Prospectus re Admission to the Official List - Heritage Oil

contractual or pricing terms, both of which could adversely affect the Group’s business, results ofoperations, financial condition and prospects.Insurance May Not be Sufficient to Cover Full Extent of LiabilitiesThe Group’s involvement in the exploration for and development of oil and gas properties may result inthe Group becoming subject to liability for claims for matters including pollution, blow-outs,environmental damage, cratering and fires all of which may result in property damage, personal injury orother hazards or for the acts or omissions of sub-contractors, operators and joint venture partners.Although, the Group may have received indemnities from such sub-contractors, operators and jointventure partners, such indemnities may be difficult to enforce given the financial positions of those givingthe indemnities or due to the jurisdiction in which the Group seeks to enforce the indemnities.The Group believes that the level of insurance cover it maintains is adequate based on various factors suchas the cost of the policies, industry standard practice and the risks associated with the exploration anddevelopment of oil and gas properties in the countries in which it operates. The Group does not maintainkey-man insurance.Although the Group has obtained insurance in accordance with industry standards to address such risks,such insurance has limitations on liability that may not be sufficient to cover the full extent of suchliabilities. In addition, such risks may not, in all circumstances be insurable or, in certain circumstances theGroup may elect not to obtain insurance to deal with specific risks due to the high premiums associatedwith such insurance or for other reasons. The payment of such uninsured liabilities would reduce the fundsavailable to the Group. The occurrence of a significant event that the Group is not fully insured against, orthe insolvency of the insurer of such event, could have a material adverse effect on the Group’s financialposition, business, results of operations or prospects.Currency Fluctuations and Foreign Exchange Particularly in Relation to United States DollarsThe Group’s current capital expenditures, exploration commitments, revenues and cost base aredenominated primarily in United States dollars and, to a lesser extent, in currencies of other countries,such as Russian roubles. Where there are fluctuations in the United States dollar exchange rate, theGroup’s revenue margins and capital expenditures may be materially affected. Expenses in Russian roublesare partially offset by income earned in Russian roubles. The developing countries in which the Groupoperates or proposes to operate impose or may impose foreign exchange restrictions that may materiallyaffect the Group’s financial condition, business, prospects and results of operations.Labour Unrest Could Affect the Group’s Ability to Explore For, Produce and Market its Oil andGas ProductionThe Group may be required to hire and train local workers in its oil and gas operations. Some of theseworkers may be organised into labour unions. Any strike activity or labour unrest in any such localjurisdiction or at any oil and gas operation could adversely affect the Group’s ongoing operations and itsability to explore for, produce and market its oil and gas production.Adverse media or other public speculation about the Chief Executive Officer’s past associations couldmaterially adversely affect the Group’s reputation and the market price of the Ordinary Shares and/or theExchangeable SharesAs disclosed in Section 9 ‘‘History and Development’’ of Part I of this document, prior to 1998, the ChiefExecutive Officer of the Company had associations with certain companies, namely Executive Outcomesand Sandline International, which were principally engaged as private military contractors in Angola,Sierra Leone and Papua New Guinea. Since the cessation of operations of those companies in 1998, theChief Executive Officer has had no association with any private military contractors or similar companiesor activities and the Group has no assets or current intentions to operate in the countries in whichExecutive Outcomes and Sandline International operated. Further, there is no connection between theassets of the Company and the previous involvement of the Chief Executive Officer with private militarycontractors and, as far as the Company is aware, no formal allegation in this regard has ever been made.However, as a result of these historic associations, there has been, from time to time and may periodicallybe in the future, media and other public speculation about the Chief Executive Officer’s associations withprivate military contractors and/or individuals involved with those types of companies. Any adverse mediaspeculation or other public statements about the Chief Executive Officer could materially adversely affectthe Group’s reputation and the market price of the Ordinary Shares.19