Ophir Energy plc Annual Report and Accounts 2011

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88 Ophir Energy plc Annual Report 2011 Notes to the financial statements continued 27 Financial risk management & financial instruments continued As at 31 December 2011, 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. (d) Foreign currency risk continued At the Balance Sheet date, the Group had the following exposure to Pounds Sterling (“GBP”), CFA Franc BEAC (“XAF”), Tanzania Shilling (“TZS”), Euros (“EUR”) and Australian Dollars (“AUD”) foreign currency that is not designated in cash flow hedges: Group 2011 US$’000 2010 US$’000 2011 US$’000 Company 2010 US$’000 Financial assets Cash and cash equivalents AUD 382 150 – – EUR 176 106 48 48 GBP 23,909 263 23,891 189 TZS 5 29 – – XAF 176 340 – – 24,648 888 23,939 237 Financial liabilities Trade and other payables AUD (213) (184) – – EUR (105) (278) – – GBP (1,160) (487) (998) (384) (1,478) (949) (998) (384) Net Exposure 23,170 (61) 22,941 (147) At 31 December 2011, had the US Dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows: Post tax loss higher/(lower) 2011 US$’000 2010 US$’000 Other comprehensive income higher/(lower) 2011 US$’000 2010 US$’000 Group US Dollar to GBP Sterling +5% (2009: +5%) (1,137) 11 – – US Dollar to GBP Sterling -5% (2009: -5%) 1,137 (11) – – US Dollar to AUD +5% (2009: +5%) 8 (2) 7 30 US Dollar to AUD -5% (2009: -5%) (8) 2 (7) (30) US Dollar to EUR +5% (2009: +5%) 3 (9) – – US Dollar to EUR -5% (2009: -5%) (3) 9 – – US Dollar to XAF +5% (2009: +5%) 9 17 – – US Dollar to XAF -5% (2009: -5%) (9) (17) – – US Dollar to TZS +5% (2009: +5%) – 1 – – US Dollar to TZS -5% (2009: -5%) – (1) – – Parent US Dollar to GBP Sterling +5% (2009: +5%) (1,145) 10 – – US Dollar to GBP Sterling -5% (2009:-5%) 1,145 (10) – – US Dollar to EUR +5% (2009: +5%) (2) (2) – – US Dollar to EUR -5% (2009:-5%) 2 2 – –
89 Ophir Energy plc Annual Report 2011 27 Financial risk management & financial instruments continued 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 balance date, moving this spot rate by the reasonably possible movements and then re-converting the US Dollar into AUD with the “new spot rate”. This methodology reflects the translation methodology undertaken by the Group. (e) 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 in and out flows on a continuous basis. All of the Group and Company’s trade creditors and other payables (Note 18) are payable in less than six months. (f) Derivative instruments The Company and Group did not make use of derivative instruments during the year or during the prior year. (g) Disclosure of fair values The carrying value of security deposits and financial liabilities disclosed in the financial statements as at 31 December 2011 approximate their fair value for both the Company and Group. The Group uses various methods in estimating the fair value for financial instruments carried at fair value in the financial statements. The methods comprise: Level 1 the fair value is calculated using quoted prices in active markets. Level 2 the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset of liability, either directly (as price) or indirectly (derived from prices). Level 3 the fair value is estimated using inputs for the asset or liability that are not based on observable market date. Fair value hierarchy Group 2011 US$’000 2010 US$’000 2011 US$’000 Company 2010 US$’000 Level 1 – – – – Level 2 – – – – Level 3 670 700 387 418 670 700 387 418 BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS There were no transfers between levels during the year. (h) 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 and potential development activities. At 31 December 2011 the Group had no debt, other than payables as part of normal working capital. 28 Related party transactions (a) Identity of related parties The Company has related party relationships with its subsidiaries (refer Note 12), its Directors and companies associated with its Directors identified in the following paragraph. Recharges from the Company to subsidiaries in the year were US$4,457,140 (2010: US$3,523,210). Transactions between the Company and its subsidiaries have been eliminated on consolidation.
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Ophir Energy plc Annual Report and Accounts 2011

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