Last checked at 6 Apr 2017 16:47
FOR IMMEDIATE RELEASE 6 April 2017
CAIRN ENERGY PLC ("Cairn" or "the Company")
Report and Accounts and Circular
The Company's annual report and accounts for the year ended 31 December 2016 (the "Report and Accounts") and a circular (the "Circular") were posted to shareholders today. The Circular contains a notice convening the 2017 Annual General Meeting (the "AGM") and details of the proposed renewal of the existing authority to dispose of the Company's residual interest in Cairn India Limited ("Cairn India") and the Company's proposed new long term incentive plan. The AGM will be held in the Castle Suite of The Caledonian, a Waldorf Astoria Hotel, Princes Street, Edinburgh, EH1 2AB at 12.00 noon on Friday 19 May 2017.
A copy of the Report and Accounts and Circular have also been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm. The Report and Accounts and Circular are also available on the Company's website at www.cairnenergy.com.
Defined terms used in this announcement shall, unless otherwise specifically defined herein, have the same meanings as in the Circular.
Circular - Cairn India Residual Interest Disposal Authority
The Company's residual interest of approximately 10% of Cairn India, which following completion of the proposed merger of Vedanta Limited and Cairn India (see further information below), will equate to approximately 5% of the equity shares in Vedanta Limited, represents a substantial proportion of the Group's assets and therefore, due to its size, the sale of all, or a substantial part of, the residual interest currently requires Shareholder approval under the Listing Rules.
At last year's annual general meeting held on 12 May 2016, Shareholders authorised the Board to dispose of all or part of the Company's then residual interest. Cairn is at present restricted by the Indian Income Tax Department from selling its shares in Cairn India (or any subsequent shares held by Cairn in Vedanta Limited as a result of the proposed merger (see further information below)) (the "Residual Interest"). Nevertheless, Cairn believes it is appropriate to retain the flexibility to realise Shareholder value from the Residual Interest in the event that the Company becomes able to make such a disposal prior to or as a result of the conclusion of its ongoing legal challenges.
The Board continues to believe that, in order to obtain the best terms, Cairn may need to make disposals via on-market transactions which would not be possible if such sales had to be subject to Shareholder approval at the time. The Board is therefore seeking to renew the existing authority from Shareholders for the Company to be able to sell the Residual Interest at or as close as reasonably possible to the prevailing market price if and when the Company considers it appropriate to make such disposals. Shareholder approval is being sought to make disposals via on-market transactions. Disposals may be executed via bought deal block-trades where an underwriting bank will assume the risk of disposing of the relevant interest efficiently. Larger disposals may be executed via accelerated book build offerings where a bank will use "best efforts" to complete a sale as agent, but the risk of completing the disposal will remain with Cairn. Disposals could also include participating in any share buy-back programme by Cairn India/Vedanta Limited or any merger or offer involving Cairn India/Vedanta Limited.
The Company only intends to utilise the Residual Interest Disposal Authority where it believes that a sale is in the best interests of Shareholders as a whole and in the meantime the Company will continue to benefit from the growth and success of the discoveries in Rajasthan and elsewhere through the Residual Interest. No decision has been taken as at the date of the document on how the net proceeds of any such sale(s) will be applied.
Provided that the resolution is passed at the Annual General Meeting, the Residual Interest Disposal Authority, unless renewed, will expire on the earlier of 30 June 2018 (the last date on which the Company's annual general meeting for 2018 could be held) or at the end of the Company's annual general meeting for 2018. Prior to that date the Company will assess the necessity and desirability of renewing the authority. Any disposal outside of the scope of the Residual Interest Authority will remain subject to the requirements for significant transactions under Listing Rule 10.
Cairn India is one of the largest oil and gas exploration and production companies in India. Together with its joint venture partners, Cairn India accounted for ~27% of India's domestic crude oil production in the Indian fiscal year 2016.
As at 31 December 2016, the fair value of the Company's residual interest in Cairn India was US$656 million (extracted without material adjustment from the Group's audited consolidated financial accounts for the year ended 31 December 2016).
