Ophir Energy plc Energy plc Annual Report and ... Farm out deal with Petrobras Participaciones S.L ... mmboe and net risked prospective

Ophir Energy plcAnnual Report and Accounts 2011

Ophir Energy plc A

nnual 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 Review01 Key highlights02 Chairman’sandChiefExecutiveOfficer’s

Joint Review06 Our strategy08 Review of operations20 Financial review22 Corporate and Social Responsibility26 Principal risks and uncertainties

Governance28 Board of Directors30 Corporate Directory31 Directors’ Report35 Corporate Governance Report45 Remuneration Report53 Statement of Directors’ Responsibilities54 Independent Auditor’s Report

Financial statements56 Group income statement and statement

of comprehensive income57 Group statement of changes in equity58 Company statement of changes in equity59 Groupstatementoffinancialposition60 Companystatementoffinancialposition61 Groupstatementofcashflows62 Companystatementofcashflows63 Notestothefinancialstatements91 Shareholder information

Ophir Energy plc Annual Report 201101B

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Key highlightsOur year in review

March 2011Portfolio managementWithdrawal from Block3 PSC, JDZ.

Farm out deal with FAR Limited (“FAR”) for 8.8% interest in AGC Profond Block.

Acquired option for a 25% interest from FAR in the Sangomar Offshore,

Rufisque Offshore and Sangomar Deep offshore blocks in Senegal.

Farm in deal with Ras Al Khaimah Gas Tanzania (“RaKGas Tanzania”) for 70% interest in the East Pande Block, offshore/onshore Tanzania.

January 2011Seismic acquisition5,000km2 3D seismic acquisition commenced in Blocks 1, 3 and 4, in Tanzania.

April 2011DiscoveryDrilled Chaza-1 Block 1, Tanzania.

Gas discovery.June 2011Portfolio managementFarm out deal with Noble Energy Inc (“Noble”) for 30% interest in AGC Profond Block.

Farm out deal with Petrobras Participaciones S.L (“Petrobras”) for 50% interest in Mbeli and Nstina blocks, Gabon.

September 2011OperatorshipTransfer of operatorship in East Pande block, Tanzania from RAKGas Tanzania to Ophir.

July 2011IPOInitial Public Offering on the Main Market of the London Stock Exchange, raising net proceeds of approximately US$352M.

Drilled Kora-1, AGC Profond Block, in the Senegal Guinea Bissau Common Zone (AGC). No significant oil or gas.

Transfer of Operatorship in Blocks 1,3 and 4, Tanzania to BG Group plc (“BG”).

2,200 km2 3D seismic acquisition commenced in Tanzania (East Pande).

2,100 km2 3D seismic acquisition commenced in Gabon (Mbeli and Ntsina).

February 2012Dominion PetroleumOphir acquires the entire issued share capital of Dominion Petroleum Ltd.

October 2011AcquisitionOphir makes recommended offer to acquire the entire issued share capital of AIM listed Dominion Petroleum Ltd.

Expansion of Block R PSC in EG.December 2011Seismic acquisitionLetter of Intent to secure the use of the Eirick Raude rig for a three well sequence in Block R to commence Q2 2012.

April 2012PlacingEquity placing raises gross proceeds of US$241.8M.

March 2012DiscoveryOphir announces that the Jodari-1 well in Block 1 offshore Tanzania is a 4.5 TCF gas discovery.

Ophir Energy plc Annual Report 201102

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 ManagementOphir continues to actively manage its portfolio to best deploy its capital resources against the most prospective acreage and plays. In 2011 the Group farmed out interests in the Mbeli and Ntsina licences in Gabon to Petrobras and an interest in the AGC Profond licence to Noble Energy. The Group acquired interests in the East Pande licence in Tanzania by way of a farm in agreement with RAKGas and acquired five further exploration interests via the Dominion transaction in Block 7 (Tanzania), Blocks L9 and L15 (Kenya), Area 4B (Uganda) and Block 5 (DRC). Ophir currently has interests in 22 licences in 11 countries and jurisdictions, 14 of which are operated, 18 of which are offshore and 4 of which are onshore.

Chairman’s and Chief Executive Officer’s Joint Review

2011 was dominated by Ophir’s IPO, which raised a total of US$384 million inclusive of the greenshoe. The IPO provided the Group with a strong cash position of US$396.6 million at year end.

Corporate Overview2011 saw Ophir successfully list on the main board of the London Stock Exchange. Ophir joined the FTSE 250 in November 2011. The IPO was set against a backdrop of turbulent capital markets and relatively low levels of new equity issuance and Ophir ended the year as the best performing IPO stock for 2011.

In October 2011 Ophir announced a proposal to acquire the share capital of AIM-listed Dominion Petroleum Ltd in an all-stock transaction. The acquisition closed in February 2012 and expanded

the Group’s portfolio in East Africa via the addition of five exploration licences, with three being complementary to Ophir’s existing deepwater portfolio. As a result Ophir now has one of the largest portfolios of operated and non-operated acreage in the exciting emerging offshore East African play.

Operationally, 2011 saw two wells completed. The Chewa-1 well in Tanzania was the third in a series of back-to-back gas discoveries in Tanzania. The Kora-1 well in the AGC joint development area was unsuccessful but costs were


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Financial2011 was dominated by Ophir’s IPO, which raised a total of $384 million inclusive of the greenshoe. The IPO provided the Group with a strong cash position of $396.6 million at year end. A further equity placing in April 2012 raised an additional gross US$242 million. We are fully funded to finance the planned exploration programmes for the next 12 months.

Board, Management and StaffThe evolution of Ophir’s Board during 2011 reflects the transition to being a public company. During 2011 Dr Nick Cooper, Mr Ron Blakely and Mr Patrick Spink joined the Board while Mr Rajan Tandon appointed Mr Jaroslaw Paczek as his alternate. At IPO Mr Michael Cohen, Mr Mikki Xayiya left the Board, Ms Yvonne Holm and Mr John Morgan left later in the year. 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.

Ophir’s senior management team was expanded in June 2011 with the appointment of Dr Nick Cooper as Chief Executive Officer, replacing Dr Alan Stein who held that position since formation of the Group in 2004. Alan remains an active member of the executive team but has signalled his intention to step down from the Board after the Annual General Meeting (“AGM”) in June 2012. In December 2011, Yvonne Holm resigned from her position of Chief Financial Officer and Director, and in January 2012, Lisa Mitchell, previously Ophir’s Group Financial Controller, was appointed as CFO.

At the heart of our Group is a small yet dedicated and extremely professional group of staff and associates who have consistently delivered outstanding performance.

This last year has seen the team raise the bar once again. Their tireless efforts might sometimes 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 reported incidents across the diverse range of operations undertaken across the African continent in often challenging conditions.

Corporate ResponsibilityCorporate Responsibility forms a key part of Ophir’s operating culture. The Group strives to make a positive impact in the development of the countries in which it operates. Ophir’s goal is to establish a sustainable, balanced approach to its business which includes assisting local communities wherever possible through such initiatives as education, protection of the environment and the creation of broad, lasting economic development. We understand that by taking a pragmatic, long-term, positive approach to corporate responsibility it will provide lasting dividends to the Group and the countries in which we operate.


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

At the heart of our Company is a small yet dedicated and extremely professional group of staff and associates who have consistently delivered outstanding performance.

In Tanzania, Ophir has continued to be actively involved in the development of Mtwara port (and its attendant services). Ophir was responsible for the initial development of this facility in partnership with the Tanzanian authorities. In 2011 the port development scheme expanded rapidly as more oil and gas operating companies joined Ophir, resulting in the transformation of a previously underutilised port into a thriving operations base which has subsequently received ‘Duty Free’ status to underscore its importance

to the development of the Mtwara region. There has been a large positive impact in the local economy as the community shares in this development through training, employment and improved infrastructure. In December 2011, parts of the main city of Dar es Salaam suffered severe flooding, making many citizens homeless. Ophir assisted relocation efforts by swiftly donating 30 large water storage tanks to the victim’s resettlement site. This initiative secured adequate sanitation and was vital to reduce disease risk for the flood victims whilst in their temporary accommodation.

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 Programme (“ITNHGE”), a collaborative educational initiative run for the benefit of adult students in Equatorial Guinea.

OutlookThe oil and gas industry’s focus on African exploration has risen dramatically in 2011 and early 2012. The pace of activity on both the East African offshore gas play and the West African pre-salt play have increased as major oil companies have entered the region and made significant discoveries. This has had important implications for Ophir’s portfolio.

In the East African gas play Anadarko and ENI are reported to have discovered more than 40 TCF of gas in Mozambique with the majority being found in extensive basin 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.


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In the adjacent Tanzania Block 2 Statoil’s recent Zafarani-1 discovery appears to have de-risked elements 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. 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 wells currently being drilled by the Ophir/BG joint venture in Blocks 1, 3 and 4, offset wells with relevance to Ophir acreage will be drilled in the next few months by Petrobras and Statoil in Tanzania, Anadarko and ENI in Mozambique and Apache in Kenya.

In West Africa, considerable recent success has occurred in the deepwater pre-salt play with notable successes by both Cobalt and Maersk in Angola. Ophir has a strong acreage position in this deepwater play, with four licences in Gabon and one in Congo-Brazzaville. In Gabon, the Group has recently completed two 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.

In 2012 Q2, the Group will commence a three well programme in Equatorial Guinea targeting further gas discoveries to aggregate into an LNG development. Already the Group is planning for a further 12 well programme in 2013 contingent on additional financing.

The outlook for Ophir in 2012 is promising. The Group enters 2012 with an extensive portfolio of interests across some of the most interesting exploration plays in Africa. The Group is well placed to meet its exploration and appraisal forecast expenditure for at least the next 12 months.


Our strategy


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Experienced and motivated management teamOphir 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 direction of explorationThe 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 managementThe 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.

Establish relationships in AfricaOphir’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.


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 4The Ophir-operated three well programme which commenced in 2010 and was completed in 2011 has confirmed the prospectivity of the Ruvuma and Mafia Deep basins and has proven the presence of potential reservoir facies in both the Tertiary and Cretaceous 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,

Review of operations

2011 was another strong year for Ophir’s Operations team with the completion of a successful, operated drilling campaign in Tanzania and the completion of a well drilled in the AGC. To date Ophir has now operated 9 deepwater wells in four countries with 5 of them resulting in commercial discoveries.

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


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these are believed to contain more than 30TCF1 in gross un-risked prospective resources.

Each of the three Tanzanian deepwater wells have demonstrated the presence of multiple play systems, all with significant follow-up potential. Although each has encountered gas, the Group believes that, based upon detailed technical studies, liquids are also possible in the future. These studies have characterised a number of potential hydrocarbon source rocks, ranging in age from Permo-Triassic to Eocene. The three wells drilled to date have targeted the centre of the basin, 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.

The Ophir-operated “Deepsea Stavanger” drilling campaign, which had commenced in 2010, continued into 2011 with further success at Chaza-1 in Block 1. The well was drilled in 982m of water, reached a TD at a depth of 4,933m and was completed as the third consecutive successful gas discovery in the programme. Chaza-1 encountered a gross 27m gas column in a Miocene channel system and, together with the discoveries at Pweza-1 and Chaza-1, takes the total contingent resources discovered in Blocks 1, 3 and 4 to 2.4TCF with a further 1.6TCF of low risk prospective resources.

1 Management estimate


Review of operations continued

Each of the three discoveries had an associated amplitude seismic anomaly which was interpreted to be a Direct Hydrocarbon indicator (“DHI”). Data from the wells has now been used to further calibrate the seismic attributes. This analysis will be used to further de-risk the exploration portfolio and focus the future drilling programme.

Blocks 1, 3 and 4 are large, with a combined area of more than 20,000km2 after the statutory relinquishments. The original 3D Kusini and Mafia 3D seismic programme covered 3,500km2 and delineate only a small portion of the possible play types. As a consequence a further seismic acquisition programme was planned outboard of the Mafia survey in Blocks 3 and 4 across the “Seagap Ridge”, a long-lived feature within the basin which it is believed could be the focus of both oil and gas generation and

migration. A further survey was also planned northwest of the Kusini survey in Block 1 to test the extension of the play system proven by Chaza-1. The second seismic programme operated by Ophir, which utilised the Fugro “GeoCaspian” vessel, commenced during January 2011 with acquisition of the Mafia East seismic survey in Blocks 3 and 4 where 3,250km2 of data were acquired in 44 days. The vessel subsequently moved to Block 1 where it acquired 1,900km2 of data in 35 days on the Kusini extension survey. The programme was completed on 8 April 2011 and the GeoCaspian released with no LTIs or security-related incidents. Pre-stack Depth Migration processing of these surveys was completed during the year and the data has been used to mature additional exploration prospects for inclusion in future drilling campaigns. Even after these new surveys, less than half the area

of the three PSAs has been covered with 3D data and further seismic acquisition is anticipated during 2012.

The Group was originally awarded a 100% interest in Block 1 on 29 October 2005. Blocks 3 and 4 were subsequently awarded on 19 June 2006, again on a 100% basis. TPDC has back-in rights of 12% in Block 1 and 15% in Blocks 3 and 4.

In April 2010 the Group entered into a farm out agreement with BG Group for a 60% interest in each Block, with Ophir retaining the remaining 40%. Under the terms of the farm out agreement BG had the right to take over Operatorship after the completion of the first three wells and the Mafia East/Kusini Extension 3D seismic acquisition programme and consequently on 1 July 2011 operatorship of all three Blocks was formally transferred to BG. As part of this arrangement


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BG also took over operatorship of the Mtwara port facility on behalf of the other participating operators (Ophir, Petrobras and Statoil). During 2011 the base has been upgraded to accommodate multiple operators working simultaneously.

Ophir shares BG’s optimism about the commerciality of the discoveries and the Joint Venture has commenced development planning for a two train onshore LNG facility In Tanzania. Screening work has begun to identify a potential site for an onshore LNG export facility and environmental assessments will commence during 2012.

Further drilling is required to quantify the scale of the hydrocarbon resource and the 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 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), and Papa-1 (formerly 3A). A further two wells are expected to be spudded during 2012 and the programme will continue into 2013.

The Group has recently announced the results of the Jodari-1 well drilled during Q1 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 3.4TCF.

Capitalised Expenditure (as at 31 December)

51% Equatorial Guinea 40% Tanzania 5% Gabon 2% Madagascar 2% East Pande



Tanzania – East PandeOphir completed its farm in to the 7,500km2 East Pande Block on 29 March 2011. The Group now holds 70% equity, with Rakgas holding the remaining 30%, and Ophir has assumed operatorship of the Block. East Pande lies to the west of Blocks 1, 3 and 4 and is believed to contain the up-dip extension of the currently identified Tertiary and Cretaceous intraslope play systems, some of which have been proven in the deep water. Regional geoseismic studies suggest that the East Pande Block’s location towards the rim of the basin may be too mature for liquids and gas generation.

The 2D seismic data coverage in the Block is sparse at present although a number of potentially attractive leads have been identified at different stratigraphic levels. These leads are potentially large

with volume estimates in excess of 500mmbbls but are currently high risk due to the limited data coverage. A 12 month extension to the permit term was granted to allow Ophir sufficient time to acquire, process and interpret a 3D seismic survey with a view to entering the next PSA term and a future drilling programme.

At year end the contracting process was completed and Fugro were mobilising the MV “Geo Caribbean” to acquire a 2,100km2 3D survey. Data from this survey should be available in the first half of 2012 to facilitate a drilling campaign late in 2012 or early in 2013. Any discoveries in East Pande are likely to be close to the export pipeline which will be used to transport gas to any future onshore LNG plant supplied from Blocks 1, 3 and 4.

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.


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Equatorial Guinea – Block RBlock R is located in the south eastern part of the Niger Delta, close to numerous oil and gas discoveries in the Nigerian sector. The licence, which covered an area of 1,674km2 at the start of 2011, was originally awarded in April 2006. Ophir drilled three wells on the Block in 2008, two of which (Fortuna-1 and Lykos-1) were commercial gas discoveries. The discoveries at Fortuna (269bcf of contingent resources, 572bcf of risked prospective resources) and Lykos (91bcf of contingent resources, 60bcf of risked prospective resources) have substantially de-risked a new play fairway at the front of the Niger Delta thrust belt. These discoveries, together with the additional 10TCF of unrisked prospective resources which had been identified prior to the addition of the former Block C, will, it is believed, be sufficient for a commercial export gas development. The gas is dry, with no CO2 or H2S, making it ideal for liquefaction.

Equatorial Guinea has an established 3.4mmtpa LNG plant at Punta Europa (EGLNG 1) that is operated by Marathon with Sonagas, Mitsui and Marubeni as JV partners. Gas is transported from the Alba Field (Operated by Marathon with Gepetrol as a JV partner) by pipeline to the Punta Europa plant and the resulting LNG is sold to BG through a sale and purchase agreement where it is marketed to the Far East. The Government of Equatorial Guinea believe that sufficient gas has been discovered in the country to warrant a second LNG train and have publicly expressed their support for a second onshore plant, to be built adjacent to Train 1. The feedstock gas for this is likely to come principally from Block R, although the recent discoveries which have been made by Noble Energy in Block I may provide additional gas to the project over time.

Equatorial Guinea

Significant progress was made during 2011 on the commercialisation of the Fortuna and Lykos gas discoveries.

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


Significant progress was made during 2011 on the commercialisation of the Fortuna and Lykos gas discoveries. The Government of Equatorial Guinea (“GEG”) has established a project delivery team (“PDT”) which will be accountable for ensuring that the gas resources in the country are developed effectively. This team consists of representatives from the MMIE, the National Oil Company (GePetrol) and the National Gas Company (Sonagas). A Memorandum of Understanding (“MoU”) was signed on 31 March 2011 by the relevant stakeholders, including Ophir, committing to support the favoured development plan, which would see gas from Block R transported by a sub-sea pipeline to a newly constructed second LNG train at Punta Europa on Bioko Island. Subsurface and engineering studies have commenced on this.

