Ophir Energy plc Annual Report and Accounts 2011

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Ophir Energy plc Annual Report 2011
27 Financial risk management & financial instruments continued
Significant assumptions used in the foreign currency exposure sensitivity analysis include:
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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.
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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.