Proposed Merger of Vedanta and Cairn India
On 22 June 2016, Cairn India and Vedanta Limited revised the terms of the scheme of arrangement regarding the proposed merger between Cairn India and Vedanta Limited which was initially announced on 14 June 2015 (the "Scheme"). As per the revised terms, upon the merger becoming effective, minority shareholders in Cairn India will receive for each equity share held, (i) one equity share in Vedanta Limited with a face value of INR1 and (ii) four 7.5% redeemable preference shares in Vedanta Limited with a face value of INR10. No shares will be issued to Vedanta Limited or any of its subsidiaries for their shareholding in Cairn India. BSE Limited (the operator of the Bombay Stock Exchange) and the National Stock Exchange of India Limited have stated they have no objections to the proposed merger and shareholders of Cairn India, Vedanta Limited and Vedanta Resources plc ("Vedanta") together with the secured and unsecured creditors of Vedanta Limited have approved the Scheme with the requisite majorities voting in favour. On 28 March 2017, both Vedanta and Cairn India announced that they have now received all the required approvals in relation to the Scheme, save for the approval of Reserve Bank of India in relation to the issuance of Redeemable Preference Shares to the non-resident shareholders of Cairn India. They noted that the Scheme would be made effective, and record date for issue of the Vedanta Limited shares pursuant to the Scheme would be set, upon receipt of the said approval of Reserve Bank of India.
Following completion of the proposed merger of Cairn India and Vedanta Limited, Cairn will receive 184,125,764 equity shares and 736,503,056 redeemable preference shares in Vedanta Limited, both of which will be listed on the Indian Stock Exchanges.
New Long Term Incentive Plan
The Company is seeking Shareholders' approval of the establishment of a new arrangement, the Cairn Energy PLC Long Term Incentive Plan (2017) (the "New LTIP"), which will primarily be used to grant performance based long term share awards to the Company's executive directors and senior management team.
The New LTIP is being introduced for two main reasons:
(i) To replace the existing arrangement which is due to expire - the Company's current long term incentive plan, the Cairn Energy PLC Long Term Incentive Plan (2009) (the "2009 LTIP"), was adopted in 2009 and will "expire" on 19 May 2019. Given that Shareholders are being asked to approve a new three-year Directors' Remuneration Policy at the Annual General Meeting (see resolution 3 in the Notice) which will last beyond that date, the Directors consider that it would be efficient also to seek approval of the New LTIP at this year's meeting; and
(ii) To facilitate the operation of the new Directors' Remuneration Policy - the revised pay policy referred to above introduces a number of variations to the basis on which future long term incentive awards will be granted to the Company's executive directors. Some of these changes would have required amendments to be made to the 2009 LTIP and it was therefore decided that it would be more appropriate in the circumstances for them simply to be incorporated into the rules of the New LTIP.
Save for changes required to accommodate the new Directors' Remuneration Policy (details of which are set out in the Directors' Remuneration Report section of the 2016 Annual Report and Accounts), the terms of the New LTIP that will apply to the Company's executive directors are broadly similar to those contained in the 2009 LTIP.
Annual Report and Accounts - Information required by Disclosure and Transparency Rule 6.3.5
The information set out below, which is extracted from the Annual Report and Accounts, is included in this announcement for the sole purpose of complying with Disclosure and Transparency Rule 6.3.5 and the requirements it imposes on issuers as to how to make annual financial reports public. It should be read in conjunction with the Company's preliminary results announcement, released on 8 March 2017 (the "Preliminary Results Announcement"). This material is not a substitute for reading the full 2016 annual report and accounts. Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Report and Accounts.
Directors' responsibility statement
The following statement is extracted from page 128 of the Report and Accounts. This statement is repeated here solely for the purposes of complying with Disclosure and Transparency Rule 6.3.5. This statement relates to and is extracted from the Annual Report and Accounts. It is not connected to the extracted information presented in this announcement or in the Preliminary Results Announcement.
