Rebalancing Our Business

AND ACCOUNTS 2018 ANNUAL REPORT REPORT ANNUAL our business Rebalancing

Ophir Energy plc Annual Report and Accounts 2018 HIGHLIGHTS 29,700 $11. 67 boepd Average daily production1 per boe Operating costs

1 On a proforma basis accounting for the Santos acquisition from effective date of 1/1/18 $298m $720m Revenue Pre-tax loss

$17. 21 $35m per boe Net cash flow generated from Net debt/(cash) at period end operating activities $391m Gross liquidity at period end

CONTENTS

Strategic report 02 Governance report 38 Financial statements 79 Strategy Corporate Governance introduction 38 Independent Auditor’s report 79 Q&A with the Chief Executive Officer 02 Board of Directors 40 Consolidated income statement and Rebalancing our business 06 Corporate Governance report 42 statement of other comprehensive income 87 Market overview 10 Report of the Audit Committee 48 Consolidated statement of financial position 88 Our business model and strategy 12 Report of the Corporate Responsibility Committee 54 Consolidated statement of changes in equity 89 Key Performance Indicators 14 Report of the Nomination Committee 56 Consolidated statement of cash flows 90 Principal risks 18 Report of the Technical and Reserves Committee 58 Notes to the financial statements 91 Company statement of financial position 127 Performance Directors’ Report 60 Company statement of changes in equity 128 Operating review 22 Directors’ Remuneration report Company statement of cash flows 128 Financial review 28 Chairman’s Annual Statement on Remuneration 62 Notes to the financial statements 129 Corporate Responsibility 32 Directors’ Remuneration Policy 64 Annual Report on Remuneration 71 Responsibility statement of the Directors in respect Supplementary information 145 of the Annual Report and Accounts 78 Statement of Directors’ responsibilities in relation Shareholder information 145 to the financial statements and Annual Report 78 Glossary 148 REBALANCING OUR BUSINESS 01 We’re rebalancing our Company portfolio to focus on a larger Asian production base, with

the aim of building a stable, STRATEGIC REPORT self-financing E&P company. Read more about how our

Asian focus is reflected in our GOVERNANCE REPORT Santos acquisition, above target production and exploration opportunities. FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION

Santos 6-7 acquisition

Production 8-9 performance 02 QUESTIONS & ANSWERS WITH ALAN BOOTH Q&A

With Alan Booth

Our focus going forward is to build a strong, cash generative production base which will serve as a platform to support both further growth and shareholder returns. The addition of the new production assets in Vietnam and Indonesia was a first step Alan Booth in this direction. We also took Interim Chief Executive Officer steps during the year to move the corporate headquarters to Asia, which reflects both the strategic direction of the business and a continued focus on cost optimisation.

Ophir Energy plc Annual Report and Accounts 2018 03

01 02 03 How would you summarise Why the change of strategy? What, for you, are the greatest a year of a lot of activity? I think it has been an evolution to this point. strengths of the business? I would summarise it by saying that we Ophir was traditionally an equity funded I would point to the strength of our entered the year with a solid, but sub-scale, exploration business but with the acquisition production and development portfolio, and production portfolio with a lot of risk of Salamander Energy in 2015 we added that is down to the quality of our operations concentration for cash flow around the production and cash flow. team in Asia. It is often overlooked but the Bualuang field. We also had a lot of However, until 2018 we were still adding uptime from our production operations has exploration commitments in high risk to the exploration portfolio and the Board been first class whilst maintaining an areas and question marks over the decided that in order to maximise cash excellent HSE record and fostering strong future of the Fortuna project. generation, and be in a position to relationships with local stakeholders. We are continually improving our HSE processes and

We end the year having doubled and potentially start returning capital to STRATEGIC REPORT this culture delivered over 3.5 million man diversified our sources of production and shareholders, we needed to further expand hours incident free in 2018. I have also been cash flow, prioritised a reduction in our our production base and lower our impressed by the safety culture in the new exploration commitments, and with clarity exploration commitments. It was this desire Indonesian licences. These strengths are over the Fortuna project, though that did to be a lean, cash generative business that essential building blocks for an E&P company not work out as we had hoped. I think we are drove the strategic decisions taken during the as they maintain our licence to operate. now a much more focused, cost effective year. The Board took the decision that to company that will generate free cash have a viable, long-term future we needed flow and have much greater discretion to increase our cash generation. GOVERNANCE REPORT over future investment decisions. The Santos acquisition was a great opportunity to pick up a high quality asset base and double our cash flow. We then also took various difficult but necessary measures such as reducing overhead through the closure of the London

office and reviewing our exploration

portfolio to remove capital commitments. FINANCIAL STATEMENTS

SUPPLEMENTARY INFORMATION

MEDCO ENERGI GLOBAL AGREEMENT In January 2019 the Board of Ophir reached Ophir well for the future as an independent agreement with Medco Energi Global for business. However, the Board believes that the recommended acquisition of the entire the offer from Medco provides Ophir’s issued share capital of Ophir for a cash shareholders with certain, upfront value for consideration of 55 pence per share. The the future cash flows and therefore believes Board believes that following the acquisition it is in the best interest of all shareholders. of the assets from Santos, and the changes Should the transaction not close, then it announced in the strategic update in we take comfort that – as outlined in September 2018, it has established a cash this report – there is a viable business generative production base that positions that we can build from going forward.

Annual Report and Accounts 2018 04 QUESTIONS & ANSWERS WITH ALAN BOOTH CONTINUED

04 05 07 The Santos acquisition was Talking of the move to Asia, What is the status of your clearly a big strategic move – how is that going and what search for a new CEO? can you tell us more about are the plans? The process was at an advanced stage that please? As the business transitioned to a greater and we had two shortlisted candidates when, We have looked at many opportunities focus on our Asian P&D assets, we felt it was in October, we were approached by Medco to grow our production over the past few appropriate from both a cost management Energi with regards to a potential offer years but it was difficult to find the right and a strategic perspective to move the for the entire company. Given the lack of combination of factors to enable a deal to HQ to Asia. clarity we were able to offer the potential candidates on the future of the Company be completed. This includes a willing buyer The plans are at an advanced stage and we and seller aligned in their expectations, we decided to hold this process until we have consulted with all of our employees in had completed the discussions with Medco. quality assets that have a low breakeven the London office. There will be a phased cost and the available finance to complete downsizing until September when we will be If the Medco transaction does not close, the transaction. left with a small, corporate office in London. it will be a priority to restart this process. These assets are ones we have looked at I would like to take this opportunity to thank 08 for some time. For various strategic reasons all Ophir employees for their efforts in It must have been disappointing Santos was prepared to sell them and we building the company that we have today. became the preferred bidder through our that you were unable to ability to offer certainty of completion, 06 progress the Fortuna project and being able to move quickly enough What does the pivot to Asia in Equatorial Guinea? to meet the seller’s timeline. and focus on P&D mean for We have worked extremely hard, and with The assets have performed better than we the rest of the business? considerable creativity, over the past few could have hoped and, due to a combination years to try and find a means to monetise Our only remaining assets in Africa now of higher than budgeted commodity prices the gas discovered in the Block R licence. are our stakes in Blocks 1 and 4 in Tanzania. and production outperformance, we have Ultimately we were unable to secure These could potentially be hugely valuable already recouped half of the acquisition cost. a partner to finance the project before in years to come and it is costing us less licence expiry at the end of 2018. There is further growth potential in the East than $5 million a year to retain this option. Java PSCs, and the Meliwis development We entered the year confident of closing out Elsewhere, we reviewed, and continue to and Paus Biru exploration success will create a project with OneLNG, a joint venture with review, our exploration portfolio, including incremental value not included in our asset Schlumberger and Golar. In May, the Board our position in Mexico, to see if we could valuation at the time of acquisition. of OneLNG decided to dissolve the company crystallise value and remove exploration which meant we were required to go back to commitments to provide greater the drawing board for a partner. Post the financial flexibility. break-up of OneLNG, we were approached by numerous parties interested in exploring investing in the project. The Board engaged with a number of these parties who it believed had the appropriate risk appetite and financial capacity to invest in the project. Unfortunately, we were unable to close a transaction by year end and present the Ministry with a financed project as I think one of the main counterparties were not able to conclude the financing required. The Ministry strengths is the quality of our team therefore decided not to extend the licence when it expired at the end of in Asia. It is often overlooked but 2018 and we have subsequently taken a $614 million impairment related to the the uptime from our production historic investment. operations has been excellent whilst What I can say to shareholders is that no stone was left unturned in trying to maintaining an excellent HSE record unlock this potential value. and fostering strong relationships with local stakeholders

Alan Booth Interim Chief Executive Officer

Ophir Energy plc Annual Report and Accounts 2018 05

Strategic STRATEGIC REPORT

09 5 The balance sheet looks to priorities be in a strong position –

how will you use it? GOVERNANCE REPORT Yes, we refinanced our debt facility during the year and with strong cash generation In September 2018 the Board announced from the expanded production base we that in order to accelerate progress towards have a balance sheet that is in great shape. sustainability and shareholder returns, it We expect it to improve further in the would be focused on: coming years.

Through proactive management we can 01 reduce our exploration commitments during SUSTAINABILITY AND FREE CASH FLOW FINANCIAL STATEMENTS 2019, which will help us to reach a position where we are generating free cash flow. To drive NAV growth and returns At that point we can weigh up the relative to shareholders merits of different potential investments and look to return capital to shareholders. 02 MINIMISING FRONTIER EXPLORATION 10 What is the vision for the future? Focus on near field exploration We will very much be a Southeast Asian

P&D company. 03 CONSOLIDATION SUPPLEMENTARY INFORMATION I think there is a real opportunity to establish the pre-eminent Southeast Asian E&P Evaluate opportunities that can company which is a platform for growth accelerate delivery of business objectives and can become the natural buyer of assets in the region. 04 LNG ASSETS Such a business will be of sufficient scale that it can both sustain a continual investment Unlock potential value and ensure our programme into the asset portfolio and shareholders share appropriately in value realised establish a policy to consistently return capital to shareholders. 05 COSTS Downsize London office and establish Asian HQ

Annual Report and Accounts 2018 06 REBALANCING OUR BUSINESS Santos acquisition driving future growth

In September 2018, we closed the deal for the Santos package of producing assets. This acquisition takes a considerable step towards our goal of building a stable, self-financing E&P company, doubling our production and operating cash flow. $205m million cost of acquiring Santos assets >18,000 net boepd from ex-Santos assets in 2018

Right The FPSO on the Chim Sao field, Block 12W, Vietnam (Source: Premier Oil)

Ophir Energy plc Annual Report and Accounts 2018 07

DEAL RATIONALE 2018 Brent Oil prices ($/bbl) Production from ex-Santos assets (boepd) The Santos transaction added a portfolio 80 20,000 of high quality P&D licences that has 18,000 enhanced the cash flow characteristics 76 of Ophir. There are also a number of 15,000 opportunities to create additional value 72 for shareholders including through: 71

—— the addition of a balanced and 68 complementary portfolio of low cost, 65 highly cash generative Producing Assets; 64 —— increased scale and stability of

cash flows; 60 0 STRATEGIC REPORT —— significant near-term development Forecast at Actual Forecast at Actual acquisition acquisition opportunities, alongside production life extensions utilising strategic infrastructure positions; —— economies of scale in operating

expenditures, G&A expenses and greater financing efficiencies; and GOVERNANCE REPORT —— cost synergies of at least $13 million per annum.

ACQUIRED ASSETS FINANCIAL STATEMENTS (production numbers quoted on a proforma basis from 1 Jan 2018) Sampang PSC – East Java, Indonesia —— 45% operated interest —— Oyong and Wortel gas fields —— Net 2P reserves of 2.4 MMboe —— 2018 net production: 3,100 boepd —— Paus Biru exploration success in 4Q 2018, plan is to certify reserves in 2019 SUPPLEMENTARY INFORMATION —— Paus Biru will add new production and extend economic life of the Oyong and Wortel fields Madura Offshore PSC – East Java, Indonesia —— 67. 5% operated interest —— Peluang and Maleo gas fields —— Net 2P reserves of 10.4 MMboe Block 12W – Vietnam —— 2018 net production: 6,200 boepd —— 31.875% non-operated interest —— FID on Melwis development taken —— Chim Sao and Dua oil fields in 1Q 2019, Ophir has 77% interest (some associated gas) in this field —— Net 2P reserves of 10.5 MMboe —— Meliwis will add new production and —— 2018 net production: 8,700 boepd extend economic life of Peluang and —— History of successful well intervention Maleo fields enabling a further 8 Bcf and infill drilling programmes. to be produced from these fields More activity planned for 2019 to sustain production

Annual Report and Accounts 2018 08 REBALANCING OUR BUSINESS CONTINUED Production performance delivering above expectations 2018 saw production outperform against budget with the Santos acquisition in particular generating more operating cash flow than envisaged at the time of the acquisition 22 Operating review

70.1 MMboe of 2P Reserves

Ophir Energy plc Annual Report and Accounts 2018 09

BLOCK 12W Cash flow from ex-Santos assets ($m) Expected payback (months) The Block 12W PSC is located in the Nam 140 40 Con Son basin, offshore Vietnam in water 36 depths of approximately 95 metres. It 120 117 32 contains the Chim Sao and Dua fields. Ophir 100 28 has a 31.875% non-operated interest in the 24 licence which is operated by Premier Oil. 80 73

Key metrics 60$MILLION 16 —— Produced 8,700 boepd 40 —— 4 successful well interventions in 8 2018 to offset natural decline 20

0 0 STRATEGIC REPORT Forecast at time Actual At acquisition Forecast at of acquisition end of 2018

GOVERNANCE REPORT SAMPANG & MADURA Key metrics OFFSHORE PSCS —— Production of 9,300 boepd These PSCs are located in the East Java —— Production ahead of expectations Basin in water depths of between 48 metres due to combination of better reservoir and 65 metres. There are two producing performance and higher than fields in each licence and a number of predicted regional gas demand development opportunities. Ophir has a 45% operated interest in the Sampang PSC FINANCIAL STATEMENTS and a 67.5% operated interest in the Madura Offshore PSC.

BANGKANAI PSC Key metrics The Bangkanai PSC is located onshore —— Produced 2,300 boepd in Central Kalimantan and contains the —— Interpretation of 3D seismic Kerendan gas field. Ophir has a 70% (captured in 2017) has helped better operated interest in the Bangkanai PSC. define the reservoir Gas is sold to a powerplant operated by —— 2C could be as much as 1.9 Tcf in SUPPLEMENTARY INFORMATION PLN around 3 km from the field. whole structure —— Challenge is finding route to market

BLOCK B8/38 Key metrics Ophir has a 100% operated interest in Block —— Produced 8,100 bopd in 2018 B8/38, which contains the Bualuang oil field. —— Phase 4A successfully completed The Block is located in the Gulf of Thailand in 20% under budget: three new wells 60 metres of water. It has been onstream and four workovers since 2008 and produced over 35 million —— Phase 4B in 2019 will see installation barrels of oil. There are two platforms with of 12 slot platform and drilling of a third due to be installed in 2019. 12 new wells; production will peak at 14,000 bopd

SINPHUHORM Key metrics The Sinphuhorm gas field is onshore —— Produced 1,300 boepd in 2018 Northeast Thailand. Ophir holds a 9.5% indirect interest in the Sinphuhorm field through its shareholding of APICO LLC. The field has been onstream since 2006 and gas is sent by pipeline to the Nam Phong power plant some 62 km south of the field.

Annual Report and Accounts 2018 10 MARKET OVERVIEW Market context: The state of Upstream

China continued playing an important role in this growth with the strong emphasis on solving the pollution problem, which has resulted in year on year Chinese gas consumption growth of 18.1%. Traded hub prices increased vis-à-vis the 2017 averages with average NBP and TTF prices higher during 2018 (see figure 4). The global LNG environment has remained challenging. The market continues to be oversupplied in the short term causing project delays and cancellations. On the positive side, the spot LNG prices have recovered with the Asian LNG (JKM) spot prices averaging US$9.8/mmbtu in 2018, up 38% from US$7.1/mmbtu for 2017. Looking forward to 2019, oil and gas demand growth is expected to continue but price uncertainty remains due to fragility of the global economy, threat of global trade wars and increased political instability. Economic overview Energy markets overview E&P sector update The global economic recovery continued Global energy demand growth has The E&P sector has been volatile, with the in 2018 with global GDP growth in 2018 remained strong in 2018 with primary sector responding positively to the oil price estimated at 3.7% (see figure 1). Advanced energy consumption increasing by 2.8%. recovery earlier in the year but declining economies posted strong domestic demand Oil demand was strong with year on year during the fourth quarter. The focus of the and output. Similarly, strong domestic growth of 1.2 million barrels per day E&P companies has continued to be cost demand in China resulted in GDP growth reaching a total demand of 99.2 million reduction and reducing average portfolio of 6.6%. Financial conditions remained barrels per day (see figure 2). break even prices, de-leveraging balance strong in both the advanced and in the sheets and conserving capital. Despite some In light of the oil price weakness OPEC and developing economies but the conditions success with the above, the listed E&P other big exporters have continued the policy tightened later in the year. universe continues to struggle for relevance of production cuts and have extended the in the context of the global equity capital The global equity markets have responded period of the cuts to mid-2019. Meanwhile, markets due to the decline in the combined accordingly with the MSCI World Index, given the strong oil price performance sector market cap and liquidity. Access to as well as other leading equity indicators early in 2018, the North American shale growth capital remained one of the key (S&P 500, DJ 30, NASDAQ Composite and production growth has accelerated, issues facing the sector. In the EMEA E&P FTSE 100), posting significant gains during contributing to decline in the benchmark space, private equity has continued as one the earlier part of the year but declining and oil prices later in 2019. Dated Brent price of the most important sources of funding. finishing the year in negative territory. The for 2018 averaged $71.2 per barrel and FTSE 100 index fell by 12% during 2018. WTI averaged $64.9 per barrel (see figure 3). In North America, the rig count has increased by 13% with a corresponding Central banks have continued reversal of the Climate change and other emission-related increase of production of 13.8% , which has policy of credit easing. The Federal Reserve concerns have accelerated the process had a strong impact on the commodity Bank of the United States has raised its of coal to gas switching. Global gas prices later in the year. target funds rate four times by 0.25% on consumption continued to grow and each occasion, and the Bank of England has reached 3999.9 billion cubic metres in 2018. The industry context has remained also raised the Bank Rate once by 0.25%. challenging for exploration with limited capital availability for frontier exploration.

Ophir Energy plc Annual Report and Accounts 2018 11 STRATEGIC REPORT Fig 1 Global GDP growth Fig 2 10 years of oil demand 7 100 6

5 95 4

3 90

2 GOVERNANCE REPORT

1 GDP GROWTH % 85

0 MILLION BARRELS PER DAY

-1 80 -2

-3 75 MAR 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 SEP 07 08 09 10 11 12 13 14 15 16 17 18 FINANCIAL STATEMENTS IMF World Real GDP % Change International Energy Agency Crude Oil Demand World Total

Fig 3 Average oil prices Fig 4 Average monthly HH, NBP and TTF prices 100 90

90 75 SUPPLEMENTARY INFORMATION

80 60

70 45 AVERAGE

60 30

50 15

40 0 DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 17 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18

WTI UK NBP Natural Gas Forward M1 (p/therm) Brent TTF NAT GAS (cent/mwh) Henry Hub ($/mmbtu) 12 BUSINESS MODEL A rebalanced strategy building a stable financing E&P company

INPUTS SUSTAINABLE THROUGH THE CYCLE

CAPITAL RETURNS

STRENGTHS PORTFOLIO PRODUCTION AND – Financial efficiency MANAGEMENT DEVELOPMENT – Balance sheet We look at opportunities to add assets Converting acquired and that will be value accretive. We divest discovered hydrocarbons into cash – Cash flow from production assets where the potential risk weighted by developing and monetising – The right people return does not warrant further efficiently to maximise value. investment. – Operational safety – Disciplined cost management

Strategic Drivers/Priorities Strategic Drivers/Priorities $391m Operating credentials Operate safely US$ Gross Liquidity Focused portfolio Maximise cash generation given financial capacity Experienced management team Using balance sheet to leverage returns Financial liquidity Strategy in action Strategy in action Bualuang Phase 4 development Acquisition of assets from Santos Meliwis FID Relinquishment of exploration assets Paus Biru exploration

FINANCE GOVERNANCE GOVERNANCE Liquidity management Controls FRAMEWORK Capital allocation discipline Compliance

Ophir Energy plc Annual Report and Accounts 2018 13 STRATEGIC REPORT

OUTPUTS

GOVERNANCE REPORT

CAPITAL DISCIPLINE MAXIMISING SHAREHOLDERS AND FREE CASH FLOW VALUE CREATION – Dividends Build a strong cash generative Deliver a sustainable business model – Share price growth production and development base with material cash flow to support to serve as a platform for further investment for growth and returns – Reinvest back into business

growth and shareholder returns. to shareholders. to drive future growth FINANCIAL STATEMENTS –– Grow value per share. –– Return capital to shareholders.

STAKEHOLDERS

– In country economic SUPPLEMENTARY INFORMATION Strategic Drivers/Priorities contribution Reduce capital commitments to exploration – Employment opportunities Focus on minimising costs – Safe and reliable operations Generate free cash flow Strong production performance

Strategy in action Reduced exploration expenditure Down size of London office Establish Asian based HQ $17/boe of net cash flow generated from operating activities

RISK MANAGEMENT SAFETY Identification Process Mitigation Education Culture 14 2019 KEY PERFORMANCE INDICATORS (KPIS) KPIs for 2019

Our Key Performance Indicators (KPIs) are a framework through which people should be able to measure the performance of the business across time in the following areas: –– Health, safety and the environment –– Operational performance –– Financial management –– Employee satisfaction We have made one change to our KPIs for 2019, removing Prospective Risked Resource Additions. The decision to remove this reflects the strategic shift undertaken in 2018 that has seen us focus less on exploration and more on cash generation.

Alan Booth Interim Chief Executive Officer

An increase in organic growth will provide the ORGANIC GROWTH basis for future growth and NAV creation

PROSPECTIVE RISKED 2018 Performance Description RESOURCE ADDITIONS We added 116 MMboe of net prospective risked Develop an inventory of exploration prospects resources through Blocks 10 and 12 in Mexico. to provide drilling opportunities for 2019 and beyond and a basis for future growth and 116 MMboe 2019 Objective manage current assets to increase value realised. This KPI will be removed in 2019 as the business model has evolved away from exploration.

Measurement Directors’ 2018 Bonus Award2 158 (25 MMboe=100%, 15 MMboe=50%, 5 MMboe=0%) 15%/15% 116 The cumulative net prospective risked resource added to prospect inventory. Additions will need to have progressed through peer review. Prospects in blocks where a decision has been 35 made to relinquish will be removed.

2016 2017 2018

Ophir Energy plc Annual Report and Accounts 2018 15 18-21 Principal risks

LICENCE TO OPERATE Providing a safe and environmentally and socially responsible operating environment will help Community, Climate, HSSE and People safeguard production, and ultimately cash generation. LOST TIME INJURY 2018 Performance Description FREQUENCY We maintained our track record of zero LTIs and each Provide a safe and secure working of our assets continued their track records of operating environment across operations to limit safely, hitting 12 years, 11 years, four years and three injury to workforce, cost of lost time due incidents/million years LTI free respectively at Madura Offshore, to injury or incident, potential insurance 0 man hours worked Sampang, Bualuang and Kerendan. or legal costs and reputational damage. 2019 Objective Continue to focus on delivering an HSE performance across expanded portfolio that delivers zero LTIs. STRATEGIC REPORT Measurement Directors’ 2018 Bonus Award2 (0=100%, 0.5=50%, 1=0%) Lost Time Incident Frequency (LTIF) calculation is based 10%/10% on number of lost time incidents expressed per millions of man hours worked. Total Recordable Incident Frequency (TRIF) is also monitored and reported internally as part of

the standard HSE monthly reporting pack. 0 0 0 GOVERNANCE REPORT 2016 2017 2018

GREENHOUSE GAS 2018 Performance Description EMISSIONS1 GHG data assessment completed, opportunities for GHG Operate in an environmentally and emissions and energy consumption reduction identified. socially responsible manner to support Corporate Responsibility requirements 2019 Objective

tonnes of CO2e Standardise GHG calculation methodology across assets 205,519 FINANCIAL STATEMENTS and conduct benchmark of GHG emissions by activity with sector average. 205,519 Measurement Directors’ 2018 Bonus Award2 (1=100%, 0=0%) Conduct and complete GHG validation and verification: 2%/2% –– Accuracy of data sources for GHG calculations 94,493 –– Opportunities for GHG emissions reduction 64,055 –– Opportunities for energy consumption reduction Deliver action plan with specific deliverables for reductions in emissions and consumption. SUPPLEMENTARY INFORMATION

2016 2017 2018

EMPLOYEE 2018 Performance Description ENGAGEMENT Results of 2017 employee engagement survey taken to Improve levels of employee Board with recommendations. Three out of four actions engagement to ensure an effective were fully completed, one was partially implemented. and efficient workforce, aid retention, % response rate to increase productivity, and strengthen 2019 Objective N/A engagement survey rate the Ophir culture. The focus will be on smooth transition to new Asian HQ, retaining key staff. Implement HR management system and leading indicators. 85 Measurement Directors’ 2018 Bonus Award2 (1=100%, 0=0%) 2.1%/3%

N/A N/A

2016 2017 2018

1 Scope 1 & 2. Scope 1 are Direct and Scope 2 are Energy Indirect Emissions. 2 Bonus achieved in 2018 measured against potential allocated for each KPI. Total allocated to all KPIs (100%) equates to 66.67% of overall bonus. Maximum bonus payment is 50% of base salary. 16 2019 KEY PERFORMANCE INDICATORS (KPIS) CONTINUED

Monetise smartly current assets to ensure a sustainable MONETISATION business and generate an increase in NAV

MONETISE 2018 Performance Description 2C RESOURCES Failed to deliver FID on the Fortuna but commercial Deliver value from contingent resource progress at Kerendan resulted in partial achievement. inventory to increase incoming funds and reduce exposure risks. 2019 Objective 0 MMboe The focus will be on converting resources associated with near field development opportunities on the Sampang, Madura Offshore and Bangkanai licences. 9.9

Measurement Directors’ 2018 Bonus Award2 Progress 2C to 2P to cash or value. 2.5%/30%

0 0

2016 2017 2018

TOTAL 2018 Performance Description PRODUCTION Operated production (excluding new assets) Maintain or increase the income was in line with budget at 10,400 boepd. received from current operations to increase incoming funds. 2019 Objective 17,100 boepd Move to benchmark against total production (operated and non-operated). Expect full year production to be 25,000 boepd. 17,100

11,700 Measurement Directors’ 2018 Bonus Award2 10,800 (10% above budget=100%, budget=50%, 10% below budget=0%) 5%/10% Daily average production rate from all fields (2018 measure was based on operated production excluding new fields).

2016 2017 2018

TOTAL 2018 Performance Description OPEX Opex on operated assets (excluding new assets) Keep operating expenditure at or under was $51 million, which was 10% under budget. budget to minimise outgoing costs. 2019 Objective $72 million Operating costs will be higher year on year due to replacement ESPs at Bualuang and workover drilling at Kerendan. 72 Measurement Directors’ 2018 Bonus Award2 49 (5% below budget=100%, budget=50%, 43 5% over budget=0%) 9%/10% Bonus target measured on an individual asset basis.

2016 2017 2018

Ophir Energy plc Annual Report and Accounts 2018 17

Ensure balance sheet remains healthy BALANCE SHEET to provide NAV protection

CAPITAL 2018 Performance Description EXPENDITURE Kerendan and Bualuang came in at 90% of budget. Keep capital expenditure in line Exploration spending was 95%. with the budget to ensure a sustainable business. 2019 Objective $133 million We expect cash flow to marginally exceed capital expenditure. Capital expenditure is forecast at $150 million but we hope to reduce through removing 156 some of our exploration commitments. 133 STRATEGIC REPORT

101 Measurement Directors’ 2018 Bonus Award2 Deliver ‘in scope’ operated Capex budget +/- 10% (10% below budget =100%, budget =50%, 10% above budget =0%) 8.3%/12% The capital expenditure target is based on the approved firm work programme. Measurement of this KPI will

take into account the $ value spent along with the work GOVERNANCE REPORT 2016 2017 2018 scope delivered.

GROSS G&A 2018 Performance Description SPEND In line with budget. Keep general and administrative spend in line with the budget to ensure a sustainable business. 2019 Objective

million FINANCIAL STATEMENTS $59 The main goal will be to deliver a smooth transition of the corporate HQ from London to Asia, without 82 compromising business effectiveness.

68 Measurement Directors’ 2018 Bonus Award2 59 (10% below budget=100%, on budget=50%, 10% above budget =0%) 2%/4% SUPPLEMENTARY INFORMATION

2016 2017 2018

LIQUIDITY 2018 Performance Description (GROSS YEAR-END) Higher than forecast cash generation and an expansion Maintain liquidity to enable the of the reserve based lending facility combined to deliver Company to maintain a funding a liquidity position well ahead of budget. cushion to be able to pursue exploration or development opportunities as they 2019 Objective $391 million may arise. We expect to maintain a strong liquidity position and will look at the options around our high yield bond ahead 427 of its expiry in 2020. 391 370

Measurement Directors’ 2018 Bonus Award2 (10% above budget=100%, 0n budget=50%, 10% below budget =0%) 4%/4%

2016 2017 2018

Ophir’s risk profile evolves over time as a its viability statement. That compares to a result of changes in the external environment five-year period last year and is revised and in how our asset portfolio develops. We following the company’s change in strategic have set out in this section the main external emphasis to that of building a strong, cash and internal events that have shaped our risk generative production and development base profile over 2018, and the principal risks and to serve as the platform for further growth and uncertainties to which Ophir is exposed. shareholder returns, whilst minimising exposure to frontier exploration. Political uncertainty Ophir’s key assets are located in relatively The company made a material acquisition in politically stable regions, principally in Asia. 2018, acquiring additional development and However, the economic slowdown in China, production assets in Indonesia and Vietnam. political instability in the United States and The expanded asset base is expected to concerns about a trade war between China provide sufficient liquidity over the viability and the US can all affect the global economy. period to support investments necessary to They can generate trade policy uncertainty replace reserves’ depletion. and hinder global trade, and there are In addition, the Directors have assessed the concerns that the recent loss of momentum in company’s capital expenditure requirements the world economy could develop into a more to 2021. During 2018 and early 2019, the severe slowdown in 2019. This environment Company implemented a numbers of Gawain Ross also enhances the possibility of unforeseen actions that will significantly reduce the Director – Corporate Risk & Services events that could have major ramifications on company’s exposure to frontier and risked economic conditions, access to capital and exploration expenditure including exiting resource pricing which in turn could adversely frontier exploration in Myanmar and impact Ophir’s business. Indonesia. These steps have reduced the Regarding oil, OPEC’s conference at the end company’s outstanding financial exposure of 2018 discussed the increasing market to host governments for undischarged volatility and that the broad consensus on commitment exploration programmes the prospects for 2019 suggests higher to $60 million ($33 million in the period supply growth than global requirements. 2019-2021). It also noted the global economic growth In making their assessment, the Directors outlook for 2019 was slightly lower than for have considered the company’s current 2018, which combined with the implications availability to liquidity and the generation of macroeconomic policies and associated Risk management of funds from forecast production over the uncertainties, could potentially have 2018 was a transitional year for the Company viability period against the company’s current ramifications for global oil demand in 2019. as we moved away from focusing on high capital expenditure plans along with meeting risk, deep-water exploration to a more cash Viability Statement its outstanding exploration commitments, generative business model focused on SE Asia. The Directors have assessed the viability the cost of maintaining a fit-for-purpose This change modified some of our risks but did of the Company over a three-year period organisation and the servicing of the not impact our risk management process. to December 2021, taking account of the company’s debt portfolio, and tested the Company’s current position and the potential scenarios at different commodity prices. The Board, its Committees and the senior impact of the principal risks documented in management team have a defined process The company, additionally, reserves the this report. Furthermore, the Directors have for monitoring and, where possible, mitigating option, if appropriate, to divest assets along considered the resilience of the Company’s the risks Ophir is exposed to. The Audit with access to the debt and capital markets. business model, future performance, Committee makes recommendations to the solvency and liquidity against these principal Based on their assessment, the Directors Board on the Group’s risk management risks in severe, but reasonable scenarios, and have a reasonable expectation that the arrangements. The Board has determined the the effectiveness of any mitigating actions. company will be able to continue in business’s risk appetite, considering the risks operation and meet its liabilities as they that could impede or threaten its strategic The Directors have determined that the fall due over the period to December 2021. objectives, and has also reviewed the control three-year period to December 2021 is an measures in place to mitigate these risks. appropriate period over which to provide

Ophir Energy plc Annual Report and Accounts 2018 19 RISK MANAGEMENT OUR RISK The Board will consider the risks associated with PERFORMANCE IN 2018 APPETITE conducting our business and delivering on our strategy, assessing the risks we are exposed to Ophir employees and contractors and if this exposure is acceptable given the worked over 3.5 million hours during likelihood and severity of the risk regarding the the year, some of them in particularly t zone consequences to people, the environment, for challenging conditions. There were no m finances and Ophir’s reputation. Then the Board co can decide how to address the risk – whether to k recordable LTIs or fatalities. During the is tolerate, terminate, treat or transfer the risk. r r year our producing assets in Thailand u The level of risk the Company is prepared to take and Indonesia reached four and three O could change over time and therefore risk years of LTI-free operations respectively. tolerance is reviewed continually by the Board. Our acquired assets in Sampang and Madura reached 11 and 12 years of LTI-free operations respectively. Board Determines the Group’s risk appetite and risk management process, and reviews the principal risks that may aect Ophir achieving its objectives. Zero recordable environmental incidents. STRATEGIC REPORT

Increased our cash generation from Audit Corporate Responsibility Technical Reserves Committee Committee Committee our production assets. Reviews ﬁnancial, regulatory and Reviews operational and ethical Reviews subsurface risks information risks and controls. behaviour and legislative and controls. Refinancing through a $350 million compliance risks and controls. Reserve Based Lending Facility secured External Auditors against our producing Asian assets. GOVERNANCE REPORT Internal Auditors Maintained a strong balance sheet – Review appropriateness of risk management policies. with low gearing. – Give relevant practical advice and guidance on the implementation of processes and policies. – At certain internals, assess whether the risk management processes have been appropriately embedded in the business. Financial efficiency through disciplined cost management and greater Principal risks aligned with strategic objectives production, generating additional cash flow. Also through beginning to 4 3 2 1 Principal Risks see synergy savings from Santos 1 Funding 6 5 2 Investment FINANCIAL STATEMENTS integration, and prior year’s staff 3 Compliance restructuring. 4 HSE 8 7 5 Market sentiment 6 Debt ﬁnancing Santos acquisition and subsequent 7 Commodity price 8 Political integration leading to Indonesian 9 Climate change

Impact organisational restructuring and 9 systems integration.

Rebalanced the portfolio towards SE Asian production and cash flow base. SUPPLEMENTARY INFORMATION

Rationalised parts of our frontier Likelihood exploration portfolio that will bring in cash and reduce our future exploration Our risk assessment process capital commitments which further 1 IDENTIFY RISKS 2 DEFINE RISK APPETITE improves our liquidity position. While the Board retains overall responsibility for risk, Our systems and processes are designed to the authority for identifying risk is delegated to the manage our exposure to risk rather than eliminate the risk completely. Therefore the Board, with the Exceeded overall production senior management team, who may call on senior management team, will assess the Group’s operational board expertise as required. A risk appetite each year with this in mind. expectations. top-down, bottom-up approach provides assurance over the completeness of risks in the risk register. Retained people with the right experience, capability and values to help the Company succeed through its 4 RESPOND, MANAGE 3 ASSESS AND QUANTIFY RISKS AND MITIGATE RISKS Risks are assessed to understand the trigger, restructuring and relocation to SE Asia, Each risk is reviewed quarterly. At each review date, the likelihood and the financial impact of the including integrating workforce the existing controls are reviewed for adequacy and risk crystallising. We assess these looking at the from Santos. effectiveness. Due to the ever changing business following areas: landscape and the industry we work in, it is quite –– Financial –– Legal possible for the control requirements to change and –– Operational –– People for processes and policies to require updating. If this –– Reputational –– Environmental is the case, then a business owner is identified and they are responsible for implementing changes.

5 MONITOR AND REVIEW RISKS The senior management team monitors progress against the principal risks. The Board reviews the summary risk register and assesses the adequacy of the principal risks identified, as well as the mitigating controls and procedures which are in place and are operational. 20 PRINCIPAL RISKS CONTINUED

Set out below are what we believe RISK DESCRIPTION OF RISK OBJECTIVE/CONTROL RESPONSIBILITY CHANGE to be the current principal risks and uncertainties that could affect FUNDING –– Failure to forecast and work within our financial structure –– An ongoing strategic objective is to optimise the use of our capital by capturing highest Chief Financial the Group. could impact our liquidity and lead to an inability to deliver commercial returns on our assets and exploration opportunities. Officer the business plan. –– Regular review of cash flow, working capital and funding options, and prudent approach to Internally, the Group monitors and –– Revenues, profitability and cash flows concentrated in a fairly budgeting and planning, to ensure sufficient capital to meet commitments. mitigates a more comprehensive list small number of producing assets. –– Effective portfolio management via farm outs/asset sales as appropriate. of risks through the Group’s risk register, –– The Group may face the possibility of future decommissioning –– Budget focused on high and medium ranked assets/projects to deliver value creation and to costs that it cannot accurately predict. ensure the Group can live within its means. which continues to be a vital component –– Inability to access internal or external funding. –– A formalised annual budget process and ongoing monthly reviews and analysis of actuals. of our risk management process. There –– Extension of oil and gas licences. –– Board approval of Annual Work Programme. may be additional risks unknown to the –– Diversify the sources of funding and apply prudent levels of debt to production activities. Company, and other risks currently believed to be immaterial, which could turn out HSE –– Loss of containment leading to major environmental incident. –– An ongoing strategic objective is to execute operations safely with excellence. Director Asia INCIDENT –– Oil and gas exploration, development and production can present –– Ophir is committed to maintaining robust health, safety, security and environmental management, Operations, Director to be material. Not all of the risks and challenging operational environments and means we are exposed and procedures are in place in order to respond to unexpected events that have a direct impact on uncertainties set out below are within to a wide range of health, safety, security and environmental risks. the Group and the communities in which it works. Exploration and our control. –– Our most significant risks are: –– Comprehensive HSE and operations management systems including emergency response and Africa –– The potential loss of hydrocarbon containment caused by oil spill response capability, as well as maintaining asset integrity. For clarity, we have indicated how our technical integrity failure, human error, natural disasters or –– Active security monitoring and management. principal risks are linked to our strategic other unforeseen events. –– Learning from Group and third-party incidents. objectives. We have done this in order to –– The risk of harm to our workforce during transportation. –– Monitoring through leading indicators the highest HSE risk events. aid understanding and more clearly –– Major health, safety, security or environmental risk events could lead to –– The contracting and procurement process ensures suitably qualified contractors are employed regulatory action and legal liability, including penalties, increased costs and and trained in Ophir’s requirements and industry best practices. illustrate how we protect and create potential loss of our licence to operate. shareholder value by operating in a manner that best balances the risks and INVESTMENT –– Lack of suitable value adding opportunities and/or failure to execute/inability –– Investments are not dictated by production or reserves growth targets; instead each investment Director Asia to fund P&D acquisitions. will be assessed on an IRR and materiality basis. rewards of our chosen strategy. Operations, Director –– The Group may not be able to identify appropriate expansion opportunities –– Focus on growing a revenue generating business. Exploration or be able to manage such expansion effectively. –– Allocate capital to highest return opportunities following rigorous risk reward analysis. We have removed counterparty and portfolio and Africa risk from the principal risks. Portfolio risk was –– Risk assessment and due diligence process is undertaken on all potential new country entries. –– Ophir endeavours to transact at the most appropriate time to create value for shareholders. associated with exploration finding costs and because we have shifted towards a COMPLIANCE –– The Group conducts business in jurisdictions that have been allocated low –– Top down leadership of the Group’s values. General Counsel & P&D strategy it no longer warrants being a scores on Transparency International’s ‘‘Corruption Perceptions Index’’, and –– We have a strong Code of Conduct which all employees and contractors are expected to follow. Company Secretary principal risk. The counterparty risk was very where changes in the regulatory and legislative environment are possible. –– There is a Group Anti-Bribery and Corruption Policy in place. –– Ethical wrong doing and non-compliance, or failure to accurately report our much focused on the Fortuna project and –– Compliance training is conducted across the Group. data, can lead to litigation against the Group which could materially impact –– Due diligence is carried out on counterparties and in our contract management. the associated counterparties. our strategy. Potential impacts could be: –– There are anti-bribery and corruption provisions in our agreements. –– Reputational damage leading to withdrawal of support by shareholders, –– Compliance controls and actions are reviewed at Board and its Committees. governments, lenders and/or co-venture partners. –– Annual employee sign off confirming their observance of the Code of Conduct, Anti-Bribery and –– Litigation and regulatory action leading to penalties and business Corruption Policy and the Gifts and Hospitality standard. disruption from investigation leading to unplanned cost impact. –– A ‘Letter of Assurance’ is signed off annually by management. Key –– Loss of assets, PSCs and projects. –– Monitoring of key leading indicators. –– Prosecution. –– All material information is released to the market on a timely basis and in accordance with all Increase applicable regulations. No change MARKET –– Adverse market sentiment and capital constraints due to competition for –– An ongoing strategic objective is to grow a revenue generating business. Chief Financial Decrease SENTIMENT capital. –– Deliver an appropriate capital structure to internally fund the addition of production assets Officer –– The impact can negatively affect project value and modelling. and monetisation of resources to generate sustainable cash flow.

COMMODITY –– We are more dependent on commodity price than previously and negative –– Continue to review the Group’s cost structure and make sure it reflects the new oil price environment. Chief Financial PRICE changes can lead to loss of value and have an adverse effect on revenue, –– Pursue acquisition opportunities that seek to protect shareholder value. Officer margins, profitability and cash flow. –– Manage balance sheet strength.

CLIMATE –– The global ambition to limit mean temperature rise to below –– Continue to develop the Company’s strategy to reflect climate change trends. Director Corporate CHANGE 2⁰C above pre-industrial levels will potentially require significant –– Continue to report in line with CDP and the Global Reporting Initiative. Risk and Services and sustained reductions in fossil fuel emissions. –– It is hard to predict what changes in laws, regulations and obligations relating to man made climate change will be, but they may increase costs, reduce value and constrain future opportunities.

POLITICAL –– We are exposed to a variety of changes in the macro environment around –– Ophir regularly monitors and seeks to understand changes taking place in political and regulatory Director Corporate global affairs and international economics that are leading to greater global environments although it is often hard to forecast the timing and gravity of political events. Risk and Services economic uncertainty. –– The Group works to the highest industry standards with regulators, closely monitoring compliance –– At a more micro-level, the Group operates in jurisdictions that are subject with the Group’s licence and PSC obligations. to significant political, economic, legal, regulatory and social uncertainties –– Appropriate legal agreements are in place to protect our interests. which could lead to licence appropriation. –– When reviewing new positions/acquisitions we evaluate and compare the potential political risks –– The impacts can affect the safety of our people, operational continuity and within our portfolio. lead to a loss in value and uncertain financial outcomes.

DEBT –– The Group’s business will require significant capital expenditure and the –– Strong financial stewardship – manage commitments and liquidity, monitor delivery of business plan, Chief Financial FINANCING future expansion and development of its business could require future debt forecast accuracy – build credibility. Officer and equity financing. The future availability of such funding is not certain. –– Effective management of debt covenants. –– Maintain strong relationships with lending banks throughout the year. –– Effective corporate governance procedures and controls in place to manage compliance with relevant regulatory/filing requirements. –– Strong balance sheet.

Ophir Energy plc Annual Report and Accounts 2018 21

RISK DESCRIPTION OF RISK OBJECTIVE/CONTROL RESPONSIBILITY CHANGE FUNDING –– Failure to forecast and work within our financial structure –– An ongoing strategic objective is to optimise the use of our capital by capturing highest Chief Financial could impact our liquidity and lead to an inability to deliver commercial returns on our assets and exploration opportunities. Officer the business plan. –– Regular review of cash flow, working capital and funding options, and prudent approach to –– Revenues, profitability and cash flows concentrated in a fairly budgeting and planning, to ensure sufficient capital to meet commitments. small number of producing assets. –– Effective portfolio management via farm outs/asset sales as appropriate. –– The Group may face the possibility of future decommissioning –– Budget focused on high and medium ranked assets/projects to deliver value creation and to costs that it cannot accurately predict. ensure the Group can live within its means. –– Inability to access internal or external funding. –– A formalised annual budget process and ongoing monthly reviews and analysis of actuals. –– Extension of oil and gas licences. –– Board approval of Annual Work Programme. –– Diversify the sources of funding and apply prudent levels of debt to production activities.

HSE –– Loss of containment leading to major environmental incident. –– An ongoing strategic objective is to execute operations safely with excellence. Director Asia –– Oil and gas exploration, development and production can present –– Ophir is committed to maintaining robust health, safety, security and environmental management, INCIDENT Operations, Director STRATEGIC REPORT challenging operational environments and means we are exposed and procedures are in place in order to respond to unexpected events that have a direct impact on to a wide range of health, safety, security and environmental risks. the Group and the communities in which it works. Exploration and –– Our most significant risks are: –– Comprehensive HSE and operations management systems including emergency response and Africa –– The potential loss of hydrocarbon containment caused by oil spill response capability, as well as maintaining asset integrity. technical integrity failure, human error, natural disasters or –– Active security monitoring and management. other unforeseen events. –– Learning from Group and third-party incidents. –– The risk of harm to our workforce during transportation. –– Monitoring through leading indicators the highest HSE risk events.

–– Major health, safety, security or environmental risk events could lead to –– The contracting and procurement process ensures suitably qualified contractors are employed regulatory action and legal liability, including penalties, increased costs and and trained in Ophir’s requirements and industry best practices. potential loss of our licence to operate. GOVERNANCE REPORT

INVESTMENT –– Lack of suitable value adding opportunities and/or failure to execute/inability –– Investments are not dictated by production or reserves growth targets; instead each investment Director Asia to fund P&D acquisitions. will be assessed on an IRR and materiality basis. Operations, Director –– The Group may not be able to identify appropriate expansion opportunities –– Focus on growing a revenue generating business. Exploration or be able to manage such expansion effectively. –– Allocate capital to highest return opportunities following rigorous risk reward analysis. –– Risk assessment and due diligence process is undertaken on all potential new country entries. and Africa –– Ophir endeavours to transact at the most appropriate time to create value for shareholders.

COMPLIANCE –– The Group conducts business in jurisdictions that have been allocated low –– Top down leadership of the Group’s values. General Counsel & scores on Transparency International’s ‘‘Corruption Perceptions Index’’, and –– We have a strong Code of Conduct which all employees and contractors are expected to follow.

Company Secretary FINANCIAL STATEMENTS where changes in the regulatory and legislative environment are possible. –– There is a Group Anti-Bribery and Corruption Policy in place. –– Ethical wrong doing and non-compliance, or failure to accurately report our –– Compliance training is conducted across the Group. data, can lead to litigation against the Group which could materially impact –– Due diligence is carried out on counterparties and in our contract management. our strategy. Potential impacts could be: –– There are anti-bribery and corruption provisions in our agreements. –– Reputational damage leading to withdrawal of support by shareholders, –– Compliance controls and actions are reviewed at Board and its Committees. governments, lenders and/or co-venture partners. –– Annual employee sign off confirming their observance of the Code of Conduct, Anti-Bribery and –– Litigation and regulatory action leading to penalties and business Corruption Policy and the Gifts and Hospitality standard. disruption from investigation leading to unplanned cost impact. –– A ‘Letter of Assurance’ is signed off annually by management. –– Loss of assets, PSCs and projects. –– Monitoring of key leading indicators. –– Prosecution. –– All material information is released to the market on a timely basis and in accordance with all applicable regulations. SUPPLEMENTARY INFORMATION MARKET –– Adverse market sentiment and capital constraints due to competition for –– An ongoing strategic objective is to grow a revenue generating business. Chief Financial SENTIMENT capital. –– Deliver an appropriate capital structure to internally fund the addition of production assets Officer –– The impact can negatively affect project value and modelling. and monetisation of resources to generate sustainable cash flow.

During 2018 the Board has been focused on rebalancing the Company with one clear goal in mind – maximising cash generation. This resolve drove the decision to expand the Group’s Asian production and development base through the acquisition of a package of assets from Santos. The principal assets acquired were the non-operated Chim Sao and Dua oil fields in Vietnam and the operated fields within the Madura Offshore and Sampang PSCs in Indonesia, both of which have gas production. Broadly speaking, the acquisition more than doubled our production and operating cash flow. Dr John Bell Dr Oliver Quinn Director – Asia Operations Director – Exploration and Africa

Ophir Energy plc Annual Report and Accounts 2018 23 Key Oil play Gas play STRATEGIC REPORT Group production in 2018 was 29,700 boepd, At the start of the year, we produced When OneLNG was dissolved in May, we ahead of market expectations of 27,500 from three fields and the majority of our were approached by a number of parties boepd. This was a consequence of successful production was from the Bualuang field in interested in co-investing in the Fortuna intervention work by the operator, Premier, the Gulf of Thailand. The addition of the project. We engaged with a short-list of on the Chim Sao field in Vietnam and Santos assets has diversified this in terms of counterparties until the end of 2018 but outperformance of the fields in the Madura geography, hydrocarbon phase and fiscal were unable to conclude a transaction Offshore and Sampang PSCs in Indonesia, regime. By the end of the year, we were prior to year-end. As we had not met the partly due to better than forecast reservoir producing from nine fields in three countries conditions set by the Ministry of Mines and GOVERNANCE REPORT performance and partly due to higher than with production approximately split evenly Hydrocarbons, when the licence expired at predicted market demand in East Java. across those countries. the end of 2018 the Ministry chose not to grant us a further extension. We therefore Production in 2019 is forecast to be 25,000 We therefore had a dual focus in 2018: firstly exited the Block R licence and subsequently boepd. This is lower than in 2018 due to a to run our existing operations safely and signed a settlement agreement with combination of natural decline in ageing efficiently; and secondly to integrate the the government. reservoirs and some of the outperformance assets acquired from Santos. With Block 12W in 2018 being driven by short-term increases in Vietnam being non-operated, the focus of Daily Average Production in gas demand which it is not certain will integration was on Indonesia where we

FY 2018 FY 2018 FY FINANCIAL STATEMENTS become a long-term trend. Development merged the existing Ophir office with that boepd Proforma1 IFRS 2017 drilling in 2019 on the Bualuang field is which we acquired from Santos. Bangkanai 2,300 2,300 2,100 scheduled for the back end of the year so Madura Our other focus of attention was the Block R the associated upturn in production will Offshore 6,200 2,000 n/a licence in Equatorial Guinea. We entered the come through in 2020. Sampang 3,100 1,000 n/a year hoping to secure financing to enable B8/38 8,100 8,100 8,400 Our production base is low cost, with the project to move forward under the joint Block 12W 8,700 2,400 n/a average operating costs of $12 per boe, venture structure with OneLNG (a joint Sinphuhorm 1,300 1,300 1,200 and generated $168 million of cash from venture between Schlumberger and Golar). Total 29,700 17,100 11,700 operations (pre-tax and working capital)

1 On a proforma basis accounting for the Santos acquisition at $27 per boe. from effective date of 1/1/18 SUPPLEMENTARY INFORMATION

Statement of contingent resources and proved and probable reserves (working interest basis) 1P 2P 3P Oil Gas Total Oil Gas Total Oil Gas Total Reserves MMstb bscf MMboe MMstb bscf MMboe MMstb bscf MMboe YE2017 22.1 83.9 37.2 29.8 111.0 49.4 40.7 114.5 60.9 Purchased via. Santos Asia acquisition 6.3 32.6 12.3 9.7 74.2 23.3 13.2 104.9 32.4 Additions – – – – – – – – – Revisions -1.0 28.1 3.8 0.7 5.3 1.7 -0.5 9.6 1.3 Production -3.0 -7.0 -4.2 -3.0 -7.0 -4.2 -3.0 -7.0 -4.2 YE2018 24.4 137.6 49.0 37.2 183.5 70.1 50.4 221.9 90.4

1C 2C 3C Oil Gas Total Oil Gas Total Oil Gas Total Contingent Resource MMstb bscf MMboe MMstb bscf MMboe MMstb bscf MMboe YE2017 11.0 4352.1 737.9 12.7 5868.9 995.7 35.5 8620.6 1483.5 Purchased via. Santos Asia acquisition 0.1 14.6 2.7 2.1 40.5 9.5 - 38.0 7.0 Additions – -2027.2 -337.9 – -2404.0 -400.7 – -2889.6 -481.6 Revisions 1.9 30.2 7.8 2.1 -64.3 -7.9 7.5 -740.2 -116.1 YE2018 13.0 2369.7 410.5 16.9 3441.1 596.6 43.0 5028.8 892.8 24 OPERATING REVIEW CONTINUED

Bualuang Field, B8/38 Highlights Concession, Thailand 100% operated interest 26.8 MMbo 2P 10.3 MMbo net 2C

Production averaged 8,100 boepd over The drilling campaign commenced six weeks The platform is currently under construction the year with uptime of 98%. In summer later than envisaged due to a combination in the Naval Shipyard at Sattahip by BJC 2018, we started work on the next phase of poor weather and the late arrival of the rig. Heavy Industry and is expected to be lowered of development known as Phase 4. Phase Once the rig was on location the team did into place in June to facilitate the start of 4 is split into two parts, in effect 2018 a first class job executing the campaign drilling in July 2019. During the shutdown for and 2019, which we refer to respectively and completed it safely, 38 days faster installation, we will take the opportunity to as Phase 4A and Phase 4B. than planned and approximately 20% make repairs and upgrades to Alpha and under budget. Bravo platform equipment. First oil from the The objective of Phase 4A was to boost Charlie platform is expected in October production from the existing facilities and Phase 4B will see a new, 12 slot, conductor- 2019 and, on completion of the Phase 4 comprised drilling three new producing wells supported platform, called the Charlie programme, field production is expected and four workovers, plus some preparatory platform, installed at the Bualuang field. We to peak at 14,000 bopd. project work ahead of Phase 4B, as well as will also increase the water disposal capacity the drilling of an exploration well testing from 75,000 barrels per day to 100,000 a near-field prospect, B8/38-11, which was barrels per day; this extra fluid-handling unsuccessful (see under following section capacity will help with recovery. covering exploration).

