Annual Report 2007 in PDF - Cairn Energy PLC

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CORPORATE GOVERNANCE STATEMENT CONTINUED Mr Grossart, the senior independent non-executive director, is available to shareholders if they have concerns which contact through the normal channels of the Chairman, Chief Executive or Finance Director has failed to resolve or for which such contact is inappropriate. Each of the non-executive directors is available to attend meetings with major shareholders (without the executive directors present), if requested by such major shareholders. Annual General Meeting The Board uses the AGM to communicate with private and institutional investors and welcomes their participation. It is policy for all directors to attend the AGM if at all possible. Whilst this may not always be possible for business or personal reasons, in normal circumstances this means that the chairmen of the audit, remuneration and nomination committees will attend the AGM and be available to answer questions. It is policy to involve shareholders fully in the affairs of the Company and to give them the opportunity at the AGM to ask questions about the Company’s activities and prospects. Details of resolutions to be proposed at the AGM on 23 May 2008 can be found in the Notice of Annual General Meeting on pages 131 to 133 and on the Company’s website. The proxy votes for and against each resolution, as well as abstentions, will be counted before the AGM and the results will be made available at the meeting after the shareholders have voted on each resolution on a show of hands. The Form of Proxy for the AGM includes a ‘vote withheld’ option in respect of each resolution, to enable shareholders to abstain on any particular resolution. It is explained on the Form of Proxy that a ‘vote withheld’ is not a vote in law and will not be counted in the calculation of the proportion of the votes ‘for’ or ‘against’ a resolution. Directors’ Responsibility Statement The directors are responsible for preparing the annual report and the Group and Company financial statements in accordance with applicable law and regulations. Uk company law requires the directors to prepare Group and Company financial statements for each financial year. Under such law the directors are required to prepare the Group financial statements in accordance with IFRS (as adopted by the EU) and have also elected to prepare the Company financial statements in accordance with IFRS (as adopted by the EU). The Group and Company financial statements are required by law and IFRS (as adopted by the EU) to present fairly the financial position and performance of the Group and the Company; the Companies Act provides in relation to such financial statements that references in the relevant part of the Companies Act to financial statements giving a true and fair view, are references to their achieving a fair presentation. In preparing each of the Group and Company financial statements, the directors are required to: • select suitable accounting policies and apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRS (as adopted by the EU); and • prepare the financial statements on the going concern basis unless it is inappropriate to assume that the Group and the Company will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The directors confirm that, to the best of their knowledge and belief: • the financial statements have been prepared in accordance with the standards summarised above, give a true and fair view of the assets, liabilities and financial position of the Group’s affairs as at 31 December 2007 and of its profit for the year then ended; and • the Directors’ Report includes a fair review of the development and performance of the Group’s business and a description of the principal risks and uncertainties that it faces. Going Concern The directors have considered the factors relevant to support a statement on going concern. They have a reasonable expectation that the Group will continue in operational existence for the foreseeable future and have therefore used the going concern basis in preparing the financial statements. 46 CAIRN ENERGY PLC ANNUAL REPORT 2007
CORPORATE GOVERNANCE STATEMENT CONTINUED Internal Control The Board acknowledges its responsibility for the system of internal control and for reviewing its effectiveness. The system of internal control plays a critical role in managing the risks towards the achievement of corporate vision and objectives, and is also central to safeguarding shareholders’ interests and Company assets. This system of internal control is in accordance with the guidance of the Turnbull Committee and is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatement or loss. The process has been in place in respect of the Group for the 2007 accounting period and up to the date of approval of the report and accounts. The Board has carried out a review of the effectiveness of the system of internal controls during 2007 and will ensure that such reviews are performed in 2008. In so doing, the Board has taken into account the assurance provided by the Chief Executive Officer of Cairn India in respect of the effectiveness of the system of internal control within Cairn