seven energy annual reports & accounts 2015

Powering Nigeria

Annual Report 2015

Seven Energ

y Annual Report 2015

Our vision is to be Nigeria’s leading integrated gas supplier, powering the industrialisation of the country through our wholly-owned infrastructure, and being recognised for the reliability and quality of our supply whilst generating value for our investors.

Why we’re important to Nigeria:

* See Glossary page 98 for definition.

Go online: www.sevenenergy.com

We invest in Nigeria’s infrastructure

p02

+9%increase in net 2P + 2C reserves and resources: 452 MMboe 2015 (2014: 414 MMboe)

$215mOperating cash flow in 2015 (vs $141m in 2014)

+200%increase in daily average gas deliveries: 70 MMcfpd 2015 (2014: 23 MMcfpd)

$62mEBITDAX in 2015 (2014: $273m)

• Average daily gas deliveries in the south east Niger Delta trebled year on year to 70 MMcfpd (2014: 23 MMcfpd)

• Average daily gross oil production during 2015 increased to 59,200 bopd (2014: 52,500 bopd)

• EBITDAX* for the year of $62 million (2014: $273 million)

• South east Niger Delta business segment contributed 73% to 2015 EBITDAX

• Loss after tax of $182 million (2014: $55 million profit)

• 9% year on year increase in 2P plus 2C net reserves and resources

• Operating cash flow increased by 52% to $215 million in 2015

Highlights

Seven Energy’s business continues to develop its focus on domestic gas distribution with an increasing percentage of sales volumes and revenues being to our local gas customers. The benefits to Nigeria are threefold: investment in infrastructure, growth of industry and investment in people.

Strategic reportOverviewWhy we’re important to Nigeria: Investing in Nigeria’s infrastructure 2 Meeting our customers’ needs 4 Investing in people 6Group overview 8Chairman’s statement 10Chief Executive’s statement 12

StrategyMarket overview 14Business model 18Our strategy 22Key performance indicators 24Resources and relationships 26Risk management 28

Operational and financial reviewOperational review: South east Niger Delta 34 North west Niger Delta 38 Anambra basin 40Corporate social responsibility 42Financial review 48

Corporate governanceOverview 52Board Committees 53Board of Directors 54Senior management 56Directors’ report 58Remuneration report 60

Financial StatementsIndependent auditor’s report to the Directors of Seven Energy International Limited 63

Consolidated statement of comprehensive income 64

Consolidated balance sheet 65

Consolidated statement of changes in equity 66

Consolidated cash flow statement 67

Notes to the consolidated financial statements 68

Glossary of terms 98

Shareholders’ information 100

We meet the needs of our customers

We invest in people

p04 p06

1Seven Energy Annual Report 2015

Strategic report

Why we’re important to Nigeria

Investing in Nigeria’s infrastructureSeven Energy has constructed a 200 MMcfpd gas processing facility and a 227 km gas distribution network.

Seven Energy Annual Report 20152

Seven Energy’s investors

The potential for Nigeria

Seven Energy recognises that a strong balance sheet is pivotal for successful oil and gas development.

We enjoy continued support from our long term investors and have recently

welcomed the IDB Infrastructure Fund II, sponsored by the Islamic Development Bank and other institutional investors, to our list of investors through their recent investment in our business of $50 million.

“By ensuring our network is strategically located to deliver gas to the NIPP’s coming on stream in south east Nigeria and having proven our ability to provide reliable supply, we expect to continue to expand our customer base”.

Stephen Tierney,Managing Director, AccugasSeven Energy

$1 billioninvested in gas production, processing and distribution infrastructure in south east Nigeria.

Domestic gas distributionSeven Energy continued to service its five contracted gas customers. Over the year, this comprised average daily deliveries of 17 MMcfpd to Ibom Power, 16 MMcfpd to Unicem cement factory, 10 MMcfpd to Notore fertiliser plant, 10 MMcfpd to Calabar NIPP power station and 17 MMcfpd to Alaoji NIPP power station.

Read more in: Business model page 18


Strategic report

Meeting our customers’ needsSuccessfully supplying our five existing gas customers in 2015, we aim to expand our customer base to deliver gas to other industries.



Read more in: Operational review page 33

Seven Energy’s opportunity

Meeting Nigeria’s gas needs

With a reputation for being a trusted partner in Nigeria with a successful track record in building a gas business known for quality of supply, Seven Energy is well positioned to become the country’s leading integrated gas supplier.

Coupled with the domestic demand for gas and favourable policy for developing Nigeria’s gas reserves, Seven Energy has prioritised the commercialisation and monetisation of its significant gas assets.

Seven Energy’s working interest gas reserves and resources base is 1.9 Tcf of gas (2P and 2C), providing a platform for growth potential and a solution to meet local gas demand.

“Seven Energy is a very reliable and professional business partner, willing to engage in a dialogue to ensure the timely and efficient resolution of issues to ensure uninterrupted operations. We have enjoyed a transparent and effective relationship over the last few years and look forward to the same going forward”.

Rabiu Umar,Energy & Strategy DirectorLafarge Africa Plc

With domestic gas prices delinked from the oil price, Seven Energy’s gas strategy provides a hedge against the volatility of the oil price facing the industry.

1.9 TcfSeven Energy’s gas reserves and resources (2P & 2C)

2 BcfpdNigeria’s gas demand

UnicemThe United Cement Company of Nigeria Limited (Unicem) is an Associate of Lafarge Africa Plc and is one of Seven Energy’s anchor customers. Located in Cross River State with a manufacturing plant at Mfamosing, Akamkpa Local Government, 40 km north east of Calabar, Unicem represents the blueprint of the Seven Energy gas customer; an energy-intensive industrial operation directly linked to the growth and development of the country.


Strategic report

Investing in peopleWe continue to develop our organisational capabilities, foster and retain the best talent and look after our people, to support the business as a whole.



Read more in: Corporate social responsibility page 42

The benefits for Seven Energy“Seven Energy stands out amongst industry peers. Within a short while, I’ve seen us make tremendous progress in our capital projects, operations and the business as a whole. Underpinning this is an engaged, competent and diverse workforce, good governance and a deep respect for employees and our various stakeholders.”

Arinola DavidHuman Resource Manager

75%of staff across office and field locations participated in a training / development programme in 2015

95% of our Nigeria-based staff are indigenous

31% of our total workforce are women

TrainingOur Learning and Development Committee continued to plan training events and programmes that were targeted to individual needs, based on organisational requirements.

Seven Energy employs 198 full-time staff and on our various infrastructure projects we employ numerous contractors. The employment opportunities offered to Nigerians through our operations are significant. In addition, through our involvement with our footprint communities, we offer casual work to many youths in our operational areas.

198full-time staff employed in 2015

104contractors hired (as of 31 Dec 2015)

The benefits for Nigeria


Strategic report

02

03

01

Oil 31%Gas 69%

Oil vs gas: net 2P + 2C

Anambra basin

Lagos

Benin City

PortHarcourt

Calabar

Warri Owerri

Aba

IkotAbasi

Ukanafun

Uyo

Oron

Nsukka

Onitsha

Enugu

Umuahia

North west

South east

North

kilometres 1000

ELPS-WAGP

Ajaokuta

Niger

Seven Energy licence areas

Seven Energy marginal field areas

Licence areas

NPDC Strategic Alliance Agreement areas

Oil and gas fields

Seven Energy gas pipeline

Seven Energy gas pipeline (under construction)

Seven Energy oil pipeline

NGC gas pipeline

3rd party oil pipeline

3rd party gas pipeline

Areas of core interest

Seven Energy customer (power station)

Seven Energy customer (industrial)

Seven Energy customer (export terminal)

Uquo gas processing facility

Major road

Legend

Group overview

At a glanceSeven Energy is the leading integrated gas company in south east Nigeria, with upstream oil and gas interests in the region. We have a deep understanding of the domestic Nigerian gas market, supplying gas to the power generation and manufacturing industries, principally through our own integrated processing and pipeline infrastructure.


02OML 4

OML 38

OML 41

Warri

03

Enugu

Nsukka

Onitsha

OPL 905

OPL 917

OPL 907

01

Aba Uyo

IkotAbasi

OML 14

OML 13

Port Harcourt Calabar

South east Niger Delta

The south east Niger Delta is Seven Energy’s flagship gas infrastructure business. Through its wholly-owned midstream business, Accugas, the Group owns gas processing capacity at the Uquo gas processing facility, processing gas from the Uquo and Stubb Creek fields. It also runs a pipeline distribution network, delivering to a diversified customer base.

/ 200 MMcfpd gas processing capacity

/ 227 km gas distribution network

/ Delivering to five gas customers during 2015

/ 156 MMboe net1 2P + 2C (Uquo and Stubb Creek)

Read more in:Operational review page 34

North west Niger Delta

Seven Energy entered into a Strategic Alliance Agreement in 2010 with the Nigerian Petroleum Development Company, whereby we agreed to pay all of NPDC’s costs in connection with the development of OMLs 4, 38 & 41 and to provide technical services in exchange for a share of NPDC’s production from its 55% licence interest. Since entering into the agreement, annual average gross production at the OMLs has increased from 25,700 bopd in 2010 to 57,000 bopd in 2015 – an increase of over 120%.

/ 231 MMboe net1 2P + 2C (OMLs 4, 38 & 41)

/ 57,000 bopd average gross production during 2015

/ 5.1 MMbbl of oil lifted in 2015 (2014: 3.7 MMbbl)


Anambra basin

In 2015, Seven Energy increased its footprint in south east Nigeria, acquiring an additional 50% licence interest in OPL 905. The Group now holds a combined 90% licence interest in OPL 905, a 22.5% share of a 41% licence interest in OPL 907 and 42% licence interest OPL 917, all located in the Anambra basin. The Anambra basin is a relatively underdeveloped region, rich in gas resources, which we will look to harness to provide gas for local industry in the medium to long term.

/ 65 MMboe net2 2C (OPLs 905, 907 & 917)

/ Existing gas discoveries

/ Appraisal programme ongoing


1 Net entitlement from indirect interest 2 Net Seven Energy interest


Strategic report

Chairman’s statement

Steering a steady course towards our vision

The headlines covering our industry and the Nigerian macro-economic landscape over the last year accurately describe the very challenging environment that we have been operating in. Nonetheless, we have continued to make good progress towards achieving our long term objectives.

Dr Andrew JamiesonChairman

Reinforcement of the business modelThe turmoil that the oil industry, and the exploration and production sector in particular, is currently experiencing due to the sharp fall in the oil price and the weakened long term outlook has in many ways emphasised the strength in our business model and our long term strategy.

Our gas business in south east Nigeria, which is fully integrated with our upstream assets in this region, will generate sustainable earnings and cash flow under long-term fixed price gas processing, transportation and sales arrangements, sheltering us from oil price volatility and the ongoing capital expenditure that is typically required by E&P companies to sustain production and growth. Our infrastructure also provides us with first mover access to significant opportunities in the growing domestic gas-to-power market in Nigeria. We are, therefore, sharpening our focus on the infrastructure business, restructuring our business and organisation and, in the process, reducing our cost base. We expect that this will also better position us to attract additional equity and longer term, lower cost debt capital, at a time when the sector as a whole is suffering from capital flight and depressed valuations.

Whilst the midstream gas business is our core focus, we remain fully committed to our upstream business and to our existing joint venture arrangements, which are an

integral part of our business model and growth strategy, and to the Strategic Alliance Agreement with NPDC.

Strengthening the balance sheetWe have continued the programme that we initiated in 2014 to strengthen the balance sheet through the renegotiation and refinancing of our existing debt facilities and the issue of additional equity. During 2015 we successfully refinanced the Accugas infrastructure debt, closed a new $52 million debt facility, put in place a $30 million local currency working capital facility and, in February 2016, we closed an equity issue to raise $100 million from existing investors and a new infrastructure fund. The focus of this ongoing programme is an initiative to put in place a tranche of longer term debt more suited to our midstream infrastructure assets so as to align the debt obligations and availability with the revenue and cash flow profile of the midstream business. Further details can be found in the Financial review.

One of the biggest risks in our business model is the creditworthiness of our gas off-takers and their ability to pay, particularly those in the power sector where the value chain stretches beyond our direct counterparty to the market regulator, the distribution companies and the end users.

This has been and continues to be an area of focus and we have made good progress in renegotiating our gas sales agreements to reduce our risk through enhancing the credit support packages.

Operational performanceDuring 2015 we continued to make good progress operationally to be in a position to meet the growing demand of our gas customers as and when they come up to fully operational capacity. Whilst the build-up in demand from these customers during the course of the year was slower than expected, gas sales had increased by over 300% to in excess of 100 MMcfpd by 2015 year end. Construction of the final leg of our pipeline network in the south east Niger Delta region is on budget and on schedule for completion this year, which will position us to supply in excess of 200 MMcfpd from mid-2016, all of which is contracted under long-term fixed price take-or-pay arrangements.

First oil production from both the Uquo and Stubb Creek fields commenced during 2015 and field performance has been in line with expectations.


Chairman (and shareholder’s representative) 1

Board composition

Executive Director (and shareholder’s representative) 1Independent Non-executive Directors 1Other shareholders’ representatives 7

Board experience

Oil and gas industry 6Financial 1Capital markets 3

We also achieved exploration success on the North East-1 prospect on the Uquo field with commercial discoveries of both oil and gas, adding 20 MMboe gross 2P reserves and extending our reserve life under existing gas sales contracts by a further two years.

Corporate social responsibilityWe place a high priority on the health, safety and security of our workforce and the local communities impacted by our operations. We continue to implement best practice in our daily activities in compliance with the highest standards and our track record has been second to none. However, it is with deep regret that I have to report the fatality of a community member in a road traffic accident involving one of our contractors. We are providing support to the family and have introduced additional safe-driving procedures, testing and training to prevent similar tragic accidents.

Financial performanceIn the short term, whilst the Group’s gas business builds up to full operational capacity, the Group’s financial performance is still materially influenced by the oil price and this is reflected in the financial performance for 2015.

Total revenue decreased by $24 million to $354 million (2014: $378 million), but this decrease masks a significant 171% increase in gas revenues to $92 million (2014: $34 million). Oil revenues declined by 24% to $261 million (2014: $344 million) with the lower realised oil price being compensated to some extent by increase lifting volumes under the terms of the Strategic Alliance Agreement on OMLs 4, 38 & 41. EBITDAX

was 77% lower at $62 million (2014: $273 million). The lower oil price has also impacted on the carrying value of our interest in OMLs 4, 38 & 41 which has resulted in an impairment charge of $90 million (2014: nil) which is a contributing factor in the reported loss after tax of $182 million (2014: profit after tax $55 million). Net cash flow generated from operations increased by 52% to $215 million (2014: $141 million), predominantly as a result of increased cash flow from our integrated gas business. Capital investment in 2015 amounted to $238 million (2014: $912 million), of which $125 million (2014: $408 million) related to OMLs 4, 38 & 41.

Board changesWe remain committed to high standards of corporate governance, whilst recognising that it should always be fit for purpose. Following the most recent equity raise we now have nine shareholder representatives (including designate Chairman and Executive Director) on the Board of Directors, recognising the significance of their ongoing financial and strategic support to the Company, representing as they do approximately 75% of the issued and voting share capital. Given the diversified nature of the shareholder base the rationale for the Company to also retain all of its independent Non-executive Directors at this stage in the Company’s development is significantly diminished so Clare Spottiswoode, Fidelis Oditah and myself will be stepping down as Directors of

the Company at this year’s Annual General Meeting, with Matthew Harwood succeeding me as Chairman of the Board. I would like to thank Clare and Fidelis for their valuable contribution to the Company.

OutlookThe oil price hiatus will continue to present short-term challenges, adversely impacting our cash flow and market sentiment generally as we look to continue to strengthen our balance sheet, at a time when our gas business is still growing to full operational capacity. However, we will see our capital expenditure programme for 2016 decrease significantly in the south east Niger Delta as we complete our distribution network, and we are continuing to closely examine our cost base to achieve sustainable savings as we restructure our business. During 2015 we reduced our operating cost base by 20%, and we expect to realise further annual cost savings of 20 – 30% as we sharpen the focus of our business to maximise shareholder value. This will position us with a leaner, more efficient organisation, to exploit what I believe is a strong and sustainable business model, with excellent long-term growth potential.

Finally, I would like to thank shareholders, management and employees for their continued support, contribution and commitment in these very challenging, yet progressive times.

Dr Andrew JamiesonChairman

Corporate governanceThe Board is committed to the highest standards of corporate governance, with strong shareholder representation, ensuring that it is fit for purpose.

Matthew Harwood

Non-executive Director (designate Chairman)

Phillip Ihenacho Chief Executive Officer

Ashley Dunster Non-executive Director

Osam Iyahen Non-executive Director

Atul Gupta Non-executive Director

Cyril Odu Non-executive Director

Lubomir Varbanov Non-executive Director

Stephen Vineburg

Non-executive Director

Peter Gutman Non-executive Director

Michael Lynch-Bell Independent non-executive Director

Read more in: Corporate governance page 52


Strategic report

Chief Executive’s statement

Growing stakeholder value in a challenging environment

Strategic updateWith a threefold increase in gas deliveries in 2015, we truly established Seven Energy as a force in the Nigerian domestic gas market and are closer than ever to reaching our vision of being Nigeria’s leading integrated gas supplier. This is due to the dedication of our people, years of hard and intensive development work and the effective deployment of $1 billion of capital expenditure into Nigeria’s gas processing and transportation infrastructure.

Last year was not, however, without its difficulties. With the oil price falling sharply during the course of 2015, Nigeria, as Africa’s largest oil producer, is facing a significant fall in revenue which has led to challenges in financing infrastructure projects. These conditions have impacted our oil production interests and pose a significant threat to Nigeria’s oil dependent economy, where we conduct our business. However, the continued development of our gas business mitigates this, both in terms of helping to reduce Nigeria’s need to import diesel and by making our revenues less reliant on the oil price. Our priority lies in establishing long term take-or-pay gas contracts with customers supported by appropriate credit arrangements.

Our vision to be the leading integrated gas supplier for the domestic Nigerian market is proving its worth in the current low oil price environment as we continue to attract new investors and enjoy support from our major

shareholders. Our focus will remain on expanding our gas sales arrangements into the domestic gas market seeking to diversify our customer base to include industrial and power generation users.

South east Niger Delta – gas businessIn the south east Niger Delta, our expanded gas processing and transportation infrastructure enabled us to reach a larger demand area for the delivery of gas and as a result we delivered gas at an average rate of 70 MMcfpd in 2015 (2014: 23 MMcfpd). We have seen volumes build up over the past year as customers have come online, in particular the Calabar NIPP and Alaoji NIPP power stations. This has resulted in a south east Niger Delta contribution to EBITDAX of $45 million in 2015 (2014: $28 million loss) which reflects the increase in deliveries to our customers.

We delivered increasing volumes of gas to five contracted gas customers (2014: two): the Ibom Power station, the Calabar NIPP power station, the Alaoji NIPP power station, the Unicem cement factory near Calabar, and the Notore fertiliser plant near Port Harcourt. During the early months of 2016 these deliveries have risen to over 100 MMcfpd, closing the gap towards our target of delivering 200 MMcfpd in line with the projected growth of customers demand.

With the full integration of the East Horizon gas pipeline into our processing and distribution network and our good working

relationship with NGC we have been able to deliver gas to customers in the Port Harcourt area in the west and to the Calabar NIPP power station and the Unicem cement factory in the east. During the year we have progressed the construction of an additional 26 km pipeline from Oron to Creek Town which will enable us to deliver gas directly to the Calabar region. This work will be concluded in mid-2016, to coincide with Calabar NIPP power station becoming fully operational and requiring full volumes of gas. The build-up in gas take from Calabar has been delayed due to the time taken to construct its electricity distribution system; however, we are confident that completion of this infrastructure is a priority for the Nigerian Government in 2016.

As we reach the final stage of this phase of our infrastructure development, capital expenditure will continue to reduce in 2016, as it did in 2015, and our focus will be on building our customer base. Our work includes targeting ‘last-mile’ customers located close to our pipeline infrastructure, including captive power plants which generate electricity for small industrial areas that value a reliable electricity supply, as well as seeking additional high volume customers to whom we can supply gas on a long term basis. Our experience and demonstrable ability to build and develop gas infrastructure efficiently and safely in the Nigerian environment is a core skill and this will enable us to efficiently access and bring online new customers in 2016.

Seven Energy is now established as a significant participant in the rapidly developing Nigerian gas market, despite the challenging environment we find ourselves in. Our gas deliveries to our five contracted customers have more than trebled during the course of 2015 and we continue to drive market penetration by diversifying and building our customer base further.

Phillip IhenachoChief Executive Officer


$m

EBITDAX contribution by operating segment

328-28

3645

-100 -50 0 50 100 150 350300250200

South east

North west

Corporate

-27

-19

2014

2015

boepd

Net production by segment

15,8003,400

10,50011,000

0 4,000 8,000 12,000 16,000

North west

2014

2015

South east

$m

Administrative expenses

5935

0 10 20 30 40 50 60

2014 2015

are monitoring the current Trans Forcados pipeline downtime and initial indications suggest the pipeline will be operational at the end of the second quarter of 2016.

A review of prior years’ claimed costs has resulted in a net reduction of incurred costs attributable to Seven Energy’s indirect interest of $158 million being recognised. Whilst this is good news in terms of reduced costs and, as a result, an increase in future profit oil production entitlement, it has resulted in a significant net reduction in our entitlement to oil for cost recovery in the current year. Our financial results for 2015 reflect this impact.

Similarly, the drop in oil prices in 2015 has resulted in impairment of asset values across the industry. We are by no means immune from this, and have taken a $90 million impairment charge on our assets on blocks OML 4, 38 and 41. More positively, our gas dominated assets in the south east Niger Delta have suffered no impairment giving us further encouragement as to the merit of our business model based on gas to power the industrialisation of Nigeria.

Anambra Basin prospectivityWe have interests in three licences in the Anambra basin in Nigeria: OPLs 905, 907 and 917. Each licence contains discovered gas in addition to existing seismic data and our work during the year provides encouragement as to the prospectivity of the area, both for gas and for oil. This is an industrial region of Nigeria and offers significant scope for development of a gas market for power and industrial consumption. Our plans are to initiate a pilot development programme supplying gas to small regional customers, both to establish a gas market and to test the deliverability of the discovered gas reservoirs, which will enable us to pursue our appraisal activities and commercialise gas across the region.

OutlookWe plan to continue to drive market penetration by expanding our customer base beyond our existing customers to deliver gas to smaller volume, higher priced, industrial off-takers to provide us with a more diverse and robust customer mix.

In the light of the current reduced oil prices we have taken measures to cut costs, which, achieved a 41% drop in administrative expenses to $35 million in 2015 (2014: $59 million). We have an ongoing cost cutting initiative, looking to achieve increases in efficiency across our operations to weather the storm and ensure our long term competitiveness, and we expect

Our current supply of gas comes from our Uquo field which is a large, highly prolific gas reservoir. With gross reserves and resources of 800 Bcf of gas, which were boosted by the Uquo North East 1 discovery, the four gas production wells on this field are well able to meet our current required delivery volumes. These wells have delivered volumes of up to 140 MMcfpd, consistently meeting our daily nominations.

South east Niger Delta – oil businessIn February 2015, we commenced oil production from one well at the Uquo field and two wells at the Stubb Creek field. This followed completion of our oil gathering manifold and its connection to ExxonMobil’s export terminal at Qua Iboe, a process that has taken some years to complete. Average combined gross oil production for 2015 from the fields was 2200 bopd (2014: nil), with 800 bopd (2014: nil) net Seven Energy entitlement.

Our Uquo North East 1 discovery well, as mentioned above, discovered gas as well as 5 MMbbl of 2P oil reserves; we intend to tie back this well as an oil producer, subject to a positive outlook in the oil price.

In 2015, for the first time, we saw a higher proportion of our production come from our south east Niger Delta region, home to our integrated gas business: 10,998 boepd, compared to 10,500 boepd from the north west Niger Delta region.

North west Niger Delta – OMLs 4, 38 and 41We hold an interest in a diversified portfolio of onshore gas interests in the north west Niger Delta region, with substantial reserves and access to export facilities and demand centres. Our focus has been to support the Nigerian Petroleum Development Company and Seplat in the development of these fields where average gross production has increased from 25,700 bopd in 2010 when we acquired our indirect interest to 57,000 bopd during 2015 with daily production rates exceeding 80,000 bopd. In June 2015 additional processing capacity at the Oben field facilities was completed, following which gas deliveries have materially increased, reaching 300 MMcfpd in December 2015.

Our objective in the coming year is to maintain production levels whilst minimising costs. Oil production from these blocks suffers considerable interruption due to sabotage and damage inflicted on the Trans Forcados Pipeline and we support efforts to reduce the loss of production caused by this activity. We

to identify further potential cost savings in excess of 20%.

We are well positioned to be part of a successful diversification of the Nigerian economy from its current over-reliance on oil and we will play our part in diversifying the economy for the benefit of all our stakeholders, in particular for the benefit of all Nigerians. We remain committed to delivering the bold vision that sees Nigeria powered by its own gas resources.



Strategic report

Market overview

Nigeria, Africa’s most attractive opportunity

Seven Energy operates solely within Nigeria, giving us a depth of local knowledge in the domestic power market. We are leaders in the development of gas to power infrastructure in Nigeria.


Nigeria’s gas resourcesNigeria has the largest proved gas reserves in Africa of 180 Tcf, yet its production is inadequate to satisfy the Government’s power generation targets. Its production lags behind that of its developing African peers, producing 3.7 billion standard cubic feet per day (“Bcfpd”) versus Egypt’s 4.7 Bcfpd and Algeria’s 8.0 Bcfpd; both countries with smaller gas reserves than Nigeria.

The International Oil Companies (“IOCs”), that have been active in Nigeria since the 1950s, have traditionally focused on oil in Nigeria, with gas left undeveloped or flared. Nigeria has the second highest gas flaring rates globally, which was estimated to cost the Nigerian government $870 million in 2014.

Since 2009, the IOCs have shifted their focus towards large offshore projects. As a result, a number of divestments have taken place and continue to create opportunities for companies like Seven Energy to increase their asset base in Nigeria. Seven Energy sees this development, coupled with a strong political backing for the development of indigenous players, as an opportunity to take the position as Nigeria’s leading integrated gas supplier to power the industrialisation of the country by the delivery of processed gas through our gas distribution infrastructure.

Nigeria’s economic outlookNigeria is Africa’s largest economy with a GDP of $569 billion in 2014. The country has seen robust historic GDP growth from 2000 to 2014 at an average of 8%, and this is forecast to continue to grow at a rate of approximately 5% per annum from 2016 to 2018. Both past and future economic growth have been restrained by a lack of investment in infrastructure and the lack of adequate power supply.

Nigeria does face pressure from the lower oil price environment being experienced currently, although this has been partially reduced due to efforts by the Nigerian Government to diversify the economy away from oil. Oil accounts for 70% of the Government’s revenue and the majority of its foreign currency reserves; the recent downturn has led to the implementation of tighter currency controls by the Central Bank of Nigeria to support the Naira and avoid a currency devaluation.

Seven Energy is well placed to absorb the impact of the continued depressed oil price through a focus on our growing gas business as we continue to attract new investors and enjoy support from our major shareholders. In addition, we carefully manage our foreign currency requirements.

Nigeria presents an attractive opportunity to Seven Energy. It is rich in gas reserves and resources, has a large and upwardly mobile population, a fast growing economy restrained by a lack of electricity and a Government committed to implementing game changing reforms in the gas-to-power sector.

Seven Energy is perfectly positioned, as a leading integrated gas supplier, to provide an economic solution to the significant power supply deficit and to play a key role in powering Nigeria’s economic growth.


Strategic report

Proved gas reserves (2014)Tcf

65

50

UK

Netherlands

India

Egypt

Nigeria180

28

9

(BP Statistical Review 2015)

Total gas production (2014)Bcfpd

(BP Statistical Review 2015)

5

4

India

Nigeria

UK

Egypt

Netherlands5

4

3

Gas pipelines (2013)‘000 km

14

9

Nigeria

Egypt

Netherlands

India

UK29

8

4

(CIA world factbook 2013)

Market overview

Nigeria’s growing demographic Nigeria’s population, the largest in Africa, and seventh largest in the world, is currently estimated at 182 million and forecast to grow by 2.5% per annum to 263 million by 2030. This makes it the fastest growing population in the top ten most populous countries in the world. The lifestyle of this growing population is hindered by the fact that Nigeria delivers an intermittent power supply to its population, which consumes only 156 kilowatt hours per capita, one of the lowest globally, lagging behind many of its African peers.

Nigeria’s middle class is also growing rapidly, as is their demand for power. Between 2000 and 2014 middle-class households grew by 600%, to a total of 4.1 million, or 11% of the total population. This is forecast to grow by 7.2% per annum, adding a further 7.6 million middle-class households over the next 16 years.