Kerendan Field, Bangkanai Highlights PSC, Indonesia 70% operated interest 14.3 MMboe 2P 80.6 MMboe net 2C

The Kerendan field has continued to However, to sell any more gas, we need to produce steadily in line with expectations have the reserves certified by LAPI ITB, an at an average daily rate in 2018 of approved Indonesian government body. 16.8 MMscfd (gross). We have started to They are currently completing their work, but see the beginning of the natural reservoir we have no reason to believe their opinion decline, with the majority of production will materially differ from our internal view. now coming from two of the four wells. Even taking into account that the PSC We are planning stimulation through will expire in 2033, it is clear that there is acid fracture work in June 2019, which material potential resource at Kerendan. we hope will restore the productivity The challenge is finding new routes to of the existing K4 and K6 wells. commercialisation, and then finding an Interpretation is well underway on the 3D engineering solution to satisfy the seismic that was completed at the end of commercial solution. Our new team in 2017. This has helped to better define the Indonesia is working on this and we believe reservoir distribution and together with the we have significantly strengthened our latest audit by ERCE indicates that the expertise in this area post the integration contingent resources in the field have of the former Santos team. increased from 457 Bcf (gross) to 583 Bcf. Our internal view is that we have up to 1.9 Tcf of gas in place across the whole Kerendan structure, all connected.

Ophir Energy plc Annual Report and Accounts 2018 25 STRATEGIC REPORT GOVERNANCE REPORT

FINANCIAL STATEMENTS Madura Offshore Highlights and Sampang 12.9 PSCs, Indonesia MMboe net 2P 67.5% and 45% operated interests

SUPPLEMENTARY INFORMATION

As part of the Santos package, we We have also decided to invest in the Meliwis Together, the Oyong and Wortel fields acquired these gas assets in East Java. field, discovered in 2016, 11 kilometres south produced at 33% above budget during 2018, of the Maleo field. The Meliwis development primarily due to higher than forecast gas Madura Offshore contains stable production is planned as a single well well-head platform demand. We will be looking at revising our from the Maleo and Peluang fields, and Ophir tie-back to Maleo, and would extend the subsurface models next year, with a view has a 67.5% operated interest in the PSC. economic field life of the Maleo and Peluang to adding other gas reservoirs. Maleo has been producing since 2006 and fields. Final investment sign off by the joint We also drilled a successful gas exploration is past the plateau, in the decline phase. Its venture was achieved in February with the well at Paus Biru-1, 27 km east of Oyong, output is sold to PGN and PLN through the signing of a gas sales agreement. Our share noted in the exploration commentary below, East Java pipeline. Production was 57% of the PSC is 77.5%, the local partner having and will be looking to achieve reserves above budget in 2018, partly due to higher declined to participate in the drilling of the certification in 2019 as a step towards FID. We gas demand but also due to better reservoir successful exploration well. believe pressure-lowering projects at the Grati performance, so we see some potential In Sampang, the Oyong field was found processing plant will create further economic upside. Peluang started producing in 2014 back in 2001 and Wortel five years later. value from the fields through extending and is on plateau production at the moment. They were put on production in 2007 and production life in Oyong and Wortel. It has also over-produced, at 15% above its 2012 respectively. Oyong is producing gas, budget, mainly due to higher gas demand. In Sampang there is potential upside from Wortel is producing gas and condensate. two undeveloped discoveries already on the All production is piped onshore to the block. We also see substantial exploration processing site at Grati. upside within both Sampang and Madura Offshore blocks – however accessing this upside would require PSC extensions as both blocks currently expire in 2027. 26 OPERATING REVIEW CONTINUED

Chim Sao/Dua fields, Highlights 12W PSC, Vietnam 10.5 31.875% non-operated interest MMboe net 2P

Part of the Santos acquisition, the Chim Sao and Dua oil fields in Vietnam are operated by Premier Oil. Chim Sao, the main field, has consistently produced over budget in the past few years and continued this trend in 2018 – outperforming budget by 18%. In the initial development plan, these fields were expected to produce until around 2020. However, due to the continued outperformance, the fields are now expected to produce out until 2030. Premier has begun a field-life extension assessment of all the facilities, most critically the well head platform and main field flow lines which had 10-year design lives (in line with the original development plan). By 2020 the necessary modifications will have been completed. In 2019 the operator is planning to conduct a series of well interventions that will help offset the natural reservoir decline rates. Ophir is currently building its own field reservoir model and plans to work with the operator in 2019 to determine the optimum way to create value from these fields in the coming years.

Sinphuhorm Gas Field, EU1, E5N and L15/43 Concessions, Thailand 9.5% non-operated interest

Operated by PTTEP, production from the Whilst encouraged by the stronger Sinphuhorm field averaged 79 MMscfd demand witnessed for large parts of (gross). This was in line with budget and 2018, we expect there to remain a Highlights approximately flat year on year. The trend certain degree of volatility in the for lower nominations from the Electricity nominations for EGAT during 2019. Generating Authority of Thailand (EGAT) that we saw at the end of 2017 continued 5.7 3.4 in the first quarter of 2018 before demand MMboe net 2P MMboe net 2C recovered to more than 100 MMscfd for most of the rest of the year.

Ophir Energy plc Annual Report and Accounts 2018 27

Tanzania LNG, Highlights Blocks 1 & 4 500.2 20% non-operated interest MMboe net 2C

Engagement with the Government of

Tanzania on the development of the STRATEGIC REPORT natural gas discoveries in Blocks 1 and 4 offshore Tanzania continues to focus on establishing key commercial terms for a cost competitive development for the Tanzania Gas and LNG project. The project continues its focus on selecting the optimal integrated upstream and liquefied natural gas GOVERNANCE REPORT project. The Tanzania LNG project is at a stage where detailed planning and multiple agreements need to be agreed between the international gas companies and the Government.

FINANCIAL STATEMENTS

EXPLORATION We announced in September that we would In line with our stated objective of reducing The Madura Offshore and Sampang PSCs be reviewing our exploration programme to our exploration commitments, we are include a number of near field exploration reduce both the commitment expenditure currently in advanced discussions with prospects. The Paus Biru -1 exploration well and the exposure to higher risk, frontier interested counterparties for the sale of resulted in a gas discovery. Paus Biru is exploration that typically takes longer to our interest in Block 5 offshore Mexico for approximately 27 kilometres east of the pay-back. a modest profit, although any such deal producing Oyong Gas field. We are now

In the early part of the year, we picked up remains subject to execution of definitive preparing a plan of development for SUPPLEMENTARY INFORMATION additional acreage in both Equatorial Guinea documents, board approvals and customary submission to the regulator for approval. governmental consents. and Mexico. In Equatorial Guinea, we were In Thailand, we drilled a step out exploration awarded an 80% operated interest in Block For Blocks 10 and 12, we signed the well, B8/38-11, to test a small target to the EG-24. We subsequently farmed out a 40% production-sharing contracts in March, north of the Bualuang field but the main interest to Kosmos Energy and then in purchased seismic data and commenced T2 reservoir target was not well developed January 2019 agreed to sell Kosmos our geological interpretation. These are held in this location and the well was abandoned remaining 40% and operatorship. on 20% equity non-operated positions. as a dry hole. In Mexico, we started the year with an In the second half of the year, we finalised a As part of the transaction with Santos, we interest in Block 5, and were awarded Blocks trade with Chevron in Myanmar, exchanging acquired an exploration licence in Malaysia, 10 and 12 in the Mexico 2.4 deep water equity in our existing block AD03 for equity in which we subsequently exited, and we expect licence round at the end of January 2018. their adjacent, shallower water block A5. the acquisition of the exploration assets in In Block 5, the main activity has been seismic Following a thorough review of prospectivity Vietnam and Bangladesh to close in 2019. interpretation and identification of drilling across both PSC areas, no commercially viable These are considered non-core and we will be prospects. The Cholula-1 exploration well opportunities were identified and a decision looking to remove the capital commitments was drilled during February and March 2019. was taken to withdraw from both PSCs. against these licences during 2019. The well encountered hydrocarbons and In the Aru Trough in Indonesia, in the West further drilling is likely to be required to Papua IV and Aru PSCs, jointly held with confirm the commerciality of the block. Equinor, further geological studies continued, utilising recently acquired 3D seismic data. Given the frontier and deep water nature of the basin a decision was taken to withdraw from both PSCs. 28 FINANCIAL REVIEW Monetising our resources offers healthy returns at low risk

Introduction The Brent oil price started the year at During 2018, we took significant steps to $67 per bbl, climbing to a peak of $87 per bbl strengthen the financial performance of in October, only to decline to a low of the Company and move towards becoming $50 per bbl in mid-December with concerns self-sustaining. In that regard, it was a year centred around a perceived over supply to of transition, requiring a number of hard the market, and finishing the year at decisions to be taken against a challenging $54 per bbl. In addition, the buoyant debt backdrop. We did not shy from those markets we witnessed in the first half of the decisions. The Company is now better placed year turned-around in the fourth quarter financially than at the beginning of 2018 to with both bank and debt capital markets face the challenges ahead and to deliver its contracting. The beginning of 2019 saw the strategic objectives. continued recovery of oil prices, reaching a high of $67 per bbl in February 2019. Key achievements in 2018 from a financial management perspective included: Despite the broader market concerns, other –– Significantly expanding the Company’s than the outcome on the Fortuna project, production and cash flow base. This base is we were able to make progress against our now capable of generating surplus cash strategic objectives, increasing our flows that can ultimately be deployed into production and cash flow base, reducing projects that have the potential to deliver exposure to frontier exploration expenditure, Tony Rouse material returns on capital employed, or, in reducing our operating cost base and Chief Financial Officer the absence of such projects, returned to strengthening the balance sheet. Delivery shareholders. on the strategic objectives is discussed in –– Reducing exposure to frontier exploration context of the Company’s financial expenditure. We recognised investment results below. into frontier exploration brings with it Statement of comprehensive income long-term financial commitments that Gross profit are not commensurate with the risk and, Following completion in September of the even in the success case, the investments acquisition of oil and gas properties in will often take many years to deliver Indonesia and Vietnam, and reflecting meaningful returns. production for the new licences from the –– Lowering the Company’s cost base. acquisition date, production for 2018 We initiated cost reduction programmes averaged 17,100 boepd (2017: 11,700 boepd). across the portfolio including plans to This comprised oil and liquids of 10,500 bpd both downsize the corporate (2017: 8,700 bpd), realising an average price headquarters and to relocate it to Asia. of $67 per bbl (2017: $51 per bbl) and –– Preserving a strong balance sheet to generating revenue of $244 million provide maximum flexibility for future (2017: $170 million), net of hedging. Similarly, investment decisions. In December, our gas production for the year was 37.2 MMscfd reserve based lending facility was both (2017: 16.1 MMscfd), realising an average expanded and the maturity extended. price of $5.94 per Mscf (2017: $5.18 per Mscf) Financial environment and generating revenue of $55 million The financial environment for the UK (2017: $19 million) and dividend income from upstream exploration and production sector Sinphuhorm of $7 million (2017: $7 million). in 2018 was one of continual change. The Accordingly, production increased by 46% early stability in the first half reversed in the year on year (2017: 9%) with revenue fourth quarter with broader macro political increased by 58% (2017: 76%). concerns driven by uncertainty over Brexit For 2018, we entered into two commodity and continued tension in the trading price hedge programmes with the financial relationship between the US and China, and effect of the hedges predominantly growing consensus around the view that the accounted for in revenue. Our strategy is to days of low interest rates may be over. hedge commodity prices on a defensive

Ophir Energy plc Annual Report and Accounts 2018 29

During 2018, we took significant steps to strengthen the financial performance of the Company and move towards becoming self- sustaining. In that regard, it was a year of transition, requiring a number of hard decisions to be taken against a challenging backdrop. STRATEGIC REPORT basis, protecting downside cash flow Key Financial Indicators exposure to commodity price fluctuations Units 2018 2017 whilst preserving as much upside cash flow Income Statement: exposure as possible. In late 2017, we entered Realised prices1: into a programme against our full year 2018 Oil and condensate $/bbl 66.62 51.15 Bualuang production for 3,200 bpd by selling Gas $/Mscf 5.94 5.18 a Brent swap at approximately $60 per bbl Revenue $’millions 298.2 188.5 2 and buying a Brent call at approximately Operating costs per boe $/boe 11.67 11.43 GOVERNANCE REPORT $68 per bbl. With Brent prices averaging Pre-licence and other exploration costs $’millions 15.5 15.7 $72 per bbl during 2018, we booked a charge Loss before taxation $’millions 720.0 64.4 to revenue of $8 million against the hedge. Current income tax charge $’millions 61.9 47.4 In August, we entered into a second Balance Sheet programme against the newly acquired Net debt/(cash)3 $’millions 34.6 (119.0) Vietnam Block 12W production for 2,000 bpd Gross liquidity 4 $’millions 391.4 427.3 by selling a Brent swap at approximately Leverage ratio 5 times 2.1 1.1 $70 per bbl and buying a Brent call at Gearing ratio 6 % 34 7 approximately $78 per bbl. With Brent pricing Cash Flow Statement FINANCIAL STATEMENTS averaging $71 per bbl over the period of the Cash generated from operations before working capital hedge, it approximately broke even in 2018. adjustments $’millions 167.7 96.9 Both programmes combined represented Income taxes paid $’millions 70.5 9.5 7 about 13% of our pro-forma total 2018 Net funds flow from production $’millions 143.5 90.1 production and 25% of our pro-forma Net cash flows generated from/(used in) operating activities per boe 8 $/boe 17.21 25.42 company’s oil and condensate production. Investing cash flows: Cost of sales totalled $199 million Acquisitions $’millions 137.8 – Exploration and evaluation $’millions 64.6 95.8 (2017: $148 million) and included operating Oil and gas properties $’millions 49.1 47.2 costs of $73 million or $12 per boe Net investment in joint ventures9 $’millions (4.8) (6.1) SUPPLEMENTARY INFORMATION (2017: $49 million or $11 per boe). Cost of 1 Realised prices are calculated as revenue divided by quantities of oil, condensate and gas sold. sales also included royalties payable of 2 Operating costs per boe is defined as operating costs divided by working interest production. 3 As per note 24 to the consolidated financial statements. $19 million (2017: $14 million), which arise on 4 Gross liquidity is defined as cash and cash equivalents plus available undrawn borrowings. a sliding scale of revenue, and depreciation 5 Leverage ratio is defined as gross debt divided by cash flow from operations before working capital adjustments. 6 Gearing ratio is defined as gross debt divided by gross debt plus book net equity. and amortisation of oil and gas properties of 7 Net funds flow from production is defined as set out on page 31. $107 million or $19 per boe (2017: $78 million 8 Net cash flows generated from/(used in) operating activities per boe is defined as net cash flows generated from/(used in) operating activities divided by working interest production. or $20 per boe). Cost of sales in 2017 also 9 Net investment in joint ventures is calculated as funding provided to joint ventures less dividends received from joint ventures. included a movement in inventories of oil of $7 million (2018: nil). the remaining carrying balance of the licence In addition, exploration expenses totalled Ultimately, we delivered a gross profit of at year-end. As a consequence, the full $130 million (2017: $92 million) and included $99 million, or $17 per boe (2017: $41 million impairment charge for the licence totalled $100 million (2017: $77 million) of exploration or $11 per boe). $614 million. expenditure written off following our decisions Operating loss to relinquish the West Papua, Aru and North We also impaired oil and gas properties by The Block R licence in Equatorial Guinea Ganal frontier exploration licences in $14 million, in respect of the Bangkanai (containing the Fortuna discovery) expired Indonesia and the Blocks AD03 and licence, and investments by $45 million in at the end of 2018. In our mid-year results, A5 licences in Myanmar. Additionally, respect of Sinphuhorm. The impairment to we impaired the Equatorial Guinea Block R exploration expenses included pre-licence Bangkanai reflects updates to cost estimates licence, held on our balance sheet under and other exploration costs of $16 million of future development phases. In the case of assets classified as held for sale, by (2017: $16 million) and exploration inventory Sinphuhorm, the impairment reflects $310 million to $300 million, recognising the written off of $15 million (2017: nil). downward revisions to gas in place increased uncertainty as to whether value for assumptions for the wider-field resulting in General and administration expenses the licence could be realised before the licence reduced estimates for contingent resource. charged to the income statement totalled expired. Following expiry of the licence at 2018 $11 million (2017: $11 million). Total general year-end, without having secured an option to and administration expenses reduced year realise value for the licence, we fully impaired 30 FINANCIAL REVIEW CONTINUED

on year by 11% with a resulting 4% reduction evaluation additions of $57 million agreed with lenders at $322 million for the to general and administration expenses (2017: $41 million) comprising $13 million availability period 1 January 2019 to 30 June charged to the income statement. in Equatorial Guinea (2017: $16 million), 2019. In July we drew $150 million against the $19 million in Mexico (2017: $9 million), reserves based lending facility, and then in Following the acquisition of oil and gas $13 million in Indonesia (2017: $7 million) January 2019, we drew a further $100 million. properties in Indonesia and Vietnam, a gain and $12 million on other assets including on purchase was recorded of $58 million being The proceeds of the draw down in Myanmar, Thailand and Tanzania the excess of the fair value of the net assets January 2019 were used to fully repay the (2017: $9 million). acquired over the purchase consideration. outstanding amount of $103 million against Oil and gas properties included $278 million the bridge facility. Other operating expenses totalled $41 million (2017: nil) for the acquisitions in Indonesia (2017: $12 million) and included restructuring At the end of the year there remained and Vietnam, which included a non-cash costs of $17 million (2017: $2 million) related $107 million (2017: $107 million) outstanding deferred income tax charge gross up of to the downsizing of the London HQ, licence for the Nordic bond. The Nordic bond $96 million and profit booked on acquisition exit costs of $7 million (2017: $9 million) and matures on 6 January 2020 and we intend to of $58 million. Oil and gas properties corporate transaction costs of $15 million refinance the bond well ahead of it maturing. additions of $60 million (2017: $44 million) (2017: nil). included expenditure in Indonesia of Cash flow statement We consequently reported an operating $9 million (2017: $13 million), Thailand of Net cash flows generated from loss of $693 million (2017: $54 million). $41 million (2017: $31 million) and Vietnam operating activity of $10 million (2017: nil). Cash flow from operations before working Loss from continuing operations capital adjustments increased to $168 million before taxation Other long-term receivables increased by or $27 per boe (2017: $97 million or We reported a loss from continuing $70 million (2017: nil) with the acquisition $23 per boe). After positive working capital operations before taxation of $720 million of the abandonment and site restoration movements of $7 million (2017: $19 million) (2017: $64 million), which included net funds as part of the acquisition of oil and gas and interest receivable of $3 million finance charges1 of $25 million properties in Indonesia and Vietnam. These (2017: $2 million), offset by taxation (2017: $13 million). We entered into two new accounts accumulate funds over time to payments of $71 million (2017: $9 million), financing arrangements during the year, meet future decommissioning expenses. net cash flows generated from operating which resulted in capitalised arrangement Current assets activity totalled $107 million or $17 per and other fees for extinguished borrowings Current assets reduced substantially boe (2017: $109 million or $25 per boe). of $11 million (2017: $2 million) being fully following the full impairment of the Block R amortised in the year. With a net interest A reconciliation of net cash flows generated licence in Equatorial Guinea, which was an expense of $14 million (2017: $11 million), from operating activity to net funds flow asset classified as held for sale. net finance charges totalled $25 million from production can be found on page 31. (2017: $13 million) resulting in a higher than The Company ended the period with cash Net cash flows used in investing activity normal all-in average cost of borrowings of and cash equivalents of $323 million Reflecting the timing of payments for 12% (2017: 10%). (2017: $224 million). With undrawn available investing activities, net cash flows used in borrowings, we closed the year with gross Loss after taxation investing activities totalled $247 million liquidity of $391 million (2017: $427 million). With the acquisition in September of oil and (2017: $136 million). This predominantly gas properties in Indonesia and Vietnam, the Non-current liabilities comprises the acquisition of oil and gas taxation expense increased to $62 million Non-current liabilities at year-end totalled properties in Indonesia and Vietnam of (2017: $48 million) comprising a current $748 million (2017: $438 million), an increase $138 million (2017: nil) other investing cash income tax charge of $69 million or of $310 million reflecting increased long- flows of $114 million (2017: $143 million), $11 per boe (2017: $33 million or $8 per boe) term drawn borrowings of $143 million, and partly offset by a credit of $5 million and a deferred income tax credit of $7 million with the acquisition of oil and gas properties (2017: $6 million) from net investments in (2017: charge $15 million). The current in Indonesia and Vietnam, increased joint ventures. The Company’s principal income tax charge comprised Thailand provisions for decommissioning of $80 investing activities are set-out above in special remuneratory benefit of $22 million million (2017: $1 million) and deferred non-current assets. (2017: $14 million), and other foreign taxes income tax liability of $89 million Net cash flows from/used in payable in Thailand, Indonesia and Vietnam (2017: $15 million). We also reported financing activities of $48 million (2017: $14 million). short-term borrowings of $103 million in Net cash inflows from financing activities of current liabilities. We reported a loss after taxation of $239 million (2017: outflow $109 million) $782 million or $1.10 per share Additionally, we entered into a $130 million, reflected changes to our borrowing portfolio (2017: $112 million, $0.16 per share). 18-month bridge facility in September to as set-out above in non-current assets, after partly fund the acquisition of oil and gas accounting for arrangement and other fees Balance sheet properties in Indonesia and Vietnam. and interest paid of $15 million Non-current assets In September we drew-down $103 million (2017: $15 million). Our non-current assets base increased of the bridge facility. Subsequently, in by $190 million to $1,282 million Financial outlook December we refinanced the bridge facility (2017: decrease $73 million), reflecting This financial outlook is provided on the and our $250 million seven-year reserve predominantly the acquisition of oil and gas premise of the Company remaining an based lending facility into a new $350 million properties in Indonesia and Vietnam. The independent entity. seven-year reserves based lending facility, balance also included exploration and with a maturity of 31 December 2025. On that basis, 2019 production is forecast The borrowing base amount under the at 25,000 boepd. We will complete workovers 1 Net finance charges includes interest income, at Kerendan and replace electric submersible amortisation of fees and interest expense. new reserve based lending facility was

Ophir Energy plc Annual Report and Accounts 2018 31 pumps at Bualuang, which will temporarily 2019 oil and gas properties expenditure is reserves that would allow the company to increase operating costs from the base level forecast at $105 million compared to the 2018 return capital to shareholders in the future. of $12 per boe to $16 per boe. In November out-turn of $49 million and includes Bualuang We will update shareholders following we entered into a further commodity price Phase 4 development, with the construction completion of this significant piece of work. hedge programme against 2019 Bualuang and hook-up of the Charlie platform and with Additionally, we are looking to reduce our production for 2,000 bopd by selling a Brent the drilling of up to 12 new infill wells, and outstanding exploration financial swap for approximately $56 per bbl and Meliwis development expenditure following commitments due to host governments buying a Brent call for approximately the FID in 1Q 2019. during 2019 and will provide further updates $66 per bbl. For 2019, we have hedged Allowing for general administration costs, in due course. Our other obligations against approximately 16% of our total production, interest charges, and short-term working net funds flow from production after equivalent to 29% of our oil and liquids capital and other balance sheet movements, investment expenditures will then be limited production. Further hedge programmes may 2019 year-end net debt is forecast at to general and administration costs and be entered into during 2019 on a defensive $60 million. borrowings’ debt service (interest plus STRATEGIC REPORT basis against production in 2019 and 2020. principal). Surplus cash flows and cash We expect to end 2019 with outstanding Exploration and evaluation expenditure is balances will then be available for borrowings of $300 million giving rise to, forecast to reduce in 2019 to $35 million investment or return to shareholders. on a gross debt basis, a leverage ratio of 1.3 versus the 2018 out-turn of $65 million. (net debt basis: 0.2) and gearing ratio of 30% Tony Rouse 2019 activity assumes certain farm outs (net debt basis: 7%). 2019 year-end gross Chief Financial Officer

as we further reduce our exposure to liquidity is estimated at $240 million. 11 March 2019 frontier exploration. Additionally, GOVERNANCE REPORT amounts are provided for settlement of The company currently has no distributable outstanding financial commitments reserves absent which, it is unable presently to due to host governments where those return capital to shareholders (including share commitments cannot be offset, deferred buy-backs). We have commenced a process to or otherwise mitigated. determine the potential to create distributable

The Company calculates an alternative performance measure, net funds flow from production. The measure eliminates cost of activities not directly related to production and working capital movements from net cash flow generated from operating activity to reflect a measure on an FINANCIAL STATEMENTS accrued basis and more aligned to production performance. A reconciliation of net cash flows generated from operating activity to net funds flow from production as follows:

Units 2018 2017 Net cash flows generated from $’millions 107.4 108.7 operating activity Reclassify from net cash flows generated from operating activity Pre-licence and other exploration expenses $’millions 15.5 15.7 Pre-licence and other exploration costs of $15.5 million

(2017: $15.7 million) as per note 6b SUPPLEMENTARY INFORMATION General and administration expenses $’millions 22.9 7.4 General and administration expenses of $10.9 million (2017: $11.3 million) as per the income statement; corporate transaction costs of $14.5 million (2017: nil) as per note 6c; less share based payment of $2.5 million (2017: $3.9 million) as per cash flows statement. Interest received $’millions (2.9) (2.1) Interest income on short-term bank deposits of $2.9 million (2017: $2.1 million) as per note 7 Dividend received from joint ventures $’millions 6.6 6.5 As per cash flow statement Total $’millions 42.1 27.5 Reclassify to/from short-term working capital and other balance sheet movements Taxation payable $’millions 1.4 (23.2) Movement in taxation receivable of nil (2017: negative $6.1 million) as per balance sheet, plus movement in taxation payable of negative $6.9 million (2017: negative $17.1 million) as per balance sheet; plus taxation payable of $8.3 million (2017: nil) as per note 11. Working capital movements $’millions (7.3) (19.2) Decrease in inventories of $6.9 million (2017: $7.1 million) as per cash flow statement; plus increase in other current and non-current payables of $14.8 million (2017: $2.0 million) as per cash flow statement; less decrease in other current and non-current liabilities of $14.4 million (2017: increase $10.1 million) as per cash flow statement. Other adjustments $’millions (0.1) (3.7) Total $’millions (6.0) (46.1) Total net funds flow from production 143.5 90.1

NB: Since we have increased our production and cash flow base, it is more appropriate to report on an IFRS basis for cash outflows, therefore we have removed the use of funds flow table used in 2017. 32 CORPORATE RESPONSIBILITY Responsibility Working with people, communities and the environment

Delivering shared value and embedding sustainability lies at the heart of our business.

Alan Booth Interim Chief Executive Officer

Ophir Energy plc Annual Report and Accounts 2018 33

The success of our business depends not just on financial outcomes, but on being known for doing the right thing. This means we treat our people, partners and other stakeholders with respect and honesty; we ensure employees and contractors are safe from harm; we support and sustain the communities we operate in; we work to minimise our environmental impact; and we aim to create shared value. STRATEGIC REPORT

Establishing a common culture Diligence Standard. For global new ventures This makes it easier to bring our employees GOVERNANCE REPORT Culture lies at the heart of responsible and M&A, we conduct a stand-alone due together, keeping people up to date operations. Although we work across a diligence process before a decision can with what’s happening around the number of regions, we expect everyone who be taken to farm-in to a new licence, Company along with holding regular works with us to demonstrate and share the contract with a new partner or make town hall meetings. values and aims stated above, whatever their a corporate acquisition. A key priority in 2018 was the integration in role. This protects our business operations We expect all staff to disclose any conflicts Indonesia of the ex-Santos employees into and enhances our reputation, preserves our of interest, personal connections to people in Ophir. Following completion of the deal on licence to operate, and helps protect and government, or requests to make a corrupt 6 September 2018, we held a successful grow shareholder value. payment. We also have a Compliance welcome day for all employees in Indonesia. FINANCIAL STATEMENTS All Directors, employees and contractors Monitoring Plan to provide the Board with We have subsequently appointed a new must work to our Code of Conduct and clarity on key corruption prevention activities, General Manager, and completed the related policies and procedures. These understand where real corruption risk lies, organisational restructure. We now have include ethical conduct standards and our and limit our exposure to it. a single office in Jakarta and the business Anti-Bribery and Corruption policy. We work is fit-for-purpose going forward. We comply with all applicable human rights hard to instil the fundamentals of working laws and regulations and use the UN Guiding We announced in September we would be responsibly throughout the workforce, and Principles of Business and Human Rights for significantly reducing staffing levels in our run a number of related training programmes guidance. We encourage our joint ventures, London office, and will set up a new head across our operations, led by a combination office close to our Southeast Asian

partners, suppliers and contractors to do SUPPLEMENTARY INFORMATION of our central corporate team and on-the- the same. production assets, most probably in ground management. Singapore. The current intention is for the Our people Working ethically move to be completed by September 2019. Working around the globe, it is important Our new reporting framework on standards We have also put in place a country we create and maintain a cohesive, of behaviour has improved data collection, representative in Vietnam. values-driven culture. Fundamentally, we wish including leading indicators on ethical to empower our people to make measured Diversity and inclusion compliance. We maintain compliance and transparent decisions, and we supported We recognise that all our employees have registers across all assets and business this principle by moving to a General different needs and aspirations. We believe functions covering government hostings, Manager model in two of our key markets that by embracing a culture of inclusivity we payments to government officials and this year – Indonesia and Thailand. Retention will achieve the best for our business and hospitality given to or received from third of staff remains key, and we continue to our people. A more diverse workforce, with parties. We also require pre-approval for offer competitive remuneration and benefits the right mix of skills, experience, culture, activities above certain financial thresholds. packages, appropriate incentives, and instil ethnicity, nationality, gender and knowledge, We undertake tailored due diligence across an open, supportive culture where trust, can make our Company stronger. Therefore a range of business activities covering the fairness and inclusion can thrive. Our aim we encourage inclusion and diversity at all supply chain, corporate responsibility and is to ensure our team members are well levels of the business. business development and M&A activities motivated to achieve their individual targets, to allow us to make informed decisions and are united in the collective goal of about who to contract with, who to do social executing Ophir’s strategy. investment work with, and who to partner In addition to training and development with. These include an Intermediaries programmes across the business, we Standard and an Ethical Compliance Due 54-55 maintain an interactive platform of key Diligence Standard, an Intermediaries Report of the Corporate communications and collaboration tools. register, and a Social Investment Due Responsibility Committee 34 CORPORATE RESPONSIBILITY CONTINUED

We are an equal opportunities employer and Personal safety 2018 safety performance, significant our Code of Conduct states we will deal fairly We are most capable of meeting the milestones and equitably with all our employees in the standards we set for ourselves on the sites –– Bualuang asset achieved four years workplace. We have a commitment to extend where we are operator. Here, we set the LTI-free on 11 May. equal employment opportunities to all, tone and establish our expected standards –– Bualuang drilling campaign was irrespective of race, colour, gender, sexual through our management systems. At sites completed LTI-free on 2 November. orientation, gender reassignment status, where we are not the operator, we look to –– Bualuang Phase 4B brownfield project religion or belief, age, nationality, ethnicity, work closely with our partners on HSE achieved 100,000 man-hours LTI-free marital or civil partnership status, pregnancy standards and best practices. Our biggest in November. and maternity, or disability. HSE challenge in 2018 was supporting the –– East Bangkanai 2D seismic campaign acquisition of Santos’ Asia assets, and completed LTI-free on 6 March. At 31 December 2018, the Company has two maintaining the highest standards of HSE –– Bangkanai asset achieved three years female Directors representing 25% of the during the transition. Our management LTI-free on 15 December. Board, 18% of the senior management team and operating managers have been busy –– Sampang asset achieved 11 years are female and throughout the Company, reinforcing the importance of safe and LTI-free on 21 September. women represent 33% of our workforce. reliable operations. –– Madura Offshore achieved 12 years Everyone is responsible for HSE LTI-free on 29 September. Process safety We aim to conduct all our operations in We structure our operations with safety The move to leading indicators a way that protects our employees and in mind at all times. We plan all operations 2018 is the third year we have incorporated contractors from injuries, fatalities and in the early design stage using engineering leading indicators in our HSE performance illnesses. In addition, we hold the health, controls, fire and gas safety precautions, tracking measurements. They are helping us safety and environment (HSE) of our and by proper maintenance, asset improve our routine operations and the quality surrounding communities in the highest integrity inspection and emergency of our job-specific risk assessments. We regard. Therefore we ensure we maintain shutdown programmes. continued to implement the OOC programme, a consistent culture of responsibility across where anyone can stop work when observing all our regions and operations. Training and competency development a safety issue, and developed an IT tool to We provide relevant health, safety and The guiding philosophy is that everyone support it. This HSSE tool is called TRA/JSA environmental training to all employees and ‘owns’ HSE, and we take a ‘top down, bottom and Incident Investigation Reports, and it contractors. This is alongside the standards, up’ approach, combining management provides additional leading indicator data to controls and procedures we use to minimise initiatives with everyday activities. An help us manage risk and refine our HSE the risk of personal harm, or loss or damage example of the latter is our Ophir performance. We supported its rollout with to our assets or the surrounding environment. Observation Card (OOC) programme where training, data tracking and trend analysis. Each person’s awareness of the potential anyone, regardless of position, is empowered hazards associated with their activities is How our leaders foster a strong to stop work where they have noticed an key to the performance of our business. HSE culture unsafe practice or condition. An example of a –– Understanding and recognising top-down initiative is the discussion of ‘safety This year, we continued with activities to the value of each individual’s moments’ at every monthly management standardise procedures across all operations, contribution to incident-free operations. meeting, highlighting any issues or lessons with a particular focus on incident response –– Sharing personal examples of safety we can share across the Company. management, permits to work, and the lessons and observations from both on on-site inductions we provide to set the A systemised approach and off the job. expectations we have for any new employee, Our HSE Management System defines our –– Never ignoring a suggestion contractor or visitor. HSE approach across all our facilities and to improve operations. activities. It provides practical guidance and In 2018, we continued the roll-out and –– Making safety observations and procedures for all staff conducting operations training of the following procedures: participating in a Job Safety Analysis or managing sites, aiming to achieve Ophir’s (JSA)/ Task Risk Assessment (TRA) –– Permit to Work HSE objectives as an integrated part of or an incident investigation –– Task Risk Assessment (TRA) our strategic goals. The system focuses on: to determine root causes. –– Isolations Personal safety; Process safety; Training –– Conducting field visits, asking questions –– Bronze and Silver Incident Management and competency development; and about safety, environmental and reliability Handbooks: Thailand Performance measurement. conditions, and providing immediate –– Ophir Observation Card (OOC) positive and constructive feedback. programme: Indonesia & Thailand

...we support and sustain the communities we operate in; we work to minimise our environmental impact; and we aim to create shared value...

Ophir Energy plc Annual Report and Accounts 2018 35 STRATEGIC REPORT

GOVERNANCE REPORT Environmental responsibility With our proposed addition of a new The global changes required to achieve this We aim to maintain high standards of platform at Bualuang, we ran a series of goal will affect the oil and gas industry environmental protection, and to avoid public events to inform the community of significantly. At Ophir, we are deepening our creating negative impacts on the our plans and to collect their views. The understanding of the implications of the environment and biodiversity, taking all Thai Department of Minerals Fuels also climate change debate and international reasonable steps to mitigate or remedy any conducted a successful audit of our waste agreements for our business. This will affect environmental impacts associated with our management process at the Bualuang field. what action we can take across a range of activities. To do this, we follow international In Indonesia, our Sampang PSC succeeded areas including our core business strategy, environmental best practices for the energy in upgrading its certification to the newest our operational emissions and our FINANCIAL STATEMENTS and mining industries, as well as ensuring version, ISO 14001:2015, and extended its interactions with stakeholders. In 2018, the we conform to local requirements and scope to include the shorebase. Board continued to review its approach to expectations. Our environmental policies tracking trends to provide commercial Environmental impact assessment identify the potential impact of exploration, foresight on how quickly the world is moving This year, we received environmental impact drilling, development, production and toward decarbonisation. Climate change assessment approval of the Phase 4 processing at our operational sites, and and the implications for Ophir will remain development at Bualuang from ONEP, the identify practical controls to mitigate on the Board’s strategic agenda. Thai environmental regulator. In the lead up these effects. to submission, we conducted over 10 public As the world moves toward a lower carbon participation sessions, including focus-group future, natural gas will play an important role Waste and discharges SUPPLEMENTARY INFORMATION We aim to prevent and reduce discharges, and one-on-one meetings. In Indonesia, we as a bridging fuel to this future, replacing emissions and waste which may affect the also completed a number of environmental fuels that have higher carbon emissions. surrounding environment adversely, including assessments, permits submission and With Kerendan, we will help contribute to the discharge of contaminants to surface environmental audits of the Kerendan, this lower carbon future. and ground water. Therefore we monitor air Sampang and Madura Offshore assets. With respect to our greenhouse gas emissions, emissions, waste generated, discharges and Environmental expenditure we report Scope 1 and 2 and certain Scope 3 inadvertent releases closely. This year at Our expenditures on environmental matters emissions. Scope 1 emissions are those we Kerendan, we had to undertake gas flaring in 2018 totalled $1.6 million, compared to have direct control over; Scope 2 emissions are due to fluctuating demand from our $0.9 in 2017. This includes costs for waste indirect energy emissions from electricity we customer, and to ensure safe operations. We disposal, environmental studies and other use in offices and logistics bases; the Scope 3 are looking at ways to avoid this. However we environmental management services. We emissions we report are a result of passenger conduct flaring to protect our people, and do had no fines or non-monetary sanctions for air miles from business flights. so in the context that the gas we supply is non-compliance with environmental laws displacing more carbon-intensive fuels. and regulations, and no comments about Assessment and audit environmental impacts filed through formal We conduct environmental impact grievance mechanisms. assessments and environmental monitoring Climate change studies, including risk assessment, risk Ophir recognises the scientific consensus mitigation and contingency planning and that greenhouse gas emissions are causing audits. We place a high value on regular man-made climate change. Achieving the reporting. It is important our local internationally agreed target of limiting the communities understand how seriously global mean temperature rise to well below we take environmental protection. 2°C above pre-industrial levels will require significant and sustained reductions in these emissions. 36 CORPORATE RESPONSIBILITY CONTINUED

Group-wide environmental Key Performance Indicators

Metric 2018 2017 Comments Energy consumption (Gigajoules (GJ)) 1,923,430 1,045,257 Energy consumption increased taking into account the additional production assets: Sampang and Madura Offshore.

Energy intensity (GJ/toe) 1.4 1.8 Value for E&P companies reporting to IOGP is 1.5 (2017).

Emissions (tonnes of CO2e): 205,519 94,493 Emissions increased taking into account the additional –Direct (Scope 1) 204,342 94,124 production assets: Sampang and Madura Offshore.

–Energy Indirect (Scope 2) 1,176 369

–Other Indirect (Scope 3)1 4,520 6,404 Scope 3 is emissions from business air travel only.

CO2 emissions intensity (tonnes CO2e per 149 162 Average value for E&P companies reporting to IOGP thousand tonnes oil equivalent production) is 133 (2017).

Flaring (MMscf) 77 38 Flaring increased taking into account the additional production assets: Sampang and Madura Offshore.

Venting (MMscf) 55.0 15.4 Venting increased taking into account the additional production assets: Sampang and Madura Offshore.

Water withdrawn for use (m3) 8,256 4,283 Kerendan operations only. Water withdrawal from ground water source only.

Waste (kg): 1,222,465 2017 hazardous and non-hazardous waste quantity revised –Hazardous 1,324,111 due to incompleted calculation of previous data. Waste generation increased taking into account the additional production assets: Sampang and Madura Off-shore. –Non-hazardous 432,399 157,001

Oil and chemical spills - released to secondary 7 cases 2 cases Seven cases of incidental spills to secondary containment. containment Oil and chemical spills – released to the 3 cases None Total amount released to environment < 3 litres. environment Loss of containment events None None

Produced water discharged (tonnes) 2,741 No produced Produced water discharge is from Sampang and Madura water Offshore Productions. All produced water of Bualuang discharged production is re-injected into the reservoir. Produced water at Kerendan production is being stored for future re-injection.

1 Not counted in the total GHG emissions of 205,519 tonnes.

Our communities Throughout 2018, the major impacts we We take good care to support the were able to make were at our operating communities close to the Company’s assets at Kerendan and Sampang in operations. Helping sustain a community is Indonesia, and at Bualuang, Thailand. fundamental to our commitment to being In all community projects, we focus on three a sustainable business. Wherever we operate, areas where we can have a sustainable we aim to link our investments to local needs impact, as agreed by our discussions with and priorities, using our own business skills the local communities: and strengths. We want our investments to make a real and lasting difference to –– Education communities, and so aim to support –– Community wellbeing, whether economic self-sustaining livelihood programmes. improvement or health initiatives –– Environmental sustainability Our community programmes work by establishing local partnerships to identify genuine community needs. Part of the work is also ensuring open and honest dialogue about our current operations and future plans.

Ophir Energy plc Annual Report and Accounts 2018 37

So far more than 5,000 rural students have taken part in this course, which recaps the key elements of the national exam, part of the route to university education. STRATEGIC REPORT

GOVERNANCE REPORT

Thailand route to university education. Similar courses Offshore, the affected villages are not that FINANCIAL STATEMENTS The communities most affected by our are unaffordable to most local people, but our physically close to operations, and so presence in the Bualuang oil field in the course is free of charge, and provides access to engagement need not be so regular. Gulf of Thailand contain a combination of nationally renowned tutors. We also continued With our onshore communities living in the fishing and tourism businesses. With CSR our special lecture for undergraduate students middle of the jungle, often without formal representatives based locally, our main aim at the Chumphon campus of KMITL education, their mindset and our emphasis is is to help the communities make their own University. “Basic Petroleum Knowledge and on daily basic needs. This year in Kerendan, decisions about their needs, rather than Petroleum Business in Thailand” explains we are focusing on providing clean water to introduce our own ideas. Ideas from ground about our industry, and also provides tips for two villages, and construction is almost level give local participants ownership of interviews and job applications that are valid complete. The clean water projects are an

the projects, and so our programmes are across all industries. More than 500 students SUPPLEMENTARY INFORMATION example of where the non-formal well-accepted and continue to create took part, and we are hoping to expand this engagement can confirm more accurately sustainable social value. initiative in future years. what the village really needs. When we One such project is our reforestation and Indonesia approve the construction, we establish a clean mangrove rehabilitation and planting We have been working with local communities water cadre, which is a management team programme in Chumphon province covering at our Kerendan gas field since 2014. It is in from the village, both formal and non-formal. more than 20 acres of land, which started in an isolated area of central Kalimantan, and With the coastal communities in Sampang, 2014 and continued during 2018. Land is key health needs are a priority due to the our main project is providing revolving funds, being used by community members, and we remoteness of the communities. Now with which are group loans for small business are building conservation awareness among the Santos acquisition, we also have offshore projects. These social development funds the public, and protecting from coastal operations in Indonesia, in Sampang. build the community’s ability to sustain erosion. We are particularly pleased when While the way we approach people onshore businesses. We fund an interest group, such we can generate a large benefit for a small and offshore is different, our aim is always to as fishermen, with money for equipment and investment, such as our hydroponic work with local villages and government then they can each pay back the loan. In vegetation greenhouse at schools in authorities to create shared value and Sampang the challenges in the community Chumphon. Young students of grade 6 sustainable livelihoods. As best practice, we are different from inland, and typically the and below work together on a planting always consider first those villages directly village chief plays a pivotal role and has the programme to grow salads, and the market affected by our operations. As we always want power, but we still need non-formal proceeds are rewarded to the school meals to make sure we operate with the community’s engagement to ensure the community fund, helping local families. social approval, we introduce ourselves, initially supports our projects. We can also use our For senior school students, we have continued through a formal channel such as village chiefs engagement for sensitive communications, with our Ordinary National Education Test or assembly, but also with non-formal figures for instance, warning fishermen of the tutor camp. Since we started this camp in such as village elders and respected figures. dangers of fishing by our platforms. 2014, more than 5,000 rural students have Onshore, this interaction with the community taken part in this course, which recaps the key can be daily, even hourly. elements of the national exam, part of the 38 CORPORATE GOVERNANCE REPORT Letter from the Chairman

I am pleased to say that the team in Asia did an excellent job of integrating these assets, and the people associated with them, into Ophir whilst remaining focused on our primary objective of safe operations. The acquisition of the Santos assets was the catalyst for the decision for Nick Cooper to stand down as Chief Executive Officer, a decision we came to by mutual agreement. Nick was appointed CEO in 2011 when Ophir was a frontier explorer, due to his background, experience and expertise in exploration. However, for Ophir today and into the future, it is important to have someone at the helm whose skills and experience are in operating production assets. I’d like to thank Nick for his seven years, during which his achievements included leading the Company through a successful IPO in 2011, realising value in Tanzania in 2013, and acquiring Salamander in 2015. Bill Schrader We have since been taking time and care to identify suitable Chairman replacement candidates in the market whose skills and experience reflect the future direction of the business, although this process is on hold given the Board has recommended the offer from Medco. During the intervening period, Alan Booth agreed to step into the Dear Shareholder, position, affording us an excellent Interim CEO with the relevant operational experience. Alan has been actively meeting with our Welcome to the 2018 Corporate Governance report. It has been a shareholders, has overseen the integration of the Santos assets year of material change within the Company but I believe we have and is providing firm leadership during the current recommended emerged with a more viable, long-term business model. cash acquisition of the Company by Medco. Before I outline our approach to governance and describe the A major disappointment during the year was the inability to find a activities of the Board and its Committees in more detail, I would like partner to enable us to move forward with the Fortuna project in to refer to the fact that, since year end, the Board has recommended Equatorial Guinea. Once the OneLNG joint venture dissolved in an offer of 55p per share from Medco Energi for the entire issued May we were approached by a number of interested counterparties. share capital of the Company. The Board has taken the relevant The Board approved engagement with a number of counterparties advice and believes that the offer provides certain, upfront value who had the financial capacity to lift the project. Unfortunately we for the strategy it has outlined and it is on this basis that it has were unable to close a deal before the production sharing contract recommended the offer to shareholders. expired at the end of 2018. Whilst it is frustrating that we were unable Outside of that, the Company made some changes in its strategic to unlock the undoubted value in this project, from a governance focus during 2018. Over the past few years we have been reducing perspective I am comfortable that our team has tried everything our exposure to frontier exploration and seeking ways to increase our it could to create value for our shareholders. level of cash generation. As a result Ophir is now a more efficient Through a combination of the situation with Fortuna and the business with the potential to deliver material amounts of free cash expansion of our footprint in Asia, our business is now very much flow in the coming years. Asia focused. As a consequence, and as part of our continued focus The acquisition of a portfolio of assets in Southeast Asia from Santos on cost minimisation, in September the Board approved the decision was the key factor in transforming the outlook of the business. This to materially downsize the London office and relocate the corporate transaction doubled our production and cash flow in the region and headquarters to Asia. I would like to thank all of our employees in materially de-risked our portfolio by reducing the concentration on London for their continued professionalism and dedication during the Bualuang field in Thailand. This field now represents just under this difficult transition. a third of production as opposed to nearly three quarters of As a consequence of the changes outlined above, I believe production at the start of the year. Ophir’s business model has gone through a major transition to focus on being an efficient, cash generative business.

UK Corporate Governance Code The UK Corporate Governance Code 2016 (the ‘Code’) applies to the year under review. A copy of the Code can be found at www.frc.org.uk. This report, which incorporates reports from the Audit, Corporate Responsibility, Nomination, and Technical and Reserves Committees on pages 48 to 59 together with the Remuneration report on pages 62 to 77 and the Directors’ Report on pages 60 and 61 describes how the Company has applied the relevant principles of the Code. The Board, along with its own assessment of compliance with the Code, therefore concludes that during the year the Company has fully complied with all provisions of the Code.

