Ophir Energy plc Annual Report and Accounts 2011

Ophir Energy plc Annual Report and Accounts 2011 Ophir Energy plc is an international oil and gas exploration company with an extensive portfolio of interests spread across the continent of Africa.

Business Review Financial statements 01 Key highlights 56 Group income statement and statement 02 Chairman’s and Chief Executive Officer’s of comprehensive income Joint Review 57 Group statement of changes in equity 06 Our strategy 58 Company statement of changes in equity 08 Review of operations 59 Group statement of financial position 20 Financial review 60 Company statement of financial position 22 Corporate and Social Responsibility 61 Group statement of cash flows 26 Principal risks and uncertainties 62 Company statement of cash flows 63 Notes to the financial statements Governance 91 Shareholder information 28 Board of Directors 30 Corporate Directory 31 Directors’ Report 35 Corporate Governance Report 45 Remuneration Report 53 Statement of Directors’ Responsibilities 54 Independent Auditor’s Report 01 Ophir Energy plc Annual Report 2011

Key highlights Our year in review

January 2011

Seismic acquisition BUSINESS REVIEW March 2011 2 5,000km 3D seismic Portfolio management acquisition commenced in Blocks 1, 3 and 4, Withdrawal from Block3 Rufisque Offshore and in Tanzania. PSC, JDZ. Sangomar Deep offshore blocks in Senegal. Farm out deal with FAR Limited (“FAR”) for 8.8% Farm in deal with Ras Al interest in AGC Profond Block. Khaimah Gas Tanzania April 2011 (“RaKGas Tanzania”) for 70% Discovery Acquired option for a 25% interest in the East Pande Drilled Chaza-1 interest from FAR in the Block, offshore/onshore Block 1, Tanzania. Sangomar Offshore, Tanzania.

Gas discovery.

June 2011 GOVERNANCE Portfolio management Farm out deal with Noble Farm out deal with Petrobras Energy Inc (“Noble”) for Participaciones S.L (“Petrobras”) 30% interest in AGC for 50% interest in Mbeli and July 2011 Profond Block. Nstina blocks, Gabon. IPO Initial Public Offering on the Main Market of the London September 2011 Stock Exchange, raising net Operatorship proceeds of approximately US$352M. Transfer of operatorship in FINANCIAL STATEMENTS East Pande block, Tanzania Drilled Kora-1, AGC Profond from RAKGas Tanzania Block, in the Senegal Guinea to Ophir. Bissau Common Zone (AGC). No significant oil or gas. October 2011 Transfer of Operatorship in Acquisition Blocks 1,3 and 4, Tanzania to BG Group plc (“BG”). Ophir makes recommended offer to acquire the entire issued share capital of AIM listed Dominion Petroleum Ltd. December 2011 Seismic acquisition Expansion of Block R PSC in EG. Letter of Intent to secure the 2,200 km2 3D seismic use of the Eirick Raude rig for acquisition commenced a three well sequence in Block in Tanzania (East Pande). February 2012 R to commence Q2 2012. Dominion Petroleum 2 2,100 km 3D seismic Ophir acquires the entire acquisition commenced issued share capital of in Gabon (Mbeli and Ntsina). Dominion Petroleum Ltd. March 2012 Discovery April 2012 Ophir announces that the Jodari-1 well in Block 1 Placing offshore Tanzania is a Equity placing raises gross 4.5 TCF gas discovery. proceeds of US$241.8M. 02 Ophir Energy plc Annual Report 2011

Chairman’s and Chief Executive Officer’s Joint Review

mitigated through a series of farm out agreements. In 2012 the Group is undertaking the busiest drilling programme in its history, with drilling continuing in Tanzania, a rig procured for an imminent programme in Equatorial Guinea and nine wells expected to be spudded by the end of the year. The Group has recently announced the results of the Jodari-1 well drilled during January and February 2012. This was the first well drilled with BG as operator and resulted in the Group’s fourth successive, and largest in the Group’s history, gas discovery in its Tanzania blocks with a recoverable resource estimate of 3.4 TCF. Preparations are also underway for a 12 well programme in 2013. Ophir ended 2011 with net contingent (2C) resources of 210 mmboe and net risked prospective resources of 1,882 mmboe.

Portfolio Management Ophir continues to actively manage 2011 was dominated by Ophir’s IPO, which raised a its portfolio to best deploy its capital resources against the most total of US$384 million inclusive of the greenshoe. prospective acreage and plays. The IPO provided the Group with a strong cash position In 2011 the Group farmed out of US$396.6 million at year end. interests in the Mbeli and Ntsina licences in Gabon to Petrobras and an interest in the AGC Profond Corporate Overview the Group’s portfolio in East Africa licence to Noble Energy. The Group 2011 saw Ophir successfully list via the addition of five exploration acquired interests in the East on the main board of the London licences, with three being Pande licence in Tanzania by Stock Exchange. Ophir joined the complementary to Ophir’s way of a farm in agreement with FTSE 250 in November 2011. The existing deepwater portfolio. As RAKGas and acquired five further IPO was set against a backdrop a result Ophir now has one of the exploration interests via the of turbulent capital markets and largest portfolios of operated Dominion transaction in Block 7 relatively low levels of new equity and non-operated acreage in the (Tanzania), Blocks L9 and L15 issuance and Ophir ended the year exciting emerging offshore East (Kenya), Area 4B (Uganda) and as the best performing IPO stock African play. Block 5 (DRC). Ophir currently for 2011. has interests in 22 licences in 11 Operationally, 2011 saw two wells countries and jurisdictions, 14 In October 2011 Ophir announced completed. The Chewa-1 well in of which are operated, 18 of a proposal to acquire the share Tanzania was the third in a series which are offshore and 4 of which capital of AIM-listed Dominion of back-to-back gas discoveries in are onshore. Petroleum Ltd in an all-stock Tanzania. The Kora-1 well in the transaction. The acquisition closed AGC joint development area was in February 2012 and expanded unsuccessful but costs were 03 Ophir Energy plc Annual Report 2011

This last year has seen the team raise the bar once again. Their tireless efforts might sometimes BUSINESS REVIEW pass without comment but they are always appreciated. On behalf of the Board and shareholders we would like to offer them our thanks and admiration for another outstanding year for the Group.

This year of performance has been delivered without compromising on safety and we are pleased to report no lost time accidents or Financial Ophir’s senior management team reported incidents across the diverse 2011 was dominated by Ophir’s was expanded in June 2011 with range of operations undertaken IPO, which raised a total of $384 the appointment of Dr Nick Cooper across the African continent in GOVERNANCE million inclusive of the greenshoe. as Chief Executive Officer, replacing often challenging conditions. The IPO provided the Group with a Dr Alan Stein who held that position strong cash position of $396.6 since formation of the Group in Corporate Responsibility million at year end. A further equity 2004. Alan remains an active Corporate Responsibility forms a placing in April 2012 raised an member of the executive team but key part of Ophir’s operating culture. additional gross US$242 million. has signalled his intention to step The Group strives to make a positive We are fully funded to finance the down from the Board after the impact in the development of the planned exploration programmes Annual General Meeting (“AGM”) countries in which it operates. for the next 12 months. in June 2012. In December 2011, Ophir’s goal is to establish a

Yvonne Holm resigned from her sustainable, balanced approach to FINANCIAL STATEMENTS Board, Management and Staff position of Chief Financial Officer its business which includes assisting The evolution of Ophir’s Board and Director, and in January 2012, local communities wherever possible during 2011 reflects the transition Lisa Mitchell, previously Ophir’s through such initiatives as education, to being a public company. During Group Financial Controller, was protection of the environment 2011 Dr Nick Cooper, Mr Ron appointed as CFO. and the creation of broad, lasting Blakely and Mr Patrick Spink joined economic development. We the Board while Mr Rajan Tandon At the heart of our Group is a small understand that by taking a appointed Mr Jaroslaw Paczek as yet dedicated and extremely pragmatic, long-term, positive his alternate. At IPO Mr Michael professional group of staff and approach to corporate responsibility Cohen, Mr Mikki Xayiya left the associates who have consistently it will provide lasting dividends to Board, Ms Yvonne Holm and Mr delivered outstanding performance. the Group and the countries in John Morgan left later in the year. which we operate. On behalf of the Board and shareholders the Chairman has thanked those that served on the Board for their contributions and has welcomed those that join the Board as we embark upon the next stage in Ophir’s growth. 04 Ophir Energy plc Annual Report 2011

Chairman’s and Chief Executive Officer’s Joint Review continued

In Equatorial Guinea, Ophir continued its support of a nursery school in the village of Ebein Yenkeng. The Group also donated funding for a training seminar on social content which was provided to members of the Ministry of Mines, Minerals and Energy (“MMIE”) in Malabo. In addition, Ophir contributes to the Equatorial Guinean Hydrocarbon Technological Institute Educational At the heart of our Company is a small yet dedicated Programme (“ITNHGE”), a and extremely professional group of staff and collaborative educational initiative associates who have consistently delivered run for the benefit of adult outstanding performance. students in Equatorial Guinea. Outlook In Tanzania, Ophir has continued to the development of the Mtwara The oil and gas industry’s focus to be actively involved in the region. There has been a large on African exploration has risen development of Mtwara port positive impact in the local economy dramatically in 2011 and early 2012. (and its attendant services). Ophir as the community shares in this The pace of activity on both the was responsible for the initial development through training, East African offshore gas play and development of this facility in employment and improved the West African pre-salt play have partnership with the Tanzanian infrastructure. In December 2011, increased as major oil companies authorities. In 2011 the port parts of the main city of Dar es have entered the region and made development scheme expanded Salaam suffered severe flooding, significant discoveries. This has rapidly as more oil and gas operating making many citizens homeless. had important implications for companies joined Ophir, resulting Ophir assisted relocation efforts Ophir’s portfolio. in the transformation of a previously by swiftly donating 30 large water underutilised port into a thriving storage tanks to the victim’s In the East African gas play Anadarko operations base which has resettlement site. This initiative and ENI are reported to have subsequently received ‘Duty Free’ secured adequate sanitation and discovered more than 40 TCF of gas status to underscore its importance was vital to reduce disease risk for in Mozambique with the majority the flood victims whilst in their being found in extensive basin temporary accommodation. floor fans. This play has not yet been tested in Ophir’s Tanzanian acreage but it is thought to potentially extend into Block 1 and possibly Block 3. A new 3D seismic survey is currently being acquired in Block 1 to test this concept and initial results are anticipated mid-year. 05 Ophir Energy plc Annual Report 2011

In the adjacent Tanzania Block 2 Statoil’s recent Zafarani-1 discovery appears to have de-risked elements BUSINESS REVIEW of the deeper Cretaceous play potential within Ophir’s acreage. Some of the wells in Ophir’s 2012 drilling programme will also test these deeper plays.

The industry’s appetite for the East African offshore gas play has been clearly demonstrated by the competitive bidding to acquire AIM-listed Cove Energy which has an 8.5% stake in the Anadarko operated block in Mozambique, to the south of BG/Ophir’s Block 1. GOVERNANCE If this appetite is sustained then it affords Ophir a degree of flexibility both in the way that it finances its exploration and appraisal activities in the play and in the way that it secures value for shareholders.

The Group now has one of the largest offshore acreage footprints in East Africa. In addition to the FINANCIAL STATEMENTS wells currently being drilled by the In 2012 Q2, the Group will commence Ophir/BG joint venture in Blocks 1, a three well programme in 3 and 4, offset wells with relevance Equatorial Guinea targeting further to Ophir acreage will be drilled in gas discoveries to aggregate into the next few months by Petrobras an LNG development. Already the and Statoil in Tanzania, Anadarko Group is planning for a further 12 and ENI in Mozambique and Apache well programme in 2013 in Kenya. contingent on additional financing.

In West Africa, considerable recent The outlook for Ophir in 2012 is success has occurred in the promising. The Group enters 2012 deepwater pre-salt play with notable with an extensive portfolio of successes by both Cobalt and Maersk interests across some of the most in Angola. Ophir has a strong acreage interesting exploration plays in position in this deepwater play, Africa. The Group is well placed to with four licences in Gabon and one meet its exploration and appraisal in Congo-Brazzaville. In Gabon, the forecast expenditure for at least Group has recently completed two the next 12 months. seismic programmes that will support both a pre-salt well with Petrobras in late 2012 on the Mbeli and Ntsina licences and also potential farm outs of the Manga and Gnondo licences. 06 Ophir Energy plc Annual Report 2011

Our strategy 07 Ophir Energy plc Annual Report 2011

Establish relationships in Africa BUSINESS REVIEW Ophir’s overarching strategy has been to establish itself as a pre-eminent independent African energy company. The Company has access to an extensive network of relationships in Africa. In combination with these and the geoscience and commercial expertise of its management, the Company has acquired and developed an extensive portfolio of oil and gas interests in Africa.

Experienced and motivated

management team GOVERNANCE Ophir has recruited and retained an experienced and motivated group of senior staff with a view to identifying attractive investment opportunities, decreasing exploration risk and adding value to its portfolio through the application of advanced geoscience technology.

Control over the pace and FINANCIAL STATEMENTS direction of exploration The Company has, wherever practical, sought to accelerate its exploration activities, while maintaining high professional and corporate responsibility standards, demonstrating its commitment to realising value from its assets in a timely fashion on behalf of its shareholders and partners. The Company believes that continuation of this approach will enhance its ability to win new business in the future.

Active portfolio management The Company’s preference is to take significant initial interests in core projects whilst retaining the flexibility to divest by way of farm out or exchange of interests as the project matures if deemed appropriate.

The Company intends to expand its portfolio through investing in new ventures, particularly where the application of advanced geoscience technology can add significant value through the reduction of exploration risk.

In keeping with the Directors’ intentions to establish Ophir as a pre-eminent independent African energy company, Ophir expects to participate to the extent considered appropriate in the development of its petroleum discoveries with a view to establishing itself as a major oil and/or gas producer in the region.

The Company also periodically evaluates opportunities to acquire producing or near-producing assets that would complement its exploration portfolio. 08 Ophir Energy plc Annual Report 2011

Review of operations

In 2012 Ophir will more than double the number of wells it has drilled since it was founded.

The process of replenishing the portfolio of drilling targets continues through the acquisition of a series of 3D seismic programmes. At year end acquisition had commenced in both Tanzania (East Pande) and Gabon (Mbeli and Ntsina) with preparations under way for further seismic acquisition in Gabon (Manga and Gnondo). These programmes will allow additional prospects to be matured for future drilling campaigns during 2012 and 2013.

In addition, planning and contracting had commenced for the second Equatorial Guinea drilling campaign which is currently due to commence in Q2 2012. This programme, which will include a well in the expanded Block R area, will be designed to prove sufficient gas volumes to underpin an LNG development.

Tanzania – Blocks 1, 3 and 4 The Ophir-operated three well programme which commenced in 2011 was another strong year for Ophir’s Operations 2010 and was completed in 2011 team with the completion of a successful, operated has confirmed the prospectivity of drilling campaign in Tanzania and the completion of a the Ruvuma and Mafia Deep basins and has proven the presence of well drilled in the AGC. To date Ophir has now operated potential reservoir facies in both 9 deepwater wells in four countries with 5 of them the Tertiary and Cretaceous resulting in commercial discoveries. stratigraphic sequences. The success in Blocks 1, 3 and 4 has, together with the discoveries by other Operators in adjacent acreage, opened up the East African play system and focused industry attention on the area. Ophir has a significant acreage position in the play and a significant inventory of prospects which will underpin future exploration and appraisal campaigns. At the end of 2011, 09 Ophir Energy plc Annual Report 2011 BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS

these are believed to contain more The Ophir-operated “Deepsea than 30TCF1 in gross un-risked Stavanger” drilling campaign, which prospective resources. had commenced in 2010, continued into 2011 with further success at Each of the three Tanzanian Chaza-1 in Block 1. The well was deepwater wells have demonstrated drilled in 982m of water, reached the presence of multiple play a TD at a depth of 4,933m and was systems, all with significant follow- completed as the third consecutive up potential. Although each has successful gas discovery in the encountered gas, the Group believes programme. Chaza-1 encountered that, based upon detailed technical a gross 27m gas column in a studies, liquids are also possible in Miocene channel system and, the future. These studies have together with the discoveries at characterised a number of potential Pweza-1 and Chaza-1, takes the hydrocarbon source rocks, ranging in total contingent resources age from Permo-Triassic to Eocene. discovered in Blocks 1, 3 and 4 to The three wells drilled to date have 2.4TCF with a further 1.6TCF of low targeted the centre of the basin, risk prospective resources. where the main source intervals have been buried to a sufficient depth to generate gas (the “gas window”). To the east and west of this, the Group believes that the source intervals are less deeply buried and thus cooler. In these areas (the so-called “oil window”) the organic rich material (“kerogens”) in the rock may have generated liquids.

1 Management estimate 10 Ophir Energy plc Annual Report 2011

Review of operations continued

Each of the three discoveries had migration. A further survey was of the three PSAs has been covered an associated amplitude seismic also planned northwest of the with 3D data and further seismic anomaly which was interpreted to Kusini survey in Block 1 to test the acquisition is anticipated be a Direct Hydrocarbon indicator extension of the play system proven during 2012. (“DHI”). Data from the wells has now by Chaza-1. The second seismic been used to further calibrate the programme operated by Ophir, which The Group was originally awarded seismic attributes. This analysis utilised the Fugro “GeoCaspian” a 100% interest in Block 1 on 29 will be used to further de-risk the vessel, commenced during January October 2005. Blocks 3 and 4 were exploration portfolio and focus the 2011 with acquisition of the Mafia subsequently awarded on 19 June future drilling programme. East seismic survey in Blocks 3 and 2006, again on a 100% basis. TPDC 4 where 3,250km2 of data were has back-in rights of 12% in Block Blocks 1, 3 and 4 are large, with a acquired in 44 days. The vessel 1 and 15% in Blocks 3 and 4. combined area of more than subsequently moved to Block 1 20,000km2 after the statutory where it acquired 1,900km2 of data In April 2010 the Group entered relinquishments. The original 3D in 35 days on the Kusini extension into a farm out agreement with BG Kusini and Mafia 3D seismic survey. The programme was Group for a 60% interest in each programme covered 3,500km2 and completed on 8 April 2011 and Block, with Ophir retaining the delineate only a small portion of the GeoCaspian released with no remaining 40%. Under the terms of the possible play types. As a LTIs or security-related incidents. the farm out agreement BG had the consequence a further seismic Pre-stack Depth Migration right to take over Operatorship acquisition programme was processing of these surveys was after the completion of the first three planned outboard of the Mafia completed during the year and the wells and the Mafia East/Kusini survey in Blocks 3 and 4 across the data has been used to mature Extension 3D seismic acquisition “Seagap Ridge”, a long-lived additional exploration prospects programme and consequently on feature within the basin which it is for inclusion in future drilling 1 July 2011 operatorship of all believed could be the focus of both campaigns. Even after these new three Blocks was formally transferred oil and gas generation and surveys, less than half the area to BG. As part of this arrangement 11 Ophir Energy plc Annual Report 2011 BUSINESS REVIEW

Further drilling is required to quantify the scale of the hydrocarbon resource and the GOVERNANCE dynamically positioned dual derrick semisubmersible rig “Metro-1”, which is owned and operated by Odfjell Drilling, was consequently secured for an extendable 12 month contract for a second drilling campaign. The rig was mobilised from Singapore on 8 December 2011 to commence

the 2012 drilling programme. The FINANCIAL STATEMENTS initial programme is designed to test new play systems in the basin. The initial programme consists of three wells: Jodari-1 (formerly named 1V), Mzia-1 (formerly 1W), Capitalised Expenditure BG also took over operatorship of and Papa-1 (formerly 3A). A further (as at 31 December) the Mtwara port facility on behalf two wells are expected to be of the other participating operators spudded during 2012 and the (Ophir, Petrobras and Statoil). programme will continue During 2011 the base has been into 2013. upgraded to accommodate multiple operators working simultaneously. The Group has recently announced the results of the Jodari-1 well Ophir shares BG’s optimism drilled during Q1 2012. This was about the commerciality of the the first well drilled with BG as discoveries and the Joint Venture operator and resulted in the has commenced development Group’s fourth successive, and 51% Equatorial Guinea planning for a two train onshore largest in the Group’s history, gas 40% Tanzania discovery in its Tanzania blocks 5% Gabon LNG facility In Tanzania. Screening 2% Madagascar work has begun to identify a with a recoverable resource 2% East Pande potential site for an onshore LNG estimate of 3.4TCF. export facility and environmental assessments will commence during 2012. 12 Ophir Energy plc Annual Report 2011

Review of operations continued

Tanzania

The success in Blocks 1, 3 and 4 has, together with the discoveries by other Operators in adjacent acreage, opened up the East African play system and focussed industry attention on the area.

Tanzania – East Pande with volume estimates in excess of Ophir completed its farm in to the 500mmbbls but are currently high 7,500km2 East Pande Block on risk due to the limited data coverage. 29 March 2011. The Group now holds A 12 month extension to the permit 70% equity, with Rakgas holding term was granted to allow Ophir the remaining 30%, and Ophir has sufficient time to acquire, process assumed operatorship of the Block. and interpret a 3D seismic survey East Pande lies to the west of Blocks with a view to entering the next PSA 1, 3 and 4 and is believed to contain term and a future drilling the up-dip extension of the currently programme. identified Tertiary and Cretaceous intraslope play systems, some of At year end the contracting process which have been proven in the deep was completed and Fugro were water. Regional geoseismic studies mobilising the MV “Geo Caribbean” suggest that the East Pande Block’s to acquire a 2,100km2 3D survey. location towards the rim of the basin Data from this survey should be may be too mature for liquids and available in the first half of 2012 gas generation. to facilitate a drilling campaign late in 2012 or early in 2013. Any The 2D seismic data coverage in the discoveries in East Pande are likely Block is sparse at present although to be close to the export pipeline a number of potentially attractive which will be used to transport gas leads have been identified at to any future onshore LNG plant different stratigraphic levels. supplied from Blocks 1, 3 and 4. These leads are potentially large 13 Ophir Energy plc Annual Report 2011

The necessary infrastructure and services are already being assembled in country to provide BUSINESS REVIEW the support for the next phase of operations in Equatorial Guinea.

Equatorial Guinea GOVERNANCE

Equatorial Guinea – Block R Equatorial Guinea has an Significant progress was Block R is located in the south established 3.4mmtpa LNG plant eastern part of the Niger Delta, at Punta Europa (EGLNG 1) that made during 2011 on close to numerous oil and gas is operated by Marathon with the commercialisation discoveries in the Nigerian sector. Sonagas, Mitsui and Marubeni as of the Fortuna and Lykos The licence, which covered an area JV partners. Gas is transported gas discoveries. of 1,674km 2 at the start of 2011, from the Alba Field (Operated by was originally awarded in April Marathon with Gepetrol as a JV 2006. Ophir drilled three wells on partner) by pipeline to the Punta the Block in 2008, two of which Europa plant and the resulting LNG FINANCIAL STATEMENTS (Fortuna-1 and Lykos-1) were is sold to BG through a sale and commercial gas discoveries. The purchase agreement where it is discoveries at Fortuna (269bcf of marketed to the Far East. The contingent resources, 572bcf of Government of Equatorial Guinea risked prospective resources) and believe that sufficient gas has been Lykos (91bcf of contingent resources, discovered in the country to warrant 60bcf of risked prospective a second LNG train and have resources) have substantially publicly expressed their support de-risked a new play fairway at the for a second onshore plant, to be front of the Niger Delta thrust belt. built adjacent to Train 1. The These discoveries, together with feedstock gas for this is likely to the additional 10TCF of unrisked come principally from Block R, prospective resources which had although the recent discoveries been identified prior to the addition which have been made by Noble of the former Block C, will, it is Energy in Block I may provide believed, be sufficient for a additional gas to the project commercial export gas development. over time.

The gas is dry, with no CO2 or H2S, making it ideal for liquefaction. 14 Ophir Energy plc Annual Report 2011

Review of operations continued

Ophir and its partners are using state-of-the- art rigs to drill safely and effectively in deep water.

