Capital Regulatory News (CAPD)

For Immediate Release

25 August 2015

Statement of Financial Position Data

H1 2015 $m

FY 2014 $m

Statement of Cash Flow Data

H1 2015 $m

H1 2014 $m

$m

$m

$m

$m

Non-Current Assets

 53.2

 56.9

Operating cash flows before working capital changes

 8.1

 12.6

Current Assets

 53.3

 56.7

Adjustments for working capital changes

 2.2

 (0.6)

Total Assets

 106.5

 113.6

Cash from operations

 10.3

 12.0

Non-Current Liabilities

 13.7

 15.0

Finance charges paid

 (0.5)

 (0.7)

Current Liabilities

 7.7

 7.6

Taxation paid

 (0.2)

 (0.5)

Total Liabilities

 21.4

 22.6

Net cash generated from operating activities

 9.6

 10.8

Equity

 85.1

 91.0

Investing Activities

Cash

 15.2

 14.7

Net cash used in investing activities

 (4.3)

 (10.6)

Debt

 13.1

 15.1

Financing Activities

Net Cash (Debt)

 2.2

 (0.4)

Long term liabilities repaid

 (2.0)

 (1.1)

Gearing (net debt/equity)

0.0%

0.4%

Dividend paid

 (2.6)

 -

Net cash generated (used) in financing activities

 (4.6)

 (1.1)

Net increase (decrease) in cash

 0.7

 (0.9)

Opening cash balance

14.7

12.3

FX on cash

(0.2)

-

Closing cash balance

15.2

11.4

CAPITAL DRILLING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2015

Six months ended

Reviewed

Reviewed

Notes

30 June 2015

30 June 2014

$

$

Revenue

38,952,636

53,796,697

Cost of sales

(25,523,338)

(35,245,436)

Gross profit

13,429,298

18,551,261

Administration costs

(5,550,683)

(6,030,146)

Depreciation

(7,302,353)

(8,473,176)

Profit from operations

576,262

4,047,939

Interest income

51,140

-

Share of losses from associate

7

(101,109)

-

Finance charges

(491,025)

(727,582)

Profit before taxation

35,268

3,320,357

Taxation

3

(3,231,984)

(1,545,186)

(Loss) profit for the period

(3,196,716)

1,775,171

Other comprehensive (loss) income:

Other comprehensive (loss) income to be reclassified to profit or loss in subsequent periods:

Exchange differences on translation of foreign operations

(138,749)

3,785

Net fair value loss on available-for-sale financial assets, net of taxes of $0

(58,305)

-

Total comprehensive (loss) income for the period

(3,393,770)

1,778,956

(Loss) earnings per share:

Basic (cents per share)

4

(2.4)

1.3

Diluted (cents per share)

4

(2.4)

1.3

CAPITAL DRILLING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30 June 2015

Reviewed

Audited

Notes

30 June 2015

31 December 2014

 $

 $

ASSETS

Non-current assets

Property, plant and equipment

6

52,708,326

56,706,524

Investment in associate

7

506,079

-

Deferred taxation

-

160,361

Total non-current assets

53,214,405

56,866,885

Current assets

Inventory

21,788,797

22,670,509

Trade and other receivables

11,032,091

10,761,649

Prepaid expenses and other assets

3,451,496

7,001,416

Taxation

1,309,162

1,397,631

Investments

421,237

189,440

Cash and cash equivalents

15,249,261

14,743,976

Total current assets

53,252,044

56,764,621

Total assets

106,466,449

113,631,506

EQUITY AND LIABILITIES

Equity

Share capital

8

13,460

13,459

Share premium

8

21,566,856

21,561,190

Equity-settled employee benefits reserve

235,704

205,146

Foreign currency translation reserve

-

138,749

Available for sale reserve

(58,305)