Ophir Energy plc Annual Report and Accounts 2018 39

The next stage, which we are conscious of, is the need to start returning capital to shareholders and this will be a topic that will The focus going forward remain on the Board’s agenda through 2019. is on building a strong, cash Governance philosophy Critical to sustaining business performance and shareholder trust is the generative production and careful and prudent management of the business. Strong corporate governance is key to achieving this, which means governance activities development base with the undertaken in a structured, transparent manner and in an atmosphere that embraces challenge and avoids group-think. I believe your Board aim of delivering further growth and its Committees meet these benchmarks. and shareholder returns. Board composition In May 2018, Nick Cooper stood down as Chief Executive Officer of Committee composition STRATEGIC REPORT the Company and resigned from the Board, by mutual agreement. On his appointment as Interim CEO in May 2018, Alan Booth stepped As noted above Alan Booth stepped in as our Interim Chief Executive. down from the Remuneration, Audit and Corporate Responsibility The Board has been actively searching for a replacement CEO with Committees. Alan Booth remains on the Technical and Reserves the requisite production experience and knowledge to lead the Committee but stepped down from his role as Chairman of Company in the future, but this has been paused as a result of the this Committee. Medco offer. Carl Trowell, independent Non-Executive Director, was appointed In January 2019, Dr Adel Chaouch was appointed as a Non-Executive

Chairman of the Technical and Reserves Committee. Vivien Gibney, GOVERNANCE REPORT Director. Dr Chaouch is currently the North Africa and Middle East independent Non-Executive Director, joined the Audit Committee. Director for Marathon Oil Company and his impressive skill set will further enhance the knowledge and experience of, and provide a Board effectiveness fresh perspective to, the Board. In line with the Company’s policy and requirements, the Board and Committees undertook an externally facilitated evaluation in 2018. We remain focused on appropriate succession planning and with a Following the results of the internal Board evaluation undertaken in number of Directors reaching six-year terms in 2019 it is important to 2017, the Board increased the focus on succession planning at Board continue to refresh the membership of the Board and to reflect the level and throughout the Company, increased the oversight by the strategic direction of the Company. Board and Committees of internal controls, and undertook a thorough review of the Company’s process safety management system. FINANCIAL STATEMENTS Schedule of Reserved Matters for the Board How we apply the principles of the The Board maintains a Schedule of Reserved Matters in line with best UK Corporate Governance Code 2016 practice, which is available on our website www.ophir-energy.com/ Section of the code about-us/corporate-governance/. There were no changes made Leadership during 2018. A company must be led by an effective board 42-44 Board Committees responsible for the success of the company, Leadership in the near and long term. Such a board will The Board Committees are charged with carrying out those actions have clear divisions of responsibility between which the Board has chosen to delegate. I am satisfied that the Board

company governance and business execution. SUPPLEMENTARY INFORMATION Committees carry out these responsibilities effectively. An overview Effectiveness of the Board’s governance framework is set out in this Report. The established board will have the relevant level of, and the appropriate balance of, 45-46 Recommendations identified following the Board and Committee skills in order to suitably steer the company. Effectiveness effectiveness reviews have helped to ensure that the Committees This is underscored by rigorous procedures regarding the appointment of new, and the are able to discharge their responsibilities on behalf of the Board. re-appointment of existing, directors. In 2018, the Terms of Reference for each of our Board Committees Accountability were reviewed, updated, and approved by the Board. At all times, the board must present a fair, balanced and understandable evaluation of Shareholder communication the company’s standing and future prospects. 1-37 The Board recognises the importance of establishing and Such future prospects are considered against Strategic report maintaining good relations with all the Company’s shareholders. risks that the company is or may face moving forward; it is the board’s responsibility to Investor relations are the primary responsibility of the Chief Executive ensure effective and appropriate risk Officer, supported by the Executive Directors, senior management management procedures are in place. and the Investor Relations function. Remuneration While it is necessary for levels of remuneration In 2018, over 125 investor meetings were hosted during the year. to attract, retain and motivate directors of 62-77 Additionally, a number of meetings were held with top shareholders, sufficient quality, at no point should the by the Chairman and Senior Independent Director primarily company allocate more than is necessary. Directors’ Where possible, remuneration should be linked Remuneration to discuss corporate governance matters, and by the Chairman to performance and, at all times, established report of the Remuneration Committee regarding the new proposed through formal and transparent procedures. No one director is involved in his or her Remuneration Policy. own remuneration.

Relations with shareholders 47 The board is responsible for ensuring a clear, Relations with Bill Schrader coherent and regular dialogue with Chairman shareholders at all times. shareholders 11 March 2019

Annual Report and Accounts 2018 40 CORPORATE GOVERNANCE CONTINUED Board of Directors Key

Audit Committee Remuneration Committee Corporate Responsibility Technical and Reserves Committee Committee Nomination Committee Committee Chairman

William (Bill) Schrader Alan Booth Chairman of the Board Executive Director & Interim Chief Executive Officer Appointed As Non-Executive Director in Appointed 2013 and as Chairman in 2016 2013 as Non-Executive Director and as Executive Director and Interim Committee membership Chief Executive Officer in 2018 Committee membership Experience Bill holds a BSc in Chemical Experience Bill Schrader has over 30 years’ Engineering from the University Alan Booth has 30 years’ experience working at BP plc, of Cincinnati and an MBA from experience in oil and Alan holds a BSc in Geology from including as Chief Executive of the University of Houston. gas exploration at Amerada the University of Nottingham several country operations, as Throughout his career he has Hess, Oryx Energy and Encana. and MSc. DIC. in Petroleum President of the Azerbaijan been commended for his strong Most recently Alan was Founder Geology from the Royal School International Operating Company leadership qualities, strategic and CEO of EnCore Oil plc and is Mines, Imperial College. He is a and as Chief Operating Officer of vision and capability in managing now the Founder and Director of former president of the UK TNK-BP. He is the non-executive complex operating and EnCounter Oil Ltd. Offshore Operators Association Chairman of Bahamas Petroleum government relationships. (UKOOA) and currently a director Company plc and Non-Executive of the Oil and Gas Independents Director of the Hess Corporation. Association (OGIA).

Anthony (Tony) Rouse Dr Carol Bell Executive Director & Independent Non-Executive Chief Financial Officer Director Appointed Appointed As Director of Finance in 2014 2015 and as Executive Director in 2016 Committee membership

Experience Tony started his career with BP, Experience Carol currently sits on the Boards Tony Rouse has over 30 years’ before moving to LASMO plc, Dr Carol Bell was appointed as a at Transglobe Energy, Bonheur ASA, experience in the upstream oil and Premier Oil and most recently Non-Executive Director in March Tharisa plc, and the Development gas industry including 13 years of Salamander Energy where he was 2015 and as Senior Independent Bank of Wales, the venture capital assignments in Europe, Africa, Group Financial Controller for nine Director on 31 March 2017. Carol arm of the Welsh Government. She Asia and South America. years. Tony is a Fellow of has over 30 years of experience in is also a Non-Executive Director of the Chartered Certified the energy industry having enjoyed the BlackRock Commodities Income Accountants (FCCA). a successful career in the City of Investment Trust plc. Carol holds an London culminating in the role MA in Natural Sciences from the of Managing Director of Chase University of Cambridge and Manhattan Bank’s Global a PhD in Archaeology from Oil & Gas Group. University College London.

Ophir Energy plc Annual Report and Accounts 2018 41 Board diversity Board experience Our Board has expertise and Board appointments are made on a Female 2 We review Board composition skills in the following areas: merit basis and measured against Male 6 regularly to ensure that the range —— Geology objective criteria. Generally, we strive and breadth of skills provided as a —— Engineering to attract a broad mix of individuals result of Director appointments —— Finance in order to create a diverse remains appropriate for our business. —— Legal workgroup to support our culture. —— HR

David Davies Vivien Gibney Independent Non-Executive Independent Non-Executive STRATEGIC REPORT Director Director Appointed Appointed 2016 2013 Committee membership Committee membership

Experience David currently sits on the Boards Experience Vivien has held a number of GOVERNANCE REPORT David Davies has over 35 years at Wienerberger AG and Uniper Vivien Gibney has 25 years’ non-executive board positions of experience as a financial SE. He is a member of the Senior experience as Counsel in the in the voluntary sector and in professional having enjoyed a Advisory Board at First Alpha upstream oil and gas industry, listed companies. More recently, successful career as the Chief Energy Capital LLP and will join including roles with Mobil Oil she was a member of the Board Financial Officer and Deputy the Board of Petrofac Plc as and Enterprise Oil plc. Whilst at of Directors of EnCore Oil plc where Chairman of the Executive Board Non-Executive Director at their Enterprise Oil, Vivien set up the she chaired the Remuneration at OMV Aktiengesellschaft as AGM in May 2018. David is a legal department and held the Committee. Vivien is a barrister with well as serving as Group Finance Chartered Accountant with a positions of General Counsel, an LL.B. and received an Honorary Director for both Morgan Crucible BA(Hons) in Economics from the Company Secretary and Fellowship in Petroleum law from Company plc and London University of Liverpool and an MBA Head of HR. the University of Dundee. FINANCIAL STATEMENTS International Group plc. from the Cass Business School.

Dr Carl Trowell Dr Adel Chaouch Independent Non-Executive Independent Non-Executive Director Director Appointed Appointed

2016 2019 SUPPLEMENTARY INFORMATION Committee membership

Experience He was promoted to this role after Experience He is currently North Africa & Dr Carl Trowell has been the serving as President – Schlumberger Dr Adel Chaouch has over 20 years’ Middle East Director for Marathon President and Chief Executive WesternGeco Ltd where he experience working in the upstream Oil. He is also a Board Director Officer of Ensco plc since June managed more than 6,500 oil and gas industry. The majority of the Bi-lateral US-Arab Chamber 2014. Prior to joining Ensco, employees with operations in of this time has been spent working of Commerce. Adel has a Ph.D. in Carl was President of Schlumberger 55 countries. Carl began his for Marathon Oil in a variety of Engineering, Focus on Oil & Gas Integrated Project Management professional career as a petroleum management and executive roles offshore geo-hazards and gas (IPM) and Schlumberger engineer with Shell before joining in West Africa, North Africa and the hydrates in deep water from Texas Production Management (SPM) Schlumberger. Carl holds a BSc in Middle East. Adel also worked with A&M University and a Master of businesses that provide oil and Geology from Imperial College Raytheon E&C managing major Engineering in Civil Engineering, gas project solutions from rig London, a PhD in Earth Sciences from projects globally, including Focus on deepwater structures and field management, to well the University of Cambridge and a Southeast Asia. from Texas A&M University. construction, and production. MBA from the Open University.

Other officers of the Company: Board departures during the reporting period: Philip Laing 18-year career with BG Group in a Dr Nicholas Cooper General Counsel & Company variety of legal and management Executive Director Secretary roles. The majority of his oil and Appointed gas experience has been gained Appointed 2011 living and working in Africa As Company Secretary in 2016. and Asia. Philip is an English Retired Philip Laing joined Ophir in March qualified lawyer with an MA from 18 May 2018 2015. Philip previously enjoyed an Cambridge University.

Annual Report and Accounts 2018 42 CORPORATE GOVERNANCE REPORT CONTINUED Leadership

Responsibilities of the Board Responsibilities of the Board The Board is collectively responsible to shareholders for the continuing long-term success of the Company. The Board provides Role of the Chairman effective leadership and is responsible for the overall conduct of the The Chairman is responsible for the leadership of the Board, setting business including establishing the values, standards and strategic the agenda for the Board, with the CEO and General Counsel & objectives of the Company, providing oversight and review of Company Secretary, and ensuring an effective decision-making process. its performance, and maintaining a successful dialogue with Chief Executive Officer shareholders. Either directly or through the operation of its The Chief Executive Officer is responsible for managing the Committees the Board brings an independent judgement on all day-to-day business of the Company, developing strategy matters of strategy, performance, risk management, resources, with the Board, and leading the senior management team. standards of conduct and accountability. The Board has adopted a Key strategic matters discussed by the Board formal schedule of matters reserved for its approval. A full copy of the schedule of reserved matters is available on the Company’s website Options to reduce capex at www.ophir-energy.com/about-us/corporate-governance. Efficient exit strategies for exploration assets The Board has delegated other specific responsibilities to the Committees of the Board, each of which has clear written Terms Options for returns of capital to shareholders of Reference that are reviewed, and updated as necessary, annually. Acquisition of assets from Santos The Terms of Reference for the Audit, Remuneration, Corporate Responsibility, Nomination, and Technical and Reserves Committees Downsizing of London office are available on the Company’s website at www.ophir-energy.com/ about-us/board-committees. Chairman and Chief Executive Officer Board composition The roles and responsibilities of the Chairman and Chief Executive The Board believes that its current composition and its size Officer are clearly established, separate and have been set out in writing. are appropriate for the Company’s ongoing requirements. Role of the Chairman The Chairman is responsible for the leadership and effective running of the Board as well as for ensuring that it plays a full and constructive part in the development and determination of the Company’s strategy. Bill Schrader, the current Chairman, was considered to be independent in character and judgement on his appointment. Non-Executive Chairman 1 Together with the Chief Executive Officer and the General Counsel Executive Director 2 & Company Secretary, the Chairman sets the agenda for Board Independent Non-Executive Director 5 meetings, ensuring that the decision-making process adopted by the Board allows for open and constructive debate. The Chairman works closely with the Chief Executive Officer, providing support and advice as well as ensuring that the strategies and actions agreed by the Board are effectively implemented. In fulfilling his role the Chairman: –– cultivates a boardroom culture of honesty and openness which encourages appropriate debate and challenge amongst the Board; –– ensures that the Board and its Committees operate in a way that conforms to the expected high standards of corporate governance; –– sets the style and tone of Board discussions, promotes constructive debate and ensures an accurate, timely and clear flow of information to the Directors;

Ophir Energy plc Annual Report and Accounts 2018 43

CORPORATE GOVERNANCE The Board has a coherent corporate governance framework with clearly defined FRAMEWORK responsibilities and accountabilities designed to safeguard and enhance long-term shareholder value and provide a robust platform to realise the Company’s strategy.

BOARD Non-Executive Chairman, two Executive Directors and five independent Non-Executive Directors STRATEGIC REPORT

Audit Remuneration Nomination Technical and Corporate Responsibility Committee Committee Committee Reserves Committee Committee GOVERNANCE REPORT Members Members Members Members Members Chairman David Davies Chairman Vivien Gibney Chairman Bill Schrader Chairman Carl Trowell Chairman Carol Bell Carol Bell Bill Schrader Carol Bell Bill Schrader Bill Schrader Vivien Gibney David Davies Vivien Gibney Vivien Gibney Carl Trowell Carl Trowell

Main Responsibilities Main Responsibilities Main Responsibilities Main Responsibilities Main Responsibilities include monitoring the are determining and are regularly reviewing are advising the Board are evaluating the

integrity of the financial agreeing with the Board the structure, size and on technical aspects effectiveness of the Group’s FINANCIAL STATEMENTS statements of the remuneration framework composition of the Board of operational business Corporate Responsibility Company and reviewing for the Chairman, the and identifying and proposals and their policies and systems as the adequacy and Executive Directors and nominating candidates potential risks and ensuring well as social, charitable effectiveness of internal the General Counsel & to fill Board vacancies, that they are consistent and educational community control and risk Company Secretary and monitoring senior with the Company strategy. projects across the management systems. and senior management, management regarding Company’s operations. and providing oversight of succession planning the wider workforce policies. and development.

48 62 56 58 54 SUPPLEMENTARY INFORMATION Read more Read more Read more Read more Read more

–– leads the Nomination Committee in the appointment of an In fulfilling his role the Chief Executive Officer: effective and complementary Board, reviews succession planning –– proposes, develops and supervises the Company’s strategy and and evaluates the performance of the Board, its Committees and overall commercial objectives and ensures that agreed strategies individual Directors, and considers succession planning across are implemented by the SMT; senior management and key roles within the Company; –– builds and develops an appropriate organisational structure for the –– fosters effective Board relationships between the Executive and Company, establishes processes and systems and plans resourcing Non-Executive members, supports and advises the Chief Executive to ensure that the Company has the capability to achieve its aims; Officer generally and in the implementation of agreed strategy; and –– leads the SMT, including undertaking appraisals, reviewing –– ensures effective communication with the Company’s stakeholders development needs and making recommendations to the and that their views are understood by the Board. Remuneration Committee with regard to remuneration Role of the Chief Executive Officer where appropriate; The Chief Executive Officer is responsible for managing the –– promotes and conducts the affairs of the Company with the highest day-to-day business of the Company, proposing and developing standards of integrity, probity and corporate governance; and strategy and overall commercial objectives in consultation with the –– progresses the Company’s communication programme and Board and, as leader of a strong and experienced executive team, ensures that financial results, business strategies and targets are implementing the decisions of the Board and its Committees. appropriately communicated to the Company’s investors. Underpinning this, the Chief Executive Officer is supported by the Senior Management Team (SMT) consisting of the Chief Financial Officer and General Counsel & Company Secretary, in addition to other senior members of the Company.

Annual Report and Accounts 2018 44 CORPORATE GOVERNANCE CONTINUED

Non-Executive Directors Bill Schrader The Non-Executive Directors bring a wealth of knowledge from the oil Date of appointment: February 2013 and gas industry together with experience from other sectors to the Board and its Committees. Through their contributions, they provide Tenure from appointment to 2019 AGM: Less than 7 years the Company with independent views on matters of strategy, Considered to be independent: Yes performance, risk and conduct. The Board considers that all its Non-Executive Directors at year-end, Dr Carol Bell namely Bill Schrader, Carol Bell, Vivien Gibney, David Davies and Carl Date of appointment: March 2015 Trowell, were independent in character and judgement and free from relationships or circumstances that might affect their judgement. Tenure from appointment to 2019 AGM: Less than 5 years Throughout 2018 and up to the date of publication of this report, Considered to be independent: Yes a majority of the Board members, excluding the Chairman, were independent Non-Executive Directors.

Dr Carl Trowell Non-Executive Directors are appointed for an initial three-year term, Date of appointment: August 2016 although subject to annual re-election at the Annual General Meeting (AGM) with the expectation that a further three-year term will Tenure from appointment to 2019 AGM: Less than 3 years follow, subject to review by the Board. Following a second term, Considered to be independent: Yes consideration as to whether a serving Non-Executive Director should be recommended for re-appointment for a third term is subject to the review of the Chairman in consultation with the Chief Executive Officer. David Davies Date of appointment: August 2016 The terms and conditions of appointment of the Non-Executive Directors are available for inspection at the registered office during Tenure from appointment to 2019 AGM: Less than 3 years normal business hours. While the expected time commitment from Considered to be independent: Yes Non-Executive Directors is set out in their letter of appointment as approximately two days per month, plus preparation time, each is required to confirm that they are able to devote such time as is Vivien Gibney necessary for the satisfactory performance of their duties. Date of appointment: August 2013 Senior Independent Director Tenure from appointment to 2019 AGM: Less than 6 years Dr Carol Bell is the Senior Independent Director and was appointed Considered to be independent: Yes with effect from 31 March 2017. The Senior Independent Director is charged with maintaining a communication channel between the Chairman and the Non-Executive Directors and for leading the Dr Adel Chaouch Non-Executive Directors in the annual performance evaluation of the Date of appointment: January 2019 Chairman. In addition, the Senior Independent Director is available to Tenure from appointment to 2019 AGM: Less than 1 year shareholders who have concerns that have not been, or cannot be, resolved through the normal channels of the Chairman or the Considered to be independent: Yes Chief Executive Officer or where such contact is inappropriate. The specific terms of the role of the Senior Independent Director have been set out in writing and approved by the Board. Board activity Key areas of focus for the Board in 2018 included: –– strategy; –– financial performance and budget approval; –– assessment and evaluation of production assets and integration of new production assets; –– risk reviews and assessment; –– prospective acquisitions, mergers and takeovers, and new business development; –– review and monitoring project developments; –– governance and Board performance; –– investor feedback and communication; –– Corporate Responsibility, including health and safety, security, environmental and community related projects; and –– legal and regulatory compliance; and employee engagement and employee value proposition.

Ophir Energy plc Annual Report and Accounts 2018 45

The Non-Executive Directors met with the Chairman twice during Corporate the year, without any Executives present, to discuss the performance Governance of the Executive Directors. report Formal quarterly meetings also take place between the Chairman, the Senior Independent Director and the Chief Executive Officer. These meetings focus on governance and operating activities in order Effectiveness to enhance the ability of the Senior Independent Director to fulfil the independence mandate of that role and aid communication. Board process Directors are provided with full and timely information before meetings, including detailed financial and risk management information where applicable. The Chairman agrees the agenda for

Board meetings in consultation with the Chief Executive Officer and STRATEGIC REPORT Board composition the General Counsel & Company Secretary, and formal minutes are At 31 December 2018 the Board was composed of the Chairman, prepared to record all decisions made. Minutes of Board and two Executive Directors and four independent Non-Executive Committee meetings are formally approved at the subsequent Directors. The following changes to the Board took place during the meetings and draft minutes are circulated to each Director or year ended 31 December 2018 and up to the date of this report: Committee member as appropriate and as soon as practicable –– 18 May 2018: Dr Nick Cooper stepped down from the Board ahead of the meeting at which they are approved. as an Executive Director. –– 18 May 2018: Alan Booth appointed Interim Chief Executive Minutes of Committee meetings may be made available to other GOVERNANCE REPORT Officer and Executive Director (having previously served as a Board members on request and as appropriate. If a Director objects Non-Executive Director). to a particular proposal, this will be recorded in the minutes of the –– 15 January 2019: Dr Adel Chaouch appointed as relevant meeting. Non-Executive Director. A range of different individual contributors, both internal and external, The Board believes that this balance of Executive and Non-Executive are invited to both Board and Committee meetings, as appropriate, Directors provides for high-quality discussion and consideration of the in order to ensure informed decision-making. This provides additional key issues concerning the Company. The composition of the Board is information and expertise to the Board and provides Committee members with the opportunity to explore further areas of complexity. regularly reviewed to ensure that the Directors have the required skills, FINANCIAL STATEMENTS knowledge and experience to meet the needs of the business. It gives access to management below Board level and gives these managers experience and exposure at Board level. Further information on how this is achieved and consideration of this in the year is contained in the Nomination Committee Report on Board evaluation pages 56 and 57. Biographical details for each of the Directors who A key requirement of good governance is to ensure that the served at the end of the year and at the date of this report are set Board operates effectively. The annual evaluation of the Board out on pages 40 and 41. is one way in which we can monitor the effectiveness of the Board and Committee structure and lead the process for continuous Meeting attendance improvement. In accordance with the requirements of the UK The Board held four formal meetings during 2018. Further Board Corporate Governance Code it is the Company’s policy to carry out update calls and ad-hoc meetings were held during the year as an external review of the Board’s performance, using an independent SUPPLEMENTARY INFORMATION required for operational or transactional requirements. Details of external consultant, every three years. Such external evaluation the attendance of all Directors who served during the year ended process took place in 2015, undertaken by Consilium Board Review 31 December 2018 at the formal Board meetings are shown in the and therefore in 2018 we undertook an externally facilitated review, table below. which was repeated by Consilium. The action points identified by the 2017 review were acted upon Scheduled Board and our progress on these areas included:- meetings –– Increased focus on succession planning at Board level and Bill Schrader, Chairman 4/4 throughout the Company. The Board has recognised the requirement to take a long-term view to succession planning to Alan Booth, Interim Chief Executive Officer 4/4 ensure the talent pipeline can provide a diverse, dynamic and Tony Rouse, Chief Financial Officer 4/4 creative pool of future management and executive candidates. The 2019 Strategy Day will have considerable focus on Carol Bell, Non-Executive Director 4/4 succession planning. –– Focus on internal controls oversight. The Board and its Committees Carl Trowell, Non-Executive Director 4/4 have continued to enhance the breadth of information reported. David Davies, Non-Executive Director 4/4 –– Review of Process Safety Management System. The Corporate Responsibility Committee has undertaken a thorough review Vivien Gibney, Non-Executive Director 4/4 of the systems and controls in place, with significant learnings following the acquisition of Santos assets during 2018. Former Directors –– Review the number of Audit Committee meetings. The increased burden on responsibilities on the Audit Committee continues to be 1 Nick Cooper 2/2 monitored and currently four meetings are considered to be sufficient to discharge its duties. 1 Nick Cooper stepped down from the Board on 18 May 2018.

Annual Report and Accounts 2018 46 CORPORATE GOVERNANCE CONTINUED

In 2018, Consilium Board Review was engaged to carry out Appointment, induction and training an externally facilitated evaluation of Board and Committee The Chairman is responsible for ensuring that an appropriate effectiveness. Consilium had no prior connection with the Company induction is given to new Board members. The induction programme or individual Directors, other than undertaking the external review in is specifically tailored to the needs of the incoming Director and will 2015. A review of Board processes and procedures and a survey of include training on the business and strategy of the Company, the Directors’ perceptions of the Board was followed up by interviews UK corporate regulatory framework, Board policies and procedures, with the Directors and the General Counsel & Company Secretary, meetings with senior management and site visits, where appropriate. which formed the basis of the report and recommendations. To assist the Board in undertaking its responsibilities, a programme Consilium noted the context in which their Board evaluation has of training and development is available to all Directors and training been conducted, where there has recently been significant change needs are assessed as part of the Board evaluation procedure. The to the composition of the Board, which is still settling down. The Board programme includes regular presentations from management review did not raise any areas of material concern and noted that and informal meetings as necessary to build their understanding of the governance of the Board and its Committees was strong; it developments within the business and sector. As part of the ongoing performed its regulatory, compliance and control responsibilities very development of Directors, key site visits can be arranged and effectively; and overall the Board and its Committees were effective, Directors are provided with the opportunity for, and encouraged to responsible and robust. Consilium highlighted that the Board was very attend, training to ensure they are kept up to date on relevant legal, well led by its Chairman, that the Directors, particularly the Non- regulatory and financial developments or changes in best practice. Executive Directors were very cohesive and the issues faced by the The directors also received reports from the General Counsel & Company were much more rigorously addressed during 2018. Company Secretary on current legal and governance issues. The actions arising from the review were: Specific and tailored updates were provided by external advisers –– The responsibilities and interaction between the various Board and management to both the Audit and Remuneration Committees. Committees should be reviewed in depth to ensure they operated Key themes included trends and changing disclosure requirements effectively without any undue repetition, particularly in light of the regarding financial and narrative reporting, accounting and auditing changing governance obligations imposed upon them in 2019. standards and remuneration developments. All Directors have –– Board reporting should be simplified so that relevant information access to the advice and services of the General Counsel & is highlighted to the Directors. All papers submitted to the Board Company Secretary. will be reviewed to determine if they can be streamlined and Independent advice re-shaped to be more efficient. The quality and timely reporting All Directors have access to the advice and services of the General of information to the Board will also be reviewed. Counsel & Company Secretary. In addition, any Director may take Risk management independent professional advice at the Company’s expense on any The Board believes that effective risk management is crucial to the matter in the furtherance of their duties, at Board or Committee level. Company’s strategy and long-term success. The Board has overall Re-election responsibility for ensuring that risk is effectively managed. In accordance with the provisions of the Code, all continuing Directors The Company’s approach to risk is further detailed on pages 18 of the Company offer themselves for annual re-election at the AGM. to 21. The Audit Committee reviews the effectiveness of the risk External directorships management process on the Board’s behalf, and its approach to this The Company has adopted a policy which allows the Executive can be found in the Audit Committee Report on pages 48 to 53. Directors to accept directorship of other quoted companies provided Insurance and indemnification that they have obtained the prior permission of the Chairman. As set The Company provides its Directors and Officers, including those out in the Code, no Executive Director would be permitted to take on acting on subsidiary boards, with the benefit of appropriate more than one non-executive directorship in a FTSE 100 company insurance, which is reviewed annually. The policy was approved or the chairmanship of such a company. and put in place from 1 January 2019. In addition, Directors and During the year ended 31 December 2018, none of the Company’s Officers have received an indemnity from the Company against Executive Directors held directorships in any other quoted company. (a) any liability incurred by or attaching to the Director or Officer in connection with any negligence, default, breach of duty, or breach of Conflicts of interest trust by them in relation to the Company or any associated company; Every Director has a duty to avoid a conflict between their personal and (b) any other liability incurred by or attaching to the Director or interests and those of the Company. The provisions of Section 175 of Officer in the actual or purported execution and/or discharge of their the Companies Act 2006 and the Company’s Articles of Association duties and/or the exercise or purported exercise of their powers and/ permit the Board to authorise situations identified by a Director in or otherwise in relation to/or in connection with their duties, powers which he or she has, or may have, a direct or indirect interest that or office; other than certain excluded liabilities including to the extent conflicts, or may conflict, with the interests of the Company. The that such an indemnity is not permitted by law. Board continues to undertake regular reviews of the outside positions and interests or arrangements with third parties held by each Director and, where appropriate, to authorise those situational conflicts following consideration. Notwithstanding the above, each Director is aware of their duty to notify the Board should there be any material change to their positions or interests during the year. Directors do not participate in Board discussions or decisions which relate to any matter in which they have or may have a conflict of interest.

Ophir Energy plc Annual Report and Accounts 2018 47

Corporate Governance report Relations with shareholders STRATEGIC REPORT Dialogue with shareholders There were over 125 shareholder meetings, as well as investor presentations, hosted during the year. The Board recognises the importance of establishing and continuing good relations with the Company’s shareholders and seeks to maintain a constructive dialogue with all shareholders. All financial and regulatory announcements, as well as other GOVERNANCE REPORT important business announcements, are published on the Investors section of the Company’s website and stakeholders can subscribe to receive news updates by email by registering online on the website at www.ophir-energy.com/investors/register-for-email-alerts/. Annual General Meeting (AGM) All shareholders are invited to attend the Company’s AGM where they are given the opportunity to ask questions on the financial report and accounts and on the general business of the Company. FINANCIAL STATEMENTS The 2019 AGM will be held at a date prior to 28 June 2019. Full details of the business of the AGM will be set out in the Notice of Meeting and sent to those shareholders who have elected to receive hard copy notifications, together with any related documentation, at least 20 clear business days before the date of the meeting in accordance with the requirement of the Code. The Board has decided not to issue the Notice of Meeting at this time in view of the timetable relating to the recommended cash acquisition of the Company by Medco, which has a longstop date of 20 June 2019. The Notice of Meeting

will also be made available on the Company website at: SUPPLEMENTARY INFORMATION www.ophir-energy.com.

Annual Report and Accounts 2018 48 CORPORATE GOVERNANCE CONTINUED Report of the Audit Committee

Membership and attendance The members of the Committee, all of whom are independent Non-Executive Directors, together with details of their individual attendance at meetings held during the year ended 31 December 2018, are set out below: Meeting Committee members attendance David Davies, Committee Chairman 5/5 Carol Bell 5/5 Alan Booth1 2/2 Vivien Gibney2 3/3

1 Alan Booth retired from the Committee on 21 May 2018. 2 Vivien Gibney joined the Committee on 21 May 2018. David Davies As set out in the biographical details on pages 40 and 41, the Audit Committee Chairman members of the Committee have a strong mix of skills, expertise and experience from a variety of industries and as a whole have the relevant competencies for the sector in which the Company operates. The Board has determined that, the Chairman of the Committee, David Davies has recent and relevant financial experience and competence in accounting. The Chief Executive Officer, Chief Financial Officer, and representatives of the external Auditor and internal Auditor attend Committee meetings on a regular basis. The internal and external Auditors also met with the Committee on several occasions throughout the year without executive management being present. The Committee hears from a range of different individual contributors at its meetings, both internal and external, in order to ensure informed decision-making. The Chair of the Committee reports to the Board, as part of a separate agenda item at Board meetings, on all significant Number of meeting matters reviewed by the Committee. 9 contributors during 2018

Dear Shareholder, of the Company’s internal audit function and, on behalf of the We were pleased to welcome Vivien to the Committee on Board, manages the appointment and remuneration of the 21 May 2018, following the appointment of Alan Booth as Interim external Auditor and in addition monitors their performance and CEO. Vivien brings a wealth of knowledge to the Committee and independence. The Group has an independent and confidential a valuable refresh of the perspective and views taken. reporting procedure and the Committee monitors the operation of this facility as well as our Compliance programmes. Committee responsibilities The Committee supports the Board in fulfilling its responsibilities in In performing our duties during the year, we have complied with the relation to financial reporting and reviews the effectiveness of the requirements under the 2016 UK Corporate Governance Code and Group’s internal financial control and financial risk management followed the best practice guidance set out by the FRC. We have also systems, pursuant to the Committee’s Terms of Reference which begun to implement the requirements under the 2018 UK Corporate are reviewed annually and are available on the Company’s website. Governance Code and will continue to evolve our procedures as The Committee also monitors and reviews the effectiveness further guidance becomes available.

Ophir Energy plc Annual Report and Accounts 2018 49

ACTIVITIES DURING THE YEAR The Audit Committee has continued to oversee developments of processes and reporting to ensure it will be compliant with the —— Continued monitoring the value and IFRS classification requirements of IFRS 15 ‘Revenue from Contracts with Customers’, of the Fortuna asset with the associated judgements IFRS 9 ‘Financial Instruments’ and IFRS 16 ‘Leases’, as and when underpinning the valuation and classification being they become applicable. IFRS 15 and IFRS 9 will impact the challenged and reviewed in detail. Company in FY18, IFRS 16 from FY19 but will also require a disclosure —— Detailed review of non-financial internal controls and their note in the 2018 financial statements. The Audit Committee has mitigations, and subsequent reporting mechanisms. received updates on preparations and estimates of the effect of the —— Ensured the robustness of financial reporting and continued implementation of these standards on the Group’s financial reporting. compliance with all relevant IFRS. We have also actively monitored the preparations for compliance —— Received, monitored and assessed the reserves report with the EU General Data Protection Regulation, which came into following recommendation from the Technical force on 25 May 2018. Amendments have been made to the Group’s

and Reserves Committee. Policies and Procedures and a thorough review of data processes and STRATEGIC REPORT —— Reviewed the Company’s proposed response to the points information has been undertaken to ensure that the data of our raised in the FRC thematic review letter related to the 2017 stakeholders is treated with the utmost care and in line with the new financial statements. The FRC carried out a thematic review of regulations. Our data retention policies have also been reviewed and smaller listed and AIM quoted company reports and accounts training rolled out across the organisation to ensure each employee for the 2017 reporting year and included Ophir as part of this dealing with data has an understanding of the new regulation and sample. The objective of the review was to improve the quality their responsibilities under it. of disclosures and identify good practice. The review only covered the specific disclosures relating to this thematic The Committee reviewed plans for the proposed relocation of the GOVERNANCE REPORT review. The FRC accepts no liability for reliance on them by the Company’s corporate headquarters to Southeast Asia, recognising company or any third party. In the case of Ophir, the FRC the fact that part of the plan had been put on hold pending the made some suggestions in terms of the use of Alternative outcome of the Medco transaction. There had been contingency Performance Measures (APMs) and the Cash Flow Statement planning made to ensure that any delays could be effectively presentation. These points were discussed with the FRC and managed to ensure the Company’s continued ability to meet all agreement reached on how these would be handled for the external reporting obligations for 2019 were also reviewed. 2018 Annual Report and Accounts. Internal controls A major focus during 2018 was an in-depth review of the FINANCIAL STATEMENTS effectiveness of the Company’s internal control and risk management systems and the development of revised annual review processes for the internal audit process. The Committee has also established a bi-annual in-depth review on risk management and the alignment with the Company’s strategic objectives. The main role and responsibilities of the Audit Committee include: Through the year, and after the restructuring, the Committee –– monitoring the integrity of the financial statements and any formal continued to monitor compliance through leading indicators. announcements relating to financial performance; These include training undertaken, registers maintained, as well as –– reviewing internal financial controls and the Company’s internal whistleblowing reports received, and declarations and sign-offs,

control and risk management systems; including conflicts of interests, from employees and contractors. SUPPLEMENTARY INFORMATION –– monitoring and reviewing the effectiveness of the internal The Committee also continued to monitor counterparty risks and the audit function; status of legal, tax, joint venture and cost recovery audit disputes and –– making recommendations to the Board in relation to the claims, as well as deciding on their classification for financial reporting appointment, re-appointment and removal of the external based on likelihood and impact. Auditor and approving the remuneration and terms of engagement of the Auditor; The Committee reviewed the effectiveness of the internal –– reviewing the Auditor’s independence and objectivity; and audit function, provided during the year by an external provider, –– developing and implementing the non-audit services policy. Mazars LLP. In addition, it received and reviewed reports from the internal Auditor on various areas of focus across the business, The Audit Committee has had a full agenda during 2018, particularly which included the below items, and established the plan for the with the acquisition of Santos assets during Q3 2018 and the 2019 audits: resultant integration of financial information as well as controls and –– Santos Acquisition procedures. We have held a number of in-depth discussions, which –– Anti-Bribery and Corruption have strengthened our processes around the monitoring and –– HR Operations and People Risk management of financial risk and ensured that the principal risks are –– Incident Response aligned with the Company’s strategic objectives. We have also spent –– Asset Visit – Thailand time understanding and, where necessary, promoting improvement –– Working Capital and Cash Management of internal controls and auditing processes along with the Company’s compliance programmes and data reporting. The Audit Committee has requested and reviewed a thorough sensitivity analysis to provide assurance for the viability statement that is included on page 18 of this report. We also considered the impact of the restructuring of the Company with headcount reductions, that the Company was sufficiently financed to meet its capital commitments, and the write-down of a number of commitments.

Annual Report and Accounts 2018 50 CORPORATE GOVERNANCE CONTINUED

External audit Financial reporting The Committee received and reviewed the External Audit Review of The Committee has the responsibility of assessing the integrity of the 2017 Financial Statements, reviewed the Representation letter of the financial statements of the Company on behalf of the Board. EY LLP (“EY”) – the Company’s Auditor, confirmed the independence The Committee’s approach to achieving this includes ensuring and objectivity of the external Auditor and received and reviewed the appropriate accounting standards are applied, reviewing in depth any External Audit Review of the 2018 Interim Financial Statements – material areas where accounting judgements have been used and/or 30 June 2018. It also received, reviewed and agreed the 2018 new accounting policies or procedures have been applied. In addition, External Audit Plan. the Committee reviews and assesses the Annual Report to determine whether it can advise the Board that, taken as a whole, the Annual Reserves reporting and additional issues Report is fair, balanced and understandable and provides The Committee considered the recommendation from the Technical shareholders with the information they need to assess the Company’s Advisory Committee (now the Technical and Reserves Committee) performance, business model and strategy as required by the Code. with regards to reporting of reserves. The Committee also reviewed The Committee considers the external Auditor’s proposed approach the key messages for the Annual Report and Accounts and its to their review of the interim results and their audit of the full-year preparation schedule; conducted its annual review of the Committee’s financial statements, to ensure that the scope of the relevant Terms of Reference; and conducted an internal evaluation of its own review or audit was appropriate. The Committee also reviewed and effectiveness as part of the annual Board and Committee evaluation. discussed the external Auditor’s report on the full and half-year Over the year, the Committee made the following recommendations financial results with EY LLP, prior to agreeing to recommend each to the Board: set of financial statements and associated reports to the Board –– Approval of 2018 Financial Statements and Reports for approval. –– Approval of 2018 Interim Statement Impairment review –– Approval of the Working Capital Memorandum, statement and A significant area of accounting judgement is the carrying value of Financial Position, Prospects and Procedures Report for the capitalised exploration and evaluation expenditure included in Santos Acquisition exploration and evaluation assets to ensure that expenditure is –– Adoption of the Going Concern Statement and Basis of Preparation appropriately expensed to the income statement, should –– Adoption of the Viability Statement impairments arise. Impairment reviews are undertaken by the –– Approval to make changes to its Terms of Reference Company in accordance with IFRS 6 and IAS 36 and assessed by the Areas of focus for FY19 Committee. If necessary, the Committee may receive advice from the When drafting our annual Audit Committee calendar, we take into Technical and Reserves Committee or other experts. The external account the external environment, internal operations of the business Auditor also reports on this most prominent area of accounting risk to and regulatory changes to ensure that all the main areas that we the Audit Committee and the Committee has been satisfied that need to prioritise are included. Our areas of focus for FY19 are to: exploration has been treated in the correct and consistent way (i) consider the implications of the New UK Corporate Governance in the financial statements. Code issued on 16 July 2018 and applicable to the Company from The Committee received a report from management on the status FY20; (ii) continue to develop processes and reporting in respect of each asset and, along with their technical as well as commercial of changes to IFRS; (iii) monitor the impact of the restructuring knowledge and expertise on the assets, challenged management of the Company; and (iv) conduct a detailed review of the on their proposed impairment recommendations. Accordingly, the Delegations of Authority. Committee reviewed each of the Group’s assets for impairment in accordance with IFRS 6 and IAS 36 and concluded that full impairment of certain of the Group’s assets was appropriate given the Group’s future plans for those assets.

Ophir Energy plc Annual Report and Accounts 2018 51 STRATEGIC REPORT Assets held for sale Going concern assessment A significant area of judgement the Committee had to consider for An important element of review by the Audit Committee is the the 2018 financial statements was the continuing reporting of an appropriateness of preparing the accounts on a going concern basis. asset held for sale under current assets on the balance sheet during The Audit Committee receives a report from management setting the year. The asset held for sale represented the Company’s interest out the going concern review undertaken by management which in its Equatorial Guinea Block R, Fortuna asset. At mid-year 2018, a forms the basis of the Board’s going concern conclusions. The going decision was taken to write off $310 million for this licence, leaving a concern review includes consideration of forecast plans and

recoverable amount of $300m based on management’s estimate supporting assumptions, as well as the options available to the GOVERNANCE REPORT of fair value less costs to sell, using discounted cash flow techniques. Company for obtaining additional funding, such as portfolio The triggers for the write down included the dissolution of the management and equity. As portfolio management is a key strategic OneLNG joint venture and the fact that the current licence period activity of the Company there is a regular review of the financial was due to end on 31 December 2018. However, on the basis that impacts and flexibility available to the Company. At both full and the licence did actually expire at the end of 2018, the Company half-year, the Committee agreed that the Company’s financial fully impaired the licence with a charge to the income statement position was such that it continued to be appropriate for the accounts totalling $614 million for the full year, with zero balance remaining. to be prepared on a going concern basis. Acquisition of Santos assets The Company adds value through its ability to find, develop and FINANCIAL STATEMENTS Ophir is required to recognise the net assets acquired from Santos eventually monetise early stage oil and gas exploration assets, which at their acquisition-date fair values. Determining these values invariably are non-revenue generating. It follows from this that the (the “purchase price allocation”) is a significant exercise and under principal focus of the Audit Committee, when considering the IFRS there is a window of 12 months for them to be finalised. The financial reporting of the Company, is to ensure that the exploration provisional fair values have been disclosed in Note 11. The results expenditure commitments of the Company are appropriately funded. of the assets acquired from Santos must be reported within Ophir’s This results in major focus being placed on forward spending plans Consolidated Financial Statements from the date of acquisition. and working capital models as much as retrospective scrutiny This requires the application of Ophir’s reporting in accordance of financial reporting. Prior to approving the full-year financial with Ophir’s accounting policies. statements for 2018, the Audit Committee considered the Company’s forward plans for fund raising and drilling commitments (being the The Committee received information to explain the basis for the SUPPLEMENTARY INFORMATION most significant forward financial commitments that the Company purchase price allocation, with a focus on oil and gas property makes) as part of its assessment of the going concern basis of valuations, and supported management’s conclusions including the preparation of the 2018 Accounts (further detail on the going final amount recognised in the income statement on the acquisition. concern statement is set out on page 61). The Committee also reviewed the integration of the Santos assets into Ophir’s accounting and reporting processes, and satisfied itself Viability Statement with the information included within Ophir’s Consolidated Financial The Committee reviews the Company’s Viability Statement and Statements post acquisition. challenges it against a number of stressed scenarios taking into account risk factors of the Company. The Committee consequentially considered the Viability Statement as reported against a range of future commodity price scenarios and expenditure profiles in adverse conditions and satisfied itself that, with the mitigating factors set out in the statement, the Company could maintain its longer-term future viability. The Company’s full Viability Statement can be found on page 18 of the Strategic Report.

Annual Report and Accounts 2018 52 CORPORATE GOVERNANCE CONTINUED

Risk management and internal controls The compliance programme includes an annual sign-off process The Board has delegated monitoring the Company’s system of for all employees and contractors to confirm adherence to the internal control and for reviewing its effectiveness on a continual Company’s key ethical compliance policies and standards; a written basis to the Committee. assurance process confirming compliance across all areas of the business by senior management to the Chief Executive; and in turn The Company’s system of internal control is designed to safeguard this allows the Chief Executive to provide this assurance in writing the Company’s assets and to ensure the reliability of financial to the Board. The Committee continues to receive detailed reporting information for internal and external use. Any system of control on compliance matters. can provide only reasonable, not absolute, assurance that assets are safeguarded, transactions are correctly authorised and recorded Internal audit and that any material errors and irregularities are detected within a Mazars LLP remained appointed as the Company’s internal Auditor reasonable time frame. The Company’s internal controls are therefore during the period under review. During the year, the Audit Committee designed to manage, rather than to eliminate, risk, recognising that received reports from the Internal Auditor on the findings of internal not all risks can be eliminated and the cost of control procedures audits conducted throughout the business, together with details of should not exceed the expected benefits. the proposed actions to rectify any issues identified. The internal Auditor is fully independent of business operations and has a The Company operates a risk management process under which Group-wide mandate. significant risks are identified, their likelihood and impact considered and actions taken to manage those risks. The Committee reviews External Auditor the Company’s risks every six months prior to a Board review, from The Committee has approved the Company’s policy governing the which particular risks may be identified for further detailed provision of audit and non-audit services provided by the Auditor presentation and discussion at the Board meetings. Additionally, and their associates. The policy clearly identifies permitted and the Committee monitored the Company’s risk management prohibited services and sets out the procedure to be followed for structure, in particular the Ethical Compliance programme the approval of all audit and non-audit services. All engagements and other internal control mitigations. with an expected fee in excess of $100,000 require the prior approval of the Committee. The Committee reviews statements on the The principal risks identified by the Company are set out independence and objectivity of the external Auditor at least twice a on pages 20 and 21. year in order to satisfy itself that independence and objectivity have Ethical compliance been met. The Committee is satisfied that there are no relationships Ophir expects all staff and stakeholders to act with integrity and in between the Company and the Auditor, its employees or its affiliates accordance with applicable international, national and local law, as that may reasonably be thought to impair the Auditor’s objectivity well as the Ophir Code of Conduct and the other principal ethical and independence. compliance policies and standards. Ophir provides staff with an During the year ended 31 December 2018 the Company committed anonymous whistleblowing hotline (by phone, email, or online), expenditure of $1,316,000 on audit services (2017: $825,000). which is also accessible to third parties including business partners. In addition, the Company committed expenditure of $685,000 on The hotline allows for the reporting of concerns regarding matters non-audit work (2017: $165,000). The non-audit work undertaken by ranging from corruption to harassment to environmental issues, EY in 2018 related to the audit of the Historical Financial information outside of the Company’s internal line management reporting and pro-forma results which formed part of the circular related to the procedure. Ophir has a zero tolerance policy towards corruption class 1 transaction (acquisition of Santos assets). $33,000 related to and will not tolerate retaliation or victimisation against anyone agreed upon procedures related to cost recovery and timewriting. who has raised a concern in good faith. Every incident of These fees were reviewed and approved by the Committee under whistleblowing is reported to the Committee, along with findings the terms of the policy. There have been no fees incurred in relation and recommendations following investigation by the Company. to any other assurance or non-audit services for the year ended During the year the Audit Committee assessed the adequacy 31 December 2018. Further details as to the nature of the services of the Group’s whistleblowing policy in accordance with the provided are set out in Note 9 to the consolidated financial requirements of the Code. It reviewed the whistleblowing procedure statements. There is no limitation of liability in the terms adopted by the Group, including steps that can be taken to enhance of appointment of EY as Auditor to the Company. awareness of the process, to ensure it remains appropriate and available to those who need to raise concerns.

Ophir Energy plc Annual Report and Accounts 2018 53 STRATEGIC REPORT Effectiveness of external Auditor To assess the effectiveness of the external audit process, the external Auditor provides information on the steps they have taken to ensure objectivity and independence, including in relation to the provision of any non-audit services. The Committee monitors the external Auditor’s performance, behaviour and effectiveness during the exercise of their duties, and this informs the Committee’s decision

on whether or not they should recommend re-appointment on an GOVERNANCE REPORT annual basis. The Chairman of the Audit Committee meets with the Company’s audit partner at EY, apart from formal scheduled meetings, between three to four times during the year to discuss matters of process, relationships between the country audit teams as well as to review plans and monitor progress. In addition, for 2018 the Company implemented an internal survey process to help in the assessment of the effectiveness of the external Auditor. The results of the survey were generally positive and have been used to assist the Committee in making their statement on external Auditor FINANCIAL STATEMENTS effectiveness. The length of tenure of EY and when a tender was last conducted as outlined on the Directors’ report on page 61. Re-appointment of external Auditor The Committee has reviewed the independence and effectiveness of EY and is satisfied they have remained independent throughout the year. The Committee has recommended to the Board that the re-appointment of EY as the Company’s Auditor is proposed to shareholders at the AGM in May 2019. SUPPLEMENTARY INFORMATION

David Davies Audit Committee Chairman 11 March 2019

Annual Report and Accounts 2018 54 CORPORATE GOVERNANCE CONTINUED Report of the Corporate Responsibility Committee

Membership and attendance The members of the Committee, consisting of the Company Chairman and independent Non-Executive Directors, together with details of their individual attendance at meetings held during the year ended 31 December 2018, are set out below: Meeting Committee members attendance Carol Bell, Committee Chairman 2/2 Alan Booth1 1/1 Vivien Gibney 2/2 Bill Schrader 2/2 Carl Trowell 2/2

1 Alan Booth retired from the Committee on 21 May 2018. Carol Bell The other members of the Board have an open invitation to attend Corporate Responsibility Committee Chairman all Committee meetings as guests. In addition, the Company’s Director of HR, Director – Asia Operations, and the Director – Corporate Risk & Services are invited to attend each meeting to present their reports directly to the Committee. Other senior members of staff and external advisers may be invited to attend Number of meeting as necessary, in order to ensure informed decision-making. 7 contributors during 2018

Dear Shareholder, The Committee also oversees the management of non-financial risk As Chair of the Committee I continue, together with my fellow and receives detailed reports on specific areas, which may vary from Committee members, to challenge and influence the Company’s year to year. The work of the Committee has again focused on topics responsible business agenda. Doing business in the right way is that are material to the Company’s strategy and values. This year, fundamental to Ophir. This is because we are judged not only by our much of the Committee’s focus has been on reviewing responsible business achievements, but also by the way we conduct ourselves. business activity in support of the Company’s significantly strengthened production and development portfolio following We recognise the risks inherent to our sector and, consequently, the acquisition of the Santos assets. the health and safety of our employees and protection of the environment around our assets are the Company’s key priorities The corporate responsibility landscape continues to evolve and and are embedded within the day to day operations of the business. the Committee monitors developments to ensure that our agenda By receiving reports and challenging those tasked with health remains relevant and current, whilst keeping a keen eye on the and safety, security, environmental responsibility, community matters that have been our principal focus for some time. The development, and business ethics where necessary, the Committee Committee also pays close attention to the evolving views and helps the business to improve continuously against relevant expectations of various stakeholders and a regular briefing on benchmarks. This approach results in implementation of relevant reporting developments and expectations is reviewed at each Policy and Procedures, underpinning efficient working practices, meeting. This year the Committee has also undertaken significant preventing direct costs associated with incidents, and supporting review of our emissions reporting and sought to adopt standardised the culture and ongoing sustainability of the Group. Committee reporting across the multiple jurisdictions in which we operate. members bring a wide range of sector experience, insight and perspectives to help provide oversight of these topics.

Ophir Energy plc Annual Report and Accounts 2018 55 STRATEGIC REPORT People Role and responsibilities of the Corporate Following the acquisition of a package of assets from Santos Limited Responsibility Committee during 2018, which accelerated our delivery of the strategy to move The Committee is responsible for evaluating the effectiveness towards a more sustainable, production based operation, the of the Group’s policies and systems for managing health and safety, Committee undertook a detailed review and obtained assurance the environment, climate change, security, community projects and that HSSE and related controls, including compliance and risk business ethics, including human rights and matters relating to management, were fit for the purpose. We also took steps equality and diversity and non-financial risks across the Group’s to ensure that reporting would be harmonised across the business. GOVERNANCE REPORT operations. The Committee’s full Terms of Reference are available The Committee is mindful that, as we grow, continued success on the Company’s website. depends on our ability to work responsibly and to deliver safety and environmental performance. Integration of the Santos assets and Corporate Responsibility Committee activities harmonising the systems and procedures of the two entities has During 2018, significant progress was made by the Corporate been a major focus for the Committee. The Committee is satisfied Responsibility Committee covering many areas. The Committee’s that Ophir continues to have the personnel and process safety key focus and outcomes are set out below: management in place to operate safely and effectively across its enlarged asset base. Corporate 2018 Corporate Responsibility Responsibility function Committee highlights FINANCIAL STATEMENTS Risk Health and Safety Zero work-related lost time injuries. The Committee remained vigilant to the rapidly changing global Ten million hours worked during the year. geopolitical trends, of which the transition of energy demand away No process safety incidents; no loss of primary from hydrocarbon fuels, in response to climate change, has the containment events. largest potential long-term impact on our industry. Consequently, Enhanced our leading indicator metrics tracking & reporting. Ophir considers responses to climate change to be one of our Environment Zero recordable spills. principal risks. Security No security incidents – continued to closely Plans monitor external risks in all areas of operations. We believe that an area of focus for 2019 will be the continued Update Security Risk Assessment of Ophir Thailand. integration of HSE behaviours across our business and ensuring SUPPLEMENTARY INFORMATION Community projects Focused on partnerships to create shared value. all our employees and contractors take ownership of delivering safe Ethics Enhanced our compliance processes and 100% operations in an environmentally conscious, safe and ethical way. sign-offs completed. Employee Continued to support the people agenda and engagement enhance the EVP; conducted our second Dr Carol Bell engagement survey during Q4. Corporate Responsibility Committee Chairman Climate change Conducted Greenhouse Gas Data Assessment and developed a standardised calculation tool. 11 March 2019 Continued to submit CDP Climate Change Questionnaire.

