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OPHIR ENERGY (LON:OPHR) Annual Financial Report

Directive transparence : information réglementée

07/04/2017 12:17
Ophir Energy Plc  -  OPHR   

Annual Financial Report

Released 12:17 07-Apr-2017

 

7 April 2017

Ophir Energy plc

 

Annual Financial Report

 

 

As required by DTR 6.3.5(3), Ophir Energy plc ("Ophir" or the "Company") announces that its Annual Report, Notice of Annual General Meeting ("AGM") and Form of Proxy for the 2017 AGM have been published and (excepting the Form of Proxy) are now available on the Ophir website: www.ophir-energy.com. This follows the release on 9 March 2017 of the Full Year Results Announcement for the year ended 31 December 2016. 

In compliance with 9.6.1 of the Listing Rules, the Company has today submitted copies of the following documents to the National Storage Mechanism and these will shortly be available for inspection at www.morningstar.co.uk/uk/NSM

·     Annual Report and Accounts for the year ended 31 December 2016

·     Notice of 2017 AGM

·     Form of Proxy for the 2017 AGM

The Ophir Annual Report will be delivered to the Registrar of Companies in due course. Copies of the Annual Report and Notice of AGM may also be obtained from the:

General Counsel & Company Secretary

Ophir Energy plc

Level 4

123 Victoria Street

London SW1E 6DE

Tel: +44 (0) 20 7811 2400

The AGM will take place on 17 May 2017.  The total of the votes cast by shareholders for or against or withheld on each resolution to be put to the meeting will be released to the market and published on www.ophir-energy.com as soon as practicable after the conclusion of the AGM.

The Disclosure and Transparency Rules ("DTR") require an announcement of the publication of certain information in full unedited text in compliance with DTR 6.3.5(2). As such the following disclosures are made below, referencing page numbers and notes to those in the accounts in the Company's Annual Report.

Audit Report and Accounts

The Full Year results announcement on 9 March 2017 included a set of condensed, financial statements and management commentary. The audited financial statements are contained in the Ophir Annual Report and Accounts. The independent Audit report of the Group and Company are contained on pages 79 to 86.

For further enquiries please contact:

 

Ophir Energy plc                                                                                                              +44 (0)20 7811 2400

Philip Laing, General Counsel & Company Secretary

Geoff Callow, Head of Investor Relations & Corporate Communications

 

 

Brunswick Group                                                                                                             +44 (0)20 7404 5959

Patrick Handley

Wendel Verbeek

 

 

Appendices

 

Appendix A

 

The following list of principal risks is extracted from pages 14 to 19 of the Annual Report and Accounts and is repeated here solely for the purpose of complying with DTR 6.3.5.

 

Principal Risks

Ophir works in often challenging, complex and uncertain environments that present a potential risk to our objectives; to counter this we maintain robust and effective risk management as an integral part of our decision-making.

 

The key elements of Ophir's risk management are to:

·      establish the risk context with reference to Ophir's strategic business objectives.

·      conduct a risk assessment through:

understanding the causes, impacts and likelihood of risk events

assessing if the risks can be reduced to a tolerable level and are consequently within the acceptable constraints of the Group's risk appetite. This process informs us of where the risk event lies on Ophir's risk matrix

determining appropriate controls to deal with the risk, allocating responsibility for managing risk controls and executing activities based on plans and procedures

·      regularly communicate and consult on the risks through established management control procedures

·      recurrent monitoring and review of our risks

 

The principal risks that have been identified within the Group are summarised as follows:

Risk

Description of risk

Objective/Control

Responsibility

Change

Compliance breach

·    The Group conducts business in jurisdictions that have been allocated low scores on Transparency International's ''Corruption Perceptions Index'' and where changes in the regulatory and legislative environment are possible.

·    Ethical wrongdoing and non-compliance, or failure to accurately report our data can lead to litigation against the Group which could materially impact our strategy. Potential impacts could be:

o Reputational damage leading to withdrawal of support by shareholders, governments, lenders and/or co-venture partners.

o Litigation and regulatory action leading to penalties and business disruption from investigation leading to unplanned cost impact.

o Loss of assets, PSCs and projects.

o Prosecution.

·    Top down leadership of the Group's values.

·    A strong Code of Conduct that all employees and contractors are expected to follow.

·    A Group Anti Bribery and Corruption Policy in place.

·    Compliance training conducted across the Group.

·    Due diligence carried out on counterparties and in contract management.

·    Anti-bribery and corruption provisions in agreements.

·    Compliance controls and actions reviewed by the Board and its Committees.

·    Annual employee sign-off confirming observance of the Code of Conduct and relevant ethical policies and standards.

·    A 'Letter of Assurance' signed off annually by management.