Significant progress was made during 2011 on the commercialisation of the Fortuna and Lykos gas discoveries. The Government of Equatorial Guinea At year end preparations were underway for a second (“GEG”) has established a project delivery team (“PDT”) which will be drilling campaign which is expected to commence in accountable for ensuring that the Q2 2012. gas resources in the country are developed effectively. This team consists of representatives from until the project Final Investment provide greater flexibility in the MMIE, the National Oil Decision (“FID”) which is currently reaching the 2.5TCF threshold Company (GePetrol) and the planned for 2013. The current volume which is believed to be National Gas Company (Sonagas). exploration term was extended necessary to commit to a Train 2 A Memorandum of Understanding by 12 months and now expires development. (“MoU”) was signed on 31 March on 18 April 2013. This provides 2011 by the relevant stakeholders, additional time for Ophir to carry At year end preparations were including Ophir, committing to out further exploration and underway for a second drilling support the favoured development appraisal drilling prior to the end campaign which is expected to plan, which would see gas from of the exploration period. A further commence in Q2 2012. The sixth Block R transported by a sub-sea step in the commercialisation generation deepwater drill rig the pipeline to a newly constructed process occurred in November “Eirik Raude” and ancillary services second LNG train at Punta Europa 2011 when Block C (located to have been secured. The on Bioko Island. Subsurface and the northwest of Block R) was programme is likely to consist of engineering studies have appended to Block R. The 3 firm and one contingent well commenced on this. additional new acreage, which covering a mix of both exploration covers an area of 773km2, and appraisal targets. To increase commercial increases the area of Block R to optionality, Ophir has also 2,447km2. The acreage had Ophir has been able to retain a explored the possibility of an previously been relinquished by high equity in the project and alternative development utilising Repsol and Exxon and includes now believes that 2012 will be floating LNG (“FLNG”) technology. two gas discoveries (Oreja Marina the appropriate time to bring in The dry nature of the gas, together and Estrela del Mar which together a suitably qualified joint venture with the benign metocean contain c. 250bcf of dry gas) as partner. Preliminary approaches conditions in the Gulf of Guinea, well as the Tonel prospect with have been received from a number makes this an ideal location prospective resources of 510bcf. of companies and it is hoped that for such a development. Ophir Ophir has committed to drill a a farm out will be concluded after believes that FLNG technology three well programme, including the 2012 drilling programme. is now sufficiently advanced to the Tonel prospect. The additional provide a viable alternative to acreage increases the portfolio of a conventional onshore LNG drilling options available to Ophir scheme. It will continue to be as well as providing additional carried as an alternate option proven gas resources. These will 15 Ophir Energy plc Annual Report 2011 BUSINESS REVIEW

Gabon GOVERNANCE

Gabon – Ntsina, Mbeli The focus of exploration in Ntsina and Mbeli has switched to the pre-salt play which has recently come to prominence through a series of world-class discoveries in Brazil, and early in 2012 on the conjugate margin in Angola. Across the conjugate margin from Gabon, Recent advances in seismic imaging technology now FINANCIAL STATEMENTS is Petrobras’ Carmopolis Field, allow pre-salt traps to be effectively mapped. The main with an estimated 1.7Bbbls in place. Until now, exploration of the focus of the seismic acquisition has been the Padouck pre-salt play in the North Gabon Deep prospect which has the potential to contain basin has been restricted by poor ca. 1.3Bbbls. seismic imaging. Recent advances in seismic imaging technology now allow pre-salt traps to be migration” (“PSDM”) processing of structure, has the potential to be effectively mapped. the data which will take much of volumetrically significant. Ophir 2012 to complete. The terms of has consequently undertaken a 3D Seismic and gravity gradiometry the Ntsina and Mbeli PSC’s will seismic programme in Manga in surveys have delineated a end in February 2014, allowing early 2012 to mature these into potentially significant pre-salt play sufficient time to fully explore drillable prospects. The play system in the Blocks. The main the pre-salt play. system also extends into the focus of the seismic acquisition has southern part of the Ntsina Block been the Padouck Deep prospect Gabon – Manga, Gnondo and the 3D survey has extended which has the potential to contain The pre-salt play has more limited into this Block. ca. 1.3Bbbls. Based upon the extent southward into Manga and relative immaturity of the play, Gnondo where the focus is instead Ophir elected to bring a JV partner on the post-salt stratigraphic with significant pre-salt experience section. Recent discoveries in and consequently concluded a Brazilian waters, in particular farm out to Petrobras for 50% Petrobras’ 2010/11 Barra equity in each Block. Under the discovery, suggest that this play terms of the agreement Petrobras could have analogues in the North is funding the cost of a new Gabon basin. The 3D seismic data 2,200km2 seismic survey designed is currently limited, particularly in to image the pre-salt play system. the potentially attractive area to The survey has been acquired by the west of the Loiret Dome where PGS early in 2012 and a key a series of stratigraphic onlap plays component of this programme will have been identified and leads be detailed “pre-stack depth identified. One of these, the Afo 16 Ophir Energy plc Annual Report 2011

Review of operations continued

AGC Profond

AGC – AGC Profond Two farm outs were completed in 2011; the first of these was for 8.8% equity to FAR Limited in March 2011 with a further 17.5% being divested to Noble Energy in June 2011. The terms of these farm outs included promoted contributions to the costs of the first well on the Block, Kora-1 (up to a gross first well cost of $40 million, Ophir has undertaken a 3D seismic programme and should they elect to participate in Manga in early 2012 to mature these into in petroleum operations, a promoted amount of the costs of drillable prospects. any second well (uncapped) and US$35 million of appraisal expenditure on Ophir’s behalf).

The Pachg Liba prospect, in the Acquisition of the two 3D surveys The Kora-1 well was drilled to Gnondo block, is covered by a was completed in January 2012. a total depth of 4,447.5mSS on limited amount of 2D seismic data Processed data will be available 27 July 2011 and the rig was which, to this point, has precluded in early 2013. Once this has been subsequently released on 31 July it from being matured to a drilling interpreted a farminee will be sought 2011 with no LTIs. The primary target. Acquisition of a prospect- for the next stage, to include (Albian) and secondary (Coniacian specific 3D seismic survey would potential drilling in 1H 2013. and Barremian) reservoir intervals be very cost inefficient unless it were penetrated close to their can be included as part of a wider anticipated depths, but the well survey. The activity in the other encountered a predominantly Ophir-Operated Gabon blocks has claystone and thinly bedded allowed this survey to be included limestone sequence, rather than as part of the larger programme the prognosed sandstone reservoir recorded in early 2012. facies. The well was plugged and abandoned and the technical assessment will continue through the first half of 2012 to characterise the remaining potential of the Block ahead of a drill or drop decision in mid-2012. 17 Ophir Energy plc Annual Report 2011 BUSINESS REVIEW

Congo-Brazzaville Madagascar Somaliland Saharawi Arab (Marine IX) Democratic Republic GOVERNANCE

Congo-Brazzaville – Marine IX Madagascar – Marovoay Block Somaliland – Block SL9 (Berbera) Ophir assumed the role of Operator 2011 has seen the interpretation During 2011 Ophir’s geotechnical from 1 May 2011. Three play of the airborne gradiometry team continued its interpretation systems have been identified in survey in order to better define of the existing legacy data on Block the Block. These are: a Tertiary play the subsurface structure. The data SL9 and to fully integrate surface system, as proven by the nearby has been integrated with existing geological information with the Moho Bilondo discoveries, an seismic data and at year end the seismic data which covers the Block. Albian “raft” play, which was tested final interpretation was underway. This will be used to determine by Frida-1 and a pre salt “Gamba” The JV faces a drill or drop decision possible future drill locations. play. Of these, the first two have in Q2 2012 and at that point will FINANCIAL STATEMENTS been fully explored within the elect whether to drill a well on Ophir has continued to work closely Block and the Group is confident the Block or to farm out. On 17 with the Government of Somaliland that no potential remains. The November 2011, the Group and to adapt the Petroleum Sharing pre-salt play, however, has not Octant Energy Madagascar Ltd Contract to reflect the expected been explored to date and the JV entered into an Option agreement work programme prior to the Group has gained a 12month extension to whereby Ophir Madagascar taking on a drilling commitment on the current PSC term in order to granted Octant Energy the right to the Block. The agreed amendments carry out a full prospectivity farm in to the Marovay PSC for a include the extension of the block assessment of the block. As part of 50% participating interest subject via the addition of a vacant Block this assessment a gradiometry to the satisfaction of certain to the west of the Ophir acreage. survey has been acquired in early conditions precedent and the January 2012 and once integrated payment of certain exploration SADR – Daora, Haouza, with the existing seismic data a costs and expenses. Mahbes, Mijek decision will be made regarding Ophir continues to monitor activities possible future drilling. and opportunities in SADR.

JDZ Ophir elected to withdraw from the JDZ PSC in March 2011. All the commitments had been fulfilled and the permit was exited in good standing. 18 Ophir Energy plc Annual Report 2011

Review of operations continued

Block L-15 Kenya

Block L-9

Tanzania Tanzania

Dominion Petroleum Assets The Group’s acquisition of Dominion Block 7 Petroleum Ltd closed in February 2012 and added the following assets to the Group’s portfolio:

Tanzania – Block 7 Block 7 is an 8,475km2 block Kenya – Block L-9 The Lamu basin has the potential 2 located on the continental slope of Block L-9 covers 5,110km offshore to contain both gas and liquids as the Indian Ocean immediately east Kenya on the Davy-Walu structural demonstrated by previous wells in of Dar es Salaam. Water depths in trend. Ophir currently has 100% the area. Synthetic aperture radar Block 7 range from less than 400m operatorship and working interest has also identified possible oil to more than 2,500m. in the L-9, but is in the process of seeps locally. Adjacent to L-9 are transferring 30% to Flow Energy blocks being operated by Apache During June 2010, a competent Limited and 10% to Avana and Anadarko. The Mbawa prospect persons report was prepared by Petroleum Limited. The JOA is in the Apache-operated block L-8 is Energy Resource Consultants Ltd. being finalised. The L-9 PSC was along trend from similar features in (“ERC”) on Block 7, which included signed by Dominion with the L-9. Mbawa is to be drilled by the Alpha prospect. The report Kenyan government on 17 May Apache in Q3, 2012. Ophir has concluded that the Alpha prospect 2011. During the first two year signed an agreement to work with has a mean prospective unrisked exploration period, Ophir has a Apache in a 3D seismic programme 2 resource of 1.104Bbbl of oil or commitment to shoot 500km of 3D over the L-8/L-9 Mbawa South area 7.069TCF of gas. ERC have risked seismic data, reprocess 2,500km of in Q1 2012. It is planned this will the prospect with a CoS of 12% as 2D seismic and carry out geological lead to potential drilling in L9 a whole. Net risked mean resource: and geophysical field studies. during 1H 2013. 134MMboe or 848Bcf. Ophir is now operator and with an 80% participating interest in the block. Further potential identified outside of 3D has led to infill 2D acquisition in early 2012 with potential drilling planned for 1H 2013. 19 Ophir Energy plc Annual Report 2011

Ophir’s expansion in Tanzania and entry into Kenya ensures a level of exploration activity extending well beyond the current drilling BUSINESS REVIEW programme.

Participating Gross area Jurisdiction Asset Operator Interest (km2) GOVERNANCE Tanzania Block 7 Dominion 80% 8,475 Kenya Block L-9 Dominion 60% 5,110 Kenya Block L-15 Dominion 100% 2,331 Uganda Area 4B Dominion 95% 486 Kenya – Block L–15 DRC Block 5 SOCO 46.75% 7,447 Block L-15 of the Lamu Basin, offshore Kenya covers an area of Total 23,849 FINANCIAL STATEMENTS 2,331km2 and lies to the north of L-9 and is also on the Davy-Walu structural trend. The only well in sedimentary rocks capable of DRC – Block V Block L-15 is Kofia-1, which was generating oil. A satellite radar- Block V in the Democratic Republic drilled by Union Oil in 1985 and imaging survey has suggested of Congo (“DRC”) incorporates encountered oil and gas shows the presence of oil seeps on Lake 7,447km 2 of land and lake areas. It in the Palaeogene and Upper Edward. During the second half of lies to the west of and includes part Cretaceous intervals. The L-15 PSC 2008, around 540km of 2D seismic of Lake Edward and adjoins EA4B in was signed on 5 October, 2011 and was acquired on land and lake Uganda. Both blocks are part of the Ophir now holds 100% working areas. Interpretation of the seismic Albertine rift system of sedimentary interest and operatorship in the has shown the presence of a deep basins where significant oil block. Ophir is planning a 3D sedimentary basin broken into discoveries have been made since seismic programme in Q3 2012, fault blocks by numerous 2006. Ophir now holds a 46.75% with potential drilling in 2013. extensional faults. participating interest in Block V with SOCO. During the first 5 year Uganda – Exploration Area 4B In 2010, Dominion drilled the phase of the Block V PSC, Ophir and Exploration Area 4B (EA4B) is a Ngaji-1 well to a total depth of its partners are committed to an 993km2 licence located in south- 1,765m. The well did not identify exploration programme which west Uganda and is inclusive of the hydrocarbons but did confirm the includes at least 300km of seismic majority of the Ugandan section of presence of high quality reservoir data and two exploration wells. Lake Edward. Ophir now holds sands. On 27 April, 2011, Dominion 100% participating interest and applied for the renewal of the operatorship in EA4B. In early exploration licence for EA4B for 2008, an airborne gravity and the third two-year period, which magnetic survey was acquired expires in July 2013. This continues which proved a presence of to be discussed with the substantial thickness of Government of Uganda. 20 Ophir Energy plc Annual Report 2011

Financial review

Overview Gain on farm out Finance expenses 2011 was a year of success for the The gain on farm out relates to the Finance costs for the period of Ophir Group, with an IPO and partial farm out of the Group’s AGC US$1.0 million (31 December 2010: listing to the Main Board of the Profond interests to Noble prior to US$0.4 million) relate to foreign London Stock Exchange (“LSE”) on spudding of the Kora-1 well in late exchange losses arising on the 13 July 2011. The Group issued June 2011. Cash proceeds of fluctuation of the Group’s 94,135,334 new shares and raised US$20 million received from Noble functional currency, the US Dollar, a total US$375 million (£235 million). were applied against the Group’s against other currencies. An over-allotment (greenshoe) of carrying value of the AGC project, 2,216,546 shares followed on reducing its book value to nil at 31 Cash flow 8 August 2011 raising a further December 2011, with surplus Overall, the Group cash inflow was US$8.9 million (£5.5 million). As the proceeds being recognised as a US$306.7 million (31 December majority of the Group’s expenditure profit. The Kora-1 well, completed 2010: outflow of US$45.4 million). is incurred in US Dollars, the bulk in early August, was subsequently of the proceeds of the capital raising an unsuccessful well. In accordance Operating Cash Flow were immediately converted to with the Group’s accounting policy, The Group’s net cash used in US Dollars. the Group’s share of well costs which operating activities was US$22.5 were incurred of approximately million (31 December 2010: The Group is currently conducting US$12.7 million, were then written US$13.3 million). Of this, US$15.7 exploration and appraisal activities off to the Income Statement during million related to exploration using existing funds from capital the 2011 year. expenditure that was written off, raised during the IPO. Following predominantly attributed to AGC the successful capital raise in April Exploration expenditure Kora-1 well costs (US$12.7 million) 2012 of US$242 million, it will Exploration expenditure of and pre-licence costs of fund its planned activities for the US$15.7 million (31 December 2010: US$2.3 million. 2012 financial year from current US$11.3 million) resulted from the cash reserves. Group’s exploration and appraisal Investing activities activities in AGC Profond, Tanzania, Cash flow used in investing was Result for the Period Equatorial Guinea, Somaliland, US$43.9 million (31 December The Group recorded a loss of Gabon, Congo and Madagascar. 2010: US$32.0 million). Investment US$19.1 million for the year ended It comprises pre-licence exploration of US$65.6 million on exploration 31 December 2011 (31 December costs of US$2.3 million (31 December (31 December 2010: US$44.6 2010: US$19.3 million loss). No 2010: US$2.0 million) charged million) was offset by a cash inflow dividends were paid or declared directly to the Income Statement. on farm out of the Group’s AGC by the Group during the period. Unsuccessful exploration interests to Noble of US$20.0 expenditure of US$13.4 million (31 million (31 December 2010: The loss for the period includes December 2010: US$13.3 million) US$11.3 million inflow net of farm exploration expenditure expensed was written off in accordance with out proceeds). The incurred of US$15.7 million (31 December the Group’s accounting policy. exploration expenditure related to: 2010: US$11.3 million), –– Planning and long lead items for administrative costs of US$16.2 Administration expenses the BG joint venture and drilling million (31 December 2010: US$7.3 Administrative expenses including programme in Blocks 1, 3 and 4 million), finance costs of US$1.0 personnel costs including in Tanzania; million (31 December 2010: US$0.5 share-based payments charges, –– Acquisition of Block C in million) and other costs of US$0.9 administration costs, professional Equatorial Guinea during million (31 December 2010: and corporate costs (audit, legal, November 2011, to the US$0.8 million). The year end result other professional advisors’ costs northwest of Block R, which was was further impacted by a farm out and Directors’ fees) totalled then appended to Block R; and gain of US$13.8 million (31 US$16.2 million (31 December –– Associated costs of the transfer December 2010: Nil). 2010: US$7.3 million). The result and completed farm in to the was impacted by 2010 bonuses East Pande block in Tanzania on payable in 2011, increased option 29 March 2011. incentive costs, additional personnel and administration costs associated with expansion of the Group’s operations and listing on the Main Board of the LSE and increased corporate related activity. 21 Ophir Energy plc Annual Report 2011

Financing Activities The net cash inflow for financing activities was US$373.1 million BUSINESS REVIEW (31 December 2010: US$0.1 million) which was as a result of the funds raised at IPO. Gross funds received were US$394.8 million with associated costs of the raise being US$21.7 million.

At year end the Group’s cash and cash equivalents were US$396.6 million (31 December 2010: US$90.0 million).

Exploration and Evaluation Assets As at 31 December 2011, exploration GOVERNANCE and evaluation assets totalled US$327.1 million (31 December 2010: US$270.0 million). The movement was due to expenditure incurred during the year of US$70.4 million (31 December 2010: $45.1 million) and written off expenses of US$13.4 million (31 December 2010: US$13.3 million). FINANCIAL STATEMENTS The main areas of exploration were: Current Assets Outlook –– Tanzania Blocks 1, 3 and 4 The Group held cash and short-term The Group is currently conducting US$40.5 million due to the costs deposits of US$396.6 million exploration activities using of drilling Chaza-1 in Block 1, and (31 December 2010: US$89.9 existing funds from capital raised the seismic programmes operated million) plus inventories of US$6.2 during the IPO and plans to utilise by Ophir in Blocks 1, 3 and 4. million (31 December 2010: US$9.1 the April equity placing to fund –– Ophir completed the farm in to million) which comprise drilling forecast expenditure for at least the 7,500km2 East Pande Block materials for future drilling the next 12 months. Accordingly, on 29 March 2011. The Group campaigns. Trade and other the financial statements have holds 70% equity, with Rakgas receivables were US$8.7 million been prepared on a going concern holding the remaining 30%. (31 December 2010: US$45.3 million). basis as the Directors are of the Ophir has assumed operatorship opinion that the Company will of the Block. Costs for 2011 Liabilities have sufficient funds to meet its amounted to US$6.6 million. The Group had no debt as at ongoing working capital and –– In Equatorial Guinea the December 31 2011 (31 December committed capital expenditure acquisition of Block C (US$2.2 2010: Nil). requirements over the next million) and preparation for the 12 months. 2012 drilling programme of Trade and other payable including three firm plus one contingent accruals were US$27.7 million (31 well (US$7.3 million). December 2010: US$59.7 million). 22 Ophir Energy plc Annual Report 2011

Corporate and Social Responsibility

Ophir focuses in the following areas: –– Environment –– Health and Safety –– Education –– Community Development

Environment: Before initiating any exploration project Ophir conducts Ophir is committed to taking an active part in the comprehensive and integrated development of the countries in which it operates. Environmental Impact Assessments The Company conducts its operations in an ethical, (“EIA’s”). These assessments are repeated at each stage of the project responsible, apolitical, independent and transparent using recognised consultants and way. We manage our Corporate and Social Responsibility methods. As a part of this process (“CSR”) with the same principles underlying the conduct Ophir consults with local authorities, NGOs and communities to ensure of our core activities, which are determination, innovation we are in compliance with both and excellence. industry best practices and any applicable local regulations and guidelines. Our environmental All of Ophir’s employees and Ophir operates in regions offering plan is implemented in association contractors are encouraged to a great variety of geographical, with our Corporate Health, Safety work to the highest standards. cultural, economic and social & Environmental Manual. These standards are reviewed and environments. Africa is a mosaic of set by the Ophir HSE Committee countries with contrasting levels of One of our initiatives for the which takes responsibility for development, regulations, languages, conservation of the environment monitoring group-level health, traditions and expectations. Our has been to support a research safety, security and environmental long-term involvement with our project in the Western Sahara. (“HSSE”) risk assessments in addition host countries and local partners, Since 2006 we have contributed to to reviewing reports on serious as well as our multicultural team, archaeological research conducted accidents and fatalities to ensure are instrumental in ensuring we during various field missions by that management is responding keep in tune and maintain an the University of East Anglia appropriately. The Committee also effective dialogue in line with our (United Kingdom) in the Tifariti ensures that the Company is fully business objectives. Region of Western Sahara. This compliant by commissioning programme represents a valuable periodic independent audits on Ophir believes its presence is felt contribution to the preservation HSE matters. positively by its hosts as the and knowledge of historical Company strives to create value occupation in Western Sahara. locally, benefiting not only the employees but the community at Reports and photos can be viewed large. The Company ensures its on http://www.cru.uea.ac. projects will bring opportunities uk/~e118/WS/WSahara.htm. and its investment will make a positive difference. 23 Ophir Energy plc Annual Report 2011

Ophir sponsored and provided the materials for an art competition between a number of schools in Mtwara. BUSINESS REVIEW

Health and safety: Ophir’s

operations are conducted in GOVERNANCE accordance with local and international health and safety best practices.

The Company offices in Gabon and Equatorial Guinea have implemented Ophir fully sponsored the Ophir has also been active in mosquito eradication programmes. construction of a two classroom Tanzania for a number of years. nursery school equipped with 20 Ophir has invested in excess of Ophir also provides internationally desks in the village of Ebein US$10 million in the development accredited driving and first aid Yenkeng in the Niefang Region, of the Mtwara port. Approximately courses to all local employees as Central South Equatorial Guinea. half of this sum was spent in the FINANCIAL STATEMENTS part of the comprehensive training Stage 1 has been completed; Stage local community providing a major programme tailored for the staff. 2 is progressing. boost to the area. As expected the Ophir also expects its subcontractors entire project was backed up by and suppliers to provide a safe and Ophir is funding a cultural exchange a comprehensive Environmental healthy working environment for programme between Gabon and Impact Assessment. their employees and to provide South Africa under the auspices appropriate training and personal of the South African Embassy for Ophir has an office in Mtwara. protective equipment. the Nelson Mandela School During its recent drilling campaign in Libreville. offshore Tanzania Ophir provided Education: Ophir encourages an accommodation in Mtwara for over atmosphere of continuous Community development: Ophir is 60 workers. To accommodate these improvement. The Company proud to help local communities people during the drilling phase contributes to the ITNHGE develop in its project areas. Ophir rented 13 residential Programme, a collaborative properties. Prior to occupation all educational initiative run for the In Equatorial Guinea, where Ophir of the properties underwent a full benefit of adult students in has invested heavily over the last refurbishment to ensure they were Equatorial Guinea. A group of 46 few years, we have been actively fully compliant with international students enrolled in the full time involved in community development. housing standards. As a result of intensive English programme and In addition to the construction of this work the landlords have seen completed their first semester in a school (details above) we have the value of their rented properties May 2008 in Malabo. also acquired and installed four increase substantially – a good electricity generators into result for both parties. Ophir runs a comprehensive training hospitals in Evinayong, Kogo programme for the Equatorial Mbini and Acurenam. Ophir has also supported other Guinean staff consisting of English schemes in the Mtwara port town. language courses as well as IT and For example it has begun funding word processing classes. of a local maternity clinic. Funds go towards providing essential drugs and baby equipment. 24 Ophir Energy plc Annual Report 2011

Corporate and Social Responsibility continued

the winning students with rucksacks and stationery supplies on behalf of Ophir. All students were awarded certificates of participation to show Ophir’s appreciation for taking part in this initiative. Further to this, each school was presented On 21 December 2011, devastating Ophir sponsored a local art with a cheque from the Regional floods hit parts of the city of Dar es competition in Mtwara from 30 Commissioner on behalf of Salaam, Tanzania, impacting the January 2012 to 3 February 2012 Ophir, for an amount depending lives of many local people, some that provided primary school on where they were placed in the losing not only their properties and students in grades 5 to 7 with the competition. Ophir hopes that this belongings, but also having to deal opportunity to learn about the oil donation will assist the schools in with the loss of lives due to the and gas industry and its benefits to maintaining a high standard of tragic event. Mtwara and the community. education for the youth of Mtwara.

Many of those affected by the floods They were then given the chance to In 2010, Ophir Congo (Marine IX) were relocated to the Mabwepande express their knowledge and Limited and joint venture partners area in Bunju Juu, north of Dar es thoughts of the industry through Premier Oil plc and Kufpec Congo Salaam. It was planned that around art. Throughout the process, (Marine IX) Limited began funding 2,000 families would relocate to this regional officials, teachers and a community project in the remote area, where temporary shelters were parents/guardians were also village of Tchisseka, Brazzaville, set up by the Red Cross until more encouraged to learn more about Congo. The first stage of this project permanent arrangements could Ophir and the oil and gas industry consisted of funding the restoration be made. and its contribution to the of the Tchisseka Health Care Centre. community. The theme of the Restoration began on 30 August, To assist in the relocation efforts competition was, “What does the 2010, with the completely restored Ophir Energy has donated 30 water oil and gas industry look like/mean Tchisseka Health Care Centre being storage tanks with a capacity of to you?” delivered to the population of 5,000 litres each to the site. These Tchisseka on 10 January 2011. tanks will be used to move and store A total of 60 students participated water, thus securing adequate in the competition, 15 from four The second stage of this social sanitation which is vital to prevent schools in Mtwara, these schools project is underway at the disease and ensure the survival of including Chuno Primary School; moment. This stage involves the the flood victims. Ophir Energy is Ligula Primary School; Mivinjeni construction of an accommodation committed to supporting the Primary School and Shangani site for the doctors and nurses set communities in this time of need. Primary School. to work in the Tchisseka Health Care Centre. The facility will be Ophir is currently assessing the best After all the entries had been equipped with solar panels providing way to contribute to community submitted, Ophir’s judging panel electrical supplies for sustainability development and to support agreed on those which they thought and because of the remoteness of local initiatives via a charitable were the most creative and the this facility. Construction of the programme which would channel winners were selected. The Regional accommodation unit is continuing future donations to individuals Commissioner attended the award and is expected to be completed or small organisations. ceremony for all schools, presenting in May 2012. 25 Ophir Energy plc Annual Report 2011

Helping out with the provision of materials and facilities for education is one of the worthwhile contributions Ophir makes to the communities BUSINESS REVIEW in which it works, the benefits of which are immediate and obvious.

HSE highlights

The high levels of Ophir Energy Ophir is working to further expand its HSE and CSR GOVERNANCE operated exploration activities experienced in 2010 spilled over reporting procedures by widening the scope of into 2011. During 2011 the Company reporting to include all services companies and carried out a number of drilling and contractor personnel. seismic acquisition programmes.