This forecast significant growth in the Nigerian population and its middle-class is a major contributing factor in the growth in demand for electricity and, in-turn, demand for gas to power the required electricity generation expansion.

Sector reforms driving gas demandNigerian Government policy is working towards stimulating domestic electricity generation to meet growing demand. This is being achieved by discouraging gas flaring through the implementation of a “flareout”

policy and fines where flaring takes place. In conjunction with this, the publication of the Gas Master Plan in 2008 aimed to address the shortfall of gas supply through the promotion of investment in gas infrastructure and gas fired power stations. Along with other power sector reforms, including the privatisation of the existing power generation and distribution companies, establishing a national bulk buyer of electricity and the implementation of a more appropriate pricing framework, the target of the GMP was to expand domestic power generation from 6 GW to 40 GW by 2020. Much of this new production will come through Independent Power Producers who have financed new gas fired power plants. This will require significant private sector investment in the full supply chain including generation, distribution and gas to power infrastructure and distribution networks to be successful.

Seven Energy’s capital expenditure of $1 billion on Nigeria’s gas infrastructure as part of our wider strategy to become an integral supplier of gas to the Nigerian domestic market, aligns and supports the Government’s sector reforms and has helped Nigeria move closer to realising the Government’s GMP targets. Since the smooth changeover of the Nigerian administration in 2015, the new Government has reiterated that the gas to power project and resolution of the power shortage in Nigeria are at the top of the national agenda.

Highlights / 180 Tcf – largest proved

natural gas reserves in Africa (BP Statistical Review 2015)

/ 182 million – Africa’s largest population (UN 2015)

/ 263 million – Nigeria’s projected population by 2030 (UN 2015)

/ $569 billion – Nigeria is Africa’s biggest economy (World Bank 2014)

continued


Electric power consumption (2012)(kWh per capita)

12,954

262

346

156

US

UK

South Africa

Cameroon

Ghana

Nigeria

4,405

5,452

(World Bank 2012)

Gas market outlookGas consumption has grown in Nigeria by 8.4% per annum between 2004 to 2014 but much of this growth is due to LNG exports (7.2%) with only modest growth in domestic consumption. Nigeria does not yet have the processing and distribution infrastructure to meet the potential demand of the domestic market.

The domestic gas demand in Nigeria is forecast to rise to 10 Bcfpd by 2020 from a current estimated demand of 2 Bcfpd. The development of gas supply for the domestic market is therefore a priority for the Nigerian Government as it looks to achieve its power generation targets and to build a diversified and stable economy.

Nigeria has one of the lowest rates of electricity generation per capita in the world; only an estimated 41% of the population has access to supply and, of this segment, only 30% receiving their electricity requirement. Nigerians have to resort to burning substantially more expensive fuels with both private individuals and businesses relying on expensive diesel generators for their power. Nigeria’s current electricity output is estimated to be approximately 4 gigawatts, just 10% of the 2020 target identified in the Gas Master Plan.

Seven Energy, by offering a solution for gas to power across the integrated value chain from gas production through to distribution, sees itself as an ideal partner for the Government in the vision of satisfying domestic demand. Our approach is being proven through our supply of gas to three gas-fired power stations; we will continue to expand our customer base in 2016 and beyond, both to power stations and other industrial customers.

Highlights / 15% – gross produced

gas volumes flared in 2013 (EIA 2015)

/ 156 kWh per capita – Nigeria’s power consumption, one of the lowest globally (World Bank 2015)

/ 2 to 10 Bcfpd – the projected growth of gas demand in Nigeria from 2015 to 2020 (NNPC 2015)


Strategic report

Corporate social responsibility


Business model

Generating wealthSeven Energy is the leading integrated gas company in south east Nigeria. Our business model demonstrates the business activities we are engaged in, the inputs we rely on, and the outputs and outcomes we look to generate to create value for our stakeholders over the short, medium and long term.

Financial capital:Debt and equity investment/ free cash flows

Natural capital:Hydrocarbons

Human capital:Employees, contractors, partners

Intellectual capital:Local knowledge, quality control, technical expertise

Social & relationship capital:Communities, joint venture partners, contractors, suppliers, customers, Government

Manufactured capital:Facilities and distribution infrastructure

ConstructionWe design and construct integrated gas infrastructure , and ensure control through ownership

Contract managementWe engage in secure and economically beneficial contracts

DistributionWe distribute our final products, high quality gas and crude oil, through our network of pipelines, with a focus on reliability

Exploration and production

We look to source gas to guarantee reliability of

supply to meet our customers’ needs

Relationship managementWe cooperate closely with all our partners, who are crucial in assisting us in getting our product to market

Financial management

We align our capital structure to support our long-term front- loaded capital intensive business

Inputs Business activitiesThese are the key inputs consumed by our business, which we manage closely to ensure the efficient and timely availability of quality resources

Through these processes we transform these inputs to create value for the Company as well as our stakeholders as a whole


Read more in: Operational and financial review page 33

Read more in: Corporate social responsibility page 42

Read more in: Corporate governance page 52

Outputs Outcomes

Cash flowReinvested into the business

Clean fuelOur gas business provides cleaner, cheaper fuel to power Nigeria

Local economic growthJob creation leads to improved living standards

Electricity generationFulfilling the Government’s power generation plans to drive economic growth

Licence to operateProven track record of delivery

Customer satisfactionReliable supply of high quality gas

Resulting in a high quality product for our customers

The value realised to Seven Energy, our investors and our stakeholders in Nigeria.

Delivery of clean

& reliable gas

Crude oil sales


Strategic report

Business model

From reservoir to customer Seven Energy is involved in the exploration, production, processing and distribution of hydrocarbons. The delivery of our gas to market involves the design, construction, operation and maintenance of significant infrastructure, which is only possible with the longstanding backing of our international investors, local Nigerian banks, and the support of our employees and partners.

continued

Oil and gas production We identify, develop and produce crude oil and natural gas.

Processing facilityWe design, construct, operate and maintain a processing facility to convert our raw hydrocarbons to delivery grade standards. This involves the importation of materials, engagement and management of hundreds of contractors, the mobilisation of heavy duty construction equipment, all conducted to the highest and most rigorous health and safety standards.

Gas pipelinesWe lay hundreds of kilometres of gas pipeline to transport our gas to customers through our own, and third party, pipeline networks. We engage with hundreds of local communities along our rights of way, through employment, education and social projects, to ensure everyone benefits from our infrastructure projects.

Gas receiving facility We operate gas receiving and transmission facilities where we filtrate, pressurise and adjust the temperature of the gas to our customers required specifications. The gas is also metered at these locations prior to delivery to our customers.

TelecommunicationsAll our sites across Nigeria need to be reliably linked to ensure the effective and safe operation of our assets.

Seven Energy


Severn Energy Our customers

Oil and gas production Oil exporters

Processing facility Power stations

Gas pipelines Manufacturing plants

Gas receiving facility

Telecommunications

Oil exporters We sell our condensate, a by-product of our gas production, and our crude oil to International Oil Companies who export the product internationally.

Power stations We sell our processed gas to power generation companies, known as Gencos, for the generation of electricity to power Nigerian businesses and homes.

Manufacturing plants We also sell our gas to the manufacturing industries who use the product either to power their plants or as feedstock which they process and transform into their own outputs.

Electricity transmission network operator It owns and maintains a network of transmission towers which are steel structures with an overhead power line to transmit electrical energy at high voltage over large distances.

Distribution company It operates the distribution network of towers and cables that bring electricity to residential, industrial and commercial customers.

Our customers Other operators


Strategic report

Our strategy

Strategy for growthCapable of adding long-term sustainable value, underpinned by targeted strategic objectives to achieve our vision of providing gas to contribute to the economic growth of Nigeria.

Short to mid term priorities KPIs Relevant risks Progress

Develop an integrated value chain• Build and operate production processing capacity and distribution infrastructure,

ensuring our ability to control the full value chain

• Expand into locations with proximate gas supply & gas demand

See through to completion the Oron to Creek Town 24-inch gas pipeline in the first half of 2016, resulting in an increase in our distribution capacity and the capability to fully use our 200 MMcfpd gas processing facility.

• Operating cash flow

•Managing for growth

• Partnership relations

Managed the construction of the Oron to Creek Town gas pipeline to align with Calabar NIPP’s progress; fully integrated with third party gas distribution network, enabling us to deliver to customers in the direction of Port Harcourt.

Drive market penetration• Expand customer base beyond existing anchor customers to deliver gas to smaller volume,

higher priced, industrial off-takers

• Supply gas to fuel a significant portion of Nigeria’s power generation and support the industrialisation of Nigeria’s manufacturing sector

Sign gas sales agreements with identified smaller volume, higher priced off-takers in the vicinity of our south east Niger Delta gas distribution network.

•Gas sales •Managing for growth

•Gas off-takers

Delivered gas to five customers through 2015, with the introduction of two new customers in 2015; the Notore fertiliser plant and the Alaoji NIPP power station. Further clusters of customers have been identified in the Calabar and Port Harcourt regions.

Gain access to reserves• Enhance existing reserves and resources by investment in low risk gas exploration,

appraisal and development

•Maximise the use of our infrastructure by processing and delivery of third party gas

We will continue to actively evaluate acquisition opportunities in Nigeria in light of the reduced asset values due to the current tight oil price environment.

•Net reserves and resources

• Reserve replacement We added 5 MMbbl of oil and 128 Bcf of gross gas reserves from the successful drilling of the North East-1 prospect, combined with the licence area extension granted, on the Uquo field.

Create stakeholder value• Secure investment opportunities with sustainable returns to achieve predictable results

and cash flows

• Identify and acquire interests in low cost, undeveloped gas fields, with clear monetisation capability, predominantly low risk onshore exploration activity

• Establish an appropriate capital structure to maximise investor returns

Our focus in the near term is to ensure that we maximise value from our existing gas infrastructure in the south east Niger Delta region. Furthermore, we will continue to review our capital structure to ensure it is aligned to our forecast income streams.

• EBITDAX • Project execution

• Funding and treasury management

•Gas off-takers

• Legislation and regulation

•Adverse media

• Bribery and corruption

During 2015, we saw a significant ramp up in gas deliveries from our south east Niger Delta integrated gas business to 70 MMcfpd (2014: 23 MMcfpd). We also successfully refinanced the Accugas debt improving average debt maturity to 4.2 years.

Achieve operational excellence•Comply with national and international operational standards

•Conduct operations in a responsible way in respect of both our external environment and the safety of all stakeholders

•Continuous improvement of corporate governance across all operations to effectively manage and mitigate risk, investing in our people, policies and procedures

We will look to maintain our ability to provide a regular stream of high quality gas to our customers. We are continuously looking to evolve and improve our high operational standards so as to continue to achieve international standards, including a rigorous internal audit program and the constant development of our policies and procedures.

• Total Recordable Incident Rate


• Employee considerations

• Project execution

•QHSSE/CSR


• Security

We continue to maintain an excellent health & safety record, evidenced by a decrease in our TRIR rate. We provided full availability of gas to meet our customers needs throughout 2015.


Short to mid term priorities KPIs Relevant risks Progress

Develop an integrated value chain• Build and operate production processing capacity and distribution infrastructure,

ensuring our ability to control the full value chain

• Expand into locations with proximate gas supply & gas demand

See through to completion the Oron to Creek Town 24-inch gas pipeline in the first half of 2016, resulting in an increase in our distribution capacity and the capability to fully use our 200 MMcfpd gas processing facility.

• Operating cash flow

•Managing for growth


Managed the construction of the Oron to Creek Town gas pipeline to align with Calabar NIPP’s progress; fully integrated with third party gas distribution network, enabling us to deliver to customers in the direction of Port Harcourt.

Drive market penetration• Expand customer base beyond existing anchor customers to deliver gas to smaller volume,

higher priced, industrial off-takers

• Supply gas to fuel a significant portion of Nigeria’s power generation and support the industrialisation of Nigeria’s manufacturing sector

Sign gas sales agreements with identified smaller volume, higher priced off-takers in the vicinity of our south east Niger Delta gas distribution network.

•Gas sales •Managing for growth

•Gas off-takers

Delivered gas to five customers through 2015, with the introduction of two new customers in 2015; the Notore fertiliser plant and the Alaoji NIPP power station. Further clusters of customers have been identified in the Calabar and Port Harcourt regions.

Gain access to reserves• Enhance existing reserves and resources by investment in low risk gas exploration,

appraisal and development

•Maximise the use of our infrastructure by processing and delivery of third party gas

We will continue to actively evaluate acquisition opportunities in Nigeria in light of the reduced asset values due to the current tight oil price environment.

•Net reserves and resources

• Reserve replacement We added 5 MMbbl of oil and 128 Bcf of gross gas reserves from the successful drilling of the North East-1 prospect, combined with the licence area extension granted, on the Uquo field.

Create stakeholder value• Secure investment opportunities with sustainable returns to achieve predictable results

and cash flows

• Identify and acquire interests in low cost, undeveloped gas fields, with clear monetisation capability, predominantly low risk onshore exploration activity

• Establish an appropriate capital structure to maximise investor returns

Our focus in the near term is to ensure that we maximise value from our existing gas infrastructure in the south east Niger Delta region. Furthermore, we will continue to review our capital structure to ensure it is aligned to our forecast income streams.

• EBITDAX • Project execution

• Funding and treasury management

•Gas off-takers

• Legislation and regulation

•Adverse media


During 2015, we saw a significant ramp up in gas deliveries from our south east Niger Delta integrated gas business to 70 MMcfpd (2014: 23 MMcfpd). We also successfully refinanced the Accugas debt improving average debt maturity to 4.2 years.

Achieve operational excellence•Comply with national and international operational standards

•Conduct operations in a responsible way in respect of both our external environment and the safety of all stakeholders

•Continuous improvement of corporate governance across all operations to effectively manage and mitigate risk, investing in our people, policies and procedures

We will look to maintain our ability to provide a regular stream of high quality gas to our customers. We are continuously looking to evolve and improve our high operational standards so as to continue to achieve international standards, including a rigorous internal audit program and the constant development of our policies and procedures.

• Total Recordable Incident Rate


• Employee considerations

• Project execution

•QHSSE/CSR


• Security

We continue to maintain an excellent health & safety record, evidenced by a decrease in our TRIR rate. We provided full availability of gas to meet our customers needs throughout 2015.

Read more: page 24

Read more: page 28


Strategic report

141

215

172

Operating cash flow $ million

201520142013

Net reserves and resources MMboe

414452

354

201520142013

Delivering on our strategy

Integrated value chain

Market penetration

Access to reserves

Stakeholder value

Operational excellence

Key performance indicators

Measuring our progressWe measure our progress through five key performance indicators that are closely aligned with delivering on our strategy.

In 2015, we saw an improvement in all of our key performance indicators except for EBITDAX, which was impacted by lower profitability in the north west Niger Delta operations, due to lower overall production entitlement from the Group’s Strategic Alliance Agreement.

Despite this significant fall in EBITDAX operating cash flow increased by 44% to $215 million due in part to the ramp-up in gas sales from the south east gas business and working capital management.

Read more in: Financial review page 48


DefinitionCash flow from operations, before capital expenditure and financing activities. It is an indicator of the Group’s ability to generate cash from its business operations.

ProgressIncreased during the year due to the ramping up of operations from the south east Niger Delta gas business, which received cash inflows of $87 million in 2015 compared to $24 million in 2014. This was partially offset by a decrease in operating cash inflows from the OMLs.

OutlookWe continue to expect to receive increased cash flows from our gas customers in the south east Niger Delta, under the take-or-pay contracts currently in place, as gas deliveries increase. This is likely to be offset by the challenging oil price environment and timing of oil liftings under the Strategic Alliance Agreement.

Risk managementClose control of expenditure and monitoring of cash flows. In addition, credit enhancing measures are sought as part of gas sales agreements.


DefinitionThe Group’s net entitlement of proved and probable 2P reserves plus 2C resources, measured in million of barrels of oil equivalent.

Progress2P plus 2C net reserves and resources increased by 9% year on year to 452 MMboe (2014: 414 MMboe). This was due in large part to an increase on the Uquo field following the successful drilling of the Uquo North East-1 prospect.

OutlookThe Group continues to look for low cost, secure opportunities to increase its interest in reserves and resources, whilst appraising opportunities to convert our existing resources into reserves.

Risk managementDetailed monitoring of supply and demand constraints (reserves replacement, processing and delivery capacity).


Gas sales$ million

201520142013

34

92

1

EBITDAX $ million

201520142013

273

62

201

Total Recordable Incident Rate (TRIR)

20152013

0.0 0.19 0.13

2014


DefinitionUS Dollar equivalent total gas sales during the year, based on actual volumes delivered to our customers.

ProgressThe Group continued to increase the portion of its revenue from gas sales in the south east Niger Delta region. This was predominantly due to the addition of two new customers in 2015, Alaoji and Notore, the commissioning gas supplied to Calabar and full year deliveries to Unicem (2014: nine months).

OutlookWith the completion of the Oron to Creek Town gas pipeline in mid-2016 we will be in a position to deliver up to our full gas processing capacity of 200 MMcfpd.

Risk managementOngoing, proactive engagement of potential gas off-takers in the south east Niger Delta region. Our gas contracts are with customers supported by appropriate credit arrangements.


DefinitionProfit or loss before finance costs, investment revenue, foreign exchange gains or losses, taxes, depreciation, depletion and amortisation and unsuccessful exploration costs and impairments.

ProgressThe reduction in EBITDAX is principally related to lower oil revenues and production entitlement from the Group’s Strategic Alliance Agreement. However, this was partially offset by an increased contribution from oil and gas operations in the south east Niger Delta, together with a reduction in administration expenses.

OutlookThe low oil price environment will continue to adversely affect our EBITDAX. However, our south east Niger Delta gas business continues to grow and is forecast to become an ever more significant contributor to EBITDAX, providing a consistent source of revenues sheltered from the fluctuations experienced by oil.

Risk managementClose operational review and monitoring of key producing assets and their development, combined with ongoing assessment of economic market opportunities.


DefinitionDetermined by multiplying the total recordable workplace incidents by 200,000 (industry standard measure) and dividing by the total hours worked during year.

ProgressDuring the year we experienced two medical treatment cases that impacted on our TRIR, a reduction from 2014 where we recorded three incidents. We deeply regret that one fatality was reported, a community member in a road traffic accident involving one of our contractors.

OutlookSeven Energy continues to monitor TRIR closely, along with various other performance measures, including Lost Time Injury Rate and Perfect Days. The Group is committed to retaining a focus on QHSSE/CSR performance.

Risk managementClose and ongoing review of all QHSSE/ CSR policies and procedures, and application thereof, including rigorous incident reporting (including incident analysis, training, follow-up, remedial action and communication of learnings).


Strategic report

Financial Resources

Natural Resources

Our People

Local Knowledge

Our Partners

Resources and relationships

Creating value through resources and relationships

Seven Energy has identified five different resources and relationships that play a key role in creating value in our business.

01: Building a strong capital base to grow our business. Our investment strategy involves building a strong balance sheet and investor-base that is committed to seeing our business succeed in Nigeria in the long-term. We have an appropriate capital structure that supports our business activities through the borrowing and reinvestment of funds to support our vision of being the leading integrated gas supplier in Nigeria. Our track record of support for debt and equity is evident and includes global investors such as Temasek, the International Finance Corporation, and the IFC African, Latin American and Caribbean Fund, Capital International Private Equity, Investec Africa Private Equity, Standard Chartered Private Equity, Africa Finance Corporation, the Islamic Development Bank (via the IDB Infrastructure Fund II) and strategic investment from organisations such as Petrofac.

Our resources and relationships are key inputs into our business that are vital to achieving the success of our strategy and business model. These inputs underpin our business activities and processes throughout our business model, and are in turn, developed and transformed by our business activities.


02: Nurturing and developing Nigeria’s natural resources.Seven Energy depends on Nigeria’s natural resources, namely gas and oil, to sustain and build our business. Oil production creates valuable revenue for our business, although an increasing proportion of our sales volumes and revenues come from our gas customers. We continue to tightly manage our resources, particularly in light of the current oil price environment, restricting capital expenditure to essential projects only and focussing rigorously on operating cost reductions. By transforming Nigeria’s gas resource into power, we believe that we are creating long term sustainable value for the Group, our stakeholders and all Nigerians.

03: Putting people at the heart of what we do.Seven Energy employs a vast range of people with diverse skills and backgrounds from a multitude of disciplines. They are driven by a strong set of core values including respect, environment and safety, leadership, creativity and openness, motivation and excellence. Their individual skills, competencies and experience collectively create value and deliver our business objectives.

As an organisation we invest financial resources in our people through the salaries they earn and the training and development they receive, thereby increasing their know-how, wellbeing and job satisfaction, which contribute to their, and our overall performance.

04: Local knowledge, ownership and experience help us to succeed.Seven Energy has local knowledge, ownership and experience in Nigeria, enabling us to succeed and gain first mover advantage as a supplier of gas to the domestic market in our core operating areas. Our success in Nigeria is dependent on our collective know-how and the way in which we deploy our capabilities to best effect in the active management of our business.

05: Productive relationships with our partners enable exponential results. Seven Energy sees its partnerships as crucial in operating successfully in Nigeria. Our partners encompass a diverse group of people, united by the desire to see us succeed. Partners include our investors, staff, business partners, gas customers, joint-venture partners, suppliers, contractors, Right-of-Way communities and local government authorities. We engage our stakeholders through a variety of means in order to take their views and priorities into account in the delivery of our strategic objectives.

Seven Energy ensures that our resources and relationships and our inter-connections are integrated into our business decisions and prioritisation of effort and investment. This inter-connectedness means that one should not be maximised at the expense of the others and we aim to balance and take into account each, in the course of day-to-day decision making and annually, in the development of our strategy. Working examples that illustrate our resources and relationships can be found throughout this Annual Report.


Strategic report

Board of Directors

Executive Committee

Senior Management

Risk owners

Review andrecommendationsby the Internal Audit team andassessment by the GovernanceBoard as to the effectiveness ofaction plans and controls.

Identification of new risks – Identification and assessment

of new risks, including risk grading.– Formulation of mitigation plans and assignment of review cycles.– Identification of key process controls.

– Review and assessment of existing risks.– Monitoring of progress against agreed mitigation plans.– Re-evaluation of review cycle or closing-out of risks.

Updating of existing risks



Market penetration

Access to reserves

Stakeholder value


Risk management framework

Current and short-term risks

Risks are inherent within every business environment. Seven Energy’s Board and Senior Management are responsible for ensuring that risks facing the Group are identified, assessed and managed to ensure creation and retention of shareholder value.

The following are the significant risks the Board and Senior Management focused on during the year as the business started to transition from a capital intensive phase to an operational phase.

Key risk factor Gas off-takers Commodity price volatility Funding and treasury management

Description Core to the Group’s business strategy and capital structure are its long-term gas sales agreements. Performance and payments by customers are the main identified exposures for Seven Energy.

Seven Energy’s financial performance is linked to the fluctuating price of oil, which impacts the profit oil element of its entitlement from OMLs 4, 38 & 41.

Seven Energy’s gas business is not exposed to price fluctuations as the prices are on a fixed inflation-adjusted basis.

The Group relies on a number of capital sources for its operations and availability of financing is essential to its future growth plans. Availability of financing, ongoing compliance with financing obligations as well as ongoing liquidity are the main risks.

2015 Performance

Seven Energy achieved average gas deliveries during 2015 of 70 MMcfpd and received $89 million in cash receipts from the south east Niger Delta gas customers, delivering to five customers during the year, a more diversified customer base than the previous year. This diversification helped Seven Energy reduce the risk as a result of the previously narrower customer base.

Although the Calabar NIPP power station commenced taking gas during 2015, delays in the finalisation of electricity distribution infrastructure has meant the ramp up in the gas business, although pronounced during 2015, was slower than forecast.

During 2015, the industry benchmark of dated Brent averaged $52 per barrel, significantly down from the 2014 average of $99 per barrel, ending the year at $37 per barrel.

This impacted the development activity and financial performance at OMLs 4, 38 & 41, where the profit oil portion of Seven Energy’s entitlement is exposed to the fluctuations in oil price. Under the cost recovery model, the lower oil price environment results in increased barrels required to recover costs and therefore, fewer remain to distribute as profit oil. The Group’s cash flow risk is mitigated to an extent by an agreed three year funding plan with NPDC and Seplat to align the timings of cash call payments with liftings.

However, during 2015 Seven Energy’s financial performance became more influenced by its gas business which is not exposed to price fluctuations as the inflation-adjusted gas priced is fixed in all contracts.

In 2015, Seven Energy communicated to investors a 2015 Annual Funding Plan that detailed the Group’s short-term funding requirements which included the refinancing of the Project Finance and Acquisition Finance facilities into a single combined facility resulting in the deferment of the current amortisation profiles of both facilities for at least 12 months; and, the securing of up to $125 million of additional debt or equity funding.

During 2015, Seven Energy successfully closed the refinancing of the Accugas debt, aligning the debt maturity profile to gas sales; secured an additional $52 million of pari passu debt; a Naira denominated $30 million Working Capital Facility; and, in February 2016, raised $100 million of additional equity capital from a combination of new and existing investors.

Short-term outlook

With the expected conclusion of the electricity distribution infrastructure in the south east Nigeria Delta region, Seven Energy forecasts gas sales within the next 12 to 18 months to reach over 200 MMcfpd, utilising the current full capacity of Seven Energy’s gas processing facility, increasing our gas revenues as well as those of our customers.

Seven Energy also expects to close the World Bank Partial Risk Guarantee in respect of the GSA with Calabar NIPP.

As Seven Energy continues to see a greater portion of its financial performance driven by its gas business the exposure to the fluctuations in commodities prices, principally oil, becomes further reduced.

Due to the terms of the cost recovery mechanism under the Strategic Alliance Agreement Seven Energy has with NPDC on OMLs 4, 38 & 41, Seven Energy does not deem it necessary or beneficial to hedge the profit oil element of its entitlement.

With the successful delivery of the 2015 Annual Funding Plan Seven Energy has strengthened its liquidity position. Discussions are ongoing with the Accugas IV lenders to confirm the rescheduling of the DSRA funding obligations, conditional approval, of which, was received on 4 April 2016.

Strategic objectives

Risk management

Effective risk management is essential if the Group is to deliver on its strategic and operational objectives whilst maintaining its excellent HSE record. The Risk Register is the means by which the Group’s principal risks are reported to the Executive Committee and the Board for review.

The Risk Register identifies those risks with the potential to seriously affect the performance, future prospects or reputation of the Group, or prevent us from delivering on our strategic objectives. It includes strategic, financial and operational risks, together with external factors over which the Board may have little or no direct control.

The Risk Register is updated quarterly and identifies:• the specific risks facing the Group• likelihood of the risks materialising and their potential

impact on the business’s strategic objectives• the Group’s ability to reduce or control

the incident and impact of risks• the risk profile by exposure and by type• the extent and categories of risk which are

regarded as acceptable for the Group to bear


Probability

Impa

ct

Projectexecution(2014)

Fundingand treasury management

Fundingand treasury management

(2014)Commodity

price volatility

Reservesreplacement

Employeeconsiderations

Projectexecution

Adversemedia

Partnershiprelations

Bribery andcorruption

QHSSE/community

Managinggrowth

Each identified risk is given a risk rating, based on the probability of the risk occurring and the estimated impact on the business.The above analysis highlights the Group’s main identified risks. Further details of these risks are set out in “Principal risks anduncertainties” on the following page.

Gasoff-takers Security

Legislationand

regulation(2014)

Risk distribution

Key risk factor Gas off-takers Commodity price volatility Funding and treasury management

Description Core to the Group’s business strategy and capital structure are its long-term gas sales agreements. Performance and payments by customers are the main identified exposures for Seven Energy.

Seven Energy’s financial performance is linked to the fluctuating price of oil, which impacts the profit oil element of its entitlement from OMLs 4, 38 & 41.

Seven Energy’s gas business is not exposed to price fluctuations as the prices are on a fixed inflation-adjusted basis.

The Group relies on a number of capital sources for its operations and availability of financing is essential to its future growth plans. Availability of financing, ongoing compliance with financing obligations as well as ongoing liquidity are the main risks.

2015 Performance

Seven Energy achieved average gas deliveries during 2015 of 70 MMcfpd and received $89 million in cash receipts from the south east Niger Delta gas customers, delivering to five customers during the year, a more diversified customer base than the previous year. This diversification helped Seven Energy reduce the risk as a result of the previously narrower customer base.

Although the Calabar NIPP power station commenced taking gas during 2015, delays in the finalisation of electricity distribution infrastructure has meant the ramp up in the gas business, although pronounced during 2015, was slower than forecast.

During 2015, the industry benchmark of dated Brent averaged $52 per barrel, significantly down from the 2014 average of $99 per barrel, ending the year at $37 per barrel.

