Annual Report 2007 in PDF - Cairn Energy PLC

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NOTES TO THE ACCOUNTS CONTINUED 29. Equity Equity Shares held Foreign Capital reserves Retained Total share by ESOP currency Other – non- earnings Minority equity capital Trust translation reserves distributable (Restated) interests (Restated) Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 At 1 January 2006 223,670 (37,311) (7,927) 215,713 45,331 318,122 – 757,598 Prior year adjustment (Note 1(u)) – – – – – 12,092 – 12,092 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– At 1 January 2006 (Restated) 223,670 (37,311) (7,927) 215,713 45,331 330,214 – 769,690 Exercise of employee share options 3,219 – – – – – – 3,219 Share-based payments – – – – – 13,304 – 13,304 Cost of shares vesting – 3,214 – – – (3,214) – – Cost of shares purchased – (21,659) – – – – – (21,659) Surplus on valuation of financial assets – – – – – 603 – 603 Currency translation differences – – 10,725 – – – – 10,725 Transfer to retained earnings – – – (215,713) (5,109) 220,822 – – Loss for the year – – – – – (97,122) – (97,122) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– At 1 January 2007 226,889 (55,756) 2,798 – 40,222 464,607 – 678,760 Exercise of employee share options 9,968 – – – – – – 9,968 Minority interests created on deemed disposal of subsidiaries – – – – – – 408,061 408,061 Share-based payments – – – – – 20,803 4,471 25,274 Cost of shares vesting – 9,935 – – – (9,935) – – Currency translation differences 2,820 – 21,198 – – – 3,506 27,524 Cash returned to shareholders (12,931) 13,802 – – – (936,524) – (935,653) Surplus on valuation of financial assets – – – – – 5,544 2,493 8,037 Profit for the year – – – – – 1,519,653 8,192 1,527,845 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– At 31 December 2007 226,746 (32,019) 23,996 – 40,222 1,064,148 426,723 1,749,816 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– Shares held by ESOP Trust Shares held by the ESOP Trust represent the cost of shares held by the Cairn Energy PLC Employees’ Share Trust at 31 December 2007. The number of shares held by the Cairn Energy PLC Employees’ Share Trust at 31 December 2007 was 1,342,701 (2006: 2,293,478) and the market value of these shares was £41,274,619 (2006: £41,259,669). As a result of the return of cash to shareholders (see below), $13.8m was returned to the ESOP Trust and is aggregated in the financial statements. Foreign currency translation Group Unrealised foreign exchange gains and losses arising on consolidation of subsidiary undertakings are taken directly to reserves in accordance with IAS 21‘The Effects of Changes in Foreign Exchange Rates’. In accordance with IAS 21, foreign exchange differences arising on intra-group loans are not eliminated on consolidation; this reflects the exposure to currency fluctuations where the subsidiaries involved have differing functional currencies. These intra-group loans are not considered to be an investment in a foreign operation. Company Unrealised foreign exchange gains and losses arise on translation of the Company’s £ functional results into $ presentational currency in accordance with IAS 21. 118 CAIRN ENERGY PLC ANNUAL REPORT 2007
NOTES TO THE ACCOUNTS CONTINUED Other reserves Other reserves, comprising capital redemption reserves and other distributable capital reserves of a subsidiary, were capitalised in 2006. Following a subsequent capital reduction in the subsidiary, these were transferred to retained earnings. Capital reserves – non-distributable Capital reserves – non-distributable include non-distributable amounts arising on various Group acquisitions. Movement in 2006 follows capitalisation of reserves in a subsidiary. Following a subsequent capital reduction in the subsidiary, these were transferred to retained earnings. Cash returned to shareholders In April 2007, Cairn Energy PLC returned cash to shareholders of £3 per share out of the proceeds of the flotation of Cairn India on the Bombay Stock Exchange and National Stock Exchange of India. Costs of the transaction of $3,292,000 have been charged direct to equity and are included within the reduction in retained earnings Capital Equity Shares Foreign reserves share held by currency – non- Retained Total capital ESOP trust translation distributable earnings equity Company $’000 $’000 $’000 $’000 $’000 $’000 At 1 January 2006 223,670 (37,311) (8,219) 79 73,928 252,147 Exercise of employee share options 3,219 – – – – 3,219 Share-based payments – – – – 6,739 6,739 Cost of shares vesting – 3,214 – – (3,214) – Cost of shares purchased – (21,659) – – – (21,659) Currency translation differences – – 45,400 – – 45,400 Profit for the year – – – – 