These exploration activities are shore base at Mtwara. Also in security plan was used not only summarised below and were Tanzania in late Q4 2011 we to ensure safe conditions in the completed without any significant initiated a Fugro 3D seismic drilling area , it was also used to occupational health and safety programme in the Ophir operated protect the personnel and assets incidents (LTIs) or offshore security East Pande block. This seismic was during the mobilisation and FINANCIAL STATEMENTS incidents (piracy). With regard completed in early 2012. The demobilisation phase as people to HSE issues in general it is operations in Tanzania were all and equipment were moved into important to highlight that several subject to the normal EIA and the project area from the Gulf of of Ophir’s exploration projects piracy risk assessments. Guinea and back out of the are carried out in offshore areas The security plans were project area on completion of affected by Somali piracy risk, successfully enforced using a the well. The Kora 1 drilling therefore Ophir and its contractors close partnership of Tanzanian programme was completed with meticulously plan and execute a Navy and private security zero LTIs. full security plan offshore to protect contractors operating with strict personnel and assets. Although rules of engagement and 3. Gabon – Ophir planned (EIA acts of piracy are reported to occur behaving in accordance with the completed and risk assessments on a fairly regular basis in the UN’s voluntary principles on carried out) and initiated a 3D Somali Basin/Indian Ocean, none human rights. seismic programme in late Q4. of these incidents has adversely The programme was concluded affected Ophir’s operations. 2. AGC (Senegal /Guinea Bissau) without incident in February – Ophir drilled one well offshore 2012. 2011 HSE operational summary Senegal /Guinea Bissau in the 1. Tanzania – Drilling in Blocks 1 joint development zone known Corporately the Ophir Energy Group and 4 carried over into Q 1–2 as the AGC. Prior to drilling a recorded a zero rate for LTIs over of 2011. This Ophir Energy consultation process including the 2011 calendar year. operated drilling was carried out a compliant EIA was issued simultaneously with shooting of including oil spill response Ophir is working to further expand 3D seismic in the same areas. planning and safety risk its HSE and CSR reporting In addition to normal HSE assessments (narco - trafficking/ procedures by widening the scope considerations these activities robbery). A security plan was of reporting to include all services required a high degree of designed and executed in companies and contractor maritime security co-ordination conjunction with service personnel employed on projects given the current risk of piracy companies (rig and supply and to further refine the Company in the region. Mid-year Ophir vessels) and HASSMAR KPIs it employs in these reporting handed over operatorship of (Senegalese body responsible procedures. Ophir expects to Blocks 1, 3 and 4 to the BG Group, for the environment and security complete these changes within this included operatorship of the of its offshore areas). The the coming months. 26 Ophir Energy plc Annual Report 2011

Principal risks and uncertainties Risk management

Ophir operates in the inherently risky upstream oil and gas sector and effective risk management is an essential process for the Group to deliver its strategic and operational objectives.

Ophir is committed to maintaining Responsibility for identifying and a balanced portfolio and to managing risks lies with Ophir’s managing risks in a proactive and Executive Directors, Senior effective manner. The key elements Management Team and Country Ophir risk management Managers. The Executive Directors processes are: continually monitor the Group’s –– Risk assessment risk exposures and report to the –– Risk analysis and evaluation Audit Committee and Board of –– Risk mitigations Directors on a six monthly basis, or –– Risk monitoring and reviewing more frequently as required. –– Communication and consultation The principal risks of the Group are summarised as follows:

Type Risk Mitigants Strategic Political risk –– The Group maintains a balanced asset portfolio across different jurisdictions in a region where the Group is most accustomed to operating. –– The Group strives continually to maintain positive relationships in all host countries that it operates. Ophir aims to work to the highest industry standards with all regulators and compliance with the Company’s licence and PSC obligations is closely monitored. Reliance on –– Ophir is reliant on a small team of experienced oil and gas professionals key personnel for its operational success. In order to retain, motivate and recruit suitably qualified employees it ensures its remuneration packages are competitive. It has established a long- term incentive programme for executives and deferred share plan for staff. Investment –– The Group and its advisors are experienced within the industry in which it decisions operates and complete a proper review against the Group’s strategy and investment criteria. Full due diligence is undertaken upon all potential new entries. The current portfolio is closely monitored.

Type Risk Mitigants Operational Drilling –– The Group maintains clearly defined operational procedures that should operations risk always be followed. –– The contracting and procurement process ensures suitably qualified contractors are employed. –– Regular training in the processes and continual monitoring of adherence are undertaken. 27 Ophir Energy plc Annual Report 2011

Type Risk Mitigants Operational HSE –– The Group maintains a comprehensive system of HSE procedures that incident risk should always be followed. The systems are overseen by the HSE continued Committee which regularly meets to review and monitor compliance. –– Comprehensive Environmental Impact Assessments are performed. Oil spill and emergency response plans are in place, regular training in the procedures occurs. BUSINESS REVIEW Discovery –– The Group has a technically and regionally experienced management risk and and geoscience team who have a proven track record of success. success rate To reduce risk, substantial technical analysis is undertaken to evaluate and manage opportunities. –– All exploration and appraisal programmes are consistently reviewed and monitored before being recommended to the Board for approval. Insurable risks –– Comprehensive insurance programmes are maintained in accordance with industry standards. Availability –– Regular market review of services and rig availability occurs. Experienced of rigs and advisors are used to ensure a rapid response to opportunities and an services ability to close binding agreements quickly. –– A dedicated drilling project manager and C&P manager ensure a clear contracting strategy and project plan are produced early in the GOVERNANCE procurement planning stage.

Type Risk Mitigants Financial Counterparty –– The Group closely monitors all trade debtors which are subject to internal credit risk credit review. Liquidity risk –– The Group has a formal annual budget process and regularly forecasts cash requirements to ensure underlying liquidity requirements are met. Actual vs budget analysis reporting occurs monthly and is monitored FINANCIAL STATEMENTS by senior management and reported to the Board. Interest rate –– The Group reports and manages its business in US Dollars. Cash balances and foreign are primarily held in US Dollars to provide a natural hedge. Small balances exchange are retained in other currencies for operating and administrative needs. risk –– The Group holds cash balances in short-term deposits; there were no hedges in 2011.

Type Risk Mitigants External Sovereign risk –– The Group recognises that there is an inherent political risk associated with the countries in which it operates. The Group regularly monitors and reviews all jurisdictions in which it operates. The Group’s personnel are experienced within the industry and maintain close relations on the ground within each jurisdiction. Legal, –– Ophir’s activities are subject to various different jurisdictional laws, tax regulatory or regimes and regulations. The Group employs suitably experienced and litigation risk qualified staff and advisors who can assess, and where necessary respond to external risks. –– The Group’s key policies and procedures have considered requirements of the UK Bribery Act. –– The Group maintains a Business Code of Conduct and ensures proper training for employees occurs. Investor and –– The Group fosters strong relations with the local communities and host stakeholder country governments in jurisdictions that it operates. It continually sentiment interacts with all relevant stakeholders. –– The Company maintains regular dialogue with all key shareholders. The Company has established investor relations and a corporate affair function during 2012 and ensures all material information is released to the market on a timely basis. 28 Ophir Energy plc Annual Report 2011

Board of Directors

Directors at year end company’s sale in December 2003. Dennis McShane Dr Stein is non-executive chairman Senior Independent Director Nicholas Smith of Neon Energy Limited, an Mr McShane (age 56) was appointed Non-Executive Chairman ASX-listed petroleum exploration to the Board as a Non-Executive Mr Smith (age 60) was appointed and production company Director in October 2007 and as to the Board of the Company as a headquartered in Perth, Australia. Senior Independent Director in Non-Executive Director in October November 2009. Mr McShane is 2007 and served as Chairman Dr Stein has notified the Board that, Chairman of the Nomination of the Audit and Nomination while continuing to make himself Committee and a member of Committees until September available for advice and guidance, the Audit and Remuneration 2009 when he was appointed as he will not be seeking re-election Committees, having also served Chairman of the Board. Mr Smith is at the Company’s AGM in 2012. as Chairman of the Audit a member of the Remuneration and Committee from September Nomination Committees and was a Nicholas Cooper 2009 to 18 August 2011. member of the Audit Committee Chief Executive Officer until 7 July 2011. Dr Cooper (age 44) was appointed Mr McShane is a founding principal to the Board as Managing Director of Midas Resource Partners. From Mr Smith trained as a chartered on 1 June 2011 and has formally September 2004 to November 2008 accountant with Ernst & Young. assumed the role of Chief Executive Mr McShane was a senior executive He joined the Jardine Fleming Group Officer in December 2011. of the Ferrexpo group of companies in 1986 serving, from 2003, as chief serving as executive director of financial officer and as a member of Dr Cooper began his career as a finance and business strategy. the Executive Committee. Mr Smith geophysicist with BG and Amoco in He led the successful initial public became a director of Robert Fleming the UK and various international offering of Ferrexpo plc on the International Ltd in 1998 and the locations. He spent two years with Official List of the London Stock Director of Origination – Investment the energy team at Booz-Allen & Exchange in June 2007. Prior to Banking serving until 2000. Hamilton, advising on upstream joining Ferrexpo, Mr McShane was an Mr Smith currently serves as a oil and gas development projects. investment banker with JPMorgan non-executive director for Asian In 1999, Dr Cooper completed an Chase & Co (JPM) emerging markets Citrus Holdings Ltd, PLUS Markets MBA at INSEAD and went on to join investment banking and mining and Group plc, Sorbic International Ltd., the oil and gas team at Goldman metals practices in London. In 2002, Japan Opportunities Fund II Limited Sachs where he held the position he became head of mining and and Schroder Asia Pacific Fund plc. of Vice President. In early 2005 he metals in JPM’s Asia-Pacific practice, co-founded and became CFO of based in Sydney. He attended Alan Stein Salamander Energy plc, the Harvard Business School and Executive Deputy Chairman Asia-focused exploration and the State University of New York. & Founder production company, which has Dr Stein (age 47) was one of the grown from start-up to FTSE 250 Ronald Blakely Company’s founding Directors constituent. Independent in 2004. Non-Executive Director Jonathan Taylor Mr Blakely (age 63) was appointed Dr Stein began his career in the UK Executive Director & Founder as a Non-Executive Director of the as a geologist with oil consultants In 2004, Mr Taylor (age 46) was one Company on 7 July 2011 and as Dolan & Associates where he worked of the founding Directors of Ophir, Chairman of the Audit Committee on projects in Europe, Australia and serving initially as its Technical in September 2011. the Far East. In 1992, he established Director and is a member of the Dolan & Associates’ first HSE Committee. Mr Blakely is a retired former international office in Australia and executive whose career spanned in 1994 was one of the founding Mr Taylor has over 20 years of more than 38 years with Royal partners of the IKODA consultancy experience in a range of technical Dutch Shell companies. At time of group which had offices in London and asset management roles in retirement in October 2008 he was and Perth. In 1996 he was one of Africa, Europe, the Far East and the Executive Vice President Global the founding directors of FIL which Middle East, for Amerada Hess Ltd, Downstream Finance. In previous acquired interests in offshore Clyde Petroleum plc and Gulf roles he has been CFO of Shell Oil Mauritania. These interests were Canada Resources Ltd. Mr Taylor Products in the USA and CFO of sold to Fusion Oil & Gas plc (Fusion) was appointed as Exploration Shell Canada, a then Canadian and Dr Stein was appointed Director of Fusion in November public integrated oil and gas managing director of Fusion in 1998, resigning in March 2004 company. He is a graduate of the 1998 and remained until that to found Ophir. University of Guelph with a major 29 Ophir Energy plc Annual Report 2011

in Economics and a member of Forces at the Allied Rapid Reaction member of the Corporate Finance the Society of Management Corps, and was an advisor to Team and served as Treasurer Accountants of Alberta. Mr Blakely the Sierra Leone Armed Forces for LNM Holdings NV until its BUSINESS REVIEW is currently the non-executive in Freetown. In 2007 he was merger with Ispat International chairman of the Board of Oil Sands appointed as deputy director of in December 2004. With a 20- Quest, a Calgary based company. Security Operations with Infinity year career within the Mittal SDC Ltd, and in 2008 moved to Steel Group, he has held various John Lander start his own company, Barbican positions in Finance and Independent Global Ltd, which specialises in Accounting within the Group. Non-Executive Director independent security advice to Mr Tandon is an Honours Graduate Mr Lander (age 68) was appointed the corporate sector. in Accounting and Commerce from as a Non-Executive Director of St Xavier’s College, Kolkata and a the Company in November 2008. Patrick Spink Fellow of The Institute of Chartered He is Chairman of the Remuneration Independent Accountants of India and Member Committee and a member of Non-Executive Director of The Institute of Internal Auditors. the Audit, Nominations and Mr Spink (age 59) was appointed as He also serves on the boards of HSE Committees. a Non-Executive Director of the various companies. GOVERNANCE Company on 7 July 2011 and is a Mr Lander started his career with member of the HSE Committee. Shell as a geophysicist in their Alternate Director international division and has more Mr Spink spent over 20 years with than 40 years’ experience in the Perenco, joining the company shortly Jaroslaw Paczek international oil and gas industry, before the start of its rapid growth Alternate Director to Rajan Tandon holding executive boardroom into one of the world’s largest private Mr Paczek (age 43) was appointed positions at RTZ Oil and Gas Limited, upstream oil and gas companies. as alternate Director for Rajan Pict Petroleum plc, Premier Oil plc, He performed a number of roles Tandon on 7 July 2011.

British-Borneo Petroleum Syndicate including head of exploration, FINANCIAL STATEMENTS plc and Tullow Oil plc, the latter general manager of one of its largest Mr Paczek trained as a barrister in until his retirement from full-time subsidiaries, and executive board Poland, having graduated from the employment. He is chairman of member before the company Jagiellonian University in Cracow, Alkane Energy plc and Canadian was privatised. For 15 years until and subsequently attended North Sea Energy Limited as well 2010, he was head of business Harvard Business School and as being a non-executive director development, including during the DePaul University in Chicago. He of Neon Energy Limited. company’s most rapid period of began his career as a lawyer with growth. Prior to joining Perenco, Mr Hogan & Hartson working in their Lyndon Powell Spink held positions in exploration office in Warsaw and also practised Independent and operations departments of a with Feuguer et Associés in Paris. Non-Executive Director number of E&P companies. He has In 1997 Mr Paczek joined ERA GSM, Mr Powell (age 60) was appointed a degree in Environmental Sciences the Polish mobile telephone as a Non-Executive Director of the from the University of Lancaster operator, as a Deputy General Company in November 2008. He and currently runs a consulting Director. For the last 10 years, serves as Chairman of the HSE business providing upstream Mr Paczek has worked with the Committee and is a member of the investment advice to a number Kulczyk Group, the largest private Remuneration Committee. of clients. equity fund in Poland, where he was involved in various Mr Powell retired from a career in Rajan Tandon transactions in Eastern Europe, the Royal Military Police and Non-Executive Director in particular in the telecom, Special Forces in 2006. During his Mr Tandon (age 48) was appointed electricity and insurance sectors, time with HM Forces, he served in as a Shareholder Representative and represented the Kulczyk Group diverse locations throughout the Non-Executive Director in on the Board of the Company world on a variety of appointments, September 2009. prior to Admission. Since 2006, gaining a wide spectrum of Mr Paczek has lived in London, experience in operational and Mr Tandon is Vice President-in- developing a portfolio of oil, gas strategic security management Charge of Finance and Accounts at and mineral investments. including work with the Foreign & Mittal Investments and has over Commonwealth Office to provide 25 years of industrial experience. protection for HM Ambassadors Prior to this he was Director-in- and commanding four major units. Charge of Finance and Accounts at Mr Powell was Chief of Special Mittal Steel. He has been a leading 30 Ophir Energy plc Annual Report 2011

Board of Directors continued

Directors & Alternate Directors who resigned during the Year

Date of appointment Position (if during the year) Date of resignation Executive Directors B. Yvonne Holm Chief Financial Officer 26 May 2011 2 December 2011

Non-Executive Directors Arun Balakrishnan Non-Executive Director 18 February 2011 7 July 2011 Harak Banthia Non-Executive Director 18 February 2011 Michael Cohen Non-Executive Director 7 July 2011 John Morgan Independent 7 July 2011 2 December 2011 Non-Executive Director Jaroslaw Paczek Non-Executive Director 7 July 2011 Mikki Xayiya Non-Executive Director 7 July 2011 Stefan Krieglstein Alternate to 10 March 2011 7 July 2011 Jaroslaw Paczek Jacob Ulrich Alternate to 7 July 2011 Mikki Xayiya & Michael Cohen

Corporate Directory

Directors Company Secretary Bankers 464 Hay Street Non Executive Chairman Prism Cosec Limited England Subiaco WA 6008 Nicholas Smith 10 Margaret Street HSBC Bank plc PO Box 463 London W1W 8RL 70 Pall Mall West Perth WA 6872 Executive Directors United Kingdom London SW1 5EY Australia Dr. Nicholas Cooper – United Kingdom Tel: +61 (0)8 9212 9600 Chief Executive Officer Registered Office Fax: +61 (0)8 9212 9699 Dr. Alan Stein – 55 Grosvenor Street Standard Bank Plc Executive Deputy London W1K 3HY 25 Dowgate Hill Plot 1228, Block 2, Chairman and Founder United Kingdom London EC4R 2SB Masaki Street Jonathan Taylor – United Kingdom Msasani Peninsula Executive Director Auditors PO Box 23184 and Founder Ernst & Young LLP Australia Dar es Salaam 1 More London Place HSBC Bank Australia United Republic of Independent London SE1 2AF Limited Tanzania Non Executive Directors United Kingdom 188–190 St George’s Tel: +255 (0)22 221 5500 John Lander Terrace Fax: +255 (0)22 221 5599 Dennis McShane Solicitors Perth WA 6000 Lyndon Powell Linklaters Australia APDO 274 Ron Blakely One Silk Street Ophir House Patrick Spink London EC2Y 8HQ Ophir Offices Km 5, Carretera United Kingdom 55 Grosvenor Street Aeropuerto Non Executive Directors London W1K 3HY Malabo Rajan Tandon United Kingdom Equatorial Guinea Jaroslaw Paczek Tel: +44 (0)20 7290 5800 Tel: +240 333 09 84 74 (alternate) Fax: +44 (0)20 7290 5821 Fax: +240 333 09 86 26 www.ophir-energy.com [email protected] 31 Ophir Energy plc Annual Report 2011

Directors’ Report

The Directors present their report for the year ended The Directors did not declare any interim dividend during 31 December 2011. the year and do not recommend a final dividend for the year ended 31 December 2011. The Directors do BUSINESS REVIEW Principal Activities and Business Review not anticipate that the Company will pay dividends in Ophir is an independent oil and gas exploration business the near future. The Directors envisage that, as the with a focus on Africa. The principal activities of Ophir Company advances the development of its operations, are currently the exploration for oil and gas, predominantly a dividend policy will be determined based on, and in deepwater acreage in eight jurisdictions in East and dependent on, the results of the Company’s operations, West Africa. Ophir Energy plc is the Parent Company of financial condition, cash requirements, prospects, the Group and is incorporated in the United Kingdom. profits available for distribution and other factors Ophir’s headquarters are located in London with deemed to be relevant at the time. operational offices in Perth (Australia), Dar es Salaam (Tanzania) and Malabo (Equatorial Guinea). Share Capital and Treasury Shares The called-up share capital of the Company, together Through this Annual Report, including the Chairman’s with details of shares allotted during the year, is shown and Chief Executive Officer’s Review, the Review of in Note 20 to the Group financial statements. The Operations, the Financial Review, the Corporate Social Company does not hold any shares in treasury. GOVERNANCE Responsibility Report and the Principal Risks and Uncertainties Report (together pages 2 to 27) and the At a general meeting held in June 2011, the Directors Corporate Governance and Remuneration Reports on were given authority by shareholders to purchase just pages 35 to 52, the Board seeks to present a balanced over 30 million of its own ordinary shares, representing and clear assessment of the Company’s activities, approximately 9.4% of its issued share capital as at position and prospects. Each of these sections is 13 July 2011. However the Board did not subsequently incorporated by reference into this Directors’ Report. seek to undertake a buyback programme during the year ended 31 December 2011. The Board intends to The Principal Risks and Uncertainties Report on pages 26 seek renewal of this authority at the 2012 AGM and to 27 sets out the key risks and uncertainties facing the while they have no current intention of exercising the FINANCIAL STATEMENTS Group, including those relating to financial risk authority, will keep the matter under review taking management and financial instruments. into account other investment opportunities.

Directors Shareholders’ Rights The names and biographical details of the Directors of The following section summarises the rights and the Company during the year ended 31 December 2011 obligations in the Company’s Articles of Association and any changes since the end of the financial year are (the “Articles”) relating to the ordinary shares of the set out on pages 28 to 30. Company. The full Articles can be found on the Company’s website (www.ophir-energy.com). The remuneration of the Directors for the year ended 31 December 2011 is set out in the Remuneration Voting: At a general meeting, subject to any special Report on pages 45 to 52, and summarised in Note 6 to rights or restrictions attached to any class of shares: the financial statements. The interests of the Directors (a) on a show of hands, every member present in person and their connected persons in the shares of the and every duly appointed proxy present shall have one Company, along with details of any share awards, vote; (b) on a show of hands, a proxy has one vote for are contained in pages 51 to 52 of the Remuneration and one vote against the resolution if the proxy has been Report. No Director had a material interest in any duly appointed by more than one member entitled significant contract with the Company or any of its to vote on the resolution and the proxy has been so subsidiaries during the year. instructed; and (c) on a poll, every member present in person or by proxy has one vote for every share held The Company has granted indemnities in favour of its by him. Unless the Directors resolve otherwise, no Directors against personal financial exposure that they member shall be entitled to vote either personally or may incur in the course of their professional duties by proxy or to exercise any other right in relation to as Directors of the Company and/or subsidiaries (as general meetings if any call or other sum due from him applicable). These indemnities, which were granted to the Company in respect of that share remains unpaid. on appointment, are qualifying third party indemnity provisions for the purposes of the Companies Act 2006. Transfer of shares: Transfers of certificated shares must be effected in writing, and signed by or on behalf of the Results and Dividend Policy transferor and, except in the case of fully paid shares, by The Company’s results for the financial year are shown or on behalf of the transferee. The transferor shall remain in the consolidated financial statement on page 56. the holder of the shares concerned until the name of the transferee is entered in the register of members in respect 32 Ophir Energy plc Annual Report 2011

Directors’ Report continued

of those shares. The Directors may decline to register any Borrowing powers: The Board may exercise all the transfer of a certificated share, unless (a) the instrument powers of the Company to borrow money, to guarantee, of transfer is in respect of only one class of share, (b) the to indemnify, to mortgage or charge its undertaking, instrument of transfer is lodged at the transfer office, property, assets (present and future) and uncalled duly stamped if required, accompanied by the relevant capital, and to issue debentures and other securities share certificate(s) or other evidence reasonably whether outright or as collateral security for any debt, required by the Directors to show the transferor’s right liability or obligation of the Company or of any third party. to make the transfer or, if the instrument of transfer is executed by some other person on the transferor’s Company’s shareholders behalf, the authority of that person to do so, and (c) As at 19 April 2012 the Company had been notified of the certificated share is fully paid up. The Directors the following substantial holdings of voting rights in may refuse to register an allotment or transfer of the issued share capital of the Company in accordance shares in favour of more than four persons jointly. with the Disclosure and Transparency Rules, or other information: Directors’ powers: The Directors shall manage the business and affairs of the Company and may exercise No. of all powers of the Company other than those that are Ordinary required by the Act or by the Articles to be exercised Name Shares held % Holding by the Company at the general meeting. The Directors Capital Research may delegate any of their powers or discretions, including and Management those involving the payment of remuneration or the Company Holdings 46,192,788 11.65 conferring of any other benefit to the Directors, to Mittal Investments S.a.r.l. 41,163,790 10.36 such person or committee and in such manner as they Kulczyk Group 40,433,833 10.17 think fit. Any such person or committee shall, unless the Directors otherwise resolve, have the power to Och Ziff 36,114,367 9.09 sub-delegate any of the powers or discretions Fidelity 26,565,741 6.68 delegated to them. Annual General Meeting Dividends: The Company may, by ordinary resolution, The Company’s first AGM as a listed public company will declare final dividends to be paid to its shareholders. be held at 2.30 pm on Tuesday 19 June 2012 at the However, no dividend shall be declared unless it has offices of Linklaters LLP, One Silk Street, London, EC2Y been recommended by the Directors and does not 8HQ. Details of the resolutions which will be proposed exceed the amount recommended by the Directors. at the AGM will be set out in the Notice of Meeting. If the Directors believe that the profits of the Company justify such payment, they may pay dividends on any Auditor class of share where the dividend is payable on fixed The Company’s external auditor, Ernst & Young LLP, dates. They may also pay interim dividends on shares had indicated its willingness to continue in office. of any class in amounts and on dates and periods as Resolutions to reappoint Ernst & Young LLP as the they think fit. Unless the share rights otherwise provide, Company’s external auditor and to authorise the all dividends shall be declared and paid according to Directors to set the auditor’s remuneration will the amounts paid up on the shares on which the dividend therefore be proposed at the forthcoming AGM. is paid, and apportioned and paid pro rata according to the amounts paid on the shares during any portion or So far as the Directors are aware, there is no relevant portions of the period in respect of which the dividend audit information (as defined in Section 418(3) of the is paid. Any unclaimed dividends may be invested or 2006 Act) of which the auditors are unaware and the otherwise applied for the benefit of the Company until Directors have taken all the steps that they ought to they are claimed. Any dividend unclaimed for 12 years have taken as Directors in order to make themselves from the date on which it was declared or became due aware of any relevant audit information and to establish for payment shall be forfeited and shall revert to the that the Companys’ auditors are aware of that information. Company. The Directors may, if authorised by ordinary resolution, offer to ordinary shareholders the right to Business Conduct and Ethics elect to receive, in lieu of a dividend, an allotment of The Company is committed to sound business conduct new ordinary shares credited as fully paid. in its relationships with stakeholders (shareholders, employees, customers, business partners and suppliers), governments and regulators, communities and the environment. The Group seeks to conduct its operations with honesty, integrity and openness, and with respect for the human rights and interests of our employees. 33 Ophir Energy plc Annual Report 2011

During the year, the Directors undertook a thorough Significant Relationships review of the Group’s anti-bribery policy and the resulting Shareholders: The Board is in regular communication updated policy and procedures have been disseminated with shareholders and institutional investors, and gives BUSINESS REVIEW to all employees and other key stakeholders. general presentations to analysts at various times throughout the year. Charitable and political donations The Group did not make any charitable donations during Press releases have been issued throughout the year and the year (2010: Nil), however as part of its commitments the Company maintains a website (www.ophir-energy. to the various countries where Ophir operates, it com) on which all press releases are posted and which participates in social and community-related as well also contains major corporate presentations and the as economic programmes. Further information on reports and accounts. Shareholders and other interested these activities is set out on pages 22 to 25. parties can subscribe to receive news updates by email by registering online on the website. The Company does not make political donations and has no intention of making donations to what are generally Shareholders are also encouraged to attend the Annual regarded as political parties, either within the European General Meeting (AGM) to discuss the progress of the Union or worldwide. As a precautionary measure and in Group and are encouraged to make their views known GOVERNANCE the light of the wide definitions of European Union to us and to raise directly any matters of concern. In political organisations for the purposes of the 2006 Act, addition, the Company employs an investor relations a resolution permitting the Company to make political manager to ensure the investor relations programme is donations and incur political expenditure will be in place for the Company. This ensures the Company proposed at the 2012 AGM. has the ability to meet major shareholders and analysts.

