16 Apr 2015 12:23
16 April 2015
Ophir Energy plc
Annual Financial Report
As required by DTR 6.3.5(3), Ophir Energy plc ("Ophir" or the "Company") announces that its Annual Report, Notice of Annual General Meeting ("AGM") and Form of Proxy for the 2015 AGM have been published and (excepting the Form of Proxy) are now available on the Ophir website: www.ophir-energy.com. This follows the release on 19 March 2015 of the Preliminary Results Announcement for the year ended 31 December 2014 (the "Preliminary Announcement").
In compliance with 9.6.1 of the Listing Rules, the Company has today submitted copies of the following document to the National Storage Mechanism and these will shortly be available for inspection at www.morningstar.co.uk/uk/NSM
· Annual Report and Accounts for the year ended 31 December 2014
· Notice of 2015 AGM
· Form of Proxy for the 2015 AGM
The Ophir Annual Report will be delivered to the Registrar of Companies in due course. Copies of the Annual Report and Notice of AGM may also be obtained from:
The Company Secretary
Ophir Energy plc
Level 4
123 Victoria Street
London SW1E 6DE
Tel:+44 (0) 20 7811 2400
The AGM will take place on 20 May 2015. The total of the votes cast by shareholders for or against or withheld on each resolution to be put to the meeting will be released to the market and published on www.ophir-energy.com as soon as practicable after the conclusion of the AGM.
The Disclosure and Transparency Rules ("DTR") require an announcement of the publication of certain information in full unedited text in compliance with DTR 6.3.5(2). As such the following disclosures are made below, referencing page numbers and notes to those in the accounts in the Company's Annual Report.
A: Audit Report
The Preliminary Announcement on 19 March 2015 included a set of condensed, financial statements and management commentary. The audited financial statements are contained in the Ophir Annual Report. The independent audit report of the Group and Company are contained on pages 95 to 97.
B: Principal Risks and Uncertainties
Ophir works in a challenging environment that has risks that are characteristic to its activities, operational sites and assets. Managing the risks associated with these challenges is explicit to addressing uncertainty to protect Ophir and create value. The Board of Ophir has overall responsibility for maintaining sound risk management and internal control systems. Ophir's risk process involves all levels of management and decision making, and work to ensure clear reporting to Committees and ultimately the Board. The Executive Directors report risk to the Board on a monthly basis or more regularly as required; the Risk Register is presented to them twice annually. During 2015 Ophir will review and look to further strengthen its risk processes and management.
The elementary summary of Ophir's risk management processes is:
1. Identify
2. Evaluate
3. Respond
4. Report
5. Monitor
The principal risks that have been identified within the Company are summarised as follows:
Type | Risk | Mitigants | Responsibility at functional level | Change |
External | Low commodity price and adverse market sentiment towards the E&P sector | · Maintenance of a strong balance sheet with discipline in capital allocation and cost management across the Company. · Manage capex and General and Administrative expenses (G&A) to navigate the Company through the downturn. · Continue to review the Company's cost structure and make sure it reflects the new oil price environment. | Director of Finance | UP |
Global economic volatility | · Act counter cyclically to take advantage of the opportunities developing from the industry downturn. · Selectively exploit the low service costs that have resulted from the drop in the oil price. · Regularly review how external risks impact the Company's strategy and remain agile to change. | Director Portfolio & Strategy | UP | |
Capital constraints
| · Aim to internally fund core exploration and appraisal activities from the addition of production assets and monetise resources to generate cash flow. · Diversify the sources of funding and apply prudent levels of debt to development and production activity to preserve balance sheet strength and flexibility. · Find resources for the minimal capital outlay and then monetise them for the highest possible price. · Only allocate capital to highest return opportunities following rigorous risk reward analysis. · Ensure that commercial terms on new acreage reflect the changing landscape and involve minimal financial commitments with options to exit pre-drill. | Director of Finance | UP | |
Legal compliance regulatory or litigation risk | · The Company accords the highest importance to corporate governance matters and upholding the highest ethical standards. · Activities are subject to various different jurisdictional laws, customs, fiscal and administrative regulations. The Company employs suitably experienced and qualified staff and, when required, external advisors to ensure full compliance. · Improved online due diligence system capturing third party risks, analysis of those risks plus approval decisions. · Legal risk assessment and due diligence (where appropriate) is undertaken for all counterparties the Company deals with. | General Counsel | NO CHANGE | |
Stakeholder sentiment | · Ophir is committed to sustainable development. The Company's approach to Corporate Responsibility underpins the way it does business. · The Company continually strives to conduct operations in an ethical, responsible, apolitical, independent and transparent manner. · Ophir places a strong emphasis on maintaining excellent relationships with the local communities and host country governments in the jurisdictions in which it operates. · Ophir pro-actively interacts with stakeholders, maintaining regular dialogue and provision of information. · All material information is released to the market on a timely basis and in accordance with all applicable regulations. · There is ongoing monitoring of public sentiment towards the Company and its operations. · Ophir places great importance on values they expect staff to demonstrate in order to be respected by its stakeholders. | Head of Investor Relations & Corporate Communications /Director Corporate Services | UP | |
Political risk | · Ophir regularly monitors and seeks to understand changes taking place in political and regulatory environments and the potential for shocks to make recommendations to the Board. · Ophir maintains a balanced asset portfolio across different jurisdictions. · The Company strives to maintain positive relationships in host countries and work to the highest industry standards with regulators, closely monitoring compliance with the Company's licence and PSC obligations. | Director Corporate Services | NO CHANGE | |
