/05/2015
214,286
22/11/20113 01/06/2014 31/05/2015
85,714
–
–
–
–
–
13/04/20122
13/04/2015 12/04/2016
19/06/20124
19/06/2015 18/06/2016
19/06/20124
19/06/2016 18/06/2017
19/06/20124
19/06/2017 18/06/2018
–
–
–
–
322,737
240,000
320,000
320,000
JONATHAN TAYLOR
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
ALAN STEIN
Long Term
Incentive Plan
Long Term
Incentive Plan
26/05/20113 26/05/2014 25/05/2015
200,000
22/11/20113 26/05/2014 25/05/2015
121,220
–
–
13/04/20122
13/04/2015 12/04/2016
–
200,814
26/05/20113 26/05/2014 25/05/2015
321,220
–
13/04/20125 26/05/2014 25/05/2015
–
128,487
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–
–
–
–
–
–
–
–
–
–
–
–
–
–
500,000
250.00
534,233
0.00
150,000
0.00
214,286
0.00
85,714
0.00
322,737
0.00
240,000
0.00
320,000
0.00
320,000
0.00
200,000
0.00
121,220
0.00
200,814
0.00
321,220
0.00
128,487
0.00
The table below shows the various share awards held by executive directors under the Company’s incentive
schemes as at 31 December 2012:
1 The award of 534,233 nil-cost options to Nick Cooper under the LTIP is not subject to any performance conditions as it was granted to
compensate him for the fact that awards over shares in his previous employer lapsed when he joined the Company.
2 Details of the performance condition for the 2012 LTIP award are set out on page 62.
3 The performance condition for the LTIP awards granted on 26 May 2011, 1 June 2011 (with the exception to that detailed in (1) above) and
Alan Stein’s award on 13 April 2012 are identical to that of the 2012 LTIP award other than in respect of some constituents of the TSR
comparator group.
Details of the performance condition for the Chief Executive Officer’s special LTIP award are set out on page 63.
4
5 As disclosed in last year’s remuneration report, Alan Stein received an award in 2012 to reflect the difference between the assumed price at the
time of grant prior to the IPO on 26 May 2011 and the actual share price on grant of £2.50 per share. This award topped up his 2011 annual grant
and similar treatment was applied to all other LTIP participants, who received their equivalent awards in November 2011 with all top-up awards
subject to the same performance period and criteria. In light of the announcement of his departure from the Company, Alan Stein did not receive
a normal annual LTIP grant in 2012. Pursuant to the rules of the LTIP, the Remuneration Committee determined Mr Stein to be a good leaver in
respect of his outstanding LTIP awards. As a result his awards became eligible to vest in full, subject to the application of performance targets, in
line with the discretion afforded to the Committee under the LTIP rules.
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GOVERNANCE
REMUNERATION REPORT CONTINUED
6 Share ownership guidelines
Details of the guidelines adopted by the Committee are
set out on page 63. Taking into account the information
set out on page 70, the holdings of the executive
directors in the ordinary shares of the Company as at
31 December 2012 are shown in the table below:
Director
Basic Salary
(at 31 December
2012)
Ordinary
Shares
Nick Cooper
£393,750
120,572
%
salary
held
153%
Jonathan
Taylor
£367,500
6,836,320
over 300%
Mid-market share prices
The Company’s mid-market share price at the close of
business on 31 December 2012 was 504.5 pence. The
highest and lowest mid-market share prices during the
year ended 31 December 2012 were 641.0 pence and
291.5 pence respectively. No share based awards held
by executive directors vested, were exercised or lapsed
during the year.
By Order of the Board
JOHN LANDER
Chairman of the Remuneration Committee
4 March 2013
72
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RESPONSIBILITY STATEMENT OF
THE DIRECTORS IN RESPECT OF THE
ANNUAL REPORT AND ACCOUNTS
I confirm on behalf of the Board that to the best of
their knowledge:
• The financial statements, prepared in accordance with
International Financial Reporting Standards as adopted
by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit and loss
of the Company and the undertakings included in the
consolidation taken as a whole; and
• The Directors’ Report and the Group Operating
and Financial review include a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
Approved by the Board and signed on their behalf
on 4 March 2013
NICK COOPER
Chief Executive Officer
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RELATION TO THE GROUP FINANCIAL
STATEMENTS AND ANNUAL REPORT
The Directors are responsible for preparing the Annual
Report and the Group financial statements in accordance
with applicable United Kingdom law and regulations.
Company law requires the Directors to prepare Group
financial statements for each financial year. Under that
law, the Directors are required to prepare Group
financial statements under IFRSs as adopted by
the European Union.
Under Company Law the Directors must not approve
the Group financial statements unless they are satisfied
that they give a true and fair view of the state of affairs
of the Group and of the profit or loss of the Group for
that period. In preparing the Group financial statements
the Directors are required to:
– Present fairly the financial position, financial
performance and cash flows of the Group;
– select suitable accounting policies in accordance with
IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors and then apply them consistently;
– present information, including accounting policies, in
a manner that provides relevant, reliable, comparable
and understandable information;
– make judgements that are reasonable;
– provide additional disclosures when compliance with
the specific requirements in IFRSs as adopted by the
European Union is insufficient to enable users to
understand the impact of particular transactions,
other events and conditions on the Group’s financial
position and financial performance; and
– state whether the Group financial statements
have been prepared in accordance with IFRSs as
adopted by the European Union, subject to any
material departures disclosed and explained in the
financial statements.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group
and enable them to ensure that the Group financial
statements comply with the Companies Act 2006 and
Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the Group and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for preparing the
Directors’ Report, the Directors’ Remuneration Report
and the Corporate Governance Statement in accordance
with the Companies Act 2006 and applicable
regulations, including the requirements of the Listing
Rules and the Disclosure and Transparency Rules.
Approved by the Board on 4 March 2013
NICK COOPER
Chief Executive Officer
73
ANNUAL REPORT AND ACCOUNTS 2012 GROUP FINANCIAL STATEMENTS
OPHIR’S FINANCIAL
STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER 2012
76 Independent Auditor’s Report
78 Consolidated income statement and
statement of comprehensive income
79 Consolidated statement of financial position
80 Consolidated statement of changes in equity
81
82 Notes to the financial statements
110 Statement of Directors’ responsibilities in
Consolidated statement of cash flows
relation to the company financial statements
111 Independent Auditor’s Report
113 Company statement of financial position
114 Company statement of changes in equity
115 Company statement of cash flows
116 Notes to the financial statements
133 Shareholder information
136 Glossary
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ANNUAL REPORT AND ACCOUNTS 2012
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF OPHIR ENERGY PLC
We have audited the Group financial statements of Ophir Energy plc for the year ended 31 December 2012 which
comprise the Consolidated Income Statement and Statement of Comprehensive Income, the Consolidated Statement
of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows,
and the related notes 1 to 28. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ responsibilities Statement the Directors are responsible for the preparation
of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the Group financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s
circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the annual report to identify material inconsistencies with
the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
Opinion on financial statements
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group’s affairs as at 31 December 2012 and of its loss for the year
then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the
IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the information given in the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the information given in the Corporate Governance Statement in the annual report with respect to internal control
and risk management systems in relation to financial reporting processes and about share capital structures is
consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
• the Directors’ statement in relation to going concern; and
• the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions
of the UK Corporate Governance Code specified for our review; and
• certain elements of the report to shareholders by the Board of directors’ remuneration.
76
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Other matter
We have reported separately on the parent company financial statements of Ophir Energy plc for the year ended
31 December 2012 and on the information in the Directors’ Remuneration Report that is described as having
been audited.
STEVEN DOBSON
(Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP
Statutory Auditor
London
4 March 2013
Notes:
1 The maintenance and integrity of the Ophir Energy plc web site is the responsibility of the Directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the web site.
2 Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
77
ANNUAL REPORT AND ACCOUNTS 2012
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
Notes
3 (a)
3 (a)
3 (a)
3 (b)
3 (c)
3 (d)
3 (e)
7
1,009
–
12
1,021
(4,521)
627
(36,394)
(1,676)
(40,943)
228
(40,715)
(40,609)
(106)
834
13,844
–
14,678
(15,688)
(1,039)
(16,156)
(870)
(19,075)
–
(19, 075)
(19,075)
–
(40,715)
(19, 075)
8
(6) pence1
(5) pence2
(40,715)
(19,075)
(28)
(28)
144
144
(40,637)
(106)
(40,743)
(18,931)
–
(18,931)
CONSOLIDATED INCOME STATEMENT
Continuing Operations
Interest income
Gain on farm out
Other income
Revenue
Exploration expenses
Finance income/(expenses)
General & administration expenses
Other expenses
Loss from continuing operations before taxation
Taxation
Loss from continuing operations for the year attributable to:
Equity holders of the Company
Non-controlling interest
Loss per share (pence) attributable to equity holders of the parent
Basic and diluted EPS on loss for the year (per share)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Loss from continuing operations for the year
Other comprehensive income
Exchange differences on retranslation of foreign operations net of tax
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year, net of tax attributable to:
Equity holders of the Company
Non-controlling interest
1
(10) cents per share.
2 (7) cents per share.
78
WWW.OPHIR-ENERGY.COM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012
Non-current assets
Exploration and evaluation assets
Goodwill
Property, plant and equipment
Financial assets
Current assets
Inventory
Trade and other receivables
Cash and short term deposits
Total assets
Current liabilities
Trade and other payables
Provisions
Non-current liabilities
Deferred income tax
Provisions
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Reserves
Equity attributable to equity shareholders of the Company
Non-controlling interest
Total equity
Approved by the Board on 4 March 2013
NICHOLAS SMITH
Chairman
NICK COOPER
Chief Executive Officer
As at
31 Dec 2012
$’000
As at
31 Dec 2011
$’000
Notes
9
10
12
13
14
15
16
17
18
7
18
961,713
57,165
2,447
10,593
327,060
–
2,205
670
1,031,918
329,935
12,811
9,500
227,743
250,054
1,281,972
6,233
9,215
396,585
412,033
741,968
(119,416)
(833)
(27,704)
(820)
(120,249)
(28,524)
(56,996)
(277)
(57,273)
–
(384)
(384)
(177,522)
(28,908)
1,104,450
713,060
20
21
21
1,739
1,213,978
(111,021)
1,448
789,714
(78,102)
1,104,696
713,060
(246)
–
1,104,450
713,060
79
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Called Up
Share
Capital
$’000
Share
Premium
$’000
Options
Premium
Reserve
$’000
Special
Reserve
$’000
Cons
Reserve
$’000
Equity
Component
On
Convertible
Bond
$’000
Foreign
Currency
Translation
Reserve
$’000
Accumulated
Losses
$’000
Non-
Controlling
Interest
$’000
1,042
417,048
23,852
156,435
(500)
669
5,736
(248,037)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,075)
144
–
144
(19,075)
–
–
–
–
–
–
–
–
–
2,674
1,448
789,714
26,526
156,435
(500)
669
5,880
(267,112)
Total Equity
$’000
356,245
(19,075)
144
(18,931)
385,033
9,738
(21,699)
2,674
713,060
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(40,609)
(106)
(40,715)
(28)
–
–
(28)
(28)
(40,609)
(106)
(40,743)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
423,432
8,495
(7,372)
7,718
(140)
(140)
1,739 1,213,978
34,244
156,435
(500)
669
5,852
(307,721)
(246) 1,104,450
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
385
384,648
9,717
(21,699)
–
–
–
–
–
–
276
423,156
8,480
(7,372)
21
–
–
15
–
–
–
–
–
7,718
–
As at 1 January 2011
Loss for the period,
net of tax
Other
comprehensive
income, net of tax
Total comprehensive
Income, net of tax
New ordinary shares
issued to third
parties
Exercise of options
Share issue costs
Share-based
payments
As at
31 December 2011
Loss for the period,
net of tax
Other
comprehensive
income, net of tax
Total comprehensive
income, net of tax
New ordinary shares
issued to third
parties
Exercise of options
Share issue costs
Share-based
payments
Acquisition of
subsidiary (Note 11)
As at
31 December 2012
80
WWW.OPHIR-ENERGY.COM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
Operating activities
Loss before taxation
Adjustments to reconcile loss before tax to net cash flows:
Interest income
Depreciation of property, plant and equipment
Amortisation of deferred costs
(Profit)/Loss on disposal of assets
Provision for employee entitlements
Share-based payments
Exploration expenditure not included in operating activities
Gain on joint venture farm out
Working capital adjustments
(Decrease)/Increase in inventory
Decrease/(Increase) in trade and other payables
Increase/(Decrease) in trade and other receivables
Increase/(Decrease) in other current assets
Cash flows from operating activities
Income taxes paid
Interest Income
Net cash flows used in/(from) operating activities
Investing activities
Purchases of property, plant and equipment
Exploration expenditure
Proceeds on disposals of assets
(Purchase)/disposal of inventory
Funds on farm out of joint venture
Acquisition of subsidiary
Cash acquired on acquisition of subsidiary
Net cash flows used in investing activities
Financing activities
Share issue costs
Issue of ordinary shares
Net cash flows from financing activities
(Decrease)/increase in cash and cash equivalents for the year
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
Notes
(40,943)
(19,075)
(1,009)
1,037
4
636
(94)
7,718
4,521
–
–
5,108
1,468
(9,923)
(31,477)
–
1,570
(834)
871
–
(1)
283
2,674
15,688
(13,844)
(4,622)
1,849
(5,887)
–
(22,898)
–
429
(29,907)
(22,469)
(1,010)
(359,436)
8,721
(6,191)
–
(38,682)
15,908
(1,313)
(65,618)
–
1,078
21,960
–
–
(380,690)
(43,893)
(7,372)
250,385
243,013
(167,584)
(1,258)
396,585
227,743
(21,699)
394,771
373,072
306,710
(50)
89,925
396,585
12
6
3b
3a
7
12
9
11
16
81
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1 Corporate information
Ophir Energy plc (the “Company” and the ultimate parent of the Group) is a public limited company incorporated,
domiciled and listed in England and Wales. Its registered offices are located at 50 New Bond Street, London W1S 1BJ.
Ophir Energy’s business is the development of offshore and deepwater oil and gas exploration assets. The Company
has an extensive and diverse portfolio of exploration interests across East and West Africa.
The Group’s financial statements for the year ended 31 December 2012 were authorised for issue by the Board of
Directors on 4 March 2013 and the Statement of Financial Position was signed on the Board’s behalf by Mr Nicholas
Smith and Nick Cooper.
