NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 
NOTE 33 – FINANCIAL RISK MANAGEMENT continued 
 
The Group’s interest rate risk arises from its borrowings.  Interest rate risk is the risk that the fair value of future 
cash flows of a financial instrument will fluctuate because of changes in market interest rates.  The Group’s 
exposure to the risk of changes in market interest rates relates primarily to the Group’s long -term debt 
obligations with floating interest rates. 
 
During the year ended 31 December 201 3, the Group entered into US dollar denominated interest rate swaps 
which fix the interest rate associated with the credit facilities to protect against the floating LIBOR rates through 
2017. As at 31 December 2014 the Group had interest rate swaps with a notional contract amount of $ 15.0 
million (2013: $15.0 million). 
 
The net fair value of interes t rate swaps at 31 December  2014 was relatively immaterial, comprising long- term 
assets of $ 0.1 million (2013: $0.2 million) and current liabilities of $0.1 million (2013: 0.1 million) .  These 
amounts were recognised as Level 2 fair value derivatives. (See Note 14) 
 
iii) Commodity Price Risk Exposure and Management 
 
The Board actively reviews oil and natural gas hedging on a monthly basis. Reports providing detailed analysis 
of the Group’s hedging activity are continually monitored against Group policy. The Group sells its oil on market 
using Nymex and LLS market spot rates reduced for basis di fferentials in the basins from which the Company 
produces.  Gas is sold using Henry Hub and Houston Ship Channel market spot prices.  Forward contracts are 
used by the Group to manage its forward co mmodity price risk exposure. The Group’ s policy is to hedge less 
than 50% of anticipated future oil and gas production for up to 24 months. The Group may hedge over 50% or 
beyond 24 months with approval of the Board. The Group has not elected to utilise hedge accounting treatment 
and changes in fair value are recognised in the statement of profit or loss and other comprehensive income.  
 
Commodity Hedge Contracts outstanding as at 31 December 2014 
Contract Type Counterparty Basis Quantity/mo Strike Price Term 
Collar Wells Fargo WTI 2,000 BBL $75.00/$98.65 1 Jan 15 – 31 Dec 15 
Collar Shell Trading US LLS 3,000 BBL $85.00/$101.05 1 Jan 15 – 31 Dec 15 
Collar Wells Fargo WTI 2,000 BBL $80.00/$97.00 1 Jan 15 – 31 Dec 15 
Collar Wells Fargo WTI 1,000 BBL $80.00/$94.94 1 Jan 15 – 31 Dec 15 
Swap Wells Fargo LLS 2,000 BBL $91.65 1 Jan 15 – 31 Dec 15 
Swap Shell Trading US LLS 5,000 BBL $98.05 1 Jan 15 – 30 Jun 15 
Swap Shell Trading US LLS 3,000 BBL $94.10 1 Jul 15 – 31 Dec 15 
Swap Wells Fargo WTI 2,000 BBL $95.08 1 Jan 15 – 31 Dec 15 
Swap Wells Fargo LLS 2,000 BBL $97.74 1 Jan 15 – 31 Dec 15 
Swap Shell Trading US LLS 5,000 BBL $100.70 1 Jan 15 – 30 Jun 15 
Swap Shell Trading US LLS 5,000 BBL $94.10 1 Jan 16 – 31 Dec 16 
Swap Shell Trading US HH 20,000 MCF $4.14 1 Jan 15 – 31 Dec 15 
 
  
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