164,870 164,870 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 1 January 2007 226,889 (55,756) 37,181 79 242,323 450,716 Exercise of employee share options 9,968 – – – – 9,968 Share-based payments – – – – 10,579 10,579 Cost of shares vesting – 9,935 – – (9,935) – Cash returned to shareholders (12,931) 13,802 – – (936,524) (935,653) Currency translation differences 2,820 – 8,589 – – 11,409 Profit for the year – – – – 1,170,772 1,170,772 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 December 2007 226,746 (32,019) 45,770 79 477,215 717,791 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– 30. Financial Risk Management: Objectives and Policies Cairn Energy PLC Group and Company The primary financial instruments comprise bank loans, cash, short- and medium-term deposits, money market liquidity funds, loans and other receivables and financial liabilities held at amortised cost. The Group’s strategy has been to finance its operations through a mixture of retained profits and bank borrowings. Other alternatives such as equity finance and project finance are reviewed by the Board, when appropriate, to fund substantial acquisitions or oil and gas projects. The Group and local treasury functions are responsible for managing investment and funding requirements including banking and cash flow monitoring. They must also recognise and manage interest and foreign exchange exposure whilst ensuring that the Company and the Group has adequate liquidity at all times in order to meet their immediate cash requirements. The Company and the Group may from time to time opt to use derivative financial instruments to minimise their exposure to fluctuations in foreign exchange and interest rates. During the year, Cairn India entered into forward foreign exchange options to hedge the exposure of future Indian Rupee requirements as part of the Rajasthan Development. Refer to Note 31 for further details. During 2007, a currency exchange option contract matured. The contract was entered into by the Company in 2006 in order to hedge the impact of currency fluctuations resulting from transactions carried out in Indian Rupees as part of the IPO. This was not exercised due to favourable movements in the exchange rate. CAIRN ENERGY PLC ANNUAL REPORT 2007 119
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ANNUAL REPORT & ACCOUNTS 2007 CAIRN
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CAIRN is an edinburgh based oil and
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CAIRN INDIA performance First comme
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2000 lakshmi disCovery 2001 sarasWa
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THE RESTRUCTURING OF THE GROUP INTO
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ajasthan midstream the government o
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Cambay Basin, India CAIRN ENERGY PL
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Cairn india assets 30% 30% 49% 40%
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Rajasthan, India the increased reso
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Detail heading here relore min ullu
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uk (West Of shetland) Block 214/19
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nePal the security situation in nep
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angladesh reserves sangu gross 2p r
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activities in all operated blocks.
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2007 marked the beginning of a new
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key financial performance indicator
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CAIRN INDIA CAPITAL EXPENDITURE FOR
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3 9 12 4 8 1 Sir Bill Gammell, Chie
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2007 ACCOUNTS Risk Factors 36 Corpo
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RISk FACTORS CONTINUED The developm
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RISk FACTORS CONTINUED Corporate Re
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CORPORATE GOVERNANCE STATEMENT CONT
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DIRECTORS’ REPORT CONTINUED At 31
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DIRECTORS’ REPORT CONTINUED Elect
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DIRECTORS’ REPORT CONTINUED Age o
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DIRECTORS’ REMUNERATION REPORT Re
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DIRECTORS’ REMUNERATION REPORT CO
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