12 Borders & Southern Petroleum plc Annual Report & Accounts 2014 PRINCIPAL RISKS AND UNCERTAINTIES RISK STATUS KEY (*RS refers to Risk Status) Risk increase Risk unchanged Risk decrease RISK NATURE OF RISK RS* RISK MITIGATION EXPLORATION Exploration for oil and gas is inherently  risky and whilst many of these risks can be  mitigated, they cannot be eliminated. Risk mitigation has been the Company’s priority  through its history. Measures the Company has  taken include the employment of experienced  technical people and acquisition of data such as  3D seismic so that the risks are understood and  assessed before drilling commences. HEALTH, SAFETY,  SECURITY AND  ENVIRONMENT  INCIDENTS The Company’s licenses are located in  a remote, environmentally sensitive  environment and these factors together  with the challenges associated with deep  water come with risks to health, safety  and security of the people involved and to  the environment. Before and during operations, the Company  develops and follows detailed project specific  health, safety and environmental management  procedures. Operations also ensure that  policies and actions closely followed industry  best practice. FUNDING RISK There are significant costs associated  with oil and gas exploration, especially in  deep water offshore. The Company has sufficient funds for day to  day overheads for the foreseeable future.  The challenge for the Company is to bring in a  partner to help fund the Darwin field appraisal  programme and potentially further exploration  and the Company is confident of achieving this. OIL PRICE Liquids from the Darwin development are  likely to be based on the Brent oil price  and changes to this benchmark impact  the economic viability of the project. Darwin is a very economically robust project and  would be viable even under oil prices lower than  the current. RELIANCE ON KEY  PERSONNEL Like many small exploration companies  the Company is reliant upon a small  number of employees. The Company has service contracts with key  employees that provide for notice periods  that would allow sufficient time to source  replacements. Also, the Company has a wide  network of consultants and other industry  experience to call upon for specific areas of  expertise and during operations. SUPPLY CHAIN The Falkland Islands are geographically  isolated and, because of political issues,  most of the Company’s supplies need to  be sourced from the UK or USA. There have been four drilling campaigns in the  Falkland Islands, including one currently under  way, which demonstrates that all the necessary  supplies could both be sourced without  disruption to operations. AVAILABILITY OF  DRILLING RIGS AND  SERVICES There is a very limited number of harsh  environment, deep-water drilling rigs that  the Company requires for its operations. With the reduction in oil prices during 2014  and the cuts to global exploration spending,  the availability of deep-water drilling rigs has  improved and the cost has significantly reduced. COUNTRY RISK There is a ongoing dispute over the  sovereign status of the Falkland Islands. The British Government strongly supports the  Falkland Islanders’ rights for self-determination.  During the Company’s operations in 2012, there  was no disruption due to political issues.