2 Basis of preparation and significant accounting policies
2.1 Basis of preparation
The Group’s financial statements have been prepared in accordance with IFRS as adopted by the European Union
and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared on a historical cost basis except for revaluation of
certain derivative instruments measured at fair value. The consolidated financial statements are presented in US
Dollars rounded to the nearest thousand dollars ($’000) except as otherwise indicated.
Comparative figures for the period to 31 December 2011 are for the year ended on that date.
New and Amended Accounting Standards and Interpretations
The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2012:
– IFRS 7 Financial Instruments: Disclosures (Amendment)
– IAS 1 Presentation of Items of Other Comprehensive Income (Amendment)
– IAS 12 Income Taxes (Amendment) – Deferred Taxes: Recovery of Underlying Assets
These amendments and interpretations have not materially affected amounts reported or disclosed in the Group’s
financial statements.
Standards and Interpretations issued but not yet effective
Standards issued but not yet effective at the date of these Financial Statements are listed below.
Effective Date (for periods beginning on or after)
IAS 19 Employee Benefits (Amendment)
IAS 27 Separate Financial Statements (as revised in 2011)
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendment)
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Involvement with Other Entities
IFRS 13 Fair Value Measurement
IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments)
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2015
1 January 2014
1 January 2014
1 January 2014
1 January 2013
1 January 2014
The Group has commenced a review of the impact to financial reporting from the changes to IFRS 10, 11 and 12.
The impact of the adoption of other standards noted above has not been assessed by the Group. The Group plans
to adopt the standards in line with the effective dates above.
82
WWW.OPHIR-ENERGY.COM 2.2 Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and the entities it controls
(its subsidiaries) drawn up to 31 December each year.
Basis of consolidation from 1 January 2010
Subsidiaries
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control,
and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through
direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way
of contractual agreement. The financial statements of subsidiaries are prepared for the same reporting year as the
parent company, using consistent accounting policies. All intercompany balances and transactions, including
unrealised profits arising therefrom, are eliminated.
A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it (i) derecognises the assets (including goodwill) and liabilities of the
subsidiary; (ii) derecognises the carrying amount of any non-controlling interest; (iii) derecognises the cumulative
translation differences, recorded in equity; (iv) recognises the fair value of the consideration received; (v) recognises
the fair value of any investment retained; and (vi) recognises any surplus or deficit in profit and loss; (vii) reclassifies
the parent’s share of components previously recognised in other comprehensive income to profit and loss or
retained earnings, as appropriate.
Non-controlling interests
Non-controlling interests represent the equity in a subsidiary not attributable, directly and indirectly, to the parent
company and is presented separately within the Consolidated statement of financial position, separately from
equity attributable to owners of the parent. Losses within a subsidiary are attributed to the non-controlling interest
even if that results in a deficit balance.
Basis of consolidation prior to 1 January 2010
Certain of the above-mentioned requirements were applied on a prospective basis. The following differences,
however, are carried forward in certain instances from the previous basis of consolidation:
Non-controlling interest represents the portion of profit or loss and net assets in subsidiaries that is not held by
the Group and is presented separately within equity in the Consolidated statement of financial position, separately
from parent shareholder’s equity. Acquisitions of non-controlling interests were accounted for using the equity
concept method.
Losses incurred by the Group were attributed to the minority interest until the balance was reduced to nil. Any
further excess losses were attributed to the parent, unless the non-controlling interest had a binding obligation
to cover these.
2.3 Summary of significant accounting policies
(a) Exploration and evaluation expenditure
The Company applies the successful efforts method of accounting for the exploration and evaluation (“E&E”)
costs as permitted by IFRS 6 “Exploration for and Evaluation of Mineral Resources.”
All costs incurred after the rights to explore an area have been obtained, such as licence acquisition costs,
geological and geophysical costs and other direct costs of E&E are accumulated and capitalised as E&E assets,
in well, field or licence-specific exploration cost centres as appropriate pending determination.
Costs (other than payments to acquire the legal right to explore) incurred prior to acquiring rights to explore
and general exploration costs not specific to any particular licence or prospect are charged directly to the
income statement.
E&E assets are not amortised prior to the determination of the results of exploration activity. At completion
of evaluation activities, if technical and commercial feasibility is demonstrated, then, following recognition of
commercial reserves, the carrying value of the relevant E&E asset will be reclassified as a development and
production asset, subject to the carrying value of the relevant E&E asset being assessed for impairment.
83
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Basis of preparation and significant accounting policies continued
If, on completion of evaluation of prospects or licences, it is not possible to determine technical feasibility and
commercial viability or if the legal right to explore expires or if the Group decides not to continue E&E activity, then
the costs of such unsuccessful E&E are written off to the income statement in the period of that determination.
The carrying value of E&E assets is reviewed for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable.
Where this is indicated, management will assess the recoverability of the carrying value of the asset. The review
is based upon a status report detailing the Group’s intention for development of the asset. Where it cannot be
recovered via successful development or sale, all costs are written off.
The Group may enter into farm-in or farm-out arrangements, where it may introduce partners to share in the
development of an asset. For transactions involving assets at the exploration and evaluation phase, the Group
adopts an accounting policy as permitted by IFRS 6 such that the Group does not record any expenditure made
on its behalf under a “carried interest” by a farm in partner. Where applicable past costs are reimbursed, the value
of the cash consideration is credited against costs previously incurred. Farmed out oil and gas properties are
accounted for in accordance with IAS 16 “Property, Plant and Equipment”.
(b) Intangibles
Intangible assets are initially measured at cost. Following initial recognition, intangible assets are carried at cost less
any accumulated amortisation and any accumulated impairment losses.
Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an
indication that the intangible asset may be impaired.
Where this is indicated, management will assess the recoverability of the carrying value of the asset. The review
is based upon a status report detailing the Group’s intention for development of the asset. Where it cannot be
recovered via successful development or sale, all costs are written off.
(c) Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interest (“NCI”) over the fair value of the identifiable net assets acquired
and liabilities assumed. If this consideration is lower than the fair value of the identifiable net assets of the
subsidiary acquired, the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
the Group’s cash generating units (“CGUs”) that are expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the
relative values of the operation disposed of and the portion of the cash-generating unit retained.
Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying
value may be impaired.
In assessing whether goodwill has been impaired, the carrying amount of the CGU or reportable segment is
compared with its recoverable amount. In determining whether goodwill is impaired the Group reviews the status
of projects including recent farm-out transactions and whether the Group’s intention is to further develop the
Groups various assets.
(d) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any
non-controlling interest (NCI) in the acquiree. For each business combination, the acquirer elects to measure the
components of NCI that are present ownership interests that entitle their holders to a proportionate share of the
entity’s net assets in the event of liquidation either at fair value or at the proportionate share of the acquiree’s
84
WWW.OPHIR-ENERGY.COM identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When
the Group acquires a business, it assesses the assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date. Those oil & gas reserves that are able to be reliably measured are recognised in the assessment
of fair values on acquisition. Other potential reserves, resources and rights, for which fair values cannot be reliably
measured, are not recognised.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value as at the acquisition date (being the date the acquirer
gains control) through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will
be recognised in accordance with IAS 39 either in profit or loss or as change to other comprehensive income. If the
contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.
(e) Property, plant and equipment
Property, plant and equipment, which comprises furniture and fittings and computer equipment, is stated at cost
less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable
to making the asset capable of operating as intended.
Depreciation is provided on property, plant and equipment calculated using the straight line method at rates to
write off the cost, less estimated residual value based on prices prevailing at the statement of financial position
date, of each asset over expected useful lives ranging from 3 to 10 years.
(f) Investments in subsidiaries
The Company holds monetary balances with its subsidiaries of which settlement is neither planned nor likely to
occur in the foreseeable future. Such balances are considered to be part of the Company’s net investment in its
subsidiaries.
The carrying values of investments in subsidiaries are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
(g) Financial instruments
i. Cash and short term deposits
Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand and short
term deposits with an original maturity of three months or less, or deposits that are held for meeting short term
cash requirements which are readily convertible to cash and are subject to insignificant risks of changes in value.
Cash and cash equivalents excludes any restricted cash which is not available for use by the Group and therefore
is not considered highly liquid – for example cash set aside to cover rehabilitation obligations.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
ii. Trade and other receivables
Trade receivables, which generally have 30 to 90 day terms, are recognised and carried at the lower of their
original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried
at amortised cost. Allowance is made when there is objective evidence that the Group will not be able to recover
balances in full. Evidence on non-recoverability may include indications that the debtor or group of debtors is
experiencing significant financial difficulty, the probability that they will enter bankruptcy or default or delinquency
in repayments. Balances are written off when the probability of recovery is assessed as being remote. The amount
of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash
flows, discounted at the original effective interest rate.
iii. Trade and other payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and services provided
to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obligated to
make future payments in respect of the purchase of those goods and services. The amounts are unsecured and
are usually paid within 30 days of recognition.
85
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Basis of preparation and significant accounting policies continued
iv. Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest rate method.
Gains and losses are recognised in the income statement when liabilities are derecognised as well as through the
amortisation process. A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying
amounts is recognised in the income statement.
(h) Inventories
Inventories which comprise drilling consumables are stated at the lower of cost and net realisable value. Cost is
determined by using weighted average cost method and comprises direct purchase costs, cost of transportation
and other related expenses.
(i) Provisions
A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is
probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can
be made of the obligation. If the effect of the time value of money is material, expected future cash flows are
discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance cost.
(j) Pensions and other post-retirement benefits
The Group does not operate its own pension plan but makes pension or superannuation contributions to private
funds of its employees which are defined contribution plans. The cost of providing such benefits are expensed in
the income statement as incurred.
(k) Employee benefits
Salaries, wages, annual leave and sick leave
Liabilities for salaries and wages, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services
up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates
paid or payable.
Long service leave
The liability for long service leave is recognised and measured at the present value of expected future payments
to be made in respect of services provided by employees up to the reporting date using the projected unit
credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods
of service. Expected future payments are discounted using market yields at the reporting date on national
government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future
cash outflows.
(l) Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
(m) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement
and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific
asset or assets and the arrangement conveys a right to use the asset.
86
WWW.OPHIR-ENERGY.COM The Group has leases where the Lessor retains substantially all the risks and benefits of ownership of the asset.
Such leases are classified as operating leases and rentals payable are charged to the income statement on a
straight line basis over the lease term.
(n) Interests in joint ventures
The Group has a number of contractual arrangements with other parties which represent joint ventures. A joint
venture is a contractual arrangement whereby the Group and other parties undertake economic activity.
Where a Group company undertakes its activities under joint venture arrangements the Group’s share of jointly
controlled assets, liabilities and related income and expenses are included in the financial statements in their
respective classification categories.
The Group’s interests in joint ventures, which are in the form of jointly controlled assets, are identified in note 23.
The Group has a number of interests in joint ventures, which are considered jointly controlled assets, whereby the
venturers have a contractual arrangement that establishes joint control over the economic activities of the asset.
The agreement requires unanimous agreement for financial and operating decisions among the venturers. The
Group recognises its interest in the joint venture using the proportionate consolidation method. The Group
combines its proportionate share of each of the assets, liabilities, income and expenses of the joint venture with
similar items, line by line, in its consolidated financial statements. The financial statements of the joint venture are
prepared for the same reporting period as the Group. Adjustments are made where necessary to bring the
accounting policies in line with those of the Group.
Adjustments are made in the Group’s consolidated financial statements to eliminate the Group’s share of
intragroup balances, transactions and unrealised gains and losses on such transactions between the Group and its
joint venture. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the
net realisable value of current assets or an impairment loss. The joint venture is proportionately consolidated until
the date on which the Group ceases to have joint control over the joint venture.
Upon loss of joint control the Group measures and recognises its remaining investment at its fair value. Any
difference between the carrying amount of the former joint controlled entity upon loss of joint control and the fair
value of the remaining investment and proceeds from disposal are recognised in the income statement. When the
remaining investment constitutes significant influence, it is accounted for as investment in an associate.
(o) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and
the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received and
receivable, excluding discounts, rebates, VAT and other sales taxes or duty.
The specific recognition criteria described below must also be met before revenue is recognised:
Interest income
Interest income is recognised as it accrues using the effective interest rate method, that is, the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying
amount of the financial asset.
(p) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to be prepared for their intended use, are added to the cost
of those assets until such time as the assets are substantially ready for their intended use.
All other borrowing costs are expensed in the income statement in the period in which they are incurred.
(q) Share-based payments
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at
which they are granted and is recognised as an expense over the vesting period, which ends on the date on which
the relevant employees become fully entitled to the award. Fair value is determined with reference to the market
value of the underlying shares using a pricing model appropriate to the circumstances which requires judgements as
to the selection of both the valuation model and inputs. In valuing equity-settled transactions, no account is taken of
any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions).
87
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Basis of preparation and significant accounting policies continued
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition or a non-vesting condition, which are treated as vesting irrespective of whether or not
the market condition or non-vesting condition is satisfied, provided that all other vesting conditions are satisfied.
At each statement of financial position date before vesting, the cumulative expense is calculated on the basis
of the extent to which the vesting period has expired and management’s best estimate of the number of equity
instruments that will ultimately vest. The movement in cumulative expense since the previous statement of
financial position date is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or
settled award, the cost based on the original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair
value of any modification, based on the difference between the fair value of the original award and the fair value of
the modified award, both as measured on the date of the modification. No reduction is recognised if this difference
is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation and any cost
not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to
the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair
value being treated as an expense in the income statement.
For equity-settled share-based payment transactions with third parties, the goods or services received are
measured at the date of receipt by reference to their fair value with a corresponding entry in equity. If the Group
cannot reliably estimate the fair value of the goods or services received, their value is measured by reference to
the fair value of the equity instruments granted.
(r) Foreign currency translation
The functional currency for each entity in the Group is determined on an individual basis according to the primary
economic environment in which it operates.
Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange
rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the statement of financial position date. All exchange differences are
taken to the income statement.
The assets and liabilities of the Company and those foreign operations whose functional currency is other than that
of the presentation currency of Ophir Energy Group are translated into the presentation currency, at the rate of
exchange ruling at the statement of financial position date. Income and expenses are translated at the weighted
average exchange rates for the period. The resulting exchange differences are taken directly to a separate
component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating
to that particular foreign operation is recognised in the income statement.
(s) Income taxes
Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial
position date.
Current income tax is charged or credited directly to equity if it relates to items that are credited or charged to
equity. Otherwise income tax is recognised in the income statement.