This impacted the development activity and financial performance at OMLs 4, 38 & 41, where the profit oil portion of Seven Energy’s entitlement is exposed to the fluctuations in oil price. Under the cost recovery model, the lower oil price environment results in increased barrels required to recover costs and therefore, fewer remain to distribute as profit oil. The Group’s cash flow risk is mitigated to an extent by an agreed three year funding plan with NPDC and Seplat to align the timings of cash call payments with liftings.

However, during 2015 Seven Energy’s financial performance became more influenced by its gas business which is not exposed to price fluctuations as the inflation-adjusted gas priced is fixed in all contracts.

In 2015, Seven Energy communicated to investors a 2015 Annual Funding Plan that detailed the Group’s short-term funding requirements which included the refinancing of the Project Finance and Acquisition Finance facilities into a single combined facility resulting in the deferment of the current amortisation profiles of both facilities for at least 12 months; and, the securing of up to $125 million of additional debt or equity funding.

During 2015, Seven Energy successfully closed the refinancing of the Accugas debt, aligning the debt maturity profile to gas sales; secured an additional $52 million of pari passu debt; a Naira denominated $30 million Working Capital Facility; and, in February 2016, raised $100 million of additional equity capital from a combination of new and existing investors.

Short-term outlook

With the expected conclusion of the electricity distribution infrastructure in the south east Nigeria Delta region, Seven Energy forecasts gas sales within the next 12 to 18 months to reach over 200 MMcfpd, utilising the current full capacity of Seven Energy’s gas processing facility, increasing our gas revenues as well as those of our customers.

Seven Energy also expects to close the World Bank Partial Risk Guarantee in respect of the GSA with Calabar NIPP.

As Seven Energy continues to see a greater portion of its financial performance driven by its gas business the exposure to the fluctuations in commodities prices, principally oil, becomes further reduced.

Due to the terms of the cost recovery mechanism under the Strategic Alliance Agreement Seven Energy has with NPDC on OMLs 4, 38 & 41, Seven Energy does not deem it necessary or beneficial to hedge the profit oil element of its entitlement.

With the successful delivery of the 2015 Annual Funding Plan Seven Energy has strengthened its liquidity position. Discussions are ongoing with the Accugas IV lenders to confirm the rescheduling of the DSRA funding obligations, conditional approval, of which, was received on 4 April 2016.

Strategic objectives

To enable the Group to achieve its objectives, risk awareness, monitoring and control is a continuous process that involves everyone in the organisation.


Strategic report

Principal risks and uncertainties

Risk management continued

Key risk factor Responsibility Potential impact MitigationKPI/Performance metric

Strategic objectives See also

Strategic risks

Reserves replacementAssessment: Medium(2014: High)

Chief Technical Officer Access to reserves and resources underpins Seven Energy’s business and its growth aspirations. Ongoing analysis undertaken to assess opportunities to access additional reserves and resources via appraisal and exploration, third party purchase arrangements, or through an enlarged asset portfolio following new fields’ bid allocation processes or via M&A activity. Annual assessment by independent experts of existing reserves and resources.

Reserves and resources Operational review

Managing for growthAssessment: Medium(2014: Medium)

Chief Executive Officer With a strategy focused on organic and acquisitive growth, the Group is exposed to risks that are inherent across the entire investment process.

For each investment opportunity, significant emphasis is placed on in-depth reviews and evaluation. Using Seven Energy’s in-house experience and expertise, combined with that of its advisers, full due diligence and integration planning are undertaken as part of the evaluation process. In addition, each asset continues to be closely monitored with decisions being implemented to capture the asset’s long term value.

Reserves and resourcesContracted gas volumesGas sales

CEO’s statement

Partnership relationsAssessment: Medium(2014: Medium)

Chief Executive Officer The legal and day-to-day interpretation and status of working relations with the Group’s various partners are key to the development and performance of Seven Energy’s assets.

Through the existing legal arrangements in place for the Group’s portfolio of assets, combined with active technical and financial participation, the Group strives to maintain a positive and mutually beneficial working relationship with its strategic and joint venture partners. In addition, the Group closely monitors the obligations attached to the licence of each of its assets, the Strategic Alliance Agreement with NPDC, and works with its partners to ensure that the relevant work programmes are met.

Capital expenditureGross production

CEO’s statement

Employee considerationsAssessment: Medium(2014: Medium)

Chief Executive Officer The retention and recruitment of high quality personnel is essential to support the Group’s achievement of its vision.

Succession planning, review and benchmarking of remuneration policies are regularly undertaken across the organisation. In addition, significant focus is being placed on internal communications to align this with the Group’s external communications programme.

Employee turnoverDiversity% in-country staff of Nigerian nationality


Operational risks

QHSSE/CSRAssessment: Medium(2014: Medium)

Chief Operating Officer The Group’s focus on upstream and midstream oil and gas activities exposes it to a wide range of QHSSE/CSR related risks, including injury, loss of life, environmental damage and community disturbances.

Industry leading QHSSE/CSR policies and procedures have been implemented across the business. The Group has a dedicated QHSSE/CSR team in place to ensure continued high awareness and application of these policies and procedures. Environmental considerations are also key and are an area of increasing regulation. Work continues to ensure that operations meet international standards. Emergency response plans have been updated and implemented and are regularly tested.

LTIRTRIRFARNo of environmental spills


Financial risks

Funding and treasurymanagementAssessment: High (2014: High)

Chief Financial Officer The Group has high levels of debt with associated obligations and restrictions. Therefore, there is a risk of breach, inability to rectify ongoing breaches, and inability to undertake further financing in support of the Group’s growth strategy. Furthermore, recent market movements have raised the possibility of the Central Bank of Nigeria currency restrictions being imposed, to which Seven Energy would be exposed.

Seven Energy closely monitors its funding and liquidity requirements. Formal budgeting and forecasting processes are in place and cash forecasts are regularly produced and reviewed to ensure compliance with funding obligations and growth plans. The Group seeks wherever possible to align its Naira and US dollar costs with corresponding currency inflows. Discussions are ongoing with the Accugas IV lenders to confirm the rescheduling of the DSRA funding obligations, conditional approval, of which, was received on 4 April 2016.

EBITDAXOperating cash flows

Financial review

Bribery and corruptionAssessment: Medium(2014: Medium)

Chief Executive Officer Seven Energy operates in a region considered particularly prone to bribery and corruption. Especially exposed are its contract and procurement operations.

Strict policies and procedures are in place across the business, and in particular with regard to contracts and procurement and anti-bribery and corruption. These policies are regularly reviewed and updated and subject to internal audit. Careful vetting and monitoring processes are in place for suppliers. A programme of regular training and awareness has been implemented and there is an independent reporting hotline.

% completion ofcompliance training% compliance certification

Board Committee report

External risks

Commodity price volatilityAssessment: High(2014: Low)

Chief Financial Officer Seven Energy is exposed to fluctuations in commodity prices, especially that of oil, which it has no ability to influence.

Seven Energy’s gas sales contracts are priced in US dollars with escalation clauses linked to consumer prices, and therefore not impacted by volatility in the oil price. Also, the Group’s oil production is partially hedged as we are entitled to lift sufficient oil to recover incurred costs. In addition, the Group has an agreed 3 year funding plan with NPDC and Seplat to align the timings of cash call payments with liftings.

EBITDAX Gas sales

Financial review

Gas off-takersAssessment: High(2014: High)

Chief Executive Officer Within its midstream business, Seven Energy has a narrow customer base and therefore the risk of non-performance and/or non-payment.

In addition to the take-or-pay provisions within each gas sales agreement, significant credit enhancing packages are sought where appropriate. The Group continues to work closely with its key customers to ensure mutually beneficial relationships. As part of Seven Energy’s core strategy additional customers have been, and continue to be, sought to diversify the risk.

Gas salesOperating cash flowsGross productionContracted gas volumes


SecurityAssessment: Medium(2014: Medium)

Chief Operating Officer Security incidents, such as kidnapping and criminal activities, vandalism to the Group and its partners’ assets are inherent risks to Seven Energy’s operations in Nigeria.

The Group is sensitive to security issues, and its operations are focused on relatively secure areas of the Niger Delta. In addition, the Group has dedicated security teams in each area of operation, with a robust security management and alert system in place. Each asset and operation is assessed regularly from a risk perspective and security considerations are incorporated into all new projects.

Gross productionLTITRIRNumber of fatalities

CEO’s statement

Adverse mediaAssessment: Medium(2014: High)

Chief Financial Officer Negative or speculative media coverage could adversely impact Seven Energy’s reputation and ability to operate.

The Group and its public relations advisers actively monitor and respond, as required, to the media. In addition, the Group seeks to provide full transparency of its operations via its external communications programme. It has also established a Crisis Media Plan.

Reputational damage CEO’s statement




Market penetration

Access to reserves

Stakeholder value


Key risk factor Responsibility Potential impact MitigationKPI/Performance metric

Strategic objectives See also

Strategic risks

Reserves replacementAssessment: Medium(2014: High)

Chief Technical Officer Access to reserves and resources underpins Seven Energy’s business and its growth aspirations. Ongoing analysis undertaken to assess opportunities to access additional reserves and resources via appraisal and exploration, third party purchase arrangements, or through an enlarged asset portfolio following new fields’ bid allocation processes or via M&A activity. Annual assessment by independent experts of existing reserves and resources.

Reserves and resources Operational review

Managing for growthAssessment: Medium(2014: Medium)

Chief Executive Officer With a strategy focused on organic and acquisitive growth, the Group is exposed to risks that are inherent across the entire investment process.

For each investment opportunity, significant emphasis is placed on in-depth reviews and evaluation. Using Seven Energy’s in-house experience and expertise, combined with that of its advisers, full due diligence and integration planning are undertaken as part of the evaluation process. In addition, each asset continues to be closely monitored with decisions being implemented to capture the asset’s long term value.

Reserves and resourcesContracted gas volumesGas sales

CEO’s statement

Partnership relationsAssessment: Medium(2014: Medium)

Chief Executive Officer The legal and day-to-day interpretation and status of working relations with the Group’s various partners are key to the development and performance of Seven Energy’s assets.

Through the existing legal arrangements in place for the Group’s portfolio of assets, combined with active technical and financial participation, the Group strives to maintain a positive and mutually beneficial working relationship with its strategic and joint venture partners. In addition, the Group closely monitors the obligations attached to the licence of each of its assets, the Strategic Alliance Agreement with NPDC, and works with its partners to ensure that the relevant work programmes are met.

Capital expenditureGross production

CEO’s statement

Employee considerationsAssessment: Medium(2014: Medium)

Chief Executive Officer The retention and recruitment of high quality personnel is essential to support the Group’s achievement of its vision.

Succession planning, review and benchmarking of remuneration policies are regularly undertaken across the organisation. In addition, significant focus is being placed on internal communications to align this with the Group’s external communications programme.

Employee turnoverDiversity% in-country staff of Nigerian nationality


Operational risks

QHSSE/CSRAssessment: Medium(2014: Medium)

Chief Operating Officer The Group’s focus on upstream and midstream oil and gas activities exposes it to a wide range of QHSSE/CSR related risks, including injury, loss of life, environmental damage and community disturbances.

Industry leading QHSSE/CSR policies and procedures have been implemented across the business. The Group has a dedicated QHSSE/CSR team in place to ensure continued high awareness and application of these policies and procedures. Environmental considerations are also key and are an area of increasing regulation. Work continues to ensure that operations meet international standards. Emergency response plans have been updated and implemented and are regularly tested.

LTIRTRIRFARNo of environmental spills


Financial risks

Funding and treasurymanagementAssessment: High (2014: High)

Chief Financial Officer The Group has high levels of debt with associated obligations and restrictions. Therefore, there is a risk of breach, inability to rectify ongoing breaches, and inability to undertake further financing in support of the Group’s growth strategy. Furthermore, recent market movements have raised the possibility of the Central Bank of Nigeria currency restrictions being imposed, to which Seven Energy would be exposed.

Seven Energy closely monitors its funding and liquidity requirements. Formal budgeting and forecasting processes are in place and cash forecasts are regularly produced and reviewed to ensure compliance with funding obligations and growth plans. The Group seeks wherever possible to align its Naira and US dollar costs with corresponding currency inflows. Discussions are ongoing with the Accugas IV lenders to confirm the rescheduling of the DSRA funding obligations, conditional approval, of which, was received on 4 April 2016.

EBITDAXOperating cash flows

Financial review

Bribery and corruptionAssessment: Medium(2014: Medium)

Chief Executive Officer Seven Energy operates in a region considered particularly prone to bribery and corruption. Especially exposed are its contract and procurement operations.

Strict policies and procedures are in place across the business, and in particular with regard to contracts and procurement and anti-bribery and corruption. These policies are regularly reviewed and updated and subject to internal audit. Careful vetting and monitoring processes are in place for suppliers. A programme of regular training and awareness has been implemented and there is an independent reporting hotline.

% completion ofcompliance training% compliance certification

Board Committee report

External risks

Commodity price volatilityAssessment: High(2014: Low)

Chief Financial Officer Seven Energy is exposed to fluctuations in commodity prices, especially that of oil, which it has no ability to influence.

Seven Energy’s gas sales contracts are priced in US dollars with escalation clauses linked to consumer prices, and therefore not impacted by volatility in the oil price. Also, the Group’s oil production is partially hedged as we are entitled to lift sufficient oil to recover incurred costs. In addition, the Group has an agreed 3 year funding plan with NPDC and Seplat to align the timings of cash call payments with liftings.

EBITDAX Gas sales

Financial review

Gas off-takersAssessment: High(2014: High)

Chief Executive Officer Within its midstream business, Seven Energy has a narrow customer base and therefore the risk of non-performance and/or non-payment.

In addition to the take-or-pay provisions within each gas sales agreement, significant credit enhancing packages are sought where appropriate. The Group continues to work closely with its key customers to ensure mutually beneficial relationships. As part of Seven Energy’s core strategy additional customers have been, and continue to be, sought to diversify the risk.

Gas salesOperating cash flowsGross productionContracted gas volumes


SecurityAssessment: Medium(2014: Medium)

Chief Operating Officer Security incidents, such as kidnapping and criminal activities, vandalism to the Group and its partners’ assets are inherent risks to Seven Energy’s operations in Nigeria.

The Group is sensitive to security issues, and its operations are focused on relatively secure areas of the Niger Delta. In addition, the Group has dedicated security teams in each area of operation, with a robust security management and alert system in place. Each asset and operation is assessed regularly from a risk perspective and security considerations are incorporated into all new projects.

Gross productionLTITRIRNumber of fatalities

CEO’s statement

Adverse mediaAssessment: Medium(2014: High)

Chief Financial Officer Negative or speculative media coverage could adversely impact Seven Energy’s reputation and ability to operate.

The Group and its public relations advisers actively monitor and respond, as required, to the media. In addition, the Group seeks to provide full transparency of its operations via its external communications programme. It has also established a Crisis Media Plan.

Reputational damage CEO’s statement


Strategic report

Operational and financial review

Operational review:

South east Niger Delta 34 North west Niger Delta 38 Anambra basin 40

Corporate social responsibility 42

Financial review 48


Strategic report

Highlights / Average gas deliveries: 70 MMcfpd

/ Commenced deliveries to Calabar NIPP

/ Introduced two new gas customers into the south east Niger Delta network, commencing deliveries during the year

/ Oil production from Uquo and Stubb Creek fields commenced

/ Average gross oil production: 2,200 bopd / Successful drilling added 20 MMboe

to gross 2P oil and gas reserves

Operational review

South east Niger Delta

Our assets in the south east Niger Delta region consist of the Uquo and Stubb Creek fields, and our major gas processing and distribution infrastructure. All are close to areas where there is significant demand for gas from existing or planned power stations and other industrial off-takers, around Ikot Abasi, Calabar, Uyo, Aba and Port Harcourt. These assets are also situated near to ExxonMobil’s Qua Iboe export terminal.


Gas delivery ramp up Seven Energy saw a trebling of its daily average gas deliveries in 2015, totalling 70 million standard cubic feet per day (“MMcfpd”) for the year, up from 23 MMcfpd in 2014. This was due to the commencement of deliveries during the year to three additional customers, Calabar NIPP power station, Alaoji NIPP power station and the Notore fertiliser plant. Seven Energy delivered 44 MMcfpd of gas to three power stations with a combined generation capacity of over 1 GW, and 26 MMcfpd to the manufacturing industry supplying the Unicem cement plant, capable of producing 2.5 million metric tons per annum, and the Notore fertiliser plant, which is able to produce 1,000 metric tons of ammonia daily.

During December 2015, daily average deliveries reached 114 MMcfpd, with 86 MMcfpd being delivered to the power sector and 28 MMcfpd to industry.

Asset overview

Uquo field

Stubb Creek field Total

Seven Licence interest 40% 51%1

Operator Frontier Oil Universal Energy

2P + 2C gross gas reserves and resources (Bcf)

812 503 1,315

2P + 2C gross oil reserves and resources (MMbbl)

9 22 31

2P + 2C gross reserves and resources (MMboe)

144 106 250

2P + 2C net reserves and resources (MMboe)

104 52 156

Type of hydrocarbon Oil and gas Oil and gas

Status In production In production

1 Held by Universal Energy (Seven Energy holds a 62.5% interest in Universal Energy).

During 2015, we saw a trebling of our gas deliveries to our customers in the south east Niger Delta, demonstrating the realisation of our vision to be the leading integrated gas business that, since inception, our strategy and hard work have been based upon.

Seven Energy marginal field areas

Licence areas

Seven Energy oil and gas fields

Seven Energy gas pipeline

Seven Energy gas pipeline (under construction)

Seven Energy oil pipeline

NGC gas pipeline

3rd party gas pipeline

Seven Energy customer (power station)

Seven Energy customer (industrial)

Seven Energy customer (export terminal)

Uquo gas processing facility

Legend


Strategic report

UkanafunJunction

26 km24 inch pipeline

8 km4 inch

pipeline

2 km 10 inch pipeline

Oron tie-in

26 km24 inch pipeline

(under construction)

128 km 18 inch East Horizon pipeline

62km 18 inch Uquo to Ikot Abasi pipeline



37 km 24 inch Uquo to Oron pipeline

Ibom Powerpower station190MW

Calabar NIPPpower station560MW

Gas ReceivingFacility

FUN oil gathering manifold

Qua Iboeterminal

LegendGas wellOil wellOil and gas wellSeven Energy gas pipelineSeven Energy oil pipelineThird-party pipeline

Uquo GasProcessing Facility

Uquo field

StubbCreek field

Stubb Creek Early ProductionFacility

Calabar Junction

Unicem

South east Niger Delta continued

Seven Energy’s midstream infrastructure

Power generation Using gas supplied by Seven Energy the Calabar NIPP power station has succeeded in commissioning all of its five gas turbines during 2015. These five working gas turbines introduce an extra 560 MW of electricity generation capacity to the national grid.

The generation and distribution capacity of the Calabar NIPP power station continued to be limited by completion of various infrastructure projects along the gas-to-power value chain. We continued work on the completion of the Oron to Creek Town 26 km, 24-inch diameter gas pipeline, phased such that construction of the pipeline will be completed and commissioning work concluded in line with the Calabar NIPP power station’s ability to take full contractual volumes. Alongside this, the Federal Government carried out construction work on the electricity transmission lines and sub-stations in the south east region of Nigeria. These infrastructure projects are on track for completion in mid-2016.

In May 2015, we commenced delivery of gas to Alaoji NIPP power station, supplying gas for one of its turbines, providing 110 MW to the national grid. Through an interim gas sales agreement Alaoji has been able to commence regular generation. This has been enabled by our agreement with the Nigerian Gas Company to utilise part of their network to reach Alaoji, and this relationship has progressed well, enabling us to meet all our gas nominations during 2015.

Thanks to our successful gas supply performance during the year, in December we began supplying gas to Alaoji for a second 110 MW gas turbine, doubling deliveries to the power station. Supplies continued through the year to Ibom Power supplying one 110 MW turbine.

The Oron to Creek Town pipeline

The 26 km long, 24 inch diameter pipeline from Oron to Creek Town has been Seven Energy’s most challenging pipeline construction project to date. The project involved the engagement of some 25 local communities, the clearing of 26 km of predominantly mangrove swamp, five pipeline river crossings with a total length of 7.7 km, the longest being 2.9 km, all of which involved horizontal directional drilling. Total project investment is $90 million.

Supplying industry Seven Energy also continued to supply local industry with gas during the year. Unicem, the cement factory near Calabar took an average of 16 MMcfpd for the year, up from an average of 8 MMcfpd in 2014. We acquired the Unicem gas sales agreement with the acquisition of the East Horizon Gas Company Limited in 2014, which has facilitated the consistent and reliable flow of our gas to the Unicem cement factory. This acquisition of the East Horizon gas pipeline also enabled us to deliver our processed gas to Calabar NIPP power station which has now commissioned its five gas turbines, while we proceeded with work to complete the Oron to Creek Town pipeline.

Under a short-term sales contract with Notore, which commenced deliveries during 2015, the fertiliser plant consumed an average of 10 MMcfpd during the year, enabling the production of urea for use in the local agriculture industry.

Operational review


Major customersSeven Energy had five gas sales agreements in place during the year – three long-term and two short-term, providing stable, diversified and long-term cash flows.

UnicemA 20 year, 80% take-or-pay gas sales agreement, to supply Unicem, a cement factory near Calabar. EHGC is contracted to supply 25 MMcfpd, increasing to 50 MMcfpd to Unicem in 2016/2017 with the completion of the factory upgrade. Unicem is owned by a consortium of Flour Mills of Nigeria, Lafarge and Holcim.

Ibom Power stationA ten year, 100% take-or-pay gas sales agreement to supply 43.5 MMcfpd to the 190 MW Ibom Power power station, near Ikot Abasi. The station is owned by Ibom Power, which is owned by Akwa Ibom State.

Calabar NIPP power stationA 20 year, 80% take-or-pay gas sales agreement to supply 131 MMcfpd to the 560 MW Calabar NIPP power station, near Calabar. The station is owned by the Calabar Electricity Generation Company.

Alaoji NIPP Power stationA one year, 80% take-or-pay gas sales agreement to supply 30 MMcfpd to the 500 MW Alaoji NIPP Power station.

Notore fertiliser stationA six month, 80% take-or-pay gas sales agreement to supply 25 MMcfpd of gas to the Notore fertiliser plant as feedstock, extended for an additional six months at 10 MMcfpd.

Oil production at Stubb Creek and Uquo fieldsIn February 2015, we commenced oil production from one well at the Uquo field and two wells at the Stubb Creek field. This followed completion of our oil gathering manifold and its connection to ExxonMobil’s export terminal at Qua Iboe. Oil from the Uquo and Stubb Creek fields was the first third party oil to be exported through this terminal.

Average gross oil production from the two fields amounted to 2,200 bopd (2014: nil); our net entitlement was 800 bopd. We received our first lift of oil from this terminal in April 2015, with average gross liftings for the year of 1,800 bopd; 600 bopd net to us.

Successful drilling campaignsIn February 2015, we drilled the Uquo North-East 1 prospect in the Uquo field area to a vertical depth of 7,576 feet, encountering gas reservoirs as expected, as well as oil accumulations in two horizons. This well is a considerable success, confirming the prolific nature of the block, adding some 20MMboe to the Uquo field gross 2P oil and gas reserves. Following the discovery, an extension to the Uquo Marginal field area was granted. The discovery well has been suspended and will be completed as an oil producer. Further wells will be drilled to develop the gas reservoirs in order to maintain gas deliveries to our customers.


Strategic report

Highlights / Average oil gross production during 2015

of 57,000 bopd (2014: 52,500 bopd).

/ Net production entitlement to Seven Energy of 10,500 bopd (2014: 15,800 bopd)

/ Nine wells drilled during 2015 (2014: 24)

North west Niger Delta

OMLs 4, 38 & 41 are located in the north west Niger Delta, near established oil and gas infrastructure, giving access to Shell’s Forcados export terminal for oil and to major demand centres for gas, including Lagos, Benin City and Ajaokuta.

Operational review


Northkilometres 200

OML 4

OML 41

OML 38

Benin River

Umutu

Asuokpu

Ogume

Nugu

Olokun

Ubaleme

Okoporo

Okwefe

Omoja

Ijomi

Jesse

Mosogar

Oriomu

OroghoSapele

Amukpe

Ovhor

Okporhuru

Oben

to be derived from six fields: Oben, Sapele, Ovhor, Amukpe, Okporhuru and Orogho. Production expectations for 2016 are forecast to be similar to 2014 and 2015, with full year downtime of 25% assumed, which takes into account the current Trans Forcados pipeline shut down from mid-February 2016.

Of the nine gas wells drilled in 2015, four were non-associated gas wells. These new wells enabled average daily gas production to increase by 119% to 191 MMcfpd.

Lower oil price environment 2015 saw net entitlement of 10,500 bopd compared with 15,800 bopd in 2014, a decrease of 34%. Seven Energy lifted the equivalent of 14,100 bopd during 2015 realising an average oil sales price of $48/bbl, significantly below the $94/bbl realised in 2014. Due to the nature of the cost recovery mechanism by which Seven Energy receives cost recovery oil on the OMLs our main exposure to the oil price is on the profit oil entitlement which reduces with the oil price as a result of more barrels being allocated for cost recovery.

Reduced activity In 2015, there was a significant reduction in the capital budget and activity at the OMLs in the shadow of the lower oil price environment that existed during 2015, in comparison to the intensive programme that took place in 2014 which saw the drilling of 24 wells and capital additions at the OMLs of $408 million.

In 2015, nine wells were drilled and the rig count went from a high of six in 2014, down to one in the second half of 2015.

Field performance Despite this reduction in drilling activity, the fields continued to perform well, demonstrating their increased productivity arising from the 2014 drilling programme, with an increase in average gross production of 9% to 57,000 bopd, compared to 52,500 bopd in 2014. This average was achieved in the face of an extended shutdown period in the early part of the year, with the Trans Forcados pipeline being down approximately 30% of the time during the first half of the year. Daily production rates reached over 85,000 bopd during the year, with production continuing

Asset overview

OMLs 4, 38, & 41

Licence interest 55%1

Operator Seplat

2P + 2C gross gas reserves and resources (Bcf) 2,129

2P + 2C gross oil reserves and resources (MMbbl) 405

2P + 2C gross reserves and resources (MMboe) 760

2P + 2C net reserves and resources (MMboe) 231

Type of hydrocarbon Oil and gas

Status In production

1 Indirect interest via the Strategic Alliance Agreement with NPDC.

We hold, through an indirect interest, a diversified portfolio of onshore oil and gas interests in the north west Niger Delta region, with substantial reserves and access to export facilities and demand centres. Our focus has been to support NPDC effectively in continuing to develop OMLs 4, 38 & 41.

NPDC Strategic Alliance Agreement areas

Third party marginal field

Oil field

Gas field

Prospective discovery

Gas pipeline

Oil pipeline

Legend


Strategic report

Highlights / Acquired acreage positions offering

significant gas upside covering interests in OPLs 905, 907 & 917

/ Industrial region offering attractive gas market potential

/ Commencement of initial technical reviews and environmental impact assessments

Anambra basin

OPLs 905, 907 & 917 are located in the Anambra basin region of Nigeria. The fields contain existing seismic evaluations and undeveloped gas discoveries and are located in a developed industrial part of Nigeria offering significant scope to develop a gas market for power and industrial use.

Operational review


OPL 905

OPL 916

OPL 908

OPL 906

OPL 903OPL 902

OPL 910 OPL 911

OPL 207

OPL 228

OPL 135

OPL 206

OPL 203

6º30”E 7º00”E 7º30”E

6º30”N

6º00”N

OPL 915

OPL 201 OPL 901

OPL 914

OPL 907

OPL 917

kilometres 250

Nig

er

Mam

u

Aboine

An

amb

ra

Enugu

Eha-Amufu

Awka

Onitsha

Nsukka

Asaba

Aiddo 1

Ikem 1

Adaobi 1

Ubulu 1

Nemomai 1

Adofi River 2Nsukwa1

Igbariam 1

Ajire 1

Alo 1Nzam 1

Okpo 1

3

2Anambra River 1

Akukwa 1

Ogbabu 1

Ugueme 4

Ishkago 1

3

Mbala 1,2

Amansiodo 1

2

Iji 1

Ihandiagu 1

With significant gas potential to be developed to serve the surrounding areas of industrial growth and high demand and with gas discoveries in all three of our licences our objective is to develop these through compressed natural gas development to generate early cash flows.

Building the gas resource baseIn 2015, Seven Energy continued to build on our position in the region with further acquisition into a licence area with existing seismic and exploration wells drilled. This included acquiring a 100% shareholding in GTPL which holds a 50% licence interest in OPL 905. The Group now has a combined 90% licence interest in OPL 905.