To increase commercial optionality, Ophir has also explored the possibility of an alternative development utilising floating LNG (“FLNG”) technology. The dry nature of the gas, together with the benign metocean conditions in the Gulf of Guinea, makes this an ideal location for such a development. Ophir believes that FLNG technology is now sufficiently advanced to provide a viable alternative to a conventional onshore LNG scheme. It will continue to be carried as an alternate option

until the project Final Investment Decision (“FID”) which is currently planned for 2013. The current exploration term was extended by 12 months and now expires on 18 April 2013. This provides additional time for Ophir to carry out further exploration and appraisal drilling prior to the end of the exploration period. A further step in the commercialisation process occurred in November 2011 when Block C (located to the northwest of Block R) was appended to Block R. The additional new acreage, which covers an area of 773km2, increases the area of Block R to 2,447km2. The acreage had previously been relinquished by Repsol and Exxon and includes two gas discoveries (Oreja Marina and Estrela del Mar which together contain c. 250bcf of dry gas) as well as the Tonel prospect with prospective resources of 510bcf. Ophir has committed to drill a three well programme, including the Tonel prospect. The additional acreage increases the portfolio of drilling options available to Ophir as well as providing additional proven gas resources. These will

provide greater flexibility in reaching the 2.5TCF threshold volume which is believed to be necessary to commit to a Train 2 development.

At year end preparations were underway for a second drilling campaign which is expected to commence in Q2 2012. The sixth generation deepwater drill rig the “Eirik Raude” and ancillary services have been secured. The programme is likely to consist of 3 firm and one contingent well covering a mix of both exploration and appraisal targets.

Ophir has been able to retain a high equity in the project and now believes that 2012 will be the appropriate time to bring in a suitably qualified joint venture partner. Preliminary approaches have been received from a number of companies and it is hoped that a farm out will be concluded after the 2012 drilling programme.


At year end preparations were underway for a second drilling campaign which is expected to commence in Q2 2012.

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


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migration” (“PSDM”) processing of the data which will take much of 2012 to complete. The terms of the Ntsina and Mbeli PSC’s will end in February 2014, allowing sufficient time to fully explore the pre-salt play.

Gabon – Manga, GnondoThe pre-salt play has more limited extent southward into Manga and Gnondo where the focus is instead on the post-salt stratigraphic section. Recent discoveries in Brazilian waters, in particular Petrobras’ 2010/11 Barra discovery, suggest that this play could have analogues in the North Gabon basin. The 3D seismic data is currently limited, particularly in the potentially attractive area to the west of the Loiret Dome where a series of stratigraphic onlap plays have been identified and leads identified. One of these, the Afo

structure, has the potential to be volumetrically significant. Ophir has consequently undertaken a 3D seismic programme in Manga in early 2012 to mature these into drillable prospects. The play system also extends into the southern part of the Ntsina Block and the 3D survey has extended into this Block.

Gabon – Ntsina, MbeliThe 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, is Petrobras’ Carmopolis Field, with an estimated 1.7Bbbls in place. Until now, exploration of the pre-salt play in the North Gabon basin has been restricted by poor seismic imaging. Recent advances in seismic imaging technology now allow pre-salt traps to be effectively mapped.

Seismic and gravity gradiometry surveys have delineated a potentially significant pre-salt play system in the Blocks. The main focus of the seismic acquisition has been the Padouck Deep prospect which has the potential to contain ca. 1.3Bbbls. Based upon the relative immaturity of the play, Ophir elected to bring a JV partner with significant pre-salt experience and consequently concluded a farm out to Petrobras for 50% equity in each Block. Under the terms of the agreement Petrobras is funding the cost of a new 2,200km2 seismic survey designed to image the pre-salt play system. The survey has been acquired by PGS early in 2012 and a key component of this programme will be detailed “pre-stack depth

Gabon

Recent advances in seismic imaging technology now allow pre-salt traps to be effectively mapped. The main focus of the seismic acquisition has been the Padouck Deep prospect which has the potential to contain ca. 1.3Bbbls.



Acquisition of the two 3D surveys was completed in January 2012. Processed data will be available in early 2013. Once this has been interpreted a farminee will be sought for the next stage, to include potential drilling in 1H 2013.

AGC – AGC ProfondTwo 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, and should they elect to participate in petroleum operations, a promoted amount of the costs of any second well (uncapped) and US$35 million of appraisal expenditure on Ophir’s behalf).

The Kora-1 well was drilled to a total depth of 4,447.5mSS on 27 July 2011 and the rig was subsequently released on 31 July 2011 with no LTIs. The primary (Albian) and secondary (Coniacian and Barremian) reservoir intervals were penetrated close to their anticipated depths, but the well encountered a predominantly claystone and thinly bedded limestone sequence, rather than the prognosed sandstone reservoir 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.

The Pachg Liba prospect, in the Gnondo block, is covered by a limited amount of 2D seismic data which, to this point, has precluded it from being matured to a drilling target. Acquisition of a prospect-specific 3D seismic survey would be very cost inefficient unless it can be included as part of a wider survey. The activity in the other Ophir-Operated Gabon blocks has allowed this survey to be included as part of the larger programme recorded in early 2012.

Ophir has undertaken a 3D seismic programme in Manga in early 2012 to mature these into drillable prospects.

AGC Profond


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Somaliland – Block SL9 (Berbera)During 2011 Ophir’s geotechnical team continued its interpretation of the existing legacy data on Block SL9 and to fully integrate surface geological information with the seismic data which covers the Block. This will be used to determine possible future drill locations.

Ophir has continued to work closely with the Government of Somaliland to adapt the Petroleum Sharing Contract to reflect the expected work programme prior to the Group taking on a drilling commitment on the Block. The agreed amendments include the extension of the block via the addition of a vacant Block to the west of the Ophir acreage.

SADR – Daora, Haouza, Mahbes, MijekOphir continues to monitor activities and opportunities in SADR.

Congo-Brazzaville (Marine IX)

Congo-Brazzaville – Marine IXOphir assumed the role of Operator from 1 May 2011. Three play systems have been identified in the Block. These are: a Tertiary play system, as proven by the nearby Moho Bilondo discoveries, an Albian “raft” play, which was tested by Frida-1 and a pre salt “Gamba” play. Of these, the first two have been fully explored within the Block and the Group is confident that no potential remains. The pre-salt play, however, has not been explored to date and the JV has gained a 12month extension to the current PSC term in order to carry out a full prospectivity assessment of the block. As part of this assessment a gradiometry survey has been acquired in early January 2012 and once integrated with the existing seismic data a decision will be made regarding possible future drilling.

JDZOphir elected to withdraw from the JDZ PSC in March 2011. All the commitments had been fulfilled and the permit was exited in good standing.

Madagascar – Marovoay Block2011 has seen the interpretation of the airborne gradiometry survey in order to better define the subsurface structure. The data has been integrated with existing seismic data and at year end the final interpretation was underway. The JV faces a drill or drop decision in Q2 2012 and at that point will elect whether to drill a well on the Block or to farm out. On 17 November 2011, the Group and Octant Energy Madagascar Ltd entered into an Option agreement whereby Ophir Madagascar granted Octant Energy the right to farm in to the Marovay PSC for a 50% participating interest subject to the satisfaction of certain conditions precedent and the payment of certain exploration costs and expenses.

Madagascar Saharawi Arab Democratic Republic

Somaliland



Kenya – Block L-9Block L-9 covers 5,110km2 offshore Kenya on the Davy-Walu structural trend. Ophir currently has 100% operatorship and working interest in the L-9, but is in the process of transferring 30% to Flow Energy Limited and 10% to Avana Petroleum Limited. The JOA is being finalised. The L-9 PSC was signed by Dominion with the Kenyan government on 17 May 2011. During the first two year exploration period, Ophir has a commitment to shoot 500km2 of 3D seismic data, reprocess 2,500km of 2D seismic and carry out geological and geophysical field studies.

The Lamu basin has the potential to contain both gas and liquids as demonstrated by previous wells in the area. Synthetic aperture radar has also identified possible oil seeps locally. Adjacent to L-9 are blocks being operated by Apache and Anadarko. The Mbawa prospect in the Apache-operated block L-8 is along trend from similar features in L-9. Mbawa is to be drilled by Apache in Q3, 2012. Ophir has signed an agreement to work with Apache in a 3D seismic programme over the L-8/L-9 Mbawa South area in Q1 2012. It is planned this will lead to potential drilling in L9 during 1H 2013.

Block 7

Block L-9

Block L-15

Tanzania

Kenya

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

Tanzania – Block 7Block 7 is an 8,475km2 block located on the continental slope of the Indian Ocean immediately east of Dar es Salaam. Water depths in Block 7 range from less than 400m to more than 2,500m.

During June 2010, a competent persons report was prepared by Energy Resource Consultants Ltd. (“ERC”) on Block 7, which included the Alpha prospect. The report concluded that the Alpha prospect has a mean prospective unrisked resource of 1.104Bbbl of oil or 7.069TCF of gas. ERC have risked the prospect with a CoS of 12% as a whole. Net risked mean resource: 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.

Tanzania


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sedimentary rocks capable of generating oil. A satellite radar-imaging survey has suggested the presence of oil seeps on Lake Edward. During the second half of 2008, around 540km of 2D seismic was acquired on land and lake areas. Interpretation of the seismic has shown the presence of a deep sedimentary basin broken into fault blocks by numerous extensional faults.

In 2010, Dominion drilled the Ngaji-1 well to a total depth of 1,765m. The well did not identify hydrocarbons but did confirm the presence of high quality reservoir sands. On 27 April, 2011, Dominion applied for the renewal of the exploration licence for EA4B for the third two-year period, which expires in July 2013. This continues to be discussed with the Government of Uganda.

DRC – Block VBlock V in the Democratic Republic of Congo (“DRC”) incorporates 7,447km2 of land and lake areas. It lies to the west of and includes part of Lake Edward and adjoins EA4B in Uganda. Both blocks are part of the Albertine rift system of sedimentary basins where significant oil discoveries have been made since 2006. Ophir now holds a 46.75% participating interest in Block V with SOCO. During the first 5 year phase of the Block V PSC, Ophir and its partners are committed to an exploration programme which includes at least 300km of seismic data and two exploration wells.

Jurisdiction Asset OperatorParticipating Interest

Gross area (km2)

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

DRC Block 5 SOCO 46.75% 7,447

Total 23,849

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

Kenya – Block L–15Block L-15 of the Lamu Basin, offshore Kenya covers an area of 2,331km2 and lies to the north of L-9 and is also on the Davy-Walu structural trend. The only well in Block L-15 is Kofia-1, which was drilled by Union Oil in 1985 and encountered oil and gas shows in the Palaeogene and Upper Cretaceous intervals. The L-15 PSC was signed on 5 October, 2011 and Ophir now holds 100% working interest and operatorship in the block. Ophir is planning a 3D seismic programme in Q3 2012, with potential drilling in 2013.

Uganda – Exploration Area 4BExploration Area 4B (EA4B) is a 993km2 licence located in south-west Uganda and is inclusive of the majority of the Ugandan section of Lake Edward. Ophir now holds 100% participating interest and operatorship in EA4B. In early 2008, an airborne gravity and magnetic survey was acquired which proved a presence of substantial thickness of


Overview2011 was a year of success for the Ophir Group, with an IPO and listing to the Main Board of the London Stock Exchange (“LSE”) on 13 July 2011. The Group issued 94,135,334 new shares and raised a total US$375 million (£235 million). An over-allotment (greenshoe) of 2,216,546 shares followed on 8 August 2011 raising a further US$8.9 million (£5.5 million). As the majority of the Group’s expenditure is incurred in US Dollars, the bulk of the proceeds of the capital raising were immediately converted to US Dollars.

The Group is currently conducting exploration and appraisal activities using existing funds from capital raised during the IPO. Following the successful capital raise in April 2012 of US$242 million, it will fund its planned activities for the 2012 financial year from current cash reserves.

Result for the PeriodThe Group recorded a loss of US$19.1 million for the year ended 31 December 2011 (31 December 2010: US$19.3 million loss). No dividends were paid or declared by the Group during the period.

The loss for the period includes exploration expenditure expensed of US$15.7 million (31 December 2010: US$11.3 million), administrative costs of US$16.2 million (31 December 2010: US$7.3 million), finance costs of US$1.0 million (31 December 2010: US$0.5 million) and other costs of US$0.9 million (31 December 2010: US$0.8 million). The year end result was further impacted by a farm out gain of US$13.8 million (31 December 2010: Nil).

Gain on farm outThe gain on farm out relates to the partial farm out of the Group’s AGC Profond interests to Noble prior to spudding of the Kora-1 well in late June 2011. Cash proceeds of US$20 million received from Noble were applied against the Group’s carrying value of the AGC project, reducing its book value to nil at 31 December 2011, with surplus proceeds being recognised as a profit. The Kora-1 well, completed in early August, was subsequently an unsuccessful well. In accordance with the Group’s accounting policy, the Group’s share of well costs which were incurred of approximately US$12.7 million, were then written off to the Income Statement during the 2011 year.

Exploration expenditureExploration expenditure of US$15.7 million (31 December 2010: US$11.3 million) resulted from the Group’s exploration and appraisal activities in AGC Profond, Tanzania, Equatorial Guinea, Somaliland, Gabon, Congo and Madagascar. It comprises pre-licence exploration costs of US$2.3 million (31 December 2010: US$2.0 million) charged directly to the Income Statement. Unsuccessful exploration expenditure of US$13.4 million (31 December 2010: US$13.3 million) was written off in accordance with the Group’s accounting policy.

Administration expensesAdministrative expenses including personnel costs including share-based payments charges, administration costs, professional and corporate costs (audit, legal, other professional advisors’ costs and Directors’ fees) totalled US$16.2 million (31 December 2010: US$7.3 million). The result was impacted by 2010 bonuses payable in 2011, increased option 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.

Finance expensesFinance costs for the period of US$1.0 million (31 December 2010: US$0.4 million) relate to foreign exchange losses arising on the fluctuation of the Group’s functional currency, the US Dollar, against other currencies.

Cash flowOverall, the Group cash inflow was US$306.7 million (31 December 2010: outflow of US$45.4 million).

Operating Cash FlowThe Group’s net cash used in operating activities was US$22.5 million (31 December 2010: US$13.3 million). Of this, US$15.7 million related to exploration expenditure that was written off, predominantly attributed to AGC Kora-1 well costs (US$12.7 million) and pre-licence costs of US$2.3 million.

Investing activitiesCash flow used in investing was US$43.9 million (31 December 2010: US$32.0 million). Investment of US$65.6 million on exploration (31 December 2010: US$44.6 million) was offset by a cash inflow on farm out of the Group’s AGC interests to Noble of US$20.0 million (31 December 2010: US$11.3 million inflow net of farm out proceeds). The incurred exploration expenditure related to: – Planning and long lead items for

the BG joint venture and drilling programme in Blocks 1, 3 and 4 in Tanzania;

– Acquisition of Block C in Equatorial Guinea during November 2011, to the northwest of Block R, which was then appended to Block R; and

– Associated costs of the transfer and completed farm in to the East Pande block in Tanzania on 29 March 2011.

Financial review


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Financing ActivitiesThe net cash inflow for financing activities was US$373.1 million (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 AssetsAs at 31 December 2011, exploration 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).

The main areas of exploration were: – Tanzania Blocks 1, 3 and 4

US$40.5 million due to the costs of drilling Chaza-1 in Block 1, and the seismic programmes operated by Ophir in Blocks 1, 3 and 4.

– Ophir completed the farm in to the 7,500km2 East Pande Block on 29 March 2011. The Group holds 70% equity, with Rakgas holding the remaining 30%. Ophir has assumed operatorship of the Block. Costs for 2011 amounted to US$6.6 million.

– In Equatorial Guinea the acquisition of Block C (US$2.2 million) and preparation for the 2012 drilling programme of three firm plus one contingent well (US$7.3 million).

Current AssetsThe Group held cash and short-term deposits of US$396.6 million (31 December 2010: US$89.9 million) plus inventories of US$6.2 million (31 December 2010: US$9.1 million) which comprise drilling materials for future drilling campaigns. Trade and other receivables were US$8.7 million (31 December 2010: US$45.3 million).

LiabilitiesThe Group had no debt as at December 31 2011 (31 December 2010: Nil). Trade and other payable including accruals were US$27.7 million (31 December 2010: US$59.7 million).

OutlookThe Group is currently conducting exploration activities using existing funds from capital raised during the IPO and plans to utilise the April equity placing to fund forecast expenditure for at least the next 12 months. Accordingly, the financial statements have been prepared on a going concern basis as the Directors are of the opinion that the Company will have sufficient funds to meet its ongoing working capital and committed capital expenditure requirements over the next 12 months.


Corporate and Social Responsibility

All of Ophir’s employees and contractors are encouraged to work to the highest standards. These standards are reviewed and set by the Ophir HSE Committee which takes responsibility for monitoring group-level health, safety, security and environmental (“HSSE”) risk assessments in addition to reviewing reports on serious accidents and fatalities to ensure that management is responding appropriately. The Committee also ensures that the Company is fully compliant by commissioning periodic independent audits on HSE matters.

Ophir is committed to taking an active part in the development of the countries in which it operates. The Company conducts its operations in an ethical, responsible, apolitical, independent and transparent way. We manage our Corporate and Social Responsibility (“CSR”) with the same principles underlying the conduct of our core activities, which are determination, innovation and excellence.