India and which derives from a parallel process followed within Cairn India. The Board is accordingly satisfied that effective control is in place and that risks have been mitigated to an acceptable level. The Company is subject to a variety of risks which derive from the nature of the oil and gas exploration and production business and relate to the countries in which it conducts its activities. The directors believe that Cairn derives its competitive edge by focusing activities in areas where they believe they have a technical and commercial advantage and the experience gained over many years enables the Company to manage these risks effectively. Operations in any country are only possible when values are shared, and the directors believe that the Group’s values of integrity, social and environmental responsibility, teamwork and nurturing of individuals, creativity, risk management and alliancing with key partners are ingredients that are central to the Company’s success. The ability to recognise the value of working as a partnership with host governments, both nationally and regionally, has also been a critical ingredient in this approach and success. 2007 was another year of significant change for the Company, with the transfer of management control of Cairn India to its own board of directors following the listing on the BSE and NSE on 9 January 2007 and the building of an exploration portfolio and new organisation in Capricorn. Particular attention has been placed by Group management on ensuring that a robust system of internal control has been maintained during 2007 in relation to the significant risks in business activities. Cairn India is subject to the rules, regulations and guidelines of SEBI and to its listing agreement with the BSE and NSE. Under the terms of a relationship agreement between the Company and Cairn India entered into at the time of the IPO (the ‘Relationship Agreement’), both companies have also agreed to use reasonable endeavours to ensure that they can comply with their respective obligations to SEBI, the FSA, the BSE, the LSE and the NSE and under the SEBI Insider Trading Regulations and Uk regulation and legislation relating to the disclosure of information or dealing in respect of listed securities or corporate governance. This has included adopting and following the principles and policies of corporate governance, including risk management, which enable each company to comply with these obligations. The following describes the key elements of the internal control system and the processes used by the Board during 2007 to review the effectiveness of the system. It also describes the approach to be taken in 2008. 1. Strategic Direction The Group business model is conventional in that strategy is set by the directors and approved by the Board and its implementation is delegated to the GMB. Following its listing on the BSE and NSE in January 2007, Cairn India is now an autonomous company and its directors decide the company strategy. In accordance with the memorandum and articles of association of Cairn India, the Company has nominated three non-executive directors to the board of Cairn India (including Sir Bill Gammell as Chairman) and, therefore, has an input to this strategy. 2. Operating Management Outside of Cairn India, the Group, through its unlisted subsidiary Capricorn, operates several business units in different countries and with various partners. Work programmes and budgets are prepared annually to meet the Group strategy, starting at the asset level before being consolidated at both country and Group levels. After an iterative process, the country budgets are presented as part of the Group budget to the GMB and the Board for approval. Each country then prepares a detailed business plan to meet the agreed annual work programme and budget. This sets out detailed objectives and kPIs for each asset and supporting functional department, and is consolidated into the country business plan. The country business plans are firstly approved by the in-country management teams and are then submitted to the GMB and the Board for approval. The in-country management teams then have the required authority to implement the business plans and to deliver the agreed work programme within the approved budget and delegation of authorities, and in accordance with the internal control framework. CAIRN ENERGY PLC ANNUAL REPORT 2007 47
Page 1 and 2: ANNUAL REPORT & ACCOUNTS 2007 CAIRN
Page 3 and 4: CAIRN is an edinburgh based oil and
Page 5 and 6: CAIRN INDIA performance First comme
Page 7 and 8: 2000 lakshmi disCovery 2001 sarasWa
Page 9 and 10: THE RESTRUCTURING OF THE GROUP INTO
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Page 13 and 14: Cambay Basin, India CAIRN ENERGY PL
Page 15 and 16: Cairn india assets 30% 30% 49% 40%
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RESERVES Direct Direct working enti
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NOTICE OF ANNUAL GENERAL MEETING No
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NOTICE OF ANNUAL GENERAL MEETING CO
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GLOSSARY OF TERMS CONTINUED TECHNIC
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