141www.tullowoil.comFINANCIAL STATEMENTS5 The $3.5 billion Reserves Based Lending Facility incurs interest on outstanding debt at sterling or US dollar LIBOR plus an applicable margin. The outstanding debt is repayable in variable amounts (determined semi-annually) over the period to 31 December 2015, or such time as is determined by reference to the remaining reserves of the assets, whichever is earlier. The $650 million Revolving Credit Facility is repayable in full on 31 December 2014. The facility incurs interest on outstanding debt at US dollar LIBOR plus an applicable margin. At the end of December 2011, the headroom under the two facilities amounted to $826 million; $176 million under the $3.5 billion Reserves Based Lending Facility and $650 million under the Revolving Credit Facility. At the end of December 2010, the headroom under the two facilities amounted to $685 million; $175 million under the $2.5 billion Reserves Based Lending Facility and $510 million under the Revolving Credit Facility. At the end of December 2009, the headroom under the two facilities was $620 million; $370 million under the $2 billion Reserves Based Lending Facility and $250 million under the Revolving Corporate Facility. The Group is exposed to floating rate interest rate risk as entities in the Group borrow funds at floating interest rates. The Group hedges its floating rate interest rate exposure on an ongoing basis through the use of interest rate swaps. The mark-to-market position of the Group's interest rate portfolio as at 31 December 2011 is $7.2 million out of the money (2010: $13.6 million and 2009: $8.9 million out of the money). The interest rate hedges are included in the fixed rate debt in the above table. Foreign currency risk Wherever possible, the Group conducts and manages its business in sterling (UK) and US dollars (all other countries), the operating currencies of the industry in the areas in which it operates. The Group's borrowing facilities are also denominated in sterling and US dollars, which further assists in foreign currency risk management. From time to time the Group undertakes certain transactions denominated in foreign currencies. These exposures are managed by executing foreign currency financial derivatives, typically to manage exposures arising on corporate transactions such as acquisitions and disposals. There were no foreign currency financial derivatives in place at the 2011 year end (2010: nil). Cash balances are held in other currencies to meet immediate operating and administrative expenses or to comply with local currency regulations. As at 31 December 2011, the only material monetary assets or liabilities of the Group that were not denominated in the functional currency of the respective subsidiaries involved were £106.0 million ($163.8 million) cash drawings under the Group's borrowing facilities (2010: £106.0 million and 2009: $1,337.0 million). The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are net liabilities of $163.8 million (2010: net liabilities of $164.0 million and 2009: net liabilities of $1,337.0 million). Foreign currency sensitivity analysis The Group is mainly exposed to fluctuations in the US dollar. The Group measures its market risk exposure by running various sensitivity analyses including 20% favourable and adverse changes in the key variables. The sensitivity analyses include only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 20% change in foreign currency rates. As at 31 December 2011, a 20% increase in foreign exchange rates against the functional currencies of entities in the Group would have resulted in a decrease in foreign currency denominated liabilities and equity of $27.3 million (2010: $27.3 million and 2009: $226.7 million) and a 20% decrease in foreign exchange rates against the functional currencies of entities in the Group would have resulted in an increase in foreign currency denominated liabilities and equity of $32.8 million (2010: $32.8 million and 2009 $339.9 million).
142Tullow Oil plc 2011 Annual Report and AccountsNotes to the Group financial statements continued Year ended 31 December 2011 Note 19. Financial liabilities continued Liquidity risk The Group manages the liquidity requirements by the use of both short- and long-term cash flow projections, supplemented by maintaining debt financing plans and active portfolio management. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short-, medium- and long-term funding and liquidity management requirements. The Group closely monitors and manages its liquidity risk. Cash forecasts are regularly produced and sensitivities run for different scenarios including, but not limited to, changes in commodity prices, different production rates from the Group's portfolio of producing fields and delays in development projects. In addition to the Group's operating cash flows, portfolio management opportunities are reviewed to potentially enhance the financial capacity and flexibility of the Group. The Group's forecasts, taking into account reasonably possible changes as described above, show that the Group will be able to operate within its current debt facilities and have significant financial headroom for the 12 months from the date of approval of the 2011 Annual Report and Accounts. The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Weighted average effective interest rateLess than 1 month$m1-3months$m3 months to 1 year$m1-5 years $m 5+years$mTotal$m31 December 2011 Non-interest bearing 0% 81.3 86.4 395.7 8.8 5.2 577.4 Variable interest rate instruments 4.3% 11.5 22.9 327.5 3,198.7 - 3,560.6 Total 92.8 109.3 723.2 3,207.5 5.2 4,138.0 Weighted average effective interest rateLess than 1 month$m1-3months$m3 months to 1 year$m1-5 years $m 5+years$mTotal$m31 December 2010 Non-interest bearing 0%100.4188.515.430.4 -334.7Finance lease liability 14%4.514.343.8232.5 401.2696.3Variable interest rate instruments 4.7%7.916.3400.92,256.7 -2,681.8Total 112.8219.1460.12,519.6 401.23,712.8 Weighted average effective interest rateLess than 1 month$m1-3months$m3 months to 1 year$m1-5 years $m 5+years$mTotal$m31 December 2009 Non-interest bearing 0%163.354.513.1- -230.9Finance lease liability 2.8%--4.64.6 -9.2Variable interest rate instruments 4.7%5.411.049.01,247.5 343.21,656.1Total 168.765.566.71,252.1 343.21,896.2