'Directors' Responsibility Statement
The directors are responsible for preparing the Annual Report and Accounts, the Directors' Remuneration Report and the financial statements in accordance with applicable laws and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have prepared the Group and parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and Company for that period. In preparing these financial statements, the directors are required to:-
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable IFRSs issued by the IASB and adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will remain in business.
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 Group and Company and enable them to ensure that the financial statements and the Directors' Remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation and other jurisdictions.
Following careful review and consideration of the Cairn Energy PLC Annual Report and Accounts 2016 (the "Accounts"), the directors consider that the Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.
Directors' Statement Pursuant to the Disclosure and Transparency Rules
Each of the directors, whose names are listed in the Board of Directors section on pages 76 and 77, confirm that, to the best of their knowledge:
· the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group and Company; and
· the Strategic report section on pages 2 to 75 of this document includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces."
The names of the directors who have given this responsibility statement are:
Ian Tyler (Non-Executive Chairman)
Todd Hunt (Non-Executive Director)
Iain McLaren (Non-Executive Director)
M. Jacqueline Sheppard QC (Non-Executive Director)
Alexander Berger (Non-Executive Director)
Keith Lough (Non-Executive Director)
Peter Kallos (Non-Executive Director)
Nicoletta Giadrossi (Non-Executive Director)
Simon Thomson (Chief Executive)
James Smith (Chief Financial Officer)
Principal risks and uncertainties
The following description of the principal risks and uncertainties is extracted from pages 41 to 47 of the Report and Accounts.
"Principal Risks and Uncertainties
During 2016, through a number of internal forums such as the Group Risk Management Committee and Management Team, the Group regularly reviewed the risks which could adversely impact on the achievement of strategic objectives. The Board also receive a risk report, highlighting the key risks and movements in risks, at each Board meeting. The tables below provide a summary overview of the principal risks to the Group at the end of 2016, the potential impacts, the mitigation measures, the risk appetite and the KPIs or strategic objectives the risks may impact on.
The Board confirm that a robust assessment of the principal risks facing the Company, including those that would threaten the business model, future performance, solvency or liquidity was completed in 2016.
Strategic objective: Deliver exploration and appraisal success
Principal risk: Exploration and appraisal Owner: Director of Exploration 2015-2016 movement No change Risk appetite High - Exposure to exploration and appraisal failure is inherent in accessing the significant upside potential ofa successful discovery and this has been, and remains, a core value driver for Cairn. The Group invests in dataand exploits the strong experience of Cairn's technical teams to mitigate this risk. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Loss of investor confidence Limited or novalue creation Failure of thebalanced portfolio business model
| Active programme for high-grading new areas through licence rounds, farm-ins and other transactions. Inventory of prospects and leads that offer opportunities with a balance of geological and technical risks. Highly competent team applying a thorough review process of prospects and development opportunities and a team of geoscientists with a track recordof delivering exploration success. Establishment of Exploration Leadership Team to undertakepeer reviews and assurance. | Completion of four successful appraisal and exploration wells inthe SNE field in H1 2016 which ledto an increase in the estimatedgross recoverable oil resource. Exploration and appraisal wells completed in the UK North Sea Greater Catcher Area and the Barents Sea. The Group will continue to assess and rank opportunities for future drilling in 2017 and beyond. | Maximise value in Senegal Achieve exploration success through discovery or addition of commercial hydrocarbons in 2017
|
Principal risk: Sustained low oil and gas price Owner: Chief Financial Officer 2015-2016 movement No change Risk appetite Medium - Exposure to commodity prices is fundamental to the Group's activities. However, the Group manages its investment programme to ensure that a threshold economic return is delivered and the business model is funded even in sustained downside price scenarios. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Reduction infuture cash flow Value impairment of development projects JV partner capital constraints
| Sensitivity analysis conducted to assess robustness of projects and development decisions. Operators' cost initiatives delivering material cost reductions on development projects. Exploit the low service cost environment for E&A activities.