-

Retained earnings

63,335,113

69,089,299

Total equity

85,092,828

91,007,843

Non-current liabilities

Long-term liabilities

9

13,000,000

15,000,000

Deferred taxation

692,184

22,277

Total non-current liabilities

13,692,184

15,022,277

Current liabilities

Trade and other payables

6,230,600

7,313,435

Taxation

1,378,722

188,725

Current portion of long-term liabilities

9

72,115

99,226

Total current liabilities

7,681,437

7,601,386

Total equity and liabilities

106,466,449

113,631,506

CAPITAL DRILLING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2015

Reserves

Share capital

Share premium

Retained earnings

Equity-settled employee benefits reserve

Foreign currency translation reserve

Available for sale reserve

Total equity

$

$

$

$

$

$

$

Balance at 31 December 2013 - Audited

13,459

 21,561,190

69,644,816

205,146

47,391

-

91,472,002

Total comprehensive income for the period

-

-

1,775,171

-

3,785

-

1,778,956

Balance at 30 June 2014 - Reviewed

13,459

21,561,190

71,419,987

205,146

51,176

-

93,250,958

Balance at 31 December 2014 - Audited

 13,459

21,561,190

 69,089,299

205,146

138,749

-

91,007,843

Issue of shares

1

5,666

-

(5,667)

-

-

-

Recognition of share-based payments

-

-

-

36,225

-

-

36,225

Total comprehensive income for the period

-

-

(3,196,716)

-

(138,749)

(58,305)

(3,393,770)

Dividends paid

-

-

(2,557,470)

-

-

-

(2,557,470)

Balance at 30 June 2015 - Reviewed

13,460

21,566,856

63,335,113

235,704

-

(58,305)

85,092,828

CAPITAL DRILLING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2015

Six months ended

Reviewed

Reviewed

Notes

30 June 2015

30 June 2014

$

$

Operating activities:

Cash from operations

10

10,333,878

12,066,377

Interest received

51,140

-

Finance charges paid

(518,136)

(694,585)

Taxation paid

(242,624)

(540,098)

Net cash generated from operating activities

9,624,258

10,831,694

Investing activities:

Purchase of property, plant and equipment

(3,446,116)

(10,695,806)

Proceeds from disposal of property, plant and equipment

30,468

40,169

Investments

(290,102)

-

Investment in associate

(607,188)

-

Net cash used in investing activities

(4,312,938)

(10,655,637)

Financing activities:

Long-term liabilities repaid

9

(2,000,000)

(1,164,341)

Dividend paid

5

(2,557,470)

-

Net cash used in financing activities

(4,557,470)

(1,164,341)

Net decrease in cash and cash equivalents

753,850

(988,284)

Cash and cash equivalents at the beginning of the period

14,743,976

12,328,148

Translation of foreign currency cash and cash equivalent adjustment

(248,565)

31,956

Cash and cash equivalents at the end of the period

15,249,261

11,371,820

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

 1.

Basis of presentation and accounting policies

Preparation of the condensed consolidated interim financial statements

The condensed consolidated financial statements of Capital Drilling Limited and Subsidiaries ("Capital Drilling" or the "Group") as at and for the six months ended 30 June 2015 (the "Interim Financial Statements") have been prepared in accordance with International Accounting Standard ("IAS") No. 34, "Interim Financial Reporting". They should be read in conjunction with the annual consolidated financial statements and the notes thereto in the Group's Annual Report for the year ended 31 December 2014 which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The Interim Financial Statements have been reviewed in terms of ISRE 2410.

Accounting policies

The Interim Financial Statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. The Group has adopted a number of new standards and interpretations effective on or before 1 January 2015, which were described in note 2 of the consolidated financial statements for the year ended 31 December 2014. The adoption of these standards and interpretations did not have a material impact on the financial statements.

The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2014.

The preparation of financial statements in conformity with IFRS recognition and measurement principles requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management reviews its estimates on an on-going basis using currently available information. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates.

2.

Operations in the interim period

Capital Drilling Limited is incorporated in Bermuda. The Group provides drilling services including but not limited to exploration, development, grade control and blast hole drilling services to mineral exploration and mining companies located in emerging and developing markets. The Group also provides some equipment rental and information technology services to mining and mining related companies.