·    Primary controls to be monitored as a key leading indicator during 2017.

·    All material information released to the market on a timely basis and in accordance with all applicable regulations.

General Counsel & Company Secretary

No change

Adverse market sentiment

towards the E&P sector

·    The sector continued to be depressed through 2016 and there remains a limited appetite for oil and gas investments.

·    The impact can negatively affect project value and modelling.

·    NAV/share growth is our key metric and we will benchmark against this more explicitly going forward.

·    Deliver an appropriate capital structure to internally fund core exploration and appraisal activities from the addition of production assets and monetisation of resources to generate sustainable cash flow.

·    Ensure that commercial terms on new acreage reflect the changing landscape and involve minimal financial commitments with options to exit early.

Chief Financial Officer

No change

Political

·    The Group operates in jurisdictions that are subject to significant political, economic, legal, regulatory and social uncertainties.

·    The impacts can affect the safety of our people, operational continuity and lead to a loss in value and uncertain financial outcomes.

·    Regularly monitor and seek to understand changes taking place in political and regulatory environments.

·    Work to the highest industry standards with regulators, closely monitoring compliance with the Group's licence and PSC obligations.

·    Seek to reduce exposure by maintaining a diverse portfolio.

·    Maintain positive relationships with governments and key stakeholders in host countries.

·    Ensure appropriate legal agreements are in place to protect our interests.

·    When reviewing new positions/ acquisitions, evaluate and compare the potential political risks within the portfolio.

Director - Security

and Surface Risk

Up

Stakeholder

sentiment

·    Actual or perceived failure to address socio-economic development, environmental issues or corporate responsibility matters in the regions where we operate may adversely affect the Group.

·    This may impact our reputation, lead to loss of investor confidence and loss of our licence to operate.

·    Pursue a shared value approach to support sustainable development goals and achieve a mutually-beneficial and constructive relationship with stakeholders.

·    Conduct all business in an ethical, responsible, apolitical and transparent manner.

·    Monitor public sentiment towards the Group and its operations.

Director - Security

and Surface Risk

No change

Global

economic

volatility

 

·    We are exposed to a variety of changes in the macro environment around global affairs and international economics that are leading to greater global economic uncertainty.

·    Slower global demand and weaker prices for major commodities are dampening growth prospects.

·    These changes can impact the operating and regulatory situation.

·    Regularly review how external risks impact the Group's strategy and remain agile to change.

·    Re-engineer value chains where appropriate to improve margins.

Director - Commercial and Planning

Up

Low

commodity

price

·    There were oversupply and demand concerns through 2016 and we anticipate a 'lower for longer' forecast.

·    This can lead to loss of value and have an adverse effect on revenue, margins, profitability and cash flow.

·    Reflect the effects of 'lower for longer' in strategic planning.

·    Continue to review the Group's cost structure and make sure it reflects the lower oil price environment.

·    Re-work economics of development plans to reflect downside sensitivities of oil price scenarios.

·    Selectively exploit low service costs resulting from the drop in the oil price.

·    Pursue acquisition opportunities that seek to protect shareholder value and sustain exploration.

·    Manage balance sheet strength.

·    Only invest in high-quality assets below the shale threshold with transformational potential, minimal commitments, and fiscal terms that enable value creation.

Chief

Financial Officer

No change

Climate change

·    The global ambition to limit mean temperature rise to below 2⁰C above pre-industrial levels will potentially require significant and sustained reductions in fossil fuel emissions.

·    It is hard to predict what changes in laws, regulations and obligations relating to manmade climate change will be, but they may increase costs, reduce value and constrain future opportunities.

·    Climate change will remain on the Board's strategic agenda going forward.

·    Understanding of the implications of a '2-degree world' for the business and what actions to take across a range of areas.

·    Systematically track trends to provide commercial foresight on how quickly the world is moving toward decarbonisation.

·    Continue to report our emissions and climate change strategies through CDP.

Director - Security and Surface Risk

Up

Divestment

·    The divestment environment through 2016 was difficult and in the short term is likely to remain so.

·    The main potential impact for Ophir is our inability to successfully divest assets at an acceptable price and/or time.

·    Continued focus on increasing NAV/share.

·    Monitor and tailor projects to fit the macro environment.

·    Maximise transparency with equity buyers.

·    Contingency planning and preparedness to change the course of action as situations change.

·    Capital selectively directed at those assets which offer the highest risk-weighted returns.

·    Appropriate balance between growth by exploration and acquisition.

Director - Commercial and Planning

No change

Investment decisions

·    The Group may not be able to identify appropriate expansion opportunities or be able to manage such expansion effectively.

·    Investments are not dictated by production or reserves growth targets; instead each investment is assessed on an IRR and materiality basis.