| The low oil price has driven down industry costs for both development and exploration projects. Debt available under the Group's RBL facility remains at a level consistent with the end of 2015. Cairn increased its working interest in Kraken by 4.5% to 29.5%. Cairn acquired the increased interest from First Oil plc for a nominal amount and assumed working capital liabilities of US$16m. | Manage balance sheet strength Portfolio optimisationand replenishment
|
Strategic objective: Portfolio management
Principal risk: Securing new venture opportunities Owner: Director of Exploration 2015-2016 movement Increased Risk appetite Medium - Building and maintaining a balanced portfolio of current and future exploration, development and production assets is core to the Group's strategy. New opportunities must first meet the Group's strict investment criteria and successfully securing them will be dependent on the prevailing competitive environment. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Loss of investor confidence Loss of competitive edge Failure to replenish the portfolio
| Geoscience, new ventures and commercial teams work closely to review and identify prospects. Experience and knowledge throughout the organisation in recognising prospective opportunities. Risk assessments and due diligence process undertaken on all potential new country entries. Development of discretionary capital allocation and opportunity ranking system.
| Pre-qualified as an Operator in Norway in late 2015 and were awarded the Group's first operated licence in H1 2016. Awarded seven blocks, including two as Operator, in the 2016 APA and one licence option in the 2015 Atlantic Margin Oil and Gas Exploration Licensing Round. Several new prospects and leads have been matured in existing acreage in Senegal. Despite the low oil price environment, acquiring quality new venture opportunities has been competitive and it is anticipated that this will remain the same for 2017. | Portfolio optimisation and replenishment
|
Strategic objective: Maintain licence to operate
Principal risk: Health, safety, environment and security Owner: Chief Executive 2015-2016 movement No change Risk appetite Low - The Group continuously strives to reduce risks that could lead to an HSSE incident to as low as reasonably practicable. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Serious injury or death Environmental impacts Reputational damage Regulatory penalties and clean-up costs
| Effectively managing health, safety, security and environmental risk exposure is the first priority for the Board, Senior Leadership Team and Management Team. HSE training is included as part of all staff and contractor inductions. Detailed training on the Group's Corporate Responsibility Management System (CRMS) has been provided to key stakeholders to ensure processes and procedures are embedded throughout the organisation and all operations. Process in place for assessing an operator's overall operating and HSE capabilities, including undertaking audits to determine the level of oversight required. OSPAR reverification completed in 2016. Emergency and oil spill response procedures and equipment are maintained and regularly tested to ensure the Group is able to respond to an emergency quickly, safely and effectively. Third party specialists in place to assist with security arrangements and travel risk assessments. HSE Leading Performance Indicators and targets developed in line with industry guidelines. Findings from 'Lessons learned' reviews are implemented from other projects. | The Group's safety performance has been effective overall in 2016 and achieved Total Recordable Injury Rate (TRIR) of 1.05. The Group's target was less than 2.0 per million hours. The rate in 2015 was 0 per million hours. Approximately 1 bbl of oil was released to the environment during testing of appraisal wells. With ongoing operations in a number of countries in 2017, the Group will continue to work responsibly as part of our strategy to deliver value for all stakeholders.
| Deliver activities with a focus on the safety of people and the environment
|
Strategic objective: Maintain licence to operate continued
Principal risk: Stakeholder reaction to operations Owner: Director of Corporate Affairs 2015-2016 movement No change Risk appetite Medium - The Group's strong reputation and licence to operate are core assets for the Group. However, where stakeholder objectives are not aligned, the Group seeks to balance these conflicting objectives when considering investment decisions in line with the Group's strategy. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Reputational damage Loss of investor confidence Loss of licence to operate Delays in work programmes
| Cairn's aim is to operate with integrity at all times, recognising that in doing so the Company will maintain the trust of investors, governments, local communities, JV partners and other stakeholders. Comprehensive stakeholder management and communication plans have been developed and executed for all operations. Work closely with JV partners to ensure transparency and social responsibility. Actively monitor steps being taken by regulators and industry through participation in industry bodies such as the International Association of Oil & Gas Producers and Oil & Gas UK.