Ophir operates in regions offering a great variety of geographical, cultural, economic and social environments. Africa is a mosaic of countries with contrasting levels of development, regulations, languages, traditions and expectations. Our long-term involvement with our host countries and local partners, as well as our multicultural team, are instrumental in ensuring we keep in tune and maintain an effective dialogue in line with our business objectives.

Ophir believes its presence is felt positively by its hosts as the Company strives to create value locally, benefiting not only the employees but the community at large. The Company ensures its projects will bring opportunities and its investment will make a positive difference.

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

Environment: Before initiating any exploration project Ophir conducts comprehensive and integrated Environmental Impact Assessments (“EIA’s”). These assessments are repeated at each stage of the project using recognised consultants and methods. As a part of this process Ophir consults with local authorities, NGOs and communities to ensure we are in compliance with both industry best practices and any applicable local regulations and guidelines. Our environmental plan is implemented in association with our Corporate Health, Safety & Environmental Manual.

One of our initiatives for the conservation of the environment has been to support a research project in the Western Sahara. Since 2006 we have contributed to archaeological research conducted during various field missions by the University of East Anglia (United Kingdom) in the Tifariti Region of Western Sahara. This programme represents a valuable contribution to the preservation and knowledge of historical occupation in Western Sahara.

Reports and photos can be viewed on http://www.cru.uea.ac.uk/~e118/WS/WSahara.htm.


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Health and safety: Ophir’s operations are conducted in accordance with local and international health and safety best practices.

The Company offices in Gabon and Equatorial Guinea have implemented mosquito eradication programmes.

Ophir also provides internationally accredited driving and first aid courses to all local employees as part of the comprehensive training programme tailored for the staff. Ophir also expects its subcontractors and suppliers to provide a safe and healthy working environment for their employees and to provide appropriate training and personal protective equipment.

Education: Ophir encourages an atmosphere of continuous improvement. The Company contributes to the ITNHGE Programme, a collaborative educational initiative run for the benefit of adult students in Equatorial Guinea. A group of 46 students enrolled in the full time intensive English programme and completed their first semester in May 2008 in Malabo.

Ophir runs a comprehensive training programme for the Equatorial Guinean staff consisting of English language courses as well as IT and word processing classes.

Ophir fully sponsored the construction of a two classroom nursery school equipped with 20 desks in the village of Ebein Yenkeng in the Niefang Region, Central South Equatorial Guinea. Stage 1 has been completed; Stage 2 is progressing.

Ophir is funding a cultural exchange programme between Gabon and South Africa under the auspices of the South African Embassy for the Nelson Mandela School in Libreville.

Community development: Ophir is proud to help local communities develop in its project areas.

In Equatorial Guinea, where Ophir has invested heavily over the last few years, we have been actively involved in community development. In addition to the construction of a school (details above) we have also acquired and installed four electricity generators into hospitals in Evinayong, Kogo Mbini and Acurenam.

Ophir has also been active in Tanzania for a number of years. Ophir has invested in excess of US$10 million in the development of the Mtwara port. Approximately half of this sum was spent in the local community providing a major boost to the area. As expected the entire project was backed up by a comprehensive Environmental Impact Assessment.

Ophir has an office in Mtwara. During its recent drilling campaign offshore Tanzania Ophir provided accommodation in Mtwara for over 60 workers. To accommodate these people during the drilling phase Ophir rented 13 residential properties. Prior to occupation all of the properties underwent a full refurbishment to ensure they were fully compliant with international housing standards. As a result of this work the landlords have seen the value of their rented properties increase substantially – a good result for both parties.

Ophir has also supported other schemes in the Mtwara port town. For example it has begun funding of a local maternity clinic. Funds go towards providing essential drugs and baby equipment.

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


Corporate and Social Responsibility continued

On 21 December 2011, devastating floods hit parts of the city of Dar es Salaam, Tanzania, impacting the lives of many local people, some losing not only their properties and belongings, but also having to deal with the loss of lives due to the tragic event.

Many of those affected by the floods were relocated to the Mabwepande area in Bunju Juu, north of Dar es Salaam. It was planned that around 2,000 families would relocate to this area, where temporary shelters were set up by the Red Cross until more permanent arrangements could be made.

To assist in the relocation efforts Ophir Energy has donated 30 water storage tanks with a capacity of 5,000 litres each to the site. These tanks will be used to move and store water, thus securing adequate sanitation which is vital to prevent disease and ensure the survival of the flood victims. Ophir Energy is committed to supporting the communities in this time of need.

Ophir is currently assessing the best way to contribute to community development and to support local initiatives via a charitable programme which would channel future donations to individuals or small organisations.

Ophir sponsored a local art competition in Mtwara from 30 January 2012 to 3 February 2012 that provided primary school students in grades 5 to 7 with the opportunity to learn about the oil and gas industry and its benefits to Mtwara and the community.

They were then given the chance to express their knowledge and thoughts of the industry through art. Throughout the process, regional officials, teachers and parents/guardians were also encouraged to learn more about Ophir and the oil and gas industry and its contribution to the community. The theme of the competition was, “What does the oil and gas industry look like/mean to you?”

A total of 60 students participated in the competition, 15 from four schools in Mtwara, these schools including Chuno Primary School; Ligula Primary School; Mivinjeni Primary School and Shangani Primary School.

After all the entries had been submitted, Ophir’s judging panel agreed on those which they thought were the most creative and the winners were selected. The Regional Commissioner attended the award ceremony for all schools, presenting

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 with a cheque from the Regional Commissioner on behalf of Ophir, for an amount depending on where they were placed in the competition. Ophir hopes that this donation will assist the schools in maintaining a high standard of education for the youth of Mtwara.

In 2010, Ophir Congo (Marine IX) Limited and joint venture partners Premier Oil plc and Kufpec Congo (Marine IX) Limited began funding a community project in the remote village of Tchisseka, Brazzaville, Congo. The first stage of this project consisted of funding the restoration of the Tchisseka Health Care Centre. Restoration began on 30 August, 2010, with the completely restored Tchisseka Health Care Centre being delivered to the population of Tchisseka on 10 January 2011.

The second stage of this social project is underway at the moment. This stage involves the construction of an accommodation site for the doctors and nurses set to work in the Tchisseka Health Care Centre. The facility will be equipped with solar panels providing electrical supplies for sustainability and because of the remoteness of this facility. Construction of the accommodation unit is continuing and is expected to be completed in May 2012.


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

HSE highlightsThe high levels of Ophir Energy operated exploration activities experienced in 2010 spilled over into 2011. During 2011 the Company carried out a number of drilling and seismic acquisition programmes.

These exploration activities are summarised below and were completed without any significant occupational health and safety incidents (LTIs) or offshore security incidents (piracy). With regard to HSE issues in general it is important to highlight that several of Ophir’s exploration projects are carried out in offshore areas affected by Somali piracy risk, therefore Ophir and its contractors meticulously plan and execute a full security plan offshore to protect personnel and assets. Although acts of piracy are reported to occur on a fairly regular basis in the Somali Basin/Indian Ocean, none of these incidents has adversely affected Ophir’s operations.

2011 HSE operational summary1. Tanzania – Drilling in Blocks 1

and 4 carried over into Q 1–2 of 2011. This Ophir Energy operated drilling was carried out simultaneously with shooting of 3D seismic in the same areas. In addition to normal HSE considerations these activities required a high degree of maritime security co-ordination given the current risk of piracy in the region. Mid-year Ophir handed over operatorship of Blocks 1, 3 and 4 to the BG Group, this included operatorship of the

shore base at Mtwara. Also in Tanzania in late Q4 2011 we initiated a Fugro 3D seismic programme in the Ophir operated East Pande block. This seismic was completed in early 2012. The operations in Tanzania were all subject to the normal EIA and piracy risk assessments. The security plans were successfully enforced using a close partnership of Tanzanian Navy and private security contractors operating with strict rules of engagement and behaving in accordance with the UN’s voluntary principles on human rights.

2. AGC (Senegal /Guinea Bissau) – Ophir drilled one well offshore Senegal /Guinea Bissau in the joint development zone known as the AGC. Prior to drilling a consultation process including a compliant EIA was issued including oil spill response planning and safety risk assessments (narco - trafficking/robbery). A security plan was designed and executed in conjunction with service companies (rig and supply vessels) and HASSMAR (Senegalese body responsible for the environment and security of its offshore areas). The

security plan was used not only to ensure safe conditions in the drilling area , it was also used to protect the personnel and assets during the mobilisation and demobilisation phase as people and equipment were moved into the project area from the Gulf of Guinea and back out of the project area on completion of the well. The Kora 1 drilling programme was completed with zero LTIs.

3. Gabon – Ophir planned (EIA completed and risk assessments carried out) and initiated a 3D seismic programme in late Q4. The programme was concluded without incident in February 2012.

Corporately the Ophir Energy Group recorded a zero rate for LTIs over the 2011 calendar year.

Ophir is working to further expand its HSE and CSR reporting procedures by widening the scope of reporting to include all services companies and contractor personnel employed on projects and to further refine the Company KPIs it employs in these reporting procedures. Ophir expects to complete these changes within the coming months.

Ophir is working to further expand its HSE and CSR reporting procedures by widening the scope of reporting to include all services companies and contractor personnel.


Principal risks and uncertainties Risk management

Ophir is committed to maintaining a balanced portfolio and to managing risks in a proactive and effective manner. The key elements Ophir risk management processes are: – Risk assessment – Risk analysis and evaluation – Risk mitigations – Risk monitoring and reviewing – Communication and consultation

Responsibility for identifying and managing risks lies with Ophir’s Executive Directors, Senior Management Team and Country Managers. The Executive Directors continually monitor the Group’s risk exposures and report to the Audit Committee and Board of Directors on a six monthly basis, or more frequently as required.

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 key personnel

– Ophir is reliant on a small team of experienced oil and gas professionals 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 decisions

– The Group and its advisors are experienced within the industry in which it 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 operations risk

– The Group maintains clearly defined operational procedures that should 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.

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.


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Type Risk Mitigants

Operationalcontinued

HSE incident risk

– The Group maintains a comprehensive system of HSE procedures that should always be followed. The systems are overseen by the HSE 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.

Discovery risk and success rate

– The Group has a technically and regionally experienced management and geoscience team who have a proven track record of success. 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 of rigs and services

– Regular market review of services and rig availability occurs. Experienced advisors are used to ensure a rapid response to opportunities and an 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 procurement planning stage.

Type Risk Mitigants

Financial Counterparty credit risk

– The Group closely monitors all trade debtors which are subject to internal 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 by senior management and reported to the Board.

Interest rate and foreign exchange risk

– The Group reports and manages its business in US Dollars. Cash balances are primarily held in US Dollars to provide a natural hedge. Small balances are retained in other currencies for operating and administrative needs.

– 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, regulatory or litigation risk

– Ophir’s activities are subject to various different jurisdictional laws, tax regimes and regulations. The Group employs suitably experienced and 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 stakeholder sentiment

– The Group fosters strong relations with the local communities and host country governments in jurisdictions that it operates. It continually 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.


Directors at year end

Nicholas SmithNon-Executive ChairmanMr Smith (age 60) was appointed to the Board of the Company as a Non-Executive Director in October 2007 and served as Chairman of the Audit and Nomination Committees until September 2009 when he was appointed as Chairman of the Board. Mr Smith is a member of the Remuneration and Nomination Committees and was a member of the Audit Committee until 7 July 2011.

Mr Smith trained as a chartered accountant with Ernst & Young. He joined the Jardine Fleming Group in 1986 serving, from 2003, as chief financial officer and as a member of the Executive Committee. Mr Smith became a director of Robert Fleming International Ltd in 1998 and the Director of Origination – Investment Banking serving until 2000. Mr Smith currently serves as a non-executive director for Asian Citrus Holdings Ltd, PLUS Markets Group plc, Sorbic International Ltd., Japan Opportunities Fund II Limited and Schroder Asia Pacific Fund plc.

Alan SteinExecutive Deputy Chairman & FounderDr Stein (age 47) was one of the Company’s founding Directors in 2004.

Dr Stein began his career in the UK as a geologist with oil consultants Dolan & Associates where he worked on projects in Europe, Australia and the Far East. In 1992, he established Dolan & Associates’ first international office in Australia and in 1994 was one of the founding partners of the IKODA consultancy group which had offices in London and Perth. In 1996 he was one of the founding directors of FIL which acquired interests in offshore Mauritania. These interests were sold to Fusion Oil & Gas plc (Fusion) and Dr Stein was appointed managing director of Fusion in 1998 and remained until that

company’s sale in December 2003. Dr Stein is non-executive chairman of Neon Energy Limited, an ASX-listed petroleum exploration and production company headquartered in Perth, Australia.

Dr Stein has notified the Board that, while continuing to make himself available for advice and guidance, he will not be seeking re-election at the Company’s AGM in 2012.

Nicholas CooperChief Executive OfficerDr Cooper (age 44) was appointed to the Board as Managing Director on 1 June 2011 and has formally assumed the role of Chief Executive Officer in December 2011.

Dr Cooper began his career as a geophysicist with BG and Amoco in the UK and various international locations. He spent two years with the energy team at Booz-Allen & Hamilton, advising on upstream oil and gas development projects. In 1999, Dr Cooper completed an MBA at INSEAD and went on to join the oil and gas team at Goldman Sachs where he held the position of Vice President. In early 2005 he co-founded and became CFO of Salamander Energy plc, the Asia-focused exploration and production company, which has grown from start-up to FTSE 250 constituent.

Jonathan TaylorExecutive Director & Founder In 2004, Mr Taylor (age 46) was one of the founding Directors of Ophir, serving initially as its Technical Director and is a member of the HSE Committee.

Mr Taylor has over 20 years of experience in a range of technical and asset management roles in Africa, Europe, the Far East and the Middle East, for Amerada Hess Ltd, Clyde Petroleum plc and Gulf Canada Resources Ltd. Mr Taylor was appointed as Exploration Director of Fusion in November 1998, resigning in March 2004 to found Ophir.

Dennis McShaneSenior Independent DirectorMr McShane (age 56) was appointed to the Board as a Non-Executive Director in October 2007 and as Senior Independent Director in November 2009. Mr McShane is Chairman of the Nomination Committee and a member of the Audit and Remuneration Committees, having also served as Chairman of the Audit Committee from September 2009 to 18 August 2011.

Mr McShane is a founding principal of Midas Resource Partners. From September 2004 to November 2008 Mr McShane was a senior executive of the Ferrexpo group of companies serving as executive director of finance and business strategy. He led the successful initial public offering of Ferrexpo plc on the Official List of the London Stock Exchange in June 2007. Prior to joining Ferrexpo, Mr McShane was an investment banker with JPMorgan Chase & Co (JPM) emerging markets investment banking and mining and metals practices in London. In 2002, he became head of mining and metals in JPM’s Asia-Pacific practice, based in Sydney. He attended Harvard Business School and the State University of New York.

Ronald BlakelyIndependent Non-Executive DirectorMr Blakely (age 63) was appointed as a Non-Executive Director of the Company on 7 July 2011 and as Chairman of the Audit Committee in September 2011.

Mr Blakely is a retired former executive whose career spanned more than 38 years with Royal Dutch Shell companies. At time of retirement in October 2008 he was Executive Vice President Global Downstream Finance. In previous roles he has been CFO of Shell Oil Products in the USA and CFO of Shell Canada, a then Canadian public integrated oil and gas company. He is a graduate of the University of Guelph with a major

Board of Directors


in Economics and a member of the Society of Management Accountants of Alberta. Mr Blakely is currently the non-executive chairman of the Board of Oil Sands Quest, a Calgary based company.

John LanderIndependent Non-Executive DirectorMr Lander (age 68) was appointed as a Non-Executive Director of the Company in November 2008. He is Chairman of the Remuneration Committee and a member of the Audit, Nominations and HSE Committees.

Mr Lander started his career with Shell as a geophysicist in their international division and has more than 40 years’ experience in the international oil and gas industry, holding executive boardroom positions at RTZ Oil and Gas Limited, Pict Petroleum plc, Premier Oil plc, British-Borneo Petroleum Syndicate plc and Tullow Oil plc, the latter until his retirement from full-time employment. He is chairman of Alkane Energy plc and Canadian North Sea Energy Limited as well as being a non-executive director of Neon Energy Limited.

Lyndon PowellIndependent Non-Executive DirectorMr Powell (age 60) was appointed as a Non-Executive Director of the Company in November 2008. He serves as Chairman of the HSE Committee and is a member of the Remuneration Committee.

Mr Powell retired from a career in the Royal Military Police and Special Forces in 2006. During his time with HM Forces, he served in diverse locations throughout the world on a variety of appointments, gaining a wide spectrum of experience in operational and strategic security management including work with the Foreign & Commonwealth Office to provide protection for HM Ambassadors and commanding four major units. Mr Powell was Chief of Special

Forces at the Allied Rapid Reaction Corps, and was an advisor to the Sierra Leone Armed Forces in Freetown. In 2007 he was appointed as deputy director of Security Operations with Infinity SDC Ltd, and in 2008 moved to start his own company, Barbican Global Ltd, which specialises in independent security advice to the corporate sector.

Patrick SpinkIndependent Non-Executive DirectorMr Spink (age 59) was appointed as a Non-Executive Director of the Company on 7 July 2011 and is a member of the HSE Committee.

Mr Spink spent over 20 years with Perenco, joining the company shortly before the start of its rapid growth into one of the world’s largest private upstream oil and gas companies. He performed a number of roles including head of exploration, general manager of one of its largest subsidiaries, and executive board member before the company was privatised. For 15 years until 2010, he was head of business development, including during the company’s most rapid period of growth. Prior to joining Perenco, Mr Spink held positions in exploration and operations departments of a number of E&P companies. He has a degree in Environmental Sciences from the University of Lancaster and currently runs a consulting business providing upstream investment advice to a number of clients.