Further information on the Company’s approach to Corporate Responsibility and HSSE matters can be found in the Corporate Responsibility report on pages 32 to 37.

Annual Report and Accounts 2018 56 CORPORATE GOVERNANCE Report of the Nomination Committee

Membership and attendance The members of the Committee, together with details of their individual attendance at meetings held during the year ended 31 December 2018, are set out below: Meeting Committee members attendance Bill Schrader, Committee Chairman 4/4 Carol Bell 4/4 Vivien Gibney 4/4 Carl Trowell 4/4 Nick Cooper1 2/2

1 Nick Cooper retired from the Board and the Committee on 18 May 2018. Bill Schrader The Board considers a majority of the members of the Committee Nomination Committee Chairman who served during the year to be independent. The Committee hears from a range of different individual contributors at its meetings, both internal and external, in order to ensure informed decision-making.

Number of meeting 4 contributors during 2018

Dear Shareholder, Board changes In 2018, the primary focus of the Nomination Committee was to In May 2018, Nick Cooper stepped down, by mutual agreement, ensure the composition of the Board and senior management from the Board and from his role as Chief Executive Officer, with remained appropriate to the strategic aims of the Company. Alan Booth taking over as Interim CEO. The search for a replacement Following the acquisition of a package of assets from Santos Limited has centred on candidates with relevant operational knowledge and during 2018, which accelerated the rebalance towards a more experience to reflect the change in the Company. As has been noted production based operation, the Committee focused on ensuring the previously, the Company’s headquarters will move from London to Board retained the right mix of skills and experience to safeguard the Asia where it is anticipated the new CEO will be based. long-term success of the Company. In January 2019, the Board appointed a new Non-Executive Director, Role and responsibilities of the Nomination Committee: Adel Chaouch. Dr Chaouch is an experienced senior oil and gas —— planning Board member succession and overseeing plans for professional currently serving as North Africa and Middle East senior management succession and the pipeline for succession, Director for Marathon Oil Company. He will bring additional taking into account skills, knowledge, diversity and experience; knowledge and experience, as well as a proven record in stakeholder —— regularly review the structure, size and composition of the Board management, which will complement and enhance the Board. and Committees; and —— identify and recommend for Board approval suitable candidates to be appointed to the Board. The Nomination Committee met four times in 2018. The increased number of meetings was due to the changes in the composition of the Board and the change in emphasis of the Company towards Asia with a production-centred business model. The Committee includes four members, with a majority considered independent, and there were no changes to the membership of the Committee during 2018, except for the retirement of Nick Cooper.

Ophir Energy plc Annual Report and Accounts 2018 57 STRATEGIC REPORT Board composition Evaluation and Terms of Reference The Committee regularly evaluates the balance of skills, experience, An evaluation of the effectiveness of the Committee took place as independence and knowledge of the Company on the Board to part of the external Board and Committee evaluation in 2018. The ensure strong and effective oversight of the Company. The majority evaluation was facilitated by an external evaluator, in accordance of the Board, excluding the Chairman, are independent Non- with regulations. The evaluator attended Board and Committee Executive Directors, and the Board’s collective experience covers a meetings throughout the year and held discussions with Board range of relevant sectors, as illustrated in the Directors’ biographical members, providing a full report to the Board at the final meeting

details on pages 40 and 41. In addition to possessing a breadth of of 2018. GOVERNANCE REPORT relevant experience in the oil and gas sector, the Board members In November 2018, the Committee also performed its annual review have personal experience of working in both complex organisations of its Terms of Reference to ensure they remain in line with best and countries in which the Company operates. practice, with particular regard to the updated 2018 Corporate Succession planning Governance Code. The Terms have been revised to broaden the The Committee works together with the Board to maintain Committee’s reporting requirements to include increased detail on comprehensive succession plans for the Board and at senior diversity and the implementation of the Board’s policy and gender

management level. Succession planning and the development of a balance below Board level. The Terms of Reference of the Committee

talent pipeline is considered, taking account of the strategy of the are available on the Company’s website at www.ophir-energy.com/ FINANCIAL STATEMENTS Company and the key challenges and opportunities facing the about-us/corporate-governance/committees/nomination/. Company to ensure the skills and expertise to meet these are on the Board and within the Company. Bill Schrader The Committee continued to monitor succession planning for key Nomination Committee Chairman senior management roles, particularly in light of the proposed 11 March 2019 headquarters move, to ensure that the Company maintains the necessary skilled personnel to execute its key projects. The Committee also discussed potential candidates as part of its

oversight of the executive pipeline of talent beneath Board level and

in order to analyse any succession gaps or potential risks. ...during 2018, which SUPPLEMENTARY INFORMATION Diversity and equality The Board and the Committee are committed to diversity and equal accelerated the rebalance opportunity at Board level and across the Company, including gender, ethnic and cultural diversity. The Company remains dedicated to towards a more production encouraging diversity at all levels of the business, acknowledging that a more diverse workforce, with the right mix of skills, experience, based operation, the culture, ethnicity, nationality, gender and knowledge, can make a Committee focused on valuable contribution to the Company. Diversity and inclusion will continue to be monitored and considered for future appointments, ensuring the Board retained whilst ensuring that all decisions are based on merit and against objective criteria. the right mix of skills and As at the date of this report, women constitute 25% of the Board, experience to safeguard 18% of the Company’s senior management and 29% of direct reports to senior management. The Board and senior management also the long-term success of contain diversity in terms of culture, nationality and international experience. The industry in which we operate provides certain the Company. challenges to increasing diversity but the Company remains committed to creating equal opportunity. A statement of the Company’s policy on diversity is set out in the Strategic Report on Bill Schrader page 33. The Company undertakes a range of measures to support Nomination Committee Chairman diversity and inclusion, including recruitment and succession planning and flexible working practices.

Annual Report and Accounts 2018 58 CORPORATE GOVERNANCE CONTINUED Report of the Technical and Reserves Committee

Membership and attendance The members of the Committee, together with details of their individual attendance at meetings held during the year ended 31 December 2018, are set out below:

Meeting Committee members attendance Carl Trowell1 4/4 Alan Booth2 4/4 Bill Schrader 4/4 Nick Cooper3 3/3

1 Appointed Chair of the Technical and Reserves Committee on 21 May 2018. 2 Resigned as Chair of the Technical and Reserves Committee on 21 May 2018. 3 Resigned as a member of the Technical and Reserves Committee on 18 May 2018. Carl Trowell Chair of the Technical and Reserves Committee The Committee hears from a range of different individual contributors at its meetings, both internal and external, to support informed decision-making. The number of different contributors during 2018 is reflected below.

Number of meeting 14 contributors during 2018

Dear Shareholder, —— Ensuring there is consistency between the technical activities I am writing to you for the first time as Chair of the Technical and of the Company and the Company strategy; Reserves Committee (TRC), having joined the Committee on —— Reviewing, with management and the Company’s technical 18 November 2016 and taken up the role of Chair on 21 May 2018. leadership, the Group’s prospect inventory and advising the The Committee is responsible for ensuring that the Company’s Board if the inventory is being managed consistent with technical processes and standards are appropriate to support delivery approved strategy; of the Company’s strategy in regards to commercial and subsurface risk. The Committee’s full Terms of Reference are available on the —— Reviewing the technical and commercial aspects of any Company’s website. operational or asset investment proposal that requires Board approval and advising the Board of any significant technical risks The Committee duties include: or concerns; —— Evaluating the effectiveness of the Group’s technical processes and standards, including the performance (both current and —— Advising the Board on the technical and commercial aspects of historic) of subsurface and commercial assurance processes; any proposed activity or investment that requires entry into a new country; and —— Reviewing subsurface and operational risks that are assessed to require Board level reporting and endorsing the associated —— Reviewing the results of management and independent audits mitigation plans and advising the Audit Committee and, of the Group’s reserves and resources and advising the Audit where appropriate, the Board of its conclusions; Committee and, where appropriate, the Board of its conclusions.

Ophir Energy plc Annual Report and Accounts 2018 59 STRATEGIC REPORT I believe the Committee continues to be well equipped for the tasks it has been set. As a Committee we remain committed to ensuring a culture of open and honest discussion with regard to key technical decisions and the incorporation of lessons learned from past successes as well as past failures, and ensuring that Ophir’s employees feel empowered to confidently make appropriate,

risk-weighted decisions. GOVERNANCE REPORT Committee focus in 2018 —— The annual reserves reporting process and independent audit was reviewed and endorsed by the Committee. —— The Committee was kept regularly updated on the progress of the Fortuna FLNG project. —— The Committee undertook assurance and oversight of the

integration and performance of the assets purchased from

Santos Limited into our existing Southeast Asian portfolio. FINANCIAL STATEMENTS —— The Committee reviewed the proposed 2019 Work Programme & Budget, including both firm and contingent items, ahead of submission to the main Board for approval. —— The proposed 2019 well on Block 5 in Mexico was reviewed as well as Blocks 10 and 12 prior to the bid submission in January. —— Ophir’s recent exploration approach and performance were also reviewed and a more sustainable, lower risk approach was agreed

to reflect material changes in the industry and investment

landscape over the recent period, especially with respect to an SUPPLEMENTARY INFORMATION increased focus on lowering our risk profile and increasing financial sustainability.

Carl Trowell Chair of the Technical and Reserves Committee 11 March 2019

I believe the Committee continues to be well equipped for the tasks it has been set. As a Committee we remain committed to ensuring a culture of open and honest discussion with regard to key technical decisions and the incorporation of lessons learned from the past

Carl Trowell Chair of the Technical and Reserves Committee

Annual Report and Accounts 2018 60 CORPORATE GOVERNANCE CONTINUED

Substantial shareholders As at 31 December 2018 and 28 February 2019, being the date of the most recent analysis of the Company’s share register, the Company discloses that the following organisations hold a substantial number Directors’ of voting rights. The information has been compiled by Equiniti Limited, the Company’s Registrars. Share capital The called-up share capital of the Company, together with details report of shares allotted during the year, is shown in Note 27 to the Group financial statements. Shareholders’ rights The rights and obligations in the Company’s Articles of Association relating to the ordinary shares of the Company are set out in the The report complies with the provisions of the Companies Act 2006 shareholder information on pages 145 to 147. The Articles can be and Schedule 8 of the Large and Medium-sized Companies and found on the Company’s website www.ophir-energy.com. Groups (Accounts and Reports) (Amendment) Regulations 2013. Dividend policy The report has been prepared in line with the recommendations The Directors have not recommended a final dividend for the year of the UK Corporate Governance Code 2016 and the requirements ended 31 December 2018 and did not declare any interim dividends of the UKLA Listing Rules. Details of the Company’s financial during the year. The Directors do not anticipate that the Company instruments and hedging activities and its exposures to credit risk will pay dividends in the near future. The Directors envisage that, and liquidity risk are set out in full in Note 26 on pages 124 to 130 as the Company advances the development of its operations, a of the financial statements. dividend policy will be determined based on, and dependent on, Results for the year ended 31 December 2018 the results of the Company’s operations, financial condition, cash The Company’s results for the financial year are shown in the requirements, prospects, profits available for distribution and other consolidated financial statements on pages 79 to 144. factors deemed to be relevant at the time. Directors Report on greenhouse gas emissions Biographical details for the Directors of the Company who held The Group’s energy consumption and associated greenhouse gas office during the year ended 31 December 2018 and at the date of emissions during 2018 are set out in the Strategic Report on pages 35 this report are set out on pages 40 and 41. Details of Directors’ service and 36. These figures have been calculated in accordance with the contracts or letters of appointment, their interests in the ordinary guidance provided by the Department for Environment, Food and shares of the Company and in any of the Company’s long-term Rural Affairs (Defra) and the Department for Business Energy and incentive and other share schemes are set out in the Directors’ Industrial Strategy and have been classified under the ‘scopes’ set Remuneration report which can be found on pages 62 to 77. The out in the World Resources Institute/World Business Council Directors’ insurance and indemnity provisions are set out on page 46. for Sustainable Development’s Greenhouse Gas Protocol. We report on all sources of emissions over which we have operational control. Diversity Number A statement of the Company’s policy on diversity is set out in the of shares % holding held as at as at Strategic Report on page 33 and the Board’s policy on diversity 31 December 31 December is summarised on page 57 of the Nomination Committee Report. Name 2018 2018 Hotchkis & Wiley Capital Management 83,293,095 11.78 Human rights A statement of the Company’s position on human rights is set out M&G Investment Management 64,187,514 9.08 in the Strategic Report on page 33. azValor Asset Management 56,819,910 8.03 FIL Investment International 46,653,783 6.60 Employees Aberdeen Standard Investments The Company is committed to actively communicating with (Standard Life) 46,074,028 6.51 employees in many ways, including town hall meetings, video Legal & General Investment briefings, team meetings, print and email communications, as well Management 40,400,873 5.71 as regular training on health and safety, and regulatory matters. In Number 2018 Vivien Gibney was appointed as the designated Non-Executive of shares % holding Director for workforce engagement. The Company is an equal held as at as at 28 February 28 February opportunities employer and continues to have a diverse workforce Name 2019 2019 comprising local employees, contractors and expatriates at most HSBC Securities 79,111,101 11.19 sites. The Company provides all its employees with the opportunity Goldman Sachs International 54,174,015 7.66 to identify and engage in training to aid and accelerate career Hotchkis & Wiley Capital Management 51,001,920 7.21 development opportunities. As at 31 December 2018, the Company azValor Asset Management 49,304,000 6.97 employed 386 people (2017: 285 people). Note that these figures include: apprentices, direct hires, Executives, expatriates, fixed term FIL Investment International 48,681,267 6.88 and permanent employees. Bank of America Merrill Lynch 46,789,458 6.62

Ophir Energy plc Annual Report and Accounts 2018 61

Corporate Responsibility, business conduct and ethics Auditor and political donations Details of the Company’s policy on external Auditor rotation are The Company is committed to sound business conduct in its set out on page 52 of the Corporate Governance report. Further relationships with its stakeholders, including shareholders, to provision C.3.7 of the Code, listed companies are expected to put employees, customers, business partners and suppliers, governments their external audit contract out to tender at least every 10 years. and regulators, communities and the environment. The Company In 2013, the Audit Committee undertook a review of audit services seeks to conduct its operations with honesty, integrity and including a tender by suppliers in advance of the 2014 audit, which openness, and with respect for the human rights and interests concluded that EY LLP should continue as the Company’s Auditor of our employees and, as such, ensures that its Global Anti- for 2019. Corruption Policy is fully understood and implemented by all The Audit Committee has also proposed that resolutions to employees and other key stakeholders. The Board is also fully re-appoint EY as the Company’s Auditor and to authorise the committed to ensuring that high standards of health, safety and Directors to set the Auditor’s remuneration be proposed at the environmental practices are implemented and maintained by the 2019 AGM. Company. Further details are set out in the Corporate Responsibility STRATEGIC REPORT review on pages 32 to 37. Going concern The Group’s business activities, together with the factors likely to The Company has not made any political donations during the year. affect its future development, performance and position, are set out The Company’s policy is not to make political donations; however in the Strategic Report on pages 1 to 37. The financial position of the certain socially responsible activities, which may include actions Group, consisting of cash resources of $323.4 million, its cash flows undertaken through the Company’s social and community related and its liquidity position, is described in the financial statements on programmes, attendance at conferences and receptions where pages 79 to 144. In addition, Note 26 to the financial statements communicating the Company’s views might be vital to its business GOVERNANCE REPORT includes the Group’s objectives, policies and processes for managing interests may be inferred by some as making political donations its capital; its financial risk management objectives; details of its as defined in the Companies Act 2006. The Company does not financial instruments and hedging activities; and its exposures consider such activities as being political donations but, to credit risk and liquidity risk. nevertheless, ensures that all such activities described in this report have been conducted in compliance with the Company’s Code of In making their going concern assessment, the Directors have Conduct and Global Anti-Corruption Policy. considered Group budgets and cash flow forecasts. As a result of this review, the Directors have a reasonable expectation that the Directors’ responsibility statement Group has adequate resources to continue in operational existence The Directors’ responsibility statement is set out on page 78 and the for the foreseeable future. Thus they continue to adopt the going FINANCIAL STATEMENTS Company’s financial statements are included on pages 79 to 144. concern basis of accounting in preparing the annual financial Change of control statements. The Company has entered into a number of commercial contracts Viability Statement which might take effect, alter or terminate on a change of control of The Company’s Viability Statement for the 2018 year-end can the Company. However, none of these are considered to be significant be found on page 18. The Viability Statement provides investors in terms of their likely impact on the business of the Company with an improved and broader assessment of long-term solvency as a whole. and liquidity of the Company. The Directors have agreed that the All the Company’s share incentive plans contain provisions relating Company can sign the Viability Statement as it has developed a robust strategy over the medium term, which includes sufficient

to a change of control and details of these plans are provided SUPPLEMENTARY INFORMATION in the Directors’ Remuneration report on pages 62 to 77. forecasting that takes account of industry and macro-economic factors, such as a low commodity price for oil and gas in addition Corporate governance statement to flexibility over the capital expenditure programme. The corporate governance statement on pages 38 to 78, in accordance with Rule 7.2 of the Disclosure and Transparency Rules Post balance sheet events and Rule 9.8.6 (5) and (6) of the Listing Rules, forms part of this A summary of the key post balance sheet events is set out Directors’ Report. in Note 39to the Group financial statements. Directors’ statement as to disclosure of information By order of the Board to the Auditor The Directors who were members of the Board at the time of approving the Directors’ Report are listed on pages 40 and 41. Alan Booth Having made enquiries of fellow Directors and of the Company’s Interim Chief Executive Officer Auditor, each of these Directors confirms that: 11 March 2019 —— To the best of each Director’s knowledge and belief, there is no Registered office: information (that is information that is needed by the Company’s Level 4, 123 Victoria Street, London SW1E 6DE Auditor in connection with preparing their report) of which the Company registered in England and Wales No. 05047425 Company’s Auditor is unaware. —— Each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company’s Auditor is aware of that information. 62 CHAIRMAN’S ANNUAL STATEMENT ON REMUNERATION Report of the Remuneration Committee

Membership and attendance The members of the Committee, all of whom are independent Non-Executive Directors, or in the case of Bill Schrader, was considered independent on his appointment as Chairman, together with details of their individual attendance at meetings held during the year ended 31 December 2018, are set out below: Meeting Committee members attendance Vivien Gibney, Committee Chairman 5/5 Alan Booth1 3/3 David Davies 4/5 Bill Schrader 5/5

1 Alan Booth stepped down from the Committee on 18 May 2018 following his appointment Vivien Gibney as Interim Chief Executive Officer. He was not involved in any Committee discussions relating to his remuneration package as Interim Chief Executive. Remuneration Committee Chairman The Committee hears from a range of different individual contributors at its meetings, both internal and external, in order to ensure informed decision-making.

Number of meeting 7 contributors during 2018

Dear Shareholder, during the year. The conclusion of the review was that it would be On behalf of the Board, I am pleased to present the Directors’ appropriate to replace our long-term NAV growth per share scheme Remuneration report for the financial year ended 31 December 2018. (the 2016 Plan) with a more traditional long-term incentive plan This report summarises our Remuneration Policy, how it has based on targets on which we intended to consult with investors been operated during the year under review and how it will be early in 2019. We would continue with an annual bonus based on implemented in 2019, together with an overview of the key activities a scorecard of metrics, dependent on how successful we were in of the Committee. executing our strategy safely and on financial performance. I would like to thank my colleagues for their positive engagement in However, following the announcement that our Board has reached the work of the Committee and for their support. Alan Booth was a agreement with Medco Global on the terms of an acquisition which valued colleague and we benefit from his understanding of the work would see Medco acquire the entire ordinary share capital of the of the Committee in his new post of Interim Chief Executive. Company and cancel the listing of our shares on the London Stock Exchange, and after considering feedback from our major Remuneration Policy and alignment to business strategy shareholders, it was decided that it was not an appropriate time As detailed in the Strategic Report, 2018 was a year of change at to revise our current approach. Ophir with new executive leadership, the completion and integration of a package of production assets acquired from Santos and a Accordingly, the Committee is seeking shareholder approval for a refinement of our strategy to provide a greater emphasis on largely unchanged Remuneration Policy. Should the acquisition production assets with a view to building a stable, self-financing of our ordinary shares by Medco not proceed, then the Committee Asian-based and focused E&P company. will reconsider whether the current Remuneration Policy remains appropriate for the future size and structure of the Company. Any Completion of the acquisition of Santos assets was a first step in future review would consider the impact on remuneration of the 2018 delivering against our refined strategy. The second step was a UK Corporate Governance Code, although it is noted that the current refocusing of our approach to exploration on near field opportunities policy retains many best practice features such as a minimum which pay back quickly. With the backdrop of these changes, allied to five-year holding period on vested shares and robust recovery and the expiration of our current three-year Remuneration Policy at the withholding provisions. 2019 AGM, a review of the Remuneration Policy was undertaken

Ophir Energy plc Annual Report and Accounts 2018 63 STRATEGIC REPORT Performance in 2018 and payments to Directors —— considering the employment terms and remuneration of the 2018 was a year of robust operational performance in which we Interim Chief Executive; achieved our operating production targets (operated production —— undertaking a review of the Remuneration Policy and operation 10,400 boepd excluding the new Santos assets and 13,400 boepd of the 2016 Plan; equivalent including them), minimised our costs of production —— taking feedback from major shareholders on the 2019 (with both operational and capital expenditure taking place well Remuneration Policy;

within budgeted performance levels), and added to our prospective —— considering annual bonus targets for 2019; and

risked resources with net additions of 116 MMboe (excluding new —— setting the Executive Directors’ 2019 base salary levels. GOVERNANCE REPORT Santos assets). In addition to the above, the Committee considered broader topical Aside from our operations, we also successfully acquired and matters including gender pay, equality and the level of remuneration integrated the Santos production assets which have proved to be for the Chief Executive Officer in relation to the broader workforce. highly cash-generative, refinanced our reserved based lending facility Developments in corporate governance and initiated a corporate restructuring to relocate our corporate In response to the 2018 UK Corporate Governance Code the functions to Southeast Asia. Committee’s Terms of Reference were reviewed to expand the remit

The above was tempered by the expiry of our Block R licence in of the Committee in line with its recommendations. Work is ongoing

Equatorial Guinea. This followed extensive discussions and in relation to the best approach to take into account employees views FINANCIAL STATEMENTS negotiations with a broad range of potential investors in the project of remuneration. In 2018 Vivien Gibney was appointed as the and with the host government. designated Non-Executive Director for workforce engagement. In aggregate, and following a reduction to the aggregate bonus With regards to the new Secondary Legislation, the Company is in the pool of 10% to reflect the Board’s assessment of the year overall, process of determining the most appropriate method of disclosing the performance delivered resulted in a bonus payable at 66% the ratio of CEO pay to the pay of our UK employees in light of the of the maximum for the Chief Financial Officer. The Committee relocation of corporate functions to Southeast Asia. If we remain considered this level of bonus appropriate in light of the performance listed in the UK, we will formally report against these matters delivered during the year. Neither the Interim Chief Executive nor next year.

the former Chief Executive were eligible for bonuses in relation to

Shareholder feedback SUPPLEMENTARY INFORMATION 2018 performance. The Board and the Committee are committed to maintaining an The LTIP awards granted on 14 March 2016 were eligible to vest open and constructive dialogue with our shareholders on based on the Company’s relative TSR performance versus a bespoke remuneration matters. We engaged with institutional investors group of 21 comparators over the three years ending 31 December representing over 50% of the shareholder register in discussions 2018. Ophir’s relative TSR was below median, which resulted in the around the 2019 Remuneration Policy renewal. We welcome award lapsing. feedback on any aspects of our Remuneration Policy and its application. With regard to the 2016 Plan there was no NAV event in 2018 that could have triggered a payment and no NAV points were awarded. Key activities of the Committee Vivien Gibney The key activities of the Committee in 2018 included: Remuneration Committee Chairman 11 March 2019 —— determining annual bonus awards in relation to 2017; —— setting annual bonus targets for 2018; —— testing 2011 LTIP performance targets concluding in the 2018 financial year; —— considering the departure terms of the Chief Executive Officer in connection with the termination of his employment; —— confirming the ‘good leaver’ status of employees’ leaving the Company through the relocation of corporate functions to Southeast Asia; —— confirming the treatment of accrued NAV points for employees (including the Chief Executive Officer);

Annual Report and Accounts 2018 64 DIRECTORS’ REMUNERATION POLICY

This part of the report sets out the Company’s Remuneration Policy which will be subject to a binding vote at the 2019 AGM and will be eligible to take effect from that date.

As detailed in the Chair’s Summary Statement, the current Policy is potentially triggering a reward if the reduced NAV due to being proposed on essentially the same terms as the Policy approved development spend has been more than offset by the value by shareholders at our 2016 AGM. The only changes to the Policy attributable to the NAV event include revised wording that takes account of the evolution of best —— NAV events will be monetisation events, which have defined practice (e.g. noting the typical UK company pension contribution values, or the risked value of development assets once a Final and broadening the annual bonus over-ride provision). Investment Decision (FID) is taken. The list of NAV events is as follows: Remuneration is structured with two elements: fixed remuneration —— Farm-outs. consisting of base salary and benefits (including non-contributory —— Asset sales. health insurance and life assurance and pension contributions) and —— FID events. variable remuneration (annual bonus scheme and a long-term —— First production. incentive scheme). —— A gas sales agreement renegotiation (since this effectively Remuneration Policy and link to business strategy re-values the asset). As set out in the sections Our Business Model and Our Strategy, —— if one of the above events takes place, then a calculation of Ophir’s focus is on production, finding resources efficiently and current Group NAV per share will be undertaken to ascertain monetising them smartly to create value for our shareholders. whether the previous Benchmark NAV has been exceeded How successful we are in implementing this strategy is captured by —— when testing whether or not a NAV event has resulted in the measuring performance against a combination of operationally opening Benchmark NAV per share being exceeded and thereby focused targets that are incorporated into the annual bonus plan creating a reward pool, the historic benchmark will be rebased, as and growing NAV per share which is rewarded through our long-term appropriate, for (i) current forward strip commodity prices to incentive plan. ensure that the reward pool is not artificially inflated or deflated by the commodity cycle and (ii) any cash distributions to Under the annual bonus plan cash awards are made with reference shareholders or funds raised from shareholders and/or the issue to our success or otherwise against operational and personal / or cancellation of shares so that these events are neutral to the strategic targets. operation of the scheme Under the long-term incentive plan (2016 Plan), opportunity for —— if a NAV event has triggered a reward, the pool would be reward only takes place when value is created (measured based on distributed to all employees, with the following features applying NAV per share growth) through the long-term development of our to Executive Directors: assets. Once value is created, reward is payable in a combination of —— the maximum variable pay (annual cash bonus plus NAV cash (25%) and shares (75%) which vest over five years and all shares scheme) that an Executive Director may receive in any (net of tax) must be retained for a minimum of five years from grant. calendar year has been limited to 500% of base salary (i.e. The scheme’s long-term focus is considered entirely appropriate for 50% annual cash bonus and 450% NAV scheme). NAV events an industry where decisions taken have multi-year time horizons. are unlikely to occur regularly in each financial year; two (or The scheme is intended to ensure clear alignment between Executive more) events may occur in any given year, or conversely none Directors and shareholders. It is noted that no further awards or may occur in any given year. Since there are likely to be payments will be made to the current Executive Directors without periods where NAV events do not take place in multiple years, prior consultation with our shareholders and there will be no but the value when they do has the potential to be payments made in connection with the Medco transaction. substantial, if a NAV event occurs in a year where there has not been a NAV event in the prior year that triggers a reward Summary details of the operation of the plan are included below: pool, the maximum variable pay (annual cash bonus plus —— remuneration would only be earned on delivery of long-term NAV scheme) will be increased to 750% of salary in that year growth in NAV per share, which is measured based on well- —— 75% of NAV scheme rewards are delivered as deferred shares defined NAV events. When an event does take place, 12.5% of the that vest after three, four and five years for Executive increase in NAV above the prior Benchmark NAV is used to create Directors. However, the total number of after-tax shares must a reward pool be retained for a minimum of five years —— NAV will be calculated using Net Present Value (NPV) as defined —— recovery and withholding provisions apply to ensure that only in the scheme at a 10% discount rate true value creation is the basis of rewards. Trigger events for —— every $1 spent on development reduces Benchmark NAV, so recovery of value overpaid include (i) when an FID is taken pay-outs under the scheme only take place, in principle, when but the development is subsequently cancelled prior to there is a return on investment decisions through value creation. production or (ii) the Company is the subject of a lawsuit that There are only certain well-defined events that count towards is successfully pursued by a third party in relation to a NAV testing the prevailing Benchmark NAV, with these events event under which a reward pool was generated.

Ophir Energy plc Annual Report and Accounts 2018 65

Since the above scheme will apply to all employees in the Group (albeit tailored by employee level), a single 10% in 10 years’ dilution limit operates in relation to the award of shares through the scheme. In addition to the deferral requirements under the 2016 Plan, share ownership guidelines apply. These require the Chief Executive Officer to build and maintain a shareholding worth 300% of salary with the Chief Financial Officer then required to maintain a shareholding worth at least 200% of salary. Policy table The table below sets out the key elements of Executive Director pay:

Purpose and Framework used link to strategy Operation Maximum opportunity to assess performance Base salary To provide the core Normally reviewed annually and effective Executive Directors will be eligible for The Committee considers individual reward for the role. from 1 January. increases during the three-year period that salaries at the appropriate STRATEGIC REPORT Sufficient level to Decision influenced by: the Remuneration Policy operates from the Committee meeting each year after help recruit and Effective Date (the date of the 2019 Annual having due regard to the factors –– role, experience and personal retain employees. General Meeting). noted in operating the salary policy. performance Reflects role and –– average change in total workforce salary During this time, salaries may be increased experience of in the location where they are based each year (in percentage of salary terms) in individual. –– total organisational salary budgets line with average increases granted to the –– Company performance and other wider workforce where they are based.

economic conditions. Increases beyond those granted to the wider workforce (in percentage of salary terms)

Salaries are benchmarked periodically and GOVERNANCE REPORT are set by reference to companies of a may be awarded in certain circumstances similar size and complexity. such as where there is a change in responsibility, experience or a significant increase in the scale of the role and/or size, value and/or complexity of the Group. Where new joiners or recent promotions have been placed on a below market rate of pay initially, a series of increases above those granted to the wider workforce (in percentage of salary terms) may be given

over the following few years subject to

individual performance and development FINANCIAL STATEMENTS in the role. Benefits To recruit and retain Directors are entitled to health insurance, The value of benefits may vary from year to n/a employees. life assurance, medical evacuation year depending on the cost to the Company insurance, travel insurance, holiday pay, sick from third-party providers. leave and other Group-wide benefits offered by the Company. Other ancillary benefits including relocation expenses may be offered, as required.

Pension

To provide long-term The Company operates a defined The Executive Directors receive a Company n/a SUPPLEMENTARY INFORMATION savings via pension contribution pension scheme or may contribution into the Group (or their provision. contribute directly into an Executive personal) pension plan (or a salary Director’s personal pension, or pay supplement in lieu of pension) to the greater a salary supplement in lieu of pension. of the statutory minimum and 11% of salary. The typical Company contribution to UK employees’ pension arrangements is between 9% and 11% of salary.

Annual Report and Accounts 2018 66 DIRECTORS’ REMUNERATION POLICY CONTINUED

Purpose and Framework used link to strategy Operation Maximum opportunity to assess performance Annual bonus To incentivise the Targets are renewed annually and relate to The maximum award under the annual Details of the performance execution of the business as a whole. bonus scheme is 50% of salary. measures used for the current year business strategy. Bonus level, payable in cash, is determined and targets set for the year under Rewards the by the Committee following the end of the review and performance against achievement of financial year and is based on performance them is provided in the Annual annual financial and against targets set at the start of the year. Report on Remuneration. The strategic business Company’s bonus scheme is based Recovery and withholding provisions apply targets and delivery on the achievement against a range that enable the Committee to recover of personal of business objectives and key value overpaid (clawback) in the event of a objectives. performance indicators. material misstatement of the Company’s results within a two-year period (this can be Given the nature of Ophir’s business, through the withholding of variable pay measures and their weightings may awards (malus) or requiring a repayment). change each year reflecting the changing business priorities. The key Dividends may accrue on deferred shares performance measures may include (and assume reinvestment) and, unless the (and are not limited to) targets Committee determines otherwise, will be related to the following: paid in shares. –– maintaining our licence to operate –– monetisation of resources –– strengthening the balance sheet A majority of the bonus will be based on structured financial and/or operational targets. The Committee may also adjust bonus outcomes, based on the application of the bonus formula set at the start of the relevant year, if it considers the quantum to be inconsistent with the Company’s overall performance during the year. For the avoidance of doubt this can be to zero and bonuses may not exceed the maximum levels detailed above. Any use of discretion would be set out in the Directors’ Remuneration report in the relevant year. For the bonus measures, which operate using a sliding scale of targets, the proportion of maximum bonus earned for achieving threshold performance is set from 0% of that part of the bonus with 100% of the maximum opportunity payable for superior performance. Bonuses for performance between threshold and maximum are determined on a pro-rata basis. Some elements of the bonus structure include a subjective assessment of performance as opposed to operating on a sliding scale (e.g. bonus earned in relation to HSE/CR performance and some personal objectives).

Ophir Energy plc Annual Report and Accounts 2018 67

Purpose and Framework used link to strategy Operation Maximum opportunity to assess performance Long-Term Value Creation Plan 2016 To reward for A reward pool comprising 12.5% of the 500% in any calendar year or 750% of salary A high watermark Benchmark NAV is the creation of growth in NAV is available for distribution if there was no NAV event in the prior year. set (either at the outset of the sustained to all employees following a NAV event The limits are inclusive of any bonus scheme or following a NAV event NAV per share. which takes the NAV per share of the payments relating to the calendar year where the previous Benchmark NAV Company above the previous high (e.g. should a bonus be earned to the is exceeded) and a payment can watermark Benchmark NAV per share. maximum of 50% of salary then the only become payable once the For Executive Directors, following a NAV maximum pay-out under the scheme in previous high watermark Benchmark event 25% of an individual share of the relation to the same year is limited to NAV is exceeded. pool is paid in cash with 75% payable in 450% of salary). deferred shares. Deferred shares vest equally after years three, four, and five. A holding period applies to vested shares

requiring a minimum of the after-tax STRATEGIC REPORT number of shares to be retained for a minimum period of five years from grant. To the extent that dividends were to be paid, a provision would operate which would enable dividends to accrue on shares at the time of vesting (or to the conclusion of any holding period).

Recovery and withholding provisions apply in the event that value is overpaid as a result of (i) an FID is taken but the GOVERNANCE REPORT development is subsequently cancelled prior to production or (ii) the Company is the subject of a lawsuit that is successfully pursued by a third party in relation to a NAV event under which a reward pool was generated. Share ownership guidelines To align the interests The Chief Executive Officer has a 300% of n/a n/a

of Executive salary holding requirement and other

Directors with those Executive Directors are required to build up of the Company’s a holding of 200% of salary through the FINANCIAL STATEMENTS shareholders. retention of 50% of the after-tax number of shares vesting under the Company’s long-term incentive plans. Non-Executive Directors’ fees To provide a The fees for the Company’s Chairman The fee levels are reviewed on a periodic n/a competitive fee and independent Non-Executive Directors basis, with reference to the time which will attract are determined by the Board as a whole commitment of the role and market levels in high-calibre (with the relevant individuals absenting companies of comparable size and individuals with the themselves from discussions relating complexity. relevant skills and directly to their own remuneration). The Fee levels will be eligible for increases during experience to Board’s policy in relation to the fee payable the three-year period that the Remuneration

enhance the Board. to the Chairman of the Board is that it

Policy operates from the Effective Date to SUPPLEMENTARY INFORMATION should be set having had regard to the ensure they appropriately recognise the time median fee payable for Non-Executive commitment of the role, increases to fee Chairmen of companies of a comparable levels for Non-Executive Directors in general size and complexity. and fee levels in companies of a similar size Remuneration levels are agreed based on and complexity. external advice and give consideration to Flexibility is retained to go above the fee the time commitment and responsibilities levels set at the start of the year if it is of the role. necessary to do so to appoint a new The Chairman and Non-Executive Directors Chairman or Non-Executive Director of an are not entitled to participate in the appropriate calibre. No benefits or other Company’s executive remuneration remuneration are provided to Non-Executive programmes or pension arrangements. Directors although the Company may make payments to Non-Executive Directors to compensate them on a pre-tax basis for any reasonable expenses incurred undertaking Company business.

Annual Report and Accounts 2018 68 DIRECTORS’ REMUNERATION POLICY CONTINUED

Operation of incentive plans Long-term performance is assessed based on our performance The Committee will operate the annual bonus scheme and long-term in growing NAV per share, which is our key long-term incentive plans, including the 2016 Plan, according to their respective performance metric. rules and in accordance with the Listing Rules, and HMRC rules where The Committee believes the above measures each achieve alignment relevant. The Committee, consistent with market practice, retains between shareholders and Executive Directors and that they are only discretion over a number of areas relating to the operation and rewarded for creating NAV per share. administration of these plans. These include the following (albeit with quantum and the operation of those plans restricted to the Other than in the case of NAV per share where a high watermark is descriptions detailed in the policy table above for Executive Directors): established that must be exceeded for a pay-out to take place, targets are normally set based on sliding scales that take account of —— who participates in the plans internal planning and external market expectations for the Company. —— the timing of grant of award and/or payment Only modest rewards are available for delivering threshold —— the size of an award and/or a payment performance levels with maximum rewards requiring achievement of —— the determination of vesting stretching performance targets approved at the start of each year. —— discretion required when dealing with a change of control (e.g. the timing of testing performance targets) or restructuring Consideration of employment conditions elsewhere in the Group of the Group The Company, in line with current market practice, does not actively —— determination of a good leaver for incentive plan purposes based consult with employees on executive remuneration. The Group has a on the rules of each plan and the appropriate treatment chosen diverse workforce operating in several different countries, with various —— adjustments required in certain circumstances (e.g. rights issues, local pay practices, which would make any cost-effective consultation corporate restructuring events and special dividends) impractical. However, when setting the Remuneration Policy for —— the annual review of performance measures, weighting and Executive Directors, the Committee takes into account the pay and targets for the incentive plans from year to year. employment conditions for other employees within the Group, including examining whether there is any gender pay difference and The Committee also retains the ability to adjust the targets and/or set the pay of the median paid employee in relation to the pay of the different measures and alter weightings for the annual bonus plan Chief Executive Officer. and to adjust targets for long-term incentives if events occur (e.g. material divestment of a Group business) which cause it to determine This process ensures that the Committee is considering broader that the conditions are no longer appropriate and the amendment is Company issues in determining executive pay and any increase to the required so that the conditions achieve their original purpose and are basic pay of Executive Directors is not out of proportion with that not materially less difficult to satisfy. proposed for other employees. All historic awards that were granted under any current or previous Differences in Remuneration Policy for Executive Directors share schemes operated by the Company prior to the 2016 AGM but compared to other employees remain outstanding remain eligible to vest based on their original Overall, the Remuneration Policy for the Executive Directors is more award terms. heavily weighted towards variable pay than for other employees. Choice of performance measures and approach to target setting This ensures that there is a clear link between the value created for The performance metrics that are used for the annual bonus scheme shareholders and the remuneration received by the Executive are based on the Company’s Key Performance Indicators (KPIs). A Directors as it is the Executive Directors who are considered to have balanced scorecard together with health and safety metrics are used. the greatest potential to influence Group value creation. As an upstream oil and gas exploration company, commercialisation The level and structure of variable pay varies within the Group by level through portfolio management is important in crystallising value at of employee and is informed by the specific responsibilities of each the right time; Executive Directors’ strategic choices and delivery are role and local market practice as appropriate. appraised and a good health and safety record underpins the activities we undertake. These metrics, which form part of the Company’s KPIs, are aligned with the Company’s underlying objective of production from existing assets, finding resources efficiently and monetising them at the appropriate time in the value chain to create growth in NAV. The precise metrics chosen and weighting ascribed to each may vary, as detailed in the Policy above, in line with the Company’s strategy.

Ophir Energy plc Annual Report and Accounts 2018 69

Recruitment and promotion policy Maximum (performance meets or exceeds maximum) For Executive Director recruitment and/or promotion situations, the —— Fixed pay plus maximum bonus at 50% of salary and a NAV Committee will follow the guidelines outlined below: event in 2018 triggering an aggregate payment (in cash and shares) at 450% of salary. Element Policy Base salary Base salary levels will be set in accordance with the Fixed pay comprises: Company’s Remuneration Policy, taking into account —— salaries – salary effective as at 1 January 2018 the experience and calibre of the individual (e.g. —— benefits – amount received (annualised as appropriate) by each typically around market rates prevalent in companies of comparable size and complexity) or salary levels may Executive Director in the 2018 financial year be set below this level (e.g. if the individual was a —— pension – employer contributions or cash-equivalent payments promotion to the Board). Where it is appropriate to at 11% of base salary. offer a below-market rate of pay initially, a series of increases to the desired salary positioning may be given NAV event every year over the next few years subject to individual

performance and development in the role. CEO STRATEGIC REPORT Benefits Directors are entitled to health insurance, life assurance, Minimum 100% £625,000 medical evacuation insurance, travel insurance, holiday Target 31% 7% 62% £2,000,000 pay, sick leave and other Group-wide benefits offered by Maximum 19% 8% 73% £3,375,000 the Company. Where necessary, the Committee may approve the payment of relocation expenses to CFO facilitate recruitment. Minimum 100% £372,000 Pension A defined contribution or cash supplement at the level Target 31% 7% 62% £1,184,000

provided to current Executive Directors as set in the Maximum 19% 8% 73% £1,997,000 policy table. GOVERNANCE REPORT Annual The annual bonus would operate as outlined for current Fixed pay Annual bonus VCP bonus Executive Directors (i.e. to a maximum of 50% of base salary), albeit pro-rated for the period of employment The analysis above shows what could be earned by the Executive during the financial year. Depending on the timing and Directors based on a NAV event in the year. If there is no NAV event, responsibilities of the appointment it may be necessary to set different performance measures and targets then the following year there is the potential for remuneration to be initially. higher allowing for the fact that NAV events may be infrequent. Long-term New joiners will normally be eligible to participate in The charts below include an illustration of the potential remuneration incentives the Long-Term Value Creation Plan 2016 after that could be earned in this circumstance based on the same

completion of a probationary period.

Buy-out In the case of an external hire, if it is necessary to buy assumptions as noted above but with the NAV event payments being awards out incentive pay or benefit arrangements (which would at 350% of salary where performance is in line with expectations and FINANCIAL STATEMENTS be forfeited on leaving the previous employer), this would be provided for taking into account the 700% of salary at maximum performance levels. form (cash or shares) and timing and expected value (i.e. likelihood of meeting any existing performance NAV event after a gap year criteria) of the remuneration being forfeited. CEO Replacement share awards, if used, will be granted as Minimum 100% £625,000 permitted under the Listing Rules. Target 23% 5% 72% £2,687,000 Maximum 13% 6% 81% £4,750,000 The amount an Executive Director could earn under the CFO Remuneration Policy Minimum 100% £372,000 A significant proportion of remuneration is linked to performance, Target 23% 5% 72% £1,591,000

particularly at maximum performance levels. The charts below show Maximum 13% 6% 81% £2,809,000 SUPPLEMENTARY INFORMATION how much the roles of Chief Executive Officer and Chief Financial Officer could earn under Ophir’s Remuneration Policy (as detailed Fixed pay Annual bonus VCP above) under different performance scenarios (based on the salaries The scenarios do not include any share price growth or dividend of the Interim Chief Executive Officer and Chief Financial Officer as at assumptions. 1 January 2019). The following assumptions have been made: Minimum (performance below threshold) —— Fixed pay only with no vesting under any of Ophir’s incentive plans. In line with expectations —— Fixed pay plus a bonus at the mid-point of the annual bonus ranges typically set (giving 50% of the maximum bonus opportunity of 50% of salary) and a NAV event in 2018 triggering an aggregate payment (in cash and shares) at 225% of salary.

Annual Report and Accounts 2018 70 DIRECTORS’ REMUNERATION POLICY CONTINUED

Service Agreements and loss of office payments Treatment of incentives The Executive Directors have rolling-term Service Agreements with If an individual is (i) under notice at the bonus payment date or the Company. The notice period for Executive Directors is set at up to (ii) not in employment, the default position is that no bonus will be 12 months if notice is given by either the individual or the Company. payable. However, in certain good leaver circumstances (death, For new hires, the Company’s policy is to set notice periods of up to retirement, ill-health, injury or disability, redundancy, employment 12 months. ceasing as a result of a sale of a Group company, or for any other reason at the Committee’s discretion after taking into account the The Executive Directors’ Service Agreements each include the ability circumstances prevailing at the time), a pro-rata bonus may become for the Company, at its discretion, to pay basic salary only in lieu of payable for the period of employment. The Committee, acting fairly any unexpired period of notice. and reasonably, may decide not to reduce the bonus pro-rata if, in the Payments may be made as either a lump sum or in equal monthly circumstances, it considers it appropriate to do so (for example in the instalments until the end of the notice period at the discretion of the case of, but not limited to, death). Remuneration Committee. In the case of the Executive Directors, the The treatment for share-based incentives previously granted Executive will be required to seek alternative income during the period to an Executive Director will be determined based on the relevant in which monthly instalments are paid and notify the Company after plan rules. The default treatment for outstanding share awards securing alternative income. Should alternative employment be or NAV points awarded under the 2016 Plan is for awards found, the instalment payments shall then be reduced by the amount to lapse on cessation of employment unless the Committee of alternative income, or cease if the alternative income exceeds the determines otherwise. monthly instalment payment. External appointments The Service Agreements contain a provision enabling the Company With the prior permission of the Board, Executive Directors are to put the Executive Director on garden leave for up to six months at permitted to accept external directorships and to retain any fees any time after notice to terminate the Service Agreement has been payable in respect of those roles. given by the Executive Director or the Company, or the Executive Director has resigned without giving due notice and the Company Non-Executive Directors’ Letters of Appointment and fees has not accepted the resignation. During the garden leave period, the Each Non-Executive Director has a Letter of Appointment from the Executive Director will be entitled to receive salary and contractual Company. The Letters of Appointment do not specifically provide for benefits (excluding bonuses). At the end of the garden leave period, terms of appointment, termination notification periods or entitlement the Company may, at its sole discretion, pay the Executive Director to payment on termination, however there is an expectation that all basic salary alone in respect of the balance of any period of notice Non-Executive Directors will serve for an initial three-year term. The given by the Company or Executive Director. Company may terminate the appointment under each Letter of Appointment if the Non-Executive Director has committed a serious These payments will be reduced to the extent alternative income is or repeated breach or non-observance of their obligations to received. For new hires, the same broad policy would apply. the Company. A summary of the terms of the Service Agreements is set out below. Consideration of shareholder views Service The Committee remains committed to shareholder dialogue and Continuous Agreement Notice by Notice by takes an active interest in voting outcomes. The Committee consults Name employment date Company Executive extensively with our major shareholders when setting the 26 June Remuneration Policy. If there are any particular shareholders opposed Alan Booth1 18 May 2018 2018 6 months 6 months to our Policy, members of the Committee would endeavour to meet Tony Rouse 1 October 27 January 12 months 12 months 2014 2016 with them, as appropriate, to understand any issues they may have and during the year the Chairman of the Committee spoke with a 1 Alan Booth was initially appointed on a one-month notice period reflecting the intended number of institutional shareholders concerning the proposed new temporary nature of his appointment. After six months in post the Committee reviewed this position and increased his notice period from one month to six months. Should there be a Remuneration Policy. change of control of the Company (including completion of the Medco deal), the notice period would immediately fall to three months. The changes to the notice period were considered necessary to ensure that there was continuity of leadership both through a potential takeover and/or in the event that the takeover did not proceed. Following confirmation from the Takeover Panel, the amended notice period of six months came into effect from 30 January 2019. Copies of the Service Agreements for current Executive Directors, together with the Letters of Appointment for the Non-Executive Directors, are available for inspection during normal business hours at the Company’s registered office.

Ophir Energy plc Annual Report and Accounts 2018 ANNUAL REPORT ON REMUNERATION 71

This part of the report has been prepared in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and the Listing Rules. STRATEGIC REPORT The Annual Statement and Annual Report on Remuneration Advisers to the Committee (combined) will be put to an advisory shareholder vote at the Korn Ferry is appointed as the independent adviser to the Committee 2019 AGM. The information on pages 73 to 76 (inclusive) has and provides services to the Company on a ‘called on’ rather than a been audited. retained basis. Korn Ferry is a member of the Remuneration Consultants Group and complies with its code of conduct. Details of Consideration of remuneration matters the terms of engagement for Korn Ferry are available on request from

Membership and attendance the General Counsel & Company Secretary. The Committee regularly The members of the Committee during the year ended 31 December reviews the external adviser relationship and is comfortable that Korn GOVERNANCE REPORT 2018, together with details of their individual attendance at Ferry’s advice is objective and independent. For the year under review Committee meetings held during the year, are set out below: Korn Ferry’s fees charged were £98,880 (excluding VAT). Committee members Meeting attendance1 Implementation of Remuneration Policy for 2019 Vivien Gibney, Committee Chairman 5/5 Base salaries Alan Booth1 3/3 The Committee reviews the Executive Directors’ base salaries prior to David Davies 4/5 each financial year taking into account individual performance and Bill Schrader 5/5

experience, Company performance and economic conditions.

1 Alan Booth stepped down from the Committee on 18 May 2018 following his appointment as FINANCIAL STATEMENTS Interim Chief Executive Officer. He was not involved in any Committee discussions relating to The Committee assessed the above factors and determined that his remuneration package as Interim Chief Executive. again there should be no base salary increases. The base salaries of the current Executive Directors, effective 1 January 2019, are included Members of the Committee are appointed by the Board and all of its in the table below. members are considered to be independent. The Chairman of the Company, Bill Schrader, was independent on appointment. Salary as at Salary as at 1 January 1 January The Executive Directors, senior management and advisers to the Role 2019 2018 Increase Committee may also be invited to attend meetings as necessary. Interim Chief Executive Officer £550,000 n/a 0% During the year, the Interim and former Chief Executive Officer, the Chief Executive Officer n/a £550,000 0% Financial Controller, the General Counsel & Company Secretary, the Chief Financial Officer £325,000 £325,000 0%

Director of Human Resources, Global Head of Human Resources and SUPPLEMENTARY INFORMATION representatives from Korn Ferry and Linklaters attended meetings Appointment terms of the Interim Chief Executive and provided guidance and advice as necessary. The Interim Chief Executive was appointed on a base salary of £550,000 being the same salary as the former Chief Executive Executive Directors and other attendees are not entitled to vote on Officer. This salary was set to be an all-encompassing payment any matter put before the Committee and do not participate in any covering all other elements of remuneration in view of the discussion relating to their own remuneration or remit. expectation that the role would operate only on a temporary basis. Role and responsibilities of the Committee However, after six months in post, and the feedback from some The role of the Committee is to determine the Remuneration Policy institutional investors in relation to aligning the individual with of the Company in order to facilitate the recruitment, retention and corporate performance as part of the 2019 Remuneration Policy motivation of the Executive Directors and senior management. consultation, the Committee considered whether the remuneration terms of appointment should be amended. Following a number of The Policy, and its implementation, is reviewed at least annually in discussions with the Takeover Panel via the Company’s advisers, to order to ensure that it is consistent with business strategy, relevant ensure the retention and alignment of the individual with the legal and regulatory requirements and wider workforce remuneration operational success of the Company, it was agreed that (i) the notice and related policies. period should be enhanced as detailed in the Policy Report on page The Committee also monitors the overall remuneration structure 70 and (ii) he should be eligible to participate in the 2019 annual across the Group to ensure that a balanced approach is adopted in bonus plan based on the targets detailed on page 72 and (iii) he relation to all employees. The Committee’s full Terms of Reference, should be eligible to receive pension and benefits with effect from which are reviewed annually, are available on the Company’s website 1 January 2019 in view of the fact that the role had moved from a at www.ophir-energy.com/about-us/corporate-governance/board- short-term interim appointment to a medium-term one. committees/remuneration.