Environmental Matters The Company held a capital markets day on 19 October The Board believe that good environmental practices 2011, where Executive Directors and senior management support the Board’s strategy by enhancing the reputation from both London and Perth presented the Company’s of the Group. Details of the ways in which the Company Operations and Strategy. The presentation was FINANCIAL STATEMENTS controls, reviews and mitigates environmental risks subsequently posted to the website mentioned above. are given in the HSE Report on page 22. Employees: Other than shareholders, the Group’s Supplier payment policy performance and value are influenced primarily through The Company’s policy, which is also applied by the our employees and key stakeholders. The Group’s Group, is to settle terms of payment with suppliers when approach is to maintain the principles of honesty and agreeing the terms of each transaction, to ensure that the integrity and open and clear communication. supplier is aware of the terms and to abide by the terms of the payment. At 31 December 2011, the Group had an Regulatory Authorities: Ophir’s assets are subject to average of 29 days’ purchases outstanding in creditors government licences in the territories within which (2010: 32 days). Ophir operates. Compliance with licence terms and conditions is taken seriously and monitored carefully. Employees The Company has a policy of actively communicating Contractors: Contractors are key to the successful with employees in many ways, including regular briefings implementation of Ophir’s strategy, particularly those on financial performance. Communication is seen as a involved in drilling campaigns and associated way to encourage employee involvement at all levels activities. The focus on relationships with contractors of the Group. in 2011 has been to ensure that there is full compliance with Ophir’s ethical standards and procedures and The Group has a diverse workforce comprising both local robust processes for monitoring performance. employees and expatriates at all sites. The Group is an equal opportunities employer and where existing Change of control employees become disabled, it is the Company’s policy The Group has entered into a number of commercial to provide continuing employment under similar terms contracts which might take effect, alter or terminate on and conditions, wherever practicable, and to provide a change of control of the Company. However, none of training and career development. these is considered to be significant in terms of their likely impact on the business of the Group as a whole. As at 31 December 2011, the Group employed 42 people (2010: 44 people). 34 Ophir Energy plc Annual Report 2011

Directors’ Report continued

Details of change of control clauses contained in the Post Balance Sheet Events contracts of employment of the Executive Directors A summary of the key Post Balance Sheet Events is set are set out on page 48 of the Directors’ Remuneration out in Note 29 to the financial statements. Report. Certain members of the Group’s Senior Management team have agreements providing for By order of the Board compensation for loss of office or employment that occurs because of a change of control. Dr Nicholas Cooper Chief Executive Officer All of the Company’s share incentive plans contain provisions relating to a change of control and details of Ophir Energy plc these plans are provided in the Directors’ Remuneration Company No. 5047425 Report on pages 46 to 47. Generally, outstanding 55 Grosvenor Street awards under the Foundation Incentive Plan and the London W1K 3HY 2006 Plan will vest in full and become exercisable on a change of control. The Remuneration Committee may allow outstanding awards under the Long-term Incentive Plan (“LTIP”) to vest to the extent that any performance condition is satisfied at the date of that event and, unless the Remuneration Committee decides otherwise, such level of vesting to be reduced to take account of the fact that the award is vesting early. LTIP awards may instead be exchanged for equivalent awards over shares in the acquiring company.

Going Concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review on pages 2 to 27. The financial position of the Group, consisting of cash resources of US$396.6 million, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 20 to 21. In addition, Note 27 to the financial statements include the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

In making their going concern assessment, the Directors have considered Group budgets and cash flow forecasts for a period of at least the next 12 months. Following the successful capital raising in April 2012 the Group has increased its cash resources available to complete its planned exploration programmes. As a consequence, the Directors believe that the Group is now well placed to meet its exploration and appraisal expenditure commitments for at least the next 12 months.

As a result of this review the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 35 Ophir Energy plc Annual Report 2011

Corporate Governance Report

Compliance with the UK Corporate Governance Code –– reviewing financial performance; On 13 July 2011 the Company was admitted to the –– approving material acquisitions, disposals, premium segment of the UK Listing Authority’s Official contracts and expenditure; BUSINESS REVIEW List and to trading on the main market of the London Stock –– appointments to the Board and senior management Exchange. As a premium listed entity, the Company is appointments, Committee membership and required to either comply with the UK Corporate remuneration for Directors and senior executives; Governance Code (a copy of which may be found on the –– ensuring the effectiveness of the Company’s system website of the Financial Reporting Council at www.frc.co.uk) of internal controls including managing risks; or to explain any reason for non-compliance. –– approval of health, safety, environmental and other relevant policies; and The UK Corporate Governance Code (the “Code”) consists –– setting the Company’s values and standards and of main and supporting principles and provisions in five ensuring good corporate governance practices. areas: Leadership, Effectiveness, Accountability, Remuneration and Relations with Shareholders, which Board composition and independence companies should apply and report to their shareholders As at 31 December 2011, the Board of Directors of the on how they have done so. Company (the “Board”) comprised the Chairman, three Executive Directors and six Non-Executive Directors. GOVERNANCE During the year ended 31 December 2011, the Company All of the Executive Directors and a majority of Non- has complied with all the provisions of the Code with the Executive Directors have extensive experience within exception of the requirement to undertake a formal and the oil and gas industry. rigorous annual evaluation of its own performance and that of its Committees and individual Directors (Code During the period leading up to the Company’s Principle B.6). admission to trading on the London Stock Exchange, the Directors considered the most appropriate In view of the fact that the new Board has only been in ongoing structure that would facilitate a smooth place since July 2011, the Directors are of the opinion transition to full public ownership from the more that it would be of greater benefit for the first formal entrepreneurial pre-IPO structure. FINANCIAL STATEMENTS evaluation to be undertaken during the Company’s first full year as a listed entity. It is therefore proposed that The Board considered a phased succession planning an evaluation be undertaken during the second half of process in relation to the Company’s senior executives 2012 and details of the process undertaken, and any and appointed Dr Nicholas Cooper as Managing outcomes reached, will be included in the Annual Report Director in June 2011. Following this appointment Dr and accounts for the year ended 31 December 2012. Alan Stein, the previous Managing Director, stepped up to the role of Executive Deputy Chairman as part of a The purpose of this Corporate Governance Report, planned withdrawal from day-to-day management of together with the Directors’ Report on pages 31 to 34 the Group. In December 2011, Dr Cooper was formally and the Remuneration Report on pages 45 to 52, is to appointed as the Group’s Chief Executive Officer and provide shareholders with details of the Company’s Dr Stein notified the Board that, while he would governance policies, processes and structures and to continue to make himself available for advice and explain how compliance with the main principles of guidance, he would not be seeking re-election at the the Code has been achieved. Company’s AGM in 2012.

Role of the Board The Board also acknowledged the need to strengthen The role of the Board is to lead the Company and, either the Company’s finance function in the short-term prior directly or through the operation of its Committees and to, and for the purposes of, the IPO. Ms Yvonne Holm was delegated authority, bring an independent judgement appointed as Chief Financial Officer in February 2011 on all matters of strategy, performance, resources and stepped down from the Board in December 2011. (including key appointments) and standards of conduct. The Board considered the Company’s requirements The Board is responsible for the strategic aims of the in relation to the roles and responsibilities of its Company, which are then implemented through the Non-Executive Directors. As a consequence of these approval and regular monitoring of performance against deliberations, the Board accepted the recommendations the budget prepared by the Executive Directors. The of the Nomination Committee to appoint additional Board has adopted a formal schedule of matters independent Non-Executive Directors and to accept reserved for its approval. Reserved matters include the resignation of a number of its shareholder Directors –– setting the Company’s strategy and objectives; in July 2011, prior to IPO. –– approving annual budgets and operating plans, annual and half year reports and interim The Board considers that the majority of its Non-Executive management statements; Directors, namely Nicholas Smith, Ronald Blakely, John 36 Ophir Energy plc Annual Report 2011

Corporate Governance Report continued

Lander, Dennis McShane, Lyndon Powell and Patrick However, in line with the provision of the Code which Spink, are independent in character and judgement and states that all directors of FTSE 350 companies should free from relationships or circumstances that might be subject to annual re-election by shareholders, and affect their judgement. The Board has considered the noting the above, the Board has agreed that all cross-directorship Mr Lander has with Dr Stein in Neon continuing Directors will offer themselves for annual Energy Limited, and has satisfied itself that this is an re-election with effect from the 2012 AGM. immaterial relationship that does not impact on Mr Lander’s independence. Dr Stein has informed the Board that he will not stand for re-election at the 2012 AGM. Dr Stein has Rajan Tandon is not considered to be independent. Mr confirmed that he will be available to continue his Tandon is an employee of Mittal Investments Sarl (“Mittal”), support for the Company in a consulting capacity after a major shareholder, and was appointed to the Board as he has formally stepped down from the Board. Mittal’s representative under the terms of the Relationship Agreement between Mittal and the Company. Mr Tandon External directorships has appointed Jaroslaw Paczek as his alternate. Mr The Company had adopted a policy which would Paczek is an employee of the Kulczyk Group, another enable its Executive Directors to accept directorship of major shareholder, and he is therefore also not other quoted companies provided that they have considered to be independent. obtained the prior permission of the Chairman. An Executive Director will not however be permitted to Non-Executive Directors are appointed for an initial take on more than one non-executive directorship in a three year term, with the expectation that a further term FTSE 100 company nor the chairmanship of such a will follow, subject to review by the Board. The terms company. During the year ended 31 December 2011, and conditions of appointment of the Non‑Executive no Executive Director held directorships in any other Directors, including the expected time commitment, are London quoted company. available for inspection at the registered office during normal business hours and at for at least 15 minutes Meetings and Attendance prior to and following the Company’s AGM. The Board met in formal meetings on 14 occasions during 2011 including meetings to consider the Re-election strategic direction of the business. Details of the The Company’s Articles of Association require all attendance at Board meetings by all Directors who Directors to be subject to election by shareholders at served during the year ended 31 December 2011, and the first AGM following their appointment and for serving up to the date of the signing of this report, re-election by shareholders at least every three years. are shown in the table below:

Appointment Date Resignation Date (if during the year) (if relevant) Board Meetings Current Directors Nicholas Smith, Chairman – 14/14 Alan Stein, Executive Deputy Chairman & Founder Director – 11/14 Nicholas Cooper, Chief Executive Officer 1 June 2011 9/9 Jonathon Taylor, Executive Director & Founder Director – 14/14 Ron Blakely, Non-Executive Director 7 July 2011 5/7 John Lander, Non-Executive Director – 12/14 Dennis McShane, Non-Executive Director – 13/14 Lyndon Powell, Non-Executive Director – 14/14 Patrick Spink, Non-Executive Director 7 July 2011 6/7 Rajan Tandon, Non-Executive Director* – 14/14 37 Ophir Energy plc Annual Report 2011

Appointment Date Resignation Date (if during the year) (if relevant) Board Meetings BUSINESS REVIEW Former Directors B Yvonne Holm, Chief Financial Officer 24 May 2011 2 December 2011 7/10 Arun Balakrishnan, Non-Executive Director 18 February 2011 7 July 2011 4/8 Harak Chand Banthia, Non-Executive Director – 18 February 2011 1/1 Michael Cohen, Non-Executive Director – 7 July 2011 7/8 John Morgan, Non-Executive Director 7 July 2011 2 December 2011 6/7 Jaroslaw Paczek, Non-Executive Director 1 – 7 July 2011 8/8 Mikki Xayiya, Non-Executive Director – 7 July 2011 2/8 Stefan Krieglstein, Non-Executive Director 2 10 March 2011 7 July 2011 n/a Jacob Ulrich, Non-Executive Director 3 – 7 July 2011 6/8

1 Appointed as continuing Alternate Director to Rajan Tandon 7 July 2011. Following his appointment as an alternate, Jaroslaw Paczek has an invitation to attend all meetings as an observer. GOVERNANCE 2 Alternate Director to Jaroslaw Paczek with effect from 10 March 2011 and attended all meetings as an observer. 3 Alternate Director to Mikki Xayiya and Michael Cohen.

Detailed biographies of the current Directors together with details of their Committee membership are shown on pages 28 to 29.

Roles and Responsibilities Senior Independent Director There is a clear division of responsibility between the The Board has appointed Mr McShane as the Senior Chairman and the Chief Executive. The Chairman’s key Independent Director. Mr McShane is charged with responsibilities are the effective running of the Board, maintaining a communication channel between the FINANCIAL STATEMENTS ensuring that the Board plays a full and constructive Chairman and the Non-Executive Directors and for part in the development and determination of the leading the Non-Executive Directors in reviewing the Company’s strategy, and acting as guardian of the Board’s performance of the Chairman. In addition, Mr McShane decision-making process. The key responsibilities of the is the contact point for shareholders who have Chief Executive are managing the day-to-day business concerns that have not, or cannot, be resolved through of the Company, proposing and developing strategy the normal channels of the Chairman or the Chief and overall commercial objectives in consultation with Executive or where such contact is inappropriate. the Board and, as leader of a strong and experienced executive team, implementing the decisions of the Non-executive Directors Board and its Committees. The Non-Executive Directors bring a broad range of business skills and experience to the Company, For the period from 1 January to 31 May 2011, providing an independent view on matters of strategy, responsibility for the day-to-day management of the performance, risk and conduct through their Company was delegated to Dr Stein. Following his contribution at Board and Committee meetings. appointment as Managing Director on 1 June 2011, A summary of each Non-Executive Director’s and subsequent confirmation as Chief Executive experience and how that experience is relevant to Officer in December, Dr Cooper assumed responsibility their roles on the Board of the Company is given in the for the day-to-day management of the business. following table: 38 Ophir Energy plc Annual Report 2011

Corporate Governance Report continued

Director Key biographical details Experience relevant to Board responsibilities board involvement

Nicholas Smith Qualified accountant – –– Accountancy –– Chairman of the Board training with Ernst & Young. –– UK capital markets –– Member of Nomination Investment banker. –– Financial experience and Remuneration Holds Far Eastern NED roles. Committees –– Member of Audit Committee (to 7 July 2011)

Ronald Blakely Management Accountant. –– Recent and relevant –– Chairman of the Executive Finance roles financial experience Audit Committee with Royal Dutch Shell. in major oil and gas NED of Canadian company resource company.

John Lander Geophysicist. –– Extensive FTSE 250 oil & –– Chairman of Boardroom roles in major gas company experience Remuneration oil & gas companies. –– HSE experience from Committee Chairman & NED of former operational roles –– Member of the Audit, resource companies. Nomination and HSE Committees

Dennis McShane Investment banker. –– Recent and relevant –– Senior Independent Senior Executive of iron corporate finance and Director ore resource company. banking experience –– Chairman of the International experience. –– Insight into emerging Nomination Committee markets & mining –– Remuneration and Audit practices Committee member (Chairman of the latter to 18 August 2011)

Lyndon Powell Career in Royal Military –– Operational and strategic –– Chairman of the Police and Special Forces. security advice HSE Committee Worked with Foreign & –– International experience –– Member of the Commonwealth Office. including advisory roles Remuneration Former advisor to Sierra in Africa Committee Leone Armed Forces. Independent security advisor to corporate sector.

Patrick Spink Environmental Scientist. –– Extensive industry –– Member of the Exploration and operational knowledge Operational HSE Committee experience in oil & gas environmental, health & companies. safety experience Upstream investment –– Knowledge of Africa and consultant. exploration

Rajan Tandon Chartered Accountant. –– Insight into views of Extensive experience major shareholders within multi-national –– General financial and resource group. accounting experience including internal audit scope 39 Ophir Energy plc Annual Report 2011

Board process, induction and training Board Performance Evaluation The Board and its Committees are provided with full and In preparation for the Initial Public Offering of the timely information prior to meetings, including detailed Company’s shares in July 2011, the Board undertook BUSINESS REVIEW financial information. The Chief Executive, in consultation a review of its membership and that of its principal with the Company Secretary, sets the agenda for Board Committees as well as a review of the terms of reference meetings, which is reviewed by the Chairman prior to of each of those Committees. Following this review and dissemination to all Board members. Formal minutes the appointment of further independent Non-executive are prepared to record all decisions made at Board and Directors, a majority of the shareholder appointed Committee meetings. Minutes of Board meetings are Directors elected to stand down immediately prior circulated to each Director as soon as practicable after to the IPO. the conclusion of the meeting, prior to their formal acceptance at the next full meeting of the Board. Minutes In view of the changes to Board and Committee of Committee meetings are reviewed and approved by membership during the year, the Directors have agreed its members and circulated to other Board members as not to undertake an evaluation of their performance for and if appropriate. If a Director objects to a particular the period. The first formal evaluation will therefore proposal, this will be recorded in the minutes of the take place during the second half of 2012 and details relevant meeting. During the year ended 31 December of the process undertaken and outcomes reached will GOVERNANCE 2011 there were no such objections. be set out in the 2012 Annual Report.

The Chairman is responsible for ensuring that an Conflicts of Interest appropriate induction is given to new Board members. Every Director has a duty to avoid a conflict between The induction programme includes training on the their personal interests and those of the Company. business and strategy of the Company, copies of The provisions of Section 175 of the Companies Act 2006 Board policies and procedures, meetings with senior and the Company’s articles of association permit the management and site visits, where appropriate. The Board to authorise situations identified by a Director intention for ongoing training is to ensure that Directors in which he or she has, or may have, a direct or indirect receive sufficient information, both verbally and in interest that conflicts, or may conflict, with the interests FINANCIAL STATEMENTS written form, to enable them to fully perform their roles of the Company. Accordingly, each Director, including on the Board and its Committees. During the Strategy Mr Paczek as alternate for Mr Tandon, has disclosed Day in October, the Board received briefings on the Oil their respective outside positions and interests in and Gas sector of the FTSE as well as the Liquid Natural arrangements with third parties in the form of lists Gas sector in Africa. There have also been specific (the “Directors’ Lists”). The Directors’ Lists were briefings on the duties of public company directors and considered in detail during the Company’s first Board the 2010 Bribery Act. meeting after Admission when all positions and interests disclosed were authorised. An annual review All Directors have access to the advice of the Company of the Directors’ Lists and situational conflicts will be Secretary and the Board has established a procedure undertaken each calendar year. whereby any Director, may take independent professional advice on any matter in the furtherance Each Director has undertaken to advise the Board if there of their duties, at the Company’s expense. are any material changes to their positions or interests and will not participate in any formal Board discussion The Directors and officers of the Company have the or decisions relating to any matter in which they have benefit of Directors’ & Officers’ insurance, the level of or may have a conflict of interests. which is reviewed annually. In addition, Directors and officers have received an indemnity from the Company Committees of the Board against (a) any liability incurred by or attaching to the The Board has delegated certain responsibilities to Director or officer in connection with any negligence, Committees in line with the provisions of the Code and default, breach of duty or breach of trust by them in to facilitate the business of the Company. These standing relation to the Company or any associated company; and Committees are the Audit, HSE, Nomination and (b) any other liability incurred by or attaching to the Remuneration Committees. Director or officer in the actual or purported execution and/or discharge of his duties and/or the exercise or purported exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office other than certain excluded liabilities including to the extent that such an indemnity is not permitted by law. 40 Ophir Energy plc Annual Report 2011

Corporate Governance Report continued

Report of the Audit Committee –– keeping under review the effectiveness of the Membership, Meetings and Attendance Company’s internal financial controls and internal Members of the Audit Committee are appointed by the control and risk management systems together with Board and all of its members are considered to be reviewing and approving statements to be included independent. The Audit Committee meets at least four in any public document concerning internal controls times each year and otherwise as required. During the and risk management; year ended 31 December 2011 the Audit Committee –– reviewing the adequacy and security of the Company’s met eight times. During the year ended 31 December procedures and arrangements for detecting fraud, 2011, the members of the Audit Committee, and their bribery and money laundering and ensuring that individual attendance at meetings, were as follows: employees and contractors are able to raise concerns, in confidence, about possible wrongdoing in financial Meeting reporting or other matters; Committee Members attendance –– monitoring and reviewing the effectiveness of the Dennis McShane (Committee Chairman Company’s internal audit processes in the context to 18 August 2011) 8/8 of the Company’s overall risk management system; –– considering and making recommendations to the Ron Blakely (appointed 7 July, Committee Board, to be put to shareholders for approval at the Chairman from 19 August 2011) 2/2 AGM, in relation to the appointment, re-appointment John Lander 7/8 and removal of the Company’s external auditor, their Nicholas Smith (until 7 July 2011) 6/6 terms of appointment and remuneration and assessing annually their independence and objectivity; and The Chairman of the Board, Mr Smith, was a member of –– developing and implementing a policy on the supply the Audit Committee prior to the Company’s admission of non-audit services by the external auditor. to the premium segment of the Official List of the Financial Services Authority and to trading on the main Financial Reporting market of the London Stock Exchange. During the year ended 31 December 2011, the Audit Committee reviewed and approved for consideration The Board considers that both Mr McShane and Mr by the Board the financial results for the year ended 31 Blakely have recent and relevant financial experience December 2010 together with the results for the half and competence in accounting as required by section -year to 30 June 2011. The Audit Committee C.3.1 of the Code and section 7.1.1 of the Disclosure & considered the appropriateness of preparing accounts Transparency Rules respectively. on a going concern basis, including reviewing cash forecasts and options for obtaining additional funding. Members of the Group’s Senior Management, including This has been a particular area of scrutiny and review the Chief Financial Officer and the Group Financial for the Audit Committee given that the Company is an Controller, may be invited to attend all or part of the exploration rather than producing entity. At both full Audit Committee’s meetings as required. The external and half-year, the Audit Committee agreed that the auditors attend meetings on a regular basis, both with Company’s financial position was such that it and without executive management being present. continued to be appropriate for accounts to be prepared on a going concern basis. Role and Responsibilities of the Audit Committee During the year, the Audit Committee undertook a review The Audit Committee also considered the financial of its objectives and terms of reference to ensure that documentation required for the Company’s Initial they were appropriate for a UK listed entity. The Audit Public Offering, including the Long Form Report, Committee’s full terms of reference are available on the Working Capital Report, Financial Reporting Company’s website www.ophir-energy.com but in Procedures Report and the financial statements to summary, following the review, the Audit Committee’s 28 February 2011. main role and responsibilities were confirmed as: –– monitoring the integrity of the financial statements Other matters considered by the Audit Committee of the Company, including its annual and half-yearly during the year include the 2011 half-year and full- reports, interim management statements and any year audit plans; well control insurance cover; other formal announcement relating to its financial Directors’ & Officer’s insurance; and the Group’s risk performance, reviewing significant financial reporting governance framework. issues and judgements which they contain; 41 Ophir Energy plc Annual Report 2011

External Auditor The Group operates a risk management process under Ernst & Young LLP (“EY”) has acted as auditor since which key risks are identified, their likelihood and February 2005. The Board has considered and impact considered and actions taken to manage those BUSINESS REVIEW approved the Committee’s recommendation that risks. The principal risks identified by the Group are EY be reappointed for 2012. This recommendation set out on pages 26 to 27. was based on a review of the 2011 audit and work undertaken in preparation for the Company’s IPO, The Board, supported by the Audit Committee, has both of which demonstrated an overall satisfaction reviewed the effectiveness of the internal control with the performance of EY as the external auditor. systems in operation during the financial year. During The Committee has approved a policy to review the the year, the Audit Committee has considered the key tenure of the external auditor every five years. processes and controls within the business, in particular: –– Procurement and Contracts The Committee has established a policy to maintain the –– Cash and Payments independence of the external auditor and its personnel, –– Payroll governing the provision of audit and non-audit services –– Information Technology provided by the auditor and its associates. The policy –– Health, safety and environment clearly identifies permitted and prohibited services and GOVERNANCE sets out the procedure to be followed for the approval Focus has been placed on developing the Group’s of all audit and non-audit services. All engagements contractor and procurement processes. A Contracts with an expected fee in excess of US$100,000 require Committee has been set up to oversee the procedures the prior approval of the Audit Committee. for procuring major goods and services. In addition, the Company has developed procedures for monitoring During the year ended 31 December 2011 the Audit third party contractors in response to implementation Committee approved fees for audit services of £292,142 of the UK Bribery Act 2010 (the “Act”). together with fees for non-audit work of £1,643,173 The nature of the services provided is set out in Note The Audit Committee has reviewed the internal

4(d) to the consolidated financial statements. There is procedures and concluded that that there are no FINANCIAL STATEMENTS no limitation of liability in the terms of appointment of failings and weaknesses identified as significant EY as auditor to the Company. during this review.