Rajan TandonNon-Executive DirectorMr Tandon (age 48) was appointed as a Shareholder Representative Non-Executive Director in September 2009.

Mr Tandon is Vice President-in-Charge of Finance and Accounts at Mittal Investments and has over 25 years of industrial experience. Prior to this he was Director-in-Charge of Finance and Accounts at Mittal Steel. He has been a leading

member of the Corporate Finance Team and served as Treasurer for LNM Holdings NV until its merger with Ispat International in December 2004. With a 20-year career within the Mittal Steel Group, he has held various positions in Finance and Accounting within the Group. Mr Tandon is an Honours Graduate in Accounting and Commerce from St Xavier’s College, Kolkata and a Fellow of The Institute of Chartered Accountants of India and Member of The Institute of Internal Auditors. He also serves on the boards of various companies.

Alternate Director

Jaroslaw PaczekAlternate Director to Rajan TandonMr Paczek (age 43) was appointed as alternate Director for Rajan Tandon on 7 July 2011.

Mr Paczek trained as a barrister in Poland, having graduated from the Jagiellonian University in Cracow, and subsequently attended Harvard Business School and DePaul University in Chicago. He began his career as a lawyer with Hogan & Hartson working in their office in Warsaw and also practised with Feuguer et Associés in Paris. In 1997 Mr Paczek joined ERA GSM, the Polish mobile telephone operator, as a Deputy General Director. For the last 10 years, Mr Paczek has worked with the Kulczyk Group, the largest private equity fund in Poland, where he was involved in various transactions in Eastern Europe, in particular in the telecom, electricity and insurance sectors, and represented the Kulczyk Group on the Board of the Company prior to Admission. Since 2006, Mr Paczek has lived in London, developing a portfolio of oil, gas and mineral investments.

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Board of Directors continued

Directors & Alternate Directors who resigned during the Year

PositionDate of appointment

(if during the year) Date of resignation

Executive DirectorsB. Yvonne Holm Chief Financial Officer 26 May 2011 2 December 2011

Non-Executive DirectorsArun Balakrishnan Non-Executive Director 18 February 2011 7 July 2011Harak Banthia Non-Executive Director 18 February 2011Michael Cohen Non-Executive Director 7 July 2011John Morgan Independent

Non-Executive Director7 July 2011 2 December 2011

Jaroslaw Paczek Non-Executive Director 7 July 2011Mikki Xayiya Non-Executive Director 7 July 2011Stefan Krieglstein Alternate to

Jaroslaw Paczek10 March 2011 7 July 2011

Jacob Ulrich Alternate to Mikki Xayiya & Michael Cohen

7 July 2011

Corporate Directory

DirectorsNon Executive Chairman Nicholas Smith

Executive Directors Dr. Nicholas Cooper –

Chief Executive OfficerDr. Alan Stein –

Executive Deputy Chairman and Founder

Jonathan Taylor –Executive Director and Founder

Independent Non Executive Directors John Lander Dennis McShane Lyndon Powell Ron BlakelyPatrick Spink

Non Executive DirectorsRajan TandonJaroslaw Paczek (alternate)

Company Secretary Prism Cosec Limited10 Margaret StreetLondon W1W 8RLUnited Kingdom

Registered Office 55 Grosvenor StreetLondon W1K 3HYUnited Kingdom

AuditorsErnst & Young LLP1 More London PlaceLondon SE1 2AFUnited Kingdom

Solicitors LinklatersOne Silk StreetLondon EC2Y 8HQUnited Kingdom

BankersEnglandHSBC Bank plc 70 Pall Mall London SW1 5EYUnited Kingdom

Standard Bank Plc25 Dowgate HillLondon EC4R 2SBUnited Kingdom

AustraliaHSBC Bank Australia Limited188–190 St George’s TerracePerth WA 6000Australia

Ophir Offices55 Grosvenor StreetLondon W1K 3HYUnited KingdomTel: +44 (0)20 7290 5800Fax: +44 (0)20 7290 5821

464 Hay StreetSubiaco WA 6008PO Box 463West Perth WA 6872AustraliaTel: +61 (0)8 9212 9600Fax: +61 (0)8 9212 9699

Plot 1228, Block 2, Masaki StreetMsasani PeninsulaPO Box 23184Dar es SalaamUnited Republic of TanzaniaTel: +255 (0)22 221 5500Fax: +255 (0)22 221 5599

APDO 274Ophir HouseKm 5, Carretera AeropuertoMalaboEquatorial GuineaTel: +240 333 09 84 74Fax: +240 333 09 86 [email protected]


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The Directors present their report for the year ended 31 December 2011.

Principal Activities and Business Review Ophir is an independent oil and gas exploration business with a focus on Africa. The principal activities of Ophir are currently the exploration for oil and gas, predominantly in deepwater acreage in eight jurisdictions in East and West Africa. Ophir Energy plc is the Parent Company of the Group and is incorporated in the United Kingdom. Ophir’s headquarters are located in London with operational offices in Perth (Australia), Dar es Salaam (Tanzania) and Malabo (Equatorial Guinea).

Through this Annual Report, including the Chairman’s and Chief Executive Officer’s Review, the Review of Operations, the Financial Review, the Corporate Social Responsibility Report and the Principal Risks and Uncertainties Report (together pages 2 to 27) and the Corporate Governance and Remuneration Reports on pages 35 to 52, the Board seeks to present a balanced and clear assessment of the Company’s activities, position and prospects. Each of these sections is incorporated by reference into this Directors’ Report.

The Principal Risks and Uncertainties Report on pages 26 to 27 sets out the key risks and uncertainties facing the Group, including those relating to financial risk management and financial instruments.

DirectorsThe names and biographical details of the Directors of the Company during the year ended 31 December 2011 and any changes since the end of the financial year are set out on pages 28 to 30.

The remuneration of the Directors for the year ended 31 December 2011 is set out in the Remuneration Report on pages 45 to 52, and summarised in Note 6 to the financial statements. The interests of the Directors and their connected persons in the shares of the Company, along with details of any share awards, are contained in pages 51 to 52 of the Remuneration Report. No Director had a material interest in any significant contract with the Company or any of its subsidiaries during the year.

The Company has granted indemnities in favour of its Directors against personal financial exposure that they may incur in the course of their professional duties as Directors of the Company and/or subsidiaries (as applicable). These indemnities, which were granted on appointment, are qualifying third party indemnity provisions for the purposes of the Companies Act 2006.

Results and Dividend PolicyThe Company’s results for the financial year are shown in the consolidated financial statement on page 56.

The Directors did not declare any interim dividend during the year and do not recommend a final dividend for the year ended 31 December 2011. The Directors do not anticipate that the Company will pay dividends in the near future. The Directors envisage that, as the Company advances the development of its operations, a dividend policy will be determined based on, and dependent on, the results of the Company’s operations, financial condition, cash requirements, prospects, profits available for distribution and other factors deemed to be relevant at the time.

Share Capital and Treasury SharesThe called-up share capital of the Company, together with details of shares allotted during the year, is shown in Note 20 to the Group financial statements. The Company does not hold any shares in treasury.

At a general meeting held in June 2011, the Directors were given authority by shareholders to purchase just over 30 million of its own ordinary shares, representing approximately 9.4% of its issued share capital as at 13 July 2011. However the Board did not subsequently seek to undertake a buyback programme during the year ended 31 December 2011. The Board intends to seek renewal of this authority at the 2012 AGM and while they have no current intention of exercising the authority, will keep the matter under review taking into account other investment opportunities.

Shareholders’ RightsThe following section summarises the rights and obligations in the Company’s Articles of Association (the “Articles”) relating to the ordinary shares of the Company. The full Articles can be found on the Company’s website (www.ophir-energy.com).

Voting: At a general meeting, subject to any special rights or restrictions attached to any class of shares: (a) on a show of hands, every member present in person and every duly appointed proxy present shall have one vote; (b) on a show of hands, a proxy has one vote for and one vote against the resolution if the proxy has been duly appointed by more than one member entitled to vote on the resolution and the proxy has been so instructed; and (c) on a poll, every member present in person or by proxy has one vote for every share held by him. Unless the Directors resolve otherwise, no member shall be entitled to vote either personally or by proxy or to exercise any other right in relation to general meetings if any call or other sum due from him to the Company in respect of that share remains unpaid.

Transfer of shares: Transfers of certificated shares must be effected in writing, and signed by or on behalf of the transferor and, except in the case of fully paid shares, by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the register of members in respect

Directors’ Report


of those shares. The Directors may decline to register any transfer of a certificated share, unless (a) the instrument of transfer is in respect of only one class of share, (b) the instrument of transfer is lodged at the transfer office, duly stamped if required, accompanied by the relevant share certificate(s) or other evidence reasonably required by the Directors to show the transferor’s right to make the transfer or, if the instrument of transfer is executed by some other person on the transferor’s behalf, the authority of that person to do so, and (c) the certificated share is fully paid up. The Directors may refuse to register an allotment or transfer of shares in favour of more than four persons jointly.

Directors’ powers: The Directors shall manage the business and affairs of the Company and may exercise all powers of the Company other than those that are required by the Act or by the Articles to be exercised by the Company at the general meeting. The Directors may delegate any of their powers or discretions, including those involving the payment of remuneration or the conferring of any other benefit to the Directors, to such person or committee and in such manner as they think fit. Any such person or committee shall, unless the Directors otherwise resolve, have the power to sub-delegate any of the powers or discretions delegated to them.

Dividends: The Company may, by ordinary resolution, declare final dividends to be paid to its shareholders. However, no dividend shall be declared unless it has been recommended by the Directors and does not exceed the amount recommended by the Directors. If the Directors believe that the profits of the Company justify such payment, they may pay dividends on any class of share where the dividend is payable on fixed dates. They may also pay interim dividends on shares of any class in amounts and on dates and periods as they think fit. Unless the share rights otherwise provide, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, and apportioned and paid pro rata according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid. Any unclaimed dividends may be invested or otherwise applied for the benefit of the Company until they are claimed. Any dividend unclaimed for 12 years from the date on which it was declared or became due for payment shall be forfeited and shall revert to the Company. The Directors may, if authorised by ordinary resolution, offer to ordinary shareholders the right to elect to receive, in lieu of a dividend, an allotment of new ordinary shares credited as fully paid.

Borrowing powers: The Board may exercise all the powers of the Company to borrow money, to guarantee, to indemnify, to mortgage or charge its undertaking, property, assets (present and future) and uncalled capital, and to issue debentures and other securities whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Company’s shareholdersAs at 19 April 2012 the Company had been notified of the following substantial holdings of voting rights in the issued share capital of the Company in accordance with the Disclosure and Transparency Rules, or other information:

Name

No. of Ordinary

Shares held % Holding

Capital Research and Management Company Holdings 46,192,788 11.65

Mittal Investments S.a.r.l. 41,163,790 10.36Kulczyk Group 40,433,833 10.17Och Ziff 36,114,367 9.09Fidelity 26,565,741 6.68

Annual General MeetingThe Company’s first AGM as a listed public company will be held at 2.30 pm on Tuesday 19 June 2012 at the offices of Linklaters LLP, One Silk Street, London, EC2Y 8HQ. Details of the resolutions which will be proposed at the AGM will be set out in the Notice of Meeting.

AuditorThe Company’s external auditor, Ernst & Young LLP, had indicated its willingness to continue in office. Resolutions to reappoint Ernst & Young LLP as the Company’s external auditor and to authorise the Directors to set the auditor’s remuneration will therefore be proposed at the forthcoming AGM.

So far as the Directors are aware, there is no relevant audit information (as defined in Section 418(3) of the 2006 Act) of which the auditors are unaware and the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Companys’ auditors are aware of that information.

Business Conduct and EthicsThe Company is committed to sound business conduct 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.

Directors’ Report continued


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During the year, the Directors undertook a thorough review of the Group’s anti-bribery policy and the resulting updated policy and procedures have been disseminated to all employees and other key stakeholders.

Charitable and political donationsThe Group did not make any charitable donations during the year (2010: Nil), however as part of its commitments to the various countries where Ophir operates, it participates in social and community-related as well as economic programmes. Further information on these activities is set out on pages 22 to 25.

The Company does not make political donations and has no intention of making donations to what are generally regarded as political parties, either within the European Union or worldwide. As a precautionary measure and in the light of the wide definitions of European Union political organisations for the purposes of the 2006 Act, a resolution permitting the Company to make political donations and incur political expenditure will be proposed at the 2012 AGM.

Environmental MattersThe Board believe that good environmental practices support the Board’s strategy by enhancing the reputation of the Group. Details of the ways in which the Company controls, reviews and mitigates environmental risks are given in the HSE Report on page 22.

Supplier payment policyThe Company’s policy, which is also applied by the Group, is to settle terms of payment with suppliers when agreeing the terms of each transaction, to ensure that the supplier is aware of the terms and to abide by the terms of the payment. At 31 December 2011, the Group had an average of 29 days’ purchases outstanding in creditors (2010: 32 days).

EmployeesThe Company has a policy of actively communicating with employees in many ways, including regular briefings on financial performance. Communication is seen as a way to encourage employee involvement at all levels of the Group.

The Group has a diverse workforce comprising both local employees and expatriates at all sites. The Group is an equal opportunities employer and where existing employees become disabled, it is the Company’s policy to provide continuing employment under similar terms and conditions, wherever practicable, and to provide training and career development.

As at 31 December 2011, the Group employed 42 people (2010: 44 people).

Significant RelationshipsShareholders: The Board is in regular communication with shareholders and institutional investors, and gives general presentations to analysts at various times throughout the year.

Press releases have been issued throughout the year and the Company maintains a website (www.ophir-energy.com) on which all press releases are posted and which also contains major corporate presentations and the reports and accounts. Shareholders and other interested parties can subscribe to receive news updates by email by registering online on the website.

Shareholders are also encouraged to attend the Annual General Meeting (AGM) to discuss the progress of the Group and are encouraged to make their views known to us and to raise directly any matters of concern. In addition, the Company employs an investor relations manager to ensure the investor relations programme is in place for the Company. This ensures the Company has the ability to meet major shareholders and analysts.

The Company held a capital markets day on 19 October 2011, where Executive Directors and senior management from both London and Perth presented the Company’s Operations and Strategy. The presentation was subsequently posted to the website mentioned above.

Employees: Other than shareholders, the Group’s performance and value are influenced primarily through our employees and key stakeholders. The Group’s approach is to maintain the principles of honesty and integrity and open and clear communication.

Regulatory Authorities: Ophir’s assets are subject to government licences in the territories within which Ophir operates. Compliance with licence terms and conditions is taken seriously and monitored carefully.

Contractors: Contractors are key to the successful implementation of Ophir’s strategy, particularly those involved in drilling campaigns and associated activities. The focus on relationships with contractors in 2011 has been to ensure that there is full compliance with Ophir’s ethical standards and procedures and robust processes for monitoring performance.

Change of controlThe Group has entered into a number of commercial contracts which might take effect, alter or terminate on a change of control of the Company. However, none of these is considered to be significant in terms of their likely impact on the business of the Group as a whole.


Directors’ Report continued

Details of change of control clauses contained in the contracts of employment of the Executive Directors are set out on page 48 of the Directors’ Remuneration Report. Certain members of the Group’s Senior Management team have agreements providing for compensation for loss of office or employment that occurs because of a change of control.

All of the Company’s share incentive plans contain provisions relating to a change of control and details of these plans are provided in the Directors’ Remuneration Report on pages 46 to 47. Generally, outstanding awards under the Foundation Incentive Plan and the 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 ConcernThe 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.

Post Balance Sheet EventsA summary of the key Post Balance Sheet Events is set out in Note 29 to the financial statements.

By order of the Board

Dr Nicholas CooperChief Executive Officer

Ophir Energy plcCompany No. 504742555 Grosvenor StreetLondon W1K 3HY


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Corporate Governance Report

Compliance with the UK Corporate Governance CodeOn 13 July 2011 the Company was admitted to the premium segment of the UK Listing Authority’s Official List and to trading on the main market of the London Stock Exchange. As a premium listed entity, the Company is required to either comply with the UK Corporate Governance Code (a copy of which may be found on the website of the Financial Reporting Council at www.frc.co.uk) or to explain any reason for non-compliance.

The UK Corporate Governance Code (the “Code”) consists of main and supporting principles and provisions in five areas: Leadership, Effectiveness, Accountability, Remuneration and Relations with Shareholders, which companies should apply and report to their shareholders on how they have done so.

During the year ended 31 December 2011, the Company has complied with all the provisions of the Code with the exception of the requirement to undertake a formal and rigorous annual evaluation of its own performance and that of its Committees and individual Directors (Code Principle B.6).

In view of the fact that the new Board has only been in place since July 2011, the Directors are of the opinion that it would be of greater benefit for the first formal evaluation to be undertaken during the Company’s first full year as a listed entity. It is therefore proposed that an evaluation be undertaken during the second half of 2012 and details of the process undertaken, and any outcomes reached, will be included in the Annual Report and accounts for the year ended 31 December 2012.

The purpose of this Corporate Governance Report, together with the Directors’ Report on pages 31 to 34 and the Remuneration Report on pages 45 to 52, is to provide shareholders with details of the Company’s governance policies, processes and structures and to explain how compliance with the main principles of the Code has been achieved.

Role of the BoardThe role of the Board is to lead the Company and, either directly or through the operation of its Committees and delegated authority, bring an independent judgement on all matters of strategy, performance, resources (including key appointments) and standards of conduct.