We continued with exploration and appraisal studies on these assets. This included the commencement of the Environmental Impact Assessment on OPLs 905, 907 & 917. We have also been progressing with a technical review of the prospects in conjunction with our joint venture partners, and the Nigerian National Petroleum Corporation and the National Petroleum Investment Management Services, with whom we are also working closely in respect of the EIAs.

A growing market opportunityThrough these acquisitions of undeveloped gas resources, we are looking at medium to long term integrated development plans and innovative gas marketing solutions such as compressed natural gas to commercialise our assets in the region. Our aim is to harness Nigeria’s vast potential gas resources to provide vital energy to power the growth of this industrial heartland.

Asset overview

OPL 905 OPL 907 OPL 917

Licence interest 90%1 41%2 42%2

Operator GTPL AGER AGER

2C gross gas resources (Bcf) 337 183 337

2C gross resources (MMboe) 56 31 56

2C net resources (MMboe) 44 9 12

Type of hydrocarbon Gas Gas Gas

Status Undeveloped Undeveloped Undeveloped

1 Held by GTPL (50%) and E905 Suntera Ltd (40%).2 Held by AGER (Seven Energy holds a 22.5% shareholding in AGER).

Gas discovery Oil discovery Other Towns / Villages LicenceLegend


Strategic report


Delivering improved standards of living to Nigerians

Our CSR approach is founded on a commitment to conduct operations in a responsible way in respect of both our external environment and the safety of all stakeholders. By developing Nigeria’s gas resource, we support local and economic growth and conduct our operations across our host communities in a manner that promotes public safety and respect for all rights for all people.


Stakeholder relationsSeven Energy continued to make good progress across Stakeholder Relations initiatives during the year, having achieved a positive outcome to the majority of our targets and priorities.

We maintained our ‘social licence’ to operate throughout the year due to effective stakeholder engagement, with no downtime recorded due to community-related incidents during 2015.

We undertook an extensive stakeholder identification and mapping exercise across all Seven Energy’s footprint communities in Akwa Ibom and Cross River States, encompassing a total of 238 groups. Regular engagement and interface meetings were held with the identified stakeholders to update, discuss and manage concerns. These activities were conducted in compliance with our Stakeholder Engagement Process.

Within our Specialised Skills Development Programme, 18 young people were trained in excavator operations by a certified trainer. These individuals were identified within our Eastern Pipeline Project Impacted Communities in Odukpani Local Government Area of Cross River State. Phase 2 of the Programme is ongoing at the Maritime Academy in Oron where 20 young people have been selected to undergo an intensive course in welding and fabrication skills. Training, skills development and employment connect Seven Energy to the community and benefit all involved.

CSR highlights

Seven Energy’s pioneering Green Team InitiativeOur Green Team Initiative was launched in June 2015 in a bid to ensure that our gas pipelines and associated Rights of Way (“RoW”) are kept safe, accessible, clear and clean. It is currently running smoothly across 17 LGAs on the Uquo – Ikot Abasi and East Horizon Gas pipelines RoW. Through this initiative, over 200 youths across Akwa Ibom and Cross River States have been engaged. The benefits of this initiative are the assured safety of Seven Energy’s RoW, clearance of obstructions and wild vegetation, and regular engagement with our RoW communities.

A further benefit of the Green Team initiative is that we have been able to quickly identify and manage encroachments and any negative activities, including erosion, on the RoW. The communities, who provide much of the information and intelligence relating to encroachments and erosion points via the initiative, are our eyes and ears on the ground and ensure that our vision of developing and providing gas to light up Nigeria is sustainable.

95%of Seven Energy’s in-country employees are Nigerian

$17mspent on local vendor contracts in 2015

18young people trained in excavator operations from our Eastern Pipeline Project Impacted Communities

$145mspent on procurement of local products and services

75%of staff participated in a training/ development programme in 2015

31%of our workforce are women

100communities running with our Green Team Initiative

Key focus areas

Stakeholder relations

Nigerian content

People

Health and safety

Asset protection

Compliance

Environment


Strategic report

Nigerian contentSeven Energy sustained its conscious efforts towards the retention of benefits in our areas of operation at the federal, state, local government and community levels through our development activities in gas infrastructure across the south east of Nigeria.

We continued to implement our Nigerian Content Development Strategy in 2015 by building capacity in the local community through individual projects and education for permanent and contract staff. In a demanding and cost focused business environment, we continue to show dedication and investment in this area.

Developing local services and suppliers is a critical market differentiator for us and during 2015, Seven Energy’s vendor management and development strategy continued to yield positive results through the dedicated principle of ‘first consideration for Nigerian goods and services’ in all our procurement and contract undertakings.

PeopleTo support our vision to be Nigeria’s leading integrated gas supplier and to ensure sustainable value creation for our various stakeholders; we continue to develop our organisational capabilities and foster and retain the best talent.

42 vendors were hired under contracts covering operations vehicle leasing, manpower supplies, waste management and civil construction, at a total cost of $16.5 million in 2015. This investment has grown local businesses into measurable small and medium scale enterprises and created job opportunities at the community and local government levels. Seven Energy also offers a Vendor’s Development Programme where local vendors are encouraged to connect with and assist one another.

Seven Energy has also made a significant investment in local procurement of pipeline construction materials, safety wares, operations and maintenance materials and services such as environmental, security, vehicle supplies, financial, legal, insurance, telecommunication, travel and other related services which amounted to $145 million during 2015. Nigerian companies make up the largest portion of our vendor ratio at 92%. This underlines our commitment to building in-country manufacturing and local content growth.

In 2015 we have invested in training and development of staff, contractors and communities; and continue to make good progress across a variety of employee initiatives. Our people encompass a wide group with varying needs and requirements, from Nigerian and UK-based staff and contractors through to local host communities.

In 2015, Seven Energy employed an average of 198 full time staff, of which 162 were based in Nigeria (82%), with the remaining 36 based in the UK. As at December 2015, 95% of our Nigeria-based employees were of Nigerian nationality (2014: 94%). Women accounted for 31% of our total workforce (2014: 28%).

We employed numerous contractors on our various infrastructure projects. The number of contractors that Seven Energy utilises is project dependent and varies according to the number, type and activity level of the projects undertaken. As of 31 December 2015, the number of contractors Seven Energy utilised was 104 (2014: 175).

It is through our investment and various initiatives that we have achieved our strategic priorities. Our established employee forums continue to serve as a valuable communication and feedback channel for all staff and contractors.

Our Learning and Development Committee continued to plan training events and programmes that were targeted and delivered value to staff. Approximately 75% of our permanent staff across office and field locations participated in technical or soft skills training during the year.

Corporate social responsibility continued

Oron to Creek Town pipeline creates 512 jobsSeven Energy employed Evomec Global Services as the principal contractor on the Oron to Creek Town gas pipeline project. A total of 512 Nigerians were employed exclusively for this project of which 219 were indigenous to Cross Rivers State, 206 to Akwa Ibom State and 87 project personnel as core staff on the project. The impact on the local employment market from this one contract is significant.


Asset protectionSeven Energy’s successful operations depend on the safety and security of its assets including personnel, gas facilities and pipeline infrastructure and property.

The key to the safe facilitation of our business and associated activities in Nigeria is largely related to maintaining a safe and secure working environment for our employees, contractors, subcontractors, partners and stakeholders, including our footprint communities.

In 2015, we embarked on the biggest security challenge to date by mobilising substantial project resources to construct a 26 km gas pipeline between Oron and Creek Town near Calabar. This involved negotiating and securing multiple jungle and swamp locations, as well as several significant river crossings, and dealing with the added security challenges presented by conducting maritime operations in shipping lanes. Although the environment was challenging and not without incident over the project

construction phase, we successfully concluded 2015 having recorded no serious injuries to any of our project personnel on this project.

During 2015, we continued to patrol our expanding pipeline network (which will increase from a current figure of ca. 230 km to ca. 260 km during 2016) and in doing so continued to interact and engage with our host communities to develop our intelligence network. Numerous encroachment cases were identified by the pipeline patrol team in collaboration with our CSR team and communities and those issues were escalated to a resolution point.

Seven Energy has also successfully secured all Company personnel whilst conducting road journeys, utilising an average of 108 vehicles per day and covering thousands of miles daily. All facilities, offices and equipment were appropriately secured in 2015, recording no serious security incidents.

This recognition underscores how we have conducted our operations across our host communities in a manner that promotes public safety and respect for the rights of the people and shows our commitment to local and national economic growth.


Seven Energy awarded membership Voluntary Principles on Security and Human RightsSince 2011, we have been active champions of a human rights based initiative so named, the Voluntary Principles on Security and Human Rights (“VP’s”). The VP’s initiative is a multi-stakeholder initiative involving governments, companies, and non-governmental organisations that promote the implementation of a set of principles that guide oil, gas and mining companies on providing security for their operations in a manner that respects human rights. In December 2015, Seven Energy became the first Nigerian indigenous company to be awarded membership of the VP’s.


Strategic report

Corporate social responsibility continued

Health and SafetyWe place a high priority on the health, safety and security of our workforce and the local communities impacted by our operations.

We continue to implement best practice in our daily activities in compliance with the highest standards and our track record has been second to none. However, it is with sincere regret that we reported a fatality of a community member in a road traffic accident in 2015 involving one of our contractors. We are providing support to the family and have introduced additional safe-driving procedures, training and testing to prevent similar tragic accidents.

Our previously developed and deployed QHSSE Management System has been embedded in all aspects of our business and is working well in the management of our contractor relationships, an area identified as potentially the most likely cause of HSE incidents.

Through the Management Facility Inspection programme, our senior management team has further strengthened commitment to managing occupational health and safety across all Group activities whilst also ensuring that our facilities are fully operational. This programme has further served to deepen the penetration of HSE in to the everyday behaviours of our field personnel, contractors and vendors.

To support management in providing a professional and competent work force across the business, the Quality, Health, Safety, Security and Environment including Corporate Social Responsibility departments initiated the ‘Ambassador’ programme to train staff across all departments in the organisation in HSE. The Ambassador trainees have since assumed, in addition to their primary responsibilities, the role of QHSSE/CSR Ambassadors within their various departments and sections. This programme was developed in line with senior management’s resolve to embed QHSSE/CSR as line management’s responsibility and to take ownership of its QHSSE/CSR performance.

Seven Energy’s Hydrocarbons under pressure Safety Awareness programmeAt Seven Energy we are committed to the safety of both the environment and people. To ensure this was achieved and sustained in 2015, Hydrocarbon and Safety Awareness programmes were carried out across all our footprint communities cutting across the Uquo – Ikot Abasi and East Horizon gas pipelines in both Akwa Ibom and Cross River States. The programmes used various mediums such as town hall meetings and local/state radio programmes to educate and sensitise the public on dangers inherent in vandalism, encroachment, dredging activities and bush burning close to the pipeline RoW. We also engaged the Village Heads and Town Criers more regularly to remind and reiterate our safety messages to the communities and general public. Seven Energy also proactively engaged with and involved government regulators from the States and Federal Ministries on the initiative.


Environment

Seven Energy’s integrated approach to its operating environment in 2015 has enabled a clear identification of the environmental impacts, risks, and opportunities associated with its operational activities.

Given our operational footprint in south east Nigeria, the Group considers the continuing maintenance of its ‘Environmental Licence to Operate’ as key to the business. A number of objectives were set in 2015 to accomplish this goal.

Results of this have been the successful execution of Seven Energy’s project and facility Environmental Impact Assessments for submission to and acceptance by the World Bank, IFC, MIGA and the local Nigerian authorities.

This approach was also used to complete the Oron to Creek Town pipeline project livelihood restoration plan, in line with IFC performance standards, for acceptance by all investors and interested parties. Also, within the Global Reporting Initiative, Seven Energy has streamlined environmental performance data, information and metrics to better monitor our environmental footprint.

Compliance is central to our CSR activities and the Seven Energy Reporting Model was successfully deployed Group- wide during 2015.

Dr. Glenn BestallVice President, QHSSE/CSR

ComplianceWe are aware that operating as an indigenous company in Nigeria brings risks associated with regulatory penalties, fraud, bribery and corruption. We continued to review our risks in 2015 to ensure effective management and mitigation.

In 2015, we embedded the IFC Performance Standards within the various Group management systems and they guided the implementation of the Oron to Creek Town pipeline project. The result has been the avoidance and minimisation of environmental issues, physical re-settlement, cost escalations and project disruptions, whilst maximising the involvement of both internal and external project stakeholders resulting in a renewed social, environmental and statutory licence to operate.

2015 saw a focused effort on streamlining Seven Energy’s sustainability and HSE performance data, information and metrics to the Group’s investors, stakeholders and the public. A Seven Energy reporting model was developed in line with the requirements of the Global Reporting Initiative and this model was successfully deployed Group-wide during 2015.

As a compliant and transparent organisation, the management of our statutory licence to operate is a core element in the development of our business. A high priority of Seven Energy’s Regulatory Affairs unit, within the QHSSE/CSR Group, has been to constantly review and update the Group’s permit and consent register during 2015 to ensure that all facilities and projects are compliant with the relevant national and international statutes. This objective was successfully achieved and supports our strategy of achieving operational excellence.


Strategic report

RevenueIn 2015, revenue decreased by 6% to $354 million (2014: $378 million). The reduction was principally due to the lower realised oil price on oil sales from OMLs 4, 38 & 41. This was offset by greater gas revenues as a result of increased gas deliveries to five customers. Oil revenues were $261 million (2014: $344 million); the benefit from the increase in the number of lifted barrels to 5.4 MMbbl (2014: 3.7 MMbbl) was offset by a reduction in average realised prices for the year to $48 per bbl (2014: $94 per bbl). The contribution from gas revenues increased to $92 million (2014: $34 million) at an average delivery rate of 70 MMcfpd (2014: 23 MMcfpd).

Cost of sales and depletionTotal cost of sales, comprising production expenses and change in underlift, increased from $41 million to $252 million.

Production expenses decreased by $42 million to $190 million (2014: $232 million). The decrease principally related to the OMLs which fell by $58 million. Underlying OML production expenses increased year on year reflecting greater production volumes; the net costs were impacted by cost revisions associated with expenditures incurred in 2014 and other prior years. As described in the “Production Entitlement” section, note 4, to the Financial Statements, costs incurred are initially estimated by the operator throughout the year and are then agreed in the following years by the joint venture partners. As a result, production costs estimated and recorded in 2014 and prior years were subsequently agreed during 2015 to be lower and this adjustment is recorded in the current year’s production expenses resulting in a net reduction year on year.

Production expenses associated with the south east Niger Delta region increased to $43 million (2014: $27 million) reflecting increased gas deliveries and the commencement of oil sales from the Uquo and Stubb Creek fields.

The change in underlift was a decrease of $62 million (2014: $191 million increase) which principally related to the Strategic Alliance Agreement. The underlying production entitlement for 2015 was lower than 2014 due to a decrease in drilling and facility related capital expenditures at the OMLs. In addition to the finalisation of the OMLs’ 2014 production expenses as described above, the cost finalisation also resulted in lower agreed capital expenditures which reduced production entitlement, and is also reflected in the current year’s results. The total impact on the underlift associated with prior year cost revisions amounted to approximately $127 million.

Further details for determining the Group’s production entitlement under the Strategic Alliance Agreement can be found in note 4 to the Financial Statements.

Depletion decreased by $8 million to $114 million (2014: $122 million), reflecting lower production entitlement generated from the OMLs offset by a greater charge relating to gas and oil production at the Uquo and Stubb Creek fields together with depletion of the Group’s infrastructure assets including the Uquo gas processing facility, the gas receiving facility at Ikot Abasi, the FUN oil gathering manifold and our network of gas pipelines.

Gross lossAs a result of a reduction in oil production entitlement from the OMLs, the Group recorded a gross loss of $13 million (2014: $215 million profit).

EBITDA and EBITDAXEBITDA decreased by $301 million from $273 million profit in 2014 to a $28 million loss in 2015. EBITDAX was $62 million (2014: $273 million). This is summarised in the table above.

2015$m

2014 $m

Operating (loss)/ profit Add back:

(145) 148

– Depletion 114 122

– Depreciation and amortisation 3 3

EBITDA (28) 273

Add back:

– Impairment charge 90 –

EBITDAX 62 273

The EBITDAX can be further analysed by business unit as below.

2015$m

2014 $m

South east Niger Delta 45 (28)

North west Niger Delta 36 328

Other (19) (27)

EBITDAX 62 273

The reduction in EBITDA in 2015 was due to: an impairment charge taken on the OMLs; a decrease in oil revenues due to lower realised oil prices; and a reduction in production entitlement as a result of a decrease in underlying capital expenditure activities, together with cost finalisation adjustments relating to the OMLs. This reduction was offset by increased gas and oil revenues from the south east Niger Delta operations, and reduced administrative expenses from $59 million in 2014 to $35 million in 2015. The reduction in administrative expenses was largely due to the Group’s cost saving initiatives implemented during the year and a reduction in costs associated with business development opportunities.

Financial review

Our resultsIn a difficult year for the oil and gas industry, we have demonstrated the strength of our gas business together with achieving our 2015 Funding Plan.


Capital expenditureSeven Energy continued to make investments in both exploration and development of its upstream and midstream assets, and also in company acquisitions, albeit at lower levels than in 2014. Total capital investment amounted to $238 million in 2015 (2014: $912 million). Set out below is a summary of this capital investment by principal assets:

2015$m

2014 $m

North west Niger Delta (OMLs) 125 408

South east Niger Delta 72 166

Other 2 4

Total capital additions 199 578

Gas Transmission and Power Limited acquisition

39 –

East Horizon Gas Company acquisition

– 270

Suntera (OPL 905) acquisition – 64

Total capital investment 238 912

Finance costsDuring the year, the Group increased its borrowings by entering into two Senior Secured Term Loans amounting to approximately $52 million, secured a $30 million Naira denominated Working Capital Facility and refinanced its infrastructure related Project Finance and Acquisition Finance facilities into a combined $445 million term loan facility – Accugas IV Facility, $385 million of which has been drawn. As a result of its new and enlarged debt facilities and a reduction in capitalised finance costs relating to capital expenditures, net finance costs increased by $27 million to $103 million (2014: $76 million).

TaxIn 2015, the Group recorded a net tax credit of $59 million (2014: $26 million charge) on losses arising from the SAA, the Stubb Creek field and our midstream infrastructure.

Loss for the yearThe Group recorded a loss after tax for the year ended 31 December 2015 of $182 million (2014: $55 million profit).

In particular, there was a significant reduction in underlying capital expenditures for the OMLs under the Strategic Alliance Agreement which amounted to $125 million (2014: $408 million). Underlying capital expenditures decreased principally due to a reduction in both drilling and facility infrastructure related activity. Seven Energy continued its investment programme in the south east Niger Delta, with additions to both its upstream and infrastructure assets, albeit at lower levels as capital expenditure programmes completed.

In addition, drilling was completed at the Uquo North–East 1 prospect in February 2015 which resulted in recording additional oil and gas reserves. Work commenced to complete the pipeline connection to the Calabar NIPP power station via a 26 km long gas pipeline from Oron to Creek Town, which will complete the gas pipeline from the Uquo gas processing facility to the Calabar NIPP power station and its completion is scheduled to coincide with the Calabar NIPP power station being fully operational and evacuating electricity into the grid at full capacity, which is expected to be by mid-2016. The acquisition of the Gas Transmission and Power Limited amounted to a capital investment of $39 million.

AcquisitionsOn 27 February 2015, the Company completed the acquisition of the entire issued share capital of Gas Transmission and Power Limited, a Nigerian oil and gas exploration and production company for a consideration of $26 million. It has a 50% licence interest in and operatorship of OPL 905 and is located in the Anambra Basin. Along with E905 Suntera Limted (acquired during 2014), the Group now has a 90% licence interest in OPL905. Further details of this acquisition are set out in note 34 to the Financial Statements.

Financial results summary 2015 2014 Change

Oil sales (bopd) 14,700 10,000 47%

Gas sales (MMcfpd) 70 23 204%

Realised oil price ($/bbl) 48 94 (48)%

Sales revenue ($m) 354 378 (6)%

Cost of sales ($m)

– Production expenses ($m) (190) (232) 18%

– Change in underlift ($m) (62) 191 n/m

Depletion ($m) (114) (122) 6%

Gross (loss)/profit ($m) (13) 215 n/m

Impairment charge ($m) (90) – n/m

Administration expenses (35) (59) 41%

Operating (loss)/profit ($m) (145) 148 n/m

Finance costs ($m) (103) (76) (36)%

(Loss)/profit before tax ($m) (241) 80 n/m

(Loss)/profit after tax ($m) (182) 55 n/m

Operating cash generated from operations ($m) 215 141 52%

Total capital investment ($m) 238 912 n/m

Gross borrowings ($m) 899 809 11%

The Group recognised an impairment charge of $90 million (2014: nil) on the OMLs principally due to the recent collapse in oil prices and the ongoing expectation of a lower forecast oil price environment. Adding back the impairment charge to EBITDA results in an EBITDAX of $62 million (2014: $273 million). More details of the impairment charge are set out in note 16 to the Financial Statements. Of note is the improvement in EBITDAX for the south east Niger Delta business from a loss of $28 million to a profit of $45 million.

n/m – not meaningful


Strategic report

Cash flows and cashAt 31 December 2015, the Group had cash balances of $30 million (2014: $38 million). The cash flow movements in 2014 and 2015 are summarised below:

2015$m

2014 $m

Operating cash generated from operations (before movements in working capital) 57 261

Movements in working capital 158 (120)

Net cash provided in operating activities 215 141

Net cash invested in capital projects (199) (328)

Acquisition of subsidiaries (1) (151)

Net cash inflow from debt financing 94 174

Cash inflow from equity financing – 255

Net cash outflow from financing costs (117) (102)

Net cash outflow (7) (11)

Effect of foreign exchange rate changes (1) (1)

Cash balance at start of year 38 50

Cash balance at end of year 30 38

Although there was a reduction in operating cash generated from operations (before movements in working capital) which principally reflected a decline in production entitlement and oil revenues at the OMLs, adjusting for movements in working capital, net cash provided from operating activities increased from $141 million to $215 million. This was principally due to an increase in the gas and oil revenues from the south east Niger Delta operations and better working capital management of the OMLs. Overall, the OMLs generated a net cash inflow of $82 million (2014: $11 million outflow) which comprised oil revenues received less cash calls paid for production and capital expenditures.

Net cash inflow from debt financing of $94 million (2014: $174 million) reflected increased borrowings mainly from the two Senior Secured Term Loans amounting to $52 million and the $30 million Naira denominated working capital facility. Net cash outflow from financing costs increased to $117 million (2014: $102 million) which reflected an increase in interest expense from greater borrowing levels, together with fees incurred on refinancing the infrastructure related Project Finance and Acquisition Finance facilities into the Accugas IV Facility.

Debt financing structure The Group has continued to augment its borrowings through new and enlarged debt facilities. A summary of the Group’s debt facilities at 31 December 2015 is set out below:

Summary of current debt facilities Purpose

Balance at 31 December 2015

$mMaturity

date

Accugas IV Funding of midstream infrastructure processing and pipeline assets

385 September 2019

Senior Secured Loan Notes General funding 300 October 2021

Private Bond General funding 100 October 2021

Senior Secured Term Loan Facility I General funding 27 December 2019

Senior Secured Term Loan Facility II General funding 25 June 2020

Naira working capital facility General funding 30 Annually, for four years

Bank of Industry Loan Funding of East Horizon pipeline 18 June 2017

UERL term loan Funding for Stubb Creek Field Development 8 December 2018

Promissory Note Acquisition of interests in OPL 907 & 917 6 June 2016

Total gross borrowings 899

As reported in note 22 to the Financial Statements and in the section below, “Going concern basis”, some of the Group’s debt facilities are not in compliance with certain financial covenants and obligations of their loan agreements. Absent formal waivers at 31 December 2015 these amounts have been disclosed within Current borrowings – scheduled repayments after more than one year in the balance sheet.

Financial review continued


As reported in note 23 to the Financial Statements, a number of the Group’s debt facilities were not in full compliance with their loan agreement obligations:

• Accugas IV Facility – as at 31 December 2015 and 31 March 2016, Accugas Limited had not fully funded the minimum balance on the Debt Service Reserve Account. A waiver request was sought prior to the year end but subsequently received with conditional approval on 4 April 2016. Therefore, the full balance of the outstanding loan was disclosed within Current borrowings – scheduled repayments after more than one year. There is no expectation that the lenders intend to demand immediate repayment of the amounts due.

• Bank of Industry Loan Facility – at the time of EHGC’s acquisition in 2014, this facility was not, and continues not to be, in compliance with certain financial covenants of the loan agreement. Whilst an informal waiver of this non-compliance was received at the time of acquisition, in the absence of a formal waiver at 31 December 2015 this facility has been disclosed within Current borrowings – scheduled repayments after more than one year. Although no formal waiver has been received to date, EHGC continues to meet its interest and principal loan obligations and therefore there is no expectation that the lenders intend to demand immediate repayment of the amounts due.

Going concern basisThe financial position of the Group, its cash flows and liquidity position are described above. In addition, note 23 to the Financial Statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposures to credit risk and liquidity risk.

The Group continues to fund its current and future development projects and operations using a combination of operating cash flows, debt facilities and, from time to time, new equity issues.

The Group is required to comply with various ongoing financial and non-financial covenants typical of facilities of this nature, details of which are provided in the previous section, “Debt financing structure” and note 23 to the Financial Statements. The Group’s ongoing funding requirements are sensitive to significant changes in the timing of cash calls from joint venture partners, the frequency of its liftings from oil and gas sales contracts together with the level of funding available under debt facilities. The objectives of the Group’s 2015 Funding Plan were to refinance the Project Finance and Acquisition Finance facilities and raise up to $125 million of debt or equity funding. The Group has been successful in achieving its Funding Plan by securing three new debt facilities amounting to $82 million, as described previously, and also issuing $100 million of new equity in February 2016.

• UERL term loan – the loan agreement assumed that oil production would commence during 2013 and that the proceeds from oil revenues would be used to service Universal Energy’s debt obligations. Therefore, principal repayments were scheduled to commence from September 2013 in semi-annual instalments, together with interest payments from commencement from first oil production at 15.0% per annum. Due to the delays in the commencement of oil production, as at 31 December 2015, Universal Energy had failed to make any of the payments due and, therefore, was not in compliance with the loan agreement. As a consequence, the loan has been disclosed within Current borrowings – scheduled repayments after more than one year. Universal Energy’s management are in discussion with the lender to reschedule the repayment and interest schedule.

Absent unconditional approval from the Accugas IV lenders waiving the DSRA breach, or sufficient funding of the DSRA account, the Directors acknowledge that a technical breach exists. This could result in immediate repayment of the Accugas IV Facility, which casts significant doubt on the Group’s and Company’s ability to continue as a going concern. Nevertheless, after making enquiries and considering the status of discussions with the relevant lenders, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the Financial Statements.

The table below has been presented to show the Group’s gross borrowings by contractual maturity profile as at 31 December 2015:

2015$m

2014$m

Within current borrowings

Scheduled within one year 72 94

Scheduled after one year but within two years 89 15

Scheduled after two years but within five years 289 4

450 113

Within non-current borrowings

Scheduled after one year but within two years 3 57

Scheduled after two years but within five years 46 239

Scheduled after five years 400 400

449 696

Gross borrowings 899 809


Strategic report

Audit Committee HR & Remuneration Committee

Executive Committee

Board of Directors

Senior Management

Environment & Community Committee

Overview

Corporate governance

We remain committed to high standards of corporate governance, whilst recognising that it should always be fit for purpose. We now have nine shareholder representatives on the Board, recognising the significance of their long term and ongoing financial and strategic support of the Company. In order to simplify the governance of the Company and given the diversified nature of our shareholder base the number of independent non-executive directors has been reduced to one.

Board attendance The following table shows the attendance of Directors at Board meetings during 2015. Attendance is expressed as the number of scheduled meetings attended out of the number eligible to be attended.

Name Number of meetings attended

Dr Andrew Jamieson – independent non-executive Director 1 5/5

Phillip Ihenacho 5/5

Ashley Dunster 3/5

Osam Iyahen 4/5

Atul Gupta 5/5

Cyril Odu 5/5

Dale Rollins 2 5/5

Peter Gutman (as alternate to Dr Yemi Osindero)2 5/5

Lubomir Varbanov3 4/5

Michael Lynch-Bell – independent non-executive Director 4/5

Clare Spottiswoode – independent non-executive Director 1 4/5

Fidelis Oditah – independent non-executive Director 1 5/5

Joshua Udofia – independent non-executive Director 1/2

1 Andrew, Clare and Fidelis are to resign with effect from the date of the AGM on 27 April 2016 (see Chairman’s Statement)2 Yemi resigned and Peter was appointed as a Non-executive Director on 22 March 2016, Dale resigned and Matthew Harwood was appointed as a Non-executive Director on 26 January 20163 Lubomir was appointed as a Non-executive Director on 18 March 2015, Stephen Vineburg was appointed as a Non-executive Director on 22 March 2016

Corporate governance framework The Group has established an effective corporate governance framework with defined roles and responsibilities that add value to the business, help build its reputation and ensure its long-term continuity.