| Norge Bank divested their interest in Cairn as a result of the Group's operations in Western Sahara. The Group continues to engage with all stakeholders to address any concerns. | Deliver activities with a focus on the safety of people and the environment
|
Principal risk: Fraud, bribery and corruption Owner: Chief Executive 2015-2016 movement No change Risk appetite Low - Cairn is committed to maintaining integrity and high ethical standards in all of the Group's business dealings. The Group has no tolerance for conduct which may compromise its reputation for integrity. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Legal fines Criminal prosecution Reputational damage
| Business Code of Ethics and bribery and corruption policies and procedures. Due diligence process and questionnaire developed for assessing potential third parties. Annual training programme for all employees, contractors and selected service providers. Extensive financial procedures in place to mitigate against fraud. | Group Code of Business Ethics and ABC procedures updated in 2016. Bribery and corruption e-learning training module rolled out across the Group and bespoke bribery and corruption training delivered to the Board in 2016. The Group's Code of Business Ethics will continue to be applied to all operations across the Group. | Deliver activities with a focus on the safety of people and the environment
|
Strategic objective: Deliver operational excellence
Principal risk: Delay in Catcher and Kraken production start-up schedule Owner: Regional Director, UK & Norway 2015-2016 movement Decreased Risk appetite Low - Operating cash flow from Kraken and Catcher will provide the Group with funding to sustain future exploration and development activity. The Group works closely with all JV partners to mitigate the risk and impact of any operational delay. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Delay or reduction in future cash flow Increased costs Portfolio replenishment Reduction in debt capacity
| Actively engage with all our JV partners early to ensure highly effective working relationships. Actively participate in technical meetings to challenge, apply influence and/or support our partners to establish a cohesive JV view and ensure operational activity is executed in a safe and secure manner. Frequent site visits to key contractor sites to increase focus on quality assurance performance. Work closely with the Kraken and Catcher operators to monitor and review progress of key milestones.
| Kraken development remains on schedule with first oil anticipated in H1 2017. Key milestones on Kraken set for 2016 have been accomplished including the completion of four producer and four injector wells; full subsea installation; safety case approval; and the FPSO sail-away from the shipyard in Singapore for UK waters. Catcher is targeting first oil in H2 2017. Significant progress has been made on Catcher and several key milestones have been achieved. | Successfully complete operated and non-operated 2017 work programme
|
Principal risk: Operational and project performance Owner: Chief Operating Officer 2015-2016 movement No change Risk appetite Low - Delivering operational excellence in all the Group's activities is a strategic objective for the Group. The Group has a low appetite for operational risks which may lead to delays and/or increased costs. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Increased well costs Project delays HSE incident Reputational damage
| Comprehensive set of criteria that must be met before contracting and accepting any rig. Work closely with the rig contractors to exert influence and impose our performance expectations. Management and influence of drilling contractors to ensure Cairn management systems are fully embedded in operations. Positive and regular engagement with JV operators and partners to share knowledge and offer support.