The Board is responsible for the strategic aims of the Company, which are then implemented through the approval and regular monitoring of performance against the budget prepared by the Executive Directors. The Board has adopted a formal schedule of matters reserved for its approval. Reserved matters include – setting the Company’s strategy and objectives; – approving annual budgets and operating plans,

annual and half year reports and interim management statements;

– reviewing financial performance; – approving material acquisitions, disposals,

contracts and expenditure; – appointments to the Board and senior management

appointments, Committee membership and remuneration for Directors and senior executives;

– ensuring the effectiveness of the Company’s system of internal controls including managing risks;

– approval of health, safety, environmental and other relevant policies; and

– setting the Company’s values and standards and ensuring good corporate governance practices.

Board composition and independenceAs at 31 December 2011, the Board of Directors of the Company (the “Board”) comprised the Chairman, three Executive Directors and six Non-Executive Directors. All of the Executive Directors and a majority of Non-Executive Directors have extensive experience within the oil and gas industry.

During the period leading up to the Company’s admission to trading on the London Stock Exchange, the Directors considered the most appropriate ongoing structure that would facilitate a smooth transition to full public ownership from the more entrepreneurial pre-IPO structure.

The Board considered a phased succession planning process in relation to the Company’s senior executives and appointed Dr Nicholas Cooper as Managing Director in June 2011. Following this appointment Dr Alan Stein, the previous Managing Director, stepped up to the role of Executive Deputy Chairman as part of a planned withdrawal from day-to-day management of the Group. In December 2011, Dr Cooper was formally appointed as the Group’s Chief Executive Officer and Dr Stein notified the Board that, while he would continue to make himself available for advice and guidance, he would not be seeking re-election at the Company’s AGM in 2012.

The Board also acknowledged the need to strengthen the Company’s finance function in the short-term prior to, and for the purposes of, the IPO. Ms Yvonne Holm was appointed as Chief Financial Officer in February 2011 and stepped down from the Board in December 2011.

The Board considered the Company’s requirements in relation to the roles and responsibilities of its Non-Executive Directors. As a consequence of these deliberations, the Board accepted the recommendations of the Nomination Committee to appoint additional independent Non-Executive Directors and to accept the resignation of a number of its shareholder Directors in July 2011, prior to IPO.

The Board considers that the majority of its Non-Executive Directors, namely Nicholas Smith, Ronald Blakely, John


Corporate Governance Report continued

Appointment Date(if during the year)

Resignation Date(if relevant) Board Meetings

Current DirectorsNicholas Smith, Chairman – 14/14Alan Stein, Executive Deputy Chairman &

Founder Director – 11/14Nicholas Cooper, Chief Executive Officer 1 June 2011 9/9Jonathon Taylor, Executive Director &

Founder Director – 14/14Ron Blakely, Non-Executive Director 7 July 2011 5/7John Lander, Non-Executive Director – 12/14Dennis McShane, Non-Executive Director – 13/14Lyndon Powell, Non-Executive Director – 14/14Patrick Spink, Non-Executive Director 7 July 2011 6/7Rajan Tandon, Non-Executive Director* – 14/14

Lander, Dennis McShane, Lyndon Powell and Patrick Spink, are independent in character and judgement and free from relationships or circumstances that might affect their judgement. The Board has considered the cross-directorship Mr Lander has with Dr Stein in Neon Energy Limited, and has satisfied itself that this is an immaterial relationship that does not impact on Mr Lander’s independence.

Rajan Tandon is not considered to be independent. Mr Tandon is an employee of Mittal Investments Sarl (“Mittal”), a major shareholder, and was appointed to the Board as Mittal’s representative under the terms of the Relationship Agreement between Mittal and the Company. Mr Tandon has appointed Jaroslaw Paczek as his alternate. Mr Paczek is an employee of the Kulczyk Group, another major shareholder, and he is therefore also not considered to be independent.

Non-Executive Directors are appointed for an initial three year term, with the expectation that a further term will follow, subject to review by the Board. The terms and conditions of appointment of the Non-Executive Directors, including the expected time commitment, are available for inspection at the registered office during normal business hours and at for at least 15 minutes prior to and following the Company’s AGM.

Re-electionThe Company’s Articles of Association require all Directors to be subject to election by shareholders at the first AGM following their appointment and for re-election by shareholders at least every three years.

However, in line with the provision of the Code which states that all directors of FTSE 350 companies should be subject to annual re-election by shareholders, and noting the above, the Board has agreed that all continuing Directors will offer themselves for annual re-election with effect from the 2012 AGM.

Dr Stein has informed the Board that he will not stand for re-election at the 2012 AGM. Dr Stein has confirmed that he will be available to continue his support for the Company in a consulting capacity after he has formally stepped down from the Board.

External directorshipsThe Company had adopted a policy which would enable its Executive Directors to accept directorship of other quoted companies provided that they have obtained the prior permission of the Chairman. An Executive Director will not however be permitted to take on more than one non-executive directorship in a FTSE 100 company nor the chairmanship of such a company. During the year ended 31 December 2011, no Executive Director held directorships in any other London quoted company.

Meetings and AttendanceThe Board met in formal meetings on 14 occasions during 2011 including meetings to consider the strategic direction of the business. Details of the attendance at Board meetings by all Directors who served during the year ended 31 December 2011, and serving up to the date of the signing of this report, are shown in the table below:


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Roles and ResponsibilitiesThere is a clear division of responsibility between the Chairman and the Chief Executive. The Chairman’s key responsibilities are the effective running of the Board, ensuring that the Board plays a full and constructive part in the development and determination of the Company’s strategy, and acting as guardian of the Board’s decision-making process. The key responsibilities of the Chief Executive are managing the day-to-day business of the Company, proposing and developing strategy and overall commercial objectives in consultation with the Board and, as leader of a strong and experienced executive team, implementing the decisions of the Board and its Committees.

For the period from 1 January to 31 May 2011, responsibility for the day-to-day management of the Company was delegated to Dr Stein. Following his appointment as Managing Director on 1 June 2011, and subsequent confirmation as Chief Executive Officer in December, Dr Cooper assumed responsibility for the day-to-day management of the business.

Senior Independent DirectorThe Board has appointed Mr McShane as the Senior Independent Director. Mr McShane is charged with maintaining a communication channel between the Chairman and the Non-Executive Directors and for leading the Non-Executive Directors in reviewing the performance of the Chairman. In addition, Mr McShane is the contact point for shareholders who have concerns that have not, or cannot, be resolved through the normal channels of the Chairman or the Chief Executive or where such contact is inappropriate.

Non-executive DirectorsThe Non-Executive Directors bring a broad range of business skills and experience to the Company, providing an independent view on matters of strategy, performance, risk and conduct through their contribution at Board and Committee meetings. A summary of each Non-Executive Director’s experience and how that experience is relevant to their roles on the Board of the Company is given in the following table:

Appointment Date(if during the year)

Resignation Date(if relevant) Board Meetings

Former DirectorsB Yvonne Holm, Chief Financial Officer 24 May 2011 2 December 2011 7/10Arun Balakrishnan, Non-Executive Director 18 February 2011 7 July 2011 4/8Harak Chand Banthia, Non-Executive Director – 18 February 2011 1/1Michael Cohen, Non-Executive Director – 7 July 2011 7/8John Morgan, Non-Executive Director 7 July 2011 2 December 2011 6/7Jaroslaw Paczek, Non-Executive Director 1 – 7 July 2011 8/8Mikki Xayiya, Non-Executive Director – 7 July 2011 2/8Stefan Krieglstein, Non-Executive Director 2 10 March 2011 7 July 2011 n/aJacob 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.

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.



Director Key biographical details Experience relevant to board involvement

Board responsibilities

Nicholas Smith Qualified accountant – training with Ernst & Young. Investment banker.Holds Far Eastern NED roles.

– Accountancy – UK capital markets – Financial experience

– Chairman of the Board – Member of Nomination

and Remuneration Committees

– Member of Audit Committee (to 7 July 2011)

Ronald Blakely Management Accountant.Executive Finance roles with Royal Dutch Shell. NED of Canadian resource company.

– Recent and relevant financial experience in major oil and gas company

– Chairman of the Audit Committee

John Lander Geophysicist.Boardroom roles in major oil & gas companies.Chairman & NED of resource companies.

– Extensive FTSE 250 oil & gas company experience

– HSE experience from former operational roles

– Chairman of Remuneration Committee

– Member of the Audit, Nomination and HSE Committees

Dennis McShane Investment banker.Senior Executive of iron ore resource company. International experience.

– Recent and relevant corporate finance and banking experience

– Insight into emerging markets & mining practices

– Senior Independent Director

– Chairman of the Nomination Committee

– Remuneration and Audit Committee member (Chairman of the latter to 18 August 2011)

Lyndon Powell Career in Royal Military Police and Special Forces. Worked with Foreign & Commonwealth Office. Former advisor to Sierra Leone Armed Forces. Independent security advisor to corporate sector.

– Operational and strategic security advice

– International experience including advisory roles in Africa

– Chairman of the HSE Committee

– Member of the Remuneration Committee

Patrick Spink Environmental Scientist.Exploration and operational experience in oil & gas companies.Upstream investment consultant.

– Extensive industry knowledge Operational environmental, health & safety experience

– Knowledge of Africa and exploration

– Member of the HSE Committee

Rajan Tandon Chartered Accountant. Extensive experience within multi-national resource group.

– Insight into views of major shareholders

– General financial and accounting experience including internal audit scope


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Board process, induction and trainingThe Board and its Committees are provided with full and timely information prior to meetings, including detailed financial information. The Chief Executive, in consultation with the Company Secretary, sets the agenda for Board meetings, which is reviewed by the Chairman prior to dissemination to all Board members. Formal minutes are prepared to record all decisions made at Board and Committee meetings. Minutes of Board meetings are circulated to each Director as soon as practicable after the conclusion of the meeting, prior to their formal acceptance at the next full meeting of the Board. Minutes of Committee meetings are reviewed and approved by its members and circulated to other Board members as and if appropriate. If a Director objects to a particular proposal, this will be recorded in the minutes of the relevant meeting. During the year ended 31 December 2011 there were no such objections.

The Chairman is responsible for ensuring that an appropriate induction is given to new Board members. The induction programme includes training on the business and strategy of the Company, copies of Board policies and procedures, meetings with senior management and site visits, where appropriate. The intention for ongoing training is to ensure that Directors receive sufficient information, both verbally and in written form, to enable them to fully perform their roles on the Board and its Committees. During the Strategy Day in October, the Board received briefings on the Oil and Gas sector of the FTSE as well as the Liquid Natural Gas sector in Africa. There have also been specific briefings on the duties of public company directors and the 2010 Bribery Act.

All Directors have access to the advice of the Company Secretary and the Board has established a procedure whereby any Director, may take independent professional advice on any matter in the furtherance of their duties, at the Company’s expense.

The Directors and officers of the Company have the benefit of Directors’ & Officers’ insurance, the level of which is reviewed annually. In addition, Directors and officers have received an indemnity from the Company against (a) any liability incurred by or attaching to the Director or officer in connection with any negligence, default, breach of duty or breach of trust by them in relation to the Company or any associated company; and (b) any other liability incurred by or attaching to the 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.

Board Performance EvaluationIn preparation for the Initial Public Offering of the Company’s shares in July 2011, the Board undertook a review of its membership and that of its principal Committees as well as a review of the terms of reference of each of those Committees. Following this review and the appointment of further independent Non-executive Directors, a majority of the shareholder appointed Directors elected to stand down immediately prior to the IPO.

In view of the changes to Board and Committee membership during the year, the Directors have agreed not to undertake an evaluation of their performance for the period. The first formal evaluation will therefore take place during the second half of 2012 and details of the process undertaken and outcomes reached will be set out in the 2012 Annual Report.

Conflicts of InterestEvery Director has a duty to avoid a conflict between their personal interests and those of the Company. The provisions of Section 175 of the Companies Act 2006 and the Company’s articles of association permit the Board to authorise situations identified by a Director in which he or she has, or may have, a direct or indirect interest that conflicts, or may conflict, with the interests of the Company. Accordingly, each Director, including Mr Paczek as alternate for Mr Tandon, has disclosed their respective outside positions and interests in arrangements with third parties in the form of lists (the “Directors’ Lists”). The Directors’ Lists were considered in detail during the Company’s first Board meeting after Admission when all positions and interests disclosed were authorised. An annual review of the Directors’ Lists and situational conflicts will be undertaken each calendar year.

Each Director has undertaken to advise the Board if there are any material changes to their positions or interests and will not participate in any formal Board discussion or decisions relating to any matter in which they have or may have a conflict of interests.

Committees of the BoardThe Board has delegated certain responsibilities to Committees in line with the provisions of the Code and to facilitate the business of the Company. These standing Committees are the Audit, HSE, Nomination and Remuneration Committees.



Report of the Audit CommitteeMembership, Meetings and AttendanceMembers of the Audit Committee are appointed by the Board and all of its members are considered to be independent. The Audit Committee meets at least four times each year and otherwise as required. During the year ended 31 December 2011 the Audit Committee met eight times. During the year ended 31 December 2011, the members of the Audit Committee, and their individual attendance at meetings, were as follows:

Committee MembersMeeting

attendance

Dennis McShane (Committee Chairman to 18 August 2011) 8/8

Ron Blakely (appointed 7 July, Committee Chairman from 19 August 2011) 2/2

John Lander 7/8Nicholas Smith (until 7 July 2011) 6/6

The Chairman of the Board, Mr Smith, was a member of the Audit Committee prior to the Company’s admission to the premium segment of the Official List of the Financial Services Authority and to trading on the main market of the London Stock Exchange.

The Board considers that both Mr McShane and Mr Blakely have recent and relevant financial experience and competence in accounting as required by section C.3.1 of the Code and section 7.1.1 of the Disclosure & Transparency Rules respectively.

Members of the Group’s Senior Management, including the Chief Financial Officer and the Group Financial Controller, may be invited to attend all or part of the Audit Committee’s meetings as required. The external auditors attend meetings on a regular basis, both with and without executive management being present.

Role and Responsibilities of the Audit CommitteeDuring the year, the Audit Committee undertook a review of its objectives and terms of reference to ensure that they were appropriate for a UK listed entity. The Audit Committee’s full terms of reference are available on the Company’s website www.ophir-energy.com but in summary, following the review, the Audit Committee’s main role and responsibilities were confirmed as: – monitoring the integrity of the financial statements

of the Company, including its annual and half-yearly reports, interim management statements and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain;

– keeping under review the effectiveness of the Company’s internal financial controls and internal control and risk management systems together with reviewing and approving statements to be included in any public document concerning internal controls and risk management;

– reviewing the adequacy and security of the Company’s procedures and arrangements for detecting fraud, bribery and money laundering and ensuring that employees and contractors are able to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters;

– monitoring and reviewing the effectiveness of the Company’s internal audit processes in the context of the Company’s overall risk management system;

– considering and making recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re-appointment and removal of the Company’s external auditor, their terms of appointment and remuneration and assessing annually their independence and objectivity; and

– developing and implementing a policy on the supply of non-audit services by the external auditor.

Financial ReportingDuring the year ended 31 December 2011, the Audit Committee reviewed and approved for consideration by the Board the financial results for the year ended 31 December 2010 together with the results for the half -year to 30 June 2011. The Audit Committee considered the appropriateness of preparing accounts on a going concern basis, including reviewing cash forecasts and options for obtaining additional funding. This has been a particular area of scrutiny and review for the Audit Committee given that the Company is an exploration rather than producing entity. At both full and half-year, the Audit Committee agreed that the Company’s financial position was such that it continued to be appropriate for accounts to be prepared on a going concern basis.

The Audit Committee also considered the financial documentation required for the Company’s Initial Public Offering, including the Long Form Report, Working Capital Report, Financial Reporting Procedures Report and the financial statements to 28 February 2011.

Other matters considered by the Audit Committee during the year include the 2011 half-year and full-year audit plans; well control insurance cover; Directors’ & Officer’s insurance; and the Group’s risk governance framework.


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External AuditorErnst & Young LLP (“EY”) has acted as auditor since February 2005. The Board has considered and approved the Committee’s recommendation that EY be reappointed for 2012. This recommendation was based on a review of the 2011 audit and work undertaken in preparation for the Company’s IPO, both of which demonstrated an overall satisfaction with the performance of EY as the external auditor. The Committee has approved a policy to review the tenure of the external auditor every five years.

The Committee has established a policy to maintain the independence of the external auditor and its personnel, governing the provision of audit and non-audit services provided by the auditor and its associates. The policy clearly identifies permitted and prohibited services and sets out the procedure to be followed for the approval of all audit and non-audit services. All engagements with an expected fee in excess of US$100,000 require the prior approval of the Audit Committee.

During the year ended 31 December 2011 the Audit Committee approved fees for audit services of £292,142 together with fees for non-audit work of £1,643,173 The nature of the services provided is set out in Note 4(d) to the consolidated financial statements. There is no limitation of liability in the terms of appointment of EY as auditor to the Company.

Risk Management and Internal Controls The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness on a continual basis. The Group’s system of internal control is designed to safeguard the Company’s assets and to ensure the reliability of financial information for internal and external use. Any system of controls can provide only reasonable, but not absolute, assurance that assets are safeguarded, transactions authorised and correctly recorded and that any material errors and irregularities are detected within a reasonable timeframe. The Group’s internal controls are therefore designed to manage, rather than eliminate, risk, recognising that not all risks can be eliminated and the cost of control procedures should not exceed the expected benefits.

The Audit Committee regularly reviews, on behalf of the Board, the effectiveness of the Group’s system of internal controls. The review covers financial, operation and risk management processes. An organisational structure has been put in place with clearly defined lines of responsibility and delegation of authority. Procedures include Board approval for all significant new projects and senior management review and 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.

The Group operates a risk management process under which key risks are identified, their likelihood and impact considered and actions taken to manage those risks. The principal risks identified by the Group are set out on pages 26 to 27.