Board and Senior Management structure


The Committees of the Board have been established with formally delegated duties and responsibilities and formal terms of reference. These terms of reference have been adopted by the Board and are reviewed on a regular basis. Membership of each Committee and attendance during 2015 are set out below. Attendance is expressed as the number of meetings scheduled.

Audit CommitteeThe Audit Committee is responsible for selecting the Group’s independent auditors, pre-approving all audit services and work plans, reviewing with management and with the auditors the financial statements and key audit issues, significant accounting policies and practices and the adequacy of internal control systems.

During 2015, the Audit Committee comprises only Non-Executive Directors and is chaired by the Independent Non-Executive Director Michael Lynch-Bell.

Name

Meetings attended

Michael Lynch-Bell (Chair) 4/4

Osam Iyahen 3/4

Cyril Odu 4/4

Dale Rollins* 4/4

Lubomir Varbanov* 4/4

Peter Gutman (as alternate for Dr Yemi Osindero)

4/4

Ashley Dunster* 2/4

* Ashley Dunster stepped down from the Audit Committee on 17 March 2015

* Lubomir Varbanov joined the Audit Committee on 26 May 2015

*Dale Rollins resigned on 26 January 2016*Dr Yemi Osindero resigned on 22 March 2016

HR & Remuneration CommitteeThe HR & Remuneration Committee is responsible for determining the terms and conditions of service of the executive management team including performance related pay and share-based payments and for setting the Group remuneration strategy.

During 2015, the HR & Remuneration Committee comprises only Non-Executive Directors and was chaired by the Independent Non-Executive Director Clare Spottiswoode.

Name

Meetings attended

Clare Spottiswoode CBE (Chair) 4/4

Cyril Odu 4/4

Dale Rollins* 4/4


Peter Gutman (as alternate to Dr Yemi Osindero)

4/4

Ashley Dunster* 3/4

* Ashley Dunster stepped down from the HR and Remuneration Committee on 18 March 2015

* Lubomir Varbanov joined the HR & Remuneration Committee on 18 March 2015

*Dale Rollins resigned on 26 January 2016*Dr Yemi Osindero resigned on 22 March 2016

Environment & Community CommitteeThe Environment and Community Committee is responsible for reviewing the Group’s policies, procedures and performance in relation to Quality, Health, Safety, Security and the Environment and in relation to Corporate Social Responsibility and Community Development and Relations with the host communities affected by the Group’s operations.

During 2015, the Environment and Community Committee comprised Non-Executive Directors, Management and Shareholder representatives and is chaired by Non-Executive Director Cyril Odu. The Environment and Community Committee re-constituted in September 2015 and had only one meeting.

Name

Meetings attended

Cyril Odu (Chair) 1/1


Michael Lynch-Bell 0/1

Adrian Smith (as an alternate for Dr Yemi Osindero)

1/1

Alfie Twum-Ampofo (an alternate for Dale Rollins)

1/1

Dr Glenn Bestall (Management) 1/1

* Ashley Dunster stepped down from the HR and Remuneration Committee on 8 September 2015

* Lubomir Varbanov joined the Environment & Community Committee on 8 September 2015

*Dr Yemi Osindero resigned on 22 March 2016

During the year, the Board established an additional committee, the Strategy & Corporate Development Committee, responsible for overseeing the Company’s long term strategic and financial planning. This committee, which comprised Phillip Ihenacho, Atul Gupta, Dale Rollins, Lubomir Varbanov, Cyril Odu and Peter Gutman, met four times during the year.


Corp

orate governance

Our Board compositionSeven Energy has a high quality Board with a strong combination of international oil and gas and financial knowledge and experience.

Board of Directors

Matthew Harwood Non-executive Director (designate Chairman)







Stephen Vineburg Non-executive Director


Michael Lynch-Bell Independent Non-executive Director

Year appointed 2016

Year appointed 2006

Year appointed 2010

Year appointed 2012

Year appointed 2012

Year appointed 2014

Year appointed 2015

Year appointed 2016

Year appointed 2016

Year appointed 2013

Other appointments None

Other appointments Non-executive director of Azura Power Holdings



Other appointments Non-executive director at Nostrum Oil and Gas plc, Vetra Energy Limited and Essar Capital

Other appointments Non-executive director of Union Bank of Nigeria, Income Electrix, Ventures Gardens Group




Other appointments Independent non-executive director and audit committee chair at Kaz Minerals PLC and Lenta Limited, board member and trustee of Action Aid International, independent director, audit committee chair and compensation committee chair at Transocean Partners LLC and independent director and audit committee chair at Gem Diamonds Ltd

Experience Matthew is currently Group Head of Strategy at Petrofac plc. Matthew started his business career at Royal Dutch Shell as a reservoir engineer, latterly moving into new business development before joining Booz Allen Hamilton as a management consultant advising a variety of clients across the energy sector. Matthew has also worked for Scottish Power where he held roles with responsibility for strategy development, business planning and mergers and acquisitions. Matthew is a Chartered Engineer and holds a BA (Hons) in Chemistry from Oxford University and a PhD from Cambridge University.

Experience Phillip is a co-founder of Amaya Capital Partners, an Africa-focused principal investing firm. He previously established and ran Afrinvest for over 10 years, overseeing the sale of the company in 2007 to United Bank for Africa. Phillip holds a BA in History from Yale University and a JD in Law from Harvard Law School.

Experience Ashley is a managing partner at Capital International Private Equity with primary responsibility for Emerging Europe, the Middle East and Africa. Prior to this, he was a principal banker in the Early Stage Equity Team at the European Bank for Reconstruction and Development. Ashley holds a BE in Civil Engineering from the University of Melbourne and a Masters in Mathematics from Oxford University.

Experience Osam is a Director, Natural Resources at Africa Finance Corporation. He has a wealth of international energy finance experience, including involvement in multibillion-dollar development projects with ExxonMobil, Shell and Chevron, as well as strategy consulting expertise for the oil and gas sector. Osam holds a BA in Political Science from Middlebury College in Vermont, and an MBA in Strategy and General Management from Cornell University (Johnson School of Management).

Experience Atul has over 30 years of experience in the international upstream oil and gas business successively with Charterhouse Petroleum, Petrofina, Monument and as CEO of Burren Energy plc. Atul holds a Bachelor’s degree in Chemical Engineering from Cambridge University and a Master’s degree in Petroleum Engineering from Heriot-Watt University.

Experience Cyril has over 40 years of oil and gas experience working for ExxonMobil in Nigeria prior to his retirement in February 2012. He was Vice-Chairman of the Board of Mobil Producing Nigeria and Chief Financial Officer of the ExxonMobil Upstream Companies in Nigeria. He is currently a partner at Africa Capital Alliance and heads the energy practice division. Cyril has a BSc(Hons) in Geology from the University of Ibadan and an MBA from Texas Southern University.

Experience Lubomir is Global Head of Equity, Infrastructure and Natural Resources Group at International Finance Corporation (IFC), responsible for equity and mezzanine investments worldwide. Prior to working at the IFC, which he joined in 2002, he worked at oil and gas multinational BG Group plc for seven years, culminating in being Head of Corporate Finance based in London. Lubomir holds a BA Hons in European Business Administration from the European Business School, a MSc in Finance from the London Business School and an Executive Certificate in Private Equity and Venture Capital from Harvard Business School.

Experience Stephen is currently Chief Executive Officer of ASMA Capital Partners, the manager of the IDB Infrastructure Fund II. The Fund is sponsored by the IDB, and other leading institutional and sovereign investors from Saudi Arabia, Bahrain and Brunei. Stephen was Partner and CEO of Infrastructure for CVC Capital Partners, and prior to that he was Global Head of Infrastructure Investment for First State Investments. He has extensive experience in managing investments including those in power stations, water companies, airports and gas pipelines.

Experience Peter is a senior adviser to the Principal Finance Group at Standard Chartered Bank. For the last six years he worked at Standard Chartered, most recently leading their Energy, Resources & Infrastructure investing business. Peter has over 25 years of experience across investment banking, private equity and operations. He has an engineering degree from The University of Michigan, an MBA from the University of Chicago and an MSc from the London School of Economics.

Experience Michael has a wealth of experience in the energy and resources sectors having spent 38 years at Ernst & Young specialising in the provision of services to a wide variety of mining and metals and oil and gas clients. Michael holds a BA in Economics and Accounting from the University of Sheffield, and is a Fellow of the Institute of Chartered Accountants of England and Wales and a member of the UK Energy Institute. He also holds an Honorary Doctorate of Humane Letters from the Schiller International University.

Committee membership Audit and HR & Remuneration Committees

Committee membership n/a


Committee membership Audit Committee


Committee membership Audit, HR & Remuneration and Environment & Community (Chair) Committees

Committee membership Audit, HR & Remuneration and Environment & Community Committees



Committee membership Audit (Chair) and Environment & Community Committees

The Board composition reflects changes already referred to in the Chairman’s Statement (Andrew Jamison, Clare Spottiswoode and Fidelis Oditah resignations) which will come into effect from 27 April 2016, the date of the AGM.


Oil and gas industry 6

Board experience

Financial 1Capital markets 3

Chairman (and shareholder’s representative) 1

Board composition

Executive Director (and shareholder’s representative) 1Independent Non-executive Directors 1Other shareholders’ representatives 7

Matthew Harwood Non-executive Director (designate Chairman)







Stephen Vineburg Non-executive Director


Michael Lynch-Bell Independent Non-executive Director

Year appointed 2016

Year appointed 2006

Year appointed 2010

Year appointed 2012

Year appointed 2012

Year appointed 2014

Year appointed 2015

Year appointed 2016

Year appointed 2016

Year appointed 2013


Other appointments Non-executive director of Azura Power Holdings



Other appointments Non-executive director at Nostrum Oil and Gas plc, Vetra Energy Limited and Essar Capital

Other appointments Non-executive director of Union Bank of Nigeria, Income Electrix, Ventures Gardens Group




Other appointments Independent non-executive director and audit committee chair at Kaz Minerals PLC and Lenta Limited, board member and trustee of Action Aid International, independent director, audit committee chair and compensation committee chair at Transocean Partners LLC and independent director and audit committee chair at Gem Diamonds Ltd

Experience Matthew is currently Group Head of Strategy at Petrofac plc. Matthew started his business career at Royal Dutch Shell as a reservoir engineer, latterly moving into new business development before joining Booz Allen Hamilton as a management consultant advising a variety of clients across the energy sector. Matthew has also worked for Scottish Power where he held roles with responsibility for strategy development, business planning and mergers and acquisitions. Matthew is a Chartered Engineer and holds a BA (Hons) in Chemistry from Oxford University and a PhD from Cambridge University.

Experience Phillip is a co-founder of Amaya Capital Partners, an Africa-focused principal investing firm. He previously established and ran Afrinvest for over 10 years, overseeing the sale of the company in 2007 to United Bank for Africa. Phillip holds a BA in History from Yale University and a JD in Law from Harvard Law School.

Experience Ashley is a managing partner at Capital International Private Equity with primary responsibility for Emerging Europe, the Middle East and Africa. Prior to this, he was a principal banker in the Early Stage Equity Team at the European Bank for Reconstruction and Development. Ashley holds a BE in Civil Engineering from the University of Melbourne and a Masters in Mathematics from Oxford University.

Experience Osam is a Director, Natural Resources at Africa Finance Corporation. He has a wealth of international energy finance experience, including involvement in multibillion-dollar development projects with ExxonMobil, Shell and Chevron, as well as strategy consulting expertise for the oil and gas sector. Osam holds a BA in Political Science from Middlebury College in Vermont, and an MBA in Strategy and General Management from Cornell University (Johnson School of Management).

Experience Atul has over 30 years of experience in the international upstream oil and gas business successively with Charterhouse Petroleum, Petrofina, Monument and as CEO of Burren Energy plc. Atul holds a Bachelor’s degree in Chemical Engineering from Cambridge University and a Master’s degree in Petroleum Engineering from Heriot-Watt University.

Experience Cyril has over 40 years of oil and gas experience working for ExxonMobil in Nigeria prior to his retirement in February 2012. He was Vice-Chairman of the Board of Mobil Producing Nigeria and Chief Financial Officer of the ExxonMobil Upstream Companies in Nigeria. He is currently a partner at Africa Capital Alliance and heads the energy practice division. Cyril has a BSc(Hons) in Geology from the University of Ibadan and an MBA from Texas Southern University.

Experience Lubomir is Global Head of Equity, Infrastructure and Natural Resources Group at International Finance Corporation (IFC), responsible for equity and mezzanine investments worldwide. Prior to working at the IFC, which he joined in 2002, he worked at oil and gas multinational BG Group plc for seven years, culminating in being Head of Corporate Finance based in London. Lubomir holds a BA Hons in European Business Administration from the European Business School, a MSc in Finance from the London Business School and an Executive Certificate in Private Equity and Venture Capital from Harvard Business School.

Experience Stephen is currently Chief Executive Officer of ASMA Capital Partners, the manager of the IDB Infrastructure Fund II. The Fund is sponsored by the IDB, and other leading institutional and sovereign investors from Saudi Arabia, Bahrain and Brunei. Stephen was Partner and CEO of Infrastructure for CVC Capital Partners, and prior to that he was Global Head of Infrastructure Investment for First State Investments. He has extensive experience in managing investments including those in power stations, water companies, airports and gas pipelines.

Experience Peter is a senior adviser to the Principal Finance Group at Standard Chartered Bank. For the last six years he worked at Standard Chartered, most recently leading their Energy, Resources & Infrastructure investing business. Peter has over 25 years of experience across investment banking, private equity and operations. He has an engineering degree from The University of Michigan, an MBA from the University of Chicago and an MSc from the London School of Economics.

Experience Michael has a wealth of experience in the energy and resources sectors having spent 38 years at Ernst & Young specialising in the provision of services to a wide variety of mining and metals and oil and gas clients. Michael holds a BA in Economics and Accounting from the University of Sheffield, and is a Fellow of the Institute of Chartered Accountants of England and Wales and a member of the UK Energy Institute. He also holds an Honorary Doctorate of Humane Letters from the Schiller International University.




Committee membership Audit Committee


Committee membership Audit, HR & Remuneration and Environment & Community (Chair) Committees

Committee membership Audit, HR & Remuneration and Environment & Community Committees



Committee membership Audit (Chair) and Environment & Community Committees


Corp

orate governance

Experienced Management teamSeven Energy has a highly experienced Management team with in-depth knowledge of Nigeria and the domestic oil and gas market, coupled with international operating, commercial, corporate finance and sustainability expertise.

Senior management

During 2015, Seven Energy’s day-to-day business was managed and supervised through a function-focused Executive Committee structure of four committees, each of which met monthly as a decision-making forum and to review performance. This approach takes full advantage of the Senior Management’s depth and breadth of experience.

Senior executivesPhillip IhenachoChief Executive OfficerPhillip is a co-founder of Amaya Capital Partners, an Africa-focused principal investing firm. He previously established and ran Afrinvest for over 10 years, overseeing the sale of the company in 2007 to United Bank for Africa. Phillip holds a BA in History from Yale University and a JD in Law from Harvard Law School.

Campbell AirlieChief Technical OfficerCampbell has over 30 years’ experience in reservoir and production engineering and asset management with Schlumberger, BP, Edinburgh Petroleum Services (EPS) and Weatherford International. He has held positions as reservoir engineering team leader for BP’s mature assets, development manager and technical director. He has consulted in over 40 countries and has served as an SPE distinguished Lecturer in Asset Management. Campbell has degrees in Physics and Petroleum Engineering and is a Fellow of the Royal Institution of Great Britain.

Bruce BurrowsChief Financial OfficerBruce served as the finance director of JKX Oil & Gas PLC, the London Stock Exchange listed exploration and production company with interests in Ukraine and central and eastern Europe for 14 years. Prior to this, he held various positions at Ernst & Young in the Wellington (New Zealand) and London offices. He holds a BSc Honours degree from Canterbury University (New Zealand), a Diploma in Accounting from Victoria University (New Zealand) and is a member of the Institute of Chartered Accountants of New Zealand.

Jeff CoreyChief Operating OfficerJeff Corey has over 30 years’ of oil and gas experience spanning five continents. Prior roles include Executive Vice President of Operations for Waha Oil Company in Libya, Australia-Pacific LNG Joint Venture Manager in Australia, Development Manager for ConocoPhillips in New Mexico, USA and Operations Manager for ConocoPhillips in Venezuela. He holds a B.S. Honors in Petroleum Engineering from New Mexico Institute of Mining & Technology and obtained Professional Engineering registration in the state of New Mexico, USA. Jeff is a member of the Society of Petroleum Engineers and previously served as Chairman of the Northern Emirates (UAE) section.


Senior managementDr Glenn BestallVice President, QHSSECGlenn brings 30 years of experience in safety, CSR and environmental management and technical roles, primarily in support of major capital projects and the upstream/downstream oil & gas business. Glenn worked for Tullow Oil, based in Uganda and in Ghana, where he was responsible for project focused HSE technical management associated with exploration and field development projects. He has also worked on the OKLNG Project in Nigeria, with Shell Global Solutions in the Netherlands and in Nigeria, SPDC/AGIP in Port Harcourt, Nigeria, and with Total E&P in Angola.

Ian Brown-PetersideGeneral CounselIan previously served as Principal Counsel at BG Group PLC. During his time with BG Group, Ian held positions as the Vice President of Legal for BG Kazakhstan, and Legal Director of Karachaganak Petroleum Operating BV, a joint venture between BG, Eni, Chevron, Lukoil and KazMunaiGas. He also worked for BG in Nigeria from 2006 to 2012 as General Manager Legal & Compliance. Ian also worked as senior associate with Herbert Smith, working from their London and Tokyo offices. Ian was admitted as a solicitor in England & Wales in 1999 and holds a BSc Honours degree from King’s College, University of London.

Abdullah BukarVice President, Regulatory AffairsAbdullah has over 35 years of experience in the Nigerian oil and gas industry with Shell. Since 1995, he has worked in the area of production management covering extensive work programmes in engineering, support and planning. Prior to his career at Shell, he gained offshore facilities experience at Woodside Australia.

Chidi ChukwuekeVice President, Joint VenturesChidi has over 20 years’ industry experience with Shell spanning integrated exploration, business development, asset development, project and stakeholder management and business relations among others. Prior to joining Seven Energy, Chidi was the business relations manager for Shell Nigeria Exploration and Production Company.

Nkem OkoroVice President, Wells and Services Nkem has over 28 years’ drilling operations experience and until his appointment was a drilling superintendent for Addax Petroleum. Nkem spent the majority of his career at Shell in various capacities where he gained significant international experience in The Hague and on secondment to an operating company, NAM, where he spent a total of four years. He also undertook the Mike-5 development project in Shell Cameroon.

Stephen TierneyManaging Director, AccugasStephen has specialised expertise in gas projects, business development and M&A in Nigeria. He previously held a number of business and general management positions in the country, eventually becoming Weatherford International’s divisional region manager for West Africa prior to the buyout of Seven Energy from Weatherford International.

Chris ThomasHead of Strategy & Business Development and Group Company SecretaryChris has over 25 years’ experience in corporate finance generally and, for the last 17 years, in the exploration and production sector. Previously, Chris was a founding director and group company secretary of Melrose Resources, the former London Stock Exchange FTSE 250 listed international E&P company with interests in EMEA and the US.

Bassey UmohVice President, Capital ProjectsBassey brings more than 30 years of relevant experience working with ExxonMobil. He has held several key positions in engineering, operations, maintenance, joint interest, projects and acquired various leadership qualifications both locally and internationally. Bassey gained significant international experience when he was transferred to Esso France in Paris to work on various oil & gas development projects, where he spent a total of six years. His most recent role was as Project Manager at ExxonMobil. Bassey holds a B.S. Honours degree in Petroleum Engineering from the University of Ibadan, Nigeria.

Ani UmorenVice President, OperationsAni has nearly 30 years of oil and gas industry experience and has held various positions in engineering, operations, maintenance and QHSSEC. His most recent role was field construction adviser at ExxonMobil. Ani has a First Degree in Mechanical Engineering and a Master’s Degree in Mechanical & Aerospace Engineering, both from the University of Delaware


Corp

orate governance

1. Principal activitiesThe Group’s principal activities are oil and gas exploration, development, production and distribution in Nigeria.

2. Capital and shareholding structureAs at 31 December 2015, the Company had an issued share capital of 514,243 ordinary shares (2014: 511,575) and an adjusted diluted issued share capital (which comprises ordinary shares and irredeemable convertible loan notes, but excludes warrants and share options) of 3,968,053 ordinary shares (2014: 3,862,784). Since the year end the Company has issued additional irredeemable convertible loan notes, convertible into 500,001 ordinary shares, increasing the adjusted diluted issued share capital to 4,468,054 ordinary shares.

Issued share capitalThe Company has been notified of the following direct interests of more than 5% in the issued share capital of the Company:

At 31 December 2015

No. %

Exoro Energy Holdings Limited 251,966 49.0JPP Ocean (Singapore) Pte. Ltd. 78,750 15.3Diamond Bank 73,302 14.3Estate of Joshua Udofia 27,697 5.4

Adjusted diluted issued share capitalThe Company has been notified of the following ultimate beneficial interests of more than 5% in the adjusted diluted issued share capital of the Company, assuming full conversion into ordinary shares of all the outstanding irredeemable convertible loan notes issued by the Company:

At 31 March 2016 At 31 December 2015

No. % No. %

Temasek Holdings 661,118 14.8 600,000 15.1Petrofac Limited 606,539 14.7 595,845 15.0Capital International Private Equity 562,431 12.6 516,011 13.0Standard Chartered Private Equity 421,719 9.4 382,733 9.6International Finance Corporation 330,559 7.4 300,000 7.6IDB infrastructure fund 250,000 5.6 – –

Director’s interests in share capitalThe Directors in office during the year and their beneficial and non-beneficial interests in the adjusted diluted issued share capital of the Company as at 31 December 2015 are summarised below.

Adjusted diluted issued share capital

BeneficialNo.

Non-beneficial1No.

Share optionsNo.

Andrew Jamieson (expected to resign on 27 April 2016) – – –Phillip Ihenacho 107,622 251,966 4,949Ashley Dunster – 516,011 –Atul Gupta – 516,011 1,000Osam Iyahen – 112,836 –Michael Lynch-Bell – – –Fidelis Oditah (expected to resign on 27 April 2016) – – –Cyril Odu – 600,000 –Yemi Osindero (resigned 22 March 2016) – 382,733 –Peter Gutman (appointed 22 March 2016) – 382,733 –Dale Rollins (resigned 26 January 2016) – 595,845 –Clare Spottiswoode (expected to resign on 27 April 2016) – – –Lubomir Varbanov (appointed 18 March 2015) – 420,000 –Joshua Udofia (deceased 8 April 2015) 27,697 – –Matthew Harwood (appointed 26 January 2016) – 595,845 –Stephen Vineburg (appointed 22 March 2016) n/a n/a n/a

1 Non-beneficial interests are in respect of the interests of the shareholder that the Director represents on the Board of Directors.

Directors’ report


3. Directors’ indemnity and insuranceThe Company provides an indemnity to all its Directors (to the extent permitted by law) in respect of liabilities incurred as a result of their office. The Group also has in place liability insurance covering the Directors and Officers of Group companies. Both the indemnity and insurance were in force during the year ended 31 December 2015. However, neither the indemnity nor the insurance provides cover in the event that the Director is proven to have acted dishonestly or fraudulently.

4. Directors’ responsibilitiesThe Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare such financial statements for each financial year. Under that law, the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EuropeanUnion. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

– properly select and apply accounting policies;– present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;– provide additional disclosures when compliance with the specific IFRSs are insufficient to enable users to understand the impact

of particular transactions, other events and conditions on the entity’s financial position and financial performance; and– make an assessment of the Group’s ability to continue as a going concern (see note 3 to the Financial Statements).

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose, with reasonable accuracy at any time, the financial position of the Group and to enable them to ensure that the financial statements comply with the Mauritius Companies Act 2001 and International Financial Reporting Standards as adopted by the European Union. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website.Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that, to the best of their knowledge, they have complied with the above requirements in preparing the Financial Statements.

5. Conflicts of interestA formal process to manage conflicts of interest is in place and the prescribed process provides a framework within which the Board manages potential conflict situations as they arise.

6. Anti-bribery and corruptionThe Group is committed to complying with all applicable provisions of the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act, the Nigerian Corrupt Practices and Other Related Offences Act and all other equivalent anti-corruption and/or anti-bribery legislation applicable to the Group by virtue of its jurisdiction of incorporation or conduct of its business operations.

7. EmploymentThe Group has adopted a Code of Conduct which provides equal employment opportunities to all employees and applicants and does not discriminate on any grounds including disability. The Group’s employment strategy is regularly reviewed to incorporate changes to legislation and ensure best practice is maintained.

8. Training and developmentThe Group encourages all employees to seek opportunities for development, ensuring the achievement of competitive advantage at both individual and business level. The Group keeps all employees informed of events relevant to their employment via all staff communications and a Group-wide intranet.

9. Health and safetyThe Group is committed to providing and maintaining a clean, hazard free and safe working environment to all employees in accordance with relevant Health and Safety regulations in the various jurisdictions it operates in.


Corp

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1. Report of the HR & Remuneration CommitteeThe Committee met four times during 2015 to conduct the following business.

1.1. Ordinary businessThe principal purpose of the Committee on a recurring basis is to agree annual performance targets for the Executives and Senior Management, to review performance against those targets and objectives, to approve any performance related bonuses or changes to executive remuneration and to approve other performance-related pay or share based payment awards.

1.2. Special businessIn addition to the recurring business of the Committee relating to executive remuneration and performance appraisal, the Committee’s activities during the year also included a review of the executive employment contracts for compliance with best practice and some proposed changes to these contracts to align with best practice for UK listed companies.

2. HR & Remuneration Committee2.1. CompositionThe members of the HR & Remuneration Committee are set out on page 53. All members of the Committee are Non-executive Directors, with the majority being made up of shareholder representative Directors. The Group Company Secretary, Chris Thomas, is Secretary to the Committee and the Chairman and Chief Executive Officer attend all Committee meetings.

2.2. Terms of reference and operationThe HR & Remuneration Committee’s responsibilities have been delegated by the Board and are set out in its terms of reference. The terms of reference include:• setting and managing a remuneration strategy that will attract, motivate and retain a top-quality Executive team;

• determining the terms of employment and remuneration and benefits for the Chief Executive and the Executive team and ensuring that remuneration recognises individual performance and the achievement of the Company’s objectives;

• recommending to the Board the remuneration of the Chairman and the independent Non-executive Directors; no Director plays a part in any discussion about his own remuneration;

• setting and maintaining performance parameters for remuneration to encourage consistent and sustainable levels of performance, including operational and financial performance, capital project execution, shareholder value growth and risk management;

• approval of the design and targets of share incentive plans and the levels of participation of each member of the Executive Team in such plans;

• reviewing the remuneration trends across the Company, overseeing any major changes in employee benefits structures and approving the design, targets and payments made in any performance-related pay schemes operated by the Company; and

• considering the effectiveness (and appropriateness) of the management structure, management succession planning, diversity and grievance procedures.

2.3. AdvisersDuring the year, the Remuneration Committee has taken advice internally from the Company Secretary, and has taken external advice from H2glenfern Limited, remuneration consultants who were appointed in 2012 and whose appointment is subject to regular review by the Committee.

2.4. Compliance with the Corporate Governance CodeThe Company is not required to comply with the Corporate Governance Code but the Committee recognises that this is best practice and strives to do so to the extent that this is practicable and appropriate.

3. Executive remuneration3.1. Remuneration philosophySeven Energy’s remuneration philosophy is to provide rewards for exceptional achievement leading to long-term increase in shareholder value. Seven Energy operates in a highly competitive talent market and is determined to recruit and retain the most able people. Executive remuneration packages, therefore, have to balance the need to be competitive in the relevant executive markets, whilst ensuring that the highest level rewards are only provided for demonstrated exceptional performance. This philosophy applies equally to all members of the Executive team.

The Company does not have a stated policy regarding Executives accepting appointments outside the Company, but this is permitted provided that the Chairman’s permission is sought. Fees from such appointments are disclosed to the Company but are not accounted for to the Company, except where specifically requested by the Committee.

Remuneration report For the year ended 31 December 2015


3.2. Remuneration policyThe Company’s remuneration policy has been designed to reflect this remuneration philosophy, with three overall objectives in mind:1. To provide a package for each Executive that is competitive in the relevant talent market in which they compete in order to retain and

keep the commitment of the Executives. The relevant markets comprise FTSE 250 companies and similar sized global energy companies, particularly those with operations in the UK and West Africa;

2. To provide financial incentives to Executives to continue to perform alongside the best in the industry, to implement agreed strategy and build long-term shareholder value; and

3. To ensure the rewards earned are fair to the Executives and shareholders alike, by full performance justification and alignment in terms of risk and timescales of reward and by appropriate differentials within the Executive team.