During the six months ended 30 June 2015, the Group provided drilling services in Botswana, Chile, Egypt, Mauritania, Peru and Tanzania.

The seasonality of the Group's operations has no significant impact on the condensed consolidated interim financial statements.

3.

Taxation

The tax expense for the period is based on an estimated annual effective tax rate, which requires management to make its best estimate of annual pre-tax income for the year, in the various tax jurisdictions in which the Group operates. During the year, management regularly updates its estimates based on changes in various factors such as operating profits, plant operating performance and cost estimates, including labour, raw materials, energy and other variable costs.

Due to the tax charge calculations in certain countries in which the Group operates being based on revenues instead of profits, the consolidated taxation expense for the period is not directly linked to profits and losses.

Included in the tax expense for the period is additional tax provisions amounting to $1,700,209 relating to the Mauritania and Zambia tax contingencies described in note 13 that was recorded during the current period.

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

Six months ended

Reviewed

Reviewed

30 June 2015

30 June 2014

$

$

4.

(Loss) earnings per share

Basic (loss) earnings per share:

The (loss) earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

(Loss) profit for the period used in the calculation of basic earnings per share

(3,196,716)

1,775,171

Weighted average number of ordinary shares for the purposes of basic earnings per share

134,602,839

134,592,800

Basic (loss) earnings per share (cents)

(2.4)

1.3

Diluted (loss) earnings per share:

The (loss) earnings used in the calculation of all diluted earnings per share measures are the same as those used in the equivalent basic (loss) earnings per share measures, as outlined above.

Weighted average number of ordinary shares used in the calculation of basic earnings per share

134,602,839

134,592,800

Shares deemed to be issued for no consideration in respect of:

 - Employee share options #

17,051

-

Weighted average number of ordinary shares used in the calculation of diluted (loss) earnings per share

134,619,890

134,592,800

Diluted (loss) earnings per share (cents)

(2.4)

1.3

# For the purposes of calculating (loss) earnings per share, diluted weighted average shares outstanding excludes 5.34 million (2014: 2.34 million) potential ordinary shares from share options and share grants, because such potential ordinary shares are anti-dilutive.

5.

Dividends

During the six months ended 30 June 2015 a dividend of 1.9 cents per ordinary share, totalling $2,557,470 (six months ended 30 June 2014: $nil) was paid.

6.

Property, plant and equipment

During the six months ended 30 June 2015, the Group acquired approximately $3.4 million (2014: $10.7 million) of drilling rigs and other assets to expand its operations and for the replacement of existing assets.

The Group disposed of property, plant and equipment with a net carrying amount of $142 thousand (2014: $89 thousand) during the period. A loss of $111 thousand (2014: $49 thousand) was incurred on the disposal of property, plant and equipment.

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

6.

Property, plant and equipment (continued)

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets may be impaired. Due to the poor performance of the Group's share price in 2014 and 2015, the net asset value of the Group exceeded its market capitalisation as at 30 June 2015 and 31 December 2014. The Group identified this circumstance as an indicator of impairment for the current and prior period. As a result property, plant and equipment was tested for impairment at the reporting date. As at 30 June 2015 and 31 December 2014 management concluded that the carrying amount of property, plant and equipment did not exceed the value in use and therefore, no impairment loss was recognised on that basis.

For purposes of determining the recoverable value of tangible assets, management estimates discount rates using pre-tax rates that reflect current market rates for investments of similar risk. The rate was estimated from the weighted average cost of capital of companies, which operate a portfolio of assets similar to those of the Group's assets.

In validating the value in use, key assumptions used in the discounted cash-flow model (such as allocating all assets to a single cash generating unit discount rates, average revenue rates, drilling volumes and terminal growth rate) management performed a sensitivity analysis to test the resilience of the assumptions used in determining the value in use for the impairment test. Management believe that reasonable movements in key assumptions would not result in an impairment loss to be recognised.

7.

Investment in associate

During the six months ended 30 June 2015, the Group acquired a 20% interest in SAAC International PTE LTD, a company incorporated in Singapore and engaged in the procurement and supply of mining equipment and consumables. The consideration for the acquisition was $607,188, including transaction costs. During the six months ended 30 June 2015, the Group recognised $101,109 as its share of the losses of SAAC International PTE LTD.

