Annual Report 2010 - Ophir Energy

OPERATIONAL RISKS
Discovery Risk:
No Current Production:
Oil & Gas Price:
Unexpected Events:
Ophir has an excellent portfolio of assets and a sound track record of success.
However, given the nature of the business there is no guarantee of exploration success.
Ophir mitigates these risks by holding a diverse portfolio in various stages of maturity and
by employing advanced geoscience techniques to evaluate its exploration prospects. Such
technology reduces, but cannot eliminate, the risk that no economically producible oil or gas
will be discovered by exploration efforts or determined to be recoverable from Ophir’s
exploration assets described in this report.
Ophir does not currently produce any oil or gas and therefore does not have operating
cash flow to sustain investment levels.
Ophir’s reporting procedures and close monitoring of cash flows ensures that funding
requirements are identified well in advance of its commitments.
Ophir’s asset value and the economic viability of its exploration projects depend on the price
of oil and gas. Ophir’s ability to raise funds in the future is likely to be sensitive to the price
of oil and gas.
The nature of Ophir’s business and its geographical spread exposes it to risks of unexpected
events such as accidents, environmental incidents and issues of security.
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Ophir energy plc | 2010 ANNUAL REPORT
Business review | Principal Risks and Uncertainties
Ophir mitigates these risks by ensuring compliance with robust policies and procedures in
the areas of Health, Safety and Environment. Ophir has clear crisis management plans in
place to immediately respond to and minimise the impact of any incident that may occur.
Ophir continually monitors security in the jurisdictions of its operations and carries
comprehensive insurance cover over these operations.
STRATEGIC RISKS
Capital Intensive
Business:
Ophir has been successful in raising capital from diverse investors to date and manages its
liquidity and commitments closely, with no debt obligations at present. However, oil and gas
exploration is a highly capital intensive business and will require Ophir to raise new capital in
the future and/or to farm out assets.
Ophir closely monitors its liquid resources and cash flow needs ensuring that funding
requirements are identified well in advance of its commitments.
Ophir funds operations across its portfolio of assets through its supportive shareholder base,
introduction of farm in partners or asset divestiture. Whilst the Company is not quoted on
any stock exchange at this time, the Directors may seek a listing for the Company’s shares
in the future.
Competition:
There is a great deal of competition in every public round of bidding for exploration
blocks throughout Africa, making the replacement of maturing assets in its portfolio a
challenging exercise.
Ophir continually looks for business opportunities and asset portfolio growth in the public
arena, through its extensive industry contacts, innovative assets swaps and farm in
arrangements.
Personnel:
Ophir is reliant on a small team of experienced oil and gas professionals for its success.
The loss of key staff would provide a serious challenge to Ophir’s growth prospects.
Ophir continually monitors its staffing needs, recruits suitably qualified staff and motivates
and retains its personnel through competitive remuneration packages and incentive plans.