Deferred tax
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements, with the following exceptions:
– where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction affects neither accounting
nor taxable profit or loss;
88
WWW.OPHIR-ENERGY.COM – in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint
ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future; and
– deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each
reporting period and are recognised to the extent that it has become probable that future taxable profit will be
available to allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected
to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or
substantively enacted at the statement of financial position date.
Deferred income tax is charged or credited directly to equity if it relates to items that are credited or charged to
equity. Otherwise deferred income tax is recognised in the income statement.
(t) Impairment
The Group assesses at each reporting date whether there is an indication that an intangible asset or item of
property plant & equipment may be impaired. If any indication exists, or when annual impairment testing for is
required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an
asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to
sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an
appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share
prices for publicly traded subsidiaries or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared
separately for each of the Group’s CGU’s to which the individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and
applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the income
statement in expense categories consistent with the function of the impaired asset, except for a property
previously revalued and the revaluation was taken to other comprehensive income. In this case, the impairment
is also recognised in other comprehensive income up to the amount of any previous revaluation.
2.4 Significant accounting judgements, estimates and assumptions
The preparation of the consolidated financial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the
consolidated financial statements and reported amounts of revenues and expenses during the reporting period.
Estimates and assumptions are continuously evaluated and are based on management’s experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
However, actual outcomes can differ from these estimates.
The Group has used estimates and assumptions in deriving certain figures within the financial statements. Such
accounting estimates may not equate with the actual results which will only be known in time. The key areas of
estimation are noted below with further details of the assumptions used listed in the relevant note.
89
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Basis of preparation and significant accounting policies continued
Item notes:
Exploration and Evaluation assets 2.2(a)
Share-based payments 2.2(q)
Deferred tax 2.2(s)
Impairment 2.2(t)
3 Operating loss before taxation
The Group operating loss from continuing operations before taxation is stated after charging/(crediting):
(a) Revenue
Gain on farm out
Interest income
Other income
Year ended
31 Dec 2012
$’000
–
1,009
12
1,021
Year ended
31 Dec 2011
$’000
13,844
834
–
14,678
The gain on farm out relates to the partial farm out of the Group’s AGC Profond interests. Cash proceeds of $20.0
million received were applied against the Group’s carrying value of the AGC project, with the surplus proceeds
being booked to profit.
(b) Exploration expenses
– Pre licence exploration costs
– Exploration expenditure written off
(c) Finance (income)/expenses
– Net foreign currency exchange (gains)/losses
(d) General & administration expenses include
– Operating lease payments – minimum lease payments
– Share-based compensation charge
(e) Other expenses
– Loss/(gain) on disposal of assets
– Depreciation of property plant & equipment
90
Year ended
31 Dec 2012
$’000
4,521
–
4,521
Year ended
31 Dec 2012
$’000
(627)
(627)
Year ended
31 Dec 2012
$’000
2,332
7,718
10,050
Year ended
31 Dec 2011
$’000
2,324
13,364
15,688
Year ended
31 Dec 2011
$’000
1,039
1,039
Year ended
31 Dec 2011
$’000
1,475
2,674
4,149
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
635
1,041
1,676
(1)
871
870
WWW.OPHIR-ENERGY.COM 4 Segment Information
The Group operates in one segment being the exploration and evaluation of oil & gas related projects located in Africa.
5 Auditors’ remuneration
The Group paid the following amounts to its auditors in respect of the audit of the financial statements and for
other services provided to the Group.
Paid/Payable to Ernst & Young LLP
Audit of the financial statements
Other services pursuant to legislation
Tax services
Corporate finance services
Local statutory audits of subsidiaries
1 Costs relating to the Group’s IPO in July 2011
Paid/Payable to auditor if not Ernst & Young LLP
Local statutory audits of subsidiaries
Taxation services
Other services
6 Staff costs and Directors’ emoluments
(a) Staff costs
Employee costs (including payments to directors) during the year comprised:
Salaries and wages
Social security costs
Contributions to pension plans/superannuation funds
Share based payments (note 22)
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
302
156
–
482
71
1,011
15
1
2
18
240
134
39
2,5631
–
2,976
–
–
–
–
1,029
2,976
Year ended
31 Dec 2012
$’000
19,400
2,519
969
7,718
30,606
Year ended
31 Dec 2011
$’000
11,558
883
833
2,674
15,948
(b) Key management
The table below sets out the details of the emoluments of the Group’s key management including directors:
Aggregate compensation:
Salaries and wages
Social security costs
Contributions to pensions/superannuation funds
Post-employment benefits
Share-based payments (note 22)
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
8,347
823
321
992
7,453
17,936
4,916
346
287
722
1,741
8,012
91
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6 Staff costs and Directors’ emoluments continued
(c) Directors’ emoluments
(i) Aggregate compensation:
Salaries and wages
Social security costs
Contributions to pensions/superannuation funds
Bonuses
Post-employment benefits
Other benefits
(ii) Share-based payments (note 22)
(iii) Amounts paid to director-related entities not included in (i) above (note 27)
Number of directors to whom superannuation or pension benefits accrued during the year
(d) Average number of persons employed (full time equivalents):
CEO
Exploration and technical
Commercial and support
7 Taxation
(a) Income tax (credit)/expense
Current income tax:
UK corporation tax
UK current tax adjustment in repect of prior periods
Foreign tax
Adjustments in repect of prior periods
Total current income tax
Deferred tax:
Origination and reversal of temporary differences
Tax (credit)/expense in the income statement
92
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
2,481
345
146
2,370
992
8
6,342
5,544
1
3
2,937
288
148
441
870
13
4,549
1,195
54
4
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
1
22
30
53
1
23
15
39
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
–
(63)
49
10
(4)
(224)
(228)
–
–
–
–
–
–
–
WWW.OPHIR-ENERGY.COM 7 Taxation continued
(b) Reconciliation of the total tax (credit)/expense
The tax benefit not recognised in the income statement is reconciled to the standard rate of corporation tax in the UK
of 24.5% (2011: 26.5%). The differences are reconciled below:
Loss on operations before taxation
Loss on operations before taxation multiplied by the UK standard rate of corporation tax of 24.5%
(2011: 26.5%)
Non-deductible expenditure
Share-based payments
Non-taxable income
(Income)/expenditure in tax exempt jurisdictions
Unrecognised deferred tax assets
Other
Adjustment in respect of prior year periods
Total tax (credit)/expense in the income statement
(c) Deferred income tax
Deferred income tax balances at 31 December relate to the following:
Deferred tax liabilities:
Property plant and equipment
Fair value adjustment in respect of exploration assets
Revenue tax losses
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
(40,943)
(19,075)
(10,031)
(5,055)
2,919
495
–
(173)
6,615
–
(53)
(228)
36
720
(3,669)
216
7,761
(9)
–
–
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
–
(56,996)
–
(56,996)
(96)
–
96
–
(d) Unrecognised tax losses
The Group has further tax losses arising in the UK and Australia totalling $93,190,734 (2011: $55,656,114) that are
available to carry forward indefinitely to offset against future taxable profits of the companies in which the losses
arose. Deferred tax assets have not been recognised in respect of these losses as there is not sufficient certainty
that taxable income will be realised in the future due to the nature of the Group’s international exploration activities
and the long lead times in either developing or otherwise realising exploration assets.
(e) Other unrecognised temporary differences
The Group has other unrecognised temporary differences in the UK, Australia and various African countries
totalling $190,976,200 (2011: $148,534,880) in respect of provisions and exploration expenditure for which
deferred tax assets have not been recognised.
(f) Change in corporation tax rate
Deferred tax has been calculated at the rates substantively enacted at the statement of financial position date.
The main United Kingdom rate of corporation tax decreased from 26% to 24% with effect from 1 April 2012, and
legislation to reduce the rate to 23% with effect from 1 April 2013 has been substantively enacted during the year.
In addition the United Kingdom Government announced as part of the 2012 Autumn statement that the
corporation tax rate was to be reduced to 21% (previously 22%) from 1 April 2014.
93
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8 Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
The following reflects the income and share data used in the basic earnings per share computations:
Earnings
Earnings for the purposes of basic and diluted earnings per share
Loss for the year
Less non-controlling interest
Loss attributable to equity holders of the parent
Number of shares
Basic weighted average number of shares
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
(40,715)
(19,075)
106
–
(40,609)
(19,075)
Year ended
31 Dec 2012
No.
Year ended
31 Dec 2011
No.
387,194,504
271,664,087
There were 11,131,204 (2011: 12,849,413) outstanding share options and warrants at 31 December 2012 which were
anti-dilutive.
There have been no issues of shares between the reporting date and the date of these Financial Statements.
9 Exploration and evaluation assets
Costs at the beginning of the year
Additions
Acquisition of subsidary2
Expenditure written off
Disposals4
Balance at the end of the year
Year ended
31 Dec 2012
$’000
327,060
415,484
228,000
Year ended
31 Dec 2011
$’000
270,043
70,3811
–
–
(13,364)3
(8,831)
–
961,713
327,060
1 Net of recovery of costs incurred on farm out of exploration interests of $8.1 million (31 December 2011)
2 The amount of $228.0 million was recognised on the acquisition of Dominion Petroleum Limited (note 11)
Includes costs of $12.7 million relating to the write off of the Kora-1 dry well in the AGC exploration block.
3
4 Net book value of 46.75% interest in Block V in the Albertine Graben in the Democratic Republic of Congo sold for $8.7 million on 20 July 2012.
94
WWW.OPHIR-ENERGY.COM 10 Goodwill
Balance at the beginning of the year
Acquisition of subsidary (note 11)
Disposal1
Balance at the end of the year
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
–
57,389
(224)
57,165
–
–
–
–
1 Unwinding of goodwill on disposal of interest in Block V in the Albertine Graben in the Democratic Republic of Congo.
The goodwill balance is largely the result of recognising a deferred tax liability on the fair value uplifts of assets
acquired through the Dominion acquisition.
Allocation of Goodwill
Goodwill has been allocated to a cash-generating unit (CGU) or groups of CGU’s no larger than the reportable
segment which are expected to benefit from the related acquisition. A CGU is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of
assets. This is usually considered a single operation or in some cases a number of operations that are in close
geographic proximity or share operational efficiencies. The carrying values of goodwill by CGU are as follows:
Tanzania (Block 7)
Kenya (Block L9)
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
107
62
169
–
–
–
The following goodwill balances result from the requirement on acquisition to recognise a deferred tax liability,
calculated as the difference between the tax effect of the fair value of the acquisition assets and liabilities and their
tax bases. For the purposes of testing this goodwill for impairment, any of the related deferred tax liabilities
recognised on acquisition that remain at balance date are treated as part of the relevant CGU or group of CGU’s.
Tanzania (Block 7)
Kenya (Block L9)
Deferred tax liability
Balance at the end of the year
36,190
20,806
56,996
57,165
–
–
–
–
Impairment test for Goodwill
The Group performs goodwill impairment testing on an annual basis at reporting date. The most recent test was
carried out at 31 December 2012. In assessing whether goodwill has been impaired, the carrying amount of the
CGU or reportable segment is compared with its recoverable amount. In determining whether goodwill is impaired
the Group reviewed the status of projects including recent farm-out transactions and whether the Group’s
intention is to further develop the Groups various assets.
No impairment expense was recognised for the year ended 31 December 2012 (31 December 2011: nil).
95
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 Business combinations
The Group acquired 100% of the share capital of Dominion Petroleum Limited (“Dominion”), an AIM quoted group
of companies operating in the oil and gas exploration industry on 2 February 2012 (the acquisition date). The Group
announced that the scheme of arrangement approved by Dominion’s shareholders on 12 December 2011 was
sanctioned by the Supreme Court in Bermuda effective on 2 February 2012.
As a result of the acquisition the Group acquired a portfolio of assets in offshore Tanzania, Kenya, Uganda and
DRC, two of which are operated by Ophir and which strengthens the Group’s position as a leading oil and
gas explorer in the East African offshore play.
The financial statements include the statement of financial position of Dominion including fair value adjustments.
Revenues and expenses from the acquired assets are consolidated with effect from the acquisition date.
The purchase consideration of $220,221,437 was satisfied by a combination of cash and equity. The Group issued
38,790,455 new shares in consideration for the entire share capital of Dominion. The fair value of the shares was
the published price of the shares of the Group at the acquisition date which was £2.951 ($4.68). Therefore, the fair
value of the share consideration given was $181,539,329. The remaining purchase consideration amount of
$38,682,108 was paid in cash. Transaction costs relating to the acquisition of $3,709,030 have been expensed and
are included in administration costs.
The fair value assessment of the Dominion assets and liabilities acquired has been reviewed in accordance with
the provisions of IFRS 3 – Business Combinations. Details of the Group accounting policies in relation to business
combinations are contained in note 2.3(d).
The fair values of the identifiable assets and liabilities of Dominion as at the date of acquisition and the
corresponding carrying values immediately before the acquisition were:
Exploration & evaluation assets (note 9)
Property, plant & equipment
Cash
Other current assets
Trade payables
Taxes payable
Other liabilities
Deferred tax liability
Net assets
Non-controlling interest
Total net assets acquired
Goodwill arising on acquisition (note 10)
Total purchase consideration
Purchase consideration:
Fair value of shares issued
Cash paid
Total purchase consideration
Fair Value
recognised
2 February 2012
$’000
228,000
441
15,908
7,063
(1,612)
(588)
(29,300)
(57,220)
162,692
140
162,832
57,389
220,221
181,539
38,682
220,221
Goodwill of $57.4 million arises on acquisition. The goodwill on the transaction has principally arisen as a result
of the requirement to recognise $57.2 million of deferred income tax liabilities representing the tax effect of the
differences between the fair value and the tax bases of assets acquired. None of the goodwill recognised is
expected to be deductible for income tax purposes.
96
WWW.OPHIR-ENERGY.COM The balance of the goodwill being $0.2 million is attributable to the synergies expected to arise from Ophir’s
current operations which are based in the same East African offshore play as other exploration and evaluation
assets acquired.
From the date of acquisition to 31 December 2012 Dominion contributed $12,268 to Group revenue and $9,819,734
to Group loss. If the combination had taken place at the beginning of the year, Dominion’s contribution to Group
revenue and loss for the period to 31 December 2012 would have been $22,268 and $13,970,602 respectively.