Six months ended

Reviewed

30 June 2015

Reviewed

30 June 2014

$

$

8.

Issued capital and share premium

Authorised capital

2,000,000,000 (2014: 2,000,000,000) ordinary shares of 0.01 cents (2014: 0.01 cents) each

200,000

200,000

Issued and fully paid:

134,603,681 (31 December 2014: 134,592,800) ordinary shares of 0.01 cents (31 December 2014: 0.01 cents) each

13,460

13,459

Share premium:

Balance at the beginning of the period

21,561,190

21,561,190

Share premium on issue of shares

 5,666

-

Balance at the end of the period

21,566,856

21,561,190

On 15 January 2015, the Company issued 10,881 new common shares pursuant to the company's employee incentive scheme. The shares rank pari passu with the existing common shares.

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

9.

Long term liabilities

In December 2014 the Group successfully negotiated the refinancing of the previous Standard Bank (Mauritius) Limited facilities. The new facility comprises (i) a $25 million revolving credit facility ("RCF") and (ii) a $5 million working capital facility ("WCF"). The finance documents for these new facilities were executed on 23 December 2014, with a set of conditions to be fulfilled before achieving an effective date of the loan. The effective date of the new facility was achieved on 3 February 2015 when all conditions were fulfilled. The facility was structured so that on achievement of the effective date the previous revolving facility were rolled over into the new RCF. The RCF facility has an annual interest rate of 5.25% above the prevailing three month US$ LIBOR (payable in arrears), and has an annual commitment fee of 1% of undrawn balance and is available for utilisation up to 2 February 2018 less an annual amortisation of $5 million.

Security for the Standard Bank (Mauritius) Limited facilities comprise:

§ Upward corporate guarantees from Capital Drilling Egypt (Limited Liability Company), Capital Drilling (Tanzania) Limited and Capital Drilling Zambia Limited.

§ A negative pledge over the assets of Capital Drilling Ltd and Capital Drilling Egypt (Limited Liability Company).

At 30 June 2015 $13 million was outstanding on the RCF, with a further $12 million available for utilisation. The WCF remain unutilised. During H1 2015 the Group repaid $2 million on the RCF.

As at the reporting date the Group has complied with all covenants that attaches to the loan facilities.

Six months ended

Reviewed

Reviewed

30 June 2015

30 June 2014

$

$

10.

Cash from operations

Profit before taxation

35,268

3,320,357

Adjusted for:

 - Depreciation

7,302,353

 8,473,176

- Loss on disposal of property, plant and equipment

111,441

 126,830

- Share based payment expense

36,225

 -

- Exchange differences on translating foreign operations

(138,697)

 2,770

- Interest received

 (51,140)

 -

- Finance charges

 491,025

727,582

- Share of losses from associate

 101,109

 -

- Unrealised foreign exchange loss (gain) on foreign exchange held

248,565

(31,956)

Operating profit before working capital changes

8,136,149

12,618,759

Adjustments for working capital changes:

- Decrease in inventory

881,712

512,306

- Increase in trade and other receivables

(270,442)

(3,573,508)

- Decrease in prepaid expenses and other assets

2,669,294

402,741

- (Decrease) increase in trade and other payables

(1,082,835)

2,106,079

10,333,878

12,066,377

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

11.

Segmental analysis

Operating segments are identified on the basis of internal management reports about components of the Group that are regularly reviewed by the chief executive officer, in order to allocate resources to the segments and to assess their performance. Information reported to the Group's chief executive officer for the purposes of resource allocation and assessment of segment performance is focused on the region of operation. For the purposes of the segmental report, the information on the operating segments has been aggregated into the principal regions of operations of the Group. The Group's reportable segments under IFRS 8 are therefore:

- Africa:

Derives revenue from the provision of drilling services.

- Rest of world:

Derives revenue from the provision of drilling services and related logistic, equipment rental and information technology support services.