Risk Management and Internal Controls Internal Audit The Board is responsible for the Group’s system of During the year the Audit Committee reviewed the internal control and for reviewing its effectiveness on requirement for the Group to establish an internal audit a continual basis. The Group’s system of internal control function. The Audit Committee was of the opinion, is designed to safeguard the Company’s assets and to supported by the Board, that the current size and scale ensure the reliability of financial information for internal of the Company did not warrant the employment of a and external use. Any system of controls can provide full time internal audit function and that consultants only reasonable, but not absolute, assurance that assets would be utilised, where appropriate, to undertake are safeguarded, transactions authorised and correctly specific internal control reviews. The Audit Committee recorded and that any material errors and irregularities will review this decision at least annually. are detected within a reasonable timeframe. The Group’s internal controls are therefore designed to manage, Anti-Bribery and Whistleblowing rather than eliminate, risk, recognising that not all risks The Audit Committee undertook a thorough review of can be eliminated and the cost of control procedures the Company’s processes and procedures in relation to should not exceed the expected benefits. the Act. Each part of the business provided input on the main ethics and compliance risks they faced which The Audit Committee regularly reviews, on behalf of were then used to update the Group’s Code of Conduct the Board, the effectiveness of the Group’s system of and Anti-corruption Policies. An extensive training internal controls. The review covers financial, operation programme has been undertaken for the Board and all and risk management processes. An organisational employees and consideration given to the monitoring structure has been put in place with clearly defined of training provided by contractors. Contracts have lines of responsibility and delegation of authority. been reviewed to ensure compliance with the Act and Procedures include Board approval for all significant a policy put in place to register all corporate hospitality new projects and senior management review and and charitable donations. approval at appropriate stages of the transaction cycle. There is a comprehensive annual budgeting and planning process with actual results reported to the Board against budgets. 42 Ophir Energy plc Annual Report 2011

Corporate Governance Report continued

The Group is committed to the highest standards of –– review the results of independent audits of the Group’s business conduct and has adopted a Whistleblowing performance in regard to health, safety, social, security Policy as a mechanism to support the achievement of or environmental matters, and to review any strategies this goal. Employees are encouraged to raise genuine and action plans developed by management in concerns which are carefully and thoroughly investigated response to issues raised. to assess what action, if any, should be taken. A report is made to the Audit Committee on matters raised in Activities of the HSE Committee during the year accordance with the Whistleblowing Policy although, The principle issue considered by the HSE Committee during the year to 31 December 2011, no such issues during the year ended 31 December 2011 has been were raised. the review of maritime security in relation to the Group’s operations, particularly off Tanzania and Report of the HSE Committee Senegal. Membership, Meetings and Attendance Members of the HSE Committee are appointed by the A reduction in piracy activity has been seen in Board and a majority of its members are independent Tanzania although support has been provided by the Non-Executive Directors. Colin Ivory, the Company’s Tanzanian Navy for the drilling and seismic study Operations & HSE Manager is invited to attend all surveys undertaken. In contrast, Senegal had meetings of the HSE Committee and external advisors experienced an increase in security issues and the may be invited to attend as necessary. Company had developed a maritime security plan for Senegal in conjunction with Salamanca Risk The HSE Committee meets at least twice each year Management and HASSMAR, the Senegalese and otherwise as required. During the year ended government agency for maritime security and offshore 31 December 2011 the HSE Committee met three times. environmental activities. Details of HSE Committee membership during the year ended 31 December 2011 and their individual The review of maritime security has led, in turn, to attendance at meetings were as follows: consideration by the HSE Committee of the Group’s crisis management and press briefing procedures, Meeting although only minor changes were required. Committee Members attendance Lyndon Powell (Committee Chairman) 3/3 During the year, the HSE Committee has also considered reports on health & safety incidents within John Lander 3/3 the Group, including a particular focus on lost time Patrick Spink (with effect from injuries, and the results of any investigations 7 July 2011) 1/1 undertaken. The HSE Committee also reviewed the Jonathan Taylor 3/3 results of HSE audits undertaken during the year, which led to an update to the Group’s air travel policy, Role and Responsibilities of the HSE Committee and the approval of the 2012 HSE budget for During the year, the HSE Committee reviewed new terms submission to the Board. of reference in line with those for UK listed entities and recommended to the Board that the new terms of Report of the Nomination Committee reference be adopted by the Board. The HSE Committee’s Membership, Meetings and Attendance full terms of reference are available on the Company’s Members of the Nomination Committee are appointed website (www.ophir-energy.com) and its main by the Board and all three of its members are considered responsibilities include to: to be independent. The Nomination Committee meets –– evaluate the effectiveness of the Group’s policies and at least twice each year and otherwise as required. systems for identifying and managing health, safety, During the year ended 31 December 2011 the social, security and environmental risks within the Nomination Committee met eight times. During the Group’s operations and assess the performance of the year ended 31 December 2011 the members of the Group with regard to the impact of its HSE decisions; Nomination Committee, and their attendance at –– receive, on behalf of the Board, reports from meetings, were as follows: management concerning all fatalities and serious accidents within the Group and actions taken by Meeting management as a result; Committee Members attendance –– review external stakeholder reporting concerning health, safety, security, social and environmental Dennis McShane (Committee Chairman) 8/8 performance and issues; and John Lander 8/8 Nicholas Smith 8/8 43 Ophir Energy plc Annual Report 2011

Role and responsibilities of the During its deliberations, the Nomination Committee also Nomination Committee considered whether the new Non-Executive Directors During the year, the Nomination Committee reviewed should be appointed to any Board Committees, and if so BUSINESS REVIEW its terms of reference and recommended to the Board which. Subsequently, the Nomination Committee minor changes in preparation for the Initial Public reviewed the membership of all Board Committees, Offering in July 2011. The Nomination Committee’s full recommending minor changes to allow for a more even terms of reference are available on the Company’s distribution of membership between all independent website (www.ophir-energy.com) and its main Non-Executive Directors. responsibilities include to: –– regularly review the structure, size and composition Diversity and the Davies Report: Women on Boards (including the skills, knowledge, experience and During the second half of the year the Nomination diversity) of the Board and make recommendations Committee considered diversity within the Group, to the Board with regard to any changes; particularly at Board and senior management level, and –– give full consideration to succession planning for it is supportive of the recommendations of the Davies Directors and other senior executives; Report: Women on Boards to increase gender diversity –– ensure that on appointment to the Board, in the Boardroom but not the implementation of quotas. Non-Executive Directors receive a formal letter GOVERNANCE of appointment setting out clearly what is expected The Company welcomes the current emphasis on of them in terms of time commitment, Committee diversity in general. All appointments, whether to the service and involvement outside Board meetings Board, the senior management team or elsewhere in the and review annually the time commitment required business, are made on the basis of merit, irrespective from the Company’s Non-Executive Directors; of any gender, racial or other considerations. The –– review the results of the Board performance evaluation Company is committed to improving diversity at all levels process that relate to the composition of the Board; of the business and recognises the valuable contribution –– review the membership of the Audit and Remuneration a more diverse workforce can make by producing the Committees and any other Board Committees as right mix of skills, experience and knowledge.

appropriate, in consultation with the chairmen of FINANCIAL STATEMENTS those committees; and During its deliberations on Board composition, succession –– consider the reappointment of any Non-Executive planning and diversity, and as an oil and gas exploration Director at the conclusion of their specified term of company with an extensive portfolio of interests in office, giving due regard to their performance and Africa, the Nomination Committee agreed that the ability to continue to contribute to the Board in the consideration of positive racial diversity could be light of the knowledge, skills and experience required. merited in any succession planning or appointment process. The Company is also putting in place a clear Activities of the Nomination Committee during equal opportunities policy which will embrace gender, the year racial and all other types of diversity. During 2011 the Nomination Committee reviewed the roles and responsibilities of Board members prior to The Company intends to develop its aspirations regarding considering candidates for additional appointments. racial, gender and other diversity during the coming By identifying the skills, knowledge and experience months, adopting wide diversity targets in its procedures held by the continuing Board members, the for Board and senior executive appointments. An update Nomination Committee was able to ascertain which on progress will be provided annually. additional skills any new Director should possess to bring the greatest benefit to the Company. Succession Planning During the latter part of the year, the Nomination The Nomination Committee recommended to the Board Committee began its consideration of the Company’s that Dr Nick Cooper be appointed as Chief Executive succession planning methodology for Executive Officer of the Company from 1 June 2011. In addition, Directors and senior management. This will continue the Nomination Committee considered, and made to be a focus for the Nomination Committee during the recommendations to the Board, regarding the early part of 2012 with the expectation that development appointment of Ronald Blakely, John Morgan and plans will be considered by the Board during the Patrick Spink as additional Non-Executive Directors of first quarter for implementation from the second the Company with effect from 7 July 2011. In each case, quarter onwards. the Company appointed international executive search agents to assist with the identification of suitable candidates for the Board vacancies. 44 Ophir Energy plc Annual Report 2011

Corporate Governance Report continued

Directors’ Remuneration Details of Directors’ remuneration during the year and the report of the Remuneration Committee are set out in the Directors’ Remuneration Report on pages 45 to 52.

Shareholder Relations Dr Cooper, Chief Executive Officer, is primarily responsible for investor relations within the Group. Presentations were made to analysts prior to IPO as well as on publication of the Group’s half-year results in August 2011. In addition, a Capital Markets Day was held in London in October 2011 to enhance investor knowledge of the Company and its strategy.

Aside from the above, the Board places a high priority on communication with its major shareholders. Prior to IPO, the Chairman was responsible for maintaining regular contact with representatives of the Company’s substantial shareholders and both he and the Chief Executive Office have continued this engagement through regular dialogue post Admission.

All financial and regulatory announcements, as well as other important business announcements, are published to the Investor Relations section of the Company’s website (www.ophir-energy.com) and stakeholders can subscribe to receive new updates by email by registering online on the website.

The Board also uses the AGM to communicate with private and institutional investors and welcomes their participation. The Board aims to ensure that the entire Board is available at the AGM to answer shareholder questions on the resolutions put to the meeting and the Company’s business (where appropriate). For 2012, the Company will ensure that the Notice of AGM and any related documentation is sent to shareholders at least 20 clear business days before the date of the meeting in accordance with the requirement of the Code.

Other Statutory and Regulatory Information Additional information on substantial shareholdings, voting rights and the appointment and powers of the Company’s Directors, amongst other things, can be found on pages 31 to 32 of the Directors’ Report. 45 Ophir Energy plc Annual Report 2011

Remuneration Report

Introduction Executive Directors may be invited to attend all or part This Remuneration Report has been prepared in of any Remuneration Committee meeting to provide accordance with the requirements of the Companies additional insight on how the Company’s remuneration BUSINESS REVIEW Act 2006 and Schedule 8 of the Large and Medium strategy can be best linked to Ophir’s strategic objectives sized Companies and Groups (Accounts and Reports) while also reflecting general workforce pay and Regulations 2008 (the “Regulations”). It also describes conditions. However, any Executive Director attending the Company’s compliance with the UK Corporate a meeting will abstain from any discussion directly Governance Code in relation to executive remuneration relating to their own remuneration. and takes into account the Association of British Insurers’ Principles of Remuneration. The Remuneration Committee has appointed Aon Hewitt Limited (operating through the brand New Bridge Street) This Remuneration Report is divided into two parts. as independent consultants to provide advice on The first, which is not audited, sets out the role of the remuneration and share incentives for both Executive Remuneration Committee, the Company’s executive Directors and the wider senior executive management reward policy and the link between this policy and the population. Representatives from New Bridge Street business strategy. The second part, which has been may be invited to attend Remuneration Committee audited in accordance with the Regulations, provides meetings and details of their terms of engagement are GOVERNANCE details of Directors’ emoluments, share incentives available on request from the Company Secretary. and other performance-related awards and Neither Aon Hewitt Limited, nor any other part of Aon pension arrangements. Corporation, provide other services to the Company.

This Report will be subject to an advisory vote at the The Remuneration Committee makes recommendations Company’s AGM in 2012. to the Board, within agreed terms of reference, on the framework of executive remuneration and on the Part A: Unaudited Information specific remuneration of the Executive Directors. The Membership, Meetings and Attendance Remuneration Committee monitors remuneration in

The Remuneration Committee is responsible for aggregate across the Group with particular visibility as FINANCIAL STATEMENTS determining the base salaries, bonuses, long-term to the individual remuneration and key performance incentive arrangements and other benefits for indicators for senior executive management. The terms Company’s Executive Directors and for determining of reference for the Remuneration Committee may be specific remuneration packages for senior executive found on the Company’s website www.ophir-energy.com. management. The Remuneration Committee also reviews the remuneration framework for all other Remuneration Policy Group employees. The Company’s remuneration policy seeks to maintain levels of remuneration so as to attract, motivate and Members of the Remuneration Committee are appointed retain executives of the highest calibre who can by the Board and all of its members are considered to contribute their skills, capabilities and experience to be independent. The Remuneration Committee is Ophir’s operations and further development of the required to meet a minimum of twice a year and otherwise business. In a business where investment decisions as required. During the year ended 31 December 2011 have multi-year impacts, the executive remuneration the Remuneration Committee met 14 times reflecting policy is structured so that a significant proportion is the significant number of executive remuneration-related made up of long-term share based incentives. In this issues that the Company was required to address prior way, the interests of Executive Directors and senior to its IPO. Members of the Remuneration Committee executive management are strongly aligned with those during the year ended 31 December 2011, together with of the Company’s shareholders. details of their attendance at meetings, were as follows: The remuneration for Executive Directors is made up Meeting of base salary, benefits (including non-contributory Committee Members attendance health insurance, life assurance), annual bonus, John Lander, Committee Chairman 14/14 long-term incentives and pension contributions. The Remuneration Committee has elected to set the Dennis McShane 13/14 basic level of pay, benefits and pension contributions John Morgan (appointed 7 July 2011, for Executive Directors at or below the average resigned 2 December 2011) 2/4 benchmark industry levels, and to more adequately Lyndon Powell 14/14 reward the Directors if they meet or exceed the targets Nicholas Smith 14/14 set under the variable components of their remuneration packages. 46 Ophir Energy plc Annual Report 2011

Remuneration Report continued

The Remuneration Committee will regularly consider Annual bonus whether the Company’s senior executive remuneration The annual bonus plan is designed to reward above policy and practices reflect Ophir’s risk policies and average performance. The Remuneration Committee systems. The Remuneration Committee is satisfied that reviews the performance targets for the bonus plan the current approach neither encourages nor rewards annually. These are linked to key performance inappropriate risk-taking. indicator (“KPI”) targets and contain a mix of financial, operational and corporate measures based on Base salary strategic targets. The maximum annual bonus payable Executive Directors’ remuneration packages – to Executive Directors in 2011 was 125% of salary. No including base salaries – are reviewed annually with bonus is payable for below target performance. regard to personal performance, Company performance, changes in responsibilities and KPI targets for 2011 were set for the Executive competitive market practices (both in the Oil & Gas Directors in respect of Health & Safety performance: sector and the market more generally). Prior to the year progress towards a liquidity event and an increase in end, the Remuneration Committee considered both the reserves and resources (both firm and provisional). Company’s and the Executive Directors’ performance Following consideration of each Executive Director’s over the year and benchmarking information prepared performance during the year, or part thereof where by New Bridge Street in relation to the remuneration of appropriate, the Remuneration Committee the Executive Directors and agreed that the Executive recommended, and the Board approved, bonus Directors’ base salaries should be increased by 5% payments equivalent to 104.17% of basic salary (which reflects the general increases made to other (being 83.3% of the maximum bonus payable). In members of the senior executive team). recognition of his involvement with the Company prior to his date of joining, it was recommenced that Dr Therefore, with effect from 1 January 2012, the base Cooper’s bonus be paid on the basis of having worked salaries for Executive Directors are Dr Nicholas Cooper for eight months of 2011. – £393,750; Dr Alan Stein – AU$852,390 and Jonathan Taylor – £367,500. In relation to their performance-related annual bonuses for the year ending 31 December 2012, Pension and other benefits Executive Directors will be assessed on Health, Safety Each of the Executive Directors is provided with the & Environmental performance; Leadership; Reserves following benefits: (i) Company pension and Resources (which are to be independently superannuation contributions of the greater of the verified); Finance (which contains a funding aspect); statutory minimum or 11% of basic salary paid into and Portfolio Management. The maximum bonus Mr Taylor’s and Dr Cooper’s personal pension opportunity will be increased to 150% of salary for arrangements, or in respect of Dr Stein into an the Executive Directors. This reflects the moderated applicable superannuation fund (further details of approach the Remuneration Committee takes to the which are set out on page 50); (ii) eligibility to Executive Directors’ fixed remuneration and increases participate in any share option scheme for employees; the proportion of their remuneration that is linked to (iii) permanent health insurance; (iv) private health performance. insurance (including spouse and children); (v) life assurance; (vi) medical evacuation insurance; (vii) in Long-term Incentives respect of Mr Taylor and Dr Cooper, 25 days’ paid Prior to IPO, long-term incentives were provided by the holiday in addition to English bank and other public award of options under the Company’s share option holidays, and in respect of Dr Stein, 25 days’ paid plans. However, it has been agreed that the Company’s holiday in addition to Australian public holidays as 2006 Share Option Plan (“2006 Plan”) will not be used gazetted in Western Australia; and (viii) six consecutive as a principal feature of the Company’s remuneration months’ paid sick leave in any 12 month period. arrangements post-IPO. Notwithstanding this, in order to retain flexibility when considering the remuneration The variable component of remuneration is made arrangements for senior executive management, the up of two elements: an annual bonus plan and Remuneration Committee has elected to retain the long-term incentives. 2006 Plan for use on an exceptional basis only (e.g. to facilitate a recruitment). It is not intended that further awards will be made to the Company’s continuing Executive Directors under the 2006 Plan.

In May 2011 the Company approved a new LTIP under which Conditional Awards/Nominal Cost Options linked to the long-term performance of the Group may be granted. As currently structured, post IPO, the 47 Ophir Energy plc Annual Report 2011

maximum value of shares (calculated using the Furthermore, in light of this exceptional performance, average share price over such period as the the Remuneration Committee has undertaken a review Remuneration Committee considers appropriate) that of long-term incentive provisions so as to ensure it is BUSINESS REVIEW can be granted to any participant is 200% of salary aligned with the interests of the Company’s each year, although awards can be made up to 300% shareholders and its strategic objectives. Proposed of salary in exceptional circumstances. changes to the current LTIP are to be tabled for approval at the forthcoming AGM, further details of Awards made in 2011 vest on a straight line basis which will be set out in the Notice of AGM. relative to the Company’s total shareholder return (“TSR”) performance over a three year period In addition, shareholder approval is being sought at compared to a comparator group set on grant (which the AGM for the establishment of a Deferred Share shall be independently measured). No vesting occurs Plan (“DSP”) and an Employee Benefit Trust (“Trust”). for below median performance. At median, 25% of the All employees of the Company and any of its award vests, with full vesting at the upper quartile. In subsidiaries (including Executive Directors) are eligible addition, the Remuneration Committee may reduce to be awarded options under the DSP, however, there is the number of shares in respect of which an award no current intention to include the Executive Directors would otherwise vest based upon TSR performance if in awards under the DSP. It is intended that the Trust GOVERNANCE it considers that the share price achieved over the will be used to hold ordinary shares in the Company in three year period does not reflect the underlying conjunction with the DSP although it could also be financial performance of the Company and/or if it feels used in conjunction with any other employee share that key operational metrics (such as health, safety and incentive plan. Further details of the DSP and the Trust environmental) have not been met. The comparator will be set out in the Notice of AGM. group used for the 2011 awards was as follows: Details of options or LTIPs held by Executive Directors Tullow Oil Cairn Energy at the date of this report or at any time during the year Essar Energy Premier Oil are shown in the table on page 52. No Executive Directors exercised any share options during the year FINANCIAL STATEMENTS Afren Soco International (2010: Nil) Enquest Heritage Oil Salamander Energy JKX Oil & Gas Performance graph Melrose Resources Gulf Keystone The following graph shows the Company’s TSR Bowleven Rockhopper Exploration performance since trading of the Company’s shares Cove Energy Chariot Oil & Gas began on the London Stock Exchange on 13 July 2011 Ithaca Energy Faroe Petroleum against the comparator group of companies, both UK and internationally quoted oil and gas producers, which Cobald International Energy Kosmos Energy were used as the TSR comparator group for the 2011 The Committee considers that relative TSR LTIP awards. The graph also shows the Company’s TSR performance is an appropriate metric to use for these performance since trading of the Company’s shares awards at the Company’s current state of development. began on the London Stock Exchange on 13 July 2011 As a result, it was used for the LTIP award made in April against the FTSE 250, the broad equity index of which 2012. In light of corporate developments within the Ophir is a constituent. sector, the Remuneration Committee has replaced Cove and Ithaca with Genel Energy plc and Maurel & Total shareholder return 120 Prom. The Remuneration Committee was also of the Ophir view that it was appropriate to grant awards in excess of the normal 200% of salary LTIP limited to certain key executives (including Dr Cooper, who received an 100 award over shares worth 300% of salary based on the FTSE 250 three month weighted average share price prior to Value (£) LTIP TSR Comparator grant) to reflect the Company’s exceptional 80 Group (Average) performance, which has encompassed the completion of the equity placing of 30.5 million new ordinary shares and continued drilling successes. 60 13-Jul-11 31-Dec-11 48 Ophir Energy plc Annual Report 2011

Remuneration Report continued

Executive Directors: giving not less than three months’ written notice. After Service Contracts and Remuneration 12 months of employment, these periods would have Dr Stein has a rolling term employment contract with the risen to 12 months’ written notice and six months’ Company and Ophir Services Pty Limited, a subsidiary of written notice respectively. the Company. Ophir Services may terminate Dr Stein’s employment by giving not less than 12 months’ written The service contracts each contains a payment in lieu of notice and Dr Stein may terminate his employment by notice provision together with a provision enabling the giving not less than six months’ written notice. In relevant employer to put the Executive Director on November 2011, Dr Stein notified the Company that he garden leave for up to six months at any time after notice would resign, under the terms of his contract, at the to terminate the service contract has been given by the conclusion of the Company’s AGM in 2012. Executive Director or the relevant employer or the Executive Director has resigned without giving due Mr Taylor has a rolling term service agreement with the notice and the relevant employer has not accepted the Company. The Company may terminate Mr Taylor’s resignation. Any payment in lieu of notice is limited to employment by giving not less than 12 months’ written basic salary for Dr Stein, Mr Taylor and Dr Cooper. Any notice and Mr Taylor may terminate his employment by payment in lieu of notice for Ms Holm was limited to giving not less than six months’ written notice. basic salary and pension contributions only.

Dr Cooper has a rolling term service agreement with the The service contracts of Dr Stein Mr Taylor and, with Company. From appointment to February 2012, both the effect from March 2012, Dr Cooper provide that if Company and Dr Cooper could terminate the service within three months of a Change of Control of the agreement by giving not less than 12 months’ written Company, the relevant employer and the Executive notice. In March 2012, Dr Coopers service agreement Director have failed to agree new terms and conditions was aligned with that of the other Executive Directors, of employment, then the relevant employer shall be whereby the Company may terminate Dr Coopers deemed to have terminated the service contract employment by giving not less than 12 months’ written immediately and the Executive Director will be notice and Dr Cooper may terminate his employment by entitled to be paid 12 months’ basic salary. giving not less than six months’ written notice. The Executive Directors will not be entitled to any Following her appointment as a Director, Ms Holm had a other payment or notice or payment in lieu of notice rolling term service agreement with the Company. in addition to this Change of Control payment. During the first 12 months of employment, the Company was entitled to terminate Ms Holm’s appointment by A summary of the terms of the service contracts giving not less than six months’ written notice and Ms of Executive Directors as at 20 April 2012 is set Holm was entitled to terminate her appointment by out below:

Continuous Contract Notice by Notice by Name employment date Company Executive Dr Alan Stein 1 May 2004 10 October 2007 12 months 6 months Jonathan Taylor 1 June 2004 16 October 2007 12 months 6 months Dr Nicholas Cooper 1 June 2011 26 May 2011 12 months 6 months 49 Ophir Energy plc Annual Report 2011

Copies of the service agreements for Executive Directors, The fees for Non-Executive Directors were reviewed together with the letters of appointment for the Non- during 2011 to take account of the Company’s Executive Directors detailed below, are available for successful IPO and entry into the FTSE 250. The Board’s BUSINESS REVIEW inspection during normal business hours at the policy in relation to the fee payable to the Chairman of Company’s registered office. the Board is that it should be comparable to the median fee payable for non-executive chairmen of With the prior permission of the Board, Executive companies of a comparable size and complexity. In Directors are permitted to accept external directorships addition, Non-Executive Directors’ fees were reviewed and to retain any fees payable in respect of those roles. to take account of the additional time commitment and Under this policy Dr Stein serves as Chairman of Neon responsibility required following Admission. As a Energy Limited, an unrelated entity listed on the result, with effect from 13 July 2011, the fees payable Australian Stock Exchange, for which he received to the Chairman and the independent Non-Executive remuneration of US$ 56,810 (2010: US$45,997). Directors were revised as follows:

Non-Executive Directors: Pre Post Letters Of Appointment And Fees 13 July 2011 13 July 2011 GOVERNANCE The letters of appointment for the independent Chairman’s fee: £90,000 £140,000 Non-Executive Directors being Messrs Smith, Blakely, per annum per annum Lander, McShane, Powell and Spink do not provide for specific terms of appointment, termination Non-Executive Director £60,000 £70,000 notification periods or entitlement to payment on basic fee: per annum per annum termination. However there is an expectation that all Committee Nil £5,000 independent Directors will serve for an initial three Chairmanship fee: per annum year term. The Company may terminate the appointment under each letter of appointment if the An additional one-off fee of £14,000 was paid to independent Non-Executive Director has committed a Mr McShane during the year in relation to the increased time commitment given and duties undertaken in serious or repeated breach or non-observance of his FINANCIAL STATEMENTS obligations to the Company. relation to the reconstitution of the post-IPO Board.