12 Property, plant and equipment
Office furniture and equipment
Cost
Balance at the beginning of the year
Foreign currency translation
Additions
Acquisition of subsidiary
Disposals
Balance at the end of the year
Depreciation
Balance at the beginning of the year
Foreign currency translation
Depreciation charge for the year
Disposals
Balance at the end of the year
Net book value
Balance at the beginning of the year
Balance at the end of the year
13 Financial assets
Non-Current
Security deposits – Rental properties
Security deposits – Exploration commitments1
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
5,431
90
1,010
441
(475)
6,497
3,226
59
1,037
(272)
4,050
2,205
2,447
4,115
5
1,313
–
(2)
5,431
2,372
(15)
871
(2)
3,226
1,743
2,205
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
1,562
9,031
10,593
670
–
670
1 Floating interest deposits pledged to third parties or banks as security in relation to the Group’s exploration commitments.
There are no receivables that are past due or impaired.
97
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14 Inventory
Drilling consumables
15 Trade and other receivables
Trade and other debtors
Prepayments
Year ended
31 Dec 2012
$’000
12,811
Year ended
31 Dec 2011
$’000
6,233
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
8,726
774
9,500
8,749
466
9,215
All debtors are current. There are no receivables that are past due or impaired. Trade and other debtors primarily
relate to receivables from joint venture partners.
Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.
16 Cash and short term deposits
Cash
Short-term deposit
Year ended
31 Dec 2012
$’000
227,743
–
227,743
Year ended
31 Dec 2011
$’000
65,359
331,226
396,585
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits
are made for varying periods, depending on the immediate cash requirements of the Group, and earn interest
at the various short-term deposit rates. Short term deposits are readily convertible to cash and are subject to
insignificant risks of changes in value. The fair value of cash and cash equivalents is $227.7 million
(31 December 2011: $396.6 million).
17 Trade and other payables
Trade payables
Accruals
Payables in relation to joint venture partners
Trade payables are unsecured and are usually paid within 30 days of recognition.
Year ended
31 Dec 2012
$’000
17,648
27,324
74,444
119,416
Year ended
31 Dec 2011
$’000
4,866
22,838
–
27,704
98
WWW.OPHIR-ENERGY.COM 18 Provisions
At 1 January 2012
Current
Non-current
Arising during the year
Utilised
Amounts released
At 31 December 2012
Current
Non-current
Employee
Annual Leave
$’000
Employee Long
Service Leave
$’000
820
–
838
(547)
(278)
833
–
–
384
67
–
(174)
–
277
The provisions are made for statutory or contractual employee entitlements. It is anticipated that these costs will
be incurred when employees choose to take their benefits and as such there is an inherent uncertainty as to the
timing of the relevant outflows required by the provisions.
19 Financial instruments
Capital management
Capital consists of equity attributable to the equity holders of the parent. The primary objective of the Group’s capital
management is to ensure it has sufficient funds to carry out its exploration activities and safeguard the Group’s
ability to continue as a going concern. The Group is not subject to any externally imposed capital requirements.
To maintain or adjust the capital structure, the Group may issue new shares for cash, engage in active portfolio
management, or other such restructuring activities as appropriate.
No significant changes were made in the objectives, policies or processes during the year ended 31 December 2012.
Financial risk management
The Group’s principal financial assets and liabilities comprise trade and other receivables (note 15), cash and
short-term deposits (note 16) and trade and other payables (note 17), which arise directly from its operations.
The main purpose of these financial instruments is to manage short-term cash flow and provide finance for the
Group’s operations.
Details of significant accounting policies and methods adopted in respect of each class of financial asset, financial
liability and equity instrument are disclosed in note 2 to these financial statements.
The Group’s senior management oversees the management of financial risk and the Board of Directors has
established an Audit Committee to assist in the identification and evaluation of significant financial risks. Where
appropriate, consultation is sought with an external advisor to determine the appropriate response to identified
risks. The Group does not trade in derivatives for speculative purposes.
The main risks that could adversely affect the Group’s financial assets, liabilities or future cash flows are credit,
interest rate, foreign currency and liquidity risks.
(a) Credit risk
Credit risk refers to the risk that a third party will default on its contractual obligations resulting in financial loss to
the Group. The Group’s maximum exposure to credit risk of third parties is the aggregate of the carrying value of
its security deposits, cash and short-term deposits, and trade and other receivables.
The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it
the Group’s policy to securitise its trade and other receivables.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s experience of
bad debts has not been significant. No impairment loss has been recognised at the year ended 31 December 2012
(31 December 2011: nil).
99
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19 Financial instruments continued
Credit quality of financial assets
Year ended 31 December 2012
Current financial assets
Cash and cash equivalents
Trade and other receivables
Non-current financial assets
Security deposits
Equivalent S&P rating1
Internally rated
A-1 and
above
A-2 and
below
No default
customers
Total
227,743
–
227,743
–
–
–
–
9,500
9,500
227,743
9,500
237,243
6,063
6,063
4,530
4,530
–
–
10,593
10,593
1 The equivalent S&P rating of the financial assets represents that rating of the counterparty with whom the financial asset is held rather than the
rating of the financial asset itself.
Year ended 31 December 2011
Current financial assets
Cash and cash equivalents
Trade and other receivables
Non-current financial assets
Security deposits
Equivalent S&P rating1
Internally rated
Equivalent A-1
and above
S&P rating1 A-2
and below
No default
customers
Total
376,229
20,320
–
–
376,229
20,320
–
–
670
670
–
7,740
7,740
–
–
396,549
7,740
404,289
670
670
1 The equivalent S&P rating of the financial assets represents that rating of the counterparty with whom the financial asset is held rather than the
rating of the financial asset itself.
Credit risk on cash and short-term deposits is managed by limiting the term of deposits to periods of less than
twelve months and selecting counterparty financial institutions with reference to long and short-term credit ratings
published by Standard & Poor’s.
Fair values
The maximum exposure to credit risk is the fair value of security deposits and receivables. Collateral is not held
as security.
The fair values and carrying values of non-current receivables of the Group are as follows:
Security deposits
31 December 2012
31 December 2011
Carrying
amount
$’000
10,593
10,593
Fair value
$’000
10,578
10,578
Carrying
amount
$’000
670
670
Fair value
$’000
631
631
The fair values are based on cash flows discounted at a rate reflecting current market rates adjusted for counter
party credit risk. The fair values of all other financial assets and liabilities approximate their carrying values.
100
WWW.OPHIR-ENERGY.COM (b) Interest rate risk
As of 31 December 2012, the Group has no borrowings (31 December 2011: Nil) so interest rate risk is limited to
interest receivable on deposits and bank balances.
The Group’s exposure to the risk of changes in market interest rate relates primarily to the Group’s cash assets held
in short-term cash deposits. The Board monitors its cash balance on an ongoing basis and liaises with its financiers
regularly to mitigate the risk of a fluctuating interest rate. The benchmark rate used for short-term deposits
is US LIBOR.
Financial assets
Security deposits
Cash and cash equivalents
Net exposure
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
10,593
227,743
238,336
670
396,585
397,255
The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all
other variables held constant, of the Group’s loss before tax (through the impact on floating rate deposits and
cash equivalent).
The analysis below reflects a reasonably possible change in interest rates compared to 2011.
Increase/decrease in Interest rate
+0.5%
–0.5%
Effect on loss
31 Dec 2012
Effect on loss
31 Dec 2011
1,192
(1,192)
1,986
(1,986)
The sensitivity in 2012 was maintained at 0.5% as interest rate volatilities remain similar to those in the prior period.
(c) Foreign currency risk
The Group has currency exposures arising from assets and liabilities denominated in foreign currencies and
transactions executed in currencies other than the respective functional currencies.
The Group, with the exception of Ophir Services Pty Ltd, have adopted US Dollars as their functional and
reporting currencies as this represents the currency of their primary economic environment as the majority of the
Group’s funding and expenditure is US Dollars. Ophir Services Pty Ltd has adopted the Australian Dollar as its
functional currency.
The Group’s exposure to foreign currency risk is managed by holding the majority of its funds in US Dollars, as a
natural hedge, with remaining funds being held in Pounds Sterling (“GBP”), Australian Dollars (“AUD”), Euros
(“EUR”), Tanzanian Shillings (“TZS”) and CFA Franc BEAC (“XAF”) to meet commitments in those currencies.
As at 31 December 2012, the Group’s predominant exposure to foreign exchange rates related to cash and cash
equivalents held in Pounds Sterling by companies with US Dollar functional currencies.
101
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19 Financial instruments continued
At the statement of financial position date, the Group had the following exposure to GBP, XAF, TZS, EUR and AUD
foreign currency that is not designated in cash flow hedges:
Financial assets
Cash and cash equivalents
AUD
EUR
GBP
TZS
XAF
Financial liabilities
Trade and other payables
AUD
EUR
GBP
Net Exposure
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
357
443
382
176
34,676
23,909
14
306
5
176
35,796
24,648
(221)
(114)
(3,859)
(4,194)
(213)
(105)
(1,160)
(1,478)
(31,602)
23,170
The below table demonstrates the sensitivity to reasonable possible changes in GBP, XAF, TZS, EUR and AUD
against the US Dollar exchange rates with all other variables held constant, of the Group’s loss before tax and
equity (due to the foreign exchange translation of monetary assets and liabilities).
US Dollar to GBP +5% (2011: +5%)
US Dollar to GBP -5% (2011: -5%)
US Dollar to AUD +5% (2011: +5%)
US Dollar to AUD -5% (2011: -5%)
US Dollar to EUR +5% (2011: +5%)
US Dollar to EUR -5% (2011: -5%)
US Dollar to XAF +5% (2011: +5%)
US Dollar to XAF -5% (2011: -5%)
US Dollar to TZS +5% (2011: +5%)
US Dollar to AUD -5% (2011: -5%)
Loss before tax
Higher/(Lower)
2012
$’000
1,541
(1,541)
7
(7)
16
(16)
15
(15)
1
(1)
2011
$’000
(1,137)
1,137
8
(8)
3
(3)
9
(9)
–
–
Equity
Higher/(Lower)
2012
$’000
2011
$’000
–
–
1
(1)
–
–
–
–
–
–
–
–
7
(7)
–
–
–
–
–
–
Significant assumptions used in the foreign currency exposure sensitivity analysis include:
– Reasonably possible movements in foreign exchange rates were determined based on a review of the last two
years’ historical movements and economic forecaster’s expectations.
– The reasonably possible movement was calculated by taking the US Dollar spot rate as at statement of financial
position date, moving this spot rate by the reasonably possible movements and then re-converting the US Dollar
into the respective foreign currency with the new spot rate. This methodology reflects the translation
methodology undertaken by the Group.
102
WWW.OPHIR-ENERGY.COM (d) Liquidity risk
The Group has a liquidity risk arising from its ability to fund its liabilities and exploration commitments. This risk is
managed by ensuring that the Group has sufficient funds to meet those commitments by monitoring the expected
total cash inflows and outflows on a continuous basis.
All of the Group’s trade creditors and other payables (note 17) are payable in less than six months.
The Group did not make use of derivative instruments during the year or during the prior year.
(e) Disclosure of fair values
The carrying value of security deposits and financial liabilities disclosed in the financial statements as at 31
December 2012 approximate their fair value.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 1 quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2 other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly; and
Level 3 techniques which use inputs which have a significant effect on the recorded fair value that are not based
on observable market data.
Level 1
Level 2
Level 3
There were no transfers between levels during the year.
20 Share capital
a) Authorised
2,000,000,000 ordinary shares of 0.25p each
b) Called up, allotted and fully paid
327,123,901 ordinary shares in issue at the beginning of the year of 0.25p each
(31 December 2011: 225,345,528)
3,589,833 ordinary shares issued of 0.25p each on exercise of options and warrants during the year
(31 December 2011: 5,426,493)
69,290,4551 ordinary shares issued of 0.25p each during the year
(31 December 2011: 96,351,880)
400,004,189 ordinary shares of 0.25p each
(31 December 2011: 327,123,901)
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
–
–
10,578
10,578
–
–
670
670
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
7,963
7,963
1,448
1,042
15
276
21
385
1,739
1,448
1 38,790,455 ordinary shares issued as part of the Dominion acquisition (note 11). 30,500,000 ordinary shares were issued at £4.95 each in relation
to the placement and capital raising announced by the Company on 28 March 2012.
The balances classified as called up; allotted and fully paid share capital represents the nominal value of the total
number of issued shares of the Company of 0.25p each.
Fully paid shares carry one vote per share and carry the right to dividends.
103
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 Reserves
Share premium account1
Option premium reserve2
Special reserve3
Consolidation reserve4
Equity component of convertible bond5
Foreign currency translation reserve6
Accumulated losses
Non-controlling interest7
Year ended
31 Dec 2012
$’000
1,213,978
34,244
156,435
(500)
669
5,852
Year ended
31 Dec 2011
$’000
789,714
26,526
156,435
(500)
669
5,880
(307,721)
(267,112)
(246)
111,267
–
711,612
1 The share premium account represents the total net proceeds on issue of the Company’s shares in excess of their nominal value of 0.25p per
share less amounts transferred to the special reserve.
2 The option premium reserve represents the cost of share-based payments to Directors, employees and third parties.
3 The special reserve was created on reduction of the Company’s share capital on 26 July 2007. The account will be available to offset accumulated
losses once all creditors who were in existence at the date of the transfer from share premium have been settled.
4 The consolidation reserve represents a premium on acquisition of a minority interest in a controlled entity.
5 This balance represents the equity component of the convertible bond, net of costs and tax as a result of the separation of the instrument into its
debt and equity components. The bond was converted into 21,661,476 ordinary shares of 0.25p each on 21 May 2008.
6 The foreign currency translation reserve is used to record unrealised exchange differences arising from the translation of the financial statements
of entities within the Group that have a functional currency other than US Dollars.
7 The non-controlling interest relates to Dominion Uganda Ltd, where the Group acquired a 95% shareholding during the year.
22 Share-based compensation
(a) Employee incentive share option plans
Ophir Energy Company Foundation Incentive Scheme
Ophir Energy Company Foundation Incentive Scheme was established on 12 May 2004 shortly after the formation
of the Company to attract new employees on start up. The plan provided for a total of 1,450,000 options to acquire
ordinary shares at 1p per share to be issued to eligible employees. The Scheme was terminated on 24 November
2005 and all options issued under the scheme have fully vested.
Ophir Energy Company 2006 Share Option Plan
On 5 April 2006 the Board resolved to establish the Ophir Energy Company Limited 2006 Share Option Plan.
Any employee of the Company or any Subsidiary or any Director of the Company or any subsidiary who is required
to devote substantially the whole of his working time to his duties is eligible to participate under the Plan. At the
grant date the Board of Directors determine the vesting terms, if any, subject to the proviso that no more than one
half of the options become exercisable on the first and second anniversaries of the date of grant and any
performance conditions are satisfied. Options have an exercise period of up to 10 years from the date of grant.