Strategic
| Investment decisions
| · Focus on growing a revenue generating business to fund exploration activities and minimise the overall cost of capital. · Only allocate capital to highest return opportunities following rigorous risk reward analysis. · The Company and its advisors are experienced within the industry, and complete a proper review of the Company's strategy and investment criteria. · The current portfolio is closely monitored and new market opportunities continually reviewed. · A robust risk assessment and due diligence process is undertaken on all potential new entries. · Ophir endeavours to transact at the most appropriate time to create value for shareholders. | Director Portfolio & Strategy | NO CHANGE |
Inadequate resource and reliance on key personnel | · The Company regularly reviews the organization to ensure it is appropriately resourced to deliver its objectives. · Ophir relies on the excellence of a 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 Plan (LTIP) for Executives and a Deferred Share Plan for staff. | Director Human Resources | DOWN | |
Operational | Health Safety and Environment (HSE) and Security incident risk | · Ophir is committed to maintaining robust health, safety, security and environmental management and procedures in place in order to respond to unexpected events that have a direct impact on the Company and the communities it works alongside. · Thorough risk assessments to develop robust mitigation and response measures are designed and overseen by management and the Corporate Responsibility Committee which meets regularly to review and monitor compliance. · Comprehensive oil spill and emergency response plans are always in place with regular training in the procedures taking place with specialist service providers. · The Company has clear in-country control measures. | Director Corporate Services | UP |
Drilling operations | · Ophir maintains clearly defined operational procedures. · The contracting and procurement process ensures suitably qualified contractors are employed and trained in Ophir's best practices. · Regular training and continued monitoring of staff adherence to HSE procedures. · The Company frequently reviews project management techniques. | Director of Drilling | DOWN | |
Discovery risk and success rate | · To achieve value creation through exploration the Company has technically and regionally experienced management and geoscience teams with a proven record of success. · To reduce risk, substantial technical analysis is undertaken to evaluate and manage opportunities. · During 2014 Ophir has significantly rebuilt its exploration footprint in order to have access to a high-graded exploration portfolio of world class potential. · Exit licences where the Company do not believe the model of finding and then monetising resource exists. | Head of Exploration Africa and Head of Exploration Asia | NO CHANGE | |
IT risk | · Regular monitoring and review of IT security vulnerabilities that could lead to information security breaches. · Various standard industry systems and processes in place to manage security, power outages and network disruptions, thereby minimising downtime to operations and corporate offices. | Head of IT | NO CHANGE | |
Availability of rigs and services | · 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 Contracts and Procurement (C&P) Manager ensure a clear contracting strategy and project plan are produced early in the procurement planning stage. | Director of Drilling | DOWN | |
Financial | Inability to fund exploration work programmes | · Regular review of cash flow, working capital and funding options, and prudent approach to budgeting and planning, to ensure sufficient capital to meet commitments. | Director of Finance | UP |
Counterparty credit risk | · Close monitoring of all trade debtors which are subject to internal credit review. | Director of Finance | NO CHANGE | |
Cost and capital spending | · In the present oil price environment Ophir is focused on preserving its balance sheet and during 2014 and into 2015 there has been an increased focus on cost management and capital allocation. Whilst the Company doubled the physical size of its exploration footprint in 2014, it has secured new acreage without any commitment wells, which maintains balance sheet flexibility. · Optimise and protect Ophir's capital by capturing highest commercial returns on assets, prioritised its capital expenditure to protect its balance sheet and reduce its cost structure. · A formalised annual budget process and ongoing monthly reviews of actuals to budget analysis. Delegation of authority, approval processes and C&P procedures. · Board approval of Annual Work Programme. | Director of Finance | NO CHANGE | |
Interest rate and foreign exchange risk | · Cash balances are primarily held in US Dollars to provide a natural hedge to reflect that the majority of the Company'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 20 on page 119 in the Company's consolidated financial statements. | Director of Finance | NO CHANGE |
C: Statement of Directors' Responsibilities in relation to Group Financial Statements
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 International Financial Reporting Standards (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 Strategic Report, 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.
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 Strategic Report and Directors' Report 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.
Directors' statement under the UK Corporate Governance Code
The Board considers that the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Approved by the Board and signed on their behalf
Nick Cooper
Chief Executive Officer
18 March 2015
For further enquiries please contact:
Ophir Energy plc +44 (0)20 7811 2400
Nick Cooper, CEO
Geoff Callow, Head of Investor Relations & Corporate Communications
Brunswick Group +44 (0)20 7404 5959
Patrick Handley
Marleen Geerlof
Notes to Editors
Ophir Energy (OPHR.LN) is an, upstream oil and gas exploration company which is a member of the FTSE 250. The Group's headquarters are located in London (England). Ophir has a large portfolio of assets across Africa and Asia.
For further information on Ophir, please refer to www.ophir-energy.com