·    Focus on growing a revenue-generating business to fund exploration activities and minimise the overall cost of capital.

·    Allocate capital to the highest return opportunities following rigorous risk/reward analysis.

·    Risk assessment and due diligence process undertaken on all potential new country entries and acquisitions.

·    Endeavour to transact at the most appropriate time to create value for shareholders.

·    Continue the momentum on the Fortuna FLNG project and achieve FID in mid-2017.

·    Facilitate buyer access/relationships with host governments.

·    Ongoing strategic objective to capture high-quality exploration acreage.

·    Pace our exploration and high-grade the plays. We will not rush to drill.

·    Continue to build a portfolio of low-cost opportunities with defined exit options for investors in order to decide whether or not to progress to the next phase of exploration.

·    Manage risk with partners in existing assets and new ventures.

·    Only continue to hold and progress assets if they can demonstrably create substantial value for shareholders.

Director Africa - Global New Ventures/

Director Asia

No change

Health, Safety and Environment (HSE) and Security incident

·    Oil and gas exploration, development and production can present challenging operational environments and exposure to a wide range of health, safety, security and environmental risks.

·    Our most significant risks are:

o The potential loss of hydrocarbon containment caused by integrity failure, human error, natural disasters or other unforeseen events.

o The risk of harm to our workforce during transportation.

·    Major Health, Safety, Security or Environmental events could lead to regulatory action and legal liability, including penalties, increased costs and potential loss of our licence to operate.

·    Ophir has rebuilt its exploration portfolio in Africa and Asia with

high quality operated positions where Ophir has competitive

advantage, where drilling commitments are minimised and where the fiscal regime allows material value creation at current prices

·    This approach enables Ophir to manage the exploration risk by high grading plays in prospective acreage; this focuses attention (and ultimately drilling) solely on the most prospective plays

·    Ongoing strategic objective to execute operations safely and with excellence.

·    Commitment to maintaining robust health, safety, security and environmental management, and procedures in place to respond to unexpected events that could have a direct impact on the Group and the communities in which we work.

·    Comprehensive HSE and operations management systems including emergency response and oil spill response capability in place.

·    Active security monitoring and management.

·    Learn from Group and third-party incidents.

·    Use of leading indicators.

·    Contracting and procurement process ensures suitably-qualified contractors are employed to meet Ophir's requirements and industry best practices.

Director - Security and

Surface Risk

Up

Exploration success

·    Successful exploration and/or appraisal is fundamental to the purpose of our business and value creation for shareholders.

·    Persistent lack of success would lead to a loss of investor confidence and ultimately the failure of the business model.

·    Generate leads and mature top-ranked prospects.

·    Board's Technical Advisory Committee reviews subsurface risk and there is a robust peer review process embedded within the Group.

·    Application of technical excellence and use of appropriate technologies in exploration methodologies.

·    Review of new opportunities without impacting focus on strategic core growth areas.

Director - Subsurface

Down

Inability to fund exploration

work programmes

·    Failure to forecast and work within our financial structure could impact our liquidity and lead to an inability to deliver the business plan.

·    Gas discoveries may require the Group to invest in LNG development projects which require long lead times and material investment in receipt, processing and transportation infrastructure and the marketing of LNG.

·    The Group's business will require significant capital expenditure and the future expansion and development of its business could require future debt and equity financing. The future availability of such funding is not certain.

·    Revenues, profitability and cash flows concentrated in a small number of producing assets.

·    The Group may face the possibility of future decommissioning costs that it cannot accurately predict.

·    Inability to access internal or external funding

·    Ongoing strategic objective to optimise the use of our capital by capturing highest commercial returns on our assets and exploration opportunities.

·    Regular review of cash flow, working capital and funding options, and prudent approach to budgeting and planning, to ensure we have sufficient capital to meet commitments.

·    Effective portfolio management via farm-outs/asset sales as appropriate.

·    Budgets are focused on high and medium ranked assets/projects to deliver value creation and to ensure the Group can live within its means.

·    Formalised annual budget process and ongoing monthly reviews and analysis of actuals.

·    Board approval of Annual Work Programme.

·    Diversify the sources of funding and apply prudent levels of debt to development and production activities.

Chief Financial Officer

No change

 

Appendix B

 

The following responsibility statement is extracted from the Statement of Directors' responsibility on page 78 of the Annual Report and Accounts and is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to the full Annual Report and Accounts and not the extracted information presented in the Full Year Results announcement.

 

Responsibility Statement of the Directors in respect of the Annual Report and Accounts

I confirm on behalf of the Board that to the best of their knowledge:

 

·     the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and

·     the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

Directors' statement under the UK Corporate Governance Code

 

The Board considers that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

Approved by the Board on 8 March 2017.

 

Nick Cooper

Chief Executive Officer