Ophir Energy Long Term Incentive Share Option Plan
On 26 May 2011 the Board resolved to establish the Ophir Energy Long Term Incentive Share Option Plan. This was
introduced to give awards to Directors and senior management subject to outperforming a comparator group of
similarly focused oil and gas exploration companies in terms of shareholder return over a three year period. The
Plan awards a number of shares to Directors and senior management based on a multiple of salary. However, these
shares only vest after a three year period and the full award is made only if Ophir has performed in the top quartile
when compared against a selected peer group of upstream oil and gas companies.
104
WWW.OPHIR-ENERGY.COM Ophir Energy plc 2012 Deferred Share Plan
On 19 June 2012 the Board resolved to establish the Ophir Energy plc Deferred Share Plan 2012 (DSP). The plan
was introduced to provide executive management with a means of retaining and incentivising employees. The
structure of the DSP will enable a portion of participants’ annual bonuses to be deferred into options to acquire
ordinary shares in the capital of the Company. All options issued to date vest after a three year period. Options
have an exercise period of 10 years from the date of grant.
The DSP operates in conjunction with the Ophir Energy plc Employee Benefit Trust. The Trust will hold ordinary
shares in the Company for the benefit of its employees and former employees, which may then be used, on a
discretionary basis, to settle the DSP Awards as and when they are exercised.
The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in,
share options during the period for the above schemes. These are denominated in Pounds Sterling and have been
translated to US Dollars using the closing exchange rate for presentation purposes.
Outstanding options beginning of year
Granted during the year
Exercised during the year
Expired during the year
Outstanding options at end of year
Exercisable at end of year
2012
2011
Number
WAEP
Number
WAEP
11,752,240
$2.37/£1.53
7,460,580
$2.50/£1.62
2,458,753
$1.17/£0.74
5,525,980
$2.24/£1.45
(2,492,660)
$3.17/£2.00
(729,320)
$1.27/£0.82
(587,129)
$2.12/£1.34
(505,000)
$3.86/£2.50
11,131,204
$2.21/£1.40
11,752,240
$2.37/£1.53
4,208,600
$2.63/£1.66
6,726,260
$2.63/£1.70
The weighted average fair value of options granted during the year was $1.17. The range of exercise prices for
options outstanding at the end of the year was $0.00 to $10.08 (2011: $0.00 to $3.86) with a remaining exercise
period in the range of 3 to 9 years.
The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model,
taking into account the terms and conditions upon which the options were granted. The table below lists the inputs
to the model used for the year ended 31 December 2012.
2006 Share Option Plan
Long Term Incentive Plan
2012 Deferred Share Plan
Dividend yield (%)
Exercise Price
Share Volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
2012
–
2011
–
$3.96/£2.50
$3.86/£2.50
50%
1%
4-9
45%
1%
4
2012
–
nil
52%
0.40%
3-6
2011
–
nil
45%
0.8%
4
2012
–
nil
50%
1%
3
Weighted average share price
$8.13/£5.13
$3.86/£2.50
$8.13/£5.13
$3.86/£2.50
$8.13/£5.13
2011
n/a
n/a
n/a
n/a
n/a
n/a
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that
may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends,
which may also not be the actual outcome.
105
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22 Share-based compensation continued
(b) Share-based payments to suppliers of goods and services
2012
2011
Number
WAEP
Number
WAEP
Outstanding options and warrants at beginning of year
1,097,173
$1.13/£0.73
5,794,346
$1.76/£1.11
Granted during the year
Exercised during the year
–
–
–
–
(1,097,173)
$1.33/£0.84
(4,697,173)
$1.84/£1.19
Outstanding options and warrants at end of year
–
–
1,097,173
$1.13/£0.73
No options or warrants were granted during the year or prior year. The range of exercise prices of options and
warrants outstanding at the end of the year was $nil to $nil (2011: $0.0039 to $3.55) with a remaining contractual
life in the range of 6 months.
(c) Share-based payments to directors
During the year a total of 1,532,038 (2011: 1,834,674) Nil cost options to acquire ordinary shares were granted to
directors under the Ophir Energy Long Term Incentive Plan.
During the year a further total of Nil (2011: 1,000,000) options at a price of £2.50 ($3.86) to acquire ordinary shares
were granted to directors under the Ophir Energy Company 2006 Share Option Plan.
106
WWW.OPHIR-ENERGY.COM 23 Interests in jointly controlled assets
The Group has the following interests in jointly controlled assets:
Country
AGC (Operator)
Congo (Brazzaville) (Operator)
Equatorial Guinea (Operator)
Gabon (Operator)
Gabon (Operator)
Gabon (Operator)
Gabon (Operator)
Ghana (Operator)
Kenya (Operator)
Kenya (Operator)
Madagascar (Operator)
SADR (Operator)
SADR (Operator)
SADR (Operator)
SADR (Operator)
Somaliland (primarily onshore) (Operator)
Tanzania
Tanzania
Tanzania
Tanzania
Tanzania (Operator)
Uganda
Asset
Profond
Marine IX
Block R
Mbeli
Ntsina
Manga
Gnondo
Accra
Block L9
Block L15
Marovoay
Daora
Haouza
Mahbes
Mijek
Berbera
Block 1
Block 3
Block 4
Block 7
East Pande
EA4B
Beneficial
Interest 2012
(%)
44.21
48.46
80
502
502
1002
1002
203
904
904
80
50
50
50
50
755
406
406
406
807
708
95
Beneficial
Interest 2011
(%)
44.2
48.46
80
502
502
1002
1002
–
–
–
80
50
50
50
50
75
40
40
40
–
70
–
1 L’Entreprise AGC S.A. (“Entreprise”) has a 12% carried participating interest, with an option to increase such participating interest by a maximum
of 5%. in return for the reimbursement of 5% of the costs expended on petroleum operations prior to such date and is carried through the
exploration and appraisal phases. Such interest would be acquired from the other parties on a pro rata basis. Noble Energy and Rocksource
assigned their respective participating interests to Ophir Profond on 31 December 2012. A letter of no objection to the assignments, dated 29
January 2013, has been received from the AGC and approval of the assignments is pending the issue of an order by the AGC. Following the issue
of such order, Ophir’s participating interest will be 79.2%.
2 The Government of Gabon has the option to participate in the petroleum operations through a 10% participating interest in Mbeli Marin, Ntsina
Marin and Gnondo Marin; and a 15% participating interest in Manga Marin. Such interest would be acquired from the
other parties on a pro rata basis.
3 The Group’s effective interest is 18% pursuant to the carried 10% interest of the Government of Ghana. The Government of Ghana may also elect
to acquire an additional interest up to a further 15% in each development and production area. Such interest would be acquired from the other
parties on a pro rata basis.
4 The Group currently has a 90% participating interest with the Government of Kenya having a 10% carried interest. The Company is currently in
advanced negotiations to offer up to 40% of its interest in Block L9 to third parties.
5 The Government of Somaliland has a 10% back in right, exercisable within 60 days of a commercial discovery. Such interest would be acquired
from the other parties on a pro rata basis.
6 The TPDC has a 12% back in right in each of Blocks 1, 3 and 4 and a further 3% back in right in each of Blocks 3 and 4 following a declaration of
commerciality. Such interest would be acquired from the other parties on a pro rata basis.
7 The TPDC has a 15% back in right in Block 7. Such interest would be acquired from the other parties on a pro rata basis.
8 The TPDC has a 20% back in right the East Pande Block exercisable any time after approval of a development licence. Such interest would be
acquired from the other parties on a pro rata basis.
Capital commitments relating to these projects are included in note 25. There are no contingent liabilities
associated with these projects. Refer to note 2.3(n) for the Group’s accounting policy for jointly controlled assets
and liabilities.
107
ANNUAL REPORT AND ACCOUNTS 2012 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Farm out arrangements
In the prior year the Group entered into a farm out arrangement with Noble Energy Inc to share costs and risks
associated with exploration activities on the AGC Profond Block. The former partners (Noble Energy Inc. and
Rocksource) withdrew from the Profond Block during the year ended 31 December 2012. The Group and the
remaining partner (FAR Limited) elected to remain in the permit. The former partner’s assigned their respective
participating interests to the Group and is pending the issue of an order by the AGC approving the assignments.
Following the issue of such order, Ophir’s participating interest will be 79.2%.
Farm in arrangements
The Group has entered into a farm in arrangement with TAP Oil (Ghana) Limited, Afex Oil (Ghana) Limited,
Vitol Upstream (Accra) Limited and Rialto Energy (Ghana) Limited to share the costs and risks associated with
exploration activities in the Offshore Accra Contract Area. The Group has acquired a 18% beneficial interest
(20% paying interest) and operatorship of the block in return for a payment of US$1.8 million relating to back costs.
Acquisitions
During the year ended 31 December 2012 the Group acquired the Dominion group of companies (note 11) and it’s
portfolio of blocks in offshore Tanzania, Kenya, Uganda and DRC. The Group has acquired a 90% beneficial interest
in Kenya Blocks L9 and L15 and are required to contribute 100% of all costs and capital expenditure. In addition the
Group has acquired a 80% beneficial interest in Tanzania Block 7 and are required to contribute 80% of all costs
and capital expenditure.
Since the acquisition, the Group has disposed of its interest in the DRC (note 9) and formally applied to the
Ugandan government to withdraw from Block E4AB. The process of withdrawing from Uganda is on-going and
subject to the Group meeting certain commitments.
24 Operating lease commitments
At 31 December 2012 the Group was committed to making the following future minimum lease payments in
respect of operating leases over land and buildings with the following lease termination dates:
Due within one (1) year
Due later than one (1) year but within five (5) years
Due later than two (2) years but within five (5) years
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
2,076
3,961
2,097
8,134
1,296
1,772
10
3,078
25 Capital commitments
Exploration
In acquiring its oil and gas interests the Group has pledged that various work programmes will be undertaken
on each permit/interest. The exploration commitments below are an estimate of the net cost to the Group of
performing these work programmes.
Due within one (1) year
Due later than one (1) year but within two (2) years
Due later than two (2) years but within five (5) years
Year ended
31 Dec 2012
$’000
184,488
33,951
–
Year ended
31 Dec 2011
$’000
113,571
775
60
218,439
114,406
108
WWW.OPHIR-ENERGY.COM 26 Contingent Liabilities
As reported in the 2011 financial statements an individual had previously commenced action against the Group
relating to an evaluation of an interest that was held in exploration blocks within the portfolio. The Group applied
for summary judgement of the claim, which was heard in the High Court on 27 April 2012. On 15 June 2012,
summary judgement was made in favour of the Group in respect of the whole of the claim. The 21 day period
during which the claimant could appeal the judgement has now expired.
27 Related party disclosures
(a) Identity of related parties
The Group has related party relationships with its subsidiaries (refer to note 6(b) of the Company financial
statements), joint ventures (note 23) and its Directors and companies associated with its Directors identified
in the following paragraph.
Recharges from the Company to subsidiaries in the year were $6,217,298 (2011: $4,457,140). Transactions between
the Company and its subsidiaries have been eliminated on consolidation.
In April 2012 the Group completed an equity placing of 30.5 million new ordinary shares of 0.25 pence at a price
of 495 pence raising $243.0 million (£150.9 million).
Pursuant to the placing the Company placed 1,650,000 new ordinary shares with the Kulczyk Group a related
party of the Company for the purpose of the Listing Rules as it held in excess of 10% of the issued share capital of
the Company at 28 March 2012. The placing to the Kulczyk Group was on the same terms as to other subscribers
and no commission was payable to them in respect of such placing.
The aggregate value of the new ordinary shares placed to the Kulczyk Group at the placing price of 495 pence per
ordinary share was £9.17 million representing 0.42% of the market capitalisation of the Company as at the close of
business on 27 March 2012 and as a result of which the Kulczyk Group held 10.20% of the issued share capital of the
Company as at 2 April 2012.
(b) Other transactions with key management personnel
The Company made payments of $1,168 (year ended 31 December 2011: $47,868) to Vectis Petroleum Limited,
a company associated with Mr J Lander, for the provision of Mr Lander’s service as a director.
Compensation of key management personnel (including directors) is disclosed in note 6(b).
28 Events after the reporting period
On 4 March 2013 the Group announced a placing and a fully underwritten Right’s Issue.
109
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RELATION TO THE COMPANY FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Company financial statements in
accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare
Company financial statements for each financial year. Under that law, the Directors are required to prepare
Company financial statements under IFRSs as adopted by the European Union.
Under Company Law the Directors must not approve the Company financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company
for that period. In preparing the Company financial statements the Directors are required to:
– Present fairly the financial position, financial performance and cash flows of the Company;
– select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors and then apply them consistently;
– present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
– make judgements that are reasonable;
– provide additional disclosures when compliance with the specific requirements in IFRSs as adopted by the
European Union is insufficient to enable users to understand the impact of particular transactions, other events
and conditions
on the Company‘s financial position and financial performance; and
– state whether the Company financial statements have been prepared in accordance with IFRSs as adopted by
the European Union, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company‘s transactions and disclose with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the Company financial statements comply with the Companies Act 2006 and
Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for preparing the Directors’ Report, the Directors‘ Remuneration Report and
the Corporate Governance Statement in accordance with the Companies Act 2006 and applicable regulations,
including the requirements of the Listing Rules and the Disclosure and Transparency Rules.
Approved by the Board on 4 March 2013
NICK COOPER
Chief Executive Officer
110
WWW.OPHIR-ENERGY.COM COMPANY FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF OPHIR ENERGY PLC
We have audited the parent company financial statements of Ophir Energy plc for the year ended 31 December
2012 which comprise the Company Statement of Financial Position, Company Statement of Changes in Equity,
Company Statement of Cash Flows and the related notes 1 to 19. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union and as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ responsibilities Statement the Directors are responsible for the preparation
of the parent company financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the parent company financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent
company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the Directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the annual report to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the parent company financial statements:
– give a true and fair view of the state of the Company’s affairs as at 31 December 2012
– have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in
accordance with the provisions of the Companies Act 2006; and
– have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
– the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006; and
– the information given in the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
– the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
111
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF OPHIR ENERGY PLC CONTINUED
Other matter
We have reported separately on the group financial statements of Ophir Energy plc for the year ended
31 December 2012.
STEVEN DOBSON
(Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP
Statutory Auditor
London
4 March 2013
Notes:
1 The maintenance and integrity of the Ophir Energy plc web site is the responsibility of the Directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the web site.