Element of remuneration Purpose & operation

1. Base salary Basic competitive package to recruit and retain2. Pension Defined contribution plan with Company contributing 15% of base salary 3. Other benefits Private medical insurance, critical illness and life insurance cover to provide Executives

with appropriate protection4. Annual bonus plan Focus attention on the Group’s annual corporate objectives and other shorter term

(1-2 years) priorities: 50% based on corporate performance and 50% based on individual objectives of the Executive

5. 2009 Share Option Scheme The original purpose of this Scheme was to incentivise long term success on a recurring basis through annual awards to Executives and Senior Management (in the period 2008–2012); this Scheme has now been replaced by the 2013 Long Term Incentive Plan (“LTIP”) and no recurring annual awards are made under this Scheme to Executives and Senior Management. This Scheme is now only used for annual share option awards to managers and senior employees and in exceptional circumstances (e.g. to provide competitive opportunity to new executives or senior management joining the Company)

6. 2013 LTIP Align Executives with the long-term interests of shareholders by creating an interest in the equity value of the Company. Three to four year performance vesting. One-off grant effective 1 January 2013 or (if later) on joining. This plan has not yet been fully implemented and is under review.

3.3. Policy on payment for loss of officeIt is the Company’s policy that Executives should have contracts of an indefinite term providing for a maximum of one year’s notice. The Executives are entitled to receive Base Salary plus Target Bonus as payment in lieu of notice on termination of the contract.

4. Directors’ remunerationDuring 2015, the Board of Directors comprised the Chief Executive Officer, five independent Non-executive Directors (including the Chairman) and seven shareholder representatives. The shareholder representative directors do not receive any remuneration from the Company for services as a director. The remuneration of the independent Non-executive Directors is determined by the Committee after consultation with the Committee’s external adviser and by reference to market rates for similar roles. The independent Non-executive Directors also receive fees for chairing the various Board Committees. In 2015, total Directors’ emoluments amounted to $2,147,000 (2014: US$2,160,000).


Corp

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Financial Statements

Independent auditor’s report to the Directors of Seven Energy International Limited 63

Consolidated statement of comprehensive income 64

Consolidated balance sheet 65

Consolidated statement of changes in equity 66

Consolidated cash flow statement 67

Notes to the consolidated Financial Statements 68

Glossary of terms 98

Shareholders’ information 100


We have audited the non-statutory consolidated Financial Statements (the “Financial Statements”) of Seven Energy International Limited and its subsidiaries (the “Group”) for the year ended 31 December 2015 which comprise the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes 1 to 36. The financial reporting framework that has been applied in their preparation is International Financial Reporting Standards (“IFRSs”) as adopted by the European Union.

This report is made solely to the Directors of Seven Energy International Limited (the “Company”) in accordance with our engagement letter dated 7 January 2016 for the purposes of showing the results of management’s stewardship of the resources entrusted to it. Our audit work has been undertaken so that we might state to the Company’s Directors those matters we are required to state to them in an independent 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 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’ report, 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 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 and to identify any information that is apparently materially incorrect, based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. 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 Group’s affairs as at 31 December 2015 and of its loss for the year then ended;

• the Financial Statements have been properly prepared in accordance with IFRSs as adopted by the European Union.

Emphasis of matter – going concernIn forming our opinion on the Financial Statements, which is not modified, we have considered the adequacy of the disclosures made in the going concern section of note 3 to the Financial Statements concerning the Company’s and the Group’s ability to continue as a going concern. In the absence of an unconditional written waiver or sufficient funding of the Accugas IV Debt Service Reserve Account at 31 December 2015 and 31 March 2016, the facility becomes repayable on demand, as explained in note 3 of the Financial Statements, indicating the existence of a material uncertainty which casts significant doubt about the Company’s and the Group’s ability to continue as a going concern. The Financial Statements do not include the adjustments that would result if the Company and Group were unable to continue as a going concern.

Deloitte LLPChartered AccountantsLondon, United Kingdom6 April 2016

Independent auditor’s report to the Directors of Seven Energy International Limited



Notes2015$000

2014$000

Revenue 5 353,571 378,155

Cost of sales

– Production expenses 6 (190,400) (231,736)

– (Decrease)/ increase in underlift 6 (61,985) 190,620

Depletion 16 (114,434) (121,973)

Gross (loss)/ profit (13,248) 215,066

Depreciation and amortisation 16 (3,320) (3,000)

Impairment charge 16 (90,381) –

Other operating expenses 8 (3,295) (4,925)

Administrative expenses 9 (35,253) (58,731)

Operating (loss)/ profit (145,497) 148,410

Investment revenue 5 536 83

Finance costs 12 (103,420) (76,181)

Foreign exchange gains 6,925 7,821

(Loss)/ profit before tax (241,456) 80,133

Tax credit/ (expense) 13 59,370 (25,569)

(Loss)/ profit for the year (182,086) 54,564

Attributable to:

Owners of the Company (180,993) 56,028

Non-controlling interests 32 (1,093) (1,464)

Other comprehensive (expense)/ income for the year


Total other comprehensive income for the year – –

Total comprehensive (expense)/ income for the year (182,086) 54,564

Attributable to:

Owners of the Company (180,993) 56,028

Non-controlling interests 32 (1,093) (1,464)

(Loss)/ earnings per share ($ per share)

Basic from continuing operations 14 (45.8) 15.9

Diluted from continuing operations 14 (45.8) 15.9

All operations relate to continuing operations in 2014 and 2015.

Consolidated statement of comprehensive incomeFor the year ended 31 December 2015


Notes2015$000

2014$000

Non-current assets

Interest in joint arrangements 11,528 11,528

Intangible assets 15 104,714 73,896

Property, plant and equipment 16 1,725,303 1,864,008

Other receivables 17 8,641 8,267

Deferred tax assets 21 46,938 42,951

1,897,124 2,000,650

Current assets

Inventories 18 228,988 291,396

Trade and other receivables 17 119,015 46,273

Cash and cash equivalents 19 30,473 38,454

378,476 376,123

Total assets 2,275,600 2,376,773

Current liabilities

Trade and other payables 20 (585,055) (603,699)

Borrowings – scheduled repayments within one year 22 (70,111) (94,453)

– scheduled repayments after more than one year 22 (354,542) (18,057)

Deferred revenue 27 – (12,204)

Current tax liabilities 13 (720) (727)

(1,010,428) (729,140)

Non-current liabilities

Borrowings 22 (420,818) (653,582)

Deferred tax liabilities 21 (128,371) (172,333)

Provisions 24 (50,945) (49,759)

Deferred revenue 27 (79,316) (34,605)

(679,450) (910,279)

Total liabilities (1,689,878) (1,639,419)

Net assets 585,722 737,354

Equity

Share capital 28 5 5

Share premium 96,111 95,710

Irredeemable convertible loan notes (“ICLNs”) 29 920,909 895,442

Retained deficit (497,176) (316,183)

Equity reserves 30 46,324 41,738

Equity attributable to owners of the Company 566,173 716,712

Non-controlling interests 32 19,549 20,642

Total equity 585,722 737,354

The Financial Statements were approved by the Board of Directors and authorised for issue on 6 April 2016. They were signed on its behalf by:

Phillip IhenachoDirector

Consolidated balance sheetAt 31 December 2015



Share capital

$000

Share premium

$000

Irredeemable convertible loan notes

$000

Retained deficit$000

Equity reserves

$000Total$000

Non-controlling

interests$000

Total equity$000

At 1 January 2014 5 95,310 612,583 (373,607) 39,384 373,675 22,106 395,781

Credit to equity for share based payments (note 31) – – – – 4,150 4,150 – 4,150

Warrants expiry (note 30) – – – 1,396 (1,396) – – –

Issuance of shares (note 30) – 400 – – (400) – – –

Issuance of ICLNs (note 29) – – 288,000 – – 288,000 – 288,000

Expenses on issuance of ICLNs (note 29) – – (5,141) – – (5,141) – (5,141)

Profit for the year and total comprehensive (expense)/ income – – – 56,028 – 56,028 (1,464) 54,564

At 31 December 2014 5 95,710 895,442 (316,183) 41,738 716,712 20,642 737,354

Credit to equity for share based payments (note 31) – – – – 4,987 4,987 – 4,987

Issuance of shares (note 30) – 401 – – (401) – – –

Issuance of ICLNs (note 29) – – 25,650 – – 25,650 – 25,650

Expenses on issuance of ICLNs (note 29) – – (183) – – (183) – (183)

Loss for the year and total comprehensive expense – – – (180,993) – (180,993) (1,093) (182,086)

At 31 December 2015 5 96,111 920,909 (497,176) 46,324 566,173 19,549 585,722

Consolidated statement of changes in equityFor the year ended 31 December 2015


2015$000

2014$000


Adjustments for:

Investment revenue (536) (83)

Finance costs 103,420 76,181

Impairment charge 90,381 –

Depreciation and amortisation 3,320 3,000

Depletion 114,434 121,973

Loss on disposal of property, plant and equipment 53 53

Income tax (credit)/ expense (59,370) 25,569

Share-based payment expense 4,987 4,150

Unrealised foreign exchange gains (4,945) (7,821)

Deferred revenue realised (13,099) (16,700)

Operating cash flows before movements in working capital 56,559 260,886

Decrease/ (increase) in inventories 62,443 (192,226)

(Increase)/ decrease in trade and other receivables (20,728) 5,908

Increase in trade and other payables 116,534 66,504

Net cash provided by operating activities 214,808 141,072

Investing activities

Interest received 40 83

Proceeds from disposal of property, plant and equipment 43 89

Proceeds from disposal of oil and gas asset - 7,000

Purchases of property, plant and equipment and intangible assets (198,672) (334,734)

Acquisitions of subsidiaries, net of cash acquired (note 34) (444) (151,205)

Net cash used in investing activities (199,033) (478,767)

Financing activities

Interest and financing fees paid (116,531) (105,937)

Net financing deposits received 838 3,880

Repayments of borrowings (43,995) (483,213)

Proceeds from borrowings 136,879 657,343

Proceeds from issue of ICLNs – 255,000

Net cash (used)/ provided by financing activities (22,809) 327,073

Net decrease in cash and cash equivalents (7,034) (10,622)

Cash and cash equivalents at beginning of year 38,454 50,383

Effect of foreign exchange rate changes (947) (1,307)

Cash and cash equivalents at end of year (note 19) 30,473 38,454

Consolidated cash flow statementFor the year ended 31 December 2015



1. General informationSeven Energy International Ltd (the “Company”) is incorporated in Mauritius under the Companies Act, 2001 (Act No. 15 of 2001). The address of the registered office is Cim Global Management, Les Cascades, Edith Cavell Street, Port Louis, Republic of Mauritius. The Company is registered with Companies House as an overseas company in the UK. The Company is the parent company of a group of companies (the “Group”) whose principal activities are oil and gas exploration, development, production and distribution in Nigeria.

These Financial Statements are presented in US Dollars, which is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 3.

2. Adoption of new and revised standardsNew standards and interpretations adopted with no significant effect on the Financial StatementsThe following new standards and amendments resulting from improvements to IFRS standards and interpretations are effective and have been adopted, but are not considered to have had any impact on the financial position or performance of the Group:

Annual improvements: 2011–2013 cycle

New standards and interpretations in issue but not yet effectiveThe following new standards and amendments resulting from improvements to IFRS standards and interpretations are in issue but not yet effective. They are applicable to the Group from 1 January 2016 and beyond. The following are expected to have a disclosure impact only:

Disclosure Initiative (amendments to IAS 1)Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

The Group is still assessing the impact of IFRS 15: Revenue from Contracts with Customers, but initial indications are a disclosure impact only, with no changes expected to the Group’s recognition of revenue. The Group is still assessing the impact of IFRS 16: Leases, but initial indications are that the financial position and performance of the Group will be affected, albeit immaterially, together with a disclosure impact.

The following are not expected to have any impact on the financial position or performance of the Group:

IAS 19 (amended): Defined Benefit Plans: Employee ContributionsClarification of acceptable methods of Depreciation and Amortisation (amendments to IAS 16 & IAS 38) Agriculture: Bearer Plants (Amendments to IAS 16 & IAS 41)Equity Method in Separate Financial Statements (amendments to IAS 27)Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (amends IFRS 10 & IAS 28) IFRS 9: Financial Instruments; Classification and Measurement (2009, 2010, 2013, superseded 2014) Investment Entities: Amendments to IFRS 10, IFRS 12 and IAS 28Recognition of Deferred Tax Assets for Unrealised Losses (amendments to IAS 12)Disclosure Initiative (amendments to IAS 7)IFRS 14: Regulatory Deferral Accounts Annual improvements: 2010–2012 cycle Annual improvements: 2012–2014 cycle

3. Significant accounting policiesBasis of accountingThe Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) adopted by the European Union and therefore the Group Financial Statements comply with Article 4 of the EU IAS Regulation.

The Financial Statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments and share-based payments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets at the time of initial recognition. The principal accounting policies adopted are set out below. Going concernNote 23 to the Financial Statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposures to credit risk and liquidity risk.

The Group intends to fund its current and future development projects and operations using a combination of operating cash flows, debt facilities and, from time to time, new equity issues. The Group has in place various borrowings available to fund the Group’s operations, but require the Group to comply with various ongoing financial and non-financial covenants typical of facilities of this nature. Further details of all these facilities are set out in note 22.

Notes to the consolidated Financial Statements


Significant accounting policies (continued)Going concern (continued)The Group’s ongoing funding requirements continue to be sensitive to changes in the timing of cash calls from joint venture partners, the frequency of its liftings from oil and gas sales, and the level of funding available under any of its undrawn facilities. The Group continually monitors its cost structures and where possible aims to reduce its cost base without adversely impacting its operational or administrative obligations.

As reported in note 22 and the Financial review, Accugas received a conditional waiver on 4 April 2016 for not fully funding the Accugas IV facility DSRA at 31 December 2015 or 31 March 2016. As such the outstanding loan amounts have been disclosed within Current borrowings – scheduled repayments due in more than one year. As a result, in the absence of an unconditional waiver, the Directors acknowledge that a material uncertainty exists which casts significant doubt on the Company’s and the Group’s ability to continue as a going concern and, therefore, that the Company and the Group may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after making enquiries, and considering the uncertainty described above, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the financial statements.

Basis of consolidationThe consolidated Financial Statements incorporate the Financial Statements of the Company and entities controlled by the Company (“its subsidiaries”), made up to 31 December each year. Control is achieved where the Company:

• has the power over the investee;

• is exposed, or has rights to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date of obtaining control or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used in line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination (see below) and the non-controlling interest’s share of changes in equity since the date of the combination.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interest and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

Joint arrangementsA joint arrangement is an arrangement over which two or more parties have joint control. The Group is engaged in oil and gas exploration, development, production and distribution through unincorporated joint ventures or jointly controlled entities. The Group accounts for its share of assets, liabilities, revenues and expenses of unincorporated joint ventures as joint operations. The Group accounts for its interests in jointly controlled entities using the equity method. Under the equity method, the investment is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the venture since the acquisition date. The consolidated statement of comprehensive income reflects the Group’s share of results of operations in the venture.

Business combinationsAcquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree, and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the statement of comprehensive income as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs.


Financial statements

3. Significant accounting policies (continued)Business combinations (continued)Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are re-measured to fair value at the acquisition date (i.e. the date the Group obtains control) and the resulting gain or loss, if any, is recognised in the consolidated statement of comprehensive income. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to the consolidated statement of comprehensive income, where such treatment would be appropriate if that interest were disposed of.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised at their fair value at the acquisition date, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

• liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with IFRS 2 Share-Based Payment; and

• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of non-controlling interest of the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date, and is subject to a maximum of one year.

Commercial reservesThe Group defines commercial reserves as proven and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids that geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and that are considered commercially producible. This is equivalent to the 2P classification established by the Society of Petroleum Engineers where there is a 50% statistical probability that the actual quantity of recoverable reserves will be more than the amount estimated as proven and probable reserves and a 50% statistical probability that it will be less.

Intangible assets – oil and gas exploration and appraisal assetsThe Group adopts the “successful efforts” method of accounting for exploration and evaluation costs under IFRS 6, Exploration for and Evaluation of Mineral Resources. All licence acquisition, exploration and evaluation costs are capitalised within intangible exploration and appraisal assets in cost centres by well, field or exploration area, as appropriate. Pre-licence expenditures on oil and gas assets are recognised as an expense within the consolidated statement of comprehensive income when incurred.

If commercial reserves are established then the relevant cost is transferred (following an impairment review as described below) from intangible exploration and appraisal assets to upstream assets within property, plant and equipment. Expenditure incurred after the commerciality of the field has been established are capitalised within upstream assets. If prospects are deemed to be impaired (unsuccessful) on completion of an evaluation, the associated capitalised costs are charged to the consolidated statement of comprehensive income.

Property, plant and equipmentProperty, plant and equipment is stated at cost, less accumulated depreciation, depletion and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of any decommissioning obligation, if any, and, for qualifying assets, borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.


Notes to the consolidated Financial Statementscontinued

3. Significant accounting policies (continued)Property, plant and equipment (continued)With the exception of upstream oil and gas assets, depreciation is charged to the consolidated statement of comprehensive income on a straight-line basis:

Annual rate

Furniture, fixtures and equipment 20%Vehicles 20%Computer hardware and software 33%Leasehold improvements 10%

The Group’s infrastructure assets (pipelines, processing facility and gas receiving facility) are depreciated on a straight line basis over the useful economic lives of the material component assets being principally between 15-25 years. Depreciation is shown within Depletion in the consolidated statement of comprehensive income. The Group reviews the useful economic lives and depreciation rates annually.

Oil and gas properties are depleted using a unit-of-production method, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus production in the period, generally on a field-by-field basis. Costs used in the unit-of-production calculation take into account expenditures incurred to date, together with the future capital expenditure expected to be incurred to access the commercial reserves. Changes in the estimates of commercial reserves or future field development costs are accounted for prospectively.

Assets in the course of construction are not depreciated. Depreciation commences on assets in the course of construction when the assets are ready for their intended use.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in administrative expenses.

Assets held for saleAssets or a disposal group classified as held for sale are measured at the lower of carrying value and fair value less costs to sell. Assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale which should expect to be completed within one year from the date of classification.

ImpairmentThe Group assesses assets or groups of assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, for example, low prices or margins for an extended period or, for oil and gas assets, significant downward revisions of estimated commercial reserves or increases in estimated future development expenditure. If any such indication of impairment exists, the Group makes an estimate of the asset’s recoverable amount. Where it is not possible to estimate an asset’s recoverable amount, the Group estimates the recoverable amount and assesses impairment of the cash generating unit (“CGU”) to which the asset belongs. A CGU is the lowest level of a group of individual assets that are grouped for impairment assessment purposes at the lowest level at which there are identifiable cash inflows that are largely independent of the cash inflows of other groups of assets. An asset or CGU’s recoverable amount is the higher of its fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset group is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using an appropriate discount rate that reflects current market assessments of the time value of money.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated statement of comprehensive income. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.



3. Significant accounting policies (continued)Decommissioning provisionProvision for decommissioning is recognised when the Group has a legal or constructive obligation to dismantle and remove a facility or an item of plant and to restore the site on which it is located, and where a reliable estimate can be made. A corresponding adjustment to property, plant and equipment of an amount equivalent to the provision is also recognised. This is subsequently depreciated as part of the asset and included in depletion expense in the statement of comprehensive income. Changes in the estimated timing of decommissioning or decommissioning cost estimates are accounted for prospectively by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment. The unwinding of the discount on the decommissioning provision is classified in the consolidated statement of comprehensive income as finance costs.

InventoriesInventories of oil and gas assets are stated at their net realisable values and changes in net realisable values are recognised in the income statement.

Other inventories are stated at the lower of cost and net realisable value. Cost is determined by the first-in first-out method and comprises direct materials and, where applicable, direct labour, overheads and other charges incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs to be incurred in marketing, selling and distribution.

Revenue recognitionRevenue arising from the sale of oil and gas products is recognised when the significant risks and rewards of ownership have passed to the buyer and it can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for oil and gas products provided in the normal course of business, net of discounts, customs duties and sales taxes.

Liftings or offtake agreements associated with the sale of oil, natural gas, natural gas liquids, liquefied natural gas, petroleum and petrochemical products in which the Group has an interest in jointly owned or controlled operations are such that each participant may not receive and sell its precise share of the overall production in each period. The resulting imbalance between cumulative entitlement and cumulative production (less inventory) attributable to each participant at a reporting date represents ‘overlift’ or ‘underlift’. Overlift and underlift are valued at market value and recorded as current liabilities or current assets respectively. Movements during an accounting period are adjusted through cost of sales such that gross profit is recognised on an entitlements basis. Revenue is recognised on an actual invoiced basis for the value of the liftings made in the period.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Foreign currenciesThe individual Financial Statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). The functional currency of the Group’s subsidiaries is the US Dollar, which is also the Company’s functional currency and presentation currency for the consolidated Financial Statements.

In preparing the Financial Statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences upon re-measurement are recognised in the statement of comprehensive income in the period in which they arise.

For the purpose of presenting consolidated Financial Statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the exchange rates at the date of transactions. Exchange differences arising, if any, are recognised in Other comprehensive income and in the Group’s equity reserves. Upon disposal of an operation, the amounts accumulated in the foreign currency translation reserve are recognised as income or expense in the period in which the operation is disposed of. Borrowing costsFinance costs of debt are allocated to periods over the term of the related debt at a constant rate on the carrying amount. Arrangement fees and issue costs are deducted from the debt proceeds on initial recognition of the liability and are amortised and charged to finance costs over the expected life of the debt.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the consolidated statement of comprehensive income in the period in which they are incurred.



3. Significant accounting policies (continued)Financial instrumentsFinancial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes party to the contractual provision of the instrument.

Effective interest methodThe effective interest method is a method of calculating the amortised cost of an interest bearing financial asset or liability and for allocating interest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash receipts or payments to present value (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or liability, or, where appropriate, a shorter period.

Financial assetsAll financial assets are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss” (“FVTPL”), “held-to-maturity” investments, “available-for-sale” financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All of the Group’s financial assets are currently classified as “loans and receivables”.

Loans and receivablesTrade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assetsFinancial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial asset have been impacted. For financial assets measured at amortised cost, if there is objective evidence of impairment, the impairment is measured as the difference between the present value of estimated future cash flows discounted at the instrument’s original effective interest rate less the carrying value of the financial asset.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the consolidated statement of comprehensive income.

Trade receivablesTrade receivables are measured at their fair value upon initial recognition. Appropriate allowances for estimated irrecoverable amounts are recognised in the consolidated statement of comprehensive income when there is objective evidence that the asset is impaired.

Cash and cash equivalentsCash and cash equivalents consist of cash at bank or in hand and short-term deposits with an original maturity of three months or less. In addition, the Group holds a number of restricted cash balances relating to deposits and cash balances associated with the Group’s borrowing facilities. These amounts are shown within the Group’s receivable balances.

Derecognition of financial assetsThe Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

Financial liabilities and equityFinancial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and equity instrument.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.



3. Significant accounting policies (continued)Financial instruments (continued)Compound instrumentsThe component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, in the case of a bond denominated in the functional currency of the issuer that may be converted into a fixed number of equity shares, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole at initial recognition. This is recognised and included in equity, net of income tax effects, and is not subsequently re-measured.

Issue costs are apportioned between the liability and equity components of the convertible loan notes based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity.

Financial liabilitiesFinancial liabilities are classified as either financial liabilities at FVTPL or held at amortised cost.

Financial liabilities at FVTPLFinancial liabilities are classified as at FVTPL when the financial liability is either held for trading or is designated as at FVTPL.

A financial liability is classified as held for trading if:

• it has been incurred principally for the purpose of repurchasing it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated or effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gain or losses arising on re-measurement recognised in the consolidated statement of comprehensive income. The net gain or loss recognised in the consolidated statement of comprehensive income incorporates any interest paid on the financial liability and is included in the finance costs line item in the consolidated statement of comprehensive income.

Other financial liabilitiesOther financial liabilities, including borrowings and trade and other payables, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis, except for short-term trade payables when the recognition of interest would be immaterial.

Derecognition of financial liabilitiesThe Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Embedded derivativesDerivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.

An embedded derivative is presented as a non-current asset or non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months ahead and is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.



3. Significant accounting policies (continued)Share-based paymentsThe Group makes equity-settled share-based payments to certain employees. Equity-settled share-based schemes are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant, measured by use of an option valuation model. The expected lives of the options used in the model are adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.

At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated statement of comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity reserve.

Retirement benefit costsPayments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme. The Group had no defined benefit schemes in place during the years presented.

TaxationTax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit/loss as reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to other comprehensive income or equity, in which case the deferred tax is also recognised in other comprehensive income or equity.

Current and deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Group’s best estimate of the expenditure required to settle the obligation at the balance sheet date, taking into account the risks and uncertainties of the obligation, and are discounted to present value where the effect is material.

Operating leasesRentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.



4. Critical accounting judgements and key sources of estimation uncertaintyThe Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertaintyThe following are the key assumptions and other sources of estimation uncertainty at the balance sheet date that may have a significant effect on the amounts recognised in the Financial Statements.

Upstream and infrastructure oil and gas assetsManagement is required to assess the Group’s intangible assets and the upstream and infrastructure oil and gas assets for indicators of impairment. Notes 15 and 16 disclose the carrying values of such assets together with details of impairment charges arising. Management take into account the Group’s latest development plans and business strategies and applies judgement in determining the appropriate cash generating units for the purpose of applying the annual impairment assessment. Management compares the carrying value of these assets to the estimated net present value of the underlying oil and gas reserves and related future cash flows that could be generated from these reserves based upon estimates of future production, oil and gas prices, development costs and operating costs and applying a suitable pre-tax discount rate. The reserve estimates are management’s best estimates, taking into consideration independent evaluations of the proved and probable reserves attributable to the Group’s economic interests using industry standard definitions and measurement techniques.

DecommissioningThe Group has decommissioning obligations in respect of certain of its oil and gas interests and related midstream infrastructure. The extent to which a provision is recognised requires management to make judgements on the legal and constructive obligations at the date of decommissioning, estimates of the restoration costs, timing of work, long-term inflation and discount rates to be applied.

Production entitlementThe Group’s SAA with NPDC relies on an agreed financial model to determine the Group’s production entitlement from this agreement. Within this model, current year operating and capital expenditure costs are initially estimated from monthly cash calls and then actualised once cost returns are agreed by the operator, resulting in either an over or an under-funded position. Daily field production rates are adjusted to reflect expected terminal throughput rates based on past experience and then trued up for actual throughput by the terminal operator. The Group’s share of production is determined at different percentage rates based on both baseline and incremental production volumes which change over the course of the contract. In the following year, NPDC and the operator formally approve the cost performance for the prior year. As such, adjustments to operating costs, capital expenditures, production entitlement and depletion are made in the year of agreement. Occasionally, residual costs relating to other prior years are also submitted and agreed, and the impact of these additional revisions are also reflected in the current year.

During 2015 NPDC reached agreement with the operator in relation to past costs incurred in the year ended 31 December 2014, which were initially estimated and unapproved by NPDC. This resulted in a significant reduction in operating and capital expenditure being attributed to the Group. Cost returns for expenditure in the year ended 31 December 2015 have not yet been agreed but management has taken into consideration the basis of the prior years’ cost determination in assessing their best estimate of the related expenditure for the current year. The basis of recognising these expenditures includes monthly costs that NPDC initially do not approve with the operator but which are expected to be approved on subsequent review by the Joint Operating Committee the following year. As a result, the recognition of these revised expenditures have resulted in reduced production entitlement, and therefore a decrease in underlift for the Group under the terms of the financial model referred to above. The current year results include net debits within cost of sales of $107.1 million (2014: $12.9 million net credit) in relation to the agreement of previously unapproved prior years’ costs, and a net debit of $34.1 million (2014: $60.5 million net credit) for the best estimate of the current year unapproved costs.

Going concernManagement are required to make estimates and judgements in respect of the quantum and timing of forecast cash flows used to confirm the application of the going concern principle. Further details are provided in note 3 to the Financial Statements.

Fair value measurementFrom time to time the Group is required to determine the fair values of both financial and non-financial assets and liabilities e.g., when the entity acquires a business (such as Gas Transmission and Power Limited – see note 34), or where an entity measures the recoverable amount of an asset or cash-generating unit (CGU). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Changes in estimates and assumptions about these inputs could affect the reported fair value.