| Significant operational milestones achieved in the Group's development projects and Senegal drilling. Seismic processing successfully completed in Senegal (Sangomar-Rufisque), Western Sahara (Boujdour Maritime), Norway (Horda) and the UK (Kraken West). There are potential operational threats in 2017 due to the level of the Group's operations and the number of rigs on hire (Stena Drillmax in Senegal, Transocean Leader in Kraken and the Ensco-100 in Catcher). | Successfully complete operated and non-operated 2017 work programme Deliver activities with a focus on the safety of people and the environment
|
Strategic objective: Deliver operational excellence continued
Principal risk: Reliance on JV operators for asset performance Owner: Chief Operating Officer 2015-2016 movement No change Risk appetite Medium - The Group seeks to operate assets which align with the Group's core areas of expertise but recognise that a balanced portfolio will also include non-operated ventures. The Group accepts that there are risks associated with a non-operator role and will seek to mitigate against these risks by working with partners of high integrity and experience and maintaining close working relationships with all JV partners. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Cost/schedule overruns Poor performance of assets HSE performance Delay in first oil from development projects Impact on asset value
| Actively engage with all JV partners early to establish good, trusting working relationships. Actively participate in technical meetings to challenge, apply influence and/or support partners to establish a cohesive JV view. Application of the Group risk management processes and non-operated ventures procedure. Active engagement with supply chain providers to monitor performance and delivery. | The sustained low oil price continues to have a financial impact across the industry and the risk remains that the Group's JV partners may not be able to fund work programme expenditures and/or reprioritise projects. The Group's two development projects and several exploration projects are operated by joint venture partners and the ability to influence can sometimes be limited. The Group continues to work closely with a number of partners in the UK & Norway, Senegal and International regions. | Successfully complete operated and non-operated 2017 work programme Deliver activities with a focus on the safety of people and the environment
|
Strategic objective: Deliver a sustainable business
Principal risk: Restriction on ability to sell CIL shareholding Owner: Chief Financial Officer 2015-2016 movement No change Risk appetite Medium - The Group faces an uncertain macroeconomic and regulatory environment in some countries of operation. The Group is willing to invest in countries where political and/or fiscal risks may occur provided such risks can be adequately managed to minimise the impact where possible. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Restriction in the funding capacity of the Group
| Committed work programme is fully funded from existing sources of funding, principally Group cash and committed debt facilities. Continued engagement with the Indian Government. Initiation of arbitration proceedings.
| Restriction on monetising assets in India remains in place. Arbitration proceedings have commenced to resolve the Indian tax dispute and a number of milestones have been achieved including the appointment of an arbitration panel; the filing of the statement of claim; and India's filing of its statement of defence. | Manage balance sheet strength
|
Principal risk: Political and fiscal uncertainties Owner: Chief Financial Officer 2015-2016 movement No change Risk appetite Medium - The Group faces an uncertain macroeconomic and regulatory environment in some countries of operation. The Group is willing to invest in countries where political and/or fiscal risks may occur provided such risks can be adequately managed to minimise the impact where possible. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Loss of value Uncertain financial outcomes
| Operate to the highest industry standards with regulators and monitor compliance with the Group's licence, Production Sharing Contract and taxation requirements. External specialist advice consulted on legal and tax issues as required. Maintain positive relationships with governments and key stakeholders. Ongoing monitoring of the political and regulatory environments in which we operate. | Cairn has not entered into any new territories in 2016 so the risk has remained static. The Group will continue to monitor changes in fiscal regimes in the areas of operation. | Manage balance sheet strength
|
Principal risk: Access to internal or external funding Owner: Chief Financial Officer 2015-2016 movement No change Risk appetite Low - The Group seeks to develop and implement a funding strategy that allows a value generative plan to be executed and ensures a minimum headroom cushion from existing sources of funding is maintained. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Work programme restricted by reduced capital availability Loss of value
| Committed work programme is fully funded from existing sources of funding, principally Group cash and debt funding. Disciplined allocation of capital across portfolio. Continue to assess other forms of financing and pursue release of Indian assets.
| Non-core E&A expenditure has been deferred, development costs for future production base have been reduced and Cairn has secured significantly lower costs for ongoing exploration activity. Continued to rationalise the portfolio with the disposal of non-core assets. Debt available under the Group's RBL facility remains at a level consistent with the end of 2015. | Manage balance sheet strength
|
Principal risk: Staff recruitment and retention Owner: Group HR Manager 2015-2016 movement Decreased Risk appetite Low - The Group relies on motivated and high quality employees to deliver the Group's strategic objectives and is committed to developing and supporting all employees. | |||
Impact | Mitigation | Risk information | 2017 KPI objectives |
Inadequate resource to deliver work programme Loss of key knowledge and experience
| Regional Directors and Departmental Heads agree resource requirements as part of the annual work programme and budget processes. As an accredited Investor in People, we support continuous professional development through technical, professional, management and behavioural skills courses as well as mentoring and educational assistance schemes. Succession planning is in place for all areas of the business. Rewarding performance process and benefits programme. | Staff retention remains strong, providing stability and consistency in the delivery of current and future projects. Prevailing market conditions have allowed the Group to attract a number of highly experienced personnel for key positions in the Group.