2 Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
112
WWW.OPHIR-ENERGY.COM
COMPANY FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Other financial assets
Current assets
Trade and other receivables
Cash and short term deposits
Total assets
Current liabilities
Trade and other payables
Provisions
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Reserves
Total equity
Approved by the Board on 4 March 2013
NICHOLAS SMITH
Chairman
NICK COOPER
Chief Executive Officer
As at
31 Dec 2012
$’000
As at
31 Dec 2011
$’000
Notes
5
6
7
8
9
10
12
13
14
14
717
507
1,133,350
393,592
5,774
387
1,139,841
394,486
1,591
45,380
46,971
1,186,812
2,154
386,190
388,344
782,830
(4,258)
(372)
(4,630)
(4,007)
(242)
(4,249)
1,182,182
778,581
1,739
1,213,978
(33,535)
1,182,182
1,448
789,714
(12,581)
778,581
ANNUAL REPORT AND ACCOUNTS 2012
113
COMPANY FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Called Up
Share
Capital
$’000
Share
Premium
$’000
1,042
–
417,048
–
Options
Premium
Reserve
$’000
23,852
–
Special
Reserve
$’000
156,435
–
Equity
Component
On
Convertible
Bond
$’000
Foreign
Currency
Translation
Reserve
$’000
Accumulated
Losses
$’000
Total Equity
$’000
669
–
11,839
–
(191,140) 419,745
(16,910)
(16,910)
As at 1 January 2011
Loss for the period, net of tax
Other comprehensive income, net of tax
Total comprehensive income, net of tax
–
–
–
–
New ordinary shares issued to third parties
385
384,648
Exercise of options
Share issue costs
Share-based payments
As at 31 December 2011
Loss for the period, net of tax
Other comprehensive income, net of tax
Total comprehensive income, net of tax
–
–
–
–
New ordinary shares issued to third parties
276
423,156
1,448
–
789,714
–
26,526
–
156,435
–
669
–
11,839 (208,050)
(28,672)
–
778,581
(28,672)
–
–
–
–
–
–
–
–
–
–
9,717
(21,699)
–
2,674
8,480
(7,372)
–
7,718
21
–
–
15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(16,910)
(16,910)
–
–
–
–
385,033
9,738
(21,699)
2,674
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(28,672)
(28,672)
–
–
–
–
423,432
8,495
(7,372)
7,718
1,739 1,213,978
34,244
156,435
669
11,839
(236,722) 1,182,182
Exercise of options
Share issue costs
Share-based payments
As at 31 December 2012
114
WWW.OPHIR-ENERGY.COM COMPANY FINANCIAL STATEMENTS
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
Operating activities
Loss before taxation
Adjustments to reconcile loss before tax to net cash flows:
Interest income
Depreciation of property, plant and equipment
Amortisation of deferred costs
Provision for employee entitlements
Share-based payments
Impairment of loans to subsidiaries
Working capital adjustments
(Increase) in trade and other payables
Decrease in trade and other receivables
(Increase)/decrease in other financial assets
Cash flows from operating activities
Income taxes paid
Interest Income
Net cash flows used in operating activities
Investing activities
Purchases of property, plant and equipment
Loans to subsidiaries
Acquisition of subsidiary
Net cash flows used in investing activities
Financing activities
Share issue costs
Issue of ordinary shares
Net cash flows from financing activities
(Decrease)/increase in cash and cash equivalents for the year
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
Notes
(28,672)
(16,910)
(3,976)
210
5
130
7,718
1,021
(251)
563
(5,387)
(28,639)
–
1,433
(815)
129
–
50
2,674
–
(895)
3,184
–
(12,583)
–
409
(27,206)
(12,174)
(605)
(517,320)
(38,682)
(272)
(48,801)
–
(556,607)
(49,073)
(7,372)
250,385
243,013
(340,800)
(10)
386,190
45,380
(21,699)
394,771
373,072
311,825
1
74,364
386,190
5
4
6
5
9
115
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1 Corporate information
Ophir Energy plc (the “Company”) is a public limited company incorporated, domiciled and listed in England and
Wales. Its registered offices are located at 50 New Bond Street, London W1S 1BJ.
Ophir Energy’s business is the development of offshore and deepwater oil and gas exploration assets. The
Company has an extensive and diverse portfolio of exploration interests across East and West Africa.
The Company’s financial statements for the year ended 31 December 2012 were authorised for issue by the
Board of Directors on 4 March 2013 and the Statement of Financial Position was signed on the Board’s behalf
by Nicholas Smith and Nick Cooper.
The Company has taken advantage of the exemption provided under s408 of the Companies Act 2006 not to
publish its individual income statement and related notes.
2 Basis of preparation and significant accounting policies
2.1 Basis of preparation and statement of compliance
The Company’s financial statements have been prepared in accordance with IFRS as adopted by the European
Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on a historical cost basis except for revaluation of certain derivative
instruments measured at fair value. The financial statements are presented in US Dollars rounded to the nearest
thousand dollars ($’000) except as otherwise indicated.
Comparative figures for the period to 31 December 2011 are for the year ended on that date.
New and Amended Accounting Standards and Interpretations
The Company has adopted new and amended IFRS and IFRIC interpretations as of 1 January 2012. These are
detailed in note 2 of the group financial statements.
2.2 Significant accounting policies
(a) Investment in subsidiaries
The Company holds monetary balances with its subsidiaries of which settlement is neither planned nor likely
to occur in the foreseeable future. Such balances are considered to be part of the Company’s net investment
in its subsidiaries.
The carrying values of investments in subsidiaries are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
(b) Financial instruments
i. Cash and short term deposits
Cash and cash equivalents in the statement of financial position comprise cash at banks and at hand and short
term deposits with an original maturity of three months or less or deposits that are held for meeting short term
cash requirements which are readily convertible to cash and are subject to insignificant risks of changes in value.
Cash and cash equivalents excludes any restricted cash which is not available for use by the Group and therefore
is not considered highly liquid – for example cash set aside to cover rehabilitation obligations.
For the purpose of the company statement of cash flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
ii. Trade and other receivables
Trade receivables, which generally have 30 to 90 day terms, are recognised and carried at the lower of their
original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried
at amortised cost. Allowance is made when there is objective evidence that the Company will not be able to
recover balances in full. Evidence on non-recoverability may include indications that the debtor or group of debtors
is experiencing significant financial difficulty, the probability that they will enter bankruptcy or default or
delinquency in repayments. Balances are written off when the probability of recovery is assessed as being remote.
The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated
future cash flows, discounted at the original effective interest rate.
116
WWW.OPHIR-ENERGY.COM 2 Basis of preparation and significant accounting policies continued
iii. Trade and other payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and services provided
to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes
obligated to make future payments in respect of the purchase of those goods and services. The amounts are
unsecured and are usually paid within 30 days of recognition.
(c) Property, plant and equipment
Property, plant and equipment, which comprises furniture and fittings and computer equipment, is stated at cost
less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable
to making the asset capable of operating as intended.
Depreciation
Depreciation is provided on property, plant and equipment calculated using the straight line method at rates to
write off the cost, less estimated residual value based on prices prevailing at the statement of financial position
date, of each asset over expected useful lives ranging from 3 to 10 years.
(d) Provisions
A provision is recognised when the Company has a legal or constructive obligation as a result of a past event and it
is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can
be made of the obligation. If the effect of the time value of money is material, expected future cash flows are
discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance cost.
(e) Pensions and other post-retirement benefits
The Company does not operate its own pension plan but makes pension or superannuation contributions to
private funds of its employees which are defined contribution plans. The cost of providing such benefits are
expensed in the income statement as incurred.
(f) Employee benefits
Salaries, wages, annual leave and sick leave
Liabilities for salaries and wages, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up
to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates
paid or payable.
(g) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
(h) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement
and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific
asset or assets and the arrangement conveys a right to use the asset.
The Company has leases where the Lessor retains substantially all the risks and benefits of ownership of the asset.
Such leases are classified as operating leases and rentals payable are charged to the Income Statement on a
straight line basis over the lease term.
(i) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received and
receivable, excluding discounts, rebates, VAT and other sales taxes or duty.
The specific recognition criteria described below must also be met before revenue is recognised:
Interest income
Interest income is recognised as it accrues using the effective interest rate method, that is, the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying
amount of the financial asset.
117
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Basis of preparation and significant accounting policies continued
(j) Share-based payments
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date
at which they are granted and is recognised as an expense over the vesting period, which ends on the date on
which the relevant employees become fully entitled to the award. Fair value is determined with reference to the
market value of the underlying shares using a pricing model appropriate to the circumstances which requires
judgements as to the selection of both the valuation model and inputs. In valuing equity-settled transactions, no
account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company
(market conditions).
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition or a non-vesting condition, which are treated as vesting irrespective of whether or not the
market condition or non-vesting condition is satisfied, provided that all other vesting conditions are satisfied.
At each statement of financial position date before vesting, the cumulative expense is calculated on the basis of the
extent to which the vesting period has expired and management’s best estimate of the number of equity
instruments that will ultimately vest. The movement in cumulative expense since the previous statement of
financial position date is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or
settled award, the cost based on the original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair
value of any modification, based on the difference between the fair value of the original award and the fair value of
the modified award, both as measured on the date of the modification. No reduction is recognised if this difference
is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation and any cost
not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to
the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair
value being treated as an expense in the income statement.
For equity-settled share-based payment transactions with third parties, the goods or services received are
measured at the date of receipt by reference to their fair value with a corresponding entry in equity. If the Company
cannot reliably estimate the fair value of the goods or services received, their value is measured by reference to the
fair value of the equity instruments granted.
(k) Foreign currency translation
The functional currency of the Company is determined on an individual basis according to the primary economic
environment in which it operates.
Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange
rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the statement of financial position date. All exchange differences are
taken to the income statement.
The assets and liabilities of the Company whose functional currency is other than that of the presentation currency
of Ophir Energy Group are translated into the presentation currency, at the rate of exchange ruling at the
statement of financial position date. Income and expenses are translated at the weighted average exchange rates
for the period. The resulting exchange differences are taken directly to a separate component of equity. On
disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign
operation is recognised in the income statement.
118
WWW.OPHIR-ENERGY.COM (l) Income taxes
Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial
position date.
Current income tax is charged or credited directly to equity if it relates to items that are credited or charged to
equity. Otherwise income tax is recognised in the income statement.
Deferred tax
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements, with the following exceptions:
– where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction affects neither accounting
nor taxable profit or loss;
– in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint
ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future; and
– deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each
reporting period and are recognised to the extent that it has become probable that future taxable profit will be
available to allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected
to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or
substantively enacted at the statement of financial position date.
Deferred income tax is charged or credited directly to equity if it relates to items that are credited or charged
to equity. Otherwise deferred income tax is recognised in the income statement.
(m) Impairment
The Company assesses at each reporting date whether there is an indication that an intangible asset or item of
property plant & equipment may be impaired. If any indication exists, or when annual impairment testing for is
required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of
an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to
sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an
appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share
prices for publicly traded subsidiaries or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared
separately for each of the Company’s CGU’s to which the individual assets are allocated. These budgets and
forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the income
statement in expense categories consistent with the function of the impaired asset, except for a property
previously revalued and the revaluation was taken to other comprehensive income. In this case, the impairment
is also recognised in other comprehensive income up to the amount of any previous revaluation.
119
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Basis of preparation and significant accounting policies continued
2.3 Significant accounting judgements, estimates and assumptions
The preparation of the Company financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the
Company financial statements and reported amounts of revenues and expenses during the reporting period.
Estimates and assumptions are continuously evaluated and are based on management’s experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
However, actual outcomes can differ from these estimates.
The Company has used estimates and assumptions in deriving certain figures within the financial statements.
Such accounting estimates may not equate with the actual results which will only be known in time. The key areas
of estimation are detailed in note 2.4 of the group financial statements.
3 Loss/profit attributable to members of the parent company
The loss attributable to the members of the Company for the year ended 31 December 2012 is $28.7 million
(31 December 2011: $16.9 million).
4 Share-based compensation
(a) Employee incentive share option plans
Ophir Energy Company Foundation Incentive Scheme
Ophir Energy Company Foundation Incentive Scheme was established on 12 May 2004 shortly after the formation
of the Company to attract new employees on start up. The plan provided for a total of 1,450,000 options to acquire
ordinary shares at 1p per share to be issued to eligible employees. The Scheme was terminated on 24 November
2005 and all options issued under the scheme have fully vested.
Ophir Energy Company 2006 Share Option Plan
On 5 April 2006 the Board resolved to establish the Ophir Energy Company Limited 2006 Share Option Plan.
Any employee of the Company or any Subsidiary or any Director of the Company or any subsidiary who is required
to devote substantially the whole of his working time to his duties is eligible to participate under the Plan. At the
grant date the Board of Directors determine the vesting terms, if any, subject to the proviso that no more than one
half of the options become exercisable on the first and second anniversaries of the date of grant and any
performance conditions are satisfied. Options have an exercise period of 10 years from the date of grant.
Ophir Energy Long Term Incentive Share Option Plan
On 26 May 2011 the Board resolved to establish the Ophir Energy Long Term Incentive Share Option Plan. This was
introduced to give awards to Directors and senior management subject to outperforming a comparator group of
similarly focused oil and gas exploration companies in terms of shareholder return over a three year period. The
Plan awards a number of shares to Directors and senior management based on a multiple of salary. However, these
shares only vest after a three year period and the full award is made only if Ophir has performed in the top quartile
when compared against a selected peer group of upstream oil and gas companies.
Ophir Energy plc 2012 Deferred Share Plan
On 19 June 2012 the Board resolved to establish the Ophir Energy plc Deferred Share Plan 2012 (DSP). The plan
was introduced to provide executive management with a means of retaining and incentivising employees. The
structure of the DSP will enable a portion of participants’ annual bonuses to be deferred into options to acquire
ordinary shares in the capital of the Company. All options issued to date vest after a three year period. Options
have an exercise period of 10 years from the date of grant.
120
WWW.OPHIR-ENERGY.COM 4 Share-based compensation continued
The DSP operates in conjunction with the Ophir Energy plc Employee Benefit Trust. The Trust will hold ordinary
shares in the Company for the benefit of its employees and former employees, which may then be used, on a
discretionary basis, to settle the DSP Awards as and when they are exercised.
The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in,
share options during the period for the above schemes. These are denominated in Pounds Sterling and have been
translated to US Dollars using the closing exchange rate for presentation purposes.