5. Revenue2015$000

2014$000

Oil sales 261,193 344,426

Gas sales 92,378 33,729

Revenue 353,571 378,155

Investment revenue 536 83

Total 354,107 378,238

Revenue from oil sales for both years primarily relates to the Group’s sale of oil lifted from the Strategic Alliance Agreement. In addition, during 2015, the Group had oil sales as a result of the commencement of oil production from its Uquo and Stubb Creek fields in the South east Niger Delta. Revenue from gas sales in 2015 represents deliveries made to the Group’s five existing customers (2014: two).

6. Cost of sales2015$000

2014$000

Production expenses

Production costs – oil 155,758 208,678

Production costs – gas 34,642 23,058

190,400 231,736

Less: decrease/ (increase) in underlift – oil (note 18) 61,985 (190,620)

Cost of sales 252,385 41,116

Oil production costs in both years primarily relates to the Group’s share of production costs associated with the Strategic Alliance Agreement. (“SAA”). In addition, during 2015, oil production commenced at the Uquo and Stubb Creek fields. The decrease in production costs largely reflect updates to prior year operational costs, previously estimated by the operator. The cumulative underlift balance of $223.1 million (2014: $285.1 million), shown within inventories, is primarily associated with the SAA.

Gas production costs relate to production from the Uquo field. Production expenses increased in 2015 as a result of an increase in production volumes at the field as the Group’s customer base has expanded from two to five.

7. Business and geographical segmentsThe accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment operating result represents the profit/ (loss) by each segment without allocation of central administration costs, investment revenue, finance costs, and tax. Segment operating result is provided to the Board for the purpose of resource allocation and assessment of segment performance.

Segment revenues and resultsThe following is an analysis of the Group’s revenue and results by reportable segment in 2015:

North west2015$000

South east2015$000

Anambra basin2015$000

Corporate2015$000

Total2015$000

Revenue 248,007 105,564 – – 353,571

Production expenses (147,261) (43,139) – – (190,400)

Increase/ (decrease) in underlift (63,523) 1,538 – – (61,985)

Depletion (59,910) (54,524) – – (114,434)

Gross (loss)/ profit (22,687) 9,439 – – (13,248)

Depreciation and amortisation – (2,539) (40) (741) (3,320)

Impairment charge (90,381) – – – (90,381)

Other operating costs (174) (3,121) – – (3,295)

Administrative expenses (400) (17,206) (337) (17,310) (35,253)

Segment operating result (113,642) (13,427) (377) (18,051) (145,497)

Investment revenue 536

Finance costs (103,420)

Foreign exchange gains 6,925

Loss before tax (241,456)

Tax credit 59,370

Loss for the year (182,086)



7. Business and geographical segments (continued)Segment revenues and results (continued)The following is an analysis of the Group’s revenue and results by reportable segment in 2014:

North west2014$000

South east2014$000

Anambra basin2014$000

Corporate2014$000

Total2014$000

Revenue 345,436 32,719 – – 378,155Production expenses (205,121) (26,615) – – (231,736)Increase in underlift 190,620 – – – 190,620Depletion (90,667) (31,306) – – (121,973)

Gross profit/ (loss) 240,268 (25,202) – – 215,066

Depreciation and amortisation – (2,328) (15) (657) (3,000)

Other operating costs (247) (4,678) – – (4,925)

Administrative expenses (3,475) (28,902) (256) (26,098) (58,731)

Segment operating result 236,546 (61,110) (271) (26,755) 148,410

Investment revenue 83Finance costs (76,181)Foreign exchange gains 7,821

Profit before tax 80,133Tax expense (25,569)

Profit for the year 54,564

Revenue and cost of sales for the north west Niger Delta in both years relate to the Group’s share of production entitlement from the Strategic Alliance Agreement. Lifting quantities under this agreement, allocated to the Group, are notified by NPDC periodically, with cash received from Shell Western Supply & Trading Ltd (“Shell”) from subsequent sale via Shell’s Forcados Export Terminal. Currently, revenues from the SAA represent more than ten percent of the Group’s total revenue. In the south east Niger Delta, revenues and cost of sales predominantly relate to gas deliveries to the Group’s five customers (2014: two), and commencing in 2015, oil sales were made from the Uquo and Stubb Creek fields to Exxon Mobil’s Quo Iboe Terminal.

Segment assets2015$000

2014$000

North west 788,618 1,009,316South east 1,357,049 1,284,365Anambra basin 116,518 64,131Corporate 13,415 18,961

Total assets 2,275,600 2,376,773

The Board monitors resources allocated to each of the reportable segments through review of segment assets to include property, plant and equipment, intangible assets and financial assets attributable to each segment. With the exception of certain financial assets and tax assets, all assets are allocated to reportable segments. Liabilities are monitored at a Group level and not allocated to reportable segments.

Other segment information – additions to non-current assets2015$000

2014$000

North west 125,295 407,900South east 88,428 489,592Anambra basin 40,632 64,131Corporate 1,651 1,062

Total additions 256,006 962,685

8. Other operating expenses2015$000

2014$000

Inventory provision (note 18) 36 577Other operating costs 3,259 4,348

Total other operating expenses 3,295 4,925



9. Administrative expenses2015$000

2014$000

Gross staff costs (note 11) 32,192 40,755

Other administrative expenses 20,396 33,080

Timewriting recharges to capital projects or production expenses (17,335) (15,104)

Total administrative expenses 35,253 58,731

10. Auditor’s remunerationThe analysis of auditor’s remuneration is as follows:

2015$000

2014$000

Fees payable to the Company’s auditors for the audit of the Group’s annual accounts 349 291

Fees payable to the Company’s auditor and their associates for other services to the Group:

– Audit of the Company’s subsidiaries pursuant to legislation 369 330

Total audit fees 718 621

Audit related assurance services 69 66

Tax services – 3

Corporate finance services 80 610

Other services 15 89

Total non-audit fees 164 768

Corporate finance services during 2014 includes fees incurred as part of the Group’s Senior Secured Loan Notes and Private Bond issuance in October 2014.

11. Staff costs The average monthly number of employees was:

2015Number

2014Number

Management 4 4

Operations and support staff 123 116

Administration 71 69

Total number of employees 198 189

Their aggregate remuneration comprised:2015$000

2014$000

Wages and salaries 22,292 31,113

Social security costs 2,644 3,444

Defined contribution pension costs (note 26) 2,269 2,048

Expense of share-based payments (note 31) 4,987 4,150

Total staff costs 32,192 40,755

Some of the Group’s gross staff costs above were subsequently recharged to the Group’s joint venture partners or capitalised through timewriting into the cost of fixed assets under the Group’s policy for Property, plant and equipment, or recharged through timewriting to Production expenses.



12. Finance costs2015$000

2014$000

Bank and other finance fees 12,452 21,031

Interest on bank loans and loan notes 90,282 61,142

Interest and other financial costs on convertible bonds – 31,439

Total interest expense 102,734 113,612

Unwinding of discount on decommissioning provision (note 24) 2,766 1,118

Gain on redemption of convertible bonds – (182)

105,500 114,548

Less: amounts capitalised in the cost of qualifying assets (note 16) (2,080) (38,367)

Total finance costs 103,420 76,181

Interest capitalised in 2015 relates to general pool borrowings raised by the Group’s subsidiaries attributable to the construction of the Oron to Creek Town pipeline, using the Group’s capitalisation rate of 11.7%. In 2014, interest capitalised related to directly attributable borrowings raised for the construction of the now completed Uquo to Oron pipeline, and other Group borrowings applied to qualifying additions using the Group’s capitalisation rate of 13.9%.

13. Tax The tax credit/ (expense) for the year is as follows:

2015$000

2014$000

Current tax

Adjustment in respect of prior years 7 330

Deferred tax (note 21)

Adjustment in respect of prior years (3,331) (3,804)

Current year 62,694 (22,095)

Tax credit/(expense) for the year 59,370 (25,569)

Corporation tax is calculated at the applicable tax rate for each jurisdiction based on the estimated assessable profit for the year. The Group’s outstanding current tax liabilities of $0.7 million (2014: $0.7 million) relate to corporation tax liabilities in Nigeria from prior year.

The credit/ (expense) for the year is reconciled below to the (loss)/ profit before tax per the consolidated statement of comprehensive income. The prior year comparative has been re-presented in the year to reconcile to the Nigerian corporation tax rate as this is considered to give a more useful analysis than to the UK corporation tax rate previously reported.

2015$000

2014$000

(Loss)/ profit before tax: (241,456) 80,133

Tax credit/(charge) at the Nigerian corporation tax rate (30%): 72,437 (24,040)

Tax effects of:

– Petroleum profits tax on oil activities 5,920 4,289

– Changes in effective future tax rates (3,586) (1,963)

– Education tax 1,972 (4,396)

– Expenses not deductible for tax purposes (2,493) (3,016)

– Unrecognised losses in head office and holding companies (6,553) (12,660)

– Other tax losses carried forward (220) (77)

– Other timing differences not recognised (2,068) (1,193)

– Tax holidays (2,715) (11,098)

– Initial recognition of deferred tax balances – 32,059

– Adjustments in respect of prior years (3,324) (3,474)

Tax credit/ (expense) for the year 59,370 (25,569)



14. Earnings per shareFrom continuing operationsThe calculation of the basic and diluted (loss)/ earnings per share is based on the following data:

2015 2014

(Loss)/ profit for the purposes of basic and diluted (loss)/ earnings per share ($000) (180,993) 56,028

Weighted average number of ordinary shares for the purposes of basic (loss)/ earnings per share (i)] 3,951,155 3,514,916

Weighted average number of ordinary shares for the purposes of diluted (loss)/ earnings per share (i)] 3,951,155 3,519,808

Basic (loss)/ earnings per ordinary share ($) (45.8) 15.9

Diluted (loss)/ earnings per ordinary share ($) (45.8) 15.9

(i) The calculation of weighted average number of ordinary shares includes the weighted average number of shares that would be issued on conversion of the ICLNs as, for the reasons outlined in note 29, the ICLNs are believed to represent equity instruments of the Company.

In 2015, there were 358,645 (2014: 302,261) of additional potentially dilutive instruments (being share options, warrants and ICLN pricing options) that were not included in the calculation of diluted (loss)/ earnings per share because they were anti-dilutive.

15. Intangible assets Oil and gas exploration and appraisal assets

Total$000

At 1 January 2014 –

Additions 9,765

Acquisitions 64,131

At 31 December 2014 73,896

Additions 19,741

Transfers to Property, plant and equipment (note 16) (27,601)

Acquisitions (note 34) 38,678

At 31 December 2015 104,714

Additions to oil and gas exploration and appraisal assets during 2014 related to expenditure on Uquo North East 1 prospect exploration well which was drilled at the end of 2014. Acquisitions in 2014 related to the Company’s acquisition of a 40% licence interest (60% economic interest) in Oil Prospecting Licence 905 (“OPL 905”) via its acquisition of the entire share capital of SRL 905 Holdings Limited on 31 January 2014.

Additions during 2015 relate to remaining expenditure to complete the Uquo North East 1 well, along with initial preparation work for future seismic studies on the Group’s Anambra basin assets. The Uquo North East 1 well successfully identified commercial quantities of oil and gas, such that $27.6m of costs were transferred from Intangible assets to Upstream assets within Property, plant and equipment (see note 16).

Acquisitions in 2015 related to the Company’s acquisition of a further 50% licence interest (36% economic interest) in OPL 905 via its acquisition of the entire share capital of Gas Transmission and Power Limited (“GTPL”) on 27 February 2015. The Company now holds, in total, a 90% licence interest and 96% economic interest in OPL 905.



16. Property, plant and equipmentUpstream

assets$000

Infrastructure assets$000

OtherPP&E(i)

$000Total$000

Cost

At 1 January 2014 939,437 559,348 13,405 1,512,190

Additions 444,353 120,024 4,222 568,599

Acquisitions – 269,822 81 269,903

Disposal – – (505) (505)

At 31 December 2014 1,383,790 949,194 17,203 2,350,187

Additions 125,294 53,904 1,756 180,954

Revisions to prior year SAA cost estimates (139,054) – – (139,054)

Transfer from Intangible assets (note 15) 27,601 – – 27,601

Acquisitions (note 34) – – 24 24

Disposal – – (3,013) (3,013)

At 31 December 2015 1,397,631 1,003,098 15,970 2,416,699

Accumulated depreciation, depletion and impairment

At 1 January 2014 (234,807) (118,712) (8,050) (361,569)

Charge for the year (95,066) (26,907) (3,000) (124,973)

Disposal – – 363 363

At 31 December 2014 (329,873) (145,619) (10,687) (486,179)

Charge for the year (79,948) (34,486) (3,320) (117,754)

Impairment (90,381) – – (90,381)

Disposal – – 2,918 2,918

At 31 December 2015 (500,202) (180,105) (11,089) (691,396)

Carrying amount

At 31 December 2014 1,053,917 803,575 6,516 1,864,008

At 31 December 2015 897,429 822,993 4,881 1,725,303

(i) Other PP&E consists of vehicles, leasehold improvements and furniture, fixtures and equipment.

In 2015, $56.1 million (2014: $100.6 million) of additions to upstream and infrastructure assets related to assets in the course of construction on the Uquo field, including the construction of the Oron to Creek Town gas pipeline. The net book value of assets in the course of construction at 31 December 2015 was $56.1 million (2014: $nil). During 2014, $330.1 million of assets were transferred from assets in the course of construction being the Uquo to Oron pipeline, Stubb Creek field, FUN oil gathering manifold and second train of the Uquo gas processing facility.

Infrastructure asset acquisitions in 2014 include $269.8 million associated with the acquisition of East Horizon Gas Company Limited on 31 March 2014.

$125.3 million was incurred for the Group’s share of ongoing capital expenditures under the SAA (2014: $407.9 million). In addition there were reductions in prior year capital expenditures of $139.1 million as a result of revisions made by the operator and NPDC to estimates of field expenditures.

Transfers during 2015 relates to costs incurred on drilling the Uquo North East –1 well which successfully identified commercial quantities of oil and gas, advancing the asset from the exploration and appraisal phase to development and production (note 15).

Additions described above included capitalised interest of $2.1 million (2014: $38.4 million) from general borrowings raised by the Group for the construction of the Oron to Creek Town pipeline using the Group’s capitalisation rate of 11.7% (2014: 13.9%). In 2014, in addition to general borrowings, capitalised interest additions included directly attributable borrowings used to fund the now completed Uquo to Oron pipeline.

The Group has granted fixed charges over $523.8 million of its oil and gas assets to secure borrowings (2014: $487.5 million).



16. Property, plant and equipment (continued)

In 2015, an impairment charge of $90.4 million within upstream assets reflects the reduction in carrying value of capital expenditures of the north west Niger Delta reporting segment, comprising the SAA. The impairment is largely as a result of the significant reduction in oil prices experienced during the year, and the revised future oil price forecasts compared to the previous year’s impairment assessment, which has the effect of delaying the recovery of the Group’s cost oil and reduces the residual profit oil.

The charge has been calculated by estimating the excess of the cash generating unit’s carrying value over the recoverable amount. The recoverable amount has been determined by using a value in use discounted cash flow model. In preparing the discounted cash flow model, management have used a number of assumptions, including a long-term forecast oil price of $60 per barrel and a 43.8% pre-tax discount rate (equivalent to an 11.5% post-tax discount rate).

17. Trade and other receivables 2015$000

2014$000

Trade receivables

Receivables from sales 79,572 28,040

Amounts receivable from joint venture partners 4,945 325

Total trade receivables 84,517 28,365

Other receivables

Deposits 456 602

VAT receivables 3,811 2,453

Other receivables (i) 19,729 7,262

Rental prepayments 4,565 3,210

Other prepayments 5,937 4,381

Total trade and other receivables 119,015 46,273

(i) Included within Other receivables are amounts owed from related parties of $2.4 million (2014: $2.3 million) (see note 33).

The average credit period given on joint interest billings and oil and gas sales is 60 days. The Group does not currently charge interest on past due receivables although in the event receivables become past due the Group can do so at rates specified in the various agreements. The Group periodically reviews all receivables outstanding to assess their recoverability.

Prior year provisions made within other receivables relate to past withholding taxes refundable from Nigerian vendors and historic payroll taxes. In addition, during the year an additional provision of $1.1 million (2014: $0.5 million) has been made against historical amounts recoverable from joint venture partners. No other trade and other receivable balances were impaired.

2015$000

2014$000

Provisions against receivables

Opening balance (2,043) (1,895)

Provided during the year (1,100) (538)

Utilisation of provision 501 390

Closing balance (2,642) (2,043)

2015$000

2014$000

Non-current other receivables

Other receivables 1,445 –

Debt service reserve account for Group borrowings 4,956 5,827

Stamp duty escrow reserve for Group borrowings 2,240 2,440

Total non-current other receivables 8,641 8,267

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.



18. Inventories2015$000

2014$000

Underlift – oil 223,072 285,057

Gas inventories 531 135

Spare parts 5,385 6,204

Total inventories 228,988 291,396

The underlift mainly includes the Group’s share of unsold production entitlement under the SAA. The underlift decrease of $62.0 million in the year (2014: $190.6 million increase) reflects $127.0 million reduction due to prior year cost revisions notified under the SAA offset by $65.0 million of current year production entitlement in excess of current year liftings (note 6).

Provisions for obsolete inventory held at 31 December 2015 were $0.6 million (2014: $0.6m) (note 8).

19. Cash and cash equivalents2015$000

2014$000

Held in Nigerian banks 27,768 26,250

Held in banks outside Nigeria 2,705 12,204

Cash and cash equivalents 30,473 38,454

Restricted cash balances 7,219 8,272

Total cash and cash equivalents 37,692 46,726

Presented as:

Restricted cash: in non-current other receivables (note 17) 7,196 8,267

Restricted cash: in trade and other receivables (note 17) 23 5

Cash and cash equivalents 30,473 38,454

Total cash and cash equivalents 37,692 46,726

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. Restricted cash balances include deposits, stamp duty and debt service reserve amounts required to be held relating to the Group’s borrowings. The carrying amount of these assets is approximately equal to their fair value.

20. Trade and other payables 2015$000

2014$000

Trade payables 80,447 28,052

Accruals 456,875 491,185

Other payables 13,888 55,861

PAYE and social security 1,860 1,004

WHT and VAT payable 18,858 16,858

Interest payable 13,127 10,739

Total trade and other payables 585,055 603,699

Trade payables and accruals principally comprise amounts outstanding to the Group’s joint venture partners, for capital expenditures, ongoing operational and corporate costs and amounts cash called or accrued under the SAA. The increase in accruals during the year includes costs associated with the Strategic Alliance Agreement which are initially unapproved by NPDC with the operator, but which are expected to be approved on subsequent review during 2016.

The average credit period taken for trade purchases is 53 days (2014: 40 days). For most suppliers, no interest is charged on the trade payables for the first 30 days from the date of the invoice. The Group has working capital risk management policies in place to ensure that all payables are paid within the agreed credit terms where possible. The Directors consider that the carrying amount of trade and other payables approximates to their fair value.



21. Deferred taxThe following are the deferred tax assets/ (liabilities) recognised by the Group and movements thereon during the current and prior year.

Fixed assets $000

Unrealised FX (gains)/

losses$000

Share- based

payments $000

Tax losses$000

Strategic Alliance

Agreement$000

Other provisions

$000

Capitalised interest

$000Total$000

At 1 January 2014 (16,463) 707 2,210 19,308 (77,899) 568 (917) (72,486)

Adjustments in respect of prior years 1,252 – 1,835 726 (7,617) 2 (2) (3,804)

Acquisitions (39,265) – – 8,268 – – – (30,997)

Credit/(expense) to income 71,243 (3,486) 1,197 4,514 (95,203) – (360) (22,095)

At 31 December 2014 16,767 (2,779) 5,242 32,816 (180,719) 570 (1,279) (129,382)

Adjustments in respect of prior years (4,889) 933 255 713 (1,065) 876 (154) (3,331)

Acquisitions (11,414) – – – – – – (11,414)

Credit/(expense) to income – current year 60,077 (2,020) 1,483 15,714 (12,393) (205) 38 62,694

At 31 December 2015 60,541 (3,866) 6,980 49,243 (194,177) 1,241 (1,395) (81,433)

Certain deferred tax assets and liabilities have been offset in line with the Group’s accounting policy (note 3). The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

2015$000

2014$000

Deferred tax liabilities (128,371) (172,333)

Deferred tax assets 46,938 42,951

Total net deferred tax liabilities (81,433) (129,382)

At the balance sheet date, the Group has unused tax losses of $382.2 million (2014: $302.7 million) available for offset against future profits. A deferred tax asset has only been recognised where future utilisation of such losses is considered probable. A deferred tax asset has been recognised on gross losses of $126.8 million (2014: $88.8 million) on the basis of the Group’s forecast results for each entity. No deferred tax asset has been recognised in respect of the remaining $255.4 million (2014: $213.9 million) of losses. Included in unrecognised tax losses are losses of $1.6 million (2014: $0.2 million) which will expire in 2018-2022. Other losses will be carried forward indefinitely.

The following deferred tax assets in entities which made a loss during the current or preceding year have been recognised on the basis of the Group’s forecast results for each entity:

2015$000

2014$000

Fixed assets 46,493 42,432

Share based payments 445 467

Other provisions - 52

Total deferred tax assets 46,938 42,951



22. Borrowings2015$000

2014$000

Secured borrowing at amortised cost

Bank loans (i)

– Loans from non-related parties 433,407 389,115

Other loans (ii)


– Loans from related parties (note 33) 50,000 50,000

Unsecured borrowing at amortised cost (iii)


– Loans from related parties (note 33) 7,800 8,533

Total gross borrowings 899,017 808,704

Unamortised finance costs incurred on raising debt (53,546) (42,612)

Total borrowings (net of unamortised finance costs) 845,471 766,092

Analysed as:

Current borrowings – scheduled repayments within one year 70,111 94,453

Current borrowings – scheduled repayments after more than one year 354,542 18,057

Non-current borrowings 420,818 653,582

Total borrowings 845,471 766,092

The contractual maturity profile of the Group’s gross borrowings including future interest expense on an undiscounted basis is shown in the table below. This differs from both the carrying value and the fair value due to the effect of discounting, future interest costs and unamortised finance fees. Interest expense on floating rate debt is based on the relevant LIBOR and NIBOR forward rates.

2015$000

2014$000

Current

Amount due within one year 166,259 171,138

Amount due after one year but within two years 125,951 15,058

Amount due after two years but within five years 323,292 4,016

Non-current

Amount due after one year but within two years 49,237 125,774

Amount due after two years but within five years 183,606 401,908

Amount due after five years 441,137 482,500

Total 1,289,482 1,200,394

(i) Bank loansAccugas IV facilityOn 27 July 2015, the Group refinanced the Project Finance and Acquisition Finance facilities into a single, combined facility of up to $445.0 million (“Accugas IV Facility”), $385.0 million of which has been initially drawn being $225.0 million that had been previously drawn on the Project Finance Facility (31 December 2014: $225.0 million) and $160.0 million on the Acquisition Finance Facility (31 December 2014: $130.0 million). The Accugas IV Facility bears interest at US LIBOR plus 10.0% per annum and is repayable in quarterly instalments from 31 March 2016 to 30 September 2019. As at 31 December 2015 and 31 March 2016, Accugas Limited had not fully funded the minimum balance on the Debt Service Reserve Account, which represents a technical breach. A waiver request was sought prior to the year-end. Conditional approval was received on 4 April 2016 (see note 3 – Going concern for further details). The balance of the outstanding loan has been disclosed within Current borrowings – scheduled repayments after more than one year.

Bank of Industry loan facilityAt 31 December 2015, the outstanding loan principal on the Naira denominated Bank of Industry Loan Facility, held by the Group’s subsidiary EHGC, was $18.2 million (31 December 2014: $34.1 million). The loan bears interest of 7.0% per annum and is repayable in quarterly instalments until June 2017. At the time of acquisition, and continuing to 31 December 2015, EHGC was not in compliance with certain financial covenants under the provisions of the facility. As a consequence, the balance of the loan has been disclosed within Current borrowings – scheduled repayments after more than one year. Continuing from 2014, the Group has an informal waiver of these non-compliant covenants from the lenders. EHGC is working with the lenders to rectify the position and continues to meet its on-going debt service obligations.

Naira working capital facilityOn 7 October 2015, the Group, through its subsidiary Seven Uquo Gas Limited, entered into a four year Naira denominated working capital facility agreement with Kakawa Discount House Limited. As at 31 December 2015 the amount drawn down on the facility was $30.2 million. The facility bears interest at NIBOR plus 4% per annum and requires a mandatory full repayment of outstanding principal annually.



22. Borrowings (continued)(ii) Other loans Senior secured loan notesThe Group has Senior Secured Loan Notes listed on the Irish Stock Exchange. The total principal outstanding at 31 December 2015 was $300.0 million (31 December 2014: $300.0 million). $50.0 million of loan notes were issued to the International Finance Corporation, a security holder and related party of the Group. The notes, issued at a discount, mature in 2021 and have a fixed coupon of 10.25%, paid semi-annually.

Private BondThe Group has a Private Bond issued to the Nigeria Sovereign Investment Authority. The total principal outstanding at 31 December 2015 was $100.0 million (31 December 2014: $100.0 million). The Bond, issued at par, matures in 2021 and has a fixed coupon of 10.5%, paid semi-annually.

Senior secured term loansOn 23 June 2015, the Group entered into two new senior secured term loan facilities which are pari passu with the Senior Secured Loan Notes and Private Bond, and have similar covenant requirements. The use of the proceeds are for general corporate purposes and working capital funding. These facilities are described below:

Senior Secured Term Loan Facility I – $25.0 million loan commitment for a term of four and a half years, with an option to extend for a further 18 months, subject to further approval. The repayment of any outstanding balance is due at the end of December 2019. During the term, amounts can be redrawn or repaid at any time. Interest accrues on the principal at US LIBOR plus 10.25% per annum and is payable quarterly. As at 31 December 2015, $25.0 million was outstanding.

Senior Secured Term Loan Facility II – $26.8 million loan commitment with a term of five years. Loan amortisation commences annually from December 2016 at approximately 10.0% of the total commitment until 2019, with the remaining balance due by June 2020. Interest accrues on the principal at US LIBOR plus 10.25% per annum for the first 18 months, increasing by 0.5% per annum every six months thereafter. Interest is payable semi-annually. As at 31 December 2015, $26.8 million was outstanding.

(iii) Unsecured borrowings at amortised cost Loans from non-related partiesThe Group has a promissory note issued as part consideration for the acquisition of the Group’s 22.5% interest in Afren Global Energy Resources Limited in 2014. During the period the Group exercised its option to extend the term of the note, from its initial six month term, by one year. Once extended, the note became interest bearing at US LIBOR plus 10.0% per annum for the extension period (payable semi-annually) with $6.0 million of principal being repaid in December 2015. The remaining balance is payable by June 2016. At 31 December 2015, $6.0 million of principal amount remained outstanding (31 December 2014: $12.0 million).

Loans from related partiesThe Group, through its subsidiary Universal Energy, holds a Naira denominated loan due to Akwa Ibom Investment and Industrial Promotion Council (a minority shareholder in Universal Energy) for $7.8 million (2014: $8.5 million). The loan agreement assumed that oil production would commence during 2013 and that the proceeds from oil revenues would be used to service Universal Energy’s debt obligations. As such, principal repayments were to commence from September 2013 in semi-annual instalments, together with interest payments from commencement of first oil production at 15.0% per annum. Due to the delays in the commencement of oil production, as at 31 December 2015, Universal Energy had failed to make any of the payments due and, therefore, was not in compliance with the loan agreement. As a consequence, the loan has been disclosed within Current borrowings – scheduled repayments after more than one year. Universal Energy’s management are in discussion with the lender to reschedule the repayment and interest schedule.

Weighted average interest rateThe weighted average effective interest rates charged on borrowings during the years were as follows:

2015%

2014%

Weighted average effective interest rate 11.78 12.81



23. Financial instrumentsCategories of financial instruments

2015$000

2014$000

Financial assets

Cash and cash equivalents (note 19) 30,473 38,454

Loans and receivables 113,342 44,497

Total 143,815 82,951

Financial liabilities

Held at amortised cost

Trade and other payables 436,803 281,994

Borrowings (note 22) 845,471 766,092

Total 1,282,274 1,048,086

With the exception of the Senior Secured Loan Notes and Private Bond, the Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Statements are a reasonable approximation to their fair values. The combined fair values of the Senior Secured Loan Notes and Private Bond at 31 December 2015 was $204.0 million (2014: $363.3 million).

Significant accounting policiesDetails of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the Financial Statements.

Capital risk managementThe Group manages its capital, including ongoing monitoring and adherence to covenants and indebtedness obligations of its borrowings to ensure that entities in the Group will be able to continue as going concerns while maximising the returns to stakeholders. The capital structure of the Group currently consists of net debt, which includes the borrowings and cash and cash equivalents, and equity which consists of irredeemable convertible loan notes and ordinary share capital. The irredeemable convertible loan notes are categorised as equity due to the terms of these instruments.