Prior to 7 July 2011, the services of Messrs Lander and Mr Tandon, Non-Executive Director representing the Powell were provided under contracts between the Mittal Group, together with the former Non-Executive Company and Vectis Petroleum Limited (a company Directors who represented major shareholders being controlled by Mr Lander) and Barbican Global Limited Mr Xayiya (representing Mvelaphanda), Mr Cohen (a company controlled by Mr Powell) respectively. (representing OZ Funds), Mr Banthia (representing Thereafter, Messrs Lander and Powell received letters Mittal Group) and Mr Paczek (representing Oil & Gas of appointment from the Company. Exploration), holds or held office by virtue of a relationship agreement between the entity The fees for the Company’s Chairman and independent represented and the Company. No representative Non-Executive Directors are determined by the Board Director (or the entity represented) receives or as a whole (with the relevant individuals absenting received any remuneration for their services as themselves from discussions relating directly to their Directors or is or was entitled to any payment on own remuneration). Remuneration paid to termination of their services as Directors. independent Non-Executive Directors is set at a level to attract persons with the necessary experience and The Chairman and Non-Executive Directors are not ability to make a significant contribution to the entitled to participate in the Company’s executive Company’s operations. Remuneration levels are remuneration programmes or pension arrangements. agreed based on external advice and give During the year, the Company did not issue options to consideration to the time commitment and any of the Non-Executive Directors nor to any entity in responsibilities of the role. which a Non-Executive Director is deemed to be interested. 50 Ophir Energy plc Annual Report 2011

Remuneration Report continued

Part B: Audited Information Directors’ Fees and Emoluments Salaries, fees and benefits paid to the Executive and Non-Executive Directors for the year ended 31 December 2011 are detailed below:

Pension/ Director Base Super- Termination Other Total Total US$’000 Salary/Fees Bonus annuation Payments Benefits 2011 2010 Chairman & Executive Directors Nicholas Smith 177 – – – – 177 151 Dr Alan Stein 952 271 26 – – 1,249 948 Dr Nicholas Cooper (from 1 June 2011) 340 – 2 37 – 5 382 – Jonathan Taylor 770 1682 47 – 5 990 746 Non-executive Directors Ronald Blakely 52 – – – – 52 – John Lander 104 – – – – 104 101 Dennis McShane1 126 – – – – 126 101 Lyndon Powell 104 – – – – 104 101 Patrick Spink 52 – – – – 52 – Rajan Tandon – – – – – – – Former Directors B. Yvonne Holm (26 May to 2 December 2011) 270 – 38 722 3 1,033 – Arun Balakrishnan – – – – – – – Harak Chand Banthia – – – – – – – Michael Cohen – – – – – – – John Morgan 44 – – – – 44 – Jaroslaw Paczek – – – – – – – Mikki Xayiya – – – – – – –

Notes: 1 Includes one-off fee of £14,000 in relation to additional duties undertaken during the reconstitution of the post-IPO Board. 2 As indicated above, post year end, Mr Taylor was awarded an annual term bonus for 2011 of £365k and Dr Cooper a bonus of £260k for the period he worked for the Company in 2011.

Ms Holm’s service agreement with the Company was Directors’ Pension Arrangements terminated pursuant to an agreement dated 1 Dr Stein, Dr Cooper and Mr Taylor do not participate December 2011. As part of the terms agreed between in a Group pension scheme. the Company and Ms Holm in respect of her departure, Ms Holm was paid a termination payment of £462,621. The Company contributes the greater of the statutory The 500,000 share options granted to Ms Holm on 8 minimum or 11% of basic salary into Dr Cooper’s and March 2011 pursuant to the 2006 Plan lapsed upon Mr Taylor’s personal pension arrangements and, in her departure. However, pursuant to the rules of the respect of Dr Stein, into an applicable superannuation LTIP, Ms Holm retains an interest in the shares which fund. Where the level of contribution is higher than were awarded to her under the LTIP subject to the that which is eligible for tax relief, the excess can be satisfactory completion of the LTIP performance converted into additional salary. In 2011, both Dr Stein conditions. Ms Holm was not paid an annual bonus. and Mr Taylor elected to convert part of their entitlements in this way . 51 Ophir Energy plc Annual Report 2011

Directors’ Interests in Shares and exercise costs) at least 50% of shares resulting from Ordinary Shareholdings the exercise of share options granted on or after 1 The Company has adopted a policy requiring all January 2011 and shares received under the Long- BUSINESS REVIEW Executive Directors to hold a substantial number of Term Incentive Plan. shares in the Company, being equivalent in value to 100% of their annual salary. Until the required holding The beneficial interests of the Directors in the ordinary is achieved, Executive Directors will be expected to shares of the Company as at 31 December 2011 are: retain (net of any shares sold to meet tax liabilities or

As at 1 January 2011 As at (or later date of 31 December Director appointment) Acquisitions Disposals 2011 Dr Alan Stein 1 7,303,792 0 1,083,326 6,220,466 Jonathan Taylor 2 6,836,320 0 0 6,836,320

Nicholas Smith 48,000 60,000 0 108,000 GOVERNANCE Dr Nicholas Cooper 7 0 120,000 0 120,000 Ronald Blakely 3 0 12,000 0 12,000 John Lander 4 7 8 152,000 20,000 0 172,000 Dennis McShane 5 104,000 0 0 104,000 Lyndon Powell 24,000 0 0 24,000 Patrick Spink 0 40,000 0 40,000 Rajan Tandon 6 0 0 0 0

1 Dr A. Stein and members of his family are the legal and beneficial owners of 5,697,140 ordinary shares. Dr Stein is the sole beneficial

owner of an indirect interest in 523,326 ordinary shares held by Haroma Pty Ltd. FINANCIAL STATEMENTS 2 Includes 101,080 ordinary shares Mr Taylor holds on trust for his children. 3 Mr Blakely and members of his family hold a beneficial interest in 12,000 ordinary shares. The legal interest is held by Hanover Nominees. 4 Mr Lander and members of his family hold a beneficial interest in 172,000 ordinary shares. The legal interest is held by WB Nominees Ltd. 5 Mr McShane holds a beneficial interest in 104,000 ordinary shares. The legal interest is held by Greenwood Nominees Limited. 6 Mr Tandon holds a non-beneficial interest in shares in the Company by virtue of his employment by Mittal, the holder of 41,163,790 ordinary shares in the Company. Mr Jaroslaw Paczek (alternate Director for Mr Tandon) holds a non-beneficial interest in shares of the Company by virtue of his directorship in a consultancy providing services to Kulczyk Investments S.A., an affiliate of the Kulczyk Group, the holder of 40,433,833 ordinary shares in the Company. 7 The interests of Dr Cooper and his family and of Mr Lander and his family increased by 572 and 21,960 shares respectively, to 120,572 and 193,960 ordinary shares respectively, following completion of the acquisition of Dominion Petroleum Limited on 3 February 2012. 8 The interests of Mr Lander and his family increased to 223,960 ordinary shares following the acquisition of a further 30,000 shares on 29 March 2012. 52 Ophir Energy plc Annual Report 2011

Remuneration Report continued

Directors’ Options and Share-based Awards The table below shows the various share awards held by Executive Directors under the Company’s incentive schemes as at 31 December 2011.

Shares under award at 1 January Shares Shares under Market value 2011 or later lapsed/ award at 31 per share on date of Shares cancelled or December Exercise date of award Director and scheme Date of grant Vesting date Lapse date appointment awarded forfeited 2011 price (pence) (pence) Dr Alan Stein Long-term Incentive Plan 26/05/2011 26/05/2014 25/05/2015 – 321,220 – 321,220 0.00 166.04 Jonathan Taylor Long-term Incentive Plan 26/05/2011 26/05/2014 25/05/2015 – 200,000 – 200,000 0.00 166.04 Long-term Incentive Plan 22/11/2011 26/05/2014 25/05/2015 – 121,2202 – 121,220 0.00 208.64 Dr Nicholas Cooper Long-term Incentive Plan 01/06/2011 01/06/2013 31/05/2014 – 534,2331 – 534,233 0.00 250.00 Long-term Incentive Plan 01/06/2011 01/06/2014 31/05/2015 – 150,000 – 150,000 0.00 166.04 Long-term Incentive Plan 01/06/2011 01/06/2014 31/05/2015 – 214,286 – 214,286 0.00 166.04 Long-term Incentive Plan 22/11/2011 01/06/2014 31/05/2015 – 85,7142 – 85,714 0.00 208.64 Share Option Plan 2006 01/06/2011 01/06/2013 31/05/2021 – 500,000 – 500,000 250.00 62.00 Yvonne Holm Share Option Plan 2006 08/03/2011 08/03/2013 07/03/2021 – 500,000 500,000 – 250.00 64.00 Long-term Incentive Plan 26/05/2011 26/05/2014 25/05/2015 – 148,572 – 148,572 0.00 166.04 Long-term Incentive Plan 22/11/2011 26/05/2014 25/05/2015 – 59,429 – 59,429 0.00 208.64

1 The award of 543,233 nil-cost options to Dr Cooper under the 2011 Long-term Incentive Plan is not subject to any performance conditions as it was granted to compensate him for the fact that awards over shares in his previous employer lapsed when he joined the company. 2 As detailed in the announcement dated 22 November 2011, an additional grant of LTIP awards was undertaken in order to reflect the difference between the assumed price at the time of the original grant on 26 May 2011, or 1 June 2011 in the case of Dr Cooper, and the actual IPO share price of £2.50 per share.

Following the year end the Remuneration Committee approved the following nil-cost awards to the Company’s Executive Directors:

Date of Vesting Lapse Shares Director and Scheme Grant Date Date Awarded Dr Nicholas Cooper Long-term Incentive Plan 13 April 2012 13 April 20151 12 April 2016 322,737 Jonathan Taylor Long-term Incentive Plan 13 April 2012 13 April 20151 12 April 2016 200,814 Dr Alan Stein Long-term Incentive Plan 13 April 2012 26 May 20142 25 May 2015 128,487

1 The performance conditions for the 2012 LTIP award to Executive Directors are summarised on page 47. 2 The award to Dr Stein was undertaken in order to reflect the difference between the assumed price at the time of the original grant on 26 May 2011 and the actual IPO share price of £2.50 per share.

The Company’s mid-market share price at the close of business on 31 December 2011 was 288.80 pence. The highest and lowest mid-market share prices during the year ended 31 December 2011 were 299 pence and 184.50 pence respectively. No share based awards held by Executive Directors vested or were exercised during the year.

By order of the Board John Lander Chairman, Remuneration Committee 19 April 2012 53 Ophir Energy plc Annual Report 2011

Statement of Directors’ Responsibilities in relation to Group and Parent Company Financial Statements

The Directors are responsible for preparing the Annual either intends to liquidate the entity or to cease Report and the Group and Parent Company financial trading, or have no realistic alternative but to do so. statements in accordance with applicable United BUSINESS REVIEW Kingdom law and those International Financial Reporting The Directors are responsible for keeping proper Standards (“IFRS”) adopted by the European Union. accounting records which disclose with reasonable accuracy at any time the financial position of the The Directors are required to prepare financial statements Company and of the Group and enable them to ensure for each financial year which present a true and fair that the financial statements comply with the Companies view of the financial position of the Company and of Acts 2006 and Article 4 of the IAS Regulation. They the Group and the financial performance and cash are also responsible for safeguarding the assets of flows of the Company and of the Group for that period. the Company and the Group and hence for taking In preparing those financial statements, the Directors reasonable steps for the prevention and detection are required to: of fraud and other irregularities. –– select suitable accounting policies in accordance with IAS 8: “Accounting Policies, Changes in Under applicable UK law and regulations the Directors Accounting Estimates and Errors” and then apply are responsible for the preparation of a Directors’ Report, them consistently; Directors’ Remuneration Report and Corporate GOVERNANCE –– present information, including accounting policies, Governance Report that comply with that law and in a manner that provides relevant, reliable, regulations. In addition the Directors are responsible comparable and understandable information; for the maintenance and integrity of the corporate and –– provide additional disclosures when compliance financial information included on the Company’s website. with the specific requirements in IFRS is insufficient Legislation in the UK governing the preparation and to enable users to understand the impact of particular dissemination of financial statements may differ from transactions, other events and conditions on the legislation in other jurisdictions. Company and of the Group’s financial position and financial performance; Neither the Company nor the Directors accepts any

–– state that the Company and the Group has complied liability to any person in relation to the annual financial FINANCIAL STATEMENTS with IFRS, subject to any material departures report except to the extent that such liability could disclosed and explained in the financial statements; arise under English law. Accordingly, any liability to a and person who has demonstrated reliance on any untrue –– prepare the accounts on a going concern basis unless, or misleading statement or omission shall be determined having assessed the ability of the Company and the in accordance with Section 90A and Schedule 10A of Group to continue as a going concern, management the Financial Services and Markets Act 2000.

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

I confirm on behalf of the Board that to the best of my knowledge: a) the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Commission, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and b) the management report (encompassed within the sections of this Annual Report headed “Chairman’s and Chief Executive Officer’s Review”; “Review of Operations”; “Financial Review”; “Corporate Social Responsibility Report”; “Principal Risks and Uncertainties”; “Directors’ Report”; “Corporate Governance Report”; and “Directors’ Remuneration Report”) includes a fair review of the development and performance of the business, and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board

Dr Nick Cooper Chief Executive Officer 19 April 2012 54 Ophir Energy plc Annual Report 2011

Independent Auditor’s Report to the Members of Ophir Energy Plc

We have audited the financial statements of Ophir Energy Opinion on financial statements plc for the year ended 31 December 2011 which comprise In our opinion: the Group and Company Statements of Financial –– the financial statements give a true and fair view of Position, the Group Income Statement and Statement the state of the Group’s and of the Company’s affairs of Comprehensive Income, the Group and Company as at 31 December 2011 and of the Group’s loss for Statements of Cash Flows, the Group and Company the year then ended; Statements of Changes in Equity and the related Notes –– the Group financial statements have been properly 1 to 29. The financial reporting framework that has prepared in accordance with IFRSs as adopted by the been applied in their preparation is applicable law and European Union; International Financial Reporting Standards (IFRSs) as –– the Company financial statements have been adopted by the European Union and, as regards the properly prepared in accordance with IFRSs as Company financial statements, as applied in accordance adopted by the European Union and as applied in with the provisions of the Companies Act 2006. accordance with the provisions of the Companies Act 2006; and This report is made solely to the Company’s members, –– the financial statements have been prepared in as a body, in accordance with Chapter 3 of Part 16 of the accordance with the requirements of the Companies Companies Act 2006. Our audit work has been undertaken Act 2006 and, as regards the Group financial so that we might state to the company’s members those statements, Article 4 of the IAS Regulation. matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent Opinion on other matters prescribed by the permitted by law, we do not accept or assume Companies Act 2006 responsibility to anyone other than the Company and In our opinion: the Company’s members as a body, for our audit work, –– the part of the Directors’ Remuneration Report to be for this report, or for the opinions we have formed. audited has been properly prepared in accordance with the Companies Act 2006; and Respective responsibilities of directors and auditor –– the information given in the Directors’ Report for the As explained more fully in the Directors’ Responsibilities financial year for which the financial statements are Statement set out on page 53, the Directors are prepared is consistent with the financial statements. responsible for the preparation of the financial statements and for being satisfied that they give a true Matters on which we are required to report and fair view. Our responsibility is to audit and express by exception an opinion on the financial statements in accordance We have nothing to report in respect of the following: with applicable law and International Standards on Under the Companies Act 2006 we are required to Auditing (UK and Ireland). Those standards require us to report to you if, in our opinion: comply with the Auditing Practices Board’s Ethical –– adequate accounting records have not been kept by Standards for Auditors. the parent company, or returns adequate for our audit have not been received from branches not Scope of the audit of the financial statements visited by us; or An audit involves obtaining evidence about the amounts –– the parent company financial statements and the and disclosures in the financial statements sufficient part of the Directors’ Remuneration Report to be to give reasonable assurance that the financial audited are not in agreement with the accounting statements are free from material misstatement, whether records and returns; or caused by fraud or error. This includes an assessment –– certain disclosures of Directors’ remuneration of: whether the accounting policies are appropriate to specified by law are not made; or the Group’s and the Company’s circumstances and have –– we have not received all the information and been consistently applied and adequately disclosed; explanations we require for our audit; or the reasonableness of significant accounting estimates –– a Corporate Governance Statement has not been made by the Directors; and the overall presentation of prepared by the company. the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. 55 Ophir Energy plc Annual Report 2011

Under the Listing Rules we are required to review: –– the Directors’ statement, set out on page 34, in relation to going concern; BUSINESS REVIEW –– the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and –– certain elements of the report to shareholders by the Board on Directors’ remuneration.

Steven Dobson (Senior statutory auditor) for and on behalf of Ernst & Young LLP Statutory Auditor London 19 April 2012

Notes: GOVERNANCE 1 The maintenance and integrity of the Ophir Energy plc web site is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. 2 Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. FINANCIAL STATEMENTS 56 Ophir Energy plc Annual Report 2011

Group Financial Statements Group income statement and statement of comprehensive income for the year ended 31 December 2011

Year ended Year ended 31 Dec 2011 31 Dec 2010 Notes US$’000 US$’000 Group income statement Continuing operations Interest Income 834 533 Gain on farm out 4 (a) 13,844 - Revenue 14,678 533

Exploration expenses 4 (b) (15,688) (11,344) Finance expenses 4 (c) (1,039) (429) Administration expenses 4 (d) (16,156) (7,272) Other expenses 4 (e) (870) (766)

Loss from continuing operations before taxation (19,075) (19,278) Taxation 8 – – Loss from continuing operations for the year attributable to equity holders of the parent (19,075) (19,278)

Loss per share for loss from continuing operations attributable to equity holders of the parent Basic and diluted EPS on loss for the year (per share) 9 (5) pence1 (6) pence2

Group statement of comprehensive income Loss from continuing operations for the year attributable to equity holders of the parent (19,075) (19,278)

Other comprehensive income Exchange differences on retranslation of foreign operations net of tax 144 602

Other comprehensive income for the year, net of tax 144 602

Total comprehensive loss for the year, net of tax attributable to equity holders of the parent (18,931) (18,676)

1 (7) cents per share 2 (9) cents per share 57 Ophir Energy plc Annual Report 2011

Group statement of changes in equity for the year ended 31 December 2011

Equity component Foreign

Called up Options on currency BUSINESS REVIEW share Share premium Special Cons convertible translation Accumulated Total capital premium reserve reserve reserve bond reserve losses equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 As at 31 December 2009 1,041 417,048 23,028 156,435 (500) 669 5,134 (228,759) 374,096 Loss for the period, net of tax – – – – – – – (19,278) (19,278) Other comprehensive income, net of tax – – – – – – 602 – 602 Total comprehensive Income, net of tax 1,041 417,048 23,028 156,435 (500) 669 5,736 (248,037) 355,420 Exercise of options 1 – – – – – – – 1 Share-based payments – – 824 – – – – – 824 As at 31 December 2010 1,042 417,048 23,852 156,435 (500) 669 5,736 (248,037) 356,245 Loss for the year, GOVERNANCE net of tax – – – – – – – (19,075) (19,075) Other comprehensive income, net of tax – – – – – – 144 – 144 Total comprehensive income, net of tax 1,042 417,048 23,852 156,435 (500) 669 5,880 (267,112) 337,314 New ordinary shares issued to third parties 385 394,365 – – – – – – 394,750 Exercise of options 21 – – – – – – – 21

Share issue costs – (21,699) – – – – – – (21,699) FINANCIAL STATEMENTS Share-based payments – – 2,674 – – – – – 2,674 As at 31 December 2011 1,448 789,714 26,526 156,435 (500) 669 5,880 (267,112) 713,060 58 Ophir Energy plc Annual Report 2011

Company statement of changes in equity for the year ended 31 December 2011

Foreign Called up Options currency share Share premium Special Other translation Accumulated Total capital premium reserve reserve reserves reserve losses equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 As at 31 December 2009 1,041 417,048 23,028 156,435 669 11,839 (183,133) 426,927 Loss for the period, net of tax – – – – – – (8,007) (8,007) Other comprehensive income, net of tax – – – – – – – Total comprehensive income, net of tax 1,041 417,048 23,028 156,435 669 11,839 (191,140) 418,920 Exercise of options 1 – – – – – – 1 Share-based payments – – 824 – – – – 824 As at 31 December 2010 1,042 417,048 23,852 156,435 669 11,839 (191,140) 419,745 Loss for the period, net of tax – – – – – – (16,910) (16,910) Other comprehensive income, net of tax – – – – – – – – Total comprehensive income, net of tax 1,042 417,048 23,852 156,435 669 11,839 (208,050) 402,835 New ordinary shares issued to third parties 385 394,365 – – – – – 394,750 Exercise of options 21 – – – – – – 21 Share issue costs – (21,699) – – – – – (21,699) Share-based payments – – 2,674 – – – – 2,674 As at 31 December 2011 1,448 789,714 26,526 156,435 669 11,839 (208,050) 778,581 59 Ophir Energy plc Annual Report 2011

Group statement of financial position As at 31 December 2011

As at As at 31 Dec 2011 31 Dec 2010 Notes US$’000 US$’000 BUSINESS REVIEW Non-current assets Exploration and evaluation assets 10 327,060 270,043 Property, plant and equipment 11 2,205 1,743 Other financial assets 13 670 700 329,935 272,486 Current assets Inventory 14 6,233 9,058 Trade and other receivables 15 8,749 45,295 Other current assets 16 466 130 Cash and short-term deposits 17 396,585 89,925 412,033 144,408

Total assets 741,968 416,894 GOVERNANCE

Current liabilities Trade and other payables 18 (27,704) (59,727) Provisions 19 (820) (611) (28,524) (60,338) Non-current liabilities Provisions 19 (384) (310) (384) (310)

Total liabilities (28,908) (60,648) FINANCIAL STATEMENTS Net assets 713,060 356,246

Capital and reserves Called up share capital 20 (b) 1,448 1,042 Share premium account 21 789,714 417,048 Reserves 21 (78,102) (61,844) Total equity 713,060 356,246

Approved by the Board on 19 April 2012.

Nicholas Smith Nick Cooper Chairman Chief Executive Officer 60 Ophir Energy plc Annual Report 2011

Company statement of financial position As at 31 December 2011

As at As at 31 Dec 2011 31 Dec 2010 Notes US$’000 US$’000 Non current assets Property, plant and equipment 11 507 364 Investments in subsidiaries 12 (a) 393,592 344,791 Other financial assets 13 387 418 394,486 345,573 Current assets Trade and other receivables 15 2,154 823 Cash and short-term deposits 17 386,190 74,364 388,344 75,187 Total assets 782,830 420,760

Current liabilities Trade and other payables 18 (4,007) (822) Provisions 19 (242) (192) Total liabilities (4,249) (1,014) Net assets 778,581 419,746

Capital and reserves Called up share capital 20 (b) 1,448 1,042 Share premium account 21 789,714 417,048 Reserves 21 (12,581) 1,656 Total equity 778,581 419,746

Approved by the Board on 19 April 2012

Nicholas Smith Nick Cooper Chairman Chief Executive Officer 61 Ophir Energy plc Annual Report 2011

Group statement of cash flows for the year ended 31 December 2011

Year ended Year ended 31 Dec 2011 31 Dec 2010 Notes US$’000 US$’000 BUSINESS REVIEW Net cash flow used in operating activities 22 (22,469) (13,343)

Investing activities Purchases of property, plant and equipment (1,313) (904) Exploration expenditure (65,618) (44,595) Funds from disposal of inventory 1,078 1,365 Funds on farm out of joint venture 21,960 11,268 Funds placed on deposit – (377) Funds returned from deposit – 1,200 Net cash flow (used in) investing activities (43,893) (32,043)

Financing activities GOVERNANCE Issue of ordinary shares 394,771 1 Issue costs (21,699) – Net cash flow from financing activities 373,072 1

(Decrease)/increase in cash and cash equivalents for the year 306,710 (45,385) Effect of exchange rates on cash and cash equivalents (50) 233 Cash and cash equivalents at the beginning of the year 89,925 135,077 Cash and cash equivalents at the end of the year 17 396,585 89,925 FINANCIAL STATEMENTS 62 Ophir Energy plc Annual Report 2011

Company statement of cash flows for the year ended 31 December 2011

Year ended Year ended 31 Dec 2011 31 Dec 2010 Notes US$’000 US$’000 Net cash used in operating activities 22 (12,174) (5,225)

Investing activities Purchases of property, plant and equipment (272) (334) Loans to subsidiaries (48,801) (52,101) Funds placed on deposit – (377) Funds returned from deposit – 1,200 Net cash used in investing activities (49,073) (51,612)

Financing activities Issue of ordinary shares 394,771 1 Issue costs (21,699) – Net cash from financing activities 373,072 1

(Decrease)/Increase in cash and cash equivalents for the year 311,825 (56,836) Effect of exchange rates on cash and cash equivalents 1 5 Cash and cash equivalents at the beginning of the year 74,364 131,195 Cash and cash equivalents at the end of the year 17 386,190 74,364 63 Ophir Energy plc Annual Report 2011

Notes to the financial statements

1 Authorisation of financial statements Ophir Energy plc (the “Company” and the ultimate parent of the Group) is a public limited company incorporated, domiciled and listed in England. Its registered offices are situated at 55 Grosvenor Street, London W1K 3HY. BUSINESS REVIEW

Ophir Energy’s business is oil and gas exploration with an extensive portfolio of exploration interests in Africa.

The Group’s and Company’s financial statements for the year ended 31 December 2011 were authorised for issue by the Board of Directors on 20 March 2012 and the Statement of Financial Position was signed on the Board’s behalf by Mr Nicholas Smith and Dr Nick Cooper.

The Company has taken advantage of the exemption provided under s408 of the Companies Act 2006 not to publish its individual income statement and related notes.

2 Basis of preparation and significant accounting policies 2.1 Basis of preparation and statement of compliance The Group’s and Company’s financial statements have been prepared in accordance with IFRS as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. GOVERNANCE

The consolidated financial statements have been prepared on a historical cost basis except for revaluation of certain derivative instruments measured at fair value. The consolidated financial statements are presented in US Dollars rounded to the nearest thousand dollars (US$’000) except as otherwise indicated.