Outstanding options beginning of year
Granted during the year
Exercised during the year
Expired during the year
Outstanding options at end of year
Exercisable at end of year
2012
2011
Number
WAEP
Number
WAEP
11,752,240
$2.37/£1.53
7,460,580
$2.50/£1.62
2,458,753
$1.17/£0.74
5,525,980
$2.24/£1.45
(2,492,660)
$3.17/£2.00
(729,320)
$1.27/£0.82
(587,129)
$2.12/£1.34
(505,000)
$3.86/£2.50
11,131,204
$2.21/£1.40
11,752,240
$2.37/£1.53
4,208,600
$2.63/£1.66
6,726,260
$2.63/£1.70
The weighted average fair value of options granted during the year was $1.17. The range of exercise prices for
options outstanding at the end of the year was $0.00 to $10.08 (2011: $0.00 to $3.86) with a remaining exercise
period in the range of 3 to 9 years.
The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model,
taking into account the terms and conditions upon which the options were granted. The table below lists the inputs
to the model used for the year ended 31 December 2012.
2006 Share Option Plan
Long Term Incentive Plan
2012 Deferred Share Plan
Dividend yield (%)
Exercise Price
Share Volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Weighted average share price
2012
–
2011
–
$3.96/£2.50
$3.86/£2.50
50%
1%
4-9
45%
1%
4
2012
–
Nil
52%
0.40%
3-6
2011
–
Nil
45%
0.8%
4
2012
–
Nil
50%
1%
3
$8.13/£5.13
$3.86/£2.50
$8.13/£5.13
$3.86/£2.50
$8.13/£5.13
2011
n/a
n/a
n/a
n/a
n/a
n/a
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that
may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends,
which may also not be the actual outcome.
121
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(b) Share-based payments to suppliers of goods and services
2012
2011
Number
WAEP
Number
WAEP
Outstanding options and warrants at beginning of year
1,097,173
$1.13/£0.73
5,794,346
$1.76/£1.11
Granted during the year
Exercised during the year
–
–
–
–
(1,097,173)
$1.33/£0.84
(4,697,173)
$1.84/£1.19
Outstanding options and warrants at end of year
–
–
1,097,173
$1.13/£0.73
No options or warrants were granted during the year or prior year. The range of exercise prices of options and
warrants outstanding at the end of the year was $nil to $nil (2011: $0.0039 to $3.55) with a remaining contractual
life in the range of 6 months.
(c) Share-based payments to directors
During the year a total of 1,532,038 (2011: 1,834,674) Nil cost options to acquire ordinary shares were granted to
directors under the Ophir Energy Long Term Incentive Plan.
During the year a further total of Nil (2011: 1,000,000) options at a price of £2.50 ($3.86) to acquire ordinary shares
were granted to directors under the Ophir Energy Company 2006 Share Option Plan.
5 Property, plant and equipment
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
767
605
(185)
1,187
260
–
210
470
507
717
495
272
–
767
131
–
129
260
364
507
Office furniture and equipment
Cost
Balance at the beginning of the year
Additions
Disposals
Balance at the end of the year
Depreciation
Balance at the beginning of the year
Disposals
Depreciation charge for the year
Balance at the end of the year
Net book value
Balance at the beginning of the year
Balance at the end of the year
122
WWW.OPHIR-ENERGY.COM 6 Investments in subsidiaries
(a) Subsidiary companies
Non-current loans to subsidiaries
Balance at the beginning of the year
Advances during the year
Ophir Holdings Limited
Ophir Services Pty Limited
Ophir Ventures (Jersey) Limited
Dominion Petroleum Limited
Dominion Petroleum Acquisitions Limited
Dominion Oil & Gas (Tanzania) Limited
Dominion Tanzania Limited
Dominion Uganda Limited
Dominion Petroleum Administrative Services Limited
Dominion Petroleum Kenya L15 (Kenya) Limited
Dominion Petroleum Kenya Limited
Dominion Petroleum Congo SPRL
Balance at end of year
Allowance for impairment
Balance at the beginning of the year
Additional allowance
Balance at the end of the year
Total
Book value
At the beginning of the year
At the end of the year
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
499,714
450,913
248,800
4,800
241,893
95
17,103
80
758
1,021
4,162
283
8,059
(6,496)
48,801
–
–
–
–
–
–
–
–
–
–
–
1,020,272
499,714
(106,122)
(106,122)
(1,021)
(107,143)
913,129
–
(106,122)
393,592
393,592
913,129
344,791
393,592
Loans to subsidiaries are unsecured, interest free and form part of the Company’s investments in subsidiaries.
The loans have no particular repayment terms and the Company has indicated that it does not intend to demand
repayment in the foreseeable future. The impairment charge primarily relates to a reduction in value of the
subsidiaries associated with the write off of exploration expenditure.
Loans to subsidiaries are denominated in US Dollars.
123
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6 Investments in subsidiaries continued
(b) The Company has investments in the following subsidiary undertakings:
Country of
incorporation
Principal activity Class of shares
Holding
Book value of
investment
31 Dec 2012 ($)
Book value of
investment
31 Dec 2011 ($)
Subsidiaries of Ophir Energy plc
Ophir Services Pty Limited
Ophir Holdings Limited
Ophir Asia Limited
Ophir Ventures (Jersey) Limited
United Kingdom
Dominion Petroleum Limited
Bermuda
Exploration
Australia Group Services
Jersey C.I.
Jersey C.I.
Holding
Dormant
Holding
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
2
8
–
145
220,221,437
220,221,592
2
8
–
–
–
10
The Group acquired 100% of the share capital of Dominion Petroleum Limited, (Dominion), an AIM quoted group
of companies operating in the oil and gas exploration industry on 2 February 2012.
The net book value of investment in subsidiaries disclosed above at 31 December 2012 is $1,133.4 million (31
December 2011: $393.6 million)
Subsidiaries of Ophir Holdings Limited
Ophir AGC (Profond) Limited
Ophir Congo (Marine IX) Limited
Ophir Equatorial Guinea Holdings Limited
Ophir Gabon (Gnondo) Limited
Ophir Gabon (Manga) Limited
Ophir Gabon (Mbeli) Limited
Ophir Gabon (Ntsina) Limited
Ophir JDZ Limited
Ophir Somaliland (Berbera) Limited
Ophir Madagascar Limited
Ophir East Africa Holdings Limited
Ophir East Africa (1) Limited
Ophir Ghana (Accra) Limited
Subsidiaries of Ophir Equatorial Guinea Holdings Limited
Ophir Equatorial Guinea (Block R) Limited
Subsidiary of Ophir JDZ Limited
Ophir Energy Company Nigeria (JDZ) Limited
Subsidiaries of Ophir East Africa Holdings Limited
Ophir Tanzania (Block 1) Limited
Ophir Tanzania (Block 3) Limited
Ophir Tanzania (Block 4) Limited
Ophir East Africa Ventures Limited
Ophir Pipeline Limited
Ophir Gas Marketing Limited
Ophir LNG Limited
Subsidiaries of Dominion Petroleum Limited
Dominion Petroleum Acquisitions Limited
DOMPet Limited
Dominion Investments Limited
124
Country of
incorporation
Principal activity Class of shares
Holding
31 Dec 2012
Holding
31 Dec 2011
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Holding
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Holding
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Jersey C.I.
Holding
Dormant
Jersey C.I.
Exploration
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
Jersey C.I.
Exploration
Ordinary
100%
100%
Nigeria
Dormant
Ordinary
100%
100%
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Exploration
Jersey C.I.
Jersey C.I.
Jersey C.I.
Holding
Holding
Holding
Bermuda
Exploration
Bermuda
Exploration
Tanzania
Exploration
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
99.96%
100%
100%
100%
100%
–
–
–
–
–
–
WWW.OPHIR-ENERGY.COM Country of
incorporation
Principal activity Class of shares
Holding
31 Dec 2012
Holding
31 Dec 2011
Dominion Acquisitions Limited
BVI
Exploration
Dominion Petroleum Administrative Services Limited
United Kingdom
Exploration
Kenya
Exploration
DRC
Exploration
Ordinary
Ordinary
Ordinary
Ordinary
Dominion Kenya Holdings Limited
Dominion Petroleum Congo SPRL
Subsidiaries of Dominion Petroleum
Acquisitions Limited
Dominion Tanzania Limited
Dominion Oil and Gas Limited
Dominion Oil and Gas Limited
Subsidiaries of Dominion Oil & Gas Limited
Dominion Oil and Gas Limited
Subsidiaries of DOMPet Limited
Dominion Tanzania Limited
Subsidiaries of Dominion Acquisitions Limited
Dominion Uganda Limited
Dominion Somaliland Limited
Dominion Petroleum Congo SPRL
Subsidiaries of Dominion Petroleum Administrative
Services Limited
Dominion Petroleum Kenya Limited
Dominion Petroleum L15(Kenya) Limited
Subsidiaries of Dominion Kenya Holdings Limited
Dominion Petroleum Kenya Limited
Dominion Petroleum L15(Kenya) Limited
100%
100%
100%
1%
0.1%
100%
100%
Tanzania
Exploration
BVI
Exploration
Tanzania
Exploration
Ordinary
Ordinary
Ordinary
Tanzania
Exploration
Ordinary
99.9%
Tanzania
Exploration
Ordinary
99.9%
Uganda
Exploration
Somaliland
Exploration
Congo
Exploration
Ordinary
Ordinary
Ordinary
Kenya
Kenya
Exploration
Exploration
Ordinary
Ordinary
Kenya
Kenya
Exploration
Exploration
Ordinary
Ordinary
95%
100%
99%
50%
50%
50%
50%
–
–
–
–
–
–
–
–
–
–
–
–
–
All subsidiaries have a functional currency of US Dollars with the exception of Ophir Services Pty Ltd which has an
Australian Dollar functional currency.
7 Other financial assets
Non-Current
Security deposits – Rental properties
Security deposits – Exploration commitments1
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
1,274
4,500
5,774
387
–
387
1 Floating interest deposits pledged to third parties or banks as security in relation to the Group’s exploration commitments.
There are no receivables that are past due or impaired.
125
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8 Trade and other receivables
Other debtors
Prepayments
Amounts due to subsidiary undertakings
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
585
744
262
1,591
2,473
–
319
2,154
All debtors are current. There are no receivables that are past due or impaired.
Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.
9 Cash and short term deposits
Cash
Short-term deposit
Year ended
31 Dec 2012
$’000
45,380
–
45,380
Year ended
31 Dec 2011
$’000
54,964
331,226
386,190
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits
are made for varying periods, depending on the immediate cash requirements of the Group and earn interest
at the various short-term deposit rates. Short term deposits are readily convertible to cash and are subject
to insignificant risks of changes in value. The fair value of cash and cash equivalents is $45.4 million
(31 December 2011: $386.2 million).
10 Trade and other payables
Trade creditors
Accruals
Amounts due to subsidiary undertakings
Trade payables are unsecured and are usually paid within 30 days of recognition.
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
1,398
2,410
450
4,258
998
3,009
–
4,007
126
WWW.OPHIR-ENERGY.COM 11 Financial instruments
The Company utilises the same financial risk and capital management as the Group. Refer to note 19 of the group
financial statements for further details.
(a) Credit quality of financial assets
Year ended 31 December 2012
Current financial assets
Cash and cash equivalents
Trade and other receivables
Non-current financial assets
Security deposits
Equivalent S&P rating1
Internally rated
A-1 and above
$’000
A-2 and below
$’000
No default
customers
$’000
Total
$’000
45,380
–
45,380
–
–
–
–
–
5,774
5,774
–
585
585
–
–
45,380
585
45,965
5,774
5,774
1 The equivalent S&P rating of the financial assets represents that rating of the counterparty with whom the financial asset is held rather than the
rating of the financial asset itself.
Year ended 31 December 2011
Current financial assets
Cash and cash equivalents
Trade and other receivables
Non-current financial assets
Security deposits
Equivalent S&P rating1
Internally rated
A-1 and above
$’000
A-2 and below
$’000
No default
customers $’000
Total $’000
366,190
20,000
–
–
366,190
20,000
–
–
387
387
–
1,688
1,688
–
–
386,190
1,688
697,868
387
387
1 The equivalent S&P rating of the financial assets represents that rating of the counterparty with whom the financial asset is held rather than the
rating of the financial asset itself.
Credit risk on cash and short-term deposits is managed by limiting the term of deposits to periods of less than
twelve months and selecting counterparty financial institutions with reference to long and short-term credit ratings
published by Standard & Poor’s.
Fair values
The maximum exposure to credit risk is the fair value of security deposits and receivables. Collateral is not held
as security.
The fair values and carrying values of non-current receivables of the Company are as follows:
Year ended 31 December 2012
Security deposits
31 Dec 2012
31 Dec 2011
Carrying amount
$’000
Fair value
$’000
Carrying amount
$’000
Fair value
$’000
5,774
5,774
5,774
5,774
387
387
387
387
The fair values are based on cash flows discounted at a rate reflecting current market rates adjusted for counter
party credit risk. The fair values of all other financial assets and liabilities approximate their carrying values.
127
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 Financial instruments continued
(b) Interest rate risk
As of 31 December 2012, the Company has no borrowings (31 December 2011: Nil) so interest rate risk is limited
to interest receivable on deposits and bank balances.
The Company’s exposure to the risk of changes in market interest rate relates primarily to the Company’s cash
assets held in short-term cash deposits. The Board monitors its cash balance on an ongoing basis and liaises with
its financiers regularly to mitigate the risk of a fluctuating interest rate. The benchmark rate used for short-term
deposits is US LIBOR.
Financial assets
Security deposits
Cash and cash equivalents
Net exposure
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
5,774
45,380
51,154
387
386,190
386,577
The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other
variables held constant, of the Company’s loss before tax (through the impact on floating rate deposits and
cash equivalent).
The analysis below reflects a reasonably possible change in interest rates compared to 2011.
Increase/decrease in interest rate
+0.5%
-0.5%
Effect on loss 31
Dec 2012
$’000
Effect On Loss 31
Dec 2011
$’000
256
(256)
1,935
(1,935)
The sensitivity in 2012 was maintained at 0.5% as interest rate volatilities remain similar to those in the prior period.
(c) Foreign currency risk
The Company adopts the same policies to manage foreign currency risk as the Group. Refer to note 19(c) of the
group financial statements for further details.
As at 31 December 2012, the Company’s predominant exposure to foreign exchange rates related to cash and cash
equivalents held in Pounds Sterling.
