Prospectus re Admission to the Official List - Heritage Oil

v) Liquidity riskLiquidity risk is the risk that the Group will not have sufficient funds to meet liabilities. Cashforecasts identifying liquidity requirements of the Group are produced quarterly. These arereviewed regularly to ensure sufficient funds exist to finance the Corporation’s currentoperational and investment cash flow requirements.Management monitors rolling forecasts of the Corporation’s liquidity reserve on the basis ofexpected cash flow.The Group had available cash at approximately $62 million at 30 September 2007. Since thenit has raised approximately $186 million by way of an equity offering of Common Shares (seenote 27). Based on its current plans and knowledge, its projected capital expenditure andoperating cash requirements, the Group projects available cash at 31 December 2008 ofapproximately $122 million.The Corporation’s financial liabilities consist of trade and other payables and borrowings.Trade and other payables are due within 12 months, and borrowings fall due as outlined innote 25.b) Capital risk managementThe Corporation’s objectives when managing capital are to safeguard the Corporation’s ability tocontinue as a going concern in order to provide returns for shareholders and benefits for otherstakeholders and to maintain an optimal capital structure to reduce the cost of capital.The Corporation monitors capital on the basis of the gearing ratio. This ratio is calculated as netdebt divided by total capital. Net debt is calculated as total borrowings (including ‘borrowings’and ‘trade and other payables’ as shown in the consolidated balance sheet) less cash and cashequivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plusnet debt.As at 31 DecemberAs at 30 September2005 2006 2006 2007$ $ $ $(Unaudited)Total borrowings ................. 12,641,981 104,047,406 81,897,283 193,803,972Less cash and cash equivalents(note 15) .................... (8,583,321) (46,861,146) (46,851,571) (61,894,711)Net debt ...................... 4,058,660 57,186,260 35,045,712 131,909,261Total equity .................... 67,704,554 42,726,467 56,230,090 24,019,303Total capital .................... 71,763,214 99,912,727 91,275,802 155,928,564Gearing ratio ................... 6% 57% 38% 85%This increase in the gearing ratio during 2006 and 2007 resulted primarily from the issuances ofbonds and long-term debt (note 17).191