Comparative figures for the period to 31 December 2010 are for the year ended on that date.

2.2 Significant accounting policies New and Amended Accounting Standards and Interpretations

The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2011: FINANCIAL STATEMENTS –– IAS 24 Related Party Transactions (Amendment) –– IAS 32 Financial Instruments: Presentation (Amendment) –– IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment) –– IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments –– Improvements to International Financial Reporting Standards (issued 2010)

When the adoption of the Standard or Interpretation is deemed to have an impact on the financial statements or the financial position and performance of the Group, its impact is described below:

Impact from changes to accounting policies as a result of amendments to IAS 24 Related Party Transactions, IAS 32 Financial Instruments: Presentation and Improvement to IFRSs.

IAS 24 Related Party Transactions (Amendment) alters the definition of a related party to emphasise a symmetrical view of related party relationships and clarifies the circumstances in which persons and key management personnel affect related party relationships of an entity. In addition, the amendment introduces an exemption from the general related party disclosure requirements for transactions with government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment has altered the identification of related parties by the Group.

IAS 32 Financial Instruments: Presentation alters the definition of a financial liability to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, to acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency. The amendment has had no effect on the financial position or performance of the Group but will alter the Group’s future accounting if any such instruments are issued. 64 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

2 Basis of preparation and significant accounting policies continued Improvements to IFRS issued In May 2010 are the third omnibus of amendments to the IAB’s standards and issued primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies but no impact on the financial position or performance of the Group.

–– IFRS 3 Business Combinations: The measurement options available for non-controlling interest (“NCI”) were amended. Only components of NCI that constitute a present ownership interest that entitles their holder to a proportionate share of the entity’s net assets in the event of liquidation shall be measured at either fair value or at the present ownership instruments’ proportionate share of the acquiree’s identifiable net assets. All other components are to be measured at their acquisition date fair value.

The amendments to IFRS 3 are effective for annual periods beginning on or after 1 July 2011. The Group however adopted these as of 1 January 2011 and changed its accounting policy accordingly as the amendment was issued to eliminate unintended consequences that may arise from the adoption of IFRS 3.

–– IAS 1 Presentation of Financial Statements: The amendment clarifies that an entity may present an analysis of each component of other comprehensive income maybe either in the statement of changes in equity or in the notes to the financial statements.

Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group: –– IFRS 3 Business Combinations (Contingent consideration arising from business combination prior to adoption of IFRS 3 (as revised in 2008)) –– IFRS 3 Business Combinations (Unreplaced and voluntarily replaced share-based payment awards) –– IFRS 7 Financial Instruments – Disclosures –– IAS 27 Consolidated and Separate Financial Statements –– IAS 34 Interim Financial Statements –– IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits) –– IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

Standards and Interpretations issued but not yet effective Standards issued but not yet effective at the date of these financial statements are listed below.

EFFECTIVE DATE (for periods beginning on or after) IAS 1 Financial Statement Presentation – Presentation of Items of Other Comprehensive Income 1 July 2012 IAS 12 Income Taxes – Recovery of Underlying Assets 1 January 2012 IAS 19 Employee Benefits (Amendment) 1 January 2013 IAS 27 Separate Financial Statements (as revised in 2011) 1 January 2013 IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) 1 January 2013 IFRS 7 Financial Instruments: Disclosures – Enhanced Derecognition Disclosure Requirements 1 July 2011 IFRS 9 Financial Instruments: Classification and Measurement 1 January 2013 IFRS 10 Consolidated Financial Statements 1 January 2013 IFRS 11 Joint Arrangements 1 January 2013 IFRS 12 Disclosure of Involvement with Other Entities 1 January 2013 IFRS 13 – Fair Value measurement 1 January 2013

The impact of the adoption of the above standards has not been assessed by the Group. 65 Ophir Energy plc Annual Report 2011

2 Basis of preparation and significant accounting policies continued 2.3 Basis of consolidation The Group financial statements consolidate the financial statements of the Company and the entities it controls BUSINESS REVIEW (its subsidiaries) drawn up to 31 December each year.

Basis of consolidation from 1 January 2010 Subsidiaries 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. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement. 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 GOVERNANCE 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; and (vi) recognises any surplus or deficit in profit and loss; (vii) reclassifies the parent’s share of components previously recognised in other comprehensive income to profit and loss or retained earnings, as appropriate.

Non-controlling interests Non-controlling interests represent the equity in a subsidiary not attributable, directly and indirectly, to the parent company and is presented separately within the Consolidated Balance Sheet, separately from equity attributable to owners of the parent. Losses within a subsidiary are attributed to the non-controlling interest FINANCIAL STATEMENTS even if that results in a deficit balance.

Basis of consolidation prior to 1 January 2010 Certain of the above-mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation:

Non-controlling interest represents the portion of profit or loss and net assets in subsidiaries that is not held by the Group and is presented separately within equity in the Consolidated Balance Sheet, separately from parent shareholder’s equity.

Acquisitions of non-controlling interests, prior to 1 January 2010, were accounted for using the equity concept method.

Losses incurred by the Group were attributed to the minority interest until the balance was reduced to nil. Any further excess losses were attributed to the parent, unless the non-controlling interest had a binding obligation to cover these.

2.4 Exploration and evaluation expenditure The Company applies the successful efforts method of accounting for the exploration and evaluation (“E&E”) costs as permitted by IFRS 6 “Exploration for and Evaluation of Mineral Resources.”

All costs incurred after the rights to explore an area have been obtained, such as licence acquisition costs, geological and geophysical costs and other direct costs of E&E are accumulated and capitalised as E&E assets, in well, field or licence-specific exploration cost centres as appropriate pending determination.

Costs (other than payments to acquire the legal right to explore) incurred prior to acquiring rights to explore and general exploration costs not specific to any particular licence or prospect are charged directly to the income statement. 66 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

2 Basis of preparation and significant accounting policies continued E&E assets are not amortised prior to the determination of the results of exploration activity. At completion of evaluation activities, if technical and commercial feasibility is demonstrated then, following recognition of commercial reserves, the carrying value of the relevant E&E asset will be reclassified as a development and production asset, subject to the carrying value of the relevant E&E asset being assessed for impairment.

If, on completion of evaluation of prospects or licences, 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 income statement in the period of that determination.

The carrying value of E&E assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Where this is indicated, management will assess the recoverability of the carrying value of the asset. The review is based upon a status report detailing the Group’s intention for development of the asset. Where it cannot be recovered via successful development or sale, all costs are written off.

2.5 Intangibles Intangible assets are initially measured at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired.

Where this is indicated, management will assess the recoverability of the carrying value of the asset. The review is based upon a status report detailing the Group’s intention for development of the asset. Where it cannot be recovered via successful development or sale, all costs are written off.

2.6 Property, plant and equipment 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 Balance Sheet date, of each asset over expected useful lives ranging from 3 to 10 years.

2.7 Investment in subsidiaries The Company holds monetary balances with its subsidiaries of which settlement is neither planned nor likely to occur in the foreseeable 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.

2.8 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 Group 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. 67 Ophir Energy plc Annual Report 2011

2 Basis of preparation and significant accounting policies continued 2.9 Inventories Inventories which comprise drilling consumables are stated at the lower of cost and net realisable value. Cost is BUSINESS REVIEW determined by using weighted average cost method and comprises direct purchase costs, cost of transportation and other related expenses.

2.10 Cash and short-term deposits Cash and short-term deposits in the balance sheet comprise cash at bank, in hand and short-term deposits with original maturity dates of up to 12 months.

2.11 Trade and other payables Trade and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group 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.

2.12 Provisions GOVERNANCE 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.

2.13 Pensions and other post-retirement benefits The Group does not operate its own pension plan but makes pension or superannuation contributions to private funds of its employees which are defined contribution plans. The cost of providing such benefits are expensed in the income statement as incurred. FINANCIAL STATEMENTS

2.14 Employee benefits Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, 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.

Long service leave The liability for long service leave is recognised and measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.

Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

2.15 Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

2.16 Interest-bearing borrowing 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. 68 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

2 Basis of preparation and significant accounting policies continued 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 respective carrying amounts is recognised in the income statement.

2.17 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 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 Income Statement on a straight line basis over the lease term.

2.18 Interests in joint ventures The Group has a number of contractual arrangements with other parties which represent joint ventures. A joint venture is a contractual arrangement whereby the Group and other parties undertake economic activity.

Where a Group company undertakes its activities under joint venture arrangements the Group’s share of jointly controlled assets, liabilities and related income and expenses are included in the financial statements in their respective classification categories.

The Group’s interests in joint ventures, which are in the form of jointly controlled assets, are identified in Note 23.

The Group has a number of interests in joint ventures, which are considered jointly controlled assets, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of the asset. The agreement requires unanimous agreement for financial and operating decisions among the venturers. The Group recognises its interest in the joint venture using the proportionate consolidation method. The Group combines its proportionate share of each of the assets, liabilities, income and expenses of the joint venture with similar items, line by line, in its consolidated financial statements. The financial statements of the joint venture are prepared for the same reporting period as the Group. Adjustments are made where necessary to bring the accounting policies in line with those of the Group.

Adjustments are made in the Group’s consolidated financial statements to eliminate the Group’s share of intragroup balances, transactions and unrealised gains and losses on such transactions between the Group and its joint venture. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss. The joint venture is proportionately consolidated until the date on which the Group ceases to have joint control over the joint venture.

Upon loss of joint control the Group measures and recognises its remaining investment at its fair value. Any difference between the carrying amount of the former joint controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal are recognised in the income statement. When the remaining investment constitutes significant influence, it is accounted for as investment in an associate.

2.19 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received and receivable, excluding discounts, rebates, VAT and other sales taxes or duty.

The specific recognition criteria described below must also be met before revenue is recognised:

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. 69 Ophir Energy plc Annual Report 2011

2 Basis of preparation and significant accounting policies continued 2.20 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are BUSINESS REVIEW assets that necessarily take a substantial period of time to be prepared for their intended use, are added to the cost of those assets until such time as the assets are substantially ready for their intended use.

All other borrowing costs are expensed in the income statement in the period in which they are incurred.

2.21 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 GOVERNANCE 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 Balance Sheet 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 balance sheet 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 FINANCIAL STATEMENTS 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 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.

2.22 Foreign currency translation 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 balance sheet date. All exchange differences are taken to the income statement.

The assets and liabilities of the Company and those foreign operations whose functional currency is other than that of the presentation currency of Ophir are translated into the presentation currency, at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the weighted average exchange rates for the year. 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 income statement. 70 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

2 Basis of preparation and significant accounting policies continued 2.23 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 balance sheet 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 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 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.

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 balance sheet 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.

2.24 Impairment The Group assesses at each reporting date whether there is an indication that an intangible asset or item of property plant & equipment may be impaired. If any indication exists, or when annual impairment testing for is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and 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 to sell, 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.

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. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in expense categories consistent with the function of the impaired asset, except for a property previously revalued and the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. 71 Ophir Energy plc Annual Report 2011

3 Significant accounting judgements, estimates and assumptions The preparation of the consolidated 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 BUSINESS REVIEW consolidated 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 Group 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 noted below with further details of the assumptions used listed in the relevant note.

Item Notes Exploration and Evaluation assets 2.4, 10 Share-based payments 2.21, 7 Deferred tax 2.23, 8 GOVERNANCE Impairment 2.24

4 Operating loss before taxation The Group operating loss from continuing operations before taxation is stated after charging/(crediting):

(a) Revenue

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 FINANCIAL STATEMENTS US$’000 US$’000 Gain on farm out 13,844 –

Gain on farm out relates to the partial farm out of the Group’s AGC Profond interests. Cash proceeds of US$20,000,000 received were applied against the Group’s carrying value of the AGC project, with the surplus proceeds being booked to profit. At year end, costs related to the dry well drilled in the AGC Profond block were written off (US$12,738,447). Refer to Note 4 (b).

(b) Exploration expenses

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 Note US$’000 US$’000 –– Inventory management – 15 –– Pre licence exploration costs 2,324 2,030 –– Exploration expense recovered on farm out(a) – (4,009) –– Exploration expenditure written off 10 13,364 13,308 15,688 11,344

(a) Exploration expenses recovered on farm out represent the recovery of exploration and evaluation costs previously recognised in the income statement upon the finalisation of farm out arrangements. 72 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

4 Operating loss before taxation (c) Finance expense

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 –– Net foreign currency exchange differences 1,039 429 1,039 429

(d) Administrative expenses include: Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 Audit of the financial statements 240 357 Other fees to auditors: –– Other services pursuant to legislation 134 155 –– Taxation services 39 14 –– Other services – 19 413 545

Other fees to auditors included in equity –– Corporate finance services 2,563 18

2,976 563

Operating lease payments – minimum lease payments 1,475 1,281 Share-based compensation charge 2,674 825

(e) Other expenses

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 –– Loss on disposal of assets (1) 14 –– Amortisation of intangible non-current assets – 17 –– Depreciation of property plant & equipment 871 735 870 766

As permitted by s408 of the Companies Act 2006 the profit and loss account of the Company has not been separately presented in these accounts. The Company’s loss for the financial year amounted to US$16.9 million (31 December 2010 – US$8.0 million).

5 Segment Information The Group operates in one segment being the exploration and evaluation of oil & gas related projects located in Africa. 73 Ophir Energy plc Annual Report 2011

6 Staff costs and Directors’ emoluments (a) Staff costs BUSINESS REVIEW

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 Employee costs (including payments to Executive Directors) during the year comprised: Wages and salaries 11,558 7,031 Social security costs 883 608 Contributions to pension plans and superannuation funds 833 617 Share-based compensation charge 2,674 333 15,948 8,589

(b) Directors’ emoluments GOVERNANCE

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 (i) Aggregate compensation Salaries 2,937 1,908 Employer contributions 288 186 Bonuses 441 114

Post-employment benefits 870 477 FINANCIAL STATEMENTS Other benefits 13 33 4,549 2,718

(ii) Share-based compensation charge 1,195 109

(iii) Amounts paid to Director related entities not included in (i) above (refer Note 28) 54 201

(iv) Amount paid to the highest paid Director Remuneration paid to the highest paid Director includes superannuation contributions of US$22,999 (2009: US$12,376). 1,249 948

321,220 options over shares were held by the highest paid Director during the year (2010: Nil)

Number Number Number of Directors to whom superannuation or pension benefits accrued during the year 4.0 3.0

Average number of persons employed (full time equivalents): CEO 1.0 1.0 Exploration & technical 23.3 19.3 Finance & commercial 9.4 10.4 Support 5.7 4.6 39.4 35.3 74 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

7 Share-based compensation (a) Employee incentive share plans Ophir Energy Company Foundation Incentive Scheme Ophir Energy Company Foundation Incentive Scheme was established on 12 May 2004 shortly after the formation of the Company to attract new employees on start up. The plan provided for a total of 1,450,000 options to acquire ordinary shares at 1p per share to be issued to eligible employees. The Scheme was terminated on 24 November 2005 and all options issued under the scheme have fully vested.

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 whole of his working time to his duties is eligible to participate under the Plan. At the grant date the Board of Directors determine 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 2011 Long-term Incentive Share Option Plan On 26 May 2011 the Board resolved to establish the Ophir Energy 2011 Long-term Incentive Share Option Plan. This was introduced to give awards to Directors and senior staff 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 staff 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.

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 Pounds Sterling and have been translated to US Dollars using the closing exchange rate for presentation purposes.

2011 2011 2010 2010 Number WAEP Number WAEP Outstanding options beginning of year 7,460,580 US$2.50/£1.62 8,498,080 US$2.60/£1.63 Granted during the year 5,525,980 US$2.24/£1.45 – – Exercised during the year (729,320) US$1.27/£0.82 (320,000) US$0.004/£0.0025 Lapsed during the year (505,000) US$3.86/£2.50 (717,500) US$3.87/£2.50 Outstanding options at end of year 11,752,240 US$2.37/£1.53 7,460,580 US$2.50/£1.62 Exercisable at end of year 11,752,240 US$2.40/£1.55 7,460,580 US$2.50/£1.62

5,525,980 options were granted (2010: Nil) during the year and 729,320 options were exercised (2010: 320,000) during the year or during the subsequent period up to the date of these financial statements.

The weighted average fair value of options granted during the year was US$2.24. The range of exercise prices for options outstanding at the end of the year was US$0.00 to US$3.86 (2010: US$0.0040 to US$3.87) with a remaining exercise period in the range of 3 to 9 years.

The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking into account the terms and conditions upon which the options were granted. The table below lists the inputs to the model used for the year ended 31 December 2011. (No options were granted during 2010.)

2006 Share Option Plan 2011 Long-term Incentive Plan 2011 2010 2011 2010 Dividend yield (%) – n/a – n/a Exercise Price £2.50 (US$3.86) n/a Nil n/a Share Volatility (%) 45% n/a 45% n/a Risk-free interest rate (%) 1.0% n/a 0.8% n/a Expected life of option (years) 4.00 n/a 4.00 n/a Weighted average share price £2.50 (US$3.86) n/a £2.50 (US$3.86) n/a 75 Ophir Energy plc Annual Report 2011

7 Share-based compensation continued The comparator group consisted of Afren PLC, Bowleven PLC, Cairn Energy PLC, Chariot Oil and Gas Ltd, Cobalt International Energy Inc, Cove Energy PLC, EnQuest PLC, Essar Energy PLC, Faroe Petroleum PLC, Gulf Keystone BUSINESS REVIEW Petroleum Ltd, Heritage Oil PLC, Ithaca Energy Inc, JKX Oil and Gas PLC, Kosmos Energy Ltd, Melrose Resources PLC, Premier Oil PLC, Rockhopper Exploration PLC, Salamander Energy PLC, SOCO International PLC and Tullow Oil PLC.

(b) Share-based payments to suppliers of goods and services

2011 2011 2010 2010 Number WAEP Number WAEP Outstanding options and warrants at beginning of year 5,794,346 US$1.76 (£1.11) 5,794,346 US$1.76 (£1.11) Granted during the year – – Exercised during the year (4,697,173) US$1.84 (£1.19) – Outstanding options and warrants at end of year (all exercisable) 1,097,173 US$1.13 (£0.73) 5,794,346 US$1.76 (£1.11) GOVERNANCE

4,697,173 options were exercised (2010: Nil) during the year. The fair value of options granted to suppliers of goods and services is determined by reference to the fair value of goods or services at the date they are received.

No options or warrants were granted during the year or prior year. The range of exercise prices of options and warrants outstanding at the end of the year was US$0.0039 to US$3.55 (2010: US$0.0040 to US$3.56) with a remaining contractual life in the range of six months.

(c) Share-based payments to Directors

During the year a total of 1,834,674 Nil cost options and 1,000,000 options at a price of £2.50 to acquire ordinary FINANCIAL STATEMENTS shares under the 2011 Ophir Energy Long-term Incentive Plan and the Ophir Energy Company Limited 2006 Share Option Plan respectively, were granted to Directors. Of the 1,000,000 options granted to Directors, 500,000 options lapsed upon resignation of the relevant Director on 2 December 2011 No options were exercised during the year. A total of 2,334,674 options were held by Directors as at 31 December 2011.

8 Taxation (a) Income tax expense

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 Current income tax: UK corporation tax – – Foreign tax – – Total current income tax – –

Deferred tax: Origination and reversal of temporary differences – – Tax charge in the income statement – – 76 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

8 Taxation continued (b) Reconciliation of the total tax charge The tax benefit not recognised in the income statement is reconciled to the standard rate of corporation tax in the UK of 26.5% (2010: 28%). The differences are reconciled below:

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 Loss on operations before taxation (19,075) (19,278) Loss on operations before taxation multiplied by the UK standard rate of corporation tax of 26.5% (2010: 28%) (5,055) (5,398) Non-deductible expenditure 36 35 Share-based payments 720 233 Non taxable income (3,669) – Expenditure in tax exempt jurisdictions 216 3,281 Unrecognised deferred tax assets 7,761 1,886 Other (9) (37) Total tax expense in the income statement – –

(c) Deferred income tax Deferred income tax balances at 31 December relate to the following:

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 Deferred tax liabilities: Property plant and equipment (96) (34)

Deferred tax assets: Revenue tax losses 96 34 – – (d) Unrecognised tax losses The Group has further tax losses arising in the UK and Australia totalling US$55,656,114 (2010: US$42,982,226) that are available to carry forward indefinitely to offset against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these 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. (e) Other unrecognised temporary differences The Group has other unrecognised temporary differences in the UK, Australia and various African countries totalling US$148,534,880 (2010: US$130,340,205) in respect of provisions and exploration expenditure for which deferred tax assets have not been recognised. (f) Change in corporation tax rate Deferred tax has been calculated at the rates substantively enacted at the balance sheet date. The main United Kingdom rate of corporation tax decreased from 28% to 26% with effect from 1 April 2011, and legislation to reduce the rate to 25% with effect from 1 April 2012 has been substantively enacted during the year. In addition, the United Kingdom Government announced on 23 March 2011 as part of its 2011 Budget that the corporation tax rate was to be reduced to 24% from 1 April 2013 and to 23% from 1 April 2014. These reductions have not been reflected in the deferred tax figures as legislation had not been substantively enacted at the balance sheet date. 77 Ophir Energy plc Annual Report 2011

9 Earnings per share The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders is based on the following data: BUSINESS REVIEW

Group Year ended Year ended 31 Dec 2011 31 Dec 2010 US$’000 US$’000 Earnings Earnings for the purposes of basic and diluted earnings per share Loss for the year attributable to equity holders (19,075) (19,278)

Group & Company 2011 2010 No. ‘000 No. ‘000 GOVERNANCE Number of shares Basic weighted average number of shares 271,664 225,267

There were 12,849,413 (2010: 13,254,926) outstanding share options and warrants at 31 December 2011 which were anti-dilutive. There have been no issues of shares between the reporting date and the date of these financial statements.

10 Exploration and evaluation assets

Group Company FINANCIAL STATEMENTS 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Capitalised exploration expenditure at the beginning of the year 270,043 238,295 – 49 Foreign currency translation – 2 – – Exploration expenditure incurred during the financial year (a) 70,381 45,071 – – Expenditure written off (b) (13,364) (13,308) – (49) 327,060 270,060 – –

Right to access geological data base – 197 – – Accumulated amortisation of right to access geological data base – (180) – – Less: amortisation of right to access geological data base – (17) – – Capitalised exploration expenditure at the end of the year 327,060 270,043 – –

(a) Net of recovery of costs incurred in prior year on farm out of AGC assets (US$8,116,000) (2010: Net of recovery of costs incurred in prior year on farm out of Tanzania assets (US$4,008,739)). The Group recognised the impairment loss on the exploration expenditure noted above in accordance with the Group policy in Note 2.4. (b) Exploration written off relates to: (i) Licences in Gabon (US$103,402) (2010: US$438,696) and Somaliland (US$68,603) (2010: US$5,276,476) where the Group is negotiating with authorities to extend current exploration licence terms and where such negotiations were incomplete at 31 December 2011. (ii) Costs relating to an exploration licence in Congo (Brazzaville) (US$453,999) (2010: US$1,031,106) were written off pre-IPO. However since then, Ophir has assumed as operator and continues to investigate the pre-salt play ‘Gamba’ play. As part of this assessment a gradiometry survey will be acquired during 2012. (iii) JDZ: US$167,834 were written off for the period where the Group elected to withdraw from the PSC during March 2011. (iv) Costs of US$12,738,447 (2010: nil) relating to the write off of the Kora-1 dry well costs in the AGC exploration block. 78 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

11 Property, plant and equipment and computer equipment

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Furniture and office equipment Cost Balance at beginning of year 4,115 3,692 495 204 Foreign currency translation 5 481 – – Additions 1,313 904 272 334 Disposals (2) (962) – (43) Balance at end of year 5,431 4,115 767 495

Accumulated depreciation Balance at beginning of year 2,372 1,488 131 78 Foreign currency translation (15) 266 – – Disposals (2) (117) – (18) Depreciation charge for the year 871 735 129 71 Balance at end of year 3,226 2,372 260 131

Book value At beginning of year 1,743 2,204 364 126 At end of year 2,205 1,743 507 364

There are no debts secured over any of the Group’s assets.

12 Investments in subsidiaries (a) Subsidiary companies

Company 2011 2010 US$’000 US$’000 Non current loans to subsidiaries Balance at beginning of year 450,913 398,812 Advances during the year Ophir Holdings Limited 48,801 51,096 Ophir Services Pty Ltd – 1,005 Balance at end of year 499,714 450,913

Allowance for impairment Balance at the beginning of the year (106,122) (104,006) Additional allowance – (2,116) Balance at end of year (106,122) (106,122) Total 393,592 344,791

Book value At beginning of year 344,791 294,806 At end of year 393,592 344,791

Loans to subsidiaries are unsecured, interest free and form part of the parent company’s investments in subsidiaries. The loans have no particular repayment terms and the parent company has indicated that it does not intend to demand repayment in the foreseeable future. The impairment charge primarily relates to a reduction in value of the subsidiaries associated with the write off of exploration expenditure.