Information regarding the Group's operating segments is reported below. At 31 December 2014, management reviewed the composition of the Group's operating segments and the allocations of operations to the reportable segments.

Segment revenue and results:

The following is an analysis of the Group's revenue and results by reportable segment:

For the six months ended 30 June 2015

Africa

Rest of World

Consolidated

$

$

$

External revenue

38,226,314

726,322

38,952,636

Segmental gross profit

14,426,056

(996,758)

13,429,298

Administration costs and depreciation, net of other income

(10,754,617)

(1,701,883)

(12,456,500)

Segment profit (loss)

3,671,439

(2,698,641)

972,798

Central administration costs and depreciation

-

(396,536)

Profit from operations

576,262

Interest income

51,140

Share of losses from associate

(101,109)

Finance charges

(491,025)

Profit before tax

35,268

For the six months ended 30 June 2014

Africa

Rest of World

Consolidated

$

$

$

External revenue

47,525,850

6,270,847

53,796,697

Segmental gross profit

17,919,163

632,098

18,551,261

Administration costs and depreciation, net of other income

(11,303,502)

(2,885,907)

(14,189,409)

Segment profit (loss)

6,615,661

(2,253,809)

4,361,852

Central administration costs and depreciation

(313,913)

Profit from operations

4,047,939

Interest income

-

Share of losses from associate

-

Finance charges

(727,582)

Profit before tax

3,320,357

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 1. Segment profit represents the profit earned by each segment without the allocation of central administration costs, depreciation, other income, finance charges, and income tax. This is the measure reported to the Group's chief executive officer for the purpose of resource allocation and assessment of segment performance.

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

Reviewed

Reviewed

30 June 2015

30 June 2014

$

$

11.

Segmental analysis (continued)

Segment assets:

Africa

147,658,012

205,147,835

Rest of world

78,276,508

83,722,566

Total segment assets

225,934,520

288,870,401

Head office companies

27,464,894

43,162,893

253,399,414

332,033,294

Eliminations *

(146,932,965)

(206,003,988)

Total assets

106,466,449

126,029,306

Segment liabilities:

Africa

52,519,206

59,360,805

Rest of world

36,556,661

52,078,384

Total segment assets

89,075,867

111,439,189

Head office companies

77,782,321

126,332,048

166,858,188

237,771,237

Eliminations *

(145,484,567)

(204,992,889)

Total liabilities

21,373,621

32,778,348

For the purposes of monitoring segment performance and allocating resources between segments the Group's chief executive monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of property, plant and equipment used by the head office companies, certain amounts included in other receivables, and cash and cash equivalents held by the head office companies.

* Eliminations include inter-group accounts receivable, inter-group accounts payable and inter-group investments.

Other segment information:

Depreciation

Africa

6,151,593

7,228,287

Rest of world

901,456

1,090,092

Total segment depreciation

7,053,049

8,318,379

Head office companies

249,304

154,797

7,302,353

8,473,176

Additions to property, plant and equipment

Africa

3,252,243

10,259,421

Rest of world

15,470

408,138

Total segment depreciation

3,267,713

10,667,559

Head office companies

178,403

28,247

3,446,116

10,695,806

Information about major customers

Included in revenues arising from the Africa segment are revenues of approximately $34.6 million (2014: $33.4 million) which arose from sales to customers that represent more than 10% of the Group's revenue.

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

Reviewed

Reviewed

30 June 2015

30 June 2014

$

$

12.

Commitments

The Group has the following capital commitments at 30 June 2015:

Committed capital expenditure

541,415

1,561,613

The Group has outstanding purchase orders amounting to $1.6 million at 30 June 2015 (30 June 2014: $1.5 million).

13.