The Board, supported by the Audit Committee, has reviewed the effectiveness of the internal control systems in operation during the financial year. During the year, the Audit Committee has considered the key processes and controls within the business, in particular: – Procurement and Contracts – Cash and Payments – Payroll – Information Technology – Health, safety and environment

Focus has been placed on developing the Group’s contractor and procurement processes. A Contracts Committee has been set up to oversee the procedures for procuring major goods and services. In addition, the Company has developed procedures for monitoring third party contractors in response to implementation of the UK Bribery Act 2010 (the “Act”).

The Audit Committee has reviewed the internal procedures and concluded that that there are no failings and weaknesses identified as significant during this review.

Internal AuditDuring the year the Audit Committee reviewed the requirement for the Group to establish an internal audit function. The Audit Committee was of the opinion, supported by the Board, that the current size and scale of the Company did not warrant the employment of a full time internal audit function and that consultants would be utilised, where appropriate, to undertake specific internal control reviews. The Audit Committee will review this decision at least annually.

Anti-Bribery and WhistleblowingThe Audit Committee undertook a thorough review of the Company’s processes and procedures in relation to the Act. Each part of the business provided input on the main ethics and compliance risks they faced which were then used to update the Group’s Code of Conduct and Anti-corruption Policies. An extensive training programme has been undertaken for the Board and all employees and consideration given to the monitoring of training provided by contractors. Contracts have been reviewed to ensure compliance with the Act and a policy put in place to register all corporate hospitality and charitable donations.



The Group is committed to the highest standards of business conduct and has adopted a Whistleblowing Policy as a mechanism to support the achievement of this goal. Employees are encouraged to raise genuine concerns which are carefully and thoroughly investigated to assess what action, if any, should be taken. A report is made to the Audit Committee on matters raised in accordance with the Whistleblowing Policy although, during the year to 31 December 2011, no such issues were raised.

Report of the HSE CommitteeMembership, Meetings and AttendanceMembers of the HSE Committee are appointed by the Board and a majority of its members are independent Non-Executive Directors. Colin Ivory, the Company’s Operations & HSE Manager is invited to attend all meetings of the HSE Committee and external advisors may be invited to attend as necessary.

The HSE Committee meets at least twice each year and otherwise as required. During the year ended 31 December 2011 the HSE Committee met three times. Details of HSE Committee membership during the year ended 31 December 2011 and their individual attendance at meetings were as follows:


attendance

Lyndon Powell (Committee Chairman) 3/3John Lander 3/3Patrick Spink (with effect from

7 July 2011) 1/1Jonathan Taylor 3/3

Role and Responsibilities of the HSE CommitteeDuring the year, the HSE Committee reviewed new terms of reference in line with those for UK listed entities and recommended to the Board that the new terms of reference be adopted by the Board. The HSE Committee’s full terms of reference are available on the Company’s website (www.ophir-energy.com) and its main responsibilities include to: – evaluate the effectiveness of the Group’s policies and

systems for identifying and managing health, safety, social, security and environmental risks within the Group’s operations and assess the performance of the Group with regard to the impact of its HSE decisions;

– receive, on behalf of the Board, reports from management concerning all fatalities and serious accidents within the Group and actions taken by management as a result;

– review external stakeholder reporting concerning health, safety, security, social and environmental performance and issues; and

– review the results of independent audits of the Group’s performance in regard to health, safety, social, security or environmental matters, and to review any strategies and action plans developed by management in response to issues raised.

Activities of the HSE Committee during the yearThe principle issue considered by the HSE Committee during the year ended 31 December 2011 has been the review of maritime security in relation to the Group’s operations, particularly off Tanzania and Senegal.

A reduction in piracy activity has been seen in Tanzania although support has been provided by the Tanzanian Navy for the drilling and seismic study surveys undertaken. In contrast, Senegal had experienced an increase in security issues and the Company had developed a maritime security plan for Senegal in conjunction with Salamanca Risk Management and HASSMAR, the Senegalese government agency for maritime security and offshore environmental activities.

The review of maritime security has led, in turn, to consideration by the HSE Committee of the Group’s crisis management and press briefing procedures, although only minor changes were required.

During the year, the HSE Committee has also considered reports on health & safety incidents within the Group, including a particular focus on lost time injuries, and the results of any investigations undertaken. The HSE Committee also reviewed the results of HSE audits undertaken during the year, which led to an update to the Group’s air travel policy, and the approval of the 2012 HSE budget for submission to the Board.

Report of the Nomination CommitteeMembership, Meetings and AttendanceMembers of the Nomination Committee are appointed by the Board and all three of its members are considered to be independent. The Nomination Committee meets at least twice each year and otherwise as required. During the year ended 31 December 2011 the Nomination Committee met eight times. During the year ended 31 December 2011 the members of the Nomination Committee, and their attendance at meetings, were as follows:


attendance

Dennis McShane (Committee Chairman) 8/8John Lander 8/8Nicholas Smith 8/8


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Role and responsibilities of the Nomination CommitteeDuring the year, the Nomination Committee reviewed its terms of reference and recommended to the Board minor changes in preparation for the Initial Public Offering in July 2011. The Nomination Committee’s full terms of reference are available on the Company’s website (www.ophir-energy.com) and its main responsibilities include to: – regularly review the structure, size and composition

(including the skills, knowledge, experience and diversity) of the Board and make recommendations to the Board with regard to any changes;

– give full consideration to succession planning for Directors and other senior executives;

– ensure that on appointment to the Board, Non-Executive Directors receive a formal letter of appointment setting out clearly what is expected of them in terms of time commitment, Committee service and involvement outside Board meetings and review annually the time commitment required from the Company’s Non-Executive Directors;

– review the results of the Board performance evaluation process that relate to the composition of the Board;

– review the membership of the Audit and Remuneration Committees and any other Board Committees as appropriate, in consultation with the chairmen of those committees; and

– consider the reappointment of any Non-Executive Director at the conclusion of their specified term of office, giving due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required.

Activities of the Nomination Committee during the yearDuring 2011 the Nomination Committee reviewed the roles and responsibilities of Board members prior to considering candidates for additional appointments. By identifying the skills, knowledge and experience held by the continuing Board members, the Nomination Committee was able to ascertain which additional skills any new Director should possess to bring the greatest benefit to the Company.

The Nomination Committee recommended to the Board that Dr Nick Cooper be appointed as Chief Executive Officer of the Company from 1 June 2011. In addition, the Nomination Committee considered, and made recommendations to the Board, regarding the appointment of Ronald Blakely, John Morgan and Patrick Spink as additional Non-Executive Directors of the Company with effect from 7 July 2011. In each case, the Company appointed international executive search agents to assist with the identification of suitable candidates for the Board vacancies.

During its deliberations, the Nomination Committee also considered whether the new Non-Executive Directors should be appointed to any Board Committees, and if so which. Subsequently, the Nomination Committee reviewed the membership of all Board Committees, recommending minor changes to allow for a more even distribution of membership between all independent Non-Executive Directors.

Diversity and the Davies Report: Women on BoardsDuring the second half of the year the Nomination Committee considered diversity within the Group, particularly at Board and senior management level, and it is supportive of the recommendations of the Davies Report: Women on Boards to increase gender diversity in the Boardroom but not the implementation of quotas.

The Company welcomes the current emphasis on diversity in general. All appointments, whether to the Board, the senior management team or elsewhere in the business, are made on the basis of merit, irrespective of any gender, racial or other considerations. The Company is committed to improving diversity at all levels of the business and recognises the valuable contribution a more diverse workforce can make by producing the right mix of skills, experience and knowledge.

During its deliberations on Board composition, succession planning and diversity, and as an oil and gas exploration company with an extensive portfolio of interests in Africa, the Nomination Committee agreed that the consideration of positive racial diversity could be merited in any succession planning or appointment process. The Company is also putting in place a clear equal opportunities policy which will embrace gender, racial and all other types of diversity.

The Company intends to develop its aspirations regarding racial, gender and other diversity during the coming months, adopting wide diversity targets in its procedures for Board and senior executive appointments. An update on progress will be provided annually.

Succession PlanningDuring the latter part of the year, the Nomination Committee began its consideration of the Company’s succession planning methodology for Executive Directors and senior management. This will continue to be a focus for the Nomination Committee during the early part of 2012 with the expectation that development plans will be considered by the Board during the first quarter for implementation from the second quarter onwards.



Directors’ RemunerationDetails 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 RelationsDr 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 InformationAdditional 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.


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Remuneration Report

IntroductionThis Remuneration Report has been prepared in accordance with the requirements of the Companies Act 2006 and Schedule 8 of the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008 (the “Regulations”). It also describes the Company’s compliance with the UK Corporate Governance Code in relation to executive remuneration and takes into account the Association of British Insurers’ Principles of Remuneration.

This Remuneration Report is divided into two parts. The first, which is not audited, sets out the role of the Remuneration Committee, the Company’s executive reward policy and the link between this policy and the business strategy. The second part, which has been audited in accordance with the Regulations, provides details of Directors’ emoluments, share incentives and other performance-related awards and pension arrangements.

This Report will be subject to an advisory vote at the Company’s AGM in 2012.

Part A: Unaudited InformationMembership, Meetings and AttendanceThe Remuneration Committee is responsible for determining the base salaries, bonuses, long-term incentive arrangements and other benefits for Company’s Executive Directors and for determining specific remuneration packages for senior executive management. The Remuneration Committee also reviews the remuneration framework for all other Group employees.

Members of the Remuneration Committee are appointed by the Board and all of its members are considered to be independent. The Remuneration Committee is required to meet a minimum of twice a year and otherwise as required. During the year ended 31 December 2011 the Remuneration Committee met 14 times reflecting the significant number of executive remuneration-related issues that the Company was required to address prior to its IPO. Members of the Remuneration Committee during the year ended 31 December 2011, together with details of their attendance at meetings, were as follows:


attendance

John Lander, Committee Chairman 14/14Dennis McShane 13/14John Morgan (appointed 7 July 2011,

resigned 2 December 2011) 2/4Lyndon Powell 14/14Nicholas Smith 14/14

Executive Directors may be invited to attend all or part of any Remuneration Committee meeting to provide additional insight on how the Company’s remuneration strategy can be best linked to Ophir’s strategic objectives while also reflecting general workforce pay and conditions. However, any Executive Director attending a meeting will abstain from any discussion directly relating to their own remuneration.

The Remuneration Committee has appointed Aon Hewitt Limited (operating through the brand New Bridge Street) as independent consultants to provide advice on remuneration and share incentives for both Executive Directors and the wider senior executive management population. Representatives from New Bridge Street may be invited to attend Remuneration Committee meetings and details of their terms of engagement are available on request from the Company Secretary. Neither Aon Hewitt Limited, nor any other part of Aon Corporation, provide other services to the Company.

The Remuneration Committee makes recommendations to the Board, within agreed terms of reference, on the framework of executive remuneration and on the specific remuneration of the Executive Directors. The Remuneration Committee monitors remuneration in aggregate across the Group with particular visibility as to the individual remuneration and key performance indicators for senior executive management. The terms of reference for the Remuneration Committee may be found on the Company’s website www.ophir-energy.com.

Remuneration PolicyThe Company’s remuneration policy seeks to maintain levels of remuneration so as to attract, motivate and retain executives of the highest calibre who can contribute their skills, capabilities and experience to Ophir’s operations and further development of the business. In a business where investment decisions have multi-year impacts, the executive remuneration policy is structured so that a significant proportion is made up of long-term share based incentives. In this way, the interests of Executive Directors and senior executive management are strongly aligned with those of the Company’s shareholders.

The remuneration for Executive Directors is made up of base salary, benefits (including non-contributory health insurance, life assurance), annual bonus, long-term incentives and pension contributions. The Remuneration Committee has elected to set the basic level of pay, benefits and pension contributions for Executive Directors at or below the average benchmark industry levels, and to more adequately reward the Directors if they meet or exceed the targets set under the variable components of their remuneration packages.


Remuneration Report continued

The Remuneration Committee will regularly consider whether the Company’s senior executive remuneration policy and practices reflect Ophir’s risk policies and systems. The Remuneration Committee is satisfied that the current approach neither encourages nor rewards inappropriate risk-taking.

Base salaryExecutive Directors’ remuneration packages – including base salaries – are reviewed annually with regard to personal performance, Company performance, changes in responsibilities and competitive market practices (both in the Oil & Gas sector and the market more generally). Prior to the year end, the Remuneration Committee considered both the Company’s and the Executive Directors’ performance over the year and benchmarking information prepared by New Bridge Street in relation to the remuneration of the Executive Directors and agreed that the Executive Directors’ base salaries should be increased by 5% (which reflects the general increases made to other members of the senior executive team).

Therefore, with effect from 1 January 2012, the base salaries for Executive Directors are Dr Nicholas Cooper – £393,750; Dr Alan Stein – AU$852,390 and Jonathan Taylor – £367,500.

Pension and other benefitsEach of the Executive Directors is provided with the following benefits: (i) Company pension superannuation contributions of the greater of the statutory minimum or 11% of basic salary paid into Mr Taylor’s and Dr Cooper’s personal pension arrangements, or in respect of Dr Stein into an applicable superannuation fund (further details of which are set out on page 50); (ii) eligibility to participate in any share option scheme for employees; (iii) permanent health insurance; (iv) private health insurance (including spouse and children); (v) life assurance; (vi) medical evacuation insurance; (vii) in respect of Mr Taylor and Dr Cooper, 25 days’ paid holiday in addition to English bank and other public holidays, and in respect of Dr Stein, 25 days’ paid holiday in addition to Australian public holidays as gazetted in Western Australia; and (viii) six consecutive months’ paid sick leave in any 12 month period.

The variable component of remuneration is made up of two elements: an annual bonus plan and long-term incentives.

Annual bonusThe annual bonus plan is designed to reward above average performance. The Remuneration Committee reviews the performance targets for the bonus plan annually. These are linked to key performance indicator (“KPI”) targets and contain a mix of financial, operational and corporate measures based on strategic targets. The maximum annual bonus payable to Executive Directors in 2011 was 125% of salary. No bonus is payable for below target performance.

KPI targets for 2011 were set for the Executive Directors in respect of Health & Safety performance: progress towards a liquidity event and an increase in reserves and resources (both firm and provisional). Following consideration of each Executive Director’s performance during the year, or part thereof where appropriate, the Remuneration Committee recommended, and the Board approved, bonus payments equivalent to 104.17% of basic salary (being 83.3% of the maximum bonus payable). In recognition of his involvement with the Company prior to his date of joining, it was recommenced that Dr Cooper’s bonus be paid on the basis of having worked for eight months of 2011.

In relation to their performance-related annual bonuses for the year ending 31 December 2012, Executive Directors will be assessed on Health, Safety & Environmental performance; Leadership; Reserves and Resources (which are to be independently verified); Finance (which contains a funding aspect); and Portfolio Management. The maximum bonus opportunity will be increased to 150% of salary for the Executive Directors. This reflects the moderated approach the Remuneration Committee takes to the Executive Directors’ fixed remuneration and increases the proportion of their remuneration that is linked to performance.

Long-term IncentivesPrior to IPO, long-term incentives were provided by the award of options under the Company’s share option plans. However, it has been agreed that the Company’s 2006 Share Option Plan (“2006 Plan”) will not be used as a principal feature of the Company’s remuneration arrangements post-IPO. Notwithstanding this, in order to retain flexibility when considering the remuneration arrangements for senior executive management, the Remuneration Committee has elected to retain the 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


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maximum value of shares (calculated using the average share price over such period as the Remuneration Committee considers appropriate) that can be granted to any participant is 200% of salary each year, although awards can be made up to 300% of salary in exceptional circumstances.

Awards made in 2011 vest on a straight line basis relative to the Company’s total shareholder return (“TSR”) performance over a three year period compared to a comparator group set on grant (which shall be independently measured). No vesting occurs for below median performance. At median, 25% of the award vests, with full vesting at the upper quartile. In addition, the Remuneration Committee may reduce the number of shares in respect of which an award would otherwise vest based upon TSR performance if it considers that the share price achieved over the three year period does not reflect the underlying financial performance of the Company and/or if it feels that key operational metrics (such as health, safety and environmental) have not been met. The comparator group used for the 2011 awards was as follows:

Tullow Oil Cairn EnergyEssar Energy Premier OilAfren Soco InternationalEnquest Heritage OilSalamander Energy JKX Oil & GasMelrose Resources Gulf KeystoneBowleven Rockhopper ExplorationCove Energy Chariot Oil & GasIthaca Energy Faroe PetroleumCobald International Energy Kosmos Energy

The Committee considers that relative TSR performance is an appropriate metric to use for these awards at the Company’s current state of development. As a result, it was used for the LTIP award made in April 2012. In light of corporate developments within the sector, the Remuneration Committee has replaced Cove and Ithaca with Genel Energy plc and Maurel & Prom. The Remuneration Committee was also of the 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 award over shares worth 300% of salary based on the three month weighted average share price prior to grant) to reflect the Company’s exceptional performance, which has encompassed the completion of the equity placing of 30.5 million new ordinary shares and continued drilling successes.

Furthermore, in light of this exceptional performance, the Remuneration Committee has undertaken a review of long-term incentive provisions so as to ensure it is aligned with the interests of the Company’s shareholders and its strategic objectives. Proposed changes to the current LTIP are to be tabled for approval at the forthcoming AGM, further details of which will be set out in the Notice of AGM.

In addition, shareholder approval is being sought at the AGM for the establishment of a Deferred Share Plan (“DSP”) and an Employee Benefit Trust (“Trust”). All employees of the Company and any of its subsidiaries (including Executive Directors) are eligible to be awarded options under the DSP, however, there is no current intention to include the Executive Directors in awards under the DSP. It is intended that the Trust will be used to hold ordinary shares in the Company in conjunction with the DSP although it could also be used in conjunction with any other employee share incentive plan. Further details of the DSP and the Trust will be set out in the Notice of AGM.