Loans to subsidiaries are denominated in US Dollars. 79 Ophir Energy plc Annual Report 2011

12 Investments in subsidiaries continued (b) The parent company has investments in the following subsidiary undertakings: BUSINESS REVIEW

Book value of Book value of Country of Principal investment investment incorporation activity Class of shares Holding 2011 (US$) 2010 (US$) Subsidiaries of Ophir Energy plc Ophir Services Pty Ltd Australia Exploration Ordinary 100% 2 2 Ophir Holdings Limited Jersey C.I. Exploration Ordinary 100% 8 8 Ophir Asia Limited Jersey C.I. Dormant Ordinary 100% – – 10 10

Holding Country of Principal

incorporation activity Class of shares 2011 2010 GOVERNANCE Subsidiaries of Ophir Holdings Limited Ophir AGC (Profond) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Congo (Marine IX) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Equatorial Guinea Holdings Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Gabon (Gnondo) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Gabon (Manga) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Gabon (Mbeli) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Gabon (Ntsina) Limited Jersey C.I. Exploration Ordinary 100% 100%

Ophir JDZ Limited Jersey C.I. Exploration Ordinary 100% 100% FINANCIAL STATEMENTS Ophir Somaliland (Berbera) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Madagascar Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir East Africa Holdings Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir East Africa (1) Limited Jersey C.I. Inactive Ordinary 100% 100%

Subsidiary of Ophir Equatorial Guinea Holdings Limited Ophir Equatorial Guinea (Block R) Limited Jersey C.I. Exploration Ordinary 100% 100%

Subsidiary of Ophir JDZ Limited Ophir Energy Company Nigeria (JDZ) Limited Nigeria Exploration Ordinary 100% 100%

Subsidiaries of Ophir East Africa Holdings Limitedb Ophir Tanzania (Block 1) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Tanzania (Block 3) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir Tanzania (Block 4) Limited Jersey C.I. Exploration Ordinary 100% 100% Ophir East Africa Ventures Limited Jersey C.I. Exploration Ordinary 100% 0%

All subsidiaries have a functional currency of US Dollars with the exception of Ophir Services Pty Ltd which has an Australian Dollar functional currency. 80 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

13 Other financial assets

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Non-Current Security deposits 670 700 387 418

Security deposits are floating interest deposits pledged to third parties or banks as security in relation to the Group’s exploration commitments. There are no receivables that are past due or impaired.

14 Inventory

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Drilling consumables (at cost) 6,233 9,058 – –

15 Trade and other receivables

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Other debtors 8,749 3,070 2,473 665 Amounts due to subsidiary undertakings – – (319) 158 Receivable from joint venture partners (refer Note 18) – 42,225 – – 8,749 45,295 2,154 823

Refer to Note 2.8 for terms and conditions.

As at 31 December 2011, all debtors are current. There are no receivables that are past due or impaired. The Group has no major customers.

Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.

16 Other current assets

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Prepayments 466 130 – – 466 130 – –

17 Cash and short-term deposits

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Cash 65,359 19,925 54,964 4,364 Short-term deposit 331,226 70,000 331,226 70,000 Cash and short-term deposits 396,585 89,925 386,190 74,364

Cash at banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of up to 12 months, depending on the immediate cash requirements of the Group and earn interest at the various short-term deposit rates. There are no deposits that are past due or impaired. 81 Ophir Energy plc Annual Report 2011

18 Trade and other payables BUSINESS REVIEW Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Amounts falling due within one (1) year Trade creditors 4,866 2,121 998 389 Accruals 22,838 15,381 3,009 433 Payables in relation to joint venture partnera – 42,225 – – 27,704 59,727 4,007 822

Refer to Notes 2.11 and 2.14 for terms and conditions.

(a) During the period to June 2011 that Ophir was Operator of the Joint Venture, the Group had a liability in respect of a joint venture partner’s share of liabilities arising under contracts entered into by a subsidiary. This amount was offset by a receivable of the same amount included in Note 15. Owing to the change of Operatorship, the liability does not exist as at 31 December 2011. GOVERNANCE

19 Provisions

Group Company Employee Employee Employee long service Employee long service annual leave leave annual leave leave US$’000 US$’000 US$’000 US$’000 At 1 January 2011 Current 611 – 192 – FINANCIAL STATEMENTS Non-current – 310 – – Arising during the year 373 109 146 – Utilised (164) (35) (96) – At 31 December 2011 Current 820 – 242 – Non-current – 384 – –

20 Called up share capital (a) Authorised

Group & Company 2011 2010 US$’000 US$’000 2,000,000,000 ordinary shares of 0.25p each 7,963 7,963 82 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

20 Called up share capital continued (b) Called up, allotted and fully paid

Group & Company 2011 2010 US$’000 US$’000 225,345,528 ordinary shares of 0.25p in issue at the beginning of the year (Year ended 31 December 2010: 225,025,528) 1,042 1,041 96,351,880 ordinary shares of 0.25p each issued during the year (Year ended 31 December 2010: Nil) 385 – 5,426,493 ordinary shares of 0.25p each issued during the year on exercise of options and warrants (Year ended 31 December 2010: 320,000) 21 1 327,123,901 ordinary shares of 0.25p each at 31 December 2011 (Year ended 31 December 2010: 225,345,528) 1,448 1,042

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.

21 Reserves

Group Company As at As at As at As at 31 Dec 2011 31 Dec 2010 31 Dec 2011 31 Dec 2010 US$’000 US$’000 US$’000 US$’000 Share premium account(a) 789,714 417,048 789,714 417,048

Reserves: Option premium reserve(b) 26,526 23,853 26,526 23,853 Equity component of convertible bond(c) 669 669 669 669 Consolidation reserve(d) (500) (500) – – Special reserve(e) 156,435 156,435 156,435 156,435 Translation reserve(f) 5,880 5,736 11,839 11,839 Accumulated losses (267,112) (248,037) (208,050) (191,140) (78,102) (61,844) (12,581) 1,656

Notes on reserves (a) 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 the Special Reserve. (b) The option premium reserve represents the cost of share-based payments to Directors, employees and third parties. (c) 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. (d) The consolidation reserve represents a premium on acquisition of a minority interest in a controlled entity. (e) The Special Reserve was created on reduction of the Company’s share capital on 26 July 2007. The Special Reserve will be available to offset accumulated losses once all creditors who were in existence at the date of the transfer from share premium have been settled. (f) 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. 83 Ophir Energy plc Annual Report 2011

22 Notes to the statement of cash flows Reconciliation of operating profit to net cash inflow from operating activities: BUSINESS REVIEW

Group Company As at As at As at As at 31 Dec 2011 31 Dec 2010 31 Dec 2011 31 Dec 2010 US$’000 US$’000 US$’000 US$’000 Operating loss before taxation (19,075) (19,278) (16,910) (8,007) Adjustments to reconcile operating loss before tax to net cash flows from operating activities Interest income (834) (533) (815) (500) Depreciation of property, plant and equipment 871 735 129 71 Amortisation of geological databases – 17 – – (Profit)/Loss on disposal of assets (1) 14 – 4 Provision for employee entitlements 283 147 50 5 GOVERNANCE Share-based payments 2,674 825 2,674 825 Exploration expenditure written off 15,688 13,308 – 49 Impairment allowance on intercompany loans – – – 2,116 Exploration recovery on farm out – (4,009) – – Gain on joint venture farm out (13,844) – – – Working capital adjustments (Decrease)/Increase in inventory (4,622) (4,286) – – (Decrease)/Increase in trade and other payables 1,849 (12) (895) (74) Increase/(Decrease) in trade and other receivables (5,887) (860) 3,184 (303) FINANCIAL STATEMENTS

Cash utilised in operations (22,898) (13,932) (12,583) (5,814) Income taxes paid – – – Interest Income 429 589 409 589 Net cash flow used in operating activities (22,469) (13,343) (12,174) (5,225)

23 Interests in jointly controlled assets The Group has the following interests in jointly controlled assets:

Beneficial Beneficial interest interest 2011 2010 Country Asset (%) (%) AGC (Operator) Profond 44.2 83 Congo (Brazzaville) (Operator) Marine IX 48.5 31.5 Equatorial Guinea (Operator) Block R 80 80 Gabon (Operator) Mbeli 45 90 Gabon (Operator) Ntsina 45 90 Gabon (Operator) Manga 85 85 Gabon (Operator) Gnondo 90 90 Madagascar (Operator) Marovoay 80 80 Nigeria – São Tomé/Principe JDZ Block 3 – 4 SADR (Operator) Daora 50 50 SADR (Operator) Haouza 50 50 SADR (Operator) Mahbes 50 50 SADR (Operator) Mijek 50 50 Somaliland (primarily onshore) (Operator) Berbera 75 75 Tanzania Block 1 40 40 Tanzania Block 3 40 40 Tanzania Block 4 40 40 Tanzania (Operator) East Pande 70 – 84 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

23 Interests in jointly controlled assets continued Capital commitments relating to these projects are included in Note 24(b). There are no contingent liabilities associated with these projects.

The Group relinquished its interest in JDZ Block 3 during the period. The permit was exited in good standing.

The former Operator of the Marine IX Block in Congo (Brazzaville) withdrew from the block during the period. The Group and the remaining partner elected to remain in the permit. The former Operator’s equity has been assigned pro rata between the partners and the Group has assumed the role of Operator from 1 May 2011.

Farm out arrangements The Group entered into a farm out arrangement with Noble Energy Inc (“Noble”) to share the costs and risks associated with exploration activities on the AGC Profond block. Noble contributed US$20 million to the Group and in return received 17.5% of the Group’s share of the asset and Rocksource 12.5%(indirectly from Ophir, in return for such amount not being transferred to Rocksource under the Rocksource farm out agreement). Noble will contribute to all costs and capital expenditure consistent with its interest. The Group also farmed out a further 8.8% interest in the AGC Profond Block to FAR Limited (“FAR”). FAR will contribute a minimum of 8.8% of all costs and capital expenditure going forward. The Group remains operator of the block.

The Group also entered into a farm out arrangement with Petróleo Brasileiro (”Petrobras”) to share the costs and risks associated with exploration activities on the Gabon Mbeli and Ntsina blocks. Petrobras contributed US$1.9 million and in return received a 50% interest in the blocks. Petrobras will contribute a minimum of 50% of all costs and capital expenditure going forward. The Group remains operator of the block.

Farm in arrangements The Group has entered into a farm in arrangement with Ras Al Khaimah Gas Tanzania Ltd (“RAKGas”) to share the costs and risks associated with exploration activities in the Tanzania East Pande block. The Group has acquired a 70% interest and operatorship of the block in return for US$4million. The Group will also fund 100% of the cost of a 3D seismic survey and reimburse certain back costs.

24 Expenditure commitments (a) Lease commitments At 31 December 2011 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:

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Due within one (1) year 1,296 1,531 557 665 Due later than one (1) year but within five (5) years 1,772 2,638 669 1,030 After five (5) years 10 - - - 3,078 4,169 1,226 1,695

(b) Exploration expenditure commitments 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 below are an estimate of the net cost to the Group of performing these work programmes.

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Due within one (1) year 113,571 37,211 – – Due later than one (1) year but within two (2) years 775 1,138 – – Due later than two (2) years but within five (5) years 60 728 – – 114,406 39,077 – – 85 Ophir Energy plc Annual Report 2011

24 Expenditure commitments continued (c) Rig commitments The Company is party to a rig sharing agreement with a major oil company. The Agreement provided availability to BUSINESS REVIEW the use of the West Polaris drillship for up to 300 days over an approximate two (2) year period from 1 January 2010. The arrangement is flexible and allows the Group, subject to specified notice periods, to defer or hand back periods (“contract slots”) in the scheduled rig programme which are allocated to the Group. During 2011 the Company handed back all days available to the Group during 2011/12.

25 Contingent Liabilities An individual has commenced action against the Group relating to an evaluation of an interest that was held in exploration blocks within the portfolio. A trial date has not been set and therefore it is not practicable to state the timing of any payment. The Group has taken the view that the action is without merit and accordingly has estimated that no liability will arise as a result of proceedings and no provision for any liability has been made in these financial statements.

26 Borrowing facilities The Company and the Group had no borrowing facilities as at 31 December 2011 (2010: Nil). GOVERNANCE

27 Financial risk management and financial instruments Strategy and objectives The Group’s principal financial assets and liabilities comprise cash and short-term deposits and various items, such as receivables and trade and other payables, which arise directly from its operations. 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 to assist in the identification and evaluation of significant financial risks. Where appropriate, consultation is sought with an external advisor to determine the appropriate response to identified FINANCIAL STATEMENTS 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 foreign currency, interest rate, liquidity and credit risks.

(a) Significant accounting policies Details of significant accounting policies and methods adopted in respect of each class of financial assets, financial liability and equity instrument are disclosed in Note 2 to the financial statements.

(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 Company or Group. The Company and Group’s maximum exposure to credit risk of third parties is the aggregate of the carrying value of its security deposits, cash and short-term deposits, and trade and other receivables.

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. 86 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

27 Financial risk management & financial instruments continued (b) Credit risk continued

Credit quality of financial assets

Equivalent S&P rating* Internally rated A-1 A-2 No default and above and below customers Total Year ended 31 December 2011 Current financial assets Cash and cash equivalents 376,229 20,320 – 396,549 Trade and other receivables – – 7,740 7,740 376,229 20,320 7,740 404,289

Non-current financial assets Security deposits – 670 – 670 – 670 – 670

* The equivalent S&P rating of the financial assets represents that rating of the counterparty with whom the financial asset is held rather than the rating of the financial asset itself.

Equivalent S&P rating* Internally rated A-1 A-2 No default and above and below customers Total Year ended 31 December 2010 Current financial assets Cash and cash equivalents 69,649 20,213 – 89,862 Trade and other receivables – – 3,070 3,070 69,649 20,213 3,070 92,932

Non-current financial assets Security deposits – 700 – 700 – 700 – 700

* The equivalent S&P rating of the financial assets represents that 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 short-term deposits is managed by limiting the term of deposits to periods of less than six months and selecting counterparty financial institutions with reference to long and short-term credit ratings published by Standard & Poors.

Fair values The maximum exposure to credit risk is the fair value of security deposits and receivables. Collateral is not held as security.

The fair values and carrying values of non-current receivables of the Group are as follows:

2011 2010 Carrying Carrying amount Fair value amount Fair value US$’000 US$’000 US$’000 US$’000 Security deposits 670 631 700 652 670 631 700 652 87 Ophir Energy plc Annual Report 2011

27 Financial risk management & financial instruments continued (b) Credit risk continued BUSINESS REVIEW The fair values and carrying values of non-current receivables of the Company are as follows:

2011 2010 Carrying Carrying amount Fair value amount Fair value US$’000 US$’000 US$’000 US$’000 Security deposits 387 387 418 418 387 387 418 418

There are no non-current receivables in the Company.

The fair values are based on cash flows discounted at a rate reflecting current market rates adjusted for counter

party credit risk (refer Note 27(g)). GOVERNANCE

(c) Interest rate risk As of 31 December 2011, the Group’s interest rate risk is limited to interest receivable on deposits and bank balances as it has no borrowings.

The Group’s exposure to the risk of changes in market interest rate relates primarily to the Group’s cash assets held primarily 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.

FINANCIAL STATEMENTS Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Financial assets Security deposits 670 700 387 418 Cash and cash equivalents 396,585 89,925 386,190 74,364 Net exposure 397,255 90,625 386,577 74,782

The following table demonstrates the sensitivity to a reasonable possible change in interest rates with all other variables held constant, of the Group’s loss before tax for a 12 month period through the impact on floating rate deposits and cash equivalent:

Group Company Effect on loss Effect on loss Effect on loss Effect on loss Increase/decrease in interest rate 31 Dec 2011 31 Dec 2010 31 Dec 2011 31 Dec 2010 +0.5% 1,986 583 1,935 524 -0.5% (1,986) (583) 1,935 (524)

The sensitivity in 2010 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 Company and all of its principal operating subsidiaries, with the exception of Ophir Services Pty Ltd, have adopted US Dollars as their functional and reporting currencies as this represents the currency of their 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 in Pounds Sterling and Australian Dollars to meet commitments in those currencies. 88 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

27 Financial risk management & financial instruments continued As at 31 December 2011, the Group’s predominant exposure to foreign exchange rates related to cash and cash equivalents held in Pounds Sterling by companies with US Dollar functional currencies.

(d) Foreign currency risk continued At the Balance Sheet date, the Group had the following exposure to Pounds Sterling (“GBP”), CFA Franc BEAC (“XAF”), Tanzania Shilling (“TZS”), Euros (“EUR”) and Australian Dollars (“AUD”) foreign currency that is not designated in cash flow hedges:

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Financial assets Cash and cash equivalents AUD 382 150 – – EUR 176 106 48 48 GBP 23,909 263 23,891 189 TZS 5 29 – – XAF 176 340 – – 24,648 888 23,939 237

Financial liabilities Trade and other payables AUD (213) (184) – – EUR (105) (278) – – GBP (1,160) (487) (998) (384) (1,478) (949) (998) (384)

Net Exposure 23,170 (61) 22,941 (147)

At 31 December 2011, had the US Dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows:

Post tax loss Other comprehensive higher/(lower) income higher/(lower) 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Group US Dollar to GBP Sterling +5% (2009: +5%) (1,137) 11 – – US Dollar to GBP Sterling -5% (2009: -5%) 1,137 (11) – – US Dollar to AUD +5% (2009: +5%) 8 (2) 7 30 US Dollar to AUD -5% (2009: -5%) (8) 2 (7) (30) US Dollar to EUR +5% (2009: +5%) 3 (9) – – US Dollar to EUR -5% (2009: -5%) (3) 9 – – US Dollar to XAF +5% (2009: +5%) 9 17 – – US Dollar to XAF -5% (2009: -5%) (9) (17) – – US Dollar to TZS +5% (2009: +5%) – 1 – – US Dollar to TZS -5% (2009: -5%) – (1) – –

Parent US Dollar to GBP Sterling +5% (2009: +5%) (1,145) 10 – – US Dollar to GBP Sterling -5% (2009:-5%) 1,145 (10) – – US Dollar to EUR +5% (2009: +5%) (2) (2) – – US Dollar to EUR -5% (2009:-5%) 2 2 – – 89 Ophir Energy plc Annual Report 2011

27 Financial risk management & financial instruments continued 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 BUSINESS REVIEW years’ historical movements and economic forecaster’s 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 AUD with the “new spot rate”. This methodology reflects the translation methodology undertaken by the Group.

(e) Liquidity risk The Group has a liquidity risk arising from its ability to fund its liabilities and exploration commitments. This risk is managed by ensuring that the Group has sufficient funds to meet those commitments by monitoring the expected total cash in and out flows on a continuous basis.

All of the Group and Company’s trade creditors and other payables (Note 18) are payable in less than six months.

(f) Derivative instruments The Company and Group did not make use of derivative instruments during the year or during the prior year. GOVERNANCE

(g) Disclosure of fair values The carrying value of security deposits and financial liabilities disclosed in the financial statements as at 31 December 2011 approximate their fair value for both the Company and Group.

The Group uses various methods in estimating the fair value for financial instruments carried at fair value in the financial statements. The methods comprise: Level 1 the fair value is calculated using quoted prices in active markets. Level 2 the fair value is estimated using inputs other than quoted prices included in Level 1 that are

observable for the asset of liability, either directly (as price) or indirectly (derived from prices). FINANCIAL STATEMENTS Level 3 the fair value is estimated using inputs for the asset or liability that are not based on observable market date.

Fair value hierarchy

Group Company 2011 2010 2011 2010 US$’000 US$’000 US$’000 US$’000 Level 1 – – – – Level 2 – – – – Level 3 670 700 387 418 670 700 387 418

There were no transfers between levels during the year.

(h) Capital management Capital consists of equity attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to ensure it has sufficient funds to carry out its exploration and potential development activities. At 31 December 2011 the Group had no debt, other than payables as part of normal working capital.

28 Related party transactions (a) Identity of related parties The Company has related party relationships with its subsidiaries (refer Note 12), its Directors and companies associated with its Directors identified in the following paragraph.

Recharges from the Company to subsidiaries in the year were US$4,457,140 (2010: US$3,523,210). Transactions between the Company and its subsidiaries have been eliminated on consolidation. 90 Ophir Energy plc Annual Report 2011

Notes to the financial statements continued

28 Related party transactions continued (b) Transactions with key management personnel The Company made payments of US$47,868 (year ended 31 December 2010: US$93,956) to Vectis Petroleum Limited, a company associated with Mr J Lander, for the provision of Mr Lander’s service as a Director and US$32,204 (year ended 31 December 2010: US$107,128) to Barbican Global Limited, a company associated with Mr L Powell, for the provision of Mr Powell’s service as a Director.

29. Post balance sheet events On 31 January, 2012 Ophir contracted the Ocean Rig’s “Eirik Raude” a dynamically positioned semi-submersible rig, to drill its Equatorial Guinea exploration campaign. Ophir plans a 60 day programme beginning in H1 2012 of three firm wells, plus one contingent well in its operated Block R.

On 2 February 2012, the Group acquired 100% of the share capital of Dominion Petroleum Ltd (“Dominion”), a group of companies operating in the oil and gas exploration industry. The Group announced that the scheme of arrangement approved by Dominion’s shareholders on 12 December 2011 was sanctioned by the Supreme Court in Bermuda effective on 1 February 2012. The transaction has therefore closed and the entire issued share capital of Dominion is now owned by Ophir. The consideration of US$220,221,437 was satisfied by a combination of cash and equity as shown below.

The enlarged footprint positions Ophir as the leading independent in the East African offshore play, with a portfolio of 7 blocks offshore Tanzania and Kenya, 4 of which are operated by the Ophir. The enlarged portfolio comprises 22 licences in 11 jurisdictions.

The provisional acquisition accounting is as follows:

Fair Value 2011 US$’000 Intangible assets (oil & gas exploration) 230,500 Property, plant & equipment 441 Current assets 22,972

Liabilities (34,097)

Net assets 219,816 Minority interest (140) Net assets attributable 219,676 Goodwill arising on acquisition 545 Cost 220,221 Consideration: Fair value of shares issued 181,539 Cash paid 38,682 220,221

The Group issued 38,790,455 new shares in consideration for the entire share capital of Dominion Petroleum Ltd. The fair value of the shares is the published price of the shares of the Group at the acquisition date. Therefore, the fair value of the share consideration given is $181,539,000.

The fair values disclosed are provisional due to the timing and complexity of the acquisition. The Group is continuing to refine the fair value of assets and liabilities identified as part of the acquisition. The review of the fair value of the assets and the liabilities acquired will continue for 12 months from the acquisition date.

In April 2012 the Group completed an equity placing of 30.5million new ordinary shares of 0.25 pence at a price of 495 pence raising $242million (£150.9million). 91 Ophir Energy plc Annual Report 2011

Shareholder information

Registrars Registered and Other Offices Financial Calendar The Company has appointed Capita The Company’s registered office Registrars to maintain its register and head office is: BUSINESS REVIEW of members. Shareholders should 55 Grosvenor Street, Annual General 19 June contact Capita using the details London W1K 3HY Meeting 2012 below in relation to all general Telephone: +44 (0)20 7290 5800 Half year end 30 June enquiries concerning their Website: www.ophir-energy.com 2012 shareholding: Other offices are located at: Half year results 23 August Capita Registrars 464 Hay Street announcement 2012 The Registry Subiaco, WA 6008 34 Beckenham Road PO Box 463 Next financial 31 Beckenham, Kent BR3 4TU West Perth WA 6872 year end December Telephone: 0871 664 0300* Australia 2012 International dialling: +44 20 8639 3399 Plot 1228, Block 2 Full year results March GOVERNANCE Website: www.capitaregistrars.com Masaki Street announcement 2013 Msasani Peninsula *Lines are open Monday – Friday PO Box 23184 Trading Market and from 9.00am – 5.30pm, excluding Dar es Salaam Shareholder Profiles bank holidays. Calls to 0871 United Republic of Tanzania Ophir Energy plc’s shares are numbers are charged at 10p per traded on the London Stock minute from a BT landline. Other APDO 274 Exchange with ticker OPHR. telephone providers’ costs may vary. Ophir House The Company’s SEDOL number Km5, Carretera Aeropuerto is B24CT19 and ISIN number is Malabo GB00B24CT194.

Equatorial Guinea FINANCIAL STATEMENTS

Shareholder profile by size of holding as at 31 December 2011

No. of % of Shares held % of Range Holders total 31.12.2011 total 1–1,000 64 16.12% 34,469 0.01% 1,001–10,000 104 26.20% 461,270 0.14% 10,001–100,000 89 22.42% 3,706,312 1.13% 100,001–1,000,000 99 24.94% 36,724,788 11.23% 1,000,001– highest 41 10.32% 286,197,062 87.49% 397 100.00% 327,123,901 100.00%

Shareholder profile by category as at 31 December 2011

No. of % of Shares held % of Category Holders total 31.12.2011 total Private shareholders 73 18.39% 18,074,936 5.53% Investment Trusts & Pension Funds 6 1.51% 3,521,960 1.07% Institutional investors 318 80.10% 305,527,005 93.40% 397 100.00% 327,123,901 100.00%

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. 92 Ophir Energy plc Annual Report 2011

Shareholder information continued

Unsolicited Mail Advisors Legal Advisors The Company is required by law Auditors Linklaters LLP to make its share register available Ernst & Young LLP One Silk Street on request to unconnected One More London Place London EC2Y 8HQ organisations. As a consequence, London SE1 2AF Telephone: +44 (0)20 7456 2000 shareholders may receive Telephone: +44 (0)20 7951 2000 unsolicited mail, including mail Financial PR Advisors from unauthorised investment Joint Brokers FTI Consulting firms. If you wish to limit the amount J.P. Morgan Cazenove Holborn Gate of unsolicited mail received, please 125 London Wall 26 Southampton Buildings contact the Mailing Preference London EC2Y 5AJ London WC2A 1PB Service, an independent organisation Telephone: +44 (0)20 7742 4000 Telephone: +44 (0)20 7831 3113 whose services are free for consumers. Further details Oriel Securities Limited can be obtained from: 150 Cheapside London EC2V 6ET The Mailing Preference Service Telephone: +44 (0)20 7710 7600 FREEPOST 29 LON 20771 RBC Capital Markets London W1E 0ZT 71 Queen Victoria Street Telephone: 0845 703 4599 London EC4V 4DE Website: www.mpsonline.org.uk Telephone: +44 (0)20 7653 4000

Further information on share fraud and unauthorised investment firms targeting UK investors may be obtained from the website of the Financial Services Authority: (http://www.fsa.gov.uk/pages/ consumerinformation/ scamsandswindles/investment_ scams/boiler_room/index.shtml)

Ophir Energy plc Annual Report and Accounts 2011

Ophir Energy plc Registered office: 55 Grosvenor Street London W1K 3HY United Kingdom T +44 (0)20 7290 5800 F +44 (0)20 7290 5821 www.ophir-energy.com