Annual Report and Accounts 2018 72 ANNUAL REPORT ON REMUNERATION CONTINUED

As noted in the 2019 Remuneration Policy on page 70, his notice Under the current circumstances the decision was made to not period will reduce from six months to three months on completion of include personal KPIs for the Executive Directors for 2019. the Medco transaction but remain at six months if the deal does not The Committee retains discretion to over-ride bonus payments to complete. The Committee is comfortable this provides the right Executive Directors, for example in the event of a serious HSE incident balance between protection of the Company and shareholders’ or series of incidents. The Committee may also adjust bonus interest in the event the transaction does not complete and outcomes, based on the application of the bonus formula set at the minimising payments in connection with the transaction noting start of the relevant year, if it considers the quantum to be the normal notice period policy is 12 months. inconsistent with the Company’s overall performance during the year. Pension and benefits For the avoidance of doubt this can be to zero and bonuses may not The Executive Directors receive Company contributions towards exceed the maximum levels detailed above. Any use of such personal pension plans or salary in lieu of pension at a rate of 11% discretion would be detailed in the Annual Report on Remuneration. of base salary. The Committee considers that the targets themselves are In addition to pension benefits, the Executive Directors also receive commercially sensitive and therefore plans to disclose them only health insurance, life assurance, medical evacuation insurance, travel on a retrospective basis. Details of the targets and actual outturn insurance, holiday pay and sick leave cover. will be disclosed in next year’s Annual Report on Remuneration. The Interim Chief Executive was not eligible to receive pension and Recovery and withholding provisions will enable the Committee to benefits until 1 January 2019. correct the bonus in the event of a material misstatement of the Company’s results so that it reflects the value that should have been Annual bonus paid had it not been for the misstatement. These provisions, in line The annual bonus scheme has been designed to provide reward for with the 2018 UK Corporate Governance Code recommendations, above-average performance. The performance targets, which are a enable the withholding of future incentive payments or through the distillation of the corporate Key Performance Indicators (KPIs) and recovery of the value overpaid (on a net of tax basis) from certain personal KPI, are reviewed by the Committee annually. the individual. The bonus opportunity under that scheme for the year ending 2016 Plan 31 December 2019 will be limited to 50% of base salary, payable in Shareholders approved the Long-Term Value Creation Plan 2016 at cash for both the Interim Chief Executive and Chief Financial Officer. the 2016 AGM and the Committee will include full details of any NAV Should the Medco transaction complete in 2019, bonuses would be events taking place in 2019 in the Annual Report on Remuneration earned based on up to 50% of the pro-rata salary earned from the for the 2019 year with the value of any reward pool subject to review start of the year and the date that the transaction completes. by the Company’s Auditor by undertaking agreed procedures to Bonuses will be performance related based on the targets determine whether the NAV model materially meets its objectives. detailed below. Recovery and withholding provisions will apply that will enable the No bonus is payable for below certain defined performance levels Committee to recover value overpaid in the event of (i) an FID being with bonuses earned on a sliding scale (where appropriate) based on taken but where the development is then subsequently cancelled the Committee’s assessment of achievement against the targets set. prior to production, or (ii) where the Company is the subject of a For 2019, the weightings and targets have been adjusted vis-à-vis lawsuit pursued successfully by a third party in relation to a NAV event 2018 to better reflect the current strategic priorities of the under which a reward pool was generated. Recovery can be achieved Company with the following bonus metric targets to apply to both through withholding of future incentive payments or through seeking Executive Directors. repayment of the value overpaid (on a net of tax basis) from the individual in line with the recommendations of the UK Corporate The bonus will be solely based on the corporate KPIs set out below Governance Code. (replacing the 66%:33% 2018 split between corporate KPIs and personal KPIs). Non-Executive Directors’ remuneration Non-Executive Directors are not eligible to participate in short or Percentage of base long-term incentive plans or to receive any pension from the Group. salary potentially Measure payable as bonus The fees payable to the Chairman and Non-Executive Directors are Corporate KPIs (100% of the bonus) as follows: Licence to operate 20% The targets relate to safety performance, 2019 2018 environmental targets and organisational Chairman £140,000 £140,000 structure Non-Executive Director basic fee £70,000 £70,000 Monetisation 55% Committee Chairmanship fee £5,000 £5,000 The targets relate to production, capital optimisation, synergy savings driven from the Senior Independent Director fee £5,000 £5,000 Santos acquisition and unlocking value from the Company’s 2C inventory Balance sheet 25% The targets relate to capital expenditure versus budget, gross G&A spend and liquidity

Ophir Energy plc Annual Report and Accounts 2018 73

Audited information Remuneration payable to Directors for the year under review The detailed emoluments for the Executive and Non-Executive Directors for the year ended 31 December 2018 are detailed below: All figures in £000 Base salary/ Long-term Total Fees Benefits Pension Bonus incentives 2018 Executive Directors Alan Booth1 342 – – – – 342 Tony Rouse 325 11 36 107 – 2 479 Former Executive Director Nick Cooper 3 367 4 14 61 – – 625 Chairman and Non-Executive Directors

Bill Schrader 140 – – – – 140 STRATEGIC REPORT Carol Bell 80 – – – – 80 Alan Booth 29 – – – – 29 Vivien Gibney 75 – – – – 75 David Davies 75 – – – – 75 Carl Trowell 5 73 – – – – 73

1 Alan Booth served as a Non-Executive Director until 18 May 2018 when he was appointed Interim Chief Executive. 2 The 2016 LTIP failed to achieve its performance conditions and therefore, the awards lapsed in full.

3 Nick Cooper stepped down from the Board on 18 May 2018. This figure does not include the loss of office payments detailed on page 75. GOVERNANCE REPORT 4 Nick Cooper received £183,336 in 2018,as part of the loss of office payment (totalling up to £412,500 subject to mitigation) detailed on page 75. 5 Carl Trowell was appointed as Chairman of the Technical and Reserves Committee on 21 May 2018. The detailed emoluments for the Executive and Non-Executive Directors for the year ended 31 December 2017 are detailed below: All figures to nearest £000 Base salary/ Long-term Total Fees Benefits Pension Bonus incentives 2017 Executive Directors

Nick Cooper 550 14 61 – 38 1,2 6246,7 Tony Rouse 325 10 36 – – 2 371 FINANCIAL STATEMENTS Former Executive Director Bill Higgs 3 287 19 32 – – 2 3388 Chairman and Non-Executive Directors Bill Schrader 140 – – – – 140 Carol Bell 4 78 – – – – 78 Ronald Blakely 5 19 – – – – 19 Alan Booth 75 – – – – 75 Vivien Gibney 75 – – – – 75 David Davies 75 – – – – 75

Carl Trowell 70 – – – – 70 SUPPLEMENTARY INFORMATION

1 The third tranche of the 2012 Special CEO award vested on 19 June 2017 at 12.5% of the total granted. This award is vested but has not been exercised. Therefore, the calculation is based on the closing share price on 19 June 2017 (£0.83). 2 The 2015 LTIP failed to achieve its performance conditions and therefore, the awards lapsed in full. 3 Bill Higgs left the Board on 7 August 2017 and ceased employment on 30 September 2017. In addition to the above he received £97,826 as a loss of office payment. 4 Carol Bell was appointed Senior Independent Director on 31 March 2017. 5 Ronald Blakely retired from the Board on 31 March 2017. 6 All figures allocated are to the nearest £000, including the total. Therefore, the components do not add up to the total figure. 7 This total figure does not include the long-term incentives figure because this award has not been exercised and therefore the benefit has not been realised during the year. 8 This total figure does not include loss of office payments.

Annual Report and Accounts 2018 74 ANNUAL REPORT ON REMUNERATION CONTINUED

Additional information in respect of the Directors’ remuneration table Annual bonus plan outturn for 2018 For 2018, the Committee set a combination of corporate KPI targets and personal KPI targets for the Executive Directors. The corporate KPIs applied to two-thirds of the total bonus opportunity and included targets relating to (i) licence to operate (ii) organic growth (iii) monetisation and (iv) balance sheet. The one-third of bonus subject to personal KPIs was tailored by role. The extent of achievement for the Chief Financial Officer (with no other Executive Director eligible for an annual bonus award in 2018) is detailed below:

Percentage of Metric Extent of achievement individual target met Licence to operate Lost Time Injury Frequency 100% achieved 10% (10% of corporate Target: 0=100%, 0.5=50%, 1=0% Recorded LTIF: 0 bonus element) Targets related to Kerendan, Bualuang and West Bangkanai Greenhouse gas emissions 100% achieved 2% (2% of corporate Conduct and complete GHG Data audit to verify: GHG audit completed with data accuracy confirmed, bonus element) –– Accuracy of data sources for GHG calculations opportunities for GHG emissions and energy consumption –– Opportunities for GHG emissions reductions reduction identified. Board update provided with all actions –– Opportunities for energy consumption reduction completed by year end. –– Following the audit present action plan to the Board with specific deliverables for reductions in emissions and consumption. Employee engagement 70% achieved 2.1% (3% of corporate –– Present for Board endorsement, action plan based on employee Results of 2017 employee engagement taken to the Board bonus element) feedback following 2017 employee engagement survey with supporting recommendations. –– Implement action plan to support the people agenda Implementation of recommendations included (i) focus during 2018 groups to mine the data results, (ii) regular leadership –– Prioritise four initiatives to enhance the EVP (Employee Value communications, and (iii) detailed work in relation to Proposition) managing high potential employees and future leaders. Partial implementation of (iv) objective of cross collaboration initiatives resulted in partial achievement of objective overall. Organic growth Prospective Risked Resource add of 25MMboe net: 100% achieved 15% (15% of corporate Target: 25MMboe=100%, 15MMboe=50%, 5MMboe=0% Prospective risked resources increased by a net addition of bonus element) 116 MMboe (excluding new Santos assets) through Blocks 10 and 12 in the Mexico Ridges basin. Monetisation Operated production: 50% achieved 5% (10% of corporate Target: 10% above budget (11.77 Mboepd)=100%, budget Operated production (excluding new Santos assets) was bonus element) (10.7 Mboepd)=50%, 10% below budget (9.63 Mboepd)=0% 10.4 Mboepd Total Opex (Operated): 90% achieved 9% (10% of corporate Target: 5% reduction=100%, budget=50%, 5% overrun=0% –– Actual Kerendan Opex was delivered 3% below budget bonus element) (so 80% of the maximum target was achieved). –– Actual Bualuang Opex was 11% below budget (so 100% of the maximum target achieved). –– Accordingly 4% out of 5% was earned in respect of Kerendan and 5% out of 5% was earned in respect of Bualuang. –– Individual budgets are commercially sensitive but the combined Opex budget was $57m with actual Opex being $50.8m for operated assets excluding new Santos assets. –– However, the targets were assessed on an asset by asset basis thus 90% was achieved. Unlock value from 2C inventory 8.3% achieved 2.5% (30% of corporate Progress 2C to 2P to cash or value: The targets relating to Fortuna were not met with the bonus element) –– Fortuna FID=67%, licence expiring. –– Kerendan Phase 2 GSA=33% Developments on commercial agreements on Kerendan resulted in partial achievement. Balance sheet Capital expenditure: 69% achieved 8.3% (12% of corporate Deliver ‘in scope’ operated Capex budget +/–10% Performance delivered: bonus element) –– <10%=100% –– 95% of budgeted exploration expenditure (75% achieved) –– On budget=50% –– Kerendan and Bualuang spend within 90% of budget –– >10%=0%) (100% achieved) –– EG spend 90% under budget as no FID

Gross G&A spend: 50% achieved 2% (4% of corporate –– <10%=100% Gross G&A budget: $58m with actual spend $58m bonus element) –– On budget=50% (excluding post budget Board approved restructuring costs) –– >10%=0% Liquidity (Gross year-end): 100% achieved with gross liquidity of $391m exceeding 4% (4% of corporate –– >10%=100% budget of $339m bonus element) –– On budget=50% –– <10%=0% Total percentage of Corporate KPI element 59.9% out of 100% Total percentage of overall bonus 39.9% out of 66.67% (up to a maximum of 66.67%)

Ophir Energy plc Annual Report and Accounts 2018 75

Personal KPIs Individual performance was based on working with the Chief Executive and the Interim Chief Executive to deliver against the following key objectives. These were as follows: (i) monitor and review the effectiveness of the corporate KPIs (ii) implement a culture of continuous improvement (iii) deliver financial leadership and (iv) provide effective stewardship and manage Ophir’s investment proposition. Performance was assessed against each objective as detailed below:

Objective Achievement Monitor and review the effectiveness of the Supported Board review of corporate KPIs and broader strategy review during the year. corporate KPIs and support delivery of quality Delivered successful, cash generative acquisition of Santos assets. outcomes Revised Board strategy approved and presented to shareholders. Objective 100% achieved Implement a culture of continuous Worked with the Interim Chief Executive and wider executive leadership team to appraise and initiate improvement a corporate restructuring to relocate our corporate functions to Southeast Asia.

Objective 100% achieved STRATEGIC REPORT Deliver financial leadership Achieved successful refinancing the Company’s reserve based lending facility and financing of cash generative Santos acquisition. Objective 100% achieved Provide effective financial stewardship and Effective operation of year end audit processes and strong internal financial management safeguarding Ophir’s investment proposition (as evidenced by delivery of the Opex and Capex budgets as detailed above). Objective 100% achieved

Total percentage of Personal KPI element 100% out of 100% GOVERNANCE REPORT Total percentage of overall bonus (up to a maximum of 33.33%) 33.33% out of 33.33% Total bonus as a % of maximum 73.23% out of 100%

Based on the above performance against the performance targets set, the Committee concluded that 73.2% of the maximum bonus of 50% of salary had been earned (i.e. 36.6% of salary). However, consistent with the approach operated for the wider executive leadership team in light of a broad assessment of overall performance across the year, the Committee reduced the Chief Financial Officer’s annual bonus by 10% and so his actual bonus was 33% of salary (i.e. limited to 66% of maximum and £107,000).

The Committee was comfortable with this level of bonus given the performance of the Chief Financial Officer and his achievements

during the year. FINANCIAL STATEMENTS Long-Term Incentive Plan awards vesting by reference to performance in 2018 The LTIP award granted on 14 March 2016 had a performance period ending on 31 December 2018. The performance condition applying to this award was comparing Ophir’s TSR versus a bespoke peer group of 21 oil and gas companies. At the conclusion of the performance period, Ophir was ranked below the median of the comparator group and so the award lapsed. Long-Term Incentive awards granted during the year and NAV point allocations in relation to 2018 Following the introduction of the 2016 Plan there were no LTIP awards granted in 2018. In relation to the 2016 Long-Term Value Creation Plan, no notional NAV points were allocated in relation to 2018 and all NAV points allocated

to date lapsed on 31 December 2018 given there has been no NAV event to date.

SUPPLEMENTARY INFORMATION While no payments were made in 2018 in relation to the 2016 Plan, any future payments to the Executive Directors under the Long-Term Value Creation Plan will be restricted to the limits detailed on page 67 and no further Notional NAV points will be allocated without prior consultation with the Company’s shareholders. Payments for loss of office As announced on 18 May 2018, Nick Cooper stepped down from the Company’s Board on 18 May 2018 by mutual agreement. In accordance with the terms of his employment contract he was placed on garden leave for the three-month period to 18 August 2018 (during which time contractual benefits remained payable) and his employment then terminated on 18 August 2018. With regards to the payments made in connection with his termination of employment these included: —— Nine monthly instalments of £45,833 that represented the balance of his 12 months’ notice period. These payments are subject to mitigation and have a maximum total of £412,500. —— No bonus was entitled to be payable in relation to the 2018 financial year. —— Nick Cooper was treated as a good leaver for the purposes of his 2016 Long-Term Incentive Plan award over 1,263,496 shares. Subject to meeting the performance targets over the full period the award would have been subject to a pro-rata reduction prior to any vesting. As a result of the performance targets not being met the award lapsed in full. —— Nick Cooper retained his accrued notional NAV points (19,325) under the Company’s Long Term Value Creation Plan (“VCP”). His points were restricted to those accrued from 1 January 2016 to 31 December 2017 to ensure that any payment made to Nick Cooper in connection with a NAV event was the subject of a pro-rata reduction vis-à-vis the position he would have been in had he remained in employment and received further allocations of NAV points through to a NAV event in line with the operation of the VCP. His entitlement to any value under the NAV scheme lapsed if there was no NAV event by 31 December 2018. Accordingly, his notional NAV points have now lapsed in full. —— Nick Cooper was paid a sum of £61,346 in lieu of accrued but untaken holiday. —— A sum of £5,200 was paid as a contribution in relation to legal services, paid directly to third party service provider.

Annual Report and Accounts 2018 76 ANNUAL REPORT ON REMUNERATION CONTINUED

Directors’ interests in shares Directors’ options and share-based awards as at 31 December 2018:

Shares Shares Shares Market under lapsed/ under Exercise price at award at Shares cancelled award at Director and Date price exercise Vesting 1 January Shares vested in Shares or 31 December Lapse Scheme of grant (pence) (pence) date 2018 awarded year exercised forfeited 2018 date Nick Cooper ESOP1 01/06/2011 216.20 – 01/06/2013 578,164 – – – – 578,164 31/05/2021 Long-Term Incentive Plan 19/06/2012 0.00 – 19/06/2017 370,025 – – 46,253 323,772 – 18/06/2018 Long-Term Incentive Plan2 14/03/2016 0.00 – 14/03/2019 1,263,496 – – – – 1,263,496 13/03/2020 Tony Rouse Long-Term Incentive Plan2 14/03/2016 0.00 – 14/03/2019 559,958 – – – – 559,958 13/03/2020

1 Nick Cooper left the Board on 18 May 2018 and ceased employment on 18 August 2018. He was granted market value options under the 2006 Share Option Scheme and an award under the Long-Term Incentive Plan as part of the terms of his recruitment. 2 The 2016 LTIP award was assessed by the Remuneration Committee and a 0% vesting outcome was determined. Therefore, all awards under the 2016 grant lapsed in full in March 2019.

Share ownership and minimum share ownership requirements To align the interests of the Executive Directors with shareholders, Executive Directors are required to build and maintain significant shareholdings in the Company. The Chairman and Non-Executive Directors are encouraged to hold shares in the Company but are not subject to a formal minimum shareholding requirement. Details of the Directors’ interests in shares are shown in the table below.

Beneficially Beneficially Proportion of Minimum share owned as at owned as at minimum share Outstanding ownership 31 December 1 January ownership share-based requirement 2018 2018 requirement incentive awards Bill Schrader 1 – 77,700 17,700 – – Tony Rouse 2 200% 337,775 337,775 27% – Carol Bell 3 – 39,194 9,1944 – – Alan Booth 5 – 378,283 125,000 – – Vivien Gibney – 20,500 15,000 – – David Davies 6 – 130,819 – – – Carl Trowell – – – – – Adel Chaouch 7 – – – – – Former Executive Director Nick Cooper 8 300% N/A 1,524,431 N/A N/A 1 Bill Schrader holds a beneficial interest in 77,700 shares. The legal interest is held by Vidacos Nominees Limited. 2 Tony Rouse holds a beneficial interest in 326,722 shares and his spouse, Claudia Rouse, holds a beneficial interest in 11,053 shares. The legal interest in all of these shares is held by Hargreaves Lansdown Nominees Limited. 3 Carol Bell holds a beneficial interest in 39,194 shares. The legal interest is held by Platform Securities Nominees Limited. 4 This shareholding was incorrectly reported in the 2017 Annual Report as 6,870. 5 Alan Booth holds a beneficial interest in 378,283 shares. The legal interest is held by TD Direct Investing Nominees (Europe) Ltd. 6 David Davies holds a beneficial interest in 130,819 shares. The legal interest is held by Barclays Direct Investing Nominees Limited. 7 Adel Chaouch joined the Board on 15 January 2019. 8 Nick Cooper left the Board on 18 May 2018 and ceased employment on 18 August 2018.

Ophir Energy plc Annual Report and Accounts 2018 77

Performance graph (not subject to audit) Percentage change in the remuneration of the Chief Executive This graph shows the value, by 31 December 2018, of £100 invested Officer (not subject to audit) in Ophir Energy plc on 13 July 2011 (the date the Company’s shares The table below shows the percentage change in remuneration began trading on the London Stock Exchange) against the FTSE All (salary, benefits and annual bonus) from 2017 to 2018 for the Chief Share Oil and Gas Producers Index and against the FTSE 250 Index. Executive Officer (with salary included as the aggregate amount paid Ophir has been a constituent of the index for much of the period and to Nick Cooper and Alan Booth for the relevant part years and Nick therefore the Committee considers this broad equity index to be Cooper’s benefits included as an annualised value noting that Alan appropriate as a comparator. Booth did not receive any benefits during 2018) compared with the average UK Head Office employee. Total shareholder returns (TSR) 250 Chief Executive Officer Average UK employee1 200 Salary 0% 6.4% Benefits 0.37%2 6.4%

150 STRATEGIC REPORT Annual bonus 0% 112%

100 1 The comparator group chosen comprises 32 employees who are the Company’s UK Value (£) based employees, excluding Executive Directors, who were employed continuously from 50 31 December 2016 to 31 December 2018. The Committee believes that this group is the most appropriate comparator group as these employees are based in the same geographical 0 location as the Chief Executive Officer and allows for a like-for-like comparison. 13 Jul 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec The comparator group has decreased from 39 to 32 employees. 2011 2011 2012 2013 2014 2015 2016 2017 2018 2 The benefits available to all employees, including the Chief Executive Officer, remain unchanged from the previous year and include pension, private healthcare, income protection insurance and life assurance. Though benefits remain unchanged the costs of insurance Ophir FTSE 250 FTSE All Share Oil&Gas Producers Index premia have been updated and the overall cost of benefits has increased for the Chief Source: Thomson Reuters Executive and increased for the average UK employee from 2017 to 2018. GOVERNANCE REPORT Relative importance of the spend on pay (not subject to audit) Chief Executive Officer’s remuneration table (not subject to audit) 2018 2017 % change The table below details the single total remuneration figure earned by Staff costs (£m) 30 29 3.5% the Chief Executive Officer since the Company moved to the Official Distributions to shareholders (£m) 0 0 0% List. Total remuneration has been calculated to be consistent with the Statement of shareholder voting (not subject to audit) figures disclosed on page 73 and the table also details the proportion

At the 2018 AGM, the resolutions to approve the Annual Report on of annual bonus and LTIP awards payable and/or vesting in the

Remuneration received the following votes from shareholders: FINANCIAL STATEMENTS relevant year. Votes Votes Votes Total Annual LTIP in favour against withheld Year remuneration bonus vesting ending Executive (£000) (% of max) (% of max) Annual Report 98.10% 1.90% on remuneration (534,865,252) (10,348,644) (5,679,708) 31/12/2018 Alan Booth/ 709 0% 0% Nick Cooper By order of the Board 31/12/2017 Nick Cooper 624 0% 12.5%1 31/12/2016 Nick Cooper 811 68%2 0% Vivien Gibney 31/12/2015 Nick Cooper 1,570 72% 0% Chairman of the Remuneration Committee 31/12/2014 Nick Cooper 2,970 58% 95 &

3,4

11 March 2019

100% SUPPLEMENTARY INFORMATION 31/12/2013 Nick Cooper 1,027 92% n/a 31/12/2012 Nick Cooper 970 89% n/a

Nick Cooper left the Board on 18 May and was replaced by Alan Booth. The values in the table for 2018 related to the aggregate emoluments paid to both individuals excluding any payments made in connection with the termination of Nick Cooper’s employment. 1 The third tranche of the 2012 Special CEO award, vested at 12.5% of the total granted. 2 Annual maximum bonus potential from 2016 is 50% of annual salary, reduced from 150% in previous policy. 3 In the year ending 31 December 2014 performance was established for the LTIPs awarded in 2011, which vested at 100% on 1 June 2014 and for the award made on 13 April 2012, which vested at 95% on 13 April 2015. 4 Reflects the fact that Nick Cooper was appointed as Chief Executive Officer part way through the year on 1 June 2011.

Annual Report and Accounts 2018 78 CORPORATE GOVERNANCE CONTINUED

Responsibility statement Statement of Directors’ of the Directors in respect responsibilities in relation of the Annual Report to the financial statements and Accounts and Annual Report

I confirm on behalf of the Board that to the best of its knowledge: The Directors are responsible for preparing the Annual Report and the —— the financial statements, prepared in accordance with financial statements in accordance with applicable United Kingdom International Financial Reporting Standards as adopted by the law and regulations. Company law requires the Directors to prepare European Union, give a true and fair view of the assets, liabilities, financial statements of the Group and the parent Company for each financial position and profit and loss of the Company and the financial year. Under that law, the Directors are required to prepare undertakings included in the consolidation taken as a whole; and financial statements under International Financial Reporting —— the Strategic Report and Directors’ Report include a fair review Standards (IFRSs) as adopted by the European Union. of the development and performance of the business and the Under Company Law the Directors must not approve the Group position of the Company and the undertakings included in the and parent Company financial statements unless they are satisfied consolidation taken as a whole, together with a description of that they give a true and fair view of the state of affairs of the Group the principal risks and uncertainties that they face. and parent Company and of the profit or loss of the Group and Directors’ statement under the UK Corporate Governance Code parent Company for that period. In preparing the financial The Board considers that the Annual Report and Accounts, taken statements the Directors are required to: as a whole, is fair, balanced and understandable and that it provides —— present fairly the financial position, financial performance and the information necessary for shareholders to assess the Company’s cash flows of the Group and parent Company; performance, business model and strategy. —— select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Approved by the Board on 11 March 2019 Errors and then apply them consistently; —— present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable Alan Booth information; Interim Chief Executive Officer —— make judgements that are reasonable; —— provide additional disclosures when compliance with the specific requirements in IFRSs as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and parent Company’s financial position and financial performance; and —— state whether the Group and parent Company financial statements have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and parent Company transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent Company and enable them to ensure that the Group and parent Company financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration report and the Corporate Governance Statement in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules. Approved by the Board on 11 March 2019

Alan Booth Interim Chief Executive Officer

Ophir Energy plc Annual Report and Accounts 2018 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF OPHIR ENERGY PLC 79

OPINION In our opinion: —— Ophir Energy plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2018 and of the group’s loss for the year then ended; —— the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; —— the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and —— the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the group financial statements, Article 4 of the IAS Regulation. We have audited the financial statements of Ophir Energy plc which comprise: Group Parent company STRATEGIC REPORT Consolidated statement of financial position as at 31 December 2018 Company statement of financial position as at 31 December 2018 Consolidated income statement and statement Company statement of changes in equity for the year then ended of other comprehensive income for the year then ended Consolidated statement of changes in equity for the year then ended Company statement of cash flows for the year then ended Consolidated statement of cash flows for the year then ended Related notes 1 to 20 to the financial statements including a summary of significant accounting policies Related notes 1 to 39 to the financial statements,

including a summary of significant accounting policies GOVERNANCE REPORT

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our FINANCIAL STATEMENTS other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs(UK) require us to report to you whether we have anything material to add or draw attention to: —— the disclosures in the annual report set out on page 18 that describe the principal risks and explain how they are being managed or mitigated;

—— the directors’ confirmation set out on page 60 in the annual report that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity; SUPPLEMENTARY INFORMATION —— the directors’ statement set out on page 60 in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements —— whether the directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or —— the directors’ explanation set out on page 60 in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. OVERVIEW OF OUR AUDIT APPROACH Key audit matters ––Impairment of the tangible oil and gas assets, exploration and evaluation assets, the equity accounted investment and the held for sale asset and its classification. –– Acquisition of assets from Santos Limited –– Estimates of oil and gas reserves –– Provision for decommissioning and restoration of oil and gas Audit scope ––We performed an audit of the complete financial information of 7 components and audit procedures on specific balances for a further 13 components. –– The components where we performed full or specific audit procedures accounted for 98% of revenue, 99% of total group equity and 99% of total assets. Materiality ––Overall group materiality of $10.4m which represents 1.5% of equity. 80 NOTES TO THE FINANCIAL STATEMENTS

KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. Risk Our response to the risk Key observations communicated to the Audit Committee Impairment of the oil and gas (“O&G”) properties, exploration and evaluation (“E&E”) assets, investments accounted for using the equity method (“APICO”) and the assets classified as held for sale. For O&G properties We inquired of both operational and finance We reported to the Audit Committee in the February Oil and gas properties: personnel regarding the assets’ performance, 2019 meeting that: $917m (2017: $700m). specifically with regard to production and reserves —— there was appropriate evidence to support the price Refer to the Audit Committee data, and future plans to assess whether there assumptions used by Ophir; were any indicators of impairment. We also read Report (page 48); Accounting —— the impairment discount rate adopted by policies (page 98); and Note 15 the most recent reserves reports and discussed management was in the middle of an acceptable of the Consolidated Financial them with the third party reservoir engineers. With range and the inflation rate assumption was Statements (page 111). regards to the Medco offer, we have considered this in respect of the net asset valuation when acceptable based on market data; Fluctuating prices, as well as assessing whether indicators of impairment exist other potential triggers such as —— we did not identify any errors or factual differences at year end. changes in reserves, production between Ophir’s oil and gas reserves and resource profiles, drilling commitments For assets where an impairment indicator was estimates that would materially impact the and cost forecasts, could identified, we obtained the relevant models financial statements. indicate heightened risk of supporting the recoverable amounts for the asset On the basis of our audit procedures, we confirmed impairment and give rise to from management and compared these to the that the oil and gas prices, discount rates, production impairment testing. carrying value of the asset as at the balance sheet volumes and the other assumptions used by date to identify if there were any impairments or This risk has remained consistent management were within a reasonable range reversals of impairments. We substantively tested with the prior year. in light of the current market conditions. the integrity of the models. We communicated to the Audit Committee that we In assessing the appropriateness of management’s considered the carrying values and disclosures in the assumptions and inputs included in the models we financial statements to be appropriate based on the worked with our valuation specialists to assist us in work we had performed. performing industry benchmarking and analysis over oil and gas prices (short, medium and long-term), discount rates, foreign exchange rates and inflation rates. We stress tested the models by performing sensitivity analyses of the key assumptions. In respect of oil and gas reserve estimates including production profiles, we made inquiries directly of the third party reservoir engineers, around their scope of work performed and their independence from Ophir in order to assess both their competence and objectivity in respect of their reserves reporting. We performed audit procedures at full and specific scope components over this risk area in 2 locations, which covered 100% of the oil and gas properties.

Ophir Energy plc Annual Report and Accounts 2018 81

Risk Our response to the risk Key observations communicated to the Audit Committee For E&E assets We verified that Ophir had the right to explore in We reported to the Audit Committee in the February E&E assets: $196m the relevant exploration licence by obtaining 2019 meeting that: (2017: $248m) supporting documentation such as licence —— E&E assets were assessed under the IFRS 6 criteria Refer to the Audit Committee agreements and correspondence with relevant and we validated this by: Report (page 48); Accounting government agencies. 1. reviewing the right to tenure for the group; policies (page 98); and Note 14 We confirmed that management had the intention 2. the anticipated work programmes for 2019 of the Consolidated Financial to carry out exploration and evaluation activity in and beyond; Statements (page 111). the relevant exploration area by performing 3. drilling results; Given the sensitivity to procedures which included the review of budgeted 4. releases made by Ophir during the year; and commodity prices and the expenditures and discussions with senior 5. budgets and commitments for 2019 and beyond. consequential impact on future management in financial and operational roles —— Discussions were held on the status of each exploration and capital and discussions with executive management. E&E asset with senior management and the expenditure plans, there is a We considered whether Ophir will be able to STRATEGIC REPORT significant risk that the carrying finance planned future exploration and asset managers. value of E&E assets may be evaluation activity. On the basis of our audit procedures, we impaired. In addition, Ophir’s right We considered the commercial viability of the communicated that we agreed with management’s to explore in the specific areas exploration block based on the results of conclusions regarding the carrying values of the either may have expired during exploration and evaluation activities carried out in exploration and evaluation assets. the period or may expire in the the relevant licence area. near future, and without We performed audit procedures at full and specific expectation of renewal. We have scope components over this risk area in 3 locations, considered the strategic direction GOVERNANCE REPORT which covered 90% of the balance. of Ophir as it moves away from being an exploration focused company to focusing on increasing cashflows through its production assets. In addition, the Medco potential acquisition was also taken into consideration. This risk has increased from the prior year due to the change in

strategic direction. FINANCIAL STATEMENTS For APICO We instructed PwC Bangkok to perform a full scope We reported to the Audit Committee in the February Investment accounted for audit over the financial statements of APICO. We 2019 meeting that: using the equity method $76m scoped out of our instructions the impairment —— the impairment discount rate adopted by (2017: $121m). procedures on the investment as this is performed management was in the lower end of an acceptable Refer to the Audit Committee by the primary team. range and the inflation rate assumption was Report (page 48); Accounting During our site visits to Bangkok, we met with PwC acceptable based on market data; policies (page 98); and Note 28 and certain directors of APICO appointed by Ophir —— we confirmed to the Audit Committee that we were of the Consolidated Financial to inquire of the financial and non-financial Statements (page 121). performance of the company to understand satisfied that the price assumptions applied in the model as a whole were reasonable and in line with Lower than anticipated whether any impairment indicators exist in respect

by our valuation specialists. SUPPLEMENTARY INFORMATION nominations reduced the of assets held by APICO. production profile attributed to In assessing the carrying value of the equity- —— we did not identify any errors or factual differences the Sinphuhorm asset and hence accounted investment in APICO, we obtained the between Ophir’s oil and gas reserves and resource there is a risk of an impairment of relevant model supporting the recoverable amount estimates that would materially impact the the APICO investment. for the asset from management and compared financial statements. This risk has increased from prior these to the carrying value of the asset as of the We communicated to the Audit Committee that on year as a result of: balance sheet date to identify whether there were the basis of our audit procedures, we agreed with any impairments or reversals of impairments. We —— the lower nominations and management’s conclusions regarding the carrying substantively tested the integrity of the models. value of the equity accounted investment. reduction in reserves for the Sinphuhorm asset; and In assessing the appropriateness of management’s assumptions and inputs included in the model we —— the significance of a potential worked with our valuation specialists to assist us in material misstatement has performing industry benchmarking and analysis increased with the reduction in over oil and gas prices (short, medium and materiality for 2018. long-term), discount rates, foreign exchange rates and inflation rates. In respect of oil and gas reserve estimates including production profiles, we made inquiries directly to the third party reservoir engineers, around their scope of work performed and their independence from Ophir in order to assess both their competence and objectivity in respect of their reserves reporting. 82 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF OPHIR ENERGY PLC continued

Risk Our response to the risk Key observations communicated to the Audit Committee For assets classified as During the financial year, Schlumberger We reported to the Audit Committee in the February held for sale announced its withdrawal from the OneLNG 2019 meeting that as a result of the licence not being Assets classified as held for sale joint venture creating further delays in FID extended, we considered the asset was appropriately $nil (2017: $604m). being reached. written off to the income statement. Refer to the Audit Committee Active and advanced discussions continued Report (page 48); Accounting throughout the year with interested parties to policies (page 98); and Note 3 secure debt and equity funding, however no of the Consolidated Financial agreement could be reached before the license Statements (page 104. expiry date of 31 December 2018. The valuation of the Equatorial Ophir announced on 5 January 2019 that it had Guinea held for sale asset is received notification from the Equatorial Guinea dependent on a number of Ministry of Mines and Hydrocarbons that the Block accounting estimates and R Licence, which contains the Fortuna gas judgments performed by discovery, would not be extended following expiry management, including but not of the licence on 31 December 2018. limited to, obtaining an extension Accordingly, we inspected the deed of termination on the licence, debt financing, and release of the Block R PSC signed between likelihood of a Final Investment Ophir and the Republic of Equatorial Guinea signed Decision (“FID”), pricing and on 21 January 2019. government participation etc. We verified the value of the held for sale asset was This risk has fallen with respect to written off to the income statement and no held the prior year-end. for sale asset was recognised at year end. Acquisition of assets from In order to assess whether management’s We reported to the Audit Committee in the February Santos Limited methodology and calculation of the purchase price 2019 meeting that: Refer to the Audit Committee allocation (“PPA”) was within an acceptable range —— the significant fair value uplift arose on the Report (page 48); Accounting and in accordance with the requirements of IFRS 3: producing assets acquired and the assumptions policies (page 98); and Note 11 Business Combinations, we have performed the used by management fell within the acceptable of the Consolidated Financial following procedures: range determined by our valuations specialists; Statements (page 108). —— Inquiries of management outside of the finance —— sensitivities were performed over the models and Ophir acquired a package of function to corroborate the assumptions made the models were integrity tested; producing and exploration assets by finance in the preparation of the PPA, oil and from Santos Limited on 6 gas reserves, impairment tests and —— we did not identify any errors or factual differences September 2018. There is a risk decommissioning estimates. between Ophir’s oil and gas reserves used in the that the provisional valuation of models and resource estimates that would —— Read the purchase agreement to gain an the assets and liabilities acquired materially impact the financial statements; is calculated incorrectly leading to understanding of the key terms and conditions and to confirm if the correct accounting —— audit procedures were performed over the opening a material misstatement in the balances at the date of acquisition. financial statements. The treatment was applied. valuation is subjective and —— Assessed the competence of both internal and —— We communicated to the Audit Committee that, we judgemental due to the complex external specialists. We also involved our internal considered the assumptions and inputs used by estimations and inputs required, tax experts to assess the recognition and management in calculating the fair values of the in particular around the valuation valuation of deferred tax assets and liabilities. assets and liabilities acquired as part the of the of the underlying assets business combination, to be within an acceptable —— Reviewed the appropriateness of the acquisition and liabilities range. We also considered the relevant disclosures accounting applied, including the timing at included in the consolidated financial statements which control was deemed to have passed. for Ophir Energy plc, to be in accordance with the —— Obtained management’s purchase price requirements of IFRS 3: Business Combinations. allocation schedules and supporting fair value models (where applicable, for example, for Production and development assets). —— In assessing the appropriateness of management’s assumptions and inputs included in the models we worked with our valuation specialists to assist us in performing industry benchmarking and analysis over oil and gas prices (short, medium and long-term), discount rates, foreign exchange rates and inflation rates including performing sensitivity analysis, in calculating the fair value of the acquired assets and liabilities. —— Performed testing over journal entries associated with the recording of the purchase price allocation to ensure that the amounts recorded accurately reflected the outcome of management’s calculations. —— Assessed the adequacy of the related disclosures in the notes to the financial statements.

Ophir Energy plc Annual Report and Accounts 2018 83

Risk Our response to the risk Key observations communicated to the Audit Committee Estimate of oil and gas Our audit procedures have focused on We reported to the Audit Committee in the February reserves management’s estimation process, including 2019 meeting that: The estimation of oil and gas whether bias exists in the determination —— we assessed the ERCE engineers to be independent, reserves and resources is a of reserves. competent and objective; significant area of judgment We carried out procedures to walkthrough and —— independent discussions with the ERCE engineers due to the technical uncertainty understand Ophir’s internal process and key had been performed to understand significant in assessing the quantities controls associated with the oil and gas reserves movements and assumption changes when and complex contractual estimation process. The equity accounted for arrangements that dictate investment’s related reserves are reported in determining the reserves for each asset; Ophir’s share of reserves and addition to the O&G assets and are included in the —— we agreed the reserves reports through to the resources volumes. The estimates reserves table in the ARA. We carry out identical related underlying accounts and we found no are based on internal or external procedures on each reserve report for both types material errors. specialists’ assessment of reserves of assets. Based on our procedures we consider that the reserves STRATEGIC REPORT in place, recovery factors and We assessed the competence of both internal and estimations are reasonable and are an appropriate crude quality. external specialists and objectivity of external basis for use in, amongst other calculations, The risk relates to significant specialists. We discussed the reserves report impairment testing, calculating depreciation and in-year movements, or lack directly with the external reservoir engineers and amortisation, determination of decommissioning thereof, in the reserves and made enquiries with them to assess their and restoration provisions and assessment resources volumes that materially competence and objectivity. of going concern. impact elements of the financial We also read and analysed the report of the statements including depreciation external specialists on their audit of the reserves for

and amortisation, impairment GOVERNANCE REPORT the tangible (oil and gas) assets in Thailand and testing and decommissioning Indonesia as at 31 December 2018 where we and restoration provisions. performed procedures to evaluate their objectivity This risk has remained consistent and competency. with the prior year. We have checked the consistency of the application of estimated reserves across the significant areas of the audit such as impairment testing; depreciation and amortisation; decommissioning provisions and assessment of going concern. Decommissioning and We have performed audit procedures over this risk We reported to the Audit Committee in the FINANCIAL STATEMENTS restoration provision area in two locations that cover 100% of the February 2019 meeting that having considered the Decommissioning and restoration decommissioning and restoration provision. components that make up the decommissioning provision: $131m (2017: $51m). We have tested the reasonableness of estimate in combination, we were satisfied the Refer to the Audit Committee management’s discount rate used for the overall decommissioning provision is reasonable. Report (page 48); Accounting decommissioning and restoration provision based We also reported that we ensured the assumptions policies (page 98); and Note 25 on market data. applied between Santos and Ophir aligned, and the methodology applied in the calculation of the Consolidated Financial We evaluated the models prepared by was harmonised. Statements (page 114). management to determine the decommissioning

The decommissioning and cost estimate including testing the integrity of the restoration provision is inherently model for mechanical and mathematical actuary. SUPPLEMENTARY INFORMATION subjective given it is based on We compared actual spend in the year to the estimates of costs that will be provision estimate. settled at some point in the future Where management utilised an internal or external Management’s estimate has specialist, such as their internal reserve engineers been determined on the basis of and ERCE, we assessed their objectivity and both external factors (discount competency. rates/inflation rates) and internal We also obtained an understanding of, and tested factors (future costs estimate). the design and implementation of, key controls This risk has increased in current related to the process. year as a result of the Santos acquisition which brought 3 new producing assets on to the balance sheet.

AN OVERVIEW OF THE SCOPE OF OUR AUDIT Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We consider size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other factors such as recent Internal audit results when assessing the level of work to be performed at each entity. In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the 91 reporting components of the Group, we selected 20 components across London, Thailand and Indonesia. Of the 20 components selected, we performed an audit of the complete financial information of 7 components (“full scope components”) which were selected based on their size or risk characteristics. For the remaining 13 components (“specific scope components”), we performed audit procedures on specific accounts within each component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile. 84 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF OPHIR ENERGY PLC continued

The reporting components where we performed audit procedures accounted for 99% (2017: 99%) of the Group’s equity, 98% (2017: 98%) of the Group’s revenue and 99% (2017: 97%) of the Group’s total assets. For the current year, the full scope components contributed 91% (2017: 69%) of the Group’s equity, 88% (2017: 90%) of the Group’s revenue and 81% (2017: 69%) of the Group’s total assets. The specific scope component contributed 9% (2017: 30%) of the Group’s equity, 10% (2017: 8%) of the Group’s revenue and 18% (2017: 28%) of the Group’s total assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group. Of the remaining 71 components that together represent 1% of the Group’s equity, none is individually greater than 1% of the Group’s equity. For these components, we performed other procedures, including analytical review, testing of consolidation journals and intercompany eliminations to respond to any potential risks of material misstatement of the Group financial statements. The charts below illustrate the coverage obtained from the work performed by our audit teams.

Total equity 2018 Total assets 2018 Revenue 2018 91% full scope components 81% full scope components 88% full scope components 8% specific scope components 18% specific scope components 10% specific scope components 1% other procedures 1% other procedures 2% other procedures

Changes from the prior year We have reassessed our scope and focused our procedures on areas that present a higher risk of material misstatement. Therefore, we have altered our split of entities covered by full and specific scope, and other procedures for 2018. We believe that the 2018 audit scopes we set for each reporting unit when taken together, enable us to form an opinion on the group consolidated financial statements. Involvement with component teams In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the components by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating under our instruction. Of the 7 full scope components, audit procedures were performed on 3 of these directly by the primary audit team. For the 13 specific scope components, where the work was performed by component auditors, we determined the appropriate level of involvement of the primary team to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole. The primary audit team continued to follow a programme of planned visits that has been designed to ensure that the Senior Statutory Auditor visits both Indonesia and Thailand during the current year’s audit cycle. During the current year’s audit cycle, two visits were undertaken by the primary audit team to the component teams in both locations. These visits involved meeting with local management (including heads of country and personnel outside of the finance function) and component teams for planning purposes which included obtaining an understanding of the businesses and their operations including current year performance to enable risk identification, discussions around audit timetables, and the scope for the audit. The primary team interacted regularly with the component teams where appropriate during various stages of the audit, reviewed key working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Group financial statements. OUR APPLICATION OF MATERIALITY We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group to be $10.5m (2017: $29.0m), which is 1.5% (2017: 2%) of Group equity. We have used total equity of the Group as the basis for our materiality calculation as we concluded that total equity is the most closely monitored financial measure for the stakeholders of Ophir Energy plc. In 2018, Ophir’s strategy changed with the acquisition of the Santos assets, which saw Ophir move from a predominantly exploration company to a producing company. This would typically alter the perception of the users of the accounts and require us to use an earnings based measure. The full effect of the strategy change will not impact Ophir for the year ended 31 December 2018 as the results of the newly acquired assets only contributed to 4 months of its financial performance in the year. As a result, we have kept our basis of materiality as equity but reduced the threshold applied of 2% to 1.5% to take this change into account. We determined materiality for the Parent Company to be $7.8m (2017: $13.9m), which is 1% (2017: 1%) of equity. During the course of our audit, we reassessed initial materiality and changed our final materiality to reflect the actual reported equity of the Group in the year. Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

Ophir Energy plc Annual Report and Accounts 2018 85

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgment was that performance materiality was 50% (2017: 50%) of our planning materiality, namely $5.2m (2017: $14.5m). We have set performance materiality at this level on the basis of a number of factors, including the results of our 2017 audit. Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken on the basis of a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was $1.1m to $3.0m (2017: $1.4m to $7.4m). Reporting threshold An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $1.45m (2016: $1.6m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. STRATEGIC REPORT We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in the light of other relevant qualitative considerations in forming our opinion. OTHER INFORMATION The other information comprises the information included in the annual report set out on pages 1 to 61, including the Strategic Report and the Directors’ Report set out on pages 2 to 37 and 38 to 61, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this GOVERNANCE REPORT report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. FINANCIAL STATEMENTS In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions: —— Fair, balanced and understandable set out on page 78 – the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the group’s performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or —— Audit committee reporting set out on page 48 – the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee / the explanation as to why the annual report does not include a section

describing the work of the audit committee is materially inconsistent with our knowledge obtained in the audit; or —— Directors’ statement of compliance with the UK Corporate Governance Code set out on page 38 – the parts of the directors’ SUPPLEMENTARY INFORMATION statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: —— the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and —— the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: —— adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or —— the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or —— certain disclosures of directors’ remuneration specified by law are not made; or —— we have not received all the information and explanations we require for our audit. 86 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF OPHIR ENERGY PLC continued

RESPONSIBILITIES OF DIRECTORS As explained more fully in the directors’ responsibilities statement set out on page 78, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. Our approach was as follows: —— We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most significant which are directly relevant to specific assertions in the financial statements are those related to the reporting framework (IFRS as adopted by the EU, the Companies Act 2006 and the UK Corporate Governance Code) and the relevant tax compliance regulations in the UK, Thailand and Indonesia. —— We understood how Ophir Energy plc is complying with those frameworks by making enquiries to management, internal audit, and those responsible for legal compliance procedures. We corroborated our enquiries through our review of board minutes, discussions with local management and papers provided to the Audit Committee by management. —— We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by making enquiries to management, reviewing the findings of internal audit, assessing the entity level controls and identifying material amounts within the financial statements which may be able to be manipulated to achieve desired results. —— Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved enquiries to management, review of internal audit reports, and those responsible for legal compliance procedures. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. OTHER MATTERS WE ARE REQUIRED TO ADDRESS —— We were appointed by the company on 17 May 2017 to audit the financial statements for the year ending 31 December 2018 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments is 5 years, covering the years ending 31 December 2014 to 31 December 2018. —— The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting the audit. —— The audit opinion is consistent with the additional report to the audit committee. USE OF OUR REPORT This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Stephney Dallmann (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 11 March 2019

Ophir Energy plc Annual Report and Accounts 2018 CONSOLIDATED INCOME STATEMENT AND STATEMENT OF OTHER COMPREHENSIVE INCOME 87 For the year ended 31 December 2018

2018 2017 Consolidated income statement Notes $’000 $’000 Continuing operations Revenue 5 298,246 188,527 Cost of sales 6a (199,208) (147,577) Gross profit 99,038 40,950 Share of profit of investments accounted for using the equity method 28 4,858 4,181 Impairment (losses)/reversal of oil and gas properties 15 (13,500) 23,681 Impairment of investments accounted for using the equity method 28 (45,000) (7,800) Impairment of non-current assets held for sale 3 (613,652) – Exploration expenses 6b (130,406) (91,836) General and administration expenses 6d (10,861) (11,279) Gain on bargain purchase 11 57,542 – STRATEGIC REPORT Other operating expenses 6c (40,763) (11,699) Operating loss (692,744) (53,802)

Net finance expense 7 (27,187) (12,907) Other financial gains 8 160 2,300 Loss from continuing operations before taxation (719,771) (64,409)

Taxation expense 12 (61,899) (47,383) GOVERNANCE REPORT Loss from continuing operations for the year (781,670) (111,792) Attributable to: Equity holders of the Company (781,670) (111,792) (781,670) (111,792) Earnings per ordinary share Basic – (Loss)/profit for the period attributable to equity holders of the Company 13 (110.5)cents (15.8)cents Diluted – (Loss)/profit for the period attributable to equity holders of the Company 13 (110.5)cents (15.8)cents FINANCIAL STATEMENTS Consolidated statement of other comprehensive income Loss from continuing operations for the year (781,670) (111,792) Other comprehensive income/(loss) Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods:

Exchange differences on retranslation of foreign operations net of tax (31) – Cash flow hedges marked to market 5,584 (5,882) Cash flow hedges reclassified to the income statement 7,968 –

Other comprehensive income/(loss) for the year, net of tax 13,521 (5,882) SUPPLEMENTARY INFORMATION Total comprehensive loss for the year, net of tax: (768,149) (117,674)

Attributable to: Equity holders of the Company (768,149) (117,674) (768,149) (117,674)

The notes on pages 91 to 126 and pages 140 to 144 form part of these consolidated financial statements.