Contingencies

Mauritania taxation:

Capital Drilling Mauritania SARL is a party to various tax claims by the Director General of Taxation (Direction Générale de Impôts) of Mauritania totalling $1,336,701 for the tax years 2011 to 2013. On 16 May 2012, the Company received a tax assessment from the Mauritanian Director General of Taxation relating to the 2011 tax year. The tax authorities made certain assumptions based on incorrect information obtained from third parties and assessed the company for taxation based on these assumptions resulting in an additional tax of $785,804 being assessed as due to the Director General of Taxation. Payment was made to the Mauritanian Director General of Taxation on behalf of Capital Drilling Mauritania SARL by a third party. Subsequent assessments totalling an additional $550,897 for the tax years 2012 and 2013 were issued by the Director General of Taxation under the same circumstances as described for the 2011 tax year again using incorrect information. The revised assessed amounts were again collected from third parties by the tax authorities. Capital Drilling Mauritania SARL appealed against the assessments and continues to do so. The erroneous recalculations by the tax authorities may result in the funds owed to Capital Drilling Mauritania not being recoverable from the Mauritanian Director General of Taxation. As a result, the Group has raised an appropriate provision against monies not considered recoverable from the Director General of Taxation.

Zambia Taxation:

Capital Drilling (Zambia) Limited is a party to various tax claims by the Zambian Revenue Authority for the tax years 2007 to 2013. On 30 April 2015, the Company received a tax assessment from the Zambian Revenue Authority totalling ZMW 144.1 million (USD equivalent: $18.9 million), inclusive of penalties and interest. The claims relate to various taxes, including income tax, value added tax, payroll tax and withholding tax. Management have responded in detail to these claims, providing the Zambian Revenue Authority with detailed analysis and arguments justifying the Company's tax position. No amount has yet been paid in this regard and discussions with the Zambian Revenue Authority are ongoing. The claims are subject to substantial uncertainties and, therefore, the probability of loss and an estimation of damages are difficult to ascertain. The directors believe that a significant portion of the tax claim by the Zambian Revenue Authority is without merit. On this basis, a provision of $1.2 million has been recorded relating to certain areas of the claim. Due to the substantial uncertainties relating to this matter, the actual results that will result from the ultimate resolution of these proceedings may vary from the amount provided.

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

14.

Events post the reporting date

The directors propose that an interim dividend of 1.1 cent per share be paid to shareholders on 9 October 2015. This dividend has not been included as a liability in these consolidated interim financial statements. The proposed dividend is payable to all shareholders on the Register of Members on 4 September 2015. The total estimated interim dividend to be paid is $1.5 million (2014: $ Nil). The payment of this dividend will not have any tax consequences for the group.

15.

Going concern

The Group has set specific objectives and also has policies and processes in place to manage its capital and its financial, credit risk and liquidity risks.

The Group has borrowings and debt facilities which, together with its clients' receipts, fund its day to day working capital requirements. Volatile economic conditions may create uncertainty particularly over (a) the level of demand for the Group's services; (b) exchange rate fluctuations against the US Dollar and thus the consequence for the cost of the Group's direct costs; and (c) the availability of bank financing in the foreseeable future.

The Group's forecasts and projections, taking into account potential changes in its performance, show that the Group should be able to operate within the level of its capital structure. The Group continuously discusses its future borrowing and / or refinancing needs with its bankers and no matters have been drawn to its attention to suggest that these needs may not be met on acceptable terms.

The directors confirm that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group continues to adopt the going concern basis of accounting in preparing the interim financial statements.

16.

Financial instruments

Financial instruments that are measured in the condensed consolidated statement of financial position at fair value require disclosure of fair value measurements by level based on the following fair value measurement hierarchy:

§ Level 1:

quoted prices (unadjusted) in active markets for identical assets or liabilities;

§ Level 2:

inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and

§ Level 3:

inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

Available-for-sale financial assets are classified as level 1 and refer to listed securities quoted in active markets. A quoted market price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available. The total fair value is the official close price as defined by the exchange on which the asset is actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs. The decrease in the available-for-sale financial assets is related to the share price evolution of the available-for-sale financial assets and the appreciation of the United States of America Dollar.

The fair values of financial instruments that are not traded in an active market are determined using standard valuation techniques. These valuation techniques maximise the use of observable market data where available and rely as little as possible on Group specific estimates.

CAPITAL DRILLING LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2015

16.

Financial instruments (continued)