Details of options or LTIPs held by Executive Directors at the date of this report or at any time during the year are shown in the table on page 52. No Executive Directors exercised any share options during the year (2010: Nil)

Performance graphThe following graph shows the Company’s TSR performance since trading of the Company’s shares began on the London Stock Exchange on 13 July 2011 against the comparator group of companies, both UK and internationally quoted oil and gas producers, which were used as the TSR comparator group for the 2011 LTIP awards. The graph also shows the Company’s TSR performance since trading of the Company’s shares began on the London Stock Exchange on 13 July 2011 against the FTSE 250, the broad equity index of which Ophir is a constituent.

13-Jul-11 31-Dec-11

Ophir

Total shareholder return

Val

ue (£

)

FTSE 250

LTIP TSR ComparatorGroup (Average)

60

80

100

120



Executive Directors: Service Contracts and RemunerationDr Stein has a rolling term employment contract with the Company and Ophir Services Pty Limited, a subsidiary of the Company. Ophir Services may terminate Dr Stein’s employment by giving not less than 12 months’ written notice and Dr Stein may terminate his employment by giving not less than six months’ written notice. In November 2011, Dr Stein notified the Company that he would resign, under the terms of his contract, at the conclusion of the Company’s AGM in 2012.

Mr Taylor has a rolling term service agreement with the Company. The Company may terminate Mr Taylor’s employment by giving not less than 12 months’ written notice and Mr Taylor may terminate his employment by giving not less than six months’ written notice.

Dr Cooper has a rolling term service agreement with the Company. From appointment to February 2012, both the Company and Dr Cooper could terminate the service agreement by giving not less than 12 months’ written notice. In March 2012, Dr Coopers service agreement was aligned with that of the other Executive Directors, whereby the Company may terminate Dr Coopers employment by giving not less than 12 months’ written notice and Dr Cooper may terminate his employment by giving not less than six months’ written notice.

Following her appointment as a Director, Ms Holm had a rolling term service agreement with the Company. During the first 12 months of employment, the Company was entitled to terminate Ms Holm’s appointment by giving not less than six months’ written notice and Ms Holm was entitled to terminate her appointment by

giving not less than three months’ written notice. After 12 months of employment, these periods would have risen to 12 months’ written notice and six months’ written notice respectively.

The service contracts each contains a payment in lieu of notice provision together with a provision enabling the relevant employer to put the Executive Director on garden leave for up to six months at any time after notice to terminate the service contract has been given by the Executive Director or the relevant employer or the Executive Director has resigned without giving due notice and the relevant employer has not accepted the resignation. Any payment in lieu of notice is limited to basic salary for Dr Stein, Mr Taylor and Dr Cooper. Any payment in lieu of notice for Ms Holm was limited to basic salary and pension contributions only.

The service contracts of Dr Stein Mr Taylor and, with effect from March 2012, Dr Cooper provide that if within three months of a Change of Control of the Company, the relevant employer and the Executive Director have failed to agree new terms and conditions of employment, then the relevant employer shall be deemed to have terminated the service contract immediately and the Executive Director will be entitled to be paid 12 months’ basic salary.

The Executive Directors will not be entitled to any other payment or notice or payment in lieu of notice in addition to this Change of Control payment.

A summary of the terms of the service contracts of Executive Directors as at 20 April 2012 is set out below:

NameContinuous

employmentContract

dateNotice byCompany

Notice byExecutive

Dr Alan Stein 1 May 2004 10 October 2007 12 months 6 monthsJonathan Taylor 1 June 2004 16 October 2007 12 months 6 monthsDr Nicholas Cooper 1 June 2011 26 May 2011 12 months 6 months


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Copies of the service agreements for Executive Directors, together with the letters of appointment for the Non-Executive Directors detailed below, are available for inspection during normal business hours at the Company’s registered office.

With the prior permission of the Board, Executive Directors are permitted to accept external directorships and to retain any fees payable in respect of those roles. Under this policy Dr Stein serves as Chairman of Neon Energy Limited, an unrelated entity listed on the Australian Stock Exchange, for which he received remuneration of US$ 56,810 (2010: US$45,997).

Non-Executive Directors: Letters Of Appointment And Fees The letters of appointment for the independent Non-Executive Directors being Messrs Smith, Blakely, Lander, McShane, Powell and Spink do not provide for specific terms of appointment, termination notification periods or entitlement to payment on termination. However there is an expectation that all independent Directors will serve for an initial three year term. The Company may terminate the appointment under each letter of appointment if the independent Non-Executive Director has committed a serious or repeated breach or non-observance of his obligations to the Company.

Prior to 7 July 2011, the services of Messrs Lander and Powell were provided under contracts between the Company and Vectis Petroleum Limited (a company controlled by Mr Lander) and Barbican Global Limited (a company controlled by Mr Powell) respectively. Thereafter, Messrs Lander and Powell received letters of appointment from the Company.

The fees for the Company’s Chairman and independent Non-Executive Directors are determined by the Board as a whole (with the relevant individuals absenting themselves from discussions relating directly to their own remuneration). Remuneration paid to independent Non-Executive Directors is set at a level to attract persons with the necessary experience and ability to make a significant contribution to the Company’s operations. Remuneration levels are agreed based on external advice and give consideration to the time commitment and responsibilities of the role.

The fees for Non-Executive Directors were reviewed during 2011 to take account of the Company’s successful IPO and entry into the FTSE 250. The Board’s policy in relation to the fee payable to the Chairman of the Board is that it should be comparable to the median fee payable for non-executive chairmen of companies of a comparable size and complexity. In addition, Non-Executive Directors’ fees were reviewed to take account of the additional time commitment and responsibility required following Admission. As a result, with effect from 13 July 2011, the fees payable to the Chairman and the independent Non-Executive Directors were revised as follows:

Pre13 July 2011

Post13 July 2011

Chairman’s fee: £90,000 per annum

£140,000per annum

Non-Executive Director basic fee:

£60,000per annum

£70,000 per annum

Committee Chairmanship fee:

Nil £5,000 per annum

An additional one-off fee of £14,000 was paid to Mr McShane during the year in relation to the increased time commitment given and duties undertaken in relation to the reconstitution of the post-IPO Board.

Mr Tandon, Non-Executive Director representing the Mittal Group, together with the former Non-Executive Directors who represented major shareholders being Mr Xayiya (representing Mvelaphanda), Mr Cohen (representing OZ Funds), Mr Banthia (representing Mittal Group) and Mr Paczek (representing Oil & Gas Exploration), holds or held office by virtue of a relationship agreement between the entity represented and the Company. No representative Director (or the entity represented) receives or received any remuneration for their services as Directors or is or was entitled to any payment on termination of their services as Directors.

The Chairman and Non-Executive Directors are not entitled to participate in the Company’s executive remuneration programmes or pension arrangements. During the year, the Company did not issue options to any of the Non-Executive Directors nor to any entity in which a Non-Executive Director is deemed to be interested.



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

DirectorUS$’000

BaseSalary/Fees Bonus

Pension/Super-

annuationTermination

PaymentsOther

BenefitsTotal2011

Total2010

Chairman & Executive Directors

Nicholas Smith 177 – – – – 177 151Dr Alan Stein 952 271 26 – – 1,249 948Dr Nicholas Cooper

(from 1 June 2011) 340 – 2 37 – 5 382 –Jonathan Taylor 770 1682 47 – 5 990 746Non-executive

DirectorsRonald Blakely 52 – – – – 52 –John Lander 104 – – – – 104 101Dennis McShane1 126 – – – – 126 101Lyndon Powell 104 – – – – 104 101Patrick Spink 52 – – – – 52 –Rajan Tandon – – – – – – –Former DirectorsB. 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 terminated pursuant to an agreement dated 1 December 2011. As part of the terms agreed between the Company and Ms Holm in respect of her departure, Ms Holm was paid a termination payment of £462,621. The 500,000 share options granted to Ms Holm on 8 March 2011 pursuant to the 2006 Plan lapsed upon her departure. However, pursuant to the rules of the LTIP, Ms Holm retains an interest in the shares which were awarded to her under the LTIP subject to the satisfactory completion of the LTIP performance conditions. Ms Holm was not paid an annual bonus.

Directors’ Pension ArrangementsDr Stein, Dr Cooper and Mr Taylor do not participate in a Group pension scheme.

The Company contributes the greater of the statutory minimum or 11% of basic salary into Dr Cooper’s and Mr Taylor’s personal pension arrangements and, in respect of Dr Stein, into an applicable superannuation fund. Where the level of contribution is higher than that which is eligible for tax relief, the excess can be converted into additional salary. In 2011, both Dr Stein and Mr Taylor elected to convert part of their entitlements in this way .


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Directors’ Interests in Shares andOrdinary ShareholdingsThe Company has adopted a policy requiring all Executive Directors to hold a substantial number of shares in the Company, being equivalent in value to 100% of their annual salary. Until the required holding is achieved, Executive Directors will be expected to retain (net of any shares sold to meet tax liabilities or

exercise costs) at least 50% of shares resulting from the exercise of share options granted on or after 1 January 2011 and shares received under the Long-Term Incentive Plan.

The beneficial interests of the Directors in the ordinary shares of the Company as at 31 December 2011 are:

Director

As at1 January 2011(or later date of

appointment) Acquisitions Disposals

As at 31 December

2011

Dr Alan Stein 1 7,303,792 0 1,083,326 6,220,466Jonathan Taylor 2 6,836,320 0 0 6,836,320Nicholas Smith 48,000 60,000 0 108,000Dr Nicholas Cooper 7 0 120,000 0 120,000Ronald Blakely 3 0 12,000 0 12,000John Lander 4 7 8 152,000 20,000 0 172,000Dennis McShane 5 104,000 0 0 104,000Lyndon Powell 24,000 0 0 24,000Patrick Spink 0 40,000 0 40,000Rajan 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.

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.


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

Director and scheme Date of grant Vesting date Lapse date

Shares under award at

1 January 2011 or later

date of appointment

Shares awarded

Shares lapsed/

cancelled or forfeited

Shares under award at 31 December

2011Exercise

price (pence)

Market value per share on

date of award (pence)

Dr Alan Stein

Long-term Incentive Plan 26/05/2011 26/05/2014 25/05/2015 – 321,220 – 321,220 0.00 166.04Jonathan TaylorLong-term Incentive Plan 26/05/2011 26/05/2014 25/05/2015 – 200,000 – 200,000 0.00 166.04Long-term Incentive Plan 22/11/2011 26/05/2014 25/05/2015 – 121,2202 – 121,220 0.00 208.64Dr Nicholas Cooper

Long-term Incentive Plan 01/06/2011 01/06/2013 31/05/2014 – 534,2331 – 534,233 0.00 250.00Long-term Incentive Plan 01/06/2011 01/06/2014 31/05/2015 – 150,000 – 150,000 0.00 166.04Long-term Incentive Plan 01/06/2011 01/06/2014 31/05/2015 – 214,286 – 214,286 0.00 166.04Long-term Incentive Plan 22/11/2011 01/06/2014 31/05/2015 – 85,7142 – 85,714 0.00 208.64Share Option Plan 2006 01/06/2011 01/06/2013 31/05/2021 – 500,000 – 500,000 250.00 62.00Yvonne HolmShare Option Plan 2006 08/03/2011 08/03/2013 07/03/2021 – 500,000 500,000 – 250.00 64.00Long-term Incentive Plan 26/05/2011 26/05/2014 25/05/2015 – 148,572 – 148,572 0.00 166.04Long-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:

Director and SchemeDate of

GrantVesting

DateLapse

DateShares

Awarded

Dr Nicholas Cooper

Long-term Incentive Plan 13 April 2012 13 April 20151 12 April 2016 322,737

Jonathan TaylorLong-term Incentive Plan 13 April 2012 13 April 20151 12 April 2016 200,814Dr Alan SteinLong-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 BoardJohn LanderChairman, Remuneration Committee19 April 2012



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The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards (“IFRS”) adopted by the European Union.

The Directors are required to prepare financial statements for each financial year which present a true and fair view of the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period. In preparing those financial statements, the Directors are required to: – select suitable accounting policies in accordance

with IAS 8: “Accounting Policies, Changes in Accounting Estimates and Errors” and then apply them consistently;

– present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

– provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company and of the Group’s financial position and financial performance;

– state that the Company and the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and

– prepare the accounts on a going concern basis unless, having assessed the ability of the Company and the Group to continue as a going concern, management

either intends to liquidate the entity or to cease trading, or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and enable them to ensure that the financial statements comply with the Companies Acts 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable UK law and regulations the Directors are responsible for the preparation of a Directors’ Report, Directors’ Remuneration Report and Corporate Governance Report that comply with that law and regulations. In addition the Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Neither the Company nor the Directors accepts any liability to any person in relation to the annual financial report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A and Schedule 10A of the Financial Services and Markets Act 2000.

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 CooperChief Executive Officer19 April 2012

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

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


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

We have audited the financial statements of Ophir Energy plc for the year ended 31 December 2011 which comprise the Group and Company Statements of Financial Position, the Group Income Statement and Statement of Comprehensive Income, the Group and Company Statements of Cash Flows, the Group and Company Statements of Changes in Equity and the related Notes 1 to 29. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement set out on page 53, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of 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.

Opinion on financial statementsIn our opinion: – the financial statements give a true and fair view of

the state of the Group’s and of the Company’s affairs as at 31 December 2011 and of the Group’s loss for the year then ended;

– the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

– the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006In our opinion: – the part of the Directors’ Remuneration Report to be

audited has been properly prepared in accordance with the Companies Act 2006; and

– the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:Under the Companies Act 2006 we are required to report to you if, in our opinion: – adequate accounting records have not been kept by

the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

– the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

– certain disclosures of Directors’ remuneration specified by law are not made; or

– we have not received all the information and explanations we require for our audit; or

– a Corporate Governance Statement has not been prepared by the company.


Under the Listing Rules we are required to review: – the Directors’ statement, set out on page 34, in

relation to going concern; – 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 AuditorLondon19 April 2012

Notes: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.

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Notes

Year ended31 Dec 2011

US$’000


US$’000

Group income statementContinuing operationsInterest Income 834 533Gain 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 incomeLoss from continuing operations for the year attributable

to equity holders of the parent (19,075) (19,278)

Other comprehensive incomeExchange 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 share2 (9) cents per share

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

Group Financial Statements


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Called upshare

capital US$’000

SharepremiumUS$’000

Optionspremium

reserveUS$’000

Specialreserve

US$’000

Consreserve

US$’000

Equitycomponent

onconvertible

bondUS$’000

Foreign currency

translation reserve

US$’000

Accumulatedlosses

US$’000

Totalequity

US$’000

As at 31 December 2009 1,041 417,048 23,028 156,435 (500) 669 5,134 (228,759) 374,096Loss for the period,

net of tax – – – – – – – (19,278) (19,278)Other comprehensive

income, net of tax – – – – – – 602 – 602Total comprehensive

Income, net of tax 1,041 417,048 23,028 156,435 (500) 669 5,736 (248,037) 355,420Exercise of options 1 – – – – – – – 1Share-based payments – – 824 – – – – – 824As at 31 December 2010 1,042 417,048 23,852 156,435 (500) 669 5,736 (248,037) 356,245Loss for the year,

net of tax – – – – – – – (19,075) (19,075)Other comprehensive

income, net of tax – – – – – – 144 – 144Total comprehensive

income, net of tax 1,042 417,048 23,852 156,435 (500) 669 5,880 (267,112) 337,314New ordinary shares

issued to third parties 385 394,365 – – – – – – 394,750Exercise of options 21 – – – – – – – 21Share issue costs – (21,699) – – – – – – (21,699)Share-based payments – – 2,674 – – – – – 2,674As at 31 December 2011 1,448 789,714 26,526 156,435 (500) 669 5,880 (267,112) 713,060

Group statement of changes in equityfor the year ended 31 December 2011


Called upshare

capital US$’000

SharepremiumUS$’000

Optionspremium

reserveUS$’000

Specialreserve

US$’000

OtherreservesUS$’000

Foreign currency

translation reserve

US$’000

Accumulatedlosses

US$’000

Totalequity

US$’000

As at 31 December 2009 1,041 417,048 23,028 156,435 669 11,839 (183,133) 426,927Loss 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) 418,920Exercise of options 1 – – – – – – 1Share-based payments – – 824 – – – – 824As at 31 December 2010 1,042 417,048 23,852 156,435 669 11,839 (191,140) 419,745Loss 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) 402,835New ordinary shares issued to

third parties 385 394,365 – – – – – 394,750Exercise of options 21 – – – – – – 21Share issue costs – (21,699) – – – – – (21,699)Share-based payments – – 2,674 – – – – 2,674As at 31 December 2011 1,448 789,714 26,526 156,435 669 11,839 (208,050) 778,581

Company statement of changes in equityfor the year ended 31 December 2011


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Notes

As at31 Dec 2011

US$’000

As at31 Dec 2010

US$’000

Non-current assetsExploration and evaluation assets 10 327,060 270,043Property, plant and equipment 11 2,205 1,743Other financial assets 13 670 700

329,935 272,486Current assetsInventory 14 6,233 9,058Trade and other receivables 15 8,749 45,295Other current assets 16 466 130Cash and short-term deposits 17 396,585 89,925

412,033 144,408Total assets 741,968 416,894

Current liabilitiesTrade and other payables 18 (27,704) (59,727)Provisions 19 (820) (611)

(28,524) (60,338)Non-current liabilitiesProvisions 19 (384) (310)

(384) (310)Total liabilities (28,908) (60,648)Net assets 713,060 356,246

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

Approved by the Board on 19 April 2012.