Annual Report and Accounts 2018 88 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2018

2018 2017 Notes $’000 $’000 Non-current assets Exploration and evaluation assets 14 196,142 247,944 Oil and gas properties 15 917,088 699,669 Other property, plant and equipment 16 1,380 2,211 Investments accounted for using the equity method 28 76,084 120,964 Other long term receivables 17 91,068 21,205 1,281,762 1,091,993 Current assets Assets classified as held for sale 3 – 604,432 Inventory 18 33,517 40,647 Derivative financial instruments 26 9,970 – Taxation receivable 9,140 9,125 Trade and other receivables 19 58,976 24,656 Cash and cash equivalents 20 323,414 223,779 435,017 902,639 Total assets 1,716,779 1,994,632

Current liabilities Trade and other payables 21 (98,984) (52,374) Interest-bearing bank borrowings due within one year 22 (103,200) – Taxation payable (37,195) (30,282) Provisions 25 (33,604) (9,399) Derivative financial instruments 26 – (3,582) (272,983) (95,637) Non-current liabilities Trade and other payables 21 (14,739) (15,279) Interest-bearing bank borrowings 22 (142,499) – Bonds payable 23 (106,650) (106,651) Provisions 25 (130,676) (51,265) Deferred tax liability 12 (353,548) (264,491) Net defined benefit liability 38 (14) – (748,126) (437,686) Total liabilities (1,021,109) (533,323) Net assets 695,670 1,461,309

Capital and reserves Called up share capital 27 3,061 3,061 Reserves 30 692,609 1,458,528 Equity attributable to equity shareholders of the Company 695,670 1,461,589 Non-controlling interest – (280) Total equity 695,670 1,461,309

The notes on pages 91 to 126 and pages 140 to 144 form part of these consolidated financial statements. The consolidated financial statements of Ophir Energy plc (registered number 05047425) on pages 87 to 126 and pages 140 to 144 were approved by the Board of Directors on 11 March 2019. On behalf of the Board: Tony Rouse Chief Financial Officer

Ophir Energy plc Annual Report and Accounts 2018 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 89 For the year ended 31 December 2018

Non- Called up Treasury Other 1 controlling share capital shares reserves interest Total $’000 $’000 $’000 $’000 equity $’000 As at 1 January 2017 3,061 (153) 1,572,449 (280) 1,575,077 Loss for the period, net of tax – – (111,792) – (111,792) Other comprehensive loss, net of tax – – (5,882) – (5,882) Total comprehensive loss, net of tax – – (117,674) – (117,674)

Exercise of options – 1 – – 1 Share-based payment – – 3,905 – 3,905 As at 31 December 2017 3,061 (152) 1,458,680 (280) 1,461,309 STRATEGIC REPORT Loss for the period, net of tax – – (781,670) – (781,670) Other comprehensive loss, net of tax – – 13,521 – 13,521 Total comprehensive loss, net of tax – – (768,149) – (768,149) Disposal of subsidiary – – (280) 280 – Exercise of options – 3 – – 3 Share-based payment – – 2,507 – 2,507

As at 31 December 2018 3,061 (149) 692,758 – 695,670 GOVERNANCE REPORT

1 Refer to Note 31 of these consolidated financial statements. The notes on pages 91 to 126 and pages 140 to 144 form part of these consolidated financial statements. FINANCIAL STATEMENTS

SUPPLEMENTARY INFORMATION

Annual Report and Accounts 2018 90 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2018

2018 2017 Notes $’000 $’000 Operating activities Loss before taxation (719,771) (64,409)

Adjustments to reconcile loss before taxation to net cash provided by operating activities Exploration expenditure written off and loss on exploration inventory 6b 114,942 76,108 Gain on bargain purchase 11 (57,542) – Impairment of non-current assets held for sale 3 613,652 – Depreciation and amortisation 107,876 79,230 Net impairment/(reversal) on oil and gas properties 13,500 (23,681) Impairment of investments accounted for using the equity method 45,000 7,800 Share of profits from joint ventures (4,858) (4,181) Net finance expenses 7 27,158 14,724 Net foreign currency loss/(gain) 7 29 (1,817) Share based payment expense 6d 2,507 3,905 Increase in provisions 24,197 9,381 Other non-cash losses/(gains) 1,015 (180) Cash flow from operations before working capital adjustments 167,705 96,880 Decrease in inventories 6,918 7,123 Increase in other current and non-current payables 14,750 1,962 (Increase)/decrease in other current and non-current assets (14,375) 10,147 Cash generated from operations 174,998 116,112 Interest received 2,949 2,057 Income taxes paid (70,528) (9,485) Net cash flows generated from/(used in) operating activities 107,419 108,684

Investing activities Additions to exploration and evaluation assets (64,587) (95,827) Additions to oil and gas assets and other property, plant and equipment (49,140) (47,179) Funding provided to joint ventures (1,824) (370) Dividends received from joint ventures 28 6,562 6,523 Acquisitions, net of cash acquired (137,847) – Proceeds from disposals of assets – 428 Net cash flows used in investing activities (246,836) (136,425)

Financing activities Interest paid (14,591) (15,217) Proceeds/(repayment) of debt 253,200 (93,656) Net issue/(repurchase) of shares 4 1 Net cash inflows/(outflows) from financing activities 238,613 (108,872)

Effect of exchange rates on cash and cash equivalents 439 (32) Increase/(decrease) in cash and cash equivalents 99,635 (136,645) Cash and cash equivalents at the beginning of the year 20 223,779 360,424 Cash and cash equivalents at the end of the year 20 323,414 223,779

The notes on pages 91 to 126 and pages 140 to 144 form part of these consolidated financial statements.

Ophir Energy plc Annual Report and Accounts 2018 NOTES TO THE FINANCIAL STATEMENTS 91

1 CORPORATE INFORMATION Ophir Energy plc (the ‘Company’ and ultimate parent of the Group) is a public limited company domiciled and incorporated in England and Wales with company number 05047425. The Company’s registered offices are located at 123 Victoria Street, London SW1E 6DE. The principal activity of the Group is the development of offshore oil and gas exploration assets. The Company has an extensive and diverse portfolio of exploration interests across Africa, Mexico and Southeast Asia. The Group’s consolidated financial statements for the year ended 31 December 2018 were authorised for issue by the Board of Directors on 11 March 2019 and the consolidated statement of financial position was signed on the Board’s behalf by Tony Rouse.

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with IFRS as issued by the International Accounting Standards Board and adopted by the European Union (EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies STRATEGIC REPORT reporting under IFRS. The consolidated financial statements are prepared on a going concern basis. The consolidated financial statements have been prepared under the historical cost convention, modified by the revaluation of certain derivative instruments measured at fair value. The consolidated financial statements are presented in US Dollars rounded to the nearest thousand dollars ($’000) except as otherwise indicated.

Comparative figures for the period to 31 December 2017 are for the year ended on that date. GOVERNANCE REPORT New and amended accounting standards and interpretations The Group has adopted the following relevant new and amended IFRS and IFRIC interpretations as of 1 January 2018: —— IFRS 9 ‘Financial Instruments’ —— IFRS 15 ‘Revenue from Contracts with Customers’ There are no other new or amended standards or interpretations adopted during the year that have a significant impact on the financial statements.

IFRS 9 ‘Financial Instruments’ FINANCIAL STATEMENTS IFRS 9 provides a single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Under the new standard the Group’s financial assets are classified as measured at amortised cost, fair value through profit or loss, or fair value through other comprehensive income. For financial liabilities the existing classification and measurement requirements of IAS 39 are largely retained. Whilst financial assets have been reclassified into the categories required by IFRS 9, the Group has not identified any impacts on the measurement of its financial assets and financial liabilities as a result of the classification and measurement requirements of the new standard. Trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. Thus, the Group has continued to measure these at amortised cost under IFRS 9.

Under IFRS 9, impairments of financial assets classified as measured at amortised cost are recognised on an expected credit loss (ECL) basis which incorporates forward-looking information when assessing credit risk. Movements in the expected loss reserve are recognised in profit SUPPLEMENTARY INFORMATION or loss. Due to the short-term nature and high quality of the financial assets, the Group has not recognised any impacts on the adoption of IFRS 9. The hedge accounting requirements of IFRS 9 have been simplified and are more closely aligned to an entity’s risk management strategy. Under IFRS 9 all existing hedging relationships will qualify as continuing hedging relationships. IFRS 9 also introduces a new way of treating fair value movements on the time value of certain hedging instruments. Whereas under IAS 39 these movements were recognised in profit or loss, under IFRS 9 they are initially recognised in equity to the extent that they relate to the hedged item. An adjustment to the 2018 opening balance sheet has been made to transfer $2.3 million of gains from retained earnings to the hedging reserve for relevant hedging instruments existing on transition (see Note 31). As permitted by IFRS 9, comparatives were not restated. IFRS 15 ‘Revenue from Contracts with Customers’ Under IFRS 15, revenue from contracts with customers is recognised as or when the Group satisfies a performance obligation by transferring a promised good or service to a customer. A good or service is transferred when the customer obtains control of that good or service. The transfer of control of oil and gas sold by the group coincides with title passing to the customer and the customer taking physical possession. The Group have applied the modified retrospective approach and there is no transition impact. The Group satisfies its performance obligations at a point in time. The accounting for revenue under IFRS 15 does not, therefore, represent a change from the Group’s previous practice for recognising revenue from sales to customers. An analysis of revenue from contracts with customers by product is presented in Note 5 and by product and segment in Note 4.

Annual Report and Accounts 2018 92 NOTES TO THE FINANCIAL STATEMENTS continued

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED Standards and interpretations issued but not yet effective The following standards and interpretations, relevant to the Group, have been issued by the IASB, but are not effective for the financial year beginning 1 January 2018 and have not been early adopted by the Group: Effective date for periods beginning on or after IFRS 16 ‘Leases’ 1 January 2019 IFRIC 23 ‘Uncertainty over income tax treatments’ 1 January 2019 Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 1 January 2019 Amendments to IFRS 9: Prepayment Features with Negative Compensation 1 January 2019 Amendments to IAS 19: Plan Amendment, Curtailment or Settlement 1 1 January 2019 Amendments to IAS 28: Long-term interests in associates and joint ventures 1 January 2019 Annual Improvements 2015-2017 Cycle 1 1 January 2019 Amendment to IFRS 3 Business Combinations 1 1 January 2020 Amendments to IAS 1 and IAS 8: Definition of material 1 1 January 2020 Amendment to References to the Conceptual Framework in IFRS Standards 1 1 January 2020

1 These standards, amendments and improvements have not yet been endorsed by the European Union. The directors anticipate the following standard will have a material impact for future financial reporting periods. IFRS 16 ‘Leases’ IFRS 16 ‘Leases’ provides a new model for lessee accounting in which all leases, other than short-term leases and leases of low value, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability. The subsequent amortisation of the right-to-use asset and the interest expense related to the lease liability will be recognised in profit or loss over the lease term. IFRS 16 replaces IAS 17 ‘Leases’ and IFRIC 4 ‘Determining whether an arrangement contains a lease’. The Company will adopt IFRS 16 on 1 January 2019. An implementation project was initiated in 2018 to cover accounting policy development and the impacts on covenants and other financial metrics. On transition, the company will use the modified retrospective approach permitted by the standard in which the lease asset is measured based on the lease liability with no adjustment to opening retained earnings and no restatement of comparative periods’ financial information. IFRS 16 introduces a revised definition of a lease. The Company has reassessed the existing population of leases under the new definition and has applied the new definition for the assessment of all material contracts in existence as at 1 January 2019. An adjustment to the 2019 opening statement of financial position is expected to be made to recognise a right of use asset of $94.1 million and a lease liability of $94.1 million. The discount rates used on transition are incremental borrowing rates with a range of such incremental borrowing rates applicable for the majority of leases for the Group of 3% to 6%, with the rate primarily determined by the country of operation. It is expected that the presentation and timing of recognition of charges in the income statement will also change as the operating lease expense currently reported under IAS 17, typically on a straight-line basis, will be replaced by depreciation of the right-to-use asset and interest on the lease liability. In the cash flow statement operating lease payments are currently presented within cash flows from operating activities but under IFRS 16 payments will be presented as financing cash flows, representing repayments of debt, and as operating cash flows, representing payments of interest. 2.2 Basis of consolidation These financial statements comprise a consolidation of the accounts of the Company and its subsidiary undertakings and incorporates the results of its joint ventures and associates using the equity method of accounting, drawn up to 31 December each year. Subsidiaries Control is achieved when the Group is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has all of the following: —— power over the investee (i.e. existing voting rights that give it the current ability to direct the relevant activities of the investee); —— exposure or rights to variable returns from its involvement with the investee; and —— the ability to use its power over the investee to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising therefrom, are eliminated. A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it (i) derecognises the assets (including goodwill) and liabilities of the subsidiary; (ii) derecognises the carrying amount of any non-controlling interest; (iii) derecognises the cumulative translation differences, recorded in equity; (iv) recognises the fair value of the consideration received; (v) recognises the fair value of any investment retained; (vi) recognises any surplus or deficit in profit and loss; and (vii) reclassifies the parent’s share of components previously recognised in other comprehensive income to profit and loss or retained earnings, as appropriate.

Ophir Energy plc Annual Report and Accounts 2018 93

2.3 Summary of significant accounting policies Non-controlling interests Non-controlling interests represent the equity in a subsidiary not attributable, directly and indirectly, to the parent Company and are presented separately within the consolidated statement of financial position, separately from equity attributable to owners of the parent. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. (a) Commercial reserves Commercial reserves are proved and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially viable. Proved and probable reserve estimates are based on a number of underlying assumptions including oil and gas prices, future costs, oil and gas in place and reservoir performance, which are inherently uncertain. The amount of reserves that will be ultimately recovered from any field cannot be known with certainty until the end of the field’s life. STRATEGIC REPORT (b) Intangible exploration and evaluation expenditure Exploration and evaluation (E&E) expenditure relates to costs incurred on the exploration for and evaluation of potential mineral reserves and resources. The Group applies the successful efforts method of accounting for E&E costs as permitted by IFRS 6 ‘Exploration for and Evaluation of Mineral Resources’. Under the successful efforts method of accounting, all licence acquisition, exploration and appraisal costs (such as geological, geochemical and geophysical costs, exploratory drilling and other direct costs associated with finding mineral resources) are initially capitalised in well, field or specific exploration cost centres as appropriate, pending determination. Costs (other than payments for the acquisition of rights to explore) GOVERNANCE REPORT incurred prior to acquiring legal rights to explore an area and general exploration costs not specific to any particular licence or prospect are charged directly to the consolidated income statement and statement of other comprehensive income. E&E assets are not amortised prior to the determination of the results of exploration activity. Treatment of E&E assets at conclusion of appraisal activities Intangible E&E assets related to each exploration licence/block are carried forward, until the existence (or otherwise) of commercial reserves has been determined, subject to certain limitations including review for indicators of impairment. If, at completion of evaluation activities, technical and commercial feasibility is demonstrated, then, following recognition of commercial reserves, the carrying value of the relevant

E&E asset is then reclassified as a development and production asset (subject to an impairment assessment before reclassification). FINANCIAL STATEMENTS If, on completion of evaluation activities, it is not possible to determine technical feasibility and commercial viability or if the legal right to explore expires or if the Group decides not to continue E&E activity, then the costs of such unsuccessful E&E are written off to the consolidated income statement and statement of other comprehensive income in the period of that determination. Impairment E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount. The cash generating unit (CGU) applied for impairment test purposes is generally the block, except that a number of block interests may be grouped as a single cash generating unit where the cash flows of each block are interdependent.

Where an indicator of impairment exists, management will assess the recoverability of the carrying value of the asset or CGU. This review includes a status report confirming that E&E drilling is still under way or firmly planned, or that it has been determined, or work is under way to SUPPLEMENTARY INFORMATION determine that the discovery is economically viable. This assessment is based on a range of technical and commercial considerations and confirming that sufficient progress is being made to establish development plans and timing. If no future activity is planned, or the value of the asset cannot be recovered via successful development or sale, the balance of the E&E costs are written off in the consolidated income statement and statement of other comprehensive income. Farm-in/farm-out arrangements The Group may enter into farm-in or farm-out arrangements, where it may introduce partners to share in the development of an asset. For transactions involving assets at the exploration and evaluation phase, the Group adopts an accounting policy as permitted by IFRS 6 such that the Group does not record any expenditure made on its behalf under a ‘carried interest’ by a farm-in partner (the ‘farmee’). Where applicable past costs are reimbursed, and any cash consideration received directly from the farmee is credited against costs previously capitalised in relation to the whole interest with any excess accounted for by the farmor as a gain on disposal. Farmed-out oil and gas properties are accounted for in accordance with IAS 16 ‘Property, Plant and Equipment’. (c) Business combinations On an acquisition that qualifies as a business combination in accordance with IFRS 3 – ‘Business Combinations’, the assets and liabilities of a subsidiary are measured at their fair value as at the date of acquisition. Determining these values (the “purchase price allocation”) is a significant exercise and under IFRS there is a period of 12 months for them to be finalised. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill which is treated as an intangible asset. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired is credited to the consolidated income statement and statement of other comprehensive income as a gain on bargain purchase in the period of acquisition. A business combination is a transaction in which an acquirer obtains control of a business. A business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends or lower costs or other economic benefits directly to investors or other owners or participants. A business consists of inputs and processes applied to those inputs that have the ability to create outputs.

Annual Report and Accounts 2018 94 NOTES TO THE FINANCIAL STATEMENTS continued

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest (NCI) in the acquiree. For each business combination, the Group elects whether to measure NCI in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in general and administration expenses. When the Group acquires a business, it assesses the assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Those oil and gas reserves that are able to be reliably measured are recognised in the assessment of fair values on acquisition. Other potential reserves, resources and rights, for which fair values cannot be reliably measured, are not recognised separately, but instead are subsumed in goodwill. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date (being the date the acquirer gains control) in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. If the contingent consideration is classified as equity, it is not remeasured and subsequent settlement is accounted for within equity. IFRS 3 requires a liability to be recognised at its fair value if there is a present obligation arising from a past event that can be reliably measured, even if it is not probable that an outflow of resources will be required to settle the obligation. If a contingent liability only represents a possible obligation arising from a past event, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group, no liability is recognised at acquisition. (d) Property, plant and equipment Oil and gas properties and other property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. Oil and gas properties – cost Development and production assets are generally accumulated on a block-by-block basis and represent the cost of developing the commercial reserves discovered and bringing them into production. The initial cost of a development and production asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the decommissioning obligation and, for qualifying assets (where relevant), borrowing costs. When a development project moves into the production stage, the capitalisation of certain construction/development costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to oil and gas property asset additions, improvements or new developments. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalised value of a finance lease is also included within property, plant and equipment. Oil and gas properties – depreciation Oil and gas properties are depreciated/amortised from the commencement of production, on a unit-of-production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, on a field-by-field basis. Costs used in the unit of production calculation comprise the net carrying amount of capitalised costs plus the estimated future field development costs. The production and reserve estimates used in the calculation are on an entitlements basis. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively. Producing assets are generally grouped with other assets that are dedicated to serving the same reserves for depreciation purposes, but are depreciated separately from producing assets that serve other reserves. Other fixed assets Property, plant and equipment other than oil and gas properties is depreciated at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful economic life of between three and ten years. Impairment The Group assesses at each reporting date whether there is an indication that an asset (or CGU) may be impaired. Management has assessed its CGUs as being an individual block, which is the lowest level for which cash flows are largely independent of those of other assets. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s (or CGU’s) recoverable amount. The recoverable amount is the higher of an asset’s (or CGU’s) fair value less costs of disposal (FVLCD) and value in use (VIU). The recoverable amount is then determined for an individual asset, unless the asset does not generate cash flows that are largely independent of those from other assets or groups of assets, in which case the asset is tested as part of a larger CGU to which it belongs. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset (or CGU) is considered impaired and written down to its recoverable amount. Impairment losses of continuing operations are recognised in the consolidated income statement and statement of other comprehensive income. Where conditions giving rise to an impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the consolidated income statement and statement of other comprehensive income, net of any depreciation that would have been charged since the impairment.

Ophir Energy plc Annual Report and Accounts 2018 95

(e) Financial instruments – initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. i. Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through OCI, or fair value through profit or loss. The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant

financing component or for which the Group has applied the practical expedient for contracts that have a maturity of one year or less, are STRATEGIC REPORT measured at the transaction price determined under IFRS 15. Refer to the revenue recognition accounting policy in Note 2.3(m). In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. GOVERNANCE REPORT Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset. Subsequent measurement For purposes of subsequent measurement, financial assets are classified in four categories: —— Financial assets at amortised cost (debt instruments) —— Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) —— Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) —— Financial assets at fair value through profit or loss FINANCIAL STATEMENTS Financial assets at amortised cost (debt instruments) This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met: —— The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and —— The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Interest received is recognised as part of finance income in the statement of profit or loss and other comprehensive income. Gains and losses SUPPLEMENTARY INFORMATION are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost include trade receivables, other receivables and receivables from joint arrangements. Refer below to ‘Financial assets at fair value through profit or loss’ for a discussion of derivatives. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, e.g. derivative instruments, financial assets designated upon initial recognition at fair value through profit or loss, e.g. debt or equity instruments, or financial assets mandatorily required to be measured at fair value, i.e. where they fail the SPPI test. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that do not pass the SPPI test are required to be classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in profit or loss. A derivative embedded in a hybrid contract with a financial liability or non-financial host is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category. A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.

Annual Report and Accounts 2018 96 NOTES TO THE FINANCIAL STATEMENTS continued

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Group’s consolidated statement of financial position) when: —— The rights to receive cash flows from the asset have expired or; —— The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Impairment of financial assets The Group recognises an allowance for ECLs for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12 month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables and other receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. For any other financial assets carried at amortised cost (which are due in more than 12 months), the ECL is based on the 12-month ECL. The 12-month ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment including forward-looking information. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. ii. Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans and borrowings. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.

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Loans and borrowings and trade and other payables After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income. This category generally applies to interest-bearing loans and borrowings and trade and other payables. For more information, refer to Note 21 and 22. Derecognition A financial liability is derecognised when the associated obligation is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the STRATEGIC REPORT respective carrying amounts is recognised in profit or loss and other comprehensive income. iii. Cash and short-term deposits Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand, short-term deposits and restricted cash. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

iv. Derivative financial instruments GOVERNANCE REPORT The Group uses derivative financial instruments to manage its exposure to movements in oil and gas prices, interest rates and foreign exchange. The Group does not use derivatives for speculative purposes. Fair value hedges Gains or losses arising from changes in the fair value of derivatives are taken directly to the consolidated income statement, except for the effective proportion of cash flow hedges, which is recognised in other comprehensive income and later reclassified to profit or loss when the hedged item affects profit or loss. The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional

derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted forward FINANCIAL STATEMENTS exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates. The estimated fair value of these derivatives is disclosed in derivative financial instruments in the consolidated statement of financial position and the related changes in the fair value are included in other financial gains unless designated as effective hedging instruments. Cash flow hedges The effective portion of the gain or loss on a cash flow hedging instrument is reported in other comprehensive income, while the ineffective portion is recognised in profit or loss. Amounts reported in other comprehensive income are reclassified to the income statement when the

hedged transaction affects profit or loss.

The Group uses derivative commodity contracts to hedge its exposure to volatility in the commodity prices. The ineffective portion relating SUPPLEMENTARY INFORMATION to commodity contracts is recognised in other operating income or expenses. Refer to Note 26a for more details. Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs. (f) Inventories Inventories of oil and gas, materials and drilling consumables are stated at the lower of cost and net realisable value. Cost is determined by using the weighted average cost method and comprises direct purchase costs, cost of transportation and other related expenses.

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2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED (g) Provisions General A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the obligation. If the effect of the time value of money is material, expected future cash flows are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance cost. Decommissioning liability The obligation generally arises when the asset is installed or the ground/environment is disturbed at the field location. When the liability is initially recognised, the present value of the estimated cost is capitalised by increasing the carrying amount of the related oil and gas assets to the extent that it was incurred by the development/construction of the field. Changes in the estimated timing or cost of decommissioning are dealt with prospectively by recording an adjustment to the provision and a corresponding adjustment to oil and gas assets. Any reduction in the decommissioning liability and, therefore, any deduction from the asset to which it relates, may not exceed the carrying amount of that asset. If it does, any excess over the carrying value is taken immediately to the consolidated income statement and statement of other comprehensive income. If the change in estimate results in an increase in the decommissioning liability and, therefore, an addition to the carrying value of the asset, the Group considers whether this is an indication of impairment of the asset as a whole, and if so, tests for impairment. If, for mature fields, the estimate for the revised value of oil and gas assets net of decommissioning provisions exceeds the recoverable value, that portion of the increase is charged directly to expense. Over time, the discounted liability is increased for the change in present value based on the discount rate that reflects current market assessments and risks specific to the liability. The periodic unwinding of the discount is recognised in the consolidated income statement and statement of other comprehensive income as a finance cost. The Group recognises neither the deferred tax asset in respect of the temporary difference on the decommissioning liability nor the corresponding deferred tax liability in respect of the temporary difference on a decommissioning asset. (h) Pensions and other post-retirement benefits For defined benefit schemes the amounts charged to operating profit are the costs arising from employee services rendered during the period and the cost of plan introductions, benefit changes, settlements and curtailments. The net interest cost on the net defined benefit liability is charged to profit or loss and included within finance costs. Remeasurement comprising actuarial gains and losses and the return on scheme assets (excluding amounts included in net interest on the net defined benefit liability) are recognised immediately in other comprehensive income. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit credit method. The actuarial valuations are obtained annually. Contributions to defined contribution plans are recognised in the income statement in the period in which they become payable. (i) Employee benefits Salaries, wages, annual leave and sick leave Liabilities for salaries and wages, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (j) Equity instruments Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. (k) Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. The Group has leases where the lessor retains substantially all the risks and benefits of ownership of the asset. Such leases are classified as operating leases and rentals payable are charged to the consolidated income statement and statement of other comprehensive income on a straight line basis over the lease term.

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(l) Interests in joint arrangements A joint arrangement is an arrangement over which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (being those that significantly affect the returns of the arrangement) require unanimous consent of the parties sharing control. i. Joint operations A joint operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. In relation to its interests in joint operations, the Group recognises its: —— assets, including its share of any assets held jointly; —— liabilities, including its share of any liabilities incurred jointly; —— revenue from the sale of its share of the output arising from the joint operation; —— share of the revenue from the sale of the output by the joint operation; and —— expenses, including its share of any expenses incurred jointly STRATEGIC REPORT ii. Joint ventures A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. The Group’s investment in its joint venture is accounted for using the equity method. Under the equity method, the investment in the joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is not individually tested for impairment.

The consolidated income statement and statement of other comprehensive income reflects the Group’s share of the results of operations of GOVERNANCE REPORT the joint venture. Unrealised gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture. The aggregate of the Group’s share of profit or loss of the joint venture is shown on the face of the consolidated income statement and statement of other comprehensive income as part of operating profit and represents profit or loss after tax and NCI in the subsidiaries of joint venture. The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and FINANCIAL STATEMENTS its carrying value, and then recognises the loss as ‘share of profit of investments accounted for using the equity method’ in the consolidated income statement and statement of other comprehensive income. On loss of joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in the consolidated income statement and statement of other comprehensive income. (m) Revenue from contracts with customers The Group generates revenue through the sale of oil and petroleum products. The sale of oil and petroleum products is the only performance

obligation. Revenue recognition occurs at a point in time when control of the asset is transferred to the customer on delivery of the products, at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those products. The normal credit SUPPLEMENTARY INFORMATION term is 30 days. The transfer of control of oil and gas sold by the group coincides with title passing to the customer and the customer taking physical possession. The Group has concluded that it is the principal in its revenue arrangements, because it typically controls the products before transferring them to the customer. The transaction price for oil sales is fixed for all contracts based on a price derived from a quoted exchange. For gas sales, prices are based on sales agreements which set out the terms of the sale and the applicable price. There are no significant financing components. (n) Cost of sales Joint operations The Group recognises revenue when sales are made to customers and production costs are accrued or deferred to reflect differences between volumes taken and sold to customers and the Group’s ownership interest in total production volumes. (o) Interest income Interest income is recognised as it accrues using the effective interest rate method, that is, the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset. Interest income is included in net finance expense in the consolidated income statement and statement of other comprehensive income. (p) Finance costs and borrowings Finance costs of borrowings are allocated to periods over the term of the related debt at a constant rate on the carrying amount. Debt is shown on the consolidated statement of financial position net of arrangement fees and issue costs, and amortised through to the consolidated income statement and statement of other comprehensive income as finance costs over the term of the debt. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit and loss in the period in which they are incurred.

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2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED (q) Share-based payments The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined with reference to the market value of the underlying shares using a pricing model appropriate to the circumstances which requires judgements as to the selection of both the valuation model and inputs. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition or a non-vesting condition, which are treated as vesting irrespective of whether or not the market condition or non-vesting condition is satisfied, provided that all other vesting conditions are satisfied. At each consolidated statement of financial position date before vesting, the cumulative expense is calculated on the basis of the extent to which the vesting period has expired and management’s best estimate of the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous consolidated statement of financial position date is recognised in the consolidated income statement and statement of other comprehensive income, with a corresponding entry in equity. Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the consolidated income statement. For equity-settled share-based payment transactions with third parties, the goods or services received are measured at the date of receipt by reference to their fair value with a corresponding entry in equity. If the Group cannot reliably estimate the fair value of the goods or services received, their value is measured by reference to the fair value of the equity instruments granted. (r) Foreign currency translation The Group’s consolidated financial statements are presented in US Dollars, which is also the parent Company’s functional currency. The functional currency for each entity in the Group is determined on an individual basis according to the primary economic environment in which it operates. Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the statement of financial position date. All exchange differences are taken to the consolidated income statement and statement of other comprehensive income. Non-monetary items that are measured at historical cost in a foreign currency are translated using the spot exchange rate ruling as at the date of the initial transaction. Non-monetary items measured at a revalued amount in a foreign currency are translated using the spot exchange rate ruling at the date when the fair value was determined. The assets and liabilities of foreign operations whose functional currency is other than that of the presentation currency of the Group are translated into the presentation currency, at the rate of exchange ruling at the consolidated statement of financial position date. Income and expenses are translated at the weighted average exchange rates for the period. The resulting exchange differences are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the consolidated income statement and statement of other comprehensive income. (s) Income taxes Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the consolidated statement of financial position date. Current income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the consolidated income statement and statement of other comprehensive income. Deferred tax Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: —— where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting nor taxable profit or loss; —— in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and —— deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Deferred tax is provided on temporary differences arising on acquisitions that are categorised as business combinations. Deferred tax is recognised at acquisition as part of the assessment of the fair value of assets and liabilities acquired. Any deferred tax is charged and credited in the consolidated income statement and statement of other comprehensive income as the underlying temporary difference is reversed.

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The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the consolidated statement of financial position date. Deferred income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise deferred income tax is recognised in the consolidated income statement and statement of other comprehensive income. In order to account for uncertain tax positions, management has formed an accounting policy, in accordance with IAS 8, whereby the ultimate outcome of legal proceedings is viewed as a single unit of account. The results of separate hearings in relation to the same matter, such as local tribunals and international arbitration, are not viewed separately and only the final outcome is assessed by management to STRATEGIC REPORT determine the best estimate of any potential outcome. If management viewed the results of individual hearings separately, an income statement charge could arise due to the differing recognition criteria of assets and liabilities. (t) Royalties, resource rent tax and revenue-based taxes In addition to corporate taxes, the Group’s consolidated financial statements also include and recognise as taxes on income, other types of taxes on net income such as certain royalties, resource rent taxes and revenue-based taxes. Royalties, resource rent taxes and revenue-based taxes are accounted for under IAS 12 when they have the characteristics of an income tax. GOVERNANCE REPORT This is considered to be the case when they are imposed under government tax authority and the amount payable is based on taxable income rather than physical quantities produced or as a percentage of revenue after adjustment for temporary differences. For such arrangements, current and deferred tax is provided on the same basis as described above for other forms of taxation. Obligations arising from royalty arrangements and other types of taxes that do not satisfy these criteria are accrued and included in cost of sales. (u) Impairment The accounting policies for the impairment of intangible exploration and evaluation assets and oil and gas properties are described in more detail in 2.3(b), 2.3(d) and 2.4.

The Group assesses at each reporting date whether there is an indication that an intangible asset or item of property, plant and equipment FINANCIAL STATEMENTS may be impaired. If any indication exists, the Group estimates the asset’s recoverable amount. The recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value

indicators. SUPPLEMENTARY INFORMATION The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. Impairment losses of continuing operations (including impairment on inventories) are recognised in the consolidated income statement and statement of other comprehensive income in expense categories consistent with the function of the impaired asset. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. Where conditions giving rise to the impairment subsequently reverse, the effect of the impairment charge is also reversed, net of any depreciation that would have been charged since the impairment. (v) Non-current assets held for sale Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale, and actions required to complete the plan of sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

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2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED 2.4 Significant accounting judgements, estimates and assumptions The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The Group has identified the following areas where significant judgements, estimates and assumptions are required. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the consolidated financial statements. Judgements Exploration and evaluation expenditure – accounting judgements The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement to determine whether future economic benefits are likely, from either future exploration, development or asset sale, or whether activities have not reached a stage which permits a reasonable assessment of the existence of reserves. Management is also required to assess impairment in respect of exploration and evaluation assets. Note 14 discloses the carrying value of such assets. All such carried costs are subject to regular technical, commercial and management review on at least an annual basis to confirm the continued intent to develop, or otherwise extract value from, the asset. Where this is no longer the case, the costs are immediately expensed. The triggering events for impairment are defined in IFRS 6. In making the assessment, management is required to make judgements on the status of each project and assumptions about future events and circumstances, in particular, whether an economically viable extraction operation can be established. Income taxes – judgement of income taxes The computation of the Group’s income tax expense and liability involves the interpretation of applicable tax laws and regulations in many jurisdictions throughout the world. The resolution of tax positions taken by the Group, through negotiations with relevant tax authorities or through litigation, can take several years to complete and in some cases it is difficult to predict the ultimate outcome. Therefore, judgement is required to determine provisions for income taxes. In addition, the Group has carry forward tax losses and tax credits in certain taxing jurisdictions that are available to offset against future taxable profit. However, deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the unused tax losses or tax credits can be utilised. Management judgement is exercised in assessing whether this is the case. To the extent that actual outcomes differ from management’s estimates, income tax charges or credits, and changes in current and deferred tax assets or liabilities, may arise in future periods. For more information see Note 12. Judgement is also required when determining whether a particular tax is an income tax or another type of tax (for example a production tax). Balance sheet classification and recoverability of asset carrying values – non-current assets held for sale IFRS 5 requires an entity to classify a single non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. To qualify as held for sale, the asset must be available for immediate sale in its present condition and its sale must be highly probable. Asset sales are often complex transactions and negotiations can be lengthy. Management judgement is required to determine whether the above held for sale conditions have been met when planning to sell an asset. A significant area of judgement throughout 2018 was the continuing reporting of the Group’s share of the Block R licence in Equatorial Guinea as a non-current asset held for sale, as described in the Group’s 2018 Half Year Results – Note 2.3 Update to accounting judgements. Ophir received notification from the Equatorial Guinea Ministry of Mines and Hydrocarbons that the Block R licence, which contains the Fortuna gas discovery, would not be extended following expiry of the licence on 31 December 2018, and therefore the asset has been written off in full. See Note 3 – Assets classified as held for sale. Estimates Oil and gas properties – estimation of oil and gas reserves The determination of the Group’s estimated oil and natural gas reserves requires significant judgements and estimates to be applied and these are regularly reviewed and updated. Factors such as the availability of geological and engineering data, reservoir performance data, acquisition and divestment activity, drilling of new wells, and commodity prices all impact on the determination of the Group’s estimates of its oil and natural gas reserves. The Group employs independent reserves specialists who periodically report on the Group’s level of commercial reserves by evaluating the estimates of the Group’s in-house reserves specialists and where necessary referencing geological, geophysical and engineering data together with reports, presentation and financial information pertaining to the contractual and fiscal terms applicable to the Group’s assets. In addition, the Group undertakes its own assessment of commercial reserves, using standard evaluation techniques and related future capital expenditure by reference to the same datasets using its own internal expertise. The estimates adopted by the Group may differ from the independent reserves specialists’ estimates where management considers that adjustments are appropriate in the circumstances. The last assessment by its independent reserves specialist was as at 31 December 2018. Estimates of oil and natural gas reserves are used to calculate depreciation, depletion and amortisation charges for the Group’s oil and gas properties. The impact of changes in reserves is dealt with prospectively by amortising the remaining carrying value of the asset over the expected future production. Oil and natural gas reserves also have a direct impact on the assessment of the recoverability of asset carrying values reported in the financial statements. If reserves estimates are revised downwards, earnings could be affected by changes in depreciation expense or an immediate write-down of the property’s carrying value. The 2018 movements in contingent resources and proved and probable reserves are reflected in the tables on page 23. Information on the carrying amounts of the group’s oil and natural gas properties, together with the amounts recognised in the income statement as depreciation, depletion and amortisation is contained in Note 15 and Note 6a respectively.

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Impairment of oil and gas properties – estimation on the recoverability of asset carrying values Determination as to whether, and by how much, an asset is impaired involves management estimates on highly uncertain matters such as future commodity prices, the effects of inflation on operating expenses, discount rates, production profiles and the outlook for regional market supply-and-demand conditions for crude oil and natural gas. For oil and natural gas properties, the expected future cash flows are estimated using management’s best estimate of future oil and natural gas prices and production and reserves volumes. The estimated future level of production in all impairment tests is based on assumptions about future commodity prices, production and development costs, field decline rates, current fiscal regimes and other factors. Macro assumptions used for prices and inflation were as follows. Brent oil price of $62.6/bbl in 2019, $61.8/bbl in 2020, $63.2/bbl in 2021, $64.6/bbl in 2022, then escalating at 2.5% for the remaining life of the asset. Gas prices were based on the relevant gas sales agreements ranging from $5.65/MMbtu flat to $7.2/MMbtu flat. 2017 price assumptions were as follows: Brent oil price of $67.50/bbl, with the forward curve increased at an average of $5/bbl in the period

2018-2021 and a tail-end increase of above $2.50/bbl. Gas price of $5.65/MMbtu flat. STRATEGIC REPORT The annual inflation assumption is 2.5% (2017: 2%). For value-in-use calculations, future cash flows are adjusted for risks specific to the cash-generating unit and are discounted using a pre-tax discount rate. The pre-tax discount rate is derived from the cost of funding the Group calculated using an established model. The discount rates applied in assessments of impairment are reassessed each year. The Group average WACC was determined as 10% (2017: 10%). The country specific discount rates were then derived by risking the Group average WACC. Reserves assumptions for value-in-use tests are restricted to proved and probable reserves. GOVERNANCE REPORT The recoverability of exploration and evaluation assets is covered under exploration and evaluation expenditure – accounting judgements above. Details of impairment charges and reversals recognised in the income statement and details on the carrying amounts of assets are shown in Note 14 and Note 15. Decommissioning – estimation of provisions Decommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to relevant legal requirements, the emergence of new technology or experience at other production sites. The expected timing, extent and amount of

expenditure may also change. Therefore significant estimates and assumptions are made in determining the provision for decommissioning. FINANCIAL STATEMENTS As a result, there could be significant adjustments to the provisions established which would affect future financial results. The estimated decommissioning costs are reviewed annually by management and the results of this review are then used for the purposes of the Group’s consolidated financial statements. Provision for environmental clean-up and remediation costs is based on current legal and contractual requirements, technology and price levels. The timing and amount of future expenditures are reviewed annually, together with the interest rate used in discounting the cash flows. The interest rates used to determine the balance sheet obligations at the end of 2018 were real rates between 2.3%–5.7%. (2017: 3.1%)

Provisions and contingent liabilities are discussed in Note 25 and 35.

Special remuneratory benefit tax – estimation of tax rate SUPPLEMENTARY INFORMATION The Group is subject to a special remuneratory benefit tax in Thailand, the rate for which depends on the annual revenue per cumulative metre drilled. Accordingly the tax rate to be applied in calculating the Group’s deferred special remuneratory benefit tax depends on management’s forecast of future revenues and drilling activities. Post-retirement benefits – estimation of projected benefit obligation Since the acquisition of the Santos companies, accounting for post-retirement benefits has become a significant estimate for the Company. Accounting for post-retirement benefits involves making significant estimates when measuring the Company’s pension plan obligations. These estimates require assumptions to be made about many uncertainties. Pensions and other post-retirement benefit assumptions are reviewed by management at the end of each year. These assumptions are used to determine the projected benefit obligation at the year-end. The assumptions that are the most significant to the amounts reported are the discount rate, inflation rate, salary growth and mortality levels. Assumptions about these variables are based on the environment in each country. The assumptions used vary from year to year. Changes to some of these assumptions, in particular the discount rate and inflation rate, could result in material changes to the carrying amounts of the Company’s pension and other post-retirement benefit obligations within the next financial year. The values ascribed to these assumptions are provided in Note 38.

Annual Report and Accounts 2018 104 NOTES TO THE FINANCIAL STATEMENTS continued

3 ASSETS CLASSIFIED AS HELD FOR SALE On 10 November 2016 Ophir and OneLNG, a joint venture between subsidiaries of Golar LNG Limited and Schlumberger, announced that they had signed a binding Shareholders’ Agreement to establish a Joint Venture (“JV”) to develop the Fortuna project, in Block R, offshore Equatorial Guinea utilising Golar’s FLNG technology. OneLNG and Ophir would have had 66.2% and 33.8% ownership of the JV respectively. The JV would have facilitated the financing, construction, development and operation of the integrated Fortuna project and, from FID, would have owned Ophir’s share of the Block R licence. In May 2018, OneLNG made the decision to dissolve itself, however management continued to classify the Fortuna asset as held for sale. Please see Note 2.4 Judgements, Balance Sheet classification and recoverability of asset carrying values – non-current assets held for sale. In January 2019, Ophir received notification from the Equatorial Guinea Ministry of Mines and Hydrocarbons that the Block R licence, which contains the Fortuna gas discovery, will not be extended following expiry of the licence on 31 December 2018, and therefore the asset has been written off in full. Ophir’s share of the Block R licence classified as held for sale at 31 December 2018 was: 2018 2017 $’000 $’000 Assets Exploration and evaluation assets 613,652 604,432 Impairment charge (613,652) – Assets classified as held for sale – 604,432

4 SEGMENTAL ANALYSIS The Group’s reportable and geographical segments are Africa, Asia and Other. The other segment relates substantially to activities in the UK. Segment revenues and results The following is an analysis of the Group’s revenue and assets by reportable segment: Year ended 31 December 2018 Africa Asia Other Total $’000 $’000 $’000 $’000 Oil revenue from contracts with customers – 251,670 – 251,670 Gas revenue from contracts with customers – 54,544 – 54,544 Loss relating to oil derivatives – (7,968) – (7,968) Depreciation and amortisation – (107,241) (635) (107,876) Impairment of exploration costs (1,206) (98,788) – (99,994) Impairment of oil and gas properties – (13,500) – (13,500) Impairment of investments accounted for using the equity method – (45,000) – (45,000) Impairment of non-current assets held for sale (613,652) – – (613,652) Share of profit of equity-accounted joint venture – 4,858 – 4,858

Segment results Operating loss (623,797) (60,794) (8,153) (692,744) Finance income – 280 2,669 2,949 Finance expense (377) (1,299) (28,460) (30,136) Other financial gains – 160 – 160 Loss before tax (624,174) (61,653) (33,944) (719,771) Taxation (1,341) (60,558) – (61,899) Loss after tax (625,515) (122,211) (33,944) (781,670)

As at 31 December 2018 Total assets and total liabilities Total assets 113,462 1,511,119 92,198 1,716,779 Total liabilities (39,751) (948,779) (32,579) (1,021,109) Investments accounted for using the equity method – 76,084 – 76,084

Year ended 31 December 2018 Additions to non-current assets 17,872 80,226 19,407 117,505

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Year ended 31 December 2017 Africa Asia Other Total $’000 $’000 $’000 $’000 Oil revenue from contracts with customers – 169,461 – 169,461 Gas revenue from contracts with customers – 19,066 – 19,066 Gain/(loss) relating to oil derivatives – – – – Depreciation and amortisation – (77,529) (542) (78,071) Impairment of exploration costs (60,744) (15,887) (21) (76,652) Impairment of oil and gas properties – 23,681 – 23,681 Impairment of investments accounted for using the equity method – 7,800 – 7,800 Share of profit of equity-accounted joint venture – 4,181 – 4,181 STRATEGIC REPORT Segment results Operating (loss)/profit (58,783) 34,604 (29,623) (53,802) Finance income 9 93 1,955 2,057 Finance expense 148 (994) (14,118) (14,964) Other financial gains – – 2,300 2,300 Loss before tax (58,626) 33,703 (39,486) (64,409) Taxation 5,296 (52,676) (3) (47,383) Loss after tax (53,330) (18,973) (39,489) (111,792) GOVERNANCE REPORT

As at 31 December 2017 Total assets and total liabilities Total assets 729,337 1,113,555 151,740 1,994,632 Total liabilities (45,443) (479,495) (8,385) (533,323) Investments accounted for using the equity method – 120,964 – 120,964

Year ended 31 December 2017 FINANCIAL STATEMENTS Additions to non-current assets 13,384 62,780 8,736 84,900

Non-current operating assets The non-current operating assets for the UK are $0.8 million (2017: $1.5 million). The non-UK, non-current operating assets are $1,114 million (2017: $948.3 million). Included in the non-UK, non-current operating assets is Thailand which makes up $409.0 million (2017: $414.9 million), Indonesia $374.6 million (2017: $284.9 million) and Tanzania £110.1 million (2017: $106.0 million). Revenue from major customers All sales of crude oil in Thailand are to a single customer PTT Public Company Limited (PTT). PTT is a Thai state-owned oil and gas company

that is listed on the Stock Exchange of Thailand. Sales to PTT make up 66% of total revenue for the Group (2017: 90%) SUPPLEMENTARY INFORMATION

5 REVENUE Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Sales of crude oil 251,670 169,461 Sale of gas 54,544 19,066 Revenue from contracts with customers 306,214 188,527 Loss relating to oil derivatives (7,968) – 298,246 188,527

Annual Report and Accounts 2018 106 NOTES TO THE FINANCIAL STATEMENTS continued

6 OPERATING (LOSS)/PROFIT BEFORE TAXATION The Group’s operating (loss)/profit before taxation included the following items: Year ended 31 Year ended Dec 2018 31 Dec 2017 $’000 $’000 (a) Cost of sales: –– Operating costs 72,764 48,864 –– Royalty payable 19,308 14,057 –– Depreciation and amortisation of oil and gas properties 107,041 77,529 –– Movement in inventories of oil 95 7,127 199,208 147,577

(b) Exploration expenses: –– Pre-licence and other exploration costs 15,464 15,728 –– Exploration expenditure written off (Note 14) 99,994 76,652 –– Impairment/(reversal) and loss on disposal of exploration inventory 14,948 (544) 130,406 91,836

(c) Other operating expense: –– Loss/(profit) on disposal of assets 1,015 (180) –– Depreciation of other property, plant & equipment 200 288 –– Provision for exiting contracts (Note 25) 7,350 8,900 –– Restructuring costs 1 17,415 1,935 –– Other 309 756 –– Corporate transaction expense 2 14,474 – 40,763 11,699

(d) General & administration expenses include: –– Operating lease payments 2,843 3,424 –– Share-based payment expense 2,507 3,905 5,350 7,329

1 Restructuring costs consist of onerous leases of $9.5 million and redundancy and other staff related costs of $7.9m. 2 Corporate transaction expenses consist of $6.5 million in relation to the acquisition of assets from Santos (see note 11) and $8.0 million incurred in relation to the potential acquisition of Ophir by PT Medco Energi Global PTE Ltd (See Note 39 – Events after the reporting period).

7 NET FINANCE EXPENSE Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Interest income on short term bank deposits 2,949 2,057 Interest expense on long term borrowings (16,691) (13,063) Amortisation of fees and other interest costs (10,837) (2,269) Unwinding of discount (Note 25) (2,579) (1,449) Net foreign currency exchange gains/(losses) (29) 1,817 (27,187) (12,907)

8 OTHER FINANCIAL GAINS Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Gain relating to oil derivatives – 2,300 Gain relating to foreign exchange hedging 160 – 160 2,300

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9 AUDITORS’ REMUNERATION The Group paid the following amounts to its Auditors in respect of the audit of the financial statements and for other services provided to the Group. Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 (a) Paid/payable to Ernst & Young LLP Audit of the financial statements 1,068 609 Local statutory audits of subsidiaries 248 216 Total audit services 1,316 825 Other assurance services1 135 146 Audit related assurance services2 550 19

Total non-audit services 685 165 STRATEGIC REPORT

(b) Paid/payable to Auditor if not Ernst & Young LLP Local statutory audits of subsidiaries – – 2,001 990

1 Other assurance services by EY relate to the interim review on the half-year results for the six months ended 30 June 2 Audit related assurance services predominantly relates to fees for audit of the combined historical financial information and pro-forma results which formed part of the circular related to the class 1 transaction (acquisition of Santos assets). GOVERNANCE REPORT

10 STAFF COSTS AND DIRECTORS’ EMOLUMENTS (a) Staff costs Employee costs (including payments to Directors) during the year comprised: Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Salaries and wages 30,211 29,096

Social security costs 3,777 4,051 FINANCIAL STATEMENTS Contributions to pension plans/superannuation funds 1,748 1,529 Share-based payment expense 2,507 3,905 38,243 38,581

(b) Key management The table below sets out the details of the emoluments of the Group’s key management including Directors who served in the year: Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Aggregate compensation: SUPPLEMENTARY INFORMATION Salaries and wages 2,917 4,452 Social security costs 419 560 Contributions to pensions/superannuation funds 231 247 Compensation for loss of office 1,929 129 Share-based payment (credit)/expense 1,190 673 6,686 6,061

Key management emoluments above exclude aggregate gains made by Directors on the exercise of share options of $40,929 (2017: Nil). (c) Directors’ emoluments Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Aggregate compensation: Salaries and wages 2,010 2,098 Bonuses – 530 Social security costs 296 346 Contributions to pensions/superannuation funds 100 126 Compensation for loss of office 240 129 Other benefits 14 17 2,660 3,246

Directors’ emoluments above exclude aggregate gains made by Directors on the exercise of share options of Nil (2017: Nil).

Annual Report and Accounts 2018 108 NOTES TO THE FINANCIAL STATEMENTS continued

10 STAFF COSTS AND DIRECTORS’ EMOLUMENTS CONTINUED (c) Directors’ emoluments continued Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Share-based payment expense/(credit) 551 (503) Number of Directors to whom superannuation or pension benefits accrued during the year 2 3

(d) Average number of persons employed (full time equivalents): Year ended Year ended 31 Dec 2018 31 Dec 2017 CEO 1 1 Exploration and technical 135 112 Commercial and support 196 170 332 283

11 BUSINESS COMBINATIONS Acquisition of producing assets from Santos Limited On 6 September 2018, Ophir completed the acquisition of a package of Southeast Asian assets from Santos. Ophir acquired interests in three producing assets: (i) a 31.875% working interest in the Block 12W PSC in Vietnam; (ii) a 45% operated interest in the Sampang PSC in Indonesia; and (iii) a 67.5% operated interest in the Madura Offshore PSC in Indonesia for a total cash consideration of $148.7 million. The acquisition was part of Ophir’s strategy to grow its production base further in order to self-fund its selective exploration, appraisal and development activities. A gain on bargain purchase of $57.5 million was recognised on the acquisition being the excess of the fair value of net assets acquired as set out below, over the purchase consideration. The net asset fair values, in line with accounting standards, were determined, where applicable, and particularly in respect of oil and gas properties, by reference to oil and gas prices as reflected in the prevailing market view on the day of completion, as well as using estimates of proved oil and gas reserves and unproved volumes including timing of production, discount rates and exchange rates. Oil prices were based on the forward price curve for the first three years and $60 per barrel inflated at 2.5% for the remaining life of the asset. Gas prices were based on the relevant gas sales agreements in place at the time of acquisition. Fair value of net assets acquired $’000 Assets Non-current assets Oil and gas properties 278,102 Other long term receivables 75,260 Defined benefit asset 969 354,331 Current assets Inventory 7,029 Trade and other receivables 24,906 Cash and cash equivalents 9,402 41,337 Total assets 395,668

Liabilities Current liabilities Trade and other payables (15,842) Taxation payable (8,269) (24,111) Non-current liabilities Long term provisions (68,951) Deferred tax liability (96,393) (165,344) Total liabilities (189,455) Total 206,213

The gross amount of trade and other receivables equates to the fair value and it is expected that the full contractual amounts can be collected. Acquisition costs of $6.5 million were recognised in other operating expenses in the consolidated income statement. The acquired production assets contributed $85.1 million of revenue and $84.9 million of profit before tax (including the gain on bargain purchase) to the consolidated income statement since the date of acquisition. Had the acquisition date been 1 January 2018, the acquired production assets would have contributed $267.1 million of revenue and $229.5 million of profit before tax (including the gain on bargain purchase) to the consolidated income statement.