Financial risk management objectivesThe Group’s Finance function coordinates access to international financial markets and monitors and manages the financial risks relating to the operations of the Group. These risks include commodity price risk, currency risk, credit risk, interest rate risk and liquidity risk.

Commodity price riskThe Group’s activities expose it primarily to the financial risks of changes in oil and gas commodity prices. The Group monitors and manages this risk where considered appropriate through long-term sales contracts.

The Group has exposure to changes in the oil price; however, this is mitigated to an extent as, under the terms of the Strategic Alliance Agreement, the Group recovers its cost oil in absolute US Dollar terms. Changes in the oil price only affects the timing of cost recovery, the number of barrels lifted, and the value of any residual profit oil.

The Group has a number of gas sales agreements of up to twenty years that contain long term fixed gas prices. As a result, changes in the market gas price over the duration of each agreement would have no impact on the Group’s result and equity in the current or future periods. Foreign currency risk management and sensitivity analysisThe Group operates internationally and has exposure to currency risk on purchases, sales, cash and cash equivalents that are denominated in currencies other than US Dollars. The currencies giving rise to this are principally the British Pound Sterling and Nigerian Naira. The Group’s exposure to foreign exchange fluctuations is reduced by maintaining cash balances primarily in US Dollars, wherever possible, reflecting the currency of the majority of the Group’s transactions, and where possible, the Group seeks to settle non-US Dollar denominated liabilities in the same currency as other cash inflows, thereby providing a natural hedge against currency fluctuations.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:Liabilities Assets Net assets/(liabilities)

2015$000

2014$000

2015$000

2014$000

2015$000

2014$000

British Pound Sterling (2,627) (4,049) 2,327 4,934 (299) 885

Nigerian Naira (110,790) (87,446) 21,511 13,240 (97,097) (74,206)



23. Financial instruments (continued) Foreign currency risk management and sensitivity analysis (continued)For 2015, a 20% increase and decrease in the US Dollar against the Sterling currency for 2015 would have resulted in a decrease in loss and an increase in equity of less than $0.1 million and increased loss and decreased equity of less than $0.1 million, respectively. For 2014, a 20% increase and decrease in the US Dollar against the Sterling currency would have resulted in an increase in profit and equity of $0.2 million and a decrease of $0.2 million, respectively.

For 2015, a 20% increase and decrease in the US Dollar against the Naira currency for 2015 would have resulted in a decrease in loss and increase in equity of $18.9 million and an increase in loss and decrease in equity $20.1 million respectively. For 2014, a 20% increase and decrease in the US Dollar against the Naira currency would have resulted in an increase in profit and equity of $13.4 million and a decrease of $17.0 million, respectively.

Credit risk managementCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or advance payment where appropriate, as a means of mitigating the risk of financial loss from defaults.

Exposure to credit risk in the periods shown is considered to be mitigated to an extent because the bulk of cash inflows from sales are from an international super-major (associated with the Strategic Alliance Agreement with a Nigerian national oil company subsidiary) or from Nigerian state-owned power companies, albeit, the current oil price environment has placed significantly increased pressure on the Nigeria Government’s finances. Other funding sources are considered to be from reputable and international banking institutions and security holders.

Further dilution of credit risk is expected to occur in the future in relation to the sale of oil and gas in Nigeria as the Group’s gas operations expand and the customer base diversifies. The Group will look to further mitigate this risk by obtaining letters of credit or bank guarantees where appropriate to support payments where possible.

The carrying amount of financial assets recorded in the Financial Statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk as no collateral is held.

Interest rate risk management and sensitivity analysisThe Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group maintaining an appropriate mix between fixed and floating borrowings and floating rates are typically based on stable indices (e.g. LIBOR).

The sensitivity analyses below have been determined for floating rate liabilities based on the exposure to interest rates at the balance sheet date. For floating rate liabilities, the analysis is prepared based on the weighted average liability outstanding during the year.

If interest rates had been 0.5% higher or lower, and all other variables were held constant, the Group’s gross interest costs (before any interest capitalisation adjustment) for the year ended 31 December 2015 would have increased or decreased respectively by $1.9 million (2014: $2.4 million). This is attributable to the Group’s exposure to interest rates on its variable rate borrowings.

The Group had cash and cash equivalents on hand on which it earned investment income. A 0.5% increase or decrease in the interest rate would have resulted in an increase or decrease in investment income of $0.2 million (2014: $0.2 million).



23. Financial instruments (continued)Liquidity risk managementUltimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group maintains adequate liquid reserves, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The Group closely monitors and manages its liquidity risk. Cash forecasts are regularly produced and sensitivities run for different scenarios including, but not limited to, changes in commodity prices, different production rates from the Group’s portfolio of producing fields and delays in development projects. In addition, the Group regularly monitors its utilised and unutilised amounts of its borrowings in place (further details of which are provided in note 22). Subject to the successful completion of the conditional Accugas IV Facility DSRA waiver, received on 4 April 2016, the Group’s forecasts show that the Group will be able to operate within its current debt facilities and has sufficient financial headroom for the next 12 months.

Refer to note 19 for the respective locations of the Group’s cash reserves. All of the Group’s cash and cash equivalents are currently held within reputable and well known commercial institutions.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities (excluding borrowings, the repayment terms of which are provided in note 22). The amounts are based on undiscounted cash flows and on the earliest date on which the Group can be required to pay.

2015$000

2014$000

Less than 30 days 425,710 271,255

31–60 days - –

61–90 days 662 1,472

91+ days 10,431 9,267

Total 436,803 281,994

24. Provisions$000

Balance at 1 January 2014 26,045

Provided during the year 22,596

Unwinding of the discount (note 12) 1,118

Balance at 31 December 2014 49,759

Provided during the year 1,518

Released during the year (3,098)

Unwinding of the discount (note 12) 2,766

Balance at 31 December 2015 50,945

Presented as:

Current balance at 31 December 2014 –

Non-current balance at 31 December 2014 49,759

Total balance at 31 December 2014 49,759

Current balance at 31 December 2015 –

Non-current balance at 31 December 2015 50,945

Total balance at 31 December 2015 50,945

The Group provides for the present value of estimated future decommissioning costs for certain of its oil and gas assets in Nigeria. The amounts shown are expected to be settled between 2027 and 2039.

During the year, net $1.6 million was released as a result of updating the assumptions for the estimated future liabilities offset by additional provisions for capital expenditure on the Oron to Creek Town pipeline during the year. In 2014, $22.6m provided related predominately to the future decommissioning of the constructed Uquo to Oron pipeline and the EHGC pipeline acquired in March 2014.



25. Capital commitments and other contingenciesOperating lease commitments – Group as lessee

2015$000

2014$000

Minimum lease payments under operating leases recognised as an expense in the year 2,656 3,308

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2015$000

2014$000

Within one year 882 644

In the second to fifth years inclusive 2,407 2,350

Total 3,289 2,994

Operating lease payments represent rentals payable by the Group for certain of its office and staff housing properties. Leases are typically negotiated for terms of one to five years. Leases in Nigeria are typically fully paid in advance.

Capital commitments2015$000

2014$000

Oil and gas assets – development 25,790 59,377

Oil and gas assets – exploration and evaluation – 3,205

Total 25,790 62,582

The commitments for development of oil and gas assets relate primarily to the contractually committed amounts for the construction of the Oron to Creek Town pipeline due to be completed in 2016. The construction contract contains a termination clause that can be exercised by the Group with 15 days’ notice with commitment only to reimburse for the value of work performed.

26. Retirement benefit schemesDefined contribution schemesThe Group operates defined contribution retirement benefit schemes for all qualifying employees. The assets of the schemes are held separately from those of the Group in funds under the control of trustees.

The employees of the Group’s subsidiaries in Nigeria are members of a state-managed retirement benefit scheme operated by the Government of Nigeria. The subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.

The total cost charged to income of $2.3 million (2014: $2.0 million) represents contributions payable to these schemes by the Group at rates specified in the rules of the plans. As at 31 December 2015, contributions of $0.4 million (2014: $0.2 million) due in respect of the year ended 31 December 2015, had not been paid over to the schemes and are recorded within Trade and other payables.

27. Deferred revenueThe deferred revenue balance at 31 December 2015 of $79.3 million (2014: $46.8 million) represents the excess of cumulative take-or-pay invoices issued since first gas production commenced in 2014, over and above the total gas volumes delivered (and recognised within revenue in 2014 and 2015).

The total amount shown as deferred revenue has been split into a current and a non-current liability, based on the future expected make-up gas delivery profile.

31 December 2015$000

31 December 2014$000

Current liability – 12,204

Non-current liability 79,316 34,605

Total 79,316 46,809



28. Share capital 2015$000

2014$000

Issued and fully paid:

514,243 ordinary shares of $0.01 each (2014: 511,575 ordinary shares of $0.01 each) 5 5

During the year, 2,668 new ordinary shares were issued to a member of the Group’s Executive Committee as the third and final part of his employment arrangements upon joining Seven Energy.

The Company does not have a specified number of shares authorised for issue. The Company has one class of ordinary shares which carries no right to fixed income.

29. Irredeemable convertible loan notesThe Company has ICLNs in issue. The following ICLNs were issued during 2014 and 2015 and were still outstanding at the year end:

ICLN value$000

Conversion price per share

$

Number of ordinary shares if

converted

At 1 January 2014 612,583 n/a 2,198,670

ICLNs issued 288,000 250.00 1,151,997

Issuance costs (5,141) n/a –

At 31 December 2014 895,442 n/a 3,350,667

ICLNs issued 25,650 250.00 102,600

Issuance costs (183) n/a –

At 31 December 2015 920,909 n/a 3,453,267

The ICLNs are non-interest-bearing and are not repayable. They are convertible by the holder into ordinary shares of the Company at any time between the date of issue of the notes and certain mandatory conversion trigger events (including an IPO) as per the irredeemable convertible loan note agreements. The proceeds received, net of transaction costs, from the issue of these irredeemable convertible loan notes have accordingly been included as a component of equity representing the fair value of the option to convert into ordinary shares of the Group. None of the ICLNs issued to date have been converted to ordinary shares.

On 31 January 2014, as part of the consideration to acquire the entire issued share capital of SRL 905 Holdings Limited (now renamed Seven Energy (Jersey) Limited), the Company issued $33.0 million of ICLNs to Suntera Management Limited. The ICLNs are convertible into 132,000 shares at a conversion price of $250.00 per share.

In April 2014, the Company signed Investment Agreements with three equity investors for a combined investment of $255.0 million. Each investment was in the form of a single ordinary share and the remainder in ICLNs at a conversion price of $250.00 per share. A total of three ordinary shares and 1,019,997 ICLNs have been issued.

On 27 February 2015, as part of the consideration to acquire the entire issued share capital of Gas Transmission and Power Limited, the Company issued $25.7 million of ICLNs to the five individual shareholders of GTPL. The ICLNs are convertible into 102,600 shares at a conversion price of $250.00 per share.



30. Equity reserves

Other equity reserve

$000

Share-based payments

reserve $000

Foreign currency

translation reserve

$000Total$000

At 1 January 2014 16,176 23,940 (732) 39,384

Share-based payments – 4,150 – 4,150

Issuance of shares – (400) – (400)

Expiry of warrants (1,396) – – (1,396)

At 31 December 2014 14,780 27,690 (732) 41,738

Share-based payments – 4,987 – 4,987

Issuance of shares – (401) – (401)

At 31 December 2015 14,780 32,276 (732) 46,324

Other equity reserve: The other equity reserve is in respect of 148,571 (2014: 148,571) outstanding warrants previously issued at a price of $350.00 per share.

Share-based payments reserve: The reserve represents cumulative amounts charged to the statement of comprehensive income in respect of employee share-based payment plans where the scheme has not yet been settled by means of an award of shares to an individual.

Foreign currency translation reserve: The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of foreign operations. The reserve was frozen from 1 January 2012 as the functional currency of the associated subsidiary (Seven Energy (UK) Limited) was changed from Sterling to US Dollars.

31. Share-based paymentsThe Group has in place a share-based payment arrangement for its employees, has previously issued warrants to a contractor and has also issued share options in connection with the purchase of the Gulf of Guinea Energy Limited group of companies in 2009. In addition, in 2013, the Company awarded fully paid up shares to a member of the Group’s Executive Committee as part of his employment arrangements.

Details of the total share-based payment charge are as follows: 2015$000

2014$000

Discretionary share option plan 4,987 3,950

Other share based payments – 200

Total share-based payment charge 4,987 4,150

Discretionary Share Option Plan The Group operates a share option scheme for employees. The Group’s policy is to award options to eligible employees at the sole discretion of the HR & Remuneration Committee of the Board. Options are issued at market price on the grant date and typically have a three-year vesting period. In addition, some options have performance related vesting conditions which require that the Company share price reaches $700.00 per share before they are able to be exercised by the employee. The options expire up to seven years from the date of grant if they remain unexercised and are forfeited if the employee leaves the Group before the options vest except at the discretion of the Board.

The Group granted 57,550 (2014: 47,550) share options to employees under the Discretionary Share Option Plan which will vest in three equal annual tranches from 1 January 2016.



31. Share-based payments (continued)Discretionary Share Option Plan (continued)Details of the share options outstanding during the year are as follows:

2015Number of

share options

2015Weighted

average exercise

price $

2014Number of

share options

2014Weighted

average exercise

price $

Outstanding at beginning of year 200,040 295.44 156,059 309.18

Granted during the year 57,550 250.00 47,550 250.00

Forfeited during the year (5,933) 264.60 (3,569) 291.07

Expired (41,783) 299.35 – –

Outstanding at the end of year 209,874 283.07 200,040 295.44

Exercisable at the end of year 119,420 305.15 128,124 308.59

The weighted average remaining contractual life of the options outstanding at 31 December 2015 was 3.92 years (2014: 3.92 years). The range of exercise prices of options outstanding at the year-end was between $250.00 and $350.00, (2014: $250.00 to $350.00) per option.

The options granted during the year have been valued by reference to the Black-Scholes option valuation model. The inputs into the Black-Scholes model were as follows:

2015$000

2014$000

Weighted average share price (i) $250.00 $250.00

Weighted average exercise price $250.00 $250.00

Expected volatility 97.2% 72.3%

Expected life (years) 1.43 1.54

Risk-free rate 0.38% 0.41%

Expected dividends Nil Nil

Weighted average fair value per option granted $110.00 $87.02

(i) The share price inputs to the share-based payments valuation have been determined on a basis consistent with the issue and valuation of equity linked instruments issued by Seven Energy at a similar time.

The Company’s shares are not listed on an open market; therefore, to determine the expected volatility of the Company shares, the Company used a peer group’s stock prices for three years prior to the option grant date.

Other share-based paymentsDuring 2013, the Company awarded options over 8,000 shares, without any performance conditions, to a member of the Group’s Executive Committee. These options vested equally in three tranches annually from 7 January 2013, with a third vesting immediately a third vesting over 12 months and a third vesting over 24 months. The fair value of the shares at issue was considered to be $150.00 per share. The charge for the year was $nil (2014: $0.2 million). No further awards were made during 2015.

32. Non-controlling interests$000

At 1 January 2014 22,106

Share of loss for the year (1,464)

At 1 January 2015 20,642

Share of loss for the year (1,093)

At 31 December 2015 19,549

The non-controlling interest relates to the remaining 37.5% shareholding in the Group’s subsidiary, Universal Energy.



33. Related party transactionsThe Group, through its subsidiary Universal Energy, holds a Naira denominated loan due to Akwa Ibom Investment and Industrial Promotion Council (a minority shareholder of Universal Energy) for $7.8 million (2014: $8.5 million). The loan is to be repaid from the production revenues generated by the Stubb Creek field, with repayment, including accrued interest by 30 December 2018. The loan bears interest at 15.0% per annum from the date of first oil production (February 2015). Management are currently in discussions with the lender to reschedule the loan repayments and to update the loan documentation, as the signed loan agreement currently in effect specified first repayment to commence in September 2013. Following delays to first oil production from the field in prior years, no repayments have been made to date, in breach of the current agreement and thus the full amount of the loan is disclosed within Current borrowings – scheduled payments within one year (see note 22).

Petrofac Ltd (“Petrofac”) the international oil and gas facilities, engineering and project management services provider, holds an equity interest and warrants in the Company. During the year, the Group received project management, engineering and procurement services totalling $0.5 million (2014: $1.0million) associated with the ongoing development of the Group’s south east assets. At 31 December 2015, the Group had a net receivable balance of less than $0.1 million due from Petrofac resulting from credit notes received for services provided (2014: $0.3 million).

During 2014 and 2015, the Company had outstanding share purchase loans with a former Director and former employees of the Company, who remain current security holders. The loans accrued interest during the years of US LIBOR plus 2.0%. The amounts outstanding at 31 December 2015 were $2.4 million (2014: $2.3 million) and are included within Trade and other receivables – Other receivables (note 17).

The International Finance Corporation (“IFC”) holds an equity interest in the Company. In addition, the IFC continues to hold $50.0 million of Senior Secured Loan Notes, for which, interest accrued and was paid during 2015 in line with the terms outlined in note 22.

In 2015, the Group paid fees of $0.1 million to the Multilateral Investment Guarantee Agency (“MIGA”), the political risk insurance and credit enhancement arm of the World Bank Group, for MIGA to provide an option over a guarantee of up to $200.0 million against risk of expropriation of the Company’s wholly owned subsidiary, Accugas Limited. A fellow associated company of the World Bank Group, the International Finance Corporation (“IFC”) is a security holder in the Company following its equity investment in 2014.

Other transactions with key management during the year were as follows:2015$000

2014$000

Amounts owed by key management personnel at year end

Amounts incurred on behalf of key management 25 25

Remuneration of key management personnelThe Directors and members of the Group’s Executive Committee are considered to be the key management personnel of the Group. The remuneration of the key management personnel of the Group is set out below in aggregate:

2015$000

2014$000

Short-term employee benefits 5,496 5,650

Other long-term benefits 384 352

Share-based payments 333 500

Total remuneration 6,213 6,502



34. Business combinations Gas Transmission and Power LimitedOn 27 February 2015, the Company completed the acquisition of the entire issued share capital of Gas Transmission and Power Limited (“GTPL”), a Nigerian oil and gas exploration and production company, with a 50% licence interest in, and operatorship of, OPL 905, located in the Anambra Basin. OPL 905 has a significant identified gas resource base with additional potential upside in the under-explored Anambra Basin. Over the next two years, the Group aims to undertake seismic studies and drill a number of appraisal wells. The gross consideration was $27.0 million less $0.9m of adjusted net liabilities. The $26.1m net consideration comprised $25.7m of ICLNs at a conversion price of $250.00 per share, with the remaining being cash. Along with E905 Suntera Limited (acquired during 2014), the Group now has a 90% licence interest.

Since the date of acquisition, GTPL did not contribute to the Group’s revenue and contributed $0.1 million loss after tax to the Group’s result for the year ended 31 December 2015. Had the acquisition occurred on 1 January 2015, the Group’s revenue and result would have remained materially unchanged. Total acquisition related costs (included in administrative expenses in the consolidated statement of comprehensive income) for the year ended 31 December 2015 were immaterial.

The fair values outlined below are considered final and have been updated since 30 June 2015 following finalisation of GTPL’s audited financial statements for the year ended 31 December 2014 and the balance sheet as at the acquisition date. Intangible assets reduced by $6.7 million, trade and other payables by $4.1 million and deferred tax liabilities by $1.8 million. In addition cash consideration decreased by $0.9 million reflecting a net liabilities adjustment.

2015$000

Recognised amounts of identifiable assets acquired and liabilities assumed

Intangible assets 38,678

Property, plant and equipment 24

Cash and cash equivalents 26

Trade and other payables (1,194)

Deferred tax liabilities (11,414)

Total fair value of identifiable net assets 26,120

Total fair value of consideration 26,120

Consideration satisfied by:

Cash 470

ICLNs 25,650

Total consideration transferred 26,120

Net cash outflow arising on acquisition

Cash consideration 470

Less: cash and cash equivalents acquired (26)

Net cash outflow 444

35. Interests in subsidiaries and joint arrangementsDetails of the principal subsidiaries and the percentage of share capital owned by the Company as at 31 December 2015 are set out below. All of these subsidiaries are included in the consolidated Group statements:

NamePlace of incorporationand operation Activity

Acquired during 2015

Ownershipinterest

%

Voting power held

%

Seven Energy (UK) Ltd Scotland Service company No 100 100

Seven Uquo Gas Ltd Nigeria Oil and gas exploration and development No 100 100

Seven Exploration and Production Ltd Nigeria Oil and gas exploration and development and related activities

No 100 100

Universal Energy Resources Ltd Nigeria Oil and gas exploration and development No 62.5 62.5

Accugas Ltd Nigeria Gas marketing and distribution No 100 100

East Horizon Gas Company Ltd Nigeria Gas marketing and distribution No 100 100

E905 Suntera Ltd Nigeria Oil and gas exploration No 100 100

Gas Transmission & Power Ltd Nigeria Oil and gas exploration Yes 100 100



35. Interests in subsidiaries and joint arrangements (continued)Details of the Group’s interests in joint arrangements as at 31 December 2015 are set out below. The cost of investment and the Group’s share of the jointly controlled entity’s post acquisition profit or loss and other comprehensive income is included in the Group’s consolidated Financial Statements:

NamePlace of incorporationand operation Activity

Acquired during 2015

Ownershipinterest

%

Voting power held

%

Afren Global Energy Resources Ltd Nigeria Oil and gas exploration No 22.5 22.5

Details of the Group’s interests in joint operations as at 31 December 2015 are set out below. The Group’s share of assets, liabilities, revenues and expenses are included in the Group’s consolidated Financial Statements:

Name Joint interest partners

Place of registration and operation Activity

Participatinginterest

%

Uquo field joint operation Frontier Oil Ltd Nigeria Oil and gas exploration and development 40

Stubb Creek field joint operation

SINOPEC International Petroleum Exploration and Production Company Nigeria Ltd

Nigeria Oil and gas exploration and development 51

Strategic Alliance Agreement1 Nigerian Petroleum Development Company Ltd

Nigeria Oil and gas exploration and development 551

OPL 905 field joint operation Ideal Oil and Gas Ltd Nigeria Oil and gas exploration 90

OPL 907 field joint operation Buston Energy Resources LtdAllene Exploration & Production LtdBepta Oil & Gas LtdKaztec Engineering LtdVP Energy LtdDe Atai Oil Services Ltd

Nigeria Oil and gas exploration 41

OPL 917 field joint operation Petrolog Oil & Gas LtdVP Energy LtdGoland Petroleum LtdDe Atai Oil Services Ltd

Nigeria Oil and gas exploration 42

1 The Group has a 55% Indirect interest in OMLs 4, 38 & 41 via the Strategic Alliance Agreement with NPDC. The Group accounts for the Strategic Alliance Agreement as a jointly controlled operation as it is considered to exercise joint control through its participation in the technical and financial discussions and the decision making process for the development of the blocks through NPDC, and also funds NPDC’s 55% share of costs.

36. Subsequent eventsSince the year end the Group successfully raised $100.0 million of new equity capital by way of issuing ICLNs. This comprised $50.0 million from existing shareholders of the Group and $50.0 million invested by the IDB Infrastructure Fund II, sponsored by the Islamic Development Bank and other institutional investors and managed by ASMA Capital Partners.



1P Proved reserves

2C Contingent resources

2P

Proved and Probable reserves. Those unproved reserves which analysis of geological and engineering data suggests are more likely than not to be recoverable. In this context, when probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated Proved plus Probable reserves

Alaoji Alaoji Generation Company Nigeria Limited owns the Alaoji Power plant near Aba, Abia State

bbl Barrel of oil, condensate or natural gas liquids

Bcf Billion cubic feet of gas

Bcfe Billion cubic feet of gas equivalent

Bcfpd Billion cubic feet of gas per day

bopd Barrels of oil per day

Calabar Calabar Generation Company Limited owns the Calabar Power plant near Calabar City, Cross River State

CNG Compressed natural gas

Company Seven Energy International Limited, a company incorporated in Mauritius

CSR Corporate social responsibility

EHGC East Horizon Gas Company Limited

EBITDA Earnings before interest, taxation, depletion, depreciation and amortisation

EBITDAX EBITDA before impairment charge

Field An area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition

Frontier Oil Frontier Oil Limited, the Operator of the Uquo Field

GDP Gross domestic product

GTPL Gas Transmission & Power Limited, the Operator of OPL 905

GW Gigawatt

hydrocarbons Oil, condensate, natural gas liquids and natural gas

Ibom Power Ibom Power Company owns the Ibom Power plant, 100% owned by the Akwa Ibom State Government

IFRS International Financial Reporting Standards

the Group/Seven Energy Seven Energy International Limited and its subsidiaries

ICLNs Irredeemable convertible loan notes

km Kilometre

km2 Square kilometre

LNG Liquid natural gas

LTI Lost Time Incident

Glossary of terms


Mbbl Thousand barrels of oil or condensate

Mbopd Thousand barrels of oil per day

Mboepd Thousand barrels of oil equivalent per day

Mcf Thousand cubic feet of gas

MMbbl Million barrels of oil or condensate

MMboe Million barrels of oil equivalent

MMBtu Million British thermal units

MMcfpd Million cubic feet of gas per day

MW Megawatt

Naira or NGN The currency of Nigeria

NIPP National Integrated Power Project

NNPC Nigerian National Petroleum Corporation

Notore Notore Chemical Industries Plc owns the Notore Fertiliser plant at Onne sea port in the Niger Delta

NPDC Nigerian Petroleum Development Company Limited, a subsidiary of NNPC

OML Oil Mining Licence

OPL Oil Prospecting Licence

Prospect A location where sufficient technical work has been undertaken to justify drilling a well

QHSSE Quality, health, safety, security and environmental

QIT ExxonMobil’s Qua Iboe export terminal

Reservoir A subsurface body of rock having sufficient porosity and permeability to store and transmit hydrocarbons

RoW A pipeline Right of Way is a defined area of land where pipelines and related equipment laid

SPE Society of Petroleum Engineers

SAA The Strategic Alliance Agreement with NPDC with respect to OMLs 4, 38 and 41

SRL 905 SRL 905 Holdings Limited

Tcf Trillion cubic feet of gas

TRIR Total Recordable Incident Rate

Underlift/overlift

The difference between the production entitlement and amounts lifted. Where amounts lifted are less than production entitlement, underlift (asset) is recorded. Where liftings exceed entitlement, overlift (liability) is recorded.

Unicem United Cement Company of Nigeria Ltd, a private company that manufactures cement

Universal Energy Universal Energy Resources Limited, a 62.5% subsidiary of Seven Energy, and the Operator of the Stubb Creek Field

$ The currency of the US, i.e. US Dollars



Shareholder enquiries

Registered Agent and Registered AddressCim Global ManagementLes CascadesEdith Cavell StreetPort-LouisMauritius

Company SecretaryChris ThomasSeven Energy International Limited6 Chesterfield GardensLondon W1J 5BQUnited Kingdom

Advisers

Auditor Deloitte LLP2 New Street Square London EC4A 3BZ United Kingdom

Solicitors Addleshaw Goddard Milton Gate60 Chiswell Street London EC1Y 4AG United Kingdom

Linklaters LLPOne Silk StreetLondon EC2Y 8HQ United Kingdom

Principal BankersFirst Bank of Nigeria Ltd.Samuel Asabia House 35 MarinaLagos Nigeria

First City Monument Bank plc17A Primrose Tower Tinubu StreetLagos Nigeria

Standard Chartered Bank 1 Basinghall Avenue London EC2V 5DDUnited Kingdom

United Bank for Africa plcUBA House 57 Marina Lagos Nigeria

Union Bank NigeriaStallion Plaza 36 Marina Lagos Nigeria

Ecobank NigeriaPlot 21Ahmadu Bello Way Victoria Island LagosNigeria

Shareholders’ information


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Cover: Lagos at night – Photo by Isaac D. Pacheco.

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Further Bondholders information

To ensure compliance with the reporting covenant relevant to Seven Energy Finance Limited’s issue of senior secured Loan notes in October 2014 the Financial Statements for the year ended 31 December 2013 can be located on the Seven Energy website.

For details of the impact business acquisitions would have had on Seven Energy’s revenue and profit, if the acquisition had taken place on 1 January in the year of acquisition, please refer to note 34 in the notes to the consolidated Financial Statements.

NigeriaSeven Exploration & Production Limited35 Kofo Abayomi StreetVictoria IslandLagosNigeria

Tel: +234 1 277 0600

United KingdomSeven Energy International Limited4th Floor6 Chesterfield GardensLondon W1J 5BQUnited Kingdom

Tel: +44 20 7518 3850Email: [email protected]

www.sevenenergy.com

Seven Energ

y Annual Report 2015

seven energy annual reports & accounts 2015

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