Nicholas Smith Nick CooperChairman Chief Executive Officer

Group statement of financial positionAs at 31 December 2011


Notes

As at31 Dec 2011

US$’000

As at31 Dec 2010

US$’000

Non current assetsProperty, plant and equipment 11 507 364Investments in subsidiaries 12 (a) 393,592 344,791Other financial assets 13 387 418

394,486 345,573Current assetsTrade and other receivables 15 2,154 823Cash and short-term deposits 17 386,190 74,364

388,344 75,187Total assets 782,830 420,760

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

Approved by the Board on 19 April 2012

Nicholas Smith Nick CooperChairman Chief Executive Officer

Company statement of financial positionAs at 31 December 2011


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US$’000


US$’000

Net cash flow used in operating activities 22 (22,469) (13,343)

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

Financing activitiesIssue of ordinary shares 394,771 1Issue 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) 233Cash and cash equivalents at the beginning of the year 89,925 135,077Cash and cash equivalents at the end of the year 17 396,585 89,925

Group statement of cash flowsfor the year ended 31 December 2011


Notes


US$’000


US$’000

Net cash used in operating activities 22 (12,174) (5,225)

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

Financing activitiesIssue of ordinary shares 394,771 1Issue 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 5Cash and cash equivalents at the beginning of the year 74,364 131,195Cash and cash equivalents at the end of the year 17 386,190 74,364

Company statement of cash flowsfor the year ended 31 December 2011


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1 Authorisation of financial statementsOphir 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.

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 policies2.1 Basis of preparation and statement of complianceThe 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.

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 policiesNew and Amended Accounting Standards and InterpretationsThe Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2011: – 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.

Notes to the financial statements


2 Basis of preparation and significant accounting policies continuedImprovements 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 effectiveStandards 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 2012IAS 19 Employee Benefits (Amendment) 1 January 2013IAS 27 Separate Financial Statements (as revised in 2011) 1 January 2013IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) 1 January 2013IFRS 7 Financial Instruments: Disclosures – Enhanced Derecognition

Disclosure Requirements 1 July 2011IFRS 9 Financial Instruments: Classification and Measurement 1 January 2013IFRS 10 Consolidated Financial Statements 1 January 2013IFRS 11 Joint Arrangements 1 January 2013IFRS 12 Disclosure of Involvement with Other Entities 1 January 2013IFRS 13 – Fair Value measurement 1 January 2013

The impact of the adoption of the above standards has not been assessed by the Group.

Notes to the financial statements continued


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2 Basis of preparation and significant accounting policies continued2.3 Basis of consolidationThe Group financial statements consolidate the financial statements of the Company and the entities it controls (its subsidiaries) drawn up to 31 December each year.

Basis of consolidation from 1 January 2010SubsidiariesSubsidiaries 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 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 interestsNon-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 even if that results in a deficit balance.

Basis of consolidation prior to 1 January 2010Certain 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 expenditureThe 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.



2 Basis of preparation and significant accounting policies continuedE&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 IntangiblesIntangible 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.

DepreciationDepreciation 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 subsidiariesThe 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 receivablesTrade 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.


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2 Basis of preparation and significant accounting policies continued2.9 InventoriesInventories which comprise drilling consumables are stated at the lower of cost and net realisable value. Cost is 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 depositsCash 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 payablesTrade 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 ProvisionsA 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 benefitsThe 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.

2.14 Employee benefits Wages, salaries, annual leave and sick leaveLiabilities 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 leaveThe 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 instrumentsEquity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

2.16 Interest-bearing borrowingAll 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.



2 Basis of preparation and significant accounting policies continuedWhen 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 LeasesThe 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 venturesThe 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 recognitionRevenue 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.


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2 Basis of preparation and significant accounting policies continued2.20 Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are 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 paymentsThe cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined with reference to the market value of the underlying shares using a pricing model appropriate to the circumstances which requires judgements as to the selection of both the valuation model and inputs. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions).

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition or a non-vesting condition, which are treated as vesting irrespective of whether or not the market condition or non-vesting condition is satisfied, provided that all other vesting conditions are satisfied.

At each 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 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 translationThe 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.



2 Basis of preparation and significant accounting policies continued2.23 Income taxesCurrent taxCurrent 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 taxDeferred 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 ImpairmentThe 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.


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3 Significant accounting judgements, estimates and assumptionsThe 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 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, 10Share-based payments 2.21, 7Deferred tax 2.23, 8Impairment 2.24

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

(a) Revenue

Group


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

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.



4 Operating loss before taxation(c) Finance expense

Group


US$’000


US$’000

– Net foreign currency exchange differences 1,039 4291,039 429

(d) Administrative expenses include:

Group


US$’000


US$’000

Audit of the financial statements 240 357Other 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 1,281Share-based compensation charge 2,674 825

(e) Other expenses

Group


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 InformationThe Group operates in one segment being the exploration and evaluation of oil & gas related projects located in Africa.


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

Group


US$’000


US$’000

Employee costs (including payments to Executive Directors) during the year comprised:Wages and salaries 11,558 7,031Social security costs 883 608Contributions to pension plans and superannuation funds 833 617Share-based compensation charge 2,674 333

15,948 8,589

(b) Directors’ emoluments

Group


US$’000


US$’000

(i) Aggregate compensationSalaries 2,937 1,908Employer contributions 288 186Bonuses 441 114Post-employment benefits 870 477Other 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 DirectorRemuneration 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 1.0Exploration & technical 23.3 19.3Finance & commercial 9.4 10.4Support 5.7 4.6

39.4 35.3


7 Share-based compensation(a) Employee incentive share plans Ophir Energy Company Foundation Incentive SchemeOphir 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.

2011Number

2011 WAEP

2010Number

2010WAEP

Outstanding options beginning of year 7,460,580 US$2.50/£1.62 8,498,080 US$2.60/£1.63Granted 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/£0.0025Lapsed during the year (505,000) US$3.86/£2.50 (717,500) US$3.87/£2.50Outstanding options at end of year 11,752,240 US$2.37/£1.53 7,460,580 US$2.50/£1.62Exercisable 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/aExercise Price £2.50 (US$3.86) n/a Nil n/aShare Volatility (%) 45% n/a 45% n/aRisk-free interest rate (%) 1.0% n/a 0.8% n/aExpected life of option (years) 4.00 n/a 4.00 n/aWeighted average share price £2.50 (US$3.86) n/a £2.50 (US$3.86) n/a



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7 Share-based compensation continuedThe 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 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

2011Number

2011 WAEP

2010Number

2010WAEP

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)

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 DirectorsDuring 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 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


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 – –


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


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 35Share-based payments 720 233Non taxable income (3,669) –Expenditure in tax exempt jurisdictions 216 3,281Unrecognised deferred tax assets 7,761 1,886Other (9) (37)Total tax expense in the income statement – –

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

Group


US$’000


US$’000

Deferred tax liabilities:Property plant and equipment (96) (34)

Deferred tax assets:Revenue tax losses 96 34

– –

(d) Unrecognised tax lossesThe 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 differencesThe 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 rateDeferred 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.



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

Group


US$’000


US$’000

EarningsEarnings for the purposes of basic and diluted earnings per share Loss for the year attributable to equity holders (19,075) (19,278)

Group & Company

2011No. ‘000

2010No. ‘000

Number of sharesBasic 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

2011US$’000

2010US$’000

2011US$’000

2010US$’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.



11 Property, plant and equipment and computer equipment

Group Company

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Furniture and office equipmentCostBalance at beginning of year 4,115 3,692 495 204Foreign currency translation 5 481 – –Additions 1,313 904 272 334Disposals (2) (962) – (43)Balance at end of year 5,431 4,115 767 495

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

Book valueAt beginning of year 1,743 2,204 364 126At 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

2011US$’000

2010US$’000

Non current loans to subsidiariesBalance at beginning of year 450,913 398,812Advances during the yearOphir Holdings Limited 48,801 51,096Ophir Services Pty Ltd – 1,005Balance at end of year 499,714 450,913

Allowance for impairmentBalance 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 valueAt beginning of year 344,791 294,806At 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.


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

Country ofincorporation

Principalactivity Class of shares Holding

Book value ofinvestment

2011 (US$)

Book value ofinvestment2010 (US$)

Subsidiaries of Ophir Energy plc Ophir Services Pty Ltd Australia Exploration Ordinary 100% 2 2Ophir Holdings Limited Jersey C.I. Exploration Ordinary 100% 8 8Ophir Asia Limited Jersey C.I. Dormant Ordinary 100% – –

10 10

Holding

Country ofincorporation

Principalactivity Class of shares 2011 2010

Subsidiaries of Ophir Holdings LimitedOphir 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%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 LimitedOphir 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.


13 Other financial assets

Group Company

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Non-CurrentSecurity 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

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Drilling consumables (at cost) 6,233 9,058 – –

15 Trade and other receivables

Group Company

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Other debtors 8,749 3,070 2,473 665Amounts due to subsidiary undertakings – – (319) 158Receivable 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

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Prepayments 466 130 – –466 130 – –

17 Cash and short-term deposits

Group Company

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Cash 65,359 19,925 54,964 4,364Short-term deposit 331,226 70,000 331,226 70,000Cash 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.



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18 Trade and other payables

Group Company

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Amounts falling due within one (1) yearTrade creditors 4,866 2,121 998 389Accruals 22,838 15,381 3,009 433Payables 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.

19 Provisions

Group Company

Employeeannual leave

US$’000

Employeelong service

leaveUS$’000

Employeeannual leave

US$’000

Employeelong service

leaveUS$’000

At 1 January 2011 Current 611 – 192 – 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

2011US$’000

2010US$’000

2,000,000,000 ordinary shares of 0.25p each 7,963 7,963



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

Group & Company

2011US$’000

2010US$’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 at31 Dec 2011

US$’000

As at31 Dec 2010

US$’000

As at31 Dec 2011

US$’000

As at31 Dec 2010

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 23,853Equity component of convertible bond(c) 669 669 669 669Consolidation reserve(d) (500) (500) – –Special reserve(e) 156,435 156,435 156,435 156,435Translation reserve(f) 5,880 5,736 11,839 11,839Accumulated 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.


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

Group Company

As at31 Dec 2011

US$’000

As at31 Dec 2010

US$’000

As at31 Dec 2011

US$’000

As at31 Dec 2010

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 activitiesInterest income (834) (533) (815) (500)Depreciation of property, plant and equipment 871 735 129 71Amortisation of geological databases – 17 – –(Profit)/Loss on disposal of assets (1) 14 – 4Provision for employee entitlements 283 147 50 5Share-based payments 2,674 825 2,674 825Exploration expenditure written off 15,688 13,308 – 49Impairment allowance on intercompany loans – – – 2,116Exploration 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)

Cash utilised in operations (22,898) (13,932) (12,583) (5,814)Income taxes paid – – –Interest Income 429 589 409 589Net 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:

Country Asset

Beneficialinterest

2011(%)

Beneficialinterest

2010(%)

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



23 Interests in jointly controlled assets continuedCapital 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 arrangementsThe 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 arrangementsThe 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 commitmentsAt 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

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Due within one (1) year 1,296 1,531 557 665Due later than one (1) year but within five (5) years 1,772 2,638 669 1,030After five (5) years 10 - - -

3,078 4,169 1,226 1,695

(b) Exploration expenditure commitmentsIn 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

2011US$’000

2010US$’000

2011US$’000

2010US$’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 – –


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24 Expenditure commitments continued(c) Rig commitmentsThe Company is party to a rig sharing agreement with a major oil company. The Agreement provided availability to 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 LiabilitiesAn 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 facilitiesThe Company and the Group had no borrowing facilities as at 31 December 2011 (2010: Nil).

27 Financial risk management and financial instrumentsStrategy and objectivesThe 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 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 policiesDetails 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.



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

Credit quality of financial assets

Equivalent S&P rating* Internally rated

A-1and above

A-2 and below

No defaultcustomers Total

Year ended 31 December 2011Current financial assetsCash and cash equivalents 376,229 20,320 – 396,549Trade and other receivables – – 7,740 7,740

376,229 20,320 7,740 404,289

Non-current financial assetsSecurity 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-1and above

A-2 and below

No defaultcustomers Total

Year ended 31 December 2010Current financial assetsCash and cash equivalents 69,649 20,213 – 89,862Trade and other receivables – – 3,070 3,070

69,649 20,213 3,070 92,932

Non-current financial assetsSecurity 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 valuesThe 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

Carryingamount

US$’000Fair value

US$’000

Carryingamount

US$’000Fair valueUS$’000

Security deposits 670 631 700 652670 631 700 652


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

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

2011 2010

Carrying amount

US$’000Fair value

US$’000

Carrying amount

US$’000Fair valueUS$’000

Security deposits 387 387 418 418387 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)).

(c) Interest rate riskAs 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.

Group Company

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Financial assetsSecurity deposits 670 700 387 418Cash and cash equivalents 396,585 89,925 386,190 74,364Net 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

Increase/decrease in interest rateEffect on loss

31 Dec 2011Effect on loss 31 Dec 2010

Effect on loss 31 Dec 2011

Effect on loss 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 riskThe 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.


27 Financial risk management & financial instruments continuedAs 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 continuedAt 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

2011US$’000

2010US$’000

2011US$’000

2010US$’000

Financial assetsCash and cash equivalents AUD 382 150 – –EUR 176 106 48 48GBP 23,909 263 23,891 189TZS 5 29 – –XAF 176 340 – –

24,648 888 23,939 237

Financial liabilitiesTrade and other payablesAUD (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 higher/(lower)

Other comprehensive income higher/(lower)

2011US$’000

2010US$’000

2011US$’000

2010US$’000

GroupUS 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 30US 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) – –

ParentUS 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 – –



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27 Financial risk management & financial instruments continuedSignificant assumptions used in the foreign currency exposure sensitivity analysis include: – Reasonably possible movements in foreign exchange rates were determined based on a review of the last two

years’ historical movements and economic 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 riskThe 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 instrumentsThe Company and Group did not make use of derivative instruments during the year or during the prior year.

(g) Disclosure of fair valuesThe 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).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

2011US$’000

2010US$’000

2011US$’000

2010US$’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 managementCapital 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 partiesThe 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.


28 Related party transactions continued(b) Transactions with key management personnelThe 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 eventsOn 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 Value2011

US$’000

Intangible assets (oil & gas exploration) 230,500Property, plant & equipment 441Current assets 22,972

Liabilities (34,097)

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



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Shareholder information

RegistrarsThe Company has appointed Capita Registrars to maintain its register of members. Shareholders should contact Capita using the details below in relation to all general enquiries concerning their shareholding:

Capita RegistrarsThe Registry34 Beckenham RoadBeckenham, Kent BR3 4TUTelephone: 0871 664 0300*International dialling:+44 20 8639 3399Website: www.capitaregistrars.com

*Lines are open Monday – Friday from 9.00am – 5.30pm, excluding bank holidays. Calls to 0871 numbers are charged at 10p per minute from a BT landline. Other telephone providers’ costs may vary.

Registered and Other OfficesThe Company’s registered office and head office is:55 Grosvenor Street,London W1K 3HYTelephone: +44 (0)20 7290 5800Website: www.ophir-energy.com

Other offices are located at:464 Hay StreetSubiaco, WA 6008PO Box 463West Perth WA 6872Australia

Plot 1228, Block 2Masaki StreetMsasani PeninsulaPO Box 23184Dar es SalaamUnited Republic of Tanzania

APDO 274Ophir HouseKm5, Carretera AeropuertoMalaboEquatorial Guinea

Financial Calendar

Annual General Meeting

19 June2012

Half year end 30 June2012

Half year results announcement

23 August2012

Next financial year end

31December

2012

Full year results announcement

March2013

Trading Market and Shareholder ProfilesOphir Energy plc’s shares are traded on the London Stock Exchange with ticker OPHR. The Company’s SEDOL number is B24CT19 and ISIN number is GB00B24CT194.

Shareholder profile by size of holding as at 31 December 2011

RangeNo. of

Holders% oftotal

Shares held31.12.2011

% oftotal

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

CategoryNo. of

Holders% oftotal

Shares held31.12.2011

% oftotal

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.


Shareholder information continued

Unsolicited MailThe Company is required by law to make its share register available on request to unconnected organisations. As a consequence, shareholders may receive unsolicited mail, including mail from unauthorised investment firms. If you wish to limit the amount of unsolicited mail received, please contact the Mailing Preference Service, an independent organisation whose services are free for consumers. Further details can be obtained from:

The Mailing Preference ServiceFREEPOST 29LON 20771London W1E 0ZTTelephone: 0845 703 4599Website: www.mpsonline.org.uk

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)

AdvisorsAuditorsErnst & Young LLPOne More London PlaceLondon SE1 2AFTelephone: +44 (0)20 7951 2000

Joint BrokersJ.P. Morgan Cazenove125 London WallLondon EC2Y 5AJTelephone: +44 (0)20 7742 4000

Oriel Securities Limited150 CheapsideLondon EC2V 6ETTelephone: +44 (0)20 7710 7600

RBC Capital Markets71 Queen Victoria StreetLondon EC4V 4DETelephone: +44 (0)20 7653 4000

Legal AdvisorsLinklaters LLPOne Silk StreetLondon EC2Y 8HQTelephone: +44 (0)20 7456 2000

Financial PR AdvisorsFTI Consulting Holborn Gate26 Southampton BuildingsLondon WC2A 1PBTelephone: +44 (0)20 7831 3113

92

Ophir Energy plcRegistered office:55 Grosvenor StreetLondon W1K 3HYUnited Kingdom

T +44 (0)20 7290 5800F +44 (0)20 7290 5821

www.ophir-energy.com

Ophir Energy plc A

nnual Report and Accounts 2011

Documents

Ophir Energy plc Energy plc Annual Report and ... Farm out deal with Petrobras Participaciones S.L ... mmboe and net risked prospective