Ophir Energy plc Annual Report and Accounts 2018 109

12 TAXATION (a) Taxation (credit)/charge Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Current tax: Special remuneratory benefit 21,495 13,696 Other foreign tax 47,666 13,901 Special remuneratory benefit – adjustments in respect of prior periods (24) – Other foreign tax – adjustments in respect of prior periods (10) 4,997 Total current income tax charge 69,127 32,594 Deferred tax: Origination and reversal of temporary differences STRATEGIC REPORT Special remuneratory benefit (6,034) 27,378 Other foreign tax (10,290) (12,589) Other foreign tax – adjustments in respect of prior periods 9,096 – Total deferred income tax (credit)/charge (7,228) 14,789 Tax charge in the consolidated income statement and statement of other comprehensive income 61,899 47,383

Special remuneratory benefit (SRB) is a tax that arises on one of the Group’s assets, Bualuang in Thailand, at rates that vary from zero to 75% GOVERNANCE REPORT of annual petroleum profit depending on the level of annual revenue per cumulative metre drilled. The current rate for SRB for 2018 was 24% (2017: 18%). Petroleum profit for the purpose of SRB is calculated as revenue less a number of deductions including operating costs, royalty, capital expenditures, special reduction (an uplift of certain capital expenditures) and losses brought forward. (b) Reconciliation of the total tax (credit)/charge The tax benefit not recognised in the consolidated income statement and statement of other comprehensive income is reconciled to the Group’s weighted average tax rate of 42.4% (2017: 48.4%). The weighted average tax rate for 2018 and 2017 is based on profit making jurisdictions only as this is deemed to be the most appropriate rate. The differences are reconciled below: Year ended Year ended 31 Dec 2018 31 Dec 2017 FINANCIAL STATEMENTS $’000 $’000 Loss on operations before taxation (719,771) (64,409) (Loss)/profit on operations before taxation multiplied by the weighted average Corporate tax rate for the Group of 42.4% (2017: 48.4%) (305,183) (31,175) Non-deductible expenditure 278,013 27,229 Share-based payments 2,507 762 Tax effect of SRB 7,719 20,537

Tax effect of equity accounted investments (2,429) (2,091)

Movement in unrecognised deferred tax assets 18,230 1,096 SUPPLEMENTARY INFORMATION Other adjustments 2,062 6,349 Adjustment in respect of prior periods 9,085 (5,580) Effect of different tax rates on loss making jurisdictions1 51,895 30,256 Total tax (credit)/charge in the consolidated income statement and statement of other comprehensive income 61,899 47,383

1 Loss making jurisdictions have been disregarded in the calculation of weighted average tax rate. (c) Reconciliation of SRB charge to loss from operations before taxation The taxation charge for SRB for the year can be reconciled to the loss from operations before tax per the consolidated income statement and statement of other comprehensive income as follows: Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Loss from operations before taxation (719,771) (64,409) Add back losses from operations before taxation for activities outside of Thailand 751,832 132,165 Profit from operations before taxation for activities in Thailand 32,061 67,756 Deduct share of profit of investments accounted for using the equity method (4,858) (4,181) Loss before taxation for activities in Thailand 27,203 63,575

Applicable rate of SRB 24% 18% Tax at the applicable rate of SRB 6,529 11,443 Change in average SRB deferred tax rate (5,314) 13,697 Change in SRB rate compared to current SRB tax rate 669 619 Other non-deductible costs 13,577 8,124 Adjustment in respect of prior periods (24) 7,191 Total SRB charge 15,437 41,074

Annual Report and Accounts 2018 110 NOTES TO THE FINANCIAL STATEMENTS continued

12 TAXATION CONTINUED (d) Deferred tax liability As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Deferred tax balances relate to the following: Corporation tax on fixed asset timing differences (333,765) (241,275) SRB tax on fixed asset timing differences (25,000) (28,033) Tax losses 5,217 4,817 (353,548) (264,491)

(e) UK unrecognised temporary differences The Group has pre-trading expenditure and unused tax losses in the UK of $629million (2017: $694 million). Of this amount, pre-trading expenditure of $29 million (2017: $25 million) will expire in the future if the Company does not commence trading within seven years of the year in which the expenditure was incurred. Deferred tax assets have not been recognised in respect of these deductible temporary differences and unused tax losses as there is not sufficient certainty that taxable income will be realised in the future due to the nature of the Group’s international exploration activities and the long lead times in either developing or otherwise realising exploration assets.

13 EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. The following reflects the income and share data used in the basic earnings per share computations: Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Earnings Earnings for the purposes of basic and diluted earnings per share (Loss)/profit for the year (781,670) (111,792) (Loss)/profit attributable to equity holders of the parent (781,670) (111,792)

Cents Cents Basic (loss)/earnings per ordinary share (110.5) (15.8) Diluted (loss)/earnings per ordinary share (110.5) (15.8)

As at As at 31 Dec 2018 31 Dec 2017 Number of shares (millions) Basic weighted average number of shares 707 706 Potentially dilutive share options and warrants 11 17 718 723

No ordinary shares of 0.25p each have been issued on exercise of options and warrants between the year ended 31 December 2018 and the date of approval of these consolidated financial statements.

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14 EXPLORATION AND EVALUATION ASSETS Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Cost Balance at the beginning of the year 247,944 310,229 Additions 1 57,411 40,788 Disposal of asset – (150) Transfers to oil and gas properties – (10,608) Reclassified as assets held for sale (9,219) (15,663) Expenditure written off 2 (99,994) (76,652) Balance at the end of the year 196,142 247,944

1 Additions for the year ended 31 December 2018 included exploration activities in: Mexico Block 10 ($9.7 million), Equatorial Guinea Block R ($9.2 million subsequently reclassified as an asset held STRATEGIC REPORT for sale and written off (see note 3)), Mexico Block 5 ($7.5 million), Paus Biru ($6.2 million), West Bangkanai ($4.2 million), Tanzania Block 1 ($3.4 million), Ophir Equatorial Guinea (EG-24) ($3.4 million), Myanmar ($3.1 million) and Mexico Block 12 ($2.2 million). Additions for the year ended 31 December 2017 included exploration activities in: Equatorial Guinea Block R ($15.7 million subsequently reclassified as an asset held for sale), Myanmar ($2.9 million), West Papua IV ($4.6 million) and Mexico Block 5 ($8.5 million). 2 Expenditure written off in the year was $100 million mainly attributable to Myanmar ($43 million), West Papua IV ($31.3 million), Aru ($8.6 million), North Ganal ($7.3 million) and North East Bangkanai ($4.5 million). Expenditure written off in 2017 was $77 million mainly attributable to Cote d’Ivoire ($32 million) and Gabon ($32 million). The CGU applied for the purpose of the impairment assessment is the Blocks. The recoverable amount of each Block was nil. This was based on management’s estimate of value in use. The trigger for expenditure write off was management’s assessment that no further expenditure on exploration and evaluation of hydrocarbons in the Block was budgeted or planned within the

current licence terms. GOVERNANCE REPORT

15 OIL AND GAS PROPERTIES Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Cost Balance at the beginning of the year 929,795 875,278 Acquisition of subsidiary 278,102 – 1 Additions 60,051 43,909 FINANCIAL STATEMENTS Transfers from Exploration and evaluation assets – 10,608 Balance at the end of the year 1,267,948 929,795

Depreciation and amortisation Balance at the beginning of the year (230,126) (176,278) Charge for the year (107,234) (77,529) Impairment (charge) reversal 2 (13,500) 23,681

Balance at the end of the year (350,860) (230,126) SUPPLEMENTARY INFORMATION Net book value Balance at the beginning of the year 699,669 699,000 Balance at the end of the year 917,088 699,669

1 Additions in 2018 are stated net of a $7.9 million (2017:Nil) decommissioning remeasurement. 2 The 2018 impairment charge was due to revisions to cost estimates of future development phases on the Bangkanai asset in Indonesia. The Bangkanai asset has a recoverable amount of $248 million based on management’s estimate of value in use. The discount rate used was 12% (pre-tax). The 2017 impairment reversal was due to further increased reserves related to the Bualuang infill drilling results in Thailand which had a recoverable amount of $424 million in 2017 based on management’s estimate of value in use. The discount rate used was 22% (pre-tax).

Annual Report and Accounts 2018 112 NOTES TO THE FINANCIAL STATEMENTS continued

16 OTHER PROPERTY, PLANT AND EQUIPMENT Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Office furniture and equipment Cost Balance at the beginning of the year 12,194 11,991 Additions 47 203 Disposals (235) – Balance at the end of the year 12,006 12,194

Depreciation Balance at the beginning of the year (9,983) (8,285) Depreciation charge for the year (772) (1,698) Disposals 129 – Balance at the end of the year (10,626) (9,983)

Net book value Balance at the beginning of the year 2,211 3,706 Balance at the end of the year 1,380 2,211

17 OTHER LONG TERM RECEIVABLES As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Security deposits – Rental properties 2,447 2,356 Amounts held in Escrow 1 75,685 – Other long term receivables 12,936 18,849 91,068 21,205

1 Amounts held in Escrow relate to funds held in joint operations’ bank accounts for decommissioning activities.

18 INVENTORY As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Oil and condensate 5,820 3,988 Materials and consumables 27,697 36,659 33,517 40,647

The inventory valuation is stated net of a provision of $14.9 million (2017: $10.1 million) to write inventories down to their net realisable value.

19 TRADE AND OTHER RECEIVABLES As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Trade and other debtors 50,994 20,877 Prepayments 7,982 3,779 58,976 24,656

All debtors are current. There are no receivables that are past due or impaired, and therefore no expected credit losses have been recognised. See Note 26 for more details on how the Group manages its credit risk. Trade and other debtors primarily relate to receivables from joint operation partners. Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.

Ophir Energy plc Annual Report and Accounts 2018 113

20 CASH AND CASH EQUIVALENTS As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Cash 192,871 99,822 Cash equivalents 130,543 123,957 323,414 223,779

Cash and cash equivalents comprise cash in hand, deposits and other short-term money market deposit accounts that are readily convertible into known amounts of cash. The fair value of cash and cash equivalents is $323.4 million (2017: $223.8 million). Cash and cash equivalents at 31 December 2018 includes $33.5 million (2017: $11.5 million) of restricted bank guarantees.

21 TRADE AND OTHER PAYABLES STRATEGIC REPORT As at As at As at As at 31 Dec 2018 31 Dec 2018 31 Dec 2017 31 Dec 2017 $’000 $’000 $’000 $’000 Within 1 year After 1 year Within 1 year After 1 year Trade payables 26,383 – 9,058 – Accruals and deferred income 67,116 14,739 42,219 15,279 Payables in relation to joint operation partners 5,485 – 1,097 – GOVERNANCE REPORT 98,984 14,739 52,374 15,279

Trade payables are unsecured and are usually paid within 30 days of recognition.

22 INTEREST BEARING BANK LOANS Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Long-term balance at the beginning of the year – 83,915 FINANCIAL STATEMENTS Short-term balance at the beginning of the year – 9,741 Additions during the year 245,699 – Less: amounts repaid during the year – (93,656) Less: amounts due within one year (103,200) – Total borrowings due after one year 142,499 –

In 2017, Ophir repaid its outstanding debt on the 2012 reserves based lending (RBL) facility. Ophir replaced this facility with a new $250 million RBL facility secured against the Group’s producing assets in Southeast Asia. This facility originally had a seven-year term due to

mature 30 June 2024. In addition to the committed $250 million, a further $100 million was available on an uncommitted “accordion” basis.

Interest will accrue at a rate of between 4% and 4.5% plus LIBOR depending on the maturity of the facility. $150 million was drawn down SUPPLEMENTARY INFORMATION from the RBL facility in July 2018. In May 2018, Ophir announced it had agreed to acquire a package of Southeast Asian assets from Santos Limited, as described in Note 11. In order to fund the Santos acquisition, an 18-month bridge facility of up to $130 million was signed in August 2018. On completion of the acquisition, $103 million was drawn down from the facility. Fees of $7.2 million were incurred in relation to the facility. In December 2018 Ophir exercised the accordion on the RBL facility and increased the facility by $100 million to $350 million and the maturity was extended by 18 months to 31 December 2025. The increased facility would be used to pay down the bridge and as such fees of $7.2m incurred in relation to the bridge were written off to the income statement. In January 2019, the bridge facility was fully repaid. Fees totaling $8.8 million have been incurred in relation to the RBL facility and are being amortised over the term of the facility. The borrowing base amount available on the facility as at 31/12/2018 was $68 million.

23 BONDS PAYABLE Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Balance at the beginning of the year 106,651 106,651 Coupon interest charged 10,218 10,218 Interest paid (10,219) (10,218) Balance at the end of the year 106,650 106,651

The unsecured callable bonds were issued by Salamander Energy plc in December 2013 at an issue price of $150 million. The bonds have a term of six years and one month and will be repaid in full at maturity. The bonds carry a coupon of 9.75% and were issued at par.

Annual Report and Accounts 2018 114 NOTES TO THE FINANCIAL STATEMENTS continued

24 NET DEBT Net debt is calculated as interest bearing bank borrowings as shown on the balance sheet, less the issue costs associated with the borrowings which have yet to be amortised, less fair value adjustments at initial recognition, less cash and cash equivalents. Ophir believes this provides useful information to investors and enables investors to see the effect of gross debt and cash and cash equivalents in total. As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Amounts due on maturity: Interest bearing bank loans (see Note 22) (245,699) – Bonds payable (see Note 23) (106,650) (106,651) Total borrowings (352,349) (106,651) Less: Issue costs not yet amortised (7,501) – Less: Fair value adjustments at initial recognition 1,850 1,850 Total gross debt (358,000) (104,801) Less cash and cash equivalents (see Note 20) 323,414 223,779 Total net(debt)/ cash (34,586) 118,978

At the balance sheet date, the bank borrowings are calculated to be repayable as follows: As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 On demand or due within one year 103,200 – In the second year 106,650 – In the third to fifth year inclusive – 106,651 After five years 142,499 – Total principal payable on maturity 352,349 106,651

25 PROVISIONS Decommissioning Litigation and restoration and other Other of oil and gas claims provision Total $’000 $’000 $’000 $’000 At 31 December 2017 51,257 – 9,407 60,664 Arising during the period – – 24,704 24,704 Acquisition 68,951 – – 68,951 Utilised/paid – – (507) (507) Unwinding of discount (Note 7) 2,579 – – 2,579 Amounts released – – – – Additions 7,889 – – 7,889 At 31 December 2018 130,676 – 33,604 164,280

Balance at the end of the year Current – – 33,604 33,604 Non-current 130,676 – – 130,676

Decommissioning and restoration of oil and gas assets The decommissioning of oil and gas properties is expected to fall due from 2021 onwards. Other provisions Amounts provided at 31 December 2018 comprise: —— $16.3 million (2017: $8.9 million) representing the unavoidable net cost of exiting a contract; —— $9.5 million in respect of onerous leases (2017: nil); and —— $7.8 million (2017: $0.5 million) representing the organisational changes as part of the Ophir Board’s strategy to reduce the Company’s underlying cost base in recognition of lower exploration activity.

26 FINANCIAL INSTRUMENTS Capital risk management The Group manages its capital to ensure that entities in the Group are able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the interest-bearing bank loans and bonds payable as disclosed in Notes 22 and 23 of these consolidated financial statements, cash and cash equivalents as disclosed in Note 20 of these consolidated financial statements, and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings as disclosed in Notes 27, 30 and 31 of these consolidated financial statements and in the consolidated statement of changes in equity. This is further discussed in the Principal risks section of these Annual Report and Accounts. To maintain or adjust the capital structure, the Group may issue new shares for cash, engage in active portfolio management, or other such restructuring activities as appropriate.

Ophir Energy plc Annual Report and Accounts 2018 115

Gearing ratio Management reviews the capital structure on a continuing basis. The gearing ratio is defined as net debt divided by equity attributable to equity holders of the Company plus net debt. At the year-end it was calculated as follows: As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Net (debt)/cash (see Note 24) (34,586) 118,978 Equity plus net debt (730,256) (1,342,331) Gearing ratio 4.7% (8.9)%

Significant accounting policies Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis

on which the income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are STRATEGIC REPORT disclosed in the statement of accounting policies. Financial assets and liabilities Current assets and liabilities Management consider that due to the short-term nature of current assets and liabilities, the carrying values equates to their fair value. Non-current assets and liabilities The carrying value and fair values of non-current financial assets and liabilities are shown in the following tables: GOVERNANCE REPORT As at As at As at As at 31 Dec 2018 31 Dec 2018 31 Dec 2017 31 Dec 2017 $’000 $’000 $’000 $’000 Carrying Estimated Carrying Estimated value fair value value fair value Financial assets: Security deposits 2,447 2,447 2,356 2,356 Amounts held in Escrow 75,685 75,685 – – FINANCIAL STATEMENTS Financial liabilities: Interest-bearing bank loans (245,699) (257,366) – – Bonds payable (106,650) (106,765) (106,651) (109,870)

Financial risk management The Group’s principal financial assets and liabilities comprise trade and other receivables, cash and cash equivalents, short-term investments and trade and other payables, interest-bearing bank loans, bonds payable, security deposits and derivative liabilities, which arise directly from its operations. Details are disclosed in Notes 19 to 23 of these consolidated financial statements. The main purpose of these financial

instruments is to manage short-term cash flow and provide finance for the Group’s operations.

The Group’s senior management oversees the management of financial risk and the Board of Directors has established an Audit Committee SUPPLEMENTARY INFORMATION to assist in the identification and evaluation of significant financial risks. Where appropriate, consultation is sought with an external adviser to determine the appropriate response to identified risks. The Group does not trade in derivatives for speculative purposes. The main risks that could adversely affect the Group’s financial assets, liabilities or future cash flows are commodity, credit, interest rate, foreign currency and liquidity risks. (a) Commodity price risk The Group’s policy is to consider oil and gas price hedging when and where it is economically attractive to lock-in prices at levels that protect the cash flow of the Group, its business plan and debt related coverage ratios. All hedging transactions to date have been related directly to expected cash flows and no speculative transactions have been undertaken. In order to execute its Risk Management Strategy, the Group uses a derivative instrument which sets a floor on the price it receives on the sale of oil by giving up some of the upside profit potential. In 2018 Ophir entered into two price swaps with a syndicate of banks as described below. 2018 Hedges In August 2018, the Group purchased, with zero cost structure, a Brent swap at an average $70.24/bbl and a call at an average price of $78.24/bbl, both for 2,000 bpd. The hedging relationship is for a period of 12 months, based on 30% of the Group’s share of production from the Block 12W PSC in Vietnam. In November 2018, the Group purchased, with a zero cost structure, a Brent swap at an average $56.00/bbl and a call at an average price of $66.47/bbl, both for 2,000 bpd. The hedging relationship is for a period of 12 months, based on 26% of the forecast production from the Bualuang oil field in Thailand.

Annual Report and Accounts 2018 116 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS CONTINUED As at 31 December 2018, the fair value of outstanding commodity contracts amounted to an asset of $9.9 million. For cash flow hedges the effective portion of the hedges are recognised in OCI and reclassified to profit and loss in the same period during which the hedged cash flows affect profit or loss. The amount in equity at 31 December 2018 is $9.9 million maturing in 2019. $8 million of cash flow hedges have been reclassified to the income statement in 2018. 2017 Hedges In late 2017, the Group hedged approximately 27% of its 2018 production. The Group purchased, with a zero cost structure, a Brent swap at an average $59.68/bbl and a call at an average price of $68.08/bbl, both for 3,200 bpd. The hedging relationship is for a period of 12 months, based on forecast cash flows. As at 31 December 2017, the fair value of outstanding commodity contracts amounted to a liability of $3.5 million. Before 1 January 2018, the Group only claimed hedge accounting for the intrinsic value of the contract with any fair value attributable to time value taken immediately to the income statement. The amount in equity at 31 December 2017 was $5.8 million maturing in 2018, with $2.3 million recognised in other financial gains. The impact of the hedging instruments on the statement of financial position is, as follows: Change in fair Line item in value used for Notional Carrying the statement measuring amount amount of financial ineffectiveness $’000 $’000 position for the period As at 31 December 2018 Derivative financial Oil price cash flow hedges 92,104 9,970 instruments 13,552

As at 31 December 2017 Derivative financial Oil price cash flow hedges 78,431 (3,582) instruments (5,882)

The impact of hedged items on the statement of financial position is as follows: 31 December 2018 31 December 2017 Change in fair Change in fair value used for Cash Cost value used for Cost measuring flow hedge of hedging measuring Cash flow of hedging ineffectiveness reserve reserve ineffectiveness hedge reserve reserve $’000 $’000 $’000 $’000 $’000 $’000 Highly probable forecast sales 13,552 9,970 – (5,882) (5,882) –

The effect of the cash flow hedge in the statement of profit or loss and other comprehensive income is, as follows: Total hedging Ineffectiveness Cost Amount Line gain/(loss) recognised of hedging reclassified item in the recognised in profit recognised from OCI to statement of in OCI or loss in OCI profit or loss profit or loss $’000 $’000 $’000 $’000 $’000 Year ended 31 December 2018 Highly probable forecast sales 13,552 – – 7,968 Revenue

Year ended 31 December 2017 Highly probable forecast sales (5,882) – – – –

Ophir Energy plc Annual Report and Accounts 2018 117

(b) Credit risk Credit risk refers to the risk that a third party will default on its contractual obligations resulting in financial loss to the Group. The Group’s maximum exposure to credit risk of third parties is the aggregate of the carrying value of its security deposits, amounts held in Escrow, cash and cash equivalents, short-term investments and trade and other receivables. In respect of the Group’s trade sales, the Group manages credit risk through dealing with, whenever possible, either international energy companies or state owned companies based in Thailand and Indonesia and obtaining sufficient collateral where appropriate. The Group consistently monitors counterparty credit risk. An impairment analysis is performed at each reporting date to measure expected credit losses. The provision rates are based on days past due. The carrying value of financial assets recorded in these financial statements represents the Group’s maximum exposure to credit risk at the year-end without taking account of any collateral obtained. In addition, the Group’s operations are typically structured via contractual joint venture arrangements. As such the Group is reliant on joint venture partners to fund their capital or other funding obligations in relation to assets and operations which are not yet cash generative. The Group closely monitors the risks and maintains a close dialogue with those counterparties considered to be highest risk in this regard. STRATEGIC REPORT The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s experience of bad debts has not been significant. Credit quality of financial assets Equivalent S&P rating1 Internally rated A-1 A-2 A-3 Not GOVERNANCE REPORT and above and above and below rated Total $’000 $’000 $’000 $’000 $’000 Year ended 31 December 2018 Current financial assets Cash and cash equivalents 222,281 96,986 3,681 466 323,414 Trade and other receivables – – – 37,503 37,503 222,281 96,986 3,681 37,969 360,917 FINANCIAL STATEMENTS Non-current financial assets Amounts held on Escrow – 75,685 – 75,685 Security deposits – – – 2,447 2,447 – – – 2,447 2,447

1 The equivalent S&P rating of the financial assets represents the rating of the counterparty with which the financial asset is held rather than the rating of the financial asset itself. Equivalent S&P rating 1 Internally rated A-1 A-2 A-3 No default

and above and above and below customers Total $’000 $’000 $’000 $’000 $’000 SUPPLEMENTARY INFORMATION Year ended 31 December 2017 Current financial assets Cash and cash equivalents 147,865 69,537 6,324 53 223,779 Trade and other receivables – – – 12,515 12,515 147,865 69,537 6,324 12,568 236,294

Non-current financial assets Security deposits – – – 2,356 2,356 – – – 2,356 2,356

1 The equivalent S&P rating of the financial assets represents that rating of the counterparty with which the financial asset is held rather than the rating of the financial asset itself. Credit risk on cash and cash equivalents and short-term investments is managed by limiting the term of deposits to periods of less than 12 months and selecting counterparty financial institutions with reference to long and short-term credit ratings published by Standard & Poor’s.

Annual Report and Accounts 2018 118 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS CONTINUED (c) Interest rate risk The Group is exposed to interest rate movements through its interest-bearing bank loans, bonds payable, cash and cash equivalent deposits and short-term investments, which are at rates fixed to LIBOR. The sensitivity analysis below has been determined based on the Group’s exposure to an interest rate movement and is prepared assuming the amount of the net debt outstanding at the balance sheet date was outstanding for the whole year. For net debt, if interest rates had been 0.5% higher or lower and all other variables were held constant, the Group’s loss after tax for the year ended 31 December 2018 would have increased by $0.1 million (2017: loss decrease $0.5 million) or decreased by $0.1 million (2017: increase $0.5 million) respectively. The sensitivity in 2018 was maintained at 0.5% as interest rate volatilities remain similar to those in the prior period. (d) Foreign currency risk The Group has currency exposures arising from assets and liabilities denominated in foreign currencies and transactions executed in currencies other than the respective functional currencies. The Group, with the exception of Ophir Services Pty Ltd, has adopted US Dollars as its functional and reporting currency as this represents the currency of its primary economic environment as the majority of the Group’s funding and expenditure is US Dollars. Ophir Services Pty Ltd has adopted the Australian Dollar as its functional currency. The Group’s exposure to foreign currency risk is managed by holding the majority of its funds in US Dollars, as a natural hedge, with remaining funds being held mainly in Pounds Sterling (GBP), Australian Dollars (AUD), Euros (EUR) and Thailand Baht (THB) to meet commitments in those currencies. The main underlying economic currency of the Group’s cash flows is the US Dollar. This is because Ophir’s products, oil and gas, are priced internationally in US Dollars. Ophir’s foreign currency exchange management policy is to limit economic and material transactional exposures arising from currency movements against the US Dollar. For highly probable forecast cash flows the Group fixes the US Dollar of non-US dollar sales by using currency forwards. The exposure mainly relates to the Thai Baht. At 31 December 2018, there are no open positions hedging these exposures (2017: No open positions). As at 31 December 2018, the Group’s predominant exposure to foreign exchange rates related to cash and cash equivalents held in GBP by companies with US Dollar functional currencies. At the statement of financial position date, the Group’s net debt had the following exposure to GBP, THB and AUD foreign currency that is not designated in cash flow hedges: As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Financial assets Cash and cash equivalents AUD – 224 GBP 9,747 3,143 THB 4,304 63,916 IDR 461 – VND 2,168 – Other 274 – 16,954 67,283 Net exposure 16,954 67,283

Ophir Energy plc Annual Report and Accounts 2018 119

The following table demonstrates the sensitivity to reasonable possible changes in GBP, AUD and THB against the US Dollar exchange rates with all other variables held constant, of the Group’s (loss)/profit before tax and equity (due to the foreign exchange translation of monetary assets and liabilities). Loss before tax Equity higher/(lower) higher/(lower) 2018 2017 2018 2017 $’000 $’000 $’000 $’000 US Dollar to GBP +5% (2017: +5%) 443 87 443 87 US Dollar to GBP -5% (2017: -5%) (443) (87) (443) (87) US Dollar to AUD +5% (2017: +5%) (1) (2) (1) (2) US Dollar to AUD -5% (2017: -5%) 1 2 1 2 US Dollar to THB +5% (2017: +5%) 760 3,039 760 3,039

US Dollar to THB -5% (2017: -5%) (760) (3,039) (760) (3,039) STRATEGIC REPORT US Dollar to IDR +5% (2017: +5%) (5,519) – (5,519) – US Dollar to IDR -5% (2017: -5%) 5,519 – 5,519 – US Dollar to VND +5% (2017: +5%) 105 – 105 – US Dollar to VND -5% (2017: -5%) (105) – (105) –

Significant assumptions used in the foreign currency exposure sensitivity analysis include: —— Reasonably possible movements in foreign exchange rates were determined based on a review of the last two years’ historical movements and economic forecast expectations. GOVERNANCE REPORT —— The reasonably possible movement was calculated by taking the US Dollar spot rate as at balance date, moving this spot rate by the reasonably possible movements and then re-converting the US Dollar into the respective foreign currency with the new spot rate. This methodology reflects the translation methodology undertaken by the Group. (e) Liquidity risk The Group manages its liquidity risk by maintaining adequate cash and cash equivalents, and borrowing facilities to meet its forecast short, medium and long-term commitments. The Group continually monitors its actual and forecast cash flows to ensure that there are adequate reserves and banking facilities to meet the maturing profiles of its financial assets and liabilities. The following tables detail the Group’s remaining contractual maturities for its financial liabilities. The tables have been drawn up based on FINANCIAL STATEMENTS the undiscounted cash flows of financial liabilities based on the earliest date the Group was required to pay at the balance sheet date. As at 31 December 2018 Greater than Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 Non-interest bearing (91,578) – – – – – (91,578) Variable interest rate

instruments (103,200) – – – – (142,499) (245,699)

Fixed interest rate SUPPLEMENTARY INFORMATION instruments: –– Bond payable – (106,650) – – – – (106,650) Total (194,778) (106,650) – – – (142,499) (443,927)

As at 31 December 2017 Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years Greater than $’000 $’000 $’000 $’000 $’000 5 years Total Non-interest-bearing (50,499) – – – – – (50,499) Variable interest rate instruments – – – – – – – Fixed interest rate instruments: –– Bond payable – – (106,651) – – – (106,651) Oil price derivatives (3,582) – – – – – (3,582) Total (54,081) – (106,651) – – – (160,732)

Additionally, Notes 33 and 34 of these consolidated financial statements set out the Group’s outstanding financial commitments at the year end.

Annual Report and Accounts 2018 120 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS CONTINUED (f) Disclosure of fair values The carrying values of security deposits, borrowings and derivative financial instruments are disclosed in the financial statements as at 31 December 2018. The fair values of these assets and liabilities are disclosed in the table of financial assets and liabilities on page 115 of these consolidated financial statements. Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1 quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2 other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3 techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. The carrying amount of the Group’s deposits and amounts held in Escrow approximate their fair value and are categorised within level 1 of the fair value hierarchy. The fair value of the Group’s NOK bond is determined using quoted prices in active markets, and so fall within level 1 of the fair value hierarchy. The fair values of other long-term borrowings are determined using discounted cash flow analysis and are consequently categorised in level 2 of the fair value hierarchy. Commodity hedges are provided by banks using industry standard models that consider various assumptions, including quoted forward prices, time value and other relevant economic factors. These derivative contracts are categorised within level 2 of the fair value hierarchy. Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Level 1 (28,519) (107,514) Level 2 (235,729) (3,582) Level 3 – – (264,248) (111,096)

There were no transfers between fair value levels during the year. (g) Changes in liabilities arising from financing activities 1 January Cash 31 December 2018 flows Other 2018 $’000 $’000 $’000 $’000 Current interest-bearing bank borrowings – 103,200 – 103,200 Non-current interest-bearing bank borrowings – 150,000 (7,501) 142,499 Bonds payable 106,651 – (1) 106,650 Total liabilities from financing activities 106,651 253,200 (7,502) 352,349

1 January 31 December 2017 Cash flows Other 2017 $’000 $’000 $’000 $’000 Current interest-bearing bank borrowings 9,741 (9,741) – – Non-current interest-bearing bank borrowings 83,915 (83,915) – – Bonds payable 106,651 – – 106,651 Total liabilities from financing activities 200,307 (93,656) – 106,651

The ‘Other’ column includes the effect of amortised fees and accrued interest.

27 CALLED UP SHARE CAPITAL Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 (a) Authorised 2,000,000,000 ordinary shares of 0.25p each 7,963 7,963

(b) Called up, allotted and fully paid ordinary shares of 0.25p each In issue at the beginning of the year 746,019,407 (2017: 746,019,407) 3,061 3,061 In issue at the end of the year 746,019,407 (2017: 746,019,407) 3,061 3,061

The balances classified as called up, allotted and fully paid share capital represent the nominal value of the total number of issued shares of the Company of 0.25p each. Fully paid shares carry one vote per share and carry the right to dividends.

Ophir Energy plc Annual Report and Accounts 2018 121

28 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD As at As at 31 Dec 2018 31 Dec 2017 % % Company APICO LLC 27.18 27.18 APICO (Khorat) Holdings LLC 27.18 27.18 APICO (Khorat) Limited 27.18 27.18

The investments in the jointly controlled entities have been classified as joint ventures under IFRS 11 and therefore the equity method of accounting has been used in the consolidated financial statements. APICO LLC is a limited liability company formed in the State of Delaware, USA. APICO LLC wholly owns APICO (Khorat) Holdings LLS, a limited

liability company formed in the State of Delaware, USA. APICO (Khorat) Holding LLC wholly owns APICO (Khorat) Limited, which is a Thai STRATEGIC REPORT limited company that was incorporated and has its principal place of business in the Kingdom of Thailand. The Group’s primary business purpose is the acquisition, exploration, development and production of petroleum interests in the Kingdom of Thailand. The Group’s share of the results of its joint venture and the Group’s share of its assets and liabilities as at 31 December 2018 are shown in the tables below: Year ended Year ended

31 Dec 2018 31 Dec 2017 GOVERNANCE REPORT Results for the year ended $’000 $’000 Sales and other operating revenues 13,709 12,215 Profit before interest and taxation 9,107 7,213 Net finance costs (209) (136) Profit before taxation 8,898 7,077 Taxation (4,040) (2,896) Profit for the period 4,858 4,181

Summarised financial information of APICO LLC FINANCIAL STATEMENTS Year ended Year ended 31 Dec 2018 31 Dec 2017 Results for the year ended $’000 $’000 Sales and other operating revenues 50,437 44,941 Profit before interest and taxation 33,601 26,537 Net finance costs (769) (500) Profit before taxation 32,738 26,037 Taxation (14,866) (10,654)

Profit for the period 17,872 15,383 SUPPLEMENTARY INFORMATION Year ended Year ended 31 Dec 2018 31 Dec 2017 Ophir’s share of assets and liabilities $’000 $’000 Non-current assets 45,165 46,147 Current assets 6,325 3,903 Total assets 51,490 50,050 Current liabilities (6,079) (4,760) Non-current liabilities (1,596) (2,077) Total liabilities (7,675) (6,837) Net assets 43,815 43,213

The following table shows the movement in investments in the jointly controlled entities: Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Balance at the beginning of the year 120,964 130,736 Additions 1,824 370 Impairment1 (45,000) (7,800) Share of profit of investments 4,858 4,181 Dividends received (6,562) (6,523) Balance at the end of the year 76,084 120,964

1 The 2018 impairment was due to changes in resource estimates. The Sinphuhorm asset had a recoverable amount of $76.1 million based on management’s estimate of value in use. The discount rate used was a pre-tax rate of 17% (2017: 14%). 2 The 2017 impairment was due to the effect of lower nominations and reclassification of reserves to resources. The Sinphuhorm asset had a recoverable amount of $121 million based on management’s estimate of value in use. The discount rate used was a pre-tax rate of 14%.

Annual Report and Accounts 2018 122 NOTES TO THE FINANCIAL STATEMENTS continued

29 TREASURY SHARES Year ended Year ended 31 Dec 2018 31 Dec 2017 Ordinary shares of 0.25p each held by the Group as treasury shares $’000 $’000 Balance at the beginning of the year 39,710,823 (2017: 39,918,385) 152 153 Disposed of on exercise of share options during the year: 903,240 (2017: 207,562) (3) (1) Balance at the end of the year 38,807,583 (2017: 39,710,823) 149 152

Treasury shares represent the cost of shares in the Company purchased in the market and held by the Company to satisfy options under the Group’s employee incentive share option plans (refer to Note 32 of these consolidated financial statements). During 2018 Nil shares were purchased (2017: Nil).

30 RESERVES As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Treasury shares (Note 29) (149) (152) Other reserves (Note 31) 692,758 1,458,680 692,609 1,458,528 Non-controlling interest 1 – (280) 692,609 1,458,248

1 The non-controlling interest relates to Dominion Uganda Ltd, where the Group acquired a 95% shareholding during 2012.

31 OTHER RESERVES Equity component Foreign Capital Option Consolid- on currency Accumulated Total Share redemption2 premium3 ation4 Merger convertible translation7 Cash flow profits/ other premium1 reserve reserve reserve reserve5 bond6 reserve hedges8 (losses) reserves $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 As at 1 January 2017 807,427 160 57,794 (500) 667,337 669 5,569 – 33,993 1,572,449 Profit for the period, net of tax – – – – – – – – (111,792) (111,792) Other comprehensive income, net of tax – – – – – – – (5,882) – (5,882) Total comprehensive loss, net of tax – – – – – – – (5,882) (111,792) (117,674) Share-based payment – – 3,905 – – – – – – 3,905 Transfers within reserves – – – – (341,792) – – – 341,792 – As at 31 December 2017 807,427 160 61,699 (500) 325,545 669 5,569 (5,882) 263,993 1,458,680 Adjustment on adoption of IFRS 9 2,300 (2,300) At 1 January 2018 807,427 160 61,699 (500) 325,545 669 5,569 (3,582) 261,693 1,458,680 Loss for the period, net of tax – – – – – – – – (781,670) (781,670) Other comprehensive income/ (loss), net of tax – – – – – – (31) 13,552 – 13,521 Total comprehensive income, net of tax – – – – – – (31) 13,552 (781,670) (768,149) Disposal of subsidiary – – – – – – – – (280) (280) Share-based payment – – 2,507 – – – – – – 2,507 Transfers within reserves – – (7,868) – – – – – 7,868 – As at 31 December 2018 807,427 160 56,338 (500) 325,545 669 5,538 9,970 (512,389) 692,758

1 The share premium account represents the total net proceeds on issue of the Company’s shares in excess of their nominal value of 0.25p per share less amounts transferred to any other reserves. 2 The capital redemption reserve represents the nominal value of shares transferred following the Company’s purchase of them. 3 The option premium reserve represents the cost of share-based payments to Directors, employees and third parties. 4 The consolidation reserve represents a premium on acquisition of a minority interest in a controlled entity. 5 In 2017, the premium arising on the 2012 Dominion Petroleum acquisition, which was classified within the merger reserves according to the provisions of the Companies Act 2006 relating to Merger Relief (s612 and s613), was realised to accumulated profits/(losses)as a result of the full impairment of the Dominion Group in previous years. 6 This balance represents the equity component of the convertible bond, net of costs and tax as a result of the separation of the instrument into its debt and equity components. The bond was converted into 21,661,476 ordinary shares of 0.25p each on 21 May 2008. 7 The foreign currency translation reserve is used to record unrealised exchange differences arising from the translation of the financial statements of entities within the Group that have a functional currency other than US Dollars. 8 The cash flow hedge reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. It includes $9.9 million relating to commodity price hedges which will only be reclassified to the income statement once the forecast sale occurs. For further information on the accounting for cash flow hedges see Note 2.3 (e) financial instruments.

Ophir Energy plc Annual Report and Accounts 2018 123

32 SHARE-BASED COMPENSATION (a) Employee incentive share option plans Ophir Energy Company 2006 Share Option Plan On 5 April 2006 the Board resolved to establish the Ophir Energy Company Limited 2006 Share Option Plan. Any employee of the Company or any subsidiary or any Director of the Company or any subsidiary who is required to devote substantially the all of his/her working time to his duties is eligible to participate under the plan. At the grant date the Board of Directors determines the vesting terms, if any, subject to the provision that no more than one half of the options become exercisable on the first and second anniversaries of the date of grant and any performance conditions are satisfied. Options have an exercise period of 10 years from the date of grant. Ophir Energy Long-Term Incentive Share Option Plan On 26 May 2011, the Board resolved to establish the Ophir Energy Long-Term Incentive Share Option Plan. This was introduced to give awards to Directors and senior management subject to outperforming a comparator group of similarly focused oil and gas exploration companies in terms of shareholder return over a three-year period. The plan awards a number of shares to Directors and senior management based on a multiple of salary. However, these shares only vest after a three-year period and the full award is made only if Ophir has performed in the top STRATEGIC REPORT quartile when compared against a selected peer group of upstream oil and gas companies. Ophir Energy plc 2012 Deferred Share Plan On 19 June 2012 the Board resolved to establish the Ophir Energy plc Deferred Share Plan 2012 (DSP). The DSP was introduced to provide executive management with a means of retaining and incentivising employees. The structure of the DSP will enable a portion of participants’ annual bonuses to be deferred into options to acquire ordinary shares in the capital of the Company. All options issued to date vest after a three year period. Options have an exercise period of 10 years from the date of grant. GOVERNANCE REPORT The DSP operates in conjunction with the Ophir Energy plc Employee Benefit Trust (the Trust). The Trust will hold ordinary shares in the Company for the benefit of its employees and former employees, which may then be used on a discretionary basis to settle the DSP awards as and when they are exercised. No shares have been acquired by the Trust. The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the period for the above schemes. These are denominated in GBP and have been translated to US Dollars using the closing exchange rate for presentation purposes. 2018 2018 2017 2017 Number WAEP Number WAEP FINANCIAL STATEMENTS Outstanding options at the beginning of year 16,807,901 $0.87/£0.65 19,285,299 $0.48/£0.36 Shares re-granted1 22,407 $0.32/0.25p – – Exercised during the year (903,240) 0.24c/0.18p (207,562) 0.34c/0.25p Expired during the year (4,630,926) $1.14/0.85p (2,269,836) $1.38/£1.02 Outstanding options at the end of year 11,296,142 $0.68/£0.51 16,807,901 $0.87/£0.65 Exercisable at end of year 2,391,153 $1.82/£1.36 2,176,460 $2.78/£2.07

1 A minor amendment has been made to the number of shares re-granted for employee share-based payment plans in 2016.

There were no share options granted in 2018. No share options granted in 2017.

(b) Share-based payments to Directors SUPPLEMENTARY INFORMATION During the year a total of nil (2017: nil) options to acquire ordinary shares were granted to Directors under the Ophir Energy Long-Term Incentive Plan. During the year nil options (2017: nil) were granted to Directors under the Ophir Energy Company 2006 Share Option Plan.

33 OPERATING LEASE COMMITMENTS At 31 December 2018 the Group was committed to making the following future minimum lease payments in respect of operating leases over land and buildings with the following lease termination dates: As at 2018 As at 2017 $’000 $’000 Due within one year 17,303 16,623 Due later than one year but within five years 72,043 66,820 Due later than five years 6,584 24,037 95,930 107,480

Annual Report and Accounts 2018 124 NOTES TO THE FINANCIAL STATEMENTS continued

34 CAPITAL COMMITMENTS – EXPLORATION In acquiring its oil and gas interests, the Group has pledged that various work programmes will be undertaken on each permit/interest. The exploration commitments in the following table are an estimate of the net cost to the Group of performing these work programmes: As at 2018 As at 2017 $’000 $’000 Due within one year 3,635 4,830 Due later than one year but within two years 1,180 26,940 Due later than two years but within five years 28,660 90 33,475 31,860

35 CONTINGENT LIABILITIES An individual has commenced claims against the Group relating to the evaluation and subsequent disposal of an interest that was held in exploration blocks within the portfolio. The individual’s primary claim was dismissed in February 2018. The individual has filed an appeal against the decision but a loss at first instance supports the Group’s view that the claims are without merit and accordingly the Group has estimated that no liability will arise as a result of proceedings and therefore no provision for any liability has been made in these financial statements. Santos acquisition As described in Note 11, Ophir completed the acquisition of three producing assets from Santos on 6 September 2018. As part of this transaction, it was agreed that Ophir would also acquire four exploration assets as set out below: (i) a 20% non-operated interest in the Deepwater Block R PSC in Sabah, Malaysia; (ii) a 50% operated interest in Block 123 PSC in the frontier Phu Khanh Basin, Vietnam; (iii) a 40% non-operated interest in Block 124 PSC in the frontier Phu Khanh Basin, Vietnam; and (iv) a 45% operated interest in Block SS-11 PSC, Bangladesh The acquisition of Block R in Malaysia completed in December 2018. The other assets have not yet completed and are conditional on regulatory consents. If completion of any or all of the remaining exploration assets is terminated, Ophir has agreed to pay Santos an amount in recognition of the ongoing commitments in respect of these exploration licences that Santos will indirectly retain as a result of such termination. Ophir’s best estimates of these ongoing work commitments as at 31 December 2018 are set out below. Asset Principal place of business Estimated work commitment Block 123 Vietnam $14.3 million Block 124 Vietnam $6.0 million Block SS-11 Bangladesh $5.5 million

36 SUBSIDIARY UNDERTAKINGS, JOINT VENTURES, ASSOCIATES AND MATERIAL JOINT OPERATIONS Subsidiary undertakings A complete list of Ophir Energy plc Group companies at 31 December 2018, and the Group’s percentage of share capital (to the nearest whole number) are set out in Appendix A to these consolidated financial statements on pages 140 to 144. All of these subsidiaries have been included in these consolidated financial statements on pages 87 to 126. The following joint operations are considered individually material to the Group as at 31 December 2018. Asset Principal place of business Activity Block 11 Tanzania Exploration Block 4 2 Tanzania Exploration Bangkanai (Kerendan) 3 Indonesia Exploration and production Madura Offshore PSC 4 Indonesia Development and Production Sampang PSC 5 Indonesia Exploration and Production Block 12W 6 Vietnam Production

1 This concession is operated by Shell in which the Group has a 20% interest. 2 This concession is operated by Shell in which the Group has a 20% interest. 3 This concession is operated by the Group and it has a 70% interest. 4 This concession is operated by the Group and it has a 67.5% interest. 5 This concession is operated by the Group and it has a 45% interest. 6 This concession is operated by Premier oil in which the Group has a 31.875% interest. Capital commitments relating to these projects are included in Note 34 of these consolidated financial statements. There are no contingent liabilities associated with these projects. Refer to Note 2.3(l) of these consolidated financial statements for the Group’s accounting policy for jointly controlled assets and liabilities.

Ophir Energy plc Annual Report and Accounts 2018 125

37 RELATED PARTY DISCLOSURES (a) Identity of related parties The Group has related party relationships with its subsidiaries (refer to Note 7 of the Company financial statements), joint ventures (refer to Note 21, Note 19 and Note 36 of these consolidated financial statements) and its Directors. Recharges from the Company to subsidiaries in the year were nil (2017: $3,062,812). Transactions between the Company and its subsidiaries have been eliminated on consolidation. (b) Other transactions with key management personnel Compensation of key management personnel (including Directors) is disclosed in Note 10(b) of these consolidated financial statements.

38 DEFINED BENEFIT PENSION PLAN Ophir operates a post-employment defined benefit arrangement in Indonesia, as regulated under the Indonesian Law No. 13/2003. The arrangement covers two sets of employees, one set under the Bangkanai PSC and one set under the Sampang PSC acquired from Santos in STRATEGIC REPORT September 2018. Prior to the acquisition of the Santos assets, the defined benefit scheme under the Bangkanai PSC was considered immaterial to the group, and therefore full IAS 19 disclosures were not presented. Since the acquisition, the Group now considers this a material disclosure and have presented IAS 19 disclosures below. The arrangement covers retirement, death, disability and voluntary resignation benefits, which are based on final wages. The actuarial valuations of scheme assets and the present value of the defined benefit obligation have been carried out at 31 December 2018 and 31 December 2017. The key actuarial assumptions applied in determining the present value of the defined benefit obligations, the related current service cost and past service cost, which are measured using the projected unit credit method, are as follows: GOVERNANCE REPORT Key economic assumptions used: 2018 2017 Discount rate 7% – 8.5% 7.5% Wage increases1 4% – 6.5% 6.5% Weighted average duration of obligation 8.03 years 13.9 years

1 Includes the effect of inflation

Mortality and disability rates FINANCIAL STATEMENTS The mortality rates for 2017 and 2018 follow the Indonesia Mortality Table 2011 (TMI III). The disability rate is set at 5% of the mortality rate for each year. Amounts recognised in the profit and loss account in respect of these defined benefit schemes are as follows: 2018 2017 $’000 $’000 Current service cost 794 533 Past service cost – (122)

Net interest cost 124 113

Foreign exchange SUPPLEMENTARY INFORMATION 918 524

Financial disclosures Recognised in other comprehensive income: 2018 2017 $’000 $’000 Actuarial gain/(loss) 189 (252) Return on plan assets (excluding amounts in net interest) (22) – 167 (252)

The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit schemes is as follows: 2018 20171 $’000 $’000 Present value of defined benefit obligations (13,159) (1,988) Fair value of scheme assets 11,888 349 Net liability recognised in the balance sheet (1,271)2 (1,639)

1 The present value of defined benefit obligations and the fair value of scheme assets in 2017 were disclosed with trade and other payable and trade and other receivables respectively in the 2017 statement of financial position. 2 $1,257,000 is classed as short term and is disclosed within trade and other payables in the statement of financial position. $14,000 is classed as long term and is disclosed within net defined benefit liability in the statement of financial position.

Annual Report and Accounts 2018 126 NOTES TO THE FINANCIAL STATEMENTS continued

38 DEFINED BENEFIT PENSION PLAN CONTINUED Movements in the present value of defined benefit obligations were as follows: 2018 2017 $’000 $’000 At 1 January (1,988) (1,420) Acquisition (10,891) – Service cost (794) (411) Interest cost (124) (113) Foreign exchange gains and (losses) 16 208 Actuarial gains and (losses) 167 (252) Benefits paid 455 – (13,159) (1,988) Movements in the fair value of scheme assets were as follows: 2018 2017 $’000 $’000 At 1 January 349 784 Acquisition 10,604 – Interest income 183 – Foreign exchange gains and (losses) (304) – Return on plan assets (excluding amounts included in net interest cost) 22 – Contributions from the employer 1,640 – Benefits paid (606) (435) 11,888 349

The Sampang plan assets ($10.5 million) are held in money market instruments and the Bangkanai assets ($1.4 million) are held in deposit accounts. The carrying value of the plan assets equates to its fair value. The group does not expect to make any contributions to the plan in 2019. Risk factor and sensitivity analyses Changes in the regulatory and legislative environment could increase the cost of compliance and affect our provisions. Potential changes to pension or financial market regulation could also impact funding requirements of the group. The discount rate and salary growth have a significant effect on the amounts reported. A one percentage point change, in isolation, in certain assumptions as at 31 December 2018 for the group’s plans would have had the effects shown in the table below.

2018 2017 Decrease/(increase) in defined benefit obligation $’000 $’000 Discount rate 1% increase 252 223 1% decrease (290) (264) Future salary increases 1% increase (393) (274) 1% decrease 356 234

39 EVENTS AFTER THE REPORTING PERIOD On 30 January 2019 the Board of Ophir reached agreement with Medco Energi Global for the recommended acquisition of the entire issued share capital of Ophir Energy plc for a cash consideration of 55 pence per share. On 1 March 2019, the Company issued a formal scheme document to all shareholders setting out the details of the recommended cash acquisition of Ophir Energy plc by means of a Scheme of Arrangement under Part 26 of the Companies Act 2006. The scheme document contained details for the transaction timetable, with a shareholder vote to be made at a general meeting convened for 25 March 2019, followed by a Court sanction on the same day, and with an agreed deal completion long-stop date of 20 June 2019. Following a successful shareholder vote and an approved court sanction, the shares of Ophir Energy plc would be delisted from the London Stock Exchange. In January 2019, $100 million was drawn down from the increased RBL facility and used to repay the $103.2 million Bridge facility.