| Successfully complete operated and non-operated 2017 work programme
|
Related party transactions
The following description of related party transactions is extracted from page 176 of the Report and Accounts:
"7.8 Related Party Transactions
The Company's principal subsidiaries are listed in Section 7.6. The following table provides the Company's balances which are outstanding with subsidiary companies at the Balance Sheet date:
2016 | 2015 | ||
US$m | US$m | ||
Amounts payable to subsidiary undertakings | (59.6) | (52.2) | |
(59.6) | (52.2) |
The amounts outstanding are unsecured and repayable on demand and will be settled in cash.
The following table provides the Company's transactions with subsidiary companies recorded in the loss for the year:
2016 | 2015 | ||
US$m | US$m | ||
Amounts invoiced to subsidiaries | 13.7 | 10.4 | |
Amounts invoiced by subsidiaries | 6.6 | 10.8 | |
Directors' Remuneration
The remuneration of the directors of the Company is set out below. Further information about the remuneration of individual directors is provided in the audited part of the Directors' Remuneration report on pages 98 to 124.
2016 | 2015 | ||
Company | US$m | US$m | |
Emoluments | 3.2 | 3.3 | |
Share-based payments | 1.4 | 0.3 | |
4.6 | 3.6 |
Pension contributions were made on behalf of directors in 2016 of US$0.2m (2015: US$0.2m).
462,065 LTIP share awards to directors vested during 2016 (2015: 120,297). Share-based payments shown above represent the market value at vesting date of these awards.
Other transactions
During the year the Company did not make any purchases in the ordinary course of business from an entity under common control (2015: US$nil)."
Directors' emoluments and remuneration of key management personnel
The following description of directors' emoluments and remuneration of key management personnel is extracted from page 159 of the Report and Accounts:
"4.4 (C) Directors' Emoluments and Remuneration of Key Management Personnel
Details of each director's remuneration, pension entitlements, share options and awards pursuant to the LTIP are set out in the Directors' Remuneration Report on pages 98 to 124. Directors' remuneration, their pension entitlements, and any share awards vested during the year is provided in aggregate in section 7.8.
Remuneration of key management personnel
The remuneration of the directors of the Company and of the members of the management and corporate teams who are the key management personnel of the Group is set out below in aggregate.
2016 | 2015 | ||
Company | US$m | US$m | |
Short-term employee benefits | 6.0 | 6.4 | |
Termination benefits | - | 0.7 | |
Post-employment benefits | 0.4 | 0.6 | |
Share-based payments | 4.4 | 4.4 | |
10.8 | 12.1 |
In addition employer's national insurance contributions for key management personnel in respect of short-term employee benefits were $0.8m (2015: US$0.9m).
Share-based payments shown above represent the cost to the Group of key management personnel's participation in the Company's share schemes, measured under IFRS 2.
During 2016, 905,940 shares awarded to key management personnel vested under the LTIP (2015: 295,186).
Forward looking statements
This announcement contains or may contain forward-looking statements regarding Cairn, our corporate plans, future financial condition, future results of operations, future business plans and strategies. All such forward-looking statements are based on our management's assumptions and beliefs in the light of information available to them at this time. These forward-looking statements are, by their nature, subject to significant risks and uncertainties and actual results, performance and achievements may be materially different from those expressed in such statements. Factors that may cause actual results, performance or achievements to differ from expectations include, but are not limited to, regulatory changes, future levels of industry product supply, demand and pricing, weather and weather related impacts, wars and acts of terrorism, development and use of technology, acts of competitors and other changes to business conditions. Cairn undertakes no obligation to revise any such forward-looking statements to reflect any changes in Cairn's expectations with regard thereto or any change in circumstances or events after the date hereof.