At the statement of financial position date, the Company had the following exposure to GBP and EUR foreign
currency that is not designated in cash flow hedges:
Financial assets
Cash and cash equivalents
EUR
GBP
Financial liabilities
Trade and other payables
GBP
Net exposure
128
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
44
347
391
48
23,891
23,939
(3,809)
(3,809)
(3,418)
(998)
(998)
22.941
WWW.OPHIR-ENERGY.COM 11 Financial instruments continued
The below table demonstrates the sensitivity to reasonable possible changes in GBP and EUR against the US Dollar
exchange rates with all other variables held constant, of the Company’s loss before tax and equity (due to the
foreign exchange translation of monetary assets and liabilities).
US Dollar to GBP Sterling +5% (2011: +5%)
US Dollar to GBP Sterling -5% (2011: -5%)
US Dollar to EUR +5% (2011: +5%)
US Dollar to EUR -5% (2011: -5%)
Loss before tax higher/(lower)
2012
$’000
(173)
173
2
(2)
2011
$’000
1,145
(1,145)
2
(2)
Significant assumptions used in the foreign currency exposure sensitivity analysis include:
1 Reasonably possible movements in foreign exchange rates were determined based on a review of the last two
years’ historical movements and economic forecaster’s expectations.
2 The reasonably possible movement was calculated by taking the US Dollar spot rate as at statement of financial
position date, moving this spot rate by the reasonably possible movements and then re-converting the US Dollar
into the respective foreign currency with the new spot rate. This methodology reflects the translation
methodology undertaken by the Company.
(d) Liquidity risk
The Company has a liquidity risk arising from its ability to fund its liabilities. This Company utilises the same
policies to mitigate liquidity risk as the rest of the Group. Refer to note 19(d) of the group financial statements
for further details.
All of the Company’s trade creditors and other payables (note 7) are payable in less than six months.
The Company did not make use of derivative instruments during the year or during the prior year.
(e) Disclosure of fair values
The carrying value of security deposits and financial liabilities disclosed in the financial statements as at 31 December
2012 approximate their fair value.
Fair value hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments
by valuation technique:
Level 1
quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2
other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly; and
Level 3
techniques which use inputs which have a significant effect on the recorded fair value that are not based
on observable market data.
Level 1
Level 2
Level 3
There were no transfers between levels during the year
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
–
–
5,774
5,774
–
–
387
387
129
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12 Provisions
At 1 January 2012
Arising during the year
Utilised
At 31 December 2012
Employee annual
leave $’000
242
422
(292)
372
The provisions are made for statutory or contractual employee entitlements. It is anticipated that these costs will
be incurred when employees choose to take their benefits and as such there is an inherent uncertainty as to the
timing of the relevant outflows required by the provisions.
13 Share capital
(a) Authorised
2,000,000,000 ordinary shares of 0.25p each
(b) Called up, allotted and fully paid
327,123,901 ordinary shares in issue at the beginning of the year of 0.25p each
(31 December 2011: 225,345,528)
3,589,833 ordinary shares issued of 0.25p each on exercise of options and warrants during the period
(31 December 2011: 5,426,493)
69,290,4551 ordinary shares issued of 0.25p each during the period
(31 December 2011: 96,351,880)
400,004,189 ordinary shares of 0.25p each
(31 December 2011: 327,123,901)
Year ended
31 Dec 2012
$’000
7,963
Year ended
31 Dec 2011
$’000
7,963
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
1,448
1,042
15
276
21
385
1,739
1,448
1 38,790,455 ordinary shares issued as part of the Dominion acquisition (refer to note 11 of the group financial statements). 30,500,000 ordinary
shares were issued at £4.95 each in relation to the placement and capital raising announced by the Company on 28 March 2012.
The balances classified as called up; allotted and fully paid share capital represents the nominal value of the total
number of issued shares of the Company of 0.25p each.
Fully paid shares carry one vote per share and carry the right to dividends.
130
WWW.OPHIR-ENERGY.COM 14 Reserves
Share premium account1
Other reserves:
Option premium reserve2
Special reserve3
Equity component of convertible bond4
Foreign currency translation reserve5
Retained earnings
Year ended
31 Dec 2012
$’000
1,213,978
34,244
156,435
669
11,839
Year ended
31 Dec 2011
$’000
789,714
26,526
156,435
669
11,839
(236,722)
(208,050)
(33,535)
(12,581)
1 The share premium account represents the total net proceeds on issue of the Company’s shares in excess of their nominal value of 0.25p per
share less amounts transferred to the special reserve.
2 The option premium reserve represents the cost of share-based payments to Directors, employees and third parties.
3 The special reserve was created on reduction of the Company’s share capital on 26 July 2007. The account will be available to offset accumulated
losses once all creditors who were in existence at the date of the transfer from share premium have been settled.
4 This balance represents the equity component of the convertible bond, net of costs and tax as a result of the separation of the instrument into its
debt and equity components. The bond was converted into 21,661,476 ordinary shares of 0.25p each on 21 May 2008.
5 The foreign currency translation reserve is used to record unrealised exchange differences arising from the translation of the financial statements
of entities within the Group that have a functional currency other than US Dollars.
15 Operating lease commitments
At 31 December 2012 the Company was committed to making the following future minimum lease payments in
respect of operating leases over land and buildings with the following lease termination dates:
Due within one (1) year
Due later than one (1) year but within five (5) years
Due later than two (2) years but within five (5) years
16 Borrowing facilities
The Company had no borrowing facilities as at 31 December 2012 (2011: Nil).
Year ended
31 Dec 2012
$’000
Year ended
31 Dec 2011
$’000
1,423
3,320
2,097
6,840
557
669
–
1,226
131
ANNUAL REPORT AND ACCOUNTS 2012 COMPANY FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17 Related party transactions
(a) Identity of related parties
The Company has related party relationships with its subsidiaries (note 6) and its Directors and companies
associated with its Directors identified in the following paragraph.
(b) Other transactions with key management personnel
The Company made payments of $1,168 (year ended 31 December 2011: $47,868) to Vectis Petroleum Limited,
a company associated with Mr J Lander, for the provision of Mr Lander’s service as a Director.
In April 2012 the Company completed an equity placing of 30.5 million new ordinary shares of 0.25 pence at
a price of 495 pence raising $242.0 million (£150.9 million).
Pursuant to the placing the Company placed 1,650,000 new ordinary shares with the Kulczyk Group a related
party of the Company for the purpose of the Listing Rules as it held in excess of 10% of the issued share capital of
the Company at 28 March 2012. The placing to the Kulczyk Group was on the same terms as to other subscribers
and no commission was payable to them in respect of such placing.
The aggregate value of the new ordinary shares placed to the Kulczyk Group at the placing price of 495 pence
per ordinary share was £9.17 million representing 0.42% of the market capitalisation of the Company as at the close
of business on 27 March 2012 and as a result of which the Kulczyk Group held 10.20% of the issued share capital of
the Company as at 2 April 2012.
Compensation of key management personnel (including directors) is disclosed in note 6(b) of the group
financial statements.
18 Contingent Liabilities
As reported in the 2011 financial statements an individual had previously commenced action against the Group
relating to an evaluation of an interest that was held in exploration blocks within the portfolio. The Group applied
for summary judgement of the claim, which was heard in the High Court on 27 April 2012. On 15 June 2012,
summary judgement was made in favour of the Group in respect of the whole of the claim. The 21 day period
during which the claimant could appeal the judgement has now expired.
19 Events after reporting period
On 4 March 2013 the Group announced a placing and a fully underwritten Right’s Issue.
132
WWW.OPHIR-ENERGY.COM SHAREHOLDER INFORMATION
Registered and Other Offices
The Company’s registered office and head office is:
50 New Bond Street
First Floor
London W1S 1BJ
Telephone: +44 (0)20 7290 5800
Website: www.ophir-energy.com
Other offices are located in:
Australia
464 Hay Street
Subiaco, WA 6008
Postal address: PO Box 463
West Perth, WA 6872
Australia
Tel: +61 (0)8 9212 9600
Tanzania
Plot 1228, Block 2 Masaki Street
Msasani Peninsula
Postal address: PO Box 23184
Dar es Salaam
United Republic of Tanzania
Tel: +255 (0)22 221 5500
Equatorial Guinea
APDO 274, Ophir House
Km 5, Carretera Aeropuerto
Malabo
Equatorial Guinea
Tel: +240 333 09 84 74
Registrars
The Company has appointed Capita Registrars to
maintain its register of members. Shareholders should
contact Capita using the details below in relation to all
general enquiries concerning their shareholding:
Capita Registrars
The Registry
34 Beckenham Road
Beckenham, Kent BR3 4TU
Telephone: 0871 664 0300*
International dialling: +44 20 8639 3399
Website: www.capitaregistrars.com
* Lines are open Monday – Friday from 9.00am – 5.30pm, excluding
bank holidays. Calls to 0871 numbers are charged at 10p per minute
from a BT landline. Other telephone providers’ costs may vary.
Financial Calendar
Annual General Meeting
Half year results announcement
Full year results announcement
6 June 2013
14 August 2013
March 2014
Trading Market and Shareholder Profiles
Ophir Energy plc’s shares are traded on the London
Stock Exchange with ticker OPHR. The Company’s
SEDOL number is B24CT19 and ISIN number is
GB00B24CT194.
Unsolicited Mail
The Company is required by law to make its share
register available on request to unconnected
organisations. As a consequence, shareholders may
receive unsolicited mail, including mail from
unauthorised investment firms. If you wish to limit the
amount of unsolicited mail received, please contact the
Mailing Preference Service, an independent organisation
whose services are free for consumers. Further details
can be obtained from:
Mailing Preference Service
MPS Freepost LON 20771
London W1E 0ZT
Website: www.mpsonline.org.uk
Further information on share fraud and unauthorised
investment firms targeting UK investors (“boiler room
scams”) may be obtained from the website of the
Financial Services Authority:
(http://www.fsa.gov.uk/pages/consumerinformation/
scamsandswindles/investment_scams/boiler_room/
index.shtml)
133
ANNUAL REPORT AND ACCOUNTS 2012 SHAREHOLDER INFORMATION
CONTINUED
Shareholder profile by size of holding as at 31 December 2012
Range
1 – 1,000
1,001 – 10,000
10,001 – 100,000
10,001 – 1,000,000
1,000,001 – 10,000,000
10,000,000+
Shareholder profile by category as at 31 December 2012
Category
Private shareholders
Nominees and other institutional investors
No. of Holders
413
311
212
159
55
6
% of total
35.73%
26.90%
18.34%
13.75%
4.76%
0.52%
Shares held
31.12.2012
165,980
1,022,455
8,099,810
52,747,662
142,090,698
195,877,584
% of total
0.04%
0.26%
2.02%
13.19%
35.52%
48.97%
1,156
100.00% 400,004,189
100.00%
No. of Holders
331
825
1,156
% of total
28.63%
Shares held
31.12.2012
9,041,863
71.37%
390,962,326
% of total
2.26%
97.74%
100.00% 400,004,189
100.00%
It should be noted that many private investors hold their shares through nominee companies and therefore the
percentage of shares held by private shareholders may be higher than that shown.
134
WWW.OPHIR-ENERGY.COM Advisors
Auditors:
Ernst & Young LLP
One More London Place
London SE1 2AF
United Kingdom
Bankers:
HSBC Bank plc
70 Pall Mall
London SW1 5EY
United Kingdom
HSBC Bank Australia Limited
188-190 St George’s Terrace
Perth WA 6000
Australia
Financial PR Advisors:
Brunswick Group LLP
16 Lincoln’s Inn Fields
London WC2A 3ED
United Kingdom
Solicitors:
Linklaters
One Silk Street
London EC2Y 8HQ
United Kingdom
Corporate brokers:
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
Oriel Securities Limited
150 Cheapside
London EC2V 6ET
United Kingdom
RBC Capital Markets
Thames Court, One Queenhithe
London EC4V 3DQ
United Kingdom
135
ANNUAL REPORT AND ACCOUNTS 2012 GLOSSARY
Appraisal well
A well drilled to follow up a discovery and evaluate
its commercial potential
AVO
Amplitude variation with offset
bbl.
Barrel(s) of oil or condensate
BCF
Billion cubic feet
bscf
Billion standard cubic feet
bo
Oil shrinkage factor
boe
barrel of oil equivalent
bopd
barrels of oil per day
Capex
Capital expenditure
CF
Cash flow
CFD
Contract for difference
Contingent resources
quantities of resources estimated, at a given date, to be potentially
recoverable from known accumulations by the application of
development projects, but not currently considered to be
commercially recoverable due to one or more contingencies
CRM
Cost Relationship Management
CR
Corporate responsibility
CSR
Corporate social responsibility
DHI
Direct hydro carbon indicators
E&P
Exploration and Production
E&A
Exploration and Appraisal
EEA
Exclusive Exploitation Authorisation
EITI
Extractive Industries Transparency Initiative
EIA
Environmental Impact Assessment
EHSS
Environment, Health, Safety and Security
ERP
Emergency Response Plan
Exploration well
A well drilled to explore a potential discovery
Farm-in
To acquire an interest in a license from another party
Farm-out
To assign an interest in a license to another party
FLNG
Floating LNG technology
GAV
Gross Asset Value
GIP
Gas In Place
Greenfield projects
a project which lacks any constraints by prior work.
HSE
Health, Safety, Environment
136
IAS regulation
International Accounting Standards
IFRS
International Financial Reporting Standards
IFRIC
International Financial Reporting Interpretation
IOC
International Oil Companies
IPO
Initial Public Offerings
ITNHGE
A collaborative educational initiative
JOA
Joint Operating Agreement
JV
Joint Venture
LNG
Liquefied natural gas
LTI
Lost Time Incident
LTIP
Long Term Investment Plan
Mmbbl
Million barrels
Mmcfd
million cubic feet of gas per day
NAV
Net Asset Value
NGO
Non-Governmental Organisation
NOC
National Oil Companies
O&G
Oil and Gas
OIM
Offshore Instillation Manager
Opex
Operating expenditure
PSA
Pooling and sharing agreement
PSC
Production Sharing Contract
PSDM
Pre Stack Depth Migration
PV
Present value of money
ROI
Return on investment
Spud
To commence drilling a well
TCF
Trillion cubic feet
TD
Total Depth
TPDC
Tanzania Petroleum Development Corporation
TVDSS
True Vertical Depth SubSea
2C
Best estimate of contingent resources
1P
Proven
2P
Proven and Probable
3P
Proven, Probable and Possible
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Ophir Energy plc
Registered office:
50 New Bond Street
First Floor
London
W1S 1BJ
United Kingdom
T +44(0)20 7290 5800
F +44(0)20 7290 5821
www.ophir-energy.com