Ophir Energy plc Annual Report and Accounts 2018 COMPANY STATEMENT OF FINANCIAL POSITION 127 As at 31 December 2018

2018 2017 Notes $’000 $’000 Non-current assets Property, plant and equipment 6 – – Investments in subsidiaries 7 738,016 1,260,298 Financial assets 8 1,959 2,079 739,975 1,262,377

Current assets Trade and other receivables 10 1,772 1,578 Cash and cash equivalents 11 55,260 127,934 57,032 129,512 STRATEGIC REPORT Total assets 797,007 1,391,889

Current liabilities Trade and other payables 12 (10,243) (54) Taxation payable (25) (25) Provisions 9 (10,032) – Total liabilities (20,300) (79)

Net assets 776,707 1,391,810 GOVERNANCE REPORT

Capital and reserves Called up share capital 14 3,061 3,061 Treasury shares 15 (149) (152) Other reserves 16 773,795 1,388,901 Total equity 776,707 1,391,810

The Company’s loss for the year was $617,613,000 (2017:$47,618,000). FINANCIAL STATEMENTS The notes on pages 129 to 139 form part of these Company financial statements. The Company financial statements of Ophir Energy plc (registered number 05047425) on pages 127 to 139 were approved by the Board of Directors on 11 March 2018. On behalf of the Board: Tony Rouse Chief Financial Officer

SUPPLEMENTARY INFORMATION 128 COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2018

Called up Treasury Other 1 Total share capital shares reserves equity $’000 $’000 $’000 $’000 As at 1 January 2017 3,061 (153) 1,432,610 1,435,518 Loss for the period, net of tax – – (47,618) – Other comprehensive income, net of tax – – – – Total comprehensive income, net of tax – – (47,618) (47,618)

Exercise of options – 1 – 1 Share-based payment – – 3,909 3,909 As at 31 December 2017 3,061 (152) 1,388,901 1,391,810

Loss for the period, net of tax – – (617,613) (617,613) Other comprehensive income, net of tax – – – – Total comprehensive income, net of tax – – (617,613) (617,613)

Exercise of options – 3 – 3 Share-based payment – – 2,507 2,507 As at 31 December 2018 3,061 (149) 773,795 776,707

1 Refer to Note 16 of these Company financial statements. The notes on pages 129 to 139 form part of these Company financial statements.

COMPANY STATEMENT OF CASH FLOWS For the year ended 31 December 2018

2018 2017 Notes $’000 $’000 Operating activities Loss before taxation (617,613) (47,618)

Adjustments to reconcile loss before tax to net cash flows: Interest income (15,419) (1,923) Foreign exchange gains (45) (940) Share-based payment expense/(credit) 684 (215) Allowance for impairment of investment in subsidiaries 7 591,429 44,910 Movement in provisions 10,032 – Working capital adjustments Increase/(decrease) in trade and other payables 10,233 (5,132) (Increase)/decrease in trade and other receivables (75) 769 Cash flows used in operating activities (20,774) (10,149) Interest income 1,487 1,923 Net cash flows used in operating activities (19,287) (8,226)

Investing activities Loans to subsidiaries (54,037) (129,614) Net cash flows (used in)/from investing activities (54,037) (129,614)

Financing activities Proceeds from of exercise of share options 3 1 Net cash flows (used in)/from financing activities 3 1

Decrease in cash and cash equivalents for the year (73,321) (137,839) Net effect of foreign exchange rates on cash and cash equivalents 647 259 Cash and cash equivalents at the beginning of the year 127,934 265,514 Cash and cash equivalents at the end of the year 11 55,260 127,934

The notes on pages 129 to 139 form part of these Company financial statements.

Ophir Energy plc Annual Report and Accounts 2018 129

1 CORPORATE INFORMATION Ophir Energy plc (the Company) is a public limited company domiciled and incorporated in England and Wales. The Company’s registered offices are located at 123 Victoria Street, London SW1E 6DE. The Company’s business is the development of offshore and deepwater oil and gas exploration assets. The Company has an extensive and diverse portfolio of exploration interests across Africa and Southeast Asia. The Company’s financial statements for the year ended 31 December 2018 were authorised for issue by the Board of Directors on 11 March 2019 and the statement of financial position was signed on the Board’s behalf by Tony Rouse.

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation and statement of compliance The Company’s financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board and adopted by the European Union (EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. STRATEGIC REPORT The financial statements are prepared on a going concern basis. The financial statements have been prepared on a historical cost basis except for revaluation of certain derivative instruments measured at fair value. The financial statements are presented in US Dollars rounded to the nearest thousand dollars ($’000) except as otherwise indicated. The Company is the ultimate parent entity of the Group. The Company’s financial statements are included in the Ophir Energy plc consolidated financial statements for the year ended 31 December 2018. As permitted by the section s408 of the Companies Act 2006, the

Company has not presented its own income statement and statement of other comprehensive income and related notes. GOVERNANCE REPORT Comparative figures for the period to 31 December 2017 are for the year ended on that date. New and amended accounting standards and interpretations. The Company has adopted relevant new and amended IFRS and IFRIC interpretations as of 1 January 2018. These are detailed in Note 2.1 of the Group financial statements. 2.2 Significant accounting policies (a) Investment in subsidiaries The Company holds monetary balances with its subsidiaries of which settlement is neither planned nor likely to occur in the foreseeable FINANCIAL STATEMENTS future. Such balances are considered to be part of the Company’s net investment in its subsidiaries. The carrying values of investments in subsidiaries are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. (b) Financial instruments i. Cash and short-term deposits Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand and short-term deposits with a maturity of three months or less, but exclude any restricted cash. Restricted cash is not available for use by the Company and therefore is

not considered highly liquid (for example, cash set aside to cover rehabilitation obligations). For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. SUPPLEMENTARY INFORMATION ii. Trade and other receivables Trade receivables, which generally have 30 to 90 day terms, are recognised and carried at the lower of their original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried at amortised cost. Allowance is made when there is objective evidence that the Company will not be able to recover balances in full. Evidence on non-recoverability may include indications that the debtor or group of debtors is experiencing significant financial difficulty, the probability that they will enter bankruptcy or default or delinquency in repayments. Balances are written off when the probability of recovery is assessed as being remote. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. iii. Trade and other payables Trade and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obligated to make future payments in respect of the purchase of those goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. iv. Interest-bearing loans and borrowings All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when liabilities are derecognised as well as through the amortisation process. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. (c) Inventories Inventories which comprise drilling consumables are stated at the lower of cost and net realisable value. Cost is determined by using the weighted average cost method and comprises direct purchase costs, cost of transportation and other related expenses.

Annual Report and Accounts 2018 130 NOTES TO THE FINANCIAL STATEMENTS continued

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED (d) Property, plant and equipment Cost Property, plant and equipment, which comprises furniture and fittings and computer equipment, is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended. Depreciation Depreciation is provided on property, plant and equipment calculated using the straight-line method at rates to write off the cost, less estimated residual value based on prices prevailing at the statement of financial position date, of each asset over expected useful lives ranging from three to ten years. (e) Provisions A provision is recognised when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the obligation. If the effect of the time value of money is material, expected future cash flows are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance cost. (f) Pensions and other post-retirement benefits Up to 31 October 2016, the Company did not operate its own pension plan but made pension or superannuation contributions to private funds of its employees which are defined contribution plans. On 1 November 2016 the Group launched its own defined contribution scheme for its Executive Directors. Contributions to defined contribution plans are recognised in the income statement in the period in which they become payable. (g) Employee benefits Salaries, wages, annual leave and sick leave Liabilities for salaries and wages, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (h) Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. (i) Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. The Company has leases where the lessor retains substantially all the risks and benefits of ownership of the asset. Such leases are classified as operating leases and rentals payable are charged to the income statement on a straight-line basis over the lease term. (j) Interest income Interest income is recognised as it accrues using the effective interest rate method, that is, the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset. (k) Share-based payments The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined with reference to the market value of the underlying shares using a pricing model appropriate to the circumstances which requires judgements as to the selection of both the valuation model and inputs. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition or a non-vesting condition, which are treated as vesting irrespective of whether or not the market condition or non-vesting condition is satisfied, provided that all other vesting conditions are satisfied. At each statement of financial position date before vesting, the cumulative expense is calculated on the basis of the extent to which the vesting period has expired and management’s best estimate of the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous statement of financial position date is recognised in the income statement, with a corresponding entry in equity. Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.

Ophir Energy plc Annual Report and Accounts 2018 131

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement. For equity-settled share-based payment transactions with third parties, the goods or services received are measured at the date of receipt by reference to their fair value with a corresponding entry in equity. If the Company cannot reliably estimate the fair value of the goods or services received, their value is measured by reference to the fair value of the equity instruments granted. (l) Foreign currency translation The functional currency of the Company is determined on an individual basis according to the primary economic environment in which it operates. Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the statement of financial position date. All exchange differences are taken to the income statement. Non-monetary items that are measured at historical STRATEGIC REPORT cost in a foreign currency are translated using the spot exchange rate ruling as at the date of the initial transaction. Non-monetary items measured at a revalued amount in a foreign currency are translated using the spot exchange rate ruling at the date when the fair value was determined. (m) Income taxes Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax

rates and laws that are enacted or substantively enacted by the statement of financial position date. GOVERNANCE REPORT Current income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the income statement. Deferred tax Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: —— where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither accounting nor taxable profit or loss; —— in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing FINANCIAL STATEMENTS of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and —— deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become

probable that future taxable profit will be available to allow the deferred tax asset to be recovered. SUPPLEMENTARY INFORMATION Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date. Deferred income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise deferred income tax is recognised in the income statement. 2.3 Significant accounting judgements, estimates and assumptions The preparation of the Company financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the Company financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. The Company has used estimates and assumptions in deriving certain figures within the financial statements. Such accounting estimates may not equate with the actual results which will only be known in time. The key areas of estimation are detailed in Note 2.4 of the Group financial statements.

3 LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY The loss attributable to the members of the parent company for the year ended 31 December 2018 is $617.6 million (2017: $47.6 million).

Annual Report and Accounts 2018 132 NOTES TO THE FINANCIAL STATEMENTS continued

4 STAFF NUMBERS AND COSTS (a) Staff costs Employee costs (including payments to Directors) during the year comprised: Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Salaries and wages including bonuses 2,283 3,016 Social security costs 315 398 Contributions to pension plans/superannuation funds – 129 Compensation for loss of office 456 129 Share-based payment expense/(credit) 684 (215) 3,738 3,457

(b) Key management The table below sets out the details of the emoluments of the Group’s key management including Directors: Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Aggregate compensation: Salaries and wages including bonuses 2,043 3,016 Social security costs 315 398 Contributions to pensions/superannuation funds 100 129 Compensation for loss of office 696 129 Share-based payment expense/(credit) 684 (215) 3,838 3,457

Key management emoluments above excludes aggregate gains made by Directors on the exercise of share options of Nil (2017: Nil). (c) Directors’ emoluments Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Aggregate compensation: Salaries and wages 2,010 2,098 Bonuses – 530 Social security costs 296 346 Contributions to pensions/superannuation funds 100 126 Other benefits 14 17 Compensation for loss of office 240 129 2,660 3,246

Directors’ emoluments above excludes aggregate gains made by Directors on the exercise of share options of Nil (2017: Nil). Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Share-based payment expense/(credit) 551 (503) Number of Directors to whom superannuation or pension benefits accrued during the year 2 3

(d) Average number of persons employed (full time equivalents): Year ended Year ended 31 Dec 2018 31 Dec 2017 CEO 1 1 Exploration and technical 0 1 Commercial and support 2 2 3 4

5 SHARE-BASED COMPENSATION (a) Employee incentive share option plans Ophir Energy Company 2006 Share Option Plan On 5 April 2006 the Board resolved to establish the Ophir Energy Company Limited 2006 Share Option Plan. Any employee of the Company or any subsidiary or any Director of the Company or any subsidiary who is required to devote substantially the all of his/her working time to his duties is eligible to participate under the plan. At the grant date the Board of Directors determines the vesting terms, if any, subject to the proviso that no more than one half of the options become exercisable on the first and second anniversaries of the date of grant and any performance conditions are satisfied. Options have an exercise period of 10 years from the date of grant.

Ophir Energy plc Annual Report and Accounts 2018 133

Ophir Energy Long-Term Incentive Share Option Plan On 26 May 2011, the Board resolved to establish the Ophir Energy Long-Term Incentive Share Option Plan. This was introduced to give awards to Directors and senior management subject to outperforming a comparator group of similarly focused oil and gas exploration companies in terms of shareholder return over a three-year period. The plan awards a number of shares to Directors and senior management based on a multiple of salary. However, these shares only vest after a three-year period and the full award is made only if Ophir has performed in the top quartile when compared against a selected peer group of upstream oil and gas companies. Ophir Energy plc 2012 Deferred Share Plan On 19 June 2012 the Board resolved to establish the Ophir Energy plc Deferred Share Plan 2012 (DSP). The DSP was introduced to provide executive management with a means of retaining and incentivising employees. The structure of the DSP will enable a portion of participants’ annual bonuses to be deferred into options to acquire ordinary shares in the capital of the Company. All options issued to date vest after a three-year period. Options have an exercise period of 10 years from the date of grant.

The DSP operates in conjunction with the Ophir Energy plc Employee Benefit Trust (the Trust). The Trust will hold ordinary shares in the STRATEGIC REPORT Company for the benefit of its employees and former employees, which may then be used on a discretionary basis to settle the DSP awards as and when they are exercised. No shares have been acquired by the Trust. The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the period for the above schemes. These are denominated in GBP and have been translated to US Dollars using the closing exchange rate for presentation purposes. 2018 2018 2017 2017

Number WAEP Number WAEP GOVERNANCE REPORT Outstanding options at the beginning of the year 16,807,901 $0.87/£0.65 19,285,299 $0.48/£0.36 Shares re-granted1 22,407 $0.32/0.25p – – Exercised during the year (903,240) 0.24c/0.18p (207,562) 0.34c/0.25p Expired during the year (4,630,926) $1.14/0.85p (2,269,836) $1.38/£1.02 Outstanding options at the end of the year 11,296,142 $0.68/£0.51 16,807,901 $0.87/£0.65 Exercisable at end of year 2,391,153 $1.82/£1.36 2,176,460 $2.78/£2.07

1 A minor amendment has been made to the number of shares re-granted for employee share-based payment plans in 2016.

There were no share options granted in 2018. No share options granted in 2017. FINANCIAL STATEMENTS (b) Share-based payments to Directors During the year a total of nil (2017: nil) options to acquire ordinary shares were granted to Directors under the Ophir Energy Long-Term Incentive Plan. During the year nil options (2017: nil) were granted to Directors under the Ophir Energy Company 2006 Share Option Plan.

6 PROPERTY, PLANT AND EQUIPMENT

Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 SUPPLEMENTARY INFORMATION Office furniture and equipment Cost Balance at the beginning of the year 2,242 9,430 Additions – – Disposals – (7,188) Balance at the end of the year 2,242 2,242

Depreciation Balance at the beginning of the year 2,242 6,678 Disposals – (4,436) Depreciation charge for the year – – Balance at the end of the year 2,242 2,242

Net book value Balance at the beginning of the year – 2,752 Balance at the end of the year – –

Annual Report and Accounts 2018 134 NOTES TO THE FINANCIAL STATEMENTS continued

7 INVESTMENTS IN SUBSIDIARIES The following table shows the movement in the investment in subsidiaries during the year Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 Balance at the beginning of the year 2,418,331 2,272,694

Additions during the year Salamander Energy plc 49,480 31,989 Ophir Holdings & Services (UK) Limited 1,178 689,026 Ophir Holdings Limited 25,433 – Ophir Holdings & Ventures Limited 16,319 5,503 Ophir Mexico Offshore Exploration S.A de CV 14,762 2,436 Ophir Mexico Operations S.A de C.V 10,503 – Ophir Asia Limited 21 9,153 Dominion Petroleum Limited – 10,537 Ophir Asia Services Limited – 180 Other 25,702 31,980

Repayments during the year Ophir Cote d’Ivore (CI-513) Limited (25,267) – Ophir Seychelles (Areas 1,2 & 3) Limited (24,905) – Ophir Malaysia (Block 2A) Limited (6,209) (143) Ophir Services Pty Limited (6,134) – Ophir Holdings Limited – (130) Ophir Equatorial Guinea (Block R) Limited (5,462) (231,300) Ophir Equatorial Guinea Holdings Limited – (397,533) Ophir Gabon (Manga) Limited (2,171) – Dominion Petroleum Limited (1,704) – Other (2,399) (6,061) Balance at the end of the year 2,487,478 2,418,331

Foreign exchange translation gains and losses – – Allowance for impairment (1,158,033) (1,113,123) Balance at the beginning of the year Additional allowance (591,429) (44,910) Balance at the end of the year (1,749,462) (1,158,033)

Net book value At the beginning of the year 1,260,298 1,159,571 At the end of the year 738,016 1,260,298

Loans to subsidiaries are unsecured and form part of the Company’s investments in subsidiaries. The loans are denominated in US Dollars and have no particular repayment terms. The Company has indicated that it does not intend to demand repayment in the foreseeable future. The allowance for impairment charge primarily relates to unrecoverable intra-group funding as a result of the write off of the Block R licence in Equatorial Guinea. A complete list of Ophir Energy plc Group companies at 31 December 2018, and Group’s percentage of share capital (to the nearest whole number) are set out in Appendix A to these financial statements on page 140 to 144. All of these subsidiaries have been consolidated in the Group financial statements on pages 87 to 126.

Ophir Energy plc Annual Report and Accounts 2018 135

8 FINANCIAL ASSETS As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Non-current Security deposits – Rental properties 1,959 2,079 1,959 2,079

9 PROVISIONS Redundancy Onerous provision leases Total $’000 $’000 $’000 At 31 December 2017 – – – STRATEGIC REPORT Arising during the year 532 9,500 10,032 At 31 December 2018 532 9,500 10,032

Onerous leases In respect of the London HQ in relation to the proposed relocation to Southeast Asia. Redundancy provisions In respect of the downsizing of the London corporate office. GOVERNANCE REPORT

10 TRADE AND OTHER RECEIVABLES As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Other debtors – 609 Prepayments 1,772 969 1,772 1,578

All debtors are current. There are no receivables that are past due or impaired. FINANCIAL STATEMENTS Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.

11 CASH AND CASH EQUIVALENTS As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Cash 1,716 3,976

Cash equivalents 53,544 123,958 55,260 127,934 SUPPLEMENTARY INFORMATION

Cash and cash equivalents comprise cash in hand, deposits and other short-term money market deposit accounts that are readily convertible into known amounts of cash. The fair value of cash and cash equivalents is $55.2 million (2017: $127.9 million). Cash and cash equivalents at 31 December 2018 includes nil (2017: $2.2 million) of restricted bank guarantees.

12 TRADE AND OTHER PAYABLES As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Trade creditors 947 54 Accruals 9,296 – 10,243 54

Trade payables are unsecured and are usually paid within 30 days of recognition.

Annual Report and Accounts 2018 136 NOTES TO THE FINANCIAL STATEMENTS continued

13 FINANCIAL INSTRUMENTS The Company utilises the same financial risk and capital management as the Group. Refer to Note 26 of the Group financial statements for further details. (a) Credit quality of financial assets Equivalent S&P rating1 Internally rated A-1 A-2 A-2 and above and above and below Not rated Total $’000 $’000 $’000 $’000 $’000 Year ended 31 December 2018 Current financial assets Cash and cash equivalents 48,103 7,151 – 6 55,260 Trade and other receivables – – – – – 48,103 7,151 – 6 55,260

Non-current financial assets Security deposits – – – 1,959 1,959 – – – 1,959 1,959

1 The equivalent S&P rating of the financial assets represents the rating of the counterparty with whom the financial asset is held rather than the rating of the financial asset itself. Equivalent S&P rating1 Internally rated A-1 A-2 A-2 and above and above and below Not rated Total $’000 $’000 $’000 $’000 $’000 Year ended 31 December 2017 Current financial assets Cash and cash equivalents 127,934 – – – 127,934 Trade and other receivables – – – – – 127,934 – – – 127,934

Non-current financial assets Security deposits – – – 2,079 2,079 – – – 2,079 2,079

1 The equivalent S&P rating of the financial assets represents the rating of the counterparty with whom the financial asset is held rather than the rating of the financial asset itself. Credit risk on cash and cash equivalents and short-term investments is managed by limiting the term of deposits to periods of less than 12 months and selecting counterparty financial institutions with reference to long and short-term credit ratings published by Standard & Poor’s. Fair values The maximum exposure to credit risk is the fair value of security deposits and receivables. Collateral is not held as security. The carrying amounts of non-current receivables approximate their fair value. (b) Interest rate risk As of 31 December 2018, the Company has no external borrowings (2017: nil) so interest rate risk is limited to interest receivable on deposits and bank balances. The Company’s exposure to the risk of changes in market interest rate relates primarily to the Company’s cash assets held in short-term cash deposits. The Board monitors its cash balance on an ongoing basis and liaises with its financiers regularly to mitigate the risk of a fluctuating interest rate. The benchmark rate used for short-term deposits is US LIBOR. As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Financial assets Security deposits 1,959 2,079 Cash and cash equivalents 55,260 127,934 57,219 130,013 Financial liabilities Loans from subsidiary undertakings – – Net exposure 57,219 130,013

Ophir Energy plc Annual Report and Accounts 2018 137

The following table demonstrates the sensitivity to reasonably possible changes in interest rates, with all other variables held constant, of the Company’s loss before tax (through the impact on floating rate deposits and cash equivalent). Effect on loss Effect on loss 31 Dec 2018 31 Dec 2017 Increase/decrease in interest rate $’000 $’000 +0.5% 276 640 -0.5% (276) (640)

The sensitivity in 2018 was maintained at 0.5% as interest rate volatilities remained similar to those in the prior period. (c) Foreign currency risk The Company adopts the same policies to manage foreign currency risk as the Group. Refer to Note 26 of the Group financial statements for further details. STRATEGIC REPORT As at 31 December 2018, the Company’s predominant exposure to foreign exchange rates related to cash and cash equivalents held in Pounds Sterling. At the statement of financial position date, the Company had the following exposure to GBP, THB, MYR and EUR foreign currency that is not designated in cash flow hedges: As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 GOVERNANCE REPORT Financial assets Cash and cash equivalents EUR – – GBP 8,372 1,397 8,372 1,397

Security deposits GBP 1,959 2,079

10,331 3,476 FINANCIAL STATEMENTS

Financial liabilities Trade and other payables AUD – – THB – – MYR – – EUR – –

GBP (409) (21)

(409) (21) SUPPLEMENTARY INFORMATION Net exposure 9,922 3,455

The table below demonstrates the sensitivity to reasonably possible changes in currencies against the US Dollar exchange rates with all other variables held constant, of the Company’s loss before tax and equity (due to the foreign exchange translation of monetary assets and liabilities). Loss before tax Equity higher/(lower) higher/(lower) 2018 2017 2018 2017 $’000 $’000 $’000 $’000 US Dollar to GBP Sterling +5% (2017: +5%) 496 173 496 173 US Dollar to GBP Sterling -5% (2017: -5%) (496) (173) (496) (173)

Significant assumptions used in the foreign currency exposure sensitivity analysis include: —— Reasonably possible movements in foreign exchange rates were determined based on a review of the last two years’ historical movements and economic forecast expectations. —— The reasonably possible movement was calculated by taking the US Dollar spot rate as at balance date, moving this spot rate by the reasonably possible movements and then re-converting the US Dollar into the respective foreign currency with the new spot rate. This methodology reflects the translation methodology undertaken by the Company. (d) Liquidity risk The Company has a liquidity risk arising from its ability to fund its liabilities. This Company utilises the same policies to mitigate liquidity risk as the rest of the Group. Refer to Note 26 of the Group financial statements for further details. All of the Company’s trade creditors and other payables (refer to Note 12 of these Company financial statements) are payable in less than six months. The Company did not make use of derivative instruments during the year or during the prior year.

Annual Report and Accounts 2018 138 NOTES TO THE FINANCIAL STATEMENTS continued

13 FINANCIAL INSTRUMENTS CONTINUED (e) Disclosure of fair values The carrying values of security deposits and financial liabilities disclosed in the financial statements as at 31 December 2018 approximate their fair value. Fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1 quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2 other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3 techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. As at As at 31 Dec 2018 31 Dec 2017 $’000 $’000 Level 1 1,959 2,079 Level 2 – – Level 3 – – 1,959 2,079

There were no transfers between fair value levels during the year.

14 CALLED UP SHARE CAPITAL Year ended Year ended 31 Dec 2018 31 Dec 2017 $’000 $’000 (a) Authorised 2,000,000,000 ordinary shares of 0.25p each 7,963 7,963

(b) Called up, allotted and fully paid ordinary shares of 0.25p each In issue at the beginning of the year 746,019,407; (2017: 746,019,407) 3,061 3,061 In issue at the end of the year; 746,019,407; (2017: 746,019,407) 3,061 3,061

The balances classified as called up, allotted and fully paid share capital represents the nominal value of the total number of issued shares of the Company of 0.25p each. Fully paid shares carry one vote per share and carry the right to dividends.

15 TREASURY SHARES Year ended Year ended 31 Dec 2018 31 Dec 2017 Ordinary shares of 0.25p each held by the Group as treasury shares $’000 $’000 Balance at the beginning of the year: 39,710,823 (2017: 39,918,385) 152 153 Disposed of on exercise of share options during the year: 903,240 (2017: 207,562) (3) (1) Balance at the end of the year; 38,807,583 (2017: 39,710,823) 149 152

Treasury shares represents the cost of shares in the Company purchased in the market and held by the Company partly to satisfy options under the Group’s employee incentive share option plans (refer to Note 5 of these Company financial statements). During 2018 Nil shares were purchased (2017: Nil)

Ophir Energy plc Annual Report and Accounts 2018 139

16 OTHER RESERVES Equity5 component Foreign Accum- Capital2 Options3 on currency ulated Share1 redemption premium Merger 4 convertible translation profits/ Total other premium reserve reserve reserve bond reserve (losses) reserves $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 At 1 January 2017 807,427 160 57,794 667,337 669 11,839 (112,616) 1,432,610 Profit for the period, net of tax – – – – – – (47,618) (47,618) Other comprehensive income net of tax – – – – – – – – Total comprehensive income net of tax – – – – – – (47,618) (47,618) Share-based payment – – 3,909 – – – – 3,909 Transfers within reserves – – – (341,792) – (11,839) 353,631 –

As at 1 January 2018 807,427 160 61,703 325,545 669 – 193,397 1,388,901 STRATEGIC REPORT

Profit for the period, net of tax – – – – – – (617,613) (617,613) Other comprehensive income net of tax – – – – – – – – Total comprehensive income net of tax – – – – – – (617,613) (617,613) Share-based payment – – 684 – – – – 684 Capital contribution – – 1,823 – – – – 1,823 Transfers within reserves – – (7,868) – – – 7,868 – GOVERNANCE REPORT As at 31 December 2018 807,427 160 56,342 325,545 669 – (416,348) 773,795

17 OPERATING LEASE COMMITMENTS FINANCIAL STATEMENTS At 31 December 2018 the Company was committed to making the following future minimum lease payments in respect of operating leases over land and buildings with the following lease termination dates: As at As at 31 Dec 2018 31 Dec 2018 $’000 $’000 Due within one year 1,124 1,180 Due later than one year but within five years 4,460 4,724

Due later than five years – 1,141

5,584 7,045 SUPPLEMENTARY INFORMATION

18 RELATED PARTY TRANSACTIONS (a) Identity of related parties The Company has related party relationships with its subsidiaries and its Directors (refer to Note 4 of these Company financial statements). A complete list of Ophir Energy plc Group companies at 31 December 2018, and the Group’s percentage of share capital (to the nearest whole number) are set out in Appendix A to these financial statements. (b) Other transactions with key management personnel Compensation of key management personnel (including Directors) is disclosed in Note 10(b) of the Group financial statements.

19 CONTINGENT LIABILITIES An individual has commenced claims against the Group relating to the evaluation and subsequent disposal of an interest that was held in exploration blocks within the portfolio. The individual’s primary claim was dismissed in February 2018. The individual has filed an appeal against the decision but a loss at first instance supports the Group’s view that the claims are without merit and accordingly the Group has estimated that no liability will arise as a result of proceedings and therefore no provision for any liability has been made in these financial statements.

20 EVENTS AFTER REPORTING PERIOD On 30th January 2019 the Board of Ophir reached agreement with Medco Energi Global for the recommended acquisition of the entire issued share capital of Ophir Energy plc for a cash consideration of 55 pence per share. On 1st March 2019, the company issued a formal scheme document to all shareholders setting out the details of the recommended cash acquisition of Ophir Energy plc by means of a Scheme of Arrangement under Part 26 of the Companies Act 2006. The scheme document contained details for the transaction timetable, with a shareholder vote to be made at a general meeting convened for 25th March 2019, followed by a Court sanction on the same day, and with an agreed deal completion long-stop date of 20th June 2019. Following a successful shareholder vote and an approved court sanction, the shares of Ophir Energy plc would be delisted from the London Stock Exchange.

Annual Report and Accounts 2018 140 APPENDIX A – SUBSIDIARY COMPANIES

SUBSIDIARY COMPANIES This is a complete list of Ophir Energy plc Group companies at 31 December 2018, and Group’s percentage of share capital to the nearest whole number. All of these subsidiaries have been included in the consolidated financial statements on pages 87 to126. Country of Location Principal Holding incorporation of operation Registered office activity 31 Dec 2018 Ophir Services Pty Limited 1 Australia Australia Level 3, 38 Station Street Group Services Subiaco, WA 6008 Australia 100% Ophir Holdings & Services (UK) Limited 1 England England Level 4, 123 Victoria Street Services & Wales & Wales London SW1E 6DE United Kingdom 100% Ophir Holdings Limited 1 Jersey C.I. Jersey C.I. 12 Castle Street, St Helier Holding Jersey JE2 3RT Channel Islands 100% Ophir Asia Limited 1 Jersey C.I. Jersey C.I. 12 Castle Street, St Helier Holding Jersey JE2 3RT Channel Islands 100% Ophir Asia Services Limited 1 Thailand Thailand 28th Floor, Unit 2802 Q House Lumpini Services Building, 1 South Sathorn Road Tungmahamek Sathorn District Bangkok 10120 Thailand 100% Dominion Petroleum Limited 1 Bermuda Bermuda Clarendon House, 2 Church Street Holding Hamilton HM 11 Bermuda 100% Salamander Energy plc 1 England England Level 4, 123 Victoria Street Holding & Wales & Wales London, SW1E 6DE United Kingdom 100% Ophir Mexico Limited England England Level 4, 123 Victoria Street Holding & Wales & Wales London, SW1E 6DE United Kingdom 100% Ophir Holdings & Ventures Limited England England Level 4, 123 Victoria Street Holding & Wales & Wales London, SW1E 6DE United Kingdom 100% Ophir Espana Holdings SL Spain Spain Calle Príncipe de Vergara 131, 1st floor Holding 28002 Madrid Spain 100% Ophir Gabon (Gnondo) Limited Jersey C.I. Gabon 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Gabon (Manga) Limited Jersey C.I. Gabon 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Gabon (Mbeli) Limited Jersey C.I. Gabon 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Gabon (Ntsina) Limited Jersey C.I. Gabon 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Gabon (Nkouere) Limited Jersey C.I. Gabon 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Gabon (Nkawa) Limited Jersey C.I. Gabon 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Equatorial Guinea (Block R) Limited Jersey C.I. Equatorial 12 Castle Street, St Helier Exploration Guinea Jersey JE2 3RT Channel Islands 100% Ophir Equatorial Guinea (Holdings) Jersey C.I. Equatorial 12 Castle Street, St Helier Exploration Limited Guinea Jersey JE2 3RT Channel Islands 100% Ophir Mexico Holdings Limited Jersey C.I. Jersey C.I. 12 Castle Street, St Helier Holding Jersey JE2 3RT Channel Islands 100%

Ophir Energy plc Annual Report and Accounts 2018 141

Country of Location Principal Holding incorporation of operation Registered office activity 31 Dec 2018 Ophir Seychelles (Area 1,2 and 3) Limited Jersey C.I. Seychelles 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Myanmar (Block AD-3) Limited Jersey C.I. Myanmar 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir East Africa Holdings Limited Jersey C.I. Jersey C.I. 12 Castle Street, St Helier Holding Jersey JE2 3RT Channel Islands 100% Ophir Tanzania (Block 1) Limited Jersey C.I. Tanzania 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% STRATEGIC REPORT Ophir Tanzania (Block 3) Limited Jersey C.I. Tanzania 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Tanzania (Block 4) Limited Jersey C.I. Tanzania 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir East Africa Ventures Limited Jersey C.I. Tanzania 12 Castle Street, St Helier Exploration Jersey JE2 3RT GOVERNANCE REPORT Channel Island 100% Ophir Pipeline Limited Jersey C.I. Tanzania 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir Gas Marketing Limited Jersey C.I. Tanzania 12 Castle Street, St Helier Exploration Jersey JE2 3RT Channel Islands 100% Ophir LNG Limited Jersey C.I. Tanzania 12 Castle Street St Helier Exploration

Jersey JE2 3RT FINANCIAL STATEMENTS Channel Islands 100% Ophir Energy Company Nigeria (JDZ) Nigeria Nigeria 9th Floor, St Nicholas House Exploration Limited Catholic Mission Street Lagos Nigeria 100% Ophir Energy Indonesia (Aru) Limited Cyprus Indonesia Level 4, 123 Victoria Street Exploration London SW1E 6DE United Kingdom 100% Ophir Energy Indonesia (Halmahera- Cyprus Indonesia Level 4, 123 Victoria Street Exploration

Kofiau) 1 Limited London SW1E 6DE United Kingdom 100% SUPPLEMENTARY INFORMATION Ophir Energy Indonesia (Kofiau) Cyprus Indonesia Level 4, 123 Victoria Street Exploration 1 Limited London SW1E 6DE United Kingdom 100% Ophir Energy Indonesia (West Papua IV) Cyprus Indonesia Level 4, 123 Victoria Street Exploration 1 Limited London, SW1E 6DE United Kingdom 100% Ophir Energy Indonesia (North Ganal) Cyprus Indonesia Level 4, 123 Victoria Street Exploration Limited London SW1E 6DE United Kingdom 100% Ophir Indonesia (Halmahera-Kofiau) Delaware Indonesia Corporation Trust Center Exploration 2 LLC 1209 Orange Street, Wilmington New Castle County Delaware 19801 United States of America 100% Ophir Indonesia (Kofiau) 2 LLC Delaware Indonesia Corporation Trust Center Exploration 1209 Orange Street, Wilmington New Castle County Delaware 19801 United States of America 100% Ophir Indonesia (West Papua IV) 2 LLC Delaware Indonesia Corporation Trust Center Exploration 1209 Orange Street, Wilmington New Castle County Delaware 19801 United States of America 100%

1 Shares held directly by Ophir Energy plc. All shares are ordinary shares.

Annual Report and Accounts 2018 142 APPENDIX A – SUBSIDIARY COMPANIES continued

Country of Location Principal Holding incorporation of operation Registered office activity 31 Dec 2018 Dominion Investments Limited Tanzania Tanzania Plot 1676, Hamza Aziz Road Exploration Msasani Penninsula Dar es Salaam Tanzania 100% Dominion Oil & Gas Limited British Virgin British Virgin Commerce House Holding Islands Islands Wickhams Cay I Road Town, Tortola VG1110 British Virgin Islands 100% Dominion Oil & Gas Limited (Tanzania) Tanzania Tanzania Plot 1676, Hamza Aziz Road Exploration Msasani Penninsula Dar es Salaam Tanzania 100% Dominion Petroleum Acquisitions Bermuda Bermuda Clarendon House, 2 Church Street Holding Limited Hamilton HM 11 Bermuda 100% DOMPET Limited Bermuda Bermuda Clarendon House, 2 Church Street Holding Hamilton HM 11 Bermuda 100% Dominion Tanzania Limited Tanzania Tanzania Plot 1676, Hamza Aziz Road Exploration Msasani Penninsula Dar es Salaam Tanzania 100% Dominion Petroleum Kenya Limited Kenya Kenya Empress Plaza, 1st Floor Exploration Corner of Ring Road Parklands & Jalaram Road Westlands P.O. Box 41968-00100 Nairobi Kenya 100% PHT Partners LP United Thailand Corporation Trust Center Holding States of 1209 Orange Street, Wilmington America New Castle County Delaware 19801 United States of America 100% Ophir Indonesia (Bangkanai) Limited British Virgin Indonesia Jayla Place, Wickhams Cay 1 Exploration Islands Road Town, Tortola VG1110 and Production British Virgin Islands 100% Salamander Energy (Bualuang Holdings) England Thailand Level 4, 123 Victoria Street Exploration Limited & Wales London, SW1E 6DE United Kingdom 100% Ophir Indonesia (Central Kalimantan) Belize Indonesia Suite 102, Ground Floor Exploration Limited Blake Building and Production Corner Eyre & Hutson Streets Belize City Belize 100% Ophir Thailand (E&P) Limited England England Level 4, 123 Victoria Street Holding & Wales & Wales London, SW1E 6DE United Kingdom 100% Salamander Energy (Glagah Kambuna) British Virgin Thailand Jayla Place, Wickhams Cay 1 Exploration Limited Islands Road Town, Tortola VG1110 British Virgin Islands 100% Ophir Indonesia (Kerendan) Limited Mauritius Indonesia Ebene Esplanade, 24 Cybercity Exploration Ebene and Production Mauritius 100% Ophir Indonesia (Kutai) Limited England Indonesia Level 4, 123 Victoria Street Exploration & Wales London SW1E 6DE United Kingdom 100% Salamander Energy (Lao) Company Lao PDR Lao LS Horizon (Lao) Limited Exploration Limited Unit 4/1.1 4th Floor Simuong Commercial Center Fa Ngum Road, Phia Vat Village Sisatanak District Vientiane Lao People’s Democratic Republic 100% Salamander Energy (Malaysia) Limited British Virgin Malaysia Jayla Place, Wickhams Cay 1 Exploration Islands Road Town, Tortola VG1110 British Virgin Islands 100%

Ophir Energy plc Annual Report and Accounts 2018 143

Country of Location Principal Holding incorporation of operation Registered office activity 31 Dec 2018 Ophir Indonesia (North East Bangkanai) British Virgin Indonesia Jayla Place, Wickhams Cay 1 Exploration Limited Islands Road Town, Tortola VG1110 British Virgin Islands 100% Salamander Energy (North Sumatra) British Virgin Indonesia Jayla Place, Wickhams Cay 1 Exploration Limited Islands Road Town, Tortola VG1110 British Virgin Islands 100% Salamander Energy (S.E. Asia) Limited England Level 4, 123 Victoria Street Holding & Wales London SW1E 6DE United Kingdom 100% Ophir Indonesia (S.E. Sangatta) Limited England Indonesia Level 4, 123 Victoria Street Exploration & Wales London SW1E 6DE United Kingdom 100% STRATEGIC REPORT Ophir Indonesia (South Sokang) Limited England Indonesia Level 4, 123 Victoria Street Exploration & Wales London SW1E 6DE United Kingdom 100% Salamander Energy (Thailand) Co., Ltd Thailand Thailand 28th Floor, Unit 2802 Q House Lumpini Exploration Building 1 South Sathorn Road Tungmahamek Sathorn District Bangkok 10120 Thailand 100% GOVERNANCE REPORT Ophir Indonesia (West Bangkanai) British Virgin Indonesia Jayla Place, Wickhams Cay 1 Exploration Limited Islands Road Town, Tortola VG1110 British Virgin Islands 100% Salamander Energy Group Limited England England Level 4, 123 Victoria Street Holding & Wales & Wales London SW1E 6DE United Kingdom 100% Ophir Malaysia (Block 2A) Limited British Virgin Malaysia Jayla Place, Wickhams Cay 1 Exploration Islands PO Box 3190

Road Town, Tortola VG 1110 British FINANCIAL STATEMENTS Virgin Islands 100% Ophir Cote d’Ivoire (CI-513) Limited British Virgin Cote Jayla Place, Wickhams Cay 1 Exploration Islands d’Ivoire Road Town, Tortola VG1110 British Virgin Islands 100% Ophir Thailand (Bualuang) Limited British Virgin Thailand Jayla Place, Wickhams Cay 1 Exploration Islands Road Town, Tortola VG1110 and Production British Virgin Islands 100% Salamander Energy (Holdco) Limited England England Level 4, 123 Victoria Street Holding

& Wales & Wales London SW1E 6DE United Kingdom 100% SUPPLEMENTARY INFORMATION Ophir Energy Indonesia Limited England Indonesia Level 4, 123 Victoria Street Holding & Wales London SW1E 6DE United Kingdom 100% Salamander Energy (JS) Limited England Indonesia Level 4, 123 Victoria Street Exploration & Wales London SW1E 6DE United Kingdom 100% Ophir Equatorial Guinea (EG-24) Limited British Virgin Equatorial Jayla Place, Wickhams Cay 1, Exploration Islands Guinea Road Town, Tortola, VG1110 British Virgin Islands 100% Ophir Mexico Block 5 Salina, S.A de C.V Mexico Mexico Guillermo Gonzalez Camarena No 1600 Exploration Piso 6, Oficina “B” Col. Centro de Ciudad Santa Fe Delegacion Alvaro Obergon C.P. 01210 Mexico City Mexico 100% Ophir Global New Ventures Limited England England Level 4, 123 Victoria Street Exploration & Wales & Wales London SW1E 6DE United Kingdom 100% Ophir Jaguar 1 Limited British Virgin British Virgin Jayla Place, Wickhams Cay 1, Holding Islands Islands Road Town, Tortola VG1110 British Virgin Islands 100% Ophir Jaguar 2 Limited British Virgin British Virgin Jayla Place, Wickhams Cay 1, Holding Islands Islands Road Town, Tortola VG1110 British Virgin Islands 100% Santos Sabah Block R Limited England England Level 4, 123 Victoria Street Exploration & Wales & Wales London SW1E 6DE United Kingdom 100%

Annual Report and Accounts 2018 144 APPENDIX A – SUBSIDIARY COMPANIES continued

Country of Location Principal Holding incorporation of operation Registered office activity 31 Dec 2018 Santos SPV Pty Ltd Australia Australia Level 1, 38 Station Street Holding Subiaco WA 6008 Australia 100% Santos (Madura Offshore) Pty Ltd Australia Australia Level 1, 38 Station Street Production Subiaco WA 6008 Australia 100% Santos Asia Pacific Pty Ltd Australia Australia Level 1, 38 Station Street Holding Subiaco WA 6008 Australia 100% Santos (Sampang) Pty Ltd Australia Australia Level 1, 38 Station Street Exploration Subiaco WA 6008 and Production Australia 100% Santos Petroleum Ventures B.V Netherlands Netherlands Thomas R., Malthusstraat 1 Production 1066 JR, Amsterdam Netherlands 100%

Ophir Energy plc Annual Report and Accounts 2018 SHAREHOLDER INFORMATION 145

Registered and other offices 2019 Financial calendar The Company’s registered office and head office is: Annual General Meeting a date prior to 28 June 2019 Half-year results announcement 29 August 2019 Level 4 Full-year results announcement 10 March 2020 123 Victoria Street London SW1E 6DE Trading market and shareholder profiles Telephone: +44 (0)20 7811 2400 Ophir Energy plc’s shares are traded on the London Stock Exchange with Fax: +44 (0)20 7811 2421 ticker OPHR. The Company’s LEI number is 213800LAZOZTKPAV2583. Website: www.ophir-energy.com The Company’s SEDOL number is B24CT19 and ISIN number is GB00B24CT194. Other offices are located in: Unsolicited mail The Company is required by law to make its share register available Jakarta on request to unconnected organisations. As a consequence, Ratu Plaza Office Tower STRATEGIC REPORT shareholders may receive unsolicited mail, including mail from 4th Floor, Jl. Jend. Sudirman Kav 9 unauthorised investment firms. If you wish to limit the amount Jakarta 10270 of unsolicited mail received, please contact the Mailing Preference Indonesia Service, an independent organisation whose services are free Telephone: +62 21 5291 2900 for consumers. Fax: +62 21 3000 4020 Further details can be obtained from: Bangkok

Q House Lumpini Building Mailing Preference Service GOVERNANCE REPORT 1 South Sathorn Road MPS Freepost LON 20771 Tungmahamek London W1E 0ZT Sathorn District Website: www.mpsonline.org.uk Bangkok 10120 Investment fraud warning Thailand Shareholders are increasingly receiving unsolicited phone calls Telephone: +66 2620 0800 regarding different investment matters which have implied a Fax: +66 2620 0820 connection with Ophir. These calls are typically from people claiming We also have smaller offices in Equatorial Guinea, Malaysia, to be brokers, offering shares in US or UK investment schemes. FINANCIAL STATEMENTS Myanmar and Tanzania. As part of their ongoing campaign to raise awareness, the Financial Registrars Conduct Authority (FCA) has recently launched “Be ScamSmart” The Company has appointed Equiniti Limited to maintain its register (http://scamsmart.fca.org.uk/) which is specifically targeted at of members. Shareholders should contact Equiniti using the details the tell-tale signs of a scam. below in relation to all general enquiries concerning their shareholding: Further information on share fraud and unauthorised investment Equiniti Limited* firms targeting UK investors (‘boiler room scams’) may be Aspect House obtained from the website of the Financial Conduct Authority: Spencer Road www.fca.org.uk/scams.

Lancing, West Sussex BN99 6DA SUPPLEMENTARY INFORMATION

Telephone: 0371 384 2030** International callers: +44 121 415 7047 * Equiniti Limited and Equiniti Financial Services Limited are part of the Equiniti group of companies. Company share registration, employee scheme and pension administration services are provided through Equiniti Limited, which is registered in England & Wales with No. 6226088. Investment and general insurance services are provided through Equiniti Financial Services Limited, which is registered in England & Wales with No. 6208699 and is authorised and regulated by the UK Financial Conduct Authority.

** Lines are open Monday – Friday from 8.30am – 5.30pm (UK time), excluding UK public holidays. 146 SHAREHOLDER INFORMATION continued

Shareholder profile by size of holding as at 31 December 2018 No. % of Shares held % of Range of holders total 31.12.2017 total 1 – 1,000 448 37.58% 185,948 0.02% 1,001 – 10,000 336 28.19% 1,110,810 0.15% 10,001 – 100,000 171 14.35% 6,579,433 0.88% 100,001 – 1,000,000 143 12.00% 54,819,784 7.35% 1,000,001 – 10,000,000 73 6.12% 234,243,268 31.40% 10,000,000+ 21 1.76% 449,080,164 60.20% 1,192 100.00% 746,019,407 100.00%

Shareholder profile by category as at 31 December 2018 No. of % of Shares held % of Category holders total 31.12.2017 total Private shareholders 573 48.07% 2,586,016 0.35% Nominees and other institutional investors 619 51.93% 743,433,391 99.65% 1,192 100.00% 746,019,407 100.00%

It should be noted that many private investors hold their shares through nominee companies and therefore the percentage of shares held by private shareholders may be higher than that shown. Shareholders’ rights The following section summarises the rights and obligations in the Company’s Articles of Association (the Articles) relating to the ordinary shares of the Company. The Articles can be found on the Company’s website. Voting: At a general meeting, subject to any special rights or restrictions attached to any class of shares: (a) on a show of hands, every member present in person and every duly appointed proxy present shall have one vote; (b) on a show of hands, a proxy has one vote for and one vote against the resolution if the proxy has been duly appointed by more than one member entitled to vote on the resolution and the proxy has been so instructed; and (c) on a poll, every member present in person or by proxy has one vote for every share held by him. Unless the Directors resolve otherwise, no member shall be entitled to vote either personally or by proxy or to exercise any other right in relation to general meetings if any call or other sum due from him to the Company in respect of that share remains unpaid. Transfer of shares: Transfers of certificated shares must be effected in writing, and signed by or on behalf of the transferor and, except in the case of fully paid shares, by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the register of members in respect of those shares. The Directors may decline to register any transfer of a certificated share, unless (a) the instrument of transfer is in respect of only one class of share, (b) the instrument of transfer is lodged at the transfer office, duly stamped if required, accompanied by the relevant share certificate(s) or other evidence reasonably required by the Directors to show the transferor’s right to make the transfer or, if the instrument of transfer is executed by some other person on the transferor’s behalf, the authority of that person to do so, and (c) the certificated share is fully paid up. The Directors may refuse to register an allotment or transfer of shares in favour of more than four persons jointly. Directors’ powers: The Directors shall manage the business and affairs of the Company and may exercise all powers of the Company other than those that are required by the Companies Act 2006 (the 2006 Act) or by the Articles to be exercised by the Company at the general meeting. The Directors may delegate any of their powers or discretions, including those involving the payment of remuneration or the conferring of any other benefit to the Directors, to such person or committee and in such manner as they think fit. Any such person or committee shall, unless the Directors otherwise resolve, have the power to sub-delegate any of the powers or discretions delegated to them. Dividends: The Company may, by ordinary resolution, declare final dividends to be paid to its shareholders. However, no dividend shall be declared unless it has been recommended by the Directors and does not exceed the amount recommended by the Directors. If the Directors believe that the profits of the Company justify such payment, they may pay dividends on any class of share where the dividend is payable on fixed dates.

Ophir Energy plc Annual Report and Accounts 2018 147

They may also pay interim dividends on shares of any class in amounts and on dates and periods as they think fit. Unless the share rights otherwise provide, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, and apportioned and paid pro-rata according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid. Any unclaimed dividends may be invested or otherwise applied for the benefit of the Company until they are claimed. Any dividend unclaimed for 12 years from the date on which it was declared or became due for payment shall be forfeited and shall revert to the Company. The Directors may, if authorised by ordinary resolution, offer to ordinary shareholders the right to elect to receive, in lieu of a dividend, an allotment of new ordinary shares credited as fully paid. Borrowing powers: The Board may exercise all the powers of the Company to borrow money, to guarantee, to indemnify, to mortgage or charge its undertaking, property, assets (present and future) and uncalled capital, and to issue debentures and other securities whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Advisers Auditors: Financial PR advisers: STRATEGIC REPORT Ernst & Young LLP Brunswick Group LLP One More London Place 16 Lincoln’s Inn Fields London SE1 2AF London WC2A 3ED United Kingdom United Kingdom Solicitors: Corporate brokers: Linklaters Morgan Stanley

One Silk Street 20 Bank Street GOVERNANCE REPORT London EC2Y 8HQ Canary Wharf United Kingdom London E14 4AD United Kingdom Bankers: HSBC Bank plc Investec Bank plc 70 Pall Mall 30 Gresham Street London SW1 5EY London EC2V 7QP United Kingdom United Kingdom FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION

Annual Report and Accounts 2018 148 GLOSSARY

$ Exploration well JV Throughout the report figures are stated in A well drilled to explore a potential discovery Joint Venture US Dollars Farm-in KGPF 2C To acquire an interest in a licence from Kerendan Gas Processing Facility Best estimate of contingent resources another party LNG 2P Farm-out Liquefied Natural Gas Proven and probable reserves To assign an interest in a licence to LTIP another party Appraisal well Long-Term Investment Plan A well drilled to follow up a discovery and FEED MMbtu evaluate its commercial potential Front end engineering and design Million British thermal units bbl FID MMbbl Barrels of oil or condensate Final Investment Decision Million barrels Bcf FLNG MMboe Billion cubic feet Floating LNG technology Million barrels of oil equivalent bcm GSA MMtpa Billion cubic metres Gas Sales Agreement Million metric tonnes per annum boe G&A MMscfd Barrel of oil equivalent General & Administration expenses Million standard cubic feet of gas per day bpwd Group MMstb Barrels of produced water per day The Company together with its subsidiaries Million stock tank barrels bscf GRI NAV Billion standard cubic feet Global Reporting Initiative Net Asset Value Capex HoA NGO Capital expenditure Heads of Agreement Non-Governmental Organisation CDP HSE OneLNG Carbon Disclosure Project Health, safety & environment Joint Venture between Golar LNG Company HSSE and Schlumberger Ophir Energy plc Health, safety, security & environment PSC C&P IAS regulation Production Sharing Contract Contracts and Procurement International Accounting Standards Spud Contingent resource IFRS To commence drilling a well Quantities of resources estimated, at a given International Financial Reporting Standards Tcf date, to be potentially recoverable from IFRIC Trillion cubic feet known accumulations by the application International Financial Reporting of development projects, but not currently Interpretations Committee considered to be commercially recoverable due to one or more contingencies IOGP International Association of Oil & Gas CR Producers Corporate Responsibility IPO E&P Initial Public Offering Exploration and Production IRR EG Internal Rate of Return Equatorial Guinea

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Designed and produced by SampsonMay Telephone: 020 7403 4099 www.sampsonmay.com Ophir Energy plc Annual Report and Accounts 2018 Ophir Energy plc Registered office: Level 4 Victoria Street123 London SW1E 6DE Kingdom United 2400 7811 T +44(0)20 2421 7811 F +44(0)20 www.ophir-energy.com Company registered in England and Wales No. 05047425 Ophir Energy